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EXHIBIT 2.8
AGREEMENT AND PLAN OF MERGER
AMONG
XXXXXXXXX ENERGY, INC.
AND
HIGH VALLEY DRILLING, INC.
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TABLE OF CONTENTS
Page
ARTICLE I THE MERGER
Section 1.1 The Merger....................................................................................1
Section 1.2 Effective Time................................................................................1
Section 1.3 Effects of the Merger.........................................................................2
Section 1.4 Certificate of Incorporation, Bylaws and Officers.............................................2
Section 1.5 Conversion of Securities; Merger Consideration................................................2
Section 1.6 No Fractional Securities......................................................................2
Section 1.7 No Further Ownership Rights in High Valley Common Stock.......................................2
Section 1.8 Further Assurances............................................................................3
Section 1.9 Closing.......................................................................................3
Section 2.1 Organization, Standing and Power..............................................................3
Section 2.2 Authority; Non-Contravention..................................................................3
Section 2.3 Capital Structure.............................................................................4
Section 2.4 SEC Documents.................................................................................5
Section 2.5 Litigation....................................................................................5
Section 2.6 Brokers.......................................................................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF HIGH VALLEY
Section 3.1 Organization, Standing and Power..............................................................5
Section 3.2 Capital Structure.............................................................................5
Section 3.3 Ownership of High Valley Common Stock.........................................................6
Section 3.4 Authority; Non-Contravention..................................................................6
Section 3.5 Financial Statements..........................................................................6
Section 3.6 Absence of Material Adverse Change............................................................7
Section 3.7 Taxes.........................................................................................7
Section 3.8 Personal Property; Title Thereto..............................................................7
Section 3.9 Liabilities...................................................................................7
Section 3.10 Insurance.....................................................................................7
Section 3.11 Contracts and Other Agreements................................................................7
Section 3.12 Records.......................................................................................8
Section 3.13 Transactions with Affiliates..................................................................8
Section 3.14 Employee Benefit Plans; Employment Agreements.................................................8
Section 3.15 Labor Matters.................................................................................8
Section 3.16 Litigation....................................................................................8
Section 3.17 Governmental Licenses and Permits; Compliance with Law........................................8
Section 3.18 Brokers.......................................................................................8
Section 3.19 Bank Accounts.................................................................................8
Section 3.20 Workers' Compensation Claims..................................................................8
ARTICLE IV COVENANTS PENDING CLOSING
Section 4.1 No Operations.................................................................................9
Section 4.2 No Solicitation...............................................................................9
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ARTICLE V ADDITIONAL AGREEMENTS
Section 5.1 Fees and Expenses.............................................................................9
Section 5.2 Reasonable Efforts............................................................................9
Section 5.3 Public Announcements..........................................................................9
Section 5.4 High Valley Indemnification..................................................................10
Section 5.5 Certain Tax Matters..........................................................................10
Section 5.6 High Valley Shareholder Approval.............................................................11
Section 5.7 Condition of High Valley Equipment...........................................................11
Section 5.8 High Valley Business and Financial Records...................................................11
ARTICLE VI CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger...................................11
Section 6.2 Conditions to Obligation of High Valley to Effect the Merger.................................11
Section 6.3 Conditions to Obligations of PEC and PDC to Effect the Merger................................13
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination..................................................................................15
Section 7.2 Effect of Termination........................................................................16
Section 7.3 Amendment....................................................................................16
Section 7.4 Waiver.......................................................................................16
ARTICLE VIII GENERAL PROVISIONS
Section 8.1 Notices......................................................................................16
Section 8.2 Interpretation...............................................................................17
Section 8.3 Counterparts.................................................................................18
Section 8.4 Entire Agreement; No Third-Party Beneficiaries...............................................18
Section 8.5 Governing Law................................................................................18
Section 8.6 Assignment...................................................................................18
Section 8.7 Severability.................................................................................18
Section 8.8 Enforcement of This Agreement................................................................18
Section 8.9 Jurisdiction and Venue.......................................................................18
EXHIBIT A Form of Stock Purchase Warrant
EXHIBIT B Registration Rights Agreement
EXHIBIT C Form of Investment Representation Letter
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 3, 2000 (this
"Agreement"), between XXXXXXXXX ENERGY, INC., a Delaware corporation ("PEC"),
and HIGH VALLEY DRILLING, INC., a Texas corporation ("High Valley") (PEC and
High Valley being hereinafter collectively referred to as the "Constituent
Entities").
WITNESSETH:
WHEREAS, the respective Boards of Directors of PEC and High
Valley have approved and declared fair to and advisable and in the best
interests of their respective shareholders the merger of High Valley with and
into PEC (the "Merger"), upon the terms and subject to the conditions set forth
herein, whereby each issued and outstanding share of Common Stock, par value
$.01, of High Valley ("High Valley Common Stock") will be converted into the
consideration set forth and provided for herein;
WHEREAS, the sole assets of High Valley are eight drilling
rigs and related equipment (collectively, the "Drilling Rigs and Equipment");
WHEREAS, for federal income tax purposes, it is intended that
the Merger will qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, PEC, on the one hand, and High Valley, on the other,
desire to make certain representations, warranties and agreements in connection
with the Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the
conditions hereof, and in accordance with the Delaware General Corporation Law
("DGCL") and the Texas Business Corporation Act ("TBCA"), High Valley shall be
merged with and into PEC at the Effective Time (as hereinafter defined).
Following the Merger, the separate corporate existence of High Valley shall
cease and PEC shall continue as the surviving entity (the "Surviving Entity")
under the name "Xxxxxxxxx Energy, Inc." and shall succeed to and assume all the
rights and obligations of High Valley in accordance with the DGCL and the TBCA.
Section 1.2 Effective Time. The Merger shall become effective
when a Certificate of Merger (the "Certificate of Merger") conforming to the
relevant provisions of the DGCL is filed with the Secretary of State of the
State of Delaware and Articles of Merger (the "Articles of Merger") conforming
to the relevant provisions of the TBCA are filed with the
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Secretary of State of the State of Texas. When used in this Agreement, the term
"Effective Time" shall mean the later of the date and time at which the
Certificate of Merger or the Articles of Merger are accepted for recordation.
The filing of the Certificate of Merger and Articles of Merger shall be made as
soon as practicable after the satisfaction or waiver of the conditions to the
Merger set forth herein.
Section 1.3 Effects of the Merger. The Merger shall have the
effects set forth in Section 5.06 of the TBCA.
Section 1.4 Certificate of Incorporation, Bylaws and Officers
. The Restated Certificate of Incorporation, as amended, and Bylaws of PEC as in
effect immediately prior to the Effective Time shall be the Restated Certificate
of Incorporation, as amended, and Bylaws of the Surviving Entity until
thereafter changed or amended as provided therein or by applicable law. The
officers of PEC at the Effective Time shall be the officers of the Surviving
Entity until their respective successors have been duly elected or appointed in
accordance with the Restated Certificate of Incorporation and Bylaws of the
Surviving Entity or by applicable law.
Section 1.5 Conversion of Securities; Merger Consideration. As
of the Effective Time, by virtue of the Merger and without any action on the
part of any shareholder of High Valley, and subject to the provisions of
Sections 1.6 hereof, the shares of High Valley Common Stock issued and
outstanding immediately prior to the Effective Time shall be converted into the
right to receive a total of (a) 1,150,000 shares of common stock $.01 par value
of PEC ("PEC Shares"), and (b) warrants, in substantially the form attached
hereto as Exhibit A, to purchase 127,000 shares of PEC Common Stock $.01 par
value, with an exercise price of $22.00 per share (the "PEC Warrants" and,
together with the PEC Shares, the "Merger Consideration"). All such shares of
High Valley Common Stock, when so converted, shall no longer be outstanding and
shall automatically be cancelled and retired and each holder of a certificate
representing shares of High Valley Common Stock shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration and
any cash, without interest, in lieu of fractional shares to be issued or paid in
consideration therefor in accordance with Section 1.6.
Section 1.6 No Fractional Securities. No certificates
representing fractional shares of PEC Common Stock shall be issued. In lieu of
any such fractional securities, each holder of shares of High Valley Common
Stock who would otherwise have been entitled to receive a fraction of a share of
PEC Common Stock shall receive cash (without interest) in an amount equal to the
product of such fractional part of a share of PEC Common Stock multiplied by the
Average Price. For purposes of this Agreement, (a) "Average Price" means the
average of the daily closing price of the PEC Common Stock rounded to four
decimal places, as reported under Nasdaq National Market Issues Reports in The
Wall Street Journal for each of the first 15 consecutive Trading Days in the
period commencing 18 Trading Days prior to the date of the Closing, and (b)
"Trading Day" means a day on which the Nasdaq National Market is open for
trading.
Section 1.7 No Further Ownership Rights in High Valley Common
Stock. All Merger Consideration issued and paid in accordance with the terms
hereof (including cash paid pursuant to Section 1.6) shall be deemed to have
been issued and paid in full satisfaction of all rights pertaining to the shares
of High Valley Common Stock.
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Section 1.8 Further Assurances. If, at any time after the
Effective Time, the Surviving Entity shall consider or be advised that any
deeds, bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Entity, its right, title or interest in, to or under
any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Entities, or (b) otherwise to carry out the purposes
of this Agreement, the Surviving Entity and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either of the Constituent Entities in the Merger, all such deeds,
bills of sale, assignments and assurances and do, in the name and on behalf of
such Constituent Entities, all such other acts and things necessary, desirable
or proper to vest, perfect or confirm its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
such Constituent Corporation and otherwise to carry out the purposes of this
Agreement.
Section 1.9 Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of PEC in Snyder, Texas at 10:00 a.m. local time, on the second business day
after the day on which the last conditions set forth in Article V hereof shall
have been fulfilled or waived, or at such other time and place as PEC and High
Valley shall agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PEC
PEC represents and warrants to High Valley as follows:
Section 2.1 Organization, Standing and Power. PEC 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. PEC 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 PEC. "Material Adverse Change" or
"Material Adverse Effect" means, when used with respect to PEC on the one hand,
or High Valley on the other, 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 PEC and its subsidiaries taken as a whole or High Valley, as the
case may be.
