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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: AUGUST 28, 1996
UTI ENERGY CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 001-2542 23-2037823
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
485 DEVON PARK DRIVE, SUITE 112
WAYNE, PENNSYLVANIA 19087
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (610) 971-9600
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ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS
On August 14, 1996 (the "Closing Date"), UTI Energy Corp., a Delaware
corporation (the "Company"), entered into a Stock Purchase Agreement (the "Stock
Purchase Agreement") with The Sam K. Viersen Jr. Trust dated September 9, 1986
as Amended and Restated on May 11, 1994 (the "Seller"), pursuant to which a
subsidiary of the Company purchased all of the outstanding shares (the "Shares")
of capital stock of the Viersen & Cochran Drilling Company, an Oklahoma
corporation ("Viersen"). Viersen owns a fleet of 13 drilling rigs with related
spare equipment and approximately 500,000 feet of drill pipe. Viersen had
suspended its operations prior to the Closing Date. The Company intends to use
Viersen's assets in its operations and may dispose of certain of the acquired
assets to the extent such assets are determined to be surplus to the future
operations of the Company. Under the terms of the Stock Purchase Agreement, the
consideration paid by the Company for the Shares, which was arrived at through
arms-length negotiations between the parties, consisted of (i) $6,000,000 in
cash paid on August 14, 1996 (a portion of which the Company borrowed under
its existing credit agreement); (ii) a two-year $8,000,000 promissory note (the
"Promissory Note") executed by the Company in favor of the Seller; and (iii)
stock warrants (the "Warrants") to purchase 200,000 shares of the Company's
common stock, $.001 par value, at $15 per share.
The Promissory Note bears interest at the rate of 6% per annum and is
payable in full on or before August 14, 1998. The terms of the Promissory Note
require the Company to make a principal payment of $1,500,000 on or before
August 14, 1996 and an additional principal payment of $1,500,000 on or before
February 14, 1997. The Company has the option under the Promissory Note to pay
Seller $7,650,000 plus accrued interest on or before February 14, 1997 in full
satisfaction of the Promissory Note. The Company's obligations under the
Promissory Note are guaranteed by Viersen and are secured by a pledge of the
assets of Viersen pursuant to a security agreement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
* (a) Financial statements of business acquired.
* (b) Pro forma financial information.
(c) Exhibits.
2.1 Stock Purchase Agreement dated August 14, 1996, by and between
The Sam K. Viersen, Jr. Trust dated September 9, 1986 as
Amended and Restated on May 11, 1994 and UTI Energy Corp.
Pursuant to Item 601(b)(2) of Regulation S-K, schedules and
similar attachments (other than Attachment A) to the Stock
Purchase Agreement have not been filed with this exhibit.
Attachments B, D and E to the Stock Purchase Agreement have
been filed as Exhibits 4.1, 4.2 and 4.3 to this Form 8-K,
respectively. Exhibits C (form of Guaranty Agreement), F
(form of Lease Agreement) and G (form of Escrow Agreement) as
well as the Disclosure Schedule, which contains a list of
Viersen's assets and liabilities and
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Viersen's financial statements, will be filed supplementally
with the Commission upon request.
4.1 Promissory Note of UTI Energy Corp. dated August 14, 1996, in
the principal amount of $8,000,000 in favor of The Sam K.
Viersen, Jr. Trust dated September 9, 1986 as Amended and
Restated on May 11, 1994.
4.2 Hypothecation/Security Agreement dated August 14, 1996, by
Viersen & Cochran Drilling Company in favor of The Sam K.
Viersen, Jr. Trust dated September 9, 1986 as Amended and
Restated on May 11, 1994.
4.3 Stock Purchase Warrant dated August 14, 1996, between The Sam
K. Viersen, Jr. Trust dated September 9, 1986 as Amended and
Restated on May 11, 1994 and UTI Energy Corp.
* To be filed by amendment. It is impracticable for the Company to
provide the required financial statements and pro forma information
for Viersen & Cochran Drilling Company as of the date of this Form
8-K. Such financial statements will be filed by amendment within 60
days from the date this is due.
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SIGNATURES
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.
UTI ENERGY CORP.
/s/ P. BLAKE DUPUIS
Dated: August 28, 1996 --------------------------------------
P. Blake DuPuis
Vice President
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EXHIBIT INDEX
2.1 Stock Purchase Agreement dated August 14, 1996, by and between
The Sam K. Viersen, Jr. Trust dated September 9, 1986 as
Amended and Restated on May 11, 1994 and UTI Energy Corp.
4.1 Promissory Note of UTI Energy Corp. dated August 14, 1996, in
the principal amount of $8,000,000 in favor of The Sam K.
Viersen, Jr. Trust dated September 9, 1986 as Amended and
Restated on May 11, 1994.
4.2 Hypothecation/Security Agreement dated August 14, 1996, by
Viersen & Cochran Drilling Company in favor of The Sam K.
Viersen, Jr. Trust dated September 9, 1986 as Amended and
Restated on May 11, 1994.
4.3 Stock Purchase Warrant dated August 14, 1996, between The Sam
K. Viersen, Jr. Trust dated September 9, 1986 as Amended and
Restated on May 11, 1994 and UTI Energy Corp.
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and entered into
this 14th day of August, 1996, by and between The Sam K. Viersen Jr. Trust
dated September 9, 1986 as Amended and Restated on May 11, 1994 ("Seller"), and
UTI Energy Corp. ("Buyer").
RECITALS
A. Seller owns all the outstanding shares of the capital stock ("Shares")
of the Viersen & Cochran Drilling Company, an Oklahoma corporation
("Company").
B. Seller desires to sell to Buyer and Buyer desires to acquire the
Shares on the terms and conditions herein set forth.
C. Capitalized terms used herein shall have the meaning set forth on
Attachment "A", attached hereto unless otherwise stated herein.
NOW THEREFORE, in consideration of mutual promises, conditions and covenants
herein contained and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
AGREEMENT TO SELL AND AGREEMENT TO PURCHASE
1.1 PURCHASE AND SALE OF SHARES. On the terms and subject to the
conditions set forth herein, Seller hereby agrees to sell, transfer,
convey, assign and deliver to Buyer, free and clear of all Security
Interests whatsoever, and Buyer hereby agrees to purchase, acquire and
accept from Seller all of the Shares for the Purchase Price set forth
in Section 1.2 below.
1.2 PURCHASE PRICE. The purchase price for the Shares shall be
$14,000,000 ("Purchase Price") subject to adjustments as herein
provided. The Purchase Price shall be paid as follows:
1.2.1 The sum of $6,000,000 shall be paid to Buyer at Closing in
immediately available funds by cashiers' check or wire
transfer to a bank account designated by Seller not less
than two business days prior to the Closing Date.
Notwithstanding the foregoing, a portion of the cash
Purchase Price in an amount equal to the Accounts Payable
and Accrued Liabilities shall be withheld by Buyer in
accordance with the provisions of Section 4.2 hereof.
1.2.2 The sum of $8,000,000 by the execution by Buyer at Closing
of a promissory note in the form set forth on Attachment
"B" hereto ("Secured Note"), which shall be secured by the
Assets, bear interest at the rate of 6% per annum and be
payable in full on or before two years from the Closing
Date. The Secured Note's terms will require that Buyer make
a principal payment of $1,500,000 on or before the first
anniversary of the Closing Date, and an additional
principal payment of $1,500,000 on or before eighteen
months after the Closing Date. Buyer shall have the right,
but not the obligation, to pay to Seller $7,650,000 on or
before six months after the Closing Date in full
satisfaction of the Secured Note, but such right shall
lapse and be void if not exercised within such six months.
Payment of the Secured Note shall be guaranteed by the
Company in the form of the Guaranty Agreement set forth on
Attachment "C" hereto. The security interest shall be
evidenced by a security agreement executed by the Company
("Security Agreement") and financing statements
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(collectively the "Collateral Documents"). The form of the
Security Agreement is attached hereto as Attachment "D".
1.2.3 Additionally, Buyer shall deliver to Seller, at the
Closing, warrants entitling Seller, at its sole option, to
purchase up to 200,000 shares of Buyer's common stock at
the initial exercise price of $15.00 per share at any time
within two years after the Closing Date and having such
additional terms and conditions as are set forth in
Attachment "E" attached hereto (the "Warrants").
1.3 CLOSING. The Closing shall take place at the offices of Pray, Walker,
Jackman, Williamson & Marlar, 100 West Fifth Street, Ninth Floor,
Tulsa, Oklahoma, commencing at 10:00 a.m. (CST) on the Closing Date,
or such other time, date or location as may be agreed to by Buyer and
Seller.
1.4 DELIVERIES AT THE CLOSING. At the Closing, (i) Seller will deliver to
Buyer stock certificates representing the Shares, endorsed in blank or
accompanied by duly executed stock powers, and the various
certificates, instruments, and documents referred to in Section 5.1,
and (ii) Buyer will deliver to Seller the cash portion of the Purchase
Price due at Closing, the Secured Note, the Collateral Documents, the
Warrants and the various certificates, instruments, and documents
referred to in Section 5.2.
1.5 FURTHER ASSURANCES. From time to time after the Closing, Seller and
Buyer agree to execute and deliver to the other such instruments of
sale, transfer, conveyance, assignment and delivery, consents,
assurances, powers of attorney and other instruments as may be
reasonably requested by counsel for Buyer and Seller in order to vest
in Buyer all right, title and interest of Seller in and to the Shares
and otherwise in order to carry out the purpose and intent of this
Agreement.
1.6 CONDEMNATION OF, OR MATERIAL DAMAGE TO, ASSETS. In the event of,
prior to the Closing, the destruction of, or material damage to, any
Asset which shall have a Fair Market Value exceeding $10,000 (a
"Casualty Event"), which Seller shall have elected not to repair,
rebuild, restore or replace as provided below, Buyer, at its option,
may elect, prior to the Closing, (i) to exclude such Asset and to
treat such Asset as an Excluded Asset, provided, however, that the
Purchase Price shall be reduced by the Fair Market Value of such Asset
to reflect the exclusion of such Asset; or (ii) in the event that such
Asset or all such Assets shall have a Fair Market Value which shall
exceed $500,000, not to consummate the transactions contemplated by
this Agreement. Seller shall give Buyer prompt written notice (a
"Casualty Notice") of any such condemnation or Casualty Event,
indicating the Asset or Assets which suffered such condemnation or
Casualty Event, and Seller's estimate of the Fair Market Value of each
such Asset, accompanied by copies of all insurance related thereto,
any deductibles or retention applicable thereto, any defenses
threatened or asserted by the insurer or known to Seller, its estimate
of, and all available information relevant to, the cost of repair,
rebuilding, restoration or replacement thereof, and any other
information reasonably requested by Buyer. In the case of any
retention or deductible, Seller shall provide to Buyer prompt notice
of such retention or deductible. Seller may, in the applicable
Casualty Notice, elect, at the sole cost and expense of Seller, to
repair, rebuild, restore or replace such Asset for the benefit of the
Company. Upon any such election, Buyer shall have the option,
exercisable by notice to Seller on or before the fifth business day
after such Casualty Notice (but in any event prior to the Closing), to
accept such Asset without such repair, rebuilding, restoration or
replacement, in which event the cash portion of the Purchase Price
shall be reduced by the estimated cost of repair, rebuilding,
restoration or replacement as set forth in such Casualty Notice. In
the event that Buyer does not exercise such option, Seller shall
promptly undertake to provide sufficient funds to, and
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otherwise to cause, the Company to repair, rebuild, restore or replace
such Asset to substantially the same condition as prior to the event
causing such destruction or damage.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Buyer that except as set forth in the Disclosure Schedule:
2.1.1 AUTHORIZATION AND TITLE. Seller is the Sam K. Viersen, Jr.
Revocable Trust u/t/a dated September 9, 1986, as amended
and Restated u/t/a dated May 11, 1994. The Trustee acting
for and on behalf of Seller has the necessary power and
authority to enter into this Agreement on behalf of Seller
and to carry out the obligations hereunder. No further
actions by Seller, and no permission by any third party, is
necessary for the execution and delivery of this Agreement
by Seller, and the performance by Seller of its obligations
hereunder. This Agreement has been duly and validly
executed and delivered by the Trustee on behalf of Seller
(and assuming the due authorization, execution and delivery
hereof by Buyer), is a legal, valid and binding obligation
of Seller, enforceable against it in accordance with its
terms, subject, however, to applicable bankruptcy,
insolvency or similar laws relating to or affecting the
enforceability of creditors' rights generally, and general
equitable principles and limitations on the availability of
equitable remedies.
2.1.2 ORGANIZATION, QUALIFICATION AND CORPORATE POWER OF THE
COMPANY. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of
the State of Oklahoma. The Company is duly qualified or
licensed to conduct business as a foreign corporation and
is in good standing under the laws of each jurisdiction
where such qualification is required, all of which are set
forth in the Disclosure Schedule. The Company has
corporate power and authority, and all licenses, permits,
and authorizations necessary to carry on, the businesses in
which it is engaged and to own and use the properties and
assets (including the Assets) owned and used by it. Seller
has delivered to Buyer, correct and complete copies of the
charter and bylaws of the Company (as amended to date).
The Company's minute book, a copy of which has been
provided to Buyer, contains the records of all meetings and
consents of the stockholders, the board of directors, and
any committees of the board of directors, and the stock
register and transfer books of the Company records all
issuances and transfers of record of the capital stock of
the Company. The Company is not in default under or in
violation of any provision of its charter or bylaws.
2.1.3 CAPITALIZATION. The authorized capital stock of the
Company consists of 20,000 shares of common stock, $100.00
par value, of which 11,300 shares (constituting the Shares)
are issued and outstanding and no shares are held in
treasury. The Shares have been duly authorized and validly
issued, are fully paid and non-assessable and were not
issued in violation of any preemptive rights or any
applicable Law. There are no outstanding or authorized
options, warrants, subscriptions, calls, conversions or
other rights, contracts, agreements, commitments or
understandings of any kind obligating the Company to issue,
sell, purchase, return or redeem any shares of its capital
stock or any other securities convertible into,
exchangeable for or evidencing the right to subscribe for
any shares of capital stock of or other ownership interest
in
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the Company. Seller is the record and beneficial owner of
the Shares, free and clear of all Security Interests, and,
upon delivery of the Shares to Buyer against payment of the
Purchase Price, Buyer will own the Shares free and clear of
all Security Interests (other than those created by Buyer).
Seller is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of
any capital stock of the Company.
2.1.4 CONFLICTING INSTRUMENTS; CONSENTS.
(i) The execution and delivery by Seller of this
Agreement do not, and the performance by Seller of
its obligations hereunder and the consummation of
the transactions contemplated hereby will not, (i)
violate any provision of the trust agreement of
Seller or the articles of incorporation or the
bylaws of the Company, or result in the creation of
any Security Interest upon the assets of Seller or
the Company, or (ii) except for the authorizations,
approvals, consents or other actions set forth in
Section 2.1.4 of the Disclosure Schedule, conflict
with or result in a breach of, create an event of
default (or event that, with the giving of notice or
lapse of time or both, would constitute an event of
default) under, or give any third party the right to
terminate, cancel or accelerate any obligation under
any agreement, contract, lease, license, instrument
or other agreement to which Seller or the Company is
a party or by which Seller or the Company, or any
assets or properties of Seller or the Company, are
bound or affected.
(ii) Except as set forth in Section 2.1.4 of the
Disclosure Schedule, the execution and delivery by
Seller of this Agreement do not, and the
consummation of the transactions contemplated hereby
will not, result in a violation of, or require any
authorization, approval, consent or other action by,
or registration, declaration or filing with or
notice to, any Governmental Authority pursuant to,
any Law applicable to Seller. There is no pending
or, to Seller's Knowledge, threatened Proceeding
before or by any Governmental Authority, involving
or to restrain or prevent the consummation of the
transactions contemplated by this Agreement or, to
Seller's Knowledge, the right of Buyer to own the
Shares after the Closing Date.
2.1.5 BROKERS' FEES. Except for Wayne E. Swearingen or
Swearingen Petroleum Management, Inc., whose fees and
expenses shall be paid by Seller, neither Seller nor the
Company has engaged any finder, broker, consultant or
intermediary who would be entitled to a fee for the
transactions relating to this Agreement, or otherwise
incurred any liability for any such fees with respect
hereto.
2.1.6 TITLE TO ASSETS. The Company has good and marketable title
to all of the drilling and related equipment listed in
Section 2.1.6 of the Disclosure Schedule (the "Assets"),
free and clear of all Security Interests.
2.1.7 SUBSIDIARIES. There are no corporations, partnerships,
joint ventures, associations, limited liability companies
or other entities in which the Company owns, of record or
beneficially, any direct or indirect equity interest or
other interest or has any right, obligation or commitment
(contingent or otherwise) to acquire any such equity
interest.
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2.1.8 FINANCIAL STATEMENTS. The Financial Statements which are
attached as Section 2.1.8 to the Disclosure Statement have
been prepared from the books and records of the Company and
present fairly the financial condition and results of
operations of the Company as of the dates and for the
periods indicated using a cash basis of accounting.
2.1.9 NO MATERIAL ADVERSE CHANGE. Since the date of the
Financial Statements, there has been no material adverse
change in the financial condition, business or assets of
the Company or, to Seller's Knowledge, any change which
would have a material effect on the future financial
condition, business or assets, of the Company.
2.1.10 INSURANCE. Section 2.1.10 of the Disclosure Schedule sets
forth a summary of the existing insurance policies carried
by the Company as of the date hereof. Such policies will
be maintained through the Closing Date.
2.1.11 COMPLIANCE WITH APPLICABLE LAW. The Company has complied
in all material respects and is now in compliance in all
material respect with all laws, ordinances, regulations,
rules, orders, judgments, injunctions and decrees
applicable to the business of the Company and the Assets.
2.1.12 UNDISCLOSED LIABILITIES. To Seller's Knowledge, the
Company has no Liability (and there is no Basis for any
present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against
it that might give rise to any Liability), except for (i)
Liabilities set forth on the face of the Financial
Statements (with any offsetting accruals thereto described
in Section 2.1.12 of the Disclosure Schedule) and (ii)
accounts payable and accrued liabilities incurred in the
Ordinary Course of Business (none of which results from,
arises out of, relates to, is in the nature of, or was
caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law) that will be satisfied
in accordance with the provisions of Section 4.2.
