<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 7, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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UTI ENERGY CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1389 23-2037823
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
16800 GREENSPOINT PARK, SUITE 225N
HOUSTON, TEXAS 77060
(281) 873-4111
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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VAUGHN E. DRUM
PRESIDENT AND CHIEF EXECUTIVE OFFICER
UTI ENERGY CORP.
16800 GREENSPOINT PARK, SUITE 225N
HOUSTON, TEXAS 77060
(281) 873-4111
Copies to:
CHARLES L. STRAUSS
FULBRIGHT & JAWORSKI L.L.P.
1301 MCKINNEY, SUITE 5100
HOUSTON, TEXAS 77010
(713) 651-5151
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the registration statement becomes effective and all other
conditions to the merger contemplated by the Agreement and Plan of Merger, dated
as of April 26, 1999, described in the enclosed Proxy Statement/Prospectus have
been satisfied or waived.
If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
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If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, par value $.001
per share............................ 1,377,651(1) N/A $15,705,222(2) $4,366.06
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</TABLE>
(1) Represents the estimated maximum number of shares of common stock issuable
upon consummation of the merger of a subsidiary of the Registrant with and
into Norton Drilling Services, Inc., assuming the exercise of all options
and other rights to purchase or acquire shares of common stock of Norton
Drilling that are exercisable prior to consummation of the merger.
(2) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(f)(1) under the Securities Act of 1933, on the basis of
$3.00, the average of the bid and asked prices of Norton Drilling common
stock on the OTC Bulletin Board on June 3, 1999, multiplied by 5,235,074,
the maximum number of shares of Norton Drilling common stock to be converted
in the merger.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
NORTON DRILLING SERVICES, INC.
5211 BROWNFIELD HIGHWAY, SUITE 230
LUBBOCK, TEXAS 79407
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1999
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NOTICE IS HEREBY GIVEN that Norton Drilling Services, Inc. will hold a
special meeting of its stockholders at 10:00 a.m., local time, on ,
1999, at , for the following purposes:
1. To consider and vote on a proposal to approve and adopt a merger
agreement among UTI Energy Corp., NDS Acquisition Corp., a wholly-owned
subsidiary of UTI Energy Corp., Norton Drilling Services, Inc. and the
primary stockholders of Norton Drilling Services, Inc., and the merger of
NDS Acquisition Corp. with and into Norton Drilling Services, Inc.
2. To transact such other business as may properly come before the
special meeting or any adjournment or postponement thereof.
The Board of Directors fixed the close of business on May 28, 1999 as the
record date for the determination of stockholders entitled to receive notice of
and to vote at the special meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on the record date are
entitled to notice of and to vote at the special meeting. A complete
stockholders list will be available for examination at the special meeting and
at Norton Drilling's offices at 5211 Brownfield Highway, Suite 230, Lubbock,
Texas, during ordinary business hours, after , 1999, for the
examination by any stockholder for any purpose germane to the special meeting.
By Order of the Board of Directors,
John W. Norton, Secretary
, 1999
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING IN PERSON. EVEN IF
YOU PLAN TO BE PRESENT, WE URGE YOU TO MARK, DATE, SIGN AND RETURN THE ENCLOSED
PROXY AT YOUR EARLIEST CONVENIENCE IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE SPECIAL MEETING, YOU
MAY VOTE EITHER IN PERSON OR BY YOUR PROXY.
THE NORTON DRILLING BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
<PAGE> 3
PRELIMINARY PROXY STATEMENT/PROSPECTUS
SUBJECT TO COMPLETION, DATED JUNE 7, 1999
UTI ENERGY CORP. NORTON DRILLING SERVICES, INC.
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PROXY STATEMENT/PROSPECTUS
SPECIAL MEETING OF NORTON DRILLING SERVICES, INC. STOCKHOLDERS TO BE HELD
, 1999
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UTI ENERGY CORP.
(COMMON STOCK, PAR VALUE $.001 PER SHARE)
UTI Energy Corp. and Norton Drilling Services, Inc. are providing this
proxy statement/prospectus to the Norton Drilling stockholders in connection
with a solicitation of proxies by the Norton Drilling Board of Directors for
approval and adoption of a merger agreement and the related proposed merger of a
wholly-owned subsidiary of UTI with and into Norton Drilling.
Under the terms of the merger, UTI will issue to the Norton Drilling
stockholders .2631579 of a share of UTI common stock in exchange for each share
of Norton Drilling common stock.
UTI common stock trades on the American Stock Exchange under the symbol
"UTI" and Norton Drilling common stock trades on the OTC Bulletin Board under
the symbol "NORT". On , 1999, the closing sale price for UTI common
stock on the American Stock Exchange was $ , and the closing sale price for
Norton Drilling common stock on the OTC Bulletin Board was $ .
This proxy statement/prospectus and the related materials, including copies
of Norton Drilling's latest annual and quarterly reports, are first being mailed
to the Norton Drilling stockholders on or about , 1999.
---------------------
AN INVESTMENT IN UTI COMMON STOCK AFTER THE MERGER INVOLVES CERTAIN RISKS.
SEE "RISK FACTORS" ON PAGE 4.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THIS TRANSACTION OR THE SHARES OF UTI
COMMON STOCK TO BE ISSUED IN CONNECTION WITH THIS TRANSACTION OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
, 1999
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
WHERE TO FIND MORE INFORMATION.............................. ii
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... iv
SUMMARY..................................................... 1
The Companies............................................. 1
Special Meeting; Record Date and Vote Required............ 1
The Merger................................................ 1
RISK FACTORS................................................ 4
FORWARD LOOKING INFORMATION................................. 7
SELECTED FINANCIAL DATA OF UTI AND NORTON DRILLING.......... 8
Selected Consolidated Historical Financial Data of UTI.... 8
Selected Consolidated Historical Financial Data of Norton
Drilling............................................... 9
Comparative Per Share Information......................... 10
Comparative Market Value Information...................... 11
SPECIAL MEETING............................................. 12
Date, Time and Place of Special Meeting................... 12
Purpose of the Special Meeting............................ 12
Solicitation of Proxies................................... 12
Record Date; Voting Rights; Proxies....................... 12
Quorum; Vote Required..................................... 13
Other Matters............................................. 13
THE MERGER.................................................. 13
Background of the Merger.................................. 13
Recommendation of the Norton Drilling Board; Norton
Drilling's Reasons for the Merger...................... 15
Opinion of Norton Drilling's Financial Advisor............ 16
Anticipated Accounting Treatment.......................... 19
Federal Securities Laws Consequences...................... 19
Stock Exchange Listing.................................... 19
Dissenters' Rights........................................ 19
Regulatory Approval....................................... 19
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................... 20
TERMS OF THE MERGER AGREEMENT............................... 22
General................................................... 22
Effective Time............................................ 22
Exchange of Norton Drilling Common Stock.................. 22
Representations and Warranties............................ 22
Conduct of Business by Norton Drilling.................... 22
No Solicitation........................................... 23
Certain Other Covenants................................... 24
Conditions to the Merger.................................. 25
Termination............................................... 26
Amendments and Waivers.................................... 28
COMPARATIVE PER SHARE PRICES AND DIVIDENDS.................. 29
COMPARISON OF RIGHTS OF STOCKHOLDERS OF UTI AND NORTON
DRILLING.................................................. 29
OTHER MATTERS............................................... 33
LEGAL MATTERS............................................... 34
EXPERTS..................................................... 34
FUTURE STOCKHOLDER PROPOSALS................................ 34
EXHIBIT A -- MERGER AGREEMENT............................... A
EXHIBIT B -- FAIRNESS OPINION OF HOULIHAN LOKEY HOWARD &
ZUKIN.......................................... B
</TABLE>
i
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WHERE TO FIND MORE INFORMATION
We (meaning both UTI and Norton) file annual, quarterly and current
reports, proxy statements and other information with the SEC. You may read and
copy any reports, statements or other information that we file with the SEC at
the SEC's public reference rooms in Washington, D.C., Chicago, Illinois and New
York, New York. Please call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms. Our SEC filings also are available to the public
from commercial document retrieval services and at the World Wide Web site
maintained by the SEC at http://www.sec.gov.
UTI filed a registration statement on Form S-4 to register with the SEC the
UTI common stock to be issued in the merger. This proxy statement/prospectus is
a part of that registration statement and constitutes a UTI prospectus in
addition to being a Norton Drilling proxy statement for the special meeting. As
allowed by SEC rules, this proxy statement/prospectus does not contain all the
information you can find in the registration statement or the exhibits to the
registration statement.
The SEC allows us to "incorporate by reference" information into this proxy
statement/prospectus, which means that we can disclose important information to
you by referring you to another document we filed separately with the SEC. The
information incorporated by reference is deemed to be a part of this proxy
statement/prospectus, except for any information superseded by information in
this proxy statement/ prospectus. This proxy statement/prospectus incorporates
by reference the documents set forth below that we have filed previously with
the SEC. These documents contain important information about us and our
finances.
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UTI SEC FILINGS (FILE NO. 001-12542) PERIOD/DATE
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Annual Report on Form 10-K and Amendment No. 1 on Form
10-K/A Fiscal year ended December 31, 1998
Quarterly Report on Form 10-Q Quarter ended March 31, 1999
Current Report on Form 8-K Filed on March 4, 1999
Registration Statement on Form 8-A Filed on March 4, 1999
Registration Statement on Form 8-A Filed on November 8, 1993
</TABLE>
<TABLE>
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NORTON DRILLING SEC FILINGS (FILE NO. 0-15784) PERIOD/DATE
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Annual Report on Form 10-K Fiscal year ended November 30, 1998
Quarterly Report on Form 10-Q Quarter ended February 28, 1999
Proxy Statement relating to Norton Drilling's Annual
Meeting Filed on January 6, 1999
</TABLE>
We also are incorporating by reference additional documents that we file
with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 after the date of this proxy statement/prospectus and
before the date of the special meeting.
If you make a written or oral request to us, we will provide you without
charge a copy of this proxy statement/prospectus and a copy of any or all of the
documents incorporated by reference in this proxy statement/prospectus, other
than the exhibits to those documents, unless the exhibits are specifically
incorporated by reference into the information that this proxy
statement/prospectus incorporates. You should direct your written or oral
requests for copies of this proxy statement/prospectus and documents that UTI
has incorporated by reference to:
UTI Energy Corp.
16800 Greenspoint Park, Suite 225N
Houston, Texas 77060
Attention: Secretary
(281) 873-4111
ii
<PAGE> 6
You should direct your written or oral requests for copies of this proxy
statement/prospectus and documents that Norton Drilling has incorporated by
reference to:
Norton Drilling Services, Inc.
