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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) November 14, 1997
PATTERSON ENERGY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-22664 75-2504748
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
P.O. BOX 1416, 4510 LAMESA HIGHWAY, SNYDER, TEXAS 79550
(Address of principal executive offices) (Zip Code)
(915) 573-1104
Registrant's telephone number, including area code
No Change
(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS.
On December 23, 1997, the Registrant issued the following press
release:
PATTERSON ENERGY, INC. ADDS NINE RIGS TO ITS CONTRACT DRILLING FLEET
AND RENEGOTIATES ITS LINE OF CREDIT
SNYDER, TEXAS, December 23, 1997-PATTERSON ENERGY, INC. (NASDAQ:PTEN) announced
that the Company had successfully completed the acquisition of the contract
drilling assets of two separate, non-affiliated entities. On November 14, 1997,
the Company completed the previously announced purchase of the contract drilling
operations of V&B Drilling Company ("V&B") for $13.0 million cash. The assets
acquired included eight drilling rigs (five of which are fully-operable), other
related drilling equipment, four yards and a shop located in Odessa, Texas. The
drilling rigs purchased from V&B will be placed into the Company's west Texas
drilling operations. The rigs have drilling depth capabilities of 6,000 to
12,000 feet.
On November 20, 1997 for a purchase price of $1.46 million, the Company acquired
one fully-operable drilling rig and other related drilling equipment from Circle
R Drilling, Ltd. 1981-A, a Louisiana limited partnership ("Circle R"). The
Circle R drilling rig has a drilling depth capacity of 14,000 feet and will be
operating in southeast Texas.
The completion of the two acquisitions increases the Company's drilling fleet to
99 land based drilling rigs (92 of which are fully-operable) making Patterson
the third largest provider of onshore contract drilling services in the United
States.
On December 9, 1997, the Company entered into a credit agreement with Norwest
Bank Texas, N.A. (the "Bank") providing for an advancing, non-revolving credit
facility of $60.0 million until May 31, 1998, at which time the outstanding
principal balance will be converted to a term loan with a maturity date of
January 1, 2001, and a seven-year amortization period. Until May 31, 1998,
interest only (at the one-month LIBOR rate plus 2.375%) is payable on the
outstanding credit balance. The new credit facility replaces the Company's
existing $30.0 million line of credit with the Bank, which, at the time the
credit facility was executed, had an outstanding balance of $23.25 million. The
credit facility is secured by the accounts receivable, drilling rigs and other
related drilling equipment of Patterson Drilling Company, the wholly owned
subsidiary of the Company that owns and operates the drilling rigs. Proceeds
provided by the credit facility may be used for future acquisitions, capital
expenditures and working capital purposes.
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.
Patterson has 99 land-based drilling rigs (92 of which are currently operable)
and focuses its operations primarily in Texas and southeast New Mexico.
For further information, contact:
Patterson Energy, Inc.
Cloyce A. Talbott, Chairman and Chief Executive Officer
James C. Brown, Vice President and Chief Financial Officer
915-573-1104
Shimmerlik Corporate Communications, Inc.
Warren M. Shimmerlik
212-247-5200
4510 LAMES HIGHWAY SNYDER, TEXAS 79549 915-573-1104
2
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ITEM 5. OTHER EVENTS (CONTINUED).
On December 9, 1997, Patterson Energy, Inc. (the "Company"), Patterson
Drilling Company, Patterson Petroleum, Inc. and Patterson Petroleum Trading
Company, Inc. entered into a credit agreement with Norwest Bank Texas, N.A. (the
"Bank") providing for a credit facility (the "Loan") of $60.0 million. The
credit facility in effect replaces the Company's existing $30.0 million line of
credit with the Bank which, at the time the credit facility was executed, had an
outstanding balance of $23.25 million.
The Loan is an advancing, non-revolving line of credit until May 31, 1998,
at which time the outstanding principal balance will be converted to a term loan
with a maturity date of January 1, 2001, and a seven-year amortization period.
Monthly payments of interest only (at the LIBOR rate plus 2.375%) are payable on
the outstanding credit balance until May 31, 1998. Commencing on July 1, 1998,
monthly payments equal to 1/84 of the principal amount outstanding under the
Loan on May 31, 1998 are payable with all remaining outstanding principal plus
accrued interest due at maturity on January 1, 2001. The Loan is secured by the
accounts receivable, drilling rigs and other related drilling equipment of
Patterson Drilling Company. In addition to corporate guaranties of Patterson
Drilling Company, Patterson Petroleum, Inc. and Patterson Petroleum Trading
Company, Inc. (collectively referred to as the "Guarantors") for the obligations
of the Company to the Bank, the Loan is further secured by the accounts
receivable, drilling rigs and other related drilling equipment owned by
Patterson Drilling Company or later acquired using proceeds provided by the
Loan.
The Loan requires a commitment fee of 0.25 percent of any portion of the
credit facility which was not advanced at May 31, 1998. The Loan contains a
number of representations, warranties and covenants, the breach of which, at the
election of the Bank would accelerate the maturity of the Loan. The covenants of
the Loan include, but are not limited to, maintenance on a quarterly basis of:
(i) a consolidated cash flow ratio of 2.0 to 1.0, (ii) a debt to tangible net
worth not to exceed 1.20 to 1.0, (iii) a current ratio of not less than 1.25 to
1.0 and (iv) a positive net income. In addition, the Company or any of the
Guarantors may not incur any other indebtedness, allow to exist any liens on any
property owned by the Company or the Guarantors or enter into a letter of
credit.
The Loan is secured by the accounts receivable, drilling rigs and other
related drilling equipment of Patterson Drilling Company, the wholly owned
subsidiary of the Company that owns and operates the drilling rigs. Proceeds
provided by the credit facility may be used for future acquisitions, capital
expenditures and working capital purposes.
3
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(C) EXHIBITS.
10.1 Credit Agreement dated December 9, 1997 among Patterson Energy,
Inc., Patterson Drilling Company, Patterson Petroleum, Inc.,
Patterson Trading Company, Inc. and Norwest Bank Texas, N.A.
10.2 Promissory Note dated December 9, 1997 among Patterson Energy,
Inc. and Norwest Bank Texas, N. A.
10.3 Security Agreement dated December 9, 1997 between Patterson
Drilling Company and Norwest Bank Texas, N.A.
10.4 Corporate Guarantees of Patterson Drilling Company, Patterson
Petroleum, Inc. and Patterson Petroleum Trading Company, Inc.
99.1 Asset Purchase Agreement dated November 14, 1997 among Patterson
Energy, Inc., Patterson Drilling Company and V & B Drilling
Company.
99.2 Asset Purchase Agreement dated November 20, 1997 among Patterson
Drilling Company and Circle R Drilling, Ltd. 1981-A.
4
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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: December 24, 1997 /s/James C. Brown
----------------------
James C. Brown
Vice President-Finance
5
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EXHIBIT INDEX
EXHIBIT EXHIBIT
NO. DESCRIPTION
10.1 Credit Agreement dated December 9, 1997 among Patterson Energy,
Inc., Patterson Drilling Company, Patterson Petroleum, Inc.,
Patterson Trading Company, Inc. and Norwest Bank Texas, N.A.
10.2 Promissory Note dated December 9, 1997 among Patterson Energy,
Inc. and Norwest Bank Texas, N. A.
10.3 Security Agreement dated December 9, 1997 between Patterson
Drilling Company and Norwest Bank Texas, N.A.
10.4 Corporate Guarantees of Patterson Drilling Company, Patterson
Petroleum, Inc. and Patterson Petroleum Trading Company, Inc.
99.1 Asset Purchase Agreement dated November 14, 1997 among Patterson
Energy, Inc., Patterson Drilling Company and V & B Drilling
Company.
99.2 Asset Purchase Agreement dated November 20, 1997 among Patterson
Drilling Company and Circle R Drilling, Ltd. 1981-A.
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EXHIBIT 10.1
CREDIT AGREEMENT
AMONG
NORWEST BANK TEXAS, NATIONAL ASSOCIATION,
AS LENDER
AND
PATTERSON ENERGY, INC.,
AS BORROWER
AND
PATTERSON DRILLING COMPANY,
PATTERSON PETROLEUM, INC.,
AND
PATTERSON PETROLEUM TRADING COMPANY, INC.,
AS GUARANTORS
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TABLE OF CONTENTS
<TABLE>
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ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 CERTAIN DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 OTHER DEFINITIONAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II
CREDIT FACILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 SHORT-TERM CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 MINIMUM AMOUNT OF EACH ADVANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 COMMITMENT FEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 BORROWING NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 LONG-TERM CREDIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.6 INTEREST RATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.7 INTEREST PAYMENT DATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.8 INTEREST BASIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.9 DEFAULT RATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.10 METHOD OF PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.11 PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE III
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 INITIAL ADVANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 EACH ADVANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IV
SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1 SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 GUARANTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3 SECURITY AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE V
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 CORPORATE EXISTENCE AND STANDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 AUTHORIZATION AND VALIDITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.3 NO CONFLICT; GOVERNMENT CONSENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.4 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.5 MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.6 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.7 LITIGATION AND CONTINGENT OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.8 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.9 ACCURACY OF INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.10 REGULATION U . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.11 MATERIAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.12 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.13 LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.14 LICENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.15 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VI
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1 FINANCIAL REPORTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.2 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.3 NOTICE OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.4 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.6 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.7 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.8 MAINTENANCE OF PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.9 INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.10 MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.11 ACCOUNT PAYABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.12 DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.13 INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.14 SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.15 SALE AND LEASEBACK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.16 GUARANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.17 LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.18 LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.19 CASH FLOW COVERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.20 DEBT TO TANGIBLE NET WORTH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.21 CURRENT RATIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.22 NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.23 PRIMARY DEPOSITORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.24 PARTICIPATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VII
DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS, REMEDIES, AND SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.1 ACCELERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.2 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.3 PRESERVATION OF RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.4 SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE IX
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.1 SURVIVAL OF REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.2 GOVERNMENTAL REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.3 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.4 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.5 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.6 BENEFITS OF THIS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.7 EXPENSES; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.8 ACCOUNTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.9 SEVERABILITY OF PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.10 NONLIABILITY OF LENDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.11 CHOICE OF LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
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<TABLE>
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9.12 CONSENT TO JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.13. WAIVER OF JURY TRIAL24
9.14 MAXIMUM INTEREST RATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.15 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.16 INDEMNIFICATION REGARDING ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.17 SURVIVAL OF REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.18 GOVERNMENTAL REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.19 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.20 PERMITTED PARTICIPANTS: EFFECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.21 DISSEMINATION OF INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.22 BUSINESS DAY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.23 FINAL AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.24 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
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LIST OF EXHIBITS
EXHIBIT "A" GUARANTY
EXHIBIT "B" NOTE
EXHIBIT "C" SECURITY AGREEMENT
EXHIBIT "D" FORM OF OPINION OF COUNSEL
EXHIBIT "E" COMPLIANCE CERTIFICATE
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of December 9, 1997, and is by and
among PATTERSON ENERGY, INC., A DELAWARE CORPORATION (THE "BORROWER");
PATTERSON DRILLING COMPANY, A DELAWARE CORPORATION ("PDC"); PATTERSON
PETROLEUM, INC., A TEXAS CORPORATION ("PPI"); AND PATTERSON PETROLEUM TRADING
COMPANY, INC., A TEXAS CORPORATION ("PPTC"); and NORWEST BANK TEXAS, NATIONAL
ASSOCIATION, a national banking association (THE "BANK").
RECITALS:
WHEREAS, the Borrower has requested the Bank to extend an advancing,
non-revolving credit to it in an amount not to exceed $60,000,000 until May 31,
1998, when all amounts due to the Bank will become payable on a seven-year,
level-principal amortization schedule with a final maturity on January 1, 2001
(the "Credit"); and
WHEREAS, the Bank is willing to make the Credit available to the
Borrower subject to the provisions of this Credit Agreement;
WHEREAS, the Credit is in substitution of, and certain proceeds of
which will retire amounts due under, the Existing Agreement on the Closing Date
(as defined in Section 1.1 hereof).
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS.
In addition to terms defined in the above recitals, as used herein:
"ADVANCE" means any disbursement to or on behalf of the Borrower under
this Agreement, including, without limitation, all amounts advanced under the
Note.
"AGREEMENT" means this Credit Agreement and all amendments and
supplements to it which become effective hereafter in accordance with its
terms.
"ARTICLE" means an article of this Agreement unless another document
is specifically referenced.
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"AUTHORIZED OFFICER" means any of the Chairman of the Board and Chief
Executive Officer, the President and Chief Operating Officer, or the Vice
President - Finance, Chief Financial Officer, Treasurer, and Secretary of the
Borrower, acting singly.
"BORROWED MONEY" means funds obtained by incurring contractual
indebtedness and shall not include trade accounts payable or money borrowed
from the Bank.
"BORROWING DATE" means a date on which an Advance is made hereunder.
"BORROWING NOTICE" is defined in Article II.
"BUSINESS DAY" means every day (other than Saturday and Sunday) on
which the Bank is open to the public generally for the transaction of business
in Wichita Falls, Texas.
"CAPITALIZED LEASE" of a Person means any lease of Property by the
Person as lessee which would be capitalized on a balance sheet of the Person
prepared in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the
obligations of the Person under Capitalized Leases which would be shown as a
liability on a balance sheet of the Person prepared in accordance with GAAP.
"CASH FLOW" means, for any 12-month period ending on the last day of
any quarterly fiscal period of the Borrower, the aggregate amount of the
following items properly shown on its income statement, determined in
accordance with GAAP: net income after taxes plus (i) amortization,
depreciation, and depletion expenses; less (ii) dividends, extraordinary
income, and noncash charges against income, which the Bank determines, in its
sole discretion, to be appropriate.
"CHANGE" is defined in Article II.
"CLOSING DATE" means the date of this Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended, reformed,
or otherwise modified from time to time.
"COMMITMENT" means the obligation of the Bank to make Advances not
exceeding $60,000,000.
"COMMITMENT TERMINATION DATE" means May 31, 1998.
"CONDEMNATION" is defined in Article VII.
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<PAGE> 8
"CONTROLLED GROUP" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, with the Borrower or any of its Subsidiaries, are or were
treated as a single employer under Section 414 of the Code.
"CURRENT ASSETS" means the aggregate amount of the Borrower's assets
on a consolidated basis properly shown as current assets on its balance sheet,
determined in accordance with GAAP, less (i) receivables, loans, and other
amounts due from any shareholder, director, officer, or employee of the
Borrower; and (ii) receivables, loans, and other amounts due from any other
related or affiliated person, corporation, partnership, trust, or other entity
of the Borrower.
"CURRENT LIABILITIES" means the aggregate amount of the Borrower's
liabilities on a consolidated basis properly shown as current liabilities on
its balance sheet, determined in accordance with GAAP.
"CURRENT MATURITIES OF LONG-TERM DEBT" means that portion of the
Borrower's Long-Term Debt that matures or is scheduled to be paid during the
next four fiscal quarters.
"DEBT" means the aggregate amount of all of the Borrower's liabilities
on a consolidated basis properly shown as liabilities on its balance sheet,
determined in accordance with GAAP.
"DEFAULT" means an event described in Article VII.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ENVIRONMENTAL LAWS" is defined in Article V.
"ENVIRONMENTAL MATTERS" is defined in Article V.
"EXISTING AGREEMENT" means that certain Credit Agreement dated as of
June 3, 1997, among the Borrower, the Bank, the Guarantors, and Patterson
Drilling Programs, Inc.
"FINAL MATURITY DATE" means January 1, 2001.
"GAAP" means generally accepted accounting principles as in effect
from time to time, applied in a manner consistent with those used in preparing
the financial statements referred to in Section 5.4 hereof.
"GUARANTORS" means PDC, PPI, and PPTC.
"GUARANTY" means that guaranty dated as of this Agreement in the form
attached hereto as Exhibit "A" and executed and delivered to the Bank by the
Guarantors on the Closing Date.
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"INDEBTEDNESS" means as to the Borrower or any Subsidiary all items of
indebtedness, obligations, or liabilities, whether matured or unmatured,
liquidated or unliquidated, direct or contingent, joint or several, all as
determined in accordance with GAAP.
"LENDING INSTITUTION" means any office, branch, subsidiary, or
affiliate of the Bank.
"LETTER OF CREDIT" of a Person means a letter of credit or similar
instrument which is issued upon the application of the Person or upon which the
Person is an account party or for which the Person is in any way liable.
"LIBOR RATE" shall mean, for any one-month period commencing on a
Payment Date, an interest rate per annum equal to the one-month LIBOR rate as
published in the "Money Rates" section of The Wall Street Journal on the second
business day preceding the first day of such Payment Date.
"LIEN" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, or preference,
priority, or other security agreement or preferential arrangement (including,
without limitation, the interest of a vendor or lessor under any conditional
sale, Capitalized Lease, or other title retention agreement).
"LOAN DOCUMENTS" means this Agreement, the Note, the Security
Agreement, the Guaranty, and other agreements, documents, certificates,
letters, and instruments delivered or executed by the Borrowers and the
Guarantors pursuant to, or in connection with, this Agreement, as any of them
may hereafter be amended, supplemented, or restated, and all future renewals
and extensions or restatements of, or amendments or supplements to, any of the
foregoing.
"LONG-TERM CREDIT" is defined in Article II.
"LONG-TERM DEBT" shall mean the aggregate amount of the Borrower's
liabilities on a consolidated basis properly shown as non-current liabilities
on its balance sheet, determined in accordance with GAAP, as of the last day of
any quarter.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, Property, or financial condition, or results of operations, of the
Borrower and the Subsidiaries taken as a whole; or (ii) the ability of the
Borrower to perform its obligations under the Loan Documents.
"MATURITY DATE" means January 1, 2001.
"MAXIMUM RATE" is defined in Article IX.
"MULTI-EMPLOYER PLAN" means a Plan maintained pursuant to a collective
bargaining agreement to which the Borrower or any member of the Controlled
Group is a party and to which more than one employer is or was obligated to
make contributions.
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"NET WORTH" means the aggregate amount of the Borrower's consolidated
assets on its balance sheet minus the aggregate amount of the Borrower's
consolidated liabilities on its balance sheet, determined in accordance with
GAAP.
"NOTE" means a promissory note in substantially the form of Exhibit
"B" hereto, duly executed and delivered by the Borrower and payable to the
order of the Bank in the amount of its Commitment, including any amendment,
modification, renewal, or replacement of the promissory note.
"OBLIGATION" means all unpaid principal of and accrued and unpaid
interest on the Note, all accrued and unpaid fees, and all expenses,
reimbursements, indemnities, and other obligations of the Borrower to the Bank
or any indemnified party hereunder arising under the Loan Documents.
"PARTICIPANTS" is defined in Article IX.
"PAYMENT DATE" means the first day of each calendar month.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"PERSON" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, trust, or other entity or organization,
or any governmental or political subdivision, or any agency, department, or
instrumentality thereof.
"PLAN" means an employee pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code as to which the Borrower or any member of the Controlled Group may
have any liability.
"PROPERTY" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of the Person, or other assets owned,
leased, or operated by the Person.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or
other regulation or official interpretation of the Board of Governors relating
to extension of credit by banks to purchase or carry margin stocks applicable
to member banks of the Federal Reserve System.
"REPORTABLE EVENT" means a reportable event as defined in Section 4043
or 4063(a) of ERISA and the regulations issued under it with respect to a Plan,
excluding, however, events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the event, but a failure to meet the minimum funding standard of Section 412 of
the Code and of Section 302 of ERISA shall be a Reportable Event regardless of
any waiver of the notice requirement in accordance with either Section 4043(a)
of ERISA or Section 412(d) of the Code.
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<PAGE> 11
"SECTION" means a numbered section of this Agreement, unless another
document is specifically referenced.
"SECURITY AGREEMENT" means that security agreement dated as of the
date of this Agreement in the form attached hereto as Exhibit "C" and executed
and delivered to the Bank by PDC on the Closing Date.
"SHORT-TERM CREDIT" is defined in Article II.
"SINGLE EMPLOYER PLAN" means a Plan maintained by the Borrower and/or
any member of the Controlled Group for employees of the Borrower or any member
of the Controlled Group, and any Multi-employer Plan covering any employees of
the Borrower and/or the Controlled Group.
"SUBSIDIARY" of a Person means (i) any corporation more than 50
percent of the outstanding securities having ordinary voting power of which is
at the time owned or controlled, directly or indirectly, by the Person or by
one or more of its Subsidiaries, or by the Person and one or more of its
Subsidiaries; or (ii) any partnership, association, joint venture, or similar
business organization more than 50 percent of the ownership interests having
ordinary voting power of which is at the time so owned or controlled. Unless
otherwise expressly provided, all references herein to a "Subsidiary" shall
mean a Subsidiary of the Borrower.
"SUBSTANTIAL PORTION" means, with respect to the Property of the
Borrower and the Subsidiaries, Property which (i) represents more than 10
percent of the consolidated assets of the Borrower and the Subsidiaries as
shown in the consolidated financial statements of the Borrower and the
Subsidiaries prepared in accordance with GAAP as of the end of the most recent
fiscal quarter before the date of determination; or (ii) produces more than 10
percent of the consolidated net sales or the consolidated net income of the
Borrower and the Subsidiaries as reflected in the financial statements referred
to in clause (i) above.
"TANGIBLE NET WORTH" means Net Worth minus the aggregate amount of the
Borrower's items on a consolidated basis properly shown as the following types
of assets on its balance sheet, determined in accordance with GAAP: (i)
goodwill, patents, copyrights, mailing lists, trade names, trademarks,
servicing rights, organizational and franchise costs, bond underwriting costs,
and similar assets properly classified as intangible; (ii) leasehold
improvements; (iii) receivables, loans, and other amounts due from any
shareholder, director, officer, or employee of the Borrower, and receivables,
loans, and other amounts due from any other related or affiliated person,
corporation, partnership, trust, or other entity of the Borrower (other than
those created in the normal course of business); and (iv) investments or
interests in non-public companies, cooperatives, or partnerships.
"TRANSFEREE" is defined in Article IX.
"UNFUNDED LIABILITIES" means the accumulated funding deficiency as
that term is defined in Code Section 412(a), for each Single Employer Plan or
Multi-employer Plan covering any
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<PAGE> 12
employees of the Borrower and/or any member of the Controlled Group, determined
as of the end of the most recent plan year for each Plan.
"UNMATURED DEFAULT" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the
above-described meanings when used in any other Loan Documents or in
any certificate, report, or other document made or delivered pursuant
to this Agreement, unless the context otherwise expressly requires.
(b) Terms used herein in the singular shall import the plural
and vice versa.
(c) The words "hereof," "herein," "hereinafter,"
"hereinabove," "hereto," "hereunder," and similar terms in this
Agreement shall refer to this Agreement as a whole and not to any
particular provisions.
(d) In this Agreement, in computing periods of time from a
specified date to a later specified date, the word "from" means "from
and including," and the words "to" and "until" each mean "to but
excluding."
(e) All accounting terms not specifically defined herein
shall be construed in accordance with GAAP.
ARTICLE II
CREDIT FACILITIES
2.1 SHORT-TERM CREDIT. From and including the date of this
Agreement and to and including the Commitment Termination Date, the Bank
agrees, on the terms and conditions of this Agreement, to make Advances from
time to time in amounts not to exceed the Commitment (the "Short-Term Credit").
Interest only is payable on the Short-Term Credit. The Bank is hereby
authorized to record the principal amount of each of its Advances on the
schedule attached to the Note.
2.2 MINIMUM AMOUNT OF EACH ADVANCE. Each Advance shall be in the
minimum amount of $100,000.
2.3 COMMITMENT FEE. The Borrower agrees to pay the Bank on the
Commitment Termination Date a fee of 0.25 percent of any portion of the
Commitment which was not advanced to the Borrower.
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2.4 BORROWING NOTICE. The Borrower shall give the Bank
irrevocable notice (the "Borrowing Notice") not later than 10:00 A.M. (Wichita
Falls, Texas, time) at least two Business Days before the Borrowing Date for
each Advance, specifying:
(i) the Borrowing Date, which shall be a Business Day, of
the Advance, and
(ii) the amount of the Advance.
The Bank will make the funds comprising each Advance available to the
Borrower no later than noon (Wichita Falls, Texas, time) on each Borrowing
Date.
2.5 LONG-TERM CREDIT. On the Commitment Termination Date, the
Bank agrees, on the terms and conditions of this Agreement, to convert all the
outstanding Advances comprising the Short-Term Credit into a long-term credit
(the "Long-Term Credit"). The Long-Term Credit will mature on the Maturity
Date and is payable in monthly installments commencing on July 1, 1998, each
equal to 1/84 of the principal amount outstanding under the Note on May 31,
1998. A final payment of all remaining outstanding principal plus accrued
interest shall be due and payable on the Maturity Date.
2.6 INTEREST RATE. Interest on the unpaid principal amount of the
Note shall be calculated at an annual rate equal to the LIBOR Rate plus 2.375
percent, which rate will change on each Payment Date. If for any reason the
Bank determines that adequate and reasonable means do not exist for
ascertaining the LIBOR Rate, the Bank shall establish in good faith an
alternative interest rate index which will result in an overall interest rate
which approximates as closely as possible the interest rate that would have
been determined under this Section.
2.7 INTEREST PAYMENT DATES. Interest accrued on each Advance
under the Short-Term Credit shall be payable on each Payment Date, commencing
with the first Payment Date after the date hereof, on any date on which the
Short-Term Credit is prepaid, whether by acceleration or otherwise, and on May
31, 1998. Interest accrued on the Long-Term Credit shall be payable on each
Payment Date commencing after June 30, 1998, on any date on which the Long-Term
Credit is prepaid, whether by acceleration or otherwise, and on the Maturity
Date. If any payment of principal of or interest on the Credit becomes due on a
day which is not a Business Day, the payment shall be made on the next Business
Day, and, in the case of a principal payment, the extension of time shall be
included in computing interest for the payment.
2.8 INTEREST BASIS. Interest shall be calculated for actual days
elapsed on the basis of a 365-day year.
2.9 DEFAULT RATE. If any portion of the Note is not paid when due
and payable, whether by acceleration or otherwise, it shall bear interest until
paid in full at a rate per annum equal to the interest rate provided in Section
2.6 hereof on the Note plus 2 percent per annum.
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2.10 METHOD OF PAYMENT. All payments of the Obligations hereunder
shall be made, without setoff, deduction, or counterclaim, in immediately
available funds to the Bank at the Bank's address specified in Article IX, by
noon (Wichita Falls, Texas, time) on the date when due. The Bank shall send
the Borrower statements of all amounts due under this Agreement, which shall be
conclusively binding on the Borrower, unless the Borrower notifies the Bank to
the contrary within 15 days of the receipt of such a statement that the
Borrower deems to be incorrect.
2.11 PREPAYMENT. Upon at least 30 days prior written notice, all
or a portion of the Credit may be prepaid without premium or penalty.
ARTICLE III
CONDITIONS PRECEDENT
3.1 INITIAL ADVANCE. The Bank shall not be required to make the
initial Advance hereunder unless the Borrower has furnished to the Bank:
(i) Copies of the articles of incorporation of the Borrower
and each of the Guarantors, together with all amendments thereto, and
certificates of good standing, all of which are certified by the
appropriate governmental officer in their jurisdictions of
incorporation.
(ii) Copies, certified by the Secretary or Assistant
Secretary of the Borrower and each of the Guarantors, of their bylaws
and of their Boards of Directors' resolutions authorizing the
execution of the Loan Documents.
(iii) Incumbency certificates, executed by the Secretary or
Assistant Secretary of the Borrower and each of the Guarantors, which
identify by name and title and bear the signature of the officers of
the Borrower and each of the Guarantors authorized to sign the Loan
Documents and to make borrowings hereunder, upon which certificate the
Bank shall be entitled to rely until informed of any change in writing
by the Borrower.
(iv) Evidence, in form and substance satisfactory to the
Bank, that the Borrower and each of the Guarantors have obtained all
governmental approvals necessary for them to enter into the Loan
Documents.
(v) A written opinion of the Borrower's counsel, addressed to
the Bank, in substantially the same form attached hereto as Exhibit
"D" and satisfactory to counsel to the Bank.
(vi) Executed Note payable to the order of the Bank.
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<PAGE> 15
(vii) Written money transfer instructions addressed to the
Bank and signed by an Authorized Officer, with any other money
transfer authorizations the Bank has reasonably requested.
(viii) Evidence, in form and substance satisfactory to the
Bank, of the termination of the Existing Agreement and the repayment
in full of all outstanding obligations of the Borrower thereunder,
including the return to the Borrower of the original promissory note
evidencing the obligations created by the Existing Agreement marked
paid in full and cancelled.
(ix) Executed Guaranty.
(x) Executed Security Agreement.
(xi) Financing Statement to be filed with the Secretary of
State of Texas.
(xii) Financing Statement to be filed with the Secretary of
State of New Mexico.
(xiii) Financing Statement to be filed with the Oklahoma
County Clerk in Oklahoma City.
(xiv) The consolidated and consolidating financial
statements of the Borrower and the Subsidiaries for the nine-month
period ending September 30, 1997.
(xv) Any other documents the Bank or its counsel has
reasonably requested.
3.2 EACH ADVANCE. The Bank shall not be required to make any
Advance, unless on the applicable Borrowing Date:
(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties in Article V are true
and correct as of the Borrowing Date.
(iii) All legal matters incident to making the Advance are
satisfactory to the Bank and its counsel.
Each Borrowing Notice for each Advance shall constitute a
representation and warranty by the Borrower that the conditions in Sections
3.2(i) and (ii) have been satisfied.
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ARTICLE IV
SECURITY
4.1 SECURITY INTEREST. The Note shall be an unsecured obligation
of the Borrower.
4.2 GUARANTY. The Borrower shall cause to be executed and
delivered to the Bank the Guaranty from each of the Guarantors, whereby each
Guarantor shall guaranty the obligations of the Borrower to the Bank.
4.3 SECURITY AGREEMENT. The Borrower shall cause to be executed
and delivered to the Bank from PDC the Security Agreement, whereby PDC will
secure its Obligations to the Bank under the Guaranty.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower and the Guarantors hereby, each Guarantor for itself and
not one for the other, represent and warrant to the Bank as follows and
acknowledge that the Bank is relying on these representations and warranties in
connection with the transactions contemplated by this Agreement:
5.1 CORPORATE EXISTENCE AND STANDING. Each of the Borrower and
the Guarantors is a corporation duly incorporated, validly existing, and in
good standing under the laws of its jurisdiction of incorporation and has all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted.
5.2 AUTHORIZATION AND VALIDITY. Each of the Borrower and the
Guarantors has the corporate power and authority and legal right to execute and
deliver the Loan Documents and to perform its obligations thereunder. The
execution and delivery of the Borrower and the Guarantors of the Loan Documents
and the performance of their obligations thereunder have been duly authorized
by proper corporate proceedings, and the Loan Documents constitute legal,
valid, and binding obligations of the Borrower and the Guarantors enforceable
against each of them in accordance with their terms, except as enforceability
may be limited by bankruptcy, insolvency, fraudulent conveyance, or similar
laws affecting the enforcement of creditors' rights generally.
5.3 NO CONFLICT; GOVERNMENT CONSENT. Neither the execution and
delivery by each of the Borrower and the Guarantors of the Loan Documents, nor
the consummation of the transactions therein contemplated, nor compliance with
the provisions thereof will violate any law, rule, regulation, order, writ,
judgment, injunction, decree, or award binding on the Borrower or any of the
Guarantors or the Borrower's or any Guarantor's articles or certificate of
incorporation or bylaws or any indenture, instrument, or agreement to which the
Borrower or any of the Guarantors is a party or is subject, or by which they
are, or their Property is, bound, or conflict with or constitute a default
thereunder, or result in the creation or imposition of any Lien in, of, or on
the Property of
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<PAGE> 17
the Borrower or a Guarantor pursuant to any such indenture, instrument, or
agreement, other than the Lien created by the Loan Documents and other than any
such violations, conflicts, or defaults that would not reasonably be expected
to have a Material Adverse Effect. No order, consent, approval, license,
authorization, or validation of, or filing, recording, or registration with, or
exemption by, any governmental or public body or authority, or any subdivision
thereof, is required to authorize, or is required in connection with the
execution, delivery, and performance of, or the legality, validity, binding
effect, or enforceability of, any of the Loan Documents, except for (a) the
filing of financing statements and the Security Agreement, (b) in connection,
or in compliance, with the provisions of the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder, and (c) such other orders, consents,
approvals, licenses, authorizations, validations, filings, recordings,
registrations, and exemptions the failure of which to be obtained or made would
not reasonably be expected to have a Material Adverse Effect.
5.4 FINANCIAL STATEMENTS. The audited consolidated financial
statements of the Borrower and the Guarantors for the 12-month period ending
December 31, 1996, and the consolidated and consolidating financial statements
of the Borrower and the Guarantors for the nine-month period ending September
30, 1997, heretofore delivered to the Bank, were prepared in accordance with
GAAP in effect when the statements were prepared and fairly present the
consolidated and consolidating (for the period ending September 30, 1997)
financial condition and operations of the Borrower and the Guarantors at those
dates and the consolidated results of their operations for the periods then
ended.