Section 2.2 Authority; Non-Contravention. PEC has all
requisite power and authority to enter into this Agreement and to consummate the
Merger. The execution and delivery by PEC of this Agreement and the consummation
by PEC of the Merger have been duly authorized by all necessary corporate action
on the part of PEC. This Agreement has been duly executed and delivered by PEC
and (assuming the valid authorization, execution and delivery of this Agreement
by High Valley) constitutes a valid and binding obligation of PEC enforceable
against PEC 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
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principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law). The execution and delivery of this Agreement
and the PEC Warrant, the Registration Rights Agreement, in substantially the
form attached hereto as Exhibit B, and the other documents and agreements
contemplated hereby (collectively, the "Closing Documents") 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 (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, mortgage, pledge, security
interest, encumbrance, claim or charge of any kind ("Liens") upon any of the
properties or assets of PEC under, any provision of (a) the Restated Certificate
of Incorporation, as amended, or Bylaws of PEC, (b) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to PEC, or (c)
any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to PEC or any of its properties or assets, other than, in the case of
clauses (b) or (c), any such conflicts, violations, defaults or Liens that,
individually or in the aggregate, would not have a Material Adverse Effect on
PEC, materially impair the ability of PEC to perform its obligations under this
Agreement or the Closing Documents 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 PEC in connection with the execution and delivery of this Agreement and the
Closing Documents or is necessary for the consummation by PEC of the Merger,
except for (a) 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"), (b) such consents and approvals,
orders, registrations, authorizations, declarations and filings as may be
required under the "Blue Sky" laws of the State of Oklahoma, (c) such filings
and approvals as may be required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976 (the "Improvements Act"), and (d) 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 PEC or materially impair the ability of PEC 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 PEC consists of 50,000,000 shares of common stock,
par value $0.01 per share ("PEC Common Stock") and 1,000,000 shares of preferred
stock, par value $0.01 per share ("PEC Preferred Stock"). At the close of
business on February 29, 2000, (a) 32,743,390 shares of PEC Common Stock were
validly issued and outstanding, fully paid and nonassessable and free of
preemptive rights, and (b) no shares of PEC Preferred Stock were issued and
outstanding. The PEC Common Stock is designated as a national market security on
an inter-dealer quotation system by the National Association of Securities
Dealers, Inc. The PEC Shares issued as a part of the Merger Consideration in
accordance with this Agreement and issuable upon exercise of the PEC Warrant
will be, when so issued, duly authorized, validly existing, fully paid and
non-assessable and free of preemptive rights.
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Section 2.4 SEC Documents. PEC has filed all required
documents with the Securities and Exchange Commission ("SEC") since January 1,
1998 (the "PEC/SEC Documents"). As of their respective dates, the PEC/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 PEC/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 PEC included in the
PEC/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 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 PEC 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 Litigation. There is no suit, action,
investigation or proceeding pending or, to the knowledge of the executive
officers of PEC, threatened against PEC 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 impair the ability of
PEC 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 PEC or any of its subsidiaries is subject
that would impair the ability of PEC to perform its obligations hereunder or to
consummate the transactions contemplated hereby.
Section 2.6 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 PEC.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HIGH VALLEY
High Valley represents and warrants to PEC as follows:
Section 3.1 Organization, Standing and Power. High Valley is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Texas. High Valley has no subsidiaries. High Valley has not
engaged in any business since its organization which was not in connection with
the acquisition of the Drilling Rigs and Equipment, the Merger or this
Agreement.
Section 3.2 Capital Structure. The authorized capital stock of
High Valley consists of 1,000,000 shares of High Valley Common Stock. At the
date of this Agreement,
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1,076 shares of High Valley Common Stock are 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 High Valley is a party or by which it is bound obligating High Valley to
issue additional shares of its capital stock.
Section 3.3 Ownership of High Valley Common Stock. Section 3.3
of the disclosure schedule of High Valley dated as of the date of this
Agreement, previously delivered to PEC (the "High Valley Disclosure Schedule"),
sets forth a true and correct list of the ownership of High Valley Common Stock
by the shareholders of High Valley (the "High Valley Shareholders"). Each of the
shareholders of High Valley beneficially holds such High Valley Common Stock
free and clear of any restrictions on transfer (other than restrictions under
the Securities Act of 1933 and state securities laws), taxes, Liens, options,
warrants, purchase rights, contracts, commitments, equities, claims and demands.
None of the shareholders of High Valley is a party to (a) any option, warrant,
purchase right, or other contract or commitment that could require him to sell,
transfer, or otherwise dispose of any High Valley Common Stock (other than
pursuant to this Agreement); or (b) any voting trust, proxy, or other agreement
or understanding with respect to the High Valley Common Stock.
Section 3.4 Authority; Non-Contravention. High Valley has all
requisite power and authority to enter into this Agreement and to consummate the
Merger. This Agreement has been duly executed and delivered by High Valley and
(assuming the valid authorization, execution and delivery of this Agreement by
PEC) constitutes a valid and binding obligation of High Valley 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 and the Closing
Documents 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 (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 upon
any of the properties or assets of High Valley under, any provision of (a) the
Articles of Incorporation or Bylaws of High Valley (true and complete copies of
which as of the date hereof have been delivered to PEC); (b) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to High Valley;
or (c) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to High Valley or any of its assets. No filing or registration with,
or authorization, consent or approval of, any Governmental Entity is required by
or with respect to High Valley in connection with the execution and delivery of
this Agreement and the Closing Documents or is necessary for the consummation by
High Valley of the Merger or any other transaction contemplated by this
Agreement, except for such filings and approvals as may be required under the
Improvements Act.
Section 3.5 Financial Statements. Included in Section 3.5 of
the High Valley Disclosure Schedule is an unaudited balance sheet of High Valley
as of March 31, 2000 (the "High Valley Balance Sheet"). The High Valley Balance
Sheet: (a) is complete and correct in all
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material respects, (b) has been prepared in conformity with accrual tax basis
accounting consistently applied, and (c) presents fairly the financial condition
of High Valley at the date presented. There does not, and there will not be at
Closing, exist any fact, event, condition or claim known to High Valley which
would cause a Material Adverse Change in the High Valley Balance Sheet as
presented other than as set forth therein.
Section 3.6 Absence of Material Adverse Change. There has not
been any Material Adverse Change with respect to High Valley since the date of
the High Valley Balance Sheet.
Section 3.7 Taxes. High Valley has timely filed an extension
for all Federal and State income tax returns otherwise required to be filed by
High Valley. High Valley has not been required to file any other Tax Returns.
High Valley is now and has been at all times since the date of its organization
an S corporation, and no taxing authority has challenged the effectiveness of
such election. The Internal Revenue Service has acknowledged receipt of High
Valley's election to be treated as an S corporation. No event has or will occur
before the Closing Date to have caused High Valley's election to be treated as
an S corporation to be terminated in any manner. High Valley shall not be
subject to a tax on built-in gains under Section 1374 of the Code as a result of
the Merger. For purposes of this Agreement, (a) "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 (b) "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. High Valley owns
no personal property having an individual fair market value in excess of $5,000
other than the Drilling Rigs and Equipment. Schedule 3.8 of the High Valley
Disclosure Schedule contains a complete and accurate description of the Drilling
Rigs and Equipment. The Drilling Rigs and Equipment are owned by High Valley
free and clear of any Liens. High Valley does not lease any property, real or
personal.
Section 3.9 Liabilities. Except as shown on the High Valley
Balance Sheet, there are no liabilities of High Valley of any kind, whether
contingent or fixed.
Section 3.10 Insurance. High Valley does not maintain any
policies of insurance of any kind.
Section 3.11 Contracts and Other Agreements. High Valley is
not a party to or bound by any written or oral (a) employment, agency,
consulting or similar contract; (b) lease, whether as lessor or lessee, with
respect to any personal property; (c) contract or commitment; (d) credit
agreements; (e) guarantee, suretyship, indemnification or contribution
agreement; or (f) other contracts.
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Section 3.12 Records. The stock record book and minute book of
High Valley 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 High
Valley.
Section 3.13 Transactions with Affiliates. No Affiliate (as
hereinafter defined) has any direct or indirect interest in or owns directly or
indirectly any asset or right owned by High Valley, or is party to any contract,
lease, agreement, arrangement or commitment related thereto. "Affiliate" as used
in this Section means a person which directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with High
Valley. For purposes of this definition, the officers, directors and
shareholders of High Valley shall be deemed Affiliates.
Section 3.14 Employee Benefit Plans; Employment Agreements.
High Valley has no employee benefit plans, programs or arrangements for the
benefit of any current or former employee, officer or director of High Valley or
any employment or severance agreements with any of its employees.
Section 3.15 Labor Matters. High Valley has never had any
employees.
Section 3.16 Litigation. There is no suit, action,
investigation or proceeding pending or, to the knowledge of High Valley,
threatened against High Valley 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.
Section 3.17 Governmental Licenses and Permits; Compliance
with Law. High Valley has not received notice of any revocation or modification
of any federal, state, local or foreign governmental license, certification,
tariff, permit, authorization or approval. High Valley has complied with all
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees or
arbitration awards applicable to it.
Section 3.18 Brokers. Except for fees payable to Xxxx Xxxxxxxx
Xxxxxxx, 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 High Valley.
Section 3.19 Bank Accounts. A complete list of each bank
account maintained by High Valley, including safe deposit boxes maintained by
High Valley, the account balances and the names of the persons authorized to
draw down upon or have access thereto is set forth in Section 3.19 of the High
Valley Disclosure Schedule.
Section 3.20 Workers' Compensation Claims. There are no
workers' compensation claims pending or, to the knowledge of High Valley,
threatened against High Valley.
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ARTICLE IV
COVENANTS PENDING CLOSING
Section 4.1 No Operations. During the period from the date of
this Agreement through the date of Closing, High Valley: (i) shall not engage in
any operations; (ii) shall not sell, lease or otherwise dispose of or agree to
sell, lease or otherwise dispose of any of the Drilling Rigs and Equipment; (ii)
shall not issue any additional shares of High Valley Common Stock or any
securities convertible into, or grant any rights, warrants or options, to
acquire any such shares or convertible securities; or (iii) shall not amend its
Articles of Incorporation to create a new class of equity security with a
redeemable feature.
Section 4.2 No Solicitation. From and after the date hereof,
High Valley will not, and will cause its officers, directors, employees, agents
and other representatives not to, directly or indirectly, solicit or initiate
any offer for High Valley, or for the Drilling Rigs and Equipment, and not to
solicit or initiate, directly or indirectly, discussions, negotiations,
considerations or inquiries concerning an offer for High Valley, from any
person, or engage in discussions or negotiations relating thereto, or provide to
any other person any information or data relating to High Valley 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 V
ADDITIONAL AGREEMENTS
Section 5.1 Fees and Expenses. All costs and expenses incurred
by PEC in connection with this Agreement and the transactions contemplated
hereby shall be paid by PEC; such costs and expenses incurred by High Valley, as
well as the fees and expenses payable to the broker referenced in Section 3.18
hereof, shall be paid by the High Valley Shareholders.
Section 5.2 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 Merger and the other transactions
contemplated by this Agreement and the prompt satisfaction of the conditions
hereto.
