-----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, IYKERiNiYPswqWuL+tTiyoB+szDTmweRSpvE8nbJZWwFhpwjQljcw1XNiU+YkdI5 vvf5EHofREEcQ93cXjsDvg== 0001012709-02-001603.txt : 20021213 0001012709-02-001603.hdr.sgml : 20021213 20021213170751 ACCESSION NUMBER: 0001012709-02-001603 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20021213 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MEXCO ENERGY CORP CENTRAL INDEX KEY: 0000066418 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 840627918 STATE OF INCORPORATION: CO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-20883 FILM NUMBER: 02857562 BUSINESS ADDRESS: STREET 1: 214 W TEXAS AVENUE STREET 2: SUITE 1101 CITY: MIDLAND STATE: TX ZIP: 79701 BUSINESS PHONE: 9156821119 MAIL ADDRESS: STREET 1: 214 W TEXAS AVENUE STREET 2: SUITE 1101 CITY: MIDLAND STATE: TX ZIP: 79701 FORMER COMPANY: FORMER CONFORMED NAME: MILLER OIL CO DATE OF NAME CHANGE: 19800702 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: FALCON BAY OPERATING LLC CENTRAL INDEX KEY: 0001207520 IRS NUMBER: 752903123 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 600 N MARIENFELO CITY: MIDLAND STATE: TX ZIP: 79701 BUSINESS PHONE: 9156827424 MAIL ADDRESS: STREET 1: 600 N MARIENFELO CITY: MIDLAND STATE: TX ZIP: 79701 SC 13D 1 falcon13d-1202.txt MEXCO ENERGY CORPORATION SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------- SCHEDULE 13D (RULE 13D-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13D-1(A) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13D-2(A) (AMENDMENT NO. ________)1 Mexco Energy Corporation - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, $.50 par value - -------------------------------------------------------------------------------- (Title of Class of Securities) 592770101 - -------------------------------------------------------------------------------- (CUSIP Number) Richard R. Albro Falcon Bay Operating, L.L.C. 600 N. Marienfeld, Suite 900 Midland, Texas 79701 915-682-7424 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) December 5, 2002 - -------------------------------------------------------------------------------- (Date of Event Which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [ ] Note. Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. (Continued on following pages) - --------------------- 1 The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act, but shall be subject to all other provisions of the Act (however, see the Notes). Page 1 of 5 Pages - -------------------- ----------------- CUSIP NO. 592770101 13D PAGE 2 OF 5 PAGES ----------- --- --- - -------------------- ----------------- - -------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Falcon Bay Operating, L.L.C. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* 00 - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Texas - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 107,500 ----------------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY OWNED BY ----------------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH 107,500 ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 107,500 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.8% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* 00 - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! Page 2 of 5 Pages ITEM 1. SECURITY AND ISSUER This statement relates to the common stock, $.50 par value (the "Common Stock") of Mexco Energy Corporation, a Colorado corporation (the "Issuer"). The address of the principle executive offices of the Issuer is 214 West Texas, Suite 1101, Midland, Texas 79701. ITEM 2. IDENTITY AND BACKGROUND The reporting person filing this statement is Falcon Bay Operating, L.L.C. ("Falcon Bay"), which is a limited liability company organized under the laws of the State of Texas. The address of its principal business and principal office is 600 N. Marienfeld, Suite 900, Midland, Texas 79701. Falcon Bay's principal business is the acquisition and development of oil and gas properties. Falcon Bay has not, during the last five (5) years, been convicted in a criminal proceeding or been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction, and as a result of such proceeding, was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. With respect to Instruction C of the General Instructions to Schedule 13D, the following information is provided for the following persons as the officers, managers and controlling persons of Falcon Bay in response to Items (a) through (f) of Item 2 of Schedule 13D: 1. (a) W. Michael Ford (b) 600 N. Marienfeld, Suite 900, Midland, Texas 79701 (c) President and Member of Falcon Bay (d) No (e) No (f) United States 2. (a) Richard R. Albro (b) 600 North Marienfeld, Suite 900, Midland, Texas 79701 (c) Vice President and Member of Falcon Bay (d) No (e) No (f) United States 3. (a) Anthony B. Sam (b) 600 North Marienfeld, Suite 900, Midland, Texas 79701 (c) Vice President and Member of Falcon Bay (d) No (e) No (f) United States ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION Pursuant to that certain Exploration Agreement dated as of December 5, 2002 by and between the Issuer and Falcon Bay (the "Exploration Agreement"), the Issuer issued to Falcon Bay on December 5, 2002 a Common Stock Purchase Warrant to purchase 107,500 shares of Common Stock (the "Outstanding Warrant"). The Outstanding Warrant is exercisable at a purchase price of $5.00 per share, and expires on December 5, 2004. The number of shares covered by the Outstanding Warrant are subject to adjustment upon any stock split, stock dividend, reorganization, reclassification, merger, sale of all or Page 3 of 5 Pages substantially all of the assets of the Issuer, and similar events. The acquisition of the Outstanding Warrant (which includes the right to acquire shares of Common Stock within sixty (60) days upon exercise of the Outstanding Warrant) is the basis for Falcon Bay filing this Schedule 13D. In exchange for the Outstanding Warrant and other consideration described below, Falcon Bay has agreed to provide the Issuer with the right to participate in and share the promotional interests on certain oil and gas prospects and lease sales to third parties pursuant and subject to the terms and conditions of the Exploration Agreement. A copy of the Outstanding Warrant is attached as an exhibit hereto. ITEM 4. PURPOSE OF TRANSACTION The purpose of the acquisition by Falcon Bay of beneficial ownership of the shares represented by the Outstanding Warrant was to serve as part of the consideration given by the Issuer to Falcon Bay under the Exploration Agreement. (a) As discussed under Item 6 below, Falcon Bay may acquire an additional warrant and other shares of Common Stock pursuant to the terms of the Exploration Agreement. ITEM 5. INTEREST IN SECURITIES OF ISSUER (a) Falcon Bay beneficially owns 107,500 shares of Common Stock represented by the Outstanding Warrant, constituting approximately 5.8% of the total issued and outstanding shares of Common Stock, based upon its right to acquire such shares upon exercise of the Outstanding Warrant within sixty (60) days of the date hereof. None of the persons other than Falcon Bay identified under Item 2 hereof beneficially own any shares of Common Stock. (b) Falcon Bay has the sole power to vote or direct the vote and the sole power to dispose or to direct the disposition of all of the shares of Common Stock which it beneficially owns as described above. (c) Other than the acquisition of the Outstanding Warrant on December 5, 2002, none of the persons identified in (a) above effected any transactions with respect to the Common Stock for a period of sixty (60) days prior to the date of this Schedule 13D. (d) None. