Exhibit 10.3
SECURITIES PURCHASE AGREEMENT
BETWEEN
SHOEINVEST II, LP
AND
MIDDLE BAY OIL COMPANY, INC.
AUGUST 27, 1999
TABLE OF CONTENTS
ARTICLE I TERMS DEFINED
Section 1.1 Definitions.....................................................................................1
Section 1.2 Accounting Terms and Determinations............................................................11
Section 1.3 Gender and Number..............................................................................11
Section 1.4 References to Agreement........................................................................11
ARTICLE II PURCHASE AND SALE OF SECURITIES
Section 2.1 Purchase and Sale..............................................................................11
Section 2.2 Closing........................................................................................11
Section 2.3 Delivery.......................................................................................11
Section 2.4 Payment........................................................................................12
ARTICLE III RESERVATION AND ISSUANCE OF CONVERSION SHARES..................................................12
ARTICLE IV CERTAIN TERMS APPLICABLE TO WARRANTS
Section 4.1 Exercise of Warrants...........................................................................12
Section 4.2 Adjustment of Number of Warrant Shares Purchasable.............................................14
Section 4.3 Notices to Warrant Holders.....................................................................16
Section 4.4 Reservation and Issuance of Warrant Shares.....................................................17
ARTICLE V TRANSFER OF SECURITIES
Section 5.1 Restrictions on Transfer.......................................................................17
Section 5.2 Registration, Transfer and Exchange of Warrants................................................18
Section 5.3 Mutilated or Missing Warrant Certificates......................................................18
Section 5.4 Registration, Transfer and Exchange of Notes...................................................19
Section 5.5 Mutilated or Missing Notes.....................................................................19
ARTICLE VI CONDITIONS
Section 6.1 Conditions Precedent to Closing................................................................19
Section 6.2 Conditions Precedent to Closing................................................................22
ARTICLE VII REPRESENTATIONS AND WARRANTIES
Section 7.1 Corporate Existence and Power..................................................................23
Section 7.2 Corporate and Governmental Authorization; Contravention........................................23
Section 7.3 Binding Effect.................................................................................24
Section 7.4 Capitalization.................................................................................24
Section 7.5 Issuance of Securities.........................................................................24
Section 7.6 Financial Statements...........................................................................24
Section 7.7 Material Agreements............................................................................25
Section 7.8 Compass Debt Documents.........................................................................25
Section 7.9 Investments ...................................................................................25
Section 7.10 Outstanding Debt...............................................................................25
Section 7.11 Transactions with Affiliates...................................................................25
Section 7.12 Employment Matters.............................................................................25
Section 7.13 Litigation.....................................................................................25
Section 7.14 ERISA..........................................................................................26
Section 7.15 Taxes and Filing of Tax Returns................................................................27
Section 7.16 Title to Assets................................................................................27
Section 7.17 Licenses, Permits, Etc.........................................................................27
Section 7.18 Proprietary Rights.............................................................................27
Section 7.19 Compliance with Law............................................................................27
Section 7.20 Environmental Matters..........................................................................27
Section 7.21 Intentionally Left Blank.......................................................................29
Section 7.22 Fiscal Year....................................................................................29
Section 7.23 No Default.....................................................................................29
Section 7.24 Insurance......................................................................................29
Section 7.25 Government Regulation..........................................................................29
Section 7.26 Securities Law.................................................................................29
Section 7.27 Brokers and Finders............................................................................29
Section 7.28 SEC Documents..................................................................................29
Section 7.29 Oil and Gas Operations.........................................................................30
Section 7.30 Financial and Commodity Hedging................................................................31
Section 7.31 Books and Records..............................................................................31
Section 7.32 Reserve Report.................................................................................31
Section 7.33 Nature of Company Assets.......................................................................31
Section 7.34 Full Disclosure................................................................................32
Section 7.35 Year 2000 Compliance...........................................................................32
ARTICLE VIII REPRESENTATIONS AND WARRANTIES OF Shoeinvest
Section 8.1 Corporate Existence and Power..................................................................32
Section 8.2 Corporate and Governmental Authorization; Contravention........................................32
Section 8.3 Binding Effect.................................................................................32
Section 8.4 Brokers and Finders............................................................................33
Section 8.5 Taxes and Filing of Returns....................................................................33
Section 8.6 Intentionally Omitted..........................................................................33
ARTICLE IX COVENANTS
Section 9.1 Maintenance of Insurance.......................................................................33
Section 9.2 Payment of Taxes and Claims....................................................................33
Section 9.3 Compliance with Laws and Documents.............................................................34
Section 9.4 Operation of Properties and Equipment..........................................................34
Section 9.5 Additional Documents...........................................................................34
Section 9.6 Maintenance of Books and Records...............................................................34
Section 9.7 Environmental Matters..........................................................................34
Section 9.8 Access to Information..........................................................................34
Section 9.9 Conduct of Business of the Company.............................................................35
Section 9.10 Intentionally Omitted..........................................................................36
Section 9.11 Intentionally Omitted..........................................................................36
ARTICLE X DEFAULTS; TERMINATION
Section 10.1 Events of Default..............................................................................36
Section 10.2 Termination....................................................................................37
Section 10.3 Effect of Termination..........................................................................37
ARTICLE XI MISCELLANEOUS
Section 11.1 Notices........................................................................................38
Section 11.2 No Waivers.....................................................................................38
Section 11.3 Expenses; Indemnification......................................................................38
Section 11.4 Amendments and Waivers; Sale of Interest.......................................................39
Section 11.5 Survival.......................................................................................39
Section 11.6 Limitation on Interest.........................................................................40
Section 11.7 Invalid Provisions.............................................................................40
Section 11.8 Successors and Assigns.........................................................................40
Section 11.9 Governing Law..................................................................................40
Section 11.10 Counterparts...................................................................................40
Section 11.11 No Third Party Beneficiaries...................................................................40
Section 11.12 Final Agreement................................................................................41
Section 11.13 Submission to Jurisdiction; Waiver of Service of Venue.........................................41
Section 11.14 Waiver of Right to Trial by Jury ............................................................41
Section 11.15 Public Announcements...........................................................................41
EXHIBITS
Exhibit A Senior Subordinate Promissory Note
Exhibit B Registration Rights Agreement
Exhibit C Intentionally Omitted
Exhibit D Form of Warrant Certificate
Exhibit E Employment Agreement
Exhibit F Intentionally Omitted
Exhibit G Purchase Price to be Transferred at Closing
Exhibit H Identification of Other Securities Purchase Agreements
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT is entered into effective this
___ day of August, 1999, by and between Shoeinvest II, LP, a New Jersey
limited partnership ("SHOEINVEST") and Middle Bay Oil Company, Inc., an
Alabama corporation (the "COMPANY").
W I T N E S S E T H:
WHEREAS, the Company has authorized and desires to issue and sell to
Shoeinvest (a) certain shares of the Company's Common Stock, par value $0.02
per share, (b) a Note, and (c) certain Warrants;
WHEREAS, Shoeinvest desires to purchase such securities from the
Company on the terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
TERMS DEFINED
SECTION 1.1. DEFINITIONS. The following terms, as used herein,
have the following meanings:
"Affiliate" means, as to any Person, any Subsidiary of such Person,
or any other Person which, directly or indirectly, controls, is controlled
by, or is under common control with, such Person and, with respect to the
Company, any executive officer of any Subsidiary or any Person who holds five
percent (5%) or more of the voting stock of the Company. For the purposes of
this definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or partnership interests,
or by contract or otherwise. Shoeinvest shall not be considered an Affiliate
of the Company for purposes of this Agreement or the other Transaction
Documents.
"Agreement" means this Securities Purchase Agreement.
"Authorized Officer" means, as to any Person, its Chairman, its
Chief Executive Officer, its President, its Chief Operating Officer, its
Financial Officer and any Vice President.
"Business Day" means any day except a Saturday, Sunday or other day
on which national banks in Dallas, Texas are authorized by law to close.
"Capital Lease" means, for any Person, as of any date, any lease of
property, real or personal, which
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would be capitalized on a balance sheet of the lessee of such lease prepared
as of such date in accordance with GAAP.
"Change of Control" means the occurrence of any of the following:
(a) the sale, lease, transfer or other disposition, in one transaction or a
series of related transactions, of more than fifty percent (50%) of the value
of the Oil and Gas Interests as set forth in the most current reserve report
of the Company and its Subsidiaries (on the date hereof, the Reserve Report
is the most recent reserve report), or (b) any sale, transfer, merger,
consolidation, disposition or other transaction which results in any Person
or Persons individually or together with their Affiliates owning more than
fifty percent (50%) of the Common Stock on a Fully Diluted Basis.
"Charter Documents" means, with respect to any Person, its
certificate of incorporation, articles of incorporation, bylaws, partnership
agreement, regulations, operating agreement and all other comparable charter
documents.
"Closing" has the meaning given such term in SECTION 2.2 hereof.
"Closing Date" means the tenth Business Day after the date of the
Company's Shareholders' meeting whereby the transactions contemplated hereby
are approved.
"Closing Transactions" means the transactions which will occur on
the Closing Date pursuant to the Transaction Documents.
"COBRA" has the meaning given such term in SECTION 7.14 hereof.
"Commission" means the Securities and Exchange Commission or any
entity succeeding to any or all of its functions under the Securities Act or
the Exchange Act.
"Common Stock" means the Company's common stock, par value $0.02 per
share.
"Common Stock Shares" means the 44,444 shares of Common Stock to be
purchased by Shoeinvest pursuant to this Agreement.
"Company" has the meaning given such term in the preamble hereto.
"Company Financial Statements" means the audited and unaudited
consolidated financial statements of the Company and its Subsidiaries
(including the related notes) included (or incorporated by reference) in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1998,
and the Company's Quarterly Report on Form 10-QSB for the quarterly period
ended March 31, 1999, filed with the Commission.
"Compass Senior Credit Agreement" means that certain Credit
Agreement dated March 27, 1998, as amended, by and among Middle Bay Oil
Company, Inc. and Enex Resources Corporation, as Borrower,
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and Compass Bank, as Agent and a Lender, Bank of Oklahoma, National
Association, as a Lender and the other lenders signatory thereto.
"Compass Senior Debt" means all Debt of the Company outstanding
under the Compass Senior Credit Agreement, including all renewals and
extensions thereof.
"Compass Senior Debt Documents" means the Compass Senior Debt
Agreement and all promissory notes, security agreements, mortgages, deeds of
trust, assignments, guarantees and other documents, instruments and
agreements executed and delivered pursuant to the Compass Senior Credit
Agreement evidencing, securing, guaranteeing or otherwise pertaining to the
Compass Senior Debt and other obligations arising under the Compass Senior
Credit Agreement, as the foregoing may be amended, renewed, extended,
supplemented, increased or otherwise modified from time to time to the extent
permitted hereunder.
"Conversion Shares" means shares of Common Stock issued upon
conversion of the Note.
"Debt" means, for any Person, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(c) all indebtedness of such Person on which interest charges are customarily
paid or accrued, (d) all Guarantees by such Person, (e) the unfunded or
unreimbursed portion of all letters of credit issued for the account of such
Person, (f) the present value of all obligations in respect of Capital Leases
of such Person, (g) any obligation of such Person representing the deferred
purchase price of property or services purchased by such Person other than
trade payables incurred in the ordinary course of business and which are not
more than ninety (90) days past invoice date, (h) any indebtedness, liability
or obligation secured by a Lien on the assets of such Person whether or not
such indebtedness, liability or obligation is otherwise non-recourse to such
Person, (i) liabilities arising under future contracts, forward contracts,
swap, cap or collar contracts, option contracts, hedging contracts, other
derivative contracts and similar agreements, (j) liabilities with respect to
payments received in consideration of oil, gas or other minerals yet to be
acquired or produced at the time of payment (including obligations under
"take-or-pay" contracts to deliver gas in return for payments already
received and the undischarged balance of any production payment created by
such Person or for the creation of which such Person directly or indirectly
received payment, and (k) all liability of such Person as a general partner
or joint venturer for obligations of the nature described in (a) through (k)
preceding.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Default Rate" means the Fixed Rate plus 3% per annum.
"Defensible Title" means such right, title and interest that is (a)
evidenced by an instrument or instruments filed of record in accordance with
the conveyance and recording laws of the applicable jurisdiction to the
extent necessary to prevail against competing claims of bona fide purchasers
for value without notice and (b) subject to Permitted Encumbrances, free and
clear of all Liens, claims, infringements, burdens or other defects.
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"Disclosure Schedule" means the disclosure schedule entitled Middle
Bay Disclosure Schedule separately provided by the Company to Shoeinvest on
or before the date hereof, and any documents listed on such disclosure
schedule and expressly incorporated therein by reference.
"Employment Agreement" means that certain employment agreement to be
executed at Closing by the Company and Xxxxx X. Xxxxxx in substantially the
form of Exhibit E.
"Environmental Complaint" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, proceeding,
judgment, letter or other communication from any federal, state, municipal or
other Governmental Authority or any other party involving a Hazardous
Discharge, Environmental Contamination or any violation of any order, permit
or Environmental Law and Laws.
"Environmental Contamination" means the presence of any Hazardous
Substances, which presence results from a Hazardous Discharge.
"Environmental Law and Laws" means any law, common law, ordinance,
regulation or policy of any Governmental Authority, as well as any order,
decree, permit, judgment or injunction issued, promulgated, approved, or
entered thereunder, relating to the environment, health and safety, Hazardous
Substances (including, without limitation, the use, handling, transportation,
production, disposal, discharge or storage thereof), industrial hygiene, the
environmental conditions on, under, or about any real property owned, leased
or operated at any time by the Company or any of its Subsidiaries or any real
property owned, leased or operated by any other party, including, without
limitation, soil, groundwater, and indoor and ambient air conditions or the
reporting or remediation of Environmental Contamination. Environmental Law
and Laws include, without limitation, the Clean Air Act, as amended, the
Federal Water Pollution Control Act, as amended, the Rivers and Harbors Act
of 1899, as amended, the Safe Drinking Water Act, as amended, the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), as amended, the Superfund Amendments and Reauthorization Act of
1986 ("XXXX"), as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Hazardous and Solid Waste Amendments Act of 1984,
as amended, the Toxic Substances Control Act, as amended, the Occupational
Safety and Health Act ("OSHA"), as amended, the Hazardous Materials
Transportation Act, as amended, and any other federal, state and local law
whose purpose is to conserve or protect health, the environment, wildlife or
natural resource.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any regulation promulgated thereunder.
"ERISA Affiliate" means the Company or any of its Subsidiaries and
any other corporation or trade or business under common control with the
Company or any of its Subsidiaries or treated as a single employer with the
Company or any of its Subsidiaries as determined under sections 414(b), (c),
(m) or (o) of the IRC.
"Event of Default" has the meaning set forth in SECTION 10.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute.
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"Exhibit" refers to an exhibit attached to this Agreement and
incorporated herein by reference, unless specifically provided otherwise.
"Financial Officer" means, as to any Person, its Chief Financial
Officer, or if no Person serves in such capacity, the highest ranking
executive officer of such Person with responsibility for accounting,
financial reporting, financial compliance and similar functions.
"Fixed Rate" means nine percent (9.0%) per annum.
"Fully Diluted Basis" means, with reference to outstanding Common
Stock, the shares of Common Stock that would be outstanding assuming that all
outstanding options, warrants and other rights to acquire Common Stock had
been exercised (regardless of whether such rights are then exercisable) and
all securities convertible into Common Stock had then been converted
(regardless of whether such securities are then convertible) and had been
issued, all in accordance with GAAP. Any reference in this Agreement or any
of the other Transaction Documents to "holder(s) of outstanding Common Stock
on a Fully Diluted Basis" or words of similar import shall be deemed to
include holder(s) of outstanding options, warrants or similar rights to
acquire Common Stock or securities convertible into Common Stock.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements
of the Financial Accounting Standards Board and/or their successors which are
applicable in the circumstances as of the date in question; and the
requirement that such principles be applied on a consistent basis means that
the accounting principles observed in a current period are comparable in all
material respects to those applied in a preceding period.
"Governmental Authority" means any national, state or county,
municipal government, domestic or foreign, any agency, board, bureau,
commission, court, department or other instrumentality of any such
government, or any arbitrator in any case that has jurisdiction over the
Company or its Subsidiaries or any of their respective properties or assets.
"Guaranty" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or
other obligation of any other Person and, without limiting the generality of
the foregoing, any obligation, direct or indirect, contingent or otherwise,
of such Person (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising by
virtue of partnership arrangements, by agreements to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions, by "comfort letter" or other similar
undertaking of support of otherwise), or (b) entered into for the purpose of
assuring in any other manner the obligee of such Debt or other obligation of
the payment thereof or to protect such obligee against loss in respect
thereof (in whole or in part); PROVIDED, that, the term "Guaranty" shall not
include endorsements for collection or deposit in the ordinary course of
business. For purposes of this Agreement, the amount of any Guaranty shall be
the maximum amount that the guarantor could be legally required to pay under
such Guaranty.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
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"Hazardous Discharge" means any releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping of a Hazardous Substance at, from, onto, under
or within any real property owned, leased or operated at any time by the
Company or any of its Subsidiaries or any real property owned, leased or
operated by any other Person.
"Hazardous Substance" means any pollutant, toxic substance,
hazardous waste, compound, element or chemical that is defined as hazardous,
toxic, noxious, dangerous or infectious pursuant to any Environmental Law and
Laws or which is otherwise regulated by any Environmental Law and Laws.
"Holder" with respect to any Security, shall mean the record or
beneficial owner of such Security.
"Hydrocarbons" means oil, condensate, gas, casinghead gas and other
liquid or gaseous hydrocarbons.
"Investment" in any Person means any investment, whether by means of
securities purchase (whether by direct purchase from such Person or from an
existing holder of securities of such Person), loan, advance, extension of
credit, capital contribution or otherwise, in or to such Person, the Guaranty
of any Debt or other obligation of such Person, or the subordination of any
claim against such Person to other Debt or other obligation of such Person;
PROVIDED, that, "Investments" shall not include advances made to employees of
such Person for reasonable travel, entertainment and similar expenses
incurred in the ordinary course of business.
"IRC" means the Internal Revenue Code of 1986, as amended from time
to time, and any regulation promulgated thereunder.
"Knowledge" means actual knowledge after reasonable investigation
consistent with the generally accepted business practices in the oil and gas
industry.
"Laws" means all applicable statutes, laws, ordinances, regulations,
orders, writs, injunctions, or decrees of any state, commonwealth, nation,
territory, possession, county, township, parish, municipality, or
Governmental Authority.
"Lien" means with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement or other
title retention agreement relating to such asset.
"Majority Noteholder" means a Noteholder or Noteholders holding more
than fifty percent (50%) of the aggregate principal balance of the Note.
"Majority Warrantholder" means a Warrant Holder or Warrant Holders
who hold more than fifty percent (50%) of the outstanding Warrant Shares.
6
"Major Shareholders" means Xxxxxx-Xxxxxxx Oil Company, X.X.
Xxxx, III, Weskids, L.P., and Xxxxx X. Xxxxxxxxx.
"Material Adverse Effect" means, with respect to a Person, a
material adverse effect on the business, financial condition, operations,
assets or prospects of such Person or any of its Subsidiaries, and shall also
mean, with respect to the Company or any of its Subsidiaries, a material
adverse effect on such Person's ability to pay and perform its obligations
under the Transaction Documents.
"Material Agreement" means any written or oral agreement, contract,
commitment, or understanding to which a Person is a party, by which such
Person is directly or indirectly bound, or to which any assets of such Person
may be subject (a) which is not cancelable by such Person upon notice of
sixty (60) days or less without liability for further payment other than
nominal penalty, (b) pursuant to which such Person acquires any material
portion of the raw materials, supplies or services used or consumed by such
Person in the operation of its business (unless such raw materials, supplies
or services are readily available to such Person from other sources on
comparable terms), or (c) pursuant to which such Person derives any material
part of its revenues.
"Maximum Lawful Rate" means the maximum rate (or, if the context so
permits or requires, an amount calculated at such rate) of interest which, at
the time in question would not cause the interest charged on the Note at such
time to exceed the maximum amount which Noteholders would be allowed to
contract for, charge, take, reserve, or receive under applicable Law after
taking into account, to the extent required by applicable Law, any and all
relevant payments or charges under the Transaction Documents.
"Noteholder" means any Person in whose name a Note is registered on
the Note Register.
"Note Redemption Date" means the date on which the entire balance of
the Note, including, without limitation, all accrued but unpaid interest
thereon and all fees payable by the Company or its Subsidiaries in connection
therewith, have been paid in full.
"Note Register" means a register maintained by the Company setting
forth the name and address of each Noteholder and the principal amount of the
Note held by such Noteholder.
"Notes" means the Company's Senior Subordinate Promissory Notes in
the aggregate principal amount of $100,000 to be issued and sold by the
Company to Shoeinvest pursuant to SECTION 2.1 hereof and any renewals,
extensions or replacements thereof, and "Note" means any of such Notes. The
Notes shall be substantially in the form of EXHIBIT A attached hereto.
"Obligations" means all present and future indebtedness, obligations
and liabilities, and all renewals and extensions thereof, or any part
thereof, of the Company, its Subsidiaries and any other Person arising
pursuant to the Transaction Documents, and all interest accrued thereon and
costs, expenses, and attorneys' fees incurred in the enforcement or
collection thereof, regardless of whether such indebtedness, obligations and
liabilities are direct, indirect, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several.
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"Oil and Gas Interest(s)" means (a) direct and indirect interests in
and rights with respect to oil, gas, mineral and related properties and
assets of any kind and nature, direct or indirect, including working, royalty
and overriding royalty interests, production payments, operating rights, net
profits interests, other non-working interests and non-operating interests;
(b) interests in and rights with respect to Hydrocarbons and other minerals
or revenues therefrom and contracts in connection therewith and claims and
rights thereto (including oil and gas leases, operating agreements,
unitization and pooling agreements and orders, division orders, transfer
orders, mineral deeds, royalty deeds, oil and gas sales, exchange and
processing contracts and agreements and, in each case, interests thereunder),
surface interests, fee interests, mineral servitudes, reversionary interests,
reservations and concessions; (c) easements, rights of way, licenses,
permits, leases, and other interests associated with, appurtenant to, or
necessary for the operation of any of the foregoing; and (d) interests in
equipment and machinery (including well equipment and machinery), oil and gas
production, gathering, transmission, compression, treating, processing and
storage facilities (including tanks, tank batteries, pipelines and gathering
systems), pumps, water plants, electric plants, gasoline and gas processing
plants, refineries and other tangible personal property and fixtures
associated with, appurtenant to, or necessary for the operation of any of the
foregoing.
"Ownership Interests" means the ownership interests of the Company
and its Subsidiaries in its assets, as set forth on SCHEDULE 1.1A of the
Disclosure Schedule.
"Other Notes" means the Company notes to be issued and sold by the
Company pursuant to provisions of the Other Securities Purchase Agreements.
"Other Securities Purchase Agreements" shall mean those securities
purchase agreements of even date herewith as listed on EXHIBIT H attached
hereto.