2.1.13 TAXES.
(i) The Company has filed or will file prior to the
Closing all Tax Returns that it was or is required
to file on or before the Closing Date. All such Tax
Returns were or will be correct and complete when
filed. All Taxes owed by the Company (whether or
not shown or to be shown on any Tax Return) have
been or will be timely paid on or before the Closing
Date. The Company is not currently the beneficiary
of any extension of time within which to file any
Tax Return. No claim has ever been made by a
Governmental Authority in a jurisdiction where the
Company does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction. There
are no Security Interests on any of the assets of
the Company that arose in connection with any
failure (or alleged failure) of any person,
including the Company and the Seller, to pay any
Tax.
(ii) Seller, in respect of its income and interest
attributable to the Company, has filed or will file
prior to the Closing all Tax Returns that it was or
is required to file on or before the Closing Date.
All such Tax Returns were or will be correct and
complete. All Taxes owed by Seller in respect of
its income and interest attributable to the Company
(whether or not shown or to be shown on
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any Tax Return) have been or will be timely paid. No
Tax Return of the Seller is subject to audit in
regard to any matter relating to the Company.
(iii) The Company has withheld and paid and will withhold
and pay prior to the Closing all Taxes required or
which will be required to have been withheld and
paid on or before the Closing Date in connection
with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or
other third party.
(iv) There is no dispute or claim concerning any Tax
Liability of the Company or the Seller in respect of
its income from or interest in the Company either
(A) claimed or raised by any Governmental Authority
in writing, or (B) as to which any of Seller and the
directors and officers (and employees responsible
for Tax matters) of the Company has knowledge based
upon personal contact with any agent of such
authority. Seller has delivered to Buyer correct
and complete copies of all federal, state, local and
foreign income Tax Returns, examination reports, and
statements of deficiencies assessed against or
agreed to by the Company since September 15, 1990.
(v) The Company has not waived any statute of
limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment
or deficiency.
(vi) The Company has not filed a consent under Code Sec.
341(f) concerning collapsible corporations. The
Company has not made any payments, is not obligated
to make any payments, and is not a party to any
agreement that under certain circumstances could
obligate it to make any payments that will not be
deductible under Code Sec. 280G. The Company has
not been a United States real property holding
corporation within the meaning of Code Sec.897(c)(2)
during the applicable period specified in Code Sec.
897(c)(1)(A)(ii). The Company is not a party to any
Tax allocation or sharing agreement. The Company
(A) has never been and is not a member of an
affiliated group filing a consolidated federal
income Tax Return, and (B) has no Liability for the
Taxes of any Person (other than the Company) under
Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a
transferee or successor by contract, or otherwise.
(vii) The Company has qualified as an "S Corporation" as
defined in Section 1361 et seq. of the Code (and any
similar provisions of state or local law) since
January 1968, and has no Subchapter C earnings and
profits.
2.1.14 PATENTS, TRADEMARKS, INTELLECTUAL PROPERTY. Except as set
forth in Section 2.1.14 of the Disclosure Statement, the
Company does not own or have rights in any patents,
copyrights, trade names, trademarks or other forms of
intellectual property.
2.1.15 CONDUCT OF BUSINESS SINCE THE FINANCIAL STATEMENTS DATE.
Since the date of the Financial Statements through the date
hereof, the Company has not, to Seller's Knowledge (i)
incurred or become subject to, or agreed to incur or become
subject to, any Liability except accounts payable and
accrued liabilities incurred in the Ordinary Course of
Business that are to be paid in accordance with Section
4.2; (ii) declared any dividend; (iii) redeemed any capital
stock; or (iv) discontinued any business operation.
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2.1.16 LITIGATION. Except as disclosed in Section 2.1.16 of the
Disclosure Statement, there are no claims, actions, suits,
proceedings or investigations pending or, to Seller's
Knowledge, threatened nor, to Seller's Knowledge, does any
basis for such a claim exist, against the Company or its
assets or business (including the Assets) before any
Governmental Authority; nor is the Company a plaintiff or
claimant in any such action or proceeding. The Company is
not subject to or in default with respect to any order,
judgment, injunction or decree of any Governmental
Authority, which materially and adversely affects the
Assets or financial condition of the Company.
2.1.17 LABOR RELATIONS. There are no labor strikes, slow downs,
work stoppages, grievance proceedings or other
controversies pending or, to Seller's Knowledge, threatened
between the Company and any of its current or former
employees. The Company is not a party to or not bound by
any collective bargaining agreement. To Seller's
Knowledge, the Company has not committed any unfair labor
practice and no organizational effort is presently being
made or threatened by or on behalf of any labor union with
respect to employees of any of the Company. All employees
of the Company are employed on an at-will basis and may be
terminated without cause, subject to applicable laws.
2.1.18 EMPLOYEE BENEFIT MATTERS.
(i) Section 2.1.18 of the Disclosure Schedule contains a
list of all "employee pension benefit plans" (as
defined in Section 3(2) of ERISA) (sometimes
referred to herein as "Pension Plans"), all
"employee welfare benefit plans" (as defined in
Section 3(1) of ERISA) (sometimes referred to herein
as "Welfare Plans"), all payroll practices providing
benefits (such as vacation and retention
incentives), cafeteria plans, employee assistance
plans, incentive compensation plans, stock purchase,
stock option, phantom stock, and scholarship
programs or other plan arrangements or
understandings, whether or not legally binding,
providing benefits (collectively referred to as
"Benefit Plans") currently maintained, or
contributed to, or obligated to be contributed to,
by the Company for the benefit of any present or
former officers or employees of the Company. The
Company has delivered to Buyer true, complete and
correct copies of all documents related to the
Benefit Plans which were requested by the Buyer as
part of its due diligence procedures.
(ii) All Benefit Plans that are Pension Plans have been
the subject of determination letters from the IRS to
the effect that such Pension Plans are qualified and
exempt from Federal income taxes under Section
401(a) and 501(a), respectively, of the Code and no
such determination letter has been revoked nor has
revocation been threatened, nor has any such Pension
Plan been amended since the date of its most recent
determination letter or application thereof in any
respect that would adversely affect its
qualification or materially increase its costs. To
Seller's Knowledge, no event has occurred which
could subject any Benefit Plan that is a Pension
Plan to disqualification by the IRS under the Code.
The Company has paid all premiums (including any
applicable interest, charges and penalties for late
payment) due the Pension Benefit Guaranty
Corporation ("PBGC") with respect to each Benefit
Plan that is a Pension Plan for which premiums are
required. No Pension Plan previously maintained by
the Company has been terminated under circumstances
which would result in liability to the PBGC.
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(iii) Each Benefit Plan which is currently sponsored,
participated in or contributed to by the Company:
(i) is in compliance with all requirements of ERISA,
(ii) has no issue pending (other than the payment of
benefits in the normal course) nor any issue
resolved adversely to the Company which may subject
the Company to the payment of any penalty, interest,
Tax or other obligation, and (iii) is in compliance
with the terms of the Benefit Plan and the Code
except where a failure would not have a material
adverse effect on the Company.
(iv) Any voluntary employee benefit associations
maintained or contributed to by the Company have
been submitted to and approved as exempt from
federal income Tax under Section 501(c)(9) of the
Code by the IRS and nothing has occurred which could
result in the revocation of such exempt status.
(v) The execution of this Agreement or the consummation
of the transactions contemplated by this Agreement
will not give rise to any, or trigger any, change of
control, or severance benefit or other similar
provision in any Benefit Plan.
(vi) Section 2.1.18 of the Disclosure Schedule lists the
names of all current retirees with either
post-retirement life insurance coverage and/or
post-retirement medical insurance coverage provided
under a Benefit Plan of the Company.
(vii) No Benefit Plan that is a Pension Plan that the
Company maintains, or to which the Company is
obligated to contribute, had, as of the respective
annual valuation date for each such Pension Plan, an
"unfunded benefit liability" (as such term is
defined in Section 4001(a)(18) of ERISA). None of
the Benefit Plans which are Pension Plans have an
"accumulated funding deficiency" (as such term is
defined in Section 302 of ERISA or Section 412 of
the Code), whether or not waived. To Seller's
knowledge, none of the Company, any officer of the
Company or any of the Benefit Plans which are
subject to ERISA, including the Benefit Plans that
are Pension Plans, or any trusts created thereunder,
or any trustee or administrator thereof, has engaged
in a "prohibited transaction" (as such term is
defined in Section 406, 407 or 408 of ERISA or
Section 4975 of the Code) or any other breach of
fiduciary responsibility that could subject the
Company or any officer of the Company to the Tax or
penalty on prohibited transactions imposed by such
Section 4975 or to any liability under Section
502(i)(1) of ERISA. Neither any of such Benefit
Plans nor any of such trusts have been terminated,
nor has there been any "reportable event" (as that
term is defined in Section 4043 of ERISA) with
respect to which the 30-day notice requirement has
not been waived and Seller is not aware of any other
reportable events with respect thereto during the
last five years. the Company has never been a party
to or contributed to a "multi-employer pension plan"
(as such term is defined in Section 4001(a)(3) of
ERISA).
(viii) With respect to any Benefit Plan that is a
Welfare Plan, (i) no such Benefit Plan includes
a welfare benefits fund, as such term is defined in
Section 419(e) of the Code, and (ii) each such
Benefit Plan that is a group health plan, as such
term is defined in Section 5000(b)(1) of the Code,
complies with the applicable requirements of Section
4980B(f) of the Code.
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(ix) Neither the Company, nor any member of a controlled
group or affiliated service group as defined in
Sections 414(b), (c), (m) and (o) of the Code or as
defined in ERISA of which the Company is a member
has made a complete or partial withdrawal from a
multi-employer plan (as defined in Section 3(37) of
ERISA) so as to incur withdrawal liability as
defined in Section 4201 of ERISA which remains
unpaid. Neither the execution of this Agreement nor
the consummation of the transactions contemplated by
this Agreement will give rise to, or trigger, any
liability under ERISA to the Company.
2.1.19 ENVIRONMENT, HEALTH, AND SAFETY. To Seller's Knowledge:
(i) The Company has complied with all Environmental,
Health, and Safety Laws, and no action, suit,
proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed
or commenced against it alleging any failure so to
comply. Without limiting the generality of the
preceding sentence, the Company has obtained and
been in compliance with all of the terms and
conditions of all permits, licenses, and other
authorizations which are required under, and has
complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are
contained in, all Environmental, Health, and Safety
Laws.
(ii) The Company has no Environmental Liabilities and has
not handled or disposed of any substance, arranged
for the disposal of any substance, exposed any
employee or other individual to any substance or
condition, owned or operated any property or
facility in any manner that could form the Basis for
any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or
demand against the Company giving rise to any
Environmental Liability for damage to any site,
location, or body of water (surface or subsurface),
for any illness of or personal injury to any
employee or other individual, or for any reason
under any Environmental, Health, and Safety Law.
(iii) All properties and equipment used in the business of
the Company has at all times been free of asbestos,
PCB's, methylene chloride, trichloroethylene,
1,2-transdichloroethylene, dioxins, dibenzofurans,
and extremely hazardous substances.
(iv) The Company has not received any notice, nor is
Seller aware, of any proposal to amend, revoke or
replace any environmental permit of the Company, or
requiring the issuance of any additional
environmental permits.
(v) The Company is not currently operating or required
to operate under any compliance order, schedule,
decree or agreement, any consent decree, order or
agreement, or corrective action decree, order or
agreement issued by any Governmental Entity
regarding any Environmental, Health, and Safety Law
2.1.20 LEASED REAL PROPERTY. As of the Closing, the Company will
not have any lease interest or obligations under any leases
respecting any real property other than those described in
the Disclosure Schedule.
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<PAGE> 10
2.1.21 MATERIAL CONTRACTS.
(i) Except as set forth in Section 2.1.21 of the
Disclosure Schedule, the Company is not a party to,
or bound by any agreement, contract, instrument,
commitment or arrangement (whether written or oral):
(a) which contains restrictions with respect to
the payment of dividends or any other
distribution in respect of its capital stock
or the purchase, redemption or other
acquisition of capital stock,
(b) relating to any expenditure or a series of
related expenditures in excess of $5,000,
(c) relating to (i) the borrowing of money by the
Company or the granting of any Security
Interest or (ii) any guarantee or other
contingent liability (identifying the primary
contract or agreement to which such guarantee
or contingent liability relates or the
agreement pursuant to which such guarantee
was delivered),
(d) with respect to employment, management
services, consulting or any other similar
type of services,
(e) limiting the freedom of the Company or any
affiliate of the Company to engage in any
line of business, to own, operate, sell,
transfer, pledge or otherwise dispose of or
encumber any asset or to compete with any
Person or to engage in any business or
activity in any geographic area,
(f) obligating the Company or that would obligate
or require any subsequent owner of the
business currently conducted by the Company
or any of the Assets to provide for
indemnification or contribution with respect
to any matter,
(g) with Seller or any Affiliate of Seller,
(h) that could be expected to have a material
adverse effect on the Company
(collectively, the "Contracts").
(ii) Except as set forth in Section 2.1.21 of the
Disclosure Schedule, the Company is not in breach of
or in default under any of the Contracts and no
event has occurred that, with the giving of notice
or lapse of time or both, would constitute such a
breach or default. All Contracts are in full force
and effect and, to Seller's Knowledge, are
enforceable in accordance with their terms, subject
to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium, fraudulent
transfer, fraudulent conveyance or similar laws
affecting creditors' rights generally and subject,
as to enforceability, to the effect of general
principles of equity.
2.1.22 ACCREDITED INVESTOR; INVESTMENT PURPOSE. Seller (i) is an
accredited investor as that term is defined in Regulation D
promulgated under the Securities Act and (ii) is acquiring
the Warrant (and any Warrant Shares upon the exercise of
the Warrant) for
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<PAGE> 11
its own account, for investment purposes and not with a
view to, or for resale in connection with, any distribution
or public offering thereof within the meaning of the
Securities Act. Seller acknowledges that the issuances to
Seller of the Warrant and, except as otherwise expressly
provided in the Warrant, the Warrant Shares (upon exercise
of the Warrant) have not been registered under the
Securities Act or the securities laws of any state.
2.2 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller that the statements contained in this Section 2.2
are correct and complete as of the Closing Date.
2.2.1 ORGANIZATION. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and corporate
authority to own, operate and lease its property and assets
and to carry on its business as it is now being conducted.
2.2.2 AUTHORIZATION. Buyer has the necessary corporate power and
authority to enter into this Agreement and to carry out its
obligations hereunder. This Agreement has been duly and
validly executed and delivered by Buyer and, assuming the
due authorization, execution and delivery hereof by Seller,
is a legal, valid and binding obligation Buyer, enforceable
against it in accordance with its terms, subject, however,
to applicable bankruptcy, insolvency or similar laws
relating to or affecting the enforceability of creditors'
rights generally, and general equitable principles and
limitations on the availability of equitable remedies. The
Secured Note, the Collateral Documents and the Warrants,
when signed and delivered at the Closing will be legal,
valid and binding obligations of Buyer, enforceable against
it in accordance with their respective terms, subject,
however, to applicable bankruptcy, insolvency or similar
laws relating to or affecting the enforceability of
creditors' rights generally, and general equitable
principles and limitations on the availability of equitable
remedies.
2.2.3 CONFLICTING INSTRUMENTS; CONSENTS.
(i) The execution and delivery by Buyer of this
Agreement do not, and the performance by Buyer of
its obligations hereunder and the consummation of
the transactions contemplated hereby will not, (i)
violate any provision of the certificate of
incorporation or the bylaws of Buyer, or (ii) except
for the approval of Buyer's lender or as otherwise
set forth in Schedule 2.2.3 hereto, conflict with or
result in a breach of, create an event of default
(or event that, with the giving of notice or lapse
of time or both, would constitute an event of
default) under, or give any third party the right to
terminate, cancel or accelerate any obligation under
any material contract to which Buyer is a party or
by which Buyer, or any of its assets or properties
are bound or affected.
(ii) Except as set forth Schedule 2.2.3 hereto, the
execution and delivery by Buyer of this Agreement do
not, and the consummation of the transactions
contemplated hereby will not, result in a violation
of, or require any authorization, approval, consent
or other action by, or registration, declaration or
filing with or notice to, any Governmental Authority
pursuant to, any Law applicable to Buyer. There is
no pending or, to the knowledge of Buyer threatened
Proceeding before or by any Governmental Authority,
involving or seeking to restrain or prevent the
consummation of the transactions contemplated by
this Agreement.
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<PAGE> 12
2.2.4 ACCREDITED INVESTOR; INVESTMENT PURPOSE. Buyer (i) is an
accredited investor as that term is defined in Regulation D
promulgated under the Securities Act, and (ii) is acquiring
the Shares for its own account, for investment purposes and
not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning
of the Securities Act. Buyer acknowledges that the
issuance to Buyer of the Shares has not been registered
under the Securities Act or the securities laws of any
state.
2.2.5 CONDITION OF ASSETS. BY CLOSING THIS TRANSACTION, BUYER
AFFIRMS THAT SELLER MAKES NO REPRESENTATIONS OR WARRANTIES
REGARDING THE CONDITION OR STATE OF REPAIR OF ANY OF THE
ASSETS. BUYER AGREES THAT IT SHALL TAKE THE ASSETS IN AN
"AS IS" CONDITION. BUYER ACKNOWLEDGES THAT SELLER
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
PARTICULAR PURPOSE AS TO ANY OF THE ASSETS OF THE COMPANY.
ARTICLE III
PRE-CLOSING COVENANTS
The parties agree as follows with respect to the period between the execution
of this Agreement and the Closing:
3.1 NOTICES AND CONSENTS. Seller and Buyer will give any notices to third
parties, and will use all reasonable commercial efforts to obtain all
third-party consents, that are required for the consummation of the
transactions contemplated hereby. Each of the parties will (and
Seller will cause the Company to) give any notices to, make any
filings with, and use all reasonable commercial efforts to obtain any
authorizations, consents and approvals of Governmental Authorities
required with respect to the transactions contemplated by this
Agreement, and each party shall give the other information reasonably
requested by such other party pertaining to it and its subsidiaries
and affiliates to enable such other party to take such actions.
3.2 ACCESS. Between the date of this Agreement and the Closing Date,
Seller will cause the Company to provide Buyer, during normal business
hours and in a manner which will not unreasonably interfere with the
Company's business operations, with full access to the Company's
offices, books and records, and provide to Buyer such financial and
operating data and other information with respect to the business and
assets of the Company as Buyer may reasonably request, including
access to or copies of all contracts, agreements and arrangements with
customers, vendors, lessees, licensors, and suppliers.