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Upon closing of the sale of four (4) selected oil and gas prospects to third parties pursuant to the Exploration Agreement, the Issuer will issue to Falcon Bay an additional common stock purchase warrant to purchase an additional 322,500 shares of Common Stock (the "Future Warrant"). Falcon Bay does not have any beneficial ownership to the shares which may become subject to the Future Warrant at this time, and any rights or interests in or to the Future Warrant are contingent upon the satisfaction of the conditions set forth in the Exploration Agreement and the issuance of the Future Warrant. If issued, the Future Warrant will be exercisable at a purchase price of $5.00 per share, and will expire two (2) years after the expiration of the Issuer's option to participate in the last of the four (4) oil and gas prospects. Page 4 of 5 Pages Also pursuant to the Exploration Agreement, the Issuer has the option to acquire interests in selected oil and gas properties by exchanging unregistered Common Stock for such interests. For purposes of this exchange, the Common Stock will be valued at 84% of the average price of the Common Stock for the longer of (i) the period from the date of the sale of the oil and gas property until the spud date of the initial well drilled on that property, or (ii) the sixty day period after the date of the sale of the oil and gas property. Falcon Bay has certain registration rights with respect to the shares of Common Stock which it may acquire through exercise of the Outstanding Warrant or the Future Warrant or otherwise acquire under the Exploration Agreement, pursuant to that certain Registration Rights Agreement dated as of December 5, 2002 by and between the Issuer and Falcon Bay. A copy of the Registration Rights Agreement is attached as an exhibit hereto. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS 7.1. - Common Stock Warrant No. 1 issued by Mexco Energy Corporation to Falcon Bay Energy, L.L.C. to purchase 107,500 shares of Common Stock of Mexco Energy Corporation. 7.2 - Registration Rights Agreement dated as of December 5, 2002 by and between Mexco Energy Corporation and Falcon Bay Operating, L.L.C. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. December 11, 2002 FALCON BAY OPERATING, L.L.C. - ----------------------- Date By: /s/ Richard R. Albro ------------------------------------- Richard R. Albro, Vice President Page 5 of 5 Pages EXHIBIT INDEX EXHIBIT NO. DESCRIPTION OF EXHIBIT - ----------- ---------------------- 7.1 Common Stock Warrant No. 1 issued by Mexco Energy Corporation to Falcon Bay Energy, L.L.C. to purchase 107,500 shares of Common Stock of Mexco Energy Corporation. 7.2 Registration Rights Agreement dated as of December 5, 2002 by and between Mexco Energy Corporation and Falcon Bay Operating, L.L.C. Exhibit Index EX-7.1 3 falconex72-1202.txt COMMON STOCK WARRANT WARRANT COMMON STOCK NO. 1 107,500 Shares MEXCO ENERGY CORPORATION (Incorporated under the laws of the State of Colorado) This is to certify that for value received FALCON BAY ENERGY LLC or assigns (hereinafter called the "Holder" or "Holders", as the case may be) is entitled to purchase from MEXCO ENERGY CORPORATION (hereinafter called the "Company"), at any time after 5:00 p.m. (Texas Time) on December 5, 2002, and before 5:00 p.m. (Texas Time) on December 5, 2004, 107,500 fully paid and non-assessable shares of Common Stock, par value $.50 per share of the Company, such shares not being registered under the Securities Act of 1933 as amended (the "Act") (hereinafter called "Common Stock") at a price of $5.00 per share (hereinafter called the "Warrant Price"). The Warrant Price and the number of shares purchasable hereunder are subject to adjustment as hereinafter provided. This Warrant may be exercised by the Holder for an aggregate of 107,500 shares of Common Stock and is issued pursuant to the terms of an Agreement dated December 5, 2002, between the Company and Holders. This Warrant and any Warrants issued in exchange therefor or in replacement thereof are hereinafter referred to as the "Warrants". This Warrant may be exercised by the Holder as hereinabove provided as to the whole or any part of the shares of Common Stock covered hereby by surrender of this Warrant at the principal office of any transfer agent for the Common Stock, or, if the Company shall not have any transfer agent for the Common Stock, at the principal office of the Company (any such transfer agent, or the Company acting hereunder, being hereinafter called the "Warrant Agent"), with the statement of election to subscribe attached hereto duly executed and upon payment to the Company of the Warrant Price for shares so purchased in cash or by cashier's check or bank draft in New York Clearing House funds. Thereupon (except that if, upon such date, the stock transfer books of the Company shall be closed, then upon the next succeeding date on which such transfer books are open) this Warrant shall be deemed to have been exercised and the person exercising the same to have become a Holder of record of shares of Common Stock (or of the other securities or property to which such person is entitled upon such exercise) purchased hereunder for all purposes, and certificates for such shares so purchased shall be delivered to the purchaser within a reasonable time (not exceeding 10 days, except while the transfer books of the Company are closed) after this Warrant shall have been exercised as set forth hereinabove. If this Warrant shall be exercised in respect of a part only of the shares of Common Stock covered hereby, the Holder shall be entitled to receive a similar Warrant of like tenor and date covering the number of shares in respect of which this Warrant shall not have been exercised. This Warrant is exchangeable, upon the surrender hereof by the Holder hereof at said principal office of the Warrant Agent, for new Warrants of like tenor and date representing in the aggregate the right to subscribe for and purchase the number of shares which may be subscribed for and purchased hereunder. The Company covenants and agrees that all shares which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued, fully paid and non-assessable and free from all taxes, liens and charges with respect to the issue thereof (other than taxes in respect of any transfer). The Company further covenants and agrees that, during the period within which the rights represented by this Warrant may WARRANT - Page 2 be exercised, the Company will at all times have authorized and reserved a sufficient number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant. The rights of the Holder of this Warrant shall be subject to the following terms and conditions: 1.1 In case the Company shall hereafter at any time (i) change by split-up, subdivision or combination the number of outstanding shares of Common Stock into a different number of shares of Common Stock with or without par value, or (ii) declare and pay a dividend in shares of Common Stock, the number of shares of Common Stock which immediately prior to such change or dividend the Holder of this Warrant shall have been entitled to purchase pursuant to this Warrant shall be increased or decreased in direct proportion to the increase or decrease, respectively, in the number of shares of Common Stock outstanding immediately prior to such change or dividend, and the Warrant Price in effect immediately prior to such change shall be increased or decreased, as the case may be, in inverse proportion to such increase or decrease in the number of such shares outstanding immediately prior to such change or dividend. Any such adjustment shall become effective on the effective date of such split-up, subdivision or combination, or the record date of such dividend, as the case may be. For the purposes of this Section 1.1 the number of shares of Common Stock outstanding at any given time shall not include shares in the treasury of the Company but shall include shares issuable in respect to scrip certificates representing fractional interests with respect to Common Stock. 