<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934*
MIDDLE BAY OIL COMPANY, INC.
(NAME OF ISSUER)
COMMON STOCK, PAR VALUE $.02 PER SHARE
(TITLE OF CLASS OF SECURITIES)
595673203
(CUSIP NUMBER)
D. MARTIN PHILLIPS
ENCAP INVESTMENTS L.L.C.
1100 LOUISIANA, SUITE 3150
HOUSTON, TEXAS 77002
(713) 659-6100
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS)
AUGUST 27, 1999
(DATE OF EVENT WHICH REQUIRES FILING
OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 204.13d-1(g), check
the following box. [ ]
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7(b) for
other parties to whom copies are to be sent.
*The remainder of the cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE> 2
CUSIP NO. 595673203 SCHEDULE 13D
(1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons
(entities only)
3TEC ENERGY COMPANY L.L.C.
- --------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group
(See Instructions) (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
(3) SEC Use Only
- --------------------------------------------------------------------------------
(4) Source of Funds (See Instructions) OO (SEE ITEM 3)
- --------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
(6) Citizenship or Place of Organization 3TEC ENERGY COMPANY L.L.C.
("3TEC") IS A LIMITED LIABILITY
COMPANY ORGANIZED UNDER THE LAWS
OF THE STATE OF DELAWARE
- --------------------------------------------------------------------------------
Number of (7) Sole Voting Power 10,482,222
Number of -------------------------------------------------------
Shares Bene-
ficially (8) Shared Voting Power 0
Owned by -------------------------------------------------------
Each
Reporting (9) Sole Dispositive Power 10,482,222
Person With -------------------------------------------------------
(10) Shared Dispositive Power 0
- --------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
10,482,222
- --------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) [ ]
- --------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11) 54.86%(1)
- --------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions) OO
- --------------------------------------------------------------------------------
(1) Based on 13,379,153 shares of Common Stock issued and outstanding on
August 27, 1999.
Page 2
<PAGE> 3
CUSIP NO. 595673203 SCHEDULE 13D
(1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons
(entities only)
ENCAP INVESTMENTS L.L.C.
- --------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group
(See Instructions) (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
(3) SEC Use Only
- --------------------------------------------------------------------------------
(4) Source of Funds (See Instructions) OO (SEE ITEM 3)
- --------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
(6) Citizenship or Place of Organization ENCAP INVESTMENTS L.L.C.
("ENCAP INVESTMENTS") IS A
LIMITED LIABILITY COMPANY
ORGANIZED UNDER THE LAWS OF THE
STATE OF DELAWARE
- --------------------------------------------------------------------------------
(7) Sole Voting Power 0
Number of -------------------------------------------------------
Shares Bene-
ficially (8) Shared Voting Power 10,482,222(1)
Owned by -------------------------------------------------------
Each
Reporting (9) Sole Dispositive Power 0
Person With -------------------------------------------------------
(10) Shared Dispositive Power 10,482,222(1)
- --------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
10,482,222(2)
- --------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions) [ ]
- --------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11) 54.86%(3)
- --------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions) OO
- --------------------------------------------------------------------------------
(1) EnCap Investments may be deemed to have voting and dispositive power
with respect to the shares of Common Stock owned by 3TEC. See Item 5.
(2) EnCap Investments disclaims any beneficial ownership of the shares
owned by 3TEC.
(3) Based on 13,379,153 shares of Common Stock issued and outstanding on
August 27, 1999.
Page 3
<PAGE> 4
ITEM 1. SECURITY AND ISSUER.
The class of equity securities to which this statement relates is
common stock, par value $.02 per share (the "Common Stock"), of Middle Bay Oil
Company, Inc., an Alabama corporation (the "Issuer"). The address of the
principal executive offices of the Issuer is 1221 Lamar Street, Suite 1020,
Houston, Texas 77010.
ITEM 2. IDENTITY AND BACKGROUND.
(a) - (c), (f)
3TEC is a Delaware limited liability company with its principal
executive offices located at 5910 North Central Expressway, Suite 1150, Dallas,
Texas 75206. The principal business of 3TEC is engaging in oil and gas
investments. Current information concerning the controlling person and the
officers and managers of 3TEC is set forth on Schedule I hereto. The controlling
person of 3TEC is EnCap Investments L.L.C., a Delaware limited liability company
("EnCap Investments").
EnCap Investments is a Delaware limited liability company with its
principal executive offices at 1100 Louisiana Street, Suite 3150, Houston, Texas
77002. The principal business of EnCap Investments is engaging in oil and gas
investments. Current information concerning the sole member and managing
directors of EnCap Investments is set forth on Schedule I hereto. The sole
member of EnCap Investments is El Paso Field Services Company, a Delaware
corporation ("El Paso Field Services").
El Paso Field Services Company is a Delaware corporation with its
principal executive offices at 1001 Louisiana Street, Houston, Texas 77002. The
principal business of El Paso Field Services is natural gas gathering and
processing and intrastate gas transmission. Current information concerning the
controlling person and executive officers and directors of El Paso Field
Services is set forth on Schedule I hereto. The controlling person of El Paso
Field Services is El Paso Energy Corporation, a Delaware corporation ("El Paso
Energy").
El Paso Energy is a Delaware corporation with its principal executive
offices located at the El Paso Energy Building, 1001 Louisiana Street, Houston,
Texas 77002. The principal business of El Paso Energy is serving as a holding
company for its various subsidiaries, which are engaged in energy and related
businesses. Current information concerning the executive officers and directors
of El Paso Energy is set forth on Schedule I hereto.
(d) During the last five years, neither the parties listed in this Item 2 nor,
to the best knowledge of the reporting persons, any of the persons listed in
Schedule I, has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) During the last five years, neither the parties listed in this Item 2 nor,
to the best knowledge of the reporting persons, any of the persons listed in
Schedule I was a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting activities subject to, federal or state securities laws or finding
any violation of such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
SECURITIES PURCHASE AGREEMENT
On August 27, 1999, the Issuer closed the transactions contemplated by
a Securities Purchase Agreement (the "Securities Purchase Agreement") with 3TEC
Energy Corporation ("Old 3TEC"), a privately-held Delaware corporation based in
Dallas, Texas. Contemporaneously with the closing of the
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<PAGE> 5
transactions contemplated by the Securities Purchase Agreement, Old 3TEC was
merged with and into 3TEC with 3TEC as the surviving entity. As a result of the
merger, all the properties, rights, privileges, powers, and franchises of Old
3TEC, including without limitation, the rights, obligations and duties of Old
3TEC under the Securities Purchase Agreement, became vested in 3TEC as the
surviving entity.
Pursuant to the Securities Purchase Agreement, 3TEC purchased 4,755,556
shares (the "Shares") of Common Stock, plus five-year warrants to purchase
3,600,000 shares of Common Stock at an exercise price of $1.00 per share (the
"Warrants"), for a total purchase price of $10,700,000. Additionally, Middle Bay
issued to 3TEC a five-year senior subordinated convertible promissory note in
the principal amount of $10,700,000(the "Note"). 3TEC paid the aggregate
purchase price for the Shares, Warrants and Note $20,525,000 in cash and
$875,000 in agreed value of certain oil and gas properties to be assigned to
Middle Bay.
The Note is convertible at any time into Middle Bay common stock at
$3.00 per share (a total of 3,566,666 common shares). Interest at 9% per annum
is payable quarterly. Middle Bay may defer 50% of the first eight interest
payments and add them to the principal due at maturity. The Note is subordinate
to Middle Bay's bank credit facility, but senior to other debt. 3TEC (as
noteholder) must approve any change in the credit facility, corporate structure
and major transactions of Middle Bay until the Note is paid.
Sixty percent (60%) of the Warrants may be exercised by 3TEC at any
time. The remaining 40% may be exercised incrementally over the five-year term
of the Warrants. The Warrants may be exercised for cash or reduction of the Note
principal.
SHAREHOLDERS' AGREEMENT
In connection with the transaction, Kaiser-Francis Oil Company, C.J.
Lett, III, Weskids, L.P., Alvin V. Shoemaker (collectively referred to as the
"Major Shareholders"), 3TEC and the Issuer entered into a Shareholders'
Agreement dated as of August 27, 1999 (the "Shareholders' Agreement"). Under the
terms of the Shareholders' Agreement, the number of directors serving as members
of the Board of Directors of Middle Bay (the "Board") was reduced from seven (7)
to five (5). 3TEC has the right to designate three members of the Board;
provided that if 3TEC owns less than 15% of the issued and outstanding shares of
Common Stock it shall be entitled to designate only two (2) members to the
Board; provided, further, that if 3TEC owns less than 7 1/2% of the issued and
outstanding shares of Common Stock it shall be entitled to designate only one
(1) member to the Board. The Major Shareholders have the right to designate two
members of the Board; provided that if the Major Shareholders own less than 7
1/2% of the issued and outstanding shares of Common Stock they shall be entitled
to designate only one (1) member to the Board. All parties to the Shareholders'
Agreement agree to vote all shares held by them in favor of the election or
removal of the directors designated by 3TEC and the Major Shareholders. If
either 3TEC or the Major Shareholders are no longer eligible to designate a
director or directors to the Board, the then existing Board shall either (1)
decrease the size of the Board, (2) leave the vacated seat empty, or (3) appoint
a replacement to serve until he next election of directors by the shareholders
of Middle Bay, and select a nominee to fill the open seat for election by
shareholders at the next annual meeting. The Major Shareholders may request that
a non-voting advisory board member that is subject to 3TEC's approval be
appointed to the Board. All parties to the Shareholders' Agreement agree to vote
all shares held by them in favor of changing the state of incorporation of the
Company from Alabama to another jurisdiction recommended by the Board. The
Shareholders' Agreement will terminate if each of 3TEC and the Major
Shareholders own less than five percent of the issued and outstanding shares of
Common Stock.
