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EXHIBIT 10.10
[EXECUTION VERSION]
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement, dated as of March 31, 1999, is by and
among Joint Energy Development Investments II Limited Partnership, a Delaware
limited partnership ("JEDI II"), Sierra Well Service, Inc., a Delaware
corporation (the "Company"), and the Persons designated on the Schedule of
Investors attached hereto as Annex A.
WHEREAS, the Company and JEDI II have entered into a Securities
Purchase Agreement, dated as of March 31, 1999 (the "Securities Purchase
Agreement"), regarding the sale of, among other investments, shares of the
Company's Preferred Stock; and
WHEREAS, the parties desire to set forth their agreement with respect
to certain matters relating to the transfer and voting of the shares of Common
Stock held by the Company's Stockholders; and
WHEREAS, the execution and delivery of this Agreement is a condition to
consummation of the transactions contemplated by the Securities Purchase
Agreement:
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS.
Unless the context otherwise requires, capitalized terms used but not
otherwise defined herein shall have the following respective meanings:
"Acceptance Notice" has the meaning specified therefor in Section 5(b)
of this Agreement.
"Adoption Agreement" shall mean an agreement in the form attached
hereto as Exhibit "A" and any similar agreement satisfactory in form and
substance to the Company.
"Affiliate" means, with respect to any specified Person, any other
Person (i) directly or indirectly controlling, controlled by, or under common
control with the first Person or (ii) that directly
or indirectly owns more than five percent (5%) of any class of the voting
securities or capital
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stock of or equity interests in such person. The term "control" (including the
terms "controlling," "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power either to (i) vote five percent
(5%) or more of the securities or interests having ordinary voting power for the
election of directors (or other comparable controlling body) of such Person or
to (ii) direct or cause the direction of the management or the policies of such
Person, whether through the ownership of voting securities or interests, by
contract or otherwise.
"Agreement" shall mean this Agreement as in effect on the date hereof
and as hereafter from time to time amended, modified or supplemented in
accordance with the terms hereof.
"Appraised Value" shall mean the fair market value of the Company
Securities determined by agreement between the Board of Directors and the
Subject Stockholder (or a representative or designee thereof) or, if such
agreement is not obtained within 30 days after the relevant determination date,
by agreement of two firms qualified to appraise the Company's business, one of
which shall be selected by a majority of the members of the Board of Directors
of the Company and one of which shall be selected by the Subject Stockholder (or
a representative or designee thereof). If the two appraisers' determinations of
fair market value are within 10% of each other, the average of these amounts
shall be the Appraised Value. Otherwise, the two appraisers shall select a
mutually agreeable third appraiser to make a determination of the fair market
value of the Company Securities. The Appraised Value shall then be the average
of: (i) the fair market value as established by such third appraiser and (ii)
the fair market value established by one of the first two appraisers that is
closest to the third appraiser's estimate. For purposes of determining Appraised
Value, the fair market value of the Company Securities shall equal the price
that could be obtained in an open (non-forced) sale of all of such outstanding
securities, with ample time for marketing and closing and assigning equal value
to each share thereof. Each party will bear the cost of its own appraiser and
any such appraiser will, upon providing reasonable notice to the Company, be
given full access to the books, records, properties and employees of the Company
and its subsidiaries during regular business hours. In the event that a third
appraiser is chosen as provided hereunder, the parties will bear the cost of
such appraiser equally.
"Board of Directors" shall mean the Board of Directors of the Company.
"Business Day" means a day that is not a Saturday, a Sunday or a day on
which banking institutions in New York, New York are not required to be open for
business.
"Change in Control" shall mean the occurrence with respect to any
Stockholder of any of the following events; provided, however, that a Change of
Control shall not be deemed to have occurred (x) if any of the events described
in subsections (i) or (ii) below directly results from a Preferred Holder
exercising its rights pursuant to this Agreement or (y) if, after any of the
events described in subsections (i) or (ii) below, the voting securities or
assets of the Stockholder are held by a Person, entity or group that was a
subsidiary of the Stockholder prior to the date hereof:
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(i) any Person, entity or group (within the meaning of Section 13(d) or
14(d) of the Exchange Act) shall purchase securities pursuant to a tender offer
or exchange offer to acquire any securities for cash, securities or any other
consideration, provided that after consummation of the offer, the Person, entity
or group in question is the beneficial owner (as such term is defined in Rule
13d-3 promulgated under the Exchange Act), directly or indirectly, of 50%
percent or more of the combined voting power of the then outstanding securities
of such Stockholder;
(ii) the stockholders of such Stockholder shall approve: (i) any
merger, consolidation, or reorganization of such Stockholder; (a) in which such
Stockholder is not the continuing or surviving corporation or (b) pursuant to
which shares of outstanding voting securities of such Stockholder would be
converted into cash, securities or other property; (ii) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of such Stockholder; or
(iii) any liquidation or dissolution of such Stockholder;
(iii) during any period of two consecutive years, the individuals who
at the beginning of such period constituted the board of directors of such
Stockholder cease for any reason to constitute a majority of such board, unless
the election or nomination for election by such Stockholder's stockholders of
each new director during any such two-year period was approved by the vote of
two-thirds of the directors then still in office who were directors at the
beginning of such two-year period; or
(iv) The substitution of any general partner of any Stockholder that is
a partnership or a Change of Control shall occur with respect to the general
partner of any Stockholder that is a partnership
"Common Stock" shall mean the common stock, no par value, of the
Company and all equity securities received in connection with any stock split,
stock dividend, reorganization, recapitalization, merger or consolidation of the
Company with or into another entity or a similar event. All references herein to
Common Stock owned by a Stockholder shall include: (i) the community interest or
similar marital property interest, if any, of a spouse of such Stockholder in
such Common Stock; and (ii) all of the equity interests and voting rights in the
Company which are reflected by Common Stock ownership.
"Common Stock Equivalent" means any right, warrant or option to
purchase shares of Common Stock of the Company or any other security convertible
into or exchangeable for shares of Common Stock of the Company.
"Company" has the meaning specified therefor in the preamble of this
Agreement.
