<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 27, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
BAYARD DRILLING TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<C> <C> <C>
DELAWARE
(State or other jurisdiction 1381 73-1508021
of incorporation or (Primary Standard Industrial (I.R.S. Employer
organization) Classification Code Number) Identification No.)
</TABLE>
4005 NORTHWEST EXPRESSWAY, SUITE 550E
OKLAHOMA CITY, OKLAHOMA 73116
(405) 840-9550
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
---------------------
JAMES E. BROWN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BAYARD DRILLING TECHNOLOGIES, INC.
4005 NORTHWEST EXPRESSWAY, SUITE 550E
OKLAHOMA CITY, OKLAHOMA 73116
(405) 840-9550
(Name, address, including zip code, and
telephone number, including area code, of agent for service)
---------------------
Copies to:
<TABLE>
<C> <C>
DAVID G. MONK WILLIAM N. FINNEGAN, IV
BAKER & BOTTS, L.L.P. ANDREWS & KURTH L.L.P.
2001 ROSS AVENUE 600 TRAVIS STREET, SUITE 4200
DALLAS, TEXAS 75201 HOUSTON, TEXAS 77002
(214) 953-6500 (713) 220-4200
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
- ------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
- ------------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==========================================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value $.01 per share...................... $164,680,000 $49,903
==========================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 27, 1997
PROSPECTUS
, 1997
8,950,000 SHARES
[BAYARD DRILLING TECHNOLOGIES, INC. LOGO]
COMMON STOCK
Of the 8,950,000 shares of common stock, par value $.01 per share ("Common
Stock"), of Bayard Drilling Technologies, Inc. ("Bayard" or the "Company")
offered hereby (the "Offering"), 4,000,000 shares are being sold by Bayard and
4,950,000 shares are being sold by certain stockholders of the Company (the
"Selling Stockholders"). The Company will not receive any of the proceeds from
the sale of shares of Common Stock by the Selling Stockholders pursuant to the
Offering. See "Use of Proceeds" and "Principal and Selling Stockholders."
Prior to the Offering, there has been no public market for the Common
Stock. It is currently estimated that the initial offering price to the public
of the Common Stock will be between $ and $ per share. For
information relating to the factors considered in determining the initial
offering price to the public of the Common Stock, see "Underwriting."
Application will be made to list the Common Stock on the American Stock
Exchange ("AMEX") under the symbol " ."
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN
MATTERS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.............................. $ $ $ $
Total(3)............................... $ $ $ $
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting expenses estimated at $750,000 which will be paid by the
Company.
(3) Certain of the Selling Stockholders have granted the Underwriters an option,
exercisable within 30 days of the date hereof, to purchase up to 1,342,500
additional shares of Common Stock at the Price to the Public less
Underwriting Discounts and Commissions, solely to cover over-allotments, if
any. If such option is exercised in full, the total Price to the Public,
Underwriting Discounts and Commissions, Proceeds to the Company and Proceeds
to the Selling Stockholders will be $ , $ , $ and
$ , respectively. See "Underwriting."
The shares of Common Stock are being offered by the several Underwriters
when, as and if delivered to and accepted by the Underwriters against payment
therefor and subject to various prior conditions, including their right to
reject orders in whole or in part. It is expected that delivery of share
certificates representing the Common Stock will be made in New York, New York on
or about , 1997.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS
PRUDENTIAL SECURITIES INCORPORATED
RAUSCHER PIERCE REFSNES, INC.
RAYMOND JAMES & ASSOCIATES, INC.
<PAGE> 3
[MAP]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING
AND MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and related notes appearing elsewhere in
this Prospectus. Unless otherwise indicated, all information contained in this
Prospectus (i) assumes that the Underwriters' over-allotment option is not
exercised and (ii) reflects a two-for-one stock split effected by means of a
stock dividend to stockholders of record on August 22, 1997. Unless the context
otherwise requires, the terms "Bayard" and the "Company" include Bayard Drilling
Technologies, Inc. and its predecessors and subsidiaries.
THE COMPANY
The Company is a leading provider of contract land drilling services to
major and independent oil and gas companies and operates the fifth largest land
drilling fleet in the United States. As of August 15, 1997, the Company's rig
fleet consisted of 41 rigs, of which 36 were being marketed and five were being
refurbished and expected to be placed in operation within the next six months.
During the six months ended June 30, 1997, the Company experienced a utilization
rate in excess of 95% for its marketed rigs.
The Company's fleet consists primarily of rigs capable of deep drilling
applications (well depths of 15,000 feet or greater). The Company believes that
deep rigs are in high demand due to improved deep drilling economics available
to domestic oil and gas companies. Deep drilling targets are more attractive to
oil and gas companies due to new technologies, including (i) three-dimensional
seismic techniques, (ii) increasingly accurate down hole measurement devices and
(iii) improved guidance systems and directional drilling motors for horizontal
and directional wells. Examples of currently active deep drilling areas include
the Tuscaloosa trend in Louisiana, the Pinnacle Reef trend in East Texas, the
Anadarko and Arkoma basins in Oklahoma and the Austin Chalk in Texas and
Louisiana.
The Company's fleet includes 31 rigs capable of drilling to depths of
15,000 feet or greater, 19 of which are capable of drilling to depths of 20,000
feet or greater. Of these 31 rigs, 19 are diesel electric silicon controlled
rectifier ("SCR") rigs which offer operators superior control and efficiency,
particularly in deep, directional or horizontal applications. For the six month
period ended June 30, 1997, the Company ranked among the top three domestic land
drillers in average measured depth per well drilled.
The Company's fleet is concentrated in its two core operating
regions -- the Mid-Continent region (which includes principally Oklahoma, North
Texas and the Texas Panhandle) and the Gulf Coast region of Texas and Louisiana.
At August 15, 1997, the Company had 23 rigs marketed in Oklahoma and was the
second most active land drilling contractor in the state. In 1996, 1,835 onshore
wells were drilled in Oklahoma, making it the third most active state for
domestic onshore drilling. The Company's rigs operating in the Mid-Continent
region are generally capable of drilling to depths of 10,000 feet or greater and
are marketed by the Company to meet the specific well depth and mobility needs
of producers in that region. At August 15, 1997, the Company had 13 rigs
marketed in the Gulf Coast region, including 11 diesel electric SCR rigs. This
region is characterized by significant drilling activity in deep, technically
challenging formations for which the Company's rigs are particularly well
suited. The Company believes that its high quality equipment, including diesel
electric SCR rigs, powerful mud pumps and high horsepower drawworks, gives the
Company a competitive advantage in attracting premium jobs with customers
engaged in multi-well horizontal drilling programs. In May 1997, one of the
Company's rigs drilled a horizontal well in the Gulf Coast region to a vertical
depth of 18,700 feet before initiating a horizontal lateral of 3,239 feet. The
Company believes this to be the deepest vertical depth at which a horizontal
lateral has ever been initiated.
The Company was formed in December 1996 as the successor to Anadarko
Drilling Company ("Anadarko"), which owned ten rigs, including two rigs
requiring refurbishment. At the time of its formation, the Company also
purchased six rigs requiring refurbishment. Since that time, the Company has
aggressively pursued acquisitions of rigs and components, and through August 15,
1997 had acquired 25 additional rigs (net of sales). Some of these rigs required
refurbishment before the Company placed such rigs in service. Many of the
acquired and refurbished rigs were put into service in May and June 1997, and
therefore did not
3
<PAGE> 5
contribute significantly to operating results through June 30, 1997. The Company
expects these rigs to be operational and to contribute to its profitability
throughout the second half of 1997.
BUSINESS STRATEGY
The Company believes that growth in earnings and cash flow can be achieved
by pursuing the following business strategy:
Operating a Technologically Advanced Rig Fleet. The Company has assembled
its existing rig fleet, and will pursue further acquisitions, with the goal of
operating one of the most technologically sophisticated land drilling fleets in
the United States. Many of the Company's rigs include engines, pumps and
drilling mud systems that represent the best drilling technology available and
that the Company believes offer greater efficiencies for customers than many of
the rigs available from its competitors. For example, by deploying its diesel
electric SCR rigs with two or three high horsepower pumps and top drive drilling
systems in challenging deep and horizontal drilling situations, the Company
believes that it can reduce its customers' overall drilling costs, thus securing
and enhancing its relationships with some of the most active operators in the
domestic market. The Company is committed to making the capital investments
required to maintain, and in appropriate circumstances, increase the
technological sophistication and operational efficiencies of its fleet.
Developing Deep Drilling Capabilities. The Company believes demand has been
particularly strong for rigs capable of drilling deeper, more complex wells,
including 1,500 horsepower and larger rigs, and has focused, and will continue
to focus, on acquiring rigs with these capabilities. Management believes that
demand and utilization rates for these types of rigs, particularly SCR rigs,
will remain higher than for rigs with lesser depth capacities due to their
greater operational flexibility and efficiency. At August 15, 1997, 76% of the
Company's rig fleet had deep drilling capability (15,000 feet or greater). In
the six months ended June 30, 1997, the Company's average depth per well drilled
was 14,877 feet, compared to the national average of 7,030 feet.
Focusing on Core Markets. The Company believes that its strong asset
position and operating expertise in the Mid-Continent and Gulf Coast regions
enable it to achieve operating efficiencies and to provide premium service to
its customers in these markets. The Company believes it is the second largest
provider of drilling rigs in Oklahoma and among the largest operators of deep
rigs in the onshore Gulf Coast region.
Developing and Maintaining Relationships with Strong Operators. In order to
maximize the utilization rate of its rig fleet and to minimize exposure to
market downturns, the Company seeks to maintain and build relationships with
operators committed to active domestic drilling programs. The Company's largest
current customers include Apache Corporation, Chesapeake Energy Corporation,
Enron Oil and Gas Company, Marathon Oil Company, Sonat Exploration Company and
Union Pacific Resources Corporation. Each of these companies was among the most
active onshore operators in the United States during the last three years.
Acquiring Additional Rigs and Related Equipment. The Company intends to
continue acquiring additional rigs and related equipment, including top drive
drilling systems. Since its formation and through August 15, 1997, the Company
has acquired 25 land rigs (net of sales) in seven transactions. At June 30,
1997, after giving effect to the application of the proceeds of the Offering,
the Company would have had a total debt to total capitalization ratio of 12.5%
and cash of $33 million, positioning the Company with the strong balance sheet
needed to be active in the acquisition market.
4
<PAGE> 6
DOMESTIC LAND DRILLING INDUSTRY OVERVIEW
The land drilling industry is experiencing higher utilization, increasing
day rates and improved financial performance as a result of a long-term decline
in the supply of rigs and increased demand for rigs attributable to improved oil
and gas industry fundamentals. Industry sources estimate that from its peak in
1982, the supply of domestic land rigs had fallen by 72% through June 1996 as a
result of normal attrition, cannibalization of components to refurbish rigs, the
inability of smaller competitors to raise capital needed to upgrade and
modernize rigs and the export of rigs to international markets. Greater demand
in the industry is evidenced by the increase in the active domestic land rig
count to 848 at August 15, 1997 from 677 at August 16, 1996, according to data
published by Baker Hughes Incorporated. The Company believes that the domestic
land drilling industry is currently experiencing utilization rates above 90% for
actively marketed rigs. While these market conditions have led to increasing day
rates in the Company's core areas, the Company does not believe that such rates
have reached levels that would justify the construction of new rigs.
Beyond the diminished size of the rig fleet, the domestic land drilling
industry is also benefitting from improved fundamentals among domestic oil and
gas exploration and production companies. In particular, new technologies and
improved operating efficiencies have increased drilling success rates, lowered
finding costs and enhanced the industry's profitability recently as compared to
the late 1980's and early 1990's. In addition, the financial positions of many
domestic oil and gas companies, and their access to additional capital, have
improved in recent years, affording these companies the ability to fund
aggressive drilling programs. From 1992 to 1996, the total equity market
capitalization of 39 of the largest domestic exploration and production
companies grew from approximately $260 billion to approximately $470 billion and
their aggregate annual capital expenditures increased from $13 billion to $19
billion. The Company believes that these improved industry fundamentals have
allowed oil and gas companies to maintain more consistently active drilling
programs, even in periods of lower commodity prices.
Much of the new technology being employed in the oil and gas industry has
increased demand for rigs capable of drilling deeper wells efficiently and
accurately. For example, more sophisticated and longer life drilling motors and
measurement-while-drilling devices have made deep horizontal drilling less
expensive and more precise. Three-dimensional seismic techniques have also
increased the demand for deep rigs. This technology permits geoscientists to
develop a more complete understanding of deep, complex geology prior to drilling
a well. As shallower fields continue to deplete, oil and gas companies are
likely to continue to pursue deep drilling prospects to maintain or increase
their production levels. While demand for land rigs capable of drilling greater
than 15,000 feet has grown significantly, the supply of such rigs is limited,
contributing to rapid increases in day rates for rigs with these capabilities.
Driven by expectations of improved economic returns and the fundamentals
discussed above, the domestic land drilling industry has experienced a period of
significant consolidation. In 1996, approximately 33% of the footage drilled in
the United States was drilled by only ten contractors, down from 25 in 1993.
This consolidation is ongoing, and the Company believes that approximately 40
transactions involving the acquisition of approximately 407 domestic land rigs
have been announced from July 1996 through July 1997, including acquisitions by
the Company.
5
<PAGE> 7
FORMATION AND ACQUISITIONS
Formation Transactions. The Company was formed in December 1996 through a
series of affiliated entity transactions in which the Company became the
successor to Anadarko, the contract drilling subsidiary of privately held AnSon
Partners Limited Partnership (together with its affiliates, "APLP"). In
connection with the formation of the Company (i) APLP contributed ten drilling
rigs, including two rigs requiring refurbishment, for shares of Common Stock,
(ii) Roy T. Oliver and related entities and Energy Spectrum Partners LP ("Energy
Spectrum") exchanged six additional drilling rigs and cash, respectively, for
shares of Common Stock and (iii) Chesapeake Energy Corporation ("Chesapeake")
entered into drilling contracts with two-year terms for six of the Company's
rigs in consideration for an option to purchase shares of Common Stock
(together, the "Formation Transactions"). See "Business -- Formation and
Acquisitions." Since the Formation Transactions, the Company has enhanced its
original fleet through acquisitions and refurbishment of rigs as described
below.
Trend Acquisition. In May 1997, the Company completed the acquisition of
Trend Drilling Co. ("Trend") for $18 million in cash and 250,000 shares of
Common Stock (the "Trend Acquisition"). Trend has operated a land drilling
business in the Mid-Continent region since 1976. Of the 14 rigs acquired from
Trend, three are diesel electric SCR rigs and seven have depth capacities of
15,000 feet or greater. The Company retained substantially all of Trend's
operating personnel.
Ward Acquisition. Also in May 1997, the Company acquired the business of
Ward Drilling Company, Inc. ("Ward") for $8 million in cash, 400,000 shares of
Common Stock and warrants to purchase an additional 200,000 shares of Common
Stock (the "Ward Acquisition"). Ward has operated a land drilling business in
the Mid-Continent region since 1981. In the Ward Acquisition, the Company
acquired six drilling rigs, including three rigs with drilling capacities of
15,000 feet or greater, further enhancing its presence in the Mid-Continent
region. The Company retained substantially all of Ward's operating personnel.
Individual Rig Acquisitions. In addition to the Trend and Ward
Acquisitions, the Company invested $5.5 million to acquire six rigs in five
transactions (the "Individual Rig Acquisitions" and, together with the Formation
Transactions, the Trend Acquisition and the Ward Acquisition, the "Consolidation
Transactions") involving purchases of individual rigs or rig components.
Refurbishment. The Consolidation Transactions included a number of rigs in
need of refurbishment. From January 1, 1997 through August 15, 1997, the Company
completed refurbishment of 12 rigs at an average cost of approximately $1.9
million per rig (excluding drill pipe). These rigs were placed in service at
various dates between January and August 15, 1997. At August 15, 1997, the
Company had five additional rigs in various stages of refurbishment. The Company
expects to place three of such rigs in service during the fourth quarter of 1997
and two in the first quarter of 1998. The Company expects the cost to refurbish
these five rigs to average approximately $2.5 million per rig (excluding drill
pipe).
The Company's principal executive offices are located at 4005 Northwest
Expressway, Suite 550E, Oklahoma City, Oklahoma 73116, and its telephone number
at such offices is (405) 840-9550.
6
<PAGE> 8
RIG FLEET INFORMATION
The following table sets forth, as of August 15, 1997, certain information
with respect to the drilling rigs owned by the Company. This table includes
information for the 36 rigs marketed at August 15, 1997 and the five rigs then
being refurbished and expected to be placed in operation within the next six
months. See "Business -- Drilling Equipment and Supplies."
<TABLE>
<CAPTION>
DEPTH CAPACITY (FEET) SCR MECHANICAL TOTAL
--------------------- --- ---------- -----
<S> <C> <C> <C>
GULF COAST REGION
15,000 to 19,999....................................... 1 1 2
20,000 or greater...................................... 13 1 14
MID-CONTINENT REGION
10,000 to 14,999....................................... 0 10 10
15,000 to 19,999....................................... 2 8 10
20,000 or greater...................................... 3 2 5
-- -- --
TOTALS......................................... 19 22 41
== == ==
</TABLE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered:
By the Company............................. 4,000,000 shares
By the Selling Stockholders................ 4,950,000 shares(1)
Total.............................. 8,950,000 shares
Common Stock to be Outstanding
after the Offering......................... 14,932,000 shares(1)(2)
Use of Proceeds.............................. The net proceeds to the Company from the
Offering will be used for the repayment of
indebtedness, the modification and upgrade of
drilling rigs and other general corporate
purposes, including acquisitions of drilling
rigs and related equipment (including top
drives). The Company will not receive any of
the proceeds from the sale of shares by the
Selling Stockholders. See "Use of Proceeds."
Proposed AMEX Symbol......................... " "
</TABLE>
- ---------------
(1) Assumes the consummation of the Chesapeake Transactions, as described in
"Certain Relationships and Related Transactions -- Chesapeake Transactions,"
and the exercise by The CIT Group/Equipment Financing, Inc. ("CIT") of a
warrant for 150,000 shares of Common Stock at an aggregate exercise price of
$1.2 million (collectively, the "Stockholder Exercises").
(2) Does not include (i) 658,600 shares of Common Stock subject to issuance
pursuant to outstanding options awarded under the Company's 1997 Stock
Option and Stock Award Plan or (ii) 562,000 shares of Common Stock subject
to issuance pursuant to other outstanding warrants issued by the Company.
See "Use of Proceeds," "Management -- 1997 Stock Option and Stock Award
Plan" and "Certain Relationships and Related Transactions." Further, this
does not include shares of Common Stock that may be issued, solely at the
option of the Company, to redeem outstanding Subordinated Notes (as defined
in "Management's Discussion and Analysis of Financial Condition and Results
of Operations"). See "Certain Relationships and Related
Transactions -- Certain Financing Arrangements -- Common Stock and
Subordinated Notes."
RISK FACTORS
See "Risk Factors" for a discussion of certain risks inherent in an
investment in the Common Stock offered hereby.
7
<PAGE> 9
SUMMARY HISTORICAL AND PRO FORMA
CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table sets forth summary historical financial and operating
data for the Company for each of the years in the three year period ended
December 31, 1996, for the six months ended June 30, 1996 and 1997, and as of
December 31, 1996 and June 30, 1997. The financial results for the period ended
and as of June 30, 1997 include the results of the Company's consolidated
subsidiary, Trend, beginning May 1, 1997. The Company's historical results
reflect the operations of its predecessor, Anadarko. The consolidated financial
data for the six months ended June 30, 1996 and 1997 is derived from the
unaudited financial statements of the Company. In the opinion of management, the
financial data for the six months ended June 30, 1996 and 1997 reflects all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of such data.
The pro forma consolidated financial and operating data for the year ended
December 31, 1996 and the six months ended June 30, 1997 shown below give effect
to (i) the Consolidation Transactions (to the extent not already reflected in
the historical financial statements), (ii) the Stockholder Exercises and (iii)
the Offering and the application of the net proceeds to the Company therefrom as
if they occurred on January 1, 1996 for purposes of operations data and June 30,
1997 for purposes of balance sheet data. The following information should be
read together with Management's Discussion and Analysis of Financial Condition
and Results of Operations, the historical financial statements of Bayard, Trend
and Ward, including the notes thereto, and the Pro Forma Consolidated Financial
Data, including the notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
YEAR ENDED DECEMBER 31, (UNAUDITED)
---------------------------------------- ------------------------------
1994 1995 1996 1996 1997
------- ------- -------------------- ------- --------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------------------------- --------- ------------------ ---------
(IN THOUSANDS, EXCEPT PER SHARE, RIG AND DAY RATE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues........................... $ 9,910 $ 7,708 $ 9,853 $36,930 $ 4,301 $ 15,107 $26,454
------- ------- -------- ------- ------- -------- -------
Operating expenses:
Drilling and other..................... 8,572 6,122 7,699 28,768 3,268 11,022 19,334
Depreciation and amortization.......... 1,557 791 1,123 4,259 415 2,599 4,173
General and administrative............. 786 880 658 2,487 323 722 1,179
------- ------- -------- ------- ------- -------- -------
Total operating expenses......... 10,915 7,793 9,480 35,514 4,006 14,343 24,686
------- ------- -------- ------- ------- -------- -------
Operating income (loss).................. (1,005) (85) 373 1,416 295 764 1,768
Interest expense and financing cost...... (18) (3) (11) (682) -- (981) (614)
Other income (expense)................... 366 (134) 71 558 36 244 291
------- ------- -------- ------- ------- -------- -------
Income (loss) before income taxes........ (657) (222) 433 1,292 331 27 1,445
Income tax expense(1).................... -- -- 165 491 126 10 549
------- ------- -------- ------- ------- -------- -------
Net income (loss)........................ $ (657) $ (222) $ 268 $ 801 $ 205 $ 17 $ 896
======= ======= ======== ======= ======= ======== =======
Earnings per share (primary and fully
diluted)............................... $ .02 $ .06 $ .02 $ 0 $ .07
======== ======= ======= ======== =======
Weighted average shares outstanding
(fully diluted)(2)..................... 11,382 13,577 11,382 11,382 13,577
======== ======= ======= ======== =======
OTHER FINANCIAL DATA:
EBITDA(3).............................. $ 552 $ 706 $ 1,496 $ 5,675 $ 710 $ 3,363 $ 5,941
Capital expenditures................... 1,183 2,088 10,578 3,224 66,231
CASH FLOWS:
Operating activities................... $ 445 $ 310 $ (462) $ (124) $ 2,074
Investing activities................... (454) (1,710) (10,441) (3,088) (60,310)
Financing activities................... 9 1,400 15,866 3,212 53,513
DRILLING RIG ACTIVITY DATA:
Total rigs at end of period............ 8 8 16 8 41
Marketed rigs at end of period......... 8 8 8 8 34
Average utilization rate of drilling
rigs available for service(4)........ 84% 86% 88% 87% 97%
Average dayrate(5)..................... $ 4,148 $ 4,298 $ 4,731 $ 4,550 $ 5,450
</TABLE>
(continued on following page)
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<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1997
1996 (UNAUDITED)
------------ -----------------------
HISTORICAL HISTORICAL PRO FORMA
------------ ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and investments...................................... $ 4,963 $ 970 $ 32,859
Working capital (deficit), excluding current portion of
long-term debt.......................................... 4,974 (1,277) 30,612
Property, plant and equipment, net........................ 26,355 90,826 90,826
Total assets.............................................. 34,055 110,935 142,824
Long-term debt, including current portion................. 7,000 48,371 15,441
Total stockholders' equity................................ 25,803 43,040 107,859
</TABLE>
- ---------------
(1) Income tax expense is presented on a pro forma basis (assuming a 38%
statutory rate) for the year ended December 31, 1996 and for the six months
ended June 30, 1996.
(2) Historical weighted average shares outstanding is calculated using (i) the
shares originally issued to Anadarko in the Formation Transactions and (ii)
the fully diluted shares outstanding through August 27, 1997 for the year
ended December 31, 1996 and the six months ended June 30, 1996 and 1997. The
pro forma shares outstanding reflect historical shares outstanding plus the
sale of a sufficient number of shares in the Offering to retire certain
indebtedness of the Company as described in "Use of Proceeds". See footnote
(i) to "Notes to Unaudited Pro Forma Consolidated Financial Data."
(3) EBITDA represents operating income (loss) before depreciation and
amortization. EBITDA is frequently used by securities analysts and is
presented herein to provide additional information about the Company's
operations. EBITDA is not a measurement presented in accordance with
generally accepted accounting principles. EBITDA should not be considered in
isolation or as a substitute for net income or cash flow data prepared in
accordance with generally accepted accounting principles or as a measure of
a company's profitability or liquidity.
(4) Rig utilization rates are calculated on a weighted average basis assuming
365 days availability for all rigs available for service. Rigs acquired have
been treated as added to the rig fleet as of the date of acquisition. Rigs
under contract that generate revenues during moves between locations or
during mobilization/ demobilization are also considered to be utilized. Rigs
that are owned but not being marketed, including rigs being refurbished, are
not considered in determining the utilization rate.
(5) Represents total contract drilling revenues (excluding mobilization, cost
reimbursements and fuel), divided by the total number of days the Company's
drilling rig fleet operated during the period, divided by the average number
of rigs in operation.
9
<PAGE> 11
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. Prospective investors should carefully consider and evaluate the following
factors relating to the Company and the Offering, together with the information
and financial data set forth elsewhere in this Prospectus, prior to purchasing
any shares of Common Stock in the Offering.
FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE
This Prospectus contains forward-looking statements and information that
are based on the beliefs of the Company's management as well as assumptions made
by and information currently available to management. All statements other than
statements of historical fact included in this Prospectus are forward-looking
statements, including but not limited to statements identified by the words
"anticipate," "believe," "estimate" and "expect" and similar expressions. Such
statements reflect the Company's current views with respect to future events,
based on what it believes are reasonable assumptions; however, such statements
are subject to certain risks, uncertainties and assumptions, including but not
limited to the risk factors described in this Prospectus. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those in the forward-looking
statements. The Company does not intend to update these forward-looking
statements and information.
DEPENDENCE ON OIL AND GAS INDUSTRY
The Company's revenues, cash flows and earnings are substantially dependent
upon, and affected by, the level of domestic oil and gas exploration and
development activity. Such activity and the resulting level of demand for
contract land drilling and related services are directly influenced by many
factors over which the Company has no control. Such factors include, among
others, the market prices of oil and gas, market expectations about future
prices, the volatility of such prices, the cost of producing and delivering oil
and gas, government regulations and trade restrictions, local and international
political and economic conditions, levels of production by, and other activities
of, the Organization of Petroleum Exporting Countries and other oil and gas
producers, the development of alternate energy sources and the long-term effects
of worldwide energy conservation measures. Substantial uncertainty exists as to
the future level of oil and gas exploration and development activity. There can
be no assurance that the current level of oil and gas exploration and
development activity will be maintained or that demand for the Company's
contract drilling services will reflect the level of such activity.
CYCLICAL CONDITIONS
Historically, the contract drilling industry has been cyclical, with
significant volatility in profitability and rig values. This industry
cyclicality has been due to changes in the level of domestic oil and gas
exploration and development activity and the available supply of drilling rigs.
The market for contract land drilling services has generally been depressed
since 1982, when oil and gas prices began to weaken following a period of
significant increase in new drilling rig capacity. Since that time and except
during occasional upturns, there have been substantially more drilling rigs
available than necessary to meet demand in most operating and geographic
segments of the domestic drilling industry, including the geographic areas in
which the Company operates.
The contract drilling business is currently experiencing increased demand
for drilling services principally due to improved oil and gas drilling and
production economics and a continued reduction in the available supply of rigs
in the domestic land drilling market. Although the Company believes that
improved technologies and stable oil and gas prices have contributed to
increased activity in the exploration and production sector, there can be no
assurance that such factors will continue. In addition, ongoing movement or
reactivation of land drilling rigs (including the movement of rigs from outside
the United States into domestic markets) or new construction of drilling rigs
could increase rig supply and adversely affect contract drilling rates and
utilization levels. The Company cannot predict the future level of demand for
its contract drilling services, future conditions in the contract drilling
industry or future contract drilling rates.
10
<PAGE> 12
LIMITED OPERATING HISTORY
The Company was founded in December 1996 as the successor to Anadarko,
which had operated as a contract land drilling rig service company since 1982 in
Oklahoma. Although Anadarko was owned by and provided drilling services to APLP
prior to December 1996, Anadarko had also provided drilling services to 23
different third party customers between 1982 and December 1996. Prior to
December 1996, however, the Company had not operated as an independent entity.
Although the President and Chief Executive Officer of the Company had been
employed by Anadarko for 14 years and several other key employees of the Company
had been with Anadarko for extended periods, much of the Company's management
group has been assembled recently. Despite the extensive experience and
qualifications of many of the recently added individual managers, there can be
no assurance that the management group will be able to manage the stand-alone
entity as a cohesive team or to implement effectively the Company's business
strategy. The pro forma financial results presented herein include the operating
results of drilling rigs which were not under the Company's control and may not
be indicative of the Company's future operating results.
MANAGEMENT OF GROWTH; RISKS OF ACQUISITION STRATEGY
The Company has experienced rapid and substantial growth since its
formation as a result of acquisitions. The Company anticipates the further
expansion of the Company's drilling fleet through additional acquisitions.
Certain risks are inherent in an acquisition strategy, such as increasing
leverage and debt service requirements and combining disparate company cultures,
which could adversely affect the Company's operating results. Continued growth
and the process of integrating such acquired businesses may involve unforeseen
difficulties and may require a disproportionate amount of management's attention
and the Company's financial and other resources. No assurance can be given that
the Company will be able to continue to identify suitable acquisition
opportunities, negotiate acceptable terms, obtain financing for acquisitions on
satisfactory terms or successfully acquire identified targets. There can be no
assurance that the Company will be able to successfully manage and integrate the
acquired businesses and assets into its existing operations or that it will be
able to successfully maintain the market share attributable to operable drilling
rigs acquired by the Company. If the Company is unable to manage its growth and
successfully integrate the acquired businesses into the Company's existing
operations, or if the Company encounters unexpected costs or liabilities in the
acquired businesses, the Company's results of operations or financial condition
could be materially adversely affected. See "Business -- Business Strategy."
Competition in the market for drilling rigs has caused substantial
increases in the acquisition prices paid for rigs in recent months. Such
competition could adversely affect the Company's growth strategy if it is unable
to purchase additional drilling rigs or related equipment on favorable terms.
There can be no assurance that the Company will be able to compete successfully
in the future for acquisitions of available drilling rigs or related equipment,
or that such competition will not have a material adverse effect on the
Company's business, financial condition and results of operations.
SHORTAGE OF QUALIFIED AND EXPERIENCED LABOR
Increases in both onshore and offshore domestic oil and gas exploration and
production since 1995 and resultant increases in contract drilling activity have
created a shortage of qualified drilling rig personnel in the industry. If the
Company is unable to attract and retain sufficient qualified operating
personnel, its ability to market and operate its drilling rigs will be
restricted. In addition, labor shortages could result in wage increases, which
could reduce the Company's operating margins and have a material adverse effect
on the Company's financial condition and results of operations.
COMPETITION
The contract drilling industry is a highly competitive and fragmented
business characterized by high capital and maintenance costs. As a result, even
though the Company has the fifth largest active land drilling rig fleet in the
United States, the Company believes such fleet represents a market share of less
than 5% of the domestic land drilling industry. Drilling contracts are usually
awarded through a competitive bid process and,
11
<PAGE> 13
while the Company believes that operators consider factors such as quality of
service, type and location of equipment, or the ability to provide ancillary
services, price and rig availability are the primary factors in determining
which contractor is awarded a job. Certain of the Company's competitors have
greater financial and human resources than the Company, which may enable them to
better withstand periods of low rig utilization, to compete more effectively on
the basis of price and technology, to build new rigs or acquire existing rigs
and to provide rigs more quickly than the Company in periods of high rig
utilization.
CONCENTRATION OF CUSTOMER BASE
During the six months ended June 30, 1997 (pro forma for the Consolidation
Transactions), the three largest customers for the Company's contract drilling
services were Chesapeake, Sonat Exploration Company and Marathon Oil Company,
which accounted for approximately 28%, 9% and 9% of total revenues,
respectively. Chesapeake recently announced that it was reducing its drilling
program in the Gulf Coast region, an area in which it utilizes a number of the
Company's rigs. While the Company does not currently expect its rigs operating
for Chesapeake to be affected, and believes that it could successfully remarket
any rigs that might be affected in the future, there can be no assurance that
Chesapeake or any of the Company's other principal customers will continue to
employ the Company's services or that the loss of any of such customers or
adverse developments affecting any of such customers would not have a material
adverse effect on the Company's financial condition and results of operations.
OPERATING HAZARDS AND UNINSURED RISKS
The Company's operations are subject to many hazards inherent in the land
drilling business, including, for example, blowouts, cratering, fires,
explosions, loss of well control, loss of hole, damaged or lost drill strings
and damage or loss from inclement weather. These hazards could cause personal
injury or death, serious damage to or destruction of property and equipment,
suspension of drilling operations, or substantial damage to the environment,
including damage to producing formations and surrounding areas. Generally,
drilling contracts provide for the division of responsibilities between a
drilling company and its customer, and the Company seeks to obtain
indemnification from its customers by contract for certain of these risks. To
the extent not transferred to customers by contract, the Company seeks
protection against certain of these risks through insurance. Although the
Company believes that it is adequately insured for public liability and property
damage to others and injury or death to persons in accordance with industry
standards with respect to its operations, no assurance can be given that such
insurance will be sufficient to protect the Company against liability for all
consequences of well disasters, personal injury, extensive fire damage or damage
to the environment. No assurance can be given that the Company will be able to
maintain adequate insurance in the future at rates it considers reasonable or
that any particular types of coverage will be available. The occurrence of
events, including any of the above-mentioned risks and hazards, that are not
fully insured or the failure of a customer to meet its indemnification
obligations could subject the Company to significant liability and could have a
material adverse effect on the Company's financial condition and results of
operations. See "Business -- Operating Hazards and Insurance."
SHORTAGE OF DRILL PIPE IN THE CONTRACT DRILLING INDUSTRY
The Company requires a substantial amount of drill pipe in order to achieve
the drilling depths required by its customers. A shortage of drill pipe exists
in the contract drilling industry in the United States. This shortage has caused
the price of drill pipe to increase significantly over the past 24 months and
has required orders for new drill pipe to be placed at least one year in advance
of expected use. The price increase and the delay in delivery has caused the
Company to substantially increase capital expenditures for drill pipe in recent
months. While the Company believes it currently has sufficient drill pipe for
its existing rigs (including those rigs in refurbishment), in the event the
shortage continues, the Company may be unable to obtain the drill pipe required
to expand its contract drilling operations.
12
<PAGE> 14
CAPITAL REQUIREMENTS AND LIQUIDITY
The oil and gas contract drilling industry is capital intensive. The
Company's cash flow from operations and the continued availability of credit are
subject to a number of variables, including the Company's utilization rate,
operating margins and ability to maintain costs and obtain contracts in a
competitive industry. There can be no assurance that the Company's cash flow
from operations, proceeds from the Offering and present borrowing capacity will
be sufficient to fund its anticipated capital expenditures and working capital
requirements. The Company may from time to time seek additional financing,
either in the form of bank borrowings, sales of the Company's debt or equity
securities or otherwise. Except with respect to the Offering and the Company's
loan agreements with its lenders, the Company has no agreements for any such
financing and there can be no assurance as to the availability or terms of any
such financing. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Financial Condition and Liquidity." To the extent
the Company's capital resources and cash flow from operations are at any time
insufficient to fund its activities or repay its indebtedness as due, the
Company will need to raise additional funds through public or private financings
or additional borrowings. No assurance can be given as to the Company's ability
to obtain any such capital resources. If the Company is at any time not able to
obtain the necessary capital resources, its financial condition and results of
operations could be materially adversely affected. In the event that additional
funds are raised through the issuance of equity securities, the percentage
ownership of the Company's stockholders at that time would be diluted and, in
addition, such equity securities may have rights, preferences or privileges
senior to those of the Common Stock.
RELIANCE ON KEY PERSONNEL
The success of the Company's business is highly dependent upon the
services, efforts and abilities of James E. Brown, the Company's President and
Chief Executive Officer and certain other officers and key employees,
particularly Edward S. Jacob, III, the Company's Executive Vice
President -- Operations & Marketing, David E. Grose, the Company's Vice
President and Chief Financial Officer, and Ron Tyson, the Company's Construction
Manager. The business of the Company could be materially and adversely affected
by the loss of any of these individuals. The Company does not maintain key man
life insurance on the lives of any of its executive officers or key employees.
The Company has employment agreements with Messrs. Brown, Jacob and Grose. See
"Management -- Executive Salaries and Employment Agreements."
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
The domestic oil and gas industry is affected from time to time in varying
degrees by political developments and federal, state and local laws and
regulations. In particular, oil and gas production, operations and economics are
or have been affected by price controls, taxes and other laws relating to the
oil and gas industry, by changes in such laws and by changes in administrative
regulations. Except for the handling of solid wastes directly generated from the
operation and maintenance of the Company's drilling rigs, such as waste oils and
wash water, it is the Company's practice to require its customers to
contractually assume responsibility for compliance with environmental
regulations. However, the Company's operations are vulnerable to certain risks
arising from the numerous environmental health and safety laws and regulations.
These laws and regulations may restrict the types, quantities and concentration
of various substances that can be released into the environment in connection
with drilling activities, require reporting of the storage, use or release of
certain chemicals and hazardous substances, require removal or cleanup of
contamination under certain circumstances, and impose substantial civil
liabilities or criminal penalties. Environmental laws and regulations may impose
strict liability, rendering a person liable for environmental damage without
regard to negligence or fault, and could expose the Company to liability for the
conduct of, or conditions caused by, others, or for acts of the Company that
were in compliance with all applicable laws at the time such acts were
performed. Moreover, there has been a trend in recent years toward stricter
standards in environmental, health and safety legislation and regulation which
is likely to continue.
The Company has made and will continue to make expenditures to comply with
governmental regulations, including environmental, health and safety
requirements. There can be no assurance, however, that the Company will not
incur material liability related to the Company's operations under such laws and
13
<PAGE> 15
regulations. The Company cannot predict how existing laws and regulations may be
interpreted by enforcement agencies or court rulings, whether additional laws
and regulations will be adopted, or the effect such changes may have on the
Company's business, financial condition or results of operations. Because the
requirements imposed by such laws and regulations are subject to change, the
Company is unable to forecast the ultimate cost of compliance with such
requirements. The modification of existing laws and regulations or the adoption
of new laws or regulations curtailing exploratory or development drilling for
oil and gas for economic, political, environmental or other reasons could have a
material adverse effect on the Company by limiting drilling opportunities. See
"Business -- Government Regulation and Environmental Matters."
RISKS ASSOCIATED WITH FOOTAGE AND TURNKEY DRILLING
The Company in the past has performed drilling services under footage and
turnkey contracts and may enter into such arrangements in the future. Revenues
from footage contracts accounted for approximately 5% of total revenues during
the six months ended June 30, 1997 and the Company had no turnkey contracts
during such period. Under footage contracts, the Company is paid a fixed amount
for each foot drilled, regardless of the time required or the problems
encountered in drilling the well. Under turnkey drilling contracts, the Company
contracts to drill a well to an agreed depth under specified conditions for a
fixed price, regardless of the time required or the problems encountered in
drilling the well. In addition, the Company provides technical expertise and
engineering services, as well as most of the equipment required for the well,
and is compensated only when the contract terms have been satisfied. On a
turnkey well, the Company often subcontracts for related services and manages
the drilling process. The risks to the Company under footage and turnkey
contracts are substantially greater than under daywork contracts because the
Company assumes most of the risks associated with drilling operations that in a
daywork contract are generally assumed by the operator, including risk of
blowout, loss of hole, stuck drill pipe, machinery breakdowns, abnormal drilling
conditions and risks associated with subcontractors' services, supplies, cost
escalation and personnel. While the Company's current strategy is to operate
primarily under daywork contracts, there can be no assurance that this strategy
will not change and the occurrence of a loss that is not insured could have a
material adverse effect on the Company's financial position and results of
operations. See "Business -- Contract Drilling Operations."
ABSENCE OF A PRIOR PUBLIC MARKET FOR THE COMMON STOCK
Prior to the Offering, there has been no public market for the Common
Stock. Although application will be made to list the Common Stock on the AMEX,
there can be no assurance that an active public market for the Common Stock will
develop or be sustained or that the price at which the Common Stock will trade
after the Offering will not be lower than the initial public offering price. The
initial public offering price of the Common Stock in the Offering will be
determined through negotiations between the Company and the Representatives. See
"Underwriting." Market prices for the Common Stock following the Offering will
be influenced by a number of factors, including the depth and liquidity of the
market for the Common Stock, investor perceptions of the Company and general
economic and other conditions.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of shares of Common Stock by the Company or its existing
stockholders could adversely affect the market price of the Common Stock. Upon
completion of the Offering, the Company will have 14,932,000 shares of Common
Stock outstanding. Additionally, as of August 20, 1997, options for the purchase
of 658,600 shares of Common Stock (including options for 300,000 shares to be
priced at the initial public offering price) had been granted to certain
employees of the Company pursuant to the Company's 1997 Stock Option and Stock
Award Plan and 562,000 shares of Common Stock were subject to outstanding
warrants issued by the Company. Except for the options for 300,000 shares to be
priced at the initial public offering price, the exercise prices of these
options and warrants are substantially lower than the anticipated initial public
offering price of the Common Stock. In addition, certain outstanding
Subordinated Notes are convertible, solely at the Company's option, into shares
of Common Stock. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" and
14
<PAGE> 16
"Certain Relationships and Related Transactions -- Certain Financing
Arrangements -- Common Stock and Subordinated Notes."
The Company may in the future issue significant amounts of Common Stock or
options or warrants to acquire Common Stock under stock option plans or to
finance capital projects, including acquisitions of rigs and related equipment.
Of the outstanding shares, the 8,950,000 shares (10,292,500 shares if the
Underwriters' over-allotment option is exercised in full) to be sold in the
Offering will be freely tradeable without restrictions or further registration
under the Securities Act, except for shares purchased by an "affiliate" (as
defined in the Securities Act) of the Company. Following the expiration of the
lock-up agreements with the Underwriters, each of the Company's directors and
executive officers and each of its existing stockholders, who will hold upon
completion of the Offering an aggregate of approximately 40% of the outstanding
shares of Common Stock (32% if the Underwriters' over-allotment option is
exercised in full), may sell such shares subject to the requirements of Rule 144
under the Securities Act or pursuant to the terms of a registration rights
agreement. See "Certain Relationships and Related Transactions" and "Shares
Eligible for Future Sale." Additionally, the Company intends to file a
registration statement on Form S-8 covering the issuance of shares of Common
Stock pursuant to the 1997 Stock Option and Stock Award Plan within 180 days
after completion of the Offering. Accordingly, shares of Common Stock issued
pursuant to the 1997 Stock Option and Stock Award Plan will be available for
sale in the public market without restriction or limitation under the Securities
Act, except for any shares held by an "affiliate" of the Company. No prediction
can be made as to the effect, if any, that future sales of shares, the issuance
or exercise of options, warrants or other securities convertible into Common
Stock, or the availability of shares for sale will have on the market price for
Common Stock prevailing from time to time. Sales of a substantial amount of
Common Stock, or a perception that such sales could occur, could adversely
affect the prevailing market price of the Common Stock and could impair the
Company's ability to raise additional capital through the sale of equity
securities.
DILUTION
Purchasers of the Common Stock in the Offering will experience immediate
and significant dilution in the net tangible book value of their shares. Based
on an initial public offering price of $ per share, pro forma as of
June 30, 1997, such dilution would have been equal to $ per share with
respect to shares purchased pursuant to the Offering. See "Dilution."
SUPERIOR RIGHTS OF PREFERRED STOCK
The Company is authorized to issue preferred stock. The Board of Directors
of the Company (the "Board"), without stockholder approval, may issue shares of
the preferred stock with rights and preferences adverse to the voting power or
other rights of the holders of the Common Stock. No preferred stock has been
issued. See "Description of Capital Stock -- Preferred Stock."
EFFECTS OF CERTAIN ANTI-TAKEOVER PROVISIONS
The Restated Certificate of Incorporation of the Company (the
"Certificate") (i) contains a "fair price" provision, (ii) does not permit
stockholders to act by written consent, (iii) does not permit stockholders to
call special meetings of stockholders, (iv) requires certain procedures to be
followed and time periods to be met for any stockholder to propose matters to be
considered at annual meetings of stockholders, including nominating directors
for election at those meetings, (v) limits the ability of stockholders to
interfere with the power of the Board in other specified ways, (vi) requires
supermajority votes to amend any of the preceding provisions and (vii)
authorizes the Board to issue up to 20,000,000 shares of preferred stock without
stockholder approval and to set the rights, preferences, and other designations,
including voting rights, of those shares as the Board may determine. See
"Description of Capital Stock -- Certain Provisions of the Certificate and
Bylaws." These provisions, alone or in combination with each other, may
discourage, hinder, delay or prevent transactions involving actual or potential
changes of control of the Company, including transactions that otherwise could
involve payment of a premium over prevailing market prices to holders of Common
Stock. The Company is also subject to provisions of the Delaware General
Corporation Law (the "DGCL") that may make some business combinations more
difficult. See "Description of Capital Stock -- Delaware Anti-Takeover Statute."
15
<PAGE> 17
USE OF PROCEEDS
The net proceeds to be received by the Company from the Offering, after
deducting underwriting discounts and commissions and the estimated expenses of
the Offering (assuming an initial public offering price of $ per share, the
mid-point of the range set forth on the cover page of this Prospectus), are
expected to be approximately $ million.
The Company intends to use the net proceeds from the Offering to (i) repay
all amounts outstanding under the revolving loan facility between Fleet Capital
Corporation ("Fleet") and the Company (the "Revolving Loan"), which amount was
$7.9 million at August 15, 1997 and which facility will remain available for
future use by the Company, (ii) redeem in full, through a cash payment of $15
million (assuming an offering price at the mid-point of the range set forth on
the cover page of this Prospectus), the Subordinated Notes of the Company held
by Chesapeake, (iii) repay 50% of the amount outstanding under the $30.5 million
term loan facility between the Company, CIT and Fleet (the "Term Loan"), which
amount was $29.1 million at August 15, 1997 and which may not be repaid until
January 1998, (iv) modify, upgrade and refurbish drilling rigs and equipment
currently owned by the Company and (v) fund working capital and for general
corporate purposes, including acquisitions of additional drilling rigs and
related equipment (including top drives). See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Certain Relationships and Related Transactions --
Chesapeake Transactions." Pending such uses, the net proceeds will be invested
in short-term, investment-grade, interest-bearing securities.
Amounts outstanding under the Revolving Loan bear interest based on Fleet's
prime rate and mature in April 2000. Amounts outstanding under the Term Loan
bear interest, at the election of the Company, at floating rates based upon
Chase Manhattan Bank's prime rate or the London Interbank Offered Rate ("LIBOR")
and mature in March 2002. At June 30, 1997, the applicable interest rates under
the Revolving Loan and the Term Loan were 10% and 9.94%, respectively. The
Subordinated Notes to be redeemed from Chesapeake were issued by the Company in
May 1997 in an original principal amount of $18 million, mature on May 1, 2003
and bear interest at the option of the Company at either (i) 11% per annum,
payable in cash, or (ii) 12.875% per annum, payable in the form of additional
Subordinated Notes. See "Certain Relationships and Related
Transactions -- Certain Financing Arrangements."
Other than the cash received by the Company in the Stockholder Exercises,
the Company will not receive any proceeds from the sale of shares of Common
Stock by the Selling Stockholders. See "Principal and Selling Stockholders" and
"Certain Relationships and Related Transactions -- Chesapeake Transactions."
DIVIDEND POLICY
The Company currently intends to retain all available earnings generated by
its operations for the development and growth of its business and does not
anticipate paying any cash dividends on its Common Stock in the foreseeable
future. Future dividend policy will be made by the Board and will depend on a
number of factors, including the Company's earnings, capital requirements,
financial condition and business prospects and such other factors as the Board
may deem relevant. The payment of cash dividends on Common Stock is restricted
under the terms of the Term Loan and the Revolving Loan. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
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<PAGE> 18
DILUTION
The pro forma net tangible book value of the Company at June 30, 1997
(adjusted to reflect the Stockholder Exercises as if they occurred on June 30,
1997) was $ million or $ per share. After giving effect to the
sale by the Company of 4,000,000 shares of Common Stock in the Offering (at the
mid-point of the range set forth on the cover page of this Prospectus), the
adjusted net tangible book value of the Company at June 30, 1997 would have been
$ million or $ per share. This represents an immediate
increase in net tangible book value of $ per share to the Company's
existing stockholders and an immediate dilution in net tangible book value of
$ per share to new investors purchasing Common Stock in the Offering.
The following table illustrates the dilution to new investors purchasing shares
in the Offering:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share at June 30,
1997...................................................
Increase in net tangible book value per share attributable
to new
investors..............................................
Pro forma net tangible book value per share after the
Offering..................................................
Dilution in net tangible book value per share to new
investors................................................. $
</TABLE>
The following table sets forth, at June 30, 1997 (adjusted to reflect the
Stockholder Exercises as if they occurred on June 30, 1997), the differences in
the number of shares purchased, the consideration paid and the average price per
share paid to the Company by the existing stockholders and by investors
purchasing shares of Common Stock in the Offering (assuming an initial public
offering price at the mid-point of the range set forth on the cover page of this
Prospectus, no exercise of the Underwriters' over-allotment option and before
deducting underwriting discounts and commissions and estimated offering
expenses).
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------- ------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------ ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)................. % $ % $
New investors(1).........................
------ ----- ------- -----
Total.......................... % $ % $
====== ===== ======= ===== =======
</TABLE>
- ---------------
(1) The net effect of sales by the Selling Stockholders in the Offering will
reduce the number of shares held by existing stockholders to 5,982,000 or
40% of the total number of shares of Common Stock outstanding after the
Offering, and will increase the number of shares held by new investors to
8,950,000 or 60% of the total number of shares of Common Stock outstanding
after the Offering.
The preceding tables exclude the effects of (i) 658,600 shares of Common
Stock subject to issuance pursuant to outstanding options awarded under the
Company's 1997 Stock Option and Stock Award Plan and (ii) 562,000 shares of
Common Stock subject to issuance pursuant to other outstanding warrants issued
by the Company. See "Management -- 1997 Stock Option and Stock Award Plan" and
"Certain Relationships and Related Transactions." Further, these tables do not
include shares of Common Stock that may be issued, solely at the option of the
Company, to redeem outstanding Subordinated Notes for shares of Common Stock.
See "Certain Relationships and Related Transactions -- Certain Financing
Arrangements -- Common Stock and Subordinated Notes." If all of the outstanding
options and warrants were exercised immediately prior to completion of the
Offering, the immediate dilution in net tangible book value to new investors
purchasing Common Stock in the Offering would have been $ per share
instead of $ per share.
17
<PAGE> 19
CAPITALIZATION
The following table sets forth the capitalization of the Company at June
30, 1997 (i) on an historical basis and (ii) on an as adjusted basis after
giving effect to the Stockholder Exercises and the Offering and the application
of the net proceeds therefrom. The table should be read in conjunction with "Use
of Proceeds," "Pro Forma Consolidated Financial Data," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements of the Company and related notes included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and investments........................................ $ 970 $ 32,859
======= ========
Current portion of long-term debt........................... $12,869 $ 521
------- --------
Long-term debt:
Term Loan................................................. 18,894 12,880(1)
Subordinated Notes........................................ 16,608 2,040(1)
------- --------
Total long-term debt.............................. 35,502 14,920
------- --------
Stockholders' equity:
Preferred Stock, par value $.01 per
share; no shares outstanding........................... -- --
Common Stock, par value $.01 per
share; 7,490,000 shares outstanding, historical; and
14,932,000 shares outstanding as adjusted(2)........... 75 149
Additional paid-in capital................................ 42,980 110,006
Accumulated deficit....................................... (15) (2,296)
------- --------
Total stockholders' equity........................ 43,040 107,859
------- --------
Total capitalization.............................. $91,411 $123,300
======= ========
</TABLE>
- ---------------
(1) The Company intends to use a portion of the net proceeds from the Offering
to repay (i) all amounts outstanding under the Revolving Loan, (ii) the
portion of the Subordinated Notes held by Chesapeake and (iii) 50% of the
amount outstanding under the Term Loan. As of August 15, 1997, $7.9 million
was outstanding under the Revolving Loan, $18 million was outstanding under
the Subordinated Notes held by Chesapeake and $29.1 million was outstanding
under the Term Loan. See "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Certain Relationships and Related
Transactions -- Chesapeake Transactions."
(2) Does not include (i) 658,600 shares of Common Stock subject to issuance
pursuant to outstanding awards under the Company's 1997 Stock Option and
Stock Award Plan or (ii) 562,000 shares of Common Stock subject to issuance
pursuant to outstanding warrants issued by the Company. See
"Management -- 1997 Stock Option and Stock Award Plan" and "Certain
Relationships and Related Transactions."
18
<PAGE> 20
PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma financial statements are derived from the
historical financial statements of Bayard, Trend and Ward included elsewhere in
this Prospectus. The Pro Forma Combined Statements of Operations for the six
months ended June 30, 1997 and for the year ended December 31, 1996 reflect (a)
in the column entitled "combined," (i) the Trend Acquisition (accounted for as a
purchase), (ii) the Ward Acquisition (accounted for as a purchase) and (iii) the
May Financing related to the Trend and Ward acquisitions and (b) in the column
entitled "as adjusted," the consummation of, and application of proceeds from,
the Offering as if it occurred on January 1, 1996. The Pro Forma Balance Sheet
at June 30, 1997 reflects the consummation of, and application of proceeds from,
the Stockholder Exercises and the Offering as if they had occurred on June 30,
1997. The unaudited pro forma combined financial information should be read in
conjunction with the notes thereto and the historical financial statements of
Bayard, Trend and Ward, including the notes thereto, which are included
elsewhere in this Prospectus.
The unaudited pro forma combined financial statements do not purport to be
indicative of the results of operations that would actually have occurred if the
transactions described had occurred as presented in such statements or that may
occur in the future. In addition, future results may vary significantly from the
results reflected in such statements due to general economic conditions, oil and
gas commodity prices, the demand and prices for contract drilling services,
changes in the number of rigs available for service, the Company's ability to
successfully integrate the operations of Trend and Ward with its current
business and several other factors, many of which are beyond the Company's
control. See "Risk Factors."
19
<PAGE> 21
BAYARD DRILLING TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------- -----------------------------------------------
ACQUISITION OFFERING AS
BAYARD TREND(A) WARD(A) ADJUSTMENTS COMBINED ADJUSTMENTS ADJUSTED
------- -------- ------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES....................... $ 9,853 $15,692 $11,385 $ -- $36,930 $ -- $36,930
------- ------- ------- ------- ------- ------ -------
COSTS AND EXPENSES:
Drilling costs............... 7,653 11,752 9,891 (574)(b) 28,722 -- 28,722
Depreciation and
amortization.............. 1,123 1,603 966 66(c) 4,259 -- 4,259
501(d)
General and administrative... 658 1,647 485 (303)(e) 2,487 -- 2,487
Other operating.............. 46 46 -- 46
------- ------- ------- ------- ------- ------ -------
Total costs and
expenses........... 9,480 15,002 11,342 (310) 35,514 -- 35,514
------- ------- ------- ------- ------- ------ -------
Operating income..... 373 690 43 310 1,416 -- 1,416
------- ------- ------- ------- ------- ------ -------
OTHER INCOME (EXPENSE):
Interest income.............. -- 8 34 -- 42 -- 42
Interest expense and
financing costs........... (11) (261) (72) (2,928)(f) (3,272) 2,590(j) (682)
Gain (loss) on sale of
assets.................... 54 2,055 8 (1,738)(g) 379 -- 379
Other........................ 17 53 67 137 -- 137
------- ------- ------- ------- ------- ------ -------
Total other income
(expense).......... 60 1,855 37 (4,666) (2,714) 2,590 (124)
------- ------- ------- ------- ------- ------ -------
Income (loss) before taxes..... 433 2,545 80 (4,356) (1,298) 2,590 1,292
Income tax expense (benefit)... 18 981 -- (999)(h) -- 491(k) 491
------- ------- ------- ------- ------- ------ -------
Net income (loss).............. $ 415 $ 1,564 $ 80 $(3,357) $(1,298) $2,099 $ 801
======= ======= ======= ======= ======= ====== =======
Earnings per share, primary and
fully diluted................ $ .04 $ (.11) $ .06
======= ======= =======
Weighted average shares
outstanding, primary and
fully diluted(i)............. 11,382 11,382 13,577
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
20
<PAGE> 22
BAYARD DRILLING TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------------------------------- --------------------------------------------------
BAYARD TREND(A) WARD(A)
------------- -------------- ------------
SIX MONTHS FOUR MONTHS FIVE MONTHS
ENDED ENDED ENDED ACQUISITION OFFERING
JUNE 30, 1997 APRIL 30, 1997 MAY 31, 1997 ADJUSTMENTS COMBINED ADJUSTMENTS AS ADJUSTED
------------- -------------- ------------ ----------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES.................. $15,107 $6,390 $4,957 $ -- $26,454 $ -- $26,454
------- ------ ------ ------- ------- ------ -------
COSTS AND EXPENSES:
Drilling costs.......... 11,022 4,845 3,754 (287)(b) 19,334 -- 19,334
Depreciation and
amortization......... 2,599 276 413 634(c) 4,173 -- 4,173
251(d)
General and
administrative....... 722 412 197 (152)(e) 1,179 -- 1,179
------- ------ ------ ------- ------- ------ -------
Total costs and
expenses...... 14,343 5,533 4,364 446 24,686 -- 24,686
------- ------ ------ ------- ------- ------ -------
Operating
income........ 764 857 593 (446) 1,768 -- 1,768
------- ------ ------ ------- ------- ------ -------
OTHER INCOME (EXPENSE):
Interest income......... 51 -- 16 -- 67 -- 67
Interest expense and
financing costs...... (981) (150) (27) (1,464)(f) (2,622) 2,008(j) (614)
Gain (loss) on sale of
assets............... 60 -- -- -- 60 -- 60
Other................... 133 -- 31 -- 164 -- 164
------- ------ ------ ------- ------- ------ -------
Total other
income
(expense)..... (737) (150) 20 (1,464) (2,331) 2,008 (323)
------- ------ ------ ------- ------- ------ -------
Income (loss) before
taxes................... 27 707 613 (1,910) (563) 2,008 1,445
Income tax expense
(benefit)............... 10 269 -- (279)(h) -- 549(k) 549
------- ------ ------ ------- ------- ------ -------
Net income (loss)......... $ 17 $ 438 $ 613 $(1,631) $ (563) $1,459 $ 896
======= ====== ====== ======= ======= ====== =======
Earning per share, primary
and fully diluted....... $ .00 $ (.05) $ .07
======= ======= =======
Weighted average shares
outstanding, primary and
fully diluted(i)........ 11,382 11,382 13,577
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
21
<PAGE> 23
BAYARD DRILLING TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1997
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
-----------------------------
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- -------------- -----------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and investments................................. $ 970 $ 31,889(1) $ 32,859
Accounts receivable.................................. 10,517 -- 10,517
Other................................................ 559 -- 559
-------- -------- --------
Total current assets......................... 12,046 31,889 43,935
Property & Equipment, net.............................. 90,826 -- 90,826
Goodwill, net.......................................... 5,927 -- 5,927
Other.................................................. 2,136 -- 2,136
-------- -------- --------
Total assets................................. $110,935 $ 31,889 $142,824
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable..................................... $ 9,632 $ -- $ 9,632
Accrued liabilities.................................. 3,691 -- 3,691
Current portion of long-term debt.................... 12,869 (12,348)(1) 521
-------- -------- --------
Total current liabilities.................... 26,192 (12,348) 13,844
-------- -------- --------
Long-term debt......................................... 18,894 (6,014)(1) 12,880
-------- -------- --------
Subordinated Notes..................................... 16,608 (14,568)(1) 2,040
-------- -------- --------
Deferred income tax liabilities........................ 6,201 -- 6,201
-------- -------- --------
STOCKHOLDERS' EQUITY:
Common stock......................................... 75 74(1) 149
Additional paid-in capital........................... 42,980 67,026(1) 110,006
Retained earnings (accumulated deficit).............. (15) (2,281)(1) (2,296)
-------- -------- --------
Total stockholders' equity................... 43,040 64,819 107,859
-------- -------- --------
Total liabilities and stockholders' equity... $110,935 $ 31,889 $142,824
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
22
<PAGE> 24
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS)
(a) Represents the results of operations for Ward and Trend prior to their
acquisition by Bayard. Operations subsequent to the date of purchase, May 1
and May 30, 1997, respectively, are included in the Bayard historical
results.
(b) To reflect reductions in the level of workers' compensation expense reported
by Trend to conform to the level of workers' compensation expense reported
by the Company.
(c) To adjust depreciation expense on assets acquired in the Trend and Ward
Acquisitions using allocated purchase prices and based on estimated useful
lives of 12 years calculated on a straight-line basis.
(d) To record amortization of goodwill attributable to the Trend Acquisition
over 12 years on a straight-line basis.
(e) To reflect reduction in personnel and related costs due to consolidation of
the operations of Trend and Ward.
(f) To reflect the addition of interest expense on an aggregate principal amount
of $20.5 million of Subordinated Notes issued in the May Financing with an
original issue discount of $4 million.
(g) To eliminate the gain recognized by Trend on a rig sold to Bayard in
December 1996, prior to the Trend Acquisition in May 1997.
(h) To eliminate income tax expense recognized by Bayard and Trend to conform to
the Company's pro forma income tax position.
(i) Calculations of weighted average shares outstanding are based upon the
following:
<TABLE>
<S> <C>
Shares outstanding at June 30, 1997......................... 7,490
Energy Spectrum warrant exercise............................ 98
Stockholder Exercises --
Chesapeake................................................ 3,194
CIT....................................................... 150
------
Shares to be outstanding immediately prior to Offering...... 10,932
Common Stock Equivalents (treasury stock method)............ 450
------
Fully diluted shares outstanding............................ 11,382
Shares issued in the Offering to the extent necessary to
repay the Subordinated Notes, the Term Loan and the
Revolving Loan............................................ 2,195
------
Pro forma shares outstanding................................ 13,577
======
</TABLE>
(j) To eliminate pro forma and historical interest based on the assumed
repayment of debt as set forth in Note (l) as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ --------
<S> <C> <C>
Revolving Loan.............................................. $ -- $ 51
Term Loan................................................... 22 673
Subordinated Notes.......................................... 2,568 1,284
------ ------
$2,590 $2,008
====== ======
</TABLE>
(k) To record a provision for federal and state income tax at the statutory rate
of 38%.
23
<PAGE> 25
(l) To adjust for the Offering and the Stockholder Exercises, and the
application of the net proceeds therefrom, as follows:
<TABLE>
<S> <C> <C> <C>
Net proceeds from the Offering......................................... $ 55,050
Stockholder Exercises.................................................. 12,050
--------
67,100
--------
</TABLE>
<TABLE>
<CAPTION>
CURRENT LONG-TERM
------- ---------
<S> <C> <C> <C>
Less debt retired --
Term Loan....................................... $ 5,537 $6,014 11,551
Revolving Loan.................................. 6,811 -- 6,811
------- ------ --------
$12,348 $6,014 18,362
======= ======
Subordinated Notes................................................... 14,568
Extraordinary loss on early extinguishment of debt................... 2,281
--------
35,211
--------
Net adjustment to cash............................................... $ 31,889
========
</TABLE>
The Company estimates that the extraordinary loss from early extinguishment
of the Subordinated Notes, when the notes are retired in November 1997, will be
approximately $1,400 instead of the $2,281 reflected in the table above due to
the accrual of interest expense and amortization of original issue discount from
July 1997 through November 1997.
24
<PAGE> 26
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The historical financial data presented in the table below for and at the
end of each of the years in the five-year period ended December 31, 1996 are
derived from the financial statements of the Company and relate to the
operations of Anadarko, the predecessor of the Company, and include, generally,
the financial results of the operation of eight rigs.
The financial statements for the years ended December 31, 1994, 1995 and
1996 have been audited by Grant Thornton LLP, independent certified public
accountants. The historical financial data presented in the table below for and
at the end of the six month periods ended June 30, 1997 and 1996 are derived
from the unaudited consolidated financial statements of the Company. In the
opinion of management of the Company, such unaudited consolidated condensed
financial statements include all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the financial data for such
periods. The results for the six months ended June 30, 1997 are not necessarily
indicative of the results to be achieved for the full year.
The data presented below should be read in conjunction with the Company's
consolidated financial statements and the notes thereto included elsewhere in
this Prospectus and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------------- ----------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------- --------- ----------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Contract drilling............... $ 9,368 $ 8,349 $ 9,910 $ 7,405 $ 9,793 $ 4,242 $ 15,107
Other........................... -- -- -- 303 60 59 --
--------- --------- --------- --------- ---------- --------- ----------
Total revenues.............. 9,368 8,349 9,910 7,708 9,853 4,301 15,107
--------- --------- --------- --------- ---------- --------- ----------
Operating expense:
Drilling........................ 7,835 7,690 8,572 6,075 7,653 3,268 11,022
Depreciation, depletion and
amortization.................. 988 1,374 1,557 791 1,123 415 2,599
General and administrative...... 651 819 786 880 658 323 722
Other........................... -- -- -- 47 46 -- --
--------- --------- --------- --------- ---------- --------- ----------
Total operating costs....... 9,474 9,883 10,915 7,793 9,480 4,006 14,343
--------- --------- --------- --------- ---------- --------- ----------
Operating income (loss)........... (106) (1,534) (1,005) (85) 373 295 764
--------- --------- --------- --------- ---------- --------- ----------
Other income and (expense):
Interest expense and financing
cost.......................... (8) (30) (18) (3) (11) -- (981)
Interest income................. -- -- -- -- -- -- 51
Gain (loss) on sale of assets... -- -- 366 (131) 54 -- 60
Other income (expense).......... 90 24 -- (3) 17 36 133
--------- --------- --------- --------- ---------- --------- ----------
Income (loss) before income
taxes........................... (24) (1,540) (657) (222) 433 331 27
Income tax expense(1)............. -- -- -- -- 165 126 10
--------- --------- --------- --------- ---------- --------- ----------
Net income (loss)................. $ (24) $ (1,540) $ (657) $ (222) $ 268 $ 205 $ 17
========= ========= ========= ========= ========== ========= ==========
Earnings (Loss) Per Common Share:
Primary and fully diluted......... $ .02 $ .02 $ .00
========== ========= ==========
Weighted Average Shares
Outstanding(2): (fully diluted)... 11,382 11,382 11,382
OTHER FINANCIAL DATA:
EBITDA(3)......................... $ 882 $ (160) $ 552 $ 706 $ 1,496 $ 710 $ 3,363
Capital expenditures.............. 823 1,291 1,183 2,088 10,578 3,224 66,231
CASH FLOWS:
Operating activities.............. $ (786) $ (51) $ 445 $ 310 $ (462) $ (124) $ 2,074
Investing activities.............. (1,352) (1,671) (454) (1,710) (10,441) (3,088) (60,310)
Financing activities.............. 2,138 1,722 9 1,400 15,866 3,212 53,513
</TABLE>
25
<PAGE> 27
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------------- ----------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------- --------- ----------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT RIG AND DAY RATE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
DRILLING RIG ACTIVITY DATA
(UNAUDITED):
Total rigs at end of period....... 7 8 8 8 16 8 41
Marketed rigs at end of period.... 7 8 8 8 8 8 34
Average utilization rate of
drilling rigs available for
service(4)...................... 77% 71% 84% 86% 88% 87% 97%
Average revenues per day(5)....... $ 4,020 $ 4,332 $ 4,148 $ 4,298 $ 4,731 $ 4,550 $ 5,450
BALANCE SHEET DATA:
Total assets...................... $ 6,858 $ 6,791 $ 6,149 $ 8,054 $ 34,055 $ 11,474 $ 110,935
Working capital (deficit),
excluding current portion of
long-term debt.................. 826 711 802 12 4,974 946 (1,277)
Total long-term debt, including
current portion................. 408 365 -- -- 7,000 -- 48,371
Total stockholders' equity........ (6,875) (913) (54) (276) 25,803 206 43,040
</TABLE>
- ---------------
(1) Income tax expense is presented on a pro forma basis (assuming a 38%
statutory rate) for the year ended December 31, 1996 and for the six months
ended June 30, 1996.
(2) Historical weighted average shares outstanding is calculated using (i) the
shares originally issued to APLP during the Formation Transactions and (ii)
the fully diluted shares outstanding through August 27, 1997 for the year
ended December 31, 1996 and six months ended June 30, 1996 and 1997. The pro
forma shares outstanding reflect historical shares outstanding plus the sale
of a sufficient number of shares in the Offering to retire certain
indebtedness of the Company as described in "Use of Proceeds." See footnote
(i) of the Notes to Unaudited Pro Forma Consolidated Financial Data.
(3) EBITDA represents operating income (loss) before depreciation and
amortization. EBITDA is frequently used by securities analysts and is
presented herein to provide additional information about the Company's
operations. EBITDA is not a measurement presented in accordance with
generally accepted accounting principles. EBITDA should not be considered in
isolation or as a substitute for net income or cash flow data prepared in
accordance with generally accepted accounting principles or as a measure of
a company's profitability or liquidity.
(4) Rig utilization rates are calculated on a weighted average basis assuming
365 days availability for all rigs available for service. Rigs acquired have
been treated as added to the rig fleet as of the date of acquisition. Rigs
under contract that generate revenues during moves between locations or
during mobilization/ demobilization are also considered to be utilized. Rigs
that are owned but not being marketed, including rigs being refurbished, are
not considered in determining the utilization rate.
(5) Represents total contract drilling revenues (excluding mobilization, cost
reimbursements and fuel), divided by the total number of days the Company's
drilling rig fleet operated during the period, divided by the average number
of rigs in operation.
26
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements of the Company and notes thereto included
elsewhere in this Prospectus.
GENERAL
The Company's operations have been and will be significantly affected by
the Consolidation Transactions which have transformed the Company from a
regional competitor with ten rigs in late 1996 to its current position of
operating the fifth largest land drilling fleet in the United States, with a
total of 41 rigs. The historical financial results presented herein include the
effects of the Formation Transactions (16 rigs), the Trend Acquisition (14
rigs), the Ward Acquisition (six rigs), the Individual Rig Acquisitions (six
rigs), only for the periods after such transactions. In addition, the historical
financial results include periods in which a number of rigs were being
refurbished and did not contribute to revenues. Accordingly, the Company does
not believe that the historical statements of operations presented herein are
necessarily indicative of the Company's future operating results, particularly
in light of the magnitude of its recent acquisitions and rig refurbishment
projects and the increased demand and contract rates for drilling rigs in its
core Mid-Continent and Gulf Coast regions. See "Business -- Formation and
Acquisitions."
After giving effect to the above mentioned transactions, the Company's pro
forma revenues and operating income for the year ended December 31, 1996, were
$36.9 million and $1.4 million, respectively, compared to the Company's actual
revenues and operating income of $9.9 million and $373,000, respectively. In
addition, the Company's pro forma EBITDA for the year ended December 31, 1996
was $5.7 million compared to a historical EBITDA of $1.5 million for the year
ended December 31, 1996. The Company's pro forma EBITDA for the six months ended
June 30, 1997 was $5.9 million compared to a historical EBITDA of $3.4 million
for the six months ended June 30, 1997. These pro forma results are not
necessarily indicative of the Company's future results.
DOMESTIC LAND DRILLING INDUSTRY OVERVIEW
Demand for the Company's contract land drilling services is substantially
dependent upon, and affected by, the level of domestic oil and gas exploration
and development activity. Industry sources estimate that from its peak in 1982,
the supply of domestic rigs has fallen by 72% through June 1996 as a result of
normal attrition, cannibalization of components to refurbish rigs, the inability
of smaller competitors to raise capital needed to upgrade and modernize rigs and
the export of rigs to international markets. As a result of these factors, the
contract land drilling industry has been cyclical with significant volatility in
profitability and rig values.
The Company's operating margins are influenced by contract drilling rates,
operating costs and drilling rig utilization. The land drilling industry is
experiencing higher utilization, increasing day rates and improved financial
performance as a result of the long term decline in the supply of rigs and
increased demand for rigs attributable to improved oil and gas industry
fundamentals. In addition, the industry is experiencing a period of rapid
consolidation as larger, better-capitalized drilling companies have acquired
smaller operators. The convergence of land drilling rig supply and demand in its
core domestic markets, along with the acquisition and refurbishment of rigs, has
contributed to higher utilization, increasing day rates and improved financial
results for the Company in recent periods.
FINANCIAL CONDITION AND LIQUIDITY
Since December 1996, the Company has completed the Formation Transactions,
the Trend Acquisition, the Ward Acquisition and the Individual Rig Acquisitions.
The Formation Transactions involved the issuance of an aggregate of 5,600,000
shares of Common Stock to existing stockholders in consideration for the
contribution to the Company of 16 rigs and $10 million in cash. At the time of
the Formation Transactions, the Company entered into a $24 million loan facility
with CIT, principally for the refurbishment of certain of the Company's rigs. In
May 1997, contemporaneously with the Trend Acquisition and in anticipation of
the
27
<PAGE> 29
Ward Acquisition, the Company completed a financing transaction in which it (i)
issued to Chesapeake and Energy Spectrum additional shares of Common Stock, and
two series of warrants together with subordinated notes due May 1, 2003 (the
"Subordinated Notes") for $28.5 million in cash and (ii) increased the
availability under its debt facilities from $24 million to $40.5 million
(collectively, the "May Financing"). In addition, the Company obtained the
right, exercisable solely at the Company's option at any time on or prior to
April 30, 1998, to require Chesapeake to provide an additional $3 million in
cash in exchange for the issuance to Chesapeake of additional shares of Common
Stock, Subordinated Notes and warrants to purchase Common Stock. The Company
later waived this right in connection with the Chesapeake Transactions. See
"Certain Relationships and Related Transactions -- Chesapeake Transactions."
The Company's principal requirements for capital, in addition to the
funding of ongoing contract drilling operations, have been capital expenditures,
including the refurbishment of existing rigs and acquisitions. From December
1996 through June 30, 1997, the Company has spent $20 million on the Trend
Acquisition, $11 million on the Ward Acquisition, $5.5 million on the Individual
Rig Acquisitions and approximately $33 million on refurbishments and other
related equipment purchases, including drill pipe. As a result, the Company's
net property and equipment increased from $26.4 million at December 31, 1996 to
$90.8 million at June 30, 1997. The Company's principal sources of liquidity
have been the issuance of Common Stock, warrants and the Subordinated Notes,
borrowings under the Term Loan and the Revolving Loan (collectively, the "Loan
Agreements") and net cash provided by operating activities.
The following table summarizes the Company's financial position on an
historical basis as of December 31, 1996 and June 30, 1997 and on a pro forma
basis as of June 30, 1997, giving effect to the Stockholder Exercises and the
Offering as if they occurred on June 30, 1997 (in thousands).
<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------
DECEMBER 31, 1996 HISTORICAL PRO FORMA
----------------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Working capital (deficit)..................... $ 4,027 $(14,146) $ 30,091
Property and equipment, net................... 26,355 90,826 90,826
Other noncurrent assets....................... 1,652 8,063 8,063
------- -------- --------
Total............................... $32,034 $ 84,743 $128,980
======= ======== ========
Long-term debt, net of current maturities..... $ 6,053 $ 35,502 $ 14,920
Other long-term liabilities................... 178 6,201 6,201
Stockholders' equity.......................... 25,803 43,040 107,859
------- -------- --------
Total............................... $32,034 $ 84,743 $128,980
======= ======== ========
</TABLE>
The most significant change in the Company's financial position from
December 31, 1996 to June 30, 1997 was a $64.5 million increase in net property
and equipment. During this same period, long-term debt net of current maturities
increased by $29.4 million and stockholders' equity increased by $17.2 million.
These changes are a direct result of the acquisition and financing transactions
described above.
From December 31, 1996 to June 30, 1997, the Company's working capital
position declined by $18.2 million to a deficit of $14.1 million. This decline
was primarily the result of an $11.9 million increase in current maturities of
long-term debt and a $4 million decrease in cash and investments, as the Company
continued to invest in rig acquisitions and the refurbishment of rigs. Pro forma
for the Stockholder Exercises and the Offering, the Company would have reported
working capital of $30.1 million.
Operating Activities
During the year ended December 31, 1996, the Company required $462,000 of
cash to fund operating activities. This was the result of $1.5 million of cash
provided by operations, partially offset by changes in working capital items
that required $2 million of cash. Cash required for changes in working capital
items included (i) increase in accounts receivable of $2.1 million, (ii)
increase in other assets totaling $185,000 and
28
<PAGE> 30
(iii) decrease of $383,000 in accounts payable, which were partially offset by
an increase of $663,000 of other current liabilities.
During the six months ended June 30, 1997, net cash provided from operating
activities totalled $2.1 million. The Company generated cash from operations of
$2.6 million and working capital changes utilized $500,000.
Investing Activities
During 1996, the Company invested $19.4 million in fixed assets, net of
asset sales. The major components of these expenditures were $10.4 million of
cash expenditures to acquire and refurbish five diesel electric SCR rigs and
$9.0 million of Common Stock issued to acquire rigs in the Formation
Transactions.
During the six months ended June 30, 1997, the Company invested $63.5
million in fixed assets, including the Trend Acquisition, the Ward Acquisition
and the Individual Rig Acquisitions. Rig refurbishments consisted of $20.2
million, and $12.9 million was invested in drill pipe and other drilling related
equipment. The acquisitions of Trend and Ward were partially funded through the
issuance of Common Stock valued at $4.9 million.
Financing Activities
During 1996, the Company raised $15.9 million from financing activities.
The Company borrowed $7.0 million during the year under the Term Loan described
below. The Company also issued 3,600,000 shares of Common Stock for assets and
cash and made debt payments totaling $900,000 during the year.
During the six months ended June 30, 1997, the Company obtained $53.5
million from financing activities, including net borrowings under the Loan
Agreements totaling $24.8 million, $8.2 million from the issuance of Common
Stock and $20.5 million from the issuance of the Subordinated Notes and the
associated warrants. The proceeds from these transactions were used to fund the
Company's working capital requirements and capital expenditures as discussed
above.
Following is a summary of certain material terms of the Formation
Transactions, the Loan Agreements and the May Financing.
Formation Transactions. The Company was formed in December 1996 through a
series of affiliated entity transactions in which the Company became successor
to Anadarko, the contract drilling subsidiary of privately held APLP. In
connection with the Formation Transactions (i) APLP contributed ten drilling
rigs in consideration for 2,000,000 shares of Common Stock, (ii) R.T. Oliver
Drilling, Inc. and Mike Mullen Energy Equipment Resource, Inc. and certain of
their affiliated companies (collectively, "the Oliver Companies") exchanged six
drilling rigs for 1,600,000 shares of Common Stock, (iii) Energy Spectrum
contributed $10 million in consideration for 2,000,000 shares of Common Stock
and (iv) Chesapeake entered into drilling contracts with two-year terms for six
of the Company's rigs in consideration for the grant by the Company of the
Chesapeake Option. See "Business -- Formation and Acquisitions."
Loan Agreements. On December 10, 1996, the Company also entered into the
Term Loan. Subsequent to that date and in connection with the May Financing, the
Company increased the Term Loan from $24 million to $30.5 million. The Term Loan
provides the Company up to approximately $30.5 million of borrowing capacity for
the purchase of additional land drilling rigs, the refurbishment of such rigs
and equipment and for working capital purposes. The Company also entered into a
Revolving Loan with Fleet in May 1997. The Revolving Loan provides for revolving
credit loans of up to $10 million, and is being used for general corporate
purposes. Amounts outstanding under the Revolving Loan bear interest based on
Fleet's prime rate plus 1.5% (10.0% at June 30, 1997) and mature in April 2000.
Amounts outstanding under the Term Loan bear interest, at the election of the
Company, at floating rates equal to Chase Manhattan Bank's prime rate plus 2.0%
or LIBOR plus 4.25% (9.94% at June 30, 1997) and mature in March 2002. To date,
loans under the Revolving Loan and the Term Loan have been used for capital
expenditures and working capital requirements. The Loan Agreements are secured
by substantially all of the assets of the Company, including all drilling rigs,
equipment and drilling contracts, and contain customary restrictive covenants
29
<PAGE> 31
(including covenants restricting the ability of the Company to pay dividends and
encumber assets) and affirmative covenants to maintain specified financial
ratios.
May Financing. In order to fund the Trend Acquisition and the Ward
Acquisition, on May 1, 1997, the Company completed the May Financing in which
the Company issued shares of Common Stock, Subordinated Notes and warrants to
purchase Common Stock to Chesapeake and Energy Spectrum in exchange for an
aggregate of $28.5 million in cash, as described below. In addition, the Company
modified the Term Loan and entered into the Revolving Loan as described above.
In the May Financing, the Company issued 1,000,000 shares of Common Stock
to Chesapeake in consideration for $7 million in cash and 140,000 shares of
Common Stock to Energy Spectrum in consideration for $980,000 in cash.
Additionally, the Company issued Subordinated Notes due May 1, 2003 in the
original principal amounts of $18 million and $2.52 million (the "Subordinated
Notes") to Chesapeake and Energy Spectrum, respectively. The Subordinated Notes
bear interest at the Company's option at either (i) 11% per annum, payable in
cash, or (ii) 12.875% per annum, payable in the form of additional Subordinated
Notes, which interest is payable quarterly in arrears. The Subordinated Notes
are general unsecured subordinated obligations of the Company that are
subordinated in right of payment to all existing and future senior indebtedness
of the Company, pari passu with all existing and future subordinated
indebtedness of the Company and senior in right of payment to all future junior
subordinated indebtedness of the Company. Chesapeake and the Company have agreed
that, upon consummation of the Offering, the Company will redeem in full the $18
million principal amount of Subordinated Notes issued to Chesapeake in
consideration for the payment by the Company to Chesapeake of $15 million in
cash, subject to adjustment. See "Certain Relationships and Related
Transactions -- Chesapeake Transactions."
In connection with the issuance of the Subordinated Notes, the Company
issued two series of detachable warrants (the "Warrants") for the purchase of
shares of Common Stock, designated as "Series A Warrants" and "Series B
Warrants." The Warrants are exercisable on or prior to May 1, 2003 at a price of
$0.01 per share in the case of the Series A Warrants and $7.50 per share in the
case of the Series B Warrants. In the May Financing, Chesapeake was issued
Series A Warrants and Series B Warrants representing the right to purchase
700,000 shares and 800,000 shares of Common Stock, respectively, and Energy
Spectrum was issued Series A Warrants and Series B Warrants representing the
right to purchase 98,000 shares and 112,000 shares of Common Stock,
respectively. On July 31, 1997, Energy Spectrum exercised in full its Series A
Warrants, but continues to hold all of the Series B Warrants issued to it. In
August 1997, Chesapeake agreed to the relinquishment and cancellation in full of
its Series A Warrants and Series B Warrants in connection with the Chesapeake
Transactions. See "Certain Relationships and Related Transactions -- Chesapeake
Transactions."
Additional Chesapeake Financing. Additionally, in connection with the May
Financing, the Company obtained the right to require Chesapeake, on or before
April 30, 1998, to provide the Company with an additional $3 million in capital
through the purchase of (i) 120,000 shares of Common Stock for a purchase price
of $7.00 per share, (ii) additional Subordinated Notes in the aggregate
principal amount of $2.16 million, (iii) additional Series A Warrants
exercisable for 84,000 shares of Common Stock and (iv) additional Series B
Warrants exercisable for 96,000 shares of Common Stock. In August 1997, the
Company agreed to waive this right in connection with the Chesapeake
Transactions. See "Certain Relationships and Related Transactions -- Chesapeake
Transactions."
The foregoing summaries of the material provisions of the Company's
principal financing agreements do not purport to be complete and are subject to,
and qualified in their entirety by reference to, all of the provisions of the
related agreements, copies or forms of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part.
Future Activities
The Company believes that the balance of the proceeds from the Offering,
cash flow from operations and, to the extent required, borrowings under the Loan
Agreements will be sufficient to fund the Company's 1997 rig refurbishment
program and to meet its other anticipated capital requirements for 1997. Upon
30
<PAGE> 32
consummation of the Offering and the application of the net proceeds therefrom,
as described under "Use of Proceeds," the Company will have $13.4 million of
borrowings outstanding under the Loan Agreements and $2.5 million of borrowings
outstanding under the Subordinated Notes, with an additional $10 million of
unused borrowing capacity, and cash or cash equivalents of $33 million.
The Company continues to actively review possible acquisition
opportunities. While the Company has no agreements to acquire additional
businesses or equipment, suitable opportunities may arise in the future. The
timing or success of any acquisition effort and the size of the associated
potential capital commitments cannot be predicted at this time. In addition,
there can be no assurance that adequate funding will be available on terms
satisfactory to the Company.
RESULTS OF OPERATIONS
Comparison of Six Months Ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1996 1997
---------- -----------
<S> <C> <C>
Rig days worked............................................ 936 2,470
Average revenues per day................................... $ 4,550 $ 5,450
Drilling revenues.......................................... $4,242,000 $15,107,000
Drilling costs(1).......................................... 3,268,000 11,022,000
---------- -----------
Operating Margin........................................... $ 974,000 $ 4,085,000
========== ===========
</TABLE>
- ---------------
(1) Drilling costs exclude depreciation and amortization and general and
administrative expenses.
Drilling revenues increased approximately $10.7 million, or 256% to $15.1
million for the six months ended June 30, 1997, from $4.2 million for the six
months ended June 30, 1996. Drilling revenues increased due to a 1,534 day, or
164%, increase in rig days worked, and a $900, or 19.8%, increase in the average
revenue per day. The increase in days worked was a result of an increase in the
average number of rigs owned and available for service. As of June 30, 1997, the
Company had 34 rigs available for service. The increase in rigs available for
service was principally the result of the Consolidation Transactions. Rig days
worked consisted of 1,305 days worked in the Gulf Coast region and 1,165 days
worked in the Mid-Continent region. Increases in revenues per day were a result
of the overall increase in demand for land drilling rigs as reflected in the
utilization rate increasing from 87% to 97%.
Drilling costs increased by approximately $7.8 million, or 237%, to $11
million for the six months ended June 30, 1997, as compared to $3.3 million for
the six months ended June 30, 1996. The increase in drilling operating expenses
was a direct result of the increase in the number of rigs owned and available
for service and the corresponding 1,534 day increase in the days worked.
Depreciation and amortization expense increased by $2.2 million, or 526%,
to $2.6 million for the six months ended June 30, 1997 as compared to $415,000
for the six months ended June 30, 1996. The increase was primarily due to
additional depreciation associated with the Consolidation Transactions.
General and administrative expense increased by $399,000, or 124%, to
$722,000 for the six months ended June 30, 1997, from $323,000 for the same
period of 1996 due primarily to increased payroll costs associated with new
management and increased corporate staff and increased legal fees due to the
Company's acquisition activities.
Interest expense was $981,000 for the six months ended June 30, 1997. The
Company had no outstanding debt for the six months ended June 30, 1996.
Other income increased for the six months ended June 30, 1997 as compared
to the six months ended June 30, 1996 due to an increase in interest income and
recognition of a gain on the sale of assets.
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<PAGE> 33
For the six months ended June 30, 1997, income tax expense was $10,000. For
the first six months of 1996 the Company was not a taxable entity.
Comparison of Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1995 1996
---------- ----------
<S> <C> <C>
Rig days worked............................................. 1,489 2,029
Average revenues per day.................................... $ 4,298 $ 4,731
Drilling revenues........................................... $7,405,000 $9,793,000
Drilling costs(1)........................................... 6,075,000 7,653,000
---------- ----------
Operating Margin............................................ $1,330,000 $2,140,000
========== ==========
</TABLE>
- ---------------
(1) Drilling costs exclude depreciation and amortization and general and
administrative expenses.
Drilling revenues increased approximately $2.4 million, or 32%, to $9.8
million for the year ended December 31, 1996 from $7.4 million for the year
ended December 31, 1995. This improvement was due to an increase in the number
of rig days worked. Rig utilization also improved from 86% to 88% in 1996, due
to an overall improvement in the contract drilling market.
Drilling costs increased by $1.6 million, or 26%, to $7.7 million for the
year ended December 31, 1996, from $6.1 million for the year ended December 31,
1995. This increase was primarily due to increased utilization and, to a lesser
extent, increased direct labor costs.
Depreciation and amortization expenses increased by $332,000, or 42%, to
$1.1 million for the year ended December 31, 1996 from $791,000 for the year
ended December 31, 1995. The increase in depreciation expense was primarily
attributable to acquisition and refurbishment costs.
General and administrative expenses decreased by $222,000 to $658,000 for
the year ended December 31, 1996, from $880,000 for the year ended December 31,
1995, due to the discontinued allocation of expenses associated with the
predecessor company.
Interest expense remained fairly constant for the year end December 31,
1996 primarily as a result of the outstanding debt level remaining fairly
constant. Interest rates during these periods remained relatively unchanged.
Other income increased $205,000 from 1995 to 1996, primarily as a result of
a loss recorded in 1995 in connection with the sale of certain assets.
The Company's income tax expense of $165,000 in 1996 was attributable to
the Company's profitable operations.
The Company had net income of $268,000 in 1996 as compared to a net loss of
$222,000 in 1995. The Company's net loss in 1995 includes net losses from the
sale of assets, for which there was no similar transaction in 1996.
32
<PAGE> 34
Comparison of Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1994 1995
---------- ----------
<S> <C> <C>
Rig days worked............................................. 2,047 1,489
Average revenues per day.................................... $ 4,148 $ 4,298
Drilling revenues........................................... $9,910,000 $7,405,000
Drilling costs(1)........................................... 8,572,000 6,075,000
---------- ----------
Operating Margin............................................ $1,338,000 $1,330,000
========== ==========
</TABLE>
- ---------------
(1) Drilling costs exclude depreciation and amortization and general and
administrative expenses.
Drilling revenues decreased $2.5 million, or 25%, to $7.4 million for the
fiscal year ended December 31, 1995 from $9.9 million for the twelve months
ended December 31, 1994. This decrease was primarily due to a decrease in the
number of rig days worked, offset by an increase in rig utilization from 84% for
the year ended December 31, 1994 to 86% for the year ended December 31, 1995 and
an increase in average revenues per day from $4,148 during 1994 to $4,298 during
1995.
Drilling costs decreased $2.5 million, or 29%, to $6.1 million for the year
ended December 31, 1995, from $8.6 million for the twelve months ended December
31, 1994. This decrease in costs was due to a decrease in the Company's rig days
worked.
Depreciation and amortization expenses decreased $766,000, or 49%, to
$791,000 for the year ended December 31, 1995 from $1.6 million for the twelve
months ended December 31, 1994. This decrease was primarily due to a change in
the estimated remaining lives of the Company's drilling rigs and other related
drilling equipment. These changes were made to more closely approximate the
remaining useful lives of such assets.
General and administrative expenses increased approximately $94,000 to
$880,000 for the year ended December 31, 1995 from $786,000 for the twelve
months ended December 31, 1994 primarily due to increased personnel costs.
Interest expense remained fairly constant for the year ended December 31,
1995. Interest rates and borrowings outstanding during these periods remained
relatively unchanged.
Other income decreased $500,000 from $366,000 in 1994 to a loss of $134,000
in 1995, primarily due to a loss on sale of assets for the year ended December
31, 1995 compared to a gain on sale of assets for the prior year.
The Company had a net loss of $222,000 in 1995 as compared to a loss of
$657,000 for the year ended December 31, 1994.
INFLATION AND CHANGING PRICES
Contract drilling revenues do not necessarily track the changes in general
inflation as they tend to respond to the level of activity on the part of the
oil and gas industry in combination with the supply of equipment and the number
of competing companies. Capital and operating costs are influenced to a larger
extent by specific price changes in the oil and gas industry and to a lesser
extent by changes in general inflation.
RECENT ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No.
128"). SFAS No. 128, which is effective for periods ending after December 15,
1997, including interim periods, simplifies the standards for computing earnings
per share and replaces the presentation of primary earnings per share with a
presentation of basic earnings per share. Initial adoption of this standard is
not expected to have a material impact on the Company's financial position or
results of operations. Early adoption is not permitted.
33
<PAGE> 35
BUSINESS
GENERAL
The Company is a leading provider of contract land drilling services to
major and independent oil and gas companies and operates the fifth largest land
drilling fleet in the United States. As of August 15, 1997, the Company's rig
fleet consisted of 41 rigs, of which 36 were being marketed and five were being
refurbished and are expected to be placed in operation within the next six
months. During the six months ended June 30, 1997, the Company experienced a
utilization rate in excess of 95% for its marketed rigs.
The Company's fleet consists primarily of rigs capable of deep drilling
applications (well depths of 15,000 feet or greater). The Company believes that
deep rigs are and will continue to be in high demand due to improved deep
drilling economics available to domestic oil and gas companies. Deep drilling
targets are more attractive to oil and gas companies due to new technologies,
including (i) three-dimensional seismic techniques, (ii) increasingly accurate
down hole measurement devices and (iii) improved guidance systems and
directional drilling motors for horizontal and directional wells. Examples of
currently active deep drilling areas include the Tuscaloosa trend in Louisiana,
the Pinnacle Reef trend in East Texas, the Anadarko and Arkoma basins in
Oklahoma and the Austin Chalk in Texas and Louisiana.
The Company's fleet includes 31 rigs capable of drilling to depths of
15,000 feet or greater, 19 of which are capable of drilling to depths of 20,000
feet or greater. Of these 31 rigs, 19 are diesel electric SCR rigs which offer
operators superior control and efficiency, particularly in deep, directional or
horizontal applications. For the six month period ended June 30, 1997, the
Company ranked among the top three domestic land drillers in average measured
depth per well drilled.
The Company's fleet is concentrated in its two core operating
regions -- the Mid-Continent region (which includes principally Oklahoma, North
Texas and the Texas Panhandle) and the Gulf Coast region of Texas and Louisiana.
At August 15, 1997, the Company had 23 rigs marketed in Oklahoma and was the
second most active land drilling contractor in the state. In 1996, 1,835 onshore
wells were drilled in Oklahoma, making it the third most active state for
domestic onshore drilling. The Company's rigs operating in the Mid-Continent
region are generally capable of drilling to depths of 10,000 feet or greater and
are marketed by the Company to meet the specific well depth and mobility needs
of producers in that region. See "-- Drilling Equipment and Supplies." At August
15, 1997, the Company had 13 rigs marketed in the Gulf Coast region, including
11 diesel electric SCR rigs. This region is characterized by significant
drilling activity in deep, technically challenging formations for which the
Company's rigs are particularly well suited. The Company believes that its high
quality equipment, including diesel electric SCR rigs, powerful mud pumps and
high horsepower drawworks, gives the Company a competitive advantage in
attracting premium jobs with customers engaged in multi-well horizontal drilling
programs. In May 1997, one of the Company's rigs drilled a horizontal well in
the Gulf Coast region to a vertical depth of 18,700 feet before initiating a
horizontal lateral of 3,239 feet. The Company believes this to be the deepest
vertical depth at which a horizontal lateral has ever been initiated.
The Company was formed in December 1996 as the successor to Anadarko, which
owned ten rigs, including two rigs requiring refurbishment. At the time of its
formation, the Company also purchased six rigs requiring refurbishment. See "--
Formation and Acquisitions." Since that time, the Company has aggressively
pursued acquisitions of additional rigs and components and through August 15,
1997 had acquired 25 additional rigs (net of sales), 19 of which were acquired
in connection with the purchases of Trend and Ward and the remaining six of
which were acquired pursuant to individual rig purchases. Some of these rigs
required refurbishment before the Company placed such rigs in service. Many of
the acquired and refurbished rigs were put into service in May and June 1997,
and therefore did not contribute significantly to operating results through June
30, 1997. The Company expects these rigs to be operational and to contribute to
its profitability throughout the second half of 1997.
34
<PAGE> 36
BUSINESS STRATEGY
The Company believes that growth in earnings and cash flow can be achieved
by pursuing the following business strategy:
Operating a Technologically Advanced Rig Fleet. The Company has assembled
its existing rig fleet, and will pursue further acquisitions, with the goal of
operating one of the most technologically sophisticated land drilling fleets in
the United States. Many of the Company's rigs include engines, pumps and
drilling mud systems that represent the best drilling technology available and
that the Company believes offer greater efficiencies for customers than many of
the rigs available from its competitors. For example, by deploying its diesel
electric SCR rigs with two or three high horsepower pumps and top drive drilling
systems in challenging deep and horizontal drilling situations, the Company
believes that it can reduce its customers' overall drilling costs, thus securing
and enhancing its relationships with some of the most active operators in the
domestic market. The Company is committed to making the capital investments
required to maintain the technological sophistication and operational
efficiencies of its fleet.
Developing Deep Drilling Capabilities. The Company believes demand has been
particularly strong for rigs capable of drilling deeper, more complex wells,
including 1,500 horsepower and larger rigs, and has focused, and will continue
to focus, on acquiring rigs with these capabilities. Management believes that
demand and utilization rates for these types of rigs, particularly SCR rigs,
will remain higher than for rigs with lesser depth capacities due to their
greater operational flexibility and efficiency. At August 15, 1997, 76% of the
Company's rig fleet (31 rigs) had deep drilling capability (15,000 feet or
greater). In the six months ended June 30, 1997, the Company's average depth per
well drilled was 14,877 feet, compared to the national average of 7,030 feet.
Focusing on Core Markets. The Company believes that its strong asset
position and operating expertise in the Mid-Continent and Gulf Coast regions
enable it to achieve operating efficiencies and to provide premium service to
its customers in these markets. The Company believes it is the second largest
provider of drilling rigs in Oklahoma and among the largest operators of deep
rigs in the onshore Gulf Coast region.
Developing and Maintaining Relationships with Strong Operators. In order to
maximize the utilization rate of its rig fleet and to minimize exposure to
market downturns, the Company seeks to maintain and build relationships with
operators committed to active domestic drilling programs. The Company's largest
current customers include Apache Corporation, Chesapeake Energy Corporation,
Enron Oil and Gas Company, Marathon Oil Company, Sonat Exploration Company and
Union Pacific Resources Corporation. Each of these companies was among the most
active onshore operators in the United States during the last three years.
Acquiring Additional Rigs and Related Equipment. The Company intends to
continue acquiring additional rigs and related equipment, including top drive
drilling systems. Since its formation and through August 15, 1997, the Company
has acquired 25 land rigs (net of sales) in seven transactions. At June 30,
1997, after giving effect to the application of the proceeds of the Offering,
the Company would have had a total debt to total capitalization ratio of 12.5%
and cash of $33 million, positioning the Company with the strong balance sheet
needed to be active in the acquisition market.
DOMESTIC LAND DRILLING INDUSTRY OVERVIEW
The land drilling industry is experiencing higher utilization, increasing
day rates and improved financial performance as a result of a long-term decline
in the supply of rigs and increased demand for rigs attributable to improved oil
and gas industry fundamentals. Industry sources estimate that from its peak in
1982, the supply of domestic land rigs had fallen by 72% through June 1996 as a
result of normal attrition, cannibalization of components to refurbish rigs, the
inability of smaller competitors to raise capital needed to upgrade and
modernize rigs and the export of rigs to international markets. Greater demand
in the industry is evidenced by the increase in the active domestic land rig
count to 848 at August 15, 1997 from 677 at August 16, 1996, according to data
published by Baker Hughes Incorporated. The Company believes that the domestic
land drilling industry is currently experiencing utilization rates above 90% for
actively marketed rigs.
35
<PAGE> 37
While these market conditions have led to increasing day rates in the Company's
core areas, the Company does not believe that such rates have reached levels
that would justify the construction of new rigs.
Beyond the diminished size of the rig fleet, the domestic land drilling
industry is also benefitting from improved fundamentals among domestic oil and
gas exploration and production companies. In particular, new technologies and
improved operating efficiencies have increased drilling success rates, lowered
finding costs and enhanced the industry's profitability recently as compared to
the late 1980's and early 1990's. In addition, the financial positions of many
domestic oil and gas companies, and their access to additional capital, have
improved in recent years, affording these companies the ability to fund
aggressive drilling programs. From 1992 to 1996, the total equity market
capitalization of 39 of the largest domestic exploration and production
companies grew from approximately $260 billion to approximately $470 billion and
their aggregate annual capital expenditures increased from $13 billion to $19
billion. The Company believes that these improved industry fundamentals have
allowed oil and gas companies to maintain more consistently active drilling
programs, even in periods of lower commodity prices.
Much of the new technology being employed in the oil and gas industry has
increased demand for rigs capable of drilling deeper wells efficiently and
accurately. For example, more sophisticated and, longer life drilling motors and
measurement-while-drilling devices have made deep horizontal drilling less
expensive and more precise. Three-dimensional seismic techniques have also
increased the demand for deep rigs. This technology permits geoscientists to
develop a more complete understanding of deep, complex geology prior to drilling
a well. As shallower fields continue to deplete, oil and gas companies are
likely to continue to pursue deep drilling prospects to maintain or increase
their production levels. While demand for land rigs capable of drilling greater
than 15,000 feet has grown significantly, the supply of such rigs is limited,
contributing to rapid increases in day rates for rigs with these capabilities.
Driven by expectations of improved economic returns and the fundamentals
discussed above, the domestic land drilling industry has experienced a period of
significant consolidation. In 1996, approximately 33% of the footage drilled in
the United States was drilled by only ten contractors, down from 25 in 1993.
This consolidation is ongoing, and the Company believes that approximately 40
transactions involving the acquisition of approximately 407 domestic land rigs
have been announced from July 1996 through July 1997, including acquisitions by
the Company.
FORMATION AND ACQUISITIONS
Formation Transactions. The Company was formed in December 1996 through a
series of affiliated entity transactions in which the Company became the
successor to Anadarko, the contract drilling subsidiary of privately held APLP.
In connection with the Formation Transactions (i) APLP contributed ten drilling
rigs, including two rigs requiring refurbishment, for 2,000,000 shares of Common
Stock, (ii) the Oliver Companies exchanged six drilling rigs requiring
refurbishment for 1,600,000 shares of Common Stock and (iii) Energy Spectrum
acquired 2,000,000 shares of Common Stock for cash. Additionally, Chesapeake
entered into drilling contracts with two-year terms for six of the Company's
rigs in consideration for an option to purchase 2,000,000 shares of Common Stock
(the "Chesapeake Option").
Since the Formation Transactions, the Company has enhanced its original
fleet through acquisitions and refurbishment of rigs as described below.
Trend Acquisition. In May 1997, the Company completed the acquisition of
Trend for $18 million in cash and 250,000 shares of Common Stock. Trend has
operated a land drilling business in the Mid-Continent region since 1976. Trend
owned 14 rigs, including three diesel electric SCR rigs and six rigs with depth
capacities of 15,000 feet or greater. The Company retained substantially all of
Trend's operating personnel.
Ward Acquisition. In May 1997, the Company acquired the business of Ward
for $8 million in cash, 400,000 shares of Common Stock and warrants to purchase
an additional 200,000 shares of Common Stock. Ward has operated a land drilling
business in the Mid-Continent region since 1981. In the Ward Acquisition, the
Company acquired six drilling rigs, including three rigs with drilling
capacities of 15,000 feet or greater,
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<PAGE> 38
further enhancing its presence in the Mid-Continent region. The Company retained
substantially all of Ward's operating personnel.
Individual Rig Acquisitions. In addition to the Trend and Ward
Acquisitions, the Company spent $5.5 to acquire six rigs in five transactions
involving purchases of individual rigs or rig components. In August 1997, the
Company sold one rig. See "Certain Relationships and Related
Transactions -- Other Related Party Transactions and Arrangements."
Refurbishment. The Consolidation Transactions included a number of rigs in
need of refurbishment. From January 1, 1997 through August 15, 1997, the Company
completed refurbishment of 12 rigs at an average cost of approximately $1.9
million per rig (excluding drill pipe). These rigs were placed in service at
various dates between January and August 15, 1997. At August 15, 1997, the
Company had five additional rigs in various stages of refurbishment. The Company
expects to place three of such rigs in service during the fourth quarter of 1997
and two in the first quarter of 1998. The Company expects the cost to refurbish
these five rigs to average approximately $2.5 million per rig (excluding drill
pipe).
DRILLING EQUIPMENT AND SUPPLIES
A land drilling rig consists of various components, including engines,
drawworks, a derrick or mast, substructure, pumps to circulate drilling fluid,
blowout preventers, drill pipe and related equipment. The actual drilling
capacity of a rig may be more or less than its rated drilling capacity due to
numerous factors, including the length of its drill pipe and the drilling
conditions of any particular well. The intended well depth and the drill site
conditions determine the rig, drill pipe length and other equipment needed to
complete a well. The Company's rigs can be relocated to areas where demand, well
specifications and day rates allow for maximization of gross operating margins
and utilization. Generally, land rigs operate with crews of five to six persons.
The Company's fleet includes 19 rigs that are diesel electric SCR rigs and
22 that are mechanical rigs. Mechanical rigs utilize diesel engines to produce
power that is transferred to drilling equipment, such as drawworks and pumps, by
way of a compound consisting of a series of chains, sprockets and pneumatic
clutches. SCR rigs employ diesel engines that generate alternating current
electricity which is converted and transferred into amps as alternating current
or direct current electricity, which in turn drives electric motors powering the
drilling equipment. The Company believes that SCR rigs offer a number of
advantages over mechanical rigs. SCR rigs enable flexible power distribution to
selected individual drilling equipment components, providing for more precise
drilling control and efficient operation. SCR rigs are also quieter and safer
because the diesel engines are typically located away from the rig floor and
well bore, allowing for better communication among rig crews. SCR rigs are also
more easily adapted to the use of top drive drilling systems which are typically
electrically powered. The Company has developed a fleet that uses the advanced
drilling technology of diesel electric SCR rigs to provide greater efficiencies
to its customers, especially in deep drilling, horizontal and directional
applications, and uses mechanical rigs primarily in areas such as the Mid-
Continent region where operators target shallower well depths and require more
frequent mobility.
In addition to its SCR rigs, the Company has focused its acquisitions on
rigs with efficient and flexible drilling mud systems as well as high horsepower
drawworks and mud pumps, features which give the Company a competitive advantage
in attracting premium jobs with customers engaged in multi-well horizontal
drilling programs. The majority of the Company's rigs employ diesel engines
manufactured by Caterpillar, Inc. as the rigs' main power sources. The Company
believes that such engines are lighter and more fuel efficient than other
available engines, thus saving the Company and its customers money in terms of
lower trucking costs and reduced fuel consumption.
Finally, the Company has begun equipping certain of its deep drilling rigs
with top drive drilling systems. Top drives provide the Company's customers with
greater control in transferring horsepower to the bit, precise orientation of
drilling tools while drilling complex directional wells, and reduced incidence
of stuck drill pipe in high risk areas. Moreover, top drives enable the
contractor to drill in 90 foot sections (as opposed to conventional 45 foot
sections), a capability which reduces connection time, and are safer for rig
employees and equipment during tubular handling operations and in well control
situations. Currently, the Company has two
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<PAGE> 39
rigs equipped with top drives, has two additional top drives on order and
anticipates using a portion of the proceeds of the Offering for the purchase of
additional top drives.
RIG FLEET
The following table identifies certain information regarding the rigs owned
and operated by the Company as of August 15, 1997.
<TABLE>
<CAPTION>
DEPTH HORSEPOWER
RIG CAPACITY RIG ----------------------- CURRENT CURRENT
NO. (FT.) DRAWWORKS TYPE(1) DRAWWORKS(2) TOTAL(3) OPERATOR STATUS
- --- -------- ---------------------------- ---------- ------------ -------- --------------- ------------
<C> <C> <S> <C> <C> <C> <C> <C>
GULF COAST REGION
21 30,000 Continental Emsco C-3 SCR 3,000 4,400 UPR Working
24 25,000 National 1320-UE SCR 2,000 3,963 Refurbishing
11 25,000 Mid Continent U-1220-EB SCR 2,500 3,600 Chesapeake Working
12 25,000 Mid Continent U-1220-EB SCR 2,500 3,600 Chesapeake Working
14 25,000 Mid Continent U-1220-EB SCR 2,500 3,600 Chesapeake Working
15 25,000 Mid Continent U-1220-EB SCR 2,500 3,600 Chesapeake Working
16 25,000 Mid Continent U-1220-EB(4) SCR 2,500 3,600 Chesapeake Working
17 25,000 Mid Continent U-1220-EB SCR 2,500 3,600 UPR Working
18 25,000 Mid Continent U-1220-EB SCR 2,500 3,600 Chesapeake Working
23 25,000 Gardner Denver 1500 E SCR 2,000 3,600 Refurbishing
22 25,000 National 1320-UE (4) SCR 2,000 3,300 Chesapeake Working
40 25,000 National 1320-UE SCR 2,000 3,300 UPR Working
20 20,000 Oilwell 840 E SCR 1,500 2,700 UPR Working
7 20,000 Mid Continent U-914-C Mechanical 1,500 2,700 Oryx Working
4 18,000 Mid Continent U-712-A Mechanical 1,200 2,700 Chesapeake Working
39 16,000 Ideco E-900 SCR 900 2,350 Refurbishing
MID-CONTINENT REGION
10 25,000 Mid Continent U-1220-EB SCR 2,500 3,600 Apache Working
46 25,000 BDW 1350 Mechanical 2,000 2,900 Marathon Working
35 20,000 National 110-UE SCR 1,500 3,300 Vastar Working
19 20,000 Continental EMSCO C-1 SCR 1,500 2,700 Burlington Working
36 20,000 National 110-M Mechanical 1,500 2,700 Sonat Working
5 16,000 Gardner Denver DW-800 Mechanical 1,000 2,900 Apache Working
31 16,000 Gardner Denver 800-E SCR 1,000 2,200 Anadarko Working
27 16,000 National 80-B Mechanical 1,000 2,060 Refurbishing
8 16,000 National 80-B Mechanical 1,000 1,650 Chesapeake Working
47 16,000 Ideco H-900 Mechanical 900 2,060 Refurbishing
33 15,000 Brewster N-46 Mechanical 1,000 2,000 Sonat Working
34 15,000 Ideco E-900 SCR 900 1,800 Sonat Working
42 15,000 Gardner Denver 700 Mechanical 800 1,650 Seagull Working
32 15,000 BDW 800 MI Mechanical 1,000 1,650 Sonat Working
44 15,000 Gardner Denver 700 Mechanical 800 1,100 Enron Working
26 14,000 National 610 Mechanical 750 1,650 ONEOK Working
41 14,000 Mid Continent U-36A Mechanical 600 1,100 Enron Working
38 13,000 Mid Continent U-36A Mechanical 600 1,630 Texaco Working
29 13,000 Continental Emsco D-2 Mechanical 750 1,450 National Energy Working
9 12,000 Gardner Denver 500 Mechanical 650 1,880 Apache Working
43 12,000 Superior 700 Mechanical 650 1,450 Enron Working
45 12,000 Gardner Denver 500 Mechanical 650 1,450 Anadarko Working
37 11,000 Gardner Denver 500 Mechanical 650 1,900 Chevron Working
28 11,000 BDW 650 Mechanical 650 1,350 National Energy Working
30 10,000 Brewster N-42 Mechanical 550 1,725 Cross Timbers Working
</TABLE>
- ---------------
(1) "SCR" denotes a diesel electric silicon controlled rectifier rig.
"Mechanical" denotes a mechanical rig powered by diesel engines.
(2) Drawworks horsepower represents the amount of input power required to
achieve the maximum hoisting capability of the drawworks.
(3) Total horsepower represents the maximum horsepower produced by a rig's
diesel engines for consumption by the drilling equipment.
(4) Rigs 16 and 22 in the Gulf Coast region are each equipped with National
PS350/500 top drives.
Drilling rigs and related equipment deteriorate over time unless they are
operated and maintained properly. The Company strives to keep its drilling rigs
well maintained and technologically competitive. An
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<PAGE> 40
active maintenance program during the life of a drilling rig permits the
maintenance, replacement and upgrading of its components on an individual basis.
Over the life of a typical drilling rig, major components, such as engines,
pumps, drawworks and drill pipe, are replaced or rebuilt on a periodic basis as
required while other components, such as the mast and substructure, can be
utilized for extended periods of time with proper maintenance.
There is a general shortage of certain drilling equipment and supplies used
in the Company's business. The Company believes these shortages may intensify.
The costs and delivery times of such equipment and supplies are higher and
longer than in prior periods and are continuing to escalate. The Company has
established arrangements to meet its current needs for certain necessary
drilling equipment and supplies, including drill pipe, on satisfactory terms,
but there can be no assurance that it will continue to be able to do so.
Accordingly, there can be no assurance that the Company will not experience
shortages of, or material price increases in, drilling equipment and supplies,
including drill pipe, in the future. Any such shortages could delay and
adversely affect the Company's ability to refurbish its inventory rigs and
obtain contracts for its marketed rigs.
CONTRACT DRILLING OPERATIONS
The Company's drilling rigs are employed under individual contracts which
extend either over a stated period of time or the time required to drill a well
or a number of wells. Drilling contracts are obtained through either a
competitive bidding process or as a result of direct negotiations with
customers. Terms of the Company's drilling contracts vary based on factors such
as the complexity and risk of operations, on-site drilling conditions, type of
equipment used and the anticipated duration of the work to be performed.
Contracts are typically entered into on a single well basis and obligate the
Company to pay certain operating expenses, including wages of drilling
personnel, maintenance expenses and costs for incidental rig supplies, equipment
and local office facilities. Contracts generally are subject to termination by
the customer on short notice, but are sometimes written on a firm basis for a
specified number of wells or years. The Company has ongoing relationships with a
number of customers that often engage a specific rig for the drilling of
consecutive wells.
At July 31, 1997, all of the Company's marketed rigs were operating under
daywork contracts; however, the Company and its predecessors in the past have
performed drilling services under footage and turnkey contracts and the Company
may do so again in the future. Revenues from daywork contracts accounted for
approximately 95% of total revenues during the six months ended June 30, 1997,
with the remainder from footage contracts.
Daywork Contracts. Under daywork contracts, the Company provides a
drilling rig with required personnel to the operator, who supervises the
drilling of the well. The Company is paid based on a negotiated fixed rate per
day while the rig is utilized. The rates for the Company's services depend on
market and competitive conditions, the nature of the operations to be performed,
the duration of the work, the equipment and services to be provided, the
geographic area involved and other variables. Lower rates may be paid when the
rig is in transit, or when drilling operations are interrupted or restricted by
equipment breakdowns, actions of the customer or adverse weather conditions or
other conditions beyond the control of the Company. In addition, daywork
contracts typically provide for a lump sum fee for the mobilization and
demobilization of the drilling rig. Daywork drilling contracts generally specify
the type of equipment to be used, the size of the hole and the depth of the
well. Under a daywork drilling contract, the customer bears a large portion of
out-of-pocket costs of drilling and the Company generally bears no part of the
usual capital risks associated with oil and gas exploration (such as time delays
for various reasons, including stuck drill pipe and blowouts).
Footage and Turnkey Contracts. Under footage contracts, the Company is
paid a fixed amount for each foot drilled, regardless of the time required or
the problems encountered in drilling the well. The Company pays more of the
out-of-pocket costs associated with footage contracts compared to daywork
contracts. Under turnkey contracts, the Company contracts to drill a well to an
agreed depth under specified conditions for a fixed price, regardless of the
time required or the problems encountered in drilling the well. The Company
provides technical expertise and engineering services, as well as most of the
equipment required for the well,
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<PAGE> 41
and is compensated when the contract terms have been satisfied. Turnkey
contracts afford an opportunity to earn a higher return than would normally be
available on daywork or footage contracts if the contract can be completed
successfully without complications.
The risks to the Company under footage and turnkey contracts are
substantially greater than under daywork contracts because the Company assumes
most of the risks associated with drilling operations generally assumed by the
operator in a daywork contract, including risk of blowout, loss of hole, lost or
damaged drill pipe, machinery breakdowns, abnormal drilling conditions and risks
associated with subcontractors' services, supplies, cost escalation and
personnel. See "Risk Factors -- Risks Associated with Footage and Turnkey
Drilling."
CUSTOMERS AND MARKETING
The Company's customers include major oil companies and independent oil and
gas producers. During the six months ended June 30, 1997 (pro forma for the
Consolidation Transactions), the three largest customers for the Company's
contract drilling services were Chesapeake, Sonat Exploration Company and
Marathon Oil Company, which accounted for approximately 28%, 9% and 9% of total
revenues, respectively.
In December 1996, Chesapeake and its operating subsidiary (collectively
referred to in this paragraph as "Chesapeake") entered into drilling contracts
(the "Chesapeake Drilling Agreements") with the Company pursuant to which
Chesapeake agreed to engage six of the Company's rigs for two-year terms. Each
of the Chesapeake Drilling Agreements provides that the Company will utilize a
specified rig to drill wells at locations and to well depths as directed by
Chesapeake. The Company is compensated on a daywork basis at rates that are
subject to annual upward adjustments, in November of each year, to approximately
$100 per day less than the average then-current market rates for the areas of
operation. In the event that the Company and Chesapeake are unable to agree on
the appropriate rate adjustment for a particular rig, the Company will have the
option to terminate the contract for such rig at the conclusion of operations at
the well then being drilled. The Company has the option to extend the Chesapeake
Drilling Agreements with respect to any two of the rigs for two additional years
on the same terms provided in the Chesapeake Drilling Agreements. Chesapeake has
the option to extend each of the other four individual drilling contracts for
two additional years on the same terms. Any of the Chesapeake Drilling
Agreements may be terminated by either party in the event of total loss,
destruction or major breakdown of the applicable rig. The Company believes that
the existence of the Chesapeake Drilling Agreements has enabled it to obtain
financing on more favorable terms than would otherwise have been available. See
"Certain Relationships and Related Transactions -- The Formation
Transactions -- Chesapeake Drilling Agreements."
The Company enters into informal, nonbinding commitments with many of its
customers to provide drilling rigs for future periods at agreed upon rates plus
fuel and mobilization charges, if applicable, and escalation provisions. This
practice is customary in the land drilling business during times of tightening
rig supply. Although neither the Company nor the customer is legally required to
honor these commitments, the Company strives to satisfy such commitments in
order to maintain good customer relations.
The Company's sales force consists of industry professionals with
significant land drilling sales experience who utilize industry contacts and
available public data to determine how to most appropriately market available
rigs.
COMPETITION
The contract drilling industry is a highly competitive and fragmented
business characterized by high capital and maintenance costs. As a result, even
though the Company has the fifth largest active land drilling rig fleet in the
United States, the Company believes that such fleet represents a market share of
less than 5% of the domestic land drilling industry. Drilling contracts are
usually awarded through a competitive bid process and, while the Company
believes that operators consider factors such as quality of service, type and
location of equipment, or the ability to provide ancillary services, price and
rig availability are the primary factors in determining which contractor is
awarded a job. Certain of the Company's competitors have greater financial and
human resources than the Company, which may enable them to better withstand
periods of low rig
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<PAGE> 42
utilization, to compete more effectively on the basis of price and technology,
to build new rigs or acquire existing rigs and to provide rigs more quickly than
the Company in periods of high rig utilization.
Competition in the market for drilling rigs has caused substantial
increases in the acquisition prices paid for rigs in recent months. Such
competition could adversely affect the Company's growth strategy if it is unable
to purchase additional drilling rigs or related equipment on favorable terms.
See "Risk Factors -- Competition" and "-- Management of Growth; Risks of
Acquisition Strategy."
OPERATING HAZARDS AND INSURANCE
The Company's operations are subject to many hazards inherent in the land
drilling business, including, for example, blowouts, cratering, fires,
explosions, loss of well control, loss of hole, damaged or lost drill strings
and damage or loss from inclement weather. These hazards could cause personal
injury or death, serious damage to or destruction of property and equipment,
suspension of drilling operations, or substantial damage to the environment,
including damage to producing formations and surrounding areas. Generally, the
Company seeks to obtain indemnification from its customers by contract for
certain of these risks. To the extent not transferred to customers by contract,
the Company seeks protection against certain of these risks through insurance,
including property casualty insurance on its rigs and drilling equipment,
commercial general liability and commercial contract indemnity, commercial
umbrella and workers' compensation insurance.
The Company's insurance coverage for property damage to its rigs and
drilling equipment is based on the Company's estimate of the cost of comparable
used equipment to replace the insured property. There is a deductible per
occurrence on rigs and equipment of $500,000.
The Company's third party liability insurance coverage under the general
policy is $1 million per occurrence, with a self insured retention of $100,000
per occurrence. The commercial umbrella policy has a self insured retention of
$10,000 per occurrence with coverage of $5 million per occurrence. The Company
believes that it is adequately insured for public liability and property damage
to others with respect to its operations. However, such insurance may not be
sufficient to protect the Company against liability for all consequences of well
disasters, extensive fire damage or damage to the environment. See "Risk
Factors -- Operating Hazards and Uninsured Risks."
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
General
The Company's operations are affected from time to time in varying degrees
by political developments and federal, state and local laws and regulations. In
particular, oil and gas production, operations and economics are or have been
affected by price controls, taxes and other laws relating to the oil and gas
industry, by changes in such laws and by changes in administrative regulations.
Although significant capital expenditures may be required to comply with such
laws and regulations, to date, such compliance costs have not had a material
adverse effect on the earnings or competitive position of the Company. In
addition, the Company's operations are vulnerable to risks arising from the
numerous laws and regulations governing the discharge of materials into the
environment or otherwise relating to environmental protection.
Environmental Regulation
The Company's activities are subject to existing federal, state and local
laws and regulations governing environmental quality, pollution control and the
preservation of natural resources. Such laws and regulations concern, among
other things, air emissions, the containment, disposal and recycling of waste
materials, and reporting of the storage, use or release of certain chemicals or
hazardous substances. Numerous federal and state environmental laws regulate
drilling activities and impose liability for discharges of waste or spills,
including those in coastal areas. The Company has conducted drilling activities
in or near ecologically sensitive areas, such as wetlands and coastal
environments, which are subject to additional regulatory requirements. State and
federal legislation also provide special protections to animal and marine life
that could be affected
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<PAGE> 43
by the Company's activities. In general, under various applicable environmental
programs, the Company may potentially be subject to regulatory enforcement
action in the form of injunctions, cease and desist orders and administrative,
civil and criminal penalties for violations of environmental laws. The Company
may also be subject to liability for natural resource damages and other civil
claims arising out of a pollution event.
Except for the handling of solid wastes directly generated from the
operation and maintenance of the Company's drilling rigs, such as waste oils and
wash water, it is the Company's practice to require its customers to
contractually assume responsibility for compliance with environmental
regulations. Laws and regulations protecting the environment have become more
stringent in recent years, and may, in certain circumstances, impose strict
liability, rendering a person liable for environmental damage without regard to
negligence or fault on the part of such person. Such laws and regulations may
expose the Company to liability for the conduct of or conditions caused by
others, or for acts of the Company which were in compliance with all applicable
laws at the time such acts were performed. The application of these requirements
or adoption of new requirements could have a material adverse effect on the
Company.
Environmental regulations that affect the Company's customers also have an
indirect impact on the Company. Increasingly stringent environmental regulation
of the oil and gas industry has led to higher drilling costs and a more
difficult and lengthy well permitting process.
The primary environmental statutory and regulatory programs that affect the
Company's operations include the following:
Oil Pollution Act and Clean Water Act. The Oil Pollution Act of 1990
("OPA") amends certain provisions of the federal Water Pollution Control Act of
1972, commonly referred to as the Clean Water Act ("CWA"), and other statutes as
they pertain to the prevention of and response to spills or discharges of
hazardous substances or oil into navigable waters. Under OPA, a person owning or
operating a facility or equipment (including land drilling equipment) from which
there is a discharge or threat of a discharge of oil into or upon navigable
waters and adjoining shorelines is liable, regardless of fault, as a
"responsible party" for removal costs and damages. Federal law imposes strict,
joint and several liability on facility owners for containment and clean-up
costs and certain other damages, including natural resource damages, arising
from a spill.
The United States Environmental Protection Agency ("EPA") is also
authorized to seek preliminary and permanent injunctive relief and, in certain
cases, criminal penalties and fines. State laws governing the control of water
pollution also provide varying civil and criminal penalties and liabilities in
the case of releases of petroleum or its derivatives into surface waters or into
the ground. In the event that a discharge occurs at a well site at which the
Company is conducting drilling or pressure pumping operations, the Company may
be exposed to claims that it is liable under the CWA or similar state laws.
Certain of the Company's operations are also subject to EPA regulations,
including regulations that require the preparation and implementation of spill
prevention control and countermeasure ("SPCC") plans to address the possible
discharge of oil into navigable waters. Where so required, the Company has SPCC
plans in place.
Superfund. The Comprehensive Environmental, Response, Compensation, and
Liability Act, as amended ("CERCLA"), also known as the "Superfund" Law, imposes
liability, without regard to fault or the legality of the original conduct, on
certain classes of persons with respect to the release of a "hazardous
substance" into the environment. These persons include (i) the current owner and
operator of a facility from which hazardous substances are released, (ii) owners
and operators of a facility at the time any hazardous substances were disposed,
(iii) generators of hazardous substances who arranged for the disposal or
treatment at or transportation to such facility of hazardous substances and (iv)
transporters of hazardous substances to disposal or treatment facilities
selected by them. The Company may be responsible under CERCLA for all or part of
the costs to clean up sites at which hazardous substances have been released. To
date, however, the Company has not been named a potentially responsible party
under CERCLA or any similar state Superfund laws.
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Hazardous Waste Disposal. The Company's operations involve the generation
or handling of materials that may be classified as hazardous waste and subject
to the federal Resource Conservation and Recovery Act and comparable state
statutes. The EPA and various state agencies have limited the disposal options
for certain hazardous and nonhazardous wastes and is considering the adoption of
stricter handling and disposal standards for nonhazardous wastes.
Management believes that the Company and its operations are in material
compliance with applicable environmental laws and regulations.
Health and Safety Matters
The Company's facilities and operations are also governed by laws and
regulations, including the federal Occupational Safety and Health Act ("OSHA"),
relating to worker health and workplace safety. As an example, the Occupational
Safety and Health Administration has issued the Hazard Communication Standard
("HCS") requiring employers to identify the chemical hazards at their facilities
and to educate employees about these hazards. HCS applies to all private-sector
employers, including the oil and gas exploration and producing industry. HCS
requires that employers assess their chemical hazards, obtain and maintain
certain written descriptions of these hazards, develop a hazard communication
program and train employees to work safely with the chemicals on site. Failure
to comply with the requirements of the standard may result in administrative,
civil and criminal penalties. The Company believes that appropriate precautions
are taken to protect employees and others from harmful exposure to materials
handled and managed at its facilities and that it operates in substantial
compliance with all OSHA regulations. While it is not anticipated that the
Company will be required in the near future to expend material amounts by reason
of such health and safety laws and regulations, the Company is unable to predict
the ultimate cost of compliance with these changing regulations.
FACILITIES AND OTHER PROPERTY
The Company leases approximately 4,200 square feet of office space for its
principal executive offices in Oklahoma City, Oklahoma at a cost of
approximately $4,000 per month. In addition, the Company owns approximately ten
acres of land in El Reno, Oklahoma and five acres of land in Weatherford,
Oklahoma that it uses for rig storage and maintenance. The Company has
negotiated the lease of a facility in Houston, Texas that includes approximately
5,000 square feet of warehouse space and 1,300 square feet of office space. The
Company considers all of its facilities to be in good operating condition and
adequate for their present uses. The Company is currently negotiating for
approximately 3,000 square feet of additional office space at its executive
offices in Oklahoma City.
EMPLOYEES
As of August 15, 1997, the Company had approximately 750 employees, of
which approximately 90 were salaried and approximately 660 were employed on an
hourly basis. None of the Company's employees is represented by any collective
bargaining unit. Management believes that the Company's relationship with its
employees is good.
LEGAL PROCEEDINGS
The Company is involved in litigation from time to time in the ordinary
course of its business. As of August 15, 1997, the Company was not a party in
any commercial litigation, but was involved in several workers' compensation
claims. Management does not believe that any litigation in which the Company
currently is involved, individually or in the aggregate, is material to the
Company's financial condition or results of operations.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the Company's
directors and executive officers, including their respective ages.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James E. Brown....................... 45 Chairman of the Board, President and Chief
Executive Officer
Edward S. Jacob, III................. 44 Executive Vice President -- Operations &
Marketing
David E. Grose....................... 44 Vice President and Chief Financial Officer
Carl B. Anderson, III................ 42 Director
Sidney L. Tassin..................... 40 Director
Lew O. Ward.......................... 67 Director
</TABLE>
James E. Brown is Chairman of the Board and has served as President and
Chief Executive Officer and as a director of the Company since its formation in
1996. From 1992 until joining the Company in 1996, Mr. Brown served as President
of Anadarko Drilling Company, an Oklahoma general partnership and the
predecessor of the Company. From 1982 through 1992, Mr. Brown served as Chief
Financial Officer of AnSon Gas Corporation and its predecessor entities. From
1979 through 1982, Mr. Brown served as Vice President, Treasurer and Controller
of Blocker Energy Corporation. Prior thereto, Mr. Brown served as an accountant
in various positions with Arthur Andersen & Co. Mr. Brown is a member of the
board of directors of Ametech, Inc.
Edward S. Jacob, III has served as Executive Vice President -- Operations &
Marketing since April 1997 and prior thereto served as Vice President of
Operations and Marketing for the Company since its formation. From 1983 until
joining the Company, Mr. Jacob was employed by Helmerich & Payne International
Drilling Co., serving as U.S. Marketing Manager from 1990 through 1996. Mr.
Jacob is a Director of the International Association of Drilling Contractors
("IADC"), serving on its Contracts and Marketing Committee, and is a former IADC
Chapter Chairman.
David E. Grose has served as Vice President and Chief Financial Officer of
the Company since July 1997. Prior to joining the Company, Mr. Grose was
affiliated with Alexander Energy Corporation from its inception in March 1980,
serving from 1987 through 1996 as a director and Vice President, Treasurer and
Chief Financial Officer. In August 1996, National Energy Group acquired
Alexander Energy Corporation and Mr. Grose served as Vice President -- Finance
and Treasurer through February 1997.
Carl B. Anderson, III has served as a director of the Company since its
formation in December 1996. Since 1994, Mr. Anderson has served as Managing
General Partner and Chief Executive Officer of APLP, a diversified energy
company and parent of Anadarko, the Company's predecessor. From 1978 through
1994, Mr. Anderson served in various capacities for APLP.
Sidney L. Tassin has served as a director of the Company since its
formation in 1996. Since March 1996, Mr. Tassin has been the President of Energy
Spectrum Capital LP, the general partner of Energy Spectrum, an equity fund that
invests in the energy industry. From 1980 to 1994, Mr. Tassin was associated
with MESA Inc., serving in various financial executive capacities, including
Vice President -- Finance from 1986 to 1988 and President of BTC Partners Inc.,
a financial and strategic consultant to MESA Inc., from 1988 to 1994.
Lew O. Ward has served as a director of the Company since May 1997. Since
1981, Mr. Ward has served as Chairman and Chief Executive Officer of Ward
Petroleum Corporation, an independent oil and gas company founded by Mr. Ward.
Mr. Ward is a former Director and Area Vice President of the Independent
Petroleum Association of America ("IPAA") and currently serves as Chairman of
the IPAA.
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BOARD OF DIRECTORS
Board Composition. The Board is currently composed of four directors. The
Company anticipates naming two additional outside directors following
consummation of the Offering. Directors are elected for one-year terms at each
annual meeting of stockholders. Each of the Company's current directors was
elected pursuant to the terms of the Stockholders and Voting Agreement. See
"Certain Relationships and Related Transactions -- Stockholders and Voting
Agreement."
Board Committees. The Company has established two standing committees of
the Board: a Compensation Committee and an Audit Committee. The current members
of the Compensation Committee are Carl B. Anderson, III and Sidney L. Tassin.
The Compensation Committee recommends to the Board the base salaries and
incentive bonuses for the officers of the Company and is charged with
administering the 1997 Stock Option and Stock Award Plan. The current members of
the Audit Committee are Sidney L. Tassin and Lew O. Ward. The Audit Committee
reviews the functions of the Company's management and independent auditors
pertaining to the Company's financial statements and performs such other related
duties and functions as are deemed appropriate by the Audit Committee or the
Board. The Board does not have a standing nominating committee or other
committee performing similar functions.
Director Compensation. Directors of the Company are not entitled to
compensation for serving on the Board or on any committee thereof. However,
directors of the Company are entitled to reimbursement for their reasonable
out-of-pocket expenses in connection with their travel to and attendance at
meetings of the Board or committees thereof.
EXECUTIVE COMPENSATION
Because the Company was formed in December 1996, total compensation awarded
to or earned by James E. Brown, the Chairman of the Board, President and Chief
Executive Officer of the Company, for the Company's last fiscal year included
$9,167 in salary and $900 in other compensation. No options to purchase Common
Stock were exercised by Mr. Brown at any time during the fiscal year ended
December 31, 1996. No executive officer of the Company received salary and bonus
in excess of $100,000 for services rendered in all capacities during such fiscal
year. For anticipated executive compensation levels in 1997 and beyond, see
"-- Executive Salaries and Employment Agreements."
The Company did not grant any options to purchase Common Stock to any
executive officer during the fiscal year ended December 31, 1996. The Company
adopted the 1997 Stock Option and Stock Award Plan (the "Stock Award Plan") in
April 1997. As of August 19, 1997, the Company had granted to James E. Brown,
Edward S. Jacob, III, and David E. Grose options to purchase 200,000, 50,000 and
50,000 shares of Common Stock, respectively, at exercise prices of $5, $5 and
$10 per share, respectively. Additionally, the Company has granted to Mr. Brown
and Mr. Jacob, subject to the closing of the Offering, options to purchase
200,000 and 100,000 shares of Common Stock, respectively, at an exercise price
equal to the initial public offering price. None of such options has been
exercised, and all of such options remain outstanding, as of the date of this
Prospectus. Each of the option agreements relating to stock options granted
under the Stock Award Plan provides for the vesting of 20% of the shares subject
to the option each year beginning on the first anniversary of the date of grant.
The option ceases to be exercisable on the earlier of (i) the sixth anniversary
of the date of grant, (ii) the date of the employee's voluntary termination of
employment with the Company or the Company's termination of the employee's
employment for Due Cause (as defined in the employee's employment agreement) or
(iii) the date that is 90 days after termination of the employee's employment by
means of retirement, disability or death. In the event of a Change of Control
(as defined in the Stock Award Plan), the committee that is charged with
administering the Stock Award Plan (the "Committee") may accelerate the
exercisability of the options or take certain other actions provided in the
Stock Award Plan. See "-- 1997 Stock Option and Stock Award Plan." The options
are exercisable for cash, or in the Committee's discretion, in an acceptable
equivalent, by the assignment of shares of Common Stock owned by the option
holder or the surrender of another Incentive Award.
In April 1997, the Company and James E. Brown entered into a restricted
stock award agreement (the "Restricted Stock Award Agreement"), effective as of
December 11, 1996 (the "Effective Date"), whereby
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Mr. Brown purchased 100,000 shares (the "Restricted Shares") of Common Stock at
a price of $2.50 per share. The Restricted Stock Award Agreement provides for
vesting of the Restricted Shares at a rate of 20% per year beginning on the
first anniversary of the Effective Date. Mr. Brown is required to remain
continuously employed by the Company through each vesting date for the
applicable portion of the Restricted Shares to vest and, prior to vesting, the
Restricted Shares are not transferrable. In the event of a Change of Control (as
defined in the Restricted Stock Award Agreement), all Restricted Shares will
vest immediately and all restrictions on transfer will terminate. If Mr. Brown's
employment with the Company terminates for any reason, all unvested Restricted
Shares (the "Unvested Shares") will no longer be eligible for vesting, but,
under certain conditions, Mr. Brown will have the opportunity to purchase all,
but not less than all, of the Unvested Shares. Such conditions include the
termination of Mr. Brown by the Company for any reason other than for due cause
or as a result of a disability, at which time, Mr. Brown, or his beneficiary in
the event of his death, will be entitled to purchase from the Company all of the
Unvested Shares at a purchase price of $2.50 per share. Unless so purchased by
Mr. Brown or his beneficiary, upon the termination of Mr. Brown's employment
with the Company for any reason other than a Change of Control, the Company will
be entitled to repurchase all such Unvested Shares at a purchase price of $2.50
per share. If the Company elects not to purchase any Unvested Shares, then the
Unvested Shares will be forfeited by the Company to Mr. Brown without any
payment of additional consideration.
The Company has not granted any stock appreciation rights.
EXECUTIVE SALARIES AND EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with James E. Brown,
Edward S. Jacob, III and David E. Grose. The aggregate of the annual salaries
for all three executive officers (taken as a group) at the completion of the
Offering will be $375,000.
Pursuant to an employment agreement dated December 10, 1996 (the "Brown
Agreement"), James E. Brown is employed as President of the Company and, if
elected by the Board, the Chairman of the Board. The Brown Agreement provides
that Mr. Brown will receive an annual salary of not less than $120,000, subject
to annual adjustment in the sole discretion of the Board based upon the
performance and accomplishments of Mr. Brown. Upon consummation of the Offering,
Mr. Brown's annual salary will be $140,000. If the Company's earnings before
deducting interest, taxes and depreciation during any full quarterly period
equal or exceed the greater of (i) $1.5 million or (ii) 5% of the sum of the
Company's stockholders' equity and long-term debt (averaged on a daily basis
throughout such quarterly period), then Mr. Brown will be eligible to receive a
quarterly bonus of $12,500. The Brown Agreement also provides for the grant of
non-transferrable options to purchase 200,000 shares of Common Stock at an
exercise price of $5 per share, which options are subject to vesting and other
restrictions provided in an option agreement. Pursuant to the Brown Agreement,
Mr. Brown purchased 100,000 shares of restricted Common Stock which are subject
to vesting in equal amounts annually over a five year period and other
restrictions provided in the agreement, including Mr. Brown's continued
employment with the Company and Mr. Brown's right, under certain circumstances,
to purchase unvested shares for $2.50 per share. See "-- Executive
Compensation." Mr. Brown is also entitled to reimbursement of reasonable
business expenses incurred by him in the performance of his duties, as well as
certain fringe benefits. The initial term of the Brown Agreement expires on
November 30, 1998 and is subject to extension for additional one-year periods by
mutual consent of Mr. Brown and the Company. In the event Mr. Brown's employment
is terminated by Mr. Brown voluntarily or by the Company for due cause, Mr.
Brown has agreed, for a period of two years thereafter, not to take certain
actions in competition with the Company in the states of Oklahoma, Texas, New
Mexico, Louisiana or any other state in which the Company then owns, leases or
operates its assets. If, in the event of a Change of Control (as defined in the
Brown Agreement), Mr. Brown is terminated without due cause or Mr. Brown
voluntarily elects to terminate his employment for any reason, then Mr. Brown
will be entitled to continue to receive his base salary and other employee
benefits through the remaining term of the Brown Agreement and to receive a cash
payment in an amount equal to any earned but unpaid quarterly bonus for the
previous quarter.
The Company has entered into employment agreements dated as of January 1,
1997 with Edward S. Jacob, III (the "Jacob Agreement") and July 16, 1997 with
David E. Grose (the "Grose Agreement" and
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collectively with the Jacob Agreement, the "Executive Agreements"). Pursuant to
the Executive Agreements, Mr. Jacob is employed as Executive Vice
President -- Operations & Marketing and Mr. Grose is employed as Vice President
and Chief Financial Officer. The Jacob Agreement provides that Mr. Jacob will
receive an annual salary of not less than $105,000 in 1997 and $115,000 in 1998,
subject to annual adjustment in the sole discretion of the Board based upon
performance and accomplishments of Mr. Jacob. Upon consummation of the Offering,
Mr. Jacob's annual salary will be $130,000. The Grose Agreement provides that
Mr. Grose will receive an annual salary of not less than $105,000, subject to
annual adjustment in the sole discretion of the Board based upon performance and
accomplishments of Mr. Grose. If the Company's earnings before deducting
interest, taxes and depreciation during any full quarterly period equal or
exceed the greater of (i) $1.5 million or (ii) 5% of the sum of the Company's
stockholders' equity and long-term debt (averaged on a daily basis throughout
such quarterly period), then each of Messrs. Jacob and Grose will be eligible to
receive a quarterly bonus of $5,000. The Executive Agreements also provide for
the grant of non-transferrable options to purchase 50,000 shares of Common Stock
to each of Messrs. Jacob and Grose at an exercise price of $5 per share, for Mr.
Jacob, and $10 per share, for Mr. Grose. Such options were granted to Mr. Jacob
on April 24, 1997 and to Mr. Grose on July 16, 1997 and are subject to vesting
and other restrictions. Such options generally become exercisable in equal
annual amounts over five years. Each of Messrs. Jacob and Grose are entitled to
reimbursement of reasonable business expenses incurred by him in the performance
of his duties, as well as certain fringe benefits. The Jacob Agreement also
provided for payment to Mr. Jacob of a relocation allowance of $50,000, which
was paid by the Company in January 1997. The initial terms of the Jacob
Agreement and the Grose Agreement expire on December 31, 1998 and June 30, 1999,
respectively, and are subject to extension for additional one-year periods by
mutual consent. Each of the Executive Agreements provides that if the applicable
executive officer's employment is terminated by the executive voluntarily or by
the Company for due cause, for a period of two years thereafter, the executive
will not take certain actions in competition with the Company in the states of
Oklahoma, Texas, New Mexico, Louisiana or any other state in which the Company
then owns, leases or operates its assets. If, in the event of a Change of
Control (as defined in the Executive Agreement), the executive is terminated
without due cause or the executive voluntarily elects to terminate his
employment for any reason, then the executive will be entitled to continue to
receive his base salary and other employee benefits through the remaining term
of his Executive Agreement and to receive a cash payment in an amount equal to
any earned but unpaid quarterly bonus for the previous quarter.
1997 STOCK OPTION AND STOCK AWARD PLAN
The description set forth below represents a summary of the principal terms
and conditions of the Stock Award Plan and does not purport to be complete. Such
description is qualified in its entirety by reference to the Stock Award Plan, a
copy of which has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part.
General
Purpose. The Company adopted the Stock Award Plan for the purposes of
strengthening the ability of the Company and its subsidiaries to attract,
motivate, and retain employees of superior capability and encouraging valued
employees to have a proprietary interest in the Company. To accomplish these
purposes, the Stock Award Plan provides terms upon which certain eligible
employees of the Company and its subsidiaries may be granted stock options
("Options"), stock appreciation rights ("SARs"), restricted stock, performance
units, performance shares or phantom stock rights (collectively, "Incentive
Awards").
Administration. The Stock Award Plan is administered by a committee (the
"Committee") consisting of two or more non-employee members of the Board elected
to the Committee by a majority of the Board. Presently, the members of the
Committee are Carl B. Anderson, III and Sidney L. Tassin. Subject to the terms
of the Stock Award Plan, the Committee has the ability to (i) determine, among
other things, which full-time employees (by individual or by class) are eligible
to receive Incentive Awards, and the time or times at which, Incentive Awards
are granted, (ii) determine the number of shares of Common Stock, Options, SARs,
restricted stock awards, performance units or shares or phantom stock rights
that will be subject to
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each Incentive Award, and the terms and provisions of each Incentive Award (iii)
interpret the Stock Award Plan and agreements thereunder, (iv) prescribe, amend,
and rescind any rules relating to the Stock Award Plan, and (v) make all other
determinations necessary for Stock Award Plan administration.
Shares Subject to Stock Award Plan. Initially, an aggregate of 1,600,000
shares of Common Stock (subject to certain adjustments) may be issued,
transferred or exercised pursuant to Incentive Awards under the Stock Award
Plan. If the total number of issued and outstanding shares of Common Stock
increases, (other than any increase due to issuances of Common Stock in
connection with Incentive Awards under the Stock Award Plan), then the number of
shares reserved under the Stock Award Plan will be increased one time per year,
each January 1 during the existence of the Plan, such that the number of shares
reserved and available for issuance under the Stock Award Plan will equal 10% of
the total number of shares of issued and outstanding Common Stock.
Notwithstanding the foregoing, only a total of 200,000 of the original 1,600,000
shares of Common Stock reserved under the Stock Award Plan may be issued,
transferred or exercised pursuant to incentive stock options ("ISOs") that
comply with the requirements of Section 422 of the Code under the Stock Award
Plan, and the number of shares eligible for such treatment as ISOs shall not be
subject to annual adjustment. At the discretion of the Board or the Committee,
the shares of Common Stock delivered under the Stock Award Plan may be made
available from (i) authorized but unissued shares, (ii) treasury shares, or
(iii) previously issued but reacquired shares (or through a combination
thereof).
Eligibility and Participation. The Stock Award Plan authorizes the
Committee to designate, by individual or class, those persons who are eligible
to receive Incentive Awards under the Plan ("Participants"). Participants must
be employed on a full-time basis by the Company or its subsidiaries. Members of
the Board who are not officers or employees of the Company may not be
Participants.
Incentive Awards
Except to the extent that the Committee in a written agreement evidencing
an Incentive Award (an "Incentive Award Agreement") or the Stock Award Plan
provides otherwise, Incentive Awards vest and become exercisable in equal
amounts on the first, second, third, fourth and fifth anniversaries of their
grant. For purposes of all Incentive Awards under the Stock Award Plan, the term
"Fair Market Value" means, the closing price per share of such Common Stock on
the principal stock exchange or quotation system on which the Common Stock is
traded or listed on the Date of Grant or other specified measuring date, or, if
there shall have been no such price so reported or listed on that date, on the
last preceding date on which a price was so reported or listed. If Common Stock
is not publicly traded, then "Fair Market Value" shall mean the value of a share
of common Stock, as determined by the Committee, in the Committee's sole and
absolute discretion, at least annually. The Committee may utilize the services
of an independent third party in determining the Fair Market Value of the Common
Stock for this purpose. The types of Incentive Awards that may be made under the
Stock Award Plan are as follows:
Options. Options are rights to purchase a specified number of shares of
Common Stock at a specified price. An Option granted pursuant to the Stock Award
Plan may consist of either an ISO or a non-qualified stock option ("NQSO") that
does not comply with the requirements of section 422 of the Code. ISOs may not
be granted to any employee who owns or would own immediately after the grant of
such ISO, directly or indirectly, stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company (unless at the time
of such grant, the incentive stock option price is at least 110% of fair market
value and such Option is not exercisable after the expiration of five years from
the date of grant). The exercise price for an ISO must be at least equal to fair
market value of the Common Stock on the date of grant and the term of such
option cannot be greater than 10 years. The exercise price for a NQSO must be
equal to at least the greater of (i) the par value of the Common Stock or (ii)
50% of the fair market value of the Common Stock on the date of grant. The
exercise price of an Option is payable in cash or an equivalent acceptable to
the Committee. At the discretion of the Committee, the exercise price for an
Option may be paid in Common Stock valued at fair market value on the exercise
date, another Incentive Award valued at fair market value, or a combination
thereof equal in value to the exercise price. Subject to the foregoing, the
exercise price and other terms and conditions relating to each Option are
determined by the Committee at the time of grant.
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Stock Appreciation Rights. SARs are rights to receive a payment, in cash or
Common Stock, equal to the excess of the fair market value of a specified number
of shares of Common Stock on the date of exercise over a specified strike price.
The Committee may grant SARs in connection with an Option (either at the time of
grant or at any time during the term of the Option) or without relation to an
Option. For SARs related to Options, the applicable strike price is the exercise
price of the related Stock Option and for SARs granted without relationship to
an Option, the applicable strike price is the fair market value of a share of
Common Stock on the date of grant of the SAR. Options related to SARs cease to
be exercisable when the SAR is exercised. Subject to certain exceptions, a SAR
granted in connection with an Option is exercisable at such time or times and
only to the extent that the related Option is exercisable, and may not be
disposed by the holder except to the extent that such related Option may be
disposed. The Committee may provide at the date of grant of an SAR for a limit
on the amount payable upon exercise of the SAR. Any such limitation must be
noted in the agreement evidencing the holder's SAR.
Restricted Stock Awards. The Committee may grant shares of restricted stock
pursuant to the Stock Award Plan. Shares of restricted stock may not be disposed
of until the restrictions are removed or expire, and the Committee may impose
other conditions on such shares as it may deem advisable. The restrictions upon
restricted stock awards lapse as determined by the Committee, subject to certain
other lapse provisions. Shares of restricted stock may remain subject to certain
restrictions as set forth in the restricted stock agreement. Each restricted
stock award may have a different restriction period, in the discretion of the
Committee. The Committee may, in its discretion, prospectively change the
restriction period applicable to a particular restricted stock award. Subject to
certain provisions, the Committee may, in its discretion, determine what rights,
if any, a grantee of a restricted stock award will have with respect to such
stock, including the right to vote the shares and receive all dividends and
other distributions paid or made with respect thereto.
Performance Awards. Performance units or performance shares (collectively,
"Performance Awards") may be granted under the Stock Award Plan subject to the
attainment of one or more performance goals. Performance goals may relate to any
financial, production, sales or cost performance objectives determined by the
Committee at the beginning of a designated period. If minimum performance is
achieved or exceeded, the value of a Performance Award will be based on the
degree to which actual performance exceeds the preestablished minimum
performance standards. The Committee may, at any time, modify the performance
measures previously established for a Performance Award as it considers
appropriate and equitable. Payments with respect to Performance Awards are made
in cash or Common Stock valued at fair market value as of the close of the
applicable performance period (or a combination of both ) in the discretion of
the Committee following the close of the applicable performance period.
Phantom Stock Rights. Phantom stock rights entitle a holder, upon
conversion, to receive payment of cash or in shares of Common Stock valued at
fair market value on the date of conversion of the Phantom Stock Right (or both)
in the discretion of the Committee. Upon conversion of a Phantom Stock Right,
the Participant shall be entitled to receive payment of an amount determined by
multiplying: (i) the fair market value of a share of Common Stock on the date of
conversion, by (ii) the number of shares of Common Stock as to which such
phantom stock right has been converted. Any payment of shares of Common Stock
upon conversion of a phantom stock right may be made in shares of restricted
stock.
Additional Provisions of the Stock Award Plan
Expiration of Incentive Awards and Effects of Employment Separation. Except
to the extent that the Committee provides otherwise in an Incentive Award
Agreement, Incentive Awards (whether or not vested) expire immediately or are
forfeited by the recipient upon termination of such recipient's employment with
the Company or any subsidiary employing such recipient for any reason other than
death, disability or retirement. Most, if not all of the Incentive Award
Agreements provide that vested Incentive Awards are not forfeited if the
recipient is terminated for reasons other than Due Cause (as defined in the
Incentive Award Agreement). Upon death, retirement, or disability resulting in
the cessation of an employee's employment with the Company or its subsidiaries,
any unexercised Options or SARs or outstanding phantom stock rights terminate on
the date that is 90 days following the date of death, retirement or disability
(unless it expires by its terms on
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an earlier date). In the event of death, disability or retirement, or other
reasons that the Committee deems appropriate, the Performance Awards will
continue after the date of the applicable event for such period of time as
determined by the Committee, subject to the terms of the Incentive Award
Agreement or any other applicable agreement, but only to the extent exercisable
on the date of the applicable event.
If a holder of a restricted stock award ceases to be an employee because of
retirement, death, permanent and total disability, or because of other reasons
as the Committee deems appropriate, the Committee may determine that
restrictions on all or some portion of the restricted stock award subject to
restrictions at the time of such employment termination will be deemed to have
lapsed. If an eligible employee who has purchased restricted stock under the
Stock Award Plan terminates employment with the Company for any reason, then all
shares of restricted stock that have not previously vested will be repurchased
by the Company at the cost paid by such employee. In addition, upon an eligible
employee's termination of employment with the Company and all of its
subsidiaries for any reason (including by reason of death or disability), the
Company has the right to purchase from such employee all shares of Common Stock
awarded under the Stock Award Plan on the terms and conditions set forth in the
applicable Incentive Award.
Adjustment Provisions. The Stock Award Plan provides that upon the
dissolution or liquidation of the Company, certain types of reorganizations,
mergers or consolidations, the sale of all or substantially all of the assets of
the Company, or a "change of control" (as defined in the Stock Award Plan), the
Committee may determine (without stockholder approval), subject to the terms of
any applicable agreement evidencing an Incentive Award, that (i) all or some
Incentive Awards then outstanding under the Stock Award Plan will be fully
vested and exercisable or convertible, as applicable, (ii) some or all
restrictions on restricted stock lapse immediately, or (iii) there will be a
substitution of new Incentive Awards by such successor employer corporation or a
parent or subsidiary company therefor, with appropriate adjustments as to the
number and kind of shares or units subject to such awards and prices. In
addition, in the event of a "change of control," the Committee may take certain
actions, without stockholder approval, including but not limited to (i)
acceleration of the exercise dates of any outstanding SARs or Options or
immediate vesting, (ii) acceleration of the restriction (lapse of forfeiture
provision) period of any restricted stock award, (iii) grants of SARs to holders
of outstanding Options, (iv) payment of cash to holders of Options in exchange
for the cancellation of their outstanding Options, (v) payment for outstanding
Performance Awards, (vi) acceleration of the conversion dates of outstanding
phantom stock rights, (vii) grants of new Incentive Awards or (viii) other
adjustments or amendments to outstanding Incentive Awards.
Transfer of Incentive Awards. No Incentive Award and no right under the
Stock Award Plan, contingent or otherwise, may be assigned, transferred or
otherwise disposed by a recipient other than pursuant to a court order, by will
or beneficiary designation, or pursuant to the laws of descent and distribution.
Pursuant to the Stock Award Plan, so long as the Common Stock has not been
publicly traded for at least 90 days, any Common Stock obtained pursuant to an
Incentive Award will be subject to the Company's right of first purchase for the
price and upon the other terms provided in the Incentive Award agreement if the
holder of such shares intends to transfer them. In addition, upon an employee's
death, the Company has the right to purchase all or some of the Common Stock
that such employee obtained pursuant to an Incentive Award at its fair market
value within nine months of the employee's death.
