1
EXHIBIT 10.4
XXXXXXXXX ENERGY, INC.
AND
XXXXXXXXX DRILLING COMPANY
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into this 12th
day of June, 1997 (this "Agreement"), between and among XXXXXXXXX ENERGY, INC.,
a Delaware corporation ("PEC"), XXXXXXXXX DRILLING COMPANY, a Delaware
corporation ("PDC") wholly owned by PEC, and XXXXX XXXXXX, an individual
residing in Abilene, Texas ("X Xxxxxx").
RECITALS:
A. Simultaneously with the execution of this Agreement, PDC
has consummated the transactions contemplated by that certain Asset Purchase
Agreement, dated June 4, 1997, as amended by the Amendment to Asset Purchase
Agreement, dated June 4, 1997 (collectively, as amended, the "Asset Purchase
Agreement"), among PEC, PDC and XXX-XXX DRILLING COMPANY ("Xxx-Xxx"), providing
for, among other things, the purchase by PDC of the drilling rigs, related
equipment, rolling stock and a shop and yard owned by Xxx-Xxx.
X. X Xxxxxx is an officer and director of Xxx-Xxx.
C. The execution and delivery of this Agreement is a
condition to the consummation of the Asset Purchase contemplated by the Asset
Purchase Agreement, and the parties are entering into this Agreement in order
to fulfill such condition.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties, intending to be legally bound, hereby agree as follows:
1. Period of Agreement.
The period of this Agreement shall commence on the date hereof
and remain in effect through the first to occur of (i) June 12, 2002, or (ii) a
Change in Control of PEC or PDC unless sooner terminated as the result of the
death of X Xxxxxx (the "Non-Compete Period"). For purposes of this Agreement,
"Change in Control" shall be deemed to have occurred, if (i) a tender offer
shall be made and consummated for the ownership of more than fifty percent of
the outstanding voting securities of PEC, or (ii) there is a merger,
consolidation or other reorganization of PEC or PDC with another entity and as
a result of such merger, consolidation or other reorganization, less than fifty
percent of the outstanding voting securities of the surviving
2
or resulting entity shall be owned by the former stockholders of PEC as the
same shall have existed immediately prior to such merger, consolidation or
other reorganization.
2. Compensation.
Simultaneously with the execution of this Agreement, PEC and PDC
have paid X Xxxxxx, by cashier's check, the amount of $2 million as
compensation for entering into this Agreement.
3. Covenant Not to Compete.
(a) X Xxxxxx covenants and agrees that during the Non-Compete
Period, X Xxxxxx shall not, without the prior written consent of PEC and PDC,
directly or indirectly, and whether as a principal or as an agent, officer,
director, employee, consultant, or otherwise, alone or in association with any
other person, carry on, be engaged, concerned, or take part in, render services
to, or own, share in the earnings of, or invest in the stock, bonds, or other
securities of, any person which is engaged in the business of contract drilling
oil and gas xxxxx within District 1, 7B, 7C, 8, 8A, 9, or 10 of Texas as
defined by the Texas Railroad Commission on the date of this Agreement or
within Chaves, Eddy, Lea, or Roosevelt County, New Mexico (the "Competitive
Business"); provided, however, that X Xxxxxx may: (i) invest and/or engage in
any business that routinely provides third-party services (as such term is
commonly used in the contract oil and gas well drilling business) to a
Competitive Business, but is not engaged in the actual conduct of a Competitive
Business; or (ii) invest in stock, bonds, or other securities of any
Competitive Business (but without otherwise participating in the Competitive
Business) if: (A) such stock, bonds, or other securities are listed on any
national securities exchange or are registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended; (B) the investment does not
exceed, in the case of any class of capital stock of any one issuer, two
percent (2%) of the issued and outstanding shares, or, in the case of bonds or
other securities of any one issuer, two percent (2%) of the aggregate principal
amount thereof issued and outstanding; and (C) such investment would not
prevent, directly or indirectly, the transaction of business by PEC or PDC or
any affiliate of PEC or PDC with any state, district, territory, or possession
of the United States or any governmental subdivision, agency, or
instrumentality thereof by virtue of any statute, law, regulation or
administrative practice. The period of time during which X Xxxxxx is
prohibited from engaging in certain activities by this Section shall be
extended by the length of time during which X Xxxxxx is in breach of the terms
of this section.
