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EXHIBIT 10.2
ASSET PURCHASE AGREEMENT
AMONG
XXXXXXXXX ENERGY, INC.,
XXXXXXXXX DRILLING COMPANY LP, LLLP
AND
X.X. XXXXX DRILLING COMPANY
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TABLE OF CONTENTS
Page
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ARTICLE I - THE ASSET PURCHASE....................................................................................1
Section 1.1 The Asset Purchase...........................................................................1
Section 1.2 Purchase Consideration.......................................................................1
Section 1.3 Further Assurances...........................................................................2
Section 1.4 Closing......................................................................................2
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF PARENT.............................................................2
Section 2.1 Organization, Standing and Power.............................................................2
Section 2.2 Authority; Non-Contravention.................................................................2
Section 2.3 Capital Structure............................................................................3
Section 2.4 SEC Documents................................................................................3
Section 2.5 Environmental Matters........................................................................4
Section 2.6 Litigation...................................................................................5
Section 2.7 Brokers......................................................................................6
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF COMPANY...........................................................6
Section 3.1 Organization, Standing and Power.............................................................6
Section 3.2 Capital Structure............................................................................6
Section 3.3 Ownership of Company Common Stock............................................................6
Section 3.4 Authority; Non-Contravention.................................................................6
Section 3.5 Financial Statements.........................................................................7
Section 3.6 Absence of Material Adverse Change...........................................................7
Section 3.7 Taxes........................................................................................7
Section 3.8 Personal Property; Title Thereto.............................................................8
Section 3.9 Accounts Receivable..........................................................................9
Section 3.10 Insurance....................................................................................9
Section 3.11 Records......................................................................................9
Section 3.12 Transactions with Affiliates.................................................................9
Section 3.13 Labor Matters................................................................................9
Section 3.14 Environmental Matters.......................................................................10
Section 3.15 Litigation..................................................................................11
Section 3.16 Brokers.....................................................................................11
Section 3.17 Bank Accounts...............................................................................11
Section 3.18 Assumed Drilling Contracts..................................................................11
ARTICLE IV - REPRESENTATIONS AND WARRANTIES REGARDING SUB........................................................11
Section 4.1 Organization, Standing and Ownership........................................................11
Section 4.2 Authority; Non-Contravention................................................................11
ARTICLE V - COVENANTS RELATING TO CONDUCT OF BUSINESS............................................................12
Section 5.1 Conduct of Company Contract Drilling Operations Pending the Asset Purchase..................12
Section 5.2 No Solicitation.............................................................................13
ARTICLE VI - ADDITIONAL AGREEMENTS...............................................................................13
Section 6.1 Fees and Expenses...........................................................................13
Section 6.2 Reasonable Efforts..........................................................................13
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Section 6.3 Public Announcements........................................................................13
Section 6.4 Indemnification.............................................................................13
Section 6.5 Certain Tax Matters.........................................................................15
Section 6.6 Personal Property Taxes.....................................................................15
Section 6.7 Access to Information.......................................................................15
Section 6.8 Filing of Registration Statement on Form S-3................................................16
Section 6.9 Condition of Company Equipment..............................................................16
Section 6.10 Delivery of Daily Drilling Reports..........................................................16
Section 6.11 Sub Assumption of Drilling Contracts........................................................16
Section 6.12 Employment..................................................................................16
ARTICLE VII - CONDITIONS PRECEDENT TO THE ASSET PURCHASE.........................................................17
Section 7.1 Conditions to Each Party's Obligation to Effect the Asset Purchase..........................17
Section 7.2 Conditions to Obligation of Company to Effect the Asset Purchase............................17
Section 7.3 Conditions to Obligations of Parent and Sub to Effect the Asset Purchase....................19
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER.................................................................21
Section 8.1 Termination.................................................................................21
Section 8.2 Effect of Termination.......................................................................22
Section 8.3 Amendment...................................................................................22
Section 8.4 Waiver......................................................................................22
ARTICLE IX - POST CLOSING COVENANTS..............................................................................22
Section 9.1 Access to Information.......................................................................22
ARTICLE X - GENERAL PROVISIONS...................................................................................22
Section 10.1 Notices.....................................................................................22
Section 10.2 Interpretation..............................................................................24
Section 10.3 Counterparts................................................................................24
Section 10.4 Entire Agreement; No Third-Party Beneficiaries..............................................24
Section 10.5 Governing Law...............................................................................24
Section 10.6 Assignment..................................................................................24
Section 10.7 Severability................................................................................24
Section 10.8 Enforcement of This Agreement...............................................................25
ANNEX 1 Description of Drilling Rigs, Equipment, Accounts Receivable
and Other Assets
ANNEX 1A Assumed Liabilities
ANNEX 2 List of Assumed Drilling Contracts
ANNEX 3 Company Employees
EXHIBIT A Registration Rights Agreement
EXHIBIT B Xxxx of Sale and Assignment
EXHIBIT C Investment Representation Letter - Xxxxx X. Xxxxx
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of January 5, 2001 (this
"Agreement"), among XXXXXXXXX ENERGY, INC., a Delaware corporation ("Parent"),
XXXXXXXXX DRILLING COMPANY LP, LLLP, a Delaware registered limited liability
limited partnership ("Sub"), a wholly-owned indirect subsidiary of Parent, and
X.X. XXXXX DRILLING COMPANY, a privately-owned Oklahoma corporation ("Company").
WITNESSETH:
WHEREAS, Sub desires to purchase, and Company desires to sell, all of
Company's right, title and interest in and to all of the assets of Company,
including its drilling rigs, related drilling equipment, accounts receivable and
other assets (collectively, Drilling Rigs, Equipment, Accounts Receivable and
Other Assets") (the "Asset Purchase") for the consideration set forth and
provided for herein;
WHEREAS, for federal income tax purposes, it is intended that the Asset
Purchase shall qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, Parent and Sub, on the one hand, and Company, on the other,
desire to make certain representations, warranties and agreements in connection
with the Asset Purchase and also prescribe various conditions to the Asset
Purchase.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE I
THE ASSET PURCHASE
Section 1.1 The Asset Purchase. Upon the terms and subject to the
conditions of this Agreement, at the Closing (as hereinafter defined) provided
herein, Sub shall purchase from Company and Company shall sell to Sub, all of
Company's right, title and interest in and to all of the assets of the Company,
including the Drilling Rigs, Equipment, Accounts Receivable and Other Assets,
but excluding cash and cash equivalents.
Section 1.2 Purchase Consideration. In consideration for all of
Company's right, title and interest in and to all of the assets of the Company,
including the Drilling Rigs, Equipment, Accounts Receivables, and Other Assets,
Sub agrees to pay or deliver to Company at the Closing a total of 149,189 shares
of common stock of Parent ("Parent Shares") and to assume and pay the
liabilities set forth on Annex 1-A (the "Assumed Liabilities"). Notwithstanding
the date of the Closing under this Agreement, for accounting and tax purposes,
the Asset Purchase will be deemed to be effective at 12:01 a.m. on January 1,
2001, and all transactions effected by Company after that
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date and prior to the Closing will be for the account of PDC and will be so
reported by Company and PDC.
Section 1.3 Further Assurances. Each of the Company and the
Company Shareholder shall use all reasonable efforts to take or cause to be
taken, all appropriate action, or cause to be done all things necessary, proper
or advisable under applicable laws, and execute and deliver such documents and
other papers, as may be required to carry out the provisions of this Agreement
and consummate and make effective the transactions contemplated by this
Agreement.
Section 1.4 Closing. The closing of the Asset Purchase (the "Closing")
shall take place in the offices of Xxxxxxxxx & Xxxxxxxxx L.L.P., Dallas, Texas
at 9:00 a.m., local time, on or at such other time and place as PDC and Company
may agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to Company as follows:
Section 2.1 Organization, Standing and Power. Parent (i) is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power and
authority to carry on its business as now being conducted, and (ii) is in good
standing in each jurisdiction where the character of its business owned or held
under lease or the nature of its activities makes such qualification necessary,
except where the failure to be so qualified would not individually or in the
aggregate, have a Material Adverse Effect on Parent. "Material Adverse Change"
or "Material Adverse Effect" means, when used with respect to Parent or Company
any change or effect that is or, so far as can reasonably be determined, is
likely to be materially adverse to the assets, properties, condition (financial
or otherwise), business or results of operations of Parent and its subsidiaries
taken as a whole or Company, as the case may be.
Section 2.2 Authority; Non-Contravention. Parent has all requisite
power and authority to enter into this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated therein, including the
Asset Purchase. The execution and delivery by Parent of this Agreement and the
consummation by Parent of the Asset Purchase have been duly authorized by all
necessary corporate action on the part of Parent. This Agreement has been duly
executed and delivered by Parent and (assuming the valid authorization,
execution and delivery of this Agreement by Company) constitutes a valid and
binding obligation of Parent enforceable against Parent in accordance with its
terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other similar
laws of general applicability relating to or affecting the enforcement of
creditors' rights and by the effect of general principles of equity (regardless
of whether enforceability is considered in a proceeding in equity or at law).
