<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
MIDDLE BAY OIL COMPANY, INC.
-----------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a(6)(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction
<PAGE>
applies:
(3) Per unit price or other underling value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
MIDDLE BAY OIL COMPANY, INC.
1221 Lamar Street, Suite 1020
Houston, Texas 77010
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 18, 1999
To the Shareholders of Middle Bay Oil Company, Inc.
A Special Meeting of Shareholders of Middle Bay Oil Company, Inc.,
an Alabama corporation ("Middle Bay" or the "Company"), will be held at the
principal office of the Company, 1221 Lamar Street, Suite 1020, Houston,
Texas, 77010 on Thursday, November 18, 1999 at 10:00 a.m., local time, for
the purpose of acting on the following matters:
(1) To approve a change in the Company's state of incorporation
from Alabama to Delaware by means of a merger of the Company
with and into a wholly-owned subsidiary, 3TEC Energy
Corporation, a Delaware corporation, which the Company shall
form for this purpose (the "Reincorporation Merger");
(2) To approve a change of the Company's name to 3TEC Energy
Corporation;
(3) To approve an increase in the number of authorized shares of
common stock of the Company from 40,000,000 shares to
60,000,000;
(4) To consider and approve the Company's 1999 Stock Option Plan;
and
(5) To transact such other business as may properly come before
the meeting or any adjournment thereof.
Only common stock shareholders of record at the close of business on
October 1, 1999 will be entitled to notice of and to vote at the Special
Meeting or any adjournments thereof, notwithstanding the transfer of any
stock on the books of the Company after such record date. A list of the
shareholders will be open to the examination of any shareholder, for any
purpose relevant to the Special Meeting, for a period of ten (10) days prior
to the meeting during regular business hours at the principal office of the
Company.
You are requested to forward your proxy in order that you will be
represented at the Special Meeting, whether or not you expect to attend in
person. Any shareholder giving the proxy enclosed with the proxy statement
has the power to revoke such proxy at any time prior to the exercise thereof
by filing with the Company a written revocation at or prior to the Special
Meeting, by executing a proxy bearing a later date
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or by attending the Special Meeting and voting in person the shares of stock
that such shareholder is entitled to vote.
Holders of the Company's common stock shall have the right to
dissent from the Reincorporation Merger and, if the Reincorporation Merger is
consummated, to receive "fair value" for their shares in cash by complying
with the provisions of Alabama law, including Sections 10-2B-13.01 through
10/2B-13.32 of the Alabama Business Corporation Act. The text of Article 13
of the Alabama Business Corporations Act relating to the rights of
shareholders to dissent from the Reincorporation Merger is attached as
Exhibit D to the Proxy Statement accompanying this Notice of Special Meeting.
By Order of the Board of Directors
Floyd C. Wilson, President and Chief Executive Officer
October 28, 1999
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN AND RETURN THE ACCOMPANYING
PROXY FORM IN THE ENVELOPE PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
4
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MIDDLE BAY OIL COMPANY, INC.
1221 Lamar Street, Suite 1020
Houston, Texas 77010
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 18, 1999
INTRODUCTION
This Proxy Statement is furnished to shareholders of Middle Bay Oil
Company, Inc., an Alabama corporation ("Middle Bay" or the "Company"), in
connection with the solicitation, at Middle Bay's expense, on behalf of the
Board of Directors of Middle Bay of proxies to be used at a Special Meeting
of Shareholders to be held at 10:00 a.m., local time, on November 18, 1999
and all adjournments thereof (the "Special Meeting") for the purposes set
forth in the accompanying Notice of Special Meeting of Shareholders.
The approximate date on which this Proxy Statement and the enclosed
form of proxy will be first sent or given to shareholders is October 28,
1999. The principal executive offices of the Company are located at 1221
Lamar Street, Suite 1020, Houston, Texas 77010.
PROXY; RIGHT TO REVOKE PROXY
Proxies in the form enclosed will be voted at the Special Meeting if
properly executed, returned to Middle Bay before the meeting and not revoked.
Any shareholder giving such proxy may revoke it at any time before it is
voted by written revocation delivered to Middle Bay's Secretary, by voting in
person at the Special Meeting or by giving a later proxy. Attendance at the
meeting will not by itself constitute a revocation. The shares represented by
proxies solicited by the Board of Directors will be voted in accordance with
the recommendations of the Board of Directors unless otherwise specified in
the proxy, and where the person solicited specifies a choice with respect to
any matter to be acted upon, the shares will be voted in accordance with the
specification so made. Arrangements will be made with brokerage houses and
other custodians, nominees and fiduciaries for the forwarding of solicitation
material to the beneficial owners of the common stock. Middle Bay may
reimburse such custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred in connection therewith.
The enclosed form of proxy allows shareholders to grant or withhold
discretionary authority to the persons named to vote on any other matters
that may properly come before the Special Meeting. Middle Bay is not aware of
any other proposals planned to be made at the Special Meeting and has no
current intention of making any additional proposals.
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BY WHOM AND THE MANNER IN WHICH PROXY IS BEING SOLICITED
The cost of solicitation will be paid by Middle Bay. In addition to
solicitation of proxies by use of the mails, directors, officers or employees
of Middle Bay may, without additional compensation, solicit proxies
personally, by telephone or by other appropriate means. Middle Bay will
request banks, brokerage houses and other custodians, nominees or fiduciaries
holding shares of common stock in their names for others to promptly send
proxy materials to, and obtain proxies from, their principals, and Middle Bay
will reimburse them for their reasonable expenses in doing so. Middle Bay has
not and will not engage any investment banking or brokerage firm or any
professional proxy solicitation firm to solicit proxies. No fees, commissions
or other compensation will be paid to anyone for proxy votes solicited by
Middle Bay.
SHARES OUTSTANDING
Voting rights regarding the matters to be considered at the Special
Meeting are vested exclusively in the holders of Middle Bay's common stock.
The record date for common stock shareholders entitled to vote at the Special
Meeting is the close of business on October 1, 1999. At the close of business
on that date, Middle Bay had issued, outstanding and entitled to vote at the
meeting 13,360,959 shares of common stock, $.02 par value, each of which is
entitled to one vote on all matters expected to be voted upon at the Special
Meeting.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of shares of
common stock entitled to vote at the Special Meeting representing a majority
of the votes entitled to be cast is necessary to constitute a quorum at the
Special Meeting. Each holder of shares of common stock is entitled to one
vote, in person or by proxy, for each share held in such shareholder's name
on the record date. Assuming the presence of a quorum, the affirmative votes
equal to at least two-thirds of the votes of holders of common stock cast at
the Special Meeting, in person or by proxy, is required for approval of the
Reincorporation Merger, and the affirmative votes equal to at least a
majority of the votes of holders of common stock cast at the Special Meeting,
in person or by proxy, is required for approval of the proposal to change the
name of the Company, the proposal to increase the number of shares of common
stock of the Company, and the Company's 1999 Stock Option Plan. Abstentions
will be included in vote totals and, as such, will have the same effect on
the matter voted upon as a negative vote. Where nominee recordholders do not
vote on proposals because they did not receive specific instructions on such
proposals from the beneficial owners of such shares ("broker nonvotes"), such
broker nonvotes will not be included in vote totals and, as such, will have
no effect on the action taken at the Special Meeting. The chairman of the
meeting shall determine the order of business at the Special Meeting and the
voting and other procedures to be observed. The chairman is authorized to
declare whether any business is properly brought before the meeting, and
business not properly brought before the meeting may not be transacted.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the shares of Middle Bay's common
stock beneficially owned by those persons known by Middle Bay to be the
beneficial owner of more than five percent of Middle Bay's issued
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and outstanding common stock. All percentages are based on 13,361,232 shares
of common stock issued and outstanding on October 11, 1999:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- - ------------------- -------------------- ----------
<S> <C> <C>
3TEC Energy Company L.L.C. 10,482,222(1), (2) 54.91%
5910 N. Central Expressway
Suite 1150
Dallas, Texas 75206
EnCap Investments L.L.C. 10,482,222(3), (2) 54.91%
1100 Louisiana
Suite 3150
Houston, Texas 77002
Kaiser-Francis Oil Company 3,337,734 24.98%
6733 South Yale
Tulsa, Oklahoma 74136
C. J. Lett, III 1,187,556 8.88%
9320 East Central
Wichita, Kansas 67206
Weskids, L.P. 961,154(4) 7.19%
310 South Street
Morristown, NJ 07960
Alvin V. Shoemaker 948,634(5) 7.04%
8800 First Avenue
Stone Harbor, NJ 08247
</TABLE>
(1) As disclosed on a joint filing on Schedule 13D filed with the
Securities and Exchange Commission on September 10, 1999, 3TEC Energy
Company LLC is the beneficial owner and has sole voting and dispositive
power with respect to 10,482,222 shares of common stock.
(2) Includes 3,566,666 shares represented by notes convertible into common
stock and 2,160,000 shares represented by warrants to purchase common
stock exercisable within 60 days of this filing.
(3) EnCap Investments L.L.C. may be deemed to share voting and dispositive
power with respect to the shares of common stock owned by 3TEC Energy
Company LLC; however, EnCap Investments L.L.C. disclaims any beneficial
ownership of these shares.
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<PAGE>
(4) As disclosed on filing on Schedule 13D filed with the Securities and
Exchange Commission on November 7, 1997; Weskids, L.P. is presently
the beneficial owner and has sole voting and disposition power of
843,687 shares of common stock and 117,467 shares of Series B preferred
stock immediately convertible into not less than 117,467 shares of
Middle Bay's common stock. The exact conversion ratio is determined by
the terms of the June 20, 1997 merger agreement between Middle Bay and
Shore Oil Company (the "Shore Merger"). Weskids, Inc. is the general
partner of Weskids, L.P. and effectively controls Weskids, L.P. The
officers and directors of Weskids, Inc. are as follows: J. Peter Simon,
director; Michael B. Lenard, President; Mark J. Butler, Vice
President/Treasurer; and Christine W. Jenkins, Secretary.
(5) As disclosed on filing on Schedule 13D filed with the Securities and
Exchange Commission on December 23, 1997; includes 117,466 shares of
Series B preferred stock immediately convertible into not less than
117,466 shares of Middle Bay's common stock. The exact conversion ratio
is determined by the terms of the June 20, 1997 merger agreement
between Middle Bay and Shore Oil Company (the "Shore Merger"). This
figure also includes 146,946 shares which Mr. Shoemaker may be deemed
to share the power to vote or direct the vote and dispose or direct the
disposition of with Shoemaker Family Partners, L.P. and Shoeinvest II,
L.P.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the shares of Middle Bay's common
stock beneficially owned by each director and executive officer and all
directors and executive officers as a group, all as of October 11, 1999:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- - ------------------- -------------------- ----------
<S> <C> <C>
Floyd C. Wilson 0 (1) *
5910 N. Central Expressway
Suite 1150
Dallas, Texas 75206
David B. Miller 0 (2) *
3811 Turtle Creek Blvd., Suite 1080
Dallas, Texas 75219
D. Martin Phillips 0 (3) *
1100 Louisiana, Suite 3150
Houston, Texas 77002
Frank C. Turner, II 156,522(4)
1406 Tallow Court
Seabrook, TX 77586
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<S> <C> <C>
Robert W. Hammons 163,546(5) *
915 Kentbury Court
Katy, TX 77450
Gary R Christopher 28,000(6) *
6733 South Yale
Tulsa, OK 74136
Stephen W. Herod 180,683(7) *
1110 Briar Ridge Drive
Houston, TX 77057
Directors and executive officers 528,751 3.95%
of the company as a group
(8 persons)
</TABLE>
* Represents less than 1%.
(1) Mr. Wilson is the Managing Director and a member of 3TEC Energy Company
L.L.C. which is the beneficial owner of 10,482,222 of Middle Bay's
common stock.
(2) Mr. Miller is a Managing Director of EnCap Investments L.L.C., which is
a member of 3TEC Energy Company L.L.C. EnCap Investments L.L.C. may be
deemed to be the beneficial owner of the 10,482,222 shares of Middle
Bay's common stock directly owned by 3TEC Energy Company L.L.C.;
however, EnCap disclaims beneficial ownership of these shares.
(3) Mr. Phillips is a Managing Director of EnCap Investments L.L.C., which
is a member of 3TEC Energy Company L.L.C. EnCap Investments L.L.C. may
be deemed to be the beneficial owner of the 10,482,222 shares of Middle
Bay's common stock directly owned by 3TEC Energy Company L.L.C.;
however EnCap disclaims beneficial ownership of these shares.
(4) Represents 20,092 shares of common stock and 136,500 shares issuable
upon exercise of options granted to Mr. Turner.
(5) Represents 7,046 shares of common stock and 156,500 shares issuable
upon exercise of options granted to Mr. Hammons.
(6) Represents 13,000 shares of common stock and 15,000 shares issuable
upon exercise of options granted to Mr. Christopher. Mr. Christopher is
an officer of Kaiser-Francis Oil Company which is the beneficial owner
of 3,337,734 of Middle Bay's common shares.
(7) Represents 109,816 shares of common stock and 55,000 shares issuable
upon exercise of options granted to Mr. Herod and 15,867 shares of
Series B preferred stock convertible into 15,867 common shares of
Middle Bay.
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PROPOSAL TO APPROVE THE CHANGE IN
STATE OF INCORPORATION OF THE COMPANY FROM
ALABAMA TO DELAWARE
BY MERGING WITH 3TEC ENERGY CORPORATION
INTRODUCTION
For the reasons set forth below, the Board of Directors believes that
it is in the best interests of the Company and its shareholders to change the
state of incorporation of the Company from Alabama to Delaware (the
"Reincorporation Merger"). Throughout this Proxy Statement, the terms "Middle
Bay Oil Company, Inc." or the "Company" refer to the existing Alabama
corporation, and the term "3TEC Energy Corporation" refers to a new Delaware
corporation to be formed, which will be a wholly owned subsidiary of the
Company, and which shall be the successor to Middle Bay Oil Company, Inc. in the
proposed Reincorporation Merger.
As discussed below, the principal reason for the proposed
Reincorporation Merger is management's belief that Delaware corporate law
affords a more refined and modern alternative to that of Alabama by virtue of
the greater flexibility of Delaware law and the substantial body of case law
interpreting that law. The Reincorporation Merger is not being proposed in order
to prevent an unsolicited takeover attempt, and the Board of Directors is not
aware of any present attempt by any person to acquire control of the Company,
obtain representation on the Board of Directors or take any action that would
materially affect the governance of the Company. If any such action were
attempted in the future, however, the Company believes that the laws of Delaware
would be better suited to the defense of such action than the laws of Alabama.
THE REINCORPORATION MERGER
The Reincorporation Merger will be effected by merging Middle Bay Oil
Company, Inc. into 3TEC Energy Corporation, which will be incorporated solely
for such purpose (the "Reincorporation Merger"), pursuant to an Agreement and
Plan of Merger (the "Merger Agreement") in substantially the form attached
hereto as Exhibit A. Upon completion of the Reincorporation Merger, Middle Bay
Oil Company, Inc. will cease to exist as a corporate entity and 3TEC Energy
Corporation will continue to operate the business of the Company under the name
of 3TEC Energy Corporation. The discussion set forth below is qualified in its
entirety by reference to the Merger Agreement attached hereto.
Pursuant to the Merger Agreement, each outstanding share of Middle Bay
Oil Company, Inc. common stock, par value $.02 per share, will be converted
automatically into one share of 3TEC Energy Corporation Common Stock, par value
$.02 per share, upon the effective date of the Reincorporation Merger. Further,
each outstanding share of Middle Bay Oil Company, Inc. Series B Preferred Stock,
par value $.02 per share, will be converted automatically into one share of 3TEC
Energy Corporation Series B Preferred Stock, par value $.02 per share, upon the
effective date of the Reincorporation Merger. In addition, pursuant to the
Merger Agreement, each outstanding share of Middle Bay Oil Company, Inc. Series
C Preferred Stock, par value $.02 per share, will be converted automatically
into one share of 3TEC Energy Corporation Series C Preferred Stock, par value
$.02 per share, upon the effective date of the Reincorporation Merger. Each
stock
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certificate representing issued and outstanding shares of Middle Bay Oil
Company, Inc. stock will continue to represent the same number of shares of 3TEC
Energy Corporation stock. It will not be necessary for shareholders to exchange
their existing stock certificates of Middle Bay for stock certificates of 3TEC
Energy Corporation. Shareholders may, however, exchange their certificates if
they so choose. In addition, the Company expects that it will issue substitute
share certificates at some point in the future. Stockholders will be contacted
when the Company undertakes such action.
The Middle Bay Common Stock is listed on the Nasdaq SmallCap Market
under the symbol ("MBOC"). As soon as reasonably practicable after the
Reincorporation Merger, the 3TEC Energy Corporation Common Stock will be listed
on the Nasdaq SmallCap Market under the symbol "TTEN" or a similar available
symbol.
After the Reincorporation Merger, all employee benefit and stock option
plans of Middle Bay Oil Company, Inc. will be continued by 3TEC Energy
Corporation, and each option or right issued pursuant to such plans will be
converted automatically into an option or right to purchase the same number of
shares of 3TEC Energy Corporation Common Stock, at the same price per share,
upon the same terms and subject to the same conditions as set forth in such
plans and any options or other rights issued under the plans.
If the Reincorporation Merger proposal is approved by the stockholders,
it is anticipated that the effective date of the Reincorporation Merger will be
as soon as practicable following the Special Meeting. The Merger Agreement
provides that the Reincorporation Merger may be abandoned by the Board of
Directors of either Middle Bay Oil Company, Inc. or 3TEC Energy Corporation for
any reason, notwithstanding shareholder approval. The Merger Agreement may also
be amended prior to the effective date of the Reincorporation Merger, except
that certain material amendments may not be made after the shareholders have
approved the Reincorporation Merger proposal.
Under the Alabama Business Corporation Act (the "Alabama Act"),
shareholders of Middle Bay Oil Company, Inc. have the right to dissent with
respect to the Reincorporation Merger proposal and to receive from the Company
payment in cash of the fair value of their shares of Common Stock if the
Reincorporation Merger is completed. See "Rights of Dissenting Shareholders."
VOTE REQUIRED FOR THE REINCORPORATION MERGER PROPOSAL
Under the Alabama Act, approval of the Reincorporation Merger proposal,
which will also constitute approval of the Merger Agreement, the Certificate of
Incorporation (the "Delaware Certificate") and the Bylaws (the "Delaware
Bylaws") of 3TEC Energy Corporation, will require the affirmative vote of
two-thirds (2/3) of the votes entitled to be cast on the Reincorporation Merger
proposal. The Delaware Certificate (which includes the Certificate of
Designation of Series B Preferred Stock and the Certificate of Designation of
Series C Preferred Stock) and the Delaware Bylaws are attached hereto as
Exhibits B and C, respectively.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
PROPOSED REINCORPORATION MERGER.
PRINCIPAL REASONS FOR THE PROPOSED REINCORPORATION MERGER
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The Company was originally incorporated in Alabama on November 30,
1992. The state of Alabama was chosen as a domicile primarily as a matter of
convenience and because the laws of that state were suitable for the governance
of the Company's operations at the time. Since 1992, however, the Company's
operations have expanded both geographically and commercially, resulting in the
larger size and broader shareholder base of the Company. As the Company plans
for the future, the Board of Directors and management believe that it is
essential to be able to draw upon well established principles of corporate
governance in making legal and business decisions. The prominence and
predictability of Delaware corporate law provide a reliable foundation on which
the Company's governance decisions can be based, and the Company believes that
shareholders will benefit from the responsiveness of Delaware corporate law to
their needs and to those of the corporation they own.
For many years, Delaware has followed a policy of encouraging
incorporation in that state and, in furtherance of that policy, has been a
leader in adopting, construing and implementing comprehensive, flexible
corporate laws responsive to the legal and business needs of the corporations
organized under its laws. Many corporations have chosen Delaware initially as a
state of incorporation, or have chosen to reincorporate in Delaware in a manner
similar to that proposed by the Company. The Board of Directors believes that
the principal reasons for considering such a reincorporation are:
(i) the General Corporation Law of the State of Delaware (the
"Delaware Law"), which is generally acknowledged to be the
most advanced and flexible corporate statute in the country;
(ii) the responsiveness and efficiency of the Division of
Corporations of the Secretary of State of Delaware, which is
on the cutting edge of computer technology;
(iii) the Delaware General Assembly, which each year considers and
adopts statutory amendments that have been proposed by the
Corporation Law Section of the Delaware bar in an effort to
ensure that the corporate statute continues to be responsive
to changing business needs;
(iv) the Delaware Court of Chancery, which brings to its handling
of complex corporate issues a level of experience and a degree
of sophistication and understanding unmatched by any other
court in the country, and the Delaware Supreme Court, the only
Delaware appellate court, which is highly regarded and
currently includes former Vice Chancellors and corporate
practitioners; and
(v) the development in Delaware over the last century of a well
established body of case law construing the Delaware Law,
which provides businesses with a greater measure of
predictability than exists in most if not all other
jurisdictions.
The Company believes that Delaware provides a more appropriate and
flexible corporate and legal environment in which to operate than currently
exists in the state of Alabama and that the Company and its shareholders would
benefit substantially from such environment.
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Management believes that the proposed Reincorporation Merger will also
help the Company attract and retain qualified directors. Both Alabama and
Delaware law permit a corporation to include a provision in its articles or
certificate of incorporation, as the case may be, which reduces or limits the
monetary liability of directors for breaches of fiduciary duty in certain
circumstances. The increasing frequency of claims and litigation directed
against directors and officers has greatly expanded the risks facing directors
and officers of corporations in exercising their respective duties. The amount
of time and money required to respond to such claims and to defend such
litigation can be substantial. It is the Company's desire to reduce these risks
to its directors and officers and to limit situations in which monetary damages
can be recovered against directors so that the Company may continue to attract
and retain qualified directors.
ANTI-TAKEOVER IMPLICATIONS
Delaware, like many other states, permits a corporation to adopt a
number of measures designed to reduce a corporation's vulnerability to
unsolicited takeover attempts through its corporate charter or bylaws or
otherwise. The Reincorporation Merger proposal is not being proposed in order to
prevent such a change in control, and the Board of Directors is not aware of any
present attempt to acquire control of the Company or to obtain representation on
the Board of Directors.
Nevertheless, certain effects of the Reincorporation Merger proposal
may be considered to have anti-takeover implications. For example, Section 203
of the Delaware Law restricts certain "business combinations" with "interested
stockholders" for three years following the date that a person becomes an
interested stockholder, unless the Board of Directors approves the business
combination. See " Certain Significant Differences Between the Laws of Alabama
and Delaware -- Certain Business Combinations."
For a detailed discussion of the changes which will be implemented as
part of the Reincorporation Merger proposal, including the significant
differences between the laws of Alabama and Delaware, see "Charter and Bylaws of
Middle Bay Oil Company, Inc. and 3TEC Energy Corporation" and "Certain
Significant Differences Between the Laws of Alabama and Delaware."
The Board of Directors of the Company has considered in the past, and
may consider again in the future, implementing certain defensive strategies
designed to enhance the Board's ability to negotiate with an unsolicited bidder
(some of which may not require shareholder approval). These strategies include,
but are not limited to, shareholder rights plans, severance agreements for its
management and key employees which become effective upon the occurrence of a
change in control of the Company, and the designation and issuance of preferred
stock, the rights and preferences of which are determined by the Board of
Directors. Some of these measures may be implemented under Alabama law. There is
nonetheless substantial judicial precedent in the Delaware courts as to the
legal principles applicable to such defensive measures and as to the conduct of
the Board of Directors under the business judgment rule with respect to
unsolicited takeover attempts. The Board of Directors has no current plans to
implement any such measures.
The Board of Directors believes that unsolicited takeover attempts may
be unfair or disadvantageous to the Company and its shareholders because, among
other reasons: (i) a non-negotiated takeover bid may be timed to take advantage
of temporarily depressed stock prices; (ii) a non-negotiated takeover bid may be
designed to foreclose or minimize the possibility of more favorable competing
bids or alternative
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transactions; and (iii) a non-negotiated takeover bid may involve the
acquisition of only a controlling interest in the corporation's stock, without
affording all shareholders the opportunity to receive the same economic
benefits.
By contrast, in a transaction in which a potential acquiror must
negotiate with an independent board of directors, the board can and should take
into account the underlying long-term values of the Company's business, the
possibilities for alternative transactions on more favorable terms, possible
advantages from a tax-free reorganization, anticipated favorable developments in
the Company's business not yet reflected in the stock price and equality of
treatment of all shareholders.
Despite the belief of the Board of Directors as to the benefits to
shareholders of the Reincorporation Merger proposal, it may be disadvantageous
to the extent that it has the effect of discouraging a future takeover attempt
which is not approved by the Board of Directors, but which a majority of the
shareholders may deem to be in their best interests or in which shareholders may
receive a substantial premium for their shares over the then current market
value or over their cost basis in such shares. As a result of such effects of
the Reincorporation Merger proposal, shareholders who might wish to participate
in an unsolicited takeover offer may not have an opportunity to do so. In
addition, to the extent that provisions of Delaware law enable the Board of
Directors to resist a takeover or a change in control of the Company, such
provisions could make it more difficult to change the existing Board of
Directors and management.
NO CHANGE IN THE BOARD MEMBERS, BUSINESS, MANAGEMENT, EMPLOYEE BENEFIT PLANS OR
LOCATION OF PRINCIPAL FACILITIES OF THE COMPANY
The Reincorporation Merger proposal will effect only a change in the
legal domicile of the Company and certain other changes of a legal nature, the
most significant of which are described in this Proxy Statement. If the proposal
regarding changing the name of the Company is not approved, the name of the
surviving company of the Reincorporation Merger will be Middle Bay Oil Company,
Inc. The proposed Reincorporation Merger will NOT result in any change in the
business, management, fiscal year, assets or liabilities or location of the
principal facilities of the Company. The current directors of Middle Bay Oil
Company, Inc. will become the directors of 3TEC Energy Corporation. All employee
benefit and stock option plans of Middle Bay Oil Company, Inc. will be continued
by 3TEC Energy Corporation, and each option or right issued pursuant to such
plans will automatically be converted into an option or right to purchase the
same number of shares of 3TEC Energy Corporation Common Stock, at the same price
per share, upon the same terms and subject to the same conditions as set forth
in such plans and in any options or other rights issued under the plans.
Approval of the Reincorporation Merger proposal will also constitute approval of
the assumption of these plans by 3TEC Energy Corporation. Other employee benefit
arrangements of Middle Bay Oil Company, Inc. will also be continued by 3TEC
Energy Corporation upon the terms and subject to the conditions currently in
effect.
CHARTER AND BYLAWS OF MIDDLE BAY OIL COMPANY, INC. AND 3TEC ENERGY CORPORATION
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The following discussion summarizes the material differences between
the Delaware Certificate and Delaware Bylaws and Middle Bay Oil Company Inc.'s
Articles of Incorporation, as amended (the "Alabama Articles") and Bylaws (the
"Alabama Bylaws"). Copies of the Delaware Certificate (which includes the
Certificate of Designation of the Series B Preferred Stock and the Certificate
of Designation of the Series C Preferred Stock) and the Delaware Bylaws are
attached hereto as Exhibits B and C, respectively, and all statements herein
concerning such documents are qualified by reference to the complete provisions
thereof.
The provisions of the Delaware Certificate and the Delaware Bylaws are
similar to those contained in the Alabama Articles and the Alabama Bylaws in
several respects. The Reincorporation Merger proposal, however, includes the
implementation of certain provisions in the Delaware Certificate and the
Delaware Bylaws which alter the rights of shareholders and the powers of
management. In addition, certain other changes could be implemented in the
future by amendment to the Delaware Certificate with stockholder approval or, in
certain cases, by amendment of the Delaware Bylaws or by other action of the
Board without stockholder approval. See "Certain Significant Differences Between
the Laws of Alabama and Delaware." Approval of the Reincorporation Merger
proposal by the shareholders will result in the adoption of all provisions set
forth in the Delaware Certificate and Delaware Bylaws.
AUTHORIZED STOCK. The Alabama Articles currently authorize the Company
to issue up to 40,000,000 shares of Common Stock, par value $.02 per share and
up to 20,000,000 shares of Preferred Stock, par value $.02 per share. The
Delaware Certificate authorizes the Company to issue up to 60,000,000 shares of
Common Stock, par value $.02 per share and 20,000,000 shares of Preferred Stock,
par value $.02 per share. If, however, the proposal to increase the number of
authorized shares of Common Stock is not approved, the Delaware Charter will
authorize the Company to issue up to 40,000,000 shares of Common Stock.
