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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) June 12, 1997
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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 No.)
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 June 12, 1997, the Registrant consummated the acquisition of the
contract drilling operations of Wes-Tex Drilling Company ("Wes-Tex"), a
non-affiliated, privately-owned company based in Abilene, Texas. As previously
announced, the two companies entered into an agreement in principle on May 7,
1997, and executed a definitive purchase agreement on June 4, 1997. Pursuant to
the transaction, the Registrant acquired 21 drilling rigs, rig hauling trucks
and trailers, and a yard and shop located in Abilene, in consideration for $25
million in cash, 283,000 shares of the Registrant's common stock and a stock
purchase warrant to purchase an additional 200,000 shares of common stock
exercisable at $32.00 per share. Of the $25 million cash portion of the
purchase price, $6 million was borrowed by the Registrant under its $30 million
credit facility with Norwest Bank Texas, N.A.
ITEM 5. OTHER EVENTS.
On June 12, 1997, the Registrant issued the following press release:
PATTERSON ENERGY COMPLETES ACQUISITION OF WES-TEX
DRILLING COMPANY'S CONTRACT DRILLING OPERATIONS
SNYDER, TEXAS, June 12, 1997--PATTERSON ENERGY, INC. (NASDAQ/NM:PTEN)
and Wes-Tex Drilling Company today announced that Patterson has
completed the acquisition of Wes-Tex's contract drilling operations.
Wes-Tex Drilling Company is a privately-owned company based in
Abilene, Texas. As previously announced, the two companies entered
into an agreement in principle on May 7, 1997, and executed a
definitive purchase agreement on June 4, 1997.
In the transaction, Patterson acquired 21 drilling rigs, rig hauling
trucks and trailers, and a yard and shop located in Abilene, Texas in
consideration for $25 million in cash, 283,000 shares of Patterson
common stock and a stock purchase warrant to purchase 200,000 shares
of Patterson common stock exercisable at $32.00 per share.
Patterson Energy, Inc., a Snyder, Texas based energy company, is one
of the leading providers of domestic land drilling services to major
and independent oil and natural gas companies and, to a lesser extent,
is engaged in the development, exploration, acquisition and production
of oil and natural gas. With the completion of the Wes-Tex
acquisition, Patterson now has 87 land-based drilling rigs (81 of
which are currently operable) and focuses its operations primarily in
Texas and southeast New Mexico.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
It is impracticable for the Registrant to provide the
required financial statements regarding the foregoing acquisition at this time.
The required financial statements will be filed not later than 60 days after
the date on which this Form 8-K must be filed.
(b) PRO FORMA FINANCIAL INFORMATION.
It is impracticable for the Registrant to provide the
required pro forma financial information regarding the foregoing acquisition at
this time. The required pro forma financial information will be filed not later
than 60 days after the date on which this Form 8-K must be filed.
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(c) EXHIBITS.
2.1 Asset Purchase Agreement, dated June 4, 1997, among Patterson
Energy, Inc., Patterson Drilling Company and Wes-Tex Drilling
Company.(1)
2.1.1 Amendment to Asset Purchase Agreement dated June 4, 1997
among Patterson Energy, Inc., Patterson Drilling Company and
Wes-Tex Drilling Company.(1)
2.2 Agreement, dated June 4, 1997, among Patterson Energy, Inc.,
Patterson Drilling Company, Greathouse Foundation and Myrle
Greathouse, Trustee under Agreement dated June 2, 1997.(1)
4.1 Registration Rights Agreement, dated June 12, 1997, by and
among Patterson Energy, Inc. and Wes-Tex Drilling Company,
Greathouse Foundation and Myrle Greathouse, Trustee under
Agreement dated June 2, 1997.
4.2 Stock Purchase Warrant of Patterson Energy, Inc., dated
June 12, 1997.
10.1 Non-Competition Agreement, dated June 12, 1997, between and
among Patterson Energy, Inc., Patterson Drilling Company and
Wes-Tex Drilling Company.
10.2 Non-Competition Agreement, dated June 12, 1997, between and
among Patterson Energy, Inc., Patterson Drilling Company
and Myrle Greathouse.
10.3 Non-Competition Agreement, dated June 12, 1997, between and
among Patterson Energy, Inc., Patterson Drilling Company and
Charles Ezzell.
10.4 Non-Competition Agreement, dated June 12, 1997, between and
among Patterson Energy, Inc., Patterson Drilling Company and
Danny Mullen.
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(1) Incorporated by reference to Item 7, "Financial Statements and
Exhibits," to Form 8-K dated June 3, 1997.
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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.
Date: June 18, 1997 /s/ James C. Brown
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James C. Brown
Vice President-Finance
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
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2.1 Asset Purchase Agreement, dated June 4, 1997, among Patterson
Energy, Inc., Patterson Drilling Company and Wes-Tex Drilling
Company.(1)
2.1.1 Amendment to Asset Purchase Agreement dated June 4, 1997
among Patterson Energy, Inc., Patterson Drilling Company and
Wes-Tex Drilling Company.(1)
2.2 Agreement, dated June 4, 1997, among Patterson Energy, Inc.,
Patterson Drilling Company, Greathouse Foundation and Myrle
Greathouse, Trustee under Agreement dated June 2, 1997.(1)
4.1 Registration Rights Agreement, dated June 12, 1997, by and
among Patterson Energy, Inc. and Wes-Tex Drilling Company,
Greathouse Foundation and Myrle Greathouse, Trustee under
Agreement dated June 2, 1997.
4.2 Stock Purchase Warrant of Patterson Energy, Inc., dated
June 12, 1997.
10.1 Non-Competition Agreement, dated June 12, 1997, between and
among Patterson Energy, Inc., Patterson Drilling Company and
Wes-Tex Drilling Company.
10.2 Non-Competition Agreement, dated June 12, 1997, between and
among Patterson Energy, Inc., Patterson Drilling Company
and Myrle Greathouse.
10.3 Non-Competition Agreement, dated June 12, 1997, between and
among Patterson Energy, Inc., Patterson Drilling Company and
Charles Ezzell.
10.4 Non-Competition Agreement, dated June 12, 1997, between and
among Patterson Energy, Inc., Patterson Drilling Company and
Danny Mullen.
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(1) Incorporated by reference to Item 7, "Financial Statements and
Exhibits," to Form 8-K dated June 3, 1997.
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EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is made and
entered into this 12th day of June, 1997, by and among PATTERSON ENERGY, INC.,
a Delaware corporation ("PEC"), and WES-TEX DRILLING COMPANY, a Texas
corporation ("Wes-Tex"), GREATHOUSE FOUNDATION, a Texas non-profit corporation
(the "Foundation"), and MYRLE GREATHOUSE, TRUSTEE under Agreement, dated
June 2, 1997 (the "Greathouse Charitable Remainder Trust") .
A. Pursuant to that certain Asset Purchase Agreement dated
June 4, 1997, as amended by the Amendment to Asset Purchase Agreement, dated
June 4, 1997 (collectively, as amended, the "Asset Purchase Agreement"), by and
among PEC, Patterson Drilling Company, a wholly-owned subsidiary of PEC
("PDC"), and Wes-Tex, and that certain Agreement dated of even date herewith
(the "Stock Purchase Agreement") by and among PEC, PDC, the Foundation, and the
Greathouse Charitable Remainder Trust, PEC has agreed to issue a total of
283,000 shares ("Restricted Shares") of PEC's Common Stock, $0.01 par value
(the "Common Stock"), and, pursuant to the Asset Purchase Agreement, PEC has
further agreed to issue to Wes-Tex a three-year Stock Purchase Warrant (the
"Stock Purchase Warrant") to purchase up to an additional 200,000 shares of
PEC's Common Stock (the "Warrant Shares") at an exercise price of $32.00 per
share, as partial consideration for the purchase by PEC and PDC of the contract
drilling operations of Wes-Tex.
B. This Agreement is being entered into in connection with
and as a condition to the parties closing the transactions contemplated under
the Asset Purchase Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement the
following terms shall have the following respective meanings:
"Commission" shall mean the United States Securities and
Exchange Commission and any successor federal agency having
similar powers.
"Holder" shall mean, with respect to the Restricted
Shares, Wes-Tex, the Foundation and the Greathouse Charitable
Remainder Trust and their respective successors and assigns
(including stockholders or partners thereof, as the case may be)
and, with respect to the Warrant Shares, Wes-Tex, and any
subsequent successors and assigns, of the Warrant Shares or any
portion thereof.
"Person" shall mean an individual, a partnership, a joint
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venture, a corporation, a trust, an unincorporated organization
and a government or any department or agency thereof.
The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and
the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses incident
to PEC's performance of or compliance with this Agreement,
including without limitation all registration and filing fees,
fees and expenses of compliance with securities or blue sky laws
and all reasonable printing expenses, messenger and delivery
expenses, and fees and disbursements of counsel for PEC and all
independent certified public accountants, underwriters (excluding
discounts and commissions) and other Person retained by PEC (all
such expenses being herein called "Registration Expenses"), will
be borne as provided in this Agreement, except that PEC will, in
any event, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, the expense of any
liability insurance and the expenses and fees for listing the
securities to be registered on each securities exchange on which
similar securities issued by PEC are then listed or on the NASD
automated quotation system.
"Requesting Holder" shall mean any Holder of Warrant
Shares who shall request registration of Warrant Shares pursuant
hereto.
"Restricted Shares" shall include Common Stock issued or
issuable with respect to the Restricted Shares by way of a stock
dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Restricted Shares, such
shares will cease to be Restricted Shares when they have been
distributed to the public pursuant to an offering registered
under the Securities Act or sold to the public through a broker,
dealer or market maker in compliance with Rule 144 under the
Securities Act (or any similar rule then in force).
"Securities Act" shall mean the Securities Act of 1933, or
any successor thereto, as the same shall be amended from time to
time.
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"Warrant Shares" shall include the Common Stock issued or
issuable with respect to the Warrant Shares by way of a stock
dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Warrant Shares such shares
will cease to be Warrant Shares when they have been distributed
to the public pursuant to an offering registered under the
Securities Act or sold to the public through a broker, dealer or
market maker in compliance with Rule 144 under the Securities Act
(or any similar rule then in force).
2. Restrictions on Transfer. The Restricted Shares were
acquired by each of Wes-Tex, the Foundation and the Greathouse Charitable
Remainder Trust, and the Warrant Shares will be acquired by Wes-Tex, from PEC
for investment for its own account and not as a nominee or agent and not with a
present view to the resale or distribution of any part thereof, except in
compliance with the Securities Act. Each of Wes-Tex, the Foundation and the
Greathouse Charitable Remainder Trust acknowledges that the Restricted Shares
are, and Wes-Tex acknowledges that the Warrant Shares will be upon issuance,
"restricted securities" within the meaning of the Securities Act.
3. Restricted Shares - Registration Under Securities Act,
etc.
3.1 Registration.
(a) Filing. Contemporaneously with the execution of this
Agreement, PEC shall have filed a Registration Statement on Form S-3 (the
"Form S-3") with the Commission covering the distribution of the Restricted
Shares. PEC agrees to use its best efforts to have the Form S-3 declared
effective.
(b) Expenses. PEC shall pay all Registration Expenses in
connection with the Form S-3.
3.2 Registration Procedures. Following the effective date of
the Form S-3, PEC will promptly:
(a) prepare and file with the Commission such amendments and
supplements to the Form S-3 and the prospectus used in connection therewith as
may be necessary to keep the Form S-3 effective and to comply with the
provisions of the Securities Act with respect to the disposition of the
Restricted Shares until the earlier of (i) such time as all of such Restricted
Shares have been disposed of in accordance with the intended methods of
disposition by Wes-Tex, the Foundation and the Greathouse Charitable Remainder
Trust, or (ii) the expiration of twelve (12) months after such effective date
and furnish to Wes-Tex, the Foundation and the Greathouse Charitable Remainder
Trust prior to the filing thereof a copy of any amendment or supplement to the
Form S-3 or prospectus and shall not file any such amendment or supplement to
which Wes-Tex
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shall have reasonably objected on the grounds that such amendment or supplement
does not comply in all material respects with the requirements of the
Securities Act or of the rules or regulations thereunder;
(b) furnish to each of Wes-Tex, the Foundation and the
Greathouse Charitable Remainder Trust one originally executed Form S-3, with
all amendments, supplements and additional documentation; such number of
conformed copies of such Form S-3 and of each such amendment and supplement
thereto (in each case including all exhibits) as Wes-Tex, the Foundation and
the Greathouse Charitable Remainder Trust may reasonably request; such number
of copies of the prospectus included in the Form S-3 (including each
preliminary prospectus and any summary prospectus) as required by the
Securities Act as such Seller may reasonably request; such documents, if any,
incorporated by reference in the Form S-3 or prospectus; and such other
documents as Wes-Tex, the Foundation or the Greathouse Charitable Remainder
Trust may reasonably request;
(c) use its best efforts to register or qualify the Restricted
Shares and other securities covered by the Form S-3 under such other securities
or blue sky laws of such jurisdictions as Wes-Tex shall reasonably request, to
keep such registration or qualification in effect for so long as the Form S-3
remains in effect, and do any and all other acts and things which may be
necessary or advisable to enable Wes-Tex, the Foundation and the Greathouse
Charitable Remainder Trust to consummate the disposition in such jurisdictions
of the Restricted Shares covered by the Form S-3, except that PEC shall not for
any such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the requirements
of this subdivision (c) be obligated to be so qualified, or to subject itself
to taxation in any such jurisdiction, or to consent to general service of
process in any such jurisdiction;
(d) immediately notify Wes-Tex, the Foundation or the
Greathouse Charitable Remainder Trust at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon discovery
that, or upon the happening of any event as a result of which, the prospectus
included in the Form S-3, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing, or if it is necessary to amend or supplement such
prospectus or Form S-3 to comply with law, and at the request of Wes-Tex,
prepare and furnish to Wes-Tex, the Foundation and the Greathouse Charitable
Remainder Trust a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Restricted Shares, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statement therein
not misleading in light of the circumstances then existing and shall otherwise
comply in all material respects with the law and so that such prospectus or
Form S-3, as amended or supplemented, will comply with law;
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(e) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
securities holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months beginning with the first
month of the first fiscal quarter after the effective date of the Form S-3, if
such earnings statement is necessary to satisfy the provisions of Section 11(a)
of the Securities Act.
