DEBENTURE PURCHASE AGREEMENT
BETWEEN
PIONEER DRILLING COMPANY
AND
WEDGE ENERGY SERVICES, L.L.C.
TABLE OF CONTENTS
Page
ARTICLE I
PURCHASE OF CONVERTIBLE DEBENTURE..........................................................................-1-
ARTICLE II
CLOSING....................................................................................................-2-
ARTICLE III
REPRESENTATIONS AND WARRANTIES BY THE COMPANY AND WEDGE....................................................-2-
ARTICLE IV
REGISTRATION RIGHTS........................................................................................-3-
ARTICLE V
AFFIRMATIVE COVENANTS......................................................................................-3-
ARTICLE VI
NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES......................................................-4-
ARTICLE VII
AFFIRMATIVE COVENANTS......................................................................................-6-
ARTICLE VIII
NEGATIVE COVENANTS.........................................................................................-6-
ARTICLE IX
DEFAULT....................................................................................................-6-
ARTICLE X
MISCELLANEOUS..............................................................................................-7-
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DEBENTURE PURCHASE AGREEMENT
THIS
DEBENTURE PURCHASE AGREEMENT (the "Agreement"), is entered into
this 9th day of October, 2001, among PIONEER DRILLING COMPANY (the "Company"), a
corporation incorporated under the laws of the State of
Texas, whose principal
place of business is at 0000 Xxxxxxxx, Xxxxxxxx X, Xxx Xxxxxxx, Xxxxx 00000 and
WEDGE ENERGY SERVICES, L.L.C., a limited liability company organized under the
laws of the State of Delaware, whose principal place of business is at 0000
Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000 ("WEDGE").
R E C I T A L S
WHEREAS, on the date hereof, the Company will enter into the Debenture
Agreement of even date herewith in the form attached hereto as Exhibit "A" ( the
"Debenture") pursuant to the payment of $18,000,000 cash by WEDGE to the
Company;
WHEREAS, WEDGE has previously acquired 7,241,007 shares of common stock of the
Company; and
WHEREAS, in connection with the issuance of the Debenture, the parties
have agreed, among other things, that WEDGE will have the right to convert the
Debenture as provided therein and certain preemptive rights to participate in
all future debt or equity offerings in the Company;
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
PURCHASE OF CONVERTIBLE DEBENTURE
1.1 Purchase by WEDGE. The Company hereby agrees to sell, and WEDGE
agrees to purchase, the 6.75% Convertible Subordinated Debenture, Series A, due
October 9, 2006, for the aggregate amount of $18,000,000 payable upon WEDGE
tendering to the Company, by wire transfer, the cash sum of $18,000,000.
Attached hereto as Exhibit "A" is the form of Debenture which sets forth all
rights of WEDGE, as a holder of such Debenture, and all duties and obligations
of the Company, as the issuer of same. The Company and WEDGE hereby expressly
incorporate all terms and conditions of the Debenture as if it were set out in
their entirety in this Section 1.1.
1.2 Continued Enforceable Agreements. The Company and WEDGE hereby
acknowledge and confirm the continued enforceability of the Common Stock
Purchase Agreement entered into on or about May 18, 2001, expressly including,
but not limited to, Sections 1.4 and 1.7, and the Registration Rights Agreement
entered into between the parties simultaneously therewith. In the event there
shall be a conflict between this Agreement and either the Common Stock Purchase
Agreement or the Registration Rights Agreement, the terms of this Agreement
shall govern.
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1.3 Board Seat. So long as Purchaser shall own at least 10% of the
capital stock of the Company, the Board of Directors agrees to support and cause
to be placed on the ballot at each election of Directors not less than one name
which shall be a nominee to the Board of Directors of the Company (the "WEDGE
Board Nominee"). So long as Purchaser shall own at least 25% of the capital
stock of the Company, the Board of Directors agrees to support and cause to be
polkaed on the ballot at each election of Directors not less than three names
which shall be nominees to the Board of Directors of the Company, one of which
shall be an individual with no affiliation to WEDGE, or its affiliates, who
shall serve as an independent outside director.