3.3 OPERATION OF BUSINESS. Between the date of this Agreement and the
Closing Date, except as otherwise contemplated in this Agreement or
consented to in writing by Buyer, Seller shall cause Company to
maintain all of its assets in good care and condition, and to maintain
insurance policies in respect of its business and assets consistent
with past practices; and to conduct its business only in the Ordinary
Course of Business, provided however, Buyer acknowledges that the
Company is no longer actively contracting for drilling and the staff
of the Company has been reduced substantially. By way of
amplification and not limitation, except as contemplated in this
Agreement, Seller will cause the Company to not, without the prior
written consent of Buyer, (i) amend its Articles of Incorporation or
Bylaws, (ii) borrow or agree to borrow any funds directly or
indirectly, guarantee or agree to guarantee the obligations of others,
(iii) enter into any agreement, contract or commitment that will have
any continuing obligations on or liability
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<PAGE> 13
to the Company, (iv) sell or otherwise dispose of any interest in any
of its assets (except the Excluded Assets), (v) commit any act or omit
to do any act which will cause a breach of any agreement, contract or
commitment, (vi) violate any law, statute, rule, governmental
regulation or order, (vii) engage in any activity or transactions or
incur any obligation (by conduct or otherwise) which reasonably could
be expected to have a material adverse effect on its business and
operations, (viii) make any loan to any affiliate of the Company, or
declare, set aside or pay to any stockholder any dividend or other
distribution in respect of its capital stock (other than in connection
with the transfer or disposition of the Excluded Assets), or redeem or
purchase any of its capital stock, or agree to take any such action;
(ix) reclassify, issue, sell, transfer, pledge, encumber or deliver or
agree to issue, sell or transfer, pledge, encumber or deliver any
shares of its capital stock or other equity securities of the Company,
or any options, warrants or other rights, of whatsoever kind or
nature, to purchase or acquire, or any securities convertible into,
any such shares of equity securities of the Company; (x) make any
change in accounting principles, policies or procedures utilized by
the Company in the preparation of the Financial Statements; (xi) make
any Tax elections; or (xii) commit to any of the foregoing.
3.4 UPDATED FINANCIAL STATEMENTS. Seller shall cause the Company to
deliver to Buyer at the Closing Date its most current unaudited
financial statements and shall deliver an updated accounts receivable
aging report, equipment list and trade payables list.
3.5 CONFIDENTIALITY. If, following the execution of this Agreement by the
parties hereto, the Closing shall not occur for any reason, each of
the parties agree to return to the other, all documents and
confidential data received by such party in connection with this
Agreement, together with all copies thereof which such party may have
made, and to refrain from disclosing any such confidential data to any
other Person, except to the extent required by law or such data is or,
through no breach by such party of its obligations hereunder, becomes
generally available to the public
3.6 PUBLICITY. The parties acknowledge that it is in their joint
interests to coordinate all industry, customer and public
communications with respect to this transaction so as to enhance the
image of the Company. Accordingly, neither party shall make any
public announcement of this Agreement or the transactions contemplated
hereby until after the Closing Date except to the extent required by
law or deemed advisable after consultation with counsel.
Announcements, when made, including required notices to customers and
agents, shall be made pursuant to a communications plan (which will
include the text of all announcements and press releases for the
public, customers and agents, and other key interested persons)
approved by the parties. Communications required to secure regulatory
approvals of this transaction, if any, shall be excluded from the
provisions of this paragraph.
3.7 CERTAIN ACTIONS PROHIBITED. Seller represents that the Company and
Seller have not taken, and shall not take, any action that would have
the effect of deferring a liability for taxes from a period prior to
or on the Closing to a period following the Closing.
3.8 NEGOTIATION WITH OTHERS. Seller agrees that from the date hereof
until the Closing Date or the termination of this Agreement pursuant
to Section 5.3, that it will not and will not permit the Company nor
any of its advisors, representatives, officers, employees or other
agents to, directly or indirectly, negotiate with any Person not a
party hereto or not affiliated with a party hereto with respect to a
merger, consolidation, asset purchase, stock purchase or any similar
transaction with any such Person.
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<PAGE> 14
ARTICLE IV
OTHER AGREEMENTS
4.1 EXCLUDED ASSETS. Prior to the Closing, Seller shall cause the Company
to assign or transfer to Seller or other third party all Excluded
Assets listed in Schedule 4.1 of the Disclosure Schedule. The
arrangements for assignment or transfer shall be acceptable to Buyer
and shall not result in any adverse income tax consequences to the
Company or other adverse effect on the business, financial condition
or Assets of the Company following the Closing.
4.2 LIABILITIES OF THE COMPANY AT CLOSING. Prior to the Closing, Seller
shall cause Company to pay or otherwise eliminate all short term or
long term debt of the Company. The arrangements for such payment or
disposition shall be by arrangements which are acceptable to Buyer and
shall not result in any adverse income Tax or other effect on the
business, financial condition or assets of the Company. Prior to the
Closing Date, Seller shall estimate the Company's accounts payable and
accrued liabilities as of the Closing Date ("Accounts Payable and
Accrued Liabilities") and provide a schedule thereof to Buyer. Buyer
shall retain from the cash Purchase Price an amount equal to the
aggregate of the Accounts Payable and Accrued Liabilities for the
purpose of satisfying same as they become due and payable; provided,
however, that nothing in this Section 4.2 shall limit the liability of
Seller under Section 6.2 in the event Seller's estimate of Accounts
Payable and Accrued Liabilities is understated. Seller represents
that after giving effect to the Accounts Payable and Accrued
Liabilities and the payment of such other liabilities, the Company
will have no liabilities or obligations, whether fixed or contingent,
known or unknown, matured or unmatured.
4.3 USE OF THE NAME OF VIERSEN AND COCHRAN. Within 120 days of the
Closing, Buyer shall eliminate the phrase "Viersen & Cochran" and any
logo or mark related thereto, together with any word or expression
similar thereto from the Assets. Neither Buyer nor any of its
Affiliates shall thereafter use such phrase, logo or mark; provided,
however, Buyer may refer to "Viersen & Cochran Drilling Company" as
the former name of the Company where necessary, except Buyer shall not
refer to such former name in its letterhead or any advertising
literature. Additionally, within the same time period, Buyer will
cause a change in the name of the Company to a name other than Viersen
& Cochran.
4.4 OBLIGATIONS REGARDING TAXES. Seller and Buyer agree as follows:
(i) Seller shall pay and be liable for and shall hold Buyer and
its affiliates (including, after the Closing, the Company)
harmless against any liability for Taxes relating to the
Company for any tax period ending on or before the Closing
Date ("Pre-Closing Tax Period"). Buyer shall pay and be
liable for and shall hold Seller harmless against any
liability for Taxes relating to the Company with respect to
any tax period beginning after the Closing Date
("Post-Closing Tax Period").
(ii) For purposes of Section 4.4(i) hereof, in the case of a
taxable period, if any, that includes but does not end on
the Closing Date, the Taxes attributable to each of the
Pre-Closing Tax Period and to the Post-Closing Tax Period
shall be determined on the basis of an interim closing of
the books as of and including the Closing Date. Buyer and
Seller agree that (x) as soon as practicable after the
Closing Date, Buyer and Seller shall consult and cooperate
with each other in good faith, and shall use their
respective best efforts, in order to reach a mutually
acceptable agreement with respect to the amount of the
Taxes for which each of Buyer and Seller are responsible
under
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<PAGE> 15
this Section 4.4(ii) and to minimize future disputes
between the parties hereto concerning such matters;
provided, however, that any failure to initiate or engage
in any such consultations or to reach any such mutually
acceptable agreement shall not impair or otherwise affect
any of the rights and obligations of the parties hereto
under this Agreement.
(iii) Buyer agrees to assign and promptly remit (and to cause the
Company to assign and promptly remit) to Seller all refunds
of any Taxes described in Section 4.4(i) for any
Pre-Closing Tax Period, together with any interest actually
received thereon, received by it with respect to
Pre-Closing Tax Periods (net of any Taxes imposed on Buyer
or the Company with respect thereto), to the extent such
Taxes (i) relate to any Pre-Closing Tax Period for which
Seller is responsible under this Section 4.4 and (ii) were
either (A) paid by or on behalf of the Company on or before
the Closing Date, or (B) paid by Seller after the Closing
Date, pursuant to Seller's obligation under this Section
4.4.
(iv) Any and all refunds received of any Taxes described in
Section 4.4(ii) hereof for which Buyer is responsible and
any interest thereon shall be retained by Buyer and its
affiliates, including, after the Closing, the Company (or,
if applicable, shall be promptly paid or caused to be paid
by Seller to Buyer if any such refund is received by
Seller). Any and all refunds of any Taxes described in
Section 4.4(ii) hereof, for which Seller is responsible,
and any interest thereon shall be retained by Seller (or,
if applicable, shall be promptly paid or caused to be paid
by Buyer to Seller, if any such refund is received by Buyer
or any of its affiliates), but such right to retain or
receive payment shall be limited to and shall not exceed
the amount of Taxes described in Section 4.4(ii) that
Seller has actually paid after the Closing Date pursuant to
Seller's obligations under Section 4.4(ii).
(v) Seller shall prepare or cause to be prepared, and shall
file or cause to be filed, all Tax Returns with respect to
Taxes of the Company for all taxable periods ending on or
before the Closing Date. Buyer and the Company shall
prepare or cause to be prepared, and shall file or cause to
be filed, all Tax Returns with respect to Taxes of, or
which include, the Company for all taxable periods ending
after the Closing Date. In the event that one party is
responsible for preparing a Tax Return under this Section
4.4(v) and the other party is responsible in whole or in
part for the Taxes reflected on such Tax Return, then such
Tax Return shall be submitted to such other party at least
60 days before its due date (including any extension
thereof), but in no event sooner than 15 days following the
close of the taxable period covered by such Tax Return, and
shall be subject to approval by such other party, which
approval shall not be unreasonably withheld.
(vi) Each of Buyer and Seller shall cooperate with the other
party with respect to, and shall make available to the
other on a reasonably timely basis such tax data and other
information as may be reasonably required for, the
preparation of any Tax Returns required to be prepared and
filed with respect to the Company and for the conduct of
any audits or litigation with respect to Taxes of the
Company or for the proper payment of any Taxes for which
such party is responsible under this Section 4.4. The
expenses of preparing such tax data and other information
will be borne by the party responsible for preparing such
Tax Return, conducting such audit or litigation or paying
such Taxes. In connection therewith, for as long as is
reasonably necessary, at Seller's request, Buyer will, and
will cause the Company to, cooperate fully with
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<PAGE> 16
Seller and make available to Seller, at the reasonable
request of Seller and at any reasonable time and from time
to time, at the business location at which the books and
records are maintained, the information required to
complete all such Tax Returns or to properly pay such Taxes
or to conduct such audits or litigation.
(vii) Each of Buyer and Seller shall promptly notify the other
party of any issues that arise out of an audit or
examination of the Company or Seller (in respect of its
income or interest in the Company) relating to Taxes
payable in respect to a taxable period that ends on or
before the Closing Date. Thereafter, if there is commenced
an administrative or judicial proceeding in which the IRS
or a foreign, state or local government is a party relating
to such Taxes (a "Contest"), Seller shall keep Buyer
informed of any material developments relating to any such
Contest, except with respect to any such Contest involving
federal income Taxes unless such Contest might affect the
Tax liability of Buyer or the Company for any Post-Closing
Tax Period. Seller shall, in good faith, consult with
Buyer concerning the appropriate actions or positions to be
taken throughout the course of any such Contest which
relate to the Company and shall allow it to participate
jointly (except with respect to matters involving federal
income Taxes) in conjunction with Seller, in any such
Contest on matters involving the Company. Seller shall
have full control over any such audit, examination or
Contest relating solely to a taxable period ending on or
before the Closing Date and ultimate discretion with
respect to any decisions to be made or the nature of any
action to be taken in the course thereof and Buyer shall
reasonably cooperate with Seller. This Section 4.4(vii)
shall apply only to an audit, examination or Contest
relating to Taxes payable with respect to a taxable period
ending on or before the Closing Date and for which Seller
has total liability pursuant to this Agreement.
(viii) Buyer and Seller each will promptly notify the other of any
audit or examination of the Company relating to Taxes
payable in respect to any taxable period beginning before
the Closing Date (the "Closing Period") and for which Buyer
is or may be responsible for all or any portion of the
liability for such Taxes under this Agreement. With
respect to any such audit or examination or any Contest
regarding any such Tax, (i) if such audit, examination or
Contest relates solely to liability for such Taxes for
which Seller is liable pursuant to this Agreement, then
Seller shall have full and complete control of such audit,
examination or Contest; (ii) if such audit, examination or
Contest relates solely to liability for such Taxes for
which Buyer is liable pursuant to this Agreement, then
Buyer shall have full and complete control of such audit,
examination or Contest; and (iii) if such audit,
examination or Contest relates to such Taxes for which both
Buyer and Seller may be liable under this Agreement, then
Seller and Buyer jointly shall control such audit,
examination or Contest and agree to cooperate in good faith
in the pursuance of such audit, examination or Contest.
The party hereto controlling an audit, examination or
Contest under clauses (i) or (ii) of the preceding sentence
shall keep the other party hereto informed of any material
developments relating to any such audit, examination or
Contest. This Section 4.4(viii) shall apply only to an
audit, examination or Contest relating to Taxes (other than
Taxes covered by the provision of Section 4.4(vii) hereof)
payable in respect of a Closing Period.
(ix) Notwithstanding anything contained in this Agreement to the
contrary, the rights and obligations set forth in this
Section 4.4 shall survive for a period coterminous with the
statute of limitations applicable to each particular item
of Taxes; provided, however,
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that in the event that a claim is brought against the
Company in respect of any item of Taxes within the
applicable survival period, the rights and obligations
under this Section 4.4 with respect thereto shall survive
the expiration of such period until such claim is finally
resolved and any obligations with respect thereto are fully
satisfied.
4.5 FINANCIAL STATEMENTS. Seller agrees to cooperate with Buyer and to
assist the Company's outside auditors in the preparation of any
financial statements relating to the Company that may be reasonably
requested by Buyer for filing with the United States Securities and
Exchange Commission in connection with any filings that may be made by
Buyer under the Securities Act or the Securities Exchange Act of 1934.
Such financial statements shall consist of (i) such audited balance
sheets and audited statements of operations, cash flows and changes in
equity together with the notes thereon and (ii) such unaudited interim
balance sheet and unaudited interim statements of operations, cash
flows and changes in equity, if any, in each case as Buyer shall
reasonably deem to be required by Buyer. Seller agrees to reimburse
the Company or Buyer, promptly upon receipt of the invoices from the
Company's outside auditors, for the cost, not to exceed $80,000, of
preparation of the foregoing financial statements.
4.6 USE OF CERTAIN PROPERTY. Following the Closing, Seller agrees that it
shall afford the Company, free of charge, full access to and use of
the office building, yard and farm located in Oklahoma City, Oklahoma
and more particularly described in the Lease Agreements set forth on
Attachment "F" hereto (the "Lease Agreements"), for a period of 30
days following the Closing Date. At Buyer's option, Buyer may
continue to use such property after such 30-day period pursuant to the
terms of the Lease Agreements and shall have an option to purchase
such properties as set forth in the Lease Agreements.
4.7 EMPLOYEE BENEFIT MATTERS. At Closing, Seller shall have caused
the Company to terminate all of its employees and shall have satisfied
or assumed all responsibilities of the Company for salaries, taxes,
withholdings, benefits and other responsibilities to such employees.
Seller agrees that it has caused one of its affiliates to assume the
obligations of the Company under the Company's insurance policy and
has secured a new policy, which (i) provides benefits to employees and
former employees of the Company and certain affiliates of the Company
who previously participated in the Company's policy and (ii) will be
made available to provide benefits to former employees of the Company
in satisfaction of any COBRA obligations the Company might have.
ARTICLE V
CONDITIONS TO OBLIGATION TO CLOSE
5.1 CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
purchase the Shares hereunder shall be subject to satisfaction of the
following conditions:
5.1.1 The Trustee of the Seller shall have furnished Buyer at the
Closing with certified copies of its appointment as Trustee
of the Trust and documents describing Trustee's authority
to act with respect to the execution, delivery and
performance of this Agreement by Seller;
5.1.2 The representations and warranties of Seller set forth in
Section 2.1 shall be true and correct in all material
respects (ignoring, for purposes of this Section 5.1.2,
any materiality qualifier in the representation or
warranty) as of the Closing Date with the same effect as
though such representations and warranties had been made as
of the
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Closing Date except (i) to the extent such representations
and warranties expressly relate to a specific date or (ii)
as otherwise contemplated by this Agreement, and Seller
shall have provided a certificate to Buyer to such effect;
5.1.3 Seller shall have performed, and complied in all material
respects with all of the covenants and agreements required
of it in this Agreement as of the Closing, and Seller shall
have provided a certificate to Buyer to such effect;
5.1.4 Seller and the Company shall have procured all third party
consents as may be necessary to permit the consummation by
Seller of the transactions contemplated by this Agreement;
5.1.5 No action, suit or proceeding shall be pending before any
Governmental Agency wherein an unfavorable outcome would
(i) prevent the consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of such
transactions to be rescinded following consummation, (iii)
affect adversely the right of Buyer to own the Shares, or
(iv) affect adversely the right of the Company to own its
Assets and to operate its business (and no such injunction,
judgment, order, decree, ruling or charge shall be in
effect);
5.1.6 Seller shall have delivered to Buyer stock certificates
representing the Shares, endorsed in blank or accompanied
by duly executed stock powers;
5.1.7 Seller shall have delivered to Buyer a certificate to the
effect that all conditions to closing set forth in this
Section 5.1 have been satisfied or waived (which
certificate shall not survive the Closing);
5.1.8 Buyer shall have received the resignations, effective as of
the Closing, of each director and officer of the Company;
5.1.9 All actions, proceedings, instruments and other documents
required to consummate the transactions contemplated by
this Agreement, and all other related legal matters, shall
be reasonably satisfactory to counsel to Buyer;
5.1.10 Seller shall have delivered to Buyer a fully executed
certification of non-foreign status as described in United
States Treasury Regulation Section 1.1445-2(a)(2);
5.1.11 Buyer shall have received approval of this transaction from
Buyer's Board of Directors;
5.1.12 Buyer shall have been satisfied with the results of its due
diligence review of business, operations, assets, and
liabilities of the Company; provided however, if Buyer
determines, during the course of its due diligence, that it
cannot proceed with the transaction due to the discovery of
an event or situation uncovered during the due diligence
process, Buyer agrees to promptly advise Seller of such
decision to terminate and not wait to disclose such
decision until the end of the due diligence period;
5.1.13 Buyer shall have obtained approval of this transaction
from its lender(s).
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5.1.14 Seller shall have executed and delivered the Escrow
Agreement and the Warrants and shall have delivered
releases from all affiliates of Seller to the effect set
forth in Sections 7.13 and 7.14 hereof.
