EXHIBIT 99.1
COMMON STOCK PURCHASE AGREEMENT
BETWEEN
SOUTH TEXAS DRILLING & EXPLORATION, INC.,
AS SELLER
AND
WEDGE ENERGY SERVICES, L.L.C.,
AS PURCHASER
DATED AS OF
MAY 18, 2001
TABLE OF CONTENTS
Page
1. Purchase and Sale............................................................................ 1
1.1 Consideration....................................................................... 1
1.2 Delivery of Certificates............................................................ 1
1.3 Material Adverse Effect............................................................. 1
1.4 Board Seat.......................................................................... 1
2. Registration Rights Agreement................................................................ 2
3. Representations and Warranties of the Company................................................ 2
3.1 Organization and Existence.......................................................... 2
3.2 Capitalization: Ownership of Stock: Authorization................................... 2
3.3 Enforceability...................................................................... 3
3.4 Securities and Exchange Commission.................................................. 3
3.5 Litigation; Contingencies........................................................... 3
3.6 Subsidiaries........................................................................ 3
3.7 Title to Assets (Personal Property). .............................................. 4
3.8 Consents. ......................................................................... 5
3.9 Proprietary Rights.................................................................. 5
3.10 Disclosure.......................................................................... 5
3.11 Reports and Financial Statements.................................................... 6
3.12 Compliance with Laws; OSHA.......................................................... 6
3.13 Labor Matters....................................................................... 6
3.14 ERISA............................................................................... 6
3.15 Environmental Matters............................................................... 7
3.16 Permits and Licenses................................................................ 8
3.17 Insurance........................................................................... 8
3.18 Taxes............................................................................... 8
3.19 Absence of Certain Developments..................................................... 8
3.20 Underground Storage Tanks........................................................... 9
4. Representations and Warranties of the Purchaser.............................................. 9
4.1 Experience.......................................................................... 9
4.2 Restricted Securities............................................................... 9
4.3 Unregistered Stock.................................................................. 9
i
5. Nature and Survival of Representations and Warranties........................................ 9
5.1 Nature of Statements................................................................ 10
5.2 Survival of Representations and Warranties.......................................... 10
5.3 Indemnity by the Company............................................................ 10
5.4 Indemnity by the Purchaser.......................................................... 10
5.5 Limitation of Liability............................................................. 10
6. Miscellaneous................................................................................ 10
6.1 Expenses............................................................................ 11
6.2 Notices............................................................................. 11
6.3 Post-Closing Actions................................................................ 12
6.4 Assignment.......................................................................... 12
6.5 Successors Bound.................................................................... 12
6.6 Section and Paragraph Headings...................................................... 12
6.7 Amendment........................................................................... 12
6.8 Entire Agreement.................................................................... 12
6.9 Counterparts........................................................................ 12
6.10 Governing Law....................................................................... 12
6.11 Arbitration......................................................................... 12
6.12 Severability........................................................................ 13
ii
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT ("Agreement"), dated effective as
of May 18, 2001 (the "Effective Date") , between WEDGE Energy Services, L.L.C.,
a Delaware limited liability company (the "Purchaser"), and South Texas Drilling
& Exploration, Inc., a Texas corporation (the "Company"). Unless the context
clearly indicates otherwise, the term "Company" shall include all of the
entities identified in Section 3.6 hereof (Subsidiaries).
WITNESSETH:
WHEREAS, the Purchaser is desirous of acquiring 2,400,000 shares of the
total authorized shares of common stock of the Company (the "Stock"); and
WHEREAS, the Company desires to sell the Stock to Purchaser on the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties and covenants herein contained, the parties hereby
agree as follows:
1. Purchase and Sale.
1.1 Consideration. The Company herewith has delivered to the
Purchaser 2,400,000 shares of the Stock at a price of $3.75 per share. In
consideration for receipt of the Stock, and in reliance upon the representations
and warranties of the Company contained herein, the Purchaser has delivered to
the Company, cash in the aggregate amount of $9,000,000, by wire transfer of
immediately available funds.
1.2 Delivery of Certificates. The Company agrees that the
Stock delivered to Purchaser is duly issued and sealed, and is fully paid,
nonassessable and not subject to fees, encumbrances, pledges or other claims,
and vests full, valid and legal title to the Stock in the Purchaser.