The execution and delivery of this Agreement do not or will not, as the case may
be, and the consummation of the transactions contemplated hereby and thereby and
compliance with the provisions hereof and thereof will not, conflict with, or
result in any violation of, or default
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(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to the
loss of a material benefit under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
Parent under, any provision of (i) the Certificate of Incorporation or Bylaws of
Parent, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or license
applicable to Parent, or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or any of its properties or
assets, other than, in the case of clauses (ii) or (iii), any such conflicts,
violations, defaults, rig losses, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not have a Material
Adverse Effect on Parent, materially impair the ability of Parent to perform its
obligations hereunder or under the Registration Rights Agreement or prevent the
consummation of any of the transactions contemplated hereby or thereby. No
filing or registration with, or authorization, consent or approval of, any
domestic (federal and state), foreign or supranational court, commission,
governmental body, regulatory agency, authority or tribunal (a "Governmental
Agency") is required by or with respect to Parent in connection with the
execution and delivery of this Agreement or is necessary for the consummation by
Parent of the Asset Purchase, except for (i) in connection or in compliance,
with the provisions of the Securities Act of 1933, as amended (the "Securities
Act"), and the Securities Exchange Act of 1934 (the "Exchange Act"), (ii) such
consents and approvals, orders, registrations, authorizations, declarations and
filings as may be required under the "Blue Sky" laws of the State of Oklahoma,
(iii) such filings and approvals as may be required under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976 (the "Improvements Act"), and (iv) such other
consents, orders, authorizations, registrations, declarations and filings, the
failure of which to be obtained or made would not, individually or in the
aggregate, have a Material Adverse Effect on Parent or materially impair the
ability of Parent to perform its obligations hereunder or prevent the
consummation of the transaction contemplated hereby.
Section 2.3 Capital Structure. As of the date hereof, the authorized
capital stock of Parent consists of 50,000,000 shares of common stock, par value
$0.01 per share ("Parent Common Stock") and 1,000,000 shares of preferred stock,
par value $0.01 per share ("Parent Preferred Stock"). At the close of business
on November 30, 2000, (i) 37,149,736 shares of Parent Common Stock were validly
issued and outstanding, fully paid and nonassessable and free of preemptive
rights; and (ii) no shares of Parent Preferred Stock are issued and outstanding.
The Parent Common Stock is designated as a national market security on an
inter-dealer quotation system by the National Association of Securities Dealers,
Inc. The Parent Shares issued as a part of the Asset Purchase Consideration in
accordance with this Agreement will be, when so issued, duly authorized, validly
issued, fully paid and non-assessable and free of preemptive rights.
Section 2.4 SEC Documents. Parent has filed all required documents with
the Securities and Exchange Commission ("SEC") since January 1, 1998 (the
"Parent/SEC Documents"). As of their respective dates, the Parent/SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and none of the Parent/SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
consolidated financial statements of Parent included in the Parent/SEC Documents
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
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thereto, have been prepared in accordance with generally accepted accounting
principles (except, in the case of the unaudited statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto) and fairly present
the consolidated financial position of Parent and its consolidated subsidiaries)
as at the dates thereof and the consolidated results of their operations and
statements of cash flows for the periods then ended (subject, in the case of the
unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein).
Section 2.5 Environmental Matters.
(a) Except to the extent that the inaccuracy of any of the
following, individually or in the aggregate, would not have a Material Adverse
Effect on Parent, to the actual knowledge of the executive officers of Parent:
(i) Parent and its subsidiaries hold, and are in compliance
with and have been in compliance with for the last three years, all
Environmental Permits, and are otherwise in substantial compliance and
have been in substantial compliance for the last three years with, all
applicable Environmental Laws and there is no condition that is
reasonably likely to prevent or materially interfere prior to the date
of Closing with compliance by Parent and its subsidiaries with
Environmental Laws;
(ii) no modification, revocation, reissuance, alteration,
transfer or amendment of any Environmental Permit, or any review by, or
approval of, any third party of any Environmental Permit is required in
connection with the execution or delivery of this Agreement or the
consummation by Parent of the transactions contemplated hereby or the
operation of the business of Parent or any of its subsidiaries on the
date of the Closing;
(iii) neither Parent nor any of its subsidiaries, including
Sub, has received any Environmental Claim, nor has any Environmental
Claim been threatened against Parent or any of its subsidiaries;
(iv) neither Parent nor any of its subsidiaries has entered
into, agreed to or is subject to any outstanding judgment, decree,
order or consent arrangement with any governmental authority under any
Environmental Laws, including without limitation those relating to
compliance with any Environmental Laws or to the investigation,
cleanup, remediation or removal of Hazardous Materials;
(v) there are no circumstances that are reasonably likely to
give rise to liability under any agreements with any person pursuant to
which Parent or any of its subsidiaries would be required to defend,
indemnify, hold harmless, or otherwise be responsible for any violation
by or other liability or expense of such person, or alleged violation
by or other liability or expense of such person, arising out of any
Environmental Law; and
(vi) there are no other circumstances or conditions that are
reasonably likely to give rise to liability of Parent or any of its
subsidiaries under any Environmental Laws.
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(b) For purposes of this Agreement, the terms below shall have
the following meanings:
"Environmental Claim" means any written complaint,
notice, claim, demand, action, suit or judicial,
administrative or arbitral proceeding by any person to Parent
or any of its subsidiaries (or, for purposes of Section 3.14,
Company) asserting liability or potential liability (including
without limitation, liability or potential liability for
investigatory costs, cleanup costs, governmental response
costs, natural resource damages, property damage, personal
injury, fines or penalties) arising out of, relating to, based
on or resulting from (i) the presence, discharge, emission,
release or threatened release of any Hazardous Materials at
any location, (ii) circumstances forming the basis of any
violation or alleged violation of any Environmental Laws or
Environmental Permits, or (iii) otherwise relating to
obligations or liabilities of Parent or any of its
subsidiaries (or, for purposes of Section 3.14 Company) under
any Environmental Law.
"Environmental Permits" means all permits, licenses,
registrations, exemptions and other governmental
authorizations required under Environmental Laws for Parent or
any of its subsidiaries (or, for purposes of Section 3.17,
Company) to conduct its operations as presently conducted.
"Environmental Laws" means all applicable foreign,
federal, state and local statutes, rules, regulations,
ordinances, orders, decrees and common law relating in any
manner to pollution or protection of the environment, to the
extent and in the form that such exist at the date hereof.
"Hazardous Materials" means all hazardous or toxic
substances, wastes, materials or chemicals, petroleum
(including crude oil or any fraction thereof) and petroleum
products, asbestos and asbestos-containing materials,
pollutants, contaminants and all other materials and
substances, including but not limited to radioactive
materials, regulated pursuant to any Environmental Laws.
Section 2.6 Litigation. There is no suit, action, investigation or
proceeding pending or, to the knowledge of the executive officers of Parent,
threatened against Parent or any of its subsidiaries at law or in equity before
or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind, that would, if adversely determined, impair
the ability of Parent to perform its obligations hereunder or to consummate the
transactions contemplated hereby, and there is no judgment, decree, injunction,
rule or order of any court, governmental department, commission, board, bureau,
agency, instrumentality or arbitrator to which Parent or any of its subsidiaries
is subject that would impair the ability of Parent to perform its obligations
hereunder or to consummate the transactions contemplated hereby.
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Section 2.7 Brokers. No broker, investment banker or other person is
entitled to any broker's, finder's or similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization, Standing and Power. Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Oklahoma and has the requisite corporate power and authority to carry
on its business as now being conducted. Company is duly qualified to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified would
not individually, or in the aggregate, have a Material Adverse Effect on the
Company. Except as set forth on Section 3.1 of the Company Disclosure Schedule
dated as of the date of this Agreement, previously delivered to Parent (the
"Company Disclosure Schedule"), Company has no subsidiaries.
Section 3.2 Capital Structure. The authorized capital stock of Company
consists of 10,000 shares of Company Common Stock. At the close of business on
the day immediately preceding the date of this Agreement, 2,500 shares of common
stock, $10.00 par value ("Company Common Stock"), were validly issued, fully
paid and nonassessable and free of preemptive rights. There are no options,
warrants, rights, commitments, agreements, arrangements or undertakings of any
kind to which Company is a party or by which it is bound obligating Company to
issue, additional shares of capital stock of Company.
Section 3.3 Ownership of Company Common Stock. Xxxxx X. Xxxxx is the
sole shareholder of Company (the "Company Shareholder").
Section 3.4 Authority; Non-Contravention. Company has all requisite
power and authority to enter into this Agreement and to consummate the Asset
Purchase. This Agreement has been duly executed and delivered by Company and
(assuming the valid authorization, execution and delivery of this Agreement by
Parent and Sub) constitutes a valid and binding obligation of Company
enforceable against it in accordance with its terms, except to the extent
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws of general applicability
relating to or affecting the enforcement of creditors' rights and by the effect
of general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law). The execution and delivery of
this Agreement do not, and the consummation of the Asset Purchase and compliance
with the provisions hereof will not, conflict with, or result in any violation
of, or default (with or without notice of lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to the loss of a material benefit under, or result in the creation of any
lien, security interest, charges or encumbrances upon any of the properties or
assets of Company under, any provision of (i) the
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Articles of Incorporation or Bylaws of Company (true and complete copies of
which as of the date hereof have been delivered to Parent), (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Company or
(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Company or any of its respective properties or assets, other than,
in the case of clauses (ii) or (iii), any such conflicts, violations, defaults,
rights, liens, losses, security interests, charges or encumbrances that,
individually or in the aggregate, would not have a Material Adverse Effect on
Company, materially impair the ability of Company to perform its obligations
hereunder or prevent the consummation of the Asset Purchase. Except as set forth
on Section 3.4 of the Company Disclosure Schedule or such filings and approvals
as may be required under the Improvements Act, no filing or registration with,
or authorization, consent or approval of, any Governmental Entity is required by
or with respect to Company in connection with the execution and delivery of this
Agreement by Company or is necessary for the consummation by Company of the
Asset Purchase or any other transaction contemplated by this Agreement.
