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