Section 5.3 Public Announcements. Before issuing any press
release or otherwise making any public statements with respect to the
transactions contemplated by this Agreement, PEC, on the one hand, and High
Valley, 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.
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Section 5.4 High Valley Indemnification. After the Effective
Time, Xxx X. Xxxxxx, Xx. (the "Indemnifying Shareholder") shall indemnify and
hold PEC harmless against and in respect of all actions, suits, demands,
judgments, costs and expenses (including reasonably attorneys' fees of PEC) in
excess of $10,000 in the aggregate ("Basket Amount") relating to any
misrepresentation, breach of any representation or warranty or non-fulfillment
of any agreement on the part of High Valley under this Agreement; provided,
however, that the Basket Amount shall not be applicable in respect of any claim
for indemnification relating to (a) any actions, suits, demands, etc. (including
reasonable attorney's fees), arising out of or based upon a fraudulent
misrepresentation of High Valley in this Agreement; or (b) any claim for
indemnification relating to unpaid or undisclosed tax liabilities of High Valley
arising on or prior to the Effective Time. Any written notice of claim for
indemnification shall be given to the Indemnifying Shareholder by PEC within 30
days after it has knowledge of any misrepresentation or breach of warranty or
non-fulfillment of any agreement on the part of the Indemnifying Shareholder,
which may give rise to a claim for indemnification. The indemnification
obligation provided for in this Section 5.4 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 High Valley given to the Indemnifying
Shareholder prior to the expiration of the applicable period of limitations.
Section 5.5 Certain Tax Matters.
(a) The parties recognize and agree that the S election of
High Valley shall be terminated under Section 1362(d)(2) of the Code on the
Effective Time as a result of the Merger. The parties further agree that under
Section 1362(d)(2)(B), the termination will be effective on the Effective Time
and that under Section 1362(e)(1)(A), the S short year return for 2000 will be
for the period of January 1, 2000, through the Effective Time.
(b) The Indemnifying Shareholder shall be responsible for
causing to be filed any amended tax returns of High Valley for taxable periods
ending on or prior to the Effective Time which are required as a result of an
examination or adjustments made by taxing authorities, and for causing to be
paid by the parties responsible therefor when due any taxes resulting therefrom.
Any such amended returns shall be furnished to PEC for approval (which approval
shall not be unreasonably withheld), signature and filing at least ten (10)
business days prior to the due date for the filing of such amended returns.
(c) All income taxes due with respect to taxable income of
High Valley for fiscal year 1999 and for the period from January 1, 2000 to the
Effective Time, including any with respect to the Merger, and all ad valorem and
franchise taxes due for calendar 1999 and for the period from January 1, 2000
through the Effective Time, including any franchise taxes due with respect to
the Merger, will be paid by the High Valley Shareholders.
(d) In the event PEC determines that any state and/or local
sales or use taxes are payable to the State of Oklahoma, the State of Texas
and/or any local taxing authority in either such state as a result of the Merger
or the initial purchase of the Drilling Rigs and Equipment by High Valley, the
High Valley Shareholders shall reimburse to PEC an amount equal to one-half of
all
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such sales or use tax actually paid by PEC or High Valley. In the event of any
rebate or refund of any such sales or use taxes paid by PEC or High Valley, PEC
shall remit one-half of such rebate or refund to the High Valley Shareholders.
(e) For federal income tax purposes, PEC and High Valley shall
each characterize the transactions contemplated by this Agreement as a
"reorganization" as defined in Section 368(a)(1)(A) of the Code, and will file
all tax returns in a manner consistent with such characterization.
Section 5.6 High Valley Shareholder Approval. High Valley
shall promptly call a meeting of its shareholders for the purpose of voting upon
the Agreement and obtain shareholder approval of the Merger. Xxx X. Xxxxxx, Xx.
agrees to vote his 700 shares of High Valley common stock in favor of the
Agreement and the Merger.
Section 5.7 Condition of High Valley Equipment. PEC agrees to
accept the Drilling Rigs and Equipment on an "as is, where is" basis.
Section 5.8 High Valley Business and Financial Records. All
business and financial records of High Valley shall remain the property of High
Valley and transferred to PEC as a part of the Merger.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligations of each party to effect the Merger 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 Merger 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 Acts Waiting Period. The applicable waiting
period under the Improvements Act shall have expired or been terminated.
Section 6.2 Conditions to Obligation of High Valley to Effect
the Merger. The obligation of High Valley to effect the Merger shall be subject
to the fulfillment at or prior to the Closing of the following additional
conditions; provided that High Valley may waive any of such conditions in its
sole discretion:
(a) Performance of Obligations; Representations and
Warranties. PEC shall have performed in all material respects each of its
agreements contained in this Agreement required
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to be performed on or prior to the Closing and each of the representations and
warranties of PEC 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.
(b) Officers' Certificate. PEC shall have furnished to High
Valley a certificate, dated the Closing, signed by the respective appropriate
officers of PEC, certifying to the effect that to the best of the knowledge and
belief of each of them, the conditions set forth in Section 6.1 and Section
6.2(a) have been satisfied in full.
(c) Opinion of Xxxxx & Xxxxxxxxx LLP. High Valley shall have
received an opinion from Xxxxx & Xxxxxxxxx LLP, counsel to PEC, dated the date
of Closing, substantially to the effect set forth in the following
subparagraphs:
(i) The incorporation, existence and good standing of
PEC are as stated in this Agreement; the authorized shares of PEC are
as stated in this Agreement; all outstanding shares of PEC 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 shareholders.
(ii) PEC has full corporate power and authority to
execute, deliver and perform this Agreement and this Agreement has been
duly authorized, executed and delivered by PEC and (assuming due and
valid authorization, execution and delivery by High Valley) constitutes
the legal, valid and binding agreement of PEC, enforceable against PEC
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) PEC has full corporate power and authority to
execute, deliver and perform the Registration Rights Agreement and the
PEC Warrants and the Registration Rights Agreement and each of the PEC
Warrants has been duly authorized, executed and delivered by PEC and
(assuming due and valid execution and delivery by the High Valley
Shareholders of the Registration Rights Agreement) constitutes the
legal, valid and binding agreement of PEC enforceable against PEC 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 PEC of this
Agreement, the PEC Warrants and the Registration Rights Agreement will
not violate the Restated Certificate of Incorporation, as amended, or
Bylaws of PEC and, to the knowledge of such counsel, will not violate,
result in a breach of or constitute a default under any material lease,
mortgage,
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contract, agreement, instrument, law, rule, regulation, judgment, order
or decree to which PEC is a party or by which they or any of their
properties or assets may be bound.
(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 PEC 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 PEC by any Governmental Entity which seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement.
(vii) The PEC Shares to be issued pursuant to this
Agreement and any shares of PEC Common Stock issuable upon exercise of
the PEC Warrants will be, when so issued, duly authorized, validly
issued and outstanding, fully paid and nonassessable.
In rendering such opinion, counsel for PEC may rely as to matters of fact upon
the representations of officers of PEC 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) PEC Warrants. PEC shall have executed and delivered the
PEC Warrants to the High Valley Shareholders.
(e) Registration Rights Agreement. PEC shall have executed and
delivered the Registration Rights Agreement to the High Valley Shareholders.
(f) Delivery of Merger Consideration. PEC shall have delivered
the Merger Consideration to the High Valley Shareholders.
Section 6.3 Conditions to Obligations of PEC to Effect the
Merger. The obligations of PEC to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of the following additional conditions,
provided that PEC may waive any such conditions in its sole discretion:
(a) Performance of Obligations; Representations and
Warranties. High Valley 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 High
Valley contained in this Agreement shall be true and correct on and as of the
Closing as if made on and as of such date.
(b) Officers' Certificate. High Valley shall have furnished to
PEC a certificate, dated the Closing, signed by the President of High Valley,
certifying to the effect that to the best of his knowledge and belief, the
conditions set forth in Section 6.1 and Section 6.3(a) have been satisfied.
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(c) Opinion of McGuire, Craddock, Xxxxxxxx & Xxxx, P.C. PEC
shall have received an opinion of counsel from McGuire, Craddock, Xxxxxxxx &
Xxxx, P.C., counsel to High Valley, dated the Closing, substantially to the
effect that:
(i) The incorporation, existence and good standing of
High Valley are as stated in this Agreement; the authorized shares of
High Valley Common Stock are as stated in this Agreement; all
outstanding shares of High Valley 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 shareholders; and, to
the knowledge of such counsel, there is no existing option, warrant,
right, call, subscription or other agreement or commitment obligating
High Valley to issue or sell, or to purchase or redeem, any shares of
its capital stock other than as stated in this Agreement.
(ii) High Valley has full corporate power and
authority to execute, deliver and perform this Agreement and this
Agreement has been duly authorized, executed and delivered by High
Valley, and (assuming the due and valid authorization, execution and
delivery by PEC) constitutes the legal, valid and binding agreement of
High Valley enforceable against High Valley 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).
(iii) The execution and performance by High Valley of
this Agreement will not violate the Articles of Incorporation or Bylaws
of High Valley 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 High Valley 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 High Valley
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 High Valley by any Governmental Entity which seeks to
restrain, prohibit or invalidate the transactions contemplated by the
Agreement.
In rendering such opinion, counsel for High Valley may rely as
to matters of fact upon the representations of officers of High Valley contained
in any certificate delivered to such
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counsel and certificates of public officials. Such opinion shall be limited to
the laws of the United States of America and the State of Texas.
(d) Officer and Director Resignation Letters. The Surviving
Entity shall have received a resignation letter dated the Closing Date from each
of the directors and officers of High Valley.
(e) Investment Representation Letter. Each High Valley
Shareholder shall have executed and delivered an investment representation
letter substantially in the form attached hereto as Exhibit C-1 or C-2, with the
form depending upon whether such shareholder has an individual net worth in
excess of $1 million.
(f) High Valley Share Certificates. The Surviving Entity shall
have received all of the High Valley share certificates from the respective
shareholders of High Valley duly endorsed to the Surviving Entity.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at
any time prior to the date of Closing, whether before or after any approval by
the shareholders of High Valley:
(a) by mutual written consent of PEC and High Valley;
(b) by PEC if High Valley 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 High Valley prior to the date of such
termination, which failure to comply has not been cured within ten business days
following receipt by High Valley of notice of such failure to comply;
(c) by High Valley if PEC 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 PEC prior to the date of such
termination, which failure to comply has not been cured within ten business days
following receipt by PEC of notice of such failure to comply;
(d) by either PEC or High Valley if (i) the Merger has not
been effected on or prior to the close of business on September 30, 2000;
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 Merger to have occurred on or prior to the aforesaid date, or (ii) any
court of competent 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;
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(e) by either PEC or High Valley 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 7.2 Effect of Termination. In the event of termination
of this Agreement by either PEC or High Valley, as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of High Valley, PEC or their respective officers, directors or
shareholders; provided, however, that nothing contained in this Section 7.2
shall relieve any party hereto from any liability for its own breach of this
Agreement.
