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EXHIBIT 10(dd)
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), is made this 23rd day
of May, 1997, by and among San Xxxxxxxx Corporation, a Texas corporation
(hereinafter called "Seller"), Xxxxxxx Xxxxxxxx, an individual (hereinafter
called "Xxxxxxxx"), and South Texas Drilling & Exploration, Inc., a Texas
corporation (hereinafter called "Purchaser").
WITNESSETH:
WHEREAS, Seller is engaged in the land contract drilling business (the
"Drilling Business"); and
WHEREAS, Xxxxxxxx is the sole shareholder of Seller; and
WHEREAS, Purchaser is desirous of purchasing from the Seller certain
of the assets of Seller used in Seller's Drilling Business.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, Seller shall sell, transfer and assign to
Purchaser and Purchaser shall purchase and acquire from Seller on the Closing
Date (as hereinafter defined), all of Seller's right, title, interest and
benefit in and to the assets, properties, and rights used and useful in
connection with the operation of Seller's Drilling Business which are described
below (the "Assets"), free and clear and expressly excluding all debts,
liabilities, obligations, taxes, liens and encumbrances of any kind, character
or description:
(a) All of the Seller's drilling rigs and related
equipment (the "Drilling Equipment") and Inventory and supplies of
Seller (the "Inventory") which are set forth on Schedule 1(a);
(b) The drilling rig lease agreement for Rig #10,
described on Schedule l(b) (the "Rig Lease");
(c) Seller's personal property related to the Drilling
Business, and all support, maintenance, warranty, and similar
agreements relating to such personal property (the "Personal
Property") described on Schedule 1(c);
(d) All contracts, agreements and commitments of Seller
under which Seller has agreed or hereafter agrees to perform land
contract drilling for any third party which are set forth on Schedule
1(d) (the "Contracts and Commitments"). In the event of any material
adverse change with respect to any Contract or Commitment which occurs
any time before Closing,
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Purchaser shall have the right to reject any such Contract or
Commitment in which event such Contract or Commitment shall remain the
property and responsibility of Seller. Any Contract rejected by
Purchaser under this paragraph shall be expressly rejected by
Purchaser by written instrument at Closing;
(e) All contracts, agreements and commitments of Seller
relating to the Drilling Business other than those listed on Schedule
1(d) above, which includes the Seller's vehicle leases and mobile
telephone equipment leases including, but not limited to, those set
forth on Schedule 1 (e) (the "Ancillary Agreements"); provided,
however, that Purchaser may, in its sole and absolute discretion,
reject any Ancillary Agreement (other than the mobile telephone
equipment leases and vehicles leases) which is not acceptable to
Purchaser, and each such rejected Ancillary Agreement shall remain the
property and responsibility of Seller. Any Ancillary Agreement
accepted by Purchaser shall be expressly assumed by Purchaser by
written instrument at Closing;
(f) All intellectual property, including, without
limitation, all customer lists, supplier lists, manuals, governmental
approvals, licenses, permits, documents, drawings, know-how,
processing information, patents, intellectual property (other than
trademarks and tradenames) and trade secrets of Seller (the
"Intellectual Property"), including those set forth on Schedule 1(f);
(g) All permits, approvals, authorizations, licenses,
qualifications, and the like issued by any government or governmental
unit, agency, board, body, or instrumentality, whether federal, state,
or local, and all applications therefor (the "Permits and
Authorizations"), including, specifically and without limitation, the
permits, approvals, and qualifications described or referred to on
Schedule 1 (g);
(h) All customer lists, drilling reports, maintenance
records and supplier lists;
(i) All personal property acquired after the date of this
Agreement but prior to Closing by Seller relating to the Drilling
Business, all of which shall be included in the appropriate Schedules
at the time of acquisition and at Closing, and appropriately
designated as Rig 10 Assets, Rig 9 Assets or Rig 5 Assets, as the case
may be; and
(j) All personal property described on Schedule 1 (j)
(the "Salvage Assets"), which consists of damaged or salvaged property
which is no longer used in the Drilling Business.
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All of the foregoing assets, properties and rights to be transferred
are collectively referred to herein as the "Assets." The term "Assets" does not
include, and Seller is not selling to Purchaser, any cash or cash equivalents,
accounts receivable, trademarks or tradenames of Seller, or any oil and gas
properties of Seller.
2. Assumption of Liabilities. Except for the obligations and
liabilities arising after the Closing, the Second Delivery Date, or the
termination of the Lease Agreement (as herein defined), as the case may be,
under the Rig Lease and the Contracts and Commitments and Ancillary Agreements
which are not rejected by Purchaser (the "Assumed Liabilities"), Purchaser does
not and shall not assume or be responsible for any obligation or liability of
Seller.
3. Consideration.
(a) Based on the representations, warranties and
agreements contained herein, Purchaser shall purchase, and Seller
agrees to sell, assign, transfer and vest in Purchaser, the Assets for
a total consideration consisting of (i) Nine Hundred Thousand Dollars
to be paid in cash (the "Cash Consideration"); (ii) a Note in the form
attached as Exhibit "A," which note shall be in the principal amount
of $300,000, amortized over five years with interest accruing from the
Closing Date (as hereafter defined) at the rate of 10% per annum, and
payable in 60 equal monthly payments commencing on the first day of
the month following the Closing Date; (iii) the issuance of 400,000
shares of the Purchaser's Common Stock (the "Common Stock
Consideration"), such Common Stock Consideration to be delivered at
Closing; and (iv) the issuance of an option to purchase 150,000 shares
of the Purchaser's Common Stock at a price of $1.50 per share pursuant
to the terms of the Stock Option Agreement attached hereto as Exhibit
"C" (the "Stock Option Agreement").
(b) In addition to the Purchase Price, and as additional
consideration for the Assets, at the Closing Purchaser and Seller
shall execute and deliver written Assignment and Assumption Agreements
in the form attached hereto as Exhibit "D" under the terms of which
Purchaser shall assume all obligations of Seller arising after
Closing, the Second Delivery Date or the termination of the Lease
Agreement (as herein defined), as the case may be, under the Rig Lease
and the Contracts and Commitments and the Ancillary Agreements which
are not rejected by Purchaser (the "Assumed Liabilities").
(c) Consideration paid by Purchaser for the Assets
($1,500,000) shall be allocated to the Assets on the basis of the
relative values set forth in the appraisal dated March 24,
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1997, conducted by X.X.X. Valuations, Inc. The parties agree that such
allocation shall be reported on Internal Revenue Service Form 8594.
4. Closing. In the event that Purchaser and Seller satisfy those
conditions set forth in this Agreement, or the conditions unsatisfied are
waived in writing, the consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at 10:00 A.M., local time on the
first business day following the completion or the termination for any reason
of the drilling contract between the Seller and KCS Energy (the "KCS
Contract"). The Closing shall take place at the offices of Xxxxxxxx &
Xxxxxxxxx, P.C., 1900 Frost Bank Plaza, Corpus Christi, Texas, or such other
time and place as the parties mutually agree. The time and date of the Closing
shall be referred to herein as the "Closing Date." If, at the time of Closing,
the Assets designated as Rig 9 Assets on Schedule 1(a) are being operated by
Seller incident to performing a drilling contract (the "Rig 9 Contract"),
Seller shall be permitted to lease the Rig 9 Assets to complete such drilling
contract pursuant to the terms of the Lease Agreement attached as Exhibit "H"
to this Agreement (the "Lease Agreement"). Such drilling contract shall be
appropriately referenced on Exhibit B to the Lease Agreement and such Rig 9
Contract shall not be assumed by Purchaser, notwithstanding anything herein to
the contrary. In addition, if at the time of Closing, Rig 10 is being operated
by Seller incident to performing a drilling contract (the "Rig 10 Contract"),
the Assignment and Assumption of the Rig Lease and the delivery of Rig 10 shall
occur at such time that Rig 10 is released from the Rig 10 Contract, and such
Rig 10 Contract shall not be assumed by the Purchaser.