LIMITATION OR ELIMINATION OF DIRECTORS' PERSONAL LIABILITY. Under the
Alabama Act, if a corporation's articles of incorporation so provide, the
liability of a director to the corporation or its shareholders for money damages
for any action taken, or any failure to take any action, as a director, may be
eliminated or limited, except liability for (a) the amount of financial benefit
received by a director to which he or she is not entitled, (b) an intentional
infliction of harm on the corporation or its shareholders, (c) the payment of
unlawful dividends, stock repurchases or redemptions, (d) an intentional
violation of criminal law, or (e) a breach of the director's duty of loyalty to
the corporation or its shareholders. The Alabama Articles do not contain such a
provision limiting the liability of its directors.
Under the Delaware Law, if a corporation's certificate of incorporation
so provides, the personal liability of a director for breach of fiduciary duty
as a director may also be eliminated or limited. However, a corporation's
certificate of incorporation may not limit or eliminate a director's personal
liability (a) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (b) for acts or omissions not in good faith or
involving intentional misconduct or a knowing violation of law, (c) under
Section 174 of the Delaware Law, involving the payment of unlawful dividends,
stock repurchases or redemptions, or (d) for any transaction in which the
director received an improper personal benefit. The Delaware Certificate
contains a provision eliminating the personal liability of its directors to the
fullest extent possible under Delaware law. The Company is not aware of any
pending or threatened litigation to which the limitation of directors' liability
under the Delaware Certificate would apply.
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STOCKHOLDER ABILITY TO CALL SPECIAL MEETINGS. The Alabama Act requires
that holders of at least 10% of the votes entitled to be cast on any issue be
able to call a special meeting of shareholders. Delaware Law does not require
that stockholders be allowed to call a special meeting of stockholders. The
proposed Delaware Bylaws provide that special meetings of the stockholders may
be called only by the president or a majority of the Board of Directors. As a
result, stockholders of 3TEC Energy Corporation would not be permitted to call
special meetings. Elimination of the right of stockholders to call a special
meeting eliminates a stockholder's ability to force stockholder consideration of
a proposal over the opposition of the Board of Directors by calling a special
meeting of stockholders prior to such time as the Board of Directors believes
such consideration to be appropriate. For example, a stockholder's proposed
amendments to the Company's Bylaws or proposed removal of directors could, if
the Board of Directors so desired, be delayed until the next annual meeting of
stockholders, at which time the proposing stockholder or group of stockholders
would be required to meet the notice requirements set forth in the Delaware
Bylaws and applicable law.
Elimination of the ability of stockholders to call special meetings may
render more difficult, discourage or delay a merger, proxy contest, or the
assumption of control by a large stockholder or group of stockholders. To the
extent that this provision enables the Board of Directors to resist a takeover
or change of control, it may be more difficult to remove the existing Board of
Directors and management.
This provision has not been included in the Delaware Bylaws as a result
of any proposed attempt to change the control of the Company and no change of
control is presently pending.
MANNER OF STOCKHOLDER VOTE. Under the Alabama Act, the election of
directors may proceed in the manner described in a corporation's bylaws. The
Alabama Bylaws do not provide for a specific method of voting for the election
of directors at a shareholders' meeting. Under the Delaware Law, election of
directors is to be by written ballot, unless the certificate of incorporation
provides otherwise. The Delaware Certificate provides that elections of
directors need not be by written ballot, unless the bylaws so provide. The
Delaware Bylaws do not require written ballots in the election of directors, but
instead provide that any vote of the stockholders on any matter shall be by
voice or hand vote unless a written vote by ballot is requested by a stockholder
entitled to vote. The Delaware Bylaws further provide that every vote taken by
written ballot shall state the name of the stockholder or proxy voting and such
other information as may be required under the procedure established for the
meeting.
BOARD OF DIRECTORS. Under the Alabama Act, the number of directors
constituting the board of directors is to be as specified in or fixed in
accordance with the articles of incorporation or bylaws. If a board of directors
has power to fix or change the number of directors, the board of directors may
only increase or decrease by 30% or less the number of directors last approved
by the shareholders. Only the shareholders may increase or decrease by more than
30% the number of directors last approved by the shareholders. The Alabama
Bylaws provide that the shareholders may fix by resolution the precise number of
members of the Board of Directors.
Similar to the Alabama Act, the Delaware Law also provides that the
number of directors constituting the board of directors is to be as specified in
or fixed in accordance with the certificate of incorporation or bylaws. The
Delaware Law does not, however, limit the ability of the board of directors to
increase or
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decrease the number of directors by any number or percentage or reserve such
right to the stockholders. The Delaware Certificate makes no reference to the
ability of the Board of Directors to fix the number of directors, but the
Delaware Bylaws authorize the Board of Directors to fix the number of directors
within a range of five to nine. In addition, the Delaware Certificate allows the
Board of Directors to amend the Delaware Bylaws. The Board of Directors of 3TEC
Energy Corporation may therefore, change the number of directors within such
range by majority vote and may change the range itself by a subsequent amendment
to the Delaware Bylaws.
The Merger Agreement provides that the directors of 3TEC Energy
Corporation, who are the same persons as the directors of Middle Bay and have
the same terms which they have as directors of Middle Bay, will continue as
directors at and after the effective time of the Reincorporation Merger.
AMENDMENTS TO BYLAWS. The Alabama Act provides that a corporation's
board of directors may amend or repeal the corporation's bylaws unless (i) such
power is reserved exclusively to the shareholders by the articles of
incorporation or (ii) the shareholders in amending or repealing a particular
bylaw provide expressly that the board of directors may not amend or repeal that
bylaw. The Alabama Bylaws provide that the power to adopt, amend or repeal the
Alabama Bylaws is jointly vested in the Board of Directors and the shareholders.
Under the Delaware Law, the stockholders have the power to adopt, amend
or repeal bylaws; however, the certificate of incorporation may confer such
power upon the board of directors, although in doing so it may not divest the
stockholders of their power to adopt, amend or repeal the bylaws. The Delaware
Certificate provides that the Board of Directors has concurrent power with the
stockholders to adopt, amend, or repeal the bylaws. The Board of Directors may
take such action upon the affirmative vote of the number of Directors which
constitutes, under the terms of the bylaws, the action of the Board of
Directors. The stockholders may amend the bylaws upon the affirmative vote of
the holders of not less than a majority of the votes entitled to be cast by the
holders of all of the outstanding shares of the voting stock, voting together as
a class.
STOCKHOLDER PROPOSALS TO BE CONSIDERED AT MEETINGS. The Delaware Bylaws
contain an advance notice procedure applicable to the proposal of business to be
considered at a meeting which requires such notice by a stockholder in
connection with the Company's annual meeting to be delivered to the Company not
less than 60 nor more than 90 days prior to the first anniversary of the of the
previous year's annual meeting. If the annual meeting is more than 30 days
before or more than 60 days after such anniversary date, however, notice by the
stockholder to be timely must be delivered no earlier than 90 days prior to the
annual meeting and no later than 60 days prior to the annual meeting and the
tenth day following the issuance by the Company of a press release announcing
the meeting date. For the purpose of the annual meeting of stockholders of the
Company to be held in 2000, if the Reincorporation Merger is effected, the first
anniversary of the preceding year's annual meeting will be on August 11, 2000.
In addition, the Delaware Bylaws contain advance notice procedures applicable to
the nomination by stockholders of directors for election to the Company's Board
of Directors. In general, notice of a director nomination for an annual meeting
must be received by the Company 90 days or more before the date of the annual
meeting and must contain specified information and conform to certain
requirements, as set forth in the Bylaws. Notice of a director nomination for a
special meeting must be received by the Company no later than the close of
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business on the seventh day following the date on which notice of such meeting
is first given to stockholders. If the chairman of the stockholders' meeting
determines that a director nomination was not made in accordance with the
Bylaws, the Company may disregard such nomination.
The Alabama Bylaws do not contain analogous advance notice procedures.
The advance notice procedures in the Delaware Bylaws may render more difficult,
discourage or delay a merger, proxy contest or the assumption of control by a
large stockholder or group of stockholders. This provision has not been included
in the Delaware Bylaws as a result of any proposed attempt to change the control
of the Company and no change of control is presently pending.
CERTAIN SIGNIFICANT DIFFERENCES BETWEEN THE LAWS OF ALABAMA AND DELAWARE
In addition to the matters discussed above, Delaware law differs in a
number of respects from Alabama law. The following discussion summarizes certain
differences which could materially affect the rights of shareholders if the
Reincorporation Merger is consummated. The discussion is not an exhaustive
description of all the differences between the two states' laws.
ALABAMA CONSTITUTIONAL PROVISIONS. Section 234 of the Alabama
Constitution provides that the stock and bonded indebtedness of a corporation
shall not be increased without the consent of the persons holding the larger
amount in value of stock, which consent shall be obtained at a meeting of
shareholders where notice of such meeting has been provided more than 30 days in
advance. Further, Section 237 of the Alabama Constitution provides that a
corporation may not issue preferred stock without the consent of the owners of
two-thirds of the stock of the corporation. The lack of certainty arising from,
and the burden placed on Alabama corporations in complying with, such provisions
are often viewed as disadvantages of incorporation in Alabama. The Delaware
Constitution contains no such provisions.
CERTAIN BUSINESS COMBINATIONS. In the past several years, a number of
states (but not including Alabama) have adopted special laws designed to make
certain kinds of "unfriendly" corporate takeovers, or other transactions
involving a corporation and one or more of its significant shareholders, more
difficult. Under Section 203 of the Delaware Law ("Section 203") certain
"business combinations" with "interested stockholders" of Delaware corporations
are subject to a three-year moratorium unless specified conditions are met.
Section 203 prohibits certain mergers, consolidations, sales of assets
and other transactions with an "interested stockholder" (generally a 15% or more
stockholder or group of stockholders) for three years following the date the
stockholder became an interested stockholder. This prohibition on business
combinations is subject to certain exceptions, the most significant of which are
that the prohibition does not apply if: (i) the business combination or
transaction in which the stockholder becomes an interested stockholder is
approved by the corporation's board of directors prior to the stockholder
becoming an interested stockholder; (ii) the business combination is with an
interested stockholder who became an interested stockholder in a transaction
whereby he acquired 85% of the corporation's voting stock, excluding shares held
by directors who are also officers and certain employee stock plans; or (iii)
the business combination is approved by the corporation's board of directors and
authorized at a meeting by the
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affirmative vote of at least 66 2/3% of the outstanding voting stock which is
not owned by the interested stockholder.
Section 203 applies to Delaware corporations which have a class of
voting stock that is listed on a national securities exchange, authorized for
quotation on an inter-dealer quotation system of a registered national
securities association, or held of record by more than 2,000 stockholders.
Because 3TEC Energy Corporation will be listed on the Nasdaq SmallCap Market
Section 203 will apply.
The Company expects that Section 203 would have the effect of
encouraging any potential acquiror to negotiate with the Board of Directors.
Section 203 also might have the effect of limiting the ability of a potential
acquiror to engage in certain tactics (such as "two-tier pricing") that can
result in dissimilar treatment of the Company's stockholders. At the time
Section 203 was adopted by the Delaware Legislature, a number of corporations
had been subject to tender offers for, or other acquisitions of, more than 15%
but less than 85% of their outstanding stock. In many cases, such purchases were
followed by business combinations in which the purchaser either paid a lower
price for the remaining outstanding shares than the price it paid in acquiring
its original interest in the corporation, or paid a less desirable form of
consideration. Federal securities law and regulations applicable to business
combinations govern the disclosure required to be made to minority stockholders
in order to consummate such a transaction, but they do not assure stockholders
that the terms of the business combination will be fair to them or that they can
effectively prevent its consummation. Moreover, the statutory right of the
remaining stockholders of the corporation to dissent in connection with certain
business combinations and receive the "fair value" of their shares in cash may
involve significant expense to such dissenting stockholders and may not be
meaningful in all cases. Such an appraisal standard as applied under Delaware
law does not take into account any appreciation of the stock's market value due
to anticipation of the business combination and may not recognize that the
market value of the shares may be adversely influenced by the interested
person's controlling stock ownership. In addition, in the case of some business
combinations, such as a sale of assets or a reclassification or recapitalization
of a corporation's capital stock, the statutory right of dissent is not
available at all. Section 203 was intended to close partially these "gaps" in
federal and state law and to prevent certain of the potential inequities of
business combinations.
Shareholders should note, however, that the application of Section 203
to 3TEC Energy Corporation would confer upon the Board of Directors the power to
reject a proposed business combination in certain circumstances, even though a
potential acquiror may be offering a substantial premium for 3TEC Energy
Corporation's shares over the then-current market price. Section 203 could also
discourage certain potential acquirors unwilling to comply with its provisions.
Under Alabama law, a merger or share exchange requires the affirmative
vote of 66 2/3% of the outstanding voting stock of the Company, unless the
articles of incorporation require a greater or lesser vote, regardless of
whether the acquiror is an interested shareholder. Alabama law does not have a
statutory provision comparable to Section 203 of the Delaware statutes, but its
laws require a higher stockholder vote (i.e. 66 2/3%, as opposed to 50% in
Delaware) as described in more detail under "Shareholder Voting" below.
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SHAREHOLDER VOTING. Under the Alabama Act, action on a matter generally
is approved if a quorum is present and the votes cast favoring the action exceed
the votes cast opposing the action, unless a greater number of affirmative votes
is required by the Alabama Constitution, the Alabama Act or the corporation's
articles of incorporation. In addition, unless the corporation's articles of
incorporation provide otherwise, directors are elected by a majority of the
votes cast by the shares entitled to vote in the election at a meeting at which
a quorum is present when the vote is taken. Under the Delaware Law, in the
absence of a specification in the corporation's certificate of incorporation or
bylaws, once a quorum is obtained, the affirmative vote of a majority of shares
present in person or represented by proxy and entitled to vote on the subject
matter is required for stockholder action; however, directors are elected by a
plurality of votes.
With certain exceptions, the Alabama Act requires that a merger, share
exchange, sale of all or substantially all the corporation's assets or similar
transaction be approved by a vote of two-thirds of the votes entitled to be cast
by each class of shares outstanding, unless the corporation's articles of
incorporation provide for a greater or lesser vote. The Delaware Law generally
requires approval by only a majority of the shares outstanding and does not
require such class voting, except in the case of transactions involving an
amendment to the certificate of incorporation where the amendment would increase
or decrease the aggregate number of authorized shares of such class, increase or
decrease the par value of the shares of such class, or alter or change the
powers, preferences or special rights of the shares of such class so as to
affect them adversely. Accordingly, there is a lower threshold for approval of
such transactions in Delaware.
The Delaware Law does not require a vote of the stockholders of the
surviving corporation in a merger (unless the corporation provides otherwise in
its certificate of incorporation) if (a) the merger agreement does not amend the
existing certificate of incorporation, (b) each share of the stock of the
surviving corporation outstanding immediately before the effective date of the
merger is an identical outstanding or treasury share after the merger, and (c)
either no shares of common stock of the surviving corporation and no shares,
securities or obligations convertible into such stock are to be issued or
delivered under the plan of merger, or the authorized and unissued shares or the
treasury shares of common stock of the surviving corporation to be issued or
delivered under the plan of merger plus those initially issuable upon conversion
of any other shares, securities or obligations to be issued or delivered under
such plan do not exceed 20% of the shares of common stock of such constituent
corporation outstanding immediately prior to the effective date of the merger.
The Alabama Act contains a similar exception to its voting requirements.
INDEMNIFICATION. In general, the Alabama Act requires indemnification
when a director or officer has successfully defended an action, on the merits or
otherwise, when he or she was a party because he or she is or was a director or
officer. The Delaware Law requires indemnification to the extent any present or
former director or officer has been successful, on the merits or otherwise, in
defense of an action where such person was a party by reason of the fact that he
or she was a director, officer, employee or agent of the corporation or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another entity.
The provisions of the Alabama Act and the Delaware Law are
substantially similar with respect to permissive indemnification. In general,
both permit indemnification against expenses reasonably incurred, provided there
is a determination by a majority vote of disinterested directors or a committee
thereof, by independent legal counsel or by a majority vote of a quorum of the
shareholders that the person seeking
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indemnification acted in good faith and in a manner reasonably believed to be in
or not opposed to the best interest of the corporation and, with respect to any
criminal proceeding, had no reasonable cause to believe that the person's
conduct was unlawful.
Under the Alabama Act, expenses incurred by a director, officer,
employee or agent in defending an action may be paid in advance, if such
individual furnishes the corporation a written affirmation of good faith belief
that he or she, in the case of conduct in his or her official capacity, acted in
the corporation's best interests and in all other cases, acted in a manner that
was at least not opposed to the corporation's best interests; provided, however,
that in the case of any criminal proceeding, such individual had no reasonable
cause to believe that his or her conduct was unlawful. Further, the individual
must undertake to repay any amounts advanced if it is ultimately determined that
he or she is not entitled to indemnification. However, under the Delaware Law,
expenses incurred by an individual in defending an action may be paid in advance
if such individual undertakes to repay all amounts advanced if it is ultimately
determined that such person is not entitled to be indemnified (except with
respect to former directors and officers, and employees and agents, with respect
to whom the corporation need not obtain such undertaking). There is no
requirement under Delaware law that the individual furnish a written affirmation
regarding his or her conduct.
In addition, the laws of both states authorize a corporation's purchase
of indemnity insurance for the benefit of its officers, directors, employees and
agents whether or not the corporation would have the power to indemnify against
the liability covered by the policy.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers, or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy and therefore unenforceable.
AMENDMENTS TO ARTICLES OR CERTIFICATE OF INCORPORATION AND BYLAWS.
Amendments to the articles of incorporation may be approved in Alabama generally
by a majority of the votes cast. Under the Delaware Law, amendments to the
certificate of incorporation generally require the affirmative vote of the
holders of a majority of the outstanding stock.
The Alabama Act, in general, provides that a corporation's board of
directors may amend or repeal the corporation's bylaws unless (i) the articles
of incorporation reserve such power exclusively to the shareholders in whole or
in part or (ii) the shareholders in amending or repealing a particular bylaw
provide expressly that the board of directors may not amend or repeal such
bylaw. Under the Delaware Law, stockholders have the power to adopt, amend or
repeal bylaws, although a corporation's certificate of incorporation may confer
such power on the board of directors without divesting the stockholders of their
right to act.
VOTING POWER OF DIRECTORS. The Delaware Law provides that a
corporation's certificate of incorporation may confer upon the holders of any
class or series of stock the right to elect one or more directors who will have
such voting power as stated in the certificate of incorporation, which voting
power
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may be greater or less than that of other directors or classes of directors. The
Alabama Act contains no such provision.
DISSENTERS' RIGHTS OF APPRAISAL. Under both the Alabama Act and the
Delaware Law, a shareholder of a corporation participating in certain major
corporate transactions may, under varying circumstances, be entitled to
appraisal rights pursuant to which the shareholder may receive cash in the
amount of the fair market value of his or her shares in lieu of the
consideration he or she would otherwise receive in the transaction.
Delaware law does not, in general, afford dissenters' rights of
appraisal with respect to (a) a sale of assets, (b) a merger by a corporation,
the shares of which are either (i) listed on a national securities exchange or
designated as a national market system security or (ii) widely held (by more
than 2,000 stockholders) if such stockholders receive shares of the surviving
corporation or of a listed or widely held corporation, or (c) stockholders of a
corporation surviving a merger if no vote of the stockholders is required to
approve the merger under the circumstances set forth above in the third
paragraph of the section titled "Shareholder Voting."
The Alabama Act, in general, affords dissenters' rights of appraisal
with respect to a merger, share exchange, sale of all or substantially all of a
corporation's assets and certain amendments to the articles of incorporation
that materially and adversely affect shareholders' rights. Alabama law does not
contain the exclusion from dissenters' rights for corporations the shares of
which are publicly traded, as described above. For a description of dissenters'
rights available to shareholders of the Company under Alabama law, see "Rights
of Dissenting Shareholders," below, and Exhibit D attached to this Proxy
Statement.
INSPECTION OF SHAREHOLDERS LIST. Both the Alabama Act and the Delaware
Law allow any shareholder to inspect lists of shareholders, although the
Delaware Law permits such inspection only for a purpose germane to the meeting
and, in general, only for a period of ten (10) days prior to the meeting at a
place within the city where the meeting is to be held or at the place where the
meeting is to be held. The Alabama Act requires the list to be available for
inspection by any shareholder, beginning two business days after notice of the
meeting is given, and continuing through the meeting, at the corporation's
principal office or, if the principal office is not located within Alabama, at
the corporation's registered office in Alabama. Lack of access to stockholder
records could result in impairment of a stockholder's ability to coordinate
opposition to management proposals, including proposals with respect to a change
in control of the Company.
DISSOLUTION. Under the Alabama Act, a corporation can voluntarily
dissolve upon its board of directors' adopting a resolution setting forth a
proposal to dissolve, which proposal is approved by two-thirds of the votes of
each class entitled to vote thereon. Under the Delaware Law, a corporation can
voluntarily dissolve if its board of directors and stockholders owning a
majority of the shares entitled to vote approve the dissolution, or if all of
its stockholders approve such a dissolution.
PREEMPTIVE RIGHTS. Under the Delaware Law, stockholders do not have
preemptive rights to new shares unless there is a specific provision granting
such rights in the corporation's certificate of incorporation. The Delaware
Certificate does not contain such a provision. By contrast, the Alabama Act
provides that shareholders have preemptive rights except to the extent that a
corporation's articles of
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incorporation otherwise provide. The Alabama Articles contain a denial of
preemptive rights. Accordingly, the Reincorporation Merger will not have a
practical impact on shareholders of the Company with respect to preemptive
rights. The Company believes that not providing for mandatory preemptive rights
in the Delaware Certificate is desirable to afford greater flexibility in
possible future financings.
INTERESTED DIRECTOR TRANSACTIONS. Under the Delaware Law, certain
contracts or transactions in which one or more of a corporation's directors has
an interest are not void or voidable solely because of such interest, provided
that the contract or transaction is fair at the time it is authorized, is
ratified by the corporation's stockholders after disclosure of the relationship
or interest, or is authorized in good faith by a majority of the disinterested
members of the board of directors or a committee thereof after disclosure of the
relationship or interest. The Delaware Law permits the interested director to be
counted in determining whether a quorum of the directors is present at the
meeting approving the transaction, and further provides that the contract or
transaction shall not be void or voidable solely because the interested
director's vote is counted at the meeting which authorizes the transaction.
Under the Alabama Act, a "conflicting interest" with respect to a
corporation means the interest a director of the corporation has respecting a
transaction effected or proposed to be effected by the corporation or by a
subsidiary if the director knows that the director, a person related to the
director or an entity affiliated with the director is a party to the transaction
or has a beneficial interest in or so closely linked to the transaction and of
such financial significance to the director or such other person that the
interest would reasonably be expected to exert an influence on the director's
judgment if the director were called upon to vote on the transaction. A
transaction which involves such a conflicting interest may not be enjoined, set
aside, or give rise to an award of damages or other sanctions, in a proceeding
by a shareholder or by or in the right of the corporation, because the director,
or any person with whom or which he or she has a personal, economic, or other
association, has an interest in the transaction, if (i) the transaction received
the affirmative vote of a majority (but no fewer than two) of qualified
directors on the board of directors or on a committee of the board who voted on
the transaction after disclosure to them; (ii) a majority of the votes entitled
to be cast by the holders of all qualified shares are cast in favor of the
transaction after notice to shareholders describing the director's conflicting
interest transaction; or (iii) the transaction, judged according to the
circumstances at the time the corporation entered into a commitment with respect
thereto, is established to have been fair to the corporation.
For purposes of the foregoing, "qualified director" means, with respect
to a director's conflicting interest transaction, any director who does not have
either a conflicting interest respecting the transaction or a familial,
financial, professional or employment relationship with a second director who
does have a conflicting interest respecting the transaction. A majority (but no
fewer than two) of all the qualified directors on the board of directors, or on
the committee, constitutes a quorum for purposes of action that complies with
the foregoing and directors' action that otherwise complies with the foregoing
is not affected by the presence or vote of a director who is not a qualified
director. "Qualified shares" means any shares entitled to vote with respect to
the director's conflicting interest transaction except shares that are
beneficially owned (or the voting of which is controlled) by a director who has
a conflicting interest respecting the transaction or by a related person of the
director, or both. A majority of the votes entitled to be cast by the holders of
all qualified shares constitutes a quorum for purposes of action that complies
with the foregoing.
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EXAMINATION OF BOOKS AND RECORDS. Under the Alabama Act, a shareholder
of an Alabama corporation or of a foreign corporation with its principal office
located in Alabama has the right to inspect and copy certain records designated
by the Alabama Act. With respect to other records, the Alabama Act requires that
a person must have been a shareholder of record for at least 180 days or be the
holder of record of at least 5% of all outstanding shares of a corporation in
order to examine the minutes of board of directors meetings, shareholder records
and other books and records of a corporation. A shareholder who meets such
requirements must also have a proper purpose for such inspection.
Under Delaware law, any stockholder of record with a proper purpose has
the right to inspect and copy stock ledgers and other books and records of a
Delaware corporation. "Proper purpose" is defined as a purpose reasonably
related to such person's interest as a stockholder.
FILLING VACANCIES ON THE BOARD OF DIRECTORS. Under the Alabama Act, any
vacancy on a corporation's board of directors may be filled by the board of
directors unless otherwise provided in the articles of incorporation, except
that the directors may only fill a vacancy resulting from an increase in the
number of directors if expressly permitted by the articles of incorporation. The
Alabama Articles do not contain a provision which permits the directors to fill
a vacancy resulting from an increase in the number of directors. Under Delaware
law, vacancies and newly created directorships may be filled by a majority of
the directors then in office (even though less than a quorum) or by a sole
remaining director, unless otherwise provided in the corporation's certificate
of incorporation or bylaws (or unless the certificate of incorporation directs
that a particular class of stock is to elect such director(s), in which case a
majority of the directors elected by such class, or a sole remaining director so
elected, may fill such vacancy or newly created directorship). Neither the
Delaware Certificate nor the Delaware Bylaws limits the ability of directors to
fill vacancies resulting from an increase in the number of directors.
In addition to the foregoing, the Alabama Act provides that the term of
a director who is elected to fill a vacancy expires at the next shareholders'
meeting at which directors are elected, even if directors serve staggered terms
on a classified board. The Delaware Law provides that in the case of a
corporation, the directors of which are divided into classes, any director
elected to fill a vacancy is to hold office until the next election of the class
for which he or she was chosen.
DIVIDENDS AND REPURCHASES OF SHARES. Under the Alabama Act and unless
otherwise restricted by its articles of incorporation, a corporation may not
make any distribution (including dividends, whether in cash or other property,
and repurchases of its shares) if, after giving it effect, (i) the corporation
would not be able to pay its debts as they become due in the usual course of
business or (ii) the corporation's total assets would be less than the sum of
its total liabilities plus (unless the articles of incorporation permit
otherwise) the amount that would be needed, if the corporation were to be
dissolved, to satisfy the preferential rights of shareholders whose preferential
rights are superior to those receiving the distribution.
The Delaware Law permits a corporation to declare and pay dividends out
of surplus or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of all classes having a preference upon the
distribution of assets. In addition, the Delaware Law generally
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<PAGE>
provides that a corporation may redeem or repurchase its shares only if the
capital of the corporation is not impaired and such redemption or repurchase
would not impair the capital of the corporation.
CERTAIN DIFFERENCES IN STATE TAXES. As an Alabama corporation, Middle
Bay Oil Company, Inc. is subject to a domestic corporation franchise tax
calculated on the basis of the amount and par value of outstanding capital stock
and a shares tax, which is an ad valorem tax calculated on the basis of the fair
market value of its outstanding stock. If the Reincorporation Merger is
effected, 3TEC Energy Corporation will be subject to a domestic franchise tax in
Delaware calculated on the basis of the amount of its authorized capital stock
(or on its authorized shares, its issued shares and its assets), and it may also
be subject to foreign franchise taxes in other jurisdictions; however, it will
no longer be subject to the Alabama shares tax.
RIGHTS OF DISSENTING SHAREHOLDERS
In accordance with Article 13 of the Alabama Act (the "Alabama Dissent
Provisions"), a shareholder of the Company may dissent from the Reincorporation
Merger and obtain payment for the fair value of his or her shares of Common
Stock. The following is a summary of the Alabama Dissent Provisions, the
relevant text of which is set forth as Exhibit D to this Proxy Statement.