5.5 MATERIAL ADVERSE CHANGE. Since September 30, 1997, there has
been no change in the business, Property, condition (financial or otherwise),
or results of operations of the Borrower and the Guarantors which could
reasonably be expected to have a Material Adverse Effect.
5.6 TAXES. The Borrower and the Guarantors have filed all United
States federal tax returns and all other tax returns due before the date hereof
and have paid all taxes due pursuant to these returns or pursuant to any
assessment received by the Borrower or any of the Guarantors, except any taxes
being contested in good faith and as to which adequate reserves have been
provided. No tax liens have been filed, and no claims are being asserted for
any such taxes. The charges, accruals, and reserves on the books of the
Borrower and the Guarantors for any taxes or other governmental charges are
adequate.
5.7 LITIGATION AND CONTINGENT OBLIGATIONS. There is no
litigation, arbitration, governmental investigation, proceeding, or inquiry
pending or, to the knowledge of any of their officers, threatened against or
affecting the Borrower or any of the Guarantors which would reasonably be
expected to have a Material Adverse Effect. Other than any liability incident
to such litigation, arbitration, or proceedings, the Borrower has no material
contingent obligations not provided for or disclosed in the financial
statements referred to in Section 5.4.
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5.8 ERISA. The Unfunded Liabilities of all Single Employer Plans
do not in the aggregate exceed $1,000,000. Each Plan complies in all material
respects with all applicable requirements of law and regulations, no Reportable
Event has occurred with respect to any Plan, neither the Borrower nor any other
members of the Controlled Group have withdrawn from any Plan or initiated steps
to do so, and no steps have been taken to reorganize, terminate, or freeze any
Plan except for the Sledge Cattle Company, Inc., Profit Sharing Plan. Neither
the Borrower nor any other member of the Controlled Group has been a party to
any Multi-employer Plan.
5.9 ACCURACY OF INFORMATION. No information, exhibit, or report
furnished by the Borrower or any of the Guarantors to the Bank in connection
with the negotiation of, or compliance with, the Loan Documents contained any
material misstatement of fact or omitted to state a material fact or any fact
necessary to make the statements therein not misleading.
5.10 REGULATION U. Margin stock (as defined in Regulation U)
constitutes less than 25 percent of the assets of the Borrower and the
Guarantors which are subject to any limitation on sale, pledge, or other
restriction hereunder.
5.11 MATERIAL AGREEMENTS. Neither the Borrower nor any Guarantor
is in default in the performance, observance, or fulfillment of any
obligations, covenants, or conditions in any agreement to which it is a party
(other than any agreement or instrument evidencing or governing Indebtedness),
which default could reasonably be expected to have a Material Adverse Effect.
5.12 COMPLIANCE WITH LAWS. The Borrower and the Guarantors have
complied in all material respects with all applicable statutes, rules,
regulations, orders, and restrictions of any domestic or foreign government or
any instrumentality or agency thereof having jurisdiction over the conduct of
their respective businesses or the ownership of their respective Property.
Neither the Borrower nor any Guarantor has received any notice that its
operations are not in material compliance with any applicable federal, state,
and local environmental, health, and safety statutes and regulations or the
subject of any federal or state investigation evaluating whether remedial
action is needed to respond to a release of any toxic or hazardous waste or
substance into the environment, which non-compliance or remedial action could
reasonably be expected to have a Material Adverse Effect.
5.13 LIENS. The Property of the Borrower and each Guarantor is not
subject to any Lien except:
(a) Liens for taxes, assessments, or governmental charges or
levies if they are not then delinquent or thereafter can be paid
without penalty, or are being contested in good faith and by
appropriate proceedings;
(b) Liens imposed by law, such as carriers', warehousemen's,
and mechanics' liens and other similar liens arising in the ordinary
course of business, which secure payment of
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obligations not more than 60 days past due, or are being contested in
good faith and by appropriate proceedings;
(c) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation;
(d) Utility easements, building restrictions, and any other
encumbrances or charges against real property which generally exist
for properties of a similar character and which do not in any material
way affect their marketability or interfere with their use in the
business of the Borrower or the Guarantors;
(e) Liens existing on the date hereof and listed in the
Borrower's consolidated financial statements described in Section 5.4
of this Agreement;
(f) Liens of the Bank or any of its predecessors-in-interest;
(g) Liens of The CIT Group/Equipment Financing, Inc. securing
obligations that have been paid in full and for which a termination
statement has been executed and forwarded to the Office of the
Secretary of State of Texas for filing;
(h) Liens of Snyder National Bank securing obligations that
have been paid in full and for which a termination statement has been
executed and forwarded to the Office of the Secretary of State of
Texas for filing; and
(i) Liens created under operating agreements with respect to
oil or gas wells.
5.14 LICENSES. The Borrower and each Guarantor possess adequate
licenses, permits, franchises, patents, copyrights, trademarks, and trade
names, or rights thereto, to conduct their businesses substantially as now
conducted and as presently proposed to be conducted.
5.15 ENVIRONMENTAL MATTERS. To their knowledge, the Borrower and
each Guarantor have obtained all material permits, licenses, and other
authorizations which are required under federal, state, and/or local laws
("Environmental Laws") relating to pollution or protection of the environment,
including laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, and hazardous or toxic materials or
wastes into ambient air, surface water, groundwater, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or hazardous or
toxic materials or wastes ("Environmental Matters"). To their knowledge, the
Borrower and each Guarantor are in compliance in all material respects with all
terms and conditions of the required permits, licenses, and authorizations and
are also in full compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules, and
timetables in the Environmental Laws or in any plan, order, decree, judgment,
or notice. To their knowledge,
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no events, conditions, circumstances, activities, practices, incidents,
actions, or plans have occurred on the Borrower's or any Guarantor's Property
which may interfere with or prevent continued compliance or which may give rise
to any liability under any Environmental Laws or the common law. The Borrower
and the Guarantors have received no summons, citation, directive, letter, or
other communication, written or oral, from any agency or department of any
state, federal, or local government relating to any Environmental Matters or
any alleged Environmental Matters. No investigation, administrative order,
consent order and agreement, litigation, or settlement with respect to any
Environmental Matters or any alleged Environmental Matters has been received by
the Borrower or any Guarantor or, to the best of their knowledge, is proposed,
threatened, anticipated, or in existence with respect to the Borrower or the
Guarantors.
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Bank otherwise consents
in writing:
6.1 FINANCIAL REPORTING. The Borrower will maintain, for itself
and each Guarantor, a system of accounting established and administered in
accordance with GAAP and furnish to the Bank:
(i) Within 95 days after the close of each of its fiscal
years, an unqualified (except for qualifications relating to changes
in accounting principles or practices reflecting changes in GAAP and
required or approved by the Borrower's independent certified public
accountants) audit report certified by nationally recognized
independent certified public accountants, prepared in accordance with
GAAP on a consolidated basis for itself and the Subsidiaries.
(ii) Within 50 days after the close of the first three
quarterly periods of each of its fiscal years, for itself and the
Subsidiaries, consolidated reviewed balance sheets at the close of
each such period and consolidated profit and loss and a statement of
cash flows from the beginning of the fiscal year to the end of the
quarter, all certified by an Authorized Officer.
(iii) Simultaneously with the submission of the financial
information required by Section 6.1(i) and (ii) hereof, a Compliance
Certificate in substantially the form of Exhibit "E" hereto executed
by the Chief Financial Officer of the Borrower.
(iv) As soon as possible and in any event within 10 days
after the Borrower knows that any Reportable Event has occurred with
respect to any Plan, a statement, signed by an Authorized Officer,
describing the Reportable Event and the action which the Borrower
proposes to take with respect thereto.
(v) As soon as possible and in any event within 10 days after
receipt by the Borrower, a copy of (a) any notice or claim that the
Borrower or any of the Subsidiaries is
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or may be liable to any Person as a result of the release by the
Borrower, any of its Subsidiaries, or any other Person of any toxic or
hazardous waste or substance into the environment; and (b) any notice
alleging any violation of any federal, state, or local environmental,
health, or safety law or regulation by the Borrower or any of its
Subsidiaries, which, in either case, could reasonably be expected to
have a Material Adverse Effect.
(vi) Promptly after the furnishing thereof to the
shareholders of the Borrower, copies of all financial statements,
reports, and proxy statements so furnished.
(vii) Promptly after the filing thereof, copies of all
registration statements and annual, quarterly, monthly, or other
regular reports which the Borrower or any of the Subsidiaries files
with the Securities and Exchange Commission.
(viii) Any other information (including non-financial
information) the Bank reasonably requests.
6.2 USE OF PROCEEDS. The Borrower and its Subsidiaries will use
the proceeds of the Advances to acquire or make improvements to drilling rigs,
rolling stock, and related drilling equipment, to pay all amounts due under
the Existing Agreement, and to acquire other drilling companies or the assets
related to their drilling operations. The Borrower will not use the proceeds
of the Advances for general corporate purposes without prior written permission
of the Bank. The Borrower will not, nor will it permit any Subsidiary to, use
any of the proceeds of the Advances to purchase or carry any "margin stock" (as
defined in Regulation U).
6.3 NOTICE OF DEFAULT. The Borrower will, and will cause each
Subsidiary to, give notice in writing to the Bank within five Business Days of
the occurrence of any Default or Unmatured Default. The Borrower and the
Subsidiaries shall not be required to make separate disclosure under this
Section 6.3 of occurrences or developments which have previously been disclosed
to the Bank in any financial statements or other information delivered to the
Bank pursuant to Section 6.1.
6.4 CONDUCT OF BUSINESS. The Borrower will, and will cause each
Guarantor to, carry on and conduct its business in substantially the same
manner and in substantially the same fields of enterprise as presently
conducted and do all things necessary to remain duly incorporated, validly
existing, and in good standing as a domestic corporation in its jurisdiction of
incorporation and maintain all requisite authority to conduct its business in
each jurisdiction in which its business is conducted.
6.5 TAXES. The Borrower will, and will cause each Subsidiary to,
pay when due all taxes, assessments, and governmental charges and levies upon
it or its income, profits, or Property, except those contested in good faith by
appropriate proceedings and for which adequate reserves have been set aside.
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6.6 INSURANCE. The Borrower will, and will cause each Subsidiary
to, adequately insure its and their Properties of an insurable nature by
reputable and solvent insurance companies against loss or damages customarily
insured against by Persons operating similar properties and similarly situated,
and carry other insurance as usually carried by Persons engaged in the same or
similar business and similarly situated, and the Borrower will furnish to the
Bank upon request full information as to the insurance carried.
6.7 COMPLIANCE WITH LAWS. The Borrower will, and will cause each
Subsidiary to, comply in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees, or awards to which
it may be subject.
6.8 MAINTENANCE OF PROPERTIES. The Borrower will, and will cause
each Subsidiary to, do all things necessary to maintain, preserve, protect, and
keep its Property in good repair, working order, and condition, normal wear and
tear excepted.
6.9 INSPECTION. The Borrower will, and will cause each Subsidiary
to, permit the Bank, by its representatives and agents, to inspect any of the
Property, corporate books, and financial records of the Borrower and each
Subsidiary, to examine and make copies of the books of accounts and other
financial records of the Borrower and each Subsidiary, and to discuss the
affairs, finances, and accounts of the Borrower and each Subsidiary at
reasonable times and intervals.
6.10 MERGER. The Borrower will not, nor will it permit any
Guarantor to, merge or consolidate with or into any other Person, unless, as
long as both immediately before and after giving effect to the merger or
consolidation, no Default or Unmatured Default has occurred and is continuing;
but (i) any Guarantor may merge with the Borrower or another Guarantor, (ii)
the Borrower or any Guarantor may merge or consolidate with any other Person as
long as the Borrower or the Guarantor is the surviving entity, and (iii) any
Guarantor may merge or consolidate with any other Person as long as the
surviving entity of the merger or consolidation is a Subsidiary.
6.11 ACCOUNT PAYABLE. The Borrower will, and will cause each
Guarantor to, pay all of its accounts payable within 120 days, except for any
accounts payable being disputed in good faith and for which, if requested by
the Bank, adequate reserves have been made.
6.12 DIVIDENDS. The Borrower will not, nor will it permit any
Guarantor to, declare or pay any dividends on its capital stock (other than
dividends payable in its own capital stock) or redeem, repurchase, or otherwise
acquire or retire any of its capital stock at any time outstanding, but any
Guarantor may declare and pay dividends to the Borrower.
6.13 INDEBTEDNESS. The Borrower will not, nor will it permit any
Guarantor to, create, incur, or suffer to exist any indebtedness for Borrowed
Money or Capitalized Lease Obligations, except:
(a) the Advances.
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(b) Indebtedness existing on the date hereof and listed in the
Borrower's consolidated financial statements described in Section 5.4
of this Agreement.
6.14 SALE OF ASSETS. The Borrower will not, nor will it permit any
Guarantor to, lease, sell, or otherwise dispose of all, or a substantial
portion, of its property, assets, or business to any other Person except for
sales of inventory in the ordinary course of business. The Borrower will not,
nor will it permit any Guarantor to, sell or otherwise dispose of any note
receivable or accounts receivable, with or without recourse, except to the
Borrower, PPI, or PDC.
6.15 SALE AND LEASEBACK. The Borrower will not, nor will it permit
any Guarantor to, sell or transfer any property in order to concurrently or
subsequently lease as lessee such or similar property.
6.16 GUARANTIES. The Borrower will not, nor will it permit any
Guarantor to, make or suffer to exist any guaranty (including, without
limitation, any guaranty of the obligations of a Guarantor), except by
endorsement of instruments for deposit or collection in the ordinary course of
business and except for the Obligations.
6.17 LIENS. The Borrower will not, nor will it permit any
Guarantor to, create, incur, or suffer to exist any Lien in, of, or on the
Property of the Borrower or any Guarantor, except:
(a) Liens for taxes, assessments, or governmental charges or
levies if they are not then delinquent or thereafter can be paid
without penalty, or are being contested in good faith and by
appropriate proceedings;
(b) Liens imposed by law, such as carriers', warehousemen's,
and mechanics' liens and other similar liens arising in the ordinary
course of business which secure payment of obligations not more than
60 days past due or are being contested in good faith and by
appropriate proceedings;
(c) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation;
(d) Utility easements, building restrictions, and any other
encumbrances or charges against real property which generally exist
for properties of a similar character and which do not in any material
way affect the marketability of the properties or interfere with their
use in the business of the Borrower or the Guarantors;
(e) Liens existing on the date hereof and listed in the
Borrower's consolidated financial statements described in Section 5.4
of this Agreement;
(f) Liens of the Bank or any of its predecessors-in-interest;
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(g) Liens of The CIT Group/Equipment Financing, Inc. securing
obligations that have been paid in full and for which a termination
statement has been executed and forwarded to the Office of the
Secretary of State of Texas for filing;
(h) Liens of Snyder National Bank securing obligations that
have been paid in full and for which a termination statement has been
executed and forwarded to the Office of the Secretary of State of
Texas for filing; and
(i) Liens created under operating agreements with respect to
oil or gas wells.
6.18 LETTERS OF CREDIT. The Borrower will not, nor will it permit
any Guarantor to, apply for or become liable upon any Letter of Credit.
6.19 CASH FLOW COVERAGE. The Borrow will maintain the Borrower's
ratio of (i) Cash Flow to (ii) Current Maturities of Long-Term Debt plus
current Capital Lease Obligations, on a consolidated basis measured on the last
day of each quarterly fiscal period of the Borrower for the 12-month period
ending on that day, at not less than 2.0 to 1.0.
6.20 DEBT TO TANGIBLE NET WORTH. The Borrower will maintain the
Borrower's ratio of Debt to Tangible Net Worth, on a consolidated basis,
measured on the last day of each quarterly fiscal period of the Borrower, at
not more than 1.20 to 1.0.
6.21 CURRENT RATIO. The Borrower will maintain the Borrower's
ratio of Current Assets to Current Liabilities, on a consolidated basis,
measured on the last day of each quarterly fiscal period of the Borrower, at
not less than 1.25 to 1.0.
6.22 NET INCOME. The Borrower will maintain a positive net income
on a consolidated basis measured on the last day of each quarterly fiscal
period of the Borrower for the 12-month period ending on that day.
6.23 PRIMARY DEPOSITORY. The Borrower will maintain the Borrower's
and each Guarantor's primary operating accounts with the Bank.
6.24 PARTICIPATIONS. The Borrower shall cooperate with the
participation efforts of the Bank by providing information reasonably requested
by the Bank. This information may be distributed on a confidential basis to
selected financial institutions. In addition, representatives of the
Borrower's management shall be available for one or more bankers' meetings and
to answer questions during the participation process.
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ARTICLE VII
DEFAULT
The occurrence of any of the following events shall constitute a
Default:
7.1 Any representation or warranty made by or on behalf of the
Borrower or any Guarantor to the Bank under or in connection with this
Agreement, any Advance, or any certificate or information delivered in
connection with this Agreement or any other Loan Document is materially false
on the date as of which made.
7.2 Nonpayment of principal of the Note within five days after it
becomes due or nonpayment of interest upon the Note or of any other Obligations
within five days after it becomes due.
7.3 The breach by the Borrower of any terms or provisions of
Section 6.2 or 6.10.
7.4 The breach by the Borrower (other than a breach which
constitutes a Default under Section 7.1, 7.2, or 7.3) of any of the terms or
provisions of this Agreement which is not remedied within 30 days after written
notice from the Bank.
7.5 Failure of the Borrower and/or any Guarantor to pay
indebtedness for Borrowed Money in an aggregate principal amount exceeding
$100,000 when due; or the default by the Borrower and/or any Guarantor in the
performance of any term, provision, or condition in any agreement under which
indebtedness for Borrowed Money in an aggregate principal amount exceeding
$100,000 is outstanding, or any other event or condition, the effect of which
is to cause, or to permit the holder or holders of the aggregate indebtedness
for Borrowed Money to cause, the aggregate indebtedness for Borrowed Money in
excess of $100,000 to become due before its stated maturity; or the Borrower or
any Guarantor does not pay, or admits in writing its inability to pay, its
debts generally as they become due.
7.6 The Borrower or any Guarantor (i) has an order for relief
entered for it under the federal bankruptcy laws as now or hereafter in effect;
(ii) makes an assignment for the benefit of creditors; (iii) applies for,
seeks, consents to, or acquiesces in the appointment of a receiver, custodian,
trustee, examiner, liquidator, or similar official for it or any Substantial
Portion of its Property; (iv) institutes any proceeding seeking an order for
relief under the federal bankruptcy laws as now or hereafter in effect, or
seeking to adjudicate it a bankrupt or an insolvent, or seeking dissolution,
winding up, liquidation, reorganization, arrangement, adjustment, or
composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization, or relief of debtors, or fails to file an answer or
other pleading denying the material allegations of any such proceeding filed
against it; (v) takes any corporate action to authorize or effect any of the
foregoing actions; or (vi) fails to contest in good faith any appointment or
proceeding described in Section 7.7.
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7.7 Without the application, approval, or consent of the Borrower
or any Guarantor, a receiver, trustee, examiner, liquidator, or similar
official is appointed for the Borrower or any Guarantor for any Substantial
Portion of the Property of the Borrower and the Guarantors, or a proceeding
described in Section 7.6(iv) is instituted against the Borrower or any
Guarantor, and the appointment continues undischarged or the proceeding
continues undismissed or unstayed for 60 consecutive days.
7.8 Any court, government, or governmental agency condemns,
seizes, or otherwise appropriates or takes custody or control of (each a
"Condemnation") all or any portion of the Property of the Borrower or any
Guarantors which, when taken together with all other Property of the Borrower
and the Guarantors so condemned, seized, appropriated, or taken custody or
control of, during the 12-month period ending with the month in which the
Condemnation occurs, constitutes a Substantial Portion of the Property of the
Borrowers and the Guarantors.
7.9 The Borrower or any Guarantor fails within 30 days to pay,
bond, or otherwise discharge any judgment or order for the payment of money in
excess of $500,000 which is not stayed on appeal or is otherwise appropriately
contested in good faith.
7.10 The Unfunded Liabilities of all Single Employer Plans exceed
in the aggregate $1,000,000; any Reportable Event occurs in connection with any
Plan; or the Borrower or any other member of the Controlled Group becomes party
to any Multi-employer Plan.
7.11 The Borrower or any Guarantor is the subject of any proceeding
pertaining to the release by the Borrower or any Guarantor, or any other
Person, of any toxic or hazardous waste or substance into the environment, or
any violation of any federal, state, or local environmental, health, or safety
law or regulation, which could reasonably be expected to have a Material
Adverse Effect unless it is being contested in good faith and by appropriate
proceedings.
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS, REMEDIES, AND SETOFF
8.1 ACCELERATION. If any Default described in Section 7.6 or 7.7
occurs with respect to the Borrower, the obligations of the Bank to make
Advances hereunder shall automatically terminate, and the Obligations shall
immediately become due and payable without election or action on the part of
the Bank. If any other Default occurs, the Bank may terminate or suspend its
obligations to make Advances hereunder, or declare the Obligations to be due
and payable, or both; if the Bank declares the Obligations due and payable
after a Default occurs, then the Obligations shall become immediately due and
payable, without presentment, demand, protest, or notice of any kind, all of
which the Borrower hereby expressly waives.
If, within 30 days after acceleration of the maturity of the
Obligations or termination of the obligation of the Bank to make Advances
hereunder as a result of any Default (other than any Default as described in
Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or
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decree for the payment of the Obligations due has been obtained or entered, the
Bank, by notice to the Borrower, may rescind and annul the acceleration and/or
termination.
8.2 AMENDMENTS. The Bank, the Borrower, and the Guarantors may
enter into agreements supplemental hereto to add or modify any provisions of
the Loan Documents or to change in any manner the rights of the Bank, the
Borrower, or the Guarantors or waive any Default hereunder.
8.3 PRESERVATION OF RIGHTS. No delay or omission of the Bank to
exercise any right under the Loan Documents shall impair the right or be
construed as a waiver of any Default or an acquiescence therein, and the making
of an Advance notwithstanding the existence of a Default or the inability of
the Borrower to satisfy the conditions precedent to the Advance shall not
constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment, or other variation of the terms,
conditions, or provisions of the Loan Documents shall be valid unless in
writing signed by the Bank, and then only to the extent specifically stated.
All remedies in the Loan Documents or afforded by law shall be cumulative, and
all shall be available to the Bank until the Obligations have been paid in
full.
8.4 SETOFF. In addition to, and without limitation of, any rights
of the Bank under applicable law, if the Borrower fails to pay any Obligations
when due hereunder, any deposits (including all account balances, whether
provisional or final, and whether or not canceled or available) at any time
held or owing by the Bank to or for the account of the Borrower or any
Guarantor in the Borrower's and the Guarantor's operating accounts may be
offset and applied toward the payment of the Obligations owing to the Bank; but
the Bank waives (and shall not have) any right of setoff against accounts
numbers 5140244244 and 5140259697 maintained by PPI with the Bank.
ARTICLE IX
GENERAL PROVISIONS
9.1 SURVIVAL OF REPRESENTATIONS. All representations and
warranties of the Borrower in this Agreement shall survive delivery of the Note
and the making of the Advances herein contemplated.
9.2 GOVERNMENTAL REGULATION. Anything in this Agreement to the
contrary notwithstanding, the Bank shall not be obligated to extend credit to
the Borrower in violation of any limitation or prohibition in any applicable
statute or regulation.
9.3 TAXES. Any taxes (excluding federal income taxes on the
overall net income of the Bank) or other similar assessments or charges payable
or ruled payable by any governmental authority in respect of the Loan Documents
shall be paid by the Borrower, with any interest and penalties.
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9.4 HEADINGS. Section headings in the Loan Documents are for
convenience of reference only and shall not govern the interpretation of any of
their provisions.
9.5 ENTIRE AGREEMENT. The Loan Documents embody the entire
agreement and understanding among the Borrower, the Guarantors, and the Bank
and supersede all prior agreements and understandings among the Borrower, the
Guarantors, and the Bank as to the subject matter thereof.
9.6 BENEFITS OF THIS AGREEMENT. This Agreement shall not be
construed to confer any right or benefit upon any Person other than the parties
to this Agreement and their respective successors and assigns.
9.7 EXPENSES; INDEMNIFICATION. The Borrower shall reimburse the
Bank for all reasonable costs and out-of- pocket expenses (including reasonable
attorneys' fees and reasonable time charges of attorneys for the Bank, who may
be employees of the Bank) paid or incurred by the Bank for the preparation,
negotiation, execution, delivery, review, amendment, modification, and
administration of the Loan Documents. The Borrower also agrees to reimburse the
Bank for all reasonable costs and out-of-pocket expenses (including reasonable
attorneys' fees and reasonable time charges of attorneys for the Bank, who may
be employees of the Bank) paid or incurred by the Bank for the collection and
enforcement of the Loan Documents. The Borrower further agrees to indemnify
the Bank, its directors, officers, and employees against all other losses,
claims, damages, penalties, judgments, liabilities, and reasonable expenses
(including, without limitation, all reasonable expenses of litigation or
preparation therefor) which any of them pay or incur arising out of or relating
to this Agreement, the other Loan Documents, the transactions contemplated
hereby, or the direct or indirect application or proposed application of the
proceeds of any Advance hereunder, except to the extent that any of the
foregoing arises out of the gross negligence or willful misconduct of the Bank.
The obligations of the Borrower under this Section shall survive the
termination of this Agreement.
9.8 ACCOUNTING. Except as provided to the contrary herein, all
accounting terms herein shall be interpreted and all accounting determinations
hereunder shall be made in accordance with GAAP.
9.9 SEVERABILITY OF PROVISIONS. Any provision in any Loan
Document that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or
invalid without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.
9.10 NONLIABILITY OF LENDERS. The relationship between the
Borrower and the Bank shall be solely that of borrower and lender. The Bank
shall have no fiduciary responsibilities to the Borrower. The Bank undertakes
no responsibility to the Borrower to review or inform the Borrower of any
matter in connection with any phase of the Borrower's business or corporation.
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9.11 CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE
CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF TEXAS, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
9.12 CONSENT TO JURISDICTION. EACH OF THE BORROWER AND THE BANK
HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR TEXAS STATE COURT SITTING IN LUBBOCK, TEXAS, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT, AND EACH OF THE
BORROWER AND THE BANK HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND
IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE
OF ANY SUCH SUIT, ACTION, OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT THE
COURT IS AN INCONVENIENT FORUM. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST
THE BANK OR ANY AFFILIATE OF THE BANK OR BY THE BANK AGAINST THE BORROWER OR
ANY AFFILIATE OF THE BORROWER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL
BE BROUGHT ONLY IN A COURT IN LUBBOCK, TEXAS.
9.13. WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE BANK
HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE) IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.
9.14 MAXIMUM INTEREST RATE. No provision of the Loan Documents
shall require the payment or permit the collection of interest in excess of the
maximum permitted by applicable law ("Maximum Rate"). If any interest in
excess of the Maximum Rate is provided for or is adjudicated to be provided
for in the Note or otherwise in connection with this Agreement, this Section
9.14 shall govern and prevail, and neither the Borrower nor the sureties,
guarantors, successors, or assigns of the Borrower shall be obligated to pay
the excess amount of the interest or any other excess sum for the use,
forbearance, or detention of sums loaned. If the Bank ever receives, collects,
or applies as interest any amount in excess of the Maximum Rate, the amount by
which it exceeds the Maximum Rate shall be applied as a payment to the
principal amount of indebtedness evidenced by the Note, and, if the principal
amount of the Note has been paid in full, any remaining excess shall forthwith
be paid to the Borrower.
9.15 NOTICES. Any notices or consents required or permitted by
this Agreement shall be in writing and shall be deemed delivered in person or
if sent by certified mail, postage prepaid, return
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receipt requested, or by telegraph, as follows, unless the address is changed
by written notice hereunder:
A. If to the Borrower: Patterson Energy, Inc.
4510 Lamesa Highway
Snyder, Texas 79549
Attention: Chief Financial Officer
B. If to the Bank: Norwest Bank Texas, National Association
2301 Kell Boulevard
Wichita Falls, Texas 76308
Attention: Business Banking Manager
C. If to the Guarantors: Patterson Drilling Company
4510 Lamesa Highway
Snyder, Texas 79549
Attention: Chief Financial Officer
Patterson Petroleum, Inc.
4510 Lamesa Highway
Snyder, Texas 79549
Attention: Chief Financial Officer
Patterson Petroleum Trading Company, Inc.
4510 Lamesa Highway
Snyder, Texas 79549
Attention: Chief Financial Officer
9.16 INDEMNIFICATION REGARDING ENVIRONMENTAL MATTERS. The Borrower
agrees to indemnify the Bank and hold the Bank harmless from and against any
and all claims, demands, losses, damages, liabilities, causes of action,
judgments, penalties, costs, and expenses (including attorney's fees and court
costs), known or unknown, fixed or contingent, imposed on, asserted against, or
incurred by the Bank at any time and from time to time because of, in
connection with, or arising out of (a) the breach of any representation or
warranty stated herein regarding the applicable environmental laws, (b) the
failure to perform any obligation herein required to be performed regarding
the applicable environmental laws, (c) any violation of any applicable
environmental laws in effect on or before the Closing Date, (d) the removal of
hazardous substances or solid wastes from the Property of the Borrower or any
Guarantor and/or (e) any act, omission,
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event, or circumstance relating to compliance by the Borrower and its
Subsidiaries with applicable environmental laws existing or occurring on or
before the full and final payment of the Credit. The foregoing indemnification
shall apply also to the directors, officers, employees, and agents of the Bank,
and to claims, demands, losses, damages, liabilities, causes of action,
judgments, penalties, costs, and expenses (including attorney's fees and court
costs) which in whole or in part are caused by or arise out of the negligence
(but not the gross negligence or willful misconduct) of each indemnified party.
If any claim or demand is asserted against the Bank for which the Bank
may be entitled to indemnification under this Section 9.16, the Borrower shall
have the right, by notifying the Bank within 10 days of its receipt of notice
of claim or demand, to assume the entire control (subject to the right of the
Bank to participate, at its expense and with counsel of its choice) of the
defense, compromise, or settlement of the matter, including, at the Borrower's
expense, employment of counsel of the Borrower's choice. Written notice of any
such claim or demand must be given by the Bank to the Borrower within 30 days
after receipt by the Bank of notice of the claim or demand. Selection of
counsel by the Borrower shall be subject to the approval of the Bank, which
approval shall not be unreasonably withheld. If the Borrower formally notifies
the Bank that it will assume control of the defense, compromise, or settlement
of the matter, the Borrower will be deemed to have waived all defenses to the
claims for indemnification by the Bank for the matter. If the Borrower has
assumed control of the defense, compromise, or settlement as provided in this
paragraph and a judgment is entered against the Bank, the Bank shall be
entitled to an indemnification payment from the Borrower when the judgment
creditor is entitled to execute on the judgment. The Borrower may prosecute
one or more appeals from the judgment only as long as execution on the judgment
is stayed. The cost of any bond or proceeding to stay execution shall be borne
by the Borrower.
9.17 SURVIVAL OF REPRESENTATIONS. All representations and
warranties of the Borrower in this Agreement shall survive delivery of the Note
and the making of the Advances herein contemplated.
9.18 GOVERNMENTAL REGULATION. Anything in this Agreement to the
contrary notwithstanding, the Bank shall not be obligated to extend credit to
the Borrower in violation of any limitation or prohibition in any applicable
statute or regulation.
9.19 SUCCESSORS AND ASSIGNS. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower and
the Bank and their respective successors and assigns, but the Borrower may not
assign its rights or obligations under the Loan Documents. The Bank may at any
time, without the consent of the Borrower, assign all or any portion of its
rights under this Agreement and the Note to a Federal Reserve Bank; but no such
assignment shall release the Bank from its obligations hereunder. Any assignee
or transferee of the Note agrees by acceptance thereof to be bound by all terms
and provisions of the Loan Documents. Any request, authority, or consent of
any Person, who at the time of making the request, authority, or consent is the
holder of the Note, shall be conclusive and binding on any subsequent holder,
transferee, or assignee of the Note or of any note or notes issued in exchange
therefor.
26
<PAGE> 32
9.20 PERMITTED PARTICIPANTS: EFFECT. The Bank may, in the ordinary
course of its business and in accordance with applicable law, at any time sell
to one or more banks or other entities (the "Participants") participating
interests in the Advances owing to the Bank, the Note held by the Bank, any
Commitment of the Bank, or any other interest of the Bank under the Loan
Documents.
9.21 DISSEMINATION OF INFORMATION. The Borrower authorizes the
Bank to disclose to any Participant or any other Person acquiring an interest
in the Loan Documents by operation of law (each a "Transferee") and any
prospective Transferee any and all information in the Bank's possession
concerning the creditworthiness of the Borrower and the Guarantors.
9.22 BUSINESS DAY. Whenever any installment of the principal or
interest on the Note becomes due and payable on a day which is not a Business
Day, the maturity or due date thereof shall be extended to the next Business
Day, and, in the case of principal of the Note, interest shall be payable
thereon at the rate per annum specified in the Note during the extension.
9.23 FINAL AGREEMENT. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
ORAL AGREEMENTS BETWEEN THE PARTIES.
9.24 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any
counterpart. This Agreement shall be effective when it has been executed by
the Borrower.
IN WITNESS WHEREOF, the Borrower, the Guarantors, and the Bank have
executed this Agreement as of the date first above written.
NORWEST BANK TEXAS, PATTERSON ENERGY, INC.