5211 Brownfield Highway, Suite 230
Lubbock, Texas 79407
Attention: David Ridley
(806) 785-8400
TO OBTAIN TIMELY DELIVERY, YOU MUST MAKE A WRITTEN OR ORAL REQUEST FOR A COPY OF
SUCH INFORMATION BY , 1999 [5 DAYS BEFORE THE MEETING].
We have not authorized any person to make statements regarding the matters
contained in this proxy statement/prospectus other than those contained herein
or in the documents incorporated by reference herein. You should not rely on any
unauthorized statements. This proxy statement/prospectus does not constitute an
offer to sell or a solicitation of an offer to buy securities, nor does it
constitute the solicitation of a proxy, in any jurisdiction to or from any
person to or from whom it is unlawful to make such offer or solicitation in such
jurisdiction.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this proxy statement/prospectus shall be deemed to
be modified or superseded for purposes of this proxy statement/prospectus to the
extent that a statement contained herein or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes that statement. Any such statement so modified or
superseded shall not constitute a part of this proxy statement/prospectus,
except as so modified or superseded.
iii
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY ARE UTI AND NORTON DRILLING PROPOSING TO MERGE?
A: UTI and Norton Drilling are both engaged in the onshore contract
drilling industry, and the companies believe that the merger will create
opportunities for cost savings and synergies. By synergies we mean that the
companies will be able to sell to one another's customers and offer customers a
more comprehensive product line.
For Norton Drilling stockholders, the merger means that they will have an
interest in a larger, more diversified company. They also should receive a
significant premium for their shares over the value of the Norton Drilling
common stock on April 26, 1999, the date the companies publicly announced the
merger.
Q: WHAT WILL NORTON DRILLING STOCKHOLDERS RECEIVE IN THE MERGER?
A: Norton Drilling stockholders will receive .2631579 of a share of UTI
common stock in exchange for each share of their Norton Drilling common stock.
UTI will pay cash instead of the distribution of fractional shares of UTI common
stock. Based upon the closing prices of the UTI common stock and Norton Drilling
common stock on the last trading day before the public announcement of the
merger, this exchange ratio represents a 128% premium over the trading value of
the Norton Drilling common stock on such date.
Q: WHAT SHOULD I DO NOW?
A: After reading this document carefully, you should complete, sign and
date your proxy card and mail it in the enclosed return envelope as soon as
possible, so that your shares may be represented at the special meeting. THE
NORTON DRILLING BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE NORTON
DRILLING STOCKHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT
AND THE MERGER.
You should not send in your share certificates now. After the merger is
completed, UTI will send you written instructions for exchanging your share
certificates.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE
MY SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on
how to vote. You should follow the directions provided by your broker regarding
how to instruct your broker to vote your shares.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes, you may change your vote by sending in a later-dated, signed proxy
card to the Secretary of Norton Drilling before the special meeting or by
attending the special meeting and voting in person.
Q: WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETING?
A: You also will be asked to allow Norton Drilling to adjourn the special
meeting to solicit additional votes if we have not received the required votes
by the time of the special meeting. We do not expect to ask you to vote on any
other matters at the special meeting.
Q: WHOM SHOULD I CALL WITH QUESTIONS?
A: If you have any questions about the merger, or if you would like copies
of any of the documents referred to or incorporated by reference in this proxy
statement/prospectus, please call David Ridley of Norton Drilling at (806)
785-8400. See also "Where to Find More Information."
iv
<PAGE> 8
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To better understand the merger and related transactions, you
should read carefully this entire proxy statement/prospectus and the documents
to which we refer. References to "we" or "us" in this proxy statement/prospectus
refer to both UTI Energy Corp. and Norton Drilling Services, Inc.
THE COMPANIES
UTI Energy Corp. UTI is a leading provider of onshore contract drilling
services to exploration and production companies and operates one of the largest
land drilling rig fleets in the United States. UTI's drilling operations are
concentrated primarily in the prolific oil and natural gas producing basins of
New Mexico, Oklahoma and Texas. UTI's rig fleet consists of 104 land drilling
rigs that are well suited to the requirements of its markets. UTI also provides
pressure pumping services in the Appalachian Basin.
UTI's principal executive offices are located at 16800 Greenspoint Park,
Suite 225N, Houston, Texas 77060, and its telephone number is (281) 873-4111.
Norton Drilling Services, Inc. Norton Drilling operates 16 oil and gas
drilling rigs and provides contract drilling services to the oil and natural gas
industry, primarily in the Permian Basin of west Texas and eastern New Mexico,
the Green River Basin and the Overthrust Belt in the Rocky Mountains.
Norton Drilling's principal executive offices are located at 5211
Brownfield Highway, Suite 230, Lubbock, Texas 79407, and its telephone number is
(806) 785-8400.
SPECIAL MEETING; RECORD DATE AND VOTE REQUIRED
Meeting Date. The meeting of the Norton Drilling stockholders will be held
at 10:00 a.m., local time, on , , 1999, at . The
purpose of the meeting is to consider and vote upon the approval and adoption of
the merger agreement and the merger.
Record Date. The record date for the Norton Drilling stockholders entitled
to receive notice of and to vote at the special meeting is the close of business
on May 28, 1999. On that date, there were 4,934,321 shares of Norton Drilling
common stock outstanding and entitled to vote.
Stockholder Vote Required. To approve and adopt the merger agreement and
the merger, a majority of the outstanding shares of Norton Drilling common stock
at a meeting at which a quorum is present is required to vote in favor of the
approval and adoption of the merger agreement and the merger. On May 28, 1999,
the directors and executive officers of Norton Drilling and their affiliates
owned approximately 23% of the outstanding shares of Norton Drilling common
stock.
THE MERGER
What Norton Drilling Stockholders Will Receive. UTI will issue to the
Norton Drilling stockholders .2631579 of a share of UTI common stock in exchange
for each share of their Norton Drilling common stock. UTI will pay the Norton
Drilling stockholders cash instead of any fractional shares of UTI common stock.
Based upon the closing prices of the UTI common stock and Norton Drilling common
stock on the last trading day before the public announcement of the merger, this
exchange ratio represents a 128% premium over the trading value of the Norton
Drilling common stock on such date.
Recommendation to Norton Drilling Stockholders. THE NORTON DRILLING BOARD
OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS
OF NORTON DRILLING AND ITS STOCKHOLDERS, HAS UNANIMOUSLY APPROVED AND ADOPTED
THE MERGER AGREEMENT AND THE MERGER AND UNANIMOUSLY RECOMMENDS THAT THE NORTON
DRILLING STOCKHOLDERS VOTE "FOR" THE APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AND THE MERGER AT THE SPECIAL MEETING.
Regulatory Approval. Other than the filing of a merger certificate with the
Delaware Secretary of State and approval of the merger under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the merger is
not subject to any federal or state regulatory requirements.
1
<PAGE> 9
No Dissenters' Rights. The Norton Drilling stockholders do not have
dissenters' rights of appraisal or other rights to demand fair value for their
shares in cash by reason of the merger.
Certain Federal Income Tax Consequences. We will complete the merger only
if we receive legal opinions to the effect that, among other things, the merger
qualifies as a tax-free reorganization and that no gain or loss will be
recognized by Norton Drilling's stockholders as a result of the merger (except
for cash received instead of fractional shares).
Tax matters are complicated, and the tax consequences of the proposed
merger to you will depend on the facts of your own situation. You should consult
your own tax advisors for a full understanding of the tax consequences to you of
the merger.
Conditions to the Merger. We will complete the merger only if certain
conditions, including those listed below, are satisfied or waived:
- The Norton Drilling stockholders approve and adopt the merger agreement
and the merger.
- We receive all required material governmental approval and other
consents.
- The American Stock Exchange authorizes the listing of the shares of UTI
common stock to be issued in the merger.
- We receive appropriate legal opinions with respect to the tax-free nature
of the merger.
We may waive various merger conditions. If Norton Drilling waives any
material conditions to closing the merger, it will provide its stockholders
supplemental disclosure of such waiver and a reasonable opportunity to change
their votes.
Termination of the Merger. We mutually may agree to terminate the merger
agreement without completing the merger. Either UTI or Norton Drilling may
terminate the merger agreement and decide not to complete the merger if:
- We do not complete the merger by December 31, 1999 through no fault of
the party seeking not to proceed with the merger;
- Legal restraints prevent the merger;
- The Norton Drilling stockholders do not approve the merger; or
- The other party breaches in a material way its representations,
warranties or covenants.
In addition, UTI or Norton Drilling may terminate the merger agreement if
the Norton Drilling Board of Directors withdraws or adversely modifies its
approval or recommendation of the merger agreement and the merger or recommends
a business combination transaction with a business entity other than UTI.
Termination Fee and Expenses. Norton Drilling may be required to pay to UTI
a termination fee of $1 million or up to $400,000 of UTI's out-of-pocket
expenses if the merger agreement is terminated. UTI may be required to pay to
Norton Drilling a termination fee of $125,000 or $250,000 and an additional
amount of up to $250,000 of Norton Drilling's out-of-pocket expenses if the
merger agreement is terminated.
The termination fee may have the effect of discouraging persons who might
be interested in entering into a business combination with Norton Drilling from
proposing a business combination transaction. This may be so even where the
consideration the Norton Drilling stockholders would receive in the other
transaction would exceed the consideration they would receive in the merger.
Anticipated Accounting Treatment. UTI expects the merger to be accounted
for using the purchase method of accounting. Under the purchase method of
accounting, UTI will record the assets and liabilities on UTI's balance sheet at
their estimated fair market values on the date of the merger.
Opinion of Norton Drilling's Financial Advisor. Norton Drilling's financial
advisor, Houlihan Lokey Howard & Zukin, has given a written opinion to the
Norton Drilling Board of Directors as to the fairness, from a financial point of
view, of the number of shares of UTI common stock to be issued to the Norton
Drilling stockholders in the merger. The full text of this written opinion is
attached to the back of this proxy statement/ prospectus as Exhibit B and you
should read it carefully in its entirety. HOULIHAN LOKEY HOWARD & ZUKIN'S
OPINION IS DIRECTED TO THE NORTON DRILLING BOARD AND DOES NOT CONSTITUTE A
RECOM-
2
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MENDATION TO ANY NORTON DRILLING STOCKHOLDER AS
TO WHETHER TO VOTE FOR OR AGAINST THE APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AND THE MERGER.
Interests of Norton Drilling Officers and Directors in the Merger. When
considering the recommendation of the Norton Drilling Board of Directors, you
should be aware that certain Norton Drilling officers and directors have
interests and arrangements that may be different from your interests as
stockholders, including the following:
- On the first day following the public announcement of the merger
agreement, Norton Drilling granted options to purchase 114,000 shares of
Norton Drilling common stock to each of S. Howard Norton III, President
of Norton Drilling, and John W. Norton, Chief Operating Officer of Norton
Drilling. At the time of the merger, each of these option grants will
convert into options to purchase 30,000 shares of UTI common stock.
