Exhibit
4.2


 


REGISTRATION
RIGHTS AGREEMENT


 


THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”)
is made and entered into effective as of the 31st day of March,
2003, by and among Pioneer Drilling Company, a Texas corporation (the
“Company”), and WEDGE Energy Services, L.L.C., a Delaware limited liability
company (“Wedge”), William H. White (“White”), and Chesapeake Energy
Corporation (“Chesapeake” and, together with Wedge and White, the “Investors”).


 


W I T N E S S E T H:


 


WHEREAS, Wedge has previously acquired from the
Company an aggregate of 7,232,007 shares of the common stock, par value $0.10
per share, of the Company (“Common Stock”);


 


WHEREAS, Wedge and White have previously acquired from
the Company $28,000,000 in aggregate principal amount of 6.75% convertible
subordinated debentures of the Company (the “6.75% Debentures”), which are
currently convertible into shares of Common Stock at a conversion rate of $4.31
per share;


 


WHEREAS, in connection with prior transactions between
the Company and Wedge, the Company and Wedge have entered into a Registration
Rights Agreement dated as of May 16, 2001 (the “Existing RRA”);


 


WHEREAS, the Company and Wedge desire that this
Agreement shall supercede the Existing RRA; and


 


WHEREAS, concurrently with the execution and delivery
of this Agreement, the Company is issuing to Chesapeake 5,333,333 shares of
Common Stock pursuant to a Common Stock Purchase Agreement of even date
herewith, and, in connection with that issuance, the Company has agreed to
provide Chesapeake with registration rights as provided herein;


 


NOW, THEREFORE, in consideration of the mutual
covenants and agreements set forth herein, and for other good and valuable
consideration, the parties hereto hereby agree as follows:


 


Section 1.               Certain
Definitions.  As used in this
Agreement, the following definitions shall apply:


 


“Affiliate” means, as to any specified Person,
any other Person that, directly or indirectly through one or more
intermediaries or otherwise, controls, is controlled by or is under common
control with the specified Person.  This
definition uses “control” to mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.


 


“Agreement” means this Agreement, as the same
may be amended, modified or supplemented from time to time pursuant to the
provisions hereof.


 


“Chesapeake” has the meaning the preamble
hereto specifies.


 


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“Commission” means the Securities and Exchange
Commission and any successor thereto as the federal agency administering the
Securities Act.


 


“Common Stock” has the meaning the recitals
hereto specify.


 


“Company” has the meaning the preamble hereto
specifies.


 


“Demanding Holder” means, in connection with
any Demand Registration, any Holder who has (acting alone or together with any
other Holders) duly made the request for such Demand Registration in accordance
with the provisions of Section 2(a).


 


“Demand Registration” has the meaning
Section 2(a) specifies.


 


“Exchange Act” means, at any time, the
Securities Exchange Act of 1934, as amended, and any successor federal statute,
and the rules and regulations of the Commission thereunder, as in effect at
that time.


 


“Exempt Offering” means any offering by the
Company of shares of Common Stock (i) in connection with or pursuant to any
benefit, compensation, incentive or savings plan or program in which any of the
officers, directors, employees or independent contractors of the Company or any
of its subsidiaries participate, (ii) as consideration in any business
combination or other acquisition transaction, (iii) as the securities into or
for which other equity or debt securities are convertible or exchangeable, or
as the securities that may be acquired by the exercise of options, warrants or
other rights, in each case at a conversion, exchange or exercise price
representing a premium over the trading price of the Common Stock at the time
of the offering, (iv) made under Regulation S under the Securities Act (or any
similar provision then in force) or (v) made only to existing holders of
securities issued by the Company.


 


“Existing RRA” has the meaning the recitals
hereto specify.


 


“Holder” means at any time any Person then
owning Registrable Securities and having the rights and obligations of a Holder
hereunder and which (i) is an Investor or (ii) has been assigned those rights
and obligations under Section 10.


 


“Indemnified Party” has the meaning Section
7(c) specifies.


 


“Indemnifying Party” has the meaning Section
7(c) specifies.


 


“Investors” has the meaning the preamble hereto
specifies.


 


“Lockup Period” has the meaning Section 4
specifies.


 


“Person” means any natural Person, any unincorporated
organization or association, and any partnership, limited liability company,
corporation, estate, trust, nominee, custodian or other individual or entity.


 


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“Piggyback Registration” has the meaning
Section 3(a) specifies.


