Exhibit 99.1
COMMON STOCK PURCHASE AGREEMENT
between
PIONEER DRILLING COMPANY,
as Seller
and
CHESAPEAKE ENERGY CORPORATION
as Purchaser
dated as of
March 31, 2003
Exhibit 99.1
TABLE OF CONTENTS
1. Purchase and Sale
1.1 Consideration.......................................................1
1.2 Authorization.......................................................1
1.3 Preemptive Rights...................................................1
1.4 Registration Rights Agreement.......................................2
1.5 Observation and Information Rights..................................3
1.6 Company Right of First Offer........................................3
2. The Closing............................................................4
2.1 Closing Date........................................................4
2.2 Payment and Delivery................................................4
3. Representations and Warranties of the Company..........................4
3.1 Organization and Existence..........................................4
3.2 Capitalization: Ownership of Stock: Authorization...................4
3.3 No Conflicts........................................................5
3.4 Authority; Enforceability...........................................5
3.5 Litigation; Contingencies...........................................6
3.6 Subsidiaries........................................................6
3.7 Title to Assets (Personal Property).................................6
3.8 Consents............................................................7
3.9 Proprietary Rights..................................................8
3.10 Financial Statements.............................................8
3.11 Compliance with Laws; OSHA.......................................8
3.12 Labor Matters....................................................9
3.13 ERISA............................................................9
3.14 Environmental Matters............................................9
3.15 Permits and Licenses............................................10
3.16 Insurance.......................................................10
3.17 Taxes...........................................................10
3.18 Absence of Certain Developments.................................11
4. Representations and Warranties of the Purchaser.......................11
4.1 No Conflict........................................................11
4.2 Authority; Enforceability..........................................11
4.3 Consents...........................................................12
4.4 Investment Representatives.........................................12
5. Nature and Survival of Representations and Warranties; Indemnity......12
5.1 Survival of Representations and Warranties.........................12
5.2 Indemnity by the Company...........................................13
5.3 Indemnity by the Purchaser.........................................13
5.4 Limitation of Liability............................................13
5.5 Exclusive Remedy...................................................14
6. Miscellaneous.........................................................14
6.1 Financial Statements and Other Information.........................14
6.2 Expenses...........................................................14
6.3 Notices............................................................14
6.4 Entire Agreement; Amendments.......................................15
6.5 Assignment.........................................................15
6.6 Brokers............................................................15
6.7 No Third Party Rights..............................................16
6.8 Counterparts.......................................................16
6.9 Headings: Interpretation...........................................16
6.10 Governing Law...................................................16
6.11 Arbitration.....................................................16
6.12 Severability....................................................17
SCHEDULES
Schedule 3.7(a)......................... Liens Against Assets
Schedule 3.7(c)......................... Use of Real Property
Schedule 3.9............................ Proprietary Rights
Schedule 3.10........................... Changes to Financial Statements
Schedule 3.11........................... Compliance With Laws
Schedule 3.13........................... ERISA
Schedule 3.14........................... Environmental Matters and Permits
Schedule 3.18........................... Absence of Certain Developments
Exhibit 99.1
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT, dated effective as of March 31, 2003
("Agreement", between Chesapeake Energy Corporation, an Oklahoma corporation
(the "Purchaser"), and Pioneer Drilling Company, a Texas corporation (the
"Company").
W I T N E S S E T H:
WHEREAS, subject to the terms and conditions of this Agreement, the Company
desires to obtain additional equity funding, and the Purchaser desires to make
an investment in the Company;
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties and covenants herein contained, the parties hereby
agree as follows:
1. PURCHASE AND SALE.
1.1 CONSIDERATION. The Company hereby agrees to issue and sell to
the Purchaser 5,333,333 shares of the common stock (the "Shares"), par
value $0.10 per share, of the Company ("Common Stock"), and the Purchaser hereby
agrees to purchase the Shares for an aggregate purchase price of $20,000,000 in
cash (the "Purchase Price"), payable by wire transfer of immediately available
funds at the closing hereunder being effected concurrently with the execution
and delivery of this Agreement by the parties hereto (the "Closing").
1.2 AUTHORIZATION. The Company agrees that the Shares to be
issued and sold to the Purchaser shall be duly authorized and issued, and
shall be fully paid, nonassessable and shall not be subject to any fees,
encumbrances, pledges or "adverse claims" (as Section 8.102(a)(1) of the Uniform
Commercial Code of the State of Texas defines that term), and upon delivery to
the Purchaser will vest full, valid and legal title to the Shares in the
Purchaser.
1.3 PREEMPTIVE RIGHTS. The Company hereby grants to the Purchaser
the preemptive right to acquire a percentage of any additional capital
stock of any class or series, or debt convertible into capital stock
(collectively, "Preemptive Right Securities"), the Company may issue equal to
the percentage of the outstanding Common Stock held by the Purchaser immediately
preceding any such issuance (assuming the conversion of all outstanding
convertible preferred stock or debt) (the "Purchaser' Pro Rata Amount"). This
preemptive right shall terminate in the event the Purchaser holds less than 10%
of the outstanding Common Stock of the Company. This preemptive right shall also
terminate on the fourth anniversary of the approval for listing of the Common
Stock on the American Stock Exchange (the "AMEX"); provided, however, in the
event the Common Stock at any time hereafter shall not be listed on the AMEX or
on another nationally recognized securities exchange or, in lieu thereof,
included in the Nasdaq Stock Market, the preemptive rights shall be reinstated,
subject to any other independent basis for termination (including as provided in
the immediately preceding sentence). This preemptive right shall not apply to
the issuance of capital stock issued pursuant to warrants, options or other
rights to acquire capital stock currently outstanding or that may hereafter be
granted by the Company to any employee, consultant or director under any
existing or future option plan or other incentive plan of the Company or under
any option, warrant or other rights to acquire capital stock that is or has been
approved by the shareholders of the Company.