1.2 In case of any capital reorganization or any reclassification of the capital stock of the Company (other than a change in par value of a stock split-up) or in case of the WARRANT - Page 3 consolidation or merger of the Company with another corporation, or in any case of any sale, transfer or other disposition to another corporation of all or substantially all the property, assets, business and goodwill of the Company as an entirety, as the case may be, the Holder of this Warrant shall thereafter be entitled to purchase for the aggregate Warrant Price payable hereunder immediately prior thereto in order to exercise this Warrant in full, the kind and amount of shares of stock and other securities and property receivable, upon such capital reorganization, reclassification of capital stock, consolidation, merger, sale, transfer or other disposition, by a Holder of the number of shares of Common Stock which this Warrant entitled the Holder thereof to purchase immediately prior to such capital reorganization, reclassification of capital stock, consolidation, merger, sale, transfer or other disposition; and in any such case appropriate provisions herein set forth with respect to rights and interests thereafter of the Holder of this Warrant, to the end that the provisions set forth herein (including the specified changes in and other adjustments of the Warrant Price) shall thereafter be applicable, as near as reasonably may be, in relation to any shares or other property thereafter purchasable upon the exercise of this Warrant. 1.3 In case the Company shall hereafter at any time declare a dividend (other than a dividend payable in shares of Common Stock or a cash dividend paid out of retained earnings) upon shares of Common Stock, the Holder of this Warrant shall, upon exercise of this Warrant in whole or in part, be entitled to receive, in addition to the number of shares of Common Stock deliverable upon such exercise pursuant hereto (including any shares deliverable pursuant to Section 1.1) against payment of the aggregate Warrant Price therefor, but without further consideration, the cash, stock or other securities or property which the Holder of this Warrant would have received as dividends (otherwise than a cash WARRANT - Page 4 dividend paid out of retained earnings and otherwise than a dividend paid in shares of Common Stock) if continuously since the date set forth at the foot of this Warrant such Holder (i) had been the Holder of record of the number of shares of Common Stock deliverable upon such exercise hereof and (ii) had retained all dividends in stock or other securities (other than a dividend payable in shares of Common Stock and otherwise than a cash dividend paid out of retained earnings) paid or payable in respect of said number of shares of Common Stock or in respect of any such stock or other securities so paid or payable as such dividends. 1.4 No certificates for fractional shares of Common Stock shall be issued upon the exercise of this Warrant, but in lieu thereof the Company shall, upon exercise in full of this Warrant, purchase out of funds legally available therefor any such fractional interest from the Holder or Holders for an amount in cash equal to the current market value of such fractional interest calculated to the nearest cent, computed on the basis of the mean between the high bid and low asked prices, as reported by the applicable quotation system, of the Common Stock in the market on the most recent day within ten days prior to the date of such exercise for which both bid and asked prices shall have been so reported, or, if the Common Stock is listed on a stock exchange located in the City of New York, the last reported sale price on such exchange on such day; and if there shall have been no sale on said day, then the computation shall be made on the basis of the last reported sale price on such exchange within ten days prior to such date. If there have been no reported bid and asked prices, or reported sales prices, as the case may be, within such ten days, the current market value shall be fixed in a manner determined in good faith by the Board of Directors of the Company. WARRANT - Page 5 1.5 Whenever the Warrant Price is adjusted As herein provided, the Company shall in the event of any dispute between the Company and the Holder cause to be filed with the Warrant Agent a statement of the Company's independent certified public accountants showing the adjusted Warrant Price which shall be conclusive and binding on the parties. Such statement shall show in detail the factors requiring such adjustment, including a statement of the consideration received by the Company for any additional securities issued. Whenever the Warrant Price is adjusted, the Company will forthwith cause a notice stating the adjustment and the Warrant Price to be mailed to the registered Holder of this Warrant at the address of such Holder shown on the books of the Company. Where appropriate, such notice may be given in advance and included as part of a notice required to be mailed under the provisions of Section 1.6. 1.6 In case at any time: (i) the Company shall pay any dividend payable in stock upon its Common Stock or make any distribution (other than cash dividends) to the Holders of its Common Stock; or (ii) the Company shall offer for subscription pro rata to the Holders of its Common Stock any additional shares of stock of any class or any other rights; or (iii) the Company shall effect any capital reorganization or any reclassification of or change in the outstanding capital stock of the Company (other than a change in par value, or a change from par value to no par value, or a change from no par value to par value, or a change resulting from a subdivision or combination of outstanding shares of Common Stock), or any consolidation or merger or any sale, transfer or other disposition of all or substantially all of its WARRANT - Page 6 property, assets, business and goodwill as an entirety or the liquidation, dissolution or winding up of the Company; or (iv) the Company shall declare a dividend (other than a dividend payable in shares of Common Stock or a cash dividend paid out of retained earnings) upon shares of its Common "Stock; then, in any such case, the Company shall cause notice at least ten days prior to the record date or the date on which the transfer books of the Company shall be closed to be mailed to the Warrant Agent and to the registered Holder of this Warrant at the address of such Holder shown on the books of the Company. Such notice shall also specify the date on which the books of the Company shall close, or a record be taken, for such stock dividend, distribution or subscription rights, or the estimated date on which such reclassification, reorganization, consolidation, merger, sale, transfer, disposition, liquidation, dissolution, winding up or dividend, as the case may be, shall take place, and the date of participation therein by the Holders of Common Stock if any such date is to be fixed, and shall also set forth such fact with respect thereto, as shall be reasonably necessary to indicate the effect of such action on the rights of the Holders of the Warrants. Such notice shall not be deemed an admission that any right of the Holder hereof has accrued. 