Section 7.3 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 7.4 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 VIII
GENERAL PROVISIONS
Section 8.1 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 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 PEC, to:
Xxxxxxxxx Energy, Inc.
0000 Xxxxxx Xxxxxxx
X.X. Xxxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: A. Xxxxx Xxxxxxxxx
President and Chief Operating
Officer
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with copies to:
Xxxxxx X. Xxxxxxxx, Esq.
Xxxxx & Xxxxxxxxx LLP
000 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000-0000
(b) if to High Valley, to:
High Valley Drilling , Inc.
0000 XX 00xx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxx X. Xxxxxx, Xx.
President
with copies to:
Xxxxxx X. Xxxxxxxx, Esq.
McGuire, Craddock, Xxxxxxxx & Xxxx, P.C.
0000 Xxxxxxx Xxxxx
000 Xxxxx Xxxxx
Xxxxxx, Xxxxx 00000
(c) if to the Indemnifying Shareholder, to:
Xxx X. Xxxxxx, Xx.
0000 XX 00xx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
with copies to:
Xxxxxx X. Xxxxxxxx, Esq.
McGuire, Craddock, Xxxxxxxx & Xxxx, P.C.
0000 Xxxxxxx Xxxxx
000 Xxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Section 8.2 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."
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Section 8.3 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 8.4 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 6.2(c)
and 6.3(c).
Section 8.5 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 8.6 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 8.7 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 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 8.8 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.
Section 8.9 Jurisdiction and Venue. Each party hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court for the Western District of Texas or any court of the State of Delaware in
any action, suit or proceeding arising from or in connection with this
Agreement, and agrees that any such action, suit or proceeding shall be brought
only in such court (and waives any objection based on forum non conveniens or
any other objection to venue therein).
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IN WITNESS WHEREOF, PEC and High Valley have executed this
Agreement as of the date first written above.
PEC:
XXXXXXXXX ENERGY, INC.
By: /s/ XXXXXX X. XXXXXXX
--------------------------------------
Xxxxxx X. Xxxxxxx
Attest: Chairman and Chief Executive Officer
/s/ XXXXXXXX X. XXXXXX
----------------------------------
Xxxxxxxx X. Xxxxxx
HIGH VALLEY:
HIGH VALLEY DRILLING, INC.
By: /s/ XXX X. XXXXXX, XX.
--------------------------------------
Xxx X. Xxxxxx, Xx.
President
Attest:
[ILLEGIBLE]
----------------------------------
, Secretary
-----------------------
TO INDUCE XXXXXXXXX ENERGY, INC. TO ENTER INTO THIS AGREEMENT AND PLAN
OF MERGER AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, THE UNDERSIGNED, BEING THE
PRINCIPAL SHAREHOLDER OF HIGH VALLEY DRILLING, INC., HEREBY ACCEPTS AND AGREES
TO BE BOUND BY THE PROVISIONS OF SECTIONS 5.4 AND 5.6 OF THE AGREEMENT.
/s/ XXX X. XXXXXX, XX.
-----------------------------------------
Xxx X. Xxxxxx, Xx.
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EXHIBIT A
================================================================================
FORM
OF
STOCK PURCHASE WARRANT
--------
XXXXXXXXX ENERGY,
INC.
================================================================================
This Warrant was originally issued on April ___, 2000 to
____________________________, an individual and shareholder of
High Valley Drilling, Inc., a Texas corporation, pursuant to
an Agreement and Plan of Merger, dated April ___, 2000 with
Xxxxxxxxx Energy, Inc. (the "Company") dated of even date
herewith, and such issuance was not registered under the
Securities Act of 1933, as amended (the "Act") or the
securities or "blue sky" laws of any state. This Warrant is a
"restricted security" as that term is defined in Rule 144
adopted by the Securities and Exchange Commission under the
Act and is, therefore transferrable only if the transfer is
exempt from the registration requirements of the Act, which
exemption must be established to the satisfaction of Xxxxxxxxx
Energy, Inc.
Date of Issuance: Certificate No. W-
---------------------- ------------------
FOR VALUE RECEIVED, Xxxxxxxxx Energy, Inc. a Delaware
corporation (the "Company"), hereby grants to _____________________, an
individual (the "Registered Holder"), the right to purchase from the Company
__________ shares of the Company's Common Stock at a price per share of $22.00
(the "Initial Exercise Price"). Certain capitalized terms used herein are
defined in Section 3 hereof. The amount and kind of securities purchasable
pursuant to the rights granted hereunder and the purchase price for such
securities are subject to adjustment pursuant to the provisions contained in
this Warrant.
This Warrant is subject to the following provisions:
Section 1. Exercise of Warrant.
1.A. Exercise Period. The Registered Holder may exercise, in
whole or in part (but not as to a fractional share of Common Stock), the
purchase rights represented by this Warrant at any time and from time to time
after the Date of Issuance to and including 5:00 p.m. (Snyder, Texas time) on
April ___, 2003 (the "Exercise Period").
EXH A-1
24
1.B. Exercise Procedure.
(a) This Warrant will be deemed to have been exercised when
the Company has received all of the following items (the "Exercise Time"):
(i) a completed Exercise Agreement, as described in
paragraph 1C below, executed by the Registered Holder
exercising all or part of the purchase rights represented by
this Warrant;
(ii) this Warrant; and
(iii) a check payable to the Company in an amount
equal to the product of the Exercise Price (as such term is
defined in Section 2) multiplied by the number of shares of
Common Stock being purchased upon such exercise (the
"Aggregate Exercise Price").
(b) As soon as practicable following the Exercise Time,
certificates for shares of Common Stock purchased upon exercise of this Warrant
will be delivered by the Company to the Registered Holder. Unless this Warrant
has expired or all of the purchase rights represented hereby have been
exercised, the Company will prepare a new Warrant, substantially identical
hereto, representing the rights formerly represented by this Warrant which have
not expired or been exercised and will, as soon as practicable following the
Exercise Time, deliver such new Warrant to the Registered Holder.
(c) The Common Stock issuable upon exercise of this Warrant
will be deemed to have been issued to the Registered Holder at the Exercise
Time, and the Registered Holder will be deemed for all purposes to have become
the record holder of such Common Stock at the Exercise Time.
(d) The issuance of certificates for shares of Common Stock
upon exercise of this Warrant will be made without charge to the Registered
Holder for any issuance tax in respect thereof or other cost incurred by the
Company in connection with such exercise and the related issuance of shares of
Common Stock, but the Company shall not be obligated to pay any transfer taxes
with respect to this Warrant or the shares of Common Stock unless reimbursed
thereafter by the transferee or transferor.
(e) The Company will not close its books against the transfer
of this Warrant or of any share of Common Stock issued or issuable upon the
exercise of this Warrant in any manner which interferes with the timely exercise
of this Warrant.
(f) The Company shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock solely for the purpose
of issuance upon exercise of the Warrants, such number of shares of Common Stock
issuable upon the exercise of all outstanding Warrants. All shares of Common
Stock which are so issuable shall, when issued, be duly and validly issued,
fully paid and nonassessable shares of Common Stock of the Company.
EXH A-2
25
1.C. Exercise Agreement. Upon any exercise of this Warrant,
the Exercise Agreement will be substantially in the form set forth in Annex A
hereto. Such Exercise Agreement will be dated the actual date of execution
thereof.
1.D. No Fractional Shares. No fractional shares of Common
Stock or scripts for fractional shares shall be issued upon the exercise of this
Warrant. If Holder of this Warrant would be entitled on the exercise of any
rights evidenced hereby, to receive a fractional interest in a share, the
Company shall pay a cash adjustment in respect of any fractional share that
would otherwise be issuable in an amount equal to the same fraction of the
current market value of a share of Common Stock, which current market value
shall be the last reported sale price immediately preceding the date of the
exercise.
Section 2. Adjustment of Exercise and Number of Shares. In
order to prevent dilution of the rights granted under this Warrant, the Initial
Exercise Price shall be subject to adjustment from time to time as provided in
this Section 2 (such price or such price as last adjusted pursuant to the terms
hereof, as the case may be, is herein called the "Exercise Price"), and the
number of shares of Common Stock obtainable upon exercise of the Warrant shall
be subject to adjustment from time to time as provided in this Section 2.
2A. (1) In case the Company shall at any time or from time to
time subdivide its outstanding shares of Common Stock into a greater number of
shares, the Exercise Price in effect immediately prior to such subdivision shall
be proportionately reduced and the number of shares purchasable under this
Warrant shall be proportionately increased; and conversely, in case the Common
Stock of the Company shall be combined into a smaller number of shares, the
Exercise Price in effect immediately prior to such combination shall be
proportionately increased and the number of shares purchased hereunder shall be
proportionately reduced.
(2) Except as hereinafter provided, in the event the
Company shall, at any time or from time to time after the date hereof, issue any
shares of Common Stock without consideration or for a consideration per share
less than $22.00 or issue any shares of Common Stock as a stock dividend to
holders of Common Stock (any such sale or issuance being herein called a "Change
of Shares"), then, and thereafter upon each further Change of Shares, the
Exercise Price for this Warrant in effect immediately prior to such Change of
Shares shall be reduced to a price (including any applicable fraction of a cent
to the nearest cent) determined by dividing (i) the sum of (a) the total number
of shares of Common Stock outstanding immediately prior to such Change of
Shares, multiplied by the Exercise Price in effect immediately prior to such
Change of Shares, and (b) the consideration, if any, received by the Company
upon such sale or issuance by (ii) the total number of shares of Common Stock
outstanding immediately after such Change of Shares; provided, however, that in
no event shall the Exercise Price be adjusted pursuant to this computation to an
amount in excess of the Exercise Price in effect immediately prior to such
computation. Upon each adjustment of the Exercise Price pursuant to this Section
2A(2), the number of shares of Common Stock purchasable upon exercise of this
Warrant shall be the number derived by multiplying the number of shares of
Common Stock purchasable immediately prior to such Change of Shares by the
Exercise Price in effect prior to such Change of Shares and dividing the product
so obtained by the applicable adjusted Exercise Price.