4. Warrant Shares - Registration Under Securities Act, etc.
4.1 Registration Upon Demand
(a) Demand Rights. At any time after the date hereof but
expiring on the third anniversary date hereof ("Demand Registration Period"),
but subject to (a) prior exercise of the Stock Purchase Warrant and payment in
full to PEC of the exercise price for the Warrant Shares, and (b) the
provisions of Section 4.1(c), below, at the written demand of Requesting
Holders and on one (1) occasion only, PEC shall prepare, file with the
Commission and use its best efforts to have declared effective a registration
statement with respect to the distribution of up to all of the Warrant Shares.
Such demand shall be made by written notice to PEC by Requesting Holders
holding at least a majority of the Warrant Shares, which notice shall
(i) request the preparation of the registration statement pursuant to the terms
of this Section 4.1, (ii) include the number of Warrant Shares to be offered by
Holders of Warrant Shares pursuant to such registration statement and (iii) be
sent to all other Holders. PEC may include in such registration any securities
of PEC for sale by PEC or persons other than PEC, and such registration shall
be deemed to be an incidental registration pursuant to Section 4.2 hereof with
Holders having the priority with respect to the Warrant Shares.
(b) Expenses. PEC shall pay all Registration Expenses in
connection with the registration of Warrant Shares demanded pursuant to this
Section 4.1.
(c) Restrictions on Demand Registrations. PEC will not be
obligated to effect any registration under Section 4.1(a) within three months
after the effective date of (i) a registration initiated by PEC; or (ii) a
registration in which the Holders of Warrant Shares were given incidental
registration rights pursuant to Section 4.2 hereof and in which there was no
reduction in the number of Warrant Shares requested to be included (the "Other
Registrations"); provided that in either case (i) or (ii) the three-month
period can be extended to four months if required by the then managing
underwriter. PEC may postpone filing or the effectiveness of a registration
statement demanded by Holders under Section 4.1(a) for up to four months
following receipt of such demand if PEC has executed in good faith (x) a letter
of intent or a commitment letter with an underwriter for a public offering or
(y) an agreement in principle relating to an acquisition of assets (other than
in the ordinary course of business) or any merger, consolidation or similar
transaction, or (z) has made a filing with the Commission under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in connection with a
tender offer. Notwithstanding anything in this Section 4.1(c) to the contrary,
if the Demand Registration Period expires without effectuation of a demand for
registration under Section 4.1(a) because of the occurrence of an event
specified above in this Section 4.1(c), the Demand Registration Period
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shall be extended for such additional period as is necessary to effect such
registration, provided that such demand is given to PEC prior to the expiration
of the Demand Registration Period.
4.2 Incidental Registration.
(a) Right to Include Warrant Shares. Subject to the further
provisions of this Section 4.2(a), if PEC, at any time commencing on the date
of this Agreement and expiring on the third anniversary date hereof, proposes
to register any of its equity securities under the Securities Act, for its own
account or the account of other holders of PEC's securities, on a form and in a
manner which would permit registration of the Warrant Shares for sale to the
public under the Securities Act, it will each such time give prompt written
notice to all Holders of its intention to do so, describing such securities and
specifying the form and manner and the other relevant facts involved in such
proposed registration and upon the written request of any such Holder delivered
to PEC within twenty (20) business days after the giving of any such notice
(which request shall specify the Warrant Shares intended to be disposed of by
such Holder and the intended method or methods of disposition thereof), PEC
will use its best efforts to effect the registration under the Securities Act
of all Warrant Shares which PEC has been so requested to register by Holders to
the extent requisite to permit the disposition (in accordance with the intended
methods thereof as aforesaid) of the Warrant Shares so to be registered
provided that (i) if, at any time after giving such written notice of its
intention to register any of its securities and prior to the effective date of
the registration statement filed in connection with such registration, PEC
shall determine for any reason not to register such securities, PEC may, at its
election give written notice of such determination to each Holder and thereupon
shall be relieved of its obligation to register any Warrant Shares in
connection with such registration (but not from its obligation to pay the
Registration Expenses in connection therewith as provided herein); and (ii) if
(A) the registration so proposed by PEC involves an underwritten primary
registration on behalf of PEC to be distributed (on a firm commitment basis) by
or through one or more underwriters of recognized standing under underwriting
terms appropriate for such a transaction, and (B) the managing underwriter of
such underwritten offering shall advise PEC in writing that, in its good faith
judgment, all the shares to be offered by PEC and other parties are greater
than can be accommodated without interfering with the successful marketing of
all the securities to be then offered publicly for the account of PEC, then the
managing underwriter or underwriters shall include in such registration (1)
first, the securities PEC proposes to register for sale, and (2) second, any
securities requested and permitted to be included in such registration pursuant
to incidental or piggyback rights granted to the holders thereof prior to the
date of this Agreement, (3) third, the Warrant Shares requested to be included
in such registration by the Requesting Holders, pro rata, if necessary, and (4)
fourth, any other securities requested to be included in such registration, if
any, pro rata; (iii) if (A) the registration so proposed by PEC is an
underwritten secondary registration on behalf of holders of PEC's securities,
to be distributed (on a firm commitment basis) by or through one or more
underwriters of recognized standing under underwriting terms appropriate for
such a transaction, and (B) the managing underwriter of such underwritten
offering shall advise PEC in writing that, in its good faith judgment, all the
shares to be offered by such requesting holder, PEC and other parties are
greater than can be accommodated without interfering with the successful
marketing of all of the securities to be then
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offered publicly for the account of PEC, then the managing underwriter shall
include in such registration (1) first, the securities requested to be included
therein by the holders requesting such registration, (2) second, any securities
requested and permitted to be included in such registration statement pursuant
to incidental or piggyback rights granted to the holders thereof prior to the
date of this Agreement, (3) third, the securities which are requested to be
included in such registration by the Holders of Warrant Shares, pro rata, if
necessary, (4) fourth, any securities to be included in such registration on
behalf of PEC, and (5) fifth, any other securities requested to be included in
such registration, if any, pro rata.
(b) Expenses. PEC will pay all Registration Expenses in
connection with each registration of Warrant Shares requested pursuant to
Section 4.2.
4.3 Registration Procedures. If and whenever PEC is required
to effect the registration of any Warrant Shares under the Securities Act as
provided in Section 4.1 or Section 4.2, PEC will promptly:
(a) prepare and (in any event within sixty (60) days) file
with the Commission a registration statement with respect to such Warrant
Shares and use its best efforts to cause such registration statement to become
effective, such registration statement to comply as to form and content in all
material respects with the Commission's forms, rules and regulations;
(b) keep such registration statement effective and comply with
the provisions of the Securities Act with respect to the disposition of all
Warrant Shares and other securities covered by such registration statement
until the earlier of (i) such time as all of such Warrant Shares and other
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement or (ii) the expiration of (A) twelve (12) months in the case of a
registration of Warrant Shares pursuant to Section 4.1 hereof, or (B) three (3)
months in the case of a registration of Warrant Shares pursuant to Section 4.2
hereof, after such registration statement becomes effective, and will furnish
to each such seller prior to the filing thereof a copy of any amendment or
supplement to such registration statement or prospectus and shall not file any
such amendment or supplement to which any such seller shall have reasonably
objected on the grounds that such amendment or supplement does not comply in
all material respects with the requirements of the Securities Act or of the
rules or regulations thereunder;
(c) promptly furnish to each seller of Warrant Shares one
originally executed registration statement, with all amendments, supplements
and additional documentation; such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits) as such seller may reasonably request; such
number of copies of the prospectus included in such registration statement
(including each preliminary prospectus and any summary prospectus) as required
by the Securities Act as such seller may reasonably request; such documents, if
any, incorporated by reference in such registration statement or prospectus;
and such other documents as such seller may reasonably request;
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(d) use its best efforts to register or qualify all Warrant
Shares and other securities covered by such registration statement under such
other securities or blue sky laws of such jurisdictions as each seller shall
reasonably request, to keep such registration or qualification in effect for so
long as such registration statement remains in effect, and do any and all other
acts and things which may be necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of his Warrant Shares covered
by such registration statement, except that PEC shall not for any such purpose
be required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this subdivision
(d) be obligated to be so qualified, or to subject itself to taxation in any
such jurisdiction, or to consent to general service of process in any such
jurisdiction;
(e) immediately notify each seller of Warrant Shares covered
by such registration statement, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing, or if it is necessary to amend or supplement
such prospectus or registration statement to comply with law, and at the
request of any such seller, prepare and furnish to such seller a reasonable
number of copies of a supplement to or an amendment of such prospectus as may
be necessary so that, as thereafter delivered to the purchasers of such Warrant
Shares, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statement therein not misleading in light of the
circumstances then existing and shall otherwise comply in all material respects
with the law and so that such prospectus or registration statement, as amended
or supplemented, will comply with law;
(f) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
securities holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months beginning with the first
month of the first fiscal quarter after the effective date of such registration
statement, if such earnings statement is necessary to satisfy the provisions of
Section 11(a) of the Securities Act;
(g) provide and cause to be maintained a transfer agent and
registrar for all Warrant Shares covered by such registration statement from
and after a date not later than the effective date of such registration
statement; and
(h) use its best efforts to list all Common Stock covered by
such registration statement on each securities exchange on which any Common
Stock is then listed or quote all such Common Stock on NASDAQ if PEC's Common
Stock is quoted on NASDAQ, or, if PEC's Common Stock is not then quoted on
NASDAQ or listed on any national securities exchange, use its best efforts to
have such Common Stock covered by such registration statement quoted on NASDAQ
or, at the option of PEC, listed on a national securities exchange.
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PEC may require each seller of Warrant Shares as to which any registration is
being effected to furnish PEC such information regarding such seller and the
distribution of such securities as PEC may from time to time reasonably request
in writing and as shall be required by law or by the Commission in connection
therewith.
4.4 Underwritten Offerings.
(a) Underwriting Agreement. If requested by the underwriters
for any underwritten offering of Warrant Shares on behalf of a Holder or
Holders pursuant to the registration demanded under Section 4.1, PEC will enter
into an underwriting agreement with such underwriters for such offering, such
agreement to contain such representations and warranties by PEC and such other
terms and provisions as are customarily contained in underwriting agreements
with respect to secondary distributions, including, without limitation,
indemnities to the effect and to the extent provided in Section 5. Holders on
whose behalf Warrant Shares are to be distributed by such underwriters shall be
parties to any such underwriting agreement and the representations and
warranties by, and the other agreements on the part of, PEC to and for the
benefit of such underwriters, shall also be made to and for the benefit of such
Holders. No such Holder shall be required by PEC to make any representations
or warranties to or agreements with PEC or the underwriters other than
reasonable representations, warranties or agreement regarding such Holder, such
Holder's Warrant Shares and such Holder's intended method or methods of
disposition and any other representation required by law and as provided in
Section 4.4(d).
(b) Inclusion of Warrant Shares. If PEC at any time proposes
to register any of its securities for its own account under the Securities Act
as contemplated by Section 4.2 and such securities are to be distributed by or
through one or more underwriters, PEC will use its best efforts, if requested
by any Holder who is entitled to request incidental registration of Warrant
Shares in connection therewith pursuant to Section 4.2, to arrange for such
underwriters to include the Warrant Shares to be offered and sold by such
Holder among the securities to be distributed by or through such underwriters;
provided that, for purposes of this sentence, best efforts shall not require
PEC to reduce the amount of sales price of such securities proposed to be
distributed by or through such underwriters. Holders of Warrant Shares to be
distributed by such underwriters shall be parties to the underwriting agreement
between PEC and such underwriters and the representations and warranties by,
and the other agreements on the part of, PEC to and for the benefit of such
underwriters, shall also be made to and for the benefit of such Holders of
Warrant Shares. PEC will cooperate with such Holders to the end that the
conditions precedent to the obligations of such Holders under such underwriting
agreement shall not include conditions that are not customary in underwriting
agreements with respect to combined primary and secondary distributions and
shall be otherwise satisfactory to such Holders. No such Holder shall be
required by PEC to make any representations or warranties other than reasonable
representations, warranties or agreements regarding such Holder, such Holder's
Warrant Shares and such Holder's intended method or methods of distribution and
any other representation required by law and as provided in Section 4.4(d).