1.7 In case at any time the Company shall pay any cash dividend payable upon its Common Stock, then in any such case, the Company shall cause notice at least ten (10) days prior to the record date for such cash dividend or the date on which the transfer books of the Company shall be closed, to be given by mail to the registered Holder of this Warrant at the address of such Holder shown on the books of the Company, and such notice shall specify the amount of the cash dividend and the date on which the books of the Company WARRANT - Page 7 shall close, or a record be taken, for such cash dividend; provided, however, that such notice need not be mailed if shares of the Company's Common Stock are listed on a national securities exchange located in the City of New York, N.Y., and the Company has complied with its agreement with such exchange with respect to notice thereto of such cash dividend. 2.1 At any time after December 5, 2002 any Holder or Holders may request in writing to the Company that it take such action, at the Holder or Holders' expense, as may be necessary in order to permit such Holder or Holders publicly to offer and sell the shares of Common Stock issuable or issued to him, it or them on the exercise of the Warrants in compliance with applicable state and Federal law. 3.1 The issue of any stock or other certificate upon the exercise of this Warrant shall be made without charge to the registered Holder hereof for any tax in respect of the issue of such certificate. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of any certificate in a name other than that of the registered Holder of this Warrant, and the Company shall not be required to issue or deliver any such certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to satisfaction of the Company that such tax has been paid. 3.2 This Warrant, which is not registered under the Act, shall be transferable only to "accredited" investors in conformity with the Act. Any such transfer shall be made upon surrender of this Warrant, with the form of Assignment attached hereto duly executed by the registered Holder hereof or by his attorney duly authorized in writing, to the Warrant Agent at its principal office hereinabove referred to, and thereupon there shall be issued in WARRANT - Page 8 the name of the transferee or transferees, in exchange for this Warrant, a new Warrant or Warrants of like tenor and date, representing in the aggregate the right to subscribe for and purchase the number of shares, or such portion thereof as shall be transferred, which may be subscribed for and purchased hereunder and if there shall be any balance of such shares not so transferred, there shall be issued in the name of the registered Holder of this Warrant, a new Warrant or Warrants of like tenor and date representing in the aggregate the right to subscribe for and purchase the balance of the number of shares which may be subscribed for and purchased hereunder. In the case of any transfer of this Warrant, or any part hereof, the person, firm or corporation to whom such transfer is made shall agree with the Company in writing to be bound by, and to observe, all of the terms and conditions herein set forth. 3.3 If this Warrant shall be lost, stolen, mutilated or destroyed, the Company may instruct the Warrant Agent, on such terms as to indemnity or otherwise as the Company may in its discretion impose, to issue a new Warrant of like denomination, tenor and date as the Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated, or destroyed Warrant shall be at any time enforceable by anyone. 3.4 The Company and any Warrant Agent may deem and treat the registered Holder of this Warrant as the absolute owner of this Warrant for all purposes and shall not be affected by any notice to the contrary. 3.5 This Warrant shall not entitle the Holder to any rights of a shareholder of the Company, either at law or in equity, including, without limitation, the right to vote, to receive dividends and other distributions (except as permitted by this Agreement), to WARRANT - Page 9 exercise any preemptive rights or to receive any notice of meetings of shareholders or of any other proceedings of the Company. 3.6 This Warrant, in all events, shall not be exercisable prior to December 5, 2002 and shall be wholly void and have no effect after December 5, 2004. 3.7 This Warrant shall be governed by the laws of the State of Texas. Dated: December 5, 2002. MEXCO ENERGY CORPORATION By ____________________________ President WARRANT - Page 10 ELECTION TO SUBSCRIBE Date: ________________, 2002 The undersigned hereby subscribes for ___________ of the shares of Common Stock covered by the within Warrant and tenders payment herewith in the amount of $_____________ in accordance with the terms thereof: Issue certificate(s) for said stock to: Deliver certificate(s) against counter recipient by mail to: - --------------------------- ----------------------------- (Name) (Name) - --------------------------- ----------------------------- (Taxpayer Identification No.) (Street and Number) - --------------------------- ----------------------------- (Street and Number) (City, State and Zip) - --------------------------- (City, State and Zip) and if said number of shares shall not be all of the shares covered by the within Warrant, that a new Warrant for the balance of the shares remaining be registered in the name of, and delivered as follows: Issue Warrant for said shares to: Deliver Warrant against counter receipt by mail to: - --------------------------- ------------------------------ (Name) (Name) - --------------------------- ----------------------------- (Taxpayer Identification No.) (Street and Number) - --------------------------- ----------------------------- (Street and Number) (City, State and Zip) - --------------------------- (City, State and Zip) WARRANT - Page 11 Very truly yours, ---------------------------------- (Signature of Subscriber or Agent) For value received _________________________ hereby sells, assigns and transfers unto the persons named in Exhibit A hereto, all of whom are accredited investors within the meaning of the Securities Act of 1933, as amended, in the respective amounts set forth opposite their respective names the right to purchase an aggregate of 107,500 of the shares of Common Stock of MEXCO ENERGY CORPORATION, a Colorado corporation, which rights are represented by the within Warrant, and does hereby irrevocably constitute and appoint ____________________ attorney to transfer said rights on the books of the within named Company, with full power of substitution in the premises. ------------------------------ By: --------------------------- Dated: -------------------------- In the Presence of - -------------------------------- WARRANT - Page 12 EX-7.2 4 falconex73-1202.txt REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT dated as of December 5, 2002 among MEXCO ENERGY CORPORATION and The Holders REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") dated as of December 5, 2002 among Mexco Energy Corporation, a Colorado corporation (the "COMPANY"), and the Holders named on the signature pages of this Agreement (collectively with their respective successors and assigns, the "HOLDERS"). RECITALS -------- WHEREAS, pursuant to that certain Exploration Agreement dated as of December 5, 2002, by and among Company and the Holders ("EXPLORATION AGREEMENT"), the Holders acquired Warrants (as defined below) to purchase up to 107,500 shares of the Company's Common Stock (as defined below) from the Company (and