Section 3.5 Financial Statements. Included in Section 3.5 of the
Company Disclosure Schedule are the following unaudited financial statements
(collectively, the "Company Financial Statements") of Company: (i) balance
sheets as of December 31, 1999 and October 31, 2000, respectively; and (ii)
statements of income for each of the years in the three-year period ended
December 31, 1999 and for the 10-month period ended October 31, 2000.
Except as may be set forth in Section 3.5 of the Company Disclosure
Schedule, the Company Financial Statements (a) are complete and correct in all
material respects, (b) have been prepared in conformity with modified accrual
tax basis accounting consistently applied, and (c) present fairly the financial
condition of Company at the dates presented and the results of operations of
Company for the periods covered. There does not, and there will not be at
Closing, exist any fact, event, condition or claim known to Company which would
cause a Material Adverse Change in the Company Financial Statements as presented
other than as set forth therein.
Section 3.6 Absence of Material Adverse Change. Except as otherwise set
forth in Section 3.6 of the Company Disclosure Schedule, there has not been any
Material Adverse Change with respect to Company since October 31, 2000.
Section 3.7 Taxes.
(a) Company has filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all material respects.
All Taxes owed by Company (whether or not shown on any tax return) have been
paid. Company currently is not the beneficiary of any extension of time within
which to file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where Company does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no Liens on any of the
assets of Company that arose in connection with any failure (or alleged failure)
to pay any Tax.
(b) Company has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
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(c) Company does not expect any authority to assess any
additional Taxes for any period for which Tax Returns have been filed. There is
no dispute or claim concerning any Tax liability of Company either (A) claimed
or raised by any authority in writing or (B) as to which any of the Company's
stockholder and any of the directors and officers (and employees responsible for
Tax matters) of Company has knowledge based upon personal contact with any agent
of such authority. Section 3.7 of the Company Disclosure Schedule lists all
federal, state, local, and foreign income Tax Returns that have been audited,
and indicates those Tax Returns that currently are the subject of audit. Company
has delivered to Purchaser correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies assessed against or
agreed to by Company since October 31, 1994.
(d) Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) Company has no obligation to make a payment that will not
be deductible under Code Section 280G. Company has disclosed on its federal
income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Code
Section 6662. Company is not a party to any Tax allocation or sharing agreement.
Company (A) has not been a member of an affiliated group filing a consolidated
federal income Tax Return (other than a group the common parent of which is
Company) and (B) does not have any Liability for the Taxes of any Person (other
than Company) under Reg. Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or otherwise.
(f) For purposes of this Agreement, (a) "Code" means the
Internal Revenue Code of 1986, as amended, (b) "Tax" (and, with correlative
meaning, "Taxes" and "Taxable") means any federal, state, local or foreign
income, gross receipts, property, sales, use, license, excise, franchise,
employment, payroll, withholding, alternative or added minimum, ad valorem,
transfer, severance or excise tax, or any other tax, custom, duty, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any governmental authority, and (c) "Tax Return"
means any return, report or similar statement required to be filed with respect
to any Tax (including any attached schedules), including, without limitation,
any information return, claim for refund, amended return or declaration of
estimated Tax.
Section 3.8 Personal Property; Title Thereto. Company neither owns nor
leases any real property. Set forth in Annex 1 attached hereto is a complete and
accurate schedule of (a) all personal property owned by the Company having an
individual fair market value in excess of $15,000 or $50,000 in the aggregate,
including, but not limited to, all drilling rigs, related equipment and rolling
stock, and (b) any personal property held by Company under lease. Except as set
forth in Section 3.8 of the Company Disclosure Schedule, Company has good title
to all of such personal property, subject to no Liens (as defined below in this
Section) except for (i) Liens for taxes not yet delinquent or the validity of
which is being contested in good faith, and (ii) any Liens arising by operation
of law securing obligations not yet overdue. Any personal property held by
Company
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under lease are held under valid and enforceable leases which will continue in
full force and effect immediately after the Closing Date; Company is not in
default with respect to any such lease. For purposes of this Agreement, "Liens"
means liens, mortgages, pledges, security interests, encumbrances, claims or
charges of any kind.
Section 3.9 Accounts Receivable. Set forth in Section 3.9(a) of the
Company Disclosure Schedule is a complete and accurate schedule of the accounts
receivable of Company as of November 30, 2000, as reflected in the balance sheet
as of that date included in the Company Financial Statements, together with an
accurate aging of those accounts. To the best knowledge of Company, except as
may be set forth in Section 3.9(b) of the Company Disclosure Schedule, the
accounts described in Section 3.9(a) have been collected in full, or are
collectible at their full amounts.
Section 3.10 Insurance. Set forth in Section 3.10 of the Company
Disclosure Schedule is an accurate and complete list and brief description of
all policies of fire and extended coverage, liability, worker compensation and
other forms of similar insurance or indemnity bonds held by Company. Company is
not in default in any material respect with respect to any provisions of any
such policy or indemnity bond and has not failed to give any notice or present
any claim thereunder in due and timely fashion, which failure would materially
adversely affect the condition (financial or otherwise), results of operations,
assets, liabilities or business of Company.
Section 3.11 Records. The stock record books and minute books of
Company are complete and correct in all material respects, and record all
transactions required to be set forth concerning all proceedings, consents,
actions and meetings of the shareholders and the Board of Directors of Company.
Section 3.12 Transactions with Affiliates. Except as otherwise set
forth in Section 3.12 of the Company Disclosure Schedule, no Affiliate (as
hereinafter defined) has any direct or indirect interest in or owns directly or
indirectly any asset or right owned by or used in the conduct of the business of
Company or is party to any contract, lease, agreement, arrangement or commitment
used in such business.
"Affiliate" as used in this Section 3.12 means a person which
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under, control with Company. For purposes of this
definition, the officers, directors and shareholders of Company shall be deemed
Affiliates.
Section 3.13 Labor Matters. (i) Company is not a party to any
collective bargaining agreement or other material contract or agreement with any
labor organization or other representative of employees nor is any such contract
being negotiated; (ii) there is no material unfair labor practice charge or
complaint pending nor, to the knowledge of Company, threatened, with regard to
employees of Company; (iii) there is no labor strike, material slowdown,
material work stoppage or other material labor controversy in effect, or, to the
knowledge of Company, threatened against Company; (iv) as of the date hereof, no
representation question exists, nor to the knowledge of any of the Company are
there any campaigns being conducted to solicit cards from the employees of
Company to authorize representation by a labor organization; (v) Company is not
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party to, or is not otherwise bound by, any consent decree with any governmental
authority relating to employees or employment practices of Company; (vi) Company
has not incurred any liability under, and has complied in all respects with, the
Worker Adjustment Retraining Notification Act, and no fact or event exists that
could give rise to liability under such Act; and (vii) except as disclosed in
Section 3.13 of the Company Disclosure Schedule, Company is in compliance with
all applicable agreements, contracts and policies relating to employment,
employment practices, wages, hours and terms and conditions of employment of the
employees, except where the failure to be in compliance with each such
agreement, contract and policy would not, either singly or in the aggregate,
have a Material Adverse Effect on Company.
Section 3.14 Environmental Matters.
(a) Except to the extent that the inaccuracy of any of the
following, individually or in the aggregate, would not have a Material Adverse
Effect on Company, to the actual knowledge of Company or the Company
Shareholder:
(i) Company holds, and is in compliance with and has
been in compliance with for the last three years, all Environmental
Permits, and is otherwise in substantial compliance and has been in
substantial compliance for the last three years with, all applicable
Environmental Laws and there is no condition that is reasonably likely
to prevent or materially interfere prior to the Effective Time with
compliance by Company with Environmental Laws;
(ii) no modification, revocation, reissuance,
alteration, transfer or amendment of any Environmental Permit, or any
review by, or approval of, any third party of any Environmental Permit
is required in connection with the execution or delivery of this
Agreement or the consummation by Company of the transactions
contemplated hereby or the operation of the business of Company on the
date of the Closing;
(iii) Company has not received any Environmental
Claim, nor has any Environmental Claim been threatened against Company;
(iv) Company has not entered into, agreed to or is
not subject to any outstanding judgment, decree, order or consent
arrangement with any governmental authority under any Environmental
Laws, including without limitation those relating to compliance with
any Environmental Laws or to the investigation, cleanup, remediation or
removal of Hazardous Materials;
(v) there are no circumstances that are reasonably
likely to give rise to liability under any agreements with any person
pursuant to which Company would be required to defend, indemnify, hold
harmless, or otherwise be responsible for any violation by or other
liability or expense of such person, or alleged violation by or other
liability or expense of such person, arising out of any Environmental
Law; and
(vi) there are no other circumstances or conditions
that are reasonably likely to give rise to liability of Company under
any Environmental Laws.
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Section 3.15 Litigation. Except as set forth in Section 3.15 of the
Company Disclosure Schedule, there is no suit, action, investigation or
proceeding pending or, to the knowledge of Company, threatened against Company
at law or in equity before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or before any arbitrator of any kind that would, if
adversely determined, impair the ability of Company to perform its obligations
hereunder or to consummate the transactions contemplated hereby, and there is no
judgment, decree, injunction, rule or order of any court, governmental
department, commission, board, bureau, agency, instrumentality or arbitrator to
which Company is subject that would impair the ability of Company to perform its
obligations or to consummate the transaction contemplated hereby.
Section 3.16 Brokers. Except as set forth in Section 3.16 of the
Company Disclosure Schedule, no broker, investment banker or other person is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Company.
Section 3.17 Bank Accounts. A complete list of each bank account
maintained by Company, including safe deposit boxes maintained by Company, the
account balances and the names of the persons authorized to draw down upon or
have access thereto is set forth in Section 3.17 of the Company Disclosure
Schedule.