- In connection with the closing of the merger, Norton Drilling will pay to
each of S. Howard Norton, III and John W. Norton $40,000 as a bonus for
their remaining as Norton Drilling employees.
- Immediately prior to the completion of the merger, Norton Drilling will
amend its employment agreement with Sherman H. Norton, Jr. to eliminate
any requirement that he provide any services to Norton Drilling, UTI or
any of their subsidiaries following the merger. In connection with the
merger, Norton Drilling also will enter into a consulting/employment
agreement with Sherman H. Norton, Jr. that will require UTI to pay him a
$25,000 fee, but that agreement will not require him to provide any
services to UTI, Norton Drilling or any of their subsidiaries.
Irrevocable Proxies. Each of Sherman H. Norton, Jr., S. Howard Norton, III,
John W. Norton and The Norton Family Trust has granted to UTI an irrevocable
proxy to vote the shares of Norton Drilling common stock owned by each of them
(a) in favor of the approval of the merger agreement and the consummation of all
other transactions contemplated thereby and (b) against any "superior proposal"
as defined in the merger agreement or any action or agreement that would be
against the merger agreement terms. These stockholders collectively own
approximately 18% of the currently outstanding shares of Norton Drilling common
stock.
Norton Drilling Market Price Information. Norton Drilling common stock is
listed on the OTC Bulletin Board. On April 26, 1999, the last full trading day
before we publicly announced the proposed merger, Norton Drilling common stock
closed at $1.13 per share and the high and low trading prices on such date were
$1.125 and $1.0625, respectively.
UTI Market Price Information. UTI common stock is listed on the American
Stock Exchange. On April 26, 1999, the last full trading day before we publicly
announced the proposed merger, UTI common stock closed at $9.81 per share and
the high and low trading prices on such date were $10.50 and $9.75,
respectively.
Listing of UTI Common Stock. UTI has applied to list the UTI common stock
to be issued to the Norton Drilling stockholders pursuant to the merger
agreement on the American Stock Exchange under the symbol "UTI".
3
<PAGE> 11
RISK FACTORS
An investment in the UTI common stock offered by this proxy
statement/prospectus involves a high degree of risk. Before you decide to invest
in the UTI common stock offered by this proxy statement/ prospectus, you should
consider carefully the following factors, together with the information
contained or incorporated by reference in this proxy statement/prospectus.
NORTON DRILLING STOCKHOLDERS MAY RECEIVE LESS VALUE THAN THEY CURRENTLY
ANTICIPATE
If the trading price of UTI common stock decreases between the date of the
Norton Drilling stockholders meeting and the date of the merger, the value of
the shares of UTI common stock that the Norton Drilling stockholders will
receive in the merger will be less than they may currently anticipate. The
Norton Drilling stockholders will receive in the merger .2631579 of a share of
UTI common stock for each share of their Norton Drilling common stock. Since the
number of shares of UTI common stock that UTI will issue to the Norton Drilling
stockholders is fixed, the market value of the consideration the Norton Drilling
stockholders will receive in the merger will fluctuate as the market price of
the UTI common stock changes.
THE COMPANIES MAY NOT REALIZE THE BENEFITS OF THE MERGER THAT THEY ARE EXPECTING
UTI may not succeed in realizing the expected benefits from integrating the
UTI and Norton Drilling businesses. Although UTI and Norton Drilling expect that
the merger will result in benefits such as operating efficiencies, cost savings
and other synergies, achieving these benefits depends in part on successfully
integrating the businesses of UTI and Norton Drilling.
THE RECEIPT OF THE UTI COMMON STOCK IN THE MERGER MAY BE TAXABLE
If the United States Internal Revenue Service determines that the issuance
of the shares of UTI common stock that UTI will issue in the merger is not tax
free, the Norton Drilling stockholders will be taxed based on the value of the
shares of UTI common stock they receive. Although the merger is conditioned on
the receipt of opinions of counsel to UTI and Norton Drilling that the issuance
of the shares of UTI common stock that UTI will issue to the Norton Drilling
stockholders will be tax free, those opinions are not binding on the IRS.
THE VOLATILITY OF THE OIL AND GAS INDUSTRY MAY HAVE AN ADVERSE IMPACT ON UTI'S
OPERATIONS
A material decline in oil or natural gas prices or land drilling activity
in the United States could have a material adverse effect on UTI's results of
operations and financial condition. Demand and prices for UTI's services depend
upon the level of activity in the onshore oil and natural gas exploration and
production industry in the United States, which in turn depends on numerous
factors over which UTI has no control, including the following:
- the level of oil and natural gas prices, expectations about future oil
and natural gas prices and the ability of the Organization of Petroleum
Exporting Countries to set and maintain production levels and prices,
- the cost of exploring for, producing and delivering oil and natural gas,
- the level and price of foreign oil and natural gas imports,
- the discovery rate of new oil and natural gas reserves,
- available pipeline and other oil and natural gas transportation capacity,
- worldwide weather conditions,
- international political, military, regulatory and economic conditions and
- the ability of oil and natural gas companies to raise capital.
4
<PAGE> 12
The level of drilling activity in the onshore oil and natural gas
exploration and production industry in the United States has been volatile. UTI
cannot assure you that current levels of oil and natural gas exploration
activities in UTI's markets will continue or that demand for UTI's services will
correspond to the level of activity in the industry generally. Further, any
material changes in the demand for or supply of oil and natural gas could
materially impact the demand for UTI's services. UTI expects oil and natural gas
prices to continue to be volatile and to affect the demand for and pricing of
UTI's services.
DECREASED DEMAND OR REDUCED PRICES UTI RECEIVES FOR ITS LAND CONTRACT DRILLING
SERVICES COULD MATERIALLY ADVERSELY AFFECT UTI'S FINANCIAL CONDITION
Any significant decrease in demand for, or the prices received for, UTI's
services could have a material adverse effect on UTI's results of operations and
financial condition. An oversupply of drilling rigs and a large number of
drilling contractors have affected adversely the United States land drilling
industry for many years. These conditions have resulted in depressed day rates
and substantial competition for available contracts. UTI cannot predict either
the future level of demand for its contract drilling services or future
conditions in the land contract drilling services industry.
THE FAILURE OF UTI TO SUCCESSFULLY EFFECT AND IMPLEMENT ITS ACQUISITION STRATEGY
COULD HAVE A NEGATIVE IMPACT ON UTI'S OPERATIONS
Any failure by UTI to successfully effect and implement its acquisition
strategy could have a material adverse effect on UTI's future results of
operations and financial condition. UTI cannot assure you that suitable
acquisition candidates can be found, and UTI faces increased competition from
other companies for available acquisition opportunities. UTI may find fewer
acceptable acquisition opportunities if the prices buyers of drilling rigs are
willing to pay continue to rise. UTI may elect or be required to incur
substantial indebtedness to finance future acquisitions and also may issue
equity securities or convertible securities in connection with any such
acquisitions. Additional debt service requirements could represent a significant
burden on UTI's results of operations and financial condition, and the issuance
of additional equity or convertible securities could result in dilution to its
stockholders. In addition, UTI cannot assure you that it will successfully
integrate the operations and assets of Norton Drilling or any future acquisition
with UTI's own operations and assets, that UTI's management will be able to
manage effectively the growth and increased size of UTI or that UTI will be
successful in deploying idle or stacked rigs that it acquires or in maintaining
the crews and market share attributable to operable drilling rigs that it
acquires.
UTI OPERATES IN A HIGHLY COMPETITIVE INDUSTRY, WHICH INCLUDES COMPETITORS WITH
GREATER FINANCIAL RESOURCES
Some of UTI's competitors have greater financial resources than UTI, which
may enable them to better withstand industry downturns, to compete more
effectively on the basis of price, to acquire existing rigs or to build new
rigs. The contract drilling, workover and well servicing industry in which UTI
operates is a highly-fragmented, intensely competitive and cyclical business.
Since 1982, the decline and continued instability in oil and natural gas prices
has impacted severely the contract drilling business. The supply of available
rigs exceeds the demand for those rigs, which has resulted in substantial
industry competition. Competition for services in a particular market is based
on price, location, type and condition of available equipment and quality of
service. A number of large and small contractors provide competition for
drilling contracts in all areas of UTI's business. In addition, certain
competitors are present in more than one of those areas and drilling rigs are
mobile and can be moved from one region to another in response to market
conditions.
UTI MAY INCUR LOSSES IN CONNECTION WITH ITS FOOTAGE AND TURNKEY CONTRACTS
UTI cannot assure you that it will not incur losses on turnkey and footage
contracts in the future. UTI performs drilling services pursuant to footage and
turnkey drilling contracts under which it agrees to drill a well to a specified
depth for a fixed price. The risks associated with a turnkey or footage contract
are greater than on a well drilled on a dayrate basis because in a turnkey or
footage contract the contractor assumes most of the risks associated with
drilling operations generally assumed by the operator in a
5
<PAGE> 13
dayrate contract, including the risk of blowout, loss of hole, stuck drill
string, machinery breakdowns, abnormal drilling conditions and risks associated
with subcontractors' services, supplies and personnel.
As of March 31, 1999, UTI had approximately 50% of its operating rigs under
footage or turnkey contracts. Under such contracts, UTI does not receive payment
unless the well is drilled to the specified depth, and UTI must bear the costs
of performing drilling services until the well has been drilled. Accordingly,
UTI typically invests working capital in footage and turnkey projects prior to
receiving payment for its services. In addition, profitability of the contract
is dependent upon keeping expenses within the estimates UTI uses in determining
the contract price and completing the contracts on schedule.
UTI'S OPERATIONS ARE SUBJECT TO OPERATING HAZARDS AND UNINSURED RISKS
UTI cannot assure you that its insurance or contractual indemnity
protection will be sufficient or effective under all circumstances or against
all hazards to which it may be subject. The occurrence of a significant event
for which UTI is not fully insured or indemnified or the failure of a UTI
customer to meet its indemnification obligations could have a material adverse
effect on UTI's results of operations and financial condition. UTI also cannot
assure you that it will be able to maintain insurance in the future at rates
that it considers reasonable. UTI's drilling operations and fleet are subject to
the many hazards inherent in the onshore drilling industry, such as blowouts,
explosions, cratering, well fires and spills. These hazards can result in
personal injury and loss of life, severe damage to or destruction of property
and equipment, pollution or environmental damage and suspension of operations.