REGISTRATION RIGHTS AGREEMENT
Pursuant to a Registration Rights Agreement by and among the Issuer,
3TEC and certain other shareholders of the Issuer dated as of August 27, 1999,
3TEC, Shoemaker Family Partners, L.P. and Shoeinvest II, L.P. have a three-time
demand right to have their Common Stock registered with the Securities
Page 5
<PAGE> 6
and Exchange Commission (at Middle Bay's expense) and have "piggyback rights"
(with certain other principal shareholders of Middle Bay having subordinate
piggyback rights) to have their Common Stock registered and publicly sold along
with any public offering of securities by Middle Bay.
ITEM 4. PURPOSE OF TRANSACTION.
3TEC holds a substantial ownership position in the Issuer in order to
be able to influence the business and management of the Issuer. 3TEC, through
its nominees on the Board, intends to actively participate in the business and
management of the Issuer. Under the Shareholders' Agreement, the number of
directors was reduced from seven (7) to five (5) and three (3) 3TEC designees
were elected to the Issuer's Board of Directors. In addition, 3TEC, through its
nominees on the Board, intends to propose that the shareholders of Middle Bay
vote in favor of changing the state of incorporation from Alabama to another
jurisdiction recommended by the Board of Directors.
The reporting persons intend to monitor and evaluate their investment
in the Issuer in light of pertinent factors, including oil and gas prices,
market conditions, the Issuer's performance and prospects, the trading prices of
the Common Stock, conditions in the oil and gas industry and general economic
conditions. 3TEC may make additional purchases of Common Stock in the future
through market transactions or otherwise, maintain its current investment or
dispose of some or all of the Common Stock.
Except as set forth above, the reporting persons have no present plans
or proposals that relate to or that would result in any of the actions specified
in clauses (a) though (j) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The following table describes the number of shares of Common Stock,
including shares of Common Stock issuable upon exercise or conversion of
derivative securities and the percent of outstanding Common Stock owned by the
reporting persons and the other parties to the Shareholders' Agreement. All
percentages are based on 13,379,153 shares of Common Stock issued and
outstanding on August 27, 1999.
<TABLE>
<CAPTION>
SHARES OUTSTANDING DERIVATIVE SECURITIES TOTAL
------------------------ ------------------------ --------------------------
NAME SOLE SHARED SOLE SHARED NUMBER %(1)
- ----------------------------------- ------------ ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
3TEC Energy Company L.L.C. 4,755,556 -- 5,726,666(2) -- 10,482,222 54.86%
EnCap Investments L.L.C. -- 4,755,556 -- 5,726,666(2) 10,482,222 54.86%
Kaiser-Francis Oil Company 3,333,334 -- -- -- 3,333,334 24.91%
C.J. Lett, III 1,187,556 -- -- -- 1,187,556 8.88%
Weskids, L.P. 843,687 -- 117,467(3) -- 961,154 7.12%
Alvin V. Shoemaker 684,222 50,466(4) 117,466(3) 30,280(4) 882,434 6.52%
</TABLE>
- --------------
(1) In accordance with SEC regulations under Section 13(d) of the Act, the
percent shown in this column for each stockholder represents the number of
shares of Common Stock owned by the stockholder plus the derivative securities
(on an as converted basis) owned by such stockholder divided by the number of
shares outstanding plus the number of derivative securities (on an as converted
basis) owned by such stockholder.
(2) Represents warrants to purchase Common Stock which are exercisable within 60
days of this filing and notes convertible into common stock.
(3) Represents shares of Common Stock issuable upon conversion of the Issuer's
Series B Convertible Preferred Stock.
(4) Mr. Shoemaker may be deemed to share the power to vote or direct the vote
and to dispose or direct the disposition of 80,746 shares of Common Stock with
Shoemaker Family Partners, L.P. and Shoeinvest II, L.P.
If the parties to the Shareholders' Agreement constitute a group for
purposes of Rule 13d-5 of the Act, then the group may collectively own an
aggregate of 16,846,700 shares of Common Stock of the Issuer
Page 6
<PAGE> 7
(which is approximately 87% of the outstanding shares of Common Stock of the
Issuer as of August 27, 1999). 3TEC and EnCap Investments disclaim any
beneficial ownership of the other parties to the Shareholder's Agreement and
only claim beneficial ownership of 10,482,222 shares of Common Stock of the
Issuer.
(b) 3TEC. 3TEC has the sole power to vote and to dispose or direct the
disposition of 10,482,222 shares of Common Stock.
EnCap Investments. EnCap Investments may be deemed to have the
power to vote and direct the vote or to dispose or direct the disposition of
10,482,222 shares of Common Stock owned by 3TEC (by virtue of being the
controlling person of 3TEC). EnCap Investments disclaims beneficial ownership of
the shares of Common Stock owned by 3TEC.
El Paso Field Services and El Paso Energy. Each of El Paso
Field Services and El Paso Energy may be deemed to have the power to vote and
direct the vote or to dispose or direct the disposition of the shares of Common
Stock owned or deemed to be owned by EnCap Investments (by virtue of being
controlling persons of EnCap Investments). El Paso Field Services and El Paso
Energy disclaim beneficial ownership of the shares of Common Stock owned by
3TEC.
Executive Officers and Directors. Except as otherwise
described herein, to the knowledge of the reporting persons, no executive
officer or director of the reporting persons or managing director of EnCap
Investments or other person listed in Schedule I has the power to vote or direct
the vote or dispose or direct the disposition of any shares of Common Stock.
(c) Except as otherwise described herein or in any Exhibit filed
herewith, to the knowledge of the reporting persons, none of the persons named
in response to paragraph (a) above has effected any transaction in shares of the
Common Stock during the past 60 days.
(d) Except as otherwise described herein, no person has the right to
receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of, the shares of Common Stock deemed to be beneficially owned by
them.
(e) It is inapplicable for the purposes herein to state the date on
which a party ceased to be the owner of more than five percent (5%) of the
shares of Common Stock.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SECURITIES OF THE ISSUER.
Except as described in this Schedule 13D, there are no
contracts, arrangements, understandings or relationships (legal or otherwise)
between any of the individuals or entities described in Item 2 or between such
persons and any other person with respect to the shares of Common Stock deemed
to be beneficially owned by the reporting persons.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 10.1 - Securities Purchase Agreement dated July 1, 1999 by
and among the Issuer and 3TEC.**
Exhibit 10.2 - Shareholders' Agreement dated August 27, 1999 by and
among the Issuer, 3TEC and each of the Major
Shareholders.*
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<PAGE> 8
Exhibit 10.3 - Registration Rights Agreement dated August 27, 1999
by and among Issuer, 3TEC, Shoemaker Family
Partnership, L.P., Shoeinvest II, L.P. and the Major
Shareholders.*
Exhibit 99.1 - Joint Filing Agreement dated September 7, 1999 by and
between 3TEC and EnCap Investments*
* Filed herewith.
** Filed as Exhibit C to the Proxy Statement filed by Issuer on July 19,
1999.
Page 8
<PAGE> 9
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: September 7, 1999 3TEC ENERGY CORPORATION
By: /s/ Floyd Wilson
------------------------------
Floyd Wilson
Managing Director
Date: September 7, 1999 ENCAP INVESTMENTS L.L.C.
By: /s/ D. Martin Phillips
------------------------------
D. Martin Phillips
Managing Director
Page 9
<PAGE> 10
SCHEDULE I
DIRECTORS, MANAGERS, EXECUTIVE OFFICERS
OR CONTROLLING PERSONS
1. 3TEC. Set forth below are the name, business address and present
principal occupation of each of the managers and officers of 3TEC. Each manager
and officer of 3TEC is a United States citizen. To the knowledge of the
reporting persons, none of such individuals directly owns any Common Stock.
<TABLE>
<CAPTION>
Name and Citizenship Business Address Position/Principal Occupation
- -------------------- ---------------- -----------------------------
<S> <C> <C>
David B. Miller 3811 Turtle Creek Blvd. David B. Miller is Managing
Dallas, Texas 75219 Director of EnCap Investments
D. Martin Phillips 1100 Louisiana Street, D. Martin Phillips is Managing
Suite 3150 Director of EnCap Investments
Houston, Texas 77002
Floyd C. Wilson 5910 N. Central Expressway Floyd C. Wilson is Chairman
Suite 1150 Of the Board, President and
Dallas, Texas 75206 Chief Executive Officer of
Middle Bay Oil Company, Inc.
</TABLE>
2. EnCap Investments. Set forth below are the name and present,
principal occupation or employment of each managing director of EnCap
Investments. The business address of each managing director, unless otherwise
indicated below, is 1100 Louisiana Street, Suite 3150, Houston, Texas 77002.
Each managing director of EnCap is a United States citizen. To the knowledge of
the reporting persons, none of such individuals directly owns any Common Stock.