(a) ISSUANCES FOR CASH. Subject to the other provisions of this
Section 1.3, upon the issuance by the Company of Preemptive Right
Securities in exchange for cash, the Purchaser shall have the right to purchase
the Purchaser's Pro Rata Amount of the Preemptive Right Securities for the same
cash purchase price and on the same terms as the other purchasers of such
Preemptive Right Securities, except in the case of an underwritten public
offering of securities registered under the Securities Act of 1933, as amended
(the "Securities Act"), in which case the Purchaser's purchase price shall be
the cash purchase price at which the Preemptive Right Securities are offered to
the public. Upon receipt of written notice from the Company of the Company'
intent to issue Preemptive Right Securities for cash, the Purchaser shall
provide written notice to the Company of its intent to exercise or not to
exercise its preemptive rights within 10 days of the Purchaser' receipt of such
notice from the Company. Failure of the Purchaser to provide notice within such
10 days shall be deemed to be a waiver of such preemptive rights. Any issuance
of Preemptive Right Securities for cash not completed within 60 days of the date
notice is provided by the Company to the Purchaser as provided in the preceding
sentence hereof shall be deemed to be a new issuance of Preemptive Right
Securities to which this subparagraph applies.
1
Exhibit 99.1
(b) ISSUANCES FOR OTHER THAN CASH. Subject to the other
provisions of this Section 1.3, upon the issuance by the Company of
Preemptive Right Securities in exchange for any consideration other than cash,
the Purchaser shall have the right to purchase the Purchaser' Pro Rata Amount
of the Preemptive Right Securities at a cash price per share equal to the value
per share received by the Company as consideration for the issuance of the
Preemptive Right Securities as determined by the Board of Directors of the
Company in good faith; provided, however, that, if such Preemptive Right
Securities are regularly traded, then the purchase price per share shall be no
less than the average of the average daily trading price of actual trades of
such Preemptive Right Securities for the 30 trading days preceding the date on
which written notice of the Company's intent to issue Preemptive Right
Securities is delivered to the Purchaser in accordance with the following
sentence. Upon receipt of written notice from the Company of the Company's
intent to issue Preemptive Right Securities for any consideration other than
cash, the Purchaser shall provide written notice to the Company of its intent to
exercise or not to exercise its preemptive rights within 10 days of the
Purchaser's receipt of such notice from the Company. Failure of the Purchaser to
provide notice within such 10 days shall be deemed to be a waiver of such
preemptive rights. Any issuance of Preemptive Right Securities for any
consideration other than cash not completed within 120 days of the date notice
is provided by the Company to the Purchaser as provided in the preceding
sentence hereof shall be deemed to be a new issuance of Preemptive Right
Securities to which this subparagraph applies. Notwithstanding anything to the
contrary contained in this Agreement, the Purchaser shall have no preemptive
rights with respect to a merger, plan of exchange or other combination involving
the Company that requires the approval of the shareholders of the Company and
with respect to which such approval is obtained.
1.4 REGISTRATION RIGHTS AGREEMENT. Simultaneous with the
execution of this Agreement, the Company and the Purchaser are entering
into a Registration Rights Agreement in form and substance of Exhibit A attached
hereto (the "Registration Rights Agreement").
1.5 OBSERVATION AND INFORMATION RIGHTS. So long as the Purchaser
owns at least five percent (5%) of the capital stock of the Company and no
Purchaser representative is serving as a member of the Company's board of
directors, the Purchaser will have the right to designate one representative of
the Purchaser to attend and observe all meetings of the board of directors of
the Company, all meetings of committees of such board and all meetings of the
board of directors of each of the subsidiaries of the Company. Subject to the
confidentiality provisions and other restrictions set forth below, the Company
will provide such designated observer with all notices, materials and
information provided to any of the members of the boards of directors or
committees at the same time as such notices, materials and information are
provided to the directors including, without implied limitation, any written
consent by the directors and any notices, material or information regarding such
written consent. The Company will promptly pay or reimburse each such designated
observer for all reasonable out-of-pocket expenses incurred in connection with
attending board or committee meetings of the Company or any subsidiary. The
parties agree that the designated observer will leave for that portion of any
meeting where outside legal counsel is discussing any legal matter with the
board of directors in a situation where the presence of the observer is, in the
reasonable opinion of such counsel, potentially able to impair the successful
assertion of the attorney client privilege with respect to the matter being so
discussed. The Purchaser will, and will cause its designated observer to, (i)
maintain the confidentiality of all material nonpublic information disclosed to
either of them pursuant to the foregoing provisions and (ii) refrain from
trading in shares of Common Stock or any other securities of the Company while
in possession of any such material nonpublic information. The Company's
obligations pursuant to this Section 1.5 shall be subject to the Company's
receipt of a written acknowledgement of the Purchaser's designated observer
which acknowledges his obligation as provided in the immediately preceding
sentence.
2
Exhibit 99.1
1.6 COMPANY RIGHT OF FIRST OFFER. The Purchaser agrees that it
will not sell, transfer or otherwise dispose of any Common Stock other than
into the public trading market under Rule 144 or incident to any registration
right granted by the Company to the Purchaser without first offering the stock
the Purchaser desires to transfer (the "Disposition Stock") to the Company in
writing (the "Disposition Notice") at the price and on the terms (the
"Disposition Terms") under which the Purchaser desires to transfer the
Disposition Stock. Upon receipt of any Disposition Notice, the Company shall
have the assignable right to acquire the Disposition Stock from the Purchaser
upon the Disposition Terms at any time within 45 days following the Company's
receipt of the Disposition Notice (the "Company Disposition Period"), so long as
the Company shall provide the Purchaser with an affirmative written
acknowledgment of its intent to acquire the Disposition Stock within 10 days
after the Company's receipt of the Disposition Notice. If the Company or its
assignee does not take all action necessary to purchase the Disposition Stock
upon the Disposition Terms within the Company Disposition Period, the Purchaser
may complete a disposition of the Disposition Stock to any third party strictly
upon the Disposition Terms and in a manner conforming to applicable securities
laws during the 45 day period following the end of the Company Disposition
Period, but not thereafter, unless the Purchaser submits a further Disposition
Notice pursuant to the terms of this paragraph. The requirements of this
paragraph shall not apply to the pledge or gift of Common Stock by the Purchaser
or a disposition to an affiliate of the Purchaser or to a disposition approved
by the Board of Directors of the Company; provided, however, that any affiliate
transferee or donee of Common Stock shall first be required to agree in writing
to be bound by the terms of this Section 1.6. The Purchaser agrees that
certificates representing Common Stock subject to this Section 1.6 may be
legended in order to provide notice of the Company's right of first refusal set
forth in this Section 1.6 to third parties.