Under the Alabama Dissent Provisions, a shareholder of the Company may
dissent from the Reincorporation Merger by following the following procedures:
(i) the dissenting shareholder must deliver to the Company, prior to the vote
being taken on the Reincorporation Merger at the Special Meeting, written notice
of his or her intent to demand payment for his or her shares of Common Stock if
the Reincorporation Merger is effected (the "Notice Requirement"); and (ii) the
dissenting shareholder must not vote in favor of the Reincorporation Merger (or
submit a Proxy which results in a vote in favor of the Reincorporation Merger).
A shareholder who does not satisfy these requirements waives his or her right to
demand payment. For example, a shareholder who merely votes against the
Reincorporation Merger without satisfying the Notice Requirement described in
(i) above is not entitled to demand payment for his or her shares of Common
Stock under the Alabama Dissent Provisions. However, a shareholder's mere
failure to vote on the Reincorporation Merger will not constitute a waiver of
his or her right to demand payment as long as he or she fulfills the Notice
Requirement described in (i) above.
In addition, if the Reincorporation Merger is approved by a vote of the
shareholders of the Company, the Company must deliver written notice of such
approval to each such dissenting shareholder (the "Written Dissenters' Notice"),
which must be sent not later than 10 days after the Reincorporation Merger is
effected, and the dissenting shareholder must make a demand for payment of the
fair value of his or her shares of Common Stock in accordance with the terms of
the Written Dissenters' Notice, which demand must be received by the Company by
a date to be specified by the Company in the Written Dissenters' Notice, which
date shall be not fewer than 30 nor more than 60 days after the date on which
the Written Dissenters' Notice is delivered.
Within twenty (20) days after making a formal payment demand, each
shareholder demanding payment shall submit the certificate or certificates
representing his or her shares of Common Stock to the Company for notation
thereon by the Company that such demand has been made. The failure to submit his
or her shares of Common Stock for such notation shall, at the option of the
Company, terminate the
25
<PAGE>
shareholder's rights under the Alabama Dissent Provisions unless a court of
competent jurisdiction, for good and sufficient cause, shall otherwise direct.
A record shareholder may dissent as to fewer than all of the shares of
Common Stock registered in his or her name only if he or she dissents with
respect to all shares of Common Stock beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he or she asserts dissenters' rights. The rights of a partial dissenter
are determined as if the shares of Common Stock to which he or she dissents and
his or her other shares of Common Stock were registered in the name of a
different shareholder. Once a formal demand for payment is made, such demand
cannot be withdrawn by the shareholder except with the consent of the Company.
Upon the effective time of the Reincorporation Merger, or upon receipt
by the Company of a demand for payment, the Company must offer to pay each
dissenting shareholder who has properly complied with the Alabama Dissent
Provisions the amount estimated by the Company to be the fair value of the
shares of Common Stock held by each such dissenting shareholder, plus accrued
interest. Such offer must be accompanied by, among other information, the
Company's balance sheet as of the end of a fiscal year ending not more than 16
months before the date of the offer, an income statement for that year, the
latest available interim financial statements, if any, a statement of the
Company's estimate of the fair value of the shares, and an explanation of how
the interest was calculated. If any dissenting shareholder accepts such offer of
payment, then such dissenting shareholder must surrender to the Company the
certificate or certificates representing his or her shares of Common Stock. Upon
receipt by the Company of the certificate or certificates, the Company shall pay
such dissenting shareholder the fair value of his or her shares, plus accrued
interest and such dissenting shareholder will cease to have any interest in the
shares. If, however, a dissenting shareholder does not accept the Company's
offer of payment, then such dissenting shareholder must, within thirty (30) days
after the Company offered payment for his or her shares of Common Stock, notify
the Company in writing of his or her own estimate of the fair value of his or
her shares of Common Stock and amount of interest due, and demand payment of
such estimate, or reject the Company's offer and demand the fair value of his or
her shares of Common Stock and interest due. If this demand by a dissenting
shareholder remains unsettled for sixty (60) days, then the Company must
commence a proceeding in the Circuit Court of Washington County, Alabama to
determine the fair value of the shares of Common Stock and accrued interest. If
the Company does not commence this proceeding within the 60-day period, then the
Company must pay each dissenting shareholder whose demand remains unsettled the
amount demanded. The Company must make all dissenting shareholders whose demands
remain unsettled parties to this proceeding. In such proceeding, the court may,
if it so elects, appoint one or more persons as appraisers to receive evidence
and recommend a decision on the question of fair value. The Company must pay
each dissenting shareholder the amount found to be due after final determination
of the proceedings. Upon payment of such judgment and surrender to the Company
of the certificate or certificates representing the appraised shares, the
dissenting shareholder will cease to have any interest in the shares of Common
Stock.
The costs and expenses of any such dissent proceeding will be
determined by the court and will be assessed against the Company, but costs and
expenses may be apportioned and assessed against all or some of the dissenting
shareholders, in such amounts as the court deems equitable, to the extent the
court finds such dissenting shareholders acted arbitrarily, vexatiously or not
in good faith in demanding payment after receiving an offer of payment from the
Company. The court may also assess the reasonable fees and
26
<PAGE>
expenses of counsel and experts for the respective parties, in amounts the court
finds equitable (a) against the Company and in favor of any or all dissenting
shareholders if the court finds that the Company did not substantially comply
with the requirements of the Alabama Dissent Provisions, or (b) against either
the Company or a dissenting shareholder, in favor of any other party, if the
court finds that the party against whom the fees and expenses are assessed acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by the Alabama Dissent Provisions. If the court finds that the services
of counsel for any dissenting shareholder were of substantial benefit to the
other dissenting shareholders similarly situated, and that the fees for the
services should not be assessed against the Company, the court may award such
counsel reasonable fees to be paid out of the amounts awarded to dissenting
shareholders who were benefitted.
The foregoing is only a summary of the Alabama Dissent Provisions, and
is qualified in its entirety by reference to the provisions thereof, the text of
which is set forth as Exhibit D to this Proxy Statement. Each shareholder of the
Company is urged to carefully read the full text of the Alabama Dissent
Provisions.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Company has been advised by counsel that, for federal income tax
purposes, no gain or loss will be recognized by the holders of Middle Bay Oil
Company, Inc. Common Stock as a result of the consummation of the
Reincorporation Merger and no gain or loss will be recognized by Middle Bay Oil
Company, Inc. or 3TEC Energy Corporation. In addition, counsel has advised that
each former holder of Middle Bay Oil Company, Inc. Common Stock will have the
same basis in the 3TEC Energy Corporation Common Stock received by such person
pursuant to the Reincorporation Merger as such holder had in the Middle Bay Oil
Company, Inc. Common Stock held by such person at the time of consummation of
the Reincorporation Merger, and such person's holding period with respect to
such 3TEC Energy Corporation Common Stock will include the period during which
such holder held the corresponding Middle Bay Oil Company, Inc. Common Stock,
provided the latter was held by such person as a capital asset at the time of
the consummation of the Reincorporation Merger.
State, local or foreign income tax consequences to shareholders may
vary from the federal tax consequences described above. SHAREHOLDERS SHOULD
CONSULT THEIR OWN TAX ADVISORS AS TO THE EFFECT OF THE REINCORPORATION MERGER
PROPOSAL UNDER APPLICABLE FEDERAL, STATE, LOCAL OR FOREIGN INCOME TAX LAWS.
PROPOSAL TO APPROVE THE CHANGE OF
THE NAME OF THE COMPANY TO
3TEC ENERGY CORPORATION
INTRODUCTION
The Company's Board of Directors believes that it is in the Company's
best interests to change its name from Middle Bay Oil Company, Inc. to 3TEC
Energy Corporation.
VOTE REQUIRED FOR THE CHANGE OF NAME PROPOSAL
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<PAGE>
The affirmative votes equal to at least a majority of the votes of
holders of common stock cast at the Special Meeting, in person or by proxy, is
required for approval of the proposal to change the name of the Company to 3TEC
Energy Corporation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
PROPOSED NAME CHANGE.
PRINCIPAL REASONS FOR THE PROPOSED NAME CHANGE
The Company believes that the proposed name change will emphasize the
Company's enhanced business strategy and potential growth.
PROPOSAL TO APPROVE THE INCREASE
IN THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK OF THE COMPANY
INTRODUCTION
At the Special Meeting, the stockholders of the Company will be asked
to vote on a proposal to increase the number of authorized shares of Common
Stock from 40,000,000 to 60,000,000.
VOTE REQUIRED FOR THE INCREASE IN THE NUMBER OF AUTHORIZED SHARES PROPOSAL
The affirmative votes equal to at least a majority of the votes of
holders of common stock cast at the Special Meeting, in person or by proxy, is
required for approval of the proposal to increase the number of shares of common
stock of the Company to 60,000,000.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
PROPOSED INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
OF THE COMPANY
PRINCIPAL REASONS FOR THE PROPOSED INCREASE IN THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK OF THE COMPANY
The Board of Directors believes that it is important to have the
additional shares of Common Stock available for issuance as and when needed in
order to avoid the delay and expense incident to obtaining stockholder approval
at a later date and to provide the Company greater flexibility in the
consideration of future sales of Common Stock or convertible securities for
possible future acquisitions and other corporate purposes. The terms and rights
of the additional shares of Common Stock to be authorized if the proposal is
approved will be identical to those of presently outstanding shares of Common
Stock.
PROPOSAL TO APPROVE THE COMPANY'S 1999 EMPLOYEE STOCK OPTION
PLAN AS DESCRIBED HEREIN
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<PAGE>
The Board voted to adopt the Company's 1999 Stock Option Plan on
October 1, 1999, subject to the approval of the stockholders of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL,
RATIFICATION AND CONFIRMATION OF THE ADOPTION BY THE BOARD OF DIRECTORS OF THE
COMPANY'S 1999 STOCK OPTION PLAN.
The Board of Directors and management believe that the 1999 Plan will
help attract and retain competitively superior employees and promote long-term
growth and profitability by further aligning employee and shareholder interests.
The affirmative vote of a majority of the shares voting on this resolution is
required for its adoption.
A summary of the essential features of the 1999 Plan is provided below,
but is qualified in its entirety by reference to the full text of the 1999 Plan
which is attached hereto as Exhibit E to this Proxy Statement.
The 1999 Plan is administered by the Compensation Committee of the
Board of Directors of the Company. The Compensation Committee has the authority
to select the employees of the Company who will receive options and to establish
the number of shares which may be issued under each option; provided, however,
that the maximum number of shares that may be subject to options granted under
the Plan to an individual optionee during any calendar year may not exceed
130,000 (subject to adjustment in the event of a recapitalization, subdivision,
consolidation, payment of a stock dividend or other corporate action affecting
the number of shares outstanding).
The 1999 Plan provides for two types of options: (a) incentive stock
options and (b) nonqualified stock options. The terms and conditions of the
option agreements to be executed pursuant to the 1999 Plan shall contain such
terms and conditions as may be approved by the Compensation Committee and such
option agreements need not be identical. Such option agreements may provide for
the surrender of the right to purchase shares under the option in return for a
payment in cash or shares of stock of the Company or a combination of cash and
shares of stock of the Company equal in value to the excess of the fair market
value of the shares with respect to which the right to purchase is surrendered
over the option price therefor (a "stock appreciation right"). Each option and
all rights granted under the 1999 Plan shall not be transferable other than by
will or the laws of descent and distribution or pursuant to a qualified domestic
relations order, and shall be exercisable during the optionee's lifetime only by
the optionee or the optionee's guardian or legal representative.
Options under the 1999 Plan may only be granted to individuals who are
employees of the Company or any parent or subsidiary of the Company at the time
the option is granted; however, members of the Compensation Committee are not
eligible to be granted options.
The aggregate number of shares which may be issued under options
granted under the 1999 Plan shall not exceed 1,500,000 shares of stock of the
Company (subject to adjustment in the event of a recapitalization, subdivision,
consolidation, payment of a stock dividend or other corporate action affecting
the number of shares outstanding). Such shares may consist of authorized but
unissued shares of stock of the Company or previously issued shares of the
Company reacquired by the Company. If any options or SARs granted under
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<PAGE>
the 1999 Plan are forfeited, or if options or SARs terminate for any other
reason prior to exercise, then the underlying shares of common stock again
become available for awards.
The purchase price of stock of the Company issued under each option
shall be equal to the fair market value of the stock of the Company subject to
the option on the date the option is granted; however, this limitation shall not
apply to incentive stock options for which a greater purchase price is required
pursuant to the provisions of the 1999 Plan.
The 1999 Plan became effective October 1, 1999, the date of its
adoption by the Board of Directors, provided the 1999 Plan is approved by the
stockholders of the Company within twelve months thereafter. Except with respect
to options then outstanding, if not sooner terminated under the provisions of
the 1999 Plan, such Plan shall terminate upon and no further options shall be
granted after September 30, 2009.
The shares with respect to which options may be granted are shares of
common stock of the Company as presently constituted. The 1999 Plan provides
that if the Company recapitalizes, reclassifies its capital stock, or otherwise
changes its capital structure (a "recapitalization"), the number and class of
shares of Stock covered by an Option theretofore granted shall be adjusted so
that such Option shall thereafter cover the number and class of shares of stock
and securities to which the Optionee would have been entitled pursuant to the
terms of the recapitalization if, immediately prior to the recapitalization, the
Optionee had been the holder of record of the number of shares of Stock then
covered by such Option.
The 1999 Plan provides that, upon a Corporate Change (hereafter
defined), the Compensation Committee may accelerate the vesting of options,
cancel options and make payments in respect thereof in cash, adjust the
outstanding option as appropriate to reflect such Corporate Change, or provide
that each option shall thereafter be exercisable for the number and class of
securities or property that the optionee would have been entitled to had the
option already been exercised. The 1999 Plan provides that a "Corporate Change"
occurs (a) if the Company is to be dissolved and liquidated, (b) if the Company
is not the surviving entity in any merger, consolidation or other reorganization
(other than in connection with a reincorporation or other merger or
consolidation in which the stockholders of the surviving company and their
proportionate interests are substantially the same as those of the Company
immediately prior to such transaction), (c) if the Company sells, leases or
exchanges all or substantially all of its assets, (d) if any person, entity or
group acquires or gains ownership or control of more than 50% of the outstanding
shares of the Company's voting stock or (e) if after a contested election of
directors, the persons who were directors before such election cease to
constitute a majority of the Board.
The Board of Directors may terminate the 1999 Plan with respect to any
shares for which options have not theretofore been granted. The Board may amend
the 1999 Plan; however, the Board may not make amendments which would materially
increase the benefits accruing to participants under the 1999 Plan, increase the
aggregate number of shares which may be issued pursuant to the provisions of the
1999 Plan, change the class of individuals eligible to receive options under the
1999 Plan or extend the term of the 1999 Plan, without the approval of the
stockholders of the Company.
FEDERAL INCOME TAX ASPECTS OF THE 1999 PLAN
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<PAGE>
NONQUALIFIED STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. As a general
rule, no federal income tax is imposed on the optionee upon the grant of a
nonqualified stock option such as those under the 1999 Plan (whether or not
including a stock appreciation right) and the Company is not entitled to a tax
deduction by reason of such a grant. Generally, upon the exercise of a
nonqualified stock option, the optionee will be treated as receiving
compensation taxable as ordinary income in the year of exercise in an amount
equal to the excess of the fair market value of the shares on the date of
exercise over the option price paid for such shares. In the case of the exercise
of a stock appreciation right, the optionee will be treated as receiving
compensation taxable as ordinary income in the year of exercise in an amount
equal to the cash received plus the fair market value of the shares distributed
to the optionee. Upon the exercise of a nonqualified stock option or a stock
appreciation right, the Company may claim a deduction for compensation paid at
the same time and in the same amount as compensation income is recognized to the
optionee assuming any federal income tax withholding requirements are satisfied.
Upon a subsequent disposition of the shares received upon exercise of a
nonqualified stock option or a stock appreciation right, any appreciation after
the date of exercise should qualify as capital gain. If the shares received upon
the exercise of an option or a stock appreciation right are transferred to the
optionee subject to certain restrictions, then the taxable income realized by
the optionee, unless the optionee elects otherwise, and the Company's tax
deduction (assuming any federal income tax withholding requirements are
satisfied) should be deferred and should be measured at the fair market value of
the shares at the time the restrictions lapse. The restrictions imposed on
officers, directors and 10% shareholders by Section 16(b) of the Securities
Exchange Act of 1934, as amended, is such a restriction during the period
prescribed thereby if other shares have been purchased by such an individual
within six months of the exercise of a nonqualified stock option or stock
appreciation right.
INCENTIVE STOCK OPTIONS. The incentive stock options under the 1999
Plan are intended to constitute "incentive stock options" within the meaning of
Section 422(b) of the Internal Revenue Code of 1986, as amended. Incentive stock
options are subject to special federal income tax treatment. No federal income
tax is imposed on the optionee upon the grant or the exercise of an incentive
stock option if the optionee does not dispose of shares acquired pursuant to the
exercise within the two-year period beginning on the date the option was granted
or within the one-year period beginning on the date the option was exercised
(collectively, the "holding period"). In such event, the Company would not be
entitled to any deduction for federal income tax purposes in connection with the
grant or exercise of the option or the disposition of the shares so acquired.
With respect to an incentive stock option, the difference between the fair
market value of the stock on the date of exercise and the exercise price must be
included in the optionee's alternative minimum taxable income. However, if the
optionee exercises an incentive stock option and disposes of the shares received
in the same year and the amount realized is less than the fair market value of
the shares on the date of exercise, the amount included in alternative minimum
taxable income will not exceed the amount realized over the adjusted basis of
the shares.
Upon disposition of the shares received upon exercise of an incentive
stock option after the holding period, any appreciation of the shares above the
exercise price should constitute capital gain. If an optionee disposes of shares
acquired pursuant to his exercise of an incentive stock option prior to the end
of the holding period, the optionee will be treated as having received, at the
time of disposition, compensation taxable as ordinary income. In such event, the
Company may claim a deduction for compensation paid at the same time and in the
same amount as compensation is treated as received by the optionee. The amount
treated as compensation is the excess of the fair market value of the shares at
the time of exercise (or in the
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<PAGE>
case of a sale in which a loss would be recognized, the amount realized on the
sale if less) over the exercise price; any amount realized in excess of the fair
market value of the shares at the time of exercise would be treated as
short-term or long-term capital gain, depending on the holding period of the
shares.
Except as described above, there are no federal income tax effects to
the Company upon the issuance of the shares of common stock pursuant to the
exercise of options or stock appreciation rights granted under the 1999 Plan or
the disposition of the shares acquired pursuant to such exercise.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the
aggregate cash compensation earned by and paid to Middle Bay's executive
officers for the periods ended December 31, 1996 through December 31, 1998:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------- -------------------------
AWARDS PAYOUTS
---------- ---------
Securities
Underlying
Restr. Options/ All Other
Name and Other Annual Stock SARs LTIP Compensation
Principal Position Year Salary ($) Bonus ($) Compensation Awards($) (#) Payouts ($) ($)
------------------ ---- ---------- --------- ------------ --------- --- ----------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Floyd C. Wilson 1998 - - - - - - -
Chairman of the 1997 - - - - - - -
Board, President, 1996 - - - - - - -
Chief Executive
Officer(1)
John J. Bassett 1998 111,667 37,121 -- -- 35,000 -- --
Executive Vice 1997 95,521 6,001 -- 129,545 132,000 -- 13,032(3)
President(2) 1996 58,075 -- -- -- 20,000 -- 2,271(4)
Stephen W. Herod 1998 100,000 24,375 -- -- 35,000 -- --
Vice President - 1997 50,000 -- -- -- -- -- --
Corp. Development 1996 -- -- -- -- -- -- --
Robert W. Hammons 1998 91,250 25,625 -- -- 22,000 -- --
Vice President - 1997 85,729 6,000 -- 57,960 94,500 -- 12,500(3)
Engineering 1996 58,075 -- -- -- 20,000 -- 2,271(4)
Frank C. Turner, II 1998 89,167 25,521 -- -- 22,000 -- --
Vice President & 1997 85,729 6,000 -- 57,960 94,500 -- 16,250(3)
CFO 1996 54,458 -- -- -- 20,000 -- 2,174(4)
</TABLE>
(1) Employed August 27, 1999
(2) Resigned effective September 30, 1999
(3) Relocation Expenses
(4) Payments under Net Profits Interest Plan and Employer contribution into
Company's SEP/IRA Plan
32
<PAGE>
COMPENSATION UNDER PLANS. Middle Bay established a SEP/IRA retirement
plan (the "Plan") in 1993 which allowed for a maximum discretionary Company
contribution of 15% of total wages paid to employees for the year. For the years
ended December 1998 through 1996, Middle Bay paid no contributions in 1998,
$51,500 in 1997 and $5,000 in 1996 to the Plan, including $32,064 (1997) and
$3,068 (1996) for all executive officers as a group. Such plan was terminated by
the Board of Directors of the Company on August 9, 1999.
Middle Bay established a 401(k) plan in October 1997, which allows for
voluntary contributions by the employees and the employer. No Company
contributions were made in 1997 or in 1998.
In March 1995, the Board of Directors adopted an employee incentive
compensation plan ("NPI Plan") whereby the proceeds equivalent to 1% net profits
interest (the "net profits interest") in all oil and gas properties, drilling
prospects and acquisitions and divestitures acquired or made after January 1,
1994 were paid into a fund for incentive compensation awards to eligible
employees.
For the year ended December 31, 1996, Middle Bay paid $6,916 to
employees through the NPI Plan, including $4,897 for all executive officers as a
group. No amount was paid into the NPI Plan in 1997 or 1998.
As part of closing of the Securities Purchase Agreement between 3TEC
and Middle Bay, the NPI Plan was terminated effective August 27, 1999. On the
termination date Middle Bay paid $274,625 to employees through the NPI Plan
including $72,651 for all executive officers as a group. All eligible employees
were notified of the termination of the plan and signed consents and waivers of
any further claim or compensation under the NPI Plan.
Middle Bay has no other retirement, pension/profit-sharing or other
deferred compensation.
STOCK OPTION PLAN
OPTION GRANTS IN LAST FISCAL YEAR. The Amended and Restated 1995 Stock
Option and Stock Appreciation Rights Plan, as amended (the "Plan") is
administered by the Compensation Committee (the "Committee") of the Board of
Directors. At least two members of the Committee must be disinterested
nonemployee directors. The Committee is authorized to determine the employees,
including officers, to whom options or rights are granted. Each option or right
granted shall be on such terms and conditions consistent with the Plan as the
Committee may determine, but the duration of any option or right shall be not
greater than ten years or less than five years from the date of grant.
Options or rights grants shall be made under the Plan only to persons
who are officers or salaried employees of Middle Bay or are nonemployee
directors. The aggregate number of shares of common stock of Middle Bay which
could be subject to options or rights under the Plan during 1998 was 1,500,000.
The option price of shares covered by options granted under the Plan may not be
less than the fair market value at the time the option is granted. The option
price must be paid in full in cash or cash equivalent at the time of purchase or
prior to delivery of the shares in accordance with cash payment arrangements
acceptable to
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<PAGE>
the Committee. If the Committee so determines, the option price may also be paid
in shares of Middle Bay's common stock already owned by the optionee.
During the fiscal year ended December 31, 1998, options covering
232,000 shares were issued under the Plan. Options covering 200,000 shares have
been granted during 1999.
The following table provides certain information with respect to all
options granted during the fiscal year ended December 31, 1998 to any executive
officer or director of Middle Bay; 232,000 options were granted under the Plan
and none were granted outside of the Plan:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
Number of
Securities % of Total
Underlying Options/SARs
Options/ Granted to
SARS Employees in Exercise or Base Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date
---- ----------- ----------- ------------ ----
<S> <C> <C> <C> <C>
Floyd C. Wilson*
John J. Bassett** 35,000 15.1% 5.75 1/13/2003
Stephen W. Herod 35,000 15.1% 5.75 1/13/2003
Frank C. Turner, II 22,000 9.5% 5.75 1/13/2003
Robert W. Hammons 22,000 9.5% 5.75 1/13/2003
</TABLE>
* Elected August 27, 1999
** Resigned as an officer and director of the Company effective September 30,
1999
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUE TABLE
AS OF DECEMBER 31, 1998. The following table sets forth certain information
concerning each exercise of stock options during the year ended December 31,
1998, by each of the named executive officers and directors and the aggregated
fiscal year-end value of the unexercised options of each such named executive
officer and director:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Options/SARs at
Shares FY END (#) FY END ($)
Acquired Value ----------------------- -----------------------
Name On Exercise (#) Realized ($) Exer. Unexer. Exer. Unexer.
---- --------------- ------------ ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
34
<PAGE>
John J. Bassett** -- - - 187,000 -- 5,000
Frank C. Turner, II -- -- 20,000 116,500 5,000 --
Robert W. Hammons -- - - 136,500 -- 5,000
Stephen W. Herod -- -- -- 35,000 -- --
Gary R. Christopher* -- -- -- 10,000 -- --
</TABLE>
*Nonemployee director
**Resigned as an officer and director of the Company effective
September 30, 1999.
CHANGES IN CONTROL
As a result of the consummation of the transactions contemplated by that certain
Securities Purchase Agreement dated July 1, 1999 by and between 3TEC Energy
Company, L.L.C., ("3TEC"), a change of control of Middle Bay occurred.
Pursuant to the terms of the Securities Purchase Agreement, 3TEC purchased
4,755,556 shares of Middle Bay common stock, plus five-year warrants to purchase
3,600,000 shares of Company 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 purchase
price for such securities, $20,525,000 in cash and $875,000 in agreed value of
certain oil and gas interests assigned to Middle Bay.
The Note is convertible at any time into Middle Bay common stock at $3.00 per
share (a total of 3,566,667 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.
In connection with such 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 Company 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
35
<PAGE>
the size of the Board, (2) leave the vacated seat empty, or (3) appoint a
replacement to serve until the 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.
Pursuant to a Registration Rights Agreement by and among the Company, 3TEC and
certain other shareholders of the Company 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 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.
If 3TEC chooses to fully exercise the Warrants and fully convert the Note to
common shares, 3TEC would control approximately 58% of the then issued and
outstanding shares of common stock of Middle Bay.
COMPENSATION OF DIRECTORS
Each director is paid an attendance fee of $500 for each meeting of the Board
and of each Committee of the Board, and Middle Bay reimburses directors'
documented travel and lodging expenses.
Each nonemployee director is eligible for incentive awards under the 1995 Stock
Option and Stock Appreciation Rights Plan. As previously reported in Middle
Bay's 1998 Proxy Statement, in January 1998, the Board of Directors approved the
Compensation Committee's recommendation to issue nonqualified stock options
pursuant to the Plan to nonemployee directors. These options were issued as
follows (see "Executive Compensation"):
<TABLE>
<CAPTION>
Issued 1/98 Issued 2/99
No. of Exercise No. of Exercise
Name Optioned Shares Price Optioned Shares Price
---- --------------- ----- --------------- -----
<S> <C> <C> <C> <C>
Edward P. Turner, Jr.* 10,000 $5.75 5,000 $1.50
Frank E. Bolling, Jr.* 10,000 $5.75 5,000 $1.50
Gary R. Christopher 10,000 $5.75 5,000 $1.50
Alvin V. Shoemaker* 10,000 $5.75 5,000 $1.50
David B. Miller** - - - -
D. Martin Phillips** - - - -
</TABLE>
* Resigned as of August 27, 1999
** Elected August 27, 1999
EMPLOYMENT AGREEMENTS
Floyd C. Wilson executed an employment agreement commencing on August
27, 1999 and terminating on November 25, 2000 to serve as President and Chief
Executive Officer with a $200,000 base salary. The Company may terminate Mr.
Wilson's employment under the employment agreement for "Cause." "Cause" is
defined as (i)
36
<PAGE>
the inability of employee, despite any reasonable accommodation required by law,
due to bodily injury or disease or any other physical or mental incapacity, to
perform the services provided for under the employment agreement for a period of
120 days in the aggregate, within any given period of 180 consecutive days
during the term of the employment agreement, in addition to any statutorily
required leave of absence, (ii) conduct of the employee that constitutes fraud,
dishonesty, theft, or a criminal act involving moral turpitude, in each case
only if it materially affects his ability to perform the duties and
responsibilities of his position or has a material adverse effect on the
Company, (iii) commission of a material act of fraud against the Company, (iv)
embezzlement of funds or misappropriation of other property by the employee from
the Company; or (v) failure of employee to observe or perform his material
duties and obligations as an employee of the Company or a material breach of the
employment agreement, after 30 days advance written notice of such failure or
breach which has not been cured. If Mr. Wilson is terminated by Middle Bay
without Cause, the Company is required to pay him an amount equal to the salary
payable to him over the remaining term of his agreement.