EXH A-3
26
For the purposes of any adjustment to be made in accordance
with this Section 2A(1) or (2), the following provisions shall be applicable:
(a) In case of the issuance or sale of shares of Common Stock
(or of other securities deemed hereunder to involve the issuance or sale of
shares of Common Stock) for a consideration part or all of which shall be cash,
the amount of the cash portion of the consideration therefor deemed to have been
received by the Company shall be (i) the subscription price, if shares of Common
Stock are offered by the Company for subscription, or (ii) the public offering
price (before deducting therefrom any compensation paid or discount allowed in
the sale, underwriting or purchase thereof by underwriters or dealers or others
performing similar services, or any expenses incurred in connection therewith),
if such securities are sold to underwriters or dealers for public offering
without a subscription offering, or (iii) the gross amount of cash actually
received by the Company for such securities, in any other case.
(b) In case of the issuance or sale (otherwise than as a
dividend or other distribution on any stock of the Company, and otherwise than
on the exercise of options, rights or warrants or the conversion or exchange of
convertible or exchangeable securities) of shares of Common Stock (or of other
securities deemed hereunder to involve the issuance or sale of shares of Common
Stock) for a consideration part or all of which shall be other than cash, the
amount of the consideration therefor other than cash deemed to have been
received by the Company shall be the value of such consideration as determined
in good faith by the Board of Directors of the Company, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company shall be the market price thereof (determined as
provided below in this Section 2A) as of the date of receipt, but in each such
case without deduction therefrom of any expenses incurred or any underwriting
commissions, discounts or concessions paid or allowed by the Company in
connection therewith. In computing the market price of a note or other
obligation that is not listed or admitted to trading on any securities exchange
or quoted in the National Association of Securities Dealers' Automated Quotation
System or reported by the National Quotation Bureau, Inc. or a similar reporting
organization, the total consideration to be received by the Company thereunder
(including interest) shall be discounted to present value at the prime rate of
interest of NationsBank of Texas, N.A. (or its successor) in effect at the time
the note or obligation is deemed to have been issued. In case any additional
shares of Common Stock shall be issued in connection with any merger of another
corporation into the Company, the amount of consideration therefor shall be
deemed to be the fair value as determined in good faith by the Board of
Directors of the Company of such portion of the assets of such merged
corporation received by the Company as the Board of Directors of the Company
shall determine to be attributable to such additional shares of Common Stock.
(c) For the purposes of any computation under Section 2
hereof, the market price of the security in question on any day shall be valued
as follows:
(i) If traded on a national securities exchange or
the NASDAQ National Market ("NASDAQ/NM"), the value shall be
deemed to be the average of the security's closing prices on
such exchange or NASDAQ/NM over the thirty (30) day period
ending three (3) business days prior to the applicable
valuation date; and
EXH A-4
27
(ii) If actively traded over the counter (other than
NASDAQ/NM), the value shall be deemed to be the average of the
security's closing bid prices over the thirty (30) day period
ending three (3) business days prior to the applicable
valuation date; and
(iii) If there is no active public market, the value
shall be the fair market value thereof as determined in good
faith by the Board of Directors.
The method of valuation of securities subject to investment
letter or other restrictions on free marketability shall be adjusted to make an
appropriate discount from the market value determined as above in clauses (i) or
(ii) to reflect the fair market value thereof as determined in good faith by the
Board of Directors. The Registered Holder of this Warrant shall have the right
to challenge any determination by the Board of Directors of fair market value
pursuant to this Section 2, in which case the determination of fair market value
shall be made by an independent appraiser selected jointly by the Board of
Directors and the challenging party, the cost of such appraisal to be borne
solely by the challenging party.
(d) Shares of Common Stock issuable by way of dividend or
other distribution on any stock of the Company shall be deemed to have been
issued immediately after the opening of business on the day following the record
date for the determination of shareholders entitled to receive such dividend or
other distribution and shall be deemed to have been issued without
consideration.
(e) The reclassification of securities of the Company other
than shares of Common Stock into securities including shares of Common Stock
shall be deemed to involve the issuance of such shares of Common Stock for a
consideration other than cash immediately prior to the close of business on the
date fixed for the determination of security holders entitled to receive such
shares, and the value of the consideration allocable to such shares of Common
Stock shall be determined as provided in subsection (b) of this Section 2A.
(f) The number of shares of Common Stock at any one time
outstanding shall be deemed to include the aggregate maximum number of shares
issuable (subject to readjustment upon the actual issuance thereof) upon the
exercise of options, rights or warrants and upon the conversion or exchange of
convertible or exchangeable securities.
2B. (1) In case the Company shall at any time after the date
hereof issue options, rights or warrants to subscribe for shares of Common
Stock, or issue any securities convertible into or exchangeable for shares of
Common Stock, for a consideration per share (determined as provided in Section
2A and as provided below) less than $22.00, or without consideration (including
the issuance of any such securities by way of dividend or other distribution),
the Exercise Price for this Warrant (whether or not the same shall be issued and
outstanding) in effect immediately prior to the issuance of such options, rights
or warrants, or such convertible or exchangeable securities, as the case may be,
shall be reduced to a price determined by making the computation in accordance
with the provisions of Section 2A(2) hereof, provided that:
EXH A-5
28
(a) The aggregate maximum number of shares of Common Stock
issuable or that may become issuable under such options, rights or warrants
(assuming exercise in full even if not then currently exercisable or currently
exercisable in full) shall be deemed to be issued and outstanding at the time
such options, rights or warrants were issued, for a consideration equal to the
minimum purchase price per share provided for in such options, rights or
warrants at the time of issuance, plus the consideration, if any, received by
the Company for such options, rights or warrants; provided, however, that upon
the expiration or other termination of such options, rights or warrants, if any
thereof shall not have been exercised, the number of shares of Common Stock
deemed to be issued and outstanding pursuant to this subsection (a) (and for the
purposes of subsection (f) of Section 2A hereof) shall be reduced by the number
of shares as to which options, warrants and/or rights shall have expired, and
such number of shares shall no longer be deemed to be issued and outstanding,
and the Exercise Price then in effect shall forthwith be readjusted and
thereafter be the price that it would have been had adjustment been made on the
basis of the issuance only of the shares actually issued plus the shares
remaining issuable upon the exercise of those options, rights or warrants as to
which the exercise rights shall not have expired or terminated unexercised.
(b) The aggregate maximum number of shares of Common Stock
issuable or that may become issuable upon conversion or exchange of any
convertible or exchangeable securities (assuming conversion or exchange in full
even if not then currently convertible or exchangeable in full) shall be deemed
to be issued and outstanding at the time of issuance of such securities, for a
consideration equal to the consideration received by the Company for such
securities, plus the minimum consideration, if any, receivable by the Company
upon the conversion or exchange thereof; provided, however, that upon the
termination of the right to convert or exchange such convertible or exchangeable
securities (whether by reason of redemption or otherwise), the number of shares
of Common Stock deemed to be issued and outstanding pursuant to this subsection
(b) (and for the purposes of subsection (f) of Section 2A hereof) shall be
reduced by the number of shares as to which the conversion or exchange rights
shall have expired or terminated unexercised, and such number of shares shall no
longer be deemed to be issued and outstanding, and the Exercise Price then in
effect shall forthwith be readjusted and thereafter be the price that it would
have been had adjustment been made on the basis of the issuance only of the
shares actually issued plus the shares remaining issuable upon conversion or
exchange of those convertible or exchangeable securities as to which the
conversion or exchange rights shall not have expired or terminated unexercised.
(c) If any change shall occur in the price per share provided
for in any of the options, rights or warrants referred to in subsection (a) of
this Section 2B, or in the price per share or ratio at which the securities
referred to in subsection (b) of this Section 2B are convertible or
exchangeable, such options, rights or warrants or conversion or exchange rights,
as the case may be, to the extent not theretofore exercised, shall be deemed to
have expired or terminated on the date when such price change became effective
in respect of shares not theretofore issued pursuant to the exercise or
conversion or exchange thereof, and the Company shall be deemed to have issued
upon such date new options, rights or warrants or convertible or exchangeable
securities.
2C. Reorganization, Reclassification, Consolidation, Merger or
Sale. Upon any reorganization, reclassification, consolidation, merger,
liquidation, dissolution or sale of all or
EXH A-6
29
substantially all of the Company's assets to another Person, the Company shall
take such action as it deems necessary to provide the Registered Holder upon the
exercise thereof, and in lieu of or in addition to the Common Stock obtainable
upon exercise of this Warrant, the kind and amount of stock, other securities or
property that such Registered Holder would have received had such Registered
Holder exercised this Warrant immediately prior to any reorganization,
reclassification, consolidation, merger, liquidation, dissolution or sale of all
or substantially all of the assets of the Company.
2D. Notices. Upon any adjustment of the Exercise Price or the
securities or property obtainable upon exercise of this Warrant, the Company
will give written notice thereof to the Registered Holder.
2E. No adjustment of the Exercise Price shall be made as a
result of or in connection with (1) the issuance or sale of shares of Common
Stock pursuant to options, warrants, stock purchase agreements and convertible
or exchangeable securities outstanding or in effect on the date hereof, (2) the
issuance or sale of shares of Common Stock upon the exercise of options granted
pursuant to any of the Company's stock option plans in effect on the date
hereof, whether or not options thereunder were outstanding on the date hereof;
provided that the exercise price of any such options is not less than the fair
market value of the Common Stock on the date of grant, or (3) the issuance or
sale of shares of Common Stock if the amount of said adjustment shall be less
than $0.10, provided, however, that in such case, any adjustment that would
otherwise be required then to be made shall be carried forward and shall be made
at the time of and together with the next subsequent adjustment that shall
amount, together with any adjustment so carried forward, to at least $0.10. In
addition, Holders shall not be entitled to cash dividends paid by the Company
prior to the exercise of any Warrant or Warrants held by them.
Section 3. Definitions. The following terms have meanings set
forth below:
"Common Stock" means the Company's Common Stock, $0.01 par
value per share.
"Person" means an individual, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
Section 4. No Voting Rights; Limitations of Liability. This
Warrant will not entitle the Registered Holder to any voting rights or other
rights as a stockholder of the Company. No provision hereof, in the absence of
affirmative action by the Registered Holder to purchase Common Stock , and no
enumeration herein of the rights or privileges of the Registered Holder shall
give rise to any liability of such holder for the Exercise Price of Common Stock
acquirable by exercise hereof or as a stockholder of the Company.
Section 5. Transfer.
5A. Except as otherwise provided herein, this Warrant and all
options and rights hereunder are transferable, as to all or any part of the
number of shares of Common Stock purchasable upon its exercise, by the
Registered Holder hereof in person or by duly authorized attorney on the books
of the Company upon surrender of this Warrant at the principal offices of the
EXH A-7
30
Company, together with the form of transfer authorization attached hereto duly
executed. The Company shall deem and treat the Registered Holder of this Warrant
at any time as the absolute owner hereof for all purposes and shall not be
affected by any notice to the contrary. If this Warrant is transferred in part,
the Company shall at the time of surrender of this Warrant, issue to the
transferee a Warrant covering the number of shares of Common Stock transferred
and to the transferor a Warrant covering the number of shares of Common Stock
not transferred.