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<PAGE> 10
(c) Selection of Underwriters. Whenever a registration demand
pursuant to Section 4.1 is for an underwritten offering, the Holders of Warrant
Shares making such demand shall have the right to select the managing
underwriter(s) (which shall be an underwriter of national standing) to
administer the offering, subject to the approval of PEC, such approval not to
be unreasonable withheld. If PEC at any time proposes to register any of its
securities under the Securities Act for sale of its own account or for the
accounts of any other sellers, including Holder, and such securities are to be
distributed by or through one or more underwriters, the selection of the
managing underwriter(s) (which shall be an underwriter of national standing)
shall be made by PEC and notice of the selection thereof delivered to Holders
eligible to participate in such registration.
(d) Holdback Agreements.
(i) If any registration pursuant to Section 4.1 or 4.2
shall be in connection with any underwritten public offering, each
Holder of Warrant Shares agrees by acquisition of such Warrant Shares,
if so required by the managing underwriter, not to effect any public
sale or distribution of Warrant Shares (other than as part of such
underwritten public offering) within seven (7) days prior to the
effective date of such registration statement or one hundred twenty
(120) days after the effective date of such registration statement,
unless the underwriters managing the offering otherwise agree.
(ii) PEC agrees (A) not to effect any public sale or
distribution prohibited by the Exchange Act after the demand or decision
to make such registration and (i) prior to the effective date of the
registration statement, except as a part of such registration statement
or pursuant to any registration statements on Forms S-8 or S-4 or any
successor form, unless the managing underwriters of such registration
otherwise agree; or (ii) prior to the ninetieth (90th) day after the
effective date of such registration statement, and (B) to use its best
efforts to cause each holder of at least 10% of its Common Stock or any
securities convertible into or exchangeable or exercisable for any of
its Common Stock, in each case purchased from PEC at any time after the
date of this Agreement (other than in a public offering), to agree not
to effect any such public sale or distribution of such securities during
such period.
4.5 Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement registering Warrant
Shares under the Securities Act, PEC will give Holders on whose behalf such
Warrant Shares are to be so registered and their underwriters, if any, and each
Requesting Holder and not more than one counsel for all Holders and their
respective accountants, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
Commission and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of PEC with its officers and the independent public accountants
who have certified its financial statements as shall be necessary in the
opinion of such Holders and such underwriters or their respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
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<PAGE> 11
5. Indemnification.
5.1 Indemnification by PEC.
In the event of any registration of any securities of PEC under
the Securities Act (pursuant to which Wes-Tex, the Foundation, the Greathouse
Charitable Remainder Trust or Holder sells Restricted Shares or Wes-Tex or
Holder sells Warrant Shares), PEC will, and hereby does, indemnify and hold
harmless Wes-Tex, the Foundation and the Greathouse Charitable Remainder Trust,
each officer and director of Wes-Tex or the Foundation, each trustee of the
Greathouse Charitable Remainder Trust or Holder, its partners and each other
person, if any, who controls Wes-Tex, the Foundation, the Greathouse Charitable
Remainder Trust or Holder within the meaning of the Securities Act, in each
case, against any losses, claims, damages, liabilities or expenses, joint or
several (including, without limitation, the costs and expenses of
investigating, preparing for and defending any legal proceeding, including
reasonable attorney's fees), to which Wes-Tex, the Foundation, the Greathouse
Charitable Remainder Trust or such Holder or any such director, trustee,
officer, employee or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions or proceedings in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any document incorporated by reference therein, or (ii)
any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and PEC will reimburse Wes-Tex, the Foundation, the Greathouse Charitable
Remainder Trust or Holder and each such partner and controlling person for any
legal or any other expenses incurred by them in connection with investigating
or defending or settling any such loss, claim, liability, action or proceeding;
provided that PEC shall not be liable in any such case to the extent that any
loss, claim, damage, liability or expense (or action or proceeding in respect
thereof) arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with written
information furnished to PEC through an instrument duly executed by Wes-Tex,
the Foundation, the Greathouse Charitable Remainder Trust or Holder or any such
director, trustee, officer, partner or controlling person specifically stating
that it is for use in preparation thereof. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of
Wes-Tex, the Foundation, the Greathouse Charitable Remainder Trust or Holder or
any such partner or controlling person and shall survive the transfer of such
securities by Wes-Tex, the Foundation, the Greathouse Charitable Remainder
Trust or Holder. PEC will make provision for contribution in lieu of any such
indemnity that may be disallowed as shall be reasonably requested by Wes-Tex,
the Foundation, the Greathouse Charitable Remainder Trust or Holder.
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<PAGE> 12
5.2 Indemnification by Wes-Tex, the Foundation, the Greathouse
Charitable Remainder Trust or Holder.
In the event of any registration of any securities of PEC under
the Securities Act (pursuant to which Wes-Tex, the Foundation, the Greathouse
Charitable Remainder Trust or Holder sells Restricted Shares or Warrant Shares
covered by such registration statement), Wes-Tex, the Foundation, the
Greathouse Charitable Remainder Trust or Holder will, and each of them hereby
does, severally indemnify and hold harmless PEC, each director of PEC, each
officer of PEC who shall sign such registration statement and each other
person, if any, who controls PEC within the meaning of the Securities Act from
and against losses, claims, damages and liabilities caused by any untrue
statement or alleged untrue statement of material fact contained in such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus included therein, or any amendment or supplement thereto, or caused
by any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, if such statement or omission was made in reliance upon and in
conformity with written information furnished to PEC through an instrument duly
executed by Wes-Tex, the Foundation, the Greathouse Charitable Remainder Trust
or Holder specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement up to the net proceeds received by Wes-Tex,
the Foundation, the Greathouse Charitable Remainder Trust or such Holder. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of PEC or any such director, officer or controlling person
and shall survive the transfer of such securities by Wes-Tex, the Foundation,
the Greathouse Charitable Remainder Trust or Holder.
5.3 Notice of Claims, etc.
In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 5, such person (hereinafter called the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (hereinafter called the "indemnifying party") in
writing and the indemnifying party, upon request of the indemnified party,
shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any other party the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i)
the indemnifying party and the indemnified party shall have mutually agreed to
the retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
The indemnifying party shall not be liable for the settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there is a final judgment for the plaintiff, the indemnifying party
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<PAGE> 13
agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment.
5.4 Indemnification Unavailable.
If the indemnification provided for in this Section 5 is
unavailable as a matter of law to an indemnified party in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under any such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by such indemnified party on the one hand and the
indemnifying parties on the other or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of such indemnified party on the one hand and
the indemnifying parties on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative fault of
such indemnified party and the indemnifying parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by such parties and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omissions. The parties agree that it would not be just and
equitable if contribution pursuant to this Section 5.4 were determined by pro
rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to above shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating, defending or settling
any such action or claim. Notwithstanding the foregoing, the liability of
Wes-Tex, the Foundation, the Greathouse Charitable Remainder Trust or a Holder
under this Section 5.4 shall be limited to the net proceeds received by
Wes-Tex, the Foundation, the Greathouse Charitable Remainder Trust or such
Holder (as the case may be).
5.5 No Settlement, etc.
No indemnifying party shall, except with the written consent of
the indemnified party, consent to entry of any judgment or entry into
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or action.
5.6 Indemnity Operative and in Full Force.
The indemnity and contribution agreements contained in this
Section 5 shall remain operative and in full force and effect regardless of any
termination of this Agreement.
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<PAGE> 14
6. Rule 144.
6.1 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Shares or the Warrant Shares to the
public without registration, PEC shall use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the date of this Agreement;
(b) File with the Commission in a timely manner all reports
and other documents required of PEC under the Securities Act and the Exchange
Act; and
(c) So long as Wes-Tex, the Foundation, the Greathouse
Charitable Remainder Trust or Holder owns any Restricted Shares or the Warrant
Shares, furnish to Wes-Tex, the Foundation, the Greathouse Charitable Remainder
Trust or the Holders as soon as reasonably practicable after request a written
statement by PEC as to its compliance with the reporting requirements of the
Exchange Act, a copy of the most recent annual or quarterly report of PEC filed
with the Commission, and such other reports filed by PEC with the Commission.
6.2 Further Assurances. PEC shall take such action any Holder
may reasonably request from time to time to enable Wes-Tex, the Foundation, the
Greathouse Charitable Remainder Trust or such Holder to sell Restricted Shares
or Warrant Shares without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon written request of
Wes-Tex, the Foundation, the Greathouse Charitable Remainder Trust or any
Holder, PEC will deliver to Wes-Tex, the Foundation, the Greathouse Charitable
Remainder Trust or such Holder a written statement as to whether it has
complied with such requirements.
7. Amendments and Waivers. This Agreement may be amended,
and PEC may take any action herein prohibited or omit to perform any act herein
required to be performed by it, only if PEC shall have obtained the written
consent to such amendment, action or omissions to act of Wes-Tex or the Holder
or Holders of at least 51% or more of the Restricted Shares and Warrant Shares.
8. Nominees for Beneficial Owners. In the event that any
Restricted Shares or Warrant Shares are held by a nominee for the beneficial
owner thereof, the beneficial owner thereof may, at its election, be treated as
Wes-Tex, the Foundation, the Greathouse Charitable Remainder Trust or the
Holder of such Restricted Shares or Warrant Shares for purposes of any request
or other action by Wes-Tex, the Foundation, the Greathouse Charitable Remainder
Trust or any Holder or Holders of Restricted Shares or Warrant Shares pursuant
to this Agreement or any determination of any number or percentage of shares of
Restricted Shares or Warrant Shares held by Wes-Tex, the Foundation, the
Greathouse Charitable Remainder Trust or any Holder or Holders of Restricted
Shares or Warrant Shares contemplated by this Agreement. If the beneficial
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<PAGE> 15
owner of any Restricted Shares or Warrant Shares so elects, PEC may require
assurances reasonably satisfactory to it of such owner's beneficial ownership
of such Restricted Shares or Warrant Shares.
9. Notices. Notices and other communications under this
Agreement shall be in writing and shall be sent by registered mail, postage
prepaid, or courier addressed to:
9.1 if to Wes-Tex, the Foundation, the Greathouse Charitable
Remainder Trust or any Holder, at the address provided to PEC in writing by
Wes-Tex, the Foundation, the Greathouse Charitable Remainder Trust or such
Holder or as shown on stock transfer books of PEC unless Wes-Tex, the
Foundation, the Greathouse Charitable Remainder Trust or such Holder has
advised PEC in writing of a different address as to which notices shall be sent
to it under this Agreement, and
9.2 if to PEC, at 4510 Lamesa Highway, P.O. Drawer 1416,
Snyder, Texas 79550 to the attention of its President or to such other address
as PEC shall have furnished to Wes-Tex, the Foundation, the Greathouse
Charitable Remainder Trust or each Holder.
10. Successors and Assigns. PEC acknowledges and agrees that
the registration rights granted to Wes-Tex, the Foundation and the Greathouse
Charitable Remainder Trust in this Agreement may be transferred and assigned by
Wes-Tex, the Foundation and the Greathouse Charitable Remainder Trust in
connection with any valid sale and assignment of the Restricted Shares or
Warrant Shares. All covenants and agreements in this Agreement by or on behalf
of either of the parties hereto will bind and, subject to the provisions of
Section 4.1 hereof, inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. In addition,
whether or not any express assignment has been made, the provisions of this
Agreement are for the benefit of Wes-Tex, the Foundation, the Greathouse
Charitable Remainder Trust or any Holder of Restricted Shares or Warrant
Shares.
11. Miscellaneous. This Agreement embodies the entire
agreement and understanding between PEC and the other parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings relating to the subject matter hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of Texas. The headings in this Agreement are for the purposes of reference
only and shall not limit or otherwise affect the meaning hereof. This
Agreement may be executed in counterparts, each of which shall be an original,
but both of which together shall constitute one instrument.
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<PAGE> 16
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
PEC:
PATTERSON ENERGY, INC.
By: /s/ Cloyce A. Talbott
---------------------------------
Cloyce A. Talbott
Chief Executive Officer
WES-TEX:
WES-TEX DRILLING COMPANY
By: /s/ Myrle Greathouse
---------------------------------
Myrle Greathouse
Chairman of the Board
FOUNDATION:
GREATHOUSE FOUNDATION
By: /s/ Myrle Greathouse
---------------------------------
Myrle Greathouse
President
GREATHOUSE CHARITABLE REMAINDER
TRUST:
/s/ Myrle Greathouse
-------------------------------------
Myrle Greathouse, Trustee
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<PAGE> 1
EXHIBIT 4.2
================================================================================
STOCK PURCHASE WARRANT
_______________
PATTERSON ENERGY, INC.
================================================================================
This Warrant was originally issued on June 12, 1997, to Wes-Tex
Drilling Company, a Texas corporation, pursuant to an Asset
Purchase Agreement, as amended, with Patterson Energy, Inc. and
Patterson Drilling Company, dated the same date, and such
issuance was not registered under the Securities Act of 1933, as
amended (the "Act") or the securities or "blue sky" laws of any
state. This Warrant is a "restricted security" as that term is
defined in Rule 144 adopted by the Securities and Exchange
Commission under the Act and is, therefore transferrable only if
the transfer is exempt from the registration requirements of the
Act, which exemption must be established to the satisfaction of
Patterson Energy, Inc.