Section 3.18 Assumed Drilling Contracts. Set forth in Annex 2 is a
true and complete list of all Assumed Drilling Contracts (as defined in Section
6.11 hereof). A complete copy of each of the Assumed Drilling Contracts has
previously been delivered to Sub. Each of the Assumed Drilling Contracts has
been fully performed by Company to date, and is in good standing and in full
force and effect. Except as set forth on Annex 2, none of the Drilling Rigs,
Equipment, Accounts Receivable and Other Assets is subject to any written or
oral contracts and agreements.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING SUB
Parent and Sub jointly and severally represent and warrant to Company
as follows:
Section 4.1 Organization, Standing and Ownership. Sub is a registered
limited liability limited partnership duly organized, validly existing and in
good standing under the laws of the State of Delaware and is a wholly-owned
indirect subsidiary of Parent. Sub is treated as a "C" Corporation for Federal
Income Tax purposes, within the meaning of the Internal Revenue Code of 1986 (as
amended).
Section 4.2 Authority; Non-Contravention. Sub has all requisite power
and authority to enter into this Agreement and to consummate the Asset Purchase
and other transactions contemplated hereby. The execution and delivery of this
Agreement by Sub, the performance by
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Sub of its obligations hereunder and the consummation by of the transactions
contemplated hereby have been duly authorized by its General Partner and Limited
Partner and, except for the limited partnership filings required by state law,
no other limited partnership proceedings on the part of Sub are necessary to
authorize this Agreement and the Asset Purchase and the other transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Sub and (assuming the due authorization, execution and delivery of
this Agreement by Company) constitutes a valid and binding obligation of Sub
enforceable against Sub in accordance with its terms, except to the extent
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws of general applicability
relating to or affecting the enforcement of creditors' rights and by the effect
of general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law). The execution and delivery of
this Agreement do not, and the consummation of the transactions contemplated
hereby and compliance with the provisions hereof will not, conflict with, or
result in any violation of, or default (with or without notice of lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a material benefit under, or
result in the creation of any lien, security interest, charges or encumbrances
upon any of the properties or assets of Sub under, any provision of (i) the
Certificate of Limited Partnership or Agreement of Limited Partnership of Sub
(true and complete copies of which as of the date hereof have been delivered to
Company), (ii) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or license
applicable to Sub, or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Sub or any of its properties or
assets, other than, in the case of clauses (ii) or (iii), any such conflicts,
violations, defaults, rights, losses, liens, security interests, charges or
encumbrances that individually or in the aggregate, would not have a Material
Adverse Effect on Sub, materially impair the ability of Sub to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.1 Conduct of Company Contract Drilling Operations Pending the
Asset Purchase. During the period from the date of this Agreement through the
date of Closing, Company: (i) shall, in all material respects, carry on its
contract drilling operations in the ordinary course and consistent with past
practice and, to the extent consistent therewith and with the terms of this
Agreement, use all reasonable efforts to keep available the services of its
employees and preserve its relationships with customers, suppliers and others
having business dealings with it to the end that its goodwill and ongoing
contract drilling operations shall be unimpaired at the date of Closing, (ii)
shall not sell, lease or otherwise dispose of or agree to sell, lease or
otherwise dispose of any of the Drilling Rigs, Equipment, Accounts Receivable
and Other Assets, or (iii) enter into any new or amend an existing drilling
contract without the prior written consent of A. Xxxxx Xxxxxxxxx, President and
Chief Operating Officer of Sub, which consent will not be unreasonably withheld.
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Section 5.2 No Solicitation. From and after the date hereof, Company
will not, and will cause its officers, directors, employees, agents and other
representatives not to, directly or indirectly, solicit or initiate any offer
for Company or the capital stock or assets of Company, and not to solicit or
initiate, directly or indirectly, discussions, negotiations, considerations or
inquiries concerning an offer for Company, from any person, or engage in
discussions or negotiations relating thereto, or provide to any other person any
information or data relating to Company or the contract drilling operations of
Company for the purpose of, or have any substantive discussions with any person
relating to, or otherwise cooperate with or assist or participate in, or
facilitate, any offer or any inquiry or proposal which would reasonably be
expected to lead to any effort or attempt by any person to effect an offer, or
agree to endorse any such inquiry or offer.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Fees and Expenses. All costs and expenses incurred by
Parent or Sub in connection with this Agreement and the transactions
contemplated hereby shall be paid by Parent; such costs and expenses incurred by
Company and its shareholders, including the costs, expenses and fee payable to
the broker referenced on Section 3.16 of the Company Disclosure Schedule, shall
be paid by the Company Shareholder.
Section 6.2 Reasonable Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Asset Purchase and the other
transactions contemplated by this Agreement and the prompt satisfaction of the
conditions hereto.
Section 6.3 Public Announcements. Before issuing any press release or
otherwise making any public statements with respect to the transactions
contemplated by this Agreement, Parent, on the one hand, and Company, on the
other, will consult with each other, and will undertake reasonable efforts to
agree upon the terms of such press release, and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by applicable law or by obligations pursuant to any listing
agreement with the Nasdaq National Market.
Section 6.4 Indemnification.
(a) After the Closing, the Company Shareholder (the
"Indemnifying Shareholder") shall indemnify and hold Parent and Sub harmless
against and in respect of all actions, suits, demands, judgments, costs and
expenses (including reasonably attorneys' fees of Parent or Sub) in excess of
$50,000 in the aggregate ("Shareholder Basket Amount"), but not exceeding
$10,000,000 in the aggregate (the "Shareholder Indemnity Cap") relating to (a)
any of the Assumed Drilling Contracts for events occurring before the Effective
Time of Assumption (as defined in Section 6.11); (b) any of the drilling
contracts of Company which are not Assumed
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Drilling Contracts; (c) any misrepresentation, breach of any representation or
warranty or non-fulfillment of any agreement on the part of Company or Company
Shareholder under this Agreement; provided, however, that the Shareholder Basket
Amount shall not be applicable in respect of any claim for indemnification
relating to any actions, suits, demands, judgments, costs and expenses
(including reasonable attorneys' fees) arising out of or based upon (x) a
fraudulent misrepresentation by Company in this Agreement, or (y) any unpaid or
undisclosed Tax liabilities of Company. Any written notice of claim for
indemnification shall be given to the Indemnifying Shareholder by Parent or Sub
within 30 days after it has knowledge of any misrepresentation or breach of
warranty or non-fulfillment of any agreement on the part of Company, which may
give rise to a claim for indemnification. The indemnification obligation
provided for in this Section 6.4(a) shall terminate and be of no further force
and effect after 24 months from the Effective Time, except (i) as to any
representation or warranty as to which a written notice of claim for
indemnification has been given to the Indemnifying Shareholder, prior to the
expiration of such 24-month period; and (ii) for a claim for indemnification for
unpaid or undisclosed Tax liability of Company given to the Indemnifying
Shareholder, prior to the thirtieth day following the expiration of the full
applicable period of limitations.
(b) On or after the Closing, Parent and Sub shall indemnify
and hold Company Shareholder harmless against and in respect of all actions,
suits, demands, judgments, costs and expenses (including reasonably attorneys'
fees of shareholder) in excess of $50,000 in the aggregate ("Parent and Sub
Basket Amount"), but not exceeding $10,000,000 in the aggregate amount (the
"Parent and Sub Indemnity Cap"), relating to (a) any of the Assumed Drilling
Contracts for events occurring after the Effective Time of Assumption; (b) any
misrepresentation, breach of any representation or warranty or non-fulfillment
of any agreement on the part of Parent or Sub under this Agreement; provided,
however, that the Parent and Sub Basket Amount shall not be applicable in
respect of any claim against Company Shareholder for indemnification relating to
any actions, suits, demands, judgments, costs and expenses (including reasonable
attorneys' fees) arising out of or based upon (x) a fraudulent misrepresentation
by Parent or Sub in this Agreement and (y) the failure on the part of Parent to
honor the provisions of Section 6.12. Any written notice of claim for
indemnification shall be given to Parent or Sub by Company Shareholder within 30
days after he has knowledge of any misrepresentation or breach of warranty or
non-fulfillment of any agreement on the part of Parent or Sub, which may give
rise to a claim for indemnification. The indemnification obligation provided for
in this Section 6.4(b) shall terminate and be of no further force and effect
after 24 months from the Effective Time, except (i) as to any representation or
warranty as to which a written notice of claim for indemnification has been
given to Parent or Sub, prior to the expiration of such 24-month period.
(c) Notwithstanding anything in this Section 6.4 to the
contrary, the Shareholder Basket Amount and the Shareholder Indemnity Cap, on
the one hand, and the Parent and Sub Basket Amount and the Parent and Sub
Indemnity Cap, on the other hand, will be reduced by any amount of indemnity
payable by the Company Shareholder, or Parent and Sub, as the case may be,
pursuant to any of the following agreements, each of which is dated of even date
with this Agreement (i) the Agreement and Plan of Merger among Parent, PDC and
Xxxxx Drilling Corporation, (ii) the LLC Interest Purchase Agreement between PDC
and Xxxxxxxxx Welding, Inc., and (iii) the LLC Interest Purchase Agreement
between PDC and L.E.J. Truck and Crane, Inc. determined without reference to the
availability of a basket amount under such agreements, such that the aggregate
basket amount applicable under this Agreement and all of such other agreements
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for the respective indemnities will be $50,000 and the aggregate indemnity cap
amount applicable under this Agreement and all such other agreements will be
$10,000,000.
Section 6.5 Certain Tax Matters. For federal income tax purposes,
Parent and Company shall each characterize the transactions contemplated by this
Agreement as a "reorganization" as defined in Section 368(a)(1)(C) of the Code,
and will file all tax returns in a manner consistent with such characterization.
