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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) October 23, 1996
PATTERSON ENERGY, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-22664 75-2504748
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification Number)
4510 Lamesa Highway, Snyder, Texas 79549
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (915) 573-1104
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No Change
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(Former name or former address, if changed since last report.)
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 24, 1996, Patterson Drilling Company, a wholly-owned
subsidiary of the Registrant ("PDC") purchased six oil and gas contract
drilling rigs and related assets through the acquisition of 100% of the capital
stock of Sledge Cattle Company, Inc., d/b/a Gene Sledge Drilling Corporation, a
privately-owned Midland, Texas based drilling contractor. Neither the
acquired company nor any of its stockholders were affiliated with the
Registrant.
The net purchase price for the stock was $13 million, which
included the drilling rigs and related equipment and inventory, three rig
hauling trucks, a yard and shop facility and approximately $4.3 million in net
working capital. The acquisition did not include various additional assets of
the acquired company retained by the stockholders which were unrelated to the
oil and gas contract drilling business. Of the $13 million net purchase price,
$10,425,000 was borrowed by PDC under an existing revolving line of credit with
The CIT Group/Equipment Financing, Inc. The acquired rigs have maximum rated
depth capabilities of up to 15,000 feet and are located in the Permian Basin of
West Texas. Five of the six rigs are operable and are currently working, and
the sixth was recently assembled and is expected to be placed into operation in
the near future. The Permian Basin of West Texas is one of the three principal
operating areas for the Registrant's contract drilling operations.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Not required
(b) PRO FORMA FINANCIAL INFORMATION.
Not required
(c) EXHIBITS.
2.1 Stock Purchase Agreement, dated October 23, 1996, among
Patterson Drilling Company and H. Gene Sledge, Joyce A.
Sledge, David W. Sledge and Michael G. Sledge (without
exhibits - included as Exhibits 2.2 through 2.4 below)
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2.2 Consulting Agreement dated October 23, 1996, between
Patterson Drilling Company and David W. Sledge
2.2.1 Consulting Agreement dated October 23, 1996, between
Patterson Drilling Company and Michael G. Sledge
2.3 Non-Competition Agreement dated October 23, 1996, by and
between Patterson Drilling Company and Michael G. Sledge
2.3.1 Non-Competition Agreement dated October 23, 1996, by and
between Patterson Drilling Company and H. Gene Sledge
2.3.2 Non-Competition Agreement dated October 23, 1996, by and
between Patterson Drilling Company and David W. Sledge
2.4 Asset Purchase Agreement dated October 23, 1996, by and
between Sledge Ranches, Ltd. and Sledge Cattle Company,
Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
PATTERSON ENERGY, INC.
By: /s/ CLOYCE A. TALBOTT
--------------------------------
Cloyce A. Talbott, Chairman of
the Board and Chief Executive
Officer
Dated: November 6, 1996.
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EXHIBIT INDEX
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EXHIBIT
NUMBER EXHIBIT DESCRIPTION
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2.1 Stock Purchase Agreement, dated October 23, 1996, among Patterson
Drilling Company and H. Gene Sledge, Joyce A. Sledge, David W.
Sledge and Michael G. Sledge (without exhibits - included as
Exhibits 2.2 through 2.4 below)
2.2 Consulting Agreement dated October 23, 1996, between Patterson
Drilling Company and David W. Sledge
2.2.1 Consulting Agreement dated October 23, 1996, between Patterson
Drilling Company and Michael G. Sledge
2.3 Non-Competition Agreement dated October 23, 1996, by and between
Patterson Drilling Company and Michael G. Sledge
2.3.1 Non-Competition Agreement dated October 23, 1996, by and between
Patterson Drilling Company and H. Gene Sledge
2.3.2 Non-Competition Agreement dated October 23, 1996, by and between
Patterson Drilling Company and David W. Sledge
2.4 Asset Purchase Agreement dated October 23, 1996, by and between
Sledge Ranches, Ltd. and Sledge Cattle Company, Inc.
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
AMONG
PATTERSON DRILLING COMPANY
AND
H. GENE SLEDGE
JOYCE A. SLEDGE
DAVID W. SLEDGE
AND
MICHAEL G. SLEDGE
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TABLE OF CONTENTS
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ARTICLE I
THE STOCK PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 The Stock Purchase . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Purchase Price . . . . . . . . . . . . . . . . . . . 1
SECTION 1.3 Closing . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PDC . . . . . . . . . . . . . . . . . . . 2
SECTION 2.1 Organization, Standing and Power . . . . . . . . . . 2
SECTION 2.2 Authority; Non-Contravention . . . . . . . . . . . . 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SLEDGES . . . . . . . . . . . . . . . 2
SECTION 3.1 Organization, Standing and Power . . . . . . . . . . 3
SECTION 3.2 Capital Structure . . . . . . . . . . . . . . . . . . 3
SECTION 3.3 Ownership of Company Stock . . . . . . . . . . . . . 3
SECTION 3.4 Authority; Non-Contravention . . . . . . . . . . . . 3
SECTION 3.5 Financial Statements . . . . . . . . . . . . . . . . 4
SECTION 3.6 Absence of Material Adverse Change . . . . . . . . . 4
SECTION 3.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3.8 Real and Personal Property; Title Thereto . . . . . . 5
SECTION 3.9 Accounts Receivable . . . . . . . . . . . . . . . . . 6
SECTION 3.10 Liabilities . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.11 Insurance . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.12 Contracts and Other Agreements . . . . . . . . . . . 6
SECTION 3.13 Records . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.14 Transactions with Affiliates . . . . . . . . . . . . 7
SECTION 3.15 Employee Benefit Plans; Employment Agreements . . . . 7
SECTION 3.16 Labor Matters . . . . . . . . . . . . . . . . . . . . 7
SECTION 3.17 Environmental Matters . . . . . . . . . . . . . . . . 8
SECTION 3.18 Litigation . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.19 Governmental Licenses and Permits; Compliance with
Law . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.20 Brokers . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.21 Bank Accounts . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.22 Distributions to Stockholders . . . . . . . . . . . . 10
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SECTION 3.23 Workers' Compensation Claims. . . . . . . . . . . . . 10
ARTICLE IV
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.1 Fees and Expenses . . . . . . . . . . . . . . . . . . 11
SECTION 4.2 Reasonable Efforts . . . . . . . . . . . . . . . . . 11
SECTION 4.3 Public Announcements . . . . . . . . . . . . . . . . 11
SECTION 4.4 Employee Benefits . . . . . . . . . . . . . . . . . . 11
SECTION 4.5 Sledges Indemnification . . . . . . . . . . . . . . . 12
SECTION 4.6 Repayment of Bank Debt . . . . . . . . . . . . . . . 13
SECTION 4.7 Repayment of Sledges Indebtedness to the Company . . 13
SECTION 4.8 Certain Tax Matters . . . . . . . . . . . . . . . . . 13
SECTION 4.9 Desta Drive Office Lease. . . . . . . . . . . . . . . 14
SECTION 4.10 IBM Leases. . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE V
CONDITIONS PRECEDENT TO THE STOCK PURCHASE . . . . . . . . . . . . . . . . 15
SECTION 5.1 Conditions to Each Party's Obligation to Effect the
Stock Purchase . . . . . . . . . . . . . . . . . . . 15
SECTION 5.2 Conditions to Obligation of the Sledges to Effect
the Stock Purchase . . . . . . . . . . . . . . . . . 15
SECTION 5.3 Conditions to Obligations of PDC to Effect the
Stock Purchase . . . . . . . . . . . . . . . . . . . 16
ARTICLE VI
POST CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.1 Sale of Assets to Sledge Ranches, Ltd. . . . . . . . 18
[SECTION 6.2 Access to Information. . . . . . . . . . . . . . . . . 18
SECTION 6.3 Use of Name. . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VII
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 7.1 Notices . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 7.2 Interpretation . . . . . . . . . . . . . . . . . . . 20
SECTION 7.3 Counterparts . . . . . . . . . . . . . . . . . . . . 20
SECTION 7.4 Entire Agreement; No Third-Party Beneficiaries . . . 20
SECTION 7.5 Governing Law . . . . . . . . . . . . . . . . . . . . 20
SECTION 7.6 Assignment . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7.7 Severability . . . . . . . . . . . . . . . . . . . . 20
SECTION 7.8 Enforcement of This Agreement . . . . . . . . . . . . 21
</TABLE>
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Exhibit A(I) CONSULTING AGREEMENT OF DAVID W. SLEDGE
Exhibit A(II) CONSULTING AGREEMENT OF MICHAEL G. SLEDGE
Exhibit B(I) NON-COMPETITION AGREEMENT OF DAVID W. SLEDGE
Exhibit B(II) NON-COMPETITION AGREEMENT OF MICHAEL G. SLEDGE
Exhibit B(III) NON-COMPETITION AGREEMENT OF H. GENE SLEDGE
Exhibit C ASSET PURCHASE AGREEMENT
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of October 23, 1996 (this
"Agreement"), among Patterson Drilling Company ("PDC"), a Delaware corporation
and a wholly-owned subsidiary of Patterson Energy, Inc., H. Gene Sledge ("G
Sledge"), Joyce A. Sledge ("J Sledge"), David W. Sledge ("D Sledge") and
Michael G. Sledge ("M Sledge"), each of whom is an individual residing in
Midland, Texas (G Sledge, J Sledge, D Sledge and M Sledge are collectively
referred to herein as the "Sledges").
WITNESSETH:
WHEREAS, the Sledges or the minor children of D Sledge and M Sledge
beneficially own all of the outstanding Common Stock, par value $0.10 per share
("Company Stock"), of Sledge Cattle Company, Inc., d/b/a Gene Sledge Drilling
Corporation (the "Company");
WHEREAS, PDC desires to purchase, and the Sledges desire to sell, or
cause the sale of, all of the outstanding Company Stock (the "Stock Purchase")
for the consideration set forth and provided for herein; and
WHEREAS, PDC, on the one hand, and the Sledges, on the other, desire to
make certain representations, warranties and agreements in connection with the
Stock Purchase.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE I
THE STOCK PURCHASE
SECTION 1.1 The Stock Purchase. Upon the terms and subject to the
conditions of this Agreement, at the Closing (as defined in Section 1.3 below)
provided herein, PDC shall purchase from the stockholders of the Company, and
the Sledges shall sell, or cause to be sold, to PDC, all of the outstanding
shares of Company Stock.
SECTION 1.2 Purchase Price. PDC agrees to pay to the stockholders of
the Company at the Closing a total of $11,728,000 (the "Purchase Price") for
all of the outstanding shares of Company Stock ($92.34645669 per share of
Company Stock). The Purchase Price shall be paid in a lump sum by a single
wire transfer to the order of H. Gene Sledge, as trustee for all stockholders
of the Company as a group.
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SECTION 1.3 Closing. The closing of the Stock Purchase (the
"Closing") shall take place at 9:00 a.m., local time, on the date of this
Agreement at the offices in Dallas, Texas of counsel to the Sledges and the
Company, Meadows, Owens, Collier, Reed, Cousins & Blau, L.L.P., or at such
other time and place as PDC and the Sledges shall agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PDC
PDC represents and warrants to the Sledges as follows:
SECTION 2.1 Organization, Standing and Power. PDC is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to carry
on its business as now being conducted.
SECTION 2.2 Authority; Non-Contravention. PDC has all requisite power
and authority to enter into this Agreement and to consummate the Stock
Purchase. The execution and delivery by PDC of this Agreement and the
consummation by PDC of the Stock Purchase have been duly authorized by all
necessary corporate action on the part of PDC. This Agreement has been duly
executed and delivered by PDC and (assuming the valid authorization, execution
and delivery of this Agreement by the Sledges) constitutes a valid and binding
obligation of PDC enforceable against PDC in accordance with its terms, except
to the extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws of
general applicability relating to or affecting the enforcement of creditors'
rights and by the effect of general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law). No filing
or registration with, or authorization, consent or approval of, any domestic
(federal and state), foreign or supranational court, commission, governmental
body, regulatory agency, authority or tribunal (a "Governmental Agency") is
required by or with respect to PDC in connection with the execution and
delivery of this Agreement by PDC or is necessary for the consummation by PDC
of the Stock Purchase and the other transactions contemplated by this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SLEDGES
The Sledges jointly and severally represent and warrant to PDC as
follows:
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SECTION 3.1 Organization, Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Texas and has the requisite corporate power and authority
to carry on its business as now being conducted. The Company has no
subsidiaries. The Company is duly qualified to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary.
SECTION 3.2 Capital Structure. The authorized capital stock of the
Company consists of 1,000,000 shares of Company Stock, of which 127,000 shares
are issued and outstanding. All outstanding shares of Company Stock are
validly issued, fully paid and nonassessable and have not been issued in
violation of any preemptive rights. There are no options, warrants, rights,
commitments, agreements, arrangements or undertakings of any kind to which the
Company is a party or by which it is bound obligating the Company to issue,
additional shares of capital stock of the Company.
SECTION 3.3 Ownership of Company Stock. Section 3.3 of the disclosure
schedule of the Sledges dated as of the date of this Agreement, previously
delivered to PDC (the "Sledges Disclosure Schedule") sets forth a true and
correct list of the ownership of Company Stock by the stockholders of the
Company. Each of the stockholders of the Company beneficially holds such
Company Stock free and clear of any restrictions on transfer (other than
restrictions under the Securities Act of 1933 and state securities laws),
taxes, Liens (as defined below in this Section), options, warrants, purchase
rights, contracts, commitments, equities, claims and demands. None of the
stockholders of the Company is a party to (i) any option, warrant, purchase
right, or other contract or commitment that could require him/her to sell,
transfer, or otherwise dispose of any Company Stock (other than pursuant to
this Agreement) or (ii) any voting trust, proxy, or other agreement or
understanding with respect to the Company Stock. For purposes of this
Agreement "Liens" means liens, mortgages, pledges, security interests,
encumbrances, claims or charges of any kind.
SECTION 3.4 Authority; Non-Contravention. Each of the Sledges has all
requisite power and authority to enter into this Agreement and to consummate
the Stock Purchase. This Agreement has been duly executed and delivered by the
Sledges and (assuming the valid authorization, execution and delivery of this
Agreement by PDC) constitutes a valid and binding obligation of each of the
Sledges enforceable against him/her in accordance with its terms, except to the
extent enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws of general applicability
relating to or affecting the enforcement of creditors' rights and by the effect
of general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law). The execution and delivery of
this Agreement do not, and the consummation of the Stock Purchase and
compliance with the provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice of lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to the loss of a material benefit under, or result in the
creation of any lien, security interest, charges or encumbrances upon any
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of the properties or assets of the Company under, any provision of (i) the
Articles of Incorporation or By-laws of the Company (true and complete copies
of which as of the date hereof have been delivered to PDC), (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or (iii) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or any of its respective properties or
assets, other than, in the case of clauses (ii) or (iii), any such conflicts,
violations, defaults, rights, liens, losses, security interests, charges or
encumbrances that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company, materially impair the ability of the Company to
perform its obligations hereunder or prevent the consummation of the Stock
Purchase. Except as set forth on Section 3.4 of the Sledges Disclosure
Schedule, no filing or registration with, or authorization, consent or approval
of, any Governmental Entity is required by or with respect to any of the
Sledges or the Company in connection with the execution and delivery of this
Agreement by the Sledges or is necessary for the consummation by the Sledges of
the Stock Purchase or any other transaction contemplated by this Agreement.