(a) Seller's Obligations at Closing. At the Closing,
Seller shall deliver to Purchaser the following:
(i) To the Purchaser, executed bills of sale,
assignments, certificates of title for motor vehicles, and
such other instruments satisfactory in form and substance to
Purchaser pursuant to which Seller shall convey the Assets to
Purchaser;
(ii) To the Purchaser, certificates as to the existence
and good standing of Seller (as of the date not earlier than
ten days prior to the Closing) in the State of Texas;
(iii) To the Purchaser, resolutions evidencing the
authorization of the execution, delivery and performance of
this Agreement by Seller and the consummation of the
transactions contemplated hereby, certified by the Secretary
of Seller;
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(iv) To the Purchaser, a certificate dated as of the
Closing Date and signed by the President and Secretary of
Seller that evidences the execution and delivery of this
Agreement by Seller and verifies the accuracy of Seller's
representations and warranties contained in this Agreement,
both as of the date of this Agreement and as of Closing;
(v) To the Purchaser, opinion of Seller's counsel in the
form of Exhibit "E";
(vi) To the Purchaser, a certificate of No Tax Due issued
by the Comptroller of the State of Texas indicating that no
sales tax, motor vehicle tax, employment tax, or other tax is
due and owing to the State of Texas;
(vii) To the Purchaser, a certified search of the UCC
records of the Secretary of State of the State of Texas and
the applicable counties where Seller resides, showing that the
Assets are free and clear of any liens or encumbrances, or
executed UCC-3 termination statements releasing any security
interest are reflected in such search;
(viii) To the Purchaser, such additional certificates,
proceedings, instruments and other documents as Purchaser may
reasonably request to evidence compliance by Seller with this
Agreement and applicable legal requirements and the
performance and satisfaction by Seller and Xxxxxxxx to this
transaction at or prior to the time of all agreements then to
be performed and all conditions then to be satisfied by Seller
and Xxxxxxxx;
(ix) To the Purchaser, the Assignment and Assumption
Agreement in the form attached as Exhibit "D" executed by
Seller and Purchaser under which the Seller assigns all of its
rights under the Contracts and Commitments (other than the Rig
9 Contract and the Rig 10 Contract) and the Ancillary
Agreements which are not rejected by Purchaser and which are
not designated on Schedules 1(d) and 1(e) as Rig 10 Assets;
(x) To the Purchaser, the Subscription Agreement in the
form attached hereto as Exhibit "G";
(xi) To the Purchaser, the Assignment and Assumption
Agreement in the form attached as Exhibit "D" executed by
Seller and Purchaser but made effective as of the Second
Delivery Date and under which the Seller assigns all of its
rights under the Rig 10 Lease, and the Contracts and
Commitments and the Ancillary Agreements which are not
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rejected by Purchaser and which are designated on Schedules
1(d) and 1(e) as Rig 10 Assets;
(xii) To the Purchaser, the Lease Agreement for Rig 9
attached hereto as Exhibit H executed by the Purchaser and the
Seller;
(xiii) To the Purchaser, the consent in a form acceptable to
Purchaser, under which Xxxxxx Bridge Equipment Company (the
"Lessor") authorizes the Seller to assign the Rig Lease to the
Purchaser and which requires the Lessor to certify at the time
of the Second Delivery Date the condition of Rig 10 at such
time; and
(xiv) To the Purchaser, to the extent that any Ancillary
Agreement or any Contract or Commitment is not freely
assignable by the Seller, the Seller shall provide written
consents by the parties to such agreements, authorizing the
assignment by the Seller to the Purchaser.
(b) Purchaser's Obligations at Closing. At the Closing,
Purchaser shall deliver to Seller, the following:
(i) To the Seller, $900,000 by certified check in current
Corpus Christi, Texas funds, or wire transfer;
(ii) To the Seller, a certificate representing 400,000
shares of the Purchaser's Common Stock, which certificate
shall bear an appropriate legend restricting the sale or
transfer of such stock other than in accordance with the
registration requirements of the Securities Act of 1933 or any
exemption therefrom;
(iii) To the Seller, the fully executed Assignment and
Assumption Agreement in the form attached as Exhibit "D" under
which the Seller assigns all of its rights under the Contracts
and Commitments (other than the Rig 9 Contract and the Rig 10
Contract) and the Ancillary Agreements which are not rejected
by Purchaser, which are not designated on Schedules 1(d) and 1
(e) as Rig 10 Assets;
(iv) To the Seller, the fully executed Note;
(v) To the Seller, the fully executed Security Agreement
in the form attached hereto as Exhibit "B" along with executed
UCC-1 financing statements, under which Seller is granted a
security interest in the Drilling Rigs designated as Rig #5
and Rig #9; which security interest is expressly subordinated
to the Purchaser's presently existing secured lenders or their
assigns.
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(vi) To the Seller, the fully executed Stock Option
Agreement under which Seller shall have the right to acquire
150,000 shares of the Purchaser's Common Stock for a purchase
price of $1.50 per share, which shares, if issued, shall be
subject to the same transfer restrictions and legends as
described in (ii) above;
(vii) To the Seller, the fully executed Assignment and
Assumption Agreement in the form attached as Exhibit "D" made
effective as of the Second Delivery Date and under which the
Seller assigns all of its rights under the Rig Lease, and the
Contracts and Commitments (other than the Rig 10 Contract) and
the Ancillary Agreements which are not rejected by Purchaser,
which are designated on Schedules 1(d) and 1(e) as Rig 10
Assets;
(viii) To the Seller, the fully executed Voting Agreement in
the form attached as Exhibit "F"; and
(ix) To the Seller, the Lease Agreement for Rig 9 attached
hereto as Exhibit "H" executed by the Purchaser and the
Seller.
5. Delivery of Assets. At the Closing, Seller shall deliver and
transfer title to the Assets to Purchaser free, clear and discharged of and
from any and all liens, charges, equities, security interests, encumbrances,
claims and demands of every kind and character whatsoever known or unknown.
Delivery of the Assets shall be deemed to occur at the time of Closing, and
with respect to the Drilling Equipment which are a part of the Assets, delivery
shall take place at the on-site location of such Drilling Equipment, and with
respect to all other Assets, delivery shall take place at the Seller's yard
located in San Xxxxxxxx, Texas. All delivery and shipment costs from location
or Seller's yard shall be the responsibility of Purchaser.
The Purchaser and Seller agree that delivery of the Assets designated
as "Rig 10 Assets," none of which are owned by the Seller, but which are leased
from Xxxxxx Bridge Equipment Company under the Rig Lease, will be made to the
Purchaser at such time that Rig 10 is released from the Rig 10 Contract (the
"Second Delivery Date"), but only to the extent that Rig 10 is being used at
the time of Closing. If Rig 10 is not being operated at the time of Closing,
delivery of Rig 10 shall occur at Closing in accordance with the first
paragraph of this Section 5 and the Assignment and Assumption Agreement
relating to the Rig Lease and the Rig 10 Assets shall be effective as
of the Closing Date.
