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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): FEBRUARY 19, 1997
PRIDE PETROLEUM SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
LOUISIANA 0-16963 76-0069030
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
</TABLE>
1500 CITY WEST BLVD., SUITE 400
HOUSTON, TEXAS 77042
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES AND ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 713/789-1400
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<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 20, 1997, Pride Petroleum Services, Inc. (the "Company" or
"Pride") consummated the transaction contemplated by the Purchase Agreement
dated as of December 23, 1996, as amended (the "Dawson Purchase Agreement"),
by and between the Company and Dawson Production Services, Inc. ("Dawson"),
pursuant to which Dawson acquired, directly or indirectly, all the issued and
outstanding equity interests in entities that own substantially all of the
assets formerly owned by the Company relating primarily to the Company's
domestic, onshore well servicing business. The purchase price consisted of
$135,650,000 in cash, which was negotiated at arms' length. The Company had no
material relationship with Dawson.
The description of the Dawson Purchase Agreement set forth herein does not
purport to be complete and is qualified in its entirety by the provisions of the
Dawson Purchase Agreement, which is attached hereto and is incorporated herein
by reference.
ITEM 5. OTHER EVENTS
On February 19, 1997, the Company entered into a definitive agreement (the
"Noble Purchase Agreement") to acquire 12 mat-supported jackup drilling rigs
and the hull of an additional jackup drilling rig from Noble Drilling
Corporation ("Noble") for $265 million in cash. Nine of the rigs are currently
operating in the Gulf of Mexico, one rig is operating offshore West Africa, one
is undergoing refurbishment and two (including the rig hull) are presently
stacked awaiting refurbishment. The Company expects to spend approximately $20
million to upgrade and complete the two rigs awaiting refurbishment. During the
nine months ended September 30, 1996, the 10 rigs that were operating generated
revenues of approximately $47.6 million, at an average operating rate of
approximately $20,000 per rig per day. Recent high demand for these types of
rigs, which typically work under well-to-well contracts, has resulted in a
significant upward trend in day rates, with the average contracted rate now
exceeding $26,000 per day. Based on current market rates and assuming continuing
high demand, the rigs to be acquired from Noble are expected to generate
revenues at an annual rate of approximately $120 million.
The Noble Purchase Agreement is subject to customary conditions, including
expiration or early termination of applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act and completion by the Company of
satisfactory financing arrangements. The closing of the transaction is expected
to occur in early June 1997. The Company plans to finance the purchase through
the issuance of a combination of its debt securities and common stock. The
Company has placed in escrow a deposit of $20 million, which will be retained by
Noble if the Company fails to secure adequate financing or is otherwise unable
to close by June 30, 1997.
1
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Combined
Balance Sheet as of September
30, 1996....................... 5
Unaudited Pro Forma Combined
Statement of Operations for the
Nine Months Ended September 30,
1996........................... 6
Unaudited Pro Forma Combined
Statement of Operations for the
Year Ended December 31, 1995... 7
Notes to Unaudited Pro Forma
Combined Financial
Statements..................... 8
(c) EXHIBITS
2.1 -- Purchase Agreement, dated as of December 23, 1996, by and between
Pride Petroleum Services, Inc. and Dawson Production Services, Inc.
2.2 -- First Amendment to Purchase Agreement, dated as of February 20,
1997, by and between Pride Petroleum Services, Inc. and Dawson
Production Services, Inc.
2
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Combined Balance Sheet as of September
30, 1996 and the Unaudited Pro Forma Combined Statements of Operations for the
nine months ended September 30, 1996 and the year ended December 31, 1995
illustrate the effect of (i) the acquisition of Quitral-Co S.A.I.C.
("Quitral-Co") by Pride, (ii) the acquisition of Forasol-Foramer N.V.
("Forasol-Foramer") by Pride, (iii) the sale of Pride's U.S. land-based well
servicing operations to Dawson and (iv) the related financing transactions.
The acquisition of Quitral-Co was completed in April 1996, and the sale of
Pride's U.S. land-based well servicing operations to Dawson was completed on
February 20, 1997. The acquisition of Forasol-Foramer by Pride is currently
scheduled to be completed on or about March 10, 1997, having previously been
approved by the shareholders of Pride.
The historical balance sheet and results of operations for Pride have been
derived from Pride's consolidated financial statements. The historical results
of operations for Quitral-Co have been derived from Quitral-Co's consolidated
financial statements as adjusted for U.S. GAAP and have been translated into
U.S. dollars in accordance with U.S. GAAP. The historical balance sheet and
results of operations for Forasol-Foramer have been derived from
Forasol-Foramer's historical consolidated financial statements. The Unaudited
Pro Forma Combined Balance Sheet has been prepared assuming the acquisition of
Forasol-Foramer by Pride, the sale of Pride's U.S. land-based well servicing
operations, and the related financing transactions were consummated as of
September 30, 1996. The Unaudited Pro Forma Statements of Operations have been
prepared assuming that such transactions were consummated as of January 1, 1995.
The pro forma adjustments and the resulting unaudited pro forma combined
financial statements are based upon available information and certain
assumptions and estimates described in the notes to unaudited pro forma combined
financial statements. A final determination of required purchase accounting
adjustments, including the allocation of the purchase price to the assets
acquired and liabilities assumed based on their respective fair values, has not
yet been made. Accordingly, the purchase accounting adjustments reflected in the
pro forma combined financial information are preliminary and have been made
solely for purposes of developing the pro forma combined financial information.
However, Pride's management believes that the pro forma adjustments and the
underlying assumptions and estimates reasonably present the significant effects
of the transactions reflected thereby and that any subsequent changes in the
underlying assumptions and estimates (other than changes after closing of the
relevant transactions to reflect cost savings resulting from the termination of
redundant personnel) will not materially affect the pro forma combined financial
statements presented herein. The pro forma combined financial statements do not
purport to represent what Pride's financial position or results of operations
actually would have been had the acquisition of Quitral-Co, the acquisition of
Forasol-Foramer, the sale of Pride's U.S. land-based well servicing operations
and the related financing transactions occurred on the dates indicated or to
project Pride's financial position or results of operations for any future date
or period. Furthermore, the unaudited pro forma combined financial statements do
not reflect changes which may occur as the result of post-combination activities
and other matters.
The unaudited pro forma combined financial statements and the notes thereto
should be read in conjunction with the historical financial statements of Pride,
including the notes thereto, the historical financial statements of
Forasol-Foramer, including the notes thereto, and the historical financial
statements of Quitral-Co, including the Notes thereto, all of which have been
included in previous filings made by Pride under the Securities Exchange Act of
1934, as amended.
PRIDE'S PRO FORMA EARNINGS PER SHARE SET FORTH HEREIN REFLECT SUBSTANTIAL
DILUTION AS A RESULT OF INCLUSION OF THE OPERATING RESULTS OF FORASOL-FORAMER.
PRIDE'S MANAGEMENT DOES NOT BELIEVE THAT FORASOL-FORAMER'S HISTORICAL OPERATING
RESULTS FOR THE YEAR ENDED DECEMBER 31, 1995 OR THE NINE MONTHS ENDED SEPTEMBER
30, 1996 ARE INDICATIVE OF THE OPERATING PERFORMANCE THAT IS EXPECTED TO BE
ACHIEVED FOLLOWING THE FORASOL-FORAMER ACQUISITION (THE "BUSINESS
COMBINATION"). DURING THESE HISTORICAL PERIODS, ONE OF FORASOL-FORAMER'S
SEMI-SUBMERSIBLE RIGS, THE PERFORMANCE OF WHICH SIGNIFICANTLY AFFECTS OPERATING
RESULTS, WAS STACKED AND SUBSEQUENTLY REFURBISHED. IT WAS PLACED BACK INTO
3
<PAGE>
SERVICE IN THE FOURTH QUARTER OF 1996. THE WORLDWIDE MARKET FOR SEMI-SUBMERSIBLE
RIGS HAS RECENTLY EFFECTIVELY REACHED FULL UTILIZATION OF AVAILABLE UNITS. SUCH
DEMAND HAS RESULTED IN SUBSTANTIAL APPRECIATION OF PREVAILING DAY RATES FOR SUCH
RIGS. FORASOL-FORAMER HAS ENTERED INTO NEW WORK AGREEMENTS FOR BOTH OF ITS
SEMI-SUBMERSIBLE RIGS TO COMMENCE DURING 1997. THESE CONTRACTS WILL RESULT IN
DAY RATES WHICH WILL BE APPROXIMATELY DOUBLE THE RATES CURRENTLY BEING RECEIVED
BY FORASOL-FORAMER. THE NEW CONTRACTS FOR THE TWO RIGS HAVE MINIMUM TERMS OF
APPROXIMATELY FOUR YEARS AND ONE YEAR, RESPECTIVELY. ADDITIONALLY,
FORASOL-FORAMER HAS EXPERIENCED IMPROVED DEMAND FOR CERTAIN OTHER OF ITS
OFFSHORE AND LAND RIGS. THESE AND OTHER FACTORS, INCLUDING SUBSTANTIAL COST
SAVINGS EXPECTED TO BE REALIZED FROM THE ELIMINATION OF REDUNDANT ADMINISTRATIVE
FUNCTIONS, HAVE LED PRIDE AND ITS FINANCIAL ADVISOR TO CONCLUDE THAT
FORASOL-FORAMER'S OPERATING RESULTS FOR 1997 SHOULD SHOW SIGNIFICANT IMPROVEMENT
FROM THOSE REPORTED FOR THE 1995 AND 1996 PERIODS, AND SHOULD BE ACCRETIVE TO
PRIDE'S 1997 EARNINGS PER SHARE.
4
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
BUSINESS PRIDE/ SALE OF PRO-
PRIDE FORASOL COMBINATION FORASOL U.S. LAND FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED BUSINESS COMBINED
---------- ---------- ----------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents.......... $ 26,515 $ 23,834 $ 100,000(H) $ 27,149 $ 40,750 (P) $37,899
(123,200)(I) (30,000)(Q)
Short-term investments............. 401 -- 401 401
Trade receivables, net............. 87,268 45,370 132,638 132,638
Parts and supplies................. 24,065 -- 24,065 (2,000)(P) 22,065
Deferred income taxes.............. 2,480 1,994 4,474 4,474
Other current assets............... 15,390 15,938 31,328 31,328
---------- ---------- --------- --------
Total current assets........ 156,119 87,136 220,055 228,805
---------- ---------- --------- --------
PROPERTY AND EQUIPMENT, NET.......... 361,759 239,272 160,052(I) 761,083 (43,100)(P) 717,983
OTHER ASSETS
Investments in and advances to
affiliates....................... -- 9,346 9,346 9,346
Deferred income taxes.............. -- 8,710 8,710 8,710
Goodwill and other intangibles,
net.............................. 3,254 -- 3,254 3,254
Other.............................. 8,472 6,339 14,811 14,811
---------- ---------- --------- --------
Total other assets.......... 11,726 24,395 36,121 36,121
---------- ---------- --------- --------
$ 529,604 $ 350,803 $1,017,259 $982,909
========== ========== ========= ========
CURRENT LIABILITIES
Accounts payable................... $ 32,513 $ 25,983 $ 58,496 $58,496
Accrued expenses................... 31,204 30,852 62,056 $ (650)(P) 61,406
Current portion of long-term
debt............................. 32,671 20,387 $ 20,000(H) 73,058 (9,000)(P) 58,058
(6,000)(Q)
Current portion of long-term lease
obligations...................... -- 4,712 4,712 4,712
---------- ---------- --------- --------
Total current liabilities... 96,388 81,934 198,322 182,672
---------- ---------- --------- --------
OTHER LONG-TERM LIABILITIES.......... 13,313 9,779 23,092 23,092
LONG-TERM DEBT, NET OF CURRENT
PORTION............................ 97,947 25,783 80,000(H) 203,730 (36,900)(P) 142,830
(24,000)(Q)
LONG-TERM LEASE OBLIGATIONS, NET OF
CURRENT PORTION.................... -- 34,597 34,597 34,597
CONVERTIBLE SUBORDINATED
DEBENTURES......................... 80,500 -- 80,500 80,500
DEFERRED INCOME TAXES................ 48,787 6,354 56,000(I) 111,141 (12,000)(P) 99,141
MINORITY INTEREST.................... -- 2,908 2,908 2,908
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock....................... 1 94 (94)(I) 1 1
Paid-in capital.................... 142,727 140,688 (140,688)(I) 313,027 313,027
170,300(I)
Treasury stock, at cost............ (191) -- (191) (191 )
Retained earnings.................. 50,132 49,006 (49,006)(I) 50,132 54,200 (P) 104,332
Cumulative translation
adjustment....................... -- (340) 340(I) -- --
---------- ---------- --------- --------
Total shareholders'
equity..................... 192,669 189,448 362,969 417,169
---------- ---------- --------- --------
$ 529,604 $ 350,803 $1,017,259 $982,909
========== ========== ========= ========
</TABLE>
The accompanying notes are an integral part of the pro forma combined financial
statements.
5
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
BUSINESS PRIDE BUSINESS PRIDE/
PRIDE QUITRAL-CO COMBINATION PRO- FORASOL COMBINATION FORASOL
HISTORICAL HISTORICAL ADJUSTMENTS FORMA HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ----------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUES............................. $ 283,593 $ 47,410 $15,800(A) $ 346,803 $ 137,640 $ 484,443
---------- ---------- ---------- ---------- ---------
COSTS AND EXPENSES
Operating costs.................... 202,796 37,001 12,340(A) 252,137 108,536 360,673
Depreciation and amortization...... 19,987 2,847 950(A) 24,314 16,598 $ 5,025(J) 45,937
530(B)
Selling, general and
administrative.................... 34,120 2,871 960(A) 37,951 12,606 50,557
---------- ---------- ---------- ---------- ---------
Total costs and expenses......... 256,903 42,719 314,402 137,740 457,167
---------- ---------- ---------- ---------- ---------
EARNINGS FROM OPERATIONS............. 26,690 4,691 32,401 (100) 27,276
OTHER INCOME (EXPENSE)
Other income (expense)............. 475 (389) (130)(A) (44) 3,060 3,016
Interest income.................... 2,044 242 80(A) 1,491 818 (870)(K) 1,439
(875)(C)
Interest expense................... (9,856) (294) (100)(A) (12,550) (6,937) (6,375)(L) (24,437)
(380)(D) 1,425(M)
(1,920)(E)
---------- ---------- ---------- ---------- ---------
Total other expense, net......... (7,337) (441) (11,103) (3,059) (19,982)
---------- ---------- ---------- ---------- ---------
EARNINGS BEFORE MINORITY INTEREST AND
INCOME TAXES........................ 19,353 4,250 21,298 (3,159) 7,294
MINORITY INTEREST.................... -- -- -- (310) (310)
---------- ---------- ---------- ---------- ---------
EARNINGS BEFORE INCOME TAXES......... 19,353 4,250 21,298 (2,849) 7,604
INCOME TAX PROVISION................. 4,899 1,091 (829)(F) 5,161 561 (4,160)(N) 1,562
---------- ---------- ---------- ---------- ---------
NET EARNINGS......................... $ 14,454 $ 3,159 $ 16,137 $ (3,410) $ 6,042
========== ========== ========== ========== =========
NET EARNINGS PER SHARE
Primary............................ $ .52 $ .59 $ .16
========== ========== =========
Fully diluted...................... $ .50 $ .55
========== ==========
WEIGHTED AVERAGE COMMON SHARES AND
EQUIVALENTS OUTSTANDING
Primary............................ 27,539 27,539 11,099(O) 38,638
========== ========== =========
Fully diluted...................... 33,518 621(G) 34,139
========== ==========
</TABLE>
SALE OF PRO-
U.S. LAND FORMA
BUSINESS COMBINED
--------- --------
REVENUES............................. $ (87,290)(R) $397,153
--------
COSTS AND EXPENSES
Operating costs.................... (67,756)(R) 292,917
Depreciation and amortization...... (4,070)(R) 41,867
Selling, general and
administrative.................... (10,252)(R) 40,305
--------
Total costs and expenses......... 375,089
--------
EARNINGS FROM OPERATIONS............. 22,064
OTHER INCOME (EXPENSE)
Other income (expense)............. (230)(R) 2,786
Interest income.................... 405(S) 1,844
Interest expense................... 2,244(R) (20,293)
1,900(T)
--------
Total other expense, net......... (15,663)
--------
EARNINGS BEFORE MINORITY INTEREST AND
INCOME TAXES........................ 6,401
MINORITY INTEREST.................... (310)
--------
EARNINGS BEFORE INCOME TAXES......... 6,711
INCOME TAX PROVISION................. (463)(U) 1,099
--------
NET EARNINGS......................... $ 5,612
========
NET EARNINGS PER SHARE
Primary............................ $ .15
========
Fully diluted......................
WEIGHTED AVERAGE COMMON SHARES AND
EQUIVALENTS OUTSTANDING
Primary............................ 38,638
========
Fully diluted......................
The accompanying notes are an integral part of the pro forma combined financial
statements.
6
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
BUSINESS PRIDE BUSINESS PRIDE/
PRIDE QUITRAL-CO COMBINATION PRO- FORASOL COMBINATION FORASOL
HISTORICAL HISTORICAL ADJUSTMENTS FORMA HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ----------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES............................. $ 263,599 $ 194,564 $ 458,163 $ 171,500 $ 629,663
---------- ---------- ---------- ---------- ---------
COSTS AND EXPENSES
Operating costs.................... 188,252 157,985 346,237 127,491 473,728
Depreciation and amortization...... 16,657 9,807 $ 1,600(B) 28,064 20,264 $ 6,700(J) 55,028
Selling, general and
administrative................... 32,418 8,645 41,063 17,660 58,723
---------- ---------- ---------- ---------- ---------
Total costs and expenses..... 237,327 176,437 415,364 165,415 587,479
---------- ---------- ---------- ---------- ---------
EARNINGS FROM OPERATIONS............. 26,272 18,127 42,799 6,085 42,184
OTHER INCOME (EXPENSE)
Other income (expense)............. 1,687 (23) 1,664 382 2,046
Interest income.................... 740 502 1,242 555 (1,160)(K) 637
Interest expense................... (6,276) (5,945) (4,450)(D) (22,421) (9,338) (8,500)(L) (36,459)
(5,750)(E) 3,800(M)
---------- ---------- ---------- ---------- ---------
Total other expense, net..... (3,849) (5,466) (19,515) (8,401) (33,776)
---------- ---------- ---------- ---------- ---------
EARNINGS BEFORE MINORITY INTEREST AND
INCOME TAXES....................... 22,423 12,661 23,284 (2,316) 8,408
MINORITY INTEREST.................... -- -- -- 1,288 1,288
---------- ---------- ---------- ---------- ---------
EARNINGS BEFORE INCOME TAXES......... 22,423 12,661 23,284 (3,604) 7,120
INCOME TAX PROVISION................. 7,064 3,867 (4,025)(F) 6,906 409 (5,680)(N) 1,635
---------- ---------- ---------- ---------- ---------
NET EARNINGS FROM CONTINUING
OPERATIONS......................... $ 15,359 $ 8,794 $ 16,378 $ (4,013) $ 5,485
========== ========== ========== ========== =========
NET EARNINGS PER SHARE
Primary............................ $ 0.60 $ .64 $ .15
========== =========
----------
Fully diluted...................... $ 0.60 $ .61
========== ==========
WEIGHTED AVERAGE COMMON
SHARES AND EQUIVALENTS OUTSTANDING
Primary............................ 25,465 25,465 11,099(O) 36,564
========== ========== =========
Fully diluted...................... 25,840 6,571(G) 32,411
========== ==========
</TABLE>
SALE OF PRO-
U.S. LAND FORMA
BUSINESS COMBINED
--------- --------
REVENUES............................. $(113,115)(R) $516,548
--------
COSTS AND EXPENSES
Operating costs.................... (86,177)(R) 387,551
Depreciation and amortization...... (5,385)(R) 49,643
Selling, general and
administrative................... (13,504)(R) 45,219
--------
Total costs and expenses..... 482,413
--------
EARNINGS FROM OPERATIONS............. 34,135
OTHER INCOME (EXPENSE)
Other income (expense)............. (1,260)(R) 786
Interest income.................... 540(S) 1,177
Interest expense................... 821(R) (33,088)
2,550(T)
--------
Total other expense, net..... (31,125)
--------
EARNINGS BEFORE MINORITY INTEREST AND
INCOME TAXES....................... 3,010
MINORITY INTEREST.................... 1,288
--------
EARNINGS BEFORE INCOME TAXES......... 1,722
INCOME TAX PROVISION................. (2,148)(U) (513)
--------
NET EARNINGS FROM CONTINUING
OPERATIONS......................... $ 2,235
========
NET EARNINGS PER SHARE
Primary............................ $ .06
========
Fully diluted......................
