<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
or
Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
[ ] For the transition period from to .
-------- --------
Commission File Number 1-12542
UTI ENERGY CORP.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 23-2037823
- ------------------------------------------- -------------------------------------
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
SUITE 225N
16800 GREENSPOINT PARK
HOUSTON, TEXAS 77060
- ------------------------------------------- -------------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (281) 873-4111
-------------------------------------
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(Former Address)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each class of issuer's common
stock, as of the latest practicable date.
16,093,221 SHARES OF COMMON STOCK AT AUGUST 1, 1998.
<PAGE> 2
INDEX
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<CAPTION>
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at June 30, 1998
and December 31, 1997 ........................................... 3
Condensed Consolidated Statements of Income for the
Three and Six Months ended June 30, 1998 and 1997 ................ 4
Condensed Consolidated Statements of Cash Flows for
the Six Months ended June 30, 1998 and 1997....................... 5
Notes to Condensed Consolidated Financial Statements............... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................. 15
Item 2. Changes in Securities.............................................. 16
Item 4. Submission of Matters to a Vote of Security Holders................ 16
Item 6. Exhibits and Reports on Form 8-K................................... 16
Signatures......................................................... 18
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UTI ENERGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------- -----------
(In thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................................................... $ 7,802 $ 58,347
Accounts receivable, net ..................................................... 32,340 35,589
Materials and supplies ....................................................... 1,484 1,363
Prepaid expenses ............................................................. 1,541 749
--------- ---------
43,167 96,048
PROPERTY AND EQUIPMENT:
Land ......................................................................... 1,149 1,149
Buildings and improvements ................................................... 2,880 2,819
Machinery and equipment ...................................................... 171,014 116,357
Oil and gas working interests ................................................ 1,893 1,893
Construction in process ...................................................... 7,501 4,305
--------- ---------
184,437 126,523
Less accumulated depreciation and amortization ............................... 38,191 31,508
--------- ---------
146,246 95,015
GOODWILL, less accumulated amortization of $1,321 in 1998 and $652 in 1997 ....... 21,556 17,758
OTHER ASSETS ..................................................................... 1,715 166
--------- ---------
$ 212,684 $ 208,987
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt ............................................ $ 20 $ 50
Accounts payable ............................................................. 14,840 14,087
Accrued payroll costs ........................................................ 3,714 5,048
Accrued income taxes ......................................................... 889 3,375
Other accrued expenses ....................................................... 4,349 3,036
--------- ---------
23,812 25,596
LONG-TERM DEBT, less current portion ............................................. 23,693 23,458
DEFERRED INCOME TAXES ............................................................ 22,341 15,256
OTHER LONG-TERM LIABILITIES ...................................................... 348 356
COMMITMENTS AND CONTINGENCIES
REDEEMABLE STOCK, Common Stock, $.001 par value, none
outstanding in 1998 and 309,374 issued and outstanding in 1997 ............... -- 6,701
SHAREHOLDERS' EQUITY:
Preferred Stock, $.01 par value, 5,000,000 shares authorized,
none issued and outstanding in 1998 and 1997 .............................. -- --
Common Stock, $.001 par value, 50,000,000 shares authorized,
16,515,095 issued and 16,055,721 outstanding in 1998, 16,146,741
issued and outstanding in 1997 ............................................. 17 16
Additional capital ........................................................... 127,398 120,208
Retained earnings ............................................................ 24,090 17,441
Restricted stock plan unearned compensation .................................. (23) (45)
Treasury stock, 459,374 shares in 1998, at cost .............................. (8,992) --
--------- ---------
142,490 137,620
--------- ---------
$ 212,684 $ 208,987
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 4
UTI ENERGY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------------- -------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
(In thousands, except share and per share amounts)
<S> <C> <C> <C> <C>
REVENUES:
Oilfield service ............................. $ 48,354 $ 42,139 $ 96,619 $ 76,434
Other ........................................ 49 301 101 374
------------ ------------ ------------ ------------
48,403 42,440 96,720 76,808
COSTS AND EXPENSES:
Cost of sales
Oilfield service ........................ 34,980 33,056 69,908 60,385
Other ................................... 32 44 57 77
Selling, general and administrative .......... 3,390 2,840 6,984 5,174
Depreciation and amortization ................ 4,553 2,475 8,354 4,020
------------ ------------ ------------ ------------
42,955 38,415 85,303 69,656
------------ ------------ ------------ ------------
OPERATING INCOME ................................. 5,448 4,025 11,417 7,152
OTHER INCOME (EXPENSE):
Interest expense ............................. (878) (1,275) (1,757) (1,754)
Interest income .............................. 312 4 959 6
Other, net ................................... 326 23 429 248
------------ ------------ ------------ ------------
(240) (1,248) (369) (1,500)
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES ....................... 5,208 2,777 11,048 5,652
INCOME TAXES ..................................... 2,106 1,000 4,399 2,031
------------ ------------ ------------ ------------
NET INCOME ....................................... $ 3,102 $ 1,777 $ 6,649 $ 3,621
============ ============ ============ ============
EARNINGS PER COMMON SHARE:
Basic ........................................ $ 0.19 $ 0.15 $ 0.41 $ 0.31
============ ============ ============ ============
Diluted ...................................... $ 0.18 $ 0.13 $ 0.39 $ 0.27
============ ============ ============ ============
AVERAGE COMMON SHARES OUTSTANDING:
Basic ........................................ 16,043,225 12,110,187 16,096,885 11,703,191
Diluted ...................................... 17,178,884 13,696,059 17,217,660 13,467,063
</TABLE>
See notes to condensed consolidated financial statements.
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UTI ENERGY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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<CAPTION>
Six Months
Ended June 30,
1998 1997
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(In thousands)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................................ $ 6,649 $ 3,621
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization .......................................... 8,354 4,020
Deferred income taxes .................................................. 271 --
Amortization of debt discount .......................................... 238 115
Stock compensation expense ............................................. 22 25
Gain on disposal of fixed assets ....................................... (293) (290)
Changes in operating assets and liabilities, net of effect of businesses
acquired:
Accounts receivable and prepaids ..................................... 5,440 (9,561)
Materials and supplies ............................................... (121) (235)
Accounts payable, accrued expenses and accrued
payroll costs ...................................................... (2,210) 5,909
Other, net ........................................................... (3,338) (31)
-------- --------
Net cash provided by operating activities .......................... 15,012 3,573
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ...................................................... (26,454) (6,767)
Acquisition of businesses, net of cash .................................... (30,756) (35,247)
Proceeds from sale of property and equipment .............................. 531 617
-------- --------
Net cash used by investing activities .............................. (56,679) (41,397)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt .................................. -- 57,190
Proceeds from exercise of options ......................................... 147 --
Repayments of long-term debt .............................................. (33) (20,324)
Redemption of stock and purchase of treasury stock ........................ (8,992) 437
-------- --------
Net cash (used) provided by financing activities ................... (8,878) 37,303
-------- --------
NET DECREASE IN CASH
AND CASH EQUIVALENTS ......................................................... (50,545) (521)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD ................................................................... 58,347 570
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .................................... $ 7,802 $ 49
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 6
UTI ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1998
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements at
June 30, 1998 have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation of the
financial position and operating results for the interim periods have been
included. The results of operations for the three and six months ended June
30, 1998 are not necessarily indicative of the results for the entire year
ending December 31, 1998. For further information, refer to the Consolidated
Financial Statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 and the Company's
Quarterly Report on Form 10-Q for the three months ended March 31, 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings per Share (SFAS 128).
SFAS 128 replaced the calculation of primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share is similar
to the previously reported fully diluted earnings per share. All earnings
per share amounts for all periods have been presented and, where
appropriate, restated to conform to the SFAS 128 requirements.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information (SFAS 131). SFAS 131, which is effective
for fiscal years beginning after December 15, 1997, established revised
guidelines for determining an entity's operating segments, as well as the
type and level of financial information to be disclosed. The Company has not
applied SFAS 131 to the 1998 interim financial statements as this
information is not required in the initial year of application.
Reclassifications
Certain items in the prior period's financial statements have been
reclassified to conform with the presentation in the current period.
3. ACQUISITIONS
On January 27, 1997, the Company acquired the land drilling assets of
Quarles Drilling Corporation ("Quarles") for $16.2 million, consisting of
$8.1 million cash and 733,779 shares of Common Stock (after adjustment
pursuant to the purchase agreement). The acquired assets consisted of nine
land drilling rigs, rig components and equipment used in Quarles' contract
drilling business. The acquisition was accounted for using the purchase
method of accounting, and Quarles' operating results since January 27, 1997
have been consolidated with the operating results of the Company. No
goodwill was recorded as the estimated fair market value of the assets
acquired exceeded the purchase price.
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<PAGE> 7
UTI ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1998
3. ACQUISITIONS (CONTINUED)
On April 11, 1997, the Company acquired the land drilling operations of
Southland Drilling Company Ltd. ("Southland") for approximately $27.1
million cash and a five-year warrant to purchase 300,000 shares of Common
Stock at an exercise price of $16 per share. The acquired assets consisted
of eight land drilling rigs, rig components and other equipment used in
Southland's contract drilling business. The acquisition was accounted for
using the purchase method of accounting, and Southland's operating results
since April 11, 1997 have been consolidated with the operating results of
the Company. Goodwill of $10.1 million was recorded related to this
acquisition and is being amortized over a period of 15 years.
On September 11, 1997, the Company acquired all of the capital stock of
J.S.M. & Associates, Inc. ("JSM") for 618,748 shares of Common Stock and
approximately $2.6 million in cash. In January 1998, the former shareholders
of JSM exercised their right to redeem one half of the shares issued by the
Company (309,374 shares) for $21.66 per share. This redemption was accounted
for as a treasury stock transaction. Prior to the acquisition of JSM by the
Company, JSM was an independent contract land driller in the Permian Basin.
JSM's assets at the time of acquisition included seven land drilling rigs,
an office and warehouse in Odessa, Texas and approximately $1.0 million in
net working capital. The acquisition was accounted for using the purchase
method of accounting, and JSM's operating results since September 11, 1997
have been consolidated with the operating results of the Company. Goodwill
of $9.1 million was recorded related to this acquisition and is being
amortized over a period of 15 years. The amortization of this goodwill is
nondeductible for tax purposes.
On April 9, 1998, the Company acquired all of the capital stock of Peterson
Drilling Company ("Peterson") for $20.4 million in cash. Peterson's assets
included eight land drilling rigs, related drilling equipment and $4.0
million in net working capital. The acquisition was accounted for using the
purchase method of accounting, and Peterson's operating results since April
9, 1998 have been consolidated with the operating results of the Company.
Goodwill of $3.6 million was recorded related to this acquisition and is
being amortized over a period of 15 years. The amortization of this goodwill
is nondeductible for tax purposes.
On June 24, 1998, the Company acquired the land drilling assets of LaMunyon
Drilling Corporation ("LaMunyon") for $12.2 million in cash. The acquired
assets consisted of five land drilling rigs, related spare parts, office
equipment and rolling stock. The acquisition was accounted for using the
purchase method of accounting, and LaMunyon's operating results since June
24, 1998 have been consolidated with the operating results of the Company.
No goodwill was recorded as the estimated fair market value of the assets
acquired exceeded the purchase price.
The following pro forma operating results reflect the inclusion of Peterson
as if the acquisition occurred on January 1, 1997 (such pro forma operating
results, however, exclude the operations of the LaMunyon assets prior to
June 24, 1998):
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Six Months Ended
June 30,
--------------------------------------
1998 1997
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Revenue ...................... $ 102,869 $ 86,403
================ ================
Net income ................... $ 7,307 $ 3,640
================ ================
Earnings per share:
-Basic ................. $ 0.45 $ 0.31
================ ================
-Diluted ............... $ 0.42 $ 0.27
================ ================
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<PAGE> 8
UTI ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1998
4. FINANCING AGREEMENTS
The Company's revolving bank credit agreement was amended and restated on
June 19, 1998 as the credit agreement was set to expire on June 30, 1998.
The amended and restated credit agreement increased the borrowing limit
from $12.4 million to $30.0 million and extended the term until June 30,
2000. Under the agreement, up to $4.0 million of the borrowing limit may be
used for letters of credit. As of June 30, 1998, no amounts were borrowed
under the agreement and $1.6 million of standby letters of credit were
issued. The agreement includes certain financial covenants covering
tangible net worth, debt service coverage, capital expenditures and
leverage and quick ratios.
5. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Numerator:
Net income ......................... $ 3,102 $ 1,777 $ 6,649 $ 3,621
=========== =========== =========== ===========
Denominator:
Denominator for basic earning per
share - weighted-average shares .. 16,043,225 12,110,187 16,096,885 11,703,191
Effect of dilutive securities:
Stock options .................... 968,133 1,208,615 967,807 1,210,237
Warrants ......................... 167,526 377,257 152,968 504,675
Other ............................ -- -- -- 48,960
----------- ----------- ----------- -----------
Dilutive potential common shares ... 1,135,659 1,585,872 1,120,775 1,763,872
----------- ----------- ----------- -----------
Denominator for diluted earnings per
share-adjusted weighted-average
shares and assumed conversions ... 17,178,884 13,696,059 17,217,660 13,467,063
=========== =========== =========== ===========
Basic earnings per share ............... $ 0.19 $ 0.15 $ 0.41 $ 0.31
=========== =========== =========== ===========
Diluted earnings per share ............. $ 0.18 $ 0.13 $ 0.39 $ 0.27
=========== =========== =========== ===========
</TABLE>
6. CONTINGENCIES
The Company is involved in several claims arising in the ordinary course of
business. In the opinion of management, all of these claims are covered by
insurance or these matters will not have a material adverse effect on the
Company's financial position.
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<PAGE> 9
UTI ENERGY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1998
6. CONTINGENCIES (CONTINUED)
The Company is partially self-insured for employee health insurance claims
and for workers' compensation. The Company incurs a maximum of $100,000 per
employee under medical claims and a maximum of $250,000 per event for
workers' compensation claims. Although the Company believes that adequate
reserves have been provided for expected liabilities arising from its
self-insured obligations, it is reasonably possible that management's
estimates of these liabilities will change over the near term as
circumstances develop.
7. SUBSEQUENT EVENT
On July 31, 1998, the Company acquired all of the capital stock of Suits
Enterprises, Inc. ("Suits") for approximately $2.4 million in cash,
approximately $7.8 million in 7% four-year notes and five-year warrants
to purchase 100,000 shares of Common Stock. Suits' assets included seven
land drilling rigs plus assorted spare parts and drilling equipment and
a fleet of rolling stock. The acquisition will be accounted for using the
purchase method of accounting.
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<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
UTI Energy Corp. is a leading provider of onshore contract drilling
services to exploration and production companies and operates one of the largest
land drilling rig fleets in the United States. The Company's drilling operations
are currently concentrated in the prolific oil and natural gas producing basins
of New Mexico, Oklahoma, Texas and the Gulf Coast. The Company also provides
drilling and pressure pumping services in the Appalachian Basin.
The Company's current rig fleet consists of 109 land drilling rigs that
are well suited to the requirements of its markets. The Company's contract
drilling services are performed through various regional drilling units and are
marketed under the names Cougar, FWA, IPSCO, JSM, LaMunyon, Peterson, Southland
and Triad.
Beginning in 1995, the Company made a strategic decision to focus its
efforts on the expansion of its land drilling operations to take advantage of
improving market conditions and the benefits arising from consolidation in the
land drilling industry. To effect this strategy, the Company disposed of its
oilfield distribution business in September 1995 and immediately embarked on a
directed acquisition program aimed at expanding the Company's presence in the
oil and gas producing regions in the United States.
Since November 1995, the Company has acquired 86 rigs in eight
transactions: (i) FWA Drilling Company, Inc. was acquired in November 1995 for
$14.0 million in cash; (ii) Viersen & Cochran Drilling Company was acquired in
August 1996 for approximately $6.0 million cash, a two-year $8.0 million note
and warrants to purchase 600,000 shares of Common Stock at $5 per share; (iii)
the land drilling assets of Quarles Drilling Corporation ("Quarles") were
acquired in January 1997 for $8.1 million cash and 733,779 shares of Common
Stock having a fair market value at the time of acquisition of $8.1 million;
(iv) the land drilling operations of Southland Drilling Company, Ltd.
("Southland") was acquired in April 1997 for $27.1 million in cash and warrants
to purchase 300,000 shares of Common Stock at $16 per share; (v) J.S.M. &
Associates, Inc. ("JSM") was acquired in September 1997 for 618,748 shares of
Common Stock (of which 309,374 shares have been redeemed for approximately $6.7
million) and approximately $2.6 million in cash; (vi) Peterson Drilling Company
("Peterson") was acquired on April 9, 1998 for $20.4 million in cash; (vii) the
land drilling assets of LaMunyon Drilling Corporation ("LaMunyon") was acquired
on June 24, 1998 for $12.2 million in cash; and (viii) Suits Enterprises, Inc.
("Suits") was acquired on July 31, 1998 for approximately $2.4 million in cash,
approximately $7.8 million in 7% four-year notes and five-year warrants to
purchase 100,000 shares of Common Stock. These acquisitions have resulted in the
Company realizing substantial growth in its revenues and earnings.
Contract drilling revenue per day for the quarter ended June 30, 1998 was
approximately $8,000 compared to $7,300 for the same period of 1997. Contract
drilling revenue per day for the six months ended June 30, 1998 was
approximately $8,100 compared to $7,100 for the same period of 1997. Since
December 1997, however, the worldwide price of oil has declined substantially
and prices for natural gas have weakened slightly. These declines have been
attributed to, among other things, an excess supply of oil in the world markets,
reduced domestic demand associated with an unseasonably warm winter and the
potential for lower worldwide demand due to the impact of the economic downturn
in Southeast Asia. As prices for oil have declined, some exploration and
production companies, including some of the Company's customers, have announced
reductions in previously disclosed spending budgets. Such reductions have
reduced the demand for drilling services and increased competitive pressures,
leading to lower contract rates for the Company's contract drilling services
than those received during the third and fourth quarters of 1997. In addition,
contract rates for the Company's contract drilling services received during the
second quarter of 1998 were lower than those received during the first quarter
of 1998. The Company currently does not expect contract rates for its services
to recover until commodity prices for oil and natural gas increase
significantly, and any prolonged continuation of depressed oil and natural gas
prices, or any further decline in oil and natural gas prices, could cause
demand, and contract rates for the Company's contract drilling services, to
decline further. Although all of the Company's operating regions have been
affected by the above-mentioned factors, certain of the Company's operating
regions, particularly the Permian Basin, that are more sensitive to changes in
oil prices will be more significantly affected by current market conditions.
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<PAGE> 11
Although conditions in the contract drilling industry have significantly
declined over prior periods and further declines are possible, the Company
intends to continue to pursue its strategy of making strategic and opportunistic
acquisitions of additional rigs and equipment and other contract drilling
contractors. Any such acquisitions will be funded by cash on hand, borrowings
under the Company's existing credit facility, issuances of equity or debt
securities, or a combination of thereof.
RESULTS OF OPERATIONS
The Company views the number of rigs actively drilling in the United
States as a barometer of the overall strength of the domestic oilfield service
industry. Without giving effect to acquisitions, variations in revenues and
gross margins of the Company's core business generally follow the rig count
trend.
The following table presents certain results of operations data for the
Company and the average United States land rig count as reported by Baker Hughes
Incorporated (1) for the periods indicated:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
--------------------- ---------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Operating data:
Average U.S. land rig count (1) .......... 688 789 738 754
Number of owned rigs at end of period .... 102 82 102 82
Average number of rigs owned during
period .................................. 97 81 93 76
Contract drilling:
Operating days(2) ........................ 5,329 5,346 10,601 9,571
Utilization rates(3) ..................... 59% 72% 62% 69%
Pressure pumping:
Cement jobs .............................. 557 418 1,065 1,018
Stimulation jobs ......................... 242 175 451 377
Financial data: (dollars in thousands)
Revenues ................................. $48,403 $42,440 $96,720 $76,808
Gross profit ............................. $13,391 $ 9,340 $26,755 $16,346
Gross profit margin ...................... 27.7% 22.0% 27.7% 21.3%
Operating income ......................... $ 5,448 $ 4,025 $11,417 $ 7,152
</TABLE>
- ---------------
(1) Baker Hughes, Incorporated is an international oilfield service and
equipment company which for more than twenty years has conducted and
published a weekly census of active drilling rigs. Its active rig
count is generally regarded as an industry standard for measuring
industry activity levels.
(2) An operating day is defined as a day during which a rig is being
operated, mobilized, assembled or dismantled while under contract.
(3) Utilization rates are based on a 365-day year and are calculated by
dividing the number of rigs utilized by the total number of rigs in the
Company's drilling fleet, included stacked rigs. A rig is considered
utilized when it is being operated, mobilized, assembled or dismantled
while under contract.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1998 AND 1997
Revenue increased 14.2% to $48.4 million for the three months ended
June 30, 1998 from $42.4 million for the corresponding period of 1997, primarily
due to the growth in the Company's rig fleet and improved contract rates. The
Company's rig fleet was employed for 5,329 days for the three months ended June
30, 1998 as compared to 5,346 days in the same period of 1997, and the Company
completed 799 pressure pumping jobs for the three months ended June 30, 1998 as
compared to 593 pressure pumping jobs for the three months ended June 30, 1997.
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<PAGE> 12
Gross profit increased 44.1% to $13.4 million in the second quarter of
1998 compared to $9.3 million for the same quarter in 1997. Contract drilling
gross profit as a percentage of revenue was 25.6% for the quarter ended June 30,
1998 compared to 21.4% for the quarter ended June 30, 1997, reflecting increased
dayrates and more efficient operations. Pressure pumping gross profit as a
percentage of revenue was 42.8% in the second quarter of 1998 and 29.5% in the
second quarter of 1997.
Depreciation and amortization expense increased $2.1 million during the
three months ended June 30, 1998 compared to the three months ended June 30,
1997, primarily due to the additional assets acquired in connection with the
acquisitions of Southland, JSM and Peterson.
Selling, general and administrative expenses increased $.6 million
during the three months ended June 30, 1998 compared to three months ended June
30, 1997, primarily due to the acquisitions of Southland, JSM and Peterson.
Interest expense decreased $.4 million during the quarter ended June
30, 1998 compared to the quarter ended June 30, 1997. This decrease was
primarily due to a reduction in outstanding debt for the three months ended June
30, 1998 compared to the same period of 1997. Average debt outstanding was $23.6
million during the quarter ended June 30, 1998 compared to $44.9 million for the
quarter ended June 30, 1997, and the effective interest rate for the quarter
ended June 30, 1998 was 14.9% compared to 11.4% for the quarter ended June 30,
1997.
Interest income increased $.3 million during the three months ended
June 30, 1998 compared to the three months ended June 30, 1997, primarily due to
the investment of the net proceeds to the Company from its secondary offering of
Common Stock in October 1997. The excess funds were invested in short-term,
interest-bearing securities and are being utilized by the Company for general
corporate purposes, including the expansion of the Company's business through
selective acquisitions of businesses and assets.
Income taxes increased $1.1 million during the quarter ended June 30,
1998 compared to the quarter ended June 30, 1997, primarily due to higher
taxable income in 1998. The Company's effective tax rate for the quarter ended
June 30, 1998 was 40.4% and 36.0% for the quarter ended June 30, 1997, with the
increase primarily attributable to goodwill amortization associated with the
acquisitions of JSM and Peterson that is nondeductible for tax purposes.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Revenue increased 25.9% to $96.7 million for the six months ended June
30, 1998 from $76.8 million for the corresponding period of 1997, primarily due
to the growth in the Company's rig fleet and improved contract rates. The
Company's rig fleet was employed for 10,601 days for the six months ended June
30, 1998 as compared to 9,571 days in the same period of 1997, and the Company
completed 1,516 pressure pumping jobs for the six months ended June 30, 1998 as
compared to 1,395 pressure pumping jobs for the six months ended June 30, 1997.
Gross profit increased 64.4% to $26.8 million for the first six months
of 1998 compared to $16.3 million for the same period in 1997. Contract drilling
gross profit as a percentage of revenue was 25.9% for the six months ended June
30, 1998 compared to 19.9% for the six months ended June 30, 1997, reflecting
increased dayrates and more efficient operations. Pressure pumping gross profit
as a percentage of revenue was 41.9% for the first six months of 1998 and 33.0%
for the same period of 1997.
Depreciation and amortization expense increased $4.3 million during the
six months ended June 30, 1998 compared to the six months ended June 30, 1997,
primarily due to the additional assets acquired in connection with the
acquisitions of Quarles, Southland, JSM and Peterson.
Selling, general and administrative expenses increased $1.8 million
during the six months ended June 30, 1998 compared to six months ended June 30,
1997, primarily due to the acquisitions of Quarles, Southland, JSM and Peterson.
The Company also realized an increase in the provision for bad debts for the six
months ended June 30, 1998 compared to the same period of 1997, primarily due to
existing market conditions.
- 12 -
<PAGE> 13
Interest expense remained flat during the six months ended June 30,
1998 compared to the six months ended June 30, 1997. Average debt outstanding
was $23.6 million during the six months ended June 30, 1998 compared to $33.8
million for the six months ended June 30, 1997, and the effective interest rate
for the six months ended June 30, 1998 was 14.9% compared to 10.4% for the six
months ended June 30, 1997.
Interest income increased $1.0 million during the six months ended June
30, 1998 compared to the six months ended June 30, 1997, primarily due to the
investment of the net proceeds to the Company from its secondary offering of
Common Stock in October 1997. The excess funds were invested in short-term,
interest-bearing securities and are being utilized by the Company for general
corporate purposes, including the expansion of the Company's business through
selective acquisitions of businesses and assets.
Income taxes increased $2.4 million during the six months ended June
30, 1998 compared to the same period of 1997, primarily due to higher taxable
income in 1998. The Company's effective tax rate for the six months ended June
30, 1998 was 39.8% and 35.9% for the six months ended June 30, 1997, with the
increase primarily attributable to amortization of goodwill in 1998 relating to
the acquisitions of JSM and Peterson that is nondeductible for income tax
purposes.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
Working capital at June 30, 1998 was $19.4 million compared to $70.5
million at December 31, 1997. The Company's primary cash needs historically have
been to fund working capital requirements, to make capital expenditures, to
replace and expand its drilling rig fleet, to fund acquisitions and to fund its
$10.0 million stock repurchase program established in February 1998. The
Company's ongoing operations have been funded through available cash, cash
provided from operations and borrowings under the Company's working capital
line.
On October 1997, the Company sold in a public offering 1,792,600 shares
of Common Stock. Shares of Common Stock held by various shareholders of the
Company were also sold in this offering, including 1,707,000 shares of Common
Stock that were subject to outstanding warrants and options. The net proceeds to
the Company from this offering were approximately $80.0 million, including
approximately $13.0 million from the exercise of warrants and options to
purchase shares of Common Stock that were sold in the offering. The Company
utilized approximately $27.9 million of the net proceeds to repay all of its
outstanding debt other than the Subordinated Notes. The Company has utilized
these available cash resources, together with its cash flow from operations, to
continue its acquisition and growth strategy and to fund a stock repurchase
program of up to $10.0 million in Common Stock.
Net cash provided by continuing operations was $14.7 million and $3.6
million for the six months ended June 30, 1998 and 1997, respectively. Such
funds were utilized primarily to fund capital expenditures. Capital
expenditures, excluding acquisitions, for the six months ended June 30, 1998 and
1997 were $26.5 million and $6.8 million, respectively.
Long Term Debt Facilities
Working Capital Line. On June 19, 1998, the Company entered into a new
Amended and Restated Loan and Security Agreement (the "Working Capital Line"),
which provides for maximum borrowings of up to $30 million. Under the Working
Capital Line, up to $4.0 million may be utilized for letters of credit.
Borrowings under the Working Capital Line will bear interest at either the
bank's prime rate or a LIBOR-based rate. Borrowings under the Working Capital
Line mature on June 30, 2000 and are secured by all of the Company's accounts
receivable and inventory (but excluding the Company's drilling rigs, drilling
equipment or drill pipe). The Working Capital Line contains covenants and
restrictions customary in financial instruments of this type, including
covenants relating to the maintenance of financial ratios, changes in control of
the Company and limits on capital expenditures. At June 30, 1998, the Company
had $28.4 million available for borrowings under this facility.
- 13 -
<PAGE> 14
Subordinated Notes. On April 11, 1997, the Company issued $25.0 million
principal amount of Subordinated Notes. The Subordinated Notes were issued at a
2% discount along with seven-year warrants to purchase 1.2 million shares of
Common Stock at an exercise price of $10.83 per share, of which warrants to
purchase 720,000 shares of Common Stock were exercised in connection with the
Company's October 1997 public offering. The Subordinated Notes contain various
affirmative and negative covenants customary in such private placements,
including restrictions on additional indebtedness (unless certain pro forma
financial coverage ratios are met) and restrictions on dividends, distributions
and other restricted payments.
Peterson
On April 9, 1998, the Company effected the acquisition of Peterson
Drilling Company, for a total purchase price of $20.4 million in cash, which the
Company funded from cash on hand following the Company's public offering in
October 1997. Peterson's assets included eight land drilling rigs, as well as
related drilling equipment, and approximately $4.0 million in net working
capital. The acquisition has been accounted for under the purchase method of
accounting.
In connection with the Company's acquisition of Peterson, the Company
retained Ray Peterson, President of Peterson, and Leroy Peterson, Vice President
of Peterson, as employees to the Company.
LaMunyon
On June 24, 1998, the Company acquired the land drilling assets of
LaMunyon Drilling Corporation for $12.2 million in cash, which the Company
funded from cash on hand following the Company's public offering in October
1997. The acquired assets consisted of five land drilling rigs, related spare
parts, office equipment and rolling stock. The acquisition has been accounted
for using the purchase method of accounting.
Suits
On July 31, 1998, the Company acquired Suits Enterprises, Inc.
approximately $2.4 million in cash, approximately $7.8 million in 7% four-year
notes and five-year warrants of Common Stock. Warrants to purchase 75,000 shares
of Common Stock are exercisable at $26.50 per share, and warrants to purchase
25,000 shares of Common Stock are exercisable at $35.00 per share. Included in
the acquisition are Suits' seven land drilling rigs plus assorted spare parts
and drilling equipment and a fleet of rolling stock. The Company intends to
continue to operate the business of Suits and integrate Suits' operations with
the Company's existing contract drilling operations. The acquisition will be
accounted for using the purchase method of accounting.
Stock Repurchase Program
On February 18, 1998, the Board of Directors of the Company approved a
stock repurchase by the Company of up to $10.0 million of Common Stock pursuant
to transactions effected from time to time in the open market. As of June 30,
1998, the Company had utilized $2.3 million to repurchase 150,000 shares of
Common Stock at an average purchase price of $15.17 per share.
Future Acquisitions
Management believes its internally generated cash, availability under
the Working Capital Line and cash balances on hand will be sufficient to meet
its working capital, capital expenditure and debt service requirements for the
next twelve months. The Company is continuing to review potential acquisitions
of rigs and related assets and rig contractors, although there can be no
assurance that such acquisitions will be completed or as to the terms thereof.
Acquisitions are expected to be funded with available cash, borrowings under the
Working Capital Line and, depending on the number and size of any acquisitions
consummated by the Company, public or private offerings of debt or equity
securities.
- 14 -
<PAGE> 15
Year 2000
As the millennium approaches, the Company is preparing all of its
computer systems to be Year 2000 compliant. Many existing application software
products in the marketplace were designed to only accommodate a two digit date
position which represents the year (e.g., "97" is stored on the system and
represents the year 1997). As a result, the year 1999 (i.e., "99") could be the
maximum date value systems will be able to accurately process. Management does
not anticipate that the Company will incur material operating expenses or be
required to invest heavily in computer system improvements to be Year 2000
compliant.
FORWARD-LOOKING STATEMENTS
From time to time, the Company may make certain statements that contain
"forward-looking" information (as defined in the Private Securities Litigation
Reform Act of 1995). Words such as "anticipate", "believe", "expect",
"estimate", "project" and similar expressions are intended to identify such
forward-looking statements. Forward-looking statements may be made by management
orally or in writing, including, but not limited to, in press releases, as part
of this "Management's Discussion and Analysis of Financial Condition and Results
of Operations" contained in this Report and in the Company's other filings with
the Securities and Exchange Commission under the Securities Act of 1933 and the
Securities Exchange Act of 1934.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Such forward-looking statements
are subject to certain risks, uncertainties and assumptions, including without
limitation those identified below. Should one or more of these risks or
uncertainties materialize, or should any of the underlying assumptions prove
incorrect, actual results of current and future operations may vary materially
from those anticipated, estimated or projected. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
their dates.
Among the factors that will have a direct bearing on the Company's
results of operations and the contract drilling service industry in which it
operates are changes in the price of oil and natural gas and the volatility of
the contract drilling service industry in general, including the effects of
recent downturns in prices for oil and natural gas; any difficulties associated
with the Company's ability to successfully integrate recent acquisitions;
contractual risk associated with turnkey and footage contracts; the presence of
competitors with greater financial resources; operating risks inherent in the
contract drilling service industry, such as blowouts, explosions, cratering,
well fires and spills; labor shortages; domestic and world-wide political
stability and economic growth; and other risks associated with the Company's
successful execution of internal operating plans as well as regulatory
uncertainties and legal proceedings.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in several claims arising in the ordinary
course of business. In the opinion of management, all of these claims are
covered by insurance or these matters will not have a material adverse effect on
the Company's financial position.
The Company and its operating subsidiaries are sometimes named as a
defendant in litigation usually relating to personal injuries alleged to result
from negligence. The Company maintains insurance coverage against such claims to
the extent deemed prudent by management.
The Company is partially self-insured for employee health insurance
claims and for workers' compensation. The Company incurs a maximum of $100,000
per employee under medical claims and a maximum of $250,000 per event for
workers' compensation claims. Although the Company believes that adequate
reserves have been provided for expected liabilities arising from its
self-insured obligations. it is reasonably possible that management's estimates
of these liabilities will change over the near term as circumstances develop.
There can be no assurance that the Company will be able to maintain
adequate insurance in the future at rates it considers reasonable, and, further,
there can be no assurance that insurance will continue to be available on terms
as favorable as those for its existing arrangements. The occurrence of an
adverse claim in excess of the coverage limits maintained by the Company could
have a material adverse effect on the Company's financial condition and results
of operations.
- 15 -
<PAGE> 16
ITEM 2. CHANGES IN SECURITIES
On February 18, 1998, the Board of Directors of the Company approved a
stock repurchase by the Company of up to $10.0 million of Common Stock pursuant
to transactions effected from time to time in the open market. As of June 30,
1998, the Company had utilized $2.3 million to repurchase 150,000 shares of
Common Stock at an average purchase price of $15.17 per share.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held on June 9, 1998, the
following members were elected to the Board of Directors in the class specified:
<TABLE>
<CAPTION>
AFFIRMATIVE NEGATIVE VOTES
VOTES VOTES WITHHELD
<S> <C> <C> <C>
Class I Curtis W. Huff 13,738,795 -0- 48,867
Terry H. Hunt 13,741,205 -0- 46,457
Nadine C. Spears 13,741,005 -0- 46,657
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE OR DESCRIPTION
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
* 2.1 - Agreement and Plan of Merger dated April 9, 1998 (the "Merger Agreement"), between
UTI Energy Corp., PDC Acquisition Company, Peterson Drilling Company ("PDC") and the
shareholders of PDC signatory thereto (incorporated by reference from the Company's
Current Report on Form 8-K dated April 21, 1998). Pursuant to Item 601(b)(2) of
Regulation S-K, schedules and similar attachments to the Merger Agreement have not been
filed with this exhibit. The Disclosure Schedule contains information relating to the
representations and warranties contained in Article IV of the Merger Agreement. The
Company agrees to furnish supplementally any omitted schedule to the Securities and
Exchange Commission upon request.
2.2 - Limited Liability Company Purchase Agreement dated June 24, 1998, between the
Company, Triad Drilling Company and LaMunyon Drilling Company ("LDC") and the
Shareholders of LDC. Pursuant to rule 601(b)(2) of Regulation S-K, schedules, exhibits and
similar attachments to such agreement have not been filed with this exhibit. Such schedules
contain information relating to the representations and warranties contained in this
agreement. The Company agrees to furnish supplementally any omitted schedule, exhibit or
attachment to the Securities and Exchange Commission upon request.
2.3 - Agreement and Plan of Merger dated July 31, 1998, among the Company, Suits Acquisition
Corp., Suits Enterprises, Inc. ("Suits") and the shareholders of Suits. Pursuant to rule
601(b)(2) of Regulation S-K, schedules, exhibits and similar attachments to such agreement
have not been filed with this exhibit. Such schedules contain information relating to the
representations and warranties contained in this agreement. The Company agrees to furnish
supplementally any omitted schedule, exhibit or attachment to the Securities and Exchange
Commission upon request.
</TABLE>
- 16 -
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE OR DESCRIPTION
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
4.1 - Form of Warrant to purchase an aggregate of 75,000 shares of Common Stock at $26.50 per
share, which was issued to the former shareholders of Suits Enterprises, Inc. listed on such
exhibit in the amounts set forth opposite such former shareholder's name on such exhibit.
4.2 - Form of Warrant to purchase an aggregate of 25,000 shares of Common Stock at $35.00 per
share, which was issued to the former shareholders of Suits Enterprises, Inc. listed on such
exhibit in the amounts set forth opposite such former shareholder's name on such exhibit.
4.3 - Form of Note Payable in the aggregate amount of $7.79 million, which was issued to the
former shareholders of Suits Enterprises, Inc. listed on such exhibit in the amounts set forth
opposite such former shareholder's name on such exhibit.
10.1 - Amended and Restated Loan and Security Agreement dated June 19, 1998, by and among
FWA Drilling Company, Inc., International Petroleum Service Company, Triad Drilling
Company, Universal Well Services, Inc., USC, Incorporated, UTI Energy Corp., UTICO,
Inc., Panther Drilling, Inc., J.S.M. & Associates, Inc., Peterson Drilling Company and
Mellon Bank, N.A.
10.2 - Amended and Restated Note dated June 19, 1998, among FWA Drilling Company,
International Petroleum Service Company, Triad Drilling Company, Universal Well
Services, Inc., USC, Incorporated, UTI Energy Corp., UTICO, Inc., Panther Drilling, Inc.,
J.S.M. & Associates, Inc., Peterson Drilling Company, Inc. and Mellon Bank, N.A.
10.3 - Amended and Restated Subordination Agreement dated June 19, 1998, among FWA Drilling
Company, International Petroleum Service Company, Triad Drilling Company, Universal
Well Services, Inc., USC, Incorporated, UTI Energy Corp., UTICO, Inc., Panther Drilling,
Inc., J.S.M. & Associates, Inc., Peterson Drilling Company, Inc. and Mellon Bank, N.A.
10.4 - Amended and Restated Contribution Agreement dated June 19, 1998, among FWA Drilling
Company, International Petroleum Service Company, Triad Drilling Company, Universal
Well Services, Inc., USC, Incorporated, UTI Energy Corp., UTICO, Inc., Panther Drilling,
Inc., J.S.M. & Associates, Inc., Peterson Drilling Company, Inc. and Mellon Bank, N.A.
27.1 - Financial Data Schedule.
27.2 - Restated Financial Data Schedule.
</TABLE>
*Previously filed with the Company's Current Report on Form 8-K dated
April 9, 1998.
(b) Reports on 8-K
To report the acquisition of Peterson, pursuant to Item 2 of Form 8-K,
the Company filed a Form 8-K with the Securities and Exchange Commission
dated April 9, 1998. To report certain historical and pro forma financial
information of Peterson and the Company, the Company filed a Form 8-K/A
with the Securities and Exchange Commission on June 19, 1998.
- 17 -
<PAGE> 18
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.
(REGISTRANT)
Date: August 14, 1998 /s/ JOHN E. VOLLMER
---------------------------------------
John E. Vollmer
Chief Financial Officer
/s/ BRUCE SAUERS
---------------------------------------
Bruce Sauers
Vice President and Corporate Controller
Signed on behalf of the registrant and
as principal financial officer
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE OR DESCRIPTION
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
* 2.1 - Agreement and Plan of Merger dated April 9, 1998 (the "Merger Agreement"), between
UTI Energy Corp., PDC Acquisition Company, Peterson Drilling Company ("PDC") and the
shareholders of PDC signatory thereto (incorporated by reference from the Company's
Current Report on Form 8-K dated April 21, 1998). Pursuant to Item 601 (b)(2) of
Regulation S-K, schedules and similar attachments to the Merger Agreement have not been
filed with this exhibit. The Disclosure Schedule contains information relating to the
representations and warranties contained in Article IV of the Merger Agreement. The
Company agrees to furnish supplementally any omitted schedule to the Securities and
Exchange Commission upon request.
2.2 - Limited Liability Company Purchase Agreement dated June 24, 1998, between the
Company, Triad Drilling Company and LaMunyon Drilling Company ("LDC") and the
Shareholders of LDC. Pursuant to rule 601(b)(2) of Regulation S-K, schedules, exhibits and
similar attachments to such agreement have not been filed with this exhibit. Such schedules
contain information relating to the representations and warranties contained in this
agreement. The Company agrees to furnish supplementally any omitted schedule, exhibit or
attachment to the Securities and Exchange Commission upon request.
2.3 - Agreement and Plan of Merger dated July 31, 1998, among the Company, Suits Acquisition
Corp., Suits Enterprises, Inc. ("Suits") and the shareholders of Suits. Pursuant to rule
601(b)(2) of Regulation S-K, schedules, exhibits and similar attachments to such agreement
have not been filed with this exhibit. Such schedules contain information relating to the
representations and warranties contained in this agreement. The Company agrees to furnish
supplementally any omitted schedule, exhibit or attachment to the Securities and Exchange
Commission upon request.
4.1 - Form of warrant to purchase an aggregate of 75,000 shares of Common Stock at $26.50 per
share, which was issued to the former shareholders of Suits Enterprises, Inc. listed on such
exhibit in the amounts set forth opposite such former shareholder's name on such exhibit.
4.2 - Form of warrant to purchase an aggregate of 25,000 shares of Common Stock at $35.00 per
share, which was issued to the former shareholders of Suits Enterprises, Inc. listed on such
exhibit in the amounts set forth opposite such former shareholder's name on such exhibit.
4.3 - Form of Note payable in the aggregate amount of $7.79 million, which was issued to the
former shareholders of Suits Enterprises, Inc. listed on such exhibit in the amounts set forth
opposite such former shareholder's name on such exhibit.
10.1 - Amended and Restated Loan and Security Agreement dated June 19, 1998, by and among
FWA Drilling Company, Inc., International Petroleum Service Company, Triad Drilling
Company, Universal Well Services, Inc., USC, Incorporated, UTI Energy Corp., UTICO,
Inc., Panther Drilling, Inc., J.S.M. & Associates, Inc., Peterson Drilling Company and
Mellon Bank, N.A.
10.2 - Amended and Restated Note dated June 19, 1998, among FWA Drilling Company,
International Petroleum Service Company, Triad Drilling Company, Universal Well
Services, Inc.,USC, Incorporated, UTI Energy Corp., UTICO, Inc., Panther Drilling, Inc.,
J.S.M. & Associates, Inc. Peterson Drilling Company, Inc. and Mellon Bank, N.A.
10.3 - Amended and Restated Subordination Agreement dated June 19, 1998, among FWA Drilling
Company, International Petroleum Service Company, Triad Drilling Company, Universal
Well Services, Inc., USC, Incorporated, UTI Energy Corp., UTICO, Inc., Panther Drilling,
Inc., J.S.M. & Associates, Inc., Peterson Drilling Company, Inc. and Mellon Bank, N.A.
10.4 - Amended and Restated Contribution Agreement dated June 19, 1998, among FWA Drilling
Company, International Petroleum Service Company, Triad Drilling Company, Universal
Well Services, Inc., USC, Incorporated, UTI Energy Corp., UTICO, Inc., Panther Drilling,
Inc., J.S.M. & Associates, Inc., Peterson Drilling Company, Inc. and Mellon Bank, N.A.
27.1 - Financial Data Schedule.
27.2 - Restated Financial Data Schedule.
</TABLE>
*Previously filed with the Company's Current Report on Form 8-K dated
April 9, 1998.
<PAGE> 1
EXHIBIT 2.2
LIMITED LIABILITY COMPANY PURCHASE AGREEMENT
THIS AGREEMENT CONTAINS PROVISIONS
RELATING TO INDEMNITY, RELEASE
OF LIABILITY AND ALLOCATION OF RISK
This Limited Liability Company Purchase Agreement (this "Agreement")
entered into as of the 24th day of June, 1998, by and among LaMunyon Drilling
Corporation, an Oklahoma corporation (the "Seller"), the shareholders of Seller
signatory hereto (the "Shareholders"), UTI Energy Corp., a Delaware corporation
("UTI") and Triad Drilling Company, a Delaware corporation ("Purchaser"), for
the sale by Seller and the purchase by Purchaser of the Assets (as defined
below).
WHEREAS, Seller is the owner of 100% (the "LLC Interest") of LaMunyon
Drilling Company, L.L.C., a Delaware limited liability company (the "LLC"), and
the LLC is the owner of certain drilling rigs, machinery, equipment, spare
parts and related appurtenances, as more fully described in Exhibit A attached
hereto (hereinafter collectively referred to herein as the "Tangible Assets"),
and is party to the land drilling contracts listed on Exhibit B attached hereto
(the "Contracts" and with the Tangible Assets, the "Assets"); and
WHEREAS, Seller desires to sell to Purchaser and Purchaser desires to
purchase from Seller the LLC Interest under terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the above and other good and
valuable consideration, the parties mutually agree as follows:
1. Purchase Price: The purchase price for the LLC Interest shall be
$12.2 million (the "Purchase Price"). Purchaser shall not assume any
liabilities of Seller except those set forth on Exhibit C attached hereto (the
"Assumed Liabilities"). It is the intent of the parties that all right, title
and interest of Seller and the Shareholders to the Assets were to have been
transferred to the LLC prior to the Closing (as defined below) free and clear
of all liens and encumbrances. Seller and the Shareholders further agree that,
except for the Assumed Liabilities, the LLC shall have no liabilities or
obligations (whether fixed, contingent or otherwise) as of the Closing Date (as
defined below) and no other liabilities of Seller or the Shareholders shall be
assumed by, or transferred to, the LLC.
2. Payment: Purchaser shall pay Seller the Purchase Price, less $600,000
(the "Escrow Consideration"), on the Closing Date, which shall be transmitted
by bank wire to accounts designated by Seller. The Escrow Consideration shall
be paid to Farmers and Merchants National Bank, Fairview, Oklahoma, in its
capacity as the Escrow Agent (the "Escrow Agent") under the Escrow Agreement
(as defined below).
<PAGE> 2
3. Closing Date: The closing (the "Closing") shall take place on the
date both parties execute this Agreement, or such later date as may be mutually
agreed upon by Seller and Purchaser, such date for closing being hereinafter
referred to as the "Closing Date".
4. Delivery: Purchaser has inspected the Tangible Assets prior to the
execution of this Agreement and agrees that the Tangible Assets are acceptable
in their current condition. The Tangible Assets shall be in substantially the
same condition as when inspected by Purchaser, reasonable wear and tear
excepted.
5. No Warranty by Seller Regarding the Tangible Assets: NEITHER SELLER
NOR ANY SHAREHOLDER MAKES A GUARANTY, WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, BY OPERATION OF LAW OR OTHERWISE, AS TO THE QUALITY, SERVICEABILITY,
MERCHANTABILITY OR CONDITION OF THE TANGIBLE ASSETS, INCLUDING BUT NOT LIMITED
TO THEIR FITNESS FOR ANY USE OR PURPOSE. SELLER SHALL NOT BE LIABLE UNDER ANY
CIRCUMSTANCES FOR ANY DEATH, INJURY, LOSS OR DAMAGE TO PURCHASER OR ANY OTHER
PARTY ARISING FROM OR RELATING TO THE USE, CONDITION OR OPERATION OF THE
TANGIBLE ASSETS ON OR AFTER THE CLOSING DATE.
6. Assumption of Risk by Purchaser/Dayrates: Purchaser specifically
assumes all risk of death, injury, loss or damage to Purchaser or the LLC or
any other party arising from or relating to the use, condition or operation of
the Tangible Assets on or after the Closing Date but does not assume any of
such risks arising from or relating in any way to the use, condition or
operation of the Tangible Assets prior to the Closing Date, which shall be the
responsibility of Seller. Dayrates and other benefits earned on the Contracts
prior to the Closing Date shall be for the benefit of Seller and dayrates and
other benefits earned on the Contracts on or after the Closing Date shall be
for the benefit of Purchaser.
7. Risk of Loss: Title, possession and risk of loss with respect to the
Tangible Assets shall pass beneficially to Purchaser on the Closing Date upon
transfer of the LLC Interest.
8. Representations and Warranties of Seller and the Shareholders: Seller
and the Shareholders jointly and severally represent and warrant as of the date
hereof that:
a. Seller is a corporation duly organized and existing under the
laws of the State of Oklahoma. The execution and delivery of
this Agreement and the LLC Assignment (as defined below), and
the due consummation of the transactions hereby and thereby
authorized, have been, and the formation of the LLC pursuant
to the LLC Documents (as defined below) were, duly and validly
authorized by Seller, and this Agreement, the LLC Assignment
and the LLC Documents represent valid and binding agreements
and obligations of Seller. Each Shareholder is an individual
-2-
<PAGE> 3
and has the requisite capacity to enter into this Agreement
and consummate the transactions contemplated hereunder and
perform his or her obligations hereunder. This Agreement has
been duly executed and delivered by each Shareholder and
represents a valid and binding agreement and obligation of
each Shareholder.
b. The execution and delivery of this Agreement, the LLC
Assignment and the consummation of the transactions hereby and
thereby contemplated will not, and the formation of the LLC
pursuant to the LLC Documents do not, (i) violate any
provision of Seller's Articles of Incorporation or Bylaws,
(ii) violate any judgment, decree or order to which Seller or
a Shareholder is a party, (iii) except for the drilling
contracts listed on Schedule 8(b) hereto, result in the breach
of, or constitute a default under, any agreement or contract
to which Seller or a Shareholder is a party or by which Seller
or a Shareholder is bound or (iv) constitute a violation of
any statute or law or any regulation or rule of any court or
governmental authority.
c. No consent of or filing with U.S. governmental authorities,
and no consent of or filing with any other governmental
authority or any other person or entity, is required in
connection with the execution, delivery and performance of
this Agreement and the LLC Assignment by Seller or the
Shareholders.
d. Seller shall transfer to Purchaser good and marketable title
to the LLC Interest free and clear of any liens and
encumbrances of any nature whatsoever. The Contracts
constitute all of the contracts, agreements, commitments,
obligations and other understandings relating to the Tangible
Assets.
e. Seller has full corporate power and authority to carry on its
business, to own, lease and operate its properties and to
execute and deliver this Agreement and all documents and
instruments referred to herein and contemplated hereby and to
carry out the terms hereof.
f. Seller or the Shareholders have filed all tax returns required
to be filed on or before the Closing Date and paid all
applicable taxes due on or before the Closing Date relating in
any way to the Assets.
g. There is no claim, litigation, proceeding or governmental
investigation pending or, to the knowledge of Seller or the
Shareholders, threatened against or relating to or in any way
affecting the Assets or the transactions contemplated by this
Agreement and the LLC Assignment. Neither Seller nor the LLC
is in default under any of the Contracts.