"Company Offer" has the meaning specified therefor in Section 5(a) of
this Agreement.
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"Company Offered Securities" has the meaning specified therefor in
Section 5(a) of this Agreement.
"Company Securities" shall mean all of the capital stock of the
Company, including, but not limited to, any Common Stock, Common Stock
Equivalents, any securities convertible into or exchangeable for such
securities, and any options, warrants or other rights to purchase such
securities.
"Conversion Shares" means the shares of Common Stock and other
securities, property or cash receivable upon conversion of the Preferred Stock.
"Dispute" has the meaning specified therefor in Section 12(d)(i) of
this Agreement.
"Effective Date" has the meaning specified therefor in Section 2 of
this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exempt Issuance" shall mean (i) the sale or issuance of Common Stock
by the Company in a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act, (ii) shares of Common
Stock sold or issued upon conversion of shares of the Preferred Stock, (iv)
Common Stock issued pursuant to any merger or acquisition by the Company that is
approved by the Board of Directors, and (vi) Common Stock issued pursuant to
stock splits, stock dividends and other distributions to Stockholders.
"Fully Diluted" shall mean the total number of shares of Common Stock
outstanding assuming the exercise of all outstanding warrants, stock options or
similar rights to acquire shares of Common Stock and the conversion of all
evidences of indebtedness, shares (other than Common Stock) and other securities
convertible into or exchangeable for shares of Common Stock; provided, the total
number of shares of Common Stock outstanding shall not include any shares
thereof then directly or indirectly owned or held by or for the account of the
Corporation or its subsidiaries.
"JEDI Affiliates" has the meaning specified therefor in Section 10(a)
of this Agreement.
"JEDI II" has the meaning specified therefor in preamble of this
Agreement.
"Liens" means mortgages, liens, security interests, pledges, voting
trusts, restrictions, encumbrances, preferential purchase rights and claims of
every kind.
"Option" has the meaning specified therefor in Section 7(b) of this
Agreement.
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"Option Purchase Price" has the meaning specified therefor in Section
7(a) of this Agreement.
"Option Shares" has the meaning specified therefor in Section 7(c) of
this Agreement.
"Participation Notice" has the meaning specified therefor in Section
4(iii) of this Agreement.
"Person" means any natural person, partnership, corporation, and any
other form of business or legal entity.
"Positions" has the meaning specified therefor in Section 10(a) of this
Agreement.
"Preferred Holder" shall mean the Persons listed as Preferred Holders
on Annex B to this Agreement, the holders of the Conversion Shares issued
pursuant to the conversion of the Preferred Stock and any transferees of any
such Persons.
"Preferred Stock" means, either singly or collectively, shares of the
Company's: (i) Series A Preferred; (ii) Series B Preferred; and (iii) Series C
Preferred.
"Pro Rata Portion," with respect to a Preferred Holder, means a
fraction, the numerator of which shall equal the total number of shares of
Common Stock then held by such Preferred Holder (assuming conversion of all of
such holder's shares of Preferred Stock) and the denominator of which shall
equal the sum of all shares of Common Stock then held by all Preferred Holders
(assuming conversion of all outstanding shares of Preferred Stock).
"Proposed Sale Price" has the meaning specified therefor in Section
4(i) of this Agreement.
"Purchase Notice" has the meaning specified therefor in Section 4(ii)
of this Agreement.
"Purchasing Investor" has the meaning specified therefor in Section
5(e) of this Agreement.
"Qualified Transferee" means a Person that is an "accredited investor,"
as such term is defined in Rule 501(a) of Regulation D under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Securities Purchase Agreement" has the meaning specified therefor in
the recitals of this Agreement.
"Securityholders" means anyone owning any shares of the capital stock
of the Company.
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"Selling Stockholder" has the meaning specified therefor in Section
4(i) of this Agreement.
"Senior Facility" means the Company's $24,408,000 Senior Credit
Facility, dated March 31, 1999.
Series A Holder" has the meaning specified therefor in Section 9(a) of
this Agreement.
"Series A Preferred" means the Company's Series A Cumulative Preferred
Stock.
Series B Holder" has the meaning specified therefor in Section 7(b) of
this Agreement.
"Series B Preferred" means the Company's Series B Convertible Preferred
Stock.
"Series C Call Option" has the meaning specified therefor in Section
6(a) of this Agreement.
"Series C Holder" has the meaning specified therefor in Section 6(b) of
this Agreement.
"Series C Preferred" means the Company's Series C Convertible Preferred
Stock.
"Stockholder" shall mean each Person listed as a Stockholder on Annex A
to this Agreement, any Transferee (other than a Preferred Holder) of any such
Person and any person who signs an Adoption Agreement in accordance with Section
3(c).
"Subject Shares" has the meaning specified therefor in Section 4(i) of
this Agreement.
"Subject Stockholder" has the meaning specified therefor in Section
4(vi) of this Agreement.
"Subordinated Facility" means the Company's $25 million Senior
Subordinated Credit Facility, dated March 31, 1999.
"Transfer" shall mean any direct or indirect transfer, assignment,
donation, devise, sale, gift, pledge, hypothecation, encumbrance, or other
disposition of any security, or any interest therein, whether voluntary or
involuntary, including without limitation any disposition or transfer as a part
of any liquidation of assets or any reorganization pursuant to the United
States' or any other jurisdiction's bankruptcy law or other similar debtor
relief laws. The term "Transfer," shall also include a transaction involving a
change of ownership interest or voting power of a Stockholder entered into for
the purpose or with the effect of avoiding the restrictions on the Transfer of
the Company Securities provided herein or other any other provision hereof
governing Transfers.
"Transfer Notice" has the meaning specified therefor in Section 4(i) of
this Agreement.
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"Transferee" shall mean any Person who acquires Company Securities from
a Stockholder (other than a Preferred Holder).
"Voting Power" shall mean, with respect to a Securityholder, the total
number of votes that could be cast by such Securityholder in a matter for which
holders of Common Stock are entitled to vote, other than the election of
directors, without giving effect to any cumulative voting rights.