(b) It is understood by and between the parties hereto that
the foregoing covenant by X Xxxxxx not to enter into competition with PEC or
PDC as set forth in Section 3(a) hereof is an essential element of this
Agreement and the Asset Purchase Agreement and that, but for the agreement of
X Xxxxxx to comply with such covenant, neither PEC nor PDC would have agreed to
enter into this Agreement or the Asset Purchase Agreement. PEC and PDC on the
one hand and X Xxxxxx on the other hand have independently consulted with their
respective counsel and have been advised in all respects concerning the
reasonableness and propriety of such covenant, with specific regard to the
nature of the business conducted by PEC and PDC and their
-2-
3
respective affiliates. X Xxxxxx agrees that such covenant is reasonable in
scope, geographic area, and duration, and that compliance with such covenant
would not impose economic or professional hardship on X Xxxxxx.
4. Restrictions on Soliciting Business of PEC and PDC.
X Xxxxxx further covenants and agrees that during the Non-Compete
Period, X Xxxxxx will not, either for himself or for any other person or
entity, directly or indirectly, engage in any of the following activities in a
Competitive Business without the express prior written consent of PEC and PDC:
(a) Solicit or hire any of the employees of PEC or PDC or
solicit or take away any of PEC's or PDC's customers, lessors, or suppliers or
attempt any of the foregoing:
(b) Acquire or attempt to acquire rights providing any product
or service in a Competitive Business within the territory described in
Section 3 hereof; or
(c) Engage in any act which would interfere with or harm any
business relationship PEC or PDC has with any customer, lessor, employee,
principal or supplier.
5. Specific Performance.
Without intending to limit the remedies available to PEC or PDC,
X Xxxxxx acknowledges that PEC or PDC will have no adequate remedies at law if
X Xxxxxx violates the terms of Section 3 or 4, hereof. In such event, X Xxxxxx
agrees that PEC or PDC shall have the right, in addition to any other rights it
may have, to obtain in any court of competent jurisdiction specific performance
of such Sections of this Agreement or injunctive relief to restrain any breach
or threatened breach thereof. Nothing herein shall be construed as prohibiting
PEC or PDC from pursuing any other remedies available to PEC or PDC (whether at
law or in equity) for such breach or threatened breach, including, without
limitation, the recovery of monetary damages from X Xxxxxx.
The provisions of this Section 5 shall survive the expiration,
termination or cancellation of this Agreement.
6. Attorneys Fees and Costs.
If an action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorneys fees, costs and necessary expenses in addition to any
other relief to which that party may be entitled. This provision is applicable
to this entire Agreement.
-3-
4
7. Representations and Warranties of PEC, PDC and X Xxxxxx.
(a) Representations and Warranties of PEC and PDC. PEC and
PDC hereby jointly and severally represent and warrant to X Xxxxxx that: (i)
they have all requisite power to enter into and perform their obligations under
this Agreement; (ii) this Agreement has been duly and validly authorized by all
necessary corporate action on the part of PEC and PDC; (iii) the execution of
this Agreement by PEC and PDC and performance of their obligations hereunder do
not require the consent or approval of any other party; and (iv) this Agreement
is a valid and binding obligation of PEC and PDC.
(b) Representations and Warranties of X Xxxxxx. X Xxxxxx
hereby represents and warrants to PEC and PDC that: (i) X Xxxxxx has the
capacity and power to enter into and perform obligations of X Xxxxxx under this
Agreement; (ii) X Xxxxxx has duly and validly executed this Agreement; (iii)
the execution of this Agreement and performance of obligations of X Xxxxxx
hereunder do not require the consent or approval of any other party; and (iv)
this Agreement constitutes a valid and binding obligation of X Xxxxxx.