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<PAGE> 4
h. Seller is in compliance in all material respects with all
applicable laws and regulations relating to its operation of
the Assets and has not received notice of any violation of any
law or regulation relating to its operation of the Assets.
i. There have been no material modifications or changes to the
Assets since Purchaser's inspection thereof.
j. The Shareholders constitute all of the owners of the capital
stock of Seller.
k. The LLC has good and marketable title to the Tangible Assets
free and clear of any liens or encumbrances of any nature
whatsoever. Seller has provided Purchaser with certified
original copies of all documents to which the LLC is or has
been a party and all documents and instruments relating to the
formation of the LLC and the transfer of the Tangible Assets
thereto including the Contribution Agreement dated June 24,
1998, between Seller and the LLC (collectively, the "LLC
Documents"). The LLC does not have any liabilities or
obligations (fixed, contingent or otherwise) except the
Assumed Liabilities.
9. Representations and Warranties of Purchaser: Purchaser represents and
warrants as of the Closing Date that:
a. Each of UTI and Purchaser is a corporation duly organized and
existing under the laws of the State of Delaware. The
execution and delivery of this Agreement and the LLC
Assignment, and the due consummation of the transactions
hereby and thereby authorized, have been duly and validly
authorized by each of UTI and Purchaser, and this Agreement
and the LLC Assignment represent valid and binding agreements
and obligations of Purchaser.
b. The execution and delivery of this Agreement and the LLC
Assignment and the consummation of the transactions hereby
contemplated will not (i) violate any provision of either
UTI's or Purchaser's Certificate of Incorporation or Bylaws,
(ii) violate any judgment, decree or order to which either is
a party, (iii) result in the breach of, or constitute a
default under, any agreement or contract to which either UTI
or Purchaser is a party or by which either UTI or Purchaser is
bound or (iv) constitute a violation of any statute or law or
any regulation or rule of any court or governmental authority.
c. No consent of or filing with U.S. governmental authorities,
and no consent of or filing with any other governmental
authority or any other
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<PAGE> 5
person or entity, is required in connection with the
execution, delivery and performance of this Agreement and the
LLC Assignment by either UTI or Purchaser.
10. Survival: The warranties and representations of Seller and Purchaser
and UTI contained in this Agreement shall survive the Closing Date without
limitation.
11. Liability, Indemnity and Allocation of Risk Provisions: Seller and
the Shareholders and Purchaser further agree that:
a. Seller's Indemnity: SUBJECT TO THE LIMITATIONS SET FORTH IN
SECTION 11(F), SELLER AND THE SHAREHOLDERS JOINTLY AND
SEVERALLY AGREE TO BE RESPONSIBLE FOR AND HOLD HARMLESS AND
INDEMNIFY PURCHASER (AND THE LLC) AND UTI FROM ANY AND ALL
CLAIMS, DEMANDS, CAUSES OF ACTION, DAMAGES, JUDGMENTS AND
AWARDS OF ANY KIND OR CHARACTER, INCLUDING FINES AND PENALTIES
(COLLECTIVELY, THE "CLAIMS"), ARISING FROM OR RELATING TO ANY
BREACH OR VIOLATION OF THE REPRESENTATIONS, WARRANTIES OR
COVENANTS OR AGREEMENTS MADE BY SELLER OR THE SHAREHOLDERS IN
THIS AGREEMENT (OR ANY CERTIFICATE DELIVERED BY SELLER OR THE
SHAREHOLDERS IN CONNECTION WITH THIS AGREEMENT) OR THE
OWNERSHIP, USE OR OPERATION OF THE ASSETS OR THE BUSINESS OF
SELLER OR OBLIGATIONS OF SELLER TO ITS EMPLOYEES ON OR BEFORE
THE CLOSING DATE.
b. Purchaser's Indemnity: PURCHASER AND UTI JOINTLY AND
SEVERALLY AGREE TO BE RESPONSIBLE FOR AND HOLD HARMLESS AND
INDEMNIFY SELLER AND THE SHAREHOLDERS FROM ANY AND ALL CLAIMS
ARISING FROM OR RELATING TO ANY BREACH OR VIOLATION OF THE
REPRESENTATIONS, WARRANTIES OR COVENANTS OR AGREEMENTS MADE BY
PURCHASER OR UTI IN THIS AGREEMENT (OR IN ANY CERTIFICATE
DELIVERED BY PURCHASER IN CONNECTION WITH THIS AGREEMENT) OR
THE USE OR OPERATION OF THE ASSETS AFTER THE CLOSING DATE,
EXCEPT TO THE EXTENT ANY SUCH CLAIM ARISES FROM OR IS RELATED
TO THE OWNERSHIP, USE OR OPERATION OF THE ASSETS OR THE
BUSINESS OF SELLER OR OBLIGATIONS OF SELLER TO ITS EMPLOYEES
ON OR PRIOR TO THE CLOSING DATE.
c. Definition: THE PARTIES EXPRESSLY INTEND AND AGREE THAT THE
PHRASE "BE RESPONSIBLE FOR AND HOLD HARMLESS AND INDEMNIFY",
AS UTILIZED IN THIS AGREEMENT, SHALL MEAN THAT THE
INDEMNIFYING PARTY SHALL RELEASE, INDEMNIFY, HOLD HARMLESS AND
DEFEND THE INDEMNIFIED PARTY FROM AND AGAINST ANY AND ALL
CLAIMS (INCLUDING, BUT NOT LIMITED TO, PAYMENT OF REASONABLE
ATTORNEY'S FEES, COSTS OF INVESTIGATION, COSTS OF LITIGATION
AND COURT COSTS INCURRED BY THE
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<PAGE> 6
INDEMNIFIED PARTY), WITHOUT LIMIT AND WITHOUT REGARD TO THE
CAUSE OR CAUSES THEREOF, INCLUDING PRE-EXISTING CONDITIONS,
WHETHER SUCH CONDITIONS BE PATENT OR LATENT, BREACH OF
REPRESENTATION OR WARRANTY (EXPRESS OR IMPLIED), STRICT
LIABILITY, TORT, BREACH OF CONTRACT, OR THE NEGLIGENCE OF ANY
PERSON OR PERSONS, INCLUDING THAT OF THE INDEMNIFIED PARTY,
WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, ACTIVE,
PASSIVE OR GROSS, OR ANY OTHER THEORY OF LEGAL LIABILITY.
d. Survival: THE PARTIES EXPRESSLY INTEND AND AGREE THAT THE
INDEMNITIES IN THIS SECTION SHALL SURVIVE THE CLOSING WITHOUT
LIMITATION, EXCEPT THAT THE INDEMNITIES RELATING TO BREACHES
OF THE NON-SHAREHOLDER REPRESENTATIONS AND WARRANTIES (AS
DEFINED BELOW) SHALL SURVIVE THE CLOSING FOR ONLY THREE YEARS.
e. Extension of Indemnities: ANY INDEMNIFYING PARTY'S
OBLIGATIONS CONTAINED IN THIS AGREEMENT SHALL EXTEND TO THE
INDEMNIFIED PARTY AND ALSO TO ANY OF ITS DIVISIONS,
SUBSIDIARIES, AFFILIATED AND/OR PARENT COMPANIES, AND THE
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, OWNERS, SHAREHOLDERS
AND INSURERS OF EACH, AND, IF APPLICABLE, TO ANY ACTIONS
AGAINST THE PARTY'S LEGAL AND BENEFICIAL OWNERS, WHETHER IN
REM OR IN PERSONAM.
f. Escrow and Limitation on Indemnification: CONTEMPORANEOUSLY
WITH THE CLOSING, PURCHASER, UTI, SELLER AND THE ESCROW AGENT
WILL EXECUTE AN ESCROW AGREEMENT IN THE FORM EXHIBIT D
ATTACHED HERETO (THE "ESCROW AGREEMENT") AND SHALL DEPOSIT THE
ESCROW CONSIDERATION WITH THE ESCROW AGENT TO BE HELD IN
ACCORDANCE WITH THE TERMS OF THE ESCROW AGREEMENT. PURCHASER
AND UTI SHALL BE ENTITLED TO SEEK PAYMENT OF INDEMNIFICATION
CLAIMS PURSUANT TO SECTION 11(A) FOR BREACHES OF THE
NON-SHAREHOLDER REPRESENTATIONS AND WARRANTIES SOLELY FROM THE
FUNDS BEING HELD BY THE ESCROW AGENT PURSUANT TO THE ESCROW
AGREEMENT (THE "ESCROW FUND") OR FROM SELLER. INDEMNIFICATION
FOR BREACHES OF REPRESENTATIONS AND WARRANTIES THAT ARE NOT
DEFINED AS NON-SHAREHOLDER REPRESENTATIONS AND WARRANTIES MAY
BE SOUGHT FROM THE ESCROW FUND OR DIRECTLY FROM THE
SHAREHOLDERS OR SELLER.
g. Non-Shareholder Representations and Warranties:
"Non-Shareholder Representations and Warranties" shall include
all representations and warranties of Seller or the
Shareholders except those contained in Sections 8(a), 8(b)(i),
8(b)(ii), 8(d) (first sentence only), 8(e), 8(j), 8(k) and
18(a).
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<PAGE> 7
12. Goodwill; Name: It is expressly agreed and understood that the sale
of the Assets to Purchaser includes the right to the name "LaMunyon Drilling"
and any derivates thereof and any goodwill associated therewith. Seller shall
promptly change its name following the Closing.
13. Non-Competition: In order to induce Purchaser to enter into
this Agreement, Seller and each of the Shareholders (the "Non-Compete
Parties"), effective as of the Closing Date, for a period of five years
thereafter in all herein stated jurisdictions other than Louisiana, which shall
be for a period of two years only, each agree that such Non-Compete Party will
not, and will cause each of its or his affiliates to not, without the consent
of Purchaser and UTI, directly or indirectly, provide oil and/or gas drilling
services in the States of Texas, Oklahoma and New Mexico and in all parishes in
Louisiana, except for the account of Purchaser and its affiliates. Each
Non-Compete Party acknowledges that a remedy at law for any breach or attempted
breach of this Section 13 will be inadequate and further agrees that any breach
of this Section 13 will result in irreparable harm to Purchaser and UTI;
accordingly, Purchaser and UTI shall, in addition to any other remedy that may
be available to it, be entitled to specific performance and injunctive and
other equitable relief in case of any such breach or attempted breach. Each
Non-Compete Party acknowledges that this covenant not to compete is being
provided as an inducement to Purchaser and UTI to enter into this Agreement,
and that this Section 13 contains reasonable limitations as to time,
geographical area and scope of activity to be restrained that do not impose a
greater restraint than is necessary to protect the goodwill or other business
interest of Purchaser and UTI. Whenever possible, each provision of this
Section 13 shall be interpreted in such a manner as to be effective and valid
under applicable law but if any provision of this Section 13 shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remaining provisions of this Section 13. If any provision of
this Section 13 shall, for any reason, be judged by any court of competent
jurisdiction to be invalid or unenforceable, such judgment shall not affect,
impair or invalidate the remainder of this Section 13 but shall be confined in
its operation to the provision of this Section 13 directly involved in the
controversy in which such judgment shall have been rendered. In the event that
the provisions of this Section 13 should ever be deemed to exceed the time or
geographic limitations permitted by applicable laws, then such provision shall
be reformed to the maximum time or geographic limitations permitted by
applicable law.
14. Information Exchange: Seller will furnish Purchaser and UTI within 30
days after the Closing Date originals or copies of the general arrangement
drawings and maintenance and similar records in Seller's possession or control
relating to the Assets. Purchaser agrees that any such information provided to
Purchaser and UTI shall remain confidential and shall not be disclosed to any
third party without Seller's written permission.
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<PAGE> 8
15. Conditions to Closing: The obligation of each of the parties to
perform this Agreement is contingent upon the following:
a. The representations, warranties, covenants and agreements of
the other parties contained herein shall be true and correct
on the Closing Date;
b. The other parties shall have duly performed the acts and
undertakings to be performed by them hereunder on or prior to
the Closing Date; and
c. No statute, rule or regulation or order of any court or
administrative agency shall be in effect that prohibits Seller
or the Shareholders from consummating the transactions
contemplated hereby and no suit, action, investigation or
other proceeding by any third party or governmental entity
shall have been instituted or threatened seeking to enjoin,
restrain or prohibit Purchaser, UTI or Seller or the
Shareholders from consummating the transactions contemplated
hereby or to obtain substantial damages in respect thereof, or
that is related to or arises out of this Agreement and the
transactions contemplated hereby and that, in the reasonable
judgment of any party hereto would make it inadvisable to
consummate such transactions.
16. Closing Procedures: On the Closing Date, the following shall be
delivered:
a. Seller shall deliver to Purchaser and UTI:
i. a duly executed Assignment of Limited Liability
Company Interest relating to the transfer of the LLC
Interest in the form of Exhibit E attached hereto
(the "LLC Assignment"), assigning the LLC Interest to
Purchaser and transferring to Purchaser good and
marketable title in and to the LLC Interest, free and
clear of any taxes, liens and encumbrances;
ii. any other documents required to be executed by Seller
or its affiliates to consummate the transactions
contemplated by this Agreement and the LLC
Assignment, which documents shall be in a form
reasonably acceptable to Purchaser, including,
without limitation, an opinion of John W. McCue,
III, counsel for Seller, a customary officer's
certificate and Secretary's certificate of Seller and
certified copies of the LLC Documents; and
iii. a duly executed consent to the assignment of each
Contract to the LLC or Purchaser.
b. Purchaser and UTI shall deliver to Seller:
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<PAGE> 9
i. funds in the amount of the Purchase Price (less the
Escrow Consideration), which shall be transmitted by
bank wire; and
ii. any other documents required to be executed by
Purchaser to consummate the transaction contemplated
by this Agreement, which documents shall be in a form
reasonably acceptable to Seller.
c. Seller and Purchaser shall execute and deliver the Escrow
Agreement and Purchaser shall deposit with the Escrow Agent
the Escrow Consideration.
d. UTI and Dana LaMunyon shall have executed an employment
contract reasonably acceptable to both parties.
17. Notice: Any notice pursuant to this Agreement shall be in writing and
shall be deemed to be given as of the date facsimiled or three days after the
date deposited in the U.S. mail (certified, return receipt requested), in each
case addressed as follows:
a. If to Seller, to:
LaMunyon Drilling Corporation
P.O. Box 387
Enid, OK 73702
Attention: Dana LaMunyon
Telephone: (580) 541-9182
Facsimile: (580) 237-0840
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<PAGE> 10
If to the Shareholders:
Dana LaMunyon
P.O. Box 387
Enid, OK 73702
Attention: Dana LaMunyon
Telephone: (580) 541-9182
Facsimile: (580) 237-0840
Walter A. Bartel
814 Cardinal Road
Fairview, OK 73737
Lonnie A. Bartel
105 Cardinal Drive
Fairview, OK 73737
Jay Lynn Bartel
1910 N. Main
Fairview, OK 73737
with copies to:
John W. McCue II
116 E. Broadway
Fairview, OK 73737
Telephone: (580) 227-3939
Facsimile: (580) 227-3507
R. Deane Wymer
311 E. Broadway
Fairview, OK 73737
b. If to Purchaser, to:
UTI Energy Corp.
16800 Greenspoint Park, Suite 225N
Houston, Texas 77060
Attention: President
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<PAGE> 11
With copies to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attention: Charles L. Strauss
18. Commissions, Fees and Taxes:
a. Indemnity for Broker's Fees and Commissions: Purchaser on the
one hand and Seller and the Shareholders on the other
represent to each other that no broker's fees or commissions
are payable in connection with this Agreement or the sale of
the Assets, and each party agrees to be responsible for and
hold harmless and indemnify the other against all Claims
arising out of or in connection with any such broker's fees or
commissions alleged to have been incurred by such party.
b. Ad Valorem (Sales) and Other Transfer Taxes: Purchaser agrees
to be responsible for and hold harmless and indemnify Seller
and the Shareholders against all Claims relating to the
imposition of federal, state or local ad valorem (sales) taxes
or other transfer taxes (but not federal or state income
taxes) applicable to the transfer of the Tangible Assets to
the LLC or the sale of the LLC Interest hereunder.
c. Federal Income Taxes: Each of the parties agree to treat and
report (if applicable) the LLC as a "pass through" entity for
federal income tax purposes and to not take any actions
inconsistent with such characterization.
19. Governing Law: This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Texas, without regard to conflict of
laws.
20. Convenience of Forum; Consent to Jurisdiction: The parties to this
Agreement hereby consent and subject themselves to the jurisdiction of the
United States District Court for the Southern District of Texas, and in the
event such court is not available to the parties, to the courts of the State of
Texas located in Harris County, Texas, with respect to any matter arising under
this Agreement. Service of process, notices and demands of such courts may be
made upon any party to this Agreement by personal service at any place where it
may be found or giving notice to such party as provided in this Agreement.
21. Enforcement of the Agreement: The parties hereto agree that
irreparable damage would occur if any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly
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<PAGE> 12
agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which they are
entitled at law or in equity.
22. Miscellaneous: This Agreement contains the entire understanding of
the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements between the parties with respect thereto. No
party except Seller, the Shareholders and Purchaser shall have any rights or
remedies under this Agreement.
(SIGNATURES BEGIN ON FOLLOWING PAGE)
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
multiple counterparts, each of which shall be deemed an original hereof.
UTI ENERGY CORP.
By: /s/ P. Blake Dupuis
-------------------------------------
P. Blake Dupuis, Vice President
LAMUNYON DRILLING CORPORATION
Signature: /s/ Dana LaMunyon
----------------------------
Printed Name: Dana LaMunyon
--------------------------
Title: President
---------------------------------
SHAREHOLDERS:
/s/ Dana LaMunyon
--------------------------------------
Dana LaMunyon
/s/ Lonnie A. Bartel
--------------------------------------
Lonnie A. Bartel
/s/ Walter A. Bartel
--------------------------------------
Walter A. Bartel
/s/ Jay Lynn Bartel
--------------------------------------
Jay Lynn Bartel
TRIAD DRILLING COMPANY
/s/ P. Blake Dupuis
--------------------------------------
P. Blake Dupuis
Vice President
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<PAGE> 1
EXHIBIT 2.3
AGREEMENT AND PLAN OF MERGER
AMONG
UTI ENERGY CORP. ("UTI"),
SUITS ACQUISITION CORP., A WHOLLY-OWNED SUBSIDIARY OF UTI,
SUITS ENTERPRISES, INC. ("SUITS")
AND
THE SHAREHOLDERS OF SUITS
DATED AS OF JULY 31, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS
"Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Balance Sheet Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Benefit Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Cash Consideration" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Certificate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Certificate of Merger" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Closing" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Closing Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Commission" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Constituent Corporations" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Contracts" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Damages" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Debt Obligations" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Effective Time" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Environmental Condition" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Environmental Laws" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Environmental Liabilities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Environmental Permit" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Estimated Working Capital" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Exchange Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Excluded Assets" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Exhibit" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Extended Representations" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Final Statement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Financial Statements" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"GAAP" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Governmental Entity" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Governmental Requirement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"HSR Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Hazardous Material" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Holder" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Indemnified Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Indemnifying Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Indemnity Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Latigo" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Latigo Note Receivable" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Material Adverse Effect" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Merger" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Merger Consideration" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Notes" and each a "Note" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Notes Receivable" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Ordinary Course of Business" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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"Other UTI Common Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Pepesa" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Proportionate Share" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Reference Balance Sheet" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Registration Expenses" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Requesting Holder" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Rigs" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Securities Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Selling Expenses" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Severance and Retention Bonus Obligations" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Shareholders" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Shareholders Indemnified Parties" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Shareholder Representative" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Shareholder Retained Liabilities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"SUITS Assets" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"SUITS Common Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"SUITS Peru" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Subsidiaries and Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Survival Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Surviving Corporation" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Taxes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Tax Returns" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"UTI Common Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"UTI Indemnified Parties" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"UTI Sub" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Warrants" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Warrant Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Welfare Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Working Capital" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II THE MERGER
Section 2.1 The Merger; Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.2 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III EFFECT OF THE MERGER ON THE CAPITAL STOCKOF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
Section 3.1 Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) Conversion of UTI Sub Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) Cancellation of Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Consideration for SUITS Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(d) Conversion and Cancellation of SUITS Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.2 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) Exchange Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(b) Distributions with Respect to Unexchanged Shares . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) No Further Ownership Rights in SUITS Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . 9
(d) No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(e) Lost Share Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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Section 3.3 Shares of Dissenting Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.4 Post-Closing Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IV-A REPRESENTATIONS AND WARRANTIES OF SUITS
Section 4.1 Incorporation; Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.2 Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.5 Liabilities, Debts and Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.6 Events Since Balance Sheet Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.7 Directors, Officers and Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.8 Taxes and Governmental Returns and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.9 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.10 Contracts and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.11 Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.12 Properties, Assets and Leasehold Estates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.13 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.14 Suits, Actions and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.15 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.16 Licenses and Permits; Compliance with Governmental Requirements . . . . . . . . . . . . . . . . . 23
Section 4.17 No Untrue Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.18 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.19 Environmental Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.20 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.21 No Affiliate or Excluded Asset Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.22 SUITS Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE IV-B REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Section 4.23 No Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.24 Effect of Agreement on Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.25 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.26 No Untrue Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.27 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.28 No Affiliate Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.29 Investment Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.30 Indebtedness and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.31 Individual Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE V REPRESENTATIONS AND WARRANTIES OF UTI
Section 5.1 Due Incorporation and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.2 Performance of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.3 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.4 Financial Ability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.5 Authorization for Warrants, Warrant Shares and Note . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.6 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VI OBLIGATIONS OF PARTIES PRIOR TO CLOSING
Section 6.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.2 Access to Records and Properties of SUITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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Section 6.3 Conduct of Business of SUITS Until the Closing . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.4 Transfer of Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OFSUITS AND THE SHAREHOLDERS
Section 7.1 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.2 Performance and Obligations of UTI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.3 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.4 Release of Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF UTI
Section 8.1 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.2 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.3 Performance and Obligations of the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.4 Covenants and Agreements Performed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.5 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.7 No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.8 Diminution in Value of the Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE IX CLOSING
Section 9.1 Place of Closing and Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 9.2 Closing Deliveries by UTI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 9.3 Closing Deliveries by the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE X TERMINATION
Section 10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE XI OBLIGATIONS OF PARTIES AFTER CLOSING
Section 11.1 Post-Closing Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 11.2 Cooperation Regarding Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 11.3 Covenant Not to Compete With the Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 11.4 Severance and Retention Bonuses and Notes Receivable . . . . . . . . . . . . . . . . . . . . . . 36
Section 11.5 Final Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XII NATURE OF STATEMENTS AND SURVIVAL
Section 12.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 12.2 Effect of Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 12.3 Effect of Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 12.4 Survival of Covenants and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE XIII INDEMNIFICATION
Section 13.1 General Indemnity by the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 13.2 General Indemnity by UTI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 13.3 Indemnification Basket; Limitation; Effect of Materiality Qualifiers; Pro Rata Obligation . . . . 39
Section 13.4 Waiver of Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 13.5 Notice of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 13.6 Right to Participate in Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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Section 13.7 Payment and Right of Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE XIV RELEASE
Section 14.1 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE XV REGISTRATION RIGHTS
Section 15.1 Piggyback Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 15.2 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 15.3 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 15.4 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE XVI MISCELLANEOUS
Section 16.1 Binding Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 16.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 16.3 Shareholder Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 16.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 16.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 16.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 16.7 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 16.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 16.9 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 16.10 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 16.11 Construction of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 16.12 References to Articles, Sections and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . 47
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EXHIBITS
Exhibit A List of Excluded Assets and Liabilities
Exhibit B Latigo Note Receivable
Exhibit C Form of Note
Exhibit D IRC Note Receivable
Exhibit E Description of Rigs
Exhibit F Severance & Retention Bonuses
Exhibit G Form of Warrant
Exhibit H Opinion of UTI counsel
Exhibit I UTI Closing Certificate
Exhibit J Opinion of SUITS counsel
Exhibit K SUITS/Shareholders closing certificate
Exhibit L Shareholder Retained Liabilities
<PAGE> 7
EXHIBIT 2.3
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as
of July 31, 1998, among UTI Energy Corp., a Delaware corporation ("UTI"), SUITS
Acquisition Corp., a Delaware corporation ("UTI Sub"), SUITS Enterprises, Inc.,
an Oklahoma corporation ("SUITS"), and Jerry L. Suits Revocable Trust dated
April 27, 1997, Tom B. Dillingham Revocable Trust, Peter C. Dillingham
Revocable Trust dated May 13, 1997, E. Gay Ungerleider, Leslie D. Ballew, Brady
Suzanne Dillingham Trust, Dana D. Hutton, Jeanne G. Dillingham and Dan L.
Dillingham Revocable Trust (collectively, the "Shareholders" and each a
"Shareholder");
W I T N E S S E T H:
WHEREAS, the Boards of Directors of each of UTI and SUITS have
determined that it is in the best interests of their respective shareholders
for UTI Sub to merge with and into SUITS (the "Merger") upon the terms and
subject to the conditions of this Agreement; and
WHEREAS, UTI, SUITS and the Shareholders desire to make
certain representations, warranties, covenants and agreements in connection
with the Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties agree as follows:
ARTICLE I
DEFINITIONS
Unless otherwise specifically stated in the text of this Agreement,
the following terms shall have the following meanings:
"Affiliate" shall mean, in relation to any Person (the "First Party"),
any other Person (a) that is directly or indirectly controlled by the First
Party, or (b) that directly or indirectly controls the First Party, or (c) that
is, directly or indirectly, controlled by a Person that also, directly or
indirectly, controls the First Party.
"Agreement" means this Agreement and Plan of Merger among UTI, SUITS,
UTI Sub and the Shareholders, including all exhibits hereto.
"Balance Sheet Date" shall have the meaning ascribed thereto in
Section 4.4.
"Benefit Plan" shall mean any collective bargaining agreement or any
bonus, Welfare Plan, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
medical dependent care, cafeteria, employee assistance, scholarship program or
other plan, arrangement or understanding (whether or not legally binding)
providing benefits.
"Cash Consideration" means $2.27 million in cash plus the difference
between Estimated Working Capital and zero.
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"Certificate" shall have the meaning ascribed thereto in Section
3.2(a).
"Certificate of Merger" shall have the meaning ascribed thereto in
Section 2.1.
"Closing" has the meaning ascribed thereto in Section 9.1.
"Closing Date" shall mean the date on which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of any subsequent federal Tax laws.
"Commission" shall mean the Securities and Exchange Commission.
"Constituent Corporations" has the meaning ascribed thereto in Section
2.2.
"Contracts" has the meaning ascribed thereto in Section 4.10.
"Damages" shall mean any and all liabilities, losses, damages,
assessments, claims, costs and expenses (including interest, awards, judgments,
penalties, settlements, fines, costs of remediation, diminutions in value,
costs and expenses incurred in connection with investigating and defending any
claims or causes of action (including, without limitation, reasonable
attorneys' fees and expenses and all reasonable fees and expenses of
consultants and other professionals)).
"Debt" shall mean (i) the principal amount of all Debt Obligations,
(ii) the carrying value of all capital leases and (iii) all accrued
liabilities, including deferred income Taxes, if any.
"Debt Obligations" shall mean any contract, agreement, indenture, note
or other instrument relating to the borrowing of money or any guarantee or
other contingent liability in respect of any indebtedness for borrowed money or
obligation of any Person (other than the endorsement of negotiable instruments
for deposit or collection in the ordinary course of business).
"Effective Time" has the meaning ascribed thereto in Section 2.1.
"Environmental Condition" means any pollution, contamination,
degradation, damage or injury to human health or the environment caused by,
related to or arising from the generation, handling, use, treatment, storage,
transportation, disposal, discharge, release or emission of any Hazardous
Materials.
"Environmental Laws" shall mean all federal, state, provincial or
municipal laws, rules, regulations, statutes, ordinances, or orders of any
Governmental Entity relating to (a) the control of any potential pollutant or
protection of the air, water, or land, (b) solid, gaseous or liquid waste
generation, handling, treatment, storage, disposal or transportation and (c)
exposure to hazardous, toxic or other substances alleged to be harmful to human
health or the environment. The term "Environmental Laws" shall also include
all state, local and municipal laws, rules, regulations, statutes, ordinances
and orders dealing with the same subject matter or promulgated by any
governmental or quasi- governmental agency thereunder or to carry out the
purposes of any federal, state, local and municipal law.
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"Environmental Liabilities" shall mean any and all Damages (including
remediation, removal, response, abatement, clean-up, investigative and/or
monitoring costs and any other related costs and expenses) incurred or imposed
(a) pursuant to any agreement, order, notice, requirement, responsibility or
directive (including directives embodied in Environmental Laws), injunction,
judgment or similar documents (including settlements) arising out of, in
connection with or under Environmental Laws, or (b) pursuant to any claim by a
Governmental Entity or other third Person or entity for personal injury,
property damage, damage to natural resources, remediation or similar costs or
expenses incurred or asserted by such entity or person pursuant to common law
or statute and arising out of or in connection with a release, as such term is
defined in Environmental Laws, of Hazardous Materials.
"Environmental Permit" shall mean any permit, license, approval,
registration, identification number or other authorization with respect to
SUITS under any applicable law, regulation or other requirement of the United
States or of any state, province, municipality or other subdivision thereof
relating to the control of any pollutant or protection of health or the
environment, including laws, regulations or other requirements relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants or hazardous or toxic materials or wastes into ambient air,
surface water, groundwater or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of chemical substances, pollutants, contaminants or hazardous or toxic
materials or wastes.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Estimated Working Capital" shall mean $225,000, the estimated amount,
as agreed upon by SUITS and UTI prior to the Closing, of Working Capital of
SUITS as of the Closing Date.
"Exchange Act" has the meaning ascribed thereto in Section 5.6.
"Excluded Assets" shall mean those assets and liabilities and
obligations listed on Exhibit A hereto, including, without limitation, (i) all
right title and interest (including interests as a limited liability company
member or owner of capital stock) that SUITS or any Affiliate of SUITS owns or
possesses or has owned or possessed in SUITS Peru or Pepesa and all assets and
liabilities and obligations, contingent or otherwise, of SUITS Peru or Pepesa,
and (ii) all of the assets and liabilities and obligations, contingent or
otherwise, of Latigo.
"Exhibit" shall refer to the Exhibits to this Agreement, unless
otherwise stated, and an Exhibit may be attached to the Agreement or set forth
in a separate document denoted as an Exhibit to this Agreement.
"Extended Representations" shall mean the representations and
warranties set forth in Sections 4.1, 4.2, 4.3, 4.7, 4.9, 4.12 (first three
sentences only), 4.21, 4.22, 4.23, 4.24, 4.25, 4.28, 4.29, 4.30, 4.31, 5.1, 5.2
and 5.5.
"Final Statement" has the meaning ascribed thereto in Section 3.4.
"Financial Statements" has the meaning in Section 4.4.
"GAAP" means generally accepted accounting principles applied on a
consistent basis throughout all of the periods presented.
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"Governmental Entity" shall mean any and all foreign, federal, state
or local governments, governmental institutions, public authorities and
governmental entities of any nature whatsoever, and any subdivisions or
instrumentalities thereof, including, but not limited to, departments, boards,
bureaus, commissions, agencies, courts, administrations and panels, and any
divisions or instrumentalities thereof, whether permanent or ad hoc and whether
now or hereafter constituted and existing.
"Governmental Requirement" shall mean any and all laws (including, but
not limited to, applicable common law principles), statutes, ordinances, codes,
rules, regulations, interpretations, guidelines, directions, orders, judgments,
writs, injunctions, decrees, decisions or similar items or pronouncements,
promulgated, issued, passed or set forth by any Governmental Entity.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Hazardous Material" shall mean (a) any petroleum or petroleum
products, (b) radioactive materials, urea formaldehyde, asbestos and PCBs and
(c) any other chemical, substance or waste that is regulated by any
Governmental Entity under any Environmental Law.
"Holder" has the meaning ascribed thereto in Section 15.1.
"Indemnified Person" has the meaning ascribed thereto in Section 13.6.
"Indemnifying Person" has the meaning ascribed thereto in Section
13.6.
"Indemnity Claim" has the meaning ascribed thereto in Section 13.6.
"Latigo" means Latigo Energy Company, an Oklahoma corporation.
"Latigo Note Receivable" means the $150,000 notes receivable payable
by the Shareholders to SUITS, true and correct copies of which are attached
hereto as Exhibit B.
"Material Adverse Effect" shall mean a single event, occurrence or
fact that (together with all other events, occurrences and facts that could
reasonably be expected to result in a loss to SUITS and its Subsidiaries
considered as a whole following disposition by SUITS of the Excluded Assets)
that would have, or might reasonably be expected to have, a material adverse
effect on the assets, business, operations or financial condition of SUITS or
any of the Subsidiaries taken as a whole following and after giving effect to
the disposition by SUITS of the Excluded Assets, or that would constitute a
criminal violation of law involving a felony or indictable offense.
"Merger" has the meaning ascribed thereto in the recitals to this
Agreement.
"Merger Consideration" means the Cash Consideration, the Warrants and
the Note, subject to adjustment as provided herein.
"Notes" and each a "Note" means the promissory notes payable by UTI to
each of the Shareholders, substantially in the form of Exhibit C hereto, which
shall have an aggregate principal amount of $7.79 million.
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"Notes Receivable" means the $1.5 million notes receivable payable by
IRC to SUITS Drilling Company, a true and correct copy of which is attached
hereto as Exhibit D, and the Latigo Note Receivable.
"Ordinary Course of Business" shall mean the operation of SUITS'
business in the ordinary course consistent with past practices.
"Other UTI Common Stock" has the meaning ascribed thereto in Section
15.1.
"Pepesa" means Peruana de Perforacion, S.A., a corporation existing
under the laws of Peru.
"Person" shall mean any natural person, any Governmental Entity and
any entity the separate existence of which is recognized by any Governmental
Entity or Governmental Requirement, including, but not limited to,
corporations, partnerships, limited liabilities companies, joint ventures,
joint stock companies, trusts, estates, companies and associations, whether
organized for profit or otherwise.
"Proportionate Share" in respect of any Shareholder shall mean a
fraction, the numerator of which shall be the total number of shares of SUITS
Common Stock held by such Shareholder immediately prior to the Merger and the
denominator of which is the total number of issued and outstanding shares of
SUITS Common Stock immediately prior to the Merger.
"Reference Balance Sheet" has the meaning ascribed thereto in Section
4.4.
"Registration Expenses" has the meaning ascribed thereto in Section
15.2.
"Requesting Holder" has the meaning ascribed thereto in Section 15.1.
"Rigs" shall mean the equipment described on Exhibit E that
constitutes seven fully-equipped land drilling rigs and parts and equipment
relating thereto.
"Securities Act" has the meaning ascribed in Section 4.29.
"Selling Expenses" has the meaning ascribed thereto in Section 15.2.
"Severance and Retention Bonus Obligations" shall mean the severance
and retention obligations of SUITS that SUITS has agreed to pay to the
employees of SUITS and its subsidiaries following consummation of the Merger (a
schedule summarizing such payments is attached hereto as Exhibit F).
"Shareholders" has the meaning ascribed in the opening paragraph of
this Agreement.
"Shareholders Indemnified Parties" has the meaning ascribed thereto in
Section 13.2.
"Shareholder Representative" shall mean Peter C. Dillingham.
"Shareholder Retained Liabilities" shall means all obligations (but
excluding obligations arising after the Closing Date under contracts performed
in the ordinary course of business) of SUITS (including indemnification and
other contingent obligations) to the extent not fully accrued
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in Working Capital in the Final Statement or relating to (i) acts, events or
omissions occurring, or circumstances relating to SUITS or its business or
assets existing, at or prior to the Closing, (ii) goods or services provided to
or for the benefit of SUITS or any of its Affiliates prior to the Closing,
(iii) goods or services provided by or on behalf of SUITS or any of its
Affiliates prior to the Closing, (iv) any pending or threatened litigation or
claims made or threatened prior to the Closing, (v) any of the matters listed
on Exhibit L hereto, (vi) any obligation relating to the conduct of the
business of SUITS, the ownership or operation of the assets of SUITS or any
benefit realized by SUITS prior to the Closing, (vii) contracts, agreements and
other commitments that were required to be scheduled in the Disclosure Schedule
and were not scheduled, (viii) any Taxes for any period through the Closing
Date, (ix) any liabilities or obligations relating to or arising from the
Excluded Assets, and (x) except for the Severance and Retention Bonus
Obligations to the extent fully accrued for and included in Working Capital as
of the Closing, any obligations to the employees of SUITS under any contracts,
agreements, arrangements or understandings with such employees entered into or
existing at or prior to the Closing and all other obligations with such
employees entered into or existing at or prior to the Closing and all other
obligations of SUITS or any of its Affiliates with respect to its employees at
or prior to the Closing.
"Shares" shall mean all of the issued and outstanding shares of
capital stock of SUITS.
"SUITS Assets" has the meaning ascribed thereto in Section 4.19.
"SUITS Common Stock" shall have the meaning ascribed thereto in
Section 3.1.
"SUITS Peru" means SUITS Peru, L.C., an Oklahoma limited liability
company.
"Subsidiaries and Subsidiary" has the meaning assigned thereto in
Section 4.3.
"Survival Period" has the meaning ascribed thereto in Section 12.1.
"Surviving Corporation" has the meaning ascribed thereto in Section
2.2.
"Taxes" shall mean all federal, state, local, foreign and other taxes
assessments or duties, including, but not limited to, all income, gross
receipts, ad valorem, sales, use, franchise, transfer, profits, value added,
withholding, payroll, employment, excise, estimated severance, property,
windfall profits and other taxes, assessments or duties of any kind whatsoever,
imposed or collected by any Governmental Entity or pursuant to any Governmental
Requirement, together with any interest, penalty, addition to tax, fine or
other additional amounts imposed thereon or related thereto, and the term "Tax"
means any one of the foregoing items.
"Tax Returns" shall mean all returns (including information returns),
declarations, reports, statements and other documents of, relating to, or
required to be filed in respect of, any and all Taxes, whether or not based in
whole or in part on net income (including, but not limited to, the Texas
franchise tax), and the term "Tax Return" shall mean any one of the foregoing
Tax Returns.
"UTI Common Stock" means the common stock, $.001 par value, of UTI.
"UTI Indemnified Parties" has the meaning ascribed thereto in Section
13.1.
"UTI Sub" has the meaning ascribed thereto in the opening paragraph of
this Agreement.
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"Warrants" and each a "Warrant" means the stock purchase warrants to
be issued to the Shareholders in substantially the same form as Exhibit G, with
underlying shares aggregating 100,000 shares of UTI Common Stock, with stock
purchase warrants to purchase 75,000 shares having an exercise price of $26.50
per share and stock purchase warrants to purchase 25,000 shares having an
exercise price of $35.00 per share..
"Warrant Shares" means the shares of UTI Common Stock underlying the
Warrants.
"Welfare Plan" shall have the meaning ascribed thereto in Section 4.9.
"Working Capital" means cash and cash equivalents, the trade accounts
receivable and prepaid assets (to the extent required by GAAP to be classified
as a current asset), less all liabilities and obligations of SUITS and the
Subsidiaries, including all accounts payable and Debt, subject to the special
rules of construction contained in Section 3.4(c).
ARTICLE II
THE MERGER
Section 2.1 The Merger; Effective Time of the Merger. Upon the
terms and conditions of this Agreement and in accordance with Oklahoma and
Delaware law and other applicable laws, UTI Sub shall be merged with and into
SUITS at the Effective Time. The Merger shall become effective immediately
when a certificate of merger (the "Certificate of Merger"), prepared and
executed in accordance with the relevant laws of Oklahoma and Delaware, is
filed with the Secretary of State of the States of Oklahoma and Delaware or, if
agreed to by the parties, at such time thereafter as is provided in the
Certificate of Merger (the "Effective Time"). The filing of the Certificate of
Merger shall be made as soon as practicable on or after the Closing.
Section 2.2 Effects of the Merger.
(a) At the Effective Time: (i) UTI Sub shall be merged
with and into SUITS, the separate existence of UTI Sub shall cease and SUITS
shall continue as the surviving corporation (UTI Sub and SUITS are sometimes
referred to herein as the "Constituent Corporations" and SUITS is sometimes
referred to herein as the "Surviving Corporation"); (ii) the Articles of
Incorporation of SUITS as in effect immediately prior to the Effective Time
shall be the Articles of Incorporation of the Surviving Corporation; and (iii)
the Bylaws of SUITS as in effect immediately prior to the Effective Time shall
be the Bylaws of the Surviving Corporation.
(b) The directors and officers of UTI Sub at the
Effective Time shall, from and after the Effective Time, be the directors and
officers of the Surviving Corporation and shall serve until their successors
have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's Articles
of Incorporation and Bylaws.
(c) At and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises of
a public as well as of a private nature, and be subject to all the
restrictions, disabilities and duties of each of the Constituent Corporations;
and all and singular rights, privileges, powers and franchises of each of the
Constituent Corporations, and all property, real, personal and mixed, and all
debts due to either of the Constituent Corporations on whatever account, as
well as for stock subscriptions and all other things in action or belonging to
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<PAGE> 14
each of the Constituent Corporations, shall be vested in the Surviving
Corporation; and all property, rights, privileges, powers and franchises, and
all and every other interest shall be thereafter as effectually the property of
the Surviving Corporation as they were of the Constituent Corporations; and the
title to any real estate vested by deed or otherwise, in either of the
Constituent Corporations, shall not revert or be in any way impaired; but all
rights of creditors and all liens upon any property of either of the
Constituent Corporations shall be preserved unimpaired; and all debts,
liabilities and duties of the Constituent Corporations shall thenceforth attach
to the Surviving Corporation, and may be enforced against it to the same extent
as if said debts and liabilities had been incurred by it.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
Section 3.1 Effect on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of common stock, $1.00 par value, of SUITS ("SUITS Common Stock") or
capital stock of UTI Sub:
(a) Conversion of UTI Sub Capital Stock. Each issued and
outstanding share of capital stock of UTI Sub shall be converted into
and become one fully paid and nonassessable share of common stock of
the Surviving Corporation.
(b) Cancellation of Treasury Stock. Each share of SUITS
Common Stock and all other shares of capital stock of SUITS that are
owned by SUITS as treasury stock shall be canceled and retired and
shall cease to exist and no stock of UTI or other consideration shall
be delivered or deliverable in exchange therefor.
(c) Consideration for SUITS Common Stock. Subject to the
provisions of Section 3.1(d), each share of SUITS Common Stock issued
and outstanding immediately prior to the Effective Time (other than
shares to be canceled in accordance with Section 3.1(a)) shall be
converted into the right to receive a Proportionate Share of the
Merger Consideration.
(d) Conversion and Cancellation of SUITS Common Stock.
All shares of SUITS Common Stock, when converted as provided in
Section 3.1(c), shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
Certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive such holder's
Proportionate Share of the Merger Consideration upon the surrender of
such certificate in accordance with Section 3.2, without interest, and
the right to receive such holder's Proportionate Share of the
post-closing adjustment in accordance with Section 3.4.
Section 3.2 Exchange of Certificates.
(a) Exchange Procedure. Upon surrender of a certificate
representing outstanding shares of SUITS Common Stock (a "Certificate") for
cancellation to the Surviving Corporation or UTI, together with any other
documents reasonably required by UTI, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration that such
holder has the right to receive pursuant to the provisions of Section 3.1, and
the Certificate so surrendered shall
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<PAGE> 15
forthwith be canceled. Until surrendered as contemplated by this Section 3.2,
each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger
Consideration as contemplated by Section 3.1.
(b) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to SUITS Common Stock declared or
made after the Effective Time with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Certificate.
(c) No Further Ownership Rights in SUITS Common Stock.
The Merger Consideration to be issued upon the surrender for exchange of shares
of SUITS Common Stock in accordance with the terms hereof shall be deemed to
have been issued, paid or delivered in full satisfaction of all rights
pertaining to such shares of SUITS Common Stock, and after the Effective Time
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of SUITS Common Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article III.
(d) No Liability. Neither UTI nor UTI Sub shall be
liable to any holder of shares of SUITS Common Stock for any cash amounts to
the extent such amount is delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. Any amounts remaining
unclaimed by holders of any such shares two years after the Effective Time (or
such earlier date immediately prior to the time at which such amounts would
otherwise escheat to or become property of any Governmental Entity) shall, to
the extent permitted by applicable law, become the property of UTI free and
clear of any claims or interest of any such holders or their successors,
assigns or personal representatives previously entitled thereto.
(e) Lost Share Certificates. If a holder shall have lost
or had destroyed such holder's Certificate, such holder may be entitled to
receive the Merger Consideration and other payments provided for hereunder
subject to such holder providing UTI Sub and UTI with a lost certificate
affidavit and indemnification acceptable to UTI.
Section 3.3 Shares of Dissenting Shareholders. Each Shareholder
hereby waives any and all rights to dissent or appraisal with respect to the
Merger.
Section 3.4 Post-Closing Adjustment.
(a) Within 60 calendar days after the Closing Date, UTI
shall prepare and deliver to the Shareholder Representative a statement
reflecting UTI's calculation of the Working Capital as of the Closing Date (the
"Final Statement"). UTI shall provide the Shareholder Representative with
access to copies of all work papers and other relevant documents to verify the
entries contained in the Final Statement. The Final Statement shall be
prepared in accordance with GAAP applied on a basis consistent with the
accounting principles applied in the preparation of the Reference Balance
Sheet. The Shareholder Representative shall have a period of 15 calendar days
after delivery to him of the Final Statement to review it and make any
objections the Shareholders may have in writing to UTI. If written objections
to the Final Statement are delivered to UTI within such 15-day period, then UTI
and the Shareholder Representative shall attempt to resolve the matter or
matters in dispute. If no written objections are made within the time period
provided above, within five calendar days after the end of such 15-day period,
(i) the Shareholders shall jointly and severally reimburse UTI the amount, if
any, by which the Working Capital reflected on the Final Statement
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is less than Estimated Working Capital and (ii) UTI shall pay to each
Shareholder his or her Proportionate Share of the amount, if any, by which the
Working Capital reflected on the Final Statement exceeds Estimated Working
Capital. All payments made pursuant to this Section 3.4 shall be paid in
immediately available funds by wire transfer to a bank account or accounts to
be designated by the party or parties to receive the payments.
(b) If disputes with respect to the Final Statement
cannot be resolved by UTI and the Shareholder Representative within 15 calendar
days after the delivery of the objections to the Final Statement, then either
party with notice to the other party may submit the specific matters in dispute
to Arthur Andersen LLP, Oklahoma City, Oklahoma office, or such other
nationally recognized independent accounting firm as may be approved by UTI and
the Shareholder Representative, which firm shall render its opinion as to such
matters. Based on such opinion, such accounting firm will then send to UTI and
the Shareholder Representative its determination on the specific matters in
dispute, which determination shall be final and binding on the parties hereto.
Within five calendar days after delivery of such opinion to UTI and the
Shareholder Representative, the Shareholders shall jointly and severally
reimburse UTI the amount, if any, by which the Working Capital reflected on the
Final Statement as revised by Arthur Anderson LLP is less than Estimated
Working Capital and UTI shall pay to each Shareholder his or her Proportionate
Share of the amount, if any, by which the Working Capital reflected on the
Final Statement as revised by Arthur Anderson LLP exceeds Estimated Working
Capital. The fees and other costs charged by each party's own independent
accounting firm shall be borne by such party and the fees and other costs
charged by Arthur Andersen LLP in connection with resolving any dispute
pursuant to this Section 3.4(b) shall be borne by UTI, on the one hand, and the
Shareholders, on the other hand, equally. All payments made pursuant to this
Section 3.4(b) shall be paid in immediately available funds by wire transfer to
a bank account or accounts to be designated by the party or parties to receive
the payments.
(c) For purposes of determining the Working Capital under
this Section 3.4, the following shall, without duplication, be applied in the
event such principles would not otherwise be applied in calculating Working
Capital:
(i) write-ups of other assets during the period
beginning on the day following the Balance Sheet Date and ending on
the Closing Date (the "Adjustment Period") shall be excluded from the
calculation of Working Capital as of the Closing Date;
(ii) all fees of all law firms and accountants
providing services for SUITS, the Shareholders and any Affiliates of
SUITS or the Shareholders and for which SUITS or the Subsidiaries are
liable, including in connection with the Merger and the transfer of
the Excluded Assets, shall be accrued for and decrease Working Capital
as of the Closing Date;
(iii) all Taxes of SUITS and the Subsidiaries and
SUITS Peru and any other entities comprising part of the Excluded
Assets (including all Taxes as a result of the Merger or as a result
of the transfer of the Excluded Assets, net of any applicable losses
on the transfer of the Excluded Assets, to the extent such amounts
would be payable by SUITS, the Subsidiaries, UTI Sub or UTI, shall be
fully accrued for and reduce Working Capital as of the Closing Date;
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(iv) no increases to Working Capital as of the
Closing Date shall be made for the addition of non-cash assets (other
than prepaid expenses and accounts receivable) and no increases in
assets or reductions for liabilities shall be made for reduction of
reserves recorded as of the Balance Sheet Date;
(v) all accounts payable and other amounts due
from SDC to SUITS Peru, to the extent not paid prior to the Closing,
shall reduce Working Capital as of the Closing Date;
(vi) the Notes Receivable (and accrued interest
thereon) shall be excluded from the calculation of Working Capital as
of the Closing Date;
(vii) the Severance and Retention Bonus Obligations
shall reduce Working Capital as of the Closing Date to the extent such
obligations exceed $660,000;
(viii) principal and accrued interest on Debt
Obligations shall not be included in the calculation of Working
Capital; provided, however, the full amount of all principal and
accrued interest on all Debt Obligations as of the Closing that in the
aggregate exceeds $1.5 million shall reduce Working Capital and the
principal and accrued interest on all Debt Obligations as of the
Closing that in the aggregate are less than $1.5 million shall
increase Working Capital;
(ix) the Excluded Assets shall be excluded from
Working Capital and any non-cash income or assets arising from or
attributable to the transfer or disposition of the Excluded Assets
shall not increase Working Capital as of the Closing Date; and
(x) the special services bonuses payable to Tom
B. Dillingham Revocable Trust and Dan L. Dillingham Revocable Trust in
the aggregate amount of $120,000 shall be deducted from Working
Capital;
(d) Except for normal expense account advances, the
Shareholders shall cause all accounts receivable and other amounts owed to
SUITS from related parties to be paid in full prior to the Closing.
