-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sb47as2BLWQnWRHkABfTJvmRXfivqwTQiNaNUBihaa/eOR5WJGxtesiA4LXWxxaW dGWBHnLzMsN0c7Rtt1EkBQ== 0001015402-00-000272.txt : 20000207 0001015402-00-000272.hdr.sgml : 20000207 ACCESSION NUMBER: 0001015402-00-000272 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000118 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000204 FILER: COMPANY DATA: COMPANY CONFORMED NAME: 3TEC ENERGY CORP CENTRAL INDEX KEY: 0000903267 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 631081013 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-14745 FILM NUMBER: 523482 BUSINESS ADDRESS: STREET 1: TWO SHELL PLZ STREET 2: 777 WALKER STE 2400 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132226275 MAIL ADDRESS: STREET 1: PO BOX 390 CITY: MOBILE STATE: AL ZIP: 36602 FORMER COMPANY: FORMER CONFORMED NAME: MIDDLE BAY OIL CO INC DATE OF NAME CHANGE: 19930504 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (date of earliest event reported): January 18, 2000 3TEC ENERGY CORPORATION (Exact Name of Registrant as Specified in its Charter) DELAWARE (State or Other Jurisdiction of Incorporation) 0-21702 76-0624573 (Commission File Number) (IRS Employer Identification Number) Two Shell Plaza, 777 Walker, Suite 2400, Houston, Texas 77002 (Address of Principal Executive Offices and Zip Code) (713) 222-6275 (Registrant's Telephone Number, Including Area Code) 1221 Lamar, Suite 1020, Houston, Texas 77010 (Former Address) ITEM 5. OTHER EVENTS. Reverse Stock Split - --------------------- On January 18, 2000, 3TEC Energy Corporation ("3TEC") announced stockholder approval of an amendment to 3TEC's Certificate of Incorporation to effect a 1-for-3 reverse stock split of the outstanding shares of 3TEC's $.02 par value Common Stock. The reverse split was effective as of the beginning of business on January 18, 2000. Until approximately February 15, 2000, 3TEC's Common Stock will trade on the NASDAQ SmallCap Market under the symbol "TTEND" to distinguish the post-split shares from the pre-split shares. Thereafter, the trading symbol will revert to "TTEN." As a result of the reverse stock split, the number of shares of Common Stock subject to outstanding options and warrants granted by 3TEC will be reduced by two-thirds, and the per share exercise price of the outstanding options and warrants will be increased by a multiple of three, to place the option and warrant holders in the same relative position they had before the reverse stock split. Additionally, pursuant to the antidilution provisions of the certificates of designation of 3TEC's Series B Preferred Stock and Series C Preferred Stock (collectively, "Preferred Stock"), the conversion ratio of each outstanding series has been automatically revised to one third of a share of Common Stock for each outstanding share of Preferred Stock. As previously described in 3TEC's definitive proxy statement filed with the Securities and Exchange Commission on January 11, 2000, 3TEC entered into an Agreement and Plan of Merger on December 21, 1999, with Magellan Exploration, LLC ("Magellan") and the other parties named therein (the "Magellan Agreement"). Pursuant to the terms of the original Magellan Agreement, 3TEC was to issue as consideration in the acquisition of Magellan 3,300,000 shares of Common Stock, warrants to purchase 1,000,000 shares of Common Stock at an exercise price of $10.00 per share, and 1,875,000 shares of Series D Preferred Stock having a redemption value of $8.00 per share and convertible into 1,875,000 shares of Common Stock. In addition, the Second Amendment to the Agreement and Plan of Merger, entered into on February 2, 2000, decreased slightly the number of shares to be issued by 3TEC in the transaction. The Magellan Agreement, as so amended to reflect the effect of the reverse stock split and the share reduction, provides, on a post-split basis, that 3TEC will issue 1,085,934 shares of its Common Stock, warrants to purchase 333,333 shares of Common Stock at an exercise price of $30.00 per share, and 617,008 shares of its Series D Preferred Stock having a redemption value of $24.00 per share, with each share of Series D Preferred Stock being convertible into one share of post-split Common Stock. A form of the amendment to 3TEC's Certificate of Incorporation was filed as Exhibit A to the definitive proxy statement filed by 3TEC on January 3, 2000. The First Amendment and Second Amendment to the Magellan Agreement are filed as Exhibits 2.1 and 2.2 hereto. The January 18, 2000, press release is filed herewith as Exhibit 99.1. Current Officers of 3TEC - --------------------------- The board of directors of 3TEC have elected the following persons to serve as officers of 3TEC:
MANAGEMENT NAME AGE POSITION(S) HELD SINCE - ---------------------- --- ----------------------------------------- ----- Floyd C. Wilson 52 Chairman, President, Chief Executive 1999 Officer and Treasurer Stephen W. Herod 40 Executive Vice President, Chief Financial 1997 Officer, Secretary and Director Richard K. Stoneburner 46 Vice President - Exploration 1999 Mark S. Holt 44 Vice President - Land 1999 Earl Ringeiser 65 Vice President - Production 1999 Terry W. Gautier 43 Controller 1999
FLOYD C. WILSON, Chairman, President and Chief Executive Officer, joined us on August 27, 1999, concurrent with the investment by 3TEC Energy Company LLC ("3TEC LLC"). Mr. Wilson founded 3TEC LLC in 1998. Mr. Wilson began his career in the energy business in Houston in 1970 as a completion engineer. He moved to Wichita in 1976 to start an oil and gas operating company, one of several private energy ventures which preceded the formation of 3TEC LLC. Mr. Wilson founded Hugoton Energy Corporation ("Hugoton") in 1987, and served as its Chairman, President, and Chief Executive Officer. In 1994, Mr. Wilson took Hugoton public, and sold the company in 1998 to Chesapeake Energy Corporation. STEPHEN W. HEROD has served as our Executive Vice President, Chief Financial Officer and Secretary since December 1999 and as a director since July 1997. From July 1997 to December 1999, Mr. Herod was our Vice President-Corporate Development. Mr. Herod served as Principal and a director of Shore Oil Company from April 1992 until the merger of Shore with us on June 30, 1997. He joined Shore's predecessor as Controller in February 1991. Mr. Herod was employed by Conquest Exploration Company from 1984 until 1991 in various financial management positions, including Operations Accounting Manager. From 1981 to 1984, Superior Oil Company employed Mr. Herod as a financial analyst. RICHARD K. STONEBURNER joined us in August 1999 and became Vice President-Exploration in December 1999. Mr. Stoneburner was employed by 3TEC as District Geologist from 1998 to 1999. Prior to joining us, Mr. Stoneburner worked as a geologist for Texas Oil & Gas, The Reach Group, Weber Energy Corporation, Hugoton and, independently through his own company, Stoneburner Exploration, Inc. Mr. Stoneburner has over 20 years of experience in the energy field. MARK S. HOLT joined us in August 1999 and became Vice President-Land in December 1999. 3TEC LLC employed Mr. Holt as District Landman from 1998 to 1999. From 1985 to 1998, Mr. Holt was the owner of Holt Resources, which provided land consulting services to various oil and gas companies and operators. From 1979 to 1985, Mr. Holt was the Senior Landman for Sun Oil Company. EARL W. RINGEISEN joined us in August 1999 and became Vice President-Production in December 1999. From 1998 to 1999, Chesapeake Energy Corporation employed Mr. Ringeisen as their Kansas District Manager. Mr. Ringeisen served as Hugoton's Vice President of Operations from 1993 to 1998. From 1987 to 1993, Mr. Ringeisen served as Production Superintendent for Hugoton. TERRY W. GAUTIER joined us as Controller in December 1999. From July 1990 to November 1999, Mr. Gautier was employed by Floyd Oil Company as Vice President, Chief Accounting Officer and Controller. 3TEC purchased substantially all of Floyd Oil Company's assets in November 1999. Prior to joining Floyd Oil Company, Mr. Gautier was employed by Pelto Oil Company for six years, serving the last two as Controller. From 1978 to 1983, Mr. Gautier was an Audit Senior with Touche Ross and Co. He is a certified public accountant. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits. The following exhibits are filed herewith: 2.1 First Amendment to Agreement and Plan of Merger, effective as of January 14, 2000, by and among 3TEC Energy Corporation, 3TM Acquisition L.L.C., Magellan Exploration, LLC, ECIC Corporation, EnCap Energy Capital Fund III, L.P., EnCap Energy Acquisition III-B, Inc., BOCP Energy Partners, L.P., and Pel-Tex Partners, L.L.C. 2.2 Second Amendment to Agreement and Plan of Merger, effective as of February 2, 2000, by and among 3TEC Energy Corporation, 3TM Acquisition L.L.C., Magellan Exploration, LLC, ECIC Corporation, EnCap Energy Capital Fund III, L.P., EnCap Energy Acquisition III-B, Inc., BOCP Energy Partners, L.P., and Pel-Tex Partners, L.L.C. 99.1 Press Release dated January 18, 2000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. 