5B. Anything in this Warrant to the contrary notwithstanding,
if, at the time of the surrender of this Warrant in connection with any
exercise, transfer, or exchange of this Warrant, this Warrant shall not be
registered under the Securities Act of 1933, as amended (the "Act"), and under
applicable state securities or blue sky laws, the Company may require, as a
condition of allowing such exercise, transfer, or exchange, that (i) the
Registered Holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel, which opinion of counsel is reasonably
acceptable to the Company, to the effect that such exercise, transfer, or
exchange may be made without registration under the Act and under applicable
state securities or blue sky laws, and (ii) the Registered Holder or transferee
execute and deliver to the Company an investment letter in form and substance
reasonably acceptable to the Company. The first Registered Holder of this
Warrant, by taking and holding the same, represents to the Company that such
Registered Holder is acquiring this Warrant for investment and not with a view
to the distribution thereof.
5C. The terms of this warrant shall be binding upon the
permitted successors, transferees and assignees of _______________________.
Section 6. Warrant Exchangeable for Different Denominations.
This Warrant is exchangeable, upon the surrender hereof by the Registered Holder
at the principal office of the Company, for new Warrants of like tenor
representing in the aggregate the purchase rights hereunder, and each of such
new Warrants will represent such portion of rights as is designated by the
Registered Holder at the time of such surrender. The date the Company initially
issues this Warrant will be deemed to be the "Date of Issuance" hereof
regardless of the number of times new certificates representing the unexpired
and unexercised rights formerly representing portions of the rights hereunder
are referred to herein as the "Warrants."
Section 7. Underlying Shares--Restricted Securities. The
shares of Common Stock acquired upon exercise of this Warrant will be
"restricted securities" as that term is defined in Rule 144 adopted by the
Securities and Exchange Commission under the Act and therefore may not be sold
or transferred in the absence of registration under the Act or an exemption
under the Act and the applicable state securities or blue sky laws. Share
certificates evidencing shares of Common Stock acquired upon exercise of this
Warrant will be imprinted with a legend reading substantially as follows:
The shares represented by this Certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act") and are "restricted securities," as that term is
defined in Rule 144 under the Act. The shares may not be
offered for sale, sold, or otherwise transferred except
pursuant to an effective Registration Statement
EXH A-8
31
under the Act or an exemption therefrom, the availability of
which is to be established to the satisfaction of the Company.
Section 8. Underlying Shares--Registration Rights. The shares
acquired upon exercise of this Warrant will be entitled to certain registration
rights under the Registration Rights Agreement by and among the Company, Xxx X.
Xxxxxx, Xx., Xxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx, Xxxxxxx X.
Xxxxxx, Xxxxx Xxxxxx and Xxxx Xxxxxx dated of even date herewith.
Section 9. Replacement. Upon receipt of evidence reasonably
satisfactory to the Company of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing this Warrant, and in the case of any
such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Company or, in the case of any such mutilation upon
surrender of such certificate, the Company will execute and deliver in lieu of
such certificate a new certificate of like kind representing the same rights
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.
Section 10. Notices. Except as otherwise expressly provided
herein, all notices referred to in this Warrant will be in writing and will be
delivered personally, sent by reputable express courier service (charges
prepaid) or sent by registered or certified mail, return receipt requested,
postage prepaid and will be deemed to have been given when so delivered, sent or
deposited in the U.S. Mail (i) to the Company, at its principal executive
offices and (ii) to the Registered Holder of this Warrant, at such holder's
address as it appears in the records of the Company.
Section 11. Amendment and Waiver. Except as otherwise provided
herein, the provisions of this Warrant may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Registered Holders of Warrants representing a majority of the shares of Common
Stock obtainable upon exercise of the Warrants.
Section 12. Descriptive Headings; Governing Law. The
descriptive headings of the several sections and paragraphs of this Warrant are
inserted for convenience only and do not constitute a part of this Warrant. The
construction, validity and interpretation of this Warrant will be governed by
the laws of the State of Texas.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed and attested by its duly authorized officer under its corporate seal and
to be dated the Date of Issuance hereof.
XXXXXXXXX ENERGY, INC.
By:
--------------------------------------
Xxxxxx X. Xxxxxxx
Chief Executive Officer
EXH A-9
32
ANNEX A
XXXXXXXXX ENERGY, INC.
EXERCISE AGREEMENT--INVESTMENT REPRESENTATIONS
To: Xxxxxxxxx Energy, Inc. Dated:
--------------------
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. W-____________ ), hereby agrees to subscribe
for the purchase of _______ shares of the Common Stock ("Restricted Shares") of
Xxxxxxxxx Energy, Inc. (the "Company") covered by such Warrant and makes payment
herewith in full therefor at the price per share provided by such Warrant.
The undersigned is acquiring the Restricted Shares for his own
account with the present intention of holding the Restricted Shares for purposes
of investment, and he has no intention of selling any of the Restricted Shares
in a public distribution in violation of federal securities laws or any
applicable state securities laws and none of such Restricted Shares may be
transferred, sold, assigned, pledged, hypothecated or otherwise disposed of by
the undersigned unless (a) a registration statement under the Securities Act of
1933, as amended (the "Act") covering the Restricted Shares has become effective
so as to permit the sale or other disposition of such shares by the undersigned;
or (b) there is presented to the Company an opinion of counsel satisfactory to
the Company to the effect that the sale or other proposed disposition of the
Restricted Shares by the undersigned may lawfully be made otherwise than
pursuant to an effective registration statement under the Act.
Signature:
-------------------------------
Address:
---------------------------------
-----------------------------------------
EXH A-10
33
ANNEX B
XXXXXXXXX ENERGY, INC.
ASSIGNMENT
FOR VALUE RECEIVED, _______________ hereby sells, assigns and
transfers all of the rights of the undersigned under the attached Warrant
(Certificate No. W-_____________ ) with respect to the number of shares of
Common Stock of Xxxxxxxxx Energy, Inc. covered thereby set forth below, unto:
Names of Assignee ("Assignee") Address No. of Shares
------------------------------ ------- -------------
Signature:
-------------------------------
Witness:
---------------------------------
ACCEPTANCE OF ASSIGNMENT
The undersigned, as Assignee, hereby agrees to be bound by the
terms of the attached Warrant.
Signature:
-------------------------------
Witness:
---------------------------------
EXH A-11
34
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is made and
entered into this ____ day of April, 2000, by and among XXXXXXXXX ENERGY, INC.,
a Delaware corporation ("PEC"), and XXX X. XXXXXX, XX. ("R XXXXXX"), XXXXXXX X.
XXXXXX ("W XXXXXX"), XXXXXXX X. XXXXXX ("J XXXXXX"), XXXXXXX X. XXXXXX ("M
XXXXXX"), XXXXXXX X. XXXXXX ("K XXXXXX"), XXXXX XXXXXX ("C XXXXXX") and XXXX
XXXXXX ("M XXXXXX"), each of whom is a shareholder of HIGH VALLEY DRILLING,
INC., a Texas corporation ("High Valley"), (R Xxxxxx, W Xxxxxx, J Xxxxxx, M
Xxxxxx, K Xxxxxx, C Xxxxxx and M Xxxxxx are sometimes collectively referred to
herein as the "High Valley Shareholders").
A. Pursuant to that certain Agreement and Plan of Merger dated
April ___, 2000 ("Merger Agreement"), by and between PEC and High Valley, PEC
has agreed to issue a total of 1,150,000 shares ("Restricted Shares") of PEC's
Common Stock, $0.01 par value (the "Common Stock"), and a three-year Stock
Purchase Warrant (the "Stock Purchase Warrant") to purchase up to an additional
127,000 shares of PEC's Common Stock (the "Warrant Shares") at an exercise price
of $22.00 per share, as consideration for the acquisition of High Valley by way
of merger with PEC.
B. This Agreement is being entered into in connection with and
as a condition to the parties closing the transactions contemplated under the
Merger 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.
"Holders" shall mean the High Valley Shareholders and
their respective successors and assigns.
"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.
EXH B-1
35
"Registrable Securities" shall mean (i) the
Restricted Shares and (ii) the Warrant Shares. The Warrant
Shares will not become Registrable Securities until the
related Stock Purchase Warrant is first exercised and payment
in full of the exercise price to PEC.
"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 Person 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 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.
"Requesting Holder" shall mean any Holder of
Registrable Securities who shall request registration of such
Registrable Securities pursuant hereto.
"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.
"Warrant Shares" shall include the Common Stock
issued or issuable with respect to the Warrant 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 Warrant Shares
such shares will cease to be Warrant 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).
2. Restrictions on Transfer. The Restricted Shares were
acquired by the High Valley Shareholders, and the Warrant Shares will be
acquired by the Holders, from PEC for
EXH B-2
36
investment for their 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. Each of the High Valley Shareholders
acknowledges that the Restricted Shares are, and each of the Holders
acknowledges that the Warrant Shares will be upon issuance, "restricted
securities" within the meaning of the Securities Act.
3. Warrant Shares - Registration Under Securities Act, etc.
3.1 Registration Upon Demand
(a) Demand Rights. At any time after the date hereof but
expiring on the second anniversary date hereof ("Demand Registration Period"),
but subject to the provisions of Section 3.1(c), below, at the written demand of
Requesting Holders and on one (1) occasion only, PEC shall prepare, file with
the Commission and use its best efforts to have declared effective a
registration statement with respect to the distribution of up to all of the
Registrable Securities, provided that the number of Registrable Securities. Such
demand shall be made by written notice to PEC by Requesting Holders holding at
least a majority of the Registrable Securities, which notice shall (i) request
the preparation of the registration statement pursuant to the terms of this
Section 3.1, (ii) include the number of Registrable Securities to be offered by
Holders of Registrable Securities pursuant to such registration statement and
(iii) be sent to all other Holders. PEC may include in such registration any
securities of PEC for sale by PEC or persons other than PEC, and such
registration shall be deemed to be an incidental registration pursuant to
Section 3.2 hereof with Holders having the priority with respect to the
Registrable Securities.
(b) Expenses. PEC shall pay all Registration Expenses in
connection with the registration of Registrable Securities demanded pursuant to
this Section 3.1.