ARTICLE IV-A
REPRESENTATIONS AND WARRANTIES OF SUITS
SUITS represents and warrants to UTI pursuant to Sections 4.1 through
4.22 that:
Section 4.1 Incorporation; Authority. Each of SUITS and each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Oklahoma, and is duly authorized,
qualified and licensed under all applicable Governmental Requirements to carry
on its business in the places and in the manner as now conducted. Section 4.1
of the Disclosure Schedule sets forth a complete list of all jurisdictions in
which SUITS or any Subsidiary owns or leases properties, has employees or
currently conducts business, and a complete list of all jurisdictions in which
SUITS or any Subsidiary is qualified as a foreign corporation. Each of SUITS
and each Subsidiary is duly qualified or licensed to do business and in good
standing as a foreign
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corporation in every jurisdiction (which jurisdictions are listed in Section
4.1 of the Disclosure Schedule) in which the conduct of its business or the
ownership or leasing of its assets requires it to be so qualified or licensed,
except where the failure to be so qualified or licensed would not have a
Material Adverse Effect. Each of SUITS and each Subsidiary has the corporate
power and authority to carry on its business as it is now being conducted and
to own and operate its assets, properties and business. The copies of the
Certificate of Incorporation of each of SUITS and each Subsidiary and all
amendments thereto to date (certified by the Secretary of the State of
Oklahoma) and of the bylaws of each of SUITS and each Subsidiary as amended to
date (certified by its Secretary), each of which are included in Section 4.1 of
the Disclosure Schedule, are true, complete and correct.
Section 4.2 Share Capital. The authorized capital stock of SUITS
consists of 3,000 shares of common stock, $1.00 par value, of which 3,000
shares are issued and 3,000 shares are outstanding as of the date of this
Agreement and 3,000 shares will be outstanding as of the Closing Date. All of
such issued and outstanding shares are validly issued and outstanding, fully
paid and nonassessable or will be validly issued, fully paid and nonassessable
on the Closing Date. Except as set forth on Schedule 4.2 hereto, there are no
outstanding subscriptions, options, warrants, calls, commitments, obligations
or agreements relating to any of the authorized or outstanding capital stock of
SUITS. The Shareholders are the record owners of all of the Shares and such
ownership is set forth on Section 4.2 of the Disclosure Schedule.
Section 4.3 Subsidiaries. Except for Latigo, SUITS Peru,
Pepesa and the entities listed in Section 4.3 to the Disclosure Schedule
(collectively, excluding SUITS Peru, Pepesa and the entities listed on Section
4.3 to the Disclosure Schedule, the "Subsidiaries"), SUITS does not, directly
or indirectly, own or control, and has not, directly or indirectly, since its
inception owned or controlled, any capital stock or equity interest, or have
any proprietary interest, in any Person, nor does it directly or indirectly
control the management of any Person, nor does it have any obligation to
acquire any such interest in the future, and SUITS has not, during the past
five years, directly or indirectly owned or controlled any capital stock or
equity interest, or had any proprietary interest, in any Person, nor has it
directly or indirectly controlled the management of any Person. The
capitalization of each Subsidiary is set forth on Section 4.3 to the Disclosure
Schedule, and all capital stock and other ownership interests in each
Subsidiary is validly issued, fully paid and nonassessable and is directly or
indirectly wholly-owned by SUITS and there are no outstanding subscriptions,
options, warrants, calls, commitments, obligations or agreements relating to
any of the authorized or outstanding capital stock of any Subsidiary. All of
SUITS' or its Affiliates' interest in the Excluded Assets has been sold prior
to the date hereof in consideration for the Note Receivable, and true and
correct copies of all documents executed in connection with such transfers are
included in Section 4.3 to the Disclosure Schedule.
Section 4.4 Financial Statements. SUITS has delivered to UTI
copies of the SUITS June 30, 1998 consolidated balance sheet (the "Reference
Balance Sheet"), and income statement for the 7-month period ended on such date
(the "Balance Sheet Date"), copies of which are included in Section 4.4 of the
Disclosure Schedule (the "Financial Statements"). The Excluded Assets did not
have a material impact on results of operations and financial condition of the
SUITS reflected in the Financial Statements. Except as declared in Section 4.4
of the Disclosure Schedule, each of the Financial Statements has been prepared
in conformity with GAAP, as adjusted to give effect to the transfer of the
Excluded Assets, and fairly presents in all material respects the financial
condition as of such date and results of operations of SUITS and its
Subsidiaries for the 12-month period ended on such date (subject, in the case
of the unaudited statements, to the absence of footnotes and to
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normal, recurring year-end adjustments, that are not, and will not be,
individually or in the aggregate, material to the financial condition and
results of operations of SUITS and the Subsidiaries, as adjusted to reflect the
transfer of the Excluded Assets) taken as a whole, as of the respective dates
thereof and for the respective periods indicated. Each of the Financial
Statements is complete, correct and in accordance with the books of account and
records of SUITS and the Subsidiaries in all material respects, as adjusted to
reflect the transfer of the Excluded Assets.
Section 4.5 Liabilities, Debts and Obligations. SUITS and the
Subsidiaries have no liabilities, debts or obligations of any nature
whatsoever, whether due or to become due, and whether accrued, absolute,
contingent or otherwise, that are not disclosed on the Reference Balance Sheet
or in this Agreement or in Section 4.5 of the Disclosure Schedule, except for
(a) liabilities incurred in the Ordinary Course of Business subsequent to the
Balance Sheet Date and (b) obligations under contracts and commitments entered
into in the Ordinary Course of Business and not required under GAAP to be
reflected on the Reference Balance Sheet (including required footnotes), which,
in both cases, individually or in the aggregate are not material to the
financial condition or operating results of SUITS.
Section 4.6 Events Since Balance Sheet Date. Since the Balance
Sheet Date there has not been, except for the transfer of the Excluded Assets
and as disclosed in Section 4.6 of the Disclosure Schedule:
(a) any change in the condition (financial or otherwise)
or in the properties, assets, liabilities, business or prospects of SUITS or
any Subsidiary, except normal and usual changes in the Ordinary Course of
Business that in the aggregate have not had a Material Adverse Effect;
(b) any declaration, setting aside, or payment of any
dividend or other distribution on or in respect of the capital stock of SUITS
or a Subsidiary, or any direct or indirect redemption, purchase or other
acquisition of any of such stock or any issuance of any shares of such stock or
any granting or entering into of any option or commitment relating to any of
such stock;
(c) any increase in the compensation or rate of
compensation or commissions payable or to become payable by SUITS or a
Subsidiary to any of its directors, officers, employees or consultants, or any
hiring of any employee by SUITS or a Subsidiary who is entitled to
compensation, or any payment or accrual of any bonus, profit-sharing or other
extraordinary compensation to any director, officer, employee or consultant, or
any change in any then existing bonus, profit-sharing, pension, retirement or
other similar plan, agreement or arrangement or any adoption of or entering
into of any new bonus, profit-sharing, pension, stock option, retirement, group
life or health insurance or other similar plan, agreement or arrangement;
(d) any change in the accounting methods or practices
followed by SUITS or any Subsidiary, including, but not limited to, the method
for accounting for contract revenues and expenses, or any change in
depreciation or amortization policies or rates heretofore adopted by it;
(e) any sale, lease, abandonment or other disposition by
SUITS or a Subsidiary of any interest in real property or of any machinery,
equipment or other tangible asset, except for any sales, leases, abandonments
or other dispositions in the Ordinary Course of Business not exceeding $25,000
individually or $50,000 in the aggregate;
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(f) any labor trouble, strike or any other occurrence,
event or condition affecting the employees of SUITS or a Subsidiary that has or
is reasonably expected to have a Material Adverse Effect;
(g) any damage, destruction or loss (whether or not
covered by insurance) adversely affecting the assets or the business of SUITS
or a Subsidiary, except for damages, destruction or loss that reasonably would
be expected to occur in the Ordinary Course of Business not exceeding $25,000,
individually or in the aggregate;
(h) any transaction entered into or engaged in by SUITS
or a Subsidiary other than transactions in the Ordinary Course of Business;
(i) any waiver by SUITS or a Subsidiary of a valuable
right or of a material debt owed to it, or any satisfaction or discharge of any
encumbrance or payment of any obligation by SUITS or a Subsidiary except in the
Ordinary Course of Business; or
(j) any transaction between SUITS or a Subsidiary and any
Shareholder or any Affiliate of a Shareholder or any family member of a
Shareholder or Affiliate of such family member.
Section 4.7 Directors, Officers and Employees. Section 4.7 of
the Disclosure Schedule contains a true and complete list of the names of and
current annual rate of compensation paid by SUITS or a Subsidiary to each
director, officer and employee of SUITS or a Subsidiary and its Affiliates and
subsidiaries. Except as previously disclosed to UTI, with respect to each
employee of SUITS Affiliates and Subsidiaries hired after October 15, 1987,
SUITS maintains in its files a fully completed Form I-9 pursuant to the
Immigration Reform and Control Act of 1986, and the rules and regulations
promulgated thereunder. To the best of SUITS' knowledge, no officer or key
employee of SUITS or a Subsidiary is in violation of any term of any employment
contract, patent disclosure agreement or any other contract or agreement
relating to the relationship of any such employee with SUITS or a Subsidiary,
or any other party. To the best of SUITS' knowledge, no employee of SUITS or a
Subsidiary has received notice from a former employer claiming such employee to
be in breach of any such employment contract, patent disclosure agreement or
other contract or agreement. Neither SUITS nor any Subsidiary has any
collective bargaining agreements covering any of its employees. The employment
of each officer and employee of SUITS or a Subsidiary is terminable at the
will of SUITS or such Subsidiary at no cost to SUITS or any Subsidiary.
Section 4.8 Taxes and Governmental Returns and Reports.
(a) All Tax Returns of or relating to any Tax that are
required to be filed on or before the Closing Date for, by, on behalf of or
with respect to SUITS and the Subsidiaries with respect to any period ending
prior to the Closing Date, including, but not limited to, those relating to the
income, business, operations or property of SUITS and the Subsidiaries and
those that include or should include SUITS and the Subsidiaries (whether on a
separate, consolidated, affiliated, combined, unitary or any other basis) have
been or will be timely filed with the appropriate foreign, federal, provincial,
state and local authorities on or before the Closing Date in accordance with
applicable tax laws, and all Taxes shown to be due and payable on such Tax
Returns or related to such Tax Returns have been (and as to all Taxes shown as
due and payable on such Tax Returns filed as of the Closing Date, will be) paid
in full in accordance with applicable laws;
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<PAGE> 21
(b) all such Tax Returns and the information and data
contained therein have been or will be properly and accurately compiled in all
material respects and completed, fairly present or will fairly present the
information purported to be shown therein, and reflect or will reflect all
liabilities for Taxes for the periods covered by such Tax Returns;
(c) none of such Tax Returns are under audit or
examination by any foreign, federal, state or local authority and there are no
agreements, waivers or other arrangements providing for an extension of time
with respect to the assessment or collection of any Tax or deficiency of any
nature against SUITS and the Subsidiaries or with respect to any such Tax
Return, or any suits or other actions, proceedings, investigations or claims
now pending or threatened against SUITS or the Subsidiaries with respect to
any Tax, or any matters under discussion with any foreign, federal, provincial,
state or local authority relating to any Tax, or any claims for any additional
Tax asserted by any such authority;
(d) all Taxes assessed and that are due and owing from or
against SUITS or a Subsidiary for all tax periods ending prior to or on the
Closing Date (including, but not limited to, ad valorem Taxes relating to any
property of SUITS or a Subsidiary) have been or will be timely paid in full on
or before the Closing Date;
(e) all withholding Tax and Tax deposit requirements
imposed on SUITS or a Subsidiary for any and all periods ending prior to or on
the Closing Date, or through and including the close of business on the day
next preceding the Closing Date for periods that have not ended on or before
the Closing Date, have been or will be timely satisfied in full on or before
the Closing Date;
(f) the Financial Statements reflect and include adequate
charges, accruals, reserves and provisions for the payment in full of any and
all Taxes payable by SUITS or a Subsidiary with respect to any and all taxable
periods ending on or before the respective dates thereof;
(g) SUITS has received no notice of proposed reassessment
of Tax or of any special assessments on any assets of SUITS or a Subsidiary;
(h) the charges, accruals and reserves for Taxes with
respect to SUITS and the Subsidiaries for any period ending on or before the
Closing Date (including any such period for which a Tax Return is not yet
required to be filed) reflected on the books of SUITS (excluding any provision
for deferred income Taxes) are reasonably adequate to cover such Taxes;
(i) neither SUITS or the Subsidiaries nor any other
Person on behalf of SUITS or the Subsidiaries has entered into nor will it
enter into any agreement or consent pursuant to Section 341(f) of the Code;
(j) there are no liens for Taxes upon the assets of SUITS
or the Subsidiaries except liens for current property Taxes not yet due and
payable;
(k) neither SUITS nor any Subsidiary is delinquent in the
payment of any Tax and neither SUITS nor any Subsidiary has requested any
extension of time within which to file any Tax Return that has not been filed;
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(l) there are no requests or determinations in respect of
any Tax matter relating to SUITS or a Subsidiary pending before or with any
Governmental Authority;
(m) all Tax Returns filed with respect to the Tax years
of SUITS or the Subsidiaries through the Tax year ended November 30, 1993, have
been examined and closed or are Tax Returns with respect to which the
applicable period for assessment under applicable law, after giving effect to
extensions or waivers, has expired;
(n) Neither SUITS nor any Subsidiary has:
(i) been a member of any affiliated,
consolidated, combined, or unitary group, or
(ii) participated in any arrangement whereby any
income, revenues, receipts, gain, loss, deduction or credit of SUITS
or such Subsidiary was determined or taken into account for Tax
purposes with reference to or in conjunction with any income,
revenues, receipts, gain, loss, deduction, credit, or liability of any
other Person (other than SUITS);
(o) SUITS has no "net unrealized built-in gains" as that
term is defined in section 1374 of the Code;
(p) Neither SUITS nor any Subsidiary is a party to any
Tax allocation or Tax sharing agreement;
(q) SUITS has not issued or entered into any restricted
stock, deferred compensation or profit-sharing plans, call options, warrants
or similar instruments with respect to its stock, stock appreciation rights,
convertible debt instruments, stock-based employee incentive plans, or other
similar instruments, obligations or arrangements;
(r) SUITS has not issued or entered into any indebtedness
other than indebtedness which constitutes "straight debt" within the meaning of
section 1361(c)(5) of the Code and Treas. Reg. Section 1.1361-1(l)(5);
(s) neither SUITS nor any Person who currently is the
record or beneficial owner of any Shares (or any interest therein) has entered
into any binding agreements relating to rights to distributions or liquidation
proceeds in respect of the Shares, or any other agreement with respect to the
Shares, including, but not limited to, buy-sell agreements, agreements
restricting the transferability of Shares, or redemption agreements;
(t) SUITS has not acquired the assets of any other
corporation in a transaction described in section 381(a) of the Code;
(u) SUITS does not own any stock (including any
instrument or interest that constitutes stock for U.S. federal income tax
purposes) of any corporation and has not been a party during the past five
years to any partnership, joint venture, marketing or other similar contract or
arrangement with any person;
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(v) Schedule 4.8 contains a list of all jurisdictions
(whether foreign or domestic) to which any Tax is properly payable by SUITS or
any Subsidiary; and
(w) As of the Closing Date, SUITS shall have fully
accrued for all Taxes that may be required to be paid as a result of the
transfer of the Excluded Assets, after giving effect to any applicable offsets,
credits, carryforwards or carrybacks; the value of the Excluded Assets sold by
SUITS reflects an amount equal to or greater than the fair value of such
assets; and prior to the sale of the Excluded Assets, there were no deferred
intercompany gains between SUITS or the Subsidiaries and SUITS Peru, Pepesa or
Latigo or the other entities comprising part of the Excluded Assets..
Section 4.9 Employee Benefit Plans.
(a) Neither SUITS nor any Subsidiary maintains or
contributes, or has maintained or contributed within the preceding six years,
to any "employee pension plan" as that term is defined in Section 3(2) of
ERISA. Section 4.9 of the Disclosure Schedule contains a list and brief
description of all "employee welfare benefit plans" (as defined in Section 3(1)
of ERISA) (sometimes referred to herein as "Welfare Plans") and all other
Benefit Plans maintained, or contributed to, by SUITS or a Subsidiary for the
benefit of any present or former officers or employees of SUITS or a
Subsidiary. SUITS has delivered to UTI true, complete and correct copies of
(i) each Benefit Plan and Welfare Plan (or, in the case of any unwritten
Benefit Plans and Welfare Plans, descriptions thereof), (ii) the most recent
three annual reports on Form 5500 filed with the IRS with respect to each
Benefit Plan (if any such report was required), (iii) the most recent IRS
determination letter and all rulings or determinations requested subsequent to
the date of that letter, (iv) the most recent actuarial report for each Benefit
Plan for which an actuarial report is required, (v) the most recent summary
plan description for each Benefit Plan for which such summary plan description
is required and each summary of material modifications prepared after the last
summary plan description, (vi) each trust agreement and group annuity contract
relating to any Benefit Plan and (vii) all material correspondence for the last
three years with the IRS or Department of Labor relating to plan qualification,
filing of required forms, or pending, contemplated or announced plan audits.
Neither SUITS nor any Subsidiary is aware of any commitment, whether legally
binding or not, to create any new plan or agreement or to modify any existing
plan or agreement.
(b) Each Benefit Plan that has been or is sponsored,
participated in or contributed to by SUITS or a Subsidiary: (i) is in
compliance in all material respects 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 SUITS or a Subsidiary that may subject SUITS or a
Subsidiary 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.
(c) 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, severance benefit, accelerated payment or
vesting or other similar provision in any Benefit Plan, nor will it increase
the amount of compensation due to any director, officer or employee or former
director, officer or employee (including beneficiaries) from SUITS or a
Subsidiary.
(d) SUITS and the Subsidiaries do not provide employee
post-retirement medical or health coverage or contribute to or maintain any
employee welfare benefit plan that provides for health benefit coverage
following termination of employment except as is required by
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Section 4980B(f) of the Code or other applicable statute, nor has it made any
representations, agreements, covenants or commitments to provide that coverage.
Each Benefit Plan can be unilaterally amended and/or terminated. No notice has
been received by SUITS or a Subsidiary of an increase or proposed increase in
the cost of a Benefit Plan.
(e) Neither SUITS nor a Subsidiary has ever been a party
to or contributed to a "multiemployer pension plan" (as such term is defined in
Section 4001(a)(3) of ERISA).
(f) 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, (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 and
(iii) each such Benefit Plan (including any such Benefit Plan covering retirees
or other former employees) may be amended or terminated without material
liability to SUITS or a Subsidiary on or at any time after the Closing.
(g) Neither SUITS or the Subsidiaries, the Shareholders,
nor any member of a controlled group or affiliated service group as defined in
Sections 414(b), (c), (m) and (o) of the Code of which SUITS or the
Subsidiaries or the Shareholders is a member has made a complete or partial
withdrawal from a multiemployer plan (as defined in Section 3(37) of ERISA) so
as to incur withdrawal liability (as defined in Section 4201 of ERISA) that
remains unpaid. The execution of this Agreement or the consummation of the
transactions contemplated by this Agreement will not give rise to, or trigger,
any liability under ERISA to SUITS or a Subsidiary. SUITS and each Subsidiary,
and each Benefit Plan maintained by SUITS and each Subsidiary, has complied
with all the requirements of such Benefit Plan, ERISA, and the Code.
Section 4.10 Contracts and Agreements. Section 4.10 of the
Disclosure Schedule sets forth a true and complete list of all of the following
contracts, agreements, leases, licenses, plans, arrangements or commitments,
written or oral, to the extent there exist any continuing obligation of SUITS
or a Subsidiary thereunder, or to SUITS' knowledge, any unperformed obligations
on behalf of any other party thereto, or any of the assets or properties of
SUITS or a Subsidiary is in any way bound or obligated (including all
amendments, supplements and modifications thereto):
(a) all contracts, agreements or commitments in an
amount in excess of $25,000 in the aggregate, including, but not limited to,
drilling contracts (identifying each contract that is a turn-key contract), all
subcontracts and contracts in respect of the provision of services or the
purchase of raw materials, supplies or other products or utilities, except
those entered into in the Ordinary Course of Business involving payments or
receipts by SUITS or a Subsidiary of less than $25,000;
(b) all outstanding offers, tenders, bids or the like
outstanding and capable of being converted into an obligation of SUITS or a
Subsidiary in an amount in excess of $25,000 in the aggregate by an acceptance
or other act of some other Person, including bids to provide turn-key drilling
services;
(c) all master supply and service contracts;
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(d) all collective bargaining agreements, union
agreements, employment agreements, consulting agreements or agreements
providing for the services of an independent contractor;
(e) all profit-sharing, pension, stock option, severance
pay, retirement, bonus, deferred compensation, group life and health insurance
or other employee benefit plans, agreements, arrangements or commitments of any
nature whatsoever and all agreements with any present or former officer,
director or stockholder of SUITS or a Subsidiary;
(f) all leases and all other contracts, agreements or
legally enforceable commitments relating to or affecting real property or any
interest therein;
(g) all Debt Obligations;
(h) all contracts, agreements, arrangements or legally
enforceable commitments relating to the issuance of capital stock, bonds or
other securities of SUITS or a Subsidiary;
(i) all contracts, agreements, arrangements or legally
enforceable commitments relating to the acquisition by SUITS or a Subsidiary of
any of its assets having a value in excess of $25,000 in the aggregate;
(j) all performance bonds, bid bonds, surety bonds and
the like, all contracts and bids covered by such bonds, and all letters of
credit and guaranties;
(k) all consent decrees and other judgments, decrees or
orders, settlement agreements and agreements relating to competitive
activities, requiring or prohibiting any future action;
(l) all accounts, notes and other receivables (other
than the Notes Receivable and customer account receivables generated in the
Ordinary Course of Business), and all security therefor, and all documents and
agreements related thereto;
(m) all contracts, agreements, arrangements or legally
enforceable commitments of any nature with the Shareholders or any Affiliate of
the Shareholders or any family member of a Shareholder or Affiliate of such
family member;
(n) all licenses of intellectual property to or from
SUITS or a Subsidiary;
(o) all contracts, agreements, arrangements or legally
enforceable commitments that cannot be canceled by SUITS or a Subsidiary by
notice of 60 days or less or without penalty involving amounts in excess of
$25,000 in the aggregate or that would restrict the operations of SUITS, the
Subsidiaries or Affiliates thereof after the Closing; and
(p) all contracts, agreements, arrangements or legally
enforceable commitments that are material to SUITS or a Subsidiary or the
operation of any of its businesses.
All of such contracts, agreements, leases, licenses, plans, arrangements and
commitments and all other such items binding on SUITS or a Subsidiary or its
assets not specifically described above (collectively, the "Contracts") are
valid, binding and in full force and effect in accordance with their
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terms and conditions and there is no existing default thereunder or breach
thereof by SUITS or a Subsidiary, or, to the best of SUITS' and each
Subsidiary's knowledge, by any other party to the Contracts, or any conditions
that, with the passage of time or the giving of notice or both, might
constitute such a default by SUITS or a Subsidiary, or, to the best of SUITS'
and each Subsidiary's knowledge, by any other party to the Contracts, and the
Contracts will not be breached by or give any other party a right of
termination as a result of the transactions contemplated by this Agreement.
Copies of all of the documents (or in the case of oral commitments,
descriptions of the material terms thereof) relevant to the Contracts listed on
Section 4.10 of the Disclosure Schedule have been delivered by the Shareholders
to UTI and such copies and descriptions are true and accurate and include all
amendments, supplements or modifications to the Contracts.
Section 4.11 Effect of Agreement. Except as set forth on Section
4.11 of the Disclosure Schedule, the execution and delivery of this Agreement
by SUITS and the consummation of the Merger and the transactions contemplated
hereby will not (i) result in any breach of any of the terms or conditions of,
or constitute a default under, the Certificate of Incorporation or other
charter documents or bylaws of SUITS or any Subsidiary or any Contract; (ii)
result in any violation of any Governmental Requirement applicable to SUITS or
a Subsidiary; (iii) cause SUITS or a Subsidiary to lose the benefit of any
material right or privilege it presently enjoys or, to the best of SUITS'
knowledge, cause any Person who normally does business with SUITS or a
Subsidiary not to continue to do so on the same basis as before; (iv) relieve
any Person of any obligation to SUITS or a Subsidiary (whether contractual or
otherwise) or enable any other Person to terminate any such obligation or any
right or benefit enjoyed by SUITS or a Subsidiary or to exercise any right
under any agreement, including any Contract, with or otherwise in respect of
SUITS or a Subsidiary or the assets or business of SUITS or a Subsidiary; or
(v) require notice to or the consent, authorization, approval or order of any
Person.
Section 4.12 Properties, Assets and Leasehold Estates. SUITS or
a Subsidiary owns or has the right to use (pursuant to a valid lease or license
disclosed on Section 4.12 of the Disclosure Schedule) all property, real or
personal, tangible or intangible, (i) reflected on the Reference Balance Sheet
(other than the Excluded Assets and items sold by SUITS or a Subsidiary since
the Balance Sheet Date in the Ordinary Course of Business for which the
proceeds from such sales did not exceed $25,000 individually or $50,000 in the
aggregate) or (ii) utilized in or necessary for the operation of its business
(including without limitation the Rigs). Section 4.12 of the Disclosure
Schedule sets forth a true and complete list of all such property (other than
the Rigs which are fully described on Exhibit E hereto) as of the date hereof
(with all property that is leased or licensed being designated as such). SUITS
or a Subsidiary has good and indefeasible title to all real property interests
(including leasehold estates) and good and marketable title to all other
properties and assets, each as set forth in Section 4.12 of the Disclosure
Schedule, free and clear of all mortgages, liens, pledges, conditional sales
agreements, charges, easements, covenants, assessments, restrictions and
encumbrances of any nature whatsoever, and there are no pending or, to SUITS'
knowledge, no threatened claims of any Person challenging SUITS' or a
Subsidiary's title or rights to the properties, assets and leasehold estates
listed on Schedule 4.12 or otherwise utilized in or necessary for the operation
of SUITS' or the Subsidiaries' business. All material leases of property under
which SUITS or a Subsidiary purports to be a lessee are valid, binding and in
full force and effect. All such structures, equipment and other properties of
SUITS or a Subsidiary and the present use of such items conform to all
Governmental Requirements, and no notice of any violation of any such
Governmental Requirements relating to such assets or their use has been
received by SUITS or a Subsidiary. SUITS and each Subsidiary has all
easements, rights of ingress and egress, and utilities and services necessary
for all operations conducted by it. Neither the whole nor any portion of any
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real property currently owned or occupied by SUITS or a Subsidiary has been
condemned or otherwise taken by any public authority, nor, to the best of the
Shareholders's and SUITS' knowledge, is any such condemnation or taking
threatened or planned. Neither SUITS nor any Shareholder makes any
representation or warranty, express or implied, as to the condition, fitness
for a particular purpose, quantity, quality or usefulness of any tangible
property of SUITS or the Subsidiaries, notwithstanding any other implied
provision of this Agreement or the law. UTI and UTI Sub have made and are
relying solely on their own independent inspection and examination of such
property and neither UTI nor UTI Sub is relying on any representation or
warranty except as set forth in this Agreement, express or implied, by SUITS or
a Shareholder as to the quality of any of such property, its condition, fitness
for a particular purpose or merchantability, and the same is accepted AS IS,
WHERE IS, with all defects and redhibitory vices, known or unknown, apparent or
hidden.
Section 4.13 Bank Accounts. Section 4.13 of the Disclosure
Schedule sets forth a true and complete list of all bank or financial accounts
and safe deposit boxes of SUITS and each Subsidiary and of the credit and debit
balances of such bank and financial accounts as of the most recent practicable
date.
Section 4.14 Suits, Actions and Claims. Except as set forth in
Section 4.14 of the Disclosure Schedule, (i) there are no suits, actions,
claims, inquiries, investigations or legal, administrative or arbitration
proceedings involving SUITS or a Subsidiary or in which SUITS or a Subsidiary
is engaged or that are pending or, to the best of SUITS' knowledge, threatened
against or affecting SUITS or a Subsidiary or any of its properties, assets or
business, or that question the validity or legality of the transactions
contemplated hereby, (ii) no reasonable basis or grounds for any such suit,
action, claim, inquiry, investigation or proceeding exists, and (iii) there is
no outstanding order, writ, injunction or decree of any Governmental Entity
against or affecting SUITS or a Subsidiary or any of its properties, assets or
business. Section 4.14 of the Disclosure Schedule sets forth all claims,
including the status thereof, since January 1, 1996 against SUITS or a
Subsidiary with respect to personal injury, negligence or responsibility for
damages or injuries relating to SUITS' and the Subsidiaries' business and
operations or for reservoir damage or obligation to redrill or work over a
well.
Section 4.15 Insurance Policies. Section 4.15 of the Disclosure
Schedule contains a list of all insurance policies (specifying the insurer, the
amount of coverage, the type of insurance and the policy number) covering SUITS
or a Subsidiary or its properties, assets, business and personnel. Such
policies afford SUITS and each Subsidiary coverage in such amounts and against
such risks as reflected in such policies. SUITS is not aware of any special
circumstances with respect to such policies or the business or operations of
SUITS or a Subsidiary that lead to any liability under such insurance policies
being avoided by the insurers issuing such policies or the premiums thereunder
being increased. Except as set forth on Section 4.15 of the Disclosure
Schedule, there is no claim outstanding under any such insurance policy nor to
the best of SUITS' knowledge are there any circumstances that are likely to
give rise to such a claim. Neither SUITS nor any Subsidiary is in default with
respect to any provision contained in such insurance policies except as would
not have a Material Adverse Effect, nor has it failed to give any notice or
present any claim thereunder in timely fashion. All such policies are in full
force and effect, with all premiums due thereon to date fully paid.
Section 4.16 Licenses and Permits; Compliance with Governmental
Requirements.
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(a) Section 4.16 of the Disclosure Schedule sets forth a
true and complete list of all licenses and permits necessary for the conduct of
SUITS' and the Subsidiaries' business. SUITS and each Subsidiary has all such
licenses and permits validly issued to it and in its name, and all such
licenses and permits are in full force and effect. To the best of SUITS'
knowledge, no violations are or have been recorded in respect of such licenses
or permits and no proceeding is pending or, to the best of the Shareholders's
and SUITS' knowledge, threatened seeking the revocation or limitation of any of
such licenses or permits. Except as set forth in Section 4.16 of the
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement will not constitute a violation of any such license or permit or
impair or adversely affect in any manner any such license or permit. SUITS and
each Subsidiary has complied in all material respects with all Governmental
Requirements applicable to its business, and all Governmental Requirements with
respect to the distribution and sale of products and services by it.
(b) Except for any matters set forth in Section 4.16 of
the Disclosure Schedule, no consent, approval, authorization, declaration,
filing or registration with any Governmental Entity or any other Person is
required to be made or obtained by SUITS or a Subsidiary or the Shareholders in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby.
Section 4.17 No Untrue Statements. The statements,
representations and warranties of SUITS set forth in this Agreement, the
Disclosure Schedule and the Exhibits hereto and in all other documents and
information furnished to UTI and UTI Sub and its representatives in connection
herewith do not include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements, representations and
warranties made not misleading.
Section 4.18 Records. The books, records and minutes kept by
SUITS and each Subsidiary with respect to its business and assets have been
kept properly in all material respects in accordance with all Governmental
Requirements and contain records of all matters required to be included therein
by any Governmental Requirement, and such books, records and minutes are true,
accurate and complete in all material respects.
Section 4.19 Environmental Representations and Warranties.
Except as otherwise set forth in Section 4.19 of the Disclosure Schedule:
(a) Neither SUITS nor a Subsidiary has received any
written notice of any investigation or inquiry by any Governmental Entity under
any applicable Environmental Laws relating to the ownership or operation of the
assets of SUITS or a Subsidiary. Neither SUITS nor any Subsidiary has disposed
of any Hazardous Material on any of the assets currently owned or leased, or
that have been owned or leased, by SUITS or a Subsidiary or its Affiliates or
predecessor entitles (the "SUITS Assets") and no condition exists on any of the
SUITS Assets, that, in either instance, would subject SUITS or a Subsidiary or
the SUITS Assets to any remedial obligations under any applicable Environmental
Law.
(b) Except where the failure to do so would not have a
Material Adverse Effect, SUITS and each Subsidiary has obtained and been in
compliance with all of the terms and conditions of all permits, licenses, and
other authorizations that are required under, and has complied with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables that are contained in, all applicable
Environmental Laws relating to the SUITS Assets.
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(c) Neither SUITS nor any Subsidiary, and to the best of
its knowledge, any prior owner or operator of the SUITS Assets, has caused or
allowed the generation, use, treatment, storage or disposal of Hazardous
Materials at any site or facility owned, leased or operated by SUITS or a
Subsidiary or its Affiliates or used in connection with the SUITS Assets except
in accordance with all applicable Environmental Laws or except to the extent
the same would not have a Material Adverse Effect.
(d) None of the SUITS Assets have been subject to the
release of any Hazardous Materials except to the extent that the same would not
have a Material Adverse Effect.
(e) Except where the failure to do so would not have a
Material Adverse Effect, SUITS or a Subsidiary has secured all Environmental
Permits necessary to the operation of the SUITS Assets currently owned by SUITS
or a Subsidiary and SUITS and each Subsidiary is in compliance with such
permits.
(f) Neither SUITS nor any Subsidiary has received any
notice, nor is it aware, of any proposal by a Governmental Entity to amend,
revoke or replace any Environmental Permit, or requiring the issuance of any
additional Environmental Permit, necessary to operate the SUITS Assets owned by
SUITS or a Subsidiary that, in any of the foregoing instances, could reasonably
be expected to have a Material Adverse Effect on SUITS or such Subsidiary.
(g) Neither SUITS nor any Subsidiary has received
inquiry or notice, or has any reasonable basis to believe that it will receive
inquiry or notice, of any actual or potential proceedings, claims or lawsuits
related to or arising under any Environmental Laws and related to the SUITS
Assets.
(h) Neither SUITS nor any Subsidiary is currently
operating or required to be operating any of the SUITS Assets under any
compliance order, schedule, decree or agreement, any consent decree, order or
agreement, or any corrective action decree, order or agreement issued or
entered into under any Environmental Law, except for Environmental Permits
currently held by or issued to SUITS or a Subsidiary.
(i) SUITS, each Subsidiary and the SUITS Assets are to
the best of SUITS' knowledge in compliance with all applicable limitations,
restrictions, conditions, standards, prohibitions, requirements and obligations
established under Environmental Laws except to the extent any such
noncompliance would not have a Material Adverse Effect.
Section 4.20 Brokers and Finders. No broker or finder has acted
for SUITS in connection with this Agreement or the transactions contemplated by
this Agreement and no broker or finder is entitled to any brokerage or finder's
fee or to any commission in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of SUITS. Section 4.20 of
the Disclosure Schedule sets forth the total amount that may be owed in
connection with such broker or finder's fees, if any.
Section 4.21 No Affiliate or Excluded Asset Obligations. Neither
SUITS nor any Subsidiary has any obligations or liabilities to the Shareholders
or any Affiliate of the Shareholders, except for obligations and liabilities
that will be released in full at no cost to SUITS and the Subsidiaries on or
prior to the Closing Date and, except for the Notes Receivable, no Shareholder
or Affiliate of a Shareholder has any obligation or liability to SUITS or the
Subsidiaries. Following
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the transfer of the Excluded Assets prior to the Closing and thereafter, except
for the Notes Receivable, neither SUITS nor any of the Subsidiaries or
Affiliate thereof will have any obligations or liabilities, contingent,
deferred or otherwise, relating in any respect to or arising from its ownership
or former ownership of the Excluded Assets.
Section 4.22 SUITS Corporate Authority. The execution and
delivery of this Agreement by SUITS, the performance by it of all the terms and
conditions hereof to be performed by it and the consummation of the
transactions contemplated hereby by it, including the Merger, have been duly
authorized and approved by any requisite corporate action on the part of SUITS,
including all necessary approvals by the Shareholders of the Merger and this
Agreement. This Agreement constitutes the legal, valid and binding obligation
of SUITS, enforceable against SUITS in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, moratorium,
insolvency or other similar laws affecting generally the rights of creditors or
by principles of equity.
ARTICLE IV-B
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder, severally and not jointly, represents and warrants
to UTI pursuant to Sections 4.23 through 4.31, solely as to itself and not as
to any other Shareholder, that:
Section 4.23 No Liens. The shares of SUITS Common Stock owned by
such Shareholder is set forth beside such Shareholder's name on Schedule 4.2_
hereto, and such Shareholder owns all of such shares of SUITS Common Stock free
and clear of all liabilities, liens, encumbrances, pledges, trusts, voting
trusts or stockholders' agreements, equities, charges, options, conditional
sale or title retention agreements, covenants, restrictions, reservations,
commitments, obligations or other burdens or encumbrances of any nature
whatsoever.
Section 4.24 Effect of Agreement on Shareholders. The execution
and delivery of this Agreement by such Shareholder and the consummation of the
Merger and the transactions contemplated hereby will not (i) result in any
breach of any of the terms or conditions of, or constitute a default under any
commitment, mortgage, note, bond, debenture, deed of trust, contract,
agreement, license or other instrument or obligation to which such Shareholder
is now a party or by which such Shareholder or any of such Shareholder's
properties or assets may be bound or affected and which breach or default could
have an adverse effect on the Shareholders' ability to vote to approve the
Merger; (ii) result in any violation of any Governmental Requirement applicable
to such Shareholder; or (iii) to the best of such Shareholder's knowledge,
cause any Person who normally does business with SUITS not to continue to do so
on the same basis as before.
Section 4.25 Authorization.
(a) Such Shareholder has all requisite legal right,
power, capacity and authority to execute and deliver this Agreement and to
perform fully such Shareholder's obligations hereunder. This Agreement has
been duly executed by such Shareholder and constitutes the legal, valid and
binding obligation of such Shareholder, enforceable against such Shareholder in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, moratorium, insolvency or other similar laws affecting
generally the rights of creditors or by principles of equity and the
indemnification provisions contained in Section 13.1 being subject to
limitation under public policy.
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(b) No consent, approval, authorization, declaration,
filing or registration with any Governmental Entity or any other Person is
required to be made or obtained by such Shareholder in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby.
Section 4.26 No Untrue Statements.
(a) To the best knowledge of such Shareholder, the
representations of SUITS contained herein are true and correct.
(b) The statements, representations and warranties of
such Shareholder set forth in this Agreement and the Exhibits hereto and in all
other documents and information furnished to UTI and UTI Sub and its
representatives in connection herewith do not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements, representations and warranties made not misleading.
Section 4.27 Brokers and Finders. No broker or finder has acted
for such Shareholder in connection with this Agreement or the transactions
contemplated by this Agreement and no broker or finder is entitled to any
brokerage or finder's fee or to any commission in respect thereof based in any
way on agreements, arrangements or understandings made by or on behalf of such
Shareholder.
Section 4.28 No Affiliate Obligations. SUITS and the
Subsidiaries do not have any obligations or liabilities to such Shareholder or
any Affiliate of such Shareholder, except for obligations and liabilities that
will be released in full at no cost to SUITS and the Subsidiaries on or prior
to the Closing Date.
Section 4.29 Investment Purpose. Such Shareholder is acquiring
a Warrant and a Note 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, except pursuant to a
valid registration statement under the Securities Act declared effective by the
Commission or pursuant to a valid exemption from registration under the
Securities Act. Such Shareholder acknowledges that the issuance to such
Shareholder of such Note, such Warrant and any Warrant Shares has not been, and
will not be, registered under the Securities Act or the securities laws of any
state and such Note, such Warrant and, when issued, the Warrant Shares will
contain an appropriate restrictive legend. Each Shareholder acknowledges and
agrees that an investment in such Note, such Warrant and any Warrant Shares
involves risks of investment, including the risks set forth in UTI's Annual
Report on Form 10-K for the year ended December 31, 1997, previously provided
to such Shareholder. Such Shareholder further acknowledges and agrees that
such Shareholder has received such Form 10-K and has had an opportunity to ask
questions regarding UTI and such Shareholder's investment in such Note, such
Warrant and any Warrant Shares. Such Shareholder acknowledges and agrees that
UTI is relying on the representations contained in this Section 4.29 in
connection with entering into this Agreement. Each Shareholder agrees that
such Note, such Warrant and the certificates representing his or her Warrant
Shares (when issued) will be imprinted with an appropriate "1933 Act"
restrictive legend. Such Shareholder represents and warrants that he or she
(a) has the financial ability to bear the economic risk of his or her
investment in such Note, such Warrant and any Warrant Shares (including the
possible loss of the entire amount thereof), (b) has adequate means for
providing for his or her current and future needs and personal contingencies
notwithstanding his or her investment in such Note, such Warrant and any
Warrant Shares, (c) has
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no need for liquidity with respect to the investment in such Note, such Warrant
and any Warrant Shares and (d) is in such financial and other circumstances
that he or she can foresee no situation in which the undersigned may be
required to sell such Note, such Warrant or any Warrant Shares. Such
Shareholder has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of an investment in such
Note, such Warrant and any Warrant Shares.
Section 4.30 Indebtedness and Agreements. Immediately subsequent
to the Effective Time, the Surviving Corporation will have no indebtedness
outstanding that is payable to any Shareholder or any of their respective
Affiliates. Immediately subsequent to the Effective Time, except for this
Agreement, there will be no agreements, contracts, leases, arrangements or
other understandings (either written or oral) between such Shareholder and the
Surviving Corporation.
Section 4.31 Individual Shareholder. Such Shareholder is a
natural person and is not a foreign person within the meaning of Code Section
1445.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF UTI
UTI represents and warrants to the Shareholders that:
Section 5.1 Due Incorporation and Qualification. UTI is a
corporation duly organized and validly existing under Delaware law and has all
requisite power to carry on its business as now being conducted. UTI Sub is a
corporation duly organized and validly existing under Texas law. Each of UTI
and UTI Sub is qualified to do business in each other jurisdiction in which its
failure to so qualify would materially and adversely affect UTI or its
financial condition or business or ability to perform the transactions
contemplated by this Agreement.
Section 5.2 Performance of Agreement.
(a) Each of UTI and UTI Sub has all necessary corporate
power and authority to enter into and carry out the transactions contemplated
by this Agreement.
(b) Each of UTI's and UTI Sub's execution, delivery and
performance of this Agreement have been duly and validly authorized and
approved by all necessary corporate action on the part of UTI and UTI Sub, as
applicable.
(c) The execution, delivery and performance of this
Agreement by UTI and UTI Sub, and the transactions contemplated hereby, will
not violate (i) any provision of the certificate or articles of incorporation
or bylaws of UTI and UTI Sub, (ii) any material agreement or instrument to
which UTI is a party or by which UTI is bound or (iii) any judgment, order,
ruling, or decree applicable to UTI as a party in interest.
(d) Except for the applicable requirements of the HSR
Act and any matters set forth in Section 5.2 of the Disclosure Schedule, no
consent, approval, authorization, declaration, filing or registration with any
Governmental Entity or any other Person is required to be made or obtained by
UTI in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby.
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(e) This Agreement is the valid and binding agreement of
UTI and UTI Sub, enforceable against UTI and UTI Sub in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
moratorium, insolvency or other similar laws affecting generally the rights of
creditors or by principles of equity and the indemnification provisions
contained in Section 13.2 being subject to limitation under public policy.
Section 5.3 Brokers and Finders. No agent, broker, investment
banker, person or firm acting on behalf of UTI or under its authority is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee directly or indirectly in connection with any of the transactions
contemplated hereby.
Section 5.4 Financial Ability. UTI has on the date hereof, and
on the Closing Date will have, the financial ability to perform its obligations
under this Agreement.
Section 5.5 Authorization for Warrants, Warrant Shares and Note.
UTI has taken all necessary corporate action required to authorize it to issue
the Notes, the Warrants and the Warrant Shares. Subject to the provisions of
Section 2.1, the Warrant Shares will, when issued in accordance with the
Warrants, be validly issued, fully paid and nonassessable and not subject to
preemptive rights. The Warrant Shares will, when issued, be listed on the
American Stock Exchange (or other principal exchange on which the UTI Common
Stock is traded, or the Nasdaq National Market System, if quoted thereon,
subject to official notice of issuance. UTI has duly reserved for issuance
from its authorized and unissued shares of UTI Common Stock the number of
shares of UTI Common Stock needed for issuance of the Warrant Shares. Subject
to the provisions of Section 2.1, the Note, when issued pursuant to the terms
hereof, will constitute the legal, valid and binding obligation of UTI,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, moratorium, insolvency
or other similar laws affecting generally the rights of creditors or by
principles of equity.
Section 5.6 SEC Documents. UTI has provided to SUITS its Annual
Report on Form 10-K for the year ended December 31, 1997, its Current Reports
on Form 8-K dated April 23, 1998, as amended, its quarterly report on Form 10-Q
for the three months ended March 31, 1998 and its proxy statement with respect
to its Annual Meeting of Stockholders for 1998 (such documents collectively
referred to herein as the "SEC Documents"). As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations of the Commission promulgated thereunder applicable to such SEC
Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of UTI included in the SEC Documents comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the Commission with respect thereto, have been
prepared in accordance with GAAP (except as may be indicated in the notes
thereto) and fairly present the consolidated financial position of UTI and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended. Since March 31,
1998, other than as discussed in the SEC Documents, there has been no material
adverse change in the business of UTI and its subsidiaries, taken as a whole.
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ARTICLE VI
OBLIGATIONS OF PARTIES PRIOR TO CLOSING
Section 6.1 General. Up to and including the Closing Date, none
of the parties will take any action that would cause any of its representations
and warranties herein not to be true and correct in all material respects as of
the Closing Date except by written authorization of the other parties. Each
party shall use its best efforts to carry out and comply with the provisions of
this Agreement, to satisfy the conditions applicable to such party and to
consummate the Merger in accordance with this Agreement.
Section 6.2 Access to Records and Properties of SUITS. Subject
to requirements of confidentiality imposed by contract or by law, SUITS will,
and the Shareholders will cause SUITS to, make available to UTI and its
accountants, counsel and other representatives access during normal business
hours to the properties, books and records of SUITS and the Subsidiaries and
allow SUITS' and the Subsidiaries' officers and representatives to be available
to UTI for consultation.
Section 6.3 Conduct of Business of SUITS Until the Closing.
Except as set forth in Section 6.3 of the Disclosure Schedule, up to and
including the Closing Date, unless UTI consents in writing to contrary action,
SUITS will and will cause each Subsidiary to, and the Shareholders will cause
SUITS to:
(a) not change its capital stock by reclassification,
subdivision, reorganization, issuance of additional stock or otherwise;
(b) not issue or sell, or purchase or otherwise
reacquire, any of its capital stock, or grant or commit to grant any options,
warrants, or other rights to subscribe for, or purchase, or otherwise acquire,
any shares of its capital stock, or issue or commit to issue any securities
convertible into or exchangeable for shares of its capital stock;
(c) not declare any dividend on its capital stock or
make any other similar payment or distribution thereon or in respect thereof
except for those made in the Ordinary Course of Business and that shall reduce
Working Capital except to the extent accrued on the Reference Balance Sheet;
(d) not change or amend its Certificate of Incorporation
or By-Laws;
(e) maintain its books, records and accounts in
accordance with its historical practice and in the usual and regular manner
consistent with prior years;
(f) not borrow or agree to borrow any money or
guarantee, or agree to guarantee the obligations of others;
(g) not make any contracts or commitments other than in
the Ordinary Course of Business;
(h) not allow any material contract to be terminated or
to be materially modified prior to the full term of the contract unless
approved by the Board of Directors or by a duly authorized officer;
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(i) not create, assume or permit to exist any mortgage,
pledge or other lien or encumbrance on any of its assets except in the Ordinary
Course of Business;
(j) other than the Excluded Assets, not sell, assign,
lease or otherwise dispose of any of its material assets other than in
connection with the replacement of obsolete or worn-out items;
(k) use best efforts to (i) preserve intact the current
business organizations of SUITS and the Subsidiaries, (ii) keep available the
services of the current officers, employees and agents of the SUITS and the
Subsidiaries, and (iii) maintain the relations and goodwill with all suppliers,
customers, licensers, licensees, landlords, trade creditors, employees, agents
and others having business relationships with SUITS or the Subsidiaries;
(l) furnish to UTI copies of all financial statements
and certificates and reports concerning operation of the business, as and when
such financial statements, certificates and reports are delivered to any
Shareholder or pursuant to any material contract of SUITS or a Subsidiary; and
(m) use its best efforts not to do, or fail to do, any
act that results or will result (i) in any of the representations and
warranties of SUITS or the Shareholders under this Agreement being materially
incorrect or (ii) in the nonfulfillment of any of the conditions stated in
Article VII.
Section 6.4 Transfer of Excluded Assets. Prior to the Closing,
the Shareholders shall cause SUITS to transfer the Excluded Assets to the
Shareholders pursuant to the transfer documents attached to Section 4.3 of the
Disclosure Schedule. As part of the transfer of the Excluded Assets, the
transferee of the Excluded Assets shall assume all obligations and liabilities
relating to the Excluded Assets. The transferees of the Excluded Assets shall
at or prior to the Closing execute, at the sole cost of the transferee, any
agreements, certificates or other documents upon the reasonable request of UTI
that are reasonably necessary to effectuate an orderly transfer of the Excluded
Assets and to evidence the assumption of all liabilities and obligations
relating to the Excluded Assets.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF
SUITS AND THE SHAREHOLDERS
The obligations of SUITS and the Shareholders to close the
transactions contemplated herein are subject to satisfaction of the conditions
set out in this Article VII at or before the Closing Date.
Section 7.1 Opinion of Counsel. SUITS shall have received the
opinion of counsel to UTI, dated the Closing Date, substantially in the form of
Exhibit H.
Section 7.2 Performance and Obligations of UTI.
(a) All of the terms and conditions of this Agreement to
be complied with and performed by UTI at or before the Closing Date shall have
been complied with and performed in all material respects, and the
representations and warranties made by UTI in this Agreement shall be correct
in all material respects with the same force and effect as though such
representations and warranties had been made at and as of the Closing Date.
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(b) UTI shall have delivered to SUITS a certificate,
dated the Closing Date, substantially in the form of Exhibit I.
(c) UTI shall have complied on or before the Closing
Date in all material respects with each of its covenants or agreements of UTI
contained in this Agreement to be performed on or before the Closing Date.
Section 7.3 Governmental Approvals. The waiting period (and any
extension thereof) under the HSR Act shall have expired or been terminated. No
statute, rule or regulation or order of any court or administrative agency
shall be in effect that prohibits SUITS and the Shareholders from consummating
the transactions contemplated hereby and no suit, action, investigation or
other proceeding by any Governmental Entity shall have been instituted or
threatened seeking to restrain or prohibit UTI, SUITS or the Shareholders from
consummating the transactions contemplated hereby.