Date of Issuance: June 12, 1997 Certificate No. W-WES-TEX-001
FOR VALUE RECEIVED, Patterson Energy, Inc. a Delaware corporation
(the "Company"), hereby grants to Wes-Tex Drilling Company, a Texas corporation
(the "Registered Holder"), the right to purchase from the Company 200,000
shares of the Company's Common Stock at a price per share of $32.00 (the
"Initial Exercise Price"). Certain capitalized terms used herein are defined
in Section 3 hereof. The amount and kind of securities purchasable pursuant to
the rights granted hereunder and the purchase price for such securities are
subject to adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
Section 1. Exercise of Warrant.
1A. Exercise Period. The Registered Holder may exercise, in
whole or in part (but not as to a fractional share of Common Stock), the
purchase rights represented by this Warrant at any time and from time to time
after the Date of Issuance to and including 5:00 p.m. (Snyder, Texas time) on
June 11, 2000 (the "Exercise Period").
<PAGE> 2
1B. Exercise Procedure.
(a) This Warrant will be deemed to have been exercised when
the Company has received all of the following items (the "Exercise Time"):
(i) a completed Exercise Agreement, as described in
paragraph 1C below, executed by the Registered Holder exercising
all or part of the purchase rights represented by this Warrant;
(ii) this Warrant; and
(iii) a check payable to the Company in an amount equal
to the product of the Exercise Price (as such term is defined in
Section 2) multiplied by the number of shares of Common Stock
being purchased upon such exercise (the "Aggregate Exercise
Price").
(b) As soon as practicable following the Exercise Time,
certificates for shares of Common Stock purchased upon exercise of this Warrant
will be delivered by the Company to the Registered Holder. Unless this Warrant
has expired or all of the purchase rights represented hereby have been
exercised, the Company will prepare a new Warrant, substantially identical
hereto, representing the rights formerly represented by this Warrant which have
not expired or been exercised and will, as soon as practicable following the
Exercise Time, deliver such new Warrant to the Registered Holder.
(c) The Common Stock issuable upon exercise of this Warrant
will be deemed to have been issued to the Registered Holder at the Exercise
Time, and the Registered Holder will be deemed for all purposes to have become
the record holder of such Common Stock at the Exercise Time.
(d) The issuance of certificates for shares of Common Stock
upon exercise of this Warrant will be made without charge to the Registered
Holder for any issuance tax in respect thereof or other cost incurred by the
Company in connection with such exercise and the related issuance of shares of
Common Stock, but the Company shall not be obligated to pay any transfer taxes
with respect to this Warrant or the shares of Common Stock unless reimbursed
thereafter by the transferee or transferor.
(e) The Company will not close its books against the transfer
of this Warrant or of any share of Common Stock issued or issuable upon the
exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant.
(f) The Company shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock solely for the
purpose of issuance upon exercise of the Warrants, such number of shares of
Common Stock issuable upon the exercise of all
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<PAGE> 3
outstanding Warrants. All shares of Common Stock which are so issuable shall,
when issued, be duly and validly issued, fully paid and nonassessable shares of
Common Stock of the Company.
1C. Exercise Agreement. Upon any exercise of this Warrant,
the Exercise Agreement will be substantially in the form set forth in Annex I
hereto. Such Exercise Agreement will be dated the actual date of execution
thereof.
1D. No Fractional Shares. No fractional shares of Common
Stock or scripts for fractional shares shall be issued upon the exercise of
this Warrant. If Holder of this Warrant would be entitled on the exercise of
any rights evidenced hereby, to receive a fractional interest in a share, the
Company shall pay a cash adjustment in respect of any fractional share that
would otherwise be issuable in an amount equal to the same fraction of the
current market value of a share of Common Stock, which current market value
shall be the last reported sale price immediately preceding the date of the
exercise.
Section 2. Adjustment of Exercise and Number of Shares. In
order to prevent dilution of the rights granted under this Warrant, the Initial
Exercise Price shall be subject to adjustment from time to time as provided in
this Section 2 (such price or such price as last adjusted pursuant to the terms
hereof, as the case may be, is herein called the "Exercise Price"), and the
number of shares of Common Stock obtainable upon exercise of the Warrant shall
be subject to adjustment from time to time as provided in this Section 2.
2A. (1) In case the Company shall at any time or from time to
time subdivide its outstanding shares of Common Stock into a greater number of
shares, the Exercise Price in effect immediately prior to such subdivision
shall be proportionately reduced and the number of shares purchasable under
this Warrant shall be proportionately increased; and conversely, in case the
Common Stock of the Company shall be combined into a smaller number of shares,
the Exercise Price in effect immediately prior to such combination shall be
proportionately increased and the number of shares purchased hereunder shall be
proportionately reduced.
(2) Except as hereinafter provided, in the event the Company
shall, at any time or from time to time after the date hereof, sell any shares
of Common Stock without consideration or for a consideration per share less
than $32.00 or issue any shares of Common Stock as a stock dividend to holders
of Common Stock (any such sale or issuance being herein called a "Change of
Shares"), then, and thereafter upon each further Change of Shares, the Exercise
Price for this Warrant in effect immediately prior to such Change of Shares
shall be reduced to a price (including any applicable fraction of a cent to the
nearest cent) determined by dividing (i) the sum of (a) the total number of
shares of Common Stock outstanding immediately prior to such Change of Shares,
multiplied by the Exercise Price in effect immediately prior to such Change of
Shares, and (b) the consideration, if any, received by the Company upon such
sale or issuance by (ii) the total number of shares of Common Stock
outstanding immediately after such Change of Shares; provided, however, that in
no event shall the Exercise Price be adjusted pursuant to this computation to
an amount in excess of the Exercise Price in effect immediately prior to such
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<PAGE> 4
computation. Upon each adjustment of the Exercise Price pursuant to this
Section 2A(2), the number of shares of Common Stock purchasable upon exercise
of this Warrant shall be the number derived by multiplying the number of shares
of Common Stock purchasable immediately prior to such Change of Shares by the
Exercise Price in effect prior to such Change of Shares and dividing the
product so obtained by the applicable adjusted Exercise Price.
For the purposes of any adjustment to be made in accordance with
this Section 2A(1) or (2), the following provisions shall be applicable:
(a) In case of the issuance or sale of shares of Common Stock
(or of other securities deemed hereunder to involve the issuance or sale of
shares of Common Stock) for a consideration part or all of which shall be cash,
the amount of the cash portion of the consideration therefor deemed to have
been received by the Company shall be (i) the subscription price, if shares of
Common Stock are offered by the Company for subscription, or (ii) the public
offering price (before deducting therefrom any compensation paid or discount
allowed in the sale, underwriting or purchase thereof by underwriters or
dealers or others performing similar services, or any expenses incurred in
connection therewith), if such securities are sold to underwriters or dealers
for public offering without a subscription offering, or (iii) the gross amount
of cash actually received by the Company for such securities, in any other
case.
(b) in case of the issuance or sale (otherwise than as a
dividend or other distribution on any stock of the Company, and otherwise than
on the exercise of options, rights or warrants or the conversion or exchange of
convertible or exchangeable securities) of shares of Common Stock (or of other
securities deemed hereunder to involve the issuance or sale of shares of Common
Stock) for a consideration part or all of which shall be other than cash, the
amount of the consideration therefor other than cash deemed to have been
received by the Company shall be the value of such consideration as determined
in good faith by the Board of Directors of the Company, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company shall be the market price thereof (determined as
provided below in this Section 2A) as of the date of receipt, but in each such
case without deduction therefrom of any expenses incurred or any underwriting
commissions, discounts or concessions paid or allowed by the Company in
connection therewith. In computing the market price of a note or other
obligation that is not listed or admitted to trading on any securities exchange
or quoted in the National Association of Securities Dealers' Automated
Quotation System or reported by the National Quotation Bureau, Inc. or a
similar reporting organization, the total consideration to be received by the
Company thereunder (including interest) shall be discounted to present value at
the prime rate of interest of NationsBank of Texas, N.A. (or its successor) in
effect at the time the note or obligation is deemed to have been issued. In
case any additional shares of Common Stock shall be issued in connection with
any merger of another corporation into the Company, the amount of consideration
therefor shall be deemed to be the fair value as determined in good faith by
the Board of Directors of the Company of such portion of the assets of such
merged corporation received by the Company as the Board of Directors of the
Company shall determine to be attributable to such additional shares of Common
Stock.
-4-
<PAGE> 5
(c) For the purposes of any computation under Section 2
hereof, the market price of the security in question on any day shall be valued
as follows:
(i) If traded on a national securities exchange or the
NASDAQ National Market ("NASDAQ/NM"), the value shall be deemed to be
the average of the security's closing prices on such exchange or
NASDAQ/NM over the thirty (30) day period ending three (3) business days
prior to the applicable valuation date; and
(ii) If actively traded over the counter (other than
NASDAQ/NM), the value shall be deemed to be the average of the
security's closing bid prices over the thirty (30) day period ending
three (3) business days prior to the applicable valuation date; and
(iii) If there is no active public market, the value
shall be the fair market value thereof as determined in good faith by
the Board of Directors.
The method of valuation of securities subject to investment
letter or other restrictions on free marketability shall be adjusted to make an
appropriate discount from the market value determined as above in clauses (i)
or (ii) to reflect the fair market value thereof as determined in good faith by
the Board of Directors. The Registered Holder of this Warrant shall have the
right to challenge any determination by the Board of Directors of fair market
value pursuant to this Section 2, in which case the determination of fair
market value shall be made by an independent appraiser selected jointly by the
Board of Directors and the challenging party, the cost of such appraisal to be
borne solely by the challenging party.
(d) Shares of Common Stock issuable by way of dividend or
other distribution on any stock of the Company shall be deemed to have been
issued immediately after the opening of business on the day following the
record date for the determination of shareholders entitled to receive such
dividend or other distribution and shall be deemed to have been issued without
consideration.
(e) The reclassification of securities of the Company other
than shares of Common Stock into securities including shares of Common Stock
shall be deemed to involve the issuance of such shares of Common Stock for a
consideration other than cash immediately prior to the close of business on the
date fixed for the determination of security holders entitled to receive such
shares, and the value of the consideration allocable to such shares of Common
Stock shall be determined as provided in subsection (b) of this Section 2A.
(f) The number of shares of Common Stock at any one time
outstanding shall be deemed to include the aggregate maximum number of shares
issuable (subject to readjustment upon the actual issuance thereof) upon the
exercise of options, rights or warrants and upon the conversion or exchange of
convertible or exchangeable securities.
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<PAGE> 6
2B. In case the Company shall at any time after the date
hereof issue options, rights or warrants to subscribe for shares of Common
Stock, or issue any securities convertible into or exchangeable for shares of
Common Stock, for a consideration per share (determined as provided in Section
2A and as provided below) less than $32.00, or without consideration (including
the issuance of any such securities by way of dividend or other distribution),
the Exercise Price for this Warrant (whether or not the same shall be issued
and outstanding) in effect immediately prior to the issuance of such options,
rights or warrants, or such convertible or exchangeable securities, as the case
may be, shall be reduced to a price determined by making the computation in
accordance with the provisions of Section 2A(2) hereof, provided that:
(a) The aggregate maximum number of shares of Common Stock
issuable or that may become issuable under such options, rights or warrants
(assuming exercise in full even if not then currently exercisable or currently
exercisable in full) shall be deemed to be issued and outstanding at the time
such options, rights or warrants were issued, for a consideration equal to the
minimum purchase price per share provided for in such options, rights or
warrants at the time of issuance, plus the consideration, if any, received by
the Company for such options, rights or warrants; provided, however, that upon
the expiration or other termination of such options, rights or warrants, if any
thereof shall not have been exercised, the number of shares of Common Stock
deemed to be issued and outstanding pursuant to this subsection (a) (and for
the purposes of subsection (f) of Section 2A hereof) shall be reduced by the
number of shares as to which options, warrants and/or rights shall have
expired, and such number of shares shall no longer be deemed to be issued and
outstanding, and the Exercise Price then in effect shall forthwith be
readjusted and thereafter be the price that it would have been had adjustment
been made on the basis of the issuance only of the shares actually issued plus
the shares remaining issuable upon the exercise of those options, rights or
warrants as to which the exercise rights shall not have expired or terminated
unexercised.
(b) The aggregate maximum number of shares of Common Stock
issuable or that may become issuable upon conversion or exchange of any
convertible or exchangeable securities (assuming conversion or exchange in full
even if not then currently convertible or exchangeable in full) shall be deemed
to be issued and outstanding at the time of issuance of such securities, for a
consideration equal to the consideration received by the Company for such
securities, plus the minimum consideration, if any, receivable by the Company
upon the conversion or exchange thereof; provided, however, that upon the
termination of the right to convert or exchange such convertible or
exchangeable securities (whether by reason of redemption or otherwise), the
number of shares of Common Stock deemed to be issued and outstanding pursuant
to this subsection (b) (and for the purposes of subsection (f) of Section 2A
hereof) shall be reduced by the number of shares as to which the conversion or
exchange rights shall have expired or terminated unexercised, and such number
of shares shall no longer be deemed to be issued and outstanding, and the
Exercise Price then in effect shall forthwith be readjusted and thereafter be
the price that it would have been had adjustment been made on the basis of the
issuance only of the shares actually issued plus the shares remaining issuable
upon conversion or
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<PAGE> 7
exchange of those convertible or exchangeable securities as to which the
conversion or exchange rights shall not have expired or terminated unexercised.
