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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: APRIL 9, 1998
UTI ENERGY CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 001-12542 23-2037823
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION)
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16800 GREENSPOINT PARK, SUITE 225N
HOUSTON, TEXAS 77060
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (281) 873-4111
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ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS
On April 9, 1998, UTI Energy Corp., a Delaware corporation (the
"Company"), effected the acquisition of Peterson Drilling Company, a Texas
corporation ("PDC"), through a merger (the "Merger") of a wholly owned
subsidiary of the Company with and into PDC. The Merger was effected pursuant
to an Agreement and Plan of Merger (the "Merger Agreement"), dated April 9,
1998, between the Company, PDC Acquisition Company, a Texas corporation, PDC
and the shareholders of PDC signatory thereto. The Company acquired PDC for a
total purchase price of $20.4 million (the "Purchase Price"). The Purchase
Price was determined through arms-length negotiations between the parties.
PDC's assets include eight drilling rigs, as well as related drilling
equipment, office facilities in Midland, Texas, and approximately $3.3 million
in cash. The Company intends to continue to operate the business of PDC and
integrate PDC's operations with the Company's existing contract drilling
operations.
In connection with the Company's acquisition of PDC, the Company
retained Ray Peterson, President of PDC, and Leroy Peterson, Vice President of
PDC, as employees to the Company. The Company executed Employment Agreements
with both Ray Peterson and Leroy Peterson.
The Purchase Price was funded with the Company's existing cash.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
The financial statements required by this item will be filed
by amendment.
(b) Pro forma financial information.
The pro forma financial information required by this item will
be filed by amendment.
(c) Exhibits.
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. 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.
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10.1 Employment Agreement dated April 9, 1998, by and between UTI
Energy Corp. and Ray Peterson.
10.2 Employment Agreement dated April 9, 1998, by and between UTI
Energy Corp. and Leroy Peterson.
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.
Dated: April 23, 1998 /s/ P. BLAKE DUPUIS
--------------------------------------------
P. Blake Dupuis
Vice President, Secretary, Treasurer
and Chief Financial Officer
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EXHIBIT INDEX
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. 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.
10.1 Employment Agreement dated April 9, 1998, by and between UTI
Energy Corp. and Ray Peterson.
10.2 Employment Agreement dated April 9, 1998, by and between UTI
Energy Corp. and Leroy Peterson.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BETWEEN
UTI ENERGY CORP. ("UTI"),
PDC ACQUISITION COMPANY, A WHOLLY-OWNED SUBSIDIARY OF UTI,
PETERSON DRILLING COMPANY ("PDC")
AND
THE SHAREHOLDERS OF PDC
DATED AS OF APRIL 9, 1998
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
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"Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Articles of Merger" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Benefit Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Cash Consideration" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Certificate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Closing" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Closing Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Constituent Corporations" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Contracts" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Damages" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Debt Obligations" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Effective Time" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Employment Agreements" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Environmental Condition" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Environmental Laws" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Environmental Liabilities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Environmental Permit" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Exhibit" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Extended Representations" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Final Statement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Financial Statements" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Governmental Entity" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Governmental Requirement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"HSR Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Hazardous Material" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Indemnity Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Material Adverse Effect" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Merger" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Net Equity" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Non-Compete Payments" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Ordinary Course of Business" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"PBGC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"PDC Common Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Pension Plans" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Proportionate Share" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Reference Balance Sheet" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Rigs" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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"Shareholders" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Shareholder Indemnified Parties" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Shareholder Liabilities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Shareholder Representative" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Survival Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Surviving Corporation" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Taxes" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Tax Returns" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"UTI Indemnified Parties" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"UTI Sub" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II
THE MERGER
Section 2.1 The Merger; Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.2 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 3.1 Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Cancellation of Treasury Stock and UTI-Owned Stock . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Consideration for PDC Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Conversion and Cancellation of PDC Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Conversion of UTI Sub Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.2 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) Exchange Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) No Further Ownership Rights in PDC Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Lost Share Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.3 Shares of Dissenting Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV-A
REPRESENTATIONS AND WARRANTIES OF PDC
Section 4.1 Incorporation; Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.2 Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.5 Liabilities, Debts and Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.6 Events Since Balance Sheet Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.7 Directors, Officers and Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.8 Taxes and Governmental Returns and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.9 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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Section 4.10 Contracts and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.11 Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.12 Properties, Assets and Leasehold Estates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.13 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.14 Suits, Actions and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.15 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.16 Licenses and Permits; Compliance with Governmental Requirements . . . . . . . . . . . . . . . . . 21
Section 4.17 No Untrue Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.18 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.19 Environmental Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.20 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.21 No Affiliate Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.22 PDC Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IV-B
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Section 4.23 No Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.24 Effect of Agreement on Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.25 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.26 No Untrue Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.27 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.28 No Affiliate Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.29 Indebtedness and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.30 Individual Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF UTI AND UTI SUB
Section 5.1 Due Incorporation and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.2 Performance of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.3 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.4 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VI
[INTENTIONALLY OMITTED]
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ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PDC
AND THE SHAREHOLDERS
Section 7.1 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.2 Performance and Obligations of UTI and UTI Sub . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.3 Governmental Approvals; Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.4 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.5 Non-Compete Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.6 Stock Option Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF UTI AND UTI SUB
Section 8.1 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.2 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.3 Performance and Obligations of PDC and the Shareholders . . . . . . . . . . . . . . . . . . . . . 28
Section 8.4 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.5 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE IX
CLOSING
Section 9.1 Place of Closing and Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 9.2 Closing Deliveries by UTI and UTI Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 9.3 Closing, Deliveries by PDC and the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 9.4 Employment Agreements and Stock Option Agreements . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE X
TERMINATION
[Intentionally Omitted]
ARTICLE XI
OBLIGATIONS OF PARTIES AFTER CLOSING
Section 11.1 Post-Closing Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 11.2 Cooperation Regarding Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 11.3 Covenant Not to Compete With the Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XII
NATURE OF STATEMENTS AND SURVIVAL
Section 12.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 12.2 Effect of Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 12.3 Effect of Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 12.4 Survival of Covenants and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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ARTICLE XIII
INDEMNIFICATION
Section 13.1 General Indemnity by the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 13.2 General Indemnity by UTI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 13.3 Indemnification Basket; Limitation; Effect of Materiality Qualifiers; Pro Rata Obligation . . . . 34
Section 13.4 Waiver of Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 13.5 Adjustment for Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 13.6 Notice of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 13.7 Right to Participate in Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE XIV
RELEASE
Section 14.1 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XV
MISCELLANEOUS
Section 15.1 Binding Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 15.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 15.3 Shareholders Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 15.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 15.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 15.7 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 15.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 15.9 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 15.10 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 15.11 Construction of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 15.12 References to Articles, Sections and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
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<PAGE> 7
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as
of April 9, 1998, between UTI Energy Corp., a Delaware corporation ("UTI"),
PDC Acquisition Company, a Texas corporation ("UTI Sub"), Peterson Drilling
Company, a Texas corporation ("PDC"), and the shareholders of PDC signatory
hereto (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 PDC have
determined that it is in the best interests of their respective shareholders
for UTI Sub to merge with and into PDC (the "Merger") upon the terms and
subject to the conditions of this Agreement; and
WHEREAS, UTI, UTI Sub, PDC 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 between UTI, UTI
Sub, PDC and the Shareholders, including all exhibits hereto.
"Articles of Merger" shall have the meaning ascribed thereto in
Section 2.1.
"Benefit Plan" shall mean any collective bargaining agreement or any
bonus, Pension Plan, 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.
<PAGE> 8
"Best knowledge of PDC", "best of PDC's knowledge", "knowledge of PDC"
and phrases of similar import, with reference to matters of fact, shall mean
the actual knowledge of the officers and directors of PDC.
"Cash Consideration" means an amount in cash equal to $20.4 million
minus the amount of the Escrowed Consideration.
"Certificate" shall have the meaning ascribed thereto in Section
3.1(c).
"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.
"Constituent Corporations" has the meaning ascribed thereto in Section
2.2(a).
"Contracts" has the meaning ascribed thereto in Section 4.10.
"Damages" shall mean any and all liabilities, losses, damages,
demands, assessments, claims, costs and expenses (including interest, awards,
judgments, penalties, settlements, fines, costs of remediation, reasonable
costs and expenses incurred in connection with investigating and defending any
claims or causes of action (including, without limitation, attorneys' fees and
expenses and all 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) and shall
specifically include any Shareholder loans.
"Effective Time" has the meaning ascribed thereto in Section 2.1.
"Employment Agreements" shall have the meaning assigned thereto in
Section 7.4.
"Environmental Condition" means any pollution, contamination,
degradation, damage or injury caused by, related to or arising from the
generation, handling, use, treatment, storage, transportation, disposal,
discharge, release or emission of any Hazardous Materials.
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<PAGE> 9
"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.
"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 PDC
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.
"Escrowed Consideration" shall mean $1.0 million.
"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, 4.4(last sentence), 4.8, 4.9,
4.11, 4.12, 4.20, 4.22, 4.23, 4.24, 4.25, 4.27, 4.30, 5.1, 5.2, 5.3 and 5.4.
"Final Statement" has the meaning ascribed thereto in Section 3.4.
"Financial Statements" has the meaning ascribed thereto in Section
4.4.
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<PAGE> 10
"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, but
excluding Environmental Laws.
"HSR Act" means the Hart-Scott-Rodino Anti-Trust 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.
"Indemnity Claim" has the meaning ascribed thereto in Section 13.6.
"Indemnity Escrow" has the meaning ascribed thereto in Section 13.3.
"Indemnity Escrow Agreement" has the meaning ascribed thereto in
Section 13.3.
"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) would have, or might reasonably be
expected to have, a material adverse effect on the assets, business,
operations, prospects or financial condition of the relevant party, 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.
"Net Equity" means the total assets less the total liabilities of PDC
calculated in accordance with the historical accounting methods of PDC, subject
to the special rules of construction contained in Section 3.4(c).
"Non-Compete Payments" shall have the meaning assigned thereto in
Section 7.5.
"Ordinary Course of Business" shall mean the operation of business in
the ordinary course consistent with past practices.
"PBGC" has the meaning ascribed thereto in Section 4.9.
"PDC Common Stock" shall have the meaning ascribed thereto in Section
3.1.
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<PAGE> 11
"Pension Plans" has the meaning ascribed thereto in Section 4.9.
"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 PDC
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
PDC Common Stock immediately prior to the Merger.
"Reference Balance Sheet" has the meaning ascribed thereto in Section
4.4.
"Rigs" shall mean the equipment described on Schedule 3 which
constitutes eight land drilling rigs and the parts and equipment relating
thereto.
"Shareholders" has the meaning ascribed in the opening paragraph of
this Agreement.
"Shareholder Indemnified Parties" has the meaning ascribed thereto in
Section 13.2.
"Shareholder Liabilities" shall mean (A) all obligations of PDC
(including indemnification and other contingent obligations), except to the
extent such obligations are accrued for on the Final Statement or were incurred
in the Ordinary Course of Business of PDC and are not required to be accrued on
the Final Statement under the historical accounting rules of PDC, relating to
(i) acts, events or omissions occurring, or circumstances relating to PDC or
its business or assets existing at or prior to the Closing, (ii) goods or
services provided to or for the benefit of PDC or any of its Affiliates at or
prior to the Closing, (iii) goods or services provided by or on behalf of PDC
or any of its Affiliates at or prior to the Closing or (iv) any obligation
relating to the conduct of the business of PDC, the ownership or operation of
the assets of PDC or any benefit realized by PDC at or prior to the Closing and
(B) all obligations of PDC (including indemnification and other contingent
obligations), except to the extent such obligations are accrued for on the
Final Statement, relating to (i) any pending or threatened litigation or claims
made or threatened at or prior to the Closing, (ii) contracts, agreements and
other commitments that were required to be scheduled in the Disclosure
Schedules and were not scheduled, (iii) any Taxes of PDC for any period ending
on or before the Closing Date to the extent such Taxes have not been fully
accrued as current liabilities on the Balance Sheet, and (iv) any obligations
to the employees of PDC arising prior to or as a result of the Closing 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 PDC with respect to its or its Affiliates' employees
arising at or prior to the Closing.