For purposes of this Agreement, "Material Adverse Change" or "Material Adverse
Effect" means any change or effect that is or, as far as can reasonably be
determined, is likely to be materially adverse to the assets, properties,
condition (financial or otherwise), business or results of operations of the
Company.
SECTION 3.5 Financial Statements. Included in Section 3.5 of the
Sledges Disclosure Schedule are the following unaudited financial statements
(collectively, the "Company Financial Statements") of the Company: (i) balance
sheets as of December 31, 1995 and August 31, 1996; and (ii) statements of
income and statements of cash flows for (x) each of the four years in the
period ended December 31, 1995, and (y) the eight-month period ended August 31,
1996.
Except as may be set forth in Section 3.5 of the Sledges Disclosure
Schedule, the Company Financial Statements (a) are complete and correct in all
material respects, (b) have been prepared in conformity with accrual tax basis
accounting consistently applied, and (c) present fairly the financial condition
of the Company at the dates presented and the results of operations of the
Company for the periods covered. There does not, and there will not be at
Closing, exist any fact, event, condition or claim known to any of the Sledges
which would cause a Material Adverse Change in the Company Financial Statements
as presented other than as set forth therein.
SECTION 3.6 Absence of Material Adverse Change. Except as otherwise
set forth in Section 3.6 of the Sledges Disclosure Schedule, there has not been
any Material Adverse Change with respect to the Company since August 31, 1996.
SECTION 3.7 Taxes. Except as otherwise set forth in Section 3.7 of
the Sledges Disclosure Schedule: (i) all Tax Returns required to be filed by
the Company have been filed or extensions have been validly obtained; (ii) Tax
Returns referred to in clause (i) are true and
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correct in all material respects and have been completed in all material
respects in accordance with applicable law; (iii) all Taxes shown to be due on
the Tax Returns referred to in clause (i) have been timely paid or extensions
have been duly obtained or such taxes have been adequately provided for on the
Company's balance sheet or are being timely and properly contested; (iv) the
Company has not waived any statute of limitations in respect of Taxes of the
Company; (v) the Tax Returns referred to in clause (i) have been examined by
the Internal Revenue Service or the appropriate state taxing authority or the
period for assessment of the Taxes in respect of such Tax Returns were required
to be filed has expired; (vi) no issues that have been raised in writing by the
relevant taxing authority in connection with the examination of the Tax Returns
referred to in clause (i) are currently pending; (vii) all deficiencies
asserted or assessments made as a result of any examination of the Tax Returns
referred to in clause (i) by a taxing authority have been paid in full or
adequately provided for on the Company's balance sheet or are being timely and
properly contested; (viii) the Company has made available to PDC correct and
complete copies of all federal and state income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by the
Company; (ix) from March 1, 1987, to the present, the Company has duly elected
to be treated as an S corporation pursuant to Section 1362(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the corresponding provisions
of the laws of the State of Texas, and no taxing authority has challenged the
effectiveness of such election; (x) approval of the Company's election to be
treated as an S corporation has been received from the Internal Revenue Service
and such approval has been recognized by the State of Texas; (xi) no event has
or will occur before the Closing Date to have caused the Company's election to
be treated as an S corporation to be terminated in any manner; and (xii) the
Company shall not be subject to a tax on built-in gains under Section 1374 of
the Code as a result of the Stock Purchase. For purposes of this Agreement,
(a) "Tax" (and, with correlative meaning, "Taxes" and "Taxable") means any
federal, state, local or foreign income, gross receipts, property, sales, use,
license, excise, franchise, employment, payroll, withholding, alternative or
added minimum, ad valorem, transfer, severance or excise tax, or any other tax,
custom, duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, imposed by any governmental
authority, and (b) "Tax Return" means any return, report or similar statement
required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
SECTION 3.8 Real and Personal Property; Title Thereto. Set forth in
Section 3.8 of the Sledges Disclosure Schedule is a complete and accurate
schedule of all real and personal property owned by the Company having an
individual fair market value in excess of $25,000, and other than the real and
personal property to be resold to Sledge Ranches, Ltd., a Texas limited
partnership, immediately following the Closing Date as provided in Section 6.1
of this Agreement. Except as set forth in Section 3.8 of the Sledges
Disclosure Schedule, the Company has good and, with respect to real property,
indefeasible title to all of such real property and personal property, subject
to no Liens except for (i) Liens for taxes not yet delinquent or the validity
of which is being contested in good faith, and (ii) any Liens arising by
operation of law
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securing obligations not yet overdue. Notwithstanding the foregoing, title to
the oil and gas interests of the Company is of the type customarily acceptable
to prudent investors in oil and gas interests in the area where such oil and
gas interests of the Company are located. Any real or personal property held
by the Company under lease are held under valid and enforceable leases which
will continue in full force and effect immediately after the Closing Date; the
Company is not in default with respect to any such lease.
SECTION 3.9 Accounts Receivable. Set forth in Section 3.9 of the
Sledges Disclosure Schedule is a complete and accurate schedule of the accounts
receivable of the Company as of August 31, 1996, as reflected in the balance
sheet as of that date included in the Company Financial Statements, together
with an accurate aging of those accounts. To the best knowledge of the
Sledges, the accounts described in Section 3.9 have been collected in full, or
are collectible at their full amounts.
SECTION 3.10 Liabilities. There are no liabilities of the Company of
any kind, whether contingent or fixed, other than (i) liabilities disclosed or
provided for in the balance sheet of the Company as of August 31, 1996 included
in the Company Financial Statements or disclosed in Section 3.10 of the Sledges
Disclosure Schedule, or (ii) liabilities incurred in the ordinary course of
business since August 31, 1996, none of which, either individually or in the
aggregate, may be reasonably expected to be materially adverse to the business,
assets, condition (financial or otherwise) or results of operations of the
Company.
SECTION 3.11 Insurance. Set forth in Section 3.11 of the Sledges
Disclosure Schedule is an accurate and complete list and brief description of
all policies of fire and extended coverage, liability, worker compensation and
other forms of similar insurance or indemnity bonds held by the Company. The
Company is not in default in any material respect with respect to any
provisions of any such policy or indemnity bond and has not failed to give any
notice or present any claim thereunder in due and timely fashion, which failure
would materially adversely affect the condition (financial or otherwise),
results of operations, assets, liabilities or business of the Company.
SECTION 3.12 Contracts and Other Agreements. Except as disclosed on
Section 3.12 of the Sledges Disclosure Schedule, the Company is not a party to
or bound by any written or oral (i) employment, agency, consulting or similar
contract which cannot be terminated upon 30 days' notice without liability to
the Company, (ii) lease, whether as lessor or lessee, with respect to any real
or personal property, (iii) contract or commitment involving more than $10,000
a year, other than contracts with the Company's contract drilling customers in
the ordinary course of business; (iv) credit agreements; (v) guarantee,
suretyship, indemnification or contribution agreement, or (vi) other contracts
not made in the ordinary course of business.
SECTION 3.13 Records. The stock record books and minute books of the
Company are complete and correct in all material respects, and record all
transactions required
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to be set forth concerning all proceedings, consents, actions and meetings of
the stockholders and the Board of Directors of the Company.
SECTION 3.14 Transactions with Affiliates. Except as otherwise set
forth in 3.14 of the Sledges Disclosure Schedule, no Affiliate (as hereinafter
defined) has any direct or indirect interest in or owns directly or indirectly
any asset or right owned by or used in the conduct of the contract drilling
business of the Company or is party to any contract, lease, agreement,
arrangement or commitment used in such business.
"Affiliate" as used in this Section 3.14 means a person which directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under, control with the Company. For purposes of this definition, the
officers, directors and stockholders of the Company shall be deemed Affiliates.
SECTION 3.15 Employee Benefit Plans; Employment Agreements. With
respect to all the employee benefit plans, programs and arrangements of the
Company, including, but not limited to, the Sledge Cattle Company, Inc. Profit
Sharing Plan (the "Company Profit Sharing Plan") and related trust maintained
for the benefit of any current or former employee, officer or director of the
Company (collectively, the "Company Plans"), except as would not, individually
or in the aggregate, have a Material Adverse Effect on the Company: (i) none of
the Company Plans is a multi-employer plan within the meaning of ERISA; (ii)
none of the Company Plans promises or provides retiree medical or life
insurance benefits to any person, except as otherwise required by law; (iii)
each Company Plan intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service
that it is so qualified and nothing has occurred since the date of such letter
that could reasonably be expected to affect the qualified status of such
Company Plan; (iv) each Company Plan has been operated in all respects in
accordance with its terms and the requirements of applicable law; and (v) the
Company has not incurred any direct or indirect liability under, arising out of
or by operation of Title IV of ERISA in connection with the termination of, or
withdrawal from, any Company Plan or other retirement plan or arrangement, and
no fact or event exists that could reasonably be expected to give rise to any
such liability. The aggregate accumulated benefit obligations of any Company
Plan subject to Title IV of ERISA do not exceed the fair market value of the
assets of such Company Plan. Except as set forth in Section 3.15 of the Sledge
Stockholder Disclosure Schedule, the Company has no Company Plans or any
employment or severance agreements with any of its employees.
SECTION 3.16 Labor Matters. (i) The Company is not a party to any
collective bargaining agreement or other material contract or agreement with
any labor organization or other representative of employees nor is any such
contract being negotiated; (ii) there is no material unfair labor practice
charge or complaint pending nor, to the knowledge of any of the Sledges,
threatened, with regard to employees of the Company; (iii) there is no labor
strike, material slowdown, material work stoppage or other material labor
controversy in effect, or, to the knowledge of any of the Sledges, threatened
against the Company; (iv) as of the date hereof,
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no representation question exists, nor to the knowledge of any of the Sledges
are there any campaigns being conducted to solicit cards from the employees of
the Company to authorize representation by a labor organization; (v) the
Company is not party to, or is not otherwise bound by, any consent decree with
any governmental authority relating to employees or employment practices of the
Company; (vi) the Company has not incurred any liability under, and has
complied in all respects with, the Worker Adjustment Retraining Notification
Act, and no fact or event exists that could give rise to liability under such
Act; and (vii) except as disclosed in Section 3.16 of the Sledges Disclosure
Schedule, the Company is in compliance with all applicable agreements,
contracts and policies relating to employment, employment practices, wages,
hours and terms and conditions of employment of the employees, except where the
failure to be in compliance with each such agreement, contract and policy would
not, either singly or in the aggregate, have a Material Adverse Effect on the
Company.
SECTION 3.17 Environmental Matters.
(a) Except to the extent that the inaccuracy of any of the
following, individually or in the aggregate, would not have a Material Adverse
Effect on the Company, to the actual knowledge of the Sledges:
(i) the Company holds, and is in compliance with and has been
in compliance with for the last three years, all Environmental Permits,
and is otherwise in substantial compliance and has been in substantial
compliance for the last three years with, all applicable Environmental
Laws and there is no condition that is reasonably likely to prevent or
materially interfere prior to the Effective Time with compliance by the
Company with Environmental Laws;
(ii) no modification, revocation, reissuance, alteration,
transfer or amendment of any Environmental Permit, or any review by, or
approval of, any third party of any Environmental Permit is required in
connection with the execution or delivery of this Agreement or the
consummation by the Company of the transactions contemplated hereby or
the operation of the business of the Company on the date of the Closing;
(iii) the Company has not received any Environmental Claim, nor
has any Environmental Claim been threatened against the Company;
(iv) the Company has not entered into, agreed to or is not
subject to any outstanding judgment, decree, order or consent
arrangement with any governmental authority under any Environmental
Laws, including without limitation those relating to compliance with any
Environmental Laws or to the investigation, cleanup, remediation or
removal of Hazardous Materials;
(v) there are no circumstances that are reasonably likely to
give rise to liability under any agreements with any person pursuant to
which the Company would be required
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to defend, indemnify, hold harmless, or otherwise be responsible for any
violation by or other liability or expense of such person, or alleged
violation by or other liability or expense of such person, arising out
of any Environmental Law; and
(vi) there are no other circumstances or conditions that are
reasonably likely to give rise to liability of the Company under any
Environmental Laws.
(b) For purposes of this Agreement, the terms below shall have
the following meanings:
"Environmental Claim" means any written complaint, notice, claim,
demand, action, suit or judicial, administrative or arbitral proceeding
by any person to the Company asserting liability or potential liability
(including without limitation, liability or potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resource damages, property damage, personal injury, fines or penalties)
arising out of, relating to, based on or resulting from (i) the
presence, discharge, emission, release or threatened release of any
Hazardous Materials at any location, (ii) circumstances forming the
basis of any violation or alleged violation of any Environmental Laws or
Environmental Permits, or (iii) otherwise relating to obligations or
liabilities of the Company under any Environmental Law.
"Environmental Permits" means all permits, licenses,
registrations, exemptions and other governmental authorizations required
under Environmental Laws for the Company to conduct its operations as
presently conducted.
"Environmental Laws" means all applicable foreign, federal, state
and local statutes, rules, regulations, ordinances, orders, decrees and
common law relating in any manner to pollution or protection of the
environment, to the extent and in the form that such exist at the date
hereof.
"Hazardous Materials" means all hazardous or toxic substances,
wastes, materials or chemicals, petroleum (including crude oil or any
fraction thereof) and petroleum products, asbestos and asbestos-
containing materials, pollutants, contaminants and all other materials
and substances, including but not limited to radioactive materials,
regulated pursuant to any Environmental Laws.
SECTION 3.18 Litigation. Except as set forth in Section 3.18 of the
Sledges Disclosure Schedule, there is no suit, action, investigation or
proceeding pending or, to the knowledge of the Sledges, threatened against the
Company at law or in equity before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or before any arbitrator of any kind, that would have a
Material Adverse Effect on the Company or, with respect to such matters that
are pending or threatened as of the date hereof, materially impair the ability
of the Company to perform its
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obligations hereunder or to consummate the Stock Purchase, and there is no
judgment, decree, injunction, rule or order of any court, governmental
department, commission, board, bureau, agency, instrumentality or arbitrator to
which the Company is subject that would have a Material Adverse Effect on the
Company or, with respect to such items that are outstanding and applicable as
of the date hereof, materially impair the ability of the Company to perform its
obligations hereunder or to consummate the Stock Purchase.
SECTION 3.19 Governmental Licenses and Permits; Compliance with Law.
The Company has not received notice of any revocation or modification of any
federal, state, local or foreign governmental license, certification, tariff,
permit, authorization or approval, the revocation or modification of which
would have a Material Adverse Effect on the Company. The conduct of the
business of the Company complies with all statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees or arbitration awards applicable
thereto, except for violations or failures to comply, if any, that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
SECTION 3.20 Brokers. No broker, investment banker or other person is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
SECTION 3.21 Bank Accounts. A complete list of each bank account
maintained by the Company, including safe deposit boxes maintained by the
Company, the account balances and the names of the persons authorized to draw
down upon or have access thereto is set forth in Section 3.21 of the Sledges
Disclosure Schedule.