Section 6.6 Personal Property Taxes. Company and Sub agree that any
unpaid personal property taxes based on the notices of proposed assessment for
rents, water and service charges and any special assessments or other charges on
the personal property included as a part of the Drilling Rigs, Equipment,
Accounts Receivable and Other Assets shall be prorated between Company and Sub
to the date of Closing. If such notices of proposed assessment are not available
at the time of Closing, the parties hereby agree that the proration of such
personal property taxes, based on such notices of proposed assessment, shall be
made promptly upon receipt of such notices. Such prorations shall be final.
Section 6.7 Access to Information.
(a) Company shall afford to Parent, and to Parent's
accountants, counsel, financial advisers and other representatives, reasonable
access and permit them to make such inspections as they may reasonably require
during the period from the date of this Agreement through the date of Effective
Time to all books, contracts, commitments and records relating to its operations
and, during such period, Company shall furnish promptly to Parent (i) access to
each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of federal or state laws and
(ii) all other information concerning Company, its business, properties and
personnel as Parent may reasonably request. Except as required by law, Parent
will hold, and will cause its affiliates, associates and representatives to
hold, any non-public information in confidence until such time as such
information otherwise becomes publicly available and shall use its reasonable
best efforts to ensure that such affiliates, associates and representatives do
not disclose such information to others without the prior written consent of
Company. In the event of termination of this Agreement for any reason, Parent
shall promptly return or destroy all non-public documents so obtained from
Company and any copies made of such documents for Parent. Parent shall not, and
shall cause its affiliates, associates and representatives not to, use any
non-public information regarding Company in any way detrimental to Company.
No investigation pursuant to this Section 6.7 shall affect any
representation or warranty of Company in this Agreement or any condition to the
obligations of Parent and Sub.
(b) Parent and Sub shall afford to Company, and to Company's
accountants, counsel, financial advisers and other representatives, reasonable
access and permit them to make such inspections as they may reasonably require
during the period from the date of this Agreement through the date of Effective
Time to all books, contracts, commitments and records relating to their
operations and, during such period, Parent and Sub shall furnish promptly to
Company (i) access to each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of federal
or state laws and (ii) all other information concerning Parent
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and Sub, their business, properties and personnel as Company may reasonably
request. Except as required by law, Company and the Company Shareholder will
hold, and will cause their affiliates, associates and representatives to hold,
any non-public information in confidence until such time as such information
otherwise becomes publicly available and shall use their reasonable best efforts
to ensure that such affiliates, associates and representatives do not disclose
such information to others without the prior written consent of Parent and Sub.
In the event of termination of this Agreement for any reason, Company shall
promptly return or destroy all non-public documents so obtained from Parent and
Sub and any copies made of such documents for Company. Company shall not, and
shall cause its affiliates, associates and representatives not to, use any
non-public information regarding Parent and Sub in any way detrimental to Parent
and Sub.
No investigation pursuant to this Section 6.7 shall affect any
representation or warranty of Parent and Sub in this Agreement or any condition
to the obligations of Company.
Section 6.8 Filing of Registration Statement on Form S-3. Parent agrees
to file a Registration Statement on Form S-3 with the SEC on the date of Closing
covering the distribution of the Parent Shares and further agrees to use its
reasonable best efforts to respond to any comments from the SEC and cause such
Registration Statement to become effective with the SEC within 45 days of its
filing, all as more fully provided in the Registration Rights Agreement attached
hereto as Exhibit A.
Section 6.9 Condition of Company Equipment. Parent and Sub agree to
accept the drilling rigs and related equipment owned by Company on an "as is,
where is" basis.
Section 6.10 Delivery of Daily Drilling Reports. Commencing on the day
following the date of this Agreement and continuing each day up to and including
Closing, Company shall fax the daily drilling report for each of its drilling
rigs to Parent (Attention: A. Xxxxx Xxxxxxxxx, President and Chief Operating
Officer, Fax: (000) 000-0000) on a same-day basis and inform A. Xxxxx Xxxxxxxxx
of any operational problems with any of the xxxxx then in process of being
drilled.
Section 6.11 Sub Assumption of Drilling Contracts. Effective as of 7:00
a.m. Snyder, Texas time on January 1, 2001 ("Effective Time of Assumption"), Sub
shall assume all obligations and rights and benefits of Company under each of
the drilling contracts set forth on Annex 2 (collectively, the "Assumed Drilling
Contracts").
Section 6.12 Employment. PDC agrees to make offers of employment to the
employees listed on Annex 3. Employees who accept such offer of employment will
be offered benefits under the employee benefit plans of Parent, substantially
similar to those of existing employees of PDC employed in substantially similar
capacities. Additionally, with respect to such employees: (i) service with
Company or its predecessors shall be counted for purposes of determining
eligibility for participation, vesting and seniority in all welfare and benefit
plans (including Parent's 401(k) plan) provided under benefit programs of
Parent, (ii) any amounts previously expended by such employees for purposes of
satisfying deductibles, co-payments and out-of-pocket expenses under Company's
medical or dental plans in the current plan year shall be credited for purposes
of satisfying any such requirements under Parent's similar plans, if any; (iii)
service with Company or its predecessors shall be counted for purposes of
determining continuous service and eligibility for
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safety awards and for purposes of determining priorities with respect to any
reduction-in-force, layoff and recall rights whenever Parent would normally
consider such service for other employees of PDC; (iv) such employees will be
credited with all accrued vacation and sick time as of the Effective Time; and
(v) any life, medical and disability plans maintained by Parent immediately
after the Effective Time shall not exclude any employee of Company, from
eligibility, or deny or reject benefits from such employee, due to any
pre-existing condition.
ARTICLE VII
CONDITIONS PRECEDENT TO THE ASSET PURCHASE
Section 7.1 Conditions to Each Party's Obligation to Effect the Asset
Purchase. The respective obligations of each party to effect the Asset Purchase
shall be subject to the fulfillment or waiver (where permissible) at or prior to
the date of Closing of each of the following conditions:
(a) No Order. No Governmental Entity or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of prohibiting the Asset Purchase or any of the other transactions
contemplated hereby; provided that, in the case of any such decree, injunction
or other order, each of the parties shall have used reasonable best efforts to
prevent the entry of any such injunction or other order and to appeal as
promptly as practicable any decree, injunction or other order that may be
entered.
(b) Improvement Act Waiting Period. The applicable waiting
period under the Improvements Act shall have expired or been terminated.
(c) Contemporaneous Closings. The transactions contemplated by
the Agreement and Plan of Merger among Parent, Sub and Xxxxx Drilling
Corporation and the respective LLC Interest Purchase Agreements between Sub and
Xxxxxxxxx Welding, Inc. and between Sub and L.E.J. Truck and Crane, Inc., each
of which agreements is dated of even date with this Agreement, are consummated
contemporaneously with this Agreement.
Section 7.2 Conditions to Obligation of Company to Effect the Asset
Purchase. The obligation of Company to effect the Asset Purchase shall be
subject to the fulfillment at or prior to the Closing of the following
additional conditions; provided that Company may waive any of such conditions in
its sole discretion:
(a) Performance of Obligations; Representations and
Warranties. Parent and Sub shall have performed in all material respects each of
their agreements contained in this Agreement required to be performed on or
prior to the Closing, each of the representations and warranties of Parent and
Sub contained in this Agreement shall be true and correct on and as of the date
of Closing as if made on and as of such date.
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(b) Officers' Certificate. Parent and Sub shall have furnished
to Company a certificate, dated the Closing, signed by the respective
appropriate officers of Parent and Sub, certifying to the effect that to the
best of the knowledge and belief of each of them, the conditions set forth in
Section 7.1 and Section 7.2(a) have been satisfied in full.
(c) Opinion of Xxxxx & Xxxxxxxxx LLP. Company shall have
received an opinion from Xxxxx & Xxxxxxxxx LLP, counsel to Parent and Sub, dated
the date of Closing, substantially to the effect set forth in the following
subparagraphs:
(i) The incorporation, organization, existence and
good standing of Parent and Sub are as stated in this Agreement; the
authorized shares of Parent are as stated in this Agreement; all
outstanding shares of Parent Common Stock are duly and validly
authorized and issued, fully paid and nonassessable and have not been
issued in violation of any preemptive right of any stockholders.
(ii) Each of Parent and Sub has full corporate or
limited partnership power and authority, as the case may be, to
execute, deliver and perform this Agreement and this Agreement has been
duly authorized, executed and delivered by Parent and Sub, as the case
may be, and (assuming due and valid authorization, execution and
delivery by Company) constitutes the legal, valid and binding agreement
of Parent and Sub, enforceable against Parent and Sub in accordance
with its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
or other similar laws of general applicability relating to or affecting
the enforcement of creditors' rights and by the effect of general
principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(iii) Parent has full corporate power and authority
to execute, deliver and perform the Registration Rights Agreement and
the Registration Rights Agreement has been duly authorized, executed
and delivered by Parent and (assuming due and valid execution and
delivery of the Registration Rights Agreement) constitutes the legal,
valid and binding agreement of Parent enforceable against Parent in
accordance with its terms, except with respect to the indemnification
provisions thereof, as to which no opinion will be expressed by such
counsel, and except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
or other similar laws of general applicability relating to or affecting
the enforcement of creditors' rights and by the effect of general
principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(iv) The execution and performance by Parent and Sub
of this Agreement and by Parent of the Registration Rights Agreement
will not violate the Certificate of Incorporation or Bylaws of Parent
or the Certificate of Limited Partnership or Limited Partnership
Agreement of Sub, as the case may be, and, to the knowledge of such
counsel, will not violate, result in a breach of or constitute a
default under any material lease, mortgage, contract, agreement,
instrument, law, rule, regulation, judgment, order or decree to which
Parent or Sub is a party or by which they or any of their properties or
assets may be bound.