1.3 Material Adverse Effect. For purposes of this Agreement,
the term "Material Adverse Effect" shall mean an event, circumstance, loss,
development or effect (individually or in the aggregate) when considered in
light of the total operations of the Company, would prohibit the Company from
engaging in any material aspect of its business or result in a material adverse
change in the business, operations, properties, prospects or assets of the
Company, or if measured monetarily, would exceed $100,000.
1.4 Board Seat. So long as Purchaser owns at least 10% of the
capital stock of the Company, the Board of Directors agrees to support and cause
to be placed on the ballot at each election of Directors one name which shall be
a nominee to the Board of Directors of the Company. So long as Purchaser owns
25% of the capital stock of the Company, the Board of Directors agrees to
support and cause to be placed on the ballot at each election of Directors, two
names which shall be nominees to the Board of Directors of the Company (the
"WEDGE Board Nominee or Nominees"
as the case may be). Additionally, the WEDGE Board Nominee or Nominees, as the
case may be, shall be appointed to serve on the audit committee and compensation
committee of the Board of Directors.
2. Registration Rights Agreement. The Company and WEDGE agree that the
Stock delivered to WEDGE pursuant to this Agreement shall be deemed to be
"Registrable Securities" for the purposes of that certain Registration Rights
Agreement entered into by the Company and WEDGE dated effective March 30, 2001
(the "Registration Rights Agreement"), and that the rights, duties and
obligations of the Company and WEDGE under the Registration Rights Agreement
shall in all ways apply to the Stock.
3. Representations and Warranties of the Company. The Company
represents and warrants to the Purchaser that, as of the Effective Date of this
Agreement that:
3.1 Organization and Existence. The Company is a corporation
duly organized and validly existing and in good standing under the laws of the
State of Texas and has all requisite corporate power to carry on its business as
now conducted and is qualified to do business in those jurisdictions where such
registration is required; its lease of property nor the conduct of its business
requires such qualification under the laws of any other jurisdiction, except
where the failure to do so would not have a Material Adverse Effect on the
financial condition or results of operations of the Company. The Company has
delivered to the Purchaser complete and correct copies of the Articles of
Incorporation and Bylaws of the Company as in effect on the date hereof.
3.2 Capitalization: Ownership of Stock: Authorization. The
Company is a corporation duly organized and validly existing and in good
standing under the laws of the state of Texas and has all requisite corporate
power and authority to carry on its business as now conducted and proposed to be
conducted. The Company has 30,000,000 authorized shares of its common stock
$0.10 par value (the "Common Stock") and 1,000,000 authorized shares of its
preferred stock, issuable in series (the "Preferred Stock"). As of December 31,
2001, the Company had (a) 12,111,921 issued and outstanding shares of Common
Stock; (b) 184,615 shares of issued and outstanding Series B Preferred Stock,
$16.25 redemption and liquidation value; and (c) no treasury shares. As of
December 31, 2000, the Company had granted stock options which, if all were
exercised, would equal 3,000,000 shares of Common Stock. Other than the
registration rights granted to Purchaser in accordance with the Registration
Rights Agreement, the Company has only incidental registration rights to two (2)
of its officers and directors, Wm. ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and no
other individual or entity has any registration rights of any kind or nature
(other than rights under Form S-8), including incidental or demand registration
rights. Other than items referred to herein, there are no other options,
warrants, rights, conversion rights, phantom rights, preemptive rights or any
other rights by any party to receive equity of the Company. Upon issuance of the
Stock to Purchaser, Purchaser will be the record and beneficial owner of the
Stock and the Stock will be duly authorized, validly issued and outstanding,
fully paid and nonassessable and would have been issued in accordance with
appropriate federal and state securities law. By virtue of the consummation of
the transactions contemplated herein, Purchaser shall receive good and valid
title to the Stock, free and clear of all liens, encumbrances, pledges, options,
claims, assessments and
PAGE -2-
adverse charges. Upon issuance of the Stock, Purchaser's ownership will
constitute approximately 49.9% of the Company's issued and outstanding shares of
Common stock as of the Closing Date. As a result of the issuance of the Stock,
the Company is not, nor will it become, obligated to issue any additional shares
of capital stock (preferred or common) to any officer, director, shareholder or
other party.