3TEC Energy Corporation (Registrant) Date: February 3, 2000 By: /s/ Stephen W. Herod ------------------------------ Stephen W. Herod Executive Vice President and Chief Financial Officer INDEX TO EXHIBITS 2.1 First Amendment to Agreement and Plan of Merger, effective as of January 14, 2000, by and among 3TEC Energy Corporation, 3TM Acquisition L.L.C., Magellan Exploration, LLC, ECIC Corporation, EnCap Energy Capital Fund III, L.P., EnCap Energy Acquisition III-B, Inc., BOCP Energy Partners, L.P., and Pel-Tex Partners, L.L.C. 2.2 Second Amendment to Agreement and Plan of Merger, effective as of February 2, 2000, by and among 3TEC Energy Corporation, 3TM Acquisition L.L.C., Magellan Exploration, LLC, ECIC Corporation, EnCap Energy Capital Fund III, L.P., EnCap Energy Acquisition III-B, Inc., BOCP Energy Partners, L.P., and Pel-Tex Partners, L.L.C. 99.1 Press Release dated January 18, 2000. EX-2.1 2 EXHIBIT 2.1 January 14, 2000 VIA FACSIMILE @ 713-222-6418 - ------------------------------- AND LOCAL COURIER - ------------------- 3TEC Energy Corporation 3TM Acquisition L.L.C. Two Shell Plaza 777 Walker Suite 2400 Houston, Texas 77002 RE: Amendment to Section 11.1(b) of the Agreement (as defined below) Ladies and Gentlemen: 1. Reference is herein made to that certain Agreement and Plan of Merger Among 3TEC Energy Corporation, 3TM Acquisition L.L.C., Magellan Exploration, LLC and ECIC Corporation, EnCap Energy Capital Fund III, L.P., EnCap Energy Acquisition III-B, Inc., BOCP Energy Partners, L.P., and Pel-Tex Partners, L.L.C. (the "Agreement"). 2. Section 11.1(b) of the Agreement shall be amended to delete the reference therein to "January 14, 2000" and to substitute in place thereof "January 26, 2000". 3. The Agreement, as amended by this letter agreement, is hereby ratified and confirmed. 4. This letter agreement may be executed in multiple counterparts, with each such counterpart constituting an original and all of such counterparts constituting but one and the same agreement. To evidence your agreement to the terms of this letter agreement, please execute a counterpart of this letter agreement in the designated place below and return it to EnCap Investments L.L.C. at the following address: EnCap Investments L.L.C. 1100 Louisiana, Suite 3150 Houston, Texas 77002 Attention: Gary A. Tanner [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] ECIC CORPORATION By: ___________________ Name: Robert L. Zorich Title: President ENCAP ENERGY CAPITAL FUND III, L.P. By: ENCAP INVESTMENTS L.L.C., General Partner By: _____________________ Name: D. Martin Phillips Title: Managing Director ENCAP ENERGY ACQUISITION III-B, INC. By: ______________________ Name: D. Martin Phillips Title: Vice President BOCP ENERGY PARTNERS, L.P. By: ENCAP INVESTMENTS L.L.C., Manager By: ________________________ Name: D. Martin Phillips Title: Managing Director PEL-TEX PARTNERS, L.L.C. By: _______________________ Name: Townes G. Pressler, Jr. Title: Manager By: DLJ LBO PLANS MANAGEMENT CORP., Manager By: ________________________ Name: Ivy Dodes Title: Vice President MAGELLAN EXPLORATION, LLC By: _________________________ Name: Wynne M. Snoots, Jr. Title: President ACCEPTED AND AGREED TO AS OF THE DATE SET FORTH ABOVE: 3TEC ENERGY CORPORATION By: ______________________ Name: Floyd C. Wilson Title: President and Chief Executive Officer 3TM ACQUISITION L.L.C. By: _______________________ Name: Floyd C. Wilson Title: Manager EX-2.2 3 EXHIBIT 2.2 SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER THIS SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER (the "Second Amendment") is made and entered into effective as the 2nd day of February, 2000, by and among 3TEC Energy Corporation, a Delaware corporation ("3TEC" or the "Company"), 3TM Acquisition L.L.C., a Delaware limited liability company ("Sub"), Magellan Exploration, LLC, a Delaware limited liability company ("Magellan"), ECIC Corporation ("ECIC"), EnCap Energy Capital Fund III, L.P. ("Fund III"), EnCap Energy Acquisition III-B, Inc. ("Acquisition III-B"), BOCP Energy Partners, L.P. ("BOCP") and Pel-Tex Partners, L.L.C. ("Pel-Tex"). WHEREAS, the parties hereto entered into a certain Agreement and Plan of Merger dated December 21, 1999 ("Original Agreement"); WHEREAS, such Agreement and Plan of Merger was amended by a certain letter amendment dated January 14, 2000; WHEREAS, in the course of conducting its due diligence, 3TEC has identified several issues which it desires to be resolved; WHEREAS, on January 14, 2000, 3TEC filed a certificate of amendment to its certificate of incorporation whereby a one-for-three reverse stock split of the Company's issued and outstanding shares of common stock, $.02 par value was effected; and WHEREAS, the parties hereto wish to further amend the Original Agreement. NOW, THEREFORE, in consideration of the foregoing, the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. TERMS DEFINED IN ORIGINAL AGREEMENT. Except as otherwise defined in ------------------------------------ this Second Amendment, terms defined in the Original Agreement and used herein shall have the meaning assigned to them in the Original Agreement. 