NATIONAL ASSOCIATION AS BORROWER
AS LENDER
BY: /s/ JAMES B. FRANK BY: /s/ JAMES C. BROWN
------------------------------------- ---------------------------------
NAME: JAMES B. FRANK
TITLE: SENIOR VICE PRESIDENT NAME: JAMES C. BROWN
-------------------------------
TITLE: C.F.O.
------------------------------
27
<PAGE> 33
PATTERSON DRILLING COMPANY
AS GUARANTOR
BY: /s/ JAMES C. BROWN
--------------------------------
NAME: James C. Brown
------------------------------
TITLE: C.F.O.
-----------------------------
PATTERSON PETROLEUM, INC.
AS GUARANTOR
BY: /s/ JAMES C. BROWN
--------------------------------
NAME: James C. Brown
------------------------------
TITLE: C.F.O.
-----------------------------
PATTERSON PETROLEUM TRADING
COMPANY, INC.
AS GUARANTOR
BY: /s/ JAMES C. BROWN
--------------------------------
NAME: James C. Brown
------------------------------
TITLE: C.F.O.
-----------------------------
28
<PAGE> 1
EXHIBIT 10.2
NOTE
$60,000,000 DECEMBER 9, 1997
PATTERSON ENERGY, INC., a Delaware corporation (the "Borrower"),
promises to pay to the order of NORWEST BANK TEXAS, NATIONAL ASSOCIATION (the
"Bank"), the lesser of the principal sum of SIXTY MILLION DOLLARS ($60,000,000)
or the aggregate unpaid principal amount of all Advances made by the Bank to the
Borrower pursuant to Article II of the Credit Agreement dated as of December 9,
1997, among the Borrower, the Bank, and the Guarantors (as it may be amended or
modified, the "Agreement"), in immediately available funds at the main office of
the Bank in Wichita Falls, Texas, together with interest on the unpaid principal
amount hereof at the rates and on the dates set forth in the Agreement.
The Bank shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Advance.
This Note is issued pursuant to, and is entitled to the benefits of,
the Agreement, to which reference is hereby made for a statement of the terms
and conditions governing this Note, including the terms and conditions under
which this Note may be prepaid or its maturity date accelerated. Capitalized
terms used herein and not otherwise defined herein are used with the meanings
attributed to them in the Agreement.
Notwithstanding anything to the contrary in this Note, no provision of
this Note shall require the payment or permit the collection of interest in
excess of the maximum permitted by applicable law ("Maximum Rate"). If any
interest in excess of the Maximum Rate is provided for or is adjudicated to be
provided in this Note or otherwise in connection with the loan transaction, this
paragraph shall govern, and neither the Borrower nor the sureties, guarantors,
successors, or assigns of the Borrower shall be obligated to pay the excess
amount of the interest or any other excess sum paid for the use, forbearance, or
detention of sums loaned. If for any reason interest in excess of the Maximum
Rate is deemed charged, required, or permitted by any court of competent
jurisdiction, the excess shall be applied as a payment and reduction of the
principal of indebtedness evidenced by this Note, and, if the principal amount
has been paid in full, any remaining excess shall forthwith be paid to the
Borrower.
This Note shall be construed in accordance with the laws (and not the
law of conflicts) of Texas, but giving effect to federal laws applicable to
national banks.
PATTERSON ENERGY, INC.
By: /s/ JAMES C. BROWN
-------------------------------
Name: James C. Brown
-----------------------------
Title: C.F.O.
----------------------------
1
<PAGE> 2
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF PATTERSON ENERGY, INC.
DATED DECEMBER 9, 1997
<TABLE>
<CAPTION>
Principal Amount of
Date Advance Unpaid Balance
- ---- ------------------- --------------
<S> <C> <C>
</TABLE>
2
<PAGE> 1
EXHIBIT 10.3
SECURITY AGREEMENT
DATED AS OF DECEMBER 9, 1997
BETWEEN
PATTERSON DRILLING COMPANY
AND
NORWEST BANK TEXAS, NATIONAL ASSOCIATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . 1
Section 1.02. Terms Defined in Credit Agreement . . . . . . . . . . . 2
ARTICLE 2 - SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.01. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A. The Rigs . . . . . . . . . . . . . . . . . . . . . . . 2
B. The Accounts . . . . . . . . . . . . . . . . . . . . . 2
C. Collateral . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.02. Continued Priority of Security Interest. . . . . . . . 2
Section 2.03. Maintenance of Status of Security Interest . . . . . . 3
Section 2.04. Evidence of Status of Security Interest . . . . . . . . 3
Section 2.05. Authorized Action . . . . . . . . . . . . . . . . . . . 3
Section 2.06. Grantors Each Remain Obligated; the Bank Not Obligated. 3
ARTICLE 3 - MAINTENANCE, USE AND OPERATION, INSPECTION,
IDENTIFICATION MARKS . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.01. Maintenance . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.02. Use and Operation . . . . . . . . . . . . . . . . . . . 4
Section 3.03. Inspection . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.04. Identification Marks . . . . . . . . . . . . . . . . . 4
ARTICLE 4 - REPLACEMENT OF PARTS; ALTERATIONS,
MODIFICATIONS, AND ADDITIONS . . . . . . . . . . . . . . . . . . 4
Section 4.01. Replacement of Parts . . . . . . . . . . . . . . . . . 4
Section 4.02. Alterations, Modifications, and Additions . . . . . . . 5
ARTICLE 5 - INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 5.01. Insurance Against Loss or Damage to Rigs . . . . . . . 5
Section 5.02. Insurance Against Public Liability and Property Damage 5
Section 5.03. Delivery of Policies . . . . . . . . . . . . . . . . . 6
Section 5.04. Notice of Cancellation . . . . . . . . . . . . . . . . 6
Section 5.05. No Act Impairing Insurance . . . . . . . . . . . . . . 6
Section 5.06. Proof of Loss . . . . . . . . . . . . . . . . . . . . . 6
Section 5.07. Insurance . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5.08. Payment to Bank. . . . . . . . . . . . . . . . . . . . 7
Section 5.09. Application of Proceeds . . . . . . . . . . . . . . . . 7
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 6 - DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 6.01. Default . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 6.02. Application of Proceeds . . . . . . . . . . . . . . . . 7
Section 6.03. Remedies . . . . . . . . . . . . . . . . . . . . . . . 7
Section 6.04. Power of Sale . . . . . . . . . . . . . . . . . . . . . 9
Section 6.05. Power of Attorney - Sale . . . . . . . . . . . . . . . 9
Section 6.06. Bank to Discharge Liens . . . . . . . . . . . . . . . . 9
Section 6.07. Payment of Expenses . . . . . . . . . . . . . . . . . . 10
Section 6.08. Remedies Cumulative. . . . . . . . . . . . . . . . . . 10
Section 6.09. Cure of Defaults . . . . . . . . . . . . . . . . . . . 10
Section 6.10. Discontinuance of Proceedings . . . . . . . . . . . . . 10
ARTICLE 7 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7.01. Contracts . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7.02. Power of Attorney . . . . . . . . . . . . . . . . . . . 11
Section 7.03. Irrevocable Nature of Power . . . . . . . . . . . . . . 11
Section 7.04. Further Documents . . . . . . . . . . . . . . . . . . . 11
Section 7.05. Notices . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7.06 Notice of Acquisition or Substitution . . . . . . . . . 11
Section 7.07. Choice of Law . . . . . . . . . . . . . . . . . . . . . 12
Section 7.08. Severability of Provisions . . . . . . . . . . . . . . 12
Section 7.09 Release of Lien . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
ii
<PAGE> 4
SECURITY AGREEMENT
SECURITY AGREEMENT, dated December 9, 1997, is between PATTERSON
DRILLING COMPANY, A DELAWARE CORPORATION ("PDC"), and NORWEST BANK TEXAS,
NATIONAL ASSOCIATION, with its successors and assigns (THE "BANK").
WHEREAS, the Bank has agreed to lend Patterson Energy, Inc., a Delaware
corporation, (the "Borrower"), up to $60,000,000 (the "Loan") to permit the
Borrower and its subsidiaries to acquire or make improvements to drilling rigs,
rolling stock, and related drilling equipment, to pay all amounts due under the
Existing Agreement, and to acquire other drilling companies or the assets
related to their drilling operations pursuant to the Credit Agreement dated the
date hereof (the "Agreement") among the Borrower, PDC, Patterson Petroleum,
Inc. ("PPI"), Patterson Petroleum Trading Company, Inc., a Texas corporation
("PPTC"), and the Bank; and
WHEREAS, PDC, PPI, and PPTC jointly and severally have guaranteed the
Obligations arising under the Agreement; and
WHEREAS, Bank requires, as a condition to the Loan, that PDC execute and
deliver this Security Agreement to Bank as security for its obligations under
the Guaranty.
NOW, THEREFORE, in consideration of the premises herein and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto agree and covenant as follows:
ARTICLE 1 - DEFINITIONS
Section 1.01. Certain Defined Terms. For purposes of this Security
Agreement:
(a) "Insurance" shall mean: (i) all insurance for the Rigs, whether
now or hereafter in effect, owned by PDC and all renewals of or
replacements for them; (ii) all claims and other moneys and
claims for moneys due and to become due under the insurance; and
(iii) all other rights of PDC under or for the insurance.
(b) "Rigs" shall mean the 99 land drilling rigs owned by PDC as more
particularly described in Schedule 1 attached hereto; (ii) all
land drilling rigs and drilling equipment acquired with the
proceeds of the Loan in the name of PDC; and (iii) all metal
products, machinery, equipment, materials, or other goods of any
description used or acquired for use by PDC or any other party
using or operating the Rigs, and all pumps, drilling equipment,
drill pipe, machinery, equipment, supplies, parts, and other
goods of any description installed in or affixed to or to be used
in connection with any Rig (except the rig hauling trucks owned
by PDC, or others) or acquired for installation on, affixation
to, or use in connection with any Rig (except the rig hauling
trucks owned by PDC or others).
<PAGE> 5
Section 1.02. Terms Defined in Credit Agreement. All capitalized
terms used in this Security Agreement and not otherwise defined herein
are used with the meanings attributed to them in the Agreement.
ARTICLE 2 - SECURITY
Section 2.01.
A. The Rigs:
In consideration of the Loan made pursuant to the Agreement and
evidenced by the Note and by way of security for payment of all amounts
due under its Guaranty, PDC does hereby sell, assign, transfer, and set
over unto, and grant a security interest in favor of, the Bank and the
Bank's successors and assigns for the Bank's own proper use and benefit,
as security for all amounts due and owing under its Guaranty, all of
PDC's right, title, and interest in and to the Rigs, whether now owned
or hereafter acquired and wherever located, and including, without
limitation, all parts, additions, alterations, or modifications thereto
or replacements of any part thereof, whenever made or performed or
acquired, and all removed parts until replaced, and any proceeds and
products of the foregoing with all attachments, accessions, tools,
parts, supplies, increases, and additions to and replacements of and
substitutions for the Rigs or any portion thereof.
B. The Accounts:
PDC grants a security interest in favor of the Bank and the
Bank's successors and assigns for the Bank's own proper use and benefit,
as security for all amounts due and owing under the Guaranty in all
accounts now or hereafter owned by PDC. The term "accounts" shall have
the meaning attributed to them in Section 9.106 of the Texas Business
and Commerce Code.
C. Collateral:
The rights, equipment, and accounts referred to in this Section
2.01 are collectively referred to herein as the "Collateral."
Section 2.02. Continued Priority of Security Interest. PDC agrees that
it will not, without the prior written consent of the Bank, create or suffer to
exist any lien or security interest upon or in the Collateral or any part
thereof other than (a) the lien and security interest created hereby (b) any
other Liens of the Bank (or any of its predecessors-in-interest), and (C) Liens
of The CIT Group/Equipment Financing, Inc., securing obligations that have been
paid in full and for which a termination statement has been executed and
forwarded to the Office of Secretary of State of Texas for filing.
2
<PAGE> 6
Section 2.03. Maintenance of Status of Security Interest. PDC agrees
that it shall take all action that may be necessary or desirable, or that the
Bank reasonably requests, so as at all times (a) to grant and perfect the
security interest in the Collateral intended to be granted hereby and to
maintain the validity, enforceability, perfection, and priority of the security
interest in the Collateral; (b) to protect or preserve the security interest
created by this Security Agreement; and (C) to protect, preserve, exercise, or
enforce the rights of the Bank therein and hereunder and of the Bank under the
Guaranty, including but not limited to (1) immediately discharging all Liens on
the Collateral other than the security interest and any lien created or
permitted hereby; (2) executing and delivering financing statements under the
Uniform Commercial Code of Texas (the "UCC"), continuation statements, notices,
instructions, and assignments in each case in form and substance reasonably
satisfactory to the Bank and not inconsistent with the terms hereof. PDC agrees
to mark its books and records as necessary or appropriate to evidence, protect,
and perfect the security interest in the Collateral and cause their financial
statements to reflect the security interest.
Section 2.04. Evidence of Status of Security Interest. PDC shall upon
the reasonable request of the Bank promptly deliver to the Bank any file-search
reports from the UCC and other filing and recording offices applicable from
time to time as the Bank reasonably designates to establish that the perfection
and priority of the interest granted hereby are maintained.
Section 2.05. Authorized Action. The Bank is hereby authorized to file
one or more financing or continuation statements (including statements of
assignment and renewals thereof) or amendments thereto reflecting the Liens
created hereby without the signature of, or in the name of, PDC. A carbon,
photographic, or other reproduction of this Security Agreement shall be
sufficient as a financing statement.
Section 2.06. Grantors Each Remain Obligated; the Bank Not Obligated.
The grant by PDC to the Bank of the security interest granted hereby shall not
relieve it from the performance of any term, covenant, condition, or agreement
on its part to be performed or observed, or from any liability to any person,
under or in respect of any Collateral or impose any obligation on the Bank to
perform or observe any term, covenant, condition, or agreement on the part of
PDC to be so performed or observed or impose any liability on the Bank for any
act or omission on the part of PDC relating thereto.
3
<PAGE> 7
ARTICLE 3 - MAINTENANCE, USE AND OPERATION,
INSPECTION, IDENTIFICATION MARKS
Section 3.01. Maintenance. PDC shall, at its sole cost and expense
(whether or not applicable insurance proceeds are adequate for the purpose),
(I) maintain and refurbish the Rigs and to keep them in good operating
condition, order, and repair, normal wear and tear excepted; and (ii) keep the
Rigs in compliance with all applicable laws, regulations, and orders of any
governmental authority having jurisdiction with respect thereto.
Section 3.02. Use and Operation. As long as no Default occurs and is
continuing, PDC shall have the full use of the Rigs, but it covenants that it
will not permit the Rigs to be incorporated or installed in or attached to any
building or real property so that they become part of or subject to any Liens
on the building or real property and cannot be removed without material injury
to the Rigs (it is the parties' intention that the Rigs are, and remain,
personal property throughout the term of the Agreement); and, further, the Rigs
shall not be used or operated contrary to any applicable law, treaty, or
convention, or any rule or regulation issued thereunder.
Section 3.03. Inspection. PDC shall permit representatives of the Bank
at any reasonable time, on reasonable notice, to inspect the Rigs, but the
inspection may not materially interfere with their normal operations.
Section 3.04. Identification Marks. PDC will cause each Rig to be kept
numbered with its identifying number as shown in Schedule 1 hereto as
appropriate. PDC will not change the identifying number of any Rig except in
accordance with a statement of the new identifying number, which statement
previously has been filed with the Bank.
ARTICLE 4 - REPLACEMENT OF PARTS; ALTERATIONS,
MODIFICATIONS, AND ADDITIONS
Section 4.01. Replacement of Parts. (a) PDC shall, at its sole cost and
expense, as necessary, promptly replace all parts on the Rigs which become worn
out, lost, destroyed, seized, damaged beyond repair, or permanently rendered
unfit for any reason. All parts removed from the Rigs shall remain subject to
the security interest granted herein until the parts are replaced by parts
which meet the requirements for replacement parts specified below. All
replacement parts incorporated or installed in or attached to any Rig as
provided by this Section 4.01 shall, without necessity of further act, become
part of the Rig for all purposes hereof and subject to the security interest
granted herein.
(b) All replacement parts shall be free and clear of all Liens (other
than Liens created or permitted by the Agreement) and shall be in as good
operating condition as, and shall have a value and utility at least equal to,
the parts replaced, assuming the replaced part is maintained in accordance with
this Security Agreement.
4
<PAGE> 8
Section 4.02. Alterations, Modifications, and Additions. PDC shall, at
its sole expense, make any alterations and modifications in and additions to
the Rigs as required by any relevant governmental authority or as deemed
necessary by PDC, whether upon the recommendation of any manufacturer or
otherwise, for the safe operation of the Rigs (any alteration, modification, or
addition required or deemed necessary is herein called a "Required
Modification"). In addition, PDC shall, at its sole expense, make other
alterations and modifications in and additions to the Rigs as it deems
necessary or prudent to properly conduct its business (any alteration,
modification, or addition deemed desirable is herein called an "Optional
Modification"); but (I) any Required Modification shall be expeditiously
completed in a good and workmanlike manner, in compliance with all applicable
legal requirements; and (ii) no Optional Modification shall diminish the value
or utility of any Rig or impair its operating condition below its value,
utility, and operating condition immediately before the Optional Modification,
assuming that the Rig was then of the value or utility and in the operating
condition required under this Security Agreement. All parts incorporated or
installed in or attached to any Rig as a result of any alteration,
modification, or addition which are not readily removable without damage to the
Rig shall, without necessity of further act, become part of the Rig for all
purposes hereof and subject to the security interest granted herein.
ARTICLE 5 - INSURANCE
Section 5.01. Insurance Against Loss or Damage to Rigs. PDC covenants
that it will, without cost to the Bank, maintain or cause to be maintained in
effect for the Rigs throughout the term of this Security Agreement adequate
insurance by reputable and solvent insurance companies against loss or damages
customarily insured against by Persons operating similar properties and
similarly situated, and carry other insurance as usually carried by Persons
engaged in the same or similar business and similarly situated (when the
policies are issued) in accordance with applicable law, an all-risk physical
damage insurance policy insuring the Rigs against, among other things, loss,
damage, or destruction from fire, explosion, windstorm, theft, breakage, and
other risks as it deems necessary or desirable in an amount in U.S. dollars
equal to, except as otherwise approved or required in writing by the Bank, the
outstanding balance of the Loan. Each policy of insurance for the Rigs shall
name the owner thereof as the insured and shall, subject to Section 5.08
hereof, provide that the Bank shall be a sole loss payee without liability for
the payment of premiums. All insurance maintained under this Article 5 shall be
primary insurance without right of contribution against any other insurance
maintained by the Bank and shall contain provisions waiving underwriters'
rights of subrogation thereunder against the Bank and any insured named in the
policy and any assignee of the Bank.
Section 5.02. Insurance Against Public Liability and Property Damage.
PDC covenants that it will, without cost to the Bank, maintain or cause to be
maintained in effect for the Rigs throughout the term of this Security
Agreement commercial general liability and pollution liability insurance
policies with reputable and solvent insurance companies, insuring against
liabilities for any injury to the person of others and any damage to the
property of others arising from those risks, with reasonable deductibles (not
in excess of $100,000 including any self-insurance) and in
5
<PAGE> 9
amounts affording coverage for personal injuries of $1,000,000 per occurrence,
$3,000,000 in the aggregate, and $20,000,000 excess coverage. Each policy shall
also include effective waivers by the insurer of all claims for insurance
premiums against the Bank.
Section 5.03. Delivery of Policies. PDC agrees that it will deliver to
the Bank original cover notes and true and correct copies of all policies,
binders, endorsements, and riders amending them, evidencing insurance required
by this Section 5.01 hereof. The Bank shall not be responsible for any
representations or warranties made to the underwriters by the insured in
connection with any policy of insurance referred to herein.
Section 5.04. Notice of Cancellation. At its expense, PDC agrees that it
will cause the relevant insurance brokers to agree to, and it hereby covenants
that it will, advise the Bank of any expiration, termination, non-renewal,
alteration, or cancellation of any policy required under Section 5.01 hereof;
of any default in the payment of any premium; and of any other act or omission
on the part of the insured of which it has knowledge and which might invalidate
or render unenforceable, in whole or in part, any insurance on the Rigs. All
policies required under Section 5.01 hereof shall provide for not less than 30
days prior written notice to be received by the Bank of the termination or
cancellation of the insurance evidenced thereby, unless the termination or
cancellation is a result of non-payment of premiums, in which case 10 days
prior written notice shall be given to the Bank.
Section 5.05. No Act Impairing Insurance. PDC agrees that it will not do
or omit any act, or voluntarily suffer or permit any act to be done or omitted,
whereby the insurance required hereunder shall or may be suspended, impaired,
or canceled, and will not use or operate the Rigs, or permit the Rigs to be
used or operated, for purposes more hazardous than allowed by the insurance
policies carried by them pursuant to this Article 5, without having previously
notified the Bank in writing and insured the Rigs by additional coverage to
extend to those uses, operations, or risks.
Section 5.06. Proof of Loss. PDC agrees that it will, at its own
expense, make, or cause to be made, all proofs of loss and take, or cause to be
taken, all other action necessary or appropriate to collect from the
underwriters of insurance required by this Article 5 in case of a loss
affecting the Rigs.
Section 5.07. Insurance. It is expressly agreed that anything herein to
the contrary notwithstanding, PDC shall remain liable under the insurance
referred to in Sections 5.01 and 5.02 above to perform all obligations assumed
by it thereunder, and the Bank shall have no obligation or liability under such
insurance because of or rising out of this Security Agreement, nor shall the
Bank be required to perform or fulfill any obligations of either under or
pursuant to the insurance or to make any payment or any inquiry about the
nature or sufficiency of any payment received by it or to present or file any
claim, or to take any other action to collect or enforce the payment of any
amounts which may have been assigned to it or to which it may be entitled
hereunder at any time.
6
<PAGE> 10
Section 5.08. Payment to Bank. Unless the Bank otherwise agrees, all
amounts payable under any policies required under Section 5.01 hereof must be
payable to the Bank for distribution first to itself under this Security
Agreement and thereafter to the insured or others as their interests appear.
Nevertheless, until a Default has occurred and is continuing, amounts payable
under any insurance for the Rigs involving damage to the Rigs not constituting
an actual or constructive total loss may be paid by underwriters directly to
PDC for the repair, salvage, or other charges involved or, if PDC has first
fully repaired the damage or paid all salvage or other charges, paid to the
insured as reimbursement therefor.
Section 5.09. Application of Proceeds. All amounts paid to the Bank from
insurance on the Rigs shall be disposed of as follows (after deducting the
reasonable expenses of the Bank in collecting the amounts):
(i) any amount which might have been paid at the time, in accordance
with Sections 5.01 and 5.02 above, directly to the owner of a Rig or others
shall be paid by the Bank to, or as directed by, PDC to be applied toward the
repair or replacement of the damaged Rig; and
(ii) all amounts paid to the Bank for an actual or constructive total
loss of a Rig shall be applied by the Bank to the payment of amounts due under
the Agreement pursuant to its terms.
ARTICLE 6 - DEFAULT
Section 6.01. Default. Default hereunder shall have the meaning given in
Article VII of the Agreement.
Section 6.02. Application of Proceeds. Any sums recovered hereunder
after a Default has occurred and is continuing shall be applied as follows:
First: To the payment of all reasonable expenses and charges, including
the expenses of any sale or retaking, reasonable attorney's fees, court costs,
and any other expenses or advances made or incurred by the Bank to protect its
rights or to pursue its remedies hereunder;
Second: To the payment of the amounts outstanding under the Agreement,
the Note, and this Security Agreement, whether due or not, including interest
thereon to the date of the payment and, if applicable, compensatory interest to
the date of the payment; and
Third: To the payment of any surplus thereafter remaining to the owner
of the Collateral or whoever is entitled thereto.
Section 6.03. Remedies. Upon the occurrence and during the continuance
of a Default, the security interest created by this Security Agreement shall
become immediately enforceable, and, without limitation, the enforcement
remedies specified can be exercised irrespective of
7
<PAGE> 11
whether the Bank has exercised the right of acceleration under the Agreement,
and the Bank shall have the following rights:
(i) Upon the declaration by the Bank that all the then unpaid
Obligations of Borrower are due and payable immediately, they shall become
immediately due and payable.
(ii) The Bank may demand, sue for, collect, or receive any money or
property at any time payable or receivable because of or in exchange for, or
make any compromise or settlement deemed desirable for, any Collateral, but the
Bank has no obligation so to do, or the Bank may extend the time of payment,
arrange for payment in installments, or otherwise modify the terms of, or
release any Collateral, without hereby incurring responsibility to, or
discharging or otherwise affecting any liability of PDC. Except for the
exercise of reasonable care, the Bank has no duty to protect, secure, perfect,
or insure the Collateral.
(iii) The Bank may require that all policies, contracts, certificates
of entry, and other records relating to the insurance provided for in Article 5
hereof (the "Insurance") (including details of and correspondence concerning
outstanding claims) be forthwith delivered to or to the order of the Bank.
(iv) The Bank may collect, recover, compromise, and give a good
discharge for any and all moneys and claims for moneys then outstanding or
thereafter arising under the Insurance and permit any brokers through whom
collection or recovery is effected to charge their usual brokerage fee.
(v) The Bank may require PDC to assemble the Collateral owned by it
and all books and record relating thereto and to make them available to the
Bank at a location designated by the Bank.
(vi) The Bank shall have the rights and remedies with respect to the
Collateral of a secured party under the UCC, whether or not the UCC is in
effect in the jurisdiction where the rights and remedies are then asserted, and
any other rights granted pursuant to the applicable law. In addition, the Bank
is hereby granted the right to sell or cause to be sold in Wichita Falls,
Texas, or elsewhere, in one or more sales or parcels, at any price or prices it
deems best and for cash or on credit or for future delivery, without assumption
of any credit risks, all or any of the Collateral, at any broker's board or at
public or private sale, without demand of performance or notice of its
intention to sell, or of time or place of sale (except for 10 Business Days'
prior written notice to PDC at its address in the Agreement, and PDC waives all
other notice of the sale), and the Bank may purchase any or all Collateral so
sold and thereafter hold it absolutely free from any claim or right, including
any right or equity or redemption of the owner thereof, any such demand,
notice, right, or equity being hereby expressly waived and released (to the
extent permitted by applicable statute). PDC shall pay to the Bank all expenses
(including reasonable fees and disbursements of counsel) of, or incidental to,
the enforcement of any provisions hereof or of any obligations of PDC of any
actual or attempted sale, or any exchange, enforcement, collection,
8
<PAGE> 12
compromise, or settlement of any Collateral or receipt of the proceeds thereof
and for the care or preservation of the Collateral before any sale of the
Collateral, including expenses of insurance; and all such expenses shall be
obligations of PDC owning the Collateral within the terms of this Security
Agreement and the Agreement. All proceeds from the sale or other disposition of
the Collateral shall be held and applied by the Bank as provided in Section
6.02 hereof. PDC agrees that any sale in accordance with this Section 6.03
shall be deemed made in a commercially reasonable manner insofar as it is
concerned.
(vii) If a Default has occurred and is continuing hereunder, PDC hereby
appoints the Bank its true and lawful attorney-in-fact, with full power of
substitution, to enforce their rights under any drilling contracts or leases
concerning the Rigs, and to take any action the Bank deems necessary or
appropriate to protect and preserve the security interest in the Collateral
granted herein.
Section 6.04. Power of Sale. Any sale of the Collateral made pursuant to
this Security Agreement, whether under the power of sale hereby granted or any
judicial proceedings, shall divest all right, title, and interest of PDC
therein and thereto, and shall bar PDC and all persons claiming by, through, or
under PDC. No purchaser shall be bound to inquire whether notice has been
given, or whether any default has occurred, or as to the propriety of the sale,
or as to the application of the proceeds thereof. In case of any such sale, the
Bank, if it is the purchaser, shall be entitled to make settlement or payment
for the property purchased, and to use and apply it to the Obligations under
the Agreement, so that there may be credited against the amount remaining due
and unpaid thereon the sums payable out of the net proceeds of the sale to the
Bank after allowing for the costs of sale and other charges. At any such sale,
the Bank may bid for and purchase the property and, upon compliance with the
terms of sale, may hold, retain, and dispose of the Collateral without further
accountability therefor.
Section 6.05. Power of Attorney - Sale. The Bank is hereby irrevocably
appointed attorney-in-fact of PDC upon the happening and during the continuance
of a Default to execute and deliver to any purchaser aforesaid, and is hereby
vested with full power and authority to make, in the name and on behalf of PDC,
a good conveyance of the title to the Collateral so sold. Any person dealing
with the Bank or its attorney-in-fact need not inquire whether the power of
attorney herein has become exercisable. In the event of any sale of any
Collateral under any power herein, PDC will, if required by the Bank, execute
any form of conveyance of the Collateral as the Bank directs or approves.
Section 6.06. Bank to Discharge Liens. If a Default has occurred, PDC
authorizes and empowers the Bank or its appointees or any of them to appear in
their names in any court of any country where a suit is pending against any
Collateral because of any alleged Lien against any Collateral from which the
Collateral has not been released and to take reasonable steps towards the
defense of the suit and the purchase or discharge of the Lien. All reasonable
expenditures made or incurred by them in the defense or purchase or discharge
shall be a debt due to the Bank from
9
<PAGE> 13
PDC on whose account the Bank appeared and shall be secured by the lien of this
Security Agreement in like manner and extent as if the amount and description
thereof were written herein.
Section 6.07. Payment of Expenses. PDC covenants that upon the happening
and during the continuance of a Default, then, upon written demand of the Bank,
PDC will pay to the Bank the whole amount due and payable for the Obligations
of the Borrower under the Agreement; and if the Borrower fails to pay them
forthwith upon demand, the Bank shall be entitled to recover judgment for the
whole amount so due and unpaid, together with any further amounts sufficient to
cover the reasonable compensation to the Bank or its agents and counsel and any
necessary advances, expenses, and liabilities made or incurred by them
hereunder. All moneys collected by the Bank under this Section 6.07 shall be
applied according to Section 6.02 above.
Section 6.08. Remedies Cumulative. Each and every power and remedy
herein given to the Bank shall be cumulative and shall be in addition to every
other power and remedy herein given or now or hereafter existing at law, in
equity, or by statute, and each and every power and remedy whether herein given
or otherwise existing may be exercised whenever deemed expedient by the Bank,
and the exercise or the beginning of the exercise of any power or remedy shall
not be construed as a waiver of the right to exercise at the same time or
thereafter any other power or remedy. The Bank shall not be required or bound
to enforce any other rights under any other agreement or instrument securing
the Obligations before enforcing its rights under this Security Agreement. No
delay or omission by the Bank in exercising any right or power, or in pursuing
any remedy accruing upon a Default, shall impair the right, power, or remedy or
be construed as a waiver of the Default or an acquiescence therein; nor shall
the Bank's acceptance of any security or payment of or on account of the
Obligations of the Borrower under the Agreement maturing after a Default or of
any payment for any past default be construed as a waiver of any right to
exercise any remedies for any future Default or any past Default not completely
cured thereby. No consent, waiver, or approval of the Bank shall be deemed
effective unless it is in writing and duly signed by the Bank; any waiver by
the Bank of any terms of this Security Agreement or any consent given under
this Security Agreement shall be effective only for the purpose and on the
terms for which it is given and shall be without prejudice to the right to give
or withhold consent for future matters.
Section 6.09. Cure of Defaults. If, at any time after a Default occurs
and before the actual sale of any Collateral by the Bank or before any
enforcement or foreclosure proceedings, the Borrower or PDC offer to cure
completely all Defaults and to pay all expenses, advances, and damages to the
Bank for the Default, with interest at the rate stated in the Agreement (but
subject to the limitations in the Agreement), then the Bank may (but need not)
accept the offer and payment and restore the Borrower and PDC to its and their
former position, but this action, if taken, shall not affect any subsequent
Default or impair any rights consequent thereon.
Section 6.10. Discontinuance of Proceedings. If the Bank has enforced
any right, power, or remedy under this Security Agreement by foreclosure,
entry, or otherwise, and the proceedings have been discontinued or abandoned or
determined adversely to the Bank, then PDC and the Bank
10
<PAGE> 14
shall be restored to their former positions and rights hereunder with respect
to the property subject or intended to be subject to this Security Agreement,
and all rights, remedies, and powers of the Bank shall continue as if no
proceedings had been taken.
ARTICLE 7 - MISCELLANEOUS
Section 7.01. Contracts. It is expressly agreed that anything herein to
the contrary notwithstanding, the Bank shall have no obligation or liability
under any drilling contract, lease, or other contract concerning the use or
operation of the Rigs because of or arising out of this Security Agreement, nor
shall the Bank be required to perform or fulfill any obligations of PDC under
or pursuant to any drilling contract, lease, or other contract concerning the
use or operation of the Rigs or to make any payment or inquiry as to the nature
or sufficiency of any payment received by it or to present or file any claim,
or to take other action to collect or enforce the payment of any amounts which
may have been assigned to it or to which it may be entitled hereunder at any
time.