WEIGHTED AVERAGE COMMON
SHARES AND EQUIVALENTS OUTSTANDING
Primary............................ 36,564
========
Fully diluted......................
The accompanying notes are an integral part of the pro forma combined financial
statements.
7
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. BACKGROUND
In April 1996, Pride acquired all of the outstanding capital stock of
Quitral-Co from Perez Companc S.A., Astra C.A.P.S.A. and other shareholders for
aggregate consideration of $140,000,000, consisting of $110,000,000 in cash and
a note payable to the sellers for $30,000,000. The note payable bears interest
at a variable rate of LIBOR plus 2% payable quarterly. Payments of principal are
expected to be made in 30 monthly installments. Of the cash portion of the
purchase price, $70,000,000 was funded from Pride's working capital and
$40,000,000 from the net proceeds from two new long-term financing arrangements
with three lending institutions. Borrowings under these arrangements, which are
collateralized by substantially all of Pride's domestic land-based rig fleet and
ancillary equipment, bear interest at a variable rate of prime plus 1/2% and are
repayable in monthly installments of principal and interest over a five to six
year period.
In January 1996, Pride completed the public sale of $80,500,000 principal
amount of 6 1/4% Convertible Subordinated Debentures due 2006, which resulted in
net proceeds to Pride of approximately $77,585,000. Approximately $10,000,000 of
such net proceeds were used to repay outstanding indebtedness. The remainder of
such net proceeds was used to fund various capital projects, including the
acquisition of Quitral-Co.
In October 1996, Pride entered into a letter agreement providing for the
acquisition of Forasol-Foramer. Pursuant to the agreement, Pride will issue .66
common shares and $6.80 cash for each share of Forasol-Foramer. A definitive
purchase agreement setting forth additional specific terms and conditions was
executed in December 1996. The transaction has been approved by both Pride's and
Forasol-Foramer's shareholders, and is expected to close on or about March 10,
1997. For purposes of preparing the pro forma combined financial information
included herein, it has been assumed that the cash portion of the purchase
price, approximately $113,200,000, will be funded out of working capital and the
proceeds of new bank facilities totalling $100,000,000, which it is assumed will
be repayable over a period of five years and bear interest at a rate of 8.50%
per annum. For each .25% change in the actual rate received, Pride/Forasol
Combined net income will change by $160,000 for the year ended December 31, 1995
and $120,000 for the nine months ended September 30, 1996, and pro forma
combined net income will change by $110,000 for the year ended December 31, 1995
and $85,000 for the nine months ended September 30, 1996.
In February 1997, Pride sold substantially all of the assets used in its
U.S. land-based well servicing operations for $135,650,000 in cash. After
federal and state income taxes, repayment of approximately $45,900,000 of debt
secured by the assets sold and prepayment of approximately $4,000,000 of lease
payments on transferred assets subject to operating leases, Pride expects the
remaining net proceeds to be approximately $40,750,000. For purposes of
preparing the pro forma combined financial information included herein, it has
been assumed that $30,000,000 of such net proceeds will be used to repay the new
bank debt assumed to be incurred in connection with the acquisition of
Forasol-Foramer.
2. BASIS OF PRESENTATION
The accompanying unaudited pro forma combined balance sheet has been
prepared assuming the acquisition of Quitral-Co and Forasol-Foramer by Pride,
the sale of Pride's U.S. land-based well servicing operations and the related
financing transactions were consummated as of September 30, 1996. The unaudited
pro forma combined statements of operations have been prepared assuming that
such transactions were consummated as of January 1, 1995.
Net earnings per share have been computed based on the weighted average
number of common shares and common share equivalents outstanding on a pro forma
basis during the applicable period. Common share equivalents include the number
of shares issuable upon the exercise of stock options and warrants, less the
number of shares that could have been repurchased with the exercise proceeds,
using the treasury stock method. Fully diluted net earnings per share have not
been presented on a pro forma combined basis as the calculation is
anti-dilutive.
8
<PAGE>
3. MANAGEMENT ASSUMPTIONS
The unaudited pro forma combined financial statements reflect the following
pro forma adjustments related to the acquisition of Quitral-Co by Pride, the
acquisition of Forasol-Foramer by Pride, the sale of Pride's U.S. land-based
well servicing operations and the related financing transactions:
QUITRAL-CO ACQUISITION
(A) Estimated Quitral-Co April 1996 operating results. Prior to the
acquisition by Pride in April 1996, the books and records of Quitral-Co were
maintained in constant Argentine pesos in accordance with Argentine GAAP, which
differs in certain respects from U.S. GAAP. Financial information in U.S.
dollars prepared in accordance with U.S. GAAP has been prepared through March
31, 1996. Such U.S. dollar, U.S. GAAP information is not available for the
period from March 31, 1996 through April 30, 1996, the date the acquisition by
Pride was consummated. Accordingly, Pride management has estimated such results
for purposes of preparing the accompanying pro forma financial information and
believes that actual results would not be materially different.
(B) Increase in depreciation and amortization expense resulting from the
preliminary allocation of the purchase cost to the assets acquired and
application of Pride's depreciation policies to such assets. Based on a
preliminary determination of the fair values of the assets and liabilities
acquired, approximately $161,420,000 was allocated to property and equipment.
The pro forma adjustment to depreciation expense was based upon an estimated
salvage value of 10% and an estimated average remaining useful life of 12.5
years for the Quitral-Co assets.
(C) Reduction in historical interest income as a result of utilization of
$70,000,000 in cash for the acquisition of Quitral-Co. Such cash amount
constituted a portion of the net proceeds from the issuance by Pride in January
1996 of $80,500,000 principal amount of 6 1/4% Convertible Subordinated
Debentures due 2006. Therefore, historical interest income on such cash amount
for the three months prior to the accquisition of Quitral-Co by Pride has been
reduced, based upon an approximate annual interest rate on investments during
the period of 5.0%.
(D) Increase in interest expense due to issuance and sale of $80,500,000
principal amount of 6 1/4% Convertible Subordinated Debentures due 2006, less
decrease in interest expense on $10,000,000 of debt, bearing interest at an
average rate of 8.5% per annum, retired with a portion of the net proceeds from
such debentures. The pro forma adjustment to interest expense relating to these
financing transactions is composed of the following:
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
(IN THOUSANDS)
Interest on convertible subordinated
debentures............................ $ 425 $ 5,000
Amortization of deferred financing
costs................................. 25 300
Interest on debt retired................ (70) (850)
------ --------
$ 380 $ 4,450
====== ========
(E) Increase in interest expense resulting from $40,000,000 of net
borrowings pursuant to two new collateralized term loans entered into in
connection with the acquisition of Quitral-Co by Pride and the addition of a
$30,000,000 note payable to the sellers. The pro forma adjustment to interest
expense relating to these financing transactions is composed of the following:
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
(IN THOUSANDS)
Collateralized term loans............... $1,170 $ 3,500
Note payable to sellers................. 750 2,250
-------- --------
$1,920 $ 5,750
======== ========
The pro forma adjustment to interest expense relating to these financing
transactions is based upon interest rates of 8.75% per annum for the
collateralized term loans and 7.50% per annum for the note payable to sellers,
which are the rates currently in effect for each of these loans. For each .25%
change in the actual interest rates incurred on the collateralized term loans
and the note payable to sellers, pro forma
9
<PAGE>
net earnings for the year ended December 31, 1995 will change by approximately
$64,000 and $52,000, respectively. For the nine months ended September 30, 1996,
the change in pro forma net earnings would be approximately $48,000 and $38,000,
respectively.
(F) Income tax effects of the pro forma adjustments included herein, based
on a combined U.S. federal and state income tax rate of 36% and an Argentine
income tax rate of 30% for 1995 and 33% for 1996. Such rates approximate the
statutory rates in effect for the respective periods.
(G) Increase in weighted average common shares and equivalents outstanding
for fully diluted earnings per share calculation purposes, due to issuance by
Pride of $80,500,000 principal amount of 6 1/4% Convertible Subordinated
Debentures due 2006, which are convertible at a price of $12.25 per share.
FORASOL-FORAMER ACQUISITION
(H) Receipt of aggregate proceeds of $100,000,000 from anticipated new
financing arrangements.
(I) Acquisition of Forasol-Foramer by Pride for aggregate consideration of
$283,500,000, consisting of $113,200,000 cash and 11,099,000 shares of common
stock valued at $170,300,000, based on the approximate market value of Pride's
common stock prior to the date of the letter agreement of $15.50 per share. In
addition, management estimates that Pride will incur legal, accounting and other
transaction-related costs, including Forasol-Foramer's closing costs and the
cost to wind up its affairs and liquidate, totalling approximately $10,000,000.
Based on a preliminary determination of the fair values of the assets and
liabilities acquired, approximately $160,052,000 of the total purchase cost was
allocated to property and equipment. Additional adjustments to reflect the
acquisition include elimination of the equity accounts of Forasol-Foramer and to
increase the deferred income tax liability by approximately $56,000,000 to
provide for temporary differences resulting from the allocation of the pro forma
purchase cost at the statutory French income tax rate of 33%.
(J) Increase in depreciation and amortization expense resulting from the
preliminary allocation of the purchase cost to the assets acquired and adoption
by Forasol-Foramer of Pride's depreciation policies, based upon an estimated
salvage value of 10% and an estimated average remaining useful life of 12.5
years for the Forasol-Foramer property and equipment.
(K) Reduction in historical interest income as a result of utilization of
a net $23,200,000 of cash for the acquisition of Forasol-Foramer, based upon an
approximate annual interest rate on investments during the period of 5.0%.
(L) Increase in interest expense resulting from $100,000,000 of borrowings
pursuant to new financing arrangements to be entered into in connection with the
acquisition of Forasol-Foramer by Pride.
(M) Reduction in interest expense resulting from use of a portion of the
net proceeds from Forasol-Foramer's public offering of common shares in May 1996
to repay indebtedness and liquidate capital lease obligations of
Forasol-Foramer. The principal amounts extinguished and the related interest
savings are as follows:
<TABLE>
<CAPTION>
INTEREST SAVINGS
--------------------------------------
NINE MONTHS ENDED
AMOUNT SEPTEMBER 30, YEAR ENDED INTEREST
EXTINGUISHED 1996 DECEMBER 31, 1995 RATE RANGE
------------ ----------------- ----------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Credit Facility......................... $ 20,840 $ 585 $ 1,563 7.5%
Current portion of long-term debt....... 8,650 240 637 7.1% - 7.7%
Current portion of long-term lease
obligations........................... 3,210 100 264 6.4% - 8.6%
Long-term debt.......................... 8,860 250 660 7.1% - 7.7%
Long-term lease obligations............. 8,040 250 657 6.4% - 8.6%
------------ -------- -----------------
Total......................... $ 49,600 $ 1,425 $ 3,781
============ ======== =================
</TABLE>
Forasol-Foramer operates in tax free jurisdictions (primarily Angola) and
approximately $3,500,000 of the $3,781,000 in pro forma annual savings result
from such tax jurisdictions.
(N) Income tax effects of the pro forma adjustments included herein, based
on a combined U.S. federal and state income tax rate of 36% and a French income
tax rate of 33%. Such rates approximate the statutory rates in effect for the
period.
10
<PAGE>
(O) Estimated increase in weighted average common shares and equivalents
outstanding due to issuance of 11,099,000 shares in connection with the
acquisition of Forasol-Foramer by Pride.
SALE OF U.S. LAND-BASED WELL SERVICING OPERATIONS
(P) Receipt of net proceeds from sale of U.S. land-based well servicing
operations, net of $44,600,000 of estimated federal and state income taxes,
repayment of approximately $45,900,000 of debt collateralized by the assets sold
and prepayment of approximately $4,000,000 of lease payments on transferred
assets subject to operating leases. Also, elimination of the assets to be sold
and the liabilities to be transferred and reflection of an estimated gain of
approximately $54,200,000 on the sale.
(Q) Repayment of $30,000,000 of debt incurred in connection with the
acquisition of Forasol-Foramer out of the net proceeds to be received from the
sale of Pride's U.S. land-based well servicing operations.
(R) Elimination of the results of operations related to the assets of
Pride's U.S. land-based well servicing business to be sold.
(S) Restoration of a portion of the historical interest income reduced by
adjustment (M), above, as a result of a net $10,750,000 cash to be generated
from the sale of Pride's U.S. land-based well servicing operations.
(T) Elimination of interest expense on $30,000,000 of debt incurred as
part of the acquisition of Forasol-Foramer to be repaid out of the net proceeds
to be received from the sale of Pride's U.S. land-based well servicing
operations.
(U) Adjustment of income tax expense as follows:
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
(IN THOUSANDS)
Elimination of actual income tax expense
incurred by U.S. land-based
operations............................. $ (1,008) $(2,873)
Income tax effects of pro forma
adjustments based on a combined U.S.
federal and state income tax rate of
36%, which rate approximates the
combined statutory rate in effect for
the period............................ 545 725
------------------ -----------------
$ (463) $(2,148)
================== =================
11
<PAGE>
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED HEREUNTO DULY AUTHORIZED.
PRIDE PETROLEUM SERVICES, INC.
By: /s/ EARL McNIEL
EARL MCNIEL
VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
Date: March 7, 1997
12
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ ------------------------------------------------------------------
2.1 Purchase Agreement, dated as of December 23, 1996, by and between
Pride Petroleum Services, Inc. and Dawson Production Services, Inc.
2.2 First Amendment to Purchase Agreement, dated as of February 20,
1997, by and between Pride Petroleum Services, Inc. and Dawson
Production Services, Inc.
13
PURCHASE AGREEMENT
BETWEEN
DAWSON PRODUCTION SERVICES, INC., PURCHASER
AND
PRIDE PETROLEUM SERVICES, INC., SELLER
THIS AGREEMENT CONTAINS IMPORTANT INDEMNITY PROVISIONS.
SEE PARTICULARLY ARTICLE VI.
==============================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I - PURCHASE AND SALE................................................1
1.1 Agreement to Sell................................................1
(a) Included Assets............................................2
(b) Excluded Assets............................................3
1.2 Agreement to Purchase............................................4
1.3 The Purchase Price...............................................4
(a) Purchase Price.............................................4
(b) Fair Market Value..........................................4
(c) Federal Income Tax Elections...............................4
1.4 Assumption of Liabilities........................................4
1.5 Prorations.......................................................5
1.6 Transfer Taxes; Recording Fees...................................5
1.7 Certain Environmental Matters....................................6
1.8 Adjustment for Certain Liabilities...............................6
ARTICLE II - CLOSING, ITEMS TO BE DELIVERED, THIRD PARTY CONSENTS
AND FURTHER ASSURANCES...........................................6
2.1 Closing..........................................................6
2.2 Items to be Delivered at Closing.................................7
2.3 Third Party Consents.............................................7
2.4 Further Assurances...............................................8
2.5 Conditions of Assets.............................................8
ARTICLE III - REPRESENTATIONS AND WARRANTIES.................................8
3.1 Representations and Warranties of Seller.........................8
(a) Corporate Existence........................................8
(b) Corporate Power; Authorization; Enforceable Obligations....9
(c) Validity of Contemplated Transactions, Etc.................9
(d) No Third Party Options....................................10
(e) Financial Statements......................................10
(f) Taxes; Tax and Other Returns and Reports..................10
(g) Books of Account..........................................11
(h) Existing Condition........................................11
(i) Title to Properties.......................................11
(j) Compliance with Laws; Authorizations......................12
(k) Transactions With Affiliates..............................12
(l) Litigation................................................12
(m) Contracts and Commitments.................................12
(n) Environmental Matters.....................................13
(o) Real Properties...........................................13
(p) Availability of Documents.................................15
(q) Assets....................................................15
(r) Restrictions..............................................15
<PAGE>
(s) Conditions Affecting the Business.........................15
(t) Employee Benefit Plans....................................15
(u) Personnel.................................................20
(v) Condition of Rigs.........................................21
3.2 Representations and Warranties of Purchaser.....................21
(a) Corporation...............................................21
(b) Corporate Power and Authorization.........................21
(c) Validity of Contemplated Transactions, Etc................21
(d) Financing.................................................22
3.3 Survival of Representations and Warranties and Covenants........22
3.4 Representations by Seller Refer to the Business.................22
ARTICLE IV - AGREEMENTS PENDING CLOSING.....................................22
4.1 Agreements of Seller Pending the Closing........................22
(a) Business in the Ordinary Course...........................22
(b) Conduct of Business.......................................22
(c) Litigation................................................23
(d) Access....................................................23
(e) Press Release.............................................23
(f) Actions of Directors and Shareholders.....................23
(g) Hart-Scott-Rodino.........................................24
(h) Employee Matters. .......................................24
(i) Actions of Seller.........................................24
4.2 Agreements of Purchaser Pending the Closing.....................24
(a) Confidentiality...........................................24
(b) Press Release.............................................24
(c) Hart-Scott-Rodino.........................................24
(d) Actions of Purchaser......................................25
ARTICLE V - CONDITIONS PRECEDENT TO THE CLOSING.............................25
5.1 Conditions Precedent to Purchaser's Obligations.................25
(a) Representations and Warranties True as of the Closing Date25
(b) Compliance with this Agreement............................25
(c) Closing Certificate.......................................25
(d) Opinion of Counsel for Seller.............................25
(e) Good Standing.............................................25
(f) No Threatened or Pending Litigation.......................25
(g) Consents and Approvals....................................26
(h) Material Adverse Changes..................................26
(i) Approval of Counsel; Corporate Matters....................26
(j) Hart-Scott-Rodino Approval................................26
(k) Financing.................................................26
(l) Securities Filings........................................26
5.2 Conditions Precedent to the Obligations of Seller...............26
(a) Representations and Warranties True as of the Closing Date27
(b) Compliance with this Agreement............................27
<PAGE>
(c) Closing Certificates......................................27
(d) No Threatened or Pending Litigation.......................27
(e) Consent of Shareholders...................................27
(f) Opinion of Counsel for Purchaser..........................27
(g) Hart-Scott-Rodino Approval................................27
ARTICLE VI - INDEMNIFICATION................................................27
6.1 Definitions.....................................................27
6.2 Indemnification by Seller.......................................28
6.3 Indemnification by Purchaser....................................29
6.4 Procedure.......................................................29
6.5 Failure to Pay Indemnification..................................30
6.6 Adjustment of Liability.........................................30
6.7 Express Negligence..............................................30
6.8 DISCLAIMER......................................................30
6.9 Arbitration.....................................................31
(a) Negotiation Period........................................31
(b) Commencement of Arbitration...............................31
(c) Consolidation of Hearings.................................31
(d) Discovery.................................................31
(e) Conclusion of Arbitration.................................32
(f) Expenses of Arbitrators...................................32
6.10 Other Rights and Remedies Not Affected..........................32
ARTICLE VII - POST CLOSING MATTERS..........................................32
7.1 Seller's Affected Employees. ..................................32
7.2 Discharge of Business Obligations...............................34
7.3 Maintenance of Books and Records................................34
7.4 Payments Received...............................................35
7.5 Use of Name.....................................................35
7.6 Inquiries.......................................................35
7.7 Covenant Not to Compete.........................................35
7.8 Subsequent Acquisitions by Seller...............................36
7.9 Transition Period...............................................36
(a) Collections...............................................36
(b) Accounting................................................36
(c) Licenses and Permits......................................36
(d) Access to Corporate Headquarters..........................36
7.10 Accounting Records..............................................36
7.11 Nondisclosure of Proprietary Information........................37
7.12 Contact with Former Employees...................................37
7.13 Assumed Obligations.............................................37
ARTICLE VIII - TERMINATION..................................................37
8.1 Events of Termination...........................................37
8.2 Liability Upon Termination......................................38
<PAGE>
8.3 Notice of Termination...........................................38
8.4 Break-Up Fee....................................................38
ARTICLE IX - MISCELLANEOUS..................................................39
9.1 Finders' Fees...................................................39
9.2 Expenses........................................................39
9.3 Assignment and Binding Effect...................................39
9.4 Notices.........................................................39
9.5 Governing Law...................................................40
9.6 No Benefit to Others............................................40
9.7 Entire Agreement................................................40
9.8 Headings........................................................40
9.9 Severability....................................................40
9.10 Counterparts....................................................41
9.11 Construction....................................................41
9.12 Waiver..........................................................41
9.13 Specific Performance............................................41
9.14 Good Faith......................................................41
9.15 Attorneys' Fees.................................................42
<PAGE>
DEFINITIONS:
The definition of "401(K) PLAN" can be found in Section 3.1(t)(i).