 


The terms “register,” “registered” and “registration”
refer to a registration effected by preparing and filing a registration
statement with the Commission in compliance with the Securities Act.


 


“Registrable Securities” means: (i) any shares
of Common Stock held by Wedge or Chesapeake as of the date hereof; and (ii) any
shares of Common Stock hereafter acquired by any of the Investors directly from
the Company (whether in exchange for or on conversion of 6.75% Debentures or other
securities of the Company or otherwise); provided, however, that Registrable
Securities shall not include any share of Common Stock if (A) a registration
statement covering that share has been filed and becomes effective under the
Securities Act and its Holder distributes it by means of that effective
registration statement, (B) its Holder distributes it to the public under Rule
144 or (C) at any time after the date hereof its Holder is neither an
“affiliate” (as that term is defined in Rule 144) of the Company nor a
holder of more than 5% of the total number of shares of Common Stock then
outstanding and such Holder may distribute such share to the public in the
United States without its being registered for resale under the Securities Act
and without being subject to the volume limitations of Rule 144.


 


“Registration Expenses” means all expenses
incurred by the Company in complying with registration obligations hereunder,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company and the reasonable fees and disbursements of not more than one counsel
chosen by the Holders who are the holders of a majority of Registrable
Securities being registered, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration. Registration
Expenses shall not include fees of counsel for the Holders other than of one
counsel as set forth above or Selling Expenses as defined below.


 


“6.75 Debentures” has the meaning the recitals
hereto specify.


 


“Request Notice” has the meaning
Section 3(a) specifies.


 


“Requesting Holder” means, in connection with
any Piggyback Registration, any Holder who has duly delivered a Request Notice
with respect to that Piggyback Registration in accordance with the provisions
of Section 3(a).


 


“Requisite Wedge Holders” means, as of any time
of determination, any combination of Holders who hold not less than 50% of the
Registrable Securities originally issued to Wedge who are also holders of not
less than 2% of the total number of shares of Common Stock then outstanding.


 


“Requisite Securities” means, as of any time of
determination hereunder, (i) Registrable Securities having an aggregate value
of at least $10,000,000, in the event a Demand Registration would require the
Company to file a registration statement on Form S-1 or its substantial
equivalent with the Commission under the Securities Act, or (ii) Registrable 


 


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Securities having an
aggregate value of at least $7,500,000, in the event a Demand Registration
would require the Company to file a registration statement on Form S-3 or its
substantial equivalent with the Commission under the Securities Act.  For purposes of this definition, the
aggregate value of Registrable Securities shall be determined by using the
average closing price (the last reported sales price for a share of Common
Stock, as reported on the consolidated transaction reporting system for the
principal national securities exchange on which shares of Common Stock are
listed (or, if shares of Common Stock are not so listed but are quoted on the
Nasdaq Stock Market, as reported by the Nasdaq Stock Market)) of Common Stock
for the 30 trading days next preceding the date on which “Requisite Securities”
is determined.


 


“Rule 144” means, at any time, Rule 144
promulgated under the Securities Act, or any similar successor rule thereto, as
the same shall be in effect at that time.


 


“Rule 145” means, at any time, Rule 145
promulgated under the Securities Act, or any similar successor rule thereto, as
the same shall be in effect at that time.


 


“Securities Act” means, at any time, the
Securities Act of 1933, as amended, and any successor federal statute, and the
rules and regulations of the Commission thereunder, as in effect at that time.


 


“Selling Expenses” shall mean all underwriting
discounts, selling commissions and stock transfer taxes arising from or
relating to the sale of Registrable Securities.


 


“Underwriters’ Maximum Number” has the meaning
Section 2(b) specifies.


 


“Wedge” has the meaning the preamble hereto
specifies.


 


“White” has the meaning the preamble hereto
specifies.


 


Section 2.               Demand
Registrations.