<TABLE>
<CAPTION>
Name Present Principal Occupation or Employment
------------- --------------------------------------------
<S> <C>
Gary R. Peterson Gary R. Petersen is a Managing Director of EnCap Investments.
D. Martin Phillips D. Martin Phillips is a Managing Director of EnCap Investments.
David B. Miller David B. Miller is a Managing Director of EnCap Investments.
Robert L. Zorich Robert L. Zorich is a Managing Director of EnCap Investments.
D. Mark Leland D. Mark Leland is a Managing Director of EnCap Investments.
</TABLE>
3. El Paso Field Services. The name and citizenship, business address
and present principal occupation or employment, and the name of any corporation
or other organization in which
I-1
<PAGE> 11
such employment is conducted, of each of the directors and executive officers of
El Paso Field Services is set forth below.
<TABLE>
<CAPTION>
Name and Citizenship Business Address Position/Principal Occupation
- -------------------- ---------------- -----------------------------
<S> <C> <C>
Executive Officers &
Directors:
William A. Wise El Paso Energy Corporation Director and Chairman of the
(United States Citizen) 1001 Louisiana Street Board
Houston, Texas 77002
Robert G. Phillips El Paso Energy Corporation Director and President
(United States Citizen) 1001 Louisiana Street
Houston, Texas 77002
H. Brent Austin El Paso Energy Corporation Director, Executive Vice
(United States Citizen) 1001 Louisiana Street President and Chief Financial
Houston, Texas 77002 Officer
Jeffrey I. Beason El Paso Energy Corporation Vice President and Controller
(United States Citizen) 1001 Louisiana Street
Houston, Texas 77002
C. Dana Rice El Paso Energy Corporation Vice President and Treasurer
(United States Citizen) 1001 Louisiana Street
Houston, Texas 77002
Robert L. Cavnar El Paso Energy Corporation Senior Vice President and Chief
(United States Citizen) 1001 Louisiana Street Operating Officer
Houston, Texas 77002
D. Mark Leland El Paso Energy Corporation Vice President
(United States Citizen) 1001 Louisiana Street
Houston, Texas 77002
Gary R. Peterson See Part 1 above. Senior Vice President
D. Martin Phillips See Part 1 above. Senior Vice President
David B. Miller See Part 1 above. Senior Vice President
Robert L. Zorich See Part 1 above. Senior Vice President
</TABLE>
4. El Paso Energy. The name and citizenship, business address and
present principal occupation or employment, and the name of any corporation or
other organization in which such employment is conducted, of each of the
directors and executive officers of El Paso Energy is set forth below.
I-2
<PAGE> 12
<TABLE>
<CAPTION>
Name and Citizenship Business Address Position/Principal Occupation
- -------------------- ---------------- -----------------------------
<S> <C> <C>
Executive Officers &
Directors:
William A. Wise El Paso Energy Corporation Director and Chairman of the
(United States Citizen) 1001 Louisiana Street Board, President and Chief
Houston, Texas 77002 Executive Officer
H. Brent Austin El Paso Energy Corporation Executive Vice President and
(United States Citizen) 1001 Louisiana Street Chief Financial Officer
Houston, Texas 77002
Joel Richards III El Paso Energy Corporation Executive Vice President
(United States Citizen) 1001 Louisiana Street
Houston, Texas 77002
Ralph Eads El Paso Energy Corporation Executive Vice President
(United States Citizen) 1001 Louisiana Street
Houston, Texas 77002
Jeffrey I. Beason El Paso Energy Corporation Vice President and Controller
(United States Citizen) 1001 Louisiana Street
Houston, Texas 77002
C. Dana Rice El Paso Energy Corporation Vice President and Treasurer
(United States Citizen) 1001 Louisiana Street
Houston, Texas 77002
Britton White Jr. El Paso Energy Corporation Executive Vice President and
(United States Citizen) 1001 Louisiana Street General Counsel
Houston, Texas 77002
Richard Owen Baish El Paso Energy Corporation President of El Paso Natural Gas
(United States Citizen) 1001 Louisiana Street Company
Houston, Texas 77002
John D. Hushon El Paso Energy Corporation President of El Paso Energy
(United States Citizen) 1001 Louisiana Street International Company
Houston, Texas 77002
Greg G. Jenkins El Paso Energy Corporation President of El Paso Services
(United States Citizen) 1001 Louisiana Street Holding Company
Houston, Texas 77002
Robert G. Phillips El Paso Energy Corporation President of El Paso Field
(United States Citizen) 1001 Louisiana Street Services Company
Houston, Texas 77002
John W. Somerhalder II El Paso Energy Corporation President of Tennessee Gas
(United States Citizen) 1001 Louisiana Street Pipeline Company
Houston, Texas 77002
</TABLE>
I-3
<PAGE> 13
<TABLE>
<CAPTION>
Name and Citizenship Business Address Position/Principal Occupation
- -------------------- ---------------- -----------------------------
<S> <C> <C>
Byron Allumbaugh Ralphs Grocery Company Director of El Paso/Retired
(United States Citizen) 610 Newport Center Drive, Chairman, Ralphs Grocery
Suite 210 Company
Newport Beach, CA 92660
Juan Carlos Braniff Presidente Masaryk No. 8 Director of El Paso/Deputy CEO
(Mexican Citizen) 6th Floor Insurance & Pensions Sector
Col. Bosques de Grupo Financiero Bancomer
Chapultepec
Mexico, D.F. 11588
Peter T. Flawn University of Texas Director of El Paso
(United States Citizen) 23rd and San Jacinto President Emeritus, University of
Room GEO526 Texas at Austin
Austin, Texas 78705
James F. Gibbons Stanford University Director of El Paso/Former Dean
(United States Citizen) Paul G. Allen Center for of Engineering, Stanford
Integrated Systems University
Room 201, Mail Stop 4075
Stanford, CA 94305
Ben F. Love Chase Bank of Texas Director of El Paso/Investor
(United States Citizen) 600 Travis, 18th Floor Former Chairman and CEO,
Houston, Texas 77002 Texas Commerce Bancshares
Kenneth L. Smalley 5 Queensview Court Director of El Paso/Retired
(United States Citizen) Dallas, Texas 75225 President of Phillips 66 Natural
Gas Company
Malcolm Wallop Frontiers of Freedom Director of El Paso/
(United States Citizen) Western Strategy Group Chairman, Western Strategy
1100 Wilson Boulevard, Group and Frontiers of Freedom
Suite 1400
Arlington, VA 22209
</TABLE>
I-4
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C> <C>
10.1 - Securities Purchase Agreement dated July 1, 1999 by
and among the Issuer and 3TEC.**
10.2 - Shareholders' Agreement dated August 27, 1999 by and
among the Issuer, 3TEC and each of the Major
Shareholders.*
10.3 - Registration Rights Agreement dated August 27, 1999
by and among Issuer, 3TEC, Shoemaker Family
Partnership, L.P., Shoeinvest II, L.P. and the Major
Shareholders.*
99.1 - Joint Filing Agreement dated September 7, 1999 by and
between 3TEC and EnCap Investments*
</TABLE>
* Filed herewith.
** Filed as Exhibit C to the Proxy Statement filed by Issuer on July 19,
1999.
<PAGE> 1
EXHIBIT 10.2
SHAREHOLDERS' AGREEMENT
This Shareholders' Agreement (the "Agreement") is made and entered into
this 27th day of August, 1999, by and among MIDDLE BAY OIL COMPANY, INC., an
Alabama corporation (the "Company") and the undersigned shareholders of the
Company (the "Shareholders")
RECITALS
WHEREAS, as of the date hereof, there are 13,379,153 issued and
outstanding shares of the Company's common stock, $.02 par value (the "Common
Stock");
WHEREAS, as of the date hereof, the Shareholders collectively own
10,804,355 shares or 80.76% of the issued and outstanding shares of Common
Stock, as follows:
<TABLE>
<CAPTION>
SHAREHOLDER SHARES PERCENTAGE
<S> <C> <C>
3TEC Energy Corporation 4,755,556 35.55%
Kaiser-Francis Oil Company 3,333,334 24.91%
C.J. Lett, III 1,187,556 8.88%
Weskids, L.P. 843,687 6.31%
Alvin V. Shoemaker 684,222 5.11%
</TABLE>
WHEREAS, Kaiser-Francis Oil Company, C.J. Lett, III, Weskids, L.P. and
Alvin V. Shoemaker are referred to herein collectively as the "Major
Shareholders";
WHEREAS, the Shareholders desire to promote their mutual interests and
interests of the Company by imposing certain restrictions and obligations upon
themselves, the Company and the shares of Common Stock; and
WHEREAS, the execution and delivery of this Shareholders' Agreement is
a condition to the closing of that certain Securities Purchase Agreement between
the Company and 3TEC Energy Corporation dated July 1, 1999 (the "Purchase
Agreement").
NOW, THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Nomination and Election of Directors. Each of the Shareholders
agrees, so long as it owns such shares, to vote (including the taking of any
action by written consent, as necessary or appropriate) and cause its Affiliates
to vote all shares of Common Stock (and any and all shares of any other voting
class of capital stock of the Company presently or at any future time owned by
the Shareholders) which it is entitled to vote (or control the voting directly
or indirectly) to ensure
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that the following shall occur:
(a) The Company shall at all times be managed by or under the
direction of the Board of Directors of the Company (the
"Board"), which shall consist of five (5) members.