The employment agreement contains certain noncompete, confidentiality
and noninterference provisions. For example, during the term of the employment
agreement Mr. Wilson may not be employed or render advisory, consulting or other
services in connection with any business enterprise or person that is engaged in
leasing, acquiring, exploring, producing, gathering or marketing hydrocarbons
and related products. Further, during the term of the employment agreement Mr.
Wilson may not be financially interested, invest or engage in any business that
is engaged in leasing, acquiring, exploring, producing, gathering or marketing
hydrocarbons and related products, with certain limited exceptions. The
agreement also provides that Mr. Wilson will not disclose or make use of any
trade secrets or confidential or proprietary information pertaining to the
Company in a way that is materially detrimental to the Company. Mr. Wilson is
also prohibited during the two-year period of his employment agreement or the
period in which Mr. Wilson is employed by the Company, whichever is longer, and
for a six-month period commencing upon the termination of such longer period
from soliciting any employee of the Company or any other person who is under
contract with or rendering services to the Company to (i) terminate his or her
employment with the Company, (ii) refrain from extending or renewing his or her
employment with the Company, (iii) refrain from rendering services to or for the
Company, (iv) become employed by or to enter into contractual relations with any
persons other than the Company, or (v) enter into a relationship with a
competitor of the Company.
In January of 1997, Mr. Hammons, entered into an employment agreement
with Middle Bay which extends through January 31, 2000, with automatic one-year
extensions upon each anniversary date of the employment agreement thereafter
unless either party gives at least 30 days' notice of termination. The
employment agreement is terminable by Middle Bay before expiration of the term
if such termination is for cause (as specified in the employment agreement). The
executive employment agreement provides for an annual salary of not less than a
base salary of $85,000, which amount may be adjusted from time to time by the
Board of Directors upon the recommendation of the Compensation Committee. It
also provides for fringe benefits in accordance with Middle Bay's policies
adopted from time to time for salaried executive employees holding comparable
positions.
Mr. Herod executed an employment agreement with Middle Bay with an
effective date of July 1, 1997 and extending through June 30, 1999, with
automatic one-year extensions upon each anniversary date of the employment
agreement thereafter unless either party gives at least 30 days' notice of
termination. The employment agreement is terminable by Middle Bay before
expiration of the term if such termination is for cause (as specified in the
employment agreement). The executive employment agreement provides for an annual
salary of not less than the base salary of $100,000, which amount may be
adjusted from time to time by the Board of Directors upon the
37
<PAGE>
recommendation of the Compensation Committee. It also provides for fringe
benefits in accordance with Middle Bay's policies adopted from time to time for
salaried executive employees holding comparable positions.
MISCELLANEOUS
SHAREHOLDER PROPOSALS
If a stockholder intends to present a proposal for action at the 2000
annual meeting and wishes to have such proposal considered for inclusion in the
Company's proxy materials in reliance on Rule 14a-8 under the Securities
Exchange Act of 1934, as amended, the proposal must be submitted in writing and
received by the Company by April 12, 2000. Such proposals must also meet the
other requirements of the rules of the Commission relating to stockholders'
proposals.
The Delaware Bylaws establish an advance notice procedure applicable to
the proposal of business to be considered at a meeting which requires such
notice by a stockholder in connection with the Company's annual meeting to be
delivered to the Company not less than 60 nor more than 90 days prior to the
first anniversary of the of the previous year's annual meeting. If the annual
meeting is more than 30 days before or more than 60 days after such anniversary
date; however, notice by the stockholder to be timely must be delivered no
earlier than 90 days prior to the annual meeting and no later than 60 days prior
to the annual meeting and the tenth day following the issuance by the Company of
a press release announcing the meeting date. For the purpose of the annual
meeting of stockholders of the Company to be held in 2000, if the
Reincorporation Merger is effected, the first anniversary of the preceding
year's annual meeting will be on August 11, 2000. In addition, the Delaware
Bylaws contain advance notice procedures applicable to the nomination by
stockholders of directors for election to the Company's Board of Directors. In
general, notice of a director nomination for an annual meeting must be received
by the Company 90 days or more before the date of the annual meeting and must
contain specified information and conform to certain requirements, as set forth
in the Bylaws. Notice of a director nomination for a special meeting must be
received by the Company no later than the close of business on the seventh day
following the date on which notice of such meeting is first given to
stockholders. If the chairman of the stockholders' meeting determines that a
director nomination was not made in accordance with the Bylaws, the Company may
disregard such nomination.
In addition, if a stockholder submits a proposal outside of Rule 14a-8
for the 2000 annual meeting, and the proposal fails to comply with the advance
notice procedure described in the Bylaws, then the Company's proxy may confer
discretionary authority on the persons being appointed as proxies on behalf of
management to vote on the proposal. Proposals and nominations should be
addressed to the Secretary of the Company, Floyd C. Wilson, 1221 Lamar Street,
Suite 1020, Houston, Texas 77010.
DISCRETIONARY AUTHORITY
At the time of mailing this Proxy Statement, the Board of Directors was
not aware of any other matters which might be presented at the meeting. If any
matter not described in this Proxy Statement should properly be presented, the
persons named in the accompanying form of proxy will vote such proxy in
accordance with their judgment.
By Order of the Board of Directors
38
<PAGE>
------------------------------------
Floyd C. Wilson
President and
Chief Executive Officer
DATED this 28th day of October, 1999
39
<PAGE>
EXHIBIT "A"
AGREEMENT AND PLAN OF MERGER BETWEEN 3TEC ENERGY CORPORATION, A DELAWARE
CORPORATION AND MIDDLE BAY OIL COMPANY, INC., AN ALABAMA CORPORATION
THIS AGREEMENT AND PLAN OF MERGER dated this _____ day of
________________, 1999 (the "Agreement") is between 3TEC Energy Corporation, a
Delaware Corporation ("3TEC"), and Middle Bay Oil Company, Inc., an Alabama
corporation ("MBOC" or "Middle Bay"). 3TEC and MBOC are sometimes hereinafter
collectively referred to as the "Constituent Corporations."
RECITALS
A. 3TEC is a corporation organized and existing under the laws
of the State of Delaware and, as of the date hereof, __________ shares of Common
Stock of 3TEC are issued and outstanding, all of which are held by Middle Bay.
B. Middle Bay is a corporation organized and existing under
the laws of the State of Alabama and, as of the date hereof, its issued and
outstanding stock consists of [13,382,732] shares of Common Stock, [ _______ ]
shares of Series B Preferred Stock, and [ _________ ] shares of Series C
Preferred Stock.
C. The Board of Directors of Middle Bay has determined that,
for the purpose of effecting the reincorporation of Middle Bay in the State of
Delaware, it is advisable and in the best interests of Middle Bay that it merge
with and into 3TEC upon the terms and conditions herein provided.
D. The respective Boards of Directors of 3TEC and Middle Bay
have approved this Agreement and have directed that this Agreement be submitted
to a vote of their respective shareholders and executed by the undersigned
officers.
NOW THEREFORE, in consideration of the mutual agreements and
covenants set forth herein, 3TEC and Middle Bay hereby agree, subject to the
terms and conditions hereinafter set forth, as follows:
40
<PAGE>
ARTICLE I
THE MERGER
1.1 MERGER. In accordance with the provisions of this
Agreement, the Delaware General Corporation Law and the Alabama Business
Corporation Act, Middle Bay shall be merged with and into 3TEC (the "Merger"),
whereupon the separate existence of Middle Bay shall cease and 3TEC shall be,
and is hereinafter sometimes referred to as, the "Surviving Corporation." On the
Effective Date of the Merger (as hereinafter defined) the name of the Surviving
Corporation shall be 3TEC Energy Corporation.
1.2 FILING AND EFFECTIVENESS. The Merger shall become
effective when the following actions shall have been completed:
(a) this Agreement and the Merger shall have been adopted and
approved by the shareholders of each Constituent Corporation
in accordance with the requirements of the Delaware General
Corporation Law and the Alabama Business Corporation Act, as
the case may be;
(b) all of the conditions precedent to the consummation of the
Merger specified in this Agreement shall have been satisfied
or duly waived by the party entitled to satisfaction thereof;
(c) an executed Certificate of Merger or an executed
counterpart of this Agreement meeting the requirements of the
Delaware General Corporation Law shall have been filed with
the Secretary of State of the State of Delaware; and
(d) executed Articles of Merger meeting the requirements of
the Alabama Business Corporation Act shall have been filed
with the Secretary of State of the State of Alabama.
The date and time when the Merger shall become effective, as
aforesaid, is herein referred to as the "Effective Date of the Merger."
1.3 EFFECT OF THE MERGER. On the Effective Date of the
Merger, the separate existence of Middle Bay shall cease, and 3TEC, as the
Surviving Corporation, (i) shall continue to possess all of its assets,
rights, powers and property as constituted immediately prior to the Effective
Date of the Merger; (ii) shall be subject to all actions previously taken by
its and Middle Bay's Board of Directors; (iii) shall succeed, without other
transfer, to all of the assets, rights, powers and property of Middle Bay in
the manner more fully set forth in Section 259 of the Delaware General
Corporation Law; (iv) shall continue to be subject to all of its debts,
liabilities and obligations as constituted immediately prior to the Effective
Date of the Merger; and (v) shall succeed, without other transfer, to all of
the debts, liabilities and obligations of Middle Bay in the same manner as if
3TEC had itself incurred them, all as more fully provided under the
applicable provisions of the Delaware General Corporation Law and the Alabama
Business Corporation Act.
41
<PAGE>
ARTICLE II
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of 3TEC as in effect immediately prior to the Effective Date of
the Merger shall continue in full force and effect as the Certificate of
Incorporation of the Surviving Corporation until duly amended in accordance with
the provisions thereof and applicable law.
2.2 BYLAWS. The Bylaws of 3TEC as in effect immediately prior
to the Effective Date of the Merger shall continue in full force and effect as
the Bylaws of the Surviving Corporation until duly amended in accordance with
the provisions thereof and applicable law.
2.3 DIRECTORS AND OFFICERS. The directors and officers of
Middle Bay immediately prior to the Effective Date of the Merger, who are
serving in the same capacities, and terms for 3TEC, shall be the directors and
officers of the Surviving Corporation, and such directors shall continue to be
constituted in the same terms of office which they had as directors of Middle
Bay, in accordance with the Bylaws of 3TEC.
ARTICLE III
MANNER OF CONVERSION OF SHARES
3.1 MIDDLE BAY COMMON SHARES. Upon the Effective Date of the
Merger, each share of Common Stock of Middle Bay, $.02 par value, issued and
outstanding immediately prior thereto shall, by virtue of the Merger and without
any action by the Constituent Corporations, the holder of such shares or any
other person, be converted into and exchanged for one fully paid and
nonassessable share of Common Stock, $.02 par value, of the Surviving
Corporation.
3.2 MIDDLE BAY SERIES B PREFERRED SHARES. Upon the Effective
Date of the Merger, each share of Series B Preferred Stock of Middle Bay, $.02
par value, issued and outstanding immediately prior thereto shall, by virtue of
the Merger and without any action by the Constituent Corporations, the holder of
such shares or any other person, be converted into and exchanged for one fully
paid and nonassessable share of Series B Preferred Stock, $.02 par value, of the
Surviving Corporation.
3.3 MIDDLE BAY SERIES C PREFERRED SHARES. Upon the Effective
Date of the Merger, each share of Series C Preferred Stock of Middle Bay, $.02
par value, issued and outstanding immediately prior thereto shall, by virtue of
the Merger and without any action by the Constituent Corporations, the holder of
such shares or any other person, be converted into and exchanged for one fully
paid and nonassessable share of Series C Preferred Stock, $.02 par value, of the
Surviving Corporation.
42
<PAGE>
3.4 MIDDLE BAY OPTIONS AND STOCK PURCHASE RIGHTS.
(a) Upon the Effective Date of the Merger, the Surviving
Corporation shall assume and continue any and all stock
option, stock incentive or stock award plans heretofore
adopted by Middle Bay. Each outstanding and unexercised option
or other right to purchase Middle Bay common shares existing
under and by virtue of any such plan shall become an option or
right to purchase the Surviving Corporation's Common Stock on
the basis of one share of the Surviving Corporation's Common
Stock for each common share of Middle Bay issuable pursuant to
any such option or stock purchase right, on the same terms and
conditions and at an exercise or conversion price per share
equal to the exercise or conversion price per share applicable
to any such Middle Bay option or stock purchase right at the
Effective Date of the Merger. Upon the Effective Date of the
Merger, each outstanding warrant to purchase Middle Bay common
shares shall become a warrant to purchase the Surviving
Corporation's Common Stock on the basis of one share of the
Surviving Corporation's Common Stock for each common share of
Middle Bay issuable pursuant to any such warrant, on the same
terms and conditions and at an exercise price per share equal
to the exercise price per share applicable to any such Middle
Bay warrant at the Effective Date of the Merger.
(b) A number of shares of the Surviving Corporation's Common
Stock shall be reserved for issuance upon the exercise of
options, warrants and stock purchase rights equal to the
number of common shares of Middle Bay so reserved immediately
prior to the Effective Date of the Merger.
3.5 3TEC COMMON STOCK. Upon the Effective Date of the Merger,
each share of 3TEC Common Stock, $.02 par value, issued and outstanding
immediately prior thereto shall, by virtue of the Merger and without any action
by 3TEC, the holder of such shares or any other person, be canceled and returned
to the status of authorized but unissued shares.
3.6 EXCHANGE OF CERTIFICATES.
(a) After the Effective Date of the Merger, each holder of
an outstanding certificate representing common or preferred
shares of Middle Bay may, at such holder's option,
surrender the same for cancellation to American Stock
Transfer & Trust Company, or such other entity as the
Surviving Corporation so designates as exchange agent (the
"Exchange Agent"), and each such holder shall be entitled
to receive in exchange therefor a certificate or
certificates representing the number of shares of the
Surviving Corporation's Common Stock or Preferred Stock,
whichever is applicable, into which the surrendered shares
were converted, or to which such holder was otherwise
entitled, as herein provided. Until so surrendered, each
outstanding certificate theretofore representing common or
preferred shares of Middle Bay shall be deemed for all
purposes to represent the number of shares of the Surviving
Corporation's Common Stock or Preferred Stock into which
such common or preferred shares of Middle Bay were
converted in the Merger and which the holder of such
certificate was otherwise entitled to receive pursuant to
this Agreement.
(b) The registered owner on the books and records of the
Surviving Corporation or the Exchange Agent of any such
outstanding certificate shall, until such certificate shall
have been surrendered for
43
<PAGE>
transfer or conversion or otherwise accounted for to the
Surviving Corporation or the Exchange Agent, have and be
entitled to exercise any voting and other rights with respect
to and to receive dividends and other distributions upon the
shares of Common Stock or Preferred Stock of the Surviving
Corporation represented by such outstanding certificate as
provided above.
(c) Each certificate representing Common Stock or Preferred
Stock of the Surviving Corporation so issued in the Merger
shall bear the same legends, if any, with respect to the
restrictions on transferability that appeared on the
certificates of Middle Bay so converted and given in exchange
therefor, unless otherwise determined by the Board of
Directors of the Surviving Corporation in compliance with
applicable laws.
(d) If any certificate for shares of Common Stock or Preferred
Stock of the Surviving Corporation is to be issued in a name
other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of
issuance thereof that the certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer,
that such transfer otherwise be proper and that the person
requesting such transfer pay to the Exchange Agent any
transfer or other taxes payable by reason of issuance of such
new certificate in a name other than that of the registered
holder of the certificate surrendered or establish to the
satisfaction of the Surviving Corporation that such tax has
been paid or is not payable.
ARTICLE IV
GENERAL PROVISIONS
4.1 COVENANTS OF 3TEC. 3TEC covenants and agrees that it
will on or before the Effective Date of the Merger:
(a) take such action as may be required to qualify to do
business as a foreign corporation in the states in which
Middle Bay is qualified to do business and in connection
therewith irrevocably appoint an agent for service of process
as required under the applicable provisions of the relevant
state law;
(b) take all such other actions as may be required by the
Delaware General Corporation Law and the Alabama Business
Corporation Act to effect the Merger.
4.2 FURTHER ASSURANCES. From time to time, as and when
required by 3TEC or by its successors or assigns, there shall be executed and
delivered on behalf of Middle Bay such deeds and other instruments, and there
shall be taken or caused to be taken by it such further and other actions as
shall be appropriate or necessary in order to vest or perfect in or confirm of
record or otherwise by 3TEC the title to and possession of all the property,
interests, assets, rights, privileges, immunities, powers, franchises and
authority of Middle Bay and otherwise to carry out the purposes of this
Agreement, and the officers and directors of 3TEC are fully authorized in the
name and on behalf of Middle Bay or otherwise to take any and all such action
and to execute and deliver any and all such deeds and other instruments.
44
<PAGE>
4.3 ABANDONMENT. At any time before the Effective Date of the
Merger, this Agreement may be terminated and the Merger may be abandoned for any
reason whatsoever by the Board of Directors of Middle Bay and 3TEC,
notwithstanding the approval of this Agreement by the shareholders of Middle Bay
or by the sole stockholder of 3TEC, or by both.
4.4 AMENDMENT. The Boards of Directors of the Constituent
Corporations may amend this Agreement at any time prior to the filing of this
Agreement or certificate in lieu thereof with the Secretary of State of the
State of Delaware, provided that an amendment made subsequent to the adoption of
this Agreement by the stockholders of either Constituent Corporation shall not
(i) alter or change the amount or kind of shares, securities, cash, property or
rights to be received in exchange for or on conversion of all or any of the
shares of any class or series thereof of such Constituent Corporation; (ii)
alter or change any term of the Certificate of Incorporation of the Surviving
Corporation to be effected by the Merger; or (iii) alter or change any of the
terms and conditions of this Agreement if such alteration or change would
adversely affect the holders of any class or series of capital stock of either
Constituent Corporation.
4.5 REGISTERED OFFICE. The registered office of the Surviving
Corporation in the State of Delaware is located at 1209 Orange Street,
Wilmington, Delaware, and The Corporation Trust Company is the registered agent
of the Surviving Corporation at such address.
4.6 AGREEMENT. Executed copies of this Agreement will be on
file at the principal place of business of the Surviving Corporation in Houston,
Texas, and copies thereof will be furnished to any stockholder of either
Constituent Corporation, upon request and without cost.
4.7 GOVERNING LAW. This Agreement shall in all respects be
construed, interpreted and enforced in accordance with and governed by the laws
of the State of Delaware and, so far as applicable, the merger provisions of the
Alabama Business Corporation Act.
4.8 COUNTERPARTS. In order to facilitate the filing and
recording of this Agreement, the same may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement, having first been approved
by the resolutions of the Board of Directors of 3TEC and Middle Bay, is hereby
executed on behalf of each of such corporations and attested by their respective
officers thereunto duly authorized, under penalties of perjury, hereby declaring
and certifying that this is their act and deed and the facts herein stated are
true.
3TEC ENERGY CORPORATION,
a Delaware corporation
By:
-----------------------------------------
Its:
-----------------------------------------
MIDDLE BAY OIL COMPANY, INC.,
45
<PAGE>
an Alabama corporation
By:
-----------------------------------------
Its:
-----------------------------------------
46
<PAGE>
EXHIBIT "B"
CERTIFICATE OF INCORPORATION
OF
3TEC ENERGY CORPORATION
FIRST: The name of the Corporation is 3TEC ENERGY CORPORATION.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, in the city of Wilmington,
county of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The Corporation is organized for the purpose of engaging in
any lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware, and the Corporation shall be authorized
to exercise and enjoy all powers, rights and privileges conferred upon
corporations by the laws of the State of Delaware as in force from time to
time, including, without limitation, all powers necessary or appropriate to
carry out all those acts and activities in which it may lawfully be engaged.
FOURTH: The Corporation has authority to issue not more than eighty
million (80,000,000) shares of capital stock, which are divided into classes
as follows:
(a) Sixty million (60,000,000) shares of common stock with $.02 par
value, designated "Common Stock" which, except as specifically granted to the
preferred stock as set forth below, are entitled to the entire stock voting
power in regard to the Corporation, to all dividends declared and to all
assets of the Corporation upon liquidation.
(b) Twenty million (20,000,000) shares of preferred stock with $.02
par value, designated "Preferred Stock".
(c) The designations and the powers, preferences and rights and the
qualifications, limitations or restrictions of the preferred stock shall be
as follows:
The Board of Directors is expressly authorized at any time and from
time to time to provide for the issuance of shares from the authorized
preferred stock which may be issued in one or more series, with such
designations, preferences and relative participating optional or other
special rights, qualifications, limitations or restrictions thereof, as shall
be stated and expressed in the resolution or resolutions providing for the
issuance thereof adopted by the Board of Directors and as are not stated or
expressed in the Certificate of Incorporation or any Amendment thereto,
including (but without limiting the generality of the foregoing) the
following:
(1) the distinctive designation of a series, if any, and
the number of shares which shall constitute such
series, which number may be increased (except where
otherwise provided by the Board
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of Directors in creating such series) or decreased (but
not below the number of shares thereof then
outstanding) from time to time by like action of the
Board of Directors;
(2) the annual rate of dividends payable on preferred
shares or on the shares of any series created, whether
the dividends shall be cumulative, noncumulative or
partially cumulative dividends and the date from which
dividends shall be accumulated, if dividends are to be
cumulative;
(3) the time or times when and the price or prices at which
preferred shares or shares of any series created, shall
be redeemable and the sinking fund provisions, if any,
for the purchase or redemption of such shares;
(4) the amount payable on preferred shares or shares of any
series created and the rights of holders of such shares
in the event of any liquidation, dissolution or winding
up of the affairs of the Corporation;
(5) the rights, if any, of the holders of preferred shares
or shares of any series created to convert such shares
into, or exchange such shares for, shares of common
stock or shares of any other series of preferred stock,
if any, and the terms and conditions of such
conversions or exchange; and
(6) the voting rights, if any, which holders of such shares
may exercise.
The Board of Directors is expressly authorized to vary the
provisions relating to the foregoing matters between the various series of
Preferred Shares, but in all other respects the shares of each series of
Preferred Shares shall be of equal rank with each other, regardless of
series. All of the Preferred Shares of any one series shall be identical with
each other in all respects.
(d) DIVIDEND RIGHTS. The holders of the Preferred Shares of any
series shall be entitled to receive, as and when declared by the Board of
Directors, out of funds legally available for that purpose under the laws of
the State of Delaware, preferential dividends which may be either cumulative
or noncumulative at the rate per annum fixed by the Board of Directors for
such series. Such dividends shall be payable at the time determined by the
Board of Directors. If Preferred Shares of more than one series are
outstanding, and the stated dividend is not paid in full, all series of
Preferred Shares shall share ratably in the payment of dividends including
accumulations, if any, in accordance with the sum which would be payable on
such shares if all dividends were declared and paid in full. Accumulations of
dividends shall not bear interest. So long as any Preferred Shares shall
remain outstanding, no dividends shall be declared or paid to any
distributions made on the Common Shares or on any other class of shares
junior to the Preferred Shares, and no share of common or of any other class
junior to the Preferred Shares shall be purchased or retired, and no monies
shall be made available for a sinking fund for such purpose unless dividends
for all past dividend periods shall have been paid on all outstanding
Preferred Shares of all series. Subject to the above provisions, and not
otherwise, dividends may be paid from time to time on the Common Shares or
other junior issues out of funds legally available for the purpose as and
when declared by the Board of Directors.
(e) REDEMPTION
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(1) The Corporation, on the sole authority of the board of
Directors, may at its option redeem all or any part of
any series of the Preferred Shares on the terms,
including redemption price, and to the extent, if any,
therefor affixed by the Board of Directors. Such
redemption may be effected only after dividends which
have been declared or accrued on any series of
Preferred Shares have been paid. If less than all of
the Preferred Shares of any series is to be redeemed,
the redemption shall be in such amount and by such
method, whether by lot or pro rata, or by such other
method as may then be required by law or by the rules
and regulations of any stock exchange upon which the
Preferred Shares may at that time be listed, as may
from time to time be determined by the Board of
Directors. Written notice of redemption stating the
date and place of redemption shall be mailed by the
Corporation, not less than thirty (30) days nor more
than sixty (60) days prior to the redemption date, to
the record holders of the shares to be redeemed,
directed to their last noted addresses as shown by the
corporate records.
(2) If notice of redemption is given as provided above, and
if on the redemption date the Corporation has set apart
in trust for the purpose, sufficient funds for such
redemption, then from and after the redemption date,
notwithstanding that any certificate for such shares
has not been surrendered for cancellation, the
Preferred Shares called for redemption shall no longer
be deemed outstanding and all rights with respect to
such shares shall forthwith cease and terminate, except
on the right of the holders thereof to receive the
redemption price, without interest, upon surrender of
certificates of the shares called for redemption.
(3) Any funds so set apart or deposited which, at the end
of one (1) year after the redemption date, remain
unclaimed by the holder(s) of Preferred Shares called
for redemption, shall be released and returned to the
Corporation upon demand, and shall thereafter be
available for general corporate purposes, and the
depository, if any, shall thereupon be relieved of all
responsibility therefor to such holders. Any interest
accrued on funds so deposited shall be paid to the
Corporation from time to time.
(4) Preferred Shares which are redeemed as provided in this
section, or are reacquired for retirement pursuant to
any sinking fund which may be established therefor, may
be held as Treasury Shares or may be cancelled and
retired in the manner provided by law, and appropriate
proceedings to effect the corresponding reduction in
the stated capital of the Corporation shall be taken.
(f) RIGHTS ON LIQUIDATION. In the event of the liquidation,
dissolution, or winding up of the Corporation, whether voluntary or
involuntary, resulting in any distribution of its assets to its shareholders,
the holders of the Preferred Shares then outstanding shall be entitled to
receive the amount per share theretofore affixed by the Board of Directors of
the various series, plus any accrued interest, and no more, before any
payment or distribution of the assets of the Corporation is made to or set
apart for the holders of Common Shares or any other class junior to the
Preferred Shares. If the assets of the Corporation distributable to the
holders of all the Preferred Shares are insufficient for the payment to them
of the full preferential amount described above, such assets shall be
distributed ratably among the holders of all Preferred Shares of all series
in accordance with the amounts which would be payable on such distribution if
all sums payable were discharged in full. After payment for the preferential
amounts required to be paid to the holders of all Preferred Shares then
outstanding, the holders of Preferred Shares and/or any
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other class junior to the Preferred Shares shall be entitled, to the
exclusion of the holders of any of the Preferred Shares, to share in all
remaining assets of the Corporation in accordance with their respective
interests.
For the purposes of this Section and any certificate filed pursuant
to law and setting forth the designation, description, and terms of any
series of Preferred Shares, a consolidation or merger of the Corporation with
any other corporation or corporations shall not be deemed a liquidation or
winding up of the Corporation.
FIFTH: Unless and except to the extent the bylaws of the Corporation
shall so require, the election of directors of the Corporation need not be by
written ballot.
SIXTH: The incorporator is Connie D. Tatum, whose mailing address is
2000 Epic Center, 301 North Main, Wichita, Kansas 67202.
SEVENTH: The Board of Directors of the Corporation is expressly
authorized to make, alter, amend or repeal the bylaws of the Corporation, but
the stockholders may make additional bylaws and may alter or repeal any bylaw
whether adopted by them or otherwise.
EIGHTH:
(a) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him
in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view
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of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b) of this
Article EIGHTH, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this
Article EIGHTH (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth
in paragraphs (a) and (b) of this Article EIGHTH. Such determination shall be
made (1) by a majority vote of the directors who are not parties to such
action, suit or proceeding, even though less than a quorum, or (2) if there
are no such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount
if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other sections of this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office.
(g) The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under this Article EIGHTH.
(h) For purposes of this Article EIGHTH, references to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with respect
to the resulting or surviving corporation as he would have with respect to
such constituent corporation if its separate existence had continued.