(c) Restrictions on Demand Registrations. PEC will not be
obligated to effect the registration under Section 3.1(a) within three months
after the effective date of (i) a registration initiated by PEC; or (ii) a
registration in which the Holders of Registrable Securities were given
incidental registration rights pursuant to Section 3.2 hereof and in which there
was no reduction in the number of Registrable Securities requested to be
included (the "Other Registrations"); provided that in either case (i) or (ii)
the three-month period can be extended to six months if required by the then
managing underwriter. PEC may postpone filing or the effectiveness of the
registration statement demanded by Holders under Section 3.1(a) for up to six
months following receipt of such demand if PEC has executed in good faith (x) a
letter of intent or a commitment letter with an underwriter for a public
offering or (y) an agreement in principle relating to an acquisition of assets
(other than in the ordinary course of business) or any merger, consolidation or
similar transaction, or (z) has made a filing with the Commission under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in connection
with a tender offer. Notwithstanding anything in this Section 3.1(c) to the
contrary, if the Demand Registration Period expires without effectuation of a
demand for registration under Section 3.1(a) because of the occurrence of an
event specified above in this Section 3.1(c), the Demand Registration Period
shall be extended for such additional period as is necessary to effect such
registration, provided that such demand is given to PEC prior to the expiration
of the Demand Registration Period. In the event of registration demanded under
Section 3.1(a) is not an underwritten offering, the number of Registrable
Securities that may be sold
EXH B-3
37
in connection with any such registration shall not exceed 350,000 shares in any
given calendar month.
3.2 Incidental Registration.
(a) Right to Include Registrable Securities. Subject to the
further provisions of this Section 3.2(a), if PEC, at any time commencing on the
date of this Agreement and expiring on the second anniversary date hereof,
proposes to register any of its equity securities under the Securities Act, for
its own account or the account of other holders of PEC's securities, on a form
and in a manner which would permit registration of the Registrable Securities
for sale to the public under the Securities Act, it will each such time give
prompt written notice to all Holders of its intention to do so, describing such
securities and specifying the form and manner and the other relevant facts
involved in such proposed registration and upon the written request of any such
Holder delivered to PEC within twenty (20) business days after the giving of any
such notice (which request shall specify the Registrable Securities intended to
be disposed of by such Holder and the intended method or methods of disposition
thereof), PEC will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities which PEC has been so requested to
register by Holders to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities so to be registered provided that (i) if, at any time after giving
such written notice of its intention to register any of its securities and prior
to the effective date of the registration statement filed in connection with
such registration, PEC shall determine for any reason not to register such
securities, PEC may, at its election give written notice of such determination
to each Holder and thereupon shall be relieved of its obligation to register any
Registrable Securities in connection with such registration (but not from its
obligation to pay the Registration Expenses in connection therewith as provided
herein); and (ii) if (A) the registration so proposed by PEC involves an
underwritten primary registration on behalf of PEC to be distributed (on a firm
commitment basis) by or through one or more underwriters of recognized standing
under underwriting terms appropriate for such a transaction, and (B) the
managing underwriter of such underwritten offering shall advise PEC in writing
that, in its good faith judgment, all the shares to be offered by PEC and other
parties are greater than can be accommodated without interfering with the
successful marketing of all the securities to be then offered publicly for the
account of PEC, then the managing underwriter or underwriters shall include in
such registration (1) first, the securities PEC proposes to register for sale,
and (2) second, any securities requested and permitted to be included in such
registration pursuant to incidental or piggyback rights granted to the holders
thereof prior to the date of this Agreement, (3) third, the Registrable
Securities requested to be included in such registration by the Requesting
Holders, pro rata, if necessary, and (4) fourth, any other securities requested
to be included in such registration, if any, pro rata; (iii) if (A) the
registration so proposed by PEC is an underwritten secondary registration on
behalf of holders of PEC's securities, to be distributed (on a firm commitment
basis) by or through one or more underwriters of recognized standing under
underwriting terms appropriate for such a transaction, and (B) the managing
underwriter of such underwritten offering shall advise PEC in writing that, in
its good faith judgment, all the shares to be offered by such requesting holder,
PEC and other parties are greater than can be accommodated without interfering
with the successful marketing of all of the securities to be then offered
publicly for the account of PEC, then the managing underwriter shall include in
such registration (1) first, the securities requested to be included therein by
the holders requesting such registration, (2) second, any
EXH B-4
38
securities requested and permitted to be included in such registration statement
pursuant to incidental or piggyback rights granted to the holders thereof prior
to the date of this Agreement, (3) third, the securities which are requested to
be included in such registration by the Holders of Registrable Securities, pro
rata, if necessary, and (4) fourth, any other securities requested to be
included in such registration, if any, pro rata. Notwithstanding anything in
this Section 3.2(a) to the contrary, PEC shall have no obligation under this
Section 3.2(a) to register any of the Restricted Securities after the second
anniversary date hereof or any of the Warrant Shares following the third
anniversary date hereof.
(b) Expenses. PEC will pay all Registration Expenses in
connection with each registration of Restricted Shares and/or Warrant Shares
requested pursuant to Section 3.2.
3.3 Registration Procedures. If and whenever PEC is required
to effect the registration of any Registrable Securities under the Securities
Act as provided in Section 3.1 or Section 3.2, PEC will promptly:
(a) prepare and (in any event within sixty (60) days) file
with the Commission a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statement to
become effective, such registration statement to comply as to form and content
in all material respects with the Commission's forms, rules and regulations;
(b) keep such registration statement effective and comply with
the provisions of the Securities Act with respect to the disposition of all
Registrable Securities and other securities covered by such registration
statement until the earlier of (i) such time as all of such Registrable
Securities and other securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement or (ii) the expiration of (A) twelve (12) months in
the case of a registration of Registrable Securities pursuant to Section 3.1
hereof, or (B) three (3) months in the case of a registration of Registrable
Securities pursuant to Section 3.2 hereof, after such registration statement
becomes effective, and will furnish to each such seller prior to the filing
thereof a copy of any amendment or supplement to such registration statement or
prospectus and shall not file any such amendment or supplement to which any such
seller 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;
(c) promptly furnish to each seller of Registrable Securities
one originally executed registration statement, with all amendments, supplements
and additional documentation; such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits) as such seller may reasonably request; such
number of copies of the prospectus included in such registration statement
(including each preliminary prospectus and any summary prospectus) as required
by the Securities Act as such seller may reasonably request; such documents, if
any, incorporated by reference in such registration statement or prospectus; and
such other documents as such seller may reasonably request;
EXH B-5
39
(d) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities or blue sky laws of such jurisdictions as
each seller shall reasonably request, to keep such registration or qualification
in effect for so long as such registration statement remains in effect, and do
any and all other acts and things which may be necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of his
Registrable Securities covered by such registration statement, 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 (d) 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;
(e) immediately notify each seller of Registrable Securities
covered by such registration statement, 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 such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required 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 registration statement to comply with law, and at
the request of any such seller, prepare and furnish to such seller 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 Registrable
Securities, 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 registration statement, as amended or supplemented, will
comply with law;
(f) 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 such registration
statement, if such earnings statement is necessary to satisfy the provisions of
Section 11(a) of the Securities Act;
(g) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such registration
statement; and
(h) list all Common Stock covered by such registration
statement on each securities exchange on which any Common Stock is then listed
or quote all such Common Stock on NASDAQ if PEC's Common Stock is quoted on
NASDAQ, or, if PEC's Common Stock is not then quoted on NASDAQ or listed on any
national securities exchange, use its best efforts to have such Common Stock
covered by such registration statement quoted on NASDAQ or, at the option of
PEC, listed on a national securities exchange.
PEC may require each seller of Registrable Securities as to which any
registration is being effected to furnish PEC such information regarding such
seller and the distribution of such securities as PEC
EXH B-6
40
may from time to time reasonably request in writing and as shall be required by
law or by the Commission in connection therewith.
3.4 Underwritten Offerings.
(a) Underwriting Agreement. If requested by the underwriters
for any underwritten offering of Registrable Securities on behalf of a Holder or
Holders pursuant to the registration demanded under Section 3.1, PEC will enter
into an underwriting agreement with such underwriters for such offering, such
agreement to contain such representations and warranties by PEC and such other
terms and provisions as are customarily contained in underwriting agreements
with respect to secondary distributions, including, without limitation,
indemnities to the effect and to the extent provided in Section 4. Holders on
whose behalf Registrable Securities are to be distributed by such underwriters
shall be parties to any such underwriting agreement and the representations and
warranties by, and the other agreements on the part of, PEC to and for the
benefit of such underwriters, shall also be made to and for the benefit of such
Holders. No such Holder shall be required by PEC to make any representations or
warranties to or agreements with PEC or the underwriters other than reasonable
representations, warranties or agreement regarding such Holder, such Holder's
Warrant Shares and such Holder's intended method or methods of disposition and
any other representation required by law and as provided in Section 3.4(d).
(b) Inclusion of Registrable Securities. If PEC at any time
proposes to register any of its securities for its own account under the
Securities Act as contemplated by Section 3.2 and such securities are to be
distributed by or through one or more underwriters, PEC will use its best
efforts, if requested by any Holder who is entitled to request incidental
registration of Registrable Securities in connection therewith pursuant to
Section 3.2, to arrange for such underwriters to include the Registrable
Securities to be offered and sold by such Holder among the securities to be
distributed by or through such underwriters; provided that, for purposes of this
sentence, best efforts shall not require PEC to reduce the amount of sales price
of such securities proposed to be distributed by or through such underwriters.
Holders of Registrable Securities to be distributed by such underwriters shall
be parties to the underwriting agreement between PEC and such underwriters and
the representations and warranties by, and the other agreements on the part of,
PEC to and for the benefit of such underwriters, shall also be made to and for
the benefit of such Holders of Registrable Securities. PEC will cooperate with
such Holders to the end that the conditions precedent to the obligations of such
Holders under such underwriting agreement shall not include conditions that are
not customary in underwriting agreements with respect to combined primary and
secondary distributions and shall be otherwise satisfactory to such Holders. No
such Holder shall be required by PEC to make any representations or warranties
other than reasonable representations, warranties or agreements regarding such
Holder, such Holder's Registrable Securities and such Holder's intended method
or methods of distribution and any other representation required by law and as
provided in Section 3.4(d).
(c) Selection of Underwriters. Whenever a registration demand
pursuant to Section 3.1 is for an underwritten offering, the Holders of
Registrable Securities making such demand shall have the right to select the
managing underwriter(s) (which shall be an underwriter of national standing) to
administer the offering, subject to the approval of PEC, such approval not to be
unreasonable withheld. If PEC at any time proposes to register any of its
securities under the
EXH B-7
41
Securities Act for sale of its own account or for the accounts of any other
sellers, including Holder, and such securities are to be distributed by or
through one or more underwriters, the selection of the managing underwriter(s)
(which shall be an underwriter of national standing) shall be made by PEC and
notice of the selection thereof delivered to Holders eligible to participate in
such registration.