"Pension Plan" means any employee benefit plan or welfare benefit
plan within the meaning of section 3(3) of ERISA maintained by the Company,
any Subsidiary of the Company or any ERISA Affiliate that is or was
previously covered by Title IV of ERISA or subject to the minimum funding
standards under section 412 of the IRC, including a "multiemployer plan" as
such term is defined in section 3(37) of ERISA, under which the Company or
any Subsidiary of the Company has any current or future obligation or
liability and under which any present or former employee of the Company or
any Subsidiary of the Company, or such present or former employee's
dependents or beneficiaries, has any current or future right to benefits.
"Per Share Stock Price" means for the Common Stock on any day shall
be the last sale price, or, in case no such sale takes place on such day, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System, or such
other system then in use.
"Permitted Encumbrances" means (a) Liens for Taxes, assessments or
other governmental charges or levies if the same shall not at the particular
time in question be due and delinquent or (if foreclosure, distraint, sale or
other similar proceedings shall not have been commenced or if commenced,
shall have been stayed) are being contested in good faith by appropriate
proceedings and if the Company or its Subsidiaries shall have set aside on
their books such reserves (segregated to the extent required by sound
accounting
8
principles) as may be required by GAAP or otherwise determined by its board
of directors to be adequate with respect thereto; (b) Liens of carriers,
warehousemen, mechanics, laborers, materialmen, landlords, vendors, workmen
and operators arising by operation of law in the ordinary course of business
or by a written agreement existing as of the date hereof and necessary or
incident to the exploration, development, operation and maintenance of
Hydrocarbon properties and related facilities and assets for sums not yet due
or being contested in good faith by appropriate proceedings, if any the
Company or its Subsidiaries shall have set aside on its books such
reserves(segregated to the extent required by sound accounting practices) as
may be required by GAAP or otherwise determined by its board of directors to
be adequate with respect thereto; (c) Liens incurred in the ordinary course
of business in connection with worker's compensation, unemployment insurance
and social security legislation (other than ERISA); (d) Liens incurred in the
ordinary course of business to secure the performance of bids, tenders, trade
contracts, leases, statutory obligations, surety and appeal bonds,
performance and repayment bonds and other obligations of a like nature; (e)
Liens, easements, rights-of-way, restrictions, servitudes, permits,
conditions, covenants, exceptions, reservations and other similar
encumbrances incurred in the ordinary course of business or existing on
property and not (i) reducing the Company's net revenue interest in any Oil
and Gas Interests below that set forth on Schedule 1.1A , (ii) increasing the
Company's Working Interest in any Oil and Gas Interest above that set forth
on Schedule 1.1A or (iii) in the aggregate materially impairing the value of
the assets of the Company or its Subsidiaries or interfering with the
ordinary conduct of the business of the Company or its Subsidiaries or rights
to any of their assets; (f) Liens created or arising by operation of law to
secure a party's obligations as a purchaser of oil and gas; (g) all rights to
consent by, required notices to, filings with, or other actions by
Governmental Authorities to the extent customarily obtained subsequent to
Closing; (h) farmout, carried working interest, joint operating, unitization,
royalty, overriding royalty, sales and similar arrangements relating to the
exploration, development of, or production from, Hydrocarbon properties
entered into in the ordinary course of business; (i) preferential rights to
purchase and Third Party Consents (to the extent not triggered by the
consummation of the transactions contemplated herein); and (j) Liens arising
under or created pursuant to the Compass Senior Debt Documents.
"Permitted Senior Debt" means the Compass Senior Debt or other debt
or credit facility of the Company which is intended to replace the Compass
Senior Debt.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof
and shall also mean the Company.
"Pre-Distribution Price" has the meaning given such term in
SECTION 4.2(c).
"Purchase Price" has the meaning given such term in SECTION 2.1
"Redemption Date" means the date on which the entire balance of the
Note, including, without limitation, all accrued but unpaid interest thereon
and all fees payable by the Company or its Subsidiaries in connection
therewith, have been paid in full.
"Registration Rights Agreement" means a Registration Rights
Agreement to be executed by the
9
Company, 3TEC and Shoeinvest at Closing, in the form attached hereto as
Exhibit B.
"Registration Statement" has the meaning giving such term in SECTION
5.1.
"Reserve Engineer" shall have the meaning set forth in SECTION 7.32.
"Reserve Report" shall have the meaning set forth in SECTION 7.32.
"SEC Documents" shall have the meaning set forth in SECTION 7.28.
"Schedule" means a "schedule" attached to this Agreement and
incorporated herein by reference, unless specifically indicated otherwise.
"Section" refers to a "section" or "subsection" of this Agreement
unless specifically indicated otherwise.
"Securities" means the Notes, the Common Stock Shares and the
Warrants to be issued and sold to Shoeinvest and any Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor federal statute.
"Senior Lender" means Compass Bank, Bank of Oklahoma, National
Association and the other lenders who executed the Compass Senior Credit
Agreement.
"Series B Convertible Preferred Shares" shall mean those shares of
Series B Convertible Preferred Stock of the Company as set forth on SCHEDULE
1.1B of the Disclosure Schedule.
"Series C Convertible Preferred Shares" shall mean those shares of
Series C Convertible Preferred Stock of the Company as set forth on SCHEDULE
1.1C of the Disclosure Schedule.
"Shareholders Agreement" means a Shareholders Agreement to be
entered into by and among the Company and the Major Shareholders of the
Company at Closing.
"Subsidiary" means, for any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other Persons performing
similar functions (including that of a general partner) are at the time
directly or indirectly owned, collectively, by such Person and any
Subsidiaries of such Person. The term Subsidiary shall include Subsidiaries
of Subsidiaries (and so on).
"Taxes" means all taxes, assessments, filing or other fees, levies,
imposts, duties, deductions, withholdings, stamp taxes, interest equalization
taxes, capital transaction taxes, foreign exchange taxes or other charges of
any nature whatsoever, from time to time or at any time imposed by law or any
federal, state or local governmental agency. "Tax" means any one of the
foregoing.
10
"Third Party Consents" means the consent or approval of any Person
other than the Company, Shoeinvest or any Governmental Authority.
"3TEC" shall mean 3TEC Energy Corporation, a Delaware corporation.
"3TEC Note" shall mean that certain Senior Subordinate Promissory
Note in the aggregate principal amount of $10,700,000 to be issued and sold
by the Company to 3TEC.
"Transaction Documents" means this Agreement, the Notes, the Warrant
Certificates, the Registration Rights Agreement, the Shareholders Agreement,
the Company's Charter Documents and all other agreements, certificates,
documents or instruments now or at any time hereafter delivered in connection
with this Agreement, as the foregoing may be renewed, extended, modified,
amended or restated from time to time.
"Warrant Certificate" means the Warrant Certificates to be issued by
the Company evidencing Warrants issued hereunder which shall be in the form
of EXHIBIT D attached hereto.
"Warrant Exercise Price" means $1.00 per share (subject to
adjustment as provided in SECTION 4.2).
"Warrant Expiration Date" means 5:00 p.m., Dallas, Texas time,
five (5) years following the Closing Date.
"Warrant Holder" means any Person (i) in whose name any Warrant is
registered on the Warrant Register, or (ii) in whose name any Warrant Shares
are registered on the books and records of the Company.
"Warrant Register" means a register maintained by the Company
setting forth the name and address of each Warrant Holder, the number of
Warrants held by such Warrant Holder and the certificate number of each
Warrant Certificate held by such Warrant Holder.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
"Warrants" means the Common Stock Purchase Warrants to be issued by
the Company to Shoeinvest pursuant to SECTION 2.1 of this Agreement, each of
which shall entitle the holder thereof to purchase one (1) share of Common
Stock at the Warrant Exercise Price (subject to adjustment as provided in
SECTION 4.2).
"Working Interests" means the Company's or its Subsidiaries' share
of all of the costs, expenses, burdens, and obligations of any type or nature
attributable to the Company's or its Subsidiaries' interests in its oil and
gas properties or any well thereon.
SECTION 1.2. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared in accordance
with GAAP as in effect from time to time, applied on a basis consistent with
the most recent annual audited, consolidated financial statements of the
Company delivered to Shoeinvest prior to the date hereof.
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SECTION 1.3. GENDER AND NUMBER. Words of any gender used in this
Agreement shall be held and construed to include any other gender and words
in the singular number shall be held to include the plural, and vice versa,
unless the context requires otherwise.
SECTION 1.4. REFERENCES TO AGREEMENT. Use of the words "herein",
"hereof", "hereinabove", and the like are and shall be construed as
references to this Agreement.
ARTICLE II
PURCHASE AND SALE OF SECURITIES
SECTION 2.1. PURCHASE AND SALE. Subject to the satisfaction of the
terms and conditions set forth herein and in reliance upon the
representations and warranties of the parties set forth herein and in the
other Transaction Documents (a) Shoeinvest agrees to purchase from the
Company and the Company agrees to issue and sell to Shoeinvest, 44,444 shares
of Common Stock and 33,644 Warrants for an aggregate purchase price of
$100,000 (the "COMMON STOCK SHARES PURCHASE PRICE"), and (b) Shoeinvest
agrees to purchase from the Company and the Company agrees to issue and sell
to Shoeinvest the Note for the purchase price of $100,000 (the "NOTE PURCHASE
PRICE," and together with the Common Stock Shares Purchase Price, the
"PURCHASE PRICE").
SECTION 2.2. CLOSING. Closing of the purchase and sale of the
Securities (the "CLOSING") shall take place at the offices of Xxxxxxxx &
Xxxxxx, P.C., Houston, Texas at 10:00 a.m. on the Closing Date, or at
such other time, date and place as may be agreed upon in writing by the
Company and Shoeinvest.
SECTION 2.3. DELIVERY. At the Closing, the Company shall deliver to
Shoeinvest, against payment therefor, certificates evidencing the Common
Stock Shares, the Note and the Warrant Certificate purchased by Shoeinvest
hereunder, in each case duly issued and in form sufficient to vest title
thereto fully in Shoeinvest, free and clear of all Liens, claims and
encumbrances.
SECTION 2.4. PAYMENT. At the Closing, Shoeinvest shall pay the
Purchase Price to the Company by wire transfer of immediately available funds.
ARTICLE III
RESERVATION AND ISSUANCE OF CONVERSION SHARES
The Company will at all times have authorized, and reserve and keep
available, free from preemptive rights, for the purpose of enabling it to
satisfy any obligation to issue Conversion Shares upon the Noteholder's
exercise of its conversion rights under the Note, the number of shares of
Common Stock deliverable upon such conversion rights. The Company covenants
that all Conversion Shares issued by it will, upon issuance in accordance
with the terms of this Agreement, be fully paid and nonassessable and free
from all Taxes with respect to the issuance thereof and free from all Liens
other than Liens arising by,
12
through or under the Noteholder to whom such Conversion Shares were issued.
ARTICLE IV
CERTAIN TERMS APPLICABLE TO WARRANTS
SECTION 4.1. EXERCISE OF WARRANTS.
(a) One-half of the Warrants may be exercised in whole or in part at
any time until the Warrant Expiration Date at which time the Warrants shall
expire and shall thereafter no longer be exercisable.
(b) The other half of the Warrants (the "Restricted Warrants") may
be exercised, in whole or in part, until the Warrant Expiration Date, as
follows:
(i) up to 20% of the Restricted Warrants may be exercised
during the one (1) year period commencing on the Closing
Date;
(ii) up to 40% of the Restricted Warrants (inclusive of any prior
exercise under this subsection (b)) may be exercised during
the one (1) year period commencing twelve (12) months after
the Closing Date;
(iii) up to 60% of the Restricted Warrants (inclusive of any prior
exercise under this subsection (b)) may be exercised during
the one (1) year period commencing twenty-four (24) months
after the Closing Date;
(iv) up to 80% of the Restricted Warrants (inclusive of any prior
exercise under this subsection (b)) may be exercised during
the one (1) year period commencing thirty-six (36) months
after the Closing Date; and
(v) up to 100% of the Restricted Warrants (inclusive of any prior
exercise under this subsection (b)) may be exercised during
the one (1) year period commencing forty-eight (48) months
after the Closing Date;
Notwithstanding the foregoing, in any event, the Restricted Warrants
may be exercised at the earlier of:
(i) the conversion of all or part of the Note into shares of
Common Stock, subject to the restrictions set forth below in
SECTION 4.1(C);
(ii) a Change of Control; or
(iii) the payment in full of the Note.
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(c) If the entire amount of principal and interest due and payable
under the Note is converted to Common Stock, all of the Restricted Warrants
shall be immediately exercisable in whole or in part at any time until the
Warrant Expiration Date. If less than the entire amount of principal and
interest due and payable under the Note is converted, a pro-rata portion of
the Restricted Warrants based upon the amount of the Note which is converted
compared to the total amount of the Note prior to conversion, shall be
immediately exercisable in whole or in part at any time until the Warrant
Expiration Date. For example, if fifty percent (50%) of the Note is
converted, one half of the Restricted Warrants would be exercisable.
(d) The Warrants shall be exercised by presentation of the Warrant
Certificate evidencing the Warrants to be exercised, with the form of
election to purchase on the reverse thereof duly completed and signed, to the
Company at the offices of the Company as set forth on the signature page of
this Agreement, together with payment of the aggregate Warrant Exercise Price
for the number of Warrant Shares in respect of which such Warrants are being
exercised in lawful money of the United States of America; PROVIDED, that, to
the extent the Warrant Holder exercising such Warrants is also the holder of
a Note, such Warrant Holder or Noteholder may elect, by written notice to the
Company delivered with such presentation, to elect to pay the applicable
Warrant Exercise Price by offsetting the next scheduled payment of such Note
by an amount equal to the aggregate Warrant Exercise Price payable in
connection with such exercise of Warrants. Upon such presentation, the
Company shall issue and cause to be delivered to or upon the written order of
the registered Holder of such Warrants and in such name or names as such
registered Holder may designate, a certificate or certificates for the
aggregate number of Warrant Shares issued upon such exercise of such
Warrants. Any Person so designated to be named therein shall be deemed to
have become holder of record of such Warrant Shares as of the date of
exercise of such Warrants; PROVIDED, that, no Warrant Holder will be
permitted to designate that such Warrant Shares be issued to any Person other
than such Warrant Holder unless each condition to transfer contained in
ARTICLE V hereof which would be applicable to a transfer of Warrants or
Warrant Shares has been satisfied.
(b) If less than all of the Warrants evidenced by a Warrant
Certificate are exercised at any time, a new Warrant Certificate or
Certificates shall be issued for the remaining number of Warrants evidenced
by such Warrant Certificate. All Warrant Certificates surrendered upon
exercise of Warrants shall be canceled.
(c) The Company shall not be required to issue fractional
shares of Common Stock upon exercise of any Warrants issued by it, but shall
pay for any such fraction of a share an amount in cash equal to the value of
such fractional share determined by the Company's board of directors in good
faith.
(d) The Company will pay all Taxes attributable to the
initial issuance of Warrant Shares upon the exercise of the Warrants issued
by it; PROVIDED, that, each Warrant Holder shall use its reasonable efforts
to avoid any such Tax on the issuance of Warrant Shares; and PROVIDED,
further that, the Company shall not be required to pay any income Tax or any
other Tax which may be payable in respect of any transfer involved in the
issue of any Warrant Certificate or any certificate for Warrant Shares in a
name other than that of the registered holder of a Warrant Certificate
surrendered upon the exercise of such a Warrant, and the Company shall not be
required to issue or deliver such certificates unless or until the Person or
Persons requesting the issuance thereof shall have paid to the Company the
amount of such Tax or shall
14
have established to the satisfaction of the Company that such Tax has been
paid.
SECTION 4.2. ADJUSTMENT OF NUMBER OF WARRANT SHARES PURCHASABLE. The
number of Warrant Shares purchasable upon the exercise of each Warrant is
subject to adjustment from time to time upon the occurrence of any of the
events enumerated in this SECTION 4.2.
(a) In the event that the Company shall at any time after the date
of this Agreement declare a dividend on the Common Stock in shares of its
capital stock (whether shares of such Common Stock or of capital stock of any
other class of the Company), split or subdivide the outstanding Common Stock,
or combine the outstanding Common Stock into a smaller number of shares, the
number of Warrant Shares purchasable upon an exercise of each Warrant after
the time of the record date for such dividend or of the effective date of
such split, subdivision or combination shall be adjusted to equal the number
of shares of Common Stock which a Holder having the same number of shares of
Common Stock as the number of Warrant Shares into which each Warrant is
exercisable immediately prior to such record date or effective date, as the
case may be, would own or be entitled to receive after such record date or
effective date.
(b) In the event that the Company shall at any time after the date
of this Agreement issue any shares of Common Stock without consideration or
at a price per share less than $1.00, or issue options, rights or warrants to
subscribe for or purchase such Common Stock (or securities convertible into
such Common Stock) without consideration or at a price per share (or having a
conversion price per share, if a security convertible into such Common Stock)
less than $1.00, the number of Warrant Shares purchasable upon an exercise of
each Warrant after the date of such issuance shall be adjusted to equal the
product obtained by multiplying the number of Warrant Shares into which each
Warrant is exercisable immediately prior to the date of such issuance by a
fraction, the numerator shall be the number of shares of Common Stock
outstanding on a Fully Diluted Basis immediately after such issuance, and the
denominator of which shall be the number of shares of Common Stock
outstanding on a Fully Diluted Basis immediately prior to such issuance PLUS
the number of shares of such Common Stock which the aggregate offering price
of the total number of shares of such Common Stock so to be issued or to be
offered for subscription or purchase (or the aggregate initial conversion
price of the convertible securities so to be offered) would purchase at $1.00
per share. In case such subscription price may be paid in a consideration
part or all of which shall be in a form other than cash, the value of such
consideration shall be as determined by an investment banker reasonably
acceptable to the Warrant Holder (the cost of the engagement of said
investment banking firm to be borne by the Company). Shares of such Common
Stock owned by or held for the account of the Company or any Subsidiary
thereof shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever the date of
such issuance is fixed (which date of issuance shall be the record date for
such issuance if a record date therefor is fixed); and, in the event that
such shares or options, rights or warrants are not so issued, the number of
Warrant Shares into which each Warrant is exercisable shall again be adjusted
to be such number of Warrant Shares into which each Warrant is exercisable if
the date of such issuance had not been fixed.
(c) In case the Company shall make a distribution to all holders of
Common Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the surviving corporation) of
shares of it stock, evidences of its indebtedness, assets, or rights, options
or
15
warrants (other than those referred to in subsection (b) of this Section 4.2)
to subscribe for or purchase such shares, evidences of indebtedness, or
assets, the number of Warrant Shares into which each Warrant is exercisable
after such date of distribution shall be adjusted to equal the product
obtained by multiplying the number of Warrant Shares purchasable upon an
exercise of each Warrant immediately prior to such date by a fraction, the
numerator of which shall be the Per Share Stock Price for the trading day
immediately preceding the day of distribution ("Pre-Distribution Price"), and
the denominator of which shall be the Pre-Distribution Price less the fair
market value of the distribution (as determined in good faith by the Board of
Directors of the Company) applicable to one share of Common Stock. Such
adjustment shall be made successively whenever a date for such distribution
is fixed (which date of distribution shall be the record date for such
issuance if a record date therefor is fixed); and, if such distribution is
not so made, the number of Warrant Shares into which each Warrant is
exercisable shall again be adjusted to be such number of Warrant Shares which
would then be in effect if the date of such distribution had not been fixed.
(d) No adjustment in the number of Warrant Shares purchasable upon
an exercise of each Warrant shall be required unless such adjustment would
require an increase or decrease of at least one-tenth of one percent (.1%) in
such number of Warrant Shares; PROVIDED that any adjustments which by reason
of this SECTION 4.2(D) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under
this SECTION 4.2 shall be made to the nearest hundredth of one percent.
(e) The Warrant Exercise Price in effect immediately prior to any
adjustment of the number of Warrant Shares into which each Warrant is
exercisable shall be simultaneously adjusted (but not below the par value of
the Common Stock) by multiplying the Warrant Exercise Price immediately prior
to such adjustment by a fraction, the numerator of which shall be the number
of Warrant Shares into which each Warrant is exercisable immediately prior to
such adjustment, and the denominator of which shall be the number of Warrant
Shares into which each Warrant is exercisable immediately after such
adjustment.
(f) In the event of any capital reorganization of the Company, or of
any reclassification of any Common Stock for which any Warrant is exercisable
(other than a subdivision or combination of outstanding shares of such Common
Stock), or in case of the consolidation of the Company with or the merger of
the Company with or into any other corporation or of the sale of the
properties and assets of the Company as, or substantially as, an entirety to
any other Person, each Warrant shall after such capital reorganization,
reclassification of such Common Stock, consolidation, merger or sale be
exercisable, upon the terms and conditions specified in this Agreement, for
the number of shares of stock or other securities or assets to which a holder
of the number of Warrant Shares purchasable (at the time of such capital
reorganization, reclassification of such Common Stock, consolidation, merger
or sale) upon exercise of such Warrant would have been entitled upon such
capital reorganization, reclassification of such Common Stock, consolidation,
merger or sale; and in any such case, if necessary, the provisions set forth
in this SECTION 4 with respect to the rights thereafter of such Warrant shall
be appropriately adjusted so as to be applicable, as nearly as may reasonably
be, to any shares of stock or other securities or assets thereafter
deliverable on the exercise of such Warrants. The Company shall not effect
any such consolidation, merger or sale, unless prior to or simultaneously
with the consummation thereof, the successor corporation (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing such assets or the appropriate
16
corporation or entity shall assume, by written instrument, the obligation to
deliver to each Warrant Holder the shares of stock, securities or assets to
which, in accordance with the foregoing provisions, such Warrant Holder may
be entitled pursuant to this SECTION 4.2(F).
(g) If any question shall at any time arise with respect to the
adjusted number of Warrant Shares, such question shall be determined by the
independent firm of certified public accountants of recognized national
standing selected by the Warrant Holder.
(h) Notwithstanding anything in this SECTION 4.2 to the contrary,
the Company shall not be permitted to take any action described in this
SECTION 4.2 (such as, but not by way of limitation, any dividend,
consolidation merger or reorganization) if such action is prohibited under
any other provision of this Agreement.
(i) Notwithstanding that the number of Warrant Shares purchasable
upon the exercise of each Warrant may have been adjusted pursuant to the
terms hereof, the Company shall nonetheless not be required to issue
fractions of Warrant Shares upon exercise of each Warrant or to distribute
certificates that evidence fractional shares, but instead shall pay to the
holder of each Warrant the cash value of any such fractional Warrant Shares.
SECTION 4.3 NOTICES TO WARRANT HOLDERS. Upon any adjustment of the
number of Warrant Shares issuable upon an exercise of the Warrants or any
adjustment of the Warrant Exercise Price pursuant to SECTION 4.3, the Company
shall promptly, but in any event within thirty (30) days thereafter, cause to
be given to each Warrant Holder, at its address appearing on the Warrant
Register, by first class mail, postage prepaid, a certificate signed by the
Company's Financial Officer setting forth the number of Warrant Shares
issuable upon the exercise of each Warrant as so adjusted and the Warrant
Exercise Price as so adjusted, and describing in reasonable detail the facts
accounting for such adjustment and the method of calculation used. Where
appropriate, such certificate may be given in advance and included as part of
the notice required to be mailed under the other provisions of this SECTION
4.3.