 


(a)           Request
for Registration.  Subject to the
provisions of Sections 2(b) through (f) and Sections 5, 6, 7 and 8,
if, at any time after the date hereof, the Company shall receive from either
(i) the Requisite Wedge Holders or (ii) Chesapeake a written request
that the Company effect the registration under the Securities Act of the resale
of Registrable Securities held by such Requisite Wedge Holders or Chesapeake,
as the case may be (a “Demand Registration”), then the Company shall:


 


(i)            promptly give written notice of the
proposed registration to all other Holders; and


 


(ii)           use its best efforts to effect, as
soon as practicable and in accordance with the provisions of Section 6,
the registration under the Securities Act of the Registrable Securities that
the Company has been so requested to register, together with all or such
portion of the Registrable Securities of any other Holders who


 


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request to participate in
such Demand Registration as are specified in a written request received by the
Company within 20 days after the Company mails the written notice referred to
in clause (i) of this Section 2(a); provided, however, that the Company
shall not be obligated to take any action to effect any such registration under
the Securities Act:  (A) after the
Company has effected four such registrations initiated by the Requisite Wedge
Holders pursuant to this Section 2(a) which have become effective; or
(B) if less than the Requisite Securities are requested to be included in
the registration; provided, further, that Chesapeake shall only be
entitled to initiate one Demand Registration (unless, following Chesapeake’s
initiation of a Demand Registration, the total amount of Registrable Securities
actually offered and sold pursuant to such Demand Registration is reduced to
less than 75% of the amount of Registrable Securities sought to be included by
Chesapeake in such Demand Registration (as specified in the written request
delivered by Chesapeake pursuant to the foregoing provisions of this Section
2(a)) as a result of a reduction in the total amount of Registrable Securities
included in such Demand Registration pursuant to the provisions of Section
2(b), in which case Chesapeake shall be entitled to initiate a second Demand
Registration in accordance with this Section 2(a)).


 


Notwithstanding the foregoing provisions of this Section 2(a): (A) the
Company will be entitled to defer the initial filing of the registration
statement relating to any Demand Registration for a period of up to 90 days after
it receives the demand therefor pursuant to the foregoing provisions if it
furnishes to the Demanding Holders a certificate signed by the President of the
Company stating that, in the good faith judgment of the board of directors of
the Company, it would be detrimental to the Company or its shareholders for
such registration statement to be filed, and it is therefore beneficial to
defer the filing of such registration statement; and (B) if, at the time of any
request for a Demand Registration from the Demanding Holders pursuant to the
foregoing provisions, the Company has fixed plans to file within 90 days after
that demand a registration statement for the public offering and sale of any of
its securities in a public offering under the Securities Act (other than an
Exempt Offering of the type specified in clause (i), (ii), (iv) or (v) of the
definition of Exempt Offering), the Company will be entitled to defer the
initial filing of that Demand Registration until 60 days after the effective
date of that registration statement if, after it receives that request for a
Demand Registration from the Demanding Holders, it (i) furnishes to the
Demanding Holders a written notice of that intent, (ii) files that registration
statement within that 90-day period and (iii) affords the Holders the right to
participate in that public offering pursuant to, and subject to, the provisions
of Section 3.


 


(b)           Underwritten
Demand Registrations. The offering of the Registrable Securities pursuant
to any Demand Registration shall be in the form of an underwritten
offering.  In the event the managing
underwriter or underwriters with respect to a Demand Registration advise the
Company and the Demanding Holders in writing that the total amount of
Registrable Securities requested to be included in such offering, together with
any other shares of Common Stock that the Company intends to have included in
such offering, would exceed the maximum amount of securities which can be
marketed at a price reasonably related to the current fair market value of such
securities without adversely affecting such offering (the “Underwriters’
Maximum Number”), the initial filing of the registration statement for such
Demand Registration will be prepared on the basis that the offering will
include, up to the Underwriters’ Maximum Number:  first, all of the Registrable Securities requested to be included
in such registration by the Holders thereof, allocated pro rata


 


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among such Holders on the basis of the number of Registrable Securities
requested to be included therein by each such Holder; and second, any shares of
Common Stock to be included in such registration by the Company or any other
holders of shares of Common Stock, allocated as determined by the Company,
subject to any applicable agreements between the Company and any such holders.


 


(c)           Selection
of Underwriters.  The managing
underwriter or underwriters to be used in connection with such registration
shall be selected by the Holders holding a majority of the Registrable
Securities being registered, subject to the approval by the Company, which
approval shall not be unreasonably withheld.


 


(d)           Underwriting
Agreements.  The Company shall
(together with all Holders offering Registrable Securities pursuant to a Demand
Registration) enter into an underwriting agreement in customary form with the
underwriters selected for such Demand Registration pursuant to the provisions
of Section 2(c), and each such Holder shall complete and execute all questionnaires,
powers of attorney, indemnities and other documents, and obtain such spousal or
other consents, as are reasonably required under the terms of those
arrangements and this Agreement.