2. EFFECTIVE DATE. The restrictions, obligations and rights of the
parties hereto imposed by Sections 3 through 9 of this Agreement shall become
effective concurrently with the Closing (as defined therein) of the Securities
Purchase Agreement (the "Effective Date"). The Company and each Stockholder
covenants and agrees that, from the date hereof until the Effective Date, such
Stockholder will not Transfer any shares of Common Stock or Company Securities
or any interest therein.
3. GENERAL RESTRICTION ON TRANSFERS.
(a) General Rule; Ownership. Each of the Stockholders agrees
that until the redemption of all outstanding shares of the Series A
Preferred in accordance with its terms, no Stockholder may effect any
Transfer of any shares of Company Securities owned by such Stockholder
without the prior written consent of holders representing a majority of
the outstanding shares of the Series A Preferred. Thereafter,
Stockholders may only Transfer Company Securities in strict compliance
with the provisions of this Agreement. Each Stockholder represents and
warrants to the Preferred Holders that such Stockholder beneficially
owns all of the Company Securities, and no other securities, set forth
opposite its name on Annex A to this Agreement, free and clear of all
Liens (except as otherwise specified on Annex A) and that such shares
are held of record in the name set forth on Annex A.
(b) Prohibited Transfers are Void. Attempts by Stockholders to
Transfer Company Securities that do not comply with the terms of this
Agreement shall be void and of no effect and the Company shall hold and
refuse to effectuate such Transfer. The Company shall give effect to
the transfer restrictions imposed by this Agreement by placing an
"issuer hold" on the Company Securities owned by the Stockholders and
it will not release such issuer hold except in accordance with the
terms hereof. Each Stockholder consents to the Company making a
notation on its records and giving instructions to any transfer agent
of the Company in order to implement the restrictions on transfer
established in this Agreement. The Company shall keep a copy of this
Agreement (as it may be amended from time to time) at its principal
place of business and shall make such Agreement subject to the same
right of examination by Securityholders of the Company, in person or by
agent, attorney or accountant, as are the books and records of the
Company by any stockholder generally. The Company's duty to prohibit
Transfers that do not comply with the terms of this Agreement is
additional to, and without prejudice to, the rights and remedies that
may be otherwise available to the parties. Each party: (i) acknowledges
that remedies at law for any breach or any attempted breach hereof
would be inadequate; (ii) agrees that each other
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party shall be entitled to specific performance and injunctive relief
and other equitable relief in case of such a breach or attempted
breach; and (iii) agrees to waive any requirement for notice prior to
obtaining injunctive or equitable relief in such circumstances.
(c) Adoption Agreement. The Company shall not issue or
Transfer Company Securities, nor shall any Stockholder Transfer any
Company Securities, unless the intended Transferee (other than a
Preferred Holder) first executes an Adoption Agreement and delivers it
to the Company, whereupon such Transferee shall be deemed a
"Stockholder" and shall have the rights and obligations of a
Stockholder under this Agreement and the Company Securities held by any
such Person shall be subject to the provisions hereof.
4. RIGHT OF FIRST REFUSAL AND TAG-ALONG RIGHT ON STOCKHOLDER TRANSFERS.
Each of the Stockholders agrees that it will not Transfer any shares of
Company Securities to any Person without first providing the Company the right
to purchase the shares to be Transferred and the Preferred Holders (i) the right
to purchase the shares to be Transferred or (ii) the right to participate in the
Stockholder's proposed Transfer, in accordance with the following provisions:
(i) Proposed Transfer. If any Stockholder (a "Selling
Stockholder") desires to Transfer Company Securities it shall
deliver to the Company and to JEDI II or its designees a
written notice (a "Transfer Notice") which shall specify the
proposed Transferee, the number and kind of Company Securities
to be Transferred (the "Subject Shares"), the proposed
consideration to be paid per share therefor (the "Proposed
Sale Price"), and other material terms of the proposed
Transfer (which terms shall not limit the ability of the
Company or the Preferred Holders to exercise their rights to
acquire the securities hereunder), and which notice shall
include a copy of any agreement with respect to the proposed
Transfer. No Stockholder may Transfer Company Securities to a
non-Preferred Holder for consideration other than cash.
(ii) Right of First Refusal.
(1) The Company shall have the right, for a
period of thirty days following its receipt of a
Transfer Notice to elect to acquire the Company
Securities specified in the Transfer Notice at a cash
price equal to the Proposed Sale Price. The Company
may exercise the foregoing right by delivering to the
Selling Stockholders, within thirty days after
receipt of the Transfer Notice, written notice (a
"Purchase Notice") of its intention to purchase the
Subject Shares. The closing of any acquisition of
Subject Shares by the Company shall be consummated
within five Business Days following delivery of the
Purchase Notice, at the principal offices of the
Company (unless otherwise mutually agreed), at which
time the Proposed Sale Price (in the form of a wire
transfer to an account designated by the
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Selling Stockholder) shall be delivered to the
Selling Stockholder or its representative and Selling
Stockholder shall deliver to the Company certificates
representing the Subject Shares, duly endorsed for
transfer or accompanied by duly executed stock
powers.
(2) If the Company does not elect to acquire
any or all of the Subject Shares, each of the
Preferred Holders shall have the right to elect to
acquire any Subject Shares not purchased by the
Company at the Proposed Sale Price. The Preferred
Holders may exercise the foregoing right by
delivering to the Selling Stockholder a Purchase
Notice of their intention to purchase the Subject
Shares within (x) sixty days following receipt of a
Transfer Notice or (y) thirty days after written
notification by the Company that it will not acquire
all of the Subject Shares, whichever is earlier. The
closing of any acquisition of Subject Shares by the
Preferred Holders shall be consummated within five
Business Days following delivery of the Purchase
Notice, at the principal offices of JEDI II (unless
otherwise mutually agreed), at which time the
purchase price (in the form of a wire transfer to an
account designated by the Selling Stockholder or, if
other than cash, in a form reasonably acceptable to
the Selling Stockholder) shall be delivered to the
Selling Stockholder or its representative and the
Selling Stockholder shall deliver to the Preferred
Holders certificates representing the Subject Shares,
duly endorsed for transfer or accompanied by duly
executed stock powers. Unless otherwise agreed among
the Preferred Holders who have exercised their
election to acquire the Subject Shares, the Subject
Shares so purchased shall be allocated among such
Preferred Holders in proportion to their Pro Rata
Portion.