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<PAGE> 12
"Shareholder Representative" shall mean Ray Peterson.
"Shares" shall mean all of the issued and outstanding shares of
capital stock of PDC.
"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.
"TBCA" means the Texas Business Corporation Act.
"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.
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 the TBCA, UTI Sub
shall be merged with and into PDC at the Effective Time. The Merger shall
become effective immediately when articles of merger (the "Articles of
Merger"), prepared and executed in accordance with the relevant provisions of
the TBCA, are filed with the Secretary of State of the State of Texas or, if
agreed to by the parties, at such time thereafter as is provided in the
Articles of Merger (the "Effective Time"). The filing of the Articles of
Merger shall be made as soon as practicable after the Closing.
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<PAGE> 13
Section 2.2 Effects of the Merger.
(a) At the Effective Time: (i) UTI Sub shall be merged
with and into PDC, the separate existence of UTI Sub shall cease and PDC shall
continue as the surviving corporation (UTI Sub and PDC are sometimes referred
to herein as the "Constituent Corporations" and PDC is sometimes referred to
herein as the "Surviving Corporation"); (ii) the Articles of Incorporation of
PDC shall be the Articles of Incorporation of the Surviving Corporation, and
(iii) the Bylaws of UTI Sub 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
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 PDC ("PDC Common Stock") or capital
stock, $.01 par value, of UTI Sub ("UTI Sub Common Stock"):
(a) Cancellation of Treasury Stock and UTI-Owned Stock.
Each share of PDC Common Stock, and all other shares of capital stock
of PDC, that are
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<PAGE> 14
owned by PDC as treasury stock shall be canceled and retired and shall
cease to exist and no consideration shall be delivered or deliverable
in exchange therefor.
(b) Consideration for PDC Common Stock. Subject to the
provisions of Section 3.1(c), each share of PDC 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 (i) a Proportionate Share of the
Cash Consideration from UTI and (ii) a Proportionate Share of the
remaining amount of the Escrowed Consideration, if any, in accordance
with Article XIII.
(c) Conversion and Cancellation of PDC Common Stock. All
shares of PDC Common Stock, when converted as provided in Section
3.1(b), 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 (a "Certificate") shall cease
to have any rights with respect thereto, except the right to receive
such holder's Proportionate Share of the Cash 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.
(d) Conversion of UTI Sub Common Stock. Each outstanding
share of UTI Sub Common Stock shall be converted into and become one
fully paid and nonassessable share of Common Stock, $1.00 par value,
of the Surviving Corporation.
Section 3.2 Exchange of Certificates.
(a) Exchange Procedure. Upon surrender of a Certificate
for cancellation to UTI, together with any other documents reasonably required
by UTI in order to effect the exchange described in this paragraph, the holder
of such Certificate shall be entitled to receive in exchange therefor (i) the
Cash Consideration that such holder has the right to receive pursuant to the
provisions of Section 3.1 from UTI and (ii) a Proportionate Share of the
remaining amount of the Escrowed Consideration, if any, in accordance with
Article XIII, and the Certificate so surrendered shall 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 (i) the right
to receive upon such surrender that portion of the Cash Consideration as
contemplated by Section 3.1 from UTI and (ii) a Proportionate Share of the
remaining amount of the Escrowed Consideration, if any, in accordance with
Article XIII.
(b) No Further Ownership Rights in PDC Common Stock. The
cash to be paid upon the surrender for exchange of shares of PDC Common Stock
in accordance with the terms hereof shall be deemed to have been paid in full
satisfaction of all rights pertaining to such shares of PDC 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 PDC
Common Stock that were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are
-8-
<PAGE> 15
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article III.
(c) Lost Share Certificates. If a holder shall have lost
or had destroyed such holder's Certificate, such holder will be entitled to
receive the Cash Consideration and other payments provided for hereunder
(including a Proportionate share of the remaining amount of the Escrowed
Consideration, if any, in accordance with Article XIII), subject to such holder
providing 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,
in cooperation with William L. Pendleton, shall prepare and deliver to the
Shareholders Representative a statement reflecting the calculation of the Net
Equity as of the Closing Date (the "Final Statement"). In the event the Net
Equity is less than $5,050,000, UTI shall provide the Shareholders
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 the historical accounting
policies of PDC. The Shareholders Representative shall have a period of 15
calendar days after delivery to him of the Final Statement to review it and
make any objections that 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 Shareholders Representative shall attempt to
resolve the matter or matters in dispute. If no written objections are made
within the time period provided above, the Shareholders shall pay to UTI their
Proportionate Share of the amount, if any, by which the Net Equity on the Final
Statement is less than $5,050,000, in each case within five calendar days after
the end of such 15-day period. All payments required to be made pursuant to
this Section 3.4 shall be paid in immediately available funds by cashier's
check payable to UTI or wire transfer to a bank account or accounts to be
designated by UTI.
(b) If disputes with respect to the Final Statement
cannot be resolved by UTI and the Shareholders Representative within 15
calendar days after the delivery of the objections to the Final Statement, then
any party with notice to the other parties may submit matters in dispute to
Arthur Andersen LLP or such other nationally recognized independent accounting
firm as may be approved by UTI and the Shareholders 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 Shareholders 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 Shareholders Representative, the
Shareholders shall pay to UTI their Proportionate Share of the amount, if any,
by which the Net Equity on the Final Statement is less than $5,050,000. The
fees and other costs charged by each party's own independent accounting firm,
if any, shall be
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<PAGE> 16
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 required to be made pursuant to this Section 3.4(b)
shall be paid in immediately available funds by cashier's check to UTI or wire
transfer to a bank account or accounts to be designated by UTI.
(c) For purposes of determining the Net Equity under this
Section 3.4, the following shall, without duplication, be applied:
(i) write-ups of inventory and other equipment
and 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 Net Equity as of
the Closing Date;
(ii) all fees of all law firms and accountants
providing services for PDC, the Shareholders and any Affiliates of PDC
or the Shareholders shall be accrued for and included in the
calculation of Net Equity as of the Closing Date;
(iii) all Taxes payable as a result of transactions
effected by PDC on or prior to the Closing, including as a result of
the Merger, shall be fully accrued for purposes of calculating Net
Equity as of the Closing Date to the extent such Taxes would be
payable by PDC; and
(iv) the full amount of all Debt as of the Closing
shall be reflected in the calculation of Net Equity.
(d) Except for normal expense account advances described
in Section 3.4(d) of the Disclosure Schedule, the Shareholders shall cause all
accounts receivable and other amounts owed to PDC from related parties to be
paid in full prior to the Closing.
ARTICLE IV-A
REPRESENTATIONS AND WARRANTIES OF PDC
PDC represents and warrants to UTI pursuant to Sections 4.1 through
4.22 that:
Section 4.1 Incorporation; Authority. PDC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas, 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 PDC owns or leases properties, has
employees or conducts business, and a complete list of all jurisdictions in
which PDC is qualified as a foreign corporation. PDC is duly qualified or
licensed to do business and in good standing as a foreign corporation in every
jurisdiction (which jurisdictions are listed in Section 4.1 of the Disclosure
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<PAGE> 17
Schedule) in which the conduct of its business or the ownership or leasing of
its assets require it to be so qualified or licensed, except where the failure
to be so qualified or licensed would not have a Material Adverse Effect on PDC.
PDC 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 Articles of Incorporation of PDC and all amendments thereto
to date (certified by the Secretary of the State of Texas) and of the bylaws of
PDC 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 PDC
consists of 1,000,000 shares of common stock, $1.00 par value, of which 623,815
shares are issued and 623,815 shares are outstanding as of the date of this
Agreement and 623,815 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 in Section 4.2 of the Disclosure
Schedule, there are no outstanding subscriptions, options, warrants, calls,
commitments, obligations or agreements relating to any of the authorized or
outstanding capital stock of PDC. The Shareholders are the record owners of
all of the Shares and such ownership is set forth in Section 4.2 of the
Disclosure Schedule 4.2 hereto.
Section 4.3 Subsidiaries. PDC does not, directly or indirectly,
own or control any capital stock, 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, except as set forth in Section 4.3 of the
Disclosure Schedule, PDC has not, since its inception, directly or indirectly
owned or controlled any capital stock, equity interest, or had any proprietary
interest in, any Person, nor has it directly or indirectly controlled the
management of any Person.
Section 4.4 Financial Statements. PDC has delivered to UTI
copies of the PDC February 28, 1998, balance sheet (the "Reference Balance
Sheet"), and income statement for the two-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"). Each of the Financial
Statements represents the most recent financial statements prepared by PDC and
has been prepared in conformity with PDC's historical accounting procedures and
fairly presents in all material respects (subject, in the case of the unaudited
statements, to the absence of footnotes and to normal, recurring year-end
adjustments, which are not, and will not be, individually or in the aggregate,
material to the financial condition or results of operations of PDC) the
financial condition and results of operations of PDC, as of the date thereof
and for the period indicated. Each of the Financial Statements is complete,
correct and in accordance with the books of account and records of PDC in all
material respects. The total assets of PDC are less than $10 million.
Section 4.5 Liabilities, Debts and Obligations. PDC has no
liabilities, debts or obligations of any nature whatsoever, whether due or to
become due, and whether
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accrued, absolute, contingent or otherwise, that are not disclosed on the
Reference Balance Sheet or in this Agreement or 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 PDC.
Section 4.6 Events Since Balance Sheet Date. Since the Balance
Sheet Date there has not been, except as disclosed fully and correctly 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 PDC, except
changes in the Ordinary Course of Business that individually and in the
aggregate have not had a Material Adverse Effect on PDC;
(b) any declaration, setting aside, or payment of any
dividend or other distribution on or in respect of the capital stock of PDC, 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 PDC to any of its
directors, officers, employees or consultants, or any hiring of any employee by
PDC 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 PDC, 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
PDC of any interest in real property or of any machinery, equipment or other
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;
(f) any labor trouble, strike or any other occurrence,
event or condition affecting the employees of PDC that has had or is reasonably
expected to have a Material Adverse Effect on PDC;
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(g) any damage, destruction or loss (whether or not
covered by insurance) adversely affecting the assets or the business of PDC,
except for damages, destruction or loss that reasonably would be expected to
occur in the Ordinary Course of Business not exceeding $50,000, individually or
in the aggregate;
(h) any transaction entered into or engaged in by PDC
other than transactions in the Ordinary Course of Business of PDC;
(i) any waiver by PDC 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 PDC except in the Ordinary Course of Business
of PDC; or
(j) any transaction between PDC 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. PDC has provided
to UTI a true and complete list of the names of and current annual compensation
paid by PDC to each director, officer and employee of PDC. Except as
previously disclosed to UTI, with respect to each employee of PDC hired after
December 15, 1987, PDC 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 PDC's knowledge, no officer
or key employee of PDC 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 PDC, or any other party. To the best of
PDC's knowledge, no employee of PDC 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. PDC does not have any
collective bargaining agreements covering any of its employees. PDC is not
aware that any officer or key employee of PDC, or that any group of those
Persons, intends to terminate their employment with PDC. The employment of
each officer and employee of PDC is terminable at the will of PDC.