In the event:
(a) that the Company shall authorize the issuance to all holders of
its Common Stock of rights or warrants to subscribe for or purchase capital
stock of the Company or of any other subscription rights or warrants; or
(b) that the Company shall issue any shares of Common Stock without
consideration or at a price per share less than $1.00, or issue options,
rights, or warrants to subscribe for or purchase such Common Stock (or
securities convertible into such Common Stock) without consideration or at a
price per share (or having a conversion price per share, if a security
convertible into such Common Stock) less than $1.00; or
17
(c) that the Company shall authorize the distribution to all holders
of its Common Stock of shares of its stock, evidences of its indebtedness,
assets, or rights, options, or warrants to subscribe for or purchase such
shares, evidences of indebtedness or assets; or
(d) of any consolidation or merger to which the Company is a party
and for which approval of any shareholders of the Company is required, or of
the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any capital reorganization or
reclassification or change of the Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value,
or as a result of a subdivision or combination); or
(d) of the voluntary dissolution, liquidation or winding up of the
Company; or
(e) that the Company proposes to take any other action which would
require an adjustment of the Warrant Exercise Price of the Warrants issued by
it pursuant to SECTION 4.2;
then the Company shall cause to be given to each Warrant Holder at
such Warrant Holder's address appearing on the Warrant Register, at least
twenty (20) days prior to the applicable date hereinafter specified, by first
class mail, postage prepaid, a written notice stating the date as of which
the holders of record of Common Stock to be entitled to receive any such
rights, warrants or distribution are to be determined, or the date on which
any such consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that the holders of record of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up.
SECTION 4.4. RESERVATION AND ISSUANCE OF WARRANT SHARES. The Company
will at all times have authorized, and reserve and keep available, free from
preemptive rights, for the purpose of enabling it to satisfy any obligation
to issue Warrant Shares upon the exercise of the Warrants, the number of
shares of Common Stock deliverable upon exercise of all outstanding Warrants.
The Company covenants that all Warrant Shares issued by it will, upon
issuance in accordance with the terms of this Agreement, be fully paid and
nonassessable and free from all Taxes with respect to the issuance thereof
and free from all Liens other than Liens arising by, through or under the
Warrant Holder to whom such Warrant Shares were issued.
ARTICLE V
TRANSFER OF SECURITIES
Section 5.1. RESTRICTIONS ON TRANSFER. Shoeinvest understands and
agrees that the Securities have not been registered under the Securities Act
or any state securities Laws, and that accordingly, they will not be fully
transferable except as permitted under various exemptions contained in the
Securities Act and applicable state securities Laws, or upon satisfaction of
the registration and prospectus delivery requirements of the Securities Act
and applicable state securities Laws. Shoeinvest acknowledges that it must
bear the economic risk of its investment in the Securities for an indefinite
period of time (subject, however, to the
18
payment terms of the Note, and the Company's obligations pursuant to the
Registration Rights Agreement) since they have not been registered under the
Securities Act and applicable state securities Laws and therefore cannot be
sold unless they are subsequently registered or an exemption from
registration is available. Absent an effective registration statement under
the Securities Act and applicable state securities Laws covering the
disposition of the Securities, Shoeinvest will not sell, transfer, assign,
pledge, hypothecate or otherwise dispose of any or all of the Securities
absent a valid exemption from the registration and prospectus delivery
requirements of the Securities Act and the registration or qualification
requirements of any applicable state securities Laws. The Company agrees that
it will effect the transfer of the Securities on its books and records upon
receipt of an opinion of counsel stating that Shoeinvest's proposed sale or
transfer of the Securities is exempt from the registration and qualification
requirements of the Securities Act.
SECTION 5.2. REGISTRATION, TRANSFER AND EXCHANGE OF WARRANTS. (a)
The Company shall maintain at the offices of the Company as set forth on the
signature pages of this Agreement, the Warrant Register for registration of
the Warrants and Warrant Certificates and transfers thereof. On the Closing
Date, the Company shall register the outstanding Warrants and Warrant
Certificates issued to Shoeinvest. The Company may deem and treat the
registered Warrant Holders as the absolute owners of the Warrants registered
to such Holders and (notwithstanding any notation of ownership or other
writing on the Warrant Certificates made by any Person) for the purpose of
any exercise thereof or any distribution to the Warrant Holders, and for all
other purposes.
(b) Upon satisfaction of each condition set forth in
SECTION 5.1 hereof, the Company shall register the transfer of any
outstanding Warrants in the Warrant Register upon surrender of the Warrant
Certificate(s) evidencing such Warrants to the Company at the offices of the
Company as set forth on the signature pages of this Agreement, accompanied
(if so required by it) by a written instrument or instruments of transfer in
form satisfactory to it, duly executed by the registered Warrant Holder or by
the duly appointed legal representative thereof. Upon any such registration
of transfer, new Warrant Certificate(s) evidencing such transferred Warrants
shall be issued to the transferee(s) and the surrendered Warrant
Certificate(s) shall be canceled. If less than all the Warrants evidenced by
a Warrant Certificate(s) surrendered for transfer are to be transferred, a
new Warrant Certificate(s) shall be issued to the Warrant Holder surrendering
such Warrant Certificate(s) evidencing such remaining number of Warrants.
(c) Warrant Certificates may be exchanged at the option of
the Warrant Holder(s) thereof, when surrendered to the Company at the offices
of the Company as set forth on the signature pages of this Agreement, for
another Warrant Certificate or other Warrant Certificates of like tenor and
representing in the aggregate a like number of Warrants. Warrant Certificates
surrendered for exchange shall be canceled.
(d) No charge shall be made for any such transfer or
exchange except for any Tax or other governmental charge imposed in
connection therewith.
SECTION 5.3. MUTILATED OR MISSING WARRANT CERTIFICATES. If any
Warrant Certificate shall be mutilated, lost, stolen or destroyed, the
Company shall issue, in exchange and substitution for and upon cancellation
of the mutilated Warrant Certificate, or in lieu of and substitution for the
Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of
like tenor and representing an equivalent number of
19
Warrants, but only upon receipt of evidence satisfactory to the Company of
such loss, theft or destruction of such Warrant Certificate and, if
requested, indemnity satisfactory to it. No service charge shall be made for
any such substitution, but all expenses and reasonable charges associated
with procuring such indemnity and all stamp, Tax and other governmental
duties that may be imposed in relation thereto shall be borne by the holder
of such Warrant Certificate.
SECTION 5.4. REGISTRATION, TRANSFER AND EXCHANGE OF NOTES. (a) The
Company shall maintain at the offices of the Company as set forth on the
signature pages of this Agreement, the Note Register for registration of the
Notes and transfers thereof. On the Closing Date, the Company shall register
the outstanding Notes issued to Shoeinvest. The Company may deem and treat
the registered Noteholder as the absolute owner of the Note registered to
such Holder and (notwithstanding any notation of ownership or other writing
on the Note made by any Person) for the purpose of any exercise thereof or
any distribution to the Noteholder, and for all other purposes.
(b) Upon satisfaction of each condition set forth in
SECTION 5.1 hereof, the Company shall register the transfer of any
outstanding Note in the Note Register upon surrender of such Note to the
Company at the offices of the Company as set forth on the signature pages of
this Agreement, accompanied (if so required by it) by a written instrument or
instruments of transfer in form satisfactory to it, duly executed by the
registered Noteholder or by the duly appointed legal representative thereof.
Upon any such registration of transfer, a new Note evidencing such
transferred Note shall be issued to the transferee and the surrendered Note
shall be canceled. If less than all of the principal amount of a Note
surrendered for transfer is to be transferred, a new Note shall be issued to
the Noteholder surrendering such Note evidencing such remaining principal
balance.
(c) The Notes may be exchanged at the option of the
Noteholders thereof, when surrendered to the Company at the offices of the
Company as set forth on the signature pages of this Agreement, for another
Note or other Notes of like tenor and representing in the aggregate a like
number of Notes. Notes surrendered for exchange shall be canceled.
(d) No charge shall be made for any such transfer or
exchange except for any Tax or other governmental charge imposed in
connection therewith.
SECTION 5.5. MUTILATED OR MISSING NOTES. If any Note shall be
mutilated, lost, stolen or destroyed, the Company shall issue, in exchange
and substitution for and upon cancellation of the mutilated Note, or in lieu
of and substitution for the Note lost, stolen or destroyed, a new Note of
like tenor and representing the same outstanding principal, but only upon
receipt of evidence satisfactory to the Company of such loss, theft or
destruction of such Note and, if requested, indemnity satisfactory to it. No
service charge shall be made for any such substitution, but all expenses and
reasonable charges associated with procuring such indemnity and all stamp,
Tax and other governmental duties that may be imposed in relation thereto
shall be borne by the holder of such Note.
ARTICLE VI
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CONDITIONS
SECTION 6.1. CONDITIONS PRECEDENT TO SHOEINVEST'S OBLIGATIONS AT
CLOSING. The obligations of Shoeinvest to purchase the Securities pursuant to
SECTION 2.1 are subject to the satisfaction of each of the conditions
precedent set forth in this SECTION 6.1 on or before 10:00 a.m. (Dallas,
Texas time) on the Closing Date. In the event all of the conditions precedent
set forth in this SECTION 6.1 are not satisfied by such time, Shoeinvest may,
at its option, terminate this Agreement and the other Transaction Documents
and all obligations of Shoeinvest hereunder and thereunder, or waive any and
all of such conditions precedent and close the transactions as contemplated
herein.
(a) CLOSING DELIVERIES. The Company shall have delivered to
Shoeinvest, in form and substance satisfactory to Shoeinvest each of the
following:
(i) the Note to be purchased by Shoeinvest pursuant to
SECTION 2.1 duly executed and delivered by the Company and
payable to Shoeinvest;
(ii) certificates issued to Shoeinvest evidencing the
Common Stock Shares to be purchased by Shoeinvest pursuant to
SECTION 2.1;
(iii) Warrant Certificates issued to Shoeinvest by the
Company evidencing the Warrants to be purchased by Shoeinvest
pursuant to SECTION 2.1;
(iv) the Registration Rights Agreement duly executed
and delivered by the Company and Shoeinvest;
(v) the Employment Agreement duly executed and
delivered by the Company and Xxxxx X. Xxxxxx;
(vi) a favorable opinion of Thrasher, Whitley, Hampton
& Xxxxxx, counsel for the Company, in form and substance
satisfactory to Shoeinvest and its counsel;
(vii) all resolutions, certificates and documents
Shoeinvest may request relating to (A) the organization,
existence, good standing and foreign qualification of the
Company and each of its Subsidiaries, (B) the corporate
authority for the execution, delivery and enforceability of this
Agreement and the consummation of the Closing Transactions, (C)
the stock ownership of the Company and each of its Subsidiaries,
(D) evidence of all resolutions and related documents necessary
to increase the Company's outstanding capital, if necessary, and
(E) such other matters relevant to the foregoing as Shoeinvest
shall reasonably request, all of which shall be in form and
substance satisfactory to Shoeinvest and its counsel;
(viii) if applicable, the waiting period applicable to
the transactions contemplated hereby under the HSR Act shall
have expired or been terminated and all filings required to be
made prior to the Closing Date, and all consents, approvals,
permits and authorizations required to be obtained
21
prior to the Closing Date from, any Governmental Authority in
connection with execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby shall have
been made or obtained.
(ix) evidence satisfactory to Shoeinvest that all
Closing Transactions have been consummated;
(x) a Subordination Agreement among Shoeinvest, Compass
Bank and Bank of Oklahoma in the form and substance reasonably
acceptable to Shoeinvest;
(xi) a certificate from an Authorized Officer of the
Company certifying that (A) neither a Default nor an Event of
Default has occurred, and (B) each and every representation and
warranty of the Company in the Transaction Documents is true and
correct in all material respects;
(xii) the holders of the requisite number of shares of
outstanding capital stock of the Company shall have duly and
validly approved all items necessary to effect the transactions
contemplated by this Agreement and the other Transaction
Documents, the Closing Transactions and all other transactions
contemplated hereby or thereby;
(xiii) the Common Stock Shares, the Warrant Shares and
the shares of Common Stock issuable upon conversion of the Notes
shall have been approved for listing on the Nasdaq Small Cap
Market, subject to official notice of issuance;
(xiv) resignations in form acceptable to Shoeinvest of
each of the directors of the Company who are not designated by
the Major Shareholders pursuant to the provisions of the
Shareholders Agreement;
(xv) evidence of cancellation of the Company's Employee
Net Profits Interest Incentive Compensation Plan ("NPI Plan")
and termination of the Company's SEP/XXX Plan established in
1993;and
(xvi) such other documents, instruments and agreements
as Shoeinvest shall reasonably request in light of the
transactions contemplated hereunder.
The documents, certificates and opinions referred to in this SECTION 6.1(A)
shall be delivered to Shoeinvest no later than the Closing Date and shall,
except as expressly provided otherwise, be dated the Closing Date.
(b) LEGAL MATTERS. All legal matters with respect to the Company and
its Subsidiaries, the Transaction Documents and the Closing Transactions
shall be acceptable to Shoeinvest.
(c) ABSENCE OF DEFAULT. No Default or Event of Default shall have
occurred which is continuing.
(d) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company
22
contained in this Agreement and in the other Transaction Documents shall be
true and correct in all material respects on the Closing Date as if they were
made on such date (in determining the truth and correctness of any
representation or warranty no effect shall be given to any limitation
contained in such representation or warranty as to Knowledge).
(e) NO MATERIAL ADVERSE EFFECT. No event has occurred or condition
exists which has had or could be expected to have a Material Adverse Effect
on the Company.
(f) PAYMENT OF EXPENSES. The Company shall have paid, or will make
arrangements to pay at Closing, in full all documented and reasonable out of
pocket fees, expenses and disbursements incurred by Shoeinvest in connection
with its investigation, negotiation and closing of the transactions
contemplated hereby.
(g) WAIVER. Shoeinvest shall have been given evidence that the
provisions, if any, listed on SCHEDULE 6.1(G) have been waived by the
Company's shareholders or board of directors, as the case may be.
(h) EMPLOYEE PARTICIPANT'S CONSENT. Evidence of each employee
participant's consent to the termination and release of all rights related to
the NPI Plan.
(i) DUE DILIGENCE REVIEW. Completion of Buyer's due diligence, the
results of which are satisfactory to Buyer, including but not limited to,
Buyer's review of all items listed on the Disclosure Schedule.
SECTION 6.2. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS AT
CLOSING. The obligations of the Company to sell the Securities pursuant to
SECTION 2.1 are subject to the satisfaction of each of the conditions
precedent set forth in this SECTION 6.2 on or before 10:00 a.m. (Dallas,
Texas time) on the Closing Date. In the event all of the conditions precedent
set forth in this SECTION 6.2 are not satisfied by such time, the Company
may, at its option, terminate this Agreement and the other Transaction
Documents and all obligations of the Company hereunder and thereunder.
(a) CLOSING DELIVERIES. Shoeinvest shall have delivered to the
Company, in form and substance satisfactory to the Company each of the
following:
(i) the Purchase Price to be paid by Shoeinvest
pursuant to SECTION 2.1;
(ii) the Registration Rights Agreement duly executed and
delivered by the Company and Shoeinvest;
(iii) the Employment Agreement duly executed and
delivered by the Company and Xxxxx X. Xxxxxx;
(iv) all resolutions, certificates and documents the
Company may request relating to (A) the organization, existence,
good standing and foreign qualification of Shoeinvest, (B) the
corporate
23
authority for the execution, delivery and enforceability of this
Agreement and the consummation of the Closing Transactions, and
(C) such other matters relevant to the foregoing as the Company
shall reasonably request, all of which shall be in form and
substance satisfactory to the Company and its counsel;
(v) if applicable, the waiting period applicable to the
transactions contemplated hereby under the HSR Act shall have
expired or been terminated and all filings required to be made
prior to the Closing Date, and all consents, approvals, permits
and authorizations required to be obtained prior to the Closing
Date from, any Governmental Authority in connection with
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby shall have been made or
obtained;
(vi) evidence satisfactory to the Company that all
Closing Transactions have been consummated;
(vii) a certificate from an Authorized Officer of
Shoeinvest certifying that (A) each and every representation and
warranty of the Company in the Transaction Documents is true and
correct in all material respects;
(viii) payment of $274,625 to current employees of the
Company as set forth on the schedule previously provided by the
Company to Shoeinvest as payment in full of each employee's
rights under the NPI Plan;
(ix) such other documents, instruments and
agreements as the Company shall reasonably request.
The documents and certificates referred to in this
SECTION 6.2(A) shall be delivered to the Company no later than
the Closing Date and shall, except as expressly provided
otherwise, be dated the Closing Date.
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Shoeinvest contained in this Agreement and in the other
Transaction Documents shall be true and correct in all material
respects on the Closing Date as if they were made on such date.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
In order to induce Shoeinvest to purchase the Securities
to be purchased by it hereunder, the Company hereby represents
and warrants to Shoeinvest that each of the following statements
(a) is true and correct on the date hereof, and (b) will be true
and correct after giving effect to the Closing Transactions.
24
SECTION 7.1. CORPORATE EXISTENCE AND POWER. Each of the
Company and each of its Subsidiaries (a) is a corporation, duly
organized, validly existing and in good standing under the Laws
of its jurisdiction of incorporation set forth on SCHEDULE 7.1 of
the Disclosure Schedule, (b) has all corporate power and
authority necessary to carry on its business as now conducted and
as proposed to be conducted, and (c) is duly qualified as a
foreign corporation in each jurisdiction set forth on SCHEDULE
7.1 on the Disclosure Schedule which constitutes all
jurisdictions where a failure to be so qualified could have a
Material Adverse Effect on the Company or such Subsidiary.
SECTION 7.2. CORPORATE AND GOVERNMENTAL AUTHORIZATION;
CONTRAVENTION. The execution, delivery and performance of this
Agreement and the other Transaction Documents by each of the
Company and each of its Subsidiaries (to the extent each is a
party to this Agreement or the other Transaction Documents) are
within its corporate powers, have been duly authorized by all
necessary corporate action, require no action by or in respect
of, or filing with, any Governmental Authority (other than
filings with any applicable securities regulatory authorities to
perfect exemptions from the registration or qualification
requirements of applicable securities Laws and which will be made
immediately following the Closing Date), and, except for matters
which have been waived in writing by the appropriate Person, do
not contravene, or constitute a default under, any provision of
applicable Law or of the Charter Documents or of any material
judgment, injunction, order, decree or Material Agreement binding
upon the Company or any of its Subsidiaries or its respective
assets, or result in the creation or imposition of any Lien on
any asset of the Company or any of its Subsidiaries.
SECTION 7.3. BINDING EFFECT. This Agreement constitutes
the valid and binding agreement of the Company; each other
Transaction Document when executed and delivered in accordance
with this Agreement, will constitute the valid and binding
obligation of the Company and each of its Subsidiaries which is a
party thereto, in each case enforceable in accordance with its
terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar Laws affecting creditors rights
generally, and (ii) the availability of equitable remedies may be
limited by equitable principles of general applicability.
SECTION 7.4. CAPITALIZATION. SCHEDULE 7.4 of the
Disclosure Schedule accurately and completely sets forth for each
of the Company and its Subsidiaries (a) its authorized, issued
and outstanding capital stock of every class, and (b) the names
of the record, and to the Company's knowledge, beneficial owner,
of its capital stock of every class, including the number and
class of shares held by each such shareholder. Except as set
forth SCHEDULE 7.4 of the Disclosure Schedule and except for the
Warrants and registration rights provided in the Registration
Rights Agreement, (x) there are not outstanding any options,
warrants or other rights to acquire capital stock of any class of
the Company or any of its Subsidiaries or securities convertible
into capital stock of the Company or any of its Subsidiaries of
any class, (y) no Person has any preemptive or similar rights
with respect to any subsequent issue of stock by the Company or
any of its Subsidiaries, and (z) no Person has any right to
require the Company or any of its Subsidiaries to register any
securities of the Company or any of its Subsidiaries under the
Securities Act.
25
SECTION 7.5. ISSUANCE OF SECURITIES. The Securities to
be issued on the Closing Date, when issued upon payment of the
applicable Purchase Price in accordance with SECTION 2.1, will be
duly authorized, validly issued, fully paid and non-assessable
and will be free and clear of all Liens, claims and encumbrances
including pre-emptive rights. The Warrant Shares, when issued
upon an exercise of the Warrants, and the Conversion Shares, when
issued upon a conversion of the amount of principal and unpaid
interest on the Notes, will be duly authorized, validly issued,
fully paid and nonassessable and free and clear of all Liens,
claims and encumbrances, including, without limitation, all
preemptive rights.
SECTION 7.6. FINANCIAL STATEMENTS. The Company Financial
Statements were prepared in accordance with the applicable
published rules and regulations of the Commission with respect
thereto and in accordance with GAAP applied on a consistent basis
during the periods involved (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as
permitted by Rule 10-01 of Regulation S-X of the Commission) and
fairly present in all material respects, in accordance with
applicable requirements of GAAP (in the case of unaudited
statements, subject to normal, recurring adjustments), the
consolidated financial position of the Company and its
Subsidiaries as of their respective dates and the consolidated
results of operations and the consolidated cash flows of the
Company and its Subsidiaries for the periods presented therein.
The are no material liabilities of the Company or any Subsidiary
(contingent or otherwise), other than as disclosed in the
Company's Financial Statements. There are no material imbalances
of production from the oil and gas properties of the Company or
its Subsidiaries whether required to be disclosed pursuant to
GAAP or otherwise. Since December 31, 1998, no event has occurred
or condition exists which has had or could be expected to have a
Material Adverse Effect.
SECTION 7.7. MATERIAL AGREEMENTS. SCHEDULE 7.7 of the
Disclosure Schedule contains a complete and accurate description
of every Material Agreement to which the Company or any of its
Subsidiaries is a party (other than the Transaction Documents) or
by which the Company or any of its Subsidiaries or any of their
respective assets are bound (including all amendments and
modifications thereto). The Company has made available to
Shoeinvest or provided Shoeinvest with a true and correct copy of
all such Material Agreements, including all amendments and
modifications thereof. No rights or obligations of any party to
any of such Material Agreements has been waived, and no party to
any of such Material Agreements is in default of its obligations
thereunder. Each of such Material Agreements is a valid, binding
and enforceable obligation of the parties thereto in accordance
with its terms and is in full force and effect.
SECTION 7.8. COMPASS DEBT DOCUMENTS. The Company has
provided to or made available to Shoeinvest with a true and
correct copy of all of the Compass Senior Debt Documents
including all amendments and modifications thereto. No rights or
obligations of any party to any of such Compass Senior Debt
Documents have been waived, and no party to any of such Compass
Senior Debt Documents is in default of its obligations
thereunder. Each of such Compass Senior Debt Documents is a
valid, binding and enforceable obligation of the parties thereto
in accordance with its terms and is in full force and affect.
