Exhibit (d)(3)
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NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT (this "Agreement") is entered into as of
March 29, 2001, by and among PURE RESOURCES, INC., a Delaware corporation
("Parent"), HALLWOOD ENERGY CORPORATION, a Delaware corporation (the "Company"),
and THE HALLWOOD GROUP INCORPORATED, a Delaware corporation ("Hallwood Group"),
which beneficially owns shares of Common Stock of the Company.
RECITALS
A. The Company is engaged in the following business (the "Business"):
development, exploration, acquisition and production of oil and gas properties,
including, without limitation, (i) the ownership of oil and gas property
interests (including, without limitation, oil and gas leases, working interests,
mineral fee interests and royalty and overriding royalty interests), (ii) the
ownership and operation of real and personal property used or useful in
connection with exploration for Hydrocarbons, the development of Hydrocarbon
reserves upon discovery thereof and the production of Hydrocarbons from xxxxx
located on oil and gas properties and (iii) the ownership of equity interests in
corporations, partnerships or other entities engaged in the exploration,
development, transportation, marketing and production of Hydrocarbons from xxxxx
located on oil and gas properties. For the purposes of this Agreement,
"Hydrocarbons" means oil, gas, or other liquid or gaseous hydrocarbons and other
substances produced in association therewith.
B. Parent, PURE RESOURCES II, INC., a Delaware corporation and wholly owned
subsidiary of Parent ("Purchaser"), and the Company are parties to that certain
Agreement and Plan of Merger dated as of March 29, 2001 (the "Merger
Agreement"), providing for the merger of Purchaser with and into the Company
(the "Merger").
C. As a condition and essential inducement to Parent's and Purchaser's
willingness to enter into the Merger Agreement and in consideration of the
transactions contemplated by the Merger Agreement, Hallwood Group has agreed to
the provisions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants and agreements in the Merger Agreement, the payment by Parent to
Hallwood Group of $7,250,000 upon the Closing, as defined in the Merger
Agreement, of the Merger and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Hallwood Group hereby
covenants and agrees as follows:
1. NONCOMPETITION AND CONFIDENTIALITY.
(a) Without the prior written consent of Parent and the Company, during
the period commencing on the date hereof and ending on the date that is
three years after the
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Effective Time (as defined in the Merger Agreement), Hallwood Group and its
Affiliates shall not:
(i) directly or indirectly (including, without limitation,
through any existing or future Affiliate or any other entity or person
Hallwood Group is in any way associated with), own, manage, operate,
control, enable (whether by license, sublicense, assignment or
otherwise) or otherwise engage or participate in, or be connected as a
shareholder, director, officer, employee, partner, member, lender,
guarantor, agent or advisor of, or consultant to, any corporation,
limited liability company, partnership, joint venture or other entity
or person that, directly or indirectly, engages or competes in the
Business in the counties of Dawson, Gaines, Xxxxxxxxx, Xxxxxx, Xxxxxx,
Midland, Xxxxxx and Xxxxxxx within the State of Texas and the counties
of Chaves, Eddy, Lea and San Xxxx within the State of New Mexico and
the county of La Plata within the State of Colorado; and
(ii) compete with the Company or its Affiliates for any
acquisition, prospect or project that the Company or its Affiliates,
at any time during the three-year period prior to the date hereof, was
pursuing (other than any acquisition, prospect or project pertaining
to properties sold by the Company or any of its Affiliates during the
three-year period prior to the date hereof), as evidenced by (i) the
expenditure of funds by the Company or any of its Affiliates, (ii) a
recommendation by personnel of the Company or any of its Affiliates
for an expenditure of funds (other than nominal administrative
expenditures) or (iii) inclusion or proposal for inclusion in the
capital expenditure budget of the Company or any of its Affiliates;
and the Hallwood Group and its Affiliates shall hold in strict
confidence and shall not, directly or indirectly, disclose or reveal
to any person, or use for the benefit of the Hallwood Group or its
Affiliates or for the benefit of anyone else, any trade secrets,
confidential dealings, or other confidential or proprietary
information of any kind, nature, or description (whether or not
acquired, learned, obtained, or developed by the Hallwood Group or its
Affiliates alone or in conjunction with others) belonging to or
concerning the Company or any of its affiliates, except (i) with the
prior written consent of the Company duly authorized by its Board of
Directors after the date of a Change of Control, (ii) for information
(x) that becomes generally available to the public other than as a
result of unauthorized disclosure by the Hallwood Group or its
Affiliates or (y) that becomes available to the Hallwood Group or its
Affiliates on a nonconfidential basis from a source other than the
Company or its affiliates who is not bound by a duty of
confidentiality, or other contractual, legal, or fiduciary obligation,
to the Company, or (iii) as required by applicable law or legal
process. The Company agrees that after the date hereof, the Hallwood
Group and its Affiliates may engage directly or indirectly in the oil
and gas business and may apply the knowledge, experience and opinions
of the Hallwood Group's officers and employees to those activities.
