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EXHIBIT 2.10
AGREEMENT
AMONG
PATTERSON ENERGY, INC.,
PATTERSON DRILLING COMPANY
AND
PADRE INDUSTRIES, INC.
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TABLE OF CONTENTS
Page
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ARTICLE I
THE TRANSACTION
SECTION 1.1 The Transaction...............................................................................1
SECTION 1.2 Asset Purchase-Purchase Consideration.........................................................1
SECTION 1.3 Closing.......................................................................................3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PEC AND PDC
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.................................................................................4
SECTION 2.5 Brokers.......................................................................................5
SECTION 2.6 Litigation....................................................................................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PADRE
SECTION 3.1 Organization, Standing and Power..............................................................5
SECTION 3.2 Authority; Non-Contravention..................................................................5
SECTION 3.3 Capital Structure.............................................................................6
SECTION 3.4 Environmental Matters.........................................................................6
SECTION 3.5 Title.........................................................................................7
SECTION 3.6 Labor Matters.................................................................................7
SECTION 3.7 Drilling Contracts............................................................................8
SECTION 3.8 Litigation....................................................................................8
SECTION 3.9 Drilling Rigs, Equipment and Rolling Stock....................................................8
SECTION 3.10 Brokers.......................................................................................8
SECTION 3.11 Vote of the Padre Stockholders................................................................8
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.1 Fees and Expenses.............................................................................8
SECTION 4.2 Reasonable Best Efforts.......................................................................8
SECTION 4.3 Padre Performance of Drilling Contracts.......................................................8
SECTION 4.4 Padre and T Billings Indemnification..........................................................8
SECTION 4.5 PEC and PDC Indemnification...................................................................9
SECTION 4.6 Public Announcements..........................................................................9
SECTION 4.7 Nasdaq National Market........................................................................9
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SECTION 4.8 Personal Property Taxes.......................................................................9
SECTION 4.9 Sales and Transfer Taxes......................................................................9
ARTICLE V
CONDITIONS PRECEDENT TO THE TRANSACTION
SECTION 5.1 Conditions to Each Party's Obligation to Effect the Transaction...............................9
SECTION 5.2 Conditions to Obligation of Padre to Effect the Transaction..................................10
SECTION 5.3 Conditions to Obligations of PEC and PDC to Effect the Transaction...........................11
ARTICLE VI
POST-CLOSING AGREEMENTS
Section 6.1 Purchase Option..............................................................................13
ARTICLE VI
GENERAL PROVISIONS
SECTION 7.1 Notices......................................................................................13
SECTION 7.2 Interpretation...............................................................................14
SECTION 7.3 Counterparts.................................................................................14
SECTION 7.4 Entire Agreement; No Third-Party Beneficiaries...............................................14
SECTION 7.5 Governing Law................................................................................14
SECTION 7.6 Assignment...................................................................................14
SECTION 7.7 Severability.................................................................................15
SECTION 7.8 Enforcement of This Agreement................................................................15
ANNEX 1..........Description of Drilling Rigs, Equipment and Rolling Stock
EXHIBIT A........Lease with Option to Purchase relating to the Real Property
EXHIBIT B........Registration Rights Agreement
EXHIBIT C .......Bill of Sale and Assignment
EXHIBIT D(I).....Non-Competition Agreement - Padre Industries, Inc.
EXHIBIT D(II)....Non-Competition Agreement - Thomas J. Billings
EXHIBIT E........Form of Investment Representation Letter
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AGREEMENT
AGREEMENT, dated as of January ___, 1999 (this "Agreement"), among
PATTERSON ENERGY, INC., a Delaware corporation ("PEC"), PATTERSON DRILLING
COMPANY, a Delaware corporation ("PDC"), wholly-owned by PEC, and PADRE
INDUSTRIES, INC., a privately-held Texas corporation ("Padre").
WITNESSETH:
WHEREAS, Padre owns, among other assets, five drilling rigs,
related drilling equipment and rolling stock (collectively, the "Drilling Rigs,
Equipment and Rolling Stock"), and a shop, office, warehouse and yard located in
Corpus Christi, Texas (collectively, the "Real Property"), all as more
particularly described on Annex 1, in the case of the Drilling Rigs, Equipment
and Rolling Stock, and in the Real Property Lease/Option to Purchase (as defined
in the next recital), in the case of the Real Property;
WHEREAS, PDC desires to (i) purchase all of Padre's right, title
and interest in and to the Drilling Rigs, Equipment and Rolling Stock (the
"Asset Purchase") and (ii) lease the Real Property with an option to purchase
(the "Real Property Lease/Option to Purchase") (the Asset Purchase and the Real
Property Lease/Option to Purchase are collectively referred to herein as the
"Transaction") for the consideration set forth and provided for herein;
WHEREAS, Padre desires to enter into the Transaction; and
WHEREAS, PDC, on the one hand, and Padre, on the other, desire to
make certain representations, warranties and agreements in connection with the
Transaction and also prescribe various conditions to the Transaction.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE I
THE TRANSACTION
SECTION 1.1 The Transaction. Upon the terms and subject to the
conditions of this Agreement, at the Closing (as defined in Section 1.3 below)
provided herein: (a) PDC shall purchase from Padre and Padre shall sell to PDC,
all of Padre's right, title and interest in and to the Drilling Rigs, Equipment
and Rolling Stock; and (b) PDC and Padre shall enter into a lease, with an
option to purchase, the Real Property providing for, among other matters, a
one-year lease for a total lease payment of $100,000, payable in equal monthly
installments, and a $1 million purchase price.
SECTION 1.2 Asset Purchase-Purchase Consideration.
(a) In consideration for all of Padre's right, title and interest
in and to the Drilling Rigs, Equipment and Rolling Stock, PDC agrees to pay or
deliver to Padre at the Closing (as defined in Section 1.3) 800,000 shares of
common stock of PEC ("PEC Shares"; also sometimes referred to herein as the
"Purchase Consideration").
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(b) PDC further agrees that:
(i) if the "Closing Date Share Price" (as defined below in
this Section) for the PEC Shares on the Closing Date (as defined
in Section 1.3) is less than $5.00 per PEC Share, PDC shall pay to
Padre on the Anniversary Date (as defined below in this Section)
such amount in cash as is equal to 10% of the product of the
difference between $5.00 and the Closing Date Share Price, times
the difference between 800,000 and the number of PEC Shares
Sold/Purchased (as defined below in this Section) times the
Reduction Ratio (as defined below in this Section) (the "First
Supplemental Cash Payment"); and
(ii) if the "Anniversary Date Share Price" (as defined below
in this Section) is less than $5.00 per PEC Share, PEC shall pay
to Padre on the Anniversary Date such amount in cash as is equal
to the product of the difference between 800,000 and the number of
PEC Shares Sold/Purchased (as defined below in this Section) times
the difference between $5.00 and the greater of (i) the Closing
Date Share Price or (ii) the Anniversary Date Share Price (the
"Second Supplemental Cash Payment") [the First Supplemental Cash
Payment and the Second Supplemental Cash Payment are collectively
referred to herein as the "Supplemental Cash Payments"]; provided
that if the Closing Date Share Price is at least $5.00 or the
Anniversary Date Share Price is at least $5.50 there shall be no
Supplemental Cash Payments.
By way of examples: (i) if the Closing Date Share Price and the
Anniversary Date Share Price were both $4.00 per PEC Share, the First
Supplemental Cash Payment would be $80,000 (10% of the product of $1.00 [the
difference between $5.00 and the $4.00 Closing Date Share Price] times 800,000)
and the Second Supplemental Cash Payment would be $800,000 (the product of
800,000 times $1.00 [the difference between $5.00 and the $4.00 Anniversary Date
Share Price]); (ii) if the Closing Date Share Price were $3.00 and the
Anniversary Date Share Price were $4.50, the First Supplemental Cash Payment
would be $160,000 (10% of the product of 800,000 times $2.00 [the difference
between $5.00 and the $3.00 Closing Date Share Price]), and the Second
Supplemental Cash Payment would be $400,000 (the product of 800,000 times $.50
[the difference between $5.00 and the $4.50 Anniversary Date Share Price]);
(iii) if the Closing Date Share Price were less than $5.00 and the Anniversary
Date Share Price were at least $5.50, there would be no First Supplemental Cash
Payment or Second Supplemental Cash Payment; (iv) if the Closing Date Share
Price were at least $5.00, there would be no First Supplemental Cash Payment or
Second Supplemental Cash Payment, regardless of the Anniversary Date Share
Price; and (v) if the Closing Date Share Price were $3.00, the Anniversary Date
Share Price were $5.10 and there were 200,000 PEC Shares Sold, the First
Supplemental Cash Payment would be $96,000 (10% of the product of $2.00 [the
difference between $5.00 and the $3.00 Closing Date Share Price] times 600,000
[the difference between 800,000 and the 200,000 PEC Shares Sold] times the 80%
Reduction Ratio [the $.40 difference between $5.50 and the $5.10 Anniversary
Date Share Price divided by $.50]) and there would be no Second Supplemental
Cash Payment.