(c) If any change shall occur in the price per share provided
for in any of the options, rights or warrants referred to in subsection (a) of
this Section 2B, or in the price per share or ratio at which the securities
referred to in subsection (b) of this Section 2B are convertible or
exchangeable, such options, rights or warrants or conversion or exchange
rights, as the case may be, to the extent not theretofore exercised, shall be
deemed to have expired or terminated on the date when such price change became
effective in respect of shares not theretofore issued pursuant to the exercise
or conversion or exchange thereof, and the Company shall be deemed to have
issued upon such date new options, rights or warrants or convertible or
exchangeable securities.
2C. Reorganization, Reclassification, Consolidation, Merger or
Sale. Upon any reorganization, reclassification, consolidation, merger,
liquidation, dissolution or sale of all or substantially all of the Company's
assets to another Person, the Company shall take such action as it deems
necessary to provide the Registered Holder upon the exercise thereof, and in
lieu of or in addition to the Common Stock obtainable upon exercise of this
Warrant, the kind and amount of stock, other securities or property that such
Registered Holder would have received had such Registered Holder exercised this
Warrant immediately prior to any reorganization, reclassification,
consolidation, merger, liquidation, dissolution or sale of all or substantially
all of the assets of the Company.
2D. Notices. Upon any adjustment of the Exercise Price or the
securities or property obtainable upon exercise of this Warrant, the Company
will give written notice thereof to the Registered Holder.
2E. No adjustment of the Exercise Price shall be made as a
result of or in connection with (1) the issuance or sale of shares of Common
Stock pursuant to options, warrants, stock purchase agreements and convertible
or exchangeable securities outstanding or in effect on the date hereof, (2) the
issuance or sale of shares of Common Stock upon the exercise of options granted
pursuant to any of the Company's stock option plans in effect on the date
hereof, whether or not options thereunder were outstanding on the date hereof;
provided that the exercise price of any such options is not less than the fair
market value of the Common Stock on the date of grant, or (3) the issuance or
sale of shares of Common Stock if the amount of said adjustment shall be less
than $0.10, provided, however, that in such case, any adjustment that would
otherwise be required then to be made shall be carried forward and shall be
made at the time of and together with the next subsequent adjustment that shall
amount, together with any adjustment so carried forward, to at least $0.10. In
addition, Holders shall not be entitled to cash dividends paid by the Company
prior to the exercise of any Warrant or Warrants held by them.
Section 3. Definitions. The following terms have meanings set
forth below:
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<PAGE> 8
"Common Stock" means the Company's Common Stock, $0.01 par value
per share.
"Person" means an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
Section 4. No Voting Rights; Limitations of Liability. This
Warrant will not entitle the Registered Holder to any voting rights or other
rights as a stockholder of the Company. No provision hereof, in the absence of
affirmative action by the Registered Holder to purchase Common Stock , and no
enumeration herein of the rights or privileges of the Registered Holder shall
give rise to any liability of such holder for the Exercise Price of Common
Stock acquirable by exercise hereof or as a stockholder of the Company.
Section 5. Transfer.
5A. Except as otherwise provided herein, this Warrant and all
options and rights hereunder are transferable, as to all or any part of the
number of shares of Common Stock purchasable upon its exercise, by the
Registered Holder hereof in person or by duly authorized attorney on the books
of the Company upon surrender of this Warrant at the principal offices of the
Company, together with the form of transfer authorization attached hereto duly
executed. The Company shall deem and treat the Registered Holder of this
Warrant at any time as the absolute owner hereof for all purposes and shall not
be affected by any notice to the contrary. If this Warrant is transferred in
part, the Company shall at the time of surrender of this Warrant, issue to the
transferee a Warrant covering the number of shares of Common Stock transferred
and to the transferor a Warrant covering the number of shares of Common Stock
not transferred.
5B. Anything in this Warrant to the contrary notwithstanding,
if, at the time of the surrender of this Warrant in connection with any
exercise, transfer, or exchange of this Warrant, this Warrant shall not be
registered under the Securities Act of 1933, as amended (the "Act"), and under
applicable state securities or blue sky laws, the Company may require, as a
condition of allowing such exercise, transfer, or exchange, that (i) the
Registered Holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel, which opinion of counsel is
reasonably acceptable to the Company, to the effect that such exercise,
transfer, or exchange may be made without registration under the Act and under
applicable state securities or blue sky laws, and (ii) the Registered Holder or
transferee execute and deliver to the Company an investment letter in form and
substance reasonably acceptable to the Company. The first Registered Holder of
this Warrant, by taking and holding the same, represents to the Company that
such Registered Holder is acquiring this Warrant for investment and not with a
view to the distribution thereof.
5C. The terms of this warrant shall be binding upon the
permitted successors, transferees and assignees of Wes-Tex Drilling Company.
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<PAGE> 9
Section 6. Warrant Exchangeable for Different Denominations.
This Warrant is exchangeable, upon the surrender hereof by the Registered
Holder at the principal office of the Company, for new Warrants of like tenor
representing in the aggregate the purchase rights hereunder, and each of such
new Warrants will represent such portion of rights as is designated by the
Registered Holder at the time of such surrender. The date the Company
initially issues this Warrant will be deemed to be the "Date of Issuance"
hereof regardless of the number of times new certificates representing the
unexpired and unexercised rights formerly representing portions of the rights
hereunder are referred to herein as the "Warrants."
Section 7. Underlying Shares--Restricted Securities. The shares
of Common Stock acquired upon exercise of this Warrant will be "restricted
securities" as that term is defined in Rule 144 adopted by the Securities and
Exchange Commission under the Act and therefore may not be sold or transferred
in the absence of registration under the Act or an exemption under the Act and
the applicable state securities or blue sky laws. Share certificates
evidencing shares of Common Stock acquired upon exercise of this Warrant will
be imprinted with a legend reading substantially as follows:
The shares represented by this Certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act") and are "restricted securities," as that term is defined
in Rule 144 under the Act. The shares may not be offered for
sale, sold, or otherwise transferred except pursuant to an
effective Registration Statement under the Act or an exemption
therefrom, the availability of which is to be established to the
satisfaction of the Company.
Section 8. Underlying Shares--Registration Rights. The shares
acquired upon exercise of this Warrant will be entitled to certain registration
rights under the Registration Rights Agreement between the Company and Wes-Tex
Drilling Company, dated of even date herewith.
Section 9. Replacement. Upon receipt of evidence reasonably
satisfactory to the Company of the ownership and the loss, theft, destruction
or mutilation of any certificate evidencing this Warrant, and in the case of
any such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Company or, in the case of any such mutilation upon
surrender of such certificate, the Company will execute and deliver in lieu of
such certificate a new certificate of like kind representing the same rights
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.
Section 10. Notices. Except as otherwise expressly provided
herein, all notices referred to in this Warrant will be in writing and will be
delivered personally, sent by reputable express courier service (charges
prepaid) or sent by registered or certified mail, return receipt requested,
postage prepaid and will be deemed to have been given when so delivered, sent
or deposited in the U.S. Mail (i) to the Company, at its principal executive
offices and (ii) to the
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<PAGE> 10
Registered Holder of this Warrant, at such holder's address as it appears in
the records of the Company.
Section 11. Amendment and Waiver. Except as otherwise provided
herein, the provisions of this Warrant may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Registered Holders of Warrants representing a majority of the shares of Common
Stock obtainable upon exercise of the Warrants.
Section 12. Descriptive Headings; Governing Law. The
descriptive headings of the several sections and paragraphs of this Warrant are
inserted for convenience only and do not constitute a part of this Warrant.
The construction, validity and interpretation of this Warrant will be governed
by the laws of the State of Texas.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed and attested by its duly authorized officer under its corporate seal and
to be dated the Date of Issuance hereof.
PATTERSON ENERGY, INC.
By: /s/ Cloyce A. Talbott
------------------------------------
Name: Cloyce A. Talbott
----------------------------------
Title: Chief Executive Officer
---------------------------------
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<PAGE> 11
ANNEX I
PATTERSON ENERGY, INC.
EXERCISE AGREEMENT--INVESTMENT REPRESENTATIONS
To: Patterson Energy, Inc. Dated:
---------------------------------
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. W-_______________), hereby agrees to
subscribe for the purchase of ______________ shares of the Common Stock
("Restricted Shares") of Patterson Energy, Inc. (the "Company") covered by such
Warrant and makes payment herewith in full therefor at the price per share
provided by such Warrant.
The undersigned is acquiring the Restricted Shares for his own
account with the present intention of holding the Restricted Shares for
purposes of investment, and he has no intention of selling any of the
Restricted Shares in a public distribution in violation of federal securities
laws or any applicable state securities laws and none of such Restricted Shares
may be transferred, sold, assigned, pledged, hypothecated or otherwise disposed
of by the undersigned unless (a) a registration statement under the Securities
Act of 1933, as amended (the "Act") covering the Restricted Shares has become
effective so as to permit the sale or other disposition of such shares by the
undersigned; or (b) there is presented to the Company an opinion of counsel
satisfactory to the Company to the effect that the sale or other proposed
disposition of the Restricted Shares by the undersigned may lawfully be made
otherwise than pursuant to an effective registration statement under the Act.
Signature:
-----------------------------
Address:
-------------------------------
---------------------------------------
<PAGE> 12
ANNEX II
PATTERSON ENERGY, INC.
ASSIGNMENT
FOR VALUE RECEIVED,_______________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant (Certificate No. W-_______________) with respect to the number
of shares of Common Stock of Patterson Energy, Inc. covered thereby set forth
below, unto:
<TABLE>
<CAPTION>
Names of Assignee ("Assignee") Address No. of Shares
- ------------------------------ ------- -------------
<S> <C> <C>
</TABLE>
Signature:
-----------------------------
---------------------------------------
Witness:
-------------------------------
ACCEPTANCE OF ASSIGNMENT
The undersigned, as Assignee, hereby agrees to be bound by the
terms of the attached Warrant.
Signature:
-----------------------------
---------------------------------------
Witness:
-------------------------------
<PAGE> 1
EXHIBIT 10.1
PATTERSON ENERGY, INC.
AND
PATTERSON DRILLING COMPANY
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into this 12th
day of June, 1997 (this "Agreement"), between and among PATTERSON ENERGY, INC.,
a Delaware corporation ("PEC"), PATTERSON DRILLING COMPANY, a Delaware
corporation ("PDC") wholly owned by PEC, and WES-TEX DRILLING COMPANY, a Texas
corporation ("Wes-Tex").
RECITALS:
A. Simultaneously with the execution of this Agreement, PDC
has consummated the transactions contemplated by that certain Asset Purchase
Agreement, dated June 4, 1997, as amended by the Amendment to Asset Purchase
Agreement, dated June 4, 1997 (collectively, as amended, the "Asset Purchase
Agreement"), among PEC, PDC and Wes-Tex providing for, among other things, the
purchase by PDC of the drilling rigs, related equipment, rolling stock, and a
shop and yard owned by Wes-Tex.
B. The execution and delivery of this Agreement is a
condition to the consummation of the Asset Purchase contemplated by the Asset
Purchase Agreement, and the parties are entering into this Agreement in order
to fulfill such condition.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties, intending to be legally bound, hereby agree as follows:
1. Period of Agreement.
The period of this Agreement shall commence on the date hereof
and remain in effect through the first to occur of (i) June 12, 2002, or (ii) a
Change in Control of PEC or PDC. For purposes of this Agreement, "Change in
Control" shall be deemed to have occurred, if (i) a tender offer shall be made
and consummated for the ownership of more than fifty percent of the outstanding
voting securities of PEC, or (ii) there is a merger, consolidation or other
reorganization of PEC or PDC with another entity and, as a result of such
merger, consolidation or other reorganization, less than fifty percent of the
outstanding voting securities of the surviving or resulting entity shall be
owned by the former stockholders of PEC as the same shall have existed
immediately prior to such merger, consolidation or other reorganization.
<PAGE> 2
2. Covenant Not to Compete.
(a) Wes-Tex covenants and agrees that during the Non-Compete
Period, Wes-Tex shall not, without the prior written consent of PEC and PDC,
directly or indirectly, alone or in association with any other person, carry
on, be engaged, concerned, or take part in, render services to, or own, share
in the earnings of, or invest in the stock, bonds, or other securities of, any
person which is engaged in the business of contract drilling oil and gas wells
within District 1, 7B, 7C, 8, 8A, 9, or 10 of Texas as defined by the Texas
Railroad Commission on the date of this Agreement or within Chaves, Eddy, Lea,
or Roosevelt County, New Mexico (the "Competitive Business"); provided,
however, that Wes-Tex may: (i) invest and/or engage in any business that
routinely provides third-party services (as such term is commonly used in the
contract oil and gas well drilling business) to a Competitive Business, but is
not engaged in the actual conduct of a Competitive Business; or (ii) invest in
stock, bonds, or other securities of any Competitive Business (but without
otherwise participating in the Competitive Business) if: (A) such stock,
bonds, or other securities are listed on any national securities exchange or
are registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended; (B) the investment does not exceed, in the case of any class of
capital stock of any one issuer, two percent (2%) of the issued and outstanding
shares, or, in the case of bonds or other securities of any one issuer, two
percent (2%) of the aggregate principal amount thereof issued and outstanding;
and (C) such investment would not prevent, directly or indirectly, the
transaction of business by PEC or PDC or any affiliate of PEC or PDC with any
state, district, territory, or possession of the United States or any
governmental subdivision, agency, or instrumentality thereof by virtue of any
statute, law, regulation or administrative practice. The period of time during
which Wes-Tex is prohibited from engaging in certain activities by this Section
shall be extended by the length of time during which Wes-Tex is in breach of
the terms of this section.