Section 7.4 Release of Guaranty. SUITS, the Subsidiaries and
the Shareholders (and any other person who may be a guarantor) shall have been
fully released from all obligations as guarantors of indebtedness and other
obligations of SUITS to Security National Bank of Enid, Oklahoma.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF UTI
The obligations of UTI to close the transactions contemplated herein
are subject to satisfaction of the conditions set out in this Article VIII at
or before the Closing Date.
Section 8.1 Absence of Litigation. No suit, action or other
proceeding by a third party or Governmental Entity shall have been instituted
or threatened before any Governmental Entity to enjoin, restrain or prohibit,
or to obtain substantial damages in respect of, or that is related to or arises
out of, this Agreement or the consummation of the transactions contemplated
hereby, that, in the reasonable judgment of UTI, would make it inadvisable to
consummate such transactions.
Section 8.2 Opinion of Counsel. UTI shall have received the
opinion of counsel to SUITS and the Shareholders, dated the Closing Date,
substantially in the form of Exhibit J.
Section 8.3 Performance and Obligations of the Shareholders.
(a) All of the terms and conditions of this Agreement to
be complied with and performed by SUITS and the Shareholders at or before the
Closing Date shall have been complied with and performed in all material
respects, and the representations and warranties made by SUITS and the
Shareholders in this Agreement shall be correct in all material respects with
the same force and effect as though such representations and warranties had
been made as of the Closing Date.
(b) The Shareholders and SUITS shall have delivered to
UTI a certificate, dated the Closing Date, substantially in the form of Exhibit
K.
Section 8.4 Covenants and Agreements Performed. SUITS and the
Shareholders shall have complied on or before the Closing Date in all material
respects with each of the covenants
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or agreements of SUITS and the Shareholders contained in this Agreement to be
performed on or before the Closing Date.
Section 8.5 Governmental Approvals. The waiting period (and any
extension thereof) under the HSR Act shall have expired or been terminated. No
statute, rule or regulation or order of any court or administrative agency
shall be in effect that prohibits UTI from consummating the transactions
contemplated hereby and no suit, action, investigation or other proceeding by
any Governmental Entity shall have been instituted or threatened seeking to
restrain or prohibit UTI, SUITS or the Shareholders from consummating the
transactions contemplated hereby.
Section 8.6 Consents. All consents, approvals, authorizations,
exemptions and waivers set forth in Section 4.16 of the Disclosure Schedule
shall been obtained and be effective and all other consents, approvals,
authorizations, exceptions and waivers from third persons that shall be
required in order to enable SUITS and the Shareholders to consummate the
transactions contemplated hereby shall have been obtained.
Section 8.7 No Adverse Change. There shall not have occurred
any Material Adverse Effect.
Section 8.8 Diminution in Value of the Assets. Since the date
of this Agreement, there shall not have been an actual or constructive total
loss of any of the Rigs.
ARTICLE IX
CLOSING
Section 9.1 Place of Closing and Closing Date. The closing of
the transactions contemplated herein (the "Closing") shall take place at the
offices of Fulbright & Jaworski L.L.P. in Houston, Texas, subject to the
satisfaction of the conditions precedent stated in Articles VII and VIII on
August 15, 1998, or such other date as may be mutually agreed.
Section 9.2 Closing Deliveries by UTI. At the Closing, UTI
shall deliver to SUITS and the Shareholders as provided in Article III the
following:
(a) the Cash Consideration, the Warrants and the Note;
(b) the executed Opinion of Counsel described in Section
7.1;
(c) the certificate executed by an authorized officer of
UTI described in Section 7.2(b); and
(d) a certificate executed by the Secretary (or
Assistant Secretary) of UTI and UTI Sub dated as of the Closing Date, providing
the resolutions adopted by the Board of Directors of UTI and UTI Sub and the
sole shareholder of UTI Sub authorizing the Merger under this Agreement and the
continued effectiveness of such resolutions, and presenting the incumbency and
representative signatures of the officers executing this Agreement on behalf of
UTI and UTI Sub, as the case may be.
Section 9.3 Closing Deliveries by the Shareholders. At the
Closing, the Shareholders shall deliver to UTI the following:
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(a) certificates evidencing the Shares duly endorsed for
transfer to UTI;
(b) a certificate of good standing for SUITS issued by
the Oklahoma Secretary of State, a good standing tax certificate from the
Oklahoma Tax Commission and a certificate of existence and good standing
(including as to tax status) in each jurisdiction listed on Section 4.1 of the
Disclosure Schedule, in each case and dated as of a date no more than ten days
prior to the Closing Date;
(c) the executed Opinion of Counsel described in Section
8.2;
(d) the certificate described in Section 8.3(b);
(e) a certificate executed by the Secretary (or
Assistant Secretary) of SUITS dated as of the Closing Date, providing the
resolutions adopted by the Board of Directors of SUITS authorizing the Merger
under this Agreement and the continued effectiveness of such resolutions, and
presenting the incumbency and representative signatures of the officers
executing this Agreement on behalf of SUITS and, if applicable, the authority
of such officers executing this Agreement on behalf of the Shareholders; and
(f) certificate providing all documents relating to the
transfer of the Excluded Assets.
ARTICLE X
TERMINATION
Section 10.1 Termination. This Agreement may be terminated:
(a) At any time prior to the Closing Date with the
mutual written consent of the Shareholders, SUITS, UTI and UTI Sub;
(b) By UTI, if a material default shall have occurred in
the observance or in the due and timely performance by SUITS or the
Shareholders of any agreements and covenants of SUITS or the Shareholders
herein contained, or if there shall have occurred a breach by SUITS or the
Shareholders of any of the warranties and representations of SUITS or the
Shareholders herein contained, and such default or breach has not been cured by
SUITS or the Shareholders, as the case may be, or has not been waived by UTI;
(c) By SUITS, if a material default shall have occurred
in the observance or in the due and timely performance by UTI of any agreements
and covenants of UTI herein contained, or if there shall have occurred a breach
by UTI of any of the warranties and representations of UTI herein contained,
and such default or breach has not been cured by UTI or has not been waived by
SUITS; and
(d) By UTI or SUITS (provided the terminating party
(including the Shareholders in the case of SUITS) has not materially breached
any of its agreements, covenants or representations and warranties herein
contained) if the Closing shall not have occurred on or before August 31, 1998.
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ARTICLE XI
OBLIGATIONS OF PARTIES AFTER CLOSING
Section 11.1 Post-Closing Confidentiality. After the Closing,
the Shareholders and their Affiliates shall maintain as confidential
information all information in their possession regarding SUITS or its business
or assets, and shall not disclose any of such information to any Person except
as may be required to comply with applicable law.
Section 11.2 Cooperation Regarding Financial Information. The
Shareholders, if requested by UTI and at UTI's expense, shall cooperate and
assist Ernst & Young LLP or other accounting firm designated by UTI (the
"Accountants") in preparing such audited financial statements of SUITS that UTI
may reasonably require to permit UTI to timely file a Current Report Form 8-K
with the Commission in accordance with the Exchange Act and the rules and
regulations thereunder in connection with the transactions contemplated hereby
and to comply with any financial statement requirements with respect to SUITS
applicable to UTI under the Exchange Act, the Securities Act and the rules and
regulations thereunder. If requested, the Shareholders shall use reasonable
good faith efforts to cause Baird Kurtz & Dobson to assist the Accountants, at
UTI's expense, in delivering such audited financial statements to UTI within
ten business days prior to the date that UTI is required to file such financial
statements with the Commission in connection with such obligations. The
Shareholders shall cause Baird Kurtz and Dobson to provide UTI, at UTI's
expense, with access to such firm's work papers in support of any accounting or
auditing work performed by the Accountants in respect of SUITS. The
Shareholders will cooperate with and assist UTI in preparing, and, if
requested, shall use reasonable efforts to cause Baird Kurtz and Dobson to
cooperate with and assist the Accountants in preparing, such other audited
financial statements for SUITS as may be specified by UTI.
Section 11.3 Covenant Not to Compete With the Business. As an
inducement to UTI and UTI Sub to effect the Merger and subject to the cash
payments aggregating $150,000 to Jerry L. Suits and $100,000 to Peter C.
Dillingham (which shall be paid in equal one-third installments ($50,000 for
Jerry L. Suits and $33,333 for Peter C. Dillingham) on the Closing Date, on
July 31, 1999, and on July 31, 2000), each of Jerry L. Suits and Peter C.
Dillingham, agrees that, effective as of the Closing Date, for a period of
three years thereafter in all jurisdictions other than Louisiana, for which the
period shall be two years, he will not, and will cause each of his Affiliates
to not, without the consent of UTI, directly or indirectly, provide contract
land drilling services in the States of Oklahoma, Texas and New Mexico and the
parishes in Louisiana listed in Section 11.3 of the Disclosure Schedule, except
for the account of UTI and its Affiliates; provided that nothing herein
contained shall prevent Jerry Suits or Peter Dillingham from providing
consulting services relating to oilfield service operations not involving
contract drilling services. Each of Jerry L. Suits and Peter C. Dillingham
acknowledges that a remedy at law for any breach or attempted breach of this
Section 11.3 will be inadequate and further agrees that any breach of this
Section 11.3 will result in irreparable harm to UTI and UTI Sub, and,
accordingly, UTI shall, in addition to any other remedy that may be available
to any of them, be entitled to specific performance and injunctive and other
equitable relief in case of any such breach or attempted breach. Each of Jerry
L. Suits and Peter C. Dillingham acknowledges that this covenant not to compete
is being provided as an inducement to UTI to effect the Merger and that this
Section 11.3 contains reasonable limitations as to time, geographical area and
scope of activity to be restrained that do not impose a greater restraint than
is necessary to protect the goodwill or other business interest of UTI and
SUITS. Whenever possible, each provision of this Section 11.3 shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Section 11.3 shall be prohibited by or
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invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remaining
provisions of this Section 11.3. If any provision of this Section 11.3 shall,
for any reason, be judged by any court of competent jurisdiction to be invalid
or unenforceable, such judgment shall not affect, impair or invalidate the
remainder of this Section 11.3 but shall be confined in its operation to the
provision of this Section 11.3 directly involved in the controversy in which
such judgment shall have been rendered. In the event that the provisions of
this Section 11.3 should ever be deemed to exceed the time or geographic
limitations permitted by applicable law, then such provision shall be reformed
to the maximum time or geographic limitations permitted by applicable law. Any
other provision of this Agreement to the contrary notwithstanding, the
ownership of less than 5% of any class of stock of a publicly-traded company
engaged in providing contract land drilling services shall not, solely by
reason of such investment, be deemed a violation of this Section 11.3.
Section 11.4 Severance and Retention Bonuses and Notes
Receivable. UTI agrees to cause the Surviving Corporation to honor and perform
the Severance and Retention Bonus Obligations with respect to all employees of
SUITS as of the date hereof. Nothing contained in this Section 11.4, however,
shall prohibit or prevent the Surviving Corporation or UTI from terminating the
employment of any employee of SUITS nor shall this provision constitute an
agreement to employ any of such persons. Immediately following the Closing,
the Shareholders shall cause the Notes Receivable, including the $70,000 in
accrued and unpaid interest thereon, to be repaid to SUITS. In the event such
repayment is not made within five business days of the Closing, UTI's
obligations under the Notes shall terminate immediately.
Section 11.5 Final Tax Return. UTI agrees that, as soon as
reasonably practicable following the Closing, it will file consolidated federal
income tax return for SUITS relating to the period beginning on December 1,
1997 through the Closing Date. To the extent that as a result of the
preparation of such federal income tax return, a net operating loss is
generated that may be carried back to the prior taxable year, UTI shall cause
SUITS to make all filings with the Internal Revenue Service reasonably
necessary for SUITS to apply such net operating losses (to the extent permitted
by applicable law) to prior year taxable income of SUITS. To the extent SUITS
actually receives a refund from the IRS relating to a reduction in previously
paid Taxes as a result of the carry back of any such net operating loss, SUITS
shall forward such amounts to the Shareholders according to their respective
Proportionate Shares.
ARTICLE XII
NATURE OF STATEMENTS AND SURVIVAL
Section 12.1 Representations and Warranties. The several
representations and warranties of the parties shall survive the execution and
delivery of this Agreement and the Closing and shall remain in full force and
effect for a period beginning on the date hereof and ending three years
following the Closing Date, with the following exceptions:
(a) the Extended Representations shall survive the
execution and delivery of this Agreement and the Closing and shall remain in
full force and effect without limitation as to time; and
(b) the representations and warranties set forth in
Sections 4.8, 4.20, 4.27 and 5.3 shall survive the execution and delivery of
this Agreement and the Closing and shall remain in
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full force and effect for a period beginning on the date hereof and ending on
the 90th day after the expiration of all applicable statutes of limitations,
including any and all extensions thereof.
The period during which the representations and warranties shall survive is
referred to herein with respect to such representations and warranties as the
"Survival Period".
Section 12.2 Effect of Survival. The several representations and
warranties made herein by each party shall be effective with respect to any
inaccuracy therein or breach thereof (and a claim for indemnification under
Article XIII may be made thereon) if a written notice asserting the claim shall
have been given within the Survival Period to the party that made the
representation or warranty. Any claim for indemnification made during the
Survival Period shall be valid, and the representations and warranties relating
thereto shall remain in effect for purposes of that indemnification,
notwithstanding the fact that the claim may not be resolved within the Survival
Period.
Section 12.3 Effect of Investigation. All representations,
warranties, covenants and agreements made by the parties shall not be affected
by any investigation heretofore or hereafter made by and on behalf of any of
them and shall not be deemed merged into any instruments or agreements
delivered in connection with this Agreement or the Closing or otherwise in
connection with the transactions contemplated hereby.
Section 12.4 Survival of Covenants and Agreements. The covenants
and agreements entered into pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing without limitation.
ARTICLE XIII
INDEMNIFICATION
Section 13.1 General Indemnity by the Shareholders. Each
Shareholder, jointly and severally (except with respect to representations and
warranties contained in Article IV-B, as to which each Shareholder severally,
and not jointly), covenants and agrees that such Shareholder will indemnify,
hold harmless and defend UTI and UTI Sub and their respective officers,
directors, employees, agents, representatives and affiliates and successors and
assigns (collectively, the "UTI Indemnified Parties"), at all times from and
after the Closing Date, from and against any and all Damages of or to any of
UTI Indemnified Parties that may now or in the future be paid, incurred or
suffered by any UTI Indemnified Party or asserted against any UTI Indemnified
Party by any Person resulting or arising from or incurred in connection with
any one or more of the following:
(a) any Shareholder Retained Liabilities or any of the
Excluded Assets, to the extent such amounts are not specifically accrued for in
Working Capital on the Final Statement;
(b) any and all Taxes pertaining or attributable to
SUITS and any of the Subsidiaries or their Affiliates with respect to any and
all taxable periods or discrete portions thereof ending on or before the
Closing Date, including any Taxes payable by SUITS, UTI or UTI Sub as a result
of the Merger or the transfer of the Excluded Assets, to the extent such
amounts are not specifically accrued for in Working Capital on the Final
Statement;
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(c) any liability or claim for liability (whether in
contract, in tort or otherwise, and whether or not successful) related to any
liens, obligations or encumbrances of any nature whatsoever against or in any
way related to the Excluded Assets or the assets or the business of SUITS or
any of the Subsidiaries or Affiliates to the extent such liability or claim for
liability arises in connection with any lien, obligation or encumbrance that is
in existence at or attributable to periods prior to the Closing Date, to the
extent not specifically accrued for in Working Capital on the Final Statement;
(d) any liability or claim for liability (whether in
contract, in tort or otherwise, and whether or not successful) related to any
lawsuit or threatened lawsuit or claim involving the Shareholders, SUITS or any
of their Subsidiaries or Affiliates based upon actions, omissions or events
occurring on or prior to the Closing Date;.
(e) any liability or claim for liability (whether in
contract, in tort or otherwise, and whether or not successful) related to any
workers' compensation or worker injury claim based on any actions, omissions or
events occurring on or prior to the Closing Date, except to the extent accrued
for in Working Capital on the Final Statement;
(f) any obligation, liability or claim for liability
(whether in contract, in tort, or otherwise, and whether or not successful) of
SUITS or any of the Subsidiaries to any Affiliate of such Shareholders to the
extent such obligation, liability or claim arises in connection with any
action, omission or event occurring on or prior to the Closing Date or relates
to any agreement or commitment in existence on the Closing Date, except to the
extent accrued for in Working Capital on the Final Statement;
(g) any misrepresentation, breach of warranty or
nonfulfillment of any covenant or agreement on the part of SUITS or the
Shareholders under this Agreement or from any misrepresentation in or omission
from any list, schedule, certificate or other instrument furnished or to be
furnished to UTI pursuant to the terms of this Agreement; and
(h) all Environmental Liabilities, whenever incurred,
based upon, arising from or related to any conditions, events, circumstances,
facts, activities, practices, incidents, actions or omissions occurring or
existing on or prior to the Closing Date at, on, under, about, or within any
SUITS Asset regardless of whether such Environmental Liabilities are known,
unknown, disclosed, undisclosed, fixed or contingent, or whether such
Environmental Liabilities relate to on-site or off-site Environmental
Conditions, including without limitation any such Environmental Liabilities
arising from the use, storage, handling, treatment, disposal, generation,
transportation or release of any Hazardous Materials on or prior to the Closing
Date.
Section 13.2 General Indemnity by UTI. UTI covenants and agrees
that it will indemnify, hold harmless and defend the Shareholders and their
representatives and affiliates (collectively, the "Shareholders Indemnified
Parties"), at all times from and after the Closing Date, from and against any
and all Damages that may now or in the future be paid, incurred or suffered by
any Shareholders Indemnified Party or asserted against any Shareholders
Indemnified Party by any Person resulting or arising from or incurred in
connection with any misrepresentation, breach of warranty or nonfulfillment of
any covenant or agreement on the part of UTI under this Agreement or from any
misrepresentation in or omission from any list, schedule, certificate or other
instrument furnished or to be furnished to the Shareholders pursuant to the
terms of this Agreement (excluding in each
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case all liabilities and obligations for which the Shareholders have agreed to
indemnify the UTI Indemnified Parties pursuant to Section 13.1 above).
Section 13.3 Indemnification Basket; Limitation; Effect of
Materiality Qualifiers; Pro Rata Obligation.
(a) There shall be no indemnification for a breach of a
representation or warranty recoverable against a party obligated to provide
indemnification therefor under this Article XIII until the Damages for all
breaches of representations and warranties by such party exceed $100,000 in the
aggregate (the "Basket Amount"), and once all such damages for breaches of
representations and warranties exceed the Basket Amount, such party shall be
obligated to the other party for any and all such Damages for breaches of
representations and warranties in excess of the Basket Amount, provided,
however, that such liability for Damages for breach of such representations and
warranties shall not exceed, in the aggregate, the amount of the Merger
Consideration.
(b) Any claim for indemnification with respect to the
breach or inaccuracy of a representation or warranty must be made within the
Survival Period applicable to the representation or warranty subject to
indemnification. Any claim for indemnification that is made during the
applicable period for making such claim shall remain in effect for purposes of
such indemnification and all matters relating to such claim, including
counterclaims and other claims arising out of or relating to the same general
matter, notwithstanding such claim may not be resolved within the applicable
Survival Period.
(c) For purposes of determining the right of a party to
make a claim for indemnification for a breach of representation or warranty
under Sections 13.1 and 13.2, all representations and warranties that have been
made subject to a materiality or dollar qualification (including any Material
Adverse Effect) shall be deemed to have been made without that qualification,
it being understood and agreed that the thresholds provided for under Section
13.3(a) are intended to be the only materiality qualification for such matters
for purposes of indemnification.
Section 13.4 Waiver of Contribution. Any claim for
indemnification made by any UTI Indemnified Party pursuant to Article XIII
shall be asserted against the Shareholders and their successors and assigns.
Each Shareholder hereby expressly acknowledges and agrees that he shall be
liable and responsible therefor and that he shall not seek or receive
indemnification or contribution from SUITS with respect to such claim for
indemnification.
Section 13.5 Notice of Claim. UTI agrees that upon its discovery
of facts giving rise to a claim for indemnity under the provisions of this
Agreement (such facts being referred to herein as an "Indemnity Claim"), UTI
will give prompt notice thereof in writing to the party from which indemnity
may be sought, together with a statement of such information regarding the
Indemnity Claim as it shall then have, provided that any delay in giving or
failure to give such notice shall not limit any UTI Indemnified Party's rights
to indemnity hereunder except to the extent that the indemnifying party is
shown to have been materially prejudiced by such delay or failure.
Section 13.6 Right to Participate in Defense. With respect to
any Indemnity Claim related to third party claims or liabilities, the Person
seeking indemnification (the "Indemnified Person") shall notify the Person from
whom indemnification is sought (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
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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 for the fees and expenses of
legal counsel for such Indemnified Person incurred thereafter in connection
with the defense thereof; provided, however, if there exists or will exist a
conflict of interest that 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. The Indemnifying Party and the
Indemnified Party agree to cooperate fully in the conduct of any such claim,
suit or proceeding, negotiation, compromise or settlement thereof, but no such
compromise or settlement shall be made without the express prior written
consent of the Indemnified Party.
Section 13.7 Payment and Right of Offset. Each party owing an
indemnity obligation hereunder shall promptly pay to the party entitled to
indemnity hereunder the amount of any Damages to which such party is entitled
by reason of the provisions of this Agreement. The indemnifying party shall
pay to the indemnified parties all costs of investigation and defense with
respect to matters subject to indemnity hereunder as such costs are incurred.
The parties agree that UTI shall have the right to set-off and shall first
apply and reduce against its obligations under the Note against interest, then
against principal any amounts owing by the Shareholders to UTI as a result of
the Shareholders' indemnity obligations under this Article XIII. UTI shall
give written notice to the Shareholders of any exercise of such set-off,
including the amount owed UTI by the Shareholders under this Article XIII that
UTI desires to set-off against principal or interest owed by UTI under the Note
(the "Proposed Set-Off Amount"); provided, however, the failure to give such
notice shall in no manner affect the right of UTI in respect to set-offs and
corresponding applications of funds. During the period beginning when UTI
notifies the Shareholders of a set-off claim for indemnification under this
Article XIII and the date the claim is resolved, interest shall not accrue on
the principal amount of the Note equal to the amount of the Proposed Set-Off
Amount; provided further, however, that if such claim is ultimately resolved
for an amount less than the Proposed Set-Off Amount (the difference between
such amount and the Proposed Set-Off Amount referred to herein as the "Claim
Amount Difference"), UTI shall pay to the Shareholders, at the next interest
payment date, the amount of interest (to the extent not already paid) not paid
on the Claim Amount Difference prior to the ultimate resolution of such claim.
In the event there be any outstanding claim for indemnification by UTI under
this Article XIII that has not been resolved as of the maturity date of the
Note, UTI shall be entitled to defer payment of such principal in the amount
that UTI believes the Shareholders will be required to indemnify UTI. Any
amounts deposited into an escrow account to be governed by the escrow agreement
referred to in the Note shall continue to be subject to UTI's right to set-off
described herein.
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ARTICLE XIV
RELEASE
Section 14.1 Release.
(a) AS OF THE CLOSING DATE, EACH SHAREHOLDER DOES HEREBY
FOR HIMSELF AND HIS SUCCESSORS AND ASSIGNS REMISE, RELEASE, ACQUIT AND FOREVER
DISCHARGE UTI, UTI SUB, SUITS AND THEIR RESPECTIVE AFFILIATES, AND THEIR
SUCCESSORS AND ASSIGNS, 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, THAT THE SHAREHOLDER OR HIS AFFILIATES NOW HAS, OWNS OR
HOLDS OR HAS AT ANY TIME PREVIOUSLY HAD, OWNED OR HELD AGAINST SUCH PARTIES,
INCLUDING WITHOUT LIMITATION ALL LIABILITIES CREATED AS A RESULT OF THE
NEGLIGENCE, GROSS NEGLIGENCE AND WILLFUL ACTS OF SUITS AND ITS EMPLOYEES AND
AGENTS, OR UNDER A THEORY OF STRICT LIABILITY, EXISTING AS OF THE CLOSING DATE
OR RELATING TO ANY ACTION, OMISSION OR EVENT OCCURRING ON OR PRIOR TO THE
CLOSING DATE; PROVIDED, HOWEVER, THAT ANY CLAIMS, LIABILITIES, DEBTS OR CAUSES
OF ACTION THAT MAY ARISE IN THE 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; PROVIDED, HOWEVER, WITH RESPECT TO THE INDIVIDUALS WHO ARE
OR HAVE BEEN DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS OF SUITS PRIOR TO THE
CLOSING, THIS RELEASE WILL DOES NOT EXTEND TO ACTS OF FRAUD PERPETRATED AGAINST
THE SHAREHOLDERS BY ANY OF SUCH PERSONS, NOR WITH RESPECT TO ANY TRANSACTION
BETWEEN SUITS AND ANY OF SUCH PERSONS IN WHICH ANY OF SUCH PERSONS HAD A DIRECT
FINANCIAL INTEREST AND IN WHICH THE SHAREHOLDERS DID NOT PARTICIPATE,
FINANCIALLY OR OTHERWISE.
(b) Each Shareholder represents and warrants that it 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 herein. Each Shareholder covenants and agrees that such Shareholder
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 to be released herein. Each Shareholder represents and
warrants that such Shareholder has read and understands all of the provisions
of this Section 14.1 and that he has been represented by legal counsel of his
own choosing in connection with the negotiation, execution and delivery of this
Agreement.
ARTICLE XV
REGISTRATION RIGHTS
Section 15.1 Piggyback Rights. If, at any time after the date
hereof, UTI proposes to register under the Securities Act any shares of UTI
Common Stock for sale by it pursuant to an underwritten public offering of UTI
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 each Shareholder that
is a holder of a Warrant (each a "Holder") of its intention so to do,
regardless of whether such Holder has previously exercised piggyback
registration rights as to any other shares of stock held by it, and, upon the
written request (which must specify the number of Warrant Shares requested to
be included in such underwritten offering) of such Holder (a "Requesting
Holder") delivered to UTI within five days of receipt of UTI's notice,
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UTI will use commercially reasonable 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 UTI. Nothing
contained in this Section 15.1 shall, however, limit UTI's right to cancel,
postpone or withdraw any such proposed registration for any reason. Any
request by a Requesting Holder pursuant to this Section 15.1 to register
Warrant Shares for sale in the underwriting shall be on the same terms and
conditions as the shares of UTI Common Stock to be registered and sold through
underwriters under such registration; provided, however, that as a condition to
such inclusion such Requesting Holder shall execute an underwriting agreement
acceptable to the underwriters and, if requested, a custody agreement and power
of attorney 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 such Requesting Holder and any other shares of UTI
Common Stock sought to be registered by any other stockholder of UTI exercising
rights comparable to those of the Requesting Holders under this Article 15 (the
"Other UTI 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 UTI, then the number of Warrant Shares and Other
UTI Common Stock requested to be included in the underwriting shall be reduced
pro rata among the Requesting Holders and the holders of Other UTI 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.
Section 15.2 Procedure. If and whenever UTI is required by the
provisions of this Article 15 to use commercially reasonable efforts to effect
the registration of any Warrant Shares under the Securities Act, UTI will,
subject to the other provisions of this Article 15:
(a) as expeditiously as reasonably practicable, prepare
and file with the Commission the registration statement on in which
such Warrant Shares are to be included 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 in accordance with
the intended method of distribution set forth in such registration
statement;
(c) as expeditiously as reasonably practicable, furnish
to each Requesting Holder such number of copies of prospectuses and
preliminary prospectuses in conformity with the requirements of the
Securities Act, and such other documents as such Requesting Holder may
reasonably request, in order to facilitate the public sale of such
Warrant Shares; provided, however, that the obligation of UTI to
deliver copies of prospectuses or preliminary prospectuses to such
Requesting Holder shall be subject to the receipt by UTI of reasonable
assurances from such Requesting 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 such Requesting Holder, on the date that Warrant
Shares are to be delivered to the underwriters for sale pursuant to
such registration (i) an opinion, dated such date, of the independent
counsel representing UTI for the purposes of such registration,
addressed to the underwriters
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<PAGE> 47
and to the Requesting Holders, stating that such registration
statement has become effective under the Securities Act and that (A)
the registration statement and the related prospectus, and each
amendment or supplement thereto, 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 (B) 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, 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 Requesting Holders or any underwriter
for inclusion therein); and (ii) a letter, dated such date, from the
independent certified public accountants of UTI, 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 UTI included in the registration statement or the
prospectus, or any amendment or supplement thereto, 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 or the Requesting Holders 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 Requesting Holders shall reasonably
request (considering the nature and size of the offering) and do any
and all other acts and things that may be necessary or desirable to
enable the Requesting Holders to consummate the public sale or other
disposition in such jurisdictions of Warrant Shares; provided,
however, that UTI 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 that 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 Requesting Holders in connection
with each registration pursuant to this Article 15 shall be borne by
the Requesting Holders. Expenses incurred by UTI in complying with
this Article 15, including, without limitation: (i) all registration
and filing fees; (ii) all printing expenses; (iii) all fees and
disbursements of counsel for UTI; (iv) all blue sky fees and expenses;
and (v) all fees and expenses of accountants for UTI, 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 Requesting Holders and fees
and expenses of the counsel for the Requesting Holders applicable to
the sales by the Requesting Holders in connection with any such
registration are herein referred to as "Selling Expenses".
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<PAGE> 48
Nothing contained in this Section 15.2 shall, however, limit UTI's right to
cancel, postpone or withdraw any proposed registration for any reason.
Section 15.3 Indemnification.
(a) In the event of a registration of any Warrant Shares
under the Securities Act pursuant to this Article 15, UTI will
indemnify and hold harmless the Requesting Holders and any other
Person, if any, who controls a Requesting Holder within the meaning of
Section 15 of the Securities Act, against any losses, claims, damages
or liabilities, joint or several, to which the Requesting Holders or
such controlling Persons 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 UTI or final prospectus contained in such effective
registration statement, or any amendment thereof or supplement
thereto, 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 Requesting Holders 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 UTI 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, in reliance upon and in
conformity with written information furnished to UTI by or on behalf
of a Requesting Holder or a controlling Person of a Requesting 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 Article 15, each
Requesting Holder will indemnify and hold harmless UTI and each
Person, if any, who controls UTI within the meaning of Section 15 of
the Securities Act, each officer of UTI who signs the registration
statement, each director of UTI and each underwriter and each Person
who controls any underwriter within the meaning of Section 15 of the
Securities Act, against any and all such losses, claims, damages,
liabilities or actions that UTI or such officer, director, underwriter
or controlling Person may become subject under the Securities Act or
otherwise, and will reimburse UTI and each such officer, director,
underwriter 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, such preliminary prospectus or such final prospectus, or
any amendment thereof or supplement thereto, or arises out of or is
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 (b) any such untrue statement
or omission of a material fact was made in reliance upon and in
conformity with written information furnished to UTI by or on behalf
of such Requesting Holder specifically for use in connection with the
preparation of such registration statement or prospectus. In
connection with any transaction contemplated by Section 15.1 hereof,
each Requesting Holder also agrees to indemnify each such underwriter
and each Person who
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<PAGE> 49
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 Article 15, 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 for the fees and expenses of legal
counsel for such indemnified Person incurred thereafter in connection
with the defense thereof; provided, however, if there exists or will
exist a conflict of interest that 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.
Section 15.4 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 Holders as to
registration provided for in this Article 15 as to such Warrant Shares shall
terminate immediately.
ARTICLE XVI
MISCELLANEOUS
Section 16.1 Binding Agreement. All the provisions, covenants,
representations, warranties and conditions of this Agreement shall be binding
upon, and inure to the benefit of and be enforceable by, the parties hereto and
their respective successors and assigns. No party hereto may assign any of its
interest herein without the written consent of the other party (which consent
will not be unreasonably withheld), provided that any Shareholder that is a
trust or estate may assign its rights hereunder to its beneficiaries provided
that such beneficiaries assume in writing (in a form reasonably satisfactory to
UTI) all obligations of such Shareholder hereunder.
Section 16.2 Notices. All notices, requests, waivers and other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and shall be deemed to have been duly given upon receipt by
personal delivery, messenger delivery, first-class mail or telecopier, at the
addresses set forth below (or at such other address for a party as such party
shall specify by like notice):
--if to the Shareholders, Mr. Peter C. Dillingham
to the Shareholder P. O. Box 1669
Representative: Enid, Oklahoma 73702
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<PAGE> 50
with copies to: Theodore M. Elam, Esq.
McAfee & Taft
211 N. Robinson, Suite 1000
Oklahoma City, OK 73102
--if to UTI, to: UTI Energy Corp.
16800 Greenspoint Park, Suite 225N
Houston, Texas 77060
Attention: President
Telecopier No.: (281) 873-4141
with copies to: Fulbright & Jaworski L.L.P.
1301 McKinney, 51st Floor
Houston, Texas 77010
Attention: Charles L. Strauss
Telecopier No.: (713) 651-5246
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<PAGE> 51
Section 16.3 Shareholder Representative. Each of the
Shareholders hereby irrevocably appoints the Shareholders Representative to be
the representatives of the Shareholders following the Closing Date in any
matter arising out of this Agreement. For any matter in which UTI, UTI Sub or
SUITS is entitled to rely on or otherwise deal with the Shareholders, UTI, UTI
Sub or SUITS shall be entitled to communicate solely with the Shareholders
Representative and shall be entitled to rely on any such communications as
being the desire and will of, and such communications shall be binding upon,
the Shareholders. Notice delivered to the Shareholder Representative in
accordance with Section 16.2 hereof shall be deemed to be notice to all of the
Shareholders.
Section 16.4 Entire Agreement. This Agreement (including the
Disclosure Schedule and the Exhibits hereto) is the entire agreement between
the parties with respect to the subject matter hereof, and supersedes all prior
agreements and understandings, written and oral, among the parties hereto with
respect to the subject matter hereof.
Section 16.5 Expenses. Except as otherwise provided herein,
each party shall be solely responsible for all expenses incurred by it in
connection with this transaction (including, without limitation, fees and
expenses of its own counsel and accountants).
Section 16.6 Severability. If any term or other provision of
this Agreement is held invalid, illegal or incapable of being enforced under
any rule or law, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in a
materially adverse manner with respect to either party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
Section 16.7 Waivers. The failure of any party at any time to
require performance of any provision hereof shall not affect its right later to
require such performance. No waiver in any one or more instances shall (except
as otherwise stated therein) be deemed to be a further or continuing waiver of
any such condition or breach in other instances or a waiver of any condition or
breach of any other term, covenant, representation or warranty.
Section 16.8 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
Section 16.9 Headings. The headings preceding the text of
articles and sections of this Agreement are for convenience only and are not
part of this Agreement.
Section 16.10 Applicable Law. This Agreement is governed by and
shall be construed and enforced in accordance with the internal laws of the
State of Texas.
Section 16.11 Construction of Agreement. This Agreement
constitutes a negotiated agreement among the parties and the fact that one
party or the other shall have drafted a particular provision or provisions
shall not be material in the construction of any provision. All Exhibits
referred to in this Agreement are a part of this Agreement.
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<PAGE> 52
Section 16.12 References to Articles, Sections and Exhibits.
Unless the context otherwise requires, all references herein to Articles,
Sections and Exhibits shall be to the Articles, Sections and Exhibits of and to
this Agreement.
(SIGNATURES BEGIN ON THE FOLLOWING PAGE)
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<PAGE> 53
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
UTI ENERGY CORP.
By: /s/ Vaughn E. Drum
-----------------------------------
Name: Vaughn E. Drum
---------------------------------
Title: President
--------------------------------
SUITS ENTERPRISES, INC.
By: /s/ Peter C. Dillingham
-----------------------------------
Name: Peter C. Dillingham
---------------------------------
Title: CEO
--------------------------------
SUITS ACQUISITION CORP.
By: /s/ Vaughn E. Drum
-----------------------------------
Name: Vaughn E. Drum
---------------------------------
Title: President
--------------------------------
JERRY L. SUITS REVOCABLE TRUST
DATED 4/23/97
By: /s/ Jerry L. Suits
-----------------------------------
Name: Jerry L. Suits
---------------------------------
Trustee
TOM B. DILLINGHAM REVOCABLE TRUST
By: /s/ E. G. Ungeleider
-----------------------------------
Name: E. G. Ungeleider
---------------------------------
Trustee
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<PAGE> 54
PETER C. DILLINGHAM REVOCABLE TRUST
DATED 5/13/97
By: /s/ Peter C. Dillingham
-----------------------------------
Name: Peter C. Dillingham
---------------------------------
Trustee
/s/ E. Gay Ungerleider
--------------------------------------
E. Gay Ungerleider
/s/ Leslie F. Ballew
--------------------------------------
Leslie F. Ballew
BRADY SUZANNE DILLINGHAM TRUST
By: /s/ Jeanne G. Dillingham
-----------------------------------
Name: Jeanne G. Dillingham
---------------------------------
Trustee
/s/ Dana D. Hutton
--------------------------------------
Dana D. Hutton
/s/ Jeanne G. Dillingham
--------------------------------------
Jeanne G. Dillingham
DAN L. DILLINGHAM REVOCABLE TRUST
By: /s/ Jeanne G. Dillingham
-----------------------------------
Name: Jeanne G. Dillingham
---------------------------------
Truste
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<PAGE> 1
EXHIBIT 4.1
FORM OF STOCK PURCHASE WARRANT
The Company has issued a stock purchase warrant substantially in the form
attached hereto to each of the following individuals and entities, entitling
such individuals and entities to purchase the number of shares of Common Stock
set forth opposite their names below:
Jerry L. Suits, as Trustee of the Jerry L. Suits Revocable Trust: 26,250
shares
Jeanne G. Dillingham, Dana Hutton, Leslie D. Ballew and E. Gay Dillingham, as
Trustees of the Tom B. Dillingham Revocable Trust: 15,375 shares.
Peter C. Dillingham, as Trustee of the Peter C. Dillingham Revocable Trust:
5,250 shares.
E. Gay Dillingham: 4,875 shares.
Leslie D. Ballew: 4,875 shares.
Jeanne G. Dillingham, as Trustee of the Brady S. Dillingham Trust: 4,875
shares.
Dana Hutton: 4,875 shares.
Jeanne G. Dillingham: 4,500 shares.
Dan L. Dillingham, as Trustee of the Dan L. Dillingham Revocable Trust: 4,125
shares.
<PAGE> 2
FOR THE PURCHASE OF ________ SHARES
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, 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 "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 ___________ 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 July 31, 1998, and
terminating on July 30, 2003.
2.2 Exercise of Warrant. This Warrant may be exercised
upon surrender to the Company at its principal office (as designated
in Section 12) 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
<PAGE> 3
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 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 (together with the duly completed and signed Form of
Election) and payment of the Warrant Price, as aforesaid.
3. WARRANT PRICE.
The price per share at which each of the Warrant Shares shall
be purchasable upon exercise of this Warrant initially shall be $26.50, which
price shall be subject to adjustment pursuant to Section 9 hereof (such prices
as so adjusted are 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 has been, and, upon
exercise hereof, any Warrant Shares will be, 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 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) 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 satisfaction that no such tax is due.
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<PAGE> 4
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 lost, stolen or destroyed Warrant, a new warrant of
like tenor and representing an equivalent right or interest, but only upon
receipt of evidence 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 applicable 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, the 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 the 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 after such adjustment if the Holder had exercised
this Warrant in full immediately prior to the event requiring the
adjustment. Comparable rights shall accrue
-4-
<PAGE> 5
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 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 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 shares of Common Stock
the right to acquire shares of Common Stock for less than the Warrant
Price (the "Purchase 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 that could be
purchased at the Current Market Price for the aggregate amount that
would be paid if all Put Rights are exercised and the denominator of
which is the number of shares of Common Stock that 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 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 that could be purchased at the Current Market Price for the
aggregate amount that would be paid if all Purchase Rights are
exercised and the denominator of which is the number of shares of
Common Stock that 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 that 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 that 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.
-5-
<PAGE> 6
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 or similar document if at the time of such merger,
consolidation or other transaction 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 stock or other equity securities
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" 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.
10. 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.
-6-
<PAGE> 7
11. 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:
(a) the Company shall declare any dividend
payable in any securities upon 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 shares of Common Stock;
(b) the Company shall offer to the holders of
shares of Common Stock any additional shares of Common Stock
or securities convertible or exchangeable 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 12 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.
12. 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:
-----------------------------------
Attn:
-----------------------------
-----------------------------------
-----------------------------------
(ii) if to the Company at:
UTI Energy Corp.
Attn: President
16800 Greenspoint Park, Suite 225N
Houston, Texas 77060
-7-
<PAGE> 8
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.
13. SUCCESSORS.
No party hereto may assign its rights or obligations hereunder
without the prior written consent of the other party; provided, however, if the
Holder is a trust or estate, Holder may assign its rights hereunder to such
Holder's beneficiaries provided that such beneficiaries assume in writing (in a
form reasonably satisfactory to the Company) all of Holder's obligations under
the Agreement and Plan of Merger dated July 31, 1998, among the Company, a
wholly-owned subsidiary of the Company, SUITS Enterprises, Inc. ("SUITS") and
the shareholders of SUITS signatory thereto. 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.
14. APPLICABLE LAW.
This Warrant shall be governed by and construed in accordance
with the laws of the State of Texas.
15. 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.
16. CAPTIONS.
The captions of the sections of this Warrant have been
inserted for convenience only and shall have no substantive effect.
SIGNATURES BEGIN ON THE FOLLOWING PAGE
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be
duly executed as of the 31st day of July, 1998.
UTI ENERGY CORP.
By:
-----------------------------------
Vaughn E. Drum
President
-9-
<PAGE> 10
EXHIBIT A
FORM OF ELECTION
To be Executed by the Holder
to Exercise Warrant
UTI Energy Corp.
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 in full of the Warrant Price of such shares.
[INDIVIDUAL]
Signature
---------------------------
Name:
----------------------
Address
----------------------
----------------------
----------------------
Dated: , .
------------------ --------
[CORPORATION OR PARTNERSHIP OR TRUST]
--------------------------------
(Name of Entity)
By:
-----------------------------
Name:
----------------------
Title:
----------------------
Address
----------------------
----------------------
----------------------
Dated: , .
------------------ --------
<PAGE> 1
EXHIBIT 4.2
FORM OF STOCK PURCHASE WARRANT
The Company has issued a stock purchase warrant substantially in the form
attached hereto to each of the following individuals and entities, entitling
such individuals and entities to purchase the number of shares of Common Stock
set forth opposite their names below:
Jerry L. Suits, as Trustee of the Jerry L. Suits Revocable Trust: 8,750
shares
Jeanne G. Dillingham, Dana Hutton, Leslie D. Ballew and E. Gay Dillingham, as
Trustees of the Tom B. Dillingham Revocable Trust: 5,125 shares.
Peter C. Dillingham, as Trustee of the Peter C. Dillingham Revocable Trust:
1,750 shares.
E. Gay Dillingham: 1,625 shares.
Leslie D. Ballew: 1,625 shares.
Jeanne G. Dillingham, as Trustee of the Brady S. Dillingham Trust: 1,625
shares.
Dana Hutton: 1,625 shares.
Jeanne G. Dillingham: 1,500 shares.
Dan L. Dillingham, as Trustee of the Dan L. Dillingham Revocable Trust: 1,375
shares.
<PAGE> 2
FOR THE PURCHASE OF ________ SHARES
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, 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 "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 ___________ 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 July 31, 1998, and
terminating on July 30, 2003.
2.2 Exercise of Warrant. This Warrant may be exercised
upon surrender to the Company at its principal office (as designated
in Section 12) 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
-2-
<PAGE> 3
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 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 (together with the duly completed and signed Form of
Election) and payment of the Warrant Price, as aforesaid.
3. WARRANT PRICE.
The price per share at which each of the Warrant Shares shall
be purchasable upon exercise of this Warrant initially shall be $35.00, which
price shall be subject to adjustment pursuant to Section 9 hereof (such prices
as so adjusted are 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 has been, and, upon
exercise hereof, any Warrant Shares will be, 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 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) 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 satisfaction that no such tax is due.
-3-
<PAGE> 4
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 lost, stolen or destroyed Warrant, a new warrant of
like tenor and representing an equivalent right or interest, but only upon
receipt of evidence 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 applicable 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, the 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 the 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 after such adjustment if the Holder had exercised
this Warrant in full immediately prior to the event requiring the
adjustment. Comparable rights shall accrue
-4-
<PAGE> 5
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 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 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 shares of Common Stock
the right to acquire shares of Common Stock for less than the Warrant
Price (the "Purchase 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 that could be
purchased at the Current Market Price for the aggregate amount that
would be paid if all Put Rights are exercised and the denominator of
which is the number of shares of Common Stock that 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 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 that could be purchased at the Current Market Price for the
aggregate amount that would be paid if all Purchase Rights are
exercised and the denominator of which is the number of shares of
Common Stock that 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 that 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 that 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.
-5-
<PAGE> 6
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 or similar document if at the time of such merger,
consolidation or other transaction 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 stock or other equity securities
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" 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.
10. 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.
-6-
<PAGE> 7
11. 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:
(a) the Company shall declare any dividend
payable in any securities upon 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 shares of Common Stock;
(b) the Company shall offer to the holders of
shares of Common Stock any additional shares of Common Stock
or securities convertible or exchangeable 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 12 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.
12. 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:
---------------------------
Attn:
---------------------
---------------------------
---------------------------
(ii) if to the Company at:
UTI Energy Corp.
Attn: President
16800 Greenspoint Park, Suite 225N
Houston, Texas 77060
-7-
<PAGE> 8
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.
13. SUCCESSORS.
No party hereto may assign its rights or obligations hereunder
without the prior written consent of the other party; provided, however, if the
Holder is a trust or estate, Holder may assign its rights hereunder to such
Holder's beneficiaries provided that such beneficiaries assume in writing (in a
form reasonably satisfactory to the Company) all of Holder's obligations under
the Agreement and Plan of Merger dated July 31, 1998, among the Company, a
wholly-owned subsidiary of the Company, SUITS Enterprises, Inc. ("SUITS") and
the shareholders of SUITS signatory thereto. 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.
14. APPLICABLE LAW.
This Warrant shall be governed by and construed in accordance
with the laws of the State of Texas.
15. 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.
16. CAPTIONS.
The captions of the sections of this Warrant have been
inserted for convenience only and shall have no substantive effect.
SIGNATURES BEGIN ON THE FOLLOWING PAGE
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be
duly executed as of the 31st day of July, 1998.
UTI ENERGY CORP.
By:
------------------------------
Vaughn E. Drum
President
-9-
<PAGE> 10
EXHIBIT A
FORM OF ELECTION
To be Executed by the Holder
to Exercise Warrant
UTI Energy Corp.
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 in full of the Warrant Price of such shares.
[INDIVIDUAL]
Signature
----------------------------
Name:
-----------------------
Address
-----------------------
-----------------------
-----------------------
Dated: , .
------------------ --------
[CORPORATION OR PARTNERSHIP OR TRUST]
---------------------------------
(Name of Entity)
By:
------------------------------
Name:
-----------------------
Title:
-----------------------
Address
-----------------------
-----------------------
-----------------------
Dated: , .
------------------ --------
<PAGE> 1
EXHIBIT 4.3
The Company has issued notes substantially in the form attached hereto to each
of the following individuals and entities, obligating the Company to pay such
individuals and entities the amounts set forth opposite their names below:
Jerry L. Suits, as Trustee of the Jerry L. Suits Revocable Trust: $2,726,500
Jeanne G. Dillingham, Dana Hutton, Leslie D. Ballew and E. Gay Dillingham, as
Trustees of the Tom B. Dillingham Revocable Trust: $1,596,950
Peter C. Dillingham, as Trustee of the Peter C. Dillingham Revocable Trust:
$545,300
E. Gay Dillingham: $506,350
Leslie D. Ballew: $506,350
Jeanne G. Dillingham, as Trustee of the Brady S. Dillingham Trust: $506,350
Dana Hutton: $506,350
Jeanne G. Dillingham: $467,400
Dan L. Dillingham, as Trustee of the Dan L. Dillingham Revocable Trust:
$428,450
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THIS NOTE HAS 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 SATISFACTORY TO MAKER THAT SUCH
REGISTRATION IS NOT REQUIRED.
PROMISSORY NOTE
$ Houston, Texas July 31, 1998
FOR VALUE RECEIVED, the undersigned, UTI Energy Corp., a Delaware
corporation ("Maker"), hereby promises to pay to the order of ______
(collectively, the "Payee"), at _______ (the "Maturity Date"), in lawful money
of the United States of America, the principal amount of ________ ($_________),
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), via company check, at said address, at a rate per
annum equal to seven percent (7%).
The outstanding principal balance of this Note, together with any
accrued and unpaid interest thereon, shall be due and payable on the Maturity
Date (or, if not a Business Day, the first Business Day thereafter). Accrued
and unpaid interest on the outstanding principal amount shall be paid quarterly
on March 31, June 30, September 30 and December 31 of each year until the
Maturity Date, beginning on September 30, 1998 (or, if any such day is not a
Business Day, the first Business Day thereafter). In the event the Average
Trading Value (defined below) on any date of Maker's common stock, $.001 par
value ("Common Stock"), is greater than $30.00 per share (a "Partial Prepayment
Event"), then Maker will, after such Partial Prepayment Event and within 90
days following written notice from Payee of such Prepayment Event, prepay by
depositing into an escrow account to be governed by the Escrow Agreement
(defined below) the amount of outstanding principal that is equal to
$3,500,000.00 less the amount of any Indemnification Claims (defined below)
(whether or not previously set-off against the principal of this Note or
whether or not finally determined).
"Average Trading Value" means the average Per Share Market Value of
the Common Stock for the 30 consecutive trading days immediately preceding (and
excluding) the relevant date.
"Business Day" means 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.
"Debt/Total Assets Ratio" means the ratio of (i) Total Debt to (2)
Total Assets.
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"Escrow Agreement" means the Escrow Agreement in the form attached
hereto as Annex A with such changes to the terms thereto as the escrow agent
thereunder shall reasonably request, among Maker, Payee and an escrow agent
selected by Maker and reasonably satisfactory to Payee.
"Indemnification Claims" means claims for Damages (as defined in the
Merger Agreement) incurred or suffered by UTI Indemnified Parties (as defined
in Section 13.1 of the Merger Agreement).
"Merger Agreement" means the Agreement and Plan of Merger among Maker,
a wholly-owned subsidiary of Maker, Payee and SUITS Enterprises, Inc., an
Oklahoma corporation, dated of even date herewith.
"Per Share Market Value" means on any particular date (a) the closing
sales price per share of the Common Stock on such date on the principal stock
exchange on which the Common Stock is listed or, if there is no such price on
such date, then the last price on such exchange on the date nearest preceding
such date, or (b) if the Common Stock is not listed on any exchange, the
average of the high and low sales price per share of Common Stock in the
over-the-counter market, as reported by The Nasdaq Stock Market at the close
of business on such date, or, if there is no sales price, the last quoted sales
price on the date nearest preceding such date.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, trust, estate or similar entity.