SECTION 3.22 Distributions to Stockholders of the Company. Except as
permitted by Section 4.1, the Company, since August 31, 1996, has not declared,
set aside or paid any dividends on, or made any other actual, constructive or
deemed distributions in respect of, any of its capital stock, or otherwise made
any payments to any of the stockholders of the Company other than salaries in
the ordinary course of business.
SECTION 3.23 Workers' Compensation Claims. There are no workers'
compensation claims pending or, to the knowledge of the Sledges, threatened
against the Company, other than claims incurred under the Company's
Petrosurance policy.
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ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.1 Fees and Expenses. All costs and expenses incurred by PDC
in connection with this Agreement and the transactions contemplated hereby
shall be paid by PDC; such costs and expenses incurred by the Sledges or the
Company up to a maximum of $38,000 shall be paid by PDC, and any such fees and
expenses in excess of that amount shall be paid by the Sledges.
SECTION 4.2 Reasonable Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Stock Purchase and the other
transactions contemplated by this Agreement and the prompt satisfaction of the
conditions hereto.
SECTION 4.3 Public Announcements. Before issuing any press release or
otherwise making any public statements with respect to the transactions
contemplated by this Agreement, PDC, on the one hand, and the Sledges, on the
other, will consult with each other, and will undertake reasonable efforts to
agree upon the terms of such press release, and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by applicable law or by obligations pursuant to any listing
agreement with the Nasdaq National Market.
SECTION 4.4 Employee Benefits. All employee benefit plans and
programs of the Company, including the Company Profit Sharing Plan shall
terminate on the Closing and, subject to all applicable laws, PDC shall cause
all vested rights, benefits and assets of such plans and programs to be
distributed to the eligible participants in accordance with the terms of such
plans. In the case of the Company Profit Sharing Plan, Patterson Energy, Inc.
("PEC") and PDC shall also cause the Company to apply for a favorable
determination letter from the IRS prior to distribution of plan assets. Until
all plan assets are fully distributed to participants, copies of all
correspondence among the Company, the Trustee, the Administrator of the Plan
and the IRS in connection with termination of the Company Profit Sharing Plan
will be sent to G Sledge, with a copy to Robert Don Collier, at the addresses
set forth for these individuals in Section 7.1 hereof. The employees of the
Company who continue as employees of "PEC" or any of PEC's subsidiaries,
including PDC, shall be provided with employee benefits under plans and
programs which, in the aggregate, are no less favorable than those provided
pursuant to the plans and programs of PEC and its subsidiaries (including PDC)
in effect on the date hereof for the benefit of all employees of PEC or any of
its subsidiaries (including but not limited to stock option, life insurance,
medical, profit sharing (including 401(k)), severance, salary continuation and
fringe benefits). For purposes of eligibility to participate in and vesting in
benefits provided
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to employees, individuals who are employees of the Company on the Closing Date
who continue as employees of the Company or PDC, will be credited with their
years of service with the Company and years of service with prior employers to
the extent service with prior employers is taken into account under analogous
plans of the Company.
SECTION 4.5 Sledges Indemnification.
(a) After the Closing Date, the Sledges (other than J Sledge
who enters into the indemnification provided for in this Section 4.5(a) solely
for purposes of Sections 3.3 and 3.4 above) shall jointly and severally
indemnify and hold PEC and PDC harmless against and in respect of all actions,
suits, demands, judgments, costs and expenses (including reasonably attorneys'
fees of PEC or PDC), in excess in the aggregate of $100,000, but after giving
effect to insurance recoveries, if any, relating to any misrepresentation,
breach of any representation or warranty or non-fulfillment of any agreement on
the part of the Sledges under this Agreement, other than with respect to the
representation and warranty contained in Section 3.17 hereof, as to which there
will be no such indemnification; provided, however, there shall be no such
limitation (other than giving effect to insurance recoveries, if any) on the
obligation of the Sledges to indemnify and hold PEC or PDC harmless against and
in respect of all actions, suits, demands, judgments, costs and expenses
(including reasonable attorneys' fees) for any knowing and wilful
misrepresentation or violation of this Agreement. Any written notice of claim
for indemnification shall be given to G Sledge, as representative of the
Sledges, by PEC or PDC within 30 days after it has knowledge of any
misrepresentation or breach of warranty or non-fulfillment of any agreement on
the part of the Sledges, which may give rise to a claim for indemnification.
This indemnification provided for in this Section 4.5(a) shall terminate and be
of no further force and effect two years from the Closing Date, except (i) as
to any representation or warranty as to which a written notice of claim for
indemnification has been given to G Sledge, as representative of the Sledges,
prior to the expiration of such two-year period; and (ii) for a claim for
indemnification for unpaid or undisclosed federal income tax liability given to
G Sledge, as representative of the Sledges, prior to the expiration of the
applicable period of limitations. Notwithstanding anything in this Section
4.5(a) to the contrary, any loss incurred by the Company, PEC or PDC as a
result of the failure of the performance by the Sledges of their agreements
contained in Section 4.9 or G Sledge of his agreement contained in Section 4.10
shall not be offset against the $100,000 "basket" provided for above in this
Section.
(b) After the Closing Date, and, in addition to, but separate
from, the indemnification contained in Section 4.5(a), the Sledges (other than
J Sledge) shall jointly and severally indemnify and hold PEC and PDC harmless
against and in respect of all actions, suits, demands, judgments, costs and
expenses (including reasonable attorneys' fees of PEC and/or PDC), but after
giving effect to insurance recoveries, if any, relating in any way to the ranch
real and personal property to be sold to Sledge Ranches, Ltd. pursuant to the
Asset Purchase Agreement referred to in Section 6.1.
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SECTION 4.6 Repayment of Bank Debt. Prior to the Closing Date, the
Sledges shall cause the Company to repay all indebtedness of the Company for
borrowed money including, but not limited to, the loans from West Texas State
Bank and Norwest Bank Texas, Midland, N.A.
SECTION 4.7 Repayment of Sledges Indebtedness to the Company. On or
prior to the Closing Date, G Sledge shall pay to the Company all principal and
interest on monies borrowed by, or advance to, him or any of the other
stockholders of the Company (total principal and interest balance of
$579,091.97 as of the date of this Agreement).
SECTION 4.8 Certain Tax Matters.
(a) The parties recognize and agree that the S election of the
Company shall be terminated under Section 1362(d)(2) of the Code on the Closing
Date as a result of the Company ceasing to be a small business corporation.
The parties further agree that under Section 1362(d)(2)(B) the termination will
be effective on the Closing Date, that under Section 1362(e)(1)(A) the S short
year return for 1996 will be for the period of January 1, 1996, through the day
before the Closing Date, and that under Section 1362(e)(1)(B) the C short year
return for 1996 will include the day on which the Closing Date occurs.
Accordingly, the parties further agree that any gain or loss from the sale of
assets pursuant to Section 6.1 hereof shall be reportable in such C short year.
(b) For each taxable period of the Company that ends before
the Closing Date, G Sledge shall cause to be timely prepared and filed with the
appropriate authorities all tax returns of the Company and shall cause to be
paid by the parties responsible therefor all taxes when due. In completing the
foregoing obligations to cause to be prepared such tax returns, G Sledge may
utilize at no cost to him the tax return preparation services of the employees
and the accountants of the Company and PDC on a reasonable and good faith basis
and subject to the reasonable prior approval of the Company and PDC. PDC shall
cause to be prepared and filed all tax returns for the Company for tax periods
not described in the immediately foregoing sentence, and the Company or PDC
shall pay all taxes required to be paid for such periods.
(c) G Sledge, the Company and PDC reasonably and in good faith
shall cooperate with each other in preparing and filing all tax returns,
including maintaining and making available to each other all records necessary
in connection with the preparation and filing of such tax returns.
(d) G Sledge shall be responsible for causing to be filed any
amended tax returns of the Company for taxable periods ending prior to the
Closing Date which are required as a result of an examination or adjustments
made by taxing authorities, and for causing to be paid by the parties
responsible therefor when due any taxes resulting therefrom. Any such amended
returns shall be furnished to PDC for approval (which approval shall not be
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unreasonably withheld), signature and filing at least ten (10) business days
prior to the due date for the filing of such amended returns.
(e) If a claim is made by any taxing authority:
(i) For any taxable period ending before the Closing Date, G
Sledge shall control the proceedings taken in connection with such
claim; and
(ii) For any taxable period ending on or after the Closing
Date, PDC shall control the proceedings taken in connection with such
claim.
Subject to the immediately foregoing clauses (i) and (ii), the parties
reasonably and in good faith shall cooperate with each other in the contesting
of any tax claim, and shall keep each other fully apprised of the status of
such claims. Notwithstanding any of the foregoing to the contrary, the Company
and PDC shall not without the prior written approval of G Sledge (1) agree to
an extension of the statute of limitations with respect to any taxable period
of the Company ending before the Closing Date or (2) amend any tax return of
the Company for any taxable period of the Company ending before the Closing
Date.
(f) If G Sledge is unable to act under the foregoing
provisions of this Section for any reason, then D Sledge shall act in his
place, or if he is also unable to act, then M Sledge shall act in his place.
(g) The parties recognize and agree that the Company has
intangible assets consisting of goodwill, going concern value and customer
lists, and specialized know-how, having a value of at least $1,000,000. The
parties also agree not to take a position for tax purposes inconsistent with
such agreed minimum value.
SECTION 4.9 Desta Drive Office Lease. The Sledges agree (i) to assume
the Desta Drive office lease as of the Closing Date and to use their best
efforts to cause the Company to be released as a party to the lease and from
any further obligation or liability with respect thereto, and in any event will
indemnify and hold harmless the Company from any whatsoever and further
liability under the lease, and (ii) during the period beginning on the Closing
Date and ending on December 31, 1996, to allow PDC and the Company to have
access to the office for use from time to time by accounting personnel and
auditors of PDC and the Company.
SECTION 4.10 IBM Lease. G Sledge agrees to assume, or cause an
affiliate of G Sledge, to assume the IBM lease as of the Closing Date and to
indemnify and hold harmless the Company from any further liability under the
lease.
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ARTICLE V
CONDITIONS PRECEDENT TO THE STOCK PURCHASE
SECTION 5.1 Conditions to Each Party's Obligation to Effect the Stock
Purchase. The respective obligations of each party to effect the Stock
Purchase shall be subject to the fulfillment or waiver (where permissible) at
or prior to the Closing Date of each of the following conditions:
(a) No Order. No Governmental Entity or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of prohibiting the Stock Purchase or any of the other transactions
contemplated hereby; provided that, in the case of any such decree, injunction
or other order, each of the parties shall have used reasonable best efforts to
prevent the entry of any such injunction or other order and to appeal as
promptly as practicable any decree, injunction or other order that may be
entered.
(b) A Consulting Agreement in the respective forms attached
hereto as Exhibits A(I) and A(II) shall have been executed and delivered by PDC
and by D Sledge and M Sledge, as the case may be.
(c) A Non-Competition Agreement in the respective forms
attached hereto as Exhibits B(I), B(II), and B(III), shall have been executed
and delivered by D Sledge, M Sledge and G Sledge, as the case may be.
SECTION 5.2 Conditions to Obligation of the Sledges to Effect the
Stock Purchase. The obligation of the Sledges to effect the Stock Purchase
shall be subject to the fulfillment at or prior to the Closing Date of the
following additional conditions; provided that the Sledges may waive any of
such conditions in their sole discretion:
(a) Performance of Obligations; Representations and
Warranties. PDC shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior to
the Closing Date, each of the representations and warranties of PDC contained
in this Agreement that is qualified by materiality shall be true and correct on
and as of the Closing Date and each of the representations and warranties that
is not so qualified shall be true and correct in all material respects on and
as of the Closing Date.
(b) Officers' Certificate. PDC shall have furnished to the
Sledges a certificate, dated the Closing Date, signed by the appropriate
officers of PDC, certifying to the effect that to the best of the knowledge and
belief of PDC, the conditions set forth in Section 5.1 and this Section 5.2(a)
have been satisfied in full.
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(c) Payment of Purchase Price. PDC shall have made delivery
of the Purchase Price as provided in Section 1.2 of this Agreement.
SECTION 5.3 Conditions to Obligations of PDC to Effect the Stock
Purchase. The obligations of PDC to effect the Stock Purchase shall be subject
to the fulfillment at or prior to the Closing Date of the following additional
conditions, provided that PDC may waive any such conditions in its sole
discretion:
(a) Performance of Obligations; Representations and
Warranties. The Sledges shall have performed in all material respects each of
their agreements contained in this Agreement required to be performed on or
prior to the Closing Date, each of the representations and warranties of the
Sledges contained in this Agreement that is qualified by materiality shall be
true and correct on and as of the Closing Date and each of the representations
and warranties that is not so qualified shall be true in all material respects
on and as of the Closing Date.
(b) Officers' Certificate. The Sledges shall have furnished
to PDC a certificate, dated the Closing Date, certifying to the effect that to
the best of the knowledge and belief of each of them, the conditions set forth
in Section 5.1 and this Section 5.3(a) have been satisfied.
(c) Opinion of Meadows, Owens, Collier, Reed, Cousins & Blau,
L.L.P. PDC shall have received an opinion of counsel from Meadows, Owens,
Collier, Reed, Cousins & Blau, L.L.P., counsel to the Company and the Sledges,
dated the Closing Date, substantially to the effect that:
(i) The incorporation, existence, good standing and
capitalization of the Company are as stated in this Agreement; the
authorized shares of Company Stock are as stated in this Agreement; all
outstanding shares of Company Stock are duly and validly authorized and
issued, fully paid and non-assessable and have not been issued in
violation of any preemptive right of stockholders; and, to the knowledge
of such counsel, there is no existing option, warrant, right, call,
subscription or other agreement or commitment obligating the Company to
issue or sell, or to purchase or redeem, any shares of its capital stock
other than as stated in this Agreement.
(ii) This Agreement has been duly authorized, executed and
delivered by each of the Sledges, and (assuming the due and valid
authorization, execution and delivery by PDC) constitutes the legal,
valid and binding agreement of him/her enforceable against him/her in
accordance with its terms, except to the extent enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other similar laws of general applicability
relating to or affecting the enforcement of creditors' rights and by the
effect of general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
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(iii) The execution and performance by the Sledges of this
Agreement will not violate the Articles of Incorporation or By-laws of
the Company and will not violate, result in a breach of, or constitute a
default under, any material lease, mortgage, contract, agreement,
instrument, law, rule, regulation, judgment, order or decree known to
such counsel to which the Company or any of the Sledges is a party or to
which they or any of their properties or assets may be bound.
(iv) To the knowledge of such counsel, there are no actions,
suits or proceedings, pending or threatened against or affecting the
Company or any of the Sledges by any Governmental Entity which seek to
restrain, prohibit or invalidate the transactions contemplated by this
Agreement.
(v) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental agency or body which
has not been obtained is required on behalf of the Company or any of the
Sledges for consummation of the transactions contemplated by this
Agreement.