26
SECTION 7.9. INVESTMENTS. Except as set forth on
SCHEDULE 7.9 of the Disclosure Schedule, neither the Company nor
any of its Subsidiaries has any outstanding Investments.
SECTION 7.10. OUTSTANDING DEBT. SCHEDULE 7.10 of the
Disclosure Schedule contains a complete and accurate description
of all Debt of the Company and each of its Subsidiaries
outstanding on the date hereof. Neither the Company nor any of
its Subsidiaries is in default in payment of any Debt with
respect to which it is an obligor or in default of any covenant,
agreement, representation, warranty or other term of any
document, instrument or agreement evidencing, securing or
otherwise pertaining to any such Debt.
SECTION 7.11. TRANSACTIONS WITH AFFILIATES. SCHEDULE
7.11 of the Disclosure Schedule contains a complete and accurate
description of all contracts, agreements and other arrangements
(whether written, oral, express or implied) between the Company
or any of its Subsidiaries and any Affiliate of the Company and
its Subsidiaries in existence on the date hereof, including,
without limitation, a complete and accurate description of all
Investments of any of the Company or any of its Subsidiaries in
any Affiliate of the Company or any of its Subsidiaries.
SECTION 7.12. EMPLOYMENT MATTERS. SCHEDULE 7.12 of the
Disclosure Schedule contains a complete and accurate list of all
employees of the Company and each of its Subsidiaries. Such
schedule also sets forth for the current fiscal year the annual
salary (including projected bonuses and other cash compensation)
of all such employees and all benefits (other than health
insurance benefits and other similar benefits which are both
customary in the industry in which the Company or any of its
Subsidiaries is engaged and provided to all full time employees
of the Company or any of its Subsidiaries generally) provided to
such employees. SCHEDULE 7.12 of the Disclosure Schedule also
contains a complete and accurate description of all employment
contracts, consulting agreements, management agreements,
non-compete and similar agreements to which the Company or any of
its Subsidiaries is a party on the date hereof.
SECTION 7.13. LITIGATION. Except as set forth on
SCHEDULE 7.13 of the Disclosure Schedule, there is no action,
suit or proceeding pending against, or to the knowledge of the
Company, threatened against or affecting the Company or any of
its Subsidiaries before any court or arbitrator or any
Governmental Authority.
SECTION 7.14. ERISA. Neither the Company nor any of its
Subsidiaries nor any ERISA Affiliate maintains or contributes to
any Pension Plan other than those disclosed on SCHEDULE 7.14 of
the Disclosure Schedule. Each such Pension Plan is in compliance
in all material respects with its terms and the applicable
provisions of ERISA and the IRC. Except as required by law, none
of the Company or any of its Subsidiaries nor any ERISA Affiliate
has any commitment to create any additional Pension Plans. Except
as set forth on SCHEDULE 7.14, neither the Company nor any of its
Subsidiaries nor any ERISA Affiliate has ever sponsored, adopted,
maintained or been obligated to contribute to, or had any
liability under, any Pension Plan. There is no material violation
of ERISA with respect to the filing of applicable reports,
documents and notices regarding the Pension Plans with the
Secretary of the Treasury or the furnishing of such documents to
the participants and
27
beneficiaries of the Pension Plans, and, to the best of the
Company's knowledge, with respect to each Pension Plan all other
reports required under ERISA or the IRC to be filed with any
Governmental Authority have been duly filed and all such reports
are true and correct in all material respects as of the dates
given. Each Pension Plan that is intended to be "qualified"
within the meaning of section 401(a) of the IRC is, and has been
during the period from its adoption to date, so qualified, both
as to form and, to the best of the Company's knowledge, has been
qualified, and all necessary governmental approvals, including a
favorable determination as to the qualification under the IRC of
each of such Pension Plans and each amendment thereto, have been
timely obtained or application for a favorable determination will
be filed prior to the applicable filing deadlines. Except as
disclosed on SCHEDULE 7.14 of the Disclosure Schedule, each trust
created under any such Pension Plan intended to be qualified
within the meaning of section 401(a) of the IRC and each trust
described in section 501(c)(9) of the IRC is exempt from federal
income taxation under section 501(a) of the IRC and has been so
exempt during the period from creation to date. The Company has
no pending or, to the best of the Company's knowledge, threatened
claims, lawsuits or actions (other than routine claims for
benefits in the ordinary course) asserted or instituted against,
and the Company has no knowledge of any threatened litigation or
claims against, the assets of any Pension Plan or its related
trust or against any fiduciary of a Pension Plan with respect to
the operation of such Pension Plan. Neither the Company nor any
of its Subsidiaries has received notice of any pending
investigations, inquires or audits with respect to any Pension
Plan by any regulatory agency. Neither the Company nor any of its
Subsidiaries has engaged in any prohibited transactions, within
the meaning of section 406 of ERISA or section 4975 of the IRC,
in connection with any Pension Plan. Neither the Company nor any
of its Subsidiaries maintains or has established any Pension Plan
which is a welfare benefit plan within the meaning of section
3(1) of ERISA which provides for retiree medical liabilities or
continuing benefits or coverage for any participant or any
beneficiary of any participant after such participant's
termination of employment except as may be required by the
Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA") and the regulations thereunder, and at the
expense of the participant or the beneficiary of the participant.
The Company and each of its Subsidiaries that maintains a Pension
Plan that is a welfare benefit plan within the meaning of section
3(1) of ERISA has complied with any applicable notice and
continuation requirements of COBRA and the regulations
thereunder. To the best of the Company's knowledge, none of the
Company or any of its Subsidiaries maintains, has established, or
has ever participated in, a multiple employer welfare benefit
arrangement within the meaning of section 3(40)(A) of ERISA.
SECTION 7.15. TAXES AND FILING OF TAX RETURNS. The
Company and each of its Subsidiaries has filed all Tax returns
required to have been filed by it or has legally extended such
returns and has paid all Taxes shown to be due and payable on
such returns, including interest and penalties, and all other
Taxes which are payable by the Company or any of its
Subsidiaries. The Company does not know of any proposed Tax
assessment against the Company or any of its Subsidiaries and all
Tax liabilities of the Company and each of its Subsidiaries are
adequately provided for and no Tax liability of the Company or
any of its Subsidiaries has been asserted by the Internal Revenue
Service or any other Governmental Authority for Taxes in excess
of those already paid.
28
SECTION 7.16. TITLE TO ASSETS. The Company and its
Subsidiaries have Defensible Title to all Oil and Gas Interests
of the Company and its Subsidiaries included or reflected in the
Ownership Interests and all of their other assets, subject only
to Permitted Encumbrances. Each Oil and Gas Interest included or
reflected in the Ownership Interest entitles the Company and its
Subsidiaries to receive not less than the undivided interest set
forth in (or derived from) the Ownership Interests of all
Hydrocarbons produced, saved and sold from or attributable to
such Oil and Gas Interest, and the portion of such costs and
expenses of operation and development of such Oil and Gas
Interest that is borne or to be borne by the Company and its
Subsidiaries is not greater than the undivided interest set forth
in (or derived from) the Ownership Interests. All proceeds from
the sale of each of the Company's and the Subsidiaries' shares of
the Hydrocarbons being produced from its Oil and Gas Interests
are currently being paid in full to such party by the purchasers
thereof on a timely basis and none of such proceeds are currently
being held in suspense by such purchaser or any other party,
except as set forth on SCHEDULE 7.16 of the Disclosure Schedule.
SECTION 7.17. LICENSES, PERMITS, ETC. The Company and
each of its Subsidiaries possess all franchises, certificates,
licenses, permits, consents, authorizations, exemptions and
orders of Governmental Authorities as are necessary to carry on
their respective businesses as now being conducted and as
proposed to be conducted, except to the extent a failure to have
such franchises, certificates, licenses, permits, consents,
authorizations, exemptions and orders could not have a Material
Adverse Effect.
SECTION 7.18. PROPRIETARY RIGHTS. The Company and each
of its Subsidiaries has ownership of, or valid licenses to use,
all trademarks, copyrights, patents and other proprietary rights
used in their respective businesses. To the best of the Company's
knowledge, the operation of the businesses of the Company and its
Subsidiaries does not infringe any patent, copyright, trademark
or other proprietary rights of others, and, neither the Company
nor any of its Subsidiaries has received any notice from any
third party of any such alleged infringement by the Company or
any of its Subsidiaries. The Company and each of its Subsidiaries
has taken reasonable steps to establish and preserve its
respective ownership of all patents, copyrights, trademarks,
trade secrets and other proprietary rights. The Company is not
aware of any infringement by others of its or any its
Subsidiaries' patents, copyrights, trademarks or other
proprietary rights.
SECTION 7.19. COMPLIANCE WITH LAW. To the Knowledge of
the Company, the business and operations of the Company and each
of its Subsidiaries have been and are being conducted in
accordance with all applicable Laws.
SECTION 7.20. ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 7.20 of the
Disclosure Schedule, (i) the reserves reflected in the Company's
Financial Statements relating to environmental matters were
adequate under GAAP as of the date of such financial statements,
and neither the Company nor its Subsidiaries has incurred any
material liability in respect of any environmental matter since
the that date, and (ii) the SEC Documents include all information
relating to environmental matters required to be included therein
under the rules and regulations of the Commission applicable
thereto.
29
(b) Except as set forth in SCHEDULE 7.20 of the Disclosure
Schedule:
(i) Each of the Company and its Subsidiaries
has conducted its business and operated its
assets, and is conducting its business and
operating its assets, in material compliance with
all Environmental Laws.
(ii) Neither the Company nor any of
its Subsidiaries has been notified by any
Governmental Authority that any of the
operations or assets of the Company or its
Subsidiaries is the subject of any
investigation or inquiry by any Governmental
Authority evaluating whether any material
remedial action is needed to respond to a
release of Hazardous Substance or to the
improper storage or disposal (including storage
or disposal at offsite locations) of any
Hazardous Substance.
(iii) Neither the Company nor any of
its Subsidiaries and no other Person has filed
any notice under any federal, state or local
law indicating that (i) the Company or its
Subsidiaries is responsible for the improper
release into the environment, or the improper
storage or disposal of any Hazardous Substance,
or (ii) any Hazardous Substance is improperly
stored or disposed of upon any property of the
Company or its Subsidiaries.
(iv) Neither the Company nor any of
its Subsidiaries has any Substance contingent
liability in connection with (i) release into
the environment at or on the property now or
previously owned or leased by the Company or
its Subsidiaries, or (ii) the storage or
disposal of any Hazardous Substance.
(v) Neither the Company nor any of its
Subsidiaries has received any claim, complaint,
notice, inquiry or request for information
which remains unresolved as of the date hereof
with respect to any alleged violation of any
Environmental Laws or regarding potential
liability under any Environmental Laws relating
to operations or conditions of any facilities
or property owned, leased or operated by the
Company or its Subsidiaries.
(vi) There are no sites, locations or
operations at which the Company or its
Subsidiaries are currently undertaking, or have
completed, any remedial or response action
relating to any such disposal or release, as
required by Environmental Laws.
(vii) There are no physical or
environmental conditions existing on any
property owned or leased by the Company or any
Subsidiary resulting from the Company's or any
Subsidiary's operations or activities, past or
present, at any location, that would give rise
to any on-site or off-site remedial obligations
under any applicable Environmental Laws, other
than normal and ordinary remedial work
associated with plugging and abandoning of oil
and gas facilities.
SECTION 7.21. Intentionally Left Blank.
30
SECTION 7.22. FISCAL YEAR. The Company's fiscal year is from
January 1 to December 31.
SECTION 7.23. NO DEFAULT. Neither a Default nor an Event of
Default has occurred.
SECTION 7.24. INSURANCE. SCHEDULE 7.24 of the Disclosure Schedule
contains a complete and accurate list and description of all insurance
policies maintained by the Company as of the date hereof.
SECTION 7.25. GOVERNMENT REGULATION. Neither the Company nor any of
its Subsidiaries is subject to regulation under the Public Utility Holding
the Company Act of 1935, the Interstate Commerce Act (as either of the
preceding acts have been amended), or any other Law which regulates the
incurring by the Company or any of its Subsidiaries of Debt, including, but
not limited to, Laws relating to common contract carriers of the sale of
electricity, gas, steam, water or other public utility services.
SECTION 7.26. SECURITIES LAWS. Assuming Shoeinvest's representations
made herein are true and correct, the offer, issuance and sale of the
Securities (a) are and will be exempt from the registration and prospectus
delivery requirements of the Securities Act, (b) have been registered or
qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable state
securities Laws, and (c) are and will be accomplished in conformity with all
other federal and applicable state securities Laws.
SECTION 7.27. BROKERS AND FINDERS. SCHEDULE 7.27 of the Disclosure
Schedule sets forth all arrangements (including amounts payable by the
Company or any of its Subsidiaries in connection therewith) pursuant to which
any Person has, or as a result of the Closing Transactions will have, any
right or valid claim against the Company or any of its Subsidiaries for any
commission, fee or other compensation as an investment banker, finder or
broker, or in any similar capacity. No Person engaged by the Company has or
will have any right or valid claim against Shoeinvest for any such
commission, fee or other compensation. The Company will indemnify and hold
Shoeinvest harmless against any liability or expense arising out of, or in
connection with, any such right or claim (including, without limitation,
claims arising out of the matters disclosed on SCHEDULE7.27 of the Disclosure
Schedule).
SECTION 7.28. SEC DOCUMENTS. The Company is current in its
obligations to file all periodic reports and proxy statements with the
Commission required to be filed under the Exchange Act. Shoeinvest has had
available to it a true and correct complete copy of each report, schedule,
Registration Statement and definitive proxy statement filed by the Company
with the Commission since October 4, 1993, and prior to the date of this
Agreement (the "SEC Documents"), which are all the documents (other than
preliminary material) that the Company was required to file with the
Commission since such date. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act
or the Exchange Act as the case may be, and the rules and regulations of the
Commission thereunder applicable to such SEC Documents, and none of the SEC
Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
SECTION 7.29. OIL AND GAS OPERATIONS. Except as set forth on
SCHEDULE 7.29 of the Disclosure
31
Schedule:
(a) All xxxxx included in the Oil and Gas Interests of the Company
or its Subsidiaries (the "Xxxxx") have been drilled and (if completed)
completed, operated and produced in accordance with generally accepted oil
and gas field practices and in compliance in all material respects with
applicable oil and gas leases and applicable laws, rules, regulations. The
Xxxxx have been drilled and completed within the limits permitted by
contract, pooling or unit agreement, and by law; and all drilling and
completion of the Xxxxx and all development and operations have been
conducted in compliance with all applicable laws, ordinances, rules,
regulations and permits, and judgments, orders and decrees of any court or
governmental body or agency. No Well is subject to penalties on allowables
because of any overproduction or any other violation of applicable laws,
rules, regulations or permits or judgments, orders or decrees of any court or
governmental body or agency that would prevent such Well from being entitled
to its full legal and regular allowable from and after the Closing Date as
prescribed by any court or governmental body or agency.
(b) There are no Xxxxx that
(i) the Company is currently obligated by law or
contract to plug and abandon;
(ii) the Company will be obligated by law or contract
to plug and abandon with the lapse of time or notice or both
because the Well is not currently capable of producing in
commercial quantities;
(iii) are subject to exceptions to a requirement to
plug and abandon issued by a regulatory authority having
jurisdiction over the applicable lease; or
(iv) to the best knowledge of the Company, have been
plugged and abandoned but have not been plugged in accordance
with all applicable requirements of each regulatory authority
having jurisdiction over the Oil and Gas Interests.
(c) With respect to the oil, gas and other mineral leases, unit
agreements, pooling agreements, communitization agreements and other
documents creating interests comprising the Oil and Gas Interests: (a) the
Company has fulfilled all requirements in all material respects for filings,
certificates, disclosures of parties in interest, and other similar matters
contained in (or otherwise applicable thereto by law, rule or regulation)
such leases or other documents and are fully qualified to own and hold all
such leases or other interests; (b) there are no provisions applicable to
such leases or other documents which increase the royalty share of the lessor
thereunder, and (c) upon the establishment and maintenance of production in
commercial quantities, the leases and other interest are to be in full force
and effect over the economic life of the property involved and do not have
terms fixed by a certain number of years.
(d) Proceeds from the sale of Hydrocarbons produced from the
Company's and its Subsidiaries' Oil and Gas Interests are being received by
the Company and its Subsidiaries in a timely manner and are not being held in
suspense for any reason (except for amounts, individually or in the
aggregate, not in excess of $100,000 and held in suspense in the ordinary
course of business).
32
(e) Seller is not obligated, by virtue of a prepayment arrangement,
a "take or pay" arrangement, a production payment or any other arrangement to
deliver Hydrocarbons produced from the Oil and Gas Interests at some future
time without then or thereafter receiving full payment therefor.
SECTION 7.30. FINANCIAL AND COMMODITY HEDGING. SCHEDULE7.30 of the
Disclosure Schedule accurately summarizes the outstanding Hydrocarbon and
financial hedging positions of the Company and its Subsidiaries (including
fixed price controls, collars, swaps, caps, xxxxxx and puts) as of the date
reflected on said Schedule. From the date of this Agreement to the date of
Closing, the Company and its Subsidiaries will not enter into any new hedging
positions without Shoeinvest's prior written consent.
SECTION 7.31. BOOKS AND RECORDS. All books, records and files of the
Company and its Subsidiaries (including those pertaining to the Company's or
its Subsidiaries' Oil and Gas Interests, xxxxx and other assets, those
pertaining to the production, gathering, transportation and sale of
Hydrocarbons, and corporate, accounting, financial and employee records) (a)
have been prepared, assembled and maintained in accordance with usual and
customary policies and procedures and (b) fairly and accurately reflect the
ownership, use, enjoyment and operation by the Company and its Subsidiaries
of their respective assets.
SECTION 7.32. RESERVE REPORT. To the knowledge of the Company, the
estimates of proved reserves of oil and natural gas prepared by Xxx Xxxxxxx &
Associates, Inc. and X. X. Xxxx and Associates, Inc. (together, the "Reserve
Engineer") as of December 31, 1998 (the "Reserve Report"): (i) are
reasonable; and (ii) were prepared in accordance with generally accepted
petroleum engineering and evaluation principles as set forth in the Standards
Pertaining to the Estimating and Auditing of Oil and Gas Reserve Information
promulgated by the Society of Petroleum Engineers. The engineering
information and production data used in the preparation of the Reserve
Report, which information and data have been available to Shoeinvest, are the
information and data which are used by the Company in good faith in the
ordinary course of business. The factual information underlying the estimates
of the reserves of the Company and the Subsidiaries, which was supplied by
the Company to the Reserve Engineers for the purpose of preparing the Reserve
Report, including, without limitation, production, volumes, sales prices for
production, contractual pricing provisions under oil or gas sales or
marketing contracts under hedging arrangements, costs of operations and
development, and working interest and net revenue information relating to the
Company's and the Subsidiaries' ownership interests in properties, was true
and correct in all material respects on the date of such Reserve Report; the
estimates of future capital expenditures and other future exploration and
development costs supplied to the Reserve Engineers were prepared in good
faith and with a reasonable basis; the information provided to the Reserve
Engineers for purposes of preparing the Reserve Report was prepared in
accordance with customary industry practices; other than normal production of
the reserves and intervening oil and gas price fluctuations, the Company is
not as of the date hereof and as of the Closing Date will not be, aware of
any facts or circumstances that would result in a materially adverse change
in the reserves in the aggregate, or the aggregate present value of future
net cash flows therefrom, as described in the Reserve Report.
SECTION 7.33. NATURE OF COMPANY ASSETS. The assets of the Company
and of the Subsidiaries consist solely of (i) reserves of oil and gas, rights
to reserves of oil and gas and associated exploration and production assets
with a fair market value not exceeding $500 million and (ii) other assets
with a fair market
33
value not exceeding $15 million. For purposes of this Section 7.33, the term
"associated exploration and production assets" shall have the meaning set
forth in Section 802.3 of the Rules promulgated pursuant to HSR Act.
SECTION 7.34. FULL DISCLOSURE. No information heretofore furnished
by or on behalf of the Company or any of its Subsidiaries to Shoeinvest for
the purposes of this Agreement or any other Transaction Document or any
transaction contemplated hereby or thereby, contained, and no written
information hereafter furnished by or on behalf of the Company or any of its
Subsidiaries to Shoeinvest for purposes of this Agreement or any other
Transaction Document or any transaction contemplated hereby or thereby will
contain, any untrue statement of a material fact or omit a material fact
necessary to make the statements therein not misleading. There is no fact or
circumstance known to the Company which may have a Material Adverse Effect on
the Company or any of its Subsidiaries which has not been disclosed to
Shoeinvest.
SECTION 7.35. YEAR 2000 COMPLIANCE. The Company's disclosure in its
Annual Report on Form 10-KSB for the year ended December 31, 1998 under the
heading "Year 2000 Compliance" accurately states the Company's statement of
readiness and contingency plans relative to the computer software which is
material to the conduct of the business and operations of the Company and its
Subsidiaries being capable of recording, storing, processing and presenting
calendar dates falling on or after January 1, 2000 in substantially the same
manner and with the same functionality as such software records, stores,
processes and presents such calendar dated falling on or before December 31,
1999.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF SHOEINVEST
In order to induce the Company to issue and sell the Securities to
Shoeinvest hereunder, Shoeinvest hereby represents and warrants to the
Company as follows:
SECTION 8.1. PARTNERSHIP EXISTENCE AND POWER. Shoeinvest (a) is a
limited partnership, duly organized, validly existing and in good standing
under the Laws of its jurisdiction of incorporation, (b) has all power and
authority necessary to carry on its business as now conducted and as proposed
to be conducted.
SECTION 8.2. PARTNERSHIP AND GOVERNMENTAL AUTHORIZATION;
CONTRAVENTION. The execution, delivery and performance of this Agreement and
the other Transaction Documents by Shoeinvest are within its powers, have
been duly authorized by all necessary action, require no action by or in
respect of, or filing with, any Governmental Authority (other than filings
with any applicable securities regulatory authorities to perfect exemptions
from the registration or qualification requirements of applicable securities
Laws and which will be made immediately following the Closing Date), and,
except for matters which have been waived in writing by the appropriate
Person, do not contravene, or constitute a default under, any provision of
applicable Law or of the Charter Documents or of any material judgment,
injunction, order, decree or Material Agreement binding upon Shoeinvest or
its assets, or result in the creation or imposition of any Lien on any asset
of Shoeinvest.
34
SECTION 8.3. BINDING EFFECT. This Agreement constitutes the valid
and binding agreement of Shoeinvest; each other Transaction Document when
executed and delivered in accordance with this Agreement, will constitute the
valid and binding obligation of Shoeinvest, in each case enforceable in
accordance with its terms except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar Laws affecting creditors rights
generally, and (ii) the availability of equitable remedies may be limited by
equitable principles of general applicability.
SECTION 8.4. BROKERS AND FINDERS. No Person engaged by Shoeinvest
has or will have any right or valid claim against the Company for any
commission, fee or other compensation. Shoeinvest will indemnify and hold the
Company harmless against any liability or expense arising out of, or in
connection with, any such right or claim.
