Exhibit 10.5
SHAREHOLDERS' AGREEMENT
This Shareholders' Agreement (the "Agreement") is made and entered
into this 27th day of August, 1999, by and among MIDDLE BAY OIL COMPANY,
INC., an Alabama corporation (the "Company") and the undersigned shareholders
of the Company (the "Shareholders")
RECITALS
WHEREAS, as of the date hereof, there are 13,379,153 issued and
outstanding shares of the Company's common stock, $.02 par value (the "Common
Stock");
WHEREAS, as of the date hereof, the Shareholders collectively own
10,804,355 shares or 80.76% of the issued and outstanding shares of Common
Stock, as follows:
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SHAREHOLDER SHARES PERCENTAGE
------------------------------------- -------------------------------- ---------------------------------------------
3TEC Energy Corporation 4,755,556 35.55%
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Xxxxxx-Xxxxxxx Oil Company 3,333,334 24.91%
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X.X. Xxxx, III 1,187,556 8.88%
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Weskids, L.P. 843,687 6.31%
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Xxxxx X. Xxxxxxxxx 684,222 5.11%
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WHEREAS, Xxxxxx-Xxxxxxx Oil Company, X.X. Xxxx, III, Weskids, L.P.
and Xxxxx X. Xxxxxxxxx are referred to herein collectively as the "Major
Shareholders";
WHEREAS, the Shareholders desire to promote their mutual interests
and interests of the Company by imposing certain restrictions and obligations
upon themselves, the Company and the shares of Common Stock; and
WHEREAS, the execution and delivery of this Shareholders' Agreement
is a condition to the closing of that certain Securities Purchase Agreement
between the Company and 3TEC Energy Corporation dated July 1, 1999 (the
"Purchase Agreement").
NOW, THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. NOMINATION AND ELECTION OF DIRECTORS. Each of the Shareholders
agrees, so long as it owns such shares, to vote (including the taking of any
action by written consent, as necessary or appropriate) and cause its
Affiliates to vote all shares of Common Stock (and any and all shares of any
other voting class of capital stock of the Company presently or at any future
time owned by the Shareholders) which it is entitled to vote (or control the
voting directly or indirectly) to ensure that the following shall occur:
(a) The Company shall at all times be managed by or under the
direction of the Board of Directors of the Company (the
"Board"), which shall consist of five (5) members.
(b) The Shareholders shall use their best efforts (including
voting the shares owned by them and their
affiliates, in calling special meetings of the Shareholders and executing and
delivering written consents), to elect five (5) members of the Board,
consisting of the following:
(i) Three (3) members designated by 3TEC Energy Corporation
("3TEC"); and
(ii) Two (2) members designated by the Major Shareholders.
The party designating a director may remove such director, with or without
cause, and designate his or her successor. If the director designated by a
party resigns, dies, becomes incapacitated or is otherwise unable to serve,
the party designating such director may designate his or her successor. All
Shareholders shall vote all shares held by them in favor of the election or
removal of such persons so designated. Action taken by either 3TEC or the
Major Shareholders in designating or removing directors shall be in writing
executed by either 3TEC or the Major Shareholders, as the case may be, and
promptly delivered to the other Shareholders and the Company.
2. ADVISORY MEMBER. As long as the Board of Directors of the Company
shall consist of five (5) members, the Major Shareholders may request that a
non-voting advisory board member be appointed. Upon such request, the Major
Shareholders shall, subject to 3TEC's approval, select the person whom it
desires to have serve as such non-voting advisory board member. Such
non-voting advisory board member shall be permitted but not required to
attend meetings of the Board of Directors.
3. VOTE IN FAVOR OF CHANGE OF STATE OF INCORPORATION. Each of the
Shareholders agrees, so long as it owns such shares, to vote (including the
taking of any action by written consent, as necessary or appropriate) and
cause its Affiliates to vote all shares of Common Stock (and any and all
shares of any other voting class of capital stock of the Company presently or
at any future time owned by the Shareholders) which it is entitled to vote
(or control the voting directly or indirectly) to ensure that, at the request
of 3TEC, to vote their shares of Common Stock in favor of changing the state
of incorporation of the Company from Alabama to another jurisdiction
recommended by the Board of Directors.
4. TERMINATION OF 3TEC'S RIGHT TO ELECT DIRECTORS. 3TEC's right to
designate the directors as provided in paragraph 1(b)(i) above shall
terminate as follows:
(a) if 3TEC's ownership of Common Stock is below 15% of the
Adjusted Outstanding Common Stock, 3TEC shall be entitled to
designate only two (2) members to the Board;
(b) if 3TEC's ownership of Common Stock is below 7 1/2% of the
Adjusted Outstanding Common Stock, 3TEC shall be entitled to
designate only one (1) member to the Board; and
(c) if 3TEC's ownership of Common Stock is below 5% of the
Adjusted Outstanding Common Stock, 3TEC's right to designate
a member to the Board shall terminate.