(c) If prior to the Anniversary Date the PEC Shares are increased
or decreased into a different number of PEC Shares as a result of a stock
dividend or stock split, the Closing Date Share Price and all dollar figures and
numbers contained in Section 1.2(b) shall be contemporaneously increased or
decreased in inverse proportions.
(d) For purposes of this Agreement: (i) "PEC Shares
Sold/Purchased" means the total of: (x) such number of PEC Shares sold by Padre
or by any transferee of Padre as a part of an incidental registration under the
Registration Rights Agreement attached hereto as Exhibit B, and (y) such number
of PEC Option Shares purchased by PEC pursuant to the provisions of Section 6.1
of this
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Agreement; (ii) "Closing Date Share Price" and "Anniversary Date Share Price,"
respectively, mean the average of the daily closing price of the shares of
Common Stock of PEC, rounded to four decimal places, as reported under Nasdaq
National Market Issues Reports, the New York Stock Exchange Composite
Transactions or the American Stock Exchange Composite Transactions, as the case
may be, in The Wall Street Journal for each of the first 10 consecutive Trading
Days in the period commencing 12 Trading Days prior to the Closing Date or the
Anniversary Date, as the case may be; (iii) "Trading Day" means a day on which
the National Association of Securities Dealers, Inc., National Market ("Nasdaq
National Market") is open for trading; (iv) "Reduction Ratio" means a fraction
(expressed as a percentage) the numerator of which is equal to the difference
between $5.50 and the greater of $5.00 or the Anniversary Date Share Price (but
not to exceed $5.50) and the denominator of which is $0.50; (v) "Change of
Control" shall be deemed to have occurred if PEC shall be merged or consolidated
into another entity and PEC is not the surviving corporation; and (vi)
"Anniversary Date" means the first to occur of the following: (x) the first
anniversary of the Closing Date; (y) the last Trading Day immediately preceding
the date PEC ceases to exist as a separate entity by way of a Change in Control
or otherwise ("Cessation of Existence"); or (z) the last Trading Day immediately
preceding the date the shares of Common Stock of PEC cease to be traded on the
Nasdaq National Market, the New York Stock Exchange or the American Stock
Exchange ("Cessation of Trading").
SECTION 1.3 Closing. The closing of the Transaction (the
"Closing") shall take place in the offices of The Kleberg Law Firm, PC in Corpus
Christi, Texas, at 9:00 a.m., local time, on the date of this Agreement, or at
such other time and place as PDC and Padre shall agree. (The date on which the
Closing is held is referred to herein as the "Closing Date.")
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PEC AND PDC
PEC and PDC represents and warrants to Padre as follows:
SECTION 2.1 Organization, Standing and Power. Each of PEC and PDC
(i) is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware and has the requisite corporate power
and authority to carry on its business as now being conducted, and (ii) is in
good standing in each jurisdiction where the character of its business owned or
held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not individually or
in the aggregate, have a Material Adverse Effect on PEC. "Material Adverse
Change" or "Material Adverse Effect" means, when used with respect to PEC, PDC
or Padre, as the case may be, 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 Padre, as the case
may be.
SECTION 2.2 Authority; Non-Contravention. Each of PEC and PDC has
all requisite power and authority to enter into this Agreement and to consummate
the Transaction. The execution and delivery by each of PEC and PDC of this
Agreement and the consummation by each of PEC and PDC of the Transaction have
been duly authorized by all necessary corporate action on the part of PEC and
PDC, as the case may be. This Agreement has been duly executed and delivered by
PEC and PDC and (assuming the valid authorization, execution and delivery of
this Agreement by Padre) constitutes a valid and binding obligation of PEC and
PDC enforceable against PEC and PDC in accordance with its terms, except to the
extent enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws of general applicability
relating to or affecting the enforcement of creditors' rights and by the effect
of general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law). The execution and delivery of
this Agreement do not, and
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the consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
the loss of a material benefit under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
PEC or PDC under, any provision of (i) the Certificate of Incorporation or
Bylaws of PEC or PDC, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to PDC or PEC, or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to PDC or PEC or any of
their respective properties or assets, other than, in the case of clauses (ii)
or (iii), any such conflicts, violations, defaults, rights, losses, liens,
security interests, charges or encumbrances that, individually or in the
aggregate, would not have a Material Adverse Effect on PEC or PDC, materially
impair the ability of PEC or PDC to perform its obligations hereunder or prevent
the consummation of any of the transactions contemplated hereby. 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 or PDC in connection with the execution and
delivery of this Agreement by PDC or is necessary for the consummation by PEC or
PDC of the Transaction, except for (i) in connection or in compliance, with the
provisions of the Securities Act of 1933, as amended (the "Securities Act"), and
the Securities Exchange Act of 1934 (the "Exchange Act"), (ii) such consents and
approvals, orders, registrations, authorizations, declarations and filings as
may be required under the "Blue Sky" laws of the State of Texas, and (iii) 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 either PEC or PDC, materially
impair the ability of PEC or PDC 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 the day immediately preceding the date of this Agreement, (i)
31,671,132 shares of PEC Common Stock were validly issued and outstanding, fully
paid and nonassessable and free of preemptive rights, and (ii) no shares of PEC
Preferred Stock are 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. All shares of PEC Common Stock
issuable pursuant to the Asset Purchase in accordance with this Agreement will
be, when so issued, duly authorized, validly issued, fully paid and
non-assessable and free of preemptive rights.
SECTION 2.4 SEC Documents. PEC has filed all required documents
with the Securities and Exchange Commission ("SEC") since January 1, 1997 (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 (the "PEC Financial Statements")
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 (including PDC) as at the dates thereof and the
consolidated results of their operations and statements of cash flows for the
periods then
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ended (subject, in the case of the unaudited statements, to normal year-end
audit adjustments and to any other adjustments described therein). There has
been no Material Adverse Change in PEC since the date of the most recent PEC
Financial Statements, other than as may be set forth in the Memorandum dated
January 22, 1999 (the "Memorandum") containing a copy of PEC's Annual Report on
Form 10-K for the year ending December 31, 1997, all other reports filed by PEC
with the SEC since January 1, 1998, and PEC's Third Quarter 1998 Quarterly
Report to Stockholders, a copy of which Memorandum has been previously furnished
to Padre.
SECTION 2.5 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 or PDC.
SECTION 2.6 Litigation. There is no suit, action, investigation or
proceeding pending or, to the knowledge of the executive officers of PEC,
threatened against PEC 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 that would have a Material
Adverse Effect on PEC in the event of an unfavorable decision, finding or
outcome, 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 is subject that would impair the
ability of PEC to perform its obligations hereunder or to consummate the
transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PADRE
Padre represents and warrants to PEC and PDC as follows:
SECTION 3.1 Organization, Standing and Power. Padre is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Texas and has the requisite corporate power and authority
to carry on its business as now being conducted.