The definition of "AFFECTED EMPLOYEES" can be found in Section 3.1(t)(xxiv)(A).
The definition of "AGREEMENT" can be found on page 1.
The definition of "ASSETS" can be found in Section 1.1.
The definition of "ASSUMED LIABILITIES" can be found in Section 1.4(a).
The definition of "AUTHORIZATIONS" can be found in Section 3.1(j).
The definition of "BALANCE SHEET" can be found in Section 3.1(e)(ii).
The definition of "BALANCE SHEET DATE" can be found in Section 3.1(e)(ii).
The definition of "BREAK-UP FEE" can be found in Section 8.4.
The definition of "BUSINESS" can be found on page 1.
The definition of "CAUSE" can be found in Section 7.1(c).
The definition of "CLOSING" can be found in Section 2.1.
The definition of "CLOSING DATE" can be found in Section 2.1.
The definition of "CODE" can be found in Section 1.3(c).
The definition of "CONTAMINANT" can be found in Section 3.1(n).
The definition of "CONTRACTS" can be found in Section 3.1(c)(iv).
The definition of "DAMAGES" can be found in Section 6.2.
The definition of "DISPUTE NOTICE" can be found in Section 6.9(a).
The definition of "DOL" can be found in Section 3.1(t)(ii).
The definition of "EFFECTIVE DATE" can be found on page 1.
The definition of "EMPLOYEE" can be found in Section 3.1(t)(xxiv)(C).
The definition of "EMPLOYEE BENEFIT PLAN" can be found in Section 3.1(t(xxiv(B).
The definition of "EQUIPMENT" can be found in Section 1.1(a)(vi).
The definition of "EQUIPMENT LEASES" can be found in Section 1.1(a)(iv).
The definition of "ERISA" can be found in Section 3.1(t)(xxiv)(D).
The definition of "ERISA AFFILIATE" can be found in Section 3.1(t)(xxiv)(E).
The definition of "EXCLUDED ASSETS" can be found in Section 1.1(b).
The definition of "EXCLUDED PARCEL" can be found in Section 1.7.
The definition of "FEE PROPERTIES" can be found in Section 1.1(a)(i).
The definition of "FINAL ARBITRATOR" can be found in Section 6.9(b).
The definition of "FINANCIAL STATEMENTS" can be found in Section 3.1(e)(i).
The definition of "FUEL AND INVENTORY" can be found in Section 1.1(a)(x).
The definition of "GOVERNMENTAL ENTITY" can be found in Section 6.1(a).
The definition of "GP" can be found on page 1.
The definition of "HOLDINGS" can be found on page 1.
The definition of "HOLDINGS CONTRACTS" can be found in Section 1.1(a)(iii).
The definition of "HSR ACT" can be found in Section 4.1(g).
The definition of "INDEMNITEE" can be found in Section 6.1(b).
The definition of "INDEMNITOR" can be found in Section 6.1(c).
The definition of "IRS" can be found in Section 3.1(t)(ii).
The definition of "LEASED PROPERTIES" can be found in Section 1.1(a)(ii).
The definition of "LP" can be found on page 1.
The definition of "MULTIEMPLOYER PLAN" can be found in Section 3.1(t)(xxiv)(F).
<PAGE>
The definition of "NEGOTIATION PERIOD" can be found in Section 6.9(a).
The definition of "PARTNERSHIP" can be found on page 1.
The definition of "PBGC" can be found in Section 3.1(t)(ii).
The definition of "PENSION PLAN" can be found in Section 3.1(t)(xxiv)(G).
The definition of "PERMITS" can be found in Section 1.1(a)(ix).
The definition of "PERMITTED LIENS" can be found in Section 3.1(i).
The definition of "PERSON" can be found in Section 9.11.
The definition of "PERSONAL PROPERTY" can be found in Section 1.1(a)(viii).
The definition of "PREVAILING PARTY" can be found in Section 9.15.
The definition of "PROPERTY TAXES" can be found in Section 1.5.
The definition of "PROPRIETARY INFORMATION" can be found in Section 7.11(a).
The definition of "PROXY STATEMENT" can be found in Section 4.1(f).
The definition of "PURCHASE PRICE" can be found in Section 1.3(a).
The definition of "PURCHASER" can be found on page 1.
The definition of "PURCHASER LOSSES" can be found in Section 6.2.
The definition of "PURCHASER'S COMMON STOCK" can be found in Section 8.4.
The definition of "REAL PROPERTIES" can be found in Section 1.1(a)(ii).
The definition of "REAL ESTATE LEASES" can be found in Section 3.1(o)(i)(A).
The definition of "RECORDS" can be found in Section 1.1(a)(vii).
The definition of "REGULATIONS" can be found in Section 3.1(j).
The definition of "SELLER" can be found on page 1.
The definition of "SELLER LOSSES" can be found in Section 6.3.
The definition of "SELLER'S DOCUMENTS" can be found in Section 3.1(b).
The definition of "STOCK" can be found in Section 1.1.
The definition of "TAX RETURNS" can be found in Section 3.1(f).
The definition of "TAXES" can be found in Section 3.1(f).
The definition of "THIRD PARTY CLAIMS" can be found in Section 6.4(b).
The definition of "TRANSITION PERIOD" can be found in Section 7.9.
The definition of "VEBA" can be found in Section 3.1(t)(iv).
The definition of "VEHICLE LEASES" can be found in Section 1.1(a)(v).
The definition of "WARN" can be found in Section 7.1(a).
The definition of "WELFARE PLAN" can be found in Section 3.1(t)(xxiv)(H).
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "AGREEMENT"), dated as of the 23rd day of
December, 1996 (the "EFFECTIVE DATE"), is entered into by and between Pride
Petroleum Services, Inc., a Louisiana corporation ("SELLER"), and Dawson
Production Services, Inc., a Texas corporation ("PURCHASER").
RECITALS:
A. Seller is engaged in the domestic, onshore well servicing
business (the "BUSINESS") as well as several other related business activities;
B. Purchaser is engaged in the business of oil well servicing;
C. The respective Boards of Directors of Purchaser and Seller have
approved this Agreement and the transactions contemplated by this Agreement;
D. Purchaser and Seller have entered into that certain
Confidentiality Agreement dated November 13, 1996;
E. Seller proposes to restructure its ownership of the Business as
set forth on SCHEDULE 1, with the result that the Business will be held,
directly or indirectly, by a corporate subsidiary of Seller ("GP") and by a
limited partnership ("PARTNERSHIP" and, together with GP, "HOLDINGS"), with GP
as the general partner of the Partnership and a wholly owned corporate
subsidiary of Seller ("LP") as the limited partner of the Partnership; and
F. Subject to the limitations and exclusions contained in this Agreement
and on the terms and conditions hereinafter set forth, Seller desires to sell
and Purchaser desires to purchase all of the issued and outstanding equity
interests in Holdings, which will at the Closing (as defined herein) own,
directly or indirectly, the Business and substantially all of the assets now
owned by Seller or acquired by Seller prior to Closing and used primarily in the
Business.
NOW, THEREFORE, in consideration of the recitals and of the respective
covenants, representations, warranties and agreements contained in this
Agreement, and intending to be legally bound by this Agreement, the parties
agree as follows:
ARTICLE I - PURCHASE AND SALE
1.1 AGREEMENT TO SELL. At the Closing (as defined in Section 2.1), and
except as otherwise specifically provided in this Section 1.1, Seller and LP
shall grant, sell, convey, assign, transfer and deliver to Purchaser, upon and
subject to the terms and conditions of this Agreement, all right, title and
interest of Seller and LP in and to all of the issued and outstanding equity
<PAGE>
interests in Holdings (collectively, the "STOCK"), consisting of (1) all of the
issued and outstanding capital stock of GP, which shall be sold to Purchaser by
Seller, and (2) all of the limited partnership interest in the Partnership,
which shall be sold to Purchaser by LP. At the Closing, such limited partnership
interest shall constitute the entire limited partnership interest in the
Partnership, and the general partnership interest in the Partnership held by GP
shall constitute the entire general partnership interest in the Partnership. At
the Closing, Holdings, directly or indirectly, shall own: (a) the Business as a
going concern, and (b) all of the assets, properties and rights of Seller and
Holdings constituting the Business or used primarily therein, of every kind and
description, real, personal and mixed, tangible and intangible, wherever
situated (which Business, assets, properties and rights are herein sometimes
collectively referred to as the "ASSETS"), free and clear of all mortgages,
liens, pledges, security interests, charges, claims, restrictions and
encumbrances of any nature whatsoever except Permitted Liens (as defined in
Section 3.1(i)).
(a) INCLUDED ASSETS. The Assets shall include, without limitation,
the following assets, properties and rights of Seller and Holdings used in the
conduct of, or generated by or constituting the Business, except as otherwise
expressly excluded pursuant to Section 1.1(b):
(i) all interests of Seller and Holdings in all real properties
that are owned by Seller or Holdings and used primarily in connection with the
Business which are identified in SCHEDULE 1.1(A)(I) (the "FEE PROPERTIES");
(ii) all of Seller's and Holdings' interests as lessee in all real
property and offices leased or subleased to Seller or Holdings and used
primarily in connection with the Business, which are identified in SCHEDULE
1.1(A)(II) (the "LEASED PROPERTIES" and, together with the Fee Properties, the
"REAL PROPERTIES");
(iii) those Contracts (as hereinafter defined), including purchase
orders and noncompetition agreements, but exclusive of all leases of personal
property, to which Seller or Holdings is a party described in SCHEDULE
1.1(A)(III), together with all Contracts that are entered into by Seller or
Holdings as part of the Business in the ordinary course of business after the
Effective Date and are not prohibited by this Agreement (collectively, the
"HOLDINGS CONTRACTS");
(iv) all of Seller's and Holdings' rights in and to operating
leases of personal property used primarily in connection with the Business other
than vehicles, all of which are described in SCHEDULE 1.1(A)(IV), together with
all such leases that are entered into by Seller or Holdings as part of the
Business in the ordinary course of business after the Effective Date that are
not prohibited by this Agreement (the "EQUIPMENT LEASES"), subject to the
consents of lessors, if required;
(v) all of Seller's rights in and to the vehicles identified in
and subject to the vehicle leases listed on SCHEDULE 1.1(A)(V) (the "VEHICLE
LEASES");
2
<PAGE>
(vi) all office furniture, fixtures and equipment owned by Seller
and Holdings and all other equipment, parts, materials, supplies, furniture and
fixtures owned by Seller or Holdings, in either case used primarily in
connection with the Business including, without limitation, the equipment,
furniture, fixtures, computers, servers, local area network systems, intranet
systems, electronic mail and financial accounting equipment, software and
systems described on SCHEDULE 1.1(A)(VI) (collectively, the "EQUIPMENT");
(vii) except for materials relating to Excluded Assets, litigation,
Employee Benefit Plans, and other matters not constituting part of the Assets,
originals or (at Seller's election) copies of all books, records,
correspondence, files, plans and other documents and instruments of Seller or
Holdings used primarily in connection with the Business, including software,
financial and accounting systems and records, information technology systems and
management information systems, and customer files related to the Business or to
the Assets (collectively, the "RECORDS");
(viii) all other intangible and tangible personal property, all
technologies, methods, formulations, data bases, trade secrets, customer lists,
know-how, inventions and other intellectual property used primarily in
connection with the Business or under development for use primarily in
connection with the Business, and owned, leased or licensed by Seller or
Holdings (collectively, the "PERSONAL PROPERTY");
(ix) any and all permits, authorizations, certificates, approvals,
registrations, or other approvals and licenses granted by any federal, state,
local or foreign court, arbitrator or administrative or Governmental Entity (as
hereinafter defined) in connection with the Business to the extent transferrable
(collectively, the "PERMITS");
(x) all motor fuel and inventory on hand on the Closing Date used
in connection with the Business, including without limitation, all motor fuel,
oil, lubricants, drilling mud and other items of tangible personal property of
similar character (collectively, the "FUEL AND INVENTORY"); and
(xi) all of the corporate books and records of Holdings.
(b) EXCLUDED ASSETS. The Assets shall not include the following: (i)
Seller's corporate headquarters located at 1500 City West Blvd., Suite 400,
Houston, Texas or the furniture, fixtures, equipment, software and systems or
other tangible property located therein other than as specifically listed in the
Schedules to Section 1.1(a) above; (ii) certain rigs and related equipment
identified on SCHEDULE 1.1(B); (iii) corporate seals, certificates of
incorporation, minute books, stock books, or other records having to do with the
corporate organization of Seller, or any of its subsidiaries other than Holdings
and its subsidiaries; (iv) cash, the accounts receivable of Seller or Holdings,
Seller's or Holdings' prepaid items, and the deposits listed on SCHEDULE 1.1(B);
(v) Seller's name and service marks, or any rights therein; and (vi) the rights
which accrue or will accrue to Seller under this Agreement, the rights to any of
Seller's or Holdings' claims for any federal, state, local, or foreign tax
refunds arising prior to Closing, Seller's financial and accounting records not
relating to the Business or the other assets, properties
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or rights described in SCHEDULE 1.1(B) (which Schedule may be modified prior to
Closing to exclude any Real Properties which Purchaser does not wish to
acquire), all of which are referred to in this Agreement as the "EXCLUDED
ASSETS."
1.2 AGREEMENT TO PURCHASE. At the Closing, Purchaser shall purchase the
Stock from Seller and LP, upon and subject to the terms and conditions of this
Agreement and in reliance on the representations, warranties and covenants of
Seller contained herein, in exchange for the Purchase Price (as defined in
Section 1.3). In addition, Purchaser shall assume at the Closing and agree to
pay, discharge or perform, as appropriate, certain liabilities and obligations
of Seller or Holdings, but only to the extent expressly provided in Section 1.4.
Except as expressly provided in Section 1.4, Purchaser shall not assume or be
responsible for any liabilities or obligations based on events occurring prior
to Closing relative to the Assets, the Business, Seller or Holdings.
1.3 THE PURCHASE PRICE.
(a) PURCHASE PRICE. In consideration of the transfer to Purchaser of
the Stock, Purchaser shall pay to Seller and LP the aggregate amount of
$135,650,000 (the "PURCHASE PRICE"), which shall be paid by wire transfer at the
Closing; provided, however, the Purchase Price shall be adjusted (by an
adjustment in the amount wire transferred to Seller) by the amount, if any,
determined in accordance with Sections 1.5, 1.6, 1.7, and 7.2 of this Agreement.
One percent of the Purchase Price shall be paid to Seller and the balance to LP.
(b) FAIR MARKET VALUE. The fair market value for federal income tax
purposes of the Assets shall be agreed to by the parties hereto prior to the
Closing Date. Seller and Purchaser each hereby covenant and agree that such
amounts reflect or will reflect the fair market value of the Assets and that
neither of them, directly or indirectly, through a subsidiary or affiliate or
otherwise, will take a position on any income tax return, before any
Governmental Entity charged with the collection of any income tax, or in any
judicial proceeding that is in any way inconsistent with the tax basis and fair
market value of the Assets set forth on SCHEDULE 1.3(B). Such allocations will
be reflected in the schedules required by Treasury Regulation ss.1.755-2T(c) to
be attached to the returns of Purchaser and GP to reflect their acquisition of
interests in the Partnership.
(c) FEDERAL INCOME TAX ELECTIONS. Purchaser and Seller will join in
making an election under Section 338(h)(10) of the Internal Revenue Code of
1986, as amended (the "CODE") with respect to the purchase and sale of the stock
of GP. Seller will pay all federal income taxes which result from such election
under Section 338(h)(10)(A)(ii) of the Code and Treasury Regulation
ss.1.338(h)(10)-1(e)(1). The Partnership will make an election under Section 754
of the Code.
1.4 ASSUMPTION OF LIABILITIES.
(a) Except as otherwise specifically provided in this Section 1.4,
(i) in connection with the transfer of the Assets from Seller to Holdings,
Holdings shall assume and agree to pay, discharge or perform, as appropriate,
the liabilities and obligations of Seller (1) that
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accrue or arise after the Closing under the leases of the Leased Properties, the
Holdings Contracts, and the Equipment Leases and (2) those that are set forth on
SCHEDULE 1.4(A) (the "ASSUMED LIABILITIES"); and (ii) at the Closing, Purchaser
shall agree to cause Holdings to pay, discharge or perform, as appropriate, the
Assumed Liabilities.
(b) Notwithstanding Section 1.4(a), it is expressly understood that,
other than obligations and liabilities expressly assumed in Section 1.4(a),
Purchaser shall not be liable for, and shall not assume, any of Seller's or
Holdings' obligations or liabilities, whether known or unknown, matured or
unmatured, fixed or contingent, including but not limited to liabilities
relating to events occurring prior to the Closing, any Taxes (as hereinafter
defined, other than those prorated as of the Closing Date), or any liabilities
under any Employee Benefit Plans (as hereinafter defined) of Seller or Holdings,
it being expressly agreed that upon Closing, Seller shall remain liable for all
obligations of Holdings incurred prior to Closing, other than Assumed
Liabilities. Seller shall remain obligated to pay and discharge any of its
liabilities and obligations not expressly assumed hereby. Seller hereby agrees
that it will indemnify Purchaser as set forth in Section 6.2 for any liabilities
of Seller not expressly assumed by Purchaser pursuant to Section 1.4(a).
1.5 PRORATIONS. All annual or periodic ad valorem fees, taxes and
assessments, licensing fees and vehicle use fees, and similar charges imposed by
taxing authorities on the Assets (collectively, "PROPERTY TAXES") shall be borne
and paid (a) by Seller for all full tax years or periods ending before the
Closing Date (as defined in Section 2.1) and for that portion of any tax year or
period ending on or after the Closing Date from the date of commencement of such
year or period to the date immediately preceding the Closing Date and (b) by
Purchaser for all full tax years or periods beginning on or after the Closing
Date and for that portion of any tax year or period ending on or after the
Closing Date from and including the Closing Date to the final date of such year
or period, regardless of when or by which party such Property Taxes are actually
paid to the applicable taxing authority. In addition, all rents and other lease
charges, power and utility charges, license or other fees, revenues on Holdings
Contracts, and similar items shall be allocated between Purchaser and Seller
effective as of 12:01 a.m. on the Closing Date. Such allocations shall be
determined and payment accordingly made from one party to the other, as the case
may be, on the Closing Date to the extent they are known and agreed to by
Purchaser and Seller; otherwise such allocations shall be determined and payment
made (effective as of 12:01 a.m. on the Closing Date) as soon as practicable.
All work for customers of Seller shall be performed for the account of
Purchaser, and invoiced under the name of Purchaser, effective as of 12:01 a.m.
on the Closing Date, unless the Closing does not occur.
1.6 TRANSFER TAXES; RECORDING FEES.
(a) Purchaser and Seller agree that Seller's sale and Purchaser's
purchase of the Stock is not subject to sales and use taxes in all
jurisdictions, and that all parties hereto shall treat the sale of Stock
provided for herein accordingly; provided, however, that if, contrary to the
foregoing, it shall be finally determined after the Closing that the sale by
Seller and the purchase by Purchaser of the Stock or any other transaction
consummated pursuant to the Closing, is
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subject to any sales, use or similar tax, then all such taxes shall be borne
equally by Purchaser and Seller.
(b) Purchaser shall pay any and all recording, filing or other fees
relating to the conveyance or transfer of (i) the Stock from Seller and LP to
Purchaser, or (ii) the Assets from Seller to Holdings.
1.7 CERTAIN ENVIRONMENTAL MATTERS. If prior to the Closing Date, Purchaser
determines pursuant to its investigation conducted in accordance with Section
4.1(d) that, as a result of an environmental condition existing at any one or
more separate parcels of the Real Properties, Purchaser elects to cause Holdings
not to acquire any such parcel(s), Purchaser may give written notice of such
election and of the reasons therefor, in which case such parcel(s) shall not be
acquired by Holdings and shall be excluded from the Assets. Each parcel excluded
pursuant to this Section 1.7 is referred to herein as an "EXCLUDED PARCEL." If
any parcel of Real Property is so excluded, the Purchase Price shall be reduced
by the value relating to such Excluded Parcel that is to be determined by the
parties, in good faith, at or prior to Closing. In addition to identifying a
parcel of Real Property as an Excluded Parcel, Purchaser at Closing also, in its
sole discretion, shall be permitted to lease such property from Seller with an
option to purchase. Any such lease shall be for a term of one year with an
option for Purchaser to purchase the Real Property at a value to be determined
by the parties, in good faith, at or prior to Closing. Rentals under any such
lease shall be $100 per month for each such parcel, plus taxes; any such lease
shall not impose any obligations on Purchaser to indemnify Seller with respect
to pre-existing environmental matters.