2. THE CLOSING.
2.1 CLOSING DATE. The Closing shall take place at the offices of
the Company, 0000 Xxxxxxxx, Xxxxxxxx X, Xxx Xxxxxxx, Xxxxx, on March 31,
2003 (the "Closing Date"), concurrently with the execution and delivery of this
Agreement.
2.2 PAYMENT AND DELIVERY. At the Closing, the Purchaser shall pay
the Purchase Price by transferring immediately available funds by wire
transfer to the Company. At the Closing, the Company will deliver to the
Purchaser certificates representing the Shares. The certificates for Shares
shall be subject to a legend restricting transfer under the Securities Act, and
referring to restrictions on transfer herein, such legend to be substantially as
follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AS
TO THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION THAT SUCH
REGISTRATION IS NOT REQUIRED AND THAT ANY PROSPECTUS DELIVERY REQUIREMENTS
ARE NOT APPLICABLE. THE SHARES WERE PURCHASED UNDER AN AGREEMENT THAT
INCLUDES ADDITIONAL RESTRICTIONS ON THEIR TRANSFER AND COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.
The Shares may also include any legend required under the laws of any state or
other jurisdiction.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to the Purchaser that, as of the date of this Agreement:
3.1 ORGANIZATION AND EXISTENCE. The Company is a corporation duly
incorporated and validly existing and in good standing under the laws of
the State of Texas and has all requisite corporate power to carry on its
business as now conducted and is qualified to do business in those jurisdictions
where its lease of property or the conduct of its business requires such
qualification, except where the failure to do so would not have a Material
Adverse Effect (as defined below). The Company has delivered to the Purchaser
complete and correct copies of the Articles of Incorporation and Bylaws of the
Company as in effect on the date hereof. As used in this Agreement, the term
"Material Adverse Effect shall mean an event, circumstance, loss, development
or effect that would result in a material adverse effect on the business,
operations, assets, condition (financial or other) or results of operations of
the Company.
3
Exhibit 99.1
3.2 CAPITALIZATION: Ownership of Stock: Authorization. The
Company has 100,000,000 authorized shares of Common Stock and 10,000,000
authorized shares of its preferred stock, issuable in series (the "Preferred
Stock"). As of December 31, 2002, the Company had (a) 16,167,459 issued and
outstanding shares of Common Stock; (b) no shares of Preferred Stock
outstanding; (c) no treasury shares; and (d) convertible secured debentures
outstanding that may be converted into 6,500,000 underlying shares of Common
Stock. As of December 31, 2002, the Company had granted or was authorized to
grant stock options that may be exercised for up to 3,000,000 underlying shares
of Common Stock pursuant to existing stock option plans approved by the
Company's shareholders. Other than the registration rights granted to the
Purchaser in accordance with the transactions contemplated hereby, the Company
has granted registration rights that are currently in effect only to (a) WEDGE
Energy Services, L.L.C. ("Wedge"), in the form of demand and piggy-back
registration rights, and (b) two of its officers and directors, Wm. Xxxxx Xxxxx
and Xxxxxxx X. Xxxxxx, in the form of piggy-back registration rights, and no
other individual or entity currently has any registration rights of any kind or
nature (other than rights under Form S-8), including demand or piggy-back
registration rights. The Company has granted Wedge preemptive rights, as set
forth in that certain Common Stock Purchase Agreement by and between the Company
and Wedge dated as of May 18, 2001, a copy of which has been made available to
the Purchaser. Wedge has executed an instrument waiving its preemptive rights
with respect to the issuance of the Shares being effected hereby. Except as set
forth in this Section 3.2, there are no other options, warrants, rights,
conversion rights, phantom rights, preemptive rights or any other rights of any
party to receive equity of the Company. Upon issuance of the Shares to the
Purchaser, the Purchaser will be the record and beneficial owner of the Shares
and the Shares will be duly authorized, validly issued and outstanding, fully
paid and nonassessable. As a result of the issuance of the Shares, the Company
is not, nor will it become, obligated to issue any additional shares of capital
stock (preferred or common) to any officer, director, shareholder or other
party.
3.3 NO CONFLICTS. The execution and delivery of this Agreement
and the Registration Rights Agreement by the Company, and performance by
the Company hereunder and thereunder, will not result in a violation or breach
of any term or provision of or constitute a default or accelerate the
performance required under the Articles of Incorporation or Bylaws of the
Company or any material indenture, mortgage, deed of trust or other contract or
agreement to which the Company is a party or by which its assets are bound, or
violate any order, writ, injunction or decree of any court, administrative
agency or governmental body.
3.4 AUTHORITY; ENFORCEABILITY. The Company has full right, power
and authority to execute and deliver this Agreement and the Registration
Rights Agreement and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Registration
Rights Agreement and the consummation of the transactions contemplated hereby to
be performed by the Company have been duly and validly authorized by all
necessary corporate action on the part of the Company, and no other corporate
proceedings are necessary to authorize the execution and delivery of this
Agreement and the Registration Rights Agreement by the Company or to consummate
the transactions contemplated hereby to be performed by the Company. This
Agreement and the Registration Rights Agreement constitute valid and legally
binding obligations of the Company, enforceable in accordance with their
respective terms, except as that enforcement may be limited by bankruptcy,
insolvency, moratorium or similar laws affecting the enforcement of creditors'
rights, by the availability of injunctive relief or specific performance and by
general principles of equity and, in the case of the Registration Rights
Agreement, any rights to indemnity or contribution thereunder may be limited by
federal and state securities laws and public policy considerations.
3.5 LITIGATION; CONTINGENCIES. Except as described in the Reports
(as defined in Section 3.10), there is no action, suit or proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any of its subsidiaries before any court, agency or arbitrator that would result
in any Material Adverse Effect or that questions the validity of any action
taken or to be taken pursuant to on in connection with this Agreement or the
Registration Rights Agreement.
4
Exhibit 99.1
3.6 SUBSIDIARIES. Other than subsidiaries that have no assets,
liabilities or operations, the Company has no subsidiaries or any material
equity interests in any other corporation, partnership or joint venture except
as follows: The Company owns 100% of PDC Investment Corp., a Delaware
corporation. PDC Investment Corp. is the sole limited partner with a 99%
partnership interest in Pioneer Drilling Services, Ltd., a Texas limited
partnership. The Company owns 100% of PDC MGMT. Co., a Texas corporation. PDC
MGMT. Co. is the sole general partner of Pioneer Drilling Services, Ltd. and
holds a 1% partnership interest in such limited partnership. Pioneer Drilling
Services, Ltd., holds substantially all of the operating assets of the
consolidated group consisting of the Company, PDC Investment Corp., Pioneer
Drilling Services, Ltd., and PDC MGMT. Co.