For purposes hereof, "Adjusted Outstanding Common Stock" shall mean the
number of shares of Common Stock outstanding less any shares of Common Stock
purchased by Xxxxxx-Xxxxxxx Oil Company pursuant to its respective Purchase
Agreement.
5. TERMINATION OF MAJOR SHAREHOLDERS' RIGHT TO ELECT DIRECTORS. The
Major Shareholders' right to designate the directors as provided in paragraph
1(b)(ii) above shall terminate as follows:
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(a) if the Major Shareholders' ownership of Common Stock is below
7 1/2% of the outstanding Common Stock, the Major Shareholders
shall be entitled to designate only one (1) member to the
Board;
(b) if the Major Shareholders' ownership of Common Stock is below
5% of the outstanding Common Stock, the Major Shareholders'
right to designate a member to the Board shall terminate.
6. REPLACEMENT DIRECTOR. If either 3TEC or the Major Shareholders is
no longer eligible to designate a director or directors to the Board, the
Board shall (i) decrease the size of the Board, (i) leave the vacated seat
empty, or (iii) appoint a replacement to serve until the next of election of
directors by the shareholders of the Company through its normal nominating
procedure, and select a nominee to fill the open seat for election by
shareholders at the next annual meeting.
7. RESTRICTIVE LEGEND. Each certificate evidencing Common Stock
subject hereto shall bear a legend as follows:
"The shares of stock represented by this certificate are,
until sale, subject to a Shareholders' Agreement, dated as of
August 27, 1999, a copy of which is on file in the office of
the Company."
Any certificate evidencing Common Stock subject to this Agreement which is
hereafter issued shall bear the same legend.
8. TERMINATION OF AGREEMENT. This Agreement shall continue until,
and shall terminate immediately upon (a) execution of a written agreement of
termination by the Shareholders and the Company, (b) the adjudication of the
Company as a bankrupt or insolvent by a court of competent jurisdiction, or
(c) each of 3TEC and the Major Stockholders own less than five percent of the
issued and outstanding shares of Common Stock.
9. SHAREHOLDERS' REPRESENTATION AND WARRANTIES. Each Shareholder,
severally, as to itself only, represents and warrants to the Company that (a)
the Shareholder has duly authorized, executed and delivered this Agreement
and this Agreement constitutes a valid and binding agreement, enforceable in
accordance with its terms and neither the execution and delivery of this
Agreement nor the consummation by the Shareholder of the transactions
contemplated hereby will constitute a violation of, a default under, or
conflict with any contract, commitment, agreement, understanding, arrangement
or restriction of any kind to which the Shareholder is a party or by which
the Shareholder is a party or by which the Shareholder is bound; (b)
consummation by the Shareholder of the transactions contemplated hereby will
not violate, or require any consent, approval, or notice under, any provision
of law other than filing on Form 13D that may be required under the
Securities Exchange Act of 1934, as amended; (c) except to the extent
contemplated herein each Shareholder's shares of Common Stock and the
certificates representing same are now and at all times during the term of
this Agreement will be held by the Shareholder, or by a nominee or custodian
for the benefit of the Shareholder, free and clear of all liens, claims,
security interests, proxies, voting trusts or agreement or any other
encumbrances whatsoever ("Encumbrances") with respect to the ownership or
voting of such shares of Common Stock or otherwise, other than Encumbrances
created by or arising pursuant to this Agreement; (d) there are no
outstanding options, warrants or rights to purchase or acquire, or proxies,
powers-of-attorney, voting agreements, trust agreements or other agreements
relating to, such shares of Common Stock other than this Agreement and the
Registration Rights Agreement of even date as defined in the Purchase
Agreement; (e) the shares of Stock listed in the second recital paragraph
hereof constitutes all of the Common Stock of each Shareholder owned
beneficially or of record by such Shareholder on the date hereof; and (f) the
Shareholder has the present power and right to vote all of the shares of
Common Stock as contemplated herein.
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10. NEGATIVE COVENANTS OF EACH SHAREHOLDER. Except to the extent
contemplated herein or in the Purchase Agreements, each Shareholder hereby
covenants and agrees that such Shareholder will not, and will not agree to,
directly or indirectly, except pursuant to an effective registration
statement or through "brokers" transactions as contemplated by subparagraphs
(f) and (g) and subject to the limitations on amount provided by subparagraph
(e) of Rule 144 under the Securities Act, (a) sell, transfer, assign, cause
to be redeemed or otherwise dispose of any of its shares of Stock or enter
into any contract, option or other agreement or understanding with respect to
the sale, transfer, assignment, redemption or other disposition of its shares
of Stock; (b) grant any proxy, power-of-attorney or other authorization or
interest in or with respect to its shares of Stock pertaining or relating to
the Purchase Agreements or any of the transactions contemplated thereby; or
(c) deposit such Stock into a voting trust or enter into a voting agreement
or arrangement with respect to such Stock, unless and until, in the case of
(a), (b) or (c) above, the Shareholder shall have taken all actions
(including, without limitation, the endorsement of a legend on the
certificates evidencing such Stock) reasonably necessary to ensure that such
Stock shall at all times be subject to all the rights, powers and privileges
granted or conferred, and subject to all the restrictions, covenants and
limitations imposed, by this Agreement and shall have caused, as a condition
to any sale, transfer, pledge or other disposition of any shares of Stock,
any transferee of any of the Stock, unless it is already a signatory to this
Agreement, shall become a signatory to and be bound by the terms of this
Agreement.