(a) Seller's Obligations at Second Delivery Date. At the
Second Delivery Date, Seller shall provide the following:
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Seller shall deliver the Rig 10 Assets, free, clear and discharged of
and from any and all liens, charges, equities, security interests,
encumbrances, claims and demands of every kind and character
whatsoever known or unknown, other than the Rig Lease. Delivery of the
Rig 10 Assets to Purchaser shall be deemed to occur at the time of the
Second Delivery Date, and with respect to the Drilling Equipment which
are a part of the Rig 10 Assets, delivery shall take place at the
on-site location of such Drilling Equipment, and with respect to all
other Assets included in the Rig 10 Assets, delivery shall take place
at the Seller's yard located in San Xxxxxxxx, Texas. All delivery and
shipment costs from location or Seller's yard shall be the
responsibility of Purchaser. Risk of loss of the Rig 10 Assets shall
pass to Purchaser at the Second Delivery Date. At the Second Delivery
Date, the Seller and Xxxxxxxx shall certify that, to the best of their
knowledge, Rig 10 is in good operating condition and in the condition
required by the Rig Lease. In addition, at the Second Delivery Date,
the Seller shall provide a certificate in a form acceptable to the
Purchaser and signed by the Lessor, which states that (i) the Rig
Lease is in full force and effect and no notice of termination has
been given by either party, and (ii) at the time of the Second
Delivery Date, Rig 10 is in good operating condition and in
the condition required by the Rig Lease.
(b) Risk of Loss. It is expressly agreed that the title to all of
the Assets shall pass to the Purchaser at Closing, unless Rig 10 is operating
at the time of Closing, in which case title to the Rig Lease and the Assignment
and Assumption of the Rig Lease will occur at the Second Delivery Date.
However, risk of loss of the Assets shall pass at the time of delivery. After
Closing, Seller agrees to maintain all insurance on the Rig 10 Assets and the
Rig 9 Assets, as currently maintained, until such time that the Rig 10 Assets
and the Rig 9 Assets are delivered to the Purchaser. All such policies shall
name the Purchaser as a named insured, in accordance with its interests. In
addition, Purchaser shall be named as an insured on all general liability
policies of the Seller. In the event of any loss or damage to any of the Assets
before delivery, the Seller shall replace or repair such damaged, destroyed or
lost Assets, so that on the Closing Date, the Second Delivery Date and upon the
termination of the Lease Agreement, as the case may be, all of the Assets are
in good operating condition and comprise all of the assets necessary for the
operation of the Drilling Business as currently operated by Seller.
(c) Salvage Assets. The parties acknowledge that the Salvage
Assets have little or no value and that the cost of
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moving the Salvage Assets is greater than the value of the Salvage
Assets. Notwithstanding anything contained herein to the contrary, the
Salvage Assets shall remain in the possession and custody of the
Seller, and the Seller shall have the right to sell the Salvage Assets
at such prices as it deems appropriate. Prior to any sale, Purchaser
shall provide Seller with a Xxxx of Sale, transferring any such assets
"AS IS AND WITHOUT ANY WARRANTY". The consideration paid by the Seller
to the Purchaser for such assets in total, shall equal Ten Dollars.
6. Covenants, Representations and Warranties of Seller and
Xxxxxxxx. Seller and Xxxxxxxx covenant, represent and warrant to Purchaser as
follows and acknowledge that Purchaser is relying upon such representations and
warranties in entering into this Agreement:
(a) Due Incorporation. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Texas and has the corporate power to carry on its business as
now being conducted. Seller is not qualified as a foreign corporation
in any jurisdiction.
(b) Corporate Authority. The execution, delivery and
performance of this Agreement, and the obligations undertaken by
Seller herein, have been duly authorized and approved by the Board of
Directors of Seller and by the Shareholders of Seller. Xxxxxxxx is the
sole shareholder of Seller, and no other person has the right to vote
or acquire his shares of stock in Seller.
(c) No Violation of Agreements, Etc. This Agreement
constitutes a valid and binding obligation of Seller enforceable
against Seller in accordance with its terms, and this Agreement and
all transactions contemplated hereby will not result in the violation
of any terms of the Articles of Incorporation or By-Laws of Seller or
any law or agreement to which Seller is a party or by which it is
bound.
(d) Title to Assets. Seller presently owns all of the
Assets, free and clear of all liens, charges, equities, pledges,
mortgages, leases, options, assessments, security interests,
restrictions and other encumbrances of any kind whatsoever ("Liens"),
other than those disclosed in Schedule 6 (d) (the "Existing Liens"),
and Seller has, and on the Closing Date will have, full right, power,
title and authority to sell, transfer and convey the Assets to
Purchaser, free and clear of all Liens, including the Existing Liens.
(e) No Litigation. Except as described on Schedule
6(e) there presently exists no litigation, proceeding, action, claim,
arbitration, or investigations at law, in
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equity or otherwise, pending or threatened against Seller or Xxxxxxxx, and
neither Seller or Xxxxxxxx has any knowledge of any facts or circumstances that
would indicate that any such claim exists. Neither Seller or Xxxxxxxx is
subject to any notice, writ, injunction, order, or decree of any court, agency,
or other governmental authority. Neither Seller or Xxxxxxxx has been served
with process or otherwise received formal notice with respect to, nor, to
Seller's or Phillip's knowledge, has Seller or Xxxxxxxx been threatened with,
any litigation or judicial, administrative, arbitration or other proceeding.
(f) Brokers. If Seller or Xxxxxxxx has retained any broker in
connection with the transactions contemplated by this Agreement, Seller and
Xxxxxxxx shall be solely responsible for the payment of any compensation due
such broker by Seller or Xxxxxxxx.
(g) Contracts/Assignments. The list of contracts and agreements
identified on Schedules 1(b), 1(d) and 1(e) is a complete and accurate list of
all contracts and agreements between Seller and any other person or related to
the Drilling Business, which are being assumed by Purchaser, unless otherwise
rejected in accordance with this Agreement. Each of the Rig Lease, Contracts
and Commitments and Ancillary Agreements described or referred to in Schedules
1(b), 1(d) and 1(e) are valid and binding obligations of Seller and the party
or parties thereto. None of the parties to any of such contracts or agreements
has terminated, cancelled, or substantially modified any of such contracts or
agreements and neither Seller nor any other party is in default thereunder.
Each of the Rig Lease, Contracts and Commitments and Ancillary Agreements may
be freely assigned by Seller to Purchaser without the requirement of any
consent or approval, except as set forth in Schedule 6(g).
(h) Personal Property. Seller owns all of the Assets free and
clear of any liens or encumbrances, other than those Existing Liens set forth
in Schedule 6(d) which will be released prior to or contemporaneous with the
Closing. The Assets described in Schedules 1(a) -- 1(j) are a full and complete
list of all tangible and intangible personal property used in connection with
the Drilling Business, and such property constitutes all of the assets
necessary for the conduct of the Drilling Business as presently conducted.
Seller has delivered or will deliver at Closing all support, maintenance,
warranty, and similar agreements related to such property. To the best of
Seller's and Phillip's knowledge, each of such assets is in good operating
condition and at the time the Assets are delivered to Purchaser, each of the
Assets (including Rig 10 and the assets relating thereto) will be in good
operating condition. In order to ensure that the Assets
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are in good operating condition, immediately prior to Closing, the Second
Delivery Date and the termination of the Lease Agreement, the Seller and
Purchaser shall conduct a joint inspection of the Assets, and the Seller and
Xxxxxxxx will certify that, to the best of their knowledge, the Assets are in
good operating condition. In addition, at all times prior to Closing, the
Second Delivery Date and the termination of the Lease Agreement, the Seller
shall provide Purchaser with accurate daily drilling reports which shall
specify any loss or damage to any of the Assets. The Seller shall take any
action necessary to place the Assets in operating condition prior to the
delivery dates specified herein. It is understood and agreed that ALL ASSETS
BEING PURCHASED FROM SELLER HEREUNDER ARE BEING PURCHASED AND SOLD "AS IS" WITH
NO WARRANTY, EXPRESSED OR IMPLIED.