3.7 TITLE TO ASSETS (PERSONAL PROPERTY).
(a) Except as set forth on Schedule 3.7(a) and except for those
assets leased under leases identified on Schedule 3.7(a), the Company or
one of its subsidiaries is the owner of, and has marketable title to, free and
clear of all Liens (as defined below), except Permitted Lines (as defined
below), the personal property shown or reflected on the December 31, 2002
balance sheet of the Company included in the Reports, except for (i) cash
expended, and (ii) inventories and other assets used or sold and receivables
collected in the ordinary course of business since December 31, 2002. The
Company and its subsidiaries have maintained all their tangible personal
properties material to the business of the Company and its subsidiaries, taken
as a whole, in good repair, working order and operating condition, subject to
ordinary wear and tear, and all such assets are suitable for the purposes for
which they are presently being used. As used in this Agreement, the term "Lien"
means, with respect to any property or other asset of any person (in each case
whether the same is consensual or nonconsensual or arises by contract, operation
of law, legal process or otherwise), any mortgage, lien, security interest,
pledge, attachment, levy or other charge or encumbrance of any kind thereupon or
in respect thereof or any "adverse claims" (as Section 8.102(a)(i) of the
Uniform Commercial Code of the State of Texas defines that term). As used in
this Agreement, the term "Permitted Liens" means, with respect to the property
or other assets of the Company: (i) Liens for taxes if the same are not at the
time due and delinquent or are being contested; (ii) Liens of mechanics,
laborers, landlords, operators and materialmen and similar Liens, arising in the
ordinary course of business; (iii) Liens incurred in the ordinary course of
business in connection with worker's compensation, unemployment insurance and
other social security legislation; (iv) Liens incurred in the ordinary course of
business in connection with deposit accounts or to secure the performance of
trade contracts, statutory obligations, surety and appeal bonds, performance and
return-of-money bonds and other obligations of like nature; and (v) Liens
securing purchase money indebtedness as set forth on Schedule 3.7)(a), so long
as those Liens do not attach to any property or other assets other than the
properties or other assets purchased with the proceeds of that indebtedness.
(b) (i) All leases to which the Company or any subsidiary is a
party are valid and binding on the Company or such subsidiary, as the case
may be, and ,to the knowledge of the Company, the other party or parties
thereto, and in full force and effect, (ii) the Company or one of its
subsidiaries is in peaceful possession of the real property or personal property
that is subject thereto, (iii) neither the Company nor any of its subsidiaries
is in default of any material provision of any such lease, except for any such
default as would not result in a Material Adverse Effect, and (iv) to the
knowledge of the Company, no event has occurred that with the giving of notice,
the passage of time or both, would become a default under any such lease, except
for any such default as would not result in a Material Adverse Effect.
(c) Except as set forth on Schedule 3.7(c), the Company and its
subsidiaries have all easements, rights-of-way and similar authorizations
required for the use of the real property leased by the Company and its
subsidiaries and used in the conduct of the business as heretofore conducted,
excluding any easements, rights-of-way and similar authorizations the absence of
which do not materially impair the use of such real property (the "Easements").
To the knowledge of the Company, no party to any Easement is in default of any
provision of any easement or any covenant, restriction or other agreement
encumbering any of the real property, except for any such default as would not
result in a Material Adverse Effect, and, to the knowledge of the Company, no
event that with the giving of notice, the passage of time or both would become a
default has occurred under any Easement or any covenant, restriction or other
agreement encumbering any of the real property, except for any such default as
would not result in a Material Adverse Effect. No real property, or any portion
thereof, occupied by the Company or any of its subsidiaries has been condemned
or otherwise taken by any public authority, and neither the Company nor any of
its subsidiaries has received written notice that any such condemnation or
taking is threatened or contemplated.
5
Exhibit 99.1
(d) (i) Neither the properties owned or occupied by the Company
or any of its subsidiaries nor the occupancy or operation thereof is in
violation of any law or any building, zoning or other ordinance, code or
regulation, except for any such violation as would not result in a Material
Adverse Effect; (ii) no notice from any governmental body has been served upon
the Company or any of its subsidiaries or upon any property owned or occupied by
the Company or any of its subsidiaries claiming any material violation of any
such law, ordinance, code or regulation or requiring, or calling to the
attention of the Company the need for, any work, repair, construction,
alteration or installation on or in connection with any such properties that has
not been complied with; and (iii) there is no encroachment of the improvements
located on the real property owned or occupied by the Company or any of its
subsidiaries upon any adjoining property, or of improvements located on any
adjoining property upon any property owned or occupied by the Company or any of
its subsidiaries, except for any such encroachment as would not result in a
Material Adverse Effect.
3.8 CONSENTS. The Company is not required to obtain any consent
from or approval of any court, governmental entity or any other person in
connection with the execution, delivery or performance by it of this Agreement
or the Registration Rights Agreement and the transactions contemplated hereby,
except such filings as may be required to be made with the Securities and
Exchange Commission and the American Stock Exchange and with any state or
foreign "blue sky" or securities regulatory authority. The consummation of the
transactions contemplated by this Agreement will not require the approval of any
entity or person in order to prevent the termination of any material right,
privilege, license or agreement of the Company.
3.9 PROPRIETARY RIGHTS. Except as set forth on Schedule 3.9, the
Company and its subsidiaries own or possess adequate licenses or other
valid rights to use all patents, patent rights, trademarks, trademark rights and
proprietary information used or held for use in connection with their respective
businesses as currently being conducted, except where the failure to own or
possess such licenses and other rights would not have a Material Adverse Effect,
and there are no assertions or claims challenging the validity of any of the
foregoing that would have a Material Adverse Effect. The conduct of the
Company' and its subsidiaries' respective businesses as currently conducted
does not conflict with any patents, patent rights, licenses, trademarks,
trademark rights, trade names, trade name rights or copyrights of others in any
way that would have a Material Adverse Effect. There is no infringement of any
proprietary right owned by or licensed by or to the Company or any of its
subsidiaries that would have a Material Adverse Effect.