Section 7.02. Power of Attorney. PDC hereby constitutes the Bank, its
successors, and assigns, as its true and lawful attorney, irrevocably, with
full power (in the name of PDC or otherwise), if a Default has occurred and is
continuing, to ask, require, demand, receive, compound, and give acquittance
for any moneys, claims, property, and rights hereby assigned, and claims for
moneys due and to become due under or arising out of the Collateral hereby
assigned, to endorse any checks or other instruments or orders in connection
therewith, and to file any claims or take any action or institute any
proceedings which the Bank reasonably deems necessary or advisable in the
premises.
Section 7.03. Irrevocable Nature of Power. The powers and authority
granted to the Bank herein have been given for a valuable consideration and are
hereby declared irrevocable.
Section 7.04. Further Documents. PDC agrees that upon the written
request of the Bank, it will promptly and duly execute and deliver any further
instruments and documents the Bank reasonably deems desirable in obtaining the
full benefits of this Security Agreement and of the rights and powers herein
granted.
Section 7.05. Notices. All notices or other communications required it
be made hereunder to PDC shall be made in the manner and to the address for it
in the Agreement and if to the Bank in the manner and to the address for the
Bank in the Agreement.
Section 7.06. Notice of Acquisition or Substitution: Within ten days of
the acquisition of a new rig or the substitution of a new rig for an old, PDC
covenants that it will notify the Bank of the acquisition or substitution and
will provide a description of the new or substituted Rig as the Bank requires.
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<PAGE> 15
Section 7.07. Choice of Law. This Security Agreement shall be governed
by the laws of Texas and may not be amended or changed except by an instrument
in writing signed by all parties hereto.
Section 7.08. Severability of Provisions. Any provision of this Security
Agreement that is prohibited or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of the prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of the provision in any other
jurisdiction. To the extent permitted by applicable law, PDC hereby waives any
law that renders any provision hereof prohibited or unenforceable in any
respect.
Section 7.09. Release of Lien. Upon the payment in full of all
Obligations, the Bank shall release PDC of all of its obligations under this
Security Agreement and file all appropriate statements pursuant to the UCC.
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be executed by their duly authorized officers all as of the date
noted above.
PATTERSON DRILLING COMPANY
By: /s/ JAMES C. BROWN
-------------------------------
Name: James C. Brown
-------------------------------
Title: C.F.O.
-------------------------------
NORWEST BANK TEXAS, NATIONAL ASSOCIATION
By: /s/ JAMES B. FRANK
-------------------------------
Name: James B. Frank
Title: Senior Vice President
<PAGE> 1
EXHIBIT 10.4
GUARANTY
FOR VALUABLE CONSIDERATION, and to induce NORWEST BANK TEXAS, NATIONAL
ASSOCIATION, a national banking association (the "Bank"), to enter into that
certain Credit Agreement dated December 9, 1997 (the "Credit Agreement"),with
PATTERSON ENERGY, INC., a Delaware corporation (the "Borrower"), PATTERSON
DRILLING COMPANY, a Delaware corporation, PATTERSON PETROLEUM, INC., a Texas
corporation, and PATTERSON PETROLEUM TRADING COMPANY, INC., a Texas corporation
(each a "Guarantor" and collectively the "Guarantors"), jointly and severally
give this guaranty (the "Guaranty") and jointly and severally, absolutely, and
unconditionally guarantee to the Bank the full and prompt payment of any and
all indebtedness of every kind and nature whatsoever which the Borrower may now
or at any time hereafter owe the Bank, including but not limited to each and
every Obligation (as defined in the Credit Agreement) arising under the Credit
Agreement, (collectively the "Indebtedness"). This Guaranty is an absolute,
unconditional, and continuing guaranty of payment of the Indebtedness and shall
continue to be binding upon the Guarantors until the Indebtedness is paid in
full.
The liability of the Guarantors under this Guaranty shall include
accrued interest and all reasonable attorneys' fees, collection costs, and
enforcement expenses incurred by the Bank in collecting on and enforcing its
rights under the Indebtedness, and all such costs and expenses incurred by the
Bank in connection with the protection, defense, or enforcement of this
Guaranty in any litigation or bankruptcy proceedings. The Bank may apply in
reduction of the Indebtedness any sums received by or available to the Bank on
account of the Indebtedness from the Borrower or any other person, or from the
Borrower's or other such persons' properties or any collateral security or
other source of payment, and such application of proceeds or receipts shall not
reduce or impair the liability of the Guarantors under this Guaranty.
The Indebtedness may be created and continued in any amount without
reducing or impairing the liability of the Guarantors under this Guaranty. Any
payment made by the Guarantors under this Guaranty shall be effective to reduce
or discharge the Guarantors' liability only if accompanied by a written
transmittal document, received by the Bank and advising it that payment is made
under this Guaranty for that purpose.
Each Guarantor further acknowledges and agrees with the Bank that:
1. No act or event need occur to establish the liability of any
Guarantor under this Guaranty, and no act or event, except full payment and
discharge of all Indebtedness, shall exonerate and discharge the liability of
the Guarantors under this Guaranty.
2. If any Guarantor is dissolved or changes its legal form of
organization without the prior written consent of the Bank or becomes insolvent
(however defined), then the Bank may declare immediately due and payable the
obligations of that Guarantor under this Guaranty, and that Guarantor shall
immediately pay to the Bank the full amount of all Indebtedness, whether due
1
<PAGE> 2
and payable or unmatured. If any Guarantor voluntarily commences or there is
commenced involuntarily against any Guarantor a case under the United States
Bankruptcy Code, and any receiver, trustee, examiner, liquidator, or similar
official is appointed for any Guarantor in connection therewith and the
appointment continues undischarged or the proceeding continues undismissed or
unstayed for 60 consecutive days, the obligations of any Guarantor under this
Guaranty shall immediately be due and payable without the necessity of demand
or notice.
3. No Guarantor will exercise or enforce any right of contribution,
reimbursement, recourse, or subrogation available to the Guarantor against the
Borrower or any person liable for payment of the Indebtedness, or as to any
collateral securing the Indebtedness, unless all Indebtedness has first been
fully paid and discharged.
4. The Bank may in its discretion enter into transactions resulting
in the creation or continuance of Indebtedness, without notice to or the
consent or approval of any Guarantor, regardless of whether any existing
relationship between the Borrower and the Guarantor has been revoked and
regardless of whether this Guaranty has been revoked.
5. The liability of any Guarantor shall not be reduced or impaired
by any of the following acts or events (which the Bank is expressly authorized
to do, omit, or suffer from time to time, both before and after revocation of
this Guaranty, without notice to or the consent or approval of any Guarantor):
(I) any acceptance of collateral security, guarantors, accommodation parties,
or sureties for any or all of the Indebtedness; (ii) any one or more extensions
or renewals of Indebtedness (including a period longer than the original
period) or any modification of the interest rate, maturity, or other
contractual terms applicable to all or part of the Indebtedness; (iii) any
waiver or indulgence granted to the Borrower, any delay or lack of diligence in
the enforcement of the Indebtedness, or any failure to institute proceedings,
file a claim, give required notices, or otherwise protect any of the
Indebtedness; (iv) any full or partial release of, settlement with, or
agreement not to sue the Borrower or any other Guarantor or other person liable
for any of the Indebtedness; (v) any discharge of any evidence of Indebtedness
or the acceptance of any instrument renewing or refinancing the Indebtedness;
(vi) any failure to obtain collateral security (including rights of setoff) for
the Indebtedness, or to assure its proper or sufficient creation, perfection,
or priority, or to protect, insure, or enforce any collateral security, or any
modification, substitution, discharge, impairment, or loss of the collateral
security; (vii) any foreclosure or enforcement of any collateral security by
the Bank or any other creditor of the Borrower with a security interest in the
collateral security; (viii) any assignment or transfer of any Indebtedness or
documentation evidencing the Indebtedness; (ix) any order of application of any
payments or credits upon the Indebtedness from the Borrower, the Guarantors, or
any other person; and (x) any election by the Bank under Section 1111(b)(2) of
the United States Bankruptcy Code.
6. Each Guarantor waives any and all defenses, claims, and
discharges of the Borrower, or any other obligor, pertaining to the
Indebtedness, except the defense of discharge by payment in full. Without
limiting the generality of the preceding sentence, no Guarantor will assert,
plead, or enforce against the Bank any defense of waiver, release, discharge in
bankruptcy,
2
<PAGE> 3
statute of limitations, res judicata, statute of frauds, anti-deficiency
statute, misrepresentation, fraud, incapacity, minority, usury, illegality, or
unenforceability which may be available to the Borrower or any other party
liable for payment of any of the Indebtedness, or any setoff available against
the Bank to the Borrower or any other person, whether or not on account of a
related transaction. Each Guarantor shall be liable for any deficiency
remaining after foreclosure of any mortgage, deed of trust, or security
interest securing the Indebtedness, whether or not the liability of the
Borrower or any other obligor for such deficiency is discharged pursuant to
statute or judicial decision.
7. The Bank may in its sole discretion demand that any Guarantor
discharge its obligations under this Guaranty at any time, either at the
scheduled or accelerated maturity of the Indebtedness or at any earlier or
later time, and regardless of whether there has been a default with respect to
the Indebtedness. The Bank shall not be required to first resort for payment
of the Indebtedness to the Borrower or to any other person or their properties,
or first to enforce, realize upon, or exhaust any collateral security given to
secure the Indebtedness before enforcing this Guaranty. Each Guarantor waives
presentment, demand for payment, notice of dishonor or nonpayment, and protest
of any instrument evidencing part or all of the Indebtedness.
8. If any payment applied by the Bank to the Indebtedness is later
set aside, recovered, rescinded, or returned for any reason (including, without
limitation, the bankruptcy, insolvency, or reorganization of the Borrower or
any other obligor), the Indebtedness to which the payment was applied shall
under this Guaranty be deemed to have continued in existence, notwithstanding
that application, and this Guaranty shall be enforceable for the Indebtedness
as fully as if the application had never been made.
9. The liability of each Guarantor under this Guaranty is in
addition to and cumulative with all other liabilities of each Guarantor to the
Bank as a guarantor or otherwise, without limitation as to amount, unless the
instrument or agreement evidencing or creating the other liability specifically
provides to the contrary.
10. This Guaranty shall be enforceable regardless of the failure of
other persons to sign other guaranties of the Indebtedness. This Guaranty
shall be effective upon delivery to the Bank, without further act, condition,
or acceptance by the Bank, and shall be binding upon each Guarantor and the
representatives, successors, and assigns of each Guarantor for the benefit of
the Bank and its participants, successors, and assigns. Any invalidity or
unenforceability of any provision or application shall not affect other lawful
provisions and applications of this Guaranty, which is severable. Before the
payment in full of the Indebtedness, this Guaranty may not be waived, modified,
amended, terminated, released, or otherwise changed except by a writing signed
by each Guarantor and the Bank. This Guaranty is issued in and shall be
governed by the laws of Texas.
11. Each Guarantor represents and warrants to the Bank that (I) it is
a corporation duly organized and existing in good standing and has full power
and authority to make and deliver this
3
<PAGE> 4
Guaranty; (ii) its execution, delivery, and performance of this Guaranty has
been duly authorized by all necessary action of its directors and shareholders
and does not and will not violate the provisions of, or constitute a default
under, any presently applicable law or its certificate or articles of
incorporation or bylaws or any agreement presently binding on it; (iii) this
Guaranty has been duly executed and delivered by its authorized officers and
constitutes its lawful, binding, and legally enforceable obligation (subject to
the United States Bankruptcy Code and other similar laws generally affecting
the enforcement of creditors' rights); and (iv) the authorization, execution,
delivery, and performance of this Guaranty do not require notification to,
registration with, or consent or approval by any federal, state, or local
regulatory body or administrative agency.
IN WITNESS WHEREOF, this Guaranty has been duly executed on December
9,1997, by the Guarantors.
PATTERSON DRILLING COMPANY
---------------------------------
By: /s/ JAMES C. BROWN
----------------------------
Its: C.F.O.
----------------------------
PATTERSON PETROLEUM, INC.
---------------------------------
By: /s/ JAMES C. BROWN
----------------------------
Its: C.F.O.
----------------------------
PATTERSON PETROLEUM TRADING COMPANY, INC.
---------------------------------
By: /s/ JAMES C. BROWN
----------------------------
Its: C.F.O.
----------------------------
4
<PAGE> 1
EXHIBIT 99.1
ASSET PURCHASE AGREEMENT
BETWEEN
PATTERSON DRILLING COMPANY
AND
V&B DRILLING, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
<S> <C>
THE ASSET PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 The Asset Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PDC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.2 Authority; Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF V&B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3.2 Authority; Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3.3 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Environmental Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Environmental Permits" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Environmental Laws" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Hazardous Materials" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Material Adverse Effect" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3.4 Contract Drilling Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3.5 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.6 Drilling Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.8 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.9 Normal Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.10 V&B Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 4.1 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 4.2 Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 4.3 V&B, V Byrd and R Vaught Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 4.4 PDC Assumption of Drilling Contracts; V&B Invoicing of Direct Costs . . . . . . . . . . . . . . 6
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
SECTION 4.5 PDC Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 4.6 Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 4.7 Disclaimer of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE V
CONDITIONS PRECEDENT TO THE ASSET PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 5.1 Conditions to Each Party's Obligation to Effect the Asset Purchase . . . . . . . . . . . . . . 7
SECTION 5.2 Conditions to Obligation of V&B to Effect the Asset Purchase . . . . . . . . . . . . . . . . . 7
SECTION 5.3 Conditions to Obligations of PDC to Effect the Asset Purchase . . . . . . . . . . . . . . . . . 7
ARTICLE VI
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6.2 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 6.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 6.4 Entire Agreement; No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 6.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 6.6 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 6.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 6.8 Enforcement of This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ANNEX 1 Description of Drilling Rigs, Equipment and Rolling Stock
ANNEX 2 Description of Real Property
ANNEX 3 List of Drilling Contracts
EXHIBIT A(I) Non-Competition Agreement of V&B Drilling, Inc.
EXHIBIT A(II) Non-Competition Agreement of Vernon Byrd
EXHIBIT A(III) Non-Competition Agreement of Roland J. Vaught
EXHIBIT B Bill of Sale and Assignment
EXHIBIT C Warranty Deed
EXHIBIT D Warranty Deed
EXHIBIT E Warranty Deed
EXHIBIT F Warranty Deed
</TABLE>
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<PAGE> 4
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated November 14, 1997 (this
"Agreement"), among PATTERSON DRILLING COMPANY ("PDC"), a Delaware corporation
and a wholly-owned subsidiary of Patterson Energy, Inc. ("PEC"), and V&B
DRILLING, INC., a Texas corporation ("V&B").
WITNESSETH:
WHEREAS, V&B owns seven drilling rigs, related drilling
equipment and certain rolling stock (collectively, the "Drilling Rigs,
Equipment and Rolling Stock"), and a shop and four yards in Odessa, Texas
(collectively, the "Real Property"), all as more particularly described on
Annex 1, in the case of the Drilling Rigs, Equipment and Rolling Stock and
Annex 2, in the case of the Real Property;
WHEREAS, PDC desires to purchase, and V&B desires to sell, all
of V&B's right, title and interest in the Drilling Rigs, Equipment and Rolling
Stock and in the Real Property (the "Asset Purchase") for the consideration set
forth and provided for herein; and
WHEREAS, PDC, on the one hand, and V&B, on the other, desire
to make certain representations, warranties and agreements in connection with
the Asset Purchase.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE I
THE ASSET PURCHASE
SECTION 1.1 The Asset Purchase. Upon the terms and subject
to the conditions of this Agreement, at the Closing (as defined in Section 1.3
below) provided herein, PDC shall purchase from V&B and V&B shall sell to PDC,
all of V&B's right, title and interest in and to the Drilling Rigs, Equipment
and Rolling Stock and in and to the Real Property.
SECTION 1.2 Purchase Price. PDC agrees to pay to V&B at the
Closing a total of $13 million cash (the "Purchase Price") for all of V&B's
right, title and interest in and to the Drilling Rigs, Equipment and Rolling
Stock and in and to the Real Property. Of the Purchase Price, $129,000 will be
allocated to the Real Property.
SECTION 1.3 Closing. The closing of the Asset Purchase (the
"Closing") shall take place at 9:00 a.m., local time, on the date of this
Agreement at the offices of Patterson Energy, Inc., in
<PAGE> 5
Snyder, Texas, or at such other time and place as PDC and V&B shall agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PDC
PDC represents and warrants to V&B as follows:
SECTION 2.1 Organization, Standing and Power. PDC is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power and
authority to carry on its business as now being conducted.
SECTION 2.2 Authority; Non-Contravention. PDC has all
requisite power and authority to enter into this Agreement and to consummate
the Asset Purchase. The execution and delivery by PDC of this Agreement and
the consummation by PDC of the Asset Purchase have been duly authorized by all
necessary corporate action on the part of PDC. This Agreement has been duly
executed and delivered by PDC and (assuming the valid authorization, execution
and delivery of this Agreement by V&B) constitutes a valid and binding
obligation of PDC enforceable against PDC in accordance with its terms, except
to the extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws of
general applicability relating to or affecting the enforcement of creditors'
rights and by the effect of general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law). No filing
or registration with, or authorization, consent or approval of, any domestic
(federal and state), foreign or supranational court, commission, governmental
body, regulatory agency, authority or tribunal (a "Governmental Agency") is
required by or with respect to PDC in connection with the execution and
delivery of this Agreement by PDC or is necessary for the consummation by PDC
of the Asset Purchase and the other transactions contemplated by this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF V&B
SECTION 3.1 Organization, Standing and Power. V&B is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Texas and has the requisite corporate power and authority
to carry on its business as now being conducted.
SECTION 3.2 Authority; Non-Contravention. V&B has all
requisite power and authority to enter into this Agreement and to consummate
the Asset Purchase. This Agreement has been duly executed and delivered by V&B
and (assuming the valid authorization, execution and delivery of this Agreement
by PDC) constitutes a valid and binding obligation of V&B enforceable against
it in accordance with its terms, except to the extent enforceability may be
limited by bankruptcy, insolvency,
2
<PAGE> 6
reorganization, moratorium, fraudulent transfer or other similar laws of
general applicability relating to or affecting the enforcement of creditors'
rights and by the effect of general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law). The
execution and delivery of this Agreement do not, and the consummation of the
Asset Purchase and compliance with the provisions hereof will not, conflict
with, or result in any violation of, or default (with or without notice of
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of a material
benefit under, or result in the creation of any lien, security interest,
charges or encumbrances upon any of the properties or assets of V&B under, any
provision of (i) the Articles of Incorporation or Bylaws of V&B (true and
complete copies of which as of the date hereof have been delivered to PDC),
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license
applicable to V&B or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to V&B or any of its respective
properties or assets. No filing or registration with, or authorization,
consent or approval of, any Governmental Entity is required by or with respect
to V&B in connection with the execution and delivery of this Agreement by V&B
is necessary for the consummation by V&B of the Asset Purchase.
SECTION 3.3 Environmental Matters.
(a) Except to the extent that the inaccuracy of any of
the following, individually or in the aggregate, would not have a Material
Adverse Effect on V&B, to the knowledge of V&B:
(i) V&B holds, and is in compliance with and has been in
compliance with for the last three years, all Environmental Permits,
and is otherwise in substantial compliance and has been in substantial
compliance for the last three years with, all applicable Environmental
Laws and there is no condition that is reasonably likely to prevent or
materially interfere prior to the Effective Time with compliance by
V&B with Environmental Laws;
(ii) no modification, revocation, reissuance, alteration,
transfer or amendment of any Environmental Permit, or any review by,
or approval of, any third party of any Environmental Permit is
required in connection with the execution or delivery of this
Agreement or the consummation by V&B of the transactions contemplated
hereby or the operation of the business of V&B on the date of the
Closing;
(iii) V&B has not received any Environmental Claim, nor has
any Environmental Claim been threatened against V&B;
(iv) V&B has not entered into, agreed to or is not subject
to any outstanding judgment, decree, order or consent arrangement with
any governmental authority under any Environmental Laws, including
without limitation those relating to compliance with any Environmental
Laws or to the investigation, cleanup, remediation or removal of
Hazardous Materials;
3
<PAGE> 7
(v) there are no circumstances that are reasonably likely
to give rise to liability under any agreements with any person
pursuant to which V&B would be required to defend, indemnify, hold
harmless, or otherwise be responsible for any violation by or other
liability or expense of such person, or alleged violation by or other
liability or expense of such person, arising out of any Environmental
Law; and
(vi) there are no other circumstances or conditions that
are reasonably likely to give rise to liability of V&B under any
Environmental Laws.
(b) For purposes of this Agreement, the terms below shall
have the following meanings:
"Environmental Claim" means any written complaint, notice,
claim, demand, action, suit or judicial, administrative or arbitral
proceeding by any person to V&B asserting liability or potential
liability (including without limitation, liability or potential
liability for investigatory costs, cleanup costs, governmental
response costs, natural resource damages, property damage, personal
injury, fines or penalties) arising out of, relating to, based on or
resulting from (i) the presence, discharge, emission, release or
threatened release of any Hazardous Materials at any location, (ii)
circumstances forming the basis of any violation or alleged violation
of any Environmental Laws or Environmental Permits, or (iii) otherwise
relating to obligations or liabilities of V&B under any Environmental
Law.
"Environmental Permits" means all permits, licenses,
registrations, exemptions and other governmental authorizations
required under Environmental Laws for V&B to conduct its operations as
presently conducted.
"Environmental Laws" means all applicable foreign, federal,
state and local statutes, rules, regulations, ordinances, orders,
decrees and common law relating in any manner to pollution or
protection of the environment, to the extent and in the form that such
exist at the date hereof.
"Hazardous Materials" means all hazardous or toxic 3
substances, wastes, materials or chemicals, petroleum (including crude
oil or any fraction thereof) and petroleum products, asbestos and
asbestos-containing materials, pollutants, contaminants and all other
materials and substances, including but not limited to radioactive
materials, regulated pursuant to any Environmental Laws.
"Material Adverse Effect" means any change or effect that is
or, as far as can reasonably be determined, is likely to be materially
adverse to the assets, properties, conditions (financial or
otherwise), business or results of operations of V&B.
SECTION 3.4 Contract Drilling Assets. Annex 1 and Annex 2
set forth a complete list
4
<PAGE> 8
of all assets of V&B, relating to or used in its contract drilling operations,
other than the two vehicles (1998 Lincoln Navigator and 1993 Lincoln) currently
being used by Roland J. Vaught ("R Vaught") and Vernon Byrd ("V Byrd").
SECTION 3.5 Title. Set forth in Annex 1 and Annex 2 is a
description of the Drilling Rigs, Equipment and Rolling Stock and of the Real
Property, respectively, which description is accurate and complete in all
material respects. V&B has good and, in the case of the Real Property,
indefeasible title to a 100% interest in the Drilling Rigs, Equipment and
Rolling Stock and in the Real Property, subject to no Liens except for (i)
Liens for taxes not yet delinquent or the validity of which is being contested
in good faith, and (ii) any Liens arising by operation of law securing
obligations not yet overdue. For purposes of this Agreement "Liens" means
liens, mortgages, pledges, security interests, encumbrances, claims or charges
of any kind.
SECTION 3.6 Drilling Contracts. Set forth in Annex 3 is a
true and correct list of all drilling contracts (collectively, the "Drilling
Contracts") to which V&B is a party as of the date of this Agreement. A copy
of each of the Drilling Contracts has previously been delivered to PDC.
SECTION 3.7 Litigation. There is no suit, action,
investigation or proceeding pending or, to the knowledge of V&B, threatened
against V&B at law or in equity before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind,
except for a suit pending in Andrews County, Texas, involving ad valorem taxes
in an amount less than $5,000 and otherwise not material to V&B or the
transaction contemplated by this Agreement.
SECTION 3.8 Brokers. No broker, investment banker or other
person is entitled to any broker's, finder's or other similar fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of V&B.
SECTION 3.9 Normal Operations. All wells currently being
drilled by V&B under the Drilling Contracts are drilling under normal
operations.
SECTION 3.10 V&B Stockholders. Vernon Byrd and Roland J.
Vaught are the only stockholders of V&B.
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.1 Fees and Expenses. All costs and expenses
incurred by PDC in connection with this Agreement and the transactions
contemplated hereby shall be paid by PDC; such costs and expenses incurred by
V&B shall be paid by V&B.
SECTION 4.2 Reasonable Efforts. Upon the terms and subject
to the conditions set forth in this Agreement, each of the parties agrees to
use all reasonable best efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Asset Purchase and
the other transactions contemplated by this Agreement and the prompt
satisfaction of the conditions hereto.
5
<PAGE> 9
SECTION 4.3 V&B, V Byrd and R Vaught Indemnification. On and
after the date of Closing, V&B, V Byrd, President, director and stockholder of
V&B, and R Vaught ("R Vaught"), Vice President, director and stockholder of
V&B, shall jointly and severally indemnify and hold PEC and PDC harmless
against and in respect of all actions, suits, demands, judgments, costs and
expenses (including reasonable attorneys' fees of PEC or PDC), relating to any
misrepresentation, breach of any representation or warranty or non-fulfillment
of any agreement on the part of V&B contained in this Agreement. The
indemnification provided for in this Section 4.3 shall terminate and be of no
further force and effect two years from the Closing Date, except as to any
representation or warranty as to which a written notice of claim for
indemnification has been given to V&B, V Byrd and R Vaught prior to the
expiration of such two-year period.
SECTION 4.4 PDC Assumption of Drilling Contracts; V&B
Invoicing of Direct Costs. Effective as of 7:00 a.m. Odessa, Texas time on the
date of this Agreement ("Effective Time of Assumption"), PDC shall assume all
obligations and rights and benefits of V&B under each of the Drilling
Contracts. In addition, within 30 days following Closing, V&B shall invoice
PDC for all direct costs incurred by V&B under each of the Drilling Contracts
prior to the Effective Time of Assumption, which invoices shall be paid to V&B
by PDC within 30 days of receipt by PDC.
SECTION 4.5 PDC Indemnification. PDC shall indemnify and
hold V&B harmless from all costs and liabilities (including reasonably
attorneys' fees) incurred by V&B under any of the Drilling Contracts for events
that occurred after the Effective Time of Assumption.
SECTION 4.6 Real Estate Taxes. V&B and PDC agree that any
special assessments or other charges relating to the Real Property shall be
prorated between V&B and PDC to the date of Closing.
SECTION 4.7 Disclaimer of Warranties. V&B and PDC both
understand and agree that the Drilling Rigs, Equipment and Rolling Stock are
being conveyed by V&B to PDC in "AS IS, WHERE IS" condition, and V&B hereby
disclaims any and all warranties relating to the condition of the Drilling
Rigs, Equipment and Rolling Stock, and V&B hereby specifically disclaims the
warranty of MERCHANTABILITY and FITNESS FOR A PARTICULAR PURPOSE, with respect
to the Drilling Rigs, Equipment and Rolling Stock.
6
<PAGE> 10
ARTICLE V
CONDITIONS PRECEDENT TO THE ASSET PURCHASE
SECTION 5.1 Conditions to Each Party's Obligation to Effect
the Asset Purchase. The respective obligations of each party to effect the
Asset Purchase shall be subject to the fulfillment or waiver (where
permissible) at or prior to the Closing Date of each of the following
conditions:
(a) No Order. No Governmental Entity or court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any law, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is then in effect and
has the effect of prohibiting the Asset Purchase or any of the other
transactions contemplated hereby; provided that, in the case of any such
decree, injunction or other order, each of the parties shall have used
reasonable best efforts to prevent the entry of any such injunction or other
order and to appeal as promptly as practicable any decree, injunction or other
order that may be entered.
(b) Consents. V&B shall have received written consents
of the other party or parties to each of the Drilling Contracts for the
assumption thereof by PDC pursuant to the provisions of Section 4.4 of this
Agreement and delivered copies thereof to PDC.
SECTION 5.2 Conditions to Obligation of V&B to Effect the
Asset Purchase. The obligation of V&B to effect the Asset Purchase shall be
subject to the fulfillment at or prior to the Closing of the following
additional conditions; provided that V&B may waive any of such conditions in
its sole discretion:
(a) Performance of Obligations; Representations and
Warranties. PDC shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior to
the Closing, each of the representations and warranties of PDC contained in
this Agreement shall be true and correct on and as of the Closing.
(b) Officers' Certificate. PDC shall have furnished to
V&B a certificate, dated the Closing, signed by the appropriate officers of
PDC, certifying to the effect that to the best of the knowledge and belief of
PDC, the conditions set forth in Section 5.1 and Section 5.2(a) have been
satisfied in full.
(c) Payment of Purchase Price. PDC shall have made
delivery of the Purchase Price as provided in Section 1.2 of this Agreement.
SECTION 5.3 Conditions to Obligations of PDC to Effect the
Asset Purchase. The obligations of PDC to effect the Asset Purchase shall be
subject to the fulfillment at or prior to the Closing of the following
additional conditions, provided that PDC may waive any such conditions in its
sole discretion:
7
<PAGE> 11
(a) Performance of Obligations; Representations and
Warranties. V&B shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior to
the Closing, each of the respective representations and warranties of V&B
contained in this Agreement shall be true and correct on and as of the Closing
shall be true in all material respects on and as of the Closing.
(b) Officers' Certificate. V&B shall have furnished to
PDC a certificate, dated the Closing, signed by the appropriate officers of
V&B, certifying to the effect that to the best of the knowledge and belief of
V&B, the conditions set forth in Section 5.1 and Section 5.3(a) have been
satisfied.
(c) Opinion of Counsel. PDC shall have received an
opinion of counsel Rick Browning, Attorney at Law, Odessa, Texas, counsel to
V&B, dated the Closing, substantially to the effect that:
(i) The incorporation, existence and good standing of V&B
are as stated in this Agreement.
(ii) This Agreement has been duly authorized, executed and
delivered by V&B, and (assuming the due and valid authorization,
execution and delivery by PDC) constitutes the legal, valid and
binding agreement of V&B enforceable against V&B in accordance with
its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws of general applicability relating to or
affecting the enforcement of creditors' rights and by the effect of
general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(iii) The execution and performance by V&B of this
Agreement will not violate the Articles of Incorporation or Bylaws of
V&B and will not violate, result in a breach of, or constitute a
default under, any material lease, mortgage, contract, agreement,
instrument, law, rule, regulation, judgment, order or decree known to
such counsel to which V&B is a party or to which it or any of its
properties or assets may be bound.
(iv) To the knowledge of such counsel, there are no
actions, suits or proceedings, pending or threatened against or
affecting V&B by any Governmental Entity which seek to restrain,
prohibit or invalidate the transactions contemplated by this
Agreement.
(v) To the knowledge of such counsel, no consent,
approval, authorization or order of any court or governmental agency
or body which has not been obtained is required on behalf of V&B for
consummation of the transactions contemplated by this Agreement.
(vi) Each Non-Competition Agreement between PDC and each
of V&B, V Byrd and R Roland constitutes the legal, valid and binding
agreement of it/him enforceable against it/him in accordance with its
terms, except to the extent enforceability may be limited by
bankruptcy,
8
<PAGE> 12
insolvency, reorganization, moratorium, fraudulent transfer or other
similar laws of general applicability relating to or affecting the
enforcement of creditors' rights and by the effect of general
principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
In rendering such opinion, counsel for V&B may rely as to matters of fact upon
the representations of officers of V&B contained in any certificate delivered
to such counsel and certificates of public officials.
Such opinion shall be limited to the laws of the United States
of America and the State of Texas.
(d) Bill of Sale and Assignment. V&B shall have executed
and delivered the Bill of Sale and Assignment covering the Drilling Rigs,
Equipment and Rolling Stock in the form attached hereto as Exhibit B.
(e) General Warranty Deeds. V&B shall have executed and
delivered the respective General Warranty Deeds in the respective forms
attached hereto as Exhibits C, D, E and F, relating to the respective yards
being purchased hereunder by PDC
(f) Title Insurance. PDC shall have obtained title
commitments for title insurance on the Real Property.
(g) Titles. V&B shall have endorsed and delivered the
title certificates to the Rolling Stock described in Annex 1.
(h) Non-Competition Agreements. A Non-Competition
Agreement in the respective forms attached hereto as Exhibits A(I), A(II) and
A(III) shall have been executed and delivered by V&B, V Byrd and R Vaught, as
the case may be.
(i) Phase I Environmental Report. PDC shall have
received a Phase I Environmental Report (at its expense) covering the Real
Property, with conclusions satisfactory to PDC.
ARTICLE VI
GENERAL PROVISIONS
SECTION 6.1 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, sent by overnight courier or telecopied (with a confirmatory copy
sent by overnight courier) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
9
<PAGE> 13
(a) If to PDC, to:
Patterson Energy, Inc.
4510 Lamesa Highway
P.O. Drawer 1416
Snyder, Texas 79549
Attention: A. Glenn Patterson
President and Chief
Operating Officer
with copies to:
Thomas H. Maxfield, Esq.
Baker & Hostetler LLP
303 East 17th Avenue, Suite 1100
Denver, Colorado 80203-1264
(b) if to V&B, to:
Vernon Byrd, President
V&B Drilling, Inc.
2513 Mercury Avenue
Post Office Box 69109
Odessa, Texas 79769-9109
with copies to:
Rick Browning
Attorney at Law
5050 East University, Suite One
Odessa, Texas 79762
(c) if to Vernon Byrd, to:
Vernon Byrd
c/o V&B Drilling, Inc.