(i) Employee Benefits. Seller has no and has never had any
employee benefit plans (as defined in Section (3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), maintained by or contributed
to by Seller in connection with the Drilling Business (all such plans are
referred to as the "Plans"), or any all employee stock option or stock
purchase, bonus, incentive compensation, severance pay and fringe benefit
arrangements. During the five-year period ending at the Closing, Seller has not
made or been required to make any contributions to any "multiemployer plan" (as
defined in Section 3(37) of ERISA).
(j) Permits and Approvals. Seller has no permits, approvals,
authorizations, licenses, consents, certifications, qualifications or
clearances held, used, or required in the conduct of the Drilling Business, and
none are required to be held by Seller.
(k) Compliance with Laws. Seller is in full compliance with all
statutes, ordinances, codes, restrictions, regulations, and other governmental
requirements. At all times prior to Closing, the conduct of Seller has been in
full compliance with all statutes, ordinances, codes, restrictions,
regulations, and other governmental requirements, including all Environmental
Laws, as hereafter defined.
(l) Tax Returns. All tax returns required to be filed by Seller
have been or will be properly and timely filed on or before the Closing Date.
All taxes, including but not limited to payroll and ad valorem taxes, have been
or will be paid when required by law. The Assets are not in any manner
encumbered by any liens arising out of unpaid taxes which are due and payable
nor shall any such lien arise on account of any taxes due for any period prior
to the Closing.
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(m) True and Correct Copies. Seller has delivered or made
available to Purchaser true, correct, and complete copies of all contracts,
agreements and documents referred to in this Agreement or related to the
Drilling Business, together with all modifications thereof and amendments
thereto, and all customer lists, supplier lists, maintenance records and daily
drilling reports with respect to the Drilling Business.
(n) Insurance. Schedule 6(n) contains a list of the policies and
contracts (including insurer, named insured, type of coverage, limits of
insurance, required deductibles or copayments, annual premiums and expiration
date) for fire, casualty, liability and other forms of insurance maintained by,
or for the benefit of Seller. All such policies are in full force and effect
and are adequate for the Drilling Business. Seller has not received any notice
of cancellation or non-renewal or of significant premium increases with respect
to any policy. All premiums due prior to the date hereof for the period prior
to the date hereof with respect to such policies have been timely paid, and all
premiums due before the Closing Date for periods between the date hereof and
the Closing Date will be timely paid. In addition, all premiums due before the
Second Delivery Date and the termination of the Lease Agreement with respect to
the Rig 9 Assets and the Rig 10 Assets for the periods between the date hereof,
the Second Delivery Date and the termination of the Lease Agreement, as the
case may be, will be timely paid so that all of the Assets are fully insured
for all periods prior to delivery.
(o) Financial Statements. Seller represents that all financial
statements provided to Purchaser are true and correct in all material respects,
and have been prepared in accordance with generally accepted accounting
principles, consistently applied. The financial statements which have been or
shall be provided to Purchaser are listed on Schedule 6(o).
(p) Disclosure. No statement in any document or certificate
furnished or to be furnished by Seller or Xxxxxxxx to, Purchaser pursuant
hereto, or in connection with the transactions contemplated hereby, contains or
will contain any untrue statement of a material fact, or fail to contain any
material facts necessary in order to make the statements therein not
misleading. Seller and Xxxxxxxx have fully disclosed in writing all material
facts pertaining to the Assets and the Drilling Business.
(q) Private Placement Memorandum. Seller and Xxxxxxxx acknowledge
the receipt of the Confidential Private Placement Memorandum (the "Memorandum")
delivered by the Purchaser prior to the execution of this Agreement, which
Memorandum
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describes, among other matters, the Purchaser, its capitalization, a
description of the Common Stock Consideration, the transferability of
the Common Stock Consideration and the Common Stock issuable upon the
exercise of the Stock Option Agreement. The Memorandum also contains
the Purchaser's latest annual report on Form 10-K, as well as its
quarterly reports filed on Form 10-Q for the Purchaser's fiscal
quarters ending March 31, 1996, June 30, 1996, September 30, 1996 and
December 31, 1996. Seller, through Xxxxxxxx, has had the opportunity
to ask questions and obtain additional information from the officers
and directors of Purchaser regarding the financial condition,
business and properties of Purchaser.
7. Representations and Warranties of Purchaser. Purchaser
represents and warrants to Seller as follows:
(a) Corporate Existence. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of
Texas and has the corporate power to carry on its business as now
being conducted.
(b) Corporate Authority. The execution, delivery and
performance of this Agreement, and the obligations undertaken by the
Purchaser herein, have been duly authorized by all necessary corporate
action by and on behalf of the Purchaser.
(c) No Violation of Agreements. This Agreement
constitutes a valid and binding obligation of Purchaser enforceable
against Purchaser in accordance with its terms, and this Agreement and
all transactions contemplated hereby will not result in the violation
of any terms of the Articles of Incorporation or By-Laws of Purchaser
or any law or agreement to which Purchaser is a party or by which it
is bound.
(d) Brokers. If Purchaser has retained any broker in
connection with the transactions contemplated by this Agreement,
Purchaser shall be solely responsible for the payment of any
compensation due such broker by Purchaser.
(e) Disclosure. No statement in any document or
certificate furnished or to be furnished by Purchaser to Seller
pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material
fact, or fail to contain any material facts necessary in order to make
the statements therein not misleading. Purchaser has fully disclosed
in writing all material facts pertaining to the Purchaser.
8. Actions before Closing.
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(a) Access. Between the date hereof and the later to occur of the
Second Delivery Date or the termination of the Lease Agreement, Seller shall
afford Purchaser and its counsel and other representatives full access during
normal business hours to Seller's contracts, properties and facilities, and
Seller shall instruct its officers, employees, accountants and agents to fully
cooperate with Purchaser and its counsel, accountants, lenders and other
representatives in its investigation and to furnish such additional information
as Purchaser and its counsel and other representatives may from time to time
reasonably request. Seller specifically covenants that Seller will permit
Purchaser to conduct such tests and investigations of the Assets as Purchaser
may request. In addition, Purchaser shall be permitted to make abstracts from,
or take copies of, such documentation relating to the Assets as may be
reasonably required by Purchaser.
(b) Interim Conduct of the Drilling Business. Seller hereby
covenants to Purchaser that, from the date hereof to the later to occur of the
Second Delivery Date or the termination of the Lease Agreement, Seller will
conduct the Drilling Business only in the ordinary course and usual course,
consistent with past practices, subject to Purchaser's approval of certain
transactions pursuant to 8(c) below. Without limiting the generality of the
foregoing, Seller hereby covenants to Purchaser that, insofar as the Drilling
Business is concerned, Seller will use its best efforts to:
(i) preserve the Drilling Business and Seller's relationships with
suppliers, customers, employees, creditors, and others having business
dealings with the Drilling Business;
(ii) maintain in full force and effect its existing policies of
insurance listed on Schedule 6(n);
(iii) maintain the Assets in good operating condition and repair;
(iv) continue performance in the ordinary course of its obligations
under the Rig Lease, the Contracts and Commitments and Ancillary
Agreements;
(v) permit employees or other representatives of Purchaser to
consult with Seller's employees who are employed in the Drilling
Business in the performance of their jobs for a period of not more
than two weeks prior to the Closing Date, provided that any such
discussions will be performed in a manner that will not disrupt the
operation of the Drilling Business; and
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(vi) pay all taxes and liabilities and perform all obligations of
Seller when due.