At or prior to the Closing, Buyer may waive in writing any conditions
specified in this Section 5.1.
5.2 CONDITIONS TO OBLIGATION OF SELLER. The obligation of Seller to sell
the Shares hereunder shall be subject to satisfaction of the following
conditions:
5.2.1 Buyer shall have furnished Seller at the Closing with
certified copies of resolutions duly adopted by the Board
of Directors of Buyer, which resolutions shall authorize
the execution, delivery and performance of this Agreement
by Buyer;
5.2.2 The representations and warranties of Buyer set forth in
Section 2.2 shall be true and correct in all material
respects (ignoring, for purposes of this Section 5.2.2,
any materiality qualifier in the representation or
warranty) as of the Closing Date with the same effect as
though such representations and warranties had been made as
of the Closing Date except (i) to the extent that such
representations and warranties expressly relate to a
specific date, or (ii) as otherwise contemplated by this
Agreement, and Buyer shall have provided a certificate to
Seller to such effect;
5.2.3 Buyer shall have performed, and complied, in all material
respects with all of the covenants and agreements required
of it in this Agreement as of the Closing, and Buyer shall
have provided a certificate to Seller to such effect;
5.2.4 Buyer shall have procured all third party consents as may
be necessary to permit the consummation by Buyer of the
transactions contemplated by this Agreement;
5.2.5 No action, suit or proceeding shall be pending before any
Governmental Agency of wherein an unfavorable outcome would
(i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of such
transactions to be rescinded following consummation, or
(iii) affect adversely the right of Seller to own the
Warrant (and no such injunction, judgment, order, decree,
ruling or charge shall be in effect);
5.2.6 Buyer shall have delivered to Seller a certificate to the
effect that all conditions to closing set forth in this
Section 5.2 have been satisfied or waived (which
certificate shall not survive the Closing);
5.2.7 All actions, proceedings, instruments and other documents
required to consummate the transactions contemplated by
this Agreement, and all other related legal matters shall
be reasonably satisfactory to counsel to Seller;
5.2.8 Buyer shall have executed and delivered the Secured Note,
the Escrow Agreement and the Warrants, and shall have
delivered the Collateral Documents and the Guaranty
Agreement.
At or prior to the Closing, Seller may waive in writing any condition
specified in this Section 5.2
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5.3 TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
5.3.1 by Buyer, if there has been a material breach or default
(which, for purposes of this Section 5.3.1, shall mean (i)
a breach or default that has a financial impact on the
Company or Buyer of $50,000 or more or (ii) a breach or
default that, if known by Buyer, would have affected
Buyer's decision to enter into this Agreement) by Seller of
any agreement, representation or warranty contained in this
Agreement, which breach or default cannot be cured and
which has not been waived in writing by Buyer;
5.3.2 by Seller, if there has been a material breach or default
(which, for purposes of this Section 5.3.2, shall mean (i)
a breach or default that has a financial impact on Seller
of $50,000 or more or (ii) a breach or default that, if
known by Seller, would have affected Seller's decision to
enter into this Agreement) by Buyer of any agreement,
representation or warranty contained in this Agreement,
which breach or default cannot be cured and which has not
been waived in writing by Seller;
5.3.3 by Buyer or Seller, if a court of competent jurisdiction or
Governmental Authority shall have issued an order, decree
or ruling or taken any other action (which Buyer and Seller
agree to use all reasonable efforts to terminate), in each
case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this
Agreement;
5.3.4 by mutual consent of Buyer and Seller; or
5.3.5 by Buyer or Seller if the Closing does not occur by August
31, 1996.
5.4 PROCEDURE AND EFFECT OF TERMINATION. If this Agreement is terminated
as provided herein, there shall be no liability or further obligation
hereunder on the part of Buyer or Seller, except as to the matters set
forth in Sections 3.5, 3.6 and 7.11; provided that, in the event of
termination by reason of Section 5.3.1 or 5.3.2, the non-breaching
party shall retain its right to recover damages as permitted by law,
including its reasonable attorney fees. Nothing in this Section 5.4
shall relieve any party to this Agreement of liability for willful
breach of this Agreement.
ARTICLE VI
INDEMNIFICATION AND REMEDIES FOR BREACH OF THE AGREEMENT
6.1 SURVIVAL. Except as otherwise provided in Section 4.4 hereof with
respect to Taxes, each of the representations and warranties of the
parties contained herein (as confirmed by the certificates delivered
pursuant to the provisions of Sections 5.1 and 5.2) shall survive the
Closing hereunder for the Survival Period after which they shall
terminate and be of no further force or effect. The agreements and
covenants contained in Articles I, IV, and VII herein shall survive
the Closing and continue without limitation; provided, however, the
agreements and covenants set forth in Section 4.2 hereof in respect of
any unknown liabilities and obligations at such date shall only
survive for 15 months following the Closing. In addition, the
indemnity and offset obligations and rights set forth in this Article
VI shall survive and continue for so long as there is any right to
seek indemnification hereunder.
6.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF BUYER. Subject to Section
6.4.6, Seller shall defend, indemnify and hold harmless Buyer, the
Company and each of their respective officers,
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directors, employees, agents, stockholders and controlling Persons and
their respective successors and assigns ("Buyer Indemnitees") from and
against any and all Adverse Consequences incurred or suffered by such
Buyer Indemnitee and resulting from, or arising out of:
6.2.1 any inaccuracy in any representation or warranty of Seller
set forth in this Agreement, or in any certificate
delivered by Seller pursuant to the provisions of Section
5.1.2 or 5.1.3, provided that, for purposes of this Section
6.2.1, all knowledge and materiality qualifiers in such
representations and warranties shall be ignored;
6.2.2 any Environmental Liability arising from or associated with
any event, condition, incident, action or omission existing
or occurring prior to the Closing Date relating in any way
to the Company or the Assets;
6.2.3 any Employee Liability;
6.2.4 any Liability of the Company to the extent it (i) was
created or incurred on or before the Closing Date, or (ii)
arose or results from or relates to any fact, event,
condition or circumstance existing on or before the Closing
Date; and
6.2.5 any breach or failure to comply with any agreement or
covenant on the part of Seller contained in this Agreement.
Each notice of any Adverse Consequence referred to in this Section 6.2
shall set forth the amount claimed by Buyer to be owing by Seller to
Buyer and a list identifying (to the extent reasonably possible) each
separate item constituting such Adverse Consequence. Buyer shall take
reasonable actions to mitigate its damages and possible Adverse
Consequences, which cost of mitigation shall be covered by the
indemnity set forth in this Section 6.2.
Any claim for indemnification under (i) Section 6.2.1 must
be made within the Survival Period applicable to the representation or
warranty subject to indemnification, (ii) Section 6.2.4 must be made
within 15 months after the Closing Date, (iii) Section 6.2.2 or 6.2.3
must be made within the statute of limitations applicable to the
Environmental Liability or Employee Liability, respectively, and (iv)
Section 6.2.5 may be made at any time. Any claim for
indemnification that is first made during the period applicable to
such claim shall remain in effect for purposes of such indemnification
notwithstanding such claim may not be resolved within the above time
periods.
6.3 INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF SELLER. Buyer shall
defend, indemnify and hold harmless Seller and its trustees, officers,
directors, employees, agents, stockholders and controlling Persons and
their respective heirs, successors and assigns ("Seller Indemnitees")
from and against any and all Adverse Consequences incurred or suffered
by such Seller Indemnitee and resulting from, or arising out of:
6.3.1 any inaccuracy in any representation or warranty of Buyer
set forth in this Agreement or in any certificate delivered
by Buyer pursuant to the provisions of Section 5.2.2 or
5.2.3, provided that, for purposes of this Section 6.3.1,
all knowledge and materiality qualifiers in such
representations and warranties shall be ignored;
6.3.2 any Liability of the Company (other than a Liability
subject to indemnification under Section 6.2) to the
extent, and only to the extent, it is created or incurred
after the
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Closing Date, with respect to the operation of the business
of the Company or the Assets after the Closing Date;
6.3.3 any breach or failure to comply with any covenant or
agreement on the part of Buyer contained in this Agreement.
Seller shall take reasonable actions to mitigate its damages, which
cost of mitigation shall be covered by the indemnity set forth in this
Section 6.3. Each notice of any Adverse Consequence referred to in
this Section 6.3 shall set forth the amount claimed by Seller to be
owing by Buyer to Seller and a list identifying (to the extent
reasonably possible) each separate item constituting such Adverse
Consequence.
Any claim for indemnification under (i) Section 6.3.1 must
be made within the Survival Period applicable to the representation or
warranty subject to indemnification and (ii) Sections 6.3.2 and 6.3.3
may be made at any time. Any claim for indemnification that is first
made during the period applicable to such claim shall remain in effect
for purposes of such indemnification notwithstanding such claim may
not be resolved within the above time periods.
6.4 MATTERS INVOLVING THIRD PARTIES.
6.4.1 If a third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim")
that may give rise to a claim for indemnification against
the other Party (the "Indemnifying Party"), then the
Indemnified Party shall promptly notify the Indemnifying
Party thereof in writing; provided, however, that no delay
on the part of the Indemnified Party in notifying the
indemnifying Party shall relieve the Indemnifying Party
from any obligation hereunder unless (and then only to the
extent that) the Indemnifying Party is prejudiced thereby.
6.4.2 The Indemnifying Party will have the right to defend the
Indemnified Party against any Third Party Claim and
administer all aspects of such defense with counsel of its
choice reasonably satisfactory to the Indemnified Party so
long as (i) the Indemnifying Party notifies the Indemnified
Party in writing within 15 days after the Indemnified Party
has given notice of such Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party
from and against the entirety of any Adverse Consequences
that the Indemnified Party may suffer resulting from,
arising out of, relating to, or caused by, such Third Party
Claim; (ii) such Third Party Claim involves only money
damages and does not seeks an injunction or other equitable
relief; and (iii) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
The Indemnified Party may retain separate co-counsel at its
sole cost and expense and participate in the defense of the
Third Party Claim.
6.4.3 So long as the Indemnifying Party is conducting the defense
of any Third Party Claim in accordance with this Section
6.4, (i) the Indemnified Party will not consent to the
entry of any judgment or enter into any settlement with
respect to such Third Party Claim without the prior written
consent of the Indemnifying Party (which consent will not
be withheld unreasonably); and (ii) the Indemnifying Party
will not consent to the entry of any judgment or enter into
any settlement with respect to such Third Party Claim
without the prior written consent of the Indemnified Party
(which consent will not be withheld unreasonably).
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6.4.4 To the extent of any payment by the Indemnifying Party of
any amount in accordance with the provisions of this
Section 6.4, upon the full satisfaction by the Indemnifying
Party of its indemnity and payment obligations with respect
to such matter, the Indemnifying Party shall be subrogated
to all rights which the Indemnified Party shall have
against third parties (other than the Company, Buyer, any
Affiliate of Buyer or any other person whom might have a
right of contribution or indemnity or other right of
payment against the Company, Buyer or any Affiliate of
Buyer in respect of the matter) for the matter indemnified
against.
6.4.5 The provision and procedures of this Section 6.4 (other
than the notice requirement) shall apply to any Third Party
Claim existing on the Closing Date, and Seller hereby
assumes, effective as of the Closing, all, and shall have
sole, responsibility for the payment, administration and
defense of, such Third Party Claims, subject to the
conditions set forth in this Section 6.4.
6.4.6 No claim for indemnification by Buyer Indemnitees or Seller
Indemnitees against the other party hereto shall be made
unless or until the aggregate amount of such claims exceeds
$50,000, at which time all claims, including those used to
aggregate the floor of $50,000 shall be subject to
indemnification to the extent herein provided; provided,
however, that claims under Section 6.2.5 hereof in respect
of the agreements and covenants set forth in Section 4.7
hereof shall not be required to satisfy such threshold
requirement, and Seller shall be required to indemnify
Buyer for any and all Adverse Consequences relating
thereto. No claim for indemnification shall be effective
unless such claim is first made in writing and delivered to
the Indemnifying Party hereunder within the time periods
required by this Article. The maximum amount of liability
by Seller to Buyer for indemnification under Section 6.2.1,
shall be the amount of the Purchase Price. The amount of
any Adverse Consequences chargeable to an Indemnifying
Party hereunder shall first be reduced by (i) any tax
benefits actually received or realized by the Indemnified
Party (or the Company) specifically attributed to the event
which gives rise to the Adverse Consequence and (ii) any
insurance proceeds received by the Indemnified Party (or
the Company) with respect thereto.
6.5 SOLE REMEDY. The right of indemnification provided to any party
hereto under Article VI shall be the sole and exclusive remedy
available to such party for any Adverse Consequences or any other
damages that may be incurred or suffered by such indemnified party(s)
from the other party(s) hereto resulting from events, actions or
matters which are subject to indemnification under Article VI.
6.6 LIMIT DAMAGE CLAIMS. To the extent any party to this Agreement or any
other agreement, document or instrument executed in connection
herewith shall have a cause of action or incur any damages that may be
recoverable against any other party hereto or thereto which are not
covered by the indemnification in Article VI, but which arise from the
transactions or obligations of such parties under this Agreement or
any other such agreement, document or instrument, all such parties
agree to waive any right they may now have or hereafter obtain to seek
the recovery of punitive, consequential or indirect damages with
respect thereto from the other parties (unless incurred as a result of
a third party claim).
6.7 OFFSET. In the event Buyer shall not have received any payments due
it under this Article VI when the same shall be due, Buyer shall be
entitled to offset any such amounts against amounts owed by it under
the Secured Note, and in the event there shall be outstanding any
claim for indemnification by Buyer under this Article VI that shall
not have been resolved as of the date
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any principal payment on the Secured Note is due, Buyer shall be
entitled to defer payment of such principal to the extent the
remaining principal outstanding under the Secured Note is less than
the amount which Buyer reasonably believes will be required to be paid
by Seller under the indemnification provisions of this Article VI for
all claims then pending by Buyer against Seller under this Article VI.
In the event Seller disputes Buyer's claim under the indemnification
provisions, the dispute shall be resolved pursuant to Section 7.7
hereof. In addition, in the event Buyer elects to prepay the Secured
Note, Seller shall be required to deposit $4,000,000 with The Trust
Company of Oklahoma, as escrow agent, to be held and disbursed in
accordance with the terms of the escrow agreement set forth in
Attachment "G" hereto (the "Escrow Agreement").
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 ENTIRE AGREEMENT; AMENDMENT. This Agreement (including the Disclosure
Schedules) contains the entire agreement among the parties hereto and
supersedes all prior oral or written agreements, commitments or
understandings with respect to the matters provided for herein. This
Agreement may be modified or amended only by a writing duly executed
by each of the parties hereto, which modification or amendment shall
be binding upon all of the parties hereto.
7.2 ASSIGNMENTS AND THIRD PARTIES. Except as specifically contemplated by
this Agreement, no party hereto shall assign this Agreement or any
part hereof without the prior written consent of the other party;
provided, however, Buyer may assign its rights in this Agreement to an
affiliate of Buyer. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. No such
assignment shall release a party of any of its obligations under this
Agreement.
7.3 WAIVERS. No waiver by any party of, or consent by any party to, a
variation from or breach of or default under any provision of this
Agreement shall be effective unless made in a written instrument duly
executed by or on behalf of such party, and any such waiver or consent
shall be limited solely to those rights or conditions expressly so
waived or consented to. No failure or delay on the part of any party
exercising any right or privilege under this Agreement shall operate
as a waiver thereof, nor shall any single or partial exercise of any
right or power preclude any other or further exercise thereof, or the
exercise of any right or power under this Agreement. No other actions
taken by any party, including, without limitation, any investigation
by or on behalf of such party, and no failure to take action, shall be
deemed to constitute a waiver or an extension by such party of
compliance with any representation, warranty, condition, agreement or
indemnification set forth in this Agreement.
7.4 NOTICES. All notices, demands, requests or other communications which
may be or are required to be given, served, or sent by any party to
any other party pursuant to this Agreement shall be in writing and
shall be mailed by first class, registered or certified mail, return
receipt requested, postage prepaid, or transmitted by hand delivery
(including delivery by courier), overnight express, telegram, telex or
facsimile transmission, addressed as follows:
If to Buyer: UTI Energy Corp.
Attn: President
485 Devon Park Drive, #112
Wayne, Pennsylvania 19087
Telecopy: 610/964-0141
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With copy to:
Fulbright & Jaworski LLP
Attn: Curtis Huff
1301 McKinney Street, Suite 5100
Houston, Texas 77010
Telecopy: 713/651-5426
If to Seller:
Trust Company of Oklahoma
P.O. Box 3627
Tulsa, Oklahoma 74101-3627
Attn: President
Telecopy: 918/744-5088
Viersen & Cochran
Attn: President
P.O. Box [19227]
Okmulgee, Oklahoma 74447
Telecopy: 918/756-5626
With copy to:
Pray, Walker, Jackman, Williamson & Marlar
Attn: Donald F. Marlar
900 Oneok Plaza
100 West 5th Street
Tulsa, Oklahoma 74103-4218
Telecopy: 918/581-5599
Each party may designate by notice in writing a new address to which
any notice, demand or communication may thereafter be so given, served
or sent. Each notice, demand, request or communication which shall be
mailed, delivered or transmitted in the manner described above shall
be deemed sufficiently given, served, sent, received and delivered for
all purposes at such time as it is delivered to the addressee (with
the return receipt, the delivery receipt, the affidavit of messenger
being deemed conclusive, but not exclusive, evidence of such delivery)
or at such time as delivery is refused by the addressee upon
presentation.
7.5 HEADINGS. The descriptive headings of the several articles and
section of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
7.6 COUNTERPARTS. To facilitate execution, this Agreement may be executed
in as many counterparts as may be required; and it shall not be
necessary that the signatures of, or on behalf of, each party, or that
the signatures of all persons required to bind any party, appear on
each counterpart; but it shall be sufficient that the signature of, or
on behalf of, each party, or that the signatures of the persons
required to bind any party, appear on one or more of the counterparts.
All counterparts shall collectively constitute a single agreement. It
shall not be necessary in making proof of this Agreement to produce or
account for more than a number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
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7.7 ARBITRATION. Any controversy, dispute, or claim arising out of, in
connection with, or in relation to, the interpretation, performance or
breach of this Agreement shall be solely and finally settled by
binding arbitration conducted in Denver, Colorado, by and in
accordance with the then existing rules for commercial arbitration of
the American Arbitration Association, or any successor organization.