acquired the contingent right to acquire an additional 322,500 Warrants to purchase shares of the Company's Common Stock), and extended to the Company the option for the Company to issue to the Holders an additional undetermined number of shares of Common Stock pursuant to Section 3.3 of the Exploration Agreement; and WHEREAS, the parties hereto hereby desire to set forth the Holders' rights and the Company's obligations to cause the registration of the securities acquired upon exercise of the Warrants and upon issuance of the additional shares of Common Stock pursuant to the Securities Act of 1933, as amended (the "1933 Act"); NOW, THEREFORE, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions and Usage. --------------------- As used in this Agreement: 1.1. Definitions. ----------- "AGENT" means the principal placement agent on an agented placement of Registrable Securities. "BOARD" means the Board of Directors of the Company. "COMMISSION" means the Securities and Exchange Commission. "COMMON STOCK" means the Common Stock of the Company, par value $.50 per share. "HOLDERS" means each of the purchasers of the Warrants pursuant to the Exploration Agreement and such persons who may be issued additional shares of Common Stock pursuant to the Exploration Agreement and their respective legal successors and assigns and Transferees at all times as such Persons shall own Registrable Securities. "MAJORITY SELLING HOLDERS" means those Selling Holders whose Registrable Securities included in such registration represent a majority of the Registrable Securities of all Selling Holders included therein. "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization or government or other agency or political subdivision thereof. "PIGGYBACK REGISTRATION" shall have the meaning set forth in SECTION 2. "REGISTER," "REGISTERED," and "REGISTRATION" shall refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the 1933 Act, and the declaration or ordering by the Commission of effectiveness of such registration statement or document. "REGISTRABLE SECURITIES" means: (i) the shares of Common Stock issuable upon exercise of any of the Warrants owned by a Holder on the date of determination; (ii) any shares of Common Stock issued pursuant to Section 3.3 of the Exploration Agreement. "REGISTRABLE SECURITIES THEN OUTSTANDING" means, with respect to a specified determination date, the Registrable Securities owned by all Holders on such date. "REGISTRATION EXPENSES" shall have the meaning set forth in SECTION 5.1. "SELLING HOLDERS" means, with respect to a specified registration pursuant to this Agreement, Holders whose Registrable Securities are included in such registration. "TRANSFER" means and includes the act of selling, giving, transferring, creating a trust (voting or otherwise), assigning or otherwise disposing of other than pledging, hypothecating or otherwise transferring as security (and correlative words shall have correlative meanings); PROVIDED HOWEVER, that any transfer or other disposition upon foreclosure or other exercise of remedies of a secured creditor after an event of default under or with respect to a pledge, hypothecation or other transfer as security shall constitute a "Transfer." "UNDERWRITERS' REPRESENTATIVE" means the managing underwriter, or, in the case of a co-managed underwriting, the managing underwriter designated as the Underwriters' Representative by the co-managers. "VIOLATION" shall have the meaning set forth in SECTION 6.1. "1934 ACT" means the Securities Exchange Act of 1934, as amended. "WARRANT" means the warrants to purchase Common Stock issued by the Company pursuant to the Exploration Agreement. 2 1.2. Usage. ----- (i) References to a Person are also references to its assigns and successors in interest (by means of merger, consolidation or sale of all or substantially all the assets of such Person or otherwise, as the case may be). (ii) References to Registrable Securities "owned" by a Holder shall include Registrable Securities beneficially owned by such Person but which are held of record in the name of a nominee, trustee, custodian, or other agent. (iii) References to a document are to it as amended, waived and otherwise modified from time to time and references to a statute or other governmental rule are to it as amended and otherwise modified from time to time (and references to any provision thereof shall include references to any successor provision). (iv) References to Sections or to Schedules or Exhibits are to sections hereof or schedules or exhibits hereto, unless the context otherwise requires. (v) The "date of" any notice or request given pursuant to this Agreement shall be determined in accordance with SECTION 10.2. Section 2. Piggyback Registration. ---------------------- 2.1. If at any time the Company proposes to register, whether for its own account or for the account of shareholders of the Company (or if for a Holder other than pursuant to SECTION 2 hereof), securities under the 1933 Act in connection with a public offering solely for cash on Form S-1, S-2 or S-3 (or any replacement or successor forms), the Company shall promptly give each Holder of Registrable Securities written notice of such registration. Upon the written request of each Holder given within 20 days following the date of such notice and subject to SECTION 2.2, the Company shall cause to be included in such registration statement and use its best efforts to be registered under the 1933 Act all the Registrable Securities that each such Holder shall have requested to be registered (a "PIGGYBACK REGISTRATION"); PROVIDED, HOWEVER, that such right of inclusion shall not apply to any registration statement covering solely an underwritten offering of non-convertible debt securities, unless the Underwriters' Representative or Agent expressly consents thereto. The Company shall have the absolute right to withdraw or cease to prepare or file any registration statement for any offering referred to in this SECTION 2 without any obligation or liability to any Holder. 2.2. If the Underwriters' Representative or Agent shall advise the Company in writing (with a copy to each Selling Holder) that, in its opinion, the amount of Registrable Securities requested to be included in such offering pursuant to any such Piggyback Registration would materially adversely affect such offering, or the timing thereof, then the Company will include in such registration statement, to the extent of the amount and class which the Company is so advised can be sold without such material adverse effect in such offering: First, all securities proposed to be sold by the Company for its own account or, if such registration is 3 being effected for the account of any security holder of the Company, for the account of such security holder; second, the Registrable Securities requested to be included in such registration by Holders pursuant to this SECTION 2, and all other securities being registered pursuant to the exercise of contractual rights comparable to the rights granted in this SECTION 2, pro rata based on the amount of such securities then owned by such holders; and third all other securities requested to be included in such registration. 