Amendment and Termination of the Stock Award Plan. Subject to stockholder
approval where expressly required by law, the Board may amend, suspend or
terminate the Stock Award Plan at any time. No amendment, unless approved by the
holders of a majority of the outstanding shares of voting stock of the Company
may: (i) change the class of persons eligible to receive Incentive Awards, (ii)
materially increase the benefits accruing to participants, (iii) increase by
more than 10% the number of shares of Common Stock subject to the Stock Award
Plan, (except for certain adjustments required by the Stock Award Plan), or (iv)
transfer the administration of the Stock Award Plan to any person who is not a
nonemployee director. Except as otherwise provided in the Stock Award Plan, the
Committee may not, without the participant's consent, modify the terms and
conditions of an Incentive Award. No amendment, suspension, or termination of
the Stock Award Plan may, without the Participant's consent, alter, terminate or
impair any right or obligation under any Incentive Award previously granted
under the Stock Award Plan. Unless previously terminated, the Stock Award Plan
will terminate and no more Incentive Awards may be granted after the
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tenth anniversary of the adoption of the Stock Award Plan by the Board. The
Stock Award Plan will continue in effect with respect to Incentive Awards
granted before termination of the Stock Award Plan and until such Incentive
Awards have been settled, terminated or forfeited.
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Certain of the directors and executive officers of the Company are
beneficial owners of shares of Common Stock. See "Principal and Selling
Stockholders."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 1996, the Company had no
compensation committee or other committee of the Board performing similar
functions and no executive officer of the Company participated in deliberations
of the Board concerning executive officer compensation. Decisions concerning
compensation of executive officers during 1996 were made by, and the Company's
Compensation Committee currently consists of, Carl B. Anderson, III and Sidney
L. Tassin, both of whom are nonemployee directors. See "-- Board of
Directors -- Board Committees." Mr. Anderson and Mr. Tassin each had direct or
indirect interests in certain transactions described in "Certain Relationships
and Related Transactions."
INDEMNIFICATION AGREEMENTS
The Company has entered into Indemnification Agreements (the
"Indemnification Agreements") with its directors, nominees for director and
certain of its officers (the "Indemnitees"), a form of which has been filed as
an Exhibit to the Registration Statement of which this Prospectus is a part.
Under the terms of the Indemnification Agreements, the Company is required to
indemnify the Indemnitees against certain liabilities arising out of their
services for the Company. The Indemnification Agreements require the Company to
indemnify each Indemnitee to the fullest extent permitted by law and to advance
certain expenses incurred by an Indemnitee. The Indemnification Agreements
provide limitations on the Indemnified Parties' rights to indemnification in
certain circumstances. To the extent that indemnification provisions contained
in the Indemnification Agreements purport to include indemnification for
liabilities arising under the Securities Act, the Company has been informed that
in the opinion of the Securities and Exchange Commission (the "Commission"),
such indemnification is contrary to public policy and therefore unenforceable.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock, after giving effect to the Offering and the
Stockholder Exercises, by (i) each person known by the Company to own more than
5% of the outstanding shares of Common Stock, (ii) each of the Company's
directors, (iii) each named executive officer, (iv) all executive officers and
directors as a group and (v) each Selling Stockholder. All persons listed have
an address in care of the Company's principal executive offices and have sole
voting and investment power with respect to their shares unless otherwise
indicated.
<TABLE>
<CAPTION>
SHARES OWNED SHARES OWNED
BEFORE THE OFFERING(1) AFTER THE OFFERING(1)(4)
NAME OF ---------------------------- SHARES TO BE SOLD --------------------------
BENEFICIAL OWNER NUMBER PERCENTAGE(2) IN THE OFFERING(3) NUMBER PERCENTAGE(2)
---------------- --------- ------------- ------------------ --------- -------------
<S> <C> <C> <C> <C> <C>
Chesapeake Energy
Corporation(5)............ 4,194,000 38.9% 3,400,000 794,000 5.3%
Energy Spectrum LLC(6)...... 2,350,000(7) 21.6 709,565 1,640,435 10.9
Mike Mullen(8).............. 1,250,000(9) 11.5 378,435 871,565 5.8
Roy T. Oliver(10)........... 1,250,000(11) 11.5 378,435 871,565 5.8
Continental Illinois
Property Corporation
#3(12).................... 624,000(13) 5.8 312,000 312,000 2.1
The CIT Group/Equipment
Financing, Inc.(14)....... 300,000(15) 2.7 150,000 150,000 1.0
James E. Brown.............. 270,000(16) 2.5 -- 270,000 1.8
Harold G. Hamm(17).......... 250,000 2.3 -- 250,000 1.7
Carl B. Anderson, III(18)... 2,000,000(19) 18.5 312,000 1,376,000 9.2
Edward S. Jacob, III........ --(20) * -- -- *
David E. Grose.............. --(21) * -- -- *
Sidney L. Tassin(22)........ 2,350,000(23) 21.6 709,565 1,640,435 10.9
Lew O. Ward(24)............. 540,000(25) 4.9 -- 540,000 3.6
All directors and executive
officers as a group (6
persons).................. 5,160,000(26) 46.5% 1,021,565 3,826,435 25.1%
</TABLE>
- ---------------
* Less than 1%
(1) The information contained in this table with respect to beneficial
ownership reflects "beneficial ownership" as defined in Rule 13d-3 under
the Exchange Act. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of Common Stock
subject to options or warrants held by that person that are currently
exercisable or become exercisable within 60 days following August 20, 1997
are deemed outstanding. However, such shares are not deemed outstanding for
the purpose of computing the percentage ownership of any other person. All
information with respect to the beneficial ownership of any stockholder has
been furnished by such stockholder and, unless otherwise indicated, each
stockholder has sole voting and investment power with respect to the shares
listed as beneficially owned by such stockholder, subject to community
property laws where applicable.
(2) Percentage of ownership is based on 10,782,000 shares of Common Stock
outstanding before the Offering and 14,932,000 shares of Common Stock
outstanding after the Offering.
(3) Assumes no exercise of the Underwriters' over-allotment option. If the
over-allotment option is exercised in full, then the following Selling
Stockholders will sell the following number of additional shares of Common
Stock: Chesapeake Energy Corporation -- 706,667; Energy Spectrum LLC --
290,435; Mike Mullen -- 154,898; Roy T. Oliver -- 154,898; The CIT
Group/Equipment Financing, Inc. -- 102,500; Carl B. Anderson,
III -- 88,000; Sidney L. Tassin -- 290,435.
(4) Assumes no exercise of the Underwriters' over-allotment option. If the
Underwriters' over-allotment option is exercised in full, after the
Offering the Selling Stockholders would beneficially own the following
number of shares which represent the percentage ownership indicated:
Chesapeake Energy
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<PAGE> 54
Corporation -- 87,333, 0.6%; Energy Spectrum LLC -- 1,350,000 (112,500 of
such shares may be acquired in the next 60 days upon the exercise of
outstanding options), 9.0%; Mike Mullen -- 716,667, 4.8%; Roy T.
Oliver -- 716,667, 4.8%; The CIT Group/Equipment Financing, Inc. -- 47,500
(all of such shares may be acquired in the next 60 days upon the exercise
of outstanding options), 0.3%; Carl B. Anderson, III -- 1,288,000 (Mr.
Anderson has been granted an irrevocable voting proxy for 170,000 of these
shares by Mr. Brown), 8.6%; Sidney L. Tassin -- 1,350,000 (112,500 of such
shares may be acquired in the next 60 days upon the exercise of outstanding
options), 9.0%.
(5) The address of Chesapeake Energy Corporation is P.O. Box 18496, Oklahoma
City, Oklahoma 73154.
(6) The address of Energy Spectrum Partners LP is 5956 Sherry Lane, Suite 600,
Dallas, Texas 75225.
(7) Represents shares of Common Stock (including 112,000 shares of Common Stock
that may be acquired within the next 60 days upon exercise of outstanding
Series B Warrants) owned of record by Energy Spectrum Partners LP, of which
Energy Spectrum Capital LP is the sole general partner. Energy Spectrum LLC
is the sole general partner of Energy Spectrum Capital LP and possesses
sole voting and investment power with respect to such shares. Sidney L.
Tassin, as President and a member of Energy Spectrum LLC, may be deemed to
have beneficial ownership of these shares. Mr. Tassin disclaims beneficial
ownership of such shares.
(8) The address of Mike Mullen is c/o Mike Mullen Energy Equipment Resource,
Inc., 8411 Preston Road, Suite 730, LB2, Dallas, Texas 75225.
(9) Includes (i) 480,000 shares held of record by Mullen-Oliver Partnership,
Ltd., a limited partnership partially owned and indirectly controlled by
Mr. Mullen, (ii) 400,000 shares held of record by Mike Mullen Energy
Equipment Resource, Inc., a corporation beneficially owned and controlled
by Mr. Mullen, (iii) 320,000 shares held of record by Grupo de Hercules,
Ltd., a limited partnership partially owned and indirectly controlled by
Mr. Mullen and (iv) 50,000 shares that may be acquired within the next 60
days upon the exercise of outstanding Warrants held by Mr. Mullen.
(10) The address of Roy T. Oliver is c/o R.T. Oliver Drilling, Inc., 6601 S.W.
29th Street, Oklahoma City, Oklahoma 73179.
(11) Includes (i) 480,000 shares held of record by Mullen-Oliver Partnership,
Ltd., a limited partnership partially owned and indirectly controlled by
Mr. Oliver, (ii) 200,000 shares held of record by RR&T, Inc., a corporation
owned and controlled by Mr. Oliver, (iii) 200,000 shares held of record by
Oliver Family Trust, (iv) 320,000 shares held of record by Grupo de
Hercules, Ltd., a limited partnership partially owned and indirectly
controlled by Mr. Oliver and (v) 50,000 shares that may be acquired within
the next 60 days upon the exercise of outstanding Warrants held by RR&T,
Inc.
(12) The address of Continental Illinois Property Corporation #3 is 231 South
LaSalle Street, Chicago, Illinois 60697.
(13) All shares held by Continental Illinois Property Corporation #3 are subject
to voting rights retained by Carl B. Anderson, III pursuant to an
irrevocable proxy that will expire upon completion of the Offering.
(14) The address of CIT is 1211 Avenue of the Americas, New York, New York
10036.
(15) Represents shares of Common Stock that may be acquired within the next 60
days upon the exercise of outstanding Warrants. Immediately prior to the
Offering, CIT exercised options for 150,000 shares for aggregate
consideration to the Company of $1.2 million. The shares received by CIT
upon such exercise will be sold by CIT in the Offering. Further, if the
Underwriters' over-allotment option is exercised, CIT has agreed to
exercise additional options for 102,500 shares for an aggregate
consideration to the Company of $820,000.
(16) Includes (i) 100,000 shares of Common Stock held by Mr. Brown which vest
pro rata over five years starting on December 11, 1997 and are subject to
certain restrictions on resale and provisions for the repurchase by the
Company at a specified price and upon certain conditions, including
termination of employment with the Company and (ii) 170,000 shares for
which an irrevocable voting proxy has been granted to Carl B. Anderson,
III. Excludes options to purchase an aggregate of 400,000 shares held by
Mr. Brown which were granted pursuant to the Stock Award Plan, subject to
vesting and other
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<PAGE> 55
conditions contained in stock option agreements. None of such options are
exercisable within the next 60 days.
(17) Shares held as Trustee of the Harold G. Hamm Revocable Inter Vivos Trust
dated April 23, 1984. The address of Harold G. Hamm is 302 North
Independence, Third Floor, P.O. Box 1032, Enid, Oklahoma 73702.
(18) The address of Carl B. Anderson, III is c/o AnSon Partners Limited
Partnership, 4005 Northwest Expressway, Suite 400E, Oklahoma City, Oklahoma
73116.
(19) Includes (i) 1,106,000 shares held of record by Anadarko Drilling Company,
a wholly owned subsidiary of APLP, of which Mr. Anderson is managing
general partner, (ii) 624,000 shares held of record by Continental Illinois
Property Corporation #3 that are subject to voting rights retained by Mr.
Anderson pursuant to an irrevocable proxy that will expire upon
consummation of the Offering, (iii) 170,000 shares held of record by James
E. Brown that are subject to voting rights retained by Mr. Anderson
pursuant to an irrevocable proxy and (iv) 100,000 shares held of record and
beneficially by Mr. Anderson.
(20) Excludes options to purchase 150,000 shares held by Mr. Jacob which were
granted pursuant to the Stock Award Plan, subject to vesting and other
conditions contained in stock option agreements. None of such options are
exercisable within the next 60 days.
(21) Excludes options to purchase 50,000 shares held by Mr. Grose which were
granted pursuant to the Stock Award Plan, subject to vesting and other
conditions contained in a stock option agreement. None of such options are
exercisable within the next 60 days.
(22) The address of Sidney L. Tassin is c/o Energy Spectrum Partners LP, 5956
Sherry Lane, Suite 600, Dallas, Texas 75225.
(23) Represents shares held of record by Energy Spectrum Partners LP and
beneficially by Energy Spectrum LLC. Mr. Tassin, a director of the Company,
is the President of Energy Spectrum LLC, which is the ultimate general
partner of Energy Spectrum Partners LP. Mr. Tassin disclaims beneficial
ownership of such shares. See note (7) above.
(24) The address of Lew O. Ward is c/o Ward Petroleum Corporation, 502 South
Fillmore Road, Enid, Oklahoma 73703.
(25) Includes (i) 338,300 shares held of record by Wil-Cas Investments, L.P., a
family limited partnership controlled by Lew O. Ward and a family trust for
the benefit of Mr. Ward's children, William C. Ward and Casidy Ward, of
which Bank of Oklahoma, N.A. is trustee, (ii) 1,700 shares held of record
by Mr. Ward and (iii) 200,000 shares that may be acquired within the next
60 days upon the exercise of outstanding warrants held in the name of Ward
Drilling Company, Inc., of which Mr. Ward is the Chairman.
(26) Includes (i) 112,000 shares that may be acquired by Energy Spectrum
Partners LP within the next 60 days upon the exercise of outstanding Series
B Warrants, (ii) 794,000 shares subject to voting rights retained by Mr.
Anderson (such voting rights will expire with respect to 624,000 shares
upon completion of the Offering), (iii) 100,000 shares of restricted stock
held by Mr. Brown and (iv) 200,000 shares that may be acquired by Ward
Drilling Company within the next 60 days upon the exercise of outstanding
warrants.
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<PAGE> 56
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following discussion identifies certain of the Company's relationships
and related transactions in which any director or executive officer of the
Company, any person known to the Company to own of record or beneficially over
5% of the Common Stock, or any member of the immediate family of any such
persons had, or has, a direct or indirect material interest. Chesapeake, Energy
Spectrum, APLP (through Anadarko), the Oliver Companies and Ward are each record
or beneficial owners of over 5% of the Common Stock. Three of the Company's
former directors, Aubrey K. McClendon, Tom L. Ward and Marcus C. Rowland, are
stockholders, executive officers and/or directors of Chesapeake. One of the
Company's directors, Sidney L. Tassin, and one of the Company's former
directors, James W. Spann, are executive officers and partners of the ultimate
general partner of Energy Spectrum. Roy T. Oliver, a former director of the
Company, is a director, executive officer and significant stockholder of certain
of the Oliver Companies. Michael Mullen is a director, executive officer and
significant stockholder of certain of the Oliver Companies. Prior to the Ward
Acquisition, Lew O. Ward, a director of the Company, was a director, executive
officer and significant stockholder of Ward. Carl B. Anderson, III, a director
of the Company, and Robert E. Bell, a former director of the Company, are
directors, executive officers and holders of substantial ownership interests in
APLP (which includes Anadarko). James E. Brown is a director and executive
officer of the Company and, prior to the formation of the Company, was a
director and executive officer of Anadarko. Each of such persons and entities
has or had a direct or indirect material interest in one or more of the
arrangements and transactions described below.
REGISTRATION RIGHTS AGREEMENT
The Company and certain of its investors, including certain directors,
officers and significant stockholders, are party to a Registration Rights
Agreement (the "Registration Rights Agreement") covering shares of Common Stock,
including the shares of Common Stock issuable upon the exercise of options,
warrants and other Company securities (collectively, "Common Stock
Equivalents"), owned by such investors (the "Registrable Securities"). The
Registration Rights Agreement applies to Registrable Securities owned by
Chesapeake, Energy Spectrum, APLP (including Anadarko), the Oliver Companies,
Ward and certain of its transferees, James E. Brown and Carl B. Anderson, III.
After giving effect to the consummation of the Stockholder Exercises and the
Offering, 5,732,000 outstanding shares of Common Stock (4,492,000 shares if the
Underwriters' over-allotment option is exercised in full) and 812,000 shares of
Common Stock Equivalents will be subject to the Registration Rights Agreement.
Additionally, any shares issued by the Company upon conversion of the
Subordinated Notes will be subject to the Registration Rights Agreement. All of
the shares of Common Stock offered hereby by the Selling Stockholders are being
registered pursuant to the terms of the Registration Rights Agreement.
The Registration Rights Agreement provides, among other things, that, at
any time (subject to customary "black-out" periods) subsequent to the earlier of
(i) an initial public offering resulting in proceeds of at least $25 million to
the Company or (ii) January 1, 2000, the holders of Registrable Securities with
a minimum aggregate share value of at least $20 million may require the Company
to effect the registration under the Securities Act of the Registrable
Securities, subject to certain limitations. The Registration Rights Agreement
also provides certain "piggyback" registration rights to the holders of
Registrable Securities whenever the Company proposes to register an offering of
any of its capital stock under the Securities Act, subject to certain
exceptions, including pro rata reduction if, in the reasonable opinion of the
managing underwriter of the offering, such a reduction is necessary to prevent
an adverse effect on the marketability or offering price of all the securities
proposed to be offered in such offering.
The Registration Rights Agreement contains customary provisions regarding
the payment of expenses by the Company and regarding mutual indemnification
agreements between the Company and the holders of Registrable Securities for
certain securities law violations.
The foregoing summary of the principal provisions of the Registration
Rights Agreement does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all of the provisions of the
Registration Rights Agreement, a copy of which has been filed as an exhibit to
the Registration Statement of which this Prospectus is a part.
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<PAGE> 57
STOCKHOLDERS AND VOTING AGREEMENT
The Company and its current stockholders are party to a Stockholders and
Voting Agreement (the "Stockholders and Voting Agreement") that provides for
certain agreements regarding the corporate governance of the Company, transfer
restrictions on shares of Common Stock and Common Stock Equivalents, and other
customary terms and conditions. After giving effect to the consummation of the
Stockholder Exercises and the Offering, 5,982,000 outstanding shares of Common
Stock and 318,100 shares of Common Stock Equivalents will be subject to the
Stockholders and Voting Agreement.
Board Representation. The Stockholders and Voting Agreement provides that
the Board shall not consist of more than nine members. In addition, the
Stockholders and Voting Agreement provides that, upon the consummation of the
Offering, certain stockholders will have the right to designate a specified
number of persons to be nominated for election as directors. Assuming that the
Selling Stockholders sell all of the shares that they are expected to sell in
the Offering, each of Energy Spectrum and Anadarko will have the right to
designate one nominee for director as follows: (i) Energy Spectrum will have the
right to designate one nominee for director if it owns at least (a) 5% or more
of the outstanding Common Stock of the Company, (b) 50% in principal amount of
the Subordinated Notes purchased by it in the May Financing or (c) 50% of the
fully diluted shares of Common Stock and/or warrants purchased by it in the May
Financing and (ii) Anadarko will have the right to designate one nominee for
director if it owns at least 5% or more of the outstanding Common Stock of the
Company. The stockholders of the Company who are party to the Stockholders and
Voting Agreement (the "Bound Stockholders") are obligated to vote all of their
voting securities (including certain Common Stock Equivalents) of the Company
for these designees.
Certain Transfer Restrictions. In accordance with the Stockholders and
Voting Agreement and in connection with the Offering, the Bound Stockholders
have agreed to a "lock-up" period of up to 180 days, during which such
stockholders will not transfer any Common Stock or Common Stock Equivalents.
Following completion of the Offering, the Bound Stockholders have agreed that
any such Bound Stockholder holding 5% or more of the Common Stock (on a fully
diluted basis) shall not, subject to certain exceptions, transfer 5% or more of
the Common Stock (on a fully diluted basis) unless such Bound Stockholder has
received the prior written consent of the Board, with any member of the Board
designated by such Bound Stockholder abstaining.
The foregoing summary of the material provisions of the Stockholders and
Voting Agreement does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all of the provisions of such
agreement, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
CERTAIN ARRANGEMENTS RELATED TO THE CONSOLIDATION TRANSACTIONS
The Formation Transactions
The Company was formed in December 1996 through a series of affiliated
entity transactions in which the Company became the successor to Anadarko, the
contract drilling subsidiary of privately held APLP. In connection with the
Formation Transactions (i) APLP contributed ten drilling rigs, including two
rigs requiring refurbishment, for 2,000,000 shares of Common Stock, (ii) the
Oliver Companies exchanged six drilling rigs requiring refurbishment for
1,600,000 shares of Common Stock and (iii) Energy Spectrum acquired 2,000,000
shares of Common Stock for $10 million. Additionally, Chesapeake entered into
drilling contracts with two-year terms for six of the Company's rigs in
consideration for the Chesapeake Option. See "Business -- Formation and
Acquisitions."
Chesapeake Option. Upon issuance by the Company, the Chesapeake Option
provided Chesapeake with the right to purchase up to 2,000,000 shares of Common
Stock from the Company at an exercise price of $6 per share. The Chesapeake
Option would have expired (i) as to 668,000 shares, on December 5, 2000 and (ii)
as to 1,332,000 shares, on December 5, 1998, subject to extension to December 5,
2000 if Chesapeake extends four of the Chesapeake Drilling Agreements for
additional two-year terms. In August 1997,
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<PAGE> 58
Chesapeake relinquished the Chesapeake Option in connection with the Chesapeake
Transactions. See "-- Chesapeake Transactions."
Chesapeake Drilling Agreements. In December 1996 in connection with the
Formation Transactions, Chesapeake and its operating subsidiary (collectively
referred to in this discussion as "Chesapeake") entered into the Chesapeake
Drilling Agreements with the Company pursuant to which Chesapeake agreed to
engage six of the Company's rigs for two-year terms. The Company has the option
to extend the Chesapeake Drilling Agreements with respect to any two of the rigs
for two additional years on the same terms provided in the Chesapeake Drilling
Agreements. Chesapeake has the option to extend each of the other four
Chesapeake Drilling Agreements for two additional years on the same terms.
Each of the Chesapeake Drilling Agreements provides that the Company will
utilize a specified rig to drill wells at locations and to well depths as
directed by Chesapeake. The Company is compensated for each day that a rig is in
operation at specified rates. The day rates for three of the rigs are subject to
additional charges for each rig in which the actual cost of drill pipe exceeds
$20 per foot, unless standard day rates are adjusted upward by certain amounts
under the terms of the Chesapeake Drilling Agreements. Reduced day rates are
applicable when the rig is in transit, when the Company's crew is standing by
for directions from Chesapeake and during periods when normal operations are
suspended due to certain conditions outside the control of the parties, such as
inclement weather, labor strikes and inability to obtain fuel or materials.
Through July 31, 1997, the Company had recognized aggregate revenues of $6.2
million from the Chesapeake Drilling Agreements.
The standard day rates are subject to upward, but not downward, adjustment
annually in November to the average then-current market rates for the areas of
operation, less $100 per day. The Company and Chesapeake are required to
consider such adjustment each November during the term of the particular
Chesapeake Drilling Agreement and if no agreement is timely reached as to the
appropriate rate adjustment, the Company will have the option to terminate the
contract for such rig at the conclusion of operations at the well then being
drilled. Any agreed rate adjustment will apply to wells spudded after each
December 1 that the contract remains in effect.
The Company is also entitled to reimbursement of 110% of the costs of
material, equipment, work or services that are required to be furnished by
Chesapeake but are instead furnished by the Company at the request of
Chesapeake. The rates provided in the individual contracts will be revised to
reflect changes if certain costs such as labor, insurance and fuel vary by more
than 5% from such costs on the date the contract was entered into or any date
such rates are revised.
Any of the Chesapeake Drilling Agreements may be terminated by either party
in the event of total loss, destruction or major breakdown of the applicable
rig. Unless so terminated, a lump sum demobilization fee of $10,000 will be
payable to the Company for each rig after the last well is drilled under the
applicable Chesapeake Drilling Agreement.
In addition to the Chesapeake Drilling Agreements, between December 1996
and July 31, 1997, Chesapeake engaged five of the Company's rigs under short
term drilling contracts on standard daywork terms. The Company recognized
aggregate revenues of $3.4 million from such contracts over that period. The
Company recognized aggregate revenues of $9.6 million over that period from all
drilling contracts with Chesapeake.
Oliver Companies' Put Rights. Also in connection with the Formation
Transactions, the Company granted the Oliver Companies a right, exercisable at
any time between June 2, 1998 and July 2, 1998 if the Company had not previously
completed an IPO (as defined in the Master Agreement providing for such right),
to require the Company to either (at the Company's option) (i) repurchase all
1,600,000 of the shares of Common Stock held by the Oliver Companies for an
aggregate purchase price of $12 million ($7.50 per share) in cash or (ii) issue
to the Oliver Companies an aggregate of 400,000 additional shares of Common
Stock. This right will terminate upon consummation of the Offering.
Fees Paid to Energy Spectrum. In January 1997, the Company paid Energy
Spectrum Capital LP ("ESC"), the general partner of Energy Spectrum, a fee in
the amount of $300,000 in consideration for
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<PAGE> 59
assistance provided by Energy Spectrum in the structuring of the Formation
Transactions and arrangement and negotiation of external financing. The Company
also reimbursed ESC for expenses incurred in connection with the rendering of
such services.
The Ward Acquisition
On May 31, 1997, the Company completed the Ward Acquisition involving the
acquisition by the Company of all of the issued and outstanding common units of
a subsidiary of Ward that held six drilling rigs in consideration for $8 million
in cash, 400,000 shares of Common Stock and a warrant (the "Ward Warrant") to
purchase up to 200,000 shares of Common Stock at an exercise price of $10 per
share. The Ward Warrant is exercisable at any time on or before the later of (i)
May 30, 2000 or (ii) one year after the completion of an initial public offering
of the Common Stock (which would be satisfied by the Offering), but no later
than June 1, 2003.
In connection with the Ward Acquisition, the Company entered into an
agreement (the "Ward Transportation Agreement") with Geronimo Trucking Company
("Geronimo"), a company owned and controlled by Lew O. Ward, a director of the
Company. The Ward Transportation Agreement provides that the Company will have a
preferential right to engage Geronimo's trucking services for covered
transportation needs and that Geronimo will make its trucking services available
to the Company at rates that are competitive in the area. The Ward
Transportation Agreement also provides Geronimo with the preferential right to
perform trucking services contracted for by the Company for the movement of the
rigs acquired by the Company in the Ward Acquisition. The Company is obligated
to allow Geronimo to bid on any covered rig movement required by the Company and
to allow Geronimo the opportunity to match or better any bid received from a
third party. Unless earlier terminated by the parties, the Ward Transportation
Agreement is effective through May 2000. Through July 31, 1997, the Company paid
an aggregate of $71,000 under the Ward Transportation Agreement.
Individual Rig Acquisitions
In May 1997, the Company purchased from R.T. Oliver Drilling, Inc. two
drilling rigs for an aggregate purchase price consisting of $3.3 million in cash
and warrants (the "Oliver Warrants") for the purchase of an aggregate of 100,000
shares of Common Stock at an exercise price of $8 per share. One of the Oliver
Warrants was issued to RR&T, Inc. and the other was issued to Mike Mullen. Each
of the Oliver Warrants expires on May 1, 2000 and is separately exercisable for
50,000 shares of Common Stock.
CERTAIN FINANCING ARRANGEMENTS
On May 1, 1997, the Company completed a financing transaction (the "May
Financing") in which the Company issued shares of Common Stock, subordinated
notes and warrants to purchase Common Stock to certain significant stockholders
in exchange for an aggregate of $28.5 million in cash, as described below. The
following summary of terms of the May Financing does not purport to be complete
and is qualified in its entirety by reference to the Securities Purchase
Agreement, dated as of April 30, 1997, the Subordinated Notes, Series A Warrants
and Series B Warrants, copies or forms of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part.
Common Stock and Subordinated Notes. In the May Financing, the Company
issued 1,000,000 shares of Common Stock to Chesapeake in consideration for $7
million in cash and 140,000 shares of Common Stock to Energy Spectrum in
consideration for $980,000 in cash. Additionally, the Company issued
Subordinated Notes due May 1, 2003 in the original principal amounts of $18
million and $2.52 million (the "Subordinated Notes") to Chesapeake and Energy
Spectrum, respectively. The Subordinated Notes bear interest at the Company's
option at either (i) 11% per annum, payable in cash, or (ii) 12.875% per annum,
payable in the form of additional Subordinated Notes, which interest is payable
quarterly in arrears. On each quarterly interest payment date, the Company may
make an election as to the interest rate to be applied for the previous quarter.
The Subordinated Notes are redeemable, solely at the option of the Company, in
whole or in part, at any time at varying redemption prices. The Company must
offer to redeem the Subordinated Notes upon the
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<PAGE> 60
occurrence of certain events constituting a "Change of Control" (as defined in
the Subordinated Notes) at a redemption price equal to 100% of the principal
amount thereof, together with accrued and unpaid interest, if any, to the date
of redemption. The Subordinated Notes are convertible into Common Stock at the
option of the Company, in whole or in part, in conjunction with a "Convertible
Event" (as defined in the Subordinated Notes), which includes certain
underwritten public offerings (including the Offering), mergers, consolidations
and other business combination transactions. The Subordinated Notes are general
unsecured subordinated obligations of the Company that are subordinated in right
of payment to all existing and future senior indebtedness of the Company, pari
passu with all existing and future subordinated indebtedness of the Company and
senior in right of payment to all future junior subordinated indebtedness of the
Company. See "Use of Proceeds." Chesapeake and the Company have agreed that,
upon consummation of the Offering, the Company will redeem in full the $18
million principal amount of Subordinated Notes issued to Chesapeake in
consideration for the payment by the Company to Chesapeake of $15 million in
cash, subject to adjustment to a maximum of $18 million or a minimum of $12
million, based on the price to public in the Offering. See "-- Chesapeake
Transactions." In May 1997, the Company paid Chesapeake a funding fee of
$250,000 in connection with the funding of the Common Stock and Subordinated
Notes in the May Financing.
Warrants. In the May Financing, the Company also issued two series of
detachable warrants (the "Warrants") for the purchase of shares of Common Stock,
designated as "Series A Warrants" and "Series B Warrants." The Warrants are
exercisable on or prior to May 1, 2003 at a price of $0.01 per share in the case
of the Series A Warrants and $7.50 per share in the case of the Series B
Warrants. In the May Financing, Chesapeake was issued Series A Warrants and
Series B Warrants representing the right to purchase 700,000 shares and 800,000
shares of Common Stock, respectively, and Energy Spectrum was issued Series A
Warrants and Series B Warrants representing the right to purchase 98,000 shares
and 112,000 shares of Common Stock, respectively. The Warrants expire on May 1,
2003 and are exercisable (i) at any time with a cash payment or (ii) pursuant to
a cashless exercise at any time after the completion of a "Qualified IPO" (as
defined in the Warrants), which includes certain underwritten public offerings
(including the Offering), mergers, consolidations and other business combination
transactions. The exercise prices, as well as the number and kind of shares
issuable under the Warrants, are subject to adjustment upon the happening of
certain events described in the Warrants, including, the payment of in-kind
dividends or distributions and the subdivision, reclassification or
recapitalization of the Common Stock, whether in connection with a consolidation
or merger or otherwise. On July 31, 1997, Energy Spectrum exercised in full its
Series A Warrants. On the date hereof, Energy Spectrum holds all of the Series B
Warrants issued to it in the May Financing. In August 1997, Chesapeake
relinquished its Series A Warrants and Series B Warrants as part of the
Chesapeake Transactions. See "-- Chesapeake Transactions."
CHESAPEAKE TRANSACTIONS
In August 1997, Chesapeake and the Company agreed to complete a series of
transactions (the "Chesapeake Transactions") pursuant to which the Company will
issue 3,194,000 shares of Common Stock to Chesapeake in consideration for (i) $9
million in cash, (ii) the relinquishment and cancellation of the Chesapeake
Option and the Warrants issued to Chesapeake in connection with the May
Financing and (iii) the redemption in full of the $18 million principal amount
of Subordinated Notes held by Chesapeake at a cash redemption price of $15
million, subject to adjustment. Also in connection with the Chesapeake
Transactions, the Company waived its right under the Securities Purchase
Agreement to require Chesapeake to purchase additional Common Stock, Warrants
and Subordinated Notes for $3 million.
OTHER RELATED PARTY TRANSACTIONS AND ARRANGEMENTS
Weatherford Storage Yard. In connection with the Formation Transactions,
Anadarko granted the Company a transferrable option, exercisable at any time
prior to June 30, 1998, to either purchase from Anadarko a storage yard located
in Weatherford, Oklahoma (the "Weatherford Storage Yard") for a price of $1,000
in cash or lease from Anadarko, for any period specified by the Company through
a date not later than December 31, 1999, the Weatherford Storage Yard for a
lease price of $100 per year. In August 1997, the Company acquired from Anadarko
approximately five acres of land also in Weatherford, Oklahoma, in
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<PAGE> 61
consideration for the relinquishment of the Company's option to acquire or lease
the Weatherford Storage Yard.
Fees Paid to Energy Spectrum. In May 1997, the Company paid ESC a fee in
the amount of $220,000 for financial advisory and other services rendered to the
Company in connection with the valuation, negotiation and closing of the Trend
Acquisition, for assistance in the arrangement of alternative financing sources,
and for structuring, negotiating and closing the amended financing arrangements
with CIT and Fleet. The Company also reimbursed ESC for expenses incurred in
connection with the rendering of such services.
Transactions with Affiliates of Roy T. Oliver. The Company has in the past
purchased drilling rig equipment from U.S. Rig & Equipment, Inc., an affiliate
of Roy T. Oliver, a director of the Company. From December 1996 through July 31,
1997, the Company paid U.S. Rig & Equipment, Inc. an aggregate of $1.3 million
in connection with such purchases. Additionally, in August 1997, the Company
sold to an affiliate of Mr. Oliver one rig acquired in the Trend Acquisition
that did not meet the Company's operational and technical standards. The Company
believes that the $500,000 price received by the Company in that sale is
equivalent to the price that would have been received from an unaffiliated third
party.
APLP Trucking Services. The Company has engaged affiliates of APLP for the
provision of trucking services related to the movement of the Company's rigs on
numerous occasions. From December 1996 through July 31, 1997, the Company paid
such affiliates of APLP an aggregate of $245,000 in consideration for such
trucking services.
APLP Administrative Services. Since December 13, 1996, APLP has made
available to the Company certain of APLP's employees, office space and
administrative equipment, such as computer and telephone systems. In
consideration for such assistance, through June 30, 1997, the Company had
reimbursed APLP an aggregate of $135,000. APLP continues to provide certain
computer services to the Company.
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<PAGE> 62
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The authorized capital stock of the Company consists of 100,000,000 shares
of common stock, par value $0.01 per share, and 20,000,000 shares of preferred
stock, par value $0.01 per share ("Preferred Stock"). Upon the consummation of
the Offering, 14,932,000 shares of Common Stock (15,034,500 shares if the
Underwriters' over-allotment option is exercised in full) and no shares of
Preferred Stock will be outstanding. The following summary is qualified in its
entirety by reference to the Certificate and Bylaws, copies of which are filed
as exhibits to the Registration Statement of which this Prospectus is a part.
COMMON STOCK
All Shares of Common Stock issued in the Offering will be fully paid and
nonassessable. As of August 15, 1997, after giving effect to the Stockholder
Exercises, there were 10,932,000 shares of Common Stock outstanding held of
record by 27 stockholders. The holders of Common Stock are entitled to one vote
for each share held on all matters submitted to a vote of common stockholders of
the Company. The Common Stock does not have cumulative voting rights in the
election of directors. Shares of Common Stock have no preemptive rights,
conversion rights, redemption rights or sinking fund provisions. The Common
Stock is not subject to redemption by the Company.
Subject to the rights of the holders of any class of capital stock of the
Company having any preference or priority over the Common Stock, the holders of
Common Stock are entitled to dividends in such amounts as may be declared by the
Board from time to time out of funds legally available for such payments and, in
the event of liquidation, to share ratably in any assets of the Company
remaining after payment in full of all creditors and provision for any
liquidation preferences on any outstanding preferred stock ranking prior to the
Common Stock.
PREFERRED STOCK
The Certificate authorizes the Board, subject to limitations prescribed by
law, to provide for the issuance of up to 20,000,000 shares of Preferred Stock
in one or more series. The Board is authorized to establish the number of shares
to be included in any such series and to fix the designations, powers,
preferences and rights of the shares of each such series, and any
qualifications, limitations or restrictions thereof.
The Company believes that the ability of the Board to issue one or more
series of Preferred Stock will provide the Company with flexibility in
structuring possible future financings and acquisitions, and in meeting other
corporate needs which might arise from time to time. The authorized shares of
Preferred Stock, as well as shares of Common Stock, will be available for
issuance without further action by the Company's stockholders, unless such
action is required by applicable law or the rules of any stock exchange or
automated quotation system on which the Company's securities may be listed or
traded. If the approval of the Company's stockholders is not required for the
issuance of shares of Preferred Stock or Common Stock, the Board may determine
not to seek stockholder approval.
Although the Board has no intention at the present time of doing so, it
could issue a series of Preferred Stock that may, depending on the terms of such
series, hinder, delay or prevent the completion of a merger, tender offer or
other takeover attempt. Among other things, the Board could issue a series of
Preferred Stock having terms that could discourage an acquisition attempt
through which an acquirer may be able to change the composition of the Board,
including a tender offer or other transaction that some, or a majority, of the
Company's stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then current
market price of such stock.
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CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS
The Board consists of directors who are elected for one-year terms at each
annual meeting of stockholders. Stockholders may remove a director only for
cause. In general, the Board, not the stockholders, has the right to appoint
persons to fill vacancies on the Board.
The Certificate contains a "fair price" provision that requires the
affirmative vote of the holders of at least 80% of the Company's voting stock
and the affirmative vote of at least 66 2/3% of the Company's voting stock not
owned, directly or indirectly, by a Company Related Person (hereinafter defined)
to approve any merger, consolidation, sale or lease of all or substantially all
of the Company's assets, or certain other transactions involving a Company
Related Person. For purposes of this fair price provision, a "Company Related
Person" is any person beneficially owning 10% or more of the voting power of the
outstanding capital stock of the Company who is a party to the transaction at
issue. The voting requirement is not applicable to certain transactions,
including those that are approved by the Company's Continuing Directors (as
defined in the Certificate) or that meet certain "fair price" criteria contained
in the Certificate.
The Company's Certificate further provides that stockholders may act only
at annual or special meetings of stockholders and not by written consent, that
special meetings of stockholders may be called only by the Board, and that only
business proposed by the Board may be considered at special meetings of
stockholders.
The Certificate also provides that the only business (including election of
directors) that may be considered at an annual meeting of stockholders, in
addition to business proposed (or persons nominated to be directors) by the
directors of the Company, is business proposed (or persons nominated to be
directors) by stockholders who comply with the notice and disclosure
requirements set forth in the Certificate. In general, the Certificate requires
that a stockholder give the Company notice of proposed business or nominations
no later than 60 days before the annual meeting of stockholders (meaning the
date on which the meeting is first scheduled and not postponements or
adjournments thereof) or (if later) ten days after the first public notice of
the annual meeting is sent to common stockholders. In general, the notice must
also contain information about the stockholder proposing the business or
nomination, his interest in the business, and (with respect to nominations for
director) information about the nominee of the nature ordinarily required to be
disclosed in public proxy solicitations. The stockholder also must submit a
notarized letter from each of his nominees stating the nominee's acceptance of
the nominations and indicating the nominee's intention to serve as director if
elected.
The Company's Certificate also restricts the ability of stockholders to
interfere with the powers of the Board in certain specified ways, including the
constitution and composition of committees and the election and removal of
officers.
The Certificate provides that approval by the holders of at least 66 2/3%
of the outstanding voting stock of the Company is required to amend the
provisions of the Certificate discussed above and certain other provisions,
except that (i) approval by the holders of at least 80% of the outstanding
voting stock of the Company, together with approval by the holders of at least
66 2/3% of the outstanding voting stock not owned, directly or indirectly, by
the Company Related Person, is required to amend the fair price provisions and
(ii) approval of the holders of at least 80% of the outstanding voting stock is
required to amend the provisions prohibiting stockholders from acting by written
consent.
DELAWARE ANTI-TAKEOVER STATUTE
The Company is a Delaware corporation and is subject to Section 203 of the
DGCL. In general, Section 203 prevents an "interested stockholder" (defined
generally as a person owning 15% or more of the outstanding voting stock of the
Company) from engaging in a "business combination" (as defined in Section 203)
with the Company for three years following the date that person becomes an
interested stockholder unless (i) before that person became an interested
stockholder, the Board approved the transaction in which the interested
stockholder became an interested stockholder or approved the business
combination, (ii) upon completion of the transaction that resulted in the
interested stockholder's becoming an interested stockholder, the interested
stockholder owns at least 85% of the Company's voting stock outstanding
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at the time the transaction commenced (excluding stock held by directors who are
also officers of the Company and by employee stock plans that do not provide
employees with the right to determine confidentially whether shares held subject
to the plan will be tendered in a tender or exchange offer), or (iii) following
the transaction in which that person became an interested stockholder, the
business combination is approved by the Board and authorized at a meeting of
stockholders by the affirmative vote of the holders of at least two-thirds of
the outstanding voting stock of the Company not owned by the interested
stockholder.
Under Section 203, these restrictions also do not apply to certain business
combinations proposed by an interested stockholder following the announcement or
notification of one of certain extraordinary transactions involving the Company
and a person who was not an interested stockholder during the previous three
years or who became an interested stockholder with the approval of a majority of
the Company's directors, if that extraordinary transaction is approved or not
opposed by a majority of the directors who were directors before any person
became an interested stockholder in the previous three years or who were
recommended for election or elected to succeed such directors by a majority of
such directors then in office.
LIABILITY OF DIRECTORS; INDEMNIFICATION
The Certificate provides, as authorized by Section 102(b)(7) of the DGCL,
that a director of the Company will not be personally liable to the Company or
any of its stockholders for monetary damages for breach of fiduciary duty as a
director involving any act or omission of any such director, except that such
provisions do not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL,
as it now exists or hereafter may be amended, or (iv) for any transaction from
which the director derived an improper personal benefit. The Certificate also
provides that if the DGCL is amended after the date of filing of the Certificate
to authorize corporate action further limiting or eliminating the personal
liability of directors, then the liability of a director of the Company, in
addition to the limitation on personal liability provided for already, shall be
limited to the fullest extent permitted by the DGCL as so amended. Any repeal or
modification of such provision in the Certificate by the stockholders of the
Company will be effective prospective only, and will not adversely affect any
limitation on the personal liability of a director of the Company existing at
the time of such repeal or modification.
The Company's Certificate also provides for indemnification of directors to
the fullest extent permitted by the DGCL. Such indemnification may be available
for liabilities arising in connection with this Offering. Insofar as
indemnification for liabilities under the Securities Act may be permitted to
directors, officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. Pursuant to its Certificate, the
Company may indemnify its officers, employees, agents and other persons to the
fullest extent permitted by the DGCL. The Company's Bylaws obligate the Company,
under certain circumstances, to advance expenses to its directors and officers
in defending an action, suit or proceeding for which indemnification may be
sought. The Company has entered into Indemnification Agreements with certain of
its directors and officers. See "Management -- Indemnification Agreements."
The Company's Bylaws also provide that the Company shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Company, or who, while a director,
officer, employee or agent, is or was serving as a director, officer, trustee,
general partner, employee or agent of one of the Company's subsidiaries or, at
the request of the Company, of any other organization, against any liability
asserted against such person or incurred by such person in any such capacity,
where the Company would have the power to indemnify such person against such
liability under the DGCL.
TRANSFER AGENT AND REGISTRAR
will be the transfer agent and registrar for the Common Stock.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 14,932,000 shares of
Common Stock outstanding (15,034,500 shares if the Underwriters' over-allotment
option is exercised in full). Additionally, as of August 20, 1997, options for
the purchase of 658,600 shares of Common Stock (including options for the
purchase of 300,000 shares to be priced at the initial public offering price)
had been granted to certain employees of the Company pursuant to the Stock Award
Plan and 562,000 shares of Common Stock were subject to outstanding warrants
issued by the Company. Except for the options for the purchase of 300,000 shares
to be priced at the initial public offering price, the exercise prices of these
options and warrants are substantially lower than the anticipated initial public
offering price of the Common Stock. In addition, the Subordinated Notes are
convertible, solely at the Company's option, into shares of Common Stock. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Certain Relationship and
Related Transactions -- Certain Financing Arrangements -- Common Stock and
Subordinated Notes."
Of the outstanding shares, the 8,950,000 shares of Common Stock (10,292,500
shares if the Underwriters' over-allotment option is exercised in full) sold in
the Offering will be freely tradeable in the public market without restriction
or limitation under the Securities Act, except for any shares purchased by an
"affiliate" (as defined in the Securities Act) of the Company. The shares of
Common Stock that continue to be held by the existing stockholders of the
Company after the Offering will constitute "restricted shares" for purposes of
Rule 144 under the Securities Act, and may not be sold by such persons other
than in compliance with the registration requirements of the Securities Act or
pursuant to an available exemption therefrom. The Company, its officers,
directors and the Selling Stockholders have agreed that they will not offer or
sell any shares of Common Stock for a period of 180 days after the date of this
Prospectus without the prior written consent of the Representatives. See
"Underwriting." Following the expiration of the lock-up agreements with the
Underwriters, each of the Company's directors and executive officers and each of
its existing stockholders, who will hold upon completion of the Offering an
aggregate of approximately 40% of the outstanding shares of Common Stock (32% if
the Underwriters' over-allotment option is exercised in full), may sell such
shares subject to the requirements of Rule 144 under the Securities Act or
pursuant to the terms of a registration rights agreement. See "Certain
Relationships and Related Transactions and -- Registration Rights Agreement." In
addition, the Company intends to file a registration statement on Form S-8
covering the issuance of shares of Common Stock pursuant to the Stock Award Plan
within 180 days after completion of the Offering. Accordingly, shares of Common
Stock issued pursuant to the Stock Award Plan will be available for sale in the
public market without restriction or limitation under the Securities Act, except
for any shares held by an "affiliate" of the Company.
In general, under Rule 144 as currently in effect, an "affiliate" of the
Company may sell within any three-month period a number of shares that does not
exceed the greater of (i) 1% of the then outstanding shares of such class or
(ii) the average weekly trading volume on the AMEX during the four calendar
weeks preceding the date on which a notice of sale is filed with the Commission
with respect to the proposed sale. Sales under Rule 144 are subject to certain
restrictions relating to the manner of sale, notice and the availability of
current public information about the issuer. A person who has not been an
affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned shares for at least two years (including the holding
period of any prior owner other than an affiliate), would be entitled to sell
such shares without regard to the volume limitations, manner of sale provisions,
notice or other requirements of Rule 144.
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UNDERWRITING
Subject to the terms and conditions contained in the Underwriting Agreement
(the "Underwriting Agreement"), each of the underwriters named below (the
"Underwriters"), for whom Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), Lehman Brothers, Prudential Securities Incorporated, Rauscher Pierce
Refsnes, Inc. and Raymond James & Associates, Inc. are acting as representatives
(the "Representatives"), has severally agreed to purchase from the Company the
respective number of shares of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.........
Lehman Brothers Inc.........................................
Prudential Securities Incorporated..........................
Rauscher Pierce Refsnes, Inc................................
Raymond James & Associates, Inc.............................
---------
Total............................................. 8,950,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by counsel and
to certain other conditions. If any of the shares of Common Stock are purchased
by the Underwriters pursuant to the Underwriting Agreement, all such shares
(other than those covered by the over-allotment option described below) must be
so purchased. The offering price and underwriting discounts and commissions per
share for Common Stock sold by the Company and the Selling Stockholders are
identical.
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public initially at the Price to the
Public set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession not in excess of $ per share, and that the
Underwriters may allow, and such dealers may re-allow, a discount not in excess
of $ per share on sales to other dealers. After the Offering, the
offering price and the concessions and discounts to dealers may be changed by
the Representatives.
Certain of the Selling Stockholders have granted to the Underwriters an
option to purchase up to an aggregate of 1,342,500 additional shares of Common
Stock from the Selling Stockholders at the Price to the Public set forth on the
cover page hereof, less underwriting discounts and commissions, solely for the
purpose of covering over-allotments. Such option may be exercised at any time
until 30 days after the date of this Prospectus. To the extent that such option
is exercised, each Underwriter will be committed, subject to certain conditions,
to purchase a number of shares proportionate to such Underwriter's initial
commitment as indicated in the preceding table.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.
The Company, its executive officers and directors and the Selling
Stockholders have agreed with the Underwriters not to offer, sell, pledge,
contract to sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of directly or indirectly any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
in any manner transfer all or a portion of the economic consequences associated
with the ownership of any Common Stock for a period of 180 days after the date
of the Prospectus without the prior written consent of DLJ and subject to
certain limited exceptions. See "Shares Eligible for Future Sale."
No action has been taken in any jurisdiction by the Company, the Selling
Stockholders or the Underwriters that would permit a public offering of the
Common Stock offered pursuant to the Offering in any jurisdiction where action
for that purpose is required, other than the United States. The distribution of
this Prospectus and the offering or sale of the shares of Common Stock offered
hereby in certain jurisdictions may
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be restricted by law. Accordingly, the shares of Common Stock offered hereby may
not be offered or sold, directly or indirectly, and neither this Prospectus nor
any other offering material or advertisements in connection with the Common
Stock may be distributed or published, in or from any jurisdiction, except under
circumstances that will result in compliance with applicable rules and
regulations of any such jurisdiction. Such restrictions may be set out in
applicable Prospectus supplements. Persons into whose possession this Prospectus
comes are required by the Company, the Selling Stockholders and the Underwriters
to inform themselves about and to observe any applicable restrictions. This
Prospectus does not constitute an offer of, or an invitation to subscribe for
purchase of, any shares of Common Stock and may not be used for the purpose of
an offer to, or solicitation by, anyone in any jurisdiction or in any
circumstances in which such offer or solicitation is not authorized or is
unlawful.
The Representatives have advised the Company that the Underwriters will not
confirm sales of shares of Common Stock to accounts over which they exercise
discretionary authority.
Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price for the shares of Common Stock will be
negotiated among the Company, the Selling Stockholders and the Representatives.
The factors to be considered in determining the initial public offering price of
the Common Stock, in addition to the prevailing market conditions, will be the
Company's historical performance, estimates of the business potential and
earnings prospects of the Company, an assessment of the Company's management and
the consideration of the above factors in relation to market valuation of
companies in related businesses.
In connection with the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may bid for and purchase shares of
Common Stock in the open market to cover syndicate short positions. In addition,
the Underwriters may bid for and purchase shares of Common Stock in the open
market to stabilize the price of the Common Stock. These activities may
stabilize or maintain the market price of the Common Stock above independent
market levels. The Underwriters are not required to engage in these activities
and may end these activities at any time.
Application will be made to list the Common Stock on the AMEX under the
symbol " ."
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered by this
Prospectus will be passed upon for the Company by Baker & Botts, L.L.P., Dallas,
Texas. Certain legal matters in connection with the sale of the Common Stock
offered hereby will be passed upon for the Underwriters by Andrews & Kurth
L.L.P., Houston, Texas.
INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements of the Company as of December 31, 1994, 1995 and
1996 and for the fiscal years then ended included in this Prospectus and
elsewhere in the Registration Statement have been audited by Grant Thornton LLP,
independent public accountants, as stated in their reports thereon appearing
elsewhere herein, and are so included in reliance on such reports given upon the
authority of that firm as experts in auditing and accounting. The financial
statements of Trend as of December 31, 1995 and 1996 and for the three fiscal
years ended December 31, 1996, 1995 and 1994, and the financial statements of
Ward as of December 31, 1996 and for the fiscal year then ended, included in
this Prospectus and elsewhere in the Registration Statement have been included
herein in reliance on the report of Coopers & Lybrand L.L.P., independent public
accountants, given upon the authority of that firm as experts in auditing and
accounting.
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In preparation for its initial public offering, the Board appointed Coopers
& Lybrand L.L.P. as auditors for the Company's financial statements for the six
months ended June 30, 1997, and for the year ending December 31, 1997. During
the period Grant Thornton L.L.P. was engaged by the Company, there were no
disagreements with Grant Thornton L.L.P. on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure and
there were no "reportable events" as the term is defined under the Securities
Act. The audit reports previously issued by Grant Thornton LLP with respect to
the Company's financial statements did not contain an adverse opinion or a
disclaimer of opinion, nor were such reports qualified or modified as to
uncertainty, audit scope or accounting principles.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement") under the Securities Act with respect to the
shares of Common Stock offered by this Prospectus. This Prospectus constitutes a
part of the Registration Statement and does not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted from
this Prospectus as permitted by the rules and regulations of the Commission.
Statements made in this Prospectus regarding the contents of any contract,
agreement or other document are not necessarily complete. With respect to each
contract, agreement or other document filed with the Commission as an exhibit to
the Registration Statement, reference is made to the exhibit for further
information regarding the contents thereof, and each such statement is qualified
in its entirety by such reference. For further information regarding the Company
and the shares of Common Stock offered hereby, reference is made to the
Registration Statement, including the exhibits and schedules thereto.
The Registration Statement, including the exhibits and schedules thereto,
are available for inspection at, and copies of such materials may be obtained at
prescribed rates from, the public reference facilities maintained by the
Commission at its principal offices located at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at its regional offices located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60601 and 7 World Trade Center, New York, New York 10048. The
Commission also makes electronic filings publicly available on the Internet at
http://www.sec.gov and the Registration Statement, including the exhibits and
schedules thereto, may be inspected at such site.
The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a
result of the Offering, the Company will become subject to the informational
requirements of the Exchange Act. The Company will fulfill its obligations with
respect to such requirements by filing periodic reports and other information
with the Commission. In addition, the Company intends to furnish to its
stockholders annual reports containing consolidated financial statements
examined by an independent public accounting firm.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF BAYARD DRILLING
TECHNOLOGIES, INC.
Report of Independent Certified Public Accountants........ F-2
Balance Sheets as of December 31, 1996 and 1995 and six
months ended June 30, 1997............................. F-3
Statements of Operations for the years ended December 31,
1996, 1995 and 1994 and six months ended June 30, 1996
and 1997............................................... F-4
Statements of Equity (Deficit) for the years ended
December 31, 1996, 1995 and 1994 and six months ended
June 30, 1997.......................................... F-5
Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994 and six months ended June 30, 1996
and 1997............................................... F-6
Notes to Financial Statements............................. F-8
FINANCIAL STATEMENTS OF TREND DRILLING COMPANY
Report of Independent Accountants......................... F-18
Balance Sheets as of December 31, 1996 and 1995........... F-19
Statements of Operations for the years ended December 31,
1996, 1995 and 1994 and four months ended April 30,
1997................................................... F-20
Statements of Stockholder's Equity for the years ended
December 31, 1996, 1995 and 1994....................... F-21
Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994 and four months ended April 30,
1997................................................... F-22
Notes to Financial Statements............................. F-23
FINANCIAL STATEMENTS OF WARD DRILLING COMPANY, INC.
Report of Independent Accountants......................... F-27
Balance Sheet as of December 31, 1996..................... F-28
Statements of Operations and Retained Earnings for the
year ended December 31, 1996 and five months ended May
30, 1997............................................... F-29
Statements of Cash Flows for the year ended December 31,
1996 and five months ended April 30, 1997.............. F-30
Notes to Financial Statements............................. F-31
</TABLE>
F-1
<PAGE> 70
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Bayard Drilling Technologies, Inc.
We have audited the accompanying balance sheets of Bayard Drilling
Technologies, Inc. (Note A), as of December 31, 1996 and 1995, and the related
statements of operations, equity (deficit), and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Bayard Drilling
Technologies, Inc., as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Oklahoma City, Oklahoma
January 20, 1997
F-2
<PAGE> 71
BAYARD DRILLING TECHNOLOGIES, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1995 1996 1997
------ ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash...................................................... $ -- $ 4,963 $ 240
Investments............................................... -- -- 730
Accounts receivable....................................... 1,692 1,084 10,517
Other current assets...................................... 19 1 559
------ ------- --------
Total current assets.............................. 1,711 6,048 12,046
Property, plant and equipment, net.......................... 6,343 26,355 90,826
Goodwill, net of accumulated amortization of $86............ -- -- 5,927
Other assets................................................ -- 1,652 2,136
------ ------- --------
Total assets...................................... $8,054 $34,055 $110,935
====== ======= ========
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable.......................................... $1,219 $ 409 $ 9,632
Payable to affiliate...................................... 433 412 --
Accrued liabilities....................................... 47 253 3,691
Current portion of long-term debt......................... -- 947 12,869
------ ------- --------
Total current liabilities......................... 1,699 2,021 26,192
------ ------- --------
Payable to affiliate........................................ 6,631 -- --
------ ------- --------
Deferred income tax liabilities............................. -- 178 6,201
------ ------- --------
Long-term debt, less current maturities..................... -- 6,053 18,894
------ ------- --------
Subordinated notes.......................................... -- -- 16,608
------ ------- --------
Commitments and Contingencies
EQUITY (DEFICIT):
Partners' deficit......................................... (276) -- --
Stockholders' equity
Preferred stock, $.01 par value, 20,000,000 shares
authorized; none issued or outstanding............... -- -- --
Common stock, $.01 par value, 100,000,000 shares
authorized; 5,600,000 shares issued and outstanding
at December 31, 1996; 7,490,000 at June 30, 1997..... -- 56 75
Additional paid-in capital................................ -- 25,779 42,980
Accumulated deficit....................................... -- (32) (15)
------ ------- --------
Total equity (deficit)............................ (276) 25,803 43,040
------ ------- --------
Total liabilities and equity (deficit)............ $8,054 $34,055 $110,935
====== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 72
BAYARD DRILLING TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------- ----------------
1994 1995 1996 1996 1997
------- ------ ------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Drilling......................................... $ 9,910 $7,405 $ 9,793 $4,242 $15,107
Other............................................ -- 303 60 59 --
------- ------ ------- ------ -------
Total revenues................................ 9,910 7,708 9,853 4,301 15,107
------- ------ ------- ------ -------
COSTS AND EXPENSES:
Drilling......................................... 8,572 6,075 7,653 3,268 11,022
General and administrative....................... 786 880 658 323 722
Depreciation and amortization.................... 1,557 791 1,123 415 2,599
Other............................................ -- 47 46 -- --
------- ------ ------- ------ -------
Total costs and expenses...................... 10,915 7,793 9,480 4,006 14,343
------- ------ ------- ------ -------
Operating income (loss)....................... (1,005) (85) 373 295 764
------- ------ ------- ------ -------
OTHER INCOME (EXPENSE):
Interest expense................................. (18) (3) (11) -- (981)
Interest income.................................. -- -- -- -- 51
Gain (loss) on sale of assets.................... 366 (131) 54 -- 60
Other............................................ -- (3) 17 36 133
------- ------ ------- ------ -------
Total other income (expense).................. 348 (137) 60 36 (737)
------- ------ ------- ------ -------
Earnings (loss) before income taxes................ (657) (222) 433 331 27
Provision for income taxes -- deferred............. -- -- 18 -- 10
------- ------ ------- ------ -------
Net earnings (loss)................................ $ (657) $ (222) $ 415 $ 331 $ 17
======= ====== ======= ====== =======
Net earnings (loss) per share...................... $ .00
=======
PRO FORMA INFORMATION:
Additional income tax expense.................... -- -- 147 126
------- ------ ------- ------
Pro forma net earnings (loss).................... $ (657) $ (222) $ 268 $ 205
------- ------ ------- ------
Pro forma earnings per share..................... $ .02 $ .02
======= ======
Weighted average common shares outstanding......... 11,382 11,382 11,382
======= ====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 73
BAYARD DRILLING TECHNOLOGIES, INC.
STATEMENT OF EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY
----------------------------------------
PARTNERS ADDITIONAL
CAPITAL COMMON PAID-IN RETAINED
(DEFICIT) STOCK CAPITAL EARNINGS TOTAL
--------- ------ ---------- -------- -------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994....................... $ (912) $ -- $ -- $ -- $ --
Net loss....................................... (657) -- -- -- --
Capital contribution........................... 1,515 -- -- -- --
------- ---- ------- ---- -------
Balance at December 31, 1994..................... (54) -- -- -- --
Net loss....................................... (222) -- -- -- --
------- ---- ------- ---- -------
Balance at December 31, 1995..................... (276) -- -- -- --
Net earnings through date of corporate
capitalization.............................. 447 -- -- -- --
Net increase in equity arising from affiliate
transactions................................ 5,285 -- -- -- --
Issuance of stock in corporate
capitalization.............................. (5,456) 20 5,436 -- 5,456
Sale of stock.................................. -- 20 9,980 -- 10,000
Issuance of stock options and warrants for
drilling agreements and debt................ -- -- 1,319 -- 1,319
Issuance of stock and options for property
and equipment............................... -- 16 9,044 -- 9,060
Net loss from date of corporate capitalization
to December 31, 1996........................ -- -- -- (32) (32)
------- ---- ------- ---- -------
Balance at December 31, 1996..................... -- 56 25,779 (32) 25,803
Net earnings (unaudited)....................... -- -- -- 17 17
Sale of stock (unaudited)...................... -- 12 8,218 -- 8,230
Issuance of stock options and warrants
(unaudited)................................. -- -- 4,023 -- 4,023
Executive compensation agreements
(unaudited)................................. -- -- 75 -- 75
Issuance of stock for acquisitions
(unaudited)................................. -- 7 4,885 -- 4,892
------- ---- ------- ---- -------
Balance at June 30, 1997 (unaudited)............. $ -- $ 75 $42,980 $(15) $43,040
======= ==== ======= ==== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 74
BAYARD DRILLING TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------- ------------------
1994 1995 1996 1996 1997
------- ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss).......................... $ (657) $ (222) $ 415 $ 331 $ 17
Adjustments to reconcile net earnings (loss)
to net cash (used in) provided by
operating activities --
Depreciation and amortization............. 1,557 791 1,123 415 2,599
(Gain) loss on sale of assets............. (366) 131 (54) (54) (60)
Deferred income taxes..................... -- -- 18 -- 10
Change in assets and liabilities, net of
effects of affiliate transactions --
Decrease (increase) in accounts
receivable........................... (96) 242 (2,059) (556) (9,433)
Decrease (increase) in other assets..... 2 (6) (185) 13 (558)
Increase (decrease) in accrued
liabilities.......................... (101) (237) 251 44 3,438
Increase (decrease) in accounts
payable.............................. 106 (389) (383) (324) 6,473
Increase (decrease) in payable to
affiliate............................ -- -- 412 7 (412)
------- ------- -------- ------- --------
Net cash (used in) provided by
operating activities............... 445 310 (462) (124) 2,074
------- ------- -------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment........ (1,183) (2,088) (10,578) (3,224) (32,534)
Acquisition of businesses.................... -- -- -- -- (26,056)
Proceeds from sale of assets................. 729 378 137 136 60
Purchase of investments...................... -- -- -- -- (730)
Organizational cost incurred................. -- -- -- -- (1,050)
------- ------- -------- ------- --------
Net cash used in investing
activities......................... (454) (1,710) (10,441) (3,088) (60,310)
------- ------- -------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Payments made to) advances received from
affiliates, net........................... 374 1,400 (928) 3,212 --
Retirement of notes payable.................. (365) -- -- -- --
Proceeds from borrowings..................... -- -- 7,000 -- 41,044
Proceeds from issuance of stock.............. -- -- 10,000 -- 8,230
Debt issuance costs.......................... -- -- (206) --
Payments on long-term debt................... -- -- -- -- (2,572)
Borrowings under line of credit.............. -- -- -- -- 6,811
------- ------- -------- ------- --------
Net cash provided by financing
activities......................... 9 1,400 15,866 3,212 53,513
------- ------- -------- ------- --------
Net change in cash............................. -- -- 4,963 -- (4,723)
Cash at beginning of period.................... -- -- -- -- 4,963
------- ------- -------- ------- --------
Cash at end of period.......................... $ -- $ -- $ 4,963 $ -- $ 240
======= ======= ======== ======= ========
Cash paid during the period for interest....... $ 20 $ -- $ -- $ -- $ 653
======= ======= ======== ======= ========
</TABLE>
Continued
F-6
<PAGE> 75
BAYARD DRILLING TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Continued
Supplemental noncash activity:
During 1994 certain affiliate payables were extinguished resulting in a
$1,515 capital contribution to the Company.
During 1995 an affiliate transferred drilling equipment to the Company at
the affiliate's basis totaling $173, net of accumulated depreciation of $1,306,
which has been reflected as an increase in payable to affiliate. Additionally,
the Company acquired property and equipment through trade payables totaling
$1,180.
During 1996 the Company acquired property and equipment totaling $9,220
through the issuance of stock and options and assumed a net deferred income tax
liability of $160. The Company acquired property and equipment through trade
payables and payables to affiliates totaling $1,390. The Company transferred
property and equipment totaling $29, net of accumulated depreciation of $1,254
to an affiliate which has been reflected as a decrease in payables to
affiliates. The Company issued stock options and warrants in exchange for
certain drilling agreements and debt. The stock options were valued at $1,100
and the warrants associated with the debt were valued at $219.
Additionally in 1996, the Company transferred the following assets and
liabilities to affiliates which resulted in a net increase in equity at the time
of corporate capitalization, effective December 1, 1996.
<TABLE>
<S> <C>
Accounts receivable......................................... $ 2,667
Other assets................................................ 17
Cash........................................................ 9,252
Accounts payable and accrued liabilities.................... (1,799)
Payable to affiliates....................................... (15,422)
--------
$ (5,285)
========
</TABLE>
During 1997 the Company acquired property and equipment through the
issuance of stock and options for $4,891 and through issuance of trade payables
of $2,750.
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 76
BAYARD DRILLING TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
INFORMATION AT JUNE 30, 1997 AND FOR THE PERIOD
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
NOTE A -- NATURE OF OPERATIONS
Bayard Drilling Technologies, Inc. together with its predecessor, (the
"Company"), a Delaware corporation, is the successor to the drilling operations
of Anadarko Drilling Company ("Anadarko"), which began drilling operations in
1980. The Company provides land-based contract drilling services primarily to
independent oil and gas companies in the Mid-Continent and Gulf Coast regions of
the United States whose level of drilling activity is related to oil and gas
prices, among other factors.
Beginning in October 1996, AnSon Partners Limited Partnership ("APLP")
initiated a series of transactions among its wholly owned affiliates, Anadarko,
a partnership, and Bayard Drilling Company ("BDC"), a corporation, and the
Company. These series of transactions resulted in the corporate capitalization
of the Company in December 1996 with net assets, primarily drilling rigs,
previously owned by Anadarko. Such transactions were accounted for as a
reorganization of entities under common control.
NOTE B -- SUMMARY OF ACCOUNTING POLICIES
The summary of significant accounting policies applied in the preparation
of the accompanying financial statements follows.
1. Basis of Presentation and Consolidation
The financial statements and information for periods prior to December 1,
1996 represent those of the predecessor. The consolidated financial statements
for periods after December 31, 1996 include the accounts of the Company and its
wholly-owned subsidiary, Trend Drilling Company ("Trend"). All significant
intercompany accounts and transactions have been eliminated.
2. Cash
The Company considers all cash and investments with an original maturity of
90 days or less to be cash equivalents. The Company maintains its cash in a bank
deposit account which, at times, may exceed federally insured limits. The
Company has not experienced any losses in such accounts and believes it is not
exposed to any significant credit risk on cash.
3. Investments
Investments consist of certificates of deposits pledged to state insurance
departments and insurance companies to support payment of workers compensation
claims.
4. Concentration of Credit Risk
The primary market for the Company's services are independent oil and gas
companies whose level of activities are related to, among other things, oil and
gas prices. The Company performs ongoing credit evaluations of its customers and
provides for potential credit losses when necessary. At June 30, 1997,
approximately 71% of the Company's trade receivables and over 80% of total
revenues were derived from five customers.
5. Property and Equipment
Property and equipment are stated at cost, reduced by provisions to
recognize economic impairment in value when management determines that such
impairment has occurred. Drilling equipment is depreciated using the declining
balance method over the estimated useful lives from five to twelve years. Other
property
F-8
<PAGE> 77
BAYARD DRILLING TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION AT JUNE 30, 1997 AND FOR THE PERIOD
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
and equipment are depreciated on a declining balance basis over estimated useful
lives from three to ten years. Maintenance and repairs on drilling equipment are
capitalized if such expenditures are significant and extend the lives of the
equipment; otherwise maintenance and repairs are expensed as incurred. When
assets are sold, retired or disposed of, the cost and related accumulated
depreciation are eliminated from the accounts and the gain or loss is
recognized.
6. Revenue Recognition
Revenues generated from the Company's dayrate drilling contracts are
recognized as services are performed. For all drilling contracts under which the
Company bears the risk of completion (such as footage and turnkey contracts)
revenues and expenses are recognized using the completed contracts method. When
estimates of projected revenues and expenses indicate a loss, the total
estimated loss is accrued.
7. Net Earnings (Loss) Per Share
Earnings per common and equivalent shares is computed based on the weighted
average number of common and equivalent shares outstanding during the period.
Under guidelines issued by the Securities and Exchange Commission, common
shares, options and warrants issued prior to a public offering at prices below
the initial offering price are treated as outstanding for all periods presented
(using the Treasury stock method) in computing net earnings (loss) per share.
8. Income Taxes
Income taxes were not provided in the financial statements for earnings
attributable to Anadarko since the partners would pay income taxes or receive as
a deduction their distributive share of Anadarko's taxable income or loss. Pro
forma adjustments are reflected on the statement of operations to provide for
income taxes in accordance with Statement of Financial Accounting Standards No.
109 at an effective rate of 38%.
The Company uses the liability method of accounting for deferred income
taxes under SFAS No. 109, whereby deferred tax assets and liabilities are
recognized based upon differences between the financial statement and tax bases
of assets and liabilities using presently enacted tax rates. If it is more
likely that not some portion or all of a deferred tax asset will not be
realized, a valuation allowance is recognized.
9. Goodwill and Other Assets
Goodwill related to the acquisition of Trend is being amortized over twelve
years. Amortization expense of $86,000 has been recognized as of June 30, 1997.
Other assets consist of (i) organizational costs incurred for the
organization of Bayard and acquisition of Trend, (ii) debt issuance costs
incurred on the term loan disclosed in Note G, and (iii) deferred contract costs
related to options granted to a related party. Amortization expense for such
other assets is recognized over one to five years on a straight-line basis.
$667,626 of amortization expense has been recognized for the six months ended
June 30, 1997 for these costs.
On an ongoing basis, management reviews the valuation and amortization of
goodwill and other intangibles to determine possible impairment. The
recoverability of these assets is assessed by determining whether the
amortization can be recovered from undiscounted future cash flows.
F-9
<PAGE> 78
BAYARD DRILLING TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION AT JUNE 30, 1997 AND FOR THE PERIOD
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
10. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period; accordingly actual results could differ from those estimates.
11. Fair Value of Financial Instruments
The Company's financial instruments consist of cash and investments which
approximate fair value because of the short maturity of those instruments, and
payable to an affiliate which approximates fair value due to the demand nature
of this obligation and a floating rate term loan which approximates fair value
because the interest rate adjusts to the market rate.
12. Interim Financial Statements and Disclosures
In the opinion of management, the unaudited interim financial statements
for June 30, 1997 and 1996 and unaudited interim financial statement disclosures
subsequent to December 31, 1996 include all adjustments, consisting of normal
recurring accruals, necessary to present fairly the Company's financial position
as of June 30, 1997 and results of operations and cash flows for the six months
ended June 30, 1997 and 1996. Results for the period ended June 30, 1997 are not
necessarily indicative of the results to be expected for the entire fiscal year.
NOTE C -- ACQUISITIONS
On May 1, 1997, the Company completed the acquisition of the common stock
of Trend ("Trend Acquisition") for $18 million in cash and 250,000 shares of
common stock valued at $1,520,000. The Company incurred costs of approximately
$307,000 in connection with this acquisition.
The Trend Acquisition was accounted for as a purchase. The following is an
analysis of the allocation of the purchase price:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Current assets.............................................. $ 2,583
Property and equipment...................................... 20,698
Goodwill.................................................... 6,013
Current liabilities......................................... (1,882)
Long-term liabilities....................................... (1,572)
Deferred income tax liability............................... (6,013)
-------
Purchase price.............................................. $19,827
=======
</TABLE>
On June 1, 1997, the Company acquired six drilling rigs from Ward Drilling
Company, Inc. ("Ward Acquisition") for approximately $8 million in cash and
400,000 shares of common stock valued at $3.2 million plus warrants to purchase
200,000 shares of common stock at $10.00 per share. The warrant had an estimated
fair market value of $285,000 at the agreement closing date, which was recorded
as an increase to property and equipment and additional paid in capital.
F-10
<PAGE> 79
BAYARD DRILLING TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION AT JUNE 30, 1997 AND FOR THE PERIOD
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
The following is the unaudited pro forma results of operations as if Trend
and Ward had been acquired January 1, 1996 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1997
----------------- ----------------
<S> <C> <C>
Revenues............................................. $36,930 $26,454
======= =======
Net Loss............................................. $(1,298) $ (563)
======= =======
Loss per common share................................ $ (.11) $ (.05)
======= =======
</TABLE>
NOTE D -- PROPERTY AND EQUIPMENT
Major classes of property and equipment consist of the following:
<TABLE>
<CAPTION>
SIX MONTHS
DECEMBER 31, ENDED
----------------- JUNE 30,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Drilling rigs and components............................ $21,152 $41,682 $106,617
Automobiles, trucks, and trailers....................... 1,546 431 1,332
Buildings and property.................................. -- -- 277
Furniture, fixtures, and other.......................... 69 7 208
------- ------- --------
22,767 42,120 108,434
Less accumulated depreciation......................... 16,424 15,765 17,608
------- ------- --------
$ 6,343 $26,355 $ 90,826
======= ======= ========
</TABLE>
NOTE E -- CHANGE IN ESTIMATED LIVES
Effective January 1, 1995, the Company changed the estimated remaining
lives of its drilling rigs and other related drilling equipment to 84 months
from remaining lives which ranged from 31 months to 113 months. The Company also
changed the estimated remaining life of drill collars from 20 months to 36
months. These changes were made to more closely approximate the remaining useful
lives of such assets. The effect of this change was to decrease depreciation
expense by approximately $539,000 for the year ended December 31, 1995.
Effective January 1, 1996, the Company changed the estimated remaining
lives of certain drilling component equipment from 84 months to 120 months and
changed the estimated remaining life of drill collars and pipe from 36 months to
60 months. After review and study by the Company, the useful lives of drilling
rigs acquired after January 1, 1996 were changed from 84 months to 144 months.
These changes were made to more closely approximate the remaining useful lives
of such assets. The effect of these changes was to increase pro forma net
earnings by approximately $251,000, net of pro forma income taxes of $154,000,
or $.02 per share for the year ended December 31, 1996.
NOTE F -- INCOME TAXES
On October 28, 1996, Anadarko conveyed its operating assets to its
wholly-owned subsidiary, BDC, which caused a change in tax status of the
drilling operations from a partnership to a taxable corporation. A deferred tax
asset was recognized for the temporary differences which existed at the date of
conveyance
F-11
<PAGE> 80
BAYARD DRILLING TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION AT JUNE 30, 1997 AND FOR THE PERIOD
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
together with a related valuation allowance. At December 31, 1996, the Company
has net operating loss carry forwards of approximately $418,000 which will
expire in 2011 if unused.
Components of net deferred income tax liabilities are as follows:
<TABLE>
<CAPTION>
OCTOBER 28, DECEMBER 31,
1996 1996
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets (liabilities)
Operating loss carryforwards.............................. $ -- $ 167
Property and equipment.................................... 1,818 (345)
Total valuation allowance................................. (1,818) --
------- -----
Net deferred tax liabilities........................... $ -- $(178)
======= =====
</TABLE>
The Company's effective income tax rate differed from the federal statutory
rate of 34% as follows for the years ended December 31: (in thousands)
<TABLE>
<CAPTION>
1995 1996
-------- ---------
<S> <C> <C>
Income tax expense (benefit) at federal statutory rate...... $ (75) $ 147
Income tax (expense) benefit attributable to individual
partners.................................................. 75 (129)
-------- ---------
$ -- $ 18
======== =========
</TABLE>
The Company's valuation allowance on tax assets was established October 28,
1996 due to a change in taxable status and decreased $1,818,000 during the
period from October 28, 1996 to December 31, 1996. The Company was not a taxable
entity in 1995 and had no valuation allowance. Effective December 1, 1996, the
Company acquired assets with deferred tax liabilities of approximately $2
million in which the purchase price allocation resulted in the reduction of the
Company's tax asset valuation allowance of approximately $1,724,000.
NOTE G -- LONG-TERM DEBT AND SUBORDINATED NOTES
Long-term debt at December 31, 1996 consisted of borrowings under loan
agreements (the "Loan Agreements") which provide for a term loan (the "Term
Loan") and a revolving loan (the "Revolving Loan"). The Term Loan of $7,000,000
bears interest at the Company's choice of LIBOR plus 4.25% (9.65% at December
31, 1996) or the prime rate of Chase Manhattan Bank, N.A. and requires monthly
payments of principal and interest in amounts sufficient to repay borrowings at
maturity on March 31, 2002. The Loan Agreements permit borrowings to a maximum
of $20 million under the Term Loan if defined collateral provisions are met. The
loan is collateralized by drilling equipment.
The Loan Agreements also permit borrowings up to $4 million under the
Revolving Loan through December 31, 1998 subject to a $2 million limitation if
the borrowings under the Term Loan exceed $17 million. Amounts advanced under
the Revolving Loan, if any, will be converted to a term loan on December 31,
1998 and will be repaid in monthly installments until maturity on January 31,
2002.
Starting in 1997, the Loan Agreements require the maintenance of defined
collateral values, cash flow and liquidity ratios, financial reporting
requirements, and the maintenance of total liabilities to tangible net worth not
greater than 1.25 and imposes certain limitations on capital expenditures and
incurrence of additional debt.
F-12
<PAGE> 81
BAYARD DRILLING TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION AT JUNE 30, 1997 AND FOR THE PERIOD
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
A December 31, 1996, the aggregate yearly maturities on long-term
obligations are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
-----------------------
<S> <C>
1997................................................... $ 947,000
1998................................................... 1,240,000
1999................................................... 1,365,000
2000................................................... 1,503,000
2001................................................... 1,654,000
Thereafter............................................. 291,000
----------
$7,000,000
==========
</TABLE>
In May 1997, the Company amended and increased the availability under the
Loan Agreements. The Term Loan provides the Company up to $30.5 million for the
purchase of additional land drilling rigs, the refurbishment of such rigs and
equipment and for working capital purposes. The Revolving Loan provides the
revolving credit loans of up to $10 million, $2 million of which is available
for the issuance of letters of credit, and which is being used for general
corporate purposes. Amounts outstanding under the Revolving Loan bear interest
based on Fleet National Bank's prime rate plus 1.5% (10% at June 30, 1997) and
mature in April 2000. Amounts outstanding under the Term Loan bear interest, at
the election of the Company, at floating rates equal to Chase Manhattan Bank's
prime rate plus 2.0% or LIBOR plus 4.25% (9.94% at June 30, 1997) and mature in
March 2002. The Loan Agreements are collateralized by substantially all of the
assets of the Company, including all drilling rigs, equipment and drilling
contracts, and contain customary restrictive covenants (including covenants
restricting the ability of the Company to pay dividends or encumber assets) and
an affirmative covenant to maintain Total Available Liquidity (as defined in the
Loan Agreements) of at least $4.5 million through December 31, 1997 and $3
million through December 31, 1998. Pursuant to the Loan Agreements, the Company
must maintain certain financial ratios, including a Cash Flow Coverage ratio (as
defined in the Loan Agreements) of at least 1.25 to 1 until December 1997, 1.5
to 1 in 1998 and 1.75 to 1 thereafter and a ratio of Total Liabilities (as
defined in the Loan Agreements) to Tangible Net Worth no greater than 1.25 to 1
in 1997 and 1 to 1 in 1998. Under the Loan Agreements the Company is obligated
to pay certain fees, including an annual commitment fee in an amount equal to
0.5% of the unused portion of the commitment.
Additionally, the Company issued Subordinated Notes due May 1, 2003 in the
original principal amounts of $18 million and $2.52 million (the "Subordinated
Notes") to Chesapeake Energy Corporation ("Chesapeake") and Energy Spectrum
Partners LP ("Energy Spectrum"), respectively. The Subordinated Notes bear
interest at either (i) 11% per annum, payable in cash or (ii) 12.875% per annum,
payable in the form of additional Subordinated Notes, which interest is payable
quarterly in arrears. On each quarterly interest payment date, the Company may
make an election as to the interest rate to be applied for the previous quarter.
The Subordinated Notes are redeemable, solely at the option of the Company, in
whole or in part, at any time after May 31, 1998 at varying redemption prices.
The Company must offer to redeem the Subordinated Notes upon the occurrence of
certain events constituting a "Change of Control" (as defined in the
Subordinated Notes) at a redemption price equal to 100% of the principal amount
thereof, together with accrued and unpaid interest, if any, to the date of
redemption. The Subordinated Notes are convertible into Common Stock at the
option of the Company, in whole or in part, in conjunction with a "Convertible
Event" (as defined in the Subordinated Notes), which includes certain
underwritten public offerings (including the Offering), mergers, consolidations
and other business combination transactions. The Subordinated Notes are general
unsecured subordinated obligations of the Company that are subordinated in
rights of payment to all existing and future senior indebtedness of the Company,
pari passu with all existing and future subordinated
F-13
<PAGE> 82
BAYARD DRILLING TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION AT JUNE 30, 1997 AND FOR THE PERIOD
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
indebtedness of the Company and senior in right of payment to all future junior
subordinated indebtedness of the Company.
NOTE H -- RELATED PARTY TRANSACTIONS
Before the corporate capitalization, Anson Gas Corporation served as the
managing general partner responsible for all management and operational
functions of the Company and charged the Company for such expenses. The Company
expensed approximately $198,000, $390,000 and $435,000 for such services
received in 1996, 1995 and 1994, respectively.
Prior to December 31, 1996, the Company and its affiliates made advances to
each other from time to time which generally had no specific repayment terms.
The Company's payable to affiliate at December 31, 1995 was in the form of a
noninterest-bearing payable to APLP.
The Company purchased drilling equipment and supplies from an affiliate
totaling $2,862,000, $779,000 and $904,000 in 1996, 1995 and 1994, respectively.
The Company also transferred drilling equipment to an affiliate at the Company's
basis totaling $29,000, net of accumulated depreciation, which resulted in a
decrease in payable to affiliate.
An affiliate transferred drilling equipment to Anadarko at the affiliates
basis totaling $173,000, net of accumulated depreciation, during 1995 which has
been reflected as an increase in payable to affiliate.
In December 1996, Anadarko granted the Company a transferrable option,
exercisable at any time prior to June 30, 1998, to either purchase from Anadarko
a storage yard located in Weatherford, Oklahoma (the "Weatherford Storage Yard")
for a price of $1,000 in cash or lease from Anadarko, for any period specified
by the Company through a date not later than December 31, 1999, the Weatherford
Storage Yard for a lease price of $100 per year. In August 1997, the Company
acquired from Anadarko approximately 5 acres of land also in Weatherford,
Oklahoma, in consideration for the relinquishment by the Company of the option
to acquire or lease the Weatherford Storage Yard.
In May 1997, the Company paid Energy Spectrum a fee in the amount of
$220,000 for financial advisory and other services rendered to the Company in
connection with the completion of the Trend Acquisition, including the valuation
and negotiation of the Trend Acquisition and for assistance in the arrangement
of alternative financing sources and structuring, negotiating and closing the
amended financing arrangements with CIT and Fleet. The Company also reimbursed
Energy Spectrum for expenses incurred in connection with the rendering of such
services.
The Company has in the past purchased rigs and related equipment from U.S.
Rig & Equipment, Inc., an affiliate of Roy T. Oliver, a director of the Company.
From January 1997 through June 30, 1997, the Company paid U.S. Rig & Equipment,
Inc. an aggregate of $1.3 million in connection with such purchases.
Additionally, in August 1997, the Company sold one of its rigs to an affiliate
of Mr. Oliver for $500,000. The Company believes that this sale price is
equivalent to the price that would have been received from an unaffiliated third
party.
The Company has engaged affiliates of APLP for the provision of trucking
services related to the movement of the Company's rigs on numerous occasions.
From January 1997 through June 30, 1997, the Company paid such affiliates of
APLP an aggregate of $225,000 in consideration for such trucking services.
Since December 13, 1996, APLP has made available to the Company certain of
APLP's employees, office space and administrative equipment, such as computer
and telephone systems. In consideration for such assistance, the Company had
reimbursed APLP an aggregate of $135,000 as of June 30, 1997 and APLP continues
to provide certain computer services to the Company.
F-14
<PAGE> 83
BAYARD DRILLING TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION AT JUNE 30, 1997 AND FOR THE PERIOD
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
Accounts receivable at June 30, 1997 included $4.4 million of receivables
from related parties. Accounts payable at June 30, 1997 included $838,000 owed
to related parties.
NOTE I -- SIGNIFICANT CUSTOMERS
During 1996, sales to two individual customers totaled 75% and 18% of
drilling revenues. During 1995, sales to one customer totaled 36% of drilling
revenue. During 1994, sales to two customers totaled 34% and 11% of total
drilling revenues.
NOTE J -- STOCKHOLDER'S EQUITY AND OPTIONS
In December 1996, the Company issued 2,000,000 shares of Common Stock to
Anadarko for the operating assets of BDC, Anadarko's subsidiary. Further, the
Company issued 2,000,000 shares of Common Stock to Energy Spectrum for $10
million cash. The Company also acquired six drilling rigs and related equipment
by the issuance of 1,600,000 shares of Common Stock and put options on the
Company's common stock. The drilling rigs were recorded at the estimated fair
value of the Common Stock and put options and the net deferred income tax
liability assumed. If the Company does not complete an initial public stock
offering prior to June 2, 1998, the holder of the options has a thirty-day
period in which to request that the Company purchase the 1,600,000 shares of
Common Stock at $7.50 per share. The Company, at its option, can either purchase
the shares or issue 400,000 additional shares of Common Stock to the holder. The
estimated fair value of the put options are recorded as additional contributed
capital to the Company.
The Company executed in December 1996 certain drilling agreements to supply
six drilling rigs to Chesapeake at rates equal to defined comparable market
rates but not less than $5,000 per day per rig. The Company granted the operator
an option to purchase 2,000,000 shares of Common Stock at $6 per share, subject
to performance of the operator under the drilling agreement. The estimated fair
value of the options of $1,100,000 was recorded as additional paid-in capital
and a deferred charge to be amortized over a twelve month period consistent with
the annual negotiations of contract terms.
In February 1997, the Company sold 100,000 shares of Common Stock at $2.50
per share to the President of the Company, which are subject to the terms of a
Restricted Stock Award Agreement.
On December 10, 1996, the Company granted the issuer of the Term Loan (Note
G) warrants to immediately purchase up to 290,000 shares of the Company's Common
Stock at $8 per share or up to 300,000 shares at $8 per share when total
outstanding Common Stock exceeds 6,000,000 shares. The warrants expire at the
earlier of December 13, 2001 or eighteen months after completion of the initial
public stock offering by the Company. The warrant holder can also elect to
receive in stock the excess of the stock market value over the warrant exercise
price. These warrants have an estimated fair value of $219,000, which has been
recorded as debt issue costs and is being amortized over the term of the loan.
In connection with the Trend Acquisition during May 1997, the Company
issued 250,000 shares of Common Stock at $6 per share.
The Company purchased during May 1997, two drilling rigs from U.S. Rig &
Equipment, Inc. for cash and granted options to purchase 100,000 shares of
Common Stock at $8 per share.
On May 31, 1997, as a part of the Ward Acquisition, the Company issued
400,000 shares of Common Stock at $7 per share and issued a warrant to purchase
up to 200,000 shares of Common Stock at an exercise price of $10 per share. The
warrant had an estimated fair market value of $285,000 at the agreement closing
date, which was recorded as an increase to property and equipment and additional
paid in capital.
F-15
<PAGE> 84
BAYARD DRILLING TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION AT JUNE 30, 1997 AND FOR THE PERIOD
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
In connection with the issuance of Subordinated Notes executed in May 1997,
the Company issued 1,140,000 shares of Common Stock at $7 per share.
Additionally, the Company issued two series of detachable Warrants, designated
as Series A Warrants and Series B Warrants. The Series A Warrants are
exercisable at a price of $.01 per share and the Series B Warrants are
exercisable at $7.50 per share. Both Warrants expire 72 months from issuance.
The Company issued Series A Warrants and Series B Warrants representing the
right to purchase 798,000 shares and 912,000 shares of Common Stock,
respectively. The fair market value of these warrants at the agreement closing
date was $6 million, $4,024,000 of which was attributable to the Subordinated
Notes. The warrant value applicable to the Subordinated Notes was allocated
between the Subordinated Notes and warrants and recorded as a discount to the
Subordinated Notes and additional paid in capital.
In October, 1995 SFAS No. 123 "Accounting for Stock Based Compensation" was
issued. The statement required the computation of compensation expense for
stock, stock options and other equity instruments issued to employees based on
the fair value of the instrument at the date the instrument was granted. The
compensation is to be recorded as an expense in the financial statements or
alternatively, disclosed. The Company has elected to disclose such information.
In June 1997, the Company granted options to employees to purchase 59,600
shares of Common Stock at $8 per share. During 1997, the Company issued stock
options to three executive officers pursuant to the 1997 Stock Option and Stock
Award Plan to purchase 200,000, 50,000 and 50,000 shares of Common Stock,
respectively, at an exercise price of $5, $5 and $10 per share, respectively.
None of such options has been exercised, and all of such options remain
outstanding. No compensation expense was recorded related to these stock option
agreements as the exercise price exceeded the fair market value of the Company's
Common Stock at the date of grant.
NOTE K -- COMMITMENTS AND CONTINGENCIES
In December 1996, the Company entered into a drilling agreement whereby
Chesapeake agreed to engage six of the Company's rigs for two-year terms,
subject to annual negotiations. The Company has the option to extend the
agreement with respect to any two of the rigs for two additional years on the
same terms. Chesapeake has the option to extend each of the other four
individual drilling rigs for two additional years on the same terms. The
agreement provides standard day rates, subject to upward, but not downward,
adjustment annually to approximately $100 per day less than the average
then-current market rates for the areas of operation. This adjustment is
determined each November during the term of the agreement and becomes effective
for any wells spudded after December 1, while such agreement remains in effect.
If a timely agreement is not reached as to a rate adjustment, the Company will
have the option to terminate the contract for the respective rig at the
conclusion of operations for the related well being drilled.
The Company has entered into two year employment agreements with three
executive officers, which provide for the payment of the remaining term of each
agreement upon a change of control. As of June 30, 1997, benefits under such
agreements, assuming a change of control, would aggregate approximately
$547,500.
As of June 30, 1997, the Company had construction commitments totaling
approximately $3.5 million for five rigs in various stages of refurbishment.
NOTE L -- SUBSEQUENT EVENTS
In August 1997, the Company issued 3,149,000 shares of Common Stock to
Chesapeake for $9 million in cash and the relinquishment by Chesapeake of its
right to exercise the Chesapeake Option and the warrants issued to it in
connection with the May Financing (the "Chesapeake Transactions"). In connection
with the
F-16
<PAGE> 85
BAYARD DRILLING TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION AT JUNE 30, 1997 AND FOR THE PERIOD
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
Chesapeake Transactions, the Company agreed that, simultaneously with the
Offering, the Company will redeem in full the $18 million principal amount of
Subordinated Notes held by Chesapeake at a cash redemption price of $15 million,
subject to adjustment. The Company estimates a $1.4 million extraordinary loss
from early extinguishment of debt on the Subordinated Notes, which estimate may
change in connection with the adjustment. Also in connection with the Chesapeake
Transactions, the Company waived its right under the Securities Purchase
Agreement to require Chesapeake to purchase additional Common Stock, Warrants
and Subordinated Notes for $3 million.
At the August 19, 1997 Board of Directors meeting, the number of authorized
shares of Common Stock was increased from 10,000,000 to 100,000,000 and the
number of authorized shares of preferred stock was increased from 2,000,000 to
20,000,000. Additionally, a two-for-one stock split effected as a stock dividend
on an August 22, 1997 record date was approved. All stock option data, per share
earnings and references to common stock have been restated to give effect to the
stock split.
On July 31, 1997, Energy Spectrum exercised in full its Series A Warrants,
at a price of $0.01 per share, for 98,000 shares of Common Stock.
F-17
<PAGE> 86
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Bayard Drilling Technologies, Inc.
We have audited the accompanying balance sheets of Trend Drilling Company
as of December 31, 1996 and 1995, and the related statements of operations,
stockholder's equity, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respect, the financial position of Trend Drilling Company as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND, L.L.P.
Oklahoma City, Oklahoma
April 28, 1997
F-18
<PAGE> 87
TREND DRILLING COMPANY
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------
1995 1996
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 448,857 $ 570,873
Accounts receivable....................................... 2,398,231 3,474,043
Other current assets...................................... 34,899 40,661
Deferred tax asset........................................ 175,593 --
---------- ----------
Total current assets.............................. 3,057,580 4,085,577
Property, plant and equipment, net.......................... 4,781,019 4,176,964
Goodwill, net of accumulated amortization of $84,000 and
$60,000, respectively..................................... 60,000 36,000
Deferred tax asset.......................................... 186,688 379,850
---------- ----------
Total assets...................................... $8,085,287 $8,678,391
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $2,358,575 $1,424,415
Accrued liabilities....................................... 626,883 1,049,338
Income taxes payable...................................... -- 986,834
Current portion of long-term debt......................... 1,457,976 415,445
Deferred tax liability.................................... -- 11,939
---------- ----------
Total current liabilities......................... 4,443,434 3,887,971
---------- ----------
Long-term debt.............................................. 1,755,437 1,339,992
---------- ----------
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Common stock, $1 par value, 25,000 shares authorized; 500
shares issued and outstanding.......................... 500 500
Additional paid-in capital................................ 2,483,880 2,483,880
Retained earnings (accumulated deficit)................... (597,964) 966,048
---------- ----------
Stockholders' equity.............................. 1,886,416 3,450,428
---------- ----------
Total liabilities and stockholders' equity........ $8,085,287 $8,678,391
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-19
<PAGE> 88
TREND DRILLING COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------- FOUR MONTHS ENDED
1994 1995 1996 APRIL 30, 1997
----------- ----------- ----------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Drilling contracts.............. $12,563,991 $12,283,649 $15,692,056 $6,389,703
----------- ----------- ----------- ----------
OPERATING EXPENSES:
Drilling........................ 10,070,842 9,218,081 11,752,135 4,844,669
General and administrative...... 1,415,842 1,878,347 1,647,330 411,687
Depreciation and amortization... 1,077,292 1,344,835 1,602,832 276,018
----------- ----------- ----------- ----------
Total operating
expenses.............. 12,563,976 12,441,263 15,002,297 5,532,374
----------- ----------- ----------- ----------
Operating income (loss)........... 15 (157,614) 689,759 857,329
----------- ----------- ----------- ----------
OTHER INCOME (EXPENSE):
Interest expense................ (183,768) (280,741) (261,331) (150,000)
Interest income................. 5,880 17,380 8,035 --
Other........................... 140,021 43,673 53,523 --
Gain on disposition of
equipment.................... 71,366 42,573 2,055,230 --
----------- ----------- ----------- ----------
Total other income
(expense)............. 33,499 (177,115) 1,855,457 (150,000)
----------- ----------- ----------- ----------
Income (loss) before income
taxes........................... 33,514 (334,729) 2,545,216 707,329
Income tax benefit (expense)...... (17,177) 112,906 (981,204) (268,785)
----------- ----------- ----------- ----------
Net Income (loss)................. $ 16,337 $ (221,823) $ 1,564,012 $ 438,544
=========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-20
<PAGE> 89
TREND DRILLING COMPANY
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
RETAINED
CAPITAL IN EARNINGS
COMMON EXCESS OF (ACCUMULATED
STOCK PAR VALUE DEFICIT) TOTAL
------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Balance, December 31, 1993.................. $500 $2,483,880 $ (392,478) $2,091,902
Net income................................ -- -- 16,337 16,337
---- ---------- ---------- ----------
Balance, December 31, 1994.................. 500 2,483,880 (376,141) 2,108,239
Net loss.................................. -- -- (221,823) (221,823)
---- ---------- ---------- ----------
Balance, December 31, 1995.................. 500 2,483,880 (597,964) 1,886,416
Net income................................ -- -- 1,564,012 1,564,012
---- ---------- ---------- ----------
Balance, December 31, 1996.................. $500 $2,483,880 $ 966,048 $3,450,428
==== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-21
<PAGE> 90
TREND DRILLING COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------- FOUR MONTHS ENDED
1994 1995 1996 APRIL 30, 1997
----------- ----------- ----------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)..................... $ 16,337 $ (221,823) $ 1,564,012 438,544
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization...... 1,077,292 1,344,836 1,602,832 276,018
Gain on disposition of property,
plant and equipment.............. (71,366) (42,573) (2,055,230) --
Deferred tax expense (benefit)..... 17,177 (112,906) (5,630) 367,911
Change in assets and liabilities:
Accounts receivable.............. (1,436,642) (120,759) (1,075,812) 1,078,330
Prepaid expenses................. 2,867 (19,349) (5,762) (537,332)
Accounts payable and accrued
liabilities................... 903,866 929,719 (511,705) (1,242,769)
Income taxes payable............. -- -- 986,834 268,785
Deferred revenue................. (172,250) -- -- --
----------- ----------- ----------- ----------
Net cash provided by operating
activities.................. 337,281 1,757,145 499,539 649,487
----------- ----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of equipment... 264,219 42,573 2,872,647 --
Capital expenditures.................. (3,645,969) (1,552,257) (1,792,194) (890,371)
----------- ----------- ----------- ----------
Net cash provided by (used in)
investing activities........ (3,381,750) (1,509,684) 1,080,453 (890,371)
----------- ----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt........ 3,000,000 850,000 775,000 --
Principal payments under debt
obligations........................ (299,809) (658,104) (2,232,976) (183,049)
----------- ----------- ----------- ----------
Net cash provided by (used in)
financing activities........ 2,700,191 191,896 (1,457,976) (183,049)
----------- ----------- ----------- ----------
Net increase (decrease) in cash and cash
equivalents........................... (344,278) 439,357 122,016 (423,933)
Cash and cash equivalents, beginning of
period................................ 353,778 9,500 448,857 570,873
----------- ----------- ----------- ----------
Cash and cash equivalents, end of
period................................ $ 9,500 $ 448,857 $ 570,873 146,940
=========== =========== =========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest........................... $ 136,857 $ 232,553 $ 254,110 150,000
=========== =========== =========== ==========
Income taxes....................... $ -- $ -- -- 275,000
=========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-22
<PAGE> 91
TREND DRILLING COMPANY
NOTES TO THE FINANCIAL STATEMENTS
INFORMATION RELATING TO THE FOUR MONTHS ENDED APRIL 30, 1997 IS UNAUDITED
(A) NATURE OF OPERATIONS
Trend Drilling Company (the "Company"), an Oklahoma corporation, began
operations in 1981. The Company provides contract drilling services in the
Mid-Continent region of the United States. The Company's customers are primarily
independent oil and gas companies.
On February 13, 1997, the owner of the Company and sole stockholder,
entered into a stock purchase agreement (the "Agreement"), with Bayard Drilling
Technologies, Inc. ("Bayard") for the sale of the Company (the "Bayard
Acquisition"). The executed agreement states a purchase price of $18 million
plus shares of Bayard stock, adjusted for changes in working capital as of the
closing date compared to December 31, 1996.
(B) SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
REVENUE RECOGNITION
The Company recognizes revenue and expenses on dayrate contracts as the
drilling progresses (percentage-of-completion method). For footage and turnkey
contracts, the Company recognizes the revenue and expenses upon completion of
the well (completed-contract method).
Revenue earned of $279,390, but not billed, is included in accounts
receivable at December 31, 1996.
CASH AND CASH EQUIVALENTS
For purposes of the balance sheet, the Company considers cash equivalents
to be all instruments that had a remaining maturity of three months or less at
the date of purchase.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost. Depreciation of
property, plant and equipment is determined primarily on the straight-line
method over the estimated useful lives of the assets at the following rates:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings................................................... 15-39
Drilling rigs and related equipment......................... 5-14
Vehicles.................................................... 5
Furniture and office equipment.............................. 5-10
</TABLE>
Upon retirement or disposal, the related cost and accumulated depreciation
are removed from the accounts and any gain or loss is included in operations.
Repairs and maintenance, which extend the useful life of property, plant and
equipment, are capitalized.
GOODWILL
The excess of the purchase price over the fair value of assets acquired is
amortized on the straight-line method over five years. Amortization expense was
$24,000 for the years-ended December 31, 1996, 1995 and 1994.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). Accordingly, deferred taxes are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
F-23
<PAGE> 92
TREND DRILLING COMPANY
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
INFORMATION RELATING TO THE FOUR MONTHS ENDED APRIL 30, 1997 IS UNAUDITED
the enacted tax rate in effect in the years in which the differences are
expected to reverse. Deferred tax expense represents the change in the deferred
tax liability balance.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade receivables with oil
and natural gas companies. For the years ended December 31, 1996 and 1995 over
ninety-five percent of the Company's trade receivables were from ten or less
customers. These customers also represented 63%, 51% and 54% of total revenues
for 1996, 1995 and 1994, respectively.
At December 31, 1996 and 1995, the Company had deposits in domestic banks
in excess of federally insured limits of approximately $467,000 and $348,000,
respectively.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts for certain revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INTERIM FINANCIAL STATEMENTS AND DISCLOSURES
In the opinion of management, the unaudited interim financial statements
for the period ended April 30, 1997 and unaudited interim financial statement
disclosures subsequent to December 31, 1996 include all adjustments, consisting
of normal recurring accruals, necessary to present fairly the Company's results
of operations for the four months ended April 30, 1997.
(C) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following at December 31,
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Building.................................................. $ 295,946 $ 295,946
Drilling rigs and related equipment....................... 12,323,939 12,887,107
Vehicles.................................................. 233,018 227,018
Furniture and office equipment............................ 153,984 141,131
Leasehold costs........................................... -- 9,290
----------- -----------
13,006,887 13,560,492
Less accumulated depreciation............................. 8,225,868 9,383,528
----------- -----------
$ 4,781,019 $ 4,176,964
=========== ===========
</TABLE>
(D) LONG-TERM DEBT
Long-term debt consisted of the following at December 31,
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Notes payable to banks...................................... $3,213,413 $1,755,437
Less current portion........................................ 1,457,976 415,445
---------- ----------
Total long-term debt.............................. $1,755,437 $1,339,922
========== ==========
</TABLE>
F-24
<PAGE> 93
TREND DRILLING COMPANY
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
INFORMATION RELATING TO THE FOUR MONTHS ENDED APRIL 30, 1997 IS UNAUDITED
On March 26, 1996, the Company entered into a term loan (the "Note") of
$3,098,058, which consolidated all of the Company's bank borrowings into one
term loan. At December 31, 1996, long-term debt consisted of borrowings under
this note of $1,755,437 which bears an interest rate at the prime rate, adjusted
quarterly (8.25% at December 31, 1996). The Note contains a subjective
acceleration clause which allows the lender to demand payment of the Note when
the lender, at its sole discretion, determines that the Note is impaired.
However, the Note has been classified based on the scheduled maturities in the
accompanying balance sheet as management does not believe such impairment has
occurred. The Note requires the maintenance of financial reporting requirements
and annual personal financial statements from the owner of the Company.
The Note requires monthly payments of principal and interest in amounts
sufficient to repay borrowings at maturity on March 26, 2001. The Note is
collateralized by Accounts Receivable and Property, Plant and Equipment and is
personally guaranteed by the owner of the Company.
At December 31, 1995, long-term debt consisted of borrowings under four
bank notes with an aggregate amount of $3,213,413 which bore interest at a rate
of 1% over prime (which was 8.75% on December 31, 1995).
At December 31, 1996, the aggregate scheduled yearly maturities on
long-term obligations are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1997................................................... $ 415,445
1998................................................... 373,762
1999................................................... 406,799
2000................................................... 442,757
2001................................................... 116,674
----------
$1,755,437
==========
</TABLE>
(E) INCOME TAXES
Income tax expense (benefit) for the years ended December 31, 1994, 1995
and 1996 is summarized as follows:
<TABLE>
<CAPTION>
1994 1995 1996
-------- --------- --------
<S> <C> <C> <C>
Current:
Federal......................................... $ -- $ -- $882,957
State........................................... -- -- 103,877
Deferred:
Federal......................................... 15,369 (101,021) (5,037)
State........................................... 1,808 (11,885) (593)
-------- --------- --------
$ 17,177 $(112,906) $981,204
======== ========= ========
</TABLE>
F-25
<PAGE> 94
TREND DRILLING COMPANY
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
INFORMATION RELATING TO THE FOUR MONTHS ENDED APRIL 30, 1997 IS UNAUDITED
Total income tax expense (benefit) differs from the amount computed by
multiplying income (loss) before income taxes by the U.S. federal income tax
statutory rate. The reasons for this difference are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- --------- ---------
<S> <C> <C> <C>
Computed expected tax expense (benefit)........... $11,394 $(113,807) $ 865,373
State income taxes................................ 1,340 (13,389) 101,808
Non-deductible business meals and entertainment
expense......................................... 4,443 14,290 14,023
------- --------- ---------
$17,177 $(112,906) $ 981,204
======= ========= =========
</TABLE>
The components of the deferred tax assets and (liabilities) consisted of
the following at December 31:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss and tax credit carry-forwards.......... $ 38,549 $ --
Excess of book basis over tax basis of current
liabilities............................................ 112,054 --
Excess of tax basis over book basis of current assets..... 24,990 --
Depreciation of property, plant and equipment............. 190,488 383,650
Deferred tax liabilities:
Excess of tax basis over book basis of current
liabilities............................................ -- (11,939)
Amortization of goodwill.................................. (3,800) (3,800)
-------- --------
Net deferred tax asset...................................... $362,281 $367,911
======== ========
</TABLE>
(F) RELATED PARTIES
The Company has several affiliates in the oil and gas industry with which
the Company does business throughout the year. The type of transactions with
these related parties varies from the Company drilling wells for affiliates to
affiliates moving rigs from one well site to another, as well as receiving
certain administrative support for which the Company was not billed (i.e.,
computer support).
As of December 31, 1996 and 1995, the Company had trade receivables with
related parties in the amount of $375,016 and $32,633, respectively, and trade
payables with related parties of $168,169 and $505,426, respectively.
For the period ended December 31, 1996, 1995 and 1994 the Company had
revenues of $462,535, $917,743 and $1,422,658, respectively and expenses of
$2,121,975, $2,003,356 and $1,660,169, respectively, with related parties.
The Company leases office space from an affiliate. For the years ended
December 31, 1996, 1995 and 1994, the Company paid rent of approximately
$10,000.
The Company has an agreement for 1997 to continue renting this office space
for approximately $1,000 per month.
(G) EMPLOYEE BENEFIT PLAN
The Company has a profit sharing plan ("the Plan") for certain eligible
employees who have attained the age of 21 and completed at least six months of
service. Participants may contribute up to 15% of compensation for any Plan
year. The Company's discretionary contribution is allocated to each
participant's account in the proportion which that participant's compensation
bears to the total compensation of all eligible participants. The Company made
contributions of approximately $130,000, $35,000 and $20,000 to the Plan in
1996, 1995 and 1994, respectively.
F-26
<PAGE> 95
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Bayard Drilling Technologies, Inc.
We have audited the accompanying balance sheet of Ward Drilling Company,
Inc. as of December 31, 1996, and the related statement of operations and
retained earnings, and cash flows for the year ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Ward Drilling Company as of
December 31, 1996, and the results of its operations and its cash flows for the
year ended December 31, 1996, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND, L.L.P.
Oklahoma City, Oklahoma
August 22, 1997
F-27
<PAGE> 96
WARD DRILLING COMPANY, INC.
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
CURRENT ASSETS:
Cash...................................................... $ 7,038
Accounts receivable....................................... 1,733,647
Prepaids and other assets................................. 781,470
-----------
Total current assets.............................. 2,522,155
-----------
EQUIPMENT:
Drilling equipment........................................ 14,701,019
Other equipment........................................... 444,606
Other..................................................... 373,263
-----------
15,518,888
Less accumulated depreciation............................. 8,569,372
-----------
Net equipment.......................................... 6,949,516
-----------
Total assets................................. $ 9,471,671
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Book overdraft............................................ $ 118,765
Accounts payable.......................................... 1,246,022
Accrued expenses.......................................... 590,161
Advances from affiliate and stockholder................... 3,265,480
-----------
Total current liabilities......................... 5,220,428
-----------
Note payable to bank........................................ 500,000
-----------
Commitments and contingencies
STOCKHOLDER'S EQUITY:
Common stock of $1 par value. Authorized 25,000 shares;
issued and outstanding 1,000 shares.................... 1,000
Additional paid-in capital................................ 99,014
Retained earnings......................................... 3,651,229
-----------
Total stockholder's equity........................ 3,751,243
-----------
Total liabilities and stockholder's equity... $ 9,471,671
===========
</TABLE>
See accompanying notes to financial statements.
F-28
<PAGE> 97
WARD DRILLING COMPANY, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
DECEMBER 31, FIVE MONTHS ENDED
1996 MAY 30, 1997
------------ -----------------
(UNAUDITED)
<S> <C> <C>
DRILLING REVENUES........................................... $11,384,944 $4,956,971
----------- ----------
OPERATING EXPENSES:
Drilling.................................................. 9,890,597 3,754,240
Depreciation.............................................. 966,328 413,249
General and administrative................................ 484,748 196,747
----------- ----------
Total operating expenses.......................... 11,341,673 4,364,236
----------- ----------
Operating income.................................. 43,271 592,735
----------- ----------
OTHER INCOME (EXPENSE):
Interest income........................................... 34,536 16,810
Interest expense.......................................... (72,056) (27,224)
Gain on sale of assets.................................... 7,895 --
Miscellaneous income...................................... 66,678 30,810
----------- ----------
Total other income................................ 37,053 20,396
----------- ----------
Net income (loss)................................. $ 80,324 $ 613,131
=========== ==========
Retained earnings at beginning of year...................... $ 3,570,905
===========
Retained earnings at end of year............................ $ 3,651,229
===========
</TABLE>
See accompanying notes to financial statements.
F-29
<PAGE> 98
WARD DRILLING COMPANY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
DECEMBER 31, FIVE MONTHS ENDED
1996 MAY 31, 1997
------------ -----------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 80,324 $ 613,131
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation........................................... 966,328 413,249
Gain on sale of assets................................. (7,895) --
Change in assets and liabilities:
(Increase) decrease in accounts receivable........... (485,735) 446,578
(Increase) decrease in prepaids and other assets..... (330,577) 261,266
Decrease in cost incurred or contracts in progress... 463,588 --
Decrease in accounts payable......................... (75,797) (862,693)
Increase (decrease) in accrued expenses.............. 250,400 (275,579)
----------- ---------
Net cash provided by operating activities.............. 860,636 595,952
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment, including major
repairs and betterments................................ (1,564,162) (623,669)
Proceeds from sale of assets.............................. 21,034 --
----------- ---------
Net cash used in investing activities.................. (1,543,128) (623,669)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds on revolving line of credit...................... 50,000
Payments on revolving line of credit...................... -- (500,000)
Advances from affiliate and stockholder................... 1,301,282 634,149
Payments to affiliates.................................... (616,136) --
Decrease in book overdraft................................ (52,671) (113,470)
----------- ---------
Net cash provided by financing activities.............. 682,475 20,679
----------- ---------
Net decrease in cash........................................ (17) (7,038)
Cash at beginning of year................................... 7,055 7,038
----------- ---------
Cash at end of year......................................... $ 7,038 $ --
=========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 57,244 $ 20,000
=========== =========
</TABLE>
See accompanying notes to financial statements.
F-30
<PAGE> 99
WARD DRILLING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
INFORMATION RELATING TO THE FIVE MONTHS ENDED MAY 31, 1997 IS UNAUDITED
(A) NATURE OF OPERATIONS
Ward Drilling Company (the "Company"), an Oklahoma corporation, began
operations in 1981. The Company provides contract drilling services in the
Mid-Continent region of the United States for independent oil and gas companies.
In May 1997, the Company's parent, L.O. Ward Revocable Trust transferred
all the fixed assets of the Company into WD Equipment L.L.C. in anticipation of
the sale of these assets to Bayard Drilling Technologies, Inc. ("Bayard"), which
was consummated on May 31, 1997 (the "Bayard Acquisition"). The Company and
Bayard agreed to a purchase price of approximately $8 million plus 400,000
shares of Bayard stock plus warrants to purchase up to 200,000 shares of Bayard
stock in exchange for the purchase of WD Equipment L.L.C.
(B) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
The Company recognizes revenue and expenses on dayrate contracts as the
drilling progresses (percentage-of-completion method). For turnkey and footage
contracts, the Company recognizes the revenue and expenses upon completion of
the well (completed-contract method).
CASH AND CASH EQUIVALENTS
The Company considers cash equivalents to be all instruments that had a
remaining maturity of three months or less at the date of purchase.
EQUIPMENT
Equipment is recorded at cost. Depreciation on drilling equipment is
determined using the units-of-production method based upon management's
estimates of remaining drilling days by rig. Depreciation on all other equipment
is determined using the straight-line method over the estimated useful lives of
the assets ranging from three to seven years. Upon retirement or disposal, the
related cost and accumulated depreciation are removed from the accounts and any
gain or loss is included in operations.
The costs of major repairs and overhauls which extend the useful life of
drilling equipment are capitalized by charges to the allowance for accumulated
depreciation. Other additions and improvements are charged to the applicable
equipment account.
INCOME TAXES
The Company is an electing S corporation for federal and state income tax
purposes. The Company's taxable income or loss will be included in its
stockholder's income tax return. Accordingly, no provision for income taxes has
been included in these financial statements.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade receivables with oil
and natural gas companies. At December 31, 1996 over ninety-eight percent of the
Company's trade receivables were from four customers. For the year ended
December 31, 1996 the ten largest customers account for over 96% of total
revenues.
At December 31, 1996 the Company had deposits in domestic banks in excess
of federally insured limits of approximately $156,000.
F-31
<PAGE> 100
WARD DRILLING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION RELATING TO THE FIVE MONTHS ENDED MAY 31, 1997 IS UNAUDITED
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts for certain revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(C) NOTE PAYABLE TO BANK
The Company has available a line of credit with a bank for $500,000 which
expires in March 1998. The line of credit is collateralized by inventory,
accounts receivable, and other miscellaneous assets. Interest is at the bank's
base rate plus one percent (9.25% and 9.5% at December 31, 1996 and 1995,
respectively.) Upon consummation of the sale of the Company on May 31, 1997,
this line of credit was extinguished.
(D) RELATED PARTIES
The Company conducts drilling activities for companies owned or controlled
by L.O. Ward, one of the trustees of the L.O. Ward Revocable Trust (the Related
Parties); however no drilling activities were conducted for the Related Parties
in 1996.
General and administrative expense in the accompanying statement of
operations is net of management fee income received from one of the Related
Parties aggregating $10,320 in 1996.
The Company allocates office space and administrative expenses directly to
Related Parties. Amounts allocated under this arrangement aggregated
approximately $25,000 for 1996.
The Company paid approximately $75,000 in 1996 to one of the Related
Parties for services which includes finding drilling contracts for the Company
and certain other administrative services. Certain expenses incurred by the
Related Parties and attributable to the Company's operations are not billed to
the Company.
Accounts receivable at December 31, 1996 included $8,446 of receivables
from affiliated entities. Accounts payable at December 31, 1996 included
$241,233 owed to affiliated entities.
(E) EMPLOYMENT AGREEMENTS
The Company has issued stock appreciation rights to certain employees which
may entitle them to receive bonuses. These bonuses are based on net income and
the ratio of stock appreciation rights owned by the employees to total
outstanding shares of common stock at year end. Ninety-nine stock appreciation
rights were outstanding at December 31, 1996. A bonus payment of approximately
$37,500 was payable to employees at December 31, 1996.
(F) SAVINGS PLAN
The Company participates in a salary deferral retirement plan which is
available to substantially all employees. Participants in the plan may make
contributions to the plan, with the Company matching up to 25% of the employee's
basic contribution. The basic contribution cannot exceed 5% of the employee's
base salary. Total contributions by the Company were approximately $10,000 in
1996.
F-32
<PAGE> 101
WARD DRILLING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION RELATING TO THE FIVE MONTHS ENDED MAY 31, 1997 IS UNAUDITED
(G) CONTINGENCIES
The Company maintains a self insurance plan for workers' compensation and
is liable for claims up to $400,000 per-occurrence. The Company is involved in
legal actions arising out of workers' compensation claims. In the opinion of
management, the ultimate disposition of these matters will not have a material
adverse effect on the Company's financial position. Total expense for workers'
compensation was approximately $335,000 in 1996, and accrued liabilities
included a reserve for unpaid and incurred but not reported claims of $310,000
at December 31, 1996.
F-33
<PAGE> 102
[PICTURE OF RIG]
<PAGE> 103
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY THE SHARES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 10
Use of Proceeds....................... 16
Dividend Policy....................... 16
Dilution.............................. 17
Capitalization........................ 18
Pro Forma Consolidated Financial
Data................................ 19
Selected Consolidated Financial and
Operating Data...................... 25
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 27
Business.............................. 34
Management............................ 44
Principal and Selling Stockholders.... 52
Certain Relationships and Related
Transactions........................ 55
Description of Capital Stock.......... 61
Shares Eligible for Future Sale....... 64
Underwriting.......................... 65
Legal Matters......................... 66
Independent Public Accountants........ 66
Available Information................. 67
Index to Financial Statements......... F-1
</TABLE>
---------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THE PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
8,950,000 SHARES
BAYARD LOGO
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS
PRUDENTIAL SECURITIES INCORPORATED
RAUSCHER PIERCE REFSNES, INC.
RAYMOND JAMES &
ASSOCIATES, INC.
, 1997
======================================================
<PAGE> 104
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
All capitalized terms used and not defined in Part II of this Registration
Statement shall have the meanings assigned to them in the Prospectus which forms
a part of this Registration Statement.
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a statement of estimated expenses incurred by the Company
in connection with the issuance and distribution of the securities being
registered pursuant to this Registration Statement, other than underwriting
discounts and commissions.
<TABLE>
<CAPTION>
AMOUNT
-------
<S> <C>
Securities Act registration fee............................. $49,903
-------
NASD filing fee............................................. 16,968
Blue sky qualification fees and expenses.................... 5,000
Printing and engraving fees and expenses.................... *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Transfer agent and registrar fees and expenses.............. *
American Stock Exchange listing fee......................... *
Miscellaneous............................................... *
-------
Total..................................................... $ *
=======
</TABLE>
- ---------------
* To be completed by amendment.
All of the foregoing estimated costs, expenses and fees will be borne by
the Company.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Delaware General Corporation Law
Section 145(a) of the DGCL provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Section 145(b) of the DGCL provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances
II-1
<PAGE> 105
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 145(c) of the DGCL provides that to the extent that a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Section 145(d) of the DGCL provides that any indemnification under
subsections (a) and (b) of Section 145 (unless ordered by a court) shall be made
by the corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standard of conduct set
forth in subsections (a) and (b) of Section 145. Such determination shall be
made (1) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2) if
such a quorum is not obtainable, or, even if obtainable, if a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
Section 145(e) of the DGCL provides that expenses (including attorneys'
fees) incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as authorized in Section 145. Such
expenses (including attorneys' fees) incurred by other employees and agents may
be so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
Section 145(f) of the DGCL provides that the indemnification and
advancement of expenses provided by, or granted pursuant to, Section 145 shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
Section 145(g) of the DGCL provides that a corporation shall have the power
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his capacity as such, whether or not the corporation
would have the power to indemnify him against such liability under Section 145.
Restated Certificate of Incorporation
Article Thirteenth of the Restated Certificate of Incorporation of the
Company (the "Certificate"), a copy of which is filed as Exhibit 3.1 to the
Registration Statement, provides as follows:
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (1) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (2) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (3) under Section 174 of the Delaware General Corporation Law,
as the same exists or as such provision may hereafter be amended, supplemented
or replaced, or (4) for any transaction from which the director derived an
improper personal benefit. Any repeal or amendment of this Article Thirteenth by
the stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation arising from an act or omission occurring prior to the time of such
repeal or amendment. In addition to the circumstances in which a director of the
Corporation is not personally liable as set forth in the foregoing provisions of
this Article Thirteenth, a director shall not be liable to the Corporation or
its stockholders to such further extent as permitted by any law hereafter
enacted, including without limitation any subsequent amendment to the Delaware
General Corporation Law. Notwithstanding any other provisions of this
Certificate of Incorporation
II-2
<PAGE> 106
or any provision of law that might otherwise permit a lesser or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of the capital stock of the Corporation required by law or by this
Restated Certificate, the affirmative vote of the holders of not less than
66 2/3% in voting power of the shares of the Corporation then entitled to be
voted in an election of directors, voting together as a single class, shall be
required to amend or repeal, or to adopt any provision inconsistent with, this
Article Thirteenth.
Article Twelfth of the Certificate provides as follows:
The Corporation shall indemnify any person who was, is, or is threatened to
be made a party to a proceeding (as hereinafter defined) by reason of the fact
that he or she (1) is or was a director or officer of the Corporation or (2)
while a director or officer of the Corporation, is or was serving at the request
of the Corporation as a director, officer, partner, venturer, proprietor,
trustee, employee, agent, or similar functionary of another foreign or domestic
corporation, limited liability company, association, partnership, joint venture,
sole proprietorship, trust, employee benefit plan or other enterprise, entity or
organization to the fullest extent permitted under the Delaware General
Corporation Law, as the same exists or may hereafter be amended. Such right
shall be a contract right and as such shall run to the benefit of any director
or officer who is elected and accepts the position of director or officer of the
Corporation or elects to continue to serve as a director or officer of the
Corporation while this Article Twelfth is in effect. Any repeal or amendment of
this Article Twelfth shall be prospective only and shall not limit the rights of
any such director or officer or the obligations of the Corporation with respect
to any claim arising from or related to the services of such director or officer
in any of the foregoing capacities prior to any such repeal or amendment to this
Article Twelfth. Such right shall include the right to be paid by the
Corporation expenses (including attorneys' fees) incurred in defending any such
proceeding in advance of its final disposition to the maximum extent permitted
under the Delaware General Corporation Law, as the same exists or may hereafter
be amended. If a claim for indemnification or advancement of expenses hereunder
is not paid in full by the Corporation within 60 days after a written claim has
been received by the Corporation, the claimant may at any time thereafter bring
suit against the Corporation to recover the unpaid amount of the claim, and, if
successful in whole or in part, the claimant shall also be entitled to be paid
the expenses of prosecuting such claim. It shall be a defense to any such action
that such indemnification is not permitted under the Delaware General
Corporation Law, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its board of
directors or any committee thereof or independent legal counsel, or
stockholders) to have made its determination prior to the commencement of such
action that indemnification of the claimant is permissible in the circumstances
nor an actual determination by the Corporation (including its board of directors
or any committee thereof, independent legal counsel or stockholders) that such
indemnification is not permissible shall be a defense to the action or create a
presumption that such indemnification is not permissible. In the event of the
death of any person having a right of indemnification under the foregoing
provisions, such right shall inure to the benefit of his or her heirs,
executors, administrators and personal representatives. The rights conferred
above shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, bylaw, resolution of stockholders or
directors, agreement or otherwise.
The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened, pending or
completed action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit or proceeding,
and any inquiry or investigation that could lead to such an action, suit or
proceeding.
Bylaws
Article Eight of the Amended and Restated Bylaws of the Company (the
"Bylaws"), a copy of which is filed as Exhibit 3.2 to the Registration Statement
provides as follows:
Each person who at any time shall serve or shall have served as a director,
officer, employee or agent of the Corporation (including any predecessor of the
Corporation), or any person who is or was serving at the written request of the
Corporation (in accordance with written procedures adopted from time to time by
the Board of Directors) as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar
II-3
<PAGE> 107
functionary of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan or other enterprise,
shall be entitled to (a) indemnification and (b) the advancement of expenses
incurred by such person from the Corporation as, and to the fullest extent,
permitted by Section 145 of the Delaware General Corporation Law or any
successor statutory provision, as from time to time amended. The foregoing right
of indemnification and to the advancement of expenses shall not be deemed
exclusive of any other rights to which those to be indemnified may be entitled
as a matter of law or under any agreement, vote of stockholders or disinterested
directors of the Corporation, or other arrangement.
The Corporation may purchase and maintain insurance or another arrangement
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation or who is or was serving at the written request of the
Corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise against any liability asserted against and
incurred by such person in such capacity or arising out of such person's status
in such capacity, whether or not the Corporation would have the power to
indemnify such person against that liability under this Article Eight or the
Delaware General Corporation Law.
Indemnification Agreements
The Company has entered into Indemnification Agreements (the
"Indemnification Agreements") with its directors and certain of its officers
(the "Indemnitees"), a form of which is filed as Exhibit 10.26 to the
Registration Statement. Under the terms of the Indemnification Agreements, the
Company has generally agreed to indemnify, and advance expenses to, each
Indemnitee to the fullest extent permitted by applicable law on the date of such
agreements and to such greater extent as applicable law may thereafter permit.
In addition, the Indemnification Agreements contain specific provisions pursuant
to which the Company has agreed to indemnify each Indemnitee (i) if such person
is, by reason of his or her status as a director, nominee for director, officer,
agent or fiduciary of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise with which such
person was serving at the request of the Company (any such status being
hereinafter referred to as a "Corporate Status"), made or threatened to be made
a party to any threatened, pending or completed action, suit, arbitration,
alternative dispute resolution mechanism, investigation or other proceeding
(each, a "Proceeding"), other than a Proceeding by or in the right of the
Company, (ii) if such person is, by reason of his or her Corporate Status, made
or threatened to be made a party to any Proceeding brought by or in the right of
the Company to procure a judgment in its favor, except that no indemnification
shall be made in respect of any claim, issue or matter in such Proceeding as to
which such Indemnitee shall have been adjudged to be liable to the Company if
applicable law prohibits such indemnification (unless and only to the extent
that a court shall otherwise determine), (iii) against expenses actually and
reasonably incurred by such person or on his or her behalf in connection with
any Proceeding to which such Indemnitee was or is a party by reason of his or
her Corporate Status and in which such Indemnitee is successful, on the merits
or otherwise, (iv) against expenses actually and reasonably incurred by such
person or on his or her behalf in connection with a Proceeding to the extent
that such Indemnitee is, by reason of his or her Corporate Status, a witness or
otherwise participates in any Proceeding at a time when such person is not a
party in the Proceeding, and (v) against expenses actually and reasonably
incurred by such person in any judicial adjudication of or any award in
arbitration to enforce his or her rights under the Indemnification Agreements.
Furthermore, under the terms of the Indemnification Agreements, the Company
has agreed to pay all reasonable expenses incurred by or on behalf of an
Indemnitee in connection with any Proceeding, whether brought by or in the right
of the Company or otherwise, in advance of any determination with respect to
entitlement to indemnification and within 15 days after the receipt by the
Company of a written request from such Indemnitee for such payment. In the
Indemnification Agreements, each Indemnitee has agreed that he or she will
reimburse and repay the Company for any expenses so advanced to the extent that
it shall ultimately be determined that he or she is not entitled to be
indemnified by the Company against such expenses.
II-4
<PAGE> 108
The Indemnification Agreements also include provisions that specify the
procedures and presumptions which are to be employed to determine whether an
Indemnitee is entitled to indemnification thereunder. In some cases, the nature
of the procedures specified in the Indemnification Agreements varies depending
on whether there has occurred a "Change of Control" (as defined in the
Indemnification Agreements) of the Company.
Stockholders and Voting Agreement
The Stockholders and Voting Agreement, a copy of which is filed as Exhibit
9.1 to the Registration Statement, provides that any Energy Spectrum Non-Voting
Observer or Chesapeake Non-Voting Observer (as both terms are defined in the
Stockholders and Voting Agreement) shall be entitled to indemnification from the
Company to the maximum extent permitted by law, as though such person were a
director of the Company or any of its subsidiaries. Any amendment, repeal or
modification of this provision may not be adverse to any member of the Board of
Directors of the Company or any subsidiary of the Company or to any Energy
Spectrum Non-Voting Observer or Chesapeake Non-Voting Observer without the
consent of a majority of the members of the Board of Directors.
Underwriting Agreement
The Underwriting Agreement, the form of which is filed as Exhibit 1.1 to
the Registration Statement, provides for the indemnification of the directors
and officers of the Company against certain liabilities, including liabilities
arising under the Securities Act.
The above discussion of the Certificate, Bylaws, Stockholders and Voting
Agreement, Underwriting Agreement and Section 145 of the DGCL is not intended to
be exhaustive and is respectively qualified in its entirety by the Certificate,
Bylaws, Stockholders and Voting Agreement, Underwriting Agreement and such
statute.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following information relates to securities of the Company issued or
sold within the past three years which were not registered under the Securities
Act:
On December 10, 1996, the Company issued 2,000,000, 1,600,000 and 2,000,000
shares (collectively, the "Initial Shares") of Common Stock to APLP, the Oliver
Companies and Energy Spectrum, respectively, and an option (the "Chesapeake
Option") to purchase 2,000,000 shares of Common Stock at a price of $6 per share
to Chesapeake. In consideration for the Initial Shares (i) APLP contributed ten
drilling rigs (and the Company paid APLP approximately $9.3 million in cash),
(ii) the Oliver Companies contributed six drilling rigs and (iii) Energy
Spectrum contributed $10 million. In consideration for the Chesapeake Option,
Chesapeake entered into drilling contracts with two-year terms for six of the
Company's rigs. Such issuances were exempt from the registration requirements of
the Securities Act by virtue of Section 4(2) thereof as transactions not
involving a public offering.
On December 10, 1996, the Company issued to The CIT Group/Equipment
Financing, Inc., a New York corporation ("CIT"), a warrant to purchase, at an
exercise price of $8 per share, up to 300,000 shares of Common Stock. The
warrant was issued for and in consideration of $500 in connection with the
entering into a loan agreement between the Company, as borrower, and CIT, as
lender, for a loan from CIT to the Company of up to $24 million. The issuance of
the warrant was exempt from the registration requirements of the Securities Act
under Section 4(2) thereof as not involving a public offering. CIT will exercise
in part the warrant for 150,000 shares of Common Stock in connection with the
Offering.
On May 1, 1997, the Company issued to Harold G. Hamm, as Trustee of the
Harold G. Hamm Revocable Inter Vivos Trust, dated April 23, 1984, 250,000 shares
of Common Stock in connection with the acquisition by the Company of all of the
issued and outstanding capital stock of Trend. The issuance of the shares of
Common Stock was exempt from the registration requirements of the Securities Act
under Section 4(2) thereof as a transaction not involving a public offering.
II-5
<PAGE> 109
On May 1, 1997, the Company issued to Chesapeake the following: (i)
1,000,000 shares of Common Stock; (ii) a subordinated note in the original
principal amount of $18 million; (iii) a warrant to purchase up to 700,000
shares of Common Stock at an exercise price of $.01 per share; and (iv) a
warrant to purchase up to 800,000 shares of Common Stock at an exercise price of
$7.50 per share, all in consideration for an aggregate purchase price of $25
million. The Company also issued to Energy Spectrum the following: (i) 140,000
shares of Common Stock; (ii) a subordinated note in the original principal
amount of $2.52 million; (iii) a warrant to purchase up to 98,000 shares of
Common Stock at an exercise price of $.01 per share; and (iv) a warrant to
purchase up to 112,000 shares of Common Stock at an exercise price of $7.50 per
share, all in consideration for an aggregate purchase price of $3.5 million. The
issuances of the shares of Common Stock, subordinated notes and warrants were
exempt from the registration requirements of the Securities Act under Section
4(2) thereof as transactions not involving a public offering.
On May 1, 1997, the Company issued to each of RR&T, Inc., an Oklahoma
corporation, and Mike Mullen warrants to purchase up to 50,000 shares of Common
Stock each at an exercise price of $8 per share in connection with the
acquisition by the Company of a drilling rig for a purchase price of $1.8
million. The issuance of the warrants was exempt from the registration
requirements of the Securities Act under Section 4(2) thereof as transactions
not involving a public offering.
On May 30, 1997, the Company issued to Ward Drilling Company, Inc., an
Oklahoma corporation, (i) 400,000 shares of Common Stock and (ii) a warrant to
purchase up to 200,000 shares of Common Stock at an exercise price of $10 per
share, each in connection with the acquisition by the Company of all of the
issued and outstanding common units of WD Equipment, LLC, a Delaware limited
liability company. The issuances of the shares of Common Stock and the warrant
were exempt from the registration requirements of the Securities Act under
Section 4(2) thereof as a transaction not involving a public offering.
In April 1997, the Company and James E. Brown, a director and the President
and Chief Executive Officer of the Company, entered into a restricted stock
award agreement (the "Restricted Stock Award Agreement"), effective as of
December 11, 1996 (the "Effective Date"), whereby Mr. Brown purchased 100,000
shares of Common Stock (the "Restricted Shares") at a purchase price of $2.50
per share, pursuant to the Stock Award Plan. The Restricted Stock Award
Agreement provides for vesting of 20% of the Restricted Shares each year
beginning on the first anniversary of the Effective Date and substantial
restrictions on transfer prior to vesting. Mr. Brown is required to remain
continuously employed by the Company through each vesting date for the
applicable shares to vest. The Restricted Shares remain subject to certain
restrictions under the agreement and the Stock Award Plan after vesting. In the
event of a Change of Control (as defined in the Restricted Stock Award
Agreement), all shares will vest immediately and pre-vesting restrictions on
transfer will terminate. Mr. Brown will forfeit any unvested shares if his
employment with the Company terminates for any reason. If the Company terminates
the employment of Mr. Brown for any reason other than for due cause or as a
result of a disability, then Mr. Brown, or his beneficiary in the event of his
death, will be entitled to purchase from the Company all of the unvested shares
at $2.50 per share. Unless so purchased by Mr. Brown or his beneficiary, then
upon the termination of Mr. Brown's employment with the Company for any reason
other than a Change of Control, the Company will be entitled to repurchase all
such unvested shares at $2.50 per share. If the Company elects not to purchase
any unvested shares, then the unvested shares will be forfeited by the Company
to Mr. Brown without any payment of additional consideration. The issuance of
the Restricted Stock was exempt from the registration requirements of the
Securities Act under Section 4(2) thereof as a transaction not involving a
public offering.
On July 31, 1997, upon the exercise by Energy Spectrum of its warrant to
purchase 98,000 shares of Common Stock at an exercise price of $.01 per share
and the payment by Energy Spectrum of an aggregate of $490 in consideration of
such exercise price, the Company issued to Energy Spectrum 98,000 shares of
Common Stock. The issuance of the shares of Common Stock was exempt from the
registration requirements of the Securities Act under Section 4(2) thereof as a
transaction not involving a public offering.
On August 20, 1997, the Company sold to Chesapeake 3,194,000 shares of
Common Stock in consideration for (i) the cancellation of each of the Chesapeake
Option, a warrant to purchase up to 700,000 shares of Common Stock at an
exercise price of $.01 per share and a warrant to purchase up to 800,000 shares
II-6
<PAGE> 110
of Common Stock at an exercise price of $7.50 per share, (ii) the payment by
Chesapeake of $9 million in cash and (iii) the redemption in full of $18 million
principal amount of Subordinated Notes issued by the Company to Chesapeake for a
cash redemption price of $15 million, subject to adjustment. The issuance of the
shares of Common Stock will be exempt from the registration requirements of the
Securities Act under Section 4(2) thereof as not involving a public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1* -- Form of Underwriting Agreement.
3.1 -- Restated Certificate of Incorporation of the Company.
3.2 -- Amended and Restated Bylaws of the Company, as adopted
August 19, 1997.
4.1* -- Specimen Stock Certificate for the Common Stock, par
value $.01 per share, of the Company.
5.1* -- Opinion of Baker & Botts, L.L.P. regarding legality of
securities being registered.
9.1* -- Amended and Restated Stockholders and Voting Agreement,
dated as of April 30, 1997, by and among the Company and
the shareholders of the Company that are signatories
thereto.
9.2* -- First Amendment to Amended and Restated Stockholders and
Voting Agreement, dated as of May 30, 1997, by and among
the Company and the shareholders of the Company that are
signatories thereto.
10.1 -- 1997 Stock Option and Stock Award Plan of the Company.
10.2 -- Forms of Non-Qualified Stock Option Agreements under the
1997 Stock Option and Stock Award Plan.
10.3 -- Amended and Restated Registration Rights Agreement, dated
as of April 30, 1997, by and among the Company and the
shareholders of the Company that are signatories thereto.
10.4 -- First Amendment to Amended and Restated Registration
Rights Agreement, dated as of May 30, 1997, by and among
the Company and the shareholders of the Company that are
signatories thereto.
10.5 -- Master Agreement, dated as of November 26, 1996, by and
among the Company and the shareholders of the Company
that are signatories thereto.
10.6 -- Master Drilling Agreement, dated as of December 10, 1996,
by and among the Company, Chesapeake Energy Corporation
and Chesapeake Operating, Inc.
10.7 -- Form of Chesapeake Drilling Agreement, by and between
Chesapeake Operating, Inc., as Operator, and the Company,
as Contractor.
10.8 -- Option Agreement, dated as of December 10, 1996, by and
between the Company and Chesapeake Energy Corporation.
10.9 -- Chesapeake Energy Corporation Option to Purchase Common
Stock of the Company, dated December 10, 1996.
10.10 -- Securities Purchase Agreement, dated as of April 30,
1997, by and among the Company, Energy Spectrum Partners
LP and Chesapeake Energy Corporation (the "April
Securities Purchase Agreement").
10.11 -- Form of Subordinated Note of the Company issued pursuant
to the April Securities Purchase Agreement.
10.12 -- Form of Series A Warrant to Purchase Common Stock of the
Company issued pursuant to the April Securities Purchase
Agreement.
</TABLE>
II-7
<PAGE> 111
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------------- ------------------------------------------------------------------------------------------
<C> <S>
10.13 -- Form of Series B Warrant to Purchase Common Stock of the Company issued pursuant to the
April Securities Purchase Agreement.
10.14 -- Ward Drilling Company, Inc. Warrant to Purchase Common Stock of the Company, dated May
30, 1997.
10.15 -- Preferential Right to Transport Agreement, dated as of May 30, 1997, by and between the
Company and Geronimo Trucking Company.
10.16 -- RR&T, Inc. Warrant to Purchase Common Stock of the Company, dated May 1, 1997.
10.17 -- Mike Mullen Warrant to Purchase Common Stock of the Company, dated May 1, 1997.
10.18 -- The CIT Group/Equipment Financing, Inc. Warrant to Purchase Common Stock of the
Company, dated December 10, 1996.
10.19 -- Loan and Security Agreement, dated as of May 1, 1997 by and among Fleet Capital
Corporation, the Company and Trend Drilling Co.
10.20 -- Amended and Restated Loan Agreement, dated as of May 1, 1997, by and among The CIT
Group/Equipment Financing, Inc. and Fleet Capital Corporation, as Lenders, and the
Company and Trend Drilling Co., as Borrowers.
10.21 -- Employment Agreement, dated as of December 10, 1996, by and between the Company and
James E. Brown.
10.22* -- Restricted Stock Award Agreement, dated as of December 10, 1996, by and between the
Company and James E. Brown.
10.23* -- Employment Agreement, dated as of January 1, 1997, by and between the Company and Ed
Jacob.
10.24 -- Employment Agreement, dated as of July 16, 1997, by and between the Company and David
E. Grose.
10.25 -- Letter Agreement, dated as of August 20, 1997, by and between the Company and
Chesapeake Energy Corporation.
10.26 -- Form of Indemnification Agreement to be entered into by the Company and each of the
directors and certain officers of the Company in connection with the Offering.
11.1 -- Statement regarding computation of per share earnings.
16.1 -- Letter re: Change in certifying Accountant.
21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Coopers & Lybrand L.L.P. regarding financial statements of Ward Drilling
Company.
23.2 -- Consent of Coopers & Lybrand L.L.P. regarding financial statements of Trend Drilling
Company.
23.3 -- Consent of Grant Thornton LLP.
23.4* -- Consent of Baker & Botts, L.L.P. (included in the opinion filed as Exhibit 5.1 to this
Registration Statement).
24.1 -- Powers of Attorney (included in the signature page of this Registration Statement).
27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment
(b) FINANCIAL STATEMENT SCHEDULES
None.
II-8
<PAGE> 112
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant also undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and this offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-9
<PAGE> 113
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas, State of Texas,
on August 27, 1997.
BAYARD DRILLING TECHNOLOGIES, INC.
By: /s/ JAMES E. BROWN
------------------------------------
James E. Brown
Chairman of the Board, President
and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and
officers of Bayard Drilling Technologies, Inc., a Delaware corporation, which is
filing a Registration Statement on Form S-1 with the Securities and Exchange
Commission under the provisions of the Securities Act of 1933, as amended (the
"Securities Act"), hereby constitutes and appoints James E. Brown and David E.
Grose, and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his name, place
and stead, and in any and all capacities, to sign and file (i) any and all
amendments (including post-effective amendments) to this Registration Statement,
with all exhibits thereto, and other documents in connection therewith, and (ii)
a registration statement, and any and all amendments thereto, relating to the
offering covered hereby filed pursuant to Rule 462(b) under the Securities Act,
with the Securities and Exchange Commission, it being understood that said
attorneys-in-fact and agents, and each of them, shall have full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person and that each of the undersigned hereby ratifies and
confirms all that said attorneys-in-fact as agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JAMES E. BROWN Chairman of the Board, President August 27, 1997
- --------------------------------------------------- and Chief Executive Officer
James E. Brown (Principal Executive Officer)
/s/ DAVID E. GROSE Vice President and Chief August 27, 1997
- --------------------------------------------------- Financial Officer
David E. Grose (Principal Financial and
Accounting Officer)
/s/ CARL B. ANDERSON, III Director August 27, 1997
- ---------------------------------------------------
Carl B. Anderson, III
/s/ SIDNEY L. TASSIN Director August 27, 1997
- ---------------------------------------------------
Sidney L. Tassin
/s/ LEW O. WARD Director August 27, 1997
- ---------------------------------------------------
Lew O. Ward
</TABLE>
II-10
<PAGE> 114
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
EXHIBITS
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
BAYARD DRILLING TECHNOLOGIES, INC.
================================================================================
<PAGE> 115
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1* -- Form of Underwriting Agreement.
3.1 -- Restated Certificate of Incorporation of the Company.
3.2 -- Amended and Restated Bylaws of the Company, as adopted
August 19, 1997.
4.1* -- Specimen Stock Certificate for the Common Stock, par
value $.01 per share, of the Company.
5.1* -- Opinion of Baker & Botts, L.L.P. regarding legality of
securities being registered.
9.1* -- Amended and Restated Stockholders and Voting Agreement,
dated as of April 30, 1997, by and among the Company and
the shareholders of the Company that are signatories
thereto.
9.2* -- First Amendment to Amended and Restated Stockholders and
Voting Agreement, dated as of May 30, 1997, by and among
the Company and the shareholders of the Company that are
signatories thereto.
10.1 -- 1997 Stock Option and Stock Award Plan of the Company.
10.2 -- Forms of Non-Qualified Stock Option Agreements under the
1997 Stock Option and Stock Award Plan.
10.3 -- Amended and Restated Registration Rights Agreement, dated
as of April 30, 1997, by and among the Company and the
shareholders of the Company that are signatories thereto.
10.4 -- First Amendment to Amended and Restated Registration
Rights Agreement, dated as of May 30, 1997, by and among
the Company and the shareholders of the Company that are
signatories thereto.
10.5 -- Master Agreement, dated as of November 26, 1996, by and
among the Company and the shareholders of the Company
that are signatories thereto.
10.6 -- Master Drilling Agreement, dated as of December 10, 1996,
by and among the Company, Chesapeake Energy Corporation
and Chesapeake Operating, Inc.
10.7 -- Form of Chesapeake Drilling Agreement, by and between
Chesapeake Operating, Inc., as Operator, and the Company,
as Contractor.
10.8 -- Option Agreement, dated as of December 10, 1996, by and
between the Company and Chesapeake Energy Corporation.
10.9 -- Chesapeake Energy Corporation Option to Purchase Common
Stock of the Company, dated December 10, 1996.
10.10 -- Securities Purchase Agreement, dated as of April 30,
1997, by and among the Company, Energy Spectrum Partners
LP and Chesapeake Energy Corporation (the "April
Securities Purchase Agreement").
10.11 -- Form of Subordinated Note of the Company issued pursuant
to the April Securities Purchase Agreement.
10.12 -- Form of Series A Warrant to Purchase Common Stock of the
Company issued pursuant to the April Securities Purchase
Agreement.
10.13 -- Form of Series B Warrant to Purchase Common Stock of the
Company issued pursuant to the April Securities Purchase
Agreement.
10.14 -- Ward Drilling Company, Inc. Warrant to Purchase Common
Stock of the Company, dated May 30, 1997.
10.15 -- Preferential Right to Transport Agreement, dated as of
May 30, 1997, by and between the Company and Geronimo
Trucking Company.
</TABLE>
<PAGE> 116
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.16 -- RR&T, Inc. Warrant to Purchase Common Stock of the
Company, dated May 1, 1997.
10.17 -- Mike Mullen Warrant to Purchase Common Stock of the
Company, dated May 1, 1997.
10.18 -- The CIT Group/Equipment Financing, Inc. Warrant to
Purchase Common Stock of the Company, dated December 10,
1996.
10.19 -- Loan and Security Agreement, dated as of May 1, 1997 by
and among Fleet Capital Corporation, the Company and
Trend Drilling Co.
10.20 -- Amended and Restated Loan Agreement, dated as of May 1,
1997, by and among The CIT Group/Equipment Financing,
Inc. and Fleet Capital Corporation, as Lenders, and the
Company and Trend Drilling Co., as Borrowers.
10.21 -- Employment Agreement, dated as of December 10, 1996, by
and between the Company and James E. Brown.
10.22* -- Restricted Stock Award Agreement, dated as of December
10, 1996, by and between the Company and James E. Brown.
10.23* -- Employment Agreement, dated as of January 1, 1997, by and
between the Company and Ed Jacob.
10.24 -- Employment Agreement, dated as of July 16, 1997, by and
between the Company and David E. Grose.
10.25 -- Letter Agreement, dated as of August 20, 1997, by and
between the Company and Chesapeake Energy Corporation.
10.26 -- Form of Indemnification Agreement to be entered into by
the Company and each of the directors and certain
officers of the Company in connection with the Offering.
11.1 -- Statement regarding computation of per share earnings.
16.1 -- Letter re: Change in Certifying Accountant.
21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Coopers & Lybrand L.L.P. regarding financial
statements of Ward Drilling Company.
23.2 -- Consent of Coopers & Lybrand L.L.P. regarding financial
statements of Trend Drilling Company.
23.3 -- Consent of Grant Thornton LLP.
23.4* -- Consent of Baker & Botts, L.L.P. (included in the opinion
filed as Exhibit 5.1 to this Registration Statement).
24.1 -- Powers of Attorney (included in the signature page of
this Registration Statement).
27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
BAYARD DRILLING TECHNOLOGIES, INC.
Bayard Drilling Technologies, Inc., a corporation organized
and existing under the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify as follows:
1. The name of the Corporation is Bayard Drilling
Technologies, Inc. and the original Certificate of Incorporation of the
Corporation (the "Original Certificate") was filed with the office of the
Secretary of State of the State of Delaware on December 3, 1996.
3. This Restated Certificate of Incorporation of the
Corporation (this "Restated Certificate") was duly adopted in accordance with
the provisions of Sections 242 and 245 of the General Corporation Law of the
State of Delaware.
4. This Restated Certificate restates and integrates and
amends the Original Certificate to read in its entirety as follows:
FIRST: The name of the corporation (the "Corporation") is
Bayard Drilling Technologies, Inc.
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, Wilmington, County
of New Castle, Delaware 19801. The name of the registered agent of the
Corporation at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware (the "General Corporation
Law").
FOURTH: The Corporation will have perpetual existence.
FIFTH: The total number of shares of stock which the
Corporation shall have the authority to issue is 120,000,000, divided into
classes as follows: (i) 100,000,000 shares of common stock, par value $0.01 per
share ("Common Stock"), and (ii) 20,000,000 shares of preferred stock, par
value $0.01 per share ("Preferred Stock").
The designations and the powers, preferences, rights,
qualifications, limitations, and restrictions of the Preferred Stock and Common
Stock are as follows:
<PAGE> 2
1. Provisions Relating to the Preferred Stock.
(a) The Preferred Stock may be issued from time
to time in one or more series, the shares of each series to
have any designations and powers, preferences, rights,
qualifications, limitations and restrictions thereof, as are
stated and expressed in this Article Fifth and in the
resolution or resolutions providing for the issue of such
series adopted by the board of directors of the Corporation as
hereafter prescribed (a "Preferred Stock Designation").
(b) Authority is hereby expressly granted to and
vested in the board of directors of the Corporation to
authorize the issuance of the Preferred Stock from time to
time in one or more series, and with respect to each series of
the Preferred Stock, to fix and state by the resolution or
resolutions from time to time adopted providing for the
issuance thereof the following:
(i) whether or not the series is to have
voting rights, full, special or limited, or is to be
without voting rights, and whether or not such series
is to be entitled to vote as a separate class either
alone or together with the holders of one or more
other classes or series of stock;
(ii) the number of shares to constitute
the series and the designations thereof;
(iii) the preferences and relative,
participating, optional, or other special rights, if
any, and the qualifications, limitations or
restrictions thereof, if any, with respect to any
series;
(iv) whether or not the shares of any
series shall be redeemable at the option of the
Corporation or the holders thereof or upon the
happening of any specified event, and, if redeemable,
the redemption price or prices (which may be payable
in the form of cash, notes, securities or other
property), and the time or times at which and the
terms and conditions upon which such shares shall be
redeemable and the manner of redemption;
(v) whether or not the shares of a
series shall be subject to the operation of
retirement or sinking funds to be applied to the
purchase or redemption of such shares for retirement,
and, if such retirement or sinking fund or funds are
to be established, the periodic amount thereof, and
the terms and provisions relative to the operation
thereof;
(vi) the dividend rate, whether dividends
are payable in cash, stock of the Corporation or
other property, the conditions upon which and the
times when such dividends are payable, the preference
to or the relation to the
2
<PAGE> 3
payment of dividends payable on any other class or
classes or series of stock, whether or not such
dividends shall be cumulative or noncumulative, and
if cumulative, the date or dates from which such
dividends shall accumulate;
(vii) the preferences, if any, and the
amounts thereof which the holders of any series
thereof shall be entitled to receive upon the
voluntary or involuntary dissolution of, or upon any
distribution of the assets of, the Corporation;
(viii) whether or not the shares of any
series, at the option of the Corporation or the
holder thereof or upon the happening of any specified
event, shall be convertible into or exchangeable for
the shares of any other class or classes or of any
other series of the same or any other class or
classes of stock, securities or other property of the
Corporation and the conversion price or prices or
ratio or ratios or the rate or rates at which such
conversion or exchange may be made, with such
adjustments, if any, as shall be stated and expressed
or provided for in such resolution or resolutions;
and
(ix) any other special rights and
protective provisions with respect to any series as
the board of directors of the Corporation may deem
advisable.
(c) The shares of each series of the Preferred
Stock may vary from the shares of any other series thereof in
any or all of the foregoing respects and in any other manner.
The board of directors of the Corporation may increase the
number of shares of the Preferred Stock designated for any
existing series by a resolution adding to such series
authorized and unissued shares of the Preferred Stock not
designated for any other series. Unless otherwise provided in
the Preferred Stock Designation, the board of directors of the
Corporation may decrease the number of shares of the Preferred
Stock designated for any existing series by a resolution
subtracting from such series authorized and unissued shares of
the Preferred Stock designated for such existing series, and
the shares so subtracted shall become authorized, unissued and
undesignated shares of the Preferred Stock.
2. Provisions Relating to the Common Stock.
(a) The holders of shares of the Common Stock
shall be entitled to vote upon all matters submitted to a vote
of the common stockholders of the Corporation and shall be
entitled to one vote for each share of the Common Stock held.
(b) Subject to the prior rights and preferences,
if any, applicable to shares of the Preferred Stock or any
class or series thereof, and subject to the right of
participation, if any, of the holders of the Preferred Stock
in any dividends, the holders of shares of the Common Stock
shall be entitled to receive such dividends
3
<PAGE> 4
(payable in cash, stock or otherwise) as may be declared
thereon by the board of directors of the Corporation, at any
time and from time to time, out of any funds of the
Corporation legally available therefor.
(c) In the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation,
after distribution in full of the preferential amounts, if
any, to be distributed to the holders of shares of the
Preferred Stock or any class or series thereof, and subject to
the rights of participation, if any, of the holders of the
Preferred Stock in any dividends, the holders of shares of the
Common Stock shall be entitled to receive all of the remaining
assets of the Corporation available for distribution to its
stockholders, ratably in proportion to the number of shares of
the Common Stock held by them. A liquidation, dissolution or
winding-up of the Corporation, as such terms are used in this
Paragraph 2(c), shall not be deemed to be occasioned by or to
include any consolidation or merger of the Corporation with or
into any other corporation or corporations or other entity or
a sale, lease, exchange or conveyance of all or a part of the
assets of the Corporation.
3. General.
(a) Subject to the foregoing provisions of this
Certificate of Incorporation, the Corporation may issue shares
of the Preferred Stock and the Common Stock from time to time
for such consideration (not less than the par value thereof)
as may be fixed by the board of directors of the Corporation,
which is expressly authorized to fix the same in its absolute
discretion subject to the foregoing conditions. Shares so
issued for which the consideration shall have been paid or
delivered to the Corporation shall be deemed fully paid stock
and shall not be liable to any further call or assessment
thereon, and the holders of such shares shall not be liable
for any further payments in respect of such shares.
(b) The Corporation shall have authority to
create and issue rights and options entitling their holders to
purchase shares of the Corporation's capital stock of any
class or series or other securities of the Corporation, and
such rights and options shall be evidenced by instrument(s)
approved by the board of directors of the Corporation. The
board of directors of the Corporation shall be empowered to
set the exercise price, duration, times for exercise and other
terms of such rights or options; provided, however, that the
consideration to be received for any share of capital stock
subject thereto shall not be less than the par value thereof.