SECTION 3.2 Authority; Non-Contravention. Padre has all requisite
power and authority to enter into this Agreement and to consummate the
Transaction. The execution and delivery of this Agreement by Padre and the
consummation by Padre of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Padre. This
Agreement has been duly executed and delivered by Padre and (assuming the valid
authorization, execution and delivery of this Agreement by PEC and PDC)
constitutes a valid and binding obligation of Padre enforceable against it in
accordance with its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other
similar laws of general applicability relating to or affecting the enforcement
of creditors' rights and by the effect of general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law). The execution and delivery of this Agreement do not, and the
consummation of the Transaction and compliance with the provisions hereof will
not, conflict with, or result in any violation of, or default (with or without
notice of lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of a material
benefit under, or result in the creation of any lien, security interest, charges
or encumbrances upon any of the properties or assets of Padre under, any
provision of (i) the Articles of Incorporation or Bylaws of Padre (true and
complete copies of which as of the date hereof have been delivered to PEC and
PDC), (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease
or other agreement, instrument, permit, concession, franchise or license
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applicable to Padre, or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Padre or any of its respective
properties or assets, other than, in the case of clauses (ii) or (iii), any such
conflicts, violations, defaults, rights, losses, liens, security interests,
charges or encumbrances that individually or in the aggregate, would not have a
Material Adverse Effect on Padre, materially impair the ability of Padre to
perform its obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby. No filing or registration with, or
authorization, consent or approval of, any Governmental Entity is required by or
with respect to Padre in connection with the execution and delivery of this
Agreement by Padre or is necessary for the consummation by Padre of the
Transaction.
SECTION 3.3 Capital Structure. All of the issued and outstanding
shares of Padre capital stock ("Padre Stock") are owned of record and
beneficially by Thomas J. Billings and Marilyn F. Billings. There are no
options, warrants, rights, commitments, agreements, arrangements or undertakings
of any kind to which Padre is a party or by which it is bound obligating Padre
to issue, deliver or sell or cause to be issued, delivered or sold additional
shares of Padre Stock. True and correct copies of the Articles of Incorporation
and Bylaws have been furnished to PEC and PDC.
SECTION 3.4 Environmental Matters.
(a) Except to the extent that the inaccuracy of any of the
following, individually or in the aggregate, would not have a Material Adverse
Effect on Padre, to the Actual Knowledge of Padre:
(i) Padre holds, and is in compliance with and has been in
compliance with for the last three years, all Environmental Permits,
and is otherwise in substantial compliance and has been in substantial
compliance for the last three years with, all applicable Environmental
Laws and there is no condition that is reasonably likely to prevent or
materially interfere prior to the Closing Date with compliance by Padre
with Environmental Laws;
(ii) no modification, revocation, reissuance, alteration,
transfer or amendment of any Environmental Permit, or any review by, or
approval of, any third party of any Environmental Permit is required in
connection with the execution or delivery of this Agreement or the
consummation by Padre of the transactions contemplated hereby or the
operation of the business of Padre on the date of the Closing;
(iii) Padre has not received any Environmental Claim, nor has
any Environmental Claim been threatened against Padre;
(iv) Padre has not entered into, agreed to or is not subject
to any outstanding judgment, decree, order or consent arrangement with
any governmental authority under any Environmental Laws, including
without limitation those relating to compliance with any Environmental
Laws or to the investigation, cleanup, remediation or removal of
Hazardous Materials;
(v) there are no circumstances that are reasonably likely to
give rise to liability under any agreements with any person pursuant to
which Padre would be required to defend, indemnify, hold harmless, or
otherwise be responsible for any violation by or other liability or
expense of such person, or alleged violation by or other liability or
expense of such person, arising out of any Environmental Law; and
(vi) there are no other circumstances or conditions that are
reasonably likely to give rise to liability of Padre under any
Environmental Laws.
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(b) For purposes of this Agreement, the terms below shall have the
following meanings:
"Acknowledge Knowledge of Padre" means the present awareness
of T Billings.
"Environmental Claim" means any written complaint, notice,
claim, demand, action, suit or judicial, administrative or arbitrable
proceeding by any person to Padre asserting liability or potential
liability (including without limitation, liability or potential
liability for investigatory costs, cleanup costs, governmental response
costs, natural resource damages, property damage, personal injury,
fines or penalties) arising out of, relating to, based on or resulting
from (i) the presence, discharge, emission, release or threatened
release of any Hazardous Materials at any location, (ii) circumstances
forming the basis of any violation or alleged violation of any
Environmental Laws or Environmental Permits, or (iii) otherwise
relating to obligations or liabilities of Padre under any Environmental
Law.
"Environmental Permits" means all permits, licenses,
registrations, exemptions and other governmental authorizations
required under Environmental Laws for Padre to conduct its operations
as presently conducted.
"Environmental Laws" means all applicable foreign, federal,
state and local statutes, rules, regulations, ordinances, orders,
decrees and common law relating in any manner to pollution or
protection of the environment, to the extent and in the form that such
exist at the date hereof.
"Hazardous Materials" means all hazardous or toxic substances,
wastes, materials or chemicals, petroleum (including crude oil or any
fraction thereof) and petroleum products, asbestos and
asbestos-containing materials, pollutants, contaminants and all other
materials and substances, including but not limited to radioactive
materials regulated pursuant to any Environmental Laws or that could
result in liability under any Environmental Laws.
SECTION 3.5 Title. Set forth in Annex 1 and Annex 2 is a
description of the Drilling Rigs, Equipment and Rolling Stock and of the Real
Property, respectively, which description is accurate and complete in all
material respects. Padre has good and, in the case of the Real Property,
indefeasible title to a 100% interest in the Drilling Rigs, Equipment and
Rolling Stock and in the Real Property, subject, in each case, to no Liens
except for (i) Liens for taxes not yet delinquent or the validity of which is
being contested in good faith; and (ii) any Liens arising by operation of law
securing obligations not yet overdue. For purposes of this Agreement "Liens"
means liens, mortgages, pledges, security interests, encumbrances, claims or
charges of any kind.
SECTION 3.6 Labor Matters. (i) Padre is not a party to any
collective bargaining agreement or other material contract or agreement with any
labor organization or other representative of employees nor is any such contract
being negotiated; (ii) there is no material unfair labor practice charge or
complaint pending nor, to the knowledge of the executive officers of Padre,
threatened, with regard to employees of Padre; (iii) there is no labor strike,
material slowdown, material work stoppage or other material labor controversy in
effect, or, to the knowledge of the executive officers of Padre, threatened
against Padre; (iv) as of the date hereof, no representation question exists,
nor to the knowledge of the executive officers of Padre are there any campaigns
being conducted to solicit cards from the employees of Padre to authorize
representation by a labor organization; (v) Padre is not party to, or is not
otherwise bound by, any consent decree with any governmental authority relating
to employees or employment practices of Padre; and (vi) Padre is in compliance
with all applicable agreements, contracts and policies relating to employment,
employment practices, wages, hours and terms and conditions of employment of
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the employees, except where the failure to be in compliance with each such
agreement, contract and policy would not, either singly or in the aggregate,
have a Material Adverse Effect on Padre.
SECTION 3.7 Drilling Contracts. Padre is not a party to any
Drilling Contracts (as defined in Section 4.3 hereof) which have not been
completed as of the date hereof.
SECTION 3.8 Litigation. There is no suit, action, investigation or
proceeding pending or, to the knowledge of the executive officers of Padre,
threatened against Padre 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 Padre 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 Padre
is subject that would impair the ability of Padre to perform its obligations
hereunder or to consummate the transactions contemplated hereby.
SECTION 3.9 Drilling Rigs, Equipment and Rolling Stock. Annex 1
sets forth or incorporates by reference a list of all drilling rigs, equipment
and rolling stock relating to the contract drilling operations of Padre, which
list is true, correct and complete in all material respects, all of which
drilling rigs, equipment and rolling stock are included in the Drilling Rigs,
Equipment and Rolling Stock.
SECTION 3.10 Brokers. 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 Padre, except for Steven B. Erickson. Padre
will be solely responsible for paying Mr. Erickson for his services.
SECTION 3.11 Vote of the Padre Stockholders. No vote of the
stockholders of Padre is required by law, the Articles of Incorporation or
Bylaws of Padre or otherwise to adopt this Agreement and approve the
Transaction.
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.1 Fees and Expenses. All costs and expenses incurred by
PEC or PDC in connection with this Agreement and the transactions contemplated
hereby shall be paid by PEC; such costs and expenses incurred by Padre shall be
paid by Padre.
SECTION 4.2 Reasonable Best Efforts. Upon the terms and subject to
the conditions set forth in this Agreement, each of the parties agrees to use
all reasonable best 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 Transaction and the
other transactions contemplated by this Agreement and the prompt satisfaction of
the conditions hereto.