(c) Purchaser's Approval of Certain Transactions. Seller hereby
covenants to Purchaser that from the date hereof to the later to occur of the
Second Delivery Date or the termination of the Lease Agreement, Seller shall
not do any of the following acts without the prior written consent of
Purchaser:
(i) sell, transfer, encumber or assign any of the Assets (except
to Purchaser in accordance with this Agreement);
(ii) enter into any transaction, contract or commitment outside of
the ordinary course of the drilling portion of Seller's business; or
(iii) enter into any agreement whereby Seller is obligated to drill
any well on or after two days prior to the Closing Date or to perform
any service or other obligation after the day set forth herein as the
Closing Date. If any required consent shall not be given by Purchaser,
Purchaser shall pay the labor costs incurred by Seller with respect
thereto.
(d) Consent to Assignment. Seller hereby covenants to Purchaser
that, at least 10 days prior to the Closing, Purchaser will use its best efforts
to obtain the consents and approvals which are necessary to assign the Rig
Lease, as well as the Contracts and Commitments and Ancillary Agreements. Any
and all such approvals and consents shall be in writing, signed by the person
entitled to consent or approve, and shall be delivered to Purchaser at Closing.
(e) Schedule Updates. Seller and Purchaser shall update by
amendment or supplement each of the Schedules referred to herein and any other
disclosure in writing from either party required by this Agreement to be
disclosed by Seller or Purchaser promptly upon any change in the information
set forth in such Schedules or other disclosures, and each party hereby
represents and warrants to the other that such Schedules and such written
disclosures, as so amended or supplemented by them, shall be true and correct
as of the dates thereof; provided however, that the inclusion of any
information in any such amendment or supplement, not included in the original
Schedule or other disclosure at or prior to the date of this Agreement, shall
not limit or impair any right that either party might otherwise have respecting
the representations and warranties of Purchaser contained in this Agreement.
(f) Updated Financial Statements. Within ten (10) days of Closing,
Seller shall provide Purchaser with updated financial statements, current
within sixty days, and such financial statements shall be reflected on Schedule
6(__).
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(g) Reports. On a daily basis, Seller shall provide
Purchaser, via telefax, with the daily drilling reports pertaining to
the operation of the Drilling Equipment, as well as all proposals
seeking the Seller to bid on any project and at least two business
days before any bids are submitted, any bids proposed to be submitted
by Seller. In addition, as situations occur, Seller shall promptly
notify Purchaser in writing with respect to any material or adverse
change in the Assets or the Drilling Business.
9. Conditions Precedent to Closing by Purchaser. Except as
expressly waived in writing by the Purchaser, the obligation of Purchaser to
purchase the Assets is subject to, among other things, the following
conditions:
(a) Approvals. All corporate and other proceedings or
actions to be taken by Seller in connection with the transactions
contemplated by this Agreement and all documents incidental thereto
shall be satisfactory in form and substance to Purchaser and
Purchaser's counsel.
(b) Title. Transfer of title on the Closing Date, by
Seller to Purchaser, of the Assets, free and clear of all Liens,
including the Existing Liens, and delivery of the Rig 5 Assets on the
Closing Date, delivery of the Rig 10 Assets on the Second Delivery
Date and delivery of the Rig 9 Assets upon the termination of the
Lease Agreement, free and clear of all Liens, including the Existing
Liens. Notwithstanding any other provision of this Agreement, Seller's
obligation to deliver the Rig 10 Assets is conditioned upon receiving
the consent to such transfer from the Lessor under the Rig 10 lease.
(c) Covenants. The fulfillment and/or performance of all
agreements, conditions and covenants of Seller contained herein on or
prior to the Closing Date or such earlier specified date for
fulfillment and/or performance.
(d) Representations. The representations and warranties
of Seller and Xxxxxxxx shall be true, accurate, and complete in all
material respects as of the date hereof and as of Closing.
(e) Documents. Delivery on the Closing Date, by Seller to
Purchaser, of all such instruments of transfer, bills of sale,
endorsements, assignments, and other instruments of transfer and
conveyance, in form and substance satisfactory to Purchaser, as are
necessary to vest in Purchaser good and indefeasible title to the
Assets free and clear of all Liens, including Existing Liens.
(f) Permits. Purchaser shall have received from the
appropriate entities such permits and licenses as are necessary for
the conduct of the Drilling Business after the Closing, or Purchaser
shall have determined, to Purchaser's sole satisfaction, that
Purchaser is not required to obtain
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such permits and licenses by reason of an available exemption.
Purchaser covenants and agrees to utilize due diligence and good faith
in obtaining such permits and licenses.
(g) Tax Certificate. Purchaser shall have received, in
accordance with Section 111.020(c) of the Texas Tax Code, a
certificate stating that no taxes are due by Seller.
(h) No Adverse Change. No material, adverse change in the
Assets or the Drilling Business (including, but not limited to, any
material, adverse change or circumstance pertaining to any Contract
or Commitment) which would have a material adverse effect on the
Purchaser, shall have occurred after the date of this Agreement and
prior to the Closing, and Seller shall have operated Seller's business
in the ordinary course. In the event that any of the Assets are
damaged or destroyed, before the Closing Date, Purchaser may at its
option, terminate this Agreement or Close the transactions
contemplated by this Agreement in which event Purchaser shall receive
all of the insurance proceeds resulting from such damage or
destruction.
(i) Litigation. There shall not have been issued and in
effect any injunction or similar legal order prohibiting or
restraining consummation of any of the actions herein contemplated and
no legal action or governmental investigation which might reasonably
be expected to result in any such injunction or order shall be pending
or threatened;
(j) Deliveries Required by Seller. Seller shall have
delivered to Purchaser all of the items enumerated in Section 4(a).
(k) Financing. Purchaser shall have obtained financing,
on such terms as are provided in the commitment received by Purchaser
from FINOVA, to enable Purchaser to complete the transactions
contemplated by this Agreement and to provide adequate working capital
for Purchaser's anticipated working capital needs after Closing.
10. Conditions Precedent to Closing by Seller. The obligation of
Seller to sell the Assets is subject to, among other things, the following
conditions:
(a) Covenants. The fulfillment and/or performance of all
conditions and covenants of Purchaser contained herein on or prior to
the Closing Date or such earlier specified date for fulfillment and/or
performance.
(b) Representations. The representations and warranties
of Purchaser shall be true, accurate, and complete in all material
respects as of the date hereof and as of Closing.
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(c) Documents. Delivery on the Closing Date, by Purchaser to
Seller of all instruments and documents required by this Agreement, in form and
substance reasonably satisfactory to Seller, as are necessary to fulfill
Purchaser's obligations under this Agreement.
(d) Deliveries Required by Purchaser. Purchaser shall have
delivered to Seller all items enumerated in Section 4(b)
11. Additional Covenants.
(a) Proration of Taxes and Other Items. All personal property
taxes shall be prorated to the Closing Date.
(b) Transfer and Liability. Seller has the sole responsibility
for any employment rights or benefits which any of its employees may have.