1.4 Definitions. All capitalized terms, not otherwise defined herein,
shall have the meaning ascribed to them in the Debenture.
ARTICLE II
CLOSING
The closing of the transactions provided for in Article 1 of this
Agreement (herein called the "Closing") shall take place at the offices of
Xxxxxxxx & Xxxxxxxxx, P.C., 000 Xxxx Xxxxx Xx., Xxxxx 0000, Xxx Xxxxxxx, Xxxxx,
on or before October 9, 2001 (the "Closing Date").
ARTICLE III
REPRESENTATIONS AND WARRANTIES BY THE COMPANY AND WEDGE
3.1 The Company hereby acknowledges and expressly reconfirms all
warranties and representations contained in Article IV of the Debenture.
3.2 WEDGE represents and warrants that:
(a) Experience. WEDGE is an "accredited investor" within the
meaning of Regulation D promulgated by the Securities and Exchange
Commission under the Act, and (by virtue of its experience in
evaluating and investing in private placement transactions of
securities in companies similar to the Company) it is capable of
evaluating the merits and risks of its investment in the Company. WEDGE
acknowledges that it had the opportunity to ask questions of the
officers of the Company. In reaching the conclusion that it desires to
acquire the Debenture and the Stock upon conversion, WEDGE has
evaluated its financial resources and investment position and the risks
associated with this investment and acknowledges that it is able to
bear the economic risks of this investment.
(b) Restricted Securities. As of the date hereof, WEDGE
represents, warrants and agrees that it is acquiring the Debenture, and
upon conversion the Stock, solely for its own account, for investment,
and not with a view to the distribution or resale thereof. WEDGE
further represents that its present financial condition is such that it
is not under any present necessity or constraint to dispose of such
Debenture or the Stock into which it is convertible to satisfy any
existing or contemplated debt or undertaking and that the investment is
suitable
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for WEDGE upon the basis of WEDGE's other security holdings, financial
situation and needs. WEDGE acknowledges and understands that it must
bear the economic risk of this investment for an indefinite period of
time because the Stock must be held indefinitely unless subsequently
registered under the Act and applicable state and other securities laws
or unless an exemption from such registration is available.
(c) Unregistered Stock. WEDGE is aware that the Debenture and
the Stock have not been registered under the Act, and that,
accordingly, the Stock must be held unless it is subsequently
registered under said Act or unless, in the opinion of counsel
reasonably satisfactory to the Company, a sale or transfer may be made
without registration thereunder. WEDGE agrees that any certificates
evidencing the Stock must bear a standard legend restricting the
transfer thereof consistent with the foregoing and that a notice may be
made in the records of the Company or its transfer agent restricting
the transfer of the Stock in a manner consistent with the foregoing.
ARTICLE IV
REGISTRATION RIGHTS
Upon conversion of the Debenture into common stock as provided in
Article VII of the Debenture, the Company and the Holder shall agree to abide by
and honor the terms of that certain Registration Rights Agreement between them
executed as of May 18, 2001.
ARTICLE V
AFFIRMATIVE COVENANTS
5.1 Conditions to Obligations of WEDGE. The obligations of WEDGE under
this Agreement shall, except as may be waived in writing by WEDGE, be subject to
the following conditions:
(a) Company's Representations and Warranties True at Closing.
WEDGE shall not have discovered any material error, misstatement or
omission in the representations and warranties made by the Company in
Article III above which such error, misstatement or omission remains
uncured; and the Company shall have performed and complied with in all
material respects all agreements and conditions required by this
Agreement to be performed or complied with by it at or prior to the
Closing.
(b) Opinion of Counsel for the Company. Attached hereto as
Exhibit "B" is a true and correct copy of the Opinion of Counsel to be
delivered by Xxxxxxxx and Xxxxxxxxx, P.C., attorneys for the Company,
as approved by counsel for WEDGE.