Section 4.8 Taxes and Governmental Returns and Reports. Except
as set forth in Section 4.8 of the Disclosure Schedule:
(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 PDC, including, but not limited to, those relating to the
income, business, operations or property of PDC and those which include or
should include PDC (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 or fully reserved against in the Final Statement;
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(b) all such Tax Returns and the information and data
contained therein have been properly and accurately compiled and completed in
all material respects, fairly present the information purported to be shown
therein, and reflect all liabilities for Taxes for the periods covered by such
Tax Returns;
(c) none of such Tax Returns are under audit or, to the
knowledge of PDC, 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 PDC or with respect to any such Tax Return, or
any suits or other actions, proceedings, investigations or claims now pending
or, to the knowledge of PDC, threatened against PDC with respect to any Tax, or
any matters under discussion between PDC and 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 due and owing from or against
PDC on or before the Closing Date (including, but not limited to, ad valorem
Taxes relating to any property of PDC) have been timely paid in full on or
before the Closing Date or fully reserved against in the Final Statement;
(e) all withholding Tax and Tax deposit requirements
imposed on PDC for any and all periods ending on or before the Closing Date, or
through and including the Closing Date for periods that have not ended on or
before the Closing Date, have been 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 PDC with respect to any and all periods ending on or
before the date thereof;
(g) there is no basis known to PDC for any reassessment
of Tax and there have been no special assessments on any assets of PDC;
(h) the charges, accruals and reserves for Taxes with
respect to PDC for any period ending on or before the Closing Date (including
any such period for which no Tax Return has yet been filed) reflected on the
books of PDC (excluding any provision for deferred income Taxes) are adequate
to cover such Taxes;
(i) neither PDC nor any other Person on behalf of PDC,
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 PDC
except liens for current property Taxes not yet due and payable;
(k) PDC is not delinquent in the payment of any Tax and
has not requested any extension of time within which to file any Tax Return
which has not been filed;
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(l) there are no requests or determinations in respect of
any Tax matter relating to PDC pending before or with any Governmental
Authority;
(m) all Tax Returns filed with respect to the Tax years
of PDC through the Tax year ended December 31, 1990, 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) PDC has not:
(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 PDC 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 PDC).
(o) PDC is not a party to any Tax allocation or Tax
sharing agreement;
(p) PDC 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,
(q) PDC 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),
(r) neither PDC nor any Person who has been 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,
(s) PDC has not acquired the assets of any other
corporation in a transaction described in section 381(a) of the Code, and
(t) Section 4.8 of the Disclosure Schedule contains a
list of all jurisdictions (whether foreign or domestic) to which any Tax is
properly payable by PDC.
Section 4.9 Employee Benefit Plans.
(a) Section 4.9 of the Disclosure Schedule contains a
list and brief description of all "employee pension benefit plans" (as defined
in Section 3(2) of ERISA)
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(sometimes referred to herein as "Pension Plans"), "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
PDC for the benefit of any present or former officers or employees of PDC. PDC
has delivered to UTI true, complete and correct copies of (i) each Benefit Plan
(or, in the case of any unwritten Benefit 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.
(b) Except as set forth in Section 4.9 of the Disclosure
Schedule, all Pension Plans have been the subject of determination letters from
the IRS to the effect that such Pension Plans are qualified and exempt from
Federal income taxes under Section 401(a) and 501(a), respectively, of the Code
and no such determination letter has been revoked nor has revocation been
threatened, nor has any such Pension Plan been amended since the date of its
most recent determination letter or application therefor in any respect that
would adversely affect its qualification or materially increase its costs. To
the best of PDC's knowledge, no event has occurred which could subject any
Pension Plan to disqualification by the Internal Revenue Service under the
Code. PDC has paid all premiums (including any applicable interest, charges
and penalties for late payment) due the Pension Benefit Guaranty Corporation
("PBGC") with respect to each Pension Plan for which premiums are required. No
Pension Plan maintained by PDC has been terminated under circumstances which
would result in liability to the PBGC.
(c) Each Benefit Plan which has been or is sponsored,
participated in or contributed to by PDC: (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 PDC which may subject PDC 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.
(d) Except as set forth in Section 4.9 of the Disclosure
Schedule, the execution of this Agreement or the consummation of the
transactions contemplated by this Agreement will not give rise to any, or
trigger any, change of control, or severance benefit or other similar provision
in any Benefit Plan.
(e) PDC does not provide employee post-retirement
medical or health coverage or contribute to or maintain any employee welfare
benefit plan which provides for health benefit coverage following termination
of employment except as is required
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by Section 4980B(f) of the Code or other applicable statute, nor has it made
any representations, agreements, covenants or commitments to provide that
coverage.
(f) No Pension Plan that PDC maintains, or to which PDC
is obligated to contribute, had, as of the respective annual valuation date for
each such Pension Plan, an "unfunded benefit liability" (as such term is
defined in Section 4001(a)(18) of ERISA). None of the Pension Plans has an
"accumulated funding deficiency" (as such term is defined in Section 302 of
ERISA or Section 412 of the Code), whether or not waived. To the best of PDC's
knowledge, none of PDC, any officer of PDC or any of the Benefit Plans which
are subject to ERISA, including the Pension Plans, or any trusts created
thereunder, or any trustee or administrator thereof, has engaged in a
"prohibited transaction" (as such term is defined in Section 406, 407 or 408 of
ERISA or Section 4975 of the Code) or any other breach of fiduciary
responsibility that could subject PDC or any officer of PDC to the tax or
penalty on prohibited transactions imposed by such Section 4975 or to any
liability under Section 502(i)(1) of ERISA. Neither any of such Benefit Plans
nor any of such trusts have been terminated, nor has there been any "reportable
event" (as that term is defined in Section 4043 of ERISA) with respect to which
the 30-day notice requirement has not been waived and PDC is not aware of any
other reportable events with respect thereto during the last five years. PDC
has never been a party to or contributed to a "multiemployer pension plan" (as
such term is defined in Section 4001(a)(3) of ERISA).
(g) 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 Plan covering retirees or
other former employees) may be amended or terminated without material liability
to PDC on or at any time after the Closing.
(h) Neither PDC, nor, to the knowledge of PDC, 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 PDC 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 which 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 PDC. PDC, and each Benefit Plan maintained by PDC 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 exists any continuing obligation of PDC
thereunder, any unperformed obligations on behalf of any other party thereto,
or any of the assets or properties of PDC is in any
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<PAGE> 24
way bound or obligated (including all amendments, supplements and modifications
thereto):
(a) all contracts, agreements or commitments in an
amount in excess of $15,000 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 PDC of less than $15,000;
(b) all outstanding offers, tenders, bids or the like
outstanding and capable of being converted into an obligation of PDC in an
amount in excess of $15,000 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;
(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 PDC;
(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 PDC;
(i) all contracts, agreements, arrangements or legally
enforceable commitments relating to the acquisition by PDC of any of its assets
having a value in excess of $15,000 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 customer account receivables generated in the Ordinary Course of
Business), and all security therefor, and all documents and agreements related
thereto;
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(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
PDC;
(o) all contracts, agreements, arrangements, or legally
enforceable commitments that cannot be canceled by PDC 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 PDC or affiliates thereof after the
Closing; and
(p) all contracts, agreements, arrangements or legally
enforceable commitments that are material to PDC 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 PDC or its assets not
specifically described above (collectively, the "Contracts") are valid, binding
and in full force and effect in accordance with their terms and conditions,
except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, moratorium, insolvency or other similar laws affecting
generally the rights of creditors or by principles of equity, there is no
existing default thereunder or breach thereof by PDC, or, to the best of PDC'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 PDC, or, to the best of PDC'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 PDC to UTI, or
made available for review, 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 PDC 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
the Articles of Incorporation or bylaws of PDC; (ii) result in any violation of
any Governmental Requirement applicable to PDC; (iii) cause PDC to lose the
benefit of any material right or privilege it presently enjoys or, to the best
of PDC's knowledge, cause any Person who normally does business with PDC not to
continue to do so on the same basis as before; (iv) relieve any Person of any
obligation to PDC (whether contractual or otherwise) or enable any other Person
to terminate any such obligation or any right or benefit enjoyed by PDC or to
exercise any right under any agreement, including any Contract, with or
otherwise in respect of PDC or the assets or business of PDC; or (v) require
notice to or the consent, authorization, approval or order of any Person.
Section 4.12 Properties, Assets and Leasehold Estates. PDC owns
or has the right to use (pursuant to a valid lease or license disclosed on
Section 4.12 of the
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Disclosure Schedule) all property, real or personal, tangible or intangible,
(i) reflected on the Reference Balance Sheet (other than items sold by PDC
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.
Section 4.12 of the Disclosure Schedule sets forth a true and complete list of
all such property as of the date hereof (with all property that is leased or
licensed being designated as such). PDC has good and marketable title to all
the properties, interests in properties, assets and leasehold estates, real and
personal, set forth in Section 4.12 of the Disclosure Schedule owned by PDC,
free and clear of all mortgages, liens, pledges, conditional sales agreements,
charges, easements, covenants, assessments, restrictions and encumbrances of
any nature whatsoever ("Encumbrances"), other than Encumbrances (i) that are
liens for Taxes not yet due and payable and that are not filed of record as of
the Closing Date, (ii) that are statutory liens securing amounts not yet due
and payable and that are not filed of record as of the Closing Date, or (iii)
that do not relate to obligations exceeding $25,000, individually or in the
aggregate, and no Person has ever challenged or given PDC notice of its intent
to challenge PDC's title or rights to the properties, assets and leasehold
estates listed in Section 4.12 of the Disclosure Schedule or otherwise utilized
in or necessary for the operation of PDC's business. All leases of property
under which PDC purports to be a lessee are valid, binding and in full force
and effect. All structures, equipment and other properties of PDC and the
present use of such items conform in all material respects 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 PDC.
PDC 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 real property owned or occupied by PDC has been condemned or
otherwise taken by any public authority, nor, to the best of PDC's knowledge,
is any such condemnation or taking threatened or planned.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH HEREIN, NEITHER PDC
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 PDC, 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. NEITHER UTI NOR UTI SUB IS RELYING ON ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, BY PDC 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 PDC and of the credit and debit balances of such bank
and financial accounts as of the most recent practicable date.
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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 PDC or in which PDC is engaged or that are pending or, to
the best of PDC's knowledge, threatened against or affecting PDC or any of its
properties, assets or business, or that question the validity or legality of
the transactions contemplated hereby, (ii) to the best knowledge of PDC, no
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 PDC or any of its
properties, assets or business. Section 4.14 of the Disclosure Schedule sets
forth all claims, including the status thereof, over the past two years against
PDC with respect to personal injury, negligence or responsibility for damages
or injuries relating to PDC's 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 PDC
or its properties, assets, business and personnel. Such policies afford PDC
coverage in such amounts and against such risks as is customary for companies
engaged in the same type and scope of business as PDC. There are no special
circumstances with respect to such policies or the business or operations of
PDC that could reasonably be expected to lead to any liability under such
insurance policies being avoided by the insurers issuing such policies or, to
the best of PDC's knowledge, 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 PDC's knowledge
are there any circumstances that are likely to give rise to such a claim. PDC
is not in default with respect to any provision contained in such insurance
policies, nor has it failed to give any notice or present any claim thereunder
that is currently pending in a 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.
(a) Section 4.16 of the Disclosure Schedule sets forth a
true and complete list of all licenses and permits maintained by PDC, which are
all the licenses and permits necessary for the conduct of PDC's business as
currently conducted, except for licenses and permits the absence of which does
not and will not have a Material Adverse Effect. PDC 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. No violations are or have been recorded in
respect of such licenses or permits and no proceeding is pending or, to the
best of PDC's knowledge, threatened seeking the revocation or limitation of any
of such licenses or permits. 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. PDC
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.