(vi) Each Consulting Agreement between PDC and each of D Sledge
and M Sledge constitutes the legal, valid and binding agreement of him
enforceable against him in accordance with its terms, except to the
extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws of
general applicability relating to or affecting the enforcement of
creditors' rights and by the effect of general principles of equity
(regardless of whether enforceability is considered in a proceeding in
equity or at law).
(vii) Each Non-Competition Agreement between PDC and each of G
Sledge, D Sledge and M Sledge constitutes the legal, valid and binding
agreement of him enforceable against him in accordance with its terms,
except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other
similar laws of general applicability relating to or affecting the
enforcement of creditors' rights and by the effect of general principles
of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
In rendering such opinion, counsel for the Company and the Sledges may rely as
to matters of fact upon the representations of officers of the Company and of
the Sledges contained in any certificate delivered to such counsel and
certificates of public officials.
Such opinion shall be limited to the laws of the United States of
America and the State of Texas.
(d) Officer and Director Resignation Letters. PDC shall have
received a resignation letter dated the Closing Date from each of the directors
and officers of the Company.
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(e) Company Stock Certificates. PDC shall have received all
of the Company Stock certificates from the respective stockholders of the
Company duly endorsed to PDC.
(f) Desta Drive Office Lease and IBM Lease. The agreements
contained in Sections 4.9 and 4.10 shall have been performed to the
satisfaction of PDC.
(g) G Sledge or an affiliate thereof shall have assumed the
IBM Lease.
ARTICLE VI
POST CLOSING COVENANTS
SECTION 6.1 Sale of Assets to Sledge Ranches, Ltd. Each of PEC and
PDC and the Sledges covenants and agrees that, immediately following the
Closing Date, it/he/she will cause the execution, delivery and performance of
the Asset Purchase Agreement in the form attached hereto as Exhibit C to this
Agreement. Each of PEC and PDC covenants and agree that immediately following
the Closing they will cause the Company to assign all of the Company's rights,
title and interest in and to the following three club memberships to G Sledge
(Midland Country Club), D Sledge (Midland Petroleum Club) and M Sledge (Midland
Petroleum Club) for $1,000 each.
SECTION 6.2 Access to Information. PDC agrees that it will cause the
Company to (i) maintain the pre-Closing business and financial records of the
Company in the offices of PEC and PDC in Snyder, Texas for a period of up to
seven years following the Closing Date, and (ii) provide the Sledges and their
respective financial and tax advisors access to such records during the
Company's normal business hours on three days' prior written notice to PDC, as
set forth in Section 7.1 hereof.
SECTION 6.3 Use of Name. PDC agrees to cause the Company to change
its name promptly following Closing to any name chosen by PDC which does not
include the name "Sledge." PDC further acknowledges and agrees that it will
promptly cause the Company to terminate and/or abandon any and all assumed name
certificates or other public documents known to PDC claiming the right of the
Company to use any assumed name which contains the name "Sledge." PDC also
agrees to cause the Company to promptly execute any and all other documents
reasonably requested by the Sledges, which document the agreement by PDC and
the Company to abandon all rights held by the Company to any use of the name
"Sledge" following the Closing.
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<PAGE> 23
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.1 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, sent by
overnight courier or telecopied (with a confirmatory copy sent by overnight
courier) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to PDC, to
Patterson Energy, Inc.
4510 Lamesa Highway
P.O. Drawer 1416
Snyder, Texas 79549
Attention: Cloyce A. Talbott
Chairman and Chief Executive Officer
with copies to:
Thomas H. Maxfield, Esq.
Baker & Hostetler
303 East 17th Avenue, Suite 1100
Denver, Colorado 80203-1264
(b) if to the Sledge Stockholders, to
H. Gene and Joyce A. Sledge
7 Hawthorne
Midland, Texas 79705
David W. Sledge
3606 Trinity Meadows Drive
Midland, Texas 79705
Michael G. Sledge
3904 Arroyo
Midland, Texas 79705
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<PAGE> 24
with copies to:
Robert Don Collier
Meadows, Owens, Collier, Reed, Cousins & Blau, L.L.P.
3700 NationsBank Plaza
901 Main Street
Dallas, Texas 75202
SECTION 7.2 Interpretation. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated, and the words "hereof', "herein" and "hereunder"
and similar terms refer to this Agreement as a whole and not to any particular
provision of this Agreement, unless the context otherwise requires. The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 7.3 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties.
SECTION 7.4 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, including the documents and instruments referred to herein, (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any person other
than the parties any rights or remedies hereunder; provided, however, that
legal counsel for the Sledges and the Company hereto may rely upon the
representations and warranties of the Sledges contained herein and in the
certificates delivered pursuant to Sections 5.3(b) and (c).
SECTION 7.5 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 7.6 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
SECTION 7.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other
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<PAGE> 25
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that
the transactions be consummated as originally contemplated to the fullest
extent possible.
SECTION 7.8 Enforcement of This Agreement. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
IN WITNESS WHEREOF, PDC and each of the Sledges have executed this
Agreement as of the date first written above.
PDC:
PATTERSON DRILLING COMPANY
By: /s/ Cloyce A. Talbott
----------------------------------
Cloyce A. Talbott
Chief Executive Officer
Attest:
/s/ James C. Brown
- ------------------------------------
James C. Brown, Secretary
SLEDGES:
/s/ H. Gene Sledge
-------------------------------------
H. Gene Sledge
/s/ Joyce A. Sledge
-------------------------------------
Joyce A. Sledge
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<PAGE> 26
/s/ David W. Sledge
-------------------------------------
David W. Sledge
/s/ Michael G. Sledge
-------------------------------------
Michael G. Sledge
THE UNDERSIGNED, BEING THE STOCKHOLDERS OF THE COMPANY OTHER THAN THE
"SLEDGES" (AS THAT TERM IS DEFINED IN THIS AGREEMENT), HEREBY (i) AGREE TO THE
PROVISIONS OF SECTION 1.2 OF THIS AGREEMENT, IN PARTICULAR, THE LUMP-SUM
PAYMENT OF THE PURCHASE PRICE BY A SINGLE WIRE TRANSFER PAYABLE TO THE ORDER OF
H. GENE SLEDGE, AS TRUSTEE FOR ALL STOCKHOLDERS OF THE COMPANY AS A GROUP, AND
(ii) RELEASES PEC AND PDC AND THEIR RESPECTIVE OFFICERS, DIRECTORS AND
EMPLOYEES FROM ANY CLAIM ANY OF THE UNDERSIGNED MAY HAVE AS A RESULT OF THE
FAILURE BY THE SLEDGES TO PAY TO THE UNDERSIGNED THE UNDERSIGNED'S SHARE OF
SUCH PURCHASE PRICE.
THE HAROLD GENE SLEDGE 1986 THE HAROLD GENE SLEDGE 1986
SPECIAL TRUST II FOR SPECIAL TRUST II FOR
DAVID W. SLEDGE MICHAEL G. SLEDGE
By: /s/ David W. Sledge By: /s/ Michael G. Sledge
------------------------------ --------------------------------
David W. Sledge, Co-Trustee Michael G. Sledge, Co-Trustee
By: By:
------------------------------ --------------------------------
M.J. Allison, Co-Trustee M.J. Allison, Co-Trustee
/s/ David W. Sledge /s/ Michael G. Sledge
- ----------------------------------- -------------------------------------
DAVID W. SLEDGE, as Custodian for MICHAEL G. SLEDGE, as Custodian for
Shelley Sledge and Samuel Sledge Spencer Sledge and Ashley Sledge
--------------------
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<PAGE> 27
THE UNDERSIGNED, BEING THE SOLE STOCKHOLDER OF PDC, HEREBY AGREES
TO BE BOUND BY THE PROVISIONS OF SECTION 4.4 AND 6.1 OF THIS AGREEMENT.
PATTERSON ENERGY, INC.
By /s/ Cloyce A. Talbott
----------------------------------
Cloyce A. Talbott
Chief Executive Officer
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<PAGE> 1
EXHIBIT 2.2
PATTERSON DRILLING COMPANY
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT is made and entered into this 23rd day
of October, 1996 (this "Agreement"), by and between PATTERSON DRILLING COMPANY,
a Delaware corporation ("PDC"), and DAVID W. SLEDGE, an individual residing in
Midland, Texas (the "Consultant").
RECITALS:
A. Simultaneously with the execution of this Agreement, PDC
has entered into that certain Stock Purchase Agreement (the "Stock Purchase
Agreement"), among PDC and H. Gene Sledge, Joyce A. Sledge, David W. Sledge and
Michael G. Sledge, providing for, among other things, the purchase by PDC of
all of the outstanding shares of capital stock of Sledge Cattle Company, Inc.
(d/b/a Gene Sledge Drilling Corporation), a Texas corporation.
B. PDC desires to retain the services of the Consultant as an
independent contractor.
C. The execution and delivery of this Agreement is a
condition to the consummation of the Stock Purchase contemplated by the Stock
Purchase Agreement, and the parties are entering into this Agreement in order
to fulfill such condition.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties, intending to be legally bound, hereby agree as follows:
1. Engagement of Consultant.
PDC hereby engages Consultant as an independent contractor to
perform the services hereinafter provided.
2. Period of Agreement.
The period of this Agreement shall commence on the date hereof
and remain in effect through October 1, 2001, unless sooner terminated as the
result of the death of the Consultant (the "Consulting Period").
<PAGE> 2
3. Services of Consultant.
(a) Consulting Services. During the Consulting Period, but
subject to the last sentence of this Section 3(a), the Consultant agrees to
make himself available at all reasonable times to consult with, and advise,
PDC, and the directors, officers, and other representatives of PDC, or any of
its affiliates, regarding such contract drilling matters of PDC, or its
affiliates, as may from time to time be referred to the Consultant by PDC (the
"Consulting Services"). In no event shall the Consultant be required to devote
(a) more than 100 hours of Consulting Services during the first month following
the date of this Agreement; (b) more than 50 hours of Consulting Services
during each of the second through the sixth month following the date of this
Agreement; or (c) more than 25 hours of Consulting Services during any month
following the sixth month and prior to expiration of the Consulting Period.
(b) Time for Performing Consulting Services. Subject to the
provisions of Section 3(a) above, the Consultant hereby agrees to perform the
Consulting Services at such time or times reasonably requested by PDC and to
make himself reasonably available to perform the Consulting Services requested
by PDC hereunder upon reasonable notice to the Consultant.
4. Consultant's Compensation.
(a) Compensation. Simultaneously with the execution of this
Agreement, PDC has paid the Consultant, by wire transfer, the amount of
$400,000 as compensation for entering into this Agreement and performing the
Consulting Services hereunder.
(b) Reimbursement of Expenses. PDC shall reimburse the
Consultant for all reasonable expenses he incurs with the prior written consent
of PDC in connection with the performance of the Consulting Services hereunder.
The reasonable expenses shall be reimbursed at cost. The Consultant shall
follow PDC's policy, as established from time to time, on reimbursement of
expenses, shall obtain receipts for all expenses in excess of $25.00, and shall
submit such receipts to PDC. PDC shall reimburse Consultant for reimbursable
expenses not more than once each month and only after receipt of an invoice
therefor and supporting receipts.
(c) Benefits. As an independent contractor to PDC, the
Consultant shall not be entitled or eligible for participation in any pension,
profit sharing, stock option, employee stock ownership, insurance, medical, or
other employee benefit plan which may be in effect from time to time, and the
Consultant shall not be entitled to be paid or otherwise provided any severance
or similar payment or any vacation, holiday, or other benefits, whether
provided for in PDC's employee handbook (if any), by custom or practice, or
otherwise.
-2-
<PAGE> 3
5. Relationship of Parties.
The Consultant is, and shall at all times during the term of this
Agreement be, an independent contractor of PDC. This Agreement does not
represent a continuing working relationship between the parties hereto. The
Consultant shall be solely responsible for payment of all federal, state, and
local taxes or contributions required under unemployment insurance, social
security, and income tax laws with respect to the Consultant. Unless requested
by PDC, the Consultant shall not work at any of PDC's business locations nor
shall the Consultant use the tools and materials of PDC. The Consultant shall
not represent or hold himself out as an agent, joint venturer, partner, or
employee of PDC. The Consultant may provide services to more than one company
at a time (subject to the terms of Section 8 hereof and the terms of the Non-
Competition Agreement among PDC and the Consultant dated of even date
herewith), and Consultant holds himself out for hire by other companies.
Except as specifically authorized in this Agreement or in writing by PDC, the
Consultant shall not enter into, or in any way be authorized or have the
authority to enter into, any contract, agreement, warranty, or representation
on behalf of PDC and shall not act as an agent of PDC. Nothing in this
Agreement is intended or shall be construed as a partnership between the
Consultant and PDC for any purpose.
6. Right of Supervision.
PDC is interested only in the accurate and timely completion of
the Consulting Services. Therefore, the Consulting Services shall be subject
to PDC's general right of inspection and supervision to secure its satisfactory
completion. However, PDC shall have no right to control Consultant's hours of
work or to supervise the Consultant in the details of the Consultant's work.
The Consultant shall comply with all federal, state, and municipal laws, rules,
and regulations that are now or may in the future become applicable to the
Consultant or the Consulting Services.
7. Allocation of Risk.
The Consulting Services shall be performed entirely at the risk
of the Consultant.
This Section 7 shall survive the termination or other expiration
or cancellation of this Agreement.
8. Confidentiality.
(a) Confidential Information Defined. It is contemplated that
PDC may disclose to the Consultant information concerning PDC's confidential
know-how, data, and trade secrets to further the performance of this Agreement.
For purposes of this Agreement, "Confidential Information" means technical and
business information relating
-3-
<PAGE> 4
to PDC's inventions or products, research and development, production,
manufacturing, engineering, and other processes, software produced by or for
PDC, source code, computer programs, costs, profit or margin information,
finances, financial information and practices, customers and customer lists,
records, marketing, production, existing, contemplated, and future business
plans, products, and services, presentation binders, sales literature, pricing,
techniques, trade secrets (as defined under applicable law), all related
information and documentation, and any other information which is marked
"Confidential" or otherwise identified by PDC to be confidential. All material
and information disclosed by PDC to the Consultant will be presumed to be
Confidential Information and will be so regarded by the Consultant.
(b) Confidentiality Agreement. The Consultant agrees that the
Consultant will hold the Confidential Information in strict confidence and will
only use the Confidential Information in connection with the providing of
Consulting Services to PDC under this Agreement and will not disclose or use
any of the Confidential Information in any manner which would constitute a
"misappropriation" under applicable law governing trade secrets and will
otherwise comply with applicable law governing trade secrets. The Consultant
further agrees that the Consultant will not make any disclosure of the
Confidential Information (including methods or concepts utilized in the
Confidential Information) to anyone without the express written consent of PDC.
The Consultant will take all reasonable steps to ensure the confidentiality of
all Confidential Information. The Consultant agrees not to copy any
Confidential Information and not to use any Confidential Information for the
Consultant's benefit or for the benefit of any third party.