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(i) For purposes of this Article EIGHTH, references to "other
enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to any
employee benefit plan; and references to "serving at the request of the
Corporation" shall include any service as a director, officer employee or
agent of the corporation which imposes duties on, or involves services by,
such director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the best interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation"
as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article EIGHTH shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
NINTH: To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, a director of
the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of duty as a director. Without
limiting the foregoing in any respect, a director of the Corporation shall
not be personally liable to the Corporation or its stockholders for monetary
damages for breach of duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the Delaware General Corporation Law, or (iv) for any transaction from
which the director derived an improper personal benefit. If the Delaware
General Corporation Law is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the Delaware General Corporation Law, as so
amended. Any repeal or modification of this provision shall not adversely
affect any right or protection of a director of the Corporation existing at
the time of such repeal or modification.
The undersigned, being the incorporator hereinabove named, for the
purpose of forming a Corporation pursuant to the General Corporation Law of
the State of Delaware, makes the certificate as of ______________, 1999,
declaring and certifying that this is her act and deed and that the facts
herein stated are true.
--------------------------------------
Connie D. Tatum
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CERTIFICATE OF DESIGNATION
of
SERIES B PREFERRED STOCK
of
3TEC ENERGY CORPORATION
-----------------------------
Pursuant to Section 151
of the General Corporation Law of Delaware
-----------------------------
3TEC ENERGY CORPORATION, a corporation existing under the laws of
the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY that, pursuant
to the authority conferred on the Board of Directors of the Corporation by
the Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation") and in accordance with Section 151 of the General Corporation
Law of the State of Delaware ("DGCL"), the Board of Directors of the
Corporation on ______________, 1999 duly adopted the following resolution
establishing and creating a series of its Preferred Stock, par value $.02 per
share, designated "Series B Preferred Stock".
RESOLVED, that pursuant to authority vested in the Board of
Directors of the Corporation (the "Board of Directors") in accordance
with the provisions of its Certificate of Incorporation (the
"Certificate of Incorporation"), a series of Preferred Stock, par value
$.02 per share, of the Corporation is hereby created, and the
designation and number of shares thereof and the preferences,
limitations and relative rights thereof are as follows:
1. DESIGNATION, NUMBER OF SHARES AND STATED VALUE OF SERIES B
PREFERRED STOCK. There is hereby authorized and established a series of
Preferred Stock that shall be designated as "Series B Preferred Stock", and
the number of shares constituting such series shall be 266,667. Such number
may be increased or decreased, but not to a number less than the number of
shares of Series B Preferred Stock then issued and outstanding, by resolution
adopted by the full Board of Directors. The "stated value" of the Series B
Preferred Stock shall be $7.50 per share.
2. CERTAIN DEFINITIONS.
"COMMON STOCK" means, collectively, the Corporation's Common Stock,
par value $.02 per share, and any capital stock of any class of the
Corporation hereafter authorized which is not limited to a fixed sum or
percentage of par or stated value in respect to the rights of the holders
thereof to participate in dividends or in the dissolution of assets upon any
liquidation, dissolution or winding up of the Corporation.
"JUNIOR SECURITIES" means any of the Corporation's equity securities
other than the Series B Shares.
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"LIQUIDATION VALUE" of any Series B Share as of any particular date
will be equal to the sum of $7.50 plus, in the event of any liquidation,
dissolution or winding up of the Corporation, any declared but unpaid
dividends on such Series B Share shall be added to the Liquidation Value of
such Share on the payment date in any liquidation, dissolution or winding up
accrued to the close of business on such payment date.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department,
agency or political subdivision thereof.
"SERIES B SHARE" means a share of the Series B Preferred Stock.
3. DIVIDENDS; CAPITAL.
A. GENERAL. When and as declared by the Corporation's
Board of Directors and only to the extent permitted
under the DGCL, the Corporation may, but is not
required to, pay dividends to the holders of its Series
B Preferred Stock; however, the Corporation shall not
be restricted from declaring and paying dividends to
the holders of any Junior Securities out of funds
lawfully available for payment of such dividends.
B. CAPITAL. Upon issuance of any Series B Preferred Stock,
the entire consideration received therefor shall be
allocated to the "capital" of the Corporation, and the
Corporation shall take no action to reduce its capital
in respect of the Series B Preferred Stock below the
Liquidation Value of all outstanding Series B Preferred
Stock.
4. LIQUIDATION. Upon any liquidation, dissolution or winding up of
the Corporation, subject to the conversion rights set forth in Paragraph 5.
hereof, the holders of Series B Shares will be entitled to be paid, before
any distribution or payment is made upon any Junior Securities, an amount in
cash equal to the Liquidation Value (including the amount of declared but
unpaid dividends, if any) of all Series B Shares outstanding. If, upon any
such liquidation, dissolution or winding up of the Corporation, the
Corporation's assets to be distributed among the holders of the Series B
Shares are insufficient to permit payment to such holders of the aggregate
amount which they are entitled to be paid, then the entire assets to be
distributed in respect of such Series B Shares will be distributed ratably
among such holders based upon the Liquidation Value of the Series B Shares
held by each such holder. The Corporation will mail written notice of such
liquidation, dissolution or winding up not less than 60 days prior to the
payment date stated therein, to each record holder of Series B Shares.
Neither the consolidation or merger of the Corporation into or with any other
corporation or corporations, the sale or transfer by the Corporation of all
or any part of its assets nor the reduction of the capital stock of the
Corporation will be deemed to be a liquidation, dissolution or winding up of
the Corporation within the meaning of this Paragraph 4.
5. CONVERSION.
A. CONVERSION BY HOLDER.
(1) Until December 31, 2002 (the "Conversion
Period"), any holder of Series B Shares may
convert all or any portion of the Series B Shares
held by such holder into shares of
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Common Stock (i) at a ratio of one share of
Common Stock for each Series B Share or (ii)
pursuant to the Alternative Conversion Method
based on Cumulative Value, as described and
defined in and in accordance with Section 2.9 of
that certain Agreement and Plan of Merger dated
June 20, 1997 among Middle Bay Oil Company, Inc.,
Shore Acquisition Company, Shore Oil Company and
its shareholders, which Section 2.9 is
incorporated herein.
(2) Upon the expiration of the Conversion Period,
unless the Corporation has given prior notice of
intent to redeem the Series B Shares pursuant to
Paragraph 7., all outstanding Series B Shares
shall be automatically converted pursuant to
Paragraph 5.A(1)(i) or 5.A(2)(ii), whichever
provides for a greater conversion ratio.
(3) Any conversion will be deemed effected (i) at the
close of business on the date which the
certificate or certificates representing the
Series B Shares to be converted have been
delivered by the holder to the Corporation at its
principal office, together with a request for
conversion of such Series B Shares, or (ii) upon
the last day of the Conversion Period if the
Series B Shares are converted pursuant to
Paragraph 5.A(2)(ii).
(4) In no event shall the aggregate total number of
Shares of Common Stock into which the Series B
Shares are converted exceed 1,333,333 Shares
(except as that number may be adjusted pursuant
to Paragraph 6).
B. CONVERSION PROCEDURES.
(1) At such time as a conversion has been effected,
the rights of the holder of such Series B Shares
as such holder will cease and the Person or
Persons in whose name or names any certificate or
certificates for shares of Common Stock are to be
issued upon such conversion will be deemed to
have become the holder or holders of record of
the shares of Common Stock represented thereby.
(2) As soon as possible after a conversion has been
effected, the Corporation will deliver to the
holder of Series B Shares being converted:
a. A certificate or certificates representing
the number of shares of Common Stock
issuable by reason of such conversion in
such name or names and such denomina tion
or denominations as the converting holder
has specified; and
b. A certificate representing any Series B
Shares which were represented by the
certificate or certificates delivered to
the Corporation in connection with such
conversion but which were not converted.
(3) The issuance of certificates for shares of Common
Stock upon conversion of Series B Shares will be
made without charge to the holders of such Series
B Shares for any issuance tax in respect thereof
or other cost incurred by the Corporation in
connection
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with such conversion and the related issuance of
shares of Common Stock. Upon conversion of each
Series B Share, the Corporation will take all
such actions as are necessary in order to insure
that the Common Stock issuable with respect to
such conversion will be validly issued, fully
paid and nonassessable.
(4) The Corporation will not close its books against
the transfer of Series B Shares or of Common
Stock issued or issuable upon conversion of
Series B Shares in any manner which interferes
with the timely conversion of Series B Shares.
6. ANTI-DILUTION PROVISIONS. In the event that the Common Stock
hereafter is changed into or exchanged for a different number or kind of
shares or other securities of the Corporation or of another corporation by
reason of merger, consolidation, other reorganization, recapitalization,
reclassification, combination of shares, stock split-up or stock dividend:
A. The aggregate number and kind of shares subject to the
conversion rights granted hereunder shall be adjusted
appropriately;
B. Conversion rights granted hereunder, both as to the
number of subject Series B Shares and the Cumulative
Value, shall be adjusted appropriately;
C. Where dissolution or liquidation of the Corporation or
any merger or combination in which the Corporation is
not a surviving corporation is involved, each
outstanding conversion right granted hereunder shall
terminate, but the holder shall have the right,
immediately prior to such dissolution, liquidation,
merger or combination, to exercise his conversion
right, in whole or in part, to the extent that it shall
not have been exercised; and
D. Such new or additional or different shares or
securities which are distributed to holder, in his
capacity as the owner of Common Stock issued pursuant
to the conversion rights granted hereunder, shall be
subject to all of the conditions and restrictions
applicable to the Common Stock issuable hereunder.
The foregoing adjustments and the manner of application of the
foregoing provisions shall be determined solely by the Corporation, and any
such adjustment may provide for the elimination of fractional share interests.
7. OPTIONAL REDEMPTION.
A. Subject to prior exercise of conversion rights by the
holder during the Conversion Period, the Series B
Preferred Stock may be redeemed, in whole or in part,
upon notice given as provided in Paragraph 7.B. (but
subject to the terms and conditions hereinafter set
forth), at the option of the Corporation, at any time
and from time to time after December 31, 2002, at a
redemption price of $7.50 per Share, together with any
dividends declared and unpaid thereon to the date of
redemption (the "Redemption Price"), so long as funds
are legally available for such redemption.
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B. If pursuant to Paragraph 7.A. the Corporation shall
redeem any shares of Series B Preferred Stock, the
Corporation shall give written notice of such
redemption to each holder of record of Series B
Shares to be redeemed not less than thirty (30) nor
more than ninety (90) days prior to the date fixed
for redemption, by certified mail enclosed in a
postage-paid envelope addressed to such holder at
such holder's address as the same shall appear on the
books of the Corporation. Such notice shall (i) state
that the Corporation has elected to redeem such
Series B Shares, (ii) state the date fixed for
redemption, (iii) state the Redemption Price and (iv)
call upon such holder to surrender to the Corporation
on or after said date at its principal place of
business designated in such notice a certificate or
certificates representing the number of Series B
Shares to be redeemed in accordance with such notice.
On or after the date fixed in such notice for
redemption, each holder of shares of Series B
Preferred Stock to be so redeemed shall present and
surrender the certificate or certificates for such
Series B Shares to the Corporation at the place
designated in said notice, and thereupon the
Redemption Price of such Series B Shares shall be
paid to, or to the order of, the Person whose name
appears on such certificate or certificates as the
owner thereof. From and after the date fixed in any
such notice as the date for redemption, unless
default shall be made by the Corporation in providing
for the payment of the Redemption Price pursuant to
such notice, all rights of the holders of the Series
B Shares so redeemed, except the right to receive the
Redemption Price (but without interest thereon),
shall cease and terminate. If less than all of the
outstanding Series B Shares are to be redeemed, the
Series B Shares to be redeemed shall be allocated
among the holders thereof in proportion to the
respective number of Series B Shares held by them.
C. Any Series B Shares redeemed by the Corporation shall
be retired.
8. COVENANTS OF CORPORATION. So long as any of the Series B Shares
are outstanding, the Corporation shall do all of the following (the
"Covenants"):
A. Maintain its corporate existence in good standing;
B. Maintain the general character of its business and
conduct its business in its ordinary and usual
manner;
C. Maintain proper business and accounting records;
D. Comply with and perform all material obligations and
duties imposed upon it by federal, state and local laws
and all rules, regulations and orders imposed by
federal, state or local governmental authorities,
except as may be contested by them in good faith by
appropriate proceedings;
E. Deliver to the holders of the Series B Preferred
Shares, within the times required for the filing of SEC
Forms 10-K and 10-Q, true and correct copies of the
annual and quarterly financial statements of the
Corporation, which statements shall be prepared in
compliance with the Rules and Regulations of the
Securities and Exchange Commission;
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F. Comply with all financial covenants in all loan
agreements or credit facilities to which the
Corporation is a party; and
G. Timely make all filings and submit all reports required
by the Rules and Regulations of the Securities and
Exchange Commission.
9. VOTING RIGHTS. The holders of the Series B Preferred Stock shall
have no voting rights, other than those rights afforded to them by law.
10. NOTICES. Except as otherwise expressly provided, all notices
referred to herein will be in writing and will be deemed to have been given
either when delivered personally or three business days after having been
mailed by registered or certified mail, return receipt requested, postage
prepaid (i) to the Corporation, at its principal executive offices, and (ii)
to any stockholder, at such holder's address as it appears in the stock
records of the Corporation (unless otherwise indicated by any such holder).
11. REMEDIES. The remedies afforded the holders of Series B
Shares in this Certificate of Designation are cumulative and not sole or
exclusive.
12. CONFLICT WITH OTHER PROVISIONS. In the event of any conflict
between the provisions of this Certificate of Designation and any other
provisions of the Certificate of Incorporation, then the provisions of this
Certificate of Designation shall govern and control.
RESOLVED FURTHER, that the appropriate officers of the
Corporation be, and they are hereby, authorized and directed from time
to time to execute such certificates, instruments or other documents
and do all such things as may be necessary or advisable in their
discretion in order to carry out the terms hereof, including the filing
with the Secretary of State for the State of Delaware of a copy of the
foregoing resolution executed by an officer of the Corporation.
Dated _____________________, 1999.
3TEC ENERGY CORPORATION
By: _________________________________
Name: _______________________________
Title: ________________________________
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CERTIFICATE OF DESIGNATION
of
SERIES C PREFERRED STOCK
of
3TEC ENERGY CORPORATION
------------------------------
Pursuant to Section 151
of the General Corporation Law of Delaware
------------------------------
3TEC ENERGY CORPORATION, a corporation existing under the laws of
the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY that, pursuant
to the authority conferred on the Board of Directors of the Corporation by
the Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation") and in accordance with Section 151 of the General Corporation
Law of the State of Delaware ("DGCL"), the Board of Directors of the
Corporation on ______________, 1999 duly adopted the following resolution
establishing and creating an additional series of its Preferred Stock, par
value $.02 per share, designated "Series C Preferred Stock".
RESOLVED, that pursuant to authority vested in the Board of
Directors of the Corporation (the "Board of Directors") in accordance
with the provisions of its Certificate of Incorporation (the
"Certificate of Incorporation"), an additional series of Preferred
Stock, par value $.02 per share, of the Corporation is hereby created,
and the designation and number of shares thereof and the preferences,
limitations and relative rights thereof are as follows:
1. DESIGNATION, NUMBER OF SHARES AND STATED VALUE OF SERIES C
PREFERRED STOCK. There is hereby authorized and established a series of
Preferred Stock that shall be designated as "Series C Preferred Stock", and
the number of shares constituting such series shall be 2,300,000. Such number
may be increased or decreased, but not to a number less than the number of
shares of Series C Preferred Stock then issued and outstanding, by resolution
adopted by the full Board of Directors. The "stated value" of the Series C
Preferred Stock shall be $5.00 per share.
2. CERTAIN DEFINITIONS. For purposes of the Series C Preferred
Stock, the following terms shall have the meanings indicated:
"AFFILIATE" of a person means a person that directly, or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with the person specified.
"BOARD OF DIRECTORS" shall mean the Board of Directors of the
Corporation or any committee authorized by such Board of Directors to perform
any of its responsibilities with respect to the Series C Preferred Stock.
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"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a
day on which state or federally-chartered banking institutions in Houston,
Texas are not required to be open.
"CALL DATE" shall have the meaning set forth in Paragraph 5.B. hereof.
"COMMON STOCK" means, collectively, the Corporation's Common Stock,
par value $0.02 per share, and any capital stock of any class of the
Corporation hereafter authorized which is not limited to a fixed sum or
percentage of par or stated value in respect to the rights of the holders
thereof to participate in dividends or in the dissolution of assets upon any
liquidation, dissolution or winding up of the Corporation.
"CONVERSION RATE" shall initially mean 1.0 to 1.0, subject to
adjustment pursuant to Section D. of Paragraph 7. hereof.
"CUMULATIVE DIVIDENDS" shall mean all accumulated, accrued and
unpaid dividends.
"CURRENT MARKET PRICE" of publicly traded shares of Common Stock or
any other class or series of stock or other security of the Corporation or of
any similar security of any other issuer for any day shall mean the last
reported sales price, regular way on such day, or, if no sale takes place on
such day, the average of the reported closing, bid and asked prices regular
way on such day, in either case as reported on the Small Cap Market of the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") or, if such security is not quoted on such Small Cap Market, the
average of the closing bid and asked prices on such day in the
over-the-counter market as reported by NASDAQ or, if bid and asked prices for
such security on such day shall not have been reported through NASDAQ, the
average of the bid and asked prices on such day as furnished by any NASDAQ
member firm regularly making a market in such security selected for such
purpose by the Chief Executive Officer of the Board of Directors or if any
class or series of securities are not publicly traded, the fair value of the
shares of such class as determined reasonably and in good faith by the Board
of Directors of the Corporation.
"DISTRIBUTION" shall have the meaning set forth in Section D(3) of
Paragraph 7. hereof.
"DIVIDEND PAYMENT DATE" shall have the meaning set forth in Section
A. of Paragraph 3. hereof.
"FAIR MARKET VALUE" shall mean the average of the daily Current
Market Prices of a share of Common Stock during five (5) consecutive Trading
Days selected by the Corporation commencing not more than twenty (20) Trading
Days before, and ending not later than, the earlier of the day in question
and the day before the "ex" date with respect to the issuance or distribution
requiring such computation. The term "'ex' date", when used with respect to
any issuance or distribution, means the first day on which the share of
Common Stock trades regular way, without the right to receive such issuance
or distribution, on the exchange or in the market, as the case may be, used
to determine that day's Current Market Price.
"ISSUE DATE" shall mean [the effective date of the merger of Middle
Bay Oil Company, Inc., an Alabama corporation, with and into this Corporation.]
"JUNIOR SECURITIES" means any of the Corporation's equity securities
other than the Series B Preferred Stock or any other series of preferred
stock issued as a Parity Stock.
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"PARITY STOCK" shall have the meaning set forth in Section A. of
Paragraph 8. hereof.
"PERMITTED COMMON STOCK CASH DISTRIBUTIONS" shall mean cash
dividends or cash distributions out of current or accumulated funds from
operations (as determined by the Board of Directors on a basis consistent
with the policies and practices adopted by the Corporation for reporting
publicly its results of operations and financial condition), and cash
dividends which result in a payment of an equal cash dividend to holders of
the Series C Preferred Stock and Parity Stock pursuant to Section A. of
Paragraph 4. hereof.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department,
agency or political subdivision thereof.
"SERIES C PREFERRED STOCK" shall have the meaning set forth in
Paragraph 1. hereof.
"SET APART FOR PAYMENT" shall be deemed to include, without any
action other than the following, the recording by the Corporation in its
accounting ledgers of any accounting or bookkeeping entry which indicates,
pursuant to an authorization of dividends or other distribution by the Board
of Directors, the allocation of funds to be so paid on any series or class of
stock of the Corporation.
"TRADING DAY", as to any securities, shall mean any day on which
such securities are traded on the Small Cap Market of NASDAQ or, if such
securities are not quoted on such Small Cap Market, in the securities market
in which such securities are traded.
"TRANSFER AGENT" means such entity as may be designated by the Board
of Directors or their designee as the transfer agent for the Series C
Preferred Stock.
3. DIVIDENDS.
A. The holders of Series C Preferred Stock shall be entitled
to receive, when, as and if authorized and declared by the
Board of Directors out of assets legally available for that
purpose, cumulative dividends in cash in an amount per
share of Series C Preferred Stock equal to $.50 per annum,
payable semi-annually on March 31 and September 30
(measured by the fiscal year of the Corporation) or on such
dates as may be set by the Board of Directors (a "Dividend
Payment Date") to holders of record on such date, not more
than sixty nor less than ten days preceding such Dividend
Payment Date, fixed for such purpose by the Board of
Directors (a "Dividend Record Date"). Such dividends shall
be cumulative from the Issue Date, whether or not such
dividends shall be authorized or there shall be assets of
the Corporation legally available for the payment of such
dividends. Each such dividend shall be payable to the
holders of record of the Series C Preferred Stock, as they
appear on the stock records of the Corporation at the close
of business on the Dividend Record Date. The amount of
Cumulative Dividends on any share of Series C Preferred
Stock, or fraction thereof, at any date shall be the amount
of any dividends thereon calculated at the applicable rate
to and including such date, whether or not earned or
authorized, which have not been paid in cash.
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B. If the Series C Preferred Stock is outstanding for less
than any full fiscal year of the Corporation, the holders
shall be entitled to receive the amount set forth in
Section A. of this Paragraph 3. multiplied by a fraction,
the numerator of which a fraction, the numerator of which
equals the number of days during such fiscal year that such
shares of Series C Preferred Stock were outstanding and the
denominator of which is 360. Holders of Series C Preferred
Stock shall not be entitled to any dividends, whether
payable in cash, property or stock, in excess of cumulative
dividends, as herein provided, on the Series C Preferred
Stock. No interest, or sum of money in lieu of interest,
shall be payable in respect of any dividend payment or
payments on the Series C Preferred Stock that may be in
arrears.
C. So long as any of the shares of Series C Preferred Stock
are outstanding, no dividends (other than dividends or
distributions paid in shares of or options, warrants or
rights to subscribe for or purchase shares of Junior Stock)
shall be authorized or paid or set apart for payment by the
Corporation or other distribution of cash or other property
authorized or made directly or indirectly by the
Corporation with respect to any shares of Junior Stock, nor
shall any shares of Junior Stock be redeemed, purchased or
otherwise acquired (other than a redemption, purchase or
other acquisition of Common Stock made for purposes of an
employee incentive or benefit plan of the Corporation or
any subsidiary) for any consideration (or any moneys be
paid to or made available for a sinking fund for the
redemption of any shares of any such stock) directly or
indirectly by the Corporation (except by conversion into or
exchange for Junior Stock), nor shall any other cash or
other property otherwise be paid or distributed to or for
the benefit of any holder of shares of Junior Stock in
respect thereof, directly or indirectly, by the Corporation
unless in each case (a) the full Cumulative Dividends on
all outstanding shares of Series C Preferred Stock and any
other Parity Stock of the Corporation shall have been paid
or such dividends have been authorized and set apart for
payment with respect to the Series C Preferred Stock and
all past dividend periods with respect to such Parity Stock
and (b) sufficient funds shall have been paid or set apart
for the payment of the full dividend for the current fiscal
year of the Corporation (including any required pursuant to
Section A. of this Paragraph 3.) with respect to the Series
C Preferred Stock and the current dividend period with
respect to such Parity Stock.
4. LIQUIDATION PREFERENCE.
A. In the event of any liquidation, dissolution or winding up
of the affairs of the Corporation, whether voluntary or
involuntary, before any assets of the Corporation shall be
distributed, paid or set aside for the holders of Junior
Stock, the Corporation shall pay cash to the holders of
shares of Series C Preferred Stock $5.00 per share of
Series C Preferred Stock plus an amount equal to all
Cumulative Dividends (whether or not earned or authorized)
to the date of final distribution to such holders; but such
holders shall not be entitled to any further payment. Until
the holders of the Series C Preferred Stock and holders of
Parity Stock have been paid this liquidation preference in
full, no payment will be made to any holder of Junior Stock
upon the liquidation, dissolution or winding up of the
Corporation. If, upon any liquidation, dissolution or
winding up of the Corporation, the assets of the
Corporation, or proceeds thereof, distributable among the
holders of Series C Preferred Stock shall be
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insufficient to pay in full the preferential amount
aforesaid and liquidating payments on any other shares of
any class or series of Parity Stock, then such assets, or
the proceeds thereof, shall be distributed among the
holders of Series C Preferred Stock and any such other
Parity Stock ratably in the same proportion as the
respective amounts that would be payable on such Series C
Preferred Stock and any such other Parity Stock if all
amounts payable thereon were paid in full. For the purposes
of this Paragraph 4., (a) a consolidation or merger of the
Corporation with one or more corporations (b) a sale or
transfer of all or substantially all of the Corporation's
assets, or (c) a statutory share exchange shall not be
deemed to be a liquidation, dissolution or winding up,
voluntary or involuntary, of the Corporation.
B. Subject to the rights of the holders of any shares of
Parity Stock, upon any liquidation, dissolution or winding
up of the Corporation, after payment shall have been made
in full to the holders of Series C Preferred Stock and any
Parity Stock, as provided in this Paragraph 4., any other
series or class or classes of Junior Stock shall, subject
to the respective terms thereof, be entitled to receive any
and all assets remaining to be paid or distributed, and the
holders of the Series C Preferred Stock and any Parity
Stock shall not be entitled to share therein.
C. In determining whether a distribution (other than upon
voluntary or involuntary liquidation) by dividend,
redemption or other acquisition of shares of stock of the
Corporation or otherwise is permitted under the DGCL, no
effect shall be given to amounts that would be needed, if
the Corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon
dissolution of holders of shares of stock of the
Corporation whose preferential rights upon dissolution are
superior to those receiving the distribution.
5. REDEMPTION AT THE OPTION OF THE CORPORATION.
A. Shares of Series C Preferred Stock shall not be redeemable
by the Corporation prior to January 1, 2000. Shares of
Series C Preferred Stock may be redeemed, in whole or in
part, at the option of the Corporation at any time on or
after January 1, 2000 out of assets legally available
therefor at a redemption price payable in cash equal to
$5.00 per share of Series C Preferred Stock plus an amount
equal to all Cumulative Dividends, if any, to the Call
Date, whether or not earned or authorized, as provided
below).
B. Shares of Series C Preferred Stock shall be redeemed by the
Corporation on the date specified in the notice to holders
required under Section D. of this Paragraph 5. (the "Call
Date"). The Call Date shall be selected by the Corporation,
shall be specified in the notice of redemption and shall be
not less than 30 days nor more than 60 days after the date
notice of redemption is sent by the Corporation. Upon any
redemption of shares of Series C Preferred Stock pursuant
to Section A. of this Paragraph 5., the Corporation shall
pay in cash to the holder of such shares an amount equal to
all Cumulative Dividends, if any, to the Call Date, whether
or not earned or authorized. Immediately prior to
authorizing any redemption of the Series C Preferred Stock,
and as a condition precedent for such redemption, the
Company, by resolution of its Board of Directors, shall
authorize a mandatory dividend on the Series C Preferred
Stock
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payable in cash on the Call Date in an amount equal to all
Cumulative Dividends as of the Call Date on the Series C
Preferred Stock to be redeemed, which amount shall be added
to the redemption price. If the Call Date falls after a
dividend payment record date and prior to the corresponding
Dividend Payment Date, then each holder of the Series C
Preferred Stock at the close of business on such dividend
payment record date shall be entitled to the dividend
payable on such shares on the corresponding Dividend
Payment Date notwithstanding the redemption of such shares
prior to such Dividend Payment Date. Except as provided
above, the Corporation shall make no payment or allowance
for accumulated or accrued dividends on shares of Series C
Preferred Stock called for redemption or on the shares of
Common Stock issued upon such redemption.
C. If full Cumulative Dividends on all outstanding shares of
Series C Preferred Stock and any other class or series of
Parity Stock of the Corporation have not been paid or
authorized and set apart for payment, no shares of Series C
Preferred Stock may be redeemed unless all outstanding
shares of Series C Preferred Stock and Parity Stock are
simultaneously redeemed.