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(b) Except 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 PDC 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 PDC set forth in this Agreement and the
Exhibits hereto and in all other documents 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 PDC
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.
(a) PDC has not 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 PDC.
PDC has not disposed of any Hazardous Material on any of the assets currently
owned or leased, or that have been owned or leased, by PDC or its Affiliates or
predecessor entities (the "PDC Assets") and to the best knowledge of PDC, no
condition exists on any of the PDC Assets which would subject PDC or the PDC
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 on PDC, PDC has obtained and been in compliance with
all of the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in, all applicable
Environmental Laws relating to the PDC Assets.
(c) PDC, and to the best of its knowledge, any prior
owner or operator of the PDC Assets, has not caused or allowed the generation,
use, treatment, storage or disposal of Hazardous Materials at any site or
facility owned, leased or operated by PDC or its Affiliates or used in
connection with any such site or facility except in accordance with all
applicable Environmental Laws or except to the extent the same would not have a
Material Adverse Effect on PDC.
(d) None of the PDC Assets have been subject to the
release of any Hazardous Materials by PDC or to the best of PDC's knowledge, by
any prior owner or operator of the PDC Assets except to the extent that the
same would not have a Material Adverse Effect.
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(e) PDC has not received any notice, nor is it aware, of
any proposal to amend, revoke or replace any Environmental Permit, or requiring
the issuance of any additional Environmental Permit, necessary to operate the
PDC Assets owned by PDC.
(f) PDC has not received inquiry or notice nor does PDC
have any reason to suspect or believe that it will receive inquiry or notice of
any actual or potential proceedings, claims, lawsuits or losses related to or
arising under any Environmental Laws and related to the PDC Assets.
(g) PDC is not currently operating or required to be
operating any of the PDC Assets under any compliance order, schedule, decree or
agreement, any consent decree, order or agreement, or corrective action decree,
order or agreement issued or entered into under any Environmental Law.
(h) PDC and the PDC Assets are to the best of PDC's
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. Except as set forth in Section
4.20 of the Disclosure Schedule, no broker or finder has acted for PDC 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 PDC. 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 Obligations. PDC does not have any
obligations or liabilities to the Shareholders or any Affiliate of the
Shareholders, except for obligations and liabilities that will be discharged in
full on or prior to the Closing Date.
Section 4.22 PDC Corporate Authority. The execution and delivery
of this Agreement by PDC, 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 PDC, including all
necessary approvals by the Shareholders of the Merger and this Agreement. This
Agreement constitutes the legal, valid and binding obligation of PDC
enforceable against PDC in accordance with its terms, subject to applicable
bankruptcy, insolvency or other similar laws relating to or affecting the
enforcement of creditors' rights generally and to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or
at law).
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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 number of shares of PDC Common Stock
owned by such Shareholder is set forth beside such Shareholder's name in
Section 4.2 of the Disclosure Schedule hereto, and such Shareholder owns all of
such shares of PDC 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; (ii) result in any violation of
any Governmental Requirement applicable to such Shareholder; or (iii) to the
best of such Shareholders's knowledge, cause any Person who normally does
business with PDC 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 limited by applicable bankruptcy,
moratorium, insolvency or other similar laws affecting generally the rights of
creditors or by principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(b) Except for any matters set forth in Section 4.25 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 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 PDC contained herein are true and correct in all material
respects.
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(b) The statements, representations and warranties of
such Shareholder set forth in this Agreement and the Exhibits hereto and in all
other documents 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. Except as set forth in Section
4.27 of the Disclosure Schedule, 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. PDC does not have any
obligations or liabilities to such Shareholder or any Affiliate of such
Shareholder, except for obligations and liabilities that will be discharged in
full on or prior to the Closing Date.
Section 4.29 Indebtedness and Agreements. Immediately subsequent
to the Effective Time, the Surviving Corporation will have no indebtedness
outstanding that is payable to such Shareholder or any of its Affiliates,
except for benefits pursuant to Benefit Plans listed on the schedules hereto.
Immediately subsequent to the Effective Time, except for this Agreement and
agreements contemplated hereby, there will be no agreements, contracts, leases,
arrangements or other understandings (either written or oral) between such
Shareholder and the Surviving Corporation, except for benefits pursuant to
Benefit Plans listed on the schedules hereto.
Section 4.30 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 AND UTI SUB
Each of UTI and UTI Sub represents and warrants to PDC and 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. UTI and UTI
Sub are each qualified to do business in each other jurisdiction in which its
failure to so qualify would have a Material Adverse Effect on UTI or UTI Sub or
the ability of UTI or UTI Sub to perform the transactions contemplated by this
Agreement.
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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 and delivery of this Agreement by each
of UTI and UTI Sub, and the consummation of the Merger and the transactions
contemplated hereby, will not (i) violate any provision of its certificate of
incorporation or bylaws, (ii) result in a breach of the terms or conditions of
any material agreement or instrument to which it is a party or by which any of
its properties or assets may be bound, (iii) result in any violation of any
Governmental Requirement applicable to it other than in respect of clauses (ii)
and (iii), violations that would not have a Material Adverse Effect on UTI or
UTI Sub.
(d) Except 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 or UTI Sub in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby.
(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 limited by applicable bankruptcy, moratorium, insolvency or
other similar laws affecting generally the rights of creditors or by principles
of equity.
(f) There are no suits, actions, claims, inquiries,
investigations or legal, administrative or arbitration proceedings involving
UTI or UTI Sub or in which UTI or UTI Sub is engaged or that are pending or, to
the best of UTI's or UTI Sub's knowledge, threatened that question the validity
or legality of the transactions contemplated hereby, and to the best knowledge
of UTI and UTI Sub, no basis or grounds for any such suit, action, claim,
inquiry, investigation or proceeding exists.
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 from the Shareholders in connection with any
of the transactions contemplated hereby.
Section 5.4 Tax Matters. Except for liabilities or obligations
incurred in connection with its incorporation or the negotiation and
consummation of this Agreement and the transactions contemplated hereby, UTI
Sub has not incurred any liabilities or obligations, engaged in any business or
activities, or entered into any agreements or arrangements, in each case of any
type or kind whatsoever. Furthermore, UTI Sub has no assets other than $1,000
in consideration received upon its initial capitalization. UTI Sub was formed
for the sole purpose of entering into this
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Agreement and consummating the transactions contemplated hereby. UTI will not
make an election under Section 338 of the Code with respect to its acquisition
of PDC.
ARTICLE VI
[INTENTIONALLY OMITTED]
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PDC
AND THE SHAREHOLDERS
The obligations of PDC 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.
(a) PDC shall have received the opinion of counsel to
UTI and UTI Sub dated the Closing Date, substantially in the form of Exhibit
7.1.
(b) The Shareholders shall have received a written
opinion from Thompson & Knight, P.C. in form reasonably satisfactory to such
parties (the "Tax Opinion"), to the effect that the Merger will not give rise
to recognition of gain or loss to PDC. In rendering the Tax Opinion, such
counsel shall be entitled to rely upon representations of the Shareholders as
well as officers of PDC, UTI and UTI Sub reasonably satisfactory in form and
substance to such counsel.
Section 7.2 Performance and Obligations of UTI and UTI Sub.
(a) All of the terms and conditions of this Agreement to
be complied with and performed by UTI and/or UTI Sub 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 and/or UTI Sub in this Agreement
shall be correct in all material respects.
(b) Each of UTI and UTI Sub shall have delivered to PDC
a certificate, in the form contemplated by Section 9.2(d).
(c) Each of UTI and UTI Sub shall have complied on or
before the Closing Date in all material respects with each of its covenants or
agreements contained in this Agreement to be performed on or before the Closing
Date.
Section 7.3 Governmental Approvals; Absence of Litigation. No
statute, rule or regulation or order of any court or administrative agency
shall be in effect which prohibits PDC and the Shareholders from consummating
the transactions contemplated hereby and no suit, action, investigation or
other proceeding by any third party or
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Governmental Entity shall have been instituted or threatened seeking to enjoin,
restrain or prohibit UTI, UTI Sub, PDC or the Shareholders from consummating
the transactions contemplated hereby or to obtain substantial damages in
respect thereof, or which is related to or arises out of this Agreement and the
transactions contemplated hereby and which, in the reasonable judgment of PDC,
would make it inadvisable to consummate such transactions.
Section 7.4 Employment Agreements. UTI and the Surviving
Corporation shall have executed employment agreements (the "Employment
Agreements") with Ray Peterson and Leroy Peterson in the forms attached hereto
as Exhibit 7.4.
Section 7.5 Non-Compete Payments. UTI shall have delivered to
Ray Peterson and Leroy Peterson the amounts (the "Non-Compete Payments") set
forth in Section 7.5 to the Disclosure Schedule.
Section 7.6 Stock Option Agreements. UTI shall have executed
stock option agreements (the "Stock Option Agreements") with each of Ray
Peterson and Leroy Peterson in the forms attached hereto as Exhibit 7.6.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF UTI AND UTI SUB
The obligations of UTI and UTI Sub 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 seeking to enjoin, restrain or
prohibit the consummation of this Agreement or the transactions contemplated
hereby, or to obtain substantial damages in respect thereof, or which is
related to or arises out of this Agreement or the consummation of the
transactions contemplated hereby, and which, 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 PDC and the Shareholders, dated the Closing Date,
substantially in the form of Exhibit 8.2.
Section 8.3 Performance and Obligations of PDC and the
Shareholders.
(a) All of the terms and conditions of this Agreement to
be complied with and performed by PDC 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 PDC and the
Shareholders in this Agreement shall be correct in all material respects.
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(b) The Shareholders and PDC shall have delivered to UTI
a certificate, substantially in the form contemplated by Section 9.3(e).
Section 8.4 Governmental Approvals. No statute, rule or
regulation or order of any court or administrative agency shall be in effect
which prohibits UTI from consummating the transactions contemplated hereby.
Section 8.5 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 PDC and the Shareholders to consummate the
transactions contemplated hereby shall have been obtained.
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., 1301 McKinney, Suite 5100, Houston,
Texas, subject to the satisfaction of the conditions precedent stated in
Articles VII and VIII on the date hereof, or such other place or date as may be
mutually agreed.
Section 9.2 Closing Deliveries by UTI and UTI Sub. At the
Closing, UTI and/or UTI Sub, as applicable, shall deliver to PDC and the
Shareholders as provided in Articles III and VIII the following:
(a) the Cash Consideration;
(b) the executed Opinion of Counsel described in Section
7.1(a);
(c) (Intentionally Omitted)
(d) a certificate executed by the Secretary (or
Assistant Secretary), of UTI and UTI Sub dated as of the Closing Date, (i)
attaching the resolutions authorizing the Merger under this Agreement adopted
by the Board of Directors of UTI and UTI Sub and certifying the continued
effectiveness of such resolutions, and (ii) presenting the incumbency and
representative signatures of the officers executing this Agreement on behalf of
UTI and UTI Sub, as the case may be;
(e) the Employment Agreements;
(f) the Non-Compete Payments;
(g) the Stock Option Agreements;
(h) the Indemnity Escrow Agreement provided for in
Article XIII; and.
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(i) UTI shall deliver the Escrowed Consideration to the
escrow agent under the Indemnity Escrow Agreement to be held and distributed in
accordance with such agreement.