(b) It is understood by and between the parties hereto that
the foregoing covenant by Wes-Tex not to enter into competition with PEC or PDC
as set forth in Section 2(a) hereof is an essential element of this Agreement
and the Asset Purchase Agreement and that, but for the agreement of Wes-Tex to
comply with such covenant, neither PEC nor PDC would have agreed to enter into
this Agreement or the Asset Purchase Agreement. PEC and PDC on the one hand,
and Wes-Tex on the other hand, have independently consulted with their
respective counsel and have been advised in all respects concerning the
reasonableness and propriety of such covenant, with specific regard to the
nature of the business conducted by PEC and PDC and their respective
affiliates. Wes-Tex on the other hand agrees that such covenant is reasonable
in scope, geographic area, and duration, and that compliance with such covenant
would not impose economic hardship on Wes-Tex.
3. Restrictions on Soliciting Business of PEC and PDC.
Wes-Tex further covenants and agrees that during the Non-Compete
Period, Wes-Tex will not, either for itself or for any other person or entity,
directly or indirectly, engage in any of the following activities in a
Competitive Business without the express prior written consent of PEC and PDC:
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<PAGE> 3
(a) Solicit or hire any of the employees of PEC or PDC or
solicit or take away any of PEC's or PDC's customers, lessors, or suppliers or
attempt any of the foregoing:
(b) Acquire or attempt to acquire rights providing any product
or service in a Competitive Business within the territory described in
Section 2 hereof; or
(c) Engage in any act which would interfere with or harm any
business relationship PEC or PDC has with any customer, lessor, employee,
principal or supplier.
4. Specific Performance.
Without intending to limit the remedies available to PEC or PDC,
Wes-Tex acknowledges that PEC or PDC will have no adequate remedies at law if
Wes-Tex violates the terms of Section 2 or 3, hereof. In such event, Wes-Tex
agrees that PEC or PDC shall have the right, in addition to any other rights it
may have, to obtain in any court of competent jurisdiction specific performance
of such Sections of this Agreement or injunctive relief to restrain any breach
or threatened breach thereof. Nothing herein shall be construed as prohibiting
PEC or PDC from pursuing any other remedies available to PEC or PDC (whether at
law or in equity) for such breach or threatened breach, including, without
limitation, the recovery of monetary damages from Wes-Tex.
The provisions of this Section 4 shall survive the expiration,
termination or cancellation of this Agreement.
5. Attorneys Fees and Costs.
If an action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorneys fees, costs and necessary expenses in addition to any
other relief to which that party may be entitled. This provision is applicable
to this entire Agreement.
6. Representations and Warranties of PEC, PDC and Wes-Tex.
(a) Representations and Warranties of PEC and PDC. PEC and
PDC hereby joint and severally represent and warrant to Wes-Tex that: (i) it
has all requisite power to enter into and perform their obligations under this
Agreement; (ii) this Agreement has been duly and validly authorized by all
necessary corporate action on the part of PEC and PDC; (iii) the execution of
this Agreement by PEC and PDC and performance of their obligations hereunder do
not require the consent or approval of any other party; and (iv) this Agreement
is a valid and binding obligation of PEC and PDC.
(b) Representations and Warranties of Wes-Tex. Wes-Tex hereby
represents and warrants to PEC and PDC that: (i) Wes-Tex has the capacity and
power to enter into and perform obligations of Wes-Tex under this Agreement;
(ii) Wes-Tex has duly and validly executed this
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<PAGE> 4
Agreement; (iii) the execution of this Agreement and performance of obligations
of Wes-Tex hereunder do not require the consent or approval of any other party;
and (iv) this Agreement constitutes a valid and binding obligation of Wes-Tex.
7. General Provisions.
(a) Compliance with Laws. The parties agree that they will
comply with all applicable laws and regulations of government bodies or
agencies in their respective performance of their obligations under this
Agreement.
(b) Governing Law and Construction. This Agreement will be
governed by and construed in accordance with the laws of the State of Texas
without reference to its conflict-of-laws principles. This Agreement's final
form resulted from review and negotiations among the parties and their
attorneys, and no part of this Agreement should be construed against any party
on the basis of authorship.
(c) Forum for Dispute Resolution. If any dispute arises among
the parties concerning the interpretation or performance of any portion of this
Agreement which the parties are unable to resolve themselves, and any party
brings an action against any other party seeking a declaratory order, specific
performance, damages, or any other legal or equitable relief based on this
Agreement, the parties agree that the forum for any such action shall be an
appropriate federal or state court in Texas having jurisdiction, agree that
venue will be proper in such courts, and waive any objections based on
inconvenience of the forum, and further agree that the prevailing party in any
such action, as determined by the court, shall be awarded its reasonable
attorneys' fees and costs in addition to any relief or judgment the court
awards.
(d) Entire Agreement; Amendment. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
contained herein and supersedes any previous oral or written communications,
representations, understandings or agreements with respect thereto. The terms
of this Agreement may be modified only in a writing, signed by authorized
representatives of both parties.
(e) Assignability. This Agreement will be binding upon the
parties' respective successors and permitted assigns. Neither party may assign
this Agreement and/or any of its rights and/or obligations hereunder without
the prior written consent of the other party, and any such attempted assignment
will be void; provided, however, that PEC or PDC may assign this Agreement to a
subsidiary or affiliate without the prior written consent of Wes-Tex.
(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.
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<PAGE> 5
(g) Severability. If any provision of this Agreement is
declared to be invalid, the parties agree that such invalidity will not affect
the validity of the remaining provisions of this Agreement, and further agree,
to the extent possible, to substitute for the invalid provision a valid
provision that approximates the intent and economic effect of the invalid
provision as closely as possible.
(h) Headings. The titles of the Sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
(i) Notice. Any notice, request, consent, demand or other
communication required to be given under this Agreement will be in writing and
will be given personally, by facsimile or by mailing the same, first-class,
postage prepaid to the appropriate address and facsimile number set forth below
or to such other person or at such other address as may hereafter be designated
by like notice. Notices by mail will be considered delivered and become
effective three days after the mailing thereof. All notices by facsimile will
be considered delivered and become effective immediately upon the confirmed (by
answer back or other tangible printed verification or successful receipt)
sending thereof.
To PEC: Patterson Energy, Inc.
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: Cloyce A. Talbott
Chairman and Chief Executive Officer
To PDC: Patterson Drilling Company
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: A. Glenn Patterson
President and Chief Operating Officer
To Wes-Tex: Wes-Tex Drilling Company
400 Pine Street
P.O. Box 3759
Abilene, Texas 79604
Attention: Myrle Greathouse
Chairman of the Board
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<PAGE> 6
(j) Counterparts. This Agreement may be executed in
counterparts and by the parties hereto in separate counterparts, each of which
will be deemed an original, but all of which together will constitute one and
the same instrument.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to
be executed by their respective representatives as of the day and year first
above written.
"PEC"
PATTERSON ENERGY, INC.
By: /s/ Cloyce A. Talbott
--------------------------------------
Cloyce A. Talbott
Chairman and Chief Executive Officer
"PDC"
PATTERSON DRILLING COMPANY
By: /s/ A. Glenn Patterson
--------------------------------------
A. Glenn Patterson
President and Chief Operating Officer
"WES-TEX"
WES-TEX DRILLING COMPANY
By: /s/ Myrle Greathouse
--------------------------------------
Myrle Greathouse
Chairman of the Board
-6-
<PAGE> 1
EXHIBIT 10.2
PATTERSON ENERGY, INC.
AND
PATTERSON DRILLING COMPANY
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into this 12th
day of June, 1997 (this "Agreement"), between and among PATTERSON ENERGY, INC.,
a Delaware corporation ("PEC"), PATTERSON DRILLING COMPANY, a Delaware
corporation ("PDC") wholly owned by PEC, and MYRLE GREATHOUSE, an individual
residing in Abilene, Texas ("M Greathouse").
RECITALS:
A. Simultaneously with the execution of this Agreement, PDC
has consummated the transactions contemplated by that certain Asset Purchase
Agreement, dated June 4, 1997, as amended by the Amendment to Asset Purchase
Agreement, dated June 4, 1997 (collectively, as amended, the "Asset Purchase
Agreement"), among PEC, PDC and WES-TEX DRILLING COMPANY ("Wes-Tex"), providing
for, among other things, the purchase by PDC of the drilling rigs, related
equipment, rolling stock and a shop and yard owned by Wes-Tex.
B. M Greathouse is an officer, a director and a stockholder
of Wes-Tex.
C. The execution and delivery of this Agreement is a
condition to the consummation of the Asset Purchase contemplated by the Asset
Purchase Agreement, and the parties are entering into this Agreement in order
to fulfill such condition.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties, intending to be legally bound, hereby agree as follows:
1. Period of Agreement.
The period of this Agreement shall commence on the date hereof
and remain in effect through the first to occur of (i) June 12, 2002, or (ii) a
Change in Control of PEC or PDC unless sooner terminated as the result of the
death of M Greathouse (the "Non-Compete Period"). For purposes of this
Agreement, "Change in Control" shall be deemed to have occurred, if (i) a
tender offer shall be made and consummated for the ownership of more than fifty
percent of the outstanding voting securities of PEC, or (ii) there is a merger,
consolidation or other reorganization of PEC or PDC with another entity and as
a result of such merger, consolidation or other reorganization, less than fifty
percent of the outstanding voting securities of the surviving or resulting
entity shall be owned by the former stockholders of PEC as the same shall have
existed immediately prior to such merger, consolidation or other
reorganization.
<PAGE> 2
2. Compensation.
Simultaneously with the execution of this Agreement, PEC and PDC
have paid M Greathouse, by cashier's check, the amount of $2 million as partial
compensation for entering into this Agreement.
3. Covenant Not to Compete.
(a) M Greathouse covenants and agrees that during the Non-
Compete Period, M Greathouse shall not, without the prior written consent of
PEC and PDC, directly or indirectly, and whether as a principal or as an agent,
officer, director, employee, consultant, or otherwise, alone or in association
with any other person, carry on, be engaged, concerned, or take part in, render
services to, or own, share in the earnings of, or invest in the stock, bonds,
or other securities of, any person which is engaged in the business of contract
drilling oil and gas wells within District 1, 7B, 7C, 8, 8A, 9, or 10 of Texas
as defined by the Texas Railroad Commission on the date of this Agreement or
within Chaves, Eddy, Lea, or Roosevelt County, New Mexico (the "Competitive
Business"); provided, however, that M Greathouse may: (i) invest and/or engage
in any business that routinely provides third-party services (as such term is
commonly used in the contract oil and gas well drilling business) to a
Competitive Business, but is not engaged in the actual conduct of a Competitive
Business; or (ii) invest in stock, bonds, or other securities of any
Competitive Business (but without otherwise participating in the Competitive
Business) if: (A) such stock, bonds, or other securities are listed on any
national securities exchange or are registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended; (B) the investment does not
exceed, in the case of any class of capital stock of any one issuer, two
percent (2%) of the issued and outstanding shares, or, in the case of bonds or
other securities of any one issuer, two percent (2%) of the aggregate principal
amount thereof issued and outstanding; and (C) such investment would not
prevent, directly or indirectly, the transaction of business by PEC or PDC or
any affiliate of PEC or PDC with any state, district, territory, or possession
of the United States or any governmental subdivision, agency, or
instrumentality thereof by virtue of any statute, law, regulation or
administrative practice. The period of time during which M Greathouse is
prohibited from engaging in certain activities by this Section shall be
extended by the length of time during which M Greathouse 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 Greathouse not to enter into competition with PEC
or PDC as set forth in Section 3(a) hereof is an essential element of this
Agreement and the Asset Purchase Agreement and that, but for the agreement of
M Greathouse to comply with such covenant, neither PEC nor PDC would have
agreed to enter into this Agreement or the Asset Purchase Agreement. PEC and
PDC on the one hand and M Greathouse on the other hand have independently
consulted with their respective counsel and have been advised in all respects
concerning the reasonableness and propriety of such covenant, with specific
regard to the nature of the business conducted by PEC and PDC and their
respective affiliates. M Greathouse agrees that such covenant is reasonable
-2-
<PAGE> 3
in scope, geographic area, and duration, and that compliance with such covenant
would not impose economic or professional hardship on M Greathouse.
4. Restrictions on Soliciting Business of PEC and PDC.
M Greathouse further covenants and agrees that during the Non-
Compete Period, M Greathouse will not, either for himself or for any other
person or entity, directly or indirectly, engage in any of the following
activities in a Competitive Business without the express prior written consent
of PEC and PDC:
(a) Solicit or hire any of the employees of PEC or PDC or
solicit or take away any of PEC's or PDC's customers, lessors, or suppliers or
attempt any of the foregoing:
(b) Acquire or attempt to acquire rights providing any product
or service in a Competitive Business within the territory described in
Section 3 hereof; or
(c) Engage in any act which would interfere with or harm any
business relationship PEC or PDC has with any customer, lessor, employee,
principal or supplier.