 


(e)           Withdrawal
From Underwriting.  If any Holder
disapproves of the proposed terms of the underwriting arrangements relating to
an underwritten offering pursuant to a Demand Registration, such Holder may
elect to withdraw therefrom by written notice to the Company and the lead
managing underwriter for that offering delivered not less than 10 days before
the registration statement relating to that Demand Registration becomes
effective under the Securities Act.  Any
Registrable Securities so withdrawn shall also be withdrawn from registration,
and such Registrable Securities (together with any other Registrable Securities
held by such Holder) shall be subject to the restrictions set forth in Section
4 until the expiration of the Lockup Period relating to the offering being made
pursuant to such registration.  If by
the withdrawal of such Registrable Securities a greater number of Registrable
Securities held by other Holders may be included in such registration (up to
the maximum of any limitation imposed by the underwriters), then the Company
shall offer to all Holders who have included Registrable Securities in the
registration the right to include any additional Registrable Securities they
own in the same proportion and manner used in determining the number of shares
originally included pursuant to Section 2(b).


 


(f)            Inclusion
as a Demand Registration.  For
purposes of this Section 2, a registration will not count as a Demand
Registration until it has become effective; provided, however, if the Demanding
Holders withdraw all their Registrable Securities (whether before or after the
effectiveness of such registration) and not as a result of any wrongdoing by
the Company, or if as a result of any action by the managing underwriters or
underwriters, such demand will count as a Demand Registration for purposes of
this Section 2 unless the Demanding Holders reimburse the Company, promptly
upon request, for all of the Registration Expenses related to the attempted
registration.


 


Section 3.               Piggyback
Registration.


 


(a)           Right
to Include Registrable Securities. 
Whenever the Company proposes to register the public offering and sale
of any shares of Common Stock for its own account  under the


 


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Securities Act, other than an Exempt Offering, the Company shall give
written notice thereof to each Holder as soon as practicable (but in any event
at least 15 days prior to its initial filing with the Commission of the
registration statement for that offering), offering such Holder the opportunity
to register on such registration statement such number of Registrable
Securities as such Holder may request in writing (a “Request Notice”), subject
to the provisions of Section 3(b), not later than 10 days after the date of the
giving of such notice (any such registration being a “Piggyback Registration”).
Upon receipt by the Company of any such request, the Company shall use
reasonable efforts to include such Registrable Securities in such registration
statement and to cause such registration statement to become effective with
respect to such Registrable Securities in accordance with the registration
procedures set forth in Section 6.  If
the Company’s registration is to be effected pursuant to an underwritten
offering, Registrable Securities registered pursuant to this Section 3 shall be
distributed in accordance with such offering; provided, however,
that:  (i) the Company may reserve to
itself the right to be the exclusive grantor of any underwriter’s overallotment
option; and (ii) the shares of Registrable Securities any Requesting Holder
will be entitled to offer and sell will be subject to reduction as
Section 3(b) provides.  In
connection with each Piggyback Registration, the Company, in its sole
discretion, will determine whether to proceed with or terminate the offering
and to select any underwriter or underwriters to administer the offering.  Each Holder requesting inclusion in a
registration pursuant to this Section 3 may, at any time before the effective
date of the registration statement relating to such registration, revoke such
request by delivering written notice of such revocation to the Company (which
notice shall be effective only upon receipt by the Company); provided,
however,
that if the Company, in consultation with its financial and legal advisors,
determines that such revocation would materially delay the registration or
require a recirculation of the prospectus subject to completion contained in
the registration statement, then such Holder shall have no right to so revoke
its request.


 


(b)           Priority
in Piggyback Registration.  The
Company will have the right to determine the aggregate size of each offering
pursuant to a Piggyback Registration and to limit the number of Registrable
Securities to be included in that offering without reducing the number of
shares of Common Stock to be offered by the Company in that offering, as
follows:  (i) if the lead managing
underwriter selected by the Company for that offering (or, if that offering
will not be underwritten, a financial advisor to the Company) determines that
marketing factors render necessary or advisable a limitation on the number of
Registrable Securities to be included in that offering, the Company will be
required to include in that offering only such number of Registrable
Securities, if any, as that lead managing underwriter (or financial advisor, as
the case may be) believes (as evidenced by its written advice to the Company)
will not jeopardize the success of the primary offering by the Company; and
(ii) if the Company limits the number of Registrable Securities that Requesting
Holders may have included in any offering pursuant to clause (i), but does not
exclude all Registrable Securities from that offering, the maximum number of
Registrable Securities to be included in that offering on behalf of each of
those Requesting Holders will be the product of (A) the number of Registrable
Securities that Requesting Holder has specified in its Request Notice relating
to that offering multiplied by (B) the fraction the numerator of which is the
number of Registrable Securities that the Company has determined (in accordance
with the foregoing provisions of this Section 3(b)) may be included in
that offering and the denominator of which is the aggregate number of
Registrable Securities all those Requesting Holders have specified in their Request
Notices relating to that offering.