2. SECTION 1.1. The definition of each of the following terms defined ------------- in Section 1.1 shall be deleted and replaced with the following: "Common Stock Shares" means the 1,085,934 shares of Common Stock to be issued to the Prepayout Members pursuant to this Agreement. "Current Warrant Exercise Price" has the meaning given said term in Section 4.1(b). "Preferred Stock" means 3TEC Series D Convertible preferred stock, par value $0.02 per share, with a stated value of $24.00 per share having the rights and preferences set forth in the Series D Stock Designation. "Warrant Exercise Price" means $30.00 per share (subject to adjustment as provided in Section 4.2). 3. SECTION 2.7. Section 2.7 will be deleted and replaced with the ------------- following: "SECTION 2.7. Conversion of Securities. Subject to the terms and -------------------------- conditions of this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of 3TEC, Sub, Magellan or any holder of the following securities: (a) the Prepayout Interests issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive (i) 1,085,934 shares of Common Stock, (ii) 617,008 shares of Preferred Stock and (iii) the Back-In Working Interest; (b) the Postpayout Interests issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive warrants to purchase 333,333 shares of Common Stock, which warrants shall be issued under the terms hereof; and (c) each issued and outstanding membership interest of Sub shall be converted into and become one fully paid and nonassessable membership interest of the Surviving Company." 4. SECTION 4.1. Section 4.1(b) will be deleted and replaced with the ------------- following: "(b) 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. The Warrants may also be exercised in a "cashless" or "net-issue" exercise by delivery to the offices of the Company of (A) a written notice of election to exercise Warrants, duly executed by the Warrant Holder in the form set forth on the reverse of, or attached to, such Warrant Certificate, which notice shall specify the number of Warrant Shares to be delivered to the Warrant Holder and the number of Warrant Shares with respect to which such Warrants are being surrendered in payment of the aggregate Warrant Exercise Price for the Warrant Shares to be delivered to the Warrant Holder, and (B) the Warrant Certificate evidencing such Warrants. For purposes of this subparagraph (b), each Warrant Share as to which such Warrants are surrendered in payment of the aggregate Warrant Exercise Price will be attributed a value equal to (x) the Current Warrant Exercise Market Price per share of Common Stock minus (y) the then-current Warrant Exercise Price. As used herein, the term "Current Warrant Exercise Market Price" shall mean the average of the last reported sales prices for the Common Stock for the ten (10) consecutive Trading Days ending on the second Trading Day prior to presentation of the Warrants to the Company. "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." 5. SECTION 4.2. ------------- (a) SECTION 4.2(a). Section 4.2 (a) will be deleted and replaced with -------------- the following: "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 and other securities which a Holder having the same number of shares of Common Stock, and other securities, 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) SECTION 4.2(e). The following shall be added as Section 4.2(e): -------------- "(e) Whenever the number of Warrant Shares into which a Warrant is exercisable is adjusted as provided in this Section 4.2, the Warrant Price payable upon exercise of the Warrant shall simultaneously be adjusted by multiplying such Warrant Price immediately prior to such adjustment by a fraction, the numerator of which shall be the number of Warrant Shares into which such Warrant was exercisable immediately prior to such adjustment, and the denominator of which shall be the number of Warrant Shares into which such Warrant was exercisable immediately thereafter." 6. SECTION 6.1(a). The following shall be added as subparagraphs (x) ---------------- and (xi) of Section 6.1(a): "(x) an investor representation letter in form reasonably acceptable to 3TEC from each party receiving securities of 3TEC pursuant to the Merger; notwithstanding the foregoing, although all parties hereto will take all reasonable efforts to obtain such letters, the receipt of such letter from those parties receiving only Warrants will not be a condition to Closing; (xi) consents to transfer from the entities identified on Exhibit H attached hereto." 