Section 9.3 Closing, Deliveries by PDC and the Shareholders. At
the Closing, PDC and the Shareholders shall deliver to UTI the following:
(a) certificates evidencing the Shares for cancellation
or an acceptable affidavit of lost stock certificate;
(b) a certificate of good standing for PDC issued by the
Texas Secretary of State and a certificate of existence and good standing
(including as to tax status) in each jurisdiction listed on Section 3.1 of the
Disclosure Schedule, in each case and dated as of a date no more than ten (10)
days prior to the Closing Date;
(c) the executed Opinion of Counsel described in Section
8.2;
(d) (Intentionally Omitted)
(e) a certificate executed by the Secretary (or
Assistant Secretary) of PDC dated as of the Closing Date stating that PDC has
taken all corporate action necessary to authorize the execution, delivery and
performance of this Agreement and presenting the authority of the officers
executing this Agreement on behalf of PDC; and
(f) the Employment Agreements.
Section 9.4 Employment Agreements and Stock Option Agreements.
At the Closing, UTI or the Surviving Corporation, Ray Peterson and Leroy
Peterson shall execute the Employment Agreements and Ray Peterson, Leroy
Peterson and UTI shall execute the Stock Option Agreements.
ARTICLE X
TERMINATION
[Intentionally Omitted]
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 material, non-public information in their possession regarding
PDC or its business or assets, and shall not disclose any of such information
to any Person except as may be required to comply with any Governmental
Requirement.
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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 PDC that UTI
may reasonably require in order to permit UTI to timely file a Current Report
Form 8-K with the Commission in accordance with the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder in connection with
the transactions contemplated hereby and to comply with any financial statement
requirements with respect to PDC applicable to UTI under the Securities
Exchange Act of 1934, as amended, the Securities Act and the rules and
regulations thereunder. If requested by UTI and at UTI's expense, the
Shareholders shall use reasonable good faith efforts to cause William L.
Pendleton to assist the Accountants 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 William L. Pendleton to
provide UTI with access to such firm's work papers in support of any accounting
or auditing work performed by Ernst & Young LLP in respect of PDC. At UTI's
expense, the Shareholders will cooperate with and assist UTI in preparing, and,
if requested, shall use reasonable efforts to cause William L. Pendleton to
cooperate with, and assist the Accountants in preparing, such other audited
financial statements for PDC as may be specified by UTI.
Section 11.3 Covenant Not to Compete With the Business. In
consideration for the receipt of the Non-Compete Payments and to induce UTI to
effect the Merger, Ray Peterson and Leroy Peterson (the "Non-Compete Parties"),
effective as of the Closing Date, for a period of three years hereafter in all
jurisdictions other than Louisiana, which shall be applicable for two years
only, 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 Texas, Oklahoma and New Mexico and in all parishes in
Louisiana, except for the account of UTI and its Affiliates. Each Non-Compete
Party 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 Surviving Corporation
and, accordingly, UTI and Surviving Corporation 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 Non-Compete Party acknowledges that this
covenant not to compete is being provided as an inducement to UTI to pay the
Non-Compete Payments and to enter into 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, UTI Sub
and PDC. 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 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
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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
laws, then such provision shall be reformed to the maximum time or geographic
limitations permitted by applicable law.
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 18 months following
the Closing Date, with the following exceptions:
(a) except as provided in (b) below, 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 (Taxes) 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 on the 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 being
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.
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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, severally (except to the extent of the Escrowed Consideration, for
which indemnification will be joint and several) 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 Liabilities;
(b) any obligation, liability or claim for liability
(whether in contract, in tort, or otherwise, and whether or not successful) of
PDC to any Affiliate of such Shareholder 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;
(c) any misrepresentation, breach of warranty or
nonfulfillment of any covenant or agreement on the part of any party hereto
other than UTI or UTI Sub 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
(d) all Environmental Liabilities imposed against UTI,
UTI Sub or PDC, 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 PDC Asset regardless of whether such Environmental Liabilities on
the Closing Date are known, unknown, disclosed, undisclosed, fixed or
contingent, or whether such Environmental Liabilities relate to on-site or
off-site Environmental Conditions; provided however, notice of such
indemnification claim under this subsection (d) must be given to the
Shareholder Representative on or before 18 months from the date hereof.
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
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future be paid, incurred or suffered by any Shareholder Indemnified Party or
asserted against any Shareholder 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 or
UTI Sub under this Agreement or from any misrepresentation in or omission from
any list, schedule, certificate or other instrument furnished or to be
furnished to PDC or the Shareholders pursuant to the terms of this Agreement
(excluding in each case all liabilities and obligations for which the
Shareholders have agreed to indemnify 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 or indemnification pursuant to
Section 13.1(d) until the Damages for which indemnification is sought from such
party (for this purpose, the Shareholders shall be deemed a single party)
exceed $100,000 in the aggregate (the "Basket Amount"), and once all such
Damages exceed the Basket Amount, such party shall be obligated to the other
party for any and all such Damages exceeding the Basket Amount. In addition,
each Shareholder's indemnification obligation shall be limited to an amount
equal to his or her Proportionate Share of $10,000,000.
(b) Any claim for indemnification with respect to a
representation or warranty breach or inaccuracy 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 Survival
Period.
(c) On the Closing Date, UTI shall deposit the Escrowed
Consideration with an escrow agent to be held in escrow (the "Indemnity
Escrow") for a period of 18 months after the Closing Date pursuant to the terms
of an Escrow Agreement to be entered into among the Shareholders, UTI and such
escrow agent in substantially the form of Exhibit 13.3 hereto (the "Indemnity
Escrow Agreement"). Notwithstanding any other provisions of this Article XIII
to the contrary, each Shareholder's liability with respect to indemnification
pursuant to Section 13.1 (as limited by Section 13.3) shall first be satisfied
from the Indemnity Escrow. On the date that is 18 months after the Closing
Date, (i) an amount equal to the unresolved or disputed portion of any existing
claim for indemnification made by a UTI Indemnified Party shall remain in the
Escrow until finally resolved by the parties, (ii) an amount equal to the
undisputed portion of any such claim shall be paid from the Escrow to the
applicable UTI Indemnified Parties and (iii) any remaining amounts of the
Escrowed Consideration shall be distributed to the Shareholders in accordance
with the Escrow Agreement. Upon distribution of amounts from the Escrow to the
Shareholders, UTI shall pay to the Shareholders an amount of interest on such
distributed amount from
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<PAGE> 41
the Closing Date to the date of payment using an annual rate of interest equal
to the short term Applicable Federal Rate (as defined in Section 1274 of the
Code) as in effect on the Closing Date (any such payment referred to as the
"Additional Escrow Payment"). The parties agree that all income earned on the
Indemnity Escrow shall be the property of UTI.
(d) 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.
Such Shareholder hereby expressly acknowledges and agrees that such Shareholder
shall be liable and responsible therefor to the extent provided in Article XIII
and that it shall not seek or receive indemnification or contribution from PDC
with respect to such claim for indemnification.
Section 13.5 Adjustment for Insurance. The amount of any
liabilities for which an indemnitor may be liable pursuant to this Article 13
shall be calculated net of any amount of insurance proceeds actually received
by indemnitee with respect to such liability.
Section 13.6 Notice of Claim. Each party agrees that upon its
discovery of facts giving rise to a claim by it for indemnity under the
provisions of this Agreement, (such facts being referred to herein as an
"Indemnity Claim"), it 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
indemnified party's rights to indemnity hereunder except to the extent that the
indemnifying party is shown to have been prejudiced by such delay or failure.
Section 13.7 Right to Participate in Defense. With respect to
any Indemnity Claim related to third party claims or liabilities as to which an
indemnified party seeks indemnity hereunder, the indemnified party shall
provide the indemnifying party with the opportunity to assume the defense of
such third party claim or liability with counsel of the indemnifying party's
choice and at the indemnifying party's cost and expense. Each of the
indemnified party and the indemnifying party shall reasonably cooperate with
the other and its representatives and counsel in any dispute or defense related
to any third party claim or liability for which indemnity is sought under the
terms of this Agreement. Such cooperation shall include, without limitation,
taking reasonable efforts to make employees and other individuals associated
with UTI and PDC available to the indemnifying party as well as making records
and other information within the
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<PAGE> 42
control of the indemnified party available to the indemnifying party on a
reasonable basis.
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 AND THEIR RESPECTIVE AFFILIATES AND PDC, AND THEIR
SUCCESSORS AND ASSIGNS, OF AND FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES,
RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION AND OBLIGATIONS OF EVERY NATURE
WHATSOEVER, LIQUIDATED OR UNLIQUIDATED, KNOWN OR UNKNOWN, MATURED OR UNMATURED,
FIXED OR CONTINGENT, THAT THE SHAREHOLDER OR HIS AFFILIATES NOW HAS, OWNS OR
HOLDS OR HAS AT ANY TIME PREVIOUSLY HAD, OWNED OR HELD AGAINST PDC, INCLUDING
WITHOUT LIMITATION ALL LIABILITIES CREATED AS A RESULT OF THE NEGLIGENCE, GROSS
NEGLIGENCE AND WILLFUL ACTS OF PDC 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 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.
(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 it has been represented by legal counsel of its
own choosing in connection with the negotiation, execution and delivery of this
Agreement.
(c) EXPRESS NEGLIGENCE. THE RELEASE PROVIDED BY THE
SHAREHOLDERS PURSUANT TO THIS SECTION 14.1 SHALL APPLY NOTWITHSTANDING SUCH
MATTER FOR WHICH RELEASE IS PROVIDED MAY RELATE TO THE ORDINARY SOLE OR
CONTRIBUTORY NEGLIGENCE, GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR VIOLATION OF
LAW BY A RELEASED PARTY, INCLUDING PDC, ITS OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS, AND FOR LIABILITIES BASED ON THEORIES OF STRICT LIABILITY, AND SHALL BE
APPLICABLE WHETHER OR NOT NEGLIGENCE OF SUCH RELEASED PARTY IS ALLEGED OR
PROVEN, IT BEING THE INTENTION OF THE PARTIES TO RELEASE SUCH RELEASED PARTY
FROM AND AGAINST
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<PAGE> 43
ITS ORDINARY SOLE AND CONTRIBUTORY NEGLIGENCE AND GROSS NEGLIGENCE AS WELL AS
LIABILITIES BASED ON THE WILLFUL ACTIONS OR OMISSIONS OF THE RELEASED PARTY AND
LIABILITIES BASED ON THEORIES OF STRICT LIABILITY.
ARTICLE XV
MISCELLANEOUS
Section 15.1 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 UTI may assign its rights
under this Agreement to an Affiliate without any requirement for such consent,
but such assignment shall not release UTI of its obligations under this
Agreement if such obligations are not performed by the assignee.
Section 15.2 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: Ray Peterson
306 West Wall
Suite 1400
Midland, TX 79701
Telecopier: (915) 686-8413
with copies to: Thompson & Knight, P.C.
1700 Pacific Avenue, Suite 3300
Dallas, TX 75201
Attention: David L. Emmons
Telecopier: (214) 969-1751
--if to UTI, to: UTI Energy Corp.
President
Houston, Texas 77060
Attention: Vaughn E. Drum
Telecopier No.: (281) 873-4141
with copies to: Fulbright & Jaworski L.L.P.
1301 McKinney
Houston, Texas 77010
Attention: Curtis W. Huff
Telecopier No.: (713) 651-5246
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<PAGE> 44
Section 15.3 Shareholders 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 is entitled
to rely on or otherwise deal with the Shareholders, UTI shall be entitled to
communicate solely with the Shareholder Representative and shall be entitled to
rely on any such communications as being the desire and will of the
Shareholders. [Except with respect to notices required under Article XIII],
notice delivered to the Shareholder Representative in accordance with Section
15.2 hereof shall be deemed to be notice to all of the Shareholders.