 


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(c)           Underwriting
Agreements. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company) enter into an underwriting
agreement in customary form with the underwriters selected for such
underwriting by the Company, and each such Holder shall complete and execute
all questionnaires, powers of attorney, indemnities and other documents, and
obtain such spousal or other consents, as are reasonably required under the
terms of those arrangements and this Agreement.


 


(d)           Withdrawal
From Underwriting.  If any Holder
disapproves of the proposed terms of the underwriting arrangements relating to
the offering being effected pursuant to a Piggyback Registration, such Holder
may elect to withdraw therefrom by written notice to the Company and the lead
managing underwriter for that offering delivered not less than 10 days before
the registration statement relating to that Piggyback Registration becomes
effective under the Securities Act.  Any
Registrable Securities so withdrawn shall also be withdrawn from such
registration, and such Registrable Securities (together with any other
Registrable Securities held by such Holder) shall be subject to the
restrictions set forth in Section 4 until the expiration of the Lockup Period
relating to the offering being made pursuant to such registration.


 


Section 4.               Market
Standoff.  If the Company at any
time shall effect the registration of an underwritten public offering of any
shares of Common Stock under the Securities Act (including any registration
pursuant to Section 2 or 3), the Holders shall not sell, transfer, make any
short sale of, grant any option for the purchase of, or otherwise dispose of,
any Registrable Securities (other than those shares of Common Stock included in
such registration pursuant to Section 2 or 3) without the prior written consent
of the Company for a period designated by the Company in writing to the Holders
(each such period being a “Lockup Period”), which period shall begin not more
than 10 days prior to the effectiveness of the registration statement pursuant
to which such public offering shall be made and shall extend until the last to
occur of (i) the 60th day after the effective date of such registration
statement and (ii) the earlier of (A) the 120th day after the commencement
of the lockup period, if any, established pursuant to the underwriting
arrangements entered into by the Company (and the Holders, if any, offering
Registrable Securities in that offering) in connection with that offering and
(B) the expiration of the lockup period described in the immediately preceding
clause (A).  The Company shall obtain
the agreement of any person permitted to sell shares of stock in a registration
to be bound by and to comply with this Section 4 as if such person was a Holder
hereunder.  Whenever the provisions of
this Section 4 become applicable, the Company will seek to obtain the agreement
of its officers and directors to be bound by the transfer restrictions set
forth in this Section 4 for the duration of the applicable Lockup Period.


 


Section 5.               Expenses
of Registration.  All Registration
Expenses incurred in connection with (i) one Demand Registration initiated by
the Requisite Wedge Holders, (ii) one Demand Registration initiated by
Chesapeake and (iii) all Piggyback Registrations shall be borne by the
Company.  All Selling Expenses relating
to Registrable Securities so registered, as well as all Registration Expenses
relating to Demand Registrations and Piggyback Registrations not required to be
borne by the Company, shall be borne by the Holders pro rata on the basis of
the number of Registrable Securities so registered on their behalf.


 


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Section 6.               Registration
Procedures.  If and whenever the
Company is required by the provisions of Section 2 or 3 to effect the
registration of Registrable Securities, the Company shall:


 


(a)           prepare
and file with the Commission a registration statement with respect to the
offering of these Registrable Securities and use its best efforts to cause such
registration statement to become and remain effective as provided herein;


 


(b)           prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be necessary to keep such registration statement effective and current and to
comply with the provisions of the Securities Act with respect to the sale of or
other disposition of all Registrable Securities covered by such registration
statement, including such amendments and supplements as may be necessary to
reflect the plan of distribution for such Registrable Securities, but for no
longer than 120 days subsequent to the effective date of such registration
statement; provided,
however,
such period shall be extended for the period of time equal to the period, if
any, that a Holder refrains from selling any Registrable Securities covered by
such offering at the request of the lead managing underwriter for such
offering;