(b) The Shareholders shall use their best efforts (including
voting the shares owned by them and their affiliates, in
calling special meetings of the Shareholders and executing and
delivering written consents), to elect five (5) members of the
Board, consisting of the following:
(i) Three (3) members designated by 3TEC Energy
Corporation ("3TEC"); and
(ii) Two (2) members designated by the Major
Shareholders.
The party designating a director may remove such director, with or without
cause, and designate his or her successor. If the director designated by a party
resigns, dies, becomes incapacitated or is otherwise unable to serve, the party
designating such director may designate his or her successor. All Shareholders
shall vote all shares held by them in favor of the election or removal of such
persons so designated. Action taken by either 3TEC or the Major Shareholders in
designating or removing directors shall be in writing executed by either 3TEC or
the Major Shareholders, as the case may be, and promptly delivered to the other
Shareholders and the Company.
2. Advisory Member. As long as the Board of Directors of the Company
shall consist of five (5) members, the Major Shareholders may request that a
non-voting advisory board member be appointed. Upon such request, the Major
Shareholders shall, subject to 3TEC's approval, select the person whom it
desires to have serve as such non-voting advisory board member. Such non-voting
advisory board member shall be permitted but not required to attend meetings of
the Board of Directors.
3. Vote in Favor of Change of State of Incorporation. Each of the
Shareholders agrees, so long as it owns such shares, to vote (including the
taking of any action by written consent, as necessary or appropriate) and cause
its Affiliates to vote all shares of Common Stock (and any and all shares of any
other voting class of capital stock of the Company presently or at any future
time owned by the Shareholders) which it is entitled to vote (or control the
voting directly or indirectly) to ensure that, at the request of 3TEC, to vote
their shares of Common Stock in favor of changing the state of incorporation of
the Company from Alabama to another jurisdiction recommended by the Board of
Directors.
4. Termination of 3TEC's Right to Elect Directors. 3TEC's right to
designate the directors as provided in paragraph 1(b)(i) above shall terminate
as follows:
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(a) if 3TEC's ownership of Common Stock is below 15% of the
Adjusted Outstanding Common Stock, 3TEC shall be entitled to
designate only two (2) members to the Board;
(b) if 3TEC's ownership of Common Stock is below 7 1/2% of the
Adjusted Outstanding Common Stock, 3TEC shall be entitled to
designate only one (1) member to the Board; and
(c) if 3TEC's ownership of Common Stock is below 5% of the
Adjusted Outstanding Common Stock, 3TEC's right to designate a
member to the Board shall terminate.
For purposes hereof, "Adjusted Outstanding Common Stock" shall mean the number
of shares of Common Stock outstanding less any shares of Common Stock purchased
by Kaiser-Francis Oil Company pursuant to its respective Purchase Agreement.
5. Termination of Major Shareholders' Right to Elect Directors. The
Major Shareholders' right to designate the directors as provided in paragraph
1(b)(ii) above shall terminate as follows:
(a) if the Major Shareholders' ownership of Common Stock is below
7 1/2% of the outstanding Common Stock, the Major Shareholders
shall be entitled to designate only one (1) member to the
Board;
(b) if the Major Shareholders' ownership of Common Stock is below
5% of the outstanding Common Stock, the Major Shareholders'
right to designate a member to the Board shall terminate.
6. Replacement Director. If either 3TEC or the Major Shareholders is no
longer eligible to designate a director or directors to the Board, the Board
shall (i) decrease the size of the Board, (i) leave the vacated seat empty, or
(iii) appoint a replacement to serve until the next of election of directors by
the shareholders of the Company through its normal nominating procedure, and
select a nominee to fill the open seat for election by shareholders at the next
annual meeting.
7. Restrictive Legend. Each certificate evidencing Common Stock subject
hereto shall bear a legend as follows:
"The shares of stock represented by this certificate are,
until sale, subject to a Shareholders' Agreement, dated as of
August 27, 1999, a copy of which is on file in the office of
the Company."
Any certificate evidencing Common Stock subject to this Agreement which is
hereafter issued shall bear the same legend.
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<PAGE> 4
8. Termination of Agreement. This Agreement shall continue until, and
shall terminate immediately upon (a) execution of a written agreement of
termination by the Shareholders and the Company, (b) the adjudication of the
Company as a bankrupt or insolvent by a court of competent jurisdiction, or (c)
each of 3TEC and the Major Stockholders own less than five percent of the issued
and outstanding shares of Common Stock.
9. Shareholders' Representation and Warranties. Each Shareholder,
severally, as to itself only, represents and warrants to the Company that (a)
the Shareholder has duly authorized, executed and delivered this Agreement and
this Agreement constitutes a valid and binding agreement, enforceable in
accordance with its terms and neither the execution and delivery of this
Agreement nor the consummation by the Shareholder of the transactions
contemplated hereby will constitute a violation of, a default under, or conflict
with any contract, commitment, agreement, understanding, arrangement or
restriction of any kind to which the Shareholder is a party or by which the
Shareholder is a party or by which the Shareholder is bound; (b) consummation by
the Shareholder of the transactions contemplated hereby will not violate, or
require any consent, approval, or notice under, any provision of law other than
filing on Form 13D that may be required under the Securities Exchange Act of
1934, as amended; (c) except to the extent contemplated herein each
Shareholder's shares of Common Stock and the certificates representing same are
now and at all times during the term of this Agreement will be held by the
Shareholder, or by a nominee or custodian for the benefit of the Shareholder,
free and clear of all liens, claims, security interests, proxies, voting trusts
or agreement or any other encumbrances whatsoever ("Encumbrances") with respect
to the ownership or voting of such shares of Common Stock or otherwise, other
than Encumbrances created by or arising pursuant to this Agreement; (d) there
are no outstanding options, warrants or rights to purchase or acquire, or
proxies, powers-of-attorney, voting agreements, trust agreements or other
agreements relating to, such shares of Common Stock other than this Agreement
and the Registration Rights Agreement of even date as defined in the Purchase
Agreement; (e) the shares of Stock listed in the second recital paragraph hereof
constitutes all of the Common Stock of each Shareholder owned beneficially or of
record by such Shareholder on the date hereof; and (f) the Shareholder has the
present power and right to vote all of the shares of Common Stock as
contemplated herein.
10. Negative Covenants of Each Shareholder. Except to the extent
contemplated herein or in the Purchase Agreements, each Shareholder hereby
covenants and agrees that such Shareholder will not, and will not agree to,
directly or indirectly, except pursuant to an effective registration statement
or through "brokers" transactions as contemplated by subparagraphs (f) and (g)
and subject to the limitations on amount provided by subparagraph (e) of Rule
144 under the Securities Act, (a) sell, transfer, assign, cause to be redeemed
or otherwise dispose of any of its shares of Stock or enter into any contract,
option or other agreement or understanding with respect to the sale, transfer,
assignment, redemption or other disposition of its shares of Stock; (b) grant
any proxy, power-of-attorney or other authorization or interest in or with
respect to its shares of Stock pertaining or relating to the Purchase Agreements
or any of the transactions contemplated thereby; or (c) deposit such Stock into
a voting trust or enter into a voting agreement or arrangement with respect to
such Stock, unless and until, in the case of (a), (b) or
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<PAGE> 5
(c) above, the Shareholder shall have taken all actions (including, without
limitation, the endorsement of a legend on the certificates evidencing such
Stock) reasonably necessary to ensure that such Stock shall at all times be
subject to all the rights, powers and privileges granted or conferred, and
subject to all the restrictions, covenants and limitations imposed, by this
Agreement and shall have caused, as a condition to any sale, transfer, pledge or
other disposition of any shares of Stock, any transferee of any of the Stock,
unless it is already a signatory to this Agreement, shall become a signatory to
and be bound by the terms of this Agreement.
11. Certain Defined Terms. Unless otherwise expressly provided herein,
all capitalized terms used herein without definition shall have the meanings
assigned to them in the Purchase Agreement.
12. Successors. This Agreement shall be binding upon and shall operate
for the benefit of the Company, its shareholders, and their respective
successors, assigns, executors, administrators and heirs, and it shall be
binding upon any entity to whom any Stock is transferred in accord with or in
violation of the provisions of this Agreement, and the executor or administrator
of such entity.
13. Modification. Notwithstanding anything to the contrary in this
Agreement or otherwise, no modification, amendment or waiver of any of the
provisions of this Agreement shall be effective unless in writing and signed by
all parties hereto. Each Shareholder covenants not to vote any shares of Stock
in favor of any amendment of the articles of incorporation or bylaws of the
Company, if such amendment would materially modify the terms or frustrate the
purpose of this Agreement or the Purchase Agreements, unless the vote on such
amendment is approved unanimously by the parties to this Agreement.
14. Non-Waiver. The failure to enforce at any time any of the
provisions of this Agreement, or to require at any time performance by any other
party of any of the provisions hereof, shall in no way be constructed to be a
waiver of such provisions.
15. Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws effective
during the term thereof, such provision shall be fully severable, this Agreement
shall be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part thereof, and the remaining provisions
thereof shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance therefrom.
16. Entire Agreement. This Agreement contains the full understanding of
the parties hereto with respect to the subject matter hereof, and there are no
representations, warranties, agreements or understandings other than expressly
contained herein.