SECTION 4.3 Padre Performance of Drilling Contracts. Padre shall
fully perform all obligations of Padre under each of the contract drilling
contracts (collectively, the "Drilling Contracts") to which Padre is a party as
of the Closing Date, if any.
SECTION 4.4 Padre and T Billings Indemnification. On and after the
date of Closing, Padre and Thomas J. Billings ("T Billings"), the Chairman of
the Board of Padre, shall jointly and
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severally indemnify and hold PEC and PDC harmless against and in respect of all
actions, suits, demands, judgments, costs and expenses (including reasonable
attorneys' fees of PEC or PDC), relating to any misrepresentation, breach of any
representation or warranty or non-fulfillment of any agreement on the part of
Padre contained in this Agreement. This indemnification provided for in this
Section 4.4 shall terminate and be of no further force and effect two years from
the Closing Date, except as to any representation or warranty as to which a
written notice of claim for indemnification has been given to Padre and T
Billings prior to the expiration of such two-year period.
SECTION 4.5 PEC and PDC Indemnification. On and after the Closing
Date, PEC and PDC shall jointly and severally indemnify and hold Padre harmless
against and in respect of all actions, suits, demands, judgments, costs and
expenses (including reasonable attorneys' fees of Padre) relating to (i) any
misrepresentation, breach of any representation or warranty or non-fulfillment
of any agreement on the part of PEC or PDC contained in this Agreement or the
Memorandum, or (ii) any of the drilling contracts entered into by PDC or PEC on
or after the Closing Date involving the drilling rigs included as a part of the
Drilling Rigs, Equipment and Rolling Stock.
SECTION 4.6 Public Announcements. Unless otherwise required by law
or the rules and regulations of the SEC or the Nasdaq National Market, neither
PDC, PEC nor Padre shall issue (a) any press release or make any public
statement with respect to the Transaction prior to Closing, or (b) any press
release or make any public statement with respect to the Transaction after
Closing which discloses the Purchase Consideration.
SECTION 4.7 Nasdaq National Market. PEC shall use its reasonable
best efforts to list on the Nasdaq National Market, upon official notice of
issuance to Padre, the shares of PEC Common Stock to be issued in connection
with the Transaction.
SECTION 4.8 Personal Property Taxes. Padre and PDC agree that ad
valorem taxes for 1999 on the Drilling Rigs, Equipment and Rolling Stock shall
be prorated between Padre and PDC to the Closing Date. The parties agree that
the proration of these ad valorem taxes shall be based on the 1999 property tax
statement or statements for ad valorem taxes on the Drilling Rigs, Equipment and
Rolling Stock. The prorations shall be made promptly upon receipt of these tax
statements. Padre agrees that PDC shall have the right to protest the 1999
appraised property values on the Drilling Rigs, Equipment and Rolling Stock. If
PDC elects to do so, Padre will execute and deliver to PDC such documents as PDC
may request in connection with its protest.
SECTION 4.9 Sales and Transfer Taxes. Padre and PDC agree that
Padre will be pay all sales and transfer taxes, if any, attributable to the sale
hereby of the Drilling Rigs and Equipment, and PDC will pay all sales and
transfer taxes, if any, attributable to the sale hereby of the Rolling Stock.
ARTICLE V
CONDITIONS PRECEDENT TO THE TRANSACTION
SECTION 5.1 Conditions to Each Party's Obligation to Effect the
Transaction. The respective obligations of each party to effect the Transaction
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) Nasdaq National Market Listing. The 800,000 shares of PEC
Shares issuable on the Closing Date pursuant to this Agreement shall have been
authorized for listing on the Nasdaq National Market upon official notice of
issuance.
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(b) 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 Transaction; 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.
(c) Lease with Option to Purchase. The Lease with Option to
Purchase relating to the Real Property in the form attached hereto as Exhibit A
shall have been executed and delivered by PDC and Padre.
(d) Registration Rights Agreement. The Registration Rights
Agreement, relating to the PEC Shares, in the form attached hereto as Exhibit B
shall have been executed and delivered by Padre and PEC.
SECTION 5.2 Conditions to Obligation of Padre to Effect the
Transaction. The obligation of Padre to effect the Transaction shall be subject
to the fulfillment at or prior to the Closing of the following additional
conditions; provided that Padre may waive any of such conditions in its sole
discretion:
(a) Performance of Agreements and Representations and
Warranties. PEC and PDC shall have performed in all material respects
each of their agreements contained in this Agreement required to be
performed on or prior to the Closing, and each of the representations
and warranties of PEC and PDC contained in this Agreement shall be true
and correct on and as of the Closing Date as if made on and as of such
date.
(b) Officers' Certificate. PEC and PDC shall have furnished to
Padre a certificate, dated the Closing, signed by the respective
appropriate officers of PEC and PDC, certifying to the effect that to
the best of the knowledge and belief of each of them, the conditions
set forth in Section 5.1 and Section 5.2(a) have been satisfied in
full.
(c) Opinion of Baker & Hostetler LLP. Padre shall have
received an opinion from Baker & Hostetler LLP, counsel to PEC and PDC,
dated the Closing Date, substantially to the effect that:
(i) The incorporation, existence and good standing of PEC and
PDC are as stated in this Agreement; the authorized shares of PEC and
PDC 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 stockholders.
(ii) Each of PEC and PDC 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 or
PDC, as the case may be, and (assuming due and valid authorization,
execution and delivery by Padre) constitutes the legal, valid and
binding agreement of PEC and PDC, enforceable against PEC and PDC 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), and
except as rights to indemnity may be limited by applicable law.
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(iii) The execution and performance by PEC and PDC of this
Agreement will not violate the Certificate of Incorporation or Bylaws
of PEC or PDC, respectively, 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 PEC or PDC is a
party or by which they or any of their 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 PEC and PDC for
the 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 PEC or
PDC by any Governmental Entity which seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement.
(vi) The shares of PEC Common Stock to be issued pursuant to
this Agreement will be, when so issued, duly authorized, validly issued
and outstanding, fully paid and nonassessable.
(vii) The 800,000 PEC Shares have been authorized for listing
on the Nasdaq National Market subject to official notice of issuance.
In rendering such opinion, counsel for PEC may rely as to matters of fact upon
the representations of officers of PEC or PDC 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) Delivery of Purchase Consideration. PEC and PDC shall have
made delivery of the Purchase Consideration as provided in Section 1.2 of this
Agreement.
SECTION 5.3 Conditions to Obligations of PEC and PDC to Effect the
Transaction. The obligations of PEC and PDC to effect the Transaction 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.
Padre 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 Padre 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. Padre shall have furnished to PEC a
certificate, dated the Closing, certifying to the effect that to the best of the
knowledge and belief of Padre, the conditions set forth in Section 5.1 and
Section 5.3(a) have been satisfied.
(c) Opinion of The Kleberg Law Firm, a Professional Corporation.
PEC shall have received an opinion from The Kleberg Law Firm, a Professional
Corporation, counsel to Padre, dated the Closing Date, substantially to the
effect that:
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(i) The incorporation, existence and good standing of Padre
are as stated in this Agreement.
(ii) Padre has full corporate power and authority to execute,
deliver and perform this Agreement and its Non-Competition Agreement,
and this Agreement and its Non-Competition Agreement have each been
duly authorized, executed and delivered by Padre, and each (assuming
the due and valid authorization, execution and delivery by PEC and PDC)
constitutes the legal, valid and binding agreement of Padre enforceable
against Padre 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), and except as rights to indemnity may be limited by
applicable law.
(iii) The execution and performance by Padre of this Agreement
and its Non-Competition Agreement will not violate the Articles of
Incorporation or Bylaws of Padre and will not violate, result in a
breach of, or constitute a default under, any material lease, mortgage,
contract, agreement, instrument, law, rule, regulation, judgment, order
or decree known to such counsel to which Padre 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 Padre 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 Padre
by any Governmental Entity which seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement.
(vi) The Non-Competition Agreement between PEC, PDC and T
Billings constitutes the legal, valid and binding agreement of T
Billings enforceable against him in accordance with its terms, except
to the extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws
of general applicability relating to or affecting the enforcement of
creditors' rights and by the effect of general principles of equity
(regardless of whether enforceability is considered in a proceeding in
equity or at law), and except as rights to indemnity may be limited by
applicable law.