(c) No stockholder of the Corporation shall by
reason of his or her holding shares of any class of capital
stock of the Corporation have any preemptive or preferential
right to acquire or subscribe for any additional, unissued or
treasury shares (whether now or hereafter acquired) of any
class of capital stock of the Corporation now or hereafter to
be authorized, or any notes, debentures, bonds or
4
<PAGE> 5
other securities convertible into or carrying any right,
option or warrant to subscribe for or acquire shares of any
class of capital stock of the Corporation now or hereafter to
be authorized, whether or not the issuance of any such shares
or such notes, debentures, bonds or other securities would
adversely affect the dividends or voting or other rights of
that stockholder.
(d) Cumulative voting of shares of any capital
stock having voting rights is prohibited.
SIXTH: The number, classification, and terms of the board of
directors of the Corporation and the procedures to elect directors, to remove
directors, and to fill vacancies in the board of directors shall be as follows:
1. The number of directors that shall constitute the
whole board of directors shall from time to time be fixed exclusively
by the board of directors by a resolution adopted by a majority of the
members of the board of directors serving at the time of that vote.
In no event shall the number of directors that constitute the whole
board of directors be fewer than three or more than 21. No decrease
in the number of directors shall have the effect of shortening the
term of any incumbent director. Directors of the Corporation need not
be elected by written ballot unless the bylaws of the Corporation
otherwise provide.
2. Each director of the Corporation shall serve for a
term ending at the annual meeting of stockholders of the Corporation
held next after such director's election and until his or her
successor is elected and qualified or until his or her earlier death,
resignation or removal.
3. Vacancies in the board of directors resulting from
death, resignation, retirement, disqualification, removal from office
or other cause and newly created directorships resulting from any
increase in the authorized number of directors shall be filled by a
majority vote of the remaining directors then in office, though less
than a quorum, or by the sole remaining director.
4. No director of the Corporation shall be removed
before the expiration of that director's term of office except for
cause and by an affirmative vote of the holders of not less than 66
2/3% in voting power of the outstanding shares entitled to vote
thereon cast at the annual meeting of stockholders or at any special
meeting of stockholders called for this purpose by a majority of the
members of the board of directors serving at the time of that vote.
5. Notwithstanding the foregoing, the election, removal
and filling of vacancies with respect to directors elected separately
by any series of Preferred Stock shall be governed by the terms of the
Preferred Stock Designation establishing such series.
5
<PAGE> 6
6. For purposes of this Article Sixth:
(a) The provisions of this paragraph 6 shall
become effective upon (and notwithstanding any other provision
of this Restated Certificate shall not be effective with
respect to any action specified in this paragraph 6 to be
taken on any date prior to) the first date (the "Public Status
Date") on which the Corporation has outstanding a class of
equity securities registered under the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
(b) Notwithstanding any other provisions of this
Restated Certificate or any provision of law that might
otherwise permit a lesser or no vote, but in addition to any
affirmative vote of the holders of any particular class or
series of the capital stock of the Corporation required by law
or by this Restated Certificate, the affirmative vote of the
holders of not less than 66 2/3% in voting power of the shares
of the Corporation then entitled to be voted in an election of
directors, voting together as a single class, shall be
required to amend or repeal, or to adopt any provision
inconsistent with, this Article Sixth.
SEVENTH: All of the power of the Corporation, insofar
as it may be lawfully vested by this Certificate of Incorporation in the board
of directors of the Corporation, is hereby conferred upon the board of
directors of the Corporation. In furtherance of and not in limitation of that
power or the powers conferred by law: (1) a majority of the whole board of
directors of the Corporation shall have the power to adopt, amend, and repeal
the bylaws of the Corporation; (2) the board of directors of the Corporation
may designate and appoint from among its members one or more committees, and
may designate one or more of its members as alternate members, who may, subject
to any limitations imposed by the board of directors, replace absent or
disqualified members at any meeting of such committee; (3) the stockholders of
the Corporation shall have no power to appoint or remove directors as members
of committees of the board of directors, nor to abrogate the power of the board
of directors to establish any such committees or the power of any such
committee to exercise the powers and authority of the board of directors; (4)
the stockholders of the Corporation shall have no power to elect or remove
officers of the Corporation nor to abrogate the power of the board of directors
to elect and remove officers of the Corporation; and (5) notwithstanding any
other provision of this Restated Certificate or any provision of law that might
otherwise permit a lesser or no vote, but in addition to any affirmative vote
of the holders of any particular class or series of the capital stock of the
Corporation required by law or by this Restated Certificate, the bylaws of the
Corporation shall not be adopted, altered, amended or repealed by the
stockholders of the Corporation except in accordance with the provisions of the
bylaws and by the vote of the holders of not less than a majority in voting
power of the outstanding shares of stock then entitled to vote upon the
election of directors, voting together as a single class or such higher vote as
is set forth in the bylaws. The bylaws of the Corporation shall not contain
any provision inconsistent with this Restated Certificate. Notwithstanding any
other provision of this Restated Certificate or any provision of law that might
otherwise permit a lesser or no vote, but in addition to any affirmative vote
of the holders of any particular class or series of the capital stock of the
Corporation required
6
<PAGE> 7
by law or by this Restated Certificate, the affirmative vote of the holders of
not less than 66 2/3% in voting power of the shares of the Corporation then
entitled to be voted in an election of directors, voting together as a single
class, shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article Seventh.
EIGHTH:
1. The provisions of this Article Eighth shall become
effective upon (and notwithstanding any other provision of this
Restated Certificate shall not be effective with respect to any action
specified in this Article Eighth to be taken on any date prior to) the
Public Status Date.
2. No action required to be taken or that may be taken
at any meeting of common stockholders of the Corporation may be taken
without a meeting, and the power of common stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied. Notwithstanding any other provision of this
Restated Certificate or any provision of law that might otherwise
permit a lesser or no vote, but in addition to any affirmative vote of
the holders of any particular class or series of the capital stock of
the Corporation required by law or by this Restated Certificate, the
affirmative vote of the holders of not less than 80% in voting power
of the shares of the Corporation then entitled to be voted in an
election of directors, voting together as a single class, shall be
required to amend or repeal, or to adopt any provision inconsistent
with, this Article Eighth.
NINTH: Special meetings of the common stockholders of the
Corporation, and any proposals to be considered at such meetings, may be called
and proposed exclusively by the board of directors of the Corporation, pursuant
to a resolution approved by a majority of the members of the board of directors
of the Corporation serving at the time of that vote, and no stockholder of the
Corporation shall require the board of directors of the Corporation to call a
special meeting of common stockholders or to propose business at a special
meeting of common stockholders. No business proposed by a stockholder to be
considered at an annual meeting of the common stockholders of the Corporation
(including the nomination of any person to be elected as a director of the
Corporation) shall be considered by the common stockholders at that meeting
unless, no later than 60 days before the annual meeting of common stockholders
of the Corporation or (if later) ten days after the first public notice of that
meeting is sent to common stockholders of the Corporation, the Corporation
receives from the stockholder proposing that business a written notice that
sets forth the following: (1) the nature of the proposed business with
reasonable particularity, including the exact text of any proposal to be
presented for adoption, and the reasons for conducting that business at the
annual meeting; (2) with respect to each such stockholder, that stockholder's
name and address (as they appear on the records of the Corporation), business
address and telephone number, residence address and telephone number, and the
number of shares of each class and series of stock of the Corporation
beneficially owned by that stockholder; (3) any interest of the stockholder in
the proposed business; (4) the name or names of each person nominated by the
stockholder to be elected or reelected as a director, if any; and (5) with
respect to each nominee, that
7
<PAGE> 8
nominee's name, business address and telephone number, and residence address
and telephone number, the number of shares, if any, of each class and series of
stock of the Corporation owned beneficially by that nominee, and all
information relating to that nominee that is required to be disclosed in
solicitations of proxies for elections of directors or is otherwise required,
pursuant to Regulation 14A under the Exchange Act (or any provision of law
subsequently replacing Regulation 14A), together with a notarized letter signed
by the nominee stating his or her acceptance of the nomination by that
stockholder, stating his or her intention to serve as director if elected, and
consenting to being named as a nominee for director in any proxy statement
relating to such election. The person presiding at the annual meeting shall
determine whether business (including the nomination of any person as a
director) has been properly brought before the meeting and, if the facts so
warrant, shall not permit any business (or voting with respect to any
particular nominee) to be transacted that has not been properly brought before
the meeting. Notwithstanding any other provision of this Restated Certificate
or any provision of law that might otherwise permit a lesser or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of the capital stock of the Corporation required by law or by this
Restated Certificate, the affirmative vote of the holders of not less than 66
2/3% in voting power of the shares of the Corporation then entitled to be voted
in an election of directors, voting together as a single class, shall be
required to amend or repeal, or to adopt any provision inconsistent with, this
Article Ninth.
TENTH: No contract or transaction between the Corporation
and one or more of its directors, officers or stockholders or between the
Corporation and any other person (as used herein "person" means a corporation,
limited liability company, partnership, association, joint venture, trust,
estate, political subdivision or instrumentality, or other entity or
organization) in which one or more of its directors, officers or stockholders
are directors, officers or stockholders, or have a financial interest, shall be
void or voidable solely for this reason, or solely because the director or
officer is present at or participates in the meeting of the board of directors
of the Corporation or committee thereof which authorizes the contract or
transaction, or solely because his, her or their votes are counted for such
purpose, if: (1) the material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are known to the board
of directors of the Corporation or the committee thereof, and the board of
directors of the Corporation or the committee thereof in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (2) the material facts as to his or her relationship or interest and
as to the contract or transaction are disclosed or are known to the
stockholders of the Corporation entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders
of the Corporation; or (3) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified by the board
of directors of the Corporation, a committee thereof, or the stockholders of
the Corporation. Interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors of the Corporation
or of a committee thereof which authorizes the contract or transaction.
8
<PAGE> 9
ELEVENTH:
1. The provisions of this Article Eleventh shall become
effective upon (and notwithstanding any other provision of this
Restated Certificate shall not be effective with respect to any action
specified in this Article Eleventh to be taken on any date prior to)
the Public Status Date.
2. In addition to any affirmative vote that may be
required by law, this Restated Certificate or the bylaws of the
Corporation, and except as otherwise prohibited by law or expressly
provided by Section 253 of the General Corporation Law or expressly
provided in paragraph 3 of this Article Eleventh:
(a) any merger, consolidation or share exchange
of the Corporation or any subsidiary of the Corporation with
(i) any Related Person or (ii) any other Person (whether or
not itself a Related Person) which is, or after such merger,
consolidation or share exchange would be, an Affiliate of a
Related Person; or
(b) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition by the Corporation or any
subsidiary of the Corporation to any Related Person or any
Affiliate of any Related Person or by any Related Person or
any Affiliate of any Related Person to the Corporation or any
subsidiary of the Corporation, of any assets or properties
having an aggregate Fair Market Value of $10,000,000 or more;
or
(c) any issuance or transfer by the Corporation
or any subsidiary of the Corporation of any securities of the
Corporation or any subsidiary of the Corporation to any
Related Person or any Affiliate of any Related Person (except
(i) pursuant to the exercise, exchange or conversion of
securities exercisable for, exchangeable for or convertible
into stock of the Corporation or any subsidiary of the
Corporation which securities were acquired by the Related
Person prior to becoming a Related Person, or (ii) pursuant to
a dividend or distribution paid or made, or the exercise,
exchange or conversion of securities exercisable for,
exchangeable for or convertible into stock of the Corporation
or of a subsidiary of the Corporation which security is
distributed, pro rata to all holders of a class or series of
stock of the Corporation subsequent to the time the Related
Person became such, and provided in the case of this clause
(ii) that there is not any increase of more than 1% in the
Related Person's proportionate share of the stock of any class
or series of the Corporation or of the Voting Stock of the
Corporation); or
(d) any adoption of any plan or proposal by the
Corporation for the liquidation or dissolution of the
Corporation voluntarily caused or proposed by or on behalf of
a Related Person or any Affiliate of any Related Person; or
9
<PAGE> 10
(e) any reclassification of securities (including
any reverse stock split) or recapitalization of the
Corporation or any merger, consolidation or share exchange of
the Corporation with any of its subsidiaries or any other
transaction (whether or not with or into or otherwise
involving a Related Person) which has the effect, either
directly or indirectly, of increasing by more than 1% the
proportionate share of the outstanding stock of any class or
series or the securities convertible into stock of any class
or series of the Corporation or any subsidiary of the
Corporation which is Beneficially Owned by any Related Person
or any Affiliate of any Related Person or otherwise increasing
the voting power of the outstanding stock of the Corporation
or any subsidiary of the Corporation possessed by any such
Related Person or Affiliate; or
(f) any series or combination of transactions
having, directly or indirectly, the same effect as any of the
foregoing; or
(g) any agreement, contract or other arrangement
providing, directly or indirectly, for any of the foregoing,
shall require the affirmative vote of the holders of (x) not
less than 80% in voting power of the then outstanding Voting
Stock held by stockholders voting together as a single class
and (y) not less than 66 2/3% in voting power of the then
outstanding Voting Stock not Beneficially Owned, directly or
indirectly, by any Related Person with respect to such
Business Combination, voting together as a single class.
Subject to the applicability of paragraph 3 below, such
affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage may
be specified, by law, elsewhere in this Restated Certificate,
in the bylaws of the Corporation or in any agreement with any
national securities exchange or otherwise.
3. The provisions of paragraph 2 shall not be applicable
to any particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by applicable
law, any other provision of this Restated Certificate other than this
Article Eleventh, the bylaws of the Corporation and any agreement with
a national securities exchange or otherwise, if all of the conditions
specified in either of the following subparagraphs (a) and (b) are
met:
(a) the cash, property, securities or other
consideration to be received per share by holders of each and
every outstanding class or series of shares of the Corporation
in the Business Combination is, with respect to each such
class or series, either (i) the same in form and amount per
share as that paid by the Related Person in a tender offer in
which such Related Person acquired at least 50% of the
outstanding stock of such class or series and which was
consummated not more than one year prior to the date of such
Business Combination or (ii) not less in amount (as to cash)
or Fair Market Value (as to consideration other than cash) as
of the date of
10
<PAGE> 11
the determination of the Highest Per Share Price (as to
property, securities or other consideration) than the Highest
Per Share Price applicable to such class or series of shares;
provided, however, that in the event of any Business
Combination in which the Corporation survives, any shares
retained by the holders thereof shall constitute consideration
other than cash for purposes of this subparagraph (a); or
(b) at least a majority of the Continuing
Directors shall have expressly approved such Business
Combination either in advance of or subsequent to such Related
Person's having become a Related Person.
In the case of any Business Combination with a Related Person
to which subparagraph (b) above does not apply, at least a majority of
the Continuing Directors, promptly following the request of a Related
Person, shall determine the Highest Per Share Price for each class or
series of stock of the Corporation. Such determination shall be
announced not less than five days prior to the meeting at which
holders of shares vote on the Business Combination. Such
determination shall be final, unless the Related Person becomes the
Beneficial Owner of additional shares after the date of the earlier
determination, in which case the Continuing Directors shall make a new
determination as to the Highest Per Share Price for each class or
series of shares prior to the consummation of the Business
Combination.
A Related Person shall be deemed to have acquired a share at
the time that such Related Person became the Beneficial Owner thereof.
With respect to shares owned by Affiliates, Associates and other
Persons whose ownership is attributable to a Related Person, if the
price paid by such Related Person for such shares is not determinable
by a majority of the Continuing Directors, the price so paid shall be
deemed to be the higher of (i) the price paid upon the acquisition
thereof by the Affiliate, Associate or other Person or (ii) the share
price of the shares in question at the time when the Related Person
became the Beneficial Owner thereof.
4. For purposes of this Article Eleventh:
(a) The term "Affiliate," used to indicate a
relationship to a specified Person, shall mean a Person that
directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with,
such specified Person.
(b) The term "Associate," used to indicate a
relationship with a specified Person, shall mean (i) any
corporation, partnership or other organization (other than the
Corporation or any wholly owned subsidiary of the Corporation)
of which such specified Person is a director, officer or
partner or is, directly or indirectly, the Beneficial Owner of
10% or more of any class of equity securities; (ii) any trust
or other estate in which such specified Person has a
beneficial interest of 10% or more
11
<PAGE> 12
or as to which such specified Person serves as trustee or in a
similar fiduciary capacity; (iii) any Person who is a director
or officer of such specified Person or any of its parents or
subsidiaries (other than the Corporation or any wholly owned
subsidiary of the Corporation); and (iv) any relative or
spouse of such specified Person or of any of its Associates or
any relative of any such spouse, who has the same home as such
specified Person or such Associate.
(c) A Person shall be a "Beneficial Owner" of any
shares of any class or series of capital stock of the
Corporation (i) which such Person or any of its Affiliates or
Associates beneficially owns, directly or indirectly; or (ii)
which such Person or any of its Affiliates or Associates has,
directly or indirectly, (A) the right or obligation to acquire
(whether such right or obligation is exercisable immediately
or only after the passage of time or the occurrence of any
event), pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise
of conversion rights, exchange rights, warrants or options, or
otherwise; provided, however, that a Person shall not be
deemed the Beneficial Owner of any stock tendered pursuant to
a tender or exchange offer made by such Person or any of such
Person's Affiliates or Associates until such tendered stock is
accepted for purchase or exchange, or (B) the right to vote or
dispose of, including pursuant to any agreement, arrangement
or understanding (whether or not in writing); provided,
however, that a Person shall not be deemed the Beneficial
Owner of any stock because of such Person's right to vote such
stock if the agreement, arrangement or understanding to vote
such stock arises solely from a revocable proxy or consent
given in response to a proxy or consent solicitation made to
ten or more Persons pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations
under the Exchange Act; or (iii) which is beneficially owned,
directly or indirectly, by any other Person (or any Affiliate
or Associate thereof) with which such Person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding (whether or not in writing) for the purpose of
acquiring, holding, voting or disposing of such stock; or (iv)
of which such Person would be the Beneficial Owner pursuant to
the terms of Rule 13d-3 of the General Rules and Regulations
under the Exchange Act, as in effect on August 19, 1997.
(d) The term "Business Combination" shall mean
any transaction which is referred to in any one or more of
clauses (a) through (g) of paragraph 2 of this Article
Eleventh.
(e) The term "Continuing Director" shall mean,
with respect to a Business Combination with a Related Person,
any director of the Corporation (i) who is unaffiliated with
the Related Person and (ii) who (A) became a director prior to
the time that the Related Person became a Related Person or
(B) was recommended or nominated to succeed a Continuing
Director by a majority of all then Continuing Directors,
acting separately or as a part of any action taken by the
board of directors
12
<PAGE> 13
or any committee thereof. Without limiting the generality of
the foregoing, a director shall be deemed to be affiliated
with a Related Person if such director (i) is or at any
previous time has been an officer, director, employee or
general partner of such Related Person; (ii) is or at any
previous time has been an Affiliate or Associate of such
Related Person; (iii) is or at any previous time has been a
relative or spouse of such Related Person or of any such
officer, director, general partner, Affiliate or Associate;
(iv) performs services for, or is a member, employee, greater
than 5% stockholder or other equity owner of any organization
(other than the Corporation and its subsidiaries) which
performs services for, such Related Person or any Affiliate of
such Related Person or is a relative or spouse of any such
Person; or (v) was nominated for election as a director by
such Related Person.
(f) The term "Fair Market Value" shall mean, in
the case of securities, the average of the closing sale prices
during the 30-day period immediately preceding the date in
question of such security on the principal United States
securities exchange registered under the Exchange Act on which
such security is listed (or the composite tape therefor) or,
if such securities are not listed on any such exchange, the
average of the closing bid quotations with respect to such
security during the 30- day period preceding the date in
question on the Nasdaq National Market or any similar system
then in use or, if no such quotations are available, the fair
market value on the date in question of such security as
determined in good faith by a majority of the Continuing
Directors; and in the case of property other than cash or
securities, the fair market value of such property on the date
in question as determined in good faith by a majority of the
Continuing Directors.
(g) The term "Highest Per Share Price" shall mean
(i) as to any class or series of stock of which the Related
Person Beneficially Owns 10% or more of the outstanding
shares, the highest price that can be determined to have been
paid or agreed to be paid for any share or shares of that
class or series by such Related Person in a transaction that
either (A) resulted in such Related Person Beneficially Owning
10% or more thereof or (B) was effected at a time when such
Related Person Beneficially Owned more than 10% thereof, (ii)
as to any class or series of stock of which the Related Person
Beneficially Owns shares, but less than 10% of the outstanding
shares, the highest price that can be determined to have been
paid or agreed to be paid at any time by such Related Person
for any share or shares of that class or series that are then
Beneficially Owned by such Related Person or (iii) as to any
other class or series of stock, the amount determined by a
majority of the Continuing Directors, on whatever basis they
believe is appropriate, to be the per share price equivalent
of the highest price that can be determined to have been paid
or agreed to be paid at any time by the Related Person for any
other class or series of stock. In determining the Highest
Per Share Price, all purchases by the Related Person shall be
taken into account regardless of whether the shares were
purchased before or after the Related Person became a Related
Person and the Highest Per
13
<PAGE> 14
Share Price will be appropriately adjusted to take into
account (W) distributions paid or payable in stock, (X)
subdivisions of outstanding stock, (Y) combinations of shares
of stock into a smaller number of shares and (Z) similar
events.
(h) The term "Person" shall mean any individual,
corporation, limited liability company, partnership,
association, joint venture, trust, estate, political
subdivision or instrumentality, or other entity or
organization.
(i) The term "Related Person" shall mean any
Person (other than the Corporation or any subsidiary of the
Corporation and other than any profit-sharing, employee
ownership or other employee benefit plan of the Corporation or
any subsidiary of the Corporation or any trustee of or
fiduciary with respect to any such plan when acting in such
capacity) who or which (i) is the Beneficial Owner of more
than 10% of the aggregate voting power of all outstanding
stock of the Corporation; or (ii) is an Affiliate of the
Corporation and at any time within the two-year period
immediately prior to the date in question was the Beneficial
Owner of more than 10% of the aggregate voting power of all
outstanding stock of the Corporation; or (iii) is an assignee
of or has otherwise succeeded to any shares of stock of the
Corporation which were at any time within the two-year period
immediately prior to the date in question Beneficially Owned
by any Related Person, if such assignment or succession shall
have occurred in the course of a privately negotiated
transaction rather than an open market transaction. For the
purposes of determining whether a Person is a Related Person,
the number of shares of any class or series deemed outstanding
shall include shares of such class or series of which the
Person is deemed the Beneficial Owner, but shall not include
any other shares which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of
conversion rights, exchange rights, warrants, options or
otherwise.
(j) The term "Voting Stock" shall mean all
outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors of the
Corporation, considered for the purpose of this Article
Eleventh as one class. If the Corporation has shares of
Voting Stock entitled to more or less than one vote for any
such share, each reference in this Article Eleventh to a
proportion or percentage in voting power of Voting Stock shall
be calculated by reference to the portion or percentage of
votes entitled to be cast by the holders of such shares.
5. Nothing contained in this Article Eleventh shall be
construed to relieve any Related Person from any fiduciary obligation
imposed by law.
6. Notwithstanding any other provision of this Restated
Certificate (and notwithstanding that a lesser percentage may be
specified by law), the affirmative vote of the holders of not less
than 80% in voting power of the then outstanding Voting Stock held by
14
<PAGE> 15
stockholders, voting together as a single class, shall be required to
amend or repeal, or adopt any provisions inconsistent with, this
Article Eleventh.
TWELFTH: The Corporation shall indemnify any person
who was, is, or is threatened to be made a party to a proceeding (as
hereinafter defined) by reason of the fact that he or she (1) is or was a
director or officer of the Corporation or (2) while a director or officer of
the Corporation, is or was serving at the request of the Corporation as a
director, officer, partner, venturer, proprietor, trustee, employee, agent or
similar functionary of another foreign or domestic corporation, limited
liability company, association, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise, entity or
organization, to the fullest extent permitted under the General Corporation
Law, as the same exists or may hereafter be amended. Such right shall be a
contract right and as such shall run to the benefit of any director or officer
who is elected and accepts the position of director or officer of the
Corporation or elects to continue to serve as a director or officer of the
Corporation while this Article Twelfth is in effect. Any repeal or amendment
of this Article Twelfth shall be prospective only and shall not limit the
rights of any such director or officer or the obligations of the Corporation
with respect to any claim arising from or related to the services of such
director or officer in any of the foregoing capacities prior to any such repeal
or amendment to this Article Twelfth. Such right shall include the right to be
paid by the Corporation expenses (including attorneys' fees) incurred in
defending any such proceeding in advance of its final disposition to the
maximum extent permitted under the General Corporation Law, as the same exists
or may hereafter be amended. If a claim for indemnification or advancement of
expenses hereunder is not paid in full by the Corporation within 60 days after
a written claim has been received by the Corporation, the claimant may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim, and, if successful in whole or in part, the claimant shall also
be entitled to be paid the expenses of prosecuting such claim. It shall be a
defense to any such action that such indemnification is not permitted under the
General Corporation Law, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its board of
directors or any committee thereof, independent legal counsel or stockholders)
to have made its determination prior to the commencement of such action that
indemnification of the claimant is permissible in the circumstances nor an
actual determination by the Corporation (including its board of directors or
any committee thereof, independent legal counsel or stockholders) that such
indemnification is not permissible shall be a defense to the action or create a
presumption that such indemnification is not permissible. In the event of the
death of any person having a right of indemnification under the foregoing
provisions, such right shall inure to the benefit of his or her heirs,
executors, administrators and personal representatives. The rights conferred
above shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, bylaw, resolution of stockholders or
directors, agreement or otherwise.
The Corporation may additionally indemnify any employee or agent of
the Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative, any appeal
15
<PAGE> 16
in such an action, suit or proceeding, and any inquiry or investigation that
could lead to such an action, suit or proceeding.
THIRTEENTH: A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (1) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of law, (3) under Section 174 of
the General Corporation Law, as the same exists or as such provision may
hereafter be amended, supplemented or replaced, or (4) for any transaction from
which the director derived an improper personal benefit. Any repeal or
amendment of this Article Thirteenth by the stockholders of the Corporation
shall be prospective only, and shall not adversely affect any limitation on the
personal liability of a director of the Corporation arising from an act or
omission occurring prior to the time of such repeal or amendment. In addition
to the circumstances in which a director of the Corporation is not personally
liable as set forth in the foregoing provisions of this Article Thirteenth, a
director shall not be liable to the Corporation or its stockholders to such
further extent as permitted by any law hereafter enacted, including without
limitation any subsequent amendment to the General Corporation Law.
Notwithstanding any other provision of this Certificate of Incorporation or any
provision of law that might otherwise permit a lesser or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of the capital stock of the Corporation required by law or by this
Restated Certificate, the affirmative vote of the holders of not less than 66
2/3% in voting power of the shares of the Corporation then entitled to be voted
in an election of directors, voting together as a single class, shall be
required to amend or repeal, or to adopt any provision inconsistent with, this
Article Thirteenth.
16
<PAGE> 17
IN WITNESS WHEREOF, Bayard Drilling Technologies, Inc. has
caused this certificate to be executed by the undersigned this 20th day of
August, 1997.
BAYARD DRILLING TECHNOLOGIES, INC.
By: /s/ James E. Brown
-------------------------------
President
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
BAYARD DRILLING TECHNOLOGIES, INC.
A Delaware Corporation
<PAGE> 2
TABLE OF CONTENTS
ARTICLE ONE: OFFICES
<TABLE>
<S> <C> <C>
1.1 Registered Office and Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 Voting List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6 Quorum of Stockholders; Adjournment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.7 Required Vote; Withdrawal of Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.8 Method of Voting; Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 Conduct of Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.11 Inspectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE THREE: DIRECTORS
3.1 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Number; Election; Classification; Term; Qualification . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Change in Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.5 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.6 Meetings of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.7 First Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.8 Election of Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.9 Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.10 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.11 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.12 Quorum; Majority Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.13 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.14 Presumption of Assent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.15 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE FOUR: COMMITTEES
4.1 Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C> <C>
4.2 Number; Qualification; Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Committee Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.5 Alternate Members of Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.6 Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.7 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.8 Quorum; Majority Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.9 Minutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.10 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.11 Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE FIVE: NOTICE
5.1 Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.2 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.2 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.3 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.4 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.5 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.6 Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.7 President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.8 Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.9 Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.10 Assistant Treasurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.11 Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.12 Assistant Secretaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.13 Other Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE SEVEN: CERTIFICATES AND STOCKHOLDERS
7.1 Certificates for Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.2 Replacement of Lost or Destroyed Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.3 Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 Registered Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.5 Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.6 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
iii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE EIGHT: INDEMNIFICATION
8.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.2 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE NINE: MISCELLANEOUS PROVISIONS
9.1 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9.2 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9.3 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9.4 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9.5 Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9.6 Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.7 Securities of Other Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.8 Telephone Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.9 Action Without a Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.10 Invalid Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.11 Mortgages, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.12 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.13 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.14 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
iv
<PAGE> 5
AMENDED AND RESTATED BYLAWS
OF
BAYARD DRILLING TECHNOLOGIES, INC.
A Delaware Corporation
PREAMBLE
These bylaws are subject to, and governed by, the General Corporation Law
of the State of Delaware (the "Delaware General Corporation Law") and the
certificate of incorporation of Bayard Drilling Technologies, Inc., a Delaware
corporation (the "Corporation"). In the event of a direct conflict between the
provisions of these bylaws and the mandatory provisions of the Delaware General
Corporation Law or the provisions of the certificate of incorporation of the
Corporation, such provisions of the Delaware General Corporation Law or the
certificate of incorporation of the Corporation, as the case may be, will be
controlling.
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent. The registered office and
registered agent of the Corporation shall be as designated from time to time by
the appropriate filing by the Corporation in the office of the Secretary of
State of the State of Delaware.
1.2 Other Offices. The Corporation may also have offices at such
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or as the business of the Corporation
may require.
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting. An annual meeting of stockholders of the
Corporation shall be held each calendar year on such date and at such time as
shall be designated from time to time by the board of directors and stated in
the notice of the meeting or in a duly executed waiver of notice of such
meeting. At such meeting, the stockholders shall elect directors and transact
such other business as may properly be brought before the meeting.
2.2 Special Meeting. Except as otherwise required by law, special
meetings of the common stockholders of the Corporation, and any proposals to be
considered at such meetings, may be called and proposed exclusively by the
board of directors, pursuant to a resolution approved by a majority of the
members of the board of directors at the time in office, and no stockholder of
the Corporation shall require the board of directors to call a special meeting
of common stockholders
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or to propose business at a special meeting of common stockholders. A special
meeting shall be held on such date and at such time as shall be designated by
the resolution calling the meeting and stated in the notice of the meeting or
in a duly executed waiver of notice of such meeting. Only such business shall
be transacted at a special meeting as may be stated or indicated in the notice
of such meeting or in a duly executed waiver of notice of such meeting.
2.3 Place of Meetings. Meetings of stockholders of the Corporation
shall be held at such place within or outside the State of Delaware as may be
designated by the board of directors.
2.4 Notice. Written or printed notice stating the place, day, and
time of each meeting of the stockholders and, in case of a special meeting, the
purpose or purposes for which the meeting is called shall be delivered not less
than ten nor more than 60 days before the date of the meeting, either
personally or by mail, by or at the direction of the Chairman of the Board if
such office has been filled (otherwise, the President), the Secretary, or the
officer or person(s) calling the meeting, to each stockholder of record
entitled to vote at such meeting. If such notice is to be sent by mail, it
shall be directed to such stockholder at his address as it appears on the
records of the Corporation, unless he shall have filed with the Secretary of
the Corporation a written request that notices to him be mailed to some other
address, in which case it shall be directed to him at such other address.
Notice of any meeting of stockholders shall not be required to be given to any
stockholder who shall attend such meeting in person or by proxy and shall not,
at the beginning of such meeting, object to the transaction of any business
because the meeting is not lawfully called or convened, or who shall, either
before or after the meeting, submit a signed waiver of notice, in person or by
proxy.
2.5 Voting List. At least ten days before each meeting of
stockholders, the Secretary or other officer of the Corporation who has charge
of the Corporation's stock ledger, either directly or through another officer
appointed by him or through a transfer agent appointed by the board of
directors, shall prepare a complete list of stockholders entitled to vote
thereat, arranged in alphabetical order and showing the address of each
stockholder and number of shares registered in the name of each stockholder.
For a period of ten days prior to such meeting, such list shall be kept on file
at a place within the city where the meeting is to be held, which place shall
be specified in the notice of meeting or a duly executed waiver of notice of
such meeting or, if not so specified, at the place where the meeting is to be
held and shall be open to examination by any stockholder during ordinary
business hours. Such list shall be produced at such meeting and kept at the
meeting at all times during such meeting and may be inspected by any
stockholder who is present.
2.6 Quorum of Stockholders; Adjournment. The holders of a majority
of the outstanding shares entitled to vote on a matter, present in person or by
proxy, shall constitute a quorum at any meeting of stockholders, except as
otherwise provided by law, the certificate of incorporation of the Corporation,
or these bylaws. If a quorum shall not be present, in person or by proxy, at
any meeting of stockholders, the stockholders entitled to vote thereat who are
present, in person or by proxy, or, if no stockholder entitled to vote is
present, any officer of the Corporation may adjourn the meeting from time to
time, without notice other than announcement at the meeting (unless the board
of directors, after such adjournment, fixes a new record date for the adjourned
meeting), until a quorum
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shall be present, in person or by proxy. At any adjourned meeting at which a
quorum shall be present, in person or by proxy, any business may be transacted
which may have been transacted at the original meeting had a quorum been
present; provided, however, that, if the adjournment is for more than 30 days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
of record entitled to vote at the adjourned meeting.
2.7 Required Vote; Withdrawal of Quorum. When a quorum is present at
any meeting, the vote of the holders of at least a majority of the outstanding
shares entitled to vote who are present, in person or by proxy, shall decide
any question brought before such meeting, unless the question is one on which,
by express provision of statute, the certificate of incorporation of the
Corporation, or these bylaws, a different vote is required, in which case such
express provision shall govern and control the decision of such question. The
stockholders present at a duly constituted meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
2.8 Method of Voting; Proxies. Except as otherwise provided in the
certificate of incorporation of the Corporation or by law, each outstanding
share, regardless of class, shall be entitled to one vote on each matter
submitted to a vote at a meeting of stockholders. Elections of directors need
not be by written ballot. At any meeting of stockholders, every stockholder
having the right to vote may vote either in person or by a proxy executed in
writing by the stockholder or by his duly authorized attorney-in-fact. Each
such proxy shall be filed with the Secretary of the Corporation before or at
the time of the meeting. No proxy shall be valid after three years from the
date of its execution, unless otherwise provided in the proxy. If no date is
stated in a proxy, such proxy shall be presumed to have been executed on the
date of the meeting at which it is to be voted. Each proxy shall be revocable
unless expressly provided therein to be irrevocable and coupled with an
interest sufficient in law to support an irrevocable power or unless otherwise
made irrevocable by law.
2.9 Record Date. For the purpose of determining stockholders of the
Corporation entitled to notice of or to vote at any meeting of stockholders of
the Corporation or any adjournment thereof, or entitled to receive a
distribution by the Corporation (other than a distribution involving a purchase
or redemption by the Corporation of any of its own shares) or a share dividend,
or in order to make a determination of stockholders of the Corporation for any
other proper purpose, the board of directors may fix in advance a date as the
record date for any such determination of stockholders of the Corporation, such
date in any case to be not more than 60 days, and in the case of a meeting of
stockholders of the Corporation, not less than ten days, prior to the date on
which the particular action requiring such determination of stockholders of the
Corporation is to be taken. The board of directors shall not close the books
of the Corporation against transfers of shares during the whole or any part of
such period.
2.10 Conduct of Meeting. The Chairman of the Board, if such office
has been filled, and, if not or if the Chairman of the Board is absent or
otherwise unable to act, the President shall preside
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at all meetings of stockholders. The Secretary shall keep the records of each
meeting of stockholders. In the absence or inability to act of any such
officer, such officer's duties shall be performed by the officer given the
authority to act for such absent or non-acting officer under these bylaws or by
some person appointed by the meeting.
2.11 Inspectors. The board of directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If any of the inspectors so appointed shall fail
to appear or act, the chairman of the meeting shall, or if inspectors shall not
have been appointed, the chairman of the meeting may, appoint one or more
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares of capital stock of the
Corporation outstanding and the voting power of each, the number of shares
represented at the meeting, the existence of a quorum, and the validity and
effect of proxies and shall receive votes or ballots, hear and determine all
challenges and questions arising in connection with the right to vote, count
and tabulate all votes or ballots, determine the results, and do such acts as
are proper to conduct the election or vote with fairness to all stockholders.
On request of the chairman of the meeting, the inspectors shall make a report
in writing of any challenge, request, or matter determined by them and shall
execute a certificate of any fact found by them. No director or candidate for
the office of director shall act as an inspector of an election of directors.
Inspectors need not be stockholders.
ARTICLE THREE: DIRECTORS
3.1 Management. The business and property of the Corporation shall
be managed by the board of directors. Subject to the restrictions imposed by
law, the certificate of incorporation of the Corporation, or these bylaws, the
board of directors may exercise all the powers of the Corporation.
3.2 Number; Election; Classification; Term; Qualification. The
number of directors that shall constitute the entire board of directors shall
be not less than three and not more than 21. The first board of directors
shall consist of the number of directors named in the certificate of
incorporation of the Corporation or, if no directors are so named, shall
consist of the number of directors elected by the incorporator(s) at an
organizational meeting or by unanimous written consent in lieu thereof.
Thereafter, within the limits above specified, the number of directors that
shall constitute the whole board of directors shall from time to time be fixed
exclusively by the board of directors by a resolution adopted by a majority of
the whole board of directors serving at the time of that vote. Except as
otherwise required by law or required or permitted by the certificate of
incorporation of the Corporation or these bylaws, the directors shall be
elected at an annual meeting of stockholders at which a quorum is present.
Directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy and entitled to vote on the election of
directors. Each director shall hold his office until the next annual meeting
of stockholders after his election and until his successor is elected and
qualified or until his earlier death, resignation or
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removal. None of the directors need be a stockholder of the Corporation or a
resident of the State of Delaware. Each director must have attained the age of
majority.
3.3 Change in Number. No decrease in the number of directors
constituting the entire board of directors shall have the effect of shortening
the term of any incumbent director.
3.4 Removal. No director of any class of directors of the
Corporation shall be removed before the expiration date of that director's term
of office except "for cause" and by an affirmative vote of the holders of not
less than 66 2/3% of the outstanding shares of the class or classes or series
of stock then entitled to be voted at an election of directors of that class or
series, voting together as a single class, cast at the annual meeting of
stockholders or at any special meeting of stockholders called by a majority of
the whole board of directors for this purpose. For purposes of this Section
3.4, "for cause" shall be deemed to exist only if: (i) such director has been
convicted, or such director is granted immunity to testify where another has
been convicted, of a felony by a court of competent jurisdiction (and such
conviction is no longer subject to direct appeal); (ii) such director has been
found by a court of competent jurisdiction (and such finding is no longer
subject to direct appeal) or by the affirmative vote of at least a majority of
the board of directors at any regular or special meeting of the board of
directors called for such purpose to have been grossly negligent or guilty of
willful misconduct in the performance of his duties to the Corporation in a
matter of substantial importance to the Corporation; (iii) such director has
been adjudicated by a court of competent jurisdiction to be mentally
incompetent, which mental incompetency directly affects his ability to perform
as a director of the Corporation; (iv) such director has been found by a court
of competent jurisdiction (and such finding is no longer subject to direct
appeal) or by the affirmative vote of at least a majority of the board of
directors at any regular or special meeting of the board of directors called
for such purpose to have breached such director's duty of loyalty to the
Corporation or its stockholders or to have engaged in any transaction with the
Corporation from which such director derived an improper personal benefit; or
(v) "cause" for removal otherwise exists under Section 141(k)(1) of the
Delaware General Corporation Law. No director of the Corporation so removed
may be nominated, re-elected or reinstated as a director of the Corporation so
long as the cause for removal continues to exist. Notwithstanding the
foregoing, whenever holders of shares of one or more outstanding series of
preferred stock of the Corporation are entitled to elect one or more directors
of the Corporation under circumstances as shall be provided by or pursuant to
the certificate of incorporation of the Corporation, any director of the
Corporation so elected may be removed in accordance with such provisions.
3.5 Vacancies. Vacancies in the board of directors resulting from
death, resignation, retirement, disqualification, removal from office, or other
cause and newly-created directorships resulting from any increase in the
authorized number of directors may be filled by no less than a majority of the
remaining directors then in office, though less than a quorum, who are
designated to represent the same class or classes of stockholders that the
vacant position, when filled, is to
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represent or by the sole remaining director (but not by the common stockholders
except as required by law), and shall hold office until the first meeting of
stockholders held after his election for the purpose of electing directors and
until his successor is elected and qualified or until his earlier death,
resignation, or removal from office. If there are no directors in office, an
election of directors may be held in the manner provided by statute. Except as
otherwise provided in these bylaws, when one or more directors shall resign
from the board of directors, effective at a future date, a majority of the
directors then in office, including those who have so resigned, who are
designated to represent the same class or classes or series of stockholders
that the position being vacated represents shall have the power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in these bylaws with respect to the filling of other
vacancies.
3.6 Meetings of Directors. The directors may hold their meetings and
may have an office and keep the books of the Corporation, except as otherwise
provided by statute, in such place or places within or outside the State of
Delaware as the board of directors may from time to time determine or as shall
be specified in the notice of such meeting or duly executed waiver of notice of
such meeting.
3.7 First Meeting. Each newly elected board of directors may hold
its first meeting for the purpose of organization and the transaction of
business, if a quorum is present, immediately after and at the same place as
the annual meeting of stockholders, and no notice of such meeting shall be
necessary.
3.8 Election of Officers. At the first meeting of the board of
directors after each annual meeting of stockholders at which a quorum shall be
present, the board of directors shall elect the officers of the Corporation.
3.9 Regular Meetings. Regular meetings of the board of directors
shall be held at such times and places as shall be designated from time to time
by resolution of the board of directors. Notice of such regular meetings shall
not be required.
3.10 Special Meetings. Special meetings of the board of directors
shall be held whenever called by the Chairman of the Board, the President, or
any director.
3.11 Notice. The Secretary shall give notice of each special meeting
of the board of directors to each director at least 24 hours before the
meeting. Notice of any such meeting need not be given to any director who
shall, either before or after the meeting, submit a signed waiver of notice or
who shall attend such meeting without protesting, prior to or at its
commencement, the lack of notice to him. Neither the business to be transacted
at, nor the purpose of, any regular or special meeting of the board of
directors need be specified in the notice or waiver of notice of such meeting.
3.12 Quorum; Majority Vote. At all meetings of the board of
directors, a majority of the directors fixed in the manner provided in these
bylaws shall constitute a quorum for the transaction
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of business. If at any meeting of the board of directors there be less than a
quorum present, a majority of those present or any director solely present may
adjourn the meeting from time to time without further notice. Unless the act
of a greater number is required by law, the certificate of incorporation of the
Corporation, or these bylaws, the act of a majority of the directors present at
a meeting at which a quorum is in attendance shall be the act of the board of
directors. At any time that the certificate of incorporation of the Corporation
provides that directors elected by the holders of a class or series of stock
shall have more or less than one vote per director on any matter, every
reference in these bylaws to a majority or other proportion of directors shall
refer to a majority or other proportion of the votes of such directors.
3.13 Procedure. At meetings of the board of directors, business shall
be transacted in such order as from time to time the board of directors may
determine. The Chairman of the Board, if such office has been filled, and, if
not or if the Chairman of the Board is absent or otherwise unable to act, the
President shall preside at all meetings of the board of directors. In the
absence or inability to act of either such officer, a chairman shall be chosen
by the board of directors from among the directors present. The Secretary of
the Corporation shall act as the secretary of each meeting of the board of
directors unless the board of directors appoints another person to act as
secretary of the meeting. The board of directors shall keep regular minutes of
its proceedings which shall be placed in the minute book of the Corporation.
3.14 Presumption of Assent. A director of the Corporation who is
present at the meeting of the board of directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as
secretary of the meeting before the adjournment thereof or shall forward any
dissent by certified or registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
3.15 Compensation. The board of directors shall have the authority to
fix the compensation, including fees and reimbursement of expenses, paid to
directors for attendance at regular or special meetings of the board of
directors or any committee thereof; provided, however, that nothing contained
herein shall be construed to preclude any director from serving the Corporation
in any other capacity or receiving compensation therefor.
ARTICLE FOUR: COMMITTEES
4.1 Designation. The board of directors may, by resolution adopted
by a majority of the entire board of directors, designate one or more
committees.
4.2 Number; Qualification; Term. Each committee shall consist of one
or more directors appointed by resolution adopted by a majority of the entire
board of directors. The number of committee members may be increased or
decreased from time to time by resolution adopted by a majority of the entire
board of directors. Each committee member shall serve as such until the
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earliest of (i) the expiration of his term as director, (ii) his resignation as
a committee member or as a director, or (iii) his removal as a committee member
or as a director.
4.3 Authority. Each committee, to the extent expressly provided in
the resolution establishing such committee, shall have and may exercise all of
the authority of the board of directors in the management of the business and
property of the Corporation except to the extent expressly restricted by law,
the certificate of incorporation of the Corporation, or these bylaws.
4.4 Committee Changes. The board of directors shall have the power
at any time to fill vacancies in, to change the membership of, and to discharge
any committee.
4.5 Alternate Members of Committees. The board of directors may
designate one or more directors as alternate members of any committee. Any
such alternate member may replace any absent or disqualified member at any
meeting of the committee. If no alternate committee members have been so
appointed to a committee or each such alternate committee member is absent or
disqualified, the member or members of such committee present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in the place of any such absent or disqualified member.
4.6 Regular Meetings. Regular meetings of any committee may be held
without notice at such time and place as may be designated from time to time by
the committee and communicated to all members thereof.
4.7 Special Meetings. Special meetings of any committee may be held
whenever called by any committee member. The committee member calling any
special meeting shall cause notice of such special meeting, including therein
the time and place of such special meeting, to be given to each committee
member at least two days before such special meeting. Neither the business to
be transacted at, nor the purpose of, any special meeting of any committee need
be specified in the notice or waiver of notice of any special meeting.
4.8 Quorum; Majority Vote. At meetings of any committee, a majority
of the number of members designated by the board of directors shall constitute
a quorum for the transaction of business. If a quorum is not present at a
meeting of any committee, a majority of the members present may adjourn the
meeting from time to time, without notice other than an announcement at the
meeting, until a quorum is present. The act of a majority of the members
present at any meeting at which a quorum is in attendance shall be the act of a
committee, unless the act of a greater number is required by law, the
certificate of incorporation of the Corporation, or these bylaws.
4.9 Minutes. Each committee shall cause minutes of its proceedings
to be prepared and shall report the same to the board of directors upon the
request of the board of directors. The minutes of the proceedings of each
committee shall be delivered to the Secretary of the Corporation for placement
in the minute books of the Corporation.
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4.10 Compensation. Committee members may, by resolution of the board
of directors, be allowed a fixed sum and expenses of attendance, if any, for
attending any committee meetings or a stated salary.
4.11 Responsibility. The designation of any committee and the
delegation of authority to it shall not operate to relieve the board of
directors or any director of any responsibility imposed upon it or such
director by law.
ARTICLE FIVE: NOTICE
5.1 Method. Whenever by statute, the certificate of incorporation of
the Corporation, or these bylaws, notice is required to be given to any
committee member, director, or stockholder and no provision is made as to how
such notice shall be given, personal notice shall not be required and any such
notice may be given (a) in writing, by mail, postage prepaid, addressed to such
committee member, director, or stockholder at his address as it appears on the
books or (in the case of a stockholder) the stock transfer records of the
Corporation, or (b) by any other method permitted by law (including but not
limited to overnight courier service, telegram, telex or telefax). Any notice
required or permitted to be given by mail shall be deemed to be delivered and
given at the time when the same is deposited in the United States mail as
aforesaid. Any notice required or permitted to be given by overnight courier
service shall be deemed to be delivered and given at the time delivered to such
service with all charges prepaid and addressed as aforesaid. Any notice
required or permitted to be given by telegram, telex, or telefax shall be
deemed to be delivered and given at the time transmitted with all charges
prepaid and addressed as aforesaid.
5.2 Waiver. Whenever any notice is required to be given to any
stockholder, director or committee member of the Corporation by statute, the
certificate of incorporation of the Corporation or these bylaws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be equivalent to the
giving of such notice. Attendance of a stockholder, director or committee
member at a meeting shall constitute a waiver of notice of such meeting, except
where such person attends for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office. The officers of the Corporation
shall be a President, a Secretary, and such other officers as the board of
directors may from time to time elect or appoint, including a Chairman of the
Board, one or more Vice Presidents (with each Vice President to have such
descriptive title, if any, as the board of directors shall determine), a
Treasurer, one or more Assistant Treasurers and one or more Assistant
Secretaries. Each officer shall hold office until his successor shall have
been duly elected and shall have qualified, or until his earlier death,
resignation or removal in the manner hereinafter provided. Any two or more
offices may be held by the same person. None of the officers need be a
stockholder or a director of the Corporation or a resident of the State of
Delaware.
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6.2 Removal. Any officer or agent elected or appointed by the board
of directors may be removed by the board of directors whenever in its judgment
the best interests of the Corporation will be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not of itself
create contract rights.
6.3 Vacancies. Any vacancy occurring in any office of the
Corporation (by death, resignation, removal or otherwise) may be filled by the
board of directors.
6.4 Authority. Officers shall have such authority and perform such
duties in the management of the Corporation as are provided in these bylaws or
as may be determined by resolution of the board of directors not inconsistent
with these bylaws.
6.5 Compensation. The compensation, if any, of officers and agents
shall be fixed from time to time by the board of directors; provided, however,
that the board of directors may delegate the power to determine the
compensation of any officer and agent (other than the officer to whom such
power is delegated) to the Chairman of the Board or the President or to any
committee of the board of directors.
6.6 Chairman of the Board. The Chairman of the Board, if elected by
the board of directors, shall have such powers and duties as may be prescribed
by the board of directors, which may include being the chief executive officer
of the Corporation. If designated as the chief executive officer, the Chairman
of the Board shall have general executive charge, management and control of the
properties and operations of the Corporation in the ordinary course of its
business, with all such powers with respect to such properties and operations
as may be reasonably incident to such responsibilities. Such officer shall
preside at all meetings of the stockholders and of the board of directors.
Such officer may agree upon and execute all division and transfer orders,
bonds, contracts and other obligations in the name of the Corporation, and he
may sign all certificates for shares of stock of the Corporation.
6.7 President. If a Chairman of the Board has not been elected or if
the Chairman of the Board has been elected but has not been designated by the
board of directors to be the chief executive officer of the Corporation, the
President shall be the chief executive officer of the Corporation and, subject
to the board of directors, he shall have general executive charge, management
and control of the properties and operations of the Corporation in the ordinary
course of its business, with all such powers with respect to such properties
and operations as may be reasonably incident to such responsibilities. If the
Chairman of the Board has been elected and has been designated as the chief
executive officer of the Corporation, the President shall be the chief
operating and administrative officer of the Corporation and, subject to the
board of directors, shall have charge of the actual day-to-day operations and
management of the Corporation and its property with all such powers with
respect to such properties and operations as may be reasonably incident to such
responsibilities. If the board of directors has not elected a Chairman of the
Board or in the absence or inability to act of the Chairman of the Board, the
President shall exercise all of the powers
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and discharge all of the duties of the Chairman of the Board. As between the
Corporation and third parties, any action taken by the President in the
performance of the duties of the Chairman of the Board shall be conclusive
evidence that there is no Chairman of the Board or that the Chairman of the
Board is absent or unable to act.
6.8 Vice Presidents. Each Vice President shall have such powers and
duties as may be assigned to him by the board of directors, the Chairman of the
Board or the President, and (in order of their seniority as determined by the
board of directors or, in the absence of such determination, as determined by
the length of time they have held the office of Vice President) shall exercise
the powers of the President during that officer's absence or inability to act.
As between the Corporation and third parties, any action taken by a Vice
President in the performance of the duties of the President shall be conclusive
evidence of the absence or inability to act of the President at the time such
action was taken.
6.9 Treasurer. The Treasurer shall have custody of the Corporation's
funds and securities, shall keep full and accurate account of receipts and
disbursements, shall deposit all monies and valuable effects in the name and to
the credit of the Corporation in such depository or depositories as may be
designated by the board of directors, and shall perform such other duties as
may be prescribed by the board of directors, the Chairman of the Board or the
President.
6.10 Assistant Treasurers. Each Assistant Treasurer shall have such
powers and duties as may be assigned to him by the board of directors, the
Chairman of the Board or the President. The Assistant Treasurers (in the order
of their seniority as determined by the board of directors or, in the absence
of such a determination, as determined by the length of time they have held the
office of Assistant Treasurer) shall exercise the powers of the Treasurer
during that officer's absence or inability to act.
6.11 Secretary. Except as otherwise provided in these bylaws, the
Secretary shall keep the minutes of all meetings of the board of directors and
of the stockholders in books provided for that purpose, and he shall attend to
the giving and service of all notices. He may sign with the Chairman of the
Board or the President, in the name of the Corporation, all contracts of the
Corporation and affix the seal of the Corporation thereto. He may sign with
the Chairman of the Board or the President all certificates for shares of stock
of the Corporation, and he shall have charge of the certificate books, transfer
books and stock papers as the board of directors may direct, all of which shall
at all reasonable times be open to inspection by any director upon application
at the office of the Corporation during business hours. He shall in general
perform all duties incident to the office of the Secretary, subject to the
control of the board of directors, the Chairman of the Board and the President.
6.12 Assistant Secretaries. Each Assistant Secretary shall have such
powers and duties as may be assigned to him by the board of directors, the
Chairman of the Board or the President. The Assistant Secretaries (in the
order of their seniority as determined by the board of directors or, in the
absence of such a determination, as determined by the length of time they have
held the office
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<PAGE> 16
of Assistant Secretary) shall exercise the powers of the Secretary during that
officer's absence or inability to act.
6.13 Other Officers. Each other officer elected by the board of
directors and designated to be an officer of the Corporation shall have the
title that the board of directors may prescribe and the duties that the board
of directors, the Chairman of the Board or the President may prescribe.
ARTICLE SEVEN: CERTIFICATES AND STOCKHOLDERS
7.1 Certificates for Shares. Certificates for shares of stock of the
Corporation shall be in such form as shall be approved by the board of
directors. The certificates shall be signed by the Chairman of the Board or
the President or a Vice President and also by the Secretary, an Assistant
Secretary, the Treasurer or an Assistant Treasurer. Any and all signatures on
the certificate may be a facsimile and may be sealed with the seal of the
Corporation or a facsimile thereof. If any officer, transfer agent or
registrar who has signed, or whose facsimile signature has been placed upon, a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, such certificate may be issued by the Corporation
with the same effect as if he were such officer, transfer agent or registrar at
the date of issue. The certificates shall be consecutively numbered and shall
be entered in the books of the Corporation as they are issued and shall exhibit
the holder's name and the number of shares.
7.2 Replacement of Lost or Destroyed Certificates. The board of
directors may direct a new certificate or certificates to be issued in place of
a certificate or certificates theretofore issued by the Corporation and alleged
to have been lost or destroyed, upon the making of an affidavit of that fact by
the person claiming the certificate or certificates representing shares to be
lost or destroyed. When authorizing such issue of a new certificate or
certificates the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the Corporation a bond with a
surety or sureties satisfactory to the Corporation in such sum as it may direct
as indemnity against any claim, or expense resulting from a claim, that may be
made against the Corporation with respect to the certificate or certificates
alleged to have been lost or destroyed.
7.3 Transfer of Shares. Shares of stock of the Corporation shall be
transferable only on the books of the Corporation by the holders thereof in
person or by their duly authorized attorneys or legal representatives. Upon
surrender to the Corporation or the transfer agent of the Corporation of a
certificate representing shares duly endorsed or accompanied by proper evidence
of succession, assignment or authority to transfer, the Corporation or its
transfer agent shall issue a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
7.4 Registered Stockholders. The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of
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<PAGE> 17
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by law.
7.5 Regulations. The board of directors shall have the power and
authority to make all such rules and regulations as they may deem expedient
concerning the issue, transfer and registration or the replacement of
certificates for shares of stock of the Corporation.
7.6 Legends. The board of directors shall have the power and
authority to provide that certificates representing shares of stock bear such
legends as the board of directors deems appropriate to assure that the
Corporation does not become liable for violations of federal or state
securities laws or other applicable law.
ARTICLE EIGHT: INDEMNIFICATION
8.1 General. Each person who at any time shall serve or shall have
served as a director, officer, employee or agent of the Corporation (including
any predecessor of the Corporation), or any person who is or was serving at the
written request of the Corporation (in accordance with written procedures
adopted from time to time by the Board of Directors) as a director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar functionary
of another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise, shall be
entitled to (a) indemnification and (b) the advancement of expenses incurred by
such person from the Corporation as, and to the fullest extent, permitted by
Section 145 of the Delaware General Corporation Law or any successor statutory
provision, as from time to time amended. The foregoing right of
indemnification and to the advancement of expenses shall not be deemed
exclusive of any other rights to which those to be indemnified may be entitled
as a matter of law or under any agreement, vote of stockholders or
disinterested directors of the Corporation, or other arrangement.
8.2 Insurance. The Corporation may purchase and maintain insurance
or another arrangement on behalf of any person who is or was a director,
officer, employee or agent of the Corporation or who is or was serving at the
written request of the Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another foreign
or domestic corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan or other enterprise against any liability asserted
against and incurred by such person in such capacity or arising out of such
person's status in such capacity, whether or not the Corporation would have the
power to indemnify such person against that liability under this Article Eight
or the Delaware General Corporation Law.
ARTICLE NINE: MISCELLANEOUS PROVISIONS
9.1 Dividends. Subject to provisions of law and the certificate of
incorporation of the Corporation, dividends may be declared by the board of
directors at any regular or special meeting
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<PAGE> 18
and may be paid in cash, in property or in shares of stock of the Corporation.
Such declaration and payment shall be at the discretion of the board of
directors.
9.2 Reserves. There may be created by the board of directors out of
funds of the Corporation legally available therefor such reserve or reserves as
the directors from time to time, in their discretion, consider proper to
provide for contingencies, to equalize dividends, or to repair or maintain any
property of the Corporation, or for such other purpose as the board of
directors shall consider beneficial to the Corporation, and the board of
directors may modify or abolish any such reserve in the manner in which it was
created.
9.3 Books and Records. The Corporation shall keep correct and
complete books and records of account, shall keep minutes of the proceedings of
its stockholders and board of directors and shall keep at its registered office
or principal place of business, or at the office of its transfer agent or
registrar, a record of its stockholders, giving the names and addresses of all
stockholders and the number and class of the shares held by each.
9.4 Fiscal Year. The fiscal year of the Corporation shall be fixed
by the board of directors; provided, that if such fiscal year is not fixed by
the board of directors and the selection of the fiscal year is not expressly
deferred by the board of directors, the fiscal year shall be the calendar year.
9.5 Seal. The seal of the Corporation shall be such as from time to
time may be approved by the board of directors.
9.6 Resignations. Any director, committee member or officer may
resign by giving written notice to the board of directors, the Chairman of the
Board, the President or the Secretary. Such resignation shall take effect at
the time specified therein or, if no time is specified therein, immediately
upon its receipt. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
9.7 Securities of Other Corporations. The Chairman of the Board, the
President or any Vice President of the Corporation shall have the power and
authority to transfer, endorse for transfer, vote, consent or take any other
action with respect to any securities of another issuer which may be held or
owned by the Corporation and to make, execute and deliver any waiver, proxy or
consent with respect to any such securities.
9.8 Telephone Meetings. Members of the board of directors and
members of a committee of the board of directors, may participate in and hold a
meeting of such board of directors or committee by means of a conference
telephone or similar communications equipment by means of which persons
participating in the meeting can hear each other, and participation in a
meeting pursuant to this section shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
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9.9 Action Without a Meeting. Unless otherwise restricted by the
certificate of incorporation of the Corporation or by these bylaws, any action
required or permitted to be taken at a meeting of the board of directors, or of
any committee of the board of directors, may be taken without a meeting if a
consent or consents in writing, setting forth the action so taken, shall be
signed by all the directors or all the committee members, as the case may be,
entitled to vote with respect to the subject matter thereof, and such consent
shall have the same force and effect as a vote of such directors or committee
members, as the case may be, and may be stated as such in any certificate or
document filed with the Secretary of State of the State of Delaware or in any
certificate delivered to any person. Such consent or consents shall be filed
with the minutes of proceedings of the board of directors or committee of the
board of directors, as the case may be.
9.10 Invalid Provisions. If any part of these bylaws shall be held
invalid or inoperative for any reason, the remaining parts, so far as it is
possible and reasonable, shall remain valid and operative.
9.11 Mortgages, etc. With respect to any deed, deed of trust,
mortgage or other instrument executed by the Corporation through its duly
authorized officer or officers, the attestation to such execution by the
Secretary of the Corporation shall not be necessary to constitute such deed,
deed of trust, mortgage or other instrument a valid and binding obligation
against the Corporation unless the resolutions, if any, of the board of
directors authorizing such execution expressly state that such attestation is
necessary.
9.12 Headings. The headings used in these bylaws have been inserted
for administrative convenience only and do not constitute matter to be
construed in interpretation.
9.13 References. Whenever herein the singular number is used, the
same shall include the plural when appropriate, and words referring to persons
of one sex shall include references to persons of the other sex when
appropriate.
9.14 Amendments. These bylaws may be altered, amended or repealed or
new bylaws may be adopted by the board of directors at any regular meeting of
the board of directors or at any special meeting of the board of directors if
notice of such alteration, amendment, repeal or adoption of new bylaws be
contained in the notice of such special meeting. These bylaws may also be
altered, amended or repealed or new bylaws may be adopted upon the vote of the
holders of not less than 66 2/3% of the outstanding shares of stock then
entitled to vote upon the election of directors at any regular meeting of the
stockholders or at any special meeting of the stockholders if notice of such
alteration, amendment, repeal or adoption of new bylaws be contained in the
notice of such special meeting.
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The undersigned, the President of the Corporation, hereby certifies that
the foregoing bylaws were adopted by unanimous consent of the directors of the
Corporation as of August 19, 1997.
BAYARD DRILLING TECHNOLOGIES, INC.
By: /s/ James E. Brown
------------------------------------
President
<PAGE> 1
EXHIBIT 10.1
BAYARD DRILLING TECHNOLOGIES, INC.
1997 STOCK OPTION
AND
STOCK AWARD PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE 1
SCOPE AND PURPOSE OF THE PLAN
1.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
GENERAL DEFINITIONS
2.1 General Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 3
SHARES OF COMMON STOCK SUBJECT TO THE PLAN
3.1 Maximum Amount of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Limitation of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Incentive Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 4
ADMINISTRATION OF THE PLAN
4.1 The Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3 Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Registration and Listing of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.5 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 5
ELIGIBILITY AND PARTICIPATION
5.1 Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.2 Incentive Stock Option Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.4 No Board Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.5 Incentive Award Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 6
STOCK OPTIONS
6.1 Exercise Price and Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
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<TABLE>
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6.2 Term of Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.3 Method of Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.4 Limitation on Incentive Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 7
STOCK APPRECIATION RIGHTS
7.1 Grant of Stock Appreciation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.2 Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.3 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 8
RESTRICTED STOCK AWARDS
8.1 Grant of Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 9
PERFORMANCE UNITS AND PERFORMANCE SHARES
9.1 Grants of Performance Units or Performance Shares . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.2 Qualified Performance-Based Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.3 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 10
PHANTOM STOCK RIGHTS
10.1 Grant of Phantom Stock Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.2 Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.3 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 11
FORFEITURE AND EXPIRATION OF INCENTIVE
AWARDS DUE TO EMPLOYMENT SEPARATION
11.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11.2 Leave of Absence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
11.3 Repurchase of Unvested Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
11.4 Company's Right to Purchase Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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ARTICLE 12
ADJUSTMENT PROVISIONS
12.1 Common Stock Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
12.2 Corporate Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
12.3 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 13
GENERAL PROVISIONS
13.1 No Right to Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
13.2 Securities Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
13.3 No Right to Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
13.4 No Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
13.5 Company's Right to Purchase Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 14
AMENDMENT AND TERMINATION
14.1 Amendments; Suspensions; Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 15
EFFECTIVE DATE OF PLAN AND DURATION OF PLAN
15.1 Effective Date and Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
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ARTICLE 1
SCOPE AND PURPOSE OF THE PLAN
1.1 Purpose. The purpose of the Bayard Drilling
Technologies, Inc. 1997 Stock Option and Stock Award Plan (the "Plan") is to
strengthen the ability of Bayard Drilling Technologies, Inc. (the "Company")
and its Subsidiaries to attract, motivate, and retain employees of superior
capability and to encourage valued employees to have a proprietary interest in
the Company. In furtherance of that purpose, selected Employees may receive
Non-qualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock, Performance Units or Performance Shares and Phantom
Stock Rights, or any combination of the foregoing compensatory benefits under
this Plan.
ARTICLE 2
GENERAL DEFINITIONS
2.1 General Definitions. As used in this Plan, the
following terms shall have the meanings set forth in this Section 2.1, unless a
clearly different meaning is required by the context in which the word or
phrase is used:
(a) "Agreement" -- the written instrument
evidencing the grant to a Participant of an Incentive Award. Each
Participant may be issued one or more Agreements from time to time,
containing one or more Incentive Awards, singly, in combination, or in
tandem.
(b) "Board" -- the Board of Directors of the
Company.
(c) "Change of Control" -- a Change of Control of
the Company as described in Section 12.3.
(d) "Code" -- the Internal Revenue Code of 1986,
as amended.
(e) "Committee" -- the Committee that the Board
appoints to administer the Plan, which shall be composed of at least
two directors who are not Employees, former Employees, or officers of
the Company, and who do not receive compensation from the Company in
any capacity other than as a director, except for amounts not
exceeding that amount for which disclosure would be required pursuant
to Item 404(a) of Regulation S-K promulgated by the Securities and
Exchange Commission.
(f) "Common Stock" -- the common shares of the
capital stock of the Company as described in the Company's Articles of
Incorporation, or such other stock as
<PAGE> 6
shall be substituted therefore as provided in Article 12. Shares of
Common Stock are subject to restrictions as set forth in this Plan,
and in each Incentive Award Agreement pursuant to which a Participant
receives or could receive Common Stock.
(g) "Company" -- Bayard Drilling Technologies,
Inc., or any successor thereto.
(h) "Date of Grant" -- the date on which the
grant of an Incentive Award is authorized by the Committee, unless
another date is specified by the Committee or by a provision in this
Plan applicable to the Incentive Award.
(i) "Disposition" -- any sale, transfer,
encumbrance, gift, donation, assignment, pledge, hypothecation, or
other disposition, whether similar or dissimilar to those previously
enumerated, whether voluntary or involuntary, and whether during the
Participant's lifetime or upon or after his or her death, including,
but not limited to, any disposition by operation of law, by court
order, by judicial process, or by foreclosure, levy, or attachment.
(j) "Employee" -- any full-time employee of the
Company or a Subsidiary.
(k) "Fair Market Value" -- if the Common Stock
is publicly traded, then "Fair Market Value" means the closing price
per share of such Common Stock on the principal stock exchange or
quotation system on which the Common Stock is traded or listed on the
Date of Grant or other specified measuring date, or, if there shall
have been no such price so reported or listed on that date, on the
last preceding date on which a price was so reported or listed. If
Common Stock is not publicly traded, then "Fair Market Value" shall
mean the value of a share of Common Stock, as determined by the
Committee, in its sole and absolute discretion, no less frequently
than annually. For purposes of this Plan, a share of Restricted Stock
shall have the Fair Market Value of a similar share of Common Stock
without any restrictions.
(l) "Incentive Award" -- a Stock Option, Stock
Appreciation Right, Restricted Stock Award, Performance Unit,
Performance Share, or Phantom Stock Right granted under the Plan.
(m) "Incentive Stock Option" -- an incentive
stock option, as defined in section 422 of the Code and the
regulations promulgated thereunder.
(n) "Non-qualified Stock Option" -- a Stock
Option other than an Incentive Stock Option.
2
<PAGE> 7
(o) "Participant" -- an Employee selected by the
Committee to be eligible to receive an Incentive Award under the Plan.
(p) "Performance Period" -- a period of one (1)
or more fiscal years of the Company, beginning with the fiscal year in
which Performance Units or Performance Shares are granted and over
which performance is measured, for the purpose of determining the
payment value of Performance Units or Performance Shares.
(q) "Performance Unit" or "Performance Share" --
an Incentive Award representing a contingent right to receive cash or
shares of Common Stock, which may be Restricted Stock, at the end of a
Performance Period and which, in the case of Performance Shares, is
denominated in Common Stock, and in the case of Performance Units, is
denominated in cash values.
(r) "Phantom Stock Right" -- the right to receive
an amount equal to the Fair Market Value of the shares of Common Stock
to which such right relates, as determined on the date of conversion
of such right. Such rights may be subject to substantial risk of
forfeiture until specific vesting conditions are met, which conditions
may be based on continuing employment.
(s) "Plan" -- the Bayard Drilling Technologies,
Inc. 1997 Stock Option and Stock Award Plan, as set forth in this
document, and as it may be amended from time to time.
(t) "Restricted Stock" or "Restricted Stock
Award" -- the grant, or purchase at a price determined by the
Committee, of Common Stock, which is nontransferable (not subject to
Disposition) and subject to substantial risk of forfeiture until
specific conditions are met. Conditions may include, but are not
limited to, continuing employment with the Company or achievement of
preestablished performance objectives.
(u) "Retirement" -- the separation of employment
on account of the Employee's retirement under any qualified plan
maintained by the Company or a Subsidiary in which the Employee is a
participant.
(v) "Securities Act" -- the Securities Exchange
Act of 1934, as amended.
(w) "Stock Appreciation Right" -- the right to
receive an amount equal to the excess of the Fair Market Value of a
share of Common Stock (as determined on the date of exercise) over the
Fair Market Value on the Date of Grant of the Stock Appreciation
Right, or such lesser amount related to such excess as shall be
determined by the Committee and described in the Agreement evidencing
the Stock Appreciation Right.
3
<PAGE> 8
(x) "Stock Option" -- a right granted to a
Participant under Article 6, to purchase Common Stock at a specified
price during specified time periods. A Stock Option may be either a
Non-qualified Stock Option or an Incentive Stock Option.
(y) "Subsidiary" - a "subsidiary corporation", as
defined in Section 424(f) of the Code, that is subsidiary to the
Company.
2.2 Construction. The singular may include the plural,
unless the context clearly indicates to the contrary. The term "delivered to
the Committee," as used in this Plan shall include delivery to a person or
persons designated by the Committee for the disbursement and receipt of
administrative forms, elections or other communications. Delivery shall be
deemed to have occurred only when the form or other communication is actually
received. Headings and subheadings are for the purpose of reference only and
are not to be considered in the construction of the Plan. All of the
provisions of this Plan shall be construed according to the laws of the State
of Texas.
ARTICLE 3
SHARES OF COMMON STOCK SUBJECT TO THE PLAN
3.1 Maximum Amount of Shares. Subject to the provisions
of Section 3.2 and Article 12 of this Plan, the aggregate number of shares of
Common Stock that may be issued, transferred or exercised pursuant to Incentive
Awards under the Plan (the "Authorized Shares") shall not exceed 1,600,000
shares; provided, however, that if the total number of issued and outstanding
shares of Common Stock shall increase after the effective date of the Plan
(other than any increase due to issuances of Common Stock in connection with
Incentive Awards under the Plan), then the number of Authorized Shares shall be
increased one time per year, commencing January 1, 1998 and occurring each
January 1 thereafter during the existence of the Plan, by a sufficient number
of shares of Common Stock such that the number of Authorized Shares reserved
and available for issuance under the Plan shall equal 10% of the total number
of shares of issued and outstanding Common Stock. Notwithstanding the
foregoing, only a total of 400,000 of the original 1,600,000 Authorized Shares
may be issued, transferred or exercised pursuant to Incentive Stock Options
under this Plan, and the number of shares eligible for such treatment as
Incentive Stock Options shall not be subject to annual adjustment. At the
discretion of the Board or the Committee, the shares to be delivered under the
Plan shall be made available either from (i) authorized but unissued shares of
Common Stock, (ii) Common Stock held in the treasury of the Company, or (iii)
previously issued shares of Common Stock reacquired by the Company, including
shares purchased on the open market, or through some combination thereof.
3.2 Limitation of Shares. For purposes of the limitation
specified in Section 3.1, the following principles shall apply:
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(a) the following shall count against and
decrease the number of shares of Common Stock that may be issued for
purposes of Section 3.1: (i) shares of Common Stock subject to
outstanding Stock Options and Phantom Stock Rights, outstanding shares
of Restricted Stock, shares subject to outstanding Stock Appreciation
Rights granted independent of Stock Options (based on a good faith
estimate by the Company or the Committee of the maximum shares for
which the Stock Appreciation Right may be settled (assuming payment in
full in shares of Common Stock)), and shares issued upon settlement of
outstanding Performance Units and Performance Shares, and (ii) in the
case of Stock Options granted in tandem with Stock Appreciation Rights
the greater of the number of shares of Common Stock that would be
counted in one or the other alone was outstanding (determined as
described in subsection (i) above);
(b) the following shall be added back to the
number of shares of Common Stock that may be issued for purposes of
Section 3.1: (i) shares of Common Stock with respect to which Stock
Options, Stock Appreciation Rights granted independent of Stock
Options, Phantom Stock Rights, or Restricted Stock Awards expire, are
canceled, or otherwise terminate without being exercised, converted,
or vested, as applicable, and (ii) in the case of Stock Options
granted in tandem with Stock Appreciation Rights, shares of Common
Stock as to which a Stock Option has been surrendered in connection
with the exercise of a related ("tandem") Stock Appreciation Right, to
the extent the number surrendered exceeds the number issued upon
exercise of the Stock Appreciation Right; provided that, in any case,
the holder of such Incentive Awards did not receive any dividends or
other benefits of ownership with respect to the shares being added
back, other than voting rights and the accumulation (but not payment)
of dividends, of the underlying Common Stock;
(c) shares of Common Stock subject to Stock
Appreciation Rights granted independent of Stock Options (calculated
as provided in Section 3.2(a) above) that are exercised and paid in
cash shall be added back to the number of shares of Common Stock that
may be issued for purposes of Section 3.1, provided that the holder of
such Stock Appreciation Right did not receive any dividends or other
benefits of ownership other than voting rights and the accumulation
(but not payment) of dividends, of the shares of Common Stock subject
to the Stock Appreciation Right;
(d) shares of Common Stock that are transferred
by a holder of an Incentive Award (or withheld by the Company) as full
or partial payment to the Company of the purchase price of shares of
Common Stock subject to a Stock Option or the Company's or any
Subsidiary's tax withholding obligations shall not be added back to
the number of shares of Common Stock that may be issued for purposes
of Section 3.1 and shall not again be subject to Incentive Awards; and
(e) if the number of shares of Common Stock
counted against the number of shares that may be issued for purposes
of Section 3.1 is based upon an estimate made by
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the Company or the Committee as provided in Section 3.2(a) above and
the actual number of shares of Common Stock issued pursuant to the
applicable Incentive Award is greater or less than the estimated
number, then, upon such issuance, the number of shares of Common Stock
that may be issued pursuant to Section 3.1 shall be further reduced by
the excess issuance or increased by the shortfall, as applicable.
3.3 Incentive Award. Subject to the general limitations
set forth in Articles 6, 7, and 12, the Committee may make any adjustment in
the exercise price of, the number of shares subject to, or the terms of a Non-
qualified Stock Option or Stock Appreciation Right by canceling an outstanding
Non-qualified Stock Option or Stock Appreciation Right and re-granting a
Non-qualified Stock Option or Stock Appreciation Right. Such adjustment shall
be made by amending, substituting, or re-granting an outstanding Non-qualified
Stock Option or Stock Appreciation Right. Such amendment, substitution, or
regrant may result in terms and conditions that differ from the terms and
conditions of the original Non-qualified Stock Option or Stock Appreciation
Right. The Committee may not, however, impair the rights of any Participant to
previously granted Non-qualified Stock Options or Stock Appreciation Rights
without such Participant's consent. If such action is effected by amendment,
the effective date of such amendment shall be the date of the original grant.
ARTICLE 4
ADMINISTRATION OF THE PLAN
4.1 The Committee. The Committee shall administer the
Plan. The Committee shall consist of two or more non-employee members of the
Board elected to the Committee by a majority of the Board. The members of the
Committee shall serve at the discretion of the Board, which shall have the
power, at any time and from time to time, to remove members from or add members
to the Committee. Any individual serving as a member of the Committee shall
have the right to resign from membership in the Committee by at least three
days' written notice to the Board. The Board, and not the remaining members of
the Committee, shall have the power and authority to fill vacancies on the
Committee, however caused. No member of the Board or the Committee shall be
liable for any action or determination made in good faith by the Board or the
Committee with respect to the Plan or any Incentive Award. The Committee may,
in its discretion, and to the extent permitted pursuant to Rule 16b-3 under the
Securities Act, section 162(m) of the Code and applicable law, delegate its
duties under the Plan to such agents as it may appoint from time to time. In
the event that the Plan becomes subject to Section 16 of the Securities Act,
the Committee shall not be able to delegate its duties with respect to
Participants subject to Section 16 of the Securities Act.
4.2 Powers. The Committee may exercise such powers and
authority as may be necessary for the Committee to carry out its functions as
described in the Plan. The Committee has discretionary authority to determine
the Employees to whom, and the time or times at which,
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Incentive Awards shall be granted. The Committee also has authority to
determine the number of shares of Common Stock, Stock Options, Stock
Appreciation Rights, Restricted Stock Awards, Performance Units or Performance
Shares, or Phantom Stock Rights that shall be subject to each Incentive Award.
The Committee shall have the discretion to determine the terms and provisions
of the Incentive Award Agreements and to make all other determinations
necessary for plan administration. The Committee has authority to interpret
the Plan and the Agreements thereunder the authority to prescribe, amend, and
rescind any rules relating to the Plan. All Committee interpretations,
determinations, and actions shall be binding on all parties. A majority of the
Committee shall constitute a quorum. Acts of a majority of the members present
at any meeting at which a quorum is present or acts approved in writing by a
majority of the Committee shall deemed to be the acts of the Committee.
4.3 Agreements. Incentive Awards shall be evidenced by a
written instrument and may include any terms and conditions consistent with the
Plan, as the Committee may determine.
4.4 Registration and Listing of Shares. From time to
time, the Board of Directors and appropriate officers of the Company shall and
are authorized to take whatever actions are necessary to file required
documents with governmental authorities, and stock exchanges to make shares of
Common Stock available for issuance pursuant to Incentive Awards.
4.5 Payment of Taxes. The Committee may, in its
discretion, require a Participant to pay to the Company, or to a Subsidiary of
the Company if the Participant is an Employee of a Subsidiary, at the time of
exercise of a Stock Option or Stock Appreciation Right, the payment of a
Performance Unit or Performance Share, the conversion of a Phantom Stock Right,
or in connection with a Restricted Stock Award, the amount that the Committee
deems necessary to satisfy the Company's or Subsidiary's current or future
obligation to withhold federal, state, or local income or other taxes that the
Participant incurs in connection with such Incentive Award. The Participant
may (i) direct the Company to withhold from the shares of Common Stock (if any)
to be issued to the Participant the number of shares necessary to satisfy the
Company's or Subsidiary's obligation to withhold taxes, such determination to
be based on the shares' Fair Market Value as of the date on which tax
withholding is to be made, (ii) deliver to the Company sufficient shares of
Common Stock (based upon the Fair Market Value at the date of withholding) to
satisfy the Company's or Subsidiary's withholding obligations, or (iii) deliver
to the Company or Subsidiary sufficient cash to satisfy the Company's or
Subsidiary's withholding obligation. Participants who elect to use the stock
withholding feature may make the election at the time and in the manner
prescribed by the Committee. The Committee may, in its sole discretion, deny
any Participant's request to satisfy withholding obligations through Common
Stock withholding instead of payment by cash. In the event the Committee
subsequently determines that the aggregate Fair Market Value (as determined
above) of any shares of Common Stock withheld as payment of any tax withholding
obligation is insufficient to discharge that tax withholding obligation, then
the Participant shall pay to the Company or Subsidiary the amount of that
deficiency immediately upon the Company's request.
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ARTICLE 5
ELIGIBILITY AND PARTICIPATION
5.1 Participation. The Committee shall designate the
Employees who are eligible to participate in this Plan. Such designations may
be by individual or by class.
5.2 Incentive Stock Option Eligibility. No person shall
be eligible for the grant of an Incentive Stock Option who owns (within the
meaning of section 422 and 424 of the Code), or would own immediately after the
grant of such Incentive Stock Option, directly or indirectly, stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary. This restriction shall not apply if, at the time
such Incentive Stock Option is granted, the Incentive Stock Option price is at
least 110% of Fair Market Value and the Incentive Stock Option is not, by its
terms exercisable after the expiration of five years from the Date of Grant.
5.3 Exercise of Options. Except to the extent that the
Committee or this Plan provides otherwise, an Incentive Award shall be
exercisable in equal amounts on the first, second, third, fourth and fifth
anniversary of grant of such Incentive Award. The Incentive Award shall cease
to be exercisable on the first of (i) the date that is not more than 10 years
from the Date of Grant, (ii) in the case of termination of employment, the date
specified in Section 11.1, (iii) in the event there is a Change of Control, the
date specified in Section 12.3, or (iv) such other date as determined by the
Committee and set forth in the Incentive Award. An Incentive Award shall cease
to be exercisable as to any share when the Employee purchases the share or when
the Option lapses.
5.4 No Board Participation. In no event may any member
of the Board who is not an officer or other Employee of the Company be granted
an Incentive Award under this Plan.
5.5 Incentive Award Eligibility. The forms of Incentive
Awards under the Plan are Stock Options, as described in Article 6, Stock
Appreciation Rights, as described in Article 7, Restricted Stock, as described
in Article 8, Performance Units or Performance Shares, as described in Article
9, and Phantom Stock Rights, as described in Article 10.
ARTICLE 6
STOCK OPTIONS
6.1 Exercise Price and Terms. The Committee is
authorized to grant Stock Options to Participants (including "reload" options
automatically granted to offset specified exercises of options). The exercise
price, terms and conditions of each Stock Option, shall be determined by
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the Committee at the time of grant. For Non-qualified Stock Options, the
purchase price shall be equal to at least the greater of (i) the par value of
the Common Stock, or (ii) 50% of the Fair Market Value of the Common Stock on
the Date of Grant. The purchase price of Common Stock under an Incentive Stock
Option shall be at least equal to the Fair Market Value of the Common Stock on
the Date of Grant.
6.2 Term of Option. Non-qualified Stock Options may be
exercised as determined by the Committee. Incentive Stock Options may be
exercised as determined by the Committee, but in no event later than 10 years
from the Date of Grant.
6.3 Method of Exercise. Upon the exercise of a Stock
Option the purchase price shall be payable in full in cash or an equivalent
acceptable to the Committee. At the discretion of the Committee, the purchase
price may be paid by assigning and delivering to the Company shares of Common
Stock, or surrendering another Incentive Award valued at Fair Market Value, or
a combination thereof equal in value to the exercise price. No fractional
shares shall be issued pursuant to the exercise of a Stock Option and no
payment shall be made in lieu of fractional shares. Any shares so assigned and
delivered to the Company in payment or partial payment of the purchase price
shall be valued at Fair Market Value on the exercise date.
6.4 Limitation on Incentive Options. The aggregate Fair
Market Value (determined at the time an Incentive Stock Option is granted) of
the Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by a Participant during any calendar year (under all stock
option plans of the Company) shall not exceed with respect to such participant
$100,000, or such other amount as may be prescribed under section 422 of the
Code or applicable regulations or rulings from time to time. As used in this
Section 6.4, Fair Market Value shall be determined as of the Date of Grant.
The Committee may amend the terms of an Incentive Stock Option at any time to
include provisions that have the effect of changing the Incentive Stock Option
to a Non-qualified Stock Option, without the consent of the Participant granted
the Incentive Stock Option.
ARTICLE 7
STOCK APPRECIATION RIGHTS
7.1 Grant of Stock Appreciation Rights. A Stock
Appreciation Right may be granted to a Participant (i) in connection with a
Stock Option, either at the time of grant or at any time during the term of the
Stock Option, or (ii) without relation to a Stock Option. A Stock Appreciation
Right granted pursuant to a Stock Option shall entitle the Participant, upon
exercise, to surrender such Stock Option or any portion thereof, to the extent
unexercised, and to receive payment of an amount computed pursuant to Section
7.2. Such Stock Option shall then cease to be exercisable to the extent
surrendered. Subject to Article 12, a Stock Appreciation Right granted in
connection with a Stock Option shall be exercisable at such time or times and
only to the extent that
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the related Stock Option is exercisable, and shall not be subject to
Disposition except to the extent that such related Stock Option may be subject
to Disposition.
7.2 Exercise. Upon the exercise of a Stock Appreciation
Right related to a Stock Option, the Participant shall be entitled to receive
payment of an amount determined by multiplying:
(a) The difference obtained by subtracting the
purchase price of a share of Common Stock specified in the related
Stock Option from the Fair Market Value of a share of Common Stock on
the date of exercise of such Stock Appreciation Right, by
(b) The number of shares as to which such Stock
Appreciation Right has been exercised.
A Stock Appreciation Right granted without relationship to a
Stock Option shall be exercisable as determined by the Committee. A Stock
Appreciation Right granted without relationship to a Stock Option shall entitle
the Participant, upon exercise of the Stock Appreciation Right, to receive
payment of an amount determined by multiplying:
(a) The difference obtained by subtracting the
Fair Market Value of a share of Common Stock on the Date of Grant from
the Fair Market Value of a share of Common Stock on the date of
exercise of such Stock Appreciation Right, by
(b) The number of shares as to which such Stock
Appreciation Right has been exercised.
Notwithstanding anything to the contrary in this Section 7.2,
the Committee may limit the amount payable upon exercise of a Stock
Appreciation Right. Any such limitation must be determined as of the Date of
Grant and be noted in the Agreement evidencing the Participant's Stock
Appreciation Right.
7.3 Payment. Payment of the amount determined under
Section 7.2 may be made solely in whole shares of Common Stock valued at Fair
Market Value on the date of exercise of the Stock Appreciation Right or,
alternatively, in the discretion of the Committee, solely in cash or a
combination of cash and Common Stock. If the Committee decides to make full
payment in shares of Common Stock and the amount payable results in a
fractional share, payment for the fractional share shall be made in cash.
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ARTICLE 8
RESTRICTED STOCK AWARDS
8.1 Grant of Restricted Stock All shares of
Restricted Stock granted or sold to the Plan shall be subject to the following
conditions:
(a) The shares of Common Stock may not be the
subject of any Disposition (other than by will or by the laws of
descent and distribution) until the restrictions are removed or
expire. Any attempted Disposition in violation of this Section 8.1
(a) shall be void and ineffective for all purposes.
(b) Each certificate representing Restricted
Stock Awards granted pursuant to the Plan may bear a legend making
appropriate reference to the restrictions imposed.
(c) The Company may issue such shares subject
only to the restrictive legend described in Section 8.1(b) or the
Committee may require, as a condition of any Incentive Award of
Restricted Stock, one or more of the following: (i) that the Company
retain physical custody of the certificates evidencing Restricted
Stock during the restriction period; (ii) that the Participant enter
into an escrow agreement providing that the certificates representing
Restricted Stock shares shall remain in the physical custody of an
escrow holder until all restrictions are removed or expire, or (iii)
that the Participant deliver a stock power endorsed in blank relating
to the Restricted Stock shares.
(d) The Committee may impose other conditions on
any shares of Common Stock granted or sold pursuant to this Section
8.1 as it may deem advisable.
The restrictions imposed under this Section 8.1 upon
Restricted Stock Awards shall lapse as determined by the Committee, subject to
the provisions of Article 12. Shares of Restricted Stock may remain subject to
certain restrictions as set forth in the Restricted Stock Agreement. Each
Restricted Stock Award may have a different restriction period, in the
discretion of the Committee. The Committee may, in its discretion,
prospectively change the restriction period applicable to a particular
Restricted Stock Award.
Subject to the provisions of this Section 8.1 and Article 12,
the Committee may, in its discretion, determine what rights, if any, a
Participant shall have with respect to the Restricted Stock Awards granted or
sold to him or her, including the right to vote the shares and receive all
dividends and other distributions paid or made with respect thereto.
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ARTICLE 9
PERFORMANCE UNITS AND PERFORMANCE SHARES
9.1 Grants of Performance Units or Performance Shares.
The Committee may make grants of Performance Units or Performance Shares in
such a manner that more than one Performance Period is in progress
simultaneously. For each Performance Period the Committee will establish the
contingent value of each Performance Unit, or Performance Share, which may vary
depending on the degree to which performance objective established by the
Committee are met. At the beginning of each Performance Period, the Committee
will: (i) establish for such Performance Period specific financial, production,
sales or cost performance objectives the Committee believes are relevant to the
Company's overall business objectives, (ii) determine the minimum and maximum
value of a Performance Unit or Performance Share and the value of a Performance
Unit or Performance Share based on the degree to which performance objectives
are achieved, exceeded or not achieved, (iii) determine a minimum performance
level below which Performance Units or Performance Share will not increase, and
(iv) notify each Participant in writing of the established performance
objectives and minimum, target, and maximum Performance Unit or Performance
Share value for such Performance Period.
If the Committee determines in its sole discretion that the
established performance measures or objectives are no longer suitable to
Company objectives because of a change in the Company's business, operations,
corporate structure, capital structure, or other conditions the Committee deems
to be material, the Committee may modify the performance measures and
objectives as it considers appropriate and equitable.
9.2 Qualified Performance-Based Awards. At the
discretion of the Committee, Performance Units or Performance Shares may be
designated in the applicable Agreement as qualified performance-based
compensation as defined in Treasury Regulation Section 1.162-27(e). Such
Performance Units or Performance Shares shall be payable solely upon the
attainment of one or more preestablished, objective performance goals as
described in Treasury Regulation Section 1.162-27(e)(2). Such goals shall be
set forth in the Agreement.
9.3 Payment. The basis for payment of Performance Units
or Performance Shares for a given Performance Period will be the achievement of
those financial, production, sales or cost performance objectives determined by
the Committee at the beginning of the Performance Period. If minimum
performance is not achieved or exceeded for a Performance Period, no payment
will be made and all contingent rights will cease. If minimum performance is
achieved or exceeded, the value of a Performance Unit or Performance Share will
be based on the degree to which actual performance exceeded the preestablished
minimum performance standards. The amount of payment will be determined by
multiplying the number of Performance Units or Performance Shares granted at
the beginning of the Performance Period and the final Performance Unit or
Performance Share value. Payments will be made in cash or Common Stock or in a
combination of cash and Common
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Stock as soon as administratively possible following the close of the
applicable Performance Period. Payment may be made, in the discretion of the
Committee, solely in whole shares of Common Stock valued at Fair Market Value
as of the close of the applicable Performance Period or, alternatively, solely
in cash or a combination of cash and Common Stock. If the Committee decides to
make full payment in shares of Common Stock and the amount payable results in a
fractional share, payment for the fractional share shall be made in cash.
Payment will be made as soon as possible following the close of the applicable
Performance Period.
ARTICLE 10
PHANTOM STOCK RIGHTS
10.1 Grant of Phantom Stock Rights. A Phantom Stock Right
granted to a Participant shall entitle the Participant, upon conversion, to
surrender such Phantom Stock Right or any portion thereof, to the extent not
then converted, and to receive payment of an amount computed pursuant to
Section 10.2. A Phantom Stock Right shall cease to be convertible to the extent
surrendered. Subject to Article 12, the Committee may, in its discretion (i)
impose restrictions upon the vesting of Phantom Stock Rights and (ii) determine
what rights, if any, the Participant shall have with respect to Phantom Stock
Rights granted to him or her, including the right to receive any or all
dividends and/or distributions paid or made with respect to the shares to which
such Participant's Phantom Stock Right relates.
10.2 Conversion. A Phantom Stock Right shall be deemed
converted upon receipt by the Company of the Agreement pursuant to which the
Phantom Stock Right was granted and written notice from the appropriate
Participant instructing the Company to convert all or any specified portion of
such Phantom Stock Right. Upon conversion of a Phantom Stock Right, the
Participant shall be entitled to receive payment of an amount determined by
multiplying:
(a) The Fair Market Value of a share of Common
Stock on the date of conversion, by
(b) The number of shares of Common Stock as to
which such Phantom Stock Right has been converted.
A Phantom Stock Right may be converted in whole or in part
with respect to whole shares of Common Stock, but may not be converted with
respect to any fractional share unless the Phantom Stock Right is being
converted in whole.
To the extent a Phantom Stock Right is converted in part, an
appropriate notation will be made on the Agreement surrendered to the Company
and the Agreement will be returned to the appropriate Participant.
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10.3 Payment. Payment of the amount determined under
Section 10.2 may be made solely in whole shares of Common Stock (which may be
Restricted Stock) valued at Fair Market Value on the date of conversion of the
Phantom Stock Right or, alternatively, in the discretion of the Committee,
solely in cash or a combination of cash and Common Stock (which may be
Restricted Stock). If the Committee decides to make full payment in shares of
Common Stock and the amount payable results in a fractional share, payment for
the fractional share shall be made in cash.
ARTICLE 11
FORFEITURE AND EXPIRATION OF INCENTIVE
AWARDS DUE TO EMPLOYMENT SEPARATION
11.1 Termination. Except to the extent that the
Committee provides otherwise in a written agreement evidencing an Incentive
Award, Incentive Awards (whether or not vested) held by a Participant shall
expire immediately and/or be forfeited upon termination of such Participant's
employment with the Company or the Subsidiary employing the Participant
(without his immediate rehire by the Company or another Subsidiary) except as
follows:
(a) With respect to Stock Options, except to the
extent otherwise provided by the Committee, (i) in the event of
Retirement or permanent and total disability while the Participant is
employed by the Company, only those Stock Options exercisable at the
time of such termination of employment may thereafter be exercised;
provided that such Stock Options may be exercised only until the
earlier of 90 days following the date of Retirement or total and
permanent disability or the end of the remaining period during which
the Stock Option would otherwise be exercisable; and (ii) in the event
of death, Stock Options exercisable at the time of death may be
exercised by the estate or beneficiary of the Participant only until
the earlier of 90 days after the date of death or the end of the
remaining period during which the Stock Option would otherwise be
exercisable.
(b) With respect to Stock Appreciation Rights,
except to the extent otherwise provided by the Committee, (i) in the
event of Retirement or total and permanent disability while the
Participant is employed by the Company, only those Stock Appreciation
Rights exercisable at the time of such termination of employment may
thereafter be exercised; provided that such Stock Appreciation Rights
may be exercised only until the earlier of 90 days following the date
of Retirement or total and permanent disability or the end of the
remaining period during which the Stock Option would otherwise be
exercisable; and (ii) in the event of death, Stock Appreciation Rights
exercisable at the time of death may be exercised by the estate or
beneficiary of the Participant until the earlier of 90 days after the
date of death or the end of the remaining period during which the
Stock Appreciation Rights would otherwise be exercisable.
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(c) If a holder of Restricted Stock Awards ceases
to be an Employee because of Retirement, death, permanent and total
disability, or because of other reasons as the Committee deems
appropriate, the Committee may determine that restrictions on all or
some portion of the Restricted Stock Award subject to restrictions at
the time of such employment termination will be deemed to have lapsed.
(d) If a Participant ceases to be an Employee
because of Retirement, death, permanent and total disability, or other
reasons that the Committee deems appropriate, the Performance Units or
Performance Shares held by the Participant shall continue after the
date of the applicable event (e.g., Retirement, death, or disability)
for such period of time as is determined by the Committee, subject to
the terms of any applicable Agreement. During this extension period,
if any, such Incentive Awards may be exercised in accordance with
their terms, but only to the extent exercisable on the date of the
applicable event. Notwithstanding anything herein or in any
applicable Agreement to the contrary, if the Common Stock is not
publicly traded, any Performance Shares shall only be exercised for
cash, except as otherwise determined by the Committee.
(e) With respect to Phantom Stock Rights, except
to the extent otherwise provided by the Committee, (i) in the event of
Retirement or total and permanent disability while the Participant is
employed by the Company, only those Phantom Stock Rights that may be
converted at the time of such termination of employment may thereafter
by converted; provided that no Phantom Stock Rights may be converted
only until the earlier of 90 days following the date of Retirement or
total and permanent disability or the end of the remaining period
during which such Phantom Stock Rights would otherwise be convertible;
(ii) in the event of death, the Phantom Stock Rights may be converted
by the estate or beneficiary of the Participant until the earlier of
90 days after the date of death or the end of the remaining period
during which the Phantom Stock Rights would otherwise be convertible.
Notwithstanding anything herein or in any applicable Agreement to the
contrary, if the Common Stock is not publicly traded, any Phantom
Stock Right shall only be exercised for cash. except as otherwise
determined by the Committee.
11.2 Leave of Absence. With respect to an Incentive
Award, the Committee may, in its sole discretion, determine that any
Participant who is on leave of absence for any reason will be considered to
still be in the employ of the Company, provided that rights to such Incentive
Award during a leave of absence will be limited to the extent to which such
rights were earned or vested when such leave of absence began.
11.3 Repurchase of Unvested Restricted Stock. If an
Employee who has purchased shares of Restricted Stock under this Plan
terminates employment with the Company for any reason, then all shares of
Restricted Stock that have not previously vested in accordance with Section 5.3
above shall be repurchased by the Company at the cost paid by the Employee.
Upon such repurchase, the Secretary of the Company shall deliver to the Company
(i) the certificates representing such forfeited shares, which were previously
deposited with the Secretary pursuant to
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Section 8.1, and (ii) the related stock power, unless vested shares of
Restricted Stock, if any, continue to be held in escrow pursuant to Section 8.1
11.4 Company's Right to Purchase Common Stock. Upon the
Employee's termination of employment with the Company and all Subsidiaries for
any reason (including by reason of death or disability), the Company shall have
the right (but not the obligation) to purchase from the Employee (or his
beneficiary or estate) all shares of Common Stock hereunder on the terms and
conditions set forth in the applicable Incentive Award.
ARTICLE 12
ADJUSTMENT PROVISIONS
12.1 Common Stock Adjustments. Subject to Section 3.1, if
the outstanding shares of Common Stock of the Company are increased, decreased
or exchanged for a different number or kind of shares or other securities, or
if additional, new or different shares or other securities are distributed with
respect to such shares of Common Stock or other securities through merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other distribution with respect to such shares of
Common Stock or other securities, an appropriate adjustment shall be made in
(i) the maximum number and kind of shares provided in Section 3.1, (ii) the
number and kind of shares or other securities subject to the outstanding
Incentive Awards, and (iii) the price for each share or other unit of any other
securities subject to then outstanding Incentive Awards, without changing the
aggregate purchase price or value as to which such Incentive Awards remain
exercisable or subject to restrictions. Adjustments under this Section 12.1
shall be made by the Committee, and its determination as to what adjustments
shall be made and the extent thereof shall be final, binding and conclusive.
No fractional interest shall be issued under the Plan on account of any such
adjustments.
12.2 Corporate Changes. Upon (i) the dissolution or
liquidation of the Company; (ii) a reorganization, merger, or consolidation
(other than a merger or consolidation effecting a reincorporation of the
Company in another state or any other merger or consolidation in which the
shareholders of the surviving corporation and their proportionate interests
therein immediately after the merger or consolidation are substantially
identical to the shareholders of the Company and their proportionate interests
therein immediately prior to the merger or consolidation) of the Company with
one or more corporations, following which the Company is not the surviving
corporation (or survives only as a subsidiary of another corporation in a
transaction in which the shareholders of the parent of the Company and their
proportionate interests therein immediately after the transaction are
substantially identical to the shareholders of the Company and their
proportionate interests therein immediately prior to the transaction); (iii)
the sale of all or substantially all of the assets of the Company; or (iv) the
occurrence of any event described in Section 12.3, subject to the terms of any
applicable Agreement, the Committee may, to the extent permitted in Article 3.1
of this Plan, in its
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<PAGE> 21
discretion, without obtaining shareholder approval, take any one or more of the
following actions: (i) determine that all or some Incentive Awards then
outstanding under this Plan shall be fully vested and exercisable or
convertible, as applicable; (ii) determine that some or all restrictions on
Restricted Stock shall lapse immediately; or (iii) determine that there shall
be substitution of new Stock Options, Stock Appreciation Rights, Restricted
Stock Awards, Performance Units or Performance Shares, or Phantom Stock Rights
by such successor employer corporation or a parent or subsidiary company
thereof, with appropriate adjustments as to the number and kind of shares or
units subject to such awards and prices.
12.3 Change of Control. In the event of a "Change of
Control" of the Company, the Committee may, in its discretion, without
obtaining shareholder approval, take any one or more of the following actions,
with respect to any Participant:
(a) Accelerate the exercise dates of any or all
outstanding Stock Appreciation Rights or Stock Options or make some or
all such Stock Appreciation Rights or Stock Options immediately fully
vested and exercisable;
(b) Accelerate the restriction (lapse of
forfeiture provision) period of any Restricted Stock Award subject to
restrictions;
(c) Grant Stock Appreciation Rights to holders of
outstanding Stock Options;
(d) Pay cash to any or all holders of Stock
Options in exchange for the cancellation of their outstanding Stock
Options;
(e) Make payment for any outstanding Performance
Units or Performance Shares based on such amounts as the Committee may
determine;
(f) Accelerate the conversion dates of any or all
outstanding Phantom Stock Rights or make some or all such Phantom
Stock Rights immediately fully vested and exercisable;
(g) Grant new Incentive Awards to any
Participants; or
(h) Make any other adjustments or amendments to
outstanding Incentive Awards and substitute new Incentive Awards for
outstanding Incentive Awards.
The term "Change of Control" means the occurrence of one or
more of the following events:
(a) In the event that the Company becomes subject
to reporting under the Securities Act, a change of control of a nature
that would be required to be reported in a
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<PAGE> 22
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Securities Act, or any successor regulation of similar
import, whether or not the Company is then subject to such reporting
requirement;
(b) After the date the Board adopts this Plan, a
change in ownership of the Company through a transaction or series of
transactions, such that any Person (as described in Sections 13(d) and
14(d) of the Securities Act) is or becomes the Beneficial Owner (as
described in Rule 13d-3 under the Securities Act), directly or
indirectly, of securities of the Company representing 50% or more of
the combined voting power of the Company's then outstanding
securities;
(c) After October 1, 1997, a change in identity
of a majority of the members of the Board within any twelve month
period;
(d) The approval by the Board (or by the
shareholders if shareholder approval is required by applicable law or
under the terms of any relevant agreement) of an agreement for the
sale or disposition of all or substantially all of the Company's
assets or a sale/leaseback of all or substantially all of the
Company's assets (with or without a purchase option);
(e) A transfer of all or substantially all of the
Company's assets pursuant to a partnership or joint venture agreement
where the Company's resulting interest is or becomes 50% or less; or
(f) The execution or approval by the Board of any
agreement, the consummation of which would result in one of the
foregoing.
ARTICLE 13
GENERAL PROVISIONS
13.1 No Right to Employment. Nothing in the Plan or in
any Agreement executed pursuant to the Plan shall confer upon any Participant
any right to continue in the employ of the Company or any Subsidiary or affect
the Company's or Subsidiary's right to terminate the employment of any
Participant at any time with or without cause.
13.2 Securities Requirements. As determined by the
Committee, no shares of Common Stock shall be issued or transferred pursuant to
an Incentive Award unless all applicable requirements imposed by federal and
state securities laws, regulatory agencies, and stock exchanges upon which the
Common Stock may be listed, if any, have been fully met. As a condition
precedent to the issuance of shares pursuant to the grant or exercise of an
Incentive Award, the Company may require the Participant to take any reasonable
action the Committee determines necessary to meet such requirements.
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<PAGE> 23
13.3 No Right to Stock. No Participant and no beneficiary
or other person claiming under or through such Participant shall have any
right, title or interest in any shares of Common Stock allocated or reserved
under the Plan or subject to any Incentive Award except as to such shares of
Common Stock, if any, that have been issued or transferred to such Participant.
13.4 No Disposition. No Incentive Award and no right
under the Plan, contingent or otherwise, shall be subject to Disposition other
than pursuant to a qualified domestic relations order as defined by section
414(p) of the Code, or the rules thereunder, by will or beneficiary designation
(pursuant to such rules as may be established by the Committee, including rules
designed to satisfy the conditions of an available exemption pursuant to Rule
16b-3 under the Securities Act) upon the death of the Participant, or pursuant
to the laws of descent or distribution. If a beneficiary is the executor or
administrator of the estate of the Participant, any rights with respect to such
Incentive Award may be transferred to the person or persons or entity
(including a trust) entitled thereto under the will of the holder of such
Incentive Award. Notwithstanding the foregoing, no Incentive Stock Option may
be transferred except by will or by the laws of descent and distribution. If
no beneficiary is designated, the Participant's legal representative shall be
the beneficiary. Any attempted Disposition in violation of this Section 13.4
shall be void and ineffective for all purposes.
13.5 Company's Right to Purchase Common Stock: While and
so long as the Common Stock has not been publicly traded for at least 90 days,
any Common Stock obtained pursuant to an Incentive Award shall be subject to
the Company's right of first purchase. By virtue of that right,
(a) If a Participant intends to transfer shares
of Common Stock obtained pursuant to an Incentive Award, he or she
shall give written notice to the Company of his or her intention to
so transfer. The notice, in addition to stating the fact of the
intention to transfer shares, shall state (i) the number of shares to
be transferred; (ii) the name, business and residence address of the
proposed transferee; (iii) whether or not the transfer is for a
valuable consideration and (iv) if so, the amount of the consideration
and the other terms of the sale.
(b) Within 30 days of the Company's receipt of
the notice described in subsection 13.5(a), the Company may exercise
an option to purchase all or any portion of the shares of Common Stock
proposed to be transferred for the price and upon the other terms
provided in the Agreement. The Company shall exercise this option by
providing the Participant with written notice of its intent to do so.
(c) If the Company does not exercise its option
to purchase the shares of Common Stock proposed to be transferred,
such shares may be transferred by the Participant in accordance with
the notice provided in subsection 13.5(a) within 10 days after the
expiration of the 30 day option period granted by subsection 13.5(b).
Upon transfer, such
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<PAGE> 24
shares shall continue to be bound by any terms and provisions of this
Incentive Award designated as continuing on transfer.
(d) Upon the Participant's death, the Company
shall have the right to purchase all or some of such Common Stock at
its Fair Market Value within 9 months of the date of the Participant's
death.
ARTICLE 14
AMENDMENT AND TERMINATION
14.1 Amendments; Suspensions; Termination. Subject to
shareholder approval where expressly required by law, the Board shall have the
power to amend, suspend or terminate this Plan at any time. No amendment,
unless approved by the holders of a majority of the outstanding shares of
voting stock of the Company will:
(a) Change the class of persons eligible to
receive Incentive Awards under this Plan,
(b) Materially increase the benefits accruing to
Participants under this Plan;
(c) Increase by more than 10% the number of
shares of Common Stock subject to this Plan; except as provided in
Article 12;
(d) Transfer the administration of this Plan to
any person who is not a nonemployee director under Rule 16b-3 under
the Securities Act.
Except as otherwise provided in this Plan, the Committee may
not, without the Participant's consent, modify the terms and conditions of an
Incentive Award. No amendment, suspension, or termination of the Plan shall,
without the Participant's consent, alter, terminate or impair any right or
obligation under any Incentive Award previously granted under this Plan.
ARTICLE 15
EFFECTIVE DATE OF PLAN AND DURATION OF PLAN
15.1 Effective Date and Duration. This Plan is an
amendment and restatement of the Bayard Drilling Technologies, Inc. 1997 Stock
Option and Stock Award Plan that was adopted effective April 24, 1997 (the
"Prior Plan"), and shall supersede and replace the Prior Plan, except that any
Incentive Awards issued under the Prior Plan shall remain in effect under this
Plan according to the terms of the Prior Plan, this Plan and the provisions of
the Incentive Award Agreement. This
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<PAGE> 25
Plan and any Incentive Award granted hereunder shall take effect not earlier
than upon adoption by the Board but be contingent upon approval of this Plan by
the majority vote of the outstanding shares of equity securities of the
Company. Unless previously terminated, the Plan shall terminate and no more
Incentive Awards may be granted on the expiration of ten (10) years after
adoption of the Plan by the Board. The Plan shall continue in effect with
respect to Incentive Awards granted before termination of the Plan and until
such Incentive Awards have been settled, terminated or forfeited.
IN WITNESS WHEREOF, this Plan is hereby adopted as of this
19th day of August, 1997.
BAYARD DRILLING TECHNOLOGIES, INC.
By: /s/ James E. Brown
-------------------------------------
Its: President
ATTEST:
/s/ Kurt Waite
- -------------------------------
Secretary
21
<PAGE> 1
EXHIBIT 10.2
[FORM TO BE USED FOR AWARDS
GRANTED TO PERSONS WITHOUT
EMPLOYMENT AGREEMENTS]
BAYARD DRILLING TECHNOLOGIES, INC.
1997 STOCK OPTION AND STOCK AWARD PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
This Non-Qualified Stock Option Agreement (the "Agreement") is
made and entered into by and between Bayard Drilling Technologies, Inc. (the
"Company") and ______________ (the "Employee") as of __________, 199__ (the
"Date of Grant").
W I T N E S S E T H
WHEREAS, the Company has adopted the 1997 Bayard Drilling
Technologies, Inc. Stock Option and Stock Award Plan (the "Plan") to strengthen
the ability of the Company to attract, motivate and retain employees of
superior capability and to encourage valued employees to have a proprietary
interest in the Company; and
WHEREAS, the committee established pursuant to the Plan (the
"Committee") believes that the granting of the stock option described herein to
the Employee is consistent with the stated purposes for which the Plan was
adopted.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions hereinafter set forth and for other good and valuable consideration,
the Company and the Employee agree as follows:
1. Grant of Option. The Company hereby grants to the Employee
the right and option (the "Option") to purchase an aggregate of ____________
shares (the "Shares") (such number being subject to adjustment as provided in
Paragraph 12 hereof) of the Common Stock, par value $.01 per share, of the
Company (the "Common Stock") on the terms and conditions herein set forth.
This Option may be exercised in whole or in part and from time to time as
hereinafter provided.
2. Purchase Price. The price at which the Employee shall be
entitled to purchase the Common Stock covered by the Option shall be $______
per share.
3. Term of Option. The Option granted hereby shall be and remain
in force and effect during the Option Period. The Option Period begins on the
first date the Option is exercisable, as provided in Paragraph 7. The date on
which the Option Period ends (the "Expiration Date") is the first to occur of
(i) the date that is ____ years from the Date of Grant, (ii) in the case of
termination
<PAGE> 2
of employment, the date specified in Paragraph 10, or (iii) in the event there
is a Change of Control, as defined in the Plan, the date specified in Paragraph
12(b).
4. Due Cause. For purposes of this Agreement, the term "Due
Cause" shall mean (i) habitual neglect of the Employee's duties or failure by
the Employee to perform or observe any obligation of employment that is not
remedied within 30 days after written notice thereof, (ii) any material breach
of any employment agreement between the Employee and the Company, or (iii) the
conviction of or a plea of guilty or nolo contendere by the Employee to a
felony or misdemeanor involving fraud, embezzlement, theft or dishonesty or
other criminal conduct.
5. Disability. For purposes of this Agreement, the term
"Disability" shall mean the inability or incapacity of the Employee for three
months to perform the essential functions of the Employee's job or position
with the Company, even with reasonable accommodation. Such inability or
incapacity shall be documented to the reasonable satisfaction of the Board by
appropriate correspondence from physicians who are reasonably satisfactory to
the Board.
6. Fair Market Value. For purposes of this Agreement, the term
"Fair Market Value" means, if the Common Stock is publicly traded, the closing
price per share of such Common Stock on the principal stock exchange or
quotation system on which the Common Stock is traded or listed on the Date of
Grant or other specified measuring date, or, if there shall have been no such
price so reported or listed on that date, on the last preceding date on which a
price was so reported or listed. If Common Stock is not publicly traded, then
"Fair Market Value" shall mean the value of a share of Common Stock, as
determined by the Committee (the "Committee") appointed by the Board of
Directors of the Company (the "Board") to administer the Plan, in the
Committee's sole and absolute discretion, at least annually. The Committee may
utilize the services of an independent third party in determining the Fair
Market Value of the Common Stock for this purpose. Any determination of Fair
Market Value made by an independent third party in good faith shall be final,
conclusive and binding on the Company (or its assignees), the transferor and
all other parties.
7. Exercise of Option. The Employee may exercise this Option as
to 20% of the Shares on and after the first anniversary of the Date of Grant,
as to 40% of the Shares on and after the second anniversary of the Date of
Grant, as to 60% of the Shares on and after the third anniversary of the Date
of Grant, as to 80% of the Shares on and after the fourth anniversary of the
Date of Grant, and as to all or any part of the Shares on and after the fifth
anniversary of the Date of Grant, through the Expiration Date described in
Paragraph 3. An Option shall cease to be exercisable as to any Share when the
Employee exercises the Option or when the Option lapses.
8. Method of Exercising Option. Subject to the terms and
conditions of this Agreement, the Option may be exercised by timely delivery to
the Committee of written notice, which notice shall be effective on the date
received by the Company. The notice must state the Employee's election to
exercise the Option, the number of shares with respect to which the election to
exercise has been made, the Social Security number of the Employee, the method
of payment elected (see Paragraph 9 hereof), and the exact name in which the
shares will be registered. Such notice must
2
<PAGE> 3
be signed by the Employee and shall be accompanied by payment of the purchase
price of such Shares. If the Option is exercised by a person or persons other
than the Employee pursuant to Paragraph 10(c) hereof, such notice must be
signed by such other person or persons and must be accompanied by proof
acceptable to the Committee of the legal right of such person or persons to
exercise the Option.
9. Method of Payment for the Option.
(a) As a general rule, the full purchase price for the
Shares purchased upon the exercise of the Option (i.e., the number of shares
being purchased multiplied by the price per shares) must be paid in cash. The
Committee may, however, in its discretion, allow the Employee to pay for the
Common Stock (i) in an equivalent acceptable to the Committee, (ii) by
assigning and delivering to the Company shares of Common Stock owned by the
Employee or surrendering another Incentive Award, or (iii) by combination of
cash, Common Stock or Incentive Award equal in value to the purchase price. In
addition, at the request of the Employee and to the extent permitted by
applicable law, the Company may approve an arrangement with a brokerage firm,
under which the brokerage firm, on behalf of the Employee, will pay for shares
of Stock purchased upon the exercise of the Option.
(b) Any Common Stock used or Incentive Award surrendered
to pay all or a part of the purchase price of the Option will be valued, for
purposes of this Agreement, on the exercise date at the Fair Market Value.
Further, such payment must be accompanied by an assignment of such Common Stock
on a duly executed stock power, which is on a form separate from the
certificate(s) for the Common Stock, authorizing the transfer of such shares to
the Company.
10. Termination of Employment. The Option Period will end and the
Option, whether or not then exercisable, will lapse, upon the Employee's
voluntary termination of employment with the Company or if the Company
terminates the Employee's employment for Due Cause.
(a) If the termination is due to the Employee's
retirement, the Employee may continue to exercise Options exercisable
at the time of retirement. The Option Period will end on the earlier
of (i) the date specified in Paragraph 3; (ii) the date which is 90
days following the date of the Employee's retirement; (iii) the date
specified in Paragraph 10(b), or 10(c), as applicable; or (iv) the
date specified in Paragraph 12(b).
(b) In the event of the Employee's Disability, the
Employee may continue to exercise Options exercisable on the date on
which the Disability occurs. The Option Period will end on the
earlier of (i) the date specified in Paragraph 3; (ii) the date which
is 90 days following the date on which the Disability occurs; or (iii)
the date specified in Paragraph 12(b).
(c) In the event of the Employee's death, the Options
exercisable at the time of the Employee's death may be exercised by
the estate or beneficiary of the Employee until the
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<PAGE> 4
earlier of (i) the date specified in Paragraph 3; (ii) the date which
is 90 days following the date of the Employee's death; or (iii) the
date specified in Paragraph 12(b).
(d) If the Company terminates the Employee's employment
for any reason other than Due Cause, then the Employee may continue to
exercise Options exercisable on the date of the Employee's
termination. The Option Period will end on the earlier of (i) the
date specified in Paragraph 3; (ii) the date which is 30 days
following the date of termination; or (iii) the date specified in
Paragraph 12(b).
(e) If, following a Change of Control, the Company
terminates the Employee's employment for any reason other than Due
Cause, or if the Company terminates the Employee's employment as a
result of a Disability, then the Options shall become fully vested and
all restrictions set forth in Paragraph 7 will terminate. The Option
Period will end on the earlier of (i) the date specified in Paragraph
3; (ii) the date which is 30 days following the date of termination;
or (iii) the date specified in Paragraph 12(b).
11. Non-transferability. The Option granted by this Agreement may
only be exercisable during the term of the Option Period provided in Paragraph
3 hereof and, except as provided in the Plan and in Paragraphs 10 and 12
hereof, only by the Employee during his lifetime and while an employee of the
Company. No Option granted by this Option Agreement is transferable by the
Employee other than by will or pursuant to applicable laws of descent and
distribution. The Option and any rights and privileges in connection
therewith, cannot be transferred, assigned, pledged or hypothecated by
operation of law, or otherwise, and is not otherwise subject to execution,
attachment, garnishment or similar process. In the event of such occurrence,
this Agreement will automatically terminate and will thereafter be null and
void.
12. Adjustments in Number of Shares and Option Price; Change of
Control.
(a) Except as provided below, in the event that the
outstanding Common Stock of the Company is increased, decreased, or exchanged
for a different number or kind of shares or other securities, or if additional,
new or different shares or securities are distributed with respect to the
Common Stock through merger, consolidation, sale of all or substantially all of
the assets of the Company, reorganization, recapitalization, stock dividend,
stock split, reverse stock split or other distribution with respect to such
Common Stock, each remaining Share of Common Stock subject to his Option will
be substituted for a like number and kind of shares of the new or replacement
securities without changing the aggregate purchase price of the shares subject
to the Option.
(b) In the event of a Change of Control of the Company
(as such term is defined in the Plan) occurring after the Date of Grant, the
Committee may accelerate the commencement of the Option Period or take such
other actions as are permitted under the Plan, in its sole discretion.
13. Delivery of Shares. No shares of Common Stock shall be
delivered to the Employee upon the exercise of the Option until (i) the
purchase price is paid in full in the manner herein
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<PAGE> 5
provided, if applicable; (ii) all the applicable taxes required to be withheld
have been paid or withheld in full; (iii) the approval of any governmental
authority required in connection with the Option, or the issuance of shares
thereunder has been received by the Company; and (iv) if required by the
Committee, the Employee has delivered to the Committee an "Investment Letter"
in form and content satisfactory to the Company as provided in Paragraph 14
hereof.
14. Securities Act. The Company will not be required to deliver
any shares of Common Stock pursuant to the exercise of all or any part of the
Option if, in the opinion of counsel for the Company, such issuance would
violate the Securities Act of 1933, as amended (the "Securities Act") or any
other applicable federal or state securities laws or regulations. The
Committee may require that the Employee, prior to the issuance of any such
shares pursuant to exercise of the Option sign and deliver to the Company a
written statement ("Investment Letter") stating (i) that the Employee is
purchasing the shares for investment and not with a view to the sale or
distribution thereof; (ii) that the Employee will not sell any shares of Common
Stock that the Employee may then own or thereafter acquire except either (a)
through a broker on a national securities exchange or (b) with the prior
written approval of the Company; and (iii) containing such other terms and
conditions as counsel for the Company may reasonably require to assure
compliance with the Securities Act or other applicable federal or state
securities laws and regulations. Such Investment Letter shall be in form and
content acceptable to the Committee, in its sole discretion.
15. Federal and State Taxes. Upon the exercise of the Option, or
any part thereof, the Employee may incur certain liabilities for federal, state
or local taxes and the Company may be required by law to withhold such taxes
for payment to taxing authorities. Upon determination by the Company of the
amount of taxes required to be withheld, if any, with respect to the Shares to
be issued pursuant to the exercise of the Option, the Employee must either (i)
direct the Company to withhold cash, if applicable, or from the Common Stock to
be issued the number of shares necessary to satisfy the Company's withholding
obligations, based on the Fair Market Value of the shares on the date of
withholding; (ii) deliver to the Company a sufficient number of shares of
Common Stock then owned by the Employee to satisfy the Company's withholding
obligations, based on the Fair Market Value of the shares as of the date of
withholding; or (iii) deliver sufficient cash to the Company to satisfy its
withholding obligations. Authorization of the Employee to the Company to
withhold taxes pursuant to this Paragraph 15 must be in a form and content
acceptable to the Committee. The payment or authorization to withhold taxes by
the Employee shall be completed prior to the delivery of any shares pursuant to
this Agreement. An authorization to withhold taxes pursuant to this provision
will be irrevocable unless and until the tax liability of the Employee has been
fully paid.
16. Company's Right to Purchase Common Stock.
(a) Upon the Employee's termination of employment with
the Company and all Subsidiaries for any reason (including by reason of death
or disability), the Company shall have the right (but not the obligation) to
purchase from the Employee (or the Employee's
5
<PAGE> 6
beneficiary or estate) all shares of Common Stock issued hereunder at the Fair
Market Value of the Common Stock.
(b) While and so long as the Common Stock has not been
publicly traded for at least 90 days, any Shares issued upon exercise of this
Option shall be subject to the following right of first purchase:
(a) If the Employee intends to transfer shares of Common
Stock obtained pursuant to this Agreement, the Employee shall give
written notice to the Company of his intention to so transfer. The
notice, in addition to stating the fact of the intention to transfer
shares, shall state (i) the number of shares to be transferred; (ii)
the name, business and residence address of the proposed transferee;
(iii) whether or not the transfer is for a valuable consideration and
(iv) if so, the amount of the consideration and the other terms of the
sale.
(b) Within 30 days of the Company's receipt of the notice
described above, the Company may exercise an option to purchase all or
any portion of the shares of Common Stock proposed to be transferred
for the price and upon the other terms provided in the Agreement. The
Company shall exercise this option by providing the Employee with
written notice of its intent to do so.
(c) If the Company does not exercise its option to
purchase the shares of Common Stock proposed to be transferred, such
shares may be transferred by the Employee in accordance with the
notice provided within 10 days after the expiration of the 30 day
option period granted to the Company. Upon transfer, such shares
shall continue to be bound by any terms and provisions of this
Agreement designated as continuing on transfer.
17. Definitions; Copy of Plan. To the extent not specifically
provided for herein, all capitalized terms used in this Agreement shall have
the same meanings ascribed to them in the Plan. By the execution of this
Agreement, the Employee acknowledges receipt of a copy of the Plan.
18. Administration. This Agreement is subject to the terms and
conditions of the Plan. The Plan will be administered by the Committee in
accordance with terms. The Committee has sole and complete discretion with
respect to all matters reserved to it by the Plan and the decisions of the
majority of the Committee with respect to the Plan and this Agreement shall be
final and binding upon the Employee and the Company. In the event of any
conflict between the terms and conditions of this Agreement and the Plan, the
provisions of the Plan shall control.
19. Continuation of Employment. This Agreement shall not be
construed to confer upon the Employee any right to continue in the employ of
the Company and shall not limit the right of the Company, in its sole
discretion, to terminate the employment of the Employee at any time.
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<PAGE> 7
20. No Right to Stock. No Employee and no beneficiary or other
person claiming under or through such Employee shall have any right, title or
interest in any shares of Common Stock allocated or reserved under the Plan or
subject to this Option, except as to such shares of Common Stock, if any, that
have been issued or transferred to such Employee.
21. Obligation to Exercise. The Employee shall have no obligation
to exercise any Option granted by this Agreement.
22. Notice. Any notice to be given to the Company shall be
addressed to the Company in care of its Secretary at its principal office, and
any notice to be given to the Employee shall be addressed to the Employee at
following address (or such other address as the Employee may hereafter
designate to the Company in writing):
--------------------------
--------------------------
--------------------------
--------------------------
Any such notice shall be in writing and shall be delivered personally or shall
be sent by first class mail, postage prepaid, to the Company or the Employee,
as applicable.
23. Governing Law. This Agreement shall be interpreted and
administered under the laws of the State of Delaware.
24. Amendments. This Agreement may be amended only by a written
agreement executed by the Company and the Employee. Any such amendment shall
be made only upon the mutual consent of the parties, which consent (of either
party) may be withheld for any reason.
25. Termination. The Company may terminate the Plan at any time;
however, such termination will not modify the terms and conditions of the
Option granted hereunder without the Employee's consent.
7
<PAGE> 8
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officers thereunto duly authorized, and the Employee has
hereunto set his hand as of the day and year first above written.
BAYARD DRILLING TECHNOLOGIES, INC.
By:
----------------------------------
Its:
---------------------------------
EMPLOYEE
-------------------------------------
Date:
---------------------------
8
<PAGE> 9
[FORM TO BE USED FOR AWARDS
GRANTED TO PERSONS WITH
EMPLOYMENT AGREEMENTS]
BAYARD DRILLING TECHNOLOGIES, INC.
1997 STOCK OPTION AND STOCK AWARD PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
This Non-Qualified Stock Option Agreement (the "Agreement") is
made and entered into by and between Bayard Drilling Technologies, Inc. (the
"Company") and ______________ (the "Employee") as of __________, 199__ (the
"Date of Grant").
W I T N E S S E T H
WHEREAS, the Company has adopted the 1997 Bayard Drilling
Technologies, Inc. Stock Option and Stock Award Plan (the "Plan") to strengthen
the ability of the Company to attract, motivate and retain employees of
superior capability and to encourage valued employees to have a proprietary
interest in the Company; and
WHEREAS, the committee established pursuant to the Plan (the
"Committee") believes that the granting of the stock option described herein to
the Employee is consistent with the stated purposes for which the Plan was
adopted; and
WHEREAS, the Company and the Employee have entered into that
certain Employment Agreement, dated as of ________________, 1997 (the
"Employment Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and
conditions hereinafter set forth and for other good and valuable consideration,
the Company and the Employee agree as follows:
1. Grant of Option. The Company hereby grants to the Employee
the right and option (the "Option") to purchase an aggregate of ____________
shares (the "Shares") (such number being subject to adjustment as provided in
Paragraph 10 hereof) of the Common Stock, par value $.01 per share, of the
Company (the "Common Stock") on the terms and conditions herein set forth.
This Option may be exercised in whole or in part and from time to time as
hereinafter provided.
2. Purchase Price. The price at which the Employee shall be
entitled to purchase the Common Stock covered by the Option shall be $______
per share.
<PAGE> 10
3. Term of Option. The Option granted hereby shall be and remain
in force and effect during the Option Period. The Option Period begins on the
first date the Option is exercisable, as provided in Paragraph 5. The date on
which the Option Period ends (the "Expiration Date") is the first to occur of
(i) the date that is ____ years from the Date of Grant, (ii) in the case of
termination of employment, the date specified in Paragraph 8, or (iii) in the
event there is a Change of Control, as defined in the Plan, the date specified
in Paragraph 10(b).
4. Fair Market Value. For purposes of this Agreement, the term
"Fair Market Value" means, if the Common Stock is publicly traded, the closing
price per share of such Common Stock on the principal stock exchange or
quotation system on which the Common Stock is traded or listed on the Date of
Grant or other specified measuring date, or, if there shall have been no such
price so reported or listed on that date, on the last preceding date on which a
price was so reported or listed. If Common Stock is not publicly traded, then
"Fair Market Value" shall mean the value of a share of Common Stock, as
determined by the Committee (the "Committee") appointed by the Board of
Directors of the Company (the "Board") to administer the Plan, in the
Committee's sole and absolute discretion, at least annually. The Committee may
utilize the services of an independent third party in determining the Fair
Market Value of the Common Stock for this purpose. Any determination of Fair
Market Value made by an independent third party in good faith shall be final,
conclusive and binding on the Company (or its assignees), the transferor and
all other parties.
5. Exercise of Option. The Employee may exercise this Option as
to 20% of the Shares on and after the first anniversary of the Date of Grant,
as to 40% of the Shares on and after the second anniversary of the Date of
Grant, as to 60% of the Shares on and after the third anniversary of the Date
of Grant, as to 80% of the Shares on and after the fourth anniversary of the
Date of Grant, and as to all or any part of the Shares on and after the fifth
anniversary of the Date of Grant, through the Expiration Date described in
Paragraph 3. An Option shall cease to be exercisable as to any Share when the
Employee exercises the Option or when the Option lapses.
6. Method of Exercising Option. Subject to the terms and
conditions of this Agreement, the Option may be exercised by timely delivery to
the Committee of written notice, which notice shall be effective on the date
received by the Company. The notice must state the Employee's election to
exercise the Option, the number of shares with respect to which the election to
exercise has been made, the Social Security number of the Employee, the method
of payment elected (see Paragraph 7 hereof), and the exact name in which the
shares will be registered. Such notice must be signed by the Employee and
shall be accompanied by payment of the purchase price of such Shares. If the
Option is exercised by a person or persons other than the Employee pursuant to
Paragraph 8 hereof, such notice must be signed by such other person or persons
and must be accompanied by proof acceptable to the Committee of the legal right
of such person or persons to exercise the Option.
2
<PAGE> 11
7. Method of Payment for the Option.
(a) As a general rule, the full purchase price for the
Shares purchased upon the exercise of the Option (i.e., the number of shares
being purchased multiplied by the price per shares) must be paid in cash. The
Committee may, however, in its discretion, allow the Employee to pay for the
Common Stock (i) in an equivalent acceptable to the Committee, (ii) by
assigning and delivering to the Company shares of Common Stock owned by the
Employee or surrendering another Incentive Award, or (iii) by combination of
cash, Common Stock or Incentive Award equal in value to the purchase price. In
addition, at the request of the Employee and to the extent permitted by
applicable law, the Company may approve an arrangement with a brokerage firm,
under which the brokerage firm, on behalf of the Employee, will pay for shares
of Stock purchased upon the exercise of the Option.
(b) Any Common Stock used or Incentive Award surrendered
to pay all or a part of the purchase price of the Option will be valued, for
purposes of this Agreement, on the exercise date at the Fair Market Value.
Further, such payment must be accompanied by an assignment of such Common Stock
on a duly executed stock power, which is on a form separate from the
certificate(s) for the Common Stock, authorizing the transfer of such shares to
the Company.
8. Termination of Employment. The Option Period will end and the
Option, whether or not then exercisable, will lapse, upon the Employee's
voluntary termination of employment with the Company or if the Company
terminates the Employee's employment for Due Cause (as such term is defined in
the Employment Agreement).
(a) If the termination is due to the Employee's
retirement, the Employee may continue to exercise Options exercisable
at the time of retirement. The Option Period will end on the earlier
of (i) the date specified in Paragraph 3; (ii) the date which is 90
days following the date of the Employee's retirement; (iii) the date
specified in Paragraph 8(b) or 8(c), as applicable; or (iv) the date
specified in Paragraph 10(b).
(b) In the event of the Employee's Disability (as such
term is defined in the Employment Agreement), the Employee may
continue to exercise Options exercisable on the date on which the
Disability occurs (as defined in the Employment Agreement). The
Option Period will end on the earlier of (i) the date specified in
Paragraph 3; (ii) the date which is 90 days following the date on
which the Disability occurs (as defined in the Employment Agreement);
or (iii) the date specified in Paragraph 10(b).
(c) In the event of the Employee's death, the Options
exercisable at the time of the Employee's death may be exercised by
the estate or beneficiary of the Employee until the earlier of (i) the
date specified in Paragraph 3; (ii) the date which is 90 days
following the date of the Employee's death; or (iii) the date
specified in Paragraph 10(b).
3
<PAGE> 12
(d) If the Company terminates the Employee's employment
for any reason other than Due Cause, as a result of a Change of
Control, or as a result of a Disability, then the Options shall become
vested and all restrictions set forth in Section 5 will terminate.
The Option Period will end on the earlier of (i) the date specified in
Paragraph 3; (ii) the date which is 30 days following the date of
termination; or (iii) the date specified in Paragraph 10(b).
9. Non-transferability. The Option granted by this Agreement may
only be exercisable during the term of the Option Period provided in Paragraph
3 hereof and, except as provided in Paragraphs 8 and 10, only by the Employee
during his lifetime and while an employee of the Company. No Option granted by
this Option Agreement is transferable by the Employee other than by will or
pursuant to applicable laws of descent and distribution. The Option and any
rights and privileges in connection therewith, cannot be transferred, assigned,
pledged or hypothecated by operation of law, or otherwise, and is not otherwise
subject to execution, attachment, garnishment or similar process. In the event
of such occurrence, this Agreement will automatically terminate and will
thereafter be null and void.
10. Adjustments in Number of Shares and Option Price; Change of
Control.
(a) Except as provided below, in the event that the
outstanding Common Stock of the Company is increased, decreased, or exchanged
for a different number or kind of shares or other securities, or if additional,
new or different shares or securities are distributed with respect to the
Common Stock through merger, consolidation, sale of all or substantially all of
the assets of the Company, reorganization, recapitalization, stock dividend,
stock split, reverse stock split or other distribution with respect to such
Common Stock, each remaining share of Common Stock subject to his Option will
be substituted for a like number and kind of shares of the new or replacement
securities without changing the aggregate purchase price of the shares subject
to the Option.
(b) In the event of a Change of Control of the Company
(as such term is defined in the Plan) occurring after the Date of Grant, the
Committee may accelerate the commencement of the Option Period or take such
other actions as are permitted under the Plan, in its sole discretion.
11. Delivery of Shares. No shares of Common Stock shall be
delivered to the Employee upon the exercise of the Option until (i) the
purchase price is paid in full in the manner herein provided, if applicable;
(ii) all the applicable taxes required to be withheld have been paid or
withheld in full; (iii) the approval of any governmental authority required in
connection with the Option, or the issuance of shares thereunder has been
received by the Company; and (iv) if required by the Committee, the Employee
has delivered to the Committee an "Investment Letter" in form and content
satisfactory to the Company as provided in paragraph 12 hereof.
12. Securities Act. The Company will not be required to deliver
any shares of Common Stock pursuant to the exercise of all or any part of the
Option if, in the opinion of counsel for the Company, such issuance would
violate the Securities Act of 1933, as amended (the "Securities Act")
4
<PAGE> 13
or any other applicable federal or state securities laws or regulations. The
Committee may require that the Employee, prior to the issuance of any such
shares pursuant to exercise of the Option sign and deliver to the Company a
written statement ("Investment Letter") stating (i) that the Employee is
purchasing the shares for investment and not with a view to the sale or
distribution thereof; (ii) that the Employee will not sell any shares of Common
Stock that the Employee may then own or thereafter acquire except either (a)
through a broker on a national securities exchange or (b) with the prior
written approval of the Company; and (iii) containing such other terms and
conditions as counsel for the Company may reasonably require to assure
compliance with the Securities Act or other applicable federal or state
securities laws and regulations. Such Investment Letter shall be in form and
content acceptable to the Committee, in its sole discretion.
13. Federal and State Taxes. Upon the exercise of the Option, or
any part thereof, the Employee may incur certain liabilities for federal, state
or local taxes and the Company may be required by law to withhold such taxes
for payment to taxing authorities. Upon determination by the Company of the
amount of taxes required to be withheld, if any, with respect to the Shares to
be issued pursuant to the exercise of the Option, the Employee must either (i)
direct the Company to withhold cash, if applicable, or from the Common Stock to
be issued the number of shares necessary to satisfy the Company's withholding
obligations, based on the Fair Market Value of the shares on the date of
withholding; (ii) deliver to the Company a sufficient number of shares of
Common Stock then owned by the Employee to satisfy the Company's withholding
obligations, based on the Fair Market Value of the shares as of the date of
withholding; or (iii) deliver sufficient cash to the Company to satisfy its
withholding obligations. Authorization of the Employee to the Company to
withhold taxes pursuant to this paragraph 15 must be in a form and content
acceptable to the Committee. The payment or authorization to withhold taxes by
the Employee shall be completed prior to the delivery of any shares pursuant to
this Agreement. An authorization to withhold taxes pursuant to this provision
will be irrevocable unless and until the tax liability of the Employee has been
fully paid.
14. Company's Right to Purchase Common Stock.
(a) Upon the Employee's termination of employment with
the Company and all Subsidiaries for any reason (including by reason of death
or disability), the Company shall have the right (but not the obligation) to
purchase from the Employee (or the Employee's beneficiary or estate) all shares
of Common Stock issued hereunder at the Fair Market Value of the Common Stock.
(b) While and so long as the Common Stock has not been
publicly traded for at least 90 days, any Shares issued upon exercise of this
Option shall be subject to the following right of first purchase:
(a) If the Employee intends to transfer shares of Common
Stock obtained pursuant to this Agreement, the Employee shall give
written notice to the Company of his intention to so transfer. The
notice, in addition to stating the fact of the intention to
5
<PAGE> 14
transfer shares, shall state (i) the number of shares to be
transferred; (ii) the name, business and residence address of the
proposed transferee; (iii) whether or not the transfer is for a
valuable consideration and (iv) if so, the amount of the consideration
and the other terms of the sale.
(b) Within 30 days of the Company's receipt of the notice
described above, the Company may exercise an option to purchase all or
any portion of the shares of Common Stock proposed to be transferred
for the price and upon the other terms provided in the Agreement. The
Company shall exercise this option by providing the Employee with
written notice of its intent to do so.
(c) If the Company does not exercise its option to
purchase the shares of Common Stock proposed to be transferred, such
shares may be transferred by the Employee in accordance with the
notice provided within 10 days after the expiration of the 30 day
option period granted to the Company. Upon transfer, such shares
shall continue to be bound by any terms and provisions of this
Agreement designated as continuing on transfer.
15. Definitions; Copy of Plan. To the extent not specifically
provided for herein, all capitalized terms used in this Agreement shall have
the same meanings ascribed to them in the Plan. By the execution of this
Agreement, the Employee acknowledges receipt of a copy of the Plan.
16. Administration. This Agreement is subject to the terms and
conditions of the Plan. The Plan will be administered by the Committee in
accordance with terms. The Committee has sole and complete discretion with
respect to all matters reserved to it by the Plan and the decisions of the
majority of the Committee with respect to the Plan and this Agreement shall be
final and binding upon the Employee and the Company. In the event of any
conflict between the terms and conditions of this Agreement and the Plan, the
provisions of the Plan shall control.
17. Continuation of Employment. This Agreement shall not be
construed to confer upon the Employee any right to continue in the employ of
the Company and shall not limit the right of the Company, in its sole
discretion, to terminate the employment of the Employee at any time.
18. No Right to Stock. No Employee and no beneficiary or other
person claiming under or through such Employee shall have any right, title or
interest in any shares of Common Stock allocated or reserved under the Plan or
subject to this Option, except as to such shares of Common Stock, if any, that
have been issued or transferred to such Employee.
19. Obligation to Exercise. The Employee shall have no obligation
to exercise any Option granted by this Agreement.
20. Notice. Any notice to be given to the Company shall be
addressed to the Company in care of its Secretary at its principal office, and
any notice to be given to the Employee shall be
6
<PAGE> 15
addressed to the Employee at following address (or such other address as the
Employee may hereafter designate to the Company in writing):
--------------------------
--------------------------
--------------------------
--------------------------
Any such notice shall be in writing and shall be delivered personally or shall
be sent by first class mail, postage prepaid, to the Company or the Employee,
as applicable.
21. Governing Law. This Agreement shall be interpreted and
administered under the laws of the State of Delaware.
22. Amendments. This Agreement may be amended only by a written
agreement executed by the Company and the Employee. Any such amendment shall
be made only upon the mutual consent of the parties, which consent (of either
party) may be withheld for any reason.
23. Termination. The Company may terminate the Plan at any time;
however, such termination will not modify the terms and conditions of the
Option granted hereunder without the Employee's consent.
7
<PAGE> 16
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officers thereunto duly authorized, and the Employee has
hereunto set his hand as of the day and year first above written.
BAYARD DRILLING TECHNOLOGIES, INC.
By:
----------------------------------
Its:
---------------------------------
EMPLOYEE
-------------------------------------
James E. Brown
Date:
---------------------------
8
<PAGE> 1
EXHIBIT 10.3
================================================================================
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
BY AND AMONG
BAYARD DRILLING TECHNOLOGIES, INC.
ANADARKO DRILLING COMPANY
R.T. OLIVER DRILLING, INC.
MIKE MULLEN ENERGY EQUIPMENT RESOURCE, INC.
GRUPO DE HERCULES, LTD.
MULLEN-OLIVER PARTNERSHIP, LTD.
ENERGY SPECTRUM PARTNERS LP
CHESAPEAKE ENERGY CORPORATION
APRIL 30, 1997
================================================================================
<PAGE> 2
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
BAYARD DRILLING TECHNOLOGIES, INC.
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated
as of April 30, 1997, is made by and among, Bayard Drilling Technologies, Inc.,
a Delaware corporation (the "Company"), Anadarko Drilling Company, an Oklahoma
general partnership ("Anadarko"), R.T. Oliver Drilling, Inc., an Oklahoma
corporation ("Oliver Drilling"), Mike Mullen Energy Equipment Resource, Inc., a
Texas corporation ("Mullen Energy"), Grupo de Hercules, Ltd., a Texas limited
partnership ("Grupo"), Mullen-Oliver Partnership, Ltd., a Texas limited
partnership ("M-O Partnership" and, together with Oliver Drilling, Mullen
Energy and Grupo, the "Oliver Companies"), Energy Spectrum Partners LP, a
Delaware limited partnership ("Energy Spectrum"), and Chesapeake Energy
Corporation, an Oklahoma corporation ("Chesapeake") (collectively, the
"Investors").
WITNESSETH:
WHEREAS, the Company and certain of the Investors are parties
to that certain Master Agreement, dated as of November 26, 1996 (the "Master
Agreement"), pursuant to which such Investors acquired interests in the
Company, and/or that certain Securities Purchase Agreement, dated as of April
30, 1997 (the "New Purchase Agreement"), by and among the Company, Chesapeake
and Energy Spectrum;
WHEREAS, the Company and certain of the Investors entered
into, among other agreements, that certain Registration Rights Agreement, dated
as of December 10, 1996 (the "Original Registration Rights Agreement"),
pursuant to which the Company granted to the Investors party thereto certain
registration rights with respect to shares of common stock of the Company owned
by them; and
WHEREAS, the Company and the Investors desire to enter into
this Agreement to amend and restate the Original Registration Rights Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein, the mutual benefits to be
gained by the performance thereof and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged and accepted, the
parties hereto hereby agree as follows:
SECTION 1. Definitions. For purposes of this Agreement,
the terms set forth below shall have the following respective meanings:
"Commission" means the Securities and Exchange Commission.
<PAGE> 3
"Common Stock" means the common stock, par value $0.01 per
share, of the Company.
"Common Stock Equivalent" means securities convertible into,
or exchangeable or exercisable for, shares of Common Stock, including
without limitation (i) the option granted under that certain Option
Agreement, dated as of December 10, 1996, by and between the Company
and Chesapeake (the "Option Agreement") and (ii) the New Warrants.
"Demand Registration" has the meaning set forth in Section
2(a) hereto.
"Demand Registration Request" has the meaning set forth in
Section 2(a) hereto.
"Holdback Agreements" has the meaning set forth in Section 4
hereto.
"Indemnified Party" has the meaning set forth in Section 7(c)
hereto.
"Issuer Indemnified Party" has the meaning set forth in
Section 7(c) hereto.
"Master Agreement" has the meaning set forth in the Recitals
hereto.
"New Purchase Agreement" has the meaning set forth in the
Recitals hereto.
"New Warrants" means (i) the Series A Warrants exercisable for
shares of Common Stock at an exercise price of $0.01 per share, issued
or issuable by the Company pursuant to the New Purchase Agreement and
(ii) the Series B Warrants exercisable for shares of Common Stock at
an exercise price of $15.00 per share, issued or issuable by the
Company pursuant to the New Purchase Agreement.
"Person" means an individual, partnership, corporation,
limited liability company, association, joint stock company, trust,
joint venture, unincorporated organization or governmental entity or
any department, agency or political subdivision thereof.
"Piggyback Registration" has the meaning set forth in Section
3 hereto.
"Qualified IPO" means (i) one or more underwritten public
offerings of Common Stock pursuant to one or more effective
registration statements filed under the Securities Act, resulting in
an aggregate of at least $25 million of net proceeds, after deducting
underwriting discounts and commission and other expenses, to the
Company or (ii) any merger, consolidation or other business
combination transaction that results in any equity securities of the
Company being registered under Section 12 of the Securities Exchange
Act.
2
<PAGE> 4
"Registrable Shares" means at any time any shares of Common
Stock owned by the Investors, whether acquired on the date hereof or
hereafter acquired, including without limitation, any shares of Common
Stock issuable upon the conversion, exchange or exercise of (i) Common
Stock Equivalents owned by the Investors, (ii) the option granted
under the Option Agreement, and (iii) the New Warrants; provided,
however, that Registrable Shares shall not include any shares the sale
of which has been registered pursuant to a registration statement
filed under the Securities Act which has been declared effective or
which may be otherwise transferred without restriction (including
volume restrictions) under Rule 144 or any similar successor rule or
provision then in force.
"Registration Expenses" has the meaning set forth in Section 6
hereto.
"Requesting Holders" has the meaning set forth in Section 2(a)
hereto.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations
promulgated thereunder, all as the same may be in effect from time to
time.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, or any successor federal statute, and the rules and
regulations promulgated thereunder, all as the same may be in effect
from time to time.
"Selling Holder" means a holder who is selling Registrable
Shares pursuant to a registration statement.
"Selling Indemnified Party" has the meaning set forth in
Section 7(a) hereto.
"Share Value" means (i) prior to a Qualified IPO, the book
value per share of Common Stock, as determined by dividing Total
Equity as of the date of the most recent quarterly or year-end
financial statements of the Company by the total number of shares of
Common Stock issued and outstanding as of the date of such financial
statements, assuming the exercise of all options, rights, warrants and
other securities convertible into or exchangeable or exercisable for
shares of Common Stock and (ii) after a Qualified IPO, the average
market price per share of Common Stock on the principal national
securities exchange or quotation system on which the Common Stock is
then traded or quoted for the ten day trading period ending on the day
prior to the determination date.
"Total Equity" means the sum of the par value, capital surplus
and retained earnings attributable to the Common Stock, other than
shares of Common Stock held in treasury of the Company, as determined
in accordance with United States generally accepted accounting
principles plus the paid in value of any preferred stock or other
security that is convertible into Common Stock to the extent that such
preferred stock or other security is a Common Stock Equivalent.
3
<PAGE> 5
SECTION 2. Demand Registration.
(a) Requests for Registration. Subject to the
limitations set forth in this Section 2, at any time the holder or
holders of Registrable Shares may request the Company to register
under the Securities Act all or any part of the Registrable Shares
held by such holder or holders (a "Demand Registration Request").
Within 10 days of receipt by the Company of a Demand Registration
Request, the Company shall give written notice of such request to all
other holders of Registrable Shares. Such holders shall have the right
to join the Demand Registration Request by delivery of written notice
to the Company of such intention, which notice shall include the
number of Registrable Shares that each such additional holder intends
to have the Company register in response thereto. All holders of
Registrable Shares that participate in any such demand registration
shall be referred to herein as "Requesting Holders".
(b) Registration by the Company. Unless the
Company has the right to refuse registration pursuant to Section 2(c)
hereof, the Company shall file a registration statement under the
Securities Act covering the Registrable Shares which are the subject
of any Demand Registration Request as soon as practicable after
receipt by the Company of any such Demand Registration Request (each,
a "Demand Registration"); provided, however, that if (i) in the good
faith judgment of the Board of Directors of the Company, such
registration would be seriously detrimental to the Company (or any
proposed acquisition or disposition of assets or properties) and the
Board of Directors of the Company concludes, as a result, that it is
essential to defer the filing of such registration statement at such
time, and (ii) the Company shall furnish all Requesting Holders a
certificate signed by the President of the Company stating that, in
the good faith judgment of the Board of Directors of the Company, it
would be seriously detrimental to the Company for such registration
statement to be filed in the near future and that it is, therefore,
essential to defer the filing of such registration statement, then the
Company shall have the right to defer such filing for the period
during which such disclosure would be seriously detrimental, provided,
however, that the Company may not defer the filing of a registration
statement for a period of more than 120 days after receipt of the
Demand Registration Request of the Requesting Holders, and, provided
further, that the Company shall not defer its obligation in this
manner more than once in any twelve-month period and shall give
written notice to the Requesting Holders immediately after the reason
for deferring the filing of the registration statement has ceased to
exist. The Company shall not be required to register any shares of
Registrable Securities during any period in which it has exercised its
deferral right as aforesaid.
(c) Demand Registration Limitations. The demand
registration rights set forth in this Section 2 may be exercised only
in accordance with the following limitations:
4
<PAGE> 6
(i) The holders of Registrable
Securities shall have the right to exercise demand
registration rights under this Section 2 only after the
earlier to occur of (x) a Qualified IPO, or (y) January 1,
2000.
(ii) The Company shall not be required to
make any Demand Registrations pursuant to this Section 2
unless the aggregate Share Value of all Registrable Shares
proposed to be registered in connection therewith shall equal
or exceed $20 million (this clause (ii) shall not apply if
clause (iv) below is applicable to a Demand Registration).
(iii) The Company shall not be required to
file more than three Demand Registrations with the Commission
pursuant to which the Company is required to register any
Registrable Shares on Form S-1 or Form S-2 promulgated under
the Securities Act.
(iv) The Company shall be required to
file any and all Demand Registrations with the Commission
pursuant to which the Company is qualified to register any
Registrable Shares on Form S- 3 promulgated under the
Securities Act, provided, however, that any such Demand
Registration permitted under this Section 2(c)(iv) must
include Registrable Shares constituting at least 5% of the
outstanding shares of Common Stock.
(v) Provided the Company is actively
employing in good faith all reasonable efforts to cause such
registration statements to become effective, the Company shall
not be required to make any Demand Registration pursuant to
this Section 2 during the period ending 180 days after the
effective date of any registration statement filed pursuant to
the Securities Act for the initial underwritten public
offering by the Company of shares of Common Stock and during
the period ending 90 days after the effective date of any
subsequent registration under the Securities Act by the
Company of shares of Common Stock or Common Stock Equivalents,
other than in connection with an employee benefit plan,
dividend reinvestment plan or merger, consolidation or other
business combination.
(d) Priority on Demand Registrations.
The registration statement filed pursuant to the Demand
Registration Request of the Requesting Holders may, subject to
the limitations set forth below, include other securities of
the Company, with respect to which registration rights have
been granted, and may include securities of the Company being
sold for the account of the Company. If a Demand Registration
is an underwritten public offering and the managing
underwriters advise the Company in writing that in their
opinion the number of Registrable Shares and other securities
requested to be included exceeds the number of Registrable
Shares and other securities which can be sold in such
offering, the Company shall include
5
<PAGE> 7
in such registration, prior to the inclusion of any securities
to be sold by the Company or any other securities which are
not Registrable Shares, the number of Registrable Shares
requested to be included, pro rata among the Requesting
Holders on the basis of the number of Registrable Shares owned
by such Requesting Holders.
(e) Underwriters. The managing underwriter or
underwriters for any Demand Registration shall be selected by the
holders of a majority of the Registrable Shares to be included in such
Demand Registration, which managing underwriter or underwriters shall
be reasonably acceptable to the Company.
SECTION 3. Piggyback Registration.
(a) Right to Piggyback. If at any time the
Company proposes to file a registration statement under the Securities
Act with respect to any underwritten offering of any securities of the
Company, other than a registration statement on Form S-4 or S-8 (or
any substitute form for comparable purposes that may be adopted by the
Commission) or a registration statement filed in connection with an
exchange offer or an offering of securities solely to the Company's
existing security holders (a "Piggyback Registration"), the Company
shall in each case give written notice of such proposed filing to all
holders of Registrable Shares as soon as practicable, but in no event
less than 20 days before the anticipated filing date, and shall,
subject to Section 3(b) hereof, include in such registration statement
all Registrable Shares with respect to which the Company has received
written requests for inclusion therein within 15 days after the
Company's notice is received by all such holders.
(b) Priority in Piggyback Registrations. If the
managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in a
registration exceeds the number which can be sold in such offering,
the Company shall include in such registration (i) first, the
securities the Company proposes to sell, if any, and (ii) second, the
Registrable Shares requested to be included in such registration, pro
rata among the holders of all such Registrable Shares and other
securities requested to be included on the basis of the then number of
Registrable Shares and other securities requested to be included by
each such holder.
(c) Right to Withdraw. Notwithstanding anything
to the contrary, neither the delivery of the notice by the Company nor
of the request by the holder of the Registrable Shares shall in any
way obligate the Company to file, or the holder of the Registrable
Shares to have included in, a registration statement under this
Section 3 and notwithstanding such filing, the Company may, at any
time prior to the effective date thereof, in its sole discretion,
determine not to offer the securities to which the registration
statement relates without liability to any of the holders of the
Registrable Shares, and any holder may determine not to include its
Registrable Shares therein without liability.
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(d) Selection of Underwriters. The managing
underwriter or underwriters for any Piggyback Registration shall be
selected by the Company, by action of the Board of Directors.
SECTION 4. Holdback Agreements. In the event that
Registrable Shares are registered by the Company pursuant to Section 2 or 3
hereof, the holders of any such Registrable Shares shall enter into such
agreements, including underwriting agreements and lock-up agreements, as the
managing underwriter of any offering registered under the Securities Act shall
reasonably request (collectively, "Holdback Agreements"); provided, however,
that (i) with respect to an initial public offering of shares of Common Stock,
such Holdback Agreements shall not exceed a period of 14 calendar days prior
to, and 180 calendar days after, the effective date of such registration, and
(ii) with respect to any subsequent registrations, such Holdback Agreements
shall not exceed a period of 14 calendar days prior to, and 120 calendar days
after, the effective date of such registration.