"Total Assets" shall mean the amount of all assets that in accordance
with generally accepted accounting principles applied on a consistent basis
would be included in the asset side of a balance sheet.
"Total Debt" shall mean the amount of all outstanding obligations for
borrowed funds that in accordance with generally accepted accounting principles
applied on a consistent basis would be included in determining total
liabilities as shown on the liability side of a balance sheet.
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.
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 and such
principal or interest shall remain unpaid after five business days
after written notice is received by Maker from Payee; provided,
however, that the interest rate on this Note during the period
beginning on the date such principal or interest is due and the date
such principal or interest is paid shall increase from 7% to 8% per
annum;
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(b) default shall be made in the due observance or
performance of, compliance with, any of the covenants or agreements
contained herein, which default shall remain uncured for 30 business
days after written notice thereof from Payee is received by Maker;
(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, (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 U.S.C. 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;
(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 U.S.C. 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;
(e) the Debt/Total Assets Ratio of Maker, or, in the
event Maker is a wholly-owned subsidiary of a public company (the
"Surviving Parent"), of the Surviving Parent, shall be greater than
60%; or
(f) an Event of Default shall occur with respect to any
other Note (as defined in the Merger Agreement) issued on the date
hereof,
then Payee, at its option, may declare the unpaid principal portion of this
Note to be forthwith due and payable, whereupon such 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 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 hereby expressly
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. With respect to any unpaid principal portion of this
Note that becomes immediately due and payable due to an Event of Default
pursuant to section (e) above, payment of such unpaid principal amount shall be
made to an escrow account to be governed by the Escrow Agreement.
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As provided in Article 13 of the Merger Agreement, Maker shall have
the right to set-off and apply and reduce against its obligations hereunder
(first against interest and then against principal) any amounts owing by Payee
to Maker as a result of Payee's obligations with regard to Indemnification
Claims under the Merger Agreement. Maker shall (except to the extent
prohibited by applicable law) give written notice to Payee (at the address set
forth above or at such other address provided to Maker in writing) following
any exercise of such set-off, including the amount owed Maker by Payee under
Article 13 of the Merger Agreement that Maker desires to set-off against
principal or interest owed by Maker hereunder (the "Proposed Set-Off Amount");
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. During the period beginning when Maker notifies Payee of a set-off
claim for Indemnification Claims and the date the claim is resolved, interest
shall not accrue on the principal amount of this Note equal to the amount of
the Proposed Set-Off Amount; provided further, however, that if such claim is
ultimately resolved for an amount less than the Proposed Set-Off Amount (the
difference between such amount and the Proposed Set-Off Amount referred to
herein as the "Claim Amount Difference"), Maker shall pay to Payee, at the next
interest payment date, the amount of interest (to the extent not already paid)
not paid on the Claim Amount Difference prior to the ultimate resolution of
such claim. In the event there be any outstanding Indemnification Claims by
Maker that has not been resolved as of the Maturity Date of the principal
payment on this Note, Maker shall be entitled to defer payment of such
principal in than the amount that Maker believes Payee will be required to
indemnify Maker. Any amounts deposited into an escrow account to governed by
the Escrow Agreement shall continue to be subject to Maker's right of set-off
described herein.
Maker's obligation to pay principal and interest on this Notes
Receivable shall terminate immediately in the event that the Notes Receivable
(as defined in the Merger Agreement) are not repaid in full within five
business days of the date hereof.
This Note shall be governed by and construed in accordance with the
internal laws of the State of Texas and applicable federal laws of the United
States of America. This Note has been delivered and accepted and is payable at
Houston, Texas. Notices to Maker hereunder shall be delivered to the notice
addresses for Maker set forth in the Merger Agreement or such other address
provided by Maker in writing to Payee. This Note is not assignable by Payee
without the prior written consent of Maker, except that, if Payee is a trust or
estate, Payee may assign its rights hereunder to its beneficiaries provided
that such beneficiaries assume in writing (in a form reasonably satisfactory to
Maker) all of Payee's obligations under the Merger Agreement.
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EXECUTED AND EFFECTIVE as of the day and year first above written.
MAKER:
UTI ENERGY CORP.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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EXHIBIT A
ESCROW AGREEMENT
This Escrow Agreement, dated as of ____________, 199_ (the "Closing Date"),
among UTI Energy Corp., a Delaware corporation ("Buyer"), ___________,
("Sellers"), and ___________, a ___________], as escrow agent ("Escrow
Agent").
This is the Escrow Agreement referred to in the Notes dated July 31, 1998,
payable by Buyer to Sellers, which Notes were issued pursuant to the terms and
conditions of that certain Agreement and Plan of Merger dated July 31, 1998
(the "Purchase Agreement"), among Buyer, a wholly-owned subsidiary of Buyer,
SUITS Enterprises, Inc., an Oklahoma corporation ("SUITS"), and the
shareholders of SUITS signatory thereto. Capitalized terms used in this
agreement without definition shall have the respective meanings given to them
in the Purchase Agreement.
The parties hereto, intending to be legally bound, hereby agree as follows:
1. ESTABLISHMENT OF ESCROW
(a) Pursuant to the terms of the Notes, Buyer is depositing with Escrow Agent,
an amount equal to $_________ (representing the principal and unpaid interest
on the Notes on the date hereof) in immediately available funds (as increased
by any earnings thereon and as reduced by any disbursements, amounts paid
pursuant to Section 3, amounts withdrawn under Section 5(j), or losses on
investments, the "Escrow Fund"). Escrow Agent acknowledges receipt thereof.
(b) Escrow Agent hereby agrees to act as escrow agent and to hold, safeguard
and disburse the Escrow Fund pursuant to the terms and conditions hereof.
2. INVESTMENT OF FUNDS
The Escrow Fund shall be invested from time to time, to the extent possible, in
United States Treasury bills having a remaining maturity of 90 days or less and
repurchase obligations secured by such United States Treasury Bills, with any
remainder being deposited and maintained in a money market deposit account with
Escrow Agent, until disbursement of the entire Escrow Fund. Escrow Agent is
authorized to liquidate in accordance with its customary procedures any portion
of the Escrow Fund consisting of investments to provide for payments required
to be made under this Agreement.
3.CLAIMS
From time to time in accordance with the terms of the Purchase Agreement, Buyer
may give notice (a "Notice") to Sellers of an Indemnity Claim. Such notice
also shall be contemporaneously provided to the Escrow Agent. Indemnity Claims
shall be paid by the Escrow Agent to Buyer upon joint
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written instructions from Buyer and Sellers or upon the order of a court of
competent jurisdiction as contemplated by Section 9.
4.TERMINATION OF ESCROW
On July 30, 2002, Escrow Agent shall pay and distribute the amount of the
Escrow Fund as of such date to Sellers in the proportions set forth on Annex A
hereto, unless (i) any Indemnity Claims are then pending, in which case an
amount equal to the aggregate dollar amount of such Indemnity Claims (as shown
in the Notices of such Claims) shall be retained by Escrow Agent in the Escrow
Fund (and the balance paid to Sellers in such proportions) or (ii) Buyer has
given notice to Sellers and Escrow Agent specifying in reasonable detail the
nature of any other Indemnity Claim it may have under the Purchase Agreement
with respect to which it is unable to specify the amount of Damages, in which
case the entire amount of the Escrow Fund as of such date shall be retained by
Escrow Agent, in either case until it receives joint written instructions of
Buyer and Sellers or an order of a court of competent jurisdiction as
contemplated by Section 9.
Notwithstanding the foregoing, in the event Escrow Funds were deposited by
Buyer with the Escrow Agent as a result of the Average Trading Value (as
defined in the Notes dated July 31, 1998, payable by Buyer to the Sellers)
being greater than $30.00 per share (the "Early Release Funds"), then the
following shall apply:
(i)if the Early Release Funds were initially deposited prior to July 31, 1999,
then (A) Escrow Agent shall, on July 31, 1999, pay and distribute one-half of
the Early Release Funds as of such date to Sellers in the proportions set forth
on Annex A hereto, unless (a) any Indemnity Claims are then pending, in which
case an amount equal to the aggregate dollar amount of such Indemnity Claims
(as shown in the Notices of such Claims) shall be retained by Escrow Agent in
the Escrow Fund (and one-half of the balance of the Early Release Funds as of
such date paid to Sellers in such proportions) or (b) Buyer has given notice
to Sellers and Escrow Agent specifying in reasonable detail the nature of any
other Indemnity Claim it may have under the Purchase Agreement with respect to
which it is unable to specify the amount of Damages, in which case the entire
amount of the Early Release Funds as of such date shall be retained by Escrow
Agent, in either case until it receives joint written instructions of Buyer and
Sellers or an order of a court of competent jurisdiction as contemplated by
Section 9 and (B) Escrow Agent shall, on July 31, 2000, pay and distribute all
of the Early Release Funds as of such date to Sellers in the proportions set
forth on Annex A hereto, unless (a) any Indemnity Claims are then pending, in
which case an amount equal to the aggregate dollar amount of such Indemnity
Claims (as shown in the Notices of such Claims) shall be retained by Escrow
Agent in the Escrow Fund (and the balance of the Early Release Funds as of such
date paid to Sellers in such proportions) or (b) Buyer has given notice to
Sellers and Escrow Agent specifying in reasonable detail the nature of any
other Indemnity Claim it may have under the Purchase Agreement with respect to
which it is unable to specify the amount of Damages, in which case the entire
amount of the Early Release Funds as of such date shall be retained by Escrow
Agent, in either case until it receives joint written instructions of Buyer and
Sellers or an order of a court of competent jurisdiction as contemplated by
Section 9;
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(ii)if the Early Release Funds were initially deposited after July 30, 1999 and
prior to July 31, 2000, then (A) Escrow Agent shall immediately pay and
distribute one-half of the Early Release Funds as of the date of deposit to
Sellers in the proportions set forth on Annex A hereto and (B) Escrow Agent
shall, on July 31, 2000, pay and distribute all of the Early Release Funds as
of such date to Sellers in the proportions set forth on Annex A hereto, unless
(a) any Indemnity Claims are then pending, in which case an amount equal to the
aggregate dollar amount of such Indemnity Claims (as shown in the Notices of
such Claims) shall be retained by Escrow Agent in the Escrow Fund (and the
balance of the Early Release Funds as of such date paid to Sellers in such
proportions) or (b) Buyer has given notice to Sellers and Escrow Agent
specifying in reasonable detail the nature of any other Indemnity Claim it may
have under the Purchase Agreement with respect to which it is unable to specify
the amount of Damages, in which case the entire amount of the Early Release
Funds as of such date shall be retained by Escrow Agent, in either case until
it receives joint written instructions of Buyer and Sellers or an order of a
court of competent jurisdiction as contemplated by Section 9;
(iii)if the Early Release Funds were initially deposited on or after July 31,
2000, then Escrow Agent shall immediately pay and distribute all of the Early
Release Funds as of the date of deposit to Sellers in the proportions set forth
on Annex A hereto, unless (A) any Indemnity Claims are then pending, in which
case an amount equal to the aggregate dollar amount of such Indemnity Claims
(as shown in the Notices of such Claims) shall be retained by Escrow Agent in
the Escrow Fund (and the balance of the Early Release Funds as of such date
paid to Sellers in such proportions) or (B) Buyer has given notice to Sellers
and Escrow Agent specifying in reasonable detail the nature of any other
Indemnity Claim it may have under the Purchase Agreement with respect to which
it is unable to specify the amount of Damages, in which case the entire amount
of the Early Release Funds as of such date shall be retained by Escrow Agent,
in either case until it receives joint written instructions of Buyer and
Sellers or an order of a court of competent jurisdiction as contemplated by
Section 9;
it being understood and agreed to by the parties hereto that the foregoing
provisions of this sentence relating to payment of the Escrow Funds shall apply
only to Early Release Funds and not to any other amounts constituting part of
the Escrow Fund that was deposited with Escrow Agent. The parties agree that
the payment of Indemnity Claims hereunder shall first be applied to Early
Release Funds and then to other funds comprising part of the Escrow Fund.
5.DUTIES OF ESCROW AGENT
(a)Escrow Agent shall not be under any duty to give the Escrow Fund held by it
hereunder any greater degree of care than it gives its own similar property and
shall not be required to invest any funds held hereunder except as directed in
this Agreement.
(b)Escrow Agent shall not be liable, except for its own gross negligence or
willful misconduct, and, except with respect to claims based upon such gross
negligence or willful misconduct that are successfully asserted against Escrow
Agent, the other parties hereto shall jointly and severally indemnify and hold
harmless Escrow Agent (and any successor Escrow Agent) from and against any and
all losses, liabilities, claims, actions, damages and expenses, including
reasonable attorneys' fees and disbursements, arising out of and in connection
with this Agreement. Without limiting the
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foregoing, Escrow Agent shall in no event be liable in connection with its
investment or reinvestment of any cash held by it hereunder in good faith, in
accordance with the terms hereof, including, without limitation, any liability
for any delays (not resulting from its gross negligence or willful misconduct)
in the investment or reinvestment of the Escrow Fund, or any loss of interest
incident to any such delays.
(c)Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. Escrow Agent may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that the person
purporting to evidence receipt or advice or make any statement or execute any
document in connection with the provisions hereof has been duly authorized to
do so. Escrow Agent may conclusively presume that the undersigned
representative of any party hereto that is an entity other than a natural
person has full power and authority to instruct Escrow Agent on behalf of that
party unless written notice to the contrary is delivered to Escrow Agent.
(d)Escrow Agent may act pursuant to the advice of counsel with respect to any
matter relating to this Agreement and shall not be liable for any action taken
or omitted by it in good faith in accordance with such advice.
(e)Escrow Agent does not have any interest in the Escrow Fund deposited
hereunder but is serving as escrow holder only and has only possession thereof.
Any payments of income from this Escrow Fund shall be subject to withholding
regulations then in force with respect to United States taxes. The parties
hereto will provide Escrow Agent with appropriate Internal Revenue Service
Forms W-9 for tax identification number certification, or non-resident alien
certifications. Section 5(b) and this Section 5(e) shall survive
notwithstanding any termination of this Agreement or the resignation of Escrow
Agent.
(f)Escrow Agent makes no representation as to the validity, value, genuineness
or the collectability of any security or other document or instrument held by
or delivered to it.
(g)Escrow Agent shall not be called upon to advise any party as to the wisdom
in selling or retaining, or taking or refraining from any action with respect
to, any securities or other property deposited hereunder.
(h)Escrow Agent (and any successor Escrow Agent) may at any time resign as such
by delivering the Escrow Fund to any successor Escrow Agent jointly designated
by the other parties hereto in writing, or to any court of competent
jurisdiction, whereupon Escrow Agent shall be discharged of and from any and
all further obligations arising in connection with this Agreement. The
resignation of Escrow Agent will take effect on the earlier of (i) the
appointment of a successor (including a court of competent jurisdiction) and
(ii) the day that is 30 days after the date of delivery of Escrow Agent's
written notice of resignation to the other parties hereto. If at the end of
such 30-day period Escrow Agent has not received a designation of a successor
Escrow Agent, Escrow Agent's sole responsibility thereafter shall be to retain
and safeguard the Escrow Fund until receipt of a designation of successor
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Escrow Agent or a joint written disposition instruction by the other parties
hereto or receipt of a final non-appealable order of a court of competent
jurisdiction.
(i)In the event of any disagreement among the other parties hereto resulting in
adverse claims or demands being made in connection with the Escrow Fund or in
the event that Escrow Agent is in doubt as to what action it should take
hereunder, Escrow Agent shall be entitled to retain the Escrow Fund until
Escrow Agent shall have received (i) a final non-appealable order of a court of
competent jurisdiction directing delivery of the Escrow Fund or (ii) a written
agreement executed by the other parties hereto directing delivery of the Escrow
Fund, in which event Escrow Agent shall disburse the Escrow Fund in accordance
with such order or agreement. Any court order shall be accompanied by a legal
opinion by counsel for the presenting party satisfactory to Escrow Agent to the
effect that the order is final and non- appealable. Escrow Agent shall act on
such court order and legal opinion without further question.
(j)Buyer and Sellers shall pay Escrow Agent compensation (as payment in full)
for the services to be rendered by Escrow Agent hereunder in the amount of
$_________ at the time of execution of this Agreement and $_____________
annually thereafter (until this Agreement is terminated) and agree to reimburse
Escrow Agent for all reasonable expenses, disbursements and advances incurred
or made by Escrow Agent in performance of its duties hereunder (including
reasonable fees, expenses and disbursements of its counsel). Any such
compensation and reimbursement to which Escrow Agent is entitled shall be borne
50% by Buyer and 50% by Sellers. Any fees or expenses of Escrow Agent or its
counsel that are not paid as provided for herein may be taken from any property
held by Escrow Agent hereunder.
(k)No printed or other matter in any language (including, without limitation,
prospectuses, notices, reports and promotional material) that mentions Escrow
Agent's name or the rights, powers or duties of Escrow Agent shall be issued by
the other parties hereto or on such parties' behalf unless Escrow Agent shall
first have given its specific written consent thereto.
(l)The other parties hereto authorize Escrow Agent, for any securities held
hereunder, to use the services of any United States central securities
depository it reasonably deems appropriate, including, without limitation, The
Depositary Trust Company and the Federal Reserve Book Entry System.
6.LIMITED RESPONSIBILITY
This Agreement expressly sets forth all the duties of Escrow Agent with respect
to any and all matters pertinent hereto. No implied duties or obligations of
Escrow Agent shall be read into this Agreement. Escrow Agent shall not be bound
by the provisions of any agreement among the other parties hereto except this
Agreement.
7.OWNERSHIP FOR TAX PURPOSES
Sellers agree that, for purposes of federal and other taxes based on income,
the Sellers will be treated as the owner of the Escrow Fund, respectively, and
that the Sellers will report all income, if any, that
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is earned on, or derived from, the Escrow Fund as their income, in the
proportions set forth on Annex A hereto, in the taxable year or years in which
such income is properly includible and pay any taxes attributable thereto.
8.NOTICES
All notices, consents, waivers and other communications under this Agreement
must be in writing and will be deemed to have been duly given (a) when
delivered by hand (with written confirmation of receipt), (b) when sent by
telecopier (with written confirmation of receipt) provided that a copy is
mailed by registered mail, return receipt requested, (c) three business days
following mailing of such notice, consent, waiver or other communication by
registered mail, return receipt requested, or (d) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Sellers:
Attention:
---------------
Facsimile No.:
---------------
with a copy to:
---------------
Attention:
---------------
Facsimile No.:
---------------
Buyer:
Attention:
---------------
Facsimile No.:
---------------
with a copy to:
---------------
Attention:
---------------
Facsimile No.:
---------------
Escrow Agent:
---------------
Attention:
---------------
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Facsimile No.:
---------------
with a copy to:
---------------
Attention:
---------------
Facsimile No.:
---------------
9. JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Agreement may be brought against any of the
parties hereto in the courts of the State of Texas, County of Harris, or, if it
has or can acquire jurisdiction, in the United States District Court for the
Southern District of Texas, and each of the parties hereto consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may
be served on any party hereto anywhere in the world.
10. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original and all of which, when taken together,
will be deemed to constitute one and the same.
11. SECTION HEADINGS
The headings of sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation.
12. WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege, and no single or partial exercise of any such right, power
or privilege will preclude any other or further exercise of such right, power
or privilege or the exercise of any other right, power or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out
of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of
the claim or right unless in writing signed by the other parties; (b) no waiver
that may be given by a party will be applicable except in the specific instance
for which it is given; and (c) no notice to or demand on one party will be
deemed to be a waiver of any obligation of such party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.
Page 13 of 14
Initials _______________
<PAGE> 14
13. EXCLUSIVE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents
referred to in this Agreement) a complete and exclusive statement of the terms
of the agreement among the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by Buyer,
Sellers and Escrow Agent.
14. GOVERNING LAW
This Agreement shall be governed by the laws of the State of Texas,
without regard to conflicts of law principles.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
Buyer:
-----------------------------------
Sellers:
By:
--------------------------------
Escrow Agent:
-----------------------------------
Page 14 of 14
Initials _______________
<PAGE> 1
EXHIBIT 10.1
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
By and Among
FWA DRILLING COMPANY, INC.
INTERNATIONAL PETROLEUM SERVICE COMPANY
TRIAD DRILLING COMPANY
UNIVERSAL WELL SERVICES, INC.
USC, INCORPORATED
UTI ENERGY CORP.
UTICO, INC.
PANTHER DRILLING, INC.
J.S.M. & ASSOCIATES, INC.
PETERSON DRILLING COMPANY
and
MELLON BANK, N.A.
___________________________________________
Dated June 19, 1998
___________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. General Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Confirmation of Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Validity of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 No Challenge to Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 No Novation or Satisfaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Consistency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. The Line; Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Line of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Method of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Savings Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.6 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Interest on the Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Default Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Post Judgment Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4 Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Limitation of Interest to Maximum Lawful Rate . . . . . . . . . . . . . . . . . . . . 7
4. Payments And Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.1 Interest Payments on the Line . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.2 Principal Payments on the Line . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 Line Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.6 Unused Line Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.7 Late Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 Termination of Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.9 Prepayment of the Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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4.10 Payment Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.11 Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.12 Loan Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.13 Indemnity; Loss of Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Surety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 Release of Certain Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5 Collection of Receivables; Proceeds of Collateral . . . . . . . . . . . . . . . . . 13
6. Representations And Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1 Valid Organization, Good Standing and Qualification . . . . . . . . . . . . . . . . 14
6.2 Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.3 Ownership Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.6 No Material Adverse Change in Financial Condition . . . . . . . . . . . . . . . . . 14
6.7 Pending Litigation or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.8 Due Authorization; No Legal Restrictions . . . . . . . . . . . . . . . . . . . . . 15
6.9 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.10 No Default Under Other Obligations, Orders or
Governmental Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.11 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.13 Title to Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.14 Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.15 Current Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.16 Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.17 Leases and Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.18 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.19 Business Interruptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.20 Interrelatedness of Obligors . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.21 Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . 17
6.22 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.23 Subordinated Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7. General Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.1 Payment of Principal, Interest and Other Amounts Due . . . . . . . . . . . . . . . 18
</TABLE>
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7.2 Limitation on Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.3 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.4 Investments and Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.5 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.6 Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.7 Merger; Consolidation; Business Acquisitions; Subsidiaries . . . . . . . . . . . . 23
7.8 Taxes; Claims for Labor and Materials . . . . . . . . . . . . . . . . . . . . . . 24
7.9 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.10 Existence; Approvals; Qualification; Business Operations;
Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.11 Maintenance of Properties; Intellectual Property . . . . . . . . . . . . . . . . . 27
7.12 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.13 Inspections; Examinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.14 Default Under Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.15 Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.16 Bank of Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.17 Maintenance of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.18 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.19 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.20 Restriction on Stock Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.21 Name or Address Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.22 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.23 Additional Documents and Future Actions . . . . . . . . . . . . . . . . . . . . . 31
7.24 Material Adverse Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.25 Restrictions on Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.26 Subordinated Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.27 Acquisition Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8. Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.1 Total Funded Debt to EBITDA Ratio . . . . . . . . . . . . . . . . . . . . . . . . 33
8.2 Modified Quick Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.3 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.4 Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.5 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.6 Changes to Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9. Accounting Records, Reports and Financial Statements . . . . . . . . . . . . . . . . . . . 34
9.1 Annual Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.2 Quarterly Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.3 Accounts Receivable Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.4 Audit Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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9.5 SEC and Other Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.6 Requested Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.7 Compliance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.8 Accountant's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.9 Projections and Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10. Environmental Representations and Covenants . . . . . . . . . . . . . . . . . . . . . . . 36
10.1 Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.2 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.3 Covenant Regarding Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.5 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.6 Testing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.7 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.8 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11. Conditions of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.1 Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.2 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.3 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.4 Proceedings and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.5 Delivery of Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.6 Non-Waiver of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12. Certain Conditions to Subsequent Advances . . . . . . . . . . . . . . . . . . . . . . . . 41
12.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.2 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.3 Other Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13. Default and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
13.3 Sale or Other Disposition of Collateral . . . . . . . . . . . . . . . . . . . . . 45
13.4 Actions with Respect to Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 46
13.5 Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
13.6 Turnover of Property Held by Bank . . . . . . . . . . . . . . . . . . . . . . . . 48
13.7 Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
13.8 Remedies Cumulative; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 48
13.9 Certain Fees, Costs, Expense Expenditures and Indemnification . . . . . . . . . . 48
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13.10 Time is of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
13.11 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14. Communications and Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
16. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
16.1 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
16.2 Forbearance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
16.3 Limitation on Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
16.4 Subrogation; Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
17. Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
18. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
18.1 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
18.2 Use of Bank's Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
18.3 No Joint Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
18.4 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
18.5 No Assignment by Obligors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
18.6 Assignment or Sale by Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
18.7 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
18.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
18.9 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
18.10 Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
18.11 Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
18.12 Law Governing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
18.13 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
18.14 Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
18.15 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
18.16 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
18.17 Joint and Several Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
18.18 Waiver of Right to Trial by Jury . . . . . . . . . . . . . . . . . . . . . . . . . 61
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AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (the
"AGREEMENT") is made effective as of June 19, 1998, by and among FWA DRILLING
COMPANY, INC. ("FWA"), INTERNATIONAL PETROLEUM SERVICE COMPANY ("IPSCO"), TRIAD
DRILLING COMPANY ("TRIAD"), UNIVERSAL WELL SERVICES, INC. ("UNIVERSAL"), USC,
INCORPORATED ("USC"), UTI ENERGY CORP. ("UTI"), UTICO, INC. ("UTICO"), PANTHER
DRILLING, INC., formerly known as VIERSEN & COCHRAN DRILLING COMPANY
("PANTHER"), J.S.M. & ASSOCIATES, INC. ("JSM"), PETERSON DRILLING COMPANY,
("PETERSON") and MELLON BANK, N.A. ("BANK"). FWA, IPSCO, Triad, Universal,
USC, JSM, Peterson and Panther are hereinafter sometimes collectively referred
to as the "BORROWERS" and individually as a "BORROWER". UTI and UTICO are
hereinafter sometimes collectively referred to as the "GUARANTORS" and
individually as a "GUARANTOR". The Borrowers and the Guarantors are
hereinafter sometimes collectively referred to as the "OBLIGORS" and
individually as an "OBLIGOR".
BACKGROUND
A. Pursuant to that certain Amended and Restated Loan and Security
Agreement dated December 7, 1995, as subsequently amended (the "PRIOR LINE OF
CREDIT LOAN AGREEMENT"), Obligors (other than JSM and Peterson) requested and
Bank agreed, inter alia, to extend to the Borrowers (other than Panther, JSM
and Peterson) a line of credit which has, prior to the effective date of this
Agreement, been increased up to a maximum principal amount of Twelve Million
Dollars ($12,000,000.00).
B. Pursuant to those certain Surety Agreements dated December 7, 1995
(collectively, the "PRIOR SURETY AGREEMENTS"), Guarantors agreed to act as
surety for and guarantee the obligations of the Borrowers (other than Panther,
JSM and Peterson) under the Prior Line of Credit Loan Documents (as hereinafter
defined). The Prior Line of Credit Loan Agreement, the Surety Agreements and
all other documents executed in connection therewith may hereinafter be
collectively referred to as the "PRIOR LINE OF CREDIT LOAN DOCUMENTS".
C. Pursuant to that certain Loan and Security Agreement dated April 11,
1997 (the "TERM LOAN AGREEMENT"), Obligors requested and Bank agreed, inter
alia, to extend to Obligors a term loan in the original principal amount of
Twenty-Five Million Dollars ($25,000,000.00) (the "TERM LOAN"). The Term Loan
Agreement and all other documents executed in connection therewith may
hereinafter be collectively referred to as the "TERM LOAN DOCUMENTS". The
Prior Line of Credit Loan Agreement and the Term Loan Agreement may hereinafter
be collectively referred to as the "PRIOR LOAN AGREEMENTS". The Prior Line of
Credit Loan Documents and the Term Loan Documents may hereinafter be
collectively referred to as the "PRIOR LOAN DOCUMENTS". The Term Loan has been
repaid in full.
<PAGE> 8
D. Obligors and Bank have agreed to amend and restate the Prior Line of
Credit Loan Agreement (a) increasing the maximum principal amount to Thirty
Million Dollars ($30,000,000.00), (b) adding Panther, JSM and Peterson as co-
borrowers, (d) deleting Panther as a guarantor, (d) revising the financial
covenants, and (e) making the additional changes set forth herein, all on the
terms and conditions set forth herein.
E. Capitalized terms not otherwise defined herein will have the
meanings set forth therefor in SECTION 15 of this Agreement.
NOW, THEREFORE, in consideration of the terms and conditions
contained herein, and of any extensions of credit now or hereafter made to or
for the benefit of Obligors by Bank, the parties hereto, intending to be
legally bound hereby, agree that the Prior Line of Credit Loan Agreement is
amended and restated to read in its entirety as follows:
1. GENERAL ACKNOWLEDGMENTS.
1.1 CONFIRMATION OF BACKGROUND. Obligors hereby ratify,
confirm and acknowledge that the statements contained in the foregoing
background are true and complete in all material respects.
1.2 VALIDITY OF LIENS. All liens and security interests
granted to Bank in the Prior Line of Credit Loan Documents are hereby ratified,
confirmed and continued, and shall secure all Bank Indebtedness and the
performance by Obligors of their respective obligations hereunder. Subject to
the release provisions set forth in SECTION 5.4 below, all UCC-1 Financing
Statements previously executed by Obligors in favor of Bank shall continue to
be in full force and effect and shall continue to operate to perfect the liens
and security interests granted to Bank.
1.3 NO CHALLENGE TO ENFORCEMENT. Obligors acknowledge and
agree that none of them has any defense, set-off, counterclaim or challenge
against the payment of any sums owing under the Prior Line of Credit Loan
Documents.
1.4 NO NOVATION OR SATISFACTION. Obligors acknowledge and
agree that this Agreement constitutes the amendment and restatement of the
Prior Line of Credit Loan Agreement. Except as expressly provided herein,
neither this Agreement nor any other agreement entered into in connection
herewith or pursuant to the terms hereof shall be deemed or construed to be a
compromise, satisfaction, reinstatement, accord and satisfaction, novation or
release of any of the Prior Line of Credit Loan Documents, or any rights or
obligations thereunder, or a waiver by Bank of any of its rights under the
Prior Line of Credit Loan Documents or at law or in equity.
1.5 CONSISTENCY. The terms of this Agreement and the terms
set forth in the Prior Line of Credit Loan Documents and any other document
executed in connection herewith shall be, as far as possible, complementary and
read and interpreted so as to expand, rather than contract, all such terms and
conditions; provided, however, in the event of any inconsistency between
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<PAGE> 9
the terms and conditions set forth in this Agreement and the terms and
conditions set forth in the Prior Line of Credit Loan Documents, this Agreement
shall control. It is expressly agreed that all collateral securing the Bank
Indebtedness is described in this Agreement and such descriptions supersede and
prevail over any contrary descriptions in any of the Loan Documents (including
the Prior Loan Documents).
2. THE LINE; USE OF PROCEEDS.
2.1 LINE OF CREDIT. Bank will establish for Borrowers for
and during the period from the date hereof and until June 30, 2000 (the
"CONTRACT PERIOD"), subject to the terms and conditions hereof, a revolving
line of credit (the "LINE") pursuant to which Bank will from time to time make
loans and other extensions of credit to Borrowers and issue letters of credit
in an aggregate amount not exceeding at any time Thirty Million Dollars
($30,000,000.00). Within the limitations in this Agreement, Borrowers may
borrow, repay and reborrow under the Line. The Line shall be subject to all
terms and conditions set forth in all of the Loan Documents which terms and
conditions are incorporated herein. Borrowers' obligation to repay the loans
and extensions of credit under the Line is evidenced by Borrowers' amended and
restated promissory note (the "LINE NOTE") in the face amount of Thirty Million
Dollars ($30,000,000.00), which shall be in form attached hereto as EXHIBIT
"A". Each Borrower shall be jointly and severally liable for repayment of all
advances and extensions of credit under the Line (including without limitation
all letters of credit issued hereunder regardless of who is named as the
account party) and all other obligations of each Borrower hereunder and under
the Loan Documents.
2.2 METHOD OF ADVANCES. On any Business Day, any Borrower
may request an advance under the Line by delivering to the Bank officer
designated by Bank no later than 2:30 p.m. Philadelphia time on the Business
Day such advance is requested to be funded, in accordance with such procedures
as Bank may from time to time require. Subject to the terms and conditions of
this Agreement, Bank may make the proceeds of an advance available to a
Borrower by crediting such proceeds to such Borrower's deposit account with
Bank. Such request may be by telephone, unless Bank has advised Borrowers that
written requests are required. Bank may require prompt written confirmation of
any telephone request and additional back-up documentation, from time to time.
Each request for an advance under the Line shall be conclusively presumed to be
made by a person authorized by Borrowers to do so.
2.3 SAVINGS CLAUSE. Anything contained in this Agreement or
any other Loan Documents to the contrary notwithstanding, the obligations of
each Borrower with respect to the repayment of the principal balance of the
Line shall be limited to the greater of: (i) the aggregate amount of the
outstanding advances under the Line made to or for the benefit of such Borrower
plus the outstanding face amount of each letter of credit issued under the Line
for the account of such Borrower, or (ii) a maximum aggregate amount equal to
the largest amount that would not render such Borrower's obligations with
respect thereto subject to avoidance as a fraudulent transfer or conveyance
under Section 548 of Title 11 of the United States Code or any applicable
provisions of comparable state law (collectively, the "FRAUDULENT TRANSFER
LAWS"), if and to the extent such
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<PAGE> 10
Borrower (or trustee on its behalf) has properly invoked the protections of the
Fraudulent Transfer Laws. In making such determination, all rights of
subrogation and contribution of a Borrower with respect to such obligations
shall be deemed to be an asset of such Borrower.
2.4 USE OF PROCEEDS. Borrowers agree that the proceeds of
the Line may be used solely for working capital purposes and general corporate
purposes, to finance Permitted Acquisitions and to repay the Subordinated Term
Loan.
2.5 CLOSING. Closing hereunder will take place at a time
and place mutually acceptable to Obligors and Bank effective on the date of
this Agreement.
2.6 LETTERS OF CREDIT. Bank, at its sole discretion, may
issue for the account of one or more of the Borrowers standby letters of credit
in form and content satisfactory to Bank, at its sole discretion, with a term
not to exceed the earlier to occur of: (a) twelve (12) months, or (b) the
expiration of the Contract Period, unless fully secured by cash collateral as
hereinafter provided. Notwithstanding the foregoing, (i) at no time shall the
aggregate face amount of all outstanding letters of credit issued under the
Line exceed the amount of Four Million Dollars ($4,000,000.00); and (ii) at no
time shall the principal balance of the Line, plus the aggregate face amount of
all outstanding letters of credit issued under the Line exceed Thirty Million
Dollars ($30,000,000.00) Borrowers acknowledge and agree that letter of credit
number S837746 in the face amount of Four Hundred Thousand Dollars
($400,000.00) dated December 20, 1994 and issued by Bank for the benefit of
IPSCO and letter of credit number S858718 in the face of One Million Two
Hundred Thousand Dollars ($1,200,000.00) dated June 1, 1998 and issued by Bank
shall be deemed to be standby letters of credit issued under the Line.
Borrowers will execute a letter of credit application and letter of
credit agreement, and such other documents as may be required by Bank in
connection with the issuance of letters of credit hereunder. The outstanding
face amount of all letters of credit issued by Bank pursuant hereto will reduce
each Borrower's ability to borrow under the Line as if such face amount were an
advance under the Line. In the event that Bank pays any sums due pursuant to
such letters of credit for any reason, such payment shall be deemed to be an
advance under the Line repayable by Borrowers pursuant to the terms hereof.
In the event that the Line is terminated for any reason, the
Contract Period expires or demand is made thereunder, Borrowers will deposit
with Bank an amount equal to the undrawn face amount of all letters of credit
then outstanding which have been issued hereunder, plus all fees related
thereto or to accrue thereunder. Such funds will be held by Bank as cash
collateral to secure Borrowers' obligations hereunder.
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<PAGE> 11
3. INTEREST RATE.
3.1 INTEREST ON THE LINE.
(a) INTEREST OPTIONS. The principal balance of the
Line will accrue interest at the Prime Rate in effect from time to time (such
interest rate to change effective immediately upon any change in the Prime
Rate), provided, however, that, subject to the terms of this SECTION 3.1, by
giving Notification, Borrowers may request to have one or more portions of the
outstanding balance of the Line as hereinafter permitted, accrue interest
instead at the LIBOR Based Rate as follows: (i) with respect to the principal
amount of any advance under the Line, from the date of such advance until the
end of the Rate Period specified in the Notification; and/or (ii) with respect
to the principal amount of any portion of the Line outstanding and accruing
interest at the LIBOR Based Rate at the time of the Notification related to
such principal amount, from the expiration of the then current Rate Period
related to such principal amount until the end of the Rate Period specified in
the Notification; and/or (iii) with respect to all or any portion of the
principal amount of the Line outstanding and accruing interest at the Prime
Rate at the time of Notification, from the date set forth in the Notification
until the end of the Rate Period specified in the Notification.
Borrowers understand and agree: (A) that subject to the provisions
of this Agreement, the Prime Rate and the LIBOR Based Rate may apply
simultaneously to different parts of the outstanding principal of the Line, (B)
that different LIBOR Based Rates may apply simultaneously to various portions
of the outstanding principal of the Line for various Rate Periods, (C) that the
LIBOR Based Rate applicable to any portion of outstanding principal of the Line
may be different from the LIBOR Based Rate applicable to any other portion of
outstanding principal, (D) that portions of the Line accruing interest at a
LIBOR Based Rate must be in increments of Five Hundred Thousand Dollars
($500,000.00) each, and (E) that Bank shall have the right to terminate any
Rate Period and the LIBOR Based Rate interest rate applicable thereto, prior to
maturity of such Rate Period, if Bank determines in good faith (which
determination shall be conclusive) that continuance of such interest rate has
been made unlawful by any law, statute, rule or regulation, to which Bank may
be subject, in which event the principal to which such terminated Rate Period
relates thereafter shall earn interest at the Prime Rate. Any termination of a
Rate Period by Bank pursuant to SUBSECTION E) above shall be without premium,
penalty or charge to any of the Obligors.
So long as (y) Borrowers comply with the conditions set forth herein
and (z) no Event of Default has occurred, Bank shall approve Borrowers' request
for a LIBOR Based Rate.
(b) PRIME RATE FALL BACK. After expiration of any
Rate Period, any principal portion of the Line accruing interest at a LIBOR
Based Rate corresponding to such Rate Period which has not been converted or
renewed to a LIBOR Based Rate in accordance with SECTION 3.1 shall accrue
interest automatically at the Prime Rate from the date of expiration of such
Rate Period until paid in full or until conversion to a LIBOR Based Rate in
accordance with SECTION 3.1. With respect to any principal amount (whether an
advance of new funds or an already
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<PAGE> 12
outstanding amount), if there is no conversion to or renewal of a LIBOR Based
Rate, for any reason, such principal amount shall be deemed to accrue interest
at the Prime Rate.
(c) INDEMNIFICATION. Obligors shall indemnify Bank
against any loss or expense (including loss of margin) which Bank has sustained
or incurred as a consequence of: (i) any payment of any principal amount
accruing interest at the LIBOR Based Rate on a day other than the last day of
the corresponding Rate Period (whether or not any such payment is made pursuant
to acceleration upon or after an Event of Default, demand by Bank otherwise
made under this Agreement, by reason of an application of proceeds incident to
an insured loss or condemnation of property, or for any other reason, and
whether or not any such payment is consented to by Bank, unless Bank shall have
expressly waived such indemnity in writing); (ii) any attempt by any Borrower
to revoke in whole or part any Notification given pursuant to this Agreement;
(iii) any attempt by any Borrower to convert or renew any principal amount
accruing interest at the LIBOR Based Rate on a day other than the last day of
the corresponding Rate Period (whether or not such conversion or renewal is
consented to by Bank, unless Bank shall have expressly waived such indemnity in
writing or unless Bank shall have terminated the Rate Period pursuant to
SECTION 3.1(A)(E) above); (iv) any conversion of any amount earning interest at
the LIBOR Based Rate on a day other than the last day of the corresponding Rate
Period; or (v) any breach of or default by any Obligor.
(d) SPECIAL REDUCTIONS TO LIBOR BASED RATE. Borrowers
may cause a reduction in the LIBOR Based Rate if Obligors' Total Funded Debt to
EBITDA Ratio is reduced to a certain level. Obligors' Total Funded Debt to
EBITDA Ratio will be tested as of the end of each fiscal quarter to determine
if Borrowers are eligible for such rate reduction. In order to obtain such
rate reduction (i) Obligors shall have submitted to Bank their quarterly
financial statements for the applicable fiscal quarter or the annual audited
year-end financial statements required under SECTIONS 9.1 AND 9.2, together
with the applicable certifications required under SECTIONS 9.7 AND 9.8, and
(ii) no Event of Default or Default shall have occurred (unless waived by Bank
or the applicable covenant is amended to cure such Event of Default or
Default). The rate reduction shall become effective as of the beginning of each
Rate Period which commences after the end of the fiscal quarter for which
Obligors have complied with the applicable rate reduction test as shown by the
financial statements and certifications described in SUBSECTION (I) above. In
the event that Obligors subsequently fail to meet the required test for
subsequent fiscal quarters, such reduction shall automatically be revoked until
such test is subsequently again satisfied.
The required ratio and rate reduction at any applicable date of
determination are as follows: if Obligors' Total Funded Debt to EBITDA Ratio is
less than 1.0 to 1.0, the LIBOR Based Rate shall be reduced by 25 basis points.
3.2 DEFAULT INTEREST. Interest will accrue on the
outstanding principal amount of the Line following the occurrence of an Event
of Default or expiration of the Contract Period at a rate per annum equal to
the sum of two percent (2%) plus the Prime Rate (the "DEFAULT RATE").
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3.3 POST JUDGMENT INTEREST. Any judgment obtained for sums
due hereunder or under the Loan Documents will accrue interest at the highest
applicable default rate set forth above until paid.
3.4 CALCULATION. Interest will be computed on the basis of
a year of 365/366 days and paid for the actual number of days elapsed.
3.5 LIMITATION OF INTEREST TO MAXIMUM LAWFUL RATE. In no
event will the rate of interest payable hereunder exceed the maximum rate of
interest permitted to be charged by applicable law (including the choice of law
rules) and any interest paid in excess of the permitted rate will be refunded
to Obligors. Such refund will be made by application of the excessive amount
of interest paid against any sums outstanding hereunder and will be applied in
such order as Bank may determine. If the excessive amount of interest paid
exceeds the sums outstanding, the portion exceeding the sums outstanding will
be refunded in cash by Bank. Any such crediting or refunding will not cure or
waive any default by Obligors. Obligors agree, however, that in determining
whether or not any interest payable hereunder exceeds the highest rate
permitted by law, any non-principal payment, including without limitation late
charges, will be deemed to the extent permitted by law to be an expense, fee,
premium or penalty rather than interest.
4. PAYMENTS AND FEES.
4.1 INTEREST PAYMENTS ON THE LINE. Borrowers will pay
interest on the principal balance of the Line monthly, on the first day of each
calendar month commencing the first day of the first calendar month following
the date hereof.
4.2 PRINCIPAL PAYMENTS ON THE LINE. Borrowers will pay the
outstanding principal balance of the Line, together with any accrued and unpaid
interest thereon, on the expiration of the Contract Period or, ON DEMAND after
the occurrence of an Event of Default. Prior to the occurrence of an Event of
Default, all payments made by or for the benefit of Borrowers, to the extent
applied to reduce the principal balance of the outstanding advances under the
Line shall be applied first towards repayment of the balance accruing interest
at the Prime Rate, before any payments are made with respect to any portion of
the principal balance accruing interest at a LIBOR Based Rate.
4.3 CHANGE OF CONTROL. Promptly and in any event within ten
(10) Business Days after the occurrence of any Change of Control, the Obligors
will give written notice of such transaction or event to Bank, which notice
shall state the date of such Change of Control, shall describe such Change of
Control in reasonable detail and shall contain an offer (i) to prepay the
unpaid balance of the Line, all interest thereon and all sums due in connection
therewith and (ii) to release the Bank from any further obligations to make
advances or issue letters of credit under the Line effective as of the date
specified therein (the "CHANGE IN CONTROL PREPAYMENT DATE"), which shall be a
Business Day not less than the earlier to occur of (a) one (1) Business Day
prior to the date upon which Obligors have offered to prepay the Subordinated
Term Loan as a result of such Change
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<PAGE> 14
of Control pursuant to the terms of Subordinated Debt Loan Documents, or (b)
thirty (30) Business Days after the date of the notice to Bank of such Change
of Control. Bank shall have the option to require the Obligors to prepay all
or any part of the Line and all interest thereon, to secure the undrawn face
amount of all outstanding letters of credit issued under the Line with cash
collateral to be held by Bank and to terminate any further obligations of Bank
to make advances or issue letters of credit under the Line, and Obligors
hereby, jointly and severally, agree to make such payments and to terminate any
further obligations of Bank to make advances or issue letters of credit under
the Line. Such option may be exercised by Bank by written notice to the
Obligors given no later than ten (10) days prior to the Change in Control
Prepayment Date, specifying the amount to be paid. On the Change in Control
Prepayment Date, Obligors shall pay such amount to Bank and, if requested by
Bank, shall execute a termination of any further obligations of Bank to make
advances or issue letters of credit under the Line; provided that,
notwithstanding its exercise of the option herein provided, Bank may at any
time prior to the Change in Control Prepayment Date waive or revoke in whole or
in part by written notice to Obligors the exercise of its option hereunder.
4.4 LETTER OF CREDIT FEES. For each issuance or renewal of
a standby letter of credit hereunder, Borrowers will pay to Bank its standard
per credit issuance fees plus an amount equal to one and one-half percent (1
1/2%) per annum of the undrawn face amount of such standby letter of credit,
payable quarterly in advance. In addition, Borrowers shall pay such other fees
and charges in connection with the negotiation or cancellation of each standby
letter of credit as may be customarily charged by Bank. Such fees shall be
computed on the basis of a year of 360 days.
4.5 LINE FEE. In consideration of Bank extending the Line
to Borrowers, Borrowers shall pay to Bank a loan fee equal to One Hundred
Twelve Thousand Five Hundred Dollars ($112,500.00). Such fee shall be payable
in full upon the execution of this Agreement. Such fee shall not be refundable
in whole or in part, regardless of whether the full amount of the Line is ever
advanced.
4.6 UNUSED LINE FEE. So long as the Line is outstanding and
has not been terminated and the Bank Indebtedness has not been satisfied in
full, Borrowers shall unconditionally pay to Bank a fee equal to one-fourth of
one percent (1/4%) per annum of the daily unused portion of the Line (which
shall be calculated as the difference between Thirty Million Dollars
($30,000,000.00) (or such greater amount if the maximum committed amount for
the Line is ever increased), minus the sum of (a) the outstanding principal
balance of cash advances under the Line, and (b) the outstanding undrawn amount
of letters of credit issued under the Line at the close of business on the date
such calculation is made), which fee shall be computed on a monthly basis in
arrears and shall be due and payable on the first day of each month commencing
on the first day of the first full month after the date hereof.
4.7 LATE CHARGE. In the event that Obligors fail to pay
when due any principal, interest or other fees or expenses payable hereunder
for a period of at least fifteen (15) days, in addition to paying such sums,
Obligors will pay to Bank a late charge equal to two percent (2%) of such past
due payment as compensation for the expenses incident to such past due payment.
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4.8 TERMINATION OF LINE. Borrowers may terminate the Line
upon fifteen (15) days' written notice to Bank. In the event the Line is
terminated as a result of an Event of Default, expiration of the Contract
Period, or otherwise, the outstanding balance of the Line, together with any
accrued and unpaid interest thereon and any other sums due pursuant to the
terms hereof shall be due and payable immediately.
4.9 PREPAYMENT OF THE LINE. Borrowers may prepay all or any
part of the principal balance of advances under the Line accruing interest at
the Prime Rate at any time, without any premium or fee. Prepayment of any
advances under the Line accruing interest at a LIBOR Based Rate shall be
subject to the provisions of SECTION 3.1(C) and SECTION 4.13. In the event
Bank exercises its right to accelerate payments under the Line following an
Event of Default or otherwise, any tender of payment of the amount necessary to
repay the principal balance of the Line made thereafter at any time by any
Obligor, its successors or assigns or by anyone on behalf of any Obligor shall
be deemed to be a voluntary prepayment and in connection therewith Bank shall
be entitled to receive any sums required to be paid under the foregoing
prepayment restrictions.
4.10 PAYMENT METHOD. Obligors irrevocably authorize Bank to
debit all payments required to be made by Obligors hereunder or under the Line,
on the date due, from any deposit account maintained by any Obligor with Bank.
Otherwise, Obligors will be obligated to make such payments directly to Bank.
All payments are to be made in immediately available funds. If Bank accepts
payment in any other form, such payment shall not be deemed to have been made
until the funds comprising such payment have actually been received by or made
available to Bank.
4.11 APPLICATION OF PAYMENTS. Any and all payments on
account of the Line will be applied first to accrued and unpaid interest, then
to unpaid principal of Prime Rate loans, then to unpaid principal of LIBOR
Based Rate loans, then to other sums due hereunder or under the Loan Documents.
Upon the occurrence of an Event of Default, Bank may apply such payments in
such order as Bank, in its discretion, elects, provided that Bank will use its
best efforts to minimize prepayment of LIBOR Based Rate loans prior to the
expiration of the applicable Rate Period. If Obligors make a payment or
payments and such payment or payments, or any part thereof, are subsequently
invalidated, declared to be fraudulent or preferential, set aside or are
required to be repaid to a trustee, receiver, or any other person under any
bankruptcy act, state or federal law, common law or equitable cause, then to
the extent of such payment or payments, the obligations or part thereof
hereunder intended to be satisfied shall be revived and continued in full force
and effect as if said payment or payments had not been made.
4.12 LOAN ACCOUNT. Bank will open and maintain on its books
a loan account (the "LOAN ACCOUNT") with respect to advances made, repayments,
prepayments, the computation and payment of interest and fees and the
computation and final payment of all other amounts due and sums paid to Bank
under this Agreement. Except in the case of manifest error in computation, the
Loan Account will be presumed correct as to the amount at any time due to Bank
from Obligors under this Agreement or the Line.
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4.13 INDEMNITY; LOSS OF MARGIN. Obligors will indemnify Bank
against any loss or expense which Bank sustains or incurs as a consequence of
an Event of Default, including, without limitation, any failure of Obligors to
pay when due (at maturity, by acceleration or otherwise) any principal,
interest, fee or any other amount due under this Agreement or the other Loan
Documents. If Bank sustains or incurs any such loss or expense it will from
time to time notify Obligors in writing of the amount reasonably determined in
good faith by the Bank to be necessary to indemnify Bank for the loss or
expense. Such amount will be due and payable by Obligors to Bank within ten
(10) days after presentation by Bank of a statement setting forth a brief
explanation of and Bank's calculation of such amount, which statement shall be
presumed correct absent manifest error. Any amount payable to the Bank under
this Section will bear interest at the Default Rate from the due date until
paid, both before and after judgment.