The execution, delivery and performance of this Agreement will not
result in a violation or breach of any term or provision of or constitute a
default or accelerate the performance required under the Articles of
Incorporation or Bylaws of the Company or any indenture, mortgage, deed of trust
or other contract or agreement to which the Company is a party or by which its
assets are bound, or violate any order, writ, injunction or decree of any court,
administrative agency or governmental body.
3.3 Enforceability. The Company has full right, power, legal
capacity and authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby, and this Agreement is a valid
and legally binding obligation enforceable in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency, moratorium or similar
laws affecting the enforcement of creditors' rights, by the availability of
injunctive relief or specific performance and by general principles of equity.
3.4 Securities and Exchange Commission. The Company has filed
all forms, reports and documents required to be filed by the Securities and
Exchange Commission, National Association of Securities Dealers, Inc. and the
American Stock Exchange and the state of Texas in order to comply with all
applicable laws, rules and regulations of the Securities Act of 1933, as amended
(the "Act"), the Securities and Exchange Act of 1934, as amended, and the
securities laws of the state of Texas. Notwithstanding the foregoing, Seller has
delivered to Purchaser a copy of that certain "no action" letter dated August
25, 1999 from the Securities and Exchange Commission regarding Seller's failure
to comply with Regulation S-X of the Act in connection with its acquisition of
assets of ▇▇▇▇▇▇ Drilling, Inc.
3.5 Litigation; Contingencies. Except as described in the
Reports, there is no action, suit or proceeding pending or, to the knowledge of
the Company, threatened against the Company before any court, agency or
arbitrator which might result in any Material Adverse Effect in the business,
properties or condition (financial or otherwise) of the Company or which
question the validity of any action taken or to be taken pursuant to on in
connection with this Agreement, the Registration Rights Agreement or the Stock.
3.6 Subsidiaries. Other than subsidiaries that have no assets,
liabilities or operations, the Company has no subsidiaries or any interests in
other corporations, partnerships or joint ventures except as follows: The
Company owns 100% of PDC Investment Corp., a Delaware corporation. PDC
Investment Corp. is the sole limited partner with a 99% partnership interest in
Pioneer Drilling Co., Ltd., a Texas limited partnership. The Company owns 100%
of SOTEX Exploration Company, a Texas corporation. SOTEX Exploration Company is
the sole general partner of Pioneer Drilling Co., Ltd. and holds a 1%
partnership interest in such limited partnership.
PAGE -3-
Pioneer Drilling Co., Ltd holds substantially all of the operating assets of the
consolidated group consisting of the Company, PDC Investment Corp., Pioneer
Drilling Co., Ltd., and SOTEX Exploration Company.
3.7 Title to Assets (Personal Property).
(a) The Company is the owner of, and has marketable title to,
all of its assets, free and clear of all liens except those set forth
on Schedule 3.7(a) hereto and except for those assets leased under
leases specifically identified on Schedule 3.7(a) hereto. The assets
referred to in the preceding sentence include, without limitation, all
assets, properties and rights of the Company shown or reflected on the
December 31, 2000 Balance Sheet or acquired by the Company since
December 31, 2000, except only for (i) cash expended and (ii)
inventories and other assets used or sold and receivables collected in
the ordinary course of business since December 31, 2000. The Company
has maintained all tangible assets material to the business in good
repair, working order and operating condition, subject only to ordinary
wear and tear, and all such tangible assets are suitable for the
purposes for which they are presently being used.
(b) With respect to each lease of real or personal property of
the Company: (i) the lease is valid and binding on the Company and in
full force and effect, (ii) no rental payment is in default, (iii) the
Company is in peaceable possession of the real property or personal
property which is subject thereto, and (iv) the Company is not in
default of any material provision thereof, and to the best knowledge of
the Company, no event has occurred that with the giving of notice, the
passage of time or both, would become a material default under any such
lease.
(c) Except as set forth on Schedule 3.7(c), the Company has
all easements, rights-of-way and similar authorizations required for
the use of the real property leased by the Company and in the conduct
of the business as heretofore conducted, excluding immaterial easements
(the "Easements"). To the best knowledge of the Company, no party
thereto is in default of any material provision of any easement or any
material covenant, restriction or other agreement encumbering any of
the real property, and to the best knowledge of the Company, no event
that with the giving of notice, the passage of time or both would
become a material default, has occurred under any easement or any
material covenant, restriction or other agreement encumbering any of
the real property. Neither the whole nor any portion of any real
property occupied by the Company has been condemned or otherwise taken
by any public authority, and the Company has received no written notice
that any such condemnation or taking is threatened or contemplated.