7. SECTION 8.9. The following shall be added as a new Section 8.9: ------------ "After Closing but before March 1, 2000, 3TEC shall pay or shall cause the Surviving Company to pay (i) $175,000 to Wynne M. Snoots, Jr. pursuant to his employment agreement with Magellan, and (ii) discretionary bonuses totaling $125,000 to the persons and in the respective amounts identified on Exhibit I attached hereto." 8. SECTION 12.4. Section 12.4 will be deleted in its entirety and -------------- replaced with the following: SECTION 12.4. Indemnification. --------------- (a) Subject to the terms of this Section 12.4, Prepayout Members severally (and expressly not jointly and severally) agree to indemnify and hold harmless, 3TEC, its shareholders and its directors, officers, employees, agents, successors and assigns (collectively, the "3TEC Indemnified Parties") from and against any and all liabilities, losses, damages, costs and expenses of any kind (including, without limitation, reasonable attorneys' fees and disbursements ("Damages") which may be incurred by any 3TEC Indemnified Party relating to or arising out any breach by Prepayout Members of any of their representations, warranties, covenants or agreements contained in this Agreement or the other Transaction Documents ("3TEC Claims"). (b)Subject to the terms of this Section 12.4, the Prepayout Members severally (and expressly not joint and severally) agree to reimburse 3TEC for all of its Transaction Costs (as defined below) if (i) any Member of Magellan (x) exercises the Magellan Preferential Right set forth in Section 9.7(a) of the Magellan Operating Agreement (i.e., the right to "adjust the Prepayout Interests" as described in Section 9.6(c) of the Magellan Operating Agreement) or (y) commences an action or proceeding of the type described in Section 6.1(k), and as a result any party hereto terminates this Agreement pursuant to Section 11.1 due to the failure of a condition precedent described in Section 6.1(k), Section 6.2(k), or Section 6.2(l), or (ii) Eugene Offshore Holdings, LLC exercises a preferential right to purchase under Article XV.J of the Joint Operating Agreement dated March 23, 1994 relating to leases at Breton Sound and then 3TEC terminates this Agreement pursuant to Section 11.1 as a result. Subject to the terms of this Section 12.4, the Prepayout Members severally (and expressly not joint and severally) agree to reimburse 3TEC for one-half of its Transaction Costs if the Prepayout Members terminate this Agreement pursuant to Section 11.1 due to the failure of the condition described in Section 6.2(h). For purposes of this Section, "Transaction Costs" mean all documented and reasonable out-of-pocket expenses and disbursements incurred by 3TEC in connection with the Merger Agreement and the investigation and negotiation hereof, including, without limitation, all fees and expenses of counsel to 3TEC, engineering costs, accounting and land due diligence costs (including the out-of - -pocket costs of 3TEC employees performing such work) and costs associated with the fairness opinion referred to in Section 6.1. (c) Subject to the terms of this Section 12.4, Prepayout Members severally (and expressly not jointly and severally) agree to indemnify and hold harmless the 3TEC Indemnified Parties and, after the Closing, Magellan, from and against any and all Damages which may be incurred by any 3TEC Indemnified Party or Magellan relating to or arising out of any actions or proceedings brought by members of Magellan (other than Prepayout Members) against 3TEC or Magellan arising out of or in connection with the Merger or the Magellan Preferential Rights. Notwithstanding any other provisions of this Agreement, the indemnification obligations under this Section 12.4(c) (i) shall survive the Closing until the expiration of the applicable statutes of limitations, and (ii) shall not be subject to Section 12.4(f)(iii). (d) Subject to the terms of this Section 12.4, Prepayout Members severally (and expressly not jointly and severally) agree to indemnify and hold harmless the 3TEC Indemnified Parties and, after the Closing, Magellan, from and against any and all Damages which may be incurred by any 3TEC Indemnified Party or Magellan relating to or arising out of the cancellation or the diminution of value of the Lafourche Basin Levee District's and the West Jefferson Levee District's leases in the Bay de Chene Field as a result of the judgment or settlement of Lafourche Basin Levee District and West Jefferson Levee District ---------------------------------------------------------------- v. Texaco, Inc., et al. Docket No. 76337, Seventeenth Judicial District Court, - ------------------------- Parish of Lafourche, State of Louisiana. For purposes of this Section 12.4(d), Damages shall include the value assigned such lease's underlying wells or prospects as identified on Exhibit J attached hereto and any amounts which 3TEC or Magellan may