In the event that any future law, rule, regulation, treaty or
official directive, interpretation or application by any central bank, monetary
authority or governmental authority, or the future compliance with any
guideline or request of any central bank, monetary authority or governmental
authority (whether or not having the force of law):
(a) subjects Bank (or any LIBOR-rate funding office of
or utilized by Bank in connection with any portion of the Line) to any tax with
respect to any amounts payable under this Agreement or the other Loan Documents
by Obligors or otherwise with respect to the transactions contemplated under
this Agreement or the other Loan Documents (except for taxes on or determined
by the overall net income of Bank imposed by the United States of America or
any political subdivision thereof); or
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit, capital maintenance, capital adequacy, or
similar requirement against assets held by, or deposits in or for the account
of, or loans or advances or commitment to make loans or advances by the Bank
(or any LIBOR-rate funding office of or utilized by Bank in connection with any
portion of the Line); or
(c) imposes upon Bank (or any LIBOR-rate funding
office of or utilized by Bank in connection with any portion of the Line) any
other condition with respect to advances or extensions of credit or the
commitment to make advances or extensions of credit under this Agreement, and
the result of any of the foregoing is to increase the costs of Bank (or any
LIBOR-rate funding office of or utilized by Bank in connection with any portion
of the Line), reduce the income receivable by or return on equity of Bank (or
any LIBOR-rate funding office of or utilized by Bank in connection with any
portion of the Line) or impose any expense upon Bank (or any LIBOR-rate funding
office of or utilized by Bank in connection with any portion of the Line) with
respect to any advances or extensions of credit or commitments to make advances
or extensions of credit under this Agreement, Bank shall so notify Obligors in
writing. Obligors agree to pay Bank the amount of such increase in cost,
reduction in income, reduced return on equity or capital, or additional expense
within ten (10) days after presentation by Bank of a statement concerning such
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increase in cost, reduction in income, reduced return on equity or capital, or
additional expense. Such statement shall set forth a brief explanation of the
amount and Bank's calculation of the amount (in determining such amount the
Bank may use any reasonable averaging and attribution methods), which statement
shall be presumed correct absent manifest error. If the amount set forth in
such statement is not paid within ten (10) days after such presentation of such
statement, interest will be payable on the unpaid amount at the highest default
rate payable under the Loans from the due date until paid, both before and
after judgment.
5. SECURITY.
5.1 PERSONAL PROPERTY. As security for the full and timely
payment and performance of the Bank Indebtedness, each Obligor hereby ratifies
and confirms the security interest granted to Bank in the Prior Line of Credit
Loan Documents (except as provided in SECTION 5.4 below) and hereby grants to
Bank a security interest in all of the following:
(a) All of such Obligor's present and future accounts,
contract rights, chattel paper, instruments and documents and all other rights
to the payment of money whether or not yet earned, for services rendered or
goods sold, consigned, leased or furnished by such Obligor or otherwise,
together with (i) all goods (including any returned, rejected, repossessed or
consigned goods), the sale, consignment, lease or other furnishings of which
shall be given or may give rise to any of the foregoing, (ii) all of such
Obligor's rights as a consignor, consignee, unpaid vendor or other lienor in
connection therewith, including stoppage in transit, set-off, detinue, replevin
and reclamation, (ill) all general intangibles related thereto, (iv) all
guaranties, mortgages, security interests, assignments, and other encumbrances
on real or personal property, leases and other agreements or property securing
or relating to any accounts, (v) choses-in-action, claims and judgments, (vi)
any return or unearned premiums, which may be due upon cancellation of any
insurance policies, and (vii) all products and proceeds of any of the
foregoing.
(b) All of such Obligor's present and future inventory
(including but not limited to goods held for sale or lease or furnished or to
be furnished under contracts for service, raw materials, work-in-process,
finished goods and goods used or consumed in such Obligor's business) whether
owned, consigned or held on consignment, together with all merchandise,
component materials, supplies, packing, packaging and shipping materials, and
all returned, rejected or repossessed goods sold, consigned, leased or
otherwise furnished by such Obligor, all documents of title covering any of
such goods or inventory and all products and proceeds of any of the foregoing.
Notwithstanding anything herein or elsewhere in this Agreement to the contrary,
the security interests granted in this SUBSECTION (B) shall not attach to or
encumber or constitute a lien upon the Obligor's drilling rigs, drilling
equipment and drill pipe.
(c) All of such Obligor's right, title and interest in
and to present and future general intangibles constituting proceeds of any
assets described in SUBSECTIONS (A) AND (B) above.
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(d) All of such Obligor's present and future general
ledger sheets, files, records, customer lists, books of account, invoices,
bills, certificates or documents of ownership, bills of sale, business papers,
correspondence, credit files, tapes, cards, computer runs and all other data
and data storage systems whether in the possession of any Obligor or any
service bureau.
(e) All letters of credit now existing or hereafter
issued naming any Obligor as a beneficiary or assigned to any Obligor,
including the right to receive payment thereunder, and all documents and
records associated therewith.
(f) All present and future deposits, funds,
instruments, documents, policies, evidences and certificates of insurance of
such Obligor or in which such Obligor has an interest and all proceeds thereof,
on deposit with or in the possession or control of Bank or owing by Bank to
such Obligor or in transit by mail or carrier to Bank or in the possession of
any other Person acting on Bank's behalf, without regard to whether Bank
received the same in pledge, for safekeeping, as agent for collection or
otherwise, or whether Bank has conditionally released the same, and in all
assets of such Obligor in which Bank now has or may at any time hereafter
obtain a lien, mortgage, or security interest for any reason.
(g) All proceeds of the foregoing.
5.2 SURETY. As further security for the Bank Indebtedness,
Guarantors shall execute and deliver to Bank their unconditional, unlimited
surety agreements in form and content acceptable to Bank (the "SURETY
AGREEMENTS").
5.3 GENERAL. The collateral described above in SECTION 5.1
is collectively referred to herein as the "COLLATERAL". The above-described
security interests and liens shall not be rendered void by the fact that no
Bank Indebtedness exists as of any particular date, but shall continue in full
force and effect until all Bank Indebtedness has been repaid and Bank has no
agreement or commitment outstanding pursuant to which Bank may extend credit to
or on behalf of any Obligor. IT IS THE EXPRESS INTENT OF THE OBLIGORS THAT ALL
OF THE COLLATERAL SHALL SECURE NOT ONLY THE OBLIGATIONS UNDER THE LOAN
DOCUMENTS, BUT ALSO ALL OTHER PRESENT AND FUTURE OBLIGATIONS (NOW EXISTING OR
HEREAFTER ARISING) OF EACH OBLIGOR TO BANK. Obligors acknowledge and agree
that (except as provided in SECTION 5.4 below) all security interests granted
to Bank pursuant to the Prior Line of Credit Loan Documents are continued and
remain in effect, that the Bank's lien position with respect to the Collateral
shall relate back to the respective dates referenced in the Prior Line of
Credit Loan Documents and that all financing statements previously filed with
respect to the Collateral shall remain in full force and effect.
5.4 RELEASE OF CERTAIN COLLATERAL. Bank hereby agrees that
its liens and security interests in the assets of Obligors shall only extend to
the collateral described in SECTION 5.1 above and hereby releases its lien and
security interests in all other assets of Obligors. Notwithstanding anything
herein or elsewhere in this Agreement to the contrary, the security interests
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granted in SECTION 5.1 above shall not attach to or encumber or constitute a
lien upon the Obligors' drilling rigs, drilling equipment and drill pipe.
5.5 COLLECTION OF RECEIVABLES; PROCEEDS OF COLLATERAL.
(a) Obligors will collect their accounts receivable
only in the ordinary course of business. Prior to the occurrence of an Event
of Default, such accounts receivable shall be deposited in operating accounts
maintained by Obligors to be ultimately transferred to a deposit account
maintained with the Bank. Upon request by Bank after occurrence of an Event of
Default, Obligors will notify all of their account debtors to forward all
accounts receivable collections owed to Obligors to a lockbox maintained by
Bank and will forward all other checks, drafts and monies received by Obligors
which are proceeds of the Collateral to such lockbox. In connection therewith,
Obligors will execute such lockbox agreements as may be required by Bank and
will pay to Bank all customary fees in connection with any lockbox arrangement.
(b) For purposes of perfecting Bank's security
interest, Obligors agree that all monies, checks, notes, instruments, drafts or
other payments relating to or constituting proceeds of any accounts receivable
or other Collateral of Obligors which come into the possession or under the
control of Obligors or any employees, agents or other persons acting for or in
concert with Obligors, shall be received and held in trust for Bank. For
purposes of perfecting Bank's security interest, Obligors shall deliver or
cause to be delivered to Bank, with appropriate endorsement and assignment to
Bank with full recourse to Obligors, all instruments, notes and chattel paper
constituting an account receivable or proceeds thereof or other Collateral.
Bank is hereby authorized to open all mail addressed to any Obligor and endorse
all checks, drafts or other items for payment on behalf of any Obligor. Bank is
granted a power of attorney by each Obligor with full power of substitution to
execute on behalf of such Obligor and in such Obligor's name or to endorse such
Obligor's name on any check, draft, instrument, note or other item of payment
or to take any other action or sign any document in order to effectuate the
foregoing. Such power of attorney being coupled with an interest is
irrevocable.
6. REPRESENTATIONS AND WARRANTIES. Obligors represent and
warrant as follows:
6.1 VALID ORGANIZATION, GOOD STANDING AND QUALIFICATION.
Each Obligor is a corporation duly incorporated, validly existing and in good
standing under the laws of the state of its incorporation, has full power and
authority to execute, deliver and comply with the Loan Documents, and to carry
on its business as it is now being conducted and is duly licensed or qualified
as a foreign corporation in good standing under the laws of each jurisdiction
in which the character or location of the properties owned by it or that
business transacted by it requires such licensing or qualification, except
where the failure to be so licensed or qualified would not have a material
adverse effect on the Collateral, assets, business, operations or financial
condition of an Obligor or its ability to perform its obligations under the
Loan Documents.
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6.2 LICENSES. Obligors and their employees, servants and
agents have all licenses, registrations, approvals and other authority as may
be necessary to enable them to own and operate their business and perform all
services and business for the Obligors which they have agreed to perform in any
state, municipality or other jurisdiction, except where the failure to have
such licenses, registrations, approvals or other authority would not have a
material adverse effect on the Collateral, assets, business, operations or
financial condition of an Obligor or its ability to perform its obligations
under the Loan Documents.
6.3 OWNERSHIP INTERESTS. The ownership of all stock,
debentures, options, warrants, bonds and other securities (debt and equity) of
Obligors (other than UTI) and all pledges, proxies, voting trusts, powers of
attorney and other agreements affecting the ownership or voting rights of said
interests is as set forth on SCHEDULE 6.3 attached hereto. SCHEDULE 6.3 also
sets forth, to the best of Obligors' knowledge, as of April 28, 1998 the
ownership interests in UTI of all Persons (including without limitation Remy)
who own 10% or more of the outstanding and issued stock of UTI.
6.4 SUBSIDIARIES. Except as set forth on SCHEDULE 6.4
attached hereto, no Obligor owns any shares of stock or other equity interests
in any Person, directly or indirectly (by any Subsidiary or otherwise).
6.5 FINANCIAL STATEMENTS. Obligors have furnished to Bank
the audited consolidated and the unaudited consolidating financial statements
of Obligors certified without qualification by independent public accountants
for the fiscal year ending as of December 31, 1997 and all management and
comment letters from such accountants in connection therewith. Such financial
statements (together with the related notes and comments), are materially
correct and complete, fairly present the financial condition and the assets and
liabilities of Obligors at such date, and have been prepared in accordance with
GAAP in all material respects.
6.6 NO MATERIAL ADVERSE CHANGE IN FINANCIAL CONDITION.
There has been no material adverse change in the financial condition of
Obligors taken as a whole since December 31, 1997.
6.7 PENDING LITIGATION OR PROCEEDINGS. Except as set forth
on SCHEDULE 6.7 attached hereto, there are no judgments outstanding or actions,
suits or proceedings pending or, to the best of Obligors' knowledge, threatened
by written notice against or affecting any Obligor, at law or in equity or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
which in the aggregate, if finally determined adversely to any Obligor would
reasonably be expected to result in a judgment or liability in excess of Five
Hundred Thousand Dollars ($500,000.00), or which individually or in the
aggregate may materially and adversely affect any of their business activities,
properties or financial condition, their right to carry on business activities
as now conducted, or their ability to perform their respective obligations
under this Agreement or the Loan Documents.
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6.8 DUE AUTHORIZATION; NO LEGAL RESTRICTIONS. The execution
and delivery by Obligors of the Loan Documents, the consummation of the
transactions contemplated by the Loan Documents and the fulfillment and
compliance with the respective terms, conditions and provisions of the Loan
Documents: (a) have been duly authorized by all requisite corporate action of
each Obligor, (b) will not conflict with or result in a breach of, or
constitute a default (or might, upon the passage of time or the giving of
notice or both, constitute a default) under, any of the terms, conditions or
provisions of any applicable statute, law, rule, regulation or ordinance or any
Obligor's Certificate or Articles of Incorporation or By-Laws or any indenture,
mortgage, loan or credit agreement or instrument to which any Obligor is a
party or by which any of them may be bound or affected, or any judgment or
order of any court or governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, and (c) will not result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the property or assets of any Obligor under the terms or
provisions of any such agreement or instrument, except liens in favor of Bank.
6.9 ENFORCEABILITY. The Loan Documents have been duly
executed by Obligors and delivered to Bank and constitute legal, valid and
binding obligations of Obligors, enforceable in accordance with their terms.
6.10 NO DEFAULT UNDER OTHER OBLIGATIONS, ORDERS OR
GOVERNMENTAL REGULATIONS. No Obligor is in violation of its Certificate or
Articles of Incorporation or in default in the performance or observance of any
of its obligations, covenants or conditions contained in any indenture or other
agreement creating, evidencing or securing any Indebtedness or pursuant to
which any such Indebtedness is issued or under any other agreement or
instrument or any judgment, decree, order, statute, rule or governmental
regulation, applicable to it or by which its properties may be bound or
affected, except such violations or defaults which do not have a material
adverse effect on the Collateral, assets, business, operations or financial
condition of an Obligor or its ability to perform its obligations under the
Loan Documents.
6.11 CONSENTS. No consent, approval or authorization of or
designation, declaration or filing (other than the filing of financing
statements) with any governmental authority or any other Person on the part of
any Obligor is required in connection with the execution, delivery or
performance by any Obligor of the Loan Documents or the consummation of the
transactions contemplated thereby.
6.12 TAXES. Obligors have filed all tax returns which they
are required to file and have paid, or made provision for the payment of, all
taxes which have or may have become due pursuant to such returns or pursuant to
any assessment received by them, except such taxes (other than real estate
taxes which must be paid regardless of challenge), if any, as are being
contested in good faith and as to which adequate reserves have been provided
and except where the failure to file such a tax return would not have a
material adverse effect on the Collateral, assets, business, operations or
financial condition of an Obligor or its ability to perform its obligations
under the Loan
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Documents. Such tax returns are complete and accurate in all material respects.
No Obligor knows of any proposed additional assessment or basis for any
assessment of additional taxes.
6.13 TITLE TO COLLATERAL. The Collateral (including without
limitation all assets acquired pursuant to the Permitted Acquisitions) is and
will be owned by Obligors free and clear of all liens and other encumbrances of
any kind (including liens or other encumbrances upon properties acquired or to
be acquired under conditional sales agreements or other title retention
devices), excepting only liens in favor of the Bank and those liens and
encumbrances permitted under SECTION 7.9 below. Obligors will defend the
Collateral against any claims of all Persons other than the Bank.
6.14 ADDRESSES. During the past five (5) years, no Obligor
has been known by any names (including trade names) other than those set forth
in SCHEDULE 6.14 attached hereto and no Obligor has been located at any
addresses other than those set forth on SCHEDULE 6.14 attached hereto. The
portions of the Collateral which are tangible property and each Obligor's books
and records pertaining thereto will at all times be located at the addresses
set forth on SCHEDULE 6.14; or such other location determined by Obligors after
prior notice to Bank and delivery to Bank of any items requested by Bank to
maintain perfection and priority of Bank's security interests and access to
Obligors' books and records. SCHEDULE 6.14 identifies the chief executive
office of each Obligor.
6.15 CURRENT COMPLIANCE. Obligors are currently in
compliance with all of the terms and conditions of the Loan Documents.
6.16 PENSION PLANS. Except as disclosed on SCHEDULE 6.16
hereto, (a) no Obligor has any obligations with respect to any employee pension
benefit plan ("PLAN") (as such term is defined in the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), (b) no events, including,
without limitation, any "Reportable Event" or "Prohibited Transaction" (as
those terms are defined under ERISA), have occurred in connection with any Plan
of any Obligor which might constitute grounds for the termination of any such
Plan by the Pension Benefit Guaranty Corporation ("PBGC") or for the
appointment by any United States District Court of a trustee to administer any
such Plan, (c) all of the Obligors' Plans meet with the minimum funding
standards of Section 302 of ERISA, and (d) no Obligor has existing liability to
the PBGC. No Obligor is subject to or bound to make contributions to any
"multi-employer plan" as such term is defined in Section 4001(a)(3) of ERISA.
6.17 LEASES AND CONTRACTS. Obligors have complied in all
material respects with the provisions of all material leases, contracts or
commitments of any kind (such as employment agreements, collective bargaining
agreements, powers of attorney, distribution agreements, patent license
agreements, contracts for future purchase or delivery of goods or rendering of
services, bonus, pension and retirement plans or accrued vacation pay,
insurance and welfare agreements) to which they are a party and are not in
default thereunder. To the best of Obligors' knowledge, no other party is in
default in any material respect under any such leases, contracts or other
commitments and no
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event has occurred which, but for the giving of notice or the passage of time
or both, would constitute an event of default thereunder.
6.18 INTELLECTUAL PROPERTY. Each Obligor owns or possesses
the irrevocable right to use all of the patents, trademarks, service marks,
trade names, filed or registered copyrights, licenses, franchises and permits
and rights with respect to the foregoing necessary to own and operate its
properties and to carry on its business as presently conducted and presently
planned to be conducted without conflict with the rights of others. SCHEDULE
6.18 sets forth an accurate list and description of each such patent,
trademark, service mark, trade name, filed or registered copyright, license,
franchise and permit and right with respect to the foregoing, together with all
registration or application numbers or information with respect thereto.
6.19 BUSINESS INTERRUPTIONS. Within five (5) years prior to
the date hereof, neither the business, Collateral nor operations of any Obligor
have been materially and adversely affected in any way by any casualty, strike,
lockout, combination of workers, order of the United States of America, or any
state or local government, or any political subdivision or agency thereof,
directed against that Obligor. There are no pending or threatened labor
disputes, strikes, lockouts or similar occurrences or grievances against the
business being operated by any Obligor.
6.20 INTERRELATEDNESS OF OBLIGORS. The business operations
of Obligors are interrelated and complement one another and such entities have
a common business purpose, with intercompany bookkeeping and accounting
adjustments used to separate their respective properties, liabilities, and
transactions. To permit their uninterrupted and continuous operations, such
entities now require and will from time to time hereafter require funds and
credit accommodations for general business purposes. The proceeds of advances
under the Line and credit facilities extended hereunder will directly or
indirectly benefit each Obligor hereunder, severally and jointly, regardless of
which Borrower requests or receives part or all of the proceeds of the
advances.
6.21 ACCURACY OF REPRESENTATIONS AND WARRANTIES. No
representation or warranty by Obligors contained herein or in any certificate
or other document furnished by Obligors pursuant hereto or in connection
herewith fails to contain any statement of material fact necessary to make such
representation or warranty not misleading in any material respect in light of
the circumstances under which it was made. There is no fact which any Obligor
knows and has not disclosed to Bank, which does or may materially and adversely
affect any Obligor or any of their operations.
6.22 SOLVENCY. After giving effect to the transactions
contemplated by the Loan Documents, this Agreement and the Subordinated Debt
Loan Documents, (a) the fair market value of the assets of each Obligor is in
excess of the total amount of its liabilities (including, without limitation,
contingent liabilities); (b) the present fair saleable value of the assets of
each Obligor is greater than its probable liability on its existing debts as
such debts become absolute and matured; (c) each Obligor is able and expects to
be able to pay its debts (including, without limitation, contingent
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debts and other commitments) as they mature; and (d) each Obligor has capital
sufficient to carry on its business as conducted and as proposed to be
conducted.
6.23 SUBORDINATED TERM LOAN. No event of default or event
which, with the giving of notice, passage of time or both, has occurred and is
continuing under the Subordinated Debt Loan Documents, which would constitute
an event of default under the Subordinated Debt Loan Documents. As of the date
hereof, the outstanding principal balance of the Subordinated Term Loan is
$25,000,000.00.
7. GENERAL COVENANTS. Except with the prior written consent of
Bank, Obligors will comply with the following:
7.1 PAYMENT OF PRINCIPAL, INTEREST AND OTHER AMOUNTS DUE.
Each Obligor will pay when due all Bank Indebtedness and all other amounts
payable by such Obligor hereunder.
7.2 LIMITATION ON SALE AND LEASEBACK. No Obligor will enter
into any arrangement whereby it will sell or transfer any real property or
improvements thereon or other fixed assets owned by it and having a fair market
value in the aggregate of more than $1,000,000.00, and then or thereafter rent
or lease as lessee such property, improvements or assets or any part thereof,
for substantially the same purposes as the property, improvements or assets
sold or transferred.
7.3 LIMITATION ON INDEBTEDNESS.
(a) No Obligor will have at any time outstanding to
any Person other than Bank, any Indebtedness for borrowed money, Capitalized
Lease Obligations, or any outstanding letters of credit, except:
(i) Accounts payable incurred in the ordinary
course of that Obligor's business and accrued expenses arising out of
transactions (other than Indebtedness for borrowed money) in the ordinary
course of that Obligor's business;
(ii) Existing Indebtedness for borrowed money and
Capitalized Lease Obligations described on SCHEDULE 7.3;
(iii) Future purchase money Indebtedness and
Capitalized Lease Obligations in an amount not to exceed (i) $5,000,000
incurred within the 12 month period ending June 30, 1999, and (ii) $5,000,000
incurred within the 12 month period ending June 30, 2000, provided that, the
aggregate amount of such purchase money Indebtedness and Capitalized Lease
Obligations incurred after the date of this Agreement shall in no event exceed
$10,000,000 in the aggregate;
(iv) The Subordinated Term Loan;
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(v) Intercompany Indebtedness owed by one
Obligor to another, provided that such Indebtedness is subordinated to the Bank
Indebtedness on terms acceptable to Bank.
(vi) Swaps entered into in the ordinary course of
business for the purpose of hedging and not for the purpose of speculation;
(vii) Indebtedness in connection with bid and
performance bonds, surety bonds and letters of credit issued for the purpose of
supporting the performance obligations of an Obligor provided in the ordinary
course of such Obligor's business;
(viii) Indebtedness arising from agreements
providing for reasonable indemnification, adjustments to the purchase price or
similar obligations, or from guarantees, letters of credit, surety bonds or
performance bonds securing such obligations of an Obligor, all of which must
have been incurred or assumed in connection with the sale of business assets of
an Obligor for the purpose of financing such sale and only to the extent such
sale of assets is permitted under this Agreement;
(ix) Indebtedness that refinances, renews,
extends or refunds any of the permitted Indebtedness described in SUBSECTIONS
(II) OR (III) above, provided that, (A) the principal amount of such new
Indebtedness does not exceed the principal amount of the Indebtedness being
refinanced, renewed, extended or refunded, (B) the terms of such new
Indebtedness are no more restrictive or onerous than the Indebtedness being
refinanced, renewed, extended or refunded, and (C) no Default or Event of
Default has occurred and is continuing or would result from such new
Indebtedness;
(x) Indebtedness arising from the honoring by a
bank or other financial institution of a check, draft or similar instrument
inadvertently drawn against insufficient funds in the ordinary course of
business; provided that, such Indebtedness is extinguished within two (2)
Business Days;
(xi) Indebtedness for borrowed money for which an
Obligor becomes liable as a successor by merger or by virtue of an assumption
of liabilities in connection with an acquisition permitted under SECTION 7.7,
provided that, the aggregate principal balance of all of such Indebtedness for
all Obligors does not exceed Five Hundred Thousand Dollars ($500,000.00)
outstanding at any time; and
(xii) Indebtedness for borrowed money not
otherwise permitted under this SECTION 7.3, provided that, the aggregate
principal balance of all of such Indebtedness for all Obligors does not exceed
Five Hundred Thousand Dollars ($500,000.00) outstanding at any time.
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The exception permitted under SUBSECTION (A)(III) shall be permitted
only provided that (a) no Default or Event of Default has occurred and is
continuing, and (b) any action taken by any Obligor which would constitute a
permitted exception would not cause or result in an Event of Default. The
Subordinated Term Loan may not be refunded or refinanced without the consent of
the Bank.
(b) In the event that any Indebtedness for borrowed
money or the capitalized portion (as determined in accordance with GAAP) of any
Capitalized Lease Obligations in excess of (i) $500,000, individually, or (ii)
$1,500,000 in the aggregate for all such liabilities involve documents
containing financial covenants which are more restrictive with respect to any
Obligor than the financial covenants of this Agreement and the other Loan
Documents, Obligors agree to notify Bank promptly and agree to enter into a
modification to this Agreement and the Loan Documents, as applicable, to
include such more restrictive financial covenants as Bank may elect.
(c) No intercreditor agreements shall be required with
other lenders or lessors if the purchase money Indebtedness or Capitalized
Lease Obligations permitted under SUBSECTION (A)(III) above is:
(i) a full recourse liability which does not
exceed (A) $500,000, individually, or (B) $1,500,000 in the aggregate; or
(ii) a liability for which recourse to any
Obligor is limited solely to the asset financed.
With respect to all other permitted purchase money Indebtedness and
Capitalized Lease Obligations, Obligors shall obtain from the applicable lender
or lessor an intercreditor agreement acceptable to Bank, providing the Bank
with notice of any default under such permitted purchase money Indebtedness or
Capitalized Lease Obligations, a forty-five (45) day period in which to cure or
cause Obligors to cure such default, and containing a forty-five (45) day
standstill provision during which the lender or lessor agrees not to exercise
any rights or remedies against any Obligor or the financed asset.
7.4 INVESTMENTS AND LOANS. No Obligor will have or make any
investments in all or a material portion of the capital stock or securities of
any Person, or any loans, advances or extensions of credit to any Person,
except:
(a) Investments in direct or indirect obligations of,
or obligations unconditionally guaranteed by, the United States of America, any
state thereof or any agency or instrumentality of any of the foregoing and
maturing within twelve (12) months from the date of acquisition;
(b) Investments in commercial paper of Bank or
commercial paper rated "Prime-1" by Moody's Investors Services or "A-1" by
Standard & Poor's Corporation, or with
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an equivalent rating by another rating agency of nationally recognized
standing, maturing within three hundred sixty-five (365) days from the date of
acquisition;
(c) (i) Certificates of deposit maturing within
twelve (12) months from the date of acquisition issued by the Bank and money
market fund or other investments offered by or maintained with the Bank or its
Affiliates; and (ii) demand deposit, operating accounts and other like banking
accounts maintained with other national banks having assets of at least Fifty
Million Dollars ($50,000,000.00), subject to the restrictions set forth in
SECTION 7.16;
(d) Bona fide advances to employees and officers of
that Obligor for the purpose of paying relocation expenses or travel and
related expenses incurred for proper business purposes of that Obligor;
(e) Investments and loans listed on SCHEDULE 7.4
attached hereto;
(f) Loans from one Obligor to another;
(g) Working interests or other ownership interests in
oil or gas wells;
(h) Investments in connection with and required to
complete Permitted Acquisitions;
(i) Negotiable instruments endorsed for deposit or
collection of similar instruments in the ordinary course of business;
(j) Repurchase agreements and reverse repurchase
agreements with Bank or any of Bank's Affiliates;
(k) Investments permitted under SECTION 7.19 hereof;
(l) Investments permitted under SECTION 7.7 hereof;
(m) The acquisition or ownership of capital stocks or
obligations or securities received in settlement of debts (created in the
ordinary course of business) owing to any Obligor;
(n) Investments permitted under SECTION 7.3(A)(VI)
hereof; and
(o) Investments not otherwise permitted under this
SECTION 7.4, provided that, the aggregate value of all of such investments for
all Obligors does not exceed Five Hundred Thousand Dollars ($500,000.00)
outstanding at any time.
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The exceptions permitted under SUBSECTIONS 7.4(F) AND (G) shall be
permitted only provided that (i) no Default or Event of Default has occurred
and is continuing, and (ii) any action taken by any Obligor which would
constitute a permitted exception would not cause or result in an Event of
Default.
7.5 GUARANTIES. Except for (a) the Surety Agreements, (b)
the guaranties required under the Subordinated Debt Loan Documents, (c)
customary guaranties and indemnities executed in connection with Permitted
Acquisitions, (d) guaranties by one Obligor of the obligations of another
Obligor, and (e) reimbursement obligations with respect to letters of credit,
bid and performance bonds and surety bonds permitted under SECTIONS 7.3(A)(VII)
AND 7.3(A)(VIII), no Obligor will directly or indirectly guarantee, endorse
(other than for collection or deposit in the ordinary course of business),
discount, sell with recourse or for less than the face value or agree
(contingently or otherwise) to purchase or repurchase or otherwise acquire, or
otherwise become directly or indirectly liable for, or agree (contingently or
otherwise) to supply or advance funds (whether by loan, stock purchase, capital
contribution or otherwise) in respect of, any Indebtedness, obligations or
liabilities of any Person.
7.6 DISPOSITION OF ASSETS.
(a) No Obligor will sell, lease, transfer or otherwise
dispose of all, substantially all, or any portion of its property or assets,
except for (i) drilling contracts and day rate drilling contracts for
inventory, equipment, and drilling rigs in the ordinary course of business for
fair consideration, (ii) sales of inventory (other than drilling rigs, related
drilling equipment and drilling pipe) in the ordinary course of business for
fair consideration, (iii) the sale for fair consideration of equipment or other
fixed assets (including drilling rigs, related drilling equipment and drilling
pipe) having a net book value of not more than Three Million Dollars
($3,000,000.00) in the aggregate in any fiscal year, and (iv) sales, leases or
transfers of property or assets from one Obligor to another.
(b) Notwithstanding the foregoing, Obligors may sell,
lease, transfer or otherwise dispose of fixed assets with a book value in
excess of Three Million Dollars ($3,000,000.00) in the aggregate in any fiscal
year as part of a transfer to an unrelated third party in a bona fide,
arms-length transaction, provided that (i) the Obligor gives Bank at least ten
(10) Business Days prior written notice together with a copy of the sale
agreement, bill of sale or other applicable agreement, (ii) the sale is for a
cash purchase price (or on deferred payment terms if the purchase price does
not exceed $1,000,000) at least equal to the reasonable fair market value of
such assets, and (iii) the proceeds of such sale are paid to Bank as a
permanent reduction of the Line or are used by the Obligors within six (6)
months after consummation of such sale, lease, transfer or disposition is
completed, to acquire new operating assets for use in one of the Lines of
Business of the Obligors.
(c) Notwithstanding anything herein or elsewhere to
the contrary, Universal may sell all or any part of its assets, or UTI may sell
all of the capital stock of Universal, to an unrelated third party in a bona
fide, arms-length sale, provided that (i) Universal gives Bank at
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least ten (10) Business Days prior written notice of any such sale together
with a copy of the sale agreement and a summary of the business terms of such
sale, (ii) the sale is for a cash purchase price at least equal to the
reasonable fair market value of Universal's assets, (iii) the proceeds of such
sale remain subject to the restrictions on liens and encumbrances in SECTION
7.9, and (iv) within twelve (12) months after the date such sale is closed,
Universal or UTI, as applicable, utilizes the proceeds of such sale to purchase
for itself or on behalf of another Obligor new assets to be used in one of
Obligors' Lines of Business, and such new assets to the extent they are
inventory or receivables and subject for the lien and security interest in
favor of Bank and are subject to the restrictions of SECTION 7.9.
(d) The exceptions permitted under SECTION 7.6(B)
shall be permitted only provided that (a) no Default or Event of Default has
occurred and is continuing, and (b) any action taken by any Obligor which would
constitute a permitted exception would not cause or result in an Event of
Default.
7.7 MERGER; CONSOLIDATION; BUSINESS ACQUISITIONS;
SUBSIDIARIES.
(a) No Obligor will merge into or consolidate with any
Person, acquire any material portion of the stock, ownership interests, assets
or business of any Person, permit any Person to merge into it, or form any new
Subsidiaries, other than as provided below.
(b) Notwithstanding the foregoing, any of the Obligors
(or any Subsidiary thereof) may acquire the stock or assets of another Person,
business unit or operating entity, provided that (i) the purchase price
therefor (including all assumed liabilities, seller financing or other debt,
equity interests issued or other consideration, but not including payments for
bona-fide employment contracts) does not exceed the then applicable Acquisition
Purchase Price Limit, (ii) the Obligors give Bank at least ten (10) Business
Days prior written notice of any such acquisition together with a copy of the
Acquisition Agreement and a summary of the business terms of such acquisition,
(iii) any entity acquired by any Obligor or formed to acquire the stock or
assets in connection with such acquisition, or any Subsidiary of an Obligor
resulting from a merger or consolidation used to effect such acquisition, shall
become a co- borrower of the Bank Indebtedness on the same terms set forth in
the Loan Documents, shall deliver to Bank such due diligence materials and
documents regarding such entity as Bank may require, and shall execute and
deliver to Bank such documents as Bank may require to join in the Loan
Documents as a co-borrower and to grant Bank a first priority perfected
security interest in such entity's assets which would constitute Collateral as
defined herein, and (iv) the Obligors shall demonstrate to Bank's reasonable
satisfaction that Obligors will continue to be in compliance with all financial
covenants set forth in SECTION 8 hereof after taking into account the proposed
acquisition on the effective date of such acquisition and for the remaining
term of the Contract Period. The consummation of all acquisitions involving a
purchase price in excess of the then applicable Acquisition Purchase Price
Limit shall be subject to the prior written approval of Bank. Obligors will
include in each acquisition, merger or similar agreement entered into involving
an acquisition requiring the consent of Bank, that Obligor's obligation to
consummate such acquisition is subject to the prior written consent of Bank.
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(c) Notwithstanding the foregoing, any Obligor may
merge into another Obligor or transfer its assets to any other Obligor.
(d) Notwithstanding anything herein or elsewhere to
the contrary, all acquisitions of any material portion of the stock, ownership
interests, assets or business of any Person contemplated by Obligors shall
require, prior to the consummation thereof, the written consent of Bank (i) if
a Default or an Event of Default has occurred and is continuing, or (ii) if any
action taken by any Obligor in connection with any acquisition would cause or
result in an Event of Default.
7.8 TAXES; CLAIMS FOR LABOR AND MATERIALS. Each Obligor
will pay or cause to be paid when due all taxes, assessments, governmental
charges or levies imposed upon it or its income, profits, payroll or any
property belonging to it, including without limitation all withholding taxes,
and all claims for labor, materials and supplies which, if unpaid, might become
a lien or charge upon any of its properties or assets; provided that it shall
not be required to pay any such tax (other than real estate taxes which must be
paid regardless of challenge), assessment, charge, levy or claim so long as the
validity thereof shall be contested in good faith by appropriate proceedings
promptly initiated and diligently conducted by it, and neither execution nor
foreclosure sale or similar proceedings shall have been commenced in respect
thereof (or such proceedings shall have been stayed pending the disposition of
such contest of validity), and it shall have set aside on its books, or at the
request of Bank deposited with Bank, adequate reserves with respect thereto.
No Obligor will file or consent to the filing of, any consolidated income tax
return with any Person other than a Subsidiary.
7.9 LIENS. No Obligor will create, incur or permit to exist
any mortgage, pledge, encumbrance, lien, security interest or charge of any
kind (including liens or charges upon properties acquired or to be acquired
under conditional sales agreements or other title retention devices) on its
property or assets, whether now owned or hereafter acquired, or upon any
income, profits or proceeds therefrom, except:
(a) Liens and security interests held by Bank;
(b) Liens incurred or deposits made in the ordinary
course of business (i) in connection with worker's compensation, unemployment
insurance, social security and other like laws or (ii) to secure the
performance of bids, leases, surety bonds, government contracts, performance
and return of money bonds, statutory obligations, other similar obligations,
not incurred in connection with either (A) the borrowing of money or (B) the
deferred purchase price of goods or inventory;
(c) Liens incurred in connection with services
rendered by carriers, warehousemen, landlords, mechanics, repairmen or
suppliers, provided that, such liens are terminated or bonded over within
thirty (30) days after Obligors receive notice thereof.
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(d) Encumbrances consisting of zoning restrictions,
easements, restrictions on the use of real property or minor irregularities of
title thereto, none of which impairs the use of such property by that Obligor
in the operation of its business;
(e) Existing liens and security interests listed on
SCHEDULE 7.9 attached hereto; or
(f) Purchase money liens or Capitalized Leases,
provided that:
(i) the property subject to any of the foregoing
is acquired or leased by that Obligor in the ordinary course of its business
and the lien on any such property is created contemporaneously with such
acquisition;
(ii) purchase money Indebtedness or Capitalized
Lease Obligations so created shall not exceed the cost as of the time of
acquisition or lease of the property covered thereby;
(iii) the purchase money Indebtedness or
Capitalized Lease Obligations shall only be secured by the property so acquired
or leased or the proceeds thereof (not including any accounts); and
(iv) the purchase money Indebtedness or
Capitalized Lease Obligations are permitted by the provisions of SECTION 7.3.
(g) Liens for taxes not yet delinquent or which are
being contested in good faith by appropriate proceedings, provided that,
adequate reserves with respect thereto are maintained on the books of the
applicable Obligors, in conformity with GAAP;
(h) Judgment and attachment liens not giving rise to
an Event of Default or liens created by or arising from any litigation or legal
proceeding that are currently being contested in good faith by appropriate
proceedings diligently conducted, and for which adequate reserves have been
made to the extent required by GAAP;
(i) Liens on the assets of any entity existing at the
time such entity is acquired by any Obligor whether by merger, consolidation,
purchase of assets or otherwise; provided that such liens (i) are not created,
incurred or assumed by such entity in contemplation of such entity's being
acquired by an Obligor; (ii) do not extend to any other assets of any Obligor;
and (iii) the Indebtedness secured by such lien is permitted pursuant to
SECTION 7.3(A)(XI) OR (XII);
(j) Set off rights arising in connection with
customary terms of International Swaps and Derivatives Association swap
documentation;
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(k) Leases or subleases granted to others and not
interfering in any material respect with the business of any of the Obligors;
(l) Liens in favor of collecting or payor banks having
a right of setoff, revocation or chargeback with respect to money or
instruments of any of the Obligors on deposit with or in possession of such
bank;
(m) Any renewal of or substitution for any lien
permitted by any of the preceding clauses; provided that, the debt secured is
not increased nor the lien extended to any additional assets; and
(n) Liens securing any Indebtedness described in
SECTION 7.3(A)(IX), secured only by liens on those assets that secured such
Indebtedness prior to the renewal, extension, refinancing or refund or by liens
otherwise permitted hereunder.
The creation of liens by Obligors shall be permitted under
SUBSECTION (F) only if (i) no Event of Default has occurred and is continuing,
and (ii) any action taken by any Obligor which would constitute a permitted
exception would not cause or result in an Event of Default.
To the extent that any Indebtedness secured by a lien permitted
under SUBSECTIONS (E) OR (F) is refinanced, renewed, extended or refunded, such
liens may continue to secure the refinancing, renewal, extended or refunded
Indebtedness.
No Obligor shall enter into any agreement with any other Person
which shall prohibit the Obligor from granting, creating or suffering to exist,
or otherwise restrict in any way (whether by covenant, by identifying such
event as a default under such agreement or otherwise) the ability of that
Obligor to grant, create or suffer to exist, any lien, security interest or
other charge or encumbrance upon or with respect to any of its assets in favor
of the Bank.
No Obligor will apply for or obtain any letters of credit for the
payment of or to secure the payment for any inventory or other assets to be
acquired by that Obligor, except letters of credit issued by Bank pursuant
hereto.
Notwithstanding anything herein or elsewhere to the contrary,
Obligors shall not be permitted to create, incur or permit to exist any
encumbrance, lien or security interest against or in any of the Collateral,
provided that, if an encumbrance, lien or security interest arises not as a
result of an Obligor executing a security, pledge or similar agreement, and
such encumbrance, lien or security interest encumbers any of the Collateral,
Obligors shall have a period of fifteen (15) days after the earlier of (i) any
Obligor receives notice that such an encumbrance, lien or security interest is
being claimed or asserted, or (ii) a responsible officer of any Obligor has
actual knowledge that such encumbrance, lien or security interest is being
claimed or asserted, in which to obtain a release or discharge of such
encumbrance, lien or security interest.
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7.10 EXISTENCE; APPROVALS; QUALIFICATION; BUSINESS
OPERATIONS; COMPLIANCE WITH LAWS. Each Obligor (a) will obtain, preserve and
keep in full force and effect its separate corporate existence and all rights,
licenses, registrations and franchises necessary to the proper conduct of its
business or affairs; (b) will qualify and remain qualified as a foreign
corporation in each jurisdiction in which the character or location of the
properties owned by it or the business transacted by it requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the Collateral, assets, business, operations or
financial condition of an Obligor or its ability to perform its obligations
under the Loan Documents; (c) will continue to operate its business as
presently operated and will not engage in any new businesses outside of Lines
of Business without the prior written consent of Bank; and (d) will comply in
all material respects with the requirements of all applicable laws and all
rules, regulations (including environmental regulations) and orders of
regulatory agencies and authorities having jurisdiction over it.
7.11 MAINTENANCE OF PROPERTIES; INTELLECTUAL PROPERTY. Each
Obligor will maintain, preserve, protect and keep, or cause to be maintained,
preserved, protected and kept its real and personal property used or useful in
the conduct of its business in good working order and condition, reasonable
wear and tear excepted, and will pay and discharge when due the cost of repairs
to and maintenance of the same.
With respect to any and all trademarks, registrations, copyrights,
patents, patent rights and applications for any of the foregoing, each Obligor
shall maintain and protect the same and shall take and assert any and all
remedies available to that Obligor to prevent any other Person from infringing
upon or claiming any interest in any such trademarks, registrations,
copyrights, patents, patent rights or application for any of the foregoing.
7.12 INSURANCE. Each Obligor will carry adequate insurance
issued by an insurer acceptable to Bank, in amounts acceptable to Bank (at
least adequate to comply with any co-insurance provisions) and against all such
liability and hazards as are usually carried by entities engaged in the same or
a similar business similarly situated or as may be required by Bank. In the
case of insurance on any of the Collateral, Obligors shall carry insurance in
amounts equal to the full insurable value thereof and cause Bank to be named as
loss payee (with a lender's loss payable endorsement) and additional insured
with respect to all liability insurance, as its interests may appear with
thirty (30) days' notice to be given Bank by the insurance carrier prior to
cancellation or material modification of such insurance coverage.
Obligors shall cause to be delivered to Bank the insurance policies
therefor and at least three (3) Business Days prior to the expiration of any
such insurance, additional policies or duplicates thereof or in the
alternative, certificates of insurance evidencing the renewal of such insurance
and payment of the premiums therefor. Obligors shall direct all insurers that
in the event of any loss involving any Collateral or the cancellation of any
insurance policy covering the Collateral, the insurers shall make payments for
such loss and pay all return or unearned premiums directly to Bank and not to
Obligors, or any of them, and Bank jointly.
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In the event of any loss involving any Collateral, Obligors will
give Bank immediate notice thereof and Bank may make proof of loss whether the
same is done by Obligors. Bank is granted a power of attorney by any Obligor
with full power of substitution to file any proof of loss in any Obligor's or
Bank's name, to endorse any Obligor's name on any check, draft or other
instrument evidencing insurance proceeds, and to take any action or sign any
document to pursue any insurance loss claim involving any Collateral. Such
power being coupled with an interest is irrevocable.
In the event of any loss involving any Collateral, Bank, at its
option, may (a) retain and apply all or any part of the insurance proceeds to
reduce, in such order and amounts as Bank may elect, the Bank Indebtedness, or
(b) disburse all or any part of such insurance proceeds to or for the benefit
of an Obligor for the purpose of repairing or replacing Collateral after
receiving proof satisfactory to Bank of such repair or replacement, in either
case without waiving or impairing the Bank Indebtedness or any provision of
this Agreement. Any deficiency thereon shall be paid by Obligors to Bank upon
demand. Obligors shall not take out any insurance covering the Collateral
without having Bank named as loss payee or additional insured thereon, as
applicable. Obligors shall bear the full risk of loss from any loss of any
nature whatsoever with respect to the Collateral.
Notwithstanding the foregoing, in the event that an Obligor suffers
a casualty loss involving any inventory which was Collateral and desires to use
the proceeds of its casualty loss insurance to repair or replace damaged
inventory which was Collateral hereunder, Bank will permit that Obligor to
utilize the proceeds of such insurance solely to purchase such replacement
inventory, provided that: (i) Obligor confirms to Bank in writing that it
intends to continue its business operations and has business interruption
insurance in effect providing for the payment of proceeds in amounts acceptable
to Bank, (ii) Obligor submits to Bank its business plan for operations after
such casualty loss, which plan must be in form and content satisfactory to
Bank, (iii) Bank will hold such insurance proceeds and will disburse such
proceeds upon receipt by Bank of evidence satisfactory to Bank that such
proceeds will be used to purchase inventory as required above, (iv)
disbursement of proceeds will be in compliance with such procedures as Bank may
require, e.g. checks payable to the inventory supplier, and (v) no Event of
Default or Default has occurred and is continuing.
7.13 INSPECTIONS; EXAMINATIONS. Obligors hereby irrevocably
authorize and direct all accountants and auditors employed by any Obligor at
any time to exhibit and deliver to Bank copies of any and all of Obligors'
financial statements, trial balances or other accounting records of any sort in
the accountant's or auditor's possession and copies of all reports submitted to
Obligors by such accountants or auditors, including management letters,
"comment" letters and audit reports, and to disclose to Bank any information
they may have concerning Obligors' financial status and business operations.
Obligors further authorize all federal, state and municipal authorities to
furnish to Bank copies of reports or examinations relating to Obligor, whether
made by an Obligor or otherwise.
The officers of Bank, or such Persons as any of them may designate,
may visit and inspect any of the properties of Obligors, examine (either by
Bank's employees or by independent
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accountants) any of the Collateral or other assets of Obligors, including the
books of account of Obligors, and discuss the affairs, finances and accounts of
Obligors with its officers and with its independent accountants, at such times
as Bank may desire.
Bank may conduct at any time and from time to time, and Obligors
will fully cooperate with, field examinations of the inventory, accounts
receivable and business affairs of Obligors. Obligors shall reimburse Bank for
its out-of-pocket costs in connection with such examinations.
7.14 DEFAULT UNDER OTHER INDEBTEDNESS. If any Indebtedness
of any Obligor is declared or becomes due and payable before its expressed
maturity by reason of default or otherwise or, to the knowledge of an Obligor,
the holder of any such Indebtedness shall have the right (or upon the giving of
notice or the passage of time, or both, shall have the right) to declare such
Indebtedness to be so due and payable, Obligors will immediately give Bank
written notice of such declaration, acceleration or right of declaration.
7.15 PENSION PLANS. Obligors will (a) keep in full force and
effect any and all Plans which are presently in existence or may, from time to
time, come into existence under ERISA and will remain a member of each
multi-employer Plan in which any Obligor is a member, unless such Plans can be
terminated or withdrawal from such multi-employer Plan can be accomplished
without material liability to any Obligor in connection with such termination
(as distinguished from any continuing funding obligation); (b) make
contributions to all of Obligors' Plans in a timely manner and in a sufficient
amount to comply with the requirements of ERISA; (c) comply with all material
requirements of ERISA which relate to such Plans so as to preclude the
occurrence of any Reportable Event, Prohibited Transaction or material
"accumulated funding deficiency" as such term is defined in ERISA; and (d)
notify Bank immediately upon receipt by any Obligor of any notice of the
institution of any proceeding or other action which may result in the
termination of any Plan and deliver to Bank, promptly after the filing or
receipt thereof, copies of all reports or notices which any Obligor files or
receives under ERISA with or from the Internal Revenue Service, the PBGC, or
the U.S. Department of Labor.
7.16 BANK OF ACCOUNT. Obligors will maintain Bank as their
major bank of account, unless otherwise agreed by Bank in writing. Subject to
SECTION 5.5, Obligors may maintain operating accounts into which their accounts
receivable are deposited for ultimate transfer to a deposit account maintained
with the Bank. Obligors may also maintain local operating accounts for
convenience as necessary. Obligors will notify Bank in writing and on a
continuing basis, of all deposit accounts and certificates of deposit
(including the numbers thereof) maintained with or purchased from any other
financial institutions.
7.17 MAINTENANCE OF MANAGEMENT. Obligors will cause their
business to be continuously managed by Vaughn E. Drum and P. Blake Dupuis or
such other persons (serving in such management positions) as may be reasonably
satisfactory to Bank. Obligors will notify Bank promptly in writing of any
change in their board of directors or executive officers.
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7.18 CAPITAL STOCK. UTI will not redeem, repurchase or
otherwise make or pay any distribution or dividend upon, or payment or
distribution to acquire, any of its capital stock or other Equity Securities.
Notwithstanding the foregoing, UTI may redeem, acquire or repurchase its Equity
Securities (a) to pay purchase price reductions or in settlement of indemnity
claims required in connection with any acquisition permitted under SECTION 7.7
in which UTI issues its common stock or other Equity Securities as part of the
purchase price, (b) in connection with the terms of UTI's existing employee
benefit plans in the ordinary course of UTI's business, provided that the
amount expended for such stock purchases related to the benefit plans does not
exceed $1,000,000 in any one fiscal year, (c) in connection with any exercise
of stock options, warrants or other rights to acquire Equity Securities that do
not result in the distribution of cash by UTI other than for fractions of a
unit of any Equity Securities, and (d) in connection with a stock buy-back plan
approved by the Board of Directors of UTI and disclosed to Bank, provided that,
the amount expended for such stock purchases does not exceed Ten Million
Dollars ($10,000,000.00) in the aggregate.
7.19 TRANSACTIONS WITH AFFILIATES. No Obligor will enter
into directly or indirectly any transaction or material group of related
transactions (including without limitation the purchase, lease, sale or
exchange of properties of any kind or the rendering of any service) with any
Affiliate (other than another Obligor) except in the ordinary course and
pursuant to the reasonable requirements of each Obligor's business and upon
fair and reasonable terms no less favorable to such Obligor than would be
obtainable in a comparable arm's-length transaction with a Person not an
Affiliate.