3.10 FINANCIAL STATEMENTS. The Company has made available to the
Purchaser its Annual Report on Form 10-K for the fiscal year ended March
31, 2002, the definitive Proxy Statement dated July 10, 2002 for the Annual
Meeting of Shareholders to be held on August 16, 2002, its Quarterly Reports on
Form 10-Q for the quarterly periods ended June 30, 2002, September 30, 2002 and
December 31, 2002, a report of Form 8-K dated July 3, 2002 and filed July 18,
2002, a report on Form 8-K dated August 8, 2002 and filed August 9, 2002, and a
report on Form 8-K dated December 23, 2002 and filed January 3, 2003
(collectively, the "Reports"). As used in this Agreement, the term "Financial
Statements" means the unaudited balance sheet and statements of operations and
cash flows for the Company as of and for the fiscal quarter ended December 31,
2002 and included in its Report on Form 10-Q for the quarter ended December 31,
2002. The Financial Statements have been prepared in conformity with generally
accepted accounting principles, consistently applied, except as otherwise stated
therein and except for the absence of footnote disclosures and normal year-end
adjustments. Except as set forth on Schedule 3.10, all of the Financial
Statements present fairly in all material respects the financial position and
the results of operations of the Company and its subsidiaries as of the dates
and for the periods shown therein, and to the knowledge of the Company, there
has been no Material Adverse Effect on the financial condition of the Company
since December 31, 2002.
6
Exhibit 99.1
Except as disclosed in the Reports, the Financial Statements or as set
forth on Schedule 3.10, to the knowledge of the Company, neither the Company nor
any of its subsidiaries has any debt, liability or obligation, contingent or
otherwise, that would have a Material Adverse Effect.
3.11 COMPLIANCE WITH LAWS; OSHA. To the knowledge of the Company,
the Company and its subsidiaries are in compliance with all applicable
laws, ordinances, statutes, rules, regulations and orders promulgated by any
court or federal, state or local governmental body or agency relating to its
assets and business, except for such violations or failures to comply that would
not result in a Material Adverse Effect. Except as set forth on Schedule 3.11,
since January 1, 2000, neither the Company nor any of its subsidiaries has
received any notice, citation, claim, assessment or proposed assessment alleging
any violation of any federal, state or local safety and health laws, except for
any such violations as would not result in a Material Adverse Effect.
3.12 LABOR MATTERS. There is no labor strike or labor disturbance
pending or, to the knowledge of the Company, threatened against the Company
or any of its subsidiaries. Neither the Company nor any of its subsidiaries has
experienced any work stoppage or other material labor disturbance within the
past three years. Neither the Company nor any of its subsidiaries is a party to
any collective bargaining agreement with respect to its employees and, to the
knowledge of the Company, there are no current attempts to organize its
employees.
3.13 ERISA. Except as set forth in any of the Reports or on
Schedule 3.13, neither the Company nor any of its subsidiaries maintains or
sponsors any pension, retirement, savings, deferred compensation or
profit-sharing plan or any stock option, stock appreciation, stock purchase,
performance share, bonus or other incentive plan, severance plan, health, group
insurance or other welfare plan, or other similar plan or any "employee benefit
plan" within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), under which the Company has any
current or future obligation or liability or under which any employee or former
employee (or beneficiary of any employee or former employee) of the Company has
or may have any current or future right to benefits on account of employment
with the Company (the term "plan" shall include any contract, agreement, policy
or understanding, each such plan being hereinafter referred to individually as a
"Plan"). Each Plan intended to be qualified under Sections 401(a) and 501(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), is, and has been
determined by the Internal Revenue Service to be, qualified under Sections
401(a) and 501(a) of the Code and, since such determination, no amendments to or
failure to amend any such Plan or any other circumstances adversely affects its
tax qualified status. There has been no prohibited transaction within the
meaning of Section 4975 of the Code and Section 406 of Title I of ERISA with
respect to any Plan that is subject to the prohibited transaction requirements
of the Code or ERISA.
3.14 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 3.14
(a) the Company and each of its subsidiaries have obtained all
Environmental Permits (as defined below) that are required with respect to their
respective businesses, operations and properties, either owned or leased, except
where the failure to have obtained any such Environmental Permit would not have
a Material Adverse Effect, and (b) the Company, each of it subsidiaries, and
their respective properties are in compliance with all terms and conditions of
all applicable Requirements of Environmental Law and Environmental Permits, in
each case except as would not have a Material Adverse Effect. Except as would
not have a Material Adverse Effect or as set forth in any of the Reports or on
Schedule 3.14, there are no Environmental Claims pending or, to the knowledge of
the Company, threatened against the Company or any of its subsidiaries. Neither
the Company nor any of its subsidiaries has received any notice from any
governmental authority of any unresolved violation or liability arising under
any Requirements of Environmental Law or Environmental Permit in connection with
its assets, businesses or operations, except for any such violation or liability
as would not have a Material Adverse Effect.
7
Exhibit 99.1
"Environmental Claim" means any third party (including
governmental agencies and employees) action, lawsuit, claim or proceeding
(including claims or proceedings under the Occupational Safety and Health Act or
similar laws relating to safety of employees) that seeks to impose liability for
(a) pollution or contamination of the ambient air, surface water, ground water
or land; (b) solid, gaseous or liquid waste generation, handling, treatment,
storage, disposal or transportation; (c) exposure to hazardous or toxic
substances; (d) the safety or health of employees; or (e) the transportation,
processing, distribution in commerce, use or storage of hydrocarbons or chemical
substances. An Environmental Claim includes, but is not limited to, a common law
action, as well as a proceeding to issue, modify or terminate an Environmental
Permit. "Environmental Permit" means any permit, license, approval or other
authorization under any applicable law, regulation and other requirement of the
United States or any foreign country or of any state, municipality or other
subdivision thereof relating to pollution or protection of health or the
environment, including laws, regulations or other requirements relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants or hazardous substances or toxic materials or wastes into ambient
air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transportation or handling of hydrocarbons or chemical substances, pollutants,
contaminants or hazardous or toxic materials or wastes.
"Requirements of Environmental Law" means all requirements in
effect on the Closing Date imposed by any applicable law, rule, regulation
or order of any federal, foreign, state or local executive, legislative,
judicial, regulatory or administrative agency, board or authority with
jurisdiction over the Company or any of its subsidiaries or any of their
respective properties or assets that relate to (a) pollution or protection of
the ambient air, surface water, ground water or land; (b) solid, gaseous or
liquid waste generation, treatment, storage, disposal or transportation; (c)
exposure to hazardous or toxic substances; (d) the safety or health of
employees; or (e) regulation of the manufacture, processing, distribution in
commerce, use or storage of hydrocarbons or chemical substances.