hereafter invest in such prospects or any future value created by 3TEC's or Magellan's drilling and other operating activities associated with such leases. Notwithstanding any other provisions of this Agreement, the indemnification obligations under this Section 12.4(d) shall survive until the above-referenced lawsuit has been dismissed with prejudice or a final non-appealable judgment has been entered which does not include cancellation or diminution of value of such leases. (e) The liability of Prepayout Members under this Section 12.4 shall be several (and expressly not joint and several), except in the instance of a 3TEC Claim relating to or out of any breach by a Prepayout Member of a representation and warranty in Section 7.2, Section 7.3 or Section 7.19 that applies ------------ ------------ ------------- specifically to such Prepayout Member (in which event such Prepayout Member, and no other Prepayout Member, shall have liability). With respect to any indemnification obligation under this Section 12.4 for which Prepayout Members have several liability, the several share of each Prepayout Member shall be as set forth in Exhibit A and in no event shall such Prepayout Member's share of any such indemnification obligation exceed such several share. (f) Notwithstanding the foregoing or anything else herein to the contrary, the indemnification obligation of the Prepayout Members pursuant to subparagraphs (a) through (e) above of this Section 12.4 shall be subject to the following: (i) No indemnification shall be required to be made by Prepayout Members pursuant to this Section 12.4 with respect to any 3TEC Claims arising out or resulting from the breach of the representations and warranties set forth in Article VII (exclusive of the representations set forth in Section 7.18)), except to the extent that the aggregate amount of the Damages incurred by the 3TEC Indemnified Parties with respect to all such 3TEC Claims exceeds $100,000. (ii) No indemnification shall be required to be made by Prepayout Members pursuant to this Section 12.4 with respect to any 3TEC Claims arising out or resulting from the breach of the representations and warranties set forth in Section 7.18, except to the extent that the aggregate amount of the Damages incurred by the 3TEC Indemnified Parties with respect to all such 3TEC Claims exceeds $100,000. (iii) No Prepayout Member shall be obligated to pay the 3TEC Indemnified Parties pursuant to this Section 12.4 (excluding for this purpose, Section 12.4(c)) an aggregate amount in excess of (x) the amount stipulated for such Prepayout Member in Exhibit A minus (y) all amounts previously paid by such Prepayout Member pursuant to Section 12.4(c). The deduction described in the preceding sentence relating to amounts paid pursuant to Section 12.4(c) shall not be construed to require any 3TEC Indemnified Party to return any amounts previously received by it pursuant to this Section 12.4 from the Prepayout Members or to put any cap on the liability of the Prepayout Members under Section 12.4(c). (iv) A Prepayout Member shall have the right to satisfy any indemnification obligation under this Section 12.4 (other than obligations under Section 12.4(b)) by delivering, at its election, Common Stock Shares or Preferred Stock Shares, as provided in this subsection (f)(iv). If a Prepayout Member so exercises its right, the number of Common Stock Shares or Preferred Stock Shares so delivered shall be equal to the amount (or portion thereof) of the obligation so owed to be paid with Common Stock Shares or Preferred Stock Shares (as applicable) divided by (A) in the instance of the Common Stock Shares, the Current Market Price (as defined below) and (B) in the instance of the Preferred Stock Shares, the greater of (x) $18.00 and (y) the aggregate Current Market Price of the shares of Common Stock into which such Preferred Stock Shares are then convertible divided by the number of Preferred Stock Shares to be delivered. As used herein, the term "Current Market Price" shall mean the average of the last reported sales prices for the Common Stock for the 10 consecutive Trading Days ending on the second Trading Day prior to delivery in satisfaction of the indemnification obligation. The last reported sales price for each day shall be the last reported sales price of the Common Stock on such date on the exchange where it is primarily traded, or, if the Common Stock is not traded on an exchange, the Common Stock shall be valued at the last reported sales price on such date on the NASDAQ National Market System, or, if the Common Stock is not traded on the NASDAQ National Market System or any similar system of automated dissemination of quotations of securities prices, the Common Stock shall be valued