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EXHIBIT 10.8
SUBSCRIPTION AGREEMENT
1. This Subscription Agreement is entered into by and between WEDGE
Energy Services, L.L.C., located at WEDGE International Tower, 0000 Xxxxxxxxx
Xx., Xxxxx 0000, Xxxxxxx, Xxxxx 00000 ("Purchaser") and South Texas Drilling &
Exploration, Inc., (the "Company") in which Purchaser subscribes for 1,153,846
Shares of $0.10 par value common stock (the "Shares") of the Company, at the
following price, payable upon the execution of this agreement.
Price of Securities: $1.30 Per Share
2. Purchaser, by reason of its knowledge and experience in financial
and business matters, believes itself capable of evaluating the merits and risks
of this investment.
3. Purchaser acknowledges receipt of a copy of the Company's Annual
Report on Form 10K for the period ended March 31, 1999 and the Quarterly Report
on Form 10Q for the periods ended June 30, September 30, 1999, and December 31,
1999, a report on Form 8K dated September 29, 1999 (the "Reports") as well as
such other information as it deems necessary or appropriate as a prudent and
knowledgeable investor in evaluating the purchase of the Shares. Purchaser
acknowledges that the Company has made available to it the opportunity to
obtain additional information to verify the accuracy of the information
contained in the Reports or to evaluate the merits and risks of this investment.
Purchaser acknowledges that it had the opportunity to ask questions of the
officers of the Company, and, to the extent it requested information, it
believes it has received satisfactory answers concerning the terms and
conditions of the offering and the information in the Reports. In reaching the
conclusion that it desires to acquire the Shares, Purchaser has evaluated its
financial resources and investment position, and the risk associated with this
investment and acknowledges that it is able to bear the economic risks of this
investment.
4. As of the date hereof, Purchaser represents, warrants and agrees
that it is acquiring the Shares 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 Shares to satisfy any
existing or contemplated debt or undertaking and that the investment is
suitable for Purchaser upon the basis of the Purchaser's other security
holdings, financial situation and needs.
5. Purchaser is aware that the Shares have not been registered nor is
registration contemplated under the Securities Act of 1933, as amended (the
"Act"), and that, accordingly, the Shares must be held unless they are
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
Shares may bear a standard legend restricting the transfer thereof consistent
with the foregoing and that a notation may be made in the records of the Company
or its transfer agent restricting the transfer of the Shares in a manner
consistent with the foregoing.
6. Purchaser understands that the Company intends to use the proceeds
in the following approximate amounts: (1) the purchase of drill pipe and collars
($500,000); (2) the purchase of approximately 500,000 shares of the Company's
stock on the open market or otherwise, and (3) the
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purchase of the common stock of TMBR Sharp Drilling, Inc. on the open market
and in private purchases.
7. Purchaser represents and warrants as follows:
Purchaser has not been formed for the purposes of making this
investment; (2) Purchaser has a history of investments similar to the type of
investment in the Company; and (3) Purchaser is wholly owned by an entity which
has total assets in excess of $5,000,000 and is an entity in which all of the
equity owners qualify as "accredited investors" as defined in Rule 501 of
Regulation D of the Securities Exchange Commission.
8. The Company represents and warrants that:
a. 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 is duly qualified and
authorized to do business and is in good standing as a foreign corporation in
all states where the ownership of property or the nature of the business
transacted by the Company makes such qualification necessary. The Company has
15,000,000 authorized shares of its common stock and 584,615 authorized shares
of its preferred stock. As of January 31, 2000, the Company had 6,120,838 issued
and outstanding shares of common stock, 584,615 issued and outstanding shares
of preferred stock and held no treasury shares. As of January 31, 2000, the
Company had granted stock options which, if all were exercised, would equal
1,726,000 shares of common stock. Other than items described herein, there are
no other options, warrant, rights, conversion rights, phantom rights, preemptive
rights or any other rights by any party to receive equity of the Company.
b. Upon issuance of the Shares to Purchaser, Purchaser will be
the record and beneficial owner of the Shares, and the Shares are duly
authorized, validly issued and outstanding, fully-paid, and non-assessable and
have been issued in accordance with appropriate federal and state securities
law. The Purchaser will own and hold good and valid title to the Shares, free
and clear of all liens, encumbrances, pledges, options, claims, assessments, and
adverse charges. By virtue of the consummation of the transaction contemplated
herein, Purchaser shall receive good and valid title to the Shares to the
Purchaser, free and clear of all liens, encumbrances, pledges, options, claims,
assessments, and adverse charges. Upon issuance of the Shares, Purchaser's
ownership will constitute 15.86 percent of the Company's issued and outstanding
shares of capital stock as of January 31, 2000.
c. The Company has full power and authority to sell the Shares
to Purchaser and to make, execute, deliver and perform the Registration Rights
Agreement executed simultaneously herewith and to consummate the transactions
contemplated hereby. The Registration Rights Agreement is a valid and legally
binding obligation of the Company, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, and moratorium
laws or any other laws of general application affecting enforcement of
creditor's rights generally. The Company has full right and power to sell,
assign, exchange, transfer and deliver the Shares to the Purchaser as provided
herein.
d. There is no action, suit or proceeding pending or, to the
knowledge of the Company, threatened against the Company before any court,
administrative agency or arbitrator which
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might result in any material adverse change in the business, properties or
condition (financial or otherwise) of the Company or which questions the
validity of any action taken or to be taken pursuant to or in connection with
this Subscription Agreement or the Shares.
e. Neither the execution and delivery of the Registration
Rights Agreement or this Subscription Agreement, nor the consummation of the
transaction contemplated thereby, nor compliance with the terms and provisions
thereof, will conflict with, or result in a breach of, the terms, conditions or
provisions of, or constitute a default under, the charter or bylaws of the
Company, or of any applicable law, or of any order, writ, injunction or decree
of any court, administrator or arbitrator, or of any agreement or instrument
which is applicable to the Company or under which the Company is obligated or by
which any of its property is bound.
f. The Company will not, upon the sale of the Shares to
Purchaser, be (i) in default under any indenture or material contract or
agreement to which it is a party, (ii) in violation of its charter or bylaws or
of any applicable law, (iii) in default with respect to any order, writ,
injunction or decree of any court or arbitrator, or (iv) in default under any
order, license, regulation or demand of any government agency.
g. The Company has filed all federal and state tax returns
required to be filed and has paid all taxes as shown on such returns and on all
assessments received by it to the extent that such taxes have become due. In the
opinion of the officers of the Company, adequate accruals have been set up to
cover all unpaid taxes. The Company is not aware of any material liabilities,
contingent or otherwise, that have not been disclosed in the financial
statements submitted to the Securities and Exchange Commission.
h. The Company is not required to obtain any consent, approval
or waiver by any security holder (debt or equity), creditor, vendor or any other
third party to sell the Shares to Purchaser or enter into the transactions
contemplated hereby.
9. Purchaser and the Company hereby agree that the representations and
warranties set forth in this Subscription Agreement shall survive the date
hereof.
10. The agreements and representations herein see forth shall become
effective and binding upon Purchaser, its heirs, legal representatives,
successors and assigns and upon the Company, its successors and assigns.
WEDGE ENERGY SERVICES, L.L.C.
By: /s/ Xxxxxxx X. Xxxxx
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Name: Xxxxxxx X. Xxxxx
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Title: President
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Dated:
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SOUTH TEXAS DRILLING & EXPLORATION, INC.
By: /s/ Wm. Xxxxx Xxxxx
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Name: Wm. Xxxxx Xxxxx
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Title: President
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Dated: 2/17/2000
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