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EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
AMONG
XXXXXXXXX ENERGY, INC.
XXXXXXXXX DRILLING COMPANY LP, LLLP
AND
XXXXX DRILLING CORPORATION
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TABLE OF CONTENTS
Page
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ARTICLE I - THE MERGER............................................................................................1
Section 1.1 The Merger...................................................................................1
Section 1.2 Effective Time...............................................................................2
Section 1.3 Effects of the Merger........................................................................2
Section 1.4 Certificate of Limited Partnership...........................................................2
Section 1.5 Conversion of Securities; Merger Consideration...............................................2
Section 1.6 Closing Date Modified Working Capital, Adjustment to Merger Consideration;
Payment of Merger Consideration..............................................................2
Section 1.7 No Fractional Shares.........................................................................4
Section 1.8 No Further Ownership Rights in Company Common Stock..........................................4
Section 1.9 Further Assurances...........................................................................4
Section 1.10 Closing......................................................................................4
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF PARENT.............................................................5
Section 2.1 Organization, Standing and Power.............................................................5
Section 2.2 Authority; Non-Contravention.................................................................5
Section 2.3 Capital Structure............................................................................6
Section 2.4 SEC Documents................................................................................6
Section 2.5 Environmental Matters........................................................................6
Section 2.6 Litigation...................................................................................8
Section 2.7 Brokers......................................................................................8
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF COMPANY...........................................................8
Section 3.1 Organization, Standing and Power.............................................................8
Section 3.2 Capital Structure............................................................................9
Section 3.3 Ownership of Company Common Stock............................................................9
Section 3.4 Authority; Non-Contravention.................................................................9
Section 3.5 Financial Statements........................................................................10
Section 3.6 Absence of Material Adverse Change..........................................................10
Section 3.7 Taxes.......................................................................................10
Section 3.8 Real and Personal Property; Title Thereto...................................................11
Section 3.9 Accounts Receivable.........................................................................12
Section 3.10 Liabilities.................................................................................12
Section 3.11 Insurance...................................................................................12
Section 3.12 Contracts and Other Agreements..............................................................12
Section 3.13 Records.....................................................................................12
Section 3.14 Transactions with Affiliates................................................................13
Section 3.15 Employee Benefit Plans; Employment Agreements...............................................13
Section 3.16 Labor Matters...............................................................................14
Section 3.17 Environmental Matters.......................................................................14
Section 3.18 Litigation..................................................................................15
Section 3.19 Governmental Licenses and Permits; Compliance with Law......................................15
Section 3.20 Brokers.....................................................................................15
Section 3.21 Bank Accounts...............................................................................15
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Section 3.22 Distributions to Shareholders of Company....................................................15
Section 3.23 Workers' Compensation Claims................................................................16
Section 3.24 Company Shareholders........................................................................16
Section 3.25 Termination of Employee Plans...............................................................16
Section 3.26 Basis in Subsidiary Stock...................................................................16
ARTICLE IV - REPRESENTATIONS AND WARRANTIES REGARDING SUB........................................................16
Section 4.1 Organization, Standing and Ownership........................................................16
Section 4.2 Authority; Non-Contravention................................................................16
ARTICLE V - COVENANTS RELATING TO CONDUCT OF BUSINESS............................................................17
Section 5.1 Conduct of Business Pending the Merger......................................................17
Section 5.2 No Solicitation.............................................................................19
ARTICLE VI - ADDITIONAL AGREEMENTS...............................................................................19
Section 6.1 Fees and Expenses...........................................................................19
Section 6.2 Reasonable Efforts..........................................................................19
Section 6.3 Public Announcements........................................................................20
Section 6.4 Indemnification.............................................................................20
Section 6.5 Certain Tax Matters.........................................................................23
Section 6.6 Access to Information.......................................................................23
Section 6.7 Filing of Registration Statement on Form S-3................................................24
Section 6.8 Condition of Company Equipment..............................................................24
Section 6.9 Company Business and Financial Records......................................................24
Section 6.10 Employee Benefits...........................................................................24
Section 6.11 Delivery of Daily Drilling Reports..........................................................25
Section 6.12 No Solicitation of Employees................................................................25
ARTICLE VII - CONDITIONS PRECEDENT TO THE MERGER.................................................................25
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger..................................25
Section 7.2 Conditions to Obligation of Company to Effect the Merger....................................26
Section 7.3 Conditions to Obligations of Parent and Sub to Effect the Merger............................28
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER.................................................................30
Section 8.1 Termination.................................................................................30
Section 8.2 Effect of Termination.......................................................................31
Section 8.3 Amendment...................................................................................31
Section 8.4 Waiver......................................................................................31
ARTICLE IX - POST CLOSING COVENANTS..............................................................................32
Section 9.1 Access to Information.......................................................................32
ARTICLE X - GENERAL PROVISIONS...................................................................................32
Section 10.1 Notices.....................................................................................32
Section 10.2 Interpretation..............................................................................34
Section 10.3 Counterparts................................................................................34
Section 10.4 Entire Agreement; No Third-Party Beneficiaries..............................................34
Section 10.5 Governing Law...............................................................................34
Section 10.6 Assignment..................................................................................34
Section 10.7 Severability................................................................................34
Section 10.8 Enforcement of This Agreement...............................................................35
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SCHEDULE I Shareholders of Xxxxx Drilling Corporation
SCHEDULE II Working Capital and Capital Expenditures
SCHEDULE III Affiliates of Company Shareholders
EXHIBIT A-1 Non-Competition Agreement - XxXxxxx X. Xxxxx
EXHIBIT A-2 Non-Competition Agreement - Xxxxx X. Xxxxx
EXHIBIT B Registration Rights Agreement
EXHIBIT C-1 Investment Representation Letter - XxXxxxx X. Xxxxx
EXHIBIT C-2 Investment Representation Letter - Xxxxx X. Xxxxx
EXHIBIT D Form of Selling Shareholder Questionnaire
EXHIBIT E Tax Indemnity Promissory Note
EXHIBIT F-1 Company Option Agreement
EXHIBIT F-2 JDC Option Agreement
EXHIBIT F-3 XxXxxxx Option Agreement
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 5, 2001 (this
"Agreement"), among XXXXXXXXX ENERGY, INC., a Delaware corporation ("Parent"),
XXXXXXXXX DRILLING COMPANY LP, LLLP, a Delaware registered limited liability
limited partnership and a wholly-owned indirect subsidiary of Parent ("Sub"),
and XXXXX DRILLING CORPORATION, an Oklahoma corporation ("Company") (Sub and
Company being hereinafter collectively referred to as the "Constituent
Entities").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent and Company and
the general partner and limited partner of Sub have approved and declared fair
to and advisable and in the best interests of their respective stockholders, in
the case of Parent and Company, and partners, in the case of Sub, the merger of
Company with and into Sub (the "Merger"), upon the terms and subject to the
conditions set forth herein, whereby each issued and outstanding share of Common
Stock, par value $10.00, of Company ("Company Common Stock") will be converted
into cash and shares of PEC common stock as provided herein;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, Parent, Sub and Company 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 Revised Uniform Limited Partnership
Act ("DULPA") and the Oklahoma General Corporation Act ("OGCA"), Company shall
be merged with and into Sub at the Effective Time (as hereinafter defined).
Following the Merger, the separate corporate existence of Company shall cease
and Sub shall continue as the surviving entity (the "Surviving Entity") under
the name "Xxxxxxxxx Drilling Company LP, LLLP," and shall succeed to and assume
all the rights and obligations of Company in accordance with DULPA.
Section 1.2 Effective Time. The Merger shall become effective when the
Certificate of Merger (the "Certificate of Merger"), executed in accordance with
the relevant provisions of
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DULPA, is filed with the Secretary of State of the State of Delaware. When used
in this Agreement, the term "Effective Time" shall mean the date and time at
which the Certificate of Merger is accepted for record. The filing of the
Certificate of Merger shall be made as soon as practicable after the
satisfaction or waiver of the conditions to the Merger set forth herein.
Notwithstanding the Effective Time as defined in this Section, for accounting
and tax purposes, the Merger will be deemed to be effective at 12:01 a.m. on
January 1, 2001, and all transactions effected by Company after that date and
prior to the Effective Time will be for the account of Surviving Entity and will
be so reported by Company and Surviving Entity.
Section 1.3 Effects of the Merger. The Merger shall have the effects
set forth in Section 17-211 of DULPA.
Section 1.4 Certificate of Limited Partnership. The Certificate of
Limited Partnership of Sub, as in effect immediately prior to the Effective
Time, shall be the Certificate of Limited Partnership of Surviving Entity until
thereafter changed or amended as provided therein or by applicable law.
Section 1.5 Conversion of Securities; Merger Consideration. At the
Effective Time, by virtue of the Merger and without any action on the part of
either shareholder of Company, the shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time shall be converted into the
right to receive $10,710,838 cash, subject to adjustment pursuant to Section
1.6, and 660,886 shares of Parent Common Stock (the "Parent Shares"). The Parent
Shares and cash as adjusted are referred to herein as the "Merger
Consideration." All such shares of Company Common Stock, when so converted,
shall no longer be outstanding and shall automatically be canceled and retired
and each holder of a certificate representing shares of Company Common Stock
(the "Certificate") 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 1.7.
Section 1.6 Closing Date Modified Working Capital, Adjustment to Merger
Consideration; Payment of Merger Consideration.
(a) Not less than three business days prior to Closing,
Company will deliver to Parent an estimate of its Modified Working Capital
(defined below) as of Closing (the "Estimated Closing Date Modified Working
Capital"). To the extent that the Estimated Closing Date Modified Working
Capital is less than $6.5 million minus the Estimated Qualified Capital
Expenditures (defined below), such difference shall be deducted from the cash
portion of the Merger Consideration. The Merger Consideration, as adjusted
pursuant to the preceding sentence, shall be paid to the Company Shareholders at
Closing.
For purposes of this Section 1.6(a):
o "Modified Working Capital" means Working Capital less
Qualified Capital Expenditures.
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o "Working Capital" means cash, plus marketable
securities, receivables and inventory, less accounts
payable and accrued liabilities, including tax
liabilities.
o "Qualified Capital Expenditures" means capital
expenditures for drilling equipment booked: (i) after
September 30, 2000, and on or before November 13,
2000 (increase in accounts payable or reduction in
cash will cause a reduction of Working Capital), and
(ii) on or after November 13, 2000, and up to and
including the date of Closing, with prior approval of
A. Xxxxx Xxxxxxxxx, President and Chief Operating
Officer of Parent, required for individual purchases
on or after November 13, 2000, in excess of $5,000
per purchase.
o "Estimated Qualified Capital Expenditures" means the
amount of Qualified Capital Expenditures used in
calculating the Estimated Closing Date Modified
Working Capital.
Working Capital and capital expenditures shall be determined on a modified
accrual tax basis of accounting consistent with prior disclosures of Company to
Parent as set forth on Schedule II, which will include, among other accruals,
accruals for all taxes payable by Company.
(b) As promptly as practicable (but in no event later than 60
business days after Closing), the shareholders of the Company listed on Schedule
I attached hereto (collectively, the "Company Shareholders") shall deliver to
Parent (i) a consolidated balance sheet of Company dated as of December 31, 2000
(the "Closing Balance Sheet"), (ii) a consolidated statement of income for the
two months ended December 31, 2000, and (iii) an accompanying closing statement
(the "Closing Statement") reasonably detailing the Company Shareholders'
determination of Company's Modified Working Capital as of the date of Closing
(the "Actual Closing Date Modified Working Capital") each of which shall (x) be
complete and correct in all material respects, (y) be prepared in conformity
with modified accrual tax basis accounting consistently applied, and (z) present
fairly the financial condition of the Company at the dates presented and the
results of operations of Company for the periods covered. Parent must, within 30
business days after Parent's receipt of the Closing Date Balance Sheet and the
Closing Statement, give written notice (the "Notice") to the Company
Shareholders specifying in reasonable detail Parent's objections, if any, with
respect thereto, including, without limitation, any objections relating to the
Company shareholder's determination of the Closing Date Balance Sheet and the
Actual Closing Date Modified Working Capital. With respect to any disputed
amounts, the parties shall meet in person and negotiate in good faith during the
10 business day period (the "Resolution Period") after the date of the Company
Shareholders' receipt of the Notice to resolve any such disputes. If the parties
are unable to resolve all such disputes within the Resolution Period, then
within five business days after the expiration of the Resolution Period, all
unresolved disputes shall be submitted to the Independent Accountant (as
defined) who shall be engaged to provide a final and conclusive resolution of
all unresolved disputes within 15 business days after such engagement. The
determination of the Independent Accountant shall be final, binding and
conclusive on the parties hereto, and the fees and expenses of the Independent
Accountant shall be borne by the party that the Independent
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Accountant determines is the nonprevailing party or, in the discretion of the
Independent Accountant, may be split between Parent and Sub, on the one hand,
and the Company Shareholders, on the other. For purposes of this Agreement,
"Independent Accountant" means an independent accountant mutually agreed upon by
Parent and Company.
(c) To the extent the Actual Closing Date Modified Working
Capital is less than the Estimated Closing Date Modified Working Capital, the
Company Shareholders shall pay such deficiency (together with interest at the
rate of nine percent (9%) per annum from the Closing Date until paid) to Parent
within five business days after its final determination pursuant to Section
1.6(b). To the extent the Actual Closing Date Modified Working Capital is
greater than the Estimated Closing Date Modified Working Capital, such excess
shall be promptly paid to the Company Shareholders in immediately available
funds (together with interest at the rate of nine percent (9%) per annum from
the Closing Date until paid).
Section 1.7 No Fractional Shares. No certificates representing
fractional shares of Parent Common Stock shall be issued. Rather, the fractional
share shall be rounded up or down to the nearest full share with .5 of a share
being rounded up.
Section 1.8 No Further Ownership Rights in Company Common Stock. All
Merger Consideration issued and paid in accordance with the terms hereof shall
be deemed to have been issued and paid in full satisfaction of all rights
pertaining to the shares of Company Common Stock.
Section 1.9 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 or their designees shall
be authorized to execute and deliver, in the name and on behalf of either of the
Constituent Entities, all such deeds, bills of sale, assignments and assurances
and do, in the name and on behalf of such Constituent Entities and at Parent's
expense, 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
Entities and otherwise to carry out the purposes of this Agreement.
Section 1.10 Closing. The closing of the transactions contemplated by
this Agreement ("Closing") shall take place at the offices of Xxxxxxxxx &
Xxxxxxxxx L.L.P., Dallas, 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 VII hereof
shall have been fulfilled or waived, or at such other time and place as Parent
and Company shall agree.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to Company as follows:
Section 2.1 Organization, Standing and Power. Parent (i) is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power and
authority to carry on its business as now being conducted, and (ii) is in good
standing in each jurisdiction where the character of its business owned or held
under lease or the nature of its activities makes such qualification necessary,
except where the failure to be so qualified would not individually or in the
aggregate, have a Material Adverse Effect on Parent. "Material Adverse Change"
or "Material Adverse Effect" means, when used with respect to Parent or Company
any change or effect that is or, so far as can reasonably be determined, is
likely to be materially adverse to the assets, properties, condition (financial
or otherwise), business or results of operations of Parent and its subsidiaries
taken as a whole or of Company, as the case may be.
Section 2.2 Authority; Non-Contravention. Parent has all requisite
power and authority to enter into this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated therein, including the
Merger. The execution and delivery by Parent of this Agreement and the
consummation by Parent of the Merger have been duly authorized by all necessary
corporate action on the part of Parent. This Agreement has been duly executed
and delivered by Parent and (assuming the valid authorization, execution and
delivery of this Agreement by Company) constitutes a valid and binding
obligation of Parent enforceable against Parent in accordance with its terms,
except to the extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws of general
applicability relating to or affecting the enforcement of creditors' rights and
by the effect of general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law). The execution
and delivery of this Agreement do not or will not, as the case may be, and the
consummation of the transactions contemplated hereby and thereby and compliance
with the provisions hereof and thereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to the loss of a material benefit under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of Parent under, any provision of (i) the Certificate of
Incorporation or Bylaws of Parent, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Parent, or (iii) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Parent
or any of its properties or assets, other than, in the case of clauses (ii) or
(iii), any such conflicts, violations, defaults, rig losses, liens, security
interests, charges or encumbrances that, individually or in the aggregate, would
not have a Material Adverse Effect on Parent, materially impair the ability of
Parent to perform its obligations hereunder or under the Registration Rights
Agreement or prevent the consummation of any of the transactions contemplated
hereby or thereby. No filing or registration with, or authorization, consent or
approval of, any domestic (federal and state), foreign or supranational court,
commission, governmental body, regulatory agency, authority or tribunal (a
"Governmental Agency:) is required by or with respect to Parent in connection
with the execution and delivery of this Agreement or is necessary for the
consummation by Parent of the Merger, except for (i) in connection or in
compliance, with the provisions of the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934 (the "Exchange Act"),
(ii) such consents and approvals, orders, registrations, authorizations,
declarations and filings as may be required under the "Blue
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Sky" laws of the State of Oklahoma, (iii) such filings and approvals as may be
required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 (the
"Improvements Act"), and (iv) such other consents, orders, authorizations,
registrations, declarations and filings, the failure of which to be obtained or
made would not, individually or in the aggregate, have a Material Adverse Effect
on Parent or materially impair the ability of Parent to perform its obligations
hereunder or prevent the consummation of the transaction contemplated hereby.
Section 2.3 Capital Structure. As of the date hereof, the authorized
capital stock of Parent consists of 50,000,000 shares of common stock, par value
$0.01 per share ("Parent Common Stock") and 1,000,000 shares of preferred stock,
par value $0.01 per share ("Parent Preferred Stock"). At the close of business
on November 30, 2000, (i) 37,149,736 shares of Parent Common Stock were validly
issued and outstanding, fully paid and nonassessable and free of preemptive
rights; and (ii) no shares of Parent Preferred Stock are issued and outstanding.
The Parent Common Stock is designated as a national market security on an
inter-dealer quotation system by the National Association of Securities Dealers,
Inc. The Parent Shares issued as a part of the Merger Consideration in
accordance with this Agreement will be, when so issued, duly authorized, validly
issued, fully paid and non-assessable and free of preemptive rights.