SECTION 8.5. TAXES AND FILING OF TAX RETURNS. Shoeinvest has filed
all Tax returns required to have been filed by it or has legally extended
such returns and has paid all Taxes shown to be due and payable on such
returns, including interest and penalties, and all other Taxes which are
payable by Shoeinvest. Shoeinvest does not know of any proposed Tax
assessment against Shoeinvest and all Tax liabilities of Shoeinvest are
adequately provided for and no Tax liability of Shoeinvest has been asserted
by the Internal Revenue Service or any other Governmental Authority for Taxes
in excess of those already paid.
SECTION 8.6 INTENTIONALLY OMITTED.
ARTICLE IX
COVENANTS
SECTION 9.1. MAINTENANCE OF INSURANCE. The Company will, and will
cause each of its Subsidiaries to, at all times maintain or cause to be
maintained insurance issued by insurers of recognized responsibility covering
such risks and in such amounts as are customary in the case of companies of
established reputation engaged in the same or similar business and similarly
situated.
SECTION 9.2. PAYMENT OF TAXES AND CLAIMS. The Company will, and will
cause each of its Subsidiaries to, pay when due (a) all Taxes imposed upon it
or its respective assets and, with respect to its respective franchises,
business, income or profits, pay such Taxes before any material penalty or
interest accrues thereon, and (b) all material claims (including, without
limitation, claims for labor, services, materials and supplies) for sums
which have become due and payable; PROVIDED, however, no payment of Taxes or
claims shall be required if (i) the amount, applicability or validity thereof
is being contested in good faith by appropriate action promptly initiated and
diligently conducted in accordance with good business practices and no
material part of the property or assets of each holder of Securities is the
subject of any pending levy or execution, and (ii) the Company has notified
each holder of Securities of such circumstances in reasonable detail.
SECTION 9.3. COMPLIANCE WITH LAWS AND DOCUMENTS. The Company will,
and will cause each
35
of its Subsidiaries to, comply with the provisions of (a) all Laws, (b) its
Charter Documents, and (c) every Material Agreement to which the Company or
any of its Subsidiaries is a party or by which the Company's or any of its
Subsidiaries' properties are bound.
SECTION 9.4. OPERATION OF PROPERTIES AND EQUIPMENT. The Company
will, and will cause each of its Subsidiaries to, at all times, maintain,
preserve and keep all operating equipment used or useful in the operation of
their respective businesses in proper repair, working order and condition,
and make all necessary or appropriate repairs, renewals, replacements,
additions and improvements thereto so that the efficiency of such equipment
shall at all times be properly preserved and maintained; PROVIDED, that, no
item of operating equipment need be so repaired, renewed, replaced, added to
or improved, if the Company shall in good faith determine that such action is
not necessary or desirable for the continued efficient and profitable
operation of the Company's and its Subsidiaries' businesses.
SECTION 9.5. ADDITIONAL DOCUMENTS. The Company will, and will cause
each of its Subsidiaries to, cure promptly any defects in the creation and
issuance of the Securities, and the execution and delivery of this Agreement
and the other Transaction Documents, and, at the Company's sole expense,
promptly and duly execute and deliver, and cause each of its Subsidiaries to
promptly execute and deliver, to the holders of the Securities, upon
reasonable request, all such other and further documents, agreements and
instruments in compliance with or accomplishment of the covenants and
agreements of the Company and each of its Subsidiaries in this Agreement and
the other Transaction Documents, all as may be reasonably necessary or
appropriate in connection therewith.
SECTION 9.6. MAINTENANCE OF BOOKS AND RECORDS. The Company will, and
will cause each of its Subsidiaries to, maintain proper books of record and
account in which true and correct entries in conformity with GAAP shall be
made on a timely basis of all dealings and transactions in relation to the
Company's and its Subsidiaries' businesses and activities.
SECTION 9.7. ENVIRONMENTAL MATTERS.
(a) The Company will, and will cause each of its Subsidiaries to,
comply with all Environmental Law and Laws applicable to their respective
properties and operations, including, without limitation, all Hazardous
Substances transportation, storage, disposal, remediation and similar
requirements of applicable Environmental Law and Laws.
(b) Notwithstanding any other provision contained within this
Agreement or the other Transaction Documents, the Company shall immediately
orally notify each holder of Securities of any Hazardous Discharge or the
receipt of any Environmental Complaint relating to any property or assets
owned by the Company or any of its Subsidiaries or affecting any properties
or assets owned or leased by other Persons and shall furnish each holder of
Securities with written notice of such Hazardous Discharge or Environmental
Complaint within five (5) days of the oral notification.
SECTION 9.8 ACCESS TO INFORMATION. The Company will (and will cause
each of its Subsidiaries to) afford Shoeinvest and its representatives
(including without limitation directors, officers and employees
36
of Shoeinvest and its Affiliates, and counsel, accountants and other
professionals retained by Shoeinvest) such access, during normal business hours
throughout the period to the Closing Date, to the Company's books, records
(including without limitation Tax returns and non-restricted work papers of the
Company's independent auditors), properties, personnel and to such other
information as Shoeinvest may reasonably request and will permit Shoeinvest to
make such inspections as Shoeinvest may reasonably request and will cause the
officers of the Company and those of its Subsidiaries to furnish Shoeinvest with
such financial and operating data and other information with respect to the
business, properties and personnel of the Company and its Subsidiaries as
Shoeinvest may from time to time reasonably request, provided, however, that no
investigation pursuant to this section will affect or be deemed to modify any of
the representations or warranties made by the Company in this Agreement.
Shoeinvest will afford the Company and its representatives (including without
limitation directors, officers and employees of the Company and its Affiliates,
and counsel, accountants and other professionals retained by the Company) such
access, during normal business hours throughout the period to the Closing Date,
to Shoeinvest's books, records (including without limitation Tax returns and
non-restricted workpapers of Shoeinvest's independent auditors), properties,
personnel and to such other information as the Company may reasonably request
and will permit the Company to make such inspections as the Company may
reasonably request and will cause the officers of Shoeinvest to furnish the
Company with such financial and operating data and other information with
respect to the business, properties and personnel of Shoeinvest as the Company
may from time to time reasonably request, provided, however, that no
investigation pursuant to this section will affect or be deemed to modify any of
the representations or warranties made by Shoeinvest in this Agreement.
SECTION 9.9 CONDUCT OF THE BUSINESS OF THE COMPANY. Except as
contemplated by this Agreement or to the extent that Shoeinvest shall otherwise
consent in writing, during the period from the date of this Agreement to the
Closing, the Company will conduct its operations only in, and the Company will
not take any action except in the ordinary course of business and the Company
will use all reasonable efforts to preserve intact in all material respects its
business organizations, assets, prospects and advantageous business
relationships, to keep available the services of its officers and key employees
and to maintain satisfactory relationships with its licensors, licensees,
suppliers, contractors, distributors, customers and others having advantageous
business relationships with it. Without limiting the generality of the
foregoing, except as contemplated by this Agreement, the Company will not,
without the prior written consent of Shoeinvest:
(a) amend its Charter Documents;
(b) split, combine or reclassify any shares of its capital
stock, declare, pay or set aside for payment any dividend or other distribution
in respect of its capital stock, or directly or indirectly, redeem, purchase or
otherwise acquire any shares of its capital stock or other securities;
(c) authorize for issuance, issue, sell or deliver or agree or
commit to issue, sell, or deliver (whether through the issuance or granting of
any options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any of its capital stock or any securities convertible into or
exercisable or exchangeable for shares of its capital stock, except the Company
may, effective as of Closing, amend its Amended and Restated 1995 Stock Option
and Stock Appreciation Rights Plan to provide that options granted to optionees
prior to the date of this Agreement may be exercised for a one (1) year period
from the
37
following dates: (i) the date of termination of an optionee whose employment
with the Company is terminated without cause by the Company during the six (6)
month period commencing with Closing, (ii) the date of termination of an
optionee's employment whose employment with Company is terminated by employee
with "Good Reason" as defined in such employee's written employment agreement,
or, (iii) from the date of resignation of a director of the Company who resigns
at Closing; provided, that the form of any such amendment to such plan be
approved in writing by Shoeinvest.
(d) incur any material liability or obligation (absolute, accrued,
contingent or otherwise) other than in the ordinary course of business or issue
any debt securities or assume, guarantee, endorse or otherwise as an
accommodation become responsible for, the obligations of any other individual or
entity, or change any assumption underlying, or methods of calculating, any bad
debt, contingency or other reserve;
(e) enter into, adopt, or amend any employment agreement or
Pension Plan, or grant, or become obligated to grant, any increase in the
compensation payable or to become payable to any of its officers or directors or
any general increase in the compensation payable or to become payable to its
employees.
(f) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof or make any investment either by purchase of stock or securities,
contributions to capital, property transfer, or purchase of properties or assets
of any Person;
(g) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against on the Company Financial Statements or
subsequently incurred in the ordinary course of business, or disclosed pursuant
to this Agreement;
(h) acquire (including by lease) any material assets or properties
or dispose of, mortgage or encumber any material assets or properties, other
than in the ordinary course of business;
(i) waive, release, grant or transfer any material rights or
modify or change in any material respect any material existing license, lease,
contract or other document, other than in the ordinary course of business and
consistent with past practice; or
(j) take any action or agree, in writing or otherwise, to take any
of the foregoing actions or any action which would at any time make any
representation or warranty in Article VII untrue or incorrect.
SECTION 9.10 INTENTIONALLY OMITTED.
SECTION 9.11 INTENTIONALLY OMITTED.
ARTICLE X
38
DEFAULTS; TERMINATION
SECTION 10.1. EVENTS OF DEFAULT. If one or more of the following events
(collectively, "EVENTS OF DEFAULT" and individually, an "EVENT OF DEFAULT")
shall have occurred and be continuing:
(a) the Company shall fail to pay when due any principal or
interest on the Note;
(5) the Company shall fail to pay when due any fees, expenses,
reimbursements, indemnification payments or other monetary
obligations when due under any of the Transaction Documents
and such failure shall continue for ten (10) days following
the due date of such payment;
(6) the Company or any of its Subsidiaries shall commence a
voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its
Debts under any bankruptcy, insolvency or other similar Law
now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall fail
generally to pay its Debts as they become due, or shall take
any corporate action to authorize any of the foregoing; or
(7) an involuntary case or other proceeding shall be commenced
against the Company or any of its Subsidiaries seeking
liquidation, reorganization or other relief with respect to it
or its Debts under any bankruptcy, insolvency or other similar
Law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of sixty (60) days; or
an order for relief shall be entered against the Company under
the federal bankruptcy Laws as now or hereafter in effect;
then, so long as any such event is continuing, any Noteholder shall
without notice or demand of any kind (including, without limitation, notice of
intention to accelerate and acceleration) (unless any such notice is expressly
provided for herein or in the other Transaction Documents), all of which are
hereby waived, take any and all actions as may be permitted by the Transaction
Documents including, declaring the obligations in respect of the Note owned by
such Noteholder (including all accrued interest thereon) to be, and such
obligations shall thereupon become, immediately due and payable.
SECTION 10.2 TERMINATION. This Agreement may be terminated, whether
before or after approval of this Agreement by the stockholders of the Company,
at any time prior to the Closing:
39
(a) By mutual written consent of Shoeinvest and the Company;
(b) By Shoeinvest if (i) there has been a breach of the
representations and warranties made by the Company in this
Agreement or (ii) the Company has failed to comply in any
material respect with any of its covenants or agreements
contained in this Agreement and such failure has not been, or
cannot be, cured within a reasonable time after notice and
demand for cure thereof;
(c) By the Company if (i) there has been a breach of the
representations and warranties made by Shoeinvest in this
Agreement or (ii) Shoeinvest has failed to comply in any
material respect with any of the its covenants or agreements
contained in this Agreement and such failure has not been, or
cannot be, cured within a reasonable time after notice and
demand for cure thereof;
SECTION 10.3. EFFECT OF TERMINATION. If this Agreement is terminated by
either the Company or Shoeinvest pursuant to the provisions of SECTION 10.2,
this Agreement shall forthwith become void and there shall be no further
obligation on the part of any party hereto or its respective Affiliates,
directors, officers, or stockholders, except pursuant to, the provisions of
Section 11.3; provided, however, that a termination of this Agreement shall not
relieve any party hereto from any liability for damages incurred as a result of
a breach by such party of its representations, warranties, covenants, agreements
or other obligations hereunder occurring prior to such termination.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex, telecopy
or similar writing) and shall be given to such party at its address, telex or
telecopy number set forth on the signature pages hereof or such other address,
telex or telecopy number as such party may hereafter specify for the purpose by
notice to the other party. Each such notice, request or other communication
shall be effective (i) if given by telex or telecopy, when such telex or
telecopy is transmitted to the telex or telecopy number specified in this
SECTION 11.1 and the appropriate answer back is received or receipt is otherwise
confirmed, (ii) if given by mail, three (3) Business Days after deposit in the
mails with first class postage prepaid, addressed as aforesaid, or (iii) if
given by any other means, when delivered at the address specified in this
SECTION 11.1.
SECTION 11.2. NO WAIVERS. No failure or delay by any holder of
Securities in exercising any right, power or privilege hereunder or under any
other Transaction Document shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by Law or in any of the other Transaction Documents.
40
SECTION 11.3. EXPENSES; INDEMNIFICATION. (a) Except as provided in
SECTION 6.1(f), all expenses incurred in connection with this Agreement shall be
paid by the party incurring such expenses.
(b) The Company agrees to indemnify and hold harmless, Shoeinvest,
its shareholders and each subsequent holder of Securities and their respective
directors, officers, employees, agents, successors and assigns (collectively,
the "INDEMNIFIED PARTIES") from and against any and all liabilities, losses,
damages, costs and expenses of any kind (including, without limitation, the
reasonable fees and disbursements of counsel for the Indemnified Parties in
connection with any investigative, administrative or judicial proceeding,
whether or not any such Indemnified Party shall be designated a party thereto)
which may be incurred by any Indemnified Party relating to or arising out of
(a) this Agreement, the other Transaction Documents, the Closing Transactions
and all other transactions contemplated hereby or thereby.
(c) The Company further agrees to defend, indemnify and hold
harmless each Indemnified Party from and against any and all losses, liabilities
(including strict liability), damages (including for bodily injury and property
damage), costs, expenses (including attorneys' fees and environmental
consultants' expenses), relating to any of the properties or assets securing the
Obligations, that any Indemnified Party may incur in connection with any
Environmental Complaint or Hazardous Discharge or any violation of any
Environmental Law and Laws regardless of whether or not caused by, or within the
control of, the Company, or any of its Subsidiaries as tenant, sub-tenant or
prior owner or occupant of any of the properties or assets securing the
Obligations or any properties owned or leased by other parties, and regardless
of whether such claim is brought by Governmental Authorities or private parties.
This indemnity shall survive the repayment of the Obligations and the discharge
or release of any Lien granted hereunder or in any other Transaction Document.
(d) (i) Promptly after receipt by an Indemnified Party of notice
of the commencement of any action, suit or other proceeding against an
Indemnified Party with respect to which an Indemnified Party demands
indemnification hereunder, such Indemnified Party shall promptly notify the
Company in writing of the commencement thereof, provided that the failure to so
notify the Company shall not relieve it from any liability that it may have to
an Indemnified Party, except to the extent that such failure has materially
prejudiced the Company's ability to provide a defense in the proceeding. The
Company shall have the right to assume the defense of any such proceeding, but
the Indemnified Parties collectively shall have the right, at the expense of the
Company, to retain not more than one counsel of their choice to represent the
Indemnified Parties in such proceeding. The counsel for the Indemnified Parties
may participate in, but not control, the defense of such proceeding.
(ii) The indemnity provided for herein shall cover the amount
of any settlements entered into by an Indemnified Party in connection with any
claim for which an Indemnified Party may be indemnified hereunder; provided
that, no settlement binding on an Indemnified Party may be made without the
consent of an Indemnified Party and the Company (which consent shall not be
reasonably withheld).
(iii) Any indemnification hereunder shall be made no later than 45 days
after receipt by the Company of the written request of the Indemnified Party.
41
THE PARTIES RECOGNIZE THAT AN INDEMNITEE MAY BE ENTITLED TO
INDEMNIFICATION HEREUNDER FROM ACTS OR OMISSIONS THAT ARISE OUT OF OR RESULT
FROM THE ORDINARY, STRICT, SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH INDEMNITEE.
(e) Shoeinvest hereby covenants and agrees with the Company that
Shoeinvest shall indemnify the Company and hold it harmless from, against and in
respect of any and all costs, losses, claims, liabilities, fines, penalties,
damages and expenses (including interest which may be imposed in connection
therewith and court costs and reasonable fees and disbursements of counsel)
incurred by it resulting from any misrepresentation, breach of warranty or
nonfulfillment of any agreement, covenant or obligation by Shoeinvest made in
this Agreement (including without limitation any certificate or instrument
delivered in connection herewith.
SECTION 11.4. AMENDMENTS AND WAIVERS; SALE OF INTEREST. Any provision
of this Agreement and the other Transaction Documents may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by the
Company and (a) the Majority Noteholder and (b) the Majority Warrant Holder. The
Company hereby consents to any participation, sale, assignment, transfer or
other disposition which complies with ARTICLE V, at any time or times hereafter,
of any Securities, this Agreement and any of the other Transaction Documents, or
of any portion hereof or thereof, including, without limitation, Shoeinvest's
rights, title, interests, remedies, powers, and duties hereunder or thereunder,
subject to compliance with applicable Laws and the provisions of the Compass
Senior Debt Documents subject to the requirement that any such assignee,
transferee or purchaser shall agree in writing to become bound by the terms of
this Agreement and the other Transaction Documents.
SECTION 11.5. SURVIVAL. All representations, warranties and covenants
made by the Company herein or in any certificate or other instrument delivered
by it or in its behalf under the Transaction Documents shall be considered to
have been relied upon by Shoeinvest and shall survive the delivery to Shoeinvest
of such Transaction Documents and the purchase of the Securities, regardless of
any investigation made by or on behalf of Shoeinvest. All representations,
warranties and covenants made by Shoeinvest herein or in any certificate or
other instrument delivered by it or in its behalf under the Transaction
Documents shall be considered to have been relied upon by the Company and shall
survive the delivery to the Company of such Transaction Documents and the
purchase of the Securities, regardless of any investigation made by or on behalf
of the Company.
SECTION 11.6. LIMITATION ON INTEREST. Regardless of any provision
contained in the Transaction Documents, no Noteholder shall ever be entitled to
receive, collect, or apply, as interest on the Note, any amount in excess of the
Maximum Lawful Rate, and in the event any Noteholder ever receives, collects or
applies as interest any such excess, such amount which would be deemed excessive
interest shall be deemed a partial prepayment of principal and treated hereunder
as such; and if the Note is paid in full, any remaining excess shall promptly be
paid to the Company. In determining whether or not the interest paid or payable
under any specific contingency exceeds the Maximum Lawful Rate, the Company and
the Noteholder shall, to the extent permitted under applicable Law, (a)
characterize any nonprincipal payment as an expense, fee or premium rather than
as interest, (b) exclude voluntary prepayments and the effects thereof, and
(c) amortize, prorate, allocate and spread, in equal parts, the total amount of
the interest
42
throughout the entire contemplated term of the Note, so that the interest rate
is the Maximum Lawful Rate throughout the entire term of the Note; PROVIDED,
HOWEVER, that, if the unpaid principal balance thereof is paid and performed in
full prior to the end of the full contemplated term thereof, and if the interest
received for the actual period of existence thereof exceeds the Maximum Lawful
Rate, the Noteholder shall refund to the Company the amount of such excess and,
in such event, the Noteholder shall not be subject to any penalties provided by
any Laws for contracting for, charging, taking, reserving or receiving interest
in excess of the Maximum Lawful Rate.
SECTION 11.7. INVALID PROVISIONS. If any provision of the Transaction
Documents is held to be illegal, invalid, or unenforceable under present or
future Laws effective during the term thereof, such provision shall be fully
severable, the Transaction Documents 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. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision there shall be added automatically as a part of the
Transaction Documents a provision as similar in terms to such illegal, invalid,
or unenforceable provision as may be possible and be legal, valid and
enforceable.
SECTION 11.8. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign or
otherwise transfer any of its rights or obligations under this Agreement.
SECTION 11.9. GOVERNING LAW. THIS AGREEMENT AND THE TRANSACTION
DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF TEXAS.
SECTION 11.10. 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.
SECTION 11.11. NO THIRD PARTY BENEFICIARIES. Except as provided in
SECTION 11.3, it is expressly intended that there shall be no third party
beneficiaries of the covenants, agreements, representations or warranties herein
contained other than transferees or assignees of all or any part of Shoeinvest's
interest hereunder.
SECTION 11.12. FINAL AGREEMENT. THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS COLLECTIVELY REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
43
SECTION 11.13. SUBMISSION TO JURISDICTION; WAIVER OF SERVICE AND VENUE.
ANY SUIT, ACTION OR PROCEEDING BROUGHT BY Shoeinvest WITH RESPECT TO THIS
AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS MAY BE BROUGHT IN THE COURTS
OF THE STATE OF TEXAS, COUNTY OF DALLAS, OR IN THE FEDERAL COURTS LOCATED IN THE
NORTHERN DISTRICT OF TEXAS, AS SHOEINVEST MAY SELECT IN ITS SOLE DISCRETION. THE
COMPANY HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS FOR THE
PURPOSE OF ANY SUCH SUIT, ACTION OR PROCEEDING. THE COMPANY HEREBY IRREVOCABLY
WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OTHER TRANSACTION DOCUMENT BROUGHT IN THE COURTS LOCATED IN THE STATE OF
TEXAS, COUNTY OF DALLAS, AND HEREBY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN ANY INCONVENIENT
FORUM.
SECTION 11.14. WAIVER OF RIGHT TO TRIAL BY JURY. SHOEINVEST AND THE
COMPANY EACH HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT, ANY TRANSACTION
DOCUMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM IN RESPECT TO
THIS AGREEMENT. SHOEINVEST AND THE COMPANY EACH AGREE THAT THE OTHER MAY FILE A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
SECTION 11.15. PUBLIC ANNOUNCEMENTS. Except as may be required by
applicable Law or this Section, Shoeinvest shall not issue any press release or
otherwise make any public statement with respect to this Agreement or the
transactions contemplated hereby without the prior written consent of the
Company (which consent shall not be unreasonably withheld). Any such press
release or public statement required by applicable Law shall only be made after
reasonable notice to the other party. Upon execution of this Agreement, the
Company shall make a press release in a form previously approved by Shoeinvest
and promptly file a report on Form 8-K with the Commission.
44
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective Authorized Officers on the day and year first above
written.
COMPANY:
MIDDLE BAY OIL COMPANY, INC.
By: /s/ Xxxx X. Xxxxxxx
--------------------------
Name: Xxxx X. Xxxxxxx
--------------------------
Title: President
--------------------------
Address for Notice:
Middle Bay Oil Company, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Fax: (000) 000-0000
SHOEINVEST II, LP
By: Xxxxx X. Xxxxxxxxx Investments, Inc.