2513 Mercury Avenue
Post Office Box 69109
Odessa, Texas 79769-9109
Facsimile: (915) 381-2720
with copies to:
Rick Browning
Attorney at Law
5050 East University, Suite One
Odessa, Texas 79762
(d) if to Roland J. Vaught, to:
Roland J. Vaught
c/o V&B Drilling, Inc.
2513 Mercury Avenue
Post Office Box 69109
Odessa, Texas 79769-9109
Facsimile: (915) 381-2720
10
<PAGE> 14
with copies to:
Rick Browning
Attorney at Law
5050 East University, Suite One
Odessa, Texas 79762
SECTION 6.2 Interpretation. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated, and the words "hereof', "herein" and "hereunder"
and similar terms refer to this Agreement as a whole and not to any particular
provision of this Agreement, unless the context otherwise requires. The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 6.3 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties.
SECTION 6.4 Entire Agreement; No Third-Party Beneficiaries.
This Agreement, including the documents and instruments referred to herein, (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any person other
than the parties any rights or remedies hereunder; provided, however, that
legal counsel for V&B hereto may rely upon the representations and warranties
of V&B contained herein and in the certificates delivered pursuant to Sections
5.2(b) and 5.3(b).
11
<PAGE> 15
SECTION 6.5 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Texas,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
SECTION 6.6 Assignment. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties without the prior written consent of the other parties. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
SECTION 6.7 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule
of law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions be consummated as originally
contemplated to the fullest extent possible.
SECTION 6.8 Enforcement of This Agreement. The parties agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
IN WITNESS WHEREOF, PDC and V&B have executed this Agreement
as of the date first written above.
PDC:
PATTERSON DRILLING COMPANY
By: /s/ A. GLENN PATTERSON
---------------------------------------
A. Glenn Patterson
Chief Operating Officer
Attest:
James C. Brown, Secretary
12
<PAGE> 16
V&B:
V&B DRILLING, INC.
By: /s/ VERNON BYRD
--------------------------------
Vernon Byrd
President
Attest:
Roland J. Vaught, Secretary
TO INDUCE PATTERSON DRILLING COMPANY TO ENTER INTO THIS ASSET PURCHASE
AGREEMENT AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, THE UNDERSIGNED, BEING THE
OFFICERS, DIRECTORS AND STOCKHOLDERS OF V&B DRILLING, INC., ACCEPT AND AGREE TO
BE BOUND BY THE INDEMNIFICATION PROVISIONS OF SECTION 4.3 OF THIS ASSET
PURCHASE AGREEMENT.
/s/ VERNON BYRD
-----------------------------
Vernon Byrd
/s/ ROLAND J. VAUGHT
-----------------------------
Roland J. Vaught
13
<PAGE> 17
ANNEX 1
TO
ASSET PURCHASE AGREEMENT
DESCRIPTION OF DRILLING RIGS, EQUIPMENT AND ROLLING STOCK
A. Drilling Rigs and Equipment.
-------- ---- --- ---------
Rig No. Drawworks Manufacturer
--- --- --------- ------------
Rig No. 1 . . . . . . . . . . . . . . . . . W-45
Rig No. 2 . . . . . . . . . . . . . . . . . W-45
Rig No. 3 . . . . . . . . . . . . . . . . . W-45
Rig No. 4 . . . . . . . . . . . . . . . . . W-45
Rig No. 5 . . . . . . . . . . . . . . . . . BDW 450-T
Rig No. 6 . . . . . . . . . . . . . . . . . V-15
Rig No. 9 . . . . . . . . . . . . . . . . . W-45
All related parts and equipment, including engines, mud pumps, hooks
and blocks, derricks, substructures, rotary tables, blow-out
prevention equipment, drill bits and all tubular goods on the rigs and
in the yards owned by V&B, all of which are set forth on Appendix I to
the Bill of Sale and Assignment attached to this Agreement as Exhibit
B.
NOTE: For more specific information concerning the rigs and related
equipment, see Appendix I, to Bill of Sale and Assignment attached to
this Agreement as Exhibit B.
B. Rolling Stock
All rolling stock owned by V&B at the Effective Time of Assumption
(except the 1998 Lincoln Navigator driven by V Byrd and the 1993
Lincoln driven by R Vaught.
NOTE: For more specific information concerning the rolling stock, see
Appendix II to Bill of Sale and Assignment attached to this Agreement
as Exhibit B.
AX-1 - 1
<PAGE> 18
ANNEX 2
TO
ASSET PURCHASE AGREEMENT
DESCRIPTION OF REAL PROPERTY
I. Lots 15, 16, 17 and 18, Block 5, Rochester Replat of a portion of 1936
Subdivision as shown by the map or plat of record in Volume 9, Page
23, Plat Records, Ector County, Texas;
II. Lots 22, 23, 24 and 25, Block 1, Rochester Replat of a portion of 1936
Subdivision, a subdivision of 312.19 acres of a land in the West part
of Section 24, Block 43, T-2-S, T & P RR Company Survey, Ector County,
Texas, as shown by the map or plat of record in the office of the
County Clerk of said County;
III. Lot 5, Block 6, Westover Acres, a subdivision in Ector County, Texas,
according to the map or plat thereof of record in Volume 4, Page 44,
Plat Records of Ector County, Texas;
IV. Being a 4.47 acre tract of land in the Southwest Part of a 10.267 acre
tract of land in the Northwest Part of Section 33, Block 43, T-2-S, T
& P Ry. Co. Survey, Ector County, Texas.
NOTE: The Real Property is more particularly described on the
Warranty Deeds attached to this Agreement as Exhibits C, D, E and F,
respectively.
AX-2 - 1
<PAGE> 19
ANNEX 3
TO
ASSET PURCHASE AGREEMENT
LIST OF DRILLING CONTRACTS
<TABLE>
<S> <C> <C> <C> <C>
RIG
NO. COUNTY DATE OPERATOR WELL NAME
--- ------- ---- -------- ---- ----
5 Midland 04/15/97 Arco Permian TXL "N" 39-1 #1
6 Andrews 10/10/97 Minihan Oil & Gas University Consolidated XII #56
1 Ector 11/03/97 Citation Oil & Gas H. E. Cummins #15
4 Ector 01/17/97 Anadarko GCDU #284
9 Ector 01/17/97 Anadarko GCDU #264
</TABLE>
AX-3 - 1
<PAGE> 20
EXHIBIT A(I)
PATTERSON DRILLING COMPANY
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into this
_____ day of November, 1997 (this "Agreement"), by and between PATTERSON
DRILLING COMPANY, a Delaware corporation ("PDC"), and V&B DRILLING, INC., a
Texas corporation ("V&B").
RECITALS:
A. Simultaneously with the execution of this Agreement,
PDC and V&B have entered into that certain Asset Purchase Agreement, dated of
even date herewith (the "Asset Purchase Agreement"), providing for, among other
things, the purchase by PDC of the drilling rigs, related equipment and rolling
stock owned by V&B.
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 November 1, 2002 (the "Non-Compete Period").
2. Covenant Not to Compete.
(a) V&B covenants and agrees that during the Non-Compete
Period, V&B shall not, without the prior written consent of 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 otherwise assist,
or own, share in the earnings of, or invest in the stock, bonds, or other
securities of, any person which is engaged in, the contract oil and gas well
drilling business within the Permian Basin of West Texas and Southeastern New
Mexico (the "Competitive Business"); provided, however, that V&B 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
EXH A(I) - 1
<PAGE> 21
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 PDC or any affiliate of PDC with any state,
district, territory, or possession of the United States or any governmental
subdivision, agency, or instrumentality thereof by virtue of any statute, law,
regulation or administrative practice. The period of time during which V&B is
prohibited from engaging in certain activities by this Section shall be
extended by the length of time during which V&B is in breach of the terms of
this section.
(b) It is understood by and between the parties hereto
that the foregoing covenant by V&B not to enter into competition with 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 V&B to comply
with such covenant, PDC would not have agreed to enter into this Agreement or
the Asset Purchase Agreement. PDC and V&B have independently consulted with
their respective counsel and have been advised in all respects concerning the
reasonableness and propriety of such covenant, with specific regard to the
nature of the business conducted by PDC and its affiliates. V&B agrees that
such covenant is reasonable in scope, geographic area, and duration, and that
compliance with such covenant would not impose economic hardship on V&B.
3. Restrictions on Soliciting Business of PDC.
V&B further covenants and agrees that during the Non-Compete
Period, V&B 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 PDC:
(a) Solicit or hire any of the employees of PDC or
solicit or take away any of PDC's customers, lessors, or suppliers or attempt
any of the foregoing:
(b) Acquire or attempt to acquire rights providing any
product or service in a Competitive Business within the territory described in
Section 2 hereof; or
(c) Engage in any act which would interfere with or harm
any business relationship PDC has with any customer, lessor, employee,
principal or supplier.
4. Specific Performance.
Without intending to limit the remedies available to PDC, V&B
acknowledges that PDC will have no adequate remedies at law if V&B violates the
terms of Sections 2 or 3, hereof. In
EXH A(I) - 2
<PAGE> 22
such event, V&B agrees that PDC shall have the right, in addition to any other
rights it may have, to obtain in any court of competent jurisdiction specific
performance of such Sections of this Agreement or injunctive relief to restrain
any breach or threatened breach thereof. Nothing herein shall be construed as
prohibiting PDC from pursuing any other remedies available to PDC (whether at
law or in equity) for such breach or threatened breach, including, without
limitation, the recovery of monetary damages from V&B.
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 PDC and V&B.
(a) Representations and Warranties of PDC. PDC hereby
represents and warrants to V&B that: (i) it has all requisite power to enter
into and perform its obligations under this Agreement; (ii) this Agreement has
been duly and validly authorized by all necessary corporate action on the part
of PDC; (iii) the execution of this Agreement by PDC and performance of PDC's
obligations hereunder do not require the consent or approval of any other
party; and (iv) this Agreement is a valid and binding obligation of PDC.
(b) Representations and Warranties of V&B. V&B hereby
represents and warrants to PDC that: (i) V&B has the capacity and power to
enter into and perform obligations of V&B under this Agreement; (ii) V&B has
duly and validly executed this Agreement; (iii) the execution of this Agreement
and performance of obligations of V&B hereunder do not require the consent or
approval of any other party; and (iv) this Agreement constitutes a valid and
binding obligation of V&B.
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.
EXH A(I) - 3
<PAGE> 23
(c) Forum for Dispute Resolution. If any dispute arises
among the parties concerning the interpretation or performance of any portion
of this Agreement which the parties are unable to resolve themselves, and any
party brings an action against any other party seeking a declaratory order,
specific performance, damages, or any other legal or equitable relief based on
this Agreement, the parties agree that the forum for any such action shall be
an appropriate federal or state court in Texas having jurisdiction, agree that
venue will be proper in such courts, and waive any objections based on
inconvenience of the forum, and further agree that the prevailing party in any
such action, as determined by the court, shall be awarded its reasonable
attorneys' fees and costs in addition to any relief or judgment the court
awards.
(d) Entire Agreement; Amendment. This Agreement
constitutes the entire agreement between the parties with respect to the
subject matter contained herein and supersedes any previous oral or written
communications, representations, understandings or agreements with respect
thereto. The terms of this Agreement may be modified only in a writing, signed
by authorized representatives of both parties.
(e) Assignability. This Agreement will be binding upon
the parties' respective successors and permitted assigns. Neither party may
assign this Agreement and/or any of its rights and/or obligations hereunder
without the prior written consent of the other party, and any such attempted
assignment will be void; provided, however, that PDC may assign this Agreement
to PEC or to another subsidiary of PEC without the prior written consent of
V&B, and provided further that a transfer by PDC as a result of a merger or
sale of all or substantially all of the assets of PDC with or to a third party
that assumes PDC's obligations hereunder by operation of law or otherwise shall
not constitute a prohibited assignment under this Section 8(e).
(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.
EXH A(I) - 4
<PAGE> 24
Notices by mail will be considered delivered and become effective three days
after the mailing thereof. All notices by facsimile will be considered
delivered and become effective immediately upon the confirmed (by answer back
or other tangible printed verification or successful receipt) sending thereof.
To PDC: Patterson Drilling Company
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: A. Glenn Patterson
President and Chief Operating
Officer
To V&B: V&B Drilling, Inc.
2513 Mercury Avenue
P.O. Box 69109
Odessa, Texas 79769-9109
Facsimile: (915) 381-2720
with copies to:
Rick Browning
Attorney at Law
5050 East University, Suite One
Odessa, Texas 79762
(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.
EXH A(I) - 5
<PAGE> 25
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.
"PDC"
PATTERSON DRILLING COMPANY
By: /s/ JAMES C. BROWN
-----------------------------------
James C. Brown
Vice President-Finance
"V&B"
V&B DRILLING, INC.
By: /s/ VERNON BYRD
-----------------------------------
Vernon Byrd
President
EXH A(I) - 6
<PAGE> 26
EXHIBIT A(II)
PATTERSON DRILLING COMPANY
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into this
_____ day of November, 1997 (this "Agreement"), by and between PATTERSON
DRILLING COMPANY, a Delaware corporation ("PDC"), and VERNON BYRD, an
individual residing in Odessa, Texas ("V Byrd").
RECITALS:
A. Simultaneously with the execution of this Agreement,
PDC has entered into that certain Asset Purchase Agreement, dated of even date
herewith (the "Asset Purchase Agreement"), between PDC and V&B DRILLING, INC.
("V&B"), providing for, among other things, the purchase by PDC of the drilling
rigs, related equipment and rolling stock owned by V&B.
B. V Byrd is an officer, director and stockholder of
V&B.
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 November 1, 2002 (the "Non-Compete Period").
2. Covenant Not to Compete.
(a) V Byrd covenants and agrees that during the
Non-Compete Period, V Byrd shall not, without the prior written consent of PDC,
directly or indirectly, and whether as a principal or as an agent, officer,
director, employee, consultant, or otherwise, alone or in association with any
other person, carry on, be engaged, concerned, or take part in, render services
to, or otherwise assist,
EXH A(II) - 1
<PAGE> 27
or own, share in the earnings of, or invest in the stock, bonds, or other
securities of, any person which is engaged in, the contract oil and gas well
drilling business within the Permian Basin of West Texas and Southeastern New
Mexico (the "Competitive Business"); provided, however, that V Byrd 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 PDC or any
affiliate of PDC with any state, district, territory, or possession of the
United States or any governmental subdivision, agency, or instrumentality
thereof by virtue of any statute, law, regulation or administrative practice.
The period of time during which V Byrd is prohibited from engaging in certain
activities by this Section shall be extended by the length of time during which
V Byrd is in breach of the terms of this section.
(b) It is understood by and between the parties hereto
that the foregoing covenant by V Byrd not to enter into competition with 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 V Byrd to
comply with such covenant, PDC would not have agreed to enter into this
Agreement or the Asset Purchase Agreement. PDC and V Byrd have independently
consulted with their respective counsel and have been advised in all respects
concerning the reasonableness and propriety of such covenant, with specific
regard to the nature of the business conducted by PDC and its affiliates. V
Byrd 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 V Byrd.
3. Restrictions on Soliciting Business of PDC.
V Byrd further covenants and agrees that during the
Non-Compete Period, V Byrd will not, either for himself or for any other person
or entity, directly or indirectly, engage in any of the following activities in
a Competitive Business without the express prior written consent of PDC:
(a) Solicit or hire any of the employees of PDC or
solicit or take away any of PDC's customers, lessors, or suppliers or attempt
any of the foregoing:
(b) Acquire or attempt to acquire rights providing any
product or service in a Competitive Business within the territory described in
Section 3 hereof; or
(c) Engage in any act which would interfere with or harm
any business relationship PDC has with any customer, lessor, employee,
principal or supplier.
EXH A(II) - 2
<PAGE> 28
4. Specific Performance.
Without intending to limit the remedies available to PDC, V
Byrd acknowledges that PDC will have no adequate remedies at law if V Byrd
violates the terms of Section 3 or 4, hereof. In such event, V Byrd agrees
that PDC shall have the right, in addition to any other rights it may have, to
obtain in any court of competent jurisdiction specific performance of such
Sections of this Agreement or injunctive relief to restrain any breach or
threatened breach thereof. Nothing herein shall be construed as prohibiting
PDC from pursuing any other remedies available to PDC (whether at law or in
equity) for such breach or threatened breach, including, without limitation,
the recovery of monetary damages from V Byrd.
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 PDC and V Byrd.
(a) Representations and Warranties of PDC. PDC hereby
represents and warrants to V Byrd that: (i) it has all requisite power to enter
into and perform its obligations under this Agreement; (ii) this Agreement has
been duly and validly authorized by all necessary corporate action on the part
of PDC; (iii) the execution of this Agreement by PDC and performance of PDC's
obligations hereunder do not require the consent or approval of any other
party; and (iv) this Agreement is a valid and binding obligation of PDC.
(b) Representations and Warranties of V Byrd. V Byrd
hereby represents and warrants to PDC that: (i) V Byrd has the capacity and
power to enter into and perform obligations of V Byrd under this Agreement;
(ii) V Byrd has duly and validly executed this Agreement; (iii) the execution
of this Agreement and performance of obligations of V Byrd hereunder do not
require the consent or approval of any other party; and (iv) this Agreement
constitutes a valid and binding obligation of V Byrd.
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.
EXH A(II) - 3
<PAGE> 29
(b) Governing Law and Construction. This Agreement will
be governed by and construed in accordance with the laws of the State of Texas
without reference to its conflict-of-laws principles. This Agreement's final
form resulted from review and negotiations among the parties and their
attorneys, and no part of this Agreement should be construed against any party
on the basis of authorship.
(c) Forum for Dispute Resolution. If any dispute arises
among the parties concerning the interpretation or performance of any portion
of this Agreement which the parties are unable to resolve themselves, and any
party brings an action against any other party seeking a declaratory order,
specific performance, damages, or any other legal or equitable relief based on
this Agreement, the parties agree that the forum for any such action shall be
an appropriate federal or state court in Texas having jurisdiction, agree that
venue will be proper in such courts, and waive any objections based on
inconvenience of the forum, and further agree that the prevailing party in any
such action, as determined by the court, shall be awarded its reasonable
attorneys' fees and costs in addition to any relief or judgment the court
awards.
(d) Entire Agreement; Amendment. This Agreement
constitutes the entire agreement between the parties with respect to the
subject matter contained herein and supersedes any previous oral or written
communications, representations, understandings or agreements with respect
thereto. The terms of this Agreement may be modified only in a writing, signed
by authorized representatives of both parties.
(e) Assignability. This Agreement will be binding upon
the parties' respective successors and permitted assigns. Neither party may
assign this Agreement and/or any of its rights and/or obligations hereunder
without the prior written consent of the other party, and any such attempted
assignment will be void; provided, however, that PDC may assign this Agreement
to PEC or to another subsidiary of PEC without the prior written consent of V
Byrd, and provided further that a transfer by PDC as a result of a merger or
sale of all or substantially all of the assets of PDC with or to a third party
that assumes PDC's obligations hereunder by operation of law or otherwise shall
not constitute a prohibited assignment under this Section 8(e).
(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
EXH A(II) - 4
<PAGE> 30
convenience of reference only and are not to be considered in construing this
Agreement.
(i) Notice. Any notice, request, consent, demand or
other communication required to be given under this Agreement will be in
writing and will be given personally, by facsimile or by mailing the same,
first-class, postage prepaid to the appropriate address and facsimile number
set forth below or to such other person or at such other address as may
hereafter be designated by like notice. Notices by mail will be considered
delivered and become effective three days after the mailing thereof. All
notices by facsimile will be considered delivered and become effective
immediately upon the confirmed (by answer back or other tangible printed
verification or successful receipt) sending thereof.
To PDC: Patterson Drilling Company
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: A. Glenn Patterson
President and Chief
Operating Officer
To V Byrd: Vernon Byrd
c/o V&B Drilling, Inc.
2513 Mercury Avenue
P.O. Box 69109
Odessa, Texas 79769-9109
Facsimile: (915) 381-2720
with copies to:
Rick Browning
Attorney at Law
5050 East University, Suite One
Odessa, Texas 79762
8. 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.
EXH A(II) - 5
<PAGE> 31
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.
"PDC"
PATTERSON DRILLING COMPANY
By: /s/ JAMES C. BROWN
--------------------------------------
James C. Brown
Vice President-Finance
"V BYRD"
/s/ VERNON BYRD
-----------------------------------------
Vernon Byrd
EXH A(II) - 6
<PAGE> 32
EXHIBIT A(III)
PATTERSON DRILLING COMPANY
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into this
_____ day of November, 1997 (this "Agreement"), by and between PATTERSON
DRILLING COMPANY, a Delaware corporation ("PDC"), and ROLAND J. VAUGHT, an
individual residing in Odessa, Texas ("R Vaught").
RECITALS:
A. Simultaneously with the execution of this Agreement,
PDC has entered into that certain Asset Purchase Agreement, dated of even date
herewith (the "Asset Purchase Agreement"), between PDC and V&B DRILLING, INC.
("V&B"), providing for, among other things, the purchase by PDC of the drilling
rigs, related equipment, rolling stock owned by V&B.
B. R Vaught is an officer, a director and a stockholder
of V&B.
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 November 1, 2002 (the "Non-Compete Period").
2. Covenant Not to Compete.
(a) R Vaught covenants and agrees that during the
Non-Compete Period, R Vaught shall not, without the prior written consent of
PDC, directly or indirectly, and whether as a principal or as an agent,
officer, director, employee, consultant, or otherwise, alone or in association
with any other person, carry on, be engaged, concerned, or take part in, render
services to, or otherwise assist, or own, share in the earnings of, or invest
in the stock, bonds, or other securities of, any person
EXH A(III) - 1
<PAGE> 33
which is engaged in, the contract oil and gas well drilling business within the
Permian Basin of West Texas and Southeastern New Mexico (the "Competitive
Business"); provided, however, that R Vaught 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 PDC or any
affiliate of PDC with any state, district, territory, or possession of the
United States or any governmental subdivision, agency, or instrumentality
thereof by virtue of any statute, law, regulation or administrative practice.
The period of time during which R Vaught is prohibited from engaging in certain
activities by this Section shall be extended by the length of time during which
R Vaught is in breach of the terms of this section.
(b) It is understood by and between the parties hereto
that the foregoing covenant by R Vaught not to enter into competition with 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 R Vaught to
comply with such covenant, PDC would not have agreed to enter into this
Agreement or the Asset Purchase Agreement. PDC and R Vaught have independently
consulted with their respective counsel and have been advised in all respects
concerning the reasonableness and propriety of such covenant, with specific
regard to the nature of the business conducted by PDC and its affiliates. R
Vaught 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 R Vaught.
3. Restrictions on Soliciting Business of PDC.
R Vaught further covenants and agrees that during the
Non-Compete Period, R Vaught will not, either for himself or for any other
person or entity, directly or indirectly, engage in any of the following
activities in a Competitive Business without the express prior written consent
of PDC:
(a) Solicit or hire any of the employees of PDC or
solicit or take away any of PDC's customers, lessors, or suppliers or attempt
any of the foregoing:
(b) Acquire or attempt to acquire rights providing any
product or service in a Competitive Business within the territory described in
Section 3 hereof; or
(c) Engage in any act which would interfere with or harm
any business relationship PDC has with any customer, lessor, employee,
principal or supplier.
EXH A(III) - 2
<PAGE> 34
4. Specific Performance.
Without intending to limit the remedies available to PDC, R
Vaught acknowledges that PDC will have no adequate remedies at law if R Vaught
violates the terms of Section 3 or 4, hereof. In such event, R Vaught agrees
that PDC shall have the right, in addition to any other rights it may have, to
obtain in any court of competent jurisdiction specific performance of such
Sections of this Agreement or injunctive relief to restrain any breach or
threatened breach thereof. Nothing herein shall be construed as prohibiting
PDC from pursuing any other remedies available to PDC (whether at law or in
equity) for such breach or threatened breach, including, without limitation,
the recovery of monetary damages from R Vaught.
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 PDC and R Vaught.
(a) Representations and Warranties of PDC. PDC hereby
represents and warrants to R Vaught that: (i) it has all requisite power to
enter into and perform its obligations under this Agreement; (ii) this
Agreement has been duly and validly authorized by all necessary corporate
action on the part of PDC; (iii) the execution of this Agreement by PDC and
performance of PDC's obligations hereunder do not require the consent or
approval of any other party; and (iv) this Agreement is a valid and binding
obligation of PDC.
(b) Representations and Warranties of R Vaught. R Vaught
hereby represents and warrants to PDC that: (i) R Vaught has the capacity and
power to enter into and perform obligations of R Vaught under this Agreement;
(ii) R Vaught has duly and validly executed this Agreement; (iii) the execution
of this Agreement and performance of obligations of R Vaught hereunder do not
require the consent or approval of any other party; and (iv) this Agreement
constitutes a valid and binding obligation of R Vaught.
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.
EXH (III) - 4
<PAGE> 35
(b) Governing Law and Construction. This Agreement will
be governed by and construed in accordance with the laws of the State of Texas
without reference to its conflict-of-laws principles. This Agreement's final
form resulted from review and negotiations among the parties and their
attorneys, and no part of this Agreement should be construed against any party
on the basis of authorship.
(c) Forum for Dispute Resolution. If any dispute arises
among the parties concerning the interpretation or performance of any portion
of this Agreement which the parties are unable to resolve themselves, and any
party brings an action against any other party seeking a declaratory order,
specific performance, damages, or any other legal or equitable relief based on
this Agreement, the parties agree that the forum for any such action shall be
an appropriate federal or state court in Texas having jurisdiction, agree that
venue will be proper in such courts, and waive any objections based on
inconvenience of the forum, and further agree that the prevailing party in any
such action, as determined by the court, shall be awarded its reasonable
attorneys' fees and costs in addition to any relief or judgment the court
awards.
(d) Entire Agreement; Amendment. This Agreement
constitutes the entire agreement between the parties with respect to the
subject matter contained herein and supersedes any previous oral or written
communications, representations, understandings or agreements with respect
thereto. The terms of this Agreement may be modified only in a writing, signed
by authorized representatives of both parties.
(e) Assignability. This Agreement will be binding upon
the parties' respective successors and permitted assigns. Neither party may
assign this Agreement and/or any of its rights and/or obligations hereunder
without the prior written consent of the other party, and any such attempted
assignment will be void; provided, however, that PDC may assign this Agreement
to PEC or to a subsidiary of PEC without the prior written consent of R Vaught
and provided further that a transfer by PDC as a result of a merger or sale of
all or substantially all of the assets of PDC with or to a third party that
assumes PDC's obligations hereunder by operation of law or otherwise shall not
constitute a prohibited assignment under this Section 8(e).
(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
EXH A(III) - 5
<PAGE> 36
convenience of reference only and are not to be considered in construing this
Agreement.
(i) Notice. Any notice, request, consent, demand or
other communication required to be given under this Agreement will be in
writing and will be given personally, by facsimile or by mailing the same,
first-class, postage prepaid to the appropriate address and facsimile number
set forth below or to such other person or at such other address as may
hereafter be designated by like notice. Notices by mail will be considered
delivered and become effective three days after the mailing thereof. All
notices by facsimile will be considered delivered and become effective
immediately upon the confirmed (by answer back or other tangible printed
verification or successful receipt) sending thereof.
To PDC:
<TABLE>
<S> <C>
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 R Vaught:
Roland J. Vaught
c/o V&B Drilling, Inc.
2513 Mercury Avenue
P.O. Box 69109
Odessa, Texas 79769-9109
Facsimile: (915) 381-2720
with copies to:
Rick Browning
Attorney at Law
5050 East University, Suite One
Odessa, Texas 79762
</TABLE>
(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.
<PAGE> 37
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.
"PDC"
PATTERSON DRILLING COMPANY
By:
-------------------------------------
James C. Brown
Vice President-Finance
"R Vaught"
------------------------------------
Roland J. Vaught
EXH A(III) - 6
<PAGE> 38
EXHIBIT B
BILL OF SALE AND ASSIGNMENT
KNOW ALL MEN BY THESE PRESENTS, that, pursuant to that certain
Asset Purchase Agreement, dated of even date herewith ("Asset Purchase
Agreement") between PATTERSON DRILLING COMPANY ("PDC"), a Delaware corporation,
and V&B DRILLING, INC. ("V&B"), a Texas corporation (V&B is referred to herein
as the "Assignor"), the Assignor, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, hereby grants,
bargains, sells, conveys and transfers unto PDC (the "Assignee"), all of the
Assignor's right, title and interest in and to (i) the Drilling Rigs, Equipment
and Rolling Stock set forth in Appendix I attached hereto and incorporated
herein by this reference; and (ii) the Drilling Contracts described in Appendix
II attached hereto and incorporated herein by this reference.
TO HAVE AND TO HOLD the same unto the Assignee and the
Assignee's successors and assigns forever. The Assignor hereby covenants and
agrees that it has the full right, power and authority to sell, convey and
transfer the foregoing property to the Assignee pursuant to this Bill of Sale
and Assignment.
IN WITNESS WHEREOF, the Assignor has caused this Bill of Sale
and Assignment to be duly executed by its duly authorized officer as of the
____ day of November, 1997.
V&B DRILLING, INC.
By:
-----------------------------------
Vernon Byrd
President
<PAGE> 39
APPENDIX I
TO
BILL OF SALE AND ASSIGNMENT
FROM
V&B DRILLING, INC.
TO
PATTERSON DRILLING COMPANY
(List of Assets Assigned)
A. DRILLING RIGS, EQUIPMENT AND ROLLING STOCK
The Drilling Rigs and Equipment includes all of the drilling rigs,
parts and related equipment, including engines, mud pumps, hooks and
blocks, derricks, substructures, rotary tables, blow-out prevention
equipment, drill bits and all tubular goods on the rigs and in the
yards owned by V&B, all of which are listed below.
-------------------------
RIG #1
H.B. CUMMINS #15 - ECTOR CO.
FOR CITATION OIL & GAS CORP.
<TABLE>
<S> <C>
Substructure 10' H, l6' W, 40' L
Derrick 97' Jacknife
Drawworks W-45
Power 2 - 8 V71 Detroit Diesels, W 955 Allison
Torque Convertor
Blocks 4 - Sheave Block & Hook
Swivel TSM 150 C
Kelly 4-1/4 X 38'
Rotary BDW 17-1/2 x 44
Tool House 8' x 8' X 28'
Pump 1 Emsco D375, skid mounted
</TABLE>
EXH B - 2
<PAGE> 40
<TABLE>
<S> <C>
Power Cat. D353
Pump 2 Emsco D-375 Skid mounted
Power Cat. 3408
Light Plant 2 - Cat 3306
Premix Pit 6' H, X 8' W x 30' L
Water Tank 500 bbl
Closing Unit Koomey 4 station
Oil container 10 bbl 4 comp.
Cat Walk 25' W X 42' H X 48' L
V-Door Ramp 5' W x 14' L
Pipe Racks 3 Sets - Triangle - 42 H
6" Drill collars 22 - Drill Collars, 29' plus
8" Drill collars 3 - 30' L
Drill Pipe Approx. 7000' of 4-1/2" drill pipe
Steps 3 Sets
Pipe tubs 2 - 8 W X 3' X 35' L
BOF Shaffer Type, 10" 900 W rams & choke Manifold
Elevators, tools, subs and misc. equipment to operate Rig.
</TABLE>
EXH B - 3
<PAGE> 41
RIG #2
IN YARD
Substructure 10' H, 18' W X 40' L
Derrick 100' Jacknife
Drawworks W-45, with 2 engine comp.
Power 2 - 8V71 Detroits, 318 HP each
Blocks 4 - Sheave with/hook
Swivel Oilwell 150C
Kelly 4-1/4" X 38'
Rotary 17.5 BDW
Tool House 8' X 8' X 28'
Pump 1 Ellis Williams 15 W 600 skidded
Power Cat 3412
Pump 2 FXN Gardner Denver
Power Cat. 3408
Light Plant Cat. 3306 W - 150, KW gen.
Premix Pit 6' X 8' x 30'
Water Tank 500 bbl Horizontal skidded
Closing Unit 4 Station
Oil Container 10 bbl, 4 compartment
Cat Walk 42' X 5' X 48'
V-Door Ramp 5' X 13'
EXH B - 4
<PAGE> 42
Pipe Racks 3 Sets - Triangle 42" H
6" Drill collars 22 - 6" X 28+
Steps 3 sets
Pipe Tub 2 - 8'W X 3'H X 35'L
Drill pipe Approx. 6000' of 4-1/2"
BOP Shaffer 10 - 900 L.W.S.
Elevators, tools, subs and misc. equipment to operate Rig.
EXH B - 5
<PAGE> 43
RIG #3 - IN YARD
ODESSA, TEXAS
Pony Sub to Raise Floor to 14'
Substructure 10' X 12' X 18' with Ramp
Derrick 97' Telecope Derrick - free standing
Drawworks W - 45
Power 2 - Cat. 3306 w/11500 Twin Disk Torque Conv.
Blocks Brewster - 4 sheave
Swivel Grey - Type F
Kelly 4-1/4" X 37'
Rotary Twister 175
Toolhouse 8 X 8 X 30'
Pump 1 Brewster 550 (run 30 days since New)
Power Cat D-353
Pump 2 FX2 G.D.
Power 8771 Detroit
Light Plant 671 Detroit w/100 KW Gen.