Section 2.4 SEC Documents. Parent has filed all required documents with
the Securities and Exchange Commission ("SEC") since January 1, 1998 (the
"Parent/SEC Documents"). As of their respective dates, the Parent/SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and none of the Parent/SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
consolidated financial statements of Parent included in the Parent/SEC Documents
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles (except, in the case of the unaudited statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto) and fairly present
the consolidated financial position of Parent and its consolidated subsidiaries)
as at the dates thereof and the consolidated results of their operations and
statements of cash flows for the periods then ended (subject, in the case of the
unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein).
Section 2.5 Environmental Matters.
(a) Except to the extent that the inaccuracy of any of the
following, individually or in the aggregate, would not have a Material Adverse
Effect on Parent, to the actual knowledge of the executive officers of Parent:
(i) Parent and its subsidiaries hold, and are in
compliance with and have been in compliance with for the last three
years, all Environmental Permits, and are otherwise in substantial
compliance and have been in substantial compliance for the last three
years with, all applicable Environmental Laws and there is no condition
that is
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reasonably likely to prevent or materially interfere prior to the date
of Closing with compliance by Parent and its subsidiaries with
Environmental Laws;
(ii) no modification, revocation, reissuance,
alteration, transfer or amendment of any Environmental Permit, or any
review by, or approval of, any third party of any Environmental Permit
is required in connection with the execution or delivery of this
Agreement or the consummation by Parent of the transactions
contemplated hereby or the operation of the business of Parent or any
of its subsidiaries on the date of the Closing;
(iii) neither Parent nor any of its subsidiaries,
including Sub, has received any Environmental Claim, nor has any
Environmental Claim been threatened against Parent or any of its
subsidiaries;
(iv) neither Parent nor any of its subsidiaries has
entered into, agreed to or is subject to any outstanding judgment,
decree, order or consent arrangement with any governmental authority
under any Environmental Laws, including without limitation those
relating to compliance with any Environmental Laws or to the
investigation, cleanup, remediation or removal of Hazardous Materials;
(v) there are no circumstances that are reasonably
likely to give rise to liability under any agreements with any person
pursuant to which Parent or any of its subsidiaries would be required
to defend, indemnify, hold harmless, or otherwise be responsible for
any violation by or other liability or expense of such person, or
alleged violation by or other liability or expense of such person,
arising out of any Environmental Law; and
(vi) there are no other circumstances or conditions
that are reasonably likely to give rise to liability of Parent or any
of its subsidiaries under any Environmental Laws.
(b) For purposes of this Agreement, the terms below shall have
the following meanings:
"Environmental Claim" means any written complaint,
notice, claim, demand, action, suit or judicial,
administrative or arbitral proceeding by any person to Parent
or any of its subsidiaries (or, for purposes of Section 3.17,
Company or Subsidiary) asserting liability or potential
liability (including without limitation, liability or
potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resource damages,
property damage, personal injury, fines or penalties) arising
out of, relating to, based on or resulting from (i) the
presence, discharge, emission, release or threatened release
of any Hazardous Materials at any location, (ii) circumstances
forming the basis of any violation or alleged violation of any
Environmental Laws or Environmental Permits, or (iii)
otherwise relating to obligations or liabilities of Parent or
any of its subsidiaries (or, for purposes of Section 3.17
Company or Subsidiary) under any Environmental Law.
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"Environmental Permits" means all permits, licenses,
registrations, exemptions and other governmental
authorizations required under Environmental Laws for Parent or
any of its subsidiaries (or, for purposes of Section 3.17,
Company or Subsidiary) to conduct its operations as presently
conducted.
"Environmental Laws" means all applicable foreign,
federal, state and local statutes, rules, regulations,
ordinances, orders, decrees and common law relating in any
manner to pollution or protection of the environment, to the
extent and in the form that such exist at the date hereof.
"Hazardous Materials" means all hazardous or toxic
substances, wastes, materials or chemicals, petroleum
(including crude oil or any fraction thereof) and petroleum
products, asbestos and asbestos-containing materials,
pollutants, contaminants and all other materials and
substances, including but not limited to radioactive
materials, regulated pursuant to any Environmental Laws.
Section 2.6 Litigation. There is no suit, action, investigation or
proceeding pending or, to the knowledge of the executive officers of Parent,
threatened against Parent or any of its subsidiaries at law or in equity before
or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind, that would, if adversely determined, impair
the ability of Parent to perform its obligations hereunder or to consummate the
transactions contemplated hereby, and there is no judgment, decree, injunction,
rule or order of any court, governmental department, commission, board, bureau,
agency, instrumentality or arbitrator to which Parent or any of its subsidiaries
is subject that would impair the ability of Parent to perform its obligations
hereunder or to consummate the transactions contemplated hereby.
Section 2.7 Brokers. No broker, investment banker or other person is
entitled to any broker's, finder's or similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization, Standing and Power. Each of Company and its
wholly owned subsidiary, JDC Exploration, Inc. ("Subsidiary"), is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Oklahoma and has the requisite corporate power and authority to carry
on its business as now being conducted. Each of Company and Subsidiary is duly
qualified to do business, and is in good standing, in each jurisdiction where
the character of its
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properties owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
individually, or in the aggregate, have a Material Adverse Effect on the
Company. Other than Subsidiary, Company has no subsidiaries. For purposes of
this section, subsidiary means any corporation, partnership, joint venture or
other legal entity of which Company (either alone or through any other
subsidiary) owns, directly or indirectly, 50% or more of the stock or other
equity interests, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
Section 3.2 Capital Structure. The authorized capital stock of Company
consists of 4,000 shares of Company Common Stock. At the close of business on
the day immediately preceding the date of this Agreement, 2,010 shares of
Company Common Stock were validly issued, outstanding, fully paid and
nonassessable and free of preemptive rights. There are no options, warrants,
rights, commitments, agreements, arrangements or undertakings of any kind to
which Company is a party or by which it is bound obligating Company to issue,
additional shares of capital stock of Company.
Section 3.3 Ownership of Company Common Stock. Section 3.3 of Company
disclosure schedule dated as of the date of this Agreement previously delivered
to Parent ("Company Disclosure Schedule") sets forth a true and correct list of
the ownership of Company Common Stock by the shareholders of Company (referred
to herein as the "Company Shareholders"). Each of the Company Shareholders
beneficially holds such Company 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 (as defined below in this Section), options,
warrants, purchase rights, contracts, commitments, equities, claims and demands.
Neither of the Company Shareholders is a party to (i) any option, warrant,
purchase right, or other contract or commitment that could require him to sell,
transfer, or otherwise dispose of any Company Common Stock (other than pursuant
to this Agreement) or (ii) any voting trust, proxy, or other agreement or
understanding with respect to Company Common Stock. For purposes of this
Agreement "Liens" means liens, mortgages, pledges, security interests,
encumbrances, claims or charges of any kind.
Section 3.4 Authority; Non-Contravention. Company has all requisite
power and authority to enter into this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated therein, including the
Merger. This Agreement has been duly executed and delivered by Company and
(assuming the valid authorization, execution and delivery of this Agreement by
Parent and Sub) constitutes a valid and binding obligation of Company
enforceable against it in accordance with its terms, except to the extent
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws of general applicability
relating to or affecting the enforcement of creditors' rights and by the effect
of general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law). The execution and delivery of
this Agreement do not, and the consummation of the Merger and compliance with
the provisions hereof will not, conflict with, or result in any violation of, or
default (with or without notice of lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
the loss of a material benefit under, or result in the creation of any lien,
security interest, charges or encumbrances upon any of the properties or assets
of Company under, any provision of (i) the Articles of Incorporation or
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Bylaws of Company (true and complete copies of which as of the date hereof have
been delivered to Parent), (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to Company or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Company or any of its
respective properties or assets, other than, in the case of clauses (ii) or
(iii), any such conflicts, violations, defaults, rights, liens, losses, security
interests, charges or encumbrances that, individually or in the aggregate, would
not have a Material Adverse Effect on Company, materially impair the ability of
Company to perform its obligations hereunder or prevent the consummation of the
Merger. Except as set forth on Section 3.4 of the Company Disclosure Schedule or
such filings and approvals as may be required under the Improvements Act, no
filing or registration with, or authorization, consent or approval of, any
Governmental Entity is required by or with respect to Company in connection with
the execution and delivery of this Agreement by Company or is necessary for the
consummation by Company of the Merger or any other transaction contemplated by
this Agreement.
Section 3.5 Financial Statements. Included in Section 3.5 of the
Company Disclosure Schedule are copies of the following unaudited financial
statements (collectively, the "Company Financial Statements") of Company: (i)
consolidated balance sheet and consolidated statement of income for and as of
the year ended October 31, 2000, (ii) consolidating balance sheets as of October
31, 1999 and October 31, 2000; and (iii) consolidating statements of income for
each of the years in the four-year period ended October 31, 2000.
Except as may be set forth in Section 3.5 of the Company Disclosure
Schedule, the Company Financial Statements (a) are complete and correct in all
material respects, (b) have been prepared in conformity with modified accrual
tax basis accounting consistently applied, and (c) present fairly the financial
condition of Company at the dates presented and the results of operations of
Company for the periods covered. There does not, and there will not be at
Closing, exist any fact, event, condition or claim known to Company which would
cause a Material Adverse Change in the Company Financial Statements as presented
other than as set forth therein.
Section 3.6 Absence of Material Adverse Change. Except as otherwise set
forth in Section 3.6 of the Company Disclosure Schedule, there has not been any
Material Adverse Change with respect to Company since October 31, 2000.
Section 3.7 Taxes.
(a) Company has filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all material respects.
All Taxes owed by Company (whether or not shown on any tax return) have been
paid. Company currently is not the beneficiary of any extension of time within
which to file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where Company does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no Liens on any of the
assets of Company that arose in connection with any failure (or alleged failure)
to pay any Tax.
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(b) Company has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
(c) Company does not expect any authority to assess any
additional Taxes for any period for which Tax Returns have been filed. There is
no dispute or claim concerning any Tax liability of Company either (A) claimed
or raised by any authority in writing or (B) as to which any of the Company
Shareholders and the directors and officers (and employees responsible for Tax
matters) of Company has knowledge based upon personal contact with any agent of
such authority. None of the Company's federal, state, local, or foreign income
Tax Returns have been audited since October 1994. Company has delivered to
Purchaser correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by Company since October 31, 1994.
(d) Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) Schedule II to this Agreement contains a complete and
accurate accounting of all accruals for taxes due and payable by the Company for
all periods prior to and ending with December 31, 2000.
(f) Company has no obligation to make a payment that will not
be deductible under Code Section 280G. Company has disclosed on its federal
income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Code
Section 6662. Company is not a party to any Tax allocation or sharing agreement.
Company (A) has not been a member of an affiliated group filing a consolidated
federal income Tax Return (other than a group the common parent of which is
Company) and (B) does not have any Liability for the Taxes of any Person (other
than Company) under Reg. Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or otherwise,
other than with respect to Subsidiary.
(g) For purposes of this Agreement, (a) "Code" means the
Internal Revenue Code of 1986, as amended, (b) "Tax" (and, with correlative
meaning, "Taxes" and "Taxable") means any federal, state, local or foreign
income, gross receipts, property, sales, use, license, excise, franchise,
employment, payroll, withholding, alternative or added minimum, ad valorem,
transfer, severance or excise tax, or any other tax, custom, duty, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any governmental authority, and (c) "Tax Return"
means any return, report or similar statement required to be filed with respect
to any Tax (including any attached schedules), including, without limitation,
any information return, claim for refund, amended return or declaration of
estimated Tax.
Section 3.8 Real and Personal Property; Title Thereto. Set forth in
Section 3.8 of the Company Disclosure Schedule is a complete and accurate
schedule of (a) all real and personal property owned by the Company having an
individual fair market value in excess of $20,000 or $50,000 in the aggregate,
including, but not limited to, all drilling rigs, related equipment and
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rolling stock, and (b) any real or personal property held by Company under
lease. Except as set forth in Section 3.8 of the Company Disclosure Schedule,
Company has good and, with respect to the real property, indefeasible title to
all of such real property and personal property, subject to no Liens except for
(i) Liens for taxes not yet delinquent or the validity of which is being
contested in good faith, and (ii) any Liens arising by operation of law securing
obligations not yet overdue. Any real or personal property held by Company under
lease are held under valid and enforceable leases which will continue in full
force and effect immediately after the Closing Date; Company is not in default
with respect to any such lease. Subsidiary owns no assets other than direct and
indirect royalty interests, working interests in oil and gas properties and
leasehold interests and related leasehold equipment.
Section 3.9 Accounts Receivable. Set forth in Section 3.9(a) of the
Company Disclosure Schedule is a complete and accurate schedule of the accounts
receivable of Company as of November 30, 2000, as reflected in the balance sheet
as of that date included in the Company Financial Statements, together with an
accurate aging of those accounts. To the best knowledge of Company, except as
may be set forth in Section 3.9(b) of the Company Disclosure Schedule, the
accounts described in Section 3.9(a) have been collected in full, or are
collectible at their full amounts.
Section 3.10 Liabilities. There are no liabilities of Company of any
kind, whether contingent or fixed, other than (i) liabilities disclosed or
provided for in the balance sheet of Company as of October 31, 2000, included in
the Company Financial Statements or disclosed in Section 3.10 of the Company
Disclosure Schedule, or (ii) liabilities incurred in the ordinary course of
business since October 31, 2000, none of which, either individually or in the
aggregate, may be reasonably expected to be materially adverse to the business,
assets, condition (financial or otherwise) or results of operations of Company.
Section 3.11 Insurance. Set forth in Section 3.11 of the Company
Disclosure Schedule is an accurate and complete list and brief description of
all policies of fire and extended coverage, liability, worker compensation and
other forms of similar insurance or indemnity bonds held by Company. Company is
not in default in any material respect with respect to any provisions of any
such policy or indemnity bond and has not failed to give any notice or present
any claim thereunder in due and timely fashion, which failure would materially
adversely affect the condition (financial or otherwise), results of operations,
assets, liabilities or business of Company.
Section 3.12 Contracts and Other Agreements. Except as disclosed on
Section 3.12 of the Company Disclosure Schedule, Company is not a party to or
bound by any written or oral (i) employment, agency, consulting or similar
contract which cannot be terminated upon 30 days' notice without liability to
Company; (ii) lease, whether as lessor or lessee, with respect to any real or
personal property involving payment or receipt of more than $20,000; (iii)
contract or commitment involving payment or receipt of more than $20,000 a year;
(iv) credit agreements; (v) guarantee, suretyship, indemnification or
contribution agreement; (vi) drilling contracts; or (vii) other contracts not
made in the ordinary course of business.
Section 3.13 Records. Except as set forth in Section 3.13 of the
Company Disclosure Schedule, the stock record books and minute books of Company
are complete and correct in all
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material respects, and record all transactions required to be set forth
concerning all proceedings, consents, actions and meetings of the shareholders
and the Board of Directors of Company.
Section 3.14 Transactions with Affiliates. Except as otherwise set
forth in Section 3.14 of the Company Disclosure Schedule, no Affiliate (as
hereinafter defined) has any direct or indirect interest in or owns directly or
indirectly any asset or right owned by or used in the conduct of the business of
Company or is party to any contract, lease, agreement, arrangement or commitment
used in such business.
"Affiliate" as used in this Section 3.14 means a person which
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under, control with Company. For purposes of this
definition, the officers, directors and shareholders of Company shall be deemed
Affiliates.
Section 3.15 Employee Benefit Plans; Employment Agreements.
(a) With respect to all the employee pension or welfare
benefit plans, incentive programs and compensation agreements and arrangements
of Company, including, but not limited to, the Xxxxx Drilling Corporation 401(k)
Employees' Retirement Plan (the "Company Retirement Plan") and related trust
maintained for the benefit of any current or former employee, officer or
director of Company (collectively, the "Company Plans"), except as would not,
individually or in the aggregate, have a Material Adverse Effect on Company: (i)
none of the Company Plans is a multi-employer plan within the meaning of ERISA;
(ii) none of the Company Plans promises or provides retiree medical or life
insurance benefits to any person, except as otherwise required by law; (iii)
each Company Plan intended to be qualified under Section 401(a) of the Code is
so qualified and nothing has occurred since the date of such letter that could
reasonably be expected to affect the qualified status of such Company Plan; (iv)
each Company Plan has been operated in all respects in accordance with its terms
and the requirements of applicable law, regulations and other administrative
pronouncements; and (v) Company has not incurred any direct or indirect
liability under, arising out of or by operation of Title IV of ERISA in
connection with the termination of, or withdrawal from, any Company Plan or
other retirement plan or arrangement, and no fact or event exists that could
reasonably be expected to give rise to any such liability. The aggregate
projected benefit obligations of any Company Plan subject to Title IV of ERISA
do not exceed the fair market value of the assets of such Company Plan. Except
as set forth in Section 3.15 of the Company Disclosure Schedule, Company has no
Company Plans or any employment or severance agreements with any of its
employees and this transaction will not cause or trigger the payment of any
severance or termination pay to any employee of Company;
(b) Compliance by Company with the following actions on or
prior to Closing will not result in any liability to Surviving Entity from
employees of Company: (i) spinning off from the Company Retirement Plan the
portion of such plan attributable to participants in such plan who will not be
employees of Surviving Entity immediately following Closing; and (ii) other than
the Company Retirement Plan and the Company's health and life insurance
programs, terminating all Company Plans, including those listed in Section 3.15
of Company Disclosure Schedule; and (iii) terminating the participation in the
Company's health and life insurance programs of all employees of Company, X.X.
Xxxxx Drilling Company, Xxxxxxxxx Welding, Inc., L.E.J. Truck and
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Crane, Inc. and any Affiliate of these companies, who will not be employees of
Surviving Entity immediately following Closing, as designated in Section 3.15 of
the Company Disclosure Schedule.