In rendering such opinion, counsel for Padre may rely as to matters of fact upon
the representations of officers of Padre contained in any certificate delivered
to such counsel and certificates of public officials. Such opinion shall be
limited to the laws of the United States of America and the State of Texas.
(d) Bill of Sale and Assignment. Padre shall have executed and
delivered the Bill of Sale and Assignment, in the form attached hereto as
Exhibit C, covering the Drilling Rigs, Equipment and Rolling Stock set forth on
Annex 1.
(e) Non-Competition Agreements. A Non-Competition Agreement in the
respective forms attached hereto as Exhibits D(I) and D(II) shall have been
executed and delivered by PEC, PDC and Padre or T Billings, as the case may be.
(f) Titles. Padre shall have endorsed and delivered the title
certificates to the Rolling Stock described in Annex 1.
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(g) Investment Representation Letter. Padre shall have executed
and delivered an investment representation letter substantially in the form
attached hereto as Exhibit E.
ARTICLE VI
POST-CLOSING AGREEMENTS
Section 6.1 Purchase Option. Padre agrees that PEC shall have the
option ("Option"), exercisable as provided in this Section, to purchase from
Padre up to 300,000 PEC Shares (the "PEC Option Shares") at a price of $5.50 per
share (the "Option Price"). Except as provided below in this Section, the Option
may be exercised on, but only on, the third Trading Day after the first
anniversary of the date on which the PEC Option Shares are issued to Padre
pursuant to Section 1.2 of this Agreement, this date being referred to herein as
the "Option Date." For example, if the PEC Option Shares were issued to Padre on
January 27, 1999, the Option Date would be February 1, 2000. The Option must be
exercised by giving written notice to Padre specifying the number of PEC Option
Shares as to which the Option is exercised accompanied by a certified or bank
check for the full amount of the purchase price. Padre agrees that it will not
sell, transfer or otherwise dispose of any of the PEC Option Shares before the
Option Date or the earlier expiration of the Option as provided in the next two
sentences of this Section. If PEC shall cease to exist as a separate corporate
entity prior to the Option Date other than as a result of a Change of Control,
the Option described in this Section shall become null and void. If in
connection with a Change of Control the PEC Shares are converted into cash, the
Option may be exercised by PEC on, but only on, the Trading Day immediately
preceding the closing date of such Change of Control. If in connection with a
Change of Control the PEC Shares are converted into stock or securities of the
surviving corporation (collectively, the "Surviving Stock"), then the surviving
corporation shall have the option to purchase up to 100% of the Surviving Stock
on the Option Date by paying to Padre an amount equal to the product of (i) the
percentage of the Surviving Stock as to which the option is exercised, times
(ii) $1,650,000. The surviving corporation may exercise its option in the same
manner as required of PEC under this Section. In the event of a stock dividend
or stock split of the shares of PEC Common Stock prior to the Option Date, the
number of PEC Option Shares and the Option Price shall be contemporaneously
increased or decreased, as the case may be, in inverse proportions in the manner
provided in Section 1.2(c) of this Agreement.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.1 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 or PDC, to:
Patterson Energy, Inc.
4510 Lamesa Highway
P.O. Drawer 1416
Snyder, Texas 79550
Attention: Cloyce A. Talbott
Chairman and Chief Executive Officer
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with copies to:
Thomas H. Maxfield, Esq.
Baker & Hostetler LLP
303 East 17th Avenue, Suite 1100
Denver, Colorado 80203-1264
(b) if to Padre, to:
Thomas J. Billings
1111 Hermann Drive 14D
Houston, Texas 77004
with copies to:
Richard L. Leshin, Esq.
The Kleberg Law Firm, P.C.
Suite 900 North Tower
800 N. Shoreline Blvd.
Corpus Christi, Texas 78401
SECTION 7.2 Interpretation. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated, and the words "hereof," "herein" and "hereunder" and
similar terms refer to this Agreement as a whole and not to any particular
provision of this Agreement, unless the context otherwise requires. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 7.3 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 7.4 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 5.2(c)
and 5.3(c).
SECTION 7.5 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 7.6 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; provided,
however, that Padre may assign some or all of its rights under this Agreement to
T Billings. 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.
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SECTION 7.7 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 7.8 Enforcement of This Agreement. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
IN WITNESS WHEREOF, PEC, PDC and Padre have executed this
Agreement as of the date first written above.
PEC:
PATTERSON ENERGY, INC.
By: /s/ JAMES C. BROWN
----------------------------------------------
James C. Brown
Vice President - Finance
PDC:
PATTERSON DRILLING COMPANY
By: /s/ JAMES C. BROWN
----------------------------------------------
James C. Brown
Vice President - Finance
PADRE:
PADRE INDUSTRIES, INC.
By: /s/ THOMAS J. BILLINGS
----------------------------------------------
Thomas J. Billings
Chairman of the Board
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TO INDUCE PATTERSON ENERGY, INC. AND PATTERSON DRILLING COMPANY TO
ENTER INTO THIS AGREEMENT AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE
RECEIPT AND SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, THE UNDERSIGNED, BEING
AN OFFICER, DIRECTOR AND STOCKHOLDER OF PADRE INDUSTRIES, INC, HEREBY ACCEPTS
AND AGREES TO BE BOUND BY THE INDEMNIFICATION PROVISIONS OF SECTION 4.4 OF THE
ABOVE AGREEMENT.
/s/ THOMAS J. BILLINGS
---------------------------------------------
Thomas J. Billings
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ANNEX 1
TO
AGREEMENT
DESCRIPTION OF DRILLING RIGS, EQUIPMENT AND ROLLING STOCK
A. Drilling Rigs and Equipment
Rig No. Drawworks Manufacturer
------- ----------------------
Rig No. 4................................... RMI Model 4610
Rig No. 7 .................................. Skytop Model H4610
Rig No. 8 .................................. Skytop Model H14610
Rig No. 9................................... RMI Model 4610
Rig No. 10.................................. RMI Model 4610
All parts and equipment, including engines, mud pumps, hooks and
blocks, derricks, substructures, rotary tables, blow-out prevention
equipment, drill bits and all tubular goods on the rigs and in the yard
owned by Padre, all of which are set forth on Attachment A to Appendix
I to the Bill of Sale and Assignment attached to this Agreement as
Exhibit C.
B. Rolling Stock
All rolling stock set forth on Attachment B to Appendix I to the Bill
of Sale and Assignment attached to this Agreement as Exhibit C.
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EXHIBIT A
[LEASE WITH OPTION TO PURCHASE]
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EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is made and entered
into as of the ___ day of January, 1999, by and between Patterson Energy, Inc.,
a Delaware corporation (hereinafter called the "Company"), and Padre Industries,
Inc., a Texas corporation (hereinafter called "Padre").
WHEREAS, pursuant to that certain Agreement of even date herewith (the
"Asset Purchase Agreement"), by and between the Company and Padre, the Company
has agreed to issue 800,000 shares of the Company's common stock, par value $.01
per share (the "Common Stock") to Padre; and
WHEREAS, this Agreement is being entered into in connection with and as
a condition to the parties closing the transactions contemplated under the Asset
Purchase 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:
"Affiliate" shall mean a person that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, the person specified.
"Closing Date" shall mean the date on which the Shares are issued
to the Holder.
"Commission" shall mean the United States Securities and Exchange
Commission and any successor federal agency having similar powers.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or
any successor thereto, as the same shall be amended from time to time.
"Holder" shall mean Padre and its successors and assigns, and any
subsequent successors and assigns, of the Registrable Securities or any portion
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.
"Registrable Securities" shall mean (i) the Shares (as defined
below) and (ii) any securities issued or issuable with respect to the Shares by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise.
"Registration Expenses" shall mean all expenses incurred by
Company in connection with the Company's complying with Section 3 hereof,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company, blue sky fees and
expenses and accountants' expenses, including without limitation, any special
audits or "comfort" letters incidental to or required by any such registration
and any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities (but excluding underwriting discounts and commissions).
Ex. B-1
23
"Requesting Holder" shall mean any Holder of Registrable
Securities who shall request registration of Registrable Securities pursuant
hereto.
"Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
"Shares" shall mean 500,000 shares of the total 800,000 shares of
Common Stock.
2. Restrictions on Transfer. The Shares are being acquired for
investment for Padre's 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. Padre acknowledges that the Shares are
considered "restricted securities" within the meaning of the Securities Act.
3. Registration Under Securities Act, etc.
3.1 Incidental Registration.
(a) Right to Include Registrable Securities. If during the
one-year period ending on the first anniversary of this Agreement
the Company proposes to register any of its equity securities
under the Securities Act, whether or not for sale for its own
account, on a form and in a manner which would permit registration
of 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 the Company 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), the Company will use its best
efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to
register by Holders to the extent requisite to permit the
disposition (in accordance with the intended methods 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, the Company shall determine for any reason
not to register such securities, the Company 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); (ii) if (A) the
registration so proposed by the Company involves an underwritten
primary registration on behalf of the Company 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 the Company
in writing that, in its good faith judgment, all the shares to be
offered by the Company 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
the Company, then the managing underwriter or underwriters shall
include in such registration (1) first, the securities the Company
proposes to register to sale, and (2) second, the Registrable
Securities requested to be included in such registration by the
Requesting Holders, pro rata, and (3) any other securities
requested by persons other than Holders to be included in such
registration, if any, pro rata; (iii) if (A) the registration so
proposed by the Company is an underwritten secondary registration
on behalf of holders
Ex. B-2
24
of the Company'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 the Company in writing that, in
its good faith judgment, all the shares to be offered by such
requesting holder, the Company 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 the Company, 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, the securities which are Registrable
Securities, (3) any securities to be included in such registration
on behalf of the Company, and (4) any other securities requested
by persons other than Holders to be included in such registration,
if any, pro rata.
(b) Expenses. The Company will pay all Registration Expenses
in connection with each registration of Registrable Securities
pursuant to this Agreement.
3.2 Registration Procedures. If and whenever the Company
effects the registration of any Registrable Securities under the Securities Act
as provided in Section 3.1, the Company 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 reasonable 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) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions
of the Securities Act 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 six (6) months in the case of
a registration of Registrable Securities, 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) 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 reasonable 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 reasonable request.
Ex. B-3
25
(d) use its reasonable 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 jurisdiction as each seller shall reasonably request,
to keep such registration or qualification in effect for so long
as such registration statement stays 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 its Registrable Securities covered by such
registration statement, except that the Company 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) 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;
(f) 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
(g) use its reasonable best efforts to 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 the Company's Common Stock is quoted on NASDAQ,
or, if the Company'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 the Company, listed on a
national securities exchange.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing and as shall be required by law or by the
Commission in connection therewith.
3.3 Underwritten Offerings.
(a) Inclusion of Registrable Securities. If the Company at
any time proposed to register any of its securities under the
Securities Act as contemplated by Section 3.1 and such securities
are to be distributed by or through one or more underwriters, the
Company will use its best efforts, if requested by any Holder who
requests incidental registration of Registrable Securities in
connection therewith pursuant to Section 3.1, 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 the Company 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 the Company
and such underwriters and the representations and warranties by,
and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the
benefit of such Holders of Registrable Securities. The Company
will
Ex. B-4
26
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
the Company 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
representations required by law.
(b) Holdback Agreements. If any registration pursuant to
Section 3.1 shall be in connection with an 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 ninety (90) days
after the effective date of such registration statement.
3.4 Indemnification.
(a) Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities
Act, the Company will, and hereby does, indemnify and hold
harmless Holder, its directors, trustees, employees, and officers
and each other person, if any, who controls Holder within the
meaning of the Securities Act, in each case, against any losses,
claims, damages, liabilities or expenses, joint or several
(including, without limitation, the costs and expenses of
investigating, preparing for and defending any legal proceeding,
including reasonable attorney's fees), to which such Holder or any
such director, trustee, officer, employee 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 the Company will reimburse Holder and each such
director, trustee, officer, employee, and 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 the Company 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 the Company through an instrument duly executed by Holder or
any such director, trustee, officer, employee 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 Holder or
any such director, trustee, officer, employee or controlling
person and shall survive the transfer of such securities by
Holder. The Company will make provision for contribution in lieu
of any such indemnity that may be disallowed as shall be
reasonably requested by Holder.
Ex. B-5
27
(b) Indemnification by Holder. In the event of any
registration of any securities of the Company under the Securities
Act (pursuant to which Holder sells Registrable Securities covered
by such registration statement), Holder will, and hereby does,
indemnify and hold harmless the Company, each director of the
Company, each officer of the Company who shall sign such
registration statement and each other person, if any, who controls
the Company 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 statements
therein not misleading, if such statement or omission was made in
reliance upon and in conformity with written information furnished
to the Company through an instrument duly executed by Holder
specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement. Such indemnity shall
remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any such director, officer
or controlling person and shall survive the transfer of such
securities by Holder.
(c) Notice of Claims, etc. In case any proceeding (including
any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to
this Section 3.4, 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.
(d) Indemnification Unavailable. If the indemnification
provided for in this Section 3.4 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, or 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
statement or omissions which resulted in such losses, claims,
Ex. B-6
28
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 omission. The parties
agree that it would not be just and equitable if contribution
pursuant to this Section 3.4(d) 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 incurred by such indemnified
party in connection with investigating, defending or settling any
such action or claim.
(e) 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. No Holder or
person controlling such Holder other than the Company shall be
obligated to make contribution hereunder that in the aggregate
exceeds the total public offering price of the Registrable
Securities sold by such Holder, less the aggregate amount of any
damages that such Holder and its controlling persons have
otherwise been required to pay in respect to the same claim or any
substantially similar claim. The obligations of such Holders to
contribute are several in proportion to their respective ownership
of the securities covered by such registration statement and not
joint.
(f) Indemnity Operative and in Full Force. The indemnity and
contribution agreements contained in this Section 3.4 shall remain
operative and in full force and effect regardless of any
termination of this Agreement.
4. Rule 144. At all times following completion by the Company of its
initial public offering of equity securities pursuant to registration in
accordance with the Securities Act, the Company shall take such action as Holder
may reasonably request, all to the extent required from time to time to enable
such Holder to sell shares of Registrable Securities 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 the
request of any Holder, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements.
5. Amendments and Waivers. This Agreement 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 shall have obtained a
written consent to such amendment, action or omissions to act of the Holder or
Holders of at least 51% or more of the shares of Registrable Securities (and, in
the case of any amendment, action or omission to act which adversely affects any
Holder of Registrable Securities or a group of holders of Registrable
Securities, the written consent of each such Holder or each member of such
group).
6. 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
Ex. B-7
29
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, the Company may require assurances
reasonably satisfactory to it of such owner's beneficial ownership of such
Registrable Securities.
7. Notices. Notices and other communications under this Agreement
shall be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) to any Holder at the address provided to the Company in
writing by such Holder or as shown on stock transfer books of the
Company unless such Holder has advised the Company in writing of a
different address as to which notices shall be sent under this
Agreement, and
(b) if to the Company at P.O. Drawer 1416, Snyder, Texas 79550 to
the attention of its President or to such other address as the Company
shall have furnished to each Holder.
8. Assignment. This Agreement may not be assigned by either party
without the prior written consent of the other party; provided that Padre may
assign this Agreement to an Affiliate of Padre without the prior written consent
of the Company, but with reasonably prompt notice to the Company of such
assignment.
9. Miscellaneous. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not, and, in particular, shall inure
to the benefit of and be enforceable by, any Holder or Holders of Registrable
Securities. This Agreement embodies the entire agreement and understanding
between the Company 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 purposes of reference only and shall not limit or
otherwise affect the meaning hereof. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all 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.
PATTERSON ENERGY, INC.
By:
-------------------------------------------------
James C. Brown
Vice President - Finance
PADRE INDUSTRIES, INC.