D. If the Corporation shall redeem shares of Series C
Preferred Stock pursuant to Section A. of this Paragraph
5., notice of such redemption shall be given to each holder
of record of the shares to be redeemed. Such notice shall
be provided by first class mail, postage prepaid, at such
holder's address as the same appears on the stock records
of the Corporation not less than 30 days nor more than 60
days prior to the Call Date. If the Corporation elects to
provide such notice by publication, it shall also promptly
mail notice of such redemption to the holders of the shares
of Series C Preferred Stock to be redeemed. Neither the
failure to mail any notice required by this paragraph (4)
nor any defect therein or in the mailing thereof, to any
particular holder, shall affect the sufficiency of the
notice or the validity of the proceedings for redemption
with respect to the other holders. Any notice which was
mailed in the manner herein provided shall be conclusively
presumed to have been duly given on the date mailed whether
or not the holder receives the notice. Each such mailed or
published notice shall state, as appropriate: (a) the Call
Date; (b) the number of shares of Series C Preferred Stock
to be redeemed and, if fewer than all such shares held by
such holder are to be redeemed, the number of such shares
to be redeemed from such holder; (c) the place or places at
which certificates for such shares are to be surrendered
for certificates representing shares of Common Stock; (d)
the then-current Conversion Rate; and (e) that dividends on
the shares of Series C Preferred Stock to be redeemed shall
cease to accrue on such Call Date except as otherwise
provided herein. Notice having been published or mailed as
aforesaid, from and after the Call Date (unless the
Corporation shall fail to issue and make available the
amount of cash necessary to effect such redemption,
including all Cumulative Dividends to the Call Date,
whether or not earned or authorized), (i)except as
otherwise provided herein, dividends on the shares of
Series C Preferred Stock so called for redemption shall
cease to accumulate or accrue on the shares of Series C
Preferred Stock called for redemption (except that, in the
case of a Call Date after a dividend record date and prior
to the related Dividend Payment Date, holders of Series C
Preferred Stock on the dividend record date will be
entitled on such Dividend Payment Date to receive the
dividend payable on such shares), (ii) said shares shall no
longer be deemed to be outstanding, and (iii) all rights of
the holders thereof as holders of
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Series C Preferred Stock of the Corporation shall cease
(except the rights to receive the cash payable upon such
redemption, without interest thereon, upon surrender and
endorsement of their certificates if so required and to
receive any dividends payable thereon. The Corpora tion's
obligation to provide cash in accordance with the preceding
sentence shall be deemed fulfilled if, on or before the
Call Date, the Corporation shall deposit with a bank or
trust company (which may be an affiliate of the
Corporation) that has, or is an affiliate of a bank or
trust company that has, a capital and surplus of at least
$50,000,000, such amount of cash as is necessary for such
redemption, in trust, with irrevocable instructions that
such cash be applied to the redemption of the shares of
Series C Preferred Stock so called for redemption. No
interest shall accrue for the benefit of the holders of
shares of Series C Preferred Stock to be redeemed on any
cash so set aside by the Corporation. Subject to applicable
escheat laws, any such cash unclaimed at the end of two
years from the Call Date shall revert to the general funds
of the Corporation, after which reversion the holders of
the shares of Series C Preferred Stock so called for
redemption shall look only to the general funds of the
Corporation for the payment of such cash.
As promptly as practicable after the surrender in
accordance with said notice of the certificates for any
such shares so redeemed (properly endorsed or assigned for
transfer, if the Corporation shall so require and if the
notice shall so state), such certificates shall be
exchanged for cash (without interest thereon) for which
such shares have been redeemed in accordance with such
notice. If fewer than all the outstanding shares of Series
C Preferred Stock are to be redeemed, shares to be redeemed
shall be selected by the Corporation from outstanding
shares of Series C Preferred Stock not previously called
for redemption by lot or by any other method as may be
determined by the Board of Directors in its discretion to
be equitable. If fewer than all the shares of Series C
Preferred Stock represented by any certificate are
redeemed, then a new certificate representing the
unredeemed shares shall be issued without cost to the
holders thereof.
6. STATUS OF SHARES. All shares of Series C Preferred Stock which
shall have been issued and redeemed, converted or reacquired in any manner by
the Corporation shall be restored to the status of authorized, but unissued
shares of Preferred Stock, without designation as to series.
7. CONVERSION. Holders of Series C Preferred Stock shall have the
right to convert all or a portion of such shares into shares of Common Stock,
as follows:
A. Subject to and upon compliance with the provisions of this
Paragraph 7., a holder of shares of Series C Preferred Stock shall
have the right, at such holder's option, at any time to convert
such shares, in whole or in part, into the number of fully paid
and nonassessable shares of authorized but previously unissued
shares of Common Stock obtained by multiplying the number of
shares of Series C Preferred Stock to be converted and the
Conversion Rate (as in effect at the time and on the date provided
for in the last clause of Section B. of this Paragraph 7.) by
surrendering such shares to be converted, such surrender to be
made in the manner provided in Section B. of this Paragraph 7.;
provided, however, that the right to convert shares of Series C
Preferred Stock called for redemption pursuant to Paragraph
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5. shall terminate at the close of business on the Call Date
fixed for such redemption, unless the Corporation shall default
in making payment upon such redemption under Paragraph 5.
hereof.
B. In order to exercise the conversion right, the holder of each
share of Series C Preferred Stock to be converted shall
surrender the certificate representing such share, duly
endorsed or assigned to the Corporation or in blank, at the
office of the Transfer Agent, accompanied by written notice to
the Corporation that the holder thereof elects to convert such
shares of Series C Preferred Stock. Unless the shares issuable
on conversion are to be issued in the same name as the name in
which such share of Series C Preferred Stock is registered,
each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the
Corporation and the Transfer Agent, duly executed by the
holder or such holder's duly authorized attorney and an amount
sufficient to pay any transfer or similar tax (or evidence
reasonably satisfactory to the Corporation and the Transfer
Agent demonstrating that such taxes have been paid).
Holders of shares of Series C Preferred Stock at the
close of business on a dividend payment record date shall be
entitled to receive the dividend payable on such shares on the
corresponding Dividend Payment Date notwithstanding the
conversion thereof following such dividend payment record date
and prior to such Dividend Payment Date. However, shares of
Series C Preferred Stock surrendered for conversion during the
period between the close of business on any dividend payment
record date and the opening of business on the corresponding
Dividend Payment Date (except shares converted after the
issuance of notice of redemption with respect to a Call Date
during such period, such shares of Series C Preferred Stock
being entitled to such dividend on the Dividend Payment Date)
must be accompanied by payment of an amount equal to the
dividend payable on such shares on such Dividend Payment Date.
A holder of shares of Series C Preferred Stock on a dividend
payment record date who (or whose transferee) tenders any such
shares for conversion into shares of Common Stock on such
Dividend Payment Date will receive the dividend payable by the
Corporation on such shares of Series C Preferred Stock on such
date, and the converting holder need not include payment of
the amount of such dividend upon surrender of shares of Series
C Preferred Stock for conversion. Except as provided above,
the Corporation shall make no payment or allowance for unpaid
dividends, whether or not in arrears, on converted shares or
for dividends on the shares of Common Stock issued upon such
conversion.
As promptly as practicable after the surrender of
certificates for shares of Series C Preferred Stock as
aforesaid, the Corporation shall issue and shall deliver at
such office to such holder, or send on such holder's written
order, a certificate or certificates for the number of full
shares of Common Stock issuable upon the conversion of such
shares of Series C Preferred Stock in accordance with
provisions of this Section F, and any fractional share of
Common Stock arising upon such conversion shall be settled as
provided in Section C of this Paragraph 7.
Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on
which the certificates for shares of Series C Preferred Stock
shall have been surrendered and such notice received by the
Corporation as aforesaid, and the person or persons in whose
name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be
deemed to have become the holder or holders of record of the
shares
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represented thereby at such time on such date and such
conversion shall be at the Conversion Rate in effect at such
time on such date unless the stock transfer books of the
Corporation shall be closed on that date, in which event such
person or persons shall be deemed to have become such holder
or holders of record at the close of business on the next
succeeding day on which such stock transfer books are open,
but such conversion shall be at the Conversion Rate in effect
on the date on which such shares shall have been surrendered
and such notice received by the Corporation.
C. No fractional share of Common Stock or scrip representing
fractions of a share of Common Stock shall be issued upon
conversion of the shares of Series C Preferred Stock. Instead
of any fractional interest in a share of Common Stock that
would otherwise be deliverable upon the conversion of shares
of Series C Preferred Stock, the Corporation shall pay to the
holder of such share an amount in cash based upon the Current
Market Price of the Common Stock on the Trading Day
immediately preceding the date of conversion. If more than
one share shall be surrendered for conversion at one time by
the same holder, the number of full shares of Common Stock
issuable upon conversion thereof shall be computed on the
basis of the aggregate number of full shares of Common Stock
issuable upon conversion thereof shall be computed on the
basis of the aggregate number of shares of Series C Preferred
Stock so surrendered.
D. The Conversion Rate shall be adjusted from time to time as
follows:
(1) If the Corporation shall after the Issue Date (i) pay a
dividend or make a distribution on its shares of Common
Stock in shares of Common Stock, (ii) subdivide its
outstanding Common Stock into a greater number of
shares, (iii) combine its outstanding Common Stock into
a smaller number of shares or (iv) issue any shares of
stock by reclassification of its Common Stock, the
Conversion Rate in effect at the opening of business on
the day following the date fixed for the determination
of stockholders entitled to receive such dividend or
distribution or at the opening of business on the day
following the day on which such subdivision,
combination or reclassification becomes effective, as
the case may be, shall be adjusted so that the holder
of any share of Series C Preferred Stock thereafter
surrendered for conversion shall be entitled to receive
the number of shares of Common Stock (or fraction of a
share of Common Stock) that such holder would have
owned or have been entitled to receive the number of
shares of Common Stock (or fraction of a share of
Common Stock) that such holder would have owned or have
been entitled to receive after the happening of any of
the events described above had such share of Series C
Preferred Stock been converted immediately prior to the
record date in the case of a dividend or distribution
or the effective date in the case of a subdivision,
combination or reclassification. An adjustment made
pursuant to this Section D(1) of Paragraph 7 shall
become effective immediately after the opening of
business on the day next following the record date
(except as provided in Section H. below) in the case of
a dividend or distribution and shall become effective
immediately after the opening of business on the day
next following the effective date in the case of a
subdivision, combination or reclassification.
(2) If the Corporation shall issue after the Issue Date rights,
options or warrants to all holders of Common Stock
entitling them (for a period expiring within 45 days after
the record date
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described below in this Section D(2) of Paragraph 7) to
subscribe for or purchase Common Stock on the record
date for the determination of stockholders entitled to
receive such rights or warrants, then the Conversion
Rate in effect at the opening of business on the day
next following such record date shall be adjusted to
equal the rate determined by multiplying (i) the
Conversion Rate in effect immediately prior to the
opening of business on the day following the date fixed
for such determination by (ii) a fraction, the
numerator of which shall be the sum of (X) the number
of shares of Common Stock outstanding on the close of
business on the date fixed for such determination and
(Y) the number of additional shares of Common Stock
offered for subscription or purchase pursuant to such
rights or warrants, and the denominator of which shall
be the sum of (XX) the number of shares of Common Stock
outstanding on the close of business on the date fixed
for such determination and (YY) the number of shares
that the aggregate proceeds to the Corporation from the
exercise of such rights or warrants for Common Stock
would purchase at such Fair Market Value. Such
adjustment shall become effective immediately after the
opening of business on the day next following such
record date (except as provided in Section H below). In
determining whether any rights or warrants entitle the
holders of Common Stock to subscribe for or purchase
Common Stock at less than such Fair Market Value, there
shall be taken into account any consideration received
by the Corporation upon issuance and upon exercise of
such rights or warrants, the value of such
consideration, if other than cash, to be determined in
good faith by the Board of Directors.
(3) If the Corporation shall distribute to all holders of
its Common Stock any shares of stock of the Corporation
(other than common Stock) or evidence of its
indebtedness of assets (including cash, but excluding
Permitted Common Stock Cash Distributions) or rights or
warrants to subscribe for or purchase any of its
securities (excluding those rights and warrants issued
to all holders of Common Stock entitling them for a
period expiring within 45 days after the record date
referred to in Section D(2) of this Paragraph 7. above
to subscribe for or purchase Common Stock, which rights
and warrants are referred to in and treated under such
Section D(2) above) (any of the foregoing being
hereinafter in this Section D(3) called the
"Distribution"), then in each such case the Conversion
Rate shall be adjusted so that it shall equal the rate
determined by multiplying (i) the Conversion Rate in
effect immediately prior to the close of business on
the date fixed for the determination of stockholders
entitled to receive such Distribution by (ii) a
fraction, the numerator of which shall be the Fair
Market Value per share of Common Stock on the record
date mentioned below, and the denominator of which
shall be the Fair Market Value per share of Common
Stock on the record date mentioned below less the then
fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and
described in a Board resolution), of the portion of the
stock or assets or evidences of indebtedness so
distributed or of such rights or warrants applicable to
one share of Common Stock. Such adjustment shall become
effective immediately at the opening of business on the
Business Day next following (except as provided in
Section H below) the record date for the determination
of stockholders entitled to receive such Distribution.
For the purposes of this Section D(3), the distribution
of a right or warrant to subscribe or purchase any of
the Corporation's securities, which is distributed not
only to the holders of the Common Stock on the date
fixed for the determination of
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stockholders entitled to such Distribution of such
right or warrant, but also is distributed with shares
of Common Stock delivered to a Person converting shares
of Series C Preferred Stock after such determination
date, shall not require an adjustment of the Conversion
Rate pursuant to this Section D(3); provided that if on
the date, if any, on which a person converting shares
of Series C Preferred Stock such person would no longer
be entitled to receive such right or warrant with
shares of Common Stock (other than as a result of the
termination of all such right or warrant), a
distribution of such rights or warrants shall be deemed
to have occurred and the Conversion Rate shall be
adjusted as provided in this Section D(3) and such day
shall be deemed to be "the date fixed for the
determination of the stockholders entitled to receive
such distribution" and "the record date" within the
meaning of the two preceding sentences.
(4) No adjustment in the Conversion Rate shall be required
unless such adjustment would require a cumulative
increase or decrease of at least 1% in such rate;
provided, however, that any adjustments that by reason
of this Section D(4) are not required to be made shall
be carried forward and taken into account in any
subsequent adjustment until made; and provided,
further, that any adjustment shall be required and made
in accordance with the provisions of this Paragraph 7
[other than this Section D(4)] not later than such time
as may be required in order to preserve the tax-free
nature of a distribution to the holders of shares of
Common Stock. Notwithstanding any other provisions of
this Paragraph 7, the Corporation shall not be required
to make any adjustment of the Conversion Rate for the
issuance of any shares of Common Stock pursuant to any
plan providing for the reinvestment of dividends or
interest payable on securities of the Corporation and
the investment of additional optional amounts in shares
of Common Stock under such plan. All calculations under
this Paragraph 7 shall be made to the nearest cent
(with $.005 being rounded upward) or to the nearest
one-tenth of a share (with .05 of a share being rounded
upward), as the case may be. Anything in this Section D
of this Paragraph 7 to the contrary notwithstanding,
the Corporation shall be entitled, to the extent
permitted by law, to make such reductions in the
Conversion Rate, in addition to those required by this
Section D, as it in its discretion shall determine to
be advisable in order that any stock dividends,
subdivision of shares, reclassification or combination
of shares, distribution of rights or warrants to
purchase stock or securities, or a distribution of
other assets (other than cash dividends) hereafter made
by the Corporation to its stockholders shall not be
taxable, or if that is not possible, to diminish any
taxes that are otherwise payable because of such event.
E. If:
(1) the Corporation shall authorize a dividend (or any
other distribution) on the Common Stock (other than
cash dividends and cash distributions to the extent
the same constitute Permitted Common Stock Cash
Distributions); or
(2) the Corporation shall authorize the granting to the
holders of the Common Stock of rights or warrants to
subscribe for or purchase any shares of any class or
series of stock or any other rights or warrants; or
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(3) there shall be any reclassification of the Common
Stock or any consolidation or merger to which the
Corporation is a party and for which approval of
any stockholders of the Corporation is required,
or a statutory share exchange, or an issuer or
self tender offer by the Corporation for all or a
substantial portion of its outstanding shares of
Common Stock (or an amendment thereto changing
the maximum number of shares sought or the amount
or type of consideration being offered therefor)
or the sale or transfer of all or substantially
all of the assets of the Corporation as an
entirety; or
(4) there shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the
Corporation,
then the Corporation shall cause to be filed with the
Transfer Agent and shall cause to be mailed to each
holder of shares of Series C Preferred Stock at such
holder's address as shown on the stock records of the
Corporation, as promptly as possible, but at least 15
days prior to the applicable date hereinafter
specified, a notice stating (i) the record date for the
payment of such dividend, distribution or rights or
warrants, or, if a record date is not established, the
date as of which the holders of Common Stock of record
to be entitled to such dividend, distribution or rights
or warrants are to be determined or (ii) the date on
which such reclassification, consolidation, merger,
statutory share exchange, sale, transfer, liquidation,
dissolution or winding up is expected to become
effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities or
other property, if any, deliverable upon such
reclassifica tion, consolidation, merger, statutory
share exchange, sale, transfer, liquidation,
dissolution or winding up or (iii) the date on which
such tender offer commenced, the date on which such
tender offer is scheduled to expire unless extended,
the consideration offered and the other material terms
thereof (or the material terms of any amendment
thereto). Failure to give or receive such notice or any
defect therein shall not affect the legality or validity
of the proceedings described in this Paragraph 7.
F. Whenever the Conversion Rate is adjusted as herein provided, the
Corporation shall promptly file with the Transfer Agent an
officer's certificate setting forth the Conversion Rate after
such adjustment and setting forth a brief statement of the
facts requiring such adjustment which certificate shall be
conclusive evidence of the correctness of such adjustment
absent manifest error. Promptly after delivery of such
certificate, the Corporation shall prepare a notice of such
adjustment of the Conversion Rate setting forth the adjusted
Conversion Rate and the date such adjustment becomes effective
and shall mail such notice of such adjustment of the
Conversion Rate to each holder of shares of Series C Preferred
Stock at such holder's last address as shown on the stock
records of the Corporation.
G. In any case in which Section D. of this Paragraph 7. provides
that an adjustment shall become effective on the day next
following the record date for an event, the Corporation may
defer until the occurrence of such event (i) issuing to the
holder of any share of Series C Preferred Stock converted after
such record date and before the occurrence of such event the
additional Common Stock issuable upon such conversion by reason
of the adjustment required by such event over and above the
Common Stock
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issuable upon such conversion before giving effect to such
adjustment and (ii) paying to such holder any amount of cash in
lieu of any fraction pursuant to Section C. of this Paragraph 7.
H. There shall be no adjustment of the Conversion Rate in case of
the issuance of any stock of the Corporation in a
reorganization, acquisition or other similar transaction
except as specifically set forth in this Paragraph 7. If any
action or transaction would require adjustment of the
Conversion Rate pursuant to more than one paragraph of this
Paragraph 7., only one adjustment shall be made and such
adjustment shall be the amount of adjustment that has the
highest absolute value.
I. If the Corporation shall take any action affecting the Common
Stock, other than action described in this Paragraph 7, that in
the opinion of the Board of Directors would materially adversely
affect the conversion rights of the holders of Series C
Preferred Stock, the Conversion Rate for the Series C Preferred
Stock may be adjusted, to the extent permitted by law, in such
manner, if any, and at such time as the Board of Directors, in
its sole discretion, may determine to be equitable under the
circumstances.
J. The Corporation will pay any and all documentary
stamp or similar issue or transfer taxes payable in respect of
the issue or delivery of shares of Common Stock or other
securities or property on conversion or redemption of shares
of Series C Preferred Stock pursuant hereto; provided,
however, that the Corporation shall not be required to pay any
tax that may be payable in respect of any transfer involved in
the issue or delivery of shares of Common Stock or other
securities or property in a name other than that of the holder
of the shares of Series C Preferred Stock to be converted or
redeemed, and no such issue or delivery shall be made unless
and until the person requesting such issue or delivery has
paid to the Corporation the amount of any such tax or
established, to be reasonable satisfaction of the Corporation,
that such tax has been paid.
8. RANKING. So long as any shares of Series C Preferred Stock are
outstanding, the Corporation shall not issue any class or series of Stock which
would entitle the holders thereof to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of Series C Preferred Stock. Any class
or series of stock of the Corporation shall be deemed to rank:
A. on a parity with the Series C Preferred Stock, as to the
payment of dividends and as to distribution of assets
upon liquidation, dissolution or winding up, whether or
not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof be
different from those of the Series C Preferred Stock,
if the holders of such class of stock or series and the
Series C Preferred Stock shall be entitled to the
receipt of dividends and of amounts distributable upon
liquidation, dissolution or winding up in proportion to
their respective amounts of accrued and unpaid
dividends per share or liquidation preferences, without
preference or priority one over the other ("Parity
Stock"); and
B. junior to the Series C Preferred Stock, as to the payment
of dividends or as to the distribution of assets upon
liquidation, dissolution or winding up, if such stock or
series shall be Common Stock or if the holders of Series C
Preferred Stock shall be entitled to receipt of dividends
or
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of amounts distributable upon liquidation, dissolution
or winding up, as the case may be, in preference or
priority to the holders of shares of such class or
series ("Junior Stock").
Series B Preferred Stock shall be considered Parity Stock.
9. VOTING RIGHTS. Holders of Series C Preferred Stock are entitled
to vote solely upon those amendments, alterations or repeals of any provision
of the Corporation's Certificate of Incorporation adversely affecting their
rights and preferences as preferred stockholders; provided, however, that the
issuance by the Corporation of additional series of preferred stock will not
be deemed to adversely affect the rights and preferences of holders of Series
C Preferred Stock, so long as any such series of preferred stock ranks junior
to or on a parity with the Series C Preferred Stock. The holders of Series C
Preferred Stock shall have no other voting rights, except as prescribed by
law.
For purposes of the foregoing provisions of this Paragraph 9,
each share of Series C Preferred Stock shall have one vote per share.
Nothing contained in this Paragraph 9 shall require a vote of
the holders of Series C Preferred Stock (i) in connection with any merger or
consolidation in which the Corporation is the surviving entity if,
immediately after the merger or consolidation, there are outstanding no
shares and no securities convertible into shares of any class ranking as to
distribution rights or liquidation preference senior to the Series C
Preferred Stock or (ii) in connection with any merger or consolidation in
which the Corporation is not the surviving entity if, as result of the merger
or consolidation, the holders of Series C Preferred Stock receive shares of
stock or beneficial interest or other equity securities with preferences,
rights and privileges not materially inferior to the preferences, rights and
privileges of the Series C Preferred Stock.
10. SEVERABILITY OF PROVISIONS. If any preference, conversion or other
right, voting power, restriction, limitation as to dividends or other
distributions, qualification or term or condition of redemption of the Series C
Preferred Stock set forth herein is invalid, unlawful or incapable of being
enforced by reason of any rule of law or public policy, all other preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications or terms or conditions of
redemption of the Series C Preferred Stock set forth herein which can be given
effect without the invalid, unlawful or unenforceable provision thereof shall,
nevertheless, remain in full force and effect, and no preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications or terms or conditions of redemption of the Series
C Preferred Stock herein set forth shall be deemed dependent upon any other
provision thereof unless so expressed therein.
RESOLVED FURTHER, that the appropriate officers of the Corporation
be, and they are hereby, authorized and directed from time to time to
execute such certificates, instruments or other documents and do all
such things as may be necessary or advisable in their discretion in
order to carry out the terms hereof, including the filing with the
Secretary of State for the State of Delaware of a copy of the foregoing
resolution executed by an officer of the Corporation.
Dated _____________________, 1999.
3TEC ENERGY CORPORATION
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By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
EXHIBIT "C"
BYLAWS OF 3TEC ENERGY CORPORATION
--------------------------------
ARTICLE I - OFFICES
Section 1.1. OFFICES. The registered office of 3TEC Energy
Corporation (the "Corporation") in the State of Delaware shall be as set
forth in its Certificate of Incorporation until changed by the Board of
Directors as provided by law. The Corporation may also have such offices and
places of business, within or without the State of Delaware, as the Board of
Directors may determine from time to time or as the business of the
Corporation may require.
ARTICLE II - SEAL
Section 2.1. SEAL. The corporate seal of the Corporation shall have
inscribed thereon, in the outer circle, the full name of the Corporation and the
word "Delaware", with the words "Corporate Seal" across the center thereof, an
imprint of which seal shall then appear on the margin hereof opposite this
Section 2.1.
ARTICLE III - STOCKHOLDERS' MEETINGS
Section 3.1. PLACE. Meetings of the stockholders may be held
anywhere, either within or without the State of Delaware, as may be
determined from time to time by the Board of Directors or the stockholders.
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Section 3.2. DATE AND PLACE OF ANNUAL MEETING. An annual meeting of
stockholders shall be held at such date, time and place, either within or
without the State of Delaware, as may be designated by resolution of the
Board of Directors from time to time.
Section 3.3. PURPOSE OF ANNUAL MEETING. The purpose of the annual
meeting shall be to elect members of the Board of Directors and to transact
such other business, without limitation, as may properly come before the
annual meeting.
Section 3.4. SPECIAL MEETINGS. Special meetings of the stockholders
for any purpose or purposes may be called by the president, or by the
directors (either by written instrument signed by a majority or by resolution
adopted by a vote of the majority). No business other than that specified in
the notice of special meeting shall be transacted at any such special meeting.
Section 3.5. NOTICE. Not less than ten (10) nor more than sixty (60)
days before every annual or special meeting of stockholders, a written or
printed notice stating the time and place thereof and, if a special meeting,
the purpose or purposes for which such meeting is called, shall be served
upon or mailed to each stockholder entitled to vote thereat, at the address
of such stockholder as it appears upon the books of the Corporation or, if
such stockholder shall have filed with the secretary of the Corporation a
written request that notices be mailed to some other address, then to the
address designated in such request. If mailed, such notice shall be deemed to
be given when deposited in the mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on the records of the
Corporation.
Section 3.6. QUORUM. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum for the transaction of business at such meeting. If a
quorum is present, the affirmative vote of the majority of the shares
represented at the meeting entitled to vote on the subject matter shall be
the act of the stockholders, unless the vote of a greater number of shares on
the matter being voted on is required by the Certificate of Incorporation of
the Corporation, these Bylaws or applicable law. Directors shall be elected
by a plurality of the shares represented at the meeting and entitled to vote
in the election of Directors.
Section 3.7. ADJOURNMENT OF STOCKHOLDERS' MEETING. Any meeting of
stockholders may be adjourned at any time, whether or not there is a quorum,
by the chairman of such meeting or the vote of the majority of shares
represented at such meeting. When a meeting is adjourned to another time or
place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken.
At the adjourned meeting, the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 3.8. PROXIES. At all meetings of stockholders, a stockholder
may vote by proxy, executed in writing by the stockholder or by his duly
authorized attorney-in-fact. Such proxy shall be filed with the Secretary of
the Corporation before or at the time of the meeting. No proxy shall be valid
after three (3) years from the date of its execution, unless the person
executing it specified therein a longer period of time for which such proxy
is to continue in force. A duly executed proxy shall be irrevocable if it
states that it is irrevocable and if, and only as long as, it is coupled with
an interest sufficient in law to support an irrevocable power. A stockholder
may revoke any proxy
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which is not irrevocable by attending the meeting and voting in person or by
filing an instrument in writing revoking the proxy or another duly executed
proxy bearing a later date with the Secretary of the Corporation.
Section 3.9. VOTING OF SHARES. Each outstanding share shall be
entitled to one vote and each fractional share shall be entitled to a
corresponding fractional vote on each matter submitted to vote at a meeting
of stockholders.
Section 3.10. VOTING BY VOICE, HAND OR BALLOT. All voting at
meetings of the stockholders, including voting for the election of directors
but excepting where otherwise required by law, shall be by a voice or hand
vote; provided, however, that upon demand therefor by a stockholder entitled
to vote or by his or her proxy, a vote by written ballot shall be taken.
Every written ballot shall state the name of the stockholder or proxy voting
and such other information as may be required under the procedure established
for the meeting.
Section 3.11. VOTING OF SHARES BY CERTAIN HOLDERS. The rights of
persons in whose names shares stand on the stock records of the Corporation
to vote is subject to the following provisions:
(a) Neither treasury shares, nor shares of its own stock held by the
Corporation in a fiduciary capacity, nor shares held by another corporation
if the majority of the shares entitled to vote for the election of directors
of such other corporation is held by the Corporation, shall be voted at any
meeting or counted in determining the total number of outstanding shares at
any given time.
(b) Shares standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent or proxy as the bylaws of such
corporation may prescribe, or, in the absence of such provision, as the board
of directors of such Corporation may determine.
(c) Shares held by an administrator, executor, personal
representative, guardian, or conservator may be voted by him, either in
person or by proxy, without a transfer of such shares into his name.