Section 3.16 Labor Matters. (i) Company is not a party to any
collective bargaining agreement or other material contract or agreement with any
labor organization or other representative of employees nor is any such contract
being negotiated; (ii) there is no material unfair labor practice charge or
complaint pending nor, to the knowledge of Company, threatened, with regard to
employees of Company; (iii) there is no labor strike, material slowdown,
material work stoppage or other material labor controversy in effect, or, to the
knowledge of Company, threatened against Company; (iv) as of the date hereof, no
representation question exists, nor to the knowledge of any of the Company are
there any campaigns being conducted to solicit cards from the employees of
Company to authorize representation by a labor organization; (v) Company is not
party to, or is not otherwise bound by, any consent decree with any governmental
authority relating to employees or employment practices of Company; (vi) Company
has not incurred any liability under, and has complied in all respects with, the
Worker Adjustment Retraining Notification Act, and no fact or event exists that
could give rise to liability under such Act; and (vii) except as disclosed in
Section 3.16 of the Company Disclosure Schedule, Company is in compliance with
all applicable agreements, contracts and policies relating to employment,
employment practices, wages, hours and terms and conditions of employment of the
employees, except where the failure to be in compliance with each such
agreement, contract and policy would not, either singly or in the aggregate,
have a Material Adverse Effect on Company.
Section 3.17 Environmental Matters.
(a) Except to the extent that the inaccuracy of any of the
following, individually or in the aggregate, would not have a Material Adverse
Effect on Company, to the actual knowledge of Company or of the Company
Shareholders:
(i) Company and Subsidiary hold, and are in
compliance with and have been in compliance with for the last three
years, all Environmental Permits, and is otherwise in substantial
compliance and has been in substantial compliance for the last three
years with, all applicable Environmental Laws and there is no condition
that is reasonably likely to prevent or materially interfere prior to
the Effective Time with compliance by Company or Subsidiary with
Environmental Laws;
(ii) No modification, revocation, reissuance,
alteration, transfer or amendment of any Environmental Permit, or any
review by, or approval of, any third party of any Environmental Permit
is required in connection with the execution or delivery of this
Agreement or the consummation by Company and Subsidiary of the
transactions contemplated hereby or the operation of the business of
Company on the date of the Closing;
(iii) Neither Company nor Subsidiary has received any
Environmental Claim, nor has any Environmental Claim been threatened
against Company or Subsidiary;
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(iv) Neither Company nor Subsidiary has entered into,
agreed to or is subject to any outstanding judgment, decree, order or
consent arrangement with any governmental authority under any
Environmental Laws, including without limitation those relating to
compliance with any Environmental Laws or to the investigation,
cleanup, remediation or removal of Hazardous Materials;
(v) there are no circumstances that are reasonably
likely to give rise to liability under any agreements with any person
pursuant to which Company or Subsidiary would be required to defend,
indemnify, hold harmless, or otherwise be responsible for any violation
by or other liability or expense of such person, or alleged violation
by or other liability or expense of such person, arising out of any
Environmental Law; and
(vi) there are no other circumstances or conditions
that are reasonably likely to give rise to liability of Company or
Subsidiary under any Environmental Laws.
Section 3.18 Litigation. Except as set forth in Section 3.18 of the
Company Disclosure Schedule, there is no suit, action, investigation or
proceeding pending or, to the knowledge of Company, threatened against Company
or Subsidiary 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, and
there is no judgment, decree, injunction, rule or order of any court,
governmental department, commission, board, bureau, agency, instrumentality or
arbitrator to which Company or Subsidiary is subject.
Section 3.19 Governmental Licenses and Permits; Compliance with Law.
Company has not received notice of any revocation or modification of any
federal, state, local or foreign governmental license, certification, tariff,
permit, authorization or approval, the revocation or modification of which would
have a Material Adverse Effect on Company. The conduct of the business of
Company or Subsidiary complies with all statutes, laws, regulations, ordinances,
rules, judgments, orders, decrees or arbitration awards applicable thereto,
except for violations or failures to comply, if any, that, individually or in
the aggregate, would not have a Material Adverse Effect on Company.
Section 3.20 Brokers. Except as set forth in Section 3.20 of the
Company Disclosure Schedule, no broker, investment banker or other person is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Company.
Section 3.21 Bank Accounts. A complete list of each bank account
maintained by Company, including safe deposit boxes maintained by Company, the
account balances and the names of the persons authorized to draw down upon or
have access thereto is set forth in Section 3.21 of the Company Disclosure
Schedule.
Section 3.22 Distributions to Shareholders of Company. Except as set
forth in Section 3.22 of the Company Disclosure Schedule, Company, since October
31, 2000, has not declared, set aside or paid any dividends on, or made any
other actual, constructive or deemed
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distributions in respect of, any of its capital stock, or otherwise made any
payments to any of the stockholders of Company.
Section 3.23 Workers' Compensation Claims. Except as set forth in
Section 3.23 of the Company Disclosure Schedule, there are no workers'
compensation claims pending or, to the knowledge of Company, threatened against
Company.
Section 3.24 Company Shareholders. Schedule I attached hereto sets
forth a true and complete list of the holders of all outstanding shares of
Company Common Stock.
Section 3.25 Termination of Employee Plans. Company has taken all
actions agreed to by it pursuant to Section 6.10(a).
Section 3.26 Basis in Subsidiary Stock. As of December 31, 2000: (A)
the basis of JDC in its assets is $2,233,656; (B) the basis of Company in its
stock in JDC (or the amount of any Excess Loss Account as that term is defined
in Treasury Regulation Section 1.1502-19) is $2,233,656; and (C) the amount of
any deferred gain or loss allocable to JDC arising out of any Deferred
Intercompany Transaction as that term is defined in Treasury Regulation Section
1.1502-13) is Zero.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING SUB
Parent and Sub jointly and severally represent and warrant to Company
as follows:
Section 4.1 Organization, Standing and Ownership. Sub is a registered
limited liability limited partnership duly organized, validly existing and in
good standing under the laws of the State of Delaware and is a wholly-owned
indirect subsidiary of Parent. Sub is treated as a "C" Corporation for Federal
Income Tax purposes, within the meaning of the Internal Revenue Code of 1986 (as
amended).
Section 4.2 Authority; Non-Contravention. Sub has all requisite power
and authority to enter into this Agreement and to consummate the Merger and
other transactions contemplated hereby. The execution and delivery of this
Agreement by Sub, the performance by Sub of its obligations hereunder and the
consummation by of the transactions contemplated hereby have been duly
authorized by its General Partner and Limited Partner and, except for the
limited partnership filings required by state law, no other limited partnership
proceedings on the part of Sub are necessary to authorize this Agreement and the
Merger and the other transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Sub and (assuming the due
authorization, execution and delivery of this Agreement by Company) constitutes
a valid and binding obligation of Sub enforceable against Sub in accordance with
its terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other similar
laws of general applicability relating to or affecting the enforcement of
creditors' rights and by the effect of general principles of equity (regardless
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of whether enforceability is considered in a proceeding in equity or at law).
The execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby and compliance with the provisions hereof will
not, conflict with, or result in any violation of, or default (with or without
notice of lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of a material
benefit under, or result in the creation of any lien, security interest, charges
or encumbrances upon any of the properties or assets of Sub under, any provision
of (i) the Certificate of Limited Partnership or Agreement of Limited
Partnership of Sub (true and complete copies of which as of the date hereof have
been delivered to Company), (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to Sub, or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Sub or any of its
properties or assets, other than, in the case of clauses (ii) or (iii), any such
conflicts, violations, defaults, rights, losses, liens, security interests,
charges or encumbrances that individually or in the aggregate, would not have a
Material Adverse Effect on Sub, materially impair the ability of Sub to perform
its obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.1 Conduct of Business Pending the Merger.
(a) Actions. During the period from the date of this Agreement
through the Effective Time, unless Parent consents thereto in writing (which
consent will not be unreasonably withheld), Company shall, in all material
respects, carry on its business in the ordinary course and consistent with past
practice and, to the extent consistent therewith and with the terms of this
Agreement, use all reasonable efforts to preserve intact its current business
organizations, keep available the services of its current officers and employees
and preserve its relationships with customers, suppliers and others having
business dealings with it to the end that its goodwill and ongoing businesses
shall be unimpaired at the Effective Time. Without limiting the generality of
the foregoing, prior to the Effective Time, except as otherwise expressly
contemplated by this Agreement (including, but not limited to, Section 5.1 of
the Company Disclosure Schedule), Company shall not, without the prior written
consent of Parent, which consent will not be unreasonably withheld:
(i) (x) declare, set aside or pay any dividends on,
or make any other actual, constructive or deemed distributions in
respect of, any of its capital stock, or otherwise make any payments to
its shareholders in their capacity as such; (y) split, combine or
reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock; or (z) purchase, redeem or otherwise
acquire any shares of capital stock of its or any other securities
thereof or any rights, warrants or options to acquire any such shares
or other securities;
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(ii) issue, deliver, sell, pledge, dispose of or
otherwise encumber any shares of its capital stock, any other voting
securities or equity equivalent or any securities convertible into, or
grant any rights, warrants or options to acquire, any such shares,
voting securities or convertible securities or equity equivalent;
(iii) amend its Articles of Incorporation or amend in
any material respects its Bylaws;
(iv) acquire, merge or consolidate with, or purchase
a portion of the assets of or equity in, any corporation, partnership,
association or other business organization or division thereof or
otherwise acquire any assets, in each case that involves a transaction
exceeding $10,000 in the aggregate, or commence any proceedings with
respect thereto, or engage in any negotiations with any person or
entity concerning any such transaction, excluding, however, the
purchase of equipment from Xxxxxxxxx Supply referenced in Section 3.14
of Company Disclosure Schedule, and any Qualified Capital Expenditures
contemplated by Section 1.6 of this Agreement;
(v) sell, lease or otherwise dispose of or agree to
sell, lease or otherwise dispose of any of its assets that is material,
individually or in the aggregate;
(vi) make any capital expenditures in excess of
$5,000 per expenditure without the prior written consent of A. Xxxxx
Xxxxxxxxx, President and Chief Operating Officer of Parent, and as
otherwise set forth on Section 5.1 of the Company Disclosure Schedule,
which consent will not be unreasonably withheld;
(vii) (A) pay, discharge, or satisfy any material
claims, liabilities, or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), except for the payment, discharge
or satisfaction of its liabilities or its obligations in the ordinary
course of business or in accordance with their terms as in effect on
the date hereof; (B) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation or a
dissolution, restructuring, recapitalization or reorganization; (C)
enter into any collective bargaining agreement, successor collective
bargaining agreement or amended collective bargaining agreement; (D)
change any accounting principle used by it, except for such changes
required to be implemented prior to the Effective Time pursuant to
generally accepted accounting principles; (E) settle or compromise any
litigation brought against it, other than settlements or compromises of
any litigation where the amount paid in settlement or compromise
(including without limitation the cost to it, as the case may be, of
complying with any provision of such settlement or compromise other
than cash payments) does not exceed $10,000, exclusive of amounts
covered by insurance; (F) enter into any new or amend any existing
drilling contract without the prior approval of A. Xxxxx Xxxxxxxxx,
President and Chief Operating Officer of Parent, which consent will not
be unreasonably withheld;
(viii) (A) enter into any new, or amend any existing,
severance agreement or arrangement, deferred compensation arrangement
or employment agreement with any officer, director or employee, except
that, it may hire additional employees to the extent
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deemed by its management to be in its best interests; provided, that it
may not enter into any employment or severance agreement or any
deferred compensation arrangement with any such additional employees,
(B) adopt any new, or amend any existing, incentive, retirement or
welfare benefit arrangements, plans or programs for the benefit of
current, former or retired employees (other than amendments required by
law or to maintain the tax qualified status of such plans under the
Code), or (C) grant any increases in employee compensation, other than
in the ordinary course or pursuant to promotions, in each case
consistent with past practice (which shall include normal individual
periodic performance reviews and related compensation and benefit
increases);
(ix) (y) incur any indebtedness for borrowed money or
guarantee any such indebtedness in excess of $10,000 or issue or sell
any debt securities or guarantee any debt securities of others or (z)
make any loans, advances or capital contributions to, or investments
in, any other person, other than Parent; or
(x) authorize or enter into any agreement to do any
of the foregoing.
(b) Advice of Changes. Company shall promptly advise Parent
orally and in writing of any change or event which would have a Material Adverse
Effect on Company or would prohibit the Merger or the other transactions
contemplated hereby.
Section 5.2 No Solicitation. From and after the date hereof, Company
will not, and will cause its officers, directors, employees, agents and other
representatives not to, directly or indirectly, solicit or initiate any offer
for Company or the capital stock of Company, and not to solicit or initiate,
directly or indirectly, discussions, negotiations, considerations or inquiries
concerning an offer for Company, from any person, or engage in discussions or
negotiations relating thereto, or provide to any other person any information or
data relating to Company or the contract drilling operations of Company for the
purpose of, or have any substantive discussions with any person relating to, or
otherwise cooperate with or assist or participate in, or facilitate, any offer
or any inquiry or proposal which would reasonably be expected to lead to any
effort or attempt by any person to effect an offer, or agree to endorse any such
inquiry or offer.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Fees and Expenses. All costs and expenses incurred by
Parent or Sub in connection with this Agreement and the transactions
contemplated hereby shall be paid by Parent; such costs and expenses incurred by
Company and its shareholders, including the costs, expenses and fee payable to
the broker referenced on Section 3.20 of the Company Disclosure Schedule, shall
be paid by the Company Shareholders.
Section 6.2 Reasonable Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
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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 6.3 Public Announcements. Before issuing any press release or
otherwise making any public statements with respect to the transactions
contemplated by this Agreement, Parent, on the one hand, and Company, on the
other, will consult with each other, and will undertake reasonable efforts to
agree upon the terms of such press release, and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by applicable law or by obligations pursuant to any listing
agreement with the Nasdaq National Market.
Section 6.4 Indemnification.
(a) After the Effective Time, the Company Shareholders (the
"Indemnifying Shareholders") shall severally, and not jointly (allocated
according to their respective ownership of common stock of the Company),
indemnify and hold Parent and Sub harmless against and in respect of all
actions, suits, demands, judgments, costs and expenses (including reasonable
attorneys' fees of Parent or Sub) in excess of $50,000 in the aggregate
("Shareholders' Basket Amount"), but not exceeding $10,000,000 in the aggregate
amount (the "Shareholders' Indemnity Cap"), relating to any misrepresentation,
breach of any representation or warranty or non-fulfillment of any agreement on
the part of Company or Company Shareholders under this Agreement; provided,
however, that the Shareholders' Basket Amount shall not be applicable in respect
of any claim for indemnification relating to any actions, suits, demands,
judgments, costs and expenses (including reasonable attorneys' fees) arising out
of or based upon (i) a fraudulent misrepresentation by Company in this
Agreement, (ii) any unpaid or undisclosed Tax liabilities of Company, or (iii)
any of the actions taken by Company pursuant to its agreements in Section
6.10(a). Any written notice of claim for indemnification shall be given to the
Indemnifying Shareholders by Parent or Sub within 30 days after it has knowledge
of any misrepresentation or breach of warranty or non-fulfillment of any
agreement on the part of Company, which may give rise to a claim for
indemnification. The indemnification obligation provided for in this Section
6.4(a) shall terminate and be of no further force and effect after 24 months
from the Effective Time, except (i) as to any representation or warranty as to
which a written notice of claim for indemnification has been given to the
Indemnifying Shareholders, prior to the expiration of such 24-month period; and
(ii) for a claim for indemnification for unpaid or undisclosed Tax liability of
Company given to the Indemnifying Shareholders, prior to the thirtieth day
following expiration of the full applicable statutory period of limitations.
Notwithstanding anything in this Section 6.4(a) to the
contrary, the Shareholders' Basket Amount and the Shareholders' Indemnity Cap
will be reduced by any amount of indemnity payable by either or both of the
Company Shareholders pursuant to any of the following agreements each of which
is dated of even date with this Agreement: (i) the Asset Purchase Agreement
among Parent, Sub and X.X. Xxxxx Drilling Company, (ii) the LLC Interest
Purchase Agreement between Sub and Xxxxxxxxx Welding, Inc. and (iii) the LLC
Interest Purchase Agreement between Sub and L.E.J. Truck & Crane, Inc.
determined without reference to the availability of a basket amount under such
agreements, such that the aggregate basket amount applicable under this
Agreement and
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all of such other agreements with respect to the Company Shareholders will be
$50,000 and the aggregate indemnity cap amount applicable under this Agreement
and all of such other agreements with respect to the Company Shareholders will
be $10,000,000.
(b) In addition to, and not as a part of, the indemnification
provided for in Section 6.4(a), the Indemnifying Shareholders, severally, but
not jointly, agree to indemnify and hold Parent and Sub harmless against and in
respect of all actions, suits, demands, judgments, costs and expenses (including
reasonable attorneys' fees of Parent and Sub) relating to, arising out of, or as
a consequence of the deaths of the three employees of Company referred to in
paragraph number 2 in Section 3.18 of the Company Disclosure Schedule, the race
and sex discrimination suits referred to in paragraphs numbered 1 and 2 of
Section 3.15 of the Company Disclosure Schedule and any age discrimination or
similar claim or suit brought by Xxxxxx Xxxxxx (the "Assumed Claims"), with the
understanding of the Indemnifying Shareholders that the Shareholders' Basket
Amount and the Shareholders' Indemnity Cap do not apply to this indemnification
and there is no time limit on the indemnification obligations of the
Indemnifying Shareholders under this paragraph with respect to the Assumed
Claims. The Indemnifying Shareholders agree to assume the defense of the Assumed
Claims upon the Closing and to permit Parent reasonable opportunity to monitor
such defense. Parent agrees that it will, and it will cause the Company after
the Closing to, provide the Indemnifying Shareholders with such access during
regular business hours to Company records and other assistance (at the expense
of the Indemnifying Shareholders) relating to the Assumed Claims as the
Indemnifying Shareholders may reasonably request from time to time.