 


(c)           furnish to each
prospective seller of Registrable Securities pursuant to such registration such
number of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as such seller may reasonably request in order to facilitate the
sale or other disposition of the Registrable Securities of such seller;


 


(d)           notify each Holder
of Registrable Securities covered by such registration statement, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or incomplete in the light of the circumstances then existing, and,
at the request of any such Holder, prepare and furnish to such Holder a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing;


 


(e)           cause all such
Registrable Securities registered pursuant hereunder to be listed on each
securities exchange or approved for quotation on any inter-dealer
quotation system on which the Common Stock is then listed or quoted;


 


(f)            use its best
efforts to register or qualify the Registrable Securities covered by such
registration under such other securities or “blue sky” laws of such
jurisdictions as any Holder may reasonably request and do any and all other
acts and things which may be reasonably necessary or advisable to enable any Holder
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such Holder; provided, however, that the Company
will not be required to qualify generally to do business, subject itself to
general taxation or consent to general


 


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service of process
in any jurisdiction where it would not otherwise be required to do so but for
this paragraph (f);


 


(g)           subject to the
execution of confidentiality agreements in form and substance satisfactory to
the Company, make available upon reasonable notice and during normal business
hours, for inspection by each Holder holding such Registrable Securities, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any Holder or
underwriter (collectively, the “Inspectors”), all pertinent financial and other
records, pertinent corporate documents and properties of the Company as shall
be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company’s officers, directors and employees to
supply all information reasonably requested by any such Inspector in connection
with such registration statement;


 


(h)           use its best efforts
to obtain from its independent public accountants “comfort” letters in
customary form and at customary times and covering matters of the type
customarily covered by comfort letters;


 


(i)            use its best
efforts to obtain from its counsel an opinion or opinions in customary form;


 


(j)            otherwise use its
best efforts to comply with all applicable rules and regulations of the
Commission, and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least 12 months,
but not more than 18 months, beginning with the first month after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act; and


 


(k)           use its best efforts
to take all other steps necessary to effect the registration of the offering
and sale of the Registrable Securities contemplated hereby.


 


Section 7.               Indemnification.  If any of the Registrable Securities are
included in a registration statement under this Agreement, the following
provisions shall apply.


 


(a)           The Company will, to
the extent applicable law permits, indemnify each Holder, each of such Holder’s
officers and directors and partners (and each partner’s officers, directors and
partners) and such Holder’s separate legal counsel and independent accountants,
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained, on the
effective date thereof, in any registration statement, any prospectus contained
therein, or any amendment or supplement thereto, or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were made) not
misleading, or any violation by the Company of any rule or regulation
promulgated under the Securities Act applicable to the Company in connection
with any such registration, qualification or


 


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compliance, and
the Company will reimburse each such Holder, each of its officers, directors
and partners (and each partner’s officers, directors and partners) and such
Holders’ separate legal counsel and independent accountants and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by an instrument duly
executed by such Holder or underwriter specifically for use therein.


 


(b)           Each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration, qualification or compliance is being effected and to
the extent applicable law permits, indemnify the Company, each of its directors
and officers and its legal counsel and independent accountants, each
underwriter, if any, of the Company’s securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act, and each other such Holder, each
of its officers and directors and each person controlling such Holder within
the meaning of Section 15 of the Securities Act, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained, on the effective date thereof, in any such registration statement,
any prospectus contained therein, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements therein (in the case of a prospectus, in the light of the
circumstances under which they were made) not misleading, and will reimburse
the Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement or prospectus in reliance upon
and in conformity with written information furnished to the Company by an
instrument duly executed by such Holder specifically for use therein; provided,
however,
that the obligations of any such Holder hereunder shall be limited to an amount
equal to the proceeds to each such Holder of Registrable Securities sold as
contemplated herein.


 


(c)           Each party entitled
to indemnification under this Section 7 (each, an “Indemnified Party”) shall
give notice to the party required to provide indemnification (the “Indemnifying
Party”) promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld or delayed), and the Indemnified Party may
participate in such defense at such party’s expense, and provided, further,
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section
7 to the extent such failure is not prejudicial. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an


 


11

















 


unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation.