SECTION 5. Registration Procedures. Whenever the holders
of Registrable Shares have requested that any Registrable Shares be registered
pursuant to this Agreement, the Company shall use its best efforts to effect
the registration and the sale of such Registrable Shares in accordance with the
intended method of disposition thereof, and pursuant thereto the Company shall
as expeditiously as possible:
(a) prepare and file with the Commission a
registration statement with respect to such Registrable Shares and use
its best efforts to cause such registration statement to become and
remain effective for such period as may be reasonably necessary to
effect the sale of such securities, in any case not to exceed six
months;
(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 for a period of not more than
six months and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
registration statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in
such registration statement;
(c) furnish, without charge, to each Selling
Holder and the underwriters of the securities being registered such
number of copies of such registration statement, each amendment and
supplement thereto, in each case including all exhibits, the
prospectus included in such registration statement, including each
preliminary prospectus, and such other documents as each such Selling
Holder or underwriters may reasonably request in order to facilitate
the disposition of the Registrable Shares owned by each such Selling
Holder or the sale of such securities by such underwriters;
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<PAGE> 9
(d) use its best efforts to register or qualify
such Registrable Shares under such other securities or blue sky laws
of such jurisdictions as each Selling Holder shall reasonably request
and do any and all other acts and things which may be reasonably
necessary or advisable to enable each such Selling Holder to
consummate the disposition in such jurisdictions of the Registrable
Shares owned by such Selling Holder, provided, however, that the
Company shall not be required to (i) qualify generally to do business
in any jurisdiction where it would not otherwise be required to
qualify but for this Section 5(d), (ii) subject itself to taxation in
any such jurisdiction or (iii) consent to general service of process
in any such jurisdiction;
(e) (i) cause all such Registrable Shares covered
by such registration statement to be listed on the principal
securities exchange on which similar securities issued by the Company
are then listed, if any, if the listing of such Registrable Shares is
then permitted under the rules of such exchange, or (ii) if no similar
securities are then so listed, cause all such Registrable Shares to be
listed on a national securities exchange or, failing that, secure
designation of all such Registrable Shares as a Nasdaq Stock Market
"national market system security" within the meaning of Rule 1lAa2-1
of the Commission or, failing that, secure Nasdaq Stock Market
authorization for such shares and, without limiting the generality of
the foregoing, take all actions that may be required by the Company as
the issuer of such Registrable Shares in order to facilitate the
managing underwriter's arranging for the registration of at least two
market makers as such with respect to such shares with the National
Association of Securities Dealers, Inc.;
(f) provide and cause to be maintained a transfer
agent and registrar for all such Registrable Shares not later than the
effective date of such registration statement;
(g) enter into such customary agreements,
including underwriting agreements in customary form, and take all such
other actions as the underwriters, if any, reasonably request in order
to expedite or facilitate the disposition of such Registrable Shares;
(h) upon receipt of such confidentiality
agreements as the Company may reasonably request, make reasonably
available for inspection by the Selling Holders, any underwriter
participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by any
such Selling Holders or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such
Selling Holder, underwriter, attorney, accountant or agent in
connection with such registration statement;
(i) promptly notify each Selling Holder, (i) of
the time when the registration statement, any pre-effective amendment,
the prospectus or any prospectus
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<PAGE> 10
supplement related thereto or post-effective amendment to the
registration statement has been filed and, with respect to the
registration statement or any post-effective amendment, when the same
has become effective and (ii) of the receipt by the Company of any
notification with respect to the suspension of the qualification of
any Registrable Shares for sale under the securities or blue sky laws
of any jurisdiction or the initiation of any proceeding for such
purpose;
(j) notify each Selling Holder of any requests by
the Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(k) prepare and file with the Commission,
promptly upon the request of any Selling Holder, any amendments or
supplements to such registration statement or prospectus which, in the
opinion of counsel selected by the holders of a majority of the
Registrable Shares being registered, is required under the Securities
Act or the rules and regulations thereunder in connection with the
distribution of Registrable Shares by such Selling Holder;
(l) prepare and promptly file with the Commission
and promptly notify each Selling Holder of the filing of such
amendment or supplement to such registration statement or prospectus
as may be necessary to correct any statements or omissions if, at the
time when a prospectus relating to such securities is required to be
delivered under the Securities Act, any event shall have occurred as
the result of which any such prospectus as then in effect would
include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light
of the circumstances in which they were made, not misleading;
(m) advise each Selling Holder, promptly after
the Company shall receive notice or obtain knowledge thereof, of the
issuance of any stop order by the Commission suspending the
effectiveness of such registration statement or the initiation or
threatening of any proceeding for such purpose and promptly use all
reasonable efforts to prevent the issuance of any stop order or to
obtain its withdrawal if such stop order should be issued;
(n) provide notice within a reasonable amount of
time prior to the filing of any registration statement or prospectus
of any amendment or supplement to such registration statement or
prospectus, furnish a copy thereof to each Selling Holder and refrain
from filing any such registration statement, prospectus, amendment or
supplement to which counsel selected by the holders of a majority of
the Registrable Shares being registered 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
the rules and regulations thereunder, unless, in the case of an
amendment or supplement, the Company
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<PAGE> 11
reasonably believes the filing of such amendment or supplement is
reasonably necessary to protect the Company from any liabilities under
any applicable federal or state law;
(o) at the request of any Selling Holder in
connection with an underwritten offering, furnish on the date or dates
provided for in the underwriting agreement: (i) an opinion of counsel,
addressed to the underwriters and the Selling Holders, covering such
matters as such underwriters may reasonably request, including,
without limiting the generality of the foregoing, opinions to the
effect that (A) such registration statement has become effective under
the Securities Act; (B) to the best of such counsel's knowledge no
stop order suspending the effectiveness thereof has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act; (C) the registration statement,
the prospectus, and each amendment or supplement thereto comply as to
form in all material respects with the requirements of the Securities
Act and the applicable rules and regulations of the Commission
thereunder except that such counsel need express no opinion as to
financial statements or other financial or statistical data contained
therein; and (ii) a "cold comfort" letter or letters from the
independent certified public accountants of the Company addressed to
the underwriters and the Selling Holders, covering such matters as
such underwriters may reasonably request, in which letters such
accountants shall state, without limiting the generality of the
foregoing, that they are independent certified public accountants
within the meaning of the Securities Act and that in the opinion of
such accountants the financial statements and other financial data of
the Company included in the registration statement, the prospectus, or
any amendment or supplement thereto comply in all material respects
with the applicable accounting requirements of the Securities Act;
(p) deliver promptly to each Holder participating
in the offering and each underwriter, if any, copies of all
correspondence between the Commission and the Company, its counsel or
auditors and all memoranda relating to discussions with the Commission
or its staff with respect to the registration statement, other than
those portions of any such correspondence and memoranda which contain
information subject to attorney-client privilege with respect to the
Company;
(q) provide a CUSIP number for all Registrable
Shares, not later than the effective date of the registration
statement;
(r) make reasonably available its employees and
personnel and otherwise provide reasonable assistance to the
underwriters, taking into account the needs of the Company's business
and the requirements of the marketing process, in the marketing of
Registrable Shares in any underwritten offering;
(s) promptly prior to the filing of any document
which is to be incorporated by reference into the registration
statement or the prospectus, after the initial
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<PAGE> 12
filing of such registration statement, provide copies of such document
to counsel to the Selling Holders of Registrable Shares and to the
managing underwriter, if any, and make the Company's representatives
reasonably available for discussion of such document and make such
changes in such document prior to the filing thereof as counsel for
such Selling Holders or underwriters may reasonably request;
(t) furnish to each Selling Holder and the
managing underwriter, without charge, at least one signed copy of the
registration statement and any post-effective amendments thereto,
including financial statements and schedules, all documents
incorporated therein by reference and all exhibits, including those
incorporated by reference;
(u) comply with all applicable rules and
regulations of the Commission, and make generally available to its
security holders, as soon as reasonably practicable after the
effective date of the registration statement, and in any event within
16 months thereafter, an earnings statement (which need not be
audited) covering the period of at least twelve consecutive months
beginning with the first day of the Company's first calendar quarter
after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder; and
(v) take all such other commercially reasonable
actions as are necessary or advisable in order to expedite or
facilitate the disposition of such Registrable Shares.
SECTION 6. Registration Expenses. Except as otherwise
provided herein, all expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation, all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, including a blue sky survey and the related fees and expenses of counsel,
printing expenses, messenger and delivery expenses, and fees and disbursements
of counsel for the Company and its independent certified public accountants,
fees and disbursements of one counsel for the Selling Holders, selected by the
Selling Holder initiating a registration under Section 2 hereof and selected by
the holders of a majority of the Registrable Shares included in a registration
under Section 3 hereof, and other Persons (including experts) retained by the
Company, and all other fees and disbursements of underwriters customarily paid
by issuers or sellers of securities (all such expenses being herein called
"Registration Expenses"), shall be borne by the Company. In addition, the
Company shall pay its internal expenses, including without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties, the expense of any annual audit or quarterly review, the
expense of any liability insurance obtained by the Company and the expenses and
fees for listing the securities so registered on each securities exchange on
which any shares of common stock are then listed or on the Nasdaq Stock Market.
Registration Expenses shall not include (a) the fees and expenses of more than
one counsel for the Selling Holders, or (b) any underwriting discounts,
commissions or similar charges attributable to the sale of Registrable Shares
included in such registration.
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SECTION 7. Indemnification and Contribution.
(a) Indemnification by the Company. The Company
shall indemnify and hold harmless to the fullest extent permitted by
law each Selling Holder, its officers, directors, fiduciaries,
stockholders, partners (and the directors, officers, employees and
stockholders thereof) and agents and each person, if any, who controls
such Selling Holder within the meaning of Section 15 of the Act or
Section 20 of the Securities Exchange Act (collectively, the "Selling
Indemnified Parties" and, individually, a "Selling Indemnified
Party"), from and against any and all losses, claims, damages, whether
in contract, tort or otherwise, liabilities, expenses, actions and
proceedings, whether commenced or threatened, in respect thereof,
including reasonable costs of investigation, counsel fees and amounts
paid in settlement, whatsoever (as incurred or suffered) arising out
of or based upon any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or preliminary,
final or summary prospectus relating to the Registrable Shares or in
any amendment or supplement thereto, or arising out of or based upon
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, except insofar as such losses, claims,
damages, liabilities or expenses arise out of, or are based upon, any
such untrue statement or omission or allegation thereof based upon
information furnished in writing to the Company by such Selling Holder
or on such Selling Holder's behalf expressly for use therein. The
Company shall also indemnify any underwriters of the Registrable
Shares, their officers, partners and directors and each person who
controls such underwriters on substantially the same basis as that of
the indemnification of the Selling Indemnified Parties provided in
this Section 7 or to provide such other indemnification customarily
obtained by underwriters at the time of offering.
(b) Conduct of Indemnification Proceedings. If
any action or proceeding, including any governmental investigation,
shall be brought or asserted against any Selling Indemnified Party in
respect of which indemnity may be sought from the Company, the Company
shall, at its expense, assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Selling
Indemnified Party. Such Selling Indemnified Party shall have the right
to employ separate counsel in any such action and to participate in
the defense thereof, but the fees and expenses of such counsel shall
be at the expense of such Selling Indemnified Party unless (i) the
Company has agreed to pay such fees and expenses, (ii) the Company
fails to diligently defend the action or proceeding within 20 days
after receiving notice from the Selling Indemnified Party that the
Selling Indemnified Party believes the Company has so failed or (iii)
the named parties to any such action or proceeding, including any
impleaded parties, include both such Selling Indemnified Party and the
Company, and such Selling Indemnified Party shall have been advised by
counsel that there may be a conflict of interest between any of the
parties, or that representation of the Selling Indemnified Party and
the Company is otherwise inappropriate under applicable standards of
professional conduct, or one or more legal defenses are available to
such Selling
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Indemnified Party which are different from or additional to those
available to the Company; in which case, if such Selling Indemnified
Party notifies the Company in writing that it elects to employ
separate counsel at the expense of the Company, the Company shall not
have the right to assume the defense of such action or proceeding on
behalf of such Selling Indemnified Party; it being understood,
however, that the Company shall not, in connection with any one such
action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such Selling
Indemnified Parties, which firm shall be designated in writing by a
majority of the Selling Indemnified Parties. The Company shall not be
liable for any settlement of any such action or proceeding effected
without the Company's written consent, but if settled with its written
consent, which consent shall not be unreasonably withheld or delayed,
or if there be a final judgment no longer subject to appeal for the
plaintiff in any such action or proceeding, the Company agrees to
indemnify and hold harmless such Selling Indemnified Parties from and
against any loss or liability (to the extent stated above) by reason
of such settlement or judgment.
(c) Indemnification by Holders of Registrable
Shares. Each Selling Holder shall severally, but not jointly,
indemnify and hold harmless the Company, its directors, officers,
fiduciaries, stockholders and agents and each person, if any, who
controls the Company within the meaning of either Section 15 of the
Act or Section 20 of the Securities Exchange Act (collectively, the
"Issuer Indemnified Parties" and, individually, a "Issuer Indemnified
Party" and, together with a Selling Indemnified Party an "Indemnified
Party"), to the same extent as the foregoing indemnity from the
Company to such Selling Holder, but only with respect to information
furnished in writing by such Selling Holder or on such Selling
Holder's behalf expressly for use in any registration statement or
prospectus relating to the Registrable Shares, or any amendment or
supplement thereto, or any preliminary prospectus. In case any action
or proceeding shall be brought against an Issuer Indemnified Party, in
respect of which indemnity may be sought against such Selling Holder,
such Selling Holder shall have the rights and duties given to the
Company, and the Issuer Indemnified Parties shall have the rights and
duties given to such Selling Holder, by the preceding Section 7(b)
hereof. Each Selling Holder shall also severally, but not jointly,
indemnify and hold harmless underwriters of the Registrable Shares,
their officers, directors, fiduciaries, stockholders and agents and
each person who controls such underwriters on substantially the same
basis as that of the indemnification of the Company provided in this
Section 7.
(d) Contribution. If the indemnification provided
for in this Section 7 is unavailable to any Indemnified Party in
respect of any losses, claims, damages, liabilities, expenses, actions
or proceedings referred to herein, then each such indemnifying party,
in lieu of indemnifying such Indemnified Party, shall contribute to
the amount paid or payable by such Indemnified Party as a result of
such losses, claims, damages, liabilities, expenses,
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<PAGE> 15
actions and proceedings (i) as between the Issuer Indemnified Parties
and the Selling Indemnified Parties on the one hand and the
underwriters on the other, in such proportion as is appropriate to
reflect the relative benefits received by the Issuer Indemnified
Parties and the Selling Indemnified Parties on the one hand and the
underwriters on the other from the offering of the Registrable Shares,
or if such allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Issuer Indemnified Parties
and the Selling Indemnified Parties on the one hand and of the
underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities,
expenses actions or proceedings, as well as any other relevant
equitable considerations and (ii) as between the Issuer Indemnified
Parties, on the one hand, and each Selling Indemnified Party on the
other, in such proportion as is appropriate to reflect the relative
fault of the Issuer Indemnified Parties and of each Selling
Indemnified Party in connection with such statements or omissions, as
well as any other relevant equitable considerations. The relative
benefits received by the Issuer Indemnified Parties and the Selling
Indemnified Parties on the one hand and the underwriters on the other
shall be deemed to be in the same proportion as the total proceeds
from the offering, net of underwriting discounts and commissions but
before deducting expenses, received by the Issuer Indemnified Parties
and the Selling Indemnified Parties bear to the total underwriting
discounts and commissions received by the underwriters, in each case
as set forth in the table on the cover page of the prospectus. The
relative fault of the Issuer Indemnified Parties and the Selling
Indemnified Parties on the one hand and of the underwriters on the
other shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Issuer Indemnified Parties and the Selling
Indemnified Parties or by the underwriters. The relative fault of the
Issuer Indemnified Parties on the one hand and of each Selling
Indemnified Party on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of
a material fact or the omission or alleged omission to state a
material fact relates to information supplied by such party, and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Selling Holders hereby agree that
it would not be just and equitable if contribution pursuant to this
Section 7(d) were determined by pro rata allocation, even if the
underwriters were treated as one entity for such purpose, or by any
other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages, liabilities, expenses, actions
or proceedings referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section
7(d), no underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the
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Registrable Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission,
and no Selling Holder shall be required to contribute any amount in
excess of the amount by which the total price at which the Registrable
Shares of such Selling Holder were offered to the public exceeds the
amount of any damages which such Selling Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement
or omission or alleged omission. No Person guilty of fraudulent
misrepresentation, within the meaning of Section 11(f) of the
Securities Act, shall be entitled to contribution from any Person who
was not guilty of such fraudulent misrepresentation. Each Selling
Holder's obligation to contribute is several in the proportion that
the proceeds of the offering received by such Selling Holder bears to
the total proceeds of the offering, and not joint.
(e) Settlement or Compromise. No indemnifying
party shall without the written consent of the Indemnified Party,
effect the settlement or compromise of, or consent to the entry of any
judgment with respect to, any pending or threatened action or claim in
respect of which indemnification or contribution may be sought
hereunder, whether or not the Indemnified Party is an actual or
potential party to such action or claim, unless such settlement,
compromise or judgment (A) includes an unconditional release of the
Indemnified Party from all liability arising out of such action or
claim and (B) does not include a statement as to or an admission of
fault, culpability or a failure to act, by or on behalf of any
Indemnified Party.
(f) Rights not Exclusive. The indemnity
agreements contained in this Section 7 shall be in addition to any
other rights to indemnification or contribution which any Indemnified
Party may have pursuant to law or contract and shall remain operative
and in full force and effect regardless of any investigation made or
omitted by or on behalf of any indemnified party and shall survive the
transfer of the Registrable Securities by any such party.
SECTION 8. Compliance with Rule 144. When it is first
legally required to do so, the Company shall register a class of securities
under Section 12 of the Securities Exchange Act, and commence to file reports
under Section 13 or 15(d) of the Securities Exchange Act. Thereafter at the
request of any holder who proposes to sell securities in compliance with Rule
144 promulgated by the Commission under the Securities Act, the Company shall
(i) forthwith furnish to such holder a written statement of compliance with the
filing requirements of the Commission as set forth in Rule 144 as such rule may
be amended from time to time and (ii) timely file and make available to the
public and such holders such reports and other information as will enable the
holders to make sales pursuant to Rule 144.
SECTION 9. Participation in Underwritten Registrations.
No Person may participate in any registration hereunder which is underwritten
unless such Person (a) agrees to sell
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such Person's securities on the basis provided in any underwriting arrangements
approved by the Person or Persons entitled hereunder to approve such
arrangements, (b) provides all such information as is reasonably required to
effect such registration and completes and executes all undertakings,
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements or applicable laws, and (c) complies with all other reasonable
requests of the managing underwriter and with the Company and complies with all
other reasonable requests related to such registration.
SECTION 10. Remedies. Any Person having rights under any
provision of this Agreement will be entitled to enforce such rights
specifically, to recover damages caused by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law.
SECTION 11. Amendments and Waivers. Except as otherwise
expressly provided herein, the provisions of this Agreement including, but not
limited to, notice provisions may be amended or waived at any time only by the
written agreement of the Company and the holders of a majority of the
Registrable Shares. Any waiver, permit, consent or approval of any kind or
character on the part of any such holders of any provision or condition of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in writing.
SECTION 12. Successors and Assigns. Except as otherwise
expressly provided herein, all covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto,
whether so expressed or not.
SECTION 13. Final Agreement. This Agreement constitutes
the final agreement of the parties hereto concerning the matters referred to
herein, and supersedes all prior agreements and understandings with respect to
the subject matter hereof.
SECTION 14. Severability. Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Agreement is held to be prohibited by or invalid under applicable law, such
provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement.
SECTION 15. Descriptive Headings. The descriptive
headings of this Agreement are inserted for convenience of reference only and
do not constitute a part of and shall not be utilized in interpreting this
Agreement.
SECTION 16. Notices. Any notices required or permitted
to be sent hereunder shall be delivered by hand, by telex or telecopier, or by
certified or registered mail, postage prepaid and return receipt requested, or
delivered by overnight courier service to the following addresses, or such
other addresses as shall be given by notice delivered hereunder. Notices shall
be deemed
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to have been given upon delivery, if delivered by hand, three business days
after mailing, if mailed, or one business day after delivery to the courier, if
delivered by overnight courier service, and upon receipt of an appropriate
electronic confirmation, if by telex or telecopier:
If to the holders of Registrable Shares, to the addresses set
forth on the stock record books of the Company.
If to the Company, to:
Bayard Drilling Technologies, Inc.
Suite 400E, Lakepoint Towers
4005 Northwest Expressway
Oklahoma City, Oklahoma 73116
Telecopy: (405) 879-3847
Attention: President
SECTION 17. Governing Law. The validity, meaning and
effect of this Agreement shall be determined in accordance with the laws of the
State of Delaware applicable to contracts made and to be performed in that
state.
SECTION 18. Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed and delivered
shall be deemed an original, and such counterparts together shall constitute
one instrument. Each party shall receive a duplicate original of the
counterpart copy or copies executed by it and the Company.
17
<PAGE> 19
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
BAYARD DRILLING TECHNOLOGIES, INC.
By: /s/ James E. Brown
---------------------------------
Name: James E. Brown
-------------------------------
Title: President
------------------------------
ANADARKO DRILLING COMPANY
By: AnSon Partners Limited
Partnership, General Partner
By: /s/ Carl B. Anderson
----------------------------
Name: Carl B. Anderson
--------------------------
Title: General Partner
-------------------------
ENERGY SPECTRUM PARTNERS LP
By: Energy Spectrum Capital LC,
General Partner
By: Energy Spectrum LLC, General
Partner
By: /s/ Sidney L. Tassin
-------------------------
Name: Sidney L. Tassin
-------------------
Title: President
------------------
CHESAPEAKE ENERGY CORPORATION
By: /s/ Aubrey K. McClendon
------------------------------------
Name: Aubrey K. McClendon
------------------------------
Title: Chairman and Chief Executive
Officer
-----------------------------
18
<PAGE> 20
R.T. OLIVER DRILLING, INC.
By: /s/ Roy T. Oliver
--------------------------------
Name: Roy T. Oliver
------------------------------
Title: President
-----------------------------
MIKE MULLEN ENERGY EQUIPMENT
RESOURCE, INC.
By: /s/ Mike Mullen
-------------------------------
Name: Mike Mullen
------------------------------
Title: President
-----------------------------
GRUPO DE HERCULES, LTD.
By: /s/ Roy T. Oliver
-------------------------------
General Partner
By: /s/ Mike Mullen
-------------------------------
Name: Mike Mullen
------------------------------
Title: President
-----------------------------
MULLEN-OLIVER PARTNERSHIP, LTD.
By: /s/ Roy T. Oliver
-------------------------------
General Partner
By: /s/ Mike Mullen
-------------------------------
Name: Mike Mullen
------------------------------
Title: President
-----------------------------
19
<PAGE> 1
Exhibit 10.4
FIRST AMENDMENT TO
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This FIRST AMENDMENT TO AMENDED AND RESTATED REGISTRATION
RIGHTS AGREEMENT (this "Amendment") is made as of May 30, 1997 by and among
Bayard Drilling Technologies, Inc., a Delaware corporation (the "Company"),
Anadarko Drilling Company, an Oklahoma general partnership ("Anadarko"), R.T.
Oliver Drilling, Inc., an Oklahoma corporation ("Oliver Drilling"), Mike Mullen
Energy Equipment Resource, Inc., a Texas corporation ("Mullen Energy"), Grupo
de Hercules, Ltd., a Texas limited partnership ("Grupo"), Mullen-Oliver
Partnership, Ltd., a Texas limited partnership ("M- O Partnership" and,
together with Oliver Drilling, Mullen Energy and Grupo, the "Oliver
Companies"), Energy Spectrum Partners LP, a Delaware limited partnership
("Energy Spectrum"), and Chesapeake Energy Corporation, an Oklahoma corporation
("Chesapeake") (collectively, the "Investors"), and amends that certain Amended
and Restated Registration Rights Agreement made as of April 30, 1997 (the
"Original Agreement"), by and among the Company and each of the Investors.
Capitalized terms used herein but not defined herein have the meanings assigned
to them in the Original Agreement.
WITNESSETH
WHEREAS, in the Original Agreement the Company has granted the
Investors certain registration rights with respect to Registrable Securities
owned by them; and
WHEREAS, pursuant to that certain Unit Purchase Agreement,
dated as of May 30, 1997 (the "Unit Purchase Agreement"), by and among Ward
Drilling Company, Inc., an Oklahoma Corporation ("Ward Drilling"), as seller,
Mr. L.O. Ward ("L.O. Ward"), an individual, as an indemnitor, and the Company,
as buyer, the Company has agreed to purchase all of the outstanding common
units of WD Equipment, LLC (the "WD LLC") for certain consideration which
includes 200,000 shares of Common Stock and warrants to purchase up to an
additional 100,000 shares of Common Stock at an initial exercise price of
$20.00 per share (the "Ward Warrants"), upon which Ward Drilling shall become a
stockholder of the Company; and
WHEREAS, the Company and the Investors desire to enter into
this Amendment to amend the Original Agreement effective as of the closing of
the acquisition of the WD LLC pursuant to the Unit Purchase Agreement (the
"Amendment Effective Time") in order to provide Ward Drilling with certain
registration rights with respect to the Common Stock to be acquired thereunder,
as well as the shares issuable upon exercise of the Ward Warrants;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein, the mutual benefits to be
gained by the performance thereof and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged and accepted, the
Company and the Stockholders agree as follows:
<PAGE> 2
1. AMENDMENTS TO SECTION 1. Section 1 of the Original
Agreement is amended to include the following new definition:
"Investors" means Anadarko, Oliver Drilling, Mullen
Energy, Grupo, M-O Partnership, Energy Spectrum, Chesapeake,
Ward Drilling and each other Person to which the Company may
grant registration rights hereunder pursuant to action taken
by the Board of Directors of the Company, provided each such
additional Person granted rights hereunder executes an
agreement acceptable to the Company agreeing to be bound by
the terms of this Agreement.
2. APPROVAL AND EFFECTIVENESS. The signatures of each of the
parties below shall constitute the approval of each such party for all
purposes to the form, terms and provisions of this Amendment to the
Original Agreement. This Amendment shall become effective at the
Amendment Effective Time.
3. GOVERNING LAW. The validity, meaning and effect of
this Agreement shall be determined in accordance with the laws of the
State of Delaware applicable to contracts made and to be performed in
that state.
4. NO FURTHER AMENDMENT; COUNTERPARTS. Except as
amended hereby, the Original Agreement shall remain in full force and
effect. This Amendment may be executed in separate counterparts, each
of which shall be an original and all of which taken together shall
constitute one and the same agreement.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders and Voting Agreement on the day and year first above written.
THE COMPANY:
BAYARD DRILLING TECHNOLOGIES, INC.
By: /s/ JAMES E. BROWN
----------------------------------------------
James E. Brown
President
INVESTORS:
ANADARKO DRILLING COMPANY
By: AnSon Partners Limited Partnership, a General
Partner
By:/s/ CARL B. ANDERSON
------------------------------------------------
Name: Carl B. Anderson
--------------------------------------
Title:
--------------------------------------
ENERGY SPECTRUM PARTNERS LP
By: Energy Spectrum Capital LP, its General Partner
By: Energy Spectrum LLC, its General Partner
By:/s/ SIDNEY L. TASSIN
----------------------------------------
Name: Sidney L. Tassin
-----------------------------
Title:
-----------------------------
3
<PAGE> 4
CHESAPEAKE ENERGY CORPORATION
By:/s/ AUBREY K. MCCLENDON
--------------------------------------------------------
Name: Aubrey K. McClendon
---------------------------------------------
Title: CEO
--------------------------------------------
R.T. OLIVER DRILLING, INC.
By:/s/ ROY T. OLIVER
--------------------------------------------------------
Name: Roy T. Oliver
---------------------------------------------
Title: President
--------------------------------------------
MIKE MULLEN ENERGY EQUIPMENT
RESOURCE, INC.
By:/s/ MIKE MULLEN
--------------------------------------------------------
Name: Mike Mullen
---------------------------------------------
Title: President
---------------------------------------------
GRUPO DE HERCULES, LTD.
By: Mullen-Oliver Rig Investments Group, Inc.
General Partner
By:/s/ MIKE MULLEN
-----------------------------------------------
Name: Mike Mullen
-------------------------------------
Title: President
-------------------------------------
<PAGE> 5
MULLEN-OLIVER PARTNERSHIP, LTD.
By: Mullen-Oliver Rig Investments Group, Inc.
General Partner
By:/s/ MIKE MULLEN
--------------------------------------------
Name: Mike Mullen
----------------------------------
Title: President
---------------------------------
<PAGE> 1
EXHIBIT 10.5
================================================================================
MASTER AGREEMENT
BY AND AMONG
BAYARD DRILLING COMPANY
ANSON PARTNERS LIMITED PARTNERSHIP
ANADARKO DRILLING COMPANY
R.T. OLIVER DRILLING, INC.
MIKE MULLEN ENERGY EQUIPMENT RESOURCE, INC.
GRUPO DE HERCULES, LTD.
MULLEN-OLIVER PARTNERSHIP, LTD.
ENERGY SPECTRUM PARTNERS LP
AND
CHESAPEAKE ENERGY CORPORATION
NOVEMBER 26, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
THE TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.2. Delivery of Master Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.3. Formation of The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Formation of Bayard Oklahoma . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Anadarko Capital Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) Bayard Merger -- Bayard Delaware Capital Structure . . . . . . . . . . . . . . . . . 7
(d) Bayard Merger -- Conversion of Bayard Oklahoma Shares . . . . . . . . . . . . . . . . 8
(e) Oliver Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(f) Oliver Put Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(g) Energy Spectrum Stock Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(h) Weatherford Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.4. Related Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) Master Drilling Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Chesapeake Drilling Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(c) Chesapeake Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(d) Stockholders Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(e) Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(f) New Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.5. Further Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY, ANSON AND ANADARKO . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.1. Organization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.2. Authority; Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.3. Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.4. Title to Anadarko Assets and Bayard Oklahoma Shares . . . . . . . . . . . . . . . . 14
SECTION 3.5. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.6. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.7. Assets Necessary to Business; Effect of Transfer . . . . . . . . . . . . . . . . . 15
SECTION 3.8. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.9. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.10. Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C>
SECTION 3.11. Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.12. Defects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.13. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.14. Government Authorizations and Filings . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.15. Brokers, Finders, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.16. Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.17. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.18. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE OLIVER COMPANIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.1. Organization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.2. Authority; Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.3. Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.4. Title to Oliver Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 4.5. Effect of Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 4.6. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 4.7. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.8 Defects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.9. Government Authorizations and Filings . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.10. Brokers, Finders, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.11. Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ENERGY SPECTRUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.1. Organization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.2. Authority; Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.3. Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.4. Governmental Authorizations and Filings . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.5. Brokers, Finders, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.6. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.7. Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CHESAPEAKE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.1. Organization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.2. Authority; Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.3. Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 6.4. Governmental Authorizations and Filings . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 6.5. Brokers, Finders, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 6.6. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
iii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VII
CONDITIONS TO THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 7.1. General Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 7.2. Additional Conditions Precedent of Energy Spectrum . . . . . . . . . . . . . . . . 33
SECTION 7.3. Additional Conditions Precedent of the Oliver Companies . . . . . . . . . . . . . . 34
ARTICLE VIII
CERTAIN COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 8.1. Energy Spectrum Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 8.2. Oliver Companies Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 8.3. Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 8.4. Satisfaction of All Conditions Precedent . . . . . . . . . . . . . . . . . . . . . 35
SECTION 8.5. Material Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 8.6. Notice of Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 8.7. Notice of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 8.8. Continuation of Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.9. Interim Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.10. Management Services Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.11. Continuing Responsibilities of AnSon and Anadarko . . . . . . . . . . . . . . . . . 38
ARTICLE IX
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS; INDEMNIFICATION . . . . . . . . . . . . . . . . . . 38
SECTION 9.1. Survival of Representations and Agreements . . . . . . . . . . . . . . . . . . . . 38
SECTION 9.2. Indemnification by AnSon and Anadarko . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 9.3. Indemnification by the Oliver Companies . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 9.4. Indemnification by Energy Spectrum . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 9.5. Indemnification by Chesapeake . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 9.6. Indemnification for Third Party Claims . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE X
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 10.1. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 10.2. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 10.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 10.4. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 10.5. Energy Spectrum Advisory Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 10.6. Energy Spectrum Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 10.7. Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 10.8. Amendment; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 10.9. Parties in Interest; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 10.10. No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 10.11. Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
iv
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 10.12. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 10.13. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 10.14. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 10.15. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 10.16. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 10.17. Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 10.18. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
v
<PAGE> 6
EXHIBITS
<TABLE>
<S> <C>
Exhibit A - Form of Bayard Merger Agreement
Exhibit B - Form of Bayard Note
Exhibit C - Form of Chesapeake Drilling Agreements
Exhibit D - Form of Chesapeake Option Agreement
Exhibit E - Form of Master Drilling Agreement
Exhibit F - Form of Registration Rights Agreement
Exhibit G - Form of Stockholders Agreement
Exhibit H - Form of Certificate
Exhibit I - Form of Bylaws
Exhibit J - Form of Bill of Sale
Exhibit K - Form of Opinion of Counsel to AnSon and Anadarko
Exhibit L - Form of Opinion of Counsel of the Oliver Companies
Exhibit M - Form of Opinion of Counsel to Energy Spectrum
Exhibit N - Form of Opinion of Counsel to Chesapeake
</TABLE>
SCHEDULES
<TABLE>
<S> <C> <C>
Schedule 2.3(b) - Anadarko Assets
Schedule 2.3(e) - Oliver Assets
Schedule 2.4(b) - Drilling Rigs Subject to Chesapeake Drilling Agreements
Schedule 3.4 - Anadarko Existing Drilling Contracts
Schedule 3.11 - Anadarko Employee Benefit Plans
Schedule 3.16 - Anadarko Financial Statements
</TABLE>
vi
<PAGE> 7
MASTER AGREEMENT
This Master Agreement (this "Agreement") is made and entered
into as of November 26, 1996 by and among Bayard Drilling Company, an Oklahoma
corporation ("Bayard Oklahoma"), AnSon Partners Limited Partnership, an
Oklahoma limited partnership ("AnSon"), Anadarko Drilling Company, an Oklahoma
general partnership ("Anadarko"), R.T. Oliver Drilling, Inc., an Oklahoma
corporation ("Oliver Drilling"), and Mike Mullen Energy Equipment Resource,
Inc., a Texas corporation ("Mullen Energy"), Grupo de Hercules, Ltd., a Texas
limited partnership ("Grupo"), Mullen-Oliver Partnership, Ltd., a Texas limited
partnership ("M-O Partnership" and, together with Oliver Drilling, Mullen
Energy and Grupo, the "Oliver Companies"), Energy Spectrum Partners LP, a
Delaware limited partnership ("Energy Spectrum"), and Chesapeake Energy
Corporation, a Delaware corporation ("Chesapeake") (collectively, the "Parties"
and each, a "Party").
WITNESSETH:
WHEREAS, the Parties desire to effect a transaction pursuant
to which the Parties will form and invest in a new corporation which will
principally engage in the oil and gas contract drilling services business; and
WHEREAS, the Parties desire to enter into this Agreement in
order to set forth the terms and conditions of the proposed transaction and
certain related agreements.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein, the mutual benefits to be
gained by the performance thereof and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged and accepted, the
Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. For purposes of this Agreement,
the terms set forth below shall have the following respective meanings:
"Affiliate" means, with respect to any Person, any other
Person who, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. As used herein, the
term "control" shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management or
policies of a Person, whether by the ownership of voting securities,
by contract or otherwise.
"Anadarko Agreements" has the meaning set forth in Section
3.2(c) hereto.
<PAGE> 8
"Anadarko Assets" has the meaning set forth in Section 2.3(b)
hereto.
"Anadarko Existing Drilling Contracts" has the meaning set
forth in Section 3.4 hereto.
"Anadarko Transfer Agreements" has the meaning set forth in
Section 2.3(b) hereto.
"Bayard Agreements" has the meaning set forth in Section
3.2(a) hereto.
"Bayard Delaware" means Bayard Drilling Technologies, Inc., a
Delaware corporation and successor by merger to Bayard Oklahoma as
described in Section 2.3 hereto.
"Bayard Merger" has the meaning set forth in Section 2.3(c)
hereto.
"Bayard Merger Agreement" means the Agreement of Merger to be
executed and delivered by Bayard Delaware and Bayard Oklahoma pursuant
to Section 2.3(c) hereto prior to the Closing to effect the Bayard
Merger, in substantially the form attached as Exhibit A hereto.
"Bayard Oklahoma" means Bayard Drilling Company, an Oklahoma
corporation formed by Anadarko as described in Section 2.3 hereto.
"Bayard Note" means the promissory note issued by Bayard
Oklahoma in favor of Anadarko, a copy of which is attached as Exhibit
B hereto, in the principal amount of $6,315,000, subject to certain
adjustments as set forth therein, executed and delivered in connection
with the formation of Bayard Oklahoma as described in Section 2.3(b)
hereto.
"Bylaws" has the meaning set forth in Section 2.3 (e) hereto.
"Certificate" has the meaning set forth in Section 2.3(c)
hereto.
"Chesapeake Agreements" has the meaning set forth in Section
6.2 hereto.
"Chesapeake Drilling Agreements" means the six drilling
agreements to be entered into by Chesapeake Operating and the Company
at or after the Closing pursuant to the Master Drilling Agreement and
Section 2.4(b) hereto, each in substantially the form attached as
Exhibit C hereto.
"Chesapeake Operating" has the meaning set forth in Section
2.4(a) hereto.
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<PAGE> 9
"Chesapeake Option Agreement" means the Chesapeake Option
Agreement to be executed and delivered pursuant to Section 2.4(d)
hereto by Chesapeake and the Company at the Closing, in substantially
the form attached as Exhibit D hereto.
"Closing" has the meaning set forth in Section 2.1 hereto.
"Closing Date" has the meaning set forth in Section 2.1
hereto.
"Common Stock" has the meaning set forth in Section 2.3(c)(i)
hereto.
"Common Stock Equivalent" means securities convertible into,
or exchangeable or exercisable for, shares of Common Stock.
"Company" means Bayard Oklahoma at all times prior to the
effectiveness of the Bayard Merger and Bayard Delaware, as the
surviving entity in the Bayard Merger, from and after the
effectiveness of the Bayard Merger.
"Consent" has the meaning set forth in Section 3.3(a) hereto.
"Contract" means any contract, agreement, arrangement,
understanding or other instrument or obligation (whether oral or
written, pending or executory).
"Energy Spectrum Agreements" has the meaning set forth in
Section 5.2 hereto.
"Environmental Laws" means any federal, state, local and
foreign laws (including common law), statutes, codes, ordinances,
rules and regulations that are applicable to the Anadarko Assets, and
in each case as amended, and any judicial or administrative
interpretation thereof, relating to pollution or protection of human
health, the environment or natural resources (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata), including, without limitation, laws, statutes,
codes, ordinances, rules, regulations, consent decrees and judgments
binding on AnSon, Anadarko, the Company or the Anadarko Assets,
relating to emissions, discharges, releases or threatened releases of
Harmful Substances, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Harmful Substances.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Governmental Authority" means any nation or government, any
state or political subdivision thereof, any federal or state court and
any other agency, body, authority or entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
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<PAGE> 10
"Harmful Substance" means (a) any radioactive materials,
asbestos in any form, polychlorinated biphenyl and, only to the extent
it exists at levels which are considered hazardous to human health,
radon gas; (b) any chemicals, materials or substances defined as or
included in the definition of "hazardous substances," "hazardous
waste," "hazardous materials," "extremely hazardous substances,"
"toxic substances," "toxic pollutants," "contaminants," or
"pollutants" or words of similar import, under any applicable
Environmental Laws; and (c) any petroleum or petroleum products to the
extent that such products are released or otherwise discharged into
the environment in contravention of any applicable Environmental Laws.
"Indemnitor" has the meaning set forth in Section 9.4 hereto.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended and as the same may be amended from time to time, and
any successor statute thereto.
"IPO" means (i) the initial underwritten public offering
pursuant to which the Common Stock becomes registered under Section 12
of the Securities Exchange Act of 1934, as amended, or (ii) any
merger, consolidation or other business combination transaction that
results in any equity securities of the Company being registered under
Section 12 of the Securities Exchange Act of 1934, as amended.
"Liability" has the meaning set forth in Section 9.2 hereto.
"Lien" means, with respect to any properties or assets, (i)
any mortgage, pledge, hypothecation, assignment, security interest,
lien or encumbrance or any preference, priority or other security
agreement or preferential arrangement of any kind or character
whatsoever in respect of such properties or assets, including, but not
limited to, (A) any conditional sale or other title retention
agreement, (B) any financing lease having substantially the same
economic effect as any of the foregoing, and (C) the filing of, or
agreement to give, any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction, and (ii) any
net profits interest, royalty interest or other similar ownership
interest in such assets or the revenues derived therefrom.
"Master Drilling Agreement" means the Master Drilling
Agreement to be executed and delivered pursuant to Section 2.4(a)
hereto by Chesapeake, Chesapeake Operating and the Company at the
Closing, in substantially the form attached as Exhibit E hereto.
"New Credit Agreement" means the credit facility to be
executed and delivered by the Company and one or more banks or other
financial institutions pursuant to which the Company will have the
right to borrow approximately $22 million for purposes of funding
working capital and the acquisition of additional drilling rigs and
equipment.
"Notice" has the meaning set forth in Section 9.4 hereto.
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<PAGE> 11
"Oliver Agreements" has the meaning set forth in Section 4.2
hereto.
"Oliver Assets" has the meaning set forth in Section 2.3(e)
hereto.
"Oliver Companies" means, collectively, Oliver Drilling and
Mullen Energy.
"Oliver Shares" has the meaning set forth in Section 2.3(e)
hereto.
"Oliver Transfer Agreements" has the meaning set forth in
Section 2.3(e) hereto.
"Oliver Transfers" has the meaning set forth in Section 2.3(e)
hereto.
"Party" and "Parties" has the meaning set forth in the
recitals hereto.
"Permitted Liens" means any Liens on the Anadarko Assets that
existed at the time Anadarko contributed such assets to Bayard
Oklahoma as described in Section 2.3 hereto and with respect to which
Anadarko and/or AnSon have agreed to indemnify and hold the Company
harmless and which will be released in full at or prior to closing.
"Person" means any individual, corporation, limited liability
company, partnership, association, trust or any other entity or
organization of any kind or character, including any Governmental
Authority.
"Preferred Stock" has the meaning set forth in Section
2.3(c)(ii) hereto.
"Registration Rights Agreement" means the Registration Rights
Agreement to be executed and delivered pursuant to Section 2.4(f)
hereto by the Company, Anadarko, the Oliver Companies, Energy Spectrum
and Chesapeake at the Closing, in substantially the form attached as
Exhibit F hereto.
"Related Agreements" has the meaning set forth in Section 2.4
hereto.
"Restricted Shares" has the meaning set forth in Section
10.7(b) hereto.
"Securities" has the meaning set forth in Section 8.9(a)
hereto.
"Securities Act" means the Securities Act of 1933, as amended.
"Services" has the meaning set forth in Section 8.9(a) hereto.
"Stockholders Agreement" means the Stockholders and Voting
Agreement to be executed and delivered pursuant to Section 2.4(e)
hereto by the Company, Anadarko, the
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<PAGE> 12
Oliver Companies, Energy Spectrum and Chesapeake at the Closing, in
substantially the form attached as Exhibit G hereto.
"Taxes" means all Taxes, charges, fees, levies or other
assessments (including, but not limited to, income, gross receipts,
excise, property, sales, occupation, use, service use, license,
payroll, franchise, transfer and recording Taxes, fees and charges)
imposed by any Governmental Authority, whether computed on a separate,
consolidated, unitary or combined basis or in any other manner, and
includes any interest, penalties and additions to any Tax.
"Tax Returns" means any return, statement, declaration or
other document relating to Taxes that is required to be filed with any
Governmental Authority.
"Third Party Claims" has the meaning set forth in Section 9.6
hereto.
"Transaction Fees" has the meaning set forth in Section
10.4(a) hereto.
"Transactions" has the meaning set forth in Section 2.4
hereto.
"Weatherford Lease Option" has the meaning set forth in
Section 2.3(h) hereto.
"Weatherford Purchase Option" has the meaning set forth in
Section 2.3(h) hereto.
"Weatherford Storage Yard" means the storage yard located in
Weatherford, Oklahoma that is owned and operated by Anadarko.
ARTICLE II
THE TRANSACTIONS
SECTION 2.1. Closing. The closing of the Transaction
contemplated by this Agreement (the "Closing") shall take place at the offices
of Baker & Botts, L.L.P., 2001 Ross Avenue, Suite 700, Dallas, Texas 75201, at
10:00 A.M., Dallas, Texas time, on December 5, 1996, or such other place and
time or on such other date as the Parties shall mutually agree (the "Closing
Date"). The Closing of the Transactions shall take place simultaneously on the
Closing Date with the satisfaction or waiver of each of the conditions set
forth in Article VII hereof.
SECTION 2.2. Delivery of Master Agreement. Prior to
Closing, each Party hereto shall deliver a duly executed counterpart of this
Agreement to each of the other Parties hereto.
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<PAGE> 13
SECTION 2.3. Formation of The Company.
(a) Formation of Bayard Oklahoma. On October 28,
1996, Anadarko incorporated Bayard Oklahoma as a corporation under the
laws of the State of Oklahoma by filing a certificate of incorporation
for Bayard Oklahoma with the Secretary of State of the State of
Oklahoma, and thereafter organized Bayard Oklahoma in accordance with
Oklahoma law.
(b) Anadarko Capital Contribution. In connection
with the formation of Bayard Oklahoma, and as an initial capital
contribution to Bayard Oklahoma, Anadarko and Bayard Oklahoma executed
and delivered such assignment and assumption agreements and bills of
sale (collectively, the "Anadarko Transfer Agreements") as were
necessary for Anadarko to contribute to Bayard Oklahoma all of the
assets identified on Schedule 2.3(b) hereto. The assets contributed
to Bayard Oklahoma constituted all of the assets utilized by Anadarko
in connection with the operation of its business as of the date
thereof, including all of the Anadarko Existing Drilling Contracts,
but excluding (i) the Weatherford Storage Yard and (ii) cash,
receivables or payables relating to the operations of Anadarko prior
to the effective date of such contributions by Anadarko to Bayard
Oklahoma (collectively, the "Anadarko Assets"). Anadarko contributed
the Anadarko Assets to Bayard Oklahoma pursuant to the Anadarko
Transfer Agreements free and clear of all Liens and unencumbered by
any liabilities other than the Permitted Liens. The effective date
for the contribution of the Anadarko Assets to Bayard Oklahoma
pursuant to the Anadarko Transfer Agreements was deemed to be October
28, 1996. In exchange for the contribution of the Anadarko Assets to
Bayard Oklahoma pursuant to the Anadarko Transfer Agreements, Bayard
Oklahoma issued to Anadarko (i) 1,000 shares of common stock, par
value $1.00 per share (the "Bayard Oklahoma Shares"), of Bayard
Oklahoma, constituting all of the issued and outstanding shares of
capital stock of Bayard Oklahoma and (ii) the Bayard Note.
(c) Bayard Merger -- Bayard Delaware Capital
Structure. Immediately prior to the Closing, Anadarko shall cause
Bayard Oklahoma to be merged with and into Bayard Delaware pursuant to
a statutory merger in which Bayard Delaware shall be the surviving
corporation (the "Bayard Merger"). The Agreement of Merger relating
to the Bayard Merger (the "Bayard Merger Agreement") shall provide,
among other things, that the certificate of incorporation and bylaws
of the surviving corporation shall be those of Bayard Delaware, except
that the name of the surviving corporation shall be changed to be
"Bayard Drilling Technologies, Inc." The certificate of incorporation
(the "Certificate") and the bylaws (the "Bylaws") of Bayard Delaware
are set forth as Exhibits H and I hereto, respectively. The
Certificate shall provide, among other things, that the initial
capital structure of Bayard Delaware shall consist of:
(i) 10,000,000 authorized shares of common
stock, par value $0.01 per share ("Common Stock"), and
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<PAGE> 14
(ii) 2,000,000 authorized shares of
preferred stock, par value $0.01 per share ("Preferred Stock").
(d) Bayard Merger -- Conversion of Bayard
Oklahoma Shares. Pursuant to the terms of the Bayard Merger
Agreement, in the Bayard Merger each of the issued and outstanding
Bayard Oklahoma Shares will be canceled and converted into the right
to receive 1,000 shares of Common Stock, with the effect that all of
the Bayard Oklahoma Shares taken together will be converted into the
right to receive an aggregate of 1,000,000 shares of Common Stock.
(e) Oliver Transfers. At the Closing, each of
the Oliver Companies and the Company shall execute and deliver such
bills of sale (collectively, the "Oliver Transfer Agreements"), each
substantially in the form attached as Exhibit J hereto, respectively,
as are necessary for the Oliver Companies to convey, transfer and
deliver to the Company all of the assets identified on Schedule 2.3(e)
hereto and owned by them respectively (the "Oliver Assets"), free and
clear of all Liens and unencumbered by any liabilities of any kind or
character. In consideration of the conveyance, transfer and delivery
of the Oliver Assets, the Company shall (i) issue (A) 200,000 shares
of Common Stock to Oliver Drilling, (B) 200,000 shares of Common Stock
to Mullen Energy, (C) 160,000 shares of Common Stock to Grupo and (D)
240,000 shares of Common Stock to M-O Partnership (collectively, the
"Oliver Shares"), and (ii) grant a "put" option to the Oliver
Companies, the terms and conditions of which are set forth in Section
2.3(f) hereto. The transactions contemplated by this Section 2.3(e)
shall be referred to herein as the "Oliver Transfers."
(f) Oliver Put Options. The "put" rights set
forth in this paragraph (f) shall become effective upon the Closing.
Unless the Company completes an IPO on or prior to June 2, 1998, then
the Oliver Companies shall have the right, exercisable by delivery of
written notice to the Company at any time after June 2, 1998 and prior
to July 2, 1998, to request that the Company purchase all, but not
less than all, of the Oliver Shares. Within 90 days after receipt by
the Company of such notice, the Company shall elect, in its
discretion, whether to (i) repurchase all of the Oliver Shares for an
aggregate purchase price of $12,000,000 ($15 per share) or (ii) to
issue to the Oliver Companies in satisfaction of the put rights an
aggregate of 200,000 additional shares of Common Stock, and shall give
written notice of its election to the Oliver Companies. If the
Company elects to purchase the shares, the Company shall purchase the
shares and the Oliver Companies will deliver the certificates
representing such shares within 30 days after the Company delivers
notice of its election. If the Company elects to satisfy the put
right by issuing additional shares, the additional shares will be
issued within 10 days after the Company delivers notice of its
election. The repurchase of shares shall be made from funds legally
available therefor. If the put right is not exercised within the
period provided above, the rights set forth in this Section 2.3(f)
shall expire and be of no further force or effect.
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<PAGE> 15
(g) Energy Spectrum Stock Purchase. At the
Closing, Energy Spectrum shall purchase from the Company, and the
Company shall issue and sell to Energy Spectrum, 1,000,000 shares of
Common Stock for an aggregate purchase price of $10 million in cash.
The Company will use a portion of such funds to repay the Bayard Note
at Closing.
(h) Weatherford Options.
(i) Effective upon the Closing, the Company
shall have a transferrable option, exercisable upon delivery
of written notice to Anadarko at any time after the Closing
and prior to June 30, 1998, to purchase from Anadarko, and
Anadarko shall be required to sell to the Company, the
Weatherford Storage Yard for a purchase price of $1,000 in
cash (the "Weatherford Purchase Option"). If the Company
exercises the Weatherford Purchase Option pursuant to this
Section 2.3(h)(i), each of the Company and Anadarko shall
execute and deliver, within 30 days after the Company delivers
its notice of exercise to Anadarko, such assignment and
assumption agreements and bills of sale as are necessary for
Anadarko to sell, convey, transfer and deliver good and
marketable title in and to the Weatherford Storage Yard to the
Company, free and clear of all Liens. The Weatherford
Purchase Option shall be transferrable at the option of the
Company upon 30 days written notice to Anadarko. If the
Weatherford Purchase Option is not exercised within the period
provided above, the rights set forth in this Section 2.3(h)(i)
shall expire and be of no further force and effect.
(ii) Effective upon the Closing, the Company
shall have an option, exercisable upon delivery of written
notice to Anadarko at any time after the Closing and prior to
June 30, 1998, to lease from Anadarko for such period as the
Company may specify in its written notice, and Anadarko shall
be required to so lease to the Company, the Weatherford
Storage Yard for a lease price of $100 per year (or portion
thereof as specified in the Company's notice) (the
"Weatherford Lease Option"). If the Company exercises the
Weatherford Lease Option pursuant to this Section 2.3(h)(ii),
each of the Company and Anadarko shall execute and deliver,
within 30 days after the Company delivers its notice of
exercise to Anadarko, a lease agreement and such other
agreements, instruments, certificates and other documents as
are necessary to convey, transfer and deliver a leasehold
interest in the Weatherford Storage Yard; provided, however,
that any lease agreement entered into by the Company and
Anadarko pursuant to this Section 2.3(h)(ii) shall expire no
later than the earlier to occur of (i) December 31, 1999 or
(ii) the exercise by the Company of the Weatherford Purchase
Option. The terms and provisions of any lease agreement
entered into by the Company and Anadarko pursuant to this
Section 2.3(h)(ii) shall provide, among other things, that
Anadarko shall have the right, during the term of such lease
agreement, to continue operations at the Weatherford Storage
Yard in a manner consistent with the ordinary course of
business and the past practices of Anadarko at the Weatherford
Storage Yard; provided, however, that any
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<PAGE> 16
continuing operations of Anadarko do not interfere with or
otherwise interrupt the operations of the Company, the
Anadarko Assets or the Oliver Assets at the Weatherford
Storage Yard. The Parties acknowledge that Affiliates of
Anadarko have in the past, and will during the term of any
lease hereunder, share in the use of the Weatherford Storage
Yard. Accordingly, the Parties agree that during any lease
term expenses incurred with respect to the maintenance and
operation of the Weatherford Storage Yard will be allocated
and borne by the Company, Anadarko and Anadarko's Affiliates
using the facility based upon the relative use thereof by them
and in a manner consistent with Anadarko's past practice. If
the Weatherford Lease Option is not exercised within the
period provided above, the rights set forth above in this
Section 2.3(h)(ii) shall expire and be of no further force or
effect.
SECTION 2.4. Related Agreements. To effect the
transactions contemplated by this Agreement (the "Transactions"), at the
Closing the Parties shall enter into the agreements (the "Related Agreements")
referred to below in this Section 2.4.
(a) Master Drilling Agreement. On the Closing
Date, Chesapeake, Chesapeake Operating Inc., a subsidiary of
Chesapeake ("Chesapeake Operating"), and the Company shall execute and
deliver the Master Drilling Agreement pursuant to which the parties
thereto shall set forth certain governing terms and conditions of the
Chesapeake Drilling Agreements. The terms and provisions of the
Master Drilling Agreement shall provide, among other things, that
Chesapeake shall guarantee the performance of Chesapeake Operating
under the Master Drilling Agreement and each Chesapeake Drilling
Agreement.
(b) Chesapeake Drilling Agreements. At the
Closing or as soon as practicable after the Closing, Chesapeake
Operating and the Company shall enter into six separate Chesapeake
Drilling Agreements pursuant to which Chesapeake Operating shall agree
to employ each of the drilling rigs identified on Schedule 2.4(b)
hereto in accordance with the terms thereof and the terms of the
Master Drilling Agreement.
(c) Chesapeake Option Agreement. On the Closing
Date, Chesapeake and the Company shall execute and deliver the
Chesapeake Option Agreement pursuant to which the Company shall grant
to Chesapeake an option to purchase 1,000,000 shares of Common Stock
at a purchase price of $12 per share, subject to the terms and
conditions thereof.
(d) Stockholders Agreement. On the Closing Date,
each of the Parties hereto, except AnSon, shall execute and deliver
the Stockholders Agreement.
(e) Registration Rights Agreement. On the
Closing Date, each of the Parties hereto, except AnSon, shall execute
and deliver the Registration Rights Agreement.
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<PAGE> 17
(f) New Credit Agreement. On the Closing Date,
the Company shall enter into the New Credit Agreement.
SECTION 2.5. Further Assurance. Each of the Parties
hereto hereby agrees that from time to time after Closing each of them shall
execute, deliver, acknowledge, file and record, or cause to be executed,
delivered, acknowledged, filed and recorded, such further agreements,
instruments, certificates and other documents as may be required in order to
consummate the Transactions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY, ANSON AND ANADARKO
The Company, AnSon and Anadarko hereby jointly and severally
represent and warrant to each of the other Parties hereto as of the date
hereof, and as of the Closing Date, as follows:
SECTION 3.1. Organization and Authority.
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the state of
its incorporation, and has all requisite corporate power and authority
to own and operate its assets and properties and conduct its business
and operations as presently being conducted.
(b) AnSon is a limited partnership duly organized
and validly existing under the laws of the State of Oklahoma and has
all requisite power and authority as a limited partnership to own
general partnership interests in, and to act as a general partner of,
Anadarko and to otherwise direct the operations and take actions on
behalf of Anadarko with respect to the Transactions. Upon the request
of any Party hereto, AnSon shall furnish to such Party a true, correct
and complete copy of its agreement of limited partnership, as amended
to the date hereof.
(c) Anadarko is a general partnership duly
organized and validly existing under the laws of the State of Oklahoma
and has all requisite power and authority as a general partnership to
own and operate the Anadarko Assets owned and/or operated by it.
Anadarko has furnished to each of the other Parties hereto a true,
correct and complete copy of its partnership agreement, as amended to
the date hereof.
(d) The statements set forth in Sections 2.3(a)
and 2.3(b) hereof are true and correct.
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SECTION 3.2. Authority; Binding Effect.
(a) The Company has all requisite power and
authority to enter into this Agreement and each of the Related
Agreements to which the Company is a party (the "Bayard Agreements"),
to perform its obligations hereunder and thereunder and to consummate
the Transactions contemplated hereby and thereby. The execution and
delivery by the Company of this Agreement and each of the Bayard
Agreements, the performance by the Company of its obligations
hereunder and thereunder and the consummation by the Company of the
Transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate and other action on the
part of the Company. This Agreement and the Bayard Agreements have
been duly executed and delivered by the Company and constitute legal,
valid and binding agreements of the Company, enforceable against the
Company in accordance with each of their respective terms, except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar
laws affecting creditors' rights generally or by general principles of
equity.
(b) AnSon has all requisite power and authority
to enter into this Agreement, to perform its obligations hereunder and
to consummate the Transactions contemplated hereby. The execution and
delivery by AnSon of this Agreement, the performance by AnSon of its
obligations hereunder and the consummation by AnSon of the
Transactions contemplated hereby have been duly and validly authorized
by all necessary partnership and other action on the part of AnSon.
This Agreement has been duly executed and delivered by AnSon and
constitutes a legal, valid and binding agreement of AnSon, enforceable
against AnSon in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar
laws affecting creditors' rights generally or by general principles of
equity.
(c) Anadarko has all requisite power and
authority to enter into this Agreement and each of the Related
Agreements to which Anadarko is a party (the "Anadarko Agreements"),
to perform its obligations hereunder and thereunder and to consummate
the Transactions contemplated hereby and thereby. The execution and
delivery by Anadarko of this Agreement and each of the Anadarko
Agreements, the performance by Anadarko of its obligations hereunder
and thereunder and the consummation by Anadarko of the Transactions
contemplated hereby and thereby have been duly and validly authorized
by all necessary partnership and other action on the part of Anadarko.
This Agreement and the Anadarko Agreements have been duly executed and
delivered by Anadarko and constitute legal, valid and binding
agreements of Anadarko, enforceable against Anadarko in accordance
with each of their respective terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting creditors'
rights generally or by general principles of equity.
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SECTION 3.3. Absence of Conflicts.
(a) The execution and delivery by the Company of
this Agreement and the Bayard Agreements, the performance by the
Company of its obligations hereunder and thereunder and the
consummation of the Transactions contemplated hereby and thereby will
not (i) conflict with, or result in any violation or breach of, any
provision of the certificate of incorporation or bylaws of the
Company, (ii) conflict with, or result in any violation or breach of,
constitute a default under, give rise to any right of termination or
acceleration (with or without notice or the lapse of time or both)
pursuant to, or result in being declared void, voidable or without
further effect, any term or provision of any material note, bond,
mortgage, indenture, lease, franchise, permit, license, Contract or
other agreement, instrument or document to which the Company is a
party or by which the Anadarko Assets may be bound, (iii) require the
Company to obtain any consent, approval, permit, notice, action,
authorization or waiver (each a "Consent") of or file with or give
notice to any Governmental Authority or any other Person not a party
to this Agreement or any of the Bayard Agreements, (iv) conflict with,
or result in any violation of, any material law, ordinance, statute,
rule or regulation of any Governmental Authority known to be
applicable to the business of the Company or the operations of the
Anadarko Assets or any order, writ, injunction, judgment or decree of
any court, arbitrator or government authority applicable to the
Company or the Anadarko Assets, or (v) result in the creation of, or
impose on the Company the obligation to create, any Lien upon the
Anadarko Assets.
(b) The execution and delivery by AnSon of this
Agreement, the performance by AnSon of its obligations hereunder and
the consummation of the Transactions contemplated hereby will not (i)
conflict with, or result in any violation or breach of, any provision
of the agreement of limited partnership of AnSon, (ii) conflict with,
or result in any violation or breach of, constitute a default under,
give rise to any right of termination or acceleration (with or without
notice or the lapse of time or both) pursuant to, or result in being
declared void, voidable or without further effect, any term or
provision of any material note, bond, mortgage, indenture, lease,
franchise, permit, license, Contract or other agreement, instrument or
document to which AnSon is a party or by which the Anadarko Assets may
be bound, (iii) require AnSon to obtain any Consent of or file with or
give notice to any Governmental Authority or any other Person not a
party to this Agreement or any of the AnSon Agreements, (iv) conflict
with, or result in any violation of, any material law, ordinance,
statute, rule or regulation of any Governmental Authority known to be
applicable to the business of AnSon or the operations of the Anadarko
Assets or any order, writ, injunction, judgment or decree of any
court, arbitrator or government authority applicable to AnSon or the
Anadarko Assets, or (v) result in the creation of, or impose on AnSon
the obligation to create, any Lien upon the Anadarko Assets.
(c) The execution and delivery by Anadarko of
this Agreement and the Anadarko Agreements, the performance by
Anadarko of its obligations hereunder and thereunder and the
consummation of the Transactions contemplated hereby and thereby will
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not (i) conflict with, or result in any violation or breach of, any
provision of the partnership agreement of Anadarko, (ii) conflict
with, or result in any violation or breach of, constitute a default
under, give rise to any right of termination or acceleration (with or
without notice or the lapse of time or both) pursuant to, or result in
being declared void, voidable or without further effect, any term or
provision of any material note, bond, mortgage, indenture, lease,
franchise, permit, license, Contract or other agreement, instrument or
document to which Anadarko is a party or by which the Anadarko Assets
may be bound, (iii) require Anadarko to obtain any Consent of or file
with or give notice to any Governmental Authority or any other Person
not a party to this Agreement or any of the Anadarko Agreements, (iv)
conflict with, or result in any violation of, any material law,
ordinance, statute, rule or regulation of any Governmental Authority
known to Anadarko to be applicable to the business of Anadarko or the
operations of the Anadarko Assets or any order, writ, injunction,
judgment or decree of any court, arbitrator or government authority
applicable to Anadarko or the Anadarko Assets, or (v) result in the
creation of, or impose on Anadarko the obligation to create, any Lien
upon the Anadarko Assets.
SECTION 3.4. Title to Anadarko Assets and Bayard Oklahoma
Shares. The Company has good and marketable title to the Anadarko Assets,
free and clear of all Liens and unencumbered by any liabilities of any kind or
character other than Permitted Liens. Except with respect to the Permitted
Liens, there are no leases, surface or subsurface use agreements, tenancy
arrangements, service contracts, management contracts, or other agreements,
instruments or encumbrances in force or effect which grant to any Person any
right, title, interest or benefit in or to all or any part of the Anadarko
Assets, or any right relating to the ownership, use, operation, management,
maintenance or repair of all or any part of the Anadarko Assets, and no Person
has any rights to acquire all or any part of the Anadarko Assets, other than
rights to use rigs pursuant to the drilling contracts identified on Schedule
3.4 hereto (the "Anadarko Existing Drilling Contracts"). There are no third
parties in possession of all or any portion of the Anadarko Assets, tenants in
sufferance, trespassers, wrongful possessors or otherwise. Anadarko has good
and marketable title to all of the Bayard Oklahoma Shares, free and clear of
all Liens and unencumbered by any liabilities, claims or restrictions on
transfer or other title defects. Upon the effectiveness of the Bayard Merger,
Anadarko will have good and marketable title to all of the shares of Common
Stock to be received by it in respect of the Bayard Merger, free and clear of
all Liens and unencumbered by any liabilities, claims or restrictions on
transfer or other title defects.
SECTION 3.5. Conduct of Business. Since December 31,
1995, other than the contribution of the Anadarko Assets by Anadarko to Bayard
Oklahoma as described in Section 2.3(b) hereof, there has not been (i) any
material adverse change in the business, operations, affairs, condition
(financial or otherwise), results of operations, properties, assets or
liabilities, of Anadarko or, since such contribution, of the Company, (ii) any
sale, assignment or disposition of any of the Anadarko Assets of any kind or
character, except for personal property sold, assigned or disposed of in the
ordinary course of Anadarko's or the Company's business and consistent with its
past practice and custom, (iii) any material damage, destruction or loss
(whether or not insured against) affecting the Anadarko Assets, (iv) except as
contemplated by this Agreement, any revocation or
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termination, or any notice of any threatened revocation or termination, of any
Consents relating to the operation of the Anadarko Assets, (v) any material
change or any anticipated change in the present relationships between Anadarko,
AnSon or the Company and any of their significant suppliers, insurers, lessors,
licensors, licensees and distributors with respect to the Anadarko Assets, or
(vi) any other material transaction other than in the ordinary course of
Anadarko's or the Company's business and consistent with its past practice and
custom.
SECTION 3.6. Solvency. Each of AnSon and Anadarko is
able to pay its respective debts as they become due, has capital sufficient to
carry on its business as presently conducted and proposed to be conducted, owns
property which has both a fair value and a fair saleable value in excess of the
amount required to pay its respective debts as they become due and is solvent
in all other respects. Each of AnSon and Anadarko has not been and will not be
rendered insolvent by the consummation of the Transactions contemplated by this
Agreement, the Bayard Merger Agreement, any of the Anadarko Transfer
Agreements, or any of the Anadarko Agreements, and following the consummation
of such Transactions, each of AnSon and Anadarko will be able to pay its
respective debts as they become due, will have capital sufficient to carry on
its business as then conducted and proposed to be conducted, and will own
property which has a fair value and a fair saleable value in excess of the
amount required to pay its respective debts as they become due.
SECTION 3.7. Assets Necessary to Business; Effect of
Transfer. The Anadarko Assets were sufficient in all material respects to
carry on the business and operations conducted by Anadarko prior to the
contribution of the such assets to Bayard Oklahoma as described in Section
2.3(b) hereof and continue to be sufficient in all material respects to carry
on the business and operations conducted by the Company. Except for Rig 15,
which is currently being refurbished, the Anadarko Assets are fit for the
purposes for which they are being used by the Company and for which they were
being used by Anadarko prior to the contribution of such assets to Bayard
Oklahoma as described in Section 2.3(b) hereof. The Anadarko Assets are in all
material respects in good operating condition and repair, ordinary wear and
tear excepted and, to the knowledge of AnSon, Anadarko and the Company, conform
in all material respects to all applicable laws relating to their use and
operation. The Company is possession of all material licenses, permits,
consents, approvals and other authorizations that, to the knowledge of AnSon,
Anadarko or the Company are required by any Governmental Authority in
connection with the ownership and operation of the Anadarko Assets or the
conduct of the business and operations of the Company. The consummation of the
Transactions contemplated hereby will not deprive the Company of the benefits
of any material properties included in the Anadarko Assets or any rights or
interests relating thereto, or result in the imposition of any debts,
liabilities or obligations on the Company.
SECTION 3.8. Litigation. There is no action, suit,
inquiry, investigation or other proceeding pending against or, to the knowledge
of AnSon, Anadarko or the Company, threatened against or affecting Anadarko,
the Company or the Anadarko Assets in any court or before any arbitrator or any
foreign or United States federal, state or local Governmental Authority (i) in
which an adverse decision could, either in any single case or in the aggregate,
have a material adverse effect on the business of the Company or the operations
of the Anadarko Assets, or (ii) which in any
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manner draws into question the validity of or otherwise affects (A) the
contribution of the Anadarko Assets to Bayard Oklahoma by Anadarko as described
in Section 2.3(b) hereof, (B) this Agreement, or (C) the Bayard Merger
Agreement or any Anadarko Agreements or Bayard Agreements, (D) the ability of
AnSon, Anadarko or the Company to perform their respective obligations
hereunder and thereunder, or (E) the consummation of the Transactions
contemplated hereby and thereby.
SECTION 3.9. Taxes.
(a) Each of AnSon, Anadarko and the Company has
filed, or will file in a timely manner with the appropriate
Governmental Authority, all Tax Returns relating to the Anadarko
Assets or the operations of the Anadarko Assets which are required to
be filed on or before the Closing Date, and each such Tax Return has
been or will be prepared in compliance in all material respects with
all applicable laws and regulations.
(b) Each of AnSon, Anadarko and the Company has
paid, or will pay on the applicable due date, all Taxes relating to
the Anadarko Assets or the operations of the Anadarko Assets which are
due and payable or accrued and not yet payable on or before the
Closing Date, including without limitation, all Taxes shown to be due
on such returns or pursuant to any assessment received by AnSon or
Anadarko from any Taxing authority, except such Taxes, if any, as are
being contested in good faith by appropriate proceedings diligently
conducted.
(c) There are no claims for Taxes pending against
AnSon, Anadarko or the Company with respect to (i) the business of
Anadarko as conducted prior to the contribution of the Anadarko Assets
to Bayard Oklahoma as described in Section 2.3(b) hereof, or the
operations of the Anadarko Assets prior to such contribution, or (ii)
the business of the Company following such contribution, or the
operations of the Anadarko Assets by the Company following such
contribution, nor to the knowledge of AnSon, Anadarko or the Company,
any threatened claims for Tax deficiencies against AnSon, Anadarko or
the Company for which the Anadarko Assets could be liable, and AnSon,
Anadarko and the Company do not know of any basis for such claims.
(d) There exist no actual or, to the knowledge of
AnSon, Anadarko or the Company, proposed additional assessments or
adjustments of Taxes by any Taxing authority for which the Anadarko
Assets could be liable.
(e) There are no pending audits, actions,
proceedings, disputes, claims or, to the knowledge of AnSon, Anadarko
or the Company, investigations with respect to any Taxes payable by or
asserted against AnSon, Anadarko or the Company with respect to (i)
the business of Anadarko prior to the contribution of the Anadarko
Assets to Bayard Oklahoma as described in Section 2.3(b) hereof, or
the operations of the Anadarko Assets by Anadarko prior to such
contribution, or (ii) the business of the Company following such
contribution, or the operations of the Anadarko Assets by the Company
following such
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<PAGE> 23
contribution, and, to the knowledge of AnSon, Anadarko or the Company,
there is no basis on which any such claim for material Taxes can be
asserted against AnSon, Anadarko, the Company or the Anadarko Assets.
AnSon, Anadarko or the Company have not received notice from any
Governmental Authority of its intent to examine or audit any Tax
Returns of AnSon, Anadarko or the Company with respect to (i) the
business of Anadarko prior to the contribution of the Anadarko Assets
to Bayard Oklahoma as described in Section 2.3(b) hereof, or the
operations of the Anadarko Assets by Anadarko prior to such
contribution, or (ii) the business of the Company following such
contribution, or the operations of the Anadarko Assets by the Company
following such contribution
(f) There are no proposed reassessments of the
Taxable value of any of the Anadarko Assets or similar matters pending
with respect to any Taxing authority.
(g) There are no outstanding agreements or
waivers that would extend the statutory period in which a Taxing
authority may assess or collect a Tax against AnSon, Anadarko or the
Company for which the Anadarko Assets could be liable.
(h) Except for the United States of America and
the States of Oklahoma and Texas, there are no other jurisdictions in
which income or franchise Tax Returns and reports, and returns and
reports relating to the payment of Tax based upon the ownership or use
of property therein or the derivation of income therefrom or measured
by premiums or investments in tangible or intangible property, were,
or were required to be, filed by AnSon, Anadarko or the Company with
respect to the Anadarko Assets or the operations of the Anadarko
Assets.
SECTION 3.10. Environmental Compliance.
(a) AnSon, Anadarko and the Company are not
subject to any existing, pending or, to the knowledge of AnSon,
Anadarko or the Company, threatened action, suit, investigation,
inquiry or proceeding by any Governmental Authority under, and are not
currently in violation of, or subject to, any remedial obligation
under, any Environmental Law.
(b) All material environmental notices, permits,
licenses or similar authorizations, if any, required to be obtained or
filed in connection with the operations of the Anadarko Assets have
been obtained or filed.
(c) Harmful Substances have not been disposed of
on, to or from any of the Anadarko Assets during the time of ownership
or possession of the Anadarko Assets by AnSon, Anadarko or the Company
and the operation of the Anadarko Assets by such Parties or, to the
knowledge of AnSon, Anadarko or the Company, prior thereto, except in
compliance with Environmental Laws in effect at the time such activity
was undertaken.
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(d) No Harmful Substances have been generated,
managed, treated or transported to or from the Anadarko Assets, except
in compliance with Environmental Laws at the time such activity was
undertaken.
(e) No underground storage tanks currently exist
or, to the knowledge of AnSon, Anadarko or the Company, have existed
on the Anadarko Assets. The Parties hereto acknowledge that Anadarko
maintains underground storage tanks at the Weatherford Storage Yard
and that AnSon and Anadarko make no representation or warranty
pursuant to this Section 3.10(e) with respect to such property.
(f) During the time the Anadarko Assets have been
occupied by AnSon, Anadarko or the Company, there has not been a
release of Harmful Substances into, onto or out of the land occupied
by the Anadarko Assets, except in compliance with Environmental Laws
at the time such activity was undertaken.
(g) AnSon, Anadarko and the Company are not a
party, whether as a direct signatory or as successor, assignee or
third party beneficiary, or otherwise bound, to any lease or other
Contract relating to the Anadarko Assets under which AnSon, Anadarko
or the Company is obligated by or entitled to the benefits of,
directly or indirectly, any representation, warranty, indemnification,
covenant, restriction or other undertaking concerning a release of
Harmful Substances or non-compliance with Environmental Laws.
SECTION 3.11. Employee Matters.
(a) Employee Benefit Plans. Except as set
forth on Schedule 3.11 hereto, Anadarko does not maintain any
compensation or other employee benefit plans, including any employee
benefit plan as defined in Section 3(3) of ERISA, any supplemental
pension, life and dependent life, accidental death and health
insurance (including medical, dental and vision), hospitalization,
savings, bonus, deferred compensation, incentive compensation, tax
preparation assistance and equalization, employee assistance, fringe
benefit or other employee benefit plans, Contracts, policies or
practices providing employee or executive compensation or benefits
with respect to the business of Anadarko or the operation of the
Anadarko Assets.
(b) Employees. Prior to the Closing, the
Company will not employ any employees, but will be managed by and
under the direction of the employees of AnSon and Anadarko as
contemplated by Section 8.9 hereof.
SECTION 3.12. Defects. There are no material defects in
any of the Anadarko Assets which would impair the use or operation of such
assets; provided, however, that the Parties hereto acknowledge that Rig 15 is
being refurbished and is not currently operational.
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SECTION 3.13. Books and Records. The books and records of
Anadarko, AnSon and the Company fairly reflect in all material respects the
transactions to which the Anadarko Assets are or were bound, and such books and
records are and have been properly kept and maintained, with the revenues,
expenses, assets and liabilities of Anadarko, AnSon and the Company accurately
recorded in all material respects therein on the accrual basis of accounting
prepared in accordance with United States generally accepted accounting
principles. True, complete and correct copies of such books and records (i)
have been made available by Anadarko, AnSon and the Company for review by the
other Parties hereto, (ii) will be delivered to the Company at Closing and
(iii) constitute part of the Anadarko Assets.
SECTION 3.14. Government Authorizations and Filings. There
is no requirement applicable to AnSon, Anadarko or the Company to obtain any
consent, approval or authorization of, or to make or effect any declaration,
filing or registration with, any Governmental Authority for the valid execution
and delivery by AnSon, Anadarko or the Company of this Agreement or any of the
Anadarko Agreements or Bayard Agreements, the due performance by each of AnSon,
Anadarko and the Company of its respective obligations hereunder and thereunder
or the lawful consummation of the Transactions contemplated hereby or thereby.
SECTION 3.15. Brokers, Finders, etc. All negotiations
relating to this Agreement, the Anadarko Agreements and the Bayard Agreements,
and the Transactions contemplated hereby and thereby, have been carried on
without the intervention of any Person acting on behalf of AnSon, Anadarko or
the Company in such manner as to give rise to a valid claim against any of the
Parties hereto for any broker's or finder's commission. AnSon and Anadarko
shall jointly and severally indemnify each of the other Parties hereto from and
against any and all liabilities and obligations arising as a result of anyone
claiming a commission, finder's fee or other payment for services rendered as a
broker or finder on behalf of AnSon, Anadarko or the Company in connection with
the Transactions contemplated hereby.
SECTION 3.16. Investment Intent.
(a) Anadarko is acquiring shares of Common Stock
for its own account, for investment purposes only and not with a view
to resale or any other distribution thereof, in whole or in part.
Anadarko acknowledges and agrees that it may not assign, sell,
hypothecate or otherwise transfer shares of Common Stock unless (i)
(A) a registration statement is in effect under the Securities Act,
with respect to the sale or other distribution of such shares of
Common Stock, or (B) a written opinion of counsel acceptable to the
Company is obtained to the effect that no such registration is
required, and (ii) except in the case of publicly traded shares of
Common Stock, the transferee is an "accredited investor" as that term
is defined in Rule 501 of Regulation D under the Securities Act. Each
of AnSon and Anadarko have no reason to anticipate any change in its
respective circumstances, financial or otherwise, that would cause or
require any sale or distribution of the shares of Common Stock to be
acquired by Anadarko pursuant to the terms of this Agreement.
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(b) AnSon and Anadarko acknowledge, agree and are
aware that (i) an investment in the Common Stock involves a high
degree of risk and that each of AnSon and Anadarko may lose the entire
amount of its respective investment in such stock; (ii) no United
States federal or state or any foreign agency has passed upon the
accuracy, validity or completeness of this Agreement or made any
finding or determination as to the fairness of an investment in the
Common Stock; (iii) shares of Common Stock are illiquid, and AnSon and
Anadarko must bear the economic risk of investment in the Common Stock
for an indefinite period of time; (iv) this Agreement and the
Stockholders Agreement contain substantial restrictions on the
transferability of the Common Stock; (v) there is no existing public
or other market for the Common Stock, and therefore, there can be no
assurance that AnSon or Anadarko will be able to sell or dispose of
its shares of Common Stock; (vi) the Common Stock has not been
registered under the Securities Act or under the securities laws of
any other jurisdiction, including the states of the United States, and
the Company is under no obligation to register or qualify the Common
Stock or any of its securities for resale by AnSon or Anadarko or
assist AnSon or Anadarko in complying with any exemption under the
Securities Act or the securities laws of any such jurisdiction or any
other jurisdiction, except as provided in the Registration Rights
Agreement; (vii) an offer or sale of shares of Common Stock by AnSon
or Anadarko in the absence of registration under the Securities Act
will require the availability of an exemption thereunder; (viii) a
restrictive legend, in substantially the form set forth in Section
10.7 hereof, shall be placed on the certificates representing shares
of Common Stock; and (ix) a notation shall be made in the appropriate
records of the Company indicating that such shares of Common Stock are
subject to restrictions on transfer.
(c) AnSon and Anadarko qualify as "accredited
investors" within the meaning of Rule 501 of Regulation D under the
Securities Act.
SECTION 3.17. Financial Statements. The audited balance
sheets as of December 31, 1994 and 1995 and the audited statements of income
and statements of cash flows for the years ended December 31, 1993, 1994 and
1995 which are attached as Schedule 3.16 hereto, fairly present in all
material respects the financial position, results of operations and cash flows
of Anadarko for such twelve-month periods and contain no material inaccuracies.
Such statements were prepared in conformity with United States generally
accepted accounting principles, except as noted therein. AnSon and Anadarko
shall provide the Company with audited financial statements of similar scope
and prepared consistently for the period from January 1, 1996 through the
Closing Date with respect to Anadarko and the Company within 90 days after the
Closing Date.
SECTION 3.18. Disclosure. Neither this Agreement nor any
certificate, instrument or written statement furnished to any of the other
Parties hereto by or on behalf of AnSon, Anadarko or the Company contains an
untrue statement of material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading.
There is no fact which AnSon, Anadarko or the Company has not disclosed to each
of the other Parties hereto and of which any such Party is aware which
materially and adversely affects or which could
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reasonably be expected to materially and adversely affect the
business, financial condition, prospects, operations, property or
affairs of the Company as proposed to be conducted or the ability of
AnSon, Anadarko or the Company to perform their respective obligations
hereunder or under the Anadarko Agreements or the Bayard Agreements.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE OLIVER COMPANIES
The Oliver Companies hereby jointly and severally represent
and warrant to each of the other Parties hereto as of the date hereof, and as
of the Closing Date, as follows:
SECTION 4.1. Organization and Authority.
(a) Each of Oliver Drilling and Mullen Energy is
a corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation, and each such company
has all requisite corporate power and authority to own and operate its
assets and properties and conduct its business and operations as
presently being conducted.
(b) Each of Grupo and M-O Partnership is a
limited partnership duly organized and validly existing under the laws
of the State of Texas, and each such limited partnership has all
requisite power and authority to own and operate its assets and
properties and conduct its business and operations as presently being
conducted.
SECTION 4.2. Authority; Binding Effect. Each of the
Oliver Companies has all requisite power and authority to enter into this
Agreement and each of the Related Agreements to which each such company or
limited partnership is a party (the "Oliver Agreements"), to perform its
respective obligations hereunder and thereunder and to consummate the
Transactions contemplated hereby and thereby. The execution and delivery by
each of the Oliver Companies of this Agreement and each of the Oliver
Agreements, the performance by each of the Oliver Companies of its respective
obligations hereunder and thereunder and the consummation by each of the Oliver
Companies of the Transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate, partnership and other
action, as applicable, on the part of each of the Oliver Companies. This
Agreement and the Oliver Agreements have been duly executed and delivered by
each of the Oliver Companies and constitute legal, valid and binding agreements
of each of the Oliver Companies, enforceable against each of the Oliver
Companies in accordance with each of their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws affecting creditors'
rights generally or by general principles of equity.
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SECTION 4.3. Absence of Conflicts. The execution and
delivery by each of the Oliver Companies of this Agreement and the Oliver
Agreements, the performance by each of the Oliver Companies of its respective
obligations hereunder and thereunder and the consummation of the Transactions
contemplated hereby and thereby will not (i) conflict with, or result in any
violation or breach of, any provision of the certificate or articles of
incorporation or bylaws of either of Oliver Drilling or Mullen Energy, (ii)
conflict with, or result in any violation or breach of, any provision of the
limited partnership agreement of either of Grupo or M-O Partnership, (iii)
conflict with, or result in any violation or breach of, constitute a default
under, give rise to any right of termination or acceleration (with or without
notice or the lapse of time or both) pursuant to, or result in being declared
void, voidable or without further effect, any term or provision of any material
note, bond, mortgage, indenture, lease, franchise, permit, license, Contract or
other agreement, instrument or document to which any of the Oliver Companies is
a party or by which the Oliver Assets may be bound, (iv) require any of the
Oliver Companies to obtain any Consent of or file with or give notice to any
Governmental Authority or any other Person not a party to this Agreement or any
of the Oliver Agreements, (v) conflict with, or result in any violation of, any
material law, ordinance, statute, rule or regulation of any Governmental
Authority known to be applicable to the business of any of the Oliver Companies
or the operations of the Oliver Assets or any order, writ, injunction, judgment
or decree of any court, arbitrator or Governmental Authority applicable to any
of the Oliver Companies or the Oliver Assets, or (vi) result in the creation
of, or impose on any of the Oliver Companies the obligation to create, any Lien
upon the Oliver Assets.
SECTION 4.4. Title to Oliver Assets. Each of the Oliver
Companies has good and marketable title to the Oliver Assets owned by such
company or limited partnership, free and clear of all Liens and unencumbered by
any liabilities of any kind or character. There are no leases, surface or
subsurface use agreements, tenancy arrangements, service contracts, management
contracts, or other agreements, instruments or encumbrances in force or effect
which grant to any Person any right, title, interest or benefit in or to all or
any part of the Oliver Assets, or any right relating to the ownership, use,
operation, management, maintenance or repair of all or any part of the Oliver
Assets, and no Person has any rights to acquire all or any part of the Oliver
Assets. There are no third parties in possession of all or any portion of the
Oliver Assets, tenants in sufferance, trespassers, wrongful possessors or
otherwise.
SECTION 4.5. Effect of Transfer. The consummation of the
Transactions contemplated hereby will not deprive the Company of the benefits
of any material properties included in the Oliver Assets or any rights or
interests relating thereto, or result in the imposition of any debts,
liabilities or obligations on the Company.
SECTION 4.6. Litigation. There is no action, suit,
inquiry, investigation or other proceeding pending against or, to the knowledge
of the Oliver Companies, threatened against or affecting the Oliver Companies
or the Oliver Assets in any court or before any arbitrator or any foreign or
United States federal, state or local Governmental Authority (i) in which an
adverse decision could, either in any single case or in the aggregate, have a
material adverse effect on the business of the Oliver Companies or the
operations of the Oliver Assets, or (ii) which in any manner
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draws into question the validity of or otherwise affects (A) this Agreement,
the Oliver Transfer Agreements or the Oliver Agreements, the ability of each of
the Oliver Companies to perform its respective obligations hereunder and
thereunder, or the consummation of the Transactions contemplated hereby and
thereby.
SECTION 4.7. Taxes.
(a) Each of the Oliver Companies has filed, or
will file in a timely manner with the appropriate Governmental
Authority, all Tax Returns relating to the Oliver Assets or the
operations of the Oliver Assets which are required to be filed on or
before the Closing Date, and each such Tax Return has been or will be
prepared in compliance in all material respects with all applicable
laws and regulations.
(b) Each of the Oliver Companies has paid, or
will pay on the applicable due date, all Taxes relating to the Oliver
Assets or the operations of the Oliver Assets which are due and
payable or accrued and not yet payable on or before the Closing Date,
including without limitation, all Taxes shown to be due on such
returns or pursuant to any assessment received by any of the Oliver
Companies from any Taxing authority, except such Taxes, if any, as are
being contested in good faith by appropriate proceedings diligently
conducted.
(c) There are no claims for Taxes pending against
any of the Oliver Companies with respect to the business of the Oliver
Companies or the operations of the Oliver Assets by the Oliver
Companies, nor to the knowledge of any of the Oliver Companies, any
threatened claims for Tax deficiencies against any of the Oliver
Companies for which the Oliver Assets could be liable, and the Oliver
Companies do not know of any basis for such claims.
(d) There exist no actual or, to the knowledge of
the Oliver Companies, proposed additional assessments or adjustments
of Taxes by any Taxing authority for which the Oliver Assets could be
liable.
(e) There are no pending audits, actions,
proceedings, disputes, claims or, to the knowledge of the Oliver
Companies, investigations with respect to any Taxes payable by or
asserted against any of the Oliver Companies with respect to (i) the
business of the Oliver Companies or the operations of the Oliver
Assets by the Oliver Companies and, to the knowledge of the Oliver
Companies, there is no basis on which any such claim for material
Taxes can be asserted against any of the Oliver Companies or the
Oliver Assets. The Oliver Companies have not received notice from any
Governmental Authority of its intent to examine or audit any Tax
Returns of any of the Oliver Companies with respect to (i) the
business of the Oliver Companies or the operations of the Oliver
Assets by the Oliver Companies.
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(f) There are no proposed reassessments of the
Taxable value of any of the Oliver Assets or similar matters pending
with respect to any Taxing authority.
(g) There are no outstanding agreements or
waivers that would extend the statutory period in which a Taxing
authority may assess or collect a Tax against any of the Oliver
Companies for which the Oliver Assets could be liable.
(h) Except for the United States of America and
the States of Oklahoma and Texas, there are no other jurisdictions in
which income or franchise Tax Returns and reports, and returns and
reports relating to the payment of Tax based upon the ownership or use
of property therein or the derivation of income therefrom or measured
by premiums or investments in tangible or intangible property, were,
or were required to be, filed by any of the Oliver Companies with
respect to the Oliver Assets or the operations of the Oliver Assets.
(i) Each of the Oliver Companies that is a
corporation has been subject to a valid and effective election (a
"Subchapter S Election") to be an S corporation, within the meaning of
section 1361(a)(1) of the Code from the date of incorporation thereof
to the date hereof, and such Subchapter S Election has not been
terminated (within the meaning of section 1362(d) of the Code) at any
time prior to the date hereof.
SECTION 4.8 Defects. The Oliver Assets include all of
the equipment made available to the Parties for inspection and, since the date
the Oliver Assets were so inspected by any of the Parties hereto, there has
been no material change in any of the Oliver Assets. None of the Oliver
Companies or their stockholders or general partners, as applicable, have any
current actual knowledge of any material latent defect in any of the Oliver
Assets.
SECTION 4.9. Government Authorizations and Filings.
There is no requirement applicable to the Oliver Companies to obtain any
consent, approval or authorization of, or to make or effect any declaration,
filing or registration with, any Governmental Authority for the valid execution
and delivery by the Oliver Companies of this Agreement or any of the Oliver
Transfer Agreements or Oliver Agreements, the due performance by each of the
Oliver Companies of its respective obligations hereunder and thereunder or the
lawful consummation of the Transactions contemplated hereby or thereby.
SECTION 4.10. Brokers, Finders, etc. All negotiations
relating to this Agreement, the Oliver Transfer Agreements and the Oliver
Agreements, and the Transactions contemplated hereby and thereby, have been
carried on without the intervention of any Person acting on behalf of the
Oliver Companies in such manner as to give rise to a valid claim against any of
the Parties hereto for any broker's or finder's commission. The Oliver
Companies shall jointly and severally indemnify each of the other Parties
hereto from and against any and all liabilities and obligations arising as a
result of anyone claiming a commission, finder's fee or other payment for
services rendered as a
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broker or finder on behalf of any of the Oliver Companies in connection with
the Transactions contemplated hereby.
SECTION 4.11. Investment Intent.
(a) Each of the Oliver Companies is acquiring
shares of Common Stock for its own account, for investment purposes
only and not with a view to resale or any other distribution thereof,
in whole or in part. Each of the Oliver Companies acknowledges and
agrees that it may not assign, sell, hypothecate or otherwise transfer
shares of Common Stock unless (i) (A) a registration statement is in
effect under the Securities Act with respect to the sale or other
distribution of such shares of Common Stock, or (B) a written opinion
of counsel acceptable to the Company is obtained to the effect that no
such registration is required, and (ii) except in the case of publicly
traded shares of Common Stock, the transferee is an "accredited
investor" as that term is defined in Rule 501 of Regulation D under
the Securities Act. Each of the Oliver Companies have no reason to
anticipate any change in its respective circumstances, financial or
otherwise, that would cause or require any sale or distribution of the
shares of Common Stock to be acquired by the Oliver Companies pursuant
to the terms of this Agreement.
(b) Each of the Oliver Companies acknowledge,
agree and are aware that (i) an investment in the Common Stock
involves a high degree of risk and that each of the Oliver Companies
may lose the entire amount of its respective investment in such stock;
(ii) no United States federal or state or any foreign agency has
passed upon the accuracy, validity or completeness of this Agreement
or made any finding or determination as to the fairness of an
investment in the Common Stock; (iii) shares of Common Stock are
illiquid, and each of the Oliver Companies must bear the economic risk
of investment in the Common Stock for an indefinite period of time;
(iv) this Agreement and the Stockholders Agreement contain substantial
restrictions on the transferability of the Common Stock; (v) there is
no existing public or other market for the Common Stock, and
therefore, there can be no assurance that any of the Oliver Companies
will be able to sell or dispose of its shares of Common Stock; (vi)
the Common Stock has not been registered under the Securities Act or
under the securities laws of any other jurisdiction, including the
states of the United States, and the Company is under no obligation to
register or qualify the Common Stock or any of its securities for
resale by any of the Oliver Companies or assist the Oliver Companies
in complying with any exemption under the Securities Act or the
securities laws of any such jurisdiction or any other jurisdiction,
except as provided in the Registration Rights Agreement; (vii) an
offer or sale of shares of Common Stock by any of the Oliver Companies
in the absence of registration under the Securities Act will require
the availability of an exemption thereunder; (viii) a restrictive
legend, in substantially the form set forth in Section 10.7 hereof,
shall be placed on the certificates representing shares of Common
Stock; and (ix) a notation shall be made in the appropriate records of
the Company indicating that such shares of Common Stock are subject to
restrictions on transfer.
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(c) The Oliver Companies qualify as "accredited
investors" within the meaning of Rule 501 of Regulation D under the
Securities Act.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF ENERGY SPECTRUM
Energy Spectrum represents and warrants to each of the other
Parties hereto as of the date hereof, and as of the Closing Date, as follows:
SECTION 5.1. Organization and Authority. Energy Spectrum
is a limited partnership duly organized and validly existing under the laws of
the State of Delaware and has all requisite power and authority to own and
operate its assets and properties and conduct its business and operations as
presently being conducted.
SECTION 5.2. Authority; Binding Effect. Energy Spectrum
has all requisite power and authority to enter into this Agreement and the
Related Agreements to which Energy Spectrum is a party (the "Energy Spectrum
Agreements"), to perform its obligations hereunder and thereunder and to
consummate the Transactions contemplated hereby and thereby. The execution and
delivery by Energy Spectrum of this Agreement and each of the Energy Spectrum
Agreements, the performance by Energy Spectrum of its obligations hereunder and
thereunder and the consummation by Energy Spectrum of the Transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary partnership and other action on the part of Energy Spectrum. This
Agreement and the Energy Spectrum Agreements have been duly executed and
delivered by Energy Spectrum and constitute legal, valid and binding agreements
of Energy Spectrum, enforceable against Energy Spectrum in accordance with
their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws affecting creditors' rights generally or by general
principles of equity.
SECTION 5.3. Absence of Conflicts. The execution and
delivery by Energy Spectrum of this Agreement and the Energy Spectrum
Agreements, the performance by Energy Spectrum of its obligations hereunder and
thereunder and the consummation by Energy Spectrum of the Transactions
contemplated hereby and thereby will not (i) conflict with, or result in any
violation or breach of, any provision of the partnership agreement of Energy
Spectrum, (ii) conflict with, or result in any violation or breach of,
constitute a default under, give rise to any right of termination or
acceleration (with or without notice or the lapse of time or both) pursuant to,
or result in being declared void, voidable or without further effect, any term
or provision of any material note, bond, mortgage, indenture, lease, franchise,
permit, license, Contract or other agreement, instrument or document to which
Energy Spectrum is a party or by which its properties or assets are or may be
bound, (iii) require Energy Spectrum to obtain any Consent of or file with or
give notice to any Governmental Authority or any other Person not a party to
this Agreement or any other Energy
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Spectrum Agreements, or (iv) conflict with, or result in any violation of, any
material law, ordinance, statute, rule or regulation of any Governmental
Authority or of any order, writ, injunction, judgment or decree of any court,
arbitrator or Governmental Authority applicable to Energy Spectrum or its
properties or assets.
SECTION 5.4. Governmental Authorizations and Filings.
There is no requirement applicable to Energy Spectrum to obtain any consent,
approval or authorization of, or to make or effect any declaration, filing or
registration with, any Governmental Authority for the valid execution and
delivery by Energy Spectrum of this Agreement or any of the Energy Spectrum
Agreements, the due performance by Energy Spectrum of its obligations hereunder
or thereunder or the lawful consummation by Energy Spectrum of the Transactions
contemplated hereby or thereby.
SECTION 5.5. Brokers, Finders, etc. All negotiations
relating to this Agreement and the Energy Spectrum Agreements, and the
Transactions contemplated hereby and thereby, have been carried on without the
intervention of any Person acting on behalf of Energy Spectrum in such manner
as to give rise to a valid claim against any of the Parties hereto for any
broker's or finder's commission. Energy Spectrum shall indemnify each of the
other Parties hereto from and against any and all liabilities and obligations
arising as a result of anyone claiming a commission, finder's fee or other
payment for services rendered as a broker or finder on behalf of Energy
Spectrum in connection with the Transactions contemplated hereby.
SECTION 5.6. Litigation. There is no action, suit,
inquiry, investigation or other proceeding pending against or, to the knowledge
of Energy Spectrum, threatened against or affecting the properties or assets of
Energy Spectrum in any court or before any arbitrator or any foreign or United
States federal, state or local Governmental Authority which in any manner draws
into question the validity of or otherwise affects this Agreement or any of the
Energy Spectrum Agreements, the ability of Energy Spectrum to perform its
obligations hereunder or thereunder or the consummation of the Transactions
contemplated hereby or thereby.
SECTION 5.7. Investment Intent.
(a) Energy Spectrum is acquiring shares of Common
Stock for its own account, for investment purposes only and not with a
view to resale or any other distribution thereof, in whole or in part.
Energy Spectrum acknowledges and agrees that it may not assign, sell,
hypothecate or otherwise transfer shares of Common Stock unless (i)
(A) a registration statement is in effect under the Securities Act,
with respect to the sale or other distribution of such shares of
Common Stock, or (B) a written opinion of counsel acceptable to the
Company is obtained to the effect that no such registration is
required, and (ii) except in the case of publicly traded shares of
Common Stock, the transferee is an "accredited investor" as that term
is defined in Rule 501 of Regulation D under the Securities Act.
Energy Spectrum has no reason to anticipate any change in its
circumstances, financial or otherwise, that would cause or require any
sale or distribution of the shares of Common Stock to be acquired by
Energy Spectrum pursuant to the terms of this Agreement.
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(b) Energy Spectrum acknowledges, agrees and is
aware that (i) an investment in the Common Stock involves a high
degree of risk and that Energy Spectrum may lose the entire amount of
its investment in such stock; (ii) no United States federal or state
or any foreign agency has passed upon the accuracy, validity or
completeness of this Agreement or made any finding or determination as
to the fairness of an investment in the Common Stock; (iii) shares of
Common Stock are illiquid, and Energy Spectrum must bear the economic
risk of investment in the Common Stock for an indefinite period of
time; (iv) this Agreement and the Stockholders Agreement contain
substantial restrictions on the transferability of the Common Stock;
(v) there is no existing public or other market for the Common Stock,
and therefore, there can be no assurance that Energy Spectrum will be
able to sell or dispose of its shares of Common Stock; (vi) the Common
Stock has not been registered under the Securities Act or under the
securities laws of any other jurisdiction, including the states of the
United States, and the Company is under no obligation to register or
qualify the Common Stock or any of its securities for resale by Energy
Spectrum or assist Energy Spectrum in complying with any exemption
under the Securities Act or the securities laws of any such
jurisdiction or any other jurisdiction, except as provided in the
Registration Rights Agreement; (vii) an offer or sale of shares of
Common Stock by Energy Spectrum in the absence of registration under
the Securities Act will require the availability of an exemption
thereunder; (viii) a restrictive legend, in substantially the form set
forth in Section 10.7 hereof, shall be placed on the certificates
representing shares of Common Stock; and (ix) a notation shall be made
in the appropriate records of the Company indicating that such shares
of Common Stock are subject to restrictions on transfer.
(c) Energy Spectrum qualifies as an "accredited
investor" within the meaning of Rule 501 of Regulation D under the
Securities Act.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF CHESAPEAKE
Chesapeake represents and warrants to each of the other
Parties hereto as of the date hereof, and as of the Closing Date, as follows:
SECTION 6.1. Organization and Authority. Chesapeake is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to own and operate its assets and properties and conduct its business
and operations as presently being conducted.
SECTION 6.2. Authority; Binding Effect. Chesapeake has
all requisite power and authority to enter into this Agreement and the Related
Agreements to which Chesapeake is a party (the "Chesapeake Agreements"), to
perform its obligations hereunder and thereunder and to consummate the
Transactions contemplated hereby and thereby. The execution and delivery by
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Chesapeake of this Agreement and each of the Chesapeake Agreements, the
performance by Chesapeake of its obligations hereunder and thereunder and the
consummation by Chesapeake of the Transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate and other
action on the part of Chesapeake. This Agreement and the Chesapeake Agreements
have been duly executed and delivered by Chesapeake and constitute legal, valid
and binding agreements of Chesapeake, enforceable against Chesapeake in
accordance with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws affecting creditors' rights generally or by
general principles of equity.
SECTION 6.3. Absence of Conflicts. The execution and
delivery by Chesapeake of this Agreement and the Chesapeake Agreements, the
performance by Chesapeake of its obligations hereunder and thereunder and the
consummation by Chesapeake of the Transactions contemplated hereby and thereby
will not (i) conflict with, or result in any violation or breach of, any
provision of the certificate of incorporation or bylaws of Chesapeake, (ii)
conflict with, or result in any violation or breach of, constitute a default
under, give rise to any right of termination or acceleration (with or without
notice or the lapse of time or both) pursuant to, or result in being declared
void, voidable or without further effect, any term or provision of any material
note, bond, mortgage, indenture, lease, franchise, permit, license, Contract or
other agreement, instrument or document to which Chesapeake is a party or by
which its properties or assets are or may be bound, (iii) require Chesapeake to
obtain any Consent of or file with or give notice to any Governmental Authority
or any other Person not a party to this Agreement or any other Chesapeake
Agreements, or (iv) conflict with, or result in any violation of, any material
law, ordinance, statute, rule or regulation of any Governmental Authority or of
any order, writ, injunction, judgment or decree of any court, arbitrator or
Governmental Authority applicable to Chesapeake or its properties or assets.
SECTION 6.4. Governmental Authorizations and Filings.
There is no requirement applicable to Chesapeake to obtain any consent,
approval or authorization of, or to make or effect any declaration, filing or
registration with, any Governmental Authority for the valid execution and
delivery by Chesapeake of this Agreement or any of the Chesapeake Agreements,
the due performance by Chesapeake of its obligations hereunder or thereunder or
the lawful consummation by Chesapeake of the Transactions contemplated hereby
or thereby.
SECTION 6.5. Brokers, Finders, etc. All negotiations
relating to this Agreement and the Chesapeake Agreements, and the Transactions
contemplated hereby and thereby, have been carried on without the intervention
of any Person acting on behalf of Chesapeake in such manner as to give rise to
a valid claim against any of the Parties hereto for any broker's or finder's
commission. Chesapeake shall indemnify each of the other Parties hereto from
and against any and all liabilities and obligations arising as a result of
anyone claiming a commission, finder's fee or other payment for services
rendered as a broker or finder on behalf of Chesapeake in connection with the
Transactions contemplated hereby.
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SECTION 6.6. Litigation. There is no action, suit,
inquiry, investigation or other proceeding pending against or, to the knowledge
of Chesapeake, threatened against or affecting the properties or assets of
Chesapeake in any court or before any arbitrator or any foreign or United
States federal, state or local Governmental Authority which in any manner draws
into question the validity of or otherwise affects this Agreement or any of the
Chesapeake Agreements, the ability of Chesapeake to perform its obligations
hereunder or thereunder or the consummation of the Transactions contemplated
hereby or thereby.
ARTICLE VII
CONDITIONS TO THE CLOSING
SECTION 7.1. General Conditions Precedent. The
obligations of each of the Parties hereto at the Closing are subject to the
satisfaction on or prior to the Closing Date of the conditions set forth below,
provided, however, that the obligations of each respective Party hereto shall
not be subject to the satisfaction of any of the following conditions insofar
as any such condition relates to the performance by such Party of any acts or
the compliance with, or delivery of, any agreement, instrument, certificate or
other document by such Party (including for purposes of this Section 7.1 (i)
the Company, AnSon and Anadarko as one Party and (ii) the Oliver Companies as
one Party):
(a) Each of the other Parties hereto shall have
taken all necessary action to approve and adopt this Agreement and
each of the Related Agreements to which each such Party is a party,
and to authorize the performance of its respective obligations
hereunder and thereunder and the consummation of the Transactions
contemplated hereby and thereby, and each Party shall have received a
certificate from an appropriate duly authorized officer of each of the
other Parties hereto, each dated as of the Closing Date, certifying to
the foregoing effect as to itself.
(b) Each of the other Parties hereto shall have
performed and complied in all material respects with all agreements
required by this Agreement to be performed and complied with by each
of such Parties at or prior to the Closing Date, and each Party hereto
shall have received a certificate from an appropriate duly authorized
officer of each of the other Parties hereto, each dated as of the
Closing Date, certifying to the foregoing effect as to itself.
(c) The Bayard Merger shall have become effective
and the Company shall be a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware and
the Parties hereto shall have received a certified copy of the
Certificate from the Office of the Secretary of State of the State of
Delaware dated within three days of the Closing Date, certifying to
the foregoing effect.
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(d) Anadarko shall have received a stock
certificate or certificates representing the 1,000,000 shares of
Common Stock to be received by Anadarko in connection with the Bayard
Merger as described in Section 2.3(c) and 2.3(d) hereof.
(e) The Oliver Companies shall have conveyed,
transferred and delivered the Oliver Assets to the Company as
described in Section 2.3(e) hereof and the Oliver Companies shall have
received a stock certificate or certificates representing the 800,000
shares of Common Stock to be received by the Oliver Companies from the
Company pursuant to Section 2.3(e) hereof.
(f) Energy Spectrum shall have purchased Common
Stock from the Company for $10,000,000 pursuant to Section 2.3(g)
hereof and Energy Spectrum shall have received a stock certificate or
certificates representing the 1,000,000 shares of Common Stock so
purchased by Energy Spectrum.
(g) All required notices shall have been given
and filings made, and, as the case may be, applicable waiting periods
shall have expired without adverse action by, or favorable orders,
consents, and approvals in the form required to consummate the
Transactions contemplated hereby shall have been received from, all
necessary Governmental Authorities and third parties.
(h) The Transactions contemplated hereby shall
have been effectuated in compliance with all applicable federal and
state securities laws and the issuance of the shares of Common Stock
to each of the Parties hereto shall have been exempt from registration
under the Securities Act, and shall have been exempt from registration
or qualification under state securities or Blue Sky laws where
applicable.
(i) Other than suits to enforce this Agreement or
any of the Related Agreements, no action or proceeding shall have been
instituted or threatened, and no injunction, writ, temporary
restraining order or any other order of any nature issued by a court
or other Governmental Authority of competent jurisdiction shall have
been issued, for the purpose or with the possible effect of enjoining
or preventing the consummation of this Agreement or any of the Related
Agreements, the performance by each of the Parties hereto of its
respective obligations hereunder or thereunder or the consummation of
the Transactions contemplated hereby or thereby.
(j) The representations and warranties of each of
the other Parties hereto set forth in Articles III, IV, and VI,
respectively, hereof shall be true and correct in all material
respects as of the Closing Date, with the same effect as though such
representations and warranties had been made by each of the other
Parties hereto on and as of the Closing Date, and each of the Parties
hereto shall have received a certificate from an appropriate duly
authorized officer of each of the other Parties hereto, each dated as
of the Closing Date, certifying to the foregoing effect as to itself.
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(k) The Bayard Note shall be repaid in full from
cash received by the Company from the sale of Common Stock to Energy
Spectrum pursuant to Section 2.3(g) hereof at the Closing.
(l) At the Closing, each of the Parties hereto
shall deliver, or cause to be delivered, each of the following
agreements to which each such Party is a party, duly executed by each
such Party thereto:
(i) the Oliver Transfer Agreements;
(ii) the Master Drilling Agreement;
(iii) the Chesapeake Option Agreement;
(iv) the Stockholders Agreement;
(v) the Registration Rights Agreement; and
(vi) the New Credit Agreement.
(m) At the Closing, each of the Parties hereto
shall deliver or cause to be delivered, the following additional
documents which are applicable to itself:
(i) such documents as any other Party
hereto shall reasonably request relating to the due
organization and valid existence of such Party under the laws
of its jurisdiction of organization; the authority of such
Party to enter into this Agreement and any Related Agreements
and any other matters relevant hereto and thereto, all in form
and substance reasonably satisfactory to the Party or Parties
making such request;
(ii) Evidence satisfactory to each of
the Parties hereto that as of the Closing the Anadarko Assets
are free and clear of all Liens and encumbrances of any kind
or character, and that all Permitted Liens have been released
in full and are of no further force or effect;
(iii) Evidence satisfactory to each of the
Parties hereto that as of the Closing the Oliver Assets are
free and clear of all Liens and encumbrances of any kind or
character;
(n) At the Closing, each of the Parties hereto
shall receive the following opinions of legal counsel to the other
Parties:
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(i) an opinion of Gable Gotwals Mock
Schwabe, counsel to AnSon and Anadarko, substantially in the
form attached as Exhibit K hereto;
(ii) an opinion of Novakov, Davidson &
Flynn, A Professional Corporation, counsel to the Oliver
Companies, substantially in the form attached as Exhibit L
hereto;
(iii) an opinion of Baker & Botts, L.L.P.,
counsel to Energy Spectrum, substantially in the form attached
as Exhibit M hereto; and
(iv) an opinion of the general counsel of
Chesapeake, substantially in the form attached as Exhibit N
hereto;
each such opinion may incorporate such reliance, assumptions, qualifications
and limitations as are customary and reasonable for transactions which are
similar to the Transactions contemplated hereby.
SECTION 7.2. Additional Conditions Precedent of Energy
Spectrum. The obligations of Energy Spectrum at the Closing are subject to the
satisfaction on or prior to the Closing Date of the additional conditions set
forth below:
(a) The due diligence conducted by Energy
Spectrum and its advisors, accountants and legal counsel in connection
with the Transactions contemplated hereby shall not have caused Energy
Spectrum to become aware of any facts relating to (i) the business,
liabilities, financial condition, results of operations, or affairs of
Anadarko, any of the Oliver Companies or the Company, or (ii) the
Anadarko Assets or the Oliver Assets, which in the good faith judgment
of Energy Spectrum makes it inadvisable for Energy Spectrum to proceed
with the Transactions contemplated hereby.
(b) The due diligence conducted by Energy
Spectrum and its advisors and legal counsel in connection with the
Transactions contemplated hereby shall not have caused Energy Spectrum
to become aware of any violation or alleged violation by AnSon,
Anadarko, any of the Oliver Companies or the Company, or any act,
omission, event, or circumstance which, in the good faith judgment of
Energy Spectrum, may constitute or serve as a basis for a material
violation by AnSon, Anadarko, any of the Oliver Companies or the
Company, of any applicable federal or state law, rule, or regulation
pertaining to health or the environment which, in the good faith
judgment of Energy Spectrum, could cause a material adverse effect on
the business or performance of Anadarko, any of the Oliver Companies
and/or the Company or the operations of either of the Anadarko Assets
or the Oliver Assets.
(c) There shall not have occurred any material
casualty or damage (whether or not insured) to any of the Anadarko
Assets or the Oliver Assets, and the business
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of Anadarko and the Company shall have been conducted only in the
ordinary course consistent with its past practice, and Energy Spectrum
shall have received a certificate from a duly authorized officer of
(i) the general partner of AnSon, (ii) the managing partner of
Anadarko, (iii) each of the Oliver Companies, and (iv) the Company,
each dated as of the Closing Date, certifying to the foregoing effect
as to itself.
SECTION 7.3. Additional Conditions Precedent of the Oliver
Companies. The obligations of the Oliver Companies at the Closing are subject
to the satisfaction on or prior to the Closing Date of the additional
conditions set forth below:
(a) The due diligence conducted by the Oliver
Companies and their advisors, accountants and legal counsel in
connection with the Transactions contemplated hereby shall not have
caused the Oliver Companies to become aware of any facts relating to
(i) the business, liabilities, financial condition, results of
operations, or affairs of Anadarko or the Company, or (ii) the
Anadarko Assets, which in the good faith judgment of the Oliver
Companies makes it inadvisable for the Oliver Companies to proceed
with the Transactions contemplated hereby.
(b) The due diligence conducted by the Oliver
Companies and their advisors and legal counsel in connection with the
Transactions contemplated hereby shall not have caused the Oliver
Companies to become aware of any violation or alleged violation by
AnSon, Anadarko or the Company, or any act, omission, event, or
circumstance which, in the good faith judgment of the Oliver
Companies, may constitute or serve as a basis for a material violation
by AnSon, Anadarko or the Company, of any applicable federal or state
law, rule, or regulation pertaining to health or the environment
which, in the good faith judgment of the Oliver Companies, could cause
a material adverse effect on the business or performance of Anadarko
and/or the Company or the operations of the Anadarko Assets.
(c) There shall not have occurred any material
casualty or damage (whether or not insured) to any of the Anadarko
Assets, and the business of Anadarko and the Company shall have been
conducted only in the ordinary course consistent with its past
practice, and the Oliver Companies shall have received a certificate
from a duly authorized officer of (i) the general partner of AnSon,
(ii) the managing partner of Anadarko, and (iii) the Company, each
dated as of the Closing Date, certifying to the foregoing effect as to
itself.
ARTICLE VIII
CERTAIN COVENANTS AND AGREEMENTS
SECTION 8.1. Energy Spectrum Inspection. From the date
hereof to the Closing, the Company and each of the Oliver Companies shall give
Energy Spectrum and its officers, attorneys, accountants, and representatives
free, full, and complete access during reasonable business hours to the
Anadarko Assets and the Oliver Assets as Energy Spectrum may deem
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necessary or appropriate; provided, however, that such due diligence review
shall not unreasonably interfere with the operations by the Company or the
Oliver Companies of the Anadarko Assets or the Oliver Assets, respectively.
AnSon, Anadarko, the Oliver Companies and the Company shall provide Energy
Spectrum and its officers, attorneys, accountants and representatives with any
information reasonably requested by them pertaining to the operations of, the
income derived from and the expenses associated with the Anadarko Assets and
the Oliver Assets.
SECTION 8.2. Oliver Companies Inspection. From the date
hereof to the Closing, the Company shall give the Oliver Companies and their
officers, attorneys, accountants, and representatives free, full, and complete
access during reasonable business hours to the Anadarko Assets as the Oliver
Companies may deem necessary or appropriate; provided, however, that such due
diligence review shall not unreasonably interfere with the operations by the
Company of the Anadarko Assets. AnSon, Anadarko and the Company shall provide
the Oliver Companies and their officers, attorneys, accountants and
representatives with any information reasonably requested by them pertaining to
the operations of, the income derived from and the expenses associated with the
Anadarko Assets.
SECTION 8.3. Compliance. From the date hereof to the
Closing, each of the Parties hereto shall not take or fail to take any action
which action or failure to take such action shall cause the representations and
warranties made by each such Party herein to be untrue or incorrect as of the
Closing Date.
SECTION 8.4. Satisfaction of All Conditions Precedent.
From the date hereof to the Closing, each of the Parties hereto shall use its
reasonable best efforts to cause all conditions precedent set forth in Article
VII hereof to be satisfied by the Closing.
SECTION 8.5. Material Developments. From the date hereof
to the Closing, AnSon, Anadarko, the Oliver Companies and the Company shall
notify each of the other Parties hereto of any material problems or
developments with respect to the business of the Company or Anadarko, or the
condition of the Anadarko Assets or the Oliver Assets, of which AnSon,
Anadarko, the Oliver Companies and/or the Company shall have or obtain
knowledge.
SECTION 8.6. Notice of Breach. From the date hereof to
the Closing, each of the Parties hereto, immediately upon becoming aware
thereof, shall give detailed written notice to each of the other Parties hereto
of the occurrence of, or the impending or threatened occurrence of, any event
which would cause or constitute a breach, or would have caused or constituted a
breach had such event occurred or been known to any such Party prior to the
date of this Agreement, of any of its respective covenants, agreements,
representations, or warranties contained or referred to herein or in any
document delivered in accordance with the terms hereof.
SECTION 8.7. Notice of Litigation. From the date hereof
to the Closing, immediately upon becoming aware thereof, each of the Parties
hereto shall notify each of the other Parties hereto of (i) any suit, action,
or proceeding to which any such Party is named as a party or
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which is threatened against any such Party in writing to the extent such suit,
action or proceeding relating to this Agreement or any of the Related
Agreements or affecting the consummation of the transactions contemplated
hereby and thereby, (ii) any order or decree or any complaint praying for an
order or decree restraining or enjoining the consummation of this Agreement or
any of the Related Agreements or consummation of the Transactions contemplated
hereby and thereby, or (iii) any notice from any tribunal of its intention to
institute an investigation into, or to institute a suit or proceeding to
restrain or enjoin the consummation of, this Agreement or any of the Related
Agreements or the Transactions contemplated hereby and thereby or to nullify or
render ineffective this Agreement or any of the Related Agreement or any such
Transactions contemplated hereby or thereby if consummated.
SECTION 8.8. Continuation of Insurance Coverage. From
the date hereof to the Closing, the Company shall keep in full force and effect
insurance coverage for the Anadarko Assets in the same amount and scope of
coverage maintained with respect to the Anadarko Assets as of the date hereof.
From the date hereof to the Closing, each of the Oliver Companies shall keep in
full force and effect insurance coverage for the Oliver Assets in the same
amount and scope of coverage maintained with respect to the Oliver Assets as of
the date hereof.
SECTION 8.9. Interim Operations.
(a) From the date hereof to the Closing, AnSon
and Anadarko shall conduct the business and affairs of the Company and
the operation of the Anadarko Assets in the ordinary course consistent
with the past practice of AnSon and Anadarko with respect to the
business of Anadarko and the operations of the Anadarko Assets, and
shall not, unless Energy Spectrum and the Oliver Companies (acting
through Oliver Drilling) shall give their prior written approval, (i)
sell, pledge, dispose of, or encumber, or agree to sell, pledge,
dispose of, or encumber, any of the Anadarko Assets except in the
ordinary course of its business, or (ii) make any material acquisition
or capital expenditure, or commit to make any such acquisition or
expenditure, with respect to the business or operations of the Company
or the Anadarko Assets if the amount of any such acquisition or
expenditure, or the aggregate amount of all related acquisitions and
expenditures, exceeds $10,000.
(b) The Company shall reimburse AnSon and
Anadarko for the entire cost of any capital asset that is acquired or
other capital expenditure that is made by AnSon and Anadarko in the
ordinary course and consistent with the past practices of AnSon and
Anadarko for and on behalf of the Company after November 1, 1996 and
until the Closing Date, whether or not the written consent of Energy
Spectrum was or is required therefor pursuant to Section 8.9(a)
hereof; provided, however, that the assets acquired pursuant to such
acquisition or capital expenditure (i) will be of continuing benefit
to or in the business of the Company and (ii) will remain a capital
asset of the Company after the Closing Date. The Company shall not be
required to reimburse AnSon and Anadarko for non-capital expenses
incurred by AnSon and Anadarko for and on behalf of the Company after
November 1, 1996 and prior to the Closing Date in the ordinary course
of the business of the
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<PAGE> 43
Company or the operation of the Anadarko Assets, including without
limitation, maintenance and repair expenses, employee costs and the
other types of services referenced in Section 8.10(a) hereof.
(c) From the date hereof to the Closing, AnSon,
Anadarko and the Company shall use their reasonable best efforts to
maintain the Anadarko Assets in their present operating condition and
repair, ordinary wear and tear excepted.
(d) From the date hereof to the Closing, the
Oliver Companies shall not, unless each of the other Parties hereto
shall give its prior written approval, sell, pledge, dispose of, or
encumber, or agree to sell, pledge, dispose of, or encumber, any of
the Oliver Assets.
(e) From the date hereof to the Closing, the
Oliver Companies shall use their reasonable best efforts to maintain
the Oliver Assets in their present operating condition and repair,
ordinary wear and tear excepted.
SECTION 8.10. Management Services Agreement.
(a) Operating and Administrative Services.
From and after the Closing Date and until December 31, 1996, AnSon and
Anadarko shall continue to make available to the Company its employees
to conduct the operations of the Company, the Anadarko Assets and the
Oliver Assets, all on behalf of the Company and under the management
and supervision of the officers of the Company; provided, however,
that AnSon and Anadarko shall (i) maintain such employees under their
respective employ, (ii) continue to pay the wages and/or salaries of
such employees, (iii) continue to provide employee benefits and other
insurance benefits to such employees, and (iv) file all necessary tax
returns on Form W-2 with the United States Internal Revenue Service
for such employees, all in a manner consistent with the ordinary
course of business and the past practices of AnSon and Anadarko. In
addition, from and after the Closing Date and until December 31, 1996,
Anadarko shall make available to the Company certain office space and
administrative equipment for purposes of conducting the administrative
operations of the Company, the Anadarko Assets and the Oliver Assets,
including without limitation, (i) 1500-2000 square feet of office
space, (ii) a conference room, (iii) a reception area, (iv) an
employee break room, (v) computer systems, related computer networks
and network printers, (vi) phone systems (excluding basic phone bill
and local and long distance charges), (vii) fax machines (including
fax paper) and (viii) copiers. At the request of the Board of
Directors of the Company, after December 31, 1996 and until such later
date as is reasonably requested by the Company, Anadarko shall
continue to make available its employees, office space and
administrative equipment pursuant to this Section 8.10 under
substantially the same terms and conditions set forth in this Section
8.10.
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(b) Compensation. As compensation for the
employees, office space and administrative equipment to be provided by
AnSon and Anadarko to the Company pursuant to this Section 8.10, the
Company shall pay AnSon and Anadarko (i) a base fee of $1.46 per
square foot of space occupied by the Company on a monthly basis, and
(ii) a computer usage fee of $.0062 per unit of use on a monthly basis
and consistent with Anadarko's internal allocation practices.
(c) Employees. Prior to the termination of
Anadarko's obligations under Sections 8.10(a)and 8.10(b) hereof, the
Company shall provide Anadarko with (i) a schedule of Anadarko's
employees to whom the Company intends to offer employment and (ii) an
offer of employment to each such employee. Upon receipt of such
schedule and offers of employment, Anadarko shall notify such
employees of the Company's offer and thereafter terminate the
employment of each such employee that elects to accept the Company's
offer of employment.
SECTION 8.11. Continuing Responsibilities of AnSon and
Anadarko. From the date hereof through the Closing, AnSon and Anadarko shall
cause the Company to comply with the terms of this Agreement and to execute and
deliver the agreements and documents to be delivered by the Company at Closing.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS, WARRANTIES
AND AGREEMENTS; INDEMNIFICATION
SECTION 9.1. Survival of Representations and Agreements.
(a) All representations and warranties contained
in this Agreement, any of the Related Agreements or in any agreement,
instrument, certificate or other document delivered pursuant to this
Agreement shall survive the Closing and the consummation of the
Transactions contemplated hereby and thereby and shall continue in
full force and effect:
(i) for a period of seven years in the
case of the representations and warranties set forth in
Section 3.10 of Article III hereof;
(ii) for a period of three years in the
case of representations and warranties set forth in Sections
3.4, 3.15, 3.17, 4.4, 4.10, 5.5 and 6.5 hereof;
(iii) for a period of one year in the case
of all other representations set forth in Article III, IV, V
and VI hereof; and
(iv) for the comparable periods of time
set forth above in this Section 9.1 in the case of each
representation and warranty (but not covenants)
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<PAGE> 45
set forth in any of the Related Agreements or any other
agreement, instrument, certificate or other document delivered
pursuant to this Agreement, based upon the nature of such
representation and warranty when compared to the most
analogous representation and warranty set forth herein;
provided, however, that all representations and warranties contained
in this Agreement and in any of the Related Agreements or any other
agreement, instrument, certificate or other document delivered
pursuant to this Agreement, shall terminate and be of no further force
or effect upon the consummation of any transaction or transactions
pursuant to which the shares of Common Stock and Common Stock
Equivalents owned by each of (i) Energy Spectrum and (ii) the Oliver
Companies (taken as a whole) constitute, in the aggregate, less than
5% of the issued and outstanding capital stock of the Company.
(b) Each covenant and agreement set forth in this
Agreement or in any of the Related Agreement to be performed after the
Closing shall survive the Closing in accordance with its terms. All
representations, warranties, covenants and agreements made or
contained in this Agreement or in any of the Related Agreement or any
other agreement, instrument, certificate or other document delivered
in accordance with this Agreement shall be deemed to be material and
to have been relied upon by the Parties hereto.
SECTION 9.2. Indemnification by AnSon and Anadarko. From
and after the Closing, AnSon and Anadarko shall jointly and severally indemnify
and hold Energy Spectrum, the Oliver Companies and the Company, and each of
their respective directors, officers, general and limited partners, employees,
agents and affiliates, harmless against any and all damages, losses,
deficiencies, liabilities, obligations, commitments, costs or expenses,
including legal and other expenses reasonably incurred in investigating and
defending against the same (collectively, "Liabilities" and each a "Liability")
incurred by Energy Spectrum, the Oliver Companies or the Company resulting from
(i) the breach of any representation or warranty of AnSon, Anadarko or the
Company contained in Article III hereof, or in any AnSon Agreement, Anadarko
Agreement or Bayard Agreement, (ii) any breach of any agreement or covenant of
AnSon, Anadarko or the Company (but in the case of the Company, only with
respect to agreements or covenants to be performed prior to Closing) contained
in this Agreement or in any AnSon Agreement, Anadarko Agreement or Bayard
Agreement, (iii) the conduct of the business and operations of the Anadarko
Assets on and prior to the Closing (whether by AnSon, Anadarko or the Company),
and (iv) Third Party Claims arising with respect to periods prior to the
Closing, whether as a result of actions or omissions of AnSon, Anadarko or the
Company.
SECTION 9.3. Indemnification by the Oliver Companies.
From and after the Closing, the Oliver Companies shall jointly and severally
indemnify and hold the Company, and its directors, officers, employees, agents
and affiliates, harmless against any and all Liabilities incurred by the
Company resulting from (i) the breach of any representation or warranty of any
of the Oliver Companies contained in Article IV hereof, or in any Oliver
Transfer Agreement or Oliver Agreement, (ii) any breach of any agreement or
covenant of any of the Oliver Companies contained
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in this Agreement or in any Oliver Transfer Agreement or Oliver Agreement, and
(iii) Third Party Claims arising with respect to periods prior to the Closing,
whether as a result of actions or omissions of any of the Oliver Companies.
SECTION 9.4. Indemnification by Energy Spectrum. From
and after the Closing, Energy Spectrum shall indemnify and hold the Company,
and its directors, officers, employees, agents and affiliates, harmless against
any and all Liabilities incurred by the Company resulting from (i) the breach
of any representation or warranty of Energy Spectrum contained in Article V
hereof, or in any Energy Spectrum Agreement, (ii) any breach of any agreement
or covenant of Energy Spectrum contained in this Agreement or in any Energy
Spectrum Agreement, and (iii) Third Party Claims arising with respect to
periods prior to the Closing, whether as a result of actions or omissions of
Energy Spectrum.
SECTION 9.5. Indemnification by Chesapeake. From and
after the Closing, Chesapeake shall indemnify and hold the Company, and its
directors, officers, employees, agents and affiliates, harmless against any and
all Liabilities incurred by the Company resulting from (i) the breach of any
representation or warranty of Chesapeake contained in Article VI hereof, or in
any Chesapeake Agreement, (ii) any breach of any agreement or covenant of
Chesapeake contained in this Agreement or in any Chesapeake Agreement, and
(iii) Third Party Claims arising with respect to periods prior to the Closing,
whether as a result of actions or omissions of Chesapeake.
SECTION 9.6. Indemnification for Third Party Claims. The
following procedures shall be applicable with respect to indemnification for
Claims (as defined below) of third parties or of present or former employees of
any Indemnitor ("Third Party Claims") arising in connection with any provision
of this Agreement.
(a) Promptly after receipt by the party seeking
indemnification hereunder (an "Indemnitee") of written notice of the
assertion or the commencement of any claim, liability or obligation by
a third party, whether by legal process or otherwise (a "Claim"), with
respect to any matter within the scope of Sections 9.2, 9.3, 9.4 and
9.5 hereof, the Indemnitee shall give written notice thereof (the
"Notice") to the Person from whom indemnification is sought pursuant
hereto (the "Indemnitor") and shall thereafter keep the Indemnitor
reasonably informed with respect thereto, provided that the failure of
the Indemnitee to give the Indemnitor prompt notice as provided herein
shall not relieve the Indemnitor of its obligations hereunder unless
such failure results in (i) a default judgment, (ii) the expiration of
the time to answer a complaint or (iii) material prejudice to
Indemnitor's defense of such Claim. In case any such Claim is brought
against any Indemnitee, the Indemnitor shall be entitled to assume the
defense thereof, by written notice of its intention to the Indemnitee
within 30 days after receipt of the Notice, with counsel reasonably
satisfactory to the Indemnitee at the Indemnitor's own expense. If
the Indemnitor shall assume the defense of such Claim, it shall not
settle such Claim without the prior written consent of the Indemnitee,
which consent shall not be unreasonably withheld. Notwithstanding the
assumption by the Indemnitor of the defense of any Claim as provided
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<PAGE> 47
in this Section 9.6, Indemnitee shall be permitted to join in the
defense of such Claim and to employ counsel at its own expense.
(b) If the Indemnitor shall fail to notify the
Indemnitee of its desire to assume the defense of any such Claim
within the prescribed period of time, or shall notify the Indemnitee
that it will not assume the defense of any such Claim, then the
Indemnitee shall assume the defense of any such Claim, in which event
it may do so in such manner as it may deem appropriate, provided that
it shall not settle any Claim which would give rise to the
Indemnitor's liability under Sections 9.2, 9.3, 9.4 and 9.5 hereof, as
the case may be, without the Indemnitor's prior written consent, such
consent not to be unreasonably withheld. The Indemnitor shall be
permitted to join in the defense of such Claim and to employ counsel
at its own expense.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Publicity. None of the Parties hereto
shall issue a press release or make any other public announcement of any sort
relating to this Agreement or the Transactions contemplated hereby or thereby
prior to the Closing; provided however, that the Parties shall be entitled to
make such disclosures as may be required pursuant to applicable law or the
lawful requirement of any Governmental Authority or by order of a court of
competent jurisdiction. The Company shall issue a press release acceptable to
all Parties on the Closing Date concerning this Agreement, the Related
Agreements and the Transactions contemplated hereby and thereby. Without
excluding the right of any other Party to issue a release pursuant to this
Section 10.1, each of the Parties hereto may issue a press release on the
Closing Date concerning this Agreement, any Related Agreements to which such
Party is a party and the Transactions contemplated hereby and thereby;
provided, however, that any press release proposed to be released by such Party
pursuant to this Section 10.1 is distributed to each of the other Parties
hereto prior to any public release of such press release; and provided further,
that such press release is mutually acceptable to each of the Parties hereto.
The Parties hereto acknowledge that any press release concerning the Company,
its business and operations issued after the Closing shall be subject to the
confidentiality provisions set forth in the Stockholders Agreement.
SECTION 10.2. Termination. This Agreement may be
terminated at any time prior to the Closing by:
(a) the mutual consent of all of the Parties
hereto;
(b) AnSon and/or Anadarko upon the failure of any
of the other Parties hereto to perform or comply in all material
respects with any of its respective covenants or agreements contained
herein prior to or at the Closing or if any representation or warranty
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<PAGE> 48
of any of the other Parties hereunder shall not have been true and
correct in all material respects as of the time at which such was
made;
(c) Any of the Oliver Companies, upon the failure
of any of the other Parties hereto to perform or comply in all
material respects with any of its respective covenants or agreements
contained herein prior to or at the Closing or if any representation
or warranty of any of the other Parties hereunder shall not have been
true and correct in all material respects as of the time at which such
was made;
(d) Energy Spectrum upon the failure of any of
the other Parties hereto to perform or comply in all material respects
with any of its respective covenants or agreements contained herein
prior to or at the Closing or if any representation or warranty of any
of the other Parties hereunder shall not have been true and correct in
all material respects as of the time at which such was made;
(e) Chesapeake upon the failure of any of the
other Parties hereto to perform or comply in all material respects
with any of its respective covenants or agreements contained herein
prior to or at the Closing or if any representation or warranty of any
of the other Parties hereunder shall not have been true and correct in
all material respects as of the time at which such was made;
(f) any of the Parties hereto if the Parties
hereto are unable to arrange financing on terms acceptable to all of
the Parties hereto with The CIT Group or another acceptable bank or
financial institution for the purpose of entering into the New Credit
Agreement; and
(g) any of the Parties hereto if the Closing
does not occur by December 31, 1996;
provided however, that no party may terminate this Agreement pursuant to
subsections (b) through (e) above if such party is, at the time of any such
attempted termination, in breach of any term or provision hereof.
SECTION 10.3. Notices. Any notice or other communication
required or permitted hereunder shall be in writing and shall be delivered by
hand, by telex or telecopier, or by certified or registered mail, postage
prepaid and return receipt requested. Notices shall be deemed to have been
given upon delivery, if delivered by hand, three days after mailing, if mailed,
one business day after delivery to the courier, if delivered by overnight
courier service, and upon receipt of an appropriate electronic confirmation, if
by telex or telecopier:
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If to the Company:
Bayard Drilling Technologies, Inc.
Lakepoint Towers
4005 Northwest Expressway
Suite 400E
Oklahoma City, Oklahoma 73116
Attention: James E. Brown
(405) 879-3844
(405) 879-3847 (Fax)
If to AnSon or Anadarko:
AnSon Partners Limited Partnership
Lakepoint Towers
4005 Northwest Expressway
Suite 400E
Oklahoma City, Oklahoma 73116
Attention: Carl B. Anderson, III
(405) 879-3844
(405) 879-3847 (Fax)
If to the Oliver Companies:
R.T. Oliver Drilling, Inc.
6601 S.W. 29th Street
Oklahoma City, Oklahoma 73179
Attention: Roy T. Oliver
(405) 745-4137
(405) 745-4557 (Fax)
and
Mike Mullen Energy Equipment Resource, Inc.
8411 Preston Road
Suite 730, LB2
Dallas, Texas 75225
(214) 692-6690
(214) 692-6101 (Fax)
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and
Grupo de Hercules, Ltd.
Mullen Oliver Partnership, Ltd.
c/o Mullen-Oliver Rig Investments Group, Inc.
8411 Preston Road
Suite 730, LB2
Dallas, Texas 75225
(214) 692-6690
(214) 692-6101 (Fax)
If to Energy Spectrum:
Energy Spectrum Partners LP
5956 Sherry Lane
Suite 600
Dallas, Texas 75225
Attention: Sidney L. Tassin
(214) 373-4080
(214) 373-4334 (Fax)
If to Chesapeake:
Chesapeake Energy Corporation
P.O. Box 18496
Oklahoma City, Oklahoma 73154-0456
Attention: Marcus C. Rowland
(405) 848-8000 Ext. 232
(405) 879-9580 (Fax)
Any Party may from time to time change its address or designee
for notification purposes by giving the other party prior notice in the manner
specified above of the new address or the new designee and the subsequent date
upon which the change shall be effective.
SECTION 10.4. Fees and Expenses.
(a) Fees and Expenses Generally. Each of the
Parties hereto shall be responsible for the payment of all fees and
expenses incurred by each such Party in connection with the pursuit of
the Transactions contemplated hereunder, including the preparation,
negotiation and execution of this Agreement and the Related Agreements
and all documents ancillary thereto ("Transaction Fees"), regardless
of whether the Transactions contemplated hereunder are closed.
Transaction Fees shall include all fees and expenses of each such
Party's legal counsel, accountants and all other third party
consultants and advisors
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<PAGE> 51
engaged by each such Party to assist with the Transactions
contemplated hereunder and all direct out of pocket expenses for
travel and similar matters. Notwithstanding the foregoing, if the
parties hereto fail to close the Transactions contemplated hereunder
for any reason, Energy Spectrum and AnSon shall share equally the
respective Transaction Fees incurred by each of them in connection
with the preparation, negotiation and execution of this Agreement and
the Related Agreements. Notwithstanding the foregoing, Energy
Spectrum shall not be required to reimburse AnSon for any other
accounting or legal fees and expenses incurred by AnSon relating to
general Tax planning and structuring that are not directly
attributable to the formation and incorporation of Bayard Oklahoma as
described in Section 2.3 hereof and the pursuit of the transactions
contemplated hereby.
(b) Reimbursement at the Closing. The Company
shall reimburse Energy Spectrum, AnSon and the Oliver Companies for
all out of pocket expenses reasonably incurred by Energy Spectrum,
AnSon and the Oliver Companies in connection with the Transactions
contemplated hereunder, including without limitation, the reasonable
fees and expenses of legal counsel, accountants and all other third
party consultants and advisors engaged by Energy Spectrum, AnSon or
the Oliver Companies to assist in such Transactions. Notwithstanding
the foregoing, the Company shall not be required to reimburse AnSon
for any other accounting or legal fees and expenses incurred by AnSon
relating to general Tax planning and structuring that are not directly
attributable to the formation and incorporation of Bayard Oklahoma as
described in Section 2.3 hereof. The Company shall reimburse
Chesapeake for all reasonable legal fees and expenses paid to outside
legal counsel in connection with the Transactions contemplated
hereunder. Such reimbursements to Energy Spectrum, AnSon, the Oliver
Companies and Chesapeake shall be due at the Closing, or promptly
following any earlier termination of the Transactions contemplated
hereunder for any reason, including without limitation, any
termination of the Letter of Intent by election of any Investor (as
defined therein).
SECTION 10.5. Energy Spectrum Advisory Fees. In
consideration of the contribution made by Energy Spectrum to the organization
and structuring of the Transactions contemplated hereunder and the arrangement
of financing in connection therewith, at the Closing the Company shall pay a
one-time financial advisory and structuring fee to the general partner of
Energy Spectrum in the amount of $300,000. In addition, in consideration of
the contribution that Energy Spectrum is expected to make to the arrangement,
organization and structuring of any subsequent equity financing of the Company
which is funded by Energy Spectrum, the Company shall pay an advisory and
structuring fee to the general partner of Energy Spectrum in an amount equal to
2% of the equity financing contributed by Energy Spectrum to the Company in
connection with any such equity financing.
SECTION 10.6. Energy Spectrum Right of First Refusal. In
the event that the Company shall desire to raise additional capital through
further equity financing, Energy Spectrum shall have the right to provide the
next $10 million of equity financing to the Company on terms which are or would
be otherwise available to the Company from third parties (the "Right of
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<PAGE> 52
Refusal"), provided however, that the Right of Refusal shall not apply to the
issuance of equity by the Company in exchange for, or to purchase, assets or
operating entities, and provided further, that the Right of Refusal shall not
apply to the issuance of equity by the Company pursuant to employee stock
option plans or in connection with an IPO and shall terminate upon the
consummation of an IPO.
SECTION 10.7. Restrictions on Transfer. Shares of Common
Stock shall not be transferable except upon the conditions specified in this
Section 10.7, which are intended to insure compliance with the provisions of
the Securities Act in respect of the transfer of any such shares.
(a) In addition to any other legend that may be
required by applicable law, each certificate representing shares of
Common Stock, unless otherwise permitted by the provisions of this
Section 10.7, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"ANY SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER
DISPOSITION OF THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED BY, AND THE RIGHTS OF THE HOLDERS OF
SUCH SHARES OF STOCK ARE SUBJECT TO, THE TERMS AND CONDITIONS
CONTAINED IN THAT CERTAIN STOCKHOLDERS AGREEMENT, DATED AS OF
DECEMBER 2, 1996, AS IT MAY BE AMENDED FROM TIME TO TIME,
WHICH IS AVAILABLE FOR EXAMINATION BY HOLDERS OF SHARES OF
COMMON STOCK OF BAYARD DRILLING TECHNOLOGIES, INC. (THE
"COMPANY") AT THE REGISTERED OFFICE OF THE COMPANY. IN
ADDITION TO THE FOREGOING RESTRICTIONS, THESE SHARES OF STOCK
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY UNITED STATES STATE
SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF UNLESS (i) A REGISTRATION STATEMENT IS IN EFFECT
UNDER THE SECURITIES ACT WITH RESPECT TO THE SALE OR OTHER
DISPOSITION OF SUCH SHARES OR A WRITTEN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY IS OBTAINED TO THE EFFECT THAT NO
SUCH REGISTRATION IS REQUIRED AND (ii) EXCEPT IN THE CASE OF
PUBLICLY TRADED SHARES, THE TRANSFEREE IS AN "ACCREDITED
INVESTOR" AS DEFINED IN REGULATION D PROMULGATED UNDER THE
SECURITIES ACT."
The certificates of shares of Common Stock shall also
bear any legend required under any applicable state securities or
"blue sky" laws.
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<PAGE> 53
(b) The holder of shares of Common Stock bearing
the restrictive legend set forth in paragraph (a) above ("Restricted
Shares"), by acceptance thereof, agrees that, unless a registration
statement is in effect under the Securities Act with respect to the
sale or other disposition of such Restricted Shares, prior to any
transfer or attempted transfer of such Restricted Shares, such holder
will give the Company (i) written notice describing the proposed
transfer of any Restricted Shares in reasonable detail, (ii)
certification that the proposed transferee of the Restricted Shares is
an "accredited investor" within the meaning of Rule 501 under the
Securities Act, (iii) such other information about the proposed
transfer of such Restricted Shares or the proposed transferee of such
Restricted Shares as the Company may reasonably request and (iv) an
opinion of counsel reasonably acceptable to the Company to the effect
that the proposed transfer of such Restricted Shares may be effected
without registration of such Restricted Shares under the Securities
Act and applicable United States state securities laws. In addition,
if the holder of the Restricted Shares delivers to the Company an
opinion of counsel that subsequent transfers of such Restricted Shares
will not require registration or qualification under the Securities
Act, the Company shall cause the transfer agent promptly after such
contemplated transfer to deliver new certificates for such Restricted
Shares that do not bear the legend set forth in paragraph (a) above.
If the foregoing conditions entitling the holder to effect a proposed
transfer of such Restricted Shares without registration under the
Securities Act have not been satisfied, the holder shall not transfer
the Restricted Shares, and the Company shall cause the transfer agent
not to transfer such Restricted Shares on its books or issue any
certificates representing such Restricted Shares. Any purported
transfer not in accordance with the terms hereof shall be void ab
initio. The restrictions imposed by this Section 10.7(b) upon the
transferability of any particular Restricted Shares shall cease and
terminate when such Restricted Shares have been sold pursuant to an
effective registration statement under the Securities Act or
transferred pursuant to Rule 144 promulgated under the Securities Act.
The holder of any Restricted Shares as to which such restrictions
shall have terminated shall be entitled to receive from the Company,
without expense, a new certificate representing shares of Common Stock
that does not bear the restrictive legend set forth above and does not
contain any other reference to the restrictions imposed by this
Section 10.7(b). As used in this Section 10.7(b), the term "transfer"
encompasses any sale, transfer, pledge or other disposition of any
shares of Common Stock referred to herein.
SECTION 10.8. Amendment; Waivers. This Agreement may be
amended only by a written instrument duly executed and delivered on behalf of
each of the Parties hereto. Compliance with any term or provision hereof may
be waived only by a written instrument executed by each Party entitled to the
benefits thereof. No failure to exercise any right, power or privilege granted
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege granted hereunder.
SECTION 10.9. Parties in Interest; Assignment. This
Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors, assigns and legal
47
<PAGE> 54
representatives. Neither this Agreement nor any rights or obligations
hereunder may be assigned by any Party, other than to an Affiliate of such
Party, without the prior written consent of each of the other Parties hereto.
SECTION 10.10. No Third Party Beneficiaries. Nothing in
this Agreement is intended or shall be construed to give any person, other than
the Parties hereto, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
SECTION 10.11. Exhibits and Schedules. The Exhibits and
Schedules to this Agreement are a part of this Agreement as if fully set forth
herein. All references herein to Articles, Sections, Exhibits and Schedules
shall be deemed references to such parts of this Agreement, unless the context
shall otherwise require.
SECTION 10.12. Severability. In the event that any one or
more of the terms or provisions contained in this Agreement, the Related
Agreements or in any other agreement, instrument or document referred to herein
shall be held to be invalid, illegal or unenforceable for any reason, the
validity, legality or enforceability of all other terms and provisions of this
Agreement, the Related Agreements or any other such agreement, instrument or
other documents referred to herein shall not be affected.
SECTION 10.13. Headings. The Article and Section headings
in this Agreement are for convenience of reference only, do not constitute a
part of this Agreement and shall limit, extend or otherwise affect the meaning
or interpretation of the terms and provisions of this Agreement.
SECTION 10.14. Rules of Construction.
(a) In this Agreement, unless the context
otherwise requires, words in the singular number or in the plural
number shall each include the singular number and the plural number.
(b) All references herein to dollar amounts are
in United States dollars.
(c) The terms "herein," "hereunder," "hereto" and
similar terms refer to this Agreement generally and not to any one
Article or Section of this Agreement.
SECTION 10.15. Entire Agreement. This Agreement, including
the Exhibits and Schedules hereto which are incorporated by reference herein,
and the Related Agreements and other documents referred to therein, constitute
the entire agreement and understanding among the Parties with respect to the
Transactions contemplated hereby and thereby and cancel, merge and supersede
all prior oral or written agreements, representations and warranties,
arrangements and understandings relating to the subject matter hereof and
thereof.
48
<PAGE> 55
SECTION 10.16. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF OKLAHOMA, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS OF
ANOTHER JURISDICTION.
SECTION 10.17. Specific Performance. The Parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement or any of the Related Agreements were not
performed in accordance with the terms thereof. Accordingly, the Parties agree
that each of them shall be entitled to injunctive relief to prevent breaches of
the terms and provisions of this Agreement and the Related Agreements and to
obtain specific performance of such terms, in addition to any other remedy now
or hereafter available at law or in equity or otherwise.
SECTION 10.18. Counterparts. This Agreement may be executed
by the Parties in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts shall together
constitute one and the same instrument.
49
<PAGE> 56
IN WITNESS WHEREOF, the parties set forth below have caused
this Master Agreement to be duly executed as of the date first above written.
BAYARD DRILLING COMPANY
By: /s/ JAMES E. BROWN
---------------------------------------------
Name: James E. Brown
-------------------------------------------
Title: PRESIDENT
------------------------------------------
ENERGY SPECTRUM PARTNERS LP
By: Energy Spectrum Capital LP, General Partner
By: Energy Spectrum LLC, General Partner
By: /s/ SIDNEY TASSIN
-------------------------------------
Sidney Tassin
President
ANSON PARTNERS LIMITED PARTNERSHIP
By:/s/ CARL B. ANDERSON
---------------------------------------------
General Partner
By:
-------------------------------------
Name: Carl B. Anderson III
-----------------------------------
Title:
----------------------------------
50
<PAGE> 57
ANADARKO DRILLING COMPANY
By: /s/ CARL B. ANDERSON
----------------------------------------
General Partner
By:
--------------------------------
Name: Carl B. Anderson
------------------------------
Title:
-----------------------------
CHESAPEAKE ENERGY CORPORATION
By: /s/ AUBREY K. MCCLENDON
----------------------------------------
Name: Aubrey K. McClendon
--------------------------------------
Title: Chairman and Chief Executive Officer
-------------------------------------
R.T. OLIVER DRILLING, INC.
By:/s/ ROY T. OLIVER
----------------------------------------
Name: Roy T. Oliver
--------------------------------------
Title: President
-------------------------------------
MIKE MULLEN ENERGY EQUIPMENT
RESOURCE, INC.
By:/s/ MIKE MULLEN
----------------------------------------
Name: Mike Mullen
--------------------------------------
Title: President
-------------------------------------
51
<PAGE> 58
GRUPO DE HERCULES, LTD.
By: Mullen-Oliver Rig Investments Group, Inc.
General Partner
By: /s/ MIKE MULLEN
---------------------------------------
Name: Mike Mullen
-------------------------------------
Title: President
------------------------------------
MULLEN-OLIVER PARTNERSHIP, LTD.
By: Mullen-Oliver Rig Investments Group, Inc.
General Partner
By:/s/ MIKE MULLEN
---------------------------------------
Name: Mike Mullen
-------------------------------------
Title: President
------------------------------------
52
<PAGE> 1
EXHIBIT 10.6
MASTER DRILLING AGREEMENT
This Master Drilling Agreement (this "Agreement") , dated as
of December 10, 1996, is made by and among Bayard Drilling Technologies, Inc.,
a Delaware corporation ("Bayard"), Chesapeake Energy Corporation, a Delaware
corporation ("Chesapeake"), and Chesapeake Operating, Inc., a Delaware
corporation ("Operating").
WITNESSETH:
WHEREAS, Bayard, Chesapeake and certain other parties named
therein entered into that certain Master Agreement, dated as of November 26,
1996 (the "Master Agreement"), pursuant to which Chesapeake and the other
parties thereto acquired interests in Bayard;
WHEREAS, the Master Agreement contemplates, among other things,
that: (a) Chesapeake will enter into this Agreement, which will set forth the
governing terms of the Drilling Agreements (as defined herein) to be entered
into by Bayard and Operating; (b) Operating shall enter into each of six (6)
separate Drilling Agreements (the "Drilling Agreements") pursuant to which
operating will employ specified drilling rigs of Bayard (the "Rigs"); and (c)
Bayard and Chesapeake will enter into an Option Agreement (as defined in the
Master Agreement) pursuant to which Bayard will grant to Chesapeake an option to
purchase shares of the common stock of Bayard for a specified term which may be
extended if operating extends four (4) of the Drilling Agreements as specified
in the Master Agreement; and
WHEREAS, Bayard, Chesapeake and Operating desire to set forth
the terms and conditions of such arrangements herein.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein, the mutual benefits to be
gained by the performance thereof and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged and accepted, the
parties hereto hereby agree as follows:
1. Form of Drilling Agreement. The terms and conditions
pursuant to which each of the Rigs shall be used and operated shall be set forth
in the "Drilling Rig Proposal and Daywork Drilling Contract - US" each of which
is attached hereto as Exhibit A (the "Drilling Agreements"). Each of the
Drilling Agreements shall be executed by Bayard and operating simultaneously
with execution of this Agreement.
2. Primary Term. The term of each Drilling Agreement
shall be two (2) years and shall commence on the spud date of the first well
drilled by each such rig pursuant to the Drilling Agreement; provided that the
spud date of the first well shall be deemed to be January 1, 1997, for each rig
and the applicable Drilling Agreement for which the spud date of the first well
is subsequent to January 1, 1997.
<PAGE> 2
3. Term Extensions. Bayard shall have the option to
extend any two (2) of the Drilling Agreements for two (2) additional years, each
on the same terms as set forth in the applicable Drilling Agreement. Operating
shall have the option to extend each of the other four (4) Drilling Agreements
for two (2) additional years on the same terms as set forth in the applicable
Drilling Agreement.
4. Guarantee. By execution of this Agreement, Chesapeake
unconditionally guarantees the payment of all amounts payable by, and the
performance of all the obligations of, operating under this Agreement and each
of the Drilling Agreements during the primary term of each such agreement and
any extension thereof.
5. Consent to Amendments, Waivers. Except as otherwise
expressly provided herein, the provisions of this Agreement shall not be amended
or waived except upon the written agreement of all parties hereto.
6. No Assignment. This Agreement may not be assigned by
Operating without the written consent of Bayard. Any purported or attempted
assignment in violation of this Section 5 shall be void ab initio.
7. Severability. Whenever possible, each provision of
this Agreement shall be interpreted so as to be effective and valid under
applicable law. If any provision of this Agreement is held to be prohibited by
or invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
8. Headings. The descriptive headings of this Agreement
are inserted for convenience of reference only and do not constitute a part of
and shall not affect the interpretation of this Agreement.
9. Notices. Any notices required or permitted to be sent
hereunder shall be delivered by hand, by telex or telecopier, or by certified
or registered mail, postage prepaid and return receipt requested, or delivered
by overnight courier service to the following addresses, or such other address
as any party hereto designates by written notice to the other parties. Notices
shall be deemed to have been given upon delivery, if delivered by hand, three
days after mailing, if mailed, one business day after delivery to the courier,
if delivered by overnight courier service, and upon receipt of an appropriate
answer back, if by telex or telecopier:
-2-
<PAGE> 3
If to Bayard, to:
Bayard Drilling Technologies, Inc.
Suite 400E, Lakepoint Towers
4005 Northwest Expressway
Oklahoma City, OK 73116
Attn: President
(405) 879-3847 (fax)
If to Chesapeake or Operating, to:
Chesapeake Energy Corporation
P.O. Box 1849
Oklahoma City, OK 73154-0456
Attn: Marcus Rowland
(405) 848-8000, ext. 232
(405) 879-9580 (fax)
10. Governing Law. This Agreement shall be governed in
accordance with the laws of the State of Oklahoma, without giving effect to the
choice of law principles thereof.
11. Entire Agreement. This Agreement constitutes the
entire agreement of the parties concerning the transactions contemplated
hereby, and supersedes all prior agreements and understandings, written or oral,
regarding the subject matter hereof.
12. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed and
delivered shall be deemed an original, and all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
BAYARD
Bayard Drilling Technologies, Inc.,
a Delaware corporation
By: /s/ James E. Brown
--------------------------------------
President
-3-
<PAGE> 4
OPERATING
Chesapeake Operating, Inc.,
a Delaware corporation
By: /s/ Aubrey McClendon
------------------------------------
Chairman and Chief Executive Officer
CHESAPEAKE
Chesapeake Energy Corporation,
a Delaware corporation
By: /s/ Aubrey McClendon
-------------------------------------
Chairman and Chief Executive Officer
-4-
<PAGE> 1
EXHIBIT 10.7
NOTE: This form contract is a suggested guide only and use of this form or any
variation thereof shall be at the sole discretion and risk of the user parties.
Users of the form contract or any portion or variation thereof are encouraged
to seek the advice of counsel to ensure that the contract reflects the complete
agreement of the parties and applicable law. The International Association of
Drilling Contractors disclaims any liability whatsoever for loss or damages
which may result from use of the form contract or portions or variations
thereof.
Revised June, 1994
[LOGO] INTERNATIONAL ASSOCIATION OF DRILLING CONTRACTORS
DRILLING BID PROPOSAL
AND
DAYWORK DRILLING CONTRACT - U.S.
TO:
-------------------------------------------
-------------------------------------------
-------------------------------------------
Please submit bid on this drilling contract form for performing the work
outlined below, upon the terms and for the consideration set forth, with the
understanding that if the bid is accepted by
-----------------------------------
- --------------------------------------------------------------------------------
this instrument will constitute a contract between us. Your bid should be
mailed or delivered not later than _______________ P.M. on _______________,
19_____ to the following address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* * * * * *
THIS AGREEMENT CONTAINS PROVISIONS RELATING TO INDEMNITY,
RELEASE OF LIABILITY, AND ALLOCATION OF RISK
THIS AGREEMENT (The "Contract") is made and entered into on the date
hereinafter set forth by and between the parties herein designated as
"Operator" and "Contractor".