Section 15.4 Entire Agreement. This Agreement 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 15.5 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 15.6 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 15.7 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 15.8 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 15.9 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 15.10 Applicable Law. This Agreement is governed by and
shall be construed and enforced in accordance with the internal laws of the
State of Texas.
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<PAGE> 45
Section 15.11 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 the Agreement are a part of the Agreement.
Section 15.12 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 FOLLOWING PAGE
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<PAGE> 46
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 & CEO
--------------------------------------
PETERSON DRILLING COMPANY
By: /s/ RAY PETERSON
-----------------------------------------
Name: Ray Peterson
---------------------------------------
Title: President
--------------------------------------
SHAREHOLDERS
/s/ MAVA M. PETERSON
--------------------------------------------
NAME MAVA M. PETERSON
/s/ CALVIN WAYNE OSBORN
--------------------------------------------
NAME CALVIN WAYNE OSBORN
/s/ ALAN J. WORTH
--------------------------------------------
NAME ALAN J. WORTH
/s/ LARRY N. CRAVENS
--------------------------------------------
NAME LARRY N. CRAVENS
/s/ R.C. WALLACE
--------------------------------------------
NAME R.C. WALLACE
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<PAGE> 47
/s/ KENNETH C. CHISUM SR.
--------------------------------------------
NAME KENNETH C. CHISUM SR.
/s/ RUSSELL D. ROBERTS
--------------------------------------------
NAME RUSSELL D. ROBERTS
/s/ LONNIE WELLS
--------------------------------------------
NAME LONNIE WELLS
/s/ CHARLES GRAHAM
--------------------------------------------
NAME CHARLES GRAHAM
/s/ TROY H. GREAVES
--------------------------------------------
NAME TROY HUGH GREAVES
/s/ THOMAS A. DUGAN
--------------------------------------------
/s/ MARY E. DUGAN
--------------------------------------------
NAME THOMAS A. DUGAN & MARY E. DUGAN,
TRUSTEES OF THE THOMAS A. DUGAN & MARY E.
DUGAN REVOCABLE TRUST
/s/ ROSSON GROVER KILLINGSTAD
--------------------------------------------
NAME ROSSON GROVER KILLINGSTAD
ROSALIND TAYLOR KILLINGSTAD TRUST U/A 12/24/91
By: /s/ ROSSON GROVER KILLINGSTAD
-----------------------------------------
NAME ROSSON GROVER KILLINGSTAD, TRUSTEE
ARDEN KAPPS KILLINGSTAD TRUST U/A 03/29/88
By: /s/ ROSSON GROVER KILLINGSTAD
-----------------------------------------
NAME ROSSON GROVER KILLINGSTAD, TRUSTEE
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<PAGE> 48
/s/ ROBERT M. GARST, JR.
--------------------------------------------
NAME ROBERT M. GARST, JR.
/s/ JULIE SONNEN CHAMBERS
--------------------------------------------
NAME JULIE SONNEN CHAMBERS
/s/ J.W. BULLION
--------------------------------------------
NAME J.W. BULLION
/s/ GLENN S. BRANT
--------------------------------------------
NAME GLENN S. BRANT
/s/ ROBERT M. GARST
--------------------------------------------
NAME ROBERT M. GARST
/s/ BYRON H. GREAVES
--------------------------------------------
NAME BYRON H. GREAVES
/s/ ARDEN R. GROVER MANAGING GENL PART.
--------------------------------------------
NAME GROVER FAMILY L.P.
/s/ ROSALIND R. GROVER
--------------------------------------------
NAME ROSALIND R. GROVER
/s/ WILLIAM L. PENDLETON
--------------------------------------------
NAME WILLIAM L. PENDLETON
/s/ MARLIN RAY PETERSON
--------------------------------------------
NAME MARLIN RAY PETERSON
/s/ JUDITH GARST BROWN
--------------------------------------------
NAME JUDITH GARST BROWN
/s/ MARTIN LEROY PETERSON
--------------------------------------------
NAME MARTIN LEROY PETERSON
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<PAGE> 49
/s/ ALICE A. KEEL
--------------------------------------------
NAME ALICE A. KEEL
1997 ADG EXEMPT TRUST
By: /s/ JOHN J. CHRISTMANN III P.O.A.
----------------------------------------
NAME JOHN J. CHRISTMANN, III, POA
1997 CDC EXEMPT TRUST
By: /s/ CHARLES DONALD CHRISTMANN
----------------------------------------
NAME CHARLES DONALD CHRISTMANN, TRUSTEE
1997 JJC EXEMPT TRUST
By: /s/ JOHN J. CHRISTMANN III
----------------------------------------
NAME JOHN J. CHRISTMANN, III, TRUSTEE
1997 ALS EXEMPT TRUST
By: /s/ JOHN J. CHRISTMANN III P.O.A.
----------------------------------------
NAME JOHN J. CHRISTMANN, III, POA
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<PAGE> 50
PDC ACQUISITION COMPANY
By: /s/ VAUGHN E. DRUM
-----------------------------------------
Name: VAUGHN E. DRUM
---------------------------------------
Title: PRESIDENT
--------------------------------------
-41-
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and entered into
this 9th day of April, 1998, by and between UTI Energy Corp., a Delaware
corporation (the "Company"), and Ray Peterson, an individual whose primary
residence is located at 4505 Lennox Drive, Midland, Texas 79707 (the
"Employee").
W I T N E S S E T H :
WHEREAS, in connection with the Agreement and Plan of Merger dated
April 9, 1998 between the Company, PDC Acquisition Company, Peterson Drilling
Company ("PDC") and the shareholders of PDC signatories thereto, the Company
desires to employ Employee on the terms set forth below to provide management
services to the Company, and Employee is willing to accept such employment and
provide such services on such terms.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the parties hereto do hereby agree:
1. Definitions. As used in this Agreement, the following terms
have the meanings set forth below:
A. "Affiliates" means the subsidiaries of the Company.
B. "Board" means the Company's board of directors.
C. "Cause" shall be deemed to exist if:
i. Employee is convicted in a court of law of
any crime (a) that constitutes a felony
relating to the Company or its Affiliates or
any other business endeavor or (b) that
constitutes a felony which involves moral
turpitude;
ii. Employee engaged in gross misconduct or any
breach of or failure to perform in any
material respect his duties and
responsibilities hereunder; or
iii. Employee shall have violated any material
corporate policy that results in a material
negative affect on the Company.
D. "Disability" shall be deemed to have occurred when
Employee shall have been unable to fully and competently perform the
duties hereunder for a period of at least three consecutive months by
reason of mental or physical illness or other incapacity. The Board
of Directors of the Company shall determine whether Employee is and
continues to be disabled.
E. "Notice of Termination" means a notice that sets
forth the date of termination and, in the event of termination for
Cause, the facts and
<PAGE> 2
circumstances claimed to provide a basis for termination of Employee's
employment.
F. "Good Reason" shall be deemed to exist, if any of the
following were to occur without the written consent of Employee, and
the Employee has given the Company written notice of such situation or
event and the Company has not cured such situation or event within 30
days following receipt of such written notice:
i. any action by the Company that results in a
substantial diminution of Employee's duties as a manager of
Peterson Drilling Company ("PDC") from those in effect on the
day following the date hereof (the parties acknowledge that
changes in Employee's duties due to the fact that PDC will be
a subsidiary of a publicly-traded company will not in and of
itself constitute "Good Reason"; or
ii. the Company requiring Employee to be based
anywhere other than Midland, Texas, it being agreed that the
duties of Employee will entail travel in the region in which
PDC operates.
2. Term. The term of employment of Employee under this Agreement
shall commence on the date hereof (the "Commencement Date") and shall continue
for a period of three years following the date hereof (the "Scheduled Term of
Employment"), unless sooner terminated in accordance with this Agreement.
3. Duties. During the term of his employment as provided in
Section 2, the Company will employ Employee in a managerial or executive
capacity, with such responsibilities as the Company may from time to time
determine during the term of this Agreement. Employee will comply with all
provisions of all applicable laws, with all corporate documents governing the
conduct of the business and affairs of the Company and its Affiliates and with
all applicable policies of the Company and its Affiliates, including any
policies regarding transactions of the Company or its Affiliates in foreign
countries. Employee agrees to devote substantially all of his business time to
the performance of his duties hereunder.
4. Compensation.
A. The Company agrees to pay to Employee a minimum base
annual salary of $105,000 ("Annual Base Salary") for all services
provided under this Agreement, payable in accordance with the normal
payroll practices of the Company.
B. On the date hereof, the Company shall deliver to
Employee a Stock Option Agreement (the "Option Agreement") granting to
Employee an option (the "Option") to purchase 40,000 shares of the
common stock of the Company, par value $.001 (the "Common Stock"), at
an option price equal to the last reported sale price for the Common
Stock on the American Stock Exchange on the date hereof. The Option
shall vest in equal 1/3 increments over three years
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<PAGE> 3
and shall be subject to such other terms and conditions as contained
in the Option Agreement.
C. In addition to the payments set forth in Section 4(A)
above, Employee shall be entitled to reimbursement of business
expenses in accordance with the Company's policies and be eligible to
participate in the employee benefit plans maintained by the Company
for its employees in general Employee shall also be entitled to such
fringe benefits and vacation time as are made available to other
managers or executives of the Company having similar responsibilities
to Employee. For purposes of participating in such plans, Employee
shall receive credit for the years of service devoted to Peterson
Drilling Company and its predecessors. The Company shall have the
right to deduct from all payments to be made under this Agreement any
federal, state, provincial or local taxes and pension or unemployment
contributions required by law to be withheld from such payments.
5. Nondisclosure of Confidential Information.
A. Employee agrees that he will not, except with the
consent of the Company, disclose to others (except for advising agents
and employees of the Company), directly or indirectly, any
confidential, non-public information relating to the business,
prospects, or plans of the Company or its Affiliates and that he will
not use such information except in the performance of his duties
hereunder. Notwithstanding the previous sentence, Employee shall not
be in violation of this section in the event of a disclosure pursuant
to a court action or governmental rule, regulation, or proceeding (an
"Ordered Disclosure") provided Employee has notified the Company or
its Affiliates of such Ordered Disclosure within five business days of
being personally served with such Ordered Disclosure. Employee agrees
to cooperate in good faith with the Company in responding to such
Ordered Disclosure in order to prevent, limit or impose restrictions
on such Ordered Disclosure. In no event, however, shall this section
require Employee to take action or otherwise cause Employee to be in
violation of any law or result in contempt of such Ordered Disclosure.
B. Upon termination of his employment with the Company,
Employee shall surrender to the Company any and all work papers,
reports, manuals, documents, and the like (including all originals and
copies thereof) in his possession which contain confidential
information relating to the business, prospects or plans of the
Company or its Affiliates.
C. Employee agrees that during the effectiveness of his
covenant not to compete set forth in Section 6.A, he will endorse
strategies of the Company, and following his termination of employment
with the Company, will not disclose or cause to be disclosed any
negative, adverse or derogatory comments or information of a
substantial nature about the Company or its Affiliates, the management
of the Company or its Affiliates, any product or service provided by
the Company or its Affiliates or the future prospects of the Company
or its Affiliates; provided that following termination of the covenant
no to compete in
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<PAGE> 4
Section 6 below and in the event Employee is competing with the
Company, Employee may make comments and disclose information as is
reasonable and customary by a competitor in the land drilling business
in New Mexico, Texas, Oklahoma or Louisiana so long as the disclosure
of information does not violate Sections 5(a) or 5(b) above. The
Company may seek the assistance, cooperation or testimony of Employee
following any termination of his employment with the Company in
connection with any investigation, litigation or proceeding arising
out of matters within the knowledge of Employee and related to his
position as an officer or employee of the Company, and in any such
instance, Employee shall provide such assistance, cooperation or
testimony as is reasonably requested and the Company shall pay
Employee's reasonable costs and expenses in connection therewith. In
addition, if such assistance, cooperation or testimony requires more
than a nominal commitment of Employee's time, the Company will
compensate Employee for such time at a per diem rate derived from
Employee's salary from the Company at the time of Employee's
termination.