By:
-------------------------------------------------
Thomas J. Billings
President
Ex. B-8
30
EXHIBIT C
BILL OF SALE AND ASSIGNMENT
KNOW ALL MEN BY THESE PRESENTS, that, pursuant to that certain
Agreement, dated January ___, 1999 (the "Agreement"), among PATTERSON ENERGY,
INC., a Delaware corporation ("PEC"), PATTERSON DRILLING COMPANY ("PDC"), a
Delaware corporation wholly owned by PEC, and PADRE INDUSTRIES, INC. ("Padre"),
a Texas corporation (Padre is referred to herein as the "Assignor"), the
Assignor, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, hereby grants, bargains, sells, conveys and
transfers unto PDC (the "Assignee"), all of the Assignor's right, title and
interest in and to the Drilling Rigs, Equipment and Rolling Stock set forth in
Appendix I attached hereto and incorporated herein by this reference ("Assets").
Assignor disclaims to the maximum extent permitted by law any and
all implied warranties (other than with respect to title) concerning the Assets.
TO HAVE AND TO HOLD the same unto the Assignee and the Assignee's
successors and assigns forever. The Assignor hereby covenants and agrees that it
has the full right, power and authority to sell, convey and transfer the
foregoing property to the Assignee pursuant to this Bill of Sale and Assignment.
IN WITNESS WHEREOF, the Assignor has caused this Bill of Sale and
Assignment to be duly executed by its duly authorized officer as of the ____ day
of January, 1999.
PADRE:
PADRE INDUSTRIES, INC.
By:
----------------------------------------------
Thomas J. Billings
Chairman of the Board
Ex. C-1
31
APPENDIX I
TO
BILL OF SALE AND ASSIGNMENT
FROM
PADRE INDUSTRIES, INC.
TO
PATTERSON DRILLING COMPANY
(List of Assets Assigned)
A. Drilling Rigs and Equipment
Rig No. Drawworks Manufacturer
------- ----------------------
Rig No. 4............................... RMI Model 4610
Rig No. 7 .............................. Skytop Model H4610
Rig No. 8 .............................. Skytop Model H14610
Rig No. 9............................... RMI Model 4610
Rig No. 10.............................. RMI Model 4610
All parts and equipment, including engines, mud pumps, hooks and
blocks, derricks, substructures, rotary tables, blow-out prevention
equipment, drill bits and all tubular goods on the rigs and in the yard
owned by Padre, all of which are set forth on Attachment A to this
Appendix I to the Bill of Sale and Assignment.
B. ROLLING STOCK
All rolling stock set forth on Attachment B to this Appendix I to the
Bill of Sale and Assignment.
Ex. C-2
32
EXHIBIT D(I)
PATTERSON ENERGY, INC.
AND
PATTERSON DRILLING COMPANY
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into this
day of January, 1999 (this "Agreement"), between and among PATTERSON ENERGY,
INC., a Delaware corporation ("PEC"), PATTERSON DRILLING COMPANY, a Delaware
corporation ("PDC") wholly owned by PEC, and PADRE INDUSTRIES, INC., a Texas
corporation ("Padre").
RECITALS:
A. Simultaneously with the execution of this Agreement, PDC has
consummated the transactions contemplated by that certain Agreement, dated
January 27, 1999 (the "Asset Purchase Agreement"), among PEC, PDC and Padre
providing for, among other things, the purchase by PDC of the drilling rigs,
related equipment and rolling stock owned by Padre and the lease by PDC of
certain real property, with improvements thereon, owned by Padre.
B. The execution and delivery of this Agreement is a condition to
the consummation of the transactions 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 earlier of: (i) January 27, 2004, or (ii) 30 days
after the date on which payments are to be made to Padre pursuant to Section 1.2
of the Asset Purchase Agreement, if the payments are not made during this 30-day
period (the "Non-Compete Period").
2. Covenant Not to Compete.
(a) Padre covenants and agrees that during the Non-Compete Period,
Padre shall not, without the prior written consent of PEC and PDC, directly or
indirectly, 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 wells within the State
of Texas (the "Competitive Business"); provided, however, that Padre 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
Ex. D(I)-1
33
(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 Padre is prohibited from engaging in certain
activities by this Section shall be extended by the length of time during which
Padre is in breach of the terms of this section.
(b) It is understood by and between the parties hereto that the
foregoing covenant by Padre not to enter into competition with PEC or PDC as set
forth in Section 2(a) hereof is an essential element of this Agreement and the
Asset Purchase Agreement and that, but for the agreement of Padre 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
Padre 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 respective affiliates. Padre also agrees that
such covenant is reasonable in scope, geographic area, and duration, and that
compliance with such covenant would not impose economic hardship on Padre.
3. Restrictions on Soliciting Business of PEC and PDC.
Padre further covenants and agrees that during the Non-Compete
Period, Padre will not, either for itself 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 2
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.
4. Specific Performance.
Without intending to limit the remedies available to PEC or PDC,
Padre acknowledges that PEC or PDC will have no adequate remedies at law if
Padre violates the terms of Section 2 or 3, hereof. In such event, Padre 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 Padre.
The provisions of this Section 4 shall survive the expiration,
termination or cancellation of this Agreement.
Ex. D(I)-2
34
5. Attorneys Fees and Costs.
If an action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys fees, costs and necessary expenses in addition to any other
relief to which that party may be entitled. This provision is applicable to this
entire Agreement.
6. Representations and Warranties of PEC, PDC and Padre.
(a) Representations and Warranties of PEC and PDC. PEC and PDC
hereby joint and severally represent and warrant to Padre that: (i) it has 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 Padre. Padre hereby
represents and warrants to PEC and PDC that: (i) Padre has the capacity and
power to enter into and perform obligations of Padre under this Agreement; (ii)
Padre has duly and validly executed this Agreement; (iii) the execution of this
Agreement and performance of obligations of Padre hereunder do not require the
consent or approval of any other party; and (iv) this Agreement constitutes a
valid and binding obligation of Padre.
7. General Provisions.
(a) Compliance with Laws. The parties agree that they will comply
with all applicable laws and regulations of government bodies or agencies in
their respective performance of their obligations under this Agreement.
(b) Governing Law and Construction. This Agreement will be
governed by and construed in accordance with the laws of the State of Texas
without reference to its conflict-of-laws principles. This Agreement's final
form resulted from review and negotiations among the parties and their
attorneys, and no part of this Agreement should be construed against any party
on the basis of authorship.
(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.
Ex. D(I)-3
35
(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 Padre, and provided
further that a transfer by PEC or PDC as a result of a merger or sale of all or
substantially all of the assets of PDC or PEC to a third party that assumes
PDC's or PEC's obligations and rights hereunder, as the case may be, by
operation of law or otherwise, shall not constitute a prohibited assignment
under this Section 7(e).
(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: Patterson Energy, Inc.
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: Cloyce A. Talbott
Chairman and Chief Executive Officer
To PDC: Patterson Drilling Company
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: A. Glenn Patterson
President and Chief Operating Officer
Ex. D(I)-4
36
To Padre: Padre Industries, Inc.
c/o The Kleberg Law Firm, P.C.
Suite 900 North Tower
800 N. Shoreline Blvd.
Corpus Christi, Texas 78401
Attention: Richard L. Leshin
To T Billings: Thomas J. Billings
c/o The Kleberg Law Firm, P.C.
Suite 900 North Tower
800 N. Shoreline Blvd.
Corpus Christi, Texas 78401
Attention: Richard L. Leshin
(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.
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:
PATTERSON ENERGY, INC.
By:
-------------------------------------------
James C. Brown
Vice President - Finance
PDC:
PATTERSON DRILLING COMPANY
By:
-------------------------------------------
James C. Brown
Vice President - Finance
PADRE:
PADRE INDUSTRIES, INC.
By:
-------------------------------------------
Thomas J. Billings
Chairman of the Board
Ex. D(I)-5
37
EXHIBIT D(II)
PATTERSON ENERGY, INC.
AND
PATTERSON DRILLING COMPANY
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into this
day of January, 1999 (this "Agreement"), between and among PATTERSON ENERGY,
INC., a Delaware corporation ("PEC"), PATTERSON DRILLING COMPANY, a Delaware
corporation ("PDC") wholly owned by PEC, and THOMAS J. BILLINGS, an individual
residing in Corpus Christi, Texas ("T Billings").