UTI maintains insurance protection as it deems appropriate. Such insurance
coverage, however, may not provide sufficient funds in all situations to protect
UTI from all liabilities that could result from its operations, and UTI's claims
will be subject to various retentions and deductibles. UTI generally seeks to
obtain indemnity agreements whenever possible from its customers requiring them
to hold UTI harmless if loss of production or reservoir damage occurs. Even when
UTI obtains contractual indemnification, however, the customer may not maintain
adequate insurance to support such indemnification.
COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS COULD ADVERSELY IMPACT UTI'S
OPERATIONS AND FINANCIAL CONDITION
The application of environmental laws and regulations or the adoption of
new laws or regulations could have a material adverse effect on UTI and its
business. UTI is subject to numerous domestic governmental regulations that
relate directly or indirectly to its operations. These regulations include those
controlling the discharge of materials into the environment, requiring removal
and cleanup under certain circumstances, or otherwise relating to the protection
of the environment. For example, UTI may be liable for damages and for the cost
of removing oil spills for which it is held responsible and for which it is not
insured or contractually indemnified. Laws and regulations protecting the
environment have become more stringent in recent years and may in certain
circumstances impose "strict liability" and render a company liable for
environmental damage without regard to negligence or fault on the part of such
company. Such laws and regulations may expose UTI to liability for the conduct
of, or conditions caused by, others, or for UTI's acts that were in compliance
with all applicable laws at the time such acts were performed.
While UTI generally has been able to obtain some degree of contractual
indemnification from its customers in most of its dayrate drilling contracts
against pollution and environmental damages, UTI cannot assure you that such
indemnification will be enforceable in all instances, that the customer will be
financially able in all cases to comply with its indemnity obligations or that
UTI will be able to obtain such indemnification agreements in the future. No
such indemnification is typically available for footage or turnkey contracts.
Although UTI also maintains insurance coverage against certain
environmental liabilities, including pollution caused by sudden and accidental
oil spills, it cannot assure you that it will continue to be able to secure or
carry this insurance or, if UTI were able to secure and carry it, that it will
be adequate to cover its liability in all circumstances.
6
<PAGE> 14
UTI DOES NOT INTEND TO PAY CASH DIVIDENDS IN THE FORESEEABLE FUTURE
UTI has not declared or paid any cash dividends on the UTI common stock and
currently anticipates that, for the foreseeable future, it will retain any
earnings for the development of its business. Accordingly, UTI does not
contemplate declaring or paying cash dividends on the UTI common stock. In
addition, UTI's existing credit arrangements with its bank lender prohibit UTI's
payment of cash dividends and its 12% Senior Subordinated Notes due 2001 limit
cash dividends and restricted payments.
FORWARD LOOKING INFORMATION
Certain statements contained in or incorporated by reference into this
proxy statement/prospectus are "forward looking statements" within the meaning
of the United States Private Securities Litigation Reform Act of 1995. All
forward looking statements involve risks and uncertainties. In particular, any
statements regarding the benefits of the merger, as well as expectations with
respect to future sales and operating efficiencies, are subject to known and
unknown risks, uncertainties and contingencies, many of which are beyond the
control of UTI and Norton Drilling, which may cause actual results, performance
or achievements to differ materially from anticipated results, performance or
achievements. Factors that might affect such forward looking statements include,
among other things, the factors discussed in "Risk Factors."
7
<PAGE> 15
SELECTED FINANCIAL DATA OF UTI AND NORTON DRILLING
In the table below, we provide you with summary historical financial data
of UTI and Norton Drilling. We have prepared this information using UTI's
audited consolidated financial statements for each year in the five year period
ended December 31, 1998 and unaudited three-month periods ended March 31, 1999
and 1998 and using Norton Drilling's audited consolidated financial statements
for each year in the five year period ended November 30, 1998 and unaudited
three-month periods ended February 28, 1999 and 1998.
When you read this summary historical financial data, it is important that
you read along with it the historical financial statements and related notes in
the annual and quarterly reports we filed with the SEC, as well as the section
of the annual and quarterly reports titled "Management's Discussion and Analysis
of Financial Condition and Results of Operations." See "Where to Find More
Information".
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF UTI
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------- -------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenue.................... $ 32,536 $ 48,317 $186,157 $182,437 $97,301 $40,124 $36,275
======== ======== ======== ======== ======= ======= =======
Gross profit............... $ 6,629 $ 12,927 $ 48,285 $ 46,081 $19,044 $ 7,439 $ 8,418
Selling, general and
administrative
expenses................. 2,724 2,728 11,844 11,154 7,627 5,092 4,888
Provision for bad debts.... 292 429 1,143 623 141 (10) 70
Other charge............... 260 -- 785 -- -- -- --
Depreciation and
amortization............. 5,834 3,801 19,529 11,075 4,292 2,552 2,302
-------- -------- -------- -------- ------- ------- -------
Operating income (loss).... (2,481) 5,969 14,984 23,229 6,984 (195) 1,158
Other income............... 3,081 750 1,934 1,235 1,341 293 461
Interest expense........... (1,028) (879) (3,815) (4,330) (1,148) (265) (260)
-------- -------- -------- -------- ------- ------- -------
Income (loss) from
continuing operations
before income taxes...... (428) 5,840 13,103 20,134 7,177 (167) 1,359
Income taxes (benefits).... (172) 2,293 5,235 7,609 2,324 (592) 293
-------- -------- -------- -------- ------- ------- -------
Income (loss) from
continuing operations.... $ (256) $ 3,547 $ 7,868 $ 12,525 $ 4,853 $ 425 $ 1,066
======== ======== ======== ======== ======= ======= =======
Income (loss) from
continuing operations per
common share
Basic.................... $ (0.02) $ 0.22 $ 0.49 $ 0.96 $ 0.46 $ 0.04 $ 0.11
======== ======== ======== ======== ======= ======= =======
Diluted.................. $ (0.02) $ 0.21 $ 0.47 $ 0.83 $ 0.42 $ 0.04 $ 0.11
======== ======== ======== ======== ======= ======= =======
Average common shares
outstanding
Basic.................... 16,211 16,151 16,070 13,083 10,448 9,899 9,732
Diluted.................. 16,469 17,256 16,891 15,069 11,439 9,899 9,732
BALANCE SHEET DATA:
Working capital............ $ 33,027 $ 57,872 $ 20,638 $ 70,452 $ 5,761 $ 5,427 $ 8,179
Total assets............... 232,450 197,884 232,067 208,987 61,870 33,990 22,474
Long-term debt, less
current portion.......... 31,840 23,575 31,721 23,458 14,658 8,701 2,211
Shareholders' equity....... 145,587 139,462 144,146 137,620 22,696 14,990 13,745
</TABLE>
8
<PAGE> 16
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF NORTON DRILLING
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FEBRUARY 28, YEARS ENDED NOVEMBER 30,
----------------- -----------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues......................................... $ 5,144 $ 9,510 $28,740 $35,841 $26,732 $20,646 $21,122
======= ======= ======= ======= ======= ======= =======
Gross profit..................................... $ 1,132 $ 2,444 $ 6,349 $ 7,337 $ 3,236 $ 1,786 $ 2,335
Selling, general and administrative expenses..... 444 455 1,848 1,326 1,471 978 948
Other............................................ -- 3 8 6 16 183 52
Depreciation and amortization.................... 773 750 2,913 2,084 1,187 1,224 1,142
------- ------- ------- ------- ------- ------- -------
Operating income (loss).......................... (85) 1,236 1,580 3,921 562 (599) 193
Other income..................................... 23 211 222 338 369 130 44
Interest expense................................. (144) (123) (484) (561) (393) (399) (406)
------- ------- ------- ------- ------- ------- -------
Income (loss) from continuing operations before
income taxes and discontinued operations....... (206) 1,324 1,318 3,698 538 (868) (169)
Income tax expense (benefit)..................... (53) 500 491 1,489 -- -- 10
------- ------- ------- ------- ------- ------- -------
Income (loss) from continuing operations......... (153) 824 827 2,209 538 (868) (179)
Income (loss) from discontinued operations....... -- -- -- 253 2,893 (1,526) (6,321)
------- ------- ------- ------- ------- ------- -------
Net income (loss)................................ $ (153) $ 824 $ 827 $ 2,462 $ 3,431 $(2,394) $(6,500)
======= ======= ======= ======= ======= ======= =======
Net income (loss) per common share
Basic:
Income (loss) from continuing operations..... $ (0.03) $ 0.17 $ 0.17 $ 0.48 $ 0.12 $ (0.19) $ (0.04)
Income (loss) from discontinued operations... -- -- -- 0.05 0.62 (0.33) (1.39)
------- ------- ------- ------- ------- ------- -------
Net income (loss)............................ $ (0.03) $ 0.17 $ 0.17 $ 0.53 $ 0.74 $ (0.52) $ (1.43)
======= ======= ======= ======= ======= ======= =======
Diluted:
Income (loss) from continuing operations..... $ (0.03) $ 0.16 $ 0.17 $ 0.45 $ 0.12 $ (0.19) $ (0.04)
Income (loss) from discontinued operations... -- -- -- 0.05 0.59 (0.33) (1.39)
------- ------- ------- ------- ------- ------- -------
Net income (loss)............................ $ (0.03) $ 0.16 $ 0.17 $ 0.50 $ 0.71 $ (0.52) $ (1.43)
======= ======= ======= ======= ======= ======= =======
Average common shares outstanding
Basic.......................................... 4,934 4,928 4,931 4,651 4,673 4,592 4,522
Diluted........................................ 4,934 5,035 5,011 4,967 4,903 4,592 4,522
BALANCE SHEET DATA:
Working capital (deficit)........................ $ 476 $ 1,619 $ 98 $ (510) $(2,030) $(7,040) $(4,125)
Total assets..................................... 19,117 19,858 20,003 19,763 16,473 13,004 13,007
Long-term debt, less current portion............. 3,243 3,554 3,404 2,634 3,363 763 1,587
Stockholders' equity............................. 8,482 8,627 8,636 7,802 4,657 1,313 3,572
</TABLE>
9
<PAGE> 17
COMPARATIVE PER SHARE INFORMATION
The following table sets forth certain historical book value per share and
earnings per share for UTI common stock and Norton Drilling common stock. The
table also reflects the equivalent per share earnings and book value with
respect to one share of Norton Drilling common stock on a pro forma basis for
the merger. You also should read the separate historical consolidated financial
statements of UTI and Norton Drilling and the related notes included or
incorporated by reference in this proxy statement/ prospectus. Information
relating to UTI's most recent fiscal year end relates to information as of and
for the twelve month period ended December 31, 1998, and information relating to
Norton Drilling's most recent fiscal year end relates to information as of and
for the twelve month period ended November 30, 1998. Information relating to
UTI's most recent quarter end relates to information as of and for the three
month period ended March 31, 1999, and information relating to Norton Drilling's
most recent quarter end relates to information as of and for the three month
period ended February 28, 1999. Neither UTI nor Norton Drilling has declared any
cash dividends during the periods presented.