Premix Pit 6' X 8' X 30'
Water Tank 500 bbl - Hori. skidded
Closing Unit 3 - Station
Oil container 8 bbl, 3 compartments
Catwalk 2 - 5' X 25' X 42
EXH B - 6
<PAGE> 44
V-Door Ramp 5'W X 10' L
Pipe Racks 3 sets - Triangle - 42" H
6" Drill Collars 22 - 5" Drill Collars
Steps 3 Sets
Pipe Tubs 2 - 8'W X 3'H X 35' L
Drill pipe Approx. 6500' of 4-1/2"
Elevators, tools, subs and misc. equipment to operate rig.
EXH B - 7
<PAGE> 45
RIG #4
GCDU #284 - ECTOR CO.
FOR ANADARKO PETROLEUM CORP.
Substructure 11'H X 17'W X 40'L
Derrick Jacknife 100'
Drawworks W 45
Power 2 - 8V71 Detroit Diesels, w955
Allison Torque Con.
Blocks EMSCO, 4 sheave w/B.J. Hook
Swivel P.C. 150 Ton
Kelly 38' - 4-1/4 square
Rotary B.D.W. - 17-1/2"
Tool House 8'W X 8' H x 28' W, 15 Lockers
Pump #1 EMSCO DB - 550, skid mounted
Power Cat. 3412
Pump #2 EMCSO D-300, skid mounted
Power Cat D-353
Light Plant 1 - Cat. 3306, 150 KW, 1 Detroit 6V71,
6 cly. - 90 KW
Premix Pit 6'H X 6' W X 30 L
Water Tank 500 bbl
Closing Unit Koomey 4 station
Oil Container 10 bbl 41 comp.
Cat Walk 5' W X 42 H X 48' L
EXH B - 8
<PAGE> 46
V-Door Ramp 5' W X 16' L
Pipe Racks 3 sets - 42" Triangle
Pipe Tube 3 - 8' W x 3' H x 35' L
6" Drill Collars 25 - 29' plus
8" Drill Collars 3 - 28' plus
Drill Pipe approx. 6000' of 4-1/2" X-hole
Steps 3 sets
Mud Pit
BOP Shaffer 10" - 900 - BOP w/ram choke
manifold
Elevators, tools, subs and misc- equipment to operate Rig.
EXH B - 9
<PAGE> 47
RIG #5
TXL "N" 39 - 1 #1
IN MIDLAND COUNTY, TEXAS
FOR SIERRA ENGINEERING/ARCO PERMIAN
Substructure 12' H x 24' W X 50' L
Derrick Derrick MFG 131', SN: 301002
Drawworks BDW 450-T
Power 2 - Cat. 3406 & 2 air corp.
Blocks Sowa - 5 sheave
Swivel NSCO Ideal - DF 150
Kelly 4-1/4" X 40'
Rotary BDW 17-1/2
Tool House 8' X 8' X 28'
Pump 1 National C-350, skid mounted
Power Cat. 3412
Pump 2 Wilson 600, skid mounted
Power Cat. 3408
Light Plant 1 Cat. 3306, 150 KW, 1 Cat. 3304, 90 KW in
house
Premix Pit 6' H x 8' W X 30' L
Water Tank 500 bbls
Closing Unit Valcon, 4 stage closing unit
Oil Container 10 bbls, 4 comp.
Cat Walk 5' W - 42" H - 48' L
EXH B - 10
<PAGE> 48
V-Door Ramp 5' W X 16' L
Pipe Racks 5 sets - 42" H, triangle
Lay Down Racks 2 sets - 24" Triangle
6" Drill Collars 26 - 29' Plus
8" Drill Collars 8 - 28' plus
Drill Pipe Approx. 10,000'
Steps 3 Sets
Mud Pit 10' W - 7'H - 50'
BOP 10" 900 Shaffer Type A W/rams &
Choke Manifold
Elevator, tools, subs and misc. equipment to operate Rig.
EXH B - 11
<PAGE> 49
RIG #6
UNIVERSITY CONSOLIDATED XII #56
IN ANDREWS COUNTY, TEXAS
FOR MINIHAN OIL & GAS CORP.
Substructure 12'H X 22'W x 48' L
Derrick TOFECO - 131", SN: 28-173
Drawworks V-15-DWKS
Power 2 - Detroit, 12V71, w/Allison Torque
Conv. and Triple hydro.
Blocks SOWA, 5 sheave
Swivel NSCO, Type F - 150 Ton
Kelly 4-1/4" X 40'
Rotary BDW 17-1/2"
Tool House 8'H X 8'W X 28' L
Pump 1 Tri Service 16", skid mounted
Power Cat. D-353
Pump 2 EMSCO D - 300 - 14"
Power Detroit l2V7l
Light Plant 1 Cat. 3306 - 135 KW. 1 Detroit 6V71
90 KW
Premix Pit 6'H X 8'W x 30' L
Water Tank 2 - 500 BBL
Closing Unit Valco - 4 station
Oil Container 10 bbl - 4 comp.
Cat Walk 2 - 5'W X 42" H X 48' L
EXH B - 12
<PAGE> 50
V-Door Ramp 5'W x 16' L
Pipe Racks 5 sets - 42" H X 30'
Lay down racks 2 sets - 18"h X 30'
6" Drill Collars 22 - 6-1/2" w/slip sec. fish neck,
6-1/2" 30' plus
8" Drill Collars 6 - 28' plus
Drill Pipe Approx. 11,000' of 4-1/2" - 1660#
Steps 3 sets
Mud Pit 8' W X 7' H x 50'L
BOP Shaffer 10" - 900 W/Rams & choke
Manifold
Tools, subs and misc. equipment to operate Rig.
EXH B - 14
<PAGE> 51
RIG #9
GCDU #264 IN ECTOR CO, TEXAS
FOR ANADARKO PETROLEUM CORP.
Substructure 10' H X 18' W X 40' L
Derrick Jacknife 98'
Drawworks W 45
Power 2 - Detroit, 8V71 with Allison
Torque Conv.
Blocks Baash Ross, 150 Ton
Swivel Oilwell PC 150
Kelly 4-1/4" X 40'
Rotary B.D.W. - 17-1/2"
Tool House 8'H X 8'W X 30'
Pump 1 National C-350, skid mounted
Power Cat. 3412
Pump 2 EMSCO - D-300
Power Cat. D-353
Light Plant Cat. 3306, 150 KW
Premix Pit 8'H X 8'W X 30'
Water Tank 500 bbl
Closing Unit Barksdale, 4 station
Oil Container 10 bbl, 4 comp.
Catwalk 1 - 5' X 42" X 48'
V-Door Ramp 5' W X 14'
EXH B - 14
<PAGE> 52
Pipe Racks 5 sets - Triangle
Pipe Tubs 8' W X 3'H X 35' L
6" Drill Collars 21 - 29' plus
8" Drill Collars 3 - 28' plus
Drill pipe Approx. 6000' of 4-1/2" X-Hole, 16#
Steps 3 sets
BOP Cameron 10" - 900 Space Saver
Tools, subs and misc. equipment to operate Rig.
EXH B - 15
<PAGE> 53
2513 MERCURY AVE.
ODESSA, TEXAS
2 Utility Trailers
1 Lincoln Welder
1 Ford 900 Truck (Yard Truck) VIN F90LVDK1239
1 Lufkin Trailer - VIN 1LOlB3825B1057976
1 Allis Chalmers, Fork Lift - SN: A0139000
1 Caterpiller, Fork Lift
1980 Kenworth
JSC Lowboy Trailer
1 1987 Ford PU - VIN 1FTEX15V1HKA83479
1 1990 Ford PU - VIN 1FTEX15Y6LKA20509
1 1994 Ford PU - VIN IFTEF15N7RLA40070
1 1995 Ford PU - VIN 1FTEF15N3SNB08732
Assortment of Drilling Bits - new and used,
various sizes
2 Radiators for D-353 cat.
2 Radiators for 3306 Cat.
1 8V-71 Detroit (new overhaul) By - J & J
Engine Serv.
1 D-353 Cat. (new overhaul) by General Machine
1 3412 Cat. (new overhaul)
2 Electric Motors
EXH B - 16
<PAGE> 54
1 Miller Electric welder
4 Weight Indicators
1 Steam Cleaner
9 Tool Houses for Storage - full
2 Kellys 4-1/4 x 40'
44 6" drill collars
4 Docks with Misc. Parts
8 Swivels, various makes & sizes
8 Blocks - various makes and sizes
4 Hook - various makes and sizes
10 Triangle Pipe Racks
In Shop Shelves & Bins with assortment of
bolts, nuts & etc.
1 BDW 17.5 - Rotary - New
EXH B - 17
<PAGE> 55
YARD #4
- 24TH ST. & MERCURY AVE.
ODESSA, TEXAS
2 Tool Houses, 8' X 8' X 30'
1 W-45 Drawworks - New
6 Misc. Mud Pits
2 Tool Houses, 8' X 8' x 15'
1 Fuel Tank, 6000 gal. skid
35 6" collars
18 8" collars
4 Kellys, 4-1/4 Square x 40'
42 Triangle Pipe Racks - 30' long
Misc. Motors, Accumulator Units, Parts and
etc.
395 Joints of Double White Drill Pipe - Grade E
EXH B - 19
<PAGE> 56
YARD
6831 UNIVERSITY BLVD.
ODESSA, TEXAS
1 Light Plant House
1 Tool House
2 FXzl72 Mud Pumps, skidded
Misc. Drawworks - 1 N4 Brewster W 2 Wakesha
1 S45A Beth.
1 National C150 Mud Pump
Misc. well used mud pumps
EXH B - 20
<PAGE> 57
MOSS YARD
MOSS AVE. AND TISDALE ROAD
ODESSA, TEXAS
1 Substructure 10 X 18 X 35
2 97' Jackknife Derrick
2 172' LCM Derrick
3 Junk Substructures
1 C350 Mud Pump
2 120000 gal. Diesel Tank - skidded
2 500 bbl. Horizontal water tanks - skidded
5 Misc. Mud Pits
Approx. 200 Joints - Structural drill pipe
2 Catwalk - 4' X 42" X 25'
9 Catwalk with Misc. Equip.
28 Triangle Pipe Racks
4 Triangle Lay down racks
1 7 X 8 X 15 Tool house
Misc. Motors, parts and junk
EXH B - 21
<PAGE> 58
APPENDIX II
TO
BILL OF SALE AND ASSIGNMENT
FROM
V&B DRILLING, INC.
TO
PATTERSON DRILLING COMPANY
(List of Drilling Contracts Assigned)
<TABLE>
<S> <C> <C> <C> <C>
RIGNO
No. COUNTY DATE OPERATOR WELL NAME
--- ------ ---- -------- ---- ----
5 Midland 04/15/97 Arco Permian TXL "N" 39-1 #1
6 Andrews 10/10/97 Minihan Oil & Gas University Consolidated XII #56
1 Ector 11/03/97 Citation Oil & Gas H. E. Cummins #15
4 Ector 01/17/97 Anadarko GCDU #284
9 Ector 01/17/97 Anadarko GCDU #264
</TABLE>
EXH B - 21
<PAGE> 59
EXHIBIT C
2251
Prepared by the State Bar of Texas for use by
lawyers only Revised 10-85
19__ for the State Bar of Texas
WARRANTY DEED
Date:
Grantor: V&B Drilling, Inc.
Grantor's Mailing Address (including county):
Grantee: Patterson Drilling Company
Grantee's Mailing Address (including county):
P.O. Drawer 1416
Snyder Texas 79550
Scurry County, Texas
Consideration:
One Hundred Dollars ($100) and other good and valuable consideration.
Property (including any improvements):
Lots 15, 16, 17 and 18, Block 5, Rochester Replat of a portion of 1936
Subdivision as shown by the map or plat of record in Volume 9, Page
23, Plat Records, Ector County, Texas.
Reservations from and Exceptions to Conveyance and Warranty:
Easements, rights-of-way, and prescriptive rights, whether of record
or not; all presently recorded restrictions, reservations, covenants,
conditions, oil and gas leases, mineral severances, and other
instruments other than liens and conveyances, that affect the
property.
Grantor, for the consideration and subject to the reservations from
and exceptions to conveyance and warranty, grants, sells and conveys to Grantee
the property, together with all and singular the rights and appurtenances
thereto in any wise belonging, to have and hold it to Grantee, Grantee's heirs,
executors, administrators, successors or assigns forever. Grantor binds
Grantor and Grantor's heirs, executors, administrators and successors to
warrant and forever defend all and singular the property to Grantee and
Grantee's heirs, executors, administrators, successors and assigns against
every person whomsoever lawfully claiming or to claim the same or any part
thereof, except as to the reservations from and exceptions to conveyance and
warranty.
When the context requires, singular nouns and pronouns include the
plural.
V & B DRILLING, INC.
----------------------------
By: Vernon Byrd, President
EXH C - 1
<PAGE> 60
(Acknowledgement)
STATE OF TEXAS )
COUNTY OF )
This instrument was acknowledged before me on the day
of , 19____.
---------------------------------------
Notary Public, State of Texas
Notary's name (printed):
Notary's commission expires:
(Corporate Acknowledgement)
STATE OF TEXAS )
COUNTY OF )
This instrument was acknowledge before me on the day of
November, 1997, by VERNON BYRD, President of V&B Drilling, Inc., a Texas
corporation, on behalf of said corporation.
------------------------------
Notary Public, State of Texas
Notary's name (printed):
Notary's commission expires:
EXH C - 2
<PAGE> 61
EXHIBIT D
2251
Prepared by the State Bar of Texas for use by lawyers only
Revised 10-85
19__ for the State Bar of Texas
WARRANTY DEED
Date:
Grantor: V&B Drilling, Inc.
Grantor's Mailing Address (including county):
Grantee: Patterson Drilling Company
Grantee's Mailing Address (including county):
P.O. Drawer 1416
Snyder Texas 79550
Scurry County, Texas
Consideration: One Hundred Dollars ($100) and other good and
valuable consideration.
Property (including any improvements):
Lots 22, 23, 24, and 25, Block 1, Rochester Replat of a portion of
1936 Subdivision, a subdivision of 312.19 acres of land in the West
part of Section 24, Block 43, T-2-S, T & P RR Company Survey, Ector
County, Texas, as shown by the map or plat of record in the office of
the County Clerk of said County.
Reservations from and Exceptions to Conveyance and Warranty:
Easements, rights-of-way, and prescriptive rights, whether of record
or not; all presently recorded restrictions, reservations, covenants,
conditions, oil and gas leases, mineral severances, and other
instruments other than liens and conveyances, that affect the
property.
Grantor, for the consideration and subject to the reservations from
and exceptions to conveyance and warranty, grants, sells and conveys to Grantee
the property, together with all and singular the rights and appurtenances
thereto in any wise belonging, to have and hold it to Grantee, Grantee's heirs,
executors, administrators, successors or assigns forever. Grantor binds
Grantor and Grantor's heirs, executors, administrators and successors to
warrant and forever defend all and singular the property to Grantee and
Grantee's heirs, executors, administrators, successors and assigns against
every person whomsoever lawfully claiming or to claim the same or any part
thereof, except as to the reservations from and exceptions to conveyance and
warranty.
When the context requires, singular nouns and pronouns include the plural.
V & B DRILLING, INC.
-----------------------------
By: Vernon Byrd, President
EXH D - 1
<PAGE> 62
(Acknowledgement)
STATE OF TEXAS )
COUNTY OF )
This instrument was acknowledged before me on the day of
, 19____.
-----------------------------
Notary Public, State of Texas
Notary's name (printed):
Notary's commission expires:
(Corporate Acknowledgement)
STATE OF TEXAS )
COUNTY OF )
This instrument was acknowledged before me on the day of
November, 1997, by VERNON BYRD, President of V&B Drilling, Inc., a Texas
corporation, on behalf of said corporation.
-----------------------------
Notary Public, State of Texas
Notary's name (printed):
Notary's commission expires:
EXH D - 2
<PAGE> 63
EXHIBIT E
2251
Prepared by the State Bar of Texas for use by lawyers only
Revised 10-85
19__ for the State Bar of Texas
WARRANTY DEED
Date:
Grantor: V&B Drilling, Inc.
Grantor's Mailing Address (including county):
Grantee: Patterson Drilling Company
Grantee's Mailing Address (including county):
P.O. Drawer 1416
Snyder Texas 79550
Scurry County, Texas
Consideration:
One Hundred Dollars ($100) and other good and valuable
consideration.
Property (including any improvements):
Lot 5, Block 6, WESTOVER ACRES, a subdivision in Ector County,
Texas, according to the map or plat thereof of record in
Volume 4, Page 44, Plat Records of Ector County, Texas
Reservations from and Exceptions to Conveyance and Warranty:
Easements, rights-of-way, and prescriptive rights, whether of
record or not; all presently recorded restrictions,
reservations, covenants, conditions, oil and gas leases,
mineral severances, and other instruments other than liens and
conveyances, that affect the property.
Grantor, for the consideration and subject to the reservations from
and exceptions to conveyance and warranty, grants, sells and conveys to Grantee
the property, together with all and singular the rights and appurtenances
thereto in any wise belonging, to have and hold it to Grantee, Grantee's heirs,
executors, administrators, successors or assigns forever. Grantor binds
Grantor and Grantor's heirs, executors, administrators and successors to
warrant and forever defend all and singular the property to Grantee and
Grantee's heirs, executors, administrators, successors and assigns against
every person whomsoever lawfully claiming or to claim the same or any part
thereof, except as to the reservations from and exceptions to conveyance and
warranty.
When the context requires, singular nouns and pronouns include the
plural.
V & B DRILLING, INC.
By: Vernon Byrd, President
EXH E - 1
<PAGE> 64
(Acknowledgement)
STATE OF TEXAS )
COUNTY OF )
This instrument was acknowledged before me on the
day of , 19____.
<TABLE>
<S> <C> <C>
-------------------------------------
Notary Public, State of Texas
Notary's name (printed):
Notary's commission expires:
(Corporate Acknowledgement)
STATE OF TEXAS )
COUNTY OF )
</TABLE>
This instrument was acknowledged before me on the day of
November, 1997, by VERNON BYRD, President of V&B Drilling, Inc., a Texas
corporation, on behalf of said corporation.
------------------------------
Notary Public, State of Texas
Notary's name (printed):
Notary's commission expires:
EXH E - 2
<PAGE> 65
EXHIBIT F
2251
Prepared by the State Bar of Texas for use by lawyers only
Revised 10-85
19__ for the State Bar of Texas
WARRANTY DEED
Date:
Grantor: V&B Drilling, Inc.
Grantor's Mailing Address (including county):
Grantee: Patterson Drilling Company
Grantee's Mailing Address (including county):
P.O. Drawer 1416
Snyder Texas 79550
Scurry County, Texas
Consideration:
One Hundred Dollars ($100) and other good and valuable consideration.
Property (including any improvements):
See attached Exhibit "A"
Reservations from and Exceptions to Conveyance and Warranty:
Easements, rights-of-way, and prescriptive rights, whether of record
or not; all presently recorded restrictions, reservations, covenants,
conditions, oil and gas leases, mineral severances, and other
instruments other than liens and conveyances, that affect the
property.
Grantor, for the consideration and subject to the reservations from
and exceptions to conveyance and warranty, grants, sells and conveys to Grantee
the property, together with all and singular the rights and appurtenances
thereto in any wise belonging, to have and hold it to Grantee, Grantee's heirs,
executors, administrators, successors or assigns forever. Grantor binds
Grantor and Grantor's heirs, executors, administrators and successors to
warrant and forever defend all and singular the property to Grantee and
Grantee's heirs, executors, administrators, successors and assigns against
every person whomsoever lawfully claiming or to claim the same or any part
thereof, except as to the reservations from and exceptions to conveyance and
warranty.
When the context requires, singular nouns and pronouns include the
plural.
V & B DRILLING, INC.
---------------------------
By: Vernon Byrd, President
EXH F - 1
<PAGE> 66
(Acknowledgement)
STATE OF TEXAS )
COUNTY OF )
This instrument was acknowledged before me on the day of
, 19____.
----------------------------------
Notary Public, State of Texas
Notary's name (printed):
Notary's commission expires:
(Corporate Acknowledgement)
STATE OF TEXAS )
COUNTY OF )
This instrument was acknowledged before me on the day of
November, 1997, by VERNON BYRD, President of V&B Drilling, Inc., a Texas
corporation, on behalf of said corporation.
----------------------------------------
Notary Public, State of Texas
Notary's name (printed):
Notary's commission expires:
EXH F - 2
<PAGE> 67
EXHIBIT "A"
Attached to and made a part of that certain Warranty Deed dated
November 14, 1997, between V&B Drilling, Inc., as Grantor, and
Patterson Drilling Company, as Grantee.
PROPERTIES
Being a 4.47 acre tract of land in the Southwest Part
of a 10.267 acre tract of land in the Northwest Part of
Section 33, Block 43, T-2-S, T & P Ry. Co. Survey, Ector
County, Texas, and being more particularly described by metes
and bounds as follows, to wit:
BEGINNING at a 1/2" iron rod set in the east
boundary Moss Avenue and west boundary of a 10.267 acre tract
of land in the northwest part of Section 33, Block 43, T-2-S,
T & P Ry. Ector County, Texas, for the northwest corner this
tract, from which point a fence corner post at the northwest
corner of 10.267 acre tract bears N 15degrees 17- 1/2 W, 150
feet, and a 1/2" galvanized iron pipe in the east boundary
Moss Avenue and north boundary Section 33 bears N 15degrees
17- 1/2 W, 650.0 feet, from which point the northwest corner
Section 33, being in the centerline of Moss Avenue, bears S
74degrees 42- 1/2' W, 50 feet;
THENCE S 15degrees 17- 1/2' E, with east boundary
Moss Avenue and west boundary 10.267 acre tract, 350.0 feet to
a 1/2" iron rod set in north boundary of Tisdale Road for the
southwest corner of 10.267 acre tract and this tract;
THENCE, N 74degrees 42- 1/2' E, with north boundary
Tisdale Road and south boundary 10.267 acre tract, 556.0 feet
to a 1/2" iron rod set for southwest corner this tract, from
which point a 1/2" galvanized iron pipe at the southeast
corner 10.267 acre tract bears N 74degrees 42- 1/2' E, 338.5
feet;
THENCE N 15degrees 17- 1/2' W, 350.0 feet to a 1/2"
iron rod set for northeast corner this tract;
THENCE S 74degrees 42- 1/2' W, 556.0 feet to the
place of beginning, containing 4.47 acres of land, more or
less.
EXH F - 3
<PAGE> 1
EXHIBIT 99.2
ASSET PURCHASE AGREEMENT
BETWEEN
PATTERSON DRILLING COMPANY
AND
CIRCLE R DRILLING, LTD. 1981-A
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
THE ASSET PURCHASE . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 The Asset Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PDC . . . . . . . . . . . . . . . . . . 2
SECTION 2.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.2 Authority; Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CIRCLE R . . . . . . . . . . . . . . . . . 2
SECTION 3.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3.2 Authority; Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3.3 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.5 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.6 General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.7 LIMITATIONS ON REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 4.1 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 4.2 Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 4.3 PDC Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 4.4 Circle R, CRD and Terry Pat Reynolds Indemnification . . . . . . . . . . . . . . . . . . . . . 5
SECTION 4.5 Notice of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE V
CONDITIONS PRECEDENT TO THE ASSET PURCHASE . . . . . . . . . . . . . . . . . 6
SECTION 5.1 Conditions to Each Party's Obligation to Effect the Asset Purchase . . . . . . . . . . . . . . 6
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 5.2 Conditions to Obligation of Circle R to Effect the Asset Purchase . . . . . . . . . . . . . . . 6
SECTION 5.3 Conditions to Obligations of PDC to Effect the Asset Purchase . . . . . . . . . . . . . . . . . 7
ARTICLE VI
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 6.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 6.2 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 6.4 Entire Agreement; No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 6.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 6.6 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 6.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 6.8 Enforcement of This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
ANNEX 1 Description of Drilling Rig and Equipment
EXHIBIT A(I) Non-Competition Agreement of Circle R Drilling, Ltd. 1981-A
EXHIBIT A(II) Non-Competition Agreement of Circle R Drilling, Inc.
EXHIBIT A(III) Non-Competition Agreement of Terry Pat Reynolds
EXHIBIT A(IV) Non-Competition Agreement of Reynolds Drilling Co., Inc.
EXHIBIT B Bill of Sale and Assignment
ii
<PAGE> 4
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated November __, 1997 (this "Agreement"),
among PATTERSON DRILLING COMPANY ("PDC"), a Delaware corporation and a
wholly-owned subsidiary of Patterson Energy, Inc. ("PEC"), and CIRCLE R
DRILLING, LTD. 1981-A, a Louisiana limited partnership ("Circle R").
WITNESSETH:
WHEREAS, Circle R owns one drilling rig and related drilling equipment
(collectively, the "Drilling Rig and Equipment"), all as more particularly
described on Annex 1;
WHEREAS, PDC desires to purchase, and Circle R desires to sell, all of
Circle R's right, title and interest in the Drilling Rig and Equipment (the
"Asset Purchase") for the consideration set forth and provided for herein; and
WHEREAS, PDC, on the one hand, and Circle R, on the other, desire to
make certain representations, warranties and agreements in connection with the
Asset Purchase.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE I
THE ASSET PURCHASE
SECTION 1.1 The Asset Purchase. Upon the terms and subject to the
conditions of this Agreement, at the Closing (as defined in Section 1.3 below)
provided herein, PDC shall purchase from Circle R and Circle R shall sell to
PDC, all of Circle R's right, title and interest in and to the Drilling Rig and
Equipment.
SECTION 1.2 Purchase Price. PDC agrees to pay to Circle R at the
Closing a total of $1,460,000 cash (the "Purchase Price") for all of Circle R's
right, title and interest in and to the Drilling Rig and Equipment.
SECTION 1.3 Closing. The closing of the Asset Purchase (the
"Closing") shall take place at 9:00 a.m., local time, on the date of this
Agreement at the offices of PEC in Snyder, Texas or at such other time and
place as PDC and Circle R shall agree.
<PAGE> 5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PDC
PDC represents and warrants to Circle R as follows:
SECTION 2.1 Organization, Standing and Power. PDC is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to carry
on its business as now being conducted.
SECTION 2.2 Authority; Non-Contravention. PDC has all requisite
power and authority to enter into this Agreement and to consummate the Asset
Purchase. The execution and delivery by PDC of this Agreement and the
consummation by PDC of the Asset Purchase have been duly authorized by all
necessary corporate action on the part of PDC. This Agreement has been duly
executed and delivered by PDC and (assuming the valid authorization, execution
and delivery of this Agreement by Circle R) constitutes a valid and binding
obligation of PDC enforceable against PDC in accordance with its terms, except
to the extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws of
general applicability relating to or affecting the enforcement of creditors'
rights and by the effect of general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law). No filing
or registration with, or authorization, consent or approval of, any domestic
(federal and state), foreign or supranational court, commission, governmental
body, regulatory agency, authority or tribunal (a "Governmental Agency") is
required by or with respect to PDC in connection with the execution and
delivery of this Agreement by PDC or is necessary for the consummation by PDC
of the Asset Purchase and the other transactions contemplated by this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CIRCLE R
Circle R represents and warrants to PDC as follows:
SECTION 3.1 Organization, Standing and Power. Circle R is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of Louisiana and has the requisite power and authority to
carry on its business as now being conducted.
SECTION 3.2 Authority; Non-Contravention. Circle R has all requisite
power and authority to enter into this Agreement and to consummate the Asset
Purchase. This Agreement has been duly executed and delivered by Circle R and
(assuming the valid authorization, execution and delivery of this Agreement by
PDC) constitutes a valid and binding obligation of Circle R enforceable against
it in accordance with its terms, except to the extent enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws of general applicability
2
<PAGE> 6
relating to or affecting the enforcement of creditors' rights and by the effect
of general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law). The execution and delivery of
this Agreement do not, and the consummation of the Asset Purchase and
compliance with the provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation which will have an adverse effect on the Drilling Rig and
Equipment or the ownership or operation thereof by PDC after the Closing under,
or result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of Circle R under, any provision of (i)
the Certificate of Limited Partnership or Agreement of Limited Partnership of
Circle R (true and complete copies of which, as of the date hereof, have been
delivered to PDC), (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to Circle R or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Circle R or any of
its respective properties or assets. No filing or registration with, or
authorization, consent or approval of, any Governmental Entity is required by
or with respect to Circle R in connection with the execution and delivery of
this Agreement by Circle R or is necessary for the consummation by Circle R of
the Asset Purchase and the other transactions contemplated by this Agreement.
SECTION 3.3 Title. Set forth in Annex 1 is a description of the
Drilling Rig and Equipment, which description is accurate and complete in all
material respects. Circle R has good title to a 100% interest in the Drilling
Rig and Equipment, subject to no Liens except for (i) Liens for taxes not yet
delinquent or the validity of which is being contested in good faith, and (ii)
any Liens arising by operation of law securing obligations not yet overdue.
For purposes of this Agreement "Liens" means liens, mortgages, pledges,
security interests, encumbrances, claims or charges of any kind.
SECTION 3.4 Litigation. There is no suit, action, investigation or
proceeding pending or, to the knowledge of Circle R, threatened against Circle
R or Circle D Drilling, Inc. ("CRD"), the General Partner of Circle R, at law
or in equity before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind.
SECTION 3.5 Brokers. No broker, investment banker or other person
(other than Jerry Bailey, the fees and expenses of which will be paid by Circle
R) is entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Circle R.
SECTION 3.6 General Partner. Circle R Drilling, Inc. is the sole
General Partner of Circle R; Circle R. Drilling, Inc. is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Louisiana and has the power and authority to carry on its business as now
being conducted.
SECTION 3.7 LIMITATIONS ON REPRESENTATIONS AND WARRANTIES. THERE ARE
NO WARRANTIES THAT EXTEND BEYOND THE FACE OF THIS AGREEMENT. THE
3
<PAGE> 7
EXPRESS REPRESENTATIONS AND WARRANTIES OF CIRCLE R CONTAINED IN THIS ARTICLE
III ARE EXCLUSIVE AND ARE IN LIEU OF, AND CIRCLE R EXPRESSLY DISCLAIMS AND
NEGATES AND PDC HEREBY WAIVES, ALL OTHER REPRESENTATIONS AND WARRANTIES,
EXPRESS, IMPLIED, STATUTORY OR OTHERWISE. AS EXAMPLES AND FOR THE AVOIDANCE OF
DOUBT, BUT WITHOUT LIMITATION OF THE FOREGOING, THE DRILLING RIG AND EQUIPMENT
SHALL BE CONVEYED PURSUANT HERETO WITHOUT ANY WARRANTY OR REPRESENTATION
WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE (OTHER THAN, AND WITHOUT
LIMITING IN ANY MANNER OR TO ANY EXTENT, THE REPRESENTATIONS AND WARRANTIES
CONTAINED IN THIS ARTICLE III), WITH RESPECT TO: (A) THE QUALITY, CONDITION,
WEIGHT, SERVICEABILITY, CONFORMITY TO SAMPLES OF MODELS OR ANY OTHER ASPECT OF
ANY PORTION OF THE DRILLING RIG AND EQUIPMENT, ALL OF WHICH SHALL BE CONVEYED
TO PURCHASER AS IS, WHERE IS, AND WITH ALL FAULTS AND DEFECTS AND IN ITS
PRESENT CONDITION AND STATE OF REPAIR AND WITHOUT ANY WARRANTIES WHATSOEVER OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE; (B) THE ACCURACY OR
COMPLETENESS OF ANY DATA, REPORTS, RECORDS, PROJECTIONS, OR INFORMATION OF
MATERIALS NOW, HERETOFORE OR HEREAFTER FURNISHED OR MADE AVAILABLE TO PDC IN
CONNECTION WITH THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, CONDITIONS
SPECIFICALLY RELATED TO THE PRESENCE OR DISPOSAL OF HAZARDOUS SUBSTANCES OR
NATURALLY OCCURRING RADIOACTIVE MATERIALS; (C) THE COMPLETENESS OR ACCURACY OF
INFORMATION CONTAINED IN ANY MATERIALS FURNISHED OR MADE AVAILABLE TO PDC BY
CIRCLE R OR BY CIRCLE R'S AGENTS OR REPRESENTATIVES OR BY ANY OTHER PARTY, IT
BEING AGREED BY PDC THAT ANY AND ALL SUCH DATA, RECORDS, REPORTS, PROJECTIONS,
INFORMATION AND OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED OR OTHERWISE MADE
AVAILABLE OR DISCLOSED TO PDC HAVE BEEN AND WILL BE PROVIDED TO PDC AS A
CONVENIENCE AND SHALL NOT CREATE OR GIVE RISE TO ANY LIABILITY OF OR AGAINST
CIRCLE R AND ANY RELIANCE ON OR USE OF THE SAME SHALL BE AT PDC'S SOLE RISK TO
THE MAXIMUM EXTENT PERMITTED BY LAW; (D) THE OPERATION OF THE DRILLING RIG AND
EQUIPMENT OR ANY PART THEREOF; AND (E) ALL OTHER REPRESENTATIONS AND
WARRANTIES, EXPRESS, IMPLIED OR STATUTORY. PURCHASER ACKNOWLEDGES THAT THIS
WAIVER IS CONSPICUOUS.
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.1 Fees and Expenses. All costs and expenses incurred by
PDC in connection with this Agreement and the transactions contemplated hereby
shall be paid by PDC; such costs and expenses incurred by Circle R shall be
paid by Circle R.