(c) Exceptions. Notwithstanding the other provisions of this
Agreement, nothing received by the Consultant will be considered to be
Confidential Information of PDC if: (i) it has been published or its otherwise
readily available to the public other than by a breach of this Agreement; (ii)
it has been rightfully received by the Consultant from a third party other than
PDC without confidentiality limitations; (iii) it has been independently
developed for the Consultant by personnel or agents having no access to the
Confidential Information; or (iv) it is required to be disclosed by order of
court or other governmental authority.
(d) Survival of Obligations. This Section 8 will survive any
termination or other expiration or cancellation of this Agreement.
9. Specific Performance.
Without intending to limit the remedies available to PDC, the
Consultant acknowledges that PDC will have no adequate remedies at law if the
Consultant violates the terms of Sections 7 or 8, hereof. In such event, the
Consultant agrees that PDC shall have the right, in addition to any other
rights it may have, to obtain in any court of competent jurisdiction specific
performance of such Sections of this Agreement or injunctive relief to
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<PAGE> 5
restrain any breach or threatened breach thereof. Nothing herein shall be
construed as prohibiting PDC from pursuing any other remedies available to PDC
(whether at law or in equity) for such breach or threatened breach, including,
without limitation, the recovery of monetary damages from the Consultant.
The provisions of this Section 9 shall survive the termination or
cancellation of this Agreement.
10. Survival of Obligations.
The restrictions and obligations of this Agreement shall survive
any expiration, termination, or cancellation of this Agreement, and shall
continue to bind the Consultant and the Consultant's successors, personal
representatives, heirs and assigns.
11. Negation of Licenses.
No rights or licenses, express or implied, are hereby granted to
the Consultant as a result of or related to this Agreement.
12. Return of Information Upon Termination.
As requested by PDC from time to time and upon the expiration or
termination of this Agreement, the Consultant will deliver to PDC, within five
(5) days of such request or termination, all copies and embodiments, in
whatever form, of all Confidential Information in the Consultant's possession
or within the Consultant's control (including, but not limited to, written
records, notes, photographs, manuals, notebooks, documentation, program
listings, flow charts, magnetic media, disks, diskettes, tapes, and all other
materials containing any Confidential Information or Intellectual Property)
irrespective of the location or form of such material and, if requested by PDC,
will provide PDC with written confirmation that all such materials have been
delivered to PDC.
13. Attorneys Fees and Costs.
If an action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorneys fees, costs and necessary expenses in addition to any
other relief to which that party may be entitled. This provision is applicable
to this entire Agreement.
14. Representations and Warranties of PDC and the Consultant.
(a) Representations and Warranties of PDC. PDC hereby
represents and warrants to the Consultant that: (i) it has all requisite power
to enter into and perform its obligations under this Agreement; (ii) this
Agreement has been duly and validly authorized
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<PAGE> 6
by all necessary corporate action on the part of PDC; (iii) the execution of
this Agreement by PDC and performance of PDC's obligations hereunder do not
require the consent or approval of any other party; and (iv) this Agreement is
a valid and binding obligation of PDC.
(b) Representations and Warranties of the Consultant. The
Consultant hereby represents and warrants to PDC that: (i) the Consultant has
the capacity and power to enter into and perform the Consultant's obligations
under this Agreement; (ii) the Consultant has duly and validly executed this
Agreement; (iii) the execution of this Agreement and performance of the
Consultant's obligations hereunder do not require the consent or approval of
any other party; and (iv) this Agreement constitutes a valid and binding
obligation of the Consultant.
15. General Provisions.
(a) Compliance with Laws. The parties agree that they will
comply with all applicable laws and regulations of government bodies or
agencies in their respective performance of their obligations under this
Agreement.
(b) No Undisclosed Agency. Each party represents that it is
acting on its own behalf and is not acting as an agent for or on behalf of any
third party.
(c) Governing Law and Construction. This Agreement will be
governed by and construed in accordance with the laws of the State of Texas
without reference to its conflict-of-laws principles. This Agreement's final
form resulted from review and negotiations among the parties and their
attorneys, and no part of this Agreement should be construed against any party
on the basis of authorship.
(d) Forum for Dispute Resolution. If any dispute arises among
the parties concerning the interpretation or performance of any portion of this
Agreement which the parties are unable to resolve themselves, and any party
brings an action against any other party seeking a declaratory order, specific
performance, damages, or any other legal or equitable relief based on this
Agreement, the parties agree that the forum for any such action shall be an
appropriate federal or state court in Texas having jurisdiction, agree that
venue will be proper in such courts, and waive any objections based on
inconvenience of the forum, and further agree that the prevailing party in any
such action, as determined by the court, shall be awarded its reasonable
attorneys' fees and costs in addition to any relief or judgment the court
awards.
(e) Entire Agreement; Amendment. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
contained herein and supersedes any previous oral or written communications,
representations, understandings or
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<PAGE> 7
agreements with respect thereto. The terms of this Agreement may be modified
only in a writing, signed by authorized representatives of both parties.
(f) Assignability. This Agreement will be binding upon the
parties' respective successors and permitted assigns. Neither party may assign
this Agreement and/or any of its rights and/or obligations hereunder without
the prior written consent of the other party, and any such attempted assignment
will be void; provided, however, that PDC may assign this Agreement to a
subsidiary or affiliate without the prior written consent of the Consultant,
and provided further that a transfer by PDC as a result of a merger or sale of
all or substantially all of the assets with or to a third party that assumes
PDC's obligations hereunder shall not constitute a prohibited assignment under
this Section 15(f).
(g) Waiver. A waiver of a breach or default under this
Agreement will not constitute a waiver of any other breach or default. Failure
or delay by either party to enforce compliance with any term or condition of
this Agreement will not constitute a waiver of such term or condition.
(h) Severability. If any provision of this Agreement is
declared to be invalid, the parties agree that such invalidity will not affect
the validity of the remaining provisions of this Agreement, and further agree,
to the extent possible, to substitute for the invalid provision a valid
provision that approximates the intent and economic effect of the invalid
provision as closely as possible.
(i) Headings. The titles of the Sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
(j) Notice. Any notice, request, consent, demand or other
communication required to be given under this Agreement will be in writing and
will be given personally, by facsimile or by mailing the same, first-class,
postage prepaid to the appropriate address and facsimile number set forth below
or to such other person or at such other address as may hereafter be designated
by like notice. Notices by mail will be considered delivered and become
effective three days after the mailing thereof. All notices by facsimile will
be considered delivered and become effective immediately upon the confirmed (by
answer back or other tangible printed verification or successful receipt)
sending thereof.
-7-
<PAGE> 8
To PDC:
Patterson Drilling Company
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: Cloyce A. Talbott
Chairman and Chief Executive Officer
To the Consultant:
David W. Sledge
3606 Trinity Meadows Drive
Midland, Texas 79705
with copies to:
Robert Don Collier
Meadows, Owens, Collier, Reed,
Cousins & Blau, L.L.P.
3700 NationsBank Plaza
901 Main Street
Dallas, Texas 75202
(k) Counterparts. This Agreement may be executed in
counterparts and by the parties hereto in separate counterparts, each of which
will be deemed an original, but all of which together will constitute one and
the same instrument.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the undersigned have caused this Agreement to
be executed by their respective representatives as of the day and year first
above written.
PATTERSON DRILLING COMPANY
By: /s/ Cloyce A. Talbott
----------------------------------
Cloyce A. Talbott
Chief Executive Officer
/s/ David W. Sledge
-------------------------------------
DAVID W. SLEDGE
-9-
<PAGE> 1
EXHIBIT 2.2.1
PATTERSON DRILLING COMPANY
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT is made and entered into this 23rd day
of October, 1996 (this "Agreement"), by and between PATTERSON DRILLING COMPANY,
a Delaware corporation ("PDC"), and MICHAEL G. SLEDGE, an individual residing
in Midland, Texas (the "Consultant").
RECITALS:
A. Simultaneously with the execution of this Agreement, PDC
has entered into that certain Stock Purchase Agreement (the "Stock Purchase
Agreement"), among PDC and H. Gene Sledge, Joyce A. Sledge, David W. Sledge and
Michael G. Sledge, providing for, among other things, the purchase by PDC of
all of the outstanding shares of capital stock of Sledge Cattle Company, Inc.
(d/b/a Gene Sledge Drilling Corporation), a Texas corporation.
B. PDC desires to retain the services of the Consultant as an
independent contractor.
C. The execution and delivery of this Agreement is a
condition to the consummation of the Stock Purchase contemplated by the Stock
Purchase Agreement, and the parties are entering into this Agreement in order
to fulfill such condition.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties, intending to be legally bound, hereby agree as follows:
1. Engagement of Consultant.
PDC hereby engages Consultant as an independent contractor to
perform the services hereinafter provided.
2. Period of Agreement.
The period of this Agreement shall commence on the date hereof
and remain in effect through October 1, 2001, unless sooner terminated as the
result of the death of the Consultant (the "Consulting Period").
<PAGE> 2
3. Services of Consultant.
(a) Consulting Services. During the Consulting Period, but
subject to the last sentence of this Section 3(a), the Consultant agrees to
make himself available at all reasonable times to consult with, and advise,
PDC, and the directors, officers, and other representatives of PDC, or any of
its affiliates, regarding such contract drilling matters of PDC, or its
affiliates, as may from time to time be referred to the Consultant by PDC (the
"Consulting Services"). In no event shall the Consultant be required to devote
(a) more than 100 hours of Consulting Services during the first month following
the date of this Agreement; (b) more than 50 hours of Consulting Services
during each of the second through the sixth month following the date of this
Agreement; or (c) more than 25 hours of Consulting Services during any month
following the sixth month and prior to expiration of the Consulting Period.
(b) Time for Performing Consulting Services. The Consultant
hereby agrees to perform the Consulting Services at such time or times
reasonably requested by PDC and to make himself reasonably available to perform
the Consulting Services requested by PDC hereunder upon reasonable notice to
the Consultant.
4. Consultant's Compensation.
(a) Compensation. Simultaneously with the execution of this
Agreement, PDC has paid the Consultant, by wire transfer, the amount of
$400,000 as compensation for entering into this Agreement and performing the
Consulting Services hereunder.
(b) Reimbursement of Expenses. PDC shall reimburse the
Consultant for all reasonable expenses he incurs with the prior written consent
of PDC in connection with the performance of the Consulting Services hereunder.
The reasonable expenses shall be reimbursed at cost. The Consultant shall
follow PDC's policy, as established from time to time, on reimbursement of
expenses, shall obtain receipts for all expenses in excess of $25.00, and shall
submit such receipts to PDC. PDC shall reimburse Consultant for reimbursable
expenses not more than once each month and only after receipt of an invoice
therefor and supporting receipts.
(c) Benefits. As an independent contractor to PDC, the
Consultant shall not be entitled or eligible for participation in any pension,
profit sharing, stock option, employee stock ownership, insurance, medical, or
other employee benefit plan which may be in effect from time to time, and the
Consultant shall not be entitled to be paid or otherwise provided any severance
or similar payment or any vacation, holiday, or other benefits, whether
provided for in PDC's employee handbook (if any), by custom or practice, or
otherwise.
-2-
<PAGE> 3
5. Relationship of Parties.
The Consultant is, and shall at all times during the term of this
Agreement be, an independent contractor of PDC. This Agreement does not
represent a continuing working relationship between the parties hereto. The
Consultant shall be solely responsible for payment of all federal, state, and
local taxes or contributions required under unemployment insurance, social
security, and income tax laws with respect to the Consultant. Unless requested
by PDC, the Consultant shall not work at any of PDC's business locations nor
shall the Consultant use the tools and materials of PDC. The Consultant shall
not represent or hold himself out as an agent, joint venturer, partner, or
employee of PDC. The Consultant may provide services to more than one company
at a time (subject to the terms of Section 8 hereof and the terms of the Non-
Competition Agreement among PDC and the Consultant dated of even date
herewith), and Consultant holds himself out for hire by other companies.
Except as specifically authorized in this Agreement or in writing by PDC, the
Consultant shall not enter into, or in any way be authorized or have the
authority to enter into, any contract, agreement, warranty, or representation
on behalf of PDC and shall not act as an agent of PDC. Nothing in this
Agreement is intended or shall be construed as a partnership between the
Consultant and PDC for any purpose.
6. Right of Supervision.
PDC is interested only in the accurate and timely completion of
the Consulting Services. Therefore, the Consulting Services shall be subject
to PDC's general right of inspection and supervision to secure its satisfactory
completion. However, PDC shall have no right to control Consultant's hours of
work or to supervise the Consultant in the details of the Consultant's work.
The Consultant shall comply with all federal, state, and municipal laws, rules,
and regulations that are now or may in the future become applicable to the
Consultant or the Consulting Services.
7. Allocation of Risk.
The Consulting Services shall be performed entirely at the risk
of the Consultant.
This Section 7 shall survive the termination or other expiration
or cancellation of this Agreement.
8. Confidentiality.
(a) Confidential Information Defined. It is contemplated that
PDC may disclose to the Consultant information concerning PDC's confidential
know-how, data, and trade secrets to further the performance of this Agreement.
For purposes of this Agreement, "Confidential Information" means technical and
business information relating
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<PAGE> 4
to PDC's inventions or products, research and development, production,
manufacturing, engineering, and other processes, software produced by or for
PDC, source code, computer programs, costs, profit or margin information,
finances, financial information and practices, customers and customer lists,
records, marketing, production, existing, contemplated, and future business
plans, products, and services, presentation binders, sales literature, pricing,
techniques, trade secrets (as defined under applicable law), all related
information and documentation, and any other information which is marked
"Confidential" or otherwise identified by PDC to be confidential. All material
and information disclosed by PDC to the Consultant will be presumed to be
Confidential Information and will be so regarded by the Consultant.
(b) Confidentiality Agreement. The Consultant agrees that the
Consultant will hold the Confidential Information in strict confidence and will
only use the Confidential Information in connection with the providing of
Consulting Services to PDC under this Agreement and will not disclose or use
any of the Confidential Information in any manner which would constitute a
"misappropriation" under applicable law governing trade secrets and will
otherwise comply with applicable law governing trade secrets. The Consultant
further agrees that the Consultant will not make any disclosure of the
Confidential Information (including methods or concepts utilized in the
Confidential Information) to anyone without the express written consent of PDC.
The Consultant will take all reasonable steps to ensure the confidentiality of
all Confidential Information. The Consultant agrees not to copy any
Confidential Information and not to use any Confidential Information for the
Consultant's benefit or for the benefit of any third party.
(c) Exceptions. Notwithstanding the other provisions of this
Agreement, nothing received by the Consultant will be considered to be
Confidential Information of PDC if: (i) it has been published or its otherwise
readily available to the public other than by a breach of this Agreement; (ii)
it has been rightfully received by the Consultant from a third party other than
PDC without confidentiality limitations; (iii) it has been independently
developed for the Consultant by personnel or agents having no access to the
Confidential Information; or (iv) it is required to be disclosed by order of
court or other governmental authority.
(d) Survival of Obligations. This Section 8 will survive any
termination or other expiration or cancellation of this Agreement.