---------------------------------------
Its General Partner
By: /s/ Xxxxx Xxxxxxxxx
------------------------
Name: Xxxxx Xxxxxxxxx
------------------------
Title: Executive Vice President
------------------------
Address for Notice:
Shoeinvest II, LP
00 Xxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
45
EXHIBIT A
SENIOR SUBORDINATE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THIS NOTE
MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO A VALID EXEMPTION COVERING SUCH
TRANSFER.
$100,000 Dallas, Texas , 1999
----------------
FOR VALUE RECEIVED, the undersigned, MIDDLE BAY OIL COMPANY, INC, an
Alabama corporation ("MAKER" or the "COMPANY") hereby promises to pay to the
order of SHOEINVEST II, LP, a New Jersey limited partnership ("PAYEE"), not
later than 2:00 P.M. (Dallas, Texas time), on the date when due, in Federal or
other funds immediately available in Dallas, Texas, at Payee's offices at
00 Xxxxxxxxx Xxxx, Xxxxxxxx, XX 00000 or such other address, given to Maker by
Payee, the principal sum of ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000),
together with interest, as hereinafter described. Whenever any payment of
principal of, or interest on, this Note shall be due on a day which is not a
Business Day, the date for payment thereof shall be extended to the next
succeeding Business Day. If the date for payment of principal is extended by
operation of law or otherwise, interest thereon shall be payable for such
extended time.
This Note has been executed and delivered pursuant to, and is subject
to and governed by, the terms of that certain Securities Purchase Agreement
dated of even date herewith, by and between Maker and Payee (the "AGREEMENT").
This Note is the "Note" referred to in the Agreement. Unless otherwise defined
herein or unless the context hereof otherwise requires, each term used herein
with its initial letter capitalized has the meaning given to such term in the
Agreement.
This Note shall rank senior in right of payment to all Company notes
and indebtedness other than the Compass Senior Debt. This Note shall rank pari
passu with the 3TEC Note and that certain Senior Subordinate $50,000 Promissory
Note dated of even date herewith payable to the order of Xxxxxxxxx Family
Partners, LP, a New Jersey limited partnership, without any preference or
priority one over another.
Maker reserves the right to prepay without premium or penalty, after
thirty (30) days prior written notice to the Noteholder, the principal amount of
the Note, in whole or in part, at any time after _______________, 2001.
Maker promises to pay interest on the outstanding principal balance
hereof, prior to the occurrence of an Event of Default, at a rate per annum
equal to the lesser of (a) the Fixed Rate or (b) the Maximum Lawful Rate, in
Federal or other funds immediately available in Dallas, Texas, at the offices of
Payee above referenced. Interest shall accrue on the principal balance of the
Note outstanding from time to time at the Fixed Rate; PROVIDED, that, interest
shall accrue on any amounts past due and owing on the Note from the date due
until paid at the Default Rate; PROVIDED FURTHER, that in no event shall the
rate of interest charged hereunder exceed the Maximum Lawful Rate. Interest
shall be payable on the Note as it accrues on December 1, 1999 and continuing on
each March 1, June 1, September 1, and December 1 thereafter until maturity.
Whenever any payment of principal of, or interest on, the Note shall be due on a
day which is not a Business Day, the date for payment thereof shall be extended
to the next succeeding Business Day.
With respect to the first eight (8) quarterly interest payments payable
hereunder commencing with the first such quarterly interest payment, the Company
may, at least thirty (30) days prior to the subject payment date, elect to
accrue and add to the principal of the Note up to fifty percent (50%) of the
interest payment due and payable on such interest payment date. If such an
election is made, the Company shall notify the Noteholder of the portion (up to
50%) of such quarterly interest payment which the Company elects to accrue and
add to the principal of the Note.
Interest shall be computed on the Note on the basis of the number of
actual days elapsed, assuming that each calendar year consisted of 360 days. The
entire outstanding principal balance of this Note and all accrued but unpaid
interest thereon shall be due and payable in full in a single installment on
___________________, 2004.
A Noteholder may elect to convert all or any portion of the amount of
principal and accrued but unpaid interest on the Note as hereinafter provided.
Each $3.00 (the "Conversion Price") of principal and accrued but unpaid interest
on the Note shall be convertible into one share of Common Stock. The Conversion
Price is subject to adjustment from time to time upon the occurrence of any of
the events enumerated below:
1. In the event that the Company shall (a) declare a dividend
on the Common Stock in shares of its capital stock (whether
shares of such Common Stock or of capital stock of any
other class of the Company), (b) split or subdivide the
outstanding Common Stock, or (c) combine the outstanding
Common Stock into a smaller number of shares, then (as a
result of an event described in (a), (b) or (c)) the
Conversion Price shall be adjusted to equal the product of
the Conversion Price in effect immediately prior to such
event multiplied by a fraction the numerator of which is
equal to the number of shares of Common Stock outstanding
on a Fully Diluted Basis (as defined below) immediately
after the event and the denominator of which is equal to
the number of shares of Common Stock outstanding on a Fully
Diluted Basis immediately prior to such event.
[Remainder of this page intentionally blank]
2. In the event that the Company shall (a) issue any shares of
Common Stock without consideration or at a price per share
less than the Conversion Price immediately prior to such
issuance, or (b) issue options, rights or warrants to
subscribe for or purchase such Common Stock (or securities
convertible into such Common Stock) without consideration
or at a price per share (or having a conversion price per
share, if a security convertible into such Common Stock)
less than the Conversion Price, then, effective upon such
issuance, the Conversion Price shall be adjusted to equal
the product obtained by multiplying the Conversion Price in
effect immediately prior to the date of such issuance by a
fraction, the numerator of which shall be the number of
shares of Common Stock outstanding on a Fully Diluted Basis
immediately prior to such issuance PLUS the number of
shares of Common Stock which the aggregate offering price
of the total number of shares of such Common Stock so
to be issued or to be offered for subscription or purchase
(or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase at
the Conversion Price immediately prior to such issuance,
and the denominator of which shall be the number of shares
of Common Stock outstanding on a Fully Diluted Basis
immediately after such issuance. In case such consideration
may be paid in a consideration part or all of which shall
be in a form other than cash, the value of such
consideration shall be as determined by an investment
banking firm reasonably acceptable to the Noteholder (the
cost of the engagement of said investment banking firm to
be borne by the Company). Shares of such Common Stock owned
by or held for the account of the Company or any Subsidiary
thereof shall not be deemed outstanding for the purpose of
any such computation. Such adjustment shall be made
successively whenever the date of such issuance is fixed
(which date of issuance shall be the record date for such
issuance if a record date therefor is fixed); and, in the
event that such shares or options, rights or warrants are
not so issued, the Conversion Price shall again be adjusted
to be the Conversion Price if the date of such issuance had
not been fixed.
3. In case the Company shall make a distribution to all
holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which
the Company is the surviving corporation) of shares of it
stock, evidences of its indebtedness, assets, or rights,
options or warrants (other than those referred to in
paragraph 2 above) to subscribe for or purchase such
shares, evidences of indebtedness, or assets, then,
effective upon such distribution, the Conversion Price
shall be adjusted to equal the product obtained by
multiplying the Conversion Price in effect immediately
prior to the date of such distribution by a fraction, the
numerator of which shall be the Per Share Stock Price for
the trading day immediately preceding the day of
distribution ("Pre-Distribution Price") less the fair
market value of the distribution (as determined in good
faith by the Board of Directors of the Company) applicable
to one share of Common Stock, and the denominator of which
shall be the Pre-Distribution Price. Such adjustment shall
be made successively whenever a date for such distribution
is fixed (which date of distribution shall be the record
date for such issuance if a record date therefor is fixed);
and, if such distribution is not so made, the
Conversion Price shall again be adjusted to be to be the
Conversion Price if the date of such issuance had not been
fixed.
4. No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or
decrease of at least one-tenth of one percent (.1%) in the
total number of shares of Common Stock that would be issued
as a result of the conversion of all the Note; PROVIDED
that any adjustments which by reason of this section are
not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations
under this section shall be made to the nearest hundredth
of one percent.
5. In the event of any capital reorganization of the Company,
or of any reclassification of any Common Stock for which
the Note is convertible (other than a subdivision or
combination of outstanding shares of such Common Stock), or
in case of the consolidation of the Company with or the
merger of the Company with or into any other corporation or
of the sale of the properties and assets of the Company as,
or substantially as, an entirety to any other entity, each
$3.00 of principal and unpaid interest outstanding of the
Note shall after such capital reorganization,
reclassification of such Common Stock, consolidation,
merger or sale be convertible, upon the terms and
conditions specified in this Agreement, into the number of
shares of stock or other securities or assets to which a
holder of the number of shares of Common Stock into which
amount of principal and interest payable under the Note is
convertible (at the time of such capital reorganization,
reclassification of such Common Stock, consolidation,
merger or sale) would have been entitled upon such capital
reorganization, reclassification of such Common Stock,
consolidation, merger or sale; and in any such case, if
necessary, the provisions set forth in this section with
respect to the rights thereafter of such Note shall be
appropriately adjusted so as to be applicable, as nearly as
may reasonably be, to any shares of stock or other
securities or assets thereafter deliverable upon the
conversion of the Note. The Company shall not effect any
such consolidation, merger or sale, unless prior to or
simultaneously with the consummation thereof, the successor
corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such
assets or the appropriate corporation or entity shall
assume, by written instrument, the obligation to deliver to
the Noteholder the shares of stock, securities or assets to
which, in accordance with the foregoing provisions, such
Noteholder may be entitled pursuant to this section.
6. If any question shall at any time arise with respect to the
Conversion Price or the number of shares issuable upon
conversion of the Note, such question shall be determined
by the independent firm of certified public accountants of
recognized national standing selected by the Noteholder and
acceptable to the Company.
7. Notwithstanding anything in this section to the contrary,
the Company shall not be permitted to take any action
described in this section, if such action is
prohibited under any other provision of this Note or the
Agreement.
If a Noteholder elects to convert all or a portion of the outstanding
principal and accrued and unpaid interest under the Note, then the Noteholder
shall deliver the Note to the Company in exchange for an amended and restated
note setting forth the new amount of principal and accrued and unpaid interest.
Upon such exchange, the Company shall promptly issue and deliver, or cause to be
issued and delivered, to the Noteholder a certificate or certificates for the
number of whole shares of Common Stock to which the Noteholder is entitled under
the terms hereof. To the extent permitted by law, such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such exchange of the Notes for the amended and restated note and Conversion
Shares, and the Noteholder shall be treated for all purposes as the record
holder of such shares of Common Stock on such date.
No fractional shares or script of Common Stock shall be issued upon
conversion of all or a portion of the outstanding principal and accrued unpaid
interest of the outstanding principal and accrued unpaid interest under the
Note. In lieu of a fractional share of Common Stock to which the holder would
otherwise be entitled, the Company shall pay cash equal to the product of such
fraction multiplied by the market value of one share of Common Stock on the date
of conversion.
Upon the occurrence and during the continuance of an Event of Default,
and upon the conditions stated in the Agreement, the holder hereof may, at its
option, declare the entire unpaid principal of and accrued interest on this Note
immediately due and payable (provided that, upon the occurrence of certain
Events of Default, and upon the conditions stated in the Agreement, such
acceleration shall be automatic), without notice, demand, or presentment, all of
which are hereby waived, and the holder hereof shall have the right to offset
against this Note any sum or sums owed by the holder hereof to Maker. After the
occurrence of an Event of Default, interest shall accrue on the outstanding
principal balance of this Note and, to the extent permitted by applicable Law,
on accrued but unpaid interest, at the lesser of (a) the Default Rate or (b) the
Maximum Lawful Rate.
After the occurrence of an Event of Default, all amounts collected or
received by any Noteholder in respect of the Obligations shall be applied first,
to the payment of all proper costs incurred by the Noteholder in connection with
the collection thereof (including reasonable fees, expenses and disbursements of
counsel for the Noteholder), second, to the reimbursement of any advances made
by Noteholder to effect performance of any unperformed covenants of the Company
under any of the Transaction Documents, third, to the payment of all accrued
interest on the Note, fourth, to unpaid principal on the Note, and fifth to the
Company or any other Person entitled to such proceeds under applicable Law.
If this Note is placed in the hands of an attorney for collection, or
if it is collected through any legal proceedings, Maker agrees to pay the court
costs, reasonable attorneys' fees, and other costs of collection of the holder
hereof.
Maker, and each surety, endorser, guarantor, and other party ever
liable for payment of any sums of money payable on this Note, jointly and
severally waive presentment and demand for payment, protest, notice of protest
and nonpayment, and notice of acceleration and the intention to accelerate, and
agree that their liability on this Note shall not be affected by any renewal or
extension in the time of payment hereof, by any indulgences, or by any release
or change in any security for the payment of this Note, and hereby consent
to any and all renewals, extensions, indulgences, releases, or changes,
regardless of the number of such renewals, extensions, indulgences, releases or
changes.
THIS NOTE AND THE OTHER TRANSACTION DOCUMENTS COLLECTIVELY REPRESENT
THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
MIDDLE BAY OIL COMPANY, INC.
By:
-------------------------
Name: Xxxx X. Xxxxxxx
Title: President
EXHIBIT "B"
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") dated as of
________________, 1999, is entered into by and among MIDDLE BAY OIL COMPANY,
INC., an Alabama corporation ("Corporation") and the parties listed on Schedule
1 attached hereto and incorporated herein by reference (each of such parties are
referred to individually as "Shareholder" and collectively, as "Shareholders")
and the parties listed on Schedule 2 attached hereto and incorporated herein by
reference (each of such parties are referred to individually as "Piggy-Back
Shareholder" and collectively, as "Piggy-Back Shareholders").
RECITALS
WHEREAS, pursuant to those
Securities Purchase Agreements by and between Corporation and each of the
Shareholders executed on ______________, 1999 (the "Purchase Agreements"), each
Shareholder will receive the number of shares of Common Stock, Notes and
Warrants as set forth on Schedule 1.
WHEREAS, each of the Piggy-Back
Shareholders currently owns shares of Common Stock as set forth on Schedule 2.
WHEREAS, as a condition to the
Purchase Agreements, Corporation has agreed to grant to Shareholders certain
registration rights with respect to their Registrable Securities (defined
hereafter) and has agreed to grant the Piggy-Back Shareholders certain
registration rights with respect to their Piggy-Back Registrable Securities
(defined hereafter).
WHEREAS, all the terms used but not
defined in this Agreement shall have the meaning ascribed to them in the
Purchase Agreements.
NOW, THEREFORE, in consideration of
the mutual promises contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. DEFINITIONS.
For purposes of this Agreement, the
following terms shall have the respective meanings assigned to them in this
Section 1 or in the recitals above or the subsections referred to below.
"Piggy-Back Registrable Securities"
shall mean (i) the shares of Common Stock owned by each Piggy-Back Shareholder
as listed on Schedule 2 (ii) the shares of Common Stock owned by each Piggy-Back
Shareholder during the term of this Agreement as a result of the conversion of
the shares of the Company's Series B Convertible Preferred Shares as listed on
Schedule 2, and (iii) any securities issued or issuable with respect to the
shares described in clauses (i) and (ii) above by way of a stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization.
"Registrable Securities" shall mean
(i) the shares of Common Stock issued to the Shareholders pursuant to the
Purchase Agreements (which, for purposes hereof, shall mean
the Common Stock Shares, the Warrant Shares and the Conversion Shares as defined
in the Purchase Agreements) and (ii) any securities issued or issuable with
respect to the shares described in clause (i) above by way of a stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization.
Section 2. INDEPENDENT REGISTRATION RIGHTS.
2.1 The Corporation hereby grants to
each Shareholder separate rights to require the Corporation to use its best
efforts to cause registration and sale in a public offering of all or a portion
of such Shareholder's Registrable Securities in accordance with this Section 2;
provided, however, the Corporation shall not have any obligation to effect more
than a total of three (3) effective registrations pursuant to this Section 2 at
the Corporation's expense. If the Corporation shall have received a written
request submitted by Shareholder(s) owning at least a majority of the
Registrable Securities outstanding at the time of such request (the "Requisite
Holders") that such Shareholder(s) desires/desire to sell Registrable Securities
and specifying the number of Registrable Securities proposed to be sold (for the
purposes of this Section 2, "Shares") and the proposed plan for distribution of
the Shares, Corporation will thereafter:
2.1.1 Give prompt (but in any event
within fifteen (15) days after the receipt of the Requisite Holder(s)' notice)
notice to all other Shareholders of such notice and of such other Shareholders'
rights to have their Registrable Securities included in such registration.
2.1.2 Upon the request of any such
Shareholder made within fifteen (15) days after the receipt by such Shareholder
of any such notice given pursuant to subsection 2.1.1 (which request shall
specify the Registrable Securities intended to be disposed of by such
Shareholder and the intended method or methods of disposition thereof), the
Corporation will use its best efforts to effect the registration of all Shares
which the Corporation has been so requested to register pursuant to this
subsection 2.1.
2.1.3 Prepare and file as soon as
practicable, but in no event later than thirty (30) days from Corporation's
receipt of the last Shareholder's request to have such Shareholder's Registrable
Securities included in such registration within the time period specified in
Section 2.1.2, a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") ("Registration Statement") with the Securities
Exchange Commission ("Commission") on Form S-1 (or Form S-2 or Form S-3, if
Corporation is entitled to use such forms, or similar forms available for use by
small business issuers) and use its best efforts to cause such Registration
Statement to become effective in order that the Shareholders may sell the Shares
in accordance with the proposed plan of distribution.
2.1.4 Prepare and file with the
Commission such amendment and supplements to such Registration Statement and
prospectus used in connection therewith including any preliminary prospectus or
supplemental or amended prospectus (the "Prospectus") as may be necessary to
keep such Registration Statement continuously effective and to comply with the
provisions of the Securities Act with respect to the offer of the Shares during
the period required for distribution of the Shares, which period shall not be in
excess of the earlier of (i) one year from the effective date of such
Registration Statement, and (ii) the distribution of all Shares covered by such
Registration Statement.
2.1.5 Furnish to each Shareholder
such number of copies of the Prospectus (including any preliminary prospectus or
supplemental or amended prospectus ) as such Shareholder may reasonably request
in order to facilitate the sale and distribution of the Shares.
2.2 The right of each Shareholder to register
Shares
pursuant to the provisions of this Section 2 shall be subject to the
condition that if a request for registration is made within sixty (60) days
prior to the conclusion of Corporation's then current fiscal year,
Corporation shall have the right to delay the filing of the Registration
Statement for such period of time until Corporation receives its audited
financial statements for such fiscal year.
2.3 If the Requisite Holder(s) intend/intends
to distribute the Registrable Securities covered by the notice pursuant to
subsection 2.1 by means of an underwriting, the Requisite Holder(s) shall so
advise the Corporation as a part of the notice made pursuant to subsection 2.1
and provide the name of the managing underwriter or underwriters that the
Requisite Holder(s) proposes/propose to employ in connection with the public
offering proposed to be made pursuant to the registration requested. If the
managing underwriter of such underwritten offering shall inform the Corporation
and the Shareholders requesting that their Shares be registered pursuant to this
Section 2 by letter of its belief that the amount of Shares requested to be
included in such registration exceeds the amount which can be sold in (or during
the time of) such offering within a price range acceptable to the Requisite
Holders, then the Corporation will include in such registration such amount of
Shares which the Corporation is so advised can be sold in (or during the time
of) such offering PRO RATA on the basis of the amount of such Shares so proposed
to be sold and so requested to be included by such parties.
2.4 A registration shall not be deemed to have
been effected (i) unless it has become effective and remained effective for the
period specified in subsection 2.1.4, (ii) if, after it has become effective,
such registration is terminated by a stop order, injunction or other order of
the Commission or other governmental agency or court, or (iii) if the conditions
to closing specified in any purchase agreement or underwriting agreement entered
into in connection with such registration are not satisfied for any reason,
other than as a result of the voluntary termination of such offering by the
Requisite Holders.
Section 3. PIGGY-BACK REGISTRATION RIGHTS.
3.1 If Corporation proposes to file, on its
behalf, a Registration Statement under the Securities Act on Form X-0, X-0 or
S-3 or similar forms available for use by small business issuers, other than
pursuant to Section 2 of this Agreement or in connection with a dividend
reinvestment, employee stock purchase, option or similar plan or in connection
with a merger, consolidation or reorganization, Corporation shall give written
notice to each Shareholder and Piggy-Back Shareholder at least thirty (30) days
before the filing with the Commission of such Registration Statement. Such
notice shall offer to include in such filing all or a portion of the Registrable
Securities and Piggy-Back Registrable Securities owned by such Shareholder or
Piggy-Back Shareholder. If a Shareholder or Piggy-Back Shareholder desires to
include all or a portion of its Registrable Securities or Piggy-Back Registrable
Securities in such Registration Statement, it shall give written notice to
Corporation within fifteen (15) days after the date of mailing of such offer
specifying the amount of Registrable Securities and/or Piggy-Back Registrable
Securities to be registered (for the purpose of this Section 3, "Shares").
Corporation shall thereupon include in such filing the Shares, subject to
priorities in registration set forth in this Agreement, and subject to its right
to withdraw such filing, and shall use its best efforts to effect registration
under the Securities Act of the Shares.
3.2 The right of the Shareholders and the
Piggy-Back Shareholders to have the Shares included in any Registration
Statement in accordance with the provisions of this Section 3 shall be subject
to the following conditions:
3.2.1 Corporation shall have the
right to require that each Shareholder or Piggy-Back Shareholder agree to
refrain from offering or selling any shares of Common Stock that it owns which
are not included in any such Registration Statement in accordance with this
Section 3 for any reasonable time period specified, not to exceed ninety (90)
days, by any managing underwriter of the offering to which
such Registration Statement relates.
3.2.2 If (i) a registration pursuant
to this Section 3 involves an underwritten offering of the securities being
registered to be distributed (on a firm commitment basis) by or through one or
more underwriters of recognized standing under underwriting terms appropriate
for such a transaction and (ii) the managing underwriter of such underwritten
offering shall inform the Corporation and the Shareholders and Piggy-Back
Shareholders who have requested that their Shares be registered pursuant to this
Section 3 by letter of its belief that the amount of Shares requested to be
included in such registration exceeds the amount which can be sold in (or during
the time of) such offering within a price range acceptable to a majority of such
requesting holders, then the Corporation will include in such registration such
amount of securities which the Corporation is so advised can be sold in (or
during the time of) such offering as follows: FIRST, the securities being
offered by the Corporation for its own account; SECOND such Shares of the
Shareholders which are requested to be included in such registration PRO RATA on
the basis of the amount of such Shares so proposed to be sold and so requested
to be included by such Shareholders; and THIRD, such Shares of the Piggy-Back
Shareholders and which are requested to be included in such registration
PRO RATA on the basis of the amount of such Shares so proposed to be sold and so
requested to be included by such Piggy-Back Shareholders.
3.2.3 Corporation shall furnish each
Shareholder and Piggy-Back Shareholder with such number of copies of the
Prospectus as such Shareholder or Piggy-Back Shareholder may reasonably request
in order to facilitate the sale and distribution of its shares.