2.3. Each Holder shall be entitled to have its Registrable Securities included in an unlimited number of Piggyback Registrations pursuant to this SECTION 2. Section 3. REGISTRATION PROCEDURES. Whenever required under SECTION 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as practicable: 3.1. Prepare and file with the Commission a registration statement with respect to such Registrable Securities and use the Company's best efforts to cause such registration statement to become effective; PROVIDED, HOWEVER, that before filing a registration statement or prospectus or any amendments or supplements thereto, including documents incorporated by reference after the initial filing of the registration statement and prior to effectiveness thereof, the Company shall furnish to one firm of counsel for the Selling Holders (selected by Majority Selling Holders) copies of all such documents in the form substantially as proposed to be filed with the Commission at least four (4) business days prior to filing for review and comment by such counsel, which opportunity to comment shall include an absolute right to control or contest disclosure if the applicable Selling Holder reasonably believes that it may be subject to controlling person liability under applicable securities laws with respect thereto. 3.2. Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the 1933 Act and rules thereunder with respect to the disposition of all securities covered by such registration statement. If the registration statement is for an underwritten offering, the Company shall amend the registration statement or supplement the prospectus whenever required by the terms of the underwriting agreement entered into pursuant to SECTION 4.2. 3.3. Furnish to each Selling Holder of Registrable Securities, without charge, such numbers of copies of the registration statement, any pre-effective or post-effective amendments thereto, the prospectus, including each preliminary prospectus and any amendments or supplements thereto, in each case in conformity with the requirements of the 1933 Act and the rules thereunder, and such other related documents as any such Selling Holder may reasonably request in order to facilitate the disposition of Registrable Securities owned by such Selling Holder. 3.4. Use the Company's best efforts (i) to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such states or jurisdictions as shall be reasonably requested by the Underwriters' Representative or Agent (as applicable, or if inapplicable, the Majority Selling Holders), and (ii) to obtain the withdrawal of any order suspending the effectiveness of a registration statement, or obtain the 4 lifting of any suspension of the qualification (or exemption from qualification) of the offer and transfer of any of the Registrable Securities, in any jurisdiction, at the earliest possible moment; PROVIDED, HOWEVER, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. 3.5. In the event of any underwritten or agented offering, enter into and perform the Company's obligations under an underwriting or agency agreement (including indemnification and contribution obligations), in usual and customary form, with the managing underwriter or underwriters of or agents for such offering. The Company shall also cooperate with the Majority Selling Holders and the Underwriters' Representative or Agent for such offering in the marketing of the Registerable Securities, including making available the Company's officers, accountants, counsel, premises, books and records for such purpose. 3.6. Promptly notify each Selling Holder of any stop order issued or threatened to be issued by the Commission in connection therewith (and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered). 3.7. Make generally available to the Company's security holders copies of all periodic reports, proxy statements, and other information referred to in SECTION 8.1. 3.8. Make available for inspection by any Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter (but not more than one firm of counsel to such Selling Holders), all financial and other information as shall be reasonably requested by them, and provide the Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter the opportunity to discuss the business affairs of the Company with its principal executives and independent public accountants who have certified the audited financial statements included in such registration statement, in each case all as necessary to enable them to exercise their due diligence responsibility under the 1933 Act; PROVIDED, HOWEVER, that information that the Company determines, in good faith, to be confidential and which the Company advises such Person in writing is confidential shall not be disclosed unless such Person signs a confidentiality agreement reasonably satisfactory to the Company, or unless the related Selling Holder of Registrable Securities agrees to be responsible for such Person's breach of confidentiality on terms reasonably satisfactory to the Company. 3.9. Use the Company's best efforts to obtain a so-called "comfort letter" from its independent public accountants, and legal opinions of counsel to the Company addressed to the Selling Holders, in customary form and covering such matters of the type customarily covered by such letters, and in a form that shall be reasonably satisfactory to Majority Selling Holders. The Company shall furnish to each Selling Holder a signed counterpart of any such comfort letter or legal opinion. Delivery of any such opinion or comfort letter shall be subject to the recipient furnishing such written representations or acknowledgments as are customarily provided by selling shareholders who receive such comfort letters or opinions. 5 3.10. Provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement. 3.11. Use all reasonable efforts to cause the Registrable Securities covered by such registration statement (i) to be listed on a national securities exchange or included for quotation in a recognized trading market, on which similar securities issued by the Company are then listed or included, and (ii) to be registered with or approved by such other United States or state governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Selling Holders of Registrable Securities to consummate the disposition of such Registrable Securities. 3.12. Take such other actions as are reasonably required in order to expedite or facilitate the disposition of Registrable Securities included in each such registration statement. Section 4. HOLDERS' OBLIGATIONS. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Agreement with respect to the Registrable Securities of any Selling Holder of Registrable Securities that such Selling Holder shall: 4.1. Furnish to the Company such information regarding such Selling Holder, the number of the Registrable Securities owned by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Selling Holder's Registrable Securities, and to cooperate with the Company in preparing such registration statement; 4.2. Agree to sell its Registrable Securities to the underwriters at the same price and on substantially the same terms and conditions as the Company or the other Persons on whose behalf the registration statement was being filed have agreed to sell their securities, and to execute the underwriting agreement. Section 5. EXPENSES OF REGISTRATION. Expenses in connection with registrations pursuant to this Agreement shall be allocated and paid as follows: 5.1. The Company shall bear and pay all pay all expenses incurred in connection with any registration, filing, or qualification of Registrable Securities with respect to each Piggy Back Registration for each Selling Holder (which right may be assigned to any Person to whom Registrable Securities are Transferred as permitted by SECTION 7), including all registration, filing and National Association of Securities Dealers, Inc. fees, all fees and expenses of complying with securities or Blue Sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the reasonable fees and disbursements of counsel for the Company, and of the Company's independent public accountants, including the expenses of "cold comfort" letters required by or incident to such performance and compliance, but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holder of Registrable Securities) and the reasonable fees and disbursements of one firm of counsel for the Selling Holders of Registrable Securities (selected by the Majority Selling Holders)(the "REGISTRATION EXPENSES"). 