at the closing bid price (or average of bid prices) last quoted on such date as reported on an established quotation service for over-the-counter securities. As used in this subsection (f)(iv), the term "Trading Days" shall mean (1) if the Common Stock is listed or admitted for trading on any generally recognized U.S. securities exchange, days on which such securities exchange is open for business and (2) if the Common Stock is quoted on the NASDAQ National Market System or any similar system of automated dissemination of quotations of securities prices, days on which trades may be made on such system. (g) Subject to the terms of this Section 12.4, 3TEC agrees to indemnify and hold harmless, each Prepayout Member and their respective partners, shareholders, members, directors, officers, managers, employees, agents, successors and assigns (collectively, the "Prepayout Member Indemnified Parties") from and against any and all Damages which may be incurred by any Prepayout Member Indemnified Party relating to or arising out any breach by 3TEC of any of its representations, warranties, covenants or agreements contained in this Agreement or the other Transaction Documents ("Prepayout Member Claims"). (h) Promptly after receipt by an indemnified party under Section 12.4(a), Section 12.4(c) or 12.4(d) of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party under such Section, give written notice to the indemnifying party of the commencement thereof, but the failure so to notify the indemnifying party shall not relieve it of any liability that it may have to any indemnified party except to the extent the indemnifying party demonstrates that the defense of such action is prejudiced thereby. In case any such action shall be brought against an indemnified party and it shall give written notice to the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it may wish, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party. If the indemnifying party elects to assume the defense of such action, the indemnified party shall have the right to employ separate counsel at its own expense and to participate in the defense thereof. If the indemnifying party elects not to assume (or fails to assume) the defense of such action, the indemnified party shall be entitled to assume the defense of such action with counsel of its own choice, at the expense of the indemnifying party. If the action is asserted against both the indemnifying party and the indemnified party and there is a conflict of interests which renders it inappropriate for the same counsel to represent both the indemnifying party and the indemnified party, the indemnifying party shall be responsible for paying for separate counsel for the indemnified party; provided, however, that if there is more than one indemnified party, the indemnifying party shall not be responsible for paying for more than one separate firm of attorneys to represent the indemnified parties, regardless of the number of indemnified parties. If the indemnifying party elects to assume the defense of such action, (i) no compromise or settlement thereof may be effected by the indemnifying party without the indemnified party's written consent (which shall not be unreasonably withheld) unless the sole relief provided is monetary damages that are paid in full by the indemnifying party and (ii) the indemnifying party shall have no liability with respect to any compromise or settlement thereof effected without its written consent (which shall not be unreasonably withheld). (i) 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. (j) In relation to any breach, default or nonperformance of any representation, warranty, covenant or agreement made by a party hereto in this Agreement, the exclusive relief and remedy available to the other parties hereto in respect of said breach, default or nonperformance shall be (i) termination, but only if said termination is expressly permitted under the provisions of Section 11.1, or (ii) indemnification as provided in this Section 12.4, but only - ------------ ------------ to the extent properly claimable hereunder and as limited pursuant hereto." 9. EXHIBIT A. Exhibit A shall be deleted in its entirety and replaced ----------- with Exhibit A attached hereto. 10. EXHIBIT D. Exhibit D shall be deleted in its entirety and ----------- replaced with Exhibit D attached hereto. 11. EXHIBIT E. Exhibit E shall be deleted in its entirety and replaced ---------- with Exhibit E attached hereto. 12. EXHIBIT F. Exhibit F shall be deleted in its entirety and replaced ---------- with Exhibit F attached hereto. 13. EXHIBIT G. Exhibit G shall be deleted in its entirety and replaced ---------- with Exhibit G attached hereto. 