Judgment upon any award rendered by the arbitrator(s) may be entered
by the State or Federal Court having jurisdiction thereof. Any of the
parties may demand arbitration by written notice to the other and to
the American Arbitration Association ("Demand for Arbitration"). Any
Demand for Arbitration pursuant to this paragraph 9.10 shall be made
within 180 days from the date that the dispute upon which the demand
is based arose. The arbitrators shall conduct the arbitration in a
manner in accordance with the Federal Arbitration Act U.S.C. Section
1, et seq. and the rules of the American Arbitration Association. The
arbitrators may only award compensatory damages and are specifically
not empowered to award punitive damages. The parties hereby expressly
waive any right any of them may have to punitive damages. The parties
intend that this agreement to arbitrate be valid, enforceable and
irrevocable.
7.8 GOVERNING LAW. The interpretation and enforcement of this Agreement
shall be governed by the laws of the State of Oklahoma, except that
interpretation and enforcement of the provisions relating to the
arbitration of disputes as set forth in Section 7.7 shall be governed
exclusively by the Federal Arbitration Act (9 U.S.C. Sections 1 et
seq.).
7.9 CONSTRUCTION. All parties hereto acknowledge that each party was
actively involved in the negotiation and drafting of this Agreement
and that no law or rule of construction shall be raised or used in
which the provisions of this Agreement shall be construed in favor or
against any party hereto solely because one is deemed to be the author
thereof.
7.10 SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof or affecting the
validity or enforceability of such provision in any other
jurisdiction.
7.11 EXPENSES. Except as otherwise provided herein, each of the parties
will bear all of its own costs and expenses (including, without
limitation, legal and accounting fees and expenses) incurred in
connection with this Agreement and the transactions contemplated
hereby.
7.12 NO THIRD-PARTY BENEFICIARIES. EXCEPT AS SET FORTH IN SECTIONS 6.2 AND
6.3, NOTHING CONTAINED IN THIS AGREEMENT, EXPRESS OR IMPLIED, IS
INTENDED TO CONFER UPON ANY PERSON, OTHER THAN THE PARTIES AND THEIR
RESPECTIVE SUCCESSORS AND PERMITTED ASSIGNS, ANY RIGHTS, REMEDIES OR
OBLIGATIONS UNDER OR BY REASON OF, THIS AGREEMENT.
7.13 RELEASE. EFFECTIVE AS OF THE CLOSING, SELLER DOES HEREBY, FOR SELLER
AND SELLER'S AFFILIATES, BENEFICIARIES, SUCCESSORS, ASSIGNS, HEIRS,
EXECUTORS, ADMINISTRATORS AND LEGAL REPRESENTATIVES REMISE, RELEASE,
ACQUIT AND FOREVER DISCHARGE THE COMPANY AND ITS AFFILIATES, OFFICERS,
DIRECTORS, CONTROLLING PERSONS, EMPLOYEES, ATTORNEYS AND SUCCESSORS
AND ASSIGNS (COLLECTIVELY WITH THE COMPANY, THE "COMPANY RELEASED
PARTIES") OF AND FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES,
RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION AND OBLIGATIONS OF EVERY
NATURE WHATSOEVER, LIQUIDATED OR UNLIQUIDATED, KNOWN OR UNKNOWN,
MATURED OR UNMATURED, FIXED OR CONTINGENT, WHICH SELLER AND SELLER'S
AFFILIATES NOW HAVE, OWN OR HOLD OR HAVE AT ANY TIME PREVIOUSLY HAD,
OWNED OR HELD AGAINST THE COMPANY RELEASED PARTIES, INCLUDING WITHOUT
LIMITATION ANY INDEMNIFICATION OBLIGATION OF THE COMPANY TO SELLER AND
ALL LIABILITIES
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<PAGE> 27
CREATED AS A RESULT OF THE SOLE OR CONTRIBUTORY NEGLIGENCE, GROSS
NEGLIGENCE AND WILLFUL ACTS OF ANY COMPANY RELEASED PARTY, EXISTING AS
OF THE CLOSING OR RELATED TO ANY MATTER THAT OCCURRED ON OR PRIOR TO
THE CLOSING; PROVIDED, HOWEVER, THAT ANY CLAIMS, LIABILITIES, DEBTS OR
CAUSES OF ACTION THAT MAY ARISE IN CONNECTION WITH THE FAILURE OF ANY
OF THE PARTIES HERETO TO PERFORM ANY OF THEIR OBLIGATIONS HEREUNDER OR
UNDER ANY OTHER AGREEMENT RELATING TO THE TRANSACTIONS CONTEMPLATED
HEREBY OR FROM ANY BREACHES BY ANY OF THEM OF ANY REPRESENTATIONS OR
WARRANTIES HEREIN OR IN CONNECTION WITH ANY OF SUCH OTHER AGREEMENTS
SHALL NOT BE RELEASED OR DISCHARGED PURSUANT TO THIS AGREEMENT.
SELLER REPRESENTS AND WARRANTS THAT SELLER HAS NOT PREVIOUSLY ASSIGNED
OR TRANSFERRED, OR PURPORTED TO ASSIGN OR TRANSFER, TO ANY PERSON OR
ENTITY WHATSOEVER ALL OR ANY PART OF THE CLAIMS, DEMANDS, LIABILITIES,
RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION OR OBLIGATIONS RELEASED
IN THIS SECTION 7.13. SELLER COVENANTS AND AGREES THAT SELLER WILL
NOT ASSIGN OR TRANSFER TO ANY PERSON OR ENTITY WHATSOEVER ALL OR ANY
PART OF THE CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES, DISPUTES,
CAUSES OF ACTION OR OBLIGATIONS RELEASED IN THIS SECTION 7.13. SELLER
REPRESENTS AND WARRANTS THAT SELLER HAS READ AND UNDERSTANDS ALL OF
THE PROVISIONS OF THIS SECTION 7.13 AND HAS BEEN REPRESENTED OR
ADVISED BY LEGAL COUNSEL AND OTHER PROFESSIONAL ADVISORS IN CONNECTION
WITH THE NEGOTIATION, EXECUTION AND DELIVERY OF THIS AGREEMENT.
SELLER FURTHER AGREES THAT ALL INDEBTEDNESS BY SELLER OR ANY AFFILIATE
OF SELLER TO THE COMPANY HAS BEEN PAID IN FULL. SELLER AGREES THAT
IMMEDIATELY SUBSEQUENT TO THE CLOSING, EXCEPT FOR ANY EXISTING
INDEMNIFICATION OBLIGATIONS OF SELLER TO THE COMPANY, WHICH SHALL
CONTINUE IN EFFECT, THERE WILL BE NO AGREEMENTS, CONTRACTS, LEASES,
ARRANGEMENTS OR OTHER UNDERSTANDINGS (EITHER WRITTEN OR ORAL) BETWEEN
SELLER AND THE COMPANY, EXCEPT FOR THIS AGREEMENT AND THE OTHER
AGREEMENTS CONTEMPLATED HEREBY.
7.14 EXPRESS NEGLIGENCE. THE INDEMNIFICATION TO BE PROVIDED BY SELLER
PURSUANT TO ARTICLE VI FOR MATTERS RELATING TO THE COMPANY OR
REPRESENTATIONS REGARDING THE COMPANY SHALL APPLY NOTWITHSTANDING SUCH
MATTERS OR REPRESENTATIONS MAY RELATE TO THE ORDINARY, SOLE OR
CONTRIBUTORY NEGLIGENCE, GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR
VIOLATION OF LAW BY THE COMPANY, ITS SUBSIDIARIES, OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS.
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<PAGE> 28
IN WITNESS WHEREOF, each of the parties has hereunto executed this
Agreement, or caused this Agreement to be executed on its behalf, as of the
date first above written.
THE SAM K. VIERSEN JR. TRUST DATED
SEPTEMBER 9, 1986 AS AMENDED AND
RESTATED ON MAY 11, 1994
"Seller"
By /s/ PAUL MINDEMAN
--------------------------------------
Paul Mindeman, President of
The Trust Company of Oklahoma
Successor Trustee
UTI ENERGY CORP.
"Buyer"
By /s/ VAUGHN E. DRUM
--------------------------------------
Print Name: Vaughn E. Drum
-----------------------------
Print Title: President
----------------------------
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<PAGE> 29
ATTACHMENT A
DEFINITIONS
In addition to other terms specifically defined elsewhere in this Agreement,
the following terms shall have the meanings assigned to them below.
"ACCOUNTS PAYABLE AND ACCRUED LIABILITIES" shall have the meaning given such
term in Section 4.2.
"ADVERSE CONSEQUENCES" shall mean all actions, suits, proceedings,
investigations, charges, complaints, claims, demands, judgments, orders,
decrees, rulings, damages, fines, penalties, costs, amounts paid in settlement,
liabilities, losses and expenses, including court costs and reasonable
attorneys' fees and expenses, suffered by a Person, but shall not include any
loss of profits, indirect, consequential or punitive damages (unless incurred
in connection with a Third Party Claim) and shall be net of any insurance
proceeds.
"AFFILIATE" of any person or entity shall mean any other person or entity that,
directly or indirectly, controls, is controlled by, or is under common control
with such person or entity.
"AGREEMENT" shall have the meaning set forth in the opening paragraph.
"ASSETS" shall have the meaning set forth in Section 2.1.6.
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for the
matter to which it relates.
"BENEFIT PLANS" shall have the meaning given such term in Section 21.8.
"BUYER" shall have the meaning set forth in the opening paragraph.
"BUYER INDEMNITEES" shall have the meaning given such term in Section 6.2.
"CASUALTY EVENT" shall have the meaning set forth in Section 1.8.
"CASUALTY NOTICE" shall have the meaning set forth in Section 1.8.
"CLOSING" shall mean the consummation of the transactions described and
contemplated by this Agreement.
"CLOSING DATE" shall mean August 8, 1996, or such other date as may be mutually
agreed to by the parties.
"COBRA" means the Congressional Omnibus Budget Reconciliation Act.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COLLATERAL DOCUMENTS" shall have the meaning set forth in Section 1.2.2.
"COMPANY" shall mean the Viersen & Cochran Drilling Company, an Oklahoma
corporation.
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<PAGE> 30
"COMPANY RELEASED PARTIES" shall have the meaning given such term in Section
8.5 below.
"CONFIDENTIAL INFORMATION" shall mean any information concerning the businesses
and affairs of the Company that is not already generally available to the
public and shall further have the meaning and shall encompass the
confidentiality obligations set forth in that certain letter from Buyer to
Seller dated May 21, 1996 the terms of which are incorporated herein by
reference.
"DEMAND FOR ARBITRATION" shall have the meaning set forth in Section 7.7.
"DISCLOSURE SCHEDULE" means one of the series of schedules of data or
information provided to Buyer by Seller on the date of this Agreement, each of
which constitutes an integral part of this Agreement.
"EMPLOYEE LIABILITIES" means any obligations under law, such as COBRA, that the
Company has to persons who were employees of the Company prior to the Closing
Date, arising as a result of such employment prior to the Closing Date.
"ENVIRONMENTAL, HEALTH AND SAFETY LAWS" shall mean the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conversation and Recovery Act of 1976, the Occupational Safety and Health Act
of 1970, the Outer Continental Shelf Lands Act, the Clean Water Act, the Oil
Pollution Act, the Clean Air Act, and the Hazardous Materials Transportation
Act, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, common law judgments, orders, decrees,
rulings and charges thereunder) of foreign, federal, state, and local
governments (and all agencies thereof) concerning pollution or protection of
the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), public health and safety, or
employee health and safety, including laws relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous or toxic materials or wastes into ambient air, surface
water, ground water or lands, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, or chemical, industrial, hazardous or
toxic materials or wastes.
"ENVIRONMENTAL LIABILITIES" means any and all costs (including remedial,
removal, response, abatement, cleanup, investigative, and/or monitoring costs),
damages, settlements, expenses, liens, penalties, fines, taxes, prejudgment and
post-judgment interest, court costs and attorneys' fees incurred or imposed (i)
pursuant to any agreement, order, notice of responsibility, directive
(including directives or requirements embodied in Environmental, Health and
Safety Laws), injunction, judgment or similar documents (including settlements)
attributable to or arising out of or under Environmental, Health and Safety
Laws, or (ii) pursuant to any claim by a government authority or other entity
or person for personal injury, property damage, damage to natural resources,
remediation or response costs arising out of or attributable to any
manufacture, processing, distribution, use, treatment, storage disposal,
transport or handling of any material or substance designated or regulated as a
dangerous, harmful, hazardous or toxic material or substance under any
Environmental, Health and Safety Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGREEMENT" shall have the meaning set forth in Section 6.7.
"EXCLUDED ASSETS" shall mean those Assets set forth in Section 4.1 of the
Disclosure Schedule.
"FAIR MARKET VALUE" of any Asset shall mean the value that would be obtained in
an arm's length transaction between an informed and willing buyer and an
informed and willing seller, determined by
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<PAGE> 31
the agreement of Seller and Buyer or by appraisal as hereinafter provided. If
the Fair Market Value of any Asset must be determined, Seller shall submit to
Buyer an estimate of the Fair Market Value of such Asset, and Seller and Buyer
shall consult for the purpose of determining the Fair Market Value of such
Asset. If, on or before the fifteenth calendar day after Seller shall have
provided such an estimate, Seller and Buyer shall not have reached agreement on
the Fair Market Value of such Asset, Seller shall designate, on or before the
fifteenth calendar day after the expiration of such 15-day period, five
nationally recognized appraisal firms with which Seller has not conducted
business within the three years previous thereto. Buyer shall select, on or
before the tenth calendar day after such designation, one of such appraisal
firms to conduct an appraisal of such Asset, and the Fair Market Value of such
Asset shall be determined by such appraisal firm as promptly as possible (and
in any event on or before the thirtieth calendar day thereafter). The cost of
such appraisal shall be paid in equal proportions by Seller and Buyer. Seller
shall provide to Buyer and, if applicable, such appraisal firm, all information
reasonably requested by Buyer or such appraisal firm, as the case may be, to
determine the Fair Market Value of such Asset.
"FINANCIAL STATEMENTS" shall mean the unaudited, internally prepared financial
statements of the Company for the period ended June 30, 1996.
"GOVERNMENTAL AUTHORITY" shall mean any federal, state, local, foreign or other
governmental or administrative authority, agency, court, tribunal, arbitrator,
commission, board or bureau.
"INDEMNIFIED PARTY" has the meaning set forth in Section 6.4.1.
"INDEMNIFIED PARTY" has the meaning set forth in Section 6.4.1.
"LAW" shall mean any applicable statute, rule, regulation, order, judgement,
decree, pronouncement, agreement or finding of any Governmental Authority.
"LIABILITY OR LIABILITIES" shall mean any liability or other obligation
(whether known or unknown, asserted or unasserted, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated, or due or to become due).
"ORDINARY COURSE OF BUSINESS" shall mean with respect to any Person, the
ordinary course of business of such Person consistent with past custom and
practice.
"PBGC" shall have the meaning set forth in Section 2.1.18.
"PENSION PLANS" shall have the meaning set forth in Section 2.1.18.
"PERSON" shall mean any individual, corporation, partnership, association,
joint stock company, trust, joint venture, unincorporated organization,
business or Governmental Authority, or other entity.
"POST-CLOSING TAX PERIOD" shall have the meaning set forth in Section 4.4.
"PRE-CLOSING TAX PERIOD" shall have the meaning set forth in Section 4.4.
"PURCHASE PRICE" shall have the meaning set forth in Section 1.2.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
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<PAGE> 32
"SECURITY INTEREST" shall mean any lien, charge, encumbrance, mortgage,
covenant, assessment, restriction, option, conditional sale agreement, title
retention agreement, financing lease, pledge or security interest of any kind
or type and whether arising by contract or under law.
"SECURITY AGREEMENT" shall have the meaning set forth in Section 1.2.2.
"SECURED NOTE" shall have the meaning set forth in Section 1.2.2.
"SELLER" shall have the meaning set forth in the opening paragraph.
"SELLER INDEMNITEES" shall have the meaning set forth in Section 6.3.
"SELLER'S KNOWLEDGE" means the actual knowledge of (i) the Trustee of Seller
who is under no obligation to make any independent investigation beyond due
inquiry of the President of the Company, (ii) the President of the Company and
(iii) James L. Woods.
"SHARES" shall have the meaning set forth in the recitals to this Agreement.
"SURVIVAL PERIOD" shall mean 15 months from the Closing Date, provided,
however, the Survival Period for the representations under Sections 2.1.5,
2.1.13, 2.1.18 and 2.1.19 (and any indemnified claims therefor) shall be the
same as the applicable statute of limitations for such claims as provided by
law and the representations under Section 2.1.3 shall survive without
limitation.
"TAX" or "TAXES" shall mean any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, environmental
(including taxes under Code Sec. 59A), customs duties, capital stock,
franchise, occupation, business, profits, withholding, social security (or
similar) employment, unemployment, disability, real property, personal
property, ad valorem, sales, use, transfer, registration, alternative or add-on
minimum, estimated, or other tax, assessment, duty, fee, levy or other
governmental charge of any kind whatsoever, including any interest, fine,
penalty or addition thereto, whether disputed or not.
"TAX RETURNS" shall mean any return, declaration, report, form, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"THIRD PARTY CLAIM" has the meaning set forth in Section 6.4.1.
"TRUSTEE" shall mean The Trust Company of Oklahoma.
"WARRANTS" shall have the meaning set forth in Section 1.2.3.
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<PAGE> 33
ATTACHMENTS
"A" Definitions
"B" Form of Secured Note
"C" Form of Guaranty Agreement
"D" Form of Security Agreement
"E" Form of Warrant
"F" Lease Agreement and Option to Purchase
"G" Escrow Agreement
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<PAGE> 1
EXHIBIT 4.1
PROMISSORY NOTE
$8,000,000.00 Houston, Texas August 14, 1996
FOR VALUE RECEIVED, the undersigned, UTI Energy Corp., a Delaware
corporation ("Maker"), hereby promises to pay to the order of The Trust Company
of Oklahoma Successor Trustee of The Sam K. Viersen Jr. Trust dated September
9, 1986 as Amended and Restated on May 11, 1994 (the "Payee"), in Tulsa,
Oklahoma, at the offices of Trust Company of Oklahoma, 5727 South Lewis Avenue,
Tulsa, Oklahoma 74136, on or before August 14, 1998 (the "Maturity Date"), in
lawful money of the United States of America, the principal amount of EIGHT
MILLION AND NO/100 DOLLARS ($8,000,000.00), together with interest on the
unpaid balance of said principal amount from time to time remaining
outstanding, from the date hereof until maturity (howsoever such maturity shall
occur), in like money, at said office, at a rate per annum equal to 6%.
All past due principal of and interest on this Note shall bear
interest from the due date thereof (whether by acceleration or otherwise) until
paid at a per annum rate equal to 6%.