(d) Holdback Agreements.
(i) If any registration pursuant to Section 3.1 or
3.2 shall be in connection with any underwritten public offering, each
Holder of Registrable Securities agrees by acquisition of such
Registrable Securities, if so required by the managing underwriter, not
to effect any public sale or distribution of Registrable Securities
(other than as part of such underwritten public offering) within seven
(7) days prior to the effective date of such registration statement or
one hundred twenty (120) days after the effective date of such
registration statement, unless the underwriters managing the offering
otherwise agree.
(ii) PEC agrees (A) not to effect any public sale or
distribution prohibited by the Exchange Act after the demand or
decision to make such registration and (i) prior to the effective date
of the registration statement, except as a part of such registration
statement or pursuant to any registration statements on Forms S-8 or
S-4 or any successor form, unless the managing underwriters of such
registration otherwise agree; or (ii) prior to the ninetieth (90th) day
after the effective date of such registration statement, and (B) to use
its best efforts to cause each holder of at least 10% of its Common
Stock or any securities convertible into or exchangeable or exercisable
for any of its Common Stock, in each case purchased from PEC at any
time after the date of this Agreement (other than in a public
offering), to agree not to effect any such public sale or distribution
of such securities during such period.
3.5 Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement registering
Registrable Securities under the Securities Act, PEC will give Holders on whose
behalf such Registrable Securities are to be so registered and their
underwriters, if any, and each Requesting Holder and not more than one counsel
for all Holders and their respective accountants, the opportunity to participate
in the preparation of such registration statement, each prospectus included
therein or filed with the Commission and each amendment thereof or supplement
thereto, and will give each of them such access to its books and records and
such opportunities to discuss the business of PEC with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary in the opinion of such Holders and such underwriters or their
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.
4. Indemnification.
4.1 Indemnification by PEC. In the event of any registration
of any securities of PEC under the Securities Act (pursuant to which any Holder
sells Registrable Securities), PEC will, and hereby does, indemnify and hold
harmless such Holder, any employees, officers, directors, shareholders, partners
or trustees of such Holder and each other person, if any, who controls such
Holder within the meaning of the Securities Act, in each case, against any
losses, claims, damages,
EXH B-8
42
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 such Holder or any
such employee, officer, director, stockholder, trustee, partner or controlling
person 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 such Holder and each such
employee, officer, director, stockholder, trustee, partner or controlling person
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 written information furnished to PEC through an instrument duly executed by
such Holder or any such employee, officer, director, stockholder, trustee,
partner or controlling person specifically stating that it is for use in
preparation thereof. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Holder or any such
employee, officer, director, stockholder, trustee, partner or controlling person
and shall survive the transfer of such securities by such Holder. PEC will make
provision for contribution in lieu of any such indemnity that may be disallowed
as shall be reasonably requested by such Holder.
4.2 Indemnification by Holder. In the event of any
registration of any securities of PEC under the Securities Act (pursuant to
which any Holder sells Registrable Securities covered by such registration
statement), such Holder will, and each of them hereby does, severally indemnify
and hold harmless PEC, each director of PEC, each officer of PEC who shall sign
such registration statement and each other person, if any, who controls PEC
within the meaning of the Securities Act from and against losses, claims,
damages and liabilities caused by any untrue statement or alleged untrue
statement of material fact contained in such registration statement, 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 written information
furnished to PEC through an instrument duly executed by such Holder specifically
stating that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement up to the net proceeds received by such Holder. 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 a Holder.
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
EXH B-9
43
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, 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 a Holder under this Section 4.4
shall be limited to the net proceeds received by such Holder.
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.
EXH B-10
44
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. Rule 144.
5.1 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Shares or the Warrant Shares to the
public without registration, PEC shall use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the date of this Agreement;
(b) File with the Commission in a timely manner all reports
and other documents required of PEC under the Securities Act and the Exchange
Act; and
(c) So long as any Holder owns any Restricted Shares or
Warrant Shares, furnish to the Holders as soon as reasonably practicable after
request a written statement by PEC as to its compliance with the reporting
requirements of the Exchange Act, a copy of the most recent annual or quarterly
report of PEC filed with the Commission, and such other reports filed by PEC
with the Commission.
5.2 Further Assurances. PEC shall take such action as any
Holder may reasonably request from time to time to enable such Holder to sell
Restricted Shares or Warrant Shares without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon written
request of any Holder, PEC will deliver to such Holder a written statement as to
whether it has complied with such requirements.
6. 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 or Holders
of at least 51% or more of the Registrable Securities.
7. Nominees for Beneficial Owners. In the event that any
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election, be treated as the Holder of
such Registrable Securities for purposes of any request or other action by any
Holder or Holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any Holder or Holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, PEC
may require assurances reasonably satisfactory to it of such owner's beneficial
ownership of such Registrable Securities.
EXH B-11
45
8. 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:
8.1 if to any Holder, at the address provided to PEC in
writing by such Holder or as shown on stock transfer books of PEC unless such
Holder has advised PEC in writing of a different address as to which notices
shall be sent to it under this Agreement, and
8.2 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 High Valley or each Holder.
9. Successors and Assigns. PEC acknowledges and agrees that
the registration rights granted to the respective High Valley Shareholders in
this Agreement may be transferred and assigned by the High Valley Shareholders
in connection with any valid sale and assignment of the Registrable Securities.
All covenants and agreements in this Agreement by or on behalf of either of the
parties hereto will bind and, subject to the provisions of Section 3.1 hereof,
inure to the benefit of the respective successors and assigns of the parties
hereto whether so expressed or not. In addition, whether or not any express
assignment has been made, the provisions of this Agreement are for the benefit
of any Holder of Registrable Securities.
10. Miscellaneous. This Agreement embodies the entire
agreement and understanding between PEC and the other parties hereto 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: HIGH VALLEY SHAREHOLDERS:
XXXXXXXXX ENERGY, INC.
-----------------------------------------
Xxx X. Xxxxxx, Xx.
By:
------------------------------- -----------------------------------------
Xxxxxx X. Xxxxxxx Xxxxxxx X. Xxxxxx
Chief Executive Officer
-----------------------------------------
Xxxxxxx X. Xxxxxx
-----------------------------------------
Xxxxxxx X. Xxxxxx
EXH B-12
46
-----------------------------------------
Xxxxxxx X. Xxxxxx
-----------------------------------------
Xxxxx Xxxxxx
-----------------------------------------
Xxxx Xxxxxx
EXH B-13
47
EXHIBIT C-1
FORM
OF
INVESTMENT REPRESENTATION LETTER
April ___, 2000
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 Merger
contemplated by the Agreement and Plan of Merger between PEC and High Valley
Drilling, Inc. ("High Valley"). 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 April ___, 2000 (the "Memorandum") containing a copy of PEC's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and all
other reports filed by PEC with the Securities and Exchange Commission since
January 1, 1999 (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/she is capable of evaluating the merits
and risks of an investment in PEC vis-a-vis the PEC Common Stock, PEC Warrant
and PEC Warrant Shares to be issued by PEC as consideration for the Merger.
c. The undersigned has had an opportunity to ask questions of
PEC and its management concerning PEC and its subsidiaries, the businesses of
PEC and its subsidiaries and the PEC Common Stock, PEC Warrant and PEC Warrant
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 Common Stock or the PEC Warrant or the PEC Warrant
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/she sell or otherwise transfer the PEC Common Stock, PEC
Warrant or the PEC Warrant Shares without registration under the Act (see
paragraph (g) below).
EXH C-1-1
48
Xxxxxxxxx Energy, Inc.
March ___, 2000
Page 2
e. The undersigned represents that he will acquire the PEC
Common Stock for his/her 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 Common Stock, the PEC Warrant
and the PEC Warrant 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 Common Stock, the PEC Warrant
and the PEC Warrant Shares.
h. The undersigned acknowledges that, except as provided in
the Registration Rights Agreement attached as Exhibit B to the Merger Agreement,
PEC is under no obligation to register the PEC Common Stock or the PEC Warrant
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 Common Stock, the PEC Warrant and the
PEC Warrant Shares.
j. The undersigned has an individual net worth in excess of $1
million.
2. Indemnification.
The undersigned agrees to indemnify and hold harmless PEC and
its officers, directors and affiliates and each other person, if any, who
controls PEC, 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 the
undersigned herein.
3. Survival.
All representations, warranties and covenants contained in
this letter shall survive the closing of the Merger.
Very truly yours,
-----------------------------------------
EXH C-1-2
49
EXHIBIT C-2
FORM
OF
INVESTMENT REPRESENTATION LETTER
April ___, 2000
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 Merger
contemplated by the Agreement and Plan of Merger between PEC and High Valley
Drilling, Inc. ("High Valley"). 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 April ___, 2000 (the "Memorandum") containing a copy of PEC's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and all
other reports filed by PEC with the Securities and Exchange Commission since
January 1, 1999 (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, either alone or with her/her purchaser
representative, has such knowledge and experience in financial and business
matters that he/she is capable of evaluating the merits and risks of an
investment in PEC vis-a-vis the PEC Common Stock, PEC Warrant and PEC Warrant
Shares to be issued by PEC as consideration for the Merger. [The name and
address of the undersigned's purchase representative is_______________________.]
c. The undersigned has had an opportunity to ask questions of
PEC and its management concerning PEC and its subsidiaries, the businesses of
PEC and its subsidiaries and the PEC Common Stock, PEC Warrant and PEC Warrant
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 Common Stock or the PEC Warrant or the PEC Warrant
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/she sell or otherwise transfer the PEC Common Stock, PEC
Warrant or the PEC Warrant Shares without registration under the Act (see
paragraph (g) below).
EXH C-2-1
50
Xxxxxxxxx Energy, Inc.
March ___, 2000
Page 2
e. The undersigned represents that he will acquire the PEC
Common Stock for his/her 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 Common Stock, the PEC Warrant
and the PEC Warrant 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 Common Stock, the PEC Warrant
and the PEC Warrant Shares.
h. The undersigned acknowledges that, except as provided in
the Registration Rights Agreement attached as Exhibit B to the Merger Agreement,
PEC is under no obligation to register the PEC Common Stock or the PEC Warrant
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 Common Stock, the PEC Warrant and the
PEC Warrant Shares.
2. Indemnification.
The undersigned agrees to indemnify and hold harmless PEC and
its officers, directors and affiliates and each other person, if any, who
controls PEC, 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 the
undersigned herein.
3. Survival.
All representations, warranties and covenants contained in
this letter shall survive the closing of the Merger.
Very truly yours,
-----------------------------------------
EXH C-2-2