(b) "Affiliate", as used herein, means, with respect to any person or
entity, any person or entity directly or indirectly controlling, controlled
by or under direct or indirect
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common control with such other person or entity, or any corporation,
partnership or other entity in which such person or entity owns an equity
interest of 5% or greater.
2. EMPLOYEE HIRING MORATORIUM. During the period commencing on the date
hereof and ending on the date that is six months after payment for any shares of
Company Stock (as defined in the Merger Agreement) pursuant to the Offer (as
defined in the Merger Agreement), neither Hallwood Group nor any of its
Affiliates shall, either on its, his or their own account or for any
corporation, limited liability company, partnership or other entity or person
(including, without limitation, through any existing or future Affiliate of
Hallwood Group), hire any person who presently is an employee of the Company or
any existing or future Affiliate of the Company (whether or not he or she
remains an employee of the Company, unless such employee has been involuntarily
terminated by the Company).
3. STAY OF TIME. In the event a court of competent jurisdiction or other
entity or person mutually selected by the parties to resolve any dispute
(collectively a "Court") has determined that Hallwood Group or its Affiliates
has violated the provisions of this Agreement, the running of the time period of
such provisions so violated shall be automatically suspended as of the date of
such violation and shall be extended for the period of time from the date such
violation commenced through the date that the Court determines that such
violation has permanently ceased.
4. INJUNCTIVE RELIEF. Hallwood Group acknowledges that failure to comply
with this Agreement will irreparably harm the Company's business and that the
remedy at law for any breach of this Agreement is and will be inadequate.
Therefore, in the event of a breach or threatened breach by Hallwood Group of
this Agreement, the Company shall be entitled to an injunction restraining
Hallwood Group from breaching or otherwise violating any provision of this
Agreement and/or specific performance without the posting of bond or other
security. Nothing herein contained shall be construed as prohibiting the Company
from pursuing any other remedies available to it or them for such breach or
threatened breach, including, without limitation, the recovery of damages from
Hallwood Group.
5. LICENSE. The Hallwood Group acknowledges and agrees that until dates
specified in Section 6.13 of the Merger Agreement, the Company and its
subsidiaries may continue to freely use the names and trademarks they are using
as of the date of this Agreement, and the Hallwood Group agrees not to take any
action directly or indirectly to stop or interfere with the use of such names
and trademarks by the Company and its subsidiaries during such period.
6. NOTICES. All notices and other communications pursuant to this Agreement
shall be in writing and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier (providing proof of
delivery) or mailed by registered or certified mail (return receipt requested),
postage prepaid, to the parties at the addresses set forth below or to such
other address as the party to whom notice is to be given may have furnished to
the other parties hereto in writing in accordance herewith. Any such notice or
communication shall be deemed to have been delivered and received (A) in the
case of personal delivery, on the date of such delivery, (B) in the case of
telecopier, on the date sent if confirmation of receipt is
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received and such notice is also promptly mailed by registered or certified mail
(return receipt requested), (C) in the case of a nationally-recognized overnight
courier in circumstances under which such courier guarantees next business day
delivery, on the next business day after the date when sent and (D) in the case
of mailing, on the third business day following that on which the piece of mail
containing such communication is posted:
if to Parent or the Company, to:
Pure Resources, Inc.
000 Xxxx Xxxxxxxx
Xxxxxxx, Xxxxx 00000
Telecopier: (000) 000-0000
Attention: Xx. Xxxx Xxxxxxxxx
with a copy to:
Xxxxxxxx & Knight L.L.P.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telecopier: (000) 000-0000
Attention: Xx. Xxx Xxxxxxxxxxx
if to Hallwood Group, to:
The Hallwood Group Incorporated
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telecopier: (000) 000-0000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
party hereto may give any notice, request, demand, claim or other communication
hereunder using any other means (including ordinary mail or electronic mail),
but no such notice, request, demand, claim or other communication shall be
deemed to have been duly given unless and until it actually is received by the
individual for whom it is intended.
7. SEPARATE COVENANTS. The parties expressly agree that the character,
duration and geographical scope of this Agreement are reasonable in light of the
circumstances as they exist on the date upon which this Agreement has been
executed. However, should a determination nonetheless be made by a court of
competent jurisdiction at a later date that the character, duration or
geographical scope of this Agreement is unreasonable in light of the
circumstances as they then exist, then it is the intention and the agreement of
the Company and Hallwood Group that this Agreement shall be construed by the
court in such a manner as to impose only those restrictions on the conduct of
the Company or Hallwood Group that are reasonable in light of the circumstances
as they then exist and as are necessary to assure the Company of the intended
benefit of this Agreement. If, in any judicial proceeding, a court shall
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refuse to enforce all of the separate covenants deemed included herein because,
taken together, they are more extensive than necessary to assure the Company of
the intended benefit of this Agreement, it is expressly understood and agreed
among the parties hereto that those of such covenants that, if eliminated, would
permit the remaining separate covenants to be enforced in such proceeding shall,
for the purpose of such proceeding, be deemed eliminated from the provisions
hereof.