OPERATOR: Chesapeake Operating, Inc.
---------------------------------------------------------
ADDRESS: P.O. Box 18496
---------------------------------------------------------
Oklahoma City, Oklahoma 73154-0496
---------------------------------------------------------
CONTRACTOR Bayard Drilling Technologies, Inc.
---------------------------------------------------------
ADDRESS: 4005 N.W. Expressway, Suite 400E
---------------------------------------------------------
Oklahoma City, Oklahoma 73116
---------------------------------------------------------
IN CONSIDERATION of the mutual promises, conditions and agreements herein
contained and the specifications and special provisions set forth in Exhibit
"A" and Exhibit "B" attached hereto and made a part hereof. Operator engages
Contractor as an independent Contractor to drill the hereinafter designated
well or wells in search of oil or gas on a daywork basis.
For purposes hereof, the term "daywork basis" means Contractor shall furnish
equipment, labor and perform services as herein provided, for a specified sum
per day under the direction, supervision and control of Operator (inclusive of
any employee, agent, consultant or subcontractor engaged by Operator to direct
drilling operations). When operating on a daywork basis, Contractor shall be
fully paid at the applicable rates of payment and assumes only the obligations
and liabilities stated herein. Except for such obligations and liabilities
specifically assumed by Contractor, Operator shall be solely responsible and
assumes liability for all consequences of operations by both parties while on a
daywork basis, including results and all other risks or liabilities incurred in
or incident to such operations.
1. LOCATION OF WELL:
Well Name
and Number: To be determined.
-----------------------------------------------------------
Parish/ Field
County: State: Name:
------------- ------------- --------------------
Well location and
land description: Initial well shall be the first well spudded
after December 10, 1996 (Bayard closing date.)
1.1 ADDITIONAL WELL LOCATIONS OR AREAS: Additional wells that fall
under the jurisdiction of this contract are to be identified by letter
agreement between Operator and Contractor.
Locations described above are for well and Contract identification only and
Contractor assumes no liability whatsoever for a proper survey or location
stake on Operator's lease.
2. COMMENCEMENT DATE:
Contractor agrees to use reasonable efforts to commence operations for
the drilling of the well by the N/A day of N/A , 19____, or This is a
term contract as described in Paragraph 6 below beginning on the spud date of
the initial well described in Paragraph 1 above.
3. DEPTH:
3.1 WELL DEPTH: The well(s) shall be drilled to a depth of approximately
_______ feet, or to the Per Operator's Specification formation, whichever is
deeper, but the Contractor shall not be required hereunder to drill said
well(s) below a maximum depth of ___________ feet, unless Contractor and
Operator mutually agree to drill to a greater depth.
4. DAYWORK RATES:
Contractor shall be paid at the following rates for the work performed
hereunder.
4.1 MOBILIZATION: Operator shall pay Contractor a mobilization fee of
$ N/A or a mobilization day rate of $ See 4.3 per day. This sum shall be
due and payable in full at the time the rig is rigged up or positioned at the
well site ready to spud. Mobilization shall include: Trucks and cranes provided
by Operator to move and rig up Contractor's equipment between wells covered by
this contract.
4.2 DEMOBILIZATION: Operator shall pay Contractor a demobilization fee
of $ 10,000 or a demobilization day rate during tear down of $ N/A per day,
provided however that no demobilization fee shall be payable if the Contract is
terminated due to the total loss or destruction of the rig. Demobilization
shall include: Lump sum demobilization for rig down and move out after last well
at end of the contract.
4.3 MOVING RATE: During the time the rig is in transit to or from a
drill site, or between drill sites, commencing on ______________, Operator
shall pay Contractor a sum of $ 2,500 per twenty-four (24) hour day.
4.4 OPERATING DAY RATE: For work performed per twenty-four (24) hour day
with 5 man crew the operating day rate shall be:
DEPTH INTERVALS See 23.2
FROM TO WITHOUT DRILL PIPE WITH DRILL PIPE
$ per day per day
- ---------- ---------- --------------- ---------------
$ per day per day
- ---------- ---------- --------------- ---------------
$ per day per day
- ---------- ---------- --------------- ---------------
Using Operator's drill pipe $ per day
---------------
(U.S. Daywork Contract - Page 1)
<PAGE> 2
Revised June, 1994
If under the above column "With Drill Pipe" no day rates are specified, the
daywork rate per twenty-four hour day when drill pipe is in use shall be the
applicable daywork rate specified in the column "Without Drill Pipe" plus
compensation for any drill pipe actually used at the rates specified below,
computed on the basis of the maximum drill pipe in use at any time during each
twenty-four hour day.
DRILL PIPE RATES PER 24-HOUR DAY
<TABLE>
<S> <C> <C> <C> <C> <C>
DIRECTIONAL OR
STRAIGHT HOLE SIZE GRADE UNCONTROLLABLE DEVIATED HOLE SIZE GRADE
$ per ft. $ per ft.
------------------------- ---------- --------- ------------------------- ---------- ----------
$ per ft. $ per ft.
------------------------- ---------- --------- ------------------------- ---------- ----------
$ per ft. $ per ft.
------------------------- ---------- --------- ------------------------- ---------- ----------
</TABLE>
Directional or uncontrolled deviated hole will be deemed to exist when
deviation exceeds __________ degrees or when the change of angle exceeds
__________ degrees per one hundred feet.
Drill pipe shall be considered in use not only when in actual use but
also while it is being picked up or laid down. When drill pipe is standing in
the derrick, it shall not be considered in use, provided, however, that if
Contractor furnishes special strings of drill pipe, drill collars, and handling
tools as provided for in Exhibit "A", the same shall be considered in use at all
times when on location or until released by Operator. In no event shall
fractions of an hour be considered in computing the amount of time drill pipe is
in use but such time shall be computed to the nearest hour, with thirty minutes
or more being considered a full hour and less than thirty minutes not to be
counted.
Operating rate will begin when the drilling unit is rigged up at the
drilling location, or positioned over the location during marine work, and ready
to commence operations; and will cease when the rig is ready to be moved off the
location.
4.5 REPAIR RATE: In the event it is necessary to shut down Contractor's
rig for repairs, excluding routine rig servicing, while Contractor is
performing daywork hereunder, Contractor shall be allowed compensation at the
applicable daywork rate for each period of shutdown time up to a maximum of 4**
hours for any one repair job and a total of 18** hours for each thirty (30) day
period. Thereafter, Contractor shall be compensated at a rate of $ 0
per twenty-four (24) hour day. Rig lubrication, cutting drilling line and
replacing mud pump expendables shall not be included in computing the number
of hours of shutdown time.
4.6 See Paragraph 7.15 in Exhibit A
4.7 FORCE MAJEURE RATE: $ 3,000 per twenty-four (24) hour day for any
continuous period that normal operations are suspended or cannot be carried on
due to conditions of force majeure as defined in Paragraph 17 hereof. It is,
however, understood that subject to Paragraph 6.3 below, Operator can release
the rig in accordance with Operator's right to direct stoppage of the work,
effective when conditions will permit the rig to be moved from the location.
4.8 REIMBURSABLE COSTS: Operator shall reimburse Contractor for the costs
of material, equipment, work or services which are to be furnished by Operator
as provided for herein but which for convenience are actually furnished by
Contractor at Operator's request, plus 10 percent for such cost of handling.
4.9 REVISION IN RATES: The rates and/or payments herein set forth due to
Contractor from Operator shall be revised to reflect the change in costs if the
costs of any of the items hereinafter listed shall vary by more than 5 percent
from the costs thereof on the date of this Contract or by the same percent
after the date of any revision pursuant to this paragraph:
(a) Labor costs, including all benefits, of Contractor's personnel;
(b) Contractor's cost of insurance premiums;
(c) Contractor's cost of fuel, including all taxes and fees; the cost per
gallon/MCF being $ N/A ;
(d) Contractor's cost of catering, when applicable;
(e) If Operator requires Contractor to increase or decrease the number of
Contractor's personnel;
(f) Contractor's cost of spare parts and supplies with the understanding
that such spare parts and supplies constitute 35 percent of the
Operating Rate and that the parties shall use the U.S. Bureau of Labor
Statistics Oilfield Drilling Machinery and Equipment Wholesale Price
Index (Code No. 1191-02) to determine to what extent a price variance
has occurred in said spare parts and supplies; Calculated after each
well
(g) If there is any change in legislation or regulations in the area in
which Contractor is working or other unforeseen, unusual event that
alters Contractor's financial burden.
5. TIME OF PAYMENT:
Payment is due by Operator to Contractor as follows:
5.1 Payment for mobilization, drilling and other work performed at
applicable day rates, and all other applicable charges shall be due, upon
presentation of invoice therefor, upon completion of mobilization, completion
of the well, or at the end of the month in which such work was performed or
other charges are incurred, whichever shall first occur. All invoices may be
mailed to Operator at the address hereinabove shown, unless Operator does
hereby designate that such invoices shall be mailed as follows:
P.O. Box 14880, Oklahoma City, Oklahoma 73113
- --------------------------------------------------------------------------------
5.2 DISPUTED INVOICES AND LATE PAYMENT: Operator shall pay all invoices
within 60 days after receipt except that if Operator disputes an invoice or
any part thereof, Operator shall, within sixty days after receipt of the
invoice, notify Contractor of the item disputed, specifying the reason
therefor, and payment of the disputed item may be withheld until settlement of
the dispute, but timely payment shall be made of any undisputed portion. Any
sums (including amounts ultimately paid with respect to a disputed invoice) not
paid within the above specified days shall bear interest at the rate of _______
percent or the maximum legal rate, whichever is less, per month from the due
date until paid. If Operator does not pay undisputed items within the above
stated time, Contractor may terminate this Contract as specified under
Subparagraph 6.3. See attached Operator's Addendum.
5.3 ATTORNEY'S FEES: If this Contract is placed in the hands of an
attorney for collection lf any sums due hereunder, or suit is brought on same,
or sums due hereunder are collected through bankruptcy or probate proceedings,
then Operator agrees that there shall be added to the amount due reasonable
attorney's fees and costs.
6. TERM:
6.1 DURATION OF CONTRACT: This Contract shall remain in full force and
effect until drilling operations are completed on the well or wells specified
in Paragraph 1 above, or for a term of 730 calendar days, commencing on the
date specified in Paragraph 2 above.*
6.2 EXTENSION OF TERM: Operator may extend the term of this Contract for
additional well(s) or for a period of 2 additional years by giving notice to
Contractor at least 45 days prior to completion of the well then being drilled
Contractor to provide written notice to operator approximately 60 days prior to
the end of the 2 year term.
6.3 EARLY TERMINATION:
(a) BY EITHER PARTY: Upon giving of written notice, either party may
terminate this Contract when total loss or destruction of the rig, or a major
breakdown with indefinite repair time necessitate stopping operations
hereunder.
(c) BY CONTRACTOR: Notwithstanding the provisions of Paragraph 3 with
respect to the depth to be drilled, in the event Operator shall become
insolvent, or be adjudicated as bankrupt, or file, by way of petition or
answer, a debtor's petition or other pleading seeking adjustment of Operator's
debts, under any bankruptcy or debtor's relief laws now or hereafter
prevailing, or if any such be filed against Operator, or in case a receiver be
appointed of Operator or Operator's property, or any part thereof, or
Operator's affairs be placed in the hands of a Creditor's Committee, or,
following ten days prior written notice to Operator if Operator does not pay
Contractor within the time specified in Subparagraph 5.2 all undisputed items
due and owing, Contractor may, at its option, elect to terminate further
performance of any work under this Contract and Contractor's right to
compensation shall be as set forth in Subparagraph 6.4 hereof. In addition to
Contractor's right to terminate performance hereunder. Operator hereby
expressly agrees to protect, defend and indemnify Contractor from and against
any claims, demands and causes of action, including all costs of defense, in
favor of Operator. Operator's joint venturers, or other parties arising out of
any drilling commitments or obligations contained in any lease, farmout
agreement or other agreement, which may be affected by such termination of
performance hereunder. *however commencement shall be no later than January 1,
1997, regardless of actual start date so that the original term shall not
extend beyond December 31, 1998
**See Paragraph 7.11 in Exhibit A
(U.S. Daywork Contract - Page 2)
<PAGE> 3
Revised June, 1994
7. CASING PROGRAM:
Operator shall have the right to designate the points at which casing will
be set and the manner of setting, cementing and testing. Operator may modify
the casing program, however, any such modification which materially increases
Contractor's hazards or costs can only be made by mutual consent of Operator
and Contractor and upon agreement as to the additional compensation to be paid
Contractor as a result thereof.
8. DRILLING METHODS AND PRACTICES:
8.1 Contractor shall maintain well control equipment in good condition at
all times and shall use all reasonable means to prevent and control fires and
blowouts and to protect the hole.
8.2 Subject to the terms hereof, and at Operator's cost, at all times
during the drilling of the well, Operator shall have the right to control the
mud program, and the drilling fluid must be of a type and have characteristics
and be maintained by Contractor in accordance with the specifications shown in
Exhibit "A".
8.3 Each party hereto agrees to comply with all laws, rules, and
regulations of any federal, state or local governmental authority which are now
or may become applicable to that party's operations covered by or arising out
of the performance of this Contract. When required by law, the terms of
Exhibit "B" shall apply to this Contract. In the event any provision of this
Contract is inconsistent with or contrary to any applicable federal, state or
local law, rule or regulation said provision shall be deemed to be modified to
the extent required to comply with said law, rule or regulation, and as so
modified said provision and this Contract shall continue in full force and
effect.
8.4 Contractor shall keep and furnish to Operator an accurate record of
the work performed and formations drilled on the IADC-API Daily Drilling Report
Form or other form acceptable to Operator. A legible copy of said form signed
by Contractor's representative shall be furnished by Contractor to Operator.
8.5 If requested by Operator, Contractor shall furnish Operator with a copy
of delivery tickets covering any material or supplies provided by Operator and
received by Contractor.
9. INGRESS, EGRESS, AND LOCATION:
Operator hereby assigns to Contractor all necessary rights of ingress and
egress with respect to the tract on which the well is to be located for the
performance by Contractor of all work contemplated by this Contract. Should
Contractor be denied free access to the location for any reason not reasonably
within Contractor's control, any time lost by Contractor as a result of such
denial shall be paid for at the applicable rate. Operator agrees at all times
to maintain the road and location in such condition that will allow free access
and movement to and from the drilling site in an ordinarily equipped highway
type vehicle. If Contractor is required to use bulldozers, tractors, four-
wheel drive vehicles, or any other specialized transportation equipment for the
movement of necessary personnel, machinery, or equipment over access roads or
on the drilling location, Operator shall furnish the same at its expense and
without cost to Contractor. The actual cost of repairs to any transportation
equipment furnished by Contractor or its personnel damaged as a result of
improperly maintained access roads or location will be charged to Operator.
Operator shall reimburse Contractor for all amounts reasonably expended by
Contractor for repairs and/or reinforcement of roads, bridges and related or
similar facilities (public and private) required as direct result of a rig move
pursuant to performance hereunder.
10. SOUND LOCATION:
Operator shall prepare a sound location adequate in size and capable of
properly supporting the drilling rig, and shall be responsible for a conductor
pipe program adequate to prevent soil and subsoil wash out. It is recognized
that Operator has superior knowledge of the location and access routes to the
location, and must advise Contractor of any subsurface conditions, or
obstructions (including, but not limited to, mines, caverns, sink holes,
streams, pipelines, power lines and telephone lines) which Contractor might
encounter while en route to the location or during operations hereunder. In
the event subsurface conditions cause a cratering or shifting of the location
surface, or if seabed conditions prove unsatisfactory to properly support the
rig during marine operations hereunder, and loss or damage to the rig or its
associated equipment results therefrom, Operator shall, without regard to other
provisions of this Contract, including Paragraph 14.1 hereof, reimburse
Contractor to the extent not covered by Contractor's insurance, for all such
loss or damage including payment of force majeure rate during repair and/or
demobilization if applicable.
11. EQUIPMENT CAPACITY:
If applicable hereunder, operations shall not be attempted where canal or
water depths are in excess of N/A feet, or under any other conditions which
exceed the capacity of the equipment specified to be used hereunder.
Contractor shall make final decision as to when an operation or attempted
operation would exceed the capacity of specified equipment.
12. TERMINATION OF LOCATION LIABILITY:
When Contractor has complied with all obligations of the Contract
regarding restoration of Operator's location, Operator shall thereafter be
liable for damage to property, personal injury or death of any person which
occurs as a result of conditions of the location and Contractor shall be
relieved of such liability; provided, however, if Contractor shall subsequently
reenter upon the location for any reason, including removal of the rig, any
term of the Contract relating to such reentry activity shall become applicable
during such period.
13. INSURANCE:
During the life of this Contract, Contractor shall at Contractor's expense
maintain, with an insurance company or companies authorized to do business in
the state where the work is to be performed or through a self-insurance
program, insurance coverages of the kind and in the amounts set forth in
Exhibit "A", insuring the liabilities specifically assumed by Contractor in
Paragraph 14 of this Contract. Contractor shall, if requested to do so by
Operator, procure from the company or companies writing said insurance a
certificate or certificates that said insurance is in full force and effect and
that the same shall not be canceled or materially changed without ten (10) days
prior written notice to Operator. For liabilities assumed hereunder by
Contractor, its insurance shall be endorsed to provide that the underwriters
waive their right of subrogation against Operator. Operator will, as well,
cause its insurer to waive subrogation against Contractor for liability it
assumes and shall maintain, at Operator's expense, or shall self insure,
insurance coverage of the same kind and in the same amount as is required of
Contractor, insuring the liabilities specifically assumed by Operator in
Paragraph 14 of this Contract.
(U.S. Daywork Contract - Page 3)
<PAGE> 4
14. RESPONSIBILITY FOR LOSS OR DAMAGE, INDEMNITY, RELEASE OF LIABILITY AND
ALLOCATION OF RISK:
14.1 CONTRACTOR'S SURFACE EQUIPMENT: Contractor shall assume
liability at all times for damage to or destruction of Contractor's surface
equipment, regardless of when or how such damage or destruction occurs, and
Contractor shall release Operator of any liability for any such loss, except
loss or damage under the provisions of Paragraphs 19 or 14.3.
14.2 CONTRACTOR'S IN-HOLE EQUIPMENT: Operator shall assume liability
at all times for damage to or destruction of Contractor's in-hole equipment,
including, but not limited to, drill pipe, drill collars, and tool joints, and
Operator shall reimburse Contractor for the value of any such loss or damage;
the value to be determined by agreement between Contractor and Operator as
current repair costs or replacement in kind and condition.
14.3 CONTRACTOR'S EQUIPMENT - ENVIRONMENTAL LOSS OR DAMAGE:
Notwithstanding the provisions of Paragraph 14.1 above, Operator shall assume
liability at all times for damage to or destruction of Contractor's equipment
caused by exposure to highly corrosive or otherwise destructive elements,
including those introduced into the drilling fluid.
14.4 OPERATOR'S EQUIPMENT: Operator shall assume liability at all
times for damage to or destruction of Operator's equipment, including, but not
limited to, casing, tubing, well head equipment, and platform if applicable,
regardless of when or how such damage or destruction occurs, and Operator shall
release Contractor of any liability for any such loss or damage.
14.5 THE HOLE: In the event the hole should be lost or damaged,
Operator shall be solely responsible for such damage to or loss of the hole,
including the casing therein. Operator shall release Contractor of any
liability for damage to or loss of the hole, and shall protect, defend and
indemnify Contractor from and against any and all claims, liability, and
expense relating to such damage to or loss of the hole.
14.6 UNDERGROUND DAMAGE: Operator shall release Contractor of any
liability for, and shall protect, defend and indemnify Contractor from and
against any and all claims, liability, and expense resulting from operations
under this Contract on account of injury to, destruction of, or loss or
impairment of any property right in or to oil, gas, or other mineral substance
or water, if at the time of the act or omission causing such injury,
destruction, loss, or impairment, said substance had not been reduced to
physical possession above the surface of the earth, and for any loss or damage
to any formation, strata, or reservoir beneath the surface of the earth.
14.7 INSPECTION OF MATERIALS FURNISHED BY OPERATOR: Contractor
agrees to visually inspect all materials furnished by Operator before using
same and to notify Operator of any apparent defects therein. Contractor shall
not be liable for any loss or damage resulting from the use of materials
furnished by Operator, and Operator shall release Contractor from, and shall
protect, defend and indemnify Contractor from and against, any such liability.
**
14.10 LIABILITY FOR WILD WELL: Operator shall be liable for the cost
of regaining control of any wild well, as well as for cost of removal of any
debris, and shall release Contractor of, and Operator shall protect, defend and
indemnify Contractor from and against any liability for such cost.
14.11 POLLUTION AND CONTAMINATION: Notwithstanding anything to the
contrary contained herein, except the provisions of Paragraphs 10 and 12, it is
understood and agreed by and between Contractor and Operator that the
responsibility for pollution and contamination shall be as follows:
(a) Unless otherwise provided herein, Contractor shall assume all
responsibility for, including control and removal of, and shall protect, defend
and indemnify Operator from and against all claims, demands and causes of action
of every kind and character arising from pollution or contamination, which
originates above the surface of the land or water from spills of fuels,
lubricants, motor oils, pipe dope, paints, solvents, ballast, bilge and garbage,
except unavoidable pollution from reserve pits, wholly in Contractor's
possession and control and directly associated with Contractor's equipment and
facilities.
(b) Operator shall assume all responsibility for, including control and
removal of, and shall protect, defend and indemnify Contractor from and against
all claims, demands, and causes of action of every kind and character arising
directly or indirectly from all other pollution or contamination which may
occur during the conduct of operations hereunder, including, but not limited
to, that which may result from fire, blowout, cratering, seepage or any other
uncontrolled flow of oil, gas, water or other substance, as well as the use or
disposition of all drilling fluids, including, but not limited to, oil
emulsion, oil base or chemically treated drilling fluids, contaminated cuttings
or cavings, lost circulation and fish recovery materials and fluids. Operator
shall release Contractor of any liability for the foregoing.
(c) In the event a third party commits an act or omission which results
in pollution or contamination for which either Contractor or Operator, for whom
such party is performing work, is held to be legally liable, the responsibility
therefor shall be considered, as between Contractor and Operator, to be the
same as if the party for whom the work was performed had performed the same and
all of the obligations respecting protection, defense, indemnity and limitation
of responsibility and liability, as set forth in (a) and (b) above, shall be
specifically applied.
14.12 CONSEQUENTIAL DAMAGES: Neither party shall be liable to the
other for special, indirect or consequential damages resulting from or arising
out of this Contract, including, without limitation, loss of profit or business
interruptions including loss or delay of production, however same may be caused.
14.13 INDEMNITY OBLIGATION: Except as otherwise expressly limited
herein, it is the intent of parties hereto that all indemnity obligations
and/or liabilities assumed by such parties under terms of this Contract,
including, without limitation, Paragraphs 14.1 through 14.12 hereof, be without
limit and without regard to the cause or causes thereof (including preexisting
conditions), the unseaworthiness of any vessel or vessels, strict liability, or
the negligence of any party or parties, whether such negligence be sole, joint
or concurrent, active or passive. The indemnities, and releases and assumptions
of liability extended by the parties hereto under the provisions of Paragraph
14 shall inure to the benefit of the parties, their parent, holding and
affiliated companies and their respective officers, directors, employees,
agents and servants. The terms and provisions of Paragraphs 14.1 through 14.12
shall have no application to claims or causes of action asserted against
Operator or Contractor by reason of any agreement of indemnity with a person or
entity not a party hereto.
15. AUDITS:
If any payment provided for hereunder is made on the basis of
Contractor's costs, Operator shall have the right to audit Contractor's books
and records relating to such costs. Contractor agrees to maintain such books
and records for a period of two (2) years from the date such costs were
incurred and to make such books and records available to Operator at any
reasonable time or times within the period.
16. NO WAIVER EXCEPT IN WRITING:
It is fully understood and agreed that none of the requirements of this
Contract shall be considered as waived by either party unless the same is done
in writing, and then only by the persons executing this Contract, or other duly
authorized agent or representative of the party.
17. FORCE MAJEURE:
Neither Operator nor Contractor shall be liable to the other for any
delays or damage or any failure to act due, occasioned or caused by reason of
any laws, rules, regulations or orders promulgated by any Federal, State, or
Local governmental body or the rules, regulations, or orders of any public body
or official purporting to exercise authority or control respecting the
operations covered hereby, including the procurance or use of tools and
equipment, or due, occasioned or caused by strikes, action of the elements,
water conditions, inability to obtain fuel or other critical materials, or
other causes beyond the control of the party affected thereby. In the event
that either party hereto is rendered unable, wholly or in part, by any of these
causes to carry out its obligation under this Contract, it is agreed that such
party shall give notice and details of Force Majeure in writing to the other
party as promptly as possible after its occurrence. In such cases, the
obligations of the party giving the notice shall be suspended during the
continuance of any inability so caused except that Operator shall be obligated
to pay to Contractor the Force Majeure Rate provided for in Paragraph 4.7 above.
** See attached Operator's addendum.
(U.S. Daywork Contract - Page 4)
<PAGE> 5
Revised June, 1994
18. GOVERNING LAW:
This Contract shall be construed, governed, interpreted, enforced and
litigated, and the relations between the parties determined in accordance with
the laws of Oklahoma.
19. INFORMATION CONFIDENTIAL:
Upon written request by Operator, information obtained by Contractor in
the conduct of drilling operations on this well, including, but not limited to,
depth, formations penetrated, the results of coring, testing and surveying,
shall be considered confidential and shall not be divulged by Contractor or its
employees, to any person, firm, or corporation other than Operator's designated
representatives.
20. SUBCONTRACTS BY OPERATOR:
Operator may employ other contractors to perform any of the operations
or services to be provided or performed by it according to Exhibit "A".
21. ASSIGNMENT:
Neither party may assign this Contract without the prior written consent
of the other, and prompt notice of any such intent to assign shall be given to
the other party. In the event of such assignment, the assigning party shall
remain liable to the other party as a guarantor of the performance by the
assignee of the terms of this Contract. If any assignment is made that
materially alters Contractor's financial burden, Contractor's compensation
shall be adjusted to give effect to any increase or decrease in Contractor's
operating costs.
22. NOTICES AND PLACE OF PAYMENT:
All notices to be given with respect to this Contract unless otherwise
provided for shall be given to the Contractor and to the Operator respectively
at the address hereinabove shown. All sums payable hereunder to Contractor
shall be payable at its address hereinabove shown unless otherwise specified
herein.
23. SPECIAL PROVISIONS:
23.1 Operator's and Contractor's acceptance of this contract includes
acceptance of the provisions of Exhibits A and B and Operator's
Addendum, all of which are attached hereto and made a part
hereof.
23.2 The Operating day rates with drill pipe, without drill pipe, and
using Operator's drill pipe shall be as follows:
<TABLE>
<CAPTION>
Operations in Operations in
Rig Texas (b) Louisiana (b)
--------- ------------- -------------
<S> <C> <C>
11 $5,550 $5,750
12 5,550 5,750
14 5,550 5,750
15 5,550 (a) 5,750 (a)
16 5,650 (a) 5,850 (a)
22 5,650 (a) 5,850 (a)
</TABLE>
(a) The day rates for rigs 15, 16, and 22 will be subject to a drill
pipe surcharge equal to $250 per day for each rig in which the
actual cost of drill pipe is in excess of $20 per foot.
This surcharge will cease if day rates are adjusted in accordance
with paragraph 7.7 in Exhibit A in excess of amount equal or
greater than the above day rates plus the surcharge.
(b) The Operating day rates of $5,650 per day in Texas and $5,850
per day in Louisiana for rigs 16 and 22 are $100 per day higher
than rates for rigs 11, 12, 14, and 15 since rigs 16 and 22 are
required to have 3 1600HP mud pumps and a mast and substructure
rated to at least 1,300,000 lb.
24. ACCEPTANCE OF CONTRACT:
The foregoing Contract is agreed to and accepted by Operator this ______
day of ___________, 19__.
Operator Chesapeake Operating, Inc.
------------------------------------
By /s/ TOM L. WARD
------------------------------------
Title Tom L. Ward, Chief Operating Officer
------------------------------------
The foregoing Contract is accepted by the undersigned as Contractor this
______ day of _____________, 19_____, which is the effective date of this
agreement, subject to rig availability, and subject to all of its terms and
provisions, with the understanding that unless said Contract is thus executed by
Operator within ___________ days of the above date, Contractor shall be in no
manner bound by its signature thereto.
Contractor Bayard Drilling Technologies, Inc.
-------------------------------------
By /s/ JAMES E. BROWN
-------------------------------------
Title James E. Brown, President
-------------------------------------
(U.S. Daywork Contract - Page 5)
<PAGE> 6
Revised June, 1994
EXHIBIT "A"
To Daywork Contract dated , 1996
-------------------------------
Operator Chesapeake Operating, Inc. Contractor Bayard Drilling Technologies,
Inc.
Well Name and Number
-----------------------------------------
SPECIFICATIONS AND SPECIAL PROVISIONS
1. CASING PROGRAM (SEE PAR. 7) per Operator's Specifications
<TABLE>
<CAPTION>
HOLE CASING APPROXIMATE WAIT ON
SIZE SIZE WEIGHT GRADE SETTING DEPTH CEMENT TIME
<S> <C> <C> <C> <C> <C>
Conductor in. in. lbs/ft. ft. hrs.
------------- ---------- ----------- --------- ---------------- -------------
Surface in. in. lbs/ft. ft. hrs.
------------- ---------- ----------- --------- ---------------- -------------
Protection in. in. lbs/ft. ft. hrs.
------------- ---------- ----------- --------- ---------------- -------------
in. in. lbs/ft. ft. hrs.
------------- ---------- ----------- --------- ---------------- -------------
Production in. in. lbs/ft. ft. hrs.
------------- ---------- ----------- --------- ---------------- -------------
Liner in. in. lbs/ft. ft. hrs.
------------- ---------- ----------- --------- ---------------- -------------
in. in. lbs/ft. ft. hrs.
- -------------- ------------- ---------- ----------- --------- ---------------- -------------
</TABLE>
2. MUD CONTROL PROGRAM (SEE PAR. 8.2)
<TABLE>
<CAPTION>
DEPTH INTERVAL
(FT.) WEIGHT VISCOSITY WATER LOSS
FROM TO TYPE MUD (LBS./GAL.) (SECS) (CC)
<S> <C> <C> <C> <C> <C>
Per Operator's Specifications
- ---------- ---------- ------------------- ------------------- ------------------- ---------------------
- ---------- ---------- ------------------- ------------------- ------------------- ---------------------
- ---------- ---------- ------------------- ------------------- ------------------- ---------------------
- ---------- ---------- ------------------- ------------------- ------------------- ---------------------
- ---------- ---------- ------------------- ------------------- ------------------- ---------------------
</TABLE>
Other mud specifications: Operator agrees to furnish corrosion inhibitor to
maintain a corrosion rate of less than two (2) lbs. per cubic foot per year.
Contractor agrees to provide corrosion rings.
3. INSURANCE (SEE PAR. 13)
3.1 Adequate Workers' Compensation Insurance complying with State Laws
applicable or Employers' Liability Insurance with limits of $
covering all of Contractor's employees working under this Contract.
3.2 Comprehensive Public Liability Insurance or Public Liability Insurance
with limits of $ for the death or injury of any one person and $
for each accident.
3.3 Comprehensive Public Liability Property Damage Insurance or Public
Liability Property Damage Insurance with limits of $ for each
accident and $ aggregate per policy.
3.4 Automobile Public Liability Insurance with limits of $ for the death or
injury of each person and $ for each accident; and Automobile Public
Liability Property Damage Insurance with limits of $ for each
accident.
3.5 In the event operations are over water, Contractor shall carry in
addition to the Statutory Workers' Compensation Insurance, endorsements
covering liability under the Longshoremen's & Harbor Workers'
Compensation Act and Maritime liability including maintenance and cure
with limits of $ for each death or injury to one person and $ for
any one accident.
3.6 Other Insurance:
--------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
4. EQUIPMENT, MATERIALS AND SERVICES TO BE FURNISHED BY CONTRACTOR:
The machinery, equipment, tools, materials, supplies, instruments, services
and labor hereinafter listed, including any transportation for such items shall
be provided at the well location at the expense of Contractor unless otherwise
noted by this Contract.
4.1 DRILLING RIG:
Complete drilling rig designated by Contractor as its Rig No. 11, the major
items of equipment being:
Drawworks: Make and Model Mid Continent 1220 EB 2000 input HP, Elmago 7838 brake
------------------------------------------------------
Engines: Make, Model, and H.P. 4-Caterpillar D-398, 1200 HP
-------------------------------------------------
No. on Rig Ross Hill SCR 4X4
-----------------------------------------------------------------
Pumps: No. 1 Make, Size, and Power PZ 10 1350 HP
----------------------------------------------
No. 2 Make, Size, and Power PZ 10 1350 HP
--------------------------------------------------
Mud Mixing Pump: Make, Size and Power
------------------------------------------
Boilers: Number, Make, H.P. and W.P.
-------------------------------------------
Derrick or Mast: Make, Size, and Capacity Pyramid 144' 1MM# Static Hook Load
--------------------------------------
Substructure: Size and Capacity 26' Self Elevating, 1 MM# Setback
------------------------------------------------
Rotary Drive: Type Mid Continent 27-1/2" Independent Drive
-------------------------------------------------------------
Drill Pipe: Size 5 in. 15,000 ft.; Size in. ft.
----- -------- ------------ -------------
Drill Collars: Number and Size
-------------------------------------------------
<PAGE> 7
Revised June, 1994
Blowout Preventers:
-------------------------------------------------------------
<TABLE>
<CAPTION>
SIZE SERIES OR TEST PR. MAKE & MODEL NUMBER
<S> <C> <C> <C>
13-5/8 5,000 Annular
- -------------------- --------------------------------- ------------------------------ ------------------------
13-5/8 10,000 Double
- -------------------- --------------------------------- ------------------------------ ------------------------
13-5/8 10,000 Double
- -------------------- --------------------------------- ------------------------------ ------------------------
- -------------------- --------------------------------- ------------------------------ ------------------------
- -------------------- --------------------------------- ------------------------------ ------------------------
- -------------------- --------------------------------- ------------------------------ ------------------------
B.O.P. Closing Unit:
-----------------------------------------------------------------------------------------------
B.O.P. Accumulator:
-----------------------------------------------------------------------------------------------
</TABLE>
4.2 Derrick Timbers
4.3 Normal Strings of drill pipe and drill collars specified above.
4.4 Conventional drift indicator.
4.5 Circulating mud pits.
4.6 Necessary pipe racks and rigging up material.
4.7 Normal storage for mud and chemicals.
4.8 Shale Shaker.
4.9
4.10
4.11 Pump No. 3 PZ 10 unitized with one Caterpillar D-399 (available for
use by
4.12 Operator on Contractor Rigs 11, 12, 14, or 15)
4.13
4.14
4.15
4.16
4.17
5. EQUIPMENT, MATERIALS AND SERVICES TO BE FURNISHED BY OPERATOR:
The machinery, equipment, tools, materials, supplies, instrument, services
and labor hereinafter listed, including any transportation required for such
items, shall be provided at the well location at the expense of Operator unless
otherwise noted by Contract.
5.1 Furnish and maintain adequate roadway and/or canal to location,
right-of-way, including rights-of-way for fuel and water lines,
river crossings, highway crossings, gates and cattle guards.
5.2 Stake location, clear and grade location, and provide turnaround,
including surfacing when necessary.
5.3 Test tanks with pipe and fittings.
5.4 Mud storage tanks with pipe and fittings.
5.5 Separator with pipe and fittings.
5.6 Labor to connect and disconnect mud tank, test tank, and
separator.
5.7 Labor to disconnect and clean test tanks and separator.
5.8 Drilling mud, chemicals, lost circulation materials and other
additives.
5.9 Pipe and connections for oil circulating lines.
5.10 Labor to lay, bury and recover oil circulating lines.
5.11 Drilling bits, reamers, reamer cutters, stabilizers and special
tools.
5.12 Contract fishing tool services and tool rental.
5.13 Wire line core bits or heads, core barrels and wire line core
catchers if required.
5.14 Conventional core bits, core catchers and core barrels.
5.15 Diamond core barrel with head.
5.16 Cement and cementing service.
5.17 Electrical wireline logging services.
5.18 Directional, caliper, or other special services.
5.19 Gun or jet perforating services.
5.20 Explosives and shooting devices.
5.21 Formation testing, hydraulic fracturing, acidizing and other
related services.
5.22 Equipment for drill stem testing.
5.23 Mud logging services.
5.24 Sidewall coring service.
5.25 Welding service for welding bottom joints of casing, guide shoe,
float shoe, float collar and in connection with installing of well
head equipment if required.
5.26 Casing, tubing, liners, screen, float collars, guide and float
shoes and associated equipment.
5.27 Casing scratchers and centralizers.
5.28 Well head connections and all equipment to be installed in or on
well or on the premises for use in connection with testing,
completion and operation of well.
5.29 Special or added storage for mud and chemicals.
5.30 Casinghead, API series, to conform to that shown for the blowout
preventers specified in Paragraph 4.1 above.
5.31 Blowout preventer testing packoff.
5.32 Casing Thread Protectors and Casing Lubricants.
5.33 H(2)S training and equipment as necessary or as required by law.
5.34 Company man telephone
5.35 PVT Equipment
5.36 Potable water for Operator and Operator's subcontractors only
5.37 Rotating Head (RBOP)
5.38 Pull trucks in and out of location if necessary
5.39
5.40
5.41
<PAGE> 8
Revised June, 1994
6.EQUIPMENT, MATERIALS AND SERVICES TO BE FURNISHED BY DESIGNATED PARTY:
The machinery, equipment, tools, materials, supplies, instruments, services,
and labor listed as the following numbered items, including any transportation
required for such items unless otherwise specified, shall be provided at the
well location and at the expense of the party hereto as designated by an X mark
in the appropriate column.
<TABLE>
<CAPTION>
TO BE PROVIDED BY AND
AT THE EXPENSE OF
Item OPERATOR CONTRACTOR
<S> <C> <C>
6.1 Cellar and runways ................................................................... X
----------------- ----------------
6.2 Fuel (located at ) .................................................................. X
----------------- ----------------
6.3 Fuel Lines (length ) ................................................................. X
----------------- ----------------
6.4 Water at source, including required permits .......................................... X
----------------- ----------------
6.5 Water well, including required permits ............................................... X
----------------- ----------------
6.6 Water lines, including required permits .............................................. X
----------------- ----------------
6.7 Water storage tanks capacity ...................................... X
----------------- ----------------
6.8 Labor to operate water well or water pump ............................................ X
----------------- ----------------
6.9 Maintenance of water well, if required .........................(labor only).......... X
----------------- ----------------
6.10 Water Pump ........................................................................... X
----------------- ----------------
6.11 Fuel for water pump .................................................................. X
----------------- ----------------
6.12 Mats for engines and boilers, or motors and mud pumps ................................
----------------- ----------------
6.13 Transportation of Contractor's property:
Move in ..........................................................Expense of.......... X Furnished by X
----------------- ----------------
Move out .........................................................Expense of.......... X Furnished by X
----------------- ----------------
6.14 Materials for "boxing in" rig and derrick ............................................ X
----------------- ----------------
6.15 Special Strings of drill pipe and drill collars as follows:
X
----------------------------------------------------------------------------- ----------------- ----------------
----------------------------------------------------------------------------- ----------------- ----------------
----------------------------------------------------------------------------- ----------------- ----------------
6.16 Kelly joints, subs, elevators, tongs and slips for use with
special drill pipe ................................................................... X
----------------- ----------------
6.17 Drill pipe protectors for Kelly joint and each joint
of drill pipe running inside of Surface Casing as required,
for use with normal strings of drill pipe ............................................ X
----------------- ----------------
6.18 Drill pipe protectors for Kelly joint and drill pipe running
inside of Protection Casing .......................................................... X
----------------- ----------------
6.19 Rate of penetration recording device .............................(4 pen)............. X
----------------- ----------------
6.20 Extra labor for running and cementing casing (Casing crews) .......................... X
----------------- ----------------
6.21 Casing tools ......................................................................... X
----------------- ----------------
6.22 Power casing tongs ................................................................... X
----------------- ----------------
6.23 Laydown and pickup machine ........................................................... X
----------------- ----------------
6.24 Tubing Tools ......................................................................... X
----------------- ----------------
6.25 Power tubing tong .................................................................... X
----------------- ----------------
6.26 Crew Boats, Number ................................................................... NA
----------------- ----------------
6.27 Service Barge ........................................................................ NA
----------------- ----------------
6.28 Service Tug Boat ..................................................................... NA
----------------- ----------------
6.29 Rat Hole ............................................................................. X
----------------- ----------------
6.30 Mouse Hole ........................................................................... X
----------------- ----------------
6.31 Reserve Pits ......................................................................... X
----------------- ----------------
6.32 Upper Kelly Cock ..................................................................... X
----------------- ----------------
6.33 Lower Kelly Valve .................................................................... X
----------------- ----------------
6.34 Drill Pipe Safety Valve .............................................................. X
----------------- ----------------
6.35 Inside Blowout Preventer ............................................................. X
----------------- ----------------
6.36 Drilling hole for or driving for conductor pipe ...................................... X
----------------- ----------------
6.37 Charges, cost of bonds for public roads ..........................Expense of.......... X Furnished by X
----------------- ----------------
6.38 Cost of all labor and material to clean rig after use of oil-base mud ................ X
----------------- ----------------
6.39 Portable Toilet ...................................................................... X
----------------- ----------------
6.40 Trash Receptacle ..................................................................... X
----------------- ----------------
6.41 Linear Motion Shale Shaker ........................................................... X
----------------- ----------------
6.42 Shale Shaker Screens ................................................................. X
----------------- ----------------
6.43 Mud Cleaner .......................................................................... X
----------------- ----------------
6.44 Mud/Gas Separator .................................................................... X
----------------- ----------------
6.45 Desander ............................................................................. X
----------------- ----------------
6.46 Desilter ............................................................................. X
----------------- ----------------
6.47 Degasser ............................................................................. X
----------------- ----------------
6.48 Centrifuge ........................................................................... X
----------------- ----------------
6.49 Rotating Head ........................................................................ X
----------------- ----------------
6.50 Rotating Head Rubbers ................................................................ X
----------------- ----------------
6.51 Hydraulic Adjustable Choke ........................................................... X
----------------- ----------------
6.52 Pit Volume Totalizer ................................................................. X
----------------- ----------------
6.53 Communications, type ................................................................. X
----------------- ----------------
6.54 Forklift, capacity ...............................................Expense of.......... X Furnished by X
----------------- ----------------
6.55 Corrosion Inhibitor for protecting drill string ...................................... X
----------------- ----------------
6.56 Corrosion Rings ...................................................................... X
----------------- ----------------
6.57 Rig Specific SPCC Plan ............................................................... X
----------------- ----------------
6.58
----------------------------------------------------------------------------- ----------------- ----------------
</TABLE>
(U.S. Daywork Contract - Exhibit "A" Page 3)
<PAGE> 9
7. OTHER PROVISIONS:
A. Drill String Inspection and Repair
Operator will pay for the original inspection of the 5" drill pipe and
components and periodic inspections during the term of the contract, and
Contractor will pay for the last inspection of the 5" drill pipe. It is
further agreed upon that the Operator will repair or replace in like
kind damaged drill pipe and collars, excluding normal wear and tear.
B. Performance Agreement
Notwithstanding anything to the contrary provided in Paragraph 6.3, if
Operator is dissatisfied with the quality or efficiency of Contractor's
work hereunder, Operator shall give Contractor written notice of any
such deficiencies. Contractor shall have fifteen (15) days from receipt
of such notice in which to remedy any such deficiencies. If at the end
of the fifteen (15) day period Contractor has not remedied such
deficiencies to the reasonable satisfaction of the Operator, Operator
may request Contractor to provide a replacement rig; if Contractor is
not able to provide a replacement rig to the reasonable satisfaction of
the Operator, Operator may terminate this contract at the end of the
current well without further liability, except as to payment for work
already performed, charges incurred prior to termination, any
demobilization payment and any indemnity owed.
7.2 Forklift
Contractor will provide and maintain a forklift at an additional cost of
$60.00 per day.
7.3 Oil Base Mud
a) While on oil base mud, Operator will reimburse Contractor $10.00 per day
per man for "oil base pay". Operator also agrees to pay for all rubber
goods that need replacing due to contact with oil base mud.
b) Upon completion of any well on which oil base mud is used, Operator will
supply and pay for the necessary steam cleaning equipment and solvents
to jet and clean the pits, and clean the rig, after it has been
released. Operator agrees to pay the Contractor $2,700.00 per day for
the labor.
7.4 Shale Shaker Maintenance and Screens
Operator will provide all shale shaker screens. Contractor will provide
necessary repairs and maintenance on both linear motion shakers to
minimize any abnormal screen usage.
7.5 Standby Rate
a) Full Crew For standby time while waiting on orders or equipment to be
furnished by the Operator, a standby rate of $5,000 per twenty-four (24)
hour day with full crew.
b) Guard Only Operator shall be permitted to order Contractor to standby
with guard only for 6 days between each well (45 cumulative days
maximum during the 2 year term and 45 cumulative days during the
extended term - if contract is extended under 6.2) without compensation
to Contractor; after 6 days between wells and/or 45 cumulative standby
with guard only, Operator shall be required to pay $3,200 per
twenty-four (24) hour day.
<PAGE> 10
7.6 Annual Dayrate Adjustment
The Daywork Rates described in Sections 4 and 23.2 and the Standby
Rates described in Section 7.5 shall be reviewed by Operator
and Contractor beginning November 1 each year this contract remains in
effect so as to cause the Rates to be adjusted to approximately $100
per day less than average current market Rates for the areas of
operation. Beginning on such dates, Operator and Contractor shall
mutually attempt in good faith, to negotiate appropriate revisions in
Rates (Rates may only be revised upward under this provision). If,
after ten days, Operator and Contractor have not been able to mutually
agree on appropriate revisions in Rates, Contractor shall give written
notice to Operator of Contractor's proposed Revised Rates. Upon receipt
of such notice, Operator shall have 10 days to reply in writing to
Contractor; Operator may accept the Revised Rates as proposed by
Contractor or propose alternate Rates (such revised Rates from Operator
must be greater or equal to Rates then in effect under this contract).
Contractor shall have 10 days to accept such Rates as proposed by
Operator or terminate this contract at the end of the current well
without further liability and shall not be entitled to further
compensation, except as to pay for work already performed, charges
incurred prior to termination plus demobilization as specified in
Paragraph 4.2. Any Rate revisions pursuant to this paragraph shall
apply to wells spudded after each December 1 that the Contractor
remains in effect.
7.7 Rig Crew
A full crew shall consist of 5 members for each tour of duty.
a) Short Crew
If the rig is operating with a short crew, Contractor's day rate may be
reduced as follows:
<TABLE>
<CAPTION>
Number of Crew Day Rate
Members Short Reduction
-------------- ---------
<S> <C>
1 $ 20 per hour
2 $ 40 per hour
3 $125 per hour
4 or more Operations are considered
to be shut down
</TABLE>
b) 6 Man Crew
Contractor may operate the rig with a crew consisting of 6 or more
members. In such event, Contractor will charge Operator $8 per
hour (limited to 12 hours per 24 hour period) for each hour the rig
crew consists of 6 or more members.
7.8 Equipment Operating Limits
Operator agrees to limit utilization of Contractor's equipment to 90%
of the manufacturer's specification and ratings.
7.9 BOP Installation
Operator will pay a maximum of 12 hours daywork (24 hours for initial)
for nipple up of Contractor provided BOP equipment, after the head has
cooled from welding, or after the B Section has been installed. This
excludes testing, mud/gas separator hook-ups, or manifold rig up.
7.10 Contractor will observe lock out/tag out policy while working on
electrical equipment.
<PAGE> 11
7.11 The allowable shutdown time of four (4) hours per occurrence and 18
hours per month shall be increased to six (6) hours per occurrence and 24
hours per month if contractor provides a top-drive as part of the rig
inventory.
The allowable shutdown time of six (6) hours per occurrence and 24 hours
per month shall include repairs to the top-drive, and shall be prorated in
the event Contractor works less than a full calendar month while on
daywork.
During the first 30 days of operation for rigs 15, 16 and 22, the allowed
shutdown time will be zero (0) hours.
See Contract Page 5, paragraph 23.1
<PAGE> 12
Revised June, 1994
EXHIBIT "B"
(See Paragraph 8.3)
The following clauses, when required by law, are incorporated in the Contract
by reference as if fully set out:
(1) The Equal Opportunity Clause prescribed in 41 CFR 60-1.4.
(2) The Affirmative Action Clause prescribed in 41 CFR 60-250.4 regarding
veterans and veterans of the Vietnam era.
(3) The Affirmative Action Clause for handicapped workers prescribed in
41 CFR 60-741.4.
(4) The Certification of Compliance With Environmental Laws prescribed in
40 CFR 15.20.
(U.S. Daywork Contract - Exhibit "B" Page 1)
<PAGE> 13
OPERATOR'S ADDENDUM
CONTINUATION OF PARAGRAPH 5.2 OF THE CONTRACT
5.2 Notwithstanding anything to the contrary contained herein, payment of
any such bills shall not prejudice the right of Operator to protest or
question the correctness thereof.
Operator, upon notice in writing to Contractor, shall have the right to
audit Contractor's accounts and records relating to the Contract for
any calendar year within the twenty-four (24) month period following the
end of such calendar year; provided, however, the making of an audit
shall not extend the time for taking of written exception to and the
adjustments of accounts as provided above. The audits shall not be
conducted more than once each year without the prior approval of
Contractor, and shall be made at the expense of the Operator. The
Contractor shall reply in writing to an audit report within 180 days
after receipt of such report.
REPLACEMENT PARAGRAPHS 14.8 AND 14.9 OF THE CONTRACT
14.8 CONTRACTOR'S INDEMNIFICATION OF OPERATOR: Contractor shall release
Operator of any liability for, and shall protect, defend and indemnify
Operator, its officers, directors, employees and joint owners from and
against all claims, demands, and causes of action of every kind and
character, without limit and without regard to the cause or causes
thereof or the negligence of any party or parties, arising in
connection herewith in favor of Contractor's employees or Contractor's
subcontractors or their employees, or Contractor's invitees
(collectively the "Contractor's Parties"), on account of bodily injury,
death or damage to property. Contractor shall further release Operator
of any liability for, and protect, defend and indemnify Operator, it
officers, directors, employees and joint owners from and against all
claims, demands and causes of action of every kind and character,
without limit, arising in connection herewith in favor of any third
party or parties (excluding "Operator's Parties") on account of bodily
injury, death or damage to property caused by the negligent or willful
acts of Contractor's Parties. Likewise, Contractor shall be responsible
for and shall protect, defend and indemnify Operator, it officers,
directors, employees and joint owners from and against any fines or
sanctions imposed by any governmental agency or authority arising from
any unlawful act or acts committed by Contractor's Parties while in the
course of performance of this Contract. Contractor's indemnity under
this paragraph shall be without regard to and without any right to
contribution from any insurance maintained by Operator pursuant to
Paragraph 13. If it is judicially determined that the monetary limits
of insurance required hereunder or of the indemnities voluntarily
assumed under Paragraph 14.8 (which Contractor and Operator hereby
agree will be supported either by available liability insurance, under
which the insurer has no right of subrogation against the indemnities,
or voluntarily self-insured, in part or whole) exceed the maximum
limits permitted under applicable law, it is agreed that said insurance
requirements or indemnities shall automatically be amended to conform
to the maximum monetary limits permitted under such law. The provisions
of this paragraph shall be subject to those contained elsewhere in this
contract (including Paragraph 14.11); in case of conflict, the other
provisions of this contract shall govern.
14.9 OPERATOR'S INDEMNIFICATION OF CONTRACTOR: Operator shall release
Contractor of any liability for, and shall protect, defend and indemnify
Contractor, it officers, directors, employees and joint owners from and
against all claims, demands, and causes of action of every kind and
character, without limit and without regard to the cause or causes
thereof or the negligence of any party or parties, arising in connection
herewith in favor of Operator's employees or Operator's contractors or
their employees, or Operator's invitees, (collectively "Operator's
Parties") other than those parties identified in Paragraph 14.8 on
account of bodily injury, death or damage to property. Operator shall
further release Contractor of any liability for, and protect, defend and
indemnify Contractor, it officers, directors, employees and joint owners
from and against all claims, demands and causes of action of every kind
and character, without limit, arising in connection herewith in favor of
any third party or parties (excluding "Contractor's Parties") on account
of bodily injury, death or damage to property caused by the negligent or
willful acts of Operator's Parties. Likewise, Operator shall be
responsible for and shall protect, defend and indemnify Contractor, its
officers, directors, employees and joint owners from and against any
fines or sanctions imposed by any governmental agency or authority
arising from any unlawful act or acts committed by Operator's Parties
while in the course of performance of this contract. Operator's
indemnity under this paragraph shall be without regard to and without
any right to contribution from any insurance maintained by Contractor
pursuant to Paragraph 13. If it is judicially determined that the
monetary limits of insurance required hereunder or of the indemnities
voluntarily assumed under Paragraph 14.9 (which Contractor and Operator
hereby agree will be supported either by available liability insurance,
under which the insurer has no right of subrogation against the
indemnities, or voluntarily self-insured, in part or whole) exceed the
maximum limits permitted under applicable law, it is agreed that said
insurance requirements or indemnities shall automatically be amended to
conform to the maximum monetary limits permitted under such law. The
provisions of this paragraph shall be subject to those contained
elsewhere in this contract (Paragraph 14.11); in case of conflict, the
other provisions of this contract shall govern.
CHESAPEAKE OPERATING, INC.
FOR CONTRACTOR /s/ ILLEGIBLE
------------------------
FOR OPERATOR /s/ ILLEGIBLE
--------------------------
<PAGE> 1
EXHIBIT 10.8
================================================================================
OPTION AGREEMENT
BY AND BETWEEN
BAYARD DRILLING TECHNOLOGIES, INC.
AND
CHESAPEAKE ENERGY CORPORATION
DECEMBER 10, 1996
================================================================================
<PAGE> 2
OPTION AGREEMENT
This OPTION AGREEMENT (this "Agreement"), dated as of December
10, 1996, is made by and between Bayard Drilling Technologies, Inc. a Delaware
corporation (the "Company"), and Chesapeake Energy Corporation, a Delaware
corporation (the "Investor").
WITNESSETH:
WHEREAS, the Company, the Investor and certain other parties
named therein have entered into that certain Master Agreement, dated as of
November 26, 1996 (the "Master Agreement"), pursuant to which the Investor and
the other parties thereto acquired interests in the Company;
WHEREAS, the Master Agreement contemplates, among other things,
that (i) the Investor will enter into an option agreement with the Company
pursuant to which the Company will grant to the Investor an option to purchase
1,000,000 shares of common stock, par value $0.01 per share ("Common Stock"),
of the Company for a purchase price of $12 per share; (ii) the Investor will
enter into a Master Drilling Agreement, dated as of December 5, 1996 (the
"Master Drilling Agreement"), pursuant to which the Investor and the Company
will set forth certain governing terms of Drilling Agreements (as defined
herein) to be entered into by the Investor and the Company; (iii) Chesapeake
Operating Inc., a subsidiary of the Investor ("Chesapeake Operating"), shall
enter into each of six separate drilling agreements pursuant to which
Chesapeake Operating will employ specified drilling rigs of the Company (the
"Drilling Agreements"); (iv) the Investor, certain other stockholders of the
Company and the Company will enter into a Stockholders and Voting Agreement
(the "Stockholders Agreement") and a Registration Rights Agreement (the
"Registration Rights Agreement"); and
WHEREAS, the Investor and the Company desire to set forth the
terms and conditions of such option.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the mutual benefits to be gained by
the performance thereof and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged and accepted, the parties
hereto hereby agree as follows:
SECTION 1. Option; Initial Exercise Price. Subject to the
terms, conditions and limitations contained in this Agreement, the Investor is
hereby granted the right to purchase up to 1,000,000 shares of Common Stock for
a purchase price of $12 per share (the "Option"). The Option will expire as
follows (each, an "Expiration Date"):
(a) As to 334,000 shares of Common Stock, the Option
will expire at 5:00 p.m., Dallas, Texas time, on December 5, 2000.
<PAGE> 3
(b) As to 666,000 shares of Common Stock, the Option
will expire at 5:00 p.m., Dallas, Texas time, on December 5, 1998;
provided, however, that if, on or before December 5, 1998, Chesapeake
Operating extends at its option the Drilling Agreement with respect to
each of four drilling rigs for additional two year terms in accordance
with the terms of the applicable Drilling Agreement, the Option
expiration date as to 166,500 shares of Common Stock will be extended
to, and expire at 5:00 p.m., Dallas, Texas time, on December 5, 2000,
for each such Drilling Agreement so extended by Chesapeake Operating.
Such right shall be evidenced by a certificate (the "Option Certificate")
issued to the Investor by the Company in the form attached as Exhibit A hereto.
The Option may be converted into shares of Common Stock upon the payment to the
Company by the Investor of the sum of $12 per share in cash (the "Exercise
Price"). The Option may not be exercised at any time that the Investor is not
in full compliance with any of the terms or provisions of the Master Drilling
Agreement or any of the Drilling Agreements.
SECTION 2. Rights of Holders and Duties of Company. Until
such time as the Investor shall exercise the Option, the Company shall have no
obligations or duties to the Investor as the holder of the Option, except as
expressly set forth in this Agreement, the Stockholders Agreement or the
Registration Rights Agreement (each as defined in the Master Agreement). The
Option does not confer upon the Investor any right to vote or to consent to or
to receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever or any other rights or liabilities as a shareholder, prior
to the exercise thereof. At such time as the Investor has exercised the
Option, in whole or in part, the Investor shall have only such rights and
benefits as are expressly set forth in this Agreement or the Stockholder
Agreement or which accrue to all shareholders in their capacity as such
pursuant to the Articles of Incorporation or Bylaws of the Company, or
applicable law.
SECTION 3. Notice of Dividends. If the Board of Directors of
the Company shall declare any dividend or other distribution payable to holders
of Common Stock (except a dividend payable solely in Common Stock), the Company
shall mail notice thereof to the Investor not less than thirty (30) days prior
to the record date fixed for determining shareholders entitled to participate
in such dividend or other distribution and the Investor shall not be entitled
to participate in such dividend or other distribution or be entitled to any
rights on account or as a result thereof unless and to the extent the Investor
exercises the Option prior to such record date, and then such Investor shall
have the right to participate in the dividend or distribution only with respect
to shares of Common Stock actually received by the Investor upon the full or
partial exercise of the Option.
SECTION 4. Subdivision or Combination of Common Stock or Stock
Dividend. In the event the Company shall at any time subdivide its
outstanding shares of Common Stock into a greater number of shares, the
Exercise Price set forth in Section 1 hereof in effect immediately prior to
such subdivision shall be proportionately reduced and the number of shares of
Common Stock purchasable upon the exercise of the Option shall be
proportionately increased. Conversely,
2
<PAGE> 4
in the event the outstanding shares of Common Stock of the Company shall be
combined into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination shall be proportionately increased and
the number of shares of Common Stock purchasable upon the exercise of the
Option shall be proportionately decreased. If the Company shall hereafter
declare or pay a dividend or make a distribution upon Common Stock in the form
of capital stock or any security convertible into Common Stock, then in each
case, from and after the record date for determining the shareholders entitled
to receive such dividend or distribution, the Exercise Price in effect
immediately prior to such record date shall be proportionately reduced. For
the purposes hereof, the payment of a dividend in, or the distribution of,
securities convertible into Common Stock, shall be deemed to have effected an
increase in the number of outstanding shares of Common Stock equal to the
number of shares of Common Stock into which such securities shall be initially
convertible. The Exercise Price shall not be adjusted to reflect any of the
following: (i) the issuance of shares pursuant to any employee stock option
plans of the Company; (ii) the issuance of shares in exchange for or to
purchase assets or other operating entities; (iii) issuance of shares in
exchange for, upon conversion of, upon the exercise of or in respect of any
shares of preferred stock of any class of the Company; and (iv) the issuance of
shares of equity securities for cash.
SECTION 5. Investment Representations. The Investor hereby
represents and warrants to the Company as follows:
(a) The Investor is acquiring the Option, and the
shares of Common Stock issuable upon exercise of the Option, for
investment purposes only and not with a view to the resale or
distribution of all or any part thereof. The offering of the Option to
the Investor was made only through direct, personal communication
between the duly authorized representatives of such Investor and the
Company and not through any public solicitation or advertising. The
Investor acknowledges that neither the Option nor the shares of Common
Stock issuable upon exercise thereof have been registered under the
Securities Act of 1933, as amended (the "Securities Act") or the
securities or "blue sky" laws of any state or other domestic or foreign
jurisdiction, and that none of such securities may be sold, transferred
or otherwise disposed of except pursuant to an effective registration
statement thereunder or an applicable exemption therefrom.
(b) The Investor (i) has such knowledge and experience
in financial and business matters such that it is capable of evaluating
the merits and risks of its investment in the Option and the Common
Stock and has the financial ability to assume the monetary risk
associated therewith; (ii) is able to bear the complete loss of its
investment in the Option and the Common Stock; (iii) has received such
documents and information as it has requested and has had the
opportunity to ask questions of, and receive answers from, the Company
and its management concerning the Company and the terms and conditions
of the offering of the Option and to obtain additional information; (iv)
is an "accredited investor" as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act; (v) is not an entity formed solely
to make this investment; and (vi) is not relying upon any statements
3
<PAGE> 5
or instruments made or issued by any person or entity other than the
Company and its officers in making its decision to invest in the Option
and the Common Stock.
SECTION 6. Legend. Until (a) a registration statement with
respect to the Option or the shares of Common Stock issued upon exercise
thereof has been declared effective under the Securities Act, or (b) the holder
of such securities delivers to the Company a written opinion of counsel to such
holder in form and substance satisfactory to the Company to the effect that
such legend is no longer necessary under the Securities Act, the Company shall
cause the Option Certificate and each certificate representing shares of Common
Stock issued upon exercise thereof to be stamped or otherwise imprinted with a
legend in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR THE SECURITIES OR BLUE
SKY LAWS OF ANY STATE OR OTHER JURISDICTION. THESE SECURITIES
MAY NOT BE SOLD, ASSIGNED, PLEDGED OR IN ANY OTHER MANNER
TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH SUCH ACT AND
SUCH LAWS.
SECTION 7. Consent to Amendments; Waivers. Except as
otherwise expressly provided herein, the provisions of this Agreement shall not
be amended or waived except upon the written agreement of the Company and the
Investor.
SECTION 8. No Assignment. This Agreement may not be assigned
by the Investor without the written consent of the Company. Any purported or
attempted assignment in violation of this Section 8 shall be void ab initio.
In addition, this Agreement and the Option are subject to the transfer
restrictions and other provisions set forth in the Stockholders Agreement.
SECTION 9. Severability. Whenever possible, each provision of
this Agreement shall be interpreted so as to be effective and valid under
applicable law. If any provision of this Agreement is held to be prohibited by
or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
SECTION 10. Headings. The descriptive headings of this
Agreement are inserted for convenience of reference only and do not constitute
a part of and shall not affect the interpretation of this Agreement.
SECTION 11. Notices. Any notices required or permitted to be
sent hereunder shall be delivered by hand, by telex or telecopier, or by
certified or registered mail, postage prepaid and return receipt requested, or
delivered by overnight courier service to the following addresses, or such
other address as any party hereto designates by written notice to the Company.
Notices shall be deemed to have been given upon delivery, if delivered by hand,
three days after mailing, if mailed,
4
<PAGE> 6
one business day after delivery to the courier, if delivered by overnight
courier service, and upon receipt of an appropriate electronic confirmation, if
by telex or telecopier:
If to the Company, to:
Bayard Drilling Technologies, Inc.
Suite 400E, Lakepoint Towers
4005 Northwest Expressway
Oklahoma City, Oklahoma 73116
Attn: President
(405) 879-3847 (fax)
If to the Investor, to:
Chesapeake Energy Corporation
P. O. Box 18496
Oklahoma City, Oklahoma 73154-0456
Attn: Marcus C. Rowland
(405) 848-8000 Ext. 232
(405) 879-9580 (fax)
SECTION 12. Governing Law. This Agreement shall be governed in
accordance with the laws of the State of Delaware, without giving effect to the
choice of law principles thereof.
SECTION 13. Entire Agreement. This Agreement constitutes the
entire agreement of the parties concerning the transactions contemplated
hereby, and supersedes all prior agreements and understandings, written or
oral, regarding the subject matter hereof.
SECTION 14. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed and
delivered shall be deemed an original, and all of which together shall
constitute one and the same instrument.
5
<PAGE> 7
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date first above written.
COMPANY:
BAYARD DRILLING TECHNOLOGIES, INC.
By: /s/ JAMES E. BROWN
------------------------------
Name:
--------------------------
Title:
--------------------------
INVESTOR:
CHESAPEAKE ENERGY CORPORATION
By: /s/ AUBREY K. MCCLENDON
------------------------------
Name:
--------------------------
Title:
--------------------------
6
<PAGE> 8
EXHIBIT A
<PAGE> 1
EXHIBIT 10.9
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE OR
OTHER JURISDICTION. THESE SECURITIES MAY NOT BE SOLD, ASSIGNED, PLEDGED OR IN
ANY OTHER MANNER TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH SUCH ACT
AND SUCH LAWS.
Option Certificate No. 1
OPTION TO PURCHASE
1,000,000 SHARES OF COMMON STOCK
BAYARD DRILLING TECHNOLOGIES, INC.
Incorporated under the laws
of the State of Delaware
This certifies that, for value received, Chesapeake Energy
Corporation, the registered holder hereof (the "Holder"), is entitled to
purchase from BAYARD DRILLING TECHNOLOGIES, INC. (the "Company"), at any time
during the period commencing the date hereof and ending at 5:00 p.m., Dallas,
Texas time, on the applicable Expiration Date set forth in the Option Agreement
(as hereinafter defined), at a purchase price per share of $12 (the "Exercise
Price"), the number of shares of Common Stock of the Company set forth above
(the "Shares"). The number of Shares purchasable upon exercise of this Option
and the Exercise Price shall be subject to adjustment from time to time as set
forth in the Option Agreement.
This Option may be exercised in whole or in part by presentation
of this Option Certificate with the Purchase Form attached hereto duly
executed, accompanied by payment of the Exercise Price, at the principal office
of the Company. Payment of the Exercise Price shall be made by wire transfer
of immediately available funds or by certified or cashiers' check or any
combination thereof.
This Option is issued under and in accordance with an Option
Agreement (the "Option Agreement"), dated as of December 5, 1996, by and among
the Company and the Holder and is subject to the terms and provisions contained
in the Option Agreement (including those terms that provide for periods during
which the Option may not be exercised).
Upon any partial exercise of this Option, there shall be signed
and issued to the Holder a new Option Certificate in respect of the Shares as
to which this Option shall not have been exercised. This Option may be
exchanged at the office of the Company by surrender of this Option Certificate
properly endorsed for one or more new Option Certificates representing the same
aggregate number of Shares as are evidenced by the Option exchanged.
BAYARD DRILLING TECHNOLOGIES, INC.
By: /s/ JAMES E. BROWN
--------------------------
President
Dated:
<PAGE> 2
BAYARD DRILLING TECHNOLOGIES, INC.
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise the right
of purchase represented by the within Option Certificate for, and to purchase
thereunder, _____________________________________ shares of Common Stock (the
"Shares") provided for therein, and requests that certificates for the Shares
be issued in the name of:
_________________________________________
_________________________________________
_________________________________________
(Please print or type name, address and Social Security
Number or Taxpayer Identification Number)
and, if said number of Shares shall not be all the Shares purchasable
thereunder, that a new Option Certificate with respect to the balance of the
Shares purchasable under the within Option Certificate be registered in the
name of the undersigned Holder as below indicated and delivered to the address
stated below.
Dated:______________________
Name of Holder:
__________________________________________________
(Please Print)
Address: ___________________________________________
___________________________________________
___________________________________________
Signature:________________________________________
NOTE: THE ABOVE SIGNATURE MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THIS OPTION CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 10.10
SECURITIES PURCHASE AGREEMENT
APRIL 30, 1997
BAYARD DRILLING TECHNOLOGIES, INC.
ENERGY SPECTRUM PARTNERS LP
AND
CHESAPEAKE ENERGY CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II - ISSUANCE AND PURCHASE OF THE SECURITIES . . . . . . . . . . . . 4
2.1 Purchase and Sale of the Initial Securities . . . . . . . . 4
2.2 Initial Closing . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Initial Closing Delivery . . . . . . . . . . . . . . . . . . 4
2.4 Initial Closing Payment . . . . . . . . . . . . . . . . . . 4
2.5 Purchase and Sale of the Additional Securities . . . . . . . 5
2.6 Second Closing . . . . . . . . . . . . . . . . . . . . . . . 5
2.7 Second Closing Delivery . . . . . . . . . . . . . . . . . . 5
2.8 Second Closing Payment . . . . . . . . . . . . . . . . . . . 5
2.9 Further Assurances . . . . . . . . . . . . . . . . . . . . . 5
2.10 Separate Purchases . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . 6
3.1 Incorporation and Good Standing . . . . . . . . . . . . . . 6
3.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 No Conflicts and Consents . . . . . . . . . . . . . . . . . 6
3.4 Valid Issuance . . . . . . . . . . . . . . . . . . . . . . . 6
3.5 Capitalization . . . . . . . . . . . . . . . . . . . . . . . 7
3.6 Financial Statements . . . . . . . . . . . . . . . . . . . . 8
3.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.9 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS . . . . . . . . 8
4.1 Incorporation and Good Standing . . . . . . . . . . . . . . 8
4.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 No Conflicts and Consents . . . . . . . . . . . . . . . . . 9
4.4 Investment Representations . . . . . . . . . . . . . . . . . 9
4.5 Accredited Investor . . . . . . . . . . . . . . . . . . . . 9
4.6 Fees and Commissions . . . . . . . . . . . . . . . . . . . . 10
ARTICLE V - ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . 10
5.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . 10
5.2 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . 10
5.3 Additional Actions . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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<TABLE>
<S> <C>
5.4 Certain Restrictions . . . . . . . . . . . . . . . . . . . . 11
5.5 Maintenance of Business . . . . . . . . . . . . . . . . . . 11
ARTICLE VI - CONDITIONS TO INITIAL CLOSING . . . . . . . . . . . . . . . . . 12
6.1 Conditions to All Parties' Obligation to Close . . . . . . . 12
6.2 Conditions to Purchasers' Obligation to Close . . . . . . . 12
6.3 Conditions to the Company's Obligation to Close . . . . . . 13
ARTICLE VII - CONDITIONS TO SECOND CLOSING . . . . . . . . . . . . . . . . . 14
7.1 Conditions to Obligation to Close . . . . . . . . . . . . . 14
ARTICLE VIII - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 14
8.1 Consent to Amendments; Waivers . . . . . . . . . . . . . . . 14
8.2 No Assignment . . . . . . . . . . . . . . . . . . . . . . . 14
8.3 Severability . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 16
8.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 16
8.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.9 Public Announcements . . . . . . . . . . . . . . . . . . . . 16
8.10 Survival of Representations and Warranties . . . . . . . . . 17
8.11 No Third Party Beneficiaries . . . . . . . . . . . . . . . . 17
8.12 Execution in Counterparts . . . . . . . . . . . . . . . . . 17
8.13 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
EXHIBITS AND SCHEDULES
Exhibit A - Form of Note
Exhibit B - Form of Series A Warrant
Exhibit C - Form of Series B Warrant
Exhibit D - Form of Restated Registration Agreement
Exhibit E - Form of Restated Stockholders Agreement
Exhibit F - Form of Opinion of Company's Counsel
Schedule 2.1 - Securities to be Purchased
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<PAGE> 4
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT ("Agreement") dated as of April
30, 1997, by and among Bayard Drilling Technologies, Inc., a Delaware
corporation (the "Company"), Chesapeake Energy Corporation, an Oklahoma
corporation ("Chesapeake"), and Energy Spectrum Partners LP, a Delaware limited
partnership ("Energy Spectrum", and together with Chesapeake, the
"Purchasers").
WITNESSETH:
WHEREAS, the Purchasers desire to purchase from the Company,
and the Company desires to issue and sell to the Purchasers, (i) an aggregate
of 570,000 shares (the "Shares") of common stock, par value $0.01 per share
("Common Stock"), of the Company, (ii) $20,520,000 aggregate principal amount
of the Company's Subordinated Notes (the "Notes"), (iii) Series A Warrants of
the Company representing the right to purchase 399,000 shares of Common Stock
at an exercise price of $0.01 per share (the "Series A Warrants"), and (iv)
Series B Warrants of the Company representing the right to purchase 456,000
shares of Common Stock at an exercise price of $15.00 per share (the "Series B
Warrants" and, collectively with the Series A Warrants, the "Warrants" and,
together with the Shares and the Notes, the "Initial Securities");
WHEREAS, in addition to the above described purchases,
Chesapeake desires to purchase from the Company at the option of the Company,
and the Company desires to issue and sell, at its option, to Chesapeake, (i)
an additional 60,000 shares of Common Stock (the "Additional Shares"), (ii) an
additional $2,160,000 aggregate principal amount of the Company's Subordinated
Notes (the "Additional Notes") and (ii) additional Series A Warrants
representing the right to purchase 42,000 shares of Common Stock at an exercise
price of $0.01 per share (the "Additional Series A Warrants") and Series B
Warrants representing the right to purchase 48,000 shares of Common Stock at an
exercise price of $15.00 per share (the "Additional Series B Warrants" and,
collectively with the Additional Series A Warrants, the "Additional Warrants"
and, together with the Additional Shares and the Additional Notes, the
"Additional Securities");
WHEREAS, in connection herewith, the parties hereto, together
with the other shareholders of the Company, are entering into (i) the Restated
Stockholders Agreement (as hereinafter defined), providing for certain rights
and obligations with respect to the management of the Company, the voting of
Common Stock and the Warrants, restrictions on transfer, and certain other
matters and (ii) the Restated Registration Agreement (as hereinafter defined)
providing the holders of Common Stock with certain rights in connection with
the registration of Common Stock.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
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<PAGE> 5
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Initial Closing" means the closing of the sale and purchase
of the Initial Securities pursuant to this Agreement.
"Interest Coverage Ratio" means, at any date, the ratio of
Cash Flow to Total Interest Expense. For this ratio, "Cash Flow" means the
arithmetic sum of the Company's trailing 12 month net income, interest expense,
deferred taxes, depreciation and amortization expense, plus or minus non-
recurring items of gain or loss included in net income, accounted on a
consolidated basis and prepared in accordance with generally accepted
accounting principles as of the date of determination, and "Total Interest
Expense" means the sum of the interest expense on all of the Company's long-
term debt and capitalized lease obligations during such trailing 12 month
period.
"Permitted Debt" means (i) accounts payable and accrued
liabilities incurred in the ordinary course of business; (ii) letters of
credit, performance and bid bonds obtained by the Company in the ordinary
course of business; (iii) debt incurred by any non-consolidated subsidiary that
is non-recourse to the Company; (iv) the Notes, the Additional Notes and the
PIK Notes (v) amounts borrowed under (a) the Loan Agreement dated as of
December 10, 1996 between the Company and The CIT Group/Equipment Financing,
Inc., (b) an Amended and Restated Loan Agreement of up to $31,000,000 to be
entered into between the Company and Fleet Capital Corporation and The CIT
Group/Equipment Financing, Inc. or another lender, (c) The CIT Group/Equipment
Financing, Inc. sale and leaseback arrangements and (d) the proposed revolving
credit facility of up to $10,000,000 to be entered into between the Company and
Fleet Capital Corporation or another lender and (vi) any refinancing of amounts
in clause (v).
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"PIK Notes" means those certain notes issued from time to time
by the Company to the holders of the Notes and the Additional Notes as provided
for in Section 1 thereof.
"Related Agreements" means the Restated Registration Agreement
and the Restated Stockholders Agreement.
"Restated Registration Agreement" means the Amended and
Restated Registration Rights Agreement by and among the Company, the Purchasers
and the other stockholders of the Company in the form of Exhibit D.
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<PAGE> 6
"Restated Stockholders Agreement" means the Amended and
Restated Stockholders and Voting Agreement by and among the Company, the
Purchasers and the other stockholders of the Company in the form of Exhibit E.
"Second Closing" means the closing of the sale and purchase of
the Additional Securities pursuant to this Agreement.
"Securities" means the Initial Securities and the Additional
Securities.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means the principal of (and premium if any) and
interest on, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company, whether
or not such claim for post-petition interest is allowed in such Proceeding),
and other obligations with respect of, the following, whether incurred on or
prior to the date of this Agreement: (i) every obligation of the Company for
money borrowed; (ii) every obligation of the Company evidenced by bonds,
debentures, notes or other similar instruments, including obligations incurred
in connection with the acquisition of property, assets or businesses; (iii)
every reimbursement obligation of the Company with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account of
the Company; (iv) every obligation of the Company issued or assumed as the
deferred purchase price of property or service (but excluding trade payables or
accrued liabilities arising in the ordinary course of business); (v) every
capitalized lease obligation of the Company; and (vi) every obligation of the
type referred to in clauses (i) through (v) of another person the payment of
which the Company has guaranteed or is responsible or liable, directly or
indirectly, as obligor or otherwise; provided, that, Senior Debt shall not be
deemed to include (a) any indebtedness or obligation of the Company which when
incurred and without respect to any election under Section 1111(b) of the
Bankruptcy Code, was without recourse to the Company, (b) any indebtedness or
obligation of the Company to any of its subsidiaries or employees, (c) any
liability for taxes, (d) any indebtedness or other monetary obligations to
trade creditors created or assumed by the Company in the ordinary course of
business in connection with the obtaining of goods, materials or services, (e)
every obligation of the type referred to in clauses (i) through (v), if the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, provides that such obligation is not superior in right of payment
to the Notes or to other obligations which are pari passu with, or subordinated
to, the Notes and (f) the Notes, the Additional Notes and the PIK Notes.
"Tangible Net Worth" means, at any date, the sum of the
Company's capital stock (excluding treasury stock, but including warrants and
preferred stock), surplus (including earned surplus, capital surplus and the
balance of the current profit and loss account not transferred to surplus)
accounted on a consolidated basis appearing on a consolidated balance sheet
prepared in accordance with generally accepted accounting principles as of the
date of determination, excluding, however, from the determination, all inter-
company transactions and after deducting therefrom the net book value of all
assets (after deducting any reserves applicable thereto) which would be treated
3
<PAGE> 7
as intangibles under generally accepted accounting principles (including,
without limitation, such items as goodwill, trademarks, trade names, patents
and licenses, franchises and operating rights) and excluding the amount of the
Company's equity investment in any non-consolidated subsidiary.
"Total Debt" means, at any date, total indebtedness for
borrowed money, including the sum of all Senior Debt outstanding, the Notes,
the Additional Notes and the PIK Notes.
"Trend" means Trend Drilling Co., an Oklahoma corporation.
"Trend Acquisition" means the acquisition by the Company of
all of the outstanding capital stock of Trend pursuant to that certain Stock
Purchase Agreement, dated as of February 13, 1997, by and between Harold G.
Hamm, an individual acting in his capacity as Trustee of the Harold G. Hamm
Revocable Inter Vivos Trust dated April 23, 1984, and the Company.
ARTICLE II
ISSUANCE AND PURCHASE OF THE SECURITIES
2.1 Purchase and Sale of the Initial Securities. Subject
to the satisfaction of the terms and conditions herein set forth and in
reliance upon the respective representations and warranties of the parties set
forth herein or in any document delivered pursuant hereto, at the Initial
Closing the Company shall sell to each Purchaser, and each Purchaser shall
purchase from the Company, the Initial Securities set forth on Schedule 2.1
hereto, in exchange for payment to the Company by each Purchaser of the
purchase price set forth thereon.
2.2 Initial Closing. The Initial Closing shall take
place at the offices of Baker & Botts, L.L.P., 2001 Ross Avenue, Suite 700,
Dallas, Texas 75201, on May 1, 1997, at 9:00 a.m., Dallas, Texas time, or at
such other time, date and place as may be agreed to in writing by the Company
and the Purchasers.
2.3 Initial Closing Delivery. At the Initial Closing,
the Company shall deliver to each of the Purchasers, against payment by each
such Purchaser of the purchase price related thereto: (i) one or more
certificates representing the Shares to be purchased by such Purchaser, duly
issued and in a form sufficient to vest title thereto fully in such Purchaser;
(ii) a Note, in the aggregate principal amount to be purchased by such
Purchaser, substantially in the form of Exhibit A hereto; (iii) a Series A
Warrant representing the right of such Purchaser to purchase the number of
shares of Common Stock provided for on Schedule 2.1, substantially in the form
of Exhibit B hereto; and (iv) a Series B Warrant representing the right of such
Purchaser to purchase the number of shares of Common Stock provided for on
Schedule 2.1, substantially in the form of Exhibit C hereto.
2.4 Initial Closing Payment. At the Initial Closing, (i)
each Purchaser shall pay to the Company, by wire transfer of immediately
available funds to an account designated by the
4
<PAGE> 8
Company or by such other means as may be acceptable to the Company, the
aggregate purchase price to be paid by such Purchaser as provided for on
Schedule 2.1 and (ii) the Company shall pay, by wire transfer of immediately
available funds to an account designated by Chesapeake or by such other means
as may be acceptable to Chesapeake, an amount equal to $250,000.
2.5 Purchase and Sale of the Additional Securities. At
anytime on or prior to April 30, 1998, the Company shall have the right, but
not the obligation, to sell the Additional Securities to Chesapeake on the
terms and subject to the conditions set forth herein. The Company may exercise
such right by delivering a written notice (the "Second Closing Notice") of such
exercise to Chesapeake at least 15 days prior to the date of the Second Closing
set forth in such Second Closing Notice. Subject to the satisfaction of the
terms and conditions herein set forth and in reliance upon the respective
representations and warranties of the parties set forth herein or in any
document delivered pursuant hereto, at the Second Closing the Company shall
sell to Chesapeake, and Chesapeake shall purchase from the Company, the
Additional Securities, in exchange for payment to the Company by Chesapeake of
$3,000,000.
2.6 Second Closing. The Second Closing shall take place
at such time, date and place as may be agreed to in writing by the Company and
Chesapeake, provided the Second Closing shall occur on or prior to April 30,
1998.
2.7 Second Closing Delivery. At the Second Closing, the
Company shall deliver to Chesapeake, against payment by Chesapeake of the
purchase price set forth in Section 2.5: (i) the Additional Shares; (ii) the
Additional Note, substantially in the form of Exhibit A hereto; (iii) the
Additional Series A Warrant, substantially in the form of Exhibit B hereto; and
(iv) the Additional Series B Warrant, substantially in the form of Exhibit C
hereto.
2.8 Second Closing Payment. At the Second Closing,
Chesapeake shall pay to the Company, by wire transfer of immediately available
funds to an account designated by the Company or by such other means as may be
acceptable to the Company, the aggregate purchase price to be paid by
Chesapeake as provided for in Section 2.5.
2.9 Further Assurances. At or after the each Closing,
the parties hereto shall execute and deliver such additional documents and take
such additional actions as any party may reasonably deem to be necessary or
advisable in order to consummate the transactions contemplated by this
Agreement and to carry out and effectuate the purposes intended hereby to be
accomplished. The parties hereto further agree to cooperate and take such
additional actions as may be necessary for the Company to enter into an Amended
and Restated Loan Agreement with The CIT Group/Equipment Financing, Inc. and
Fleet Capital Corporation, including a subordination agreement.
2.10 Separate Purchases. The sale of the Initial
Securities and the Additional Securities hereunder to the Purchasers are to be
separate sales, and neither of the Purchasers is to be responsible for the acts
or defaults of the other Purchaser at either Closing.
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<PAGE> 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company hereby represents and warrants to each of the
Purchasers that the following are true and correct as of the date hereof and
will be true and correct at and as of each Closing as if made on the date of
such Closing:
3.1 Incorporation and Good Standing. The Company is duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. The Company has all requisite corporate power and authority to
own the properties owned by it, to conduct its business as presently conducted
and to execute and deliver this Agreement and the Related Agreements and the
other documents and instruments contemplated hereunder and thereunder to be
executed and delivered by it to consummate the transactions contemplated
hereunder and thereunder.
3.2 Authority. The execution and delivery of this
Agreement and the Related Agreements and the consummation of the transactions
contemplated hereunder and thereunder by the Company have been duly and validly
authorized by all requisite corporate action on the part of the Company. This
Agreement and the Related Agreements have been duly and validly executed by the
Company and constitute legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
affecting creditors' rights generally or by general principles of equity.
3.3 No Conflicts and Consents. The execution, delivery
and performance by the Company of this Agreement and the Related Agreements do
not, and the consummation by the Company of the transactions contemplated
hereunder and thereunder will not (i) conflict with, or result in any violation
or breach of, any provision of the certificate of incorporation or bylaws of
the Company, (ii) conflict with, or result in any violation or breach of,
constitute a default under, give rise to any right of termination or
acceleration (with or without notice or the lapse of time or both) pursuant to,
any term or provision of any material note, bond, mortgage, indenture, lease,
franchise, permit or license to which the Company is a party or by which the
Company's assets may be bound, (iii) require the Company to obtain any consent,
approval, permit, notice, action, authorization or waiver of or file with or
give notice to any governmental authority or any other Person not a party to
this Agreement or any of the Related Agreements, (iv) conflict with, or result
in any violation of, any material law, ordinance, statute, rule or regulation
of any governmental authority or any order, writ, injunction, judgment or
decree of any court, arbitrator or government authority or (v) result in the
creation or imposition of any lien, charge or encumbrance upon any assets of
the Company.
3.4 Valid Issuance.
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<PAGE> 10
(a) The Shares have been duly authorized, and when
issued, sold and delivered in accordance with the terms of this
Agreement, will be validly issued, fully paid, non-assessable and free
and clear of all liens, charges, claims and encumbrances created by
the Company and will not have been issued in violation of the
preemptive rights of any stockholder of the Company. Upon the
delivery to the Purchasers of the certificates evidencing the Shares,
the Purchasers shall acquire good and indefeasible title to the
Shares.
(b) The Notes and the Additional Notes have been duly
authorized, and when executed by an authorized officer of the Company
and sold and delivered in accordance with the terms of this Agreement,
will be valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws
affecting creditors' rights generally or by general principles of
equity.
(c) The Warrants and the Additional Warrants have been
duly authorized, and when sold and delivered in accordance with the
terms of this Agreement, will be valid and binding obligations of the
Company, enforceable against the Company in accordance with their
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other
laws affecting creditors' rights generally or by general principles of
equity.
(d) The shares of Common Stock issuable upon exercise of
the Warrants and the Additional Warrants have been validly reserved
and, upon issuance in accordance with the exercise provisions of the
Warrants or Additional Warrants, as applicable, will be validly
issued, fully paid, non-assessable and free and clear of all liens,
charges, claims and encumbrances created by the Company.
3.5 Capitalization. The authorized capital stock of the
Company consists of (a) 10,000,000 shares of Common Stock, of which (i)
2,850,000 shares are issued and outstanding, (ii) 1,000,000 shares are subject
to issuance pursuant to an option agreement with Chesapeake (iii) up to 150,000
shares are subject to issuance pursuant to a warrant issued to The CIT
Group/Equipment Financing, Inc., (iv) up to 50,000 shares are subject to
issuance pursuant to a warrant to be issued to R.T. Oliver Drilling, Inc., (v)
125,000 shares are to be issued to the sole stockholder of Trend in connection
with the Trend Acquisition, (vi) 200,000 shares are to be issued to the
shareholders of Ward Drilling Company, and (vii) up to 100,000 shares are
subject to issuance pursuant to a warrant to be issued to the shareholders of
Ward Drilling Company and (b) 2,000,000 shares of Preferred Stock, $0.01 par
value per share, none of which are issued and outstanding. No shares of capital
stock of the Company are held in its treasury. All outstanding shares of
capital stock of the Company have been validly issued and are fully paid and
non-assessable. Except as referred to in this Section 3.5, and any share
options for Common Stock granted or to be granted under the Company's 1997
Stock Option and Stock Award Plan, there are no outstanding options, warrants,
conversion or other rights or agreements of any kind (other than this
Agreement, the Related
7
<PAGE> 11
Agreements and the Master Agreement, dated as of November 26, 1996, of which
each Purchaser is a party) for the purchase or acquisition from, or the sale or
issuance by, the Company of any shares of capital stock of the Company, and no
authorization therefor has been given.
3.6 Financial Statements. The Company's consolidated
balance sheet as of December 31, 1996 and the related consolidated statements
of operations for the year then ended have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis and
present fairly, in all material respects, the financial position of the Company
at such date and the results of operations for the year then ended in
conformity with such principles.
3.7 Taxes. The Company has filed or caused to be filed
all tax returns required to be filed and has paid or caused to be paid all
taxes as shown on such returns or on any assessment received by it to the
extent that such taxes have become due and except as to such taxes being
contested in good faith by appropriate proceedings for which adequate reserves
are being maintained The Company has established reserves to the extent it
believes to be adequate for the payment of additional taxes for years which
have not been audited by the respective tax authorities.
3.8 Litigation. There are no suits or proceedings
pending or, to the Company's knowledge, threatened which might reasonably be
expected to have a material adverse effect on the Company.
3.9 Insurance. The Company is a beneficiary of policies
of insurance, issued by insurers of recognized responsibility, providing
adequate coverage to insure the assets of the Company against such risks and in
such amounts as are prudent and customary in the Company's industry. All
premiums due on such policies have been paid and no notice of cancellation has
been received with respect thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS
Each Purchaser, severally and not jointly, hereby represents and
warrants to the Company that the following are true and correct as of the date
hereof and will be true and correct at and as of the Initial Closing and, in
the case of Chesapeake, at the Second Closing, as if made on the date of such
Closing:
4.1 Incorporation and Good Standing. The Purchaser is a
legal entity duly incorporated or formed and validly existing under the laws of
its jurisdiction of organization, and has all requisite power and authority to
enter into this Agreement and the Related Agreements and to consummate the
transactions contemplated hereunder and thereunder.
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<PAGE> 12
4.2 Authority. The execution and delivery of this
Agreement and the Related Agreements and the consummation of the transactions
contemplated hereunder and thereunder by the Purchaser have been duly and
validly authorized by all requisite partnership or corporate action on the part
of the Purchaser. This Agreement and the Related Agreements have been duly and
validly executed by the Purchaser and constitute legal, valid and binding
obligations of the Purchaser, enforceable against the Purchaser in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws affecting creditors' rights generally or by general
principles of equity.
4.3 No Conflicts and Consents. The execution, delivery
and performance by the Purchaser of this Agreement and the Related Agreements
do not, and the consummation by the Purchaser of the transactions contemplated
hereunder and thereunder will not (i) conflict with, or result in any violation
or breach of, any provision of the certificate of incorporation or bylaws or
partnership agreement, as applicable, of the Purchaser, (ii) conflict with, or
result in any violation or breach of, constitute a default under, give rise to
any right of termination or acceleration (with or without notice or the lapse
of time or both) pursuant to, any term or provision of any material note, bond,
mortgage, indenture, lease, franchise, permit or license to which the Purchaser
is a party or by which the Purchaser's assets may be bound, (iii) require the
Purchaser to obtain any consent, approval, permit, notice, action,
authorization or waiver of or file with or give notice to any governmental
authority or any other Person not a party to this Agreement or any of the
Related Agreements or (iv) conflict with, or result in any violation of, any
material law, ordinance, statute, rule or regulation of any governmental
authority or any order, writ, injunction, judgment or decree of any court,
arbitrator or government authority.
4.4 Investment Representations. The Purchaser is
acquiring the Securities (including shares of Common Stock issuable upon
exercise of the Warrants or Additional Warrants) for its own account, for
investment purposes only and not with a view to resale or any other
distribution thereof, in whole or in part, in violation of the Securities Act.
The Purchaser acknowledges and agrees that it may not assign, sell, hypothecate
or otherwise transfer the Securities (including shares of Common Stock issuable
upon exercise of the Warrants or Additional Warrants) unless (i) (A) a
registration statement is in effect under the Securities Act with respect to
the sale or other distribution of such Securities (including shares of Common
Stock issuable upon exercise of the Warrants or Additional Warrants), or (B) a
written opinion of counsel acceptable to the Company is obtained to the effect
that no such registration is required, and (ii) except in the case of publicly
traded shares of Common Stock, the transferee is an "accredited investor" as
that term is defined in Rule 501 of Regulation D under the Securities Act. The
Purchaser has no reason to anticipate any change in its respective
circumstances, financial or otherwise, that would cause or require any sale or
distribution of the Securities (including shares of Common Stock issuable upon
exercise of the Warrants or Additional Warrants).
4.5 Accredited Investor. The Purchaser (a) has such
knowledge and experience in financial and business matters that it is capable
of evaluating the merits and risks of its investment
9
<PAGE> 13
in the Securities (including shares of Common Stock issuable upon exercise of
the Warrants or Additional Warrants) and has the financial ability to assume
the monetary risk associated therewith; (b) is able to bear the complete loss
of its investment in the Securities (including shares of Common Stock issuable
upon exercise of the Warrants or Additional Warrants); (c) has received such
documents and information as it has requested and has had the opportunity to
ask questions of, and receive answers from, the Company and its management
concerning the Company and the terms and conditions of the offering of the
Securities (including shares of Common Stock issuable upon exercise of the
Warrants or Additional Warrants) and to obtain additional information; (d) is
an "accredited investor" as defined in Rule 501(a) of Regulation D promulgated
under the Securities Act; (e) is not an entity formed solely to make this
investment; and (f) is not relying upon any statements or instruments made or
issued by any Person other than the Company and its officers in making its
decision to invest in the Securities (including shares of Common Stock
issuable upon exercise of the Warrants or Additional Warrants).
4.6 Fees and Commissions. The Purchaser has not retained
any broker or any other person acting on behalf of the Purchaser in connection
with the transactions contemplated by this Agreement which would give rise to
any valid claim against the Purchaser or the Company for any brokerage or
finder's commission, fee or similar compensation.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Conduct of Business. From the date hereof until the
Second Closing, except as permitted by this Agreement or as otherwise consented
to by each Purchaser in writing, such consent not to be unreasonably withheld,
the Company shall:
(a) carry on its business in the ordinary course in
substantially the same manner in which it previously has been
conducted and, to the extent consistent with such business, use
reasonable efforts to preserve intact its present business
organization and to preserve its relationship with customers,
suppliers and others having business dealings with it; and
(b) maintain its books of account and records in its
usual, regular and ordinary manner, consistent with its past practice.
5.2 Use of Proceeds. The Company will use the proceeds
from the sale of the Initial Securities for (i) payment of the purchase price
and other costs and expenses associated with the Trend Acquisition, (ii) the
acquisition of other drilling rigs, equipment, and other assets and properties
used in connection with the Company's drilling business, (iii) fees and
expenses related to the transactions contemplated hereunder, and (iv) working
capital and capital expenditures related to the Company's drilling business.
10
<PAGE> 14
5.3 Additional Actions. The Company agrees that on or
prior to the Initial Closing and the Second Closing:
(a) The Company shall not take any action that would
adversely affect the condition (financial or otherwise), business,
operations or assets of the Company without the prior written consent
of the Purchasers, or take or fail to take any action that would cause
or permit the representations made in Article III hereof to be
inaccurate at the time of the Initial Closing or the Second Closing,
as the case may be, or preclude the Company from making such
representations and warranties at and as of the time of the Initial
Closing or the Second Closing, as the case may be.
(b) As soon as practicable after the execution of this
Agreement, but in any event prior to the Initial Closing, the Company
will use commercially reasonable efforts to secure all necessary
approvals and consents of third parties to the consummation of the
transactions contemplated by this Agreement and the Related
Agreements.
5.4 Certain Restrictions. For so long as either of the
Purchasers beneficially owns at least $2,000,000 principal amount of the Notes,
the Company shall not, without the prior consent of each Purchaser owning at
least $2,000,000 principal amount of the Notes on such date:
(a) pay any dividends or make any cash distributions to
its shareholders;
(b) sell, within any 12 month period, any assets
representing greater than 10% of the total book value of the Company's
assets as shown on the Company's most recent audited balance sheet,
unless the proceeds of such sales are used to repay Senior Debt or the
Notes;
(c) incur any indebtedness for borrowed money, other than
Permitted Indebtedness, unless at such incurrence:
(i) the ratio of Senior Debt to Tangible Net Worth
as of the most recent balance sheet date and after giving
effect to the proposed borrowing is not greater than 1.5:1.0
prior to June 30, 1998, 1.33:1.0 from July 1, 1998 to June 30,
1999 and 1.25:1.0, thereafter;
(ii) the ratio of Total Debt to Tangible Net Worth as
of the most recent balance sheet date and after giving effect
to the proposed borrowing is not greater than 2.0:1.0 prior to
June 30, 1998, 1.75:1.0 from July 1, 1998 to June 30, 1999 and
1.50:1.0, thereafter; and
(iii) the Interest Coverage Ratio is at least 2.5:1.0
prior to June 30, 1998 and 3.0:1.0, thereafter.
11
<PAGE> 15
5.5 Maintenance of Business. For so long as either of
the Purchasers beneficially owns at least $2,000,000 principal amount of the
Notes, the Company shall retain contract drilling in the United States as it
principal business activity and shall not enter into any business activity
unrelated to the provision of oilfield services.
ARTICLE VI
CONDITIONS TO INITIAL CLOSING
6.1 Conditions to All Parties' Obligation to Close. The
obligation of each party hereto to consummate the transaction contemplated
hereunder at the Initial Closing shall be subject to the satisfaction of each
of the following conditions:
(a) As of the Initial Closing, the purchase of the
Initial Securities by the Purchasers hereunder shall be legally
permitted by all laws and regulations to which the Purchasers and the
Company are subject.
(b) As of the Initial Closing, all authorizations,
approvals or permits of, or filings with any governmental authority,
including state securities or "blue sky" offices, that are required by
law in advance of the lawful sale and issuance of the Securities,
shall have been duly obtained by the Company, and shall be effective
as of the Initial Closing.
(c) No action, proceeding or order by any court or
governmental body or agency shall have been threatened in writing,
asserted, instituted or entered to restrain or prohibit the carrying
out of the transactions contemplated by this Agreement.
(d) The Restated Stockholders Agreement and the Restated
Registration Agreement shall have been executed and delivered by all
parties thereto.
6.2 Conditions to Purchasers' Obligation to Close. The
obligation of each Purchaser to consummate the transactions contemplated
hereunder at the Initial Closing shall be subject to the satisfaction of each
of the following conditions:
(a) The representations and warranties made by the
Company herein shall be true and correct when made, and shall be true
and correct as of the Initial Closing as if made at the Initial
Closing.
(b) All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Company at or
prior to the Initial Closing shall have been performed or complied
with in all material respects.
(c) At the Initial Closing, the Company shall have
delivered to the Purchasers a certificate, executed by its chief
executive officer, dated the date of the Initial Closing,
12
<PAGE> 16
certifying to the fulfillment of the conditions specified in Sections
6.2 (a) and (b) of this Agreement.
(d) At the Initial Closing, the Company shall have
delivered to the Purchasers copies of each of the following, in each
case certified to be in full force and effect on the date of the
Initial Closing by the Secretary of the Company:
(i) the Certificate of Incorporation of the Company
certified by the Secretary of State of the State of
Delaware as of a date not more than ten days prior to
the Initial Closing;
(ii) the Bylaws of the Company; and
(iii) resolutions of the Board of Directors of the Company
authorizing the execution, delivery and performance
of this Agreement and the Related Agreements, and the
transactions contemplated hereunder and thereunder,
the issuance and sale of the Initial Securities and
the reservation of the shares of Common Stock
issuable upon conversion of the Warrants.
(e) The Purchasers shall have received at the Closing the
opinion of Baker & Botts, L.L.P., counsel for the Company, dated the
date of the Closing, in substantially the form of Exhibit F.
(f) The Company shall have obtained and delivered to the
Purchasers such written consents to the transactions contemplated by
this Agreement as shall be necessary to effect this Agreement.
6.3 Conditions to the Company's Obligation to Close. The
obligation of the Company to consummate the transactions contemplated hereunder
at the Initial Closing shall be subject to the satisfaction of each of the
following conditions:
(a) The representations and warranties made by each of
the Purchasers herein shall be true and correct when made, and shall
be true and correct as of the Initial Closing as if made at the
Initial Closing.
(b) All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by each of the
Purchasers at or prior to the Initial Closing shall have been
performed or complied with in all material respects.
(c) At the Initial Closing, each of the Purchasers shall
have delivered to the Company a certificate of a duly authorized
officer of such Purchaser certifying that the execution, delivery and
performance of this Agreement and the Related Agreements and the
transactions contemplated hereby and thereby have been duly authorized
by such Purchaser
13
<PAGE> 17
and each of the Purchasers shall have delivered to the Company a copy
of the resolutions of the Board of Directors of each Purchaser,
authorizing the execution, delivery and performance of this Agreement
and the Related Agreements and the transactions contemplated hereunder
and thereunder, certified to be in full force and effect on the date
of the Initial Closing by an officer of such Purchaser.
ARTICLE VII
CONDITIONS TO SECOND CLOSING
7.1 Conditions to Obligation to Close. In the event the
Company provides the Second Closing Notice to Chesapeake:
(a) the obligation of the Company and Chesapeake to
consummate the transaction contemplated hereunder at the Second
Closing shall be subject to the satisfaction of each of the conditions
set forth in Section 6.1(a), (b) and (c) with respect to the
Additional Securities and as of the date of Second Closing;
(b) the obligation of Chesapeake to consummate the transaction
contemplated hereunder at the Second Closing shall be subject to (i)
the satisfaction of each of the conditions set forth in Section
6.2(a), (b) (c), (d) (iii), (e) and (f) with respect to the Additional
Securities and as of the date of Second Closing, and (ii) the
following additional conditions: (i) the consummation of the
transactions contemplated hereunder at the Second Closing shall not
conflict with, or result in any violation or breach of, constitute a
default under, give rise to any right of termination or acceleration
pursuant to, any term or provision of any loan document of Chesapeake
in existence on the date hereof and (ii) since the date of the Initial
Closing, there shall not have been any material adverse change in the
business, financial condition or operations of the Company and its
subsidiaries taken as a whole; and
(c) the obligation of the Company to consummate the
transaction contemplated hereunder at the Second Closing shall be
subject to the satisfaction of each of the conditions set forth in
Section 6.3(a), (b) and (c) with respect to the Additional Securities
and as of the date of Second Closing.
ARTICLE VIII
MISCELLANEOUS
8.1 Consent to Amendments; Waivers. Except as otherwise
expressly provided herein, the provisions of this Agreement shall not be
amended or waived except upon the written agreement of the Company and the
Purchasers.
14
<PAGE> 18
8.2 No Assignment. This Agreement is not assignable by
any party without the prior written consent of the other parties hereto. Any
purported or attempted assignment in violation of this Section shall be void
and unenforceable.
8.3 Severability. Whenever possible, each provision of
this Agreement shall be interpreted so as to be effective and valid under
applicable law. If any provision of this Agreement is held to be prohibited by
or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
8.4 Headings. The descriptive headings of this Agreement
are inserted for convenience of reference only and do not constitute a part of
and shall not affect the interpretation of this Agreement.
8.5 Notices. Any notices required or permitted to be
sent hereunder shall be delivered personally or mailed by certified mail,
return receipt requested, or delivered by overnight courier service to the
following addresses, or such other address as any party hereto designates by
written notice to the Company, and shall be deemed to have been given upon
delivery, if delivered personally, three days after mailing, if mailed, or one
business day after delivery to the courier, if delivered by overnight courier
service:
If to the Company, to:
Bayard Drilling Technologies, Inc.
4005 Northwest Expressway
Suite 400E
Oklahoma City, Oklahoma 73116
Attention: President
With a copy to:
Baker & Botts, L.L.P.
2001 Ross Avenue
Suite 700
Dallas, Texas 75201
Attention: Carlos A. Fierro
15
<PAGE> 19
If to Chesapeake, to:
Chesapeake Energy Corporation
P.O. Box 18496
Oklahoma City, Oklahoma 73154-0456
Attention: Marcus C. Rowland
With a copy to:
Self, Giddens & Lees, Inc.
2725 Oklahoma Tower
210 Park Avenue
Oklahoma City, Oklahoma 73102-5643
Attention: Ray Lees
If to Energy Spectrum, to:
Energy Spectrum Partners LP
5956 Sherry Lane
Suite 600
Dallas, Texas 75225
Attention: Sidney L. Tassin
8.6 Governing Law. This Agreement shall be governed in
accordance with the laws of the State of Delaware, without giving effect to the
choice of law principles thereof.
8.7 Entire Agreement. This Agreement and the Related
Agreements constitute the entire agreement of the parties concerning the
transactions contemplated hereby, and supersede all prior agreements and
understandings, written or oral, regarding the subject matter hereof.
8.8 Expenses. The Company shall reimburse Energy
Spectrum for all costs and expenses incurred by it in connection with the
matters contemplated by this Agreement, and Chesapeake shall bear all costs and
expenses incurred by it in connection with the matters contemplated by this
Agreement.
8.9 Public Announcements. Except as set forth in the
following sentence, the parties to this Agreement agree that prior to making
any public announcement or statement with respect to the transactions
contemplated by this Agreement, the party desiring to make such public
announcement or statement shall consult with the other parties and exercise
reasonable efforts to (i) agree upon the text of a joint public announcement or
statement to be made by both of such parties or (ii) obtain approval of the
other parties to the text of a public announcement or statement to be made
solely by the Company or one of the Purchasers, as the case may be. Nothing
contained in this Section 8.9 shall be construed to require either party to
obtain approval of the other parties
16
<PAGE> 20
to disclose information with respect to any disclosure (i) required by
applicable law or by any applicable rules, regulations or orders of any
governmental authority having jurisdiction or (ii) necessary to comply with
disclosure requirements of any applicable stock exchange.
8.10 Survival of Representations and Warranties. The
representations and warranties contained in this Agreement or in any
certificate, document, or instrument delivered pursuant to this Agreement shall
survive until the Initial Closing.
8.11 No Third Party Beneficiaries. Except as otherwise
provided, this Agreement has been and is made solely for the benefit of and
shall be binding upon the parties hereto and their respective successors and
permitted assigns; and no other person shall acquire or have any rights under
or by virtue of this Agreement.
8.12 Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed and
delivered shall be deemed an original, and all of which together shall
constitute one and the same instrument.
8.13 WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES TRIAL
BY JURY IN ANY ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH
LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY ANY COURT.
17
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
COMPANY:
-------
BAYARD DRILLING TECHNOLOGIES, INC.
By:/s/ JAMES E. BROWN
-------------------------------------------
James E. Brown
President
PURCHASERS:
----------
CHESAPEAKE ENERGY CORPORATION
By:/s/ AUBREY K. MCCLENDON
-------------------------------------------
Aubrey K. McClendon
Chairman and Chief Executive Officer
ENERGY SPECTRUM PARTNERS LP
By: Energy Spectrum Capital LP, General
Partner
By: Energy Spectrum LLC, General
Partner
By:/s/ SIDNEY L. TASSIN
--------------------------
Sidney L. Tassin
President
18
<PAGE> 22
SCHEDULE 2.1
SECURITIES TO BE PURCHASED AT INITIAL CLOSING
<TABLE>
<CAPTION>
Purchaser Security Amount and Type Purchase Price
-------------------------- --------------------------------------------------- ------------------------
<S> <C> <C>
Chesapeake 500,000 shares of Common Stock $7,000,000
$18,000,000 aggregate principal amount of Notes $18,000,000
Series A Warrant for the Purchase of 350,000
shares of Common Stock
Series B Warrant for the Purchase of 400,000
shares of Common Stock
------------------------
Aggregate Purchase Price $25,000,000
========================
Energy Spectrum 70,000 shares of Common Stock $980,000
$2,520,000 aggregate principal amount of Notes $2,520,000
Series A Warrant for the purchase of 49,000 shares
of Common Stock
Series B Warrant for the purchase of 56,000 shares
of Common Stock
------------------------
Aggregate Purchase Price $3,500,000
========================
</TABLE>
19
<PAGE> 1
EXHIBIT 10.11
SECURITIES PURCHASE AGREEMENT
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE IS NOT TRANSFERRABLE
WITHOUT COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH LAWS, UNLESS AN
EXEMPTION OR EXCLUSION FROM REGISTRATION IS AVAILABLE. THIS NOTE IS SUBJECT TO
AN AMENDED AND RESTATED STOCKHOLDERS AND VOTING AGREEMENT, DATED MAY 1, 1997,
BY AND AMONG THE COMPANY AND THE STOCKHOLDERS THAT ARE SIGNATORIES THERETO (THE
"STOCKHOLDERS AGREEMENT"). THE TRANSFER OF THIS NOTE IS SUBJECT TO THE
CONDITIONS SPECIFIED IN THE STOCKHOLDERS AGREEMENT. NO TRANSFER OF THIS NOTE
WILL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN SATISFIED.
THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT DATES AS
OF MAY 1, 1997, IN FAVOR OF THE CIT GROUP/EQUIPMENT FINANCING, INC., AS LENDER,
WHICH AGREEMENT IS INCORPORATED HEREIN BY REFERENCE.
THIS AGREEMENT IS ALSO SUBJECT TO THE TERMS OF ONE OR MORE SUBORDINATION
AGREEMENTS TO BE ENTERED INTO AFTER THE DATE HEREOF IN FAVOR OF ONE OR MORE
LENDERS. COPIES OF SUCH SUBORDINATION AGREEMENTS WILL BE FURNISHED BY THE
COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST.
SUBORDINATED NOTE
Date of Original Issuance: May 1, 1997 $____________
FOR VALUE RECEIVED, Bayard Drilling Technologies, Inc., a Delaware
corporation (the "Company"), hereby promises to pay to the order of
___________________________, a ______________ (the "Holder"), or permitted
assigns, the principal amount of __________ Dollars ( $__________) on May 1,
2003, subject to earlier redemption or conversion as provided herein (the
"Maturity Date"), together with interest thereon calculated from the date
hereof in accordance with the provisions of this Note. This Note is one of a
series of Notes (collectively, the "Notes") issued by the Company on the date
hereof or that may be issued pursuant to Section 1 hereof.
Section 1. Payment of Interest. This Note shall bear interest
on the unpaid principal amount of the Note outstanding from time to time, from
and including the date hereof. Interest shall be payable quarterly on each May
1, August 1, November 1 and February 1 during the term hereof
<PAGE> 2
(each, a "Payment Date"), commencing on August 1, 1997, and ending on the date
the Note is paid in full. On each quarterly Payment Date the Company may
elect, in respect of all outstanding Notes, (i) to pay, in cash, the interest
accrued during such previous quarterly period at 11.00% per annum (the "Cash
Rate") or (ii) to issue one or more additional Notes of this series (a "PIK
Note") to the Holder hereof in an aggregate principal amount equal to the
interest accrued on this Note during such previous quarterly period at 12.875%
per annum (the "PIK Rate"). Interest will be computed on the basis of twelve
30-day months and a 360-day year and, for any period shorter than a full
calendar month, on the basis of the actual number of days elapsed in such
period. Interest will accrue on any principal payment due under this Note,
and, unless prohibited under applicable law, on any interest which has not been
paid on the date on which it is payable (other than in connection with an
election by the Company to issue a PIK Note), until such time as payment
therefor is actually delivered to the Holder of this Note. Any accrued
interest which for any reason has not theretofore been paid will be paid in
full on the Maturity Date.
Section 2. Redemption and Conversion.
2.1 Optional Redemption by the Company. (a) The Notes may be
redeemed, in cash, at the option of the Company, in whole at any time or in
part from time to time, on a pro rata basis, at the following redemption prices
(expressed as a percentage of the principal amount thereof redeemed, plus
accrued and unpaid interest thereon to the date fixed by the Company for
redemption):
<TABLE>
<CAPTION>
Year Ended May 31, Price
------------------ -----
<S> <C>
1998 110%
1999 108%
2000 106%
2001 104%
2002 102%
2003 100%
</TABLE>
(b) The Notes may be redeemed, in cash, at the option of the
Company, in whole at any time or in part from time to time, on a pro rata
basis, at a redemption price equal to 100% of the principal amount thereof
redeemed, plus accrued and unpaid interest thereon to the date fixed by the
Company for redemption, with the proceeds of one or more Qualified Public
Equity Offerings (as defined hereafter) or a debt issuance occurring in
conjunction with any Qualified Public Equity Offering.
2.2 Offer to Redeem on Change of Control. The Company shall offer
to redeem the Notes, in cash, at any time there has occurred a Change of
Control (as defined hereafter), on a pro rata basis, at a redemption price
equal to 100% of the principal amount thereof redeemed, plus
2
<PAGE> 3
accrued and unpaid interest thereon to the date fixed by the Company for such
redemption. The Company shall make such offer to redeem the Notes within ten
days following the occurrence of the Change of Control by sending a notice to
each holder describing the transaction or transactions that constitute the
Change of Control and stating that if any Note is tendered for redemption it
shall be accepted for payment on the redemption date specified in such Notice,
which redemption date shall not be earlier than 10 days nor later than 20 days
following the date of such notice.
2.3 Conversion. The Notes may be converted in whole or in part,
at the option of the Company, on a pro rata basis, in conjunction with any
Convertible Event into fully paid and nonassessable shares of common stock, par
value $0.01 per share (the "Common Stock") of the Company, as said shares shall
be constituted at the date of conversion. This Note or the portion hereof to
be converted hereunder shall be convertible into the number of shares of Common
Stock determined by dividing the Conversion Value (as defined hereafter) by the
Share Value (as defined hereafter) on the date of conversion.
2.4 Procedure for Redemption or Conversion. The Company will send
written notice of its election to redeem or convert or its offer to redeem this
Note, as the case may be, to the Holder of this Note by registered or certified
mail, return receipt requested, at least ten days prior to the date of
redemption. On or before the date of redemption or conversion, as the case may
be, the Company will deliver to the Holder of this Note, upon surrender of this
Note the full amount of the redemption price (including accrued interest to the
date of redemption, if any) or shares of Common Stock issuable upon conversion,
as the case may be. If less than the entire principal amount of this Note is
to be redeemed or converted, in addition to delivering the redemption price or
shares of Common Stock issuable upon conversion, as the case may be, the
Company shall also deliver, upon surrender of this Note, a new Note in
principal amount equal to the unredeemed or unconverted portion of this Note,
which shall be issued in the name of the Holder upon cancellation of the
original Note. On and after any redemption date or conversion date, unless the
Company defaults in the payment of the redemption price or the delivery of
shares of Common Stock issuable upon conversion, as the case may be, interest
shall cease to accrue on this Note or the portion hereof actually redeemed or
converted. No fractional shares of Common Stock or scrip representing
fractional shares of Common Stock shall be issued upon conversion of this Note.
Instead of any fractional shares of Common Stock which would otherwise be
issuable upon conversion, the Company will pay a cash adjustment in respect of
such fractional interest in an amount equal to that fraction of the closing
price of the Common Stock on the principal national securities exchange or
quotation system on which the Common Stock is then traded or quoted as of the
Trading Day (as defined hereafter) immediately preceding the date of
conversion.
Section 3. Subordination.
3.1 Subordination of Notes. The Company hereby agrees and the
holders of Notes, by their acceptance thereof, likewise agree, that, to the
extent and in the manner set forth in this Section
3
<PAGE> 4
3, the payment of the principal of and interest on the Notes is hereby
expressly made subordinate and subject in right of payment to the prior payment
in full of all amounts then due and payable in respect of all Senior Debt.
3.2 Payment Over of Proceeds Upon Dissolution, Etc. In the event
of (a) any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, arrangement, reorganization, debt restructuring or other similar
case or proceeding in connection with any insolvency or bankruptcy proceeding,
relative to the Company or to its assets, or (b) any liquidation, dissolution
or other winding up of the Company, whether voluntary or involuntary and
whether or not involving insolvency or bankruptcy, or (c) any assignment for
the benefit of creditors or any other marshaling of assets and liabilities of
the Company, then and in any such event specified in (a), (b) or (c) above
(each such event, if any, herein sometimes referred to as a "Proceeding") the
holders of Senior Debt shall be entitled to receive payment in full of
principal of and interest and premium, if any, on such Senior Debt, or
provision shall be made for such payment in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of Senior Debt, before the
holders of Notes are entitled to receive or retain any payment or distribution
of any kind or character, whether in cash, property or securities, on account
of principal of or interest on the Notes or on account of the purchase or other
acquisition of Notes by the Company and to that end the holders of Senior Debt
shall be entitled to receive, for application to the payment thereof, any
payment or distribution of any kind or character, whether in cash, property or
securities, which may be payable or deliverable in respect of the Notes in such
Proceeding.
In the event that, notwithstanding the provisions of this Section 3.2,
the holders of Notes shall have received any payment or distribution of assets
of the Company of any kind or character, whether in cash, property or
securities, after the commencement of a Proceeding and before all Senior Debt
is paid in full or payment thereof is provided for in cash or cash equivalents
or otherwise in a manner satisfactory to the holders of Senior Debt, then and
in such event such payment or distribution shall be paid over or delivered
forthwith by the holders to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other person making payment or
distribution of assets of the Company for application to the payment of all
Senior Debt remaining unpaid, to the extent necessary to pay all Senior Debt in
full, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Debt.
3.3 Suspension of Payment When Senior Debt in Default. (a) In the
event and during the continuation of any default in the payment of principal
of, premium, if any, or interest on any Senior Debt, or in the event that any
event of default (other than a payment default) with respect to any Senior Debt
shall have occurred and be continuing and such event of default shall have
resulted in such Senior Debt becoming or being declared due and payable prior
to the date on which it would otherwise have become due and payable, unless and
until such event of default shall have been cured or waived or shall have
ceased to exist and such acceleration shall have been rescinded or annulled, or
(b) in the event any judicial proceeding shall be pending with respect to any
such default in
4
<PAGE> 5
payment or such event of default, then no payment or distribution of any kind
or character, whether in cash, properties or securities shall be made by the
Company on account of the principal of or interest on the Notes or on account
of the purchase or other acquisition of any Notes by the Company; provided,
however, that interest on the Notes may continue to accrue and be paid at the
PIK Rate in PIK Notes. In the event that, notwithstanding the foregoing, the
Company shall make any payment to the holders of Notes prohibited by this
Section 3.2, then in such event such payment shall be paid over and delivered
by each holder forthwith to the holders of Senior Debt.
3.4 Subrogation to Rights of Holders of Senior Debt. Subject to
the payment in full of all Senior Debt, or the provision for such payment in
cash or cash equivalents or otherwise in a manner satisfactory to the holders
of Senior Debt, holders of Notes shall be subrogated to the extent of the
payments or distributions made to the holders of such Senior Debt pursuant to
the provisions of this Section 3 (equally and ratably with the holders of all
indebtedness of the Company which by its express terms is subordinated to
Senior Debt of the Company to substantially the same extent as the Notes are
subordinated to the Senior Debt and are entitled to like rights of subrogation
by reason of any payments or distributions made to holders of such Senior Debt)
to the rights of the holders of such Senior Debt to receive payments and
distributions of cash, property and securities applicable to the Senior Debt
until the principal of and interest on the Notes shall be paid in full. For
purposes of such subrogation or assignment, no payments or distributions to the
holders of the Senior Debt of any cash, property or securities to which the
holders of Notes would be entitled except for the provisions of this Section 3,
and no payments over pursuant to the provisions of this Section 3 to the
holders of Senior Debt by the holders of Notes, shall, as among the Company,
its creditors other than holders of Senior Debt, and the holders of Notes, be
deemed to be a payment or distribution by the Company to or on account of the
Senior Debt.
3.5 Provisions Solely to Define Relative Rights. The provisions
of this Section 3 are and are intended solely for the purpose of defining the
relative rights of the holders of Notes on the one hand and the holders of
Senior Debt on the other hand. Nothing contained in this Section 3 or
elsewhere in the Notes is intended to or shall (a) impair, as between the
Company and the holders of Notes, the obligations of the Company, which are
absolute and unconditional, to pay to the holders the principal of and interest
on the Notes as and when the same shall become due and payable in accordance
with their terms; or (b) affect the relative rights against the Company of the
holders of the Notes and creditors of the Company other than in relation to the
holders of Senior Debt; or (c) prevent the holder of Notes from exercising all
remedies otherwise permitted by applicable law.
3.6 No Waiver of Subordination. No right of any present or future
holder of any Senior Debt to enforce subordination as herein provided shall at
any time in any way be prejudiced or impaired by any act or failure to act on
the part of the Company or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by the Company with the terms of the
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<PAGE> 6
Notes, regardless of any knowledge thereof that any such holder may have or be
otherwise charged with.
Section 4. Events of Default. For purposes of the Notes, an
Event of Default shall be deemed to have occurred if:
(a) the Company fails to pay within five business days after
any date on which interest is due (other than in connection with an
election by the Company to issue PIK Notes), the full amount of
interest then accrued on the Notes;
(b) the Company fails to pay when due the full amount of any
principal payment on the Notes;
(c) the Company breaches or otherwise fails to perform or
observe the covenants in Sections 5.4 and 5.5 of the Securities
Purchase Agreement, dated as of April 30, 1997, by and among the
Company, Energy Spectrum Partners LP and Chesapeake Energy
Corporation, and such breach or failure to perform or observe a
covenant is not cured within 15 days after the receipt of notice
thereof delivered to the Company by any holder of the Notes;
(d) the Company makes an assignment for the benefit of
creditors; or an order, judgment or decree is entered adjudicating the
Company bankrupt or insolvent; or any order for relief with respect to
the Company is entered under the Federal Bankruptcy Code and the
Company consents to the order or the order is not dismissed within 30
days after it is entered; or the Company petitions or applies to any
tribunal for the appointment of a custodian, trustee, receiver or
liquidator of the Company, or of any substantial part of the assets of
the Company, or commences any proceeding relating to the Company under
any bankruptcy, reorganization, arrangement, insolvency, readjustment
of debt, dissolution or liquidation law of any jurisdiction; or any
such petition or application is filed, or any such proceeding is
commenced, against the Company and (i) the Company does not contest
the petition, application or proceeding, or (ii) such petition,
application or proceeding is not dismissed or withdrawn within 30 days
after it is filed or commenced; or
(e) the Company defaults on any Senior Debt, and such default
shall have resulted in such Senior Debt becoming or being declared due
and payable prior to the date on which it would otherwise have become
due and payable.
Section 5. Consequences of Events of Default. (a) If any Event
of Default of the type described in Section 4.1(d) occurs, the outstanding
principal amount of the Notes (plus all accrued interest thereon) will
automatically accelerate and become immediately due and payable without any
notice to or action by any holder of the Notes.
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<PAGE> 7
(b) If any other Event of Default has occurred and is
continuing, any holder of at least $2,000,000 aggregate principal amount of the
Notes may demand immediate payment of all or any portion of the outstanding
principal amount of the Notes. If such holder demands immediate payment of all
or any portion of the Notes, the Company will promptly (but in any event within
two business days after receipt of such demand) deliver a notice to each other
holder of the Notes, advising such holders of the fact of any such demand.
(c) The Company shall notify the holders of the Notes of the
occurrence of any Event of Default within ten days after such Event of Default.
(d) The holders of the Notes shall also have any other rights
which such holders may have pursuant to applicable law.
Section 6. Definitions. For purposes of this Note:
"Change of Control" means the date on which any person beneficially
owns (as defined in Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended) 50% or more of the Common Stock outstanding at such date.
"Conversion Value" means an amount equal to 110% of sum of (x) the
principal amount of Notes being converted plus (y) accrued and unpaid interest
thereon to the date fixed by the Company for such conversion.
"Convertible Event" means either an (i) an underwritten public
offering of Common Stock pursuant to an effective registration statement filed
under the Securities Act of 1933, as amended, resulting in at least $25,000,000
of net proceeds to the Company, after deducting underwriting discounts and
commission and other expenses or (ii) a merger, consolidation or other business
combination transaction that results in any equity securities of the Company
being registered under Section 12 of the Securities Exchange Act of 1934, as
amended, if, in either case, (A) the price per share to the public in any such
offering is equal to or greater than the Target Price at such date or (B) for
each day in any Trading Range Period following such event, the market price per
share of Common Stock on the principal national securities exchange or
quotation system on which the Common Stock is then traded or quoted is at or
above the Target Price.
"Qualified Public Equity Offering" means (i) an underwritten public
offering of Common Stock pursuant to an effective registration statement filed
under the Securities Act of 1933, as amended, resulting in at least $25,000,000
of net proceeds to the Company, after deducting underwriting discounts and
commission and other expenses or (ii) a merger, consolidation or other business
combination transaction that results in any equity securities of the Company
being registered under Section 12 of the Securities Exchange Act of 1934, as
amended.
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<PAGE> 8
"Senior Debt" means the principal of (and premium if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company, whether
or not such claim for post-petition interest is allowed in such Proceeding) on,
and other obligations with respect of, the following, whether incurred on or
prior to the date of the Notes: (i) every obligation of the Company for money
borrowed; (ii) every obligation of the Company evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in
connection with the acquisition of property, assets or businesses; (iii) every
reimbursement obligation of the Company with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of the
Company; (iv) every obligation of the Company issued or assumed as the deferred
purchase price of property or service (but excluding trade payables or accrued
liabilities arising in the ordinary course of business); (v) and every
obligation of the type referred to in clauses (i) through (iv) of another
person the payment of which the Company has guaranteed or is responsible or
liable, directly or indirectly, as obligor or otherwise; provided, that, Senior
Debt shall not be deemed to include (a) any indebtedness or obligation of the
Company which when incurred and without respect to any election under Section
1111(b) of the Bankruptcy Code, was without recourse to the Company, (b) any
indebtedness or obligation of the Company to any of its subsidiaries or
employees, (c) any liability for taxes, (d) any indebtedness or other monetary
obligations to trade creditors created or assumed by the Company in the
ordinary course of business in connection with the obtaining of goods,
materials or services, (e) every obligation of the type referred to in clauses
(i) through (v), if the instrument creating or evidencing the same or pursuant
to which the same is outstanding, provides that such obligation is not superior
in right of payment to the Notes or to other obligations which are pari passu
with, or subordinated to, the Notes and (f) the Notes.
"Share Value" at any date means (i) if conversion occurs at the time
of any Qualified Public Equity Offering, the price per share to the public in
any such offering or (ii) if conversion occurs as a result of the Company
equaling or exceeding the Target Price for any Trading Range Period following a
Qualified Public Equity Offering, the average market price per share of Common
Stock on the principal national securities exchange or quotation system on
which the Common Stock is then traded or quoted during such Trading Range
Period .
"Target Price" means: if prior to May 31, 1999, $25.00; if on or after
May 31, 1999 and prior to May 31, 2000, $30.00; if on or after May 31, 2000 and
prior to May 31, 2001, $35.00; if on or after May 31, 2001, $40.00.
"Trading Date" means any day that the principal national securities
exchange or quotation system on which the Common Stock is then traded or quoted
is open for trading.
"Trading Range Period" means any period of twenty consecutive Trading
Dates.
8
<PAGE> 9
Section 7. Payments. If any payment of principal or interest on
this Note becomes due on a Saturday, Sunday or a bank or legal holiday under
the laws of the State of Delaware, such payment will be made on the next
succeeding business day and such extension of time will in such case be
included in computing interest in connection with such payment. Any payment to
be made hereunder will be made at the direction of the Holder hereof by check
or draft payable to or upon the order of the Holder or by wire transfer of
immediately available federal funds to an account designated by the Holder.
Section 8. Amendment and Waiver. Except as otherwise expressly
provided herein, the provisions of the Notes may not be amended and the Company
may not take any action herein prohibited, without the prior written consent of
the holders of the Notes.
Section 9. Place of Payment and Notices. Payments of principal
and interest, and notices hereunder, are to be delivered to the Holder at the
following address:
__________________________________
__________________________________
__________________________________
Attention: _______________________
Section 10. Usury Laws. It is the intention of the Company and
the holders of the Notes to conform strictly to all applicable usury laws now
or hereafter in force, and any interest payable under the Notes will be subject
to reduction to the amount not in excess of the maximum legal amount allowed
under the applicable usury laws as now or hereafter construed by the courts
having jurisdiction over such matters. The aggregate of all interest (whether
designated as interest, service charges, points or otherwise) contracted for,
chargeable or receivable under the Notes will under no circumstances exceed the
maximum legal rate upon the unpaid principal balance of the Notes remaining
unpaid from time to time. If such interest does exceed the maximum legal rate,
it will be deemed a mistake and such excess will be canceled automatically and,
if theretofore paid, rebated to the Company or credited on the principal amount
of the Notes, or if the Notes have been repaid, then such excess will be
rebated to the Company.
Section 11. Severability; Waiver of Notice. Whenever possible,
each provision of the Notes will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of the Notes is
held to be prohibited by or invalid under applicable law in any jurisdiction,
such provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating any other provision of the Notes. To the
extent permitted by law, the Company hereby waives presentment, demand, notice
of protest and all other demands and notices, in connection with the delivery,
acceptance, performance, default or enforcement of the Notes.
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<PAGE> 10
Section 12. Governing Law. The Notes are being delivered and are
intended to be performed in the State of Delaware and will be construed and
enforced in accordance with the laws of such State.
BAYARD DRILLING TECHNOLOGIES, INC.
By:
------------------------------------
James E. Brown
President
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<PAGE> 1
EXHIBIT 10.12
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT.
THIS WARRANT MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR ASSIGNED TO ANY
OTHER PERSON OR ENTITY, EXCEPT AS SET FORTH HEREIN.
SERIES A WARRANT
TO SUBSCRIBE FOR AND PURCHASE COMMON STOCK OF
BAYARD DRILLING TECHNOLOGIES, INC.
VOID AFTER 5:00 P.M., CENTRAL TIME, ON MAY 1, 2003,
OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., CENTRAL
TIME ON THE IMMEDIATELY FOLLOWING BUSINESS DAY
THIS CERTIFIES that, for good and valuable consideration,
___________________________ ("_______________") or registered assigns, is
entitled to subscribe for and purchase from Bayard Drilling Technologies, Inc.,
a Delaware corporation (hereinafter the "Company"), at the price of $0.01 per
share (such price, as from time to time to be adjusted as hereinafter provided,
being hereinafter called the "Warrant Price"), at any time and from time to
time after the date hereof but not later than the Expiration Date (as defined
below), up to such number of fully paid, nonassessable shares of Common Stock,
par value $.01 per share, of the Company ("Common Stock") as is specified in
the following sentence, subject, however, to the provisions and upon the terms
and conditions hereinafter set forth, including without limitation the
provisions of Section 3 hereof. This Warrant shall be exercisable for up to
__________ shares of Common Stock upon issuance, subject to adjustment as
provided herein. "Expiration Date" shall mean the earlier of (i) 5:00 P.M.,
Central time, on May 1, 2003, which is six years from the date hereof,
provided, in each case, that if such day is not a Business Day, as defined
herein, at 5:00 P.M., Central time, on the immediately following Business Day.
"Business Day" shall mean a day other than a Saturday, Sunday or other day on
which banks in the State of Texas are authorized by law to remain closed.
<PAGE> 2
SECTION 1. EXERCISE OF WARRANT
(a) CASH EXERCISE
This Warrant may be exercised, at any time and from time to time but not
later than the Expiration Date, by the holder hereof (hereinafter referred to
as the "Warrantholder"), in whole or in part (but not as to a fractional share
of Common Stock and in no event for less than 100 shares (unless less than an
aggregate of 100 shares are then purchasable under all outstanding Warrants
held by a Warrantholder)), by the completion of the subscription form attached
hereto and by the surrender of this Warrant (properly endorsed) at the
Company's offices at 4005 Northwest Expressway, Suite 400E, Oklahoma City,
Oklahoma 73116 (or at such other location in the United States as the Company
may designate by notice in writing to the Warrantholder at the address of the
Warrantholder appearing on the books of the Company), and by payment to the
Company of the Warrant Price for each share being purchased, (i) in cash or by
certified or official bank check or (ii) by surrender of an amount equal to the
Warrant Price in accrued unpaid interest and principal of Notes, dated from
time to time, from the Company to _____________ .
(b) NET EXERCISE
Notwithstanding anything to the contrary contained in Subsection 1(a),
at any time after the completion by the Company of a Qualified IPO (as defined
below), the Warrantholder may elect to exercise this Warrant and receive shares
on a "net exercise" basis in an amount equal to the value of this Warrant by
delivery of the subscription form attached hereto and surrender of this Warrant
at the principal office of the Company, in which event the Company shall issue
to the Warrantholder a number of shares of Common Stock computed using the
following formula:
(P)(Y)(A-B)
X = -----------
A
Where: X= the number of shares of Common Stock to be issued
to the Warrantholder.
P= the portion of the Warrant being exercised
(expressed as a fraction).
Y= the total number of shares of Common Stock issuable
upon exercise of this Warrant.
A= the Current Market Price (as determined pursuant to
Subsection 1(d)) of one share of Common Stock.
B= Warrant Price.
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"Qualified IPO" means (i) one or more underwritten public offerings of Common
Stock pursuant to one or more effective registration statements filed under the
Securities Act of 1933, as amended, resulting in an aggregate of at least $25
million of net proceeds, after deducting underwriting discounts and commission
and other expenses, to the Company or (ii) any merger, consolidation or other
business combination transaction that results in any equity securities of the
Company being registered under Section 12 of the Securities Exchange Act of
1934, as amended.
(c) PROCEDURE FOR EXERCISE
In the event of any exercise of the rights represented by this Warrant,
a certificate or certificates for the total number of whole shares of Common
Stock so purchased, registered in the name of the Warrantholder, shall be
delivered to the Warrantholder within a reasonable time, not exceeding five
Business Days, after the rights represented by this Warrant shall have been so
exercised; and, unless this Warrant has expired, a new Warrant representing the
number of shares (except a remaining fractional share), if any, with respect to
which this Warrant shall not then have been exercised shall also be issued to
the Warrantholder within such time. With respect to any such exercise, the
Warrantholder shall for all purposes be deemed to have become the holder of
record of the number of shares of Common Stock evidenced by such certificate or
certificates, from the date on which this Warrant was surrendered and, if
exercise is pursuant to Section 1(a), payment of the Warrant Price was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date on which the stock transfer books
of the Company are closed, such person shall be deemed to have become the
holder of such shares at the close of business on the next succeeding date on
which the stock transfer books are open. No fractional shares shall be issued
upon exercise of this Warrant and no payment or adjustment shall be made upon
any exercise on account of any cash dividends on the Common Stock issued upon
such exercise. If any fractional interest in a share of Common Stock would,
except for the provisions of this Section 1, be delivered upon any such
exercise, the Company, in lieu of delivering the fractional share thereof,
shall pay to the Warrantholder an amount in cash equal to the current market
price of such fractional interest, as determined below.
(d) CURRENT MARKET PRICE
For any computation hereunder, the current market price per share of
Common Stock on any date shall be deemed to be the average of the daily market
price per share for the 20 consecutive Trading Days commencing 30 Trading Days
before the date in question. "Market Price" is defined as the closing sale
price (or, if no closing sale price is reported, the closing bid price) of the
Common Stock on the principal United States national securities exchange on
which the Common Stock is then listed for trading or, if not so listed, in the
over-the-counter market, as reported by the Nasdaq Stock Market ("Nasdaq"), or,
if the Common Stock is not quoted on Nasdaq, as reported by the National
Quotation Bureau Incorporated. If Market Price cannot be established as
described above, market price shall be the fair market value of the Common
Stock as determined in good faith by the Board of Directors whose determination
shall be conclusive. The term "Trading Day" shall mean
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<PAGE> 4
a day on which the principal national securities exchange on which the Common
Stock is listed or admitted to trading or Nasdaq is open for the transaction of
business.
SECTION 2. ADJUSTMENT OF NUMBER OF SHARES
Upon each adjustment of the Warrant Price for any stock dividend or
distribution or any subdivision or combination of the outstanding shares of the
Common Stock as provided in Section 3, the Warrantholder shall thereafter be
entitled to purchase, at the Warrant Price resulting from such adjustment, the
number of shares (calculated to the nearest tenth of a share) obtained by
multiplying the Warrant Price in effect immediately prior to such adjustment by
the number of shares purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Warrant Price resulting from
such adjustment.
SECTION 3. ADJUSTMENT OF WARRANT PRICE
The Warrant Price and the number and kind of shares issuable hereunder
shall be subject to adjustment from time to time upon the happening of certain
events as provided in this Section 3.
(a) ADJUSTMENTS
(1) If at any time prior to the exercise of this Warrant in
full, the Company shall (A) declare a dividend or make a distribution on the
Common Stock payable in shares of its capital stock (whether shares of Common
Stock or of capital stock of any other class); (B) subdivide, reclassify or
recapitalize its outstanding Common Stock into a greater number of shares; (C)
combine, reclassify or recapitalize its outstanding Common Stock into a smaller
number of shares; or (D) issue any shares of its capital stock by
reclassification of its Common Stock (excluding any such reclassification in
connection with a consolidation or a merger that is subject to Section 3(c)),
the Warrant Price in effect at the time of the record date of such dividend,
distribution, subdivision, combination, reclassification or recapitalization
shall be adjusted so that the Warrantholder shall be entitled to receive the
aggregate number and kind of shares which, if this Warrant had been exercised
in full immediately prior to such event, it would have owned upon such exercise
and been entitled to receive by virtue of such dividend, distribution,
subdivision, combination, reclassification or recapitalization. Any adjustment
required by this Section 3(a) shall be made successively immediately after the
record date, in the case of a dividend or distribution, or the effective date,
in the case of a subdivision, combination, reclassification or
recapitalization, to allow the purchase of such aggregate number and kind of
shares.
(2) If at any time prior to the exercise of this Warrant in
full, the Company shall make a distribution to all holders of the Common Stock
of stock of a subsidiary or securities convertible into or exercisable for such
stock, then in lieu of an adjustment in the Warrant Price or the number of
shares of Common Stock purchasable upon the exercise of this Warrant, each
Warrantholder, upon the exercise hereof at any time after such distribution,
shall be entitled to receive from the Company, such subsidiary or both, as the
Company shall determine, the stock or
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<PAGE> 5
other securities to which such Warrantholder would have been entitled if such
Warrantholder had exercised this Warrant immediately prior thereto, all subject
to further adjustment as provided in this Section 3, and the Company shall
reserve, for the life of the Warrant, such securities of such subsidiary or
other corporation; provided, however, that no adjustment in respect of
dividends or interest on such stock or other securities shall be made during
the term of this Warrant or upon its exercise.
(3) If at any time prior to the expiration of this Warrant in
full, the Company shall issue rights or warrants to all holders of Common Stock
as such entitling them to subscribe for or purchase Common Stock at a price per
share less than the current Market Price per share (calculated pursuant to
Section 1(d) above) on such record date, then, in each such case the number of
shares subject to this Warrant thereafter purchasable upon the exercise of this
Warrant shall be determined by multiplying the number of shares of Common Stock
theretofore purchasable upon exercise of this Warrant by a fraction, of which
the numerator shall be the number of shares of Common Stock outstanding on the
date of issuance of such rights or warrants, plus the number of additional
shares of Common Stock offered for subscription or purchase, and of which the
denominator shall be the number of shares of Common Stock outstanding on the
date of issuance of such rights or warrants plus the number of shares that the
aggregate offering price of the total number of shares of Common Stock so
offered would purchase at such current Market Price. For purposes of this
Section 3(a)(3), the issuance of rights or Warrants to subscribe for or
purchase securities convertible into Common Stock shall be deemed to be the
issuance of rights or Warrants to purchase the Common Stock into which such
securities are convertible at an aggregate offering price equal to the
aggregate offering price of such securities plus the minimum aggregate amount
(if any) payable upon conversion of such securities into Common Stock.
(4) If at any time prior to the exercise of this Warrant in
full, the Company shall distribute to all holders of its Common Stock evidence
of indebtedness of the Company or assets of the Company (excluding cash
dividends or distributions out of earned surplus) or rights or Warrants to
subscribe for securities of the Company (excluding those referred to in
Sections 3(a)(2) or (3) above), then in each case the Warrant Price shall be
adjusted to a price determined by multiplying the Warrant Price in effect
immediately prior to such distribution by a fraction, of which the numerator
shall be the then current Market Price per share of Common Stock (calculated
pursuant to Section 1(d) above) on the record date for determination of
stockholders entitled to receive such distribution, less the then fair value
(as determined by the Board of Directors of the Company, whose determination
shall be conclusive) of the portion of the assets or evidences of indebtedness
so distributed or of such subscription rights or Warrants which are applicable
to one share of Common stock, and of which the denominator shall be the Market
Price per share of Common Stock; provided, however, that if the then current
Market Price per share of Common Stock on the record date for determination, of
stockholders entitled to receive such distribution is less than the then fair
value of the portion of the assets or evidence of indebtedness so distributed
or of such subscription rights or Warrants which are applicable to one share of
Common Stock, the foregoing adjustment of the Warrant Price shall not be made
and in lieu thereof the number of shares purchasable upon exercise of each
Warrant immediately prior to such distribution shall be adjusted so that the
holder
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<PAGE> 6
of such Warrant shall be entitled to receive upon exercise of such Warrant the
kind and number of assets, evidence of indebtedness, subscription rights and
Warrants (or, in the event of the redemption of such evidence of indebtedness,
subscription rights or Warrants, any cash paid in respect of such redemption)
that such Warrantholder would have owned or have been entitled to receive after
the happening in such distribution had such Warrant been exercised immediately
prior to the record date of such distribution.
(5) In the event of any capital reorganization of the Company
(other than an event referred to in Section 3(a)(1)), or in case of the
consolidation of the Company with, the merger of the Company with or into or
the sale of all or substantially all of the properties and assets of the
Company to any other person, and in connection therewith consideration is
payable to holders of Common Stock (or other securities or property purchasable
upon exercise of this Warrant) in exchange therefor, this Warrant shall remain
subject to the terms and conditions set forth in this Warrant and this Warrant
shall, after such capital reorganization, consolidation, merger or sale be
exercisable for the number of shares of stock or other securities or assets to
which a holder of the number of shares of Common Stock purchasable (at the time
of such capital reorganization, reclassification of such Common Stock,
consolidation, merger or sale) upon exercise of this Warrant would have been
entitled if such Warrant had been exercised immediately prior to such capital
reorganization, reclassification of such Common Stock, consolidation, merger or
sale; and in any such case, if necessary, the provisions set forth in this
Warrant with respect to the rights and interests thereafter of the
Warrantholder shall be appropriately adjusted so as to be applicable, as nearly
as may reasonably be, to any shares of stock or other securities or assets
thereafter deliverable on the exercise of this Warrant. The Company shall not
effect any such consolidation, merger or sale, unless prior to or
simultaneously with the consummation thereof, the successor corporation (if
other than the Company) resulting from such consolidation or merger or the
corporation purchasing such assets or the appropriate corporation or entity
shall assume, by written instrument, the obligation to deliver to the
Warrantholder the shares of stock, securities or assets to which the
Warrantholder may be entitled pursuant to this Section 3(a)(5).
(6) Notwithstanding Section 3(a)(5), (i) if the Company merges
or consolidates with, or sells all or substantially all of its property and
assets to, any other person and consideration is payable to holders of Common
Stock in exchange for their Common Stock in connection with such merger,
consolidation or sale which consists solely of cash, or (ii) in the event of
the dissolution, liquidation or winding up of the Company, then the
Warrantholder shall be entitled to receive distributions on the date of such
event on an equal basis with holders of Common Stock (or other securities
issuable upon exercise of this Warrant) as if this Warrant had been exercised
immediately prior to such event, less the Warrant Price. Upon receipt of such
payment, if any, the rights of the Warrantholder shall terminate and cease and
this Warrant shall expire. In case of any such merger, consolidation or sale
of assets, the surviving or acquiring person and, in the event of any
dissolution, liquidation or winding up of the Company, the Company shall
promptly, after receipt of this surrendered Warrant, make payment by delivering
a check in such amount as is appropriate (or, in the case of consideration
other than cash, such other consideration as is
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<PAGE> 7
appropriate) to such person as it may be directed in writing by the
Warrantholder surrendering this Warrant.
(7) If any question shall at any time arise with respect to
the adjusted number of shares of Common Stock or other securities issuable
upon exercise of this Warrant, such question shall be determined by the
independent firm of certified public accountants of recognized national
standing selected by the Company and reasonably acceptable to the
Warrantholder.
(8) No adjustment in the Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least one
cent ($.01) in such price; provided, however, that any adjustments which by
reason of this Section 3(a)(8) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 3(a) shall be made to the nearest cent or to the nearest
tenth of a share, as the case may be. Notwithstanding anything in this Section
3(a) to the contrary, the Warrant Price shall not be reduced to less than the
then existing par value of the Common Stock as a result of any adjustment made
hereunder.
(9) In the event that at any time, as the result of any
adjustment made pursuant to this Section 3(a), the Warrantholder thereafter
shall become entitled to receive any securities other than Common Stock,
thereafter the number of such other securities so receivable upon exercise of
any Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Section 3(a).
(b) NO ADJUSTMENT FOR DIVIDENDS
Except as provided in Section 3(a) of this Agreement, no adjustment in
respect of any cash dividends shall be made during the term of this Warrant or
upon the exercise of this Warrant.
(c) FORM OF WARRANT AFTER ADJUSTMENTS
The form of this Warrant need not be changed because of any adjustments
in the Warrant Price or the number or kind of the shares purchasable pursuant
to this Warrant, and Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in this
Warrant, as initially issued, provided, however, that the Company may, at any
time in its sole discretion (which shall be conclusive), make any change in the
form of Warrant certificate that it may deem appropriate and that does not
affect the substance thereof. Any Warrant certificate thereafter issued,
whether upon registration of transfer of, or in exchange or substitution for,
an outstanding Warrant certificate may be in the form so changed.
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<PAGE> 8
(d) TREATMENT OF WARRANTHOLDER
Prior to due presentment for registration of transfer of this Warrant,
the Company may deem and treat the Warrantholder as the absolute owner of this
Warrant (notwithstanding any notation of ownership or other writing hereon) for
all purposes and shall not be affected by any notice to the contrary.
(e) NOTICE OF ADJUSTMENT
Upon any adjustment of the Warrant Price, then and in each such case the
Company shall give written notice thereof, by first-class mail, postage
prepaid, addressed to each Warrantholder at the address of such holder as shown
on the books of the Company, which notice shall state the Warrant Price
resulting from such adjustments setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based.
(f) STOCK TO BE RESERVED
The Company will at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance upon the exercise
of this Warrant as herein provided, such number of shares of Common Stock as
shall then be issuable upon the exercise of this Warrant. The Company
covenants that all shares of Common Stock which shall be so issued, upon full
payment of the Warrant Price therefor or as otherwise set forth herein, shall
be duly and validly issued and fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof, and, without
limiting the generality of the foregoing, the Company covenants that it will
from time to time take all such action as may be required to ensure that the
par value per share, if any, of the Common Stock is at all times equal to or
less than the effective Warrant Price. The Company will take all such action
as may be necessary to ensure that all such shares of Common Stock may be so
issued without violation of any applicable law or regulation, or of any
requirement of any national securities exchange or automated quotation system
upon which the Common Stock of the Company may be listed or quoted. The
Company will not take any action which results in any adjustment of the Warrant
Price if the total number of shares of Common Stock issued and issuable after
such action upon exercise of this Warrant would exceed the total number of
shares of Common Stock then authorized by the Company's Certificate of
Incorporation. The Company has not granted and will not grant any right of
first refusal with respect to shares issuable upon exercise of this Warrant,
and there are no preemptive rights associated with such shares.
(g) ISSUE TAX
The issuance of certificates for shares of Common Stock upon exercise of
any Warrant shall be made without a charge to the Warrantholder for any
issuance tax in respect thereto provided that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
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<PAGE> 9
(h) CLOSING OF BOOKS
The Company will at no time close its transfer books against the
transfer of the shares of Common Stock issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant.
(i) DEFINITION OF COMMON STOCK
The shares purchasable pursuant to this Warrant shall include only
securities designated as Common Stock of the Company. As used herein the term
"Common Stock" shall mean and include the Common Stock, par value $.01 per
share, of the Company as authorized on the date hereof, or shares of any class
or classes resulting from any recapitalization or reclassification thereof
which are not limited to any fixed sum or percentage and are not subject to
redemption by the Company and in case at any time there shall be more than one
such resulting class, the shares of each class then so issuable shall be
substantially in the proportion which the total number of shares of such class
resulting from all such reclassification bears to the total number of shares of
all such classes resulting from all such reclassification.
(j) TITLE TO STOCK
All shares of the Common Stock delivered upon the exercise of this
Warrant shall be validly issued, fully paid and nonassessable; the
Warrantholder shall receive good and marketable title to the Common Stock, free
and clear of all voting and other trust arrangements, liens, encumbrances,
equities and claims created by the Company whatsoever, other than the Amended
and Restated Stockholders and Voting Agreement, dated April 30, 1997, by and
among the Company, _________, and the other stockholders of the Company that
are signatories thereto (the "Stockholders Agreement").
SECTION 4. NOTICES OF RECORD DATES
In the event of:
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution (other than cash
dividends out of earned surplus), or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any right to sell shares of stock of any class or any
other right; or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of all
or substantially all the assets of the Company to or consolidation or merger of
the Company with or into any other corporation or entity; or
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<PAGE> 10
(c) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company;
then and in each such event the Company will give notice to the Warrantholder
specifying (1) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right and stating the amount and character of
such dividend, distribution or right, and (2) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up is to take place, and the time,
if any is to be fixed, as of which the holders of record of Common Stock will
be entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given at least 20 days and not more than 90
days prior to the date therein specified, and such notice shall state that the
action in question or the record date is subject to the effectiveness of a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act") or to a favorable vote of stockholders, if either is
required.
SECTION 5. NO STOCKHOLDERS RIGHTS OR LIABILITIES
Except as may be provided by the Stockholders Agreement, this Warrant
shall not entitle the Warrantholder to any voting rights or other rights as a
stockholder of the Company. No provision hereof, in the absence of affirmative
action by the Warrantholder to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of the Warrantholder shall give
rise to any liability of such Warrantholder for the Warrant Price or as a
stockholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company.
SECTION 6. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT
In case the certificate or certificates evidencing the Warrants shall be
mutilated, lost, stolen or destroyed, the Company shall, at the request of the
Warrantholder, issue and deliver in exchange and substitution for and upon
cancellation or the mutilated certificate or certificates, or in lieu of and
substitution for the certificate or certificates lost, stolen or destroyed, a
new Warrant certificate or certificates of like tenor and representing an
equivalent right or interest but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction of such Warrant and a bond of
indemnity, if requested, also satisfactory in form and amount at the
applicant's cost. Applicants for such substitute Warrant certificate or
certificates shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company may prescribe.
SECTION 7. NOTICES
All notices, requests and other communications required or permitted to
be given or delivered hereunder shall be in writing, and shall be delivered, or
shall be sent by certified or registered mail or overnight courier, postage
prepaid and addressed, or by facsimile, and if to the Warrantholder to such
Warrantholder at such address or facsimile number as shall have been furnished
to the Company by notice from such Warrantholder and if to the Company, at 4005
Northwest
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Expressway, Suite 400E, Oklahoma City, Oklahoma 73116; Attention: President,
facsimile number (405) 879-3847 or at such other address or facsimile number as
shall have been furnished to the Warrantholder by notice from the Company.
SECTION 8. RESTRICTIONS ON TRANSFER
Except as may be permitted by the Stockholders Agreement, this Warrant
may not be sold, transferred, hypothecated or assigned to any other person or
entity other than (i) the respective successors to _______________ in a merger
or consolidation; (ii) the respective purchasers of all or substantially all of
the assets of _______________; or (iii) the _______________ shareholders in the
event _______________ is liquidated or dissolved. _______________ agrees not
to make any sale or other disposition of either the Warrant or the underlying
Common Stock except pursuant to a registration statement which has become
effective under the Securities Act, setting forth the terms of such offering,
the underwriting discount and the commissions and any other pertinent data with
respect thereto, unless _______________ has provided the Company with an
opinion of counsel reasonably acceptable to the Company that such registration
is not required. This Warrant shall bear a legend setting forth the foregoing
restriction.
SECTION 9. AMENDMENTS AND WAIVERS
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by each of (i) a majority in
interest of the holders of this Warrant and (ii) an authorized representative
of the Company.
SECTION 10. SEVERABILITY
If one or more provisions of this Warrant are held to be unenforceable
under applicable law, such provisions shall be excluded from this Warrant, and
the balance of this Warrant shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
SECTION 11. GOVERNING LAW
This Warrant shall be governed by and construed under the laws of the
State of Delaware without regard to conflict of law principles.
SECTION 12. HEADINGS
The headings in this Warrant are for purposes of reference only and
shall not limit or otherwise affect any of the terms hereof.
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<PAGE> 12
SECTION 13. COUNTERPARTS
This Warrant may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the Company and _______________ have executed this
Warrant on and as of the day and year first above written.
BAYARD DRILLING TECHNOLOGIES INC.,
a Delaware corporation
By:__________________________________
James E. Brown
President
[___________________________________]
By:__________________________________
Name:________________________________
Title:_______________________________
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<PAGE> 13
SUBSCRIPTION FORM
(To be executed upon exercise of this Warrant)
____________________________:
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
______________ shares of Common Stock, as provided for therein, and either
tenders herewith payment of the purchase price of $________________ in full (i)
in cash or a certified or official bank check or (ii) by surrender of an
aggregate principal and accrued unpaid interest amount of Notes, dated from
time to time, from the Company to __________, in an amount equal to the
purchase price or, if the undersigned elects pursuant to Section 1(b) of the
within Warrant to convert such Warrant into Common Stock on a net issuance
basis, the undersigned exercises the within Warrant by exchange under the terms
of Section 1(b).
Please issue a certificate or certificates for such Common Stock in the
name of, and pay any cash for any fractional share to:
Name:______________________________________
Address:___________________________________
Social
Security No:_______________________________
Signature__________________________________
Note: The above signature must correspond
exactly with the name on the first
page of this Warrant.
If said number of shares shall not be all the shares purchasable under
the within Warrant, a new Warrant is to be issued in the name of the
Warrantholder for the balance remaining of the shares purchasable thereunder
rounded up to the next higher number of shares.
Signature Guaranteed:____________________________________
(Signature must be guaranteed by a bank or trust company having an
office or correspondence in the United States or by a member firm of a
registered securities exchange or the National Association of Security Dealers,
Inc.)
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<PAGE> 1
EXHIBIT 10.13
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT.