Subject to Maker's right of set-off described below, the outstanding
principal balance of this Note shall be due and payable as follows:
1. On August 14, 1997 (or, if not a Business Day (hereinafter
defined), the first Business Day thereafter), a principal
payment of $1,500,000.00, together with accrued and unpaid
interest as of such date;
2. On February 14, 1998 (or, if not a Business Day, the first
Business Day thereafter), a principal payment of
$1,500,000.00, together with accrued and unpaid interest as of
such date; and
3. On the Maturity Date (or, if not a Business Day, the first
Business Day thereafter), all outstanding principal, together
with accrued and unpaid interest as of such date.
The foregoing notwithstanding, all unpaid accrued interest on this Note, and
the outstanding unpaid principal balance hereof, shall be immediately due and
payable in full upon the maturity of the principal of this Note, whether by
acceleration or otherwise. "Business Day" shall mean any day on which banks
are open for general banking business in the State of Texas, other than on
Saturday, Sunday, a legal holiday or any other day on which banks in the State
of Texas are required or authorized by law or executive order to close.
Maker shall have the right and privilege of prepaying this Note, in
whole or in part, at any time or from time to time without premium or penalty
or notice to the holder hereof. All amounts prepaid shall be applied first to
earned, accrued and unpaid interest and the balance, if any, shall be applied
to the payment of principal. As an incentive to Maker to prepay this Note, if
the Maker prepays $7,650,000.00 principal amount of this Note, together with
accrued
PAGE 1 OF 3 PAGES
<PAGE> 2
and unpaid interest, on or before February 14, 1997, this Note shall be paid in
full, and Maker shall have no further obligation, and Payee shall have no
further rights, hereunder. In the event of such prepayment, the difference
between the face amount of this Note and $7,650,000.00 shall, for all purposes,
be deemed to be a downward adjustment to the Purchase Price, as that term is
defined in that certain Stock Purchase Agreement dated August 14, 1996, by and
between Maker and Payee (the "Stock Purchase Agreement").
If any one of the following events shall occur and be continuing (an
"Event of Default"):
(a) Maker shall fail to pay timely when due, the
principal of, or accrued unpaid interest on, this Note, which shall
remain uncured for 5 days after such due date; or
(b)(i) Default shall be made in the due observance or
performance of, or compliance with, any of the covenants or agreements
contained herein or (ii) the occurrence of any event or circumstance
which constitutes an "event of default" under any security agreement
or other instrument securing payment hereof, which shall remain
uncured for 20 days after notice to Maker; or
(c) Maker shall (i) apply for or consent to the
appointment of a receiver, trustee, custodian or liquidator of it or
of all or a substantial part of its property, or (ii) generally fail
to pay its debts as they come due in the ordinary course of business,
or (iii) commence, or file an answer admitting the material
allegations of or consenting to, or default in a petition filed
against it in, any case, proceeding or other action under any existing
or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, or
seeking to have an order for relief entered with respect to it under
the federal Bankruptcy Code 11 USC Section 101 et. seq., or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or the similar relief with respect to it or
its debt; or
(d) A receiver, conservator, liquidator, custodian or
trustee of Maker or any of its property is appointed by the order or
decree of any court or agency or supervisory authority having
jurisdiction; or Maker obtains an order for relief under the federal
Bankruptcy Code 11 USC Section 101 et. seq.; or any of the property of
Maker is sequestered by court order; or a petition is filed or a
proceeding is commenced against Maker under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect, which remains unstayed and in effect for 60
consecutive days,
then the Payee, at its option, may declare the unpaid principal portion of this
Note to be forthwith due and payable, whereupon the said portion of this Note
and all accrued, earned and unpaid interest shall become immediately due and
payable by Maker without demand, presentment for payment, notice of
non-payment, protest, notice of protest, notice of intent to accelerate
maturity, notice of acceleration of maturity or any other notice of any kind to
Maker, or any other person liable hereon or with respect hereto, all of which
are hereby expressly
PAGE 2 OF 3 PAGES
<PAGE> 3
waived by Maker and each other person liable hereon or with respect hereto,
anything contained herein or in any other documents or instruments to the
contrary notwithstanding; and upon the happening of any Event of Default
referred to in paragraphs (c) or (d), the unpaid principal portion of this Note
and all other interest on this Note then accrued, earned and unpaid shall
become automatically due and payable by Maker without demand, presentment for
payment, notice of nonpayment, protest, notice of protest, notice of intent to
accelerate maturity, notice of acceleration of maturity or any other notice of
any kind to Maker or any other person liable hereon or with respect hereto, all
of which are expressly waived by Maker and each other Person liable hereon or
with respect hereto, anything contained herein or in any document or instrument
to the contrary notwithstanding.
As provided in the Stock Purchase Agreement, Maker shall have the
right to set-off, apply and reduce against its obligations hereunder (principal
or interest, at the option of the Maker) any amounts owing by Payee to Maker as
a result of Payee's indemnity obligations under the Stock Purchase Agreement.
Maker will give written notice to Payee of any exercise of said set-off,
including the amount owed Maker by Payee under Article VI of the Stock Purchase
Agreement that Maker desires to set-off against principal or interest owed by
Maker hereunder; provided, however, the failure to give such notice shall in no
manner affect the right of Maker in respect to set-offs and corresponding
applications of funds.
This Note is secured by all security agreements, collateral
assignments and lien instruments executed by the Maker in favor of Payee, or
executed by any other party as security for this Note, including without
limitation, security agreement(s) of even date herewith by Maker in favor of
Payee.
This Note shall be governed by and construed in accordance with the
internal laws of the State of Oklahoma and applicable federal laws of the
United States of America. This Note has been delivered and accepted and is
payable at Tulsa, Oklahoma.
EXECUTED AND EFFECTIVE as of the day and year first above written.
MAKER:
UTI ENERGY CORP.
By: /s/ VAUGHN E. DRUM
-------------------------------------
Name: Vaughn E. Drum
-------------------------
Title: President
------------------------
PAGE 3 OF 3 PAGES
<PAGE> 1
EXHIBIT 4.2
HYPOTHECATION/SECURITY AGREEMENT
THIS HYPOTHECATION SECURITY AGREEMENT ("Security Agreement") is made
and entered into as of this 14th day of August, 1996, by Viersen & Cochran
Drilling Company, an Oklahoma corporation, with its chief place of business
office located at 485 Devon Park Drive, #112, Wayne, Pennsylvania 19087
(hereinafter called "Debtor"), in favor of The Sam K. Viersen, Jr. Trust dated
September 9, 1986 as Amended and Restated on May 11, 1994, located at the
offices of The Trust Company of Oklahoma, 5727 South Lewis Avenue, Tulsa,
Oklahoma 74136 (hereinafter called "Secured Party").
WITNESSETH:
WHEREAS, UTI Energy Corp., a Delaware corporation, executed a
Promissory Note dated on even date herewith ("Note") in favor of Secured Party
as partial consideration for the purchase by Utico, Inc., a wholly owned
subsidiary of Borrower, from Secured Party of all the outstanding common stock
of Debtor (the "Stock Acquisition"); and
WHEREAS, Debtor executed a Guaranty Agreement dated on even date
herewith, guaranteeing Borrower's payment of the Note (the "Guaranty"); and
WHEREAS, it was a condition to Secured Party's accepting the Note from
Borrower and the Guaranty from Debtor that Debtor execute and deliver this
Security Agreement, and Debtor has agreed to enter into this Security
Agreement;
NOW, THEREFORE, (i) for and in consideration of the premises and the
agreements herein contained, and (ii) for other good and valuable
consideration, the receipt and sufficiency of all of which is hereby
acknowledged, Debtor hereby agrees with Secured Party as follows:
ARTICLE I
GENERAL TERMS
Section 1.01 TERMS DEFINED ABOVE. As used in this Security
Agreement, the terms "Security Agreement", "Debtor", "Secured Party",
"Borrower", "Stock Acquisition", "Guaranty" and "Note" shall have the meanings
indicated above.
Section 1.02 DEFINITIONS CONTAINED IN THE NOTE. Unless otherwise
defined herein, all terms beginning with a capital letter which are defined in
the Note shall have the same meanings herein as therein unless the context
hereof otherwise requires.
Section 1.03 CERTAIN DEFINITIONS. As used in this Security
Agreement, the following terms shall have the following meanings, unless the
context otherwise requires:
"CODE" shall mean the Uniform Commercial Code as presently in effect
in the State of Oklahoma, Title 12A, Sections 1.101-11.105, Sections
1.101-11.108.
"COLLATERAL" shall have the meaning given such term in Section 2.01
hereof.
"DEFAULT" shall mean the occurrence of any of the events specified
herein or in the Note or the Guaranty as a "default", whether or not
any requirement for notice or lapse of time or other condition
precedent has been satisfied.
<PAGE> 2
"EQUIPMENT" shall have the meaning given such term in Section 2.01
hereof.
"EVENT OF DEFAULT" shall mean the occurrence of any of the events
specified in Section 5.01, provided that any requirement for notice or
lapse of time or other condition precedent has been satisfied.
"INDEBTEDNESS" shall mean all obligations and liabilities of any kind
owed or to be owed, whether now existing or hereafter arising, by
Debtor to Secured Party under the Guaranty.
"OBLIGATIONS" shall have the meaning given such term in Section 2.02
hereof.
"SECURITY AGREEMENT" shall mean this Security Agreement, as the same
may from time to time be amended or supplemented.
Section 1.04 TERMS DEFINED IN CODE. All terms used herein, not
otherwise defined herein, which are defined in the Code shall have the same
meaning herein unless the context otherwise requires.
ARTICLE II
SECURITY INTEREST
Section 2.01 GRANT OF SECURITY INTEREST. Debtor hereby grants to
Secured Party a security interest in, and a general lien upon all of the
equipment described more fully on Exhibit "A" attached hereto, including the
proceeds, products, additions to, substitutions for and accessions of any and
all of said equipment, excluding, however, any lease payments received in
respect of said equipment (collectively the "Collateral").
Section 2.02 OBLIGATIONS SECURED. The security interest in, and
general lien upon, the Collateral is granted to secure the payment of all
Indebtedness of Debtor to Secured Party now or hereafter existing under or in
connection with the Guaranty and any and all renewals, extensions for any
period or rearrangements thereof, and out-of- pocket costs, expenses and
reasonable attorneys' fees and collection expenses in accordance with the
Guaranty and this Security Agreement ((herein collectively called the
"Obligations").
ARTICLE III
REPRESENTATIONS AND WARRANTIES
In order to induce Secured Party to accept this Security Agreement,
Debtor represents and warrants to Secured Party that:
Section 3.01 OWNERSHIP AND LIENS. Since the Stock Acquisition,
except for the security interest of Secured Party granted in this Security
Agreement, Debtor has not granted any security interest in, or otherwise
encumbered, the Collateral, and, except for any liens, adverse claims and
options existing prior to the Stock Acquisition, Debtor has no knowledge of any
other liens, adverse claims or options burdening the Collateral.
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<PAGE> 3
Section 3.02 SECURED PARTY'S SECURITY INTEREST. This Security
Agreement creates a valid and binding security interest in the Collateral
securing the Obligations. All filings and other actions now or hereafter
necessary or desirable by Secured Party on the part of the Debtor to perfect or
protect such security interest will be promptly taken by Debtor upon the
request of Secured Party.
ARTICLE IV
COVENANTS AND AGREEMENTS
From the date hereof and for so long as any part of the Indebtedness
is outstanding, Debtor will comply with the covenants contained in this Article
IV.
Section 4.01 TITLE; PROHIBITED LIENS AND FILINGS. Except for the
security interest to the Secured Party (or to the extent a security interest
existed with respect to the Collateral prior to the Stock Acquisition), Debtor
will not pledge, mortgage, otherwise encumber, create or suffer a lien to exist
on any of the Collateral. Debtor will not file or permit to be filed or
recorded any financing statement or other security instrument with respect to
the Collateral other than in favor of Secured Party.
Section 4.02 DISPOSITION OF COLLATERAL. Debtor may sell, transfer
or otherwise dispose of ("Sell") Collateral (excluding for this purpose
transfers pursuant to Section 4.08 hereof) having an aggregate Section 4.02
Calculation Amount (hereinafter defined) not in excess of $2,000,000; provided
that to the extent the cumulative Section 4.02 Calculation Amount for all
Collateral sold pursuant to this Section 4.02 through such date (after giving
effect to such Sale) shall exceed the cumulative sales proceeds received by
Debtor from such Sales by more than $300,000, Debtor shall have 45 days to
restore such relationship (either through the Sale of additional Collateral or
by prepaying the Note in an amount equal to the excess over $300,000 (which
prepayment shall be considered sales proceeds for purposes of future
calculations under this proviso). To the extent Debtor Sells Collateral (other
than pursuant to Section 4.08 hereof) having an aggregate Section 4.02
Calculation Amount (hereinafter defined) in excess of $2,000,000, Debtor shall
apply the Net Proceeds from such sale(s) (hereinafter defined) to reduce the
principal amount of the Note, and, to the extent the cumulative Section 4.02
Calculation Amount for all Collateral sold pursuant to this Section 4.02
through such date (after giving effect to such Sale) shall exceed the
cumulative sales proceeds received by Debtor from such Sales by more than
$300,000, Debtor shall have 45 days to restore such relationship (either
through the Sale of additional Collateral or by prepaying the Note in an amount
equal to the excess over $300,000 (which prepayment shall be considered sales
proceeds for purposes of future calculations under this proviso). "Section
4.02 Calculation Amount" shall mean the amount set forth opposite such item on
Exhibit "A" hereto. "Net Proceeds" shall mean the gross proceeds received by
Debtor from such Sale less selling expenses paid to unrelated third parties.
In connection with a Sale of Collateral pursuant to the terms of this Section
4.02, Secured Party agrees to timely provide appropriate releases with respect
thereto as may be reasonably requested by Debtor. Except as set forth above or
pursuant to Section 4.08, Debtor may not sell, assign or otherwise dispose of
any Collateral.
Section 4.03 TAXES. Debtor agrees to pay prior to delinquency all
taxes, charges, liens and assessments against the Collateral.
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Section 4.04 INSPECTION OF COLLATERAL. Secured Party may from
time to time, and upon request and during regular business hours, inspect the
Collateral.
Section 4.05 EXPENSES. Debtor agrees to pay to Secured Party at
Secured Party's offices, all out-of-pocket costs and expenses (including
reasonable attorneys' fees and legal expenses) incurred by Secured Party in
connection with protecting Secured Party against the claims or interests of any
person against the Collateral (except to the extent such claims or interests
relate to events occurring prior to the Stock Acquisition), and in exercising
any right, power or remedy conferred by this Security Agreement or by law or in
equity. The amount of all such costs and expenses shall be due and payable by
Debtor to Secured Party upon submission of documentation evidencing such
payment or incurrence by Secured Party.
Section 4.06 TRANSFER OF LOCATION. No part of the Collateral
shall be moved outside the states of Texas, Louisiana, New Mexico, Oklahoma, or
Pennsylvania unless Debtor gives written notice of such move, and no part of
the Collateral shall be moved outside the 48 contiguous states of the United
States without the prior written consent of Secured Party. Each such notice
shall include specific legal descriptions to enable the parties to maintain the
Secured Party's security interest in such Collateral following such move and
shall identify the approximate date upon which the move will occur and the
method of transportation. Debtor shall be responsible to ensure that the
Collateral that is being moved is insured from any loss during transportation
and at the new location. Debtor agrees to timely execute and deliver
additional UCC financing statements or other documents that Secured Party may
reasonably request as to any of the Collateral which is moved during the term
of this Security Agreement to ensure continued perfection of Secured Party's
security interest in such Collateral.
Section 4.07 MAINTENANCE OF COLLATERAL GENERALLY. Debtor will
maintain the Collateral in at least the condition, repair and working order as
exists on the date of this Security Agreement, ordinary wear and tear excepted.
Section 4.08 TRANSFER OF COLLATERAL TO AFFILIATES. Debtor may
sell, assign or transfer any Collateral to any affiliate of Borrower provided
that (i) Secured Party's security interest in the Collateral continues as a
first priority security interest therein, and (ii) such affiliate agrees, in
writing, to be bound by the terms of this Security Agreement with respect to
such Collateral and evidence of such agreement is provided to Secured Party.
Section 4.09 FURTHER ASSURANCES. Debtor will, from time to time,
sign, execute, deliver and file, alone or with the Secured Party, any financing
statements, security agreements or other documents and take all further action
that may be reasonably requested by Secured Party by way of further assurance
to Secured Party of the matters and things herein provided for.
ARTICLE V
RIGHTS, REMEDIES AND DEFAULT
Section 5.01 EVENTS OF DEFAULT. Any of the following events shall
be considered an "event of default" under this Security Agreement:
(a) default is made in the payment when due of any of the
Indebtedness after giving effect to any grace periods therefor; or
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(b) any representation or warranty of Debtor herein is
determined to be false or misleading in any material respect; or
(c) an event of default occurs under the Note or the
Guaranty.
Section 5.02 DEFAULT REMEDIES. Upon the happening and during the
continuance of any Event of Default, Secured Party may then, or at any time
thereafter and from time to time, apply, collect, sell in one or more sales,
lease, or otherwise dispose of, any or all of the Collateral, in its then
condition or following any commercially reasonable preparation or processing,
in such order as Secured Party may elect, and any such sale may be made either
at public or private sale at its place of business or elsewhere, in any manner
authorized or permitted under the Code. If any applicable provision of the
Code or other law requires Secured Party to give reasonable notice of any such
sale or disposition or other action, Debtor hereby agrees ten days' prior
written notice shall constitute reasonable notice. Secured Party may require
Debtor to assemble the Collateral and make it available to Secured Party at a
place designated by Secured Party which is reasonably convenient to Secured
Party and Debtor. Any sale hereunder may be conducted by an auctioneer or any
officer or agent of Secured Party.
Section 5.03 PROCEEDS. After the happening of any Event of
Default and during the continuance thereof, the proceeds of any sale or other
disposition of the Collateral and all sums received or collected by Secured
party from or on account of the Collateral shall be applied by Secured Party in
the manner set forth in Section 9.504 of the Code.
Section 5.04 DEFICIENCY. This Security Agreement shall not be
construed as relieving Debtor from full liability on the Obligations, including
any deficiency as a result of the application of any remedy by Secured Party
under Section 5.02 and 5.03 hereof.