17. Notices. Any notice to be given by any party hereunder to any other
shall be in writing, mailed by certified or registered mail, return receipt
requested, and shall be addressed to all other parties at the addresses listed
on the signature page hereof. All such notices shall be
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<PAGE> 6
deemed to be given three (3) days after the date of mailing thereof.
18. Specific Performance. Each of the Shareholders acknowledges and
agrees that the Company would be damaged irreparably in the event that any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Shareholders
agrees that the Company shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions hereof in any action instituted in
any court having jurisdiction over the parties hereto and the subject matter
hereof, in addition to any other remedy to which the Company may be entitled at
law or in equity.
19. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF ALABAMA.
20. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
[Signature Page to Follow]
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<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
COMPANY:
MIDDLE BAY OIL COMPANY, INC.
By: /s/ John J. Bassett
-----------------------------
Name: John J. Bassett
Title: President
Address for Notice:
Middle Bay Oil Company, Inc.
1221 Lamar Street, Suite 1020
Houston, TX 77010
Fax: (713) 650-0352
3TEC ENERGY CORPORATION
By: /s/ Floyd C. Wilson
-----------------------------
Name: Floyd C. Wilson
Title: President
Address for Notice:
3TEC Energy Corporation
5910 N. Central Expressway
Suite 1150
Dallas, TX 75206
Fax: (214) 373-9731
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<PAGE> 8
KAISER-FRANCIS OIL COMPANY
By: /s/ Gary R. Christopher
----------------------------
Name: Gary R. Christopher
Title: Acquisitions Coordinator
Address for Notice:
Kaiser-Francis Oil Company
6733 South Yale
Tulsa, OK 74136
Fax: (918) 491-4694
/s/ C.J. Lett, III
----------------------------
C.J. LETT, III
Address for Notice:
C.J. Lett, III
9320 East Central
Wichita, Kansas 67206
Fax: (316) 636-1803
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<PAGE> 9
WESKIDS, L.P.
By: Weskids, Inc.
Its General Partner
By: /s/ Christine W. Jenkins
------------------------
Name: Christine W. Jenkins
Title: Vice President
Address for Notice:
Weskids, L.P.
310 South Street
Morristown, NJ 07960
Fax: (973) 682-2684
/s/ Alvin V. Shoemaker
---------------------------------
ALVIN V. SHOEMAKER
Address for Notice:
Alvin V. Shoemaker
8800 First Avenue
Stone Harbor, NJ 08247
Fax: (609) 368-0147
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<PAGE> 1
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") dated as of August
27, 1999, is entered into by and among MIDDLE BAY OIL COMPANY, INC., an Alabama
corporation ("Corporation") and the parties listed on Schedule 1 attached hereto
and incorporated herein by reference (each of such parties are referred to
individually as "Shareholder" and collectively, as "Shareholders") and the
parties listed on Schedule 2 attached hereto and incorporated herein by
reference (each of such parties are referred to individually as "Piggy-Back
Shareholder" and collectively, as "Piggy-Back Shareholders").
RECITALS
WHEREAS, pursuant to those Securities Purchase Agreements by and
between the Corporation and each of the Shareholders as referenced on Schedule 1
(the "Purchase Agreements"), each Shareholder will receive the number of shares
of Common Stock, Notes and Warrants as set forth on Schedule 1.
WHEREAS, each of the Piggy-Back Shareholders currently owns shares of
Common Stock as set forth on Schedule 2.
WHEREAS, as a condition to the Purchase Agreements, Corporation has
agreed to grant to Shareholders certain registration rights with respect to
their Registrable Securities (defined hereafter) and has agreed to grant the
Piggy-Back Shareholders certain registration rights with respect to their
Piggy-Back Registrable Securities (defined hereafter).
WHEREAS, all the terms used but not defined in this Agreement shall
have the meaning ascribed to them in the Purchase Agreements.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions.
For purposes of this Agreement, the following terms shall have the
respective meanings assigned to them in this Section 1 or in the recitals above
or the subsections referred to below.
"Piggy-Back Registrable Securities" shall mean (i) the shares of Common
Stock owned by each Piggy-Back Shareholder as listed on Schedule 2 (ii) the
shares of Common Stock owned by each Piggy-Back Shareholder during the term of
this Agreement as a result of the conversion of the shares of the Company's
Series B Convertible Preferred Shares as listed on Schedule 2, and (iii) any
securities issued or issuable with respect to the shares described in clauses
(i) and (ii)
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above by way of a stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization.
"Registrable Securities" shall mean (i) the shares of Common Stock
issued to the Shareholders pursuant to the Purchase Agreements (which, for
purposes hereof, shall mean the Common Stock Shares, the Warrant Shares and the
Conversion Shares as defined in the Purchase Agreements) and (ii) any securities
issued or issuable with respect to the shares described in clause (i) above by
way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization.
Section 2. Independent Registration Rights.
2.1 The Corporation hereby grants to each Shareholder separate rights
to require the Corporation to use its best efforts to cause registration and
sale in a public offering of all or a portion of such Shareholder's Registrable
Securities in accordance with this Section 2; provided, however, the Corporation
shall not have any obligation to effect more than a total of three (3) effective
registrations pursuant to this Section 2 at the Corporation's expense. If the
Corporation shall have received a written request submitted by Shareholder(s)
owning at least a majority of the Registrable Securities outstanding at the time
of such request (the "Requisite Holders") that such Shareholder(s)
desires/desire to sell Registrable Securities and specifying the number of
Registrable Securities proposed to be sold (for the purposes of this Section 2,
"Shares") and the proposed plan for distribution of the Shares, Corporation will
thereafter:
2.1.1 Give prompt (but in any event within fifteen (15) days
after the receipt of the Requisite Holder(s)' notice) notice to all other
Shareholders of such notice and of such other Shareholders' rights to have their
Registrable Securities included in such registration.
2.1.2 Upon the request of any such Shareholder made within
fifteen (15) days after the receipt by such Shareholder of any such notice given
pursuant to subsection 2.1.1 (which request shall specify the Registrable
Securities intended to be disposed of by such Shareholder and the intended
method or methods of disposition thereof), the Corporation will use its best
efforts to effect the registration of all Shares which the Corporation has been
so requested to register pursuant to this subsection 2.1.
2.1.3 Prepare and file as soon as practicable, but in no event
later than thirty (30) days from Corporation's receipt of the last Shareholder's
request to have such Shareholder's Registrable Securities included in such
registration within the time period specified in Section 2.1.2, a registration
statement under the Securities Act of 1933, as amended (the "Securities Act")
("Registration Statement") with the Securities Exchange Commission
("Commission") on Form S-1 (or Form S-2 or Form S-3, if Corporation is entitled
to use such forms, or similar forms available for use by small business issuers)
and use its best efforts to cause such Registration Statement to become
effective in order that the Shareholders may sell the Shares in accordance with
the proposed plan of distribution.
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<PAGE> 3
2.1.4 Prepare and file with the Commission such amendment and
supplements to such Registration Statement and prospectus used in connection
therewith including any preliminary prospectus or supplemental or amended
prospectus (the "Prospectus") as may be necessary to keep such Registration
Statement continuously effective and to comply with the provisions of the
Securities Act with respect to the offer of the Shares during the period
required for distribution of the Shares, which period shall not be in excess of
the earlier of (i) one year from the effective date of such Registration
Statement, and (ii) the distribution of all Shares covered by such Registration
Statement.
2.1.5 Furnish to each Shareholder such number of copies of the
Prospectus (including any preliminary prospectus or supplemental or amended
prospectus ) as such Shareholder may reasonably request in order to facilitate
the sale and distribution of the Shares.
2.2 The right of each Shareholder to register Shares pursuant to the
provisions of this Section 2 shall be subject to the condition that if a request
for registration is made within sixty (60) days prior to the conclusion of
Corporation's then current fiscal year, Corporation shall have the right to
delay the filing of the Registration Statement for such period of time until
Corporation receives its audited financial statements for such fiscal year.
2.3 If the Requisite Holder(s) intend/intends to distribute the
Registrable Securities covered by the notice pursuant to subsection 2.1 by means
of an underwriting, the Requisite Holder(s) shall so advise the Corporation as a
part of the notice made pursuant to subsection 2.1 and provide the name of the
managing underwriter or underwriters that the Requisite Holder(s)
proposes/propose to employ in connection with the public offering proposed to be
made pursuant to the registration requested. If the managing underwriter of such
underwritten offering shall inform the Corporation and the Shareholders
requesting that their Shares be registered pursuant to this Section 2 by letter
of its belief that the amount of Shares requested to be included in such
registration exceeds the amount which can be sold in (or during the time of)
such offering within a price range acceptable to the Requisite Holders, then the
Corporation will include in such registration such amount of Shares which the
Corporation is so advised can be sold in (or during the time of) such offering
pro rata on the basis of the amount of such Shares so proposed to be sold and so
requested to be included by such parties.
2.4 A registration shall not be deemed to have been effected (i) unless
it has become effective and remained effective for the period specified in
subsection 2.1.4, (ii) if, after it has become effective, such registration is
terminated by a stop order, injunction or other order of the Commission or other
governmental agency or court, or (iii) if the conditions to closing specified in
any purchase agreement or underwriting agreement entered into in connection with
such registration are not satisfied for any reason, other than as a result of
the voluntary termination of such offering by the Requisite Holders.
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<PAGE> 4
Section 3. Piggy-Back Registration Rights.