3.15 PERMITS AND LICENSES. The Company and its subsidiaries have
all licenses, permits and other authorizations necessary for the conduct of
their respective businesses as they are currently being conducted, except where
the failure to hold any such licenses, permits or authorizations would not have
a Material Adverse Effect.
3.16 INSURANCE. The Company and its subsidiaries maintain
insurance policies (together with all riders and amendments) relating to
the assets or the businesses of the Company and its subsidiaries with coverage
limits in amounts that the Company believes are sufficient to protect against
any material claim for casualty or property damage. Such insurance policies are
in full force and effect and all premiums due thereon have been paid or accrued
on the books of the Company.
3.17 TAXES. The Company and its subsidiaries have filed all
material tax returns and reports required by law to be filed, or filed
extensions for any period in which a tax return was due, and, as of December 31,
2002, have paid or accrued on the Financial Statements all taxes, assessments
and other governmental charges that are due and payable, except for any such
items as are being contested in good faith as set forth on Schedule 3.17. The
charges, accruals and reserves on the books of the Company in respect of taxes
for all prior fiscal periods are considered adequate by the Company, and the
Company knows of no assessment for additional taxes for any of such fiscal years
or any basis therefor, except for any such assessment as would not have a
Material Adverse Effect. All tax returns and reports that have been filed by the
Company and its subsidiaries are complete in all material respects. To the
knowledge of the Company, no claim has been made that the Company or any of its
subsidiaries is subject to a tax in any jurisdiction in which the Company or any
of its subsidiaries has not filed a return and that remains unpaid as of the
Closing Date. The Company and its subsidiaries have withheld and paid all
material amounts of taxes required to have been withheld and paid in connection
with amounts previously paid to any employee, independent contractor, creditor,
stockholder or other third party. Since January 1, 2000, (i) neither the Company
nor any of its subsidiaries has been the subject of an audit and (ii) neither
the Company not any of its subsidiaries has waived any statute of limitations or
agreed to an extension of time with respect to a tax assessment or deficiency.
8
Exhibit 99.1
3.18 ABSENCE OF CERTAIN DEVELOPMENTS. Since December 31, 2002,
there has been no change in the business or operations of the Company or
any of its subsidiaries that would have a Material Adverse Effect, except
changes in the ordinary course of business. Except as set forth on Schedule
3.18, the Company has not, since the date of the Financial Statements, directly
or indirectly, declared or paid any dividend or ordered or made any other
distribution on account of any shares of any class of the capital stock of the
Company. The Company has not, since such date, directly or indirectly redeemed,
purchased or otherwise acquired any such shares or agreed to do so or set aside
any sum or property for any such purpose.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants to the Company that, as of the date of this
Agreement:
4.1 NO CONFLICT. The execution and delivery of this Agreement and
the Registration Rights Agreement by the Purchaser, and performance by the
Purchaser hereunder and thereunder will not result in a violation or breach of
any term or provision of or constitute a default or accelerate the performance
required under the Articles of Incorporation or Bylaws of the Purchaser or any
material indenture, mortgage, deed of trust or other contract or agreement to
which the Purchaser is a party or by which its assets are bound, or violate any
order, writ, injunction or decree of any court, administrative agency or
governmental body.
4.2 AUTHORITY; ENFORCEABILITY. The Purchaser has full right,
power and authority to execute and deliver this Agreement and the
Registration Rights Agreement and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the
Registration Rights Agreement and the consummation of the transactions
contemplated hereby to be performed by the Purchaser have been duly and validly
authorized by all necessary corporate action on the part of the Purchaser, and
no other corporate proceedings are necessary to authorize the execution and
delivery of this Agreement and the Registration Rights Agreement by the
Purchaser or to consummate the transactions contemplated hereby to be performed
by the Purchaser. This Agreement and the Registration Rights Agreement will
constitute valid and legally binding obligations of the Purchaser, enforceable
in accordance with their respective terms, except as that enforcement may be
limited by bankruptcy, insolvency, moratorium or similar laws affecting the
enforcement of creditors' rights, by the availability of injunctive relief or
specific performance and by general principles of equity.
4.3 CONSENTS. The Purchaser is not required to obtain any consent
from or approval of any court, governmental entity or any other person in
connection with the execution, delivery or performance by it of this Agreement
or the Registration Rights Agreement and the transactions contemplated hereby.
The consummation of the transactions contemplated by this Agreement will not
require the approval of any entity or person in order to prevent the termination
of any material right, privilege, license or agreement of the Purchaser.
4.4 INVESTMENTS REPRESENTATIVES. The Purchaser is an "credited
investor" within the meaning of Regulation D promulgated by the Securities
and Exchange Commission under the Securities Act, and (by virtue of its
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company) it is capable of evaluating the
merits and risks of its investment in the Company. The Purchaser acknowledges
that it has had the opportunity to ask questions of the officers of the Company.
In reaching the conclusion that it desires to acquire the Shares, the Purchaser
has evaluated its financial resources and investment position and the risks
associated with this investment and acknowledges that it is able to bear the
economic risks of this investment. As of the date hereof, the Purchaser
represents, warrants and agrees that it is acquiring the Shares solely for its
own account, for investment, and not with a view to the distribution or resale
thereof. The Purchaser further represents that its present financial condition
is such that it is not under any present necessity or constraint to dispose of
such Shares to satisfy any existing or contemplated debt or undertaking and that
the investment is suitable for the Purchaser upon the basis of the Purchaser's
other security holdings, financial situation and needs. The Purchaser
acknowledges and understands that it must bear the economic risk of this
investment for an indefinite period of time because the offering of the Shares
has not been registered under the Securities Act and, accordingly, the Shares
must be held indefinitely unless subsequently registered under the Securities
Act and applicable state and other securities laws or unless an exemption from
such registration is available. The Purchaser agrees that any certificates
evidencing the Shares must bear a legend restricting the transfer thereof as set
forth in Section 2.2 and that a notice may be made in the records of the Company
or to its transfer agent restricting the transfer of the Shares in a manner
consistent with the foregoing.
9
Exhibit 99.1
5. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY.