1.8 ADJUSTMENT FOR CERTAIN LIABILITIES. The Purchase Price set forth in
Section 1.3(a) was determined on the basis that Seller prior to the Closing
would fully pay (i) the Vehicle Leases and (ii) indebtedness evidenced by a note
dated on or about March 22, 1995, payable by Seller to Billy B. Cooper and
Raymond H. Eaves in the approximate outstanding amount of $3.9 million, secured
by certain of the Assets, and that Purchaser and Holdings would not be subject
to any liability or obligation with respect to such indebtedness from and after
the Closing.
ARTICLE II - CLOSING, ITEMS TO BE DELIVERED,
THIRD PARTY CONSENTS AND FURTHER ASSURANCES
2.1 CLOSING. Subject to the terms and conditions of this Agreement, the
closing (the "CLOSING") of the sale and purchase of the Stock shall take place
at 10:00 a.m., local time, on such date as is mutually agreed to by Purchaser
and Seller but in no event later than two business days after the date on which
the conditions specified in Sections 5.1(j), 5.1(k), 5.2(e) and 5.2(g) have been
satisfied, at the offices of Jenkens & Gilchrist, A Professional Corporation,
1100 Louisiana, Suite 1800, Houston, Texas 77002, and shall be effective as of
12:01 a.m. local time on such date. The effective date of the Closing is
sometimes herein referred to as the "CLOSING DATE."
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2.2 ITEMS TO BE DELIVERED AT CLOSING. In connection with the Closing and
subject to the terms and conditions contained in this Agreement:
(a) Seller shall deliver to Purchaser the following:
(i) at the Closing, stock certificates representing all of the
Stock of Holdings, together with properly executed stock transfer powers in a
form consistent with the provisions of this Agreement and reasonably
satisfactory to the parties hereto; copies of fully executed instruments of
conveyance evidencing that all of the Assets have been transferred and conveyed
to Holdings, including but not limited to bills of sale with covenants of
warranty of title in a form consistent with the provisions of this Agreement and
reasonably satisfactory to the parties hereto; assignments in a form consistent
with the provisions of this Agreement and reasonably satisfactory to the parties
hereto; warranty deeds (or special warranty deeds if Seller acquired such
property pursuant to a special warranty deed) in a form consistent with the
provisions of this Agreement and reasonably satisfactory to the parties hereto;
and other good and sufficient instruments and documents of conveyance and
transfer, in forms reasonably satisfactory to Purchaser and its counsel, as
shall be necessary and effective to evidence the transfer and assignment to
Holdings of all of Seller's right, title and interest in and to the Assets; and
(ii) at the Closing or concurrently therewith at a mutually agreed
upon location, all of the certificates, certificates of title, Contracts,
customer lists, supplier lists, Equipment Leases, Real Estate Leases, all
correspondence, files, plans and other documents and instruments, books,
Records, and data belonging to Seller or Holdings which are part of the Assets;
and simultaneously with such delivery, Seller shall take all steps as may be
reasonably required to put Purchaser in control of Holdings and to put Holdings
in actual possession and operating control of the Assets.
(b) Purchaser shall deliver to Seller, and in the case of(i) to
LP, the following:
(i) the wire transfer of the Purchase Price (adjusted in
accordance with Sections 1.5, 1.6, 1.7, and 7.2); and
(ii) a fully executed assignment of Contracts, assignment of
leases of Leased Properties, and assignment of Equipment Leases in a form
consistent with the provisions of this Agreement and reasonably satisfactory to
the parties hereto.
(c) At or prior to the Closing, the parties hereto also shall
deliver to each other the agreements, opinions, certificates and other documents
and instruments referred to in Article V.
2.3 THIRD PARTY CONSENTS. To the extent that Seller's or Holdings' rights
under any Contracts, Authorizations (as defined in Section 3.1(j)), Permits,
Equipment Leases, Real Estate Leases, or other Assets may not be transferred in
accordance with the terms of this Agreement
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without the consent of another person, which consent has not been obtained prior
to the Closing, this Agreement shall not constitute an agreement to assign or
transfer the same if an attempted assignment or transfer would constitute a
breach thereof or be unlawful, and Purchaser and Seller, each at its own
expense, shall use commercially reasonable efforts to obtain any such required
consent(s) as promptly as possible. If any such consent shall not be obtained or
if any attempted assignment or transfer would be ineffective or would impair
Holdings' rights under the Asset in question so that Holdings would not in
effect acquire the benefit of all such rights, Seller, to the maximum extent
permitted by law and by the terms of any documents affecting the Asset, shall
act for one year after the Closing as Holdings' agent in order to obtain for
Holdings the benefits thereunder and shall cooperate, to the maximum extent
permitted by law and by the terms of any document affecting the Asset, with
Purchaser in any other reasonable arrangement designed to provide such benefits
to Holdings. Seller agrees to pay any termination or assignment fees provided in
such agreements.
2.4 FURTHER ASSURANCES. Seller from time to time after the Closing, at
Purchaser's request, will execute, acknowledge and deliver to Purchaser such
other instruments of conveyance and transfer and will take such other actions
and execute and deliver such other documents, certifications and further
assurances as Purchaser reasonably may request in order to vest more effectively
in Holdings, or to put Holdings more fully in possession of, any of the Assets,
or to better enable Holdings to complete, perform or discharge any of the
liabilities or obligations assumed by Holdings at the Closing pursuant to
Section 1.4. Each of the parties will cooperate with the other and execute and
deliver to the other parties hereto such other instruments and documents and
take such other actions as reasonably may be requested from time to time by the
other party hereto as necessary to carry out, evidence and confirm the intended
purposes of this Agreement. If Seller dissolves or is merged out of existence
within one year following the Closing Date, effective as of the dissolution of
Seller, Seller hereby irrevocably appoints Purchaser or Purchaser's substitute
as its attorney-in-fact coupled with an interest and with full power of
substitution to carry out the provisions of this Section 2.4.
2.5 CONDITIONS OF ASSETS. The Assets acquired by Purchaser as a result of
Purchaser's acquisition of the Stock, shall be acquired on an "AS IS, WHERE IS"
basis. Title, possession and risk of loss with respect to the Assets shall be
deemed to pass on the Closing Date.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents and
warrants to Purchaser that the following statements are true and correct, except
as set forth on the Schedules. Unless the context clearly indicates otherwise,
references in this Agreement to Seller shall include Seller, Holdings and LP
prior to Closing.
(a) CORPORATE EXISTENCE. Seller is and, prior to Closing, GP will be
a corporation duly organized, validly existing and in good standing under the
laws of Louisiana and Delaware, respectively, and the Partnership will be a
limited partnership duly organized and validly existing; Seller is and, prior to
Closing, Holdings will be duly qualified to do business and
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in good standing as a foreign corporation, and the Partnership will be duly
qualified to do business in Texas and in each other jurisdiction where the
conduct of the Business by it requires it or them to be so qualified, all of
which jurisdictions are listed on SCHEDULE 3.1(A).
(b) CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Seller
has the corporate power and authority to execute, deliver and perform this
Agreement. The execution, delivery and performance of this Agreement by Seller
have been duly authorized by all necessary corporate action as of the Closing
Date. This Agreement has been, and the other agreements, documents and
instruments required to be delivered by Seller in accordance with the provisions
hereof (collectively, the "SELLER'S DOCUMENTS") will be, duly executed and
delivered on behalf of Seller by duly authorized officers or directors of
Seller, and this Agreement constitutes, and the Seller's Documents when executed
and delivered will constitute, the legal, valid and binding obligation of Seller
enforceable against Seller in accordance with their respective terms except as
the same may be limited by applicable bankruptcy, insolvency, reorganization, or
other laws affecting the enforcement of creditors' rights generally and the
application of general principles of equity. Seller's Board of Directors has
approved this Agreement and the transactions contemplated hereby.
(c) VALIDITY OF CONTEMPLATED TRANSACTIONS, ETC. The execution,
delivery and performance of this Agreement by Seller does not and will not
violate, conflict with or result in the breach of any material term, condition
or provision of, or require the consent of any other person under:
(i) any Regulation (as hereinafter defined) to which Seller is
subject other than filings required under the HSR Act and the Securities
Exchange Act of 1934, as amended,
(ii) any judgment, order, writ, injunction, decree or award of any
court, arbitrator or Governmental Entity which is applicable to Seller,
(iii) the charter documents of Seller or any securities issued by
Seller, or
(iv) any material mortgage, indenture, undertaking, note, bond,
debenture, letter of credit, commitment, agreement, contract, lease,
Authorization, Holdings' Contract (including but not limited to the Equipment
Leases) or other instrument, or understanding, whether or not assigned hereby
(collectively, the "CONTRACTS"), by which Seller may have rights or by which any
of the Assets may be bound or affected.
No fact or condition exists which would give any party to a Contract the right
to terminate, modify, accelerate or otherwise change the existing rights or
obligations of Seller or Holdings in or to any material Asset. Except as
aforesaid, no Authorization, approval or consent of, and no registration or
filing with, any Governmental Entity is required in connection with the
execution, delivery or performance of this Agreement by Seller.
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(d) NO THIRD PARTY OPTIONS. No person has any existing agreements,
options, commitments or rights to acquire any of the Assets or any interest
therein.
(e) FINANCIAL STATEMENTS.
(i) Seller has delivered to Purchaser copies of balance sheets
relating to the Business at December 31, 1994 and December 31, 1995 and related
statements of income, cash flows, and owner's equity for the fiscal years then
ended and for the fiscal year ended December 31, 1993, audited and reported upon
by Coopers & Lybrand. Seller also has delivered to Purchaser certain unaudited
financial information of the Business as of and for the nine months ended
September 30, 1995, and September 30, 1996. Upon the Effective Date or promptly
thereafter as soon as they are available, Seller will deliver to Purchaser the
unaudited monthly statements of income for the month ended October 31, 1996 and
for each month thereafter until the Closing relating to the Business. Such
unaudited financial statements will contain all adjustments, which shall be
solely of a normal recurring nature, necessary to present fairly, in all
material respects, the results of operations for the period then ended. The
monthly unaudited financial statements described above shall also set forth for
each such period the amount of maintenance capital expenditures, and maintenance
and repairs, recorded for such period with respect to the Business. All of the
above mentioned financial statements shall be referred to herein as the
"FINANCIAL STATEMENTS."
(ii) The balance sheet as of September 30, 1996 (the "BALANCE
SHEET") includes the Assets which, if the Closing had been held on September 30,
1996 (the "BALANCE SHEET DATE"), would have been held directly or indirectly by
Holdings in accordance herewith.
(iii) The Financial Statements fairly present, in all material
respects, as of their respective dates, the financial position, assets and
liabilities (whether accrued, absolute, contingent or otherwise) of the
Business. The monthly, unaudited financial information referred to above fairly
presents, and shall fairly present, in all material respects, the operating
income of the Business for such periods. The property, plant and equipment shown
as belonging to the Business in the Balance Sheet fairly reflects and at the
Closing will fairly reflect in all material respects the Assets being acquired
hereunder and necessary to conduct the Business, subject to acquisitions and
dispositions thereof subsequent to the Balance Sheet Date not prohibited by this
Agreement.
(f) TAXES; TAX AND OTHER RETURNS AND REPORTS. All federal, state,
local and foreign tax returns, reports, statements and other similar filings
required to be filed by Seller or to be filed by Holdings or LP and affecting
the Assets or the Business (the "TAX RETURNS") with respect to any federal,
state, local or foreign taxes, assessments, interest, penalties, deficiencies,
fees, duties and other governmental charges or impositions (including without
limitation all income tax, unemployment compensation, social security, payroll,
sales and use, excise, gross receipts, value-added, privilege, property, ad
valorem, franchise, license, school transfer, mortgage recording, customs,
withholding, estimated and other tax or similar governmental charge or
imposition under laws of the United States or any state, county, or municipal
entity, agency or instrumentality or political subdivision thereof or any
foreign country or political
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subdivision thereof) insofar as same may affect the Assets or the Business (the
"TAXES") have been timely filed with the appropriate governmental agencies in
all jurisdictions in which such Tax Returns are required to be filed, and all
such Tax Returns properly reflect the liabilities of Seller or Holdings for
Taxes for the periods, property and events covered thereby. All Taxes,
including, without limitation, those which are called for by the Tax Returns,
have been properly accrued or timely paid. Purchaser will have no liability to
any person or taxing authority for Taxes relating to actions or events occurring
prior to the Closing Date, except as otherwise provided by Section 1.5. Seller's
warranties and representations under this Section 3.1(f) shall be construed
consistently with Section 1.5.
(g) BOOKS OF ACCOUNT. The books, records and accounts of Seller and
Holdings maintained with respect to the Business and the Assets fairly reflect,
in all material respects and in reasonable detail, the transactions and the
assets and liabilities of Seller and Holdings with respect to the Business.
(h) EXISTING CONDITION. Since the Balance Sheet Date, neither Seller
nor Holdings has entered into any transaction affecting the Business or the
Assets except in the ordinary course of business, consistent with past practice;
encumbered or transferred any material assets which would have been included in
the Assets if the Closing had been held on the Balance Sheet Date or on any date
since then except in the ordinary course of business, consistent with past
practice; subjected any of its Assets to any lien or other encumbrance of any
nature whatsoever, except in the ordinary course of business, consistent with
past practice, and except for Permitted Liens (defined in Section 3.1(i)); made
any amendment or termination of any material agreement affecting the Business or
the Assets, or canceled, modified or waived any rights of substantial value
affecting the Business or the Assets, whether or not in the ordinary course of
business; changed any of the accounting principles followed by it or the methods
of applying such principles; increased the compensation of any Affected Employee
(as hereinafter defined) other than in the ordinary course of business; or
suffered any loss, whether or not covered by insurance, materially and adversely
affecting the Business or Assets.
(i) TITLE TO PROPERTIES. Notwithstanding anything herein to the
contrary, Seller has at the Effective Date and Holdings will have on the Closing
Date, good, valid and marketable title (or in the case of real property,
indefeasible title) to all of its assets, real, personal and mixed, which would
be included in the Assets if the Closing took place on the date hereof, which it
purports to own, including without limitation all assets reflected in the
Balance Sheet, free and clear of all liens (including but not limited to Tax
liens), claims, restrictions and other encumbrances and defects of title of any
nature whatsoever, except for (i) liens for current real or personal Property
Taxes not yet due and payable; (ii) Real Properties as to which Seller or
Holdings is the lessee; (iii) liens and other exceptions to title as disclosed
in SCHEDULE 3.1(I); (iv) inchoate mechanics' and materialmen's liens for
construction in progress; (v) inchoate workmen's, repairmen's, warehousemen's,
customers', employees' and carriers' liens arising in the ordinary course of
business; (vi) liens and imperfections of title (including liens created by
operation of law) that, singularly or in the aggregate, would not materially
affect the value or operations of the Assets subject to such lien in the hands
of a purchaser thereof; and (vii) liens securing obligations included in the
Assumed Liabilities (collectively, "PERMITTED LIENS").
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(j) COMPLIANCE WITH LAWS; AUTHORIZATIONS. Seller and Holdings have
complied in all material respects with each, and are not in material violation
of any, law, ordinance or governmental or regulatory rule or regulation, whether
federal, state, local or foreign, to which the Business or Assets is subject
("REGULATIONS"). Seller on the Effective Date and Holdings on the Closing Date
owns, holds, possesses or lawfully uses or will own, hold, possess or lawfully
use in the operation of the Business, all permits, franchises, licenses,
easements, rights, applications, filings, registrations and other authorizations
("AUTHORIZATIONS") which are in any material respect necessary for it to conduct
its Business as now conducted or for the ownership and use of the Assets in the
conduct of the Business. Seller is and at the Closing Date, Holdings will be in
compliance in all material respects with all Regulations related to the
Authorizations. Seller is not in material default, and on the Closing Date
Holdings will not be in material default, nor has Seller received any notice of
any claim of material default, with respect to any such Authorization. Seller
has not received any notice that any of the material Authorizations used by
Seller or to be used by Holdings in the operation of the Business would not or
cannot be renewed or continued in the ordinary course of business, and to
Seller's knowledge, all such material Authorizations are renewable by their
terms or in the ordinary course of business. No person other than Seller owns or
has any proprietary, financial or other interest (direct or indirect) in any
Authorization.
(k) TRANSACTIONS WITH AFFILIATES. Any material transactions between
Seller and its affiliates affecting the Business or the Assets and occurring
since January 1, 1995 have been upon terms substantially comparable to those
that would have been available to Seller from third parties in arms length
transactions.
(l) LITIGATION. As of the date hereof, except as set forth on
SCHEDULE 3.1(L), and except for insured claims subject to customary deductibles,
no litigation or administrative proceeding, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
Governmental Entity is pending or, to the best knowledge of Seller, threatened
against Seller, which relates to the Business or Assets or the transactions
contemplated by this Agreement, nor does Seller know of any reasonably likely
basis for any such litigation, arbitration, investigation or proceeding. As of
the date hereof, Seller is not a party to or subject to the provisions of any
judgment, order, writ, injunction, decree or award of any court, arbitrator or
Governmental Entity which may materially adversely affect the Assets or
Business, or the transactions contemplated hereby.
(m) CONTRACTS AND COMMITMENTS. Except as set forth on SCHEDULE
3.1(M), Seller is not a party to, and at Closing, Holdings will not be a party
to any written or oral:
(i) lease under which Seller or Holdings is either lessor or
lessee relating to the Assets or any property at which the Assets are located
other than those set forth on the Schedules to this Agreement;
(ii) Contract or agreement for any capital expenditure or
leasehold improvement in excess of $100,000 relating to the Assets or the
Business; or
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(iii) Contract or agreement limiting or restraining Seller or
Holdings, or their respective successors or assigns, from engaging or competing
in any manner in the Business.
Each of the Contracts and agreements listed in SCHEDULE 3.1(M), and each other
Holdings Contract, including but not limited to Equipment Leases under which
Purchaser is to acquire rights or obligations hereunder, is valid and
enforceable in accordance with its terms; Seller is, and to Seller's knowledge
all other parties thereto are, in material compliance with the provisions
thereof; Seller is not, and to Seller's knowledge no other party thereto is, in
default in the performance, observance or fulfillment of any material
obligation, covenant or condition contained therein; and to Seller's knowledge
no event has occurred which with or without the giving of notice or lapse of
time, or both, would constitute a default thereunder. Furthermore, Seller is not
aware of any reason that Seller or any other party will be unable to comply with
any of the requirements contained in any such Contract or agreement.
(n) ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 3.1(N),
Seller with respect to the Assets (a) is, and has continuously been, in
compliance in all material respects with all laws, regulations and ordinances
relating to environmental, health and safety matters (including those relating
to toxic and hazardous waste and the discharge of matter into the air or water)
and (b) have not had any Contaminant (as hereinafter defined) placed, held,
located, released, generated, treated, stored or disposed of thereon except for
Contaminants properly and legally stored or disposed of in compliance with
applicable environmental laws or as would not have a material adverse effect.
Except as set forth in SCHEDULE 3.1(N), Seller has not received any notice or
claim, and Seller is not aware of any facts suggesting, that it has been or may
be liable to any person as a result of any Contaminant having been generated,
treated, stored, discharged, emitted, released or transported by it with respect
to the Business or the Assets that would have a material adverse effect on the
Assets or the Business. Except as set forth in SCHEDULE 3.1(N), no conditions or
circumstances are known to Seller to exist or to have existed, and no activities
are known to Seller to be occurring or to have occurred, that are resulting or
have resulted in the exposure of any person or property to a Contaminant such
that Seller, or after Closing, Holdings or Purchaser may in the future be liable
to such persons or to the owners of such property for personal or other injuries
or damages resulting from such exposure. For purposes of this Agreement, a
"CONTAMINANT" is any waste, pollutant, hazardous substance, toxic substance,
hazardous waste, special waste, petroleum-based substance or waste, product or
by-product or any constituent of any said substance, waste or product, whether
solid, liquid or gaseous in form.
(o) REAL PROPERTIES.
(i) REAL ESTATE LEASES.
A. Seller has delivered to Purchaser a true and complete
copy of every real estate lease and sublease that is in writing to which Seller
is a tenant or subtenant as to each of the Leased Properties described on
SCHEDULE 1.1(A)(II) (the "REAL ESTATE LEASES").