<TABLE>
<CAPTION>
AT AT
MOST RECENT MOST RECENT
FISCAL YEAR END QUARTER END
--------------- -----------
<S> <C> <C>
Book value per share
UTI historical........................................... $ 9.00 $ 8.83
Norton Drilling historical............................... 1.81 1.70
UTI/Norton Drilling pro forma combined................... 9.83 9.63
Norton Drilling pro forma equivalent(1).................. 2.59 2.53
</TABLE>
<TABLE>
<CAPTION>
FOR THE FOR THE
MOST RECENT MOST RECENT
FISCAL YEAR END QUARTER END
--------------- -----------
<S> <C> <C>
Net income (loss) per share
UTI historical -- basic.................................. $0.49 $(0.02)
UTI historical -- diluted................................ 0.47 (0.02)
Norton Drilling historical -- basic...................... 0.17 (0.03)
Norton Drilling historical -- diluted.................... 0.17 (0.03)
UTI/Norton Drilling pro forma combined -- basic.......... 0.53 (0.01)
UTI/Norton Drilling pro forma combined -- diluted........ 0.50 (0.01)
Norton Drilling pro forma equivalent -- basic(1)......... 0.14 (0.00)
Norton Drilling pro forma equivalent -- diluted(1)....... 0.13 (0.00)
</TABLE>
- ---------------
(1) The Norton Drilling pro forma equivalents are calculated by multiplying the
unaudited combined per share data by .2631579 (the exchange ratio for the
merger).
10
<PAGE> 18
COMPARATIVE MARKET VALUE INFORMATION
The following table sets forth:
- the closing prices per share and aggregate market values of UTI common
stock and Norton Drilling common stock on April 26, 1999, the last
trading day prior to the public announcement of the proposed merger, and
on June , 1999, the most recent date for which prices were available
prior to printing this proxy statement/prospectus; and
- the equivalent price per share and equivalent market values of Norton
Drilling common stock, based on the exchange ratio.
UTI common stock is traded on the American Stock Exchange and Norton
Drilling common stock is traded on the OTC Bulletin Board.
<TABLE>
<CAPTION>
UTI NORTON DRILLING NORTON DRILLING
HISTORICAL HISTORICAL EQUIVALENT
---------- --------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
On April 26, 1999
Closing price per share of common stock...... $ 9.8125 $1.125 $ 2.58
Market value of common stock(1).............. $161,801 $5,551 $12,731
On June , 1999
Closing price per share of common stock...... $ $ $
Market value of common stock(1).............. $ $ $
</TABLE>
- ---------------
(1) Market value is based on 16,489,281 shares of UTI common stock and 4,934,321
shares of Norton Drilling common stock outstanding as of April 26, 1999 and
shares of UTI common stock and shares of Norton Drilling
common stock outstanding as of June , 1999.
11
<PAGE> 19
SPECIAL MEETING
DATE, TIME AND PLACE OF SPECIAL MEETING
The meeting of the Norton Drilling stockholders will be held at 10:00 a.m.,
local time, on , 1999, at .
PURPOSE OF THE SPECIAL MEETING
At the special meeting, Norton Drilling stockholders will consider and vote
upon a proposal to approve and adopt the Agreement and Plan of Merger, dated as
of April 26, 1999, by and among UTI Energy Corp., a wholly-owned subsidiary of
UTI, Norton Drilling and the primary stockholders of Norton Drilling, and the
merger.
THE NORTON DRILLING BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND ADOPTED
THE MERGER AGREEMENT AND THE MERGER AND RECOMMENDS THAT NORTON DRILLING
STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
MERGER AND TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
SPECIAL MEETING. SEE "RECOMMENDATION OF THE NORTON DRILLING BOARD; NORTON
DRILLING'S REASONS FOR THE MERGER".
SOLICITATION OF PROXIES
The solicitation of the enclosed proxies from Norton Drilling stockholders
is made on behalf of the Norton Drilling Board of Directors. Norton Drilling
will bear the expenses of the solicitation of proxies, including preparing,
handling, printing and mailing the proxy soliciting material. Solicitation will
be made by mail, by electronic telecommunications or in person. Norton Drilling
has retained the services of to assist in the solicitation of proxies
for a fee estimated to be $ plus out-of-pocket expenses. Norton
Drilling management also may use the services of its directors, officers and
employees in soliciting proxies, who will not receive any additional
compensation therefor, but who will be reimbursed for their out-of-pocket
expenses. Norton Drilling will reimburse banks, brokers, nominees, custodians
and fiduciaries for their expenses in forwarding copies of the proxy soliciting
material to the beneficial owners of the stock held by such persons and in
requesting authority for the execution of proxies.
RECORD DATE; VOTING RIGHTS; PROXIES
Only holders of record of shares of Norton Drilling common stock on May 28,
1999 are entitled to notice of and to vote at the special meeting. As of May 28,
1999, there were 4,934,321 outstanding shares of Norton Drilling common stock,
held by approximately 273 holders of record, each of which is entitled to one
vote per share on any matter that properly comes before the special meeting.
All shares of Norton Drilling common stock represented by properly executed
proxies will be voted in accordance with the instructions indicated in such
proxies, unless such proxies have been previously revoked. IF NO INSTRUCTIONS
ARE INDICATED, SUCH SHARES OF NORTON DRILLING COMMON STOCK WILL BE VOTED IN
FAVOR OF APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER. A
stockholder who has given a proxy may revoke it at any time prior to its
exercise by giving written notice of revocation to the Secretary of Norton
Drilling, by signing and returning a later dated proxy, or by voting in person
at the special meeting. However, mere attendance at the meeting will not, in and
of itself, have the effect of revoking the proxy.
Norton Drilling stockholders can vote either by mailing their completed and
signed proxy card to Continental Stock Transfer & Trust Company, 2 Broadway, New
York, New York 10004, by transmitting both sides of their proxy card by
facsimile to (212) 509-5152 or by delivering a completed proxy card at the
special meeting. Norton Drilling stockholders can change their vote prior to the
meeting by mailing, faxing or delivering a later dated signed proxy in the same
manner.
12
<PAGE> 20
QUORUM; VOTE REQUIRED
The presence in person or by properly executed proxy of holders of a
majority of the issued and outstanding shares of Norton Drilling common stock
entitled to vote is necessary to constitute a quorum at the special meeting.
The affirmative vote of the holders of at least a majority of the
outstanding shares of Norton Drilling common stock entitled to vote is required
to approve and adopt the merger agreement and the merger. Abstentions will be
counted for purposes of determining the presence of a quorum but will not be
counted for purposes of determining the number of votes cast. Shares represented
by "broker non-votes," if any, will be counted for purposes of determining
whether there is a quorum at the special meeting, but will not be counted for
purposes of determining the number of votes cast. "Broker non-votes" are shares
held by brokers or nominees that are represented at a meeting but with respect
to which the broker or nominee is not empowered to vote on a particular
proposal. Thus, if a quorum is present, abstentions and broker non-votes will
have the effect of a vote against the approval and adoption of the merger
agreement and the merger.
OTHER MATTERS
As of the date of this proxy statement/prospectus, the Norton Drilling
Board of Directors does not know of any business to be presented at the special
meeting other than as stated in the notice accompanying this proxy
statement/prospectus. If any other matter should properly come before the
special meeting, including a proposal to adjourn the special meeting, management
intends to vote the shares represented by the proxies with respect to such
matters according to its judgment as to the merits of such matters.
THE MERGER
This section of this proxy statement/prospectus and the next section
entitled "Terms of the Merger Agreement" describe the material aspects of the
proposed merger. These discussions are qualified in their entirety by reference
to the merger agreement, which is attached as Exhibit A to this proxy
statement/prospectus, and to the other agreements and documents that are
discussed in this proxy statement/prospectus and that are filed as exhibits to
the registration statement of which this proxy statement/prospectus forms a
part. The merger agreement is incorporated by reference into this document. You
should read the merger agreement in its entirety, as it is the legal document
that governs the merger.
BACKGROUND OF THE MERGER
UTI is a leading provider of onshore contract drilling services to
exploration and production companies and operates one of the largest land
drilling rig fleets in the United States. UTI's drilling operations are
concentrated primarily in the prolific oil and natural gas producing basins of
New Mexico, Oklahoma and Texas.
Beginning in 1995, UTI made a strategic decision to focus its efforts on
the expansion of its land drilling operations to take advantage of improving
market conditions and the benefits arising from a consolidation in the land
drilling industry. To effect this strategy, UTI disposed of its oilfield
distribution business in September 1995 and immediately focused on a directed
acquisition program aimed at expanding UTI's presence in the oil and gas
producing regions in the United States. Pursuant to this strategy, UTI acquired
86 rigs in eight transactions during 1995, 1996, 1997 and 1998. Historically,
UTI's acquisition strategy has focused on companies with strong regional
management teams that UTI believes it can integrate into its operational
structure, as well as companies with underutilized and undervalued assets.
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<PAGE> 21
At various meetings during 1998 and 1999, the UTI Board of Directors
discussed various potential acquisition candidates, including Norton Drilling.
UTI's management believed that a business combination with Norton Drilling would
provide many benefits, including the following:
- Strengthen UTI's operations in west Texas and New Mexico;
- Provide UTI with a strong management team;
- Expand UTI's operations into new markets, including capabilities
internationally in Mexico; and
- Provide Norton Drilling's operations with additional access to capital
and other resources during periods of depressed market conditions, such as
those currently being experienced in the United States contract drilling
industry.
During the summer of 1998, Vaughn E. Drum, UTI's President and Chief
Executive Officer, and Mark S. Siegel, UTI's Chairman of the Board, met with
Sherman H. Norton, Jr., Chairman of the Board of Norton Drilling, in Lubbock,
Texas to discuss a possible business combination between UTI and Norton
Drilling.
On January 18, 1999, John E. Vollmer III, UTI's Senior Vice President,
Treasurer and Chief Financial Officer, contacted Sherman H. Norton, Jr. by
telephone to discuss a possible business combination between UTI and Norton
Drilling. On February 16, 1999, Mark S. Siegel and John E. Vollmer met in
Houston, Texas with S. Howard Norton, III, President of Norton Drilling, and
Kevin Lewis, a director of Norton Drilling, to discuss the merits of a potential
business combination transaction and the strategic operating reasons for a
business combination.