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(v) To the knowledge of such counsel, no consent,
approval, authorization or order of any court or governmental agency or
body which has not been obtained is required on behalf of Parent and
Sub for the consummation of the transactions contemplated by this
Agreement.
(vi) To the knowledge of such counsel, there are no
actions, suits or proceedings, pending or threatened against or
affecting Parent or Sub by any Governmental Entity which seek to
restrain, prohibit or invalidate the transactions contemplated by this
Agreement.
(vii) The Parent Shares to be issued pursuant to this
Agreement, when so issued, will be duly authorized, validly issued and
outstanding, fully paid and nonassessable.
In rendering such opinion, counsel for Parent may rely as to matters of fact
upon the representations of officers of Parent or Sub contained in any
certificate delivered to such counsel and certificates of public officials. Such
opinion shall be limited to the General Corporation Law of the State of Delaware
and the laws of the United States of America and the State of Texas.
(d) Opinion of Xxxxxxxxx & Xxxxxxxxx L.L.P. The Company
Shareholder shall have received the opinion of Xxxxxxxxx & Xxxxxxxxx L.L.P.,
dated as of the date of Closing, to the effect that the Merger will qualify as a
tax-free reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended.
(e) Registration Statement on Form S-3. Parent shall have
filed a Registration Statement on Form S-3 with the SEC relating to the Parent
Shares.
(f) Registration Rights Agreement. Parent shall have executed
and delivered the Registration Rights Agreement in the form attached hereto as
Exhibit A.
(g) Delivery of Purchase Consideration. Parent shall have made
delivery of the Purchase Consideration
Section 7.3 Conditions to Obligations of Parent and Sub to Effect the
Asset Purchase. The obligations of Parent and Sub to effect the Asset Purchase
shall be subject to the fulfillment at or prior to the Closing of the following
additional conditions, provided that Parent may waive any such conditions in its
sole discretion:
(a) Performance of Obligations; Representations and
Warranties. Company shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior to
the Closing and each of the respective representations and warranties of Company
contained in this Agreement shall be true and correct on and as of the Closing
as if made on and as of such date.
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(b) Officers' Certificate. Company shall have furnished to
Parent a certificate, dated the Closing, certifying to the effect that to the
best of the knowledge and belief of Company, the conditions set forth in Section
7.1 and Section 7.3(a) have been satisfied.
(c) Consents. Company shall have received written consents of
the other party or parties to each of the Assumed Drilling Contracts for the
assumption thereof by Sub pursuant to the provisions of Section 6.11 of this
Agreement and delivered copies thereof to Sub.
(d) Opinion of Xxxxxxxxx & Xxxxxxxxx L.L.P. Parent shall have
received an opinion of counsel from Xxxxxxxxx & Xxxxxxxxx L.L.P., counsel to
Company, dated the Closing, substantially to the effect that:
(i) The incorporation, existence, good standing and
capitalization of Company are as stated in this Agreement; the
authorized shares of Company Common Stock are as stated in this
Agreement; all outstanding shares of Company Common Stock are duly and
validly authorized and issued, fully paid and non-assessable and have
not been issued in violation of any preemptive right of stockholders;
and, to the knowledge of such counsel, there is no existing option,
warrant, right, call, subscription or other agreement or commitment
obligating Company to issue or sell, or to purchase or redeem, any
shares of its capital stock other than as stated in this Agreement.
(ii) Company has full corporate power and authority
to execute, deliver and perform this Agreement and this Agreement has
been duly authorized, executed and delivered by Company, and (assuming
the due and valid authorization, execution and delivery by Parent and
Sub) constitutes the legal, valid and binding agreement of Company
enforceable against Company in accordance with its terms, except to the
extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws
of general applicability relating to or affecting the enforcement of
creditors' rights and by the effect of general principles of equity
(regardless of whether enforceability is considered in a proceeding in
equity or at law).
(iii) The execution and performance by Company of
this Agreement will not violate the Articles of Incorporation or Bylaws
of Company and will not violate, result in a breach of, or constitute a
default under, any material lease, mortgage, contract, agreement,
instrument, law, rule, regulation, judgment, order or decree known to
such counsel to which Company is a party or to which it or any of its
properties or assets may be bound.
(iv) To the knowledge of such counsel, no consent,
approval, authorization or order of any court or governmental agency or
body which has not been obtained is required on behalf of Company for
consummation of the transactions contemplated by this Agreement.
(v) To the knowledge of such counsel, there are no
actions, suits or proceedings, pending or threatened against or
affecting Company by any Governmental
20
24
Entity which seeks to restrain, prohibit or invalidate the transactions
contemplated by the Agreement.
In rendering such opinion, counsel for Company may rely as to matters of fact
upon the representations of officers of Company contained in any certificate
delivered to such counsel and certificates of public officials. Such opinion
shall be limited to the laws of the United States of America, the State of Texas
and the Oklahoma General Corporation Act.
(e) Investment Representation Letter. Xxxxx X. Xxxxx, the sole
shareholder of the Company, shall have executed and delivered an investment
representation letter in the form attached hereto as Exhibit C.
(f) Xxxx of Sale and Assignment. Company shall have executed
and delivered the Xxxx of Sale and Assignment, in the form attached hereto as
Exhibit B, covering the Drilling Rigs, Equipment, Accounts Receivable and Other
Assets set forth on Annex 1, and the Assumed Drilling Contracts set forth on
Annex 2.
(g) Titles. Company shall have escrowed and delivered the
title certificates to the rolling stock described in Annex 1.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination. This Agreement may be terminated at any time
prior to the date of Closing:
(a) by mutual written consent of Parent and Company;
(b) by Parent if Company shall have failed to comply in any
material respect with any of its covenants or agreements contained in this
Agreement required to be complied with by Company prior to the date of such
termination, which failure to comply has not been cured within ten business days
following receipt by Company of notice of such failure to comply;
(c) by Company if Parent or Sub shall have failed to comply in
any material respect with any of its covenants or agreements contained in this
Agreement required to be complied with by Parent or Sub prior to the date of
such termination, which failure to comply has not been cured within ten business
days following receipt by Parent or Sub of notice of such failure to comply;
(d) by either Parent or Company if (i) the Effective Time has
not occurred on or prior to the close of business on the date of the Agreement;
provided, however, that the right to terminate this Agreement pursuant to this
clause shall not be available to any party whose failure to fulfill any
obligation of this Agreement has been the cause of, or resulted in, the failure
of the Asset Purchase to have occurred on or prior to the aforesaid date, or
(ii) any court of competent
21
25
jurisdiction or any governmental, administrative or regulatory authority, agency
or body shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and nonappealable; or
(e) by either Parent or Company if there has been (i) a
material breach by the other of any representation or warranty that is not
qualified as to materiality or (ii) a breach by the other of any representation
or warranty that is qualified as to materiality, in each case which breach has
not been cured within five business days following receipt by the breaching
party of notice of the breach.
Section 8.2 Effect of Termination. In the event of termination of this
Agreement by either Parent or Company, as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of Company, Parent or Sub or their respective officers or directors;
provided, however, that nothing contained in this Section 8.2 shall relieve any
party hereto from any liability for any breach of this Agreement.
Section 8.3 Amendment. This Agreement may be amended by the parties
hereto only by an instrument in writing signed on behalf of each of the parties
hereto.
Section 8.4 Waiver. At any time prior to the date of Closing, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein which may legally be waived. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX
POST CLOSING COVENANTS
Section 9.1 Access to Information. Company agrees that it will (i)
maintain the pre-closing financial records of Company relating to its contract
drilling operations in the offices of Company in Duncan, Oklahoma for a period
of up to three years following the date of Closing, and (ii) permit Parent and
its respective financial and tax advisors access to such records during
Company's normal business hours.
ARTICLE IX
GENERAL PROVISIONS
Section 10.1 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, sent by
overnight courier or telecopied (with a
22
26
confirmatory copy sent by overnight courier) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to:
Xxxxxxxxx Energy, Inc.
0000 Xxxxxx Xxxxxxx
X.X. Xxxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: A. Xxxxx Xxxxxxxxx
President and Chief Operating
Officer
with copies to:
Xxxxxx X. Xxxxxxxx, Esq.
Xxxxx & Xxxxxxxxx LLP
000 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000-0000
(b) if to Company, to:
by mail: L.E.J. Drilling Company
X.X. Xxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxx
President
other deliveries: L.E.J. Drilling Company
00 Xxxxx 00xx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxx
President
with copies to:
Xxxxxxx X. Xxxxxxxxxx, Esq.
Xxxxxxxxx & Xxxxxxxxx, L.L.P.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
(c) if to the Indemnifying Shareholder, to:
(i) by mail: Xxxxx X. Xxxxx
P.O. Box 1185
Duncan, Oklahoma 73534
23
27
other deliveries: Xxxxx X. Xxxxx
00 Xxxxx 00xx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
with copies to:
Xxxxxxx X. Xxxxxxxxxx, Esq.
Xxxxxxxxx & Xxxxxxxxx, L.L.P.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Section 10.2 Interpretation. When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated, and the words "hereof," "herein" and "hereunder" and
similar terms refer to this Agreement as a whole and not to any particular
provision of this Agreement, unless the context otherwise requires. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 10.3 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 10.4 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, including the documents and instruments referred to herein, (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (ii) is not intended to confer upon any person other
than the parties any rights or remedies hereunder; provided, however, that legal
counsel for the parties hereto may rely upon the representations and warranties
contained herein and in the certificates delivered pursuant to Sections 7.2(b)
and 7.3(b).