B. Each Real Estate Lease is, and at Closing shall be,
in full force and effect and has not been assigned, modified, supplemented or
amended except as listed
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in SCHEDULE 1.1(A)(II) or SCHEDULE 3.1(O), and no party to any Real Estate Lease
is in material default under any of the Real Estate Leases, and, other than
provisions in the Real Estate Leases permitting termination without cause, no
circumstances or state of facts presently exists which, with the giving of
notice or passage of time, or both, would permit the landlord, lessee or
sublessee under any Real Estate Lease to terminate any Real Estate Lease.
C. Prior to Closing, Seller shall assign to Holdings all
right, title and interest of Seller in and to all Real Estate Leases and shall
deliver to Purchaser originals or copies of all consents required for such
assignments. All security deposits made by Seller or Holdings pursuant to any of
the Real Estate Leases, including but not limited to the security deposits
pertaining to the Real Estate Leases listed in SCHEDULE 3.1(O), together with
all interest earned on such deposits shall be retained by Holdings at and
following the Closing.
(ii) ZONING. To the best of Seller's knowledge, the Real
Properties, as used at the date of execution of this Agreement, until and
including the Closing Date, are in material compliance with all applicable
zoning and other land use requirements.
(iii) ACCESS. Seller has obtained all material Authorizations and
rights-of-way, including proof-of-dedication, which are necessary to ensure
vehicular and pedestrian ingress and egress to and from the Real Properties. To
the best of Seller's knowledge, there are no material restrictions on entrances
to or exits from the Real Properties to adjacent public streets and no
conditions exist which will result in the termination of the present access from
the Real Properties to existing highways and roads.
(iv) ASSESSMENTS. Neither Seller nor Holdings has received any
written notice from any Governmental Entity that the assessed value of any of
the Real Properties has been determined to be materially greater than that upon
which county, township or school tax was paid for the 1995 tax year. If, at the
time of Closing, the Real Properties or any portion thereof are affected by any
assessment which is or may become payable in annual installments, of which one
or more is then payable or has been paid, then for the purpose of this
Agreement, all the unpaid installments of any such assessment including without
limitation those which are to become due and payable after Closing, shall be
prorated in accordance with Section 1.5.
(v) EMINENT DOMAIN. Neither Seller nor Holdings has received any
written notice and neither of them has any reason to believe that any
Governmental Entity having the power of eminent domain over the Real Properties
has commenced or intends to exercise the power of eminent domain or a similar
power with respect to any part of the Real Properties that in the aggregate is
material to the Business.
(vi) NO VIOLATIONS. The Real Properties and the present uses
thereof comply in all material respects with all regulations of the Governmental
Entities having jurisdiction over the Real Properties, and neither Seller nor
Holdings has received any written notices from any Governmental Entity, and
neither of them has any reasonable basis upon which to believe that the Real
Properties or any improvements erected or situated thereon, or the uses
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conducted thereon, violate any regulations of any such Governmental Entity that
would have a material adverse effect on Purchaser.
(vii) EXECUTORY CONTRACTS. Other than the Real Estate Leases,
Seller is not a party to or bound by, and at the Closing Date, Holdings will not
be a party to or bound by, any material executory contracts for the operation,
management or maintenance of the Real Properties.
(p) AVAILABILITY OF DOCUMENTS. Seller has made available to
Purchaser copies of all of the Contracts, Permits, and licenses listed in the
Schedules. Seller will use its best efforts to obtain any such documents not in
its possession and promptly deliver same to Purchaser. Such copies are true and
complete and include all amendments, supplements and modifications thereto or
waivers currently in effect thereunder.
(q) ASSETS. Except as set forth in SCHEDULE 3.1(Q), and except for
working capital of Holdings and the other assets of Holdings expressly excluded
from the Assets pursuant to Section 1.1(b), the Assets on the Closing Date will
include all rights and properties reasonably necessary for Purchaser or Holdings
to continue to conduct the Business in the manner in which it is conducted by
Seller on the Effective Date, and no property excluded or omitted from the
Assets constitutes property or rights material to the Business.
(r) RESTRICTIONS. Neither Seller nor Holdings is a party to any
material agreement, license, Permit, Authorization or other instrument or, to
the best of either of their knowledge, any understanding or oral agreement, and
neither Seller nor Holdings is subject to any charter or other corporate
restriction or any judgment, order, writ, injunction, decree or award, which
materially adversely affects or materially restricts the Business or Assets.
(s) CONDITIONS AFFECTING THE BUSINESS. Other than the transactions
contemplated by this Agreement and such conditions as may affect as a whole the
well servicing industry generally, there is no fact known to Seller or Holdings
which would materially adversely affect the Business considered as a whole.
(t) EMPLOYEE BENEFIT PLANS.
(i) SCHEDULE 3.1(T) lists all Employee Benefit Plans of Seller.
Except for the plan maintained by Seller pursuant to Section 401(k) of the Code
(the "401(K) PLAN"), Seller is not now a party to any Pension Plan, and for the
preceding five years has not been a party to any Pension Plan subject to Title
IV of ERISA. Seller is under no legal obligation to create a new Employee
Benefit Plan or, except as provided herein, amend an existing Employee Benefit
Plan in a manner that would have a material effect on any Affected Employee,
except as required by applicable law.
(ii) All material documents, including all amendments thereto,
with respect to each Employee Benefit Plan under which one or more Affected
Employees are, or are reasonably likely to be, participants have been given to
Purchaser or will be made available to
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Purchaser prior to the Closing Date. Such documents include, but are not limited
to, the following documents to the extent material and applicable: plan
documents, trust agreements, insurance contracts, annuity contracts, fidelity
bonds and fiduciary liability policies and applications therefor, summary plan
descriptions, pending filings with, pending applications to and correspondence
with any Governmental Entity, unresolved disputed claims made by or against any
Employee Benefit Plan, investment manager and investment advisory contracts,
administration contracts, actuarial reports, audit reports, financial
statements, union contracts, agreements concerning plan mergers or transfers,
determination letters and private letter rulings from the Internal Revenue
Service ("IRS"), advisory opinion letters from the Department of Labor ("DOL")
or the Pension Benefit Guaranty Corporation ("PBGC"), prohibited transaction
exemptions, resolutions of the Board of Directors of Seller, minutes or other
records of the meetings of any plan committee, and current reports of trustees.
(iii) To the extent required under the terms of any Employee
Benefit Plan and applicable law, and otherwise only to the extent Holdings shall
determine in its sole discretion, Holdings shall adopt each Employee Benefit
Plan(s) for the benefit of Affected Employees prior to the Closing Date, and
Seller and Holdings shall not (except by operation of law) terminate any adopted
Employee Benefit Plan solely with respect to Affected Employees prior to the
Closing Date without providing prior written notice to Purchaser; however, at
the written request of Purchaser delivered within a reasonable time prior to the
Closing Date, Seller shall, or shall cause Holdings to, terminate any one or
more of such Employee Benefit Plans prior to the Closing Date with respect to
the participation of Holdings and, to the extent possible under the terms of the
Employee Benefit Plan, and applicable law, the Affected Employees. All benefits
earned or accrued by Affected Employees under the 401(k) Plan, or the 401(k)
Restoration Plan, if terminated prior to the Closing Date, shall be fully
vested. Seller shall cooperate with Purchaser to the full extent reasonably
possible to insure that Affected Employees receive all of the benefits they have
accrued under each Employee Benefit Plan through the Closing Date. Without
limitation, to the extent Seller maintains an Employee Benefit Plan which
provides coverage or benefits to any Employee or such Employee's dependents with
respect to medical expenses incurred after the Employee terminates employment
with Seller, other than coverage or benefits provided solely as a result of
compliance with Section 4980B of the Code, at any time through the Closing Date
if such Employee Benefit Plan is adopted by Holdings, Seller is legally entitled
to cause Holdings to terminate such post-termination of employment medical
coverage or benefits, with respect to all Affected Employees.
(iv) At the written request of Purchaser within a reasonable time
prior to the Closing Date, and upon agreement between Seller and Purchaser with
respect to Purchaser's reimbursement of Seller for the cost hereof, and subject
to the consents, if any, required of third parties, Seller will allow Affected
Employees to remain under Seller's medical plans and related cafeteria plan for
a period requested by Purchaser, not to exceed 30 days, after the Closing Date.
Seller shall cause Holdings to withdraw as an adopting employer in all Employee
Benefit Plans as of the Closing Date (or, if later, the applicable date under
the preceding sentence). Seller, Holdings and Purchaser shall cooperate in
causing the separation of the portion of each Employee Benefit Plan adopted by
Holdings and continued after the Closing Date attributable to Affected Employees
from the corresponding Employee Benefit Plan sponsored by Seller. Without
limiting
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the generality of the foregoing, Seller, Holdings, and Purchaser agree to
separate Seller's voluntary employee beneficiary association ("VEBA") trust
under which vacation benefits are paid, by transferring to a separate VEBA trust
maintained by Holdings as soon as practicable following the Closing Date,
$400,000 in cash.
(v) Except to the extent the following would not have a material
adverse effect on Purchaser, each person who has participated in the operations
of any Employee Benefit Plan has acted in accordance with the material terms and
conditions of such Employee Benefit Plan; and each Employee Benefit Plan is now,
and has always been established, maintained and operated materially in
accordance with all applicable laws (including but not limited to ERISA and the
Code), as well as materially in accordance with its plan documents.
(vi) Except to the extent the following would not have a material
adverse effect on Purchaser, all communications to Affected Employees with
respect to each Employee Benefit Plan by any authorized person have reflected
accurately the documents and operations of such Employee Benefit Plan, and no
person has any material liability by reason of any communication or failure to
communicate with respect to or in connection with any Employee Benefit Plan.
(vii) The 401(k) Plan is and always has been qualified under
Section 401 of the Code, and each trust maintained in connection with such
401(k) Plan is and always has been tax exempt under Section 501 of the Code. The
IRS has issued a determination letter with respect to the current version of the
401(k) Plan stating that such 401(k) Plan is qualified.
(viii) The assets of all funded Employee Benefit Plans that are not
Pension Plans are held by entities that are and always have been tax exempt
under all applicable federal and state laws and, without limitation, each VEBA
which is intended to fund or implement any Welfare Plan has received a favorable
ruling or determination letter as to its tax-exempt status.
(ix) Except as described in SCHEDULE 3.1(T), and except with
respect to taxes on benefits paid or provided, no material income, excise or
other tax or penalty (federal or state) has been waived or excused, has been
paid or is owed by any person (including but not limited to any Employee Benefit
Plan, any plan fiduciary and Seller) with respect to the operations of, or any
transactions with respect to, any Employee Benefit Plan. No action has been
taken, nor has there been any failure to take action, that would subject
Holdings to any material liability for any tax or penalty in connection with any
Employee Benefit Plan. No reserve for any taxes or penalties has been
established with respect to any Employee Benefit Plan, nor has any advice been
given to any person with respect to the need to establish such a reserve.
(x) There are no agreements by Seller which might, under any
circumstances, result in payments to any Affected Employee who is an officer,
shareholder, or highly compensated individual within a period of two years
following the Closing Date of amounts which would constitute "parachute
payments" under Section 280G of the Code that are nondeductible to Seller or
subject to tax under Section 4999 of the Code.
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(xi) All reports, forms, summaries, and other documents required
to be filed, or advisable to be filed, with any Governmental Entity, or with any
participant or beneficiary with respect to any Employee Benefit Plan have been
timely filed and are materially accurate.
(xii) Except as described in SCHEDULE 3.1(T) or with respect to the
filing of a Summary Plan Description, a Summary of Material Modifications, an
Annual Report, tax report, or a request for a determination letter with respect
to the qualified status of a Pension Plan, there have been no written or oral
communications with respect to any Employee Benefit Plan with the IRS, DOL, or
the PBGC.
(xiii) All contributions required to be made to or with respect to
each Employee Benefit Plan that are due have been completely and timely made.
All such contributions, and any further such contributions paid prior to the
Closing Date, have been, or will be, fully deducted by Seller for federal and
state income tax purposes; such deductions have not been challenged or
disallowed by any Governmental Entity; and Seller has no reason to believe that
such deductions are not allowable.
(xiv) All material benefits and other payments due and payable
under or by any Employee Benefit Plan have been completely and timely paid.
(xv) Except as described in SCHEDULE 3.1(T), to the best of
Seller's knowledge, there has been no actual, anticipated, threatened, or
expected material actions, suits, or claims (other than routine claims for
benefits in the ordinary course), or arbitration, or any material complaints to
or by any Governmental Entity filed, threatened, or expected, concerning or
involving any Employee Benefit Plan, and, without limitation, Seller has no
knowledge of any facts which could give rise to any such actions, suits, claims
or complaints.
(xvi) No material claims have been made or are expected to be made
with respect to any bond or any fiduciary liability or other similar insurance
with regard to the actions of any person in connection with any Employee Benefit
Plan, nor has there been nor is there expected to be any notice to any insurer
under any such bond or policy with regard to any Employee Benefit Plan. No
application for any bond or fiduciary liability or similar insurance policy with
respect to any Employee Benefit Plan has been rejected nor is any such bond or
policy now subject to any qualification, condition or exclusion.
(xvii) Holdings will be in material compliance with all requirements
of the continuation health care coverage requirements of Section 4980B of the
Code with respect to any Employee Benefit Plan adopted by Holdings on or prior
to the Closing Date.
(xviii) With respect to the 401(k) Plan and the 401(k) Restoration
Plan, Seller's and/or Holdings' matching contribution shall be made with respect
to Affected Employee contributions through the Closing Date. All financial
reports and statements with respect to each Employee Benefit Plan contain
materially accurate statements of the financial condition of such Employee
Benefit Plan.
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(xix) No events have occurred or are expected to occur with respect
to any Employee Benefit Plan that would cause a material adverse effect on
Holdings.
(xx) The cost of providing benefits under, and paying liabilities
of, each material Employee Benefit Plan with respect to Affected Employees for
1996 will be provided prior to the Closing Date upon written request. All
additional direct or indirect costs with respect to establishing or maintaining
each Employee Benefit Plan (including but not limited to legal fees, accounting
fees, and administrative costs), to the extent they can be allocated to Affected
Employees, for 1996 will be made available to Purchaser prior to the Closing
Date upon written request. All of the information in this subsection shall be
based on the best reasonable estimate of Seller.
(xxi) There have been no contributions to any Employee Benefit Plan
in any form other than cash, and there has been no prohibited transaction
(within the meanings of Section 406 of ERISA and Section 4975 of the Code) with
respect to any Employee Benefit Plan which would materially affect Holdings.
(xxii) With respect to any Employee Benefit Plan, no insurance
contract, annuity contract or other agreement or arrangement with any financial
or other organization would impose a penalty, discount or other reduction on
account of the withdrawal of assets from such organization or the change in
investment of such assets.
(xxiii) The name, address and telephone number of each person who
gives or has given material advice of any kind to or in connection with each
Employee Benefit Plan will be made available to Purchaser prior to the Closing
Date upon written request.
(xxiv) The following are definitions used primarily, or exclusively
in this Section 3.1(t):
A. "AFFECTED EMPLOYEE" means every Employee employed by
Holdings on the Closing Date, and each former Employee, if any, with respect to
whom Holdings has assumed a direct or indirect liability, responsibility, or
employment relationship with under any contract, law or Employee Benefit Plan.
B. "EMPLOYEE BENEFIT PLAN" means all present plans, programs,
agreements, arrangements, and methods of contribution or compensation providing
any remuneration or benefits, other than current cash compensation, to any
current or former Employee or to any other person who provides services to
Seller, whether or not such plan or plans, programs, agreements, arrangements,
and methods of contribution or compensation are subject to ERISA, as hereinafter
defined, and whether or not such plan or plans, programs, agreements,
arrangements and methods of contribution or compensation are qualified under the
Code; and such term includes, but is not limited to plans which are, or are in
the nature of pension, retirement, profit sharing, stock bonus, 401(k),
nonqualified deferred compensation, medical, dental, workers' compensation,
health insurance, life insurance, incentive, compensation
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for forgoing vacation benefits, and fringe benefits, but such term does not
include normal policies concerning holidays, vacations and salary continuations
during short absences for illness or other reasons, nor any Multiemployer Plan,
as hereinafter defined.
C. "EMPLOYEE" shall mean all current or former officers,
employees, consultants or others who are or were employed or otherwise
compensated by Seller, or any such person employed by an ERISA Affiliate who is
or becomes an Affected Employee.
D. "ERISA" means the Employee Retirement Income and Security
Act of 1974, as amended, and the regulations and rulings thereunder.
E. "ERISA AFFILIATE" shall mean any person (as defined in
Section 3(9) of ERISA) (including each trade or business (whether or not
incorporated)) which is a member of a "controlled group" including, or under
common control with Seller or a Subsidiary of Seller within the meaning of
Sections 414(b) and (c) of the Code or Section 4001(a)(14) of ERISA, or an
affiliated service group under Section 414 of the Code.
F. "MULTIEMPLOYER PLAN" means a plan which is described in
Section 3(37) of ERISA.
G. "PENSION PLAN" means an Employee Benefit Plan described in
Section 3(2) of ERISA, and a Multiemployer Plan.
H. "WELFARE PLAN" means an Employee Benefit Plan described in
Section 3(1) of ERISA.
(u) PERSONNEL. SCHEDULE 3.1(U) lists the names, years of service,
and current annual base rates of compensation for salaried, non-hourly Affected
Employees, and current hourly rates for hourly Affected Employees; Seller will
make available to Purchaser information concerning the bonus, profit sharing,
percentage compensation, automobile, club membership and other like benefits, if
any, paid or payable to Affected Employees during Seller's 1996 fiscal year and
to the date hereof. SCHEDULE 3.1(U) also contains a list of all written, and a
brief description of all material terms of all oral, employment agreements,
severance agreements, confidentiality agreements, noncompete agreements or
similar agreements with Seller to which any Employee is or may be subject.
Seller has delivered to Purchaser accurate and complete copies of all such
agreements, and all other agreements, plans and other instruments to which
Seller is a party and under which Affected Employees and/or sales
representatives involved in the Business are entitled to receive benefits of any
nature. To Seller's knowledge, and except as set forth on SCHEDULE 3.1(U), the
employee relations of Seller are good and there is no pending or threatened
controversy, labor dispute or union organization campaign between Seller and any
Affected Employees. None of the Affected Employees or sales representatives of
Seller are represented by any labor union or organization nor is Seller a party
to any collective bargaining agreement. Except as set forth on SCHEDULE 3.1(U)
OR 3.1(L), Seller is in compliance in all material respects with all federal and
state laws respecting employment and employment practices, terms and condi tions
of employment and wages and hours and is not engaged in any unfair labor
practices.
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Except as set forth on SCHEDULE 3.1(U), there is no unfair labor practices
complaint or charge of employment discrimination pending, or threatened against
Seller with respect to an Affected Employee before the National Labor Relations
Board, the Equal Employment Opportunity Commission, or any other state, federal
or local court or government board, agency or commission or any strike, labor
dispute, work slowdown or work stoppage pending or, to Seller's knowledge,
threatened against or involving Seller, and Seller has not experienced any
material labor dispute during the last three years. Seller agrees that to the
extent it has entered into confidentiality agreements, noncompete agreements or
similar agreements affecting the Business with Employees who are not Affected
Employees, it shall cooperate with Purchaser in enforcing such agreements to the
maximum extent permitted by law, subject only to Purchaser reimbursing Seller
for the cost, if any, incurred by Seller with respect to such enforcement;
provided, however, Seller shall not be obligated to bring legal action to
enforce any such agreements or to take action materially detrimental to Seller
and its other businesses.
(v) CONDITION OF RIGS. Of the total of approximately 407 workover
rigs to be owned by Holdings on the Closing Date, approximately 318 rigs have
been operated within the 12 months preceding the Effective Date.
3.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents
and warrants to Seller as follows:
(a) CORPORATION.Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas.
(b) CORPORATE POWER AND AUTHORIZATION. Purchaser has the corporate
power, authority and legal right to execute, deliver and perform this Agreement.
The execution, delivery and performance of this Agreement by Purchaser have been
duly authorized by all necessary corporate action. This Agreement has been duly
executed and delivered by Purchaser and constitutes the legal, valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, or other laws affecting the enforcement of creditors' rights
generally and the application of general principles of equity.