9. Specific Performance.
Without intending to limit the remedies available to PDC, the
Consultant acknowledges that PDC will have no adequate remedies at law if the
Consultant violates the terms of Sections 7 or 8, hereof. In such event, the
Consultant agrees that PDC shall have the right, in addition to any other
rights it may have, to obtain in any court of competent jurisdiction specific
performance of such Sections of this Agreement or injunctive relief to
-4-
<PAGE> 5
restrain any breach or threatened breach thereof. Nothing herein shall be
construed as prohibiting PDC from pursuing any other remedies available to PDC
(whether at law or in equity) for such breach or threatened breach, including,
without limitation, the recovery of monetary damages from the Consultant.
The provisions of this Section 9 shall survive the termination or
cancellation of this Agreement.
10. Survival of Obligations.
The restrictions and obligations of this Agreement shall survive
any expiration, termination, or cancellation of this Agreement, and shall
continue to bind the Consultant and the Consultant's successors, personal
representatives, heirs and assigns.
11. Negation of Licenses.
No rights or licenses, express or implied, are hereby granted to
the Consultant as a result of or related to this Agreement.
12. Return of Information Upon Termination.
As requested by PDC from time to time and upon the expiration or
termination of this Agreement, the Consultant will deliver to PDC, within five
(5) days of such request or termination, all copies and embodiments, in
whatever form, of all Confidential Information in the Consultant's possession
or within the Consultant's control (including, but not limited to, written
records, notes, photographs, manuals, notebooks, documentation, program
listings, flow charts, magnetic media, disks, diskettes, tapes, and all other
materials containing any Confidential Information or Intellectual Property)
irrespective of the location or form of such material and, if requested by PDC,
will provide PDC with written confirmation that all such materials have been
delivered to PDC.
13. Attorneys Fees and Costs.
If an action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorneys fees, costs and necessary expenses in addition to any
other relief to which that party may be entitled. This provision is applicable
to this entire Agreement.
14. Representations and Warranties of PDC and the Consultant.
(a) Representations and Warranties of PDC. PDC hereby
represents and warrants to the Consultant that: (i) it has all requisite power
to enter into and perform its obligations under this Agreement; (ii) this
Agreement has been duly and validly authorized
-5-
<PAGE> 6
by all necessary corporate action on the part of PDC; (iii) the execution of
this Agreement by PDC and performance of PDC's obligations hereunder do not
require the consent or approval of any other party; and (iv) this Agreement is
a valid and binding obligation of PDC.
(b) Representations and Warranties of the Consultant. The
Consultant hereby represents and warrants to PDC that: (i) the Consultant has
the capacity and power to enter into and perform the Consultant's obligations
under this Agreement; (ii) the Consultant has duly and validly executed this
Agreement; (iii) the execution of this Agreement and performance of the
Consultant's obligations hereunder do not require the consent or approval of
any other party; and (iv) this Agreement constitutes a valid and binding
obligation of the Consultant.
15. General Provisions.
(a) Compliance with Laws. The parties agree that they will
comply with all applicable laws and regulations of government bodies or
agencies in their respective performance of their obligations under this
Agreement.
(b) No Undisclosed Agency. Each party represents that it is
acting on its own behalf and is not acting as an agent for or on behalf of any
third party.
(c) Governing Law and Construction. This Agreement will be
governed by and construed in accordance with the laws of the State of Texas
without reference to its conflict-of-laws principles. This Agreement's final
form resulted from review and negotiations among the parties and their
attorneys, and no part of this Agreement should be construed against any party
on the basis of authorship.
(d) Forum for Dispute Resolution. If any dispute arises among
the parties concerning the interpretation or performance of any portion of this
Agreement which the parties are unable to resolve themselves, and any party
brings an action against any other party seeking a declaratory order, specific
performance, damages, or any other legal or equitable relief based on this
Agreement, the parties agree that the forum for any such action shall be an
appropriate federal or state court in Texas having jurisdiction, agree that
venue will be proper in such courts, and waive any objections based on
inconvenience of the forum, and further agree that the prevailing party in any
such action, as determined by the court, shall be awarded its reasonable
attorneys' fees and costs in addition to any relief or judgment the court
awards.
(e) Entire Agreement; Amendment. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
contained herein and supersedes any previous oral or written communications,
representations, understandings or
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<PAGE> 7
agreements with respect thereto. The terms of this Agreement may be modified
only in a writing, signed by authorized representatives of both parties.
(f) Assignability. This Agreement will be binding upon the
parties' respective successors and permitted assigns. Neither party may assign
this Agreement and/or any of its rights and/or obligations hereunder without
the prior written consent of the other party, and any such attempted assignment
will be void; provided, however, that PDC may assign this Agreement to a
subsidiary or affiliate without the prior written consent of the Consultant,
and provided further that a transfer by PDC as a result of a merger or sale of
all or substantially all of the assets with or to a third party that assumes
PDC's obligations hereunder shall not constitute a prohibited assignment under
this Section 15(f).
(g) Waiver. A waiver of a breach or default under this
Agreement will not constitute a waiver of any other breach or default. Failure
or delay by either party to enforce compliance with any term or condition of
this Agreement will not constitute a waiver of such term or condition.
(h) Severability. If any provision of this Agreement is
declared to be invalid, the parties agree that such invalidity will not affect
the validity of the remaining provisions of this Agreement, and further agree,
to the extent possible, to substitute for the invalid provision a valid
provision that approximates the intent and economic effect of the invalid
provision as closely as possible.
(i) Headings. The titles of the Sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
(j) Notice. Any notice, request, consent, demand or other
communication required to be given under this Agreement will be in writing and
will be given personally, by facsimile or by mailing the same, first-class,
postage prepaid to the appropriate address and facsimile number set forth below
or to such other person or at such other address as may hereafter be designated
by like notice. Notices by mail will be considered delivered and become
effective three days after the mailing thereof. All notices by facsimile will
be considered delivered and become effective immediately upon the confirmed (by
answer back or other tangible printed verification or successful receipt)
sending thereof.
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<PAGE> 8
To PDC:
Patterson Drilling Company
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: Cloyce A. Talbott
Chairman and Chief Executive Officer
To the Consultant:
Michael G. Sledge
3904 Arroyo
Midland, Texas 79705
with copies to:
Robert Don Collier
Meadows, Owens, Collier, Reed,
Cousins & Blau, L.L.P.
3700 NationsBank Plaza
901 Main Street
Dallas, Texas 75202
(k) Counterparts. This Agreement may be executed in
counterparts and by the parties hereto in separate counterparts, each of which
will be deemed an original, but all of which together will constitute one and
the same instrument.
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<PAGE> 9
IN WITNESS WHEREOF, the undersigned have caused this Agreement to
be executed by their respective representatives as of the day and year first
above written.
PATTERSON DRILLING COMPANY
By: /s/ Cloyce A. Talbott
----------------------------------
Cloyce A. Talbott
Chief Executive Officer
/s/ Michael G. Sledge
-------------------------------------
MICHAEL G. SLEDGE
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<PAGE> 1
EXHIBIT 2.3
PATTERSON DRILLING COMPANY
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into this 23rd
day of October, 1996 (this "Agreement"), by and between PATTERSON DRILLING
COMPANY, a Delaware corporation ("PDC"), and MICHAEL G. SLEDGE, an individual
residing in Midland, Texas ("M Sledge").
RECITALS:
A. Simultaneously with the execution of this Agreement, PDC
has entered into that certain Stock Purchase Agreement (the "Stock Purchase
Agreement"), among PDC and H. Gene Sledge, Joyce A. Sledge, David W. Sledge and
Michael G. Sledge, providing for, among other things, the purchase by PDC of
all of the outstanding shares of capital stock of Sledge Cattle Company, Inc.
(d/b/a Gene Sledge Drilling Corporation), a Texas corporation.
B. The execution and delivery of this Agreement is a
condition to the consummation of the Stock Purchase contemplated by the Stock
Purchase Agreement, and the parties are entering into this Agreement in order
to fulfill such condition.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties, intending to be legally bound, hereby agree as follows:
1. Period of Agreement.
The period of this Agreement shall commence on the date hereof
and remain in effect through October 1, 2001, unless sooner terminated as the
result of the death of M Sledge (the "Non-Compete Period").
2. Compensation.
Simultaneously with the execution of this Agreement, PDC has paid
M Sledge, by wire transfer, the amount of $1,000,000 as compensation for
entering into this Agreement.
<PAGE> 2
3. Covenant Not to Compete.
(a) M Sledge covenants and agrees that during the Non-Compete
Period, M Sledge shall not, without the prior written consent of PDC, directly
or indirectly, and whether as a principal or as an agent, officer, director,
employee, consultant, or otherwise, alone or in association with any other
person, carry on, be engaged, concerned, or take part in, render services to,
or own, share in the earnings of, or invest in the stock, bonds, or other
securities of, any person which is engaged in, the contract oil and gas well
drilling business within the Permian Basin of West Texas and Southeastern New
Mexico (the "Competitive Business"); provided, however, that M Sledge may
invest in stock, bonds, or other securities of any Competitive Business (but
without otherwise participating in the Competitive Business) if: (A) such
stock, bonds, or other securities are listed on any national securities
exchange or are registered under Section 12(g) of the Securities Exchange Act
of 1934, as amended; (B) the investment does not exceed, in the case of any
class of capital stock of any one issuer, two percent (2%) of the issued and
outstanding shares, or, in the case of bonds or other securities of any one
issuer, two percent (2%) of the aggregate principal amount thereof issued and
outstanding; and (C) such investment would not prevent, directly or indirectly,
the transaction of business by PDC or any affiliate of PDC with any state,
district, territory, or possession of the United States or any governmental
subdivision, agency, or instrumentality thereof by virtue of any statute, law,
regulation or administrative practice. The period of time during which M
Sledge is prohibited from engaging in certain activities by this Section shall
be extended by the length of time during which M Sledge is in breach of the
terms of this section.
(b) It is understood by and between the parties hereto that
the foregoing covenant by M Sledge not to enter into competition with PDC as
set forth in Section 3(a) hereof is an essential element of this Agreement and
the Stock Purchase Agreement and that, but for the agreement of M Sledge to
comply with such covenant, PDC would not have agreed to enter into this
Agreement or the Stock Purchase Agreement. PDC and M Sledge have independently
consulted with their respective counsel and have been advised in all respects
concerning the reasonableness and propriety of such covenant, with specific
regard to the nature of the business conducted by PDC and its affiliates. M
Sledge agrees that such covenant is reasonable in scope, geographic area, and
duration, and that compliance with such covenant would not impose economic or
professional hardship on M Sledge.
4. Restrictions on Soliciting Business of PDC.
M Sledge further covenants and agrees that during the Non-Compete
Period, M Sledge will not, either for himself or for any other person or
entity, directly or indirectly, engage in any of the following activities in a
Competitive Business without the express prior written consent of PDC:
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<PAGE> 3
(a) Solicit or hire any of the employees of PDC or solicit or
take away any of PDC's customers, lessors, or suppliers or attempt any of the
foregoing:
(b) Acquire or attempt to acquire rights providing any product
or service in a Competitive Business within the territory described in Section
3 hereof; or
(c) Engage in any act which would interfere with or harm any
business relationship PDC has with any customer, lessor, employee, principal or
supplier.
5. Specific Performance.
Without intending to limit the remedies available to PDC, M
Sledge acknowledges that PDC will have no adequate remedies at law if M Sledge
violates the terms of Section 3 or 4, hereof. In such event, M Sledge agrees
that PDC shall have the right, in addition to any other rights it may have, to
obtain in any court of competent jurisdiction specific performance of such
Sections of this Agreement or injunctive relief to restrain any breach or
threatened breach thereof. Nothing herein shall be construed as prohibiting
PDC from pursuing any other remedies available to PDC (whether at law or in
equity) for such breach or threatened breach, including, without limitation,
the recovery of monetary damages from M Sledge.
The provisions of this Section 5 shall survive the expiration,
termination or cancellation of this Agreement.
6. Attorneys Fees and Costs.
If an action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorneys fees, costs and necessary expenses in addition to any
other relief to which that party may be entitled. This provision is applicable
to this entire Agreement.
7. Representations and Warranties of PDC and M Sledge.
(a) Representations and Warranties of PDC. PDC hereby
represents and warrants to M Sledge that: (i) it has all requisite power to
enter into and perform its obligations under this Agreement; (ii) this
Agreement has been duly and validly authorized by all necessary corporate
action on the part of PDC; (iii) the execution of this Agreement by PDC and
performance of PDC's obligations hereunder do not require the consent or
approval of any other party; and (iv) this Agreement is a valid and binding
obligation of PDC.
(b) Representations and Warranties of M Sledge. M Sledge
hereby represents and warrants to PDC that: (i) M Sledge has the capacity and
power to enter into
-3-
<PAGE> 4
and perform obligations of M Sledge under this Agreement; (ii) M Sledge has
duly and validly executed this Agreement; (iii) the execution of this Agreement
and performance of obligations of M Sledge hereunder do not require the consent
or approval of any other party; and (iv) this Agreement constitutes a valid and
binding obligation of M Sledge.
8. General Provisions.
(a) Compliance with Laws. The parties agree that they will
comply with all applicable laws and regulations of government bodies or
agencies in their respective performance of their obligations under this
Agreement.
(b) Governing Law and Construction. This Agreement will be
governed by and construed in accordance with the laws of the State of Texas
without reference to its conflict-of-laws principles. This Agreement's final
form resulted from review and negotiations among the parties and their
attorneys, and no part of this Agreement should be construed against any party
on the basis of authorship.
(c) Forum for Dispute Resolution. If any dispute arises among
the parties concerning the interpretation or performance of any portion of this
Agreement which the parties are unable to resolve themselves, and any party
brings an action against any other party seeking a declaratory order, specific
performance, damages, or any other legal or equitable relief based on this
Agreement, the parties agree that the forum for any such action shall be an
appropriate federal or state court in Texas having jurisdiction, agree that
venue will be proper in such courts, and waive any objections based on
inconvenience of the forum, and further agree that the prevailing party in any
such action, as determined by the court, shall be awarded its reasonable
attorneys' fees and costs in addition to any relief or judgment the court
awards.
(d) Entire Agreement; Amendment. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
contained herein and supersedes any previous oral or written communications,
representations, understandings or agreements with respect thereto. The terms
of this Agreement may be modified only in a writing, signed by authorized
representatives of both parties.
(e) Assignability. This Agreement will be binding upon the
parties' respective successors and permitted assigns. Neither party may assign
this Agreement and/or any of its rights and/or obligations hereunder without
the prior written consent of the other party, and any such attempted assignment
will be void; provided, however, that PDC may assign this Agreement to a
subsidiary or affiliate without the prior written consent of M Sledge, and
provided further that a transfer by PDC as a result of a merger or sale of all
or substantially all of the assets of PDC with or to a third party that assumes
PDC's obligations hereunder by operation of law or otherwise shall not
constitute a prohibited assignment under this Section 8(e).
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<PAGE> 5
(f) Waiver. A waiver of a breach or default under this
Agreement will not constitute a waiver of any other breach or default. Failure
or delay by either party to enforce compliance with any term or condition of
this Agreement will not constitute a waiver of such term or condition.