14. MAGELLAN DISCLOSURE SCHEDULE SUPPLEMENT. The Magellan Disclosure ------------------------------------------ Schedule is supplemented by the Supplement to Magellan Disclosure Schedule dated February 2, 2000. 15. FULL FORCE AND EFFECT. Except with respect to the changes made in ----------------------- this Second Amendment, the terms and provisions of the Original Agreement as amended by the First Amendment are in full force and effect. 16. BINDING EFFECT. This Second Amendment shall be binding upon the ---------------- parties hereto and their respective successors and assigns. 17. COUNTERPARTS. This Second Amendment may be executed in any number ------------- of counterparts, each of which shall constitute an original and all of which together shall constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be duly executed by their respective Authorized Officers on the day and year first above written. COMPANY: 3TEC ENERGY CORPORATION By: ________________________________ Name: Floyd C. Wilson Title: President and Chief Executive Officer Address for Notice: 3TEC Energy Corporation Two Shell Plaza 777 Walker Suite 2400 Houston, TX 77002 Fax: (713) 222-6418 SUB: 3TM ACQUISITION L.L.C. By: ________________________________ Name: Floyd C. Wilson Title: Manager Address for Notice: c/o 3TEC Energy Corporation Two Shell Plaza 777 Walker Suite 2400 Houston, TX 77002 Fax: (713) 222-6418 MAGELLAN EXPLORATION, LLC By: _________________________________ Name: Wynne M. Snoots, Jr. Title: President Address For Notice: Five Post Oak Park Suite 1500 Houston, Texas 77027 Attention: Wynne M. Snoots, Jr. Fax: (713) 622-5511 ECIC CORPORATION By: ________________________________ Name: Robert L. Zorich Title: President Address for Notice: c/o EnCap Investments L.L.C. 1100 Louisiana Suite 3150 Houston, Texas Attention: Garry A. Tanner Fax: (713) 659-6130 ENCAP ENERGY CAPITAL FUND III, L.P. By: ENCAP INVESTMENTS L.L.C., General Partner By: ____________________________ Name: D. Martin Phillips Title: Managing Director Address For Notice: c/o EnCap Investments L.L.C. 1100 Louisiana Suite 3150 Houston, Texas Attention: Garry A. Tanner Fax: (713) 659-6130 ENCAP ENERGY ACQUISITION III-B, INC. By: __________________________________ Name: D. Martin Phillips Title: Vice President Address For Notice: c/o EnCap Investments L.L.C. 1100 Louisiana Suite 3150 Houston, Texas Attention: Garry A. Tanner Fax: (713) 659-6130 BOCP ENERGY PARTNERS, L.P. By: ENCAP INVESTMENTS L.L.C., Manager By: __________________________ Name: D. Martin Phillips Title: Managing Director Address For Notice: c/o EnCap Investments L.L.C. 1100 Louisiana Suite 3150 Houston, Texas Attention: Garry A. Tanner Fax: (713) 659-6130 PEL-TEX PARTNERS, L.L.C. By:________________________________ Name: Townes G. Pressler, Jr. Title: Manager By: DLJ LBO PLANS MANAGEMENT CORP., Manager By:____________________ Name: Ivy Dodes Title: Vice President Address For Notice: 277 Park Avenue New York, New York 10172 Attn: Ivy Dodes Fax: (212) 892-7512 EX-99.1 4 EXHIBIT 99.1 FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION CONTACT: STEVE W. HEROD 713/759-6808, EXT. 104 3TEC ENERGY CORPORATION ANNOUNCES SHAREHOLDER APPROVAL OF ONE FOR THREE REVERSE STOCK SPLIT HOUSTON, TEXAS, JANUARY 18, 2000 3TEC Energy Corporation ("3TEC" or "Company") (NASDAQ SmallCap: TTEN) announced today that its shareholders have approved a one-for-three reverse split of the outstanding shares of common stock of the Company. This approval was obtained at 3TEC's Special Meeting of Shareholders held January 14, 2000. The shares will begin trading on a post split basis under the symbol TTEND on January 18, 2000. The reverse split reduces the Company's common shares outstanding to approximately 5.33 million. 3TEC's common stock will trade under the symbol "TTEND" on the NASDAQ Small Cap Market. 3TEC Energy Corporation is engaged in the acquisition, development, production and exploration of oil and natural gas, with properties geographically concentrated in East Texas and the Gulf Coast regions. The Company also owns significant properties in the Permian and San Juan basins and in the Mid-Continent region. The information contained in this press release may contain projections, estimates and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals will be achieved. Important factors that could cause actual results to differ materially from those included in the forward-looking statements include the timing and extent of changes in commodity prices for oil and gas, environmental risks, drilling, producing and operating risks, risks related to exploration and development, uncertainties about the estimates of reserves, government regulation, competition and the ability of the Company to meet its stated business goals. -----END PRIVACY-ENHANCED MESSAGE-----