6. COVENANT NOT TO COMPETE WITH THE COMPANY.
A. EMPLOYEE AGREES THAT, DURING THE SCHEDULED TERM OF
EMPLOYMENT, NEITHER HE NOR ANY ENTITY CONTROLLED BY HIM, WILL, WITHOUT
THE CONSENT OF THE COMPANY, DIRECTLY OR INDIRECTLY, ENGAGE IN THE
CONTRACT LAND DRILLING BUSINESS IN THE STATES OF NEW MEXICO, TEXAS,
OKLAHOMA OR LOUISIANA.
B. EMPLOYEE ACKNOWLEDGES THAT A REMEDY AT LAW FOR ANY
BREACH OR ATTEMPTED BREACH OF THIS SECTION 6 WILL BE INADEQUATE AND
FURTHER AGREES THAT ANY BREACH OF THIS SECTION 6 WILL RESULT IN
IRREPARABLE HARM TO THE COMPANY AND ITS BUSINESS AND THE COMPANY
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. EMPLOYEE
ACKNOWLEDGES THAT THIS COVENANT NOT TO COMPETE IS BEING PROVIDED IN
CONNECTION WITH THE COMPANY'S EMPLOYMENT OF EMPLOYEE AND THAT THIS
SECTION 6 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 THE COMPANY.
C. WHENEVER POSSIBLE, EACH PROVISION OF THIS SECTION 6
SHALL BE INTERPRETED IN SUCH A MANNER AS TO BE EFFECTIVE AND VALID
UNDER APPLICABLE LAW BUT IF ANY PROVISION OF THIS SECTION 6 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 6. IF ANY
PROVISION OF THIS SECTION 6 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 6 BUT SHALL BE CONFINED IN ITS OPERATION TO THE PROVISION OF
THIS SECTION 6 DIRECTLY INVOLVED IN THE CONTROVERSY IN WHICH SUCH
JUDGMENT SHALL HAVE BEEN RENDERED. IN THE EVENT THAT THE PROVISIONS
OF THIS SECTION 6 SHOULD EVER BE DEEMED TO EXCEED THE TIME OR
GEOGRAPHIC LIMITATIONS PERMITTED BY APPLICABLE LAWS, THEN SUCH
PROVISION SHALL
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<PAGE> 5
BE REFORMED TO THE MAXIMUM TIME OR GEOGRAPHIC LIMITATIONS PERMITTED BY
APPLICABLE LAW.
7. Termination.
A. The employment of Employee by the Company hereunder
shall automatically terminate upon Employee's death or Disability. In
addition, the employment of Employee by the Company may be terminated
by Employee or the Company at any time for any reason whatsoever. Any
termination of Employee's employment by the Company or by Employee
(other than termination pursuant to the first sentence of this
subsection A) shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 13. Employee
understands and agrees that the Company may terminate the Employment
of Employee at any time with or without Cause by notice to the
Employee as provided herein.
B. Upon termination of the employment of Employee for
any reason, Employee shall be entitled to receive, and the Company
shall pay Employee (or, if such termination is caused by Employee's
death, his estate or as may be directed by the legal representatives
of such estate) within 30 days following the termination date, any
unpaid amounts payable to Employee under Section 4(A) through the date
of termination.
C. In addition to the amounts to which Employee is
entitled under Section 7(B), if Employee's employment is terminated by
the Company prior to the end of the term of this Agreement for any
reason other than for Cause or if Employee terminates his employment
for Good Reason prior to the expiration of the term of this Agreement,
the Company shall, within 30 days following the termination date, pay
to Employee a lump sum equal to one year's Annual Base Salary as
provided under Section 4(A). Such compensation shall be the only
compensation payable as a result of such termination and, except as
may otherwise be expressly provided in any employee benefit plans in
which the Employee is participating at the date of his termination,
Employee shall not be entitled to any other rights he may have under
any other employee benefit plan or arrangement, it being understood
and agreed that the Company may terminate this Agreement at any time
with or without Cause by notice to the Employee as provided herein.
8. Additional Remedies. In the event of a breach or a threatened
breach of the terms of Section 5 and 6 by Employee, the Company shall, in
addition to all other remedies, be entitled to a temporary or permanent
injunction or a decree for specific performance, in accordance with the
provisions hereof, without showing any actual damage or that monetary damages
would not provide an adequate remedy and without any bond or other security
being required.
9. Nonassignment. This Agreement is personal to Employee and
shall not be assigned by him. Employee shall not hypothecate, delegate,
encumber, alienate, transfer, or otherwise dispose of his rights and duties
hereunder. The Company may
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<PAGE> 6
assign this Agreement without Employee's consent to any Affiliate or to any
other entity who, in connection with such assignment, acquires all or
substantially all of the Company's assets, or into or with which the Company is
merged or consolidated.
10. Mitigation. Employee shall not be required to mitigate his
damages or the amount of any payment provided for under this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment to
Employee under this Agreement be reduced by any compensation earned by Employee
as a result of employment by another employer after termination, or otherwise.
11. Indemnification. Employee shall be entitled to
indemnification rights as set forth in the Company's Bylaws, as they may exist
from time to time.
12. Waiver. The waiver by the Company of a breach by Employee of
any provision of this Agreement shall not be construed as a waiver of any
subsequent breach by Employee.
13. Severability. Should any provision of this Agreement be held
unenforceable or invalid, then the parties hereto agree that such provision
shall be deemed modified to the extent necessary to render it lawful and
enforceable, or if such a modification is not possible without materially
altering the intention of the parties hereto, then such provision shall be
severed from this Agreement. In such case the validity of the remaining
provisions shall not be affected and this Agreement shall be construed as if
such provision were not contained herein.
14. Governing Law. This Agreement shall be construed by, subject
to, and governed in accordance with the laws of the State of Texas without
regard to its choice of law provisions.
15. Notices. Any notice, request, communication, instruction or
other document to be given hereunder by any party hereto to any other party
shall be in writing and delivered personally, by facsimile (with receipt
confirmed) or by registered or certified mail, postage prepaid:
A. If to the Company:
UTI Energy Corp.
16800 Greenspoint Park, Suite 225N
Houston, Texas 77060
Facsimile: (281) 873-4141
Attention: Vaughn E. Drum
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<PAGE> 7
B. If to Employee:
Ray Peterson
306 West Wall, Suite 1400
Midland, Texas 79701
Facsimile: (915) 686-8413
Any notice which is delivered personally in the manner provided herein
shall be deemed to have been duly given to the party to whom it is directed
upon actual receipt by such party (or its agent for notices hereunder). Any
notice which is addressed and mailed in the manner herein provided shall be
conclusively presumed to have been duly given to the party to which it is
addressed at the close of business, local time of the recipient, on the third
day after the day it is so placed in the mail. Any notice which is sent by
facsimile shall be deemed to have been duly given to the party to which it is
addressed upon telephonic confirmation of the same as provided herein. A copy
of any notices delivered by facsimile shall promptly be mailed in the manner
herein provided to the party to which such notice was given.
16. Entire Agreement. This Agreement sets forth the entire
understanding of the parties and supersedes all prior agreements, arrangements,
and communications, whether oral or written, and this Agreement shall not be
modified or amended except by written agreement of the Company and Employee.
17. Construction. Words used in the masculine apply equally to
the feminine, and wherever the context dictates, the plural should be read as
the singular and the singular as the plural. References to Sections are to
Sections of this Agreement. The headings at the beginning of each section are
inserted for convenience only and are not intended to describe, interpret,
define, or limit the scope, extent, or intent of this Agreement.
18. Counterparts. This Agreement may be executed in separate
counterparts, each of which will be deemed to be an original, but all of which
shall be considered one and the same instrument.
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
COMPANY:
UTI ENERGY CORP.
By: /s/ VAUGHN E. DRUM
----------------------------------------
Vaughn E. Drum
President and Chief Executive Officer
EMPLOYEE:
/s/ RAY PETERSON
--------------------------------------------
Ray Peterson
-8-
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and entered into
this 9th day of April, 1998, by and between UTI Energy Corp., a Delaware
corporation (the "Company"), and Leroy Peterson, an individual whose primary
residence is located at 2404 Whittle Way, Midland, Texas 79707 (the
"Employee").
W I T N E S S E T H :
WHEREAS, in connection with the Agreement and Plan of Merger dated
April 9, 1998 between the Company, PDC Acquisition Company, Peterson Drilling
Company ("PDC") and the shareholders of PDC signatories thereto, the Company
desires to employ Employee on the terms set forth below to provide management
services to the Company, and Employee is willing to accept such employment and
provide such services on such terms.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the parties hereto do hereby agree:
1. Definitions. As used in this Agreement, the following terms
have the meanings set forth below:
A. "Affiliates" means the subsidiaries of the Company.
B. "Board" means the Company's board of directors.
C. "Cause" shall be deemed to exist if:
i. Employee is convicted in a court of law of
any crime (a) that constitutes a felony
relating to the Company or its Affiliates or
any other business endeavor or (b) that
constitutes a felony which involves moral
turpitude;
ii. Employee engaged in gross misconduct or any
breach of or failure to perform in any
material respect his duties and
responsibilities hereunder; or
iii. Employee shall have violated any material
corporate policy that results in a material
negative affect on the Company.
D. "Disability" shall be deemed to have occurred when
Employee shall have been unable to fully and competently perform the
duties hereunder for a period of at least three consecutive months by
reason of mental or physical illness or other incapacity. The Board
of Directors of the Company shall determine whether Employee is and
continues to be disabled.
E. "Notice of Termination" means a notice that sets
forth the date of termination and, in the event of termination for
Cause, the facts and
<PAGE> 2
circumstances claimed to provide a basis for termination of Employee's
employment.
F. "Good Reason" shall be deemed to exist, if any of the
following were to occur without the written consent of Employee, and
the Employee has given the Company written notice of such situation or
event and the Company has not cured such situation or event within 30
days following receipt of such written notice:
i. any action by the Company that results in a
substantial diminution of Employee's duties as a manager of
Peterson Drilling Company ("PDC") of PDC from those in effect
on the day following the date hereof (the parties acknowledge
that changes in Employee's duties due to the fact that PDC
will be a subsidiary of a publicly-traded company will not in
and of itself constitute "Good Reason"; or
ii. the Company requiring Employee to be based
anywhere other than Midland, Texas, it being agreed that the
duties of Employee will entail travel in the region in which
PDC operates.
2. Term. The term of employment of Employee under this Agreement
shall commence on the date hereof (the "Commencement Date") and shall continue
for a period of three years following the date hereof (the "Scheduled Term of
Employment"), unless sooner terminated in accordance with this Agreement.
3. Duties. During the term of his employment as provided in
Section 2, the Company will employ Employee in a managerial or executive
capacity, with such responsibilities as the Company may from time to time
determine during the term of this Agreement. Employee will comply with all
provisions of all applicable laws, with all corporate documents governing the
conduct of the business and affairs of the Company and its Affiliates and with
all applicable policies of the Company and its Affiliates, including any
policies regarding transactions of the Company or its Affiliates in foreign
countries. Employee agrees to devote substantially all of his business time to
the performance of his duties hereunder.
4. Compensation.
A. The Company agrees to pay to Employee a minimum base
annual salary of $90,000 ("Annual Base Salary") for all services
provided under this Agreement, payable in accordance with the normal
payroll practices of the Company.