(d) (i) Neither the properties owned or occupied by the
Company nor the occupancy or operation thereof is in material violation
of any law or any building, zoning or other ordinance, code or
regulation; (ii) no notice from any governmental body has been served
upon the Company or upon any property owned or occupied by the Company
claiming any material violation of any such law, ordinance, code or
regulation or requiring, or calling
PAGE -4-
to the attention of the Company the need for, any work, repair,
construction, alterations or installation on or in connection with any
such properties which has not been complied with; and (iii) there is no
material encroachment of the improvements located on the real property
owned or occupied by the Company upon any adjoining property, or of
improvements located on any adjoining property upon any property owned
or occupied by the Company.
3.8 Consents.
(a) The Company is not required to obtain any consent from or
approval of any court, governmental entity or any other person in
connection with the execution, delivery or performance by it of this
Agreement or the Registration Rights Agreement and the transactions
contemplated hereby. The consummation of the transactions contemplated
by this Agreement will not require the approval of any entity or person
in order to prevent the termination of any material right, privilege,
license or agreement of the Company. Although not requiring approval of
the American Stock Exchange to consummate the transaction contemplated
by this Agreement or the Registration Rights Agreement, the Company
shall have listed the Stock on the American Stock Exchange prior to
Closing.
3.9 Proprietary Rights. All patents (pending or issued),
copyrights, trademarks, state, federal and foreign registrations and
applications and trade secrets of the Company are listed in Schedule 3.9 (the
"Proprietary Rights") and are valid and in full force and effect and are not
subject to any taxes, maintenance fees, or extension, renewal or continuation
actions by the Company falling due within 90 days after the date hereof. Except
as disclosed on Schedule 3.9, there have not been any claims, actions or
judicial or other adversary proceedings involving the Company concerning any of
the Proprietary Rights and, no such action or proceeding is threatened. The
Company has the right and authority to use each item of the rights and property
referenced in Schedule 3.9 in connection with the conduct of its business
including all patents, trademarks, computer hardware and software licenses; such
use has not and will not conflict with, infringe upon, or violate any patent or
other proprietary right of any other person, and the Company has not infringed
and is not now infringing any proprietary right belonging to any other person.
There are no outstanding nor threatened claims for breach, termination or
penalty payment with respect to any licenses or similar agreements or
arrangements identified in Schedule 3.9. In regard to all issued and pending
patents, the Company is unaware of any third party infringing upon its rights
and authority to fully utilize and protect such proprietary rights.
3.10 Disclosure. The Company represents and warrants that no
representation or warranty by the Company in this Agreement or in any of Exhibit
or Schedules hereto, or certificate furnished to the Purchaser by or on behalf
of the Company in connection with the transactions contemplated hereby, contains
or will contain any materially untrue statement of a material fact; and further,
no Schedule omits or will omit any material item required to be included in such
Schedule. Any indemnification by the Company hereunder for a breach of its
representation and warranty in this Section 3.10 shall be made in the manner
applicable pursuant to Section 9 hereof to such representation and warranty or
to the provision of this Agreement to which such Exhibit, Schedule or
certificate relates.
PAGE -5-
3.11 Reports and Financial Statements. The Company has caused
to be delivered to the Purchaser its Annual Report on Form 10K for the period
ended March 31, 2000 and its Quarterly Reports on Form 10Q for the periods ended
June 30, 2000, September 30, 2000, and December 31, 2000, a report on Form 8K
dated August 21, 2000, and filed September 1, 2000, a report on Form 8K/A filed
October 31, 2000, and a report on Form 8K filed on March 22, 2001 (the
"Reports"). "Financial Statements" shall mean the unaudited balance sheet and
statements of operations, changes in equity and cash flows for the Company as of
and for the fiscal quarter ended December 31, 2000 and included in its Report on
Form 10Q for the period ended December 31, 2000. Prior to Closing, the Company
shall also deliver to the Purchaser each monthly financial statement that is
produced by the Company during calendar year 2001 in its ordinary course of
business and such monthly financial statements shall be included in this
definition of Financial Statements. The Financial Statements have been prepared
in conformity with generally accepted accounting principles applied on a basis
consistent with prior periods. Except as disclosed on Schedule 3.11, all of the
Financial Statements present fairly the financial position and the results of
operations of the Company on the dates and for the periods shown therein, and to
the best knowledge of the Company, there has been no Material Adverse Effect in
the financial condition of the Company since December 31, 2000.