THIS WARRANT MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR ASSIGNED TO ANY OTHER
PERSON OR ENTITY, EXCEPT AS SET FORTH HEREIN.
SERIES B WARRANT
TO SUBSCRIBE FOR AND PURCHASE COMMON STOCK OF
BAYARD DRILLING TECHNOLOGIES, INC.
VOID AFTER 5:00 P.M., CENTRAL TIME, ON MAY 1, 2003,
OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M.,
CENTRAL TIME ON THE IMMEDIATELY FOLLOWING BUSINESS DAY
THIS CERTIFIES that, for good and valuable consideration, ____________
("_______________") or registered assigns, is entitled to subscribe for and
purchase from Bayard Drilling Technologies, Inc., a Delaware corporation
(hereinafter the "Company"), at the price of $15.00 per share (such price, as
from time to time to be adjusted as hereinafter provided, being hereinafter
called the "Warrant Price"), at any time and from time to time after the date
hereof but not later than the Expiration Date (as defined below), up to such
number of fully paid, nonassessable shares of Common Stock, par value $.01 per
share, of the Company ("Common Stock") as is specified in the following
sentence, subject, however, to the provisions and upon the terms and conditions
hereinafter set forth, including without limitation the provisions of Section 3
hereof. This Warrant shall be exercisable for up to ____________________ shares
of Common Stock upon issuance, subject to adjustment as provided herein.
"Expiration Date" shall mean the earlier of (i) 5:00 P.M., Central time, on May
1, 2003, which is six years from the date hereof, provided, in each case, that
if such day is not a Business Day, as defined herein, at 5:00 P.M., Central
time, on the immediately following Business Day. "Business Day" shall mean a
day other than a Saturday, Sunday or other day on which banks in the State of
Texas are authorized by law to remain closed.
<PAGE> 2
SECTION 1. EXERCISE OF WARRANT
(a) CASH EXERCISE
This Warrant may be exercised, at any time and from time to time but
not later than the Expiration Date, by the holder hereof (hereinafter referred
to as the "Warrantholder"), in whole or in part (but not as to a fractional
share of Common Stock and in no event for less than 100 shares (unless less
than an aggregate of 100 shares are then purchasable under all outstanding
Warrants held by a Warrantholder)), by the completion of the subscription form
attached hereto and by the surrender of this Warrant (properly endorsed) at the
Company's offices at 4005 Northwest Expressway, Suite 400E, Oklahoma City,
Oklahoma 73116 (or at such other location in the United States as the Company
may designate by notice in writing to the Warrantholder at the address of the
Warrantholder appearing on the books of the Company), and by payment to the
Company of the Warrant Price for each share being purchased, (i) in cash or by
certified or official bank check or (ii) by surrender of an amount equal to the
Warrant Price in accrued and unpaid interest and principal of Notes, dated from
time to time, from the Company to _____________.
(b) NET EXERCISE
Notwithstanding anything to the contrary contained in Subsection 1(a),
at any time after the completion by the Company of a Qualified IPO (as defined
below), the Warrantholder may elect to exercise this Warrant and receive shares
on a "net exercise" basis in an amount equal to the value of this Warrant by
delivery of the subscription form attached hereto and surrender of this Warrant
at the principal office of the Company, in which event the Company shall issue
to the Warrantholder a number of shares of Common Stock computed using the
following formula:
X = (P)(Y)(A-B)
-----------
A
Where: X= the number of shares of Common Stock to be
issued to the Warrantholder.
P= the portion of the Warrant being exercised
(expressed as a fraction).
Y= the total number of shares of Common Stock
issuable upon exercise of this Warrant.
A= the Current Market Price (as determined pursuant
to Subsection 1(d)) of one share of Common Stock.
B= Warrant Price.
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<PAGE> 3
"Qualified IPO" means (i) one or more underwritten public offerings of Common
Stock pursuant to one or more effective registration statements filed under the
Securities Act of 1933, as amended, resulting in an aggregate of at least $25
million of net proceeds, after deducting underwriting discounts and commission
and other expenses, to the Company or (ii) any merger, consolidation or other
business combination transaction that results in any equity securities of the
Company being registered under Section 12 of the Securities Exchange Act of
1934, as amended.
(c) PROCEDURE FOR EXERCISE
In the event of any exercise of the rights represented by this Warrant,
a certificate or certificates for the total number of whole shares of Common
Stock so purchased, registered in the name of the Warrantholder, shall be
delivered to the Warrantholder within a reasonable time, not exceeding five
Business Days, after the rights represented by this Warrant shall have been so
exercised; and, unless this Warrant has expired, a new Warrant representing the
number of shares (except a remaining fractional share), if any, with respect to
which this Warrant shall not then have been exercised shall also be issued to
the Warrantholder within such time. With respect to any such exercise, the
Warrantholder shall for all purposes be deemed to have become the holder of
record of the number of shares of Common Stock evidenced by such certificate or
certificates, from the date on which this Warrant was surrendered and, if
exercise is pursuant to Section 1(a), payment of the Warrant Price was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date on which the stock transfer books
of the Company are closed, such person shall be deemed to have become the
holder of such shares at the close of business on the next succeeding date on
which the stock transfer books are open. No fractional shares shall be issued
upon exercise of this Warrant and no payment or adjustment shall be made upon
any exercise on account of any cash dividends on the Common Stock issued upon
such exercise. If any fractional interest in a share of Common Stock would,
except for the provisions of this Section 1, be delivered upon any such
exercise, the Company, in lieu of delivering the fractional share thereof,
shall pay to the Warrantholder an amount in cash equal to the current market
price of such fractional interest, as determined below.
(d) CURRENT MARKET PRICE
For any computation hereunder, the current market price per share of
Common Stock on any date shall be deemed to be the average of the daily market
price per share for the 20 consecutive Trading Days commencing 30 Trading Days
before the date in question. "Market Price" is defined as the closing sale
price (or, if no closing sale price is reported, the closing bid price) of the
Common Stock on the principal United States national securities exchange on
which the Common Stock is then listed for trading or, if not so listed, in the
over-the-counter market, as reported by the Nasdaq Stock Market ("Nasdaq"), or,
if the Common Stock is not quoted on Nasdaq, as reported by the National
Quotation Bureau Incorporated. If Market Price cannot be established as
described above, market price shall be the fair market value of the Common
Stock as determined in good faith by the Board of Directors whose determination
shall be conclusive. The term "Trading Day" shall mean
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<PAGE> 4
a day on which the principal national securities exchange on which the Common
Stock is listed or admitted to trading or Nasdaq is open for the transaction
of business.
SECTION 2. ADJUSTMENT OF NUMBER OF SHARES
Upon each adjustment of the Warrant Price for any stock dividend or
distribution or any subdivision or combination of the outstanding shares of the
Common Stock as provided in Section 3, the Warrantholder shall thereafter be
entitled to purchase, at the Warrant Price resulting from such adjustment, the
number of shares (calculated to the nearest tenth of a share) obtained by
multiplying the Warrant Price in effect immediately prior to such adjustment by
the number of shares purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Warrant Price resulting from
such adjustment.
SECTION 3. ADJUSTMENT OF WARRANT PRICE
The Warrant Price and the number and kind of shares issuable hereunder
shall be subject to adjustment from time to time upon the happening of certain
events as provided in this Section 3.
(a) ADJUSTMENTS
(1) If at any time prior to the exercise of this Warrant
in full, the Company shall (A) declare a dividend or make a distribution on the
Common Stock payable in shares of its capital stock (whether shares of Common
Stock or of capital stock of any other class); (B) subdivide, reclassify or
recapitalize its outstanding Common Stock into a greater number of shares; (C)
combine, reclassify or recapitalize its outstanding Common Stock into a smaller
number of shares; or (D) issue any shares of its capital stock by
reclassification of its Common Stock (excluding any such reclassification in
connection with a consolidation or a merger that is subject to Section 3(c)),
the Warrant Price in effect at the time of the record date of such dividend,
distribution, subdivision, combination, reclassification or recapitalization
shall be adjusted so that the Warrantholder shall be entitled to receive the
aggregate number and kind of shares which, if this Warrant had been exercised
in full immediately prior to such event, it would have owned upon such exercise
and been entitled to receive by virtue of such dividend, distribution,
subdivision, combination, reclassification or recapitalization. Any adjustment
required by this Section 3(a) shall be made successively immediately after the
record date, in the case of a dividend or distribution, or the effective date,
in the case of a subdivision, combination, reclassification or
recapitalization, to allow the purchase of such aggregate number and kind of
shares.
(2) If at any time prior to the exercise of this Warrant
in full, the Company shall make a distribution to all holders of the Common
Stock of stock of a subsidiary or securities convertible into or exercisable
for such stock, then in lieu of an adjustment in the Warrant Price or the
number of shares of Common Stock purchasable upon the exercise of this Warrant,
each Warrantholder, upon the exercise hereof at any time after such
distribution, shall be entitled to receive from the Company, such subsidiary or
both, as the Company shall determine, the stock or
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<PAGE> 5
other securities to which such Warrantholder would have been entitled if such
Warrantholder had exercised this Warrant immediately prior thereto, all subject
to further adjustment as provided in this Section 3, and the Company shall
reserve, for the life of the Warrant, such securities of such subsidiary or
other corporation; provided, however, that no adjustment in respect of
dividends or interest on such stock or other securities shall be made during
the term of this Warrant or upon its exercise.
(3) If at any time prior to the expiration of this Warrant
in full, the Company shall issue rights or warrants to all holders of Common
Stock as such entitling them to subscribe for or purchase Common Stock at a
price per share less than the current Market Price per share (calculated
pursuant to Section 1(d) above) on such record date, then, in each such case
the number of shares subject to this Warrant thereafter purchasable upon the
exercise of this Warrant shall be determined by multiplying the number of
shares of Common Stock theretofore purchasable upon exercise of this Warrant by
a fraction, of which the numerator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants, plus the
number of additional shares of Common Stock offered for subscription or
purchase, and of which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants plus the
number of shares that the aggregate offering price of the total number of
shares of Common Stock so offered would purchase at such current Market Price.
For purposes of this Section 3(a)(3), the issuance of rights or Warrants to
subscribe for or purchase securities convertible into Common Stock shall be
deemed to be the issuance of rights or Warrants to purchase the Common Stock
into which such securities are convertible at an aggregate offering price equal
to the aggregate offering price of such securities plus the minimum aggregate
amount (if any) payable upon conversion of such securities into Common Stock.
(4) If at any time prior to the exercise of this Warrant
in full, the Company shall distribute to all holders of its Common Stock
evidence of indebtedness of the Company or assets of the Company (excluding
cash dividends or distributions out of earned surplus) or rights or Warrants to
subscribe for securities of the Company (excluding those referred to in
Sections 3(a)(2) or (3) above), then in each case the Warrant Price shall be
adjusted to a price determined by multiplying the Warrant Price in effect
immediately prior to such distribution by a fraction, of which the numerator
shall be the then current Market Price per share of Common Stock (calculated
pursuant to Section 1(d) above) on the record date for determination of
stockholders entitled to receive such distribution, less the then fair value
(as determined by the Board of Directors of the Company, whose determination
shall be conclusive) of the portion of the assets or evidences of indebtedness
so distributed or of such subscription rights or Warrants which are applicable
to one share of Common stock, and of which the denominator shall be the Market
Price per share of Common Stock; provided, however, that if the then current
Market Price per share of Common Stock on the record date for determination,
of stockholders entitled to receive such distribution is less than the then
fair value of the portion of the assets or evidence of indebtedness so
distributed or of such subscription rights or Warrants which are applicable to
one share of Common Stock, the foregoing adjustment of the Warrant Price shall
not be made and in lieu thereof the number of shares purchasable upon exercise
of each Warrant immediately prior to such distribution shall be adjusted so
that the holder
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<PAGE> 6
of such Warrant shall be entitled to receive upon exercise of such Warrant the
kind and number of assets, evidence of indebtedness, subscription rights and
Warrants (or, in the event of the redemption of such evidence of indebtedness,
subscription rights or Warrants, any cash paid in respect of such redemption)
that such Warrantholder would have owned or have been entitled to receive after
the happening in such distribution had such Warrant been exercised immediately
prior to the record date of such distribution.
(5) In the event of any capital reorganization of the
Company (other than an event referred to in Section 3(a)(1)), or in case of the
consolidation of the Company with, the merger of the Company with or into or
the sale of all or substantially all of the properties and assets of the
Company to any other person, and in connection therewith consideration is
payable to holders of Common Stock (or other securities or property purchasable
upon exercise of this Warrant) in exchange therefor, this Warrant shall remain
subject to the terms and conditions set forth in this Warrant and this Warrant
shall, after such capital reorganization, consolidation, merger or sale be
exercisable for the number of shares of stock or other securities or assets to
which a holder of the number of shares of Common Stock purchasable (at the time
of such capital reorganization, reclassification of such Common Stock,
consolidation, merger or sale) upon exercise of this Warrant would have been
entitled if such Warrant had been exercised immediately prior to such capital
reorganization, reclassification of such Common Stock, consolidation, merger or
sale; and in any such case, if necessary, the provisions set forth in this
Warrant with respect to the rights and interests thereafter of the
Warrantholder shall be appropriately adjusted so as to be applicable, as nearly
as may reasonably be, to any shares of stock or other securities or assets
thereafter deliverable on the exercise of this Warrant. The Company shall not
effect any such consolidation, merger or sale, unless prior to or
simultaneously with the consummation thereof, the successor corporation (if
other than the Company) resulting from such consolidation or merger or the
corporation purchasing such assets or the appropriate corporation or entity
shall assume, by written instrument, the obligation to deliver to the
Warrantholder the shares of stock, securities or assets to which the
Warrantholder may be entitled pursuant to this Section 3(a)(5).
(6) Notwithstanding Section 3(a)(5), (i) if the Company
merges or consolidates with, or sells all or substantially all of its property
and assets to, any other person and consideration is payable to holders of
Common Stock in exchange for their Common Stock in connection with such merger,
consolidation or sale which consists solely of cash, or (ii) in the event of
the dissolution, liquidation or winding up of the Company, then the
Warrantholder shall be entitled to receive distributions on the date of such
event on an equal basis with holders of Common Stock (or other securities
issuable upon exercise of this Warrant) as if this Warrant had been exercised
immediately prior to such event, less the Warrant Price. Upon receipt of such
payment, if any, the rights of the Warrantholder shall terminate and cease and
this Warrant shall expire. In case of any such merger, consolidation or sale
of assets, the surviving or acquiring person and, in the event of any
dissolution, liquidation or winding up of the Company, the Company shall
promptly, after receipt of this surrendered Warrant, make payment by delivering
a check in such amount as is appropriate (or, in the case of consideration
other than cash, such other consideration as is
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<PAGE> 7
appropriate) to such person as it may be directed in writing by the
Warrantholder surrendering this Warrant.
(7) If any question shall at any time arise with respect
to the adjusted number of shares of Common Stock or other securities issuable
upon exercise of this Warrant, such question shall be determined by the
independent firm of certified public accountants of recognized national standing
selected by the Company and reasonably acceptable to the Warrantholder.
(8) No adjustment in the Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least one
cent ($.01) in such price; provided, however, that any adjustments which by
reason of this Section 3(a)(8) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 3(a) shall be made to the nearest cent or to the nearest
tenth of a share, as the case may be. Notwithstanding anything in this Section
3(a) to the contrary, the Warrant Price shall not be reduced to less than the
then existing par value of the Common Stock as a result of any adjustment made
hereunder.
(9) In the event that at any time, as the result of any
adjustment made pursuant to this Section 3(a), the Warrantholder thereafter
shall become entitled to receive any securities other than Common Stock,
thereafter the number of such other securities so receivable upon exercise of
any Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Section 3(a).
(b) NO ADJUSTMENT FOR DIVIDENDS
Except as provided in Section 3(a) of this Agreement, no adjustment in
respect of any cash dividends shall be made during the term of this Warrant or
upon the exercise of this Warrant.
(c) FORM OF WARRANT AFTER ADJUSTMENTS
The form of this Warrant need not be changed because of any adjustments
in the Warrant Price or the number or kind of the shares purchasable pursuant to
this Warrant, and Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in this
Warrant, as initially issued, provided, however, that the Company may, at any
time in its sole discretion (which shall be conclusive), make any change in the
form of Warrant certificate that it may deem appropriate and that does not
affect the substance thereof. Any Warrant certificate thereafter issued,
whether upon registration of transfer of, or in exchange or substitution for, an
outstanding Warrant certificate may be in the form so changed.
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<PAGE> 8
(d) TREATMENT OF WARRANTHOLDER
Prior to due presentment for registration of transfer of this Warrant,
the Company may deem and treat the Warrantholder as the absolute owner of this
Warrant (notwithstanding any notation of ownership or other writing hereon) for
all purposes and shall not be affected by any notice to the contrary.
(e) NOTICE OF ADJUSTMENT
Upon any adjustment of the Warrant Price, then and in each such case
the Company shall give written notice thereof, by first-class mail, postage
prepaid, addressed to each Warrantholder at the address of such holder as shown
on the books of the Company, which notice shall state the Warrant Price
resulting from such adjustments setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based.
(f) STOCK TO BE RESERVED
The Company will at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance upon the exercise
of this Warrant as herein provided, such number of shares of Common Stock as
shall then be issuable upon the exercise of this Warrant. The Company
covenants that all shares of Common Stock which shall be so issued, upon full
payment of the Warrant Price therefor or as otherwise set forth herein, shall
be duly and validly issued and fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof, and, without
limiting the generality of the foregoing, the Company covenants that it will
from time to time take all such action as may be required to ensure that the
par value per share, if any, of the Common Stock is at all times equal to or
less than the effective Warrant Price. The Company will take all such action
as may be necessary to ensure that all such shares of Common Stock may be so
issued without violation of any applicable law or regulation, or of any
requirement of any national securities exchange or automated quotation system
upon which the Common Stock of the Company may be listed or quoted. The
Company will not take any action which results in any adjustment of the Warrant
Price if the total number of shares of Common Stock issued and issuable after
such action upon exercise of this Warrant would exceed the total number of
shares of Common Stock then authorized by the Company's Certificate of
Incorporation. The Company has not granted and will not grant any right of
first refusal with respect to shares issuable upon exercise of this Warrant,
and there are no preemptive rights associated with such shares.
(g) ISSUE TAX
The issuance of certificates for shares of Common Stock upon exercise
of any Warrant shall be made without a charge to the Warrantholder for any
issuance tax in respect thereto provided that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
-8-
<PAGE> 9
(h) CLOSING OF BOOKS
The Company will at no time close its transfer books against the
transfer of the shares of Common Stock issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant.
(i) DEFINITION OF COMMON STOCK
The shares purchasable pursuant to this Warrant shall include only
securities designated as Common Stock of the Company. As used herein the term
"Common Stock" shall mean and include the Common Stock, par value $.01 per
share, of the Company as authorized on the date hereof, or shares of any class
or classes resulting from any recapitalization or reclassification thereof
which are not limited to any fixed sum or percentage and are not subject to
redemption by the Company and in case at any time there shall be more than one
such resulting class, the shares of each class then so issuable shall be
substantially in the proportion which the total number of shares of such class
resulting from all such reclassification bears to the total number of shares of
all such classes resulting from all such reclassification.
(j) TITLE TO STOCK
All shares of the Common Stock delivered upon the exercise of this
Warrant shall be validly issued, fully paid and nonassessable; the Warrantholder
shall receive good and marketable title to the Common Stock, free and clear of
all voting and other trust arrangements, liens, encumbrances, equities and
claims created by the Company whatsoever, other than the Amended and Restated
Stockholders and Voting Agreement, dated April 30, 1997, by and among the
Company, _________ and the other stockholders of the Company that are
signatories thereto (the "Stockholders Agreement").
SECTION 4. NOTICES OF RECORD DATES
In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution (other than cash
dividends out of earned surplus), or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any right to sell shares of stock of any class or any
other right; or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of all
or substantially all the assets of the Company to or consolidation or merger of
the Company with or into any other corporation or entity; or
-9-
<PAGE> 10
(c) any voluntary or involuntary dissolution, liquidation
or winding-up of the Company;
then and in each such event the Company will give notice to the Warrantholder
specifying (1) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right and stating the amount and character of
such dividend, distribution or right, and (2) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up is to take place, and the time,
if any is to be fixed, as of which the holders of record of Common Stock will
be entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given at least 20 days and not more than 90
days prior to the date therein specified, and such notice shall state that the
action in question or the record date is subject to the effectiveness of a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act") or to a favorable vote of stockholders, if either is required.
SECTION 5. NO STOCKHOLDERS RIGHTS OR LIABILITIES
This Warrant shall not entitle the Warrantholder to any voting rights
or other rights as a stockholder of the Company. No provision hereof, in the
absence of affirmative action by the Warrantholder to purchase shares of Common
Stock, and no mere enumeration herein of the rights or privileges of the
Warrantholder shall give rise to any liability of such Warrantholder for the
Warrant Price or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
SECTION 6. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT
In case the certificate or certificates evidencing the Warrants shall
be mutilated, lost, stolen or destroyed, the Company shall, at the request of
the Warrantholder, issue and deliver in exchange and substitution for and upon
cancellation or the mutilated certificate or certificates, or in lieu of and
substitution for the certificate or certificates lost, stolen or destroyed, a
new Warrant certificate or certificates of like tenor and representing an
equivalent right or interest but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction of such Warrant and a bond of
indemnity, if requested, also satisfactory in form and amount at the
applicant's cost. Applicants for such substitute Warrant certificate or
certificates shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company may prescribe.
SECTION 7. NOTICES
All notices, requests and other communications required or permitted
to be given or delivered hereunder shall be in writing, and shall be delivered,
or shall be sent by certified or registered mail or overnight courier, postage
prepaid and addressed, or by facsimile, and if to the Warrantholder to such
Warrantholder at such address or facsimile number as shall have been furnished
to the Company by notice from such Warrantholder and if to the Company, at 4005
Northwest
-10-
<PAGE> 11
Expressway, Suite 400E, Oklahoma City, Oklahoma 73116; Attention: President,
facsimile number (405) 879-3847 or at such other address or facsimile number as
shall have been furnished to the Warrantholder by notice from the Company.
SECTION 8. RESTRICTIONS ON TRANSFER
Except as may be permitted by the Stockholders Agreement, this Warrant
may not be sold, transferred, hypothecated or assigned to any other person or
entity other than (i) the respective successors to _______________ in a merger
or consolidation; (ii) the respective purchasers of all or substantially all of
the assets of _______________; or (iii) the _______________ shareholders in the
event _______________ is liquidated or dissolved. _______________ agrees not
to make any sale or other disposition of either the Warrant or the underlying
Common Stock except pursuant to a registration statement which has become
effective under the Securities Act, setting forth the terms of such offering,
the underwriting discount and the commissions and any other pertinent data with
respect thereto, unless _______________ has provided the Company with an
opinion of counsel reasonably acceptable to the Company that such registration
is not required. This Warrant shall bear a legend setting forth the foregoing
restriction.
SECTION 9. AMENDMENTS AND WAIVERS
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by each of (i) a majority in
interest of the holders of this Warrant and (ii) an authorized representative
of the Company.
SECTION 10. SEVERABILITY
If one or more provisions of this Warrant are held to be unenforceable
under applicable law, such provisions shall be excluded from this Warrant, and
the balance of this Warrant shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
SECTION 11. GOVERNING LAW
This Warrant shall be governed by and construed under the laws of the
State of Delaware without regard to conflict of law principles.
SECTION 12. HEADINGS
The headings in this Warrant are for purposes of reference only and
shall not limit or otherwise affect any of the terms hereof.
-11-
<PAGE> 12
SECTION 13. COUNTERPARTS
This Warrant may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the Company and _______________ have executed this
Warrant on and as of the day and year first above written.
BAYARD DRILLING TECHNOLOGIES INC.,
a Delaware corporation
By:
---------------------------------
James E. Brown
President
[ ]
--------------------------------------
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
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<PAGE> 13
SUBSCRIPTION FORM
(To be executed upon exercise of this Warrant)
__________________________________:
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
______________ shares of Common Stock, as provided for therein, and either
tenders herewith payment of the purchase price of $________________ in full (i)
in cash or a certified or official bank check or (ii) by surrender of an
aggregate principal and accrued unpaid interest amount of Notes, dated from
time to time, from the Company to __________, in an amount equal to the
purchase price or, if the undersigned elects pursuant to Section 1(b) of the
within Warrant to convert such Warrant into Common Stock on a net issuance
basis, the undersigned exercises the within Warrant by exchange under the terms
of Section 1(b).
Please issue a certificate or certificates for such Common Stock in the
name of, and pay any cash for any fractional share to:
Name:
------------------------------
Address:
------------------------------
Social
Security No:
--------------------------
Signature:
----------------------------
Note: The above signature must correspond
exactly with the name on the first page
of this Warrant.
If said number of shares shall not be all the shares purchasable under
the within Warrant, a new Warrant is to be issued in the name of the
Warrantholder for the balance remaining of the shares purchasable thereunder
rounded up to the next higher number of shares.
Signature Guaranteed:_____________________________________________
(Signature must be guaranteed by a bank or trust company having an
office or correspondence in the United States or by a member firm of a
registered securities exchange or the National Association of Security Dealers,
Inc.)
-13-
<PAGE> 1
EXHIBIT 10.14
[EXECUTION COPY]
WARRANT AGREEMENT
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT.
THIS WARRANT MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR ASSIGNED TO ANY
OTHER PERSON OR ENTITY, EXCEPT AS SET FORTH HEREIN.
WARRANT
TO SUBSCRIBE FOR AND PURCHASE COMMON STOCK OF
BAYARD DRILLING TECHNOLOGIES, INC.
VOID AFTER 5:00 P.M., CENTRAL TIME, ON THE DATE THAT IS THE LATER OF
(i) THREE YEARS AFTER THE DATE HEREOF OR (ii) ONE YEAR AFTER AN
INITIAL PUBLIC OFFERING OF THE COMMON STOCK OF BAYARD DRILLING
TECHNOLOGIES, INC., BUT IN NO EVENT LATER THAN JUNE 1, 2003, OR, IF
ANY SUCH DAY IS NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M.,
CENTRAL TIME ON THE IMMEDIATELY FOLLOWING BUSINESS DAY
THIS CERTIFIES that, for good and valuable consideration, Ward
Drilling Company, Inc., an Oklahoma corporation ("Ward"), or its registered
assigns, is entitled to subscribe for and purchase from Bayard Drilling
Technologies, Inc., a Delaware corporation (hereinafter the "Company"), at the
price of $20.00 per share (such price, as from time to time to be adjusted as
hereinafter provided, being hereinafter called the "Warrant Price"), at any
time and from time to time after the date hereof but not later than the
Expiration Date (as defined below), up to such number of fully paid,
nonassessable shares of Common Stock, par value $.01 per share, of the Company
("Common Stock") as is specified in the following sentence, subject, however,
to the provisions and upon the terms and conditions hereinafter set forth,
including without limitation the provisions of Section 3 hereof. This Warrant
shall be exercisable for up to 100,000 shares of Common Stock upon issuance,
subject to adjustment as provided herein. "Expiration Date" shall mean 5:00
P.M., Central Time, on the date that is the later of (i) three years after the
date hereof or (ii) one year after an initial public offering of Common Stock,
but in no event later than June 1, 2003, or, if any such day is not a Business
Day, as defined herein, at 5:00 P.M., Central Time on the immediately following
Business Day "Business Day" shall mean a day other than a Saturday, Sunday or
other day on which banks in the State of Texas are authorized by law to remain
closed.
<PAGE> 2
SECTION 1. EXERCISE OF WARRANT
(a) CASH EXERCISE
This Warrant may be exercised, at any time and from time to time
but not later than the Expiration Date, by the holder hereof (hereinafter
referred to as the "Warrantholder"), in whole or in part (but not as to a
fractional share of Common Stock and in no event for less than 100 shares
(unless less than an aggregate of 100 shares are then purchasable under all
outstanding Warrants held by a Warrantholder)), by the completion of the
subscription form attached hereto and by the surrender of this Warrant
(properly endorsed) at the Company's offices at 4005 Northwest Expressway,
Suite 400E, Oklahoma City, Oklahoma 73116 (or at such other location in the
United States as the Company may designate by notice in writing to the
Warrantholder at the address of the Warrantholder appearing on the books of the
Company), and by payment to the Company of the Warrant Price for each share
being purchased in cash or by certified or official bank check.
(b) NET EXERCISE
Notwithstanding anything to the contrary contained in Subsection
1(a), at any time after the completion by the Company of a Qualified IPO (as
defined below), the Warrantholder may elect to exercise this Warrant and
receive shares on a "net exercise" basis in an amount equal to the value of
this Warrant by delivery of the subscription form attached hereto and surrender
of this Warrant at the principal office of the Company, in which event the
Company shall issue to the Warrantholder a number of shares of Common Stock
computed using the following formula:
(P)(Y)(A-B)
X = -----------
A
Where: X= the number of shares of Common Stock to be
issued to the Warrantholder.
P= the portion of the Warrant being exercised
(expressed as a fraction).
Y= the total number of shares of Common Stock
issuable upon exercise of this Warrant.
A= the Current Market Price (as determined
pursuant to Subsection 1(d)) of one share of
Common Stock.
B= Warrant Price.
<PAGE> 3
"Qualified IPO" means (i) one or more underwritten public offerings of Common
Stock pursuant to one or more effective registration statements filed under the
Securities Act of 1933, as amended, resulting in an aggregate of at least $25
million of net proceeds, after deducting underwriting discounts and commission
and other expenses, to the Company or (ii) any merger, consolidation or other
business combination transaction that results in any equity securities of the
Company being registered under Section 12 of the Securities Exchange Act of
1934, as amended.
(c) PROCEDURE FOR EXERCISE
In the event of any exercise of the rights represented by this
Warrant, a certificate or certificates for the total number of whole shares of
Common Stock so purchased, registered in the name of the Warrantholder, shall
be delivered to the Warrantholder within a reasonable time, not exceeding five
Business Days, after the rights represented by this Warrant shall have been so
exercised; and, unless this Warrant has expired, a new Warrant representing the
number of shares (except a remaining fractional share), if any, with respect to
which this Warrant shall not then have been exercised shall also be issued to
the Warrantholder within such time. With respect to any such exercise, the
Warrantholder shall for all purposes be deemed to have become the holder of
record of the number of shares of Common Stock evidenced by such certificate or
certificates, from the date on which this Warrant was surrendered and, if
exercise is pursuant to Section 1(a), payment of the Warrant Price was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date on which the stock transfer books
of the Company are closed, such person shall be deemed to have become the
holder of such shares at the close of business on the next succeeding date on
which the stock transfer books are open. No fractional shares shall be issued
upon exercise of this Warrant and no payment or adjustment shall be made upon
any exercise on account of any cash dividends on the Common Stock issued upon
such exercise. If any fractional interest in a share of Common Stock would,
except for the provisions of this Section 1, be delivered upon any such
exercise, the Company, in lieu of delivering the fractional share thereof,
shall pay to the Warrantholder an amount in cash equal to the current market
price of such fractional interest, as determined below.
(d) CURRENT MARKET PRICE
For any computation hereunder, the current market price per share
of Common Stock on any date shall be deemed to be the average of the daily
market price per share for the 20 consecutive Trading Days commencing 30
Trading Days before the date in question. "Market Price" is defined as the
closing sale price (or, if no closing sale price is reported, the closing bid
price) of the Common Stock on the principal United States national securities
exchange on which the Common Stock is then listed for trading or, if not so
listed, in the over-the-counter market, as reported by the Nasdaq Stock Market
("Nasdaq"), or, if the Common Stock is not quoted on Nasdaq, as reported by the
National Quotation Bureau Incorporated. If Market Price cannot be established
as described above, market price shall be the fair market value of the Common
Stock as determined in good faith by the Board of Directors whose determination
shall be conclusive. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the Common Stock is listed or
admitted to trading or Nasdaq is open for the transaction of business.
<PAGE> 4
SECTION 2. ADJUSTMENT OF NUMBER OF SHARES
Upon each adjustment of the Warrant Price for any stock dividend
or distribution or any subdivision or combination of the outstanding shares of
the Common Stock as provided in Section 3, the Warrantholder shall thereafter
be entitled to purchase, at the Warrant Price resulting from such adjustment,
the number of shares (calculated to the nearest tenth of a share) obtained by
multiplying the Warrant Price in effect immediately prior to such adjustment by
the number of shares purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Warrant Price resulting from
such adjustment.
SECTION 3. ADJUSTMENT OF WARRANT PRICE
The Warrant Price and the number and kind of shares issuable
hereunder shall be subject to adjustment from time to time upon the happening
of certain events as provided in this Section 3.
(a) ADJUSTMENTS
(1) If at any time prior to the exercise of this Warrant in
full, the Company shall (A) declare a dividend or make a distribution on the
Common Stock payable in shares of its capital stock (whether shares of Common
Stock or of capital stock of any other class); (B) subdivide, reclassify or
recapitalize its outstanding Common Stock into a greater number of shares; (C)
combine, reclassify or recapitalize its outstanding Common Stock into a smaller
number of shares; or (D) issue any shares of its capital stock by
reclassification of its Common Stock (excluding any such reclassification in
connection with a consolidation or a merger that is subject to Section 3(c)),
the Warrant Price in effect at the time of the record date of such dividend,
distribution, subdivision, combination, reclassification or recapitalization
shall be adjusted so that the Warrantholder shall be entitled to receive the
aggregate number and kind of shares which, if this Warrant had been exercised
in full immediately prior to such event, it would have owned upon such exercise
and been entitled to receive by virtue of such dividend, distribution,
subdivision, combination, reclassification or recapitalization. Any adjustment
required by this Section 3(a) shall be made successively immediately after the
record date, in the case of a dividend or distribution, or the effective date,
in the case of a subdivision, combination, reclassification or
recapitalization, to allow the purchase of such aggregate number and kind of
shares.
(2) If at any time prior to the exercise of this Warrant in
full, the Company shall make a distribution to all holders of the Common Stock
of stock of a subsidiary or securities convertible into or exercisable for such
stock, then in lieu of an adjustment in the Warrant Price or the number of
shares of Common Stock purchasable upon the exercise of this Warrant, each
Warrantholder, upon the exercise hereof at any time after such distribution,
shall be entitled to receive from the Company, such subsidiary or both, as the
Company shall determine, the stock or other securities to which such
Warrantholder would have been entitled if such Warrantholder had exercised this
Warrant immediately prior thereto, all subject to further adjustment as
provided in this Section 3, and the Company shall reserve, for the life of the
Warrant, such securities of such subsidiary or
<PAGE> 5
other corporation; provided, however, that no adjustment in respect of
dividends or interest on such stock or other securities shall be made during
the term of this Warrant or upon its exercise.
(3) If at any time prior to the expiration of this Warrant in
full, the Company shall issue rights or warrants to all holders of Common Stock
as such entitling them to subscribe for or purchase Common Stock at a price per
share less than the current Market Price per share (calculated pursuant to
Section 1(d) above) on such record date, then, in each such case the number of
shares subject to this Warrant thereafter purchasable upon the exercise of this
Warrant shall be determined by multiplying the number of shares of Common Stock
theretofore purchasable upon exercise of this Warrant by a fraction, of which
the numerator shall be the number of shares of Common Stock outstanding on the
date of issuance of such rights or warrants, plus the number of additional
shares of Common Stock offered for subscription or purchase, and of which the
denominator shall be the number of shares of Common Stock outstanding on the
date of issuance of such rights or warrants plus the number of shares that the
aggregate offering price of the total number of shares of Common Stock so
offered would purchase at such current Market Price. For purposes of this
Section 3(a)(3), the issuance of rights or Warrants to subscribe for or
purchase securities convertible into Common Stock shall be deemed to be the
issuance of rights or Warrants to purchase the Common Stock into which such
securities are convertible at an aggregate offering price equal to the
aggregate offering price of such securities plus the minimum aggregate amount
(if any) payable upon conversion of such securities into Common Stock.
(4) If at any time prior to the exercise of this Warrant in
full, the Company shall distribute to all holders of its Common Stock evidence
of indebtedness of the Company or assets of the Company (excluding cash
dividends or distributions out of earned surplus) or rights or Warrants to
subscribe for securities of the Company (excluding those referred to in
Sections 3(a)(2) or (3) above), then in each case the Warrant Price shall be
adjusted to a price determined by multiplying the Warrant Price in effect
immediately prior to such distribution by a fraction, of which the numerator
shall be the then current Market Price per share of Common Stock (calculated
pursuant to Section 1(d) above) on the record date for determination of
stockholders entitled to receive such distribution, less the then fair value
(as determined by the Board of Directors of the Company, whose determination
shall be conclusive) of the portion of the assets or evidences of indebtedness
so distributed or of such subscription rights or Warrants which are applicable
to one share of Common stock, and of which the denominator shall be the Market
Price per share of Common Stock; provided, however, that if the then current
Market Price per share of Common Stock on the record date for determination, of
stockholders entitled to receive such distribution is less than the then fair
value of the portion of the assets or evidence of indebtedness so distributed
or of such subscription rights or Warrants which are applicable to one share of
Common Stock, the foregoing adjustment of the Warrant Price shall not be made
and in lieu thereof the number of shares purchasable upon exercise of each
Warrant immediately prior to such distribution shall be adjusted so that the
holder of such Warrant shall be entitled to receive upon exercise of such
Warrant the kind and number of assets, evidence of indebtedness, subscription
rights and Warrants (or, in the event of the redemption of such evidence of
indebtedness, subscription rights or Warrants, any cash paid in respect of such
redemption) that such Warrantholder would have owned or have been entitled to
receive after the
<PAGE> 6
happening in such distribution had such Warrant been exercised immediately
prior to the record date of such distribution.
(5) In the event of any capital reorganization of the Company
(other than an event referred to in Section 3(a)(1)), or in case of the
consolidation of the Company with, the merger of the Company with or into or
the sale of all or substantially all of the properties and assets of the
Company to any other person, and in connection therewith consideration is
payable to holders of Common Stock (or other securities or property purchasable
upon exercise of this Warrant) in exchange therefor, this Warrant shall remain
subject to the terms and conditions set forth in this Warrant and this Warrant
shall, after such capital reorganization, consolidation, merger or sale be
exercisable for the number of shares of stock or other securities or assets to
which a holder of the number of shares of Common Stock purchasable (at the time
of such capital reorganization, reclassification of such Common Stock,
consolidation, merger or sale) upon exercise of this Warrant would have been
entitled if such Warrant had been exercised immediately prior to such capital
reorganization, reclassification of such Common Stock, consolidation, merger or
sale; and in any such case, if necessary, the provisions set forth in this
Warrant with respect to the rights and interests thereafter of the
Warrantholder shall be appropriately adjusted so as to be applicable, as nearly
as may reasonably be, to any shares of stock or other securities or assets
thereafter deliverable on the exercise of this Warrant. The Company shall not
effect any such consolidation, merger or sale, unless prior to or
simultaneously with the consummation thereof, the successor corporation (if
other than the Company) resulting from such consolidation or merger or the
corporation purchasing such assets or the appropriate corporation or entity
shall assume, by written instrument, the obligation to deliver to the
Warrantholder the shares of stock, securities or assets to which the
Warrantholder may be entitled pursuant to this Section 3(a)(5).
(6) Notwithstanding Section 3(a)(5), (i) if the Company merges
or consolidates with, or sells all or substantially all of its property and
assets to, any other person and consideration is payable to holders of Common
Stock in exchange for their Common Stock in connection with such merger,
consolidation or sale which consists solely of cash, or (ii) in the event of
the dissolution, liquidation or winding up of the Company, then the
Warrantholder shall be entitled to receive distributions on the date of such
event on an equal basis with holders of Common Stock (or other securities
issuable upon exercise of this Warrant) as if this Warrant had been exercised
immediately prior to such event, less the Warrant Price. Upon receipt of such
payment, if any, the rights of the Warrantholder shall terminate and cease and
this Warrant shall expire. In case of any such merger, consolidation or sale
of assets, the surviving or acquiring person and, in the event of any
dissolution, liquidation or winding up of the Company, the Company shall
promptly, after receipt of this surrendered Warrant, make payment by delivering
a check in such amount as is appropriate (or, in the case of consideration
other than cash, such other consideration as is appropriate) to such person as
it may be directed in writing by the Warrantholder surrendering this Warrant.
(7) If any question shall at any time arise with respect to
the adjusted number of shares of Common Stock or other securities issuable
upon exercise of this Warrant, such question shall be determined by the
independent firm of certified public accountants of recognized national
standing selected by the Company and reasonably acceptable to the
Warrantholder.
<PAGE> 7
(8) No adjustment in the Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least one
cent ($.01) in such price; provided, however, that any adjustments which by
reason of this Section 3(a)(8) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 3(a) shall be made to the nearest cent or to the nearest
tenth of a share, as the case may be. Notwithstanding anything in this Section
3(a) to the contrary, the Warrant Price shall not be reduced to less than the
then existing par value of the Common Stock as a result of any adjustment made
hereunder.
(9) In the event that at any time, as the result of any
adjustment made pursuant to this Section 3(a), the Warrantholder thereafter
shall become entitled to receive any securities other than Common Stock,
thereafter the number of such other securities so receivable upon exercise of
any Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Section 3(a).
(b) NO ADJUSTMENT FOR DIVIDENDS
Except as provided in Section 3(a) of this Agreement, no
adjustment in respect of any cash dividends shall be made during the term of
this Warrant or upon the exercise of this Warrant.
(c) FORM OF WARRANT AFTER ADJUSTMENTS
The form of this Warrant need not be changed because of any
adjustments in the Warrant Price or the number or kind of the shares
purchasable pursuant to this Warrant, and Warrants theretofore or thereafter
issued may continue to express the same price and number and kind of shares as
are stated in this Warrant, as initially issued, provided, however, that the
Company may, at any time in its sole discretion (which shall be conclusive),
make any change in the form of Warrant certificate that it may deem appropriate
and that does not affect the substance thereof. Any Warrant certificate
thereafter issued, whether upon registration of transfer of, or in exchange or
substitution for, an outstanding Warrant certificate may be in the form so
changed.
(d) TREATMENT OF WARRANTHOLDER
Prior to due presentment for registration of transfer of this
Warrant, the Company may deem and treat the Warrantholder as the absolute owner
of this Warrant (notwithstanding any notation of ownership or other writing
hereon) for all purposes and shall not be affected by any notice to the
contrary.
(e) NOTICE OF ADJUSTMENT
Upon any adjustment of the Warrant Price, then and in each such
case the Company shall give written notice thereof, by first-class mail,
postage prepaid, addressed to each Warrantholder at the address of such holder
as shown on the books of the Company, which notice shall state the
<PAGE> 8
Warrant Price resulting from such adjustments setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.
(f) STOCK TO BE RESERVED
The Company will at all times reserve and keep available out of
its authorized Common Stock, solely for the purpose of issuance upon the
exercise of this Warrant as herein provided, such number of shares of Common
Stock as shall then be issuable upon the exercise of this Warrant. The Company
covenants that all shares of Common Stock which shall be so issued, upon full
payment of the Warrant Price therefor or as otherwise set forth herein, shall
be duly and validly issued and fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof, and, without
limiting the generality of the foregoing, the Company covenants that it will
from time to time take all such action as may be required to ensure that the
par value per share, if any, of the Common Stock is at all times equal to or
less than the effective Warrant Price. The Company will take all such action
as may be necessary to ensure that all such shares of Common Stock may be so
issued without violation of any applicable law or regulation, or of any
requirement of any national securities exchange or automated quotation system
upon which the Common Stock of the Company may be listed or quoted. The
Company will not take any action which results in any adjustment of the Warrant
Price if the total number of shares of Common Stock issued and issuable after
such action upon exercise of this Warrant would exceed the total number of
shares of Common Stock then authorized by the Company's Certificate of
Incorporation. The Company has not granted and will not grant any right of
first refusal with respect to shares issuable upon exercise of this Warrant,
and there are no preemptive rights associated with such shares.
(g) ISSUE TAX
The issuance of certificates for shares of Common Stock upon
exercise of any Warrant shall be made without a charge to the Warrantholder for
any issuance tax in respect thereto provided that the Company shall not be
required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
that of the Warrantholder.
(h) CLOSING OF BOOKS
The Company will at no time close its transfer books against the
transfer of the shares of Common Stock issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant.
(i) DEFINITION OF COMMON STOCK
The shares purchasable pursuant to this Warrant shall include
only securities designated as Common Stock of the Company. As used herein the
term "Common Stock" shall mean and include the Common Stock, par value $.01 per
share, of the Company as authorized on the date hereof, or shares of any class
or classes resulting from any recapitalization or reclassification thereof
which are not limited to any fixed sum or percentage and are not subject to
redemption by the
<PAGE> 9
Company and in case at any time there shall be more than one such resulting
class, the shares of each class then so issuable shall be substantially in the
proportion which the total number of shares of such class resulting from all
such reclassification bears to the total number of shares of all such classes
resulting from all such reclassification.
(j) TITLE TO STOCK
All shares of the Common Stock delivered upon the exercise of
this Warrant shall be validly issued, fully paid and nonassessable; the
Warrantholder shall receive good and marketable title to the Common Stock, free
and clear of all voting and other trust arrangements, liens, encumbrances,
equities and claims created by the Company whatsoever, other than the Amended
and Restated Stockholders and Voting Agreement, dated April 30, 1997, by and
among the Company, Ward, and the other stockholders of the Company that are
signatories thereto (the "Stockholders Agreement").
SECTION 4. NOTICES OF RECORD DATES
In the event of:
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution (other than cash
dividends out of earned surplus), or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any right to sell shares of stock of any class or any
other right; or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all the assets of the Company to or
consolidation or merger of the Company with or into any other corporation or
entity; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then and in each such event the Company will give notice to the Warrantholder
specifying (1) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right and stating the amount and character of
such dividend, distribution or right, and (2) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up is to take place, and the time,
if any is to be fixed, as of which the holders of record of Common Stock will
be entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given at least 20 days and not more than 90
days prior to the date therein specified, and such notice shall state that the
action in question or the record date is subject to the effectiveness of a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act") or to a favorable vote of stockholders, if either is
required.
<PAGE> 10
SECTION 5. NO STOCKHOLDERS RIGHTS OR LIABILITIES
Except as may be provided by the Stockholders Agreement, this
Warrant shall not entitle the Warrantholder to any voting rights or other
rights as a stockholder of the Company. No provision hereof, in the absence of
affirmative action by the Warrantholder to purchase shares of Common Stock, and
no mere enumeration herein of the rights or privileges of the Warrantholder
shall give rise to any liability of such Warrantholder for the Warrant Price or
as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
SECTION 6. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT
In case the certificate or certificates evidencing the Warrants
shall be mutilated, lost, stolen or destroyed, the Company shall, at the
request of the Warrantholder, issue and deliver in exchange and substitution
for and upon cancellation or the mutilated certificate or certificates, or in
lieu of and substitution for the certificate or certificates lost, stolen or
destroyed, a new Warrant certificate or certificates of like tenor and
representing an equivalent right or interest but only upon receipt of evidence
satisfactory to the Company of such loss, theft or destruction of such Warrant
and a bond of indemnity, if requested, also satisfactory in form and amount at
the applicant's cost. Applicants for such substitute Warrant certificate or
certificates shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company may prescribe.
SECTION 7. NOTICES
All notices, requests and other communications required or
permitted to be given or delivered hereunder shall be in writing, and shall be
delivered, or shall be sent by certified or registered mail or overnight
courier, postage prepaid and addressed, or by facsimile, and if to the
Warrantholder to such Warrantholder at such address or facsimile number as
shall have been furnished to the Company by notice from such Warrantholder and
if to the Company, at 4005 Northwest Expressway, Suite 400E, Oklahoma City,
Oklahoma 73116; Attention: President, facsimile number (405) 879-3847 or at
such other address or facsimile number as shall have been furnished to the
Warrantholder by notice from the Company.
SECTION 8. RESTRICTIONS ON TRANSFER
Except as may be permitted by the Stockholders Agreement, this
Warrant may not be sold, transferred, hypothecated or assigned to any other
person or entity other than (i) the respective successors to Ward in a merger
or consolidation; (ii) the respective purchasers of all or substantially all of
the assets of Ward; or (iii) the Ward shareholders in the event Ward is
liquidated or dissolved. Ward agrees not to make any sale or other disposition
of either the Warrant or the underlying Common Stock except pursuant to a
registration statement which has become effective under the Securities Act,
setting forth the terms of such offering, the underwriting discount and the
commissions and any other pertinent data with respect thereto, unless Ward has
provided the Company with an opinion of counsel reasonably acceptable to the
Company that such registration is not required. This Warrant shall bear a
legend setting forth the foregoing restriction.
<PAGE> 11
SECTION 9. AMENDMENTS AND WAIVERS
This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by each of (i)
a majority in interest of the holders of this Warrant and (ii) an authorized
representative of the Company.
SECTION 10. SEVERABILITY
If one or more provisions of this Warrant are held to be
unenforceable under applicable law, such provisions shall be excluded from this
Warrant, and the balance of this Warrant shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
SECTION 11. GOVERNING LAW
This Warrant shall be governed by and construed under the laws of
the State of Delaware without regard to conflict of law principles.
SECTION 12. HEADINGS
The headings in this Warrant are for purposes of reference only
and shall not limit or otherwise affect any of the terms hereof.
SECTION 13. COUNTERPARTS
This Warrant may be executed in any number of counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
<PAGE> 12
IN WITNESS WHEREOF, the Company and Ward have executed this
Warrant on and as of May 30, 1997.
BAYARD DRILLING TECHNOLOGIES INC.,
a Delaware corporation
By: /s/ JAMES E. BROWN
----------------------------------
James E. Brown
President
WARD DRILLING COMPANY, INC.
an Oklahoma corporation
By: /s/ LARRY CURRIER
----------------------------------
Name:
--------------------------------
Title: President
-------------------------------
<PAGE> 13
SUBSCRIPTION FORM
(To be executed upon exercise of this Warrant)
:
- ----------------------------
The undersigned hereby irrevocably elects to exercise the right
of purchase represented by the within Warrant for, and to purchase thereunder,
______________ shares of Common Stock, as provided for therein, and either
tenders herewith payment of the purchase price of $________________ in full in
cash or a certified or official bank check in an amount equal to the purchase
price or, if the undersigned elects pursuant to Section 1(b) of the within
Warrant to convert such Warrant into Common Stock on a net issuance basis, the
undersigned exercises the within Warrant by exchange under the terms of Section
1(b).
Please issue a certificate or certificates for such Common Stock
in the name of, and pay any cash for any fractional share to:
Name:
----------------------------------------
Address:
-------------------------------------
Social Security No:
--------------------------
Signature:
-----------------------------------
If said number of shares shall not be all the shares purchasable
under the within Warrant, a new Warrant is to be issued in the name of the
Warrantholder for the balance remaining of the shares purchasable thereunder
rounded up to the next higher number of shares.
Signature Guaranteed:
------------------------
(Signature must be guaranteed by a bank or trust company having an office or
correspondence in the United States or by a member firm of a registered
securities exchange or the National Association of Security Dealers, Inc.)
<PAGE> 1
EXHIBIT 10.15
PREFERENTIAL RIGHT TO TRANSPORT AGREEMENT
This Preferential Right to Transport Agreement (this
"Agreement") is entered into and effective this 30th day of May, 1997
("Effective Date"), between Bayard Drilling Technologies, Inc., a Delaware
corporation ("the Company"), and Geronimo Trucking Company, an Oklahoma
corporation ("Geronimo").
1. Agreement to Utilize Trucks. The Company agrees to
and does hereby grant Geronimo the preferential right to perform trucking
services contracted for by the Company relative to the movement of the rigs
acquired by the Company pursuant to the terms of that certain Unit Purchase
Agreement, of even date herewith, between Ward Drilling Company, Inc. and the
Company (the "Acquired Rigs"). The Company agrees to use the services of
Geronimo at rates which are competitive in the area. The Company agrees to
solicit bids from Geronimo for the movement of all the rigs which it owns.
Provided, however, in the event that the Company receives a bona fide written
offer to move its rigs from another rig moving company which is better than
Geronimo' offer and which the Company is willing to accept, it agrees to
immediately (a) forward to Geronimo the written offer from the third party
setting forth the terms and provisions of such offer and (b) forward to
Geronimo, at the same time as the writing required in (a) above is sent, copies
of all information supplied by and between the Company and such third party.
The information and materials addressed in (a) and (b) above shall hereinafter
collectively be referred to as the "Notification". Upon Geronimo's receipt of
the Notification, Geronimo shall then have an optional prior right, for a
period of 24 hours thereafter, to (i) match the offer and move the rigs on the
same terms and conditions as offered by such third party or (ii) make a better
offer than the offer submitted by such third party. The Company agrees that it
will be a violation of this Agreement if it intentionally arranges for another
party to contract for such trucking services, other than the current
shareholders of the Company as of the date hereof, in order to avoid the
provisions of this Agreement.
2. Agreement to Provide Trucks. Geronimo agrees to and
does hereby grant the Company the preferential right to engage Geronimo's
trucking services relative to the movement of the Company's Rigs. Geronimo
agrees to make its trucking services available to the Company at rates which
are competitive in the area. Geronimo agrees to tender a competitive bid
whenever the Company solicits bids from Geronimo for the movement of any of the
Company's Rigs.
3. Duration of Agreement. This Agreement shall be
binding for the three-year period beginning on the Effective Date of this
Agreement.
4. Termination of Agreement. This Agreement may be
terminated prior to its expiration only upon the written agreement of the
Company and Geronimo.
<PAGE> 2
5. Assignment. The rights and duties of either party
hereunder shall not be assigned without the prior written consent of the other
party; provided, that the Company may assign such rights and duties to any
person or entity affiliated with the Company without such consent.
6. Equitable Relief. The parties hereto acknowledge and
agree that in the event of the violation of the provisions of this Agreement,
neither party could be fully or adequately compensated by money damages and
that, in addition to any other relief to which either is entitled, such party
shall be entitled to temporary or permanent equitable relief.
7. Modification; Waiver. No termination, cancellation,
modification, amendment, deletion, addition, or other change in this Agreement,
or any provision hereof, or waiver of any right or remedy herein provided,
shall be effective for any purpose unless specifically set forth in writing
signed by the party or parties to be bound thereby. The waiver of any right or
remedy with respect to any occurrence or event on one occasion shall not be
deemed a waiver of such right or remedy with respect to such occurrence or
event on any other occasion.
8. Binding on Successors. Except as otherwise provided
herein, this Agreement shall be binding upon, and shall inure to the benefit
of, the parties hereto and their respective successors and assigns.
9. Notices. All notices or deliveries required or
desired to be given hereunder shall be in writing and shall be delivered in
person or by registered or certified United States mail, first-class postage
prepaid, return receipt requested or by wire, telegram or telex and addressed
to the parties at their respective addresses set forth below, unless by such
notice a different address shall have been designated. All notices sent by
mail as aforesaid shall be deemed delivered five business days after deposit in
the mail. All notices sent by wire, telegram or telex as aforesaid shall be
deemed delivered one business day after being sent. All other notices shall be
deemed delivered when actually received.
Company: Bayard Drilling Technologies, Inc.
4005 N.W. Expressway, Suite 400E
P. O. Box 268867
Oklahoma City, OK 73126-8867
Attn: James E. Brown, President
Geronimo: Geronimo Trucking Company
502 South Fillmore
P.O. Box 1187
Enid, Oklahoma 73702
Attn: President
10. Enforcement Costs. The court costs and attorneys'
fees incurred by either party in a successful prosecution or defense of any
legal or equitable proceedings to construe this
2
<PAGE> 3
Agreement or enforce any right or obligation arising from it shall become an
obligation due and payable from the other party; and each such obligation shall
bear interest from the date of its accrual at the rate of 10% per annum.
11. Headings. The headings and titles to the sections of
this Agreement are inserted for convenience only and shall not be deemed a part
hereof or affect the construction or interpretation of any provision hereof.
12. Entire Agreement. This Agreement supersedes all
other agreements, oral or written, heretofore made with respect to the subject
matter hereof and the transactions contemplated hereby, and contains the entire
agreement of the parties.
13. Severability. Any provision hereof prohibited by or
unlawful or unenforceable under any applicable law of any jurisdiction shall,
as to such jurisdiction, be ineffective, without affecting any other provision
of this Agreement, or shall be deemed to be severed or modified to conform with
such law, and the remaining provisions of this Agreement shall remain in force,
provided that the purpose of the Agreement can be effected. To the full
extent, however, that the provisions of such applicable law may be waived, they
are hereby waived, in order that this Agreement may be deemed to be a valid,
binding and enforceable Agreement.
14. Governing Law. All questions concerning the
validity, operation and interpretation of this Agreement and the performance of
the obligations imposed upon the parties hereunder shall be governed by the
laws of the State of Oklahoma.
15. Counterparts. This Agreement may be executed in
multiple identical counterparts, each of which shall be deemed to be an
original, and all such counterparts together shall constitute but one and the
same instrument.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
GERONIMO TRUCKING COMPANY
By: /s/ LARRY CURRIER
-------------------------------------
Name: Larry Currier
-----------------------------------
Title: Vice President
----------------------------------
BAYARD DRILLING TECHNOLOGIES, INC.
By: /s/ JAMES E. BROWN
-------------------------------------
James E. Brown
President
<PAGE> 1
EXHIBIT 10.16
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT.
THIS WARRANT MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR ASSIGNED TO ANY
OTHER PERSON OR ENTITY, EXCEPT AS SET FORTH HEREIN.
WARRANT
TO SUBSCRIBE FOR AND PURCHASE COMMON STOCK OF
BAYARD DRILLING TECHNOLOGIES, INC.
VOID AFTER 5:00 P.M., CENTRAL TIME, ON MAY 1, 2000,
OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M.,
CENTRAL TIME ON THE IMMEDIATELY FOLLOWING BUSINESS DAY
THIS CERTIFIES that, for good and valuable consideration, RR&T, INC.
or registered assigns, is entitled to subscribe for and purchase from BAYARD
DRILLING TECHNOLOGIES, INC., a Delaware corporation (hereinafter the
"Company"), at the price of $16.00 per share (such price, as from time to time
to be adjusted as hereinafter provided, being hereinafter called the "Warrant
Price"), at any time and from time to time after the date hereof but not later
than the Expiration Date (as defined below), up to such number of fully paid,
nonassessable shares of Common Stock, par value $.01 per share, of the Company
("Common Stock") as is specified in the following sentence, subject, however,
to the provisions and upon the terms and conditions hereinafter set forth,
including without limitation the provisions of Section 3 hereof. This Warrant
shall be exercisable for up to 25,000 shares of Common Stock upon issuance,
subject to adjustment as provided herein. "Expiration Date" shall mean the
earlier of (i) 5:00 P.M., Central time, on May 1, 2000, which is three years
from the date hereof, provided, in each case, that if such day is not a
Business Day, as defined herein, at 5:00 P.M., Central time, on the immediately
following Business Day. "Business Day" shall mean a day other than a Saturday,
Sunday or other day on which banks in the State of Texas are authorized by law
to remain closed.
<PAGE> 2
SECTION 1. EXERCISE OF WARRANT
(a) CASH EXERCISE
This Warrant may be exercised, at any time and from time to time but
not later than the Expiration Date, by the holder hereof (hereinafter referred
to as the "Warrantholder"), in whole or in part (but not as to a fractional
share of Common Stock and in no event for less than 100 shares (unless less
than an aggregate of 100 shares are then purchasable under all outstanding
Warrants held by a Warrantholder)), by the completion of the subscription form
attached hereto and by the surrender of this Warrant (properly endorsed) at the
Company's offices at 4005 Northwest Expressway, Suite 400E, Oklahoma City,
Oklahoma 73116 (or at such other location in the United States as the Company
may designate by notice in writing to the Warrantholder at the address of the
Warrantholder appearing on the books of the Company), and by payment to the
Company of the Warrant Price for each share being purchased, in cash or by
certified or official bank check.
(b) NET EXERCISE
Notwithstanding anything to the contrary contained in Subsection 1(a),
at any time after the completion by the Company of a Qualified IPO (as defined
below), the Warrantholder may elect to exercise this Warrant and receive shares
on a "net exercise" basis in an amount equal to the value of this Warrant by
delivery of the subscription form attached hereto and surrender of this Warrant
at the principal office of the Company, in which event the Company shall issue
to the Warrantholder a number of shares of Common Stock computed using the
following formula:
(P)(Y)(A-B)
X= -----------
A
Where: X= the number of shares of Common Stock to be issued to
the Warrantholder.
P= the portion of the Warrant being exercised
(expressed as a fraction).
Y= the total number of shares of Common Stock
issuable upon exercise of this Warrant.
A= the Current Market Price (as determined pursuant to
Subsection 1(d)) of one share of Common Stock.
B= Warrant Price.
-2-
<PAGE> 3
"Qualified IPO" means (i) one or more underwritten public offerings of Common
Stock pursuant to one or more effective registration statements filed under the
Securities Act of 1933, as amended, resulting in an aggregate of at least $25
million of net proceeds, after deducting underwriting discounts and commission
and other expenses, to the Company or (ii) any merger, consolidation or other
business combination transaction that results in any equity securities of the
Company being registered under Section 12 of the Securities Exchange Act of
1934, as amended.
(c) PROCEDURE FOR EXERCISE
In the event of any exercise of the rights represented by this
Warrant, a certificate or certificates for the total number of whole shares of
Common Stock so purchased, registered in the name of the Warrantholder, shall
be delivered to the Warrantholder within a reasonable time, not exceeding five
Business Days, after the rights represented by this Warrant shall have been so
exercised; and, unless this Warrant has expired, a new Warrant representing the
number of shares (except a remaining fractional share), if any, with respect to
which this Warrant shall not then have been exercised shall also be issued to
the Warrantholder within such time. With respect to any such exercise, the
Warrantholder shall for all purposes be deemed to have become the holder of
record of the number of shares of Common Stock evidenced by such certificate or
certificates, from the date on which this Warrant was surrendered and, if
exercise is pursuant to Section 1(a), payment of the Warrant Price was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date on which the stock transfer books
of the Company are closed, such person shall be deemed to have become the
holder of such shares at the close of business on the next succeeding date on
which the stock transfer books are open. No fractional shares shall be issued
upon exercise of this Warrant and no payment or adjustment shall be made upon
any exercise on account of any cash dividends on the Common Stock issued upon
such exercise. If any fractional interest in a share of Common Stock would,
except for the provisions of this Section 1, be delivered upon any such
exercise, the Company, in lieu of delivering the fractional share thereof,
shall pay to the Warrantholder an amount in cash equal to the current market
price of such fractional interest, as determined below.
(d) CURRENT MARKET PRICE
For any computation hereunder, the current market price per share of
Common Stock on any date shall be deemed to be the average of the daily market
price per share for the 20 consecutive Trading Days commencing 30 Trading Days
before the date in question. "Market Price" is defined as the closing sale
price (or, if no closing sale price is reported, the closing bid price) of the
Common Stock on the principal United States national securities exchange on
which the Common Stock is then listed for trading or, if not so listed, in the
over-the-counter market, as reported by the Nasdaq Stock Market ("Nasdaq"), or,
if the Common Stock is not quoted on Nasdaq, as reported by the National
Quotation Bureau Incorporated. If Market Price cannot be established as
described above, market price shall be the fair market value of the Common
Stock as determined in good faith by the Board of Directors whose determination
shall be conclusive. The term "Trading Day" shall mean
-3-
<PAGE> 4
a day on which the principal national securities exchange on which the Common
Stock is listed or admitted to trading or Nasdaq is open for the transaction of
business.
SECTION 2. ADJUSTMENT OF NUMBER OF SHARES
Upon each adjustment of the Warrant Price for any stock dividend or
distribution or any subdivision or combination of the outstanding shares of the
Common Stock as provided in Section 3, the Warrantholder shall thereafter be
entitled to purchase, at the Warrant Price resulting from such adjustment, the
number of shares (calculated to the nearest tenth of a share) obtained by
multiplying the Warrant Price in effect immediately prior to such adjustment by
the number of shares purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Warrant Price resulting from
such adjustment.
SECTION 3. ADJUSTMENT OF WARRANT PRICE
The Warrant Price and the number and kind of shares issuable hereunder
shall be subject to adjustment from time to time upon the happening of certain
events as provided in this Section 3.
(a) ADJUSTMENTS
(1) If at any time prior to the exercise of this Warrant
in full, the Company shall (A) declare a dividend or make a distribution on the
Common Stock payable in shares of its capital stock (whether shares of Common
Stock or of capital stock of any other class); (B) subdivide, reclassify or
recapitalize its outstanding Common Stock into a greater number of shares; (C)
combine, reclassify or recapitalize its outstanding Common Stock into a smaller
number of shares; or (D) issue any shares of its capital stock by
reclassification of its Common Stock (excluding any such reclassification in
connection with a consolidation or a merger that is subject to Section 3(c)),
the Warrant Price in effect at the time of the record date of such dividend,
distribution, subdivision, combination, reclassification or recapitalization
shall be adjusted so that the Warrantholder shall be entitled to receive the
aggregate number and kind of shares which, if this Warrant had been exercised
in full immediately prior to such event, it would have owned upon such exercise
and been entitled to receive by virtue of such dividend, distribution,
subdivision, combination, reclassification or recapitalization. Any adjustment
required by this Section 3(a) shall be made successively immediately after the
record date, in the case of a dividend or distribution, or the effective date,
in the case of a subdivision, combination, reclassification or
recapitalization, to allow the purchase of such aggregate number and kind of
shares.
(2) If at any time prior to the exercise of this Warrant
in full, the Company shall make a distribution to all holders of the Common
Stock of stock of a subsidiary or securities convertible into or exercisable
for such stock, then in lieu of an adjustment in the Warrant Price or the
number of shares of Common Stock purchasable upon the exercise of this Warrant,
each Warrantholder, upon the exercise hereof at any time after such
distribution, shall be entitled to receive from the Company, such subsidiary or
both, as the Company shall determine, the stock or
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<PAGE> 5
other securities to which such Warrantholder would have been entitled if such
Warrantholder had exercised this Warrant immediately prior thereto, all subject
to further adjustment as provided in this Section 3, and the Company shall
reserve, for the life of the Warrant, such securities of such subsidiary or
other corporation; provided, however, that no adjustment in respect of
dividends or interest on such stock or other securities shall be made during
the term of this Warrant or upon its exercise.
(3) If at any time prior to the expiration of this
Warrant in full, the Company shall issue rights or warrants to all holders of
Common Stock as such entitling them to subscribe for or purchase Common Stock
at a price per share less than the current Market Price per share (calculated
pursuant to Section 1(d) above) on such record date, then, in each such case
the number of shares subject to this Warrant thereafter purchasable upon the
exercise of this Warrant shall be determined by multiplying the number of
shares of Common Stock theretofore purchasable upon exercise of this Warrant by
a fraction, of which the numerator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants, plus the
number of additional shares of Common Stock offered for subscription or
purchase, and of which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants plus the
number of shares that the aggregate offering price of the total number of
shares of Common Stock so offered would purchase at such current Market Price.
For purposes of this Section 3(a)(3), the issuance of rights or Warrants to
subscribe for or purchase securities convertible into Common Stock shall be
deemed to be the issuance of rights or Warrants to purchase the Common Stock
into which such securities are convertible at an aggregate offering price equal
to the aggregate offering price of such securities plus the minimum aggregate
amount (if any) payable upon conversion of such securities into Common Stock.
(4) If at any time prior to the exercise of this Warrant
in full, the Company shall distribute to all holders of its Common Stock
evidence of indebtedness of the Company or assets of the Company (excluding
cash dividends or distributions out of earned surplus) or rights or Warrants to
subscribe for securities of the Company (excluding those referred to in
Sections 3(a)(2) or (3) above), then in each case the Warrant Price shall be
adjusted to a price determined by multiplying the Warrant Price in effect
immediately prior to such distribution by a fraction, of which the numerator
shall be the then current Market Price per share of Common Stock (calculated
pursuant to Section 1(d) above) on the record date for determination of
stockholders entitled to receive such distribution, less the then fair value
(as determined by the Board of Directors of the Company, whose determination
shall be conclusive) of the portion of the assets or evidences of indebtedness
so distributed or of such subscription rights or Warrants which are applicable
to one share of Common stock, and of which the denominator shall be the Market
Price per share of Common Stock; provided, however, that if the then current
Market Price per share of Common Stock on the record date for determination, of
stockholders entitled to receive such distribution is less than the then fair
value of the portion of the assets or evidence of indebtedness so distributed
or of such subscription rights or Warrants which are applicable to one share of
Common Stock, the foregoing adjustment of the Warrant Price shall not be made
and in lieu thereof the number of shares purchasable upon exercise of each
Warrant immediately prior to such distribution shall be adjusted so that the
holder
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<PAGE> 6
of such Warrant shall be entitled to receive upon exercise of such Warrant the
kind and number of assets, evidence of indebtedness, subscription rights and
Warrants (or, in the event of the redemption of such evidence of indebtedness,
subscription rights or Warrants, any cash paid in respect of such redemption)
that such Warrantholder would have owned or have been entitled to receive after
the happening in such distribution had such Warrant been exercised immediately
prior to the record date of such distribution.
(5) In the event of any capital reorganization of the
Company (other than an event referred to in Section 3(a)(1)), or in case of the
consolidation of the Company with, the merger of the Company with or into or
the sale of all or substantially all of the properties and assets of the
Company to any other person, and in connection therewith consideration is
payable to holders of Common Stock (or other securities or property purchasable
upon exercise of this Warrant) in exchange therefor, this Warrant shall remain
subject to the terms and conditions set forth in this Warrant and this Warrant
shall, after such capital reorganization, consolidation, merger or sale be
exercisable for the number of shares of stock or other securities or assets to
which a holder of the number of shares of Common Stock purchasable (at the time
of such capital reorganization, reclassification of such Common Stock,
consolidation, merger or sale) upon exercise of this Warrant would have been
entitled if such Warrant had been exercised immediately prior to such capital
reorganization, reclassification of such Common Stock, consolidation, merger or
sale; and in any such case, if necessary, the provisions set forth in this
Warrant with respect to the rights and interests thereafter of the
Warrantholder shall be appropriately adjusted so as to be applicable, as nearly
as may reasonably be, to any shares of stock or other securities or assets
thereafter deliverable on the exercise of this Warrant. The Company shall not
effect any such consolidation, merger or sale, unless prior to or
simultaneously with the consummation thereof, the successor corporation (if
other than the Company) resulting from such consolidation or merger or the
corporation purchasing such assets or the appropriate corporation or entity
shall assume, by written instrument, the obligation to deliver to the
Warrantholder the shares of stock, securities or assets to which the
Warrantholder may be entitled pursuant to this Section 3(a)(5).
(6) Notwithstanding Section 3(a)(5), (i) if the Company
merges or consolidates with, or sells all or substantially all of its property
and assets to, any other person and consideration is payable to holders of
Common Stock in exchange for their Common Stock in connection with such merger,
consolidation or sale which consists solely of cash, or (ii) in the event of
the dissolution, liquidation or winding up of the Company, then the
Warrantholder shall be entitled to receive distributions on the date of such
event on an equal basis with holders of Common Stock (or other securities
issuable upon exercise of this Warrant) as if this Warrant had been exercised
immediately prior to such event, less the Warrant Price. Upon receipt of such
payment, if any, the rights of the Warrantholder shall terminate and cease and
this Warrant shall expire. In case of any such merger, consolidation or sale
of assets, the surviving or acquiring person and, in the event of any
dissolution, liquidation or winding up of the Company, the Company shall
promptly, after receipt of this surrendered Warrant, make payment by delivering
a check in such amount as is appropriate (or, in the case of consideration
other than cash, such other consideration as is
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<PAGE> 7
appropriate) to such person as it may be directed in writing by the
Warrantholder surrendering this Warrant.
(7) If any question shall at any time arise with respect
to the adjusted number of shares of Common Stock or other securities issuable
upon exercise of this Warrant, such question shall be determined by the
independent firm of certified public accountants of recognized national
standing selected by the Company and reasonably acceptable to the
Warrantholder.
(8) No adjustment in the Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least one
cent ($.01) in such price; provided, however, that any adjustments which by
reason of this Section 3(a)(8) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 3(a) shall be made to the nearest cent or to the nearest
tenth of a share, as the case may be. Notwithstanding anything in this Section
3(a) to the contrary, the Warrant Price shall not be reduced to less than the
then existing par value of the Common Stock as a result of any adjustment made
hereunder.
(9) In the event that at any time, as the result of any
adjustment made pursuant to this Section 3(a), the Warrantholder thereafter
shall become entitled to receive any securities other than Common Stock,
thereafter the number of such other securities so receivable upon exercise of
any Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Section 3(a).
(b) NO ADJUSTMENT FOR DIVIDENDS
Except as provided in Section 3(a) of this Agreement, no adjustment in
respect of any cash dividends shall be made during the term of this Warrant or
upon the exercise of this Warrant.
(c) FORM OF WARRANT AFTER ADJUSTMENTS
The form of this Warrant need not be changed because of any
adjustments in the Warrant Price or the number or kind of the shares
purchasable pursuant to this Warrant, and Warrants theretofore or thereafter
issued may continue to express the same price and number and kind of shares as
are stated in this Warrant, as initially issued, provided, however, that the
Company may, at any time in its sole discretion (which shall be conclusive),
make any change in the form of Warrant certificate that it may deem appropriate
and that does not affect the substance thereof. Any Warrant certificate
thereafter issued, whether upon registration of transfer of, or in exchange or
substitution for, an outstanding Warrant certificate may be in the form so
changed.
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<PAGE> 8
(d) TREATMENT OF WARRANTHOLDER
Prior to due presentment for registration of transfer of this Warrant,
the Company may deem and treat the Warrantholder as the absolute owner of this
Warrant (notwithstanding any notation of ownership or other writing hereon) for
all purposes and shall not be affected by any notice to the contrary.
(e) NOTICE OF ADJUSTMENT
Upon any adjustment of the Warrant Price, then and in each such case
the Company shall give written notice thereof, by first-class mail, postage
prepaid, addressed to each Warrantholder at the address of such holder as shown
on the books of the Company, which notice shall state the Warrant Price
resulting from such adjustments setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based.
(f) STOCK TO BE RESERVED
The Company will at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance upon the exercise
of this Warrant as herein provided, such number of shares of Common Stock as
shall then be issuable upon the exercise of this Warrant. The Company
covenants that all shares of Common Stock which shall be so issued, upon full
payment of the Warrant Price therefor or as otherwise set forth herein, shall
be duly and validly issued and fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof, and, without
limiting the generality of the foregoing, the Company covenants that it will
from time to time take all such action as may be required to ensure that the
par value per share, if any, of the Common Stock is at all times equal to or
less than the effective Warrant Price. The Company will take all such action
as may be necessary to ensure that all such shares of Common Stock may be so
issued without violation of any applicable law or regulation, or of any
requirement of any national securities exchange or automated quotation system
upon which the Common Stock of the Company may be listed or quoted. The
Company will not take any action which results in any adjustment of the Warrant
Price if the total number of shares of Common Stock issued and issuable after
such action upon exercise of this Warrant would exceed the total number of
shares of Common Stock then authorized by the Company's Certificate of
Incorporation. The Company has not granted and will not grant any right of
first refusal with respect to shares issuable upon exercise of this Warrant,
and there are no preemptive rights associated with such shares.
(g) ISSUE TAX
The issuance of certificates for shares of Common Stock upon exercise
of any Warrant shall be made without a charge to the Warrantholder for any
issuance tax in respect thereto provided that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
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<PAGE> 9
(h) CLOSING OF BOOKS
The Company will at no time close its transfer books against the
transfer of the shares of Common Stock issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant.
(i) DEFINITION OF COMMON STOCK
The shares purchasable pursuant to this Warrant shall include only
securities designated as Common Stock of the Company. As used herein the term
"Common Stock" shall mean and include the Common Stock, par value $.01 per
share, of the Company as authorized on the date hereof, or shares of any class
or classes resulting from any recapitalization or reclassification thereof
which are not limited to any fixed sum or percentage and are not subject to
redemption by the Company and in case at any time there shall be more than one
such resulting class, the shares of each class then so issuable shall be
substantially in the proportion which the total number of shares of such class
resulting from all such reclassification bears to the total number of shares of
all such classes resulting from all such reclassification.
(j) TITLE TO STOCK
All shares of the Common Stock delivered upon the exercise of this
Warrant shall be validly issued, fully paid and nonassessable; the
Warrantholder shall receive good and marketable title to the Common Stock, free
and clear of all voting and other trust arrangements, liens, encumbrances,
equities and claims created by the Company whatsoever, other than the Amended
and Restated Stockholders and Voting Agreement, dated April 30, 1997, by and
among the Company and the stockholders of the Company that are signatories
thereto (the "Stockholders Agreement").
SECTION 4. NOTICES OF RECORD DATES
In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution (other than cash
dividends out of earned surplus), or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any right to sell shares of stock of any class or any
other right; or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all the assets of the Company to or
consolidation or merger of the Company with or into any other corporation or
entity; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
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<PAGE> 10
then and in each such event the Company will give notice to the Warrantholder
specifying (1) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right and stating the amount and character of
such dividend, distribution or right, and (2) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up is to take place, and the time,
if any is to be fixed, as of which the holders of record of Common Stock will
be entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given at least 20 days and not more than 90
days prior to the date therein specified, and such notice shall state that the
action in question or the record date is subject to the effectiveness of a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act") or to a favorable vote of stockholders, if either is
required.
SECTION 5. NO STOCKHOLDERS RIGHTS OR LIABILITIES
This Warrant shall not entitle the Warrantholder to any voting rights
or other rights as a stockholder of the Company. No provision hereof, in the
absence of affirmative action by the Warrantholder to purchase shares of Common
Stock, and no mere enumeration herein of the rights or privileges of the
Warrantholder shall give rise to any liability of such Warrantholder for the
Warrant Price or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
SECTION 6. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT
In case the certificate or certificates evidencing the Warrants shall
be mutilated, lost, stolen or destroyed, the Company shall, at the request of
the Warrantholder, issue and deliver in exchange and substitution for and upon
cancellation or the mutilated certificate or certificates, or in lieu of and
substitution for the certificate or certificates lost, stolen or destroyed, a
new Warrant certificate or certificates of like tenor and representing an
equivalent right or interest but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction of such Warrant and a bond of
indemnity, if requested, also satisfactory in form and amount at the
applicant's cost. Applicants for such substitute Warrant certificate or
certificates shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company may prescribe.
SECTION 7. NOTICES
All notices, requests and other communications required or permitted
to be given or delivered hereunder shall be in writing, and shall be delivered,
or shall be sent by certified or registered mail or overnight courier, postage
prepaid and addressed, or by facsimile, and if to the Warrantholder to such
Warrantholder at such address or facsimile number as shall have been furnished
to the Company by notice from such Warrantholder and if to the Company, at 4005
Northwest Expressway, Suite 400E, Oklahoma City, Oklahoma 73116; Attention:
President, facsimile number
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<PAGE> 11
(405) 879-3847 or at such other address or facsimile number as shall have been
furnished to the Warrantholder by notice from the Company.
SECTION 8. RESTRICTIONS ON TRANSFER
Except as may be permitted by the Stockholders Agreement, this Warrant
may not be sold, transferred, hypothecated or assigned to any other person or
entity. Oliver agrees not to make any sale or other disposition of either the
Warrant or the underlying Common Stock except pursuant to a registration
statement which has become effective under the Securities Act, setting forth
the terms of such offering, the underwriting discount and the commissions and
any other pertinent data with respect thereto, unless Oliver has provided the
Company with an opinion of counsel reasonably acceptable to the Company that
such registration is not required. This Warrant shall bear a legend setting
forth the foregoing restriction.
SECTION 9. AMENDMENTS AND WAIVERS
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by each of (i) a majority in
interest of the holders of this Warrant and (ii) an authorized representative
of the Company.
SECTION 10. SEVERABILITY
If one or more provisions of this Warrant are held to be unenforceable
under applicable law, such provisions shall be excluded from this Warrant, and
the balance of this Warrant shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
SECTION 11. GOVERNING LAW
This Warrant shall be governed by and construed under the laws of the
State of Delaware without regard to conflict of law principles.
SECTION 12. HEADINGS
The headings in this Warrant are for purposes of reference only and
shall not limit or otherwise affect any of the terms hereof.
SECTION 13. COUNTERPARTS
This Warrant may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall constitute
one and the same instrument.
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<PAGE> 12
IN WITNESS WHEREOF, the Company and R.T. Oliver have executed this
Warrant on and as of the day and year first above written.
BAYARD DRILLING TECHNOLOGIES INC.
By: /s/ James E. Brown
-------------------------------------
President
RR&T, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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<PAGE> 13
SUBSCRIPTION FORM
(To be executed upon exercise of this Warrant)
:
- ----------------------------------
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
______________ shares of Common Stock, as provided for therein, and either
tenders herewith payment of the purchase price of $________________ in full in
cash or a certified or official bank check or, if the undersigned elects
pursuant to Section 1(b) of the within Warrant to convert such Warrant into
Common Stock on a net issuance basis, the undersigned exercises the within
Warrant by exchange under the terms of Section 1(b).
Please issue a certificate or certificates for such Common Stock in
the name of, and pay any cash for any fractional share to:
Name:
----------------------------------------------
Address:
-------------------------------------------
Social
Security No:
---------------------------------------
Signature
------------------------------------------
Note: The above signature must correspond exactly
with the name on the first page of this
Warrant.
If said number of shares shall not be all the shares purchasable under
the within Warrant, a new Warrant is to be issued in the name of the
Warrantholder for the balance remaining of the shares purchasable thereunder
rounded up to the next higher number of shares.
Signature Guaranteed:
---------------------------------
(Signature must be guaranteed by a bank or trust company having an
office or correspondence in the United States or by a member firm of a
registered securities exchange or the National Association of Security Dealers,
Inc.)
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<PAGE> 1
EXHIBIT 10.17
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT.
THIS WARRANT MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR ASSIGNED TO ANY
OTHER PERSON OR ENTITY, EXCEPT AS SET FORTH HEREIN.
WARRANT
TO SUBSCRIBE FOR AND PURCHASE COMMON STOCK OF
BAYARD DRILLING TECHNOLOGIES, INC.
VOID AFTER 5:00 P.M., CENTRAL TIME, ON MAY 1, 2000,
OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M.,
CENTRAL TIME ON THE IMMEDIATELY FOLLOWING BUSINESS DAY
THIS CERTIFIES that, for good and valuable consideration, MIKE MULLEN
("Mullen") or registered assigns, is entitled to subscribe for and purchase
from BAYARD DRILLING TECHNOLOGIES, INC., a Delaware corporation (hereinafter
the "Company"), at the price of $16.00 per share (such price, as from time to
time to be adjusted as hereinafter provided, being hereinafter called the
"Warrant Price"), at any time and from time to time after the date hereof but
not later than the Expiration Date (as defined below), up to such number of
fully paid, nonassessable shares of Common Stock, par value $.01 per share, of
the Company ("Common Stock") as is specified in the following sentence,
subject, however, to the provisions and upon the terms and conditions
hereinafter set forth, including without limitation the provisions of Section 3
hereof. This Warrant shall be exercisable for up to 25,000 shares of Common
Stock upon issuance, subject to adjustment as provided herein. "Expiration
Date" shall mean the earlier of (i) 5:00 P.M., Central time, on May 1, 2000,
which is three years from the date hereof, provided, in each case, that if such
day is not a Business Day, as defined herein, at 5:00 P.M., Central time, on
the immediately following Business Day. "Business Day" shall mean a day other
than a Saturday, Sunday or other day on which banks in the State of Texas are
authorized by law to remain closed.
<PAGE> 2
SECTION 1. EXERCISE OF WARRANT
(a) CASH EXERCISE
This Warrant may be exercised, at any time and from time to time but
not later than the Expiration Date, by the holder hereof (hereinafter referred
to as the "Warrantholder"), in whole or in part (but not as to a fractional
share of Common Stock and in no event for less than 100 shares (unless less
than an aggregate of 100 shares are then purchasable under all outstanding
Warrants held by a Warrantholder)), by the completion of the subscription form
attached hereto and by the surrender of this Warrant (properly endorsed) at the
Company's offices at 4005 Northwest Expressway, Suite 400E, Oklahoma City,
Oklahoma 73116 (or at such other location in the United States as the Company
may designate by notice in writing to the Warrantholder at the address of the
Warrantholder appearing on the books of the Company), and by payment to the
Company of the Warrant Price for each share being purchased, in cash or by
certified or official bank check.
(b) NET EXERCISE
Notwithstanding anything to the contrary contained in Subsection 1(a),
at any time after the completion by the Company of a Qualified IPO (as defined
below), the Warrantholder may elect to exercise this Warrant and receive shares
on a "net exercise" basis in an amount equal to the value of this Warrant by
delivery of the subscription form attached hereto and surrender of this Warrant
at the principal office of the Company, in which event the Company shall issue
to the Warrantholder a number of shares of Common Stock computed using the
following formula:
X = (P) (Y) (A-B)
-------------
A
Where: X = the number of shares of Common Stock to be issued to the
Warrantholder.
P = the portion of the Warrant being exercised (expressed as
a fraction).
Y = the total number of shares of Common Stock issuable upon
exercise of this Warrant.
A = the Current Market Price (as determined pursuant to
Subsection 1(d)) of one share of Common Stock.
B = Warrant Price.
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<PAGE> 3
"Qualified IPO" means (i) one or more underwritten public offerings of Common
Stock pursuant to one or more effective registration statements filed under the
Securities Act of 1933, as amended, resulting in an aggregate of at least $25
million of net proceeds, after deducting underwriting discounts and commission
and other expenses, to the Company or (ii) any merger, consolidation or other
business combination transaction that results in any equity securities of the
Company being registered under Section 12 of the Securities Exchange Act of
1934, as amended.
(c) PROCEDURE FOR EXERCISE
In the event of any exercise of the rights represented by this
Warrant, a certificate or certificates for the total number of whole shares of
Common Stock so purchased, registered in the name of the Warrantholder, shall
be delivered to the Warrantholder within a reasonable time, not exceeding five
Business Days, after the rights represented by this Warrant shall have been so
exercised; and, unless this Warrant has expired, a new Warrant representing the
number of shares (except a remaining fractional share), if any, with respect to
which this Warrant shall not then have been exercised shall also be issued to
the Warrantholder within such time. With respect to any such exercise, the
Warrantholder shall for all purposes be deemed to have become the holder of
record of the number of shares of Common Stock evidenced by such certificate or
certificates, from the date on which this Warrant was surrendered and, if
exercise is pursuant to Section 1(a), payment of the Warrant Price was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date on which the stock transfer books
of the Company are closed, such person shall be deemed to have become the
holder of such shares at the close of business on the next succeeding date on
which the stock transfer books are open. No fractional shares shall be issued
upon exercise of this Warrant and no payment or adjustment shall be made upon
any exercise on account of any cash dividends on the Common Stock issued upon
such exercise. If any fractional interest in a share of Common Stock would,
except for the provisions of this Section 1, be delivered upon any such
exercise, the Company, in lieu of delivering the fractional share thereof,
shall pay to the Warrantholder an amount in cash equal to the current market
price of such fractional interest, as determined below.
(d) CURRENT MARKET PRICE
For any computation hereunder, the current market price per share of
Common Stock on any date shall be deemed to be the average of the daily market
price per share for the 20 consecutive Trading Days commencing 30 Trading Days
before the date in question. "Market Price" is defined as the closing sale
price (or, if no closing sale price is reported, the closing bid price) of the
Common Stock on the principal United States national securities exchange on
which the Common Stock is then listed for trading or, if not so listed, in the
over-the-counter market, as reported by the Nasdaq Stock Market ("Nasdaq"), or,
if the Common Stock is not quoted on Nasdaq, as reported by the National
Quotation Bureau Incorporated. If Market Price cannot be established as
described above, market price shall be the fair market value of the Common
Stock as determined in good faith by the Board of Directors whose determination
shall be conclusive. The term "Trading Day" shall mean
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<PAGE> 4
a day on which the principal national securities exchange on which the Common
Stock is listed or admitted to trading or Nasdaq is open for the transaction of
business.
SECTION 2. ADJUSTMENT OF NUMBER OF SHARES
Upon each adjustment of the Warrant Price for any stock dividend or
distribution or any subdivision or combination of the outstanding shares of the
Common Stock as provided in Section 3, the Warrantholder shall thereafter be
entitled to purchase, at the Warrant Price resulting from such adjustment, the
number of shares (calculated to the nearest tenth of a share) obtained by
multiplying the Warrant Price in effect immediately prior to such adjustment by
the number of shares purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Warrant Price resulting from
such adjustment.
SECTION 3. ADJUSTMENT OF WARRANT PRICE
The Warrant Price and the number and kind of shares issuable hereunder
shall be subject to adjustment from time to time upon the happening of certain
events as provided in this Section 3.
(a) ADJUSTMENTS
(1) If at any time prior to the exercise of this Warrant in
full, the Company shall (A) declare a dividend or make a distribution on the
Common Stock payable in shares of its capital stock (whether shares of Common
Stock or of capital stock of any other class); (B) subdivide, reclassify or
recapitalize its outstanding Common Stock into a greater number of shares; (C)
combine, reclassify or recapitalize its outstanding Common Stock into a smaller
number of shares; or (D) issue any shares of its capital stock by
reclassification of its Common Stock (excluding any such reclassification in
connection with a consolidation or a merger that is subject to Section 3(c)),
the Warrant Price in effect at the time of the record date of such dividend,
distribution, subdivision, combination, reclassification or recapitalization
shall be adjusted so that the Warrantholder shall be entitled to receive the
aggregate number and kind of shares which, if this Warrant had been exercised
in full immediately prior to such event, it would have owned upon such exercise
and been entitled to receive by virtue of such dividend, distribution,
subdivision, combination, reclassification or recapitalization. Any adjustment
required by this Section 3(a) shall be made successively immediately after the
record date, in the case of a dividend or distribution, or the effective date,
in the case of a subdivision, combination, reclassification or
recapitalization, to allow the purchase of such aggregate number and kind of
shares.
(2) If at any time prior to the exercise of this Warrant in
full, the Company shall make a distribution to all holders of the Common Stock
of stock of a subsidiary or securities convertible into or exercisable for such
stock, then in lieu of an adjustment in the Warrant Price or the number of
shares of Common Stock purchasable upon the exercise of this Warrant, each
Warrantholder, upon the exercise hereof at any time after such distribution,
shall be entitled to receive from the Company, such subsidiary or both, as the
Company shall determine, the stock or
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<PAGE> 5
other securities to which such Warrantholder would have been entitled if such
Warrantholder had exercised this Warrant immediately prior thereto, all subject
to further adjustment as provided in this Section 3, and the Company shall
reserve, for the life of the Warrant, such securities of such subsidiary or
other corporation; provided, however, that no adjustment in respect of
dividends or interest on such stock or other securities shall be made during
the term of this Warrant or upon its exercise.
(3) If at any time prior to the expiration of this Warrant in
full, the Company shall issue rights or warrants to all holders of Common Stock
as such entitling them to subscribe for or purchase Common Stock at a price per
share less than the current Market Price per share (calculated pursuant to
Section 1(d) above) on such record date, then, in each such case the number of
shares subject to this Warrant thereafter purchasable upon the exercise of this
Warrant shall be determined by multiplying the number of shares of Common Stock
theretofore purchasable upon exercise of this Warrant by a fraction, of which
the numerator shall be the number of shares of Common Stock outstanding on the
date of issuance of such rights or warrants, plus the number of additional
shares of Common Stock offered for subscription or purchase, and of which the
denominator shall be the number of shares of Common Stock outstanding on the
date of issuance of such rights or warrants plus the number of shares that the
aggregate offering price of the total number of shares of Common Stock so
offered would purchase at such current Market Price. For purposes of this
Section 3(a)(3), the issuance of rights or Warrants to subscribe for or
purchase securities convertible into Common Stock shall be deemed to be the
issuance of rights or Warrants to purchase the Common Stock into which such
securities are convertible at an aggregate offering price equal to the
aggregate offering price of such securities plus the minimum aggregate amount
(if any) payable upon conversion of such securities into Common Stock.
(4) If at any time prior to the exercise of this Warrant in
full, the Company shall distribute to all holders of its Common Stock evidence
of indebtedness of the Company or assets of the Company (excluding cash
dividends or distributions out of earned surplus) or rights or Warrants to
subscribe for securities of the Company (excluding those referred to in
Sections 3(a)(2) or (3) above), then in each case the Warrant Price shall be
adjusted to a price determined by multiplying the Warrant Price in effect
immediately prior to such distribution by a fraction, of which the numerator
shall be the then current Market Price per share of Common Stock (calculated
pursuant to Section 1(d) above) on the record date for determination of
stockholders entitled to receive such distribution, less the then fair value
(as determined by the Board of Directors of the Company, whose determination
shall be conclusive) of the portion of the assets or evidences of indebtedness
so distributed or of such subscription rights or Warrants which are applicable
to one share of Common Stock, and of which the denominator shall be the Market
Price per share of Common Stock; provided, however, that if the then current
Market Price per share of Common Stock on the record date for determination, of
stockholders entitled to receive such distribution is less than the then fair
value of the portion of the assets or evidence of indebtedness so distributed
or of such subscription rights or Warrants which are applicable to one share of
Common Stock, the foregoing adjustment of the Warrant Price shall not be made
and in lieu thereof the number of shares purchasable upon exercise of each
Warrant immediately prior to such distribution shall be adjusted so that the
holder
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<PAGE> 6
of such Warrant shall be entitled to receive upon exercise of such Warrant the
kind and number of assets, evidence of indebtedness, subscription rights and
Warrants (or, in the event of the redemption of such evidence of indebtedness,
subscription rights or Warrants, any cash paid in respect of such redemption)
that such Warrantholder would have owned or have been entitled to receive after
the happening in such distribution had such Warrant been exercised immediately
prior to the record date of such distribution.
(5) In the event of any capital reorganization of the Company
(other than an event referred to in Section 3(a)(1)), or in case of the
consolidation of the Company with, the merger of the Company with or into or
the sale of all or substantially all of the properties and assets of the
Company to any other person, and in connection therewith consideration is
payable to holders of Common Stock (or other securities or property purchasable
upon exercise of this Warrant) in exchange therefor, this Warrant shall remain
subject to the terms and conditions set forth in this Warrant and this Warrant
shall, after such capital reorganization, consolidation, merger or sale be
exercisable for the number of shares of stock or other securities or assets to
which a holder of the number of shares of Common Stock purchasable (at the time
of such capital reorganization, reclassification of such Common Stock,
consolidation, merger or sale) upon exercise of this Warrant would have been
entitled if such Warrant had been exercised immediately prior to such capital
reorganization, reclassification of such Common Stock, consolidation, merger or
sale; and in any such case, if necessary, the provisions set forth in this
Warrant with respect to the rights and interests thereafter of the
Warrantholder shall be appropriately adjusted so as to be applicable, as nearly
as may reasonably be, to any shares of stock or other securities or assets
thereafter deliverable on the exercise of this Warrant. The Company shall not
effect any such consolidation, merger or sale, unless prior to or
simultaneously with the consummation thereof, the successor corporation (if
other than the Company) resulting from such consolidation or merger or the
corporation purchasing such assets or the appropriate corporation or entity
shall assume, by written instrument, the obligation to deliver to the
Warrantholder the shares of stock, securities or assets to which the
Warrantholder may be entitled pursuant to this Section 3(a)(5).
(6) Notwithstanding Section 3(a)(5), (i) if the Company
merges or consolidates with, or sells all or substantially all of its property
and assets to, any other person and consideration is payable to holders of
Common Stock in exchange for their Common Stock in connection with such merger,
consolidation or sale which consists solely of cash, or (ii) in the event of
the dissolution, liquidation or winding up of the Company, then the
Warrantholder shall be entitled to receive distributions on the date of such
event on an equal basis with holders of Common Stock (or other securities
issuable upon exercise of this Warrant) as if this Warrant had been exercised
immediately prior to such event, less the Warrant Price. Upon receipt of such
payment, if any, the rights of the Warrantholder shall terminate and cease and
this Warrant shall expire. In case of any such merger, consolidation or sale of
assets, the surviving or acquiring person and, in the event of any dissolution,
liquidation or winding up of the Company, the Company shall promptly, after
receipt of this surrendered Warrant, make payment by delivering a check in such
amount as is appropriate (or, in the case of consideration other than cash,
such other consideration as is
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<PAGE> 7
appropriate) to such person as it may be directed in writing by the
Warrantholder surrendering this Warrant.
(7) If any question shall at any time arise with respect to
the adjusted number of shares of Common Stock or other securities issuable upon
exercise of this Warrant, such question shall be determined by the independent
firm of certified public accountants of recognized national standing selected
by the Company and reasonably acceptable to the Warrantholder.
(8) No adjustment in the Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least one
cent ($.01) in such price; provided, however, that any adjustments which by
reason of this Section 3(a)(8) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 3(a) shall be made to the nearest cent or to the nearest
tenth of a share, as the case may be. Notwithstanding anything in this Section
3(a) to the contrary, the Warrant Price shall not be reduced to less than the
then existing par value of the Common Stock as a result of any adjustment made
hereunder.
(9) In the event that at any time, as the result of any
adjustment made pursuant to this Section 3(a), the Warrantholder thereafter
shall become entitled to receive any securities other than Common Stock,
thereafter the number of such other securities so receivable upon exercise of
any Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Section 3(a).
(b) NO ADJUSTMENT FOR DIVIDENDS
Except as provided in Section 3(a) of this Agreement, no adjustment in
respect of any cash dividends shall be made during the term of this Warrant or
upon the exercise of this Warrant.
(c) FORM OF WARRANT AFTER ADJUSTMENTS
The form of this Warrant need not be changed because of any
adjustments in the Warrant Price or the number or kind of the shares
purchasable pursuant to this Warrant, and Warrants theretofore or thereafter
issued may continue to express the same price and number and kind of shares as
are stated in this Warrant, as initially issued, provided, however, that the
Company may, at any time in its sole discretion (which shall be conclusive),
make any change in the form of Warrant certificate that it may deem appropriate
and that does not affect the substance thereof. Any Warrant certificate
thereafter issued, whether upon registration of transfer of, or in exchange or
substitution for, an outstanding Warrant certificate may be in the form so
changed.
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<PAGE> 8
(d) TREATMENT OF WARRANTHOLDER
Prior to due presentment for registration of transfer of this Warrant,
the Company may deem and treat the Warrantholder as the absolute owner of this
Warrant (notwithstanding any notation of ownership or other writing hereon) for
all purposes and shall not be affected by any notice to the contrary.
(e) NOTICE OF ADJUSTMENT
Upon any adjustment of the Warrant Price, then and in each such case
the Company shall give written notice thereof, by first-class mail, postage
prepaid, addressed to each Warrantholder at the address of such holder as shown
on the books of the Company, which notice shall state the Warrant Price
resulting from such adjustments setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based.
(f) STOCK TO BE RESERVED
The Company will at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance upon the exercise
of this Warrant as herein provided, such number of shares of Common Stock as
shall then be issuable upon the exercise of this Warrant. The Company covenants
that all shares of Common Stock which shall be so issued, upon full payment of
the Warrant Price therefor or as otherwise set forth herein, shall be duly and
validly issued and fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Company covenants that it will from time to
time take all such action as may be required to ensure that the par value per
share, if any, of the Common Stock is at all times equal to or less than the
effective Warrant Price. The Company will take all such action as may be
necessary to ensure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any requirement of
any national securities exchange or automated quotation system upon which the
Common Stock of the Company may be listed or quoted. The Company will not take
any action which results in any adjustment of the Warrant Price if the total
number of shares of Common Stock issued and issuable after such action upon
exercise of this Warrant would exceed the total number of shares of Common
Stock then authorized by the Company's Certificate of Incorporation. The
Company has not granted and will not grant any right of first refusal with
respect to shares issuable upon exercise of this Warrant, and there are no
preemptive rights associated with such shares.
(g) ISSUE TAX
The issuance of certificates for shares of Common Stock upon exercise
of any Warrant shall be made without a charge to the Warrantholder for any
issuance tax in respect thereto provided that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
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<PAGE> 9
(h) CLOSING OF BOOKS
The Company will at no time close its transfer books against the
transfer of the shares of Common Stock issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant.
(i) DEFINITION OF COMMON STOCK
The shares purchasable pursuant to this Warrant shall include only
securities designated as Common Stock of the Company. As used herein the term
"Common Stock" shall mean and include the Common Stock, par value $.01 per
share, of the Company as authorized on the date hereof, or shares of any class
or classes resulting from any recapitalization or reclassification thereof
which are not limited to any fixed sum or percentage and are not subject to
redemption by the Company and in case at any time there shall be more than one
such resulting class, the shares of each class then so issuable shall be
substantially in the proportion which the total number of shares of such class
resulting from all such reclassification bears to the total number of shares of
all such classes resulting from all such reclassification.
(j) TITLE TO STOCK
All shares of the Common Stock delivered upon the exercise of this
Warrant shall be validly issued, fully paid and nonassessable; the
Warrantholder shall receive good and marketable title to the Common Stock, free
and clear of all voting and other trust arrangements, liens, encumbrances,
equities and claims created by the Company whatsoever, other than the Amended
and Restated Stockholders and Voting Agreement, dated April 30, 1997, by and
among the Company and the stockholders of the Company that are signatories
thereto (the "Stockholders Agreement").
SECTION 4. NOTICES OF RECORD DATES
In the event of:
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution (other than cash
dividends out of earned surplus), or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any right to sell shares of stock of any class or any
other right; or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or consolidation or merger of
the Company with or into any other corporation or entity; or
(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Company;
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<PAGE> 10
then and in each such event the Company will give notice to the Warrantholder
specifying (1) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right and stating the amount and character of
such dividend, distribution or right, and (2) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up is to take place, and the time,
if any is to be fixed, as of which the holders of record of Common Stock will
be entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given at least 20 days and not more than 90
days prior to the date therein specified, and such notice shall state that the
action in question or the record date is subject to the effectiveness of a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act") or to a favorable vote of stockholders, if either is
required.
SECTION 5. NO STOCKHOLDERS RIGHTS OR LIABILITIES
This Warrant shall not entitle the Warrantholder to any voting rights
or other rights as a stockholder of the Company. No provision hereof, in the
absence of affirmative action by the Warrantholder to purchase shares of Common
Stock, and no mere enumeration herein of the rights or privileges of the
Warrantholder shall give rise to any liability of such Warrantholder for the
Warrant Price or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
SECTION 6. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT
In case the certificate or certificates evidencing the Warrants shall
be mutilated, lost, stolen or destroyed, the Company shall, at the request of
the Warrantholder, issue and deliver in exchange and substitution for and upon
cancellation or the mutilated certificate or certificates, or in lieu of and
substitution for the certificate or certificates lost, stolen or destroyed, a
new Warrant certificate or certificates of like tenor and representing an
equivalent right or interest but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction of such Warrant and a bond of
indemnity, if requested, also satisfactory in form and amount at the
applicant's cost. Applicants for such substitute Warrant certificate or
certificates shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company may prescribe.
SECTION 7. NOTICES
All notices, requests and other communications required or permitted
to be given or delivered hereunder shall be in writing, and shall be delivered,
or shall be sent by certified or registered mail or overnight courier, postage
prepaid and addressed, or by facsimile, and if to the Warrantholder to such
Warrantholder at such address or facsimile number as shall have been furnished
to the Company by notice from such Warrantholder and if to the Company, at 4005
Northwest Expressway, Suite 400E, Oklahoma City, Oklahoma 73116; Attention:
President, facsimile number
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<PAGE> 11
(405) 879-3847 or at such other address or facsimile number as shall have been
furnished to the Warrantholder by notice from the Company.
SECTION 8. RESTRICTIONS ON TRANSFER
Except as may be permitted by the Stockholders Agreement, this Warrant
may not be sold, transferred, hypothecated or assigned to any other person or
entity. Mullen agrees not to make any sale or other disposition of either the
Warrant or the underlying Common Stock except pursuant to a registration
statement which has become effective under the Securities Act, setting forth
the terms of such offering, the underwriting discount and the commissions and
any other pertinent data with respect thereto, unless Mullen has provided the
Company with an opinion of counsel reasonably acceptable to the Company that
such registration is not required. This Warrant shall bear a legend setting
forth the foregoing restriction.
SECTION 9. AMENDMENTS AND WAIVERS
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by each of (i) a majority in
interest of the holders of this Warrant and (ii) an authorized representative
of the Company.
SECTION 10. SEVERABILITY
If one or more provisions of this Warrant are held to be unenforceable
under applicable law, such provisions shall be excluded from this Warrant, and
the balance of this Warrant shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
SECTION 11. GOVERNING LAW
This Warrant shall be governed by and construed under the laws of the
State of Delaware without regard to conflict of law principles.
SECTION 12. HEADINGS
The headings in this Warrant are for purposes of reference only and
shall not limit or otherwise affect any of the terms hereof.
SECTION 13. COUNTERPARTS
This Warrant may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall constitute
one and the same instrument.
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<PAGE> 12
IN WITNESS WHEREOF, the Company and Mike Mullen have executed this
Warrant on and as of the day and year first above written.
BAYARD DRILLING TECHNOLOGIES INC.
By: /s/ James E. Brown
----------------------------------
President
/s/ Mike Mullen
----------------------------------
Mike Mullen
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<PAGE> 13
SUBSCRIPTION FORM
(To be executed upon exercise of this Warrant)
:
- --------------------------------
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
______________ shares of Common Stock, as provided for therein, and either
tenders herewith payment of the purchase price of $________________ in full in
cash or a certified or official bank check or, if the undersigned elects
pursuant to Section 1(b) of the within Warrant to convert such Warrant into
Common Stock on a net issuance basis, the undersigned exercises the within
Warrant by exchange under the terms of Section 1(b).
Please issue a certificate or certificates for such Common Stock in
the name of, and pay any cash for any fractional share to:
Name:
----------------------------------
Address:
-------------------------------
Social
Security No:
---------------------------
Signature
-----------------------------
Note: The above signature must
correspond exactly with the
name on the first page of this
Warrant.
If said number of shares shall not be all the shares purchasable under
the within Warrant, a new Warrant is to be issued in the name of the
Warrantholder for the balance remaining of the shares purchasable thereunder
rounded up to the next higher number of shares.
Signature Guaranteed:
-----------------------------------------
(Signature must be guaranteed by a bank or trust company having an
office or correspondence in the United States or by a member firm of a
registered securities exchange or the National Association of Security Dealers,
Inc.)
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<PAGE> 1
EXHIBIT 10.18
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT.
THIS WARRANT MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR ASSIGNED TO ANY
OTHER PERSON OR ENTITY, EXCEPT AS SET FORTH HEREIN.
WARRANT
TO SUBSCRIBE FOR AND PURCHASE COMMON STOCK OF
BAYARD DRILLING TECHNOLOGIES, INC.
VOID AFTER 5:00 P.M., CENTRAL TIME, ON DECEMBER 13, 2001,
OR IF NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M.,
CENTRAL TIME ON THE IMMEDIATELY PRECEDING BUSINESS DAY
THIS CERTIFIES that, for and in consideration of $500, CIT
Group/Equipment Financing, Inc. ("CIT") or registered assigns, is entitled to
subscribe for and purchase from Bayard Drilling Technologies, Inc., a Delaware
corporation (hereinafter the "Company"), at the price of $16.00 per share (such
price, as from time to time to be adjusted as hereinafter provided, being
hereinafter called the "Warrant Price"), at any time and from time to time
after the date hereof but not later than the Expiration Date (as defined
below), up to such number of fully paid, nonassessable shares of Common Stock,
par value $.01 per share, of the Company ("Common Stock") as is specified in
the following sentence, subject, however, to the provisions and upon the terms
and conditions hereinafter set forth, including without limitation the
provisions of Section 3 hereof. This Warrant shall be exercisable for (i) up
to 145,000 shares of Common Stock upon issuance and (ii) up to 150,000 shares
of Common Stock from and after such time as the Company first has issued and
outstanding (including such 150,000 shares of Common Stock issuable hereunder)
at least 3,000,001 shares of Common Stock. "Expiration Date" shall mean the
earlier of (i) 5:00 P.M., Central time, on December ___, 2001, which is five
years from the date hereof, and (ii) 5:00 P.M., Central time, on the day that
is eighteen (18) months after the date that the Company completes an IPO,
provided, in each case, that if such day is not a Business Day, as defined
herein, at 5:00 P.M., Central time, on the immediately preceding Business Day.
"Business Day" shall mean a day other than a Saturday, Sunday or other day on
which banks in the State of Texas are authorized by law to remain closed.
"IPO" means (i) the initial underwritten public offering pursuant to which the
Common Stock becomes registered under Section 12 of the Securities Exchange Act
of 1934, as amended (the
<PAGE> 2
"Exchange Act"), or (ii) any merger, consolidation or other business
combination transaction that results in any equity securities of the Company
being registered under Section 12 of the Exchange Act.
SECTION 1. EXERCISE OF WARRANT
(a) CASH EXERCISE
This Warrant may be exercised, at any time and from time to time but
not later than the Expiration Date, by the holder hereof (hereinafter referred
to as the "Warrantholder"), in whole or in part (but not as to a fractional
share of Common Stock and in no event for less than 100 shares (unless less
than an aggregate of 100 shares are then purchasable under all outstanding
Warrants held by a Warrantholder)), by the completion of the subscription form
attached hereto and by the surrender of this Warrant (properly endorsed) at the
Company's offices at 4005 Northwest Expressway, Suite 400E, Oklahoma City,
Oklahoma 73116 (or at such other location in the United States as it may
designate by notice in writing to the Warrantholder at the address of the
Warrantholder appearing on the books of the Company), and by payment to the
Company of the Warrant Price, in cash or by certified or official bank check,
for each share being purchased.
(b) NET EXERCISE
Notwithstanding anything to the contrary contained in Subsection 1(a),
at any time after the completion by the Company of an IPO, the Warrantholder
may elect to exercise this Warrant and receive shares on a "net exercise" basis
in an amount equal to the value of this Warrant by delivery of the subscription
form attached hereto and surrender of this Warrant at the principal office of
the Company, in which event the Company shall issue to the Warrantholder a
number of shares of Common Stock computed using the following formula:
X= (P)(Y)(A-B)
-----------
A
Where: X= the number of shares of Common Stock to be
issued to the Warrantholder.
P= the portion of the Warrant being exercised
(expressed as a fraction).
Y= the total number of shares of Common Stock
issuable upon exercise of this Warrant.
A= the Current Market Price (as determined
pursuant to Subsection 1(d)) of one share of
Common Stock.
B= Warrant Price.
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<PAGE> 3
(c) PROCEDURE FOR EXERCISE
In the event of any exercise of the rights represented by this
Warrant, a certificate or certificates for the total number of whole shares of
Common Stock so purchased, registered in the name of the Warrantholder, shall
be delivered to the Warrantholder within a reasonable time, not exceeding five
Business Days, after the rights represented by this Warrant shall have been so
exercised; and, unless this Warrant has expired, a new Warrant representing the
number of shares (except a remaining fractional share), if any, with respect to
which this Warrant shall not then have been exercised shall also be issued to
the Warrantholder within such time. With respect to any such exercise, the
Warrantholder shall for all purposes be deemed to have become the holder of
record of the number of shares of Common Stock evidenced by such certificate or
certificates, from the date on which this Warrant was surrendered and, if
exercise is pursuant to Section 1(a), payment of the Warrant Price was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date on which the stock transfer books
of the Company are closed, such person shall be deemed to have become the
holder of such shares at the close of business on the next succeeding date on
which the stock transfer books are open. No fractional shares shall be issued
upon exercise of this Warrant and no payment or adjustment shall be made upon
any exercise on account of any cash dividends on the Common Stock issued upon
such exercise. If any fractional interest in a share of Common Stock would,
except for the provisions of this Section 1, be delivered upon any such
exercise, the Company, in lieu of delivering the fractional share thereof,
shall pay to the Warrantholder an amount in cash equal to the current market
price of such fractional interest, as determined below.
(d) CURRENT MARKET PRICE
For any computation hereunder, the current market price per share of
Common Stock on any date shall be deemed to be the average of the daily market
price per share for the 20 consecutive Trading Days commencing 30 Trading Days
before the date in question. "Market Price" is defined as the closing sale
price (or, if no closing sale price is reported, the closing bid price) of the
Common Stock on the principal United States national securities exchange on
which the Common Stock is then listed for trading or, if not so listed, in the
over-the-counter market, as reported by the Nasdaq Stock Market ("Nasdaq"), or,
if the Common Stock is not quoted on Nasdaq, as reported by the National
Quotation Bureau Incorporated. If Market Price cannot be established as
described above, market price shall be the fair market value of the Common
Stock as determined in good faith by the Board of Directors whose determination
shall be conclusive. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the Common Stock is listed or
admitted to trading or Nasdaq is open for the transaction of business.
SECTION 2. ADJUSTMENT OF NUMBER OF SHARES
Upon each adjustment of the Warrant Price for any stock dividend or
distribution or any subdivision or combination of the outstanding shares of the
Common Stock as provided in Section 3, the Warrantholder shall thereafter be
entitled to purchase, at the Warrant Price resulting from such
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<PAGE> 4
adjustment, the number of shares (calculated to the nearest tenth of a share)
obtained by multiplying the Warrant Price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately
prior to such adjustment and dividing the product thereof by the Warrant Price
resulting from such adjustment.
SECTION 3. ADJUSTMENT OF WARRANT PRICE
The Warrant Price and the number and kind of shares issuable hereunder
shall be subject to adjustment from time to time upon the happening of certain
events as provided in this Section 3.
(a) ADJUSTMENTS
(1) If at any time prior to the exercise of this Warrant
in full, the Company shall (A) declare a dividend or make a distribution on the
Common Stock payable in shares of its capital stock (whether shares of Common
Stock or of capital stock of any other class); (B) subdivide, reclassify or
recapitalize its outstanding Common Stock into a greater number of shares; (C)
combine, reclassify or recapitalize its outstanding Common Stock into a smaller
number of shares; or (D) issue any shares of its capital stock by
reclassification of its Common Stock (excluding any such reclassification in
connection with a consolidation or a merger that is subject to Section 3(c)),
the Warrant Price in effect at the time of the record date of such dividend,
distribution, subdivision, combination, reclassification or recapitalization
shall be adjusted so that the Warrantholder shall be entitled to receive the
aggregate number and kind of shares which, if this Warrant had been exercised
in full immediately prior to such event, it would have owned upon such exercise
and been entitled to receive by virtue of such dividend, distribution,
subdivision, combination, reclassification or recapitalization. Any adjustment
required by this Section 3(a) shall be made successively immediately after the
record date, in the case of a dividend or distribution, or the effective date,
in the case of a subdivision, combination, reclassification or
recapitalization, to allow the purchase of such aggregate number and kind of
shares.
(2) If at any time prior to the exercise of this Warrant
in full, the Company shall make a distribution to all holders of the Common
Stock of stock of a subsidiary or securities convertible into or exercisable
for such stock, then in lieu of an adjustment in the Warrant Price or the
number of shares of Common Stock purchasable upon the exercise of this Warrant,
each Warrantholder, upon the exercise hereof at any time after such
distribution, shall be entitled to receive from the Company, such subsidiary or
both, as the Company shall determine, the stock or other securities to which
such Warrantholder would have been entitled if such Warrantholder had exercised
this Warrant immediately prior thereto, all subject to further adjustment as
provided in this Section 3, and the Company shall reserve, for the life of the
Warrant, such securities of such subsidiary or other corporation; provided,
however, that no adjustment in respect of dividends or interest on such stock
or other securities shall be made during the term of this Warrant or upon its
exercise.
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(3) If at any time prior to the expiration of this
Warrant in full, the Company shall issue rights or warrants to all holders of
Common Stock as such entitling them to subscribe for or purchase Common Stock
at a price per share less than the current market price per share (calculated
pursuant to Section 1(d) above) on such record date, then, in each such case
the number of shares subject to this Warrant thereafter purchasable upon the
exercise of this Warrant shall be determined by multiplying the number of
shares of Common Stock theretofore purchasable upon exercise of each Warrant by
a fraction, of which the numerator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or Warrants, plus the
number of additional shares of Common Stock offered for subscription or
purchase, and of which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or Warrants plus the
number of shares that the aggregate offering price of the total number of
shares of Common Stock so offered would purchase at such current market price.
For purposes of this Section 3(a)(3), the issuance of rights or Warrants to
subscribe for or purchase securities convertible into Common Stock shall be
deemed to be the issuance of rights or Warrants to purchase the Common Stock
into which such securities are convertible at an aggregate offering price equal
to the aggregate offering price of such securities plus the minimum aggregate
amount (if any) payable upon conversion of such securities into Common Stock.
(4) If at any time prior to the exercise of this Warrant
in full, the Company shall distribute to all holders of its Common Stock
evidence of indebtedness of the Company or assets of the Company (excluding
cash dividends or distributions out of earned surplus) or rights or Warrants to
subscribe for securities of the Company (excluding those referred to in
Sections 3(a)(2) or (3) above), then in each case the Warrant Price shall be
adjusted to a price determined by multiplying the Warrant Price in effect
immediately prior to such distribution by a fraction, of which the numerator
shall be the then current market price per share of Common Stock (calculated
pursuant to Section 1(d) above) on the record date for determination of
stockholders entitled to receive such distribution, less the then fair value
(as determined by the Board of Directors of the Company, whose determination
shall be conclusive) of the portion of the assets or evidences of indebtedness
so distributed or of such subscription rights or Warrants which are applicable
to one share of Common stock, and of which the denominator shall be the market
price per share of Common Stock; provided, however, that if the then current
market price per share of Common Stock on the record date for determination, of
stockholders entitled to receive such distribution is less than the then fair
value of the portion of the assets or evidence of indebtedness so distributed
or of such subscription rights or Warrants which are applicable to one share of
Common Stock, the foregoing adjustment of the Warrant Price shall not be made
and in lieu thereof the number of shares purchasable upon exercise of each
Warrant immediately prior to such distribution shall be adjusted so that the
holder of such Warrant shall be entitled to receive upon exercise of such
Warrant the kind and number of assets, evidence of indebtedness, subscription
rights and Warrants (or, in the event of the redemption of such evidence of
indebtedness, subscription rights or Warrants, any cash paid in respect of such
redemption) that such Warrantholder would have owned or have been entitled to
receive after the happening in such distribution had such Warrant been
exercised immediately prior to the record date of such distribution.
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(5) In the event of any capital reorganization of the
Company (other than an event referred to in Section 3(a)(1)), or in case of the
consolidation of the Company with, the merger of the Company with or into or
the sale of all or substantially all of the properties and assets of the
Company to any other person, and in connection therewith consideration is
payable to holders of Common Stock (or other securities or property purchasable
upon exercise of this Warrant) in exchange therefor, this Warrant shall remain
subject to the terms and conditions set forth in this Warrant and this Warrant
shall, after such capital reorganization, consolidation, merger or sale be
exercisable for the number of shares of stock or other securities or assets to
which a holder of the number of shares of Common Stock purchasable (at the time
of such capital reorganization, reclassification of such Common Stock,
consolidation, merger or sale) upon exercise of this Warrant would have been
entitled if such Warrant had been exercised immediately prior to such capital
reorganization, reclassification of such Common Stock, consolidation, merger or
sale; and in any such case, if necessary, the provisions set forth in this
Warrant with respect to the rights and interests thereafter of the
Warrantholder shall be appropriately adjusted so as to be applicable, as nearly
as may reasonably be, to any shares of stock or other securities or assets
thereafter deliverable on the exercise of this Warrant. The Company shall not
effect any such consolidation, merger or sale, unless prior to or
simultaneously with the consummation thereof, the successor corporation (if
other than the Company) resulting from such consolidation or merger or the
corporation purchasing such assets or the appropriate corporation or entity
shall assume, by written instrument, the obligation to deliver to the
Warrantholder the shares of stock, securities or assets to which the
Warrantholder may be entitled pursuant to this Section 3(a)(5).
(6) Notwithstanding Section 3(a)(5), (i) if the Company
merges or consolidates with, or sells all or substantially all of its property
and assets to, any other person and consideration is payable to holders of
Common Stock in exchange for their Common Stock in connection with such merger,
consolidation or sale which consists solely of cash, or (ii) in the event of
the dissolution, liquidation or winding up of the Company, then the
Warrantholder shall be entitled to receive distributions on the date of such
event on an equal basis with holders of Common Stock (or other securities
issuable upon exercise of this Warrant) as if this Warrant had been exercised
immediately prior to such event, less the Warrant Price. Upon receipt of such
payment, if any, the rights of the Warrantholder shall terminate and cease and
this Warrant shall expire. In case of any such merger, consolidation or sale
of assets, the surviving or acquiring person and, in the event of any
dissolution, liquidation or winding up of the Company, the Company shall
promptly, after receipt of this surrendered Warrant, make payment by delivering
a check in such amount as is appropriate (or, in the case of consideration
other than cash, such other consideration as is appropriate) to such person as
it may be directed in writing by the Warrantholder surrendering this Warrant.
(7) If any question shall at any time arise with respect
to the adjusted number of shares of Common Stock or other securities issuable
upon exercise of this Warrant, such question shall be determined by the
independent firm of certified public accountants of recognized national
standing selected by the Company and reasonably acceptable to the
Warrantholder.
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(8) No adjustment in the Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least one
cent ($.01) in such price; provided, however, that any adjustments which by
reason of this Section 3(a)(8) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 3(a) shall be made to the nearest cent or to the nearest
tenth of a share, as the case may be. Notwithstanding anything in this Section
3(a) to the contrary, the Warrant Price shall not be reduced to less than the
then existing par value of the Common Stock as a result of any adjustment made
hereunder.
(9) In the event that at any time, as the result of any
adjustment made pursuant to this Section 3(a), the Warrantholder thereafter
shall become entitled to receive any securities other than Common Stock,
thereafter the number of such other securities so receivable upon exercise of
any Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Section 3(a).
(b) NO ADJUSTMENT FOR DIVIDENDS
Except as provided in Section 3(a) of this Agreement, no adjustment in
respect of any cash dividends shall be made during the term of this Warrant or
upon the exercise of this Warrant.
(c) FORM OF WARRANT AFTER ADJUSTMENTS
The form of this Warrant need not be changed because of any
adjustments in the Warrant Price or the number or kind of the shares
purchasable pursuant to this Warrant, and Warrants theretofore or thereafter
issued may continue to express the same price and number and kind of shares as
are stated in this Warrant, as initially issued, provided, however, that the
Company may, at any time in its sole discretion (which shall be conclusive),
make any change in the form of Warrant certificate that it may deem appropriate
and that does not affect the substance thereof. Any Warrant certificate
thereafter issued, whether upon registration of transfer of, or in exchange or
substitution for, an outstanding Warrant certificate may be in the form so
changed.
(d) TREATMENT OF WARRANTHOLDER
Prior to due presentment for registration of transfer of this Warrant,
the Company may deem and treat the Warrantholder as the absolute owner of this
Warrant (notwithstanding any notation of ownership or other writing hereon) for
all purposes and shall not be affected by any notice to the contrary.
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<PAGE> 8
(e) NOTICE OF ADJUSTMENT
Upon any adjustment of the Warrant Price, then and in each such case
the Company shall give written notice thereof, by first-class mail, postage
prepaid, addressed to each Warrantholder at the address of such holder as shown
on the books of the Company, which notice shall state the Warrant Price
resulting from such adjustments setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based.
(f) STOCK TO BE RESERVED
The Company will at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance upon the exercise
of this Warrant as herein provided, such number of shares of Common Stock as
shall then be issuable upon the exercise of this Warrant. The Company
covenants that all shares of Common Stock which shall be so issued, upon full
payment of the Warrant Price therefor or as otherwise set forth herein, shall
be duly and validly issued and fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof, and, without
limiting the generality of the foregoing, the Company covenants that it will
from time to time take all such action as may be required to ensure that the
par value per share, if any, of the Common Stock is at all times equal to or
less than the effective Warrant Price. The Company will take all such action
as may be necessary to ensure that all such shares of Common Stock may be so
issued without violation of any applicable law or regulation, or of any
requirement of any national securities exchange or automated quotation system
upon which the Common Stock of the Company may be listed or quoted. The
Company will not take any action which results in any adjustment of the Warrant
Price if the total number of shares of Common Stock issued and issuable after
such action upon exercise of this Warrant would exceed the total number of
shares of Common Stock then authorized by the Company's Certificate of
Incorporation. The Company has not granted and will not grant any right of
first refusal with respect to shares issuable upon exercise of this Warrant,
and there are no preemptive rights associated with such shares.
(g) ISSUE TAX
The issuance of certificates for shares of Common Stock upon exercise
of any Warrant shall be made without a charge to the Warrantholder for any
issuance tax in respect thereto provided that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(h) CLOSING OF BOOKS
The Company will at no time close its transfer books against the
transfer of the shares of Common Stock issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant.
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(i) DEFINITION OF COMMON STOCK
The shares purchasable pursuant to this Warrant shall include only
securities designated as Common Stock of the Company. As used herein the term
"Common Stock" shall mean and include the Common Stock, par value $.01 per
share, of the Company as authorized on the date hereof, or shares of any class
or classes resulting from any recapitalization or reclassification thereof
which are not limited to any fixed sum or percentage and are not subject to
redemption by the Company and in case at any time there shall be more than one
such resulting class, the shares of each class then so issuable shall be
substantially in the proportion which the total number of shares of such class
resulting from all such reclassification bears to the total number of shares of
all such classes resulting from all such reclassification.
SECTION 4. REGISTRATION RIGHTS
(a) DEMAND REGISTRATION
At any time that the Company is eligible to use Form S-3 to register
its securities under the Securities Act of 1933, as amended (the "Securities
Act"), and prior to the Expiration Date, the Warrantholder shall have the right
to make written request of the Company to register as a shelf registration
under the rules and regulations (the "Regulations") of the Securities and
Exchange Commission (the "SEC") all of the shares of Common Stock issuable upon
exercise of this Warrant or any other securities received by or to be received
by the Warrantholder upon exercise of the Warrant (the "Registrable Stock").
The underlying shares of Registrable Stock specified in such request or a
request pursuant to Section 4(c) hereof is referred to hereto as the "Subject
Stock." Promptly upon receipt of such request the Company shall file with the
SEC a registration statement on the applicable form for the registration of the
Subject Stock ("registration statement") and use its best efforts to cause such
registration statement to become effective (including, without limitation,
filing post-effective amendments and appropriate compliance with the
Regulations) as soon as practicable to permit or facilitate the sale and
distribution of the Subject Stock. The Company is obligated to effect only one
(1) such registration pursuant to this Section 4(a).
Notwithstanding the provisions of this Section 4(a), if the Company
shall furnish to the Warrantholder a certificate signed by the Chief Executive
Officer of the Company stating that in the good faith judgment of the Board of
Directors of the Company it would be seriously detrimental to the Company and
its stockholders for such a registration statement to be filed in light of the
existence of non-public information regarding the Company and it is therefore
essential to defer a filing of such registration statement, the Company shall
have the right to defer such filing for a period of not more than one hundred
eighty (180) days after receipt of the request from the Warrantholder to effect
such a registration; provided, however, that the Company may not utilize the
right more than once in any twenty-four month period; and provided, further
that the Warrantholder may, at any time in writing, withdraw such request for
such registration and therefore preserve the right provided in this Section
4(a) for the Warrantholder to request such registration.
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(b) PREPARATION OF DOCUMENTS
Prior to filing a registration statement or any amendments or
supplements thereto with the SEC required hereby, the Company will furnish to
the counsel selected by the Warrantholder copies of all documents proposed to
be filed, which documents will be subject to the timely review of such counsel.
In connection therewith, the Company shall prepare and file a registration
statement on a form then available to it to effect such registration. The
Warrantholder agrees to provide all such information and materials and take all
such action as may be reasonably required in order to permit the Company to
comply with all applicable requirements of the SEC and to obtain any desired
acceleration of the effective date of such registration statement. The
Warrantholder shall provide the Company with all information that is reasonably
required to effect any IPO or other public or private offering of securities
of the Company, including completing and executing all undertakings,
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of any underwriting
agreement or other financing agreement or under applicable law.
(c) PIGGYBACK REGISTRATION
If (but without any obligation to do so) the Company proposes to
register, whether or not for its own account, with the SEC any of the Common
Stock (or any other securities of the Company, provided that if the securities
being registered are not those for which the Warrant is then exercisable, the
Warrant Shares shall not be included in any related underwritten offering),
under the Regulations of the SEC (other than pursuant to a request under
Section 4(a) and other than securities to be issued pursuant to a stock option
or other employee benefit or similar plan, or in connection with a merger,
acquisition, or a Rule 145 transaction), the Company shall, as promptly as
practicable, but at least 20 days prior to the filing date of the applicable
registration statement give written notice to the Warrantholder of its
intention to effect such registration. If, within 20 days after receipt of
such notice but before the Expiration Date, the Warrantholder submits a written
request to the Company specifying the amount of Registrable Stock that the
Warrantholder proposes to sell, the Company shall include the shares specified
in such request in such registration statement and the Company shall keep each
such registration statement in effect and maintain compliance with each federal
law and regulation as set forth in Section 4(d).
Prior to filing a registration statement pursuant to the Regulations
under which the shares of Common Stock issuable upon exercise of this Warrant
may be included, the Company shall give reasonable notice to the holder(s) of
this Warrant or such shares of Common Stock and shall allow such shares of
Common Stock of the Warrantholder to be included in such registration statement
subject to the following terms and conditions: (i) such shares need not be
included in any underwritten offering if and to the extent that the managing
underwriter determines in its best judgment that their inclusion would impair
the success of the offering provided that (A) if other selling stockholders
without contractual registration rights have requested registration of
securities in the proposed offering, the Company will reduce or eliminate such
securities held by selling stockholders without registration rights before any
reduction or elimination of Registrable Stock;
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<PAGE> 11
and (B) any such reduction or elimination (after taking into account the effect
of clause (A)) shall be pro rata to all other selling stockholders with
contractual registration rights; (ii) if shares of Registrable Stock are
included in such registration, to the extent requested in writing by a
managing underwriter, if any, of any registration effected pursuant to Section
4(a) or 4(c), each holder of Registrable Stock agrees not to sell, transfer or
otherwise dispose of, including any sale pursuant to Rule 144 under the
Securities Act, any Common Stock, or any other equity security of the Company
or any security convertible into or exchangeable or exercisable for any equity
security of the Company (other than as part of such underwritten public
offering) during the time period reasonably requested by the managing
underwriter, not to exceed 180 days; and (iii) the Company shall have no
obligation pursuant to this Section if at the time the registration statement
is proposed to be filed the holders may freely sell the shares of Common Stock
issuable upon exercise of this Warrant pursuant to the Regulations of the SEC.
(d) COVENANTS OF THE COMPANY
In connection with any offering of Subject Stock registered pursuant
to this Warrant, the Company shall (a) furnish to the Warrantholder such number
of copies of any registration statement (including any preliminary prospectus)
as it may reasonably request in order to effect the offering and sale of the
Subject Stock to be offered and sold, but only while the Company shall be
required under the provisions hereof to cause the registration statement to
remain current, and (b) keep the Warrantholder advised in writing as to the
initiation of each registration and as to the completion thereof. Upon any
registration becoming effective pursuant to this Section 4, the Company shall
use its best efforts to: (i) keep such registration statement current for a
period of 120 days; (ii) prepare and file with the SEC such amendments and
supplements to such registration statement as may be necessary to comply with
the provisions of the Regulations of the SEC with respect to the disposition of
all securities covered by such registration statement; (iii) cause all such
Subject Stock registered pursuant to such registration statement to be listed
on each securities exchange or automated quotation system on which the Common
Stock is then listed; (iv) provide a transfer agent and registrar for all
Subject Stock registered pursuant to such registration statement and a CUSIP
number for all such Subject Stock, in each case not later than the effective
date of such registration; and (v) otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC.
(e) EXPENSES
With respect to the registration of Subject Stock pursuant to Section
4(a), together with any inclusion of the Subject Stock in a so-called piggyback
registration pursuant to Section 4(c), the Company will pay all expenses
incident to its performance of or compliance with this Section 4 including,
without limitation, all registration and filing fees, printing expenses,
messenger, telephone and delivery expenses, and fees and disbursements of its
counsel and independent certified public accountants. The Warrantholder will
be responsible for the underwriting discounts and commissions and any stock
transfer taxes, broker's fees or other direct marketing expenses with respect
to shares sold for its account, all internal management personnel and
administrative costs of the Warrantholder
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<PAGE> 12
and the fees and expenses of its attorneys, if any, incurred by it in
connection with affecting any such transactions.
(f) INDEMNIFICATION
The Company will, indemnify, to the maximum extent permitted by law,
the Warrantholder, its officers and directors and each person who controls the
Warrantholder (within the meaning of the Regulations of the SEC) against all
losses, claims, damages, liabilities and expenses (or actions, proceedings or
settlements in respect thereof) caused by, arising out of or based on any
untrue or alleged untrue statement of a material fact contained in any
registration statement (or any amendment or supplement thereto) of the Company
relating to the sale of Subject Stock registered pursuant to this Section 4, or
any exhibits or materials incorporated by reference therein, filed with the
SEC, or 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, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by the Warrantholder expressly
for use therein.
The Warrantholder will indemnify, to the maximum extent permitted by
law, the Company, its officers and directors and each person who controls the
Company (within the meaning of the Regulations of the SEC) against all losses,
claims, damages, liabilities and expenses (or actions, proceedings or
settlements in respect thereof) caused by, arising out of or based on any
untrue or alleged untrue statement of a material fact contained in any
registration statement (or any amendment or supplement thereto) of the Company
relating to the sale of Subject Stock registered pursuant to this Section 4, or
any exhibits or materials incorporated by reference therein, filed with the
SEC, or 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, but only insofar as the same are caused by or contained in any
information furnished in writing to the Company by the Warrantholder expressly
for use therein.
Any person entitled to indemnification under this Section 4(f) will
(i) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification and (ii) unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to
such claim in which case, the indemnifying party shall be obligated to pay the
fees and expenses of up to two counsel for all parties indemnified by such
indemnifying party with respect to such claim.
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<PAGE> 13
The indemnification provisions set forth in this Section 4(f) shall
survive the termination or expiration of this Warrant.
(g) TITLE TO STOCK
All shares of the Common Stock delivered upon the exercise of this
Warrant shall be validly issued, fully paid and nonassessable; the
Warrantholder shall receive good and marketable title to the Common Stock, free
and clear of all voting and other trust arrangements, liens, encumbrances,
equities and claims created by the Company whatsoever.
SECTION 5. NOTICES OF RECORD DATES
In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution (other than cash
dividends out of earned surplus), or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any right to sell shares of stock of any class or any
other right; or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all the assets of the Company to or
consolidation or merger of the Company with or into any other corporation or
entity; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then and in each such event the Company will give notice to the Warrantholder
specifying (1) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right and stating the amount and character of
such dividend, distribution or right, and (2) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up is to take place, and the time,
if any is to be fixed, as of which the holders of record of Common Stock will
be entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given at least 20 days and not more than 90
days prior to the date therein specified, and such notice shall state that the
action in question or the record date is subject to the effectiveness of a
registration statement under the Securities Act or to a favorable vote of
stockholders, if either is required.
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SECTION 6. NO STOCKHOLDERS RIGHTS OR LIABILITIES
This Warrant shall not entitle the Warrantholder to any voting rights
or other rights as a stockholder of the Company. No provision hereof, in the
absence of affirmative action by the Warrantholder to purchase shares of Common
Stock, and no mere enumeration herein of the rights or privileges of the
Warrantholder shall give rise to any liability of such Warrantholder for the
Warrant Price or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
SECTION 7. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT
In case the certificate or certificates evidencing the Warrants shall
be mutilated, lost, stolen or destroyed, the Company shall, at the request of
the Warrantholder, issue and deliver in exchange and substitution for and upon
cancellation or the mutilated certificate or certificates, or in lieu of and
substitution for the certificate or certificates lost, stolen or destroyed, a
new Warrant certificate or certificates of like tenor and representing an
equivalent right or interest but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction of such Warrant and a bond of
indemnity, if requested, also satisfactory in form and amount at the
applicant's cost. Applicants for such substitute Warrant certificate or
certificates shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company may prescribe.
SECTION 8. NOTICES
All notices, requests and other communications required or permitted
to be given or delivered hereunder shall be in writing, and shall be delivered,
or shall be sent by certified or registered mail or overnight courier, postage
prepaid and addressed, or by facsimile, and if to the Warrantholder to such
Warrantholder at such address or facsimile number as shall have been furnished
to the Company by notice from such Warrantholder and if to the Company, at 4005
Northwest Expressway, Suite 400E, Oklahoma City, Oklahoma 73116; Attention:
President, facsimile number (405) 879-3847 or at such other address or
facsimile number as shall have been furnished to the Warrantholder by notice
from the Company.
SECTION 9. RESTRICTIONS ON TRANSFER
This Warrant may not be sold, transferred, hypothecated or assigned to
any other person or entity other than (i) the respective successors to CIT in a
merger or consolidation; (ii) the respective purchasers of all or substantially
all of the assets of CIT; or (iii) the CIT shareholders in the event CIT is
liquidated or dissolved. CIT agrees not to make any sale or other disposition
of either the Warrant or the underlying Common Stock except pursuant to a
registration statement which has become effective under the Act, setting forth
the terms of such offering, the underwriting discount and the commissions and
any other pertinent data with respect thereto, unless CIT has provided the
Company with an opinion of counsel reasonably acceptable to the Company that
such registration is not required. This Warrant shall bear a legend setting
forth the foregoing restriction.
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<PAGE> 15
SECTION 10. AMENDMENTS AND WAIVERS
This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by each of (i) a majority in
interest of the holders of the Registrable Stock and (ii) an authorized
representative of the Company.
SECTION 11. SEVERABILITY
If one or more provisions of this Warrant are held to be unenforceable
under applicable law, such provisions shall be excluded from this Warrant, and
the balance of this Warrant shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
SECTION 12. REPRESENTATION AND WARRANTIES OF THE COMPANY
The Company represents and warrants to CIT as follows:
(a) INCORPORATION AND GOOD STANDING
The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
power and authority (corporate and other) to own its properties and conduct its
business, and the Company is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions, if any, in which it
owns or leases properties or in which the conduct of its business requires such
qualification.
(b) CAPITALIZATION
As of the date hereof, the authorized capital stock of the Company
consists of 10,000,000 shares of Common Stock and 2,000,000 shares of
preferred stock, par value $.01 per share. As of the date hereof, 2,800,000
shares of Common Stock are issued and outstanding and 1,000,000 shares of
Common Stock are subject to issuance pursuant to an option agreement with
Chesapeake Energy Corporation. No shares of preferred stock are outstanding.
(c) CORPORATE AND OTHER ACTION
The Company has all requisite power and authority (corporate and
other), and has taken all necessary corporate action, to authorize, execute,
deliver and perform this Warrant, to authorize and reserve for issuance and,
upon payment from time to time of the Warrant Price, to issue, sell and
deliver, the shares of the underlying Common Stock issuable upon exercise of
this Warrant, and to perform all of its obligations under this Warrant. This
Warrant has been duly executed and delivered by the Company and is a legal,
valid and binding agreement of the Company enforceable in accordance with its
terms. No authorization, approval, consent or other order of any regulatory
authority is required for such authorization, issue or sale.
-15-
<PAGE> 16
(d) NO VIOLATION
The execution and delivery of this Warrant, the consummation of the
transactions herein contemplated and the compliance with the terms and
provisions of this Warrant will not conflict with, or result in a breach of, or
constitute a default or an event permitting acceleration under, any statute,
the Certificate of Incorporation or Bylaws of the Company or any indenture,
mortgage, deed of trust, note, bank loan, credit agreement, franchise, license,
lease, permit, or any other agreement, understanding, instrument, judgment,
decree, order, statute, rule or regulation to which the Company is a party or
by which it is bound as of the date hereof.
(e) VALIDITY
The shares of underlying Common Stock of the Company issued upon
exercise of this Warrant will be duly authorized and validly issued and
outstanding, fully paid and nonassessable and free of preemptive rights created
by the Company or under applicable law.
(f) REMEDIES
The Company stipulates that the remedies at law of the Warrantholder
or any holder of underlying Common Stock in the event of any default or
threatened default by the Company in the performance of or compliance with any
of the terms of this Warrant are not and will not be adequate and that such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein or by an injunction against a violation of any
of the terms hereof.
SECTION 13. GOVERNING LAW
This Warrant shall be governed by and construed under the laws of the
State of Delaware without regard to conflict of law principles.
SECTION 14. HEADINGS
The headings in this Warrant are for purposes of reference only and
shall not limit or otherwise affect any of the terms hereof.
SECTION 15. COUNTERPARTS
This Warrant may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall constitute
one and the same instrument.
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<PAGE> 17
IN WITNESS WHEREOF, the Company and CIT have executed this Warrant on
and as of the day and year first above written.
BAYARD DRILLING TECHNOLOGIES INC.,
a Delaware corporation
By:/s/ JAMES E. BROWN
---------------------------------------------------
James E. Brown
President
CIT GROUP/EQUIPMENT FINANCING, INC.
By:/s/ ASHBURN BYWATERS
---------------------------------------------------
Name:Ashburn Bywaters
-------------------------------------------------
Title:Vice President
------------------------------------------------
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<PAGE> 18
SUBSCRIPTION FORM
(To be executed upon exercise of this Warrant)
_________________:
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant for, and to purchase thereunder,
______________ shares of Common Stock, as provided for therein, and either
tenders herewith payment of the purchase price in full in the form of cash or a
certified or official bank check in the amount of $____________ or, if the
undersigned elects pursuant to Section 1(b) of the within Warrant to convert
such Warrant into Common Stock net issuance, the undersigned exercises the
within Warrant by exchange under the terms of Section 1(b).
Please issue a certificate or certificates for such Common Stock in the
name of, and pay any cash for any fractional share to:
Name:___________________________________________
Address:________________________________________
Social
Security No:____________________________________
Signature_______________________________________
Note: The above signature must correspond exactly
with the name on the first page of this
Warrant or with the name of the assignee
appearing in the assignment form below.
If said number of shares shall not be all the shares purchasable under the
within Warrant, a new Warrant is to be issued in the name of said undersigned
for the balance remaining of the shares purchasable thereunder rounded up to
the next higher number of shares.
Signature Guaranteed:____________________________________________
(Signature must be guaranteed by a bank or trust company having an office
or correspondence in the United States or by a member firm of a registered
securities exchange or the National Association of Security Dealers, Inc.)
-18-
<PAGE> 1
EXHIBIT 10.19
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
FLEET CAPITAL CORPORATION
AND
BAYARD DRILLING TECHNOLOGY, INC.
AND
TREND DRILLING CO.
DATED: MAY 1, 1997
$10,000,000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
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SECTION 1. CREDIT FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Revolving Credit Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Letters of Credit; LC Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 All Loans to Constitute One Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Joint and Several Liability; Rights of Contribution . . . . . . . . . . . . . . . . . . . 2
1.5 Structure of Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2. INTEREST, FEES AND CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Closing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Letter of Credit and LC Guaranty Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.6 Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.7 Audit and Appraisal Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.8 Reimbursement of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.9 Bank Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3. LOAN ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 Manner of Borrowing Revolving Credit Loans . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Application of Payments and Collections . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 Loan Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 Statements of Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 4. TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.1 Term of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 5. SECURITY INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 Security Interest in Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Cross-Collateralization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Lien Perfection; Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 Lien on Realty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 6. COLLATERAL ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.2 Administration of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.3 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.4 Administration of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
i
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<TABLE>
<S> <C> <C>
6.5 Payment of Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 7. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.1 General Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.2. Continuous Nature of Representations and Warranties . . . . . . . . . . . . . . . . . . . 22
7.3. Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.1 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.2 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.3 Specific Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 9. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.1 Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.2 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.3 Other Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.4 Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.5 Availability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.6 Articles of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.7 Good Standing Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.8 Opinion Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.9 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.10 Disbursement Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.11 Dominion Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.12 Landlord Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.13 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.14 Evidence of Perfection and Priority of Liens in Collateral . . . . . . . . . . . . . . . . 30
9.15 Subordination of Chesapeake Debt and Energy Spectrum Debt . . . . . . . . . . . . . . . . 30
9.16 CIT Intercreditor Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.17 Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.18 CIT Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.19 Sale/Leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.20 Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.21 Purchase of Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.22 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.23 Trend Financials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.24 No-Offset Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.25 Trend Financial Statements . . . . . . . . . . . . . . . . . . . .ERROR! BOOKMARK NOT DEFINED.
9.26 Lender shall have received the Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT . . . . . . . . . . . . . . . . . . . . 30
10.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.2 Acceleration of the Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.3 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.4 Remedies Cumulative; No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
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<TABLE>
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SECTION 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.1 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.2 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.3 Modification of Agreement; Sale of Interest . . . . . . . . . . . . . . . . . . . . . . . 36
11.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.5 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.6 Cumulative Effect; Conflict of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.7 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.8 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.9 Lender's Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.10 Credit Inquiries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.11 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.12 Entire Agreement; Appendix A and Exhibits and Schedules . . . . . . . . . . . . . . . . . 39
11.13 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.14 GOVERNING LAW; CONSENT TO FORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.15 WAIVERS BY BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.16 ORAL AGREEMENTS INEFFECTIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.17 Nonapplicability of Article 5069-15.01 et seq. . . . . . . . . . . . . . . . . . . . . . . 41
11.18 Certain Matters of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
iii
<PAGE> 5
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made this 1st day of May, 1997, by
and between FLEET CAPITAL CORPORATION ("Lender"), a Rhode Island corporation
with an office at 2711 North Haskell Avenue, Suite 2100, LB 21, Dallas, Texas
75204; and Bayard Drilling Technologies, Inc., a Delaware corporation
("Bayard"), and Trend Drilling Co., an Oklahoma corporation ("Trend") (Bayard
and Trend being referred to individually, collectively, and jointly and
severally, as "Borrower"), each Borrower having its chief executive office and
principal place of business at 4005 N.W. Expressway, Oklahoma City, Oklahoma
73116. Capitalized terms used in this Agreement have the meanings assigned to
them in Appendix A, General Definitions. Accounting terms not otherwise
specifically defined herein shall be construed in accordance with GAAP
consistently applied.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make a total credit facility of up to $10,000,000
available upon Borrower's request therefor, as follows:
1.1 Revolving Credit Loans.
1.1.1 Loans and Reserves. Lender agrees, during the term of
this Agreement and for so long as no Default or Event of Default exists, to
make Revolving Credit Loans to Borrower from time to time, as requested by
Borrower in the manner set forth in Section 3.1.1 hereof, up to a maximum
principal amount at any time outstanding equal to the Borrowing Base. Lender
shall have the right to establish reserves in such amounts, and with respect to
such matters, as Lender shall deem necessary or appropriate, against the amount
of Revolving Credit Loans which Borrower may otherwise request under this
Section 1.1.1, including, without limitation, with respect to (i) any sums
chargeable against Borrower's Loan Account as Revolving Credit Loans under any
section of this Agreement; (ii) amounts owing by Borrower to any Person to the
extent secured by a Lien on, or trust over, any Property of Borrower other than
the CIT Debt and the CIT Sale/Leaseback; (iii) all amounts of past due rent or
other charges owing at such time by Borrower to any landlord of any premises
where any of the Collateral is located; and (iv) such other matters, events,
conditions or contingencies as to which Lender, in its reasonable judgment,
determines reserves should be established from time to time hereunder.
1.1.2 Use of Proceeds. The Revolving Credit Loans shall be used
solely for Borrower's general corporate purposes capital needs in a manner
consistent with the provisions of this Agreement and Applicable Law. In no
event shall any proceeds of any Revolving Credit Loans be used to purchase or
to carry, reduce, retire or refinance any Indebtedness incurred to purchase or
carry any margin stock (within the meaning of Regulations G or U of the Federal
Reserve Board).
1
<PAGE> 6
1.2 Letters of Credit; LC Guaranties. Lender agrees, for so long as
no Default or Event of Default exists and if requested by Borrower, to (i)
issue its, or cause to be issued by its Affiliates, standby Letters of Credit
for the account of Borrower or (ii) execute LC Guaranties by which Lender or
its Affiliates shall guaranty the payment or performance by each Borrower of
its reimbursement obligations with respect to standby Letters of Credit,
provided that the LC Amount at any time shall not exceed $2,000,000. No Letter
of Credit or LC Guaranty may have an expiration date that is after the last day
of the Original Term. Any amounts paid by Lender under any LC Guaranty or in
connection with any Letter of Credit shall be treated as Revolving Credit
Loans, shall be secured by all of the Collateral and shall bear interest and be
payable at the same rate and in the same manner as Revolving Credit Loans.
1.3 All Loans to Constitute One Obligation. All Loans shall
constitute one general joint and several obligation of Borrowers, and shall be
secured by Lender's security interest in and Lien upon all of the Collateral,
and by all other security interests and Liens heretofore, now or at any time or
times hereafter granted by any Borrower to Lender.
1.4 Joint and Several Liability; Rights of Contribution.
(A) Each Borrower states and acknowledges that: (i) pursuant
to this Agreement, Borrowers desire to utilize their borrowing potential on a
consolidated basis to the same extent possible if they were merged into a
single corporate entity and that this Agreement reflects the establishment of
credit facilities which would not otherwise be available to such Borrower if
each Borrower were not jointly and severally liable for payment of all of the
Obligations; (ii) it has determined that it will benefit specifically and
materially from the advances of credit contemplated by this Agreement; (iii) it
is both a condition precedent to the obligations of Lender hereunder and a
desire of the Borrowers that each Borrower execute and deliver to Lender this
Agreement; and (iv) Borrowers have requested and bargained for the structure
and terms of and security for the advances contemplated by this Agreement.
(B) Each Borrower hereby irrevocably and unconditionally: (i)
agrees that it is jointly and severally liable to Lender for the full and
prompt payment of the Obligations and the performance by each Borrower of its
obligations hereunder in accordance with the terms hereof; (ii) agrees to fully
and promptly perform all of its obligations hereunder with respect to each
advance of credit hereunder as if such advance had been made directly to it;
and (iii) agrees as a primary obligation to indemnify Lender on demand for and
against any loss incurred by Lender as a result of any of the obligations of
any one or more of the Borrowers being or becoming void, voidable,
unenforceable or ineffective for any reason whatsoever (subject to the Lender's
obligations under the terms of this Agreement and the Loan Documents), whether
or not known to Lender or any Person, the amount of such loss being the amount
which Lender would otherwise have been entitled to recover from any one or both
of the Borrowers.
(C) It is the intent of each Borrower that the indebtedness,
obligations and liability hereunder of no one of them be subject to challenge
on any basis, including, without limitation, pursuant to any applicable
fraudulent conveyance or fraudulent transfer laws. Accordingly, as of the date
hereof, the liability of each Borrower under this Section 1.4, together
2
<PAGE> 7
with all of its other liabilities to all Persons as of the date hereof and as
of any other date on which a transfer or conveyance is deemed to occur by
virtue of this Agreement, calculated in amount sufficient to pay its probable
net liabilities on its existing Indebtedness as the same become absolute and
matured ("Dated Liabilities") is, and is to be, less than the amount of the
aggregate of a fair valuation of its property as of such corresponding date
("Dated Assets"). To this end, each Borrower under this Section 1.4, (i)
grants to and recognizes in each other Borrower, ratably, rights of subrogation
and contribution in the amount, if any, by which the Dated Assets of such
Borrower, but for the aggregate of subrogation and contribution in its favor
recognized herein, would exceed the Dated Liabilities of such Borrower or, as
the case may be, (ii) acknowledges receipt of and recognizes its right to
subrogation and contribution ratably from each of the other Borrowers in the
amount, if any, by which the Dated Liabilities of such Borrower, but for the
aggregate of subrogation and contribution in its favor recognized herein, would
exceed the Dated Assets of such Borrower under this Section 1.4. In
recognizing the value of the Dated Assets and the Dated Liabilities, it is
understood that Borrowers will recognize, to at least the same extent of their
aggregate recognition of liabilities hereunder, their rights to subrogation and
contribution hereunder. It is a material objective of this Section 1.4 that
each Borrower recognizes rights to subrogation and contribution rather than be
deemed to be insolvent (or in contemplation thereof) by reason of an arbitrary
interpretation of its joint and several obligations hereunder. In addition to
and not in limitation of the foregoing provisions of this Section 1.4, the
Borrowers and Lender hereby agree and acknowledge that it is the intent of each
Borrower and of Lender that the obligations of each Borrower hereunder be in
all respects in compliance with, and not be voidable pursuant to, applicable
fraudulent conveyance and fraudulent transfer laws.
1.5 Structure of Credit Facility. Each Borrower agrees and
acknowledges that the present structure of the credit facilities detailed in
this Agreement is based in part upon the financial and other information
presently known to Lender regarding each Borrower, the corporate structure of
Borrowers, and the present financial condition of each Borrower. Each Borrower
hereby agrees that Lender shall have the right, in its sole credit judgment, to
require that any or all of the following changes be made to these credit
facilities: (i) restrict loans and advances between Borrowers, (ii) establish
separate lockbox and dominion accounts for each Borrower, and (iii) establish
such other procedures as shall be reasonably deemed by Lender to be useful in
tracking where Loans are made under this Agreement and the source of payments
received by Lender on such Loans.
SECTION 2. INTEREST, FEES AND CHARGES
2.1 Interest.
2.1.1 Rates of Interest. The outstanding principal amount of
the Loans shall bear interest at a fluctuating rate per annum equal to the
lesser of (a) one and one-half percent (1.5 %) above the Base Rate (the
"Applicable Annual Rate") and (b) the Maximum Legal Rate. The rate of interest
applicable to all Loans shall increase or decrease by an amount equal to any
increase or decrease in the Base Rate, effective as of the opening of business
on the day that any such change in the Base Rate occurs.
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2.1.2 Default Rate of Interest. Upon and after the occurrence
of an Event of Default, and during the continuation thereof, the principal
amount of all Loans shall bear interest at a rate per annum equal to the lesser
of (a) two percent (2.00%) above the Applicable Annual Rate and (b) the Maximum
Legal Rate.
2.1.3 Maximum Interest. (A) Notwithstanding anything to the
contrary in this Agreement or otherwise, (i) if at any time the amount of
interest computed on the basis of an Applicable Annual Rate or a Default Rate
would exceed the amount of such interest computed upon the basis of the maximum
rate of interest permitted by applicable state or federal law in effect from
time to time hereafter (the "Maximum Legal Rate"), the interest payable under
this Agreement shall be computed upon the basis of the Maximum Legal Rate, but
any subsequent reduction in such Applicable Annual Rate or Default Rate, as
applicable, shall not reduce such interest thereafter payable hereunder below
the amount computed on the basis of the Maximum Legal Rate until the aggregate
amount of such interest accrued and payable under this Agreement equals the
total amount of interest which would have accrued if such interest had been at
all times computed solely on the basis of an Applicable Annual Rate or Default
Rate, as applicable; and (ii) unless preempted by federal law, an Applicable
Annual Rate or Default Rate, as applicable, from time to time in effect
hereunder may not exceed the "indicated ceiling rate" from time to time in
effect under Tex. Rev. Civ. Stat. Ann. art 5069-1.04(c) (Vernon 1987). If the
applicable state or federal law is amended in the future to allow a greater
rate of interest to be charged under this Agreement than is presently allowed
by applicable state or federal law, then the limitation of interest hereunder
shall be increased to the maximum rate of interest allowed by applicable state
or federal law as amended, which increase shall be effective hereunder on the
effective date of such amendment, and all interest charges owing to Lender by
reason thereof shall be payable in accordance with Section 3.2.2 hereof.