(c) After the Effective Time, Parent and Sub (the
"Indemnifying Companies") shall jointly and severally indemnify and hold
Shareholders harmless against and in respect of all actions, suits, demands,
judgments, costs and expenses (including reasonably attorneys' fees of
Shareholders) in excess of $50,000 in the aggregate ("Companies' Basket
Amount"), but not exceeding $10,000,000 in the aggregate amount (the "Companies'
Indemnity Cap"), relating to (i) any misrepresentation, breach of any
representation or warranty or non-fulfillment of any agreement on the part of
the Indemnifying Companies under this Agreement; or (ii) any liability of
Surviving Entity arising from an event occurring after the Effective Time;
provided, however, that the Companies' Basket Amount shall not be applicable in
respect of any claim for indemnification relating to any actions, suits,
demands, judgments, costs and expenses (including reasonable attorneys' fees)
arising out of or based upon: (i) a fraudulent misrepresentation by either of
the Indemnifying Companies in this Agreement; or (ii) the failure of Parent or
Sub to honor the provisions of subparagraphs (i) through (vi) of Section
6.10(b). Any written notice of claim for indemnification shall be given to
either of the Indemnifying Companies by either Company Shareholder within 30
days after he has knowledge of any misrepresentation or breach of warranty or
non-fulfillment of any agreement on the part of the Indemnifying Companies,
which may give rise to a claim for indemnification. The indemnification
obligation provided for in this Section 6.4(c) shall terminate and be of no
further force and effect after 24 months from the Effective Time, except as to
any representation or warranty as to which a written notice of claim for
indemnification has been given to the Indemnifying Shareholders, prior to the
expiration of such 24-month period.
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Notwithstanding anything in this Section 6.4(c) to the
contrary, the Companies' Basket Amount and the Companies' Indemnity Cap will be
reduced by any amount of indemnity payable by either or both of the Indemnifying
Companies pursuant to any of the following Agreements each of which is dated of
even date with this Agreement: (i) the Asset Purchase Agreement among Parent,
Sub and X.X. Xxxxx Drilling Company, (ii) the LLC Interest Purchase Agreement
between Sub and Xxxxxxxxx Welding, Inc. and (iii) the LLC Interest Purchase
Agreement between Sub and L.E.J. Truck & Crane, Inc. determined without
reference to the availability of a basket amount under such agreements, such
that the aggregate basket amount applicable under this Agreement and all of such
other agreements with respect to the Indemnifying Companies will be $50,000 and
the aggregate indemnity cap amount applicable under this Agreement and all of
such other agreements with respect to the Indemnifying Company will be
$10,000,000.
(d) If for any reason the Internal Revenue Service
determines that the Merger is not properly characterized as a "reorganization"
as defined in Section 368(a) of the Code (a "Redetermination"), and as a result
of the Redetermination the Merger is deemed to be a transaction that is taxable
to the Company, the Indemnifying Shareholders agree that they will loan to
Parent (a "Tax Indemnity Loan") an amount equal to the amount of federal and
state income and franchise taxes, plus accrued interest, that are paid to the
Internal Revenue Service and any applicable state taxing authorities as a result
of the Redetermination (the "Assessed Taxes"), less an amount equal to the
"Deemed Tax Benefit" (as defined below) that has accrued to the date of payment.
The Tax Indemnity Loan shall be made to Parent promptly following final
Redetermination, but in no event later than 20 days after that date. The Tax
Indemnity Loan will be evidenced by a promissory note in the form of Exhibit E
to this Agreement. The "Deemed Tax Benefit" is the sum of (i) the annual amount
of depreciation or amortization that is recognizable by Parent and Sub that is
attributable to the increase in basis of the assets of the Company resulting
from the Redetermination multiplied by 38.72% (35% Federal rate, 3.72% effective
OK rate), from the date of the Closing until the end of the depreciation periods
for the Company's assets, which Parent agrees for purposes of this Agreement
will be set at the shortest periods for each asset class permitted by the Code,
and in no event will exceed seven years from the date of Closing for purposes of
the calculations contemplated by this Subsection (b), plus (ii) an amount equal
to 38.72% of any federal income tax deduction allowed to Parent by Sub
attributable to the payment of interest to the Internal Revenue Service in
respect of the tax due from a Redetermination or the payment of state income
taxes arising from a Redetermination. The amount of any penalties paid by
Surviving Entity with respect to a Redetermination shall be promptly repaid to
the Surviving Entity by the Indemnifying Shareholders.
Terms of Tax Indemnity Loan - Amount - as stated above
Maturity - 7 years from closing
Payment: principal due on each March 15;
principal is payable in an amount equal to
the Deemed Tax Benefit for the preceding
year.
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Section 6.5 Certain Tax Matters.
(a) The Company Shareholders shall be responsible for causing
to be filed any final and any amended tax returns of Company 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 Parent for approval (which
approval shall not be unreasonably withheld), signature and filing at least
thirty (30) calendar days prior to the due date for the filing of such final and
any amended returns.
(b) For federal income tax purposes, Parent and Company shall
each characterize the transactions contemplated by this Agreement as a
"reorganization" as defined in Section 368(a)(1)(A) of the Code, and will file
all tax returns in a manner consistent with such characterization.
Section 6.6 Access to Information.
(a) Company shall afford to Parent, and to Parent's
accountants, counsel, financial advisers and other representatives, reasonable
access and permit them to make such inspections as they may reasonably require
during the period from the date of this Agreement through the Effective Time to
all books, contracts, commitments and records relating to its operations and,
during such period, Company shall furnish promptly to Parent (i) access to each
report, schedule, registration statement and other document filed by it during
such period pursuant to the requirements of federal or state laws and (ii) all
other information concerning Company, its business, properties and personnel as
Parent may reasonably request. Except as required by law, Parent will hold, and
will cause its affiliates, associates and representatives to hold, any
non-public information in confidence until such time as such information
otherwise becomes publicly available and shall use its reasonable best efforts
to ensure that such affiliates, associates and representatives do not disclose
such information to others without the prior written consent of Company. In the
event of termination of this Agreement for any reason, Parent shall promptly
return or destroy all non-public documents so obtained from Company and any
copies made of such documents for Parent. Parent shall not, and shall cause its
affiliates, associates and representatives not to, use any non-public
information regarding Company in any way detrimental to Company.
No investigation pursuant to this Section 6.6(a) shall affect
any representation or warranty of Company in this Agreement or any condition to
the obligations of Parent and Sub.
(b) Parent and Sub shall afford to Company, and to Company's
accountants, counsel, financial advisers and other representatives, reasonable
access and permit them to make such inspections as they may reasonably require
during the period from the date of this Agreement through the date of Effective
Time to all books, contracts, commitments and records relating to their
operations and, during such period, Parent and Sub shall furnish promptly to
Company (i) access to each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of federal
or state laws and (ii) all other information concerning Parent and Sub, their
business, properties and personnel as Company may reasonably request. Except as
required by law, Company and the Company Shareholders will hold, and will cause
their affiliates, associates and representatives to hold, any non-public
information in confidence until such time as such information otherwise becomes
publicly available and shall use their reasonable best efforts to
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ensure that such affiliates, associates and representatives do not disclose such
information to others without the prior written consent of Parent and Sub. In
the event of termination of this Agreement for any reason, Company shall
promptly return or destroy all non-public documents so obtained from Parent and
Sub and any copies made of such documents for Company. Company shall not, and
shall cause its affiliates, associates and representatives not to, use any
non-public information regarding Parent and Sub in any way detrimental to Parent
and Sub.
No investigation pursuant to this Section 6.6(b) shall affect
any representation or warranty of Parent and Sub in this Agreement or any
condition to the obligations of Company.
Section 6.7 Filing of Registration Statement on Form S-3. Parent agrees
to file a Registration Statement on Form S-3 with the SEC on the Effective Time
covering the distribution of the Parent Shares and further agrees to use its
reasonable best efforts to respond to any comments from the SEC and cause such
Registration Statement to become effective with the SEC within 45 days of its
filing, all as more fully provided in the Registration Rights Agreement attached
hereto as Exhibit B.
Section 6.8 Condition of Company Equipment. Parent and Sub agree to
accept the drilling rigs and related equipment and rolling stock owned by
Company on an "as is, where is" basis.
Section 6.9 Company Business and Financial Records. All business and
financial records of Company shall remain the property of Company and
transferred to Sub as a part of the Merger.
Section 6.10 Employee Benefits.
(a) Company agrees to terminate on or prior to Closing all
Company Plans, including those listed on Section 3.15 of the Company Disclosure
Schedule, other than the Company Retirement Plan and the Company's health and
life insurance programs, and further agrees to terminate the participation in
the Company's health and life insurance programs of all employees of Company,
X.X. Xxxxx Drilling Company, Xxxxxxxxx Welding, Inc. L.E.J. Truck and Crane,
Inc. and any Affiliate of these companies, who will not become employees of
Surviving Entity immediately following Closing as specified in Section 3.15 of
the Company Disclosure Schedule. In addition, Company agrees on or prior to
Closing to spin-off from the Company Retirement Plan the portion of such plan
attributable to participants in the plan who will not be employees of Surviving
Entity.
(b) Promptly following Closing, the Company Retirement Plan
will be amended by Parent to make provisions under that plan consistent with
Parent's 401(k) Employee's Retirement Plan (including, but not limited to,
amendments to have discretionary matching of employee donations rather than
mandatory), and then will be merged into Parent's 401(k) Employee's Retirement
Plan. Employees of Company who continue as employees of the Surviving Entity
shall be provided with employee benefits under Parent plans and programs
(including, but not limited to, stock option, life insurance, medical, profit
sharing (including 401(k), severance and salary continuation as fringe
benefits). With respect to employees of Company who will be employees of
Surviving Entity immediately after the Effective Time, (i) Parent agrees to
offer
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such employees benefits substantially similar to those of existing employees of
PDC employed in substantially similar capacities, (ii) service with Company or
its predecessors shall be counted for purposes of determining eligibility for
participation, vesting and seniority in all welfare and benefit (including
Parent's 401(k) plan) plans provided under benefit programs of Parent, (iii) any
amounts previously expended by such employees for purposes of satisfying
deductibles, co-payments and out-of-pocket expenses under Company's medical or
dental plans in the current plan year shall be credited for purposes of
satisfying any such requirements under Parent's similar plans, if any; (iv)
service with Company or its predecessors shall be counted for purposes of
determining continuous service and eligibility for safety awards and for
purposes of determining priorities with respect to any reduction-in-force,
layoff and recall rights whenever Parent would normally consider such service
for other employees of PDC; (v) such employees will be credited with all accrued
vacation and sick time as of the Effective Time; and (vi) any life, medical and
disability plans maintained by Parent immediately after the Effective Time shall
not exclude any employee of Company, from eligibility, or deny or reject
benefits from such employee, due to any pre-existing condition.
Section 6.11 Delivery of Daily Drilling Reports. Commencing on the day
following the date of this Agreement and continuing each day up to and including
Closing, Company shall fax the daily drilling report for each of its drilling
rigs to Parent (Attention: A. Xxxxx Xxxxxxxxx, President and Chief Operating
Officer, Fax: (000) 000-0000) on a same-day basis and inform A. Xxxxx Xxxxxxxxx
of any operational problems with any of the xxxxx then in process of being
drilled.
Section 6.12 No Solicitation of Employees. Neither Parent nor the
Surviving Entity will solicit or hire any of the employees of the Company
Shareholders or their affiliates named on Schedule III, for a period of four
years from Closing.
ARTICLE VII
CONDITIONS PRECEDENT TO THE MERGER
Section 7.1 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 Act Waiting Period. The applicable waiting
period under the Improvements Act shall have expired or been terminated.
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(c) Tax Opinion of Xxxxxxxxx & Xxxxxxxxx. L.L.P. The Company
shall have received the opinion of Xxxxxxxxx & Xxxxxxxxx, L.L.P., dated as of
the date of Closing, to the effect that the Merger will qualify as a tax-free
reorganization within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended, which opinion will be reasonably satisfactory
in form and content to Parent and Company Shareholders.
(d) Option Agreements. The option agreement among Company,
Xxxxx X. Xxxxx ("X.X. Xxxxx") and Xxxx Xxxxx Xxxxxx ("X. Xxxxxx") in the form
attached hereto as Exhibit F-1 relating to the purchase by X. X. Xxxxx and X.
Xxxxxx of the oil and gas properties owned by Company shall have been executed
and delivered to PDC (the "Company Option Agreement"). The option agreement
among Subsidiary, X.X. Xxxxx and X. Xxxxxx in the form attached hereto as
Exhibit F-2 relating to the purchase by X. X. Xxxxx and X. Xxxxxx of the oil and
gas properties owned by Subsidiary shall have been executed and delivered to PDC
(the "JDC Option Agreement"). The option agreement between Company and XxXxxxx
X. Xxxxx in the form attached hereto as Exhibit F-3 relating to the purchase by
XxXxxxx X. Xxxxx of the capital stock of Subsidiary shall have been executed and
delivered to PDC (the "XxXxxxx Option Agreement").
(e) Contemporaneous Closings. The transactions contemplated by
the Asset Purchase Agreement among Parent, Sub and X.X. Xxxxx Drilling Company
and the respective LLC Interest Purchase Agreements between Sub and Xxxxxxxxx
Welding, Inc. and between Sub and L.E.J. Truck and Crane, Inc., all of which
agreements are dated of even date with this Agreement, are consummated
contemporaneously with the transaction contemplated by this Agreement.
Section 7.2 Conditions to Obligation of Company to Effect the Merger.
The obligation of Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of the following additional conditions;
provided that Company may waive any of such conditions in its sole discretion:
(a) Performance of Obligations; Representations and
Warranties. Parent and Sub shall have performed in all material respects each of
their agreements contained in this Agreement required to be performed on or
prior to the Closing, each of the representations and warranties of Parent and
Sub contained in this Agreement shall be true and correct on and as of the date
of Closing as if made on and as of such date.
(b) Officers' Certificate. Parent and Sub shall have furnished
to Company a certificate, dated the Closing, signed by the respective
appropriate officers of Parent and Sub, certifying to the effect that to the
best of the knowledge and belief of each of them, the conditions set forth in
Section 7.1 and Section 7.2(a) have been satisfied in full.
(c) Opinion of Xxxxx & Xxxxxxxxx LLP. Company shall have
received an opinion from Xxxxx & Xxxxxxxxx LLP, counsel to Parent and Sub,
dated the date of Closing, substantially to the effect set forth in the
following subparagraphs:
(i) The incorporation, organization, existence and good
standing of Parent and Sub are as stated in this Agreement; the
authorized shares of Parent are as stated in this Agreement; all
outstanding shares of Parent Common Stock are duly and validly
authorized
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and issued, fully paid and nonassessable and have not been issued in
violation of any preemptive right of any stockholders.
(ii) Each of Parent and Sub has full corporate or limited
partnership power and authority, as the case may be, to execute,
deliver and perform this Agreement and this Agreement has been duly
authorized, executed and delivered by Parent and Sub, as the case may
be, and (assuming due and valid authorization, execution and delivery
by Company) constitutes the legal, valid and binding agreement of
Parent and Sub, enforceable against Parent and Sub in accordance with
its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
or other similar laws of general applicability relating to or affecting
the enforcement of creditors' rights and by the effect of general
principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(iii) Parent has full corporate power and authority to
execute, deliver and perform the Registration Rights Agreement and the
Registration Rights Agreement has been duly authorized, executed and
delivered by Parent and (assuming due and valid execution and delivery
of the Registration Rights Agreement) constitutes the legal, valid and
binding agreement of Parent enforceable against Parent in accordance
with its terms, except with respect to the indemnification provisions
thereof, as to which no opinion will be expressed by such counsel, and
except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other
similar laws of general applicability relating to or affecting the
enforcement of creditors' rights and by the effect of general
principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(iv) The execution and performance by Parent and Sub of this
Agreement and by Parent of the Registration Rights Agreement will not
violate the Certificate of Incorporation or Bylaws of Parent or the
Certificate of Limited Partnership or Limited Partnership Agreement of
Sub, as the case may be, and, to the knowledge of such counsel, will
not violate, result in a breach of or constitute a default under any
material lease, mortgage, contract, agreement, instrument, law, rule,
regulation, judgment, order or decree to which Parent or Sub is a party
or by which they or any of their properties or assets may be bound.
(v) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental agency or body
which has not been obtained is required on behalf of Parent and Sub for
the consummation of the transactions contemplated by this Agreement.
(vi) To the knowledge of such counsel, there are no actions,
suits or proceedings, pending or threatened against or affecting Parent
or Sub by any Governmental Entity which seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement.
(vii) The Parent Shares to be issued pursuant to this
Agreement, when so issued, will be duly authorized, validly issued and
outstanding, fully paid and nonassessable.
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In rendering such opinion, counsel for Parent may rely as to matters of fact
upon the representations of officers of Parent or Sub contained in any
certificate delivered to such counsel and certificates of public officials. Such
opinion shall be limited to the General Corporation Law of the State of Delaware
and the laws of the United States of America and the State of Texas.
(d) Registration Statement on Form S-3. Parent shall have
filed a Registration Statement on Form S-3 with the SEC relating to the Parent
Shares.
(e) Registration Rights Agreement. Parent shall have executed
and delivered the Registration Rights Agreement in the form attached hereto as
Exhibit B.
(f) Delivery of Merger Consideration. Parent shall have made
delivery of the Merger Consideration.
Section 7.3 Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to effect the Merger shall be subject
to the fulfillment at or prior to the Closing of the following additional
conditions, provided that Parent may waive any such conditions in its sole
discretion:
(a) Performance of Obligations; Representations and
Warranties. Company shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior to
the Closing and each of the respective representations and warranties of Company
contained in this Agreement shall be true and correct on and as of the Closing
as if made on and as of such date.
(b) Officers' Certificate. Company shall have furnished to
Parent a certificate, dated the Closing, certifying to the effect that to the
best of the knowledge and belief of Company, the conditions set forth in Section
7.1 and Section 7.3(a) have been satisfied.
(c) Opinion of Xxxxxxxxx & Xxxxxxxxx L.L.P. Parent shall have
received an opinion of counsel from Xxxxxxxxx & Xxxxxxxxx L.L.P., counsel to
Company, dated the Closing, substantially to the effect that:
(i) The incorporation, existence, good standing and
capitalization of Company are as stated in this Agreement; the
authorized shares of Company Common Stock are as stated in this
Agreement; all outstanding shares of Company Common Stock are duly and
validly authorized and issued, fully paid and non-assessable and have
not been issued in violation of any preemptive right of stockholders;
and, to the knowledge of such counsel, there is no existing option,
warrant, right, call, subscription or other agreement or commitment
obligating Company to issue or sell, or to purchase or redeem, any
shares of its capital stock other than as stated in this Agreement.