Section 5.05 SECURED PARTY'S DUTIES. The powers conferred upon
Secured Party by this Security Agreement are solely to protect its interest in
the Collateral and shall not impose any duty upon Secured Party to exercise any
such powers. Secured Party shall be under no duty whatsoever to make or give
any presentment, demand for performance, notice of nonperformance, protest,
notice of protest, notice of dishonor, or other notice or demand in connection
with any Collateral or the Obligations, or to take any steps necessary to
preserve any rights against prior parties. Secured Party shall not be liable
for failure to collect or realize upon any or all of the Obligations or
Collateral, or for any delay in so doing, nor shall Secured Party be under any
duty to take any action whatsoever with regard thereto. Secured Party shall
use reasonable care in the custody and preservation of any Collateral in its
possession. Secured Party shall have no duty to comply with any recording,
filing, or other legal requirements necessary to establish or maintain the
validity, priority or enforceability of, or Secured Party's rights in or to,
any of the Collateral.
Section 5.06 SECURED PARTY'S ACTIONS. Debtor waives any right to
require Secured Party to proceed against any person, exhaust any Collateral, or
pursue any other remedy in Secured Party's power and waives any and all notice
of creation, modification, rearrangement, renewal or extension for any period
of any of the Obligations from time to time.
Section 5.07 CUMULATIVE SECURITY. The execution and delivery of
this Security Agreement in no manner shall impair or affect any other security
(by endorsement or otherwise) for the Obligations. No security taken hereafter
as security for the Obligations
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shall impair in any manner or affect this Security Agreement. All such present
and future additional security is to be considered as cumulative security.
Section 5.08 CONTINUING AGREEMENT. This is a continuing Security
Agreement and the grant of a security interest hereunder shall remain in full
force and effect and all the rights, powers and remedies of Secured Party
hereunder shall continue to exist until the Indebtedness is paid in full.
Section 5.09 CUMULATIVE RIGHTS. The rights, powers and remedies
of Secured Party hereunder shall be in addition to all rights, powers and
remedies given by statute or rule of law and are cumulative. The exercise of
any one or more of the rights, powers and remedies provided herein shall not be
construed as a waiver of any other rights, powers and remedies of Secured
Party. Furthermore, regardless of whether or not the Code is in effect in the
jurisdiction where such rights, powers and remedies are asserted, Secured Party
shall have the rights, powers and remedies of a secured party under the Code.
Section 5.10 EXERCISE OF RIGHTS, ETC. Time shall be of the
essence for the performance of any act under this Security Agreement or the
Obligations by Debtor, but neither Secured Party's acceptance of partial or
delinquent payments nor any forbearance, failure or delay by Secured Party in
exercising any right, power or remedy shall be deemed a waiver of any
obligation of Debtor or of any right, power or remedy of Secured Party or
preclude any other or further exercise thereof; and no single or partial
exercise of any right, power or remedy shall preclude any other or further
exercise thereof, or the exercise of any other right, power or remedy.
Section 5.13 REMEDY AND WAIVER. Secured Party may remedy any
Default without waiving the Default remedied and may waive any Default without
waiving any prior or subsequent Default.
Section 5.14 NON-JUDICIAL REMEDIES. The right of Secured Party to
take lawful possession or control of the Collateral upon the occurrence of an
Event of Default may be exercised without resort to any court proceedings or
judicial process whatever and without any hearing whatever thereon.
ARTICLE VI
MISCELLANEOUS
Section 6.01 CONSTRUCTION. This Security Agreement has been made
in and the security interest granted hereby is granted in and each shall be
governed by the laws of the State of Oklahoma and of the United States of
America, as applicable, in all respects, including matters of construction,
validity, enforcement and performance.
Section 6.02 AMENDMENT AND WAIVER. This Security Agreement may
not be amended (nor may any of its terms be waived) except by written
instrument signed by the party to be bound thereby.
Section 6.03 INVALIDITY. If any provision of this Security
Agreement is rendered or declared invalid, illegal or unenforceable by reason
of any existing or subsequently enacted legislation or by a judicial decision
which shall have become final, Debtor and Secured Party
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<PAGE> 7
shall promptly meet and negotiate substitute provisions for those rendered
invalid, illegal or unenforceable, but all of the remaining provisions shall
remain in full force and effect.
Section 6.04 SURVIVAL OF AGREEMENTS. All representations and
warranties of Debtor herein, and all covenants and agreements herein not fully
performed before the effective date of this Security Agreement, shall survive
such date.
Section 6.05 SUCCESSORS AND ASSIGNS. The covenants and agreements
herein contained by or on behalf of Debtor shall bind Debtor, and Debtor's
successors and assigns and shall inure to the benefit of Secured Party, and its
successors and assigns.
Section 6.06 TITLES OF ARTICLES, SECTIONS AND SUBSECTIONS. All
titles or headings to articles, sections, subsections or other divisions of
this Security Agreement are only for the convenience of the parties and shall
not be construed to have any effect or meaning with respect to the other
content of such articles, sections, subsections or other divisions, such other
content being controlling as to the agreement between the parties hereto.
Section 6.07 COUNTERPARTS. This Security Agreement may be
executed in two or more counterparts, and it shall not be necessary that the
signatures of all parties hereto be contained on any one counterpart hereof;
each counterpart shall be deemed an original, but all of which together shall
constitute one and the same instrument.
Section 6.08 NOTICES. All notices, requests, consents and other
communications under this Security Agreement shall be in writing and shall be
deemed to have been delivered on the date personally delivered or on the date
mailed, postage prepaid, by certified mail, return receipt requested, if
addressed to the respective parties as set forth in the opening paragraph of
this Security Agreement. Either party hereto may designate a different address
by providing written notice of such new address to the other party hereto.
Copies of all notices to the Secured Party shall be simultaneously delivered or
mailed to Pray, Walker, Jackman, Williamson & Marlar, attention: Donald F.
Marlar, Esq., 900 Oneok Plaza, Tulsa, Oklahoma 74103.
IN WITNESS HEREOF, Debtor has caused this instrument to be duly
executed as of the date first above written.
VIERSON & COCHRAN DRILLING COMPANY
"Debtor"
By: /s/ VAUGHN E. DRUM
-------------------------------------
Name: Vaughn E. Drum
-------------------------
Title: President
------------------------
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<PAGE> 1
EXHIBIT 4.3
NO. 1 FOR THE PURCHASE OF 200,000 SHARES
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR THE LAWS OF ANY STATE AND IS NOT TRANSFERRABLE.
STOCK PURCHASE WARRANT TO PURCHASE SHARES OF
COMMON STOCK OF UTI ENERGY CORP.
This certifies that, for value received, The Sam K. Viersen Jr. Trust
dated September 9, 1986, as Amended and Restated on May 11, 1994 (the "Holder")
is entitled, subject to the terms and conditions of this Warrant, at any time
or from time to time during the Exercise Period (as hereinafter defined), to
purchase up to 200,000 shares (subject to adjustment pursuant to Section 9
below) of common stock, $.001 par value ("Common Stock"), of UTI Energy Corp.,
a Delaware corporation (the "Company") (the shares of Common Stock issuable
upon exercise of this Warrant, as adjusted under Section 9, being referred to
herein as the "Warrant Shares").
1. FORM OF ELECTION.
The form of election to purchase shares of Common Stock (the
"Form of Election") shall be substantially as set forth in Exhibit A attached
hereto. The price per Warrant Share and the number of Warrant Shares issuable
upon exercise of this Warrant are subject to adjustment upon the occurrence of
certain events, all as hereinafter provided.
2. EXERCISE PERIOD; EXERCISE OF WARRANT.
2.1 Exercise Period. Subject to the terms of this
Warrant, the Holder shall have the right, which may be exercised at
any time or from time to time during the Exercise Period, to purchase
from the Company the number of fully paid and nonassessable Warrant
Shares this Warrant at the time represents the right to purchase, and,
in the event that this Warrant is exercised in respect of fewer than
all of the Warrant Shares purchasable on such exercise, a new warrant
evidencing the remaining Warrant Shares that may be purchased shall be
promptly signed, issued and delivered by the Company to the Holder
pursuant to the provisions of this Section 2. The term "Exercise
Period" shall mean the period commencing on August 14, 1996, and
terminating at 5:00 p.m. (central time) on August 14, 1998.
2.2 Exercise of Warrant. This Warrant may be exercised
upon surrender to the Company at its principal office (as designated
in Section 13) of this Warrant, together with the Form of Election
duly completed and signed, and upon payment to the Company of the
Warrant Price (as defined in and determined in accordance with the
provisions of Sections 3 and 9 hereof) for the number of Warrant
Shares in respect of which this Warrant is then exercised. Payment of
the aggregate Warrant Price with respect to the portion of this
Warrant being exercised shall be made in cash or by certified or
official bank check, payable to the order of the Company.
Subject to Section 6 hereof, upon the surrender of this
Warrant and payment of the Warrant Price as set forth above, the
Company shall issue and cause to be delivered to the Holder or, upon
the written order of the Holder, to and in such name or names as the
Holder may designate, a certificate or certificates for the number of
full Warrant Shares so purchased upon the exercise of this Warrant.
Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named
<PAGE> 2
therein shall be deemed to have become a holder of record of such
Warrant Shares as of the date of the surrender of this Warrant and
payment of the Warrant Price, as aforesaid.
3. WARRANT PRICE.
The price per share at which Warrant Shares shall be
purchasable upon exercise of this Warrant initially shall be $15.00 and shall
be subject to adjustment pursuant to Section 9 hereof (such price as so
adjusted is referred to herein as the "Warrant Price").
4. EXCHANGE OF WARRANT.
This Warrant may be exchanged at the option of the Holder when
surrendered at the principal office of the Company for another warrant, or
other warrants of different denominations, of like tenor and representing in
the aggregate the right to purchase a like number of Warrant Shares as this
Warrant then entitles the Holder to purchase. Any Holder desiring to exchange
this Warrant shall make such request in writing delivered to the Company, and
shall surrender this Warrant for exchange. Thereupon, the Company shall
promptly sign and deliver to the person entitled thereto a new warrant or
warrants, as the case may be, as so requested.
5. NO REGISTRATION OF WARRANT.
This Warrant has not been registered under the Securities Act
of 1933, as amended (the "Securities Act"), or any applicable state securities
laws. The Holder represents and agrees that this Warrant and, upon exercise
hereof, any Warrant Shares have been acquired for investment and not with a
view to distribution or resale. The Holder further acknowledges and agrees
that this Warrant may not be transferred, and the Warrant Shares, upon exercise
of this Warrant, may not be transferred without an effective registration
statement therefor under the Securities Act and applicable state securities
laws or an opinion of counsel satisfactory to the Company that registration is
not required thereunder. Unless registered, any Warrant Shares shall bear the
following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933 or the laws of any state
and may not be transferred in the absence of an effective registration
statement for the securities under the Securities Act of 1933 and
applicable state laws or an opinion of counsel reasonably satisfactory
to the Company that such registration is not required.
6. PAYMENT OF TAXES.
The Company will pay when due and payable any and all U.S.
federal and state transfer taxes and charges that may be payable in respect of
the issuance or delivery of this Warrant or of any Warrant Shares upon the
exercise of this Warrant. The Company shall not, however, be required to (i)
pay any transfer tax that may be payable in respect of any transfer involved in
the issuance or delivery of certificates for Warrant Shares in the name other
than that of the Holder or (ii) to issue or deliver any certificates for
Warrant Shares upon the exercise of this Warrant until such tax shall have been
paid (any such tax being payable by the Holder at the time of surrender) or
until it has been established to the Company's reasonable satisfaction that no
such tax is due.
<PAGE> 3
7. MUTILATED OR MISSING WARRANT.
In case this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall execute, issue and deliver in exchange and
substitution for and upon cancellation of the mutilated Warrant, or in lieu of
and substitution for the Warrant lost, stolen or destroyed, a new warrant of
like tenor and representing an equivalent right or interest; but only upon
receipt of evidence reasonably satisfactory to the Company of such loss, theft
or destruction of this Warrant and indemnity, if requested, satisfactory to the
Company. The Holder requesting such a substitute warrant shall also comply
with such other reasonable regulations and pay such other reasonable charges as
the Company may prescribe.
8. RESERVATION OF WARRANT SHARES; PURCHASE OF WARRANT BY THE
COMPANY.
8.1 Reservation of Warrant Shares. The Company shall at
all times reserve for issuance from its authorized and unissued shares
of Common Stock the number of shares of Common Stock needed for
issuance upon the exercise of this Warrant. The Company covenants
that all shares of Common Stock issuable as herein provided shall,
when so issued, be duly and validly issued, fully paid and
nonassessable.
8.2 Purchase of Warrant by the Company. The Company
shall not be prohibited, except as limited by law, any other agreement
or herein, from offering to purchase, purchasing or otherwise
acquiring this Warrant from any holder thereof at such times, in such
manner and for such consideration as the Company and such holder may
agree to.
8.3 Cancellation of Purchased or Acquired Warrant. In
the event the Company shall purchase or otherwise acquire this
Warrant, the same shall thereupon be canceled and retired.
9. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF WARRANT SHARES.
9.1 Mechanical Adjustments. The existence of this
Warrant shall not affect in any way the right or power of the Company
or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's
capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior
preference stock ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale
or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or
otherwise.
If the Company shall effect a subdivision (by stock split,
stock dividend, recapitalization or otherwise) or consolidation (by
reverse stock split or otherwise) of shares or other capital
adjustment of, or the payment of a dividend in capital stock or other
equity securities of the Company on, its Common Stock, or other
increase or reduction of the number of shares of the Common Stock
without receiving consideration therefor in money, services, or
property, or the reclassification of its Common Stock, in whole or in
part, into other equity securities of the Company, then the number,
class and per share price of Warrant Shares shall be appropriately
adjusted (or in the case of the issuance of equity securities as a
dividend on, or in a reclassification of, the Common Stock, this
Warrant shall extend to such other securities) in such a manner as to
entitle the Holder to receive, upon exercise of this Warrant, for the
same aggregate cash compensation, the same total number and class or
classes of shares (or in the case of a dividend of, or
reclassification into, other equity securities, such other securities)
it would have held
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after such adjustment if the Holder had exercised this Warrant in full
immediately prior to the event requiring the adjustment. Comparable
rights shall accrue in the event of successive subdivisions,
consolidations, capital adjustments, dividends or reclassifications of
the character described above.
If the Company shall distribute to all holders of its shares
of Common Stock (including any such distribution made to
non-dissenting stockholders in connection with a consolidation or
merger in which the Company is the surviving corporation and in which
holders of shares of Common Stock continue to hold shares of Common
Stock after such merger or consolidation) evidences of indebtedness or
cash or other assets (other than cash dividends payable out of
consolidated retained earnings not in excess of, in any one year
period, the greater of (a) $.10 per share of Common Stock and (b) two
times the aggregate amount of dividends per share paid during the
preceding calendar year and dividends or distributions payable in
shares of Common Stock or other equity securities of the Company
described in the immediately preceding paragraph), then in each case
the Warrant Price shall be adjusted by reducing the Warrant Price in
effect immediately prior to the record date for the determination of
stockholders entitled to receive such distribution by the fair market
value, as determined in good faith by the Board of Directors of the
Company (whose determination shall be described in a statement filed
in the Company's corporate records and be available for inspection by
the Holder) of the portion of the evidence of indebtedness or cash or
other assets so to be distributed applicable to one share of Common
Stock; provided that in no event shall the Warrant Price be less than
the par value of a share of Common Stock. Such adjustment shall be
made whenever any such distribution is made, and shall become
effective on the date of the distribution retroactive to the record
date for the determination of the stockholders entitled to receive
such distribution. Comparable adjustments shall be made in the event
of successive distributions of the character described above.
After the Company shall make a tender offer for, or grant to
all of its holders of its shares of Common Stock the right to require
the Company to acquire from such stockholders shares of, Common Stock,
at a price in excess of the Current Market Price (a "Put Right") or
the Company shall grant to all of its holders of its shares of Common
Stock the right to acquire shares of Common Stock for less than the
Warrant Price (the "Exercise Right") then, in the case of a Put Right,
the Warrant Price shall be adjusted by multiplying the Warrant Price
in effect immediately prior to the record date for the determination
of stockholders entitled to receive such Put Right by a fraction, the
numerator of which shall be the number of shares of Common Stock then
outstanding minus the number of shares of Common Stock which could be
purchased at the Current Market Price for the aggregate amount which
would be paid if all Put Rights are exercised and the denominator of
which is the number of shares of Common Stock which would be
outstanding if all Put Rights are exercised; and, in the case of a
Purchase Right, the Warrant Price shall be adjusted by multiplying the
Warrant Price in effect immediately prior to the record date for the
determination of the stockholders entitled to receive such Purchase
Right by a fraction, the numerator of which shall be the number of
shares of Common Stock then outstanding plus the number of shares of
Common Stock which could be purchased at the Current Market Price for
the aggregate amount which would be paid if all Purchase Rights are
exercised and the denominator of which is the number of shares of
Common Stock which would be outstanding if all Purchase Rights are
exercised. In addition, the number of shares subject to this Warrant
shall be adjusted by multiplying the number of shares then subject to
this Warrant by a fraction which is the inverse of the fraction used
to adjust the Warrant Price. Notwithstanding the foregoing if any
such Put Rights or Purchase Rights shall terminate without being
exercised, the Warrant Price and number of shares subject to this
Warrant shall be appropriately readjusted to reflect the Warrant Price
and number of shares subject to this Warrant which
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would have been in effect if such unexercised Rights had never
existed. Comparable adjustments shall be made in the event of
successive transactions of the character described above.
After the merger of one or more corporations with or into the
Company, after any consolidation of the Company and one or more
corporations, or after any other corporate transaction described in
Section 424(a) of the Internal Revenue Code of 1986, as amended, the
Holder, at no additional cost, shall be entitled to receive, upon any
exercise of this Warrant, in lieu of the number of shares as to which
this Warrant may then be so exercised, the number and class of shares
of stock or other equity securities to which the Holder would have
been entitled pursuant to the terms of the agreement of merger or
consolidation if at the time of such merger or consolidation the
Holder had been a holder of a number of shares of Common Stock equal
to the number of shares as to which this Warrant may then be so
exercised and, if as a result of such merger, consolidation or other
transaction, the holders of Common Stock are not entitled to receive
any shares of Common Stock pursuant to the terms thereof, the Holder,
at no additional cost, shall be entitled to receive, upon exercise of
this Warrant, such other assets and property, including cash, to which
the Holder would have been entitled if at the time of such merger,
consolidation or other transaction the Holder had been the holder of
the number of shares of Common Stock equal to the number of shares as
to which this Warrant shall then be so exercised. Comparable rights
shall accrue in the event of successive mergers or consolidations of
the character described above.