 


(d)           If the
indemnification provided for in this Section 7 is held by a court of competent
jurisdiction to be unavailable to an Indemnified Party with respect to any
loss, liability, claim, damage or expense referred to herein, then the
Indemnifying Party, in lieu of indemnifying the Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party with respect
to such loss, liability, claim, damage or expense in the proportion that is
appropriate to reflect the relative fault of the Indemnifying Party and the
Indemnified Party in connection with the statements or omissions that resulted
in such loss, liability, claim, damage or expense, as well as any other
relevant equitable considerations. The relative fault of the Indemnifying Party
and the Indemnified Party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of material fact or the
omission (or alleged omission) to state a material fact relates to information
supplied by the Indemnifying Party or by the Indemnified Party, and the
parties, relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. 
No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.


 


Section 8.               Information
by Holder.  The Holder or Holders of
Registrable Securities included in any registration shall furnish to the
Company such information regarding such Holder or Holders and the distribution
proposed by such Holder or Holders as the Company may request in writing and as
shall be required in connection with any registration, qualification or
compliance referred to herein.


 


Section 9.               Rule
144 Reporting.  The Company
will:  (i) use commercially
reasonable efforts to file with the Commission in a timely manner all reports
and other documents Section 13 or 15(d) of the Exchange Act, as applicable,
requires it to file with the Commission; and (ii) so long as a Holder owns
Registrable Securities, deliver to the Holder, on the Holder’s request, a
written statement as to whether the Company is in compliance with the
requirements referred to in clause (i) of this sentence (if it is then subject to
those requirements).


 


Section 10.             Assignment
of Registration Rights.  A Holder
may not transfer the registration rights this Agreement affords the Holder to
any other Person (other than (i) an Affiliate of that Holder or
(ii) a member of the “immediate family” (as that term is used in
Item 404 of Regulation S-K promulgated by the Commission, as in
effect on the date hereof) of (A) that Holder or (B) any Affiliate of
that Holder) without the prior written consent of the Company (which consent
will not be unreasonably withheld), and in that case only if the transferee
executes an addendum to this Agreement in which that transferee agrees to
comply with and otherwise be bound by all the terms and conditions hereof.


 


Section 11.             Subsequent
Grants of Registration Rights.


 


(a)           Without
the affirmative vote of the Holders of at least 66 2/3% of the Registrable
Securities, the Company shall not grant to any purchaser of the Company’s
securities any


 


12

















 


demand registration rights or piggyback registration rights that, with
respect to underwriters cutbacks, would be inconsistent or in conflict with the
provisions hereof.


 


(b)           For
as long as any Holder is entitled to exercise any registration rights described
herein in respect of any Registrable Securities held by that Holder, such
Holder shall be entitled to receive the benefit of any and all registration
rights hereafter granted by the Company to any other Person which are more
favorable than the registration rights provided to such Holder pursuant to this
Agreement.


 


Section 12.             Term.  This Agreement and all rights granted to the
Investors hereunder shall expire on the eighth anniversary of the date hereof.


 


Section 13.             Miscellaneous.


 


(a)           Notices.  All notices and other communications
provided for or permitted hereunder must be in writing and will be deemed
delivered and received (i) if personally delivered or if delivered by
facsimile or courier service, when actually received by the party to whom the
notice or communication is sent, or (ii) if deposited with the United
States postal service (whether actually received or not), at the close of
business on the third San Antonio, Texas business day next following the day
when placed in the mail, postage prepaid, certified or registered with return
receipt requested, addressed to the appropriate party or parties at the address
of that party set forth or referred to below (or at such other address as that
party may designate by written notice to each other party in accordance herewith):


 


	
  (i)            If to the Company:

  	
  Pioneer Drilling
  Company

  
	
   

  	
  9310 Broadway,
  Bldg. 1

  
	
   

  	
  San Antonio,
  Texas  78217

  
	
   

  	
  Attn: President

  
	
   

  	
  Facsimile:  (210) 828-8228

  
	
   

  	
   

  
	
  with a copy (which
  shall not constitute notice for purposes of this Agreement) to: 

  
	
   

  	
  Baker Botts
  L.L.P.

  
	
   

  	
  3000 One Shell
  Plaza

  
	
   

  	
  910 Louisiana

  
	
   

  	
  Houston, Texas
  77002-4995

  
	
   

  	
  Attn: Ted W.
  Paris

  
	
   

  	
  Facsimile: (713)
  229-7738

  
	
   

  	
   

  
	
  (ii)           If to Wedge:

  	
  WEDGE Energy
  Services, L.L.C.