(d) Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
(e) Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted
by such receiver without the transfer thereof into his name if authority to
do so be contained in an appropriate order of the court by which such
receiver was appointed.
(f) A stockholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the shares so
transferred.
Section 3.12. ACTION BY CONSENT. Unless otherwise provided in the
Certificate of Incorporation, any action required or permitted to be taken at
any annual or special meeting of stockholders of the Corporation, may be
taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and
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voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders
who have not consented in writing.
Section 3.13. CONDUCT OF STOCKHOLDER MEETINGS. Meetings of the
stockholders shall be presided over by the Chairman of the Board or, in his
absence, the President of the Corporation, or, if no such person is present,
a person designated by the Chairman of the Board or, in his absence, the
President of the Corporation. The Secretary of the Corporation, or in his
absence, an Assistant Secretary, or, if no such person is present, a person
designated by the chairman of the meeting, shall act as secretary of the
meeting. The precedence of and procedure on motions and other procedural
matters at a meeting shall be as determined by the chairman of such meeting,
in his sole discretion, provided that such chairman acts in a manner which is
not inconsistent with the Certificate of Incorporation of the Corporation,
these Bylaws and applicable law.
Section 3.14. WAIVER OF NOTICE. Whenever written notice is required
to be given to the stockholders, a written waiver thereof signed by any
stockholder entitled to such notice (whether, in the case of notice of a
meeting, the written waiver thereof is signed before or after the meeting)
shall in all respects be considered notice. Attendance in person at any
stockholders' meeting shall for all purposes constitute waiver of notice
thereof unless the stockholder attends the meeting for the sole purpose of
objecting to the transaction of any business thereat because the meeting is
not lawfully called or convened and unless such stockholder so objects at the
beginning of the meeting and does not otherwise participate therein.
Section 3.15. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer or
agent having charge of the stock transfer books for shares of the Corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder
for any purpose germane to the meeting during ordinary business hours at the
principal office of the Corporation for a period of at least ten (10) days
prior to the meeting. Such list shall also be produced and kept open at the
time and place of the meeting and shall be subject to the inspection of any
stockholder during the whole time of the meeting. The original stock transfer
books shall be prima facie evidence as to who are the stockholders entitled
to examine such list or transfer books or to vote at any meeting of
stockholders.
Section 3.16. NOTIFICATION OF STOCKHOLDER BUSINESS. All business
properly brought before an annual meeting of stockholders shall be transacted
at such meeting. Business shall be deemed properly brought only if it is (i)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (ii) otherwise properly brought
before the meeting by or at the direction of the Board of Directors or (iii)
brought before the meeting by a stockholder of record entitled to vote at
such meeting if written notice of such stockholder's intent to bring such
business before such meeting is delivered to, or mailed, postage prepaid, and
received by, the Secretary of the Corporation at the principal executive
offices of the Corporation not later than the close of business on the 60th
day nor earlier than the close of business on the 90th day prior to the first
anniversary of the preceding year's annual meeting of stockholders; provided,
however, that in the event that the date of the annual meeting is more than
30 days before or more than 60 days after such anniversary date, notice by
the stockholder to be timely must be so delivered not earlier than the close
of business on the 90th day prior to such annual meeting and not later than
the close of business on the later of the 60th day prior to such annual
meeting and the 10th day following the issuance by the Corporation of a press
release announcing the meeting date. In no event
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shall any press release announcing an adjournment of an annual meeting
commence a new time period for the giving of a stockholder's notice as
described above. For the purpose of the annual meeting of stockholders to be
held in 2000, the first anniversary of the preceding year's annual meeting
shall be the first anniversary of the 1999 annual meeting of stockholders of
Middle Bay Oil Company, Inc. Each notice given by such stockholder shall set
forth: (A) a brief description of the business desired to be brought before
the meeting and the reasons for conducting such business at the meeting; (B)
the name and address of the stockholder who intends to propose such business;
(C) a representation that the stockholder is a holder of record of shares of
the Corporation entitled to vote at such meeting and intends to appear in
person or by proxy at such meeting to propose such business; (D) any material
interest of the stockholder in such business; and (E) as to the stockholder
giving the notice and the beneficial owner, if any, or whose behalf the
proposal is made (i) the name and address of such stockholder, as they appear
on the Corporation's books, and of such beneficial owner and (ii) the class
and number of shares of the Corporation which are owned beneficially and of
record by such stockholder and such beneficial owner. The Chairman of the
meeting may refuse to transact any business at any meeting presented without
compliance with the foregoing procedure.
ARTICLE IV - DIRECTORS
Section 4.1. GENERAL POWERS; ELECTION AND TERMS; BOARD VACANCIES.
The property, business and affairs of the Corporation shall be managed by the
Board of Directors. The Board of Directors shall consist of not less than
five (5) nor more than nine (9) members, as such number may be designated by
the Board of Directors from time to time. Directors shall be elected by a
plurality of the votes of the stockholders present in person or represented
by written proxy at the annual meeting. Each director so elected shall hold
office until the next annual stockholders' meeting or until said director's
successor is duly elected and qualified, or until his or her earlier death,
resignation, or removal. Any director of the Corporation may resign at any
time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
herein, or, if the time be not specified, it shall take effect immediately
upon its receipt; and unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective. Vacancies on
the Board of Directors, however occurring, including, but not limited to,
vacancies arising from newly created directorships, may be filled only by a
majority of the remaining directors, or by the sole remaining director,
although less than a quorum; but if there is a complete vacancy upon the
Board with no remaining director, the vacancies may be filled by the
stockholders.
Section 4.2. MEETINGS OF DIRECTORS. The directors shall meet at such
times and places, within or without the State of Delaware, as the Board may
from time to time determine. Any regular or special meeting of the Board may
be called by the president, or by a majority of the authorized number of
directors. The annual meeting of the Board of Directors shall be held before
or immediately following the stockholders' annual meeting and at the same
place; provided, however, that said meeting may be held on such other day,
hour or place, as may be determined by the written consent of all directors,
or, in the absence of such consent, as may be designated in written notice
sent by the president or by the secretary to each director at least two (2)
days prior to the date specified in said notice. The annual directors'
meeting shall, in any event, be held within ninety (90) days after the annual
meeting of the stockholders if so demanded in writing by any director.
Section 4.3. TELEPHONIC MEETINGS. Members of the Board of
Directors or any committee designated by the Board of Directors may
participate in a meeting of the Board of Directors or committee by means of
conference
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telephone or similar communications equipment by which all persons
participating in the meeting can hear one another at the same time. Such
participation shall constitute presence in person at the meeting. All
participants in any meeting of Directors, by virtue of their participation
and without further action on their part, shall be deemed to have consented
to the recording of such meeting by electronic device or otherwise, and to
the making of a written transcript thereof, in order that minutes thereof
shall be available for the Corporation's records.
Section 4.4. QUORUM AND VOTING. A majority of the total number of
the Board of Directors shall constitute a quorum for the transaction of
business, but a lesser number may adjourn any meeting from time to time and
the meeting may be held as adjourned without further notice. When a quorum is
present, the vote of at least a majority of the directors who are present in
person or by proxy, shall decide any questions brought before the meeting
unless a different vote is required by statute, the Certificate of
Incorporation of the Corporation, or these Bylaws.
Section 4.5. NOTICE. Notice of any special meeting shall be given at
least four (4) days previous thereto by written notice mailed to each
Director at his business address, or by notice given at least two (2) days
prior to the meeting, in person or by any means specified in Section 11.1.
Any Director may waive notice and a written waiver thereof signed by a
director (whether, in the case of notice of a meeting, the written waiver is
signed before or after the meeting) shall constitute notice. Attendance in
person at any directors' meeting shall for all purposes constitute waiver of
notice thereof unless the director attends the meeting for the sole purpose
of objecting to the transaction of any business thereat because the meeting
is not lawfully called or convened and unless he or she voices his or her
objections at the beginning of the meeting and does not otherwise participate
therein. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
Section 4.6. REMOVAL. At any meeting of stockholders called
expressly for that purpose, any one or more directors may be removed with or
without cause, by the holders of a majority of the shares then entitled to
vote on the election of directors.
Section 4.7. ACTION BY CONSENT. Any action required or permitted to
be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of
the Board or of such committee, as the case may be, and such written consent
is filed with the minutes of proceedings of the Board or committee.
Section 4.8. COMPENSATION. The directors shall receive only such
compensation for their services as directors may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse
each such director for any expense incurred by such director on account of
such director's attendance at any meetings of the Board or committees of the
Board. Neither the payment of such compensation nor the reimbursement of such
expenses shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 4.9. COMMITTEES. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee
to consist of two or more of the directors of the Corporation. Any such
committee, to the extent provided in the resolution of the Board and except
as otherwise limited by law, shall have and may exercise all the powers and
authority of the Board in the management and the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to
all papers which may require it, but no
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such committee shall have power or authority in reference to amending the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of
shares of stock adopted by the Board of Directors as provided in Section
151(a) of the General Corporation Law of Delaware, fix any of the
designations, preferences or rights of such shares), adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and
assets, recommending to the stockholders a dissolution of the Corporation or
a revocation of dissolution, or amending these Bylaws; and, unless the
resolution, Bylaws or Certificate of Incorporation expressly so provides, no
such committee shall have the power or authority to declare a dividend,
authorize the issuance of stock, or to adopt a certificate of ownership and
merger pursuant to Section 253 of the General Corporation Law of Delaware. A
majority of the members of a committee shall constitute a quorum for the
transaction of business. Any such committee shall keep written minutes of its
meetings and report the same to the Board at the next regular meeting of the
Board. Vacancies in such committees shall be filled by the Board of Directors.
Section 4.10 NOMINATION OF DIRECTORS. Subject to the rights of the
holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation, nominations for the election of
directors may be made by the Board of Directors or by any stockholder
entitled to vote for the election of directors. Any stockholder entitled to
vote for the election of directors at a meeting (i.e., any stockholder of
record) may nominate persons for election as directors only if written notice
of such stockholder's intent to make such nomination is given, either by
personal delivery or by United States mail, postage prepaid, to the Secretary
of the Corporation not later than (i) with respect to an election to be held
at an annual meeting of stockholders, 90 days in advance of such meeting, and
(ii) with respect to an election to be held at a special meeting of
stockholders for the election of directors, the close of business on the
seventh day following the date on which notice of such meeting is first given
to stockholders. Each such notice shall set forth: (1) the name and address
of the stockholder who intends to make the nomination of the person or
persons to be nominated; (2) a representation that the stockholder is a
holder of record of stock of the Corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (3) a description of all
arrangements or understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder; (4) such
other information regarding each nominee proposed by such stockholder as
would have been required to be included in a proxy statement filed pursuant
to the proxy rules of the Securities and Exchange Commission had each nominee
been nominated, or intended to be nominated, by the Board of Directors; and
(5) the written consent of each nominee to serve as a director of the
Corporation if so elected. The filing of a stockholder notice as required by
this Section 4.10 shall not, in and of itself, constitute the making of the
nomination(s) described therein. The chairman of the meeting may refuse to
acknowledge the nomination of any person not made in compliance with the
foregoing procedure.
ARTICLE V - OFFICERS
Section 5.1. OFFICERS AND ELECTION THEREOF. The officers of the
Corporation shall be a chief executive officer, president, secretary and a
treasurer, and such other officers and assistant officers, including, but not
limited to, a chairman of the board or one or more vice-presidents, as the
Board of Directors may from time to time deem necessary or advisable.
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a. CHAIRMAN OF THE BOARD. The chairman of the board, if there
be such an officer, shall, if present, preside at all meetings of the
Board of Directors, and exercise and perform such other powers and
duties as may be from time to time be assigned to him by the Board of
Directors or prescribed by these Bylaws.
b. CHIEF EXECUTIVE OFFICER AND PRESIDENT. Subject to such
supervisory powers, if any, as may be given by the Board of Directors
to the chairman of the board, if there be such an officer, the Chief
Executive Officer and President shall be the chief executive officer
of the Corporation and shall, subject to the control of the Board of
Directors, have general supervision, direction, and control of the
business and officers of the Corporation. He shall preside at all
meetings of the stockholders and, in the absence of the chairman of the
board, at all meetings of the Board of Directors. He shall have the
general powers and duties of management usually vested in the office of
chief executive officer of a corporation, and shall have such other
powers and duties as may be prescribed by the Board of Directors or
these Bylaws.
c. VICE PRESIDENT. In the absence or disability of the chief
executive officer, the vice president or vice presidents, if there be
such an officer or officers, in order of their rank as fixed by the
Board of Directors, or if not ranked, the vice president designated by
the Board of Directors, shall perform all the duties of the chief
executive officer and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the chief executive officer.
The vice presidents shall have such other powers and perform such other
duties as from time to time may be prescribed for them respectively by
the Board of Directors or these Bylaws.
d. SECRETARY. The secretary shall keep, or cause to be kept, a
book of minutes at the principal office or such other place as the
Board of Directors may order, of all meetings of directors and
stockholders, with the time and place of holding, whether regular or
special, and if special, how authorized, the notice thereof given, the
names of those present at meetings of directors, the number of shares
present or represented at meetings of stockholders and the proceedings
thereof. The secretary shall keep, or cause to be kept, at the
principal office or at the office of the Corporation's transfer agent,
a stock ledger, or a duplicate stock ledger, showing the names of the
stockholders and their addresses, the number and classes of shares held
by each, the number and date of certificates issued for the same, and
the number and date of cancellation of every certificate surrendered
for cancellation. The secretary shall give, or cause to be given,
notice of all the meetings of the stockholders and of the directors
required by these Bylaws or by law to be given, and he shall keep the
seal of the Corporation, if any, in safe custody, and shall have such
other powers and perform such other duties as may be prescribed by the
Board of Directors or these Bylaws.
e. TREASURER. The treasurer, if there be such an officer,
shall keep and maintain or cause to be kept and maintained, adequate
and correct accounts of the properties and business transactions of the
Corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, surplus, and shares. Any
surplus, including earned surplus, paid-in surplus and surplus arising
from a reduction of stated capital, shall be classified according to
source and shown in a separate account. The books of account shall at
all reasonable times be open to inspection by any Director. The
treasurer shall deposit all monies and other valuables in the name and
to the credit of the Corporation with such depositories as may be
designated by the Board of Directors. He shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, shall
render to the president and the Board of Directors, whenever they
request it, an account of all transactions as treasurer and of the
financial condition of the Corporation, and shall have such other
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powers and perform such other duties as may be prescribed by the Board
of Directors or these Bylaws. He shall be bonded, if required by the
Board of Directors.
Any number of offices may be held by the same person. All officers shall be
elected by the Board of Directors at its annual meeting, and the Board of
Directors shall also be empowered to fill all vacancies in office.
Section 5.2. TERM AND REMOVAL. Each officer of the Corporation shall
hold office until the next annual meeting of the Board of Directors or until
his successor is duly elected and qualified, or until his earlier death,
resignation, or removal; provided, however, that any officer elected by the
Board of Directors may at any time, with or without cause, be removed by the
affirmative vote of a majority of the total number of the Board, but such
removal shall be without prejudice to the contractual rights of such officer,
if any, with the corporation.
Section 5.3. ASSISTANTS, AGENTS AND EMPLOYEES, ETC. In addition to
the officers specified in Section 5.1, the Board may appoint other
assistants, agents and employees as it may deem necessary or advisable,
including, by way of expansion and not limitation, one or more Assistant
Secretaries, and one or more Assistant Treasurers, each of whom shall hold
office for such period, have such authority, and perform such duties as the
Board may from time to time determine. The Board may delegate to any officer
of the Corporation or any committee of the Board the power to appoint, remove
and prescribe the duties of any such assistants, agents or employees.
Section 5.4. RESIGNATIONS. Any officer or assistant may resign at
any time by giving written notice of such resignation to the Board or the
Secretary of the Corporation. Any such resignation shall take effect at the
time specified therein, or, if the time be not specified, upon receipt
thereof by the Board or the Secretary, as the case may be; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 5.5. COMPENSATION. The compensation of the officers of the
Corporation shall be fixed from time to time by the Board. None of such
officers shall be prevented from receiving such compensation by reason of the
fact that such officer is also a director of the Corporation. Nothing
contained herein shall preclude any officer from serving the Corporation, or
any subsidiary corporation, in any other capacity and receiving such
compensation by reason of the fact that such officer is also a director of
the Corporation. Nothing contained herein shall preclude any officer from
serving the Corporation, or any subsidiary corporation, in any other capacity
and receiving proper compensation therefor.
ARTICLE VI - DIVIDENDS AND DEPOSIT OF FUNDS
Section 6.1. DIVIDENDS. Subject to the laws of the State of
Delaware, the Board of Directors may, from time to time, declare and the
Corporation may pay dividends on its outstanding shares in cash, property, or
its own shares, except when the Corporation is insolvent or when the
declaration or payment thereof would be contrary to any restrictions
contained in the Certificate of Incorporation.
Section 6.2. BANK ACCOUNTS AND DEPOSITS. All funds of the
Corporation shall be deposited from time to time to the credit of the
Corporation with such banks, bankers, trust companies or other depositories
as the Board of Directors may select or as may be selected by any other
officer or officers, agent or agents of the Corporation to whom such power
may be delegated from time to time by the Board of Directors.
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Section 6.3. SIGNING OF CHECKS AND DRAFTS. Except as otherwise
provided in these Bylaws, all checks, drafts, or other order or payment of
money, notes, or other evidences of indebtedness, issued in the name of or
payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
Section 6.4. LOANS. No loans and no renewals of any loans shall be
contracted on behalf of the Corporation except as authorized by the Board of
Directors. When authorized so to do by the Board of Directors, any officer of
the Corporation may effect loans and advances for the Corporation from any
bank, trust company or other institution or from any firm, corporation or
individual, and for such loans and advances may make, execute and deliver
promissory notes, bonds or other evidences of indebtedness of the
Corporation. When authorized so to do by the Board of Directors, any officer
of the Corporation may pledge, hypothecate or transfer, as security for the
payment of any and all loans, advances, indebtedness and liabilities of the
Corporation, any and all stocks, securities and other personal property at
any time held by the Corporation, and to that end, may endorse, assign and
deliver the same. Such authority may be general or confined to specific
instances.
ARTICLE VII - STOCK
Section 7.1. STOCK CERTIFICATES. The certificates for shares of the
Corporation's capital stock shall be in such form as shall be determined from
time to time by the Board of Directors. Each stock certificate shall have
plainly stated on its face: the name of the Corporation, its state of
incorporation, the name of the registered holder of such certificate, and the
number and par value of the shares represented thereby, and any other matters
required by law. The certificates representing shares of such stock shall be
numbered in the order in which they shall be issued and shall be signed in
the name of the Corporation by the president or a vice-president and by the
secretary or assistant secretary or the treasurer or assistant treasurer. Any
of or all of the signatures on the certificates may be a facsimile. In case
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon, any such certificate, shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued,
such certificate may nevertheless be issued by the Corporation with the same
effect as though the person who signed such certificate, or whose facsimile
signature shall have been placed thereupon, were such officer, transfer agent
or registrar at the date of issue. Each stock certificate shall also have
conspicuously noted thereon any restriction on transfer applicable to such
certificate.
Section 7.2. STOCK TRANSFER BOOKS. A record of all certificates for
shares issued by the Corporation shall be kept by the Secretary or by any
transfer agent or registrar appointed pursuant to Section 7.3 below at the
principal office of the Corporation or at the office of such transfer agent
or registrar. Such record shall show the name and address of the person, firm
or corporation in which certificates for shares are registered, the number
and classes of shares represented by each such certificate, the date of each
such certificate, and in the case of certificates which have been cancelled,
the dates of cancellation thereof.
Section 7.3. TRANSFER AGENTS AND REGISTRARS. The Board of Directors
may appoint one (1) or more transfer agents, registrars or other agents for
the purpose of registering transfer of shares of the Corporation, issuing new
certificates of shares of the Corporation and cancelling certificates
surrendered to the Corporation. Such agents and registrars shall be appointed
at such times and places as the requirements of the Corporation may
necessitate and the Board of Directors may designate. Any such transfer
agent, registrar or other agent shall be under a duty to the
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Corporation to exercise good faith and due diligence in performing his
functions. Such transfer agent, registrar or other agent shall have, with
regard to the particular functions he performs, the same obligation to the
holder or owner of shares of the Corporation and shall have the same rights
and privileges as the Corporation has in regard to those functions.
Section 7.4. REGISTRATION OF TRANSFER. Registration of stock
transfers shall be made only upon the books of the Corporation upon due
presentment to the Corporation of a stock certificate for registration of
transfer of the shares evidenced thereby, accompanied by the written
assignment thereof by the person in whose name the stock is registered or by
his or her duly constituted attorney-in-fact. Prior to presentment for
registration of transfer as aforesaid, the Corporation may, at its option,
treat the registered owner of any shares of its stock as the owner-in-fact of
such shares and as the person exclusively entitled to exercise and enjoy all
rights, powers, and privileges of the owner thereof.
Section 7.5. LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. In
any case of loss, theft, destruction, or mutilation of any certificate of
stock, another may be issued in its place upon proof of such loss, theft,
destruction, or mutilation and upon the giving of a bond of indemnity to the
Corporation in such form and in such sum as the Board may direct; provided,
however, that a new certificate may be issued without requiring any bond
when, in the judgment of the Board, it is proper to do so.
ARTICLE VIII - RECORD DATE
Section 8.1. CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE FOR
DETERMINING STOCKHOLDERS' RIGHTS. For the purposes of determining
stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, the Board of Directors may provide that the stock
transfer books shall be closed for a stated period not to exceed in any case
sixty (60) days immediately preceding such meeting. In lieu of closing the
stock transfer books, the Board of Directors may fix, in advance, a record
date for any such determination of stockholders, which record date shall not
precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors, and not be more than sixty (60) nor less than ten
(10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. If the stock transfer books are not closed and no
record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the
date on which such notice is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting, except
that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 8.2. RECORD DATE WHEN NO MEETING HELD. In order that the
Corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. If no record
date has been fixed by the Board of Directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required
by this act, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by
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delivery to its registered office in this state, its principal place of
business, or an officer or agent of the Corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be by hand or by certified
or registered mail, return receipt requested. If no record date has been
fixed by the Board of Directors and prior action by the Board of Directors is
required by the law, the Certificate of Incorporation of the Corporation, or
these Bylaws, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the
close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
Section 8.3. RECORD DATE; DISTRIBUTIONS; OTHER. In order that the
Corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment of any rights of the stockholders
entitled to exercise any rights in respect of any change, conversion or
exchange of stock, or for the purpose of any other lawful action, the Board
of Directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted, and which
record date shall be not more than sixty (60) days prior to such action. If
the stock transfer books are not closed and no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the date on which the Board of Directors adopts the
resolution relating thereto.
ARTICLE IX - FISCAL YEAR
Section 9.1. FISCAL YEAR. The fiscal year of the Corporation shall
be the calendar year unless and until changed by the Board of Directors.
ARTICLE X - AMENDMENTS
Section 10.1. AMENDMENTS. These Bylaws may be altered, amended or
repealed or new bylaws may be adopted by the stockholders or by the Board of
Directors at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting.
ARTICLE XI - NOTICES
Section 11.1. GIVING OF NOTICE. Except as otherwise provided by the
General Corporation Law of Delaware, these Bylaws, the Corporation's
Certificate of Incorporation, or resolution of the Board of Directors, every
meeting notice or other notice, demand, bill, statement or other
communication (collectively "Notice") to or from the Corporation from or to a
director, officer or stockholder shall be duly given if it is written or
printed and is (a) sent by first class mail or by overnight service of the
U.S. Postal Service, postage prepaid, (b) sent by any established overnight
air courier service, such as Federal Express, Emery Airborne or UPS, (c) sent
by telegraph, tested telex or other tested facsimile transmission, (d)
delivered by any commercial messenger service which regularly retains its
receipts, or (e) personally delivered, provided a receipt is obtained
reflecting the date of delivery. Notice shall not be duly given unless all
delivery or postage charges are prepaid. Notice shall be given to an
addressee's most recent address as it appears on the Corporation's records. A
Notice shall be deemed "given" when dispatched for delivery,
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or if mailed, on the date postmarked. This Section shall not have the effect
of shortening any notice period provided for in these Bylaws.
ARTICLE XII - MISCELLANEOUS
Section 12.1. EXECUTION OF CONTRACTS. The Board, except as otherwise
provided in these Bylaws, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name of
and on behalf of the Corporation, and such authority may be general or
confined to specific instances.
Section 12.2. HEADINGS. All headings and other titles and captions
used in these Bylaws are for convenience only and shall not be considered in
construing or interpreting any provision of these Bylaws.
Section 12.3. INTERESTED DIRECTORS; QUORUM. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be
void or voidable solely for this reason, or solely because the director or
officer is present at or participates in the meeting of the Board or
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if: (1) the material
facts as to his relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board or committee in good faith authorizes the contract
or transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
(2) the material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (3) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified by the Board of Directors, a committee thereof, or the
stockholders. Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors or of a
committee which authorizes the contract or transaction.
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CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
(1) That I am the duly elected and acting secretary of 3TEC
Energy Corporation, a Delaware corporation; and
(2) That the foregoing bylaws, comprising _________ (__) pages,
including this Certificate, constitute the original bylaws
of said Corporation, as duly adopted at the first meeting
of the Board of Directors thereof duly held on the ____ day
of _____________, 1999.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name this ____
day of _____________, 1999.
------------------------------------
, Secretary
-------------------------
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EXHIBIT "D"
PROVISIONS OF ALABAMA BUSINESS CORPORATION ACT RELATING TO DISSENTERS' RIGHTS
ALABAMA CODE ANNOTATED
TITLE 10. CORPORATIONS, PARTNERSHIPS AND ASSOCIATIONS
CHAPTER 2B. BUSINESS CORPORATIONS
ARTICLE 13. DISSENTERS' RIGHTS
SECTION 10-2B-13.01. DEFINITIONS.
(1) "Corporate action" means the filing of articles of merger or
share exchange by the probate judge or Secretary of State, or other action
giving legal effect to a transaction that is the subject of dissenters'
rights.
(2) "Corporation" means the issuer of shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 10-2B-13.02 and who exercises that right when
and in the manner required by Sections 10-2B-13.20 through 10-2B-13.28.
(4) "Fair Value," with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion would
be inequitable.
(5) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate currently
paid by the corporation on its principal bank loans, or, if none, at a rate
that is fair and equitable under all circumstances.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
to the extent of the rights granted by a nominee certificate on file with a
corporation.
(7) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
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SECTION 10-2B-13.02. RIGHT TO DISSENT.
(a) A shareholder is entitled to dissent from, and obtain payment of
the fair value of his or her shares in the event of, any of the following
corporate actions:
(1) Consummation of a plan of merger to which the
corporation is a party (i) if shareholder approval is
required for the merger by Section 10-2B-11.03 or the
articles of incorpora tion and the shareholder is
entitled to vote on the merger or (ii) if the
corporation is a subsidiary that is merged with its
parent under Section 10-2B-11.04;
(2) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose
shares will be acquired, if the shareholder is
entitled to vote on the plan;
(3) Consummation of a sale or exchange by all, or
substantially all, of the property of the corporation
other than in the usual and regular course of
business, if the shareholder is entitled to vote on
the sale or exchange, including a sale in
dissolution, but not including a sale pursuant to
court order or a sale for cash pursuant to a plan by
which all or substantially all of the net proceeds of
the sale will be distributed to the shareholders
within one year after the date of sale;
(4) To the extent that the articles of incorporation of
the corporation so provide, an amend ment of the
articles of incorporation that materially and
adversely affects rights in respect to a dissenter's
shares because it:
(i) Alters or abolishes a preferential right
of the shares;
(ii) Creates, alters, or abolishes a right in
respect of redemption, including a provi
sion respecting a sinking fund for the
redemption or repurchase of the shares;
(iii) Alters or abolishes a preemptive right of
the holder of the shares to acquire shares
or other securities;
(iv) Excludes or limits the right of the shares
to vote on any matter, or to cumulate votes,
other than a limitation by dilution through
issuance of shares or other securities with
similar voting rights; or
(v) Reduces the number of shares owned by the
shareholder to a fraction of a share if the
fractional share so created is to be
acquired for cash under Section 10-2B-6.04;
or
(5) Any corporate action taken pursuant to a shareholder
vote to the extent the articles of incorporation,
bylaws, or a resolution of the board of directors
provides that voting or nonvoting shareholders are
entitled to dissent and obtain payment for their
shares.