(B) Excess Interest. No agreements, conditions,
provisions or stipulations contained in this Agreement or any other instrument,
document or agreement between Borrower and Lender or default of Borrower, or
the exercise by Lender of the right to accelerate the payment of the maturity
of principal and interest, or to exercise any option whatsoever contained in
this Agreement or any other Loan Document, or the arising of any contingency
whatsoever, shall entitle Lender to contract for, charge, or receive, in any
event, interest exceeding the Maximum Legal Rate. In no event shall Borrower
be obligated to pay interest exceeding such Maximum Legal Rate and all
agreements, conditions or stipulations, if any, which may in any event or
contingency whatsoever operate to bind, obligate or compel Borrower to pay a
rate of interest exceeding the Maximum Legal Rate, shall be without binding
force or effect, at law or in equity, to the extent only of the excess of
interest over such Maximum Legal Rate. In the event any interest is contracted
for, charged or received in excess of the Maximum Legal Rate ("Excess
Interest"), Borrower acknowledges and stipulates that any such contract,
charge, or receipt shall be the result of an accident and bona fide error, and
that any Excess received by Lender shall be applied, first, to reduce the
principal then unpaid hereunder; second, to reduce the other Obligations; and
third, returned to Borrower, it being the intention of the parties hereto not
to enter at any time into a usurious or otherwise illegal relationship.
Borrower recognizes that, with fluctuations in the Base Rate and the Maximum
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Legal Rate, such a result could inadvertently occur. By the execution of this
Agreement, Borrower covenants that (i) the credit or return of any Excess
Interest shall constitute the acceptance by Borrower of such Excess Interest,
and (ii) to the extent permitted by law, Borrower shall not seek or pursue any
other remedy, legal or equitable, against Lender, based in whole or in part
upon contracting for, charging or receiving of any interest in excess of the
maximum authorized by applicable law. For the purpose of determining whether
or not any Excess Interest has been contracted for, charged or received by
Lender, all interest at any time contracted for, charged or received by Lender
in connection with this Agreement shall be amortized, prorated, allocated and
spread in equal parts during the entire term of this Agreement.
(C) Incorporation by this Reference. The provisions of
Section 2.1.3(B) shall be deemed to be incorporated into every document or
communication relating to the Obligations which sets forth or prescribes any
account, right or claim or alleged account, right or claim of Lender with
respect to Borrower (or any other obligor in respect of Obligations), whether
or not any provision of Section 2.1.3(B) is referred to therein. All such
documents and communications and all figures set forth therein shall, for the
sole purpose of computing the extent of the Obligations of Borrower (or any
other obligor) asserted by Lender thereunder, be automatically re-computed by
Borrower or any such obligor, and by any court considering the same, to give
effect to the adjustments or credits required by Section 2.1.3(B).
2.2 Computation of Interest and Fees. Interest, Letter of Credit and
LC Guaranty fees and commitment fees hereunder shall be calculated daily and
shall be computed on the actual number of days elapsed over a year of 360 days.
For the purpose of computing interest hereunder, all items of payment received
by Lender shall be deemed applied by Lender on account of the Obligations
(subject to final payment of such items) one (1) Business Day after receipt by
Lender of such items in Lender's account located in Atlanta, Georgia, and
Lender shall be deemed to have received such items of payment on the date
specified in Section 3.3 hereof.
2.3 Closing Fee. Borrower shall pay to Lender a closing fee of
$175,000, which shall be fully earned and (except to the extent otherwise
required by Applicable Law) nonrefundable on the Closing Date. This closing
fee shall be paid as follows: (i) $75,000 shall be paid concurrently with the
initial Loan hereunder, and (ii) the remaining $100,000 shall be paid on or
before December 31, 1997.
2.4 Letter of Credit and LC Guaranty Fees. Borrower shall pay to
Lender for standby Letters of Credit and LC Guaranties of standby Letters of
Credit, two percent (2.00 %) per annum of the aggregate face amount of such
Letters of Credit and LC Guaranties outstanding from time to time during the
term of this Agreement, plus all normal and customary charges associated with
the issuance thereof, which fees and charges shall be deemed fully earned upon
issuance of each such Letter of Credit or LC Guaranty, shall be due and payable
on the first Business Day of each month and shall not be subject to rebate or
proration upon the termination of this Agreement for any reason.
2.5 Commitment Fee. Borrower shall pay to Lender a commitment fee
equal to one-half of one percent (.5%) per annum of the amount by which the
Average Monthly Revolving
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Credit Loan Balance is less than the Total Credit Facility. The commitment fee
shall be payable monthly, in arrears, on the last day of each calendar month
hereafter.
2.6 Servicing Fee. Borrower shall pay to Lender an annual servicing
fee of $20,000. This servicing fee shall be paid as follows: (i) $5,000 on
the Closing Date, and (ii) in equal installments of $5,000, payable on the
first day of each April, July, October, and January thereafter.
2.7 Audit and Appraisal Fees. Borrower shall reimburse Lender for
all actual out-of-pocket costs and expenses incurred by Lender in connection
with audits and appraisals of Borrower's books and records and such other
matters as Lender shall deem appropriate. All such out-of-pocket expenses
shall be payable on demand.
2.8 Reimbursement of Expenses. If, at any time or times regardless
of whether or not an Event of Default then exists, Lender incurs reasonable
legal expenses or any accounting expenses or any other costs or out-of-pocket
expenses in connection with (i) the negotiation and preparation of this
Agreement or any of the other Loan Documents, any amendment of or modification
of this Agreement or any of the other Loan Documents, or any sale or attempted
sale of any interest herein to any other Person; (ii) the administration of
this Agreement or any of the other Loan Documents and the transactions
contemplated hereby and thereby; (iii) any litigation, contest, dispute, suit,
proceeding or action (whether instituted by Lender, Borrower or any other
Person) in any way relating to the Collateral, this Agreement or any of the
other Loan Documents or Borrower's affairs; (iv) any attempt to enforce any
rights of Lender against Borrower or any other Person which may be obligated to
Lender by virtue of this Agreement or any of the other Loan Documents,
including the Account Debtors; or (v) any attempt to inspect, verify, protect,
preserve, restore, collect, sell, liquidate or otherwise dispose of or realize
upon the Collateral; then all such legal and accounting expenses, other costs
and out of pocket expenses of Lender shall be charged to Borrower. All amounts
chargeable to Borrower under this Section 2.8 shall be Obligations secured by
all of the Collateral, shall be payable on demand to Lender and shall bear
interest from the date such demand is made until paid in full at the rate
applicable to Revolving Credit Loans from time to time. Borrower shall also
reimburse Lender for expenses incurred by Lender in its administration of the
Collateral to the extent and in the manner provided in Section 6 hereof.
2.9 Bank Charges. Borrower shall pay to Lender, on demand, any and
all normal and customary fees, costs or expenses which Lender pays to a bank or
other similar institution arising out of or in connection with (i) the
forwarding to Borrower or any other Person on behalf of Borrower, by Lender, of
proceeds of loans made by Lender to Borrower pursuant to this Agreement and
(ii) the depositing for collection, by Lender, of any check or item of payment
received or delivered to Lender on account of the Obligations.
2.10 Line Debit for Charges. Lender may, at its option, make a
Revolving Credit Loan to reimburse itself for any and all amounts payable by
Borrower to Lender hereunder. Alternatively, Lender may invoice Borrower for
any such amounts and, in such case and
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notwithstanding anything contained herein to the contrary, interest shall not
begin to accrue on such amounts until five (5) days after the delivery by
Lender of such invoice.
SECTION 3. LOAN ADMINISTRATION
3.1 Manner of Borrowing Revolving Credit Loans. Borrowings under the
credit facility established pursuant to Section 1 hereof shall be as follows:
3.1.1 Loan Requests. A request for a Revolving Credit Loan
shall be made, or shall be deemed to be made, in the following manner: (i)
Borrower shall give Lender notice of its intention to borrow, in which notice
Borrower shall specify the amount of the proposed borrowing and the proposed
borrowing date, no later than 11:00 a.m. Dallas, Texas time on the proposed
borrowing date; provided, however, Lender shall have the right to refuse to
accept such a request or make a Revolving Credit Loan if at such time there
exists a Default or an Event of Default; and (ii) the becoming due of any
amount required to be paid under this Agreement or under any of the other Loan
Documents, whether as principal, accrued interest, fees or other charges, shall
be deemed irrevocably to be a request by Borrower from Lender for a Revolving
Credit Loan on the due date of, and in an aggregate amount required to pay,
such principal, accrued interest, fees or other charges, and the proceeds of
any such Revolving Credit Loan may be disbursed by Lender by way of direct
payment of the relevant Obligation (whether or not any Default, Event of
Default or Out-of-Formula Condition exists at the time of or would result from
such Revolving Credit Loan) and shall bear interest at the rate of interest
applicable to Revolving Credit Loans. As an accommodation to Borrower, Lender
may permit telephonic requests for loans and electronic transmittal of
instructions, authorizations, agreements or reports to Lender by Borrower.
Unless Borrower specifically directs Lender in writing not to accept or act
upon telephonic or electronic communications from Borrower, Lender shall have
no liability to Borrower for any loss or damage suffered by Borrower as a
result of Lender's honoring of any requests, execution of any instructions,
authorizations or agreements or reliance on any reports communicated to Lender
telephonically or electronically and purporting to have been sent to Lender by
any individual from time to time designated by Borrower as an authorized
officer and Lender shall have no duty to verify the origin or authenticity of
any such communication.
3.1.2 Disbursement. Borrower hereby irrevocably authorizes
Lender to disburse the proceeds of each Revolving Credit Loan requested, or
deemed to be requested, pursuant to this Section 3.1.2 as follows: (i) the
proceeds of each Revolving Credit Loan requested under Section 3.1.1(i) shall
be disbursed by Lender in lawful money of the United States of America in
immediately available funds, in the case of the initial borrowing, in
accordance with the terms of the written disbursement letter from Borrower, and
in the case of each subsequent borrowing, by wire transfer to such bank account
as may be agreed upon by Borrower and Lender from time to time or elsewhere if
pursuant to a written direction from Borrower; and (ii) the proceeds of each
Revolving Credit Loan requested under Section 3.1.1(ii) shall be disbursed by
Lender by way of direct payment of the relevant interest or other Obligation.
3.1.3 Authorization. Borrower hereby irrevocably authorizes
Lender, in Lender's sole discretion, to advance to Borrower, and to charge to
Borrower's Loan Account
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hereunder as a Revolving Credit Loan, a sum sufficient to pay all interest
accrued on the Obligations during the immediately preceding month and to pay
all costs, fees and expenses at any time owed by Borrower to Lender hereunder.
3.2 Payments. All payments with respect to any of the Obligations
shall be made to Lender on the date when due, in Dollars and in immediately
available funds, without any offset or counterclaim. Except where evidenced by
notes or other instruments issued or made by Borrower to Lender specifically
containing payment provisions which are in conflict with this Section 3.2 (in
which event the conflicting provisions of said notes or other instruments shall
govern and control), the Obligations shall be payable as follows:
3.2.1 Principal. Principal payable on account of Revolving
Credit Loans shall be payable by Borrower to Lender immediately upon the
earliest of (i) the receipt by Lender or Borrower of any proceeds of any of the
Collateral, to the extent of said proceeds, (ii) the occurrence of an Event of
Default in consequence of which Lender elects to accelerate the maturity and
payment of the Obligations, or (iii) termination of this Agreement pursuant to
Section 4 hereof; provided, however, that if an Out-of-Formula Condition shall
exist at any time, Borrower shall, on demand, repay the Obligations to the
extent necessary to eliminate the Out-of-Formula Condition.
3.2.2 Interest. Interest accrued on the Revolving Credit Loans
shall be due on the earliest of (i) the first calendar day of each month (for
the immediately preceding month), computed through the last calendar day of the
preceding month, (ii) the occurrence of an Event of Default in consequence of
which Lender elects to accelerate the maturity and payment of the Obligations
or (iii) termination of this Agreement pursuant to Section 4 hereof.
3.2.3 Costs, Fees and Charges. Costs, fees and charges payable
pursuant to this Agreement shall be payable by Borrower as and when provided in
Section 2 hereof, to Lender or to any other Person designated by Lender in
writing.
3.2.4 Other Obligations. The balance of the Obligations
requiring the payment of money, if any, shall be payable by Borrower to Lender
as and when provided in this Agreement, the Other Agreements or the Security
Documents, or, if no date of payment is otherwise specified in the Loan
Documents, on demand.
3.3 Application of Payments and Collections. All items of payment
received by Lender by 12:00 noon, Dallas, Texas time, on any Business Day shall
be deemed received on that Business Day. All items of payment received after
12:00 noon, Dallas, Texas time, on any Business Day shall be deemed received on
the following Business Day. Borrower irrevocably waives the right to direct
the application of any and all payments and collections at any time or times
hereafter received by Lender from or on behalf of Borrower, and Borrower does
hereby irrevocably agree that Lender shall have the continuing exclusive right
to apply and reapply any and all such payments and collections received at any
time or times hereafter by Lender or its agent against the Obligations, in such
manner as Lender may deem advisable, notwithstanding any entry by Lender upon
any of its books and records. If as the result of collections of
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Accounts as authorized by Section 6.2.6 hereof a credit balance exists in the
Loan Account, such credit balance shall not accrue interest in favor of
Borrower, but shall be available to Borrower at any time or times for so long
as no Default or Event of Default exists. Lender may, at its option, offset
such credit balance against any of the Obligations upon and after the
occurrence of an Event of Default.
3.4 Loan Account. Lender shall establish an account on its books
(the "Loan Account") and shall enter all Loans as debits to the Loan Account
and shall also record in the Loan Account all payments made by Borrower on any
Obligations and all proceeds of Collateral which are finally paid to Lender,
and may record therein, in accordance with customary accounting practice, other
debits and credits, including interest and all charges and expenses properly
chargeable to Borrower.
3.5 Statements of Account. Lender will account to Borrower monthly
with a statement of Loans, charges and payments made pursuant to this Agreement
supported, if requested by Borrower, by appropriate documentation, and such
account rendered by Lender shall be deemed final, binding and conclusive upon
Borrower unless Lender is notified by Borrower in writing to the contrary
within sixty (60) days after the date each accounting is deemed to have been
sent pursuant to Section 11.8 hereof. Such notice shall only be deemed an
objection to those items specifically objected to therein.
SECTION 4. TERM AND TERMINATION
4.1 Term of Agreement. Subject to Section 4.2 hereof and Lender's
right to cease making Loans to Borrower upon or after the occurrence of any
Default or Event of Default, this Agreement shall be in effect for a period of
three (3) years from the date hereof, through and including April 30, 2000 (the
"Original Term").
4.2 Termination.
4.2.1 Termination by Lender. After the occurrence and during
the continuation of an Event of Default, Lender may terminate this Agreement
without notice.
4.2.2 Termination by Borrower. Upon at least sixty (60) days
prior written notice to Lender, Borrower may, at its option, terminate this
Agreement; provided, however, no such termination shall be effective until
Borrower has paid all of the Obligations in immediately available funds and all
Letters of Credit and LC Guaranties have expired or have been cash
collateralized to Lender's satisfaction. Any notice of termination given by
Borrower shall be irrevocable unless Lender otherwise agrees in writing, and
Lender shall have no obligation to make any Loans or issue or procure any
Letters of Credit or LC Guaranties on or after the termination date stated in
such notice. Borrower may elect to terminate this Agreement in its entirety
only. No section of this Agreement or type of Loan available hereunder may be
terminated singly.
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4.2.3 Termination Charges.
(i) On the effective date of termination of this
Agreement for any reason, Borrower shall pay to Lender (in addition to the then
outstanding principal, accrued interest and other charges owing under the terms
of this Agreement and any of the other Loan Documents) as liquidated damages
for the loss of the bargain and not as a penalty, an amount equal to three
percent (3%) of the Total Credit Facility if termination occurs during the
first twelve-month period of the Original Term (May 1, 1997, through April 30,
1998); two percent (2%) of the Total Credit Facility if termination occurs
during the second twelve-month period of the Original Term (May 1, 1998,
through April 30, 1999); and one percent (1%) of the Total Credit Facility if
termination occurs during the third twelve-month period of the Original Term
(May 1, 1999, through April 30, 2000). If termination occurs on the last day
of the Original Term, no termination charge shall be payable.
(ii) In the event that (a) Borrowers make a prepayment
of the CIT Debt pursuant to the terms of Section 1.06(b)(ii) of the CIT Loan
Agreement, (b) the Borrowers deliver a written request to CIT, as agent, to
release from the Liens granted to CIT, as agent thereunder, certain Drilling
Rigs or other collateral securing the CIT Debt, (c) Borrowers deliver a written
request to Lender to release the Liens of Lender with respect to the Drilling
Rigs and other collateral requested to be released by CIT, as agent, and (d)
Lender, in its capacity as Lender hereunder and in its capacity as a co-lender
under the CIT Loan Agreement, either fails to respond to such request or does
not approve such request, in either case within ten (10) Business Days from the
date of delivery of such request to Lender, then, in such event, Borrower may,
by written notice to Lender delivered within ten (10) Business Days after the
effective date of Lender's response, notify Lender of its intent to terminate
this Agreement and to payoff and remove Lender as a co-lender under the CIT
Loan Agreement no later than sixty (60) days after such notice. Such notice to
terminate by Borrowers shall be irrevocable. Notwithstanding the provisions of
Section 4.2.3(i) above, in the event Borrowers, within such sixty (60) day
period, terminate this Agreement and indefeasibly pay in full all Obligations
of Borrowers to Lender under this Agreement and terminate, with respect to
Lender as a co-lender, the CIT Loan Agreement and indefeasibly pay in full all
obligations, liabilities and amounts owing to Lender as a co-lender under the
CIT Loan Agreement, then Lender shall waive the application of the pre-payment
fees under Section 4.2.3(i) with respect to such termination and, with respect
to Lender in its capacity as a co-lender under the CIT Loan Agreement, waive
the application of the pre-payment fees under Section 1.06(b)(ii) of the CIT
Loan Agreement with respect to such termination.
4.2.4 Effect of Termination. All of the Obligations shall be
immediately due and payable upon the termination date stated in any notice of
termination of this Agreement. All undertakings, agreements, covenants,
warranties and representations of Borrower contained in the Loan Documents
shall survive any such termination and Lender shall retain its Liens in the
Collateral and all of its rights and remedies under the Loan Documents
notwithstanding such termination until Borrower has paid the Obligations to
Lender, in full, in immediately available funds, together with the applicable
termination charge, if any. Notwithstanding the payment in full of the
Obligations, Lender shall not be required to terminate its security interests
in the
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Collateral unless, with respect to any loss or damage Lender may incur as a
result of dishonored checks or other items of payment received by Lender from
Borrower or any Account Debtor and applied to the Obligations, Lender shall, at
its option (i) have received a written agreement, executed by Borrower and by
any Person whose loans or other advances to Borrower are used in whole or in
part to satisfy the Obligations, indemnifying Lender from any such loss or
damage; or (ii) have retained such monetary reserves and Liens on the
Collateral for such period of time as Lender, in its reasonable discretion, may
deem necessary to protect Lender from any such loss or damage.
SECTION 5. SECURITY INTERESTS
5.1 Security Interest in Collateral. To secure the prompt payment
and performance to Lender of all of the Obligations, each Borrower hereby
grants to Lender a continuing security interest in and Lien upon all of each
Borrower's assets, including all of the following Property and interests in
Property of Borrower, whether now owned or existing or hereafter created,
acquired or arising and wheresoever located:
(i) All Accounts;
(ii) All Inventory;
(iii) All Equipment;
(iv) All General Intangibles;
(v) All investment property (as defined in Section 9.115 of
the Code);
(vi) All real Property;
(vii) All Drilling Rigs;
(viii) All Drilling Contracts;
(ix) All monies and other Property of any kind now or at any
time or times hereafter in the possession or under the control of Lender or a
bailee or Affiliate of Lender;
(x) All accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (i) through (ix) above, including,
without limitation, proceeds of and unearned premiums with respect to insurance
policies insuring any of the Collateral; and
(xi) All books and records (including, without limitation,
customer lists, credit files, computer programs, print-outs, and other computer
materials and records) of Borrower pertaining to any of (i) through (x) above.
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5.2 Cross-Collateralization. Each Borrower agrees that the
Collateral pledged by such Borrower hereunder shall secure all of the
Obligations of the Borrower. Upon and after an Event of Default by any
Borrower, Lender may pursue all rights and remedies that Lender may have
against all or any part of the Collateral regardless of which Borrower has
legal title to such Collateral. Each Borrower hereby acknowledges that this
cross-collateralization of the Collateral owned by such Borrower is in
consideration of Lender extending the credit hereunder and is mutually
beneficial to each Borrower.
5.3 Lien Perfection; Further Assurances. Borrower shall execute such
UCC-1 financing statements as are required by the Code and such other
instruments, assignments or documents as are necessary to perfect Lender's Lien
upon any of the Collateral and shall take such other action as may be required
to perfect or to continue the perfection of Lender's Lien upon the Collateral.
Unless prohibited by Applicable Law, Borrower hereby authorizes Lender to
execute and file any such financing statement on Borrower's behalf. The
parties agree that a carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in any
appropriate office in lieu thereof. At Lender's reasonable request, Borrower
shall also promptly execute or cause to be executed and shall deliver to Lender
any and all documents, instruments and agreements deemed necessary by Lender to
give effect to or carry out the terms or intent of the Loan Documents.
5.4 Lien on Realty. The due and punctual payment and performance of
the Obligations shall also be secured by a Lien upon all real Property of
Borrower now or hereafter acquired by Borrower and wheresoever located.
Concurrently with the purchase of any real Property by Borrower, a
mortgage/deed of trust shall be executed by Borrower in favor of Lender and
shall be duly recorded, at Borrower's expense, in each office where such
recording is required to constitute a fully perfected Lien on the real Property
covered thereby. In connection with the purchase of such real Property,
Borrower shall deliver to Lender, at Borrower's expense, detailed surveys and
mortgagee title insurance policies issued by a title insurance company
satisfactory to Lender, which policies shall be in form and substance
satisfactory to Lender; provided, however, Lender hereby agrees that no
mortgagee's title insurance or survey shall be required if the real Property is
acquired for, or has been independently appraised at a value of, less than
$1,000,000.
SECTION 6. COLLATERAL ADMINISTRATION
6.1 General
6.1.1 Location of Collateral. All tangible items of Collateral,
other than Inventory in transit and Drilling Rigs, the locations of which are
reported to Lender pursuant to Section 6.4.4 hereof, motor vehicles and
investment property held in an account with a securities intermediary, shall at
all times be kept by Borrower and its Subsidiaries at one or more of the
business locations set forth in Exhibit A hereto and shall not, without the
prior written approval of Lender, be moved therefrom except, prior to an Event
of Default and Lender's acceleration of the maturity of the Obligations in
consequence thereof, for (i) sales of Inventory in the ordinary
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course of business, and (ii) removals in connection with dispositions of
Equipment that are authorized by Section 6.4.2 hereof.
6.1.2 Insurance of Collateral. Borrower shall maintain and pay
for insurance upon all Collateral wherever located and with respect to
Borrower's business, covering casualty, hazard, public liability and such other
risks in such amounts and with such insurance companies as are reasonably
satisfactory to Lender. Borrower shall deliver the originals or certified
copies of such policies to Lender with satisfactory lender's loss payable
endorsements, which policies shall name Lender as loss payee, assignee or
additional insured, as appropriate. Each policy of insurance or endorsement
shall contain a clause requiring the insurer to give not less than thirty (30)
days prior written notice to Lender in the event of cancellation of the policy
for any reason whatsoever, unless such cancellation is a result of non-payment
of premiums in which case 10 days prior written notice shall be given to
Lender, and a clause specifying that the interest of Lender shall not be
impaired or invalidated regardless of any breach of or violation by Borrower of
any warranties, declarations or conditions contained in said policy. If
Borrower fails to provide and pay for such insurance, Lender may, at its
option, but shall not be required to, procure the same and charge Borrower
therefor. Borrower agrees to deliver to Lender, promptly as rendered, true
copies of all reports made in any reporting forms to insurance companies.
6.1.3 Protection of Collateral. All expenses of protecting,
storing, warehousing, insuring, handling, maintaining and shipping the
Collateral, any and all excise, property, sales, and use taxes imposed by any
Applicable Law on any of the Collateral or in respect of the sale thereof, and
all other payments required to be made by Lender to any Person to realize upon
any Collateral shall be borne and paid by Borrower. If Borrower fails to
promptly pay any portion thereof when due, Lender may, at its option, but shall
not be required to, pay the same and charge Borrower therefor. Lender shall
not be liable or responsible in any way for the safekeeping of any of the
Collateral or for any loss or damage thereto (except for reasonable care in the
custody thereof while any Collateral is in Lender's actual possession) or for
any diminution in the value thereof, or for any act or default of any
warehouseman, carrier, forwarding agency, or other Person whomsoever, but the
same shall be at Borrower's sole risk.
6.2 Administration of Accounts.
6.2.1 Records, Schedules and Assignments of Accounts. Borrower
shall keep accurate and complete records of its Accounts and all payments and
collections thereon and shall submit to Lender on such periodic basis as Lender
shall request a sales and collections report for the preceding period, in form
satisfactory to Lender. On or before the fifteenth day of each month from and
after the date hereof, Borrower shall deliver to Lender, in form acceptable to
Lender, a detailed aged trial balance of all Accounts existing as of the last
day of the preceding month, specifying the names, addresses, face value, dates
of invoices and due dates for each Account Debtor obligated on an Account so
listed ("Schedule of Accounts"), and, upon Lender's request therefor, copies of
proof of delivery and the original copy of all documents, including, without
limitation, repayment histories and present status reports relating to the
Accounts so scheduled and such other matters and information relating to the
status of then existing Accounts as Lender shall reasonably request. In
addition, if Accounts in an aggregate face amount in
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excess of $250,000 become ineligible because they fall within one of the
specified categories of ineligibility set forth in the definition of Eligible
Accounts or otherwise established by Lender, Borrower shall notify Lender of
such occurrence on the first Business Day following the day such occurrence
becomes known to Borrower and the Borrowing Base shall thereupon be adjusted to
reflect such occurrence. If requested by Lender, Borrower shall execute and
deliver to Lender agings and formal written assignments of all of its Accounts
weekly or daily, which shall include all Accounts that have been created since
the date of the last assignment, together with copies of invoices or invoice
registers related thereto.
6.2.2 Discounts, Allowances, Disputes. If Borrower grants any
discounts, allowances or credits that are not shown on the face of the invoice
for the Account involved, Borrower shall report such discounts, allowances or
credits, as the case may be, to Lender as part of the next required Schedule of
Accounts. If any amounts due and owing in excess of $250,000 are in dispute
between Borrower and any Account Debtor, Borrower shall provide Lender with
written notice thereof at the time of submission of the next Schedule of
Accounts, explaining in detail the reason for the dispute, all claims related
thereto and the amount in controversy. Upon and after the occurrence of an
Event of Default, Lender shall have the right to settle or adjust all disputes
and claims directly with the Account Debtor and to compromise the amount or
extend the time for payment of the Accounts upon such terms and conditions as
Lender may deem advisable, and to charge the deficiencies, costs and expenses
thereof, including attorney's fees, to Borrower.
6.2.3 Taxes. If an Account includes a charge for any tax
payable to any governmental taxing authority, Lender is authorized, in its sole
discretion, to pay the amount thereof to the proper taxing authority for the
account of Borrower and to charge Borrower therefor; provided, however, that
Lender shall not be liable for any such taxes to any governmental taxing
authority that may be due by Borrower.
6.2.4 Account Verification. Whether or not a Default or an
Event of Default has occurred, any of Lender's officers, employees or agents
shall have the right, at any time or times hereafter, in the name of Lender,
any designee of Lender or Borrower, to verify the validity, amount or any other
matter relating to any Accounts by mail, telephone, facsimile transmission or
otherwise. Borrower shall cooperate fully with Lender in an effort to
facilitate and promptly conclude any such verification process.
6.2.5 Maintenance of Dominion Account. Borrower shall maintain
a Dominion Account pursuant to a lockbox arrangement acceptable to Lender with
such banks as may be selected by Borrower and be acceptable to Lender.
Borrower shall issue to any such banks an irrevocable letter of instruction
directing such banks to deposit all payments or other remittances received in
the lockbox to the Dominion Account for application on account of the
Obligations. All funds deposited in the Dominion Account shall immediately
become the property of Lender and Borrower shall obtain the agreement by such
banks in favor of Lender to waive any offset rights against the funds so
deposited.
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6.2.6 Collection of Accounts, Proceeds of Collateral. To
expedite collection, Borrower shall endeavor in the first instance to make
collection of its Accounts for Lender. All remittances received by Borrower in
respect of Accounts, together with the proceeds of any other Collateral, shall
be held as Lender's property by Borrower as trustee of an express trust for
Lender's benefit and Borrower shall immediately deposit same in kind in the
Dominion Account. Lender retains the right at all times after the occurrence of
an Event of Default to notify Account Debtors that Accounts have been assigned
to Lender and to collect Accounts directly in its own name and to charge the
collection costs and expenses, including reasonable attorneys' fees to
Borrower.
6.3 Intentionally Omitted.
6.4 Administration of Equipment.
6.4.1 Records and Schedules of Drilling Rigs and Equipment.
Borrower shall keep accurate records itemizing and describing the kind, type,
quality, quantity and value of its Drilling Rigs and Equipment and all
dispositions made in accordance with Section 6.4.2 hereof, and shall furnish
Lender with a current schedule containing the foregoing information on at least
an annual basis and more often if requested by Lender. Immediately on request
therefor by Lender, Borrower shall deliver to Lender any and all evidence of
ownership, if any, of any of the Drilling Rigs and Equipment.
6.4.2 Dispositions of Drilling Rigs and Equipment. Borrower
will not sell, lease or otherwise dispose of or transfer any of the Drilling
Rigs or Equipment or any part thereof without the prior written consent of
Lender; provided, however, that the foregoing restriction shall not apply, for
so long as no Default or Event of Default exists, to (i) dispositions of
Equipment or Drilling Rigs which, in the aggregate during any fiscal year of
Borrower, has a fair market value or book value, whichever is less, of
$1,000,000 or less, (ii) replacements of Drilling Rigs and Equipment that are
substantially worn, damaged or obsolete with Drilling Rigs and Equipment of
like kind, function and value, provided that the replacement Equipment or
Drilling Rigs shall be acquired prior to or concurrently with any disposition
of the Drilling Rigs and Equipment that is to be replaced, the replacement
Drilling Rigs and Equipment or Drilling Rigs shall be free and clear of Liens
other than Permitted Liens that are not Purchase Money Liens, or (iii)
dispositions of Equipment and Drilling Rigs permitted under Section 8.2.9
hereof.
6.4.3 Condition of Equipment. Each Borrower represents and
warrants to Lender that its Equipment and Drilling Rigs are in good operating
condition and repair according to customary oil and gas industry practice, and
all necessary replacements of and repairs thereto shall be made so that the
value and operating efficiency of the Equipment and Drilling Rigs shall be
maintained and preserved in accordance with such practice, reasonable wear and
tear excepted. Borrower will not permit any of the Equipment and Drilling Rigs
to become affixed to any real Property leased to Borrower so that an interest
arises therein under the real estate laws of the applicable jurisdiction unless
the landlord of such real Property has executed a landlord waiver or leasehold
mortgage in favor of and in form acceptable to Lender, and Borrower will not
permit any of the Equipment or Drilling Rigs to become an accession to any
personal
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Property that is subject to a Lien unless the Lien is a Permitted Lien (other
than a Purchase Money Lien).
6.4.4 Location of Drilling Rigs. Not later than fifteen (15)
days after the end of each month hereafter, Borrower shall cause to be prepared
and furnish to Lender a schedule indicating the precise location of each
Drilling Rig of each Borrower as of the end of such month.
6.5 Payment of Charges. All amounts chargeable to Borrower under
Section 6 hereof shall be Obligations secured by all of the Collateral, shall
be payable on demand and shall bear interest from the date such advance was
made until paid in full at the rate applicable to Revolving Credit Loans from
time to time.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1 General Representations and Warranties. To induce Lender to
enter into this Agreement and to make advances hereunder, each Borrower
warrants and represents to Lender and covenants with Lender that:
7.1.1. Organization and Qualification. Each Borrower and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Each
Borrower and its Subsidiaries is duly qualified and is authorized to do
business and is in good standing as a foreign corporation in each state or
jurisdiction listed on Exhibit B hereto and in all other states and
jurisdictions where the character of its Properties or the nature of its
activities make such qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect.
7.1.2. Corporate Power and Authority. Each Borrower is duly
authorized and empowered to enter into, execute, deliver and perform this
Agreement and each of the other Loan Documents to which it is a party. The
execution, delivery and performance of this Agreement and each of the other
Loan Documents have been duly authorized by all necessary corporate action and
do not and will not (i) require any consent or approval of the shareholders of
any Borrower; (ii) contravene any Borrower's charter, articles or certificate
of incorporation or by-laws; (iii) violate, or cause any Borrower to be in
default under, any provision of any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award in effect having
applicability to any Borrower; (iv) result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which any Borrower is a party or by which it or its
Properties may be bound or affected; or (v) result in, or require, the creation
or imposition of any Lien (other than Permitted Liens) upon or with respect to
any of the Properties now owned or hereafter acquired by any Borrower.
7.1.3. Legally Enforceable Agreement. This Agreement is, and
each of the other Loan Documents when delivered under this Agreement will be, a
legal, valid and binding obligation of each Borrower, enforceable against it in
accordance with its respective terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency
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or similar laws affecting creditors' rights generally or by principles of
equity pertaining to the availability of equitable remedies.
7.1.4. Capital Structure, Exhibit C hereto states (i) the correct
name of each of the Subsidiaries of each Borrower, its jurisdiction of
incorporation and the percentage of its Voting Stock owned by such Borrower,
(ii) the name of each of each Borrower's corporate or joint venture Affiliates
and the nature of the affiliation, (iii) the number, nature and holder of all
outstanding Securities of each Borrower and each Subsidiary of such Borrower
and (iv) the number of authorized, issued and treasury shares of each Borrower
and each Subsidiary of such Borrower. Each Borrower has good title to all of
the shares it purports to own of the stock of each of its Subsidiaries, free
and clear in each case of any Lien, other than Permitted Liens. All such
shares have been duly issued and are fully paid and non-assessable. Except as
set forth on Exhibit C there are no outstanding options to purchase, or any
rights or warrants to subscribe for, or any commitments or agreements to issue
or sell, or any Securities or obligations convertible into, or any powers of
attorney relating to, shares of the capital stock of any Borrower or any of
their respective Subsidiaries. Except for the Shareholder Agreement and the
Registration Rights Agreement, there are no outstanding agreements or
instruments between either Borrower and any of their respective shareholders
relating to the ownership of Borrower's capital stock.
7.1.5. Corporate Names. Neither any Borrower nor any of its
Subsidiaries has been known as or used any corporate, fictitious or trade names
except those listed on Exhibit D hereto. Except as set forth on Exhibit D
neither any Borrower nor any of its Subsidiaries has been the surviving
corporation of a merger or consolidation or acquired all or substantially all
of the assets of any Person.
7.1.6. Business Locations; Agent for Process. Each Borrower's
and its Subsidiaries' chief executive office and other places of business are
as listed on Exhibit A hereto. During the preceding five-year period, neither
any Borrower nor any of its Subsidiaries has had an office or place of business
other than as listed on Exhibit A. Except as shown on Exhibit A no Inventory
of Borrower is stored with a bailee, warehouseman or similar Person, nor is any
Inventory consigned to any Person.
7.1.7. Title to Properties; Priority of Liens. To the best of
Borrower's knowledge, each Borrower and its Subsidiaries have good and
marketable title to and fee simple ownership of, or valid and subsisting
leasehold interests in, all of their real Property, and good title to all of
the Collateral and all of their other Property, in each case, free and clear of
all Liens except Permitted Liens. Each Borrower has paid or discharged all
lawful claims (other than accounts payable permitted to be outstanding under
Section 8.2.3(iv)) which, if unpaid, might become a Lien against any of such
Borrower's Properties that is not a Permitted Lien. The Liens granted to
Lender under Section 5 hereof are first priority Liens, subject only to
Permitted Liens. All of the Drilling Rigs are mobile equipment which are not
designed to be permanently used for any one location and none of the Drilling
Rigs are certificated as motor vehicles under the laws of any jurisdiction.
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7.1.8 Accounts. Lender may rely, in determining which Accounts
of Borrower are Eligible Accounts, on all statements and representations made
by any Borrower with respect to any Account or Accounts. Unless otherwise
indicated in writing to Lender, with respect to each Account:
(i) It is genuine and in all respects what it purports
to be, and it is not evidenced by a judgment;
(ii) It arises out of a completed, bona fide sale and
delivery of goods or rendition of services by Borrower in the ordinary course
of its business and in accordance with the terms and conditions of all purchase
orders, contracts or other documents relating thereto and forming a part of the
contract between Borrower and the Account Debtor;
(iii) It is for a liquidated amount maturing as stated in
the duplicate invoice covering such sale or rendition of services, a copy of
which has been furnished or is available to Lender;
(iv) Such Account, and Lender's security interest
therein, is not subject to any offset, Lien, deduction, defense, dispute,
counterclaim or any other adverse condition, except for disputes resulting in
disputes in service where the amount in controversy is deemed by Lender to be
immaterial, and each such Account is absolutely owing to Borrower and is not
contingent in any respect or for any reason;
(v) Borrower has made no agreement with any Account
Debtor thereunder for any extension, compromise, settlement or modification of
any such Account or any deduction therefrom, except discounts or allowances
which are granted by Borrower in the ordinary course of its business for prompt
payment and which are reflected in the calculation of the net amount of each
respective invoice related thereto and are reflected in the Schedules of
Accounts submitted to Lender pursuant to Section 6.2.1 hereof;
(vi) There are no facts, events or occurrences known to
Borrower which in any way impair the validity or enforceability of any Accounts
or tend to reduce the amount payable thereunder from the face amount of the
invoice and statements delivered to Lender with respect thereto;
(vii) To the best of Borrower's knowledge, the Account
Debtor thereunder (a) had the capacity to contract at the time any contract or
other document giving rise to the Account was executed and (b) such Account
Debtor is Solvent; and
(viii) To the best of Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against any Account
Debtor thereunder which might result in any material adverse change in such
Account Debtor's financial condition or the collectibility of such Account.
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7.1.9 Financial Statements; Fiscal Year. (a) The Consolidated
balance sheet of Bayard as of December 31, 1996, and the related statements of
income, changes in stockholder's equity, and cash flow statement for the
periods ended on such dates, have been prepared in accordance with GAAP, and
present fairly in all material respects the Consolidated financial position of
Bayard at such date and the results of Bayard's operations for such periods in
accordance with GAAP. Since February 28, 1997, there has been no material
adverse change in the condition, financial or otherwise, of Bayard or its
Subsidiaries and since such date there has been no change in the aggregate
value of Equipment and real Property owned by Borrower, except changes in the
ordinary course of business, none of which individually or in the aggregate has
been materially adverse. The fiscal year of each Bayard and each of its
respective Subsidiaries ends on December 31 of each year.
(b) The Consolidated balance sheet of Trend as of
December 31, 1996, and the related statements of income, changes in
stockholder's equity, and cash flow statement for the periods ended on such
dates, have been prepared in accordance with GAAP, and present fairly in all
material respects the Consolidated financial position of Trend at such date and
the results of Trend's operations for such periods in accordance with GAAP.
Since February 28, 1997, there has been no material adverse change in the
condition, financial or otherwise, of Trend or its Subsidiaries and since such
date there has been no change in the aggregate value of Equipment and real
Property owned by Borrower, except changes in the ordinary course of business,
none of which individually or in the aggregate has been materially adverse.
The fiscal year of Trend ends on December 31 of each year.
7.1.10 Full Disclosure. The financial statements referred to in
Section 7.1.9 hereof do not, nor does this Agreement or any other written
statement of any Borrower to Lender, contain any untrue statement of a material
fact or omit a material fact, in either case known to Borrower, necessary to
make the statements contained therein or herein not misleading in light of the
circumstances under which such statement was made. There is no fact or
circumstance known to Borrower which either Borrower or their respective
subsidiaries has failed to disclose to Lender in writing which could reasonably
be expected to have a Material Adverse Effect.
7.1.11. Solvent Financial Condition. Each Borrower and its
respective Subsidiaries are now and, after giving effect to the Loans to be
made and the Letters of Credit and LC Guaranties to be issued hereunder, at all
times will be, Solvent.
7.1.12. Surety Obligations. Except as disclosed on Exhibit
E, neither any Borrower nor any of its Subsidiaries is obligated as surety or
indemnitor under any surety or similar bond or other contract issued or entered
into any agreement to assure payment, performance or completion of performance
of any undertaking or obligation of any Person.
7.1.13. Taxes. Bayard's federal tax identification number
is 73-1508021. Trend's federal tax identification number is 73-1141066. Each
Borrower and each of its Subsidiaries has filed all federal, state and local
tax returns and other reports it is required by law to file and has paid, or
made provision for the payment of, all Taxes upon it, its income and Properties
as and
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when such Taxes are due and payable, except to the extent being Properly
Contested. The provision for Taxes on the books of Bayard and its Subsidiaries
are adequate for all years not closed by applicable statutes, and for its
current fiscal year.
7.1.14. Intentionally Omitted.
7.1.15. Patents, Trademarks, Copyrights and Licenses. Each
Borrower and its Subsidiaries own or possess all the material patents,
trademarks, service marks, trade names, copyrights and licenses necessary for
the present and planned future conduct of their business without any material
conflict with the rights of others. All patents, trademarks, service marks,
trade names, copyrights, licenses and other similar rights are listed on
Exhibit F hereto.
7.1.16. Governmental Consents. Each Borrower and its
Subsidiaries have, and are in good standing with respect to, all material
governmental consents, approvals, licenses, authorizations, permits,
certificates, inspections and franchises necessary to continue to conduct their
business as heretofore or proposed to be conducted by them and to own or lease
and operate their Properties as now owned or leased by them.
7.1.17. Compliance with Laws. Each Borrower and its
Subsidiaries have duly complied with, and their Properties, business operations
and leaseholds are in compliance in all material respects with, the provisions
of all material Applicable Law and there have been no citations, notices or
orders of material noncompliance issued to any Borrower or any of its
Subsidiaries under any such law, rule or regulation. Each of each Borrower and
its Subsidiaries has established and maintains an adequate monitoring system to
insure that it remains in compliance with all federal, state and local laws,
rules and regulations applicable to it.
7.1.18. Restrictions. Neither any Borrower nor any of
their respective Subsidiaries is a party or subject to any contract, agreement,
or charter or other corporate restriction, which has or could be reasonably
expected to have a Material Adverse Effect. Except as set forth on Exhibit G,
neither Borrower nor any of their respective Subsidiaries is a party or
otherwise subject to any contract or agreement which restricts the right or
ability of Borrower or such Subsidiaries, as the case may be, to incur
Indebtedness upon terms which are more restrictive than the terms of this
Agreement. No contracts or agreements to which either Borrower or any of their
respective Subsidiaries is a party or by which any of their respective
properties are bound prohibits the execution of or compliance with this
Agreement or the other Loan Documents by either Borrower or any of their
respective Subsidiaries, as applicable.
7.1.19. Litigation. Except as set forth on Exhibit H
hereto, there are no actions, suits, proceedings or investigations pending, or
to the knowledge of any Borrower, threatened, against or affecting any Borrower
or any of its Subsidiaries, or the business, operations, Properties, prospects,
profits or condition of any Borrower or any of its Subsidiaries in which the
amount in controversy exceeds $250,000. Neither any Borrower nor any of its
Subsidiaries is in default with respect to any order, writ, injunction,
judgment, decree or rule of any court, governmental authority or arbitration
board or tribunal.
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7.1.20. No Defaults. No event has occurred and no
condition exists which would, upon or after the execution and delivery of this
Agreement or any Borrower's performance hereunder, constitute a Default or an
Event of Default that may reasonably be expected to result in costs to Borrower
in excess of $250,000. Neither any Borrower nor any of its Subsidiaries is in
default, and no event has occurred and no condition exists which constitutes,
or which with the passage of time or the giving of notice or both would
constitute, a default in the payment of any Indebtedness to any Person for
Money Borrowed that may reasonably be expected to result in costs to Borrower
in excess of $250,000.
7.1.21. Leases. Exhibit I hereto is a complete listing of
all capitalized leases of each Borrower and its Subsidiaries with current terms
greater than 180 days or which require aggregate lease payments during the
current term of more than $50,000, and Exhibit J hereto is a complete listing
of all operating leases of each Borrower and its Subsidiaries with current
terms of greater than 180 days or which require aggregate lease payments during
the current term of more than $50,000. Each Borrower and its Subsidiaries is
in full compliance with all of the terms of each of their respective
capitalized and operating leases.
7.1.22. Pension Plans. Except as disclosed on Exhibit K
hereto, neither any Borrower nor any of its Subsidiaries has any Plan. Each
Borrower and each of its Subsidiaries is in full compliance with the
requirements of ERISA and the regulations promulgated thereunder with respect
to each Plan. No fact or situation that could result in a material adverse
change in the financial condition of any Borrower or any of its Subsidiaries
exists in connection with any Plan. Neither any Borrower nor any of its
Subsidiaries has any withdrawal liability in connection with a Multiemployer
Plan.
7.1.23. Trade Relations. There exists no actual or
threatened termination, cancellation or limitation of, or any adverse
modification or change in, the business relationship between any Borrower or
any of its Subsidiaries and any customer or any group of customers whose
purchases individually or in the aggregate are material to the business of such
Borrower or any of its Subsidiaries, or with any material supplier, and there
exists no condition or state of facts or circumstances which would materially
affect adversely any Borrower or any of its Subsidiaries or prevent any
Borrower or any of its Subsidiaries from conducting such business after the
consummation of the transaction contemplated by this Agreement in substantially
the same manner in which it has heretofore been conducted.
7.1.24. Labor Relations. Except as described on Exhibit L
hereto, neither any Borrower nor any of their respective Subsidiaries is a
party to any collective bargaining agreement. There are no material
grievances, disputes or controversies with any union or any other organization
of any Borrower's or any of its Subsidiaries' employees, or threats of strikes,
work stoppages or any asserted pending demands for collective bargaining by any
union or organization.
7.1.25. Acquisition. No default has occurred under any of
the Purchase Documents on the date hereof, and after the date hereof, no
default has occurred that has not been disclosed to Lender.
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7.2. Continuous Nature of Representations and Warranties. Each
representation and warranty contained in this Agreement and the other Loan
Documents shall be continuous in nature and shall remain accurate, complete and
not misleading at all times during the term of this Agreement, except for
changes in the nature of a Borrower's or its Subsidiaries' business or
operations that would render the information in any Exhibit attached hereto
either inaccurate, incomplete or misleading, so long as Lender has consented to
such changes or such changes are expressly permitted by this Agreement, and
except for such representations and warranties that by their nature are limited
only to a specific date in time.
7.3. Survival of Representations and Warranties. All representations
and warranties of Borrower contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance thereof by
Lender and the parties thereto and the closing of the transactions described
therein or related thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1 Affirmative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, each Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
8.1.1. Visits and Inspections. Permit representatives of Lender,
from time to time, as often as may be reasonably requested, but only during
normal business hours, to (i) visit and inspect its Properties and the
Properties of each of their respective Subsidiaries, and (ii) inspect, audit
and make extracts from its books and records (including, without limitation,
all maintenance records for Drilling Rigs) and discuss with its officers,
employees and independent accountants, its business, assets, liabilities,
financial condition, business prospects and results of operations.
8.1.2. Notices. Notify Lender in writing (i) of the occurrence
of any event or the existence of any fact which renders any representation or
warranty in this Agreement or any of the other Loan Documents inaccurate,
incomplete or misleading in any material respect; (ii) promptly after
Borrower's learning thereof, of the commencement of any litigation affecting
Borrower or any of its Properties, whether or not the claim is considered by
Borrower to be covered by insurance, and of the institution of any
administrative proceeding which if determined adversely to Borrower, would have
a Material Adverse Effect; (iii) at least thirty (30) days prior thereto, of
Borrower's opening of any new office or place of business or Borrower's closing
of Borrower's principal place of business; (iv) promptly after Borrower's
learning thereof, of any material labor dispute to which Borrower may become a
party, any strikes or walkouts relating to any of its plants or other
facilities, and the expiration of any material labor contract to which it is a
party or by which it is bound; (v) promptly after Borrower's learning thereof,
of any material default by any Loan Party under any note, indenture, loan
agreement, mortgage, lease, deed, guaranty or other similar agreement relating
to any Indebtedness of Borrower exceeding $250,000; (vi) promptly after the
occurrence thereof, of any Default or Event of Default; (vii) promptly after
the occurrence thereof, of any default by any obligor under any note or other
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evidence of Indebtedness payable to Borrower in an amount exceeding $250,000;
and (viii) promptly after the rendition thereof, of any judgment rendered
against any Loan Party in an amount exceeding $250,000.
8.1.3 Financial Statements. Keep, and cause each Subsidiary to
keep, adequate records and books of account with respect to its business
activities in which proper entries are made in accordance with GAAP reflecting
all its financial transactions; and cause to be prepared and furnished to
Lender the following (all to be prepared in accordance with GAAP applied on a
consistent basis, unless Borrower's certified public accountants concur in any
change therein and such change is disclosed to Lender and is consistent with
GAAP):
(i) not later than one hundred and twenty (120) days
after the close of each fiscal year of Borrower, unqualified audited financial
statements of Bayard and its Subsidiaries as of the end of such year, on a
Consolidated basis, certified by a firm of independent certified public
accountants of recognized standing selected by Borrower but acceptable to
Lender (except for a qualification for a change in accounting principles with
which the accountant concurs);
(ii) not later than thirty (30) days after the end of
each month hereafter, except for April, May, June and July of 1997 and each
December, which period shall be forty-five (45) days after the end of each such
respective month, unaudited interim financial statements of Borrower and its
Subsidiaries as of the end of such month and of the portion of Borrower's
financial year then elapsed, on a Consolidated and consolidating basis,
certified by the principal financial officer of Borrower as prepared in
accordance with GAAP and fairly presenting in all material respects the
Consolidated financial position and results of operations of Borrower and its
Subsidiaries for such month and period subject only to changes from audit and
year-end adjustments and except that such statements need not contain notes;
provided, however, in the event Borrower becomes subject to, and is in
compliance with, the periodic reporting requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended, the monthly reports described
in this clause (ii) of this Section 8.1.3, shall be delivered to Lender (a)
within forty-five (45) days after the end of any month during which a Form 10-Q
must filed by Borrower with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor and (b) within thirty
(30) days after the end of all other months;
(iii) promptly after the sending or filing thereof, as
the case may be, copies of any proxy statements, financial statements or
reports which Borrower and/or its Subsidiaries has generally made available to
its shareholders and copies of any regular, periodic and special reports or
registration statements which Borrower and/or its Subsidiaries files with the
Securities and Exchange Commission or any governmental authority which may be
substituted therefor, or any national securities exchange;
(iv) promptly after the filing thereof, copies of any
annual report to be filed in accordance with ERISA in connection with each
Plan;
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(v) such other data and information (financial and
otherwise) as Lender, from time to time, may reasonably request, bearing upon
or related to the Collateral or Borrower's and each of its Subsidiaries'
financial condition or results of operations; and
(vi) on or before May 31, 1997, audited financial
statements of Trend for the last three (3) fiscal years of Trend.
Concurrently with the delivery of the financial statements
described in clause (i) of this Section 8.1.3, Borrower shall forward to Lender
a copy of the accountants' letter to each Borrower's management that is
prepared in connection with such financial statements and also shall cause to
be prepared and shall furnish to Lender a certificate of the aforesaid
certified public accountants certifying to Lender that, based upon their
examination of the financial statements of Borrower and its Subsidiaries
performed in connection with their examination of said financial statements,
they are not aware of any Default or Event of Default, or, if they are aware of
such Default or Event of Default, specifying the nature thereof. Concurrently
with the delivery of the financial statements described in clauses (i) and (ii)
of this Section 8.1.3, or more frequently if requested by Lender, Borrower
shall cause to be prepared and furnished to Lender a Compliance Certificate in
the form of Exhibit M hereto executed by the chief financial officer of
Borrower.
8.1.4 Landlord and Storage Agreements. Provide Lender with
copies of all agreements between any Borrower or any of its Subsidiaries and
any landlord or warehouseman which owns any premises at which any Inventory,
Equipment and Drilling Rigs may, from time to time, be kept.
8.1.5 Projections. No later than thirty (30) days prior to the
end of each fiscal year of Borrower, deliver to Lender projections of
Borrower's (consisting of Consolidated (and, if available, consolidating)
balance sheets, income statements and cash flow statements, together with
appropriate supporting details and underlying assumptions) for the forthcoming
three (3) years, year by year, and for the forthcoming fiscal year, month by
month.
8.1.6 Taxes. Pay and discharge, and cause each Subsidiary to pay
and discharge, all Taxes prior to the date on which such Taxes become
delinquent or penalties attach thereto, except and to the extent only that such
Taxes are being Properly Contested.
8.1.7 Compliance with Laws. Comply and cause each Subsidiary to
comply, with all Applicable Laws, including all laws, statutes, regulations and
ordinances regarding the collection, payment and deposit of all Taxes, and all
ERISA and Environmental Laws, and obtain and keep in force any and all
licenses, permits, franchises, or other governmental authorizations necessary
to the ownership of its Properties or to the conduct of its business, which
violation or failure to obtain could reasonably be expected to have a Material
Adverse Effect.
8.1.8 Insurance. In addition to the insurance required herein
with respect to the Collateral, Borrower shall maintain, with financially sound
and reputable insurers, insurance with respect to its Properties and business
against such casualties and contingencies of such type (including product
liability, business interruption, larceny, embezzlement, or other criminal
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misappropriation insurance) as is customary in its business and in such amounts
as is acceptable to Lender.
8.2 Negative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, each Borrower
covenants that, unless Lender has first consented thereto in writing, it will
not:
8.2.1 Mergers; Consolidations; Acquisitions. Merge or
consolidate, or permit any Subsidiary of Borrower to merge or consolidate, with
any Person; nor acquire, nor permit any of its Subsidiary of Borrower to
acquire, all or any substantial part of the Properties of any Person; provided,
however, (i) Trend may merge with and into Bayard and Bayard may acquire all or
a substantial part of the Properties of Ward on terms substantially similar to
those contained in that certain Letter of Understanding dated April 25, 1997 by
and between Ward and Bayard; and (ii) subject to Sections 8.2.8 and 10.1.11,
acquisition of assets of another Person for consideration paid in cash or stock
of Borrower.
8.2.2 Loans. Except as provided in Section 8.2.12 hereof and
any intercompany loans between Trend and Bayard, make or permit any of its
Subsidiaries to make, any loans or other advances of money to any Person,
except for travel advances, advances against commissions and other similar
advances in the ordinary course of business.
8.2.3 Total Indebtedness. Create, incur, assume, or suffer to
exist, or permit any of its Subsidiaries to create, incur or suffer to exist,
any Indebtedness, except:
(i) Obligations owing to Lender;
(ii) Subordinated Debt existing on the date of this
Agreement (including, without limitation, the Chesapeake Debt and the Energy
Spectrum Debt);
(iii) Indebtedness between Bayard and Trend;
(iv) accounts payable to trade creditors and current
operating expenses (other than for Money Borrowed) which are not aged more than
thirty (30) days from the due date, in each case incurred in the ordinary
course of business and paid within such time period, unless the same are being
Properly Contested;
(v) Obligations to make lease payments permitted by
Section 8.2.13;
(vi) Permitted Purchase Money Indebtedness;
(vii) contingent liabilities arising out of endorsements
of checks and other negotiable instruments for deposit or collection in the
ordinary course of business;
(viii) liabilities for taxes not yet due and payable;
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(ix) liabilities under performance and bid bonds
incurred by Borrower in the ordinary course of their business up to an
aggregate amount of $1,000,000 at any time;
(x) Indebtedness existing on the date hereof and
described on Exhibit N hereto (including, without limitation, but without
duplication of the indebtedness described above, the CIT Debt and the CIT
Sale/Leaseback);
(xi) Indebtedness incurred by Non-consolidated
Subsidiaries that is non-recourse to either Borrower; and
(xii) Indebtedness not included in paragraphs (i) through
(xi) above which does not exceed at any time, in the aggregate, the sum of
$100,000.
8.2.4 Affiliate Transactions. Enter into or be a party to, or
permit any of its Subsidiaries to enter into or be a party to, any transaction
with any Affiliate or stockholder (excluding transactions between Bayard and
Trend), except in the ordinary course of and pursuant to the reasonable
requirements of Borrower's or such Subsidiary's business and upon fair and
reasonable terms at the time entered into which are fully disclosed to Lender
and are no less favorable than would be obtained in a comparable arm's length
transaction with a Person not an Affiliate or stockholder of Borrower or such
Subsidiary.
8.2.5 Limitation on Liens. Create or suffer to exist, or permit
any its Subsidiaries to create or suffer to exist, any Lien upon any of its
Property, income or profits, whether now owned or hereafter acquired, except:
(i) Liens at any time granted in favor of Lender;
(ii) Liens for taxes (excluding any Lien imposed
pursuant to any of the provisions of ERISA) not yet due or being Properly
Contested;
(iii) Liens arising in the ordinary course of its
business by operation of law or regulation, but only if (a) payment in respect
of any such Lien is not at the time required or (b) the Indebtedness secured by
such Lien is being Properly Contested and such Lien does not materially detract
from the value of the Property or materially impair the use thereof in the
operation of its business;
(iv) security interests on top drives to the extent that
such security interests secure the financing by third parties of at least 80%
of the purchase price of top drives; provided, however, that the aggregate
purchase price of top drives shall not exceed $6,000,000; and provided,
further, that the financings for the purchase of top drives shall be repaid
from the proceeds of contracts for the use of the top drives of equal or longer
duration to the amortization schedules of such financings;
(v) liens securing performance and bid bonds obtained
by Borrower in the ordinary course of their business up to an aggregate amount
of $1,000,000 at any time;
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(vi) liens securing the Indebtedness described in
Section 8.2.3(xi) above;
(vii) such other Liens as appear on Exhibit O hereto
(including, without limitation, the liens securing the CIT Debt); and
(viii) liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the performance of
tenders, statutory obligations, surety, stay, customs and appeal bonds, bids,
leases, government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the payment
of borrowed money).
8.2.6 Subordinated Debt. Make, or permit any of its
Subsidiaries to make, any payment of all or any part of any Subordinated Debt
or take any other action or omit to take any other action in respect of any
Subordinated Debt (including, without limitation, the Chesapeake Debt and the
Energy Spectrum Debt), except in accordance with the subordination agreement
relative thereto.
8.2.7 Distributions. Declare or make, or permit any of its
Subsidiaries to declare or make, any Distributions, except Distributions from
any Subsidiary to a Borrower.
8.2.8 Capital Expenditures. Make Capital Expenditures
(excluding Capital Expenditures of a Non-consolidated Subsidiary) in excess of:
(i) in fiscal 1997, $66,000,000, and
(ii) in fiscal 1998 and each fiscal year thereafter, $5,000,000
plus 50% of the excess of Cash Flow over Borrower's Projected
Debt Service for the fiscal year,
plus in the case of each of subsections (i) and (ii),
(a) the amount of the Additional Securities issued in the
respective fiscal year, but in no event to exceed $3,000,000 in
the aggregate, and
(b) the amount of equity and subordinated debt issued by Bayard,
on terms acceptable to Lender, in such fiscal year if the
proceeds are used for Capital Expenditures within thirty (30)
days of the receipt thereof by Borrower.
8.2.9 Disposition of Assets. Sell, lease or otherwise dispose
of, or permit any of its Subsidiaries to sell, lease or otherwise dispose of,
any of its Properties, including any disposition of Property as part of a sale
and leaseback transaction (other than as contemplated in connection with the
CIT Sale/Leaseback), to or in favor of any Person, except (i) sales of
Inventory in the ordinary course of business for so long as no Event of Default
exists hereunder,
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(ii) a transfer of Property to Borrower by a Subsidiary of Borrower,
(iii) dispositions permitted under Section 6.4.2, or (iv) dispositions
otherwise expressly authorized by this Agreement.
8.2.10 Stock of Subsidiaries. Permit any of its Subsidiaries to
issue any additional shares of its capital stock to any Person other than a
Borrower.
8.2.11 Intentionally Omitted.
8.2.12 Restricted Investment. Make or have, or permit any of its
Subsidiaries to make or have, any Restricted Investment.
8.2.13 Operating Leases. Become, or permit any of its
Subsidiaries to become, a lessee under any operating lease (other than a lease
under which Borrower or any of its Subsidiaries is lessor) of Property having a
current term greater than 180 days if the aggregate lease payment payable
during any current or future period of twelve (12) consecutive months under the
lease in question and all other leases under which Borrower or any of its
Subsidiaries is then lessee would exceed $250,000.
8.2.14 Tax Consolidation. File or consent to the filing of any
consolidated income tax return with any Person other than its Subsidiaries.
8.3 Specific Financial Covenants. During the term of this Agreement,
and thereafter for so long as there are any Obligations to Lender, Borrowers
covenant that, unless otherwise consented to by Lender in writing, they shall:
(i) maintain, on a quarterly basis, a Cash Flow
Coverage Ratio of at least 1.25:1.0 from June 30, 1997 to December 31, 1997,
1.50:1.0 in 1998 and 1.75:1.0 thereafter;
(ii) maintain Total Available Liquidity of $4,500,000.00
from January 1, 1997 to December 31, 1997 and $3,000,000.00 in 1998; "Total
Available Liquidity" shall be the sum of the Borrowers' (a) cash and cash
equivalents (excluding cash or cash equivalents pledged to secure letters of
credit, but only to the extent of accrued liabilities for workers compensation
claims), (b) unused capacity available under the CIT Loan Agreement based on
the most recent determination of Collateral Value (as defined in the CIT Loan
Agreement), excluding for purposes of this test the Total Available Liquidity
of any Non-consolidated Subsidiary and (c) Availability; and
(iii) maintain, on a consolidated basis, a ratio of Total
Liabilities to Tangible Net Worth not greater than 1.25:1.0 during 1997 and
1.0:1.0 in 1998 and thereafter (excluding for purposes of this test the Total
Liabilities and Tangible Net Worth of any Non-consolidated Subsidiary).
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SECTION 9. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the
other Loan Documents, and without affecting in any manner the rights of Lender
under the other Sections of this Agreement, Lender shall not be required to
make any Loan under this Agreement unless and until each of the following
conditions has been and continues to be satisfied:
9.1 Documentation. Lender shall have received, in form and substance
satisfactory to Lender and its counsel, a duly executed copy of this Agreement
and the other Loan Documents, together with such additional documents,
instruments and certificates as Lender and its counsel shall require in
connection therewith from time to time, all in form and substance satisfactory
to Lender and its counsel.
9.2 No Default. No Default or Event of Default shall exist.
9.3 Other Loan Documents. Each of the conditions precedent set forth
in the other Loan Documents shall have been satisfied.
9.4 Equity. Lender shall have received evidence satisfactory to it
that not less than $7,980,000 in cash has been contributed as equity to the
capital of Borrower by Chesapeake and Energy Spectrum.
9.5 Availability. Lender shall have determined that immediately
after Lender has made the initial Loans contemplated hereby, Borrower has paid
(or made provision for payment of) all closing costs incurred in connection
with the transactions contemplated hereby, the sum of Availability, cash on
hand and the dollar amount of unused availability under the CIT Debt shall not
be less than $13,000,000.
9.6 Articles of Incorporation. Lender shall have received a copy of
the Articles or Certificate of Incorporation of Borrowers and each of its
Subsidiaries, and all amendments thereto, certified by the Secretary of State
or other appropriate official of the jurisdiction of Borrowers' and each
Subsidiary's incorporation.
9.7 Good Standing Certificates. Lender shall have received good
standing certificates for Borrower and each of its Subsidiaries, issued by the
Secretary of State or other appropriate official of Borrower's and each
Subsidiary's jurisdiction of incorporation and each jurisdiction where the
conduct of Borrower's or any of its Subsidiary's business activities or
ownership of its Property necessitates qualification.
9.8 Opinion Letters. Lender shall have received a favorable, written
opinion of counsel to Borrowers, as to the transactions contemplated by this
Agreement, to be in form and substance satisfactory to Lender and Lender's
counsel, in their sole discretion.
9.9 Insurance. Lender shall have received copies of the casualty
insurance policies of Borrower and each of its Subsidiaries, together with loss
payable endorsements on Lender's
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standard form of loss payee endorsement naming Lender as loss payee and copies
of Borrowers' and each such Subsidiary's liability insurance policies, together
with endorsements naming Lender as a co-insured.
9.10 Disbursement Letter. Lender shall have received written
instructions from Borrower directing application of proceeds of the initial
Loans made pursuant to this Agreement, and an initial Borrowing Base
Certificate from Borrower, in form satisfactory to Lender.
9.11 Dominion Account. Lender shall have received the duly executed
agreement establishing the Dominion Account with a financial institution
acceptable to Lender for the collection or servicing of the Accounts.
9.12 Landlord Agreements. Lender shall have received all landlord or
warehouseman agreements with respect to all premises leased by Borrower and its
Subsidiaries and which are disclosed on Exhibit J hereto.
9.13 No Litigation. No action, proceeding, investigation, regulation
or legislation shall have been instituted, threatened or proposed before any
court, governmental agency or legislative body to enjoin, restrain or prohibit,
or to obtain damages in respect of, or which is related to or arises out of
this Agreement or the consummation of the transactions contemplated hereby.
9.14 Evidence of Perfection and Priority of Liens in Collateral.
Lender shall have received copies of all filing receipts or acknowledgments
issued by any governmental authority to evidence any filing or recordation
necessary to perfect the Liens of Lender in the Collateral and evidence in form
satisfactory to Lender that such Liens constitute valid and perfected security
interests and Liens, and that there are no other Liens upon any Collateral
except for Permitted Liens.
9.15 Subordination of Chesapeake Debt and Energy Spectrum Debt. The
Chesapeake Debt and the Energy Spectrum Debt shall have been subordinated to
the prior payment of the Obligations in a manner and pursuant to executed
documentation satisfactory to Lender.
9.16 CIT Intercreditor Agreement. CIT and Lender shall have executed
an intercreditor agreement in form and substance satisfactory to Lender.
9.17 Acquisition. The Acquisition shall have been consummated
substantially in accordance with the terms of the Purchase Documents.
9.18 CIT Commitment. CIT and Lender shall have committed to provide a
$30,577,131.15 term loan to Borrower.
9.19 Sale/Leaseback. CIT and Borrower shall have committed to the CIT
Sale/Leaseback transaction relating to two drilling rigs for an aggregate
consideration of up to $6,300,000 on or before the Closing Date.
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9.20 Subordinated Debt. Chesapeake shall have loaned at least
$18,000,000 to Borrower in the form of Subordinated Debt as of the Closing
Date, and Energy Spectrum shall have loaned at least $2,500,000 to Borrower in
the form of Subordinated Debt as of the Closing Date, in each case on terms
satisfactory to Lender.
9.21 Purchase of Term Loan. Lender shall have purchased and CIT shall
have sold a $7,000,000 interest in the $31,000,000 term loan to be provided by
CIT to Borrower on terms satisfactory to Lender.
9.22 No Material Adverse Change. There shall have been no material
adverse change in any of Borrower's financial condition between December 31,
1996, and the Closing Date.
9.23 Trend Balance Sheet. Lender shall have received copies of
Trend's audited balance sheet for the fiscal year ended December 31, 1996.
9.24 No-Offset Letter. Lender shall have received from Chesapeake and
Chesapeake Operating, Inc., a duly executed no-offset letter in form and
substance acceptable to Lender.
9.25 Mortgage. Lender shall have received the Mortgage, duly executed
by Trend; provided however, Borrower shall have thirty (30) days after the
Closing Date to cause the Mortgage to be duly filed to perfect the Lien created
by the Mortgage. .
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1 Events of Default. The occurrence of one or more of the
following events shall constitute an "Event of Default":
10.1.1 Payment of Obligations. Borrower shall fail to pay any of
the Obligations on the due date thereof (whether due at stated maturity, on
demand, upon acceleration or otherwise).
10.1.2 Misrepresentations. Any representation, warranty or other
statement made or furnished to Lender by or on behalf of any Borrower, any
Subsidiary of any Borrower or any other Loan Party in this Agreement, any of
the other Loan Documents or any instrument, certificate or financial statement
furnished in compliance with or in reference thereto proves to have been false
or misleading in any material respect when made or furnished or when reaffirmed
pursuant to Section 7.2 hereof.
10.1.3 Breach of Specific Covenants. Borrower shall fail or
neglect to perform, keep or observe any covenant contained in Sections 5.2,
5.3, 6.1.2, 6.2, 8.1.1, 8.1.3, 8.2 or 8.3 hereof on the date that Borrower is
required to perform, keep or observe such covenant.
10.1.4 Breach of Other Covenants. Borrower shall fail or neglect
to perform, keep or observe any covenant contained in this Agreement (other
than a covenant which is dealt with specifically elsewhere in Section 10.1
hereof) and the breach of such other covenant is not
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cured to Lender's satisfaction within twenty (20) days after the sooner to
occur of Borrower's receipt of notice of such breach from Lender or the date on
which such failure or neglect first becomes known to any officer of Borrower.
10.1.5 Default Under Security Documents/Other Agreements/Purchase
Documents. Any event of default shall occur under, or any Loan Party shall
default in the performance or observance of any term, covenant, condition or
agreement contained in, any of the Security Documents, the Other Agreements or
the Purchase Documents and such default shall continue beyond any applicable
grace period.
10.1.6 Other Defaults. There shall occur any default or event of
default on the part of Borrower or any of its Subsidiaries under any agreement,
document or instrument to which Borrower or any such Subsidiary is a party or
by which Borrower or any of its Subsidiaries or any of their respective
Property is bound, creating or relating to any Indebtedness (other than the
Obligations) in excess of $1,000,000, if the payment or maturity of such
Indebtedness is or may be accelerated in consequence of such event of default
or demand for payment of such Indebtedness is made.
10.1.7 Uninsured Losses. Any material loss, theft, damage or
destruction of any of the Collateral not fully covered (subject to such
deductibles as Lender shall have permitted) by insurance.
10.1.8 Adverse Changes. There shall occur any material adverse
change in the financial condition or business prospects of Borrower and any
Subsidiary taken as a whole.
10.1.9 Insolvency and Related Proceedings. Any Loan Party shall
cease to be Solvent or shall suffer the appointment of a receiver, trustee,
custodian or similar fiduciary, or shall make an assignment for the benefit of
creditors, or any petition for an order for relief shall be filed by or against
a Loan Party under the Bankruptcy Code (and if, with respect to any petition
filed against any Loan Party, such proceeding shall continue for more than
thirty (30) days), or any Loan Party shall make any offer of settlement,
extension or compromise to such Loan Party's unsecured creditors generally.
10.1.10 Business Disruption; Condemnation. There shall occur a
cessation of a substantial part of the business of any Borrower, any Subsidiary
of any Borrower for a period which significantly affects such Borrower's or
such Subsidiary's capacity to continue its business, on a profitable basis; or
any Borrower or any Subsidiary of any Borrower shall suffer the loss or
revocation of any license or permit now held or hereafter acquired by such
Borrower or such Subsidiary which is necessary to the continued or lawful
operation of its business; or any Borrower or any Subsidiary of Borrower shall
be enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of its business
affairs; or any material lease or agreement pursuant to which any Borrower or
any Subsidiary of any Borrower leases, uses or occupies any Property shall be
canceled or terminated prior to the expiration of its stated term; or any part
of the Collateral shall be taken through condemnation or the value of such
Property shall be impaired through condemnation.
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10.1.11 Change of Ownership. (i) Bayard shall cease to own and
control, beneficially and of record, one hundred percent (100%) of each class
of the issued and outstanding capital stock of Trend; or (ii) Chesapeake, AnSon
Partners and Energy Spectrum shall cease to own and control, beneficially and
of record fifty-one percent (51%), collectively, of Bayard's issued and
outstanding common stock on a fully diluted basis.
10.1.12 ERISA. A Reportable Event shall occur which Lender, in
its sole discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for the
appointment by the appropriate United States district court of a trustee for
any Plan, or if any Plan shall be terminated or any such trustee shall be
requested or appointed, or if Borrower or any Subsidiary of Borrower is in
"default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments
to a Multiemployer Plan resulting from Borrower's or such Subsidiary's complete
or partial withdrawal from such Plan.
10.1.13 Challenge to Agreement. Borrower, any Subsidiary of
Borrower or any other Loan Party, or any Affiliate of any of them, shall
challenge or contest in any action, suit or proceeding the validity or
enforceability of this Agreement, or any of the other Loan Documents, the
legality or enforceability of any of the Obligations or the perfection or
priority of any Lien granted to Lender.
10.1.14 Criminal Forfeiture. Any Borrower or any Subsidiary of
Borrower shall be criminally indicted or convicted under any law that could
lead to a forfeiture of any Property of Borrower or any Subsidiary of Borrower.
10.1.15 Judgments. Any (i) money judgment for the payment of
money in excess of $750,000 is filed against any Borrower or any Subsidiary of
Borrower or any of their respective Property, and such judgment shall remain
unpaid, unsatisfied by insurance, and unstayed for more than thirty (30) days,
whether or not consecutive, or (ii) writ of attachment or similar process is
filed against any Borrower or any Subsidiary of Borrower, or any of their
respective Property, and such writ of attachment or similar process is not
bonded or secured in an amount and manner reasonably satisfactory to lender.
10.1.16 Dominion Account. Borrower shall fail to maintain a
Dominion Account or shall notify Lender that it intends to terminate its
existing Dominion Account.
10.2 Acceleration of the Obligations. Without in any way limiting the
right of Lender to demand payment of any portion of the Obligations payable on
demand in accordance with Section 3.2 hereof, upon or at any time after the
occurrence of an Event of Default, all or any portion of the Obligations shall,
at the option of Lender and without presentment, demand, protest, notice of
intent to accelerate, notice of acceleration, or any other further notice by
Lender, become at once due and payable and Borrower shall forthwith pay to
Lender, the full amount of such Obligations; provided, however, that upon the
occurrence of an Event of Default
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specified in Section 10.1.9 hereof, all of the Obligations shall become
automatically due and payable without declaration, notice or demand by Lender.
10.3 Other Remedies. Upon the occurrence and during the continuance
of an Event of Default, Lender shall have and may exercise from time to time
the following rights and remedies:
10.3.1 All of the rights and remedies of a secured party under
the Code or under other Applicable Law, and all other legal and equitable
rights to which Lender may be entitled, all of which rights and remedies shall
be cumulative and shall be in addition to any other rights or remedies
contained in this Agreement or any of the other Loan Documents, and none of
which shall be exclusive.
10.3.2 The right to take immediate possession of the Collateral,
and to (i) require Borrower to assemble the Collateral, at Borrower's expense,
and make it available to Lender at a place designated by Lender which is
reasonably convenient to both parties, and (ii) enter any premises where any of
the Collateral shall be located and to keep and store the Collateral on said
premises until sold (and if said premises be the Property of Borrower, Borrower
agrees not to charge Lender for storage thereof).
10.3.3 The right to sell or otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as may
be required by law, in lots or in bulk, for cash or on credit, all as Lender,
in its sole discretion, may deem advisable. Borrower agrees that any
requirement of notice to Borrower of any proposed public or private sale or
other disposition of Collateral by Lender shall be deemed reasonable notice
thereof if given at least ten (10) days prior thereto, and any such sale may be
held at such locations as Lender may designate in said notice. Lender shall
have the right to conduct such sales on Borrower's premises, without charge
therefor, and such sales may be adjourned from time to time in accordance with
Applicable Law. Lender shall have the right to sell, lease or otherwise
dispose of the Collateral, or any part thereof, for cash, credit or any
combination thereof, and Lender may purchase all or any part of the Collateral
at public or, if permitted by law, private sale and, in lieu of actual payment
of such purchase price, may set off the amount of such price against the
Obligations. The proceeds realized from the sale of any Collateral may be
applied, after allowing two (2) Business Days for collection, first to the
costs, expenses and attorneys' fees incurred by Lender in collecting the
Obligations, in enforcing the rights of Lender under the Loan Documents and in
collecting, retaking, completing, protecting, removing, storing, advertising
for sale, selling and delivering any Collateral; second to the interest due
upon any of the Obligations; and third, to the principal of the Obligations.
If any deficiency shall arise, each Borrower shall remain jointly and severally
liable to Lender therefor.
10.3.4 The right to exercise all of Lender's rights and remedies
under any mortgage/deed of trust with respect to any real Property forming a
part of the Collateral.
10.3.5 Lender is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the
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Collateral, in advertising for sale and selling any Collateral and Borrower's
rights under all licenses and all franchise agreements shall inure to Lender's
benefit.
10.3.6 Lender may, at its option, require Borrower to deposit
with Lender funds equal to the LC Amount and, if Borrower fails to promptly
make such deposit, Lender may advance such amount as a Revolving Credit Loan
(whether or not an Out of Formula Condition is created thereby). Any such
deposit or advance shall be held by Lender as a reserve to fund future payments
on such LC Guaranties and future drawings against such Letters of Credit. At
such time as all LC Guaranties have been paid or terminated and all Letters of
Credit have been drawn upon or expired, any amounts remaining in such reserve
shall be applied against any outstanding Obligations, or, if all Obligations
have been indefeasibly paid in full, returned to Borrower.
10.4 Remedies Cumulative; No Waiver. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower contained in this Agreement and the other Loan Documents, or in any
document referred to herein or contained in any agreement supplementary hereto
or in any schedule or in any Guaranty Agreement given to Lender or contained in
any other agreement between Lender and Borrower, heretofore, concurrently, or
hereafter entered into, shall be deemed cumulative to and not in derogation or
substitution of any of the terms, covenants, conditions, or agreements of
Borrower herein contained. The failure or delay of Lender to require strict
performance by Borrower of any provision of this Agreement or to exercise or
enforce any rights, Liens, powers, or remedies hereunder or under any of the
aforesaid agreements or other documents or security or Collateral shall not
operate as a waiver of such performance, Liens, rights, powers and remedies,
but all such requirements, Liens, rights, powers, and remedies shall continue
in full force and effect until all Loans and all other Obligations owing or to
become owing from Borrower to Lender shall have been fully satisfied. None of
the undertakings, agreements, warranties, covenants and representations of
Borrower contained in this Agreement or any of the other Loan Documents and no
Event of Default by Borrower under this Agreement or any other Loan Documents
shall be deemed to have been suspended or waived by Lender, unless such
suspension or waiver is by an instrument in writing specifying such suspension
or waiver and is signed by a duly authorized representative of Lender and
directed to Borrower.
SECTION 11. MISCELLANEOUS
11.1 Power of Attorney. Borrower hereby irrevocably designates,
makes, constitutes and appoints Lender (and all Persons designated by Lender)
as Borrower's true and lawful attorney (and agent-in-fact) and Lender, or
Lender's agent, may, without notice to Borrower and in either Borrower's or
Lender's name, but at the cost and expense of Borrower:
11.1.1 At such time or times as Lender or said agent, in its sole
discretion, may determine, endorse Borrower's name on any checks, notes,
acceptances, drafts, money orders or any other evidence of payment or proceeds
of the Collateral which come into the possession of Lender or under Lender's
control.
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11.1.2 At such time or times upon the occurrence and during the
continuance of an Event of Default as Lender or its agent in its sole
discretion may determine: (i) demand payment of the Accounts from the Account
Debtors, enforce payment of the Accounts by legal proceedings or otherwise, and
generally exercise all of Borrower's rights and remedies with respect to the
collection of the Accounts; (ii) settle, adjust, compromise, discharge or
release any of the Accounts or other Collateral or any legal proceedings
brought to collect any of the Accounts or other Collateral; (iii) sell or
assign any of the Accounts and other Collateral upon such terms, for such
amounts and at such time or times as Lender deems advisable; (iv) take control,
in any manner, of any item of payment or proceeds relating to any Collateral;
(v) prepare, file and sign Borrower's name to a proof of claim in bankruptcy or
similar document against any Account Debtor or to any notice of lien,
assignment or satisfaction of lien or similar document in connection with any
of the Collateral; (vi) receive, open and dispose of all mail addressed to
Borrower and to notify postal authorities to change the address for delivery
thereof to such address as Lender may designate; (vii) endorse the name of
Borrower upon any of the items of payment or proceeds relating to any
Collateral and deposit the same to the account of Lender on account of the
Obligations; (viii) endorse the name of Borrower upon any chattel paper,
document, instrument, invoice, freight bill, bill of lading or similar document
or agreement relating to the Accounts, Inventory and any other Collateral; (ix)
use Borrower's stationery and sign the name of Borrower to verifications of the
Accounts and notices thereof to Account Debtors; (x) use the information
recorded on or contained in any data processing equipment and computer hardware
and software relating to the Accounts, Inventory, Equipment and any other
Collateral; (xi) make and adjust claims under policies of insurance; and (xii)
do all other acts and things necessary, in Lender's determination, to fulfill
Borrower's obligations under this Agreement.
11.2 Indemnity. BORROWER HEREBY INDEMNIFIES, HOLDS HARMLESS, AND
SHALL DEFEND LENDER AND ITS DIRECTORS, OFFICERS, AGENTS, COUNSEL AND EMPLOYEES
("INDEMNIFIED PERSONS") FROM AND AGAINST ANY AND ALL LOSSES, LIABILITIES,
DAMAGES, COSTS, EXPENSES, SUITS, ACTIONS AND PROCEEDINGS ("LOSSES") EVER
SUFFERED OR INCURRED BY ANY INDEMNIFIED PERSON ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OTHER TRANSACTION CONTEMPLATED HEREBY, INCLUDING, WITHOUT
LIMITATION, ANY LOSSES CAUSED BY THE NEGLIGENCE OF ANY SUCH INDEMNIFIED PERSON,
BUT NOT INCLUDING ANY LOSSES CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF ANY SUCH INDEMNIFIED PERSON, AND BORROWER SHALL REIMBURSE LENDER
AND EACH OTHER INDEMNIFIED PERSON FOR ANY EXPENSES (INCLUDING IN CONNECTION
WITH THE INVESTIGATION OF, PREPARATION FOR OR DEFENSE OF ANY ACTUAL OR
THREATENED CLAIM, ACTION OR PROCEEDING ARISING THEREFROM, INCLUDING ANY SUCH
COSTS OF RESPONDING TO DISCOVERY REQUESTS OR SUBPOENAS, REGARDLESS OF WHETHER
LENDER OR SUCH OTHER INDEMNIFIED PERSON IS A PARTY THERETO). WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, THIS INDEMNITY SHALL EXTEND TO ANY CLAIMS
ASSERTED AGAINST LENDER OR ANY OTHER INDEMNIFIED PERSON BY ANY PERSON UNDER ANY
ENVIRONMENTAL LAWS OR SIMILAR LAWS BY REASON OF BORROWER'S OR
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ANY OTHER PERSON'S FAILURE TO COMPLY WITH LAWS APPLICABLE TO SOLID OR HAZARDOUS
WASTE MATERIALS OR OTHER TOXIC SUBSTANCES. BORROWER MAY SELECT COUNSEL WITH
RESPECT TO ANY LOSSES; PROVIDED, HOWEVER, EACH INDEMNIFIED PERSON SHALL HAVE
THE RIGHT TO MONITOR THE PROGRESS OF ANY CLAIMS, SUITS AND ADMINISTRATIVE
PROCEEDINGS DEFENDED BY BORROWER HEREUNDER WITH COUNSEL OF SUCH INDEMNIFIED
PERSON'S CHOICE, OR CONDUCT ITS DEFENSE THROUGH COUNSEL OF SUCH INDEMNIFIED
PERSON'S CHOICE, IN THE EVENT THAT (I) SUCH INDEMNIFIED PERSON DETERMINES IN
GOOD FAITH THAT THE CONDUCT OF ITS DEFENSE BY BORROWER COULD BE MATERIALLY
PREJUDICIAL TO SUCH INDEMNIFIED PERSON'S INTERESTS OR THAT OTHER REASONABLE
GROUNDS EXIST WHICH DEMONSTRATE A LACK OF EFFECTIVENESS OR HIGH LEVEL OF
QUALITY IN THE CONDUCT OF SUCH DEFENSE BY BORROWER, AND (II) PRIOR TO RETAINING
SUCH COUNSEL FOR SUCH PURPOSE, SUCH INDEMNIFIED PERSON SHALL CONSULT WITH
BORROWER AND SHALL ATTEMPT IN GOOD FAITH TO AGREE UPON COUNSEL TO CONDUCT THE
DEFENSE ON BEHALF OF BORROWER AND SUCH INDEMNIFIED PERSON, AND IN EACH CASE THE
FEES AND DISBURSEMENTS OF SUCH COUNSEL SHALL BE PAID BY BORROWER; PROVIDED,
HOWEVER, THAT IF SUCH MUTUAL AGREEMENT IS NOT REACHED WITHIN A REASONABLE TIME
ON SELECTING COUNSEL, THEN SUCH INDEMNIFIED PERSON MAY RETAIN ITS OWN COUNSEL
AT BORROWER'S EXPENSE. NOTWITHSTANDING ANY CONTRARY PROVISION OF THIS
AGREEMENT, THE OBLIGATION OF BORROWER UNDER THIS SECTION 11.2 SHALL SURVIVE THE
PAYMENT IN FULL OF THE OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
11.3 Modification of Agreement; Sale of Interest. This Agreement may
not be modified, altered or amended, except by an agreement in writing signed
by Borrower and Lender. Borrower may not sell, assign or transfer any interest
in this Agreement, any of the other Loan Documents, or any of the Obligations,
or any portion thereof, including Borrower's rights, title, interests,
remedies, powers, and duties hereunder or thereunder. Borrower hereby consents
to Lender's participation, sale, assignment, transfer or other disposition, at
any time or times hereafter, of this Agreement and any of the other Loan
Documents, or of any portion hereof or thereof, including Lender's rights,
title, interests, remedies, powers, and duties hereunder or thereunder to any
Affiliate of Lender or any Person that purchases all or substantially all of
the assets of Lender. Any other participation, sale, assignment, transfer or
other disposition, at any time or times hereafter, of this Agreement and any of
the other Loan Documents shall be subject to Bayard's prior consent, such
consent not to be unreasonably withheld. If Lender requests such consent in
writing and Bayard does not respond in writing within five (5) Business Days
from the date of delivery of such request, the consent of Bayard shall be
deemed to have been given. In the case of an assignment, the assignee shall
have, to the extent of such assignment, the same rights, benefits and
obligations as it would if it were "Lender" hereunder and Lender shall be
relieved of all obligations hereunder upon any such assignment. Borrower
agrees that it will use its best efforts to assist and cooperate with Lender in
any manner reasonably requested by Lender to effect the sale of participations
in or assignments of any of the Loan Documents or any portion thereof or
interest therein, including assisting in the preparation of appropriate
disclosure
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documents. Borrower further agrees that Lender may disclose credit information
regarding Borrower and its Subsidiaries to any potential Participant or
assignee.
11.4 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under Applicable Law, but if any provision of this Agreement shall be
prohibited by or invalid under Applicable Law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
11.5 Successors and Assigns. This Agreement, the Other Agreements and
the Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of Borrower and Lender permitted under Section 11.3
hereof.
11.6 Cumulative Effect; Conflict of Terms. The provisions of the
Other Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in Section 3.2
hereof and except as otherwise provided in any of the other Loan Documents by
specific reference to the applicable provision of this Agreement, if any
provision contained in this Agreement is in direct conflict with, or
inconsistent with, any provision in any of the other Loan Documents, the
provision contained in this Agreement shall govern and control.
11.7 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which counterparts taken together shall constitute
but one and the same instrument.
11.8 Notice. All notices, requests and demands to or upon a party
hereto shall be in writing and shall be sent by certified or registered mail,
return receipt requested, by personal delivery against receipt, by overnight
courier or by facsimile transmissions and shall be deemed to have been validly
served, given or delivered immediately when delivered against receipt or three
(3) Business Days after deposit in the mail, postage prepaid, or with an
overnight courier or, in the case of facsimile transmission, when sent,
answerback received, in each case addressed as follows:
If to Lender: Fleet Capital Corporation
2711 North Haskell Avenue
Suite 2100, LB 21
Dallas, Texas 75204
Attention: Loan Administration Manager
Facsimile No.: (214) 828-6530
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With a copy to: Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
Attention: Larry A. Makel, Esq.
Facsimile No.: (214) 939-6100
If to Borrower: Bayard Drilling Technologies, Inc.
4005 N.W. Expressway
Oklahoma City, OK 73126
Attention: Mr. James E. Brown
Facsimile No.: (405) 879-3847
With a copy to: Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Attention: Mr. Stephen Krebs
Facsimile No.: (713) 229-1522
or to such other address as each party may designate for itself by notice given
in accordance with this Section 11.8; provided, however, that any notice,
request or demand to or upon Lender pursuant to Section 3.1.1 or 4.2.2 hereof
shall not be effective until received by Lender. Any written notice or demand
that is not sent in conformity with the provisions hereof shall nevertheless be
effective on the date that such notice is actually received by the noticed
party.
11.9 Lender's Consent. Unless otherwise provided herein, whenever
Lender's consent is required to be obtained under this Agreement, any of the
Other Agreements or any of the Security Documents as a condition to any action,
inaction, condition or event, Lender shall be authorized to give or withhold
such consent in its sole and absolute discretion.
11.10 Credit Inquiries. Borrower hereby authorizes and permits Lender
(but Lender shall have no obligation) to respond to usual and customary credit
inquiries from third parties concerning Borrower or any of its Subsidiaries.
11.11 Time of Essence. Time is of the essence of this Agreement, the
Other Agreements and the Security Documents.
11.12 Entire Agreement; Appendix A and Exhibits and Schedules. This
Agreement and the other Loan Documents, together with all other instruments,
agreements and certificates executed by the parties in connection therewith or
with reference thereto, embody the entire understanding and agreement between
the parties hereto and thereto with respect to the subject matter hereof and
thereof and supersede all prior agreements, understandings and inducements,
whether express or implied, oral or written. Appendix A and each of the
Exhibits and Schedules attached hereto are incorporated into this Agreement
and by this reference made a part hereof.
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11.13 Interpretation. No provision of this Agreement or any of the
other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.
11.14 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN
DALLAS, DALLAS COUNTY, TEXAS. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS: PROVIDED,
HOWEVER, THAT IF ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION
OTHER THAN TEXAS, THE LAWS OF SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER
AND PROCEDURE FOR FORECLOSURE OF LENDER'S LIEN UPON SUCH COLLATERAL AND THE
ENFORCEMENT OF LENDER'S OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE
EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT
WITH THE LAWS OF TEXAS. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED,
AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS
OF BORROWER OR LENDER, BORROWER HEREBY CONSENTS AND AGREES THAT THE DISTRICT
COURT OF DALLAS COUNTY, TEXAS, OR, AT LENDER'S OPTION, THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION, SHALL HAVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND
LENDER PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED
TO THIS AGREEMENT. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER
HEREBY WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH BORROWER MAY
HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES PERSONAL
SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION
OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS
MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE
ADDRESS SET FORTH IN THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF OR THREE (3)
DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF LENDER TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE
ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE
TAKING OF ANY ACTION
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UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR
JURISDICTION.
11.15 WAIVERS BY BORROWER. BORROWER WAIVES (I) THE RIGHT TO TRIAL BY
JURY (WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN
DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL; (II) PRESENTMENT, DEMAND AND
PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON-PAYMENT, INTENT TO
ACCELERATE, ACCELERATION, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION
OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS,
DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER
ON WHICH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS
WHATEVER LENDER MAY DO IN THIS REGARD; (III) TO THE EXTENT PERMITTED BY LAW,
NOTICE PRIOR TO TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR
SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO
EXERCISE ANY OF LENDER'S REMEDIES; (IV) TO THE EXTENT PERMITTED BY LAW, THE
BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS; AND (V) NOTICE OF
ACCEPTANCE HEREOF. BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A
MATERIAL INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS
RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER.
BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS
WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION,
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
11.16 ORAL AGREEMENTS INEFFECTIVE. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES, AND THE SAME MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
11.17 Nonapplicability of Article 5069-15.01 et seq. Borrower and
Lender hereby agree that, except for Section 15.10(b) thereof, the provisions
of Tex. Rev. Civ. Stat. Ann. art. 5069-15.01 et seq. (Vernon 1987) (regulating
certain revolving credit loans and revolving tri-party accounts) shall not
apply to this Agreement or any of the other Loan Documents.
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11.18 Certain Matters of Construction.
(A) References to Other Documents. All references to statutes
and related regulations in this Agreement, the Other Agreements and the
Security Agreements shall include any amendments of same and any successor
statutes and regulations. All references in this Agreement, the Other
Agreements and the Security Agreements to any of the Loan Documents shall
include any and all modifications thereto and any and all extensions or
renewals thereof.
(B) The Term "Borrower" or Borrowers". All references to
"Borrower" or "Borrowers" herein shall refer to and include each of Bayard and
Trend separately and all representations contained herein shall be deemed to be
separately made by each of them, and each of the covenants, agreements and
obligations set forth herein shall be deemed to be the joint and several
covenants, agreements and obligations of them. Any notice, request, consent,
report or other information or agreement delivered to Lender by any Borrower
shall be deemed to be ratified by, consented to and also delivered by the other
Borrower. Each Borrower recognizes and agrees that each covenant and agreement
of "Borrower" or "Borrowers" under this Agreement and the other Loan Documents
shall create a joint and several obligation of the Borrowers, which may be
enforced against Borrowers, jointly, or against each Borrower separately.
Without limiting the terms of this Agreement and the other Loan Documents,
security interests granted under this Agreement and other Loan Documents in
properties, interests, assets and collateral shall extend to the properties,
interests, assets and collateral of each Borrower. Similarly, the term
"Obligations" shall include, without limitation, all obligations, liabilities
and indebtedness of such corporations, or any one of them, to Lender, whether
such obligations, liabilities and indebtedness shall be joint, several, joint
and several or individual.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement has been duly executed in Dallas,
Texas, on the day and year specified at the beginning of this Agreement.
BORROWER:
BAYARD DRILLING TECHNOLOGIES, INC.
By: /s/ JAMES E. BROWN
----------------------------------
Name: James E. Brown
----------------------------------
Title: Chief Executive Officer
TREND DRILLING CO.
By: /s/ JAMES E. BROWN
----------------------------------
Name: James E. Brown
----------------------------------
Title: President
----------------------------------
Accepted in Dallas, Dallas County, Texas:
LENDER:
FLEET CAPITAL CORPORATION
By: /s/ DICK HARRIS
----------------------------------
Name: Dick Harris
----------------------------------
Title: Vice President
----------------------------------
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APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of May 1, 1997, by
and between Fleet Capital Corporation, Bayard Drilling Technologies, Inc. and
Trend Drilling Company, the following terms shall have the following meanings
(terms defined in the singular to have the same meaning when used in the plural
and vice versa):
Account Debtor - any Person who is or may become obligated under
or on account of an Account.
Accounts - all accounts, contract rights, chattel paper,
instruments and documents, whether now owned or hereafter created or
acquired by Borrower or in which Borrower now has or hereafter acquires
any interest.
Acquisition - the purchase by Bayard of all of the issued and
outstanding capital stock of Trend pursuant to the Purchase Documents.
Additional Securities - the Additional Securities (as defined in
that certain Securities Purchase Agreement dated as of April 30, 1997
between and among Bayard, Energy Spectrum, and Chesapeake) that Bayard
may cause Chesapeake to purchase.
Affiliate - a Person (other than a Subsidiary): (i) which
directly or indirectly through one or more intermediaries controls, or
is controlled by, or is under common control with, a Person; (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock
of a Person; or (iii) 5% or more of the Voting Stock (or in the case of
a Person which is not a corporation, 5% or more of the equity interest)
of which is beneficially owned or held by a Person or a Subsidiary of a
Person.
Agreement - the Loan and Security Agreement referred to in the
first sentence of this Appendix A, all Exhibits and Schedules thereto
and this Appendix A, as amended, renewed, extended and restated from
time to time.
Allowed Affiliate Accounts - each Account receivable from
Chesapeake, Ward, or AnSon Company which arises in the ordinary course
of Borrower's business from the sale of goods or rendition of services
to such Persons and which is payable in Dollars. Without limiting the
generality of the foregoing, no Account shall be an Allowed Affiliate
Account if: (i) it is due or unpaid more than 90 days after the
original invoice date; (ii) 20% or more of the Accounts from the Account
Debtor are due and unpaid more than 60 days from invoice date or
otherwise are not deemed Allowed Affiliate Accounts hereunder (subject,
however, to redeterminations by Lender if Borrower provides written
evidence to Lender reflecting that sufficient payments have been made on
such Accounts between the date of determination of eligibility and the
date the Schedule of Accounts was delivered to Lender to merit their
inclusion in a Borrowing Base determination);
A-1-1
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(iii) any covenant, representation or warranty contained in the
Agreement with respect to such Account has been breached; (iv) the
Account Debtor has disputed liability with respect to such Account, or
the Account Debtor has made any claim with respect to any other Account
due from such Account Debtor to Borrower, or the Account otherwise is or
may become subject to any right of setoff, counterclaim, reserve or
chargeback, provided that, in any event, the Accounts of such Account
Debtor shall be ineligible only to the extent of the amount owing by
Borrower to such creditor or supplier or to the extent of such offset,
counterclaim, disputed amount, reserve or chargeback; (v) the Account
Debtor has commenced a voluntary case under the federal bankruptcy laws
or made an assignment for the benefit of creditors, or a decree or order
for relief has been entered by a court having jurisdiction in the
proceedings in respect of the Account Debtor in an involuntary case
under the federal bankruptcy laws or any other petition or other
application for relief under the federal bankruptcy laws has been filed
against the Account Debtor, or if the Account Debtor has failed,
suspended business, ceased to be Solvent, or consented to or suffered a
receiver, trustee, liquidator or custodian to be appointed for it or for
all or a significant portion of its assets or affairs; (vi) it arises
from a sale to an Account Debtor with its principal office, assets or
place of business outside the United States, unless the sale is backed
by an irrevocable letter of credit issued or confirmed by Bank and is in
form and substance acceptable to Lender, payable in the full amount of
the Account in freely convertible Dollars at a place of payment within
the United States; (vii) it arises from a sale to the Account Debtor on
a bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval,
consignment or any other repurchase or return basis; (viii) the Account
Debtor has relocated to New Jersey, Minnesota, Indiana, West Virginia or
any other state imposing similar conditions on the right of a creditor
to collect accounts receivable unless Borrower has either qualified to
transact business in such state as a foreign corporation or filed a
Notice of Business Activities Report or other required report with the
appropriate officials in those states for the then current year; (ix)
the Account is subject to a Lien other than a Permitted Lien; (x) the
goods giving rise to such Account have not been delivered to and
accepted by the Account Debtor or the services giving rise to such
Account have not been performed by Borrower and accepted by the Account
Debtor or the Account otherwise does not represent a final sale; (xi)
the Account is evidenced by chattel paper or an instrument of any kind,
or has been reduced to judgment; (xii) Borrower has made any agreement
with the Account Debtor for any deduction therefrom, except for
discounts or allowances which are made in the ordinary course of
business for prompt payment and which discounts or allowances are
reflected in the calculation of the face value of each invoice related
to such Account; or (xiii) Borrower has made an agreement with the
Account Debtor to extend the time of payment thereof.
AnSon Company - AnSon Company, an Oklahoma general partnership.
AnSon Partners - AnSon Partners Limited Partnership, an Oklahoma
limited partnership.
Applicable Annual Rate - as defined in Section 2.1.1 of the
Agreement.
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Applicable Law - all laws, rules and regulations applicable to
the Person, conduct, transaction, covenant or Loan Documents in
question, including all applicable common law and equitable principles;
all provisions of all applicable state and federal constitutions,
statutes, rules, regulations and orders of governmental bodies; and
orders, judgments and decrees of all courts and arbitrators.
Availability - the amount of money which Borrower is entitled to
borrow from time to time as Revolving Credit Loans, such amount being
the difference derived when the sum of the principal amount of Revolving
Credit Loans then outstanding (including any amounts which Lender may
have paid for the account of Borrower pursuant to any of the Loan
Documents and which have not been reimbursed by Borrower) and the LC
Amount is subtracted from the Borrowing Base. If the amount outstanding
is equal to or greater than the Borrowing Base, Availability is 0.
Average Monthly Revolving Credit Balance - the amount obtained by
adding the aggregate unpaid principal amount of Revolving Credit Loans
plus the LC Amount at the end of each day during the month in question
and by dividing such sum by the number of days in such month.
Bank - Fleet National Bank, and its successors or assigns.
Base Rate - the rate of interest announced or quoted by Bank from
time to time as its prime rate for commercial loans, whether or not such
rate is the lowest rate charged by Bank to its most preferred borrowers;
and, if such prime rate for commercial loans is discontinued by Bank as
a standard, a comparable reference rate designated by Bank as a
substitute therefor shall be the Base Rate.
Borrowing Base - as at any date of determination thereof, an
amount equal to the lesser of:
(a) Total Credit Facility; or
(b) an amount equal to:
(i) 80% of the net amount of Eligible Accounts
outstanding at such date;
PLUS
(ii) 50% of the net amount of Borrower's Turnkey
Accounts;
PLUS
(iii) the lesser of (x) 80% of the net amount of Allowed
Affiliate Accounts and (y) $5,000,000;
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MINUS (subtract from the sum of clauses
(a) and (b) above)
(c) the sum of (i) the LC Amount, plus (ii) the amount
of any reserves established by Lender pursuant to Section 1.1.1
at such date.
For purposes of clauses (l)(b)(i), (b)(ii) and (b)(iii) hereof,
the net amount of Eligible Accounts, Turnkey Accounts, and Allowed
Affiliate Accounts, as the case may be, at any time shall be the face
amount of such Accounts less any and all returns, rebates, discounts
(which may, at Lender's option, be calculated on shortest terms),
credits, allowances or sales, excise or withholding taxes of any nature
at any time issued, owing, claimed by Account Debtors, granted,
outstanding or payable in connection with such Accounts at such time.
Business Day - any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the state of Texas or is a
day on which banking institutions located in such state are closed.
Capital Expenditures - expenditures made or liabilities incurred
for the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than
one year, including the total principal portion of Capitalized Lease
Obligations.
Capitalized Lease Obligation - any Indebtedness represented by
obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
Cash Flow Coverage Ratio - means the ratio of Cash Flow to
Projected Debt Service. For this ratio, "Cash Flow" means, for any
period, the sum of Bayard's consolidated net income plus depreciation,
depletion and amortization less dividends paid and extraordinary items
of income or loss (as determined in accordance with GAAP) in the prior
four quarters. Cash Flow shall exclude the Cash Flow attributable to
any Non-consolidated Subsidiary.
Cash Flow will be calculated as follows:
(i) as of June 30,1997, Cash Flow is equal to the product of (x)
actual Cash Flow for the month of June 1997 times (y) twelve;
(ii) as of September 30, 1997, Cash Flow is equal to the sum of (x)
the product of actual Cash Flow for the month of June 1997 times
nine, plus (y) the sum of actual Cash Flow for the months of
July, August and September 1997.
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(iii) as of December 31, 1997, Cash Flow is equal to the sum of (x) the
product of actual Cash Flow for the month of June 1997 times six,
plus (y) the sum calculated in (ii)(y) above, plus the sum of
actual Cash Flows for the months of October, November and
December 1997;
(iv) as of March 31, 1998, Cash Flow is equal to the sum of (x) the
product of the actual cash flow for the month of June 1997 times
three, plus (y) the sum calculated in (iii)(y) above, plus the
sum of the cash flows for the months of January, February and
March 1998; and
(v) as of June 30, 1998 and for all subsequent periods; Cash Flow is
equal to the sum of the actual Cash Flow for the then preceding
twelve months.
Chesapeake - Collectively and individually, Chesapeake Energy
Corporation, an Oklahoma corporation and Chesapeake Operating, Inc., an
Oklahoma corporation.
Chesapeake Debt - means (a) all the obligations of Bayard to
Chesapeake evidenced by that certain Subordinated Note of even date
herewith in the principal amount of $18,000,000, and (b) all other
amounts now or hereafter owed by Bayard to Chesapeake under the
Subordinated Note and that certain Securities Purchase Agreement of even
date herewith by and between Chesapeake and Bayard, but in no event to
exceed $20,160,000 in the aggregate, plus accrued interest and the
amount of any additional notes issued by Bayard to pay interest on such
debt.
CIT - The CIT Group/Equipment Financing, Inc., a New York
corporation.
CIT Debt - means any and all indebtedness, claims, debts,
liabilities, or obligations of Borrower owing to CIT, individually and
as agent for CIT and Lender, and Lender, of whatever nature, character,
or description, arising solely as a result of the loans made pursuant to
the CIT Loan Agreement, but in no event shall such CIT Debt exceed
$30,577,131.15 plus accrued interest in the aggregate.
CIT Loan Agreement - means that certain Loan Agreement, dated as
of December 10, 1996, by and between CIT and Bayard, as amended and
restated as of May 1, 1997, by and between CIT, Lender, CIT as agent for
CIT and Lender, and Borrower, and any and all other agreements,
documents and instruments currently or hereafter entered into by and
between Borrower, CIT, Lender, and CIT as agent for CIT and Lender, or
executed by Borrower in favor of, or to the order of, CIT, Lender, and
CIT as agent for CIT and Lender, in connection with such Loan Agreement.
CIT Sale/Leaseback - means any and all indebtedness, claims,
debts, liabilities or obligations of Bayard owing to CIT, of whatever
nature, character, or description, arising solely as a result of that
certain Agreement to Purchase and Lease, dated as of May 1, 1997, by and
between Borrower and CIT, and any and all other agreements, documents
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and instruments currently or hereafter entered into by and between
Borrower and CIT, or executed by Borrower in favor of, or to the order
of, CIT in connection with such Agreement to Purchase and Lease, but in
no event shall such obligations exceed $7,500,000 in the aggregate.
Closing Date - the date on which all of the conditions precedent
in Section 9 of the Agreement are satisfied and the initial Loan is made
or the initial Letter of Credit or LC Guaranty is issued under the
Agreement.
Code - the Uniform Commercial Code as adopted and in force in the
state of Texas, as from time to time in effect.
Collateral - all of the Property and interests in Property
described in Section 5 of the Agreement, and all other Property and
interests in Property that now or hereafter secure the payment and
performance of any of the Obligations.
Consolidated - the consolidation in accordance with GAAP of the
accounts or other items as to which such term applies.
Current Assets - at any date means the amount at which all of the
current assets of a Person would be properly classified as current
assets shown on a balance sheet at such date in accordance with GAAP.
Default - an event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, become an Event
of Default.
Default Rate - as defined in Section 2.1.2 of the Agreement.
Distribution - in respect of any corporation means and includes:
(i) the payment of any dividends or other distributions on capital stock
of the corporation (except distributions in such stock) and (ii) the
redemption or acquisition of Securities unless made contemporaneously
from the net proceeds of the sale of Securities.
Dollars and the sign "$" - lawful money of the United States of
America.
Dominion Account - a special account of Lender established by
Borrower pursuant to the Agreement at a bank selected by Borrower, but
acceptable to Lender in its reasonable discretion, and over which Lender
shall have sole and exclusive access and control for withdrawal
purposes.
Drilling Contracts - any and all drilling contracts entered into
by either Borrower and any and all rights of either Borrower, including
but not limited to the right to receive payments due or to become due,
thereunder.
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Drilling Rigs - all land drilling rigs and drilling equipment now
owned or hereafter acquired by Borrower and all metal products,
machinery, equipment, materials or other goods of any description
whatsoever, used or acquired for use by Borrower and all pumps, drilling
equipment, drill pipe, machinery, equipment, supplies, parts and other
goods of any description whatsoever installed in or affixed to or to be
used in connection with any Drilling Rig or acquired for installation
on, affixation to, or use in connection with any Drilling Rig including,
without limitation, the Drilling Rigs identified on Exhibit P to the
Agreement.
Eligible Account - an Account (other than a Turnkey Account)
arising in the ordinary course of Borrower's business from the sale of
goods or rendition of services which is payable in Dollars and which
Lender, in its sole credit judgment, deems to be an Eligible Account.
Without limiting the generality of the foregoing, no Account shall be an
Eligible Account if: (i) it arises out of a sale made by Borrower to a
Subsidiary or an Affiliate of Borrower or to a Person controlled by an
Affiliate of Borrower, including, without limitation, any Allowed
Affiliate Account; (ii) it is due or unpaid more than 90 days after the
original invoice date; (iii) 20% or more of the Accounts from the
Account Debtor are due and unpaid more than 60 days from invoice date or
otherwise are not deemed Eligible Accounts hereunder; (iv) the total
unpaid Accounts of the Account Debtor exceed 20% of the net amount of
all Eligible Accounts (excluding Accounts receivable from Chesapeake,
Union Pacific Resource Corporation and Sonat Exploration Company, to the
extent of such excess; (v) any covenant, representation or warranty
contained in the Agreement with respect to such Account has been
breached; (vi) the Account Debtor, other than Chesapeake, is also
Borrower's creditor or supplier, or the Account Debtor has disputed
liability with respect to such Account, or the Account Debtor has made
any claim with respect to any other Account due from such Account Debtor
to Borrower, or the Account otherwise is or may become subject to any
right of setoff, counterclaim, reserve or chargeback, provided that, in
any event, the Accounts of such Account Debtor shall be ineligible only
to the extent of the amount owing by Borrower to such creditor or
supplier or to the extent of such offset, counterclaim, disputed amount,
reserve or chargeback; (vii) the Account Debtor has commenced a
voluntary case under the federal bankruptcy laws or made an assignment
for the benefit of creditors, or a decree or order for relief has been
entered by a court having jurisdiction in the proceedings in respect of
the Account Debtor in an involuntary case under the federal bankruptcy
laws or any other petition or other application for relief under the
federal bankruptcy laws has been filed against the Account Debtor, or if
the Account Debtor has failed, suspended business, ceased to be Solvent,
or consented to or suffered a receiver, trustee, liquidator or custodian
to be appointed for it or for all or a significant portion of its assets
or affairs; (viii) it arises from a sale to an Account Debtor with its
principal office, assets or place of business outside the United States,
unless the sale is backed by an irrevocable letter of credit issued or
confirmed by Bank and is in form and substance acceptable to Lender,
payable in the full amount of the Account in freely convertible Dollars
at a place of payment within the United States; (ix) it arises from a
sale to the Account Debtor on a bill-and-hold, guaranteed sale, sale-or-
return, sale-on-approval, consignment or any other repurchase or return
basis; (x) (a) the Account Debtor
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<PAGE> 55
is the United States of America or any department, agency or
instrumentality thereof, unless Borrower assigns its right to payment of
such Account to Lender, in a manner satisfactory to Lender, so as to
comply with the Assignment of Claims Act of 1940 (31 U.S.C. Section 203
et seq.) or (b) the Account Debtor is a state, county or municipality,
or a political subdivision or agency thereof, which is subject to any
Applicable Law that would disallow an assignment of Accounts on which it
is the Account Debtor; (xi) the Account Debtor is located in New Jersey,
Minnesota, Indiana, West Virginia or any other state imposing similar
conditions on the right of a creditor to collect accounts receivable
unless Borrower has either qualified to transact business in such state
as a foreign corporation or filed a Notice of Business Activities Report
or other required report with the appropriate officials in those states
for the then current year; (xii) the Account is subject to a Lien other
than a Permitted Lien; (xiii) the goods giving rise to such Account have
not been delivered to and accepted by the Account Debtor or the services
giving rise to such Account have not been performed by Borrower and
accepted by the Account Debtor or the Account otherwise does not
represent a final sale; (xiv) the Account is evidenced by chattel paper
or an instrument of any kind, or has been reduced to judgment; (xv)
Borrower has made any agreement with the Account Debtor for any
deduction therefrom, except for discounts or allowances which are made
in the ordinary course of business for prompt payment and which
discounts or allowances are reflected in the calculation of the face
value of each invoice related to such Account; or (xvi) Borrower has
made an agreement with the Account Debtor to extend the time of payment
thereof.
Energy Spectrum - Energy Spectrum Partners LP, a Delaware limited
partnership.
Energy Spectrum Debt - means (a) all the obligations of Energy
Spectrum to Bayard evidenced by that certain Subordinated Note of even
date herewith in the principal amount of $2,520,000, and (b) all other
amounts now or hereafter owed by Energy Spectrum to Bayard under the
Subordinated Note and that certain Securities Purchase Agreement of even
date herewith by and between Energy Spectrum and Bayard, but in no event
to exceed $2,520,000 in the aggregate, plus accrued interest and the
amount of any additional notes issued by Bayard to pay interest on such
debt.
Environmental Laws - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and
consent decrees relating to health, safety or environmental matters.
Equipment - all machinery, apparatus, equipment, Drilling Rigs,
fittings, furniture, fixtures, motor vehicles and other tangible
personal Property (other than Inventory) of every kind and description
used in Borrower's operations or owned by Borrower or in which Borrower
has an interest, whether now owned or hereafter acquired by Borrower and
wherever located, and all parts, accessories and special tools and all
increases and accessions thereto and substitutions and replacements
therefor.
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ERISA - the Employee Retirement Income Security Act of 1974, as
amended, and all rules and regulations from time to time promulgated
thereunder.
Event of Default - as defined in Section 10.1 of the Agreement.
Excess Interest - as defined in Section 2.1.3(B) of the
Agreement.
GAAP - generally accepted account principles in the United States
of America in effect from time to time.
General Intangibles - all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower,
including all choices in action, causes of action, corporate or other
business records, deposit accounts, inventions, blueprints, designs,
patents, patent applications, trademarks, trademark applications, trade
names, trade secrets, service marks, goodwill, brand names, copyrights,
registrations, licenses, franchises, customer lists, tax refund claims,
computer programs, operational manuals, all claims under guaranties,
security interests or other security held by or granted to Borrower to
secure payment of any of the Accounts by an Account Debtor, all rights
to indemnification and all other intangible property of every kind and
nature (other than Accounts).
Indebtedness - as applied to a Person means, without duplication:
(i) all items which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of a
balance sheet of such Person as at the date as of which Indebtedness is
to be determined, including Capitalized Lease Obligations; (ii) all
obligations of other Persons which such Person has guaranteed; (iii) all
reimbursement obligations in connection with letters of credit or letter
of credit guaranties issued for the account of such Person; and (iv) in
the case of Borrower (without duplication), the Obligations.
Indemnified Persons - as defined in Section 11.2 of the
Agreement.
Inventory - all of Borrower's inventory, whether now owned or
hereafter acquired, including, but not limited to, all goods intended
for sale or lease by Borrower, or for display or demonstration; all work
in process; all raw materials and other materials and supplies of every
nature and description used or consumed in Borrower's business; and all
documents evidencing and General Intangibles relating to any of the
foregoing, whether now owned or hereafter acquired by Borrower.
LC Amount - at any time, the aggregate undrawn face amount of all
Letters of Credit and LC Guaranties then outstanding.
LC Guaranty - any guaranty pursuant to which Lender or any
Affiliate of Lender shall guaranty the payment or performance by
Borrower of its reimbursement obligation under any letter of credit.
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Letter of Credit - any letter of credit issued by Lender or any
of Lender's Affiliates for the account of Borrower.
Lien - any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether
such interest is based on common law, statute or contract. The term
"Lien" shall also include reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases
and other title exceptions and encumbrances affecting Property. For the
purpose of the Agreement, Borrower shall be deemed to be the owner of
any Property which it has acquired or holds subject to a conditional
sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for
security purposes.
Loan Account - the loan account established on the books of
Lender pursuant to Section 3.4 of the Agreement.
Loan Documents - the Agreement, the Other Agreements and the
Security Documents.
Loan Party - Each Borrower and each other Person (other than
Lender) who is at any time a party to any Loan Document.
Loans - all loans and advances of any kind made by Lender
pursuant to the Agreement.
Losses - as defined in Section 11.2 of the Agreement.
Material Adverse Effect - the effect of any event or condition
which, alone or when taken together with other events or conditions
occurring or existing concurrently therewith, (a) has a material adverse
effect upon the business, operations, Properties, condition (financial
or otherwise) or business prospects of Borrowers and their Subsidiaries
taken as a whole; (b) has any material adverse effect whatsoever upon
the validity or enforceability of any material provisions of the
Agreement or any of the other Loan Documents; (c) has or may be
reasonably expected to have any material adverse effect upon the value
of the whole or any material part of the Collateral, the Liens of Lender
with respect to the Collateral or any material part thereof or the
priority of such Liens; (d) materially impairs the ability of Borrower
and the other Loan Parties, taken as a whole, to perform their material
obligations under this Agreement or any of the other Loan Documents,
including repayment of the Obligations when due; or (e) materially
impairs the ability of Lender to enforce or collect the Obligations or
realize upon any of the Collateral in accordance with the Loan Documents
and Applicable Law.
Maximum Legal Rate - as defined in Section 2.1.3(A) of the
Agreement.
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Money Borrowed - means (i) Indebtedness arising from the lending
of money by any Person to Borrower; (ii) Indebtedness, whether or not in
any such case arising from the lending by any Person of money to
Borrower, (A) which is represented by notes payable or drafts accepted
that evidence extensions of credit, (B) which constitutes obligations
evidenced by bonds, debentures, notes or similar instruments, or (C)
upon which interest charges are customarily paid (other than accounts
payable) or that was issued or assumed as full or partial payment for
Property, other than accounts payable; (iii) Indebtedness that
constitutes a Capitalized Lease Obligation; (iv) reimbursement
obligations with respect to letters of credit or guaranties of letters
of credit and (v) Indebtedness of Borrower under any guaranty of
obligations that would constitute Indebtedness for Money Borrowed under
clauses (i) through (iii) hereof, if owed directly by Borrower.
Mortgage - the mortgage or deed of trust to be executed by
Borrower in favor of Lender by which Borrower shall grant and convey to
Lender, as security for the Obligations, a Lien upon the real Property
owned in fee by Borrower, located at El Reno, Oklahoma.
Multiemployer Plan - has the meaning set forth in Section
4001(a)(3) of ERISA.
Non-consolidated Subsidiary - a Subsidiary of either Borrower
whose assets are not subject to a Lien in favor of Lender and which has
debt that is non-recourse to the Borrowers or the Borrowers' assets.
Obligations - all Loans, and all other advances, debts,
liabilities, obligations, covenants and duties, together with all
interest, fees and other charges thereon, owing, arising, due or payable
from Borrower to Lender of any kind or nature, present or future,
whether or not evidenced by any note, guaranty or other instrument,
whether arising under the Agreement or any of the other Loan Documents
or otherwise, and whether direct or indirect (including those acquired
by assignment), absolute or contingent, primary or secondary, due or to
become due, now existing or hereafter arising and however acquired.
Original Term - as defined in Section 4.1 of the Agreement.
Other Agreements - any and all agreements, instruments and
documents (other than the Agreement and the Security Documents),
heretofore, now or hereafter executed by Borrower, any Subsidiary of
Borrower or any other third party and delivered to Lender in respect of
the transactions contemplated by the Agreement.
Out-of-Formula Condition - at any date of determination thereof,
a condition such that the outstanding principal amount of Revolving
Credit Loans plus the LC Amount on such date exceeds the Borrowing Base
on such date.
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Participant - each Person who shall be granted the right by
Lender to participate in any of the Loans described in the Agreement and
who shall have entered into a participation agreement in form and
substance satisfactory to Lender.
Permitted Indebtedness - Indebtedness specified in Exhibit N to
the Agreement.
Permitted Lien - a Lien of a kind specified in Section 8.2.5 of
the Agreement.
Permitted Purchase Money Indebtedness - Purchase Money
Indebtedness of Borrower incurred after the date hereof which is secured
by a Purchase Money Lien and which, when aggregated with the principal
amount of all other such Indebtedness and Capitalized Lease Obligations
of Borrower at the time outstanding, does not exceed $6,000,000. For
the purposes of this definition, the principal amount of any Purchase
Money Indebtedness consisting of capitalized leases shall be computed as
a Capitalized Lease Obligation.
Person - an individual, partnership, corporation, limited
liability company, joint stock company, land trust, business trust, or
unincorporated organization, or a government or agency or political
subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained for
employees of Borrower that is covered by Title IV of ERISA.
Projected Debt Service - means the sum of the current portion of
each Borrower's long term debt and capitalized lease obligations coming
due in the following four quarters, including any maturities of the
Loans associated with this Agreement. Projected Debt Service shall
exclude the Projected Debt Service attributable to any Non-consolidated
Subsidiary.
Properly Contested - in the case of any Indebtedness of a Loan
Party (including any Taxes) that is not paid as and when due or payable
by reason of such Loan Party's bona fide dispute concerning its
liability to pay same or concerning the amount thereof, that (i) such
Indebtedness and any Liens securing same are being properly contested in
good faith by appropriate proceedings promptly instituted and diligently
conducted, (ii) such Loan Party has established appropriate reserves as
shall be required in conformity with GAAP, (iii) the non-payment of such
Indebtedness will not have a Material Adverse Effect and will not result
in a forfeiture of any assets of such Loan Party; (iv) no Lien is
imposed upon any of such Loan Party's assets with respect to such
Indebtedness unless such Lien is at all times junior and subordinate in
priority to the Liens in favor of Lender (except only with respect to
property taxes that have priority as a matter of applicable state law);
(v) if the Indebtedness results from the entry, rendition or issuance
against a Loan Party or any of its assets of a judgment, writ, order or
decree, such judgment, writ, order or decree is stayed or bonded pending
a timely appeal or other judicial review; and (vi) if such contest is
abandoned, settled or determined adversely to
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such Loan Party, such Loan Party forthwith pays such Indebtedness and
all penalties and interest in connection therewith.
Property - any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
Purchase Documents - the Stock Purchase Agreement, dated as of
February 13, 1997, by and between Bayard and Harold G. Hamm, an
individual acting in his capacity as Trustee of The Harold G. Hamm
Revocable Inter Vivos Trust dated April 23, 1984, pursuant to which
Bayard has agreed to purchase all of the issued and outstanding capital
stock of Trend, and all documents and instruments executed or delivered
in connection therewith.
Purchase Money Indebtedness - means and includes (i) Indebtedness
(other than the Obligations) for the payment of all or any part of the
purchase price of any fixed assets, (ii) any Indebtedness (other than
the Obligations) incurred at the time of or within ten (10) days prior
to or after the acquisition of any fixed assets for the purpose of
financing all or any part of the purchase price thereof, and (iii) any
renewals, extensions or refinancings thereof, but not any increases in
the principal amounts thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets and their proceeds
which secures Purchase Money Indebtedness, but only if such Lien shall
at all times be confined solely to the fixed assets the purchase price
of which was financed through the incurrence of the Purchase Money
Indebtedness secured by such Lien.
Registration Rights Agreements The Amended and Restated
Registration Rights Agreement, dated as of May 1, 1997, by and among
Bayard, Anadarko Drilling Company, R.T. Oliver Drilling, Inc., Mike
Mullen Energy Equipment Resource, Inc., Grupo de Hercules, Ltd., Mullen-
Oliver Partnership, Ltd., Energy Spectrum, and Chesapeake.
Rentals - as defined in Section 8.2.13 of the Agreement.
Reportable Event - any of the events set forth in Section 4043(b)
of ERISA.
Restricted Investment - any investment made in cash or by
delivery of Property to any Person, whether by acquisition of stock,
Indebtedness or other obligation or Security, or by loan, advance or
capital contribution, or otherwise, or in any Property except the
following:
(i) investments in (a)one or more Subsidiaries
(including Trend) of Borrower to the extent existing on the
Closing Date, and (b) cash investments in Non-consolidated
Subsidiaries not in excess of the net proceeds to either
A-1-13
<PAGE> 61
Borrower from the concurrent issuance of equity or, subject to
Section 8.2.3, debt on terms acceptable to Lender;
(ii) Property to be used in the ordinary course of
business;
(iii) Current Assets arising from the sale of goods and
services in the ordinary course of business of Borrower and its
Subsidiaries;
(iv) investments in direct obligations of the United
States of America, or any agency thereof or obligations
guaranteed by the United States of America, provided that such
obligations mature within one year from the date of acquisition
thereof;
(v) investments in certificates of deposit maturing
within one year from the date of acquisition issued by a bank or
trust company organized under the laws of the United States or
any state thereof having capital surplus and undivided profits
aggregating at least $100,000,000; and
(vi) investments in commercial paper given the highest
rating by a national credit rating agency and maturing not more
than 270 days from the date of creation thereof.
Revolving Credit Loan - a Loan made by Lender as provided in
Section 1.1 of the Agreement.
Schedule of Accounts - as defined in Section 6.2.1 of the
Agreement.
Security - shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
Security Documents - the Guaranty Agreements and all other
instruments and agreements now or at any time hereafter securing the
whole or any part of the Obligations.
Senior Debt - means all Money Borrowed, excluding Subordinated
Debt.
Shareholder Agreement - The Amended and Restated Stockholders and
Voting Agreement, dated May 1, 1997, by and among Bayard and each of the
stockholders of Bayard executing the same.
Solvent - as to any Person, such Person (i) owns Property whose
fair salable value is greater than the amount required to pay all of
such Person's Indebtedness (including contingent debts), (ii) is able to
pay all of its Indebtedness as such Indebtedness matures and (iii) has
capital sufficient to carry on its business and transactions and all
business and transactions in which it is about to engage.
A-1-14
<PAGE> 62
Subordinated Debt - Indebtedness of Borrower that is subordinated
to the Obligations in a manner satisfactory to Lender, including,
without limitation, the Chesapeake Debt and the Energy Spectrum Debt.
Subsidiary - any corporation of which a Person owns, directly or
indirectly through one or more intermediaries, more than 50% of the
Voting Stock at the time of determination.
Tangible Net Worth - means, at a particular date, the sum of the
Borrowers' capital stock (excluding treasury stock), warrants, surplus
(including earned surplus, capital surplus and the balance of the
current profit and loss account not transferred to surplus) and debt
that is specifically subordinated to the Obligations on the terms
acceptable to the Lender (including the Chesapeake Debt and the Energy
Spectrum Debt) accounted on a consolidated basis appearing on a
consolidated balance sheet prepared in accordance with GAAP as of the
date of determination, excluding, however, from the determination, all
inter-company transactions and after deducting therefrom the net book
value of all assets (after deducting any reserves applicable thereto)
which would be treated as intangibles under GAAP (including, without
limitation, such items as goodwill, trademarks, trade names, patents and
licenses, franchises and operating rights) and excluding the amount of
the Borrowers' equity investment in any Non-consolidated Subsidiary.
Taxes - any present or future taxes, levies, imposts, duties,
fees, assessments, deductions, withholdings or other charges of whatever
nature, including, without limitation, income, receipts, excise,
property, sales, transfer, license, payroll, withholding, social
security and franchise taxes now or hereafter imposed or levied by the
United States, or any state, local or foreign government or by any
department, agency or other political subdivision or taxing authority
thereof or therein and all interest, penalties, additions to tax and
similar liabilities with respect thereto.
Total Credit Facility - $10,000,000.
Total Liabilities - means indebtedness of the Borrowers on a
consolidated basis which would in accordance with GAAP be classified as
current and long term liabilities of a corporation conducting a business
the same as or similar to the Borrowers, but excluding debt that is
specifically subordinated to the Obligations on terms acceptable to the
Lender (including the Chesapeake Debt and the Energy Spectrum Debt) and
total liabilities of any Non-consolidated Subsidiary.
Turnkey Accounts - Accounts arising from oil or gas drilling
contracts between Borrower and owners or operators of oil or gas wells
pursuant to which Borrower assumes primary control over drilling
activity, and is responsible for subcontracting related services.
A-1-15
<PAGE> 63
Voting Stock - Securities of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors
(or Persons performing similar functions).
Ward - Ward Drilling Company.
OTHER TERMS. All other terms contained in the Agreement shall have,
when the context so indicates, the meanings provided for by the Code to the
extent the same are used or defined therein.
CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. In the computation of periods of time
from a specified date to a later specified date, the word "from" means "from
and including" and the words "to" and "until" each means "to but excluding."
The section titles, table of contents and list of Exhibits appear as a matter
of convenience only and shall not affect the interpretation of the Agreement.
All references to statutes and related regulations shall include any amendments
of same and any successor statutes and regulations. All references to any of
the Loan Documents shall include any and all modifications thereto and any and
all extensions or renewals thereof. Wherever the phrase "including" shall
appear in the Agreement, such word shall be understood to mean "including,
without limitation."
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
A-1-16
<PAGE> 64
LIST OF EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
Exhibit A Borrower's and each Subsidiary's Business Locations
Exhibit B Jurisdictions in which Borrower and each Subsidiary is Authorized
to do Business
Exhibit C Capital Structure of Borrower
Exhibit D Corporate Names
Exhibit E Surety Obligations
Exhibit F Patents, Trademarks, Copyrights and Licenses
Exhibit G Contracts Restricting Borrower's Right to Incur Debts
Exhibit H Litigation
Exhibit I Capitalized Leases
Exhibit J Operating Leases
Exhibit K Pension Plans
Exhibit L Labor Contracts
Exhibit M Compliance Certificate
Exhibit N Permitted Indebtedness
Exhibit O Permitted Liens
Exhibit P Drilling Rigs
</TABLE>
A-1-17
<PAGE> 1
EXHIBIT 10.20
AMENDED AND RESTATED LOAN AGREEMENT
AMONG
THE CIT GROUP/EQUIPMENT FINANCING, INC.
and
FLEET CAPITAL CORPORATION
as Lenders,
and
BAYARD DRILLING TECHNOLOGIES, INC.,
and
TREND DRILLING CO.
as Borrowers.
Dated as of May 1, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
R E C I T A L S: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I.
THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.02 Term Loan Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1.03 Pro-Rata Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1.04 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1.05 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1.06 Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(a) Mandatory Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(i) Total Loss or Sale . . . . . . . . . . . . . . . . . . . . . . . . 12
(ii) "Total Loss" . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(iii) Collateral Value . . . . . . . . . . . . . . . . . . . . . . . . . 13
(iv) Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Voluntary Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 1.07 Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1.08 Amendment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1.09 Agency Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1.10 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE II.
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.01 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.02 Conditions to Subsequent Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.03 Waiver of Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE III.
REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.01 Representations of the Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.02 Covenants of the Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IV.
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
<PAGE> 3
ARTICLE V.
<TABLE>
<S> <C> <C>
THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.01 Appointment and Duties of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.02 Discretion and Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.03 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.04 Consultation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.05 Communications to and from Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.06 Limitations of Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.07 No Representations or Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.08 Lender Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.09 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.10 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.11 Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.12 Limitation of Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VI.
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 6.01 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 6.02 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 6.03 Applicable Law and Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 6.04 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.05 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.06 Assignment and Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.07 Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.08 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.09 Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.10 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.11 Agent for Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
Exhibit A-1 - CIT Note
Exhibit A-2 - Fleet Note
Exhibit B - Notice of Drawing
<PAGE> 4
THIS AMENDED AND RESTATED LOAN AGREEMENT dated as of May 1, 1997 among
BAYARD DRILLING TECHNOLOGIES, INC., a Delaware corporation ("Bayard"), TREND
DRILLING CO., an Oklahoma corporation ("Trend;" and with Bayard, the
"Borrowers"), THE CIT GROUP/EQUIPMENT FINANCING, INC., a New York corporation
("CIT"), FLEET CAPITAL CORPORATION, a Rhode Island corporation ("Fleet;"
collectively with CIT, the "Lenders") and CIT as Agent for the Lenders (the
"Agent"). Capitalized terms used herein and not otherwise defined herein are
used with the meanings ascribed thereto in the Definitions Section of this
Agreement.
R E C I T A L S:
1. The Borrowers are in the business of owning and operating land
drilling rigs.
2. Pursuant to the Loan Agreement dated as of December 10, 1996 (the
"Original Loan Agreement") CIT as the Lender in the Original Loan Agreement
agreed to make a loan to Bayard in the principal amount of up to Twenty-Four
Million United States Dollars (USD 24,000,000.00) (the "Original Loan") in
order to (i) facilitate the purchase of additional drilling rigs by Bayard,
(ii) upgrade existing and new drilling rigs, and (iii) provide working capital
for Bayard.
3. The Original Loan was evidenced by the secured promissory note
made by Bayard to CIT.
4. The Borrowers and the Lenders wish to restate the Original Loan
Agreement in order to add Trend as a Borrower, add Fleet as a Lender, name CIT
as Agent for the Lenders, increase the amount of the Original Loan Agreement
and amend certain other terms and covenants of the Original Loan Agreement.
NOW, THEREFORE, in consideration of the above recitals, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree to amend and restate the Original Loan
Agreement as follows:
DEFINITIONS
The following terms shall have the following meanings for all purposes
of this Agreement and shall be equally applicable to both the singular and the
plural forms of the terms herein defined.
"Advance" means a loan by the Lenders under Section 1.01(b) of this
Agreement.
"Agreement", "this Agreement", "herein", "hereunder"' or other like
words mean this Loan Agreement as originally executed or as modified, amended
or supplemented from time to time pursuant to the provisions hereof.
1
<PAGE> 5
"Amendment No. 1 to Security Agreement" means the amendment to the
Security Agreement appointing CIT as Agent for the Lenders in form and
substance satisfactory to the Agent.
"Amendment Date" means the date on which the conditions precedent
contained in Section 2.01 of this Agreement are fulfilled or waived and the
modifications to the Original Loan Agreement contemplated by this Agreement
become effective.
"Assignment and Acceptance" means the Assignment and Acceptance
Agreement dated as of May 1, 1997 between CIT and Fleet concerning the purchase
by Fleet from CIT of an interest in the Loan; in form and substance
satisfactory to the Lenders.
"Borrowers" mean Bayard and Trend and their successors and permitted
assigns.
"Business Day" means a day other than a Saturday or a Sunday or a day
on which commercial banks are authorized to be closed in the State of New York
or the State of Texas.
"Cash Flow Coverage Ratio" means the ratio of Cash Flow to Projected
Debt Service. For this ratio, "Cash Flow" means, for any period, the sum of
Bayard's consolidated net income plus depreciation, depletion and amortization,
less dividends paid and extraordinary items of income or loss (as determined in
accordance with generally accepted United States accounting principles) in the
prior four quarters.
Cash Flow will be calculated as follows:
(i) as of June 30, 1997, Cash Flow is equal to the product of (x)
actual Cash Flow for the month of June 1997 times (y) twelve;
(ii) as of September 30, 1997, Cash Flow is equal to the sum of (x)
the product of actual Cash Flow for the month of June 1997
times nine, plus (y) the sum of actual Cash Flow for the
months of July, August and September 1997;
(iii) as of December 31, 1997, Cash Flow is equal to the sum of (x)
the product of actual Cash Flow for the month of June 1997
times six, plus (y) the sum calculated in (ii)(y) above, plus
the sum of actual Cash Flows for the months of October,
November and December 1997;
(iv) as of the March 31, 1998, Cash Flow is equal to the sum of (x)
the product of the actual Cash Flow for the month of June 1997
times three, plus (y) the sum calculated in (iii)(y) above,
plus the sum of the Cash Flows for the months of January,
February and March 1998; and
(v) as of June 30, 1998 and for all subsequent periods; Cash Flow
is equal to the sum of the actual Cash Flow for the then
preceding twelve months.
2
<PAGE> 6
"Collateral Value" has the meaning set forth in Section 1.06(a)(iii)
hereof.
"Commitment" means USD 30,577,131.15; subject, however to reduction
pursuant to Section 1.01(e) below. CIT's portion of the Commitment on the
Amendment Date shall be 77.107% and Fleet's portion of the Commitment on the
Amendment Date shall be 22.893%. Both portions of the Commitment shall be
subject to recalculation pursuant to Section 1.01(g) below.
"Dollars" or "USD" means lawful currency of the United States of
America.
"Event of Default" has the meaning set forth in Article IV hereof.
"Excluded Income Taxes" has the meaning set forth in Section 1.05(a)
hereof.
"Fair Market Value" has the meaning set forth in Section 1.06(a)(iv)
hereof.
"Governmental Agencies" means any government or any state, department
or other political subdivision thereof or governmental body, agency, authority,
department or commission having jurisdiction over either Borrower or their
properties (including without limitation any court or tribunal) exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any corporation, partnership or other entity
directly or indirectly owned by the foregoing.
"Hazardous Substances" means petroleum and used oil, or any other
pollutant or contaminant, hazardous, dangerous or toxic waste, substance or
material as defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. Sec. 9601, et seq.
(hereinafter called "CERCLA"); the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Sec. 6901, et seq. (hereinafter called "RCRA"); the Toxic
Substances Control Act, as amended, 15 U.S.C. Sec. 2601, et seq. (hereinafter
called "TSCA"); the Hazardous Materials Transportation Act, as amended, 49
U.S.C. Sec. 1801, et seq. (hereinafter called "HMTA"); the Oil Pollution Act of
1990, Pub.L. No. 101-380, 104 Stat. 484 (1990) (hereinafter called "OPA"); or
any other statute, law, ordinance, code or regulation of any Governmental
Agency relating to or imposing liability or standards of conduct concerning the
use, production, generation, treatment, storage, recycling, handling,
transportation, release, threatened release or disposal of any hazardous,
dangerous or toxic waste, substance or material, currently in effect or at any
time hereafter adopted.
"Intercreditor Agreement" means the Intercreditor Agreement dated as
of May 1, 1997 among the Lenders and the Agent in form and substance
satisfactory to the Lenders.
"Interest Period" has the meaning set forth in Section 1.04(d) hereof.
"Interest Rate" has the meaning set forth in Section 1.04(b) hereof.
3
<PAGE> 7
"LIBOR Rate" means the one-month rate of interest per annum at which
deposits in Dollars are offered to major banks in the London interbank market
at approximately 11:00 a.m. (London time), as reported and published in the
Wall Street Journal for the 15th day of each month, or, if the 15th day of the
month is not a day for which the Wall Street Journal reports LIBOR, then on the
first preceding day on which the Wall Street Journal reports the LIBOR and
shall become effective as of the first day of the succeeding calendar month and
shall continue in effect to, and including, the last day of such Month.
"Loan" means the Term Loan made pursuant to Section 1.01 of this
Agreement.
"Loan Documents" means the Notes, this Agreement, the Security
Agreements and the Intercreditor Agreement.
"material adverse effect" means having a material adverse effect on
the business, properties or condition (financial or otherwise) of the Borrowers
and their subsidiaries taken as a whole.
"Maturity Date" means March 31, 2002.
"Mortgage" means the Oklahoma mortgage from Trend to the Agent
covering the property known as the El Reno yard located in Canadian County,
Oklahoma; in form and substance satisfactory to the Agent.
"Non-consolidated Subsidiary" means a subsidiary of either Borrower
whose assets are not subject to the Security Agreements and which has debt that
is non-recourse to the Borrowers or the Borrowers' assets.
"New Equity" means the new equity investment for Bayard from
Chesapeake Energy Corporation ("Chesapeake") in the amount of USD 7,000,000.00
and from Energy Spectrum Partners LP ("Energy Spectrum") in the amount of USD
980,000.00 and any additional equity investment actually provided by Chesapeake
or Energy Spectrum pursuant to the Securities Purchase Agreement among Bayard,
Chesapeake and Energy Spectrum dated April 30, 1997 (the "Securities Purchase
Agreement").
"New Subordinated Debt" means the new subordinated debt financing for
Bayard from Chesapeake in the amount of USD 18,000,000.00 and from Energy
Spectrum in the amount of USD 2,520,000.00 and any additional subordinated debt
financing actually provided by Chesapeake or Energy Spectrum pursuant to the
Securities Purchase Agreement or any additional promissory notes issued by
Bayard to pay interest on the New Subordinated Debt.
"Notes" means the promissory notes of the Borrowers in favor of the
Lenders, substantially in the form of Exhibits A-1 and A-2 attached hereto and
made a part hereof.
"Notice of Drawing" means the notice of drawing given by the Borrowers
pursuant to Section 1.02(d), substantially in the form of Exhibit B attached
hereto.
4
<PAGE> 8
"Orderly Liquidation Value" has the meaning set forth in Section
1.06(a)(iv) hereof.
"Payment Date" has the meaning set forth in Section 1.04(a) hereof.
"Prepayment Premium" means the prepayment premiums required by Section
1.06 hereof.
"Prime Rate" means with respect to any Interest Period, the rate
publicly announced in New York, New York from time to time as the prime rate of
The Chase Manhattan Bank (or any successor thereof) ("Chase"). The Prime Rate
shall be determined by the Lender at the close of business two (2) Business
Days before the applicable date of Loan Advance or a Payment Date, as the case
may be, and shall be effective to but not including the next applicable Payment
Date. The Prime Rate is not intended to be the lowest rate of interest charged
by Chase or the Lenders in connection with extensions of credit to debtors.
"Projected Debt Service" means the sum of the current portion of each
Borrower's long term debt and capitalized lease obligations coming due in the
following four quarters, including any maturities associated with the Fleet
Credit Facility. Both Cash Flow and Projected Debt Service shall exclude the
Cash Flow and Projected Debt Service attributable to any Non-consolidated
Subsidiary.
"Responsible Officer" means, as to either Borrower, its chief
executive officer, chief financial officer or any other officer having
principal responsibility for the financial affairs of such company.
"Rigs" means all land drilling rigs now owned or hereafter acquired by
either Borrower and all metal products, machinery, equipment, materials or
other goods of any description whatsoever, used or acquired for use by either
Borrower and all pumps, drilling equipment, drill pipe, machinery, equipment,
supplies, parts and other goods of any description whatsoever installed in or
affixed to or to be used in connection with any Rig, or acquired for
installation on, affixation to, or use in connection with any Rig, other than
the top drives referred to in Section 3.02(k)(i) below.
"Security Agreements" means the security agreement between CIT and
Bayard dated as of December 10, 1996, as amended by Amendment No. 1 (as so
amended, the "Original Security Agreement") and the security agreement dated as
of May 1, 1997 between the Agent and Trend covering the Rigs owned by Trend,
Trend's accounts receivable, inventory and general intangibles (the "Trend
Security Agreement") in form and substance satisfactory to the Agent.
"Tangible Net Worth" means, at a particular date, the sum of the
Borrowers' capital stock (excluding treasury stock), warrants, surplus
(including earned surplus, capital surplus and the balance of the current
profit and loss account not transferred to surplus), the New Subordinated Debt
and other debt that is specifically subordinated to the Loan on the terms
acceptable to the Lenders accounted on a consolidated basis appearing on a
consolidated
5
<PAGE> 9
balance sheet prepared in accordance with generally accepted United States
accounting principles as of the date of determination, excluding, however, from
the determination, all inter-company transactions and after deducting therefrom
the net book value of all assets (after deducting any reserves applicable
thereto) which would be treated as intangibles under generally accepted United
States accounting principles (including, without limitation, such items as
goodwill, trademarks, trade names, patents and licenses, franchises and
operating rights) and excluding the amount of the Borrowers' equity investment
in any Non-consolidated Subsidiary.
"Taxes" has the meaning set forth in Section 1.05(a) of this
Agreement.
"Term Loan" has the meaning set forth in Section 1.01 of this
Agreement.
"Term Loan Advance" means an Advance under Section 1.01(b) of this
Agreement.
"Term Loan Period" means the period of time beginning on the date of
this Agreement and ending on December 31, 1997.
"Total Liabilities" means indebtedness of the Borrowers on a
consolidated basis which would in accordance with generally accepted United
States accounting principles be classified as current and long term liabilities
of a corporation conducting a business the same as or similar to the Borrowers,
but excluding the New Subordinated Debt and other debt that is specifically
subordinated to the Loan on terms acceptable to the Agent and total liabilities
of any Non-consolidated Subsidiary.
"Total Loss" has the meaning set forth in Section 1.06(a) of this
Agreement.
ARTICLE I.
THE LOAN
Section 1.01 (a) Subject to the terms and conditions of Section 2.01
of this Agreement, each Lender agrees, severally and not jointly, to make its
percentage share of the Commitment available to the Borrowers by making
Advances to the Borrowers in an aggregate principal amount equal to the lesser
of (1) Collateral Value determined in accordance with Section 1.06(a)(iii) and
as substantiated by the appraisal to be delivered to the Lender pursuant to
Section 2.02(b) hereof and (2) the Commitment.
(b) Advances made under this Agreement are referred to as the
"Term Loan". All Advances shall be advanced and made ratably by the Lenders in
accordance with each Lender's portion of the Commitment on the date the Advance
is made.
(c) All Term Loan Advances shall be used by the Borrowers for the
purchase of additional Rigs and equipment or the refurbishment of such Rigs and
equipment and for
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working capital purposes. Each Term Loan Advance shall be in an amount of at
least One Million United States Dollars (USD 1,000,000.00) and no more than two
Term Loan Advances shall be made by the Lenders during any thirty (30) calendar
days.
(d) The Borrowers shall make a request for a Term Loan Advance by
sending to the Lenders a written Notice of Drawing not later than 11:00 a.m.,
New York time, three (3) Business Days prior to the date such Advance is
requested setting forth the Business Day on which the Term Loan Advance is
required, the amount of the requested Advance, and the bank account or accounts
to which the Advance is to be remitted. All Notices of Drawing shall be
irrevocable.
(e) Pursuant to the Agreement to Purchase and Lease dated as of
May 1, 1997 (the "Agreement to Purchase and Lease") between CIT and Bayard, CIT
has agreed to purchase from Bayard two (2) land drilling rigs (the "New Rigs")
and to lease the New Rigs to Bayard for a term of seven (7) years (the
"Lease"). On the date or dates of the purchase and lease of the New Rigs, the
amount outstanding under the Loan and the undrawn but available principal
amount of the Commitment allocable to CIT shall be automatically, and without
the need for further amendment of this Agreement, reduced by the purchase price
paid by CIT for the New Rigs. If the Borrowers have received Term Loan
Advances before the date or dates of the purchase of the New Rigs which would
make the outstanding amount of the Term Loan greater than would be otherwise
allowed under this Section 1.01(e), such amounts shall be repaid by the
Borrowers to CIT simultaneously with the purchase of the New Rigs by CIT and
without Prepayment Premium.
(f) All Advances made prior to the Amendment Date shall continue
under this Agreement. Any Advances made as Revolving Loan Advances under the
Original Loan Agreement and outstanding on the Amendment Date shall be
automatically converted on the Amendment Date to Term Loan Advances.
(g) (i) Any reduction of the Commitment available to be drawn by
the Borrowers or any amounts prepaid pursuant to Section 1.01(e) above shall be
allocated to CIT's portion of the Commitment available to be drawn or CIT's
portion of amounts outstanding, respectively.
(ii) After such allocation, new percentages for each Lender
shall be calculated by dividing such Lender's resulting shares of the
outstanding Loan and the Commitment available to be drawn by the aggregate
amount of all Advances and unused Commitments of all Lenders after making the
reductions required by Section 1.01(g)(i) above. The Agent shall notify all
other parties to this Agreement of such new percentages in writing.
(h) The obligations of the Lenders hereunder are several and not
joint; therefore, notwithstanding anything herein to the contrary:
(i) no Lender shall be required to make Advances at any one
time outstanding in excess of such Lender's portion of the Commitment;
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<PAGE> 11
(ii) if a Lender fails to make an Advance as and when required
hereunder and the Borrowers subsequently make a repayment on the Loan, such
repayment shall be divided among the non-defaulting Lenders in accordance with
their respective portions of the Commitment until each Lender has its portion
of the Commitment of the outstanding Loan, after which the balance of such
repayment shall be divided among all of the Lenders in accordance with their
respective portions of the Commitment; and
(iii) the failure of any Lender to make any Advance shall not
in itself relieve any other Lender of its obligation to lend hereunder
(provided, that no Lender shall be responsible for the failure of any other
Lender to make an Advance such other Lender is obligated to make hereunder).
(i) All Advances made by a Lender to the Borrowers shall be
evidenced by a single Note dated as of the Amendment Date, delivered and
payable to such Lender in a principal amount equal to such Lender's portion of
the Commitment as of the Amendment Date.
Section 1.02 Term Loan Repayment. The Borrowers shall jointly and
severally repay the principal amount of each Term Loan Advance in equal
consecutive monthly installments each such installment to be paid by the
Borrowers to the Lenders on a Payment Date with the first Payment Date for all
Term Loan Advances being May 31, 1997 and the first Payment Date for each
subsequent Term Loan Advance being the Payment Date in the month following the
date of such Advance and ending on the Maturity Date. The amount of principal
to be repaid on each Payment Date shall be the amount necessary to amortize
over the remaining number of Payment Dates following such Advance the principal
amount of each Term Loan Advance; provided, however, that the final installment
shall be in an amount sufficient to discharge all outstanding amounts due under
such Advance. No amount of any Term Loan Advance, once repaid or prepaid, may
be reborrowed hereunder.
Section 1.03 Pro-Rata Treatment. Except to the extent otherwise
provided herein: (a) each borrowing from the Lenders under Section 1.01 above
shall be made and each payment of fees other than those referred to in Sections
1.08 and 1.09 below shall be made and applied for the account of the Lenders
pro rata, according to each Lender's portion of the Commitment as of the date
of borrowing or payment; and (b) each payment or prepayment by the Borrowers of
principal of or interest on the Loans shall be made for the account of the
Lenders pro rata in accordance with such Lender's portion of the Commitment as
of the date of such payment or prepayment.
Section 1.04 Interest.
(a) The Borrowers shall jointly and severally pay interest, in
arrears, on the unpaid principal amount of the Loan from the Closing Date until
the principal amount of the Loan is paid in full on the last day of each
calendar month, commencing December 31, 1996 up to and including the Maturity
Date (each such date a "Payment Date") at a rate of interest per annum
(computed on the basis of a 365-day year and actual days elapsed) equal to the
applicable
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<PAGE> 12
Interest Rate; provided, however, that all interest accrued on the Loan and
unpaid on the Maturity Date shall be paid on the Maturity Date.
(b) The term "Interest Rate" shall mean, for an Interest Period
(as hereinafter defined), an interest rate per annum at either the rate
certified by the Lender to be (i) the LIBOR Rate, plus four and one quarter
percent (4.25%) or (ii) the Prime Rate plus two percent (2%), at each
Borrower's option.
(c) (i) The Borrowers may elect to pay interest on the Advance
made by CIT hereunder at either the LIBOR Rate or the Prime Rate on the
following terms:
A. If no election is received by Agent, the Borrowers
shall pay interest on the Loan at the LIBOR Rate.
B. Any interest rate election of the Borrowers must be
made by written notice three (3) Business days in
advance of a Payment Date and may be made once in any
twelve (12) month period.
C. Each interest rate election made by the Borrowers
shall be effective as to all amounts outstanding
under this Agreement for a twelve (12) month period.
(ii) The Borrowers may elect to pay interest on the Advances
made by Fleet hereunder at either the LIBOR Rate or the Prime Rate in
accordance with the terms of the promissory note of the Borrowers issued in
favor of Fleet, the form of which is attached to this Agreement as Exhibit A-2.
(d) If at any time that the Borrowers have elected the LIBOR Rate,
the Agent shall determine that by reason of circumstances affecting the London
interbank market adequate and reasonable means do not exist for ascertaining
the Interest Rate based on the LIBOR Rate for the succeeding Interest Period or
the making or continuance of the Loan at an Interest Rate based on the LIBOR
Rate has become impracticable as a result of a contingency occurring after the
date of this Agreement which materially and adversely affects the London
interbank market, the Agent shall notify the Borrowers that the Interest Rate
shall be the Prime Rate, plus two percent (2%). As used in this Agreement,
"Interest Period" shall mean each respective and successive calendar month
commencing on the last day of the month in which the Closing Date occurs;
provided, however, that no Interest Period shall commence or extend past the
Maturity Date.
(e) Any amount of principal or any other amount due hereunder
which is not paid when due, whether at stated maturity, by acceleration or
otherwise, shall bear interest from the date when due until such amount is paid
in full, payable on demand, at a rate per annum equal at all times to two
percent (2%) above the Interest Rate.
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<PAGE> 13
(f) In no event shall any interest rate provided for in this
Agreement or the Notes exceed the maximum rate permitted by the then applicable
law. It is the intention of the parties hereto to strictly comply with
applicable usury laws; accordingly, it is agreed that, notwithstanding any
provision to the contrary in this Agreement, in the Notes, or in the other Loan
Documents, in no event shall this Agreement, the Notes, or the other Loan
Documents be construed to charge, contract for or require the payment or permit
the collection of interest in excess of the maximum amount permitted by
applicable law. If any such excess interest is contracted for, charged or
received under this Agreement, the Notes or the other Loan Documents, or in the
event that all of the principal balance shall be prepaid, so that under any of
such circumstances the amount of interest contracted for, charged or received
on the principal balance shall exceed the maximum amount of interest permitted
by applicable law, then in such event (i) the provisions of this Section
1.04(f) shall govern and control, (ii) neither the Borrowers nor any other
person or entity now or hereafter liable for the payment thereof shall be
obligated to pay the amount of such interest to the extent that it is in excess
of the maximum amount of interest permitted by applicable law, (iii) any such
excess which may have been collected shall be either applied as a credit
against the then unpaid principal balance or refunded to the Borrowers, at the
option of the Lenders, and (iv) the effective rate of interest shall be
automatically reduced to the maximum lawful contract rate allowed under
applicable law as now or hereafter construed by the courts having jurisdiction
thereof. It is further agreed that without limitation of the foregoing, all
calculations of the rate of interest contracted for, charged or received under
this Agreement, the Notes and the other Loan Documents which are made for the
purpose of determining whether such rate exceeds the maximum lawful contract
rate, shall be made, to the extent permitted by applicable law, by amortizing,
prorating, allocating and spreading in equal parts during the period of the
full stated term of the indebtedness evidenced hereby, all interest at any time
contracted for, charged or received from the Borrowers or otherwise by the
Lenders in connection with such indebtedness; provided, however, that if any
applicable state law is amended or the law of the United States of America
preempts any applicable state law, so that it becomes lawful for the Lenders to
receive a greater simple interest per annum rate than is presently allowed, the
Borrowers agree that, on the effective date of such amendment or preemption as
the case may be, the lawful maximum hereunder shall be increased to the maximum
simple interest per annum rate allowed by the higher of the amended state law
or the law of the United States of America.