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All covenants,
agreements, representations and warranties made hereunder or pursuant
hereto or in connection with the transactions contemplated hereby shall survive
the Closing; provided, however, that for purposes of the indemnification
provided for in this Article 5, (a) the representations and warranties set forth
in Article 3 and 4 (other than Sections 3.2, 3.5, 3.13, 3.14 and 3.16) shall
survive until the second anniversary of the Closing Date, (b) the
representations and warranties of the Company set forth in Sections 3.5, 3.13
and 3.14 shall survive until the fourth anniversary of the Closing Date, and (c)
the representations and warranties of the Company set forth in Sections 3.2 and
3.16 shall survive for the applicable limitations period established by law (the
"Surviving Representations and Warranties"), whereupon they will terminate and
expire. After a Surviving Representation and Warranty has terminated and
expired, no indemnification will or may be sought under this Article 5 by any
person who would have been entitled under this Article 5 to indemnification on
the basis of that Surviving Representation and Warranty prior to such
termination and expiration; provided, however, that no claim for indemnification
hereunder based on a Surviving Representation and Warranty, written notice of
which is presented to the indemnifying party prior to the termination and
expiration of such Surviving Representation and Warranty, will be affected in
any way by that termination and expiration.
5.2 INDEMNITY BY THE COMPANY. The Company shall indemnify and
hold harmless the Purchaser and the officers, directors, managers, agents,
affiliates and representatives of the Purchaser (the "Purchaser Indemnitees")
from and against, and shall reimburse the Purchaser Indemnitees for, any loss,
liability, damage or expense, including reasonable attorneys' fees and costs of
investigation incurred as a result thereof, that the Purchaser shall incur or
suffer (collectively, the "Purchaser Recoverable Losses"), arising out of or
resulting from (a) any misrepresentation or breach of any representation or
warranty contained in Article 3 hereof on the part of the Company, or (b) any
nonfulfillment or breach of any agreement or covenant under or pursuant to this
Agreement or the Registration Rights Agreement on the part of the Company.
5.3 INDEMNITY BY THE PURCHASER. The Purchaser shall indemnify and
hold harmless the Company and the officers, directors, managers, agents,
affiliates and representatives of the Purchaser (the "Company Indemnitees") from
and against, and shall reimburse the Company Indemnitees for, any loss,
liability, damage or expense, including reasonable attorneys' fees and cost of
investigation incurred as a result thereof, that the Company shall incur or
suffer (collectively, the "Company Recoverable Losses") arising out of or
resulting from (a) any misrepresentation or breach of any representation or
warranty contained in Article 4 hereof on the part of the Purchaser, or (b) any
nonfulfillment or breach of any agreement or covenant under or pursuant to this
Agreement or the Registration Rights Agreement on the part of the Purchaser.
5.4 LIMITATION OF LIABILITY.
(a) Notwithstanding any liability that the Company or the
Purchaser may incur in Sections 5.2 and 5.3, respectively, above, the
Company shall not be obligated for a Purchaser Recoverable Loss, and the
Purchaser shall not be obligated for a Company Recoverable Loss, unless and
until such loss, individually, or in the aggregate, shall exceed $250,000, in
which case the Company or the Purchaser, as the case may be, shall be obligated
for all amounts in excess thereof. In no event will the liability of the Company
under this Article 5 with respect to Purchaser Recoverable Losses or the
Purchaser under this Article 5 with respect to Company Recoverable Losses exceed
an amount equal to the Purchase Price.
(b) Notwithstanding any provision in any other Section of this
Agreement to the contrary, no Purchaser Recoverable Loss or Company Recoverable
Loss will include any indirect, consequential, exemplary, punitive or treble
damage (collectively, the "Excluded Damages") suffered by the Purchaser
Indemnitees or the Company Indemnitees. The Purchaser hereby releases the
Company, to the fullest extent applicable law permits, from liability for all
Excluded Damages, and the Company hereby releases the Purchaser, to the fullest
extent applicable law permits, from liability for all Excluded Damages.
5.5 EXCLUSIVE REMEDY. The rights to indemnification set forth in
this Article 5 shall be the sole and exclusive remedy of the Purchaser
Indemnitees against the Company and the Company Indemnitees against the
Purchaser, respectively, in connection with the Surviving Representations and
Warranties (except to the extent that the Purchaser Indemnitees or the Company
Indemnitees may have any claim against the other party arising out of or based
on fraud).
10
Exhibit 99.1
6. MISCELLANEOUS.
6.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. Upon the written
request of the Purchaser, the Company will provide to the Purchaser copies
of all financial statements and other information provided to Wedge pursuant to
Section 3.01 of that certain Debenture Agreement dated July 3, 2002 between the
Company and Wedge.
6.2 EXPENSES. Each of the parties will pay their respective costs
and expenses (including legal fees) in connection with this Agreement as a
result of the transactions contemplated hereby.
6.3 NOTICES. All notices and other communications provided for or
permitted hereunder must be in writing and will be deemed delivered and
received (i) if personally delivered or if delivered by facsimile or courier
service, when actually received by the party to whom the notice or communication
is sent, or (ii) if deposited with the United States postal service (whether
actually received or not), at the close of business on the third San Antonio,
Texas business day next following the day when placed in the mail, postage
prepaid, certified or registered with return receipt requested, addressed to the
appropriate party or parties at the address of that party set forth or referred
to below (or at such other address as that party may designate by written notice
to each other party in accordance herewith):
(a) if to the Company, to:
Pioneer Drilling Company
0000 Xxxxxxxx, Xxxxxxxx X
Xxx Xxxxxxx, Xxxxx 00000
Attention: President
Fax No.: (000) 000-0000
with a copy (which will not constitute notice for
purposes of this Agreement) to:
Xxxxx Xxxxx L.L.P.
Xxx Xxxxx Xxxxx
000 Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxx X. Paris
Fax No.: (000) 000-0000
(b) if to the Purchaser, to:
Chesapeake Energy Corporation
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Chief Financial Officer
Fax No.: (000) 000-0000
with a copy (which will not constitute notice for
purposes of this Agreement) to:
Commercial Law Group, P.C.