RECITALS:
A. Simultaneously with the execution of this Agreement, PDC has
consummated the transactions contemplated by that certain Agreement, dated
January 27, 1999 (the "Asset Purchase Agreement"), among PEC, PDC and PADRE
INDUSTRIES, INC. ("Padre"), providing for, among other things, the purchase by
PDC of the drilling rigs, related equipment, rolling stock and certain real
property with improvements thereon owned by Padre.
B. T Billings is an officer, a director and one of two
stockholders of Padre.
C. The execution and delivery of this Agreement is a condition to
the consummation of the transactions 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 earlier of (i) January 27, 2004, (ii) the death of
T Billings, or (iii) 30 days after the date on which payments are to be made to
Padre pursuant to Section 1.2 of the Asset Purchase Agreement, if the payments
are not made during this 30-day period (the "Non-Compete Period").
2. Covenant Not to Compete.
(a) T Billings covenants and agrees that during the Non-Compete
Period, T Billings 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 wells within the State of Texas (the "Competitive Business");
provided, however, that T Billings 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
Ex. D(II)-1
38
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 T Billings is prohibited from engaging in certain activities by
this Section shall be extended by the length of time during which T Billings is
in breach of the terms of this section.
(b) It is understood by and between the parties hereto that the
foregoing covenant by T Billings not to enter into competition with PEC or PDC
as set forth in Section 2(a) hereof is an essential element of this Agreement
and the Asset Purchase Agreement and that, but for the agreement of T Billings
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 T Billings 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 respective affiliates.
T Billings also 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 T Billings.
3. Restrictions on Soliciting Business of PEC and PDC.
T Billings further covenants and agrees that during the
Non-Compete Period, T Billings 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 2
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.
4. Specific Performance.
Without intending to limit the remedies available to PEC or PDC, T
Billings acknowledges that PEC or PDC will have no adequate remedies at law if T
Billings violates the terms of Section 2 or 3, hereof. In such event, T Billings
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 T Billings.
The provisions of this Section 5 shall survive the expiration,
termination or cancellation of this Agreement.
Ex. D(II)-2
39
5. Attorneys Fees and Costs.
If an action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys fees, costs and necessary expenses in addition to any other
relief to which that party may be entitled. This provision is applicable to this
entire Agreement.
6. Representations and Warranties of PEC, PDC and T Billings.
(a) Representations and Warranties of PEC and PDC. PEC and PDC
hereby jointly and severally represent and warrant to T Billings 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 T Billings. T Billings
hereby represents and warrants to PEC and PDC that: (i) T Billings has the
capacity and power to enter into and perform obligations of T Billings under
this Agreement; (ii) T Billings has duly and validly executed this Agreement;
(iii) the execution of this Agreement and performance of obligations of T
Billings hereunder do not require the consent or approval of any other party;
and (iv) this Agreement constitutes a valid and binding obligation of T
Billings.
7. General Provisions.
(a) Compliance with Laws. The parties agree that they will comply
with all applicable laws and regulations of government bodies or agencies in
their respective performance of their obligations under this Agreement.
(b) Governing Law and Construction. This Agreement will be
governed by and construed in accordance with the laws of the State of Texas
without reference to its conflict-of-laws principles. This Agreement's final
form resulted from review and negotiations among the parties and their
attorneys, and no part of this Agreement should be construed against any party
on the basis of authorship.
(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.
Ex. D(II)-3
40
(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 T Billings, and
provided further that a transfer by PEC or PDC as a result of a merger or sale
of all or substantially all of the assets of PDC with or to a third party that
assumes PDC's or PEC's obligations and rights, as the case may be, by operation
of law or otherwise, shall not constitute a prohibited assignment under this
Section 7(e).
(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: Patterson Energy, Inc.
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: Cloyce A. Talbott
Chairman and Chief Executive Officer
To PDC: Patterson Drilling Company
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: A. Glenn Patterson
President and Chief Operating Officer
Ex. D(II)-4
41
To T Billings: Thomas J. Billings
c/o The Kleberg Law Firm, P.C.
Suite 900 North Tower
800 N. Shoreline Blvd.
Corpus Christi, Texas 78401
Attention: Richard L. Leshin
(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.
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:
PATTERSON ENERGY, INC.
By:
----------------------------------------
James C. Brown
Vice President - Finance
PDC:
PATTERSON DRILLING COMPANY
By:
----------------------------------------
James C. Brown
Vice President - Finance
T BILLINGS:
-------------------------------------------
Thomas J. Billings
Ex. D(II)-5
42
EXHIBIT E
FORM
OF
INVESTMENT REPRESENTATION LETTER
January 27, 1999
Patterson Energy, Inc.
4510 Lamesa Highway
Snyder, Texas 79549
This letter is being submitted to Patterson Energy, Inc. ("PEC")
in connection with and as a condition to PEC's closing of the transaction
contemplated by the Agreement among PEC, Patterson Drilling Company ("PDC") and
Padre Industries, Inc. ("Padre"), dated of even date with this letter (the
"Agreement"). 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 January 20, 1999 (the "Memorandum") containing a copy of PEC's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997, and all other
reports filed by PEC with the Securities and Exchange Commission since January
1, 1998 (collectively, the "Reports") and has carefully reviewed the Memorandum
and the Reports, including, but not limited to, (i) the statements in the
Memorandum relating to taxation of the transaction and lack of free
transferability of the PEC Shares to be issued by PEC as consideration for the
transaction, and (ii) the section entitled "Disclosure Concerning
Forward-Looking Statements," setting forth certain Cautionary Statements or risk
factors relating to PEC and PDC and their businesses and operations.
b. The undersigned has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of an
investment in PEC vis-a-vis the PEC Shares to be issued by PEC as consideration
for the transactions.
c.The undersigned has had an opportunity to ask questions of PEC
and PDC and its management concerning PEC and PDC, the businesses of PEC and PDC
and the PEC Shares and, if asked, all such questions have been answered to the
full satisfaction of the undersigned.
d. The undersigned understands that PEC has not registered the
offer or sale of the PEC Common Stock 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 it sell or otherwise
transfer the PEC Common Stock without registration under the Act (see paragraph
(h) below), unless an exemption from registration is available.
e. The undersigned represents that it will acquire the PEC Shares
for its own account, with no intention to distribute or offer to distribute the
same to others without registration under the Act (unless an exemption from
registration is available), and understands that the issuance by PEC of the PEC
Common Stock will be predicated upon the undersigned's lack of such intention.
Ex. E-1
43
f. The undersigned understands that neither the Securities and
Exchange Commission nor the securities commissioner of any state has received or
reviewed any documents relative to an investment in PEC, or has made any finding
or determination relating to the fairness of an investment in PEC.
g. The undersigned acknowledges that stop transfer instructions
will be placed with PEC's transfer agent to restrict the resale, pledge,
hypothecation or other transfer of the PEC Shares.
h. The undersigned acknowledges that, except as provided in the
Registration Rights Agreement attached to the Agreement as Exhibit B, PEC is
under no obligation to register the PEC Shares for sale under the Act or to
assist the undersigned in complying with any exemption from registration under
the Act, or any state securities laws.
i. If other than a natural person, the undersigned was not
organized for the specific purpose of acquiring the PEC Common Stock.
j. The undersigned understands and acknowledges that the foregoing
representations and warranties will be relied upon by PEC in connection with the
issuance of the PEC Shares.
k. Each of the two stockholders of the undersigned has an
individual net worth, or joint net worth with the undersigned's spouse in excess
of $1 million.
l. The undersigned has total assets of at least $5,000,000 and was
not formed for the specific purpose of acquiring the PEC Common Stock.
2. Indemnification.
The undersigned agrees to indemnify and hold harmless PEC and PDC,
or either of them, the officers, directors and affiliates of either of them and
each other person, if any, who controls either of them, within the meaning of
Section 15 of the Act, against any and all loss, liability, claim, damage and
expense whatsoever (including, but not limited to, any and all expenses
reasonably incurred in investigating, preparing or defending against any
litigation commenced or threatened or any claim whatsoever) arising out of or
based upon any false representation or warranty or failure by the undersigned to
comply with any covenant or agreement made by the undersigned herein.
3. Survival.
All representations, warranties and covenants contained in this
letter shall survive the closing of the transactions.
Very truly yours,
PADRE:
PADRE INDUSTRIES, INC.
By:
----------------------------------
Thomas J. Billings
President
Ex. E-2