(iii) Tag-Along Right. Each of the Preferred Holders
shall have the right, for a period of thirty days following
receipt of a Transfer Notice, to elect to participate in the
sale to the Selling Stockholder's proposed Transferee of the
Subject Shares on substantially the same terms as the proposed
Transferee could acquire the Subject Shares from the Selling
Stockholder. A Preferred Holder shall exercise the foregoing
right by delivering to the Selling Stockholder, within thirty
days after receipt of the Transfer Notice, written notice of
its intention to participate in the sale to the Transferee (a
"Participation Notice"), specifying the amount of shares the
Preferred Holder desires to sell to the proposed Transferee
(such amount being equal to or less than its Pro Rata Portion
of the Subject Shares). The closing of any tag-along sale by
the Preferred Holders shall be consummated within five
Business Days following delivery of the Participation Notice,
at the principal offices of JEDI II (unless otherwise mutually
agreed), at which time the purchase price (in the form of a
wire transfer to an account designated by the Preferred
Holders) shall be delivered to the Preferred Holders or their
representatives and the Preferred Holders shall deliver to
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the third-party Transferee certificates representing the
shares they are selling, duly endorsed for transfer or
accompanied by duly executed stock powers.
(iv) Lapse. If the Preferred Holders shall (i) fail
to give either a Purchase Notice or a Participation Notice
within the applicable time period specified in paragraph
(ii)(2) above, or (ii) notify the Selling Stockholder in
writing of the waiver of their "first-refusal" and "tag-along"
rights given in subparagraphs (ii) and (iii) above with
respect to the Subject Shares, whichever is earlier, then the
Selling Stockholder shall have the right, for a period of 30
calendar days to sell to any Qualified Transferee the Subject
Shares remaining unsold at a price not less than the Proposed
Sale Price and on terms substantially the same as set forth in
the Selling Stockholder's Transfer Notice delivered pursuant
to subparagraph (i) above.
(v) Waiting Period with Respect to Subsequent
Transfers. In the event that the Preferred Holders do not
exercise their "first-refusal" and "tag-along" rights given in
subparagraphs (ii) and (iii) above with respect to the Subject
Shares and the Selling Stockholder shall not have sold the
Subject Shares to a Qualified Transferee before the expiration
of the 30-day period set forth in subparagraph (iv), then such
Selling Stockholder shall not propose another Transfer of
Company Securities for a period of 60 calendar days after the
last day of such 30-day period.
(vi) Change in Control Option.
(1) If any Stockholder undergoes a Change in
Control, or in the event of the death or divorce of
any individual Stockholder (each a "Subject
Stockholder"), the Company shall have the option to
purchase all (but not less than all) of the Subject
Stockholder's Company Securities. The price per share
at which such Company Securities shall be purchased
shall be the Appraised Value and shall be payable in
cash. Such option must be exercised within 30 days
after the date on which the Company receives written
notice of the Change in Control, death or divorce of
the Subject Stockholder.
(2) If the Company elects not to purchase
all of the Subject Stockholder's Company Securities,
the Preferred Holders shall have the right to acquire
all, but not less than all, of such securities. The
price per share at which such Company Securities
shall be purchased shall be the Appraised Value and
shall be payable in cash. Such option must be
exercised within (x) 60 days after the date on which
the Preferred Holders receive written notice of the
Change in Control, death or divorce of the Subject
Stockholder or (y) 30 days after written notification
by the Company that it will not acquire all of the
Subject Stockholder's Company Securities, whichever
is earlier. If any Preferred Holder elects to
purchase less than its Pro Rata Portion of the
Subject Stockholder's Company Securities, then such
Preferred Holder shall
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be allocated and shall purchase the amount of such
securities it elected to purchase and the other
Preferred Holders shall be allocated and shall
purchase the balance of the Subject Stockholder's
Securities.
(3) To the extent not exercised by the
Company or the Preferred Holders, the option to
acquire the Subject Stockholder's Company Securities
will expire and be of no further force and effect.
Each Subject Stockholder agrees to provide prompt
written notice to each Preferred Holder and the
Company of the occurrence of any Change in Control or
upon the occurrence of any divorce of such Subject
Stockholder.
5. PREEMPTIVE RIGHT ON COMPANY ISSUES.
(a) Company Offer. The Company shall give the Preferred
Holders thirty (30) days' prior written notice (the "Company Offer"), delivered
or mailed as provided in Section 12(k), of the Company's intention to sell or
issue any Company Securities, other than an Exempt Issuance (the "Company
Offered Securities"), stating the intended date and material proposed terms of
such sale or issuance and the respective record ownership of Company Securities
and Voting Power of each Securityholder immediately before and after giving
effect to the proposed issuance. Such notice shall include a representation to
the Preferred Holders that the Company has a good faith intention to sell such
Company Securities on the terms specified in the Company Offer. A Company Offer
shall constitute an offer by the Company, irrevocable for thirty (30) days, to
sell or issue all or any portion of the Company Offered Securities to the
Preferred Holders on the same terms as specified in the Company Offer or, if
such terms provide for consideration other than cash, for cash in an amount
equal to the fair market value of such non-cash consideration. The fair market
value of such non-cash consideration shall be determined in good faith by a
majority of the Board of Directors.
(b) Acceptance of Company Offer. Within thirty (30) days after
receipt of a Company Offer, each Preferred Holder shall give an irrevocable
written notice to the Company (an "Acceptance Notice") that (a) such Preferred
Holder has elected to purchase all or a stated portion of the Company Offered
Securities without regard to the other Preferred Holders' election or (b) such
Preferred Holder has elected to purchase all or a stated portion of the Company
Offered Securities only if the other Preferred Holders elect to purchase all or
a stated portion of the Company Offered Securities. If any Preferred Holder does
not give an Acceptance Notice by the end of such thirty (30) day period, such
Preferred Holder shall be deemed to have elected not to purchase any of the
Company Offered Securities.