5. Specific Performance.
Without intending to limit the remedies available to PEC or PDC,
M Greathouse acknowledges that PEC or PDC will have no adequate remedies at law
if M Greathouse violates the terms of Section 3 or 4, hereof. In such event,
M Greathouse agrees that PEC or PDC shall have the right, in addition to any
other rights it may have, to obtain in any court of competent jurisdiction
specific performance of such Sections of this Agreement or injunctive relief to
restrain any breach or threatened breach thereof. Nothing herein shall be
construed as prohibiting PEC or PDC from pursuing any other remedies available
to PEC or PDC (whether at law or in equity) for such breach or threatened
breach, including, without limitation, the recovery of monetary damages from
M Greathouse.
The provisions of this Section 5 shall survive the expiration,
termination or cancellation of this Agreement.
6. Attorneys Fees and Costs.
If an action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorneys fees, costs and necessary expenses in addition to any
other relief to which that party may be entitled. This provision is applicable
to this entire Agreement.
-3-
<PAGE> 4
7. Representations and Warranties of PEC, PDC and
M Greathouse.
(a) Representations and Warranties of PEC and PDC. PEC and
PDC hereby jointly and severally represent and warrant to M Greathouse that:
(i) they have all requisite power to enter into and perform their obligations
under this Agreement; (ii) this Agreement has been duly and validly authorized
by all necessary corporate action on the part of PEC and PDC; (iii) the
execution of this Agreement by PEC and PDC and performance of their obligations
hereunder do not require the consent or approval of any other party; and (iv)
this Agreement is a valid and binding obligation of PEC and PDC.
(b) Representations and Warranties of M Greathouse.
M Greathouse hereby represents and warrants to PEC and PDC that: (i)
M Greathouse has the capacity and power to enter into and perform obligations
of M Greathouse under this Agreement; (ii) M Greathouse has duly and validly
executed this Agreement; (iii) the execution of this Agreement and performance
of obligations of M Greathouse hereunder do not require the consent or approval
of any other party; and (iv) this Agreement constitutes a valid and binding
obligation of M Greathouse.
8. General Provisions.
(a) Compliance with Laws. The parties agree that they will
comply with all applicable laws and regulations of government bodies or
agencies in their respective performance of their obligations under this
Agreement.
(b) Governing Law and Construction. This Agreement will be
governed by and construed in accordance with the laws of the State of Texas
without reference to its conflict-of-laws principles. This Agreement's final
form resulted from review and negotiations among the parties and their
attorneys, and no part of this Agreement should be construed against any party
on the basis of authorship.
(c) Forum for Dispute Resolution. If any dispute arises among
the parties concerning the interpretation or performance of any portion of this
Agreement which the parties are unable to resolve themselves, and any party
brings an action against any other party seeking a declaratory order, specific
performance, damages, or any other legal or equitable relief based on this
Agreement, the parties agree that the forum for any such action shall be an
appropriate federal or state court in Texas having jurisdiction, agree that
venue will be proper in such courts, and waive any objections based on
inconvenience of the forum, and further agree that the prevailing party in any
such action, as determined by the court, shall be awarded its reasonable
attorneys' fees and costs in addition to any relief or judgment the court
awards.
(d) Entire Agreement; Amendment. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
contained herein and supersedes any previous oral or written communications,
representations, understandings or agreements with respect thereto. The terms
of this Agreement may be modified only in a writing, signed by authorized
representatives of both parties.
-4-
<PAGE> 5
(e) Assignability. This Agreement will be binding upon the
parties' respective successors and permitted assigns. Neither party may assign
this Agreement and/or any of its rights and/or obligations hereunder without
the prior written consent of the other party, and any such attempted assignment
will be void; provided, however, that PEC or PDC may assign this Agreement to a
subsidiary or affiliate without the prior written consent of M Greathouse.
(f) Waiver. A waiver of a breach or default under this
Agreement will not constitute a waiver of any other breach or default. Failure
or delay by either party to enforce compliance with any term or condition of
this Agreement will not constitute a waiver of such term or condition.
(g) Severability. If any provision of this Agreement is
declared to be invalid, the parties agree that such invalidity will not affect
the validity of the remaining provisions of this Agreement, and further agree,
to the extent possible, to substitute for the invalid provision a valid
provision that approximates the intent and economic effect of the invalid
provision as closely as possible.
(h) Headings. The titles of the Sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
(i) Notice. Any notice, request, consent, demand or other
communication required to be given under this Agreement will be in writing and
will be given personally, by facsimile or by mailing the same, first-class,
postage prepaid to the appropriate address and facsimile number set forth below
or to such other person or at such other address as may hereafter be designated
by like notice. Notices by mail will be considered delivered and become
effective three days after the mailing thereof. All notices by facsimile will
be considered delivered and become effective immediately upon the confirmed (by
answer back or other tangible printed verification or successful receipt)
sending thereof.
To PEC:
Patterson Energy, Inc.
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: Cloyce A. Talbott
Chairman and Chief Executive Officer
-5-
<PAGE> 6
To PDC:
Patterson Drilling Company
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: A. Glenn Patterson
President and Chief Operating Officer
To M Greathouse:
Myrle Greathouse
400 Pine Street
P.O. Box 3759
Abilene, Texas 79604
(j) Counterparts. This Agreement may be executed in
counterparts and by the parties hereto in separate counterparts, each of which
will be deemed an original, but all of which together will constitute one and
the same instrument.
-6-
<PAGE> 7
IN WITNESS WHEREOF, the undersigned have caused this Agreement to
be executed by their respective representatives as of the day and year first
above written.
"PEC"
PATTERSON ENERGY, INC.
By: /s/ Cloyce A. Talbott
--------------------------------------
Cloyce A. Talbott
Chairman and Chief Executive Officer
"PDC"
PATTERSON DRILLING COMPANY
By: /s/ A. Glenn Patterson
--------------------------------------
A. Glenn Patterson
President and Chief Operating Officer
"M GREATHOUSE"
/s/ Myrle Greathouse
-----------------------------------------
Myrle Greathouse
-7-
<PAGE> 1
EXHIBIT 10.3
PATTERSON ENERGY, INC.
AND
PATTERSON DRILLING COMPANY
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into this 12th
day of June, 1997 (this "Agreement"), between and among PATTERSON ENERGY, INC.,
a Delaware corporation ("PEC"), PATTERSON DRILLING COMPANY, a Delaware
corporation ("PDC") wholly owned by PEC, and CHARLES EZZELL, an individual
residing in Abilene, Texas ("C Ezzell").
RECITALS:
A. Simultaneously with the execution of this Agreement, PDC
has consummated the transactions contemplated by certain Asset Purchase
Agreement, dated June 4, 1997, as amended by the Amendment to Asset Purchase
Agreement, dated June 4, 1997 (collectively, as amended, the "Asset Purchase
Agreement"), among PEC, PDC and WES-TEX DRILLING COMPANY ("Wes-Tex"), providing
for, among other things, the purchase by PDC of the drilling rigs, related
equipment, rolling stock and a shop and yard owned by Wes-Tex.
B. C Ezzell is an officer and director of Wes-Tex.
C. The execution and delivery of this Agreement is a
condition to the consummation of the Asset Purchase contemplated by the Asset
Purchase Agreement, and the parties are entering into this Agreement in order
to fulfill such condition.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties, intending to be legally bound, hereby agree as follows:
1. Period of Agreement.
The period of this Agreement shall commence on the date hereof
and remain in effect through the first to occur of (i) June 12, 2002, or (ii) a
Change in Control of PEC or PDC unless sooner terminated as the result of the
death of C Ezzell (the "Non-Compete Period"). For purposes of this Agreement,
"Change in Control" shall be deemed to have occurred, if (i) a tender offer
shall be made and consummated for the ownership of more than fifty percent of
the outstanding voting securities of PEC, or (ii) there is a merger,
consolidation or other reorganization of PEC or PDC with another entity and as
a result of such merger, consolidation or other reorganization, less than fifty
percent of the outstanding voting securities of the surviving
<PAGE> 2
or resulting entity shall be owned by the former stockholders of PEC as the
same shall have existed immediately prior to such merger, consolidation or
other reorganization.
2. Compensation.
Simultaneously with the execution of this Agreement, PEC and PDC
have paid C Ezzell, by cashier's check, the amount of $2 million as
compensation for entering into this Agreement.
3. Covenant Not to Compete.
(a) C Ezzell covenants and agrees that during the Non-Compete
Period, C Ezzell shall not, without the prior written consent of PEC and PDC,
directly or indirectly, and whether as a principal or as an agent, officer,
director, employee, consultant, or otherwise, alone or in association with any
other person, carry on, be engaged, concerned, or take part in, render services
to, or own, share in the earnings of, or invest in the stock, bonds, or other
securities of, any person which is engaged in the business of contract drilling
oil and gas wells within District 1, 7B, 7C, 8, 8A, 9, or 10 of Texas as
defined by the Texas Railroad Commission on the date of this Agreement or
within Chaves, Eddy, Lea, or Roosevelt County, New Mexico (the "Competitive
Business"); provided, however, that C Ezzell may: (i) invest and/or engage in
any business that routinely provides third-party services (as such term is
commonly used in the contract oil and gas well drilling business) to a
Competitive Business, but is not engaged in the actual conduct of a Competitive
Business; or (b) invest in stock, bonds, or other securities of any Competitive
Business (but without otherwise participating in the Competitive Business) if:
(A) such stock, bonds, or other securities are listed on any national
securities exchange or are registered under Section 12(g) of the Securities
Exchange Act of 1934, as amended; (B) the investment does not exceed, in the
case of any class of capital stock of any one issuer, two percent (2%) of the
issued and outstanding shares, or, in the case of bonds or other securities of
any one issuer, two percent (2%) of the aggregate principal amount thereof
issued and outstanding; and (C) such investment would not prevent, directly or
indirectly, the transaction of business by PEC or PDC or any affiliate of PEC
or PDC with any state, district, territory, or possession of the United States
or any governmental subdivision, agency, or instrumentality thereof by virtue
of any statute, law, regulation or administrative practice. The period of time
during which C Ezzell is prohibited from engaging in certain activities by this
Section shall be extended by the length of time during which C Ezzell is in
breach of the terms of this section.
(b) It is understood by and between the parties hereto that
the foregoing covenant by C Ezzell not to enter into competition with PEC or
PDC as set forth in Section 3(a) hereof is an essential element of this
Agreement and the Asset Purchase Agreement and that, but for the agreement of
C Ezzell to comply with such covenant, neither PEC nor PDC would have agreed to
enter into this Agreement or the Asset Purchase Agreement. PEC and PDC on the
one hand and C Ezzell on the other hand have independently consulted with their
respective counsel and have been advised in all respects concerning the
reasonableness and propriety of such covenant, with specific regard to the
nature of the business conducted by PEC and PDC and their
-2-
<PAGE> 3
respective affiliates. C Ezzell 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 C Ezzell.
4. Restrictions on Soliciting Business of PEC and PDC.
C Ezzell further covenants and agrees that during the Non-Compete
Period, C Ezzell will not, either for himself or for any other person or
entity, directly or indirectly, engage in any of the following activities in a
Competitive Business without the express prior written consent of PEC and PDC:
(a) Solicit or hire any of the employees of PEC or PDC or
solicit or take away any of PEC's or PDC's customers, lessors, or suppliers or
attempt any of the foregoing:
(b) Acquire or attempt to acquire rights providing any product
or service in a Competitive Business within the territory described in
Section 3 hereof; or
(c) Engage in any act which would interfere with or harm any
business relationship PEC or PDC has with any customer, lessor, employee,
principal or supplier.
5. Specific Performance.
Without intending to limit the remedies available to PEC or PDC,
C Ezzell acknowledges that PEC or PDC will have no adequate remedies at law if
C Ezzell violates the terms of Section 3 or 4, hereof. In such event, C Ezzell
agrees that PEC or PDC shall have the right, in addition to any other rights it
may have, to obtain in any court of competent jurisdiction specific performance
of such Sections of this Agreement or injunctive relief to restrain any breach
or threatened breach thereof. Nothing herein shall be construed as prohibiting
PEC or PDC from pursuing any other remedies available to PEC or PDC (whether at
law or in equity) for such breach or threatened breach, including, without
limitation, the recovery of monetary damages from C Ezzell.
The provisions of this Section 5 shall survive the expiration,
termination or cancellation of this Agreement.
6. Attorneys Fees and Costs.
If an action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorneys fees, costs and necessary expenses in addition to any
other relief to which that party may be entitled. This provision is applicable
to this entire Agreement.
-3-
<PAGE> 4
7. Representations and Warranties of PEC, PDC and C Ezzell.
(a) Representations and Warranties of PEC and PDC. PEC and
PDC hereby jointly and severally represent and warrant to C Ezzell that: (i)
they have all requisite power to enter into and perform their obligations under
this Agreement; (ii) this Agreement has been duly and validly authorized by all
necessary corporate action on the part of PEC and PDC; (iii) the execution of
this Agreement by PEC and PDC and performance of their obligations hereunder do
not require the consent or approval of any other party; and (iv) this Agreement
is a valid and binding obligation of PEC and PDC.
(b) Representations and Warranties of C Ezzell. C Ezzell
hereby represents and warrants to PEC and PDC that: (i) C Ezzell has the
capacity and power to enter into and perform obligations of C Ezzell under this
Agreement; (ii) C Ezzell has duly and validly executed this Agreement; (iii)
the execution of this Agreement and performance of obligations of C Ezzell
hereunder do not require the consent or approval of any other party; and (iv)
this Agreement constitutes a valid and binding obligation of C Ezzell.