Purchaser has no obligation whatsoever to employ any such employees or to pay
any benefits which any employee has or claims to have by virtue of an
employment relationship with Seller. Purchaser shall have the right to
interview all of the employees of Seller. If Purchaser elects to hire an
employee of Seller, Seller agrees to cooperate and not to interfere with such
employee becoming an employee of Purchaser. However, Purchaser shall not
employ any employee of Seller while they are assigned to Rig 10 or Rig 9, until
the termination of the Lease Agreement or the Second Delivery Date, as the case
may be. Seller shall be solely responsible for any salary, wages, bonuses,
commissions, accrued vacation time, sick leave time, profit sharing or pension
benefits and any other compensation or benefits as well as any actions or
causes of action, including, but not limited to, unemployment compensation
claims and workers compensation claims which may be asserted by and determined
by a court or appropriate agency ruling to be due to any of its employees which
are not hired by Purchaser or by any of its employees which are hired by
Purchaser if the claims of such hired employee relates to or arises from
employment with Seller or termination of employment by Seller. The above
notwithstanding, Purchaser agrees to offer employment to Seller's drilling
superintendent and its contract manager at annual salaries of $50,000 and
$47,500, respectively. All such employees shall be at-will employees. Xxxxxxxx
agrees to work as a consultant to the Purchaser on an as-needed basis, at a
rate of $300.00 for each day of requested services. All reasonable expenses
related to Xxxxxxxx' serving as a consultant to Purchaser will be paid by
Purchaser, provided that Purchaser approves such expenses before incurred.
(c) Trading in Stock. Until the Closing, neither Seller nor
Xxxxxxxx will trade in any of the stock of the Purchaser and acknowledge that
any such trading may be a violation of
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law and subject Seller and Xxxxxxxx to substantial liabilities. In order to
protect against such unlawful trading in the Purchaser's stock, until the
Closing, Seller and Xxxxxxxx agree to keep the existence of this Agreement and
the terms thereof confidential and only to disclose the existence of this
Agreement and its terms, on an as needed basis.
(d) Board Representation. At his option, and provided that the
transactions contemplated by this Agreement are consummated, Xxxxxxxx will be
appointed to serve on the Board of Directors of the Purchaser until the next
annual meeting of the shareholders of Purchaser. He shall be nominated to serve
annually thereafter so long as the Note shall not have been discharged in full.
Xxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxxx, Xx. Xxxxx Xxxxx and Xxxxx X. Xxxxxx shall
each agree to vote all shares of the Purchaser owned or controlled by them in
favor of Xxxxxxx Xxxxxxxx serving as a director in each election, in accordance
with the Voting Agreement attached hereto as Exhibit "F, " which will be
delivered to the Seller at Closing.
(e) Survival of Covenants. The warranties, covenants, promises,
undertakings, and obligations of each of the parties hereto, whether set forth
in this Agreement, or in any document, exhibit or schedule delivered in
connection with this Agreement shall survive the Closing and, in the event of
the dissolution and liquidation of Seller or Purchaser, survive such
dissolution and liquidation and continue, notwithstanding such dissolution and
liquidation, to be performable by, and actionable and enforceable against, any
person, or persons, to whom, or to which, any of the assets of and property of
Seller or Purchaser, shall have been distributed as a result of such
dissolution and liquidation.
(f) Further Consents and Conveyances. After the Closing, Seller
shall, without further cost or expense to Purchaser, execute and deliver to
Purchaser, such additional instruments of conveyance, and take such other and
further actions to more completely sell, transfer, and assign to Purchaser, the
Assets. In addition, to the extent that any consent or approval was not
obtained prior to Closing and Purchaser nevertheless elected to proceed with
Closing, Seller shall continue to use its best efforts to obtain from such
person or persons any such consents or approvals.
(g) Right of Set-off. It is expressly agreed that for a period of
thirty (30) days following the later to occur of the Second Delivery Date or
termination of the Rig 9 lease agreement. Purchaser shall have the right to
reduce the amount owing under the Note by the amounts, if any, owed by Seller
under the Lease Agreement or this Agreement as a result of the breach of any
agreement, covenant, representation or warranty under this Agreement or the
Lease Agreement, or
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arising under Purchaser's right to indemnification as provided in Section 12
below.
(h) Books and Records. Incident to any public offering of the
Stock of Purchaser or as necessary to satisfy Purchaser's obligations under the
Securities Exchange Act of 1934, as amended, within the twenty four month
period following the Closing, and to the extent necessary, Purchaser shall have
the right to conduct an audit of Seller's Drilling Business operations, in
which event Seller and Xxxxxxxx will fully cooperate with Purchaser and allow
access to such books and records as is necessary to conduct such audit. As
such, the books and records of Seller relating to the Drilling Business shall
be maintained by Seller for a period of two years from the date of Closing.
(i) Rig Lease. Xxxxxxxx agrees to provide any assistance
requested by Purchaser necessary to maintain the Rig Lease and agrees that at no
time shall he attempt to influence the owner of Rig 10 to terminate the Rig
Lease or assist any third party to contact, or negotiate with the owner of Rig
10.
12. Indemnification.
(a) Each party, whether the Seller and Xxxxxxxx, or the Purchaser
("Indemnifying Party") shall defend, indemnify and hold harmless the other
party, its directors, officers, employees and shareholders, and its successors
and assigns (the "Indemnified Parties") from and against any and all costs,
losses, claims, liabilities, fines, expenses, penalties, and damages (including
interest, legal and accounting fees, court costs and fees and costs on appeal,
costs of arbitration and disbursements of counsel) ("Damages") suffered by an
Indemnified Party as a proximate result of:
(i) Any breach, violation, falsification, failure to
satisfy, or other default in any respect of any warranty, covenant or
representation provided herein by the indemnifying Party.
(ii) Any liability arising out of the ownership, use or
operation by the Indemnifying Party of the Assets or Drilling
Business, including, without limitation, the violation of any
Environmental Law, rule or regulation, and including any liability
arising out of or attributable to acts or omissions with respect to
the Rig Lease, the Contracts and Commitments and the Ancillary
Agreements.
(iii) The presence, management, production, refinement,
manufacture, processing, distribution, use,
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treatment, sale, storage, disposal, transportation or
handling, or the emission, discharge, release, or threatened
release of any Hazardous Substances; any death, personal
injury or property damage (real or personal) arising out of or
related to such Hazardous Substances; any, action, suit,
proceeding or investigation brought or threatened, settlement
reached or governmental order relating to such Hazardous
Substances; and any violation of any Environmental Law by the
Indemnifying Party or its officers, directors, agents,
employees or representatives.
(b) The following terms used in this Section 12 have the
meanings set forth below:
"Environmental Laws" shall mean all federal, state, county,
municipal and local, foreign and other statutes, laws, regulations and
ordinances which relate to or deal with protection of human health or
the environment, all as may be from time to time amended.
"Hazardous Substance(s)" shall mean (i) any flammable
substances, explosives, radioactive materials, hazardous substances,
hazardous wastes, toxic substances, pollutants, contaminants or any
related materials or substances identified in or regulated by any of
the Environmental Laws, and (ii) asbestos, polychlorinated bipheyls,
urea formaldehyde, nuclear fuel or material, chemical waste,
explosives, known carcinogens, petroleum products and by-products
(including any fraction thereof) and radon.
(c) Subject to the rights of either party to arbitrate
any dispute as hereinafter provided for, each party shall have the
absolute right, for a period of thirty (30) days following the later
to occur of the Second Delivery Date or termination of the Rig 9 lease
agreement, to exercise its right of set-off of any indemnity owed
the other party under this Section 12 against any obligation owing
from the Indemnifying Party.
13. Mediation. In the event a dispute or disagreement may arise
between the parties out of or in connection with this Agreement, the parties
agree to submit, pursuant to Section 154.025 of the Texas Civil Practice and
Remedies Code, such dispute or disagreement to mediation within thirty (30)
days of written notice from one party to the other demanding such mediation. In
the event of any default under this Agreement, or the agreements entered into
incident to the Closing, the breaching party shall be liable for the attorney's
fees and expenses of the non-breaching party.