4
<PAGE> 8
SECTION 4.2 Reasonable Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use all
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Asset Purchase and
the other transactions contemplated by this Agreement and the prompt
satisfaction of the conditions hereto.
SECTION 4.3 PDC Indemnification. On or after the date of Closing,
PDC shall indemnify and hold Circle R and CRD harmless against and in respect
of all actions, suits, demands, judgments, costs and expenses (including
reasonable attorneys' fees of Circle R and CRD), relating to any
misrepresentation, breach of any representation or warranty or non-fulfillment
of any agreement on the part of PDC contained in this Agreement. The
indemnification provided for in this Section 4.3 shall terminate and be of no
further force and effect one year from the date of Closing, except as to any
representation or warranty as to which a written notice of claim for
indemnification has been given to PDC prior to the expiration of such one-year
period.
SECTION 4.4 Circle R, CRD and Terry Pat Reynolds Indemnification. On
and after the date of Closing, Circle R, CRD, and Terry Pat Reynolds ("T.
Reynolds"), a principal stockholder of Reynolds Drilling Company, Inc., the
majority stockholder of CRD, shall jointly and severally indemnify and hold PEC
and PDC harmless against and in respect of all actions, suits, demands,
judgments, costs and expenses (including reasonable attorneys' fees of PEC or
PDC), relating to any misrepresentation, breach of any representation or
warranty or non-fulfillment of any agreement on the part of Circle R contained
in this Agreement. The indemnification provided for in this Section 4.4 shall
terminate and be of no further force and effect one year from the date of the
Closing, except as to any representation or warranty as to which a written
notice of claim for indemnification has been given to Circle R, CRD, and T.
Reynolds prior to the expiration of such one-year period.
SECTION 4.5 Notice of Claim. Within fifteen (15) days after any
party (the "Indemnified Party") becomes aware of facts giving rise to a claim
by it for indemnification pursuant to this Article IV, and prior to the
expenditure or approval of the expenditure of any funds, such Indemnified Party
will provide notice thereof in writing (a "Claim Notice") to the party owing
such indemnification (the "Indemnifying Party") specifying the nature and
specific basis for such claim and a copy of all papers served with respect to
such claim (if any). For purposes of this Section 4.5, receipt by the
Indemnified Party of written notice of any demand, assertion, claim, action or
proceeding (judicial, administrative or otherwise) by or from any person or
entity other than a party to this Agreement or any affiliate thereof which
gives rise to a claim on behalf of such party shall constitute becoming aware
of facts giving rise to a claim by it and shall require notice within fifteen
(15) days after the receipt of such matter as provided in the first sentence of
this Section 4.5. Each Claim Notice shall set forth a reasonable description
of the claim based upon the information the Indemnified Party shall then have
and shall contain a statement to the effect that the Indemnified Party is
making a claim pursuant to, and formal demand for indemnification under, this
Article IV. No party shall be entitled to any indemnification without having
first timely delivered a proper Claim Notice.
5
<PAGE> 9
ARTICLE V
CONDITIONS PRECEDENT TO THE ASSET PURCHASE
SECTION 5.1 Conditions to Each Party's Obligation to Effect the Asset
Purchase. The respective obligations of each party to effect the Asset
Purchase shall be subject to the fulfillment or waiver (where permissible) at
or prior to the Closing of each of the following conditions:
(a) No Order. No Governmental Entity or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of prohibiting the Asset Purchase or any of the other transactions
contemplated hereby; provided that, in the case of any such decree, injunction
or other order, each of the parties shall have used reasonable best efforts to
prevent the entry of any such injunction or other order and to appeal as
promptly as practicable any decree, injunction or other order that may be
entered.
SECTION 5.2 Conditions to Obligation of Circle R to Effect the Asset
Purchase. The obligation of Circle R to effect the Asset Purchase shall be
subject to the fulfillment at or prior to the Closing of the following
additional conditions; provided that Circle R may waive any of such conditions
in its sole discretion:
(a) Performance of Obligations; Representations and Warranties.
PDC shall have performed in all material respects each of its agreements
contained in this Agreement required to be performed on or prior to the Closing
and each of the representations and warranties of PDC contained in this
Agreement shall be true and correct on and as of the Closing.
(b) Officers' Certificate. PDC shall have furnished to Circle R a
certificate, dated the Closing, signed by the appropriate officers of PDC,
certifying to the effect that to the best of the knowledge and belief of PDC,
the conditions set forth in Section 5.1 and Section 5.2(a) have been satisfied
in full.
(c) Payment of Purchase Price. PDC shall have made delivery of
the Purchase Price as provided in Section 1.2 of this Agreement by wire
transfer to the account of Circle R.
SECTION 5.3 Conditions to Obligations of PDC to Effect the Asset
Purchase. The obligations of PDC to effect the Asset Purchase shall be subject
to the fulfillment at or prior to the Closing of the following additional
conditions, provided that PDC may waive any such conditions in its sole
discretion:
(a) Performance of Obligations; Representations and Warranties.
Circle R shall have performed in all material respects each of its agreements
contained in this Agreement required to be performed on or prior to the Closing
and each of the respective representations and warranties of Circle R contained
in this Agreement shall be true and correct on and as of the Closing.
6
<PAGE> 10
(b) Officers' Certificate. Circle R shall have furnished
to PDC a certificate, dated the Closing, signed by the appropriate officers of
CRD as general partner of Circle R, certifying to the effect that to the best
of the knowledge and belief of CRD and Circle R, the conditions set forth in
Section 5.1 and Section 5.3(a) have been satisfied.
(c) Opinion of Counsel. PDC shall have received an
opinion of counsel from Davidson, Nix & Jones, Professional Law Corporation,
counsel to Circle R and CRD, dated the Closing, substantially to the effect
that:
(i) The organization, existence and good standing of
Circle R are as stated in this Agreement.
(ii) This Agreement has been duly authorized, executed and
delivered by Circle R, and (assuming the due and valid authorization,
execution and delivery by PDC) constitutes the legal, valid and
binding agreement of Circle R enforceable against Circle R in
accordance with its terms, except to the extent enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other similar laws of general applicability
relating to or affecting the enforcement of creditors' rights and by
the effect of general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
(iii) The execution and performance by Circle R of this
Agreement will not violate the Certificate of Limited Partnership of
Circle R and will not violate, result in a breach of, or constitute a
default under, any material lease, mortgage, contract, agreement,
instrument, law, rule, regulation, judgment, order or decree known to
such counsel to which Circle R is a party or to which it or any of its
properties or assets may be bound.
(iv) To the knowledge of such counsel, there are no
actions, suits or proceedings, pending or threatened against or
affecting Circle R or CRD by any Governmental Entity which seek to
restrain, prohibit or invalidate the transactions contemplated by this
Agreement.
(v) To the knowledge of such counsel, no consent,
approval, authorization or order of any court or governmental agency
or body which has not been obtained is required on behalf of Circle R
for consummation of the transactions contemplated by this Agreement.
(vi) Each Non-Competition Agreement between PDC and each
of Circle R, CRD, Reynolds Drilling Co., Inc. ("RDC") and Terry Pat
Reynolds constitutes the legal, valid and binding agreement of it/him
enforceable against it/him in accordance with its terms, except to the
extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws
of general applicability relating to or affecting the enforcement of
creditors' rights and by the effect of general principles of equity
(regardless of whether enforceability is considered in a proceeding in
equity or at law).
7
<PAGE> 11
In rendering such opinion, counsel for Circle R may rely as to matters of fact
upon the representations of officers of Circle R contained in any certificate
delivered to such counsel and certificates of public officials.
(d) Bill of Sale and Assignment. Circle R shall have executed and
delivered the Bill of Sale and Assignment covering the Drilling Rig and
Equipment in the form attached hereto as Exhibit A.
(e) Non-Competition Agreements. A Non-Competition Agreement in
the respective forms attached hereto as Exhibits A(I), A(II), A(III) or A(IV)
shall have been executed and delivered by Circle R, CRD, RDC and Terry Pat
Reynolds, as the case may be.
ARTICLE VI
GENERAL PROVISIONS
SECTION 6.1 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, sent by
overnight courier or telecopied (with a confirmatory copy sent by overnight
courier) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) If to PDC, to:
Patterson Energy, Inc.
4510 Lamesa Highway
P.O. Drawer 1416
Snyder, Texas 79549
Telecopier No.: (915) 573-0281
Attention: A. Glenn Patterson
President and Chief Operating Officer
with copies to:
Thomas H. Maxfield, Esq.
Baker & Hostetler LLP
303 East 17th Avenue, Suite 1100
Denver, Colorado 80203-1264
Telecopier No.: (303) 861-2307
8
<PAGE> 12
(b) if to Circle R, to:
Terry Pat Reynolds
Circle R Drilling, Ltd. 1981-A
515 Spring Street
Shreveport, Louisiana 71101
Telecopier No.: (318) 227-0171
with copies to:
Ernest Nix, Esq.
Davidson, Nix & Jones
Professional Law Corporation
509 Market Street, Suite 800
Shreveport, Louisiana 71101
Telecopier No.: (318) 226-0168
(c) if to CRD, to:
Terry Pat Reynolds
Circle R Drilling, Inc.
515 Spring Street
Shreveport, Louisiana 71101
Telecopier No.: (318) 227-0171
with copies to:
Ernest Nix, Esq.
Davidson, Nix & Jones
Professional Law Corporation
509 Market Street, Suite 800
Shreveport, Louisiana 71101
Telecopier No.: (318) 226-0168
(d) if to RDC, to:
Terry Pat Reynolds
Reynolds Drilling Co., Inc.
515 Spring Street
Shreveport, Louisiana 71101
Telecopier No.: (318) 227-0171
9
<PAGE> 13
with copies to:
Ernest Nix, Esq.
Davidson, Nix & Jones
Professional Law Corporation
509 Market Street, Suite 800
Shreveport, Louisiana 71101
Telecopier No.: (318) 226-0168
(e) if to T. Reynolds, to:
Terry Pat Reynolds
515 Spring Street
Shreveport, Louisiana 71101
Telecopier No.: (318) 227-0171
with copies to:
Ernest Nix, Esq.
Davidson, Nix & Jones
Professional Law Corporation
509 Market Street, Suite 800
Shreveport, Louisiana 71101
Telecopier No.: (318) 226-0168
SECTION 6.2 Interpretation. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated, and the words "hereof', "herein" and "hereunder"
and similar terms refer to this Agreement as a whole and not to any particular
provision of this Agreement, unless the context otherwise requires. The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 6.3 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties.
SECTION 6.4 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, including the documents and instruments referred to herein, (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any person other
than the parties any rights or remedies hereunder; provided, however, that
legal counsel for Circle R hereto may rely upon the representations and
warranties of Circle R contained herein and in the certificate delivered
pursuant to Section 5.3(b).
10
<PAGE> 14
SECTION 6.5 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 6.6 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties without the prior written consent of the other parties. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
SECTION 6.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions be consummated as originally
contemplated to the fullest extent possible.
SECTION 6.8 Enforcement of This Agreement. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
IN WITNESS WHEREOF, PDC and Circle R have executed this Agreement as
of the date first written above.
PDC:
PATTERSON DRILLING COMPANY
By: /s/ A. GLENN PATTERSON
-----------------------------------
A. Glenn Patterson
Chief Operating Officer
Attest:
/s/ JAMES C. BROWN
- -----------------------------
James C. Brown, Secretary
11
<PAGE> 15
CIRCLE R:
CIRCLE R DRILLING, LTD. 1981-A, a
Louisiana limited partnership
By: Circle R Drilling, Inc.,
General Partner
By: /s/ TERRY PAT REYNOLDS
--------------------------------
Terry Pat Reynolds,
Vice President
Attest:
DONNA S. WALSH
- --------------------------
Donna S. Walsh, Secretary
TO INDUCE PATTERSON DRILLING COMPANY TO ENTER INTO THIS ASSET PURCHASE
AGREEMENT AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, THE UNDERSIGNED, BEING BENEFICIAL
OWNERS OF CIRCLE R, ACCEPT AND AGREE TO BE BOUND BY THE INDEMNIFICATION
PROVISIONS OF SECTION 4.4 OF THIS ASSET PURCHASE AGREEMENT.
CIRCLE R DRILLING, INC.
By: /s/ TERRY PAT REYNOLDS
----------------------------------
Terry Pat Reynolds, Vice President
----------------------------------
TERRY PAT REYNOLDS
12
<PAGE> 16
ANNEX 1
TO
ASSET PURCHASE AGREEMENT
DESCRIPTION OF DRILLING RIG AND EQUIPMENT
A. Drilling Rig and Equipment.
The Drilling Rig and Equipment includes the drilling rig, parts and
related equipment, including engines, mud pumps, hooks and blocks,
derrick, substructure, rotary tables, blow-out prevention equipment,
drill bits and all tubular goods on the rig, all of which are listed
below, less the parts and related equipment sold or disposed of since
August 26, 1997, and plus the parts and related equipment acquired by
Circle R since August 26, 1997, in each case in the ordinary course of
business, consistent with past practice.
------------
DRAWWORKS
Superior 1000-M Single Drum Drawworks, 1000 HP, LEBUS Grooved
f/1 1/4" Line, Makeup & Breakout Catheads, Overrunning Clutch,
Air Driller's Console Controls, Crown-O-Matic
COMPOUND
SUPERIOR 3-Engine In-Line Compound w/Single-Pedestal Pump
Drive, GARDNER-DENVER 2-Stage A/C Belt Drive
BRAKE
(2) PARMAC V-80 Single Hydromatic Brakes
ENGINES
(3)CAT D-353E TA Diesel Engines, S/Ns-46BO9128 & N/A, Each
w/Air Starter, Radiator, Gauges, NATIONAL C- 245-80 Torque
Converter; (1) CAT D-353ETA Diesel Engine, S/N 046B07814
located at Darr Equipment Company, Waco, Texas
MAST
DRECO 136'H x 22'W Cantilever Mast, 600,000# Static Hook Load,
Pin-Type, Crown Block w/(5) Sheaves, Fastline Sheave, 4"
Standpipe, Crown Safety Platform, Racking
AX-1 - 1
<PAGE> 17
Board, Tong Counterweights, Ladder, Derrick Climber, Mast
Stand, Standpipe Manifold w/4" & 2" Gate Valves, OTECO 5000
PSI Pressure Gauge
SUBSTRUCTURE
DRECO 18'6"H x 27'W x 50'L Slingshot Substructure w/Rotary
Beams, V-Door Ramp, (4) Stairs, Safety Rails, Deadline Anchor,
Air Volume Tank, Hydraulic Reservoir, (2) LANTEC Air Winches
PUMP
GARDNER-DENVER PZ-9 Triplex Mud Pump, 1000 HP, Forged Steel
Fluid End w/Quick-Change Caps, HYDRIL K-20- 1 0000 Pulsation
Dampener, Rod Cooling Pump, DEMCO 4" & OTECO 2" Gate Valves,
Drive Assembly, Compound- Driven
PUMP
WILSON 600 Duplex Mud Pump, 600 HP, 7 1/2" x 14", MATTCO Cast
Steel Fluid End w/Quick-Change Caps, CONTINENTAL EMSCO
Pulsation Dampener, OTECO 2" Shear Relief Valve, Rod Cooling
Pump, OTECO 4" & DEMCO 2" Gate Valves, Drive Assembly, Master
Skidded w/Engine
PUMP POWER
CAT D-379 TA Diesel Engine, S/N-68BO7069, w/Air Starter,
Radiator, Gauges, Torque Converter
ROTATING EQUIPMENT
HACKER 27 1/2" x 44 1/2" Rotary Table w/Split Master Bushing
GARDNER-DENVER 300-Ton Swivel
VARCO Kelly Drive Bushing, Square Drive
Lower Kelly Valve
Inside BOP
TRAVELING EQUIPMENT
GARDNER-DENVER 300-Ton Block/Hook Combination w/(5) 60"
Sheaves, 1 1/4" Line, BJ 6150 Unimatic Hook
AX-1 - 2
<PAGE> 18
2 1/2" x 102" Elevator Links
WELL CONTROL EQUIPMENT
HYDRIL GK-10-5000 5000 PSI Annular Blowout Preventer
HYDRIL WP 11" 5000 PSI Double Blowout w/Pipe & Blind Rams
24"H x 11"ID Drilling Spool w/4-1/16" Outlets, (2) DEMCO
3-1/16" 5000 PSI & (2) DEMCO 2-1/16" 3000 PSI Gate Valves
24"H x 11"D 5000 PSI Spacer Spool
KOOMEY T20120 5-Station 120-Gallon Closing Unit, S/N-1 550601,
(12) 10-Gallon Accumulator Bottles, Triplex Charging Pump p/b
25 HP Electric Motor, (1) Air-Actuated Hydraulic Charging Pump
SHAFFER 5-Station Remote Closing Unit, Mounted on Console
5000 PSI Blowout Preventer Choke Manifold, 5-Way Cross w/(2)
DEMCO 3-1/16" 5000 PSI & (2) 2-1/16" 3000 PSI Gate Valves,
Buffer Chamber, Mounted on Adjustable-Height Skid
RIG HOUSES
8'W x 30'L Triaxle Toolpusher's Trailer, Fully Furnished
10'W x 24'L Doghouse w/4'L Porch Extension, Round Top,
Knowledge Box, Lockers, Bench Storage, Cabinets, Parts Bins,
Fluorescent Lights, Heater, Skidded
10'W x 38'L Parts/Change House w/Round-Top, Lockers, Bench
Storage, Cabinets, Parts Bins, Workbenches, Fluorescent
Lights, Heater, Skidded
GENERATORS/UTILITY HOUSE
CAT SR-4 320 KW AC Generator Set, SIN-5LA01675, p/b CAT 3412
DITA Diesel
Engine, S/N-38509492, w/Air Starter, Radiator, Gauges, Skidded
502FDR 320 KW AC Generator Set, S/N-PJ3156691, p/b CAT 3412
DITA Diesel Engine w/Air Starter, Radiator, Gauges, Skidded
QUINCY 350 Air Compressor p/b LISTER 2-Cylinder Air-Cooled
Diesel Engine, SN-US11078ST2A3110, w/Manual & Electric
Starter, Air Volume Tank
AX-1 - 3
<PAGE> 19
QUINCY 520 Air Compressor p/b 10 HP Electric Motor
SQUARE D Electrical Control Panel w/Switchboard
All Above Mounted in 10'W x 38'L Utility House w/Round Top,
Fluorescent Lights, Heater, Skidded
MUD SYSTEM
10'W x 7H x 36'L Mud Suction Tank w/10'L Covered Porch
Extension, (2) Compartments, Round Bottom, Internal Plumbing,
(3) DEMCO 6" x 8" Centrifugal Pumps, Each p/b 50 HP Electric
Motor, (2) 7 1/2 HP Mud Agitators, Each p/b Electric Motor,
Mud Hopper, Top-Mounted Walkways, Stairs, Safety Rails,
Skidded
10'W x 7'H x 40'L Mud Shaker Tank w/(2) 4'L Covered Porch
Extensions, (3) Compartments, Round Bottom, Internal Plumbing,
(2) DEMCO 6" x 8" Centrifugal Pumps, Each p/b 50 HP Electric
Motor, (2) 7 1/2 HP Mud Agitators, Each p/b Electric Motor,
Top-Mounted, Walkways, Stairs, Safety Rails, Skidded
FLUID SYSTEMS High Speed Linear Screen Vibrating Shale Shaker
p/b 5 HP Electric Motor
DEMCO Desander w/12" Cone
DEMCO Desilter w/(1) 6" Cones
WATER/FUEL TANKS
10'Dia x 30'L Water Tank, Skidded
10'W x 8'H x 30'L Fuel Tank, Skidded w/Fuel Pump & Filter p/b
(2) 1 HP Electric Motors, Mounted on Stand
7'10"W x 3'H x 5'L 3-Compartment Lubester
HANDLING TOOLS
INGERSOLL-RAND Pneumatic Pipe Spinner
BJ Type B Rotary Tongs w/Extra Heads
BJ 3 3/8" BN to 5 1/2" BN 250-Ton Center Latch Pipe Elevators
BJ Type A 6 3/4" SS 250-Ton Center Latch Drill Collar
Elevators
AX-1 - 4
<PAGE> 20
WOOLLEY DU Long 4 1/2" Drill Pipe Slips
8" Drill Collar Slips
6 1/4" Drill Collar Slips
Approximately (1) Drill Collar Lift Subs
INGERSOLL-RAND HUL-RO 9000 PSI Capacity Air Hoist,
S/N-RSH11417
Mud Bucket
AUXILIARY EQUIPMENT
MARTIN DECKER E 600,000# Capacity Weight Indicator w/Pump
Pressure, Tong Line Pull & RPM Gauges, Console-Mounted
3 1/2"ID x 55'L Rotary Hose
(2)6"ID x 5'L & 8'L Suction Hoses w/Pipe
(2) 3 1/2"ID x 10'L Vibrator Hoses
42"H x 5'W x 60'L 2-Section Catwalk w/Steel Deck Steps
60"H x 8"W x 25'L Junk Box w/15'L Covered Porch f/Closing Unit
MATHEY RET Hydraulic/Electric Wireline Measuring Device,
S/N-633, w/.092" Measuring Line
Rathole & Mousehole
Fluorescent Rig Lights w/Wiring
Approximately 6000' of 1 1/4" Drill Line w/Spool Stand
BEAR Automatic Driller
(4) Sets of 42"H x 28'L Triangular Pipe Rack
Miscellaneous Spare Parts, Hand Tools, Valves, Fire
Extinguishers, Etc.
AX-1 - 5
<PAGE> 21
DRILL PIPE
12,000' (400 Joints) 4 1/2", Grade E, 16.60#, Range 2 Drill
Pipe w/4 1/2"XH, BN, HB Tool Joints, 5- 15/16" to 6"OD, PC
DRILL COLLARS
(24) 6 1/8"OD to 6 1/2"OD x 2"ID x 30'L Slick Drill Collars
w/4 1/2"XH Connections, HB, Recessed
AX-1 - 6
<PAGE> 22
EXHIBIT A(I)
PATTERSON DRILLING COMPANY
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into this _____ day
of November, 1997 (this "Agreement"), by and between PATTERSON DRILLING
COMPANY, a Delaware corporation ("PDC"), and CIRCLE R DRILLING, LTD. 1981-A, a
Louisiana limited partnership ("Circle R").
RECITALS:
A. Simultaneously with the execution of this Agreement, PDC and
Circle R have entered into that certain Asset Purchase Agreement, dated of even
date herewith (the "Asset Purchase Agreement"), providing for, among other
things, the purchase by PDC of the drilling rig and related equipment owned by
Circle R.
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 November 1, 2000 (the "Non-Compete Period").
2. Covenant Not to Compete.
(a) Circle R covenants and agrees that during the Non-Compete
Period, Circle R shall not, without the prior written consent of 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 otherwise assist,
or own, share in the earnings of, or invest in the stock, bonds, or other
securities of, any person which is engaged in providing contract drilling rig
services to the oil and gas industry within Texas Railroad Commission Districts
1, 2, 3, 4, 5 and 6 in the State of Texas (the "Competitive Business");
provided, however, that Circle R may (i) invest and/or engage in any business
that
EXH A(I) - 1
<PAGE> 23
EXHIBIT A(I)
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 PDC or any affiliate of PDC with any state,
district, territory, or possession of the United States or any governmental
subdivision, agency, or instrumentality thereof by virtue of any statute, law,
regulation or administrative practice. The period of time during which Circle
R is prohibited from engaging in certain activities by this Section shall be
extended by the length of time during which Circle R is in breach of the terms
of this Section.
(b) It is understood by and between the parties hereto that the
foregoing covenant by Circle R not to enter into competition with 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 Circle R to comply
with such covenant, PDC would not have agreed to enter into this Agreement or
the Asset Purchase Agreement. PDC and Circle R have independently consulted
with their respective counsel and have been advised in all respects concerning
the reasonableness and propriety of such covenant, with specific regard to the
nature of the business conducted by PDC and its affiliates. Circle R agrees
that such covenant is reasonable in scope, geographic area, and duration, and
that compliance with such covenant would not impose economic hardship on Circle
R.
3. Restrictions on Soliciting Business of PDC.
Circle R further covenants and agrees that during the Non-Compete
Period, Circle R 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 PDC:
(a) Solicit or hire any of the employees of PDC or solicit or take
away any of PDC's customers, lessors, or suppliers or attempt any of the
foregoing; or
(b) Engage in any act which would interfere with or harm any
business relationship PDC has with any employee or (with respect to PDC's
contract oil and gas well drilling business) with any customer, lessor,
principal or supplier.
EXH A(I) - 2
<PAGE> 24
EXHIBIT A(I)
4. Specific Performance.
Without intending to limit the remedies available to PDC, Circle R
acknowledges that PDC will have no adequate remedies at law if Circle R
violates the terms of Sections 2 or 3, hereof. In such event, Circle R agrees
that PDC shall have the right, in addition to any other rights it may have, to
obtain in any court of competent jurisdiction specific performance of such
Sections of this Agreement or injunctive relief to restrain any breach or
threatened breach thereof. Nothing herein shall be construed as prohibiting
PDC from pursuing any other remedies available to PDC (whether at law or in
equity) for such breach or threatened breach, including, without limitation,
the recovery of monetary damages from Circle R.
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 PDC and Circle R.
(a) Representations and Warranties of PDC. PDC hereby represents
and warrants to Circle R that: (i) it has all requisite power to enter into and
perform its obligations under this Agreement; (ii) this Agreement has been duly
and validly authorized by all necessary corporate action on the part of PDC;
(iii) the execution of this Agreement by PDC and performance of PDC's
obligations hereunder do not require the consent or approval of any other
party; and (iv) this Agreement is a valid and binding obligation of PDC.
(b) Representations and Warranties of Circle R. Circle R hereby
represents and warrants to PDC that: (i) Circle R has the capacity and power to
enter into and perform obligations of Circle R under this Agreement; (ii)
Circle R has duly and validly executed this Agreement; (iii) the execution of
this Agreement and performance of obligations of Circle R hereunder do not
require the consent or approval of any other party; and (iv) this Agreement
constitutes a valid and binding obligation of Circle R.
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.
EXH A(I) - 3
<PAGE> 25
EXHIBIT A(I)
(b) Governing Law and Construction. This Agreement will be
governed by and construed in accordance with the laws of the State of Louisiana
without reference to its conflict-of-laws principles. This Agreement's final
form resulted from review and negotiations among the parties and their
attorneys, and no part of this Agreement should be construed against any party
on the basis of authorship.
(c) Forum for Dispute Resolution. If any dispute arises among the
parties concerning the interpretation or performance of any portion of this
Agreement which the parties are unable to resolve themselves, and any party
brings an action against any other party seeking a declaratory order, specific
performance, damages, or any other legal or equitable relief based on this
Agreement, the parties agree that the forum for any such action shall be an
appropriate federal or state court in Texas having jurisdiction, agree that
venue will be proper in such courts, and waive any objections based on
inconvenience of the forum, and further agree that the prevailing party in any
such action, as determined by the court, shall be awarded its reasonable
attorneys' fees and costs in addition to any relief or judgment the court
awards.
(d) Entire Agreement; Amendment. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter
contained herein and supersedes any previous oral or written communications,
representations, understandings or agreements with respect thereto. The terms
of this Agreement may be modified only in a writing, signed by authorized
representatives of both parties.
(e) Assignability. This Agreement will be binding upon the
parties' respective successors and permitted assigns. Neither party may assign
this Agreement and/or any of its rights and/or obligations hereunder without
the prior written consent of the other party, and any such attempted assignment
will be void; provided, however, that PDC may assign this Agreement to PEC or
to another subsidiary of PEC without the prior written consent of Circle R, and
provided further that a transfer by PDC as a result of a merger or sale of all
or substantially all of the assets of PDC with or to a third party that assumes
PDC's obligations hereunder by operation of law or otherwise shall not
constitute a prohibited assignment under this Section 7(e).
(f) Waiver. A waiver of a breach or default under this Agreement
will not constitute a waiver of any other breach or default. Failure or delay
by either party to enforce compliance with any term or condition of this
Agreement will not constitute a waiver of such term or condition.
(g) Severability. If any provision of this Agreement is declared
to be invalid, the parties agree that such invalidity will not affect the
validity of the remaining provisions of this Agreement, and further agree, to
the extent possible, to substitute for the invalid provision a valid
EXH A(I) - 4
<PAGE> 26
EXHIBIT A(I)
provision that approximates the intent and economic effect of the invalid
provision as closely as possible.
(h) Headings. The titles of the Sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
(i) Notice. Any notice, request, consent, demand or other
communication required to be given under this Agreement will be in writing and
will be given personally, by facsimile or by mailing the same, first-class,
postage prepaid to the appropriate address and facsimile number set forth below
or to such other person or at such other address as may hereafter be designated
by like notice. Notices by mail will be considered delivered and become
effective three days after the mailing thereof. All notices by facsimile will
be considered delivered and become effective immediately upon the confirmed (by
answer back or other tangible printed verification or successful receipt)
sending thereof.
To PDC: Patterson Drilling Company
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: A. Glenn Patterson
President and Chief Operating Officer
To Circle R: Circle R Drilling, Ltd. 1981-A
515 Spring Street
Shreveport, Louisiana 71101
Facsimile: (318) 227-0171
Attention: Terry Pat Reynolds
with copies to:
Ernest Nix, Esq.
Davidson, Nix & Jones
Professional Law Corporation
509 Market Street, Suite 800
Shreveport, Louisiana 71101
Facsimile: (318) 226-0168
EXH A(I) - 5
<PAGE> 27
EXHIBIT A(I)
(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.
"PDC"
PATTERSON DRILLING COMPANY
By:
----------------------------
James C. Brown
Vice President-Finance
"Circle R"
CIRCLE R DRILLING, LTD. 1981-A
By: Circle R Drilling, Inc.,
General Partner
By:
------------------------
Terry Pat Reynolds,
Vice President
EXH A(I) - 6
<PAGE> 28
EXHIBIT A(II)
PATTERSON DRILLING COMPANY
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into this _____ day
of November, 1997 (this "Agreement"), by and between PATTERSON DRILLING
COMPANY, a Delaware corporation ("PDC"), and CIRCLE R DRILLING, INC., a
Louisiana corporation ("CRD").
RECITALS:
A. Simultaneously with the execution of this Agreement, PDC has
entered into that certain Asset Purchase Agreement, dated of even date herewith
(the "Asset Purchase Agreement"), between PDC and CIRCLE R DRILLING, LTD.
1981-A ("Circle R"), providing for, among other things, the purchase by PDC of
the drilling rig and related equipment owned by Circle R.
B. CRD is the sole general partner of Circle R.
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 November 1, 2000 (the "Non-Compete Period").
2. Covenant Not to Compete.
(a) CRD covenants and agrees that during the Non-Compete Period,
CRD shall not, without the prior written consent of PDC, directly or
indirectly, and whether as a principal or as an agent, officer, director,
employee, consultant, or otherwise, alone or in association with any other
person, carry on, be engaged, concerned, or take part in, render services to,
or otherwise assist, or own, share in the earnings of, or invest in the stock,
bonds, or other securities of, any person which is engaged in providing
contract drilling rig services to the oil and gas industry within Texas
Railroad Commission Districts 1, 2, 3, 4, 5 and 6 in the State of Texas (the
"Competitive Business"); provided, however, that CRD may (i) invest and/or
engage in any business that routinely provides third-party
EXH A(II) - 1
<PAGE> 29
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 PDC or any
affiliate of PDC with any state, district, territory, or possession of the
United States or any governmental subdivision, agency, or instrumentality
thereof by virtue of any statute, law, regulation or administrative practice.
The period of time during which CRD is prohibited from engaging in certain
activities by this Section shall be extended by the length of time during which
CRD is in breach of the terms of this Section.
(b) It is understood by and between the parties hereto that the
foregoing covenant by CRD not to enter into competition with 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 CRD to comply with such
covenant, PDC would not have agreed to enter into this Agreement or the Asset
Purchase Agreement. PDC and CRD have independently consulted with their
respective counsel and have been advised in all respects concerning the
reasonableness and propriety of such covenant, with specific regard to the
nature of the business conducted by PDC and its affiliates. CRD 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 CRD.
3. Restrictions on Soliciting Business of PDC.
CRD further covenants and agrees that during the Non-Compete Period,
CRD will not, either for himself or for any other person or entity, directly or
indirectly, engage in any of the following activities in a Competitive Business
without the express prior written consent of PDC:
(a) Solicit or hire any of the employees of PDC or solicit or take
away any of PDC's customers, lessors, or suppliers or attempt any of the
foregoing; or
(b) Engage in any act which would interfere with or harm any
business relationship PDC has with any employee or (with respect to PDC's
contract oil and gas well drilling business) with any customer, lessor,
principal or supplier.
4. Specific Performance.
Without intending to limit the remedies available to PDC, CRD
acknowledges that PDC will have no adequate remedies at law if CRD violates the
terms of Section 2 or 3, hereof. In such event, CRD agrees that PDC shall have
the right, in addition to any other rights it may have, to obtain in any court
of competent jurisdiction specific performance of such Sections of this
Agreement
EXH A(II) - 2
<PAGE> 30
or injunctive relief to restrain any breach or threatened breach thereof.
Nothing herein shall be construed as prohibiting PDC from pursuing any other
remedies available to PDC (whether at law or in equity) for such breach or
threatened breach, including, without limitation, the recovery of monetary
damages from CRD.