3.1 If Corporation proposes to file, on its behalf, a Registration
Statement under the Securities Act on Form S-1, S-2 or S-3 or similar forms
available for use by small business issuers, other than pursuant to Section 2 of
this Agreement or in connection with a dividend reinvestment, employee stock
purchase, option or similar plan or in connection with a merger, consolidation
or reorganization, Corporation shall give written notice to each Shareholder and
Piggy-Back Shareholder at least thirty (30) days before the filing with the
Commission of such Registration Statement. Such notice shall offer to include in
such filing all or a portion of the Registrable Securities and Piggy-Back
Registrable Securities owned by such Shareholder or Piggy-Back Shareholder. If a
Shareholder or Piggy-Back Shareholder desires to include all or a portion of its
Registrable Securities or Piggy-Back Registrable Securities in such Registration
Statement, it shall give written notice to Corporation within fifteen (15) days
after the date of mailing of such offer specifying the amount of Registrable
Securities and/or Piggy-Back Registrable Securities to be registered (for the
purpose of this Section 3, "Shares"). Corporation shall thereupon include in
such filing the Shares, subject to priorities in registration set forth in this
Agreement, and subject to its right to withdraw such filing, and shall use its
best efforts to effect registration under the Securities Act of the Shares.
3.2 The right of the Shareholders and the Piggy-Back Shareholders to
have the Shares included in any Registration Statement in accordance with the
provisions of this Section 3 shall be subject to the following conditions:
3.2.1 Corporation shall have the right to require that each
Shareholder or Piggy-Back Shareholder agree to refrain from offering or selling
any shares of Common Stock that it owns which are not included in any such
Registration Statement in accordance with this Section 3 for any reasonable time
period specified, not to exceed ninety (90) days, by any managing underwriter of
the offering to which such Registration Statement relates.
3.2.2 If (i) a registration pursuant to this Section 3
involves an underwritten offering of the securities being registered to be
distributed (on a firm commitment basis) by or through one or more underwriters
of recognized standing under underwriting terms appropriate for such a
transaction and (ii) the managing underwriter of such underwritten offering
shall inform the Corporation and the Shareholders and Piggy-Back Shareholders
who have requested that their Shares be registered pursuant to this Section 3 by
letter of its belief that the amount of Shares requested to be included in such
registration exceeds the amount which can be sold in (or during the time of)
such offering within a price range acceptable to a majority of such requesting
holders, then the Corporation will include in such registration such amount of
securities which the Corporation is so advised can be sold in (or during the
time of) such offering as follows: first, the securities being offered by the
Corporation for its own account; second such Shares of the Shareholders which
are requested to be included in such registration pro rata on the basis of the
amount of such Shares so proposed to be sold and so requested to be included by
such Shareholders; and third, such Shares of the Piggy-Back Shareholders and
which are requested to be included in such registration pro rata on the basis of
the amount of such Shares so proposed to be sold and so requested to be included
by such Piggy-Back Shareholders.
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<PAGE> 5
3.2.3 Corporation shall furnish each Shareholder and
Piggy-Back Shareholder with such number of copies of the Prospectus as such
Shareholder or Piggy-Back Shareholder may reasonably request in order to
facilitate the sale and distribution of its shares.
3.3 Notwithstanding the foregoing, Corporation in its sole discretion
may determine not to file the Registration Statement or proceed with the
offering as to which the notice specified herein is given without liability to
the Shareholders or the Piggy-Back Shareholders.
Section 4. Participation in Underwritten Registrations. No Shareholder
or Piggy-Back Shareholder may participate in any registration hereunder which
relates to an underwritten offering unless such Shareholder or Piggy-Back
Shareholder (a) agrees to sell such holder's securities on the basis provided in
any underwriting arrangements approved by the holders of at least a majority of
the Registrable Securities and Piggy-Back Registrable Securities to be included
in such registration, or by a Person appointed by such holders to act on their
behalf to approve such arrangements, and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
Section 5. Exclusive Registration Rights and Transfer.
The rights of each Shareholder under this Agreement may upon notice to
the Corporation be transferred to its respective Affiliates in combination with
a transfer of shares to such Affiliates. In addition, the rights of each
Shareholder under this Agreement may upon notice to the Corporation be
transferred to a non-Affiliate transferee in combination with a transfer of
shares to such non-Affiliate transferee. However, such non-Affiliate transferee
may not thereafter transfer its rights under this Agreement without the
Corporation's written consent. Except as provided in this Section 5, the rights
granted under this Agreement are granted specifically to and for the benefit of
each Shareholder and Piggy Back Shareholder and shall not pass to any transferee
of Registrable Securities. From and after the date of this Agreement, the
Corporation will not, without the prior written consent of Shareholders holding
at least a majority of the Registrable Securities then outstanding, enter into
any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the Shareholders in this Agreement. Without
limiting the foregoing, the Corporation also specifically agrees that during the
period commencing on the date hereof and ending when the Shareholders have
disposed of all of their Registrable Securities, the Corporation will not enter
into an agreement with any party pertaining to the registration by the
Corporation of such party's Common Stock. The Corporation represents and
warrants to each of the Shareholders that, as of the date hereof, the
Corporation is not a party to any agreement, other than this Agreement,
pertaining to the registration by the Corporation of Common Stock.
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<PAGE> 6
Section 6. Expenses. Corporation will bear all the expenses in
connection with any Registration Statement under this Agreement, other than
transfer taxes payable on the sale of such shares, the fees and expenses of
counsel to the Shareholders and Piggy-Back Shareholders and fees and commissions
of brokers, dealers and underwriters.
Section 7. Recall of Prospectuses, etc. With respect to a Registration
Statement or amendment thereto filed pursuant to this Agreement, if, at any
time, Corporation notifies the Shareholders and Piggy-Back Shareholders that an
amendment or supplement to such Registration Statement or amendment to the
Prospectus included therein is necessary or appropriate, each Shareholder and
Piggy-Back Shareholder will forthwith cease selling and distributing shares
thereunder and will forthwith redeliver to Corporation all copies of such
Registration Statement and Prospectuses then in its possession or under its
control. Corporation will use its best efforts to cause any such amendment or
supplement to become effective as soon as practicable and will furnish each
Shareholder and Piggy-Back Shareholder with a reasonable number of copies of
such amended or supplemented prospectus (and the period during which Corporation
is required to use its best efforts to maintain such Registration Statement in
effect pursuant to this Agreement will be increased by the period from the date
on which such Shareholder or Piggy-Back Shareholder ceased selling and
distributing shares thereunder to the date on which such amendment or supplement
becomes effective).
Section 8. Cooperation with Existing Shareholders. Corporation shall be
entitled to require the Shareholders and Piggy-Back Shareholders to cooperate
with Corporation in connection with a registration of Registrable Securities
pursuant to this Agreement and furnish (i) such information as may be required
by Corporation or the Commission in connection therewith and (ii) such
representations, undertakings and agreements as may be required by the
Commission in connection therewith.
Section 9. Registration Procedures Upon the receipt of a request for
registration of any Registrable Securities pursuant to Section 2 or Section 3 of
this Agreement, Corporation will use its best efforts to effect the registration
of the Registrable Securities in accordance with the intended method of
disposition thereof, and pursuant thereto Corporation will as expeditiously as
possible:
9.1.1 Prepare and file with the Commission a registration
statement on an appropriate form under the Securities Act and use its best
efforts to cause such registration statement to become effective; provided, that
before filing a registration statement or prospectus or any amendments or
supplements thereto, including documents incorporated by reference after the
initial filing of any registration statement, Corporation will promptly furnish
to the holders of Registrable Securities and Piggy-Back Registrable Securities
to be registered and sold pursuant to this Agreement (the "Registered Holders")
and the underwriters, if any, copies of all such
6
<PAGE> 7
documents proposed to be filed, which documents will be subject to the review of
the Registered Holders and the underwriters, and Corporation will not file any
registration statement or amendment thereto, or any prospectus or any supplement
thereto (including such documents incorporated by reference) to which the
Registered Holders or the underwriters, if any, shall reasonably object in the
light of the requirements of the Securities Act and any other applicable laws
and regulations.
9.1.2 Prepare and file with the Commission such amendments and
post-effective amendments to a registration statement as may be necessary to
keep such registration statement effective for the applicable period; cause the
related prospectus to be filed pursuant to Rule 424(b) (or any successor
provision) under the Securities Act; cause such prospectus to be supplemented by
any required prospectus supplement and, as so supplemented, to be filed pursuant
to Rule 424(b) (or any successor provision) under the Securities Act; and comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during the applicable period
in accordance with the intended methods of disposition set forth in such
registration statement or supplement to such prospectus.
9.1.3 Notify the Registered Holders and the managing underwriters,
if any, promptly, and (if requested by any such person) confirm such advice in
writing, (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, and, with respect to a registration statement or any
post-effective amendment, when the same has become effective, (ii) of any
request by the Commission for amendments or supplements to a registration
statement or related prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of a
registration statement or the initiation of any proceeding for that purpose,
(iv) if at any time the representations and warranties of Corporation
contemplated by subsection 9.1.10 cease to be true and correct, (v) of the
receipt by Corporation of any notification with respect to the suspension or
qualification of any of the Registrable Securities for sale in any jurisdiction
or the initiation of any proceeding for such purpose, (vi) of the happening of
any event which requires the making of any changes in a registration statement
or related prospectus so that such documents will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading and
(vii) of Corporation's reasonable determination that a post-effective amendment
to a registration statement would be appropriate or that there exist
circumstances not yet disclosed to the public which make further sales under
such registration statement inadvisable pending such disclosures and
post-effective amendment.