(ii) Company has full corporate power and authority
to execute, deliver and perform this Agreement and this Agreement has
been duly authorized, executed and delivered by Company, and (assuming
the due and valid authorization, execution and delivery by Parent and
Sub) constitutes the legal, valid and binding agreement of Company
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enforceable against Company in accordance with its terms, except to the
extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws
of general applicability relating to or affecting the enforcement of
creditors' rights and by the effect of general principles of equity
(regardless of whether enforceability is considered in a proceeding in
equity or at law).
(iii) The execution and performance by Company of
this Agreement will not violate the Articles of Incorporation or Bylaws
of Company and will not violate, result in a breach of, or constitute a
default under, any material lease, mortgage, contract, agreement,
instrument, law, rule, regulation, judgment, order or decree known to
such counsel to which Company is a party or to which it or any of its
properties or assets may be bound.
(iv) To the knowledge of such counsel, no consent,
approval, authorization or order of any court or governmental agency or
body which has not been obtained is required on behalf of Company for
consummation of the transactions contemplated by this Agreement.
(v) To the knowledge of such counsel, there are no
actions, suits or proceedings, pending or threatened against or
affecting Company by any Governmental Entity which seeks to restrain,
prohibit or invalidate the transactions contemplated by the Agreement.
In rendering such opinion, counsel for Company may rely as to matters of fact
upon the representations of officers of Company contained in any certificate
delivered to such counsel and certificates of public officials. Such opinion
shall be limited to the laws of the United States of America, the State of Texas
and the Oklahoma General Corporation Act.
(d) Opinion Regarding Choice of Law and Forum. Parent and PDC
shall have received an opinion in form and content reasonably satisfactory to
them to the effect that under Oklahoma and Texas law the choice of law and
choice of forum provisions of each of the respective Non-Competition Agreements
dated the date of the Closing among Parent, Sub and each of XxXxxxx X. Xxxxx and
Xxxxx X. Xxxxx constitutes the legal, valid and binding agreement of him
enforceable against him 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 whether enforceability is considered in a
proceeding in equity or at law.
(e) 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 Company.
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(f) Investment Representation Letter. Each Company shareholder
shall have executed and delivered an investment representation letter in the
respective forms attached hereto as Exhibit C-1 and C-II.
(g) Phase I Environmental Report. The conclusions contained in
any Phase I Environmental Report obtained by Sub (at its expense) prior to
Closing relating to the real property owned by Company shall be satisfactory to
Parent.
(h) Company Share Certificates. The Surviving Entity shall
have received all of the Company share certificates from the respective
shareholders of Company duly endorsed to the Surviving Entity.
(i) Non-Competition Agreement. Each of XxXxxxx X. Xxxxx and X.
X. Xxxxx shall have executed and delivered a Non-Competition Agreement in the
respective forms attached hereto as Exhibit A-I and A-II.
(j) Selling Stockholder Questionnaire. Each of XxXxxxx X.
Xxxxx and X.X. Xxxxx shall have executed and delivered the Selling Stockholder
Questionnaire in the form attached hereto as Exhibit D.
(k) Termination of Company Employee Plans. The Company
Shareholders shall have provided evidence satisfactory to Parent that (i) the
Company employee plans, etc., other than the Company Retirement Plan, have been
terminated as required by Section 6.10; and (ii) the portion of the Company
Retirement Plan relating to employees of Company or affiliates thereof who will
not be employees of Surviving Entity immediately following the Closing shall
have been spun out of the Company Retirement Plan.
(l) Receipt from Xxxx Xxxxxxxx Xxxxxxx. Company Shareholders
shall have delivered to Parent and Sub a receipt from Xxxx Xxxxxxxx Xxxxxxx
acknowledging payment of all amounts due or payable under engagement letter
dated June 27, 2000, or otherwise with respect to the transactions contemplated
by this Agreement and the agreements referenced in Section 7.1(e).
(m) Copy of resolutions of the Board of Directors of Company
authorizing and directing the actions agreed to by the Company in Section
6.10(a), which resolutions shall have been certified by the President of
Company.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination. This Agreement may be terminated at any time
prior to the date of Closing:
(a) by mutual written consent of Parent and Company;
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(b) by Parent if Company shall have failed to comply in any
material respect with any of its covenants or agreements contained in this
Agreement required to be complied with by Company prior to the date of such
termination, which failure to comply has not been cured within ten business days
following receipt by Company of notice of such failure to comply;
(c) by Company if Parent or Sub shall have failed to comply in
any material respect with any of its covenants or agreements contained in this
Agreement required to be complied with by Parent or Sub prior to the date of
such termination, which failure to comply has not been cured within ten business
days following receipt by Parent or Sub of notice of such failure to comply;
(d) by either Parent or Company if (i) the Effective Time has
not occurred on or prior to the close of business on the date of this Agreement;
provided, however, that the right to terminate this Agreement pursuant to this
clause shall not be available to any party whose failure to fulfill any
obligation of this Agreement has been the cause of, or resulted in, the failure
of the 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; or
(e) by either Parent or Company if there has been (i) a
material breach by the other of any representation or warranty that is not
qualified as to materiality or (ii) a breach by the other of any representation
or warranty that is qualified as to materiality, in each case which breach has
not been cured within five business days following receipt by the breaching
party of notice of the breach.
Section 8.2 Effect of Termination. In the event of termination of this
Agreement by either Parent or Company, as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of Company, Parent or Sub or their respective officers or directors;
provided, however, that nothing contained in this Section 8.2 shall relieve any
party hereto from any liability for any breach of this Agreement.
Section 8.3 Amendment. This Agreement may be amended by the parties
hereto only by an instrument in writing signed on behalf of each of the parties
hereto.
Section 8.4 Waiver. At any time prior to the date of Closing, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein which may legally be waived. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
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ARTICLE IX
POST CLOSING COVENANTS
Section 9.1 Access to Information. The Surviving Entity agrees that it
will (i) maintain the pre-closing business and financial records of Company in
the offices of Parent in Snyder, Texas for a period of up to six years following
the Closing Date, and (ii) provide the Company Shareholders and their respective
financial and tax advisors access to such records during Surviving Entity's
normal business hours on three days' prior written notice to Surviving Entity,
as set forth in Article X hereof.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, sent by
overnight courier or telecopied (with a confirmatory copy sent by overnight
courier) to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
Xxxxxxxxx Energy, Inc.
0000 Xxxxxx Xxxxxxx
X.X. Xxxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: A. Xxxxx Xxxxxxxxx
President and Chief Operating
Officer
with copies to:
Xxxxxx X. Xxxxxxxx, Esq.
Xxxxx & Xxxxxxxxx LLP
000 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000-0000
(b) if to Company, to:
by mail:
Xxxxx Drilling Corporation
X.X. Xxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: XxXxxxx X. Xxxxx
Chairman
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other deliveries:
Xxxxx Drilling Corporation
00 Xxxxx 00xx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: XxXxxxx X. Xxxxx
Chairman
with copies to:
Xxxxxxx X. Xxxxxxxxxx, Esq.
Xxxxxxxxx & Xxxxxxxxx, L.L.P.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
(c) if to the Indemnifying Shareholders, to:
(i) by mail:
XxXxxxx X. Xxxxx
X.X. Xxx 0000
Xxxxxx, Xxxxxxxx 00000
other deliveries:
XxXxxxx X. Xxxxx
00 Xxxxx 00xx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
(ii) by mail:
Xxxxx X. Xxxxx
X.X. Xxx 0000
Xxxxxx, Xxxxxxxx 00000
other deliveries:
Xxxxx X. Xxxxx
00 Xxxxx 00xx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
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with copies to:
Xxxxxxx X. Xxxxxxxxxx, Esq.
Xxxxxxxxx & Xxxxxxxxx, L.L.P.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Section 10.2 Interpretation. When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated, and the words "hereof," "herein" and "hereunder" and
similar terms refer to this Agreement as a whole and not to any particular
provision of this Agreement, unless the context otherwise requires. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 10.3 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 10.4 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, including the documents and instruments referred to herein, (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (ii) is not intended to confer upon any person other
than the parties any rights or remedies hereunder; provided, however, that legal
counsel for the parties hereto may rely upon the representations and warranties
contained herein and in the certificates delivered pursuant to Sections 7.2(b)
and 7.3(b).
Section 10.5 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 10.6 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
Section 10.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby are not affected in any manner
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.
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Section 10.8 Enforcement of This Agreement. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
IN WITNESS WHEREOF, Parent, Sub and Company have executed this
Agreement as of the date first written above.
PARENT:
XXXXXXXXX ENERGY, INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxx
Attest: Chairman and Chief Executive
Officer
/s/ Xxxxxxxx X. Xxxxxx
-----------------------------
Xxxxxxxx X. Xxxxxx, Secretary
SUB:
XXXXXXXXX DRILLING COMPANY LP,
LLLP
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxx
Attest: Chief Executive Officer
/s/ Xxxxxxxx X. Xxxxxx
-----------------------------
Xxxxxxxx X. Xxxxxx, Secretary
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COMPANY:
XXXXX DRILLING CORPORATION
By: /s/ XxXxxxx X. Xxxxx
-------------------------
XxXxxxx X. Xxxxx
Attest: Chairman
/s/ Xxxxxx Xxxxx
---------------------------
Xxxxxx Xxxxx, Secretary
TO INDUCE XXXXXXXXX ENERGY, INC. AND XXXXXXXXX DRILLING COMPANY LP,
LLLP 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, EACH OF THE UNDERSIGNED, BEING A SHAREHOLDER OF XXXXX DRILLING
CORPORATION, HEREBY AGREES TO VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND IN
FAVOR OF THE MERGER AND ACCEPTS AND AGREES TO BE BOUND BY THE PROVISIONS OF
SECTIONS 1.6(b) AND (c), 6.4(a), (b) AND (d) AND 6.5 OF THIS AGREEMENT.
/s/ XxXxxxx X. Xxxxx /s/ Xxxxx X. Xxxxx
--------------------------- -----------------------------
XxXxxxx X. Xxxxx Xxxxx X. Xxxxx
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SCHEDULE I
XXXXX DRILLING CORPORATION SHAREHOLDERS
Number and Class Percentage
Name of Shares Owned Owned
---- ---------------- ----------
XxXxxxx X. Xxxxx ........................ 1979 98.46
Xxxxx X. Xxxxx .......................... 31 1.54
---- ------
Total .............................. 2010 100.00%
==== ======
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EXHIBIT A-1
XXXXXXXXX DRILLING COMPANY LP, LLLP
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into as of January
__, 2001 (this "Agreement"), by and between XXXXXXXXX ENERGY, INC., a Delaware
corporation ("PEC"), XXXXXXXXX DRILLING COMPANY LP, LLLP, a Delaware registered
limited liability limited partnership and a wholly-owned indirect subsidiary of
PEC ("PDC"), and XxXxxxx X. Xxxxx, an individual residing in Duncan, Oklahoma
("L Xxxxx").
RECITALS:
A. Simultaneously with the execution of this Agreement, PEC and
PDC have entered into that certain Agreement and Plan of
Merger (the "Merger Agreement"), among PEC, PDC and Xxxxx
Drilling Corporation, an Oklahoma corporation ("Company"),
providing for, among other things, the merger of Company with
and into PDC (the "Merger"), and that certain Asset Purchase
Agreement (the "Asset Purchase Agreement") among PEC, PDC and
X.X. Xxxxx Drilling Company, an Oklahoma corporation
wholly-owned by Xxxxx X. Xxxxx ("X.X. Xxxxx"), providing for,
among other things, the sale of certain of the assets of X.X.
Xxxxx Drilling Company to PDC (the "Asset Purchase"), and PDC
has also entered into an LLC Interest Purchase Agreement with
each of Xxxxxxxxx Welding, Inc., and L.E.J. Truck and Crane,
Inc., both Oklahoma corporations wholly owned by L Xxxxx (each
such agreement referred to herein as the "LLC Interest
Purchase Agreement"), providing for, among other things, the
purchase of the limited liability company interests owned by
those companies in their respective subsidiaries (the "LLC
Interest Purchase") (collectively, the Merger, the LLC
Interest Purchase and the Asset Purchase are referred to
herein as the "Transaction").
B. L Xxxxx and X.X. Xxxxx are the sole shareholders of Company.
C. The execution and delivery of this Agreement is a material
inducement to PEC and PDC to enter into the Transaction and is
a condition to consummation of the Merger, and the parties are
entering into this Agreement in order to fulfill such
condition.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound, hereby agree as follows:
1. Period of Agreement.
The period of this Agreement shall commence on the date hereof
and remain in effect through December 31, 2005, unless sooner terminated as the
result of the death of L Xxxxx or extended according to the terms of Section 4
below (the "Non-Compete Period").
2. Covenant Not to Compete.
(a) L Xxxxx covenants and agrees that during the
Non-Compete Period, L Xxxxx shall not, without the
prior written consent of PEC and PDC obtained
according to the
EXH A-1-1
43
terms of Section 2(d) to this Agreement, directly or
indirectly, and whether as a principal or as an
agent, officer, director, employee, consultant, or
otherwise, alone or in association with any other
person or entity, carry on, be engaged, concerned, or
take part in, manage or render services to, or own,
share in the earnings of, or control, hold or invest
in any ownership, control or voting interest of, or
the stock, bonds, or other securities of, any person
or entity which is engaged in, either directly or
indirectly, (hereinafter, "Participate In"), the
contract oil and gas well drilling business (the
"Competitive Business") within the states of Alabama,
Colorado, Louisiana, Mississippi, New Mexico,
Oklahoma, Texas, Utah and Wyoming (the "Restricted
Territory"); provided, however, that L Xxxxx may
passively invest in stock, bonds, or other securities
of any Competitive Business (but may not otherwise
Participate In the Competitive Business) if: (A) such
stock, bonds, or other securities are listed on any
national securities exchange or are registered under
Section 12(g) of the Securities Exchange Act of 1934,
as amended; (B) the investment does not exceed, in
the case of any class of capital stock of any one
issuer, two percent (2%) of the issued and
outstanding shares, or, in the case of bonds or other
securities of any one issuer, two percent (2%) of the
aggregate principal amount thereof issued and
outstanding; and (C) such investment would not
prevent, directly or indirectly, the transaction of
business by PEC and PDC or any affiliate of PEC and
PDC with any state, district, territory, or
possession of the United States or any governmental
subdivision, agency, or instrumentality thereof by
virtue of any statute, law, regulation or
administrative practice. L Xxxxx acknowledges that
(i) the Company's business has been conducted or is
presently proposed to be conducted within the
Restricted Territory; (ii) the customers of Company's
business, prior to the date of the Transaction, have
themselves conducted business throughout the
Restricted Territory; and (iii) that the geographic
restrictions set forth above are reasonable and
necessary to protect the goodwill of the business
being acquired by PEC and PDC pursuant to the
Transaction.
(b) It is understood by and between the parties hereto
that the foregoing covenant by L Xxxxx not to enter
into competition with PEC and PDC as set forth in
Section 2(a) hereof is an essential element of the
Transaction and that, but for the agreement of L
Xxxxx to comply with such covenant, PEC and PDC would
not have agreed to enter into the Transaction. PEC
and PDC, on the one hand, and L Xxxxx, on the other
hand, have independently consulted with their
respective counsel and have been advised in all
respects concerning the reasonableness and propriety
of such covenant, with specific regard to the nature
of the business conducted by PEC and PDC and its
affiliates. L Xxxxx, after consulting with counsel,
agrees that such covenant is reasonable in scope,
geographic area, and duration and necessary to
protect the goodwill acquired and the substantial
investment made by PEC and PDC pursuant to the
Transaction, and that compliance with such covenant
would not impose economic or professional hardship on
L Xxxxx.
(c) Parties agree that the following will not constitute
Competitive Business for the purposes of this
Agreement: (i) buying and selling drilling equipment;
or (ii) engaging in well service business which
includes drilling in shallow holes not to exceed
3,000 feet.
EXH A-1-2
44
(d) In the event L Xxxxx requests the prior written
consent of PEC and PDC to Participate In a
Competitive Business, L Xxxxx shall first notify PEC
and PDC of such request in writing, and PEC and PDC
shall have sixty (60) days (the "Review Period") to
consent to or deny the request, in their sole
discretion. The Review Period shall not begin until
such time as L Xxxxx has provided PEC and PDC with
all relevant information they deem necessary to
conduct such evaluation; provided, however, that PEC
and PDC shall not utilize information requests to
unreasonably delay the start of the Review Period.
3. Restrictions on Soliciting Business of PEC and PDC.
L Xxxxx further covenants and agrees that during the
Non-Compete Period, L Xxxxx will not, either for himself or for any other person
or entity, directly or indirectly, engage in any of the following activities in
a Competitive Business without the express prior written consent of PEC and PDC:
(a) Solicit or hire any of the employees of PEC or PDC or
solicit or take away any of PEC's or PDC's customers,
lessors, or suppliers or attempt any of the
foregoing;
(b) Acquire or attempt to acquire rights providing any
product or service in a Competitive Business within
the Restricted Territory; or
(c) Engage in any act which would interfere with or harm
any business relationship PEC or PDC has with any
customer, lessor, employee, principal or supplier.
(d) For purposes of this Section 3, L Xxxxx, members of
his family and his Affiliates will not be deemed
customers, lessors or suppliers of PDC or PEC.
"Affiliates" shall have the same meaning as given to
it in the Merger Agreement, and shall be limited to
those persons and entities set forth in Section 3.14
of the Company Disclosure Schedule to the Merger
Agreement.
4. Reasonableness of Restrictions; Reformation; Enforcement.
(a) L Xxxxx hereby acknowledges that he is one of two
shareholders in the Company and that, if he were to
Participate In a Competitive Business or otherwise
violates the terms and conditions of this Agreement,
such activity would result in significant loss of the
goodwill acquired by PEC and PDC pursuant to the
Transaction. L Xxxxx further acknowledges and agrees
that the covenants and agreements set forth in this
Agreement formed part of the consideration to the
Transaction and were a material inducement to PEC and
PDC to enter into the Transaction and perform the
obligations resulting therefrom, and that PEC and
PDC, and its owners, would not obtain the benefit of
the bargain from the Transaction as specifically
negotiated by the parties thereto if he were to
Participate In a Competitive Business or otherwise
violates the terms and conditions of this Agreement.