(g) Severability. If any provision of this Agreement is
declared to be invalid, the parties agree that such invalidity will not affect
the validity of the remaining provisions of this Agreement, and further agree,
to the extent possible, to substitute for the invalid provision a valid
provision that approximates the intent and economic effect of the invalid
provision as closely as possible.
(h) Headings. The titles of the Sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
(i) Notice. Any notice, request, consent, demand or other
communication required to be given under this Agreement will be in writing and
will be given personally, by facsimile or by mailing the same, first-class,
postage prepaid to the appropriate address and facsimile number set forth below
or to such other person or at such other address as may hereafter be designated
by like notice. Notices by mail will be considered delivered and become
effective three days after the mailing thereof. All notices by facsimile will
be considered delivered and become effective immediately upon the confirmed (by
answer back or other tangible printed verification or successful receipt)
sending thereof.
To PDC:
Patterson Drilling Company
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: Cloyce A. Talbott
Chairman and Chief Executive Officer
To M Sledge:
Michael G. Sledge
3904 Arroyo
Midland, Texas 79705
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<PAGE> 6
with copies to:
Robert Don Collier
Meadows, Owens, Collier, Reed,
Cousins & Blau, L.L.P.
3700 NationsBank Plaza
901 Main Street
Dallas, Texas 75202
(j) Counterparts. This Agreement may be executed in
counterparts and by the parties hereto in separate counterparts, each of which
will be deemed an original, but all of which together will constitute one and
the same instrument.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to
be executed by their respective representatives as of the day and year first
above written.
PATTERSON DRILLING COMPANY
By: /s/ Cloyce A. Talbott
----------------------------------
Cloyce A. Talbott
Chief Executive Officer
/s/ Michael G. Sledge
-------------------------------------
MICHAEL G. SLEDGE
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<PAGE> 1
EXHIBIT 2.3.1
PATTERSON DRILLING COMPANY
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into this 23rd
day of October, 1996 (this "Agreement"), by and between PATTERSON DRILLING
COMPANY, a Delaware corporation ("PDC"), and H. GENE SLEDGE, an individual
residing in Midland, Texas ("G Sledge").
RECITALS:
A. Simultaneously with the execution of this Agreement, PDC
has entered into that certain Stock Purchase Agreement, dated as of October 23,
1996 (the "Stock Purchase Agreement"), among PDC and H. Gene Sledge, Joyce A.
Sledge, David W. Sledge and Michael G. Sledge, providing for, among other
things, the purchase by PDC of all of the outstanding shares of capital stock
of Sledge Cattle Company, Inc. (d/b/a Gene Sledge Drilling Corporation), a
Texas corporation.
B. The execution and delivery of this Agreement is a
condition to the consummation of the Stock Purchase contemplated by the Stock
Purchase Agreement, and the parties are entering into this Agreement in order
to fulfill such condition.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties, intending to be legally bound, hereby agree as follows:
1. Period of Agreement.
The period of this Agreement shall commence on the date hereof
and remain in effect through October 1, 2001, unless sooner terminated as the
result of the death of G Sledge (the "Non-Compete Period").
2. Compensation.
Simultaneously with the execution of this Agreement, PDC has paid
G Sledge, by wire transfer, the amount of $200,000 as compensation for entering
into this Agreement.
<PAGE> 2
3. Covenant Not to Compete.
(a) G Sledge covenants and agrees that during the Non-Compete
Period, G Sledge shall not, without the prior written consent of PDC, directly
or indirectly, and whether as a principal or as an agent, officer, director,
employee, consultant, or otherwise, alone or in association with any other
person, carry on, be engaged, concerned, or take part in, render services to,
or own, share in the earnings of, or invest in the stock, bonds, or other
securities of, any person which is engaged in, the contract oil and gas well
drilling business within the Permian Basin of West Texas and Southeastern New
Mexico (the "Competitive Business"); provided, however, that G Sledge may
invest in stock, bonds, or other securities of any Competitive Business (but
without otherwise participating in the Competitive Business) if: (A) such
stock, bonds, or other securities are listed on any national securities
exchange or are registered under Section 12(g) of the Securities Exchange Act
of 1934, as amended; (B) the investment does not exceed, in the case of any
class of capital stock of any one issuer, two percent (2%) of the issued and
outstanding shares, or, in the case of bonds or other securities of any one
issuer, two percent (2%) of the aggregate principal amount thereof issued and
outstanding; and (C) such investment would not prevent, directly or indirectly,
the transaction of business by PDC or any affiliate of PDC with any state,
district, territory, or possession of the United States or any governmental
subdivision, agency, or instrumentality thereof by virtue of any statute, law,
regulation or administrative practice. The period of time during which G
Sledge is prohibited from engaging in certain activities by this Section shall
be extended by the length of time during which G Sledge is in breach of the
terms of this section.
(b) It is understood by and between the parties hereto that
the foregoing covenant by G Sledge not to enter into competition with PDC as
set forth in Section 3(a) hereof is an essential element of this Agreement and
the Stock Purchase Agreement and that, but for the agreement of G Sledge to
comply with such covenant, PDC would not have agreed to enter into this
Agreement or the Stock Purchase Agreement. PDC and G Sledge have independently
consulted with their respective counsel and have been advised in all respects
concerning the reasonableness and propriety of such covenant, with specific
regard to the nature of the business conducted by PDC and its affiliates. G
Sledge agrees that such covenant is reasonable in scope, geographic area, and
duration, and that compliance with such covenant would not impose economic or
professional hardship on G Sledge.
4. Restrictions on Soliciting Business of PDC.
G Sledge further covenants and agrees that during the Non-Compete
Period, G Sledge will not, either for himself or for any other person or
entity, directly or indirectly, engage in any of the following activities in a
Competitive Business without the express prior written consent of PDC:
-2-
<PAGE> 3
(a) Solicit or hire any of the employees of PDC or solicit or
take away any of PDC's customers, lessors, or suppliers or attempt any of the
foregoing:
(b) Acquire or attempt to acquire rights providing any product
or service in a Competitive Business within the territory described in Section
3 hereof; or
(c) Engage in any act which would interfere with or harm any
business relationship PDC has with any customer, lessor, employee, principal or
supplier.
5. Specific Performance.
Without intending to limit the remedies available to PDC, G
Sledge acknowledges that PDC will have no adequate remedies at law if G Sledge
violates the terms of Section 3 or 4, hereof. In such event, G Sledge agrees
that PDC shall have the right, in addition to any other rights it may have, to
obtain in any court of competent jurisdiction specific performance of such
Sections of this Agreement or injunctive relief to restrain any breach or
threatened breach thereof. Nothing herein shall be construed as prohibiting
PDC from pursuing any other remedies available to PDC (whether at law or in
equity) for such breach or threatened breach, including, without limitation,
the recovery of monetary damages from G Sledge.
The provisions of this Section 5 shall survive the expiration,
termination or cancellation of this Agreement.
6. Attorneys Fees and Costs.
If an action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorneys fees, costs and necessary expenses in addition to any
other relief to which that party may be entitled. This provision is applicable
to this entire Agreement.
7. Representations and Warranties of PDC and G Sledge.
(a) Representations and Warranties of PDC. PDC hereby
represents and warrants to G Sledge that: (i) it has all requisite power to
enter into and perform its obligations under this Agreement; (ii) this
Agreement has been duly and validly authorized by all necessary corporate
action on the part of PDC; (iii) the execution of this Agreement by PDC and
performance of PDC's obligations hereunder do not require the consent or
approval of any other party; and (iv) this Agreement is a valid and binding
obligation of PDC.
(b) Representations and Warranties of G Sledge. G Sledge
hereby represents and warrants to PDC that: (i) G Sledge has the capacity and
power to enter into and
-3-
<PAGE> 4
perform obligations of G Sledge under this Agreement; (ii) G Sledge has duly
and validly executed this Agreement; (iii) the execution of this Agreement and
performance of obligations of G Sledge hereunder do not require the consent or
approval of any other party; and (iv) this Agreement constitutes a valid and
binding obligation of G Sledge.
8. General Provisions.
(a) Compliance with Laws. The parties agree that they will
comply with all applicable laws and regulations of government bodies or
agencies in their respective performance of their obligations under this
Agreement.
(b) Governing Law and Construction. This Agreement will be
governed by and construed in accordance with the laws of the State of Texas
without reference to its conflict-of-laws principles. This Agreement's final
form resulted from review and negotiations among the parties and their
attorneys, and no part of this Agreement should be construed against any party
on the basis of authorship.
(c) Forum for Dispute Resolution. If any dispute arises among
the parties concerning the interpretation or performance of any portion of this
Agreement which the parties are unable to resolve themselves, and any party
brings an action against any other party seeking a declaratory order, specific
performance, damages, or any other legal or equitable relief based on this
Agreement, the parties agree that the forum for any such action shall be an
appropriate federal or state court in Texas having jurisdiction, agree that
venue will be proper in such courts, and waive any objections based on
inconvenience of the forum, and further agree that the prevailing party in any
such action, as determined by the court, shall be awarded its reasonable
attorneys' fees and costs in addition to any relief or judgment the court
awards.
(d) Entire Agreement; Amendment. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
contained herein and supersedes any previous oral or written communications,
representations, understandings or agreements with respect thereto. The terms
of this Agreement may be modified only in a writing, signed by authorized
representatives of both parties.
(e) Assignability. This Agreement will be binding upon the
parties' respective successors and permitted assigns. Neither party may assign
this Agreement and/or any of its rights and/or obligations hereunder without
the prior written consent of the other party, and any such attempted assignment
will be void; provided, however, that PDC may assign this Agreement to a
subsidiary or affiliate without the prior written consent of G Sledge, and
provided further that a transfer by PDC as a result of a merger or sale of all
or substantially all of the assets of PDC with or to a third party that assumes
PDC's obligations hereunder by operation of law or otherwise shall not
constitute a prohibited assignment under this Section 8(e).
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<PAGE> 5
(f) Waiver. A waiver of a breach or default under this
Agreement will not constitute a waiver of any other breach or default. Failure
or delay by either party to enforce compliance with any term or condition of
this Agreement will not constitute a waiver of such term or condition.
(g) Severability. If any provision of this Agreement is
declared to be invalid, the parties agree that such invalidity will not affect
the validity of the remaining provisions of this Agreement, and further agree,
to the extent possible, to substitute for the invalid provision a valid
provision that approximates the intent and economic effect of the invalid
provision as closely as possible.
(h) Headings. The titles of the Sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
(i) Notice. Any notice, request, consent, demand or other
communication required to be given under this Agreement will be in writing and
will be given personally, by facsimile or by mailing the same, first-class,
postage prepaid to the appropriate address and facsimile number set forth below
or to such other person or at such other address as may hereafter be designated
by like notice. Notices by mail will be considered delivered and become
effective three days after the mailing thereof. All notices by facsimile will
be considered delivered and become effective immediately upon the confirmed (by
answer back or other tangible printed verification or successful receipt)
sending thereof.
To PDC:
Patterson Drilling Company
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: Cloyce A. Talbott
Chairman and Chief Executive Officer
To G Sledge:
H. Gene Sledge
7 Hawthorne
Midland, Texas 79705
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<PAGE> 6
with copies to:
Robert Don Collier
Meadows, Owens, Collier, Reed,
Cousins & Blau, L.L.P.
3700 NationsBank Plaza
901 Main Street
Dallas, Texas 75202
H. Gene Sledge
7 Hawthorne
Midland, Texas 79705
(j) Counterparts. This Agreement may be executed in
counterparts and by the parties hereto in separate counterparts, each of which
will be deemed an original, but all of which together will constitute one and
the same instrument.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to
be executed by their respective representatives as of the day and year first
above written.
PATTERSON DRILLING COMPANY
By: /s/ Cloyce A. Talbott
----------------------------------
Cloyce A. Talbott
Chief Executive Officer
/s/ H. Gene Sledge
-------------------------------------
H. GENE SLEDGE
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<PAGE> 1
EXHIBIT 2.3.2
PATTERSON DRILLING COMPANY
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into this 23rd
day of October, 1996 (this "Agreement"), by and between PATTERSON DRILLING
COMPANY, a Delaware corporation ("PDC"), and DAVID W. SLEDGE, an individual
residing in Midland, Texas ("D Sledge").
RECITALS:
A. Simultaneously with the execution of this Agreement, PDC
has entered into that certain Stock Purchase Agreement (the "Stock Purchase
Agreement"), among PDC and H. Gene Sledge, Joyce A. Sledge, David W. Sledge and
Michael G. Sledge, providing for, among other things, the purchase by PDC of
all of the outstanding shares of capital stock of Sledge Cattle Company, Inc.
(d/b/a Gene Sledge Drilling Corporation), a Texas corporation.
B. The execution and delivery of this Agreement is a
condition to the consummation of the Stock Purchase contemplated by the Stock
Purchase Agreement, and the parties are entering into this Agreement in order
to fulfill such condition.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties, intending to be legally bound, hereby agree as follows:
1. Period of Agreement.
The period of this Agreement shall commence on the date hereof
and remain in effect through October 1, 2001, unless sooner terminated as the
result of the death of D Sledge (the "Non-Compete Period").
2. Compensation.
Simultaneously with the execution of this Agreement, PDC has paid
D Sledge, by wire transfer, the amount of $1,000,000 as compensation for
entering into this Agreement.
<PAGE> 2
3. Covenant Not to Compete.
(a) D Sledge covenants and agrees that during the Non-Compete
Period, D Sledge shall not, without the prior written consent of PDC, directly
or indirectly, and whether as a principal or as an agent, officer, director,
employee, consultant, or otherwise, alone or in association with any other
person, carry on, be engaged, concerned, or take part in, render services to,
or own, share in the earnings of, or invest in the stock, bonds, or other
securities of, any person which is engaged in, the contract oil and gas well
drilling business within the Permian Basin of West Texas and Southeastern New
Mexico (the "Competitive Business"); provided, however, that D Sledge may
invest in stock, bonds, or other securities of any Competitive Business (but
without otherwise participating in the Competitive Business) if: (A) such
stock, bonds, or other securities are listed on any national securities
exchange or are registered under Section 12(g) of the Securities Exchange Act
of 1934, as amended; (B) the investment does not exceed, in the case of any
class of capital stock of any one issuer, two percent (2%) of the issued and
outstanding shares, or, in the case of bonds or other securities of any one
issuer, two percent (2%) of the aggregate principal amount thereof issued and
outstanding; and (C) such investment would not prevent, directly or indirectly,
the transaction of business by PDC or any affiliate of PDC with any state,
district, territory, or possession of the United States or any governmental
subdivision, agency, or instrumentality thereof by virtue of any statute, law,
regulation or administrative practice. The period of time during which D
Sledge is prohibited from engaging in certain activities by this Section shall
be extended by the length of time during which D Sledge is in breach of the
terms of this section.
(b) It is understood by and between the parties hereto that
the foregoing covenant by D Sledge not to enter into competition with PDC as
set forth in Section 3(a) hereof is an essential element of this Agreement and
the Stock Purchase Agreement and that, but for the agreement of D Sledge to
comply with such covenant, PDC would not have agreed to enter into this
Agreement or the Stock Purchase Agreement. PDC and D Sledge have independently
consulted with their respective counsel and have been advised in all respects
concerning the reasonableness and propriety of such covenant, with specific
regard to the nature of the business conducted by PDC and its affiliates. D
Sledge agrees that such covenant is reasonable in scope, geographic area, and
duration, and that compliance with such covenant would not impose economic or
professional hardship on D Sledge.