14.1 Incidental Registration.
(a) Right to Include Registrable Common Stock. The
Purchaser understands that the Seller intends to transfer all or
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part of the Common Stock Consideration to Xxxxxx Xxxxxxxxx, Xx. and/or Xxxxxxx
Xxxxxxxx (the "Transferee"), and the Purchaser agrees to facilitate such
transfer to the Transferee provided that the Transferee signs a subscription
agreement in the form acceptable to the Purchaser and acknowledges receipt and
review of the Private Placement Memorandum prepared by the Purchaser and
delivered to the Seller. If the Purchaser at any time within two years of the
Closing Date, files a registration statement covering any of its securities
under the Securities Act (other than by a registration on Form X-0, X-0 or any
successor similar forms or any other form not available for registering the
Registrable Common Stock for sale to the public), whether for sale for its own
account or for the account of any Person exercising demand registration rights,
it will each such time, at least 30 days prior to filing the registration
statement, give written notice to the Seller and the Transferee ("Holders")
(the Common Stock Consideration and the Common Stock issuable upon the exercise
of the rights under the Option Agreement are referred to herein as the
"Registrable Common Stock") at the last address provided to the Purchaser of
its intention to do so. Upon the written request of any such Holder made within
15 days after the receipt of any such notice (which request shall specify the
Registrable Common Stock intended to be disposed of by such Holder and the
intended method of disposition thereof), the Purchaser will use reasonable
efforts to effect the registration under the Securities Act of all Registrable
Common Stock which the Purchaser has been so requested to register by the
Holders of such Registrable Common Stock, to the extent requisite to permit the
disposition of the Registrable Common Stock so to be registered, provided that
if, at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Purchaser shall determine for any
reason not to register or to delay registration of such securities, the
Purchaser may, at its election, give written notice of such determination to
each Holder of Registrable Common Stock and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligation to register
any Registrable Common Stock in connection with such registration (but not from
its obligation to pay expenses in accordance with Section 14.1 (d)), and (ii)
in the case of a determination to delay registering, shall be permitted to
delay registering any Registrable Common Stock being registered pursuant to
this Section 14.1(a), for the same period as the delay in registering such
other securities.
(b) Priority in Incidental Registrations. If (i) a
registration pursuant to this Section 14.1 involves an underwritten offering of
the securities so being registered, whether or not for sale for the account of
the Purchaser or by any Person exercising demand registration rights, to be
distributed (on a firm commitment basis) by or through one or more underwriters
of recognized standing, whether or not the Registrable Common Stock so
requested to be registered for sale for the account of Holders of Registrable
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Common Stock is also to be included in such underwritten offering, and (ii) the
managing underwriter of such underwritten offering shall inform the Purchaser
and the Holders of the Registrable Common Stock requesting such registration by
letter of its belief that the number of securities requested to be included in
such registration would materially adversely affect the marketability or
offering price of any securities proposed to be offered by the Purchaser or any
Person exercising demand registration rights, exceeds the number which can be
sold in (or during the time of) such offering, then the Purchaser may include
in such offering all securities proposed by the Purchaser to be sold for its
own account or by any Person exercising demand registration rights and may
decrease the number of shares of Registrable Common Stock and other securities
of the Purchaser requested to be included in such registration pursuant to
contractual "piggyback" rights similar to those granted hereby pro rata on the
basis of the number of shares of Registrable Common Stock and other securities
of the Purchaser requested to be included in such registration to the extent
necessary to reduce the number of securities to be included in the registration
to the level recommended by the managing underwriter.
(c) Incidental Underwritten Offerings. If the Purchaser
at any time proposes to register any of its securities under the Securities Act
as contemplated by Section 14.1 and such securities are to be distributed by or
through one or more underwriters, the Purchaser will, if requested by any
Holder of Registrable Common Stock as provided in Section 14.1 and subject to
the provisions of Section 14.1(b), arrange for such underwriters to include all
the Registrable Common Stock to be offered and sold by such Holder owning the
securities to be distributed by such underwriters. Further, the Purchaser, at
its option, may require that such securities be distributed through such
underwriters.
(d) Expenses. Except as otherwise provided in this
Section 14.1(d), all expenses incurred in connection with each registration
pursuant to Section 14.2 (excluding in each case underwriter's discounts and
commissions applicable to Registrable Common Stock), including, without
limitation, in each case, all registration, filing and National Association of
Securities Dealer fees; all fees and expenses of complying with state
securities or blue sky laws; all word processing, duplicating and printing
expenses, messenger, delivery and shipping expenses; fees and disbursements of
the accountants and counsel for the Purchaser including the expenses (of any
special audits, "cold comfort" letters or opinions required by or incident to
such registrations; and the reasonable fees and disbursements of one firm of
counsel retained by the Holders of such Registrable Common Stock, any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities, but excluding underwriting discounts and commissions, if any, shall
be borne by the Purchaser. In all cases, each Holder of Registrable Common
Stock shall pay the
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underwriter's discounts and commissions applicable to the securities sold by
such Holder.
14.2 Registration Procedures. If and whenever the Purchaser is
required to use reasonable efforts to effect the registration of any
Registrable Common Stock under the Securities Act as provided in this Section,
the Purchaser will, subject to the limitations provided herein, as
expeditiously as possible:
(i) prepare and file with the Commission the requisite
registration statement to effect such registration and thereafter use
reasonable efforts to cause such registration statement to become
effective, provided that the Purchaser may discontinue any
registration of its securities at any time prior to the effective date
of the registration statement relating thereto;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the
Securities Act of 1933, as amended, with respect to the disposition of
all securities covered by such registration statement until such time
as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement; provided, however, that if the
Purchaser is requested or required to maintain such registration
effective for more than 90 days, all out-of-pocket expenses of the
Purchaser in maintaining such effectiveness after such 90 day period
shall be borne by such of the holders of securities who have requested
the maintaining of such effectiveness in order to continue with the
distribution, in such proportions as they may agree upon;
(iii) furnish to each seller of Registrable Common Stock
covered by such registration statement such number of confirmed copies
of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such number
of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and
any other prospectus filed under Rule 424 under the Securities Act,
and such other documents, as such seller may reasonably request;
(iv) use its best effort to register or qualify all
Registrable Common Stock and other securities covered by such
registration statement under such other securities or blue sky laws of
such jurisdictions as each seller thereof shall reasonably request, to
keep such registration or qualification in effect for so long as such
registration statement remains
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in effect (provided, however, that if the Purchaser is requested or
required to maintain such registration effective for more than 90
days, all out-of-pocket expenses of the Purchaser in maintaining such
effectiveness after such 90 day period shall be borne by such of the
holders of securities who have requested the maintaining of such
effectiveness in order to continue with the distribution, in such
proportions as they may agree upon, and take any other action which
may be reasonably necessary or advisable to enable Such Seller to
consummate the disposition in such jurisdictions of the securities
owned by such seller, except that the Purchaser 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 (iv) be obligated to be so qualified
or to consent to general service of process in any such jurisdiction;
(v) use its best efforts to cause all Registrable Common
Stock covered by such registration statement to be registered with or
approved by such other United States Federal or state governmental
agencies or authorities as may be necessary to enable the seller or