9.1.4 Make reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of a registration statement, or the lifting of any
suspension of the qualification of any of the Registrable Securities for sale in
any jurisdiction, at the earliest possible moment.
9.1.5 If requested by the managing underwriters or the Registered
Holders in connection with an underwritten offering, immediately incorporate in
a prospectus supplement or post effective amendment such information as the
managing underwriters and the Registered Holders agree should be included
therein relating to such sale and distribution of Registrable Securities,
7
<PAGE> 8
including, without limitation, information with respect to the number of shares
of Registrable Securities being sold to such underwriters and the purchase price
being paid therefor by such underwriters and with respect to any other terms of
the underwritten (or best efforts underwritten) offering of the Registrable
Securities to be sold in such offering; make all required filings of such
prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment; and supplement or make amendments to any registration statement if
requested by the Registered Holders or any underwriter of such Registrable
Securities.
9.1.6 Furnish to the Registered Holders and each managing
underwriter, if any, without charge, at least one signed copy of the
registration statement, any post-effective amendment thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference).
9.1.7 Deliver without charge to the Registered Holders and the
underwriters, if any, as many copies of the prospectus or prospectuses
(including each preliminary prospectus) and any amendment or supplement thereto
as such persons may reasonably request; and Corporation consents to the use of
such prospectus or any amendment or supplement thereto by such Registered
Holders and the underwriters, if any, in connection with the offer and sale of
the Registrable Securities covered by such prospectus or any amendment or
supplement thereto.
9.1.8 Prior to any public offering of Registrable Securities,
register or qualify or cooperate with the Registered Holders, the underwriters,
if any, and respective counsel in connection with the registration or
qualification of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Registered Holders or
an underwriter reasonably requests in writing; keep each such registration or
qualification effective during the period such registration statement is
required to be kept effective and do any and all other acts or things necessary
or advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by the applicable registration statement; provided, however,
that Corporation will not be required in connection therewith or as a condition
thereto to qualify generally to do business or subject itself to general service
of process in any such jurisdiction where it is not then so subject.
9.1.9 Upon the occurrence of any event contemplated by subsection
9.1.3 (ii) - (vii) above, prepare, to the extent required, a supplement or
post-effective amendment to the applicable registration statement or related
prospectus or any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchaser of the
Registrable Securities being sold thereunder, such prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading.
9.1.10 Enter into such agreements (including an underwriting
agreement) and take all such other actions in connection therewith in order to
expedite or facilitate the disposition of such Registrable Securities and in
such connection, whether or not an underwriting agreement is
8
<PAGE> 9
entered into and whether or not the Registrable Securities to be covered by such
registration are to be offered in an underwritten offering: (i) make such
representations and warranties to the Registered Holders to the registration
statement, prospectus and documents incorporated by reference, if any, in form,
substance and scope as are customarily made by issuers to underwriters in
underwritten offerings and confirm the same if and when requested; (ii) obtain
opinions of counsel to Corporation and updates thereof with respect to the
registration statement and the prospectus in the form, scope and substance which
are customarily delivered in underwritten offerings; (iii) in the case of an
underwritten offering, enter into an underwriting agreement in form, scope and
substance as is customary in underwritten offerings and obtain opinions of
counsel to Corporation and updates thereof (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to the managing
underwriters and the Registered Holders) addressed to the Registered Holders and
the underwriters, if any, covering the matters customarily covered in opinions
delivered in underwritten offerings and such other matters as may be reasonably
requested by the Registered Holders and such underwriters; (iv) obtain "cold
comfort" letters and updates thereof from Corporation's independent certified
public accountants addressed to the Registered Holders and the underwriters, if
any, such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters by accountants in connection with
underwritten offerings; (v) if any underwriting agreement is entered into, the
same shall set forth in full the indemnification provisions and procedures
customarily included in underwriting agreements in underwritten offerings; and
(vi) Corporation shall deliver such documents and certificates as may be
requested by the Registered Holders and the managing underwriters, if any, to
evidence compliance with clause (i) above and with any customary conditions
contained in the underwriting agreement or other agreement entered into by
Corporation. The above shall be done at each closing under such underwriting or
similar agreement or as and to the extent required thereunder.
9.1.11 Make available for inspection by a representative of the
Registered Holders, any underwriter participating in any disposition pursuant to
such registration, and any attorney or accountant retained by the Registered
Holders or such underwriter, all financial and other records, pertinent
corporate documents and properties of Corporation, and cause Corporation's
officers, directors and employees to supply all information reasonably requested
by any such representative, underwriter, attorney or accountant in connection
with such registration; provided that any records, information or documents that
are designated by Corporation in writing as confidential shall be kept
confidential by such Persons unless disclosures of such records, information or
documents is required by court or administrative order.
9.1.12 Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make generally available
to its security holders earning statements satisfying the provisions of Section
11(a) of the Securities Act, no later than 90 days after the end of any 12-month
period (i) commencing at the end of any fiscal quarter in which Registrable
Securities are sold to underwriters in a firm or best efforts underwritten
offering and (ii) beginning with the first day of Corporation's first fiscal
quarter next succeeding each sale of Registrable Securities after the effective
date of a registration statement, which statements shall cover said 12-month
periods.
9
<PAGE> 10
9.1.13 If Corporation, in the exercise of its reasonable judgment,
objects to any change reasonably requested by the Registered Holders or the
underwriters, if any, to any registration statement or prospectus or any
amendments or supplements thereto (including documents incorporated or to be
incorporated therein by reference) as provided for in this Section 9,
Corporation shall not be obligated to make any such change and such Registered
Holders may withdraw their Registrable Securities from such registration, in
which event (i) Corporation shall pay all registration expenses (including its
counsel fees and expenses) incurred in connection with such registration
statement or amendment thereto or prospectus or supplement thereto, and (ii) in
the case of a registration being effected pursuant to Section 2, such
registration shall not count as one of the registrations Corporation is
obligated to effect pursuant to Section 2 hereof.
Section 10. Indemnification.
10.1 In the event of any registration of any securities under the
Securities Act pursuant to this Agreement, Corporation will indemnify and hold
harmless each Shareholder, each Piggy-Back Shareholder, any underwriter and each
other Person, if any, who controls such Shareholder, Piggy-Back Shareholder or
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which each such
Shareholder, Piggy-Back Shareholder or any underwriter may become subject, under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or action in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
such Registration Statement or preliminary prospectus (if used prior to the
effective date of such Registration Statement) or final or summary prospectus
contained therein (if used during the period the Corporation is required to keep
the Registration Statement effective), or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements made therein not misleading, and will reimburse each such
Shareholder, Piggy-Back Shareholder or underwriter for any legal or any other
expenses as reasonably incurred by such person in connection with investigating
or defending any such action or claim, excluding any amounts paid in settlement
of any litigation, commenced or threatened, if such settlement is effected
without prior written consent of Corporation; provided, however, that
Corporation will not be liable to the Shareholders, Piggy-Back Shareholders or
an underwriter in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
omission or alleged omission made in said Registration Statement, said
preliminary prospectus or said final or summary prospectus or any amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished to Corporation by that Shareholder, Piggy-Back Shareholder or their
respective affiliates or representatives, or by that underwriter, as the case
may be, specifically for use in the preparation thereof; and provided further
that the indemnity agreement contained in this Section 10 with respect to any
preliminary prospectus shall not inure to the benefit of the Shareholders,
Piggy-Back Shareholders or any underwriter or to any Person selling the same in
respect of any loss, claim, damage, liability or action asserted by someone who
purchased shares from such person if a copy of the final
10
<PAGE> 11
prospectus (as the same may be amended or supplemented) in connection with such
registration statement was not sent or given to such person with or prior to
written confirmation of the sale and if the untrue statement or omission or
alleged untrue statement or omission of a material fact contained in such
preliminary prospectus was corrected in the final prospectus.
10.2 In the event of any registration of securities under the
Securities Act pursuant to this Agreement, each Shareholder and Piggy-Back
Shareholder will indemnify and hold harmless Corporation, each of its directors
and officers, any underwriter and each other Person, if any, who controls
Corporation or underwriter within the meaning of the Securities Acts, against
any losses, claims, damages or liabilities, joint or several, to which
Corporation or any such director, officer, underwriter may become subject, under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or action in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
such Registration Statement or preliminary prospectus or final or summary
prospectus contained therein, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
made therein not misleading, and will reimburse Corporation, each such director,
officer, underwriter for any legal or any other expenses as reasonably incurred
by them in connection with investigating or defending any such action or claim,
excluding any amounts paid in settlement of any litigation, commenced or
threatened, if such settlement is effected without prior written consent of the
indemnifying Shareholder, Piggy-Back Shareholder or their respective
representative; but in all cases only if, and to the extent that any such loss,
claim, damage, liability or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission therein
made in reliance upon and in conformity with written information furnished to
Corporation by the indemnifying Shareholder, Piggy-Back Shareholder or their
respective affiliates or representatives specifically for use in the preparation
thereof. Notwithstanding the foregoing, the amount of the indemnity provided by
each such Shareholder or Piggy-Back Shareholder pursuant to this Section 10
shall not exceed the net proceeds received by such Shareholder or Piggy-Back
Shareholder in such related registration and sale.