(c) VALIDITY OF CONTEMPLATED TRANSACTIONS, ETC. The execution,
delivery and performance of this Agreement by Purchaser does not and will not
violate, conflict with or result in the breach of any material term, condition
or provision of, or require the consent of any other party under, (i) any
existing law, ordinance, or governmental rule or regulation to which Purchaser
is subject, (ii) any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or authority
which is applicable to Purchaser, (iii) the Articles of Incorporation or Bylaws
of, or any securities issued by, Purchaser, or (iv) any contract to which
Purchaser is a party or by which Purchaser is otherwise bound. Except as
otherwise contemplated by this Agreement, no Authorization, approval or consent
of, and no registration or filing with, any Governmental Entity is required in
connection with the execution, delivery and performance of this Agreement by
Purchaser.
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(d) FINANCING. Purchaser intends to finance the transactions
contemplated hereby as set forth in Section 5.1(k), and reasonably expects to be
able to consummate such financing on terms acceptable to it.
3.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS. The
representations and warranties of the parties to this Agreement shall expire as
of the Closing except for the representations and warranties set forth in
Sections 3.1(a) (Corporate Existence), 3.1(b) (Corporate Power; Authorization;
Enforceable Obligations), 3.1(f) (Taxes; Tax and Other Returns and Reports),
3.2(b) (Corporate Power and Authorization), and 9.1 (Finders' Fees) which shall
survive the Closing Date. All covenants and agreements contained herein shall
survive without limitation. All representations, warranties, covenants and
agreements made by the parties shall not be affected by any investigation
heretofore or hereafter made by and on behalf of any of them and shall not be
deemed merged into any instruments or agreements delivered in connection with
this Agreement or otherwise in connection with the transactions contemplated
hereby.
3.4 REPRESENTATIONS BY SELLER REFER TO THE BUSINESS. Whether or not so
expressed, all representations and warranties of Seller herein relate only to
Holdings or to the Business or the Assets and not to any other businesses or
assets of Seller.
ARTICLE IV - AGREEMENTS PENDING CLOSING
4.1 AGREEMENTS OF SELLER PENDING THE CLOSING. Seller covenants and agrees
that, pending the Closing and except as otherwise agreed to in writing by
Purchaser:
(a) BUSINESS IN THE ORDINARY COURSE. Except as otherwise
specifically provided herein, the Business shall be conducted solely in the
ordinary course consistent with past practice. Seller shall maintain its capital
expenditures and shall continue to maintain and service the physical Assets used
in the conduct of the Business consistent with Seller's past practices. Seller
shall not cause, or permit to occur to the extent Seller may reasonably prevent,
any of the events or occurrences described in Section 3.1(h) (Existing
Condition). Seller shall use commercially reasonable efforts to maintain in full
force and effect all Authorizations currently in effect and used in the conduct
of the Business, and shall comply with all Regulations applicable to the
Business, the noncompliance with which might materially and adversely affect the
Business or the Assets. Seller shall not (i) sell any of the Assets, (ii) enter
into any Contract outside of the ordinary course of business, (iii) amend,
modify, terminate, waive any material provision of, or breach any material
Contract, or (iv) cancel, terminate or cause or allow to lapse any insurance
coverage affecting the Business or the Assets.
(b) CONDUCT OF BUSINESS. Seller shall use commercially reasonable
efforts to conduct the Business in such a manner that on the Closing Date the
representations and warranties contained in this Agreement shall be true, except
as specifically contemplated by this Article IV, as though such representations
and warranties were made on and as of such date.
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(c) LITIGATION. Between the Effective Date and the Closing Date,
Seller shall notify Purchaser of any and all pending or threatened litigation
and administrative proceedings, including any arbitration, investigation or
other proceeding of or before any court, arbitrator or Governmental Entity which
relates to the Business or Assets or the transactions contemplated by this
Agreement arising since the Effective Date; Seller also will notify Purchaser if
it becomes aware after the Effective Date of any reasonably likely basis for any
such litigation, arbitration, investigation or proceeding, the result of which
could adversely affect the Assets or Business, or the transactions contemplated
hereby.
(d) ACCESS. Seller shall give to Purchaser's officers, employees,
counsel, accountants and other representatives reasonable access to and the
right to inspect, during normal business hours, all of the premises, properties,
Assets, Records, Contracts and other documents relating to Holdings, the
Business and the Assets and shall permit them to consult with the officers,
employees, accountants, counsel and agents of Seller for the purpose of making
such investigation of Holdings, the Business and the Assets as Purchaser shall
desire to make, provided that such investigation shall be at Purchaser's sole
cost and expense and shall not unreasonably interfere with Seller's business
operations. Without limitation, Seller shall permit Purchaser to perform Phase I
environmental testing (but not Phase II tests or any other testing of the soil
or any testing of groundwater without Seller's consent). Furthermore, Seller
shall furnish to Purchaser copies of all such documents, Records and information
with respect to Holdings, the Business and the Assets, and copies of any
internal financial records relating thereto as Purchaser shall from time to time
reasonably request and shall permit Purchaser and its agents to make such
physical inventories and inspections of the Assets as Purchaser may reasonably
request from time to time.
(e) PRESS RELEASE. Upon the execution of this Agreement, Seller
shall cooperate with Purchaser in the drafting and issuance of a press release
concerning this Agreement. Except for such press release and discussions with
employees and customers as mutually agreed to by Seller and Purchaser and except
as required by applicable law, Seller shall not give notice to third parties or
otherwise make any public statement or releases concerning this Agreement or the
transactions contemplated hereby except for such written information as shall
have been approved in writing as to form and content by Purchaser, which
approval shall not be unreasonably withheld.
(f) ACTIONS OF DIRECTORS AND SHAREHOLDERS. If required by law or by
the rules of any stock exchange, Seller shall promptly and diligently take all
action necessary in accordance with law and its Articles of Incorporation,
Bylaws and other organizational documents to convene a meeting of its
shareholders promptly to consider and vote upon the approval of this Agreement.
The proxy statement (such proxy statement and the form of proxy, including all
amendments, supplements, or modifications thereto, being herein referred to as
the "PROXY STATEMENT") disseminated to its shareholders shall contain the
recommendation of the Board of Directors of Seller in favor of the transaction
contemplated hereby, and the Board of Directors of Seller shall recommend that
the shareholders vote to approve this Agreement. Seller shall use reasonable
efforts to solicit from its shareholders proxies in favor of such adoption and
approval and shall take all other action customary in transactions of this
nature in accordance with its organizational
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documents and applicable law which is necessary to secure a vote of its
shareholders in favor of and to consummate this transaction.
(g) HART-SCOTT-RODINO. Seller shall promptly make any and all
filings required to be made by Seller under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR ACT") with respect to the transactions
contemplated by this Agreement and will take all reasonable actions necessary to
obtain any consent, Authorization, order or approval of, or any exemption from
or termination of any applicable waiting periods required by, any Governmental
Entity or other public or private third party in connection with the
transactions contemplated by this Agreement.
(h) EMPLOYEE MATTERS. Seller shall give Affected Employees all
notices required by law, including but not limited to notices of their rights
under the Comprehensive Omnibus Budget Reconciliation Act of 1986.
(i) ACTIONS OF SELLER. Seller will not take any action which would
result in a material breach of any of its representations and warranties
hereunder. Furthermore, Seller shall cooperate with Purchaser and use its best
efforts to cause all of the conditions to the obligations of Purchaser under
this Agreement to be satisfied on or prior to and at the Closing Date.
4.2 AGREEMENTS OF PURCHASER PENDING THE CLOSING. Purchaser covenants and
agrees that, pending the Closing and except as otherwise agreed to in writing by
Seller:
(a) CONFIDENTIALITY. Until the Closing, Purchaser will hold, and
shall cause its counsel, independent certified public accountants, appraisers
and investment bankers and other representatives to hold, in confidence any
confidential data or information made available to Purchaser in connection with
this Agreement with respect to the Assets or Business in accordance with the
Confidentiality Agreement between Seller and Purchaser dated November 13, 1996.
(b) PRESS RELEASE. Upon the execution of this Agreement, Purchaser
shall cooperate with Seller in the drafting and issuance of a press release
concerning this Agreement. Except for such press release and discussions with
Affected Employees and customers as mutually agreed to by Seller and Purchaser
and except as required by applicable law, Purchaser will not give notice to
third parties or otherwise make any public statement or releases concerning this
Agreement or the transactions contemplated hereby except for such written
information as shall have been approved in writing as to form and content by
Seller, which approval shall not be unreasonably withheld.
(c) HART-SCOTT-RODINO. Purchaser shall promptly make any and all
filings required to be made by Purchaser under the HSR Act with respect to the
transactions contemplated by this Agreement and will take all reasonable actions
necessary to obtain any consent, Authorization, order or approval of, or any
exemption from or termination of any applicable waiting periods required by, any
Governmental Entity or other public or private third party in connection with
the transactions contemplated by this Agreement.
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(d) ACTIONS OF PURCHASER. Purchaser will not take any action which
would result in a breach of any of its representations and warranties hereunder.
Furthermore, Purchaser shall cooperate with Seller and use its best efforts to
cause all of the conditions to the obligations of Seller under this Agreement to
be satisfied on or prior to the Closing Date.
ARTICLE V - CONDITIONS PRECEDENT TO THE CLOSING
5.1 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS. The obligations of
Purchaser under this Agreement to purchase the Stock are subject to the
fulfillment or satisfaction, prior to or at the Closing, of each of the
following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES TRUE AS OF THE CLOSING DATE. The
representations and warranties of Seller contained in this Agreement or in any
Schedule, certificate or document delivered by Seller to Purchaser pursuant to
the provisions hereof shall have been true on the Effective Date and shall be
true on the Closing Date as though such representations and warranties were made
as of such date (except to the extent such representations and warranties
expressly speak only as of an earlier date), except where the failure to be true
(without giving effect to the individual materiality qualifications and
thresholds otherwise contained in Section 3.1) would not have a material adverse
effect on Holdings, the Stock, the Business or the Assets.
(b) COMPLIANCE WITH THIS AGREEMENT. Seller shall have performed and
complied in all material respects with all of its obligations under this
Agreement to be performed or complied with by it prior to or at the Closing.
(c) CLOSING CERTIFICATE. Purchaser shall have received certificates
from Seller, dated the Closing Date, certifying in such detail as Purchaser may
reasonably request that the conditions specified in Sections 5.1(a), 5.1(b) and
5.1(h) have been fulfilled and certifying that Seller has obtained all consents
and approvals required by Section 5.1(g) with respect to it or the Business.
(d) OPINION OF COUNSEL FOR SELLER. Baker & Botts, L.L.P., outside
counsel for Seller, shall have delivered to Purchaser a written opinion, dated
the Closing Date, in the form of EXHIBIT A with only such changes as shall be in
form and substance reasonably satisfactory to Purchaser and its counsel. In
rendering such opinion, Baker & Botts, L.L.P. may rely on special Louisiana
counsel as to all matters of Louisiana law relevant to such opinion.
(e) GOOD STANDING. Seller shall have delivered to Purchaser a
certificate issued by the appropriate Secretary of State evidencing the good
standing of Seller and Holdings, as of a date not more than five calendar days
prior to the Closing Date. Seller also shall have delivered to Purchaser a
certificate issued by the appropriate taxing authority evidencing that all
applicable corporate income and state franchise taxes have been paid.
(f) NO THREATENED OR PENDING LITIGATION. On the Closing Date, no
suit, action or other proceeding, or injunction or final judgment relating
thereto, shall be threatened or be
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pending before any Governmental Entity in which it is sought to restrain or
prohibit or to obtain damages or other relief in connection with this Agreement
or the consummation of the transactions contemplated hereby, and no
investigation that might result in any such suit, action or proceeding shall be
pending or threatened.
(g) CONSENTS AND APPROVALS. Consistent with Section 2.3, Purchaser
or Seller shall have obtained the consents of third parties relative to
Contracts, Authorizations, Permits, Equipment Leases, or Real Estate Leases
reasonably sufficient to permit Purchaser after the Closing to operate the
Business as previously operated by Seller, except as would not have a material
adverse effect.
(h) MATERIAL ADVERSE CHANGES. Neither Holdings, the Assets nor the
Business in the aggregate shall have been or shall be threatened to be
materially adversely affected in any way as a result of any event or occurrence
other than such conditions as may affect as a whole the well servicing industry
generally.
(i) APPROVAL OF COUNSEL; CORPORATE MATTERS. All actions,
proceedings, resolutions, instruments and documents required to carry out this
Agreement or incidental hereto and all other related legal matters shall have
been approved with respect to sufficiency and legal compliance on the Closing
Date by Jenkens & Gilchrist, A Professional Corporation, counsel for Purchaser,
in the exercise of its reasonable judgment. Seller also shall have delivered to
Purchaser such other documents, instruments, certifications and further
assurances as such counsel may reasonably require to enable such counsel to pass
on such matters.
(j) HART-SCOTT-RODINO APPROVAL. The waiting period (including any
extension thereof) applicable to the consummation of the transactions
contemplated by this Agreement under the HSR Act shall have expired or
terminated.
(k) FINANCING. Purchaser shall have completed the offer and sale,
including the closing and funding thereof, of (i) newly issued senior notes in
the original principal amount of approximately $110,000,000, and (ii) authorized
but unissued shares of Purchaser's common stock in an amount sufficient to raise
gross proceeds to Purchaser of at least $50,000,000.
(l) SECURITIES FILINGS. Purchaser shall have received from Seller
consolidated audited and unaudited financial statements for the Business in
compliance with the requirements for filing a Form 8-K with the Securities and
Exchange Commission and reasonable assurances from the independent accountants
performing such audits that they will, consistent with their professional
obligations, provide to Purchaser manually signed reports and consents in the
future as required under the rules of the Securities and Exchange Commission.
5.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. The obligations of
Seller under this Agreement to sell the Stock are subject to the fulfillment or
satisfaction, prior to or at the Closing, of each of the following conditions
precedent:
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(a) REPRESENTATIONS AND WARRANTIES TRUE AS OF THE CLOSING DATE. The
representations and warranties of Purchaser contained in this Agreement or in
any Schedule, certificate or document delivered to Seller by Purchaser pursuant
to the provisions hereof shall have been true on the Effective Date and shall be
true on the Closing Date as though such representations and warranties were made
as of such date (except to the extent such representations and warranties
expressly speak only as of an earlier date).
(b) COMPLIANCE WITH THIS AGREEMENT. Purchaser shall have performed
and complied with all obligations required by this Agreement to be performed or
complied with by it prior to or at the Closing.
(c) CLOSING CERTIFICATES. Seller shall have received a certificate
from Purchaser, dated the Closing Date, certifying in such detail as Seller may
reasonably request that the conditions specified in Sections 5.2(a) and 5.2(b)
have been fulfilled.
(d) NO THREATENED OR PENDING LITIGATION. On the Closing Date, no
suit, action or other proceeding, or injunction or final judgment relating
thereto, shall be threatened or be pending before any Governmental Entity in
which it is sought to restrain or prohibit or to obtain damages or other relief
in connection with this Agreement or the consummation of the transactions
contemplated hereby, and no investigations that might result in any such suit,
action or proceeding shall be pending or threatened.
(e) CONSENT OF SHAREHOLDERS. If required, the requisite percentage
of Seller's shareholders shall have approved the consummation of the
transactions contemplated by this Agreement in accordance with the requirements
of applicable law.
(f) OPINION OF COUNSEL FOR PURCHASER. Jenkens & Gilchrist, A
Professional Corporation, counsel for Purchaser, shall have delivered to Seller
a written opinion, dated the Closing Date, in the form of EXHIBIT B with only
such changes as shall be in form and substance reasonably satisfactory to Seller
and its counsel.
(g) HART-SCOTT-RODINO APPROVAL. The waiting period (including any
extension thereof) applicable to the consummation of the transactions
contemplated by this Agreement under the HSR Act shall have expired or
terminated.
ARTICLE VI - INDEMNIFICATION
THE FOLLOWING SECTIONS ARE IMPORTANT
AND SHOULD BE READ CAREFULLY.
==============================================================================
6.1 DEFINITIONS.
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(a) "GOVERNMENTAL ENTITY" shall mean any arbitrator, court,
administrative or regulatory agency, commission, department, board or bureau or
body or other government or authority or instrumentality or any entity or person
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
(b) "INDEMNITEE" shall mean the person or persons indemnified, or
entitled or claiming to be entitled to be indemnified, pursuant to the
provisions of Article VI.
(c) "INDEMNITOR" shall mean the person or persons having the
obligation to indemnify pursuant to the provisions of Article VI.
6.2 INDEMNIFICATION BY SELLER. Except as otherwise limited by this Article
VI or by Section 3.3 (Survival of Representations and Warranties and Covenants),
Seller agrees to indemnify, defend and hold harmless Purchaser and Holdings and
each of its respective officers, directors, employees, agents, shareholders and
controlling persons, and their respective successors and assigns, separate
consideration for which is hereby acknowledged, of, from and against and in
respect of any and all liabilities, actions, lawsuits, conduct, losses, damages,
demands, assessments, claims, costs and expenses (including interest, awards,
judgments, penalties, settlements, fines, diminutions in value, costs and
expenses incurred in connection with investigating and defending any claims or
causes of action including reasonable attorneys' fees and expenses and all
reasonable fees and expenses of consultants and other professionals) ("DAMAGES")
actually suffered, incurred or realized by such party (collectively, "PURCHASER
LOSSES") arising out of or resulting from or relating to any of the following:
(a) any misrepresentation, breach of warranty or breach of any
covenant or agreement made or undertaken by Seller in this Agreement or any
misrepresentation in or omission from any other agreement, certificate, exhibit
or writing delivered to Purchaser pursuant to this Agreement, including the
Schedules; provided that this clause shall apply with respect to any
misrepresentation, breach of warranty or omission if, but only if, the
representation, warranty or omission is set forth in a provision that survives
the Closing pursuant to Section 3.3;
(b) any Damages or Purchaser Losses (other than the Assumed
Liabilities) relating to Seller, Holdings, the Assets or the Business, whether
known or unknown, now existing or hereafter arising, contingent or liquidated,
(including without limitation, any Tax liabilities) accruing or arising prior to
the Closing Date; and
(c) any services provided by or on behalf of Seller or Holdings on
or prior to the Closing Date or with respect to any claims made pursuant to
warranties to third persons in connection with services provided by or on behalf
of Seller or Holdings on or prior to the Closing Date.
Notwithstanding the foregoing, Seller shall not be liable under clause (a) of
this Section 6.2 based upon a misrepresentation or breach of warranty or
omission unless and until the aggregate amount of any Purchaser Losses exceeds
$2.0 million at which time all Purchaser Losses in excess of such amount shall
be subject to indemnification by Seller; provided, however, (i) Seller's
liability under
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Sections 6.2(b) and (c) shall not be so limited, and (ii) liability under
Section 6.2(a) shall not be so limited if such Purchaser Losses arise from
Seller's breach of any of the provisions set forth in Sections 3.1(b), 3.1(f),
or 9.1 of this Agreement.
6.3 INDEMNIFICATION BY PURCHASER. Except as otherwise limited by this
Article VI and Section 3.3 (Survival of Representations and Warranties and
Covenants), Purchaser agrees to indemnify, defend and hold Seller and each of
its officers, directors, employees, agents, shareholders and controlling persons
and its successors and assigns harmless from and against and in respect of any
and all Damages actually suffered, incurred or realized by such party
(collectively, "SELLER LOSSES") arising out of or resulting from any of the
following:
(a) any misrepresentation, breach of warranty or breach of any
covenant or agreement made or undertaken by Purchaser in this Agreement or any
misrepresentation in or omission from any other agreement, certificate, exhibit
or writing delivered to Seller pursuant to this Agreement; provided that this
clause shall apply with respect to any misrepresentation, breach of warranty or
omission if, but only if, the representation, warranty or omission is set forth
in a provision that survives the Closing pursuant to Section 3.3;
(b) any Assumed Liability;
(c) conduct of the Business or the ownership or operation of the
Assets or Holdings on or after the Closing Date, or any other action by
Purchaser or any affiliate of Purchaser (including Holdings after the Closing)
related to the Business or the Assets; or
(d) the application of WARN (as hereinafter defined) to Seller as a
result of the impact on the Affected Employees of the transactions contemplated
by this Agreement.
6.4 PROCEDURE. All claims for indemnification shall be asserted and
resolved as follows:
(a) An Indemnitee shall promptly give the Indemnitor notice of any
matter that an Indemnitee has determined has given or could give rise to a right
of indemnification under this Agreement, stating the amount of the Damages, if
known, and method of computation thereof, all with reasonable particularity, and
stating with particularity the nature of such matter. Failure to provide such
notice shall not affect the right of an Indemnitee to indemnification except to
the extent such failure shall have resulted in liability to the Indemnitor that
actually could have been avoided had such notice been provided within the
required time period.