Except as disclosed in the Reports, the Financial Statements
or in Schedule 3.11, the Company has no debt, liability or obligation,
contingent or otherwise, which would have a Material Adverse Effect on the
business or the assets of the Company.
3.12 Compliance with Laws; OSHA. To the best of the knowledge
of the Company, the Company is in compliance with all applicable laws,
ordinances, statutes, rules, regulations and orders promulgated by any court or
federal, state or local governmental body or agency relating to its assets and
business the failure to comply with which would cause a Material Adverse Effect.
Except as otherwise disclosed in Schedule 3.12, the Company has not received any
notice, citation, claim, assessment or proposed assessment as to or alleging any
violation of any Federal, state or local Occupational Safety and Health laws and
no violations which materially, presently exist.
3.13 Labor Matters. There is no labor strike or labor
disturbance pending, or to the knowledge of the Company threatened, against the
Company nor is any arbitration concerning an employee grievance currently
pending against the Company. The Company has experienced no work stoppage or
other material labor disturbance within the past three years. The Company is not
a party to any collective bargaining agreement with respect to its employees
and, to the knowledge of the Company, there are no current attempts to organize
its employees.
3.14 ERISA. Schedule 3.14 contains a list of each pension,
retirement, savings, deferred compensation, and profit-sharing plan and each
stock option, stock appreciation, stock purchase, performance share, bonus or
other incentive plan, severance plan, health, group insurance or other welfare
plan, or other similar plan and any "employee benefit plan" within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974
("ERISA"), under which the
PAGE -6-
Company has any current or future obligation or liability or under which any
employee or former employee (or beneficiary of any employee or former employee)
of the Company has or may have any current or future right to benefits on
account of employment with the Company (the term "plan" shall include any
contract, agreement, policy or understanding, each such plan being hereinafter
referred to individually as a "Plan"). Each Plan intended to be tax qualified
under Sections 401(a) and 501(a) of the Internal Revenue Code of 1986 (the
"Code") is, and has been determined by the IRS to be, tax qualified under
Sections 401(a) and 501(a) of the Code and, since such determination, no
amendments to or failure to amend any such Plan or any other circumstances
adversely affects its tax qualified status. There has been on prohibited
transaction within the meaning of Section 4975 of the Code and Section 406 of
Title I of ERISA with respect to any Plan that is subject to the prohibited
transaction requirements of the Code or ERISA.
3.15 Environmental Matters. Except as set forth on Schedule
3.15 (i) the Company has obtained all Environmental Permits that are required
with respect to its business, operations and properties, either owned or leased,
and (ii) the Company and its properties are in compliance with all terms and
conditions of all applicable Requirements of Environmental Law and Environmental
Permits, the failure to comply with which would cause a Material Adverse Affect.
Except as would not have a Material Adverse Effect or as disclosed on Schedule
3.15, there are no Environmental Claims pending, or, to the knowledge of the
Company, threatened, against the Company. The Company has not received any
notice from any governmental authority of any violation or liability arising
under any Requirements of Environmental Law or Environmental Permit in
connection with the assets, the businesses or operations of the Company.
"Environmental Claim" means any third party (including
governmental agencies and employees) action, lawsuit, claim or
proceeding (including claims or proceedings under the Occupational
Safety and Health Act or similar laws relating to safety of employees)
which seeks to impose liability for (i) pollution or contamination of
the air, surface water, ground water or land; (ii) solid, gaseous or
liquid waste generation, handling, treatment, storage, disposal or
transportation; (iii) exposure to hazardous or toxic substances; (iv)
the safety or health of employees or (v) the transportation,
processing, distribution in commerce, use, or storage of hydrocarbons
or chemical substances. An Environmental Claim includes, but is not
limited to, a common law action, as well as a proceeding to issue,
modify or terminate an Environmental Permit.
"Environmental Permit" means any permit, license, approval or
other authorization under any applicable law, regulation and other
requirement of the United States or foreign country or of any state,
municipality or other subdivision thereof relating to pollution or
protection of health or the environment, including laws, regulations or
other requirements relating to emissions, discharges, releases or
threatened releases of Pollutants, contaminants or hazardous substances
or toxic materials or wastes into ambient air, surface water, ground
water or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation, or
handling of hydrocarbons or chemical substances, pollutants,
contaminants or hazardous or toxic materials or wastes.