8. General Provisions.
(a) Compliance with Laws. The parties agree that they will
comply with all applicable laws and regulations of government bodies or
agencies in their respective performance of their obligations under this
Agreement.
(b) Governing Law and Construction. This Agreement will be
governed by and construed in accordance with the laws of the State of Texas
without reference to its conflict-of-laws principles. This Agreement's final
form resulted from review and negotiations among the parties and their
attorneys, and no part of this Agreement should be construed against any party
on the basis of authorship.
(c) Forum for Dispute Resolution. If any dispute arises among
the parties concerning the interpretation or performance of any portion of this
Agreement which the parties are unable to resolve themselves, and any party
brings an action against any other party seeking a declaratory order, specific
performance, damages, or any other legal or equitable relief based on this
Agreement, the parties agree that the forum for any such action shall be an
appropriate federal or state court in Texas having jurisdiction, agree that
venue will be proper in such courts, and waive any objections based on
inconvenience of the forum, and further agree that the prevailing party in any
such action, as determined by the court, shall be awarded its reasonable
attorneys' fees and costs in addition to any relief or judgment the court
awards.
(d) Entire Agreement; Amendment. This Agreement constitutes
the entire agreement between the parties with respect to the subject matter
contained herein and supersedes any previous oral or written communications,
representations, understandings or agreements with respect thereto. The terms
of this Agreement may be modified only in a writing, signed by authorized
representatives of both parties.
-4-
<PAGE> 5
(e) Assignability. This Agreement will be binding upon the
parties' respective successors and permitted assigns. Neither party may assign
this Agreement and/or any of its rights and/or obligations hereunder without
the prior written consent of the other party, and any such attempted assignment
will be void; provided, however, that PEC or PDC may assign this Agreement to a
subsidiary or affiliate without the prior written consent of C Ezzell.
(f) Waiver. A waiver of a breach or default under this
Agreement will not constitute a waiver of any other breach or default. Failure
or delay by either party to enforce compliance with any term or condition of
this Agreement will not constitute a waiver of such term or condition.
(g) Severability. If any provision of this Agreement is
declared to be invalid, the parties agree that such invalidity will not affect
the validity of the remaining provisions of this Agreement, and further agree,
to the extent possible, to substitute for the invalid provision a valid
provision that approximates the intent and economic effect of the invalid
provision as closely as possible.
(h) Headings. The titles of the Sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
(i) Notice. Any notice, request, consent, demand or other
communication required to be given under this Agreement will be in writing and
will be given personally, by facsimile or by mailing the same, first-class,
postage prepaid to the appropriate address and facsimile number set forth below
or to such other person or at such other address as may hereafter be designated
by like notice. Notices by mail will be considered delivered and become
effective three days after the mailing thereof. All notices by facsimile will
be considered delivered and become effective immediately upon the confirmed (by
answer back or other tangible printed verification or successful receipt)
sending thereof.
To PEC:
Patterson Energy, Inc.
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: Cloyce A. Talbott
Chairman and Chief Executive Officer
-5-
<PAGE> 6
To PDC:
Patterson Drilling Company
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: A. Glenn Patterson
President and Chief Operating Officer
To C Ezzell:
Charles Ezzell
400 Pine Street
P.O. Box 3759
Abilene, Texas 79604
(j) Counterparts. This Agreement may be executed in
counterparts and by the parties hereto in separate counterparts, each of which
will be deemed an original, but all of which together will constitute one and
the same instrument.
-6-
<PAGE> 7
IN WITNESS WHEREOF, the undersigned have caused this Agreement to
be executed by their respective representatives as of the day and year first
above written.
"PEC"
PATTERSON ENERGY, INC.
By: /s/ Cloyce A. Talbott
--------------------------------------
Cloyce A. Talbott
Chairman and Chief Executive Officer
"PDC"
PATTERSON DRILLING COMPANY
By: /s/ A. Glenn Patterson
--------------------------------------
A. Glenn Patterson
President and Chief Operating Officer
"C Ezzell"
/s/ Charles Ezzell
-----------------------------------------
Charles Ezzell
-7-
<PAGE> 1
EXHIBIT 10.4
PATTERSON ENERGY, INC.
AND
PATTERSON DRILLING COMPANY
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into this 12th
day of June, 1997 (this "Agreement"), between and among PATTERSON ENERGY, INC.,
a Delaware corporation ("PEC"), PATTERSON DRILLING COMPANY, a Delaware
corporation ("PDC") wholly owned by PEC, and DANNY MULLEN, an individual
residing in Abilene, Texas ("D Mullen").
RECITALS:
A. Simultaneously with the execution of this Agreement, PDC
has consummated the transactions contemplated by that certain Asset Purchase
Agreement, dated June 4, 1997, as amended by the Amendment to Asset Purchase
Agreement, dated June 4, 1997 (collectively, as amended, the "Asset Purchase
Agreement"), among PEC, PDC and WES-TEX DRILLING COMPANY ("Wes-Tex"), providing
for, among other things, the purchase by PDC of the drilling rigs, related
equipment, rolling stock and a shop and yard owned by Wes-Tex.
B. D Mullen is an officer and director of Wes-Tex.
C. The execution and delivery of this Agreement is a
condition to the consummation of the Asset Purchase contemplated by the Asset
Purchase Agreement, and the parties are entering into this Agreement in order
to fulfill such condition.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties, intending to be legally bound, hereby agree as follows:
1. Period of Agreement.
The period of this Agreement shall commence on the date hereof
and remain in effect through the first to occur of (i) June 12, 2002, or (ii) a
Change in Control of PEC or PDC unless sooner terminated as the result of the
death of D Mullen (the "Non-Compete Period"). For purposes of this Agreement,
"Change in Control" shall be deemed to have occurred, if (i) a tender offer
shall be made and consummated for the ownership of more than fifty percent of
the outstanding voting securities of PEC, or (ii) there is a merger,
consolidation or other reorganization of PEC or PDC with another entity and as
a result of such merger, consolidation or other reorganization, less than fifty
percent of the outstanding voting securities of the surviving
<PAGE> 2
or resulting entity shall be owned by the former stockholders of PEC as the
same shall have existed immediately prior to such merger, consolidation or
other reorganization.
2. Compensation.
Simultaneously with the execution of this Agreement, PEC and PDC
have paid D Mullen, by cashier's check, the amount of $2 million as
compensation for entering into this Agreement.
3. Covenant Not to Compete.
(a) D Mullen covenants and agrees that during the Non-Compete
Period, D Mullen shall not, without the prior written consent of PEC and PDC,
directly or indirectly, and whether as a principal or as an agent, officer,
director, employee, consultant, or otherwise, alone or in association with any
other person, carry on, be engaged, concerned, or take part in, render services
to, or own, share in the earnings of, or invest in the stock, bonds, or other
securities of, any person which is engaged in the business of contract drilling
oil and gas wells within District 1, 7B, 7C, 8, 8A, 9, or 10 of Texas as
defined by the Texas Railroad Commission on the date of this Agreement or
within Chaves, Eddy, Lea, or Roosevelt County, New Mexico (the "Competitive
Business"); provided, however, that D Mullen may: (i) invest and/or engage in
any business that routinely provides third-party services (as such term is
commonly used in the contract oil and gas well drilling business) to a
Competitive Business, but is not engaged in the actual conduct of a Competitive
Business; or (ii) invest in stock, bonds, or other securities of any
Competitive Business (but without otherwise participating in the Competitive
Business) if: (A) such stock, bonds, or other securities are listed on any
national securities exchange or are registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended; (B) the investment does not
exceed, in the case of any class of capital stock of any one issuer, two
percent (2%) of the issued and outstanding shares, or, in the case of bonds or
other securities of any one issuer, two percent (2%) of the aggregate principal
amount thereof issued and outstanding; and (C) such investment would not
prevent, directly or indirectly, the transaction of business by PEC or PDC or
any affiliate of PEC or PDC with any state, district, territory, or possession
of the United States or any governmental subdivision, agency, or
instrumentality thereof by virtue of any statute, law, regulation or
administrative practice. The period of time during which D Mullen is
prohibited from engaging in certain activities by this Section shall be
extended by the length of time during which D Mullen 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 Mullen not to enter into competition with PEC or
PDC as set forth in Section 3(a) hereof is an essential element of this
Agreement and the Asset Purchase Agreement and that, but for the agreement of
D Mullen to comply with such covenant, neither PEC nor PDC would have agreed to
enter into this Agreement or the Asset Purchase Agreement. PEC and PDC on the
one hand and D Mullen on the other hand have independently consulted with their
respective counsel and have been advised in all respects concerning the
reasonableness and propriety of such covenant, with specific regard to the
nature of the business conducted by PEC and PDC and their
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respective affiliates. D Mullen 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 Mullen.
4. Restrictions on Soliciting Business of PEC and PDC.
D Mullen further covenants and agrees that during the Non-Compete
Period, D Mullen will not, either for himself or for any other person or
entity, directly or indirectly, engage in any of the following activities in a
Competitive Business without the express prior written consent of PEC and PDC:
(a) Solicit or hire any of the employees of PEC or PDC or
solicit or take away any of PEC's or PDC's customers, lessors, or suppliers or
attempt any of the foregoing:
(b) Acquire or attempt to acquire rights providing any product
or service in a Competitive Business within the territory described in
Section 3 hereof; or
(c) Engage in any act which would interfere with or harm any
business relationship PEC or PDC has with any customer, lessor, employee,
principal or supplier.
5. Specific Performance.
Without intending to limit the remedies available to PEC or PDC,
D Mullen acknowledges that PEC or PDC will have no adequate remedies at law if
D Mullen violates the terms of Section 3 or 4, hereof. In such event, D Mullen
agrees that PEC or PDC shall have the right, in addition to any other rights it
may have, to obtain in any court of competent jurisdiction specific performance
of such Sections of this Agreement or injunctive relief to restrain any breach
or threatened breach thereof. Nothing herein shall be construed as prohibiting
PEC or PDC from pursuing any other remedies available to PEC or PDC (whether at
law or in equity) for such breach or threatened breach, including, without
limitation, the recovery of monetary damages from D Mullen.
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.
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7. Representations and Warranties of PEC, PDC and D Mullen.
(a) Representations and Warranties of PEC and PDC. PEC and
PDC hereby jointly and severally represent and warrant to D Mullen that: (i)
they have all requisite power to enter into and perform their obligations under
this Agreement; (ii) this Agreement has been duly and validly authorized by all
necessary corporate action on the part of PEC and PDC; (iii) the execution of
this Agreement by PEC and PDC and performance of their obligations hereunder do
not require the consent or approval of any other party; and (iv) this Agreement
is a valid and binding obligation of PEC and PDC.
(b) Representations and Warranties of D Mullen. D Mullen
hereby represents and warrants to PEC and PDC that: (i) D Mullen has the
capacity and power to enter into and perform obligations of D Mullen under this
Agreement; (ii) D Mullen has duly and validly executed this Agreement; (iii)
the execution of this Agreement and performance of obligations of D Mullen
hereunder do not require the consent or approval of any other party; and (iv)
this Agreement constitutes a valid and binding obligation of D Mullen.
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.
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(e) Assignability. This Agreement will be binding upon the
parties' respective successors and permitted assigns. Neither party may assign
this Agreement and/or any of its rights and/or obligations hereunder without
the prior written consent of the other party, and any such attempted assignment
will be void; provided, however, that PEC or PDC may assign this Agreement to a
subsidiary or affiliate without the prior written consent of D Mullen.
(f) Waiver. A waiver of a breach or default under this
Agreement will not constitute a waiver of any other breach or default. Failure
or delay by either party to enforce compliance with any term or condition of
this Agreement will not constitute a waiver of such term or condition.
(g) Severability. If any provision of this Agreement is
declared to be invalid, the parties agree that such invalidity will not affect
the validity of the remaining provisions of this Agreement, and further agree,
to the extent possible, to substitute for the invalid provision a valid
provision that approximates the intent and economic effect of the invalid
provision as closely as possible.
(h) Headings. The titles of the Sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
(i) Notice. Any notice, request, consent, demand or other
communication required to be given under this Agreement will be in writing and
will be given personally, by facsimile or by mailing the same, first-class,
postage prepaid to the appropriate address and facsimile number set forth below
or to such other person or at such other address as may hereafter be designated
by like notice. Notices by mail will be considered delivered and become
effective three days after the mailing thereof. All notices by facsimile will
be considered delivered and become effective immediately upon the confirmed (by
answer back or other tangible printed verification or successful receipt)
sending thereof.
To PEC:
Patterson Energy, Inc.
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: Cloyce A. Talbott
Chairman and Chief Executive Officer
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To PDC:
Patterson Drilling Company
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: A. Glenn Patterson
President and Chief Operating Officer
To D Mullen:
Danny Mullen
400 Pine Street
P.O. Box 3759
Abilene, Texas 79604
(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.
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to
be executed by their respective representatives as of the day and year first
above written.
"PEC"
PATTERSON ENERGY, INC.
By: /s/ Cloyce A. Talbott
--------------------------------------
Cloyce A. Talbott
Chairman and Chief Executive Officer
"PDC"
PATTERSON DRILLING COMPANY
By: /s/ Cloyce A. Talbott
--------------------------------------
A. Glenn Patterson
President and Chief Operating Officer
"D Mullen"
/s/ Danny Mullen
-----------------------------------------
Danny Mullen
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