(c) Allocation of Company Offered Securities. If the Preferred
Holders elect to purchase, in the aggregate, either all or more than all of the
Company Offered Securities, the Company Offered Securities shall be allocated as
follows:
(i) If any Preferred Holder elects to purchase less
than its Pro Rata Portion of the Offered Securities, then such Preferred Holder
shall be allocated and shall purchase the
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amount of Company Offered Securities it elected to purchase and the other
Preferred Holders electing to purchase the Company Offered Securities shall be
allocated and shall purchase the balance of the Company Offered Securities;
provided, however, that, no such Preferred Holder shall be obligated to purchase
an amount of Company Offered Securities in excess of the amount set forth in its
Acceptance Notice; and
(ii) Otherwise, each Preferred Holder electing to
purchase the Company Offered Securities shall be allocated and shall purchase
its Pro Rata Portion of the Company Offered Securities.
(d) Rejection of Company Offer. If the Preferred Holders do
not elect to purchase all of the Company Offered Securities, the Company shall
have the right, exercisable not later than one hundred twenty (120) days after
the giving of the Company Offer, to issue the Company Offered Securities not
purchased by the Preferred Holders on substantially the same terms as, and in
any case, no more favorable to the purchaser than, those set forth in the
Company Offer.
(e) Closing. The closing of any sale or issue of Company
Offered Securities to a Preferred Holder pursuant to this Section 5, (a
"Purchasing Investor") shall take place on such date, within thirty (30) days of
the date of the Acceptance Notice (subject to extension to comply with any
applicable law), as shall be agreed by the Company and the Purchasing Investor.
At any such closing, the Company shall deliver to each Purchasing Investor
certificates representing the Company Offered Securities being issued,
registered in the name of such Purchasing Investor or its nominee, against
payment of the applicable purchase price by wire transfer of same day funds or
check as deemed acceptable to the Company.
6. OPTION TO PURCHASE SERIES C PREFERRED.
(a) Stockholders' Call Option. Beginning on the date hereof
and ending on June 30, 2004, the Stockholders shall have the option to purchase
the outstanding shares of the Company's Series C Preferred At the price and upon
the terms as set forth herein (the "Series C Call Option"); provided, however,
that the Stockholders may not exercise such option unless and until the
company's Series a Preferred has been redeemed in full.
(b) Notice of Exercise. The Series C Call Option Set forth in
this Section 6 may be exercised by the action of Stockholders representing, in
the aggregate, at least a majority in interest of the then outstanding shares of
Common Stock, giving 15 days' prior written notice to the holder of the Series C
Preferred (the "Series C Holder") in accordance with Section 12(k) hereof.
(c) Purchase price. The total purchase price for the Series C
Preferred Shall be that amount which would yield to JEDI II An eighteen percent
(18%) annual internal rate of return (compounded quarterly) on the aggregate of
all investments made by JEDI II and its Affiliates in the Company (excluding in
such calculation the Series B Preferred issued to JEDI and its affiliates
pursuant to the Securities Purchase Agreement), calculated from the date on
which the respective
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investments were made (less any cash received) to the date of exercise of the
Series C Call Option, as set forth on Annex C hereto.
(d) Closing. The closing of the purchase and sale of shares of
the Series C Preferred pursuant to this Section 6 shall take place at the
principal office of the Company on the date specified in the notice of exercise.
At such closing, the Series C Holder shall deliver the certificate representing
the Series C Preferred, duly endorsed or assigned to the purchasers or in blank,
against payment of the applicable purchase price by wire transfer of same day
funds or check as deemed acceptable to the Series C Holder. The Series C
Preferred shall be free and clear of any and all claims, charges, security
interests or other encumbrances of any nature whatsoever.
7. OPTION TO REDEEM COMMON STOCK.
(a) Company's Call Option. Each Stockholder agrees that the
Company shall have the exclusive option, commencing June 30, 2004 and ending 30
days thereafter, to purchase all or part of the shares of Common Stock owned by
such Stockholder for a purchase price equal to $1.00 per share (the "Option
Purchase Price"); provided, however, that such option may only be exercised if,
prior to the date of exercise, one or more shares of the Series A Preferred
remain outstanding.
(b) Series B Holders' Call Option. Each Stockholder agrees
that if the Company does not elect to purchase all of such Stockholder's shares
of Common Stock pursuant to subsection (a), the holders of the Series B
Preferred (the "Series B Holders") shall have the option to purchase all or part
of the shares of Common Stock owned by such Stockholder at the Option Purchase
Price; provided, however, that such option may only be exercised if, prior to
the date of exercise, one or more shares of the Series A Preferred remain
outstanding. Collectively, the Company's call option provided in subsection (a)
above and the Series B Holders' call option provided in this subsection (b) are
referred to as the "Option."
(c) Adjustment of Option Purchase Price. The Option Purchase
Price shall be subject to adjustment from time to time on and after the date
hereof as provided in this Section 7(c). In case the Company shall at any time
after the date hereof (i) pay a dividend of shares of Common Stock or make a
distribution of shares of Common Stock, (ii) subdivide its outstanding shares of
Common Stock into a larger number of shares of Common Stock, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares of Common
Stock or (iv) issue any shares of its capital stock or other assets in a
reclassification or reorganization of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing entity), then the Option Purchase Price shall be
adjusted to equal the Option Purchase Price immediately prior to the adjustment
multiplied by a fraction, (A) the numerator of which is the number of shares of
Common Stock for which this Option is exercisable immediately prior to the
adjustment, and (B) the denominator of which is the number of shares of Common
Stock for which this Option is exercisable immediately after such adjustment.
The adjustments made pursuant to this Section 7(c) shall become effective
immediately after the effective date of the event creating such right of
adjustment, retroactive to the record date, if any, for such event. Any Option
Shares
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purchasable as a result of such adjustment shall not be issued prior to the
effective date of such event.