2725 Oklahoma Tower
000 Xxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000-0000
Attention: Xxx Xxxx
Fax No.: (000) 000-0000
11
Exhibit 99.1
6.4 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the schedules
hereto and the documents specifically referred to herein or executed
contemporaneously herewith constitute the entire agreement, understanding,
representations and warranties of the parties hereto related to the subject
matter hereof and supercede all prior agreements of the parties related to the
subject matter hereof. This Agreement may be amended only by an instrument in
writing executed by both of the parties hereto. The Company will not amend or
modify the Common Stock Purchase Agreement by and between the Company and Wedge
dated as of May 18, 2001 or Wedge's rights under the Registration Rights
Agreement without the prior written consent of the Purchaser.
6.5 ASSIGNMENT. This Agreement may be assigned at any time by the
Purchaser to an Affiliate (as defined in the Registration Rights Agreement)
without the prior consent of the Company so long as the party to whom this
Agreement is assigned agrees in writing to be bound by all terms and conditions
contained herein. No other assignment may be made by the Purchaser without the
Company's prior written consent. Subject to the provisions of this Section 6.5,
this Agreement will inure to the benefit of and be binding on the successors and
assigns of each of the parties hereto.
6.6 BROKERS.
(a) The Purchaser represents and warrants that it has not
engaged, consented to or authorized any broker, finder or intermediary to
act on its behalf, directly or indirectly, as a broker, finder or intermediary
in connection with the transactions contemplated by this Agreement. The
Purchaser hereby agrees to indemnify and hold harmless the Company from and
against all fees, commissions or other payments owing to any such person or firm
acting on behalf of the Purchaser hereunder.
(b) The Company has engaged, consented to and authorized
Xxxxxxxxx & Co, Inc. in connection with the transactions contemplated by
this Agreement. The Company agreed to pay Xxxxxxxxx & Company, Inc.
("Jefferies") a commission and to reimburse expenses in accordance with that
certain Letter Agreement dated March 19, 2003 between the Company and Jefferies
(which the Company will pay in accordance with the terms of that agreement), and
the Company agrees to indemnify and hold harmless the Purchaser from and against
all fees, commissions or other payments owing by the Company to any other person
or firm acting on behalf of the Company hereunder.
6.7 NO THIRD PARTY RIGHTS. Except as expressly contemplated
hereby, nothing in this Agreement shall create or be deemed to create any
rights in any person or entity not a party to this Agreement.
6.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original instrument,
but all of which taken together shall constitute one and the same agreement.
6.9 HEADINGS: INTERPRETATION. The headings of the various
sections of this Agreement have been inserted for convenience of reference
only and shall not limit or affect the meaning or interpretation of this
Agreement. Whenever the context requires, references in this Agreement to the
singular number shall include the plural and vice versa, and words denoting
gender shall include the masculine, feminine and neuter. This Agreement uses the
words "herein," "hereof," "hereto" and "hereunder" and words of similar import
to refer to this Agreement as a whole and not to any particular provision of
this Agreement. As used in this Agreement, the word "including" (and, with
correlative meaning, the word "include") means including without limiting the
generality of any description preceding that word, and the verbs "shall" and
"will" are used interchangeably and have the same meaning.
6.10 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without regard
to any principles of conflicts of law thereof that would result in the
application of the laws of any other jurisdiction.
12
Exhibit 99.1
6.11 ARBITRATION.
(a) The parties shall attempt in good faith to resolve any dispute arising
out of or relating to this Agreement promptly by negotiation between executives
who have authority to settle the controversy and who are at a higher level of
management than the persons with direct responsibility for administration of
this Agreement. Any party may give the other party written notice of any dispute
not resolved in the normal course of business. Within 15 days after delivery of
the notice, the receiving party shall submit to the other party a written
response. The notice and response shall include (a) a statement of that party'
position and a summary of arguments supporting that position, and (b) the name
and title of the executive who will represent that party and of any other person
who will accompany the executive. Within 30 days after delivery of the initial
notice, the executives of both parties shall meet at a mutually acceptable time
and place, and thereafter as often as they reasonably deem necessary, to attempt
to resolve the dispute. All reasonable requests for information made by one
party to the other will be honored.
All negotiations pursuant to this clause are confidential and shall be
treated as compromise and settlement negotiations for purposes of applicable
rules of evidence.
(b) If the dispute has not been resolved by negotiation as
provided herein within 45 days after delivery of the initial notice of
negotiation, the parties shall endeavor to settle the dispute by mediation under
the CPR Mediation Procedure in effect on the date of this Agreement, provided,
however, that if one party fails to participate in the negotiation as provided
herein, the other party can initiate mediation prior to the expiration of the 45
days. Unless otherwise agreed, the parties will select a mediator from the CPR
Panels of Distinguished Neutrals.
(c) Any dispute arising out of or relating to this Agreement,
including the breach, termination or validity thereof, that has not been
resolved by mediation as provided herein within 45 days after initiation of the
mediation procedure, shall be finally resolved by arbitration in accordance with
the CPR Rules for Non-Administered Arbitration in effect on the date of this
Agreement, by three independent and impartial arbitrators, of whom each party
shall designate one; provided, however, that if one party fails to participate
in either the negotiation or mediation as agreed herein, the other party can
commence arbitration prior to the expiration of the time periods set forth
above. The arbitration shall be governed by the Federal Arbitration Act, 9
U.S.C. Section 1-16, and judgment upon the award rendered by the arbitrators may
be entered by any court having jurisdiction thereof. The place of arbitration
shall be Houston, Texas.
Each party is required to continue to perform its obligations
under this Agreement pending final resolution of any dispute arising out of
or relating to this Agreement, unless to do so would be impossible or
impractical.
The arbitrators are not empowered to award damages in excess of
compensatory damages and each party expressly waives and foregoes any right
to punitive, exemplary or similar damages unless a statute requires that
compensatory damages be increased in a specified manner.
6.12 SEVERABILITY. In case any one or more of the provisions
contained in this Agreement or any application thereof shall be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and other
applications thereof shall not in any way be affected or impaired thereby.
13
Exhibit 99.1
IN WITNESS WHEREOF, this Agreement has been duly executed by the Company
and by the Purchaser by their respective officers duly authorized effective as
of the date first above written.
THE COMPANY:
PIONEER DRILLING COMPANY
By: /s/ Wm. Xxxxx Xxxxx
-------------------------
Wm. Xxxxx Xxxxx
President and CFO
THE PURCHASER:
CHESAPEAKE ENERGY CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
-------------------------
Xxxxxx X. Xxxxxx
Senior Vice President
14