No Obligor will make any loans or extensions of credit to any of its
Affiliates (that are not Obligors), shareholders, directors or officers, except
as hereinafter expressly provided. Each Obligor will cause all of its
Indebtedness at any time owed to its Affiliates (that are not Obligors),
shareholders, directors and officers to be subordinated in all respects to all
present and future Bank Indebtedness and will not make any payments thereon,
except as approved by Bank in writing.
Notwithstanding the foregoing, the restrictions set forth above in
this SECTION 7.19 will not apply to (a) the payment of reasonable and customary
regular fees to directors of UTI who are not employees of UTI; (b) loans and
advances to officers, directors and employees of Obligors for travel,
entertainment and moving and other relocation expenses made in direct
furtherance and in the ordinary course of business of Obligors; (c) any other
transaction with any employee, officer or director of Obligors pursuant to
employee benefit or compensation arrangements entered into in the ordinary
course of business and approved by the Board of Directors of Obligors; or (d)
customary investment banking or similar transactions with an Affiliate,
provided that compensation paid to such Affiliate and related expenses and
reimbursements are in customary amounts as would be determined in arm's-length
negotiations.
Obligors agree to give Bank prompt notice of each Affiliate
transaction involving cash or other compensation in excess of $500,000 (not
including Equity Securities issued as compensation).
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The exceptions permitted under SECTION 7.19 shall be permitted only
provided that (a) no Default or Event of Default has occurred and is
continuing, and (b) any action taken by any Obligor which would constitute a
permitted exception would not cause or result in an Event of Default.
Nothing in this SECTION 7.19 shall prohibit, limit or restrict the
transactions permitted under SECTIONS 7.3, 7.4, 7.5, 7.6, 7.7, 7.15, 7.18 OR
7.20 hereof.
7.20 RESTRICTION ON STOCK TRANSFER. No Obligor, other than
UTI, will directly or indirectly issue, transfer, sell or otherwise dispose of,
or part with control of, or permit the transfer of, any shares of its capital
stock, except for issuance, transfer, sale or disposition by one Obligor to
another.
7.21 NAME OR ADDRESS CHANGE. No Obligor will change its name
or address except upon thirty (30) days prior written notice to Bank and
delivery to Bank of any items requested by Bank to maintain perfection and
priority of Bank's security interests and access to Obligors' books and
records.
7.22 NOTICES. Obligors will promptly notify Bank of (a) any
action or proceeding brought against any Obligor wherein such action or
proceeding would, if determined adversely to any Obligor result in liability of
any Obligor in excess of One Million Dollars ($1,000,000.00) in the aggregate
with all other actions and proceedings, (b) the occurrence of any Default or
Event of Default, (c) the failure of any Obligor to observe any of its
undertakings under the Loan Documents, or (d) any material adverse change in
the assets, business, operations or financial condition of any Obligor.
7.23 ADDITIONAL DOCUMENTS AND FUTURE ACTIONS. Each Obligor
will, at its sole cost, take such actions and provide Bank from time to time
with such agreements, financing statements and additional instruments,
documents or information as the Bank may in its discretion deem reasonably
necessary or advisable to perfect, protect, maintain or enforce the security
interests in the Collateral, to permit Bank to protect or enforce its interest
in the Collateral, or to carry out the terms of the Loan Documents. Each
Obligor hereby authorizes and appoints Bank as its attorney-in-fact, with full
power of substitution, to take such actions as Bank may deem advisable to
protect the Collateral and its interests thereon and its rights hereunder, to
execute on that Obligor's behalf and file at that Obligor's expense financing
statements, and amendments thereto, in those public offices deemed necessary or
appropriate by Bank to establish, maintain and protect a continuously perfected
security interest in the Collateral, and to execute on that Obligor's behalf
such other documents and notices as Bank may deem advisable to protect the
Collateral and its interests therein and its rights hereunder. Such power
being coupled with an interest is irrevocable. Each Obligor irrevocably
authorizes the filing of a carbon, photographic or other copy of this
Agreement, or of a financing statement, as a financing statement and agrees
that such filing is sufficient as a financing statement.
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7.24 MATERIAL ADVERSE CONTRACTS. No Obligor will become or
be a party to any contract or agreement which has a materially adverse impact
on that Obligor's ability to perform under this Agreement or any other
agreement with Bank to which that Obligor is a party.
7.25 RESTRICTIONS ON USE OF PROCEEDS. No Obligor will carry
or purchase with the proceeds of the Line any "margin security" within the
meaning of Regulations U, G, T or X of the Board of Governors of the Federal
Reserve System.
7.26 SUBORDINATED TERM LOAN. Obligors will not amend, modify
or restate any of the provisions of the Subordinated Term Loan or any of the
Subordinated Debt Loan Documents, in any way which in Bank's judgment would
adversely affect the Bank Indebtedness, the Collateral, the Subordination
Agreement, any Obligor's business, operations or financial condition, or any
rights or remedies of Bank. Without limitation, no modification shall be made
which increases the interest rate, fees or other sums payable in connection
with the Subordinated Term Loan or under the Subordinated Debt Loan Documents,
shortens or accelerates the maturity or due date of any payments under the
Subordinated Term Loan, grants any security interest to secure all or any part
of the Subordinated Term Loan, makes any financial covenant or ratio more
restrictive, or results in any situation in which a default could occur under
the Subordinated Term Loan without such event constituting an Event of Default
hereunder.
The provisions in the Subordination Agreement permitting the
Subordinated Lenders to enter into amendments or modifications of the
Subordinated Debt Loan Documents with respect to interest rate increases and
fees shall not be deemed to be a consent or agreement by Bank to any increase
in the interest rate of the Subordinated Term Loan or any new or increased fees
payable in connection with the Subordinated Term Loan. Such amendments or
modifications shall still require the consent by Bank. Obligors will give Bank
a copy of any proposed amendment, modification or restatement of any
Subordinated Debt Loan Document at least ten (10) days prior to the execution
thereof. Obligors will not enter into any such amendment, modification or
restatement, if Bank has notified Obligors that it would be a violation of this
SECTION 7.26.
No Obligor will, directly or indirectly, repurchase, redeem, or
defease prior to the date when due or otherwise make any prepayment prior to
the date when due, or effect any prepayment that is optional on the part of
such Obligor, on any Indebtedness for borrowed money (other than the
Subordinated Term Loan) without the prior written consent of Bank, except that
no such consent is required for and UTI may effect (a) any transaction in which
UTI's capital stock is exchanged for Indebtedness owed by any of the Obligors,
including any cashless warrant exercise arrangements in which warrants are
exercised without cash payment by the Person so exercising, or exchange of
indebtedness owed by any of the Obligors for capital stock of UTI, (b)
permitted prepayments under this Agreement, (c) prepayments required or
permitted under the terms of the Subordinated Debt Loan Documents, and (d)
prepayments of Indebtedness owed to Bank in accordance with or required under
this Agreement. Obligors will give Bank a copy of each notice of default or
other substantive notice received by any Obligors from any Subordinated Lender,
as soon as possible but no later than two (2) Business Days after such
Obligor's receipt. Obligors will also deliver to Bank a copy of each
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compliance certificate or other report or certificate delivered by any Obligor
to any Subordinated Lender simultaneously with delivery to such Subordinated
Lender. Nothing contained in this SECTION 7.26 shall limit, restrict, waive or
adversely affect any of Bank's rights or remedies under the Subordination
Agreement.
Promptly upon becoming aware of the existence of any default or
event of default under the Subordinated Debt Loan Documents, Obligors will give
Bank written notice specifying the nature thereof and describing what action
the Obligors are taking or propose to take with respect thereto.
Notwithstanding anything herein or elsewhere to the contrary, no
Obligor will make any payment on any of the Subordinated Term Loan, if an Event
of Default or Default has occurred and is continuing, or such payment would
result in an Event of Default.
7.27 ACQUISITION DOCUMENTS. Obligors will not amend or
modify any of the documents or agreements executed and delivered in connection
with any prior acquisitions or in connection with any future acquisitions
approved or permitted under SECTION 7.7 in any material way or waive any
material rights thereunder.
8. FINANCIAL COVENANTS. Except with the written consent of Bank,
Obligors will comply with the following:
8.1 TOTAL FUNDED DEBT TO EBITDA RATIO. Obligors will
maintain a Total Funded Debt to EBITDA Ratio of not more than 1.5 to 1.0 as of
the end of each fiscal quarter, calculated on a rolling four (4) quarters basis
for the four (4) full fiscal quarters then ended:
8.2 MODIFIED QUICK RATIO. Obligors will maintain a Modified
Quick Ratio of not less than 1.25 to 1.0 as of the end of each fiscal quarter.
8.3 INTEREST COVERAGE RATIO. Obligors will maintain an
Interest Coverage Ratio of not less than 4.0 to 1.0 as of the end of each
fiscal quarter, calculated on a rolling four (4) quarters basis for the four
(4) full fiscal quarters then ended.
8.4 CONSOLIDATED TANGIBLE NET WORTH. Obligors will maintain
a Consolidated Tangible Net Worth of at least One Hundred Million Dollars
($100,000,000.00) as of June 30, 1998 and as of the end of each fiscal quarter
thereafter, provided that, such minimum required Consolidated Tangible Net
Worth shall be increased each fiscal quarter by an amount equal to seventy-five
percent (75%) of Obligors' Net Income for the immediately preceding fiscal
quarter during the term of this Agreement, commencing with the fiscal quarter
ending September 30, 1998. The minimum required Consolidated Tangible Net
Worth shall not be reduced by any net losses suffered by Obligors during any
fiscal quarter.
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8.5 CAPITAL EXPENDITURES. Obligors will not cause, suffer
or permit Obligors' aggregate annual Capital Expenditures (not including the
expenditures comprising the purchase price of Permitted Acquisitions) to exceed
(i) $15,000,000 for the six month period ended December 31, 1998, (ii)
$20,000,000 for the twelve month period ended December 31, 1999, and (iii)
$10,000,000 for the six month period ended June 30, 2000. Such permitted
Capital Expenditures are on a non-cumulative basis as to unused or unaccrued
portions for any fiscal year. However, amounts accrued in accordance with GAAP
in one year but not disbursed, may be disbursed in a subsequent year and
counted (without duplication) towards the Capital Expenditures limit in the
year for which the accrual was made.
8.6 CHANGES TO FINANCIAL COVENANTS. The Bank may condition
extension of the Line after the Contract Period upon revision of the foregoing
financial covenants as Bank in its sole discretion may require.
9. ACCOUNTING RECORDS, REPORTS AND FINANCIAL STATEMENTS.
Obligors will maintain books of record and account in which full, correct and
current entries in accordance with GAAP will be made of all of their dealings,
business and affairs, and Obligors will deliver to Bank the following:
9.1 ANNUAL STATEMENTS. As soon as available and in any
event within ninety (90) days after the end of each fiscal year of Obligors:
(a) the audited, consolidated and unaudited
consolidating income and retained earnings statements of Obligors for such
fiscal year,
(b) the audited, consolidated and unaudited
consolidating balance sheet of Obligors as at the end of such fiscal year, and
(c) the audited, consolidated statement of cash flows
of Obligors for such fiscal year,
setting forth in comparative form the corresponding figures as at the end of
the previous fiscal year, all in reasonable detail, including all supporting
schedules and comments. The foregoing statements and balance sheets shall be
prepared in accordance with GAAP and shall be audited by independent certified
public accountants of recognized standing acceptable to Bank in the reasonable
exercise of its discretion with respect to which such accountants shall deliver
their unqualified opinion. Bank approves Ernst & Young as acceptable certified
public accountants. Such statements shall also be certified by the chief
financial officer of Obligors to be accurate.
9.2 QUARTERLY STATEMENTS. As soon as available and in any
event within forty-five (45) days after the close of each fiscal quarter of
Obligors:
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(a) the consolidated and consolidating income and
retained earnings statements of Obligors for such quarter;
(b) the consolidated and consolidating balance sheet
of Obligors as of the end of such quarter; and
(c) the consolidated statement of cash flows of
Obligors for such quarter;
setting forth in comparative form the corresponding figures as at the end of
the corresponding quarter of the previous fiscal year (if applicable), all in
reasonable detail, subject to year end adjustments and certified by the chief
financial officer of Obligors to be a fair representation in all material
respects of the financial condition and results of operation of the Obligors
for such period and to have been prepared in all material respects in
accordance with GAAP.
9.3 ACCOUNTS RECEIVABLE STATEMENTS. Together with the
quarterly statements required under SECTION 9.2, a summary schedule of the
Borrowers' accounts receivable and the aging thereof, on a summary basis, all
certified by the chief financial officer of Obligors to be a fair
representation of accounts receivable of Obligors. Obligors will also provide
Bank with all information reasonably requested by Bank with respect to any
account debtor.
9.4 AUDIT REPORTS. Promptly upon receipt thereof, one copy
of each other report submitted to any Obligor, by independent accountants,
including management letters, "comment" letters, in connection with any annual,
interim or special audit report made by them of the books of any Obligor.
9.5 SEC AND OTHER REPORTS. Promptly upon their becoming
available, (a) any effective registration statement (other than a registration
statement on Form S-8) and all related materials being publicly filed in
connection with any securities offering of any Obligor, if any, (b) one copy of
each financial statement, report, notice or proxy statement sent by any Obligor
to its creditors and stockholders generally and of each regular or periodic
report, and any effective registration statement (other than a registration
statement on Form S-8) or final prospectus filed by any Obligor with any
securities exchange or the Securities and Exchange Commission or any successor
agency, (c) copies of any orders in any proceedings to which any Obligor is a
party, issued by any governmental agency, Federal or state, having jurisdiction
over any Obligor which would have a material adverse effect on the Collateral,
assets, business, operations or financial condition of an Obligor or its
ability to perform its obligations under the Loan Documents, and (d) any press
releases issued by any Obligor.
9.6 REQUESTED INFORMATION. With reasonable promptness, all
such other data, information and projections in respect of the condition,
operation and affairs of any Obligor as Bank may reasonably request from time
to time.
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9.7 COMPLIANCE CERTIFICATES. Within the periods provided in
SECTIONS 9.1 AND 9.2 above, a certificate of the chief financial officer of
Obligors: (a) stating that, to the best of such officer's knowledge after due
inquiry, Obligors have observed, performed and complied with each and every
undertaking contained herein, (b) setting forth the information and
computations (in sufficient detail) required in order to establish whether
Obligors were operating in compliance with the financial covenants in SECTION 8
of this Agreement, and (c) certifying that, to the best of such officer's
knowledge after due inquiry, as of the date of such certification, there does
not exist any Event of Default or Default. Such certificate will be in the
form of EXHIBIT "B" attached hereto.
9.8 ACCOUNTANT'S CERTIFICATE. Within the period provided in
SECTION 9.1, a report of the independent public accountants who render an
opinion with respect to the financial statements referred to therein, stating
that they have reviewed the terms of this Agreement and that in making the
examinations necessary to their certification mentioned in SECTION 9.1, they
have reviewed the accounts and condition of Obligors during the accounting
period covered by their certificate and that such review did not disclose the
existence of any condition or event which constitutes a Default or Event of
Default (or that such conditions or events existed, describing them).
9.9 PROJECTIONS AND CASH FLOW. As soon as available and in
any event prior to the end of each fiscal year of Obligors, projected
consolidated income statement, balance sheet and cash flow statement of
Obligors on a quarterly basis for the next succeeding four (4) fiscal quarters
prepared by the chief financial officer of Obligors. Obligors covenant that
(a) all projections required by this section shall be prepared by the chief
financial officer of Obligors and shall represent the best available good faith
estimate of Obligors regarding the course of Obligors' business for the period
covered thereby; (b) the assumptions set forth in the projections delivered
hereafter shall be reasonable and realistic based on then current economic
conditions; and (c) Obligors shall have no knowledge at the time of delivery of
future projections of any reason why Obligors shall not be able to meet the
performance levels set forth in said projections.
10. ENVIRONMENTAL REPRESENTATIONS AND COVENANTS.
10.1 REPRESENTATIONS. Obligors represent to Bank that to the
best of Obligors' knowledge: (a) the Environmental Affiliates are in
compliance in all material respects with all Environmental Requirements and
Obligors have no knowledge of any circumstances which may prevent or interfere
with such compliance in the future; (b) the Environmental Affiliates have all
material licenses, permits, approvals and authorizations required under
applicable Environmental Requirements; (c) there are no pending or threatened
claims against any of the Environmental Affiliates or any of their assets
related to the failure to comply with any Environmental Requirements, or any
facts or circumstances which could give rise to such a claim; (d) no facility
or property now or previously owned, operated or leased by any Environmental
Affiliate is an Environmental Cleanup Site; (e) no Environmental Affiliate has
treated, stored, transported, handled or disposed of Special Materials at or
adjacent to any Environmental Cleanup Site; (f) there are no liens or claims
for cost reimbursement outstanding or threatened against any Environmental
Affiliate or any of their assets, or any facts or circumstances which could
give rise to such a lien or claim; and (g) there are no facts
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or circumstances which, under the provisions of any Environmental Requirements,
could restrict in any material respect the use, occupancy or transferability of
any of the Collateral or any of the facilities owned, leased or operated by any
Environmental Affiliate.
10.2 REAL PROPERTY. Obligors represent and warrant to Bank
that, to the best of Obligors' knowledge, there are no Special Materials
presently located on or, to the best of their knowledge, near any real property
owned, leased or operated by any Environmental Affiliate (collectively, "REAL
PROPERTY") except for Special Materials which are and have at all times been
treated, stored, transported, handled and disposed of in compliance in all
material respects with all Environmental Requirements. Obligors represent to
Bank that, to the best of Obligors' knowledge, the Real Property is not now
being used nor, to the best of their knowledge, has it ever been used in the
past for activities involving Special Materials, including but not Limited to
the use, generation, collection, storage, treatment, or disposal of any Special
Materials except for Special Materials which are and have at all times been
treated, stored, transported, handled and disposed of in compliance in all
material respects with all Environmental Requirements. Without limiting the
generality of the foregoing, the Real Property is not being used nor, to the
best of Obligors' knowledge, have they ever been used in the past for a
landfill, surface impoundment or other area for the treatment, storage or
disposal of solid waste (including solid waste such as sludge).
Obligors and the Bank hereby acknowledge and agree that they have
received a report entitled Phase I and Environmental Assessment covering real
property in Victoria, Texas, (the "REPORT"), prepared by Southern Ecology
Management, Inc. and Miller Environmental Service, Inc. (the "CONSULTANTS")
pursuant to which the Consultants describe certain matters that may affect the
environmental remediation obligations of UTI and Triad related to the
acquisition of Southland. The representations and warranties of the Obligors
with respect to compliance with environmental laws set forth in this Agreement
are hereby qualified by the terms and content of the Report. The Obligors
represent and warrant that compliance with the terms and recommendations in the
Report will not materially and adversely affect the business, financial
condition or results of operations of the Obligors taken as a whole.
10.3 COVENANT REGARDING COMPLIANCE. Obligors shall take or
cause all Environmental Affiliates to take, at Obligors' and such Environmental
Affiliate's sole expense, such actions as may be necessary to comply in all
material respects with all Environmental Requirements, as hereinafter defined.
If any Environmental Affiliate shall fail to take such action, Bank may make
advances or payments towards performance or satisfaction of the same but shall
be under no obligation to do so. All sums so advanced or paid, including all
sums advanced or paid by Bank in connection with any judicial or administrative
investigation or proceeding relating thereto, including, without limitation,
attorney's fees, fines, or other penalty payments, shall be at once repayable
by Obligors and all sums so advanced or paid shall become a part of the Bank
Indebtedness.
The Environmental Affiliates will maintain all licenses, permits,
approvals and authorizations required under applicable Environmental
Requirements. In connection with off-site treatment, storage, handling,
transportation or disposal of Special Materials, the Environmental
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Affiliates will conduct such activities only at facilities and with carriers
who operate in compliance with all Environmental Requirements and will obtain
certificates of compliance or disposal from all contractors retained in
connection with such activities.
10.4 NOTICES. In the event Obligors become aware of any
past, present or future facts or circumstances which have given rise or could
give rise to a claim against any Environmental Affiliate related to a failure
to comply with any Environmental Requirements, Obligors will promptly give Bank
notice thereof, together with a written statement of an officer of Obligors
setting forth the details thereof and the action with respect thereto taken or
proposed to be taken by the Environmental Affiliates.
10.5 INDEMNITY. Obligors agree to indemnify, defend and hold
harmless Bank, its parents, subsidiaries, successors and assigns, and any
officer, director, shareholder, employee, Affiliate or agent of Bank, for all
loss, liability, damage, cost and expenses, including, without limitation,
attorney's fees and disbursements (including the reasonable allocated cost of
in-house counsel and staff) arising from or related to (a) the release of any
Special Materials at any facility at any time owned, leased or operated by any
Obligor or any Environmental Affiliate, (b) the release of any Special
Materials treated, stored, transported, handled, generated or disposed of by or
on behalf of any Obligor or any Environmental Affiliate, at any third party
owned site, (c) any claim against Borrowers or any Environmental Affiliate that
they have failed to comply with all Environmental Requirements, and (d) the
breach by Obligors of any representation or covenant in this SECTION 10.
10.6 TESTING. Bank shall have the right from time to time to
designate such persons ("Environmental Consultants") as Bank may select to
visit, inspect, examine and test all properties owned, leased or operated by
and all products and wastes generated, treated, stored, transported, handled or
disposed of by or on behalf of any Environmental Affiliate, for the purpose of
investigating compliance with Environmental Requirements, any actual or
potential claims related thereto, and any condition which could result in
potential liability, cost or expenses to the Bank. Obligors will permit, and
will cause all Environmental Affiliates to permit, such Environmental
Consultants to have access to all of such properties, products and wastes and
all books, records and reports related to compliance by the Environmental
Affiliates with all Environmental Requirements. Obligors will supply, and will
cause all Environmental Affiliates to supply, Bank or the Environmental
Consultants with all information, records, correspondence, audits, reviews and
materials related to compliance by the Environmental Affiliates with all
Environmental Requirements and will make available to Bank or the Environmental
Consultants appropriate personnel employed by or consultants retained by the
Environmental Affiliates having knowledge of such matters.
The cost of such visits, inspections, examination and tests shall be
borne by the Obligors. In the event Bank pays such costs, such sums shall be
at once repayable by Obligors and all sums so advanced or paid by Bank shall
become part of the Bank Indebtedness. Notwithstanding the foregoing, the Bank
shall have no obligation to perform any tests, examinations or inspections or
to monitor the Environmental Affiliates' compliance with all Environmental
Requirements.
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10.7 SURVIVAL. The representations and covenants of Obligors
contained in this SECTION 10, including without limitation the indemnification
obligation of Obligors, shall survive the occurrence of any event whatsoever,
including the payment of the Bank Indebtedness or any investigation by or
knowledge of Bank.
10.8 DEFINITIONS. For purposes of the foregoing:
(a) "ENVIRONMENTAL CLEANUP SITE" shall mean any
location which is listed or proposed for listing on the National Priorities
List, on CERCLIS or on any similar state list of sites requiring investigation
or cleanup, or which is the subject of any pending or threatened action, suit,
proceeding or investigation related to or arising from any alleged violation of
any Environmental Requirements.
(b) "ENVIRONMENTAL REQUIREMENTS" means any and all
applicable federal, state or local laws, statutes, ordinances, regulations or
standards, administrative or court orders or decrees, common law doctrines or
private agreements, relating to (i) pollution or protection of the environment
and natural resources, (ii) exposure of employees or other persons to Special
Materials, (iii) protection of the public health and welfare from the effects
of Special Materials and their products, by-products, wastes, emissions,
discharges or releases, and (iv) regulation, licensing, approval or
authorization of the manufacture, generation, use, formulation, packaging,
labeling, transporting, distributing, handling, storing or disposing of any
Special Materials.
(c) "SPECIAL MATERIALS" means any and all materials
which, under Environmental Requirements, require special handling in use,
generation, collection, storage, treatment or disposal, or payment of costs
associated with responding to the lawful directives of any court or agency of
competent jurisdiction. Special Materials shall include, without limitation:
(i) any flammable substance, explosive, radioactive material, hazardous
material, hazardous waste, toxic substance, solid waste, pollutant, contaminant
or any related material, raw material, substance, product or by-product of any
substance specified in or regulated or otherwise affected by any Environmental
Requirements (including but not limited to any "hazardous substance" as defined
in the Comprehensive Environmental Response, Compensation and Liability Act of
1980 as amended or any similar state or local law), (ii) any toxic chemical or
other substance from or related to industrial, commercial or institutional
activities, and (iii) asbestos, gasoline, diesel fuel, motor oil, waste and
used oil, heating oil and other petroleum products or compounds,
polychlorinated biphenyls, radon, urea formaldehyde and lead-containing
materials.
11. CONDITIONS OF CLOSING. The obligation of Bank to make
available the Line is subject to the performance by Obligors of all of their
agreements to be performed hereunder and to the following further conditions
(any of which may be waived by Bank):
11.1 LOAN DOCUMENTS. Obligors and all other required persons
and entities will have executed and delivered to Bank the Loan Documents.
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11.2 REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Obligors set forth in the Loan Documents and the Subordinated
Debt Loan Documents will be true at and as of the date hereof, except for such
representations and warranties that are by their express terms limited to a
specific prior date.
11.3 NO DEFAULT. No condition or event shall exist or have
occurred which would constitute a Default or Event of Default hereunder or
under the Subordinated Loan Documents.
11.4 PROCEEDINGS AND DOCUMENTS. All proceedings taken by
Obligors in connection with the transactions contemplated by this Agreement and
all documents incident to such transactions shall be satisfactory in form and
substance to Bank and Bank's counsel, and Bank shall have received all
documents or other evidence which it reasonably may request in connection with
such proceedings and transactions. Each Obligor shall have delivered to Bank a
certificate, in form and substance satisfactory to Bank, dated the date hereof
and signed on behalf of that Obligor by an officer of that Obligor, certifying
(a) true copies of the Articles of Incorporation and Bylaws of that Obligor in
effect on such date, (b) true copies of all corporate actions taken by that
Obligor relative to the Loan Documents, and (c) the names, true signatures and
incumbency of the officers of that Obligor authorized to execute and deliver
this Agreement and the other Loan Documents. Bank may conclusively rely on
such certificate unless and until a later certificate revising the prior
certificate has been received by Bank.
11.5 DELIVERY OF OTHER DOCUMENTS. The following documents
shall have been delivered by or on behalf of Obligors to Bank, all of which
must be in form and content satisfactory to Bank:
(a) GOOD STANDING CERTIFICATES. A good standing
certificate certifying to the good standing and corporate status of each
Obligor in its state of incorporation, good standing/foreign qualification
certificates from all other jurisdictions in which Borrowers are required to be
qualified to do business, as the Bank may require.
(b) AUTHORIZATION DOCUMENTS. Evidence of
authorization of each Obligor's execution and full performance of this
Agreement, the Loan Documents and all other documents and actions required
hereunder.
(c) OPINION OF COUNSEL. An opinion of counsel for
Obligors in form and content satisfactory to Bank, covering matters related to
the laws of Pennsylvania, Oklahoma, Texas, Delaware (as to corporate law
matters only) and such other jurisdictions as required by Bank.
(d) LIEN SEARCH. Copies of record searches
(including UCC searches and judgments, suits, tax and other lien searches)
confirming that Bank has a first priority security interest in the Collateral,
acceptable to Bank.
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(e) OTHER DOCUMENTS. Such other documents as may be
required by Bank.
11.6 NON-WAIVER OF RIGHTS. By completing the closing
hereunder, or by making advances hereunder, Bank does not thereby waive a
breach of any warranty or representation made by any Obligor hereunder or any
agreement, document, or instrument delivered to Bank or otherwise referred to
herein, and any claims and rights of Bank resulting from any breach or
misrepresentation by any Obligor are specifically reserved by Bank.
12. CERTAIN CONDITIONS TO SUBSEQUENT ADVANCES. Subsequent
advances and issuances of letters of credit under the Line shall be conditioned
upon the following conditions and each request by an Obligor for an advance or
issuance of a letter of credit shall constitute a representation by Obligors to
Bank that each condition has been met or satisfied:
12.1 REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Obligors contained herein or in the Loan Documents shall be true
at and as of the date of such advance as if made on such date, and each request
for an advance shall constitute reaffirmation by Obligors that such
representations and warranties are then true.
12.2 NO DEFAULT. No condition or event shall exist or have
occurred at or as of the date of such advance which would constitute a Default
or Event of Default hereunder.
12.3 OTHER REQUIREMENTS. Bank shall have received all
certificates, authorizations, affidavits, schedules and other documents which
are provided for hereunder or under the Loan Documents, or which Bank may
reasonably request.
13. DEFAULT AND REMEDIES.
13.1 EVENTS OF DEFAULT. The occurrence and continuation, of
any one or more of the following events shall constitute an Event or Events of
Default hereunder:
(a) The failure of Obligors to pay any amount of
principal or interest on the Line Note, or any fee or other sums payable
hereunder, or any other Bank Indebtedness on the date on which such payment is
due, whether on demand, at the stated maturity or due date thereof, or by
reason of any requirement for the prepayment thereof, by acceleration or
otherwise, provided that, with respect to payments of sums other than principal
and interest, such failure to pay continues unremedied for a period of ten (10)
days after such sums are first due;
(b) The failure of any Obligors to duly perform or
observe any obligation, covenant or agreement on its part contained herein or
in any other Loan Document, provided that, notwithstanding the foregoing,
Obligors' failure to comply with the provisions of SECTIONS 7.4, 7.11, 7.12
(other than the requirement that insurance coverage be maintained at all
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times), 9.3 AND 9.9 shall not constitute an Event of Default hereunder unless
such failure to comply continues unremedied for a period of fifteen (15) days
after the earlier of (i) any Obligor receives notice from Bank of such failure,
or (ii) a responsible officer of any Obligor has actual notice of such failure;
(c) The failure of any Obligor to pay any Indebtedness
for borrowed money in excess of One Million Dollars ($1,000,000.00) due to any
third Person (including without limitation the Subordinated Term Loan) or the
existence of any other event of default under any loan, security agreement,
mortgage or other agreement providing for loans or credit extensions in excess
of One Million Dollars ($1,000,000.00) pertaining thereto binding an Obligor
after the expiration of any notice and/or grace periods permitted in such
documents;
(d) The failure of any Obligor to pay or perform any
other material obligation to Bank under any other agreement or note, not
constituting a Loan Document, after the expiration of any notice and/or grace
periods permitted in such documents;
(e) The adjudication of any Obligor as a bankrupt or
insolvent, or the entry of an Order for Relief any Obligor or the entry of an
order appointing a receiver or trustee for any Obligor of any of their property
or approving a petition seeking reorganization or other similar relief under
the bankruptcy or other similar laws of the United States or any state or any
other competent jurisdiction;
(f) A proceeding under any bankruptcy, reorganization,
arrangement of debt, insolvency, readjustment of debt or receivership law is
filed by or against any Obligor or any Obligor makes an assignment for the
benefit of creditors, or any Obligor takes any action to authorize any of the
foregoing;
(g) The suspension of the operation of any Obligor's
present business (except as permitted under SECTION 7.7(C)), or any Obligor
becoming unable to meet its debts as they mature, or the admission in writing
by any Obligor to such effect, or any Obligor calling any meeting of all or any
material portion of its creditors for the purpose of debt restructure;
(h) All or any part of the Collateral or any material
part of the other assets of any Obligor are attached, seized, subjected to a
writ or distress warrant, or levied upon, or come within the possession or
control of any receiver, trustee, custodian or assignee for the benefit of
creditors;
(i) The entry of a final judgment for the payment of
money against any Obligor which, within ten (10) days after such entry, shall
not have been discharged or execution thereof stayed pending appeal or shall
not have been discharged within five (5) days after the expiration of any such
stay;
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(j) Any representation or warranty of any Obligor in
any of the Loan Documents is discovered to be untrue in any material respect or
any statement, certificate or data furnished by any Obligor pursuant hereto is
discovered to be untrue in any material respect as of the date as of which the
facts therein set forth are stated or certified;
(k) Any Obligor voluntarily or involuntarily dissolves
or is dissolved, terminates or is terminated;
(l) Any Obligor is enjoined, restrained, or in any way
prevented by the order of any court or any administrative or regulatory agency,
the effect of which order restricts an Obligor from conducting all or any
material part of its business;
(m) A material breach by any Obligor occurs under any
material agreement, document or instrument, whether heretofore, now or
hereafter existing between any Obligor and any other Person;
(n) A material and adverse change occurs in the
operations, management or financial condition of the Obligors taken as a whole
or in the value of the Collateral;
(o) The Collateral or the prospects of the payment of
the Bank Indebtedness is jeopardized or impaired in any material respect or
Bank otherwise deems itself insecure with respect to any Obligor's ability to
pay the Bank Indebtedness or otherwise perform hereunder;
(p) Any material uninsured damage to, or loss, theft,
or destruction of, any of the Collateral occurs;
(q) Any strike, lockout, labor dispute, embargo,
condemnation, act of God or public enemy, or other casualty loss occurs
resulting in the cessation or substantial curtailment of production or other
revenue producing activities at any facility of any Obligor for more than
thirty (30) consecutive days;
(r) The loss, suspension, revocation or failure to
renew any license or permit now held or hereafter acquired by any Obligor,
which loss, suspension, revocation or failure to renew might have a material
adverse effect on the business, profits, assets or financial condition of the
Obligors taken as a whole;
(s) Any change in the stock ownership of any Obligor
(other than (i) a change in stock ownership of UTI, or (ii) or a change in
ownership as permitted under SECTION 7.20); any issuance of stock, debentures,
warrants or other Equity Securities of any Obligor (other than (A) any issuance
of stock, debentures, warrants or other Equity Securities of UTI, or (B) any
issuance of stock, debentures, warrants or other equity securities permitted
under SECTION 7.20); or any pledge of the stock of any Obligor (other than UTI)
to any Person other than the Bank;
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(t) Any breach by any Obligor or any creditor of their
obligations under any subordination agreement now or hereafter executed in
favor of Bank, including without limitation, the Subordination Agreement;
(u) The validity or enforceability of this Agreement
or any of the Loan Documents is contested by any Obligor or any stockholder of
any Obligor; or any Obligor denies that it has any or any further liability or
obligation hereunder or thereunder; or
(v) The continuing failure of any Borrower to perform
any obligation under the Subordinated Debt Loan Documents regardless of whether
any Subordinated Lender shall declare an event of default to have occurred as a
result thereof, or the occurrence and continuation of any event of default or
event which with the giving of notice, passage of time or both would constitute
an event of default under the Subordinated Debt Loan Documents.
13.2 REMEDIES. At the option of the Bank, upon the
occurrence and during the continuance of an Event of Default:
(a) The entire unpaid principal of the Line, all other
Bank Indebtedness, or any part thereof, all interest accrued thereon, all fees
due hereunder and all other obligations of Obligors to Bank hereunder or under
any other agreement, note or otherwise arising will become immediately due and
payable without any further demand or notice;
(b) The Line will be terminated and Obligors will
receive no further extensions of credit thereunder;
(c) Bank may increase the interest rate on the Bank
Indebtedness to the Default Rate, without notice;
(d) Bank may enter any premises occupied by any
Obligor and take possession of the Collateral and any records relating thereto;
(e) Bank may exercise each and every right and remedy
granted to it under the Loan Documents, under the Uniform Commercial Code and
under any other applicable law or at equity; and/or
(f) Bank may exercise each and every right and remedy
under the Subordination Agreement.
If an Event of Default occurs under SECTION 13.1(E) or (F), all Bank
Indebtedness shall become immediately due and payable.
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13.3 SALE OR OTHER DISPOSITION OF COLLATERAL. The sale,
lease or other disposition of the Collateral, or any part thereof, by Bank
after an Event of Default may be for cash, credit or any combination thereof,
and Bank may purchase all or any part of the Collateral at public or, if
permitted by law, private sale, and in lieu of actual payment of such purchase
price, may set-off the amount of such purchase price against the Bank
Indebtedness then owing. Any sales of the Collateral may be adjourned from
time to time with or without notice. Bank may cause the Collateral to remain
on any Obligor's premises or otherwise or to be removed and stored at premises
owned by other persons, at Obligors' expense, pending sale or other disposition
of the Collateral. Obligors, at Bank's request, shall assemble the Collateral
consisting of inventory and tangible assets and make such assets available to
Bank at a place to be designated by Bank. Bank shall have the right to conduct
such sales on any Obligor's premises, at any Obligor's expense, or elsewhere,
on such occasion or occasions as Bank may see fit. Any notice required to be
given by Bank of a sale, lease or other disposition or other intended action by
Bank with respect to any of the Collateral which is deposited in the United
States mail, postage prepaid and duly addressed to Obligors at the address
specified in SECTION 14 below, at least five (5) Business Days prior to such
proposed action, shall constitute fair and reasonable notice to Obligors of any
such action. The net proceeds realized by Bank upon any such sale or other
disposition, after deduction for the expenses of retaking, holding, storing,
transporting, preparing for sale, selling or otherwise disposing of the
Collateral incurred by Bank in connection therewith and all other costs and
expenses related thereto including attorney fees, shall be applied in such
order as Bank, in its sole discretion, elects, toward satisfaction of the Bank
Indebtedness. Bank shall account to Obligors for any surplus realized upon
such sale or other disposition, and Obligors shall remain liable for any
deficiency. The commencement of any action, legal or equitable, or the
rendering of any judgment or decree for any deficiency shall not affect Bank's
security interest in the Collateral. Obligors agree that Bank has no
obligation to preserve rights to the Collateral against any other parties.
Bank is hereby granted a license or other right to use, after an Event of
Default, without charge, any Obligor's labels, general intangibles,
intellectual property, equipment, real estate, patents, copyrights, rights of
use of any name, trade secrets, trade names, trademarks, service marks and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale and selling any
inventory or other Collateral and Obligors' rights under all contracts,
licenses, approvals, permits, leases and franchise agreements shall inure to
Bank's benefit. Bank shall be under no obligation to marshall any assets in
favor of any Obligor or any other party or against or in payment of any or all
of the Bank Indebtedness.
13.4 ACTIONS WITH RESPECT TO ACCOUNTS. Each Obligor hereby
irrevocably makes, constitutes and appoints Bank (and any of Bank's designated
officers, employees or agents) as its true and lawful attorney-in-fact, with
full power of substitution, with power to sign its name and to take any of the
following actions, in its name or the name of Bank, as Bank may determine,
without notice to any Obligor and at Obligors' expense:
(a) Verify the validity and amount of or any other
matter relating to the Collateral by mail, telephone, telecopy or otherwise;
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(b) Upon the occurrence of an Event of Default, notify
all account debtors that Obligors' accounts have been assigned to Bank and that
Bank has a security interest therein;
(c) Upon the occurrence of an Event of Default, direct
all account debtors to make payment of all Obligors' accounts directly to Bank
and forward invoices directly to such account debtors;
(d) Upon the occurrence of an Event of Default, take
control in any manner of any cash or non-cash items of payment or proceeds of
such accounts;
(e) Upon the occurrence of an Event of Default, notify
the United States Postal Service to change the address for delivery of mail
addressed to any Obligor to such address as Bank may designate;
(f) Upon the occurrence of an Event of Default, have
access to any lockbox or postal boxes into which any Obligor's mail is
deposited and receive, open and dispose of all mail addressed to any Obligor
(any sums received pursuant to the exercise of the rights provided in SECTIONS
13.4(A) through (E) above may, at Bank's option, be deposited in a cash
collateral account);
(g) Upon the occurrence of an Event of Default, take
control in any manner of any rejected, returned, stopped in transit or
repossessed goods relating to any accounts;
(h) Upon the occurrence of an Event of Default,
enforce payment of and collect any accounts, by legal proceedings or otherwise,
and for such purpose Bank may:
(i) Demand payment of any accounts or direct any
account debtors to make payment of accounts directly to Bank;
(ii) Receive and collect all monies due or to
become due to any Obligor;
(iii) Exercise all of any Obligor's rights and
remedies with respect to the collection of accounts;
(iv) Settle, adjust, compromise, extend, renew,
discharge or release the accounts;
(v) Sell or assign the accounts on such terms,
for such amount and at such times as Bank deems advisable;
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(vi) Prepare, file and sign any Obligor's name or
names on any Proof of Claim or similar document in any proceeding filed under
federal or state bankruptcy, insolvency, reorganization or other similar law as
to any account debtor;
(vii) Prepare, file and sign any Obligor's name or
names on any Notice of Lien, Claim of Mechanic's Lien, Assignment or
Satisfaction of Lien or Mechanic's Lien or similar document in connection with
the Collateral;
(viii) Endorse the name of each Obligor upon any
chattel papers, documents, instruments, invoices, freight bills, bills of lading
or similar documents or agreements relating to the accounts or goods pertaining
thereto or upon any checks or other media of payment or evidences of a security
interest that may come into Bank's possession;
(ix) Sign the name of each Obligor to
verifications of accounts and notices thereof sent by account debtors to such
Obligor; or
(x) Take all other actions necessary or
desirable to protect any Borrower's or Bank's interest in the accounts.
Obligors ratify and approve all acts of said attorneys and agree that said
attorneys shall not be liable for any acts of commission or omission, nor for
any error of judgment or mistake of fact or law, except gross negligence or
willful misconduct. This power, being coupled with an interest, is
irrevocable. Obligors agree to assist the Bank in the collection and
enforcement of Obligors' accounts and not to hinder, delay or impede the Bank
in its collection or enforcement of said accounts.
13.5 SET-OFF. Without limiting the rights of Bank under
applicable law, Bank has and may exercise a right of set-off, a lien against
and a security interest in all property of any Obligor now or at any time in
Bank's possession in any capacity whatsoever, including but not limited to any
balance of any deposit, trust or agency account, or any other bank account with
Bank, as security for all Bank Indebtedness. At any time and from time to time
following the occurrence of an Event of Default or any Default, Bank may
without notice or demand, set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by Bank to or for the credit of any Obligor
against any or all of the Bank Indebtedness and each Obligor's obligations
under the Loan Documents. Bank shall use its best efforts to provide to the
Obligors prompt written notice of the exercise of any set-off rights, provided
that the failure of Bank to provide such notice shall not limit or affect the
validity or effectiveness of such set-off.
13.6 TURNOVER OF PROPERTY HELD BY BANK. Each Obligor
irrevocably authorizes any Affiliate of Bank, upon and following the occurrence
of an Event of Default, at the request of Bank and without further notice, to
turnover to Bank any property of any Obligor held by such Affiliate, including
without limitation, funds and securities for any Obligor's account and to
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debit, for the benefit of Bank, any deposit account maintained by any Obligor
with such Affiliate (even if such deposit account is not then due or there
results a loss or reduction of interest or the imposition of a penalty in
accordance with law applicable to the early withdrawal of time deposits), in
the amount requested by Bank up to the amount of the Bank Indebtedness, and to
pay or transfer such amount or property to Bank for application to the Bank
Indebtedness.
13.7 DELAY OR OMISSION NOT WAIVER. Neither the failure nor
any delay on the part of Bank to exercise any right, remedy, power or privilege
under the Loan Documents upon the occurrence of any Event of Default or
otherwise shall operate as a waiver thereof or impair any such right, remedy,
power or privilege. No waiver of any Event of Default shall affect any later
Event of Default or shall impair any rights of Bank. No single, partial or
full exercise of any rights, remedies, powers and privileges by the Bank shall
preclude further or other exercise thereof. No course of dealing between Bank
and Obligors shall operate as or be deemed to constitute a waiver of Bank's
rights under the Loan Documents or affect the duties or obligations of
Obligors.
13.8 REMEDIES CUMULATIVE; CONSENTS. The rights, remedies,
powers and privileges provided for herein shall not be deemed exclusive, but
shall be cumulative and shall be in addition to all other rights, remedies,
powers and privileges in Bank's favor at law or in equity. Whenever the Bank's
consent or approval is required or permitted, such consent or approval shall be
at the sole and absolute discretion of Bank.
13.9 CERTAIN FEES, COSTS, EXPENSE EXPENDITURES AND
INDEMNIFICATION. Each Obligor agrees to pay on demand all costs and expenses
of Bank, consisting of:
(a) all costs and expenses in connection with (i) the
preparation, review, negotiation, execution, delivery and administration of the
Loan Documents, and the other documents to be delivered in connection
therewith, or any waivers, consents, amendments, extensions and increases to
any of the foregoing, (ii) the preparation for, negotiations regarding,
consultations concerning, or the defense or prosecution of legal proceedings
involving any claims made or threatened against Bank arising out of or related
to the Loan Documents, the transactions contemplated hereunder as to the
protection of any of the Collateral, or (iii) obtaining any appraisals or
reappraisals of Collateral, periodic lien searches and tax clearance
certificates, as Bank in its discretion deems necessary (including in all
cases, without limitation, reasonable attorney's fees and expenses);
(b) all losses, costs and expenses in connection with
the interpretation, enforcement, protection and preservation of the Bank's
rights or remedies under the Loan Documents, or any other agreement relating to
any Bank Indebtedness, or in connection with legal advice relating to the
rights or responsibilities of Bank (including without limitation court costs,
reasonable attorney's fees, reasonable expenses of accountants and appraisers
and the cost of all appeals); and
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(c) any and all stamp and other taxes payable or
determined to be payable in connection with the execution and delivery of the
Loan Documents, and all liabilities to which Bank may become subject as the
result of delay in paying or omission to pay such taxes.
In the event any Obligor shall fail to pay taxes, insurance,
assessments, costs or expenses which it is required to pay hereunder, or fails
to keep the Collateral free from security interests or lien (except as
expressly permitted herein), or fails to maintain or repair the Collateral as
required hereby, or otherwise breaches any obligations under the Loan
Documents, Bank in its discretion, may make expenditures for such purposes and
the amount so expended (including attorney's fees and expenses, filing fees and
other charges) shall be payable by Obligors on demand and shall constitute part
of the Bank Indebtedness.
With respect to any amount required to be paid by Obligors under
this Section, in the event Obligors fail to pay such amount on demand, Obligors
shall also pay to Bank interest thereon at the Default Rate.
Obligors agree to indemnify and hold harmless, Bank and Bank's
officers, directors, shareholders, employees and agents, from and against any
and all claims, liabilities, losses, damages, costs and expenses (whether or
not such Person is a party to any litigation), including attorney's fees and
costs and costs of investigation, document production, attendance at
depositions or other discovery with respect to or arising out of this
Agreement, the use of any proceeds advanced hereunder, the transactions
contemplated hereunder, or any claim, demand, action or cause of action being
asserted against any Obligor or any of its Affiliates.
Obligors' obligations under this Section shall survive termination
of this Agreement and repayment of the Bank Indebtedness.
13.10 TIME IS OF THE ESSENCE. Time is of the essence in
Obligors' performance of their obligations under the Loan Documents.
13.11 INDEMNIFICATION. Obligors, jointly and severally shall
indemnify, defend and hold Bank, and its directors, agents, employees and
counsel, harmless from and against any and all losses, claims, damages,
liabilities, deficiencies, judgments, penalties, costs or expenses imposed on,
incurred by or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Loan Documents, or any undertaking
or proceeding related to any of the transactions contemplated hereby or any
act, omission to act, event or transaction related or attendant thereto and
including, without limitation, amounts paid in settlement, court costs, and the
fees and expenses of counsel, except that Obligors shall not be required to
indemnify, defend or hold harmless Bank from or against any such loss, claim,
damage, liability, deficiency, judgment, penalty or cost to the extent that the
undertaking to indemnify, pay and hold harmless set forth in this section may
be unenforceable because it violates any law or public policy, or results from
Bank's gross negligence or wilful misconduct. Obligors shall
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pay the maximum portion which it is permitted to pay under applicable law to
Bank in satisfaction of indemnified matters under this Section. The foregoing
indemnity shall survive the payment of the Bank Indebtedness and the
termination or non-renewal of this Agreement.
14. COMMUNICATIONS AND NOTICES. All notices, requests and other
communications made or given in connection with the Loan Documents shall be in
writing and, unless receipt is stated herein to be required, shall be deemed to
have been validly given if delivered personally to the individual or division
or department to whose attention notices to a party are to be addressed, or by
private carrier, or registered or certified mail, return receipt requested, in
all cases, with charges prepaid, addressed as follows, until some other address
(or individual or division or department for attention) shall have been
designated by notice given by one party to the other:
To Obligors:
UTI Energy Corp.
16800 Greenspoint Park, Suite 225N
Houston, TX 77060
Attention: P. Blake Dupuis, Chief Financial Officer
To Bank:
Mellon Bank, N.A.
Plymouth Meeting Executive Campus
610 West Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
Attention: Stephen Wilus, Vice President
ALL "PAYMENT IN FULL" CHECKS OR OTHER MEDIA OF PAYMENT MUST BE SENT
TO BANK ONLY TO THE ABOVE ADDRESS.
15. DEFINITIONS. The following words and phrases as used in
capitalized form in this Agreement, whether in the singular or plural, shall
have the meanings indicated:
ACCOUNTING TERMS. As used in this Agreement, or any certificate,
report or other document made or delivered pursuant to this Agreement,
accounting terms not defined elsewhere in this Agreement shall have the
respective meanings given to them under GAAP.
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"ACQUISITION PURCHASE PRICE LIMIT" means as follows:
(a) $40,000,000.00 if the Obligors' Total Funded Debt to
EBITDA Ratio at such time is less than 1.0 to 1.0.
(b) $35,000,000 if the Obligors' Total Funded Debt to
EBITDA Ratio at such time is greater than or equal to 1.0 to 1.0.
Notwithstanding the foregoing, the Acquisition Purchase Price
Limit shall be unlimited as to dollar amount if at least 75% of the
purchase price to be paid as part of the applicable acquisition is paid by
the issuance of Equity Securities of an Obligor.
"AFFILIATE", as to any Person, means each other Person that
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person in question.
"BANK INDEBTEDNESS" shall mean all liabilities, obligations and
Indebtedness of any Obligor to Bank, whether now or hereafter owing or
existing, including, without limitation, all obligations under the Loan
Documents, all obligations to reimburse Bank for payments made by Bank
pursuant to any letter of credit issued for the account or benefit of any
Obligor by Bank, all liabilities and risk exposure related to cash
management services provided by Bank, rate swap agreements, and funds
clearinghouse services, all other obligations or undertakings now or
hereafter made by or for the benefit of any Obligor to or for the benefit of
Bank under any other agreement, promissory note or undertaking now existing or
hereafter entered into by any Obligor with Bank, including, without
limitation, all obligations of any Obligor to Bank under the Line, the Line
Note, the Loan Documents and any documents executed in connection therewith,
or under any guaranty or surety agreement, including, without limitation, the
Surety Agreements, and all obligations of any Obligor to immediately pay to
Bank the amount of any overdraft on any deposit account maintained with
Bank, together with all interest and other sums payable in connection with any
of the foregoing.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day
on which commercial banks in Pennsylvania are authorized by law to close.
"CAPITAL EXPENDITURES" means any expenditure that would be
classified as a capital expenditure on a financial statement prepared in
accordance with GAAP, provided that capital expenditures shall not include
Permitted Acquisitions.