(d) Adjustment Notices. Upon any increase or decrease in the
Option Purchase Price the Company shall, within 30 days thereafter, deliver
written notice thereof to all Series B Holders, which notice shall state the
adjusted Option Purchase Price, setting forth in reasonable detail the method of
calculation and the facts upon which such calculations are based.
(e) Notice of Exercise.
(i) The Company's Option set forth in subsection
7(a)(i) may be exercised by action of a majority of the members of the
Board of Directors of the Company by delivery to the Stockholder of
written notice of such exercise no less than 15 days in advance of the
date of exercise pursuant to the notice requirements of Section 12(k).
(ii) The Series B Holders' Option set forth in
subsection 7(a)(ii) may be exercised by any Series B Holder upon
delivery to the Stockholder of written notice of such exercise no less
than 15 days in advance of the date of exercise pursuant to the notice
requirements of Section 12(k). If more than one Series B Holder elects
to exercise its Option set forth in subsection 7(a)(ii) with respect to
the same share or shares of Common Stock, such share or shares will be
allocated among such Series B Holders to the extent of their Pro Rata
Portion or as otherwise agreed.
(f) Closing. The closing of the purchase and sale of shares of
Common Stock pursuant to this Section 7 shall take place at the principal office
of the Company on the date specified in the notice of exercise. At such closing,
the Company or Series B Holders, as the case may be, shall deliver payment of
the purchase price in the form of a check or wire transfer to the holder or
holders of the shares of Common Stock purchased, against delivery of the
certificate or certificates representing such shares, duly endorsed or assigned
to the Company or the Series B Holders, as the case may be, or in blank, free
and clear of any and all claims, charges, security interests or other
encumbrances of any nature whatsoever.
8. BRING ALONG/COME-ALONG RIGHTS. If Preferred Holders owning 10% or
more of the shares of Common Stock (calculated on a Fully Diluted Basis) make a
determination to sell their interest to a third party (excluding subsidiaries of
the Preferred Holders), such Preferred Holders shall have the right to require
all of the Stockholders of the Company to participate in such sale at the same
price and on the same terms as the other Stockholders.
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9. CORPORATE GOVERNANCE MATTERS.
(a) Designation and Removal of Directors. The Company and the
Stockholders agree that, so long as shares of Series A are outstanding, the
holders of Series A Preferred (the "Series A Holders") shall be entitled to
designate and remove members of the Company's Board of Directors in accordance
with the Company's Certificate of Designations for the Series A.
(b) Stockholder Action. Each Stockholder hereby agrees to vote
its shares of Common Stock (and to execute any requested written consent in lieu
of a meeting) from time to time as may be necessary to elect the Series A
Holders' designees to the Board of Directors and to take any other action
necessary to accomplish the purposes of this Section.
(c) Action by Preferred Holders. Each Preferred Holder hereby
agrees, so long as the Series A Holders' designees to the Board of Directors
have been elected as provided in this Section 9, to vote its shares of Preferred
Stock (and execute any requested written consent in lieu of a meeting) in any
election for the remaining members (if any) of the Board of Directors in the
same proportion as the Stockholders, so that the percentage of votes cast by the
Preferred Holders for any candidate shall equal the percentage of votes cast by
the Stockholders for such candidate.
(d) Committee Representation. At the election of the holders
of the Series A Preferred, any or all of the designees of the Series A Holders
serving on the Board of Directors pursuant to this Section 9 shall be members of
any executive committee or compensation committee, and, except for any
environmental committee, each other committee of the Board of Directors of the
Company.
10. CORPORATE OPPORTUNITIES.
(a) The Stockholders and the Company recognize that JEDI II,
its Affiliates (other than the directors elected or appointed to the Board of
Directors by JEDI II) and assigns (collectively, the "JEDI Affiliates") and the
directors elected or appointed to the Board of Directors of the Company by the
JEDI Affiliates (i) may have participated, directly or indirectly, and may
continue to participate in venture capital and other direct investments in
corporations, partnerships, joint ventures, limited liability companies and
other entities and other similar transactions, (ii) may have interests in,
participate with, and maintain seats on the board of directors of other such
entities and (iii) may develop opportunities for such entities. Specifically,
such directors elected or appointed to the Board of Directors by JEDI II may be
directors or employees of the JEDI Affiliates or directors or advisors of
entities in which the JEDI Affiliates have invested or may invest (collectively,
the "Positions"). In such Positions, such directors elected or appointed by the
JEDI Affiliates may encounter business opportunities that the Company or its
Stockholders may desire to pursue. The Stockholders and the Company recognize
that such opportunities may include, but shall not be limited to, identifying,
pursuing and investing in entities, financing entities, acquiring property or
other assets of entities, engaging investment banking firms or other
underwriters for access to public and private securities markets, and obtaining
investment funds from institutional and private
15
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investors or others, and agree that, to the fullest extent permitted by law, the
JEDI Affiliates and the directors elected or appointed to the Board of Directors
by the JEDI Affiliates shall not be expressly or implicitly restricted or
proscribed from engaging in any of the foregoing activities, regardless of
whether such business activity is (or such business entity engages in businesses
that are) in direct or indirect competition with the business or activities of
the Company and its Affiliates.
(b) The Stockholders and the Company agree that the JEDI
Affiliates and the directors elected or appointed by the JEDI Affiliates shall
have no obligation to the Company, the Stockholders of the Company or to any
other person or entity to present any such business opportunity to the Company
before presenting and allowing time to develop such opportunity to any other
entities, other than such opportunities presented to him or her solely in, and
as a direct result of, his or her capacity as a director of the Company;
provided, that this paragraph shall in no way allow a director to usurp a
corporate opportunity solely for his or her benefit without first presenting and
allowing time to the entities set forth above to develop such opportunity.
However, if an opportunity is separately presented by a person other than such
director of the Company to such entity, including the JEDI Affiliates, such
entity shall be free to pursue such opportunity even if it came to the
director's attention solely as a result of and in his or her capacity as a
director of the Company.