8. General Provisions.
(a) Compliance with Laws. The parties agree that they will
comply with all applicable laws and regulations of government bodies or
agencies in their respective performance of their obligations under this
Agreement.
(b) Governing Law and Construction. This Agreement will be
governed by and construed in accordance with the laws of the State of Texas
without reference to its conflict-of-laws principles. This Agreement's final
form resulted from review and negotiations among the parties and their
attorneys, and no part of this Agreement should be construed against any party
on the basis of authorship.
(c) Forum for Dispute Resolution. If any dispute arises among
the parties concerning the interpretation or performance of any portion of this
Agreement which the parties are unable to resolve themselves, and any party
brings an action against any other party seeking a declaratory order, specific
performance, damages, or any other legal or equitable relief based on this
Agreement, the parties agree that the forum for any such action shall be an
appropriate federal or state court in Texas having jurisdiction, agree that
venue will be proper in such courts, and waive any objections based on
inconvenience of the forum, and further agree that the prevailing party in any
such action, as determined by the court, shall be awarded its reasonable
attorneys' fees and costs in addition to any relief or judgment the court
awards.
(d) Entire Agreement; Amendment. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
contained herein and supersedes any previous oral or written communications,
representations, understandings or agreements with respect thereto. The terms
of this Agreement may be modified only in a writing, signed by authorized
representatives of both parties.
-4-
5
(e) Assignability. This Agreement will be binding upon the
parties' respective successors and permitted assigns. Neither party may assign
this Agreement and/or any of its rights and/or obligations hereunder without
the prior written consent of the other party, and any such attempted assignment
will be void; provided, however, that PEC or PDC may assign this Agreement to a
subsidiary or affiliate without the prior written consent of X Xxxxxx.
(f) Waiver. A waiver of a breach or default under this
Agreement will not constitute a waiver of any other breach or default. Failure
or delay by either party to enforce compliance with any term or condition of
this Agreement will not constitute a waiver of such term or condition.
(g) Severability. If any provision of this Agreement is
declared to be invalid, the parties agree that such invalidity will not affect
the validity of the remaining provisions of this Agreement, and further agree,
to the extent possible, to substitute for the invalid provision a valid
provision that approximates the intent and economic effect of the invalid
provision as closely as possible.
(h) Headings. The titles of the Sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
(i) Notice. Any notice, request, consent, demand or other
communication required to be given under this Agreement will be in writing and
will be given personally, by facsimile or by mailing the same, first-class,
postage prepaid to the appropriate address and facsimile number set forth below
or to such other person or at such other address as may hereafter be designated
by like notice. Notices by mail will be considered delivered and become
effective three days after the mailing thereof. All notices by facsimile will
be considered delivered and become effective immediately upon the confirmed (by
answer back or other tangible printed verification or successful receipt)
sending thereof.
To PEC:
Xxxxxxxxx Energy, Inc.
0000 Xxxxxx Xxxxxxx
X.X. Xxxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
Chairman and Chief Executive Officer
-5-
6
To PDC:
Xxxxxxxxx Drilling Company
0000 Xxxxxx Xxxxxxx
X.X. Xxxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attention: A. Xxxxx Xxxxxxxxx
President and Chief Operating Officer
To X Xxxxxx:
Xxxxx Xxxxxx
000 Xxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000
(j) Counterparts. This Agreement may be executed in
counterparts and by the parties hereto in separate counterparts, each of which
will be deemed an original, but all of which together will constitute one and
the same instrument.
-6-
7
IN WITNESS WHEREOF, the undersigned have caused this Agreement to
be executed by their respective representatives as of the day and year first
above written.
"PEC"
XXXXXXXXX ENERGY, INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxx
Chairman and Chief Executive Officer
"PDC"
XXXXXXXXX DRILLING COMPANY
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
A. Xxxxx Xxxxxxxxx
President and Chief Operating Officer
"X Xxxxxx"
/s/ Xxxxx Xxxxxx
-----------------------------------------
Xxxxx Xxxxxx
-7-