(b) The obligations and liabilities of an Indemnitor with respect to
Damages arising from claims of any third party that are subject to the
indemnification provided for in this Article VI ("THIRD PARTY CLAIMS") shall be
governed by and contingent upon the following additional terms and conditions:
if an Indemnitee receives notice of any Third Party Claim, the Indemnitee shall
give the Indemnitor prompt notice of such Third Party Claim and the Indemnitor
may, at its option, assume and control the defense of such Third Party Claim at
the Indemnitor's expense and through counsel of the Indemnitor's choice
reasonably acceptable to the Indemnitee.
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If the Indemnitor assumes the defense against any such Third Party Claim as
provided above, the Indemnitee shall have the right to participate at its own
expense in the defense of such asserted liability, shall cooperate with the
Indemnitor in such defense and will use commercially reasonable efforts to make
available on a reasonable basis to the Indemnitor all witnesses, pertinent
records, materials and information in its possession or under its control
relating thereto as reasonably required by the Indemnitor. If the Indemnitor
does not elect to conduct the defense against any such Third Party Claim, the
Indemnitor shall pay all reasonable costs and expenses of such defense as
incurred and shall cooperate with the Indemnitee (and be entitled to
participate) in such defense and will use commercially reasonable efforts to
make available to it on a reasonable basis all such witnesses, records,
materials and information in its possession or under its control relating
thereto as reasonably required by the Indemnitee. Except for the settlement of a
Third Party Claim that involves the payment of money only and for which the
Indemnitee is totally indemnified by the Indemnitor, no Third Party Claim may be
settled without the written consent of the Indemnitee.
6.5 FAILURE TO PAY INDEMNIFICATION. If and to the extent an Indemnitee
makes written demand upon an Indemnitor for indemnification pursuant to this
Article VI and the Indemnitor refuses or fails to pay in full within 10 business
days after final determination with respect thereto, then the Indemnitee may use
any legal or equitable remedy to collect from the Indemnitor the amount of its
Damages. Nothing contained herein is intended to limit or constrain an
Indemnitee's rights against an Indemnitor for indemnity, the remedies herein
being cumulative and in addition to all other rights and remedies of the
Indemnitee.
6.6 ADJUSTMENT OF LIABILITY. The amount which an Indemnitee shall be
entitled to receive from an Indemnitor with respect to any Damages under this
Article VI shall be net of any insurance recovery by an Indemnitee on account of
such Damages from an unaffiliated party.
6.7 EXPRESS NEGLIGENCE. THE FOREGOING INDEMNITIES ARE INTENDED TO BE
ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE WITH THE EXPRESS TERMS AND SCOPE
THEREOF NOTWITHSTANDING TEXAS' EXPRESS NEGLIGENCE RULE OR ANY SIMILAR DIRECTIVE
THAT WOULD PROHIBIT OR OTHERWISE LIMIT INDEMNITIES BECAUSE OF THE NEGLIGENCE
(WHETHER SOLE, CONCURRENT, ACTIVE OR PASSIVE) OR OTHER FAULT OR STRICT LIABILITY
OF ANY OF THE INDEMNIFIED PARTIES.
6.8 DISCLAIMER. SELLER MAKES NO GUARANTEE, WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, BY OPERATION OF LAW OR OTHERWISE,
AS TO THE QUALITY, SERVICEABILITY, MERCHANTABILITY OR CONDITION OF
THOSE ASSETS CONSISTING OF TANGIBLE PERSONAL PROPERTY, BUILDINGS,
FIXTURES OR OTHER IMPROVEMENTS TO REAL ESTATE, ANY MACHINERY,
EQUIPMENT, SPARE PARTS, DRILLING RIGS AND RELATED APPURTENANCE, OR
THEIR FITNESS FOR ANY USE OR PURPOSE, AND SELLER SHALL NOT BE LIABLE
TO PURCHASER FOR ANY SPECIAL OR CONSEQUENTIAL DAMAGES ARISING FROM
ANY USE OF SUCH ASSETS AFTER THE CLOSING BY HOLDINGS OR PURCHASER OR
ARISING IN CONNECTION WITH THIS SALE. SELLER DOES NOT WARRANT THAT
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THE SUBJECT ASSETS ARE FIT FOR A PARTICULAR PURPOSE, OR ARE FREE FROM
REDHIBITORY OR LATENT DEFECTS OR VICES AND SELLER IS RELIEVED OF ANY LIABILITY
FOR REDHIBITORY OR LATENT DEFECTS OR VICES UNDER LOUISIANA CIVIL CODE, ARTICLE
2476 (INSOFAR ONLY THAT ARTICLE 2476 RELATES TO HIDDEN DEFECTS OF THE THING SOLD
OR ITS REDHIBITORY VICES AND NOT AS ARTICLE 2476 RELATES TO PURCHASER'S
PEACEABLE POSSESSION OF THE THING SOLD), AND LOUISIANA CIVIL CODE, ARTICLE 2520
THROUGH ARTICLE 2548.
6.9 ARBITRATION.
(a) NEGOTIATION PERIOD. After the Closing, all disputes arising
under this Agreement (other than a suit for injunctive relief) or arising with
respect to any transaction contemplated hereby will be subject to binding
arbitration in accordance with this Section 6.9. If such a dispute exists, the
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 and shall be delivered to each party to this Agreement to whom the
dispute relates. 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, each party shall have 10
days from the end of such period to give each other party who received a Dispute
Notice written notice of the selection of an independent arbitrator. If only one
party gives such written notice, the arbitrator selected by that party (the
"FINAL ARBITRATOR") shall make a final and binding determination as to the
parties' respective rights and obligations with respect to the matters set forth
in the Dispute Notice. If more than one party selects an arbitrator, the persons
so selected shall, within 10 days of the last timely notice of such selection,
select a different independent arbitrator (also referred to herein as the "FINAL
ARBITRATOR") who shall make a final and binding determination of the parties'
respective rights and obligations with respect to the matters set forth in the
Dispute Notice. Following the selection of the Final Arbitrator, the other
arbitrators selected shall have no further responsibilities hereunder. Each
arbitrator selected hereunder shall be experienced in the arbitration of complex
commercial disputes.
(c) Consolidation of Hearings. If more than one party delivers a
Dispute Notice to one or more other parties pursuant to this Section 6.9, the
Final Arbitrators selected with respect to each such Dispute Notice may elect,
in their sole discretion, to combine the matters set forth in one or more, but
not necessarily all, of the Dispute Notices into one or more hearings, in which
case, the Final Arbitrators shall adjust the time deadlines set forth herein as
they determine appropriate, and shall decide which one of them will hear the
evidence and render a final determination with respect to each hearing.
(d) DISCOVERY. Unless the Final Arbitrator otherwise directs, each
party to an arbitration shall be entitled to one deposition, lasting no more
than one day, of a designated
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representative of each other party to the arbitration prior to the arbitration
hearing; and each party shall be entitled, within 30 days of the appointment of
the Final Arbitrator, to serve upon each other party one set of Interrogatories
(seeking no more than 30 responses), one set of Requests for Production (limited
to 30 requests) and one set of Requests for Admission (limited to 30 requests),
each of which shall be answered by the recipient thereof within two weeks of its
receipt. Otherwise, the arbitration shall be conducted in accordance with the
rules of the American Arbitration Association.
(e) CONCLUSION OF ARBITRATION. Unless the Final Arbitrator otherwise
directs, the decision of the Final Arbitrator as to the parties' respective
rights and obligations shall be made within 60 days of the end of the
Negotiation Period and shall be binding on the parties. The Final Arbitrator may
determine that a party is entitled to Damages hereunder from one or more other
parties, and the manner in which such Damages shall be assessed against the
other parties. However, the Final Arbitrator may not award emotional distress or
punitive Damages.
(f) EXPENSES OF ARBITRATORS. The expenses of the Final Arbitrator
shall be shared equally by the parties to the arbitration. The expenses of each
other arbitrator selected hereunder shall be borne by the party selecting such
arbitrator.
6.10 OTHER RIGHTS AND REMEDIES NOT AFFECTED. Except as set forth herein,
the indemnification rights of the parties under this Agreement are independent
of and in addition to such rights and remedies as the parties may have at law or
in equity or otherwise for any misrepresentation, breach of warranty or failure
to fulfill any agreement or covenant hereunder on the part of any party hereto,
including without limitation the right to seek specific performance, rescission
or restitution, none of which rights or remedies shall be affected or diminished
hereby. The indemnification rights of the parties under this Article VI shall be
the sole remedy available to Purchaser and Seller after the Closing with respect
to the representations and warranties set forth herein or made or deemed to be
made in connection with this Agreement.
ARTICLE VII - POST CLOSING MATTERS
7.1 SELLER'S AFFECTED EMPLOYEES.
(a) Purchaser will cause Holdings to continue the employment of, or
reemploy, all of the Affected Employees listed on SCHEDULE 3.1(U) who have been
actively working on the job for the period beginning 30 days prior to the
Closing Date and ending on the Closing Date initially at the same salaries and
wages of such Affected Employees on the Closing Date. Nothing in this Agreement
shall be considered a Contract between Holdings or Purchaser and any Affected
Employee or consideration for, or inducement with respect to, any Affected
Employee's continued employment, or reemployment, and, without limitation, all
such Affected Employees are and will continue to be considered to be employees
at will pursuant to the applicable state employment at will laws or doctrines.
Purchaser warrants to Seller that it will take no action not contemplated in
this Agreement which would have the effect of causing a "plant closing" or "mass
layoff" within the meaning of the Workers Adjustment and Retraining Notification
Act ("WARN").
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(b) Without limiting the generality of any other provision of this
Agreement, Seller agrees that it is required to, and shall comply with the
provisions of Section 4980B of the Code by notifying each Affected Employee who
is not employed by Holdings on or after the Closing Date, and does not continue
in the employ of Seller after the Closing Date, of their right, if any, to
"continuation coverage" (as defined in Section 4980B(f)(2) of the Code) under
the group health plan of Seller or ERISA Affiliate, and Seller agrees that
Seller or an ERISA Affiliate will maintain a group health plan in which such
Affected Employees who do not become employees of Holdings will have
continuation coverage rights until that continuation coverage terminates with
respect to all such Affected Employees.
(c) Notwithstanding anything to the contrary in this Section 7.1, if
a salaried, non-hourly Affected Employee remains a salaried, non-hourly employee
of Holdings or Purchaser on the Closing Date, and Holdings or Purchaser
terminates such salaried, non-hourly Affected Employee without cause prior to
the date that is 18 months from the Closing Date, Holdings or Purchaser will pay
any such terminated salaried, non-hourly Affected Employee (other than tool
pushers) an amount (in regular bi-weekly payments) which is equal to the product
of (i) one month's current salary, as determined at the time of the termination,
times (ii) such Affected Employee's number of full years of service for Seller
shown on SCHEDULE 3.1(U). Any such salaried, non-hourly Affected Employee may be
required by Purchaser or Holdings to change his or her primary work location,
provided any such change does not require a change of principal residence or an
unreasonable commute; if the salaried, non-hourly Affected Employee refuses or
declines any such relocation, he/she shall not be entitled to the termination
payments described in this Section. "CAUSE" for this purpose shall mean conduct
such as fraud, embezzlement, theft, commission of a felony, or any other
criminal act against Purchaser, Holdings, or employees of Purchaser or Holdings,
dishonesty in the course of employment with Purchaser or Holdings, excessive
absenteeism under Purchaser's or Holdings' applicable policies, or deliberate
disregard of assigned duties and responsibilities, or of Purchaser's or
Holdings' written employment policies of general application.
(d) With respect to each Affected Employee employed by Purchaser,
Purchaser shall deem the period of employment with Seller (as reflected on
SCHEDULE 3.1(U)) to have been employment and service with Purchaser for purposes
of determining the Affected Employee's eligibility to join, and vesting (if any)
under, but, without limitation, not with respect to the Affected Employee's
accrual of benefits under, all of Purchaser's employee benefit plans, programs,
policies or similar employment related arrangements to the extent service with
Purchaser is recognized thereunder. Purchaser shall waive, and to the extent
necessary to effect the terms hereof, if any, shall cause the relevant insurance
carriers and other third parties to waive, such restrictions and limitations for
any medical condition existing as of the Closing Date of those Affected
Employees, and such of their dependents, who are covered on the Closing Date
under the Employee Benefit Plan which is a group health plan, but only to the
extent that such medical condition would be covered by Purchaser's or Holdings'
group health plan if it were not a pre-existing condition and only to the extent
of comparable coverage in effect under such Employee Benefit Plan which is a
group health plan immediately prior to the Closing Date. Further, Purchaser
shall offer to each Affected Employee coverage under a group health plan (as
defined in Section 5000(b)(1) of the Code) which (i) provides medical and dental
benefits to such
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Affected Employee and his eligible dependents (within the meaning of Purchaser's
group health plan) effective as of the later of the Closing Date and the date
Affected Employees' coverage under Purchaser's or Holdings' group health plan
terminates, (ii) credits such Affected Employee towards the deductibles imposed
under Purchaser's group health plan, for the year during which the Closing Date
occurs, with any deductibles already incurred during such year under Seller's
group health plan, and (iii) waives any pre-existing condition restrictions to
the extent provided in the preceding sentence.
7.2 DISCHARGE OF BUSINESS OBLIGATIONS. Following the Closing Date, Seller
shall pay and discharge, in accordance with past practice but not less than on a
timely basis, all obligations and liabilities incurred by Seller or Holdings
prior to the Closing Date relating to the Business and the Assets, its
operations or the assets and properties used therein (except for the Assumed
Liabilities and except to the extent prorated pursuant to Section 1.5),
including without limitation any liabilities or obligations to employees, trade
creditors and customers of the Business. Seller and Purchaser shall each use
their best efforts following the Closing to ensure a smooth transition of the
Business to Holdings as controlled by Purchaser. Following the Closing Date,
Purchaser shall pay and discharge, or cause Holdings to pay and discharge, not
less than on a timely basis, all obligations and liabilities incurred on or
after the Closing Date with respect to the Business or the Assets, and
operations or the assets and properties used therein, including without
limitation any such liabilities or obligations to trade creditors and customers.
Notwithstanding the foregoing, with respect to accrued vacation and other
similar employee expenses relating to Affected Employees, all such amounts up to
but not to exceed $650,000, will be assumed by Purchaser at the Closing. Any
such amounts ultimately not paid by Purchaser or Holdings within one year
following Closing, up to $250,000, shall be accounted for and refunded to
Seller.
7.3 MAINTENANCE OF BOOKS AND RECORDS. Seller and Purchaser shall (and
Purchaser will cause Holdings to) each preserve all Records possessed by such
party relating to the Business or Assets prior to the Closing Date for a period
of at least six years following the fiscal year to which the Records relate.
After the Closing Date, where there is a legitimate purpose, such party shall
provide the other parties and their representatives with access, upon prior
reasonable written request specifying the need therefor, during regular business
hours, to (a) the officers and employees of such party and (b) the books of
account and Records of such party, but, in each case, only to the extent
relating to the Assets or Business prior to the Closing Date, and the other
parties and their representatives shall have the right to make copies of such
books and Records; provided, however, that the foregoing right of access shall
not be exercisable in such a manner as to interfere unreasonably with the normal
operations and business of such party; and further, provided that, as to so much
of such information as constitutes trade secrets or confidential business
information of such party, the requesting party and its officers, directors and
representatives will use due care to not disclose such information except (x) as
required by law, (y) with the prior written consent of such party, which consent
shall not be unreasonably withheld, or (z) where such information becomes
available to the public generally, or becomes generally known to competitors of
such party through sources other than the requesting party, its affiliates or
its officers, directors or representatives. Such Records may nevertheless be
destroyed by a party if such party sends to the other parties written notice of
its intent to destroy the Records, specifying with particularity the contents of
the Records to be destroyed. Such Records may then
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be destroyed after the 30th day after such notice is given unless another party
objects to the destruction in which case the party seeking to destroy the
Records shall deliver such Records to the objecting party.
7.4 PAYMENTS RECEIVED. Seller and Purchaser each agree that after the
Closing they will (and Purchaser will cause Holdings to) hold and will promptly
transfer and deliver to the other, from time to time as and when received by
them, any cash, checks with appropriate endorsements (using their best efforts
not to convert such checks into cash), or other property that they may receive
on or after the Closing which properly belongs to the other party, including
without limitation any insurance proceeds, and will account to the other for all
such receipts. Following the Closing, Purchaser and Holdings shall have the
right and authority to endorse without recourse the name of Seller on any check
or any other evidences of indebtedness received by Purchaser or Holdings on
account of the Business and the Assets, for the sole purpose of depositing such
items into accounts over which Seller has signatory authority.
7.5 USE OF NAME. Promptly following the Closing Date, and in any event
within 60 days following the Closing Date, Purchaser shall cause Holdings to
replace, repaint or remark all signs, signage and other items containing
Seller's name, logo or otherwise containing the word "Pride" so as not to make
any reference to Seller's name or logo.
7.6 INQUIRIES. Following the Closing Date, Seller will promptly refer all
inquiries with respect to Holdings or with respect to ownership of the Assets or
the Business to Purchaser. In addition, Seller will execute such documents and
financing statements as Purchaser may reasonably request from time to time to
evidence the transactions contemplated by this Agreement.
7.7 COVENANT NOT TO COMPETE. Seller agrees that for a period of five years
after the Closing Date, neither Seller nor any of its subsidiaries will,
directly or indirectly, own, manage, operate, join or control, or participate in
ownership, management, operation or control of, any business whether in
corporate, proprietorship or partnership form or otherwise as more than a ten
percent owner in such business where such business is competitive with the
Business in providing onshore oil field rig workover services and is within a
75-mile radius of any of Purchaser's facilities now existing or Seller's or
Holdings' facilities used in the Business or in the operation of the Assets as
of the Closing Date. The foregoing does not restrict Seller or its subsidiaries
from owning or operating drilling rigs. The parties hereto specifically
acknowledge and agree that the remedy at law for any breach of the foregoing
will be inadequate and that Purchaser, in addition to any other relief available
to it, shall be entitled to temporary and permanent injunctive relief without
the necessity of proving actual damage. Seller acknowledges that this covenant
not to compete is being provided as an inducement to Purchaser to acquire the
Stock and that this Section 7.7 contains reasonable limitations as to time,
geographical area and scope of activity to be restrained that do not impose a
greater restraint than is necessary to protect the goodwill or other business
interest of Purchaser in the Business. Whenever possible, each provision of this
Section 7.7 shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Section 7.7 is prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remaining
provisions of this Section 7.7. If any provision of this Section 7.7 is, for any
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reason, judged by any court of competent jurisdiction to be invalid or
unenforceable, such judgment shall not affect, impair or invalidate the
remainder of this Section 7.7 but shall be confined in its operation to the
provision of this Section 7.7 directly involved in the controversy in which such
judgment has been rendered. If the provisions of this Section 7.7 are ever
deemed to exceed the time or geographic limitations permitted by applicable
laws, then such provisions shall be reformed to the maximum time or geographic
limitations permitted by applicable law.
7.8 SUBSEQUENT ACQUISITIONS BY SELLER. The parties agree that during the
five-year period specified in Section 7.7 above, Seller may acquire entities
which, as an immaterial part of their business, provide domestic, onshore well
servicing. If, as a result of any such acquisition, Seller is in violation of
the provisions of Section 7.7, Seller shall have one year from the date of such
acquisition, to cease all operations that violate Section 7.7, and shall be
deemed not to be in violation of Section 7.7 during such one-year period as a
result of such activities.
7.9 TRANSITION PERIOD. During the six-month period following the Closing
(the "TRANSITION PERIOD"), the parties shall operate the Business in the
following manner. As used in this Section 7.9, references to Purchaser shall
include Holdings.
(a) COLLECTIONS. Purchaser's employees shall issue invoices for work
in process as of the Closing Date for both the portion of the work completed by
Seller prior to the effective date of the Closing and the portion of the work
completed by Purchaser thereafter. Purchaser's employees shall use commercially
reasonable best efforts to collect the invoices issued on Seller's behalf and
Purchaser shall promptly pay to Seller all such amounts collected representing
work completed by Seller prior to the effective date of the Closing.
(b) ACCOUNTING. Purchaser's employees will assist Seller as
reasonably necessary to close out Seller's books and Records related to the
Business.
(c) LICENSES AND PERMITS. Seller will continue to cooperate with
Purchaser in connection with Purchaser's applications for the transfer, renewal
or issuance of any Permits, licenses, approvals or other Authorizations and as
required to satisfy any regulatory requirements arising as a result of the sale
of the Business pursuant to this Agreement, provided that all out-of-pocket
expenses incurred in connection therewith shall be paid by Purchaser.