3.3 Notwithstanding the foregoing, Corporation
in its sole discretion may determine not to file the Registration Statement or
proceed with the offering as to which the notice specified herein is given
without liability to the Shareholders or the Piggy-Back Shareholders.
Section 4. PARTICIPATION IN UNDERWRITTEN
REGISTRATIONS. No Shareholder or Piggy-Back Shareholder may participate in any
registration hereunder which relates to an underwritten offering unless such
Shareholder or Piggy-Back Shareholder (a) agrees to sell such holder's
securities on the basis provided in any underwriting arrangements approved by
the holders of at least a majority of the Registrable Securities and Piggy-Back
Registrable Securities to be included in such registration, or by a Person
appointed by such holders to act on their behalf to approve such arrangements,
and (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements.
Section 5. EXCLUSIVE REGISTRATION RIGHTS AND
TRANSFER.
The rights of each Shareholder under
this Agreement may upon notice to the Corporation be transferred to its
respective Affiliates in combination with a transfer of shares to such
Affiliates. In addition, the rights of each Shareholder under this Agreement may
upon notice to the Corporation be transferred to a non-Affiliate transferee in
combination with a transfer of shares to such non-Affiliate transferee. However,
such non-Affiliate transferee may not thereafter transfer its rights under this
Agreement without the Corporation's written consent. Except as provided in this
Section 5, the rights granted under this Agreement are granted specifically to
and for the benefit of each Shareholder and Piggy Back Shareholder and shall not
pass to any transferee of Registrable Securities. From and after the date of
this Agreement, the Corporation will not, without the prior written consent of
Shareholders holding at least a majority of the Registrable Securities then
outstanding, enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the Shareholders in this
Agreement. Without limiting the foregoing, the Corporation also specifically
agrees that during the period commencing on the date hereof and ending when the
Shareholders have disposed of all of their Registrable Securities,
the Corporation will not enter into an agreement with any party pertaining to
the registration by the Corporation of such party's Common Stock. The
Corporation represents and warrants to each of the Shareholders that, as of the
date hereof, the Corporation is not a party to any agreement, other than this
Agreement, pertaining to the registration by the Corporation of Common Stock.
Section 6. EXPENSES. Corporation will bear all
the expenses in connection with any Registration Statement under this Agreement,
other than transfer taxes payable on the sale of such shares, the fees and
expenses of counsel to the Shareholders and Piggy-Back Shareholders and fees and
commissions of brokers, dealers and underwriters.
Section 7. RECALL OF PROSPECTUSES, ETC. With
respect to a Registration Statement or amendment thereto filed pursuant to this
Agreement, if, at any time, Corporation notifies the Shareholders and Piggy-Back
Shareholders that an amendment or supplement to such Registration Statement or
amendment to the Prospectus included therein is necessary or appropriate, each
Shareholder and Piggy-Back Shareholder will forthwith cease selling and
distributing shares thereunder and will forthwith redeliver to Corporation all
copies of such Registration Statement and Prospectuses then in its possession or
under its control. Corporation will use its best efforts to cause any such
amendment or supplement to become effective as soon as practicable and will
furnish each Shareholder and Piggy-Back Shareholder with a reasonable number of
copies of such amended or supplemented prospectus (and the period during which
Corporation is required to use its best efforts to maintain such Registration
Statement in effect pursuant to this Agreement will be increased by the period
from the date on which such Shareholder or Piggy-Back Shareholder ceased selling
and distributing shares thereunder to the date on which such amendment or
supplement becomes effective).
Section 8. COOPERATION WITH EXISTING
SHAREHOLDERS. Corporation shall be entitled to require the Shareholders and
Piggy-Back Shareholders to cooperate with Corporation in connection with a
registration of Registrable Securities pursuant to this Agreement and furnish
(i) such information as may be required by Corporation or the Commission in
connection therewith and (ii) such representations, undertakings and agreements
as may be required by the Commission in connection therewith.
Section 9. REGISTRATION PROCEDURE Upon the
receipt of a request for registration of any Registrable Securities pursuant to
Section 2 or Section 3 of this Agreement, Corporation will use its best efforts
to effect the registration of the Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto Corporation will as
expeditiously as possible:
9.1.1 Prepare and file with the Commission a
registration statement on an appropriate form under the Securities Act and use
its best efforts to cause such registration statement to become effective;
provided, that before filing a registration statement or prospectus or any
amendments or supplements thereto, including documents incorporated by reference
after the initial filing of any registration statement, Corporation will
promptly furnish to the holders of Registrable Securities and Piggy-Back
Registrable Securities to be registered and sold pursuant to this Agreement (the
"Registered Holders") and the underwriters, if any, copies of all such documents
proposed to be filed, which documents will be subject to the review of the
Registered Holders and the underwriters, and Corporation will not file any
registration statement or amendment thereto, or any prospectus or any supplement
thereto (including such documents incorporated by reference) to which the
Registered Holders or the underwriters, if any, shall reasonably object in the
light of the requirements of the Securities Act and any other applicable laws
and regulations.
9.1.2 Prepare and file with the Commission such
amendments and post-effective amendments to a registration statement as may be
necessary to keep such registration statement effective for the applicable
period; cause the related prospectus to be filed pursuant to Rule 424(b) (or any
successor provision) under the Securities Act; cause such prospectus to be
supplemented by any required prospectus supplement and, as so supplemented, to
be filed pursuant to Rule 424(b) (or any successor provision) under the
Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement during the applicable period in accordance with the intended methods
of disposition set forth in such registration statement or supplement to such
prospectus.
9.1.3 Notify the Registered Holders and the
managing underwriters, if any, promptly, and (if requested by any such person)
confirm such advice in writing, (i) when a prospectus or any prospectus
supplement or post-effective amendment has been filed, and, with respect to a
registration statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the Commission for amendments or supplements
to a registration statement or related prospectus or for additional information,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of a registration statement or the initiation of any proceeding
for that purpose, (iv) if at any time the representations and warranties of
Corporation contemplated by subsection 9.1.10 cease to be true and correct,
(v) of the receipt by Corporation of any notification with respect to the
suspension or qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation of any proceeding for such purpose, (vi) of the
happening of any event which requires the making of any changes in a
registration statement or related prospectus so that such documents will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and (vii) of Corporation's reasonable determination that a
post-effective amendment to a registration statement would be appropriate or
that there exist circumstances not yet disclosed to the public which make
further sales under such registration statement inadvisable pending such
disclosures and post-effective amendment.
9.1.4 Make reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of a registration
statement, or the lifting of any suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction, at the earliest possible
moment.
9.1.5 If requested by the managing underwriters
or the Registered Holders in connection with an underwritten offering,
immediately incorporate in a prospectus supplement or post effective amendment
such information as the managing underwriters and the Registered Holders agree
should be included therein relating to such sale and distribution of Registrable
Securities, including, without limitation, information with respect to the
number of shares of Registrable Securities being sold to such underwriters and
the purchase price being paid therefor by such underwriters and with respect to
any other terms of the underwritten (or best efforts underwritten) offering of
the Registrable Securities to be sold in such offering; make all required
filings of such prospectus supplement or post-effective amendment as soon as
notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and supplement or make amendments to any registration
statement if requested by the Registered Holders or any underwriter of such
Registrable Securities.
9.1.6 Furnish to the Registered Holders and
each managing underwriter, if any, without charge, at least one signed copy of
the registration statement, any post-effective amendment thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference).
9.1.7 Deliver without charge to the Registered
Holders and the underwriters, if any, as many copies of the prospectus or
prospectuses (including each preliminary prospectus) and any amendment or
supplement thereto as such persons may reasonably request; and Corporation
consents to the use of such prospectus or any amendment or supplement thereto by
such Registered Holders and the underwriters, if any, in connection with the
offer and sale of the Registrable Securities covered by such prospectus or any
amendment or supplement thereto.
9.1.8 Prior to any public offering of
Registrable Securities, register or qualify or cooperate with the Registered
Holders, the underwriters, if any, and respective counsel in connection with the
registration or qualification of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as the Registered
Holders or an underwriter reasonably requests in writing; keep each such
registration or qualification effective during the period such registration
statement is required to be kept effective and do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions of
the Registrable Securities covered by the applicable registration statement;
PROVIDED, HOWEVER, that Corporation will not be required in connection therewith
or as a condition thereto to qualify generally to do business or subject itself
to general service of process in any such jurisdiction where it is not then so
subject.
9.1.9 Upon the occurrence of any event
contemplated by subsection 9.1.3 (ii) - (vii) above, prepare, to the extent
required, a supplement or post-effective amendment to the applicable
registration statement or related prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchaser of the Registrable Securities being sold thereunder,
such prospectus will not contain an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not
misleading.
9.1.10 Enter into such agreements (including an
underwriting agreement) and take all such other actions in connection therewith
in order to expedite or facilitate the disposition of such Registrable
Securities and in such connection, whether or not an underwriting agreement is
entered into and whether or not the Registrable Securities to be covered by such
registration are to be offered in an underwritten offering: (i) make such
representations and warranties to the Registered Holders to the registration
statement, prospectus and documents incorporated by reference, if any, in form,
substance and scope as are customarily made by issuers to underwriters in
underwritten offerings and confirm the same if and when requested; (ii) obtain
opinions of counsel to Corporation and updates thereof with respect to the
registration statement and the prospectus in the form, scope and substance which
are customarily delivered in underwritten offerings; (iii) in the case of an
underwritten offering, enter into an underwriting agreement in form, scope and
substance as is customary in underwritten offerings and obtain opinions of
counsel to Corporation and updates thereof (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to the managing
underwriters and the Registered Holders) addressed to the Registered Holders and
the underwriters, if any, covering the matters customarily covered in opinions
delivered in underwritten offerings and such other matters as may be reasonably
requested by the Registered Holders and such underwriters; (iv) obtain "cold
comfort" letters and updates thereof from Corporation's independent certified
public accountants addressed to the Registered Holders and the underwriters, if
any, such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters by accountants in connection with
underwritten offerings; (v) if any underwriting agreement is entered into, the
same shall set forth in full the indemnification provisions and procedures
customarily included in underwriting agreements in underwritten offerings; and
(vi) Corporation shall deliver such documents and certificates as may be
requested by the Registered Holders and the managing underwriters, if any, to
evidence compliance with clause (i) above and with any customary conditions
contained in the underwriting agreement or other agreement entered into by
Corporation. The above shall be done at each closing under such underwriting or
similar agreement or as and to the extent required thereunder.
9.1.11 Make available for inspection by a
representative of the Registered Holders, any underwriter participating in any
disposition pursuant to such registration, and any attorney or accountant
retained by the Registered Holders or such underwriter, all financial and other
records, pertinent corporate documents and properties of Corporation, and cause
Corporation's officers, directors and employees to supply all information
reasonably requested by any such representative, underwriter, attorney or
accountant in connection with such registration; provided that any records,
information or documents that are designated by Corporation in writing as
confidential shall be kept confidential by such Persons unless disclosures of
such records, information or documents is required by court or administrative
order.
9.1.12 Otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission and make generally
available to its security holders earning statements satisfying the provisions
of Section 11(a) of the Securities Act, no later than 90 days after the end of
any 12-month period (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm or best efforts
underwritten offering and (ii) beginning with the first day of Corporation's
first fiscal quarter next succeeding each sale of Registrable Securities after
the effective date of a registration statement, which statements shall cover
said 12-month periods.
9.1.13 If Corporation, in the exercise of its
reasonable judgment, objects to any change reasonably requested by the
Registered Holders or the underwriters, if any, to any registration statement or
prospectus or any amendments or supplements thereto (including documents
incorporated or to be incorporated therein by reference) as provided for in this
Section 9, Corporation shall not be obligated to make any such change and such
Registered Holders may withdraw their Registrable Securities from such
registration, in which event (i) Corporation shall pay all registration expenses
(including its counsel fees and expenses) incurred in connection with such
registration statement or amendment thereto or prospectus or supplement thereto,
and (ii) in the case of a registration being effected pursuant to Section 2,
such registration shall not count as one of the registrations Corporation is
obligated to effect pursuant to Section 2 hereof.
Section 10. INDEMNIFICATION.
10.1 In the event of any registration of any
securities under the Securities Act pursuant to this Agreement, Corporation will
indemnify and hold harmless each Shareholder, each Piggy-Back Shareholder, any
underwriter and each other Person, if any, who controls such Shareholder,
Piggy-Back Shareholder or underwriter within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
each such Shareholder, Piggy-Back Shareholder or any underwriter may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or action in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in such Registration Statement or preliminary prospectus (if used
prior to the effective date of such Registration Statement) or final or summary
prospectus contained therein (if used during the period the Corporation is
required to keep the Registration Statement effective), or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements made therein not misleading, and will reimburse
each such Shareholder, Piggy-Back Shareholder or underwriter for any legal or
any other expenses as reasonably incurred by such person in connection with
investigating or defending any such action or claim, excluding any amounts paid
in settlement of any litigation, commenced or threatened, if such settlement is
effected without prior written consent of Corporation; provided, however, that
Corporation will not be liable to the Shareholders, Piggy-Back Shareholders or
an underwriter in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
omission or alleged omission made in said Registration Statement, said
preliminary prospectus or said final or summary prospectus or any amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished to Corporation by that Shareholder, Piggy-Back Shareholder or their
respective affiliates or representatives, or by that underwriter, as the case
may be, specifically for use in the preparation thereof; and provided further
that the indemnity agreement contained in this Section 10 with respect to any
preliminary prospectus shall not inure to the benefit of the Shareholders,
Piggy-Back Shareholders or any underwriter or to any Person selling the same in
respect of any loss, claim, damage, liability or action asserted by someone who
purchased shares from such person if a copy of the final prospectus (as the same
may be amended or supplemented) in connection with such registration statement
was not sent or given to such person with or prior to written confirmation of
the sale and if the untrue statement or omission or alleged untrue statement or
omission of a material fact contained in such preliminary prospectus was
corrected in the final prospectus.
10.2 In the event of any registration of
securities under the Securities Act pursuant to this Agreement, each Shareholder
and Piggy-Back Shareholder will indemnify and hold harmless Corporation, each of
its directors and officers, any underwriter and each other Person, if any, who
controls Corporation or underwriter within the meaning of the Securities Acts,
against any losses, claims, damages or liabilities, joint or several, to which
Corporation or any such director, officer, underwriter may become subject, under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or action in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
such Registration Statement or preliminary prospectus or final or summary
prospectus contained therein, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
made therein not misleading, and will reimburse Corporation, each such director,
officer, underwriter for any legal or any other expenses as reasonably incurred
by them in connection with investigating or defending any such action or claim,
excluding any amounts paid in settlement of any litigation, commenced or
threatened, if such settlement is effected without prior written consent of the
indemnifying Shareholder, Piggy-Back Shareholder or their respective
representative; but in all cases only if, and to the extent that any such loss,
claim, damage, liability or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission therein
made in reliance upon and in conformity with written information furnished to
Corporation by the indemnifying Shareholder, Piggy-Back Shareholder or their
respective affiliates or representatives specifically for use in the preparation
thereof. Notwithstanding the foregoing, the amount of the indemnity provided by
each such Shareholder or Piggy-Back Shareholder pursuant to this Section 10
shall not exceed the net proceeds received by such Shareholder or Piggy-Back
Shareholder in such related registration and sale.
10.3 Promptly after receipt by a party entitled
to indemnification under subsection 10.1 or 10.2 hereof of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under either of such
subsections, notify the indemnifying party in writing of the commencement
thereof. In case any such action is brought against the indemnified party and it
shall so notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in, and, to the extent that
it so chooses, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party, and, after notice from the indemnifying
party that it so chooses, such indemnifying party shall not be liable for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, provided, however, that if the indemnifying
party fails to take reasonable steps necessary to diligently defend such claim
within twenty (20) days after receiving notice from the indemnified party that
the indemnified party believes the indemnifying party has failed to take such
steps, the indemnified party may assume its own defense and the indemnifying
party shall be liable for any expenses therefor. The indemnity agreements in
this Section 10 shall be in addition to any liabilities which the indemnifying
parties may have pursuant to law.
10.4 If the indemnification provided for in
this Section 10 from the indemnifying party is unavailable to an indemnified
party hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified parties in connection
with the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Section 10 hereof,
any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be
just and equitable if contribution pursuant to this Section 10 were determined
by pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to in the immediately
preceding paragraph. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
Section 11. SALES UNDER RULE 144. With a view
to making available to each Shareholder and Piggy-Back Shareholder the benefits
of Rule 144 promulgated under the Securities Act and any other similar rule or
regulation of the Commission that may at any time permit such Shareholder or
Piggy-Back Shareholder to sell the Registrable Securities without registration,
Corporation agrees to:
(a) make and keep public information
available, as those terms are understood and defined in Rule 144 (or any
successor provision);
(b) file with the Commission in a timely
manner all reports and other documents required of Corporation under the
Securities Act and the Exchange Act;
(c) furnish to such Shareholder or
Piggy-Back Shareholder forthwith upon request (i) a written statement by
Corporation that it has complied with the reporting requirements of Rule 144 (or
any successor provision), the Securities Act and the Exchange Act, (ii) a copy
of the most recent annual or quarterly report of Corporation and such other
reports and documents so filed by Corporation under the Securities Act and the
Exchange Act and (iii) such other information as may be reasonably requested by
such Shareholder or Piggy-Back Shareholder in availing itself of any rule or
regulation of the Commission which permits the selling of any such securities
without registration; and
(d) after any sale of Registrable
Securities pursuant to Rule 144, to the extent allowed by law, to cause any
restrictive legends to be removed and any transfer restrictions to be rescinded
with respect to such Registration Securities.
Section 12. REMOVAL OF LEGEND. The Corporation
agrees, to the extent allowed by law, to remove any legends on certificates
representing Registrable Securities or Piggy-Back Registrable Securities
describing transfer restrictions applicable to such securities upon the sale of
such securities (i) pursuant to an effective Registration Statement under the
Securities Act or (ii) in accordance with the provisions of Rule 144 under the
Securities Act.
Section 13. NOTICES. Any notice to be given by
any party hereunder to any other shall be in writing, mailed by certified or
registered mail, return receipt requested, and shall be addressed to the other
parties at the addresses listed on the signature pages hereof. All such notices
shall be deemed to be given three (3) days after the date of mailing thereof.
Section 14. MODIFICATION. Notwithstanding
anything to the contrary in this Agreement or otherwise, no modification,
amendment or waiver of any of the provisions of this Agreement shall be
effective unless in writing and signed by the Corporation and the Shareholders
holding not less than 95% of the Registrable Securities then outstanding.
Section 15. NON-WAIVER. The failure to enforce
at any time any of the provisions of this Agreement, or to require at any time
performance by any other party of any of the provisions hereof, shall in no way
be construed to be a waiver of such provisions.
Section 16. PARTIAL INVALIDITY. If any clause,
sentence, paragraph, section or part of this Agreement shall be deemed invalid,
unenforceable or against public policy, the part which is invalid, unenforceable
or contrary to public policy shall not affect, impair, invalidate or nullify the
remainder of this Agreement, but the invalidity, unenforceability or
contrariness to public policy shall be confined only to the clause, sentence,
paragraph, section or party of this Agreement so invalidated, unenforceable or
against public policy.
Section 17. CONSTRUCTION. The language in all
parts of this Agreement shall in all cases be construed simply, according to its
fair meaning, and shall not be construed strictly for or against either of the
parties hereto.
Section 18. GOVERNING LAW. This Agreement shall
be governed and construed according to the laws of the State of Alabama, without
regard to its conflicts of law principles.
Section 19. COUNTERPARTS. This Agreement may be
executed in one or more counterparts, each of which shall constitute an original
and all of which together shall constitute but one and the same instrument.
Section 20. SUCCESSORS AND ASSIGNS. This
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the parties hereto and their respective successors and permitted assigns.
Section 21. SPECIFIC PERFORMANCE. The parties
agree that, to the extent permitted by law, (i) the obligations imposed on them
in this Agreement are special, unique and of an extraordinary character, and
that in the event of a breach of any such party damages would not be an adequate
remedy and (ii) the other party shall be entitled to specific performance and
injunctive and equitable relief in addition to any other remedy to which it may
be entitled at law or in equity.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
IN WITNESS WHEREOF, the parties have executed
this Agreement as of the date first above written.
"CORPORATION"
MIDDLE BAY OIL COMPANY, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Address for Notice:
Middle Bay Oil Company, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Fax: (000) 000-0000
"SHAREHOLDERS"
3TEC ENERGY CORPORATION
By:
----------------------------------
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
XXXXXXXXX FAMILY PARTNERS, LP
By:
--------------------
Its General Partner
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Address for Notice:
Xxxxxxxxx Family Partners, LP
00 Xxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
SHOEINVEST II, LP
By:
--------------------
Its General Partner
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Address for Notice:
Shoeinvest II, LP
00 Xxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
"PIGGY-BACK SHAREHOLDERS"
XXXXXX-XXXXXXX OIL COMPANY
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Address for Notice:
Xxxxxx-Xxxxxxx Oil Company
0000 Xxxxx Xxxx
Xxxxx, XX 00000
Fax: (000) 000-0000
-------------------------------
X.X. XXXX, III
Address for Notice:
X.X. Xxxx, III
0000 Xxxx Xxxxxxx
Xxxxxxx, Xxxxxx 00000
Fax: (000) 000-0000
WESKIDS, L.P.
By: Weskids, Inc.
Its General Partner
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Address for Notice:
Weskids, L.P.
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
----------------------------------------
XXXXX X. XXXXXXXXX
Address for Notice:
Xxxxx X. Xxxxxxxxx
0000 Xxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Fax: (000) 000-0000
SCHEDULE 1
3TEC Energy Corporation 4,775,556 shares of Common Stock
Warrants exercisable for
3,600,000 shares of
Common Stock
$10,700,000 Note (which
is convertible to
Conversion Shares)
Xxxxxxxxx Family Partners, LP
22,222 shares of Common
Stock
Warrants exercisable for
16,822 shares of Common
Stock
$50,000 Note (which is
convertible to Conversion
Shares)
Shoeinvest II, LP 44,444 shares of Common Stock
Warrants exercisable for
33,644 shares of Common
Stock $100,000 Note (which
is convertible to
Conversion Shares)
SCHEDULE 2
PIGGY-BACK SHAREHOLDER NUMBER OF SHARES OF
COMMON STOCK HELD
SERIES B CONVERTIBLE IMMEDIATELY PRIOR TO
PREFERRED SHARES HELD CLOSING
Xxxxxx-Xxxxxxx Oil Company 3,333,334
0
X.X. Xxxx, III 1,187,556
0
Weskids, L.P. 843,687
117,467
Xxxxx X. Xxxxxxxxx 684,222
117,466
EXHIBIT "C"
INTENTIONALLY OMITTED
EXHIBIT D
FORM OF WARRANT CERTIFICATE
---------------------------
THE OFFER AND SALE OF THE WARRANTS EVIDENCED BY THIS CERTIFICATE AND
THE SECURITIES ISSUABLE UPON AN EXERCISE OF SUCH WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND SUCH SECURITIES MAY NOT BE
SOLD OR TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT COVERING SUCH SALE OR TRANSFER OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) STATING THAT SUCH SALE OR
TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS
OF SUCH ACT. THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES
ISSUABLE UPON AN EXERCISE OF SUCH WARRANTS ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS SET FORTH IN A SHAREHOLDERS AGREEMENT AMONG THE COMPANY, CERTAIN
OF ITS SHAREHOLDERS AND SHOEINVEST ENERGY CORPORATION, DATED AS OF
_____________, 1999, A COPY OF WHICH MAY BE OBTAINED BY THE HOLDER HEREOF AT
THE COMPANY'S PRINCIPAL PLACE OF BUSINESS.