4. Restrictions on Soliciting Business of PDC.
D Sledge further covenants and agrees that during the Non-Compete
Period, D Sledge will not, either for himself or for any other person or
entity, directly or indirectly, engage in any of the following activities in a
Competitive Business without the express prior written consent of PDC:
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<PAGE> 3
(a) Solicit or hire any of the employees of PDC or solicit or
take away any of PDC's customers, lessors, or suppliers or attempt any of the
foregoing:
(b) Acquire or attempt to acquire rights providing any product
or service in a Competitive Business within the territory described in Section
3 hereof; or
(c) Engage in any act which would interfere with or harm any
business relationship PDC has with any customer, lessor, employee, principal or
supplier.
5. Specific Performance.
Without intending to limit the remedies available to PDC, D
Sledge acknowledges that PDC will have no adequate remedies at law if D Sledge
violates the terms of Section 3 or 4, hereof. In such event, D Sledge agrees
that PDC shall have the right, in addition to any other rights it may have, to
obtain in any court of competent jurisdiction specific performance of such
Sections of this Agreement or injunctive relief to restrain any breach or
threatened breach thereof. Nothing herein shall be construed as prohibiting
PDC from pursuing any other remedies available to PDC (whether at law or in
equity) for such breach or threatened breach, including, without limitation,
the recovery of monetary damages from D Sledge.
The provisions of this Section 5 shall survive the expiration,
termination or cancellation of this Agreement.
6. Attorneys Fees and Costs.
If an action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorneys fees, costs and necessary expenses in addition to any
other relief to which that party may be entitled. This provision is applicable
to this entire Agreement.
7. Representations and Warranties of PDC and D Sledge.
(a) Representations and Warranties of PDC. PDC hereby
represents and warrants to D Sledge that: (i) it has all requisite power to
enter into and perform its obligations under this Agreement; (ii) this
Agreement has been duly and validly authorized by all necessary corporate
action on the part of PDC; (iii) the execution of this Agreement by PDC and
performance of PDC's obligations hereunder do not require the consent or
approval of any other party; and (iv) this Agreement is a valid and binding
obligation of PDC.
(b) Representations and Warranties of D Sledge. D Sledge
hereby represents and warrants to PDC that: (i) D Sledge has the capacity and
power to enter into and
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<PAGE> 4
perform obligations of D Sledge under this Agreement; (ii) D Sledge has duly
and validly executed this Agreement; (iii) the execution of this Agreement and
performance of obligations of D Sledge hereunder do not require the consent or
approval of any other party; and (iv) this Agreement constitutes a valid and
binding obligation of D Sledge.
8. General Provisions.
(a) Compliance with Laws. The parties agree that they will
comply with all applicable laws and regulations of government bodies or
agencies in their respective performance of their obligations under this
Agreement.
(b) Governing Law and Construction. This Agreement will be
governed by and construed in accordance with the laws of the State of Texas
without reference to its conflict-of-laws principles. This Agreement's final
form resulted from review and negotiations among the parties and their
attorneys, and no part of this Agreement should be construed against any party
on the basis of authorship.
(c) Forum for Dispute Resolution. If any dispute arises among
the parties concerning the interpretation or performance of any portion of this
Agreement which the parties are unable to resolve themselves, and any party
brings an action against any other party seeking a declaratory order, specific
performance, damages, or any other legal or equitable relief based on this
Agreement, the parties agree that the forum for any such action shall be an
appropriate federal or state court in Texas having jurisdiction, agree that
venue will be proper in such courts, and waive any objections based on
inconvenience of the forum, and further agree that the prevailing party in any
such action, as determined by the court, shall be awarded its reasonable
attorneys' fees and costs in addition to any relief or judgment the court
awards.
(d) Entire Agreement; Amendment. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
contained herein and supersedes any previous oral or written communications,
representations, understandings or agreements with respect thereto. The terms
of this Agreement may be modified only in a writing, signed by authorized
representatives of both parties.
(e) Assignability. This Agreement will be binding upon the
parties' respective successors and permitted assigns. Neither party may assign
this Agreement and/or any of its rights and/or obligations hereunder without
the prior written consent of the other party, and any such attempted assignment
will be void; provided, however, that PDC may assign this Agreement to a
subsidiary or affiliate without the prior written consent of D Sledge, and
provided further that a transfer by PDC as a result of a merger or sale of all
or substantially all of the assets of PDC with or to a third party that assumes
PDC's obligations hereunder by operation of law or otherwise shall not
constitute a prohibited assignment under this Section 8(e).
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<PAGE> 5
(f) Waiver. A waiver of a breach or default under this
Agreement will not constitute a waiver of any other breach or default. Failure
or delay by either party to enforce compliance with any term or condition of
this Agreement will not constitute a waiver of such term or condition.
(g) Severability. If any provision of this Agreement is
declared to be invalid, the parties agree that such invalidity will not affect
the validity of the remaining provisions of this Agreement, and further agree,
to the extent possible, to substitute for the invalid provision a valid
provision that approximates the intent and economic effect of the invalid
provision as closely as possible.
(h) Headings. The titles of the Sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
(i) Notice. Any notice, request, consent, demand or other
communication required to be given under this Agreement will be in writing and
will be given personally, by facsimile or by mailing the same, first-class,
postage prepaid to the appropriate address and facsimile number set forth below
or to such other person or at such other address as may hereafter be designated
by like notice. Notices by mail will be considered delivered and become
effective three days after the mailing thereof. All notices by facsimile will
be considered delivered and become effective immediately upon the confirmed (by
answer back or other tangible printed verification or successful receipt)
sending thereof.
To PDC:
Patterson Drilling Company
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: Cloyce A. Talbott
Chairman and Chief Executive Officer
To D Sledge:
David W. Sledge
3606 Trinity Meadows Drive
Midland, Texas 79705
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<PAGE> 6
with copies to:
Robert Don Collier
Meadows, Owens, Collier, Reed,
Cousins & Blau, L.L.P.
3700 NationsBank Plaza
901 Main Street
Dallas, Texas 75202
(j) Counterparts. This Agreement may be executed in
counterparts and by the parties hereto in separate counterparts, each of which
will be deemed an original, but all of which together will constitute one and
the same instrument.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to
be executed by their respective representatives as of the day and year first
above written.
PATTERSON DRILLING COMPANY
By: /s/ Cloyce A. Talbott
----------------------------------
Cloyce A. Talbott
Chief Executive Officer
/s/ David W. Sledge
-------------------------------------
DAVID W. SLEDGE
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<PAGE> 1
EXHIBIT 2.4
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made and entered
into this 23rd day of October, 1996, by and between SLEDGE RANCHES, LTD., a
Texas limited partnership ("Buyer"), and SLEDGE CATTLE COMPANY, INC., a Texas
corporation (the "Company" or the "Seller").
RECITALS
A. Patterson Drilling Company ("Patterson") and the former
stockholders of Seller are parties to the Stock Purchase Agreement dated as of
October 23, 1996, ("Stock Purchase Agreement") pursuant to which Patterson
purchased on this date all of the outstanding shares of capital stock of
Seller.
B. Pursuant to the Stock Purchase Agreement, immediately
following the Stock Purchase, Seller has agreed to sell, and Buyer has agreed
to purchase certain specified assets of Seller which assets were owned by
Seller prior to the Stock Purchase (the "Assets")
C. Buyer desires to purchase and Seller desires to sell the
Assets (as defined herein).
AGREEMENTS
In consideration of the mutual promises and covenants contained
herein, the parties agree as follows:
1. PURCHASE OF ASSETS. Subject to the terms and conditions
of this Agreement, Seller shall sell, convey, transfer, assign and deliver AS
IS to Buyer, and Buyer shall purchase and accept from Seller, AS IS, the
following assets (collectively, the "Assets"):
(a) Land located in Mills County, Texas consisting of
approximately 3,090.54 acres more or less, together with all improvements
thereon, including but not limited to buildings (houses, furnishings, barns,
sheds, etc.), fences, gates, corrals, pens, earthen tanks, water wells, and
land improvements ("Land").
(b) All machinery and equipment located on the Land, which
consists of tractors/loaders, plows, mowers, trailers, balers, and two ranch
vehicles.
<PAGE> 2
(c) All livestock on the above land, including cattle, goats
and horses.
(d) All tack equipment, including saddles, bridles, etc.
PRICE FOR ITEMS 1 THROUGH 4: $1,500,000.
(e) All the office furniture, fixtures, equipment and the
telephone system located at 6 Desta Drive, Midland, Texas 79705. PRICE:
$50,000.
(f) Real Property located in the north 2.40 acres and
buildings thereon located in the 1600 block of South Midkiff Street, Midland,
Texas. Legal description: 2.40 acres out of NE/4, Section 3, Block 39, T2S,
Midland County, Texas. PRICE: $50,000.
(g) The following motor vehicles:
1995 Mercedes VIN: WDBGA51E4SA212074
1995 Chevrolet Suburban VIN: 1GNGK26N0SJ310211
1994 Chevrolet Blazer VIN: 1GNEK18K7RJ382392
1996 Chevrolet Suburban VIN: 1GNGK26J8TJ368243
1996 Chevrolet 1 ton 4-door Pickup VIN: 1GCGC33J6TF003353
PRICE FOR ALL FIVE VEHICLES: $125,000.
2. ASSUMPTION OF LIABILITIES. Buyer shall assume all
liabilities or obligations arising out of or connected in any way with the
Assets.
3. PURCHASE PRICE. As consideration for the Assets, Buyer
shall pay to Seller, the sum of $1,728,000 ("Purchase Price"), all of which
shall be due and payable at Closing by wire transfer. The Purchase Price shall
be allocated as set forth above on Exhibit A with such allocation to be used by
the parties in reporting the transaction contemplated hereby for federal,
state, county and local tax purposes.
4. CLOSING.
(a) TIME AND PLACE. The Closing shall take place at 10:00
a.m. (CST) on October 23, 1996, at the offices of Meadows, Owens, Collier,
Reed, Cousins & Blair, L.L.P., 3700 Nationsbank Plaza, 901 Main Street, Dallas,
Texas 75202 or at such other time or location as the parties may mutually
agree.
(b) SELLER'S DELIVERIES. At Closing, Seller shall deliver to
Buyer the following:
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<PAGE> 3
(1) A Bill of Sale in substantially the form attached
hereto as Exhibit B, duly executed by Seller.
(2) Deeds without Warranty for each of the properties
listed in Sections 1.a. and 1.f. above in substantially the form attached
hereto as Exhibit C-1 and C-2, respectively, duly executed by Seller.
(3) A Livestock Bill of Sale in substantially the form
attached hereto as Exhibit D, duly executed by Seller.
(4) Certificates of Title for each of the motor
vehicles listed in Sections 1.b and 1.h. above.
(c) BUYER'S DELIVERIES. At Closing, Buyer shall deliver to
Seller the following:
(1) Payment of the Purchase Price.
(2) A Livestock Bill of Sale in substantially the form
attached hereto as Exhibit D, duly executed by Buyer.
5. DISCLAIMER OF WARRANTIES. SELLER EXPRESSLY DISCLAIMS ANY
REPRESENTATIONS OR WARRANTIES OF ANY KIND WITH RESPECT TO THE ASSETS, INCLUDING
WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. Seller transfers to Buyer, and Buyer accepts from Seller,
the Assets AS IS without any warranties or representations thereon.
6. MISCELLANEOUS.
(a) SEVERABILITY. In the event any provision of this
Agreement is held to be invalid or unenforceable, the remaining provisions of
this Agreement will remain in full force and effect.
(b) NOTICES. Unless otherwise specified in this Agreement all
notices, including change of address notices, required to be sent hereunder
shall be in writing and shall be deemed to have been given when mailed as
follows:
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<PAGE> 4
Buyer: Sledge Ranches, Ltd.
c/o H. Gene Sledge
7 Hawthorne
Midland, Texas 79705
Tel:
Fax:
Seller: Sledge Cattle Company, Inc.
4510 Lamesa Highway
P.O. Box 1416
Snyder, Texas 79550
Tel: (915) 573-1104
Fax: (915) 573-0281
(c) BINDING ARBITRATION. Any controversy, dispute, or claim
arising out of, in connection with, or in relation to, the interpretation,
performance, or breach of this Agreement, including, without limitation, the
validity, scope, and enforceability of this Section, may at the election of
Buyer or Seller be solely and finally settled by binding arbitration conducted
in Lubbock, Texas, or if arbitration cannot be conducted in such location, then
at such other location as the parties may mutually agree, by and in accordance
with the then existing rules for commercial arbitration of the American
Arbitration Association ("AAA"), or any successor organization. Judgment upon
any award rendered by the arbitrator(s) may be entered by the State or Federal
Court having jurisdiction thereof. Either of the parties may demand
arbitration by written notice to the other and to the AAA ("Demand for
Arbitration"). The arbitrator(s) shall conduct the arbitration in a manner in
accordance with the Federal Arbitration Act U.S.C. Section 1 et seq. and the
rules of the AAA. The arbitrator(s) may award only compensatory and/or
punitive damages. The parties intend that this agreement to arbitrate be
valid, enforceable, and irrevocable.
(d) CHOICE OF LAW. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Texas, without regard
to the conflict of laws principles of such State.
(e) RISK OF LOSS. All risk of loss to the Assets shall be
borne by Buyer, whether prior to or after the Closing.
(f) WAIVER. The waiver by either party of any default or
breach of this Agreement will not constitute a waiver of any other or
subsequent default or breach.
(g) COUNTERPARTS. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed to be
an original, but all of which shall constitute but one and the same instrument.
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<PAGE> 5
(h) ENTIRETY. This Agreement embodies the entire
understanding and agreement between the parties relative to its subject matter,
and there are no understandings, agreements, conditions, or representations,
oral or written, express or implied, with reference to such subject matter that
are not merged in or superseded by this Agreement. This Agreement may be
modified only by a writing signed by both parties.
(i) HEADINGS. The headings to Sections of this Agreement are
for convenience of reference only and do not form a part of this Agreement, and
shall not in any way affect the interpretation of this Agreement.
(j) NO BROKERS. Neither party has utilized any brokers in
connection with this transaction.
(k) FURTHER ASSURANCES. Each party shall cooperate fully with
the other and execute such further instruments, documents, and agreements and
give such further written assurances, as may be reasonably requested by the
other to better evidence and reflect the transactions described herein and
contemplated hereby, and to carry into effect the intents and purposes of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the Effective Date.
SLEDGE RANCHES, LTD.
By: SIGMA EQUIPMENT CORPORATION,
General Partner
By: /s/ Michael G. Sledge
----------------------------------
Name: Michael G. Sledge
Title: President
SLEDGE CATTLE COMPANY, INC.
By: /s/ Cloyce A. Talbott
----------------------------------
Cloyce A. Talbott
Chief Executive Officer
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