B. On the date hereof, the Company shall deliver to
Employee a Stock Option Agreement (the "Option Agreement") granting to
Employee an option (the "Option") to purchase 20,000 shares of the
common stock of the Company, par value $.001 (the "Common Stock"), at
an option price equal to the last reported sale price for the Common
Stock on the American Stock Exchange on the date hereof. The Option
shall vest in equal 1/3 increments over three years
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<PAGE> 3
and shall be subject to such other terms and conditions as contained
in the Option Agreement.
C. In addition to the payments set forth in Section 4(A)
above, Employee shall be entitled to reimbursement of business
expenses in accordance with the Company's policies and be eligible to
participate in the employee benefit plans maintained by the Company
for its employees in general Employee shall also be entitled to such
fringe benefits and vacation time as are made available to other
managers or executives of the Company having similar responsibilities
to Employee. For purposes of participating in such plans, Employee
shall receive credit for the years of service devoted to Peterson
Drilling Company and its predecessors. The Company shall have the
right to deduct from all payments to be made under this Agreement any
federal, state, provincial or local taxes and pension or unemployment
contributions required by law to be withheld from such payments.
5. Nondisclosure of Confidential Information.
A. Employee agrees that he will not, except with the
consent of the Company, disclose to others (except for advising agents
and employees of the Company), directly or indirectly, any
confidential, non-public information relating to the business,
prospects, or plans of the Company or its Affiliates and that he will
not use such information except in the performance of his duties
hereunder. Notwithstanding the previous sentence, Employee shall not
be in violation of this section in the event of a disclosure pursuant
to a court action or governmental rule, regulation, or proceeding (an
"Ordered Disclosure") provided Employee has notified the Company or
its Affiliates of such Ordered Disclosure within five business days of
being personally served with such Ordered Disclosure. Employee agrees
to cooperate in good faith with the Company in responding to such
Ordered Disclosure in order to prevent, limit or impose restrictions
on such Ordered Disclosure. In no event, however, shall this section
require Employee to take action or otherwise cause Employee to be in
violation of any law or result in contempt of such Ordered Disclosure.
B. Upon termination of his employment with the Company,
Employee shall surrender to the Company any and all work papers,
reports, manuals, documents, and the like (including all originals and
copies thereof) in his possession which contain confidential
information relating to the business, prospects or plans of the
Company or its Affiliates.
C. Employee agrees that during the effectiveness of his
covenant not to compete set forth in Section 6.A, he will endorse
strategies of the Company, and following his termination of employment
with the Company, will not disclose or cause to be disclosed any
negative, adverse or derogatory comments or information of a
substantial nature about the Company or its Affiliates, the management
of the Company or its Affiliates, any product or service provided by
the Company or its Affiliates or the future prospects of the Company
or its Affiliates; provided that following termination of the covenant
no to compete in
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<PAGE> 4
Section 6 below and in the event Employee is competing with the
Company, Employee may make comments and disclose information as is
reasonable and customary by a competitor in the land drilling business
in New Mexico, Texas, Oklahoma or Louisiana so long as the disclosure
of information does not violate Sections 5(a) or 5(b) above. The
Company may seek the assistance, cooperation or testimony of Employee
following any termination of his employment with the Company in
connection with any investigation, litigation or proceeding arising
out of matters within the knowledge of Employee and related to his
position as an officer or employee of the Company, and in any such
instance, Employee shall provide such assistance, cooperation or
testimony as is reasonably requested and the Company shall pay
Employee's reasonable costs and expenses in connection therewith. In
addition, if such assistance, cooperation or testimony requires more
than a nominal commitment of Employee's time, the Company will
compensate Employee for such time at a per diem rate derived from
Employee's salary from the Company at the time of Employee's
termination.
6. COVENANT NOT TO COMPETE WITH THE COMPANY.
A. EMPLOYEE AGREES THAT, DURING THE SCHEDULED TERM OF
EMPLOYMENT, NEITHER HE NOR ANY ENTITY CONTROLLED BY HIM, WILL, WITHOUT
THE CONSENT OF THE COMPANY, DIRECTLY OR INDIRECTLY, ENGAGE IN THE
CONTRACT LAND DRILLING BUSINESS IN THE STATES OF NEW MEXICO, TEXAS,
OKLAHOMA OR LOUISIANA.
B. EMPLOYEE ACKNOWLEDGES THAT A REMEDY AT LAW FOR ANY
BREACH OR ATTEMPTED BREACH OF THIS SECTION 6 WILL BE INADEQUATE AND
FURTHER AGREES THAT ANY BREACH OF THIS SECTION 6 WILL RESULT IN
IRREPARABLE HARM TO THE COMPANY AND ITS BUSINESS AND THE COMPANY
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. EMPLOYEE
ACKNOWLEDGES THAT THIS COVENANT NOT TO COMPETE IS BEING PROVIDED IN
CONNECTION WITH THE COMPANY'S EMPLOYMENT OF EMPLOYEE AND THAT THIS
SECTION 6 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 THE COMPANY.
C. WHENEVER POSSIBLE, EACH PROVISION OF THIS SECTION 6
SHALL BE INTERPRETED IN SUCH A MANNER AS TO BE EFFECTIVE AND VALID
UNDER APPLICABLE LAW BUT IF ANY PROVISION OF THIS SECTION 6 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 6. IF ANY
PROVISION OF THIS SECTION 6 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 6 BUT SHALL BE CONFINED IN ITS OPERATION TO THE PROVISION OF
THIS SECTION 6 DIRECTLY INVOLVED IN THE CONTROVERSY IN WHICH SUCH
JUDGMENT SHALL HAVE BEEN RENDERED. IN THE EVENT THAT THE PROVISIONS
OF THIS SECTION 6 SHOULD EVER BE DEEMED TO EXCEED THE TIME OR
GEOGRAPHIC LIMITATIONS PERMITTED BY APPLICABLE LAWS, THEN SUCH
PROVISION SHALL
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<PAGE> 5
BE REFORMED TO THE MAXIMUM TIME OR GEOGRAPHIC LIMITATIONS PERMITTED BY
APPLICABLE LAW.
7. Termination.
A. The employment of Employee by the Company hereunder
shall automatically terminate upon Employee's death or Disability. In
addition, the employment of Employee by the Company may be terminated
by Employee or the Company at any time for any reason whatsoever. Any
termination of Employee's employment by the Company or by Employee
(other than termination pursuant to the first sentence of this
subsection A) shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 13. Employee
understands and agrees that the Company may terminate the Employment
of Employee at any time with or without Cause by notice to the
Employee as provided herein.
B. Upon termination of the employment of Employee for
any reason, Employee shall be entitled to receive, and the Company
shall pay Employee (or, if such termination is caused by Employee's
death, his estate or as may be directed by the legal representatives
of such estate) within 30 days following the termination date, any
unpaid amounts payable to Employee under Section 4(A) through the date
of termination.
C. In addition to the amounts to which Employee is
entitled under Section 7(B), if Employee's employment is terminated by
the Company prior to the end of the term of this Agreement for any
reason other than for Cause or if Employee terminates his employment
for Good Reason prior to the expiration of the term of this Agreement,
the Company shall, within 30 days following the termination date, pay
to Employee a lump sum equal to one year's Annual Base Salary as
provided under Section 4(A). Such compensation shall be the only
compensation payable as a result of such termination and, except as
may otherwise be expressly provided in any employee benefit plans in
which the Employee is participating at the date of his termination,
Employee shall not be entitled to any other rights he may have under
any other employee benefit plan or arrangement, it being understood
and agreed that the Company may terminate this Agreement at any time
with or without Cause by notice to the Employee as provided herein.
8. Additional Remedies. In the event of a breach or a threatened
breach of the terms of Section 5 and 6 by Employee, the Company shall, in
addition to all other remedies, be entitled to a temporary or permanent
injunction or a decree for specific performance, in accordance with the
provisions hereof, without showing any actual damage or that monetary damages
would not provide an adequate remedy and without any bond or other security
being required.
9. Nonassignment. This Agreement is personal to Employee and
shall not be assigned by him. Employee shall not hypothecate, delegate,
encumber, alienate, transfer, or otherwise dispose of his rights and duties
hereunder. The Company may
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<PAGE> 6
assign this Agreement without Employee's consent to any Affiliate or to any
other entity who, in connection with such assignment, acquires all or
substantially all of the Company's assets, or into or with which the Company is
merged or consolidated.
10. Mitigation. Employee shall not be required to mitigate his
damages or the amount of any payment provided for under this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment to
Employee under this Agreement be reduced by any compensation earned by Employee
as a result of employment by another employer after termination, or otherwise.
11. Indemnification. Employee shall be entitled to
indemnification rights as set forth in the Company's Bylaws, as they may exist
from time to time.
12. Waiver. The waiver by the Company of a breach by Employee of
any provision of this Agreement shall not be construed as a waiver of any
subsequent breach by Employee.
13. Severability. Should any provision of this Agreement be held
unenforceable or invalid, then the parties hereto agree that such provision
shall be deemed modified to the extent necessary to render it lawful and
enforceable, or if such a modification is not possible without materially
altering the intention of the parties hereto, then such provision shall be
severed from this Agreement. In such case the validity of the remaining
provisions shall not be affected and this Agreement shall be construed as if
such provision were not contained herein.
14. Governing Law. This Agreement shall be construed by, subject
to, and governed in accordance with the laws of the State of Texas without
regard to its choice of law provisions.
15. Notices. Any notice, request, communication, instruction or
other document to be given hereunder by any party hereto to any other party
shall be in writing and delivered personally, by facsimile (with receipt
confirmed) or by registered or certified mail, postage prepaid:
A. If to the Company:
UTI Energy Corp.
16800 Greenspoint Park, Suite 225N
Houston, Texas 77060
Facsimile: (281) 873-4141
Attention: Vaughn E. Drum
-6-
<PAGE> 7
B. If to Employee:
Leroy Peterson
306 West Wall, Suite 1400
Midland, Texas 79701
Facsimile: (915) 686-8413
Any notice which is delivered personally in the manner provided herein
shall be deemed to have been duly given to the party to whom it is directed
upon actual receipt by such party (or its agent for notices hereunder). Any
notice which is addressed and mailed in the manner herein provided shall be
conclusively presumed to have been duly given to the party to which it is
addressed at the close of business, local time of the recipient, on the third
day after the day it is so placed in the mail. Any notice which is sent by
facsimile shall be deemed to have been duly given to the party to which it is
addressed upon telephonic confirmation of the same as provided herein. A copy
of any notices delivered by facsimile shall promptly be mailed in the manner
herein provided to the party to which such notice was given.
16. Entire Agreement. This Agreement sets forth the entire
understanding of the parties and supersedes all prior agreements, arrangements,
and communications, whether oral or written, and this Agreement shall not be
modified or amended except by written agreement of the Company and Employee.
17. Construction. Words used in the masculine apply equally to
the feminine, and wherever the context dictates, the plural should be read as
the singular and the singular as the plural. References to Sections are to
Sections of this Agreement. The headings at the beginning of each section are
inserted for convenience only and are not intended to describe, interpret,
define, or limit the scope, extent, or intent of this Agreement.
18. Counterparts. This Agreement may be executed in separate
counterparts, each of which will be deemed to be an original, but all of which
shall be considered one and the same instrument.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
COMPANY:
UTI ENERGY CORP.
By: /s/ VAUGHN E. DRUM
----------------------------------------
Vaughn E. Drum
President and Chief Executive Officer
EMPLOYEE:
/s/ LEROY PETERSON
--------------------------------------------
Leroy Peterson
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