On February 19, 1999, Norton Drilling's Board of Directors authorized
management to pursue strategic alternatives in order to enhance stockholder
value, including the possible sale of the company. On February 22, 1999, Norton
Drilling announced that it suspended its drilling operations in Mexico and that
the company would be reviewing its strategic alternatives, including a possible
sale of the company. Following this announcement, members of UTI management and
Norton Drilling management had several telephone conversations regarding
proposed terms of a possible business combination of the two companies. Also, in
late February, UTI and Norton Drilling entered into a confidentiality agreement
and Norton Drilling provided UTI certain financial and operational information
UTI had requested in order to analyze a potential business combination.
On March 19, 1999, UTI formally proposed a merger transaction whereby UTI
would acquire Norton Drilling. On March 22, 1999, Norton Drilling's Board of
Directors reviewed this proposal with management and its outside legal advisor,
Solovay Edlin & Eiseman, P.C., and directed management to proceed with further
negotiations concerning such proposal. From March 23, 1999 through April 18,
1999, UTI's management and Norton Drilling's management communicated on a daily
basis regarding the terms of the proposed merger. Norton Drilling's Board of
Directors met on April 16, 1999 to review with management and its outside legal
advisor the status of such discussions and the potential transaction and to
direct management concerning certain terms and conditions thereof. UTI and
Norton Drilling agreed on the final financial terms of the merger on April 18,
1999. Between April 18, 1999 and April 26, 1999, business, financial and legal
representatives of UTI and Norton Drilling conducted due diligence and
negotiated the final terms of the merger agreement.
On April 20, 1999, Norton Drilling retained Houlihan Lokey Howard & Zukin
to review the fairness of a potential business combination between UTI and
Norton Drilling. Also on such date, Norton Drilling began to provide Houlihan
Lokey with information regarding Norton Drilling and UTI.
On April 25, 1999, Norton Drilling's Board of Directors met to review with
management and its outside legal advisor the proposed terms of the merger and
the merger agreement. On April 26, 1999, the Norton Drilling Board of Directors
met to discuss the proposed terms of the merger and the merger agreement with
Houlihan Lokey and its outside legal advisor. Following these discussions,
Norton Drilling's Board of Directors received the oral opinion (subsequently
confirmed in writing) of Houlihan Lokey as to the fairness of the transaction to
the Norton Drilling stockholders from a financial point of
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<PAGE> 22
view. Norton Drilling's Board of Directors unanimously approved and adopted the
merger agreement and the merger at this meeting.
On April 26, 1999, the UTI Board of Directors met to discuss the proposed
terms of the merger and the proposed form of the merger agreement. UTI's Board
of Directors approved and adopted the merger agreement and the merger at this
meeting.
RECOMMENDATION OF THE NORTON DRILLING BOARD; NORTON DRILLING'S REASONS FOR THE
MERGER
At a meeting of the Norton Drilling Board held on April 26, 1999, after
careful consideration, the Norton Drilling Board unanimously:
- approved and adopted the merger agreement and the merger,
- determined that the merger is in the best interests of Norton Drilling
and fair to its stockholders, and
- recommended that holders of shares of Norton Drilling common stock vote
FOR approval and adoption of the merger agreement and the merger.
In reaching its decision to approve the merger agreement and the merger and
to recommend approval and adoption of the merger agreement and the merger by the
holders of Norton Drilling common stock, Norton Drilling's Board considered the
following material factors:
- information concerning the financial condition, results of operations,
prospects and businesses of Norton Drilling and UTI, including:
I the revenues of the companies, their complementary businesses and the
potential for synergies, and
I the recent stock price performance of Norton Drilling common stock and
UTI common stock;
- the fact that the exchange ratio represented, as of the signing of the
merger agreement, consideration having a value of $2.58 per share of
Norton Drilling common stock, which represents a premium of 128% over
$1.13, the closing price per share of Norton Drilling common stock on
such date;
- the review of, and discussions with Norton Drilling senior management,
legal and financial advisors and accountants regarding, certain business,
financial, legal and accounting aspects of the merger, the results of
legal and financial due diligence and the terms of and conditions to the
merger agreement;
- the financial opinion of Houlihan Lokey Howard & Zukin to the effect
that, as of the date of such opinion and based upon and subject to
certain matters stated therein, the exchange ratio was fair to the
holders of Norton Drilling common stock from a financial point of view
(see "Opinion of Norton Drilling's Financial Advisor" below); and
- the recommendation of Norton Drilling's management that the merger
agreement and the merger be approved.
This discussion of the information and factors considered by Norton
Drilling's Board of Directors is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation of the merger,
Norton Drilling's Board did not find it practicable to and did not quantify or
otherwise assign relative weights to the specific factors considered in reaching
its determination. In addition, individual members of Norton Drilling's Board
may have given different weights to different factors.
THE NORTON DRILLING BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
HOLDERS OF NORTON DRILLING COMMON STOCK VOTE "FOR" THE APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT AND THE MERGER.
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<PAGE> 23
OPINION OF NORTON DRILLING'S FINANCIAL ADVISOR
Norton Drilling engaged Houlihan Lokey Howard & Zukin to render an opinion
to Norton Drilling's Board of Directors as to the fairness, from a financial
point of view, of the consideration to be received by the Norton Drilling
stockholders in connection with the merger. Houlihan Lokey is a nationally
recognized investment banking firm that is continually engaged in providing
financial advisory services in connection with mergers and acquisitions,
leveraged buyouts, business valuations for a variety of regulatory and planning
purposes, recapitalizations, financial restructurings and private placements of
debt and equity securities. Houlihan Lokey has not performed financial advisory
services for Norton Drilling in the past.
In a written opinion to the Norton Drilling Board of Directors dated April
26, 1999, Houlihan Lokey stated that, as of such date and based upon and subject
to certain enumerated matters, the consideration that the Norton Drilling
stockholders will receive in the merger was fair to the Norton Drilling
stockholders from a financial point of view.
Norton Drilling agreed to pay Houlihan Lokey a fee of $125,000 for its
preparation and delivery of the fairness opinion. No portion of Houlihan Lokey's
fee is contingent upon the successful completion of the merger. Norton Drilling
agreed to indemnify Houlihan Lokey and its affiliates against certain
liabilities, including liabilities under federal securities laws that arise out
of the engagement of Houlihan Lokey.
Houlihan Lokey's opinion does not address Norton Drilling's underlying
business decision to effect the merger. Houlihan Lokey has not been requested
to, and did not, solicit third party indications of interest in acquiring all or
any part of Norton Drilling. Furthermore, Houlihan Lokey has not negotiated the
merger or advised Norton Drilling with respect to alternatives to it. Houlihan
Lokey did not, and was not requested by Norton Drilling to, make any
recommendations as to the form or amount of consideration that the Norton
Drilling stockholders will receive and has not expressed any opinion as to the
fairness of any aspect of the merger not expressly addressed in its fairness
opinion.
In arriving at its opinion, among other things, Houlihan Lokey:
- reviewed Norton Drilling's Form 10-K for the fiscal year ended November
30, 1998 and quarterly reports on Form 10-Q for the quarters ended August
31, 1998, and February 28, 1999, which Norton Drilling's management has
identified as including the most current financial statements publicly
available;
- reviewed UTI's Form 10-K for the fiscal year ended December 31, 1998;
- reviewed a draft copy dated April 26, 1999 of the merger agreement;
- reviewed a draft press release dated April 26, 1999 detailing the merger;
- reviewed UTI's April 26, 1999 press release regarding its earnings for
the quarter ended March 31, 1999;
- met with certain members of the senior management of Norton Drilling to
discuss its operations, financial condition, future prospects and
projected operations and performance;
- spoke with certain members of UTI senior management to discuss the
operations, financial condition, future prospects and projected
operations and performance of the combined businesses and UTI's rationale
for the merger;
- visited Norton Drilling's business offices;
- reviewed the historical market prices and trading volume for Norton
Drilling's publicly traded securities;
- reviewed the historical market prices and trading volume for UTI's
publicly traded securities;
- reviewed certain other publicly available financial data for certain
companies that Houlihan Lokey deemed comparable to Norton Drilling, and
publicly available prices and premiums paid in other transactions that
Houlihan Lokey considered similar to the merger; and
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<PAGE> 24
- conducted such other studies, analyses and inquiries as Houlihan Lokey
deemed appropriate.
In connection with the merger, Houlihan Lokey determined that the aggregate
consideration to be received in the merger is approximately $20.34 million,
consisting of .2631579 shares of UTI common stock for each share of Norton
Drilling common stock ($14.18 million as of the date of the fairness opinion)
and the assumption of $6.16 million of total interest-bearing debt as of
February 28, 1999, which Norton Drilling management represented to Houlihan
Lokey as the most recent debt balance available.
Houlihan Lokey used several methodologies to assess the fairness, from a
financial point of view, of the consideration to be received by the Norton
Drilling stockholders in connection with the merger. Each methodology provided
an estimate as to the aggregate value of the assets UTI will acquire in the
merger.
Comparable Company Analysis
Using publicly available information, Houlihan Lokey compared selected
financial data of Norton Drilling with similar data of selected companies
engaged in businesses considered by Houlihan Lokey to be comparable to that of
Norton Drilling. Houlihan Lokey included in its selected comparable companies
Grey Wolf, Inc., Nabors Industries, Inc., Parker Drilling Company, Patterson
Energy, Inc., TMBR/Sharp Drilling, Inc. and UTI. For each of the comparable
companies, Houlihan Lokey calculated the following multiples:
<TABLE>
<CAPTION>
MULTIPLE OF CURRENT MEDIAN MULTIPLE OF CURRENT
ENTERPRISE VALUE FOR ENTERPRISE VALUE FOR THE
NORTON DRILLING(1) COMPARABLE COMPANIES(1)
-------------------- --------------------------
<S> <C> <C>
LTM Revenue Multiple(2)...................... 0.83x 1.64x
LTM EBITDA Multiple(3)....................... 6.4x 6.3x
Rig Multiple(4).............................. 1.27x 2.32x
</TABLE>
- ---------------
(1) Current enterprise value represents the aggregate market value of equity,
plus interest-bearing debt, less cash.
(2) Latest twelve months revenue.
(3) Latest twelve months earnings before interest, taxes, depreciation and
amortization.
(4) Latest rig count.
Inherent differences exist between the businesses, operations and prospects
of Norton Drilling and the comparable companies. Accordingly, Houlihan Lokey
believed that it was inappropriate to, and therefore did not, rely solely on the
above-described quantitative results of the comparable company analysis and
accordingly also made qualitative judgments concerning differences between the
financial and operating characteristics and prospects of Norton Drilling and the
comparable companies that would, in Houlihan Lokey's opinion, affect the public
market valuation of such companies.