(b) If any portion of the restrictions contained in this
Agreement are held to be unreasonable, arbitrary or
against public policy, then the restrictions shall be
considered divisible, as to the time, business scope
and/or geographic area, with each day of the
specified period being deemed a separate period of
time and each radius mile of the restricted territory
being deemed a separate geographical area, so that
the maximum period of time or geographical area shall
remain effective
EXH A-1-3
45
so long as the same is not unreasonable, arbitrary or
against public policy. In the event any court of
competent jurisdiction determines the restrictions
contained in this Agreement to be unreasonable,
arbitrary or against public policy, a lesser time
period, business scope or geographical area which is
determined to be reasonable, nonarbitrary and not
against public policy may be enforced against L Xxxxx
and/or other restricted parties. If L Xxxxx and/or
other restricted parties shall violate any of the
covenants contained herein and if any court action is
instituted to prevent or enjoin such violation, then
the period of time during which the business
activities of L Xxxxx (or other restricted parties)
shall be restricted, as provided in this Agreement,
shall be lengthened by a period of time equal to the
period between the date of the breach of the terms or
covenants contained in this Agreement and the date on
which the decree of the court disposing of the issues
upon the merits shall become final and not subject to
further appeal.
(c) Without intending to limit the remedies available to
PEC and PDC, L Xxxxx acknowledges that the remedy at
law for any breach by him of the restrictions
contained in this Agreement will be inadequate and
would be difficult to ascertain and therefore, in the
event of the breach or threatened breach of any such
covenants, L Xxxxx agrees that PEC and PDC shall have
the right, in addition to any other rights it may
have, to obtain in any court of competent
jurisdiction specific performance of such Sections of
this Agreement or injunctive relief to restrain any
breach or threatened breach thereof. L Xxxxx (and all
other restricted parties) hereby consents and agrees
that temporary and permanent injunctive relief may be
granted in any proceedings which might be brought to
enforce any such covenants without the necessity of
proof of actual damages or the posting of any bond,
cash or otherwise. In the event PEC or PDC applies
for such an injunction, L Xxxxx shall not raise a
defense thereto that PEC or PDC has an adequate
remedy at law. Nothing herein shall be construed as
prohibiting PEC or PDC from pursuing any other
remedies available to PEC or PDC (whether at law or
in equity) for such breach or threatened breach,
including, without limitation, the recovery of
monetary damages from L Xxxxx. The provisions of this
Section 4 shall survive the expiration, termination
or cancellation of this Agreement.
5. Attorneys Fees and Costs.
If an action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys fees, costs and necessary expenses in addition to any other
relief to which that party may be entitled. This provision is applicable to this
entire Agreement.
6. Representations and Warranties of PEC and PDC and L Xxxxx.
(a) Representations and Warranties of PEC and PDC. Each
of PEC and PDC hereby represents and warrants to L
Xxxxx that: (i) it has all requisite power to enter
into and perform its obligations under this
Agreement; (ii) this Agreement has been duly and
validly authorized by all necessary corporate action
on its part; (iii) the execution of this Agreement by
it and performance of its obligations hereunder do
not require the consent or approval of any other
party; (iv) each of the parties hereto have sought
out and received advice from Texas counsel
EXH A-1-4
46
regarding this Agreement and that the restrictions
and terms contained in this Agreement are reasonable
and necessary to protect the goodwill acquired and
the substantial investment made by PEC and PDC
pursuant to the Transaction; and (v) this Agreement
is a valid and binding obligation of it.
(b) Representations and Warranties of L Xxxxx. L Xxxxx
hereby represents and warrants to PEC and PDC that:
(i) L Xxxxx has the capacity and power to enter into
and perform obligations of L Xxxxx under this
Agreement; (ii) L Xxxxx has duly and validly executed
this Agreement; (iii) the execution of this Agreement
and performance of obligations of L Xxxxx hereunder
do not require the consent or approval of any other
party; (iv) each of the parties hereto have sought
out and received advice from Texas counsel regarding
this Agreement and that the restrictions and terms
contained in this Agreement are reasonable and
necessary to protect the goodwill acquired and the
substantial investment made by PEC and PDC pursuant
to the Transaction; and (v) this Agreement
constitutes a valid and binding obligation of L
Xxxxx.
7. General Provisions.
(a) Compliance with Laws. The parties agree that they
will comply with all applicable laws and regulations
of government bodies or agencies in their respective
performance of their obligations under this
Agreement.
(b) Governing Law and Construction. This Agreement will
be governed by and construed in accordance with the
laws of the State of Texas without reference to its
conflict-of-laws principles. This Agreement's final
form resulted from review and negotiations among the
parties and their attorneys, and no part of this
Agreement should be construed against any party on
the basis of authorship. Any action or proceeding
seeking to enforce any provision of, or based on any
right arising out of, this Agreement may be brought
against any party in the courts of the State of Texas
located in Xxxxxx County or, if it has acquired or
can acquire jurisdiction, in the United States
District Court located in Lubbock, Texas, and each of
the parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in
any such action or proceeding and waives any
objection to venue laid therein.
(c) Entire Agreement; Amendment. Except where specific
reference is made to the Merger Agreement, LLC
Interest Purchase Agreement or the Asset Purchase
Agreement, this Agreement constitutes the entire
agreement among the parties with respect to the
subject matter contained herein and supersedes any
previous oral or written communications,
representations, understandings or agreements with
respect thereto. The terms of this Agreement may be
modified only in a writing, signed by authorized
representatives of both parties.
(d) Assignability. This Agreement will be binding upon
the parties' respective successors and permitted
assigns. Neither party may assign this Agreement
and/or any of its rights and/or obligations hereunder
without the prior written consent of the other party,
and any such attempted assignment will be void;
provided, however, that PEC and/or PDC may assign
this Agreement to a subsidiary or affiliate of PEC
without the prior written consent of L Xxxxx, and
provided further that a transfer by PEC or PDC as a
result of a merger or sale of
EXH A-1-5
47
all or substantially all of the assets of PEC or PDC
with or to a third party that assumes PEC's or PDC's,
as the case may be, obligations hereunder by
operation of law or otherwise shall not constitute a
prohibited assignment under this Section 7(d).
(e) Waiver. A waiver of a breach or default under this
Agreement will not constitute a waiver of any other
breach or default. Failure or delay by either party
to enforce compliance with any term or condition of
this Agreement will not constitute a waiver of such
term or condition.
(f) Severability. If any provision of this Agreement is
declared to be invalid, the parties agree that such
invalidity will not affect the validity of the
remaining provisions of this Agreement, and further
agree, to the extent possible, to substitute for the
invalid provision a valid provision that approximates
the intent and economic effect of the invalid
provision as closely as possible.
(g) Headings. The titles of the Sections and subsections
of this Agreement are for convenience of reference
only and are not to be considered in construing this
Agreement.
(h) Notice. Any notice, request, consent, demand or other
communication required to be given under this
Agreement will be in writing and will be given
personally, by facsimile or by mailing the same,
first-class, postage prepaid to the appropriate
address and facsimile number set forth below or to
such other person or at such other address as may
hereafter be designated by like notice. Notices by
mail will be considered delivered and become
effective three days after the mailing thereof. All
notices by facsimile will be considered delivered and
become effective immediately upon the confirmed (by
answer back or other tangible printed verification or
successful receipt) sending thereof.
To PEC and PDC:
Xxxxxxxxx Drilling Company LP, LLLP
0000 Xxxxxx Xxxxxxx
X.X. Xxxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
Chairman and Chief Executive
Officer
To L Xxxxx:
if by mail:
XxXxxxx X. Xxxxx
X.X. Xxx 0000
Xxxxxx, Xxxxxxxx 00000
other deliveries:
XxXxxxx X. Xxxxx
00 Xxxxx 00xx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
EXH A-1-6
48
with copies to:
Xxxxxxx X. Xxxxxxxxxx, Esq.
Xxxxxxxxx & Xxxxxxxxx, L.L.P.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Facsimile: (000) 000-0000
(i) Counterparts. This Agreement may be executed in
counterparts and by the parties hereto in separate
counterparts, each of which will be deemed an
original, but all of which together will constitute
one and the same instrument.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their respective representatives as of the day and year first above
written.
XXXXXXXXX DRILLING COMPANY LP,
LLLP
By:
----------------------------------
Xxxxxx X. Xxxxxxx
Chief Executive Officer
L XXXXX
-------------------------------------
XxXxxxx X. Xxxxx
EXH A-1-7
49
EXHIBIT A-2
XXXXXXXXX DRILLING COMPANY LP, LLLP
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into as of January
__, 2001 (this "Agreement"), by and between XXXXXXXXX ENERGY, INC., a Delaware
corporation ("PEC"), XXXXXXXXX DRILLING COMPANY LP, LLLP, a Delaware registered
limited liability limited partnership and a wholly-owned indirect subsidiary of
PEC ("PDC"), and Xxxxx X. Xxxxx, an individual residing in Duncan, Oklahoma
("X.X. Xxxxx").
RECITALS:
D. Simultaneously with the execution of this Agreement, PEC and
PDC have entered into that certain Agreement and Plan of
Merger (the "Merger Agreement"), among PEC, PDC and Xxxxx
Drilling Corporation, an Oklahoma corporation ("Company"),
providing for, among other things, the merger of Company with
and into PDC (the "Merger"), and that certain Asset Purchase
Agreement (the "Asset Purchase Agreement") among PEC, PDC and
X.X. Xxxxx Drilling Company, an Oklahoma corporation
wholly-owned by X.X. Xxxxx, providing for, among other things,
the sale of certain of the assets of X.X. Xxxxx Drilling
Company to PDC (the "Asset Purchase"), and PDC has also
entered into an LLC Interest Purchase Agreement with each of
Xxxxxxxxx Welding, Inc., and L.E.J. Truck and Crane, Inc.,
both Oklahoma corporations wholly owned by XxXxxxx X. Xxxxx
(each such agreement referred to herein as the "LLC Interest
Purchase Agreement"), providing for, among other things, the
purchase of the limited liability company interests owned by
those companies in their respective subsidiaries (the "LLC
Interest Purchase") (collectively, the Merger, the LLC
Interest Purchase and the Asset Purchase are referred to
herein as the "Transaction").
E. XxXxxxx X. Xxxxx and X.X. Xxxxx are the sole shareholders of
Company.
F. The execution and delivery of this Agreement is a material
inducement to PEC and PDC to enter into the Transaction and is
a condition to consummation of the Merger, and the parties are
entering into this Agreement in order to fulfill such
condition.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound, hereby agree as follows:
8. Period of Agreement.
The period of this Agreement shall commence on the date hereof
and remain in effect through December 31, 2004, unless sooner terminated as the
result of the death of X.X. Xxxxx or extended according to the terms of Section
4 below (the "Non-Compete Period").
9. Covenant Not to Compete.
(e) X.X. Xxxxx covenants and agrees that during the
Non-Compete Period, X.X. Xxxxx shall not, without the
prior written consent of PEC and PDC obtained
according
EXH A-2-1
50
to the terms of Section 2(d) to this Agreement,
directly or indirectly, and whether as a principal or
as an agent, officer, director, employee, consultant,
or otherwise, alone or in association with any other
person or entity, carry on, be engaged, concerned, or
take part in, manage or render services to, or own,
share in the earnings of, or control, hold or invest
in any ownership, control or voting interest of, or
the stock, bonds, or other securities of, any person
or entity which is engaged in, either directly or
indirectly, (hereinafter, "Participate In"), the
contract oil and gas well drilling business (the
"Competitive Business") within the states of Alabama,
Colorado, Louisiana, Mississippi, New Mexico,
Oklahoma, Texas, Utah and Wyoming (the "Restricted
Territory"); provided, however, that X.X. Xxxxx may
passively invest in stock, bonds, or other securities
of any Competitive Business (but may not otherwise
Participate In the Competitive Business) if: (A) such
stock, bonds, or other securities are listed on any
national securities exchange or are registered under
Section 12(g) of the Securities Exchange Act of 1934,
as amended; (B) the investment does not exceed, in
the case of any class of capital stock of any one
issuer, two percent (2%) of the issued and
outstanding shares, or, in the case of bonds or other
securities of any one issuer, two percent (2%) of the
aggregate principal amount thereof issued and
outstanding; and (C) such investment would not
prevent, directly or indirectly, the transaction of
business by PEC and PDC or any affiliate of PEC and
PDC with any state, district, territory, or
possession of the United States or any governmental
subdivision, agency, or instrumentality thereof by
virtue of any statute, law, regulation or
administrative practice. X.X. Xxxxx acknowledges that
(i) the Company's business has been conducted or is
presently proposed to be conducted within the
Restricted Territory; (ii) the customers of Company's
business, prior to the date of the Transaction, have
themselves conducted business throughout the
Restricted Territory; and (iii) that the geographic
restrictions set forth above are reasonable and
necessary to protect the goodwill of the business
being acquired by PEC and PDC pursuant to the
Transaction.
(f) It is understood by and between the parties hereto
that the foregoing covenant by X.X. Xxxxx not to
enter into competition with PEC and PDC as set forth
in Section 2(a) hereof is an essential element of the
Transaction and that, but for the agreement of X.X.
Xxxxx to comply with such covenant, PEC and PDC would
not have agreed to enter into the Transaction. PEC
and PDC, on the one hand, and X.X. Xxxxx, on the
other hand, have independently consulted with their
respective counsel and have been advised in all
respects concerning the reasonableness and propriety
of such covenant, with specific regard to the nature
of the business conducted by PEC and PDC and its
affiliates. X.X. Xxxxx, after consulting with
counsel, agrees that such covenant is reasonable in
scope, geographic area, and duration and necessary to
protect the goodwill acquired and the substantial
investment made by PEC and PDC pursuant to the
Transaction, and that compliance with such covenant
would not impose economic or professional hardship on
X.X. Xxxxx.
(g) Parties agree that the following will not constitute
Competitive Business for the purposes of this
Agreement: (i) buying and selling drilling equipment;
or (ii) engaging in well service business which
includes drilling in shallow holes not to exceed
3,000 feet.
EXH A-2-2
51
(h) In the event X.X. Xxxxx requests the prior written
consent of PEC and PDC to Participate In a
Competitive Business, X.X. Xxxxx shall first notify
PEC and PDC of such request in writing, and PEC and
PDC shall have sixty (60) days (the "Review Period")
to consent to or deny the request, in their sole
discretion. The Review Period shall not begin until
such time as X.X. Xxxxx has provided PEC and PDC with
all relevant information they deem necessary to
conduct such evaluation; provided, however, that PEC
and PDC shall not utilize information requests to
unreasonably delay the start of the Review Period.
10. Restrictions on Soliciting Business of PEC and PDC.
X.X. Xxxxx further covenants and agrees that during the
Non-Compete Period, X.X. Xxxxx will not, either for himself or for any other
person or entity, directly or indirectly, engage in any of the following
activities in a Competitive Business without the express prior written consent
of PEC and PDC:
(e) Solicit or hire any of the employees of PEC or PDC or
solicit or take away any of PEC's or PDC's customers,
lessors, or suppliers or attempt any of the
foregoing;
(f) Acquire or attempt to acquire rights providing any
product or service in a Competitive Business within
the Restricted Territory; or
(g) Engage in any act which would interfere with or harm
any business relationship PEC or PDC has with any
customer, lessor, employee, principal or supplier.
(h) For purposes of this Section 3, X.X. Xxxxx, members
of his family and his Affiliates will not be deemed
customers, lessors or suppliers of PDC or PEC.
"Affiliates" shall have the same meaning as given to
it in the Merger Agreement, and shall be limited to
those persons and entities set forth in Section 3.14
of the Company Disclosure Schedule to the Merger
Agreement.
11. Reasonableness of Restrictions; Reformation; Enforcement.
(d) X.X. Xxxxx hereby acknowledges that he is one of two
shareholders in the Company and that, if he were to
Participate In a Competitive Business or otherwise
violates the terms and conditions of this Agreement,
such activity would result in significant loss of the
goodwill acquired by PEC and PDC pursuant to the
Transaction. X.X. Xxxxx further acknowledges and
agrees that the covenants and agreements set forth in
this Agreement formed part of the consideration to
the Transaction and were a material inducement to PEC
and PDC to enter into the Transaction and perform the
obligations resulting therefrom, and that PEC and
PDC, and its owners, would not obtain the benefit of
the bargain from the Transaction as specifically
negotiated by the parties thereto if he were to
Participate In a Competitive Business or otherwise
violates the terms and conditions of this Agreement.
(e) If any portion of the restrictions contained in this
Agreement are held to be unreasonable, arbitrary or
against public policy, then the restrictions shall be
considered divisible, as to the time, business scope
and/or geographic area, with each day of the
specified period being deemed a separate period of
time and each radius mile of the restricted territory
being deemed a separate geographical area, so that
the maximum period of time or geographical area shall
remain effective
EXH A-2-3
52
so long as the same is not unreasonable, arbitrary or
against public policy. In the event any court of
competent jurisdiction determines the restrictions
contained in this Agreement to be unreasonable,
arbitrary or against public policy, a lesser time
period, business scope or geographical area which is
determined to be reasonable, nonarbitrary and not
against public policy may be enforced against X.X.
Xxxxx and/or other restricted parties. If X.X. Xxxxx
and/or other restricted parties shall violate any of
the covenants contained herein and if any court
action is instituted to prevent or enjoin such
violation, then the period of time during which the
business activities of X.X. Xxxxx (or other
restricted parties) shall be restricted, as provided
in this Agreement, shall be lengthened by a period of
time equal to the period between the date of the
breach of the terms or covenants contained in this
Agreement and the date on which the decree of the
court disposing of the issues upon the merits shall
become final and not subject to further appeal.