PAGE -7-
"Requirements of Environmental Law" means all requirements in
effect on the Closing Date imposed by any law, rule, regulation, or
order of any federal, foreign, state or local executive, legislative,
judicial, regulatory or administrative agency, board or authority with
jurisdiction over the Company or its properties or assets which relate
to (i) pollution or protection of the air, surface water, ground water
or land; (ii) solid, gaseous or liquid waste generation, treatment,
storage, disposal or transportation; (iii) exposure to hazardous or
toxic substances; (iv) the safety or health of employees or (v)
regulation of the manufacture, processing, distribution in commerce,
use, or storage of chemical substances.
3.16 Permits and Licenses. The Company has all material
licenses, permits and other authorizations necessary for the conduct of its
business as it is currently being conducted. Schedule 3.16 sets forth an
accurate list and summary description of all permits, titles (excluding motor
vehicles, titles and current registrations which have been made available to the
Purchaser), fuel permits, licenses, franchises and certificates (the "Permits")
held by the Company. To the best of the Company's knowledge, all of such Permits
are adequate for the operation of the business of the Company as it is presently
being conducted.
3.17 Insurance. All insurance policies (together with all
riders and amendments) relating to the assets or the business of the Company are
sufficient to protect against any material claim for casualty or property
damage. Such insurance policies are in full force and effect, all premiums due
thereon have been paid or accrued on the books of the Company and will not
terminate as of the Closing or the consummation of the transactions contemplated
hereby. The Company has no reason to believe that such insurance policies will
be terminated or subject to non-renewal.
3.18 Taxes. The Company has filed all tax returns and reports
required by law to be filed, or filed extensions for any period in which a tax
return was due and has paid or accrued on the financial statements provided to
the Purchaser all taxes, assessments and other governmental charges that are due
and payable. The charges, accruals and reserves on the books of the Company in
respect of taxes for all fiscal periods are considered adequate by the Company,
and the Company knows of no assessment for additional taxes for any of such
fiscal years or any basis therefor. All tax returns and reports are complete. No
claim has ever been made to the Company's knowledge that the Company is subject
to a tax in any jurisdiction in which the Company has not filed a return which
remains unpaid as of the Closing Date. The Company has withheld and paid all
taxes required to have been withheld or paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third party. The Company has not since 1990 been the subject of an audit and the
Company has not waived any statute of limitations or agreed to an extension of
time with respect to a tax assessment or deficiency.
3.19 Absence of Certain Developments. Since December 31, 2000,
there has been no change which would have a Material Adverse Effect,
individually or in the aggregate, in the assets, liabilities, condition
(financial or otherwise), operating results, business or prospects of the
Company, except changes in the ordinary course of business. Except as disclosed
on Schedule 3.19, the Company has not, since the date of the Financial
Statements, directly or indirectly, declared or
PAGE -8-
paid any dividend or ordered or made any other distribution on account of any
shares of any class of the capital stock of the Company. The Company has not,
since such date, directly or indirectly redeemed, purchased or otherwise
acquired any such shares or agreed to do so or set aside any sum or property for
any such purpose. Additionally, except for the previous sale of common stock of
the Company to Purchaser on or about May 11, 2000, and the issuance of 341,575
shares of Common Stock as partial consideration for the purchase of the stock of
Pioneer Drilling Co. in August of 2000 there have been no other sales of
securities of any kind or nature by the Company.
3.20 Underground Storage Tanks. There are no underground
storage tanks on any of the Company's owned or leased real property.
4. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Company that:
4.1 Experience. The Purchaser is an "accredited investor"
within the meaning of Regulation D promulgated by the Securities and Exchange
Commission under the Act, and (by virtue of its experience in evaluating and
investing in private placement transactions of securities in companies similar
to the Company) it is capable of evaluating the merits and risks of its
investment in the Company. Purchaser acknowledges that it had the opportunity to
ask questions of the officers of the Company. In reaching the conclusion that it
desires to acquire the Stock, Purchaser has evaluated its financial resources
and investment position and the risks associated with this investment and
acknowledges that it is able to bear the economic risks of this investment.