No. W-1 _______ Warrants
WARRANT CERTIFICATE
This Warrant Certificate ("WARRANT CERTIFICATE") certifies that
Shoeinvest II, LP, a New Jersey limited partnership ("HOLDER"), or registered
assigns, is the registered holder of ( ) Warrants
("WARRANTS") to purchase Common Stock of MIDDLE BAY OIL COMPANY, INC. an
Alabama corporation (the "COMPANY"). Each Warrant entitles the holder, subject
to the conditions set forth herein and in the Securities Purchase Agreement
referred to below, to purchase from the Company before 5:00 P.M., Dallas,
Texas time, five (5) years following the Closing Date (as defined in the
Securities Purchase Agreement) (the "EXPIRATION DATE"), one fully paid and
nonassessable share of the Common Stock of the Company (the "WARRANT SHARES")
at a price (the "WARRANT EXERCISE PRICE") of $1.00 per Warrant Share, subject
to adjustment as provided in SECTION 4.2 of the Securities Purchase Agreement,
payable in lawful money of the United States of America (or, subject to the
terms of SECTION 4.1 of the Securities Purchase Agreement, by offsetting the
principal balance of the Note, upon surrender of this Warrant Certificate,
execution of the form of Election to Purchase on the reverse hereof, and
payment of the Warrant Exercise Price (in lawful money of the United States of
America or by offsetting the principal balance of the Note) to the Company,
at its offices located at 0000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000,
or at such other address as the Company may specify in writing to the registered
holder of the Warrants evidenced hereby (the "WARRANT OFFICE"). The Warrant
Exercise Price and number of Warrant Shares purchasable upon exercise of the
Warrants are subject to adjustment prior to the Expiration Date upon the
occurrence of certain events as set forth in SECTION 4.2 of the Securities
Purchase Agreement.
The Company may deem and treat the registered holder(s) of the
Warrants evidenced hereby as the absolute owner(s) thereof (notwithstanding
any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof and of any distribution to
the holder(s) hereof, and for all other purposes, and the Company shall not
be affected by any notice to the contrary.
Warrant Certificates, when surrendered at the office of the Company
at the above-mentioned address by the registered holder hereof in person or
by a legal representative duly authorized in writing, may be exchanged, in
the manner and subject to the limitations provided in the Securities Purchase
Agreement, but without payment of any service charge, for another Warrant
Certificate or Warrant Certificates of like tenor evidencing in the aggregate
a like number of Warrants.
Upon due presentment for registration of transfer of this Warrant
Certificate at the office of the Company at the above-mentioned address and
subject to the conditions set forth on this Certificate and in SECTION 4.2 of
the Securities Purchase Agreement, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued in exchange for this Warrant Certificate to the
transferee(s) and, if less than all the Warrants evidenced hereby are to be
transferred, to the registered holder hereof, subject to the limitations
provided in the Securities Purchase Agreement, without charge except for any
tax or other governmental charge imposed in connection therewith.
This Warrant Certificate is one of the Warrant Certificates referred
to in the Securities Purchase Agreement, dated as of ____________, 1999,
between the Company and Holder. Said Securities Purchase Agreement is hereby
incorporated by referenced in and made a part of this instrument and is
hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Company and the holders.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be signed by its duly authorized officers and has caused its corporate
seal to be affixed hereunto.
MIDDLE BAY OIL COMPANY, INC.
By:
Name: XXXX X. XXXXXXX
Title: PRESIDENT
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ______ Warrant Shares
and herewith / / tenders payment for such Warrant Shares to the order of the
Company in the amount of $_______ in accordance with the terms hereof, or
represents and warrants to the Company that the undersigned is the legal and
beneficial owner of the Warrant Shares and hereby advises the Company that
the undersigned has offset the principal balance of the Note in the amount of
$__________ in payment for the Warrant Shares. The undersigned requests that
a certificate for such Warrant Shares be registered in the name of
___________ whose address is ________ _____________ and that such certificate
be delivered to __________ whose address is ____________________. If said
number of Warrant Shares is less than all of the Warrant Shares purchased
hereunder, the undersigned requests that a new Warrant Certificate be
registered in the name of ______________ whose address is ______________ and
that such Warrant Certificate is to be delivered to _______________ whose
address is __________________.
SIGNATURE:
-----------------------------
(Signature must conform in all respects
to name as specified on the face of
the Warrant Certificate.)
Date:
----------------------------
EXHIBIT "E"
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into this ___ day of
________, 1999 (the "Effective Date"), by and between MIDDLE BAY OIL COMPANY,
INC., an Alabama corporation (hereinafter referred to as the "Company") and
XXXXX X. XXXXXX (hereinafter referred to as "Employee").
WITNESSETH:
WHEREAS, the Company is engaged in the oil and gas business;
WHEREAS, the Company desires to employ Employee as President and
Chief Executive Officer of the Company and Employee desires to be employed by
the Company in that capacity; and
WHEREAS, the Company and Employee desire to set forth in writing
the terms and conditions of their agreements and understandings;
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises herein contained, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound, agree as follows:
1. TERM OF EMPLOYMENT. The Company shall employ Employee in the
capacity set forth herein for a term commencing on the Effective Date and
ending on November 25, 2000 (the "Employment Period"). Within the period
commencing one hundred twenty (120) days prior to the end of the Employment
Period, the Employee and the Company shall review the terms of this
Employment Agreement in light of the circumstances existing at that time and,
if the parties in good xxxxx xxxx it necessary or advisable, agree to extend
the term of this Employment Agreement or negotiate and enter into a new
employment agreement. Notwithstanding the foregoing, Employee's employment
hereunder may be terminated earlier in accordance with the provisions of
Section 8 hereof.
2. RESPONSIBILITIES OF EMPLOYEE.
(a) In accepting employment by the Company, Employee shall
undertake and assume the responsibility of performing for and on behalf of
the Company any and all duties of the Chief Executive Officer and President
as set forth in the Company's Bylaws, as they may be amended from time to
time, and shall have such other duties, functions, responsibilities and
authority commensurate with such offices from time to time delegated to the
Employee by the Board of Directors provided that such duties, functions,
responsibilities and authority are customarily associated with the position
of President and Chief Executive Officer.
(b) Employee agrees to devote his full time and effort to his
duties as an employee of the Company. Employee may devote a reasonable amount
of his time to civic and community affairs, and subject to the provisions of
Section 7, to the business and financial interests described on EXHIBIT A
attached hereto; provided that such other activities do not materially
interfere with the performance of Employee's responsibility as President and
Chief Executive Officer; and provided further that no additional outside
business activities shall be undertaken without the prior written consent of
the Board of Directors.
3. COMPENSATION. As compensation for the services to be rendered
by Employee for the Company under this Agreement, Employee shall be entitled
to the following:
(a) The Company shall pay Employee during the Employment Period
an annual salary of not less than Two Hundred Thousand Dollars ($200,000).
The amount of such annual salary may be amended by the Company's Board of
Directors (the "Board") from time to time (but in no event shall such annual
salary be less than Two Hundred Thousand Dollars ($200,000)). Such annual
salary shall be payable periodically for such periods as may be established
by the Company for payment of its employees under its normal payroll
practices.
(b) Employee may receive a bonus and fringe benefits each year in
amounts to be determined by the Board. Such bonus may, in the discretion of
the Board, be based, in part, upon the Company meeting certain financial
goals, which goals may be agreed upon by the Board and Employee.
4. EXPENSES. Employee shall be reimbursed for all reasonable
business expenses incurred by him in connection with or incident to the
performance of his duties and responsibilities hereunder upon the Employee's
submission to the Company of vouchers or expense statements evidencing such
expenses in such form or format as the Company may reasonably require.
5. VACATION AND OTHER BENEFITS.
(a) VACATION. Employee shall be entitled to four (4) weeks of
paid vacation per year during the Employment Period. In addition, Employee
shall be entitled to participate in all other present and future benefit
plans provided by the Company to its employees and for which Employee meets
the eligibility requirements thereof.
(b) MEDICAL INSURANCE. The Company shall provide Employee and his
dependents with medical insurance coverage under the Company's medical
insurance plan, which plan shall be reasonably acceptable to Employee.
6. BUSINESS OPPORTUNITIES AND INTELLECTUAL PROPERTY.
(a) During the period in which Employee is employed by the
Company, Employee shall promptly disclose to the Company all "Business
Opportunities" and "Intellectual Property" (each as defined below).
(b) Employee hereby assigns and agrees to assign to the Company,
its successors, assigns or designees, all of Employee's right, title and
interest in and to all "Business Opportunities" and "Intellectual Property,"
and further acknowledges and agrees that all Business Opportunities and
Intellectual Property constitute the exclusive property of the Company.
(c) For purposes hereof, "Business Opportunities" shall mean all
business ideas, prospects, proposals or other opportunities pertaining to the
lease, acquisition, exploration, production, gathering or marketing of
hydrocarbons and related products and the exploration potential of
geographical areas on which hydrocarbon exploration prospects are located,
which are:
(i) developed by Employee (A) during the period in which
Employee is employed by the Company, or (B) before the period in which
Employee is employed by the Company, but only to the extent of
Employee's rights thereto during such period, or
(ii) originated by any third party and brought to the
attention of Employee (A) during the period in which Employee is
employed by the Company, or (B) before the period in which Employee is
employed by the Company, but only to the extent of Employee's rights
thereto during such period,
together with information relating thereto, including, without limitation,
any "Business Records" (as defined below).
(d) For purposes hereof "Intellectual Property" shall mean all
ideas, inventions, discoveries, processes, designs, methods, substances,
articles, computer programs and improvements (including, without limitation,
enhancements to, or further interpretation or processing of, information that
was in the possession of Employee prior to the date of this Agreement),
whether or not patentable or copyrightable, which do not fall within the
definition of Business Opportunities, which are discovered, conceived,
invented, created or developed by Employee, alone or with others: (i) during
the period in which Employee is employed by the Company if such discovery,
conception, invention, creation, or development (A) occurs in the course of
the Employee's employment with the Company, or (B) occurs with the use of any
of the Company's time, materials or facilities, or (C) in the opinion of the
Board of Directors of the Company, relates or pertains in any way to the
Company's purposes, activities or affairs, or (ii) before the period in which
Employee is employed by the Company, but only to the extent of Employee's
rights thereto during such period.
7. NON-COMPETITION AND NON-DISCLOSURE; INJUNCTIVE RELIEF. Employee
acknowledges that the services he is to render in the course of his
employment by the Company are of a special and unusual character with unique
value to the Company. In view of the value to the Company of the services of
Employee during the course of his employment by the Company, because of the
Business Opportunities, Intellectual Property and "Confidential Information"
(as defined below) to be obtained by or disclosed to Employee, and as a
inducement to the Company to enter into this Agreement and to pay to Employee
the compensation stated herein, Employee covenants and agrees as follows:
(a) During the period in which Employee is employed by the
Company, unless otherwise extended pursuant to the terms of this Section 7,
Employee shall not directly or indirectly be employed by 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.
(b) During the period in which Employee is employed by the
Company, unless otherwise extended pursuant to the terms of this Section 7,
Employee shall not, directly or indirectly, in any capacity (including,
without limitation, as a proprietor, investor, director or officer or in any
other individual or representative capacity), be financially interested in or
engage in any business that is engaged in leasing, acquiring, exploring,
producing, gathering or marketing hydrocarbons and related products; however,
it is specifically agreed between the parties that Employee may continue to
be financially interested in and engage in any business similar to or related
to the Company's business that is described on EXHIBIT A attached hereto,
provided, that such activities do not materially detract from the Employee's
performance of his responsibilities as President and Chief Executive Officer,
provided, further that, nothing contained in this paragraph 7(b) shall
relieve the Employee of his obligations contained in paragraph 7(a) above.
(c) During the period in which Employee is employed by the
Company, unless otherwise extended pursuant to the terms of this Section 7,
all investments made by Employee (whether in his own name or in the name of
any family members or made by Employee's controlled affiliates), which relate
to the lease, acquisition, exploration, production, gathering or marketing or
hydrocarbons and related products shall be made solely through the Company;
and Employee will not (directly or indirectly through any family members),
and will not permit any of his controlled affiliates to (i) invest or
otherwise participate alongside the Company in any Business Opportunities, or
(ii) invest or otherwise participate in any business or activity relating to
a Business Opportunity, regardless of whether the Company ultimately
participates in such business or activity.
(d) During the period in which Employee is employed by the
Company and thereafter, Employee will not disclose to any third party or
directly or indirectly make use of, in a way materially detrimental to the
Company, any and all trade secrets and confidential or proprietary
information pertaining to the Company (collectively referred to as
"Confidential Information"). For purposes of this Section 7, it is agreed
that Confidential Information includes, without limitation, any information
heretofore or hereafter acquired, developed or used by the Company relating
to Business Opportunities or Intellectual Property or other geological,
geophysical, economic, financial or management aspects of the business,
operations, properties or prospects of the Company whether oral or in written
form in a "Business Records" (as defined in paragraph 7(g) below).
Notwithstanding the foregoing, no information of the
Company will be deemed confidential for the purposes of this paragraph 7(d)
if such information is or becomes public knowledge through no act of Employee
or was previously known by Employee prior to entering into this Agreement.
(e) During the Employment Period or the period in which Employee
is employed by the Company, whichever is longer, and for a six-month period
commencing upon the termination of such longer period, unless otherwise
extended pursuant to the terms of this Section 7, Employee may not solicit,
raid, entice or induce, directly or indirectly, any employee (or person who
within the preceding ninety (90) days was an employee) of the Company or any
other person who is under contract with or rendering services to the Company,
to (i) terminate his employment by, or contractual relationship with, the
Company, (ii) refrain from extending or renewing the same (upon the same or
new terms), (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; provided that during the six-month period commencing upon the
termination of the Employment Period or the period in which the Employee is
employed by the Company, whichever is longer, nothing in this paragraph 7(e)
shall prohibit Employee from entering into contractual relations to obtain
capital as long as the Board of Directors of the Company in good faith
determines that such relations are not detrimental to the Company.
(f) Employee acknowledges and agrees that the services to be
rendered by him are of a special, unique and extraordinary character and, in
connection with such services, he will have access to Business Opportunities,
Intellectual Property and Confidential Information vital to the Company's
businesses. By reason of this, the Employee consents and agrees that if he
violates any of the provisions of this Section 7, the Company would sustain
irreparable harm and, therefore, in addition to any other remedies which the
Company may have under this Agreement or otherwise, the Company shall be
entitled to an injunction restraining the Employee from committing or
continuing any such violation of this Agreement. Such right to an injunction
shall be cumulative and in addition to, and not in lieu of, any other
remedies to which the Company may show itself justly entitled. Further,
during any period in which the Employee is in breach of the covenants set
forth in this Section 7, the time period of this covenant shall be extended
for an amount of time that the Employee is in breach.
(g) The Employee agrees to promptly deliver to the Company, upon
termination of Employee's employment with the Company, or at any other time
when the Company so requests, all documents relating to the business of the
Company, including, without limitation: all geological and geophysical
reports and related data such as maps, charts, logs, seismographs, seismic
records and other reports and related data, calculations, summaries,
memoranda and opinions relating to the foregoing, production records,
electric logs, core data, pressure data, lease files, well files and records,
land files, abstracts, title opinions, title or curative matters, contract
files, notes, records, drawings, manuals, correspondence, financial and
accounting information, customer lists, statistical data and compilations,
patents, copyrights, trademarks, trade names, inventions, formulae, methods,
processes, agreements, contracts, manuals or any other documents relating to
the business of the Company (collectively, the "Business Records"), and all
copies thereof and therefrom. The Employee confirms that all of the Business
Records (and all copies thereof and therefrom) that are required to be
delivered to the Company pursuant to this paragraph 7(g) constitute the
exclusive property of the Company. The obligation of confidentiality set
forth in this Section 7 shall continue notwithstanding the Employee's
delivery of any such documents to the Company. Notwithstanding the foregoing
provisions of this Section 7 or any other provision of this Agreement, the
Employee shall be entitled to retain any written materials which, as shown by
the Employee's records, were in Employee's possession on or prior to the date
hereof, subject to the Company's right to receive a copy of all such
materials.
(h) The representations and covenants contained in this Section 7
on the part of the Employee will be construed as ancillary to and independent
of any other provision of this Agreement, and the existence of any claim or
cause of action of the Employee against the Company or any officer, director,
or shareholder of the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company
of the covenants of the Employee contained in this Section 7. In addition,
the provisions of this Section 7 shall continue to be binding upon the
Employee in accordance with their terms, notwithstanding the termination of
the Employee's
employment hereunder for any reason.
(i) The parties to this Agreement agree that the limitations
contained in this Section 7 with respect to time, geographical area, and
scope of activity are reasonable. However, if any court shall determine that
the time, geographical area, or scope of activity of any restriction
contained in this Section 7 is unenforceable, it is the intention of the
parties that such restrictive covenants set forth herein shall not thereby be
terminated but shall be deemed amended to the extent required to render it
valid and enforceable.
8. TERMINATION BY THE COMPANY FOR CAUSE.
(a) The Company may terminate Employee's employment under this
Agreement for Cause. The termination shall be evidenced by written notice
thereof to the Employee and shall specify the Cause for termination. For
purposes hereof, the term "Cause" shall mean (i) 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 hereunder for a period of 120 days in the aggregate, within any
given period of 180 consecutive days during the term of this 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 this Agreement, after thirty (30) days
advance written notice of such failure or breach which has not been cured.
(b) Upon Employee's death or if Employee's employment with the
Company is terminated for Cause, Employee shall be paid his salary through
the month of his death or termination.
9. TERMINATION BY THE COMPANY WITHOUT CAUSE.
(a) The Company may terminate Employee's employment under this
Agreement without Cause. The termination shall be evidenced by written
notice thereof to the Employee and shall specify that the termination
was without Cause.
(b) If Employee's employment with the Company is terminated
without Cause during any period in which Employee is employed by the
Company, Employee shall be entitled to receive, within ten (10) days
of such termination, the amount of compensation Employee would have
earned if his employment had continued through the remainder of the
Employment Period. Notwithstanding the foregoing, if the payment
referred to above is not made within ten (10) days of Employee's
termination, all unpaid amounts shall bear interest at a rate equal
to the New York Prime (as published in the Wall Street Journal) on
the date of such termination.
10. BURDEN AND BENEFIT. This Agreement shall be binding upon, and
shall inure to the benefit of, the Company and Employee, and their respective
heirs, personal and legal representatives, successors and permitted assigns.
11. GOVERNING LAW. It is understood and agreed that the construction
and interpretation of this Agreement shall at all times and in all respects
be governed by the laws of the State of Texas. The parties hereto hereby
irrevocably submit to the exclusive jurisdiction of the courts of the State
of Texas and the federal courts of the United States of America located in
Texas, and appropriate appellate courts therefrom, over any dispute arising
out of or relating to this Agreement or any of the transactions contemplated
hereby, and each party hereby irrevocably agrees that all claims in respect
of such dispute or proceeding may be heard and determined in such courts. The
parties hereby irrevocably
waive, to the fullest extent permitted by applicable law, any objection which
they may now or hereafter have to the laying of venue of any dispute arising
out of or relating to this Agreement or any of the transactions contemplated
hereby brought in such court or any defense of inconvenient forum for the
maintenance of such dispute. Each of the parties hereto agrees that a
judgment in any such dispute may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law. This consent to
jurisdiction is being given solely for purposes of this Agreement and is not
intended to, and shall not, confer consent to jurisdiction with respect to
any other dispute in which a party to this Agreement may become involved.
Each of the parties hereto hereby consents to process being served by any
party to this Agreement in any suit, action, or proceeding of the nature
specified above by the mailing of a copy thereof in the manner specified by
the provisions of Section 13.
12. SEVERABILITY. The provisions of this Agreement shall be deemed
severable, and the invalidity or unenforceability of any one or more of the
provisions of this Agreement shall not affect the validity and enforceability
of the other provisions.
13. NOTICE. Any notice required to be given shall be sufficient if
it is in writing and sent by certified or registered mail, return receipt
requested, first-class postage prepaid, to his last know residence in the
case of Employee, and to its principal office in the State of Texas in the
case of the Company.
14. ENTIRE AGREEMENT. This Agreement contains the entire agreement
and understanding by and between the Company and Employee with respect to the
employment of Employee, and no representations, promises, agreements, or
understandings, written or oral, not contained herein shall be of any force
or effect. No waiver of any provision of this Agreement shall be valid unless
it is in writing and signed by the party against whom the waiver is sought to
be enforced. No valid waiver of any provision of this Agreement at any time
shall be deemed a waiver of any other provision of this Agreement at such
time or any other time.
15. MODIFICATION. No amendment, alteration or modification to any of
the provisions of this Agreement shall be valid unless made in writing and
signed by both parties.
16. PARAGRAPH HEADINGS. The paragraph headings have been inserted
for convenience only and are not to be considered when construing the
provisions of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the Company and Employee have executed this
Agreement on the day and year first above written.
"COMPANY" "EMPLOYEE"
MIDDLE BAY OIL COMPANY, INC.
------------------------------------
XXXXX X. XXXXXX
By: ______________________________
Name: ______________________________
Title: ______________________________
EXHIBIT A
ENERGY RELATED INVESTMENTS
1. Employee owns a 50% interest in Encorp Inc., a privately held energy and
production company which hold oil and gas properties valued at less than $2
million.
2. Employee owns or controls two Kansas corporations FCW Energy Corporation
and FCW Holding Corporation. The assets of these two corporations consist of
a net operating loss and non-operated, non-managed working interests and
overriding royalty interests of nominal value located in Kansas, Oklahoma and
Texas.
3. Employee holds non-operated, non-managed working interests in oil and gas
properties alongside the following entities: (1) RAK Energy Corp.; (2)
Javelin Exploration Company; and (3) JAVEX Inc. Employee is also a limited
partner in certain limited partnerships related to the foregoing entities.
The aggregate value of Employee's working interests and partnership interests
is less than $2 million.
4. Employee owns approximately 2,500,000 shares of common stock of Chesapeake
Energy Corporation (NYSE:CHK).
5. Employee owns shares of capital stock of various publicly-traded energy
and production companies. The aggregate number of shares Employee owns in
each entity does not exceed 1% of the outstanding shares of capital stock of
such entity.
EXHIBIT "F"
INTENTIONALLY OMITTED
EXHIBIT G
Purchase Price to be transferred at Closing
Immediately available funds
$200,000
EXHIBIT H
Securities Purchase Agreement dated July 1, 1999, by and between the
Company and 3TEC
Securities Purchase Agreement of even date herewith by and between
the Company and Shoeinvest II, LP