(d) ACCESS TO CORPORATE HEADQUARTERS. Seller shall provide
Purchaser's employees with reasonable access during normal business hours to
Seller's ordinary work environment at Seller's corporate headquarters in
Houston, Texas, including but not limited to reasonable access during normal
business hours to Seller's computer systems used in the Business and MIS systems
used in the Business, and shall allow Purchaser's employees to communicate with
Seller's employees at that location in order for Purchaser's employees to obtain
certain information required for the operation of the Business.
7.10 ACCOUNTING RECORDS. For a five-year period following the Closing,
Seller will use commercially reasonable efforts to allow Purchaser to obtain
access to audit work papers of
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Seller's accountants for the immediately preceding five years, if Purchaser
requests such access in connection with the audit by Purchaser of Seller for
periods preceding the Closing.
7.11 NONDISCLOSURE OF PROPRIETARY INFORMATION.
(a) Seller agrees that, from and after the Closing Date, Seller and
its subsidiaries shall hold in confidence and will not directly or indirectly at
any time reveal, report, publish, disclose or transfer to any person other than
Purchaser any proprietary information relating primarily to the Business or the
Assets (the "PROPRIETARY INFORMATION") that is not generally known to the public
or use any Proprietary Information for any purpose.
(b) Seller acknowledges that all documents and objects containing or
reflecting any Proprietary Information whether developed by Seller or by a third
party for Seller, will after the Closing Date become the exclusive property of
Purchaser and be delivered to Purchaser.
7.12 CONTACT WITH FORMER EMPLOYEES. Purchaser and Seller agree for a
period of two years following the Closing Date, not to solicit, directly or
indirectly, any of the other's respective employees, or employees of their
respective subsidiaries.
7.13 ASSUMED OBLIGATIONS. Purchaser shall, and shall cause Holdings to,
fulfill in all material respects the obligations it assumes in connection with
the Assumed Liabilities, and shall indemnify Seller for any loss or expense
incurred by Seller for events occurring after the effective time of the Closing
relative to the Assumed Liabilities or relating to the conduct of the Business
after the Closing.
ARTICLE VIII - TERMINATION
8.1 EVENTS OF TERMINATION. The obligation to close the transactions
contemplated by this Agreement may be terminated as follows:
(a) by mutual agreement of Purchaser and Seller;
(b) by Purchaser, if a material default is made by Seller in the
observance or in the due and timely performance by Seller of any agreements and
covenants of Seller herein contained, or if there has been a breach by Seller of
any of the warranties and representations of Seller herein contained that
results in a material adverse effect (without giving effect to the individual
materiality qualifications and thresholds otherwise contained in Section 3.1
hereof), and such default or breach has not been cured or waived within 20 days
of written notice thereof;
(c) by Seller, if a material default is made by Purchaser in the
observance or in the due and timely performance by Purchaser of any agreements
and covenants of Purchaser herein contained, or if there has been a breach by
Purchaser of any of the warranties and representations of Purchaser herein
contained that results in a material adverse effect (without giving effect to
the individual materiality qualifications and thresholds otherwise contained in
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Section 3.2 hereof), and such default or breach has not been cured or has not
been waived within 20 days of written notice thereof;
(d) by Purchaser or Seller, upon written notice provided not less
than four business days prior to the effective date of such termination
(provided the terminating party has not materially breached any of its
agreements, covenants or representations and warranties), if the Closing shall
not have occurred on or before March 17, 1997.
8.2 LIABILITY UPON TERMINATION. If the obligation to consummate the
transactions contemplated by this Agreement is terminated pursuant to any
provision of this Article VIII, then, other than the provisions of Section 8.4
which shall survive such termination, this Agreement shall forthwith become void
and there shall not be any liability or obligation with respect to this
Agreement on the part of Seller or Purchaser except and to the extent such
termination results from the willful breach by a party of any of its
representations, warranties or agreements hereunder.
8.3 NOTICE OF TERMINATION. The parties hereto may exercise their
respective rights of termination under this Article VIII only by delivering
written notice to that effect to the other party on or before the Closing Date
(or, in the event of a termination pursuant to Section 8.1(d), at the time
therein provided), specifically describing the factual basis and provisions of
this Agreement relied upon for such termination.
8.4 BREAK-UP FEE. Seller acknowledges that Purchaser is required to secure
financing to fund the Closing, and intends to seek funding by offering
securities in public or, if required, in private transactions as set forth in
Section 5.1(k). In the event Purchaser is not able to obtain such funding and
this Agreement is terminated pursuant to Section 8.1(d), Purchaser agrees to pay
Seller within fifteen days following the date of such termination (i) $1.0
million in cash and (ii) $4.0 million in cash or, at Purchaser's option, through
the issuance to Seller of Purchaser's common stock, par value $0.01 per share
("PURCHASER'S COMMON STOCK"). Purchaser's Common Stock shall be valued at the
average closing price reported on the Nasdaq National Market for the 10 trading
days immediately prior to the date of termination of this Agreement. In the
event Purchaser's Common Stock is issued as described above, Purchaser shall
grant registration rights to Seller with respect to such shares, consistent with
the Registration Rights Agreement dated November 1, 1995, by and among Purchaser
and the Holders, as therein defined. The fee described above is referred to
herein as the "BREAK-UP FEE." The parties agree that the Break-Up Fee is a
substitute for Damages and not an incentive to performance and that the amount
is a reasonable estimate of the harm that would result from any such breach or
termination in light of the anticipated harm, difficulties of proof of loss, and
inconvenience or non-feasibility of any other remedy and that the Break-Up Fee
is not imposed as a penalty; provided, however, that if any court or other
authority determines that the Break-Up Fee is unreasonable or otherwise
unenforceable, Purchaser shall pay to Seller the maximum reasonable amount
payable as a Break-Up Fee allowable by law, but not to exceed $5.0 million. If
the Break-Up Fee is judicially determined not to be enforceable, Seller shall be
entitled to all other rights and remedies provided by law or in equity.
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ARTICLE IX - MISCELLANEOUS
9.1 FINDERS' FEES. Other than the fees payable by Purchaser to Jefferies &
Company, Inc., Seller represents to Purchaser and Purchaser represents to Seller
that all negotiations relative to this Agreement have been carried on by them
directly without the intervention of any person who may be entitled to any
brokerage or finder's fee or other commission in respect of this Agreement or
the consummation of the transactions contemplated hereby, and each agrees to
indemnify and hold harmless the other against any and all claims, losses,
liabilities and expenses which may be asserted against or incurred by it as a
result of its dealings, arrangements or agreements with any such person.
9.2 EXPENSES. Except as otherwise provided in this Agreement, each party
hereto shall pay its own expenses incidental to the preparation of this
Agreement, the carrying out of the provisions of this Agreement and the
consummation of the transactions contemplated hereby.
9.3 ASSIGNMENT AND BINDING EFFECT. This Agreement may not be assigned
prior to the Closing by any party hereto without the prior written consent of
the other party; provided, however, Purchaser may assign its rights and
obligations hereunder to any other entity that is controlling, controlled by or
under common control with Purchaser but any such assignment shall not relieve
Purchaser of its obligations hereunder. Purchaser shall give Seller prompt
written notice of any such assignment. Subject to the foregoing, all of the
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the successors and assigns of Seller and
Purchaser.
9.4 NOTICES. Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by facsimile (in
either case, with a copy also sent by first class mail, postage prepaid) as
follows:
If to Purchaser, to: With a copy to:
Dawson Production Services, Inc. Jenkens & Gilchrist,
901 N.E. Loop 410, Suite 700 A Professional Corporation
San Antonio, Texas 78209-1306 600 Congress Avenue, Suite 2200
ATTN: Michael E. Little Austin, Texas 78701
Facsimile Number: (210) 930-3345 ATTN: J. Rowland Cook
Facsimile Number: (512) 404-3520
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If to Seller, to: With a copy to:
Pride Petroleum Services, Inc. Baker & Botts, L.L.P.
1500 City West Blvd., Suite 400 One Shell Plaza
Houston, Texas 77042 910 Louisiana Street
ATTN: Robert W. Randall Houston, Texas 77002
Facsimile Number: (713) 789-1430 ATTN: L. Proctor Thomas and
J. David Kirkland, Jr.
Facsimile Number: (713) 229-1522
or to such other address or facsimile number as the addressee may have specified
in a notice duly given to the sender as provided herein. Such notice, request,
demand, waiver, consent, approval or other communication will be deemed to have
been given as of the date so delivered or faxed.
9.5 GOVERNING LAW. This Agreement shall be governed by, interpreted and
enforced in accordance with the laws of the State of Texas (without regard to
the choice or conflicts of law provisions of Texas law).
9.6 NO BENEFIT TO OTHERS. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the parties
hereto and their heirs, executors, administrators, legal representatives,
successors and assigns and they shall not be construed as conferring any rights
on any other persons, except for (a) in the case of Article VI hereof, certain
other indemnified parties, and (b) in the case of Section 7.1(d) hereof, the
Affected Employees.
9.7 ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the parties and supersedes any
prior understandings, agreements, or representations by or among the parties,
written or oral, to the extent they related in any way to the subject matter
hereof except that the Confidentiality Agreement dated November 13, 1996,
between Purchaser and Seller shall remain in full force and effect. All Exhibits
and Schedules referred to herein are incorporated herein in full and are
specifically made a part of this Agreement.
9.8 HEADINGS. All Section headings contained in this Agreement are for
convenience of reference only, do not form a part of this Agreement and shall
not affect in any way the meaning or interpretation of this Agreement.
9.9 SEVERABILITY. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or enforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction; provided if any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws effective
during the effective period of this Agreement, such provision shall be fully
severable; this Agreement shall be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions of this Agreement shall remain in full
force and effect
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and shall not be affected by the illegal, invalid, or unenforceable provision or
by its severance from this Agreement. Furthermore, in lieu of each illegal,
invalid, or unenforceable provision there shall be added automatically as part
of this Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
9.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when all counterparts taken
together shall have been executed and delivered by the parties. It shall not be
necessary in making proof of this Agreement as to a party to produce or account
for any of the other counterparts signed by another party not joined in the
action.
9.11 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. Words used herein,
regardless of the number and gender specifically used, shall be deemed and
construed to include any other number, singular or plural, and any other gender,
masculine, feminine or neuter, as the context requires. Any reference to a
"PERSON" herein shall include an individual, firm, corporation, partnership,
trust, Governmental Entity, association, unincorporated organization and any
other entity. Any references to a Section, Article, Schedule or Exhibit are to
sections, articles, schedule and exhibits to this Agreement, unless otherwise
specifically stated.
9.12 WAIVER. No waiver by any party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent occurrence.
9.13 SPECIFIC PERFORMANCE. The parties acknowledge and agree that a party
would be damaged irreparably if any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, a party shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions of this Agreement in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the parties and the matter (subject to the provisions set
forth in Section 6.9), in addition to any other remedy to which they may be
entitled, at law or in equity.
9.14 GOOD FAITH. The parties agree to act in good faith in the performance
and enforcement of the Agreement.
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9.15 ATTORNEYS' FEES. Except as otherwise provided in Section 6.9, if any
arbitration or action at law or in equity, including an action for declaratory
relief, is brought to enforce or interpret the provisions of this Agreement, the
Prevailing Party shall be entitled to recover reasonable attorneys' fees and
costs from the other party. No party to any such proceeding shall be considered
a "PREVAILING PARTY" unless it recovers more (or pays less) as a result of
arbitration or a lawsuit than it has been offered as a settlement of the
dispute.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first written.
DAWSON PRODUCTION SERVICES, INC.
By: /s/MICHAEL E. LITTLE
Michael E. Little
President
PRIDE PETROLEUM SERVICES, INC.
By: /s/RAY TOLSON
Ray Tolson
Chairman of the Board, President
and Chief Executive Officer
43
FIRST AMENDMENT TO PURCHASE AGREEMENT
This First Amendment to Purchase Agreement (this "AMENDMENT") amends
certain provisions of the Purchase Agreement dated December 23, 1996 (the
"PURCHASE AGREEMENT"). This Amendment is entered into on February 20, 1997 (the
"EFFECTIVE DATE"), by and between Dawson Production Services, Inc., a Texas
corporation (the "PURCHASER") and Pride Petroleum Services, Inc., a Louisiana
corporation (the "SELLER"). In this Amendment, capitalized terms shall have the
meanings given to them in the Purchase Agreement.
RECITALS:
A. The parties previously entered into the Purchase Agreement relating to
the sale to Purchaser of equity interests in entities that own all or
substantially all of Seller's domestic onshore well servicing assets; and
B. The parties desire to amend the Purchase Agreement to add several
additional
provisions;
NOW, THEREFORE, in consideration of the recitals and of the respective
covenants, representations, warranties and agreements contained in this
Agreement, and intending to be legally bound by this Agreement, the parties
agree as follows:
1. REAL PROPERTIES.
1.1. EXCLUDED FEE PROPERTIES. The following fee properties which are
further identified on Schedule 1.1(a)(i) of the Purchase Agreement shall not be
transferred by Seller to the Partnership. Pursuant to Section 1.7 of the
Purchase Agreement, Purchaser and Seller shall enter into leases with respect to
each of these properties, effective as of the Closing Date, which shall each
have a one year term and include an option to purchase.
Alice, Texas
El Campo, Texas
Lafayette, Louisiana
Pearland, Texas
Kilgore, Texas
Liberty Maintenance Shop, Liberty County, Texas
Midland, Texas
Crane, Texas- (510 S.E. County Road) (Lots 1,2 and 3 of Block 5, in
the Industrial Park Addition to the City of Crane, Crane
County, Texas, as the same are shown of record in the office
of the County Clerk of Crane County, Texas)
Hobbs, New Mexico
Snyder, Texas
<PAGE>
At least 30 days prior to February 20, 1998, Purchaser will notify Seller as to
which properties it elects to purchase pursuant to such options. Purchaser and
Seller will cause an independent appraiser or appraisers mutually agreed to by
them to appraise the fair market value of the properties that Purchaser elects
not to purchase. If the aggregate appraised value of the properties not
purchased by Purchaser exceeds $250,000, Seller shall pay the excess to
Purchaser and if such aggregate appraised value is less than $250,000, Purchaser
shall pay the deficiency to Seller.
1.2. ADJUSTMENT TO PURCHASE PRICE. As a result of Purchaser's election not
to acquire the fee properties identified in Section 1.1 above, the Purchase
Price to be paid at Closing shall be reduced by $250,000. The parties hereby
expressly agree that the amount of this price reduction is not intended to
represent the fair market value of these properties.
1.3. EXCLUDED LEASE PROPERTIES. The rights of Seller relating to the lease
property located in Fellows, California, which is further identified on Schedule
1.1(a)(ii) of the Purchase Agreement shall not be transferred by Seller to the
Partnership.
1.4. ADDITIONAL PROPERTIES. The Crane properties located at 111 North
Gaston, 1100 County Road East, and 606 S.E. County Road, which are more fully
described on EXHIBIT A of this Amendment, were not included on Schedule
1.1(a)(i) but shall be transferred from Seller to the Partnership.
1.5. POST-CLOSING ITEMS. After the Closing, Seller shall take all actions
necessary or appropriate to accomplish the following:
i. To obtain the release of the $3 million lien in favor of Post Oak
Bank that affects Crane, El Campo and Bakersfield and a State of
Texas tax lien in the amount of $14,369.80 affecting several
properties. In addition, if at any time the Partnership or
Purchaser, as the case may be, exercises its option to purchase
any of the properties identified in Section 1.1 of this
Amendment, Seller shall, at that time, take all commercially
reasonable action necessary or appropriate to obtain the release
of all third party liens on those properties, if any, other than
the Permitted Liens.
ii. To correct all errors in and omissions from the property
descriptions listed on Schedule 1.1(a)(i) of the Purchase
Agreement and to provide evidence sufficient to reasonably
satisfy Purchaser that the deeds transferred by Seller to the
Partnership convey all of the Real Property Seller or its
affiliates own that is used primarily in connection with the
Business. If any additional properties owned by Seller that is
used primarily in connection with the Business are identified by
either party after the Closing, Seller shall, at Purchaser's
option, cause such properties to be promptly conveyed to the
Partnership or Purchaser for no additional consideration.
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iii. If prior to February 20, 1998 Purchaser advises Seller that it
has obtained information indicating that improvements on any of
the properties being conveyed to the Partnership prior to the
Closing (or on any of the properties which are acquired by the
Partnership or the Purchaser pursuant to an option to purchase
under a lease from Seller), violate or encroach into any existing
easement, and such does not constitute a Permitted Lien, Seller
shall take all commercially reasonable efforts to assist
Purchaser (at Purchaser's cost) in securing a waiver and release
of the violation or encroachment, provided that Seller shall not
be required to expend funds or incur liabilities.
iv. Seller shall take all commercially reasonable actions requested
by title companies issuing title policies on properties being
conveyed by Seller to the Partnership to allow such title
companies to issue such policies without exception for Schedule C
items, except for the $8,751.28 judgment lien effecting the
Liberty Property.
2. EMPLOYEE MATTERS.
2.1. EMPLOYEE TERMINATIONS. Any employee listed on Schedule 3.1(u) who is
the subject of an employment agreement assumed by the Partnership or Purchaser
at Closing, upon termination, shall receive the greater of the amount provided
in Section 7.1(c) and the amount he would otherwise be entitled to under such
employment agreement, if any; provided, however, that no such employee shall be
entitled to receive both amounts.
2.2. ROB MATTHEWS. The parties acknowledge that Rob Matthews was
terminated by Seller, for cause, prior to the date of the Purchase Agreement and
that Mr. Matthews' name should not have been included on Schedule 3.1(u).
Schedule 3.1(u) is hereby amended to exclude Rob Matthews' name and any
reference to his employment agreement from Schedule 3.1(u).
2.3. HOLDINGS CONTRACTS. Schedule 3.1(u) is amended by adding the
employment agreement effective January 1, 1988 with F.R. Littlefield. The
employment agreements listed on Schedule 3.1(u) (other than the employment
agreement with Rob Matthews), to the extent assignable, and that certain
Noncompetition Agreement dated February 7, 1996, by and between Eagle Well
Service, Inc., Eagle Well Production Services, Inc. and Pride Petroleum
Services, Inc. are hereby added to Schedule 1.1(a)(iii) and shall be included in
the assets transferred by Seller to the Partnership prior to Closing. The
employment agreement between Seller and Rob Matthews is hereby expressly
excluded from the assets being transferred by Seller to the Partnership prior to
Closing.
3. EMPLOYMENT TAX ISSUES.
3.1. STATE UNEMPLOYMENT INSURANCE TAXES. After the Closing, Seller shall
grant Purchaser access to records relating to Seller's unemployment tax accounts
and shall assist Purchaser in its efforts, if any, to cause the relevant state
agency to transfer Seller's unemployment experience record
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relating to the Business (the "RECORD") to the Partnership. In connection with
the foregoing, upon the request of Purchaser, Seller shall sign an application
for the partial or complete transfer of the Record to the Partnership, so long
as such action will not have any material adverse effect on or cost to Seller.
3.2. FEDERAL EMPLOYMENT TAXES. After the Closing, Purchaser shall have the
right to transfer Seller's federal taxable wages for social security and federal
unemployment tax under applicable federal tax rules and regulations. After the
Closing, Seller shall report and remit federal taxes at the appropriate time or
times.
4. BECHTEL AGREEMENT. With respect to the Novation agreements and
instruments executed by Bechtel Petroleum Operations, Inc. (the "BPOI
AGREEMENT"), the parties agree:
4.1. Purchaser and the Partnership shall indemnify and hold Seller
harmless from and against any amount or cost Seller or its affiliates is
required to pay with respect thereto with respect to services provided or other
actions after the Closing.
4.2. Purchaser and the Partnership will cause Seller to be named as an
additional named insured, and to waive rights of subrogation against Seller,
under its insurance policies with respect to work subject to the BPOI Agreement.
4.3. Neither Purchaser nor the Partnership shall extend the term of the
BPOI Agreement without procuring the express release of Seller and its
affiliates from any liabilities arising after the scheduled termination of the
BPOI Agreement.
5. AFFIRMATION OF PURCHASE AGREEMENT. All provisions of the Purchase
Agreement remain in full force and effect except as may be expressly provided
herein.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the Effective Date.
DAWSON PRODUCTION SERVICES, INC.
By: /s/ MICHAEL E. LITTLE
Michael E. Little
President
PRIDE PETROLEUM SERVICES, INC.
By: /s/ ROBERT W. RANDALL
Robert W. Randall
Vice President and General Counsel
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