Section 1.05 Payments.
(a) The payment obligations of the Borrowers under the Notes and
all other amounts payable under this Agreement shall be paid to the Lenders in
proportion to their percentage of the Commitment at the time of such payment at
such address as the Lenders may designate (not less than one (1) Business Day
prior to the due date therefor), not later than the close of business on the
due date thereof, in lawful money of the United States. All payments shall be
made (i) without set-off, counterclaim or condition and (ii) free and clear of,
and without deduction for or on account of, any present or future taxes,
levies, duties, imposts, charges, fees, deductions or withholdings of any
nature ("Taxes"), unless the Borrowers are required by law or regulation to
make payment subject to any Taxes. In the event that the Borrowers are required
by law or regulation to make any deduction or withholding on account of any
Taxes
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<PAGE> 14
from any payment due under this Agreement, then: (a) the Borrowers shall notify
the Lenders promptly as soon as they become aware of such requirement and shall
remit promptly the amount of such Taxes to the appropriate taxation authority,
and in any event prior to the date on which penalties attach thereto; and (b)
such payment shall be increased by such amount as may be necessary to ensure
that the Lenders receive a net amount, free and clear of all Taxes, equal to
the full amount which the Lenders would have received had such payment not been
subject to such Taxes (other than Excluded Income Taxes as such term is defined
below). Notwithstanding the foregoing, the Borrowers shall not be liable for,
or required to pay, any Taxes which are overall income or franchise taxes
imposed at any time on either Lender in the United States of America or any
Governmental Agency ("Excluded Income Taxes"). Each such payment or
reimbursement by the Borrowers shall be net of any credit or the value of any
deduction received by the Lenders thereon to the extent that the same can be
determined by the Lenders (as certified by the Agent to the Borrowers, such
certificate to be conclusive absent manifest error). The Borrowers shall
indemnify the Lenders against any liability of the Lenders in respect of such
Taxes (other than Excluded Income Taxes) and shall supply copies of applicable
tax receipts.
(b) If any payment to be made by the Borrowers shall become due on
a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day.
(c) Each payment to be made on a Payment Date and all prepayments,
Prepayment Premiums, and other payments (other than the fees referred to in
Sections 1.08 and 1.09 below) shall be allocated to the Lenders in proportion
to their percentage of the Commitment at the time of payment and shall be
applied first to the payment of accrued and unpaid interest on the Advance
designated by the Borrowers, then to the payment of all other amounts due under
this Agreement and the other Loan Documents, and the balance shall be applied
to the payment of principal due under the Notes.
(d) The Borrowers shall indemnify the Lenders and the Agent on
demand against all costs, expenses, liabilities and losses (including funding
losses) actually incurred by the Lenders and the Agent sustained or incurred by
the Lenders and the Agent as a result of or in connection with: (a) the
occurrence and/or continuance of any Event of Default (or event which, with the
giving of notice and/or lapse of time or other applicable condition might
constitute an Event of Default); and/or (b) any judgment or order which relates
to any sum due hereunder being expressed in a currency other than the currency
expressed to be due hereunder and as a result of a variation in rates of
exchange between the rate at which such amount is converted into such other
currency for the purposes of such judgment or order and the rate prevailing on
the date of actual payment of such amount pursuant thereto; and/or (c) any
postponement of the Amendment Date or any Advance occurring because of one or
more of the conditions precedent set forth in Article II shall not have been
satisfied or waived; and/or (d) any payment of principal of or interest on the
Notes made on a date which is not a Payment Date. The above indemnities are
separate and independent obligations of each Borrower and apply irrespective of
any indulgence granted by the Lenders or the Agent.
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Section 1.06 Prepayment.
(a) Mandatory Prepayment.
(i) Total Loss or Sale. If there shall have occurred a
Total Loss as herein defined or the sale of a Rig, the value of which
is included in the calculation of Collateral Value set forth in
Section 1.06(a)(iii), on the earlier of (x) the date insurance or sale
proceeds are received or (y) seventy five (75) days after the date of
occurrence of the Total Loss or sale, the Borrowers shall either
purchase a replacement Rig, or other drilling equipment acceptable to
the Agent which is, as determined by the appraiser referred to in
Section 1.06(a)(iii) below, of comparable or greater value to the lost
or sold Rig, which replacement rig will be added to the lien of the
Original Security Agreement or the Trend Security Agreement, as
applicable, or, if after giving effect to the release of such lost or
sold Rig from the lien of the Original Security Agreement or the Trend
Security Agreement, as applicable, the amount outstanding under the
Loan is greater than the Collateral Value, (A) prepay the outstanding
principal balance under the Notes in an amount equal to the amount by
which the outstanding principal amount of the Loan on the date of
prepayment exceeds the Collateral Value on such date, and (B) pay
accrued interest thereon to the date of such prepayment together with
any other amount due hereunder or under any Loan Document. The
Lenders shall apply payments received pursuant to this Section
1.06(a)(i) in accordance with Section 1.05(c) hereof, provided,
however, that the principal repayments shall be applied so that the
remaining installments of principal of the selected Advance, if any,
are reduced on a pro rata basis, such reduction to be confirmed by the
Agent in a certificate delivered to the Borrowers which certificate
shall be conclusive absent manifest error. Mandatory Prepayments made
by the Borrowers pursuant to this Section 1.06(a) shall include a
Prepayment Premium as follows:
(1) If made on or before December 31, 1997 - three
percent (3%) of the aggregate principal amount
prepaid;
(2) If made between January 1, 1998 and December 31, 1998
- two percent (2%) of the aggregate principal amount
prepaid;
(3) If made between January 1, 1999 and December 31, 1999
- one percent (1%) of the aggregate principal amount
prepaid; or
(4) If made after December 31, 1999 - no Prepayment
Premium.
(ii) "Total Loss" means in respect of a Rig (i) the actual
or constructive or compromised or arranged total loss of such Rig; or
(ii) the requisition for title or other compulsory acquisition of such
Rig otherwise than by requisition for rental; or (iii) the seizure,
attachment, detention or confiscation of such Rig by any government or
by persons acting or purporting to act on behalf of any government
unless such Rig is released from such seizure, attachment, detention
or confiscation within thirty (30) days
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of the occurrence thereof. A Total Loss shall be deemed to have
occurred (a) in the event of an actual total loss of a Rig, on the
date of such loss, (b) in the event of damage to a Rig which results
in a constructive or compromised or arranged total loss of such Rig,
on the date of the occurrence of the event giving rise to such damage,
or (c) in the case of any event referred to in clauses (ii) or (iii)
above, on the date of the occurrence of such event. In the event of
any Total Loss of a Rig, the Borrowers shall give written or
telegraphic notice to the Agent not later than ten (10) days after a
Responsible Officer of either Borrower has actual knowledge of such
occurrence.
(iii) Collateral Value. At the end of the Term Loan Period
and on other dates as may be requested by either Lender, but not more
than once in any twelve (12) month period (unless required by Section
2.01(t) or Section 2.02(b) below, the Agent shall arrange to have the
Fair Market Value and the Orderly Liquidation Value of each of the
Rigs determined at the Borrowers' expense by an independent appraisal
firm chosen by the Agent and reasonably acceptable to the Borrowers.
Each such valuation shall be based on the Fair Market Value of each
Rig and the oil field tubular or drill pipe attributable to such Rig.
The most recent determination of the lesser of (A) 50% of the
aggregate Fair Market Values of all of the Rigs that are working or
available for work (a "Working Rig") or (B)75% of the aggregate
Orderly Liquidation Values of all of the Working Rigs is hereinafter
referred to as the "Collateral Value". If, after any Advance, the
outstanding principal amount of the Loan shall exceed the Collateral
Value, then the Borrowers shall either prepay within five days of the
Agent's demand the amount of the Loan necessary to restore the ratio
referred to herein together with payment of accrued interest thereon
or provide additional security for the Loan which shall be acceptable
in the sole opinion of the Lenders for these purposes. The Lenders
shall apply payments received under this Section 1.06(a)(iii) in
accordance with Section 1.05(c) hereof, provided, however, that the
principal repayments shall be applied so that the remaining
installments of principal of the selected Advance, if any, shall be
reduced on a pro rata basis, such reduction to be confirmed by the
Agent in a certificate delivered to the Borrowers which certificate
shall be conclusive absent manifest error. No Prepayment Premium
shall be payable with respect to any prepayment required by this
Section 1.06(a)(iii).
(iv) Fair Market Value. The "Fair Market Value" of any
Rig shall be the value determined by an independent appraisal firm
chosen by the Agent in accordance with clause (ii) above on the basis
of an arms-length purchase by a willing buyer from a willing seller
and without consideration of any selling expenses, drilling contract,
or other rig employment contract. The "Orderly Liquidation Value" of
any Rig shall have the meaning customarily attributed to it in the
equipment appraisal industry at the time of the valuation, less the
estimated marshalling, stacking, reconditioning and sale expenses
designed to maximize the resale value of such Rig as determined by the
appraisal firm referred to above). The appraisal firm's valuation
shall be made with or without physical inspection at the Agent's
discretion; provided however, that no more than one physical
inspection shall be permitted in any one twelve (12) month period.
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(b) Voluntary Prepayment. (i) Subject to Section 3.02(aa) below,
after December 31, 1999, the Borrowers may prepay from the proceeds of a loan,
other than a loan made pursuant to the Securities Purchase Agreement, made
without the participation of CIT, in full or in part in amounts of not less
than USD 500,000.00, its indebtedness under the Notes on the next Payment Date
after giving at least thirty (30) Business Days prior notice of such
prepayment. Prepayments made between January 1, 2000 and December 31, 2000
shall include a premium (the "Prepayment Premium") in an amount equal to three
percent (3%) of the aggregate principal amount prepaid. Prepayments made
between January 1, 2001 and the Maturity Date shall include a Prepayment
Premium in an amount equal to two percent (2%) of the aggregate principal
amount prepaid. If following a prepayment under this Section 1.06(b)(i), the
amount outstanding under the Loan is less than Collateral Value, the Agent
agrees to release from the lien of the Original Security Agreement or the Trend
Security Agreement, as applicable, such Rig or Rigs as will result in
Collateral Value equalling the amount outstanding under the Loan.
(ii) After December 31, 1997, the Borrowers may prepay from the
proceeds of an initial public offering or private offering of their equity
securities, of USD 10,000,000.00 or more, up to fifty (50%) of amounts
outstanding under the Notes on the next Payment Date after giving at least
thirty (30) days prior notice of such prepayment. Prepayments made between
January 1, 1998 and December 31, 1998 shall include a Prepayment Premium in an
amount equal to three percent (3%) of the aggregate principal amount prepaid.
Prepayments made between January 1, 1999 and December 31, 1999 shall include a
Prepayment Premium of two percent (2%) of the aggregate principal amount
prepaid. Prepayments made between January 1, 2000 and December 31, 2000 shall
include a Prepayment Premium of one percent (1%) of the aggregate principal
amount prepaid. Prepayments made after December 31, 2000 shall include no
Prepayment Premium. If following a prepayment under this Section 1.06(b)(ii),
the amount outstanding under the Loan is less than the Collateral Value, the
Agent, subject to the consent of Fleet, agrees to release from the lien of the
Original Security Agreement or the Trend Security Agreement, as applicable,
such Rig or Rigs as will result in Collateral Value equalling the amount
outstanding under the Loan. The amount of any prepayment under this Section
1.06(b)(ii) cannot exceed the net proceeds to the Borrowers of any such
offering. If Fleet does not consent to the release of collateral described
above and the Borrower elects to prepay the Fleet Credit Facility and all
amounts due to Fleet under this Agreement (as provided in Section 4.2.3 of the
Fleet Credit Facility) such prepayments shall not be made by the Borrower
without the consent of CIT.
(iii) Subject to 3.02(l) below, at any time during the term of this
Agreement if all or substantially all of the stock or assets of the Borrowers
are sold to another entity or the Borrowers merge with another entity and is
not the surviving entity, the Borrowers may prepay in full or in part in
amounts of not less than USD 500,000.00, its indebtedness under the Notes on
the next Payment Date after giving at least thirty (30) days prior notice of
such prepayment. Prepayments made under this Section 1.06(b)(iii) shall
include a Prepayment Premium as follows:
(A) If made between January 1, 1997 and December 31, 1997
- five percent (5%) of the aggregate principal amount
prepaid;
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<PAGE> 18
(B) If made between January 1, 1998 and December 31, 1998
- four percent (4%) of the aggregate principal amount
prepaid;
(C) If made between January 1, 1999 and December 31, 1999
- three percent (3%) of the aggregate principal
amount prepaid;
(D) If made between January 1, 2000 and December 31, 2000
- two percent (2%) of the aggregate principal amount
prepaid; or
(E) If made after January 1, 2001 - one percent (1%) of
the aggregate principal amount prepaid.
(iv) The Lenders shall apply payments received pursuant to this
Section 1.06(b) in accordance with Section 1.05(c) hereof, provided, however,
that the principal repayments shall be applied so that the remaining
installments of principal of the selected Advance, if any, shall be reduced on
a pro rata basis, such reduction to be confirmed by the Agent in a certificate
delivered to the Borrowers which certificate shall be conclusive absent
manifest error.
Section 1.07 Security. All amounts due hereunder and under the Notes
shall be secured by the Security Agreements. As further security for the
repayment of all amounts due under this Agreement and the Notes, the Lenders
and the Agent will execute and deliver the Intercreditor Agreement and the
Borrowers will consent to its terms.
Section 1.08 Amendment Fee. The Borrowers shall jointly and severally
pay to CIT an amendment fee in an amount of USD 30,000.00 to be paid on the
Amendment Date.
Section 1.09 Agency Fee. The Borrowers jointly and severally agree to
pay the Agent an annual agency fee of USD 25,000.00 for each of the three (3)
years commencing January 1, 1998, payable in advance on the first Business Day
in each such year.
Section 1.10 Sharing of Payments, Etc. The Borrowers agree that, in
addition to (and without limitation of) any right of set-off, bankers' lien or
counterclaim a Lender may otherwise have, each Lender shall be entitled, at its
option after an Event of Default has occurred and is continuing to offset
balances held by it for the account of any of the Borrowers at any of its
offices against any principal of or interest on any of such Lender's Advances
to the Borrowers hereunder or any other obligation of the Borrowers hereunder
which is not paid (regardless of whether such balances are then due to the
Borrowers), in which case it shall promptly notify the Borrowers and the Agent
thereof, provided that such Lender's failure to give such notice shall not
affect the validity thereof. If a Lender shall obtain payment of any principal
of or interest on any Advance made by it under this Agreement or other
obligation then due to such Lender hereunder, through the exercise of any right
of set-off or lien granted under Section 5.13 below), bankers' lien,
counterclaim or similar right, or otherwise, it shall promptly purchase from
the other Lenders participations in the Advances made by, or the other
obligations of the Borrowers hereunder of, the other Lenders in such amounts,
and make such other adjustments from time to time as shall be equitable to the
end that all the Lenders shall
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<PAGE> 19
share the benefit of such payment (net of any expenses which may be incurred by
such Lender in obtaining or preserving such benefit) pro-rata in accordance
with their respective portions of the Commitment. To such end all the Lenders
shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must
otherwise be restored. The Borrowers agree, to the fullest extent they may
effectively do so under applicable law, that any Lender so purchasing a
participation in the Advances made by or other obligations hereunder of, the
other Lenders may exercise all rights of set-off, bankers' lien, counterclaim
or similar rights with respect to such participation as fully as if such Lender
were a direct holder of said Advances or other obligations in the amount of
such participation. Nothing contained herein shall require any Lender to
exercise any such right or shall affect the right of any Lender to exercise,
and retain the benefits of exercising, any such right with respect to any other
indebtedness or obligations of the Borrowers to such Lender.
ARTICLE II.
CONDITIONS PRECEDENT
Section 2.01 Conditions Precedent. The effectiveness of the
modifications to the Original Loan Agreement contemplated by this Agreement and
the obligation of the Lenders to make any Advance on the Amendment Date are
subject to the following conditions having been satisfied in the opinion of the
Lenders on or prior to the Amendment Date:
(a) Each of this Agreement and the other Loan Documents shall have
been duly authorized and executed with original counterparts thereof delivered
to the Lenders.
(b) The Borrowers shall have delivered to the Lenders evidence of
good standing, certificates of incumbency and duly certified resolutions of
their Boards of Directors and all such other corporate documentation
authorizing them to enter into the transactions contemplated by this Agreement
and the other Loan Documents.
(c) The Lenders shall have received opinions from Baker & Botts,
L.L.P., counsel to the Borrowers and an opinion of CIT's counsel, Gardere Wynne
Sewell & Riggs, L.L.P., each in form and substance satisfactory to the Lenders.
(d) The representations and warranties contained in Article III of
this Agreement and in each other Loan Document shall be true on the Amendment
Date with the same effect as though such representations and warranties had
been made on and as of such date, and no Event of Default specified in Article
IV hereof and no event which, with the lapse of time or the notice and lapse of
time specified in Article IV hereof, would become such an Event of Default,
shall have occurred and be continuing or shall have occurred at the completion
of the making of the Loan, and the Lenders shall have received satisfactory
certificates signed by Responsible Officers of the Borrowers, as to all
questions of fact involved in this condition.
(e) In connection with the Initial Advance only, the Lenders shall
have received, reviewed and accepted the audited consolidated financial
statements of Trend dated as of the
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period ending on December 31, 1996 prepared in accordance with generally
accepted United States accounting principles.
(f) There shall have been no material adverse change in the
business, financial condition or operations of Bayard and of its subsidiaries
taken as a whole since December 13, 1996.
(g) The Lenders shall have received evidence that the person
specified to act as agent for service of process for the Borrowers, pursuant to
Section 6.03 has agreed to so act.
(h) The Lenders shall have received a certificate of the Borrowers
signed by an officer in charge of environmental affairs and safety as to
compliance by the Borrowers with all environmental, safety and public health
laws and regulations applicable to the Borrowers, without limitation of the
foregoing, all other laws and regulations affecting or relating to the Rigs, in
each case the non-compliance with which would have a material adverse effect.
(i) The Lenders shall have received evidence satisfactory to them
that the Borrowers have good title to any Rigs acquired by them from December
13, 1996 through the Amendment Date in the form of Bills of Sale and officer's
certificates as to freedom from liens other than as permitted by Section
3.02(k) below.
(j) The Borrowers shall have provided evidence of insurance
maintained by the Borrowers and approved by Agent on the Rigs as required by
Article 5 of the Original Security Agreement and the Trend Security Agreement.
(k) Amendment No. 1 to the Original Security Agreement and the
Trend Security Agreement shall have been duly executed and delivered and the
New Security Agreement and the Trend Security Agreement shall create a valid
and perfected lien on the collateral described therein.
(l) Financing statements or other documents necessary to continue
the perfection of the Original Security Agreement or to perfect the Agent's
security interests under the Trend Security Agreement in the States of Texas
and Oklahoma and any other relevant jurisdiction shall have been filed.
(m) The Rigs shall not have been the subject of a Total Loss and
shall not have sustained any material damage to their condition since the date
of the appraisal reports therefor delivered to CIT pursuant to Section 2.01(m)
of the Original Loan Agreement, or materially decreased in value from the value
attributed thereto as set forth in the appraisal report therefor delivered to
CIT pursuant to Section 2.01(m) of the Original Loan Agreement.
(n) The Lender shall have received such other documents and
instruments it may reasonably request necessary to consummate the transactions
described in this Agreement, in each case in form and substance reasonably
satisfactory to it.
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(o) The Agent shall have received evidence of the acquisition by
the Borrowers of all of the issued and outstanding shares of Trend.
(p) The Agent shall have received evidence of receipt by Bayard of
the first USD 7,980,000.00 in New Equity and the first USD 20,520,000.00 in New
Subordinated Debt.
(q) The Agent shall have received evidence of the repayment of all
of Trend's indebtedness for borrowed money.
(r) The Agent shall have received evidence of the execution and
delivery by the Borrowers and Fleet of a revolving credit agreement in an
amount of no less than USD 10,000,000.00 (the "Fleet Credit Facility").
(s) The Agent shall have received evidence of the execution and
delivery by Bayard and CIT of the Agreement to Purchase and Lease.
(t) If an Advance is made on the Amendment Date and such Advance
is used by the Borrowers to acquire additional Rigs, which the Borrowers wish
to be included in Collateral Value, the Agent shall have received a Fair Market
Value and Orderly Liquidation Value report as described in Section 1.06
(a)(iii) above for such additional Rigs.
(u) The Mortgage shall have been duly executed and delivered and
all filings in the State of Oklahoma necessary to perfect the lien created by
the Mortgage shall have been provided for. Failure to complete such filings
within thirty (30) days of the Amendment Date so that the Mortgage shall
constitute a valid, perfected and first priority lien on the real property
described therein shall be an Event of Default under Article IV.B below;
provided, however, that no notice by the Agent or passage of time following
such thirty (30) day period shall be necessary.
(v) The Agent shall have received from Chesapeake Energy
Corporation, a duly executed no-offset letter in form and substance acceptable
to the Agent.
(w) The Agent shall have received evidence of the execution and
delivery of the Assignment and Acceptance by CIT and Fleet and the purchase by
Fleet of the interest referred to in such agreement.
(x) The Agent shall have received evidence of the lease by Trend
of all of its drilling rigs to Bayard on terms, and in form, acceptable to the
Agent.
Section 2.02 Conditions to Subsequent Advances. The Lenders'
obligation to make Advances subsequent to any Advances made on the Amendment
Date is subject to the following conditions having been satisfied in the
opinion of the Lenders on or prior to the date of each such subsequent Advance:
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(a) Certification by a Responsible Officer that no Event of
Default or any event which with the giving of notice or the passage of time
would become an Event of Default has occurred and is continuing.
(b) If the proceeds of any such subsequent Advance shall be used
by the Borrowers for the acquisition of additional Rigs, the Agent shall have
received the materials for such additional drilling Rigs or drilling equipment
comparable to that required by Section 2.01(i) and (j) above and if the
Borrowers wish to include such Rigs in Collateral Value, a Fair Market Value
and Orderly Liquidation Value report as described in Section 1.06(a)(iii) above
for such Rigs.
Section 2.03 Waiver of Conditions Precedent. All of the conditions
precedent contained in this Article II are for the sole benefit of the Lenders
and the Lenders may waive any or all of them in their absolute discretion.
ARTICLE III.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01 Representations of the Borrowers. Each Borrower
represents and warrants that:
(a) It is a corporation, duly organized and validly existing, in
good standing under the laws of the state of its incorporation and has the
requisite power and authority (i) to carry on its business as presently
conducted, (ii) to enter into and perform its obligations under each Loan
Document to which it is a party, (iii) to borrow moneys, and (iv) to grant a
security interest on the Rigs and give the security provided in the Original
Security Agreement, the New Security Agreement and the Trend Security
Agreement, respectively.
(b) The execution, delivery and performance by such Borrower of
each Loan Document, and any other instrument or agreement provided for by this
Agreement, have been duly authorized by all necessary corporate action, do not
require stockholder approval other than such as has been duly obtained or
given, do not or will not contravene any of the terms of its articles of
incorporation or by-laws, and will not violate any provision of law or of any
order of any court or governmental agency if such violation would result in a
material adverse effect, or constitute (with or without notice or lapse of time
or both) a default under, or result (except as contemplated by this Agreement)
in the creation of any security interest, lien, charge or encumbrance upon any
of its properties or assets pursuant to, any agreement, indenture or other
instrument to which it is a party or by which it may be bound; this Agreement
and each Loan Document to which it is a party has been duly executed and
delivered by such Borrower and constitutes its legal, valid and binding
agreement or instrument, enforceable in accordance with the respective terms
thereof.
(c) There are no suits or proceedings pending or to its knowledge
threatened against or affecting such Borrower which if adversely determined
would have a material adverse effect.
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(d) The principal place of business of such Borrower and the place
where all records relating to the transactions contemplated hereby, including
records relating to the operations of the Rigs are kept is 4005 Northwest
Expressway, Suite 400E, Oklahoma City, Oklahoma 73116.
(e) Other than such as have been obtained, no license, consent,
approval of or filing or registration with any Governmental Agency or other
regulatory authority is required for the execution, delivery and performance of
this Agreement or any Loan Document or any instrument contemplated herein or
therein. Such Borrower is the holder of all certificates and authorizations of
governmental authorities required by law to enable it to engage in the business
transacted by it.
(f) No part of the proceeds of the Loan will be used for any
purpose that violates the provisions of any of Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System or any other regulation of
such Board of Governors. Such Borrower is not engaged in the business of
extending credit to others for the purpose of purchasing or carrying margin
stock within the meaning of Regulations G, T, U and X of the Board of Governors
of the Federal Reserve System. If requested by the Agent, such Borrower will
furnish to the Lenders in connection with the Loan hereunder a statement in
conformity with the requirements of Federal Reserve Form U-1 referred to in
said Regulation U. Such Borrower is not an "investment company" or a company
"controlled" by an "investment company" (as each of such terms is defined or
used in the Investment Company Act of 1940, as amended). No proceeds of the
Loan will be used to acquire any security in any transaction which is subject
to Sections 13 and 14 of the Securities Exchange Act of 1934, as amended.
(g) The Rigs are and will be on the Amendment Date owned by the
Borrowers, free and clear of all liens, charges and rights of others except as
provided in the Security Agreements or as permitted by Section 3.02(k) below.
All of the Rigs are mobile equipment which are not designed to be permanently
used in any one location and none of the Rigs are certificated as motor
vehicles under the laws of any jurisdiction.
(h) It has filed or caused to be filed all tax returns required by
the United States of America, the state of its principal place of business and
the states where its business or operations require such filings which are
required to be filed and has paid or caused to be paid all taxes as shown on
such returns or on any assessment received by it to the extent that such taxes
have become due and except as to such taxes being contested in good faith by
appropriate proceedings for which adequate reserves are being maintained. Such
Borrower has established reserves to the extent believed by it to be adequate
for the payment of additional taxes for years which have not been audited by
the respective tax authorities.
(i) On the Amendment Date the Borrowers have no subsidiaries
except that Trend is a subsidiary of Bayard.
(j) (i) Such Borrower has duly complied with, and the Rigs
and its other properties and operations are in compliance with, the
provisions of all applicable
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environmental, health and safety laws, codes and ordinances and all
rules and regulations promulgated thereunder of all Governmental
Agencies, the non-compliance with which would have a material adverse
effect, unless such compliance would violate the laws or regulations
of the jurisdiction in which the Rigs are operating.
(ii) As of the date of this Agreement, such Borrower has
received no notice from any Governmental Agency, and has no knowledge,
of any fact(s) which constitute a violation of any applicable
environmental, health or safety laws, codes or ordinances, and any
rules or regulations promulgated thereunder of all Governmental
Agencies, which relate to the use or ownership of the Rigs or other
properties owned or operated by such Borrower.
(iii) Such Borrower has been issued all required permits,
licenses, certificates and approvals of all Governmental Agencies the
failure to have issued which would result in a material adverse effect
relating to (a) air emissions, (b) discharges to surface water or
ground water, (c) noise emissions, (d) solid or liquid waste disposal,
(e) the use, generation, storage, transportation, treatment, recycling
or disposal of Hazardous Substances or (f) other environmental, health
or safety matters which are material and necessary for the ownership
or operation of the Rigs or other properties owned or operated by such
Borrower and such permits, licenses, certificates and approvals are in
full force and effect on the date of this Agreement.
(iv) Except as disclosed to the Agent in writing, to the
best of such Borrower's knowledge, except in accordance with a valid
governmental permit, license, certificate or approval, there has been
no spill or unauthorized discharge or release of any Hazardous
Substance to the environment at, from, or as a result of any
operations on the Rigs or other properties and operations owned or
operated by such Borrower required to be reported to any Governmental
Agency by such Borrower.
(v) Except as disclosed to the Agent in writing, there
has been no material complaint, compliance order, compliance schedule,
notice letter, notice of citation or other similar notice from any
applicable environmental agency delivered to such Borrower which
concerns the operations of the Rigs or other properties owned or
operated by such Borrower and which would result in a material adverse
effect.
(k) All representations and warranties made by such Borrower
herein or pursuant to any Loan Document or made in any certificate or written
statement delivered pursuant hereto or thereto (i) do not contain any untrue
statement of or omit to state a material fact necessary to make the statements
contained herein or therein not misleading and (ii) shall survive the making of
the Loan hereunder and the execution and delivery to the Lenders of the Notes
and any other Loan Document.
Section 3.02 Covenants of the Borrowers. After the date of execution
of this Agreement and until payment in full of the Notes and the termination of
this Agreement and the other Loan Documents, each Borrower agrees that it will:
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(a) promptly inform the Lenders of any event which constitutes or
will constitute, by giving of notice or lapse of time, or both, an Event of
Default or adversely affect its ability to fully perform its obligations under
this Agreement and the Loan Documents to which it is a party;
(b) pay and discharge, or cause to be paid and discharged, any
taxes, assessments and governmental charges or levies that may be imposed upon
such Borrower or upon its income or profits or upon any of its properties prior
to the date on which penalties attach thereto and all lawful claims which, if
unpaid, when due, might become a lien or charge upon its properties; provided,
however, that this provision shall not be deemed to require payment of any
taxes, assessments, governmental charges, levies or claims while such Borrower
contests the validity thereof by appropriate proceedings in good faith and so
long as it shall have set aside on its books adequate reserves with respect
thereto;
(c) preserve and maintain, or cause to be preserved or maintained,
its existence in good standing in the state of its incorporation and in all
other jurisdictions where it is currently conducting business and is required
to be authorized to so conduct its business.
(d) file or cause to be filed in such offices as shall be required
or appropriate under any applicable Uniform Commercial Code of any State or any
other statute of any other jurisdiction, and in such manner and form as the
Agent may require or as may be reasonably necessary or appropriate under
applicable law, any financing statement or statements or other instruments that
may be reasonably necessary or desirable or that the Agent may request in order
to create, perfect, preserve, continue, validate or satisfy the Agent's liens
on and security interests and rights in collateral arising out of or related to
this Agreement and any Loan Document;
(e) promptly notify the Agent of any proposed change in its name
or its assumed name, location of its registered place of business or the office
where its records are kept or any principal place of business stated in Section
3.01(d) hereof;
(f) promptly obtain and upon the reasonable request, deliver to
the Agent all authorizations, approvals, consents and licenses and renewals
thereof required under any applicable law or regulation with respect to this
Agreement, the Loan Documents, and the ownership or operation of the Rigs which
are the responsibility of such Borrower and it shall comply with the terms of
the same except where non-compliance would not result in a material adverse
effect;
(g) promptly notify the Lenders of any suit or proceedings brought
against such Borrower or, to the knowledge of such Borrower, threatened against
or affecting it which, if adversely determined, would have a material adverse
effect;
(h) upon the request of the Agent give the Lenders or the Agent or
any representative of the Lenders or the Agent access during normal business
hours to, and permit the Lenders or the Agent or such representative to
inspect, all properties belonging to such
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Borrower (including, but not limited to, the Rigs) and permit such
representative to examine, copy and make extracts from such books, records and
documents in the possession of such Borrower, relating to the affairs of such
Borrower, as such representative may reasonably request. If requested by such
Borrower, the Lenders and the Agent will enter into their standard
confidentiality agreement respecting the affairs of such Borrower;
(i) comply with and use its best efforts to cause its agents,
contractors and sub-contractors (while such persons are acting within the scope
of their contractual relationship with such Borrower) to so comply with all
material, applicable environmental, health and safety laws, codes and
ordinances, and all rules and regulations promulgated thereunder of all
Governmental Agencies the non-compliance with which would result in a material
adverse effect; and with the terms and conditions of all applicable permits,
licenses, certificates and approvals of all Governmental Agencies now or
hereafter granted or obtained with respect to the Rigs or other properties
owned or operated by such Borrower the non-compliance with which would result
in a material adverse effect; unless such compliance would violate the laws or
regulations of the jurisdictions in which the Rigs are operating.
(i) Such Borrower will use its best efforts and safety
practices to prevent the unauthorized release, discharge, disposal,
escape or spill of Hazardous Substances on or about the Rigs or other
properties owned or operated by such Borrower.
(ii) Such Borrower shall notify the Lenders in writing,
within five (5) Business Days of any of the following events occurring
after the date of this Agreement:
A. Any written notification made by such
Borrower to any federal, state or local environmental agency
required under any federal, state or local environmental
statute, regulation or ordinance relating to a spill or
unauthorized discharge or release of any Hazardous Substance
to the environment at, from, or as a result of any operations
on, the Rigs or other properties and operations owned or
operated by such Borrower if such spill, discharge or release
would result in a material adverse effect.
B. Knowledge by a Responsible Officer of such
Borrower of receipt of service by such Borrower of any
complaint, compliance order, compliance schedule, notice
letter, notice of violation, citation or other similar notice
or any judicial demand by any court, federal, state or local
environmental agency, alleging (i) any spill, unauthorized
discharge or release of any Hazardous Substance to the
environment from, or as a result of the operations on, the
Rigs or other properties owned or operated by such Borrower or
(ii) violations of applicable laws, regulations or permits
regarding the generation, storage, handling, treatment,
transportation, recycling, release or disposal of Hazardous
Substances on or as a result of operations on the Rigs or
other properties and operations owned or operated by such
Borrower if such violation would result in a material adverse
effect.
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C. It is understood by the parties hereto that
the aforementioned notices are solely for the Agent's and the
Lenders' information, may not otherwise be required by any
federal, state or local environmental laws, regulations or
ordinances, and are to be considered confidential information
by the Agent and the Lenders.
D. The term "environmental agency" as used
herein shall include, but not be limited to, the United States
Environmental Protection Agency, the Texas Railroad
Commission, the United States Minerals Management Service, the
United States Department of Transportation (in its
administration of the Hazardous Materials Transportation Act,
49 U.S.C. Sec. 1801, et seq.) and other analogous or similar
Governmental Agencies regulating or administering statutes,
regulations or ordinances relating to or imposing liability or
standards of conduct concerning the generation, storage, use,
production, transportation, handling, treatment, recycling,
release or disposal of any Hazardous Substance.
(iii) Such Borrower hereby agrees to indemnify and hold the
Agent and the Lenders harmless from and against any and all claims,
losses, liability, damages and injuries of any kind whatsoever
asserted against the Agent and the Lenders with respect to or as a
direct result of the presence, escape, seepage, spillage, release,
leaking, discharge or migration from any Rig or other properties owned
or operated by such Borrower of any Hazardous Substance, including
without limitation, any claims asserted or arising under any
applicable environmental, health and safety laws, codes and
ordinances, and all rules and regulations promulgated thereunder of
all Governmental Agencies, regardless of whether or not caused by or
within the control of such Borrower subject to the following:
A. It is the parties' understanding that the
Agent and the Lenders do not now, have never and do not intend
in the future to exercise any operational control or
maintenance over the Rigs or any other properties and
operations owned or operated by such Borrower, nor have they
in the past, presently, or intend in the future to, maintain
an ownership interest in the Rigs or any other properties
owned or operated by either Borrower except as may arise upon
enforcement of the Agent's rights under the Security
Agreements and except as arising under the Lease.
B. Should, however, the Agent or the Lenders
hereafter exercise any ownership interest in or operational
control over the Rigs or any other properties owned or
operated by either Borrower, other than pursuant to the Lease,
but including but not limited to, through foreclosure, then
the above stated indemnity and hold harmless shall be limited
with respect to any actions or failures to act by the Agent or
the Lenders subsequent to exercising such interest or
operational control, to the extent such action or inaction by
the Agent or the Lenders is found by a court or Governmental
Agency with competent jurisdiction to have caused or made
worse any condition for which liability is
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asserted, including but not limited to, the presence, escape,
seepage, spillage, leaking, discharge or migration on or from
the Rigs or other properties owned or operated by either
Borrower of any Hazardous Substance.
C. The indemnity and hold harmless contained in
this Subsection (i) shall not extend to the Agent or CIT in
their capacity as an equity investor in the Borrowers or as an
owner of any property or interest as to which either Borrower
is also owner but only to their capacity as a lender, a
financial lessor, a holder of security interests, or a
beneficiary of security interests.
(j) not, without the prior written consent of the Lenders, (i)
sell, transfer, lend, lease for a period longer than one hundred eighty (180)
days or otherwise dispose of any of the Rigs, the whole or, in the opinion of
the Lenders any substantial part of either Borrower's business, property or
other assets, whether by a single transaction or by a series of transactions,
(related or not); provided, however, that the sale of any equipment with a Fair
Market Value or for a price (whichever is less) of up to USD 1,000,000.00 in
aggregate in any fiscal year shall not require the consent of the Lenders and
the Agent agrees to release such assets from the lien of the Original Security
Agreement or the Trend Security Agreement, (ii) enter into any transaction
which results in the shareholders and option holders of Bayard as of December
10, 1996 having less than 50% of the shares of Bayard unless such change
results from a public offering of Bayard securities; or (iii) transfer any
substantial part of either Borrower's property, assets or business to any other
person, firm or corporation other than transfers between the Borrowers.
(k) not, other than pursuant to or permitted by the Loan Documents
create, assume or permit to exist any encumbrance upon the Rigs, or any of its
property or assets described in the Security Agreements (whether now owned or
hereafter acquired) except:
(i) security interests on top drives to the extent that
such security interests secure the financing by third parties of at
least 80% of the purchase price of top drives; provided, however, that
the aggregate purchase price of top drives shall not exceed USD
6,000,000.00; and provided further, that the financings for the
purchase of top drives shall be repaid from the proceeds of contracts
for the use of the top drives of equal or longer duration to the
amortization schedules of such financings;
(ii) liens for taxes, assessments or other governmental
charges not yet due and payable or, if due and payable, which are
being contested in good faith and for which adequate reserves have
been established in accordance with generally accepted accounting
principles in the U.S. but only if such liens have not been filed or
recorded;
(iii) statutory liens of landlords, carriers,
warehousemen, mechanics, materialmen and other similar liens imposed
by law, which are incurred in the ordinary course of business for sums
not more than thirty (30) days delinquent or which are being contested
in good faith; provided that a reserve or other appropriate provision,
if
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any, as shall be required by generally accepted accounting principles
in the U.S., shall have been made therefor;
(iv) liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety,
stay, customs and appeal bonds, bids, leases, government contracts,
trade contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of
borrowed money);
(v) deposits or other advances made in the ordinary
course of business to secure liability for (A) insurance premiums and
other liability to insurance carriers provided such deposits and other
advances do not, in an aggregate amount, exceed USD 250,000.00 in any
calendar year, or (B) worker's compensation claims or premiums or
other liability to worker's compensation insurance carriers or
administrators;
(vi) a security interest on the Borrowers' assets in favor
of Fleet to secure the Fleet Credit Facility;
(vii) a security interest on the Rigs and related drilling
equipment, the Drilling Contracts, the Borrowers' inventory and
general intangibles in favor of CIT to secure Bayard's obligations
under the Lease;
(viii) a security interest on the Rigs and related drilling
equipment, the Drilling Contracts, the Borrowers' inventory and
general intangibles in favor of Fleet to secure the Fleet Credit
Facility; and
(ix) liens securing indebtedness described in Section
3.02(aa)(v) below.
(l) not, without the prior written consent of the Lenders (which
consent shall not be unreasonably withheld): (i) conduct or manage any business
or activity other than as presently conducted or managed or as is contemplated
by this Agreement and the Loan Documents; or (ii) liquidate or dissolve or
consolidate or amalgamate with, or merge into, any other entity other than a
merger of Trend into Bayard or unless such Borrower is the surviving entity;
(m) not, without the prior written consent of the Agent repay any
stockholders' loan nor make any loans or advances to any other person except in
the ordinary course of business not to exceed USD 100,000.00 in any calendar
year other than loans between the Borrowers;
(n) forthwith upon demand by the Agent and at such Borrower's sole
cost and expense, execute and provide all such assurances and do all acts and
things as the Agent or any receiver in its absolute discretion may reasonably
require for: (i) perfecting or protecting the security created (or intended to
be created) by any of the Loan Documents, including, without
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limitation, granting in favor of the Lender a security interest covering the
security created (or intended to be created) by any of the Loan Documents with
respect to any obligations of such Borrower hereafter owing to the Lenders; or
(ii) preserving or protecting any of the rights of the Agent under any of the
Loan Documents; or (iii) facilitating the appropriation or realization of any
of the collateral assigned or granted to the Agent under any of the Loan
Documents and enforcing the security constituted by any of the Loan Documents
on or at any time after the same shall have become enforceable; or (iv) the
exercise of any power, authority or discretion vested in the Lender under any
of the Loan Documents;
(o) deliver to the Lenders such financial or other information
relating to it, any of the transactions contemplated by this Agreement or any
of the Loan Documents, as may be reasonably requested by the Lenders and if
requested by the Borrowers, the Lenders and the Agent will enter into their
standard confidentiality agreement respecting the affairs of the Borrowers;
(p) upon the request of the Agent, give the Lenders or the Agent
or any representative of the Lenders or the Agent at any reasonable time,
access to the Rigs and permit the Lenders or the Agent or such representative
to inspect the Rigs and any part thereof, as the Lenders or the Agent or such
representative may reasonably request and if requested by the Borrowers, the
Lenders and the Agent will enter into their standard confidentiality agreement
respecting the affairs of the Borrowers;
(q) not, without the prior written consent of the Lenders (i)
repurchase or redeem any of its shares, whether now in existence or issued
after the date of this Agreement or (ii) pay any dividends or make any cash
distributions to its shareholders other than dividends paid by Trend to Bayard;
provided, however, that if the dividend or distribution is payable solely to
CIT, the consent of Fleet shall be required;
(r) maintain all permits and certificates which are material and
necessary to the operation of such Borrower's business under all applicable
environmental, safety and public health laws and regulations applicable to the
Borrowers and the Rigs, and all other laws and regulations affecting or
relating to the Rigs the failure to maintain which would have a material
adverse effect;
(s) deliver, or shall cause to be delivered, to each Lender at
least two copies and as many additional copies as each Lender may reasonably
require from time to time of, (i) Bayard's audited annual consolidated
financial statements (including the balance sheet and income statement of
Bayard), in a form consistent with generally accepted United States accounting
principles and practices consistently applied, as soon as is practicable after
the same have been issued but in any case within one hundred and twenty (120)
days of the end of its fiscal year certified by Coopers & Lybrand or other
auditors as may be acceptable to the Lenders that the consolidated financial
statements present fairly, in all material respects, the financial position of
Bayard as of the date thereof, (ii) its quarterly consolidated and
consolidating financial statements (including the balance sheet and income
statement of Bayard) in a form consistent with generally accepted United States
accounting principles and practices
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consistently applied, as soon as is practicable after the end of each financial
quarter but in any case within sixty (60) days of the end of its financial
quarter certified by one of its Responsible Officers that the consolidated
financial statements present fairly, in all material respects, the financial
position of Bayard as of the date thereof, (iii) such financial or other
information relating to it, any of the transactions contemplated by this
Agreement or any of the other Loan Documents, as may reasonably be requested by
the Agent and generally made available to its other creditors, its shareholders
and to any governmental authorities;
(t) maintain, on a quarterly basis, a Cash Flow Coverage Ratio of
at least 1.25:1.0 from June 30, 1997 to December 31, 1997, 1.50:1.0 in 1998 and
1.75:1.0 thereafter;
(u) maintain Total Available Liquidity of USD 4,500,000.00 from
January 1, 1997 to December 31, 1997 and USD 3,000,000.00 in 1998; "Total
Available Liquidity" shall be the sum of the Borrowers' (i) cash and cash
equivalents (excluding cash or cash equivalents pledged to secure letters of
credit, but only to the extent of accrued liabilities for workers compensation
claims), (ii) unused capacity available under this Agreement based on the most
recent determination of Collateral Value, (excluding for purposes of this test
the Total Available Liquidity of any Non-consolidated Subsidiary), and (iii)
unused capacity available under the Fleet Credit Facility.
(v) maintain, on a consolidated basis, a ratio of Total
Liabilities to Tangible Net Worth not greater than 1.25:1.0 during 1997 and
1.0:1.0 in 1998 and thereafter (excluding for purposes of this test the Total
Liabilities and Tangible Net Worth of any Non-consolidated Subsidiary);
(w) maintain all permits and certificates which are material and
necessary to the operation of the Borrowers' business under all applicable
environmental, safety and public health laws and regulations applicable to the
Borrowers and the Rigs, and all other laws and regulations affecting or
relating to the Rigs the failure to maintain which would have a material
adverse effect; and
(x) deliver to each Lender, contemporaneously with the delivery to
each Lender of the annual and quarterly financial statements specified in
Section 3.03(g) above, its certificate (in form and substance satisfactory to
the Lenders), signed by one of their Responsible Officers, (i) stating that
such officer has reviewed the relevant terms of this Agreement, the other Loan
Documents and all other agreements of such Borrower which evidence indebtedness
for borrowed money and leases (the "Financial Obligation Agreements") and has
made or caused to be made under his supervision, a review of the transactions
and condition of such Borrower during the relevant fiscal quarter or year, as
the case may be, and that such review has not disclosed the existence during
such period, nor does such Responsible Officer have knowledge of the existence
as at the date of such certificate, of any condition or event which constitutes
an event of default under any of the Loan Documents or Financial Obligation
Agreements, or which, after notice or lapse of time or both would constitute an
event of default under any of the Loan Documents or Financial Obligation
Agreements, or if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action
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such Borrower has taken or proposes to take with respect thereto, (ii) setting
forth in form and detail satisfactory to the Lenders, the calculations
respecting compliance with the financial covenants of this Agreement and (iii)
for purposes of the annual certificate only, attaching and certifying as true
and correct a certificate evidencing the insurance in place with respect to the
Rigs and their operation by the Borrowers.
(y) deliver to each Lender on each anniversary of the Amendment
Date a certification from a Responsible Officer that the Rigs and their related
equipment are being maintained according to customary oil and gas drilling
industry practice confirmed, if requested by the Lenders by an appraiser
selected in accordance with Section 1.06(a)(iii) above.
(z) not, without the prior written consent of the Lenders, make,
assume or incur any obligations for capital expenditures in excess of:
(i) USD 62,300,000.00 in fiscal 1997;
(ii) for fiscal 1998 and thereafter USD 5,000,000.00 plus fifty
percent (50%) of the excess of Cash Flow over Projected Debt
Service;
plus in each case (A) the amount of New Subordinated Debt and New
Equity issued to Chesapeake under the Securities Purchase Agreement and (B) the
amount of equity and subordinated debt issued after the Amendment Date on terms
acceptable to the Lenders and that is issued within thirty (30) days of such
capital expenditures;
in each case excluding capital expenditures referred to in Section
3.02(k)(i) and capital expenditures of Non- consolidated Subsidiaries.
(aa) not, without the prior written consent of the Lenders, incur
any indebtedness for borrowed money, except:
(i) the Advances;
(ii) accounts payable and accrued liabilities incurred in the
ordinary course of business;
(iii) letters of credit, performance and bid bonds obtained by the
Borrower in the ordinary course of its business up to an
aggregate amount of USD 1,000,000.00 at any time;
(iv) debt incurred to purchase the top drives referred to in
Section 3.02(k)(i) above;
(v) debt incurred by Non-consolidated Subsidiaries that is
non-recourse to either Borrower;
(vi) the Fleet Credit Facility;
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(vii) the New Subordinated Debt; provided, however, that the New
Subordinated Debt is subordinated to all amounts due under
this Agreement on terms and conditions acceptable to the
Agent; and
(viii) indebtedness not included in paragraphs (i) through (vii)
above which does not exceed at any time, in the aggregate, USD
100,000.00 for both Borrowers.
(bb) not, without the prior written consent of the Lenders make any
investment in a Non-consolidated Subsidiary in excess of the net proceeds to
either Borrower from the concurrent issuance of equity or subordinated debt on
terms acceptable to the Lenders.
(cc) Not later than fifteen (15) days after the end of each month
after the Amendment Date furnish to the Agent a schedule showing the precise
location of each Rig and its contract status.
ARTICLE IV.
EVENTS OF DEFAULT
If any of the following events shall occur and be continuing, (each an
"Event of Default"):
A. the Borrowers shall fail to pay any principal of or interest
on either Note, which failure shall continue for five (5) days after the date
when due;
B. any representation or warranty made by either Borrower herein
or made in any certificate or financial statement furnished to the Lenders or
the Agent hereunder or under any of the Loan Documents shall prove to have been
incorrect in any material respect when made;
C. default in the performance of any agreement, covenant, term or
condition contained herein or in any Loan Document to be performed by the
Borrowers other than A. above, if such default has continued for twenty (20)
days after notice thereof by the Agent to the Borrowers;
D. an event of default under any loan agreement, credit
agreement, security agreement, guaranty agreement or lease agreement now
existing or hereafter entered into by either Borrower shall not have been
remedied within any stated grace periods during such time as USD 1,000,000.00
or more is outstanding under such agreement;
E. Any of the following events shall occur:
(i) either Borrower commences a voluntary case under
Title 11 of the United States Code as now or hereafter in effect, or
any successor thereto (the "Bankruptcy Code"); or
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(ii) an involuntary case is commenced against either
Borrower under the Bankruptcy Code and relief is ordered against
either Borrower or the petition is controverted but is not dismissed
or stayed within sixty (60) days after the commencement of the case;
or
(iii) a custodian (as defined in the Bankruptcy Code) or a
similar official is appointed for, or takes charge of, all or
substantially all of the property of either Borrower and such
appointment is not terminated within ninety (90) days; or
(iv) either Borrower commences any other proceeding under
any reorganization, arrangement, readjustment of debt, relief of
debtors, dissolution, insolvency, liquidation or similar law of any
jurisdiction relating to either Borrower (whether now or hereafter in
effect), or there is commenced against either Borrower any such
proceeding which remains undismissed or unstayed for a period of sixty
(60) days or either Borrower is adjudicated insolvent or bankrupt; or
either Borrower fails to controvert in a timely manner any such case
under the Bankruptcy Code or any such proceeding, or any order of
relief or other order approving any such case or proceeding is
entered; or
(v) either Borrower by any act or failure to act
indicates its consent to, approval of or acquiescence in any such case
or proceeding or in the appointment of any custodian of or for it or
any substantial part of its property or suffers any such appointment
to continue undischarged or unstayed for a period of sixty (60) days;
or
(vi) either Borrower makes a general assignment for the
benefit of creditors; or
(vii) any corporate action is taken by either Borrower for
the purpose of effecting any of the foregoing.
F. an order, judgment or decree shall be entered, without the
application, approval or consent of either Borrower by any court of competent
jurisdiction, approving a petition seeking reorganization of either Borrower
seizure or attachment of all or a substantial part of either Borrower's assets,
and such order, judgment or decree shall continue unstayed and in effect for
any period of sixty (60) consecutive days; or
G. judgments or orders for the payment of monies in excess of USD
750,000.00 in aggregate at any time outstanding shall be rendered against
either Borrower and such judgments or orders shall continue unsatisfied,
unstayed or unhanded for a period of thirty (30) days;
then the Agent, subject to Section 5.01(b) below, may by written notice to the
Borrowers (1) immediately terminate the commitment of the Lenders hereunder;
(2) declare the principal of, and interest accrued to the date of such
declaration on, the Notes together with all other amounts due hereunder or
under any of the Loan Documents, to be forthwith due and payable,
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whereupon the same shall become forthwith due and payable (provided, however,
no notice or declaration shall be required and such amounts shall be
immediately due and payable upon the occurrence of an event described in
Article IV(E) or (F) hereof) and (3) exercise any remedies to which it may be
entitled by any Loan Document or by applicable law. If an Event of Default has
occurred under this Article IV and the Agent has neither notified the Borrowers
of any of the actions referred to above nor waived such Event of Default, the
Lenders' may, but shall have no obligation to, make further Advances under this
Agreement until such Event of Default has either been cured (if it is capable
of being cured) or has been waived by the Agent.
ARTICLE V.
THE AGENT
Section 5.01 Appointment and Duties of Agent.
(a) The parties hereto agree that The CIT Group/Equipment
Financing, Inc. shall act, subject to the terms and conditions of this
Article V, as the Agent for the Lenders in connection with the Loan,
and to the extent set forth herein each Lender hereby irrevocably
appoints, authorizes, empowers and directs the Agent to take such
action on its behalf and to exercise such powers as are specifically
delegated to the Agent herein or are reasonably incidental thereto in
connection with the administration of and the enforcement of any
rights or remedies with respect to this Agreement, the Notes and the
other Loan Documents. It is expressly understood and agreed that the
obligations of the Agent under the Loan Documents are only those
expressly set forth in this Agreement. The Agent shall use reasonable
diligence to examine the face of each document received by it
hereunder to determine whether such documents, on its face, appears to
be what it purports to be. However, the Agent shall not under any
duty to examine into and pass upon the validity or genuineness of any
documents received by it hereunder and the Agent shall be entitled to
assume that any of the same which appears regular on its face is
genuine and valid and what it purports to be.
(b) The Agent shall:
(i) as to matters not specifically referred to in
Section 5.01(b)(ii) below, act pursuant to the instructions of
the Lenders in all matters relating to the Loan Documents
including but not limited to, all collateral for the Loan and
waivers or amendments of the Loan Documents; and
(ii) act pursuant to the instructions of The CIT
Group/Equipment Financing, Inc. as to the Events of Default
(and any waivers or remedies arising because of such defaults)
referred to in Article IV. A. and E, above.
Section 5.02 Discretion and Liability of Agent. Subject to
Sections 5.01(b) above and 5.03 and 5.05 below, the Agent shall be entitled to
use its discretion with respect to exercising
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or refraining from exercising any rights which may be vested in it under any of
the Loan Documents or otherwise, or with respect to taking or refraining from
taking any action or actions which it may be able to take under any of the Loan
Documents. Neither the Agent nor any of its directors, officers, employees,
agents or representatives shall be liable for any action taken or omitted by it
hereunder or in connection herewith, except for its own gross negligence or
wilful misconduct. The Agent shall incur no liability under, or in respect of
this Agreement or the other Loan Agreements by acting upon a notice,
certificate, warranty or other paper or instrument reasonably believed by it to
be genuine or authentic or to be signed by the proper party or parties, or with
respect to anything which it may do or refrain from doing in the reasonable
exercise of its judgment, or which may seem to it to be necessary or desirable
in the premises.
Section 5.03 Event of Default.
(a) The Agent shall be entitled to assume that no Event
of Default or event which would constitute an Event of Default after
notice or lapse of time, or both, has occurred and is continuing,
unless the Agent has actual knowledge of such facts or has received
notice from a Lender in writing that such Lender considers that an
Event of Default or event which would constitute an Event of Default
after notice or lapse of time, or both, has occurred and is continuing
and which specifies the nature thereof.
(b) In the event that the Agent shall acquire actual
knowledge of any Event of Default or event which would constitute an
Event of Default after notice or lapse of time, or both, the Agent
shall promptly notify (either orally, confirmed in writing, or in
writing) the Lenders of such Event of Default or event and (i) in the
case of default under Article IV.A. or E. above may, or if instructed
in writing by The CIT Group/Equipment Financing, Inc. shall, take such
action and assert such rights as are contemplated under this Agreement
and (ii) in the case of any other default under Article IV above may
in an emergency, or if requested in writing by the Lenders shall, take
such action and assert such rights as are contemplated under this
Agreement. The Agent shall be indemnified pro rata by the Lenders
against any liability or expenses, including, but not limited to,
travel expenses and internal and external counsel fees and expenses,
incurred in connection with taking such action. The Agent may refrain
from acting in accordance with any instructions from the Lenders until
it shall have been indemnified to its satisfaction against any and all
costs and expenses which it will or may expend or incur in complying
with such instructions.
Section 5.04 Consultation. When acting in connection with this
Agreement, or the other Loan Documents, the Agent may engage and pay for the
advice and services of any lawyers, accountants, surveyors, appraisers or other
experts whose advice or services may to it appear necessary, expedient or
desirable and the Agent shall be entitled to fully rely upon any opinion or
such advice so obtained.
Section 5.05 Communications to and from Agent. When any notice,
approval, consent, waiver or other communication or action is required or may
be delivered by the Lenders
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hereunder or the other Loan Documents, action by the Agent shall be effective
for all purposes hereunder; provided, that upon any occasion requiring or
permitting an approval, consent, waiver, election or other action on the part
of the Lenders, unless action by the Agent alone, or only upon instruction of
all of the Lenders, is expressly permitted or required hereunder, action shall
be taken by the Agent for and on behalf of or for the benefit of all the
Lenders as provided in Section 5.03 above. The Borrowers may rely on any
communication from the Agent hereunder or the other Loan Documents, and need
not inquire into the propriety of or authorization for such communication.
Upon receipt by the Agent from the Borrowers or any Lender of any communication
it will, in turn, promptly forward such communication to the Lenders; provided,
however, that the Agent shall not be liable for any costs, expenses or losses
arising from any failure to so forward any such communication.
Section 5.06 Limitations of Agency. Notwithstanding anything in
the Loan Documents, expressed or implied, it is agreed by the parties hereto,
that the Agent will act under the Loan Documents as Agent solely for the
Lenders and only to the extent specifically set forth herein, and will, under
no circumstances, be considered to be an agent or fiduciary of any nature
whatsoever in respect to any other person. The Agent may generally engage in
any business with the Borrowers or any of their affiliates as if it was not the
Agent.
Section 5.07 No Representations or Warranty.
(i) No Lender (including the Agent) makes to any
other Lender any representation or any warranty, expressed or
implied, or assumes any responsibility with respect to the
Loan or the execution, construction or enforceability of the
Loan Documents or any instrument or agreement executed by the
Borrowers or any other person in connection therewith.
(ii) The Agent takes no responsibility for the
accuracy or completeness of any information concerning the
Borrowers distributed by the Agent in connection with the Loan
nor for the truth of any representation or warranty given or
made herein, nor for the validity, effectiveness, adequacy or
enforceability of this Agreement or any of the other Loan
Documents.
Section 5.08 Lender Credit Decision. Each Lender acknowledges
that it has independent of and without reliance upon any other Lender (including
the Agent) or any information provided by any other Lender (including the Agent)
and based on the financial statements of the Borrowers and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independent of and without reliance upon any other Lender (including the
Agent) and based on such documents and information as it shall deem appropriate
at that time, continue to make its own credit decisions in taking or not taking
action under this Agreement and any other documents relating thereto.
Section 5.09 Indemnity. Notwithstanding any of the provisions
hereof, to the extent the Agent has not been so indemnified by the Borrowers,
the Lenders shall severally indemnify
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the Agent against any and all losses, costs, liabilities, damages or expenses,
including but not limited to, reasonable travel expenses and internal and
external counsel's reasonable fees and expenses, arising from, or in connection
with, its performance as Agent hereunder and not caused by its gross negligence
or willful misconduct.
Section 5.10 Resignation. The Agent may resign as such at any
time upon at least 30 days' prior notice to the Borrowers and the Lenders,
provided that such resignation shall not take effect until a successor agent
has been appointed. In the event of a resignation by the Agent, the Lenders
shall promptly appoint a successor agent from among the Lenders.
Section 5.11 Distribution. The Agent shall be responsible for
promptly distributing each Lender's pro rata share of all net amounts received
by the Agent under any of the Loan Documents. Each Lender shall be responsible
for designating by written notice to the Agent the account to which such
distribution shall be deposited.
Section 5.12 Limitation of Suits. All rights of action and claims
under this Agreement and the Security Agreements of the Lenders shall be
prosecuted and enforced only by the Agent. The Lenders agree that they shall
not independently institute any proceedings, judicial or otherwise, to enforce
their rights against the Borrowers under this Agreement or the Security
Agreements. However, notwithstanding anything contained in this Section 5.12,
the Lenders shall always retain their ability to retain independent counsel and
to protect their rights under this Agreement and the other Loan Documents.
Section 5.13 Right of Setoff. Upon the occurrence and during the
continuation of any Event of Default, the Lenders each are hereby authorized at
any time and from time to time, without notice to the Borrowers (any such
notice being expressly waived by the Borrowers), to setoff and apply any and
all deposits (general or special, time or demand, provisional or final, whether
or not such setoff results in any loss of interest or other penalty, and
including without limitation all certificates of deposit) at any time held by
the Lenders and all of the indebtedness arising in connection with this
Agreement irrespective of whether or not such Lender will have made any demand
under this Agreement, the Notes or any other Loan Document. The Borrowers also
hereby grant to each of the Lenders a security interest in and hereby transfer,
assign, set over and convey to each of the Lenders, as security for payment of
all Advances, all such deposits, funds or property of the Borrowers or
indebtedness of any Lender to the Borrowers. Should the right of any Lender to
realize funds in any manner set forth hereinabove be challenged and any
application of such funds be reversed, whether by court order or otherwise, the
Lenders shall make restitution or refund to the Borrowers pro rata in
accordance with their respective portions of the Commitment. Each Lender
agrees to promptly notify the Borrowers and the Agent after any such setoff and
application, provided that the failure to give such notice will not affect the
validity of such setoff and application. The rights of the Agent and the
Lenders under this Section 5.13 are in addition to other rights and remedies
(including without limitation other rights of setoff) which the Agent or the
Lenders may have. Nothing contained herein shall affect the right of any
Lender to exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness or
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obligation of the Borrowers to such Lender. This Section is subject to the
terms and provision of Section 1.03 hereof.
ARTICLE VI.
MISCELLANEOUS
Section 6.01 Notices. All notices, requests and demands shall be in
writing (including telecopier transmission) given to or made upon the
respective parties hereto as follows:
In the case of the Borrowers, at
1. Bayard Drilling Technologies, Inc.
4005 Northwest Expressway, Suite 400E
Oklahoma City, Oklahoma 73116
Attention: Mr. James Brown
Telecopier: (405) 879-3847
2. Trend Drilling Co.
4005 Northwest Expressway, Suite 400E
Oklahoma City, Oklahoma 73116
Attention: Mr. James Brown
Telecopier: (405) 879-3847
In the case of the Lenders, at
1. The CIT Group/Equipment Financing, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attention: (a) Senior Vice President - Credit
Telecopier: (212) 536-1385
(b) Legal Department
Telecopier: (212) 536-1388
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with a copy to
The CIT Group/Equipment Financing, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attention: Mr. Richard G. Hansen
Telecopier: (212) 536-9399
2. Fleet Capital Corporation
2711 North Haskell
Suite 2100, LB21
Dallas, Texas 75204
Telecopier: (214) 828-6530
Attention: Loan Administration Manager
In the case of the Agent, at
The CIT Group/Equipment Financing, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attention: (a) Senior Vice President - Credit
Telecopier: (212) 536-1385
(b) Legal Department
Telecopier: (212) 536-1388
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with a copy to
The CIT Group/Equipment Financing, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attention: Mr. Richard G. Hansen
Telecopier: (212) 536-9399
or in such other manner as any party hereto shall designate by written notice
to the other parties hereto. All such notices shall be effective upon delivery
or 3 days after being deposited in the United States mail with postage prepaid
certified, return receipt requested in a correctly addressed wrapper, or upon
receipt if delivered to Federal Express or similar courier company or
transmitted by telefax during normal business hours. All notices, demands,
requests, communications and other documents delivered hereunder or under the
Loan Documents, unless submitted in the English language, shall be accompanied
by certified English translation thereof.
Section 6.02 No Waiver. No failure on the part of the Lenders or the
Agent to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise by the
Lenders or the Agent of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.
Section 6.03 Applicable Law and Jurisdiction. (a) THIS AGREEMENT AND
THE LOAN DOCUMENTS PROVIDED FOR HEREIN (INCLUDING, BUT NOT LIMITED TO, THE
VALIDITY AND ENFORCEABILITY HEREOF AND THEREOF) SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, OTHER THAN
CONFLICT OF LAWS RULES THEREOF. Any legal action or proceeding against the
Borrowers with respect to this Agreement or any Loan Document may be brought in
the courts of the State of New York, the U.S. Federal Courts in such state,
sitting in the County of New York, or in the courts of any other jurisdiction
where such action or proceeding may be properly brought, and the Borrowers
hereby irrevocably accept the jurisdiction of such courts for the purpose of
any action or proceeding. The Borrowers hereby designate and irrevocably
appoint and empower C T Corporation System (the "Process Agent"), currently
located at 1633 Broadway, New York, New York 10019 in each case as its
authorized agent to accept, receive and acknowledge for and on behalf of each
and its property service of any and all process which may be served but only in
any action, suit or proceeding of the nature referred to above in the State of
New York and further agree that failure of such firm to give the Borrowers any
notice of any such service shall not impair or affect the validity of such
service or of any judgment rendered in any action or proceeding based thereon.
The Borrowers hereby irrevocably authorize and direct the Process Agent to
accept such service on its behalf. The Borrowers further irrevocably consent to
the service of process out of said courts by the mailing thereof by the Agent
by U.S. registered or certified mail postage prepaid to the party to be served
at its address designated in Section 6.01. The
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Borrowers agree that a final judgment in any action or proceeding shall be
conclusive and may be enforced in any other jurisdiction by suit on the
judgment or in any other manner provided by law. Nothing in this Section 6.03
shall affect the right of the Lenders or the Agent to serve legal process in
any other manner permitted by law or affect the right of the Lenders or the
Agent to bring any action or proceeding against the Borrowers or their
respective properties in the courts of any other jurisdiction. To the extent
that the Borrowers have or hereafter may acquire any immunity from jurisdiction
of any court or from any legal process (whether through service of notice,
attachment prior to judgment, attachment in aid of execution, execution or
otherwise) with respect to either itself or its property, the Borrowers hereby
irrevocably waive such immunity in respect of their obligations under this
Agreement and the other Loan Documents. The Borrowers hereby irrevocably waive
any objection which they may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
any Loan Document brought in the Supreme Court of the State of New York, County
of New York or the U.S. District Court for the Southern District of New York,
and hereby further irrevocably waive any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
(b) THE LENDERS, THE AGENT AND THE BORROWERS IRREVOCABLY WAIVE ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 6.04 Severability. In the event that any provision of this
Agreement is held to be void or unenforceable in any jurisdiction, all other
provisions shall remain unaffected and be enforceable in accordance with their
terms in such jurisdiction, and all provisions of this Agreement shall remain
unaffected and shall be enforceable in accordance with their terms in all other
jurisdictions.
Section 6.05 Amendment. Neither this Agreement nor any provision
hereof, including without limitation this Section 6.05, may be amended,
modified, waived, discharged or terminated orally, but only by an instrument in
writing signed by the Agent, the Lenders and the Borrowers. This Agreement
shall be binding upon and inure to the benefit of the Borrowers, the Agent and
the Lenders, and their respective successors and assigns, except that the
Borrowers shall not have the right to assign its rights hereunder or any
interest herein without the prior written consent of the Agent.
Section 6.06 Assignment and Participation. The Lenders shall have the
right, provided they comply with all applicable state and federal securities
laws, to assign or grant participation in all or any portion of the Loan
outstanding under this Agreement or the Notes to any affiliate of the Lenders
or to any foreign, federal or state banking institution, savings and loan
institution or finance company upon thirty (30) days written notice to the
Borrowers of such assignment or participation; provided, however, that CIT
agrees that it will always retain a portion of the Commitment and a percentage
of the Loan outstanding under this Agreement equal to or greater than Fleet's.
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<PAGE> 43
Section 6.07 Costs, Expenses and Taxes. The Borrowers jointly and
severally agree to pay on demand all reasonable fees, costs and expenses in
connection (i) with the preparation, execution, delivery, administration,
amendment and enforcement of this Agreement, the Notes, the other Loan
Documents and any other documents to be delivered hereunder and thereunder
(including, without limitation, the appraisal and inspection reports required
hereunder) and any amendment, modification or supplement hereto or thereto,
including, without limitation, the reasonable fees and out-of-pocket expenses
of counsel for the Lenders and the Agent, and any special counsel associated
with them, and with respect thereto and the filing of any document or
instrument in connection with any of the foregoing, (ii) with respect to
reasonable fees and out of pocket expenses of counsel for advising the Lenders
and the Agent as to their rights and responsibilities under this Agreement and
the transactions contemplated thereby after an Event of Default or an event
which, with the giving of notice or lapse of time, or both, shall have
occurred, and (iii) with any filing or recording of any document or instrument.
In addition, the Borrowers shall pay any and all stamp and other taxes
(including, without limitation penalties and interest assessed thereon) other
than Excluded Income Taxes payable or determined to be payable in connection
with the execution, delivery or performance of this Agreement and the Loan
Documents and any other documents to be delivered hereunder and thereunder and
agrees to save the Agent and Lenders harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission
to pay such taxes.
Section 6.08 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument.
Section 6.09 Section Headings. The headings of the various Sections
and subsections of this Agreement are for convenience of reference only and
shall not define or limit any of the terms or provisions hereof.
Section 6.10 Merger. THIS AGREEMENT AND THE LOAN DOCUMENTS EMBODY THE
ENTIRE AGREEMENT AMONG THE BORROWERS, THE AGENT AND THE LENDERS AND SUPERSEDE
ALL PRIOR AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, IF ANY, RELATING TO
THE SUBJECT MATTER HEREOF AND THEREOF.
Section 6.11 Agent for Borrowers.
(a) The Borrowers agree that Bayard shall be the true and lawful
agent and attorney-in-fact of the Borrowers hereunder in connection with all of
the rights, powers and duties of the Borrowers hereunder, including, without
limitation, the giving or withholding and the receipt of consents and notices.
(b) The Agent and the Lenders shall be entitled to and agree to
treat any notice given or action taken by Bayard, acting in its capacity as
agent, as a notice from or an action by the Borrowers.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
40
<PAGE> 44
BAYARD DRILLING TECHNOLOGIES, INC.
By: /s/ JAMES E. BROWN
---------------------------------------------
Name: James E. Brown
----------------------------------
Title: President
---------------------------------
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By: /s/ RICHARD G. HANSEN
---------------------------------------------
Name: Richard G. Hansen
----------------------------------
Title: Vice President
---------------------------------
TREND DRILLING CO.
By: /s/ JAMES E. BROWN
---------------------------------------------
Name: James E. Brown
----------------------------------
Title: President
---------------------------------
FLEET CAPITAL CORPORATION
By: /s/ DICK HARRIS
---------------------------------------------
Name: Dick Harris
----------------------------------
Title: Vice President
---------------------------------
THE CIT GROUP/EQUIPMENT FINANCING,
INC., As Agent
By: /s/ RICHARD G. HANSEN
---------------------------------------------
Name: Richard G. Hansen
----------------------------------
Title: Vice President
---------------------------------
41
<PAGE> 1
EXHIBIT 10.21
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into
by and between Bayard Drilling Technologies, Inc., a Delaware corporation (the
"Company"), and James E. Brown, a resident of Edmond, Oklahoma (the
"Executive"), effective as of December 10, 1996.
1. Introduction. The Executive is currently the
President of the Company. The Company desires to continue to employ Executive
and Executive desires to continue to remain in the employ of the Company. To
this end, the Executive and the Company believe that an agreement is necessary
and appropriate to outline the employment relationship that has existed and
will continue to exist between the Company and the Executive. Therefore, the
Company and the Executive intend by this Agreement to specify the terms and
conditions of the Executive's employment relationship with the Company.
2. Employment. The Company hereby employs the Executive
and the Executive hereby accepts employment with the Company upon the terms and
subject to the conditions set forth herein.
3. Duties and Responsibilities.
(a) Subject to the power of the Board to elect and remove
officers, the Executive shall serve the Company as its President and, if
elected by the Board of Directors of the Company (the "Board"), its Chairman
of the Board and shall perform, faithfully and diligently, the services and
functions relating to such offices or otherwise reasonably incident to such
offices as may be designated from time to time by the Board.
(b) The Executive shall, during the term of this
Agreement (or any extension thereof), devote such of his time, attention,
energies and business efforts to his duties as an executive of the Company as
are reasonably necessary to carry out the duties specified in Section 3(a).
The Executive shall not, during the term of this Agreement (or any extension
thereof), engage in any other business activity (regardless of whether such
business activity is pursued for gain, profit or other pecuniary advantage) if
such business activity would impair the Executive's ability to carry out his
duties hereunder. This Section 3(b), however, shall not be construed to
prevent the Executive from (i) investing his personal assets as a passive
investor in such form or manner as will not contravene the best interests of
the Company, (ii) participating in various charitable efforts, or (iii) serving
as a director or member of a committee of any charitable or civic organization;
provided, however, Executive will not serve as a director or member of any
committee of an operating company unless such position has previously been
approved in writing by the Board.
<PAGE> 2
4. Compensation and Other Employee Benefits. As
compensation for his services under the terms of this Agreement:
(a) The Executive shall be paid an annual salary of not
less than $120,000, payable in accordance with the then current payroll
policies of the Company. Such annual salary is herein referred to as the "Base
Salary." The Base Salary shall be reviewed annually by the Board and shall be
subject to adjustment in the sole discretion of the Board based upon a review
of the performance and accomplishments of the Executive.
(b) If the Company's earnings before deducting interest,
taxes and depreciation during any full quarterly period (commencing with the
first quarter of 1997) equal or exceed the greater of (i) $1,500,000, or (ii)
five percent (5%) of the sum of the Company's stockholders' equity and long-
term debt (averaged on a daily basis throughout such quarterly period), then
the Executive shall be eligible to receive a quarterly bonus award of $12,500
(each, a "Quarterly Bonus"). Each earned Quarterly Bonus, if any, is payable
within 15 business days after the Company's unaudited financial statements for
such quarterly period become available.
(c) The Executive will be granted non-transferrable
options to purchase 100,000 shares of common stock of the Company, par value
$.01 per share (the "Common Stock"). The exercise price for the initial grant
of options will be $10.00 per share of Common Stock. The options will be
granted under an stock option and stock award plan (the "Stock Plan") proposed
to be adopted by the Board in the near future, which plan will require that the
Executive enter into an option agreement (the "Option Agreement). The Option
Agreement will provide, among things, that the options, when granted, will vest
in equal amounts on the first, second, third, fourth and fifth anniversary of
grant, subject to continued employment by the Executive. The Option Agreement
will restrict the transfer of shares of Common Stock issuable under the
options. The Executive agrees to become a party to that certain Stockholders'
and Voting Agreement, dated as of December 10, 1996, by and among the Company's
stockholders and the Company (the "Stockholders' Agreement"), and the Common
Stock issuable upon exercise of the options will be subject to the terms and
conditions of the Stockholders' Agreement.
(d) The Executive will be granted 50,000 shares of Common
Stock at the price of $5.00 per share, subject to the following terms and
conditions (the "Restricted Stock"). The Restricted Stock will be granted
under the Stock Plan, which plan will require the Executive to enter into a
restricted stock agreement (the "Restricted Stock Agreement"). The Restricted
Stock will initially be unvested (the "Unvested Shares"). The Unvested Shares
will vest in equal amounts on the first, second, third, fourth and fifth
anniversary of grant, subject to continued employment by the Executive and the
Executive's right under certain circumstances to purchase Unvested Shares for
$10.00 per share. The Company will retain the right to repurchase any or all
of the Unvested Shares in the event of any termination or cessation of
Executive's employment with the Company, other than by reason of a Change of
Control (as defined in the Stock Plan). The Restricted Stock will be subject
to the terms and conditions of the Stockholders' Agreement.
2
<PAGE> 3
(e) Subject to the right of the Company to amend or
terminate any employee and/or group or executive benefit plan, the Executive
shall be entitled to receive the following employee benefits:
(i) The Executive shall have the right to
participate in all current or future employee and/or group welfare
benefit plans of the Company that are available to its exempt salaried
employees generally (including, without limitation, disability,
accident, medical, life insurance and hospitalization plans) at the
same level and on the same basis as other officers of the Company
participate.
(ii) The Executive shall have the right to
participate in all future executive benefit plans of the Company,
including, without limitation, any pension or retirement plan that may
hereafter be established, all in accordance with the Company's regular
practices with respect to its officers.
(iii) The Executive shall be entitled to
reimbursement from the Company for reasonable out-of-pocket business
expenses incurred by him in the course of the performance of his
duties during the term of this Agreement, subject to receipt of
appropriate supporting documentation.
(iv) The Company will reimburse the Executive all
dues and fees required to be paid by a regular member of the Oak Tree
Country Club located in Edmond, Oklahoma, upon submission of
appropriate supporting documentation. Upon termination of the
Executive's employment for any reason, the Company shall have no
further obligation to reimburse such dues and fees from and after the
date of such termination.
(v) The Executive shall be entitled to such
vacation, holidays and other paid or unpaid leaves of absence as are
consistent with the Company's normal policies or as are otherwise
approved by the Board.
(vi) The Executive shall be entitled to the
exclusive use of a Company automobile, selected by Executive but
subject to the Company's approval, and the Company will pay all costs
and expenses necessary to operate, maintain and repair such automobile
for business purposes. The Executive will be responsible for all
costs associated with personal use of the automobile. The Executive
will report all costs associated with personal use of the automobile
to the Company for tax purposes. The automobile will at all times
remain the property of the Company and may not be sold, assigned,
transferred or pledged by the Executive. Upon termination of the
Executive's employment for any reason, the Executive agrees to
immediately return the automobile to the Company.
3
<PAGE> 4
5. Term.
(a) Subject to the earlier termination pursuant to the
provisions of Section 7, the term of this Agreement shall commence on December
10, 1996 and shall end on November 30, 1998. The term of this Agreement is
referred to herein as the "Employment Term."
(b) The term of this Agreement may be extended for
additional one year periods by mutual consent of the Executive and the Board,
acting on behalf of the Company.
6. Competition and Confidentiality.
(a) If during the Employment Term (or any extension
thereof), (i) the employment of the Executive is terminated pursuant to Section
7(a) or (ii) the Executive voluntarily terminates his employment pursuant to
Section 7(d), then for two years from the date of such termination or
nonrenewal, as the case may be, the Executive shall not, without the prior
written consent of the Board (which consent shall not be unreasonably
withheld), with respect to the States of Oklahoma, Texas, New Mexico and
Louisiana and any other state in which the Company owns, leases or operates
assets at the time of termination or nonrenewal:
(i) accept employment or render service to any person,
firm or corporation that is engaged in a business directly competitive
with the business then engaged in by the Company or any of its
affiliated companies in such states; or
(ii) directly or indirectly enter into or in any manner
take part in or lend his name, counsel or assistance to any venture,
enterprise, business or endeavor, either as proprietor, principal,
investor, partner, director, officer, employee, consultant, advisor,
agent, independent contractor, or in any other capacity whatsoever,
for any purpose that would be competitive with the business of the
Company or any of its affiliated companies in such states; or
(iii) directly or indirectly solicit, sell, call upon or
otherwise contact any customer of the Company or any of its affiliated
companies or any person who has been in contact with the Company or
such affiliated company with respect to the Company's or such
affiliate's business, for the purpose of selling or providing the same
or similar products or services provided or offered by the Company or
its affiliate to such customers or prospective customers; or
(iv) directly or indirectly solicit, entice, persuade or
induce any individual who presently is, or at any time during such
period shall be, an employee of the Company or any of its affiliated
companies or any of their respective successors, to terminate or
refrain from renewing or extending his or her employment with the
Company, any of its affiliated companies or any of their successors,
or to be employed by or enter into a contractual
4
<PAGE> 5
relationship with the Executive or any other individual, person or
entity, and Executive shall not approach any employee for any such
purpose or authorize or knowingly cooperate with the taking of any
action by any other individual, person or entity.
(b) It is the desire and intent of each of the parties
that the provisions of Section 6(a) shall be enforced to the fullest extent
permissible under the laws and public policies applied in the State of
Oklahoma. Accordingly, if any particular portion of Section 6(a) shall be
adjudicated to be invalid or unenforceable, Section 6(a) shall be deemed
amended to (i) reform the particular portion to provide for such maximum
restrictions as will be valid and enforceable, or if that is not possible, then
(ii) delete the portion adjudicated to be invalid or unenforceable.
(c) During and after the Employment Term, the Executive
will not divulge or appropriate for his own use or for the use of others
(except during the Employment Term as required to fulfill the Executive's
duties hereunder) any secret or confidential information or secret or
confidential knowledge pertaining to the business of the Company obtained by
the Executive in any way while he was employed by the Company. The Executive
shall hold in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, which shall have
been obtained by the Executive during the Executive's employment by the Company
or any of its affiliated companies, unless such information, knowledge or data
is or becomes public knowledge (other than by acts of the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it.
(d) The Executive acknowledges that Sections 6(a) and (c)
are expressly for the benefit of the Company, that the Company would be
irreparably injured by a violation of Section 6(a) or (c), and that the Company
would have no adequate remedy at law in the event of such violation.
Therefore, the Executive acknowledges and agrees that injunctive relief,
specific performance or any other appropriate equitable remedy (without any
bond or other security being required) are appropriate remedies to enforce
compliance by the Company with Sections 6(a) and (c).
7. Termination of Employment.
(a) For Due Cause. The Company may terminate the
Executive's employment for "Due Cause" (as hereinafter defined) at any time and
without prior notice, in which event this Agreement shall terminate and the
Executive shall be entitled to receive (i) his Base Salary on a pro rata basis
to the date of termination, and (ii) a cash payment equal to the amount of any
earned but unpaid Quarterly Bonus in respect of any quarterly period ended
prior to the quarter in which such termination occurs. In the event of such
termination for Due Cause, all other rights and benefits the
5
<PAGE> 6
Executive may have under the employee and/or group or executive benefit plans
and programs of the Company, generally, shall be determined in accordance with
the terms and conditions of such plans and programs. The term "Due Cause"
shall mean (i) habitual neglect of the Executive's duties or failure by the
Executive to perform or observe any obligation of employment that is not
remedied within 30 days after written notice thereof from the Board, (ii) any
material breach of this Agreement, or (iii) the conviction of or a plea of
guilty or nolo contendere by the Executive to a felony or misdemeanor involving
fraud, embezzlement, theft or dishonesty or other criminal conduct.
(b) Due To Death. In the event of the death of the
Executive, this Agreement shall terminate on the date of death and the estate
of the Executive shall be entitled to (i) the Executive's Base Salary through
the date of death, and (ii) a cash payment equal to the amount of any earned
but unpaid Quarterly Bonus in respect of the quarterly period ended prior to
the quarter in which his death occurs. In the event of termination due to
death, all other rights and benefits the Executive (or his estate) may have
under the employee and/or group or executive benefit plans and programs of the
Company, generally, shall be determined in accordance with the terms and
conditions of such plans and programs.
(c) Disability. In the event the Executive suffers a
"Disability" (as hereafter defined), the Company may terminate the Executive's
employment, in which event this Agreement shall terminate on "the date on which
the Disability occurs" (as hereafter defined) and the Executive shall be
entitled to (i) his Base Salary through the date on which the Disability
occurs, and (ii) a cash payment equal to the amount of any earned but unpaid
Quarterly Bonus in respect of the quarterly period ended prior to the quarter
in which the Disability occurs. In the event of such termination due to a
Disability, all other rights and benefits the Executive may have under the
employee and/or group or executive benefit plans and programs of the Company,
generally, shall continue to the extent permissible in accordance with the
terms and conditions of such plans and programs for a period of one year from
the date on which the Disability occurs. For purposes of this Agreement,
"Disability" shall mean the inability or incapacity of the Employee for three
months to perform the essential functions of the job or position with the
Company described in Section 3, even with reasonable accommodation, and "the
date on which the Disability occurs" shall mean the first day following such
three month period. Such inability or incapacity shall be documented to the
reasonable satisfaction of the Board by appropriate correspondence from
physicians who are reasonably satisfactory to the Board.
(d) Voluntary Termination. The Executive may voluntarily
terminate his employment under this Agreement at any time by providing at least
60 days' prior written notice to the Company. In such event, the Executive
shall be entitled to receive (i) his Base Salary on a pro rata basis to the
date of termination, and (ii) a cash payment equal to the amount of any earned
but unpaid Quarterly Bonus in respect of the quarterly period ended prior to
the quarter in which the termination occurs. All other rights and benefits the
Executive may have under the employee and/or group or executive benefit plans
and programs of the Company, generally, shall be determined in accordance with
the terms and conditions of such plans and programs.
6
<PAGE> 7
(e) Other Termination. If the Company terminates the
employment of the Executive for any reason (other than pursuant to Sections
7(a), (c) or (f) hereof or if the Company elects not to renew this Agreement),
then the Executive shall be entitled to receive (i) his Base Salary until
termination of this Agreement pursuant to Section 5, payable at such times as
and in accordance with the Company's payroll practices, and (ii) a cash payment
equal to the amount of any earned but unpaid Quarterly Bonus in respect of the
quarterly period ended prior to the quarter in which the termination occurs.
All other rights and benefits the Executive may have under employee and/or
group or executive benefit plans and programs of the Company, generally, shall
continue to the extent permissible in accordance with the terms and conditions
of such plans and programs until termination of this Agreement pursuant to
Section 5.
(f) Change of Control. If in the event of and as a
result of a Change of Control (as defined in Section 8), the Executive is
terminated without Due Cause or the Executive voluntarily elects to terminate
this Agreement and his employment for any reason, then the Executive shall be
entitled to receive (i) his Base Salary until termination of this Agreement
pursuant to Section 5, payable at such times as and in accordance with the
Company's payroll practices, and (ii) a cash payment equal to the amount of any
earned but unpaid Quarterly Bonus in respect of the quarterly period ended
prior to the quarter in which the termination occurs. All other rights and
benefits the Executive may have under employee and/or group or executive
benefit plans and programs of the Company, generally, shall continue to the
extent permissible in accordance with the terms and conditions of such plans
and programs until termination of this Agreement pursuant to Section 5.
8. Definition of Change of Control. The term "Change of
Control" means the occurrence of one or more of the following events:
(a) In the event that the Company becomes subject to
reporting under the Securities Exchange Act of 1934, as amended (the
"Securities Act"), a change in control of a nature that would be required to be
reported in a response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Act, or any successor regulation of similar
import, whether or not the Company is then subject to such reporting
requirement;
(b) As a result of a transaction or series of
transactions, securities of the Company representing less than 50% of the
combined voting power of the Company's then outstanding securities are owned,
directly or indirectly, by Persons who were shareholders of the Company
immediately prior to such transaction or transactions;
(c) A transfer of all or substantially all of the
Company's assets to any Person other than an affiliate of the Company.
"Person" shall have the same meaning as that term is given in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended,
whether or not the Company is then subject to the Securities Act.
7
<PAGE> 8
9. Indemnification. The Company will indemnify the
Executive as provided for in the Company's Certificate of Incorporation or
Bylaws for officers of the Company.
10. Preservation of Business; Fiduciary Responsibility.
The Executive shall use his best efforts to preserve the business and
organization of the Company, to keep available to the Company the services of
present employees and to preserve the business relations of the Company with
suppliers, distributors, customers and others. The Executive shall not commit
any act, or in any way assist others to commit any act, that would injure the
Company. So long as the Executive is employed by the Company, the Executive
shall observe and fulfill proper standards of fiduciary responsibility
attendant upon his service and office.
11. Notices. All notices, requests, demands and other
communications given under or by reason of this Agreement shall be in writing
and shall be deemed given when delivered in person, or when confirmed if
delivered by telecopy or when mailed, by certified mail (return receipt
requested), postage prepaid, addressed as follows (or to such other address as
a party may specify by notice pursuant to this Section 11):
(a) To the Company:
Bayard Drilling Technologies, Inc.
Suite 400E, Lakepoint Towers
4005 N. W. Expressway
Oklahoma City, Oklahoma 73116
Attn: Board of Directors
Facsimile: (405) 879-3847
(b) To the Executive:
James E. Brown
1600 Faircloud Drive
Edmond, Oklahoma 73034
Facsimile: (405)_________
12. Controlling Law and Performability. The execution,
validity, interpretation and performance of this Agreement shall be governed by
and construed in accordance with the laws of the State of Oklahoma, excluding
conflicts of laws principles.
13. Arbitration. The Company and the Executive desire to
resolve certain disputes, controversies and claims arising out of this
Agreement without litigation. Accordingly, except in the case of a suit,
action or proceeding to compel either party to comply with the dispute
8
<PAGE> 9
resolution procedures set forth in this Section 13, the parties agree that any
dispute or controversy arising under or in connection with this Agreement shall
be settled by arbitration in Oklahoma City, Oklahoma. In the proceeding, the
Executive shall select one arbitrator, the Company shall select one arbitrator
and the two arbitrators so selected shall select a third arbitrator. The
decision of a majority of the arbitrators shall be binding on the Executive and
the Company. Should one party fail to select an arbitrator within five days
after notice of the appointment of an arbitrator by the other party or should
the two arbitrators selected by the Executive and the Company fail to select an
arbitrator within ten days after the date of the appointment of the last of
such two arbitrators, any person sitting as a Judge of the United States
District Court for the Federal District of Oklahoma in which the City of
Oklahoma City is then situated, upon application of the Executive or the
Company, shall appoint an arbitrator to fill such space with the same force and
effect as though such arbitrator had been appointed in accordance with the
first sentence of this Section 13. Any arbitration proceeding pursuant to this
Section 13 shall be conducted in accordance with the rules of the American
Arbitration Association. Judgment may be entered on the arbitrators' award in
any court having jurisdiction.
14. Additional Instruments. The Executive and the
Company shall execute and deliver any and all additional instruments and
agreements that may be necessary or proper to carry out the purposes of this
Agreement.
15. Entire Agreement and Amendments. This Agreement
(together with the Stock Plan, the Option Agreement and the Restricted Stock
Agreement, upon the effectiveness thereof) contains the entire agreement of the
Executive and the Company relating to the matters contained herein and
supersedes all prior agreements and understandings, oral or written, between
the Executive and the Company with respect to the subject matter hereof. This
Agreement may be changed only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
16. Separability. If any provision of this Agreement is
rendered or declared illegal or unenforceable by reason of any existing or
subsequently enacted legislation or by the decision of any arbitrator or by
decree of a court of last resort, the Executive and the Company shall promptly
meet and negotiate substitute provisions for those rendered or declared illegal
or unenforceable to preserve the original intent of this Agreement to the
extent legally possible, but all other provisions of this Agreement shall
remain in full force and effect.
17. Assignments. This Agreement shall inure to the
benefit of and be binding upon the Company and its successors and assigns. The
rights and obligations of the Executive under this Agreement are personal to
the Executive, and no such rights, benefits or obligations shall be subject to
voluntary or involuntary alienation, assignment or transfer. This Agreement
shall be binding upon the Executive and his heirs, executors, administrators,
legal representatives and assigns.
9
<PAGE> 10
18. Execution. This Agreement may be executed in
multiple counterparts each of which shall be deemed an original and all of
which shall constitute one and the same instrument.
19. Waiver of Breach. The waiver by either party to this
Agreement of a breach of any provision of the Agreement by the other party
shall not operate or be construed as a waiver by such party of any subsequent
breach by such other party.
10
<PAGE> 11
IN WITNESS WHEREOF, the Executive and the Company have
executed this Agreement effective as of the date first above written.
"COMPANY"
BAYARD DRILLING TECHNOLOGIES, INC.
By:/s/ Carl B. Anderson
-------------------------------------
[Name]
Acting on behalf of the Board
of Directors
"EXECUTIVE"
/s/ James E. Brown
-------------------------------------
James E. Brown
11
<PAGE> 1
EXHIBIT 10.24
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into
by and between Bayard Drilling Technologies, Inc., a Delaware corporation (the
"Company"), and David E. Grose III, a resident of Oklahoma City, Oklahoma (the
"Executive"), effective as of July 16, 1997.
1. Introduction. The Company desires to retain the
Executive as its Vice President - Chief Financial Officer, and the Executive
desires to be employed by the Company in this position. To this end, the
Executive and the Company believe that an agreement is necessary and
appropriate to outline the employment relationship that will exist between the
Company and the Executive. Therefore, the Company and the Executive intend by
this Agreement to specify the terms and conditions of the Executive's
employment relationship with the Company.
2. Employment. The Company hereby employs the Executive
and the Executive hereby accepts employment with the Company upon the terms and
subject to the conditions set forth herein.
3. Duties and Responsibilities.
(a) Subject to the power of the Board to elect and remove
officers, the Executive shall serve the Company as its Vice President - Chief
Financial Officer and shall perform, faithfully and diligently, the services
and functions relating to such offices or otherwise reasonably incident to such
offices as may be designated from time to time by the Board.
(b) The Executive shall, during the term of this
Agreement (or any extension thereof), devote such of his time, attention,
energies and business efforts to his duties as an executive of the Company as
are reasonably necessary to carry out the duties specified in Section 3(a).
The Executive shall not, during the term of this Agreement (or any extension
thereof), engage in any other business activity (regardless of whether such
business activity is pursued for gain, profit or other pecuniary advantage) if
such business activity would impair the Executive's ability to carry out his
duties hereunder. This Section 3(b), however, shall not be construed to
prevent the Executive from (i) investing his personal assets as a passive
investor in such form or manner as will not contravene the best interests of
the Company, (ii) participating in various charitable efforts, or (iii) serving
as a director or member of a committee of any charitable or civic organization;
provided, however, Executive will not serve as a director or member of any
committee of an operating company unless such position has previously been
approved in writing by the Board.
<PAGE> 2
4. Compensation and Other Employee Benefits. As
compensation for his services under the terms of this Agreement:
(a) The Executive shall be paid an annual salary of not
less than $105,000, payable in accordance with the then current payroll
policies of the Company. Such annual salary is herein referred to as the "Base
Salary." The Base Salary shall be reviewed annually by the Board and shall be
subject to adjustment in the sole discretion of the Board based upon a review
of the performance and accomplishments of the Executive.
(b) If the Company's earnings before deducting interest,
taxes and depreciation during any full quarterly period (commencing with the
first quarter of 1997) equal or exceed the greater of (i) $1,500,000, or (ii)
five percent (5%) of the sum of the Company's stockholders' equity and
long-term debt (averaged on a daily basis throughout such quarterly period),
then the Executive shall be eligible to receive a quarterly bonus award of
$5,000 (each, a "Quarterly Bonus"). Each earned Quarterly Bonus, if any, is
payable within 15 business days after the Company's unaudited financial
statements for such quarterly period become available.
(c) The Executive will be granted non-transferrable
options to purchase 25,000 shares of common stock of the Company, par value
$.01 per share (the "Common Stock"). The exercise price for the initial grant
of options will be $20.00 per share of Common Stock. The options will be
granted under the Company's existing stock option and stock award plan (the
"Stock Plan"), which plan will require that the Executive enter into an option
agreement (the "Option Agreement). The Option Agreement will provide, among
things, that the options, when granted, will vest in equal amounts on the
first, second, third, fourth and fifth anniversary of grant, subject to
continued employment by the Executive. The Option Agreement will restrict the
transfer of shares of Common Stock issuable under the options. The Executive
agrees to become a party to the Company's Amended and Restated Stockholders and
Voting Agreement, dated as of May 1, 1997, and as subsequently amended, by and
among the Company's stockholders and the Company (as amended, the "Stockholders
Agreement"), and the Common Stock issuable upon exercise of the options will be
subject to the terms and conditions of the Stockholders' Agreement.
(d) Subject to the right of the Company to amend or
terminate any employee and/or group or executive benefit plan, the Executive
shall be entitled to receive the following employee benefits:
(i) The Executive shall have the right to
participate in all current or future employee and/or group welfare
benefit plans of the Company that are available to its exempt salaried
employees generally (including, without limitation, disability,
accident, medical, life insurance and hospitalization plans) at the
same level and on the same basis as other officers of the Company
participate.
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<PAGE> 3
(ii) The Executive shall have the right to
participate in all future executive benefit plans of the Company,
including, without limitation, any pension or retirement plan that may
hereafter be established, all in accordance with the Company's regular
practices with respect to its officers.
(iii) The Executive shall be entitled to
reimbursement from the Company for reasonable out- of-pocket business
expenses incurred by him in the course of the performance of his
duties during the term of this Agreement, subject to receipt of
appropriate supporting documentation.
(iv) The Executive shall be entitled to such
vacation, holidays and other paid or unpaid leaves of absence as are
consistent with the Company's normal policies or as are otherwise
approved by the Board.
5. Term.
(a) Subject to the earlier termination pursuant to the
provisions of Section 7, the term of this Agreement shall commence on July 16,
1997 and shall end on June 30, 1999. The term of this Agreement is referred to
herein as the "Employment Term."
(b) The term of this Agreement may be extended for
additional one year periods by mutual consent of the Executive and the Board,
acting on behalf of the Company.
6. Competition and Confidentiality.
(a) If during the Employment Term (or any extension
thereof), (i) the employment of the Executive is terminated pursuant to Section
7(a) or (ii) the Executive voluntarily terminates his employment pursuant to
Section 7(d), then for two years from the date of such termination or
nonrenewal, as the case may be, the Executive shall not, without the prior
written consent of the Board (which consent shall not be unreasonably
withheld), with respect to the States of Oklahoma, Texas, New Mexico and
Louisiana and any other state in which the Company owns, leases or operates
assets at the time of termination or nonrenewal:
(i) accept employment or render service to any person,
firm or corporation that is engaged in a business directly competitive
with the business then engaged in by the Company or any of its
affiliated companies in such states; or
(ii) directly or indirectly enter into or in any manner
take part in or lend his name, counsel or assistance to any venture,
enterprise, business or endeavor, either as proprietor, principal,
investor, partner, director, officer, employee, consultant, advisor,
agent, independent contractor, or in any other capacity whatsoever,
for any purpose that would be competitive with the business of the
Company or any of its affiliated companies in such states; or
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<PAGE> 4
(iii) directly or indirectly solicit, sell, call upon or
otherwise contact any customer of the Company or any of its affiliated
companies or any person who has been in contact with the Company or
such affiliated company with respect to the Company's or such
affiliate's business, for the purpose of selling or providing the same
or similar products or services provided or offered by the Company or
its affiliate to such customers or prospective customers; or
(iv) directly or indirectly solicit, entice, persuade or
induce any individual who presently is, or at any time during such
period shall be, an employee of the Company or any of its affiliated
companies or any of their respective successors, to terminate or
refrain from renewing or extending his or her employment with the
Company, any of its affiliated companies or any of their successors,
or to be employed by or enter into a contractual relationship with the
Executive or any other individual, person or entity, and Executive
shall not approach any employee for any such purpose or authorize or
knowingly cooperate with the taking of any action by any other
individual, person or entity.
(b) It is the desire and intent of each of the parties
that the provisions of Section 6(a) shall be enforced to the fullest extent
permissible under the laws and public policies applied in the State of
Oklahoma. Accordingly, if any particular portion of Section 6(a) shall be
adjudicated to be invalid or unenforceable, Section 6(a) shall be deemed
amended to (i) reform the particular portion to provide for such maximum
restrictions as will be valid and enforceable, or if that is not possible, then
(ii) delete the portion adjudicated to be invalid or unenforceable.
(c) During and after the Employment Term, the Executive
will not divulge or appropriate for his own use or for the use of others
(except during the Employment Term as required to fulfill the Executive's
duties hereunder) any secret or confidential information or secret or
confidential knowledge pertaining to the business of the Company obtained by
the Executive in any way while he was employed by the Company. The Executive
shall hold in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, which shall have
been obtained by the Executive during the Executive's employment by the Company
or any of its affiliated companies, unless such information, knowledge or data
is or becomes public knowledge (other than by acts of the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it.
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<PAGE> 5
(d) The Executive acknowledges that Sections 6(a) and (c)
are expressly for the benefit of the Company, that the Company would be
irreparably injured by a violation of Section 6(a) or (c), and that the Company
would have no adequate remedy at law in the event of such violation.
Therefore, the Executive acknowledges and agrees that injunctive relief,
specific performance or any other appropriate equitable remedy (without any
bond or other security being required) are appropriate remedies to enforce
compliance by the Company with Sections 6(a) and (c).
7. Termination of Employment.
(a) For Due Cause. The Company may terminate the
Executive's employment for "Due Cause" (as hereinafter defined) at any time and
without prior notice, in which event this Agreement shall terminate and the
Executive shall be entitled to receive (i) his Base Salary on a pro rata basis
to the date of termination, and (ii) a cash payment equal to the amount of any
earned but unpaid Quarterly Bonus in respect of any quarterly period ended
prior to the quarter in which such termination occurs. In the event of such
termination for Due Cause, all other rights and benefits the Executive may have
under the employee and/or group or executive benefit plans and programs of the
Company, generally, shall be determined in accordance with the terms and
conditions of such plans and programs. The term "Due Cause" shall mean (i)
habitual neglect of the Executive's duties or failure by the Executive to
perform or observe any obligation of employment that is not remedied within 30
days after written notice thereof from the Board, (ii) any material breach of
this Agreement, or (iii) the conviction of or a plea of guilty or nolo
contendere by the Executive to a felony or misdemeanor involving fraud,
embezzlement, theft or dishonesty or other criminal conduct.
(b) Due To Death. In the event of the death of the
Executive, this Agreement shall terminate on the date of death and the estate
of the Executive shall be entitled to (i) the Executive's Base Salary through
the date of death, and (ii) a cash payment equal to the amount of any earned
but unpaid Quarterly Bonus in respect of the quarterly period ended prior to
the quarter in which his death occurs. In the event of termination due to
death, all other rights and benefits the Executive (or his estate) may have
under the employee and/or group or executive benefit plans and programs of the
Company, generally, shall be determined in accordance with the terms and
conditions of such plans and programs.
(c) Disability. In the event the Executive suffers a
"Disability" (as hereafter defined), the Company may terminate the Executive's
employment, in which event this Agreement shall terminate on "the date on which
the Disability occurs" (as hereafter defined) and the Executive shall be
entitled to (i) his Base Salary through the date on which the Disability
occurs, and (ii) a cash payment equal to the amount of any earned but unpaid
Quarterly Bonus in respect of the quarterly period ended prior to the quarter
in which the Disability occurs. In the event of such termination due to a
Disability, all other rights and benefits the Executive may have under the
employee and/or group or executive benefit plans and programs of the Company,
generally,
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<PAGE> 6
shall continue to the extent permissible in accordance with the terms and
conditions of such plans and programs for a period of one year from the date on
which the Disability occurs. For purposes of this Agreement, "Disability"
shall mean the inability or incapacity of the Employee for three months to
perform the essential functions of the job or position with the Company
described in Section 3, even with reasonable accommodation, and "the date on
which the Disability occurs" shall mean the first day following such three
month period. Such inability or incapacity shall be documented to the
reasonable satisfaction of the Board by appropriate correspondence from
physicians who are reasonably satisfactory to the Board.
(d) Voluntary Termination. The Executive may voluntarily
terminate his employment under this Agreement at any time by providing at least
60 days' prior written notice to the Company. In such event, the Executive
shall be entitled to receive (i) his Base Salary on a pro rata basis to the
date of termination, and (ii) a cash payment equal to the amount of any earned
but unpaid Quarterly Bonus in respect of the quarterly period ended prior to
the quarter in which the termination occurs. All other rights and benefits the
Executive may have under the employee and/or group or executive benefit plans
and programs of the Company, generally, shall be determined in accordance with
the terms and conditions of such plans and programs.
(e) Other Termination. If the Company terminates the
employment of the Executive for any reason (other than pursuant to Sections
7(a), (c) or (f) hereof or if the Company elects not to renew this Agreement),
then the Executive shall be entitled to receive (i) his Base Salary until
termination of this Agreement pursuant to Section 5, payable at such times as
and in accordance with the Company's payroll practices, and (ii) a cash payment
equal to the amount of any earned but unpaid Quarterly Bonus in respect of the
quarterly period ended prior to the quarter in which the termination occurs.
All other rights and benefits the Executive may have under employee and/or
group or executive benefit plans and programs of the Company, generally, shall
continue to the extent permissible in accordance with the terms and conditions
of such plans and programs until termination of this Agreement pursuant to
Section 5.
(f) Change of Control. If in the event of and as a
result of a Change of Control (as defined in Section 8), the Executive is
terminated without Due Cause or the Executive voluntarily elects to terminate
this Agreement and his employment for any reason, then the Executive shall be
entitled to receive (i) his Base Salary until termination of this Agreement
pursuant to Section 5, payable at such times as and in accordance with the
Company's payroll practices, and (ii) a cash payment equal to the amount of any
earned but unpaid Quarterly Bonus in respect of the quarterly period ended
prior to the quarter in which the termination occurs. All other rights and
benefits the Executive may have under employee and/or group or executive
benefit plans and programs of the Company, generally, shall continue to the
extent permissible in accordance with the terms and conditions of such plans
and programs until termination of this Agreement pursuant to Section 5.
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<PAGE> 7
8. Definition of Change of Control. The term "Change of
Control" means the occurrence of one or more of the following events:
(a) In the event that the Company becomes subject to
reporting under the Securities Exchange Act of 1934, as amended (the
"Securities Act"), a change in control of a nature that would be required to be
reported in a response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Act, or any successor regulation of similar
import, whether or not the Company is then subject to such reporting
requirement;
(b) As a result of a transaction or series of
transactions, securities of the Company representing less than 50% of the
combined voting power of the Company's then outstanding securities are owned,
directly or indirectly, by Persons who were shareholders of the Company
immediately prior to such transaction or transactions;
(c) A transfer of all or substantially all of the
Company's assets to any Person other than an affiliate of the Company.
"Person" shall have the same meaning as that term is given in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended,
whether or not the Company is then subject to the Securities Act.
9. Indemnification. The Company will indemnify the
Executive as provided for in the Company's Certificate of Incorporation or
Bylaws for officers of the Company.
10. Preservation of Business; Fiduciary Responsibility.
The Executive shall use his best efforts to preserve the business and
organization of the Company, to keep available to the Company the services of
present employees and to preserve the business relations of the Company with
suppliers, distributors, customers and others. The Executive shall not commit
any act, or in any way assist others to commit any act, that would injure the
Company. So long as the Executive is employed by the Company, the Executive
shall observe and fulfill proper standards of fiduciary responsibility
attendant upon his service and office.
11. Notices. All notices, requests, demands and other
communications given under or by reason of this Agreement shall be in writing
and shall be deemed given when delivered in person, or when confirmed if
delivered by telecopy or when mailed, by certified mail (return receipt
requested), postage prepaid, addressed as follows (or to such other address as
a party may specify by notice pursuant to this Section 11):
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<PAGE> 8
(a) To the Company:
Bayard Drilling Technologies, Inc.
Suite 400E, Lakepoint Towers
4005 N. W. Expressway
Oklahoma City, Oklahoma 73116
Attn: Board of Directors
Facsimile: (405) 879-3847
(b) To the Executive:
David E. Grose III
7512 N.W. 103rd Street
Oklahoma City, Oklahoma 73162
12. Controlling Law and Performability. The execution,
validity, interpretation and performance of this Agreement shall be governed by
and construed in accordance with the laws of the State of Oklahoma, excluding
conflicts of laws principles.
13. Arbitration. The Company and the Executive desire to
resolve certain disputes, controversies and claims arising out of this
Agreement without litigation. Accordingly, except in the case of a suit,
action or proceeding to compel either party to comply with the dispute
resolution procedures set forth in this Section 13, the parties agree that any
dispute or controversy arising under or in connection with this Agreement shall
be settled by arbitration in Oklahoma City, Oklahoma. In the proceeding, the
Executive shall select one arbitrator, the Company shall select one arbitrator
and the two arbitrators so selected shall select a third arbitrator. The
decision of a majority of the arbitrators shall be binding on the Executive and
the Company. Should one party fail to select an arbitrator within five days
after notice of the appointment of an arbitrator by the other party or should
the two arbitrators selected by the Executive and the Company fail to select an
arbitrator within ten days after the date of the appointment of the last of
such two arbitrators, any person sitting as a Judge of the United States
District Court for the Federal District of Oklahoma in which the City of
Oklahoma City is then situated, upon application of the Executive or the
Company, shall appoint an arbitrator to fill such space with the same force and
effect as though such arbitrator had been appointed in accordance with the
first sentence of this Section 13. Any arbitration proceeding pursuant to this
Section 13 shall be conducted in accordance with the rules of the American
Arbitration Association. Judgment may be entered on the arbitrators' award in
any court having jurisdiction.
14. Additional Instruments. The Executive and the
Company shall execute and deliver any and all additional instruments and
agreements that may be necessary or proper to carry out the purposes of this
Agreement.
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15. Entire Agreement and Amendments. This Agreement
(together with the Stock Plan, the Option Agreement and the Restricted Stock
Agreement, upon the effectiveness thereof) contains the entire agreement of the
Executive and the Company relating to the matters contained herein and
supersedes all prior agreements and understandings, oral or written, between
the Executive and the Company with respect to the subject matter hereof. This
Agreement may be changed only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
16. Separability. If any provision of this Agreement is
rendered or declared illegal or unenforceable by reason of any existing or
subsequently enacted legislation or by the decision of any arbitrator or by
decree of a court of last resort, the Executive and the Company shall promptly
meet and negotiate substitute provisions for those rendered or declared illegal
or unenforceable to preserve the original intent of this Agreement to the
extent legally possible, but all other provisions of this Agreement shall
remain in full force and effect.
17. Assignments. This Agreement shall inure to the
benefit of and be binding upon the Company and its successors and assigns. The
rights and obligations of the Executive under this Agreement are personal to
the Executive, and no such rights, benefits or obligations shall be subject to
voluntary or involuntary alienation, assignment or transfer. This Agreement
shall be binding upon the Executive and his heirs, executors, administrators,
legal representatives and assigns.
18. Execution. This Agreement may be executed in
multiple counterparts each of which shall be deemed an original and all of
which shall constitute one and the same instrument.
19. Waiver of Breach. The waiver by either party to this
Agreement of a breach of any provision of the Agreement by the other party
shall not operate or be construed as a waiver by such party of any subsequent
breach by such other party.
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IN WITNESS WHEREOF, the Executive and the Company have
executed this Agreement effective as of the date first above written.
"COMPANY"
BAYARD DRILLING TECHNOLOGIES, INC.
By: /s/ JAMES E. BROWN
-------------------------------------
James E. Brown
President
"EXECUTIVE"
/s/ DAVID E. GROSE III
-------------------------------------
David E. Grose III
10
<PAGE> 1
EXHIBIT 10.25
BAYARD DRILLING TECHNOLOGIES, INC.
4005 NORTHWEST EXPRESSWAY, SUITE 550E
OKLAHOMA CITY, OKLAHOMA 73116
August 20, 1997
Chesapeake Energy Corporation
P.O. Box 18496
Oklahoma City, Oklahoma 73154-0456
Attention: Marcus C. Rowland
Gentlemen:
This letter (this "Letter"), when executed and delivered by
you ("Chesapeake" or "you"), will constitute a binding agreement between you
and Bayard Drilling Technologies, Inc. ("Bayard") to consummate the
transactions hereinafter described, subject only to the conditions set forth in
paragraph 8 below.
1. Exercise of Option and Warrants. At the Closing (as
hereinafter defined), Chesapeake shall exercise in full each of the following
instruments (collectively the "Options") previously issued by Bayard to
Chesapeake: (i) that certain Option, dated December 10, 1996, representing the
right to purchase up to 1,000,000 shares of Common Stock, par value $.01 per
share ("Common Stock"), of Bayard at a purchase price per share of $12.00; (ii)
that certain Series A Warrant, issued on May 1, 1997, representing the right to
purchase up to 350,000 shares of Common Stock at a purchase price of $0.01 per
share; and (iii) that certain Series B Warrant, issued on May 1, 1997,
representing the right to purchase up to 400,000 shares of Common Stock at a
purchase price of $15.00 per share. Notwithstanding any provisions of the
Options to the contrary, in order to exercise in full all of the Options,
Chesapeake shall make payment of the purchase prices for the shares of Common
Stock represented by the Options by wire transfer of immediately available
funds to an account designated in writing by Bayard as follows: (a) upon
execution and delivery of this Letter, Chesapeake shall pay Bayard $3,000,000
(the "Initial Payment") and (b) at the Closing (as hereinafter defined),
Chesapeake shall pay Bayard $6,000,000 and shall surrender to Bayard the
original instruments representing the Options. At the Closing, Bayard shall
deliver to Chesapeake certificates representing an aggregate of 1,597,000
shares (3,194,000 shares if a two-for-one stock split (the "Stock Split") has
then been effected) of Common Stock (the "Option Shares") in consideration for
the exercise in full of such Options. Bayard and Chesapeake acknowledge and
agree that the exercise price is being paid with a combination of cash,
surrender of options and warrants, credit against the Subordinated Note (as
hereinafter defined) and forgiveness of interest on the Subordinated Note.
<PAGE> 2
Chesapeake Energy Corporation Page 2 August 20, 1997
2. Sale of Chesapeake Shares in IPO. Chesapeake hereby
agrees to sell, and Bayard hereby agrees to include, 80% of the shares of
Common Stock then held by Chesapeake (including but not limited to the Option
Shares) in any registration of an initial public offering of shares of Common
Stock (an "IPO") by Bayard; provided, however, that if the managing
underwriters in such IPO advise Bayard and Chesapeake in writing that in their
reasonable good faith opinion the number of securities required by this
paragraph 2 to be included in the IPO, when combined with the number of shares
to be offered by the Company, exceeds the number which can be sold without
materially adversely affecting the existing plan for such IPO, then Chesapeake
shall be obligated to sell, and Bayard shall be obligated to include, only the
maximum number of shares that such managing underwriters determine can be
included without materially adversely affecting the existing plan for the IPO.
The obligations of Chesapeake and Bayard under this paragraph 2 to include in
the IPO more than Chesapeake's pro rata portion of the shares to be offered by
all selling stockholders in the IPO are subject to the receipt of any required
consents or waivers of all other persons who have rights to register shares of
Common Stock in the IPO.
3. Redemption of Subordinated Note. Upon the
consummation of an IPO, Bayard shall redeem in full that certain Subordinated
Note, dated May 1, 1997 and made payable to Chesapeake, in the original
principal amount of $18,000,000 (the "Subordinated Note"), by the wire transfer
of immediately available funds in an amount equal to the Redemption Price (as
hereinafter defined) to an account designated in writing by Chesapeake. If the
per share price to the public of the shares of Common Stock issued in the IPO
(the "IPO Price") exceeds $30.00, then the "Redemption Price" shall equal
$15,000,000 plus the product obtained by multiplying (x) $200,000 by (y) the
difference between the IPO Price and $30.00. If the IPO Price is less than
$30.00, then the "Redemption Price" shall equal $15,000,000 minus the product
obtained by multiplying (x) $200,000 by (y) the difference between $30.00 and
the IPO Price. Simultaneously with the consummation of the IPO, Chesapeake
shall deliver to Bayard the original Subordinated Note and on receipt thereof
by Bayard and payment by Bayard of the Redemption Price, the Subordinated Note
shall be deemed to be paid in full. If the Stock Split has been effected prior
to the IPO, then all references in this paragraph 3 to values of $30.00 and
$200,000 shall be deemed to be $15.00 and $400,000, respectively. Bayard and
Chesapeake agree that, upon payment of the Redemption Price, all accrued and
unpaid interest on the Subordinated Note (including interest otherwise payable
on November 1, 1997) will be forgiven and that no interest on such note shall
thereafter accrue or become payable. This paragraph 3 shall become null and
void if an IPO is not consummated on or before December 31, 1997.
4. Timing of IPO. Bayard agrees that so long as
Chesapeake has the right to include any shares of Common Stock in the IPO,
Bayard shall not consummate the IPO prior to November 3, 1997 without the prior
approval of Chesapeake.
<PAGE> 3
Chesapeake Energy Corporation Page 3 August 20, 1997
5. Waiver of Right to Sell Additional Securities;
Purchase of Common Stock. As of the Closing, Bayard shall irrevocably waive
its right under section 2.5 of that certain Securities Purchase Agreement,
dated as of April 30, 1997 (the "Securities Purchase Agreement"), to sell the
Additional Securities (as defined in the Securities Purchase Agreement) to
Chesapeake and all rights and obligations of Bayard and Chesapeake in respect
of such sale and the Second Closing (as defined in the Securities Purchase
Agreement) shall thereupon terminate; provided, however, that if the Closing
does not occur on or before the termination of this Letter in accordance with
paragraph 8 hereof, then the Initial Payment shall be deemed to have been paid
in consideration for the Additional Securities and Chesapeake and Bayard shall
promptly consummate the Second Closing. Notwithstanding any agreement to the
contrary, the Series A Warrants comprising a portion of the Additional
Securities shall not carry contractual voting rights unless and until clearance
has been obtained under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), for Chesapeake's acquisition of such
Additional Securities.
6. HSR Filings. As promptly as practicable following
the execution of this Letter by Chesapeake and Bayard, each of Chesapeake and
Bayard shall file with the Department of Justice and the Federal Trade
Commission the required notification forms under the HSR Act relating to
Chesapeake's acquisition of Common Stock pursuant hereto.
7. The Closing. The closing of the transactions
contemplated by paragraphs 1 and 5 of this Letter (the "Closing") shall be held
at 10:00 a.m. on the third business day following the satisfaction or waiver of
all of the conditions set forth in paragraph 8 hereof, at the offices of Baker
& Botts, L.L.P., 2001 Ross Avenue, Dallas, Texas 75201, or at such other time,
date or place as Bayard and Chesapeake shall mutually agree.
8. Conditions to Effectiveness. The obligations of
Chesapeake and Bayard under this Letter are subject to the approval of this
Letter and the transactions contemplated hereby by the Boards of Directors of
each of Chesapeake and Bayard and the obligations of Chesapeake and Bayard to
consummate the Closing are further subject to (i) the receipt of all consents
or waivers necessary to effect the transactions under Bayard's Stockholders
Agreement and Registration Rights Agreement, (ii) the receipt of any required
consents or waivers of the other holders of Subordinated Notes of Bayard in
order to allow for the disparate treatment of such notes, (iii) the receipt of
the consent of Bayard's lenders to the redemption of the Subordinated Note as
contemplated by paragraph 3 above and (iv) the expiration or early termination
of the waiting period with respect to the HSR Act filings. This Letter (except
the obligations to consummate the Second Closing as provided in paragraph 5)
shall terminate at 5:00 p.m. Central Time on September 30, 1997 if such
conditions have not been satisfied.
9. Amendments. The provisions of this Letter shall not
be amended or waived except by the written agreement of Chesapeake and Bayard.
<PAGE> 4
Chesapeake Energy Corporation Page 4 August 20, 1997
10. Governing Law. This Letter shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without giving
effect to any choice of law principles that would require the application of
the laws of any other jurisdiction.
11. Counterparts. This Letter may be executed in
multiple counterparts, each of which when so executed and delivered shall be
deemed to be an original, and all of which together shall constitute one and
the same instrument.
If you agree with the foregoing, please execute and return one
copy of this Letter.
Very truly yours,
BAYARD DRILLING TECHNOLOGIES, INC.
By: /s/ James E. Brown
----------------------------------
Chief Executive Officer
Accepted and agreed this
20th day of August, 1997:
CHESAPEAKE ENERGY CORPORATION
By: /s/ Aubrey K. McClendon
-------------------------------
Chief Executive Officer
<PAGE> 1
EXHIBIT 10.26
BAYARD DRILLING TECHNOLOGIES, INC.
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is entered into as of August __, 1997
("Agreement"), between Bayard Drilling Technologies, Inc., a Delaware
corporation (the "Company"), and _______________________________ ("Indemnitee").
BACKGROUND STATEMENT AND RECITALS
Highly competent and experienced persons are becoming more
reluctant to serve corporations as directors or in other capacities unless they
are provided with adequate protection through insurance and adequate
indemnification against inordinate risks of claims and actions against them
arising out of their service to and activities on behalf of the corporation.
The Board of Directors of the Company (the "Board") has
determined that the inability to attract and retain such persons would be
detrimental to the best interests of the Company and its stockholders and that
the Company should act to assure such persons that there will be increased
certainty of such protection in the future.
The Board has also determined that it is reasonable, prudent
and necessary for the Company, in addition to purchasing and maintaining
directors' and officers' liability insurance (or otherwise providing for
adequate arrangements of self-insurance), contractually to obligate itself to
indemnify such persons to the fullest extent permitted by applicable law so
that they will serve or continue to serve the Company free from undue concern
that they will not be so indemnified.
Indemnitee is willing to serve, continue to serve and to take
on additional service for or on behalf of the Company on the condition that he
be so indemnified.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants herein contained, and other good and valuable consideration,
the sufficiency and receipt of which are hereby acknowledged, the parties
hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used herein, the following words and terms shall have the
following respective meanings:
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"Change of Control" means a change of control of the Company
occurring after the Public Status Date of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in
response to any similar item on any similar schedule or form) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or
not the Company is then subject to such reporting requirement; provided,
however, that, without limiting the generality of the foregoing, a Change of
Control shall be deemed to have occurred (irrespective of the applicability of
the initial clause of this definition) if at any time after the Public Status
Date (a) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act, but excluding (i) any employee benefit plan of the Company or of
any subsidiary of the Company, and (ii) any entity organized, appointed or
established by the Company pursuant to the terms of any such plan) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then outstanding securities
without the prior approval of at least two-thirds of the members of the whole
Board in office immediately prior to such person attaining such percentage
interest; (b) the Company is a party to a merger, consolidation, share
exchange, sale of assets or other reorganization, or a proxy contest, as a
consequence of which members of the Board in office immediately prior to such
transaction or event constitute less than a majority of the whole Board
thereafter; or (c) during any period of two consecutive years, individuals who
at the beginning of such period constituted members of the Board (including for
this purpose any new member whose election or nomination for election by the
Company's stockholders was approved by at least two-thirds of the members of
the whole Board then still in office who were members of the Board at the
beginning of such period) cease for any reason to constitute a majority of the
whole Board.
"Claim" means an actual or threatened claim or request for
relief.
"Corporate Status" means the status of a person who is or was
a director, nominee for director, officer, employee, agent or fiduciary of the
Company or of any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise which such person is or was serving
at the request of the Company.
"Disinterested Director," with respect to any request by
Indemnitee for indemnification hereunder, means a director of the Company who
neither is nor was a party to the Proceeding or subject to a Claim, issue or
matter in respect of which indemnification is sought by Indemnitee.
"DGCL" means the Delaware General Corporation Law and any
successor statute thereto as either of them may be amended from time to time.
"Expenses" means all attorneys' fees, retainers, court costs,
transcript costs, fees of experts, witness fees, travel expenses, duplicating
costs, printing and binding costs, telephone charges, postage, delivery service
fees and all other disbursements or expenses of the types customarily incurred
in connection with prosecuting, defending, preparing to prosecute or defend,
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investigating, being or preparing to be a witness in, or participating in
(including on appeal), a Proceeding.
"Independent Counsel" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and neither
contemporaneously is, nor in the five years theretofore has been, retained to
represent (a) the Company or Indemnitee in any matter material to either such
party, (b) any other party to the Proceeding giving rise to a claim for
indemnification hereunder or (c) the beneficial owner, directly or indirectly,
of securities of the Company representing 20% or more of the combined voting
power of the Company's then outstanding voting securities (other than, in each
such case, with respect to matters concerning the rights of Indemnitee under
this Agreement, or of other indemnitees under similar indemnification
agreements). Notwithstanding the foregoing, the term "Independent Counsel"
shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine
Indemnitee's rights under this Agreement.
"person" shall have the meaning ascribed to such term in
Sections 13(d) and 14(d) of the Exchange Act.
"Proceeding" means any threatened, pending or completed
action, suit, arbitration, alternate dispute resolution mechanism,
administrative hearing or any other proceeding, whether civil, criminal,
administrative or investigative and whether or not based upon events occurring,
or actions taken, before the date hereof (except any of the foregoing initiated
by Indemnitee pursuant to Article VI or Section 7.8 to enforce his rights under
this Agreement), and any inquiry or investigation that could lead to, and any
appeal in or related to, any such action, suit, arbitration, alternative
dispute resolution mechanism, hearing or proceeding.
"Public Status Date" means the first date on which the Company
has outstanding a class of equity securities registered under the Exchange Act.
ARTICLE II
SERVICES BY INDEMNITEE
Section 2.1 Services. Indemnitee agrees to serve, or
continue to serve, as an officer or director of the Company and, as the Company
has requested or may request from time to time, as a director, officer,
employee, agent or fiduciary of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise. Indemnitee and the
Company each acknowledge that they have entered into this Agreement as a means
of inducing Indemnitee to serve, or continue to serve, the Company in such
capacities. Indemnitee may at any time and for any reason resign from such
position or positions (subject to any other contractual obligation or any
obligation imposed by operation of law). The Company shall have no obligation
under this Agreement to continue Indemnitee in any such position or positions.
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ARTICLE III
INDEMNIFICATION
Section 3.1 General. The Company shall indemnify, and
advance Expenses to, Indemnitee to the fullest extent permitted by applicable
law in effect on the date hereof and to such greater extent as applicable law
may thereafter from time to time permit. The rights of Indemnitee provided
under the preceding sentence shall include, but shall not be limited to, the
right to be indemnified and to have Expenses advanced in all Proceedings to the
fullest extent permitted by Section 145 of the DGCL. The provisions set forth
in this Agreement are provided in addition to and as a means of furtherance and
implementation of, and not in limitation of, the obligations expressed in this
Article III.
Section 3.2 Proceedings Other Than by or in Right of the
Company. Indemnitee shall be entitled to indemnification pursuant to this
Section 3.2 if, by reason of his Corporate Status, he was, is or is threatened
to be made, a party to any Proceeding, other than a Proceeding by or in the
right of the Company. Pursuant to this Section 3.2, the Company shall
indemnify Indemnitee against Expenses, judgments, penalties, fines and amounts
paid in settlement (including all interest, assessments and other charges paid
or payable in connection with any such Expenses, judgments, penalties, fines
and amounts paid in settlement) actually and reasonably incurred by him or on
his behalf in connection with such Proceeding or any Claim, issue or matter
therein, if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Company, and with respect to any
criminal Proceeding, had no reasonable cause to believe his conduct was
unlawful. Nothing in this Section 3.2 shall limit the benefits of Section 3.1
or any other Section hereunder.
Section 3.3 Proceedings by or in Right of the Company.
Indemnitee shall be entitled to indemnification pursuant to this Section 3.3
if, by reason of his Corporate Status, he was, is or is threatened to be made,
a party to any Proceeding brought by or in the right of the Company to procure
a judgment in its favor. Pursuant to this Section 3.3, the Company shall
indemnify Indemnitee against Expenses actually and reasonably incurred by him
or on his behalf in connection with such Proceeding or any Claim, issue or
matter therein, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company.
Notwithstanding the foregoing, no indemnification against such Expenses shall
be made in respect of any Claim, issue or matter in such Proceeding as to which
Indemnitee shall have been adjudged to be liable to the Company if applicable
law prohibits such indemnification; provided, however, that, if applicable law
so permits, indemnification against such Expenses shall nevertheless be made by
the Company in such event if and only to the extent that the Court of Chancery
of the State of Delaware or other court of competent jurisdiction (the
"Court"), or the court in which such Proceeding shall have been brought or is
pending, shall so determine. Nothing in this Section 3.3 shall limit the
benefits of Section 3.1 or any other Section hereunder.
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ARTICLE IV
EXPENSES
Section 4.1 Expenses of a Party Who Is Wholly or Partly
Successful. Notwithstanding any other provision of this Agreement to the
contrary (except as set forth in Section 7.2(c) or 7.6), and without a
requirement for any determination described in Section 5.2, the Company shall
indemnify Indemnitee against all Expenses actually and reasonably incurred by
him or on his behalf in connection with any Proceeding to which Indemnitee was
or is a party by reason of his Corporate Status and in which Indemnitee is
successful, on the merits or otherwise. If Indemnitee is not wholly
successful, on the merits or otherwise, in a Proceeding but is successful, on
the merits or otherwise, as to any Claim, issue or matter in such Proceeding,
the Company shall indemnify Indemnitee against all Expenses actually and
reasonably incurred by him or on his behalf relating to each successfully
resolved Claim, issue or matter. For purposes of this Section 4.1 and without
limitation, the termination of a Claim, issue or matter in a Proceeding by
dismissal, with or without prejudice, shall be deemed to be a successful result
as to such Claim, issue or matter.
Section 4.2 Expenses of a Witness or Non-Party.
Notwithstanding any other provision of this Agreement to the contrary, to the
extent that Indemnitee is, by reason of his Corporate Status, a witness or
otherwise participates in any Proceeding at a time when he is not a party in
the Proceeding, the Company shall indemnify him against all Expenses actually
and reasonably incurred by him or on his behalf in connection therewith.
Section 4.3 Advancement of Expenses. The Company shall
pay all reasonable Expenses incurred by or on behalf of Indemnitee in
connection with any Proceeding, whether brought by or in the right of the
Company or otherwise, in advance of any determination with respect to
entitlement to indemnification pursuant to Article V within 15 days after the
receipt by the Company of a written request from Indemnitee requesting such
payment or payments from time to time, whether prior to or after final
disposition of such Proceeding. Such statement or statements shall reasonably
evidence the Expenses incurred by Indemnitee. Indemnitee hereby undertakes and
agrees that he will reimburse and repay the Company for any Expenses so
advanced to the extent that it shall ultimately be determined (in a final
adjudication by a court from which there is no further right of appeal or in a
final adjudication of an arbitration pursuant to Section 6.1 if Indemnitee
elects to seek such arbitration) that Indemnitee is not entitled to be
indemnified by the Company against such Expenses.
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ARTICLE V
PROCEDURE FOR DETERMINATION OF ENTITLEMENT
TO INDEMNIFICATION
Section 5.1 Request by Indemnitee. To obtain
indemnification under this Agreement, Indemnitee shall submit to the Company a
written request, including therein or therewith such documentation and
information as is reasonably available to Indemnitee and is reasonably
necessary to determine whether and to what extent Indemnitee is entitled to
indemnification. The Secretary or an Assistant Secretary of the Company shall,
promptly upon receipt of such a request for indemnification, advise the members
of the Board in writing that Indemnitee has requested indemnification.
Section 5.2 Determination of Request. Upon written
request by Indemnitee for indemnification pursuant to Section 5.1, a
determination, if required by applicable law, with respect to Indemnitee's
entitlement thereto shall be made in the specific case as follows:
(a) If a Change of Control shall have occurred, by
Independent Counsel in a written opinion to the Board, a copy of which
shall be delivered to Indemnitee unless Indemnitee shall request that
such determination be made by the Disinterested Directors, in which
case in the manner provided for in clause (i) of paragraph (b) below;
(b) If a Change of Control shall not have occurred,
(i) by a majority vote of the Disinterested Directors, even though
less than a quorum of the Board, or (ii) if there are no Disinterested
Directors, or if such Disinterested Directors so direct, by
Independent Counsel in a written opinion to the Board, a copy of which
shall be delivered to the Indemnitee, or (iii) if Indemnitee and the
Company mutually agree, by the stockholders of the Company; or
(c) As provided in Section 5.4(b).
If it is so determined that Indemnitee is entitled to indemnification
hereunder, payment to Indemnitee shall be made within 15 days after such
determination. Indemnitee shall cooperate with the person or persons making
such determination with respect to Indemnitee's entitlement to indemnification,
including providing to such person upon reasonable advance request any
documentation or information that is not privileged or otherwise protected from
disclosure and that is reasonably available to Indemnitee and reasonably
necessary for such determination. Any costs or expenses (including attorneys'
fees and disbursements) incurred by Indemnitee in so cooperating with the
person or persons making such determination shall be borne by the Company
(irrespective of the determination as to Indemnitee's entitlement to
indemnification), and the Company shall indemnify and hold harmless Indemnitee
therefrom.
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Section 5.3 Independent Counsel. If a Change of Control
shall not have occurred and the determination of entitlement to indemnification
is to be made by Independent Counsel, the Independent Counsel shall be selected
by (a) a majority vote of the Disinterested Directors, even though less than a
quorum of the Board or (b) if there are no Disinterested Directors, by a
majority vote of the Board, and the Company shall give written notice to
Indemnitee, within 10 days after receipt by the Company of Indemnitee's request
for indemnification, specifying the identity and address of the Independent
Counsel so selected. If a Change of Control shall have occurred and the
determination of entitlement to indemnification is to be made by Independent
Counsel, the Independent Counsel shall be selected by Indemnitee, and
Indemnitee shall give written notice to the Company, within 10 days after
submission of Indemnitee's request for indemnification, specifying the identity
and address of the Independent Counsel so selected (unless Indemnitee shall
request that such selection be made by the Disinterested Directors, in which
event the Company shall give written notice to Indemnitee, within 10 days after
receipt of Indemnitee's request for the Disinterested Directors to make such
selection, specifying the identity and address of the Independent Counsel so
selected). In either event, (i) such notice to Indemnitee or the Company, as
the case may be, shall be accompanied by a written affirmation of the
Independent Counsel so selected that it satisfies the requirements of the
definition of "Independent Counsel" in Article I and that it agrees to serve in
such capacity and (ii) Indemnitee or the Company, as the case may be, may,
within seven days after such written notice of selection shall have been given,
deliver to the Company or to Indemnitee, as the case may be, a written
objection to such selection. Any objection to selection of Independent Counsel
pursuant to this Section 5.3 may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirements of the
definition of "Independent Counsel" in Article I, and the objection shall set
forth with particularity the factual basis of such assertion. If such written
objection is timely made, the Independent Counsel so selected may not serve as
Independent Counsel unless and until the Court has determined that such
objection is without merit. In the event of a timely written objection to a
choice of Independent Counsel, the party originally selecting the Independent 8
Counsel shall have seven days to make an alternate selection of Independent
Counsel and to give written notice of such selection to the other party, after
which time such other party shall have five days to make a written objection to
such alternate selection. If, within 30 days after submission of Indemnitee's
request for indemnification pursuant to Section 5.1, no Independent Counsel
shall have been selected and not objected to, either the Company or Indemnitee
may petition the Court for resolution of any objection that shall have been
made by the Company or Indemnitee to the other's selection of Independent
Counsel and/or for the appointment as Independent Counsel of a person selected
by the Court or by such other person as the Court shall designate, and the
person with respect to whom an objection is so resolved or the person so
appointed shall act as Independent Counsel under Section 5.2. The Company
shall pay any and all reasonable fees and expenses incurred by such Independent
Counsel in connection with acting pursuant to Section 5.2, and the Company
shall pay all reasonable fees and expenses incident to the procedures of this
Section 5.3, regardless of the manner in which such Independent Counsel was
selected or appointed. Upon the due commencement of any judicial proceeding or
arbitration pursuant to Section 6.1, Independent Counsel shall be discharged
and relieved of any further
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responsibility in such capacity (subject to the applicable standards of
professional conduct then prevailing).
Section 5.4 Presumptions and Effect of Certain
Proceedings.
(a) Indemnitee shall be presumed to be entitled
to indemnification under this Agreement upon submission of a request
for indemnification pursuant to Section 5.1, and the Company shall
have the burden of proof in overcoming that presumption in reaching a
determination contrary to that presumption. Such presumption shall be
used by Independent Counsel (or other person or persons determining
entitlement to indemnification) as a basis for a determination of
entitlement to indemnification unless the Company provides information
sufficient to overcome such presumption by clear and convincing
evidence.
(b) If the person or persons empowered or
selected under this Article V to determine whether Indemnitee is
entitled to indemnification shall not have made a determination within
60 days after receipt by the Company of Indemnitee's request for
indemnification, the requisite determination of entitlement to
indemnification shall be deemed to have been made and Indemnitee shall
be entitled to such indemnification, absent (i) a knowing misstatement
by Indemnitee of a material fact, or knowing omission of a material
fact necessary to make Indemnitee's statement not materially
misleading, in connection with Indemnitee's request for
indemnification, or (ii) a prohibition of such indemnification under
applicable law; provided, however, that such 60-day period may be
extended for a reasonable time, not to exceed an additional 30 days,
if the person making the determination with respect to entitlement to
indemnification in good faith requires such additional time for the
obtaining or evaluating of documentation and/or information relating
to such determination; provided further, that the 60-day limitation
set forth in this Section 5.4(b) shall not apply and such period shall
be extended as necessary (i) if within 30 days after receipt by the
Company of Indemnitee's request for indemnification under Section 5.1
Indemnitee and the Company have agreed, and the Board has resolved, to
submit such determination to the stockholders of the Company pursuant
to Section 5.2(b) for their consideration at an annual meeting of
stockholders to be held within 90 days after such agreement and such
determination is made thereat, or a special meeting of stockholders
for the purpose of making such determination to be held within 60 days
after such agreement and such determination is made thereat, or (ii)
if the determination of entitlement to indemnification is to be made
by Independent Counsel, in which case the applicable period shall be
as set forth in clause (c) of Section 6.1.
(c) The termination of any Proceeding or of any
Claim, issue or matter by judgment, order, settlement (whether with or
without court approval) or conviction, or upon a plea of nolo
contendere or its equivalent, shall not by itself adversely affect the
rights of Indemnitee to indemnification or create a presumption that
Indemnitee did not act in good faith or in a manner that he reasonably
believed to be in or not opposed to the best
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<PAGE> 9
interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was
unlawful. Indemnitee shall be deemed to have been found liable in
respect of any Claim, issue or matter only after he shall have been so
adjudged by the Court after exhaustion of all appeals therefrom.
ARTICLE VI
CERTAIN REMEDIES OF INDEMNITEE
Section 6.1 Indemnitee Entitled to Adjudication in an
Appropriate Court. If (a) a determination is made pursuant to Article V that
Indemnitee is not entitled to indemnification under this Agreement, (b) there
has been any failure by the Company to make timely payment or advancement of
any amounts due hereunder, or (c) the determination of entitlement to
indemnification is to be made by Independent Counsel and such determination
shall not have been made and delivered in a written opinion within 90 days
after the latest of (i) such Independent Counsel's being appointed, (ii) the
overruling by the Court of objections to such counsel's selection or (iii)
expiration of all periods for the Company or Indemnitee to object to such
counsel's selection, Indemnitee shall be entitled to commence an action seeking
an adjudication in the Court of his entitlement to such indemnification or
advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an
award in arbitration to be conducted by a single arbitrator pursuant to the
commercial arbitration rules of the American Arbitration Association.
Indemnitee shall commence such action seeking an adjudication or an award in
arbitration within 180 days following the date on which Indemnitee first has
the right to commence such action pursuant to this Section 6.1, or such right
shall expire. The Company shall not oppose Indemnitee's right to seek any such
adjudication or award in arbitration.
Section 6.2 Adverse Determination Not to Affect any
Judicial Proceeding. If a determination shall have been made pursuant to
Article V that Indemnitee is not entitled to indemnification under this
Agreement, any judicial proceeding or arbitration commenced pursuant to this
Article VI shall be conducted in all respects as a de novo trial or arbitration
on the merits, and Indemnitee shall not be prejudiced by reason of such initial
adverse determination. In any judicial proceeding or arbitration commenced
pursuant to this Article VI, Indemnitee shall be presumed to be entitled to
indemnification or advancement of Expenses, as the case may be, under this
Agreement and the Company shall have the burden of proof in overcoming such
presumption and to show by clear and convincing evidence that Indemnitee is not
entitled to indemnification or advancement of Expenses, as the case may be.
Section 6.3 Company Bound by Determination Favorable to
Indemnitee in any Judicial Proceeding or Arbitration. If a determination shall
have been made or deemed to have been made pursuant to Article V that
Indemnitee is entitled to indemnification, the Company shall be irrevocably
bound by such determination in any judicial proceeding or arbitration commenced
pursuant to this Article VI and shall be precluded from asserting that such
determination has not been made or that the procedure by which such
determination was made is not valid, binding and
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enforceable, in each such case absent (a) a knowing misstatement by Indemnitee
of a material fact, or a knowing omission of a material fact necessary to make
a statement by Indemnitee not materially misleading, in connection with
Indemnitee's request for indemnification or (b) a prohibition of such
indemnification under applicable law.
Section 6.4 Company Bound by the Agreement. The Company
shall be precluded from asserting in any judicial proceeding or arbitration
commenced pursuant to this Article VI that the procedures and presumptions of
this Agreement are not valid, binding and enforceable and shall stipulate in
any such court or before any such arbitrator that the Company is bound by all
the provisions of this Agreement.
Section 6.5 Indemnitee Entitled to Expenses of Judicial
Proceeding. If Indemnitee seeks a judicial adjudication of or an award in
arbitration to enforce his rights under, or to recover damages for breach of,
this Agreement, Indemnitee shall be entitled to recover from the Company, and
the Company shall indemnify Indemnitee against, any and all expenses (of the
types described in the definition of Expenses in Article I) actually and
reasonably incurred by him in such judicial adjudication or arbitration but
only if Indemnitee prevails therein. If it shall be determined in such
judicial adjudication or arbitration that Indemnitee is entitled to receive
part but not all of the indemnification or advancement of expenses or other
benefit sought, the expenses incurred by Indemnitee in connection with such
judicial adjudication or arbitration shall be equitably allocated between the
Company and Indemnitee. Notwithstanding the foregoing, if a Change of Control
shall have occurred, Indemnitee shall be entitled to indemnification under this
Section 6.5 regardless of whether Indemnitee ultimately prevails in such
judicial adjudication or arbitration.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Non-Exclusivity.
(a) The rights of Indemnitee to receive
indemnification and advancement of Expenses under this Agreement shall
not be deemed exclusive of any other rights to which Indemnitee may at
any time be entitled under applicable law, the Certificate of
Incorporation or Bylaws of the Company, any other agreement, vote of
stockholders or a resolution of directors, or otherwise. No amendment
or alteration of the Certificate of Incorporation or Bylaws of the
Company or any provision thereof shall adversely affect Indemnitee's
rights hereunder and such rights shall be in addition to any rights
Indemnitee may have under the Company's Certificate of Incorporation,
Bylaws and the DGCL or otherwise. To the extent that there is a
change in the DGCL or other applicable law (whether by statute or
judicial decision) that allows greater indemnification by agreement
than would be afforded currently under the Company's Certificate of
Incorporation or
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<PAGE> 11
Bylaws and this Agreement, it is the intent of the parties hereto that
the Indemnitee shall enjoy by virtue of this Agreement the greater
benefit so afforded by such change.
(b) The Company shall not amend the Bylaws of the
Company in a manner that adversely affects Indemnittee's rights to
indemnification thereunder existing as of the date hereof until the
six-year anniversary of the Public Status Date.
Section 7.2 Insurance and Subrogation.
(a) To the extent the Company maintains an
insurance policy or policies providing liability insurance for
directors, officers, employees, agents or fiduciaries of the Company
or of any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise that such person serves at
the request of the Company, Indemnitee shall be covered by such policy
or policies in accordance with its or their terms to the maximum
extent of the coverage available for any such director, officer,
employee, agent or fiduciary under such policy or policies.
(b) In the event of any payment by the Company
under this Agreement, the Company shall be subrogated to the extent of
such payment to all of the rights of recovery of Indemnitee, who shall
execute all papers required and take all action necessary to secure
such rights, including execution of such documents as are necessary to
enable the Company to bring suit to enforce such rights.
(c) The Company shall not be liable under this
Agreement to make any payment of amounts otherwise indemnifiable
hereunder if and to the extent that Indemnitee has otherwise actually
received such payment under the Company's Certificate of Incorporation
or Bylaws or any insurance policy, contract, agreement or otherwise.
Section 7.3 Certain Settlement Provisions. The Company
shall have no obligation to indemnify Indemnitee under this Agreement for
amounts paid in settlement of a Proceeding or Claim without the Company's prior
written consent. The Company shall not settle any Proceeding or Claim in any
manner that would impose any fine or other obligation on 12 Indemnitee without
Indemnitee's prior written consent. Neither the Company nor Indemnitee shall
unreasonably withhold their consent to any proposed settlement.
Section 7.4 Duration of Agreement. This Agreement shall
continue for so long as Indemnitee serves as a director, nominee for director,
officer, employee, agent or fiduciary of the Company or, at the request of the
Company, as a director, nominee for director, officer, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, and thereafter shall survive until and
terminate upon the latest to occur of (a) the expiration of 10 years after the
latest date that Indemnitee shall have ceased to serve in any such capacity;
(b) the final termination of all pending Proceedings in respect of which
Indemnitee is granted rights of indemnification or advancement of Expenses
hereunder and of any
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proceeding commenced by Indemnitee pursuant to Article VI relating thereto; or
(c) the expiration of all statutes of limitation applicable to possible Claims
arising out of Indemnitee's Corporate Status.
Section 7.5 Notice by Each Party. Indemnitee shall
promptly notify the Company in writing upon being served with any summons,
citation, subpoena, complaint, indictment, information or other document or
communication relating to any Proceeding or Claim for which Indemnitee may be
entitled to indemnification or advancement of Expenses hereunder; provided,
however, that any failure of Indemnitee to so notify the Company shall not
adversely affect Indemnitee's rights under this Agreement except to the extent
the Company shall have been materially prejudiced as a direct result of such
failure. The Company shall notify promptly Indemnitee in writing, as to the
pendency of any Proceeding or Claim that may involve a claim against the
Indemnitee for which Indemnitee may be entitled to indemnification or
advancement of Expenses hereunder.
Section 7.6 Certain Persons Not Entitled to
Indemnification. Notwithstanding any other provision of this Agreement to the
contrary, Indemnitee shall not be entitled to indemnification or advancement of
Expenses hereunder with respect to any Proceeding or any Claim, issue or matter
therein, brought or made by Indemnitee against the Company or any affiliate of
the Company, except as specifically provided in Article V or Article VI.
Section 7.7 Indemnification for Negligence, Gross
Negligence, etc. Without limiting the generality of any other provision
hereunder, it is the express intent of this Agreement that Indemnitee be
indemnified and Expenses be advanced regardless of Indemnitee's acts of
negligence, gross negligence or intentional or willful misconduct to the extent
that indemnification and advancement of Expenses is allowed pursuant to the
terms of this Agreement and under applicable law.
Section 7.8 Enforcement. The Company agrees that its
execution of this Agreement shall constitute a stipulation by which it shall be
irrevocably bound in any court or arbitration in which a proceeding by
Indemnitee for enforcement of his rights hereunder shall have been commenced,
continued or appealed, that its obligations set forth in this Agreement are
unique and special, and that failure of the Company to comply with the
provisions of this Agreement will cause irreparable and irremediable injury to
Indemnitee, for which a remedy at law will be inadequate. As a result, in
addition to any other right or remedy he may have at law or in equity with
respect to breach of this Agreement, Indemnitee shall be entitled to injunctive
or mandatory relief directing specific performance by the Company of its
obligations under this Agreement.
Section 7.9 Successors and Assigns. All of the terms and
provisions of this Agreement shall be binding upon, shall inure to the benefit
of and shall be enforceable by the parties hereto and their respective
successors, assigns, heirs, executors, administrators, legal representatives.
The Company shall require and cause any direct or indirect successor (whether
-12-
<PAGE> 13
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of the Company, by written agreement in form and
substance reasonably satisfactory to Indemnitee, expressly to assume and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no such succession had taken place.
Section 7.10 Amendment. This Agreement may not be
modified or amended except by a written instrument executed by or on behalf of
each of the parties hereto.
Section 7.11 Waivers. The observance of any term of this
Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) by the party entitled to enforce such
term only by a writing signed by the party against which such waiver is to be
asserted. Unless otherwise expressly provided herein, no delay on the part of
any party hereto in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party
hereto of any right, power or privilege hereunder operate as a waiver of any
other right, power or privilege hereunder nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder.
Section 7.12 Entire Agreement. This Agreement and the
documents expressly referred to herein constitute the entire agreement between
the parties hereto with respect to the matters covered hereby, and any other
prior or contemporaneous oral or written understandings or agreements with
respect to the matters covered hereby are expressly superseded by this
Agreement.
Section 7.13 Severability. If any provision of this
Agreement (including any provision within a single section, paragraph or
sentence) or the application of such provision to any person or circumstance,
shall be judicially declared to be invalid, unenforceable or void, such
decision will not have the effect of invalidating or voiding the remainder of
this Agreement or affect the application of such provision to other persons or
circumstances, it being the intent and agreement of the parties that this
Agreement shall be deemed amended by modifying such provision to the extent
necessary to render it valid, legal and enforceable while preserving its
intent, or if such modification is not possible, by substituting therefor
another provision that is valid, legal and unenforceable and that achieves the
same objective. Any such finding of invalidity or unenforceability shall not
prevent the enforcement of such provision in any other jurisdiction to the
maximum extent permitted by applicable law.
Section 7.14 Notices. All notices and other
communications hereunder shall be in writing and shall be deemed given upon (a)
transmitter's confirmation of a receipt of a facsimile transmission, (b)
confirmed delivery of a standard overnight courier or when delivered by hand or
(c) the expiration of five business days after the date mailed by certified or
registered mail (return receipt requested), postage prepaid, to the parties at
the following addresses (or at such other addresses for a party as shall be
specified by like notice):
-13-
<PAGE> 14
If to the Company, to:
Bayard Drilling Technologies, Inc.
4005 Northwest Expressway, Suite 550E
Oklahoma City, Oklahoma 73116
Attention: President
Facsimile: (405) 840-9553
If to Indemnitee, to:
--------------------------------------
--------------------------------------
--------------------------------------
Facsimile:
----------------------------
Section 7.15 Certain Construction Rules.
(a) The article and section headings contained in
this Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement. As used in
this Agreement, unless otherwise provided to the contrary, (i) all
references to days shall be deemed references to calendar days and
(ii) any reference to a "Section" or "Article" shall be deemed to
refer to a section or article of this Agreement. The words "hereof,"
"herein" and "hereunder" and words of similar import referring to this
Agreement refer to this Agreement as a whole and not to any particular
provision 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." Unless otherwise
specifically provided for herein, the term "or" shall not be deemed to
be exclusive. Whenever the context may require, any pronoun used in
this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall
include the plural and vice versa.
(b) For purposes of this Agreement, references to
"other enterprises" shall include employee benefit plans; references
to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; references to "serving at the
request of the Company" shall include any service as a director,
nominee for director, officer, employee or agent of the Company which
imposes duties on, or involves services by, such director, nominee,
officer, employee or agent with respect to an employee benefit plan,
its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests
of the Company" as referred to in this Agreement.
-14-
<PAGE> 15
Section 7.16 Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Delaware, without giving effect to the conflicts of laws principles thereof.
Section 7.17 Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed to be an original
and all of which together shall be deemed to be one and the same instrument,
notwithstanding that both parties are not signatories to the original or same
counterpart.
-15-
<PAGE> 16
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered to be effective as of the date first above written.
BAYARD DRILLING TECHNOLOGIES, INC.
By:
-------------------------------------
President
INDEMNITEE
----------------------------------------
Name:
<PAGE> 1
EXHIBIT 11.1
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
----------------- -----------------
1995 1996 1996 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Weighted average shares outstanding, primary and
fully diluted..................................... 10,932 10,932 10,932 10,932
Net effect of dilutive stock options based on the
treasury method using average market price
assuming all stock options issued within one year
prior to filing of registration statement deemed
outstanding pursuant to Securities and Exchange
Commission Staff Accounting Bulletin
Topic 4D.......................................... 450 450 450 450
------- ------- ------- -------
Total................................................ 11,382 11,382 11,382 11,382
======= ======= ======= =======
Net earnings (loss).................................... (222) 415 331 17
======= ======= ======= =======
Pro forma net earnings (loss).......................... (222) 268 205 17
Pro forma per share amount............................. N/A $ .02 .02 .00
======= ======= ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 16.1
[GRANT THORNTON LETTERHEAD]
August 27, 1997
Mr. David E. Grose
VP-Finance and Chief Financial Officer
Bayard Drilling Technologies, Inc.
4005 Northwest Expressway, Suite 550E
Oklahoma City, Oklahoma 73126
Dear Mr. Grose:
We have read the information under the caption "Independent Public Accountants"
contained in the Registration Statement and Prospectus on Form S-1 to be filed
on August 27, 1997 and agree with the statements contained therein.
Very truly yours,
/s/ GRANT THORNTON LLP
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF BAYARD DRILLING TECHNOLOGIES, INC.
Trend Drilling Co.
WD Equipment, L.L.C.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (File
No. 333- ) of our report dated August 22, 1997, on our audit of the financial
statements of Ward Drilling Company, Inc. We also consent to the references to
our firm under the caption "Independent Public Accountants."
Coopers & Lybrand L.L.P.
Oklahoma City, OK
August 25, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (File
No. 333- ) of our report dated April 28, 1997, on our audits of the financial
statements of Trend Drilling Company. We also consent to the references to our
firm under the caption "Independent Public Accountants."
Coopers & Lybrand L.L.P.
Oklahoma City, OK
August 25, 1997
<PAGE> 1
Exhibit 23.3
CONSENT OF INDEPENDENT CERTIFIED ACCOUNTANTS
We have issued our report dated January 20, 1997, accompanying the
financial statements of Bayard Drilling Technologies, Inc. contained in the
Registration Statement on Form S-1 (Registration No. 333- ) and Prospectus.
We consent to the use of the aforementioned report in the Registration
Statement and Prospectus and to the use of our name as it appears under the
caption "Independent Public Accountants".
GRANT THORNTON LLP
Oklahoma City, Oklahoma
August 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Bayard Drilling Technologies, Inc. (i) as of December
31, 1995 and 1996 and June 30, 1997, (ii) for the years ended December 31,
1996, 1995 and 1994 and (iii) for the six months ended June 30, 1997 and 1996,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1994 JAN-01-1995 JAN-01-1996 JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1994 DEC-31-1995 DEC-31-1996 JUN-30-1996 JUN-30-1997
<CASH> 0 0 4,963 0 240
<SECURITIES> 0 0 0 0 730
<RECEIVABLES> 0 1,692 1,084 0 10,517
<ALLOWANCES> 0 0 0 0 0
<INVENTORY> 0 0 0 0 0
<CURRENT-ASSETS> 0 1,711 6,048 0 12,046
<PP&E> 0 7,134 42,120 0 108,434
<DEPRECIATION> 0 791 15,765 0 17,608
<TOTAL-ASSETS> 0 7,793 34,055 0 110,935
<CURRENT-LIABILITIES> 0 1,699 2,021 0 26,192
<BONDS> 0 0 6,053 0 35,502
0 0 0 0 0
0 0 0 0 0
<COMMON> 0 0 56 0 75
<OTHER-SE> 0 (276) 25,747 0 42,965
<TOTAL-LIABILITY-AND-EQUITY> 0 8,054 34,055 0 110,935
<SALES> 0 0 0 0 0
<TOTAL-REVENUES> 9,910 7,708 9,853 4,301 15,107
<CGS> 0 0 0 0 0
<TOTAL-COSTS> 10,915 7,793 9,480 4,006 14,343
<OTHER-EXPENSES> 0 0 0 0 0
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 18 3 11 0 981
<INCOME-PRETAX> (657) (222) 433 331 27
<INCOME-TAX> 0 0 18 0 10
<INCOME-CONTINUING> 0 (222) 0 0 0
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> (657) (222) 415 331 17
<EPS-PRIMARY> 0 0 .04 .03 .00
<EPS-DILUTED> 0 0 .04 .03 .00
</TABLE>