4.2 Restricted Securities. As of the date hereof, Purchaser
represents, warrants and agrees that it is acquiring the Stock solely for its
own account, for investment, and not with a view to the distribution or resale
thereof. Purchaser further represents that its present financial condition is
such that it is not under any present necessity or constraint to dispose of such
Stock to satisfy any existing or contemplated debt or undertaking and that the
investment is suitable for Purchaser upon the basis of Purchaser's other
security holdings, financial situation and needs. The Purchaser acknowledges and
understands that it must bear the economic risk of this investment for an
indefinite period of time because the Stock must be held indefinitely unless
subsequently registered under the Act and applicable state and other securities
laws or unless an exemption from such registration is available.
4.3 Unregistered Stock. Purchaser is aware that the Stock has
not been registered under the Act, and that, accordingly, the Stock must be held
unless it is subsequently registered under said Act or unless, in the opinion of
counsel reasonably satisfactory to the Company, a sale or transfer may be made
without registration thereunder. Purchaser agrees that any certificates
evidencing the Stock must bear a standard legend restricting the transfer
thereof consistent with the foregoing and that a notice may be made in the
records of the Company or its transfer agent restricting the transfer of the
Stock in a manner consistent with the foregoing.
5. Nature and Survival of Representations and Warranties.
PAGE -9-
5.1 Nature of Statements. All statements contained in any
Exhibit or schedule hereto or in any certificate or other instrument delivered
by or on behalf of the Company pursuant to this Agreement shall be deemed
representations and warranties by the Company.
5.2 Survival of Representations and Warranties. All covenants,
agreements, representations and warranties made hereunder or pursuant hereto or
in connection with the transactions contemplated hereby shall survive the
Effective Date. Generally, all covenants, representations and warranties shall
remain effective for a period of 24 months from the Effective Date. The
representations and warranties of the Company with respect to litigation, ERISA
and environmental matters shall remain effective for a period of 48 months from
the Effective Date. The representations and warranties of the Company with
respect to taxes and title to Stock shall survive for the applicable limitations
period established by law. Notwithstanding the foregoing, any bona fide claim
which shall have been asserted during any such survival period and the
obligation to indemnify for such claim shall continue in effect until such time
as such claim shall have been resolve or settled.
5.3 Indemnity by the Company. The Company shall indemnify and
hold harmless Purchaser and the officers, directors, managers, agents,
affiliates and representatives of Purchaser or any of them (the "Purchaser
Indemnitees") from and against, and shall reimburse the Purchaser Indemnitees
from any loss, liability, damage or expense, including reasonable attorneys'
fees and costs of investigation incurred as a result thereof, that the Purchaser
Indemnitees shall incur or suffer (collectively, the "Purchaser Recoverable
Losses"), arising out of or resulting from (a) any misrepresentation by the
Company, or (b) breach by the Company of any (i) representation or warranty
contained in Article 3 hereof, (ii) agreement or covenant under or pursuant to
this Agreement, including the Registration Rights Agreement, or (iii) document,
certificate, schedule or instrument delivered by or on behalf of the Company
pursuant hereto.
5.4 Indemnity by the Purchaser. Purchaser shall indemnify and
hold harmless the Company and the officers, directors, agents, affiliates and
representatives of the Company or any of them (the "Company Indemnitees") from
and against, and shall reimburse the Company Indemnitees for any loss,
liability, damage or expense, including reasonable attorneys' fees and cost of
investigation incurred as a result thereof, that the Company Indemnitees shall
incur or suffer (collectively, the "Company's Recoverable Losses") resulting
from (a) any misrepresentation by Purchaser, or (b) breach by Purchaser of any
(i) representation or warranty contained in Article 4 hereof, (ii) agreement or
covenant under or pursuant to this Agreement, or (iii) document, certificate,
schedule or instrument delivered by or on behalf of Purchaser in connection
herewith.
5.5 Limitation of Liability. Notwithstanding any liability
which the Company or the Purchaser may incur in Sections 5.3 and 5.4,
respectively, above, the Company shall not be obligated for a Purchaser's
Recoverable Loss, and the Purchaser shall not be obligated for a Company's
Recoverable Loss, unless and until such loss, individually, or in the aggregate,
shall have exceed $100,000, in which case such liability shall be for all
amounts in excess thereof.