  
	
   

  	
  1415 Louisiana
  Street, Suite 3000

  
	
   

  	
  Houston,
  Texas  77002

  
	
   

  	
  Attn: President

  
	
   

  	
  Facsimile:  (713) 524-3586

  



 


13

















 


	
  with a copy (which
  shall not constitute notice for purposes of this Agreement) to: 

  
	
   

  
	
   

  	
  WEDGE Energy
  Services, L.L.C.

  
	
   

  	
  1415 Louisiana
  Street, Suite 3000

  
	
   

  	
  Houston,
  Texas  77002

  
	
   

  	
  Attn: General
  Counsel

  
	
   

  	
  Facsimile:  (713) 524-3586

  
	
   

  	
   

  
	
  (iii)          If to Chesapeake:

  	
  Chesapeake Energy Corporation

  
	
   

  	
  6100 North Western Avenue

  
	
   

  	
  Oklahoma City, Oklahoma  73118

  
	
   

  	
  Attn:  Chief
  Financial Officer

  
	
   

  	
  Facsimile:  (405) 879-9580

  
	
   

  	
   

  
	
  with a copy (which
  shall not constitute notice for purposes of this Agreement) to: 

  
	
   

  
	
   

  	
  Commercial Law Group 

  
	
   

  	
  2725 Oklahoma Tower

  
	
   

  	
  210 Park Avenue

  
	
   

  	
  Oklahoma City, Oklahoma 73102-5643

  
	
   

  	
  Attn: Ray Lees

  
	
   

  	
  Facsimile:  (405) 232-5553

  
	
   

  	
   

  
	
  (iv)          If
  to any other Holder, at the most current address of that Holder as reflected
  in the books and records of the Company.

  



 


(b)           Entire
Agreement; Amendments.  This
Agreement represents the entire agreement of the parties hereto, and supersedes
any other agreements among the parties with respect to the subject matter
hereof.  Without limiting the generality
of the foregoing, the Existing RRA is hereby canceled in its entirety and
rendered a nullity by agreement of the Company and Wedge.  The terms and provisions of this Agreement
may not be modified or amended, or any of the provisions hereof waived, except
pursuant to the written consent of the Company and holders of a majority of the
Registrable Securities then outstanding.


 


(c)           Assignment.  Subject to the provisions of
Section 10, this Agreement will inure to the benefit of and be binding on
the heirs, executors, administrators, successors and assigns of each of the
parties hereto.


 


(d)           Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original instrument, but all of which taken together
shall constitute one and the same agreement.


 


(e)           Headings;
Interpretation.  The headings of the
various sections of this Agreement have been inserted for convenience of
reference only and shall not limit or affect the meaning or interpretation of
this Agreement. Whenever the context requires, references in this Agreement to
the singular number shall include the plural and vice versa, and words denoting
gender


 


14

















 


shall include the masculine, feminine and neuter.  This Agreement uses the words “herein,”
“hereof,” “hereto” and “hereunder” and words of similar import to refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
the word “Section” is used to refer to Sections of this Agreement, unless
otherwise specified.  As used in this
Agreement, the word “including” (and, with correlative meaning, the word
“include”) means including without limiting the generality of any description
preceding that word, and the verbs “shall” and “will” are used interchangeably
and have the same meaning.


 


(f)            Governing
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of Texas, without
regard to any principles of conflicts of law thereof that would result in the
application of the laws of any other jurisdiction.


 


(g)           Severability.  In case any one or more of the provisions
contained in this Agreement or any application thereof shall be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and other
applications thereof shall not in any way be affected or impaired thereby.


 


15

















 


IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed as of the date first above written.


 


 


	
   

  	
  PIONEER DRILLING
  COMPANY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  William Stacy Locke

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Wm. Stacy Locke

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  President &
  CEO

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WEDGE ENERGY
  SERVICES, L.L.C.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Richard E. Blohm, Jr.

  	
   

  
	
   

  	
   

  	
  Name:

  	
   Richard E. Blohm, Jr

  	
   

  
	
   

  	
   

  	
  Title:  

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CHESAPEAKE
  ENERGY CORPORATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Martha A. Burger

  	
   

  
	
   

  	
   

  	
  Martha A.
  Burger, Senior Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  WILLIAM H.
  WHITE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  /s/
  Bill White

  	
   

  



 


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