(c) Absence of Restraint. No order to restrain, enjoin or
otherwise prevent the consummation of this Agreement or the
transactions contemplated hereby shall have been entered; and, on the
Closing Date, there shall not be any pending or threatened litigation
in
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any court, or any proceeding by or before any governmental commission,
board or agency, with a view to seeking to restrain or prohibit
consummation of this Agreement or the transactions contemplated hereby
or in which divestiture, rescission or significant damages are sought
in connection with this Agreement or the transactions contemplated
hereby, and no investigation by any governmental agency shall be
pending or threatened which might result in any such litigation or
other proceeding.
(d) Company Officers' Certificate. WEDGE shall have received a
certificate, dated the Closing Date, of the president, executive vice
president and financial officers of the Company (the "Officers'
Certificate") to the effect that the representations and warranties
relating to the Company or its business, financial condition,
properties or assets are true in all material respects at and as of the
Closing Date or, to the extent such representations and warranties are
made at and as of a specific date, such representations and warranties
were true in all material respects, and as of such date.
(e) No Material Adverse Effect. No Material Adverse Effect in
the results of operations, financial condition or business of the
Company taken as a whole shall have occurred, and the Company shall not
have suffered any material loss or damages to any of its properties or
assets which change, loss or damage materially affects or impairs the
ability of the Company to conduct its respective businesses. For
purposes of this Agreement, the term "Material Adverse Effect" shall
mean an event, circumstance, loss, development or effect (individually
or in the aggregate) when considered in light of the total operations
of the Company, would prohibit the Company from engaging in any
material aspect of its business or result in a material adverse change
in the business, operations, properties, prospects or assets of the
Company, or if measured monetarily, would exceed $100,000.
(f) Consents and Other Approvals. WEDGE shall have received
all consents and other approvals which are necessary or required, if
any, to consummate this Agreement.
(g) Release of Line of Credit. The Company shall cause to be
released and returned that certain Letter of Credit issued by Credit
Suisse in favor of Frost National Bank in the original amount of
$6,000,000.
5.2 Deliveries. WEDGE shall have received (a) Debenture certificates,
and (b) any other documents which WEDGE may reasonably request to consummate
this Agreement and the transactions contemplated hereby.
ARTICLE VI
NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES
6.1 Nature of Statements. All statements contained in any Exhibit or
schedule hereto, including the Debenture, or in any certificate or other
instrument delivered by or on behalf of the
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Company pursuant to this Agreement shall be deemed representations and
warranties by the Company.
6.2 Survival of Representations and Warranties. All covenants,
agreements, representations and warranties made hereunder or pursuant hereto or
in connection with the transactions contemplated hereby shall survive the
Closing. Generally, all covenants, representations and warranties shall remain
effective for a period of 24 months from the date of closing. The
representations and warranties of the Company with respect to litigation, ERISA
and environmental matters shall remain effective for a period of 48 months from
the Closing Date. The representations and warranties of the Company with respect
to taxes and title to Stock shall survive for the applicable limitations period
established by law. Notwithstanding the foregoing, any bona fide claim which
shall have been asserted during any such survival period and the obligation to
indemnify for such claim shall continue in effect until such time as such claim
shall have been resolve or settled.
6.3 Indemnity by the Company. The Company shall indemnify and hold
harmless WEDGE and the officers, directors, managers, agents, affiliates and
representatives of WEDGE or any of them (the "WEDGE Indemnitees") from and
against, and shall reimburse the WEDGE Indemnitees from any loss, liability,
damage or expense, including reasonable attorneys' fees and costs of
investigation incurred as a result thereof, that the WEDGE Indemnitees shall
incur or suffer (collectively, the "WEDGE Recoverable Losses"), arising out of
or resulting from (a) any misrepresentation by the Company, or (b) breach by the
Company of any (i) representation or warranty contained in Article III hereof,
(ii) agreement or covenant under or pursuant to this Agreement, including the
Registration Rights Agreement, or (iii) document, certificate, schedule or
instrument delivered by or on behalf of the Company pursuant hereto.