11. LEGEND ON CERTIFICATES; STOP TRANSFER ORDERS. The Stockholders
agree to the placement of a conspicuous legend on all certificates representing
shares of Company Securities or Common Stock Equivalents indicating that such
securities may not be Transferred except in accordance with this Agreement and
to the entry of a stop transfer order with the transfer agent for such
securities against the transfer of such securities except in accordance with
this Agreement. Such legend shall be substantially in the following form:
BY THE TERMS OF A STOCKHOLDERS' AGREEMENT DATED MARCH 31,
1999 AMONG CERTAIN STOCKHOLDERS AND THE COMPANY (THE "STOCKHOLDERS'
AGREEMENT"), CERTAIN RESTRICTIONS HAVE BEEN PLACED ON THE TRANSFER AND
VOTING OF THE SHARES REPRESENTED BY THIS CERTIFICATE. NEITHER THESE
SECURITIES NOR ANY INTEREST HEREIN MAY BE TRANSFERRED, BY MEANS OF A
DIRECT OR INDIRECT SALE, ASSIGNMENT, DONATION, TRANSFER, DEVISE,
PLEDGE, HYPOTHECATION, ENCUMBRANCE OR OTHER DISPOSITION OF LEGAL TITLE
OR BENEFICIAL INTEREST HEREIN, EXCEPT IN ACCORDANCE WITH THE
STOCKHOLDERS' AGREEMENT. A COPY OF THE STOCKHOLDERS' AGREEMENT HAS BEEN
PLACED ON FILE BY THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS OR
REGISTERED OFFICE AND IS AVAILABLE FOR INSPECTION.
Each Stockholder holding Company Securities issued prior to the Effective Date
of this Agreement agrees to surrender all certificates representing such
securities for endorsement as indicated above.
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12. MISCELLANEOUS.
(a) Action by Preferred Holders. Where consent, approval or a
designation by the Preferred Holders is contemplated by this Agreement, such
consent, approval or designation shall be deemed given, unless otherwise
specified by this Agreement, if (i) JEDI II shall evidence in writing its
consent, approval or designation, provided JEDI II and its Affiliates then own
beneficially at least 10% of the outstanding shares of Preferred Stock or (ii)
if JEDI II and its Affiliates own beneficially less than 10% of the outstanding
shares of Preferred Stock, the Persons beneficially owning over 50% of the
outstanding shares of Preferred Stock evidence such consent, approval or
designation in one or more signed writings in each case. Where any action by the
Preferred Holders is contemplated by this Agreement, each Preferred Holder may
independently exercise its respective rights. Shares of Preferred Stock or
Conversion Shares held by the Company or any subsidiary of the Company shall not
be deemed to be outstanding and neither the Company nor any subsidiary may
exercise any rights as a Preferred Holder.
(b) Determination of Beneficial Ownership. For purposes of
this Agreement, the determination of beneficial ownership of Company Securities
shall be made in accordance with Rule 13d-3 under the Exchange Act.
(c) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the parties hereto.
(d) Arbitration.
(i) On the request of any of the parties hereto,
(whether made before or after the institution of any legal proceeding), any
action, dispute, claim or controversy of any kind now existing or hereafter
arising between any of the parties hereto in any way arising out of, pertaining
to or in connection with this Agreement (a "Dispute") shall be resolved by
binding arbitration in accordance with the terms hereof. Any of the parties may,
by summary proceedings, bring an action in court to compel arbitration of any
Dispute.
(ii) Any arbitration shall be administered by the
American Arbitration Association (the "AAA") in accordance with the terms of
this Section, the Commercial Arbitration Rules of the AAA, and, to the maximum
extent applicable, the Federal Arbitration Act. Judgment on any award rendered
by an arbitrator may be entered in any court having jurisdiction.
(iii) Arbitration hereunder shall be before a
three-person panel of neutral arbitrators, consisting of one person from each of
the following categories: (1) an attorney who has practiced in the area of
commercial law for at least 10 years or a retired judge at the Texas or United
States District Court or an appellate court level: (2) a person with at least 10
years experience in commercial lending: and (3) a person with at least 10 years
experience in the petroleum industry. The AAA shall submit a list of persons
meeting the criteria outlined above for each category of arbitrator, and the
parties shall select one person from each category in the manner established by
the AAA. If the parties cannot agree on an arbitrator within 30 days after the
request for an arbitration, then any party may request the AAA to select an
arbitrator. The arbitrators may engage
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engineers, accountants or other consultants that the arbitrator deems necessary
to render a conclusion in the arbitration proceeding.
(iv) To the maximum extent practicable, an
arbitration proceeding hereunder shall be concluded within 180 days of the
filing of the Dispute with the AAA. Arbitration proceedings shall be conducted
in Houston, Texas. Arbitrators shall be empowered to impose sanctions and to
take such other actions as the arbitrators deem necessary to the same extent a
judge could impose sanctions or take such other actions pursuant to the Federal
Rules of Civil Procedure and applicable law. At the conclusion of any
arbitration proceeding, the arbitrator shall make specific written findings of
fact and conclusions of law. The arbitrators shall have the power to award
recovery of all costs and fees to the prevailing party. Each of the parties
agrees to keep all Disputes and arbitration proceedings strictly confidential
except for disclosure of information required by applicable law.
(v) All fees of the arbitrators and any engineer,
accountant or other consultant engaged by the arbitrators, shall be paid by the
disputing parties equally unless otherwise awarded by the arbitrators.
(e) Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but one
and the same Agreement.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Choice of Law. The laws of the State of Delaware shall
govern this Agreement without regard to principles of conflict of laws.
(h) Saving Clause. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting or impairing the
validity or enforceability of such provision in any other jurisdiction.
(i) Integrated Agreement. This Agreement, together with the
Securities Purchase Agreement and the documents and instruments to be executed
in connection therewith, is intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. This Agreement, the Securities Purchase Agreement and
the documents and instruments to be executed in connection therewith supersede
all prior agreements and understandings between the parties with respect to such
subject matter.
(j) Amendment. This Agreement may be amended only by means of
a written amendment signed by all of the parties hereto.