6 5.2. Any failure of the Company to pay any Registration Expenses as required by this SECTION 5 shall not relieve the Company of its obligations under this Agreement. Section 6. INDEMNIFICATION; CONTRIBUTION. If any Registrable Securities are included in a registration statement under this Agreement: 6.1. To the extent permitted by applicable law, the Company shall indemnify and hold harmless each Selling Holder, each Person, if any, who controls such Selling Holder within the meaning of the 1933 Act, and each officer, director, partner, and employee of such Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint or several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may become subject under the 1933 Act, the 1934 Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses arise out of or are based upon any of the following statements, omissions or violations (collectively a "VIOLATION"): (i) Any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein, or any amendments or supplements thereto; (ii) The omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) Any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any applicable state securities law or any rule or regulation promulgated under the 1933 Act, the 1934 Act or any applicable state securities law; PROVIDED, HOWEVER, that the indemnification required by this SECTION 6.1 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or expense to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished to the Company by the indemnified party expressly for use in connection with such registration statement. 6.2. To the extent permitted by applicable law, each Selling Holder, severally and not jointly, shall indemnify and hold harmless the Company, each of its directors, each of its officers who shall have signed the registration statement, each Person, if any, who controls the Company within the meaning of the 1933 Act, any other Selling Holder, any controlling Person of any such other Selling Holder and each officer, director, partner, and employee of such other Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint and several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may otherwise 7 become subject under the 1933 Act, the 1934 Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Selling Holder expressly for use in connection with such registration; PROVIDED, HOWEVER, that (x) the indemnification required by this SECTION 6.2 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if settlement is effected without the consent of the relevant Selling Holder of Registrable Securities, which consent shall not be unreasonably withheld, and (y) in no event shall the amount of any indemnity under this SECTION 6.2 exceed the proceeds from the applicable offering received by such Selling Holder. 6.3. Promptly after receipt by an indemnified party under this SECTION 6 of notice of the commencement of any action, suit, proceeding, investigation or threat thereof made in writing for which such indemnified party may make a claim under this SECTION 6, such indemnified party shall deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties. The failure to deliver written notice to the indemnifying party within a reasonable time following the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this SECTION 6 to the extent of such material prejudice resulting therefrom, but shall not relieve the indemnifying party of any liability that it may have to any indemnified party otherwise than pursuant to this SECTION 6. Any fees and expenses incurred by the indemnified party (including any fees and expenses incurred in connection with investigating or preparing to defend such action or proceeding) shall be paid to the indemnified party, as incurred, within thirty (30) days of written notice thereof to the indemnifying party. Any such indemnified party shall have the right to employ separate counsel in any such action, claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expenses of such indemnified party unless (i) the indemnifying party has agreed to pay such fees and expenses or (ii) the indemnifying party shall have failed to promptly assume the defense of such action, claim or proceeding or (iii) such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or in addition to those available to the indemnifying party and that the assertion of such defenses would create a conflict of interest such that counsel employed by the indemnifying party could not faithfully represent the indemnified party (in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action, claim or proceeding on behalf of such indemnified party, it being understood, that the indemnifying party shall not, in connection with any one such action, claim or proceeding or separate but substantially similar or related actions, claims or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, unless it otherwise agrees, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for all such indemnified parties, unless in the reasonable judgment of such indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such action, claim or 8 proceeding, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels), then, and in the case of clauses (i), (ii) and (iii) above, the indemnifying party shall pay all such fees and expenses. No indemnifying party shall be liable to an indemnified party for any settlement of any action, proceeding or claim without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. 6.4. If the indemnification required by this Section 6 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to in this SECTION 6: (a) 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 Violation has been committed 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 Violation. 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 6.1 and SECTION 6.2, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. (b) The parties hereto agree that it would not be just and equitable if contribution pursuant to this SECTION 6.4 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 SECTION 6.4(a). No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 6.5. If indemnification is available under this SECTION 6, the indemnifying parties shall indemnify each indemnified party to the full extent provided in this SECTION 6 without regard to the relative fault of such indemnifying party or indemnified party or any other equitable consideration referred to in SECTION 6.4. 6.6. The obligations of the Company and the Selling Holders of Registrable Securities under this SECTION 6 shall survive the completion of any offering of Registrable Securities pursuant to a registration statement under this Agreement, and otherwise. Section 7. TRANSFER OF REGISTRATION RIGHTS. Rights with respect to Registrable Securities may be Transferred by such Holder to any Person in connection with the Transfer of Registrable Securities to such Person, in all cases, if Transferor shall have delivered to the Secretary of the Company, no later than 15 days following the date of the Transfer, written notification of such Transfer setting forth the name of the Transferor, name and address of the 9 Transferee, and the number of Warrants and/or shares of Registrable Securities which shall have been so Transferred. Section 8. COVENANTS OF THE COMPANY. The Company hereby agrees and covenants as follows: 8.1. The Company shall, at such time as any securities of the Company become registered for sale under the 1933 Act, file as and when applicable, on a timely basis, all reports required to be filed by it under the 1934 Act, and take such further action as may be reasonably required from time to time and as may be within the reasonable control of the Company, to enable the Holders to Transfer Registrable Securities without registration under the 1933 Act within the limitation of the exemptions provided by Rule 144 under the 1933 Act or any similar rule or regulation hereafter adopted by the Commission. 