Comparable Transaction Analysis
Houlihan Lokey analyzed the multiples of certain financial performance
measures implied by the consideration for four merger and acquisition
transactions announced or consummated since February 1997, and involving
companies in the same industry. Among other factors, Houlihan Lokey considered
that the merger and acquisition transaction environment varies over time because
of macroeconomic factors that include, but are not limited to, interest rate and
equity market fluctuations and microeconomic factors that include, but are not
limited to, industry results and growth expectations. To the extent that
information was publicly available for these transactions, Houlihan Lokey
analyzed the multiples of current enterprise value to the latest twelve months
revenues, latest twelve months EBITDA and latest rig count. Recent transactions
included the following (target/acquirer): Bayard Drilling Technologies,
Inc./Nabors Industries, Inc., Peterson Drilling Company/UTI, Drilex
International, Inc./ Baker Hughes Incorporated and Bonray Drilling Corp/DLB Oil
& Gas, Inc. No company or transaction used in the analysis described above was
directly comparable to Norton Drilling or the merger. Accordingly, the analysis
of the results of the foregoing involved complex considerations and judgments
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<PAGE> 25
concerning differences in financial and operating characteristics of the
companies that could affect public trading values.
Such analysis indicated the following multiples:
<TABLE>
<CAPTION>
RANGE OF MULTIPLE OF CURRENT
ENTERPRISE VALUE FOR
COMPARABLE TRANSACTIONS
----------------------------
<S> <C>
LTM Revenue Multiple......................... 0.93x to 2.61x
LTM EBITDA Multiple.......................... 2.9x to 10.5x
Rig Multiple................................. 0.89x to 2.62x
</TABLE>
Based on historical financial results for Norton Drilling, the above analyses
resulted in a wide range of enterprise values. Houlihan Lokey noted that the
total consideration to be received by the Norton Drilling stockholders in the
merger is within the range described above.
Market Trading Analysis
Houlihan Lokey reviewed current and historical market prices and trading
data of Norton Drilling's common stock. During the 90 day trading period from
December 15, 1998 to April 26, 1999, the last trading day prior to the public
announcement of the merger, Norton Drilling's common stock closing prices ranged
from a high of $2.1875 per share to a low of $0.6875 per share with an average
price of $1.46 per share. During the 60 day trading period from January 29, 1999
to April 26, 1999, Norton Drilling's common stock closing prices ranged from a
high of $2.00 per share to a low of $0.6875 per share with an average price of
$1.20 per share. Houlihan Lokey also analyzed the relative performance of the
UTI common stock for the twelve months prior to the public announcement of the
merger. Houlihan Lokey performed the market trading analysis to provide
background information and to add context to the other analyses it performed as
described above.
Houlihan Lokey drew no specific conclusion from its comparable company,
comparable transaction and market trading analyses, but subjectively factored
its observations from these analyses into its qualitative assessment of the
facts and circumstances relevant to its opinion.
The conclusions resulting from the analyses indicated that the
consideration to be received by the Norton Drilling stockholders in connection
with the merger is fair to the Norton Drilling stockholders from a financial
point of view.
The analyses required studies of the overall market, economic and industry
conditions in which Norton Drilling operates, and the operating results of
Norton Drilling.
Houlihan Lokey's opinion is based on the business, economic, market and
other conditions as they existed as of April 26, 1999. In rendering its opinion,
Houlihan Lokey relied upon and assumed, without independent verification, that
the historical financial information Norton Drilling provided to Houlihan Lokey
was reasonably and accurately prepared based upon the best then currently
available estimates of Norton Drilling's results of operations and financial
condition. Additionally, Houlihan Lokey relied upon and assumed, without
independent verification, that the historical and projected financial
information UTI provided to it was reasonably and accurately prepared based upon
the best currently available estimates of UTI's results of operations and
financial condition. Houlihan Lokey did not independently verify the accuracy or
completeness of the information supplied to it with respect to Norton Drilling
or UTI and does not assume responsibility for it. Except as set forth above,
Houlihan Lokey did not make any physical inspection or independent appraisal or
physical inspection of the specific properties or assets of Norton Drilling or
UTI.
The summary set forth above describes the material points of more detailed
analyses performed by Houlihan Lokey in arriving at its fairness opinion. The
preparation of a fairness opinion is a complex analytical process involving
various determinations as to the most appropriate and relevant methods of
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<PAGE> 26
financial analysis and application of those methods to the particular
circumstances and is therefore not readily susceptible to summary description.
In arriving at its opinion, Houlihan Lokey made qualitative judgments as to the
significance and relevance of each analysis and factor. Accordingly, Houlihan
Lokey believes that its analyses and summary set forth herein must be considered
as a whole. In its analysis, Houlihan Lokey made numerous assumptions with
respect to Norton Drilling, UTI, industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of management of either company. The estimates contained in
such analyses are not necessarily indicative of actual values or predictive of
future results or values, which may be more or less favorable than suggested by
such analyses. Additionally, analyses relating to the value of businesses or
securities are not appraisals. Accordingly, such analyses and estimates are
inherently subject to substantial uncertainty. You should carefully read this
summary in conjunction with the Opinion Letter dated April 26, 1999 which is
included as Exhibit B to this proxy statement/prospectus.
ANTICIPATED ACCOUNTING TREATMENT
UTI expects to account for the merger using the purchase method of
accounting. Under the purchase method of accounting, UTI will record the Norton
Drilling assets and liabilities on UTI's balance sheet at their estimated fair
market values on the date of the merger.
FEDERAL SECURITIES LAW CONSEQUENCES
All shares of UTI common stock issued in the merger will be freely
transferable, except that persons who are deemed to be "affiliates" (as defined
under the Securities Act) of Norton Drilling prior to the merger may only resell
shares of UTI common stock they receive in the merger in transactions registered
under the Securities Act, permitted by the resale provisions of Rule 145 under
the Securities Act (or Rule 144 if such persons are or become UTI affiliates),
or as otherwise permitted under the Securities Act. Persons who control, are
controlled by or are under common control with Norton Drilling, including
certain officers and directors of Norton Drilling, may be deemed to be Norton
Drilling affiliates.
STOCK EXCHANGE LISTING
It is a condition to the merger that the American Stock Exchange authorize
for listing the UTI common stock to be delivered to the Norton Drilling
stockholders in connection with the merger.
DISSENTERS' RIGHTS
Norton Drilling stockholders do not have dissenters' rights of appraisal or
other rights to demand fair value in cash for their shares by reason of the
merger or other transactions contemplated by the merger agreement.
REGULATORY APPROVAL
It is a condition to the merger that UTI and Norton Drilling obtain all
required regulatory and governmental approvals. Other than the filing of a
merger certificate with the Delaware Secretary of State and approval of the
merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, the merger is not subject to any federal or state regulatory
requirements.
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<PAGE> 27
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain U.S. Federal income tax
consequences of the merger which are generally applicable to holders of Norton
Drilling common stock under the Internal Revenue Code of 1986, as amended (the
"Code"). Tax consequences which are different from or in addition to those
described herein may apply to Norton Drilling stockholders who are subject to
special treatment under the U.S. federal income tax laws, such as non-U.S.
persons, tax exempt organizations, financial institutions, insurance companies,
broker-dealers, Norton Drilling stockholders who hold their Norton Drilling
common stock as part of a hedge, straddle, wash sale, synthetic security,
conversion transaction, or other integrated investment comprised of Norton
Drilling common stock and one or more other investments, and persons who
acquired their shares in compensatory transactions. The discussion does not
address non-U.S. or state or local tax considerations.
THIS SUMMARY IS NOT A SUBSTITUTE FOR AN INDIVIDUAL ANALYSIS OF THE TAX
CONSEQUENCES OF THE MERGER TO A NORTON DRILLING STOCKHOLDER. EACH NORTON
DRILLING STOCKHOLDER SHOULD CONSULT A TAX ADVISER REGARDING THE PARTICULAR
FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF THE MERGER IN LIGHT OF
SUCH STOCKHOLDER'S OWN SITUATION.
Neither UTI nor Norton Drilling has requested a ruling from the Internal
Revenue Service (the "Service") in connection with the merger. It is a condition
precedent to the closing of the merger that UTI receive an opinion from its
counsel, Fulbright & Jaworski L.L.P., to the effect that (i) the merger will be
treated for U.S. federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, (ii) UTI, Merger Sub and Norton Drilling
will each be a party to the reorganization within the meaning of Section 368(b)
of the Code, and (iii) no gain or loss will be recognized by UTI or Merger Sub
as a result of the merger. It is also a condition precedent to the closing of
the merger that Norton Drilling receive an opinion from its outside counsel to
the effect that (i) the merger will be treated for U.S. federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
(ii) UTI, Merger Sub and Norton Drilling will each be a party to the
reorganization within the meaning of Section 368(b) of the Code, (iii) no gain
or loss will be recognized by a Norton Drilling stockholder as a result of the
merger upon the conversion of shares of Norton Drilling common stock into shares
of UTI common stock, except with respect to cash received in lieu of fractional
shares of UTI common stock, and (iv) no gain or loss will be recognized by
Norton Drilling as a result of the merger. Such opinions (the "Opinions") will
be subject to certain qualifications and assumptions as noted therein and will
rely upon certain representations of UTI and Norton Drilling provided to counsel
as a basis for the Opinions. The Opinions will be based upon counsels'
interpretation of the Code, applicable Treasury regulations, judicial authority
and administrative rulings and practice, all as of the date of the Opinions.
There can be no assurance that future legislative, judicial or administrative
changes or interpretations will not adversely affect the accuracy of the
conclusions set forth herein. The Opinions will not be binding upon the Service,
and no assurance can be given that the Service will not adopt a contrary
position or that a contrary position adopted by the Service would not be
sustained by a court.
Assuming the merger qualifies as a reorganization under section 368(a) of
the Code, the following U.S. federal income tax consequences should occur:
1. no gain or loss will be recognized by UTI, Merger Sub or Norton Drilling
as a result of the merger;
2. no gain or loss will be recognized by a holder of Norton Drilling common
stock who exchanges all of his or her shares of Norton Drilling common
stock solely for shares of UTI common stock in the merger;
3. the aggregate tax basis of the shares of UTI common stock received by a
stockholder of Norton Drilling in the merger (including any fractional
share not actually received) will be the same as the aggregate tax basis
of the Norton Drilling common stock surrendered in exchange therefor;
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<PAGE> 28
4. the holding period of the shares of UTI common stock received by a
stockholder of Norton Drilling in the merger (including any fractional
share not actually received) will include the holding period of the
shares of the Norton Drilling common stock surrendered in exchange
therefor, provided that such shares of Norton Drilling common stock are
held as capital assets at the effective time of the merger; and
5. a cash payment in lieu of a fractional share will be treated as if a
fractional share of UTI common stock had been received in the merger and
then redeemed by UTI. Such redemption should qualify as a distribution
in full payment in exchange for the fractional share rather than as a
distribution of a dividend. Accordingly, a stockholder of Norton
Drilling receiving cash in lieu of a fractional share will recognize
gain or loss upon such payment in an amount equal to the difference, if
any, between such stockholder's basis in the fractional share and the
amount of cash received. Such gain or loss will be a capital gain or
loss if the Norton Drilling common stock is held as a capital asset at
the effective time of the merger.