10.3 Promptly after receipt by a party entitled to indemnification
under subsection 10.1 or 10.2 hereof of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under either of such subsections, notify the
indemnifying party in writing of the commencement thereof. In case any such
action is brought against the indemnified party and it shall so notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it so chooses, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party,
and, after notice from the indemnifying party that it so chooses, such
indemnifying party shall not be liable for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof, provided, however, that if the indemnifying party fails to take
reasonable steps necessary to diligently defend such claim within twenty (20)
days after receiving notice from the indemnified party that the indemnified
party believes the indemnifying party has failed to take such steps, the
indemnified party may assume its own defense and the indemnifying party shall be
liable for any expenses therefor. The indemnity
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<PAGE> 12
agreements in this Section 10 shall be in addition to any liabilities which the
indemnifying parties may have pursuant to law.
10.4 If the indemnification provided for in this Section 10 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in Section 10 hereof, any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 10 were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to in the immediately preceding paragraph. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
Section 11. Sales under Rule 144. With a view to making available to
each Shareholder and Piggy-Back Shareholder the benefits of Rule 144 promulgated
under the Securities Act and any other similar rule or regulation of the
Commission that may at any time permit such Shareholder or Piggy-Back
Shareholder to sell the Registrable Securities without registration, Corporation
agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 (or any successor provision);
(b) file with the Commission in a timely manner all reports and other
documents required of Corporation under the Securities Act and the Exchange Act;
(c) furnish to such Shareholder or Piggy-Back Shareholder forthwith
upon request (i) a written statement by Corporation that it has complied with
the reporting requirements of Rule 144 (or any successor provision), the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of Corporation and such other reports and documents so filed by
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<PAGE> 13
Corporation under the Securities Act and the Exchange Act and (iii) such other
information as may be reasonably requested by such Shareholder or Piggy-Back
Shareholder in availing itself of any rule or regulation of the Commission which
permits the selling of any such securities without registration; and
(d) after any sale of Registrable Securities pursuant to Rule 144, to
the extent allowed by law, to cause any restrictive legends to be removed and
any transfer restrictions to be rescinded with respect to such Registration
Securities.
Section 12. Removal of Legend. The Corporation agrees, to the extent
allowed by law, to remove any legends on certificates representing Registrable
Securities or Piggy-Back Registrable Securities describing transfer restrictions
applicable to such securities upon the sale of such securities (i) pursuant to
an effective Registration Statement under the Securities Act or (ii) in
accordance with the provisions of Rule 144 under the Securities Act.
Section 13. Notices. Any notice to be given by any party hereunder to
any other shall be in writing, mailed by certified or registered mail, return
receipt requested, and shall be addressed to the other parties at the addresses
listed on the signature pages hereof. All such notices shall be deemed to be
given three (3) days after the date of mailing thereof.
Section 14. Modification. Notwithstanding anything to the contrary in
this Agreement or otherwise, no modification, amendment or waiver of any of the
provisions of this Agreement shall be effective unless in writing and signed by
the Corporation and the Shareholders holding not less than 95% of the
Registrable Securities then outstanding.
Section 15. Non-Waiver. The failure to enforce at any time any of the
provisions of this Agreement, or to require at any time performance by any other
party of any of the provisions hereof, shall in no way be construed to be a
waiver of such provisions.
Section 16. Partial Invalidity. If any clause, sentence, paragraph,
section or part of this Agreement shall be deemed invalid, unenforceable or
against public policy, the part which is invalid, unenforceable or contrary to
public policy shall not affect, impair, invalidate or nullify the remainder of
this Agreement, but the invalidity, unenforceability or contrariness to public
policy shall be confined only to the clause, sentence, paragraph, section or
party of this Agreement so invalidated, unenforceable or against public policy.
Section 17. Construction. The language in all parts of this Agreement
shall in all cases
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<PAGE> 14
be construed simply, according to its fair meaning, and shall not be construed
strictly for or against either of the parties hereto.
Section 18. Governing Law. This Agreement shall be governed and
construed according to the laws of the State of Alabama, without regard to its
conflicts of law principles.
Section 19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute but one and the same instrument.
Section 20. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns.
Section 21. Specific Performance. The parties agree that, to the extent
permitted by law, (i) the obligations imposed on them in this Agreement are
special, unique and of an extraordinary character, and that in the event of a
breach of any such party damages would not be an adequate remedy and (ii) the
other party shall be entitled to specific performance and injunctive and
equitable relief in addition to any other remedy to which it may be entitled at
law or in equity.
(Remainder of page intentionally left blank)
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<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"CORPORATION"
MIDDLE BAY OIL COMPANY, INC.
By: /s/ JOHN JAY BASSETT
------------------------------------
Name: John J. Bassett
Title: President
Address for Notice:
Middle Bay Oil Company, Inc.
1221 Lamar Street, Suite 1020
Houston, TX 77010
Fax: (713) 650-0352
"SHAREHOLDERS"
3TEC ENERGY CORPORATION
By: /s/ FLOYD C. WILSON
------------------------------------
Name: Floyd C. Wilson
Title: President
Address for Notice:
3TEC Energy Corporation
5910 N. Central Expressway
Suite 1150
Dallas, TX 75206
Fax: (214) 373-9731
15
<PAGE> 16
SHOEMAKER FAMILY PARTNERS, LP
By: Alvin V. Shoemaker
------------------------------------
Its General Partner
By: /s/ Peter Shoemaker
------------------------------------
Name: Peter Shoemaker
Title: Attorney in Fact
Address for Notice:
Shoemaker Family Partners, LP
60 Brushhill Road
Kinnelon, NJ 07405
Fax: (310) 444-3833
SHOEINVEST II, LP
By: Alvin V. Shoemaker Investments, Inc.
------------------------------------
Its General Partner
By: /s/ Peter Shoemaker
------------------------------------
Name: Peter Shoemaker
Title: Executive Vice President
Address for Notice:
Shoeinvest II, LP
60 Brushhill Road
Kinnelon, NJ 07405
Fax: (310) 444-3833
16
<PAGE> 17
"PIGGY-BACK SHAREHOLDERS"
KAISER-FRANCIS OIL COMPANY
By: /s/ Gary R. Christopher
------------------------------------
Name: Gary R. Christopher
Title: Acquisitions Coordinator
Address for Notice:
Kaiser-Francis Oil Company
6733 South Yale
Tulsa, OK 74136
Fax: (918) 491-4694
/s/ C.J. Lett, III
- ----------------------------------------
C.J. LETT, III
Address for Notice:
C.J. Lett, III
9320 East Central
Wichita, Kansas 67206
Fax: (316) 636-1803
17
<PAGE> 18
WESKIDS, L.P.
By: Weskids, Inc.
Its General Partner
By: /s/ Christine W. Jenkins
--------------------------
Name: Christine W. Jenkins
Title: Vice President
Address for Notice:
Weskids, L.P.
310 South Street
Morristown, NJ 07960
Fax: (973) 682-2684
/s/ Alvin V. Shoemaker
- ----------------------------------
ALVIN V. SHOEMAKER
Address for Notice:
Alvin V. Shoemaker
8800 First Avenue
Stone Harbor, NJ 08247
Fax: (609) 368-0147
18
<PAGE> 19
SCHEDULE 1
3TEC Energy Corporation Securities Purchase Agreement by and between 3TEC
Energy Corporation and Middle Bay Oil Company, Inc., dated July 1, 1999
4,775,556 shares of Common Stock
Warrants exercisable for 3,600,000
shares of Common Stock
$10,700,000 Note (which is
convertible to Conversion Shares)
Shoemaker Family Partners,
LP Securities Purchase Agreement by and
between Shoemaker Family Partners,
LP and Middle Bay Oil Company, Inc.,
dated August 27, 1999
22,222 shares of Common Stock
Warrants exercisable for 16,822
shares of Common Stock
$50,000 Note (which is convertible
to Conversion Shares)
Shoeinvest II, LP Securities Purchase Agreement by and
between Shoeinvest II, LP and Middle
Bay Oil Company, Inc., dated August
27, 1999
44,444 shares of Common Stock
Warrants exercisable for 33,644
shares of Common Stock
$100,000 Note (which is convertible
to Conversion Shares)
<PAGE> 20
SCHEDULE 2
<TABLE>
<CAPTION>
Piggy-Back Shareholder Number of Shares of Number of Shares of
Common Stock Held Series B Convertible
Immediately Prior to Closing Preferred Shares Held
Immediately Prior to
Closing
<S> <C> <C>
Kaiser-Francis Oil Company 3,333,334 0
C.J. Lett, III 1,187,556 0
Weskids, L.P. 843,687 117,467
Alvin V. Shoemaker 684,222 117,466
</TABLE>
<PAGE> 1
EXHIBIT 99.1
AGREEMENT
The undersigned reporting persons hereby agree that the statements
filed pursuant to this Schedule 13D, to which this Agreement is filed as an
exhibit, are filed on behalf of each of them.
Date: September 7, 1999 3TEC ENERGY CORPORATION
By: /s/ Floyd Wilson
------------------------------
Floyd Wilson
Managing Director
Date: September 7, 1999 ENCAP INVESTMENTS L.L.C.
By: /s/ D. Martin Phillips
------------------------------
D. Martin Phillips
Managing Director