11. CERTAIN DEFINED TERMS. Unless otherwise expressly provided
herein, all capitalized terms used herein without definition shall have the
meanings assigned to them in the Purchase Agreement.
12. SUCCESSORS. This Agreement shall be binding upon and shall
operate for the benefit of the Company, its shareholders, and their
respective successors, assigns, executors, administrators and heirs, and it
shall be binding upon any entity to whom any Stock is transferred in accord
with or in violation of the provisions of this Agreement, and the executor or
administrator of such entity.
13. MODIFICATION. Notwithstanding anything to the contrary in this
Agreement or otherwise, no modification, amendment or waiver of any of the
provisions of this Agreement shall be effective unless in writing and signed
by all parties hereto. Each Shareholder covenants not to vote any shares of
Stock in favor of any amendment of the articles of incorporation or bylaws of
the Company, if such amendment would materially modify the terms or frustrate
the purpose of this Agreement or the Purchase Agreements, unless the vote on
such amendment is approved unanimously by the parties to this Agreement.
14. NON-WAIVER. The failure to enforce at any time any of the
provisions of this Agreement, or to require at any time performance by any
other party of any of the provisions hereof, shall in no way be constructed
to be a waiver of such provisions.
15. INVALID PROVISIONS. If any provision of this Agreement is held
to be illegal, invalid, or unenforceable under present or future laws
effective during the term thereof, such provision shall be fully severable,
this Agreement shall be construed and enforced as if such illegal, invalid,
or unenforceable provision had never comprised a part thereof, and the
remaining provisions thereof shall remain in full force and effect and shall
not be affected by the illegal, invalid, or unenforceable provision or by its
severance therefrom.
16. ENTIRE AGREEMENT. This Agreement contains the full understanding
of the parties hereto with respect to the subject matter hereof, and there
are no representations, warranties, agreements or understandings other than
expressly contained herein.
17. NOTICES. Any notice to be given by any party hereunder to any
other shall be in writing, mailed by
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certified or registered mail, return receipt requested, and shall be
addressed to all other parties at the addresses listed on the signature page
hereof. All such notices shall be deemed to be given three (3) days after the
date of mailing thereof.
18. SPECIFIC PERFORMANCE. Each of the Shareholders acknowledges and
agrees that the Company would be damaged irreparably in the event that any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the
Shareholders agrees that the Company shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in
any action instituted in any court having jurisdiction over the parties
hereto and the subject matter hereof, in addition to any other remedy to
which the Company may be entitled at law or in equity.
19. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF ALABAMA.
20. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
[Signature Page to Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on the day and year first above written.
COMPANY:
MIDDLE BAY OIL COMPANY, INC.
By: /s/ Xxxx X. Xxxxxxx
--------------------------------
Name: Xxxx X. Xxxxxxx
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Title: President
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Address for Notice:
Middle Bay Oil Company, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Fax: (000) 000-0000
3TEC ENERGY CORPORATION
By: /s/ Xxxxx X. Xxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxx
------------------------------
Title: President
-----------------------------
Address for Notice:
3TEC Energy Corporation
0000 X. Xxxxxxx Xxxxxxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Fax: (000) 000-0000
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XXXXXX-XXXXXXX OIL COMPANY
By: /s/ Xxxx X. Xxxxxxxxxxx
--------------------------------
Name: Xxxx X. Xxxxxxxxxxx
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Title: Acquisitions Coordinator
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Address for Notice:
Xxxxxx-Xxxxxxx Oil Company
0000 Xxxxx Xxxx
Xxxxx, XX 00000
Fax: (000) 000-0000
/s/ X.X. Xxxx, III
----------------------------------
X.X. Xxxx, III
Address for Notice:
X.X. Xxxx, III
0000 Xxxx Xxxxxxx
Xxxxxxx, Xxxxxx 00000
Fax: (000) 000-0000
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WESKIDS, L.P.
By: Weskids, Inc.
Its General Partner
By: /s/ Xxxxxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxxxxx X. Xxxxxxx
------------------------------------
Title: Vice President
-----------------------------------
Address for Notice:
Weskids, L.P.
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
/s/ Xxxxx X. Xxxxxxxxx
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XXXXX X. XXXXXXXXX
Address for Notice:
Xxxxx X. Xxxxxxxxx
0000 Xxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Fax: (000) 000-0000