6.4 Indemnity by WEDGE. WEDGE shall indemnify and hold harmless the
Company and the officers, directors, agents, affiliates and representatives of
the Company or any of them (the "Company Indemnitees") from and against, and
shall reimburse the Company Indemnitees for any loss, liability, damage or
expense, including reasonable attorneys' fees and cost of investigation incurred
as a result thereof, that the Company Indemnitees shall incur or suffer
(collectively, the "Company's Recoverable Losses") resulting from (a) any
misrepresentation by WEDGE, or (b) breach by WEDGE of any (i) representation or
warranty contained in Article III hereof, (ii) agreement or covenant under or
pursuant to this Agreement, or (iii) document, certificate, schedule or
instrument delivered by or on behalf of WEDGE in connection herewith.
6.5 Limitation of Liability. Notwithstanding any liability which the
Company or WEDGE may incur in Sections 6.3 and 6.4, respectively, above, the
Company shall not be obligated for a WEDGE's Recoverable Loss, and WEDGE shall
not be obligated for a Company's Recoverable Loss, unless and until such loss,
individually, or in the aggregate, shall have exceed $100,000, in which case
such liability shall be for all amounts in excess thereof.
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ARTICLE VII
AFFIRMATIVE COVENANTS
Inspection of Property, Books and Records. The Company shall (a) keep
proper books of record and account in which full, true and correct entries in
conformity with generally accepted accounting principles shall be made of all
dealings and transactions in relation to its business activity, (b) permit
representatives of WEDGE to visit and inspect any of its properties and to
examine and make abstracts from any of its books and records at their customary
location during normal business hours or at such other times as WEDGE may
reasonably request, and as often as may be reasonably desired for use by WEDGE,
and to discuss the business, operations, properties and financial and other
condition of the Company with the Company's officers and employees.
Additionally, the Company will adhere to the requirements of Section 3.01 of the
Debenture by providing all financial and business information and statements
required therein within the time frames provided.
ARTICLE VIII
NEGATIVE COVENANTS
Reorganization, Stock Dividends, Reclassification, Subdivision or Stock
Issuances. The Company will not (a) enter into a reorganization, consolidation,
merger, lease or sale with another entity in connection with the sale, transfer
or conveyance of its Common Stock or assets, (b) subdivide or reclassify the
outstanding Common Stock into a greater or lesser number of shares, or (c) issue
any additional shares of its capital stock, unless it shall have given WEDGE at
least fifteen (15) days' advance written notice.
ARTICLE IX
DEFAULT
9.1 Event of Default. As used in this Agreement, the term "Event of
Default" shall mean any of the following:
(a) any default of any kind or nature under Section 8.01 of
the Debenture;
(b) any breach of any representation or warranty contained in
Article III herein in any material respect as of the date of issuance
or making thereof; or
(c) any default in the observance of any affirmative covenant
set forth in Article VI herein which is not remedied within 30 days
after written notice thereof to the Company by WEDGE.
9.2 Default Remedies. Upon the occurrence of an Event of Default, WEDGE
shall be entitled to enforce all rights and remedies provided in Section 8.02 of
the Debenture, in addition to all other rights and remedies it may be entitled
to at equity or under law.
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ARTICLE X
MISCELLANEOUS
10.1 Conflict of Agreement. The parties agree that in the event that
any of the terms or conditions of this Agreement shall conflict with the terms
or conditions of the Debenture, the Debenture shall govern.
10.2 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which together shall
constitute one agreement.
10.3 Amendments. This Agreement may be amended, modified or terminated
only by a written instrument signed by the parties hereto.
10.4 Governing Law. This Agreement shall in all respects be governed by
and shall be construed in accordance with the laws of the State of
Texas.
10.5 Severability. If any provision or part thereof of this Agreement
is found to be prohibited, unenforceable or invalid under the laws of any
jurisdiction, the provision or part thereof shall be ineffective only to the
extent of such prohibition, unenforceability or invalidity under the applicable
law without effecting the enforceability or validity of such provision in any
other jurisdiction and without invalidating the remainder of such provision or
other provisions in this Agreement.