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(k) Notices. All notices provided for hereunder shall be in
writing by registered or certified mail, return receipt requested, telex,
telegram, telecopy, air courier guaranteeing overnight delivery or personal
delivery to the following addresses:
to the Company:
Sierra Well Service, Inc.
000 X. Xxx Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention:
Telecopier:
to JEDI II:
Joint Energy Development Investments II Limited Partnership
c/o Enron Corp.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention:
Telecopier: (000) 000-0000
to the Stockholders:
At the addresses set forth on Annex A
with a copy to:
Baker, Donelson, Xxxxxxx & Xxxxxxxx
0000 Xxxxxxxx Xxxxxx
000 Xxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: X. Xxxxxx Durham, Jr.
Telecopier: (000) 000-0000
or to such other address as any such party may designate by notice in the manner
provided above. All such notices and communications and all notices and
communications shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; four days after being sent by certified mail,
return receipt requested, if mailed; when answered back, if telexed; when
receipt acknowledged, if telecopied; and on the next Business Day if timely
delivered to an air courier guaranteeing overnight delivery.
(l) Authority. Each signatory hereto signing in a
representative capacity represents and warrants to every party that his
principal has duly authorized him to execute this Agreement on its behalf and
that he has the power to bind his principal to this Agreement by such signature.
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(m) Reliance. Each Stockholder acknowledges that JEDI II, in
making the investment described in the Securities Purchase Agreement, is relying
on the representations, warranties and covenants of the Stockholders as set
forth in this Agreement.
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[SIGNATURE PAGE - STOCKHOLDERS' AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
SIERRA WELL SERVICE, INC.
/s/ Xxxx X. Xxxxxx
---------------------------------------------
Xxxx X. Xxxxxx
Vice President
JOINT ENERGY DEVELOPMENT
INVESTMENTS II LIMITED PARTNERSHIP
By: Enron Capital Management II Limited
Partnership, its General Partner
By: Enron Capital II Corp., its
General Partner
By: /s/ Xxxx X. Xxxxxx III
--------------------------------------------
Name: Xxxx X. Xxxxxx III
Title: Agent and Attorney-in-Fact
STOCKHOLDERS:
SOUTHWEST ROYALTIES, INC.
By: /s/ Xxxx X. Xxxxxx
--------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President
S-1
22
[SIGNATURE PAGE - STOCKHOLDERS' AGREEMENT]
SOUTHWEST PARTNERS II, L.P.
By: /s/ Xxxx X. Xxxxxx
--------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President
SOUTHWEST PARTNERS III, L.P.
By: /s/ Xxxx X. Xxxxxx
--------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President
/s/ Xxxx X. Xxxxxx
-----------------------------------------------
Xxxx X. Xxxxxx
/s/ Dub X. Xxxxxxxx
-----------------------------------------------
Dub X. Xxxxxxxx
X-0
23
SIERRA WELL SERVICE, INC.
SPOUSAL CONSENT
The undersigned spouse of hereby joins the Stockholders' Agreement
dated as of March __, 1999 (the "Stockholders' Agreement"), among Sierra Well
Service, Inc., a Delaware corporation (the "Company"), and its Stockholders and
Preferred Holders, a copy of which has been reviewed by such spouse. The
undersigned executes this Consent to evidence this act with respect to any
community property interest or other marital interest such spouse may hold in
the Company Securities held by . Initially capitalized terms used but not
defined herein have the meanings given to them in the Stockholders' Agreement.
WITNESS: SPOUSE:
--------------------------- --------------------------------
Name: Name:
Date: Date:
24
ANNEX A
Name of Stockholder Number of Shares of Common Stock
------------------- --------------------------------
Southwest Partners III, L.P. 2,009.71
Southwest Royalties Holdings, Inc. 1,260.00
Southwest Partners II, L.P. 1,071.00
Xxxx X. Xxxxxx 20.00
Dub X. Xxxxxxxx 10.00
25
ANNEX B
Name of Preferred Holder Series and Number of Preferred Shares
------------------------ -------------------------------------
JEDI II Series A 500
JEDI II Series B 1000
JEDI II Series C 1
26
[SIGNATURE PAGE - STOCKHOLDERS' AGREEMENT]
EXHIBIT A
ADOPTION AGREEMENT
This Adoption Agreement ("Agreement") is executed by the person or
entity named as "Transferee" below pursuant to the terms of the Stockholders'
Agreement dated as of March __, 1999 ("Stockholders' Agreement") relating to
restrictions imposed on the Stockholders of Sierra Well Service, Inc., a
Delaware corporation (the "Company"). Initially capitalized terms used but not
otherwise defined herein, shall have the meanings ascribed to them in the
Stockholders' Agreement.
1. Acknowledgment. The Transferee acknowledges receipt of a copy of the
Stockholders' Agreement. Transferee further acknowledges that Transferee's
acquisition of Company Securities (or any interest therein) is subject to the
terms and conditions of the Stockholders' Agreement.
2. Agreement. The Transferee hereby adopts the Stockholders' Agreement
and agrees that, so long as the Transferee holds Company Securities, the
Transferee shall be bound by and subject to the terms of the Stockholders'
Agreement with the same force and effect as if Transferee were a
"Securityholder" thereunder.
3. Notice. Any notice required or permitted by the Stockholders'
Agreement shall be given to Transferee at the address listed below Transferee's
signature.
4. Joinder. The spouse of Transferee, if applicable, executes this
Agreement to acknowledge that it is fair and in such spouse's best interests and
to bind such spouse's community interest, if any, in the securities acquired by
Transferee to the terms of the Stockholders' Agreement.
27
[SIGNATURE PAGE - STOCKHOLDERS' AGREEMENT]
This Agreement is executed by Transferee on .
--------------
TRANSFEREE: SPOUSE (if applicable):
-------------------------- -------------------------------
Signature Signature
-------------------------- -------------------------------
Print Name Print Name
--------------------------
--------------------------
Address
SIERRA WELL SERVICE, INC.
-------------------------------
Xxxx X. Xxxxxx
Vice President