In the event that the merger were held not to qualify as a reorganization
under section 368(a) of the Code, a stockholder of Norton Drilling would
recognize gain or loss in an amount equal to the difference between such
stockholder's basis in his or her shares and the fair market value, as of the
effective date of the merger, of the UTI common stock received in exchange
therefor. In such event, such stockholder's basis in the UTI common stock so
received would be equal to its fair market value as of the effective date of the
merger, and the holding period for such stock would begin on the day after the
effective date of the merger.
THE U.S. FEDERAL INCOME TAX CONSEQUENCES SUMMARIZED ABOVE ARE FOR GENERAL
INFORMATION ONLY. EACH NORTON DRILLING STOCKHOLDER SHOULD CONSULT A TAX ADVISER
AS TO THE PARTICULAR CONSEQUENCES OF THE MERGER THAT MAY APPLY TO SUCH
STOCKHOLDER, INCLUDING THE APPLICATION OF STATE, LOCAL, NON-U.S. AND OTHER
FEDERAL TAX LAWS.
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<PAGE> 29
TERMS OF THE MERGER AGREEMENT
GENERAL
This section of the proxy statement/prospectus describes the material terms
of the merger agreement. This description is not complete and you are encouraged
to read the full text of the merger agreement, which is attached to this proxy
statement/prospectus as Exhibit A. In addition, we have provided important
information about the merger agreement and the merger in the section entitled
"The Merger".
EFFECTIVE TIME
Promptly after the satisfaction or waiver of the conditions to the merger
set forth in the merger agreement, Norton Drilling will file a certificate of
merger with the Delaware Secretary of State, as prescribed by Delaware law. The
effect of this filing is that UTI's merger subsidiary will merge with and into
Norton Drilling and Norton Drilling will become a direct wholly-owned UTI
subsidiary.
EXCHANGE OF NORTON DRILLING COMMON STOCK
As soon as reasonably practicable after the merger, UTI will instruct
, as exchange agent, to mail to each holder of record of Norton
Drilling common stock a letter of transmittal and instructions as to how to
surrender certificates of Norton Drilling common stock in exchange for shares of
UTI common stock and payment for any fractional shares. YOU SHOULD NOT RETURN
STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
After the merger, each certificate or other authorized evidence of
ownership that previously represented shares of Norton Drilling common stock
will represent only the right to receive the UTI common stock into which such
Norton Drilling shares were convertible in the merger and the right to receive
cash in lieu of fractional shares.
A holder of a certificate previously representing shares of Norton Drilling
common stock will not be paid dividends or distributions on the shares of UTI
common stock and will not be paid cash in lieu of a fractional share of UTI
common stock until the holder surrenders the certificate to for
exchange. When the holder surrenders the certificate, UTI will pay to such
holder, without interest, any unpaid dividends UTI has declared after the merger
and any cash in lieu of a fractional share of UTI common stock. For all other
corporate purposes, certificates that represented shares of Norton Drilling
common stock prior to the merger will represent, from and after the merger, the
number of shares of UTI common stock and cash in respect of fractional shares
into which such shares of Norton Drilling common stock are actually converted in
the merger.
REPRESENTATIONS AND WARRANTIES
UTI and Norton Drilling have made various customary mutual representations
and warranties in the merger agreement about themselves and their subsidiaries.
CONDUCT OF BUSINESS BY NORTON DRILLING
Norton Drilling has agreed that, prior to the merger, it will conduct its
business only in the ordinary course of business and in a manner consistent with
past practice. Norton Drilling also has agreed to use reasonable efforts to
preserve intact its business organizations, to keep available the services of
its current officers and employees and endeavor to preserve its relationships
with customers, suppliers and others with whom it has business dealings. In
particular, unless the merger agreement provides otherwise or as Norton
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Drilling previously disclosed to UTI, Norton Drilling has agreed that neither it
nor any of its subsidiaries, without UTI's prior written consent, will, subject
in certain cases to specified exceptions:
- declare or pay any dividend or other distribution on any of its capital
stock;
- split, combine or reclassify any of its capital stock or permit or
propose the issuance of any other securities in respect of, in lieu of or
in substitution for the shares of its capital stock;
- acquire, or permit any subsidiary to acquire, any of its capital stock;
- issue, deliver or sell any shares of its capital stock of any class, or
any options, warrants, convertible securities or other rights to acquire
its securities (other than the options to purchase 114,000 shares of
Norton Drilling common stock issued to each of John W. Norton, Chief
Operating Officer of Norton Drilling and S. Howard Norton, III, President
of Norton Drilling, on the first business day following the public
announcement of the merger agreement;
- amend or propose to amend its certificate of incorporation or bylaws;
- make any acquisitions;
- dispose of or encumber any Norton Drilling assets or any assets of its
subsidiaries out of the ordinary course of business;
- authorize, recommend, propose or announce an intention to liquidate or
dissolve Norton Drilling or any of its subsidiaries;
- amend or increase the compensation payable to its directors, officers or
employees;
- enter into or amend any employment or severance agreement with any of its
directors, officers or employees;
- pay or agree to pay any pension, retirement allowance or other benefit
not required by existing benefit plans;
- incur any indebtedness;
- authorize capital expenditures in excess of $100,000 during any calendar
month;
- make any material tax election or compromise any material tax liability;
or
- change any material accounting principles.
NO SOLICITATION
Norton Drilling has agreed that it will not solicit or encourage the
initiation of any inquiries or proposals regarding any other merger,
consolidation or other business combination, including a proposal to acquire
more than a 15% interest in the equity securities or assets of Norton Drilling
or its subsidiaries. Any of the foregoing transactions are referred to in this
proxy statement/prospectus as an "Acquisition Proposal."
Until the Norton Drilling stockholders approve the merger and if the Norton
Drilling Board, following consultation with counsel, determines that such action
is necessary to discharge properly its fiduciary duties, the Norton Drilling
Board, after notice to UTI, is permitted to furnish information to a third party
that has made an unsolicited Acquisition Proposal.
The Norton Drilling Board of Directors may not withdraw or modify, in any
manner adverse to UTI, the Norton Drilling Board's approval of the merger, or
approve or recommend any Acquisition Proposal, unless the Board has received a
"Superior Proposal", which the merger agreement defines as a bona fide
Acquisition Proposal to acquire all of the outstanding Norton Drilling common
stock, or all or substantially all of Norton Drilling's assets, on terms that
the Norton Drilling Board reasonably believes are more favorable than the
merger.
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Norton Drilling agreed to cease any discussions or negotiations with any
third party that were ongoing at the time of execution of the merger agreement.
CERTAIN OTHER COVENANTS
Legal Conditions
UTI and Norton Drilling each will take all reasonable actions necessary to
comply promptly with all legal requirements imposed with respect to the merger
and all actions reasonably necessary to obtain all consents, authorizations,
orders or approvals required in connection with the merger.
Treatment of Stock Options
After the merger, each outstanding option to purchase Norton Drilling
common stock and any related stock appreciation right, and any warrant to
purchase Norton Drilling common stock, will be deemed to constitute an option to
acquire a number of shares of UTI common stock equal to the number of shares of
Norton Drilling common stock purchasable pursuant to such option or warrant
multiplied by, and at a price equal to the exercise price divided by, .2631579.
Upon the exercise of such options, UTI will make a cash payment for all
fractional shares.
On the first business day following the public announcement of the merger
agreement, Norton Drilling granted stock options to certain of its executive
officers. UTI has agreed to take all corporate action necessary to reserve for
issuance a sufficient number of shares of UTI common stock to be issued upon
conversion of all outstanding options. UTI has agreed to file with the SEC a
registration statement covering such shares as soon as possible after the
merger.
Indemnification and Insurance
After the merger, Norton Drilling will indemnify and hold harmless each
present and former officer and director of Norton Drilling or its subsidiaries
against all losses, claims, damages, costs, expenses, liabilities, judgments or
amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation based on or arising out of the fact that such person
is or was an officer or director of Norton Drilling or its subsidiaries, whether
pertaining to matters existing or occurring at or prior to the merger and
whether asserted or claimed prior to, at or after the merger.
Following the merger, Norton Drilling will continue to honor its
indemnification obligations under its certificate of incorporation and bylaws,
and under any indemnification agreements, in favor of its present and former
officers and directors, for acts and omissions prior to the merger.
Public Announcements
Neither UTI nor Norton Drilling will issue any press release or make any
public statement with respect to the merger or the merger agreement without the
prior written consent of the other party, except as required by law or pursuant
to a listing agreement with a national securities exchange or transaction
reporting system.
Notification of Certain Matters
UTI and Norton Drilling will promptly advise each other of any change or
event having, or that reasonably could have, a material adverse effect on UTI or
Norton Drilling, as the case may be.
Tax Treatment
Neither UTI nor Norton Drilling will take or omit to take any action,
either before or after the merger, that would cause the merger not to qualify as
a reorganization under the provisions of Section 368 of the Internal Revenue
Code.
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<PAGE> 32
Issuance of Stock Options
On the first business day following the public announcement of the merger
agreement, Norton Drilling granted options to purchase 114,000 shares of Norton
Drilling common stock to each of S. Howard Norton, III, President of Norton
Drilling, and John W. Norton, Chief Operating Officer of Norton Drilling. At the
time of the merger, these options will convert into options to purchase an
aggregate of 60,000 shares of UTI common stock.
Employment Agreements; Other Benefits
In connection with the closing of the merger, Norton Drilling will pay to
each of S. Howard Norton, III, President of Norton Drilling, and John W. Norton,
Secretary of Norton Drilling, $40,000 as a bonus for their remaining as Norton
Drilling employees.
Immediately prior to the completion of the merger, Norton Drilling will
amend its employment agreement with Sherman H. Norton, Jr., Chairman of the
Board of Norton Drilling, to eliminate any requirement that he provide any
services to Norton Drilling, UTI or any of their subsidiaries following the
merger. In connection with the merger, Norton Drilling also will enter into a
consulting/employment agreement with Sherman H. Norton, Jr. that will require
UTI to pay him a $25,000 fee, but that agreement will not require him to provide
any services to UTI, Norton Drilling or any of their subsidiaries.
CONDITIONS TO THE MERGER
Conditions to Obligation of Each Party to Effect the Merger
Each of Norton Drilling's and UTI's respective obligations to complete the