sellers thereof to consummate the disposition of such Registrable
Common Stock;
(vi) furnish to each seller of Registrable Common Stock a
copy, or, upon request, a signed counterpart, addressed to such seller
(and the underwriters, if any) of
(x) an opinion of counsel for the Purchaser,
dated the effective date of such registration statement (and,
if such registration includes an underwritten public offering,
dated the date of the closing under the underwriting
agreement), and
(y) a "comfort" letter, dated the effective date
of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of
the closing under the underwriting agreement), signed by the
independent public accountants who have audited the
Purchaser's financial statements included in such registration
statement, covering substantially the same matters with
respect to such registration statement (and the prospectus
included therein) and, in the case of the accountants' letter,
with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to
the underwriters in underwritten public offerings of
securities and, in the case of the accountants letter, such
other financial matters, and, in the case of the legal opinion
such other
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legal matters, as such seller or such Holder (or the
underwriters, if any) may reasonably request;
(vii) notify each seller of Registrable Common
Stock covered by such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any
event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which
they were made, and at the request of any such seller, prepare and
furnish to such seller a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances under which they were made;
(viii) otherwise use reasonable efforts to comply
with all applicable rules and regulations of the Commission, and make
available to its security Holders, as soon as reasonably practicable,
an earnings statement covering the period of at least twelve months
beginning with the first full calendar month after the effective date
of such registration statement which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act, and will
furnish to each such seller, upon request of such seller, at least
five days prior to the filing thereof a copy of any amendment or
supplement to such registration statement or prospectus and shall not
file any thereof to which any such seller shall have delivered to the
company an opinion of counsel 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;
(ix) provide and cause to be maintained a transfer
agent for all Registrable Common Stock covered by such registration
statement from and after a date not later than the effective date of
such registration statement; and
(x) use its best efforts to list all Registrable
Common Stock covered by such registration statement on any securities
exchange on which any of the Common Stock of the Purchaser is then
listed; and
It shall be a condition precedent to the obligations of the Purchaser to take
any action with respect to registering a Holder's
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Registrable Common Stock pursuant to this Section 14.2 that such seller of
Registrable Common Stock as to which any registration is being effected furnish
the Purchaser in writing such information regarding such seller, the
Registrable Common Stock and other securities of the Purchaser held by such
seller, and the distribution of such securities as the Purchaser may from time
to time reasonably request in writing. If a Holder refuses to provide the
Purchaser with any of such information on the grounds that it is not necessary
to include such information in the registration statement, the Purchaser may
exclude such Holder's Registrable Common Stock from the registration statement
if the Purchaser provides such Holder with an opinion of counsel to the effect
that such information must be included in the registration statement and such
Holder thereafter continues to withhold such information. The deletion of such
Holder's Registrable Common Stock from a registration statement shall not
affect the registration of the other Registrable Common Stock to be included in
such registration statement.
Each Holder of Registrable Common Stock agrees by acquisition of such
Registrable Common Stock that upon receipt of any notice from the Purchaser of
the happenings of any event of the kind described in subdivision (vii) of this
Section 14.2, such Holder will forthwith discontinue such Holder's disposition
of Registrable Common Stock pursuant to the registration statements relating to
such Registrable Common Stock until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
Section 14.2 and, if so directed by the Purchaser, will deliver to the
Purchaser (at the Purchaser's expense) all copies, other than permanent file
copies then in such Holder's possession, of the prospectus relating to such
Registrable common Stock current at the time of receipt of such notice.
15. Miscellaneous.
(a) Entire Agreement and Amendment. This Agreement and
the attached exhibits, schedules and other documents delivered
hereunder contain the entire agreement between the parties with
respect to the matters described herein and are a completely
integrated and exclusive statement as to the terms thereof and
supersede all previous agreements. This Agreement may not be altered
or modified except by a writing signed by the parties hereto.
(b) Notices. Any notice, demand or other writing of any
kind whatsoever which may or shall be given pursuant to this Agreement
shall be deemed given if personally delivered or on the third
succeeding business day after being mailed by registered or certified
mail, postage prepaid and return receipt requested, addressed as
follows (or at such address as shall be specified by notice given
hereunder):
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If to Seller: Mr. Xxxxxxx Xxxxxxxx
0000 Xxxxx Xxxxxx
Xxxxxx Xxxxxxx, Xxxxx 00000
If to Xxxxxxxx: Mr. Xxxxxxx Xxxxxxxx
0000 Xxxxx Xxxxxx
Xxxxxx Xxxxxxx, Xxxxx 00000
with copy to: Xxx Xxxxxxxx; 0000 Xxxxx Xxxx Xxxxx;
Xxxxxx Xxxxxxx, XX 00000-0000
If to Purchaser: Mr. Wm. Xxxxx Xxxxx
0000 Xxxxxxxx, Xxxxxxxx 0
Xxx Xxxxxxx, Xxxxx 00000
with copy to: Xxxxxx X. Xxxxx
Xxxxxxxx & Xxxxxxxxx, P.C.
000 X. Xx. Xxxx'x Xx. Xxxxx 000
Xxx Xxxxxxx, Xxxxx 00000
(c) Headings. The Background section and all Section and paragraph
headings contained herein are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
(d) Assignment. No party shall assign, transfer, pledge,
hypothecate or encumber this Agreement, or any interest herein or hereunder,
without the prior written consent of the other party.
(e) Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
(f) Parties in Interest. This Agreement shall inure to the benefit
of and be binding upon the parties named herein and their respective heirs,
beneficiaries, legal representatives, successors and assigns, provided that any
assignment of this Agreement or the rights hereunder by any party hereto except
as permitted hereunder without the written consent of the other shall be void.
(g) Waiver. The failure of any party at any time to require
performance by any other party of any provision of this Agreement shall not be
deemed a continuing waiver of that provision or a waiver of any other provision
of this Agreement and shall in no way affect the full right to require such
performance from the other party at any time thereafter.
(h) Payment of Expenses. Except as specifically described
herein, each of the parties shall pay all of the costs which each incurs
incident to the preparation, execution
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and delivery of this Agreement and the performance of the obligations
hereunder, including, without limitation, the fees and disbursements
of counsel, accountants and consultants, whether or not the
transactions contemplated by this Agreement shall be consummated.
(i) Invalidity. The invalidity of any provision of this
Agreement shall not affect the validity of the remainder of any such
provision or the remaining provisions of this Agreement.
(j) Severability. This Agreement and the transactions
contemplated herein constitute one sale and shall not be divisible in
any manner. A breach of any portion of this Agreement shall be
deemed a breach of the whole Agreement.
(k) Governing Law and Choice of Forum. Texas law shall
govern the construction and enforceability of this Agreement. Any and
all actions concerning any dispute arising hereunder shall be filed
and maintained only in a court sitting in Texas.
(l) Further Assurances. Seller, Xxxxxxxx and Purchaser
each agree that they shall execute and deliver any and all additional
writings, instruments and other documents contemplated hereby or
referred to herein and shall take such further action as shall be
reasonably required in order to effectuate the terms and conditions
of this Agreement.
(m) Specific Performance. Seller and Xxxxxxxx
acknowledge that a wrongful refusal by Seller to consummate the
transactions contemplated by this Agreement will cause harm to
Purchaser for which there may be no adequate remedy at law and for
which the ascertainment of damages will be difficult. Therefore, in
addition to and without having to prove the inadequacy of other
remedies at law, Purchaser shall be entitled to specific performance
of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
Seller:
SAN XXXXXXXX CORPORATION,
a Texas corporation
By: /s/ XXXXXXX XXXXXXXX
-------------------------
Its: President
---------------------
XXXXXXX XXXXXXXX
/s/ XXXXXXX XXXXXXXX
----------------------------
Purchaser:
SOUTH TEXAS DRILLING &
EXPLORATION, INC.,
a Texas corporation
By: /s/ WM. XXXXX XXXXX
-------------------------
Its: President
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