6. Miscellaneous.
PAGE -10-
6.1 Expenses. Each of the parties will pay their respective
costs and expenses (including legal fees) in connection with this Agreement and
all filing requirements of Purchaser as a result of the transactions
contemplated hereby.
6.2 Notices. All notices, requests and other communications
hereunder shall be in writing and shall be deemed to have been given if
personally delivered or mailed, registered or certified mail, postage prepaid,
or by facsimile with confirmation of sending such communication by the party
giving notice:
(a) if to the Company, to:
South Texas Drilling & Exploration, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Wm. ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
with copy to:
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
(b) if to the Purchaser, to:
WEDGE Energy Services, L.L.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
with copy to:
WEDGE Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
with an additional copy to:
PAGE -11-
▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
or at such other address as shall be given in writing by either party to the
other.
6.3 Post-Closing Actions. Each party hereto hereby agrees to
deliver or cause to be delivered to the requesting party at such other
subsequent times and places as shall be reasonably agreed on, such additional
instruments as the requesting party may reasonably request for the purpose of
carrying out this Agreement.
6.4 Assignment. This Agreement may be assigned at any time, by
Purchaser to an Affiliate, without the prior consent of the other party so long
as the party to whom this Agreement is assigned to agrees to be bound by all
terms and conditions contained herein.
6.5 Successors Bound. Subject to the provisions of Section
6.4, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective predecessors, successors and assigns.
6.6 Section and Paragraph Headings. The section and paragraph
headings in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
6.7 Amendment. This Agreement may be amended only by an
instrument in writing executed by the parties hereto.
6.8 Entire Agreement. This Agreement, the exhibits, annexes
and schedules hereto and the documents specifically referred to herein or
executed contemporaneously herewith constitute the entire agreement,
understanding, representations and warranties of the parties hereto.
6.9 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
6.10 Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Texas. Any dispute
hereunder shall be resolved through arbitration and may be brought in Houston,
▇▇▇▇▇▇ County, Texas.
6.11 Arbitration.
(a) Negotiation Period. Any dispute, controversy or claim
arising out of or relating to this Agreement, or any alleged breach
hereof, will be subject to binding arbitration in accordance with this
Section 6.11. If such a dispute, controversy or claim exists, the
PAGE -12-
parties shall attempt for a 30-day period (the "Negotiation Period")
from the date any party gives any one or more of the other parties
notice (a "Dispute Notice") pursuant to this Section, to negotiate in
good faith, a resolution of the dispute. The Dispute Notice shall set
forth with specificity the basis of the dispute. During the Negotiation
Period, representatives of each party involved in the dispute who have
authority to settle the dispute shall meet at mutually convenient times
and places and use their best efforts to resolve the dispute.
(b) Commencement of Arbitration. If a resolution is not
reached by the parties prior to the end of the Negotiation Period,
either party may provide a written request to the American Arbitration
Association within ten (10) days from the end of such period requesting
the selection of three (3) arbitrators (the "Panel") to arbitrate the
parties' respective rights and obligations with respect to the matters
set forth in the Dispute Notice. Each arbitrator on the Panel shall be
experienced in the arbitration of complex commercial disputes.
(c) Discovery. Each party to an arbitration shall be entitled
to such discovery as the Panel shall determine is appropriate.
(d) Expenses of Arbitration. The expenses of the Panel shall
be paid by the party that does not substantially prevail on the merits
in the arbitration (as determined by the award of the Panel).
(e) Location of Arbitration. The arbitration shall take place
in Houston, Texas.
(f) AAA Rules. Except as expressly provided in this Section
6.11, the Arbitration shall be conducted in accordance with the
Commercial Rules of the America Arbitration Association as then in
effect.
(g) Attorneys' Fees and Expenses. The party that substantially
prevails on the merits of the arbitration (as defined by the Panel)
shall be entitled to reasonable attorneys' fees, costs, expenses, and
necessary disbursements in addition to any other relief to which such
party may be entitled.
6.12 Severability. If any term or provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms 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 is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Company and by the Purchaser by their respective officers duly authorized
effective as of the Effective Date.
PAGE -13-
THE COMPANY:
SOUTH TEXAS DRILLING & EXPLORATION, INC.
By: /s/ WM. ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
Wm. ▇▇▇▇▇ ▇▇▇▇▇, President
PURCHASER:
WEDGE ENERGY SERVICES, L.L.C.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
PAGE -14-