(f) Without intending to limit the remedies available to
PEC and PDC, X.X. Xxxxx acknowledges that the remedy
at law for any breach by him of the restrictions
contained in this Agreement will be inadequate and
would be difficult to ascertain and therefore, in the
event of the breach or threatened breach of any such
covenants, X.X. Xxxxx agrees that PEC and PDC shall
have the right, in addition to any other rights it
may have, to obtain in any court of competent
jurisdiction specific performance of such Sections of
this Agreement or injunctive relief to restrain any
breach or threatened breach thereof. X.X. Xxxxx (and
all other restricted parties) hereby consents and
agrees that temporary and permanent injunctive relief
may be granted in any proceedings which might be
brought to enforce any such covenants without the
necessity of proof of actual damages or the posting
of any bond, cash or otherwise. In the event PEC or
PDC applies for such an injunction, X.X. Xxxxx shall
not raise a defense thereto that PEC or PDC has an
adequate remedy at law. Nothing herein shall be
construed as prohibiting PEC or PDC from pursuing any
other remedies available to PEC or PDC (whether at
law or in equity) for such breach or threatened
breach, including, without limitation, the recovery
of monetary damages from X.X. Xxxxx. The provisions
of this Section 4 shall survive the expiration,
termination or cancellation of this Agreement.
12. Attorneys Fees and Costs.
If an action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys fees, costs and necessary expenses in addition to any other
relief to which that party may be entitled. This provision is applicable to this
entire Agreement.
13. Representations and Warranties of PEC and PDC and X.X. Xxxxx.
(c) Representations and Warranties of PEC and PDC. Each
of PEC and PDC hereby represents and warrants to X.X.
Xxxxx that: (i) it has all requisite power to enter
into and perform its obligations under this
Agreement; (ii) this Agreement has been duly and
validly authorized by all necessary corporate action
on its part; (iii) the execution of this Agreement by
it and performance of its obligations hereunder do
not require the consent or approval of any other
party; (iv) each of the parties hereto have sought
out and received advice from Texas counsel
EXH A-2-4
53
regarding this Agreement and that the restrictions
and terms contained in this Agreement are reasonable
and necessary to protect the goodwill acquired and
the substantial investment made by PEC and PDC
pursuant to the Transaction; and (v) this Agreement
is a valid and binding obligation of it.
(d) Representations and Warranties of X.X. Xxxxx. X.X.
Xxxxx hereby represents and warrants to PEC and PDC
that: (i) X.X. Xxxxx has the capacity and power to
enter into and perform obligations of X.X. Xxxxx
under this Agreement; (ii) X.X. Xxxxx has duly and
validly executed this Agreement; (iii) the execution
of this Agreement and performance of obligations of
X.X. Xxxxx hereunder do not require the consent or
approval of any other party; (iv) each of the parties
hereto have sought out and received advice from Texas
counsel regarding this Agreement and that the
restrictions and terms contained in this Agreement
are reasonable and necessary to protect the goodwill
acquired and the substantial investment made by PEC
and PDC pursuant to the Transaction; and (v) this
Agreement constitutes a valid and binding obligation
of X.X. Xxxxx.
14. General Provisions.
(j) Compliance with Laws. The parties agree that they
will comply with all applicable laws and regulations
of government bodies or agencies in their respective
performance of their obligations under this
Agreement.
(k) Governing Law and Construction. This Agreement will
be governed by and construed in accordance with the
laws of the State of Texas without reference to its
conflict-of-laws principles. This Agreement's final
form resulted from review and negotiations among the
parties and their attorneys, and no part of this
Agreement should be construed against any party on
the basis of authorship. Any action or proceeding
seeking to enforce any provision of, or based on any
right arising out of, this Agreement may be brought
against any party in the courts of the State of Texas
located in Xxxxxx County or, if it has acquired or
can acquire jurisdiction, in the United States
District Court located in Lubbock, Texas, and each of
the parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in
any such action or proceeding and waives any
objection to venue laid therein.
(l) Entire Agreement; Amendment. Except where specific
reference is made to the Merger Agreement, LLC
Interest Purchase Agreement or the Asset Purchase
Agreement, this Agreement constitutes the entire
agreement among the parties with respect to the
subject matter contained herein and supersedes any
previous oral or written communications,
representations, understandings or agreements with
respect thereto. The terms of this Agreement may be
modified only in a writing, signed by authorized
representatives of both parties.
(m) Assignability. This Agreement will be binding upon
the parties' respective successors and permitted
assigns. Neither party may assign this Agreement
and/or any of its rights and/or obligations hereunder
without the prior written consent of the other party,
and any such attempted assignment will be void;
provided, however, that PEC and/or PDC may assign
this Agreement to a subsidiary or affiliate of PEC
without the prior written consent of X.X. Xxxxx, and
provided further that a transfer by PEC or PDC as a
result of a merger or sale of
EXH A-2-5
54
all or substantially all of the assets of PEC or PDC
with or to a third party that assumes PEC's or PDC's,
as the case may be, obligations hereunder by
operation of law or otherwise shall not constitute a
prohibited assignment under this Section 7(d).
(n) Waiver. A waiver of a breach or default under this
Agreement will not constitute a waiver of any other
breach or default. Failure or delay by either party
to enforce compliance with any term or condition of
this Agreement will not constitute a waiver of such
term or condition.
(o) Severability. If any provision of this Agreement is
declared to be invalid, the parties agree that such
invalidity will not affect the validity of the
remaining provisions of this Agreement, and further
agree, to the extent possible, to substitute for the
invalid provision a valid provision that approximates
the intent and economic effect of the invalid
provision as closely as possible.
(p) Headings. The titles of the Sections and subsections
of this Agreement are for convenience of reference
only and are not to be considered in construing this
Agreement.
(q) Notice. Any notice, request, consent, demand or other
communication required to be given under this
Agreement will be in writing and will be given
personally, by facsimile or by mailing the same,
first-class, postage prepaid to the appropriate
address and facsimile number set forth below or to
such other person or at such other address as may
hereafter be designated by like notice. Notices by
mail will be considered delivered and become
effective three days after the mailing thereof. All
notices by facsimile will be considered delivered and
become effective immediately upon the confirmed (by
answer back or other tangible printed verification or
successful receipt) sending thereof.
To PEC and PDC:
Xxxxxxxxx Drilling Company LP, LLLP
0000 Xxxxxx Xxxxxxx
X.X. Xxxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
Chairman and Chief Executive
Officer
To X.X. Xxxxx:
if by mail:
Xxxxx X. Xxxxx
X.X. Xxx 0000
Xxxxxx, Xxxxxxxx 00000
other deliveries:
Xxxxx X. Xxxxx
00 Xxxxx 00xx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
EXH A-2-6
55
with copies to:
Xxxxxxx X. Xxxxxxxxxx, Esq.
Xxxxxxxxx & Xxxxxxxxx, L.L.P.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Facsimile: (000) 000-0000
(r) Counterparts. This Agreement may be executed in
counterparts and by the parties hereto in separate
counterparts, each of which will be deemed an
original, but all of which together will constitute
one and the same instrument.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their respective representatives as of the day and year first above
written.
XXXXXXXXX DRILLING COMPANY LP,
LLLP
By:
------------------------------
Xxxxxx X. Xxxxxxx
Chief Executive Officer
X.X. XXXXX
---------------------------------
Xxxxx X. Xxxxx
EXH A-2-7
56
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is made and entered
into as of this 5th day of January, 2001, by and among XXXXXXXXX ENERGY, INC., a
Delaware corporation ("PEC"), and XXXXXXX X. XXXXX and XXXXX X. XXXXX, the sole
shareholders of Xxxxx Drilling Corporation, an Oklahoma corporation (the
"Company") (collectively, the "Shareholders").
A. Pursuant to that certain Agreement and Plan of Merger dated of even
date herewith ("Merger Agreement") by and among PEC, Xxxxxxxxx Drilling Company
LP, LLLP, a Delaware registered limited liability limited partnership and a
wholly-owned indirect subsidiary of PEC ("PDC"), and Company, PEC has agreed to
issue a total of 660,886 shares ("Restricted Shares") of PEC's Common Stock,
$0.01 par value (the "Common Stock") as partial consideration to the
Shareholders for the merger of Company with and into PDC.
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.
"Person" shall mean an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incident to PEC's
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws and all reasonable printing expenses, messenger and
delivery expenses, and fees and disbursements of counsel for PEC and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other persons retained by PEC (all such expenses being herein
called "Registration Expenses"), will be borne as provided in this Agreement,
except that PEC will, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit
EXH B-1-1
57
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.
"Restricted Shares" shall include Common Stock issued or issuable with
respect to the Restricted Shares by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular Restricted Shares, such shares
will cease to be Restricted Shares when they have been distributed to the public
pursuant to an offering registered under the Securities Act or sold to the
public through a broker, dealer or market maker in compliance with Rule 144
under the Securities Act (or any similar rule then in force).
"Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
2. Restrictions on Transfer; Rule 144.
2.1 Restricted Shares. The Restricted Shares were acquired by
the respective Shareholders from PEC for 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 Shareholders acknowledges that the Restricted Shares are "restricted
securities" within the meaning of the Securities Act.
2.2 Rule 144. PEC will use its reasonable best efforts to make
all necessary filings with the SEC to ensure the availability of Rule 144 to
Shareholders.
2.3 Document Request. Promptly following receipt by PEC from a
Shareholder of an opinion of counsel, in form and content reasonably acceptable
to PEC and its counsel, PEC will provide, or cause its counsel to provide, its
transfer agent with such instructions or opinions as may be required by the
transfer agent to remove the restrictive legend on the certificate evidencing
the PEC shares so that the shares may be sold in compliance with Rule 144.
2.4 Legends. Upon expiration of two years from Closing, PEC
will promptly remove the legends from the Restricted Shares; provided that the
provisions of Rule 144(k) have been satisfied.
3. Restricted Shares - Registration Under Securities Act, etc.
3.1 Registration.
(a) Filing. Promptly following the execution of this Agreement
and the contemporaneous closing of the transaction contemplated by the Merger
Agreement, PEC shall file a Registration Statement on Form S-3 (the "Form S-3")
with the Commission covering the distribution of the Restricted Shares. PEC
agrees to use its reasonable best efforts to (i) have the Form S-3 declared
effective; (ii) respond to any comments from the SEC, and (iii) cause such
Registration Statement to become effective with the SEC within 45 days of its
filing.
EXH B-1-2
58
(b) Expenses. PEC shall pay all Registration Expenses in
connection with the Form S-3.
3.2 Registration Procedures. Following the effective date of
the Form S-3, PEC will promptly:
(a) prepare and file with the Commission such amendments and
supplements to the Form S-3 and the prospectus used in connection therewith as
may be necessary to keep the Form S-3 effective and to comply with the
provisions of the Securities Act with respect to the disposition of the
Restricted Shares until the earlier of (i) such time as all of such Restricted
Shares have been disposed of in accordance with the intended methods of
disposition by the Shareholders, or (ii) the expiration of twenty-four (24)
months after such effective date and furnish to each of the Shareholders prior
to the filing thereof a copy of any amendment or supplement to the Form S-3 or
prospectus and shall not file any such amendment or supplement to which either
of the Shareholders shall have reasonably objected on the grounds that such
amendment or supplement does not comply in all material respects with the
requirements of the Securities Act or of the rules or regulations thereunder.
The number of Restricted Shares that may be sold under the Form S-3 including
the 149,184 shares of PEC Common Stock to be issued by PEC pursuant to the terms
of the Asset Purchase Agreement, date of even date with this Agreement, among
PEC, Xxxxxxxxx Drilling Company LP, LLLP and Xxxxx Drilling Corporation may not
exceed 200,000 shares in a 30-day period without consultation with PEC;
(b) furnish to each of the Shareholders one originally
executed Form S-3, with all amendments, supplements and additional
documentation; such number of conformed copies of such Form S-3 and of each such
amendment and supplement thereto (in each case including all exhibits) as either
or both of the Shareholders may reasonably request; such number of copies of the
prospectus included in the Form S-3 (including each preliminary prospectus and
any summary prospectus) as required by the Securities Act as such Shareholders
may reasonably request; such documents, if any, incorporated by reference in the
Form S-3 or prospectus; and such other documents as either or both of the
Shareholders may reasonably request;
(c) use its best efforts to register or qualify the Restricted
Shares and other securities covered by the Form S-3 under such other securities
or blue sky laws of such jurisdictions as either or both of the Shareholders
shall reasonably request, to keep such registration or qualification in effect
for so long as the Form S-3 remains in effect, and do any and all other acts and
things which may be necessary or advisable to enable the Shareholders to
consummate the disposition in such jurisdictions of the Restricted Shares
covered by the Form S-3, except that PEC shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this subdivision
(c) be obligated to be so qualified, or to subject itself to taxation in any
such jurisdiction, or to consent to general service of process in any such
jurisdiction;
(d) immediately notify the Shareholders at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in the Form S-3, as then in effect, includes an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
in light
EXH B-1-3
59
of the circumstances then existing, or if it is necessary to amend or supplement
such prospectus or Form S-3 to comply with law, and at the request of the
Shareholders, prepare and furnish to the Shareholders a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such Restricted Shares,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statement therein not misleading in light of the circumstances then existing and
shall otherwise comply in all material respects with the law and so that such
prospectus or Form S-3, as amended or supplemented, will comply with law;
(e) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
securities holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months beginning with the first
month of the first fiscal quarter after the effective date of the Form S-3, if
such earnings statement is necessary to satisfy the provisions of Section 11(a)
of the Securities Act.
4. Indemnification.
4.1 Indemnification by PEC. PEC will, and hereby does,
indemnify and hold harmless each of the Shareholders against any losses, claims,
damages, liabilities or expenses, joint or several (including, without
limitation, the costs and expenses of investigating, preparing for and defending
any legal proceeding, including reasonable attorney's fees), to which the
respective Shareholders 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
the respective Shareholders for any legal or any other expenses incurred by them
in connection with investigating or defending or settling any such loss, claim,
liability, action or proceeding; provided that PEC shall not be liable in any
such case to the extent that any loss, claim, damage, liability or expense (or
action or proceeding in respect thereof) arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with information furnished to PEC by either or both of the
Shareholders for use in preparation thereof. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Shareholders and shall survive the transfer of such securities by either or both
of the Shareholders. PEC will make provision for contribution in lieu of any
such indemnity that may be disallowed as shall be reasonably requested by either
or both of the Shareholders.
4.2 Indemnification by the Shareholders. The Shareholders
hereby 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
EXH B-1-4
60
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 the Form S-3 any preliminary prospectus, final prospectus or
summary prospectus included therein, or any amendment or supplement thereto, or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, if such statement or omission was made in reliance upon and in
conformity with information furnished to PEC by such Shareholder for use in the
preparation of the Form S-3, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement up to the net proceeds received by the
Shareholders. 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 either
or both of the Shareholders.
4.3 Notice of Claims, etc. In case any proceeding (including
any governmental investigation) shall be instituted involving any person in
respect of which indemnity may be sought pursuant to this Section 4, such person
(hereinafter called the "indemnified party") shall promptly notify the person
against whom such indemnity may be sought (hereinafter called the "indemnifying
party") in writing and the indemnifying party, upon request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any other party the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
The indemnifying party shall not be liable for the settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there is a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment.
4.4 Indemnification Unavailable. If the indemnification
provided for in this Section 4 is unavailable as a matter of law to an
indemnified party in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under any such paragraph, in
lieu of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (i) in such proportion as is appropriate to
reflect the relative benefits received by such indemnified party on the one hand
and the indemnifying parties on the other or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of such indemnified party on the one hand and
the indemnifying parties on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of such
indemnified party and the indemnifying parties shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a
EXH B-1-5
61
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 the
respective Shareholders under this Section 4.4 shall be limited to the net
proceeds received by each such Stockholder.
4.5 No Settlement, etc. No indemnifying party shall, except
with the written consent of the indemnified party, consent to entry of any
judgment or entry into settlement that does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or action.
4.6 Indemnity Operative and in Full Force. The indemnity and
contribution agreements contained in this Section 4 shall remain operative and
in full force and effect regardless of any termination of this Agreement.
5. Amendments and Waivers. This Agreement may be amended, and PEC may
take any action herein prohibited or omit to perform any act herein required to
be performed by it, only if PEC shall have obtained the written consent to such
amendment, action or omissions to act of the holder or holders of at least 51%
or more of the Restricted Shares.
6. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid, or courier
addressed to:
6.1 if to the respective Shareholders, at the address shown on
stock transfer books of PEC or such other address as either of the Shareholders
has advised PEC in writing, and
6.2 if to PEC, at 0000 Xxxxxx Xxxxxxx, X.X. Xxxxxx 0000,
Xxxxxx, Xxxxx 00000 to the attention of its President or to such other address
as PEC shall have furnished to the Shareholders.
7. Miscellaneous. This Agreement embodies the entire agreement and
understanding between PEC and the respective Shareholders 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.
EXH B-1-6
62
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
PEC:
XXXXXXXXX ENERGY, INC.
By:
----------------------------------
Xxxxxx X. Xxxxxxx
Chief Executive Officer
SHAREHOLDERS:
-------------------------------------
XxXxxxx X. Xxxxx
-------------------------------------
Xxxxx X. Xxxxx
EXH B-1-7
63
EXHIBIT C-1
INVESTMENT REPRESENTATION LETTER
January 5, 2001
Xxxxxxxxx Energy, Inc.
0000 Xxxxxx Xxxxxxx
Xxxxxx, Xxxxx 00000
This letter is being submitted to Xxxxxxxxx Energy, Inc. ("PEC") in
connection with and as a condition to PEC's closing of the transaction
contemplated by the Agreement and Plan of Merger among PEC, Xxxxxxxxx Drilling
Company LP, LLLP ("PDC") and Xxxxx Drilling Corporation (the "Company"). The
undersigned, one of two shareholders of the Company, will be issued shares of
common stock of PEC ("PEC Shares") as partial consideration for the merger of
Company with and into PDC. Capitalized terms not defined herein shall have the
meaning given them in the Memorandum (as defined below).