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(b) A shareholder entitled to dissent and obtain payment for
shares under this chapter may not challenge the corporate
action creating his or her entitlement unless the action is
unlawful or fraudulent with respect to the shareholder or the
corporation.
SECTION 10-2B-13.03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer
than all of the shares registered in his or her name only if he or she
dissents with respect to all shares beneficially owned by any one person and
notifies the corporation in writing of the name and address of each person on
whose behalf he or she asserts dissenters' rights. The rights of a partial
dissenter under this subsection are determined as if the shares to which he
or she dissents and his or her other shares were registered in the names of
different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to
shares held on his or her behalf only if:
(1) He or she submits to the corporation the record
shareholder's written consent to the dissent not
later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He or she does so with respect to all shares of which
he or she is the beneficial share holder or over
which he or she has power to direct the vote.
SECTION 10-2B-13.20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under
Section 10-2B-13.02 is submitted to a vote at a shareholders' meeting, the
meeting notice must state that shareholders are or may be entitled to assert
dissenters' rights under this article and be accompanied by a copy of this
article.
(b) If corporate action creating dissenters' rights under Section
10-2B-13.02 is taken without a vote of shareholders, the corporation shall
(1) notify in writing all shareholders entitled to assert dissenters' rights
that the action was taken; and (2) send them the dissenters' notice described
in Section 10-2B-13.22.
SECTION 10-2B-13.21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under
Section 10-2B-13.02 is submitted to a vote at a shareholder's meeting, a
shareholder who wishes to assert dissenters' rights (1) must deliver to the
corporation before the vote is taken written notice of his or her intent to
demand payment or his or her shares if the proposed action is effectuated;
and (2) must not vote his or her shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of
subsection (a) is not entitled to payment for his or her shares under this
article.
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SECTION 10-2B-13.22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under
Section 10-2B-13.02 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied
the requirements of Section 10-2B-13.21.
(b) The dissenters' notice must be sent no later than 10 days
after the corporate action was taken, and must:
(1) State where the payment demand must be sent;
(2) Inform holders of shares to what extent transfer of
the shares will be restricted after the payment
demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the
payment demand, which date may not be fewer than 30
nor more than 60 days after the date the subsection
(a) notice is delivered; and
(5) Be accompanied by a copy of this article.
SECTION 10-2B-13.23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in Section
10-2B-13.22 must demand payment in accordance with the terms of the
dissenters' notice.
(b) The shareholder who demands payment retains all other rights of
a shareholder until those rights are canceled or modified by the taking of
the proposed corporate action.
(c) A shareholder who does not demand payment by the date set in the
dissenters' notice is not entitled to payment for his or her shares under
this article.
(d) A shareholder who demands payment under subsection (a) may not
thereafter withdraw that demand and accept the terms offered under the
proposed corporate action unless the corporation shall consent thereto.
SECTION 10-2B-13.24. SHARE RESTRICTIONS.
(a) Within 20 days after making a formal payment demand, each
shareholder demanding payment shall submit the certificate or certificates
representing his or her shares to the corporation for (1) notation thereon by
the corporation that such demand has been made and (2) return to the
shareholder by the corporation.
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(b) The failure to submit his or her shares for notation shall, at
the option of the corporation, terminate the shareholders' rights under this
article unless a court of competent jurisdiction, for good and sufficient
cause, shall otherwise direct.
(c) If shares represented by a certificate on which notation has
been made shall be transferred, each new certificate issued therefor shall
bear similar notation, together with the name of the original dissenting
holder of such shares.
(d) A transferee of such shares shall acquire by such transfer no
rights in the corporation other than those which the original dissenting
shareholder had after making demand for payment of the fair value thereof.
SECTION 10-2B-13.25. OFFER OF PAYMENT.
(a) As soon as the proposed corporate action is taken, or upon
receipt of a payment demand, the corporation shall offer to pay each
dissenter who complied with Section 10-2B-13.23 the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a
fiscal year ending not more than 16 months before the
date of the offer, an income statement for that year,
and the latest available interim financial
statements, if any;
(2) A statement of the corporation's estimate of the
fair value of the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand
payment under Section 10-2B-13.28; and
(5) A copy of this article.
(c) Each dissenter who agrees to accept the corporation's offer of
payment in full satisfaction of his or her demand must surrender to the
corporation the certificate or certificates representing his or her shares in
accordance with terms of the dissenters' notice. Upon receiving the
certificate or certificates, the corporation shall pay each dissenter the
fair value of his or her shares, plus accrued interest, as provided in
subsection (a). Upon receiving payment, a dissenting shareholder ceases to
have any interest in the shares.
SECTION 10-2B-13.26. FAILURE TO TAKE CORPORATE ACTION.
(a) If the corporation does not take the proposed action within 60
days after the date set for demanding payment, the corporation shall release
the transfer restrictions imposed on shares.
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(b) If, after releasing transfer restrictions, the corporation takes
the proposed action, it must send a new dissenters' notice under Section
10-2B-13.22 and repeat the payment demand procedure.
SECTION 10-2B-13.27. RESERVED.
SECTION 10-2B-13.28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH OFFER OF
PAYMENT.
(a) A dissenter may notify the corporation in writing of his or her
own estimate of the fair value of his or her shares and amount of interest
due, and demand payment of his or her estimate, or reject the corpora tion's
offer under Section 10-2B-13.25 and demand payment of the fair value of his
or her shares and interest due, if:
(1) The dissenter believes that the amount offered under
Section 10-2B-13.25 is less than the fair value of
his or her shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make an offer under Section
10-2B-13.25 within 60 days after the date set for
demanding payment; or
(3) The corporation, having failed to take the proposed
action, does not release the transfer restrictions
imposed on shares within 60 days after the date set
for demanding payment.
(b) A dissenter waives his or her right to demand payment under this
section unless he or she notifies the corporation or his or her demand in
writing under subsection (a) within 30 days after the corporation offered
payment for his or her shares.
SECTION 10-2B-13.30. COURT ACTION.
(a) If a demand for payment under Section 10-2B-13.28 remains
unsettled, the corporation shall commence a proceeding within 60 days after
receiving the payment demand and petition the court to determine the fair value
of the shares and accrued interest. If the corporation does not commence the
proceeding within the 60 day period, it shall pay each dissenter whose demand
remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the circuit court
of the county where the corporation's principal office (or, if none in this
state, its registered office) is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters (whether or not residents
of this state) whose demands remain unsettled parties to the proceeding as in an
action against their shares, and all parties must be served with
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a copy of the petition. Nonresidents may be served by registered or certified
mail or by publication as provided under the Alabama Rules of Civil Procedure.
(d) After service is completed, the corporation shall deposit with the
clerk of the court an amount sufficient to pay unsettled claims of all
dissenters party to the action in an amount per share equal to its prior
estimate of fair value, plus accrued interest, under Section 10-2B-13.25.
(e) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order appointing
them, or in any amendment to it. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
(f) Each dissenter made a party to the proceeding is entitled to
judgment for the amount the court finds to be the fair value of his or her
shares, plus accrued interest. If the court's determination as to the fair value
of a dissenter's shares, plus accrued interest, is higher than the amount
estimated by the corporation and deposited with the clerk of the court pursuant
to subsection (d), the corporation shall pay the excess to the dissenting
shareholder. If the court's determination as to fair value, plus accrued
interest, of a dissenter's shares is less than the amount estimated by the
corporation and deposited with the clerk of the court pursuant to subsection
(d), then the clerk shall return the balance of funds deposited, less any costs
under Section 10-2B-13.31, to the corporation.
(g) Upon payment of the judgment, and surrender to the corporation
of the certificate or certificates representing the appraised shares, a
dissenting shareholder ceases to have any interest in the shares.
SECTION 10-2B-13.31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Section
10-2B-13.30 shall determine all costs of the proceeding, including
compensation and expenses of appraisers appointed by the court. The court
shall assess the costs against the corporation, except that the court may
assess costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted
arbitrarily, vexatiously, or not in good faith in demanding payment under
Section 10-2B-13.28.
(b) The court may also assess the reasonable fees and expenses of
counsel and experts for the respective parties, in amounts the court finds
equitable:
(1) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not
substantially comply with the requirements of
Sections 10-2B-13.20 through 10-2B-13.28; or
(2) Against either the corporation or a dissenter, in
favor of any other party, if the court finds that the
party against whom the fees and expenses are assessed
acted arbitrarily, vexa tiously, or not in good faith
with respect to the rights provided by this chapter.
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(c) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly situated,
and that the fees for those services should not be assessed against the
corporation, the court may award to these counsel reasonable fees to be paid
out of the amounts awarded the dissenters who were benefitted.
SECTION 10-2B-13.32. STATUS OF SHARES AFTER PAYMENT.
Shares acquired by a corporation pursuant to payment of the agreed
value therefor or to payment of the judgment entered therefor, as in this
chapter provided, may be held and disposed of by such corporation as in the
case of other treasury shares, except that, in the case of a merger or share
exchange, they may be held and disposed of as the plan of merger or share
exchange may otherwise provide.
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EXHIBIT "E"
MIDDLE BAY OIL COMPANY, INC. 1999 STOCK OPTION PLAN
MIDDLE BAY OIL COMPANY, INC.
[3TEC ENERGY CORPORATION]
1999 STOCK OPTION PLAN
I. PURPOSE OF PLAN
The MIDDLE BAY OIL COMPANY, INC. [3TEC ENERGY CORPORATION] STOCK OPTION PLAN
(the "PLAN") is intended to provide a means whereby certain employees of
MIDDLE BAY OIL COMPANY, INC., an Alabama corporation
[3TEC ENERGY CORPORATION, A DELAWARE CORPORATION] (the "COMPANY"), and its
subsidiaries may develop a sense of proprietorship and personal involvement
in the development and financial success of the Company, and to encourage
them to remain with and devote their best efforts to the business of the
Company, thereby advancing the interests of the Company and its stockholders.
Accordingly, the Company may grant to certain employees ("OPTIONEES") the
option ("OPTION") to purchase shares of the common stock of the Company
("STOCK"), as hereinafter set forth. Options granted under the Plan may be
either incentive stock options, within the meaning of section 422(b) of the
Internal Revenue Code, as amended (the "CODE"), ("INCENTIVE STOCK OPTIONS")
or options which do not constitute Incentive Stock Options.
II. ADMINISTRATION
The Plan shall be administered by the Compensation Committee (the
"COMMITTEE") of the Board of Directors of the Company (the "BOARD"), and the
Committee shall be (a) comprised solely of two or more outside directors
(within the meaning of section 162(m) of the Code and applicable interpretive
authority thereunder), and (b) constituted so as to permit the Plan to comply
with Rule 16b-3, as currently in effect or as hereinafter modified or amended
("RULE 16b-3"), promulgated under the Securities Exchange Act of 1934, as
amended (the "1934 ACT"). The Committee shall have sole authority to select
the Optionees from among those individuals eligible hereunder and to
establish the number of shares which may be issued under each Option;
provided, however, that, notwithstanding any provision in the Plan to the
contrary, the maximum number of shares that may be subject to Options granted
under the Plan to an individual Optionee during any calendar year may not
exceed one percent (1%) of the number of shares of the Company's Stock
outstanding on October 1, 1999 (subject to adjustment in the same manner as
provided in Paragraph VIII hereof with respect to shares of Stock subject to
Options then outstanding). The limitation set forth in the preceding sentence
shall be applied in a manner which will permit compensation generated under
the Plan to constitute "performance-based" compensation for purposes of
section 162(m) of the Code, including, without limitation, counting against
such maximum number of shares, to the extent required under section 162(m) of
the Code and applicable interpretive authority thereunder, any shares subject
to Options that are canceled or repriced. In selecting the Optionees from
among individuals eligible hereunder and in establishing the number of shares
that may be issued under each Option, the Committee may take into account the
nature of the services rendered by such individuals, their present and
potential contributions to the Company's success and such other factors as
the Committee in its discretion shall deem
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relevant. The Committee is authorized to interpret the Plan and may from time
to time adopt such rules and regulations, consistent with the provisions of
the Plan, as it may deem advisable to carry out the Plan. All decisions made
by the Committee in selecting the Optionees, in establishing the number of
shares which may be issued under each Option and in construing the provisions
of the Plan shall be final.
III. OPTION AGREEMENTS
(a) Each Option shall be evidenced by a written agreement between the Company
and the Optionee ("OPTION AGREEMENT") which shall contain such terms and
conditions as may be approved by the Committee. The terms and conditions of
the respective Option Agreements need not be identical. Specifically, an
Option Agreement may provide for the surrender of the right to purchase
shares under the Option in return for a payment in cash or shares of Stock or
a combination of cash and shares of Stock equal in value to the excess of the
fair market value of the shares with respect to which the right to purchase
is surrendered over the option price therefor ("STOCK APPRECIATION RIGHTS"),
on such terms and conditions as the Committee in its sole discretion may
prescribe; provided, that with respect to Stock Appreciation Rights granted
to employees who are subject to Section 16 of the 1934 Act, except as
provided in Subparagraph VIII(c) hereof, the Committee shall retain final
authority (i) to determine whether an Optionee shall be permitted, or (ii) to
approve an election by an Optionee, to receive cash in full or partial
settlement of Stock Appreciation Rights. Moreover, an Option Agreement may
provide for the payment of the option price, in whole or in part, by the
delivery of a number of shares of Stock (plus cash if necessary) having a
fair market value equal to such option price.
(b) For all purposes under the Plan, the fair market value of a share of
Stock on a particular date shall be equal to the mean of the reported high
and low sales price of the Stock (i) reported by the National Market System
or NASDAQ on that date or (ii) if the Stock is listed on a national stock
exchange, reported on the stock exchange composite tape on that date; or, in
either case, if no prices are reported on that date, on the last preceding
date on which such prices of the Stock are so reported. If the Stock is
traded over the counter at the time a determination of its fair market value
is required to made hereunder, its fair market value shall be deemed to be
equal to the average between the reported high and low or closing bid and
asked prices of Stock on the most recent date on which Stock was publicly
traded. In the event Stock is not publicly traded at the time a determination
of its value is required to be made hereunder, the determination of its fair
market value shall be made by the Committee in such manner as it deems
appropriate.
(c) Each Option and all rights granted thereunder shall not be transferable
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder, and shall be exercisable during the Optionee's lifetime only by
the Optionee or the Optionee's guardian or legal representative.
IV. ELIGIBILITY OF OPTIONEE
Options may be granted only to individuals who are employees (including
officers and directors who are also employees) of the Company or any parent
or subsidiary corporation (as defined in section 424 (e) and (f) of the Code)
of the Company at the time the Option is granted; provided, however, that
members of the Committee shall
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not be eligible to be granted Options. Options may be granted to the same
individual on more than one occasion. No Incentive Stock Option shall be
granted to an individual if, at the time the Option is granted, such
individual owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or its parent or subsidiary
corporation, unless (i) at the time such Option is granted the option price
is 110% of the fair market value of the Stock subject to the Option and (ii)
such Option by its terms is not exercisable after the expiration of five
years from the date of grant. To the extent that the aggregate fair market
value (determined at the time the respective Incentive Stock Option is
granted) of stock with respect to which Incentive Stock Options are
exercisable for the first time by an individual during any calendar year
under all incentive stock option plans of the Company and its parent and
subsidiary corporations exceeds $100,000, such excess Incentive Stock Options
shall be treated as Options which do not constitute Incentive Stock Options.
The Committee shall determine, in accordance with applicable provisions of
the Code, Treasury Regulations and other administrative pronouncements, which
of an Optionee's Incentive Stock Options will not constitute Incentive Stock
Options because of such limitation and shall notify the Optionee of such
determination as soon as practicable after such determination.
V. SHARES SUBJECT TO PLAN
The aggregate number of shares which may be issued under Options granted
under the Plan shall not exceed 1,500,000 shares of Stock. Such shares may
consist of authorized but unissued shares of Stock or previously issued
shares of Stock reacquired by the Company. Any of such shares which remain
unissued and which are not subject to outstanding Options at the termination
of the Plan shall cease to be subject to the Plan, but, until termination of
the Plan, the Company shall at all times make available a sufficient number
of shares to meet the requirements of the Plan. Should any Option hereunder
expire or terminate prior to its exercise in full, the shares theretofore
subject to such Option may again be subject to an Option granted under the
Plan to the extent permitted under Rule 16b-3. The aggregate number of shares
which may be issued under the Plan shall be subject to adjustment in the same
manner as provided in Paragraph VIII hereof with respect to shares of Stock
subject to Options then outstanding. Exercise of an Option in any manner,
including an exercise involving a Stock Appreciation Right, shall result in a
decrease in the number of shares of Stock which may thereafter be available,
both for purposes of the Plan and for sale to any one individual, by the
number of shares as to which the Option is exercised. Separate stock
certificates shall be issued by the Company for those shares acquired
pursuant to the exercise of any Option which does not constitute an Incentive
Stock Option.
VI. OPTION PRICE
The purchase price of Stock issued under each Option shall be equal to the
fair market value of Stock subject to the Option on the date the Option is
granted; provided, however, that this limitation shall not apply to Incentive
Stock Options for which a greater purchase price is required pursuant to
Paragraph IV hereof.
VII. TERM OF PLAN
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The Plan shall be effective upon October 1, 1999, the date of its adoption
by the Board, provided the Plan is approved by the stockholders of the
Company within twelve months thereafter. Notwithstanding any provision in
this Plan or in any Option Agreement, no Option shall be exercisable prior to
such stockholder approval. Except with respect to Options then outstanding,
if not sooner terminated under the provisions of Paragraph IX, the Plan shall
terminate upon and no further Options shall be granted after September 30,
2009.
VIII. RECAPITALIZATION OR REORGANIZATION
(a) The existence of the Plan and the Options granted hereunder shall not
affect in any way the right or power of the Board or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganiza
tion or other change in the Company's capital structure or its business, any
merger or consolidation of the Company, any issue of debt or equity
securities, the dissolution or liquidation of the Company or any sale, lease,
exchange or other disposition of all or any part of its assets or business or
any other corporate act or proceeding.
(b) The shares with respect to which Options may be granted are shares of
Stock as presently constituted, but if, and whenever, prior to the expiration
of an Option theretofore granted, the Company shall effect a subdivision or
consolidation of shares of Stock or the payment of a stock dividend on Stock
without receipt of consideration by the Company, the number of shares of
Stock with respect to which such Option may thereafter be exercised (i) in
the event of an increase in the number of outstanding shares shall be
proportionately increased, and the purchase price per share shall be
proportionately reduced, and (ii) in the event of a reduction in the number
of outstanding shares shall be proportionately reduced, and the purchase
price per share shall be proportionately increased.
(c) If the Company recapitalizes, reclassifies its capital stock, or
otherwise changes its capital structure (a "recapitalization"), the number
and class of shares of Stock covered by an Option theretofore granted shall
be adjusted so that such Option shall thereafter cover the number and class
of shares of stock and securities to which the Optionee would have been
entitled pursuant to the terms of the recapitalization if, immediately prior
to the recapitalization, the Optionee had been the holder of record of the
number of shares of Stock then covered by such Option.
If (i) the Company shall not be the surviving entity in any merger,
consolidation or other reorganization (or survives only as a subsidiary of an
entity other than a previously wholly-owned subsidiary of the Company), (ii)
the Company sells, leases or exchanges substantially all of its assets to any
other person or entity (other than a wholly-owned subsidiary of the Company),
(iii) the Company is to be dissolved and liquidated, (iv) any person or
entity, including a "group" as contemplated by Section 13(d)(3) of the 1934
Act acquires or gains ownership or control (including, without limitation,
power to vote) of more than 50% of the outstanding shares of the Company's
voting stock (based upon voting power), or (v) as a result of or in
connection with a contested election of directors, the persons who were
directors of the Company before such election shall cease to constitute a
majority of the Board (each such event is referred to herein as a "CORPORATE
CHANGE"), no later than (a) ten (10) days after the approval by the
stockholders of the Company of such merger, consolidation, reorganization,
sale, lease or exchange of assets or dissolution or such election of
directors or (b) thirty (30) days after a change of control of the type
described in Clause (iv), the Committee, acting in its sole discretion
without the consent or approval of any Optionee, shall act to effect one or
more of the following alternatives, which may vary among individual Optionees
and which may vary among Options held by any individual Optionee: (1)
accelerate the time at which Options then outstanding may be exercised so
that such Options may be exercised in full for a limited period of time on or
before a specified date (before or after such Corporate Change) fixed by the
Committee, after which specified date all unexercised Options and all rights
of Optionees thereunder shall terminate, (2) require that mandatory surrender
to the Company by selected Optionees of some or all of the outstanding
Options held by such Optionees (irrespective of whether such Options are then
exercisable under the provisions of the Plan) as of a date, before or after
such Corporate Change, specified by the Committee, in which event the
Committee shall thereupon cancel such Options and the Company shall pay to
each Optionee an amount of cash per share equal to the excess, if any, of the
amount calculated in Subparagraph (d) below (the "Change of Control Value")
of the shares subject to such Option over the exercise price(s) under such
Options for such shares, (3) make such adjustments to Options then
outstanding as the Committee deems appropriate to reflect such Corporate
Change (provided, however, that the Committee may determine in its sole
discretion that no adjustment is necessary to Options then outstanding) or
(4) provide that the number and class of shares of Stock covered by an Option
theretofore granted shall be adjusted so that such Option shall thereafter
cover the number and class of shares of stock or other securities or property
(including, without limitation, cash) to which the Optionee would have been
entitled pursuant to the terms of the agreement of merger, consolidation or
sale of assets and dissolution if, immediately prior to such merger,
consolidation or sale of assets and dissolution the Optionee had been the
holder of record of the number of shares of Stock then covered by such Option.
(d) Except as hereinbefore expressly provided, the issuance by the Company of
shares of stock of any class or securities convertible into shares of stock
of any class, for cash, property, labor or services, upon direct sale, upon
the exercise of rights or warrants to subscribe therefor, or upon conversion
of shares or obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect,
and no adjustment by reason therefor shall be made with respect to, the
number of shares of Stock subject to Options theretofore granted or the
purchase price per share.
IX. AMENDMENT OR TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with respect
to any shares for which Options have not theretofore been granted. The Board
shall have the right to alter or amend the Plan or any part thereof from time
to time; provided, that no change in any Option theretofore granted may be
made which would impair the rights of the Optionee without the consent of
such Optionee (unless such change is required in order to cause the
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benefits under the Plan to qualify as performance-based compensation within
the meaning of section 162(m) of the Code and applicable interpretive
authority thereunder); and provided, further, that (i) the Board may not make
any alteration or amendment which would decrease any authority granted to the
Committee hereunder in contravention of Rule 16b-3 and (ii) the Board may not
make any alteration or amendment which would materially increase the benefits
accruing to participants under the Plan, increase the aggregate number of
shares which may be issued pursuant to the provisions of the Plan, change the
class of individuals eligible to receive Options under the Plan or extend the
term of the Plan, without the approval of the stockholders of the Company.
X. SECURITIES LAWS
(a) The Company shall not be obligated to issue any Stock pursuant to any
Option granted under the Plan at any time when the offering of the shares
covered by such Option have not been registered under the Securities Act of
1933 and such other state and federal laws, rules or regulations as the
Company or the Committee deems applicable and, in the opinion of legal
counsel for the Company, there is no exemption from the registration
requirements of such laws, rules or regulations available for the offering
and sale of such shares.
(b) It is intended that the Plan and any grant of an Option made to a person
subject to Section 16 of the 1934 Act meet all of the requirements of Rule
16b-3. If any provision of the Plan or any such Option would disqualify the
Plan or such Option under, or would otherwise not comply with, Rule 16b-3,
such provision or Option shall be construed or deemed amended to conform to
Rule 16b-3.
XI. GENERAL
(a) Nothing contained in this Plan or any Option granted pursuant to this
Plan shall confer upon any employee the right to continue in the employ of
the Company or its parent or subsidiary or any other corporation affiliated
with the Company, or interfere in any way with the rights of the Company or
its parent or subsidiaries or any corporation affiliated with the Company to
terminate his or her employment.
(b) No Optionee shall have any rights as a stockholder of the Company with
respect to any shares of Stock subject to an Option hereunder until such shares
of Stock have been issued.
(c) Nothing contained in this Plan or in any Option Agreement issued
hereunder shall impose any liability or responsibility on the Company, the
Board, the Committee or any member or any of the foregoing to pay, or
reimburse any Optionee for the payment of any tax arising out of, or on
account of the issuance of an Option or Options hereunder to any Optionee, an
Optionee's exercise of any Option issued under the Plan or an Optionee's
sale, transfer or other disposition of any Stock acquired pursuant to the
exercise of any Option issued hereunder. Any person receiving an Option
hereunder shall expressly acknowledge and agree that such participation is
voluntary and that the Optionee shall be solely responsible for all taxes to
which he or she may or become subject as a consequence of such participation.
99
<PAGE>
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
MIDDLE BAY OIL COMPANY, INC.
The undersigned, a shareholder of record of Middle Bay Oil Company,
Inc. (the "Company"), hereby appoints Floyd C. Wilson, with power of
substitution, to represent and to vote all of the shares of the Company which
the undersigned is entitled to vote at the Special Meeting of Shareholders of
the Company to be held at 1221 Lamar Street, Suite 1020, Houston, Texas 77010,
on November 18, 1999 at 10:00 a.m. Central Daylight Time, and at any adjournment
or adjournments thereof, hereby revoking all proxies heretofore given with
respect to such shares; and the undersigned hereby instructs said proxy to vote
all such shares of stock at the Special Meeting in accordance with the following
instructions: (indicate by check mark)
I. PROPOSAL TO APPROVE A CHANGE IN THE COMPANY'S STATE OF INCORPORATION FROM
ALABAMA TO DELAWARE BY MEANS OF A MERGER OF THE COMPANY WITH AND INTO A
WHOLLY-OWNED SUBSIDIARY, 3TEC ENERGY CORPORATION, A DELAWARE CORPORATION
/ / FOR / / AGAINST / / ABSTAIN
II. PROPOSAL TO APPROVE A CHANGE IN THE NAME OF THE COMPANY TO 3TEC ENERGY
CORPORATION
/ / FOR / / AGAINST / / ABSTAIN
III. PROPOSAL TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMPANY COMMON
STOCK FROM 40,000,000 TO 60,000,000
/ / FOR / / AGAINST / / ABSTAIN
IV. PROPOSAL TO APPROVE THE COMPANY'S 1999 STOCK OPTION PLAN
/ / FOR / / AGAINST / / ABSTAIN
V. OTHER MATTERS
WITH discretionary authority WITHOUT AUTHORITY
to vote upon any other matters / / to vote upon any other matters / /
Shareholders approving the proposals set forth herein should mark the
"For" box herein; those opposing such action should register their position
by marking the appropriate "Against" or "Abstain" box herein or by not
returning this Proxy Form. SIGNED BUT UNMARKED PROXY FORMS
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WILL BE DEEMED TO AUTHORIZE A VOTE "FOR" THE PROPOSALS SET FORTH
HEREIN.
The invalidity, illegality or unenforceability of any particular
provision of this Proxy Form shall be construed in all respects as if such
invalid, illegal or unenforceable provision were omitted without affecting
the validity, legality or enforceability of the remaining provisions hereof.
YOUR VOTE IS IMPORTANT. IF YOU ARE UNABLE TO ATTEND THE
SPECIAL MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN
THIS PROXY FORM, USING THE ENCLOSED ENVELOPE.
PLEASE SEE REVERSE SIDE FOR SIGNATURE
101
<PAGE>
PLEASE SIGN BELOW EXACTLY AS NAME APPEARS ON THIS PROXY FORM. If shares
are registered in more than one name, the signatures of all such persons are
required. A corporation should sign in its full corporate name by a duly
authorized officer, stating his title. Trustees, guardians, executors and
administrators should sign in their official capacity, giving their full
title as such. If a partnership, please sign in the partnership name by
authorized persons.
The undersigned acknowledges receipt of the Notice of said Special
Meeting and the Proxy Statement dated October 28, 1999 by signing this Proxy.
- - - -
----------------------------------------
(Number of Shares)
(Paste mailing label from
Transfer Agent here) ----------------------------------------
(Signature of Shareholder)
- - - -
Dated: __________________, 1999 ----------------------------------------
(Additional Signatures, if held jointly)
----------------------------------------
(Title or Authority, if applicable)
102