8.2. The Company shall not, directly or indirectly, (x) enter into any merger, consolidation or reorganization in which the Company shall not be the surviving corporation or (y) Transfer or agree to Transfer all or substantially all the Company's assets, unless prior to such merger, consolidation, reorganization or asset Transfer, the surviving corporation or the Transferee, respectively, shall have agreed in writing to assume the obligations of the Company under this Agreement, and for that purpose references hereunder to "REGISTRABLE SECURITIES" shall be deemed to include the securities which the Holders of Registrable Securities would be entitled to receive in exchange for Registrable Securities pursuant to any such merger, consolidation or reorganization. 8.3. The Company shall not grant to any Person (other than a Holder of Registrable Securities) any registration rights with respect to securities of the Company. Section 9. ASSIGNMENT; BENEFIT. This Agreement and all of the provisions hereof shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, assigns, executors, administrators or successors; PROVIDED, HOWEVER, that except as specifically provided herein with respect to certain matters, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned or delegated by the Company without the prior written consent of Holders owning Registrable Securities possessing a majority in number of the Registrable Securities outstanding on the date as of which such delegation or assignment is to become effective. A Holder may Transfer its rights hereunder to a successor in interest to the Registrable Securities owned by such assignor only as permitted by SECTION 7. Section 10. Miscellaneous. ------------- 10.1. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF. 10.2. NOTICES. Any and all notices, designations, consents, offers, acceptances, or any other communication provided for herein shall be given in writing delivered personally 10 (including delivery by courier or by facsimile if received during normal working hours) or by registered or certified mail, addressed, if to the Company, to the attention of N.C. Taylor, President; and, if to a Holder, to him, her or it at the address indicated for such Holder on the appropriate signature page attached hereto; or to such other address as may be designated in writing by any such party. Except as otherwise provided in this Agreement, each such notice shall be deemed given when delivered or on a date which is four (4) days after it is mailed in any post office or branch post office regularly maintained by the United States Postal Service (registered or certified, with postage prepaid and properly addressed). 10.3. AMENDMENT. This Agreement may be amended with the consent of the Company and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent of Holders owning Registrable Securities possessing a majority in number of the Registrable Securities then outstanding to such amendment, action or omission to act. 10.4. WAIVER. No failure or delay on the part of the parties or any of them in exercising any right, power or privilege hereunder, nor any course of dealing between the parties or any of them shall operate as a waiver of any such right, power or privilege nor shall any single or partial exercise of any such right, power or privilege preclude the simultaneous or later exercise of any other right, power or privilege. The rights and remedies herein expressly provided are cumulative and are not exclusive of any rights or remedies which the parties or any of them would otherwise have. No notice to or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the other parties or any of them to take any other or further action in any circumstances without notice or demand. 10.5. ENTIRE AGREEMENT; INTEGRATION. This Agreement supersedes all prior agreements between or among any of the parties hereto with respect to the subject matter contained herein and therein, and such agreements embody the entire understanding among the parties relating to such subject matter. 10.6. INJUNCTIVE RELIEF. Each of the parties hereto acknowledges that in the event of a breach by any of them of any material provision of this Agreement, the aggrieved party may be without an adequate remedy at law. Each of the parties therefore agrees that in the event of such a breach hereof the aggrieved party may elect to institute and prosecute proceedings in any court of competent jurisdiction to enforce specific performance or to enjoin the continuing breach hereof. By seeking or obtaining any such relief, the aggrieved party shall not be precluded from seeking or obtaining any other relief to which it may be entitled. 10.7. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, and all of which shall together constitute one and the same instrument. All signatures need not be on the same counterpart. 10.8. SEVERABILITY. Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the 11 remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. The parties hereto agree to negotiate in good faith to replace any illegal, invalid or unenforceable provision of this Agreement with a legal, valid and enforceable provision that, to the extent possible, will preserve the economic bargain of this Agreement. 10.9. TERMINATION. This Agreement may be terminated at any time by a written instrument signed by the parties hereto. Unless sooner terminated in accordance with the preceding sentence, this Agreement (other than SECTION 7 hereof) shall terminate in its entirety on such date as there shall be no Registrable Securities outstanding; PROVIDED that any securities previously subject to this Agreement shall not be Registrable Securities following the sale of any such shares in an offering registered pursuant to this Agreement. 10.10. ATTORNEYS' FEES. In any action or proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys' fees (including any fees incurred in any appeal) in addition to its costs and expenses and any other available remedy. 10.11. NO THIRD PARTY BENEFICIARIES. Nothing herein expressed or implied is intended to confer upon any person, other than the parties hereto or their respective permitted assigns, successors, heirs and legal representatives, any rights, remedies, obligations or liabilities under or by reason of this Agreement. THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK 12 IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the date first written above. COMPANY MEXCO ENERGY CORPORATION, a Colorado corporation By: -------------------------------------------------- Name: ------------------------------------------------ Title: ----------------------------------------------- HOLDERS FALCONBAY OPERATING, L.L.C. A Texas corporation By: -------------------------------------------------- Name: ------------------------------------------------ Title: ----------------------------------------------- Address for Notice: 600 N. Marienfeld, Suite 900 Midland, Texas 79701 13 -----END PRIVACY-ENHANCED MESSAGE-----