For purposes of this Section 9.1, "Current Market Price per
share of Common Stock" shall mean the closing price of a share of
Common Stock on the principal national securities exchange on which
the Common Stock is listed or, if the Common Stock is not so listed,
the average bid and asked price of a share of Common Stock as reported
in the NASDAQ System, in each case on the trading day immediately
preceding the first trading day on which, as a result of the
establishment of a record date or otherwise, the trading price
reflects that an acquiror of Common Stock in the public market will
not participate in or receive the payment of any applicable dividend
or distribution.
Except as hereinbefore expressly provided, (i) the issue by
the Company of shares of Common Stock of any class, or securities
convertible into shares of stock of any class, for cash or property,
or for labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or
other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares
of Common Stock then subject to this Warrant and (ii) no adjustment in
respect of any dividends shall be made during the term of this Warrant
or upon the exercise of this Warrant.
9.2 Voluntary Adjustment by the Company. The Company may
at its option, at any time during the term of this Warrant, reduce the
then current Warrant Price to any amount deemed appropriate by the
Board of Directors of the Company.
9.3 Statement on Warrant. Irrespective of any
adjustments in the Warrant Price with respect to this Warrant or the
number or kind of shares purchasable upon the exercise of this
Warrant, warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in
this Warrant.
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10. REGISTRATION RIGHTS.
10.1 Demand Rights. On one occasion after January 1,
1997, the Holder may request, pursuant to this Section 10.1, that the
Company register under the Securities Act the Warrant Shares (as
adjusted under Section 9) issued to the Holder upon exercise of this
Warrant pursuant to a non-underwritten offering having a period of
distribution not to exceed 120 days; provided, however, the Company
shall not be obligated to prepare and file any registration statement
pursuant to this Section 10.1, or prepare or file any amendment or
supplement thereto, at any time when the Company, in the good faith
judgment of its Board of Directors, expressed by resolution specifying
the reason therefor, reasonably believes that the filing thereof at
the time requested, or the offering of securities pursuant thereto,
would materially and adversely affect a pending or proposed public
offering of securities of the Company, an acquisition, merger,
recapitalization, consolidation, reorganization or similar transaction
relating to the Company or negotiations, discussions or pending
proposals with respect thereto or require premature disclosure of
information not otherwise required to be disclosed to the potential
detriment of the Company. Notwithstanding anything to the contrary
contained in this Section 10.1, the Company shall be permitted, on
three business days prior written notice to the Holder, to suspend the
period of sale or distribution of shares of Common Stock subject to a
registration pursuant to this Section 10.1 at any time when the
Company, in the good faith judgment of its Board of Directors,
expressed by resolution specifying the reason therefor, reasonably
believes that the sale or distribution thereof at the time requested
would materially and adversely affect a pending or proposed public
offering of securities of the Company, an acquisition, merger,
recapitalization, consolidation, reorganization or similar transaction
relating to the Company or negotiations, discussions or pending
proposals with respect thereto or require premature disclosure of
information not otherwise required to be disclosed to the potential
detriment of the Company; provided, however, that such period of sale
or distribution shall resume after any such suspension for a number of
days necessary to keep such registration effective for permitted sales
thereunder for a term of 120 days. The filing of a registration
statement, or any amendment or supplement thereto, by the Company may
not be deferred, and the sale and distribution of shares may not be
suspended, in each case pursuant to the foregoing provisions, for more
than 60 days after the abandonment or consummation (or the completion
of the distribution of securities in the case of a public offering) of
any of the proposals or transactions described therein or, in any
event, for more than 120 days.
10.2 Piggyback Rights. If, at any time after the date
hereof, the Company proposes to register under the Securities Act any
shares of Common Stock for sale by it pursuant to an underwritten
public offering of the Common Stock (except with respect to
registration statements filed on Form S-4 or such other forms as shall
be prescribed under the Securities Act for the same purposes as such
form), it will at each such time, prior to the filing of any such
registration statement, give written notice to the Holder of its
intention so to do, regardless of whether the Holder has previously
exercised piggyback registration rights or demand rights as to any
other shares of stock hold by it, and, upon the written request (which
must specify the number of shares of Common Stock to participate in
such underwritten offering) of the Holder delivered to the Company
within five days of receipt of the Company's notice, the Company will
use its best efforts to cause any Warrant Shares as to which
registration shall have been so requested to be included in the shares
to be covered by the registration statement proposed to be filed by
the Company. Nothing contained in this Section 10.2 shall, however,
limit the Company's right to cancel, postpone or withdraw any such
proposed registration for any reason. Any request by the Holder
pursuant to this Section 10.2 to register Warrant Shares for sale in
the underwriting shall be on the same terms and conditions as the
shares of Common Stock to be registered and sold through underwriters
under such
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<PAGE> 7
registration; provided, however, that as a condition to such inclusion
the Holder shall execute an underwriting agreement acceptable to the
underwriters and, if requested, a custody agreement having such
customary terms as the underwriters shall request, including
indemnification, and if the managing underwriter determines and
advises in writing that the inclusion in the underwriting of all
Warrant Shares proposed to be included by the Holder and any other
shares of Common Stock sought to be registered by any other
stockholder of the Company exercising rights comparable to those of
the Holder under this Warrant (the "Other Common Stock") would, in its
reasonable and good faith judgment, interfere with the successful
marketing of the securities proposed to be registered for underwriting
by the Company or by any holder of Common Stock having the right to
require the Company to file a registration statement to register such
Common Stock, then the number of Warrant Shares and Other Common Stock
requested to be included in the underwriting shall be reduced pro rata
among the Holder and the holders of Other Common Stock requesting such
registration and inclusion in the underwriting and may, in the
determination of such managing underwriter and consistent with pro
rata reduction, be reduced to zero.
10.3 Procedure. If and whenever the Company is required
by the provisions of this Warrant to use its best efforts to effect
the registration of any Warrant Shares under the Securities Act, the
Company will, subject to the other provisions of this Section 10:
(a) as expeditiously as reasonably practicable,
prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement on the appropriate
form with respect to such Warrant Shares and seek to cause
such registration statement to become and remain effective;
(b) as expeditiously as reasonably practicable,
prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the
provisions of the Securities Act with respect to the
disposition of such Warrant Shares covered by such
registration statement in accordance with the intended method
of distribution set forth in such registration statement;
(c) as expeditiously as reasonably practicable,
furnish to the Holder such number of copies of prospectuses
and preliminary prospectuses in conformity with the
requirements of the Securities Act, and such other documents
as the Holder may reasonably request, in order to facilitate
the public sale or other disposition of such Warrant Shares;
provided, however, that the obligation of the Company to
deliver copies of prospectuses or preliminary prospectuses to
the Holder shall be subject to the receipt by the Company of
reasonable assurances from the Holder that it will comply with
the applicable provisions of the Securities Act and of such
other securities laws as may be applicable in connection with
any use by it of any prospectuses or preliminary prospectuses;
(d) as expeditiously as reasonably practicable,
furnish, at the request of the Holder, on the date that
Warrant Shares are to be delivered to the underwriters for
sale pursuant to such registration or, if such Warrant Shares
are not being sold through underwriters, on the date the
registration statement with respect to such Warrant Shares
becomes effective (i) an opinion, dated such date, of the
independent counsel representing the Company for the purposes
of such registration, addressed to the underwriters, if any,
and to the Holder, stating that such registration statement
has become effective under the Securities Act and that (A) to
the knowledge of such
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<PAGE> 8
counsel, no stop order suspending the effectiveness of such
registration statement has been instituted or is pending or
contemplated under the Securities Act; (B) the registration
statement, the related prospectus, and each amendment or
supplement thereto, including all documents incorporated by
reference therein, comply as to form in all material respects
with the requirements of the Securities Act and the applicable
rules and regulations of the Commission thereunder (except
that such counsel need express no opinion as to financial
statements or other financial or statistical or reserve data
contained or incorporated by reference therein); and (C) no
facts have come to the attention of such counsel that caused
such counsel to believe (with customary qualifications) that
either the registration statement or the final prospectus, or
any amendment or supplement thereto, including all documents
incorporated by reference therein, in light of the
circumstances under which they were made, contains any untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading (except that such counsel
need express no belief as to financial statements or other
financial or statistical or reserve data contained or
incorporated by reference therein or as to any information
provided by the stockholders of the Company or any underwriter
for inclusion therein); and (ii) a letter, dated such date,
from the independent certified public accountants of the
Company, addressed to the underwriters, stating that they are
independent certified public accountants within the meaning of
the Securities Act and that in the opinion of such
accountants, the financial statements and other financial data
of the Company included in the registration statement or the
prospectus, or any amendment or supplement thereto, including
all documents incorporated by reference therein, comply as to
form in all material respects with the applicable accounting
requirements of the Securities Act. Such letter from the
independent certified public accountants shall additionally
cover such other customary financial matters (including
information as to the period ending not more than five
business days prior to the date of such letter) with respect
to the registration in respect of which such letter is being
given as such underwriters, if any, or the stockholders of the
Company making such request may reasonably request;
(e) as expeditiously as practicable, use its best
efforts to register or qualify Warrant Shares covered by such
registration statement under such other securities laws of
such United States jurisdictions as the Holder shall
reasonably request (considering the nature and size of the
offering) and do any and all other acts and things which may
be necessary or desirable to enable the Holder to consummate
the public sale or other disposition in such jurisdictions of
Warrant Shares; provided, however, that the Company shall not
be required to qualify to transact business as a foreign
corporation in any jurisdiction in which it would otherwise
not be required to be so qualified or to take any action which
would subject it to general service of process in any
jurisdiction in which it is not then so subject;
(f) bear all Registration Expenses (as defined
below) in connection with all registrations hereunder;
provided, however, that all Selling Expenses (as defined
below) of Warrant Shares and all fees and disbursements of
counsel for the Holder in connection with each registration
pursuant to this Warrant shall be borne by the Holder.
Expenses incurred by the Company in complying with this
Warrant, including, without limitation: (i) all registration
and filing fees; (ii) all printing expenses; (iii) all fees
and disbursements of counsel for the Company; (iv) all blue
sky fees and expenses; and (v) all fees and expenses of
accountants for the Company are herein referred to as
"Registration Expenses". All underwriting fees and discounts
and brokerage and selling commissions relating to Warrant
Shares to be registered for sale by the
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<PAGE> 9
Holder and fees and expenses of the counsel for the Holder and
any underwriter's counsel applicable to the sales by the
Holder in connection with any such registration are herein
referred to as "Selling Expenses"; and
(g) keep each registration pursuant to Section
10.1 hereof effective for a period of up to 120 days or such
shorter period of time until the transfer or sale of all
Warrant Shares so registered has been completed.
10.4 Indemnification.
(a) In the event of a registration of any Warrant
Shares under the Securities Act pursuant to this Warrant, the
Company will indemnify and hold harmless the Holder and any
other Person, if any, who controls the Holder within the
meaning of Section 15 of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to
which such selling stockholder of the Company or such
controlling Person may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or
liabilities or actions in respect thereof arise out of or are
based upon any untrue statement or alleged untrue statement of
any material fact contained, on the effective date thereof, in
any registration statement under which such Warrant Shares
were registered under the Securities Act, any preliminary
prospectus distributed with the consent of the Company or
final prospectus contained therein, or any amendment thereof
or supplement thereto, including all documents incorporated by
reference therein, or arise out of or are based upon the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the
Holder and each such controlling Person for any legal or any
other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will
not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration
statement, such preliminary prospectus, such final prospectus
or such amendment or supplement, including all documents
incorporated by reference therein, in reliance upon and in
conformity with written information furnished to the Company
by or on behalf of the Holder or a controlling Person of the
Holder specifically for use in the preparation thereof.
(b) In the event of any registration of any
Warrant Shares under the Securities Act pursuant to this
Warrant, Holder indemnify and hold harmless the Company and
each Person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act, each officer of
the Company who signs the registration statement, each
director of the Company and each underwriter (if any) and each
Person who controls any underwriter (if any) within the
meaning of Section 15 of the Securities Act, against any and
all such losses, claims, damages, liabilities or actions which
the Company or such officer, director, underwriter (if any) or
controlling Person may become subject under the Securities Act
or otherwise, and will reimburse the Company, each such
officer, director, underwriter (if any) and controlling Person
for any legal or any other expenses reasonably incurred by
such party in connection with investigating or defending any
such loss, claim, damage, liability or action, if (a) such
loss, claim, damage, liability or action in respect thereof
arises out of or is based upon any untrue statement or alleged
untrue statement of any material fact contained in any such
registration statement or any such prospectus, or any
amendment thereof or supplement thereto, or arises out of or
is based upon
-9-
<PAGE> 10
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading and (b) any such statement
or omission of a material fact was made in reliance upon and
in conformity with written information furnished to the
Company by or on behalf of the Holder specifically for use in
connection with the preparation of such registration statement
or prospectus. In connection with any transaction
contemplated by Section 10.2 hereof, the Holder also agrees to
indemnify each such underwriter and each Person who controls
any such underwriter within the meaning of Section 15 of the
Securities Act as may reasonably and customarily be requested
by the underwriters in connection with any underwritten
offering of such Warrant Shares.
(c) Promptly after receipt by any indemnified
Person of notice of any claim or commencement of any action in
respect of which indemnity is to be sought against an
indemnifying Person pursuant to this Warrant, such indemnified
Person shall notify the indemnifying Person in writing of such
claim or of the commencement of such action, and, subject to
provisions hereinafter stated, in case any such action shall
be brought against an indemnified Person and such indemnifying
Person shall have been notified of the same, such indemnifying
Person shall be entitled to participate therein, and, to the
extent it shall wish, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified Person,
and after notice from the indemnifying Person to such
indemnified Person of its election to assume the defense
thereof, such indemnifying Person shall not be liable to such
indemnified Person in connection with the defense thereof;
provided, however, if there exists or will exist a conflict of
interest which would make it inappropriate in the reasonable
judgment of the indemnified Person for the same counsel to
represent both the indemnified Person and such indemnifying
Person then such indemnified Person shall be entitled to
retain its own counsel at the expense of such indemnifying
Person; provided further, however, the indemnifying Person
shall not be required to pay for more than one separate
counsel for all of the indemnified Persons in addition to any
local counsel.
10.5 Termination. If Rule 144 or Rule 145 as promulgated
under the Securities Act or any successor or similar rule or statute
shall permit the sale of Warrant Shares in compliance with the
conditions thereof and the provisions thereof, the rights of the
Holder as to registration provided for in this Warrant as to such
Warrant Shares shall terminate immediately.
11. FRACTIONAL INTERESTS.
The Company shall not be required to issue fractional Warrant
Shares on the exercise of this Warrant and the number of Warrant Shares
issuable upon such exercise shall be rounded down to the nearest whole share.
12. NO RIGHTS AS STOCKHOLDERS; NOTICES TO HOLDER.
Nothing contained in this Warrant shall be construed as
conferring upon the Holder the right to vote or to receive dividends or to
consent to or receive notice as a stockholder in respect of any meeting of
stockholders for the election of directors of the Company or any other matter,
or any rights whatsoever as a stockholder of the Company. If, however, at any
time during the Exercise Period:
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<PAGE> 11
(a) the Company shall declare any dividend
payable in any securities upon its shares of Common Stock or
make any distribution (other than a cash dividend or a
dividend payable in additional shares of Common Stock) to the
holders of its shares of Common Stock;
(b) the Company shall offer to the holders of its
shares of Common Stock any additional shares of Common Stock
or securities convertible into shares of Common Stock or any
right to subscribe to shares of Common Stock or securities
convertible or exchangeable into shares of Common Stock; or
(c) a dissolution, liquidation or winding up of
the Company (other than in connection with a consolidation,
merger or sale of all or substantially all of its property,
assets and business as an entirety) shall be proposed;
then in any one or more of such events, the Company shall give notice in
writing of such event to the Holder as provided in Section 13 hereof at least
10 days prior to the date fixed as a record date or the date of closing the
transfer books for the determination of the stockholders entitled to such
dividend, distribution or subscription rights, or for the determination of
stockholders entitled to vote on such proposed dissolution, liquidation or
winding up. Such notice shall specify such record date or date of the closing
of the transfer books, as the case may be. Failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of any
action taken in connection with such dividend, distribution or subscription
rights, or proposed dissolution, liquidation or winding up.
13. NOTICES.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered or
mailed first class, postage prepaid:
(i) if to the Holder at:
Trust Company of Oklahoma
P.O. Box 3627
Tulsa, Oklahoma 74101-3627
Attn: President
(ii) if to the Company at:
UTI Energy Corp.
Attn: President
485 Devon Park Drive, #112
Wayne, Pennsylvania 19087
or to such other address or addresses as the Holder or the Company may
designate from time to time for itself by a notice pursuant hereto.
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<PAGE> 12
14. SUCCESSORS.
No party hereto may assign its rights or obligations hereunder
without the prior written consent of the other party. All the covenants and
provisions of this Warrant by or for the benefit of the Company or the Holder
shall bind and inure to the benefit of their respective permitted successors
and assigns hereunder.
15. APPLICABLE LAW.
This Warrant shall be governed by and construed in accordance
with the laws of the State of Delaware.
16. BENEFITS OF WARRANT.
Nothing in this Warrant shall give or be construed to give any
person or corporation other than the Company and the Holder any legal or
equitable right, remedy or claim under this Warrant. This Warrant shall be for
the sole and exclusive benefit of the Company and the Holder.
17. CAPTIONS.
The captions of the sections of this Warrant have been
inserted for convenience only and shall have no substantive effect.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be
duly executed as of the 14th day of August, 1996.
UTI ENERGY CORP.
By: /s/ VAUGHN E. DRUM
-------------------------------------
Vaughn E. Drum
President
ATTEST:
/s/ VINCENT J. DONAHUE
- --------------------------------------
SECRETARY
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<PAGE> 13
THE SAM K. VIERSEN JR. TRUST DATED
SEPTEMBER 9, 1986 AS AMENDED
AND RESTATED ON MAY 11, 1994
By /s/ PAUL MINDEMAN
--------------------------------------
Paul Mindeman, President of
The Trust Company of Oklahoma
Successor Trustee
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<PAGE> 14
EXHIBIT A
SUBSCRIPTION FORM
TO BE EXECUTED BY THE HOLDER
TO EXERCISE WARRANT
UTI ENERGY CORPORATION
The undersigned hereby exercises the right to purchase _____________
shares of common stock covered by this Warrant according to the conditions
thereof and herewith makes payment of the Warrant Price of such shares in full.
[INDIVIDUAL]
Signature
-------------------------------
Name:
------------------------------
Address
-------------------------------
---------------------------------
---------------------------------
Dated:
----------------,--------.
[CORPORATION OR PARTNERSHIP]
----------------------------------------
(Name of Entity)
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
Address
-------------------------------
---------------------------------
---------------------------------
Dated:
----------------,--------.