"CAPITALIZED LEASES" means all lease obligations which have been
or should be, in accordance with GAAP, capitalized on the books of the
lessee.
"CAPITALIZED LEASE OBLIGATIONS" means all amounts payable with
respect to a Capitalized Lease.
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"CHANGE OF CONTROL" shall mean the occurrence of both of the
following: (a) Remy Capital Partners III and its Affiliates as a group
(collectively, "REMY") shall cease to be the largest beneficial owner of the
total voting power of all issued and outstanding shares of the capital
stock of UTI (or successor thereto) entitled to vote generally in the
election of directors; and (b) any Person or group (within the meaning of
Rule 13d-5 as in effect on the date hereof under the Securities Exchange
Act of 1934, as amended) shall be the beneficial owner, directly or
indirectly, through a purchase, merger, consolidation or other acquisition
transaction of more than 35% of the total voting power of all issued and
outstanding shares of the capital stock of UTI (or successor thereto)
entitled to vote generally in the election of directors; provided however
that a Person shall not be deemed to have beneficial ownership of the shares
of UTI solely by reason of one or more of (i) the granting of a proxy or
agreement to such Person to vote in a particular manner in connection with a
transaction of the type described in clause (b), (ii) the granting of a
revocable proxy to such Person in connection with a matter to be
considered by stockholders of UTI, (iii) that Person's ownership of a right
to purchase or acquire stock in connection with such Person's purchase of
stock of UTI from UTI or Remy, or (iv) by reason of the ownership of an
underwriter of shares of the capital stock of UTI in connection with a
public offering of such shares; provided further that, in the case of
subclauses (i), (ii) and (iii), no payment or consideration in the form of
cash or property shall have been received in connection with such grants or
purchases.
"CHANGE IN CONTROL PREPAYMENT DATE" shall have the meaning set
forth therefor in SECTION 4.3.
"COLLATERAL" shall have the meaning set forth therefor in SECTION
5.3.
"CONSOLIDATED TANGIBLE NET WORTH", shall mean, at any time, the
amount by which all assets of Obligors, excluding (a) intangible assets, as
that term would be defined under GAAP, and (b) leasehold improvements,
exceed all of Obligors' liabilities, as would be shown on a consolidated
balance sheet of Obligors prepared as of such date in accordance with GAAP.
"CONSULTANTS" shall have the meaning set forth therefor in SECTION
10.2.
"CONTRACT PERIOD" shall have the meaning set forth therefor in
SECTION 2.1.
"CORPORATION" means a corporation, partnership, trust,
unincorporated organization, association, joint stock company, limited
liability company or other legal entity.
"DEFAULT" means any event which with the giving of notice,
passage of time or both would constitute an Event of Default.
"DEFAULT RATE " shall have the meaning set forth therefor in
SECTION 3.2.
"EBITDA" for any period means Net Income of Obligors for such
period, plus Taxes accrued by Obligors in such period, plus Interest
Expenses accrued by Obligors in such period, plus depreciation, depletion
and amortization expenses of Obligors accrued for such period, all determined
in accordance with GAAP and on a consolidated basis.
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"ENVIRONMENTAL AFFILIATE" means Obligors and any other Person for
whom any Obligor at any time has any liability (contingent or otherwise)
with respect to any claims arising out of the failure of Obligors or such
Person to comply with all applicable Environmental Requirements.
"EQUITY SECURITIES" shall mean, for any Person, such Person's
common stock, preferred stock, warrants, options or other rights to
acquire common stock or preferred stock of such Person, and all
securities of such Person convertible into or exchangeable for common
stock or preferred stock of such Person.
"ERISA" shall have the meaning set forth therefor in SECTION 6.16.
"EVENT OF DEFAULT" means each of the events specified in SECTION
13.1.
"FRAUDULENT TRANSFER LAWS" shall have the meaning set forth
therefor in SECTION 2.3.
"GAAP" means generally accepted accounting principles in the United
States of America, in effect from time to time, consistently applied and
maintained.
"INDEBTEDNESS", as applied to a Person, means:
(a) all items (except items of capital stock or of
surplus) which in accordance with GAAP would be included in determining
total liabilities as shown on the liability side of a balance sheet of such
Person as at the date as of which Indebtedness is to be determined;
(b) to the extent not included in the foregoing, all
indebtedness, obligations, and liabilities secured by any mortgage, pledge,
lien, conditional sale or other title retention agreement or other security
interest to which any property or asset owned or held by such Person is
subject, whether or not the indebtedness, obligations or liabilities
secured thereby shall have been assumed by such Person; and
(c) to the extent not included in the foregoing, all
indebtedness, obligations and liabilities of others which such Person has
directly or indirectly guaranteed, endorsed (other than for collection or
deposit in the ordinary course of business), sold with recourse, or agreed
(contingently or otherwise) to purchase or repurchase or otherwise acquire or
in respect of which such Person has agreed to supply or advance funds
(whether by way of loan, stock purchase, capital contribution or
otherwise) or otherwise to become directly or indirectly liable.
"INTEREST COVERAGE RATIO" means the ratio calculated as of the end
of each fiscal quarter of the Obligors, equal to Obligors' (a) Net Income
for the applicable four (4) quarters then ended, to (b) Interest
Expenses for the applicable four (4) quarters then ended, all determined on
a consolidated basis in accordance with GAAP.
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"INTEREST EXPENSE", as applied to Obligors, means for any period,
the amount of interest accrued on Indebtedness by Obligors for such period,
determined in accordance with GAAP.
"LIBOR BASED RATE" means with respect to advances under the Line
accruing interest at a LIBOR Based Rate as permitted hereunder, for any
day during each Rate Period the per annum rate of interest (computed on a
basis of a year of 360 days and actual days elapsed) determined by Bank by
adding (a) the per annum rate of interest estimated in good faith by Bank in
accordance with its usual procedures (which determination shall be
conclusive) to be the average of the rate per annum for deposits, in an
amount of U.S. Dollars comparable to the amount of principal relating to
such Rate Period and having maturities comparable to such Rate Period,
offered to major money center banks in the London interbank market at or
about 11:00 a. m., London time, two (2) London business days prior to
such Rate Period, plus (b) one hundred fifty (150) basis points. In the
event that the LIBOR Based Rate is unavailable or cannot be ascertained,
Bank shall have the right to designate the LIBOR Based Rate on such
basis as it shall reasonably determine.
"LINE" shall have the meaning set forth therefor in SECTION 2.1.
"LINE NOTE" shall have the meaning set forth therefor in SECTION
2.1.
"LINES OF BUSINESS" means (a) the provision of drilling or
workover services, (b) the provision of other oilfield services to Persons
in the oil and gas industry, and (c) the manufacture, production,
distribution or sale of any products for use in the oil and gas industry.
"LOAN ACCOUNT" shall have the meaning set forth therefor in SECTION
4.12.
"LOAN DOCUMENTS" means this Agreement, the Line Note, the Surety
Agreements, the Subordination Agreement, the UCC-1 Financing Statements and
all other documents, executed or delivered by Obligors in connection
therewith or in connection with the Prior Loan Documents which may still
survive, as they may be amended from time to time.
"MODIFIED QUICK RATIO" means, at any date of determination, the
ratio of (a) the sum of the Obligors' cash and accounts receivable on such
date to (b) the sum of the outstanding principal balance of the Line on such
date, plus the undrawn amount of all letters of credit issued for the
account of any Obligor under the Line on such date.
"NET INCOME" means, as of the date of determination,
consolidated net income (or loss) of Obligors after income and franchise
taxes and shall have the meaning given such term by GAAP, provided that there
shall be specifically excluded therefrom, without duplication: (a) losses
from the sale of capital assets, (b) gains in excess of Two Hundred Fifty
Thousand Dollars ($250,000.00) in any one fiscal year from the sale of capital
assets, (c) net income of any Person (other than an Obligor) in which any
Obligor has an ownership interest, unless received by such Obligor in a
cash distribution, and (d) any gains arising from extraordinary items, as
defined by GAAP.
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<PAGE> 61
"NOTE PURCHASE AGREEMENT" means the Note Purchase Agreement
executed in connection with the Subordinated Term Loan.
"NOTIFICATION" means telephonic notice (which shall be
irrevocable) by Borrowers to Bank that Borrowers have requested that the
LIBOR Based Rate shall apply to some portion of the principal amount of the
Line in accordance with the provisions of SECTION 3.1, which notice shall be
given no later than 10:00 a.m. Philadelphia time, on the day which is at
least three (3) Business Days prior to the day (which shall be a day on
which Bank is open for business) on which such election is to become
effective, which notice shall specify (a) the principal amount to be subject
to such LIBOR Based Rate; (b) whether such amount is a new advance, a
renewal of a previous request of such rate, a conversion from one interest
rate to another, or a combination thereof; (c) the Rate Period selected; and
(d) the date on which such request is to become effective (which date shall
be a date selected in accordance with SECTION 3.1(A). Borrowers agree to
confirm each telephonic Notification in writing delivered to Bank by
telecopy by the close of business on the date the Notification is given.
"PBGC" shall have the meaning set forth therefor in SECTION 6.16.
"PERMITTED ACQUISITIONS" means the acquisitions permitted under
SECTION 7.7.
"PERSON" means an individual, a Corporation or a government
or any agency or subdivision thereof, or any other entity.
"PLAN" shall have the meaning set forth therefor in SECTION 6.16.
"PRIME RATE" means the annual interest rate established from time
to time by Bank and generally known by Bank as its "prime rate", whether
published by it publicly or only for the internal guidance of its loan
officers. The Prime Rate is used merely as a pricing index and is not
and should not be considered to represent the lowest or best rate available
to a borrower.
"PRIOR LINE OF CREDIT LOAN AGREEMENT" shall have the meaning set
forth therefor in RECITAL A.
"PRIOR LINE OF CREDIT LOAN DOCUMENTS" shall have the meaning set
forth therefor in RECITAL B.
"PRIOR LOAN AGREEMENTS" shall have the meaning set forth therefor
in RECITAL C.
"PRIOR LOAN DOCUMENTS" shall have the meaning set forth therefor in
RECITAL C.
"PRIOR SURETY AGREEMENTS" shall have the meaning set forth therefor
in RECITAL B.
"RATE PERIOD" means for any portion of principal of the Line for
which Borrowers elect a LIBOR Based Rate, the period of time for which
such rate shall apply to such principal. Rate Periods for principal
accruing interest at the LIBOR Based Rate shall be for periods of one, two
or three months and for no other length of time, provided that no Rate
Period may extend beyond the expiration of the Contract Period for the Line.
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<PAGE> 62
"REPORT" shall have the meaning set forth therefor in SECTION 10.2.
"SOUTHLAND" means Southland Drilling Company, Ltd.
"SUBORDINATED DEBT LOAN DOCUMENTS" means all of the documents
executed and delivered in connection with the Subordinated Term Loan,
including without limitation, the Note Purchase Agreement, the $25,000,000.00
Note, the Subordination Agreement and the Warrant Agreement.
"SUBORDINATED LENDERS" means collectively Canpartners Investment
IV, LLC and its permitted successors and assigns.
"SUBORDINATED TERM LOAN" means the subordinated term loan in
the face amount of $25,000,000 extended by the Subordinated Lenders to
certain of the Obligors in accordance with the terms of the Subordinated
Debt Loan Documents.
"SUBORDINATION AGREEMENT" means the Subordination and
Intercreditor Agreement among Obligors, the Subordinated Lenders and Bank,
dated April 11, 1997 as it may be amended, modified or restated.
"SUBSIDIARY" means a Corporation (a) which is organized under the
laws of the United States or any State thereof, or any other county or
jurisdiction, (b) which conducts substantially all of its business and has
substantially all of its assets within the United States, and (c) of which
more than fifty percent (50%) of its outstanding voting stock of every class
(or other voting equity interest) is owned by any Obligor or one or more of
its Subsidiaries.
"SURETY AGREEMENTS" shall have the meaning set forth therefor in
SECTION 5.2.
"TAXES" means all income and other taxes, levies, imposts,
deductions, charges or withholdings paid or payable by any Obligor in
connection with the business, existence or other activities of such
Obligor, and all liabilities, penalties and fees with respect thereto,
determined in accordance with GAAP.
"TERM LOAN" shall have the meaning set forth therefor in RECITAL C.
"TERM LOAN AGREEMENT" shall have the meaning set forth therefor in
RECITAL C.
"TERM LOAN DOCUMENTS" shall have the meaning set forth therefor in
RECITAL C.
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<PAGE> 63
"TOTAL FUNDED DEBT" means as of the date of determination, on
a consolidated basis for all Obligors, the sum of (i) all Indebtedness for
borrowed money of Obligors (including without limitation the principal
balance of the Line and the Subordinated Term Loan), plus (ii) the undrawn
available amount of all letters of credit issued for the account of any
Obligor, plus (iii) the capitalized portion (as defined by GAAP) of all
Capitalized Lease Obligations of Obligors, plus (iv) all indebtedness,
obligations and liabilities of others for borrowed money which any Obligor
has directly or indirectly guarantied (excluding customary indemnity
obligations in connection with Permitted Acquisitions) or with respect to
which any Obligor is otherwise directly or indirectly liable.
"TOTAL FUNDED DEBT TO EBITDA RATIO" means as of the date of
determination the ratio of (a) Obligors' Total Funded Debt as of the date
of determination to (b) Obligors' EBITDA for the four (4) fiscal quarter
period then ended on the date of determination.
16. WAIVERS.
16.1 WAIVERS. In connection with any proceedings under the
Loan Documents, including without limitation any action by Bank in replevin,
foreclosure or other court process or in connection with any other action
related to the Loan Documents or the transactions contemplated hereunder,
Obligors waive:
(a) all errors, defects and imperfections in such
proceedings;
(b) all benefits under any present or future laws
exempting any property, real or personal, or any part of any proceeds thereof
from attachment, levy or sale under execution, or providing for any stay of
execution to be issued on any judgment recovered under any of the Loan
Documents or in any replevin or foreclosure proceeding, or otherwise providing
for any valuation, appraisal or exemption;
(c) all rights to inquisition on any real estate,
which real estate may be levied upon pursuant to a judgment obtained under any
of the Loan Documents and sold upon any writ of execution issued thereon in
whole or in part, in any order desired by Bank;
(d) presentment for payment, demand, notice of demand,
notice of nonpayment, protest and notice of protest of any of the Loan
Documents, including the Line Note;
(e) any requirement for bonds, security or sureties
required by statute, court rule or otherwise;
(f) any demand for possession of Collateral prior to
commencement of any suit; and
57
<PAGE> 64
(g) all rights to claim or recover attorney's fees and
costs in the event that any Obligor is successful in any action to remove,
suspend or prevent the enforcement of a judgment entered by confession.
16.2 FORBEARANCE. Bank may release, compromise, forbear with
respect to, waive, suspend, extend or renew any of the terms of the Loan
Documents, without notice to any Obligor.
16.3 LIMITATION ON LIABILITY. Obligors shall be responsible
for and Bank is hereby released from any claim or liability in connection with:
(a) Safekeeping any Collateral;
(b) Any loss or damage to any Collateral;
(c) Any diminution in value of the Collateral; or
(d) Any act or default of another Person.
Bank shall only be liable for any act or omission on its part
constituting gross negligence or wilful misconduct. In the event that Bank
breaches its required standard of conduct, Obligors agree that Bank's liability
shall be only for direct damages suffered and shall not extend to punitive,
consequential or incidental damages. In the event any Obligor brings suit
against Bank in connection with the transactions contemplated hereunder and
Bank is found not to be liable, Obligors will indemnify and hold Bank harmless
from all costs and expenses, including attorney's fees, incurred by Bank in
connection with such suit. This Agreement is not intended to obligate Bank to
take any action with respect to the Collateral or to incur expenses or perform
any obligation or duty of any Obligor.
16.4 SUBROGATION; SUBORDINATION. Any and all rights of
subrogation that any Obligor may have against another Obligor or against any
collateral or security for any Bank Indebtedness, and any and all rights of
contribution, indemnity and/or substitution that any Obligor may have against
another Obligor shall be junior and subordinate to all Bank Indebtedness, to
any rights that Bank may have against all Obligors, and to all right, title and
interest that Bank may have in any such collateral or security for the Bank
Indebtedness. Bank may use, sell or dispose of any item of collateral or
security for the Bank Indebtedness as it sees fit without regard to any
subrogation rights any Obligor may have, and upon any such disposition or sale
of such collateral or security any rights of subrogation that any Obligor may
have with respect to such collateral or security shall terminate.
Until the Bank Indebtedness shall have been indefeasibly paid in
full, no Obligor shall take, or permit to be taken, any action to exercise (a)
any right of subrogation arising in respect of the Bank Indebtedness, (b) any
right of contribution arising in respect of the Bank Indebtedness that
58
<PAGE> 65
any Obligor may have, (c) any right to enforce any remedy which Bank now has or
may hereafter have against any Obligor or (d) any benefit of, and any right to
participate in, any security now or hereafter held by Bank. If any amount
shall be paid to any Obligor on account of such subrogation or contribution
rights at any time when all Bank Indebtedness shall not have been paid in full,
such amount shall be held in trust for Bank and shall forthwith be paid over to
Bank to be credited and applied against the Bank Indebtedness, whether matured
or unmatured, in accordance with the terms hereof.
17. SUBMISSION TO JURISDICTION. Obligors hereby consent to the
jurisdiction of any state or federal court located within the Commonwealth of
Pennsylvania, and irrevocably agree that, subject to the Bank's election, all
actions or proceedings relating to the Loan Documents or the transactions
contemplated hereunder shall be litigated in such courts. Obligors waive any
objection which they may have based on lack of personal jurisdiction, improper
venue or forum non conveniens to the conduct of any proceeding in any such
court and waive personal service of any and all process upon them, and consent
that all such service of process be made by mail or messenger directed to them
at the address set forth in SECTION 14. Nothing contained in this SECTION 17
shall affect the right of Bank to serve legal process in any other manner
permitted by law or affect the right of Bank to bring any action or proceeding
against any Obligor or its property in the courts of any other jurisdiction.
18. MISCELLANEOUS.
18.1 BROKERS. The transaction contemplated hereunder was
brought about and entered into by Bank and Obligors acting as principals and
without any brokers, agents or finders being the effective procuring cause
hereof. Obligors represent to Bank that Obligors have not committed Bank to
the payment of any brokerage fee or commission in connection with this
transaction. If any such claim is made against Bank by any broker, finder or
agent or any other Person, Obligors agree to indemnify, defend and hold Bank
harmless against any such claim, at Obligors' own cost and expense, including
Bank's attorneys' fees. Obligors further agree that until any such claim or
demand is adjudicated in Bank's favor, the amount claimed and/or demanded shall
be deemed part of the Bank Indebtedness secured by the Collateral.
18.2 USE OF BANK'S NAME. No Obligor shall use Bank's name or
the name of any of Bank's Affiliates in connection with any of its business or
activities except as may otherwise be required by the rules and regulations of
the Securities and Exchange Commission or any like regulatory body and except
as may be required in its dealings with any governmental agency.
18.3 NO JOINT VENTURE. Nothing contained herein is intended
to permit or authorize any Obligor to make any contract on behalf of Bank, nor
shall this Agreement be construed as creating a partnership, joint venture or
making Bank an investor in any Obligor.
18.4 SURVIVAL. All covenants, agreements, representations
and warranties made by Obligors in the Loan Documents or made by or on their
behalf in connection with the
59
<PAGE> 66
transactions contemplated herein shall be true at all times this Agreement is
in effect and shall survive the execution and delivery of the Loan Documents,
any investigation at any time made by Bank or on its behalf and the making by
Bank of the loans or advances to Obligors. All statements contained in any
certificate, statement or other document delivered by or on behalf of any
Obligor pursuant hereto or in connection with the transactions contemplated
hereunder shall be deemed representations and warranties by Obligors.
18.5 NO ASSIGNMENT BY OBLIGORS. No Obligor may assign any of
its rights hereunder without the prior written consent of Bank, and Bank shall
not be required to lend hereunder except to Obligors as they presently exist.
18.6 ASSIGNMENT OR SALE BY BANK. Bank may sell, assign or
participate all or a portion of its interest in the Loan Documents and in
connection therewith may make available to any prospective purchaser, assignee
or participant any information relative to any Obligor in its possession,
provided that, there are at no time more than six (6) other co-lenders or
participants and provided further that, the amount of each co-lender's or
participant's interest in the commitments under the Line and the original
balance of the Line are not less than $5,000,000 in the aggregate at the time
of assignment or purchase.
18.7 BINDING EFFECT. This Agreement and all rights and
powers granted hereby will bind and inure to the benefit of the parties hereto
and their respective permitted successors and assigns.
18.8 SEVERABILITY. The provisions of this Agreement and all
other Loan Documents are deemed to be severable, and the invalidity or
unenforceability of any provision shall not affect or impair the remaining
provisions which shall continue in full force and effect.
18.9 NO THIRD PARTY BENEFICIARIES. The rights and benefits
of this Agreement and the Loan Documents shall not inure to the benefit of any
third party.
18.10 MODIFICATIONS. No modification of this Agreement or any
of the Loan Documents shall be binding or enforceable unless in writing and
signed by or on behalf of the party against whom enforcement is sought.
18.11 HOLIDAYS. If the day provided herein for the payment of
any amount or the taking of any action falls on a Saturday, Sunday or public
holiday at the place for payment or action, then the due date for such payment
or action will be the next succeeding Business Day.
18.12 LAW GOVERNING. This Agreement has been made, executed
and delivered in the Commonwealth of Pennsylvania and will be construed in
accordance with and governed by the laws of such Commonwealth, without regard
to any rules or principles regarding conflict of laws or any rule or canon of
construction which interprets agreements against the draftsman.
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<PAGE> 67
18.13 INTEGRATION. The Loan Documents shall be construed as
integrated and complementary of each other, and as augmenting and not
restricting Bank's rights, powers, remedies and security. The Loan Documents
contain the entire understanding of the parties thereto with respect to the
matters contained therein and supersede all prior agreements and understandings
between the parties with respect to the subject matter thereof and do not
require parol or extrinsic evidence in order to reflect the intent of the
parties. In the event of any inconsistency between the terms of this Agreement
and the terms of the other Loan Documents, the terms of this Agreement shall
prevail.
18.14 EXHIBITS AND SCHEDULES. All exhibits and schedules
attached hereto are hereby made a part of this Agreement.
18.15 HEADINGS. The headings of the Articles, Sections,
paragraphs and clauses of this Agreement are inserted for convenience only and
shall not be deemed to constitute a part of this Agreement.
18.16 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument, and any of the parties hereto may execute this Agreement
by signing any such counterpart.
18.17 JOINT AND SEVERAL LIABILITY. If there is more than one
Obligor hereunder, all agreements, conditions, covenants and provisions of the
Loan Documents shall be the joint and several obligation of each Obligor.
18.18 WAIVER OF RIGHT TO TRIAL BY JURY. OBLIGORS AND BANK
WAIVE ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (A) ARISING UNDER ANY OF THE LOAN DOCUMENTS OR (B) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF OBLIGORS OR BANK WITH RESPECT
TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN
EACH CASE WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. OBLIGORS AND
BANK AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS
AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF OBLIGORS AND BANK TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY. OBLIGORS ACKNOWLEDGE THAT THEY HAVE HAD THE
OPPORTUNITY TO CONSULT WITH COUNSEL REGARDING THIS SECTION, THAT THEY FULLY
UNDERSTAND ITS TERMS, CONTENT AND EFFECT, AND THAT THEY VOLUNTARILY AND
KNOWINGLY AGREE TO THE TERMS OF THIS SECTION.
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<PAGE> 68
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
FWA DRILLING COMPANY, INC.
By: /s/ P. Blake Dupuis
---------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
INTERNATIONAL PETROLEUM
SERVICE COMPANY
By: /s/ P. Blake Dupuis
---------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
TRIAD DRILLING COMPANY
By: /s/ P. Blake Dupuis
---------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
UNIVERSAL WELL SERVICES, INC.
By: /s/ P. Blake Dupuis
---------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
USC, INCORPORATED
By: /s/ P. Blake Dupuis
---------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]
62
<PAGE> 69
[SIGNATURES CONTINUED FROM THE PREVIOUS PAGE]
UTI ENERGY CORP.
By: /s/ P. Blake Dupuis
---------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
UTICO, INC.
By: /s/ P. Blake Dupuis
---------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
PANTHER DRILLING, INC.,
FORMERLY KNOWN AS
VIERSEN & COCHRAN
DRILLING COMPANY
By: /s/ P. Blake Dupuis
---------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
J.S.M. & ASSOCIATES, INC.
By: /s/ P. Blake Dupuis
---------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
PETERSON DRILLING COMPANY
By: /s/ P. Blake Dupuis
---------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]
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<PAGE> 70
[SIGNATURES CONTINUED FROM THE PREVIOUS PAGE]
MELLON BANK, N.A.
By: /s/ Stephen Wilus
--------------------------------------
Stephen Wilus, Vice President
<PAGE> 71
EXHIBITS
Exhibit "A" - Line Note
Exhibit "B" - Form of Compliance Certificate
SCHEDULES
Schedule 6.3 Ownership Interests, Pledges, etc.
Schedule 6.4 Subsidiaries
Schedule 6.7 Pending or Threatened Litigation or Proceedings
Schedule 6.14 Names (including trade names) and Addresses, identifying
chief executive office
Schedule 6.16 Employee Pension Benefit Plan Obligations
Schedule 6.18 Intellectual Property
Schedule 7.3 Permitted Indebtedness for Borrowed Money
Schedule 7.4 Permitted Investments and Loans
Schedule 7.9 Permitted Liens and Security Interests
<PAGE> 1
EXHIBIT 10.2
AMENDED AND RESTATED
NOTE
Plymouth Meeting, Pennsylvania
Effective as of: June 19, 1998
$30,000,000.00
FOR VALUE RECEIVED AND INTENDING TO BE LEGALLY BOUND, the
undersigned ("BORROWERS"), hereby promise to pay to the order of MELLON BANK,
N.A. ("BANK"), ON DEMAND after and so long as an Event of Default shall have
occurred and be continuing or after expiration of the Contract Period, the
principal sum of Thirty Million Dollars ($30,000,000.00), or such greater or
lesser principal amount as may be outstanding from time to time under the line
of credit established by Bank for the benefit of Borrowers pursuant to the
terms of that certain Amended and Restated Loan and Security Agreement dated
June 19, 1998 between Obligors and Bank, as the same may be amended,
supplemented, restated from time to time (the "LOAN AGREEMENT"), together with
interest thereon, upon the following terms:
1. LINE NOTE. This Note is the "Line Note" as defined
in the Loan Agreement and, as such, shall be construed in accordance with all
terms and conditions thereof. Capitalized terms not defined herein shall have
such meaning as provided in the Loan Agreement. This Note is entitled to all
the rights and remedies provided in the Loan Agreement and the Loan Documents
and is secured by all collateral as described therein. Borrowers agree to make
all payments of the balance of this Note as required under the Loan Agreement.
2. INTEREST RATE. Interest on the unpaid principal
balance hereof will accrue from the date of advance until final payment thereof
in accordance with the provisions of SECTION 3.1 of the Loan Agreement.
3. DEFAULT INTEREST. Interest will accrue on the
outstanding principal amount hereof following the occurrence of an Event of
Default or the expiration of the Contract Period until paid the applicable
default rate set forth in SECTION 3.2 of the Loan Agreement (the "DEFAULT
RATE").
4. POST JUDGMENT INTEREST. Any judgment obtained for
sums due hereunder or under the Loan Documents will accrue interest at the
Default Rate until paid.
5. INTEREST PAYMENTS. Interest which accrues on the
outstanding principal balance hereof at the applicable rate set forth above
shall be due and payable monthly, on the first day of each calendar month,
commencing on the first day of the first calendar month following the date
hereof.
6. PLACE OF PAYMENT. Principal and interest hereunder
shall be payable as provided in the Loan Agreement, or at such other place as
Bank, from time to time, may designate in writing.
<PAGE> 2
7. DEFAULT; REMEDIES. Upon the occurrence of an Event
of Default and so long as same shall be continuing as provided above, Bank, at
its option and without notice to Borrowers, may declare immediately due and
payable the entire unpaid balance of principal and all other sums due by
Borrowers hereunder or under the Loan Documents, together with interest accrued
thereon at the applicable rate specified above. Payment thereof may be
enforced and recovered in whole or in part at any time and from time to time by
one or more of the remedies provided to Bank in this Note or in the Loan
Documents or as otherwise provided at law or in equity, all of which remedies
are cumulative and concurrent.
8. WAIVERS. BORROWERS, OBLIGORS AND ALL ENDORSERS,
JOINTLY AND SEVERALLY, WAIVE PRESENTMENT FOR PAYMENT, DEMAND, NOTICE OF DEMAND,
NOTICE OF NONPAYMENT OR DISHONOR, PROTEST AND NOTICE OF PROTEST OF THIS NOTE,
AND ALL OTHER NOTICES IN CONNECTION WITH THE DELIVERY, ACCEPTANCE, PERFORMANCE,
DEFAULT OR ENFORCEMENT OF THE PAYMENT OF THIS NOTE, EXCEPT FOR SUCH NOTICES, IF
ANY, AS ARE EXPRESSLY REQUIRED TO BE DELIVERED BY BANK TO BORROWERS UNDER THE
LOAN AGREEMENT.
9. MISCELLANEOUS. If any provisions of this Note shall
be held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof. This Note has been delivered in and shall
be governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania without regard to the law of conflicts. This Note shall be
binding upon Borrowers and upon each Borrower's successors and assigns and
shall benefit Bank and its successors and assigns. The prompt and faithful
performance of all of each Borrower's obligations hereunder, including without
limitation, time of payment, is of the essence of this Note.
10. JOINT AND SEVERAL LIABILITY. If there is more than
one Borrower executing this Note, all agreements, conditions, covenants and
provisions of this Note shall be the joint and several obligation of each
Borrower.
11. NO NOVATION. This Note shall amend, restate and
increase, but not repay or satisfy, the obligations of the Borrowers under a
certain Amended and Restated Note dated April 11, 1997 in the original
principal amount of Twelve Million Dollars ($12,000,000.00) (the "PRIOR NOTE").
Nothing contained herein shall be deemed to constitute a novation or
satisfaction of the Prior Note, but the terms and conditions of this Note shall
supersede and replace in its entirety the terms of the Prior Note.
2
<PAGE> 3
IN WITNESS WHEREOF, Borrowers, intending to be legally bound
hereby, have duly executed this Note the day and year first above written.
FWA DRILLING COMPANY, INC.
By: /s/ P. Blake Dupuis
---------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
INTERNATIONAL PETROLEUM
SERVICE COMPANY
By: /s/ P. Blake Dupuis
---------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
TRIAD DRILLING COMPANY
By: /s/ P. Blake Dupuis
---------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
UNIVERSAL WELL SERVICES, INC.
By: /s/ P. Blake Dupuis
---------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
USC, INCORPORATED
By: /s/ P. Blake Dupuis
---------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
(CORPORATE SEAL)
<PAGE> 4
PANTHER DRILLING, INC.
FORMERLY KNOWN AS
VIERSEN & COCHRAN DRILLING COMPANY
By: /s/ P. Blake Dupuis
---------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
J.S.M. & ASSOCIATES, INC.
By: /s/ P. Blake Dupuis
---------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
PETERSON DRILLING COMPANY
By: /s/ P. Blake Dupuis
---------------------------------------
P. Blake Dupuis, Vice President
<PAGE> 1
EXHIBIT 10.3
AMENDED AND RESTATED
SUBORDINATION AGREEMENT
THIS AMENDED AND RESTATED SUBORDINATION AGREEMENT (this
"AGREEMENT") is made effective as of the 19th day of June, 1998, by and among
FWA DRILLING COMPANY, INC. ("FWA"), INTERNATIONAL PETROLEUM SERVICE COMPANY
("IPSCO"), TRIAD DRILLING COMPANY ("TRIAD"), UNIVERSAL WELL SERVICES, INC.
("UNIVERSAL"), USC, INCORPORATED, ("USC"), UTI ENERGY CORP. ("UTI"), UTICO,
INC. ("UTICO"), PANTHER DRILLING, INC. FORMERLY KNOWN AS VIERSEN & COCHRAN
DRILLING COMPANY ("PANTHER") J.S.M. & ASSOCIATES, INC. ("JSM") AND PETERSON
DRILLING COMPANY ("PETERSON") AND MELLON BANK, N.A. ("BANK"). FWA, IPSCO,
Triad, Universal, USC, Panther and Peterson are hereinafter sometimes
collectively referred to as the "BORROWERS" and individually as a "BORROWER".
UTI and UTICO are hereinafter sometimes collectively referred to as the
"GUARANTORS" and individually as a "GUARANTOR". The Borrowers and the
Guarantors are hereinafter sometimes collectively referred to as the "OBLIGORS"
and individually as an "OBLIGOR".
BACKGROUND
A. Each Obligor is or may become indebted to another Obligor. Each
Obligor is interested in the welfare of the other Obligors and will
benefit if Bank extends or maintains credit to Borrowers.
B. Borrowers have requested that Bank extend and maintain credit to
Borrowers. Bank is willing to do so provided this Agreement is
executed.
C. Obligors and Bank are parties to that certain Amended and Restated
Loan and Security Agreement dated April 11, 1997, as amended (the
"PRIOR LOAN AGREEMENT").
D. Obligors and Bank are parties to that certain Amended and Restated
Loan and Security Agreement of even date herewith (the "LOAN
AGREEMENT"). The Prior Loan Agreement and the Loan Agreement may
hereinafter be collectively referred to as the "Loan Agreements".
NOW, THEREFORE, the parties hereto, as an inducement for Bank
to extend and maintain credit to Borrowers, and with the understanding that
Bank is relying upon the provisions of this Agreement and intending to be
legally bound hereby, agree as follows:
1. DEFINITIONS. Capitalized terms used but not
otherwise defined herein shall have the meanings set forth therefor in the Loan
Agreement. The following words and phrases as used in capitalized form in this
Agreement, whether in singular or plural, shall have the meanings indicated:
<PAGE> 2
1.1 "SENIOR DEBT" shall mean all liabilities and
obligations of any nature, whether primary,
secondary, absolute, contingent, sole, joint, several
or joint and several, and all interest thereon and
all fees, costs and expenses (including attorney's
fees and legal expenses) related thereto, now or at
any time or times hereafter existing, contracted or
incurred, of or by any Obligor to Bank, including
without limitation, the obligations of Obligors with
respect to that certain $30,000,000 line of credit
from Bank to Borrowers and all other sums payable
under the Loan Agreement as it may be amended,
modified or supplemented and all Loan Documents as
defined therein and all other sums payable under the
Loan Agreement as it may be amended, modified or
supplemented and all Loan Documents as defined
therein, and all increases, decreases, extensions,
amendments, replacements and renewals of any of such
liabilities and obligations. Without limiting the
foregoing, Bank shall have the option to make
advances and provide financing in the future to any
Obligor or to a receiver, trustee or other fiduciary
appointed by a court in any insolvency or court
proceeding for any Obligor or to any Obligor as a
debtor-in-possession. Obligors consent to the
financing of any Obligor or such fiduciary or
debtor-in-possession after any such insolvency or
court proceeding and agree that such financing shall
be included within the Senior Debt and the
subordination and other restrictions and provisions
of this Agreement shall be applicable thereto.
1.2 "SUBORDINATED DEBT" shall mean all liabilities and
obligations of any nature, whether primary,
secondary, absolute, contingent, sole, joint, several
or joint and several, and all interest thereon and
all fees, costs and expenses (including attorney's
fees and legal expenses) related thereto, now or at
any time or times hereafter existing, contracted or
incurred, of any one Obligor to another Obligor.
2. SUBORDINATION.
2.1 Each Obligor subordinates all Subordinated Debt and
all claims and demands arising therefrom to all the
Senior Debt. Each Obligor agrees that all of the
Senior Debt shall be paid before such Obligor shall
be paid anything (of any kind or character) on
account of the principal of or interest on any
Subordinated Debt or any other sums payable in
connection therewith. Until all of the Senior Debt
is paid, performed and complied with in full and this
Agreement is terminated, no Obligor will make, demand
or accept, either directly or indirectly, payment (of
any kind or character) of all or any part of the
Subordinated Debt without the prior written consent
of Bank. The Senior Debt shall not be deemed to have
been paid, performed or complied with in full unless
the Bank has unconditionally and irrevocably received
payment of the Senior Debt and this Agreement has
been terminated.
2
<PAGE> 3
2.2 Notwithstanding the foregoing, Obligors may make
payments on the Subordinated Debt, provided that, (a)
no Event of Default, or event which, with the giving
of notice, passage of time or both, would constitute
an Event of Default with respect to the Senior Debt
or any documents executed in connection therewith,
has occurred; and (b) such payment would not result
in such an Event of Default.
2.3 The right of Bank to enforce the subordination
provisions and any other provisions hereof shall not
in any way be prejudiced or impaired by any act or
failure to act on the part of Bank or Obligors, or by
any noncompliance by Obligors with the terms,
provisions and covenants of this Agreement.
3. IN FURTHERANCE OF SUBORDINATION.
3.1 Each Obligor assigns to Bank its interest in all
Subordinated Debt and all security and guaranties
therefor as security for the payment of the Senior
Debt. Bank will be under no duty to take any action
with respect to the preservation of rights in any
such collateral or guaranties or against any parties
thereto or any other person, or to make any demand or
give any notice, or to take any other action with
respect thereto other than to exercise reasonable
care in the physical custody thereof.
3.2 Upon any distribution of any of the assets of any
Obligor, any guarantor of any of the Subordinated
Debt or any collateral securing the Subordinated
Debt, upon or in connection with any dissolution,
winding up, liquidation, arrangement or
reorganization of any Obligor, any guarantor of any
of the Subordinated Debt or any other person or
entity, or upon any assignment for the benefit of
creditors or any other marshalling of the assets
and/or liabilities of any Obligor or any guarantor of
any of the Subordinated Debt, any payment, dividend
or distribution of any kind (whether in cash,
securities or other property) which would otherwise
be payable or deliverable with respect to the
Subordinated Debt, shall be paid or delivered
directly to Bank for application (in the case of
cash) to or as collateral (in the case of securities
or other property) for the Senior Debt.
3.3 If any proceeding described in SUBSECTION 3.2 is
commenced, Bank is irrevocably authorized (in its own
name or in the name of any Obligor or otherwise), but
shall have no obligation, to demand, sue for, collect
and receive all such payments, dividends and
distributions referred to in subsection 3.2, give
acquittances therefor, file claims, proofs of claim
and take such other actions (including without
limitation, voting the Subordinated Debt) as it may
deem necessary or advisable. Bank is granted a power
of attorney by each
3
<PAGE> 4
Obligor with full power of substitution to execute
and file such documentation and take any other action
Bank may deem advisable to accomplish the foregoing,
and to protect Bank's interest in the Subordinated
Debt and its right of enforcement thereof. Such power
being coupled with an interest is irrevocable.
4. LIMITATIONS ON CREDITOR'S RIGHTS. Without the prior
written consent of Bank, each Obligor agrees that it will not: (a) institute
any court proceedings against any Obligor to collect any Subordinated Debt, or
(b) exercise any right or remedy against any Obligor or its assets.
5. PAYMENTS HELD IN TRUST. In the event that any
Obligor receives any dividend, distribution or payment referred to in SECTION
3, or receives any payment (of any kind or character) of any Subordinated Debt
or security therefor in violation of this Agreement, such Obligor will (a) not
credit such payments against the Subordinated Debt, (b) notify Bank immediately
thereof, and (c) receive the same in trust for Bank and will immediately pay
and deliver the same to Bank in precisely the form received, except for any
requisite endorsement or assignment, which such Obligor will make and
authorizes Bank or any of its officers or employees to make in the event that
such Obligor does not make the same. Bank will apply any such moneys so
received by it in reduction of the Senior Debt and will hold any property other
than money so received by it as collateral security therefor.
6. BANK'S RIGHTS. Without affecting or releasing any
obligation or agreement of any Obligor under this Agreement or the
subordination provided herein, Bank may at any time or times consent or agree
to any of the following with respect to any of the Senior Debt: (a) amend,
modify, alter or waive any of the terms thereof or any of the documents
executed in connection therewith, (b) renew or extend the time for payment of
all or any part thereof, (c) increase or decrease the amount thereof, (d)
accept collateral security or guaranties therefor and sell, exchange, fail to
perfect, release or otherwise deal with all or any part of any such collateral
or guaranties, (e) release any party primarily or secondarily obligated
thereon, (f) grant indulgences and take or refrain from taking any action with
regard to the collection or enforcement thereof, and (g) take any action which
might otherwise constitute a defense to or a discharge of any Obligor. Nothing
contained in this Agreement shall impair any right of Bank with respect to any
of the Senior Debt or any collateral security or guaranties therefor or the
proceeds thereof.
7. TERMINATION. This Agreement will continue in full
force and effect as long as any Senior Debt remains outstanding, and
thereafter, even if there is no longer any Senior Debt remaining unpaid, so
long as Bank has any agreement or understanding with Borrower pursuant to which
Bank may extend credit to any Obligor. To the extent any payment or payments of
any Senior Debt or any Subordinated Debt received by Bank are subsequently
invalidated, declared to be fraudulent or preferential, set aside or are
required to be repaid to a trustee, receiver or other person or entity under
any bankruptcy act, state or federal law, common law or equitable cause, then
this Agreement will be revived and continue in full force and effect. This
Agreement may not be terminated except by an instrument in writing signed by
the Bank.
4
<PAGE> 5
8. RELEASES. Bank may release any one or more parties
hereto, or the successors or assigns thereof, from any or all obligations
hereunder, and such release, or any release by operation of law, shall not
release any other party hereto from, nor in any way affect, any of the
obligations of any other party under this Agreement, or affect the
subordination of any of the Subordinated Debt to the Senior Debt.
9. NOTICES. All notices, requests and other
communications made or given in connection with this Agreement shall be given
in the manner set forth in the Loan Agreement.
10. DELAY OR OMISSION NOT WAIVER. Neither the failure
nor any delay on the part of Bank to exercise any right, remedy, power or
privilege hereunder shall operate as a waiver thereof or impair any such right,
remedy, power or privilege. No single, partial or full exercise of any rights,
remedies, powers and privileges by Bank shall preclude further or other
exercise thereof. No course of dealing between Bank and any Obligor shall
operate as or be deemed to constitute a waiver of Bank's rights hereunder or
affect the duties or obligations of any Obligor.
11. MISCELLANEOUS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective permitted
successors and assigns. If any party hereto is a partnership, all provisions
of this Agreement applicable to such party shall be binding upon and include
not only the partnership but each and all of the partners thereof individually.
This Agreement may not be modified except in writing executed by the party
against whom enforcement of such modification is sought. The rights granted to
Bank hereby shall be in addition to any other rights of Bank under any other
subordination agreement, if any, now or hereafter outstanding. All rights and
remedies of Bank shall be cumulative.
12. GOVERNING LAW. This Agreement shall be governed by
and construed according to the laws of the Commonwealth of Pennsylvania.
13. SEVERABILITY. If any provision herein stall for any
reason be held invalid or unenforceable, no other provision shall be affected
thereby, and this Agreement shall be construed as if the invalid or
unenforceable provision had never been a part of it.
14. ENTIRE AGREEMENT. This instrument embodies the entire
agreement of the parties hereto with respect to the subject matter hereof, and
there are no courses of dealing, usages of trade, or other representations,
promises, terms or conditions referring to such subject matter, and no
inducements or representations leading to the execution hereof other than as
mentioned herein.
15. PRIOR SUBORDINATION AGREEMENT. This Agreement amends,
restates and supersedes the terms of that certain Amended and Restated
Subordination Agreement dated April 11, 1997 among the Obligors (other than
Viersen) and Bank.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, intending to be legally bound hereby, effective as of the day and
year first above written.
FWA DRILLING COMPANY, INC.
By: /s/ P. Blake Dupuis
-------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
INTERNATIONAL PETROLEUM
SERVICE COMPANY
By: /s/ P. Blake Dupuis
-------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
TRIAD DRILLING COMPANY
By: /s/ P. Blake Dupuis
-------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
UNIVERSAL WELL SERVICES, INC.
By: /s/ P. Blake Dupuis
-------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
USC, INCORPORATED
By: /s/ P. Blake Dupuis
-------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
[SIGNATURES CONTINUED ON NEXT PAGE]
6
<PAGE> 7
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
UTI ENERGY CORP.
By: /s/ P. Blake Dupuis
-------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
UTICO, INC.
By: /s/ P. Blake Dupuis
-------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
PANTHER DRILLING, INC.,
FORMERLY KNOWN AS
VIERSEN & COCHRAN
DRILLING COMPANY
By: /s/ P. Blake Dupuis
-------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
J.S.M. & ASSOCIATES, INC.
By: /s/ P. Blake Dupuis
-------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL)
PETERSON DRILLING COMPANY
By: /s/ P. Blake Dupuis
-------------------------------------
P. Blake Dupuis, Vice President
(CORPORATE SEAL) MELLON BANK, N.A.
/s/ Stephen Wilus
----------------------------------------
By: Stephen Wilus
Name/Title: Vice President
<PAGE> 1
EXHIBIT 10.4
AMENDED AND RESTATED CONTRIBUTION AGREEMENT
THIS AMENDED AND RESTATED CONTRIBUTION AGREEMENT (the
"AGREEMENT") is made effective as June 19, 1998 by and among FWA DRILLING
COMPANY, INC. ("FWA") INTERNATIONAL PETROLEUM SERVICE COMPANY ("IPSCO"), TRIAD
DRILLING COMPANY ("TRIAD"), UNIVERSAL WELL SERVICES, INC. ("UNIVERSAL"), USC,
INCORPORATED ("USC"), UTI ENERGY CORP. ("UTI"), UTICO, INC. ("UTICO"), PANTHER
DRILLING, INC., formerly known as VIERSEN & COCHRAN DRILLING COMPANY
("PANTHER"), J.S.M. & ASSOCIATES, INC. ("JSM"), PETERSON DRILLING COMPANY
("PETERSON"),) and MELLON BANK, N.A. ("BANK"). FWA, Triad, Universal, USC,
Panther, JSM, Peterson and SUITS are hereinafter sometimes collectively
referred to as the "BORROWERS" and individually as a "BORROWER." The Borrowers
and Guarantors are hereinafter sometimes collectively referred to as the
"OBLIGORS" and individually as an "OBLIGOR."
BACKGROUND
A. Pursuant to the terms of the certain Amended and Restated Loan and
Security Agreement dated April 11, 1997, as amended, by and among
Borrowers (other than SUITS) and Bank (the "PRIOR LOAN AGREEMENT"),
Bank agreed, inter alia, to extend to Borrowers a Term Loan in the
amount of Twenty-Five Million ($25,000,000.00) and a line of credit up
to a maximum outstanding principal amount of Twelve Million
($12,000,000.00).
B. Pursuant to the terms of the certain Amended and Restated Loan and
Security Agreement dated June 19, 1998, as amended by that certain
First Amendment and Modification to Amended and Restated Loan and
Security Agreement dated of even date herewith (collectively, as the
same may be amended, modified, supplemented and/or restated from time
to time (the "LOAN AGREEMENT"), Bank increased the amount of the Line
extended to Obligors.
C. Capitalized terms used herein and not otherwise defined herein shall
have such meaning as provided in the Loan Agreement.
NOW THEREFORE, the parties hereto, intending to be legally
bound, agree as follows:
1. Each Obligor shall have the right of contribution
against any other Obligor in the event that such Obligor repays the Line in
excess of the pro-rata benefit, direct or indirect, received by such Obligor in
connection with such Line. It is the intent that after payment by Obligors of
all such contribution claims, each Obligor shall have a net liability equal to
its pro-rata benefit received.
<PAGE> 2
2. The allocation among the Obligors of their respective
liabilities with respect to the Line under this Agreement or under any other
right of contribution shall in no way limit their liability under any of the
Loan Documents.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
INTERNATIONAL PETROLEUM SERVICE COMPANY
By: /s/ P. Blake Dupuis
-------------------------------------
Name/Title: Vice President
-----------------------------
(CORPORATE SEAL)
TRIAD DRILLING COMPANY
By: /s/ P. Blake Dupuis
-------------------------------------
Name/Title: Vice President
-----------------------------
(CORPORATE SEAL)
UNIVERSAL WELL SERVICES, INC.
By: /s/ P. Blake Dupuis
-------------------------------------
Name/Title: Vice President
-----------------------------
(CORPORATE SEAL)
USC, INCORPORATED
By: /s/ P. Blake Dupuis
-------------------------------------
Name/Title: Vice President
-----------------------------
(CORPORATE SEAL)
UTI ENERGY CORP.
By: /s/ P. Blake Dupuis
-------------------------------------
Name/Title: Vice President
-----------------------------
(CORPORATE SEAL)
2
<PAGE> 3
UTICO, INC.
By: /s/ P. Blake Dupuis
-------------------------------------
Name/Title: Vice President
-----------------------------
(CORPORATE SEAL)
FWA DRILLING COMPANY, INC.
By: /s/ P. Blake Dupuis
-------------------------------------
Name/Title: Vice President
-----------------------------
(CORPORATE SEAL)
PANTHER DRILLING, INC., formerly known
as VIERSEN & COCHRAN DRILLING COMPANY
By: /s/ P. Blake Dupuis
-------------------------------------
Name/Title: Vice President
-----------------------------
(CORPORATE SEAL)
J.S.M. & ASSOCIATES, INC.
By: /s/ P. Blake Dupuis
-------------------------------------
Name/Title: Vice President
-----------------------------
(CORPORATE SEAL)
PETERSON DRILLING COMPANY
By: /s/ P. Blake Dupuis
-------------------------------------
Name/Title: Vice President
-----------------------------
(CORPORATE SEAL)
MELLON BANK, N.A.
By: /s/ Stephen M. Wilus
-------------------------------------
Stephen M. Wilus, Vice President
(CORPORATE SEAL)
3
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
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<SECURITIES> 0
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<ALLOWANCES> 1,804
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<PP&E> 184,437
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<CURRENT-LIABILITIES> 23,812
<BONDS> 23,693
0
0
<COMMON> 16
<OTHER-SE> 142,474
<TOTAL-LIABILITY-AND-EQUITY> 212,684
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,102
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.18
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<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 49
<SECURITIES> 0
<RECEIVABLES> 28,251
<ALLOWANCES> 413
<INVENTORY> 1,109
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<PP&E> 102,567
<DEPRECIATION> 26,704
<TOTAL-ASSETS> 116,953
<CURRENT-LIABILITIES> 22,489
<BONDS> 48,520
0
0
<COMMON> 12
<OTHER-SE> 37,277
<TOTAL-LIABILITY-AND-EQUITY> 116,953
<SALES> 0
<TOTAL-REVENUES> 42,440
<CGS> 0
<TOTAL-COSTS> 33,100
<OTHER-EXPENSES> 2,475
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,275
<INCOME-PRETAX> 2,777
<INCOME-TAX> 1,000
<INCOME-CONTINUING> 1,777
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