8. SEVERABILITY. If any of the provisions of this Agreement shall
otherwise contravene or be invalid under the laws of any state, country or other
jurisdiction where this Agreement is applicable but for such contravention or
invalidity, such contravention or invalidity shall not invalidate all of the
provisions of this Agreement but rather the Agreement shall be construed,
insofar as the laws of that state or other jurisdiction are concerned, as not
containing the provision or provisions contravening or invalid under the laws of
that state or jurisdiction, and the rights and obligations created hereby shall
be construed and enforced accordingly.
9. GOVERNING LAW; CONSENT TO JURISDICTION; CERTAIN WAIVERS. This Agreement
shall be construed in accordance with and governed by the internal laws (without
reference to choice or conflict of laws) of the State of Texas. Each of the
parties hereto consents to the jurisdiction of any state or federal court
located within the Dallas metropolitan area of the State of Texas and
irrevocably agrees that all actions or proceedings relating to this Agreement
shall be litigated in one of such courts, and each of the parties waives any
objection that it may have based on improper venue or forum non conveniens to
the conduct of any such action or proceeding in any such court and waives
personal service of any and all process upon it, and consent to all such service
of process made in the manner set forth in Section 6. Nothing contained in this
Section 9 shall affect the right of any party to serve legal process on any
other party in any other manner permitted by law. The parties hereto waive all
rights to a jury trial in connection with actions arising in connection with
this Agreement.
10. AMENDMENTS AND WAIVERS.
(a) This Agreement may be modified only by a written instrument duly
executed by each party hereto.
(b) No waiver by a party of any default, misrepresentation or breach of
a warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation or
breach of a warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent occurrence. No failure or
delay by a party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided under applicable law.
11. ATTORNEYS' FEES. Should any litigation, arbitration or other proceeding
be commenced between the parties concerning this Agreement (including, without
limitation, the enforcement hereof and the rights and duties of the parties
hereunder), the party prevailing shall
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be entitled, in addition to such other relief as may be granted, such party's
attorneys' fees in connection with such litigation, arbitration or other
proceeding.
12. ENTIRE AGREEMENT. This Agreement, together with the Merger Agreement
and the ancillary documents executed in connection therewith, contains the
entire understanding of the parties, supersedes all prior and contemporaneous
agreements and understandings relating to the subject matter hereof and shall
not be amended except by a written instrument hereafter signed by all of the
parties hereto.
13. COUNTERPARTS. This Agreement may be executed by the parties in separate
counterparts, each of which, when so executed and delivered, shall be an
original, but all of which, when taken as a whole, shall constitute one and the
same instrument.
14. SECTION HEADINGS AND REFERENCES. The headings of each Section,
subsection or other subdivision of this Agreement are for reference only and
shall not limit or control the meaning thereof. All references to a Section are
references to a Section of this Agreement, unless otherwise specified, and
include all subparts thereof.
15. ASSIGNS. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors, heirs, personal
representatives and permitted assigns. Neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof nor any of
the documents executed in connection herewith may be assigned by any party
without the consent of the other parties; provided, however, that the Company
may assign its rights hereunder, without the consent of Hallwood Group, to any
existing or future Affiliate of the Company or Parent and to any person or
entity that acquires or succeeds to all or any part of the Business. No such
assignment shall relieve the assigning party of its obligations hereunder if
such assignee does not perform such obligations.
16. FURTHER ASSURANCES. From time to time, at the Company's request and
without further consideration, Hallwood Group shall execute and deliver such
additional documents and take all such further action as reasonably requested by
Company, to make effective, in the most expeditious manner possible, the terms
of this Agreement.
17. EXPENSES. Each party hereto shall pay its own expenses in connection
with this Agreement.
18. EARLY TERMINATION. Notwithstanding any other provision of this
Agreement, this Agreement shall terminate and be of no further force and effect
in the event that the Merger shall not occur and the Merger Agreement is
terminated in accordance with its terms.
19. CAPITALIZED TERMS. Capitalized terms used and not defined herein have
the respective meanings ascribed to them in the Merger Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
PURE RESOURCES, INC.
By: /s/ Xxxx Xxxxxxxxx
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Name: Xxxx Xxxxxxxxx
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Title: President
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HALLWOOD ENERGY CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxx
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Title: President
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THE HALLWOOD GROUP
INCORPORATED
By: /s/ Xxxxxxx X. Xxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxx
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Title: Executive Vice President
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