10.6 Injunctive Relief. The Company acknowledges that a breach of any
of the provisions hereof would cause irreparable harm to WEDGE and agrees that
in the event of any such threatened breach WEDGE shall be entitled to injunctive
relief and that it shall not be required to post any bond in excess of $1,000.
10.7 Term. Defined terms not defined herein shall have the meaning
ascribed thereto in the Debenture.
10.8 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been made when
delivered or mailed, first-class postage prepaid, by certified mail, return
receipt requested.
If to WEDGE:
WEDGE Energy Services, L.L.C.
0000 Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: President
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with a copy to:
WEDGE Energy Services, L.L.C.
0000 Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
with a copy to:
Xxxxxx X. Xxxxxx, Esq.
XxXxxxx, Xxxx & Xxxxxx
0000 Xxxx Xxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
If to the Company:
Pioneer Drilling Company
0000 Xxxxxxxx, Xxxxxxxx X
Xxx Xxxxxxx, Xxxxx 00000
with a copy to:
Xxxx X. Xxxxx
Xxxxxxxx and Xxxxxxxxx, PC
000 Xxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000
10.9 Headings. The headings of the sections of this Agreement have been
inserted for convenience or reference only and shall in no way restrict or
otherwise modify any of the terms or provisions hereof.
10.10 Arbitration.
Negotiation Period. Any dispute, controversy or claim arising out of or relating
to this Agreement, or any alleged breach hereof, will be subject to binding
arbitration in accordance with this Section 10.10. If such a dispute,
controversy or claim exists, the parties shall attempt for a 30-day period (the
"Negotiation Period") from the date any party gives any one or more of the other
parties notice (a "Dispute Notice") pursuant to this Section, to negotiate in
good faith, a resolution of the dispute. The Dispute Notice shall set forth with
specificity the basis of the dispute. During the Negotiation
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Period, representatives of each party involved in the dispute who have authority
to settle the dispute shall meet at mutually convenient times and places and use
their best efforts to resolve the dispute.
Commencement of Arbitration. If a resolution is not reached by the parties prior
to the end of the Negotiation Period, either party may provide a written request
to the American Arbitration Association within ten (10) days from the end of
such period requesting the selection of three (3) arbitrators (the "Panel") to
arbitrate the parties' respective rights and obligations with respect to the
matters set forth in the Dispute Notice. Each arbitrator on the Panel shall be
experienced in the arbitration of complex commercial disputes.
Discovery. Each party to an arbitration shall be entitled to such discovery as
the Panel shall determine is appropriate.
Expenses of Arbitration. The expenses of the Panel shall be paid by the party
that does not substantially prevail on the merits in the arbitration (as
determined by the award of the Panel).
Location of Arbitration. The arbitration shall take place in Houston,
Texas.
AAA Rules. Except as expressly provided in this Section 10.10, the Arbitration
shall be conducted in accordance with the Commercial Rules of the America
Arbitration Association as then in effect.
Attorneys' Fees and Expenses. The party that substantially prevails on the
merits of the arbitration (as defined by the Panel) shall be entitled to
reasonable attorneys' fees, costs, expenses, and necessary disbursements in
addition to any other relief to which such party may be entitled.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first set forth above.
COMPANY: HOLDER:
PIONEER DRILLING COMPANY WEDGE ENERGY SERVICES, L.L.C.
By: /s/ XXXXXXX X. XXXXXX By: /s/ XXXXXXX X. XXXXX
--------------------------- -----------------------------
Name: Xxxxxxx X. Xxxxxx Name: Xxxxxxx X. Xxxxx
------------------------- ---------------------------
Title: CEO Title: President
------------------------ ---------------------------
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EXHIBIT "A"
DEBENTURE
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EXHIBIT "B"
FORM OF OPINION OF XXXXXXXX & XXXXXXXXX
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