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 PDC and CRD.
(a) Representations and Warranties of PDC. PDC hereby represents
and warrants to CRD that: (i) it has all requisite power to enter into and
perform its obligations under this Agreement; (ii) this Agreement has been duly
and validly authorized by all necessary corporate action on the part of PDC;
(iii) the execution of this Agreement by PDC and performance of PDC's
obligations hereunder do not require the consent or approval of any other
party; and (iv) this Agreement is a valid and binding obligation of PDC.
(b) Representations and Warranties of CRD. CRD hereby represents
and warrants to PDC that: (i) CRD has the capacity and power to enter into and
perform obligations of CRD under this Agreement; (ii) CRD has duly and validly
executed this Agreement; (iii) the execution of this Agreement and performance
of obligations of CRD hereunder do not require the consent or approval of any
other party; and (iv) this Agreement constitutes a valid and binding obligation
of CRD.
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 Louisiana
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
EXH A(II) - 3
<PAGE> 31
unable to resolve themselves, and any party brings an action against any other
party seeking a declaratory order, specific performance, damages, or any other
legal or equitable relief based on this Agreement, the parties agree that the
forum for any such action shall be an appropriate federal or state court in
Texas having jurisdiction, agree that venue will be proper in such courts, and
waive any objections based on inconvenience of the forum, and further agree
that the prevailing party in any such action, as determined by the court, shall
be awarded its reasonable attorneys' fees and costs in addition to any relief
or judgment the court awards.
(d) Entire Agreement; Amendment. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter
contained herein and supersedes any previous oral or written communications,
representations, understandings or agreements with respect thereto. The terms
of this Agreement may be modified only in a writing, signed by authorized
representatives of both parties.
(e) Assignability. This Agreement will be binding upon the
parties' respective successors and permitted assigns. Neither party may assign
this Agreement and/or any of its rights and/or obligations hereunder without
the prior written consent of the other party, and any such attempted assignment
will be void; provided, however, that PDC may assign this Agreement to PEC or
to another subsidiary of PEC without the prior written consent of CRD, and
provided further that a transfer by PDC as a result of a merger or sale of all
or substantially all of the assets of PDC with or to a third party that assumes
PDC's obligations hereunder by operation of law or otherwise shall not
constitute a prohibited assignment under this Section 7(e).
(f) Waiver. A waiver of a breach or default under this Agreement
will not constitute a waiver of any other breach or default. Failure or delay
by either party to enforce compliance with any term or condition of this
Agreement will not constitute a waiver of such term or condition.
(g) Severability. If any provision of this Agreement is declared
to be invalid, the parties agree that such invalidity will not affect the
validity of the remaining provisions of this Agreement, and further agree, to
the extent possible, to substitute for the invalid provision a valid provision
that approximates the intent and economic effect of the invalid provision as
closely as possible.
(h) Headings. The titles of the Sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
(i) Notice. Any notice, request, consent, demand or other
communication required to be given under this Agreement will be in writing and
will be given personally, by facsimile or by mailing the same, first-class,
postage prepaid to the appropriate address and facsimile number set forth below
or to such other person or at such other address as may hereafter be designated
by like notice. Notices by mail will be considered delivered and become
effective three days after the mailing thereof. All notices by facsimile will
be considered delivered and become effective immediately upon
EXH A(II) - 4
<PAGE> 32
the confirmed (by answer back or other tangible printed verification or
successful receipt) sending thereof.
To PDC: Patterson Drilling Company
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: A. Glenn Patterson
President and Chief Operating Officer
To CRD: Circle R Drilling, Inc.
515 Spring Street
Shreveport, Louisiana 71101
Facsimile: (318) 227-0171
Attention: Terry Pat Reynolds
with copies to:
Ernest Nix, Esq.
Davidson, Nix & Jones
Professional Law Corporation
509 Market Street, Suite 800
Shreveport, Louisiana 71101
Facsimile: (318) 226-0168
8. 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.
EXH A(II) - 5
<PAGE> 33
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.
"PDC"
PATTERSON DRILLING COMPANY
By:
---------------------------------
James C. Brown
Vice President-Finance
"CRD"
CIRCLE R DRILLING, INC.
By:
---------------------------------
Terry Pat Reynolds, Vice President
EXH A(II) - 6
<PAGE> 34
EXHIBIT A(III)
PATTERSON DRILLING COMPANY
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into this _____ day
of November, 1997 (this "Agreement"), by and between PATTERSON DRILLING
COMPANY, a Delaware corporation ("PDC"), and TERRY PAT REYNOLDS, an individual
residing in Shreveport, Louisiana ("T. Reynolds").
RECITALS:
A. Simultaneously with the execution of this Agreement, PDC has
entered into that certain Asset Purchase Agreement, dated of even date herewith
(the "Asset Purchase Agreement"), between PDC and CIRCLE R DRILLING, LTD.
1981-A ("Circle R"), providing for, among other things, the purchase by PDC of
the drilling rig and related equipment owned by Circle R.
B. T. Reynolds is an officer, a director and a principal
stockholder of Reynolds Drilling Company, Inc., the majority stockholder of
Circle R Drilling, Inc., general partner of Circle R.
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 November 1, 2000 (the "Non-Compete Period").
2. Covenant Not to Compete.
(a) T Reynolds covenants and agrees that during the Non-Compete
Period, T Reynolds shall not, without the prior written consent of PDC,
directly or indirectly, and whether as a principal or as an agent, officer,
director, employee, consultant, or otherwise, alone or in association with any
other person, carry on, be engaged, concerned, or take part in, render services
to, or otherwise assist, or own, share in the earnings of, or invest in the
stock, bonds, or other securities of, any person which is engaged in providing
contract drilling rig services to the oil and gas
EXH A(III) - 1
<PAGE> 35
industry within Texas Railroad Commission Districts 1, 2, 3, 4, 5, and 6 of the
State of Texas (the "Competitive Business"); provided, however, that T.
Reynolds 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 PDC or any affiliate of PDC with any state, district, territory, or
possession of the United States or any governmental subdivision, agency, or
instrumentality thereof by virtue of any statute, law, regulation or
administrative practice. The period of time during which T. Reynolds is
prohibited from engaging in certain activities by this Section shall be
extended by the length of time during which T. Reynolds is in breach of the
terms of this Section.
(b) It is understood by and between the parties hereto that the
foregoing covenant by T. Reynolds not to enter into competition with PDC as set
forth in Section 2(a) hereof is an essential element of this Agreement and the
Asset Purchase Agreement and that, but for the agreement of T. Reynolds to
comply with such covenant, PDC would not have agreed to enter into this
Agreement or the Asset Purchase Agreement. PDC and T. Reynolds have
independently consulted with their respective counsel and have been advised in
all respects concerning the reasonableness and propriety of such covenant, with
specific regard to the nature of the business conducted by PDC and its
affiliates. T. Reynolds agrees that such covenant is reasonable in scope,
geographic area, and duration, and that compliance with such covenant would not
impose economic or professional hardship on T. Reynolds.
3. Restrictions on Soliciting Business of PDC.
T. Reynolds further covenants and agrees that during the Non-Compete
Period, T. Reynolds will not, either for himself or for any other person or
entity, directly or indirectly, engage in any of the following activities in a
Competitive Business without the express prior written consent of PDC:
(a) Solicit or hire any of the employees of PDC or solicit or take
away any of PDC's customers, lessors, or suppliers or attempt any of the
foregoing; or
(b) Engage in any act which would interfere with or harm any
business relationship PDC has with any employee or (with respect to PDC's
contract oil and gas well drilling business) with any customer, lessor,
principal or supplier.
EXH A(III) - 2
<PAGE> 36
4. Specific Performance.
Without intending to limit the remedies available to PDC, T. Reynolds
acknowledges that PDC will have no adequate remedies at law if T. Reynolds
violates the terms of Section 2 or 3, hereof. In such event, T. Reynolds
agrees that PDC shall have the right, in addition to any other rights it may
have, to obtain in any court of competent jurisdiction specific performance of
such Sections of this Agreement or injunctive relief to restrain any breach or
threatened breach thereof. Nothing herein shall be construed as prohibiting
PDC from pursuing any other remedies available to PDC (whether at law or in
equity) for such breach or threatened breach, including, without limitation,
the recovery of monetary damages from T. Reynolds.
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 PDC and T. Reynolds.
(a) Representations and Warranties of PDC. PDC hereby represents
and warrants to T. Reynolds that: (i) it has all requisite power to enter into
and perform its obligations under this Agreement; (ii) this Agreement has been
duly and validly authorized by all necessary corporate action on the part of
PDC; (iii) the execution of this Agreement by PDC and performance of PDC's
obligations hereunder do not require the consent or approval of any other
party; and (iv) this Agreement is a valid and binding obligation of PDC.
(b) Representations and Warranties of T. Reynolds. T. Reynolds
hereby represents and warrants to PDC that: (i) T. Reynolds has the capacity
and power to enter into and perform obligations of T. Reynolds under this
Agreement; (ii) T. Reynolds has duly and validly executed this Agreement; (iii)
the execution of this Agreement and performance of obligations of T. Reynolds
hereunder do not require the consent or approval of any other party; and (iv)
this Agreement constitutes a valid and binding obligation of T. Reynolds.
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.
EXH A(III) - 3
<PAGE> 37
(b) Governing Law and Construction. This Agreement will be
governed by and construed in accordance with the laws of the State of Louisiana
without reference to its conflict-of-laws principles. This Agreement's final
form resulted from review and negotiations among the parties and their
attorneys, and no part of this Agreement should be construed against any party
on the basis of authorship.
(c) Forum for Dispute Resolution. If any dispute arises among the
parties concerning the interpretation or performance of any portion of this
Agreement which the parties are unable to resolve themselves, and any party
brings an action against any other party seeking a declaratory order, specific
performance, damages, or any other legal or equitable relief based on this
Agreement, the parties agree that the forum for any such action shall be an
appropriate federal or state court in Texas having jurisdiction, agree that
venue will be proper in such courts, and waive any objections based on
inconvenience of the forum, and further agree that the prevailing party in any
such action, as determined by the court, shall be awarded its reasonable
attorneys' fees and costs in addition to any relief or judgment the court
awards.
(d) Entire Agreement; Amendment. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter
contained herein and supersedes any previous oral or written communications,
representations, understandings or agreements with respect thereto. The terms
of this Agreement may be modified only in a writing, signed by authorized
representatives of both parties.
(e) Assignability. This Agreement will be binding upon the
parties' respective successors and permitted assigns. Neither party may assign
this Agreement and/or any of its rights and/or obligations hereunder without
the prior written consent of the other party, and any such attempted assignment
will be void; provided, however, that PDC may assign this Agreement to PEC or
to a subsidiary of PEC without the prior written consent of T. Reynolds and
provided further that a transfer by PDC as a result of a merger or sale of all
or substantially all of the assets of PDC with or to a third party that assumes
PDC's obligations hereunder by operation of law or otherwise shall not
constitute a prohibited assignment under this Section 7(e).
(f) Waiver. A waiver of a breach or default under this Agreement
will not constitute a waiver of any other breach or default. Failure or delay
by either party to enforce compliance with any term or condition of this
Agreement will not constitute a waiver of such term or condition.
(g) Severability. If any provision of this Agreement is declared
to be invalid, the parties agree that such invalidity will not affect the
validity of the remaining provisions of this Agreement, and further agree, to
the extent possible, to substitute for the invalid provision a valid provision
that approximates the intent and economic effect of the invalid provision as
closely as possible.
EXH A(III) - 4
<PAGE> 38
(h) Headings. The titles of the Sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
(i) Notice. Any notice, request, consent, demand or other
communication required to be given under this Agreement will be in writing and
will be given personally, by facsimile or by mailing the same, first-class,
postage prepaid to the appropriate address and facsimile number set forth below
or to such other person or at such other address as may hereafter be designated
by like notice. Notices by mail will be considered delivered and become
effective three days after the mailing thereof. All notices by facsimile will
be considered delivered and become effective immediately upon the confirmed (by
answer back or other tangible printed verification or successful receipt)
sending thereof.
To PDC:
Patterson Drilling Company
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: A. Glenn Patterson
President and Chief Operating Officer
To T. Reynolds:
Terry Pat Reynolds
515 Spring Street
Shreveport, Louisiana 71101
Facsimile: (318) 227-0171
with copies to:
Ernest Nix, Esq.
Davidson, Nix & Jones
Professional Law Corporation
509 Market Street, Suite 800
Shreveport, Louisiana 71101
Facsimile: (318) 226-0168
8. 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.
EXH A(III) - 5
<PAGE> 39
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.
"PDC"
PATTERSON DRILLING COMPANY
By:
-----------------------------------
James C. Brown
Vice President-Finance
"T. Reynolds"
--------------------------------------
Terry Pat Reynolds
EXH A(III) - 6
<PAGE> 40
EXHIBIT A(IV)
PATTERSON DRILLING COMPANY
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into this _____ day
of November, 1997 (this "Agreement"), by and between PATTERSON DRILLING
COMPANY, a Delaware corporation ("PDC"), and REYNOLDS DRILLING CO., INC., a
Louisiana corporation ("RDC").
RECITALS:
A. Simultaneously with the execution of this Agreement, PDC has
entered into that certain Asset Purchase Agreement, dated of even date herewith
(the "Asset Purchase Agreement"), between PDC and CIRCLE R DRILLING, LTD.
1981-A ("Circle R"), providing for, among other things, the purchase by PDC of
the drilling rig and related equipment, rolling stock and office equipment
owned by Circle R.
B. RDC is the majority stockholder of CRD.
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 November 1, 2000 (the "Non-Compete Period").
2. Covenant Not to Compete.
(a) RDC covenants and agrees that during the Non-Compete Period,
RDC shall not, without the prior written consent of PDC, directly or
indirectly, and whether as a principal or as an agent, officer, director,
employee, consultant, or otherwise, alone or in association with any other
person, carry on, be engaged, concerned, or take part in, render services to,
or otherwise assist, or own, share in the earnings of, or invest in the stock,
bonds, or other securities of, any person which is engaged in providing
contract drilling rig services to the oil and gas industry within Texas
Railroad Commission Districts 1, 2, 3, 4, 5, and 6 of the State of Texas (the
"Competitive Business");
EXH A(IV) - 1
<PAGE> 41
provided, however, that RDC 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 PDC or any affiliate of PDC with any state,
district, territory, or possession of the United States or any governmental
subdivision, agency, or instrumentality thereof by virtue of any statute, law,
regulation or administrative practice. The period of time during which RDC is
prohibited from engaging in certain activities by this Section shall be
extended by the length of time during which RDC is in breach of the terms of
this Section.
(b) It is understood by and between the parties hereto that the
foregoing covenant by RDC not to enter into competition with 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 RDC to comply with such
covenant, PDC would not have agreed to enter into this Agreement or the Asset
Purchase Agreement. PDC and RDC have independently consulted with their
respective counsel and have been advised in all respects concerning the
reasonableness and propriety of such covenant, with specific regard to the
nature of the business conducted by PDC and its affiliates. RDC 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 RDC.
3. Restrictions on Soliciting Business of PDC.
RDC further covenants and agrees that during the Non-Compete Period,
RDC will not, either for himself or for any other person or entity, directly or
indirectly, engage in any of the following activities in a Competitive Business
without the express prior written consent of PDC:
(a) Solicit or hire any of the employees of PDC or solicit or take
away any of PDC's customers, lessors, or suppliers or attempt any of the
foregoing; or
(b) Engage in any act which would interfere with or harm any
business relationship PDC has with any employee or (with respect to PDC's
contract oil and gas well drilling business) with any customer, lessor,
principal or supplier.
4. Specific Performance.
Without intending to limit the remedies available to PDC, RDC
acknowledges that PDC will have no adequate remedies at law if RDC violates the
terms of Section 2 or 3, hereof. In
EXH A(IV) - 2
<PAGE> 42
such event, RDC agrees that PDC shall have the right, in addition to any other
rights it may have, to obtain in any court of competent jurisdiction specific
performance of such Sections of this Agreement or injunctive relief to restrain
any breach or threatened breach thereof. Nothing herein shall be construed as
prohibiting PDC from pursuing any other remedies available to PDC (whether at
law or in equity) for such breach or threatened breach, including, without
limitation, the recovery of monetary damages from RDC.
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 PDC and RDC.
(a) Representations and Warranties of PDC. PDC hereby represents
and warrants to RDC that: (i) it has all requisite power to enter into and
perform its obligations under this Agreement; (ii) this Agreement has been duly
and validly authorized by all necessary corporate action on the part of PDC;
(iii) the execution of this Agreement by PDC and performance of PDC's
obligations hereunder do not require the consent or approval of any other
party; and (iv) this Agreement is a valid and binding obligation of PDC.
(b) Representations and Warranties of RDC. RDC hereby represents
and warrants to PDC that: (i) RDC has the capacity and power to enter into and
perform obligations of RDC under this Agreement; (ii) RDC has duly and validly
executed this Agreement; (iii) the execution of this Agreement and performance
of obligations of RDC hereunder do not require the consent or approval of any
other party; and (iv) this Agreement constitutes a valid and binding obligation
of RDC.
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 Louisiana
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.
EXH A(IV) - 3
<PAGE> 43
(c) Forum for Dispute Resolution. If any dispute arises among the
parties concerning the interpretation or performance of any portion of this
Agreement which the parties are unable to resolve themselves, and any party
brings an action against any other party seeking a declaratory order, specific
performance, damages, or any other legal or equitable relief based on this
Agreement, the parties agree that the forum for any such action shall be an
appropriate federal or state court in Texas having jurisdiction, agree that
venue will be proper in such courts, and waive any objections based on
inconvenience of the forum, and further agree that the prevailing party in any
such action, as determined by the court, shall be awarded its reasonable
attorneys' fees and costs in addition to any relief or judgment the court
awards.
(d) Entire Agreement; Amendment. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter
contained herein and supersedes any previous oral or written communications,
representations, understandings or agreements with respect thereto. The terms
of this Agreement may be modified only in a writing, signed by authorized
representatives of both parties.
(e) Assignability. This Agreement will be binding upon the
parties' respective successors and permitted assigns. Neither party may assign
this Agreement and/or any of its rights and/or obligations hereunder without
the prior written consent of the other party, and any such attempted assignment
will be void; provided, however, that PDC may assign this Agreement to PEC or
to a subsidiary of PEC without the prior written consent of RDC and provided
further that a transfer by PDC as a result of a merger or sale of all or
substantially all of the assets of PDC with or to a third party that assumes
PDC's obligations hereunder by operation of law or otherwise shall not
constitute a prohibited assignment under this Section 7(e).
(f) Waiver. A waiver of a breach or default under this Agreement
will not constitute a waiver of any other breach or default. Failure or delay
by either party to enforce compliance with any term or condition of this
Agreement will not constitute a waiver of such term or condition.
(g) Severability. If any provision of this Agreement is declared
to be invalid, the parties agree that such invalidity will not affect the
validity of the remaining provisions of this Agreement, and further agree, to
the extent possible, to substitute for the invalid provision a valid provision
that approximates the intent and economic effect of the invalid provision as
closely as possible.
(h) Headings. The titles of the Sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
(i) Notice. Any notice, request, consent, demand or other
communication required to be given under this Agreement will be in writing and
will be given personally, by facsimile or by mailing the same, first-class,
postage prepaid to the appropriate address and facsimile number set forth below
or to such other person or at such other address as may hereafter be designated
by like notice.
EXH A(IV) - 4
<PAGE> 44
Notices by mail will be considered delivered and become effective three days
after the mailing thereof. All notices by facsimile will be considered
delivered and become effective immediately upon the confirmed (by answer back
or other tangible printed verification or successful receipt) sending thereof.
To PDC:
Patterson Drilling Company
4510 Lamesa Highway
P.O. Drawer 1410
Snyder, Texas 79550
Facsimile: (915) 573-0281
Attention: A. Glenn Patterson
President and Chief Operating Officer
To RDC:
Reynolds Drilling Co., Inc.
Terry Pat Reynolds
515 Spring Street
Shreveport, Louisiana 71101
Facsimile: (318) 227-0171
with copies to:
Ernest Nix, Esq.
Davidson, Nix & Jones
Professional Law Corporation
509 Market Street, Suite 800
Shreveport, Louisiana 71101
Facsimile: (318) 226-0168
8. 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.
EXH A(IV) - 5
<PAGE> 45
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.
"PDC"
PATTERSON DRILLING COMPANY
By:
----------------------------------
James C. Brown
Vice President-Finance
"RDC"
REYNOLDS DRILLING CO., INC.
By:
----------------------------------
Terry Pat Reynolds
Vice President
EXH A(IV) - 6
<PAGE> 46
EXHIBIT B
BILL OF SALE AND ASSIGNMENT
KNOW ALL MEN BY THESE PRESENTS, that, pursuant to that certain Asset
Purchase Agreement, dated of even date herewith ("Asset Purchase Agreement")
between PATTERSON DRILLING COMPANY ("PDC"), a Delaware corporation, and CIRCLE
R DRILLING, LTD. 1981-A ("Circle R"), a Louisiana limited partnership (Circle R
is referred to herein as the "Assignor"), the Assignor, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
hereby grants, bargains, sells, conveys and transfers unto PDC (the
"Assignee"), all of the Assignor's right, title and interest in and to the
Drilling Rig and Equipment (as defined in the Asset Purchase Agreement) set
forth in Appendix I attached hereto and incorporated herein by this reference.
TO HAVE AND TO HOLD the same unto the Assignee and the Assignee's
successors and assigns forever. The Assignor hereby covenants and agrees that
it has the full right, power and authority to sell, convey and transfer the
foregoing property to the Assignee pursuant to this Bill of Sale and
Assignment.
CIRCLE R MAKES THIS ASSIGNMENT AND BILL OF SALE WITHOUT ANY REPRESENTATIONS AND
WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE EXCEPT AS MAY BE
SPECIFICALLY CONTAINED HEREIN OR IN THE ASSET PURCHASE AGREEMENT. AS EXAMPLES
AND FOR THE AVOIDANCE OF DOUBT, BUT WITHOUT LIMITATION OF THE FOREGOING, THE
DRILLING RIG AND EQUIPMENT SHALL BE CONVEYED PURSUANT HERETO WITHOUT ANY
WARRANTY OR REPRESENTATION WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE
(OTHER THAN, AND WITHOUT LIMITING IN ANY MANNER OR TO ANY EXTENT, THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN THE ASSET PURCHASE AGREEMENT), WITH
RESPECT TO THE QUALITY, CONDITION, WEIGHT, SERVICEABILITY, CONFORMITY TO
SAMPLES OF MODELS OR ANY OTHER ASPECT OF ANY PART, COMPONENT OR PORTION OF THE
DRILLING RIG AND EQUIPMENT, ALL OF WHICH IS CONVEYED TO PDC AS IS, WHERE IS,
AND WITH ALL FAULTS AND DEFECTS AND IN ITS PRESENT CONDITION AND STATE OF
REPAIR AND WITHOUT ANY WARRANTIES WHATSOEVER OF MERCHANTABILITY OR OF FITNESS
FOR A PARTICULAR PURPOSE AND ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS,
IMPLIED OR STATUTORY. PDC ACKNOWLEDGES THAT THIS WAIVER IS CONSPICUOUS.
EXH B - 1
<PAGE> 47
IN WITNESS WHEREOF, the Assignor has caused this Bill of Sale and
Assignment to be duly executed by its duly authorized officer as of the ____
day of November, 1997.
CIRCLE R DRILLING, LTD. 1981-A
Its General Partner
By: CIRCLE R DRILLING, INC.
Its General Partner
By:
---------------------------------
Terry Pat Reynolds
Vice President
EXH B - 2
<PAGE> 48
APPENDIX I
TO
BILL OF SALE AND ASSIGNMENT
FROM
CIRCLE R DRILLING, LTD. 1981-A
TO
PATTERSON DRILLING COMPANY
(List of Assets Assigned)
A. Drilling Rig and Equipment
The Drilling Rig and Equipment includes the drilling rig, parts and
related equipment, including engines, mud pumps, hooks and blocks,
derrick, substructure, rotary tables, blow-out prevention equipment,
drill bits and all tubular goods on the rig, all of which are listed
below, less the parts and related equipment sold or disposed of since
August 26, 1997, and plus the parts and related equipment acquired by
Circle R since August 26, 1997, in each case in the ordinary course of
business, consistent with past practice.
--------------
DRAWWORKS
Superior 1000-M Single Drum Drawworks, 1000 HP, LEBUS Grooved
f/1 1/4" Line, Makeup & Breakout Catheads, Overrunning Clutch,
Air Driller's Console Controls, Crown-O-Matic
COMPOUND
SUPERIOR 3-Engine In-Line Compound w/Single-Pedestal Pump
Drive, GARDNER-DENVER 2-Stage A/C Belt Drive
BRAKE
(2) PARMAC V-80 Single Hydromatic Brakes
ENGINES
(3)CAT D-353E TA Diesel Engines, S/Ns-46BO9128 & N/A, Each
w/Air Starter, Radiator, Gauges, NATIONAL C- 245-80 Torque
Converter; (1) CAT D-353ETA Diesel Engine, S/N 046B07814
located at Darr Equipment Company, Waco, Texas
EXH B - 3
<PAGE> 49
MAST
DRECO 136'H x 22'W Cantilever Mast, 600,000# Static Hook Load,
Pin-Type, Crown Block w/(5) Sheaves, Fastline Sheave, 4"
Standpipe, Crown Safety Platform, Racking Board, Tong
Counterweights, Ladder, Derrick Climber, Mast Stand, Standpipe
Manifold w/4" & 2" Gate Valves, OTECO 5000 PSI Pressure Gauge
SUBSTRUCTURE
DRECO 18'6"H x 27'W x 50'L Slingshot Substructure w/Rotary
Beams, V-Door Ramp, (4) Stairs, Safety Rails, Deadline Anchor,
Air Volume Tank, Hydraulic Reservoir, (2) LANTEC Air Winches
PUMP
GARDNER-DENVER PZ-9 Triplex Mud Pump, 1000 HP, Forged Steel
Fluid End w/Quick-Change Caps, HYDRIL K-20- 1 0000 Pulsation
Dampener, Rod Cooling Pump, DEMCO 4" & OTECO 2" Gate Valves,
Drive Assembly, Compound- Driven
PUMP
WILSON 600 Duplex Mud Pump, 600 HP, 7 1/2" x 14", MATTCO Cast
Steel Fluid End w/Quick-Change Caps, CONTINENTAL EMSCO
Pulsation Dampener, OTECO 2" Shear Relief Valve, Rod Cooling
Pump, OTECO 4" & DEMCO 2" Gate Valves, Drive Assembly, Master
Skidded w/Engine
PUMP POWER
CAT D-379 TA Diesel Engine, S/N-68BO7069, w/Air Starter,
Radiator, Gauges, Torque Converter
ROTATING EQUIPMENT
HACKER 27 1/2" x 44 1/2" Rotary Table w/Split Master Bushing
GARDNER-DENVER 300-Ton Swivel
VARCO Kelly Drive Bushing, Square Drive
Lower Kelly Valve
Inside BOP
EXH B - 4
<PAGE> 50
TRAVELING EQUIPMENT
GARDNER-DENVER 300-Ton Block/Hook Combination w/(5) 60"
Sheaves, 1 1/4" Line, BJ 6150 Unimatic Hook
2 1/2" x 102" Elevator Links
WELL CONTROL EQUIPMENT
HYDRIL GK-10-5000 5000 PSI Annular Blowout Preventer
HYDRIL WP 11" 5000 PSI Double Blowout w/Pipe & Blind Rams
24"H x 11"ID Drilling Spool w/4-1/16" Outlets, (2) DEMCO
3-1/16" 5000 PSI & (2) DEMCO 2-1/16" 3000 PSI Gate Valves
24"H x 11"D 5000 PSI Spacer Spool
KOOMEY T20120 5-Station 120-Gallon Closing Unit, S/N-1 550601,
(12) 10-Gallon Accumulator Bottles, Triplex Charging Pump p/b
25 HP Electric Motor, (1) Air-Actuated Hydraulic Charging Pump
SHAFFER 5-Station Remote Closing Unit, Mounted on Console
5000 PSI Blowout Preventer Choke Manifold, 5-Way Cross w/(2)
DEMCO 3-1/16" 5000 PSI & (2) 2-1/16" 3000 PSI Gate Valves,
Buffer Chamber, Mounted on Adjustable-Height Skid
RIG HOUSES
8'W x 30'L Triaxle Toolpusher's Trailer, Fully Furnished
10'W x 24'L Doghouse w/4'L Porch Extension, Round Top,
Knowledge Box, Lockers, Bench Storage, Cabinets, Parts Bins,
Fluorescent Lights, Heater, Skidded
10'W x 38'L Parts/Change House w/Round-Top, Lockers, Bench
Storage, Cabinets, Parts Bins, Workbenches, Fluorescent
Lights, Heater, Skidded
GENERATORS/UTILITY HOUSE
CAT SR-4 320 KW AC Generator Set, SIN-5LA01675, p/b CAT 3412
DITA Diesel
Engine, S/N-38509492, w/Air Starter, Radiator, Gauges, Skidded
EXH B - 5
<PAGE> 51
502FDR 320 KW AC Generator Set, S/N-PJ3156691, p/b CAT 3412
DITA Diesel Engine w/Air Starter, Radiator, Gauges, Skidded
QUINCY 350 Air Compressor p/b LISTER 2-Cylinder Air-Cooled
Diesel Engine, SN-US11078ST2A3110, w/Manual & Electric
Starter, Air Volume Tank
QUINCY 520 Air Compressor p/b 10 HP Electric Motor
SQUARE D Electrical Control Panel w/Switchboard
All Above Mounted in 10'W x 38'L Utility House w/Round Top,
Fluorescent Lights, Heater, Skidded
MUD SYSTEM
10'W x 7H x 36'L Mud Suction Tank w/10'L Covered Porch
Extension, (2) Compartments, Round Bottom, Internal Plumbing,
(3) DEMCO 6" x 8" Centrifugal Pumps, Each p/b 50 HP Electric
Motor, (2) 7 1/2 HP Mud Agitators, Each p/b Electric Motor,
Mud Hopper, Top-Mounted Walkways, Stairs, Safety Rails,
Skidded
10'W x 7'H x 40'L Mud Shaker Tank w/(2) 4'L Covered Porch
Extensions, (3) Compartments, Round Bottom, Internal Plumbing,
(2) DEMCO 6" x 8" Centrifugal Pumps, Each p/b 50 HP Electric
Motor, (2) 7 1/2 HP Mud Agitators, Each p/b Electric Motor,
Top-Mounted, Walkways, Stairs, Safety Rails, Skidded
FLUID SYSTEMS High Speed Linear Screen Vibrating Shale Shaker
p/b 5 HP Electric Motor
DEMCO Desander w/12" Cone
DEMCO Desilter w/(1) 6" Cones
WATER/FUEL TANKS
10'Dia x 30'L Water Tank, Skidded
10'W x 8'H x 30'L Fuel Tank, Skidded w/Fuel Pump & Filter p/b
(2) 1 HP Electric Motors, Mounted on Stand
7'10"W x 3'H x 5'L 3-Compartment Lubester
EXH B - 6
<PAGE> 52
HANDLING TOOLS
INGERSOLL-RAND Pneumatic Pipe Spinner
BJ Type B Rotary Tongs w/Extra Heads
BJ 3 3/8" BN to 5 1/2" BN 250-Ton Center Latch Pipe Elevators
BJ Type A 6 3/4" SS 250-Ton Center Latch Drill Collar
Elevators
WOOLLEY DU Long 4 1/2" Drill Pipe Slips
8" Drill Collar Slips
6 1/4" Drill Collar Slips
Approximately (1) Drill Collar Lift Subs
INGERSOLL-RAND HUL-RO 9000 PSI Capacity Air Hoist,
S/N-RSH11417
Mud Bucket
AUXILIARY EQUIPMENT
MARTIN DECKER E 600,000# Capacity Weight Indicator w/Pump
Pressure, Tong Line Pull & RPM Gauges, Console-Mounted
3 1/2"ID x 55'L Rotary Hose
(2)6"ID x 5'L & 8'L Suction Hoses w/Pipe
(2) 3 1/2"ID x 10'L Vibrator Hoses
42"H x 5'W x 60'L 2-Section Catwalk w/Steel Deck Steps
60"H x 8"W x 25'L Junk Box w/15'L Covered Porch f/Closing Unit
MATHEY RET Hydraulic/Electric Wireline Measuring Device,
S/N-633, w/.092" Measuring Line
Rathole & Mousehole
Fluorescent Rig Lights w/Wiring
Approximately 6000' of 1 1/4" Drill Line w/Spool Stand
EXH B - 7
<PAGE> 53
BEAR Automatic Driller
(4) Sets of 42"H x 28'L Triangular Pipe Rack
Miscellaneous Spare Parts, Hand Tools, Valves, Fire
Extinguishers, Etc.
DRILL PIPE
12,000' (400 Joints) 4 1/2", Grade E, 16.60#, Range 2 Drill
Pipe w/4 1/2"XH, BN, HB Tool Joints, 5- 15/16" to 6"OD, PC
DRILL COLLARS
(24) 6 1/8"OD to 6 1/2"OD x 2"ID x 30'L Slick Drill Collars
w/4 1/2"XH Connections, HB, Recessed
EXH B - 8