Section 10.5 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 10.6 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
Section 10.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby are not affected in any manner
24
28
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions be consummated as originally contemplated to the
fullest extent possible.
Section 10.8 Enforcement of This Agreement. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
IN WITNESS WHEREOF, Parent, Sub and Company have executed this
Agreement as of the date first written above.
PARENT:
XXXXXXXXX ENERGY, INC.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxx
Attest: Chairman and Chief Executive Officer
/s/ Xxxxxxxx X. Xxxxxx
--------------------------------
Xxxxxxxx X. Xxxxxx, Secretary
SUB:
XXXXXXXXX DRILLING COMPANY LP,
LLLP
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxx
Chief Executive Officer
Attest:
/s/ Xxxxxxxx X. Xxxxxx
--------------------------------
Xxxxxxxx X. Xxxxxx, Secretary
25
29
COMPANY:
X.X. XXXXX DRILLING COMPANY
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Xxxxx X. Xxxxx
Attest: President
/s/ Xxxxxx Xxxxx
--------------------------------
Xxxxxx Xxxxx, Secretary
26
30
TO INDUCE XXXXXXXXX ENERGY, INC. AND XXXXXXXXX DRILLING COMPANY LP,
LLLP TO ENTER INTO THIS ASSET PURCHASE AGREEMENT AND FOR OTHER GOOD AND VALUABLE
CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, THE
UNDERSIGNED, BEING AN OFFICER, DIRECTOR AND SOLE SHAREHOLDER OF X.X. XXXXX
DRILLING COMPANY, HEREBY ACCEPTS AND AGREES TO BE BOUND BY THE INDEMNIFICATION
PROVISIONS OF SECTION 1.3, 6.4(a) AND 6.4(c) OF THE ABOVE ASSET PURCHASE
AGREEMENT.
/s/ Xxxxx X. Xxxxx
----------------------------------------
Xxxxx X. Xxxxx
27
31
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is made and entered
into this ____ day of January, 2001, by and among XXXXXXXXX ENERGY, INC., a
Delaware corporation ("PEC"), and XXXXX X. XXXXX, the sole shareholder of X.X.
Xxxxx Drilling Company, an Oklahoma corporation ("Company") (the "Shareholder").
A. Pursuant to that certain Asset Purchase Agreement dated of even date
herewith ("Asset Purchase Agreement") by and among PEC, Xxxxxxxxx Drilling
Company LP, LLLP, a Delaware registered limited liability limited partnership
and a wholly-owned indirect subsidiary of PEC ("PDC"), and Company, PEC has
agreed to issue a total of 149,184 shares ("Restricted Shares") of PEC's Common
Stock, $0.01 par value (the "Common Stock") as consideration to Shareholder for
the purchase of all of the Drilling Rigs, Equipment, Accounts Receivable and
Other Assets of Company.
B. This Agreement is being entered into in connection with and as a
condition to the parties closing the transactions contemplated under the Asset
Purchase Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement the following terms
shall have the following respective meanings:
"Commission" shall mean the United States Securities and Exchange
Commission and any successor federal agency having similar powers.
"Person" shall mean an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incident to PEC's
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws and all reasonable printing expenses, messenger and
delivery expenses, and fees and disbursements of counsel for PEC and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other persons retained by PEC (all such expenses being herein
called "Registration Expenses"), will be borne as provided in this Agreement,
except that PEC will, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit or
quarterly review, the expense of any liability insurance and the expenses and
fees for listing
EXH A-1
32
the securities to be registered on each securities exchange on which similar
securities issued by PEC are then listed or on the NASD automated quotation
system.
"Restricted Shares" shall include Common Stock issued or issuable with
respect to the Restricted Shares by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular Restricted Shares, such shares
will cease to be Restricted Shares when they have been distributed to the public
pursuant to an offering registered under the Securities Act or sold to the
public through a broker, dealer or market maker in compliance with Rule 144
under the Securities Act (or any similar rule then in force).
"Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
2. Restrictions on Transfer; Rule 144.
(a) Restricted Shares. The Restricted Shares were acquired by
Shareholder from PEC for investment for his own account and not as a nominee or
agent and not with a present view to the resale or distribution of any part
thereof, except in compliance with the Securities Act. The Shareholder
acknowledges that the Restricted Shares are "restricted securities" within the
meaning of the Securities Act.
(b) Rule 144. PEC will use its reasonable best efforts to make
all necessary filings with the SEC to ensure the availability of Rule 144 to
Shareholder.
(c) Document Request. Promptly following receipt by PEC from
Shareholder of an opinion of counsel, in form and content reasonably acceptable
to PEC and its counsel, PEC will provide, or cause its counsel to provide, its
transfer agent with such instructions or opinions as may be required by the
transfer agent to remove the restrictive legend on the certificate evidencing
the PEC shares so that the shares may be sold in compliance with Rule 144.
(d) Legends. Upon expiration of two years from Closing, PEC
will promptly remove the legends from the Restricted Shares; provided that the
provisions of Rule 144(k) have been satisfied.
3. Restricted Shares - Registration Under Securities Act, etc.
3.1 Registration.
(a) Filing. Promptly following the execution of this Agreement
and the contemporaneous closing of the transaction contemplated by the Asset
Purchase Agreement, PEC shall file a Registration Statement on Form S-3 (the
"Form S-3") with the Commission covering the distribution of the Restricted
Shares. PEC agrees to use its best efforts to (i) have the Form S-3 declared
effective, and (ii) respond to any comments from the SEC, and (iii) cause such
Registration to become effective with the SEC within 45 days of its filing.
EXH A-2
33
(b) Expenses. PEC shall pay all Registration Expenses in
connection with the Form S-3.
3.2 Registration Procedures. Following the effective date of
the Form S-3, PEC will promptly:
(a) prepare and file with the Commission such amendments and
supplements to the Form S-3 and the prospectus used in connection therewith as
may be necessary to keep the Form S-3 effective and to comply with the
provisions of the Securities Act with respect to the disposition of the
Restricted Shares until the earlier of (i) such time as all of such Restricted
Shares have been disposed of in accordance with the intended methods of
disposition by the Shareholder, or (ii) the expiration of twenty-four (24)
months after such effective date and furnish to each of the Shareholder prior to
the filing thereof a copy of any amendment or supplement to the Form S-3 or
prospectus and shall not file any such amendment or supplement to which
Shareholder shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the requirements of the
Securities Act or of the rules or regulations thereunder. The number of
Restricted Shares that may be sold under the Form S-3, including the 660,886
shares of PEC Common Stock to be issued by PEC pursuant to the terms of the
Agreement and Plan of Merger, dated of even date with this Agreement, among PEC,
Xxxxxxxxx Drilling Company LP, LLLP and Xxxxx Drilling Corporation, may not
exceed 200,000 shares in a 30-day period without consultation with PEC;
(b) furnish to Shareholder one originally executed Form S-3,
with all amendments, supplements and additional documentation; such number of
conformed copies of such Form S-3 and of each such amendment and supplement
thereto (in each case including all exhibits) as Shareholder may reasonably
request; such number of copies of the prospectus included in the Form S-3
(including each preliminary prospectus and any summary prospectus) as required
by the Securities Act as Shareholder may reasonably request; such documents, if
any, incorporated by reference in the Form S-3 or prospectus; and such other
documents as Shareholder may reasonably request;
(c) use its best efforts to register or qualify the Restricted
Shares and other securities covered by the Form S-3 under such other securities
or blue sky laws of such jurisdictions as Shareholder shall reasonably request,
to keep such registration or qualification in effect for so long as the Form S-3
remains in effect, and do any and all other acts and things which may be
necessary or advisable to enable Shareholder to consummate the disposition in
such jurisdictions of the Restricted Shares covered by the Form S-3, except that
PEC shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not but
for the requirements of this subdivision (c) be obligated to be so qualified, or
to subject itself to taxation in any such jurisdiction, or to consent to general
service of process in any such jurisdiction;
(d) immediately notify Shareholder at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in the Form S-3, as then in effect, includes an
untrue statement of a material fact or omits to state any material fact required
EXH A-3
34
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing, or if it is necessary to amend or
supplement such prospectus or Form S-3 to comply with law, and at the request of
Shareholder, prepare and furnish to Shareholder a reasonable number of copies of
a supplement to or an amendment of such prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such Restricted Shares, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statement therein not misleading in light of the circumstances then existing and
shall otherwise comply in all material respects with the law and so that such
prospectus or Form S-3, as amended or supplemented, will comply with law; and
(e) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
securities holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months beginning with the first
month of the first fiscal quarter after the effective date of the Form S-3, if
such earnings statement is necessary to satisfy the provisions of Section 11(a)
of the Securities Act.
4. Indemnification.
4.1 Indemnification by PEC. PEC will, and hereby does,
indemnify and hold harmless Shareholder against any losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation, the
costs and expenses of investigating, preparing for and defending any legal
proceeding, including reasonable attorney's fees), to which Shareholder may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any document incorporated by
reference therein, or (ii) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and PEC will reimburse Shareholder for any legal or any
other expenses incurred by them in connection with investigating or defending or
settling any such loss, claim, liability, action or proceeding; provided that
PEC shall not be liable in any such case to the extent that any loss, claim,
damage, liability or expense (or action or proceeding in respect thereof) arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with information furnished to PEC
by Shareholder for use in preparation thereof. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Shareholder and shall survive the transfer of such securities by
Shareholder. PEC will make provision for contribution in lieu of any such
indemnity that may be disallowed as shall be reasonably requested by
Shareholder.