1. Representations and Warranties.
The undersigned hereby represents and warrants to PEC that the
following statements are true:
a. The undersigned has been furnished a copy of the
Memorandum, dated December 29, 2000 (the "Memorandum") containing a copy of
PEC's Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended
December 31, 1999, and all other reports filed by PEC with the Securities and
Exchange Commission since January 1, 2000 (collectively, the "Reports") and has
carefully reviewed the Memorandum and the Reports, including, but not limited
to, the section entitled "Disclosure Concerning Forward-Looking Statements,"
setting forth certain Cautionary Statements or risk factors relating to PEC and
its businesses and operations.
b. The undersigned has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of an investment in PEC vis-a-vis the PEC Common Stock to be issued by PEC
as partial consideration for the merger.
c. The undersigned has had an opportunity to ask questions of
PEC and its management concerning PEC and PDC, the businesses of PEC and PDC and
the PEC Shares and, if asked, all such questions have been answered to the full
satisfaction of the undersigned.
d. The undersigned understands that PEC has not registered the
offer or sale of the PEC Shares under the Securities Act of 1933, as amended
(the "Act"), in reliance upon an exemption therefrom under Section 4(2) of the
Act and the provisions of Regulation D promulgated thereunder. The undersigned
therefore acknowledges that in no event may he sell or otherwise transfer the
PEC Shares without registration under the Act (see paragraph (g) below).
EXH C-1-1
64
e. The undersigned represents that he will acquire the PEC
Shares for his own account, with no intention to distribute or offer to
distribute the same to others without registration under the Act, and
understands that the issuance by PEC of the PEC Shares will be predicated upon
the undersigned's lack of such intention.
f. The undersigned understands that neither the Securities and
Exchange Commission nor the securities commissioner of any state has received or
reviewed any documents relative to an investment in PEC, or has made any finding
or determination relating to the fairness of an investment in PEC.
g. The undersigned acknowledges that stop transfer
instructions will be placed with PEC's transfer agent to restrict the resale,
pledge, hypothecation or other transfer of the PEC Shares.
h. The undersigned acknowledges that, except as provided in
the Registration Rights Agreement attached as Exhibit B to the Agreement and
Plan of Merger, PEC is under no obligation to register the PEC Shares for sale
under the Act or to assist the undersigned in complying with any exemption from
registration under the Act, or any state securities laws.
i. The undersigned understands and acknowledges that the
foregoing representations and warranties will be relied upon by PEC in
connection with the issuance of the PEC Shares.
j. The undersigned has an individual net worth, or joint net
worth with the undersigned's spouse in excess of $1 million.
2. Indemnification.
The undersigned agrees to indemnify and hold harmless PEC and PDC, or
either of them, the officers, directors and affiliates of either of them and
each other person, if any, who controls either of them, within the meaning of
Section 15 of the Act, against any and all loss, liability, claim, damage and
expense whatsoever (including, but not limited to, any and all expenses
reasonably incurred in investigating, preparing or defending against any
litigation commenced or threatened or any claim whatsoever) arising out of or
based upon any false representation or warranty or failure by the undersigned to
comply with any covenant or agreement made by each of the undersigned herein.
3. Survival.
All representations, warranties and covenants contained in this letter
shall survive the closing of the merger.
Very truly yours,
--------------------
XxXxxxx X. Xxxxx
EXH C-1-2
65
EXHIBIT C-2
INVESTMENT REPRESENTATION LETTER
January 5, 2001
Xxxxxxxxx Energy, Inc.
0000 Xxxxxx Xxxxxxx
Xxxxxx, Xxxxx 00000
This letter is being submitted to Xxxxxxxxx Energy, Inc. ("PEC") in
connection with and as a condition to PEC's closing of the transaction
contemplated by the Agreement and Plan of Merger among PEC, Xxxxxxxxx Drilling
Company LP, LLLP ("PDC") and Xxxxx Drilling Corporation (the "Company"). The
undersigned, one of two shareholders of the Company, will be issued shares of
common stock of PEC ("PEC Shares") as partial consideration for the merger of
Company with and into PDC. Capitalized terms not defined herein shall have the
meaning given them in the Memorandum (as defined below).
1. Representations and Warranties.
The undersigned hereby represents and warrants to PEC that the
following statements are true:
a. The undersigned has been furnished a copy of the
Memorandum, dated December 29, 2000 (the "Memorandum") containing a copy of
PEC's Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended
December 31, 1999, and all other reports filed by PEC with the Securities and
Exchange Commission since January 1, 2000 (collectively, the "Reports") and has
carefully reviewed the Memorandum and the Reports, including, but not limited
to, the section entitled "Disclosure Concerning Forward-Looking Statements,"
setting forth certain Cautionary Statements or risk factors relating to PEC and
its businesses and operations.
b. The undersigned has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of an investment in PEC vis-a-vis the PEC Common Stock to be issued by PEC
as partial consideration for the merger.
c. The undersigned has had an opportunity to ask questions of
PEC and its management concerning PEC and PDC, the businesses of PEC and PDC and
the PEC Shares and, if asked, all such questions have been answered to the full
satisfaction of the undersigned.
d. The undersigned understands that PEC has not registered the
offer or sale of the PEC Shares under the Securities Act of 1933, as amended
(the "Act"), in reliance upon an exemption therefrom under Section 4(2) of the
Act and the provisions of Regulation D promulgated thereunder. The undersigned
therefore acknowledges that in no event may he sell or otherwise transfer the
PEC Shares without registration under the Act (see paragraph (g) below).
EXH C-2-1
66
e. The undersigned represents that he will acquire the PEC
Shares for his own account, with no intention to distribute or offer to
distribute the same to others without registration under the Act, and
understands that the issuance by PEC of the PEC Shares will be predicated upon
the undersigned's lack of such intention.
f. The undersigned understands that neither the Securities and
Exchange Commission nor the securities commissioner of any state has received or
reviewed any documents relative to an investment in PEC, or has made any finding
or determination relating to the fairness of an investment in PEC.
g. The undersigned acknowledges that stop transfer
instructions will be placed with PEC's transfer agent to restrict the resale,
pledge, hypothecation or other transfer of the PEC Shares.
h. The undersigned acknowledges that, except as provided in
the Registration Rights Agreement attached as Exhibit B to the Agreement and
Plan of Merger, PEC is under no obligation to register the PEC Shares for sale
under the Act or to assist the undersigned in complying with any exemption from
registration under the Act, or any state securities laws.
i. The undersigned understands and acknowledges that the
foregoing representations and warranties will be relied upon by PEC in
connection with the issuance of the PEC Shares.
j. The undersigned has an individual net worth, or joint net
worth with the undersigned's spouse in excess of $1 million.
2. Indemnification.
The undersigned agrees to indemnify and hold harmless PEC and PDC, or
either of them, the officers, directors and affiliates of either of them and
each other person, if any, who controls either of them, within the meaning of
Section 15 of the Act, against any and all loss, liability, claim, damage and
expense whatsoever (including, but not limited to, any and all expenses
reasonably incurred in investigating, preparing or defending against any
litigation commenced or threatened or any claim whatsoever) arising out of or
based upon any false representation or warranty or failure by the undersigned to
comply with any covenant or agreement made by each of the undersigned herein.
3. Survival.
All representations, warranties and covenants contained in this letter
shall survive the closing of the merger.
Very truly yours,
--------------------
Xxxxx X. Xxxxx
EXH C-2-2
67
EXHIBIT D
PATTERSON ENERGY, INC.
SELLING SHAREHOLDER QUESTIONNAIRE
Full Name:
---------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
Total number of shares of Common Stock of Xxxxxxxxx Energy, Inc. ("PEC")
beneficially owned(1) by the Undersigned:
--------------------------------------
Total number of Shares of PEC's Common Stock to be sold by the undersigned
pursuant to the Registration Statement on Form S-3 to be filed by PEC in
accordance with the Registration Rights Agreement (the "Registration Rights
Agreement") among PEC and XxXxxxx X. Xxxxx and Xxxxx X. Xxxxx to be entered into
at the closing of the transactions contemplated by that certain Agreement and
Plan of Merger dated as of January 1, 2001 among PEC, Xxxxxxxxx Drilling Company
LP, LLLP, and Xxxxx Drilling Corporation:
--------------------------------------
Positions or offices held, or other material relationship, with PEC or any of
its affiliates at any time since October 31, 1997:
-----------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(1) A beneficial owner of a security includes any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship,
or otherwise, has or shares:
(a) voting power, which includes the power to vote, or to direct the
voting of, such security; and/or
(b) investment power, which includes the power to dispose, or to direct the
the disposition, of such security
In addition, you are deemed to be the beneficial owner of a security if you
have the right to acquire such voting power or investment power within 60
days, including, specifically, but not limited to, any right to acquire (i)
through the exercise of any option, warrant or right, (ii) through the
conversion of a security, (iii) pursuant to the power to revoke a trust,
discretionary account or similar arrangement, or (iv) pursuant to the
automatic termination of a trust, discretionary account, or similar
arrangement; provided, however, if you acquire a security or power as
specified in provisions (i), (ii) or (iii) above, with the purpose or effect
of changing or influencing the control of the issuer, or in connection with
or as a participant in any transaction having such purpose or effect,
immediately upon such acquisition you shall be deemed to be the beneficial
owner of the securities which may be acquired through the exercise or
conversion of such security or power.
EXH D-1
68
The Undersigned represents and warrants to PEC that the above
information is true and correct and understands and agrees that it will be used
in the Registration on Form S-3 being filed by PEC with the Securities and
Exchange Commission pursuant to the Registration Rights Agreement. The
Undersigned also represents and agrees that it will promptly notify PEC in
writing of any change in the information contained herein prior to termination
of the offering.
Dated: January __, 2001
-------------------------
--------------
EXH D-2
69
PROMISSORY NOTE
$_________ Duncan, Oklahoma ___________, 200__
FOR VALUE RECEIVED, Xxxxxxxxx Energy, Inc., a Delaware corporation
("Maker"), hereby promises to pay to the order of ____________________
("Lender"),_________________, Xxxxxx, Xxxxxxxx 00000, the principal sum of
________________________________ and No/100 Dollars ($____________) (or the
unpaid balance of all principal advanced against this Note, if that amount is
less), on or before January __, 2007 (the "Termination Date"). This Note is the
"Tax Indemnity Note" referenced in the Agreement and Plan of Merger dated as of
January 5, 2001 between Maker and Xxxxx Drilling Corporation, an Oklahoma
corporation and is intended to evidence the obligation of Maker to repay to
Lender certain amounts paid to Maker by Lender as indemnity thereunder.
1. Interest and Payment.
(a) Payments of Principal. The principal of this Note shall be
due on the dates (the "Payment Dates") and in the amounts as follows:
Amount Payment Date
$ March 15,
------- -------
$ March 15,
------- -------
(b) Maturity. The principal of this Note and all accrued but
unpaid interest hereon shall be due and payable in full on the Termination Date,
or on the date earlier accelerated as permitted herein.
(c) Accrual and Payment of Interest. Interest on this Note
shall not accrue as to any principal which is paid on or before the date payment
is due. If any payment of principal is not made on the date due, interest will
thereafter accrue on the unpaid amount of such payment until paid at a rate of
nine percent (9%) per annum. The aggregate outstanding principal balance of the
Note, together with any accrued and unpaid interest thereon, shall be due and
payable in full on the earlier of the Termination Date or the date on which the
Note is accelerated as permitted herein.
2. Default. Maker shall be in default under this Note ("Default")
upon the occurrence of any of the following events:
(a) if any principal, interest or other amount of money due
under this Note is not paid in full within five business days of the date due;
EXH E-1
70
(b) upon the occurrence and continuance of an event of default
beyond any applicable period of grace under any indebtedness for borrowed money
of Borrower which results in the acceleration of such indebtedness in excess of
$5 million in principal amount; or
(c) upon the dissolution, termination of existence, insolvency
or business failure of the Maker, or the application for the appointment of a
receiver for the property of the Maker or the commencement by or against the
Maker of any proceeding under any bankruptcy, reorganization, insolvency or
similar law for the relief of debtors).
3. Remedies.
(a) All Remedies Available. Upon the occurrence of a default,
the holder hereof shall have the right to declare the unpaid principal balance
and any accrued but unpaid interest on this Note at once due and payable (and
upon such declaration, the same shall be at once due and payable), to foreclose
any liens and security interests securing payment hereof and to exercise any of
its other rights, powers and remedies under this Note or at law or in equity.
(b) No Waiver. Neither the failure by the holder hereof to
exercise, nor delay by the holder hereof in exercising, the right to accelerate
the maturity of this Note or any other right, power or remedy upon any default
shall be construed as a waiver of such default or as a waiver of the right to
exercise any such right, power or remedy at any time. No single or partial
exercise by the holder hereof of any right, power or remedy shall exhaust the
same or shall preclude any other or further exercise thereof, and every such
right, power or remedy may be exercised at any time and from time to time. All
rights and remedies provided for in this Note and are cumulative of each other
and of any and all other rights and remedies existing at law or in equity, and
the holder hereof shall, in addition to the rights and remedies provided herein,
be entitled to avail itself of all such other rights and remedies as may now or
hereafter exist at law or in equity for the collection of the indebtedness owing
hereunder, and the resort to any right or remedy provided for hereunder or
provided for by law or in equity shall not prevent the concurrent or subsequent
employment of any other appropriate rights or remedies. Without limiting the
generality of the foregoing provisions, the acceptance by the holder hereof from
time to time of any payment under this Note which is past due or which is less
than the payment in full of all amounts due and payable at the time of such
payment, shall not (i) constitute a waiver of or impair or extinguish the rights
of the holder hereof to accelerate the maturity of this Note or to exercise any
other right, power or remedy at the time or at any subsequent time, or nullify
any prior exercise of any such right, power or remedy, or (ii) constitute a
waiver of the requirement of punctual payment and performance, or a novation in
any respect.
4. Usury Savings Provisions.
(a) General Limitation. Notwithstanding anything herein,
expressed or implied, to the contrary, in no event shall any interest rate
charged hereunder, or any interest contracted for, collected or received by
Lender or any holder hereof, exceed the Maximum Lawful Rate.
EXH E-2
71
(b) Intent of Parties. It is expressly stipulated and agreed
to be the intent of Maker and Lender at all times to comply with applicable law
governing the maximum rate or amount of interest payable on or in connection
with this Note. If the applicable law is ever judicially interpreted so as to
render usurious any amount called for under this Note, or contracted for,
charged, taken, reserved or received with respect to this Note, or if
acceleration of the maturity of this Note, any prepayment by Maker, or any other
circumstance whatsoever, results in Lender having been paid any interest in
excess of that permitted by applicable law, then it is the express intent of
Maker and Lender that all excess amounts theretofore collected by Lender be
credited on the principal balance of this Note (or, if this Note has been or
would thereby be paid in full, refunded to Maker), and the provisions of this
Note immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of any
new document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder and thereunder.
The right to accelerate the maturity of this Note does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and Lender does not intend to collect any unearned interest in the
event of acceleration. All sums paid or agreed to be paid to Lender for the use,
forbearance or detention of the indebtedness evidenced hereby shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such indebtedness until payment in full so that the
rate or amount of interest on account of such indebtedness does not exceed the
Maximum Lawful Rate. The term "applicable law" as used herein shall mean the
laws of the State of Texas, or any applicable United States federal law to the
extent that it permits Lender to contract for, charge, take, reserve or receive
a greater amount of interest than under Texas law. The provisions of this
paragraph shall control all agreements between Maker and Lender.
5. General Provisions.
(a) Business Days. Whenever any payment shall be due under
this Note on a day which is not a Business Day, the date on which such payment
is due shall be extended to the next succeeding Business Day, and such extension
of time shall be included in the computation of the amount of interest then
payable.
(b) Prepayments. Maker shall be entitled to prepay this Note
in whole or in part at any time.
(c) Application of Payments. All payments made as scheduled on
this Note shall be applied, to the extent thereof, first to accrued but unpaid
interest and the balance to unpaid principal. Nothing herein shall limit or
impair any rights of the holder hereof to apply any proceeds from the
disposition of any collateral by foreclosure or other collections after default.
(d) Costs of Collection. If any holder of this Note retains an
attorney in connection with any default or at maturity or to collect, enforce or
defend this Note in any lawsuit or in any probate, reorganization, bankruptcy or
other proceeding, or if Maker sues any holder of this Note in connection with
this Note and does not prevail, then Maker agrees to pay to each such holder, in
addition to principal and interest, all costs and expenses incurred by such
EXH E-3
72
holder in trying to collect this Note or in any such suit or proceeding,
including reasonable attorneys' fees.
(e) Waivers and Acknowledgments. Maker hereby (i) waives
demand, presentment for payment, notice of dishonor and of nonpayment, protest,
notice of protest, notice of intent to accelerate, notice of acceleration and
all other notice, filing of suit and diligence in collecting this Note or
enforcing any of the security herefor; (ii) agrees that the holder hereof shall
not be required first to institute suit or exhaust its remedies against Maker or
others liable or to become liable hereon or to enforce its rights against them
or any security herefor; and (iii) consents to any extension or postponement of
time of payment of this Note for any period or periods of time and to any
partial payments, before or after maturity, and to any other indulgences with
respect hereto, without notice thereof to any of them.
(f) Amendments in Writing. This Note may not be changed,
amended or modified except in a writing expressly intended for such purpose and
executed by the party against whom enforcement of the change, amendment or
modification is sought.
(g) Assignments/Participations. Maker acknowledges and agrees
that the holder of this Note may assign this Note, at any time and from time to
time, to any person.
(h) Successors and Assigns. All of the covenants,
stipulations, promises and agreements contained in this Note by or on behalf of
Maker shall bind its successors and assigns and shall be for the benefit of
Lender and any holder hereof, and their successors and assigns.
(i) GOVERNING LAW. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY TEXAS LAW, EXCEPT TO THE EXTENT THAT THE LAWS OF ANOTHER
JURISDICTION GOVERN THE CREATION, PERFECTION OR ENFORCEMENT OF INTERESTS, OR THE
REMEDIES RELATED TO ANY PART OF THE COLLATERAL, OR TO THE EXTENT THAT UNITED
STATES FEDERAL LAW APPLIES.
IN WITNESS WHEREOF, Maker has duly executed this Note as of the date
first above written.
MAKER:
XXXXXXXXX ENERGY, INC.,
a Delaware corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
EXH E-4