4.2 Indemnification by Shareholder. Shareholder hereby
indemnifies and holds harmless PEC, each director of PEC, each officer of PEC
who shall sign the Form S-3 and each other person, if any, who controls PEC
within the meaning of the Securities Act from and
EXH A-4
35
against losses, claims, damages and liabilities caused by any untrue statement
or alleged untrue statement of material fact contained in the Form S-3 any
preliminary prospectus, final prospectus or summary prospectus included therein,
or any amendment or supplement thereto, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if such statement or
omission was made in reliance upon and in conformity with information furnished
to PEC by Shareholder for use in the preparation of the Form S-3, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement up to
the net proceeds received by Shareholder. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of PEC or
any such director, officer or controlling person and shall survive the transfer
of such securities by Shareholder.
4.3 Notice of Claims, etc. In case any proceeding (including
any governmental investigation) shall be instituted involving any person in
respect of which indemnity may be sought pursuant to this Section 4, such person
(hereinafter called the "indemnified party") shall promptly notify the person
against whom such indemnity may be sought (hereinafter called the "indemnifying
party") in writing and the indemnifying party, upon request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any other party the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
The indemnifying party shall not be liable for the settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there is a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment.
4.4 Indemnification Unavailable. If the indemnification
provided for in this Section 4 is unavailable as a matter of law to an
indemnified party in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under any such paragraph, in
lieu of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (i) in such proportion as is appropriate to
reflect the relative benefits received by such indemnified party on the one hand
and the indemnifying parties on the other or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of such indemnified party on the one hand and
the indemnifying parties on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of such
indemnified party and the indemnifying parties shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by such parties and the parties' relative intent,
EXH A-5
36
knowledge, access to information and opportunity to correct or prevent such
statement or omissions. The parties agree that it would not be just and
equitable if contribution pursuant to this Section 4.4 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above. The amount paid or payable by
an indemnified party as a result of the losses, claims, damages and liabilities
referred to above shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating, defending or settling any such action or
claim. Notwithstanding the foregoing, the liability of Shareholder under this
Section 4.4 shall be limited to the net proceeds received by Shareholder.
4.5 No Settlement, etc. No indemnifying party shall, except
with the written consent of the indemnified party, consent to entry of any
judgment or entry into settlement that does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or action.
4.6 Indemnity Operative and in Full Force. The indemnity and
contribution agreements contained in this Section 4 shall remain operative and
in full force and effect regardless of any termination of this Agreement.
5. Amendments and Waivers. This Agreement may be amended, and PEC may
take any action herein prohibited or omit to perform any act herein required to
be performed by it, only if PEC shall have obtained the written consent to such
amendment, action or omissions to act of the Holder.
6. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid, or courier
addressed to:
6.1 if to Shareholder, at the address shown on stock transfer
books of PEC or such other address as Shareholder has advised PEC in writing,
and
6.2 if to PEC, at 0000 Xxxxxx Xxxxxxx, X.X. Xxxxxx 0000,
Xxxxxx, Xxxxx 00000 to the attention of its President or to such other address
as PEC shall have furnished to Shareholder.
EXH A-6
37
7. Miscellaneous. This Agreement embodies the entire agreement and
understanding between PEC and Shareholder with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to the
subject matter hereof. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Texas. The headings in
this Agreement are for the purposes of reference only and shall not limit or
otherwise affect the meaning hereof. This Agreement may be executed in
counterparts, each of which shall be an original, but both of which together
shall constitute one instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
PEC:
XXXXXXXXX ENERGY, INC.
By:
------------------------------------
Xxxxxx X. Xxxxxxx
Chief Executive Officer
SHAREHOLDER:
---------------------------------------
Xxxxx X. Xxxxx
EXH A-7
38
EXHIBIT B
XXXX OF SALE AND ASSIGNMENT
KNOW ALL MEN BY THESE PRESENTS, that, pursuant to that certain Asset
Purchase Agreement, dated as of January 1, 2001 ("Asset Purchase Agreement"),
among XXXXXXXXX ENERGY, INC., a Delaware corporation ("Parent"), XXXXXXXXX
DRILLING COMPANY LP, LLLP ("Sub"), a Delaware registered limited liability
limited partnership wholly owned by Parent, and X.X. XXXXX DRILLING COMPANY
("Company"), an Oklahoma corporation (Company is referred to herein as the
"Assignor"), the Assignor, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, hereby grants, bargains, sells,
conveys and transfers unto Sub (the "Assignee"), all of the Assignor's right,
title and interest in and to all of the assets of Company including but not
limited to (i) the Drilling Rigs, Equipment, Accounts Receivable and Other
Assets set forth in Appendix I attached hereto and incorporated herein by this
reference, including in the case of the accounts receivable, accounts receivable
relating to work completed or in process at Closing but not yet billed and all
accounts receivable generated after the date of such schedule; and (ii) the
Assumed Drilling Contracts described in Appendix II attached hereto and
incorporated herein by this reference.
TO HAVE AND TO HOLD the same unto the Assignee and the Assignee's
successors and assigns forever. The Assignor hereby covenants and agrees that it
has the full right, power and authority to sell, convey and transfer the
foregoing property to the Assignee pursuant to this Xxxx of Sale and Assignment.
IN WITNESS WHEREOF, the Assignor has caused this Xxxx of Sale and
Assignment to be duly executed by its duly authorized officer as of the 1st day
of January, 2001.
X.X. XXXXX DRILLING COMPANY
By:
-------------------------------------
Xxxxx X. Xxxxx
President
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39
EXHIBIT C
INVESTMENT REPRESENTATION LETTER
January ___, 2001
Xxxxxxxxx Energy, Inc.
0000 Xxxxxx Xxxxxxx
Xxxxxx, Xxxxx 00000
This letter is being submitted to Xxxxxxxxx Energy, Inc. ("PEC") in
connection with and as a condition to PEC's closing of the transaction
contemplated by the Agreement and Plan of Asset Purchase among PEC, Xxxxxxxxx
Drilling Company LP, LLLP ("PDC") and Xxxxx Drilling Corporation ("Company").
The undersigned, the sole shareholder of Company, will be issued shares of
common stock of PEC ("PEC Shares") as partial consideration for the merger of
Company with and into PDC. Capitalized terms not defined herein shall have the
meaning given them in the Memorandum (as defined below).
1. Representations and Warranties.
The undersigned hereby represents and warrants to PEC that the
following statements are true:
a. The undersigned has been furnished a copy of the
Memorandum, dated December 29, 2000 (the "Memorandum") containing a copy of
PEC's Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended
December 31, 1999, and all other reports filed by PEC with the Securities and
Exchange Commission since January 1, 2000 (collectively, the "Reports") and has
carefully reviewed the Memorandum and the Reports, including, but not limited
to, the section entitled "Disclosure Concerning Forward-Looking Statements,"
setting forth certain Cautionary Statements or risk factors relating to PEC and
its businesses and operations.
b. The undersigned has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of an investment in PEC vis-a-vis the PEC Common Stock to be issued by PEC
as partial consideration for the merger.
c. The undersigned has had an opportunity to ask questions of
PEC and its management concerning PEC and PDC, the businesses of PEC and PDC and
the PEC Shares and, if asked, all such questions have been answered to the full
satisfaction of the undersigned.
d. The undersigned understands that PEC has not registered the
offer or sale of the PEC Shares under the Securities Act of 1933, as amended
(the "Act"), in reliance upon an exemption therefrom under Section 4(2) of the
Act and the provisions of Regulation D promulgated thereunder. The undersigned
therefore acknowledges that in no event may he sell or otherwise transfer the
PEC Shares without registration under the Act (see paragraph (g) below).
EXH C-1
40
e. The undersigned represents that he will acquire the PEC
Shares for his own account, with no intention to distribute or offer to
distribute the same to others without registration under the Act, and
understands that the issuance by PEC of the PEC Shares will be predicated upon
the undersigned's lack of such intention.
f. The undersigned understands that neither the Securities and
Exchange Commission nor the securities commissioner of any state has received or
reviewed any documents relative to an investment in PEC, or has made any finding
or determination relating to the fairness of an investment in PEC.
g. The undersigned acknowledges that stop transfer
instructions will be placed with PEC's transfer agent to restrict the resale,
pledge, hypothecation or other transfer of the PEC Shares.
h. The undersigned acknowledges that, except as provided in
the Registration Rights Agreement attached as Exhibit A to the Asset Purchase
Agreement, PEC is under no obligation to register the PEC Shares for sale under
the Act or to assist the undersigned in complying with any exemption from
registration under the Act, or any state securities laws.
i. The undersigned understands and acknowledges that the
foregoing representations and warranties will be relied upon by PEC in
connection with the issuance of the PEC Shares.
j. The undersigned has an individual net worth, or joint net
worth with the undersigned's spouse in excess of $1 million.
2. Indemnification.
The undersigned agrees to indemnify and hold harmless PEC and PDC, or
either of them, the officers, directors and affiliates of either of them and
each other person, if any, who controls either of them, within the meaning of
Section 15 of the Act, against any and all loss, liability, claim, damage and
expense whatsoever (including, but not limited to, any and all expenses
reasonably incurred in investigating, preparing or defending against any
litigation commenced or threatened or any claim whatsoever) arising out of or
based upon any false representation or warranty or failure by the undersigned to
comply with any covenant or agreement made by each of the undersigned herein.
3. Survival.
All representations, warranties and covenants contained in this letter
shall survive the closing of the merger.
Very truly yours,
--------------------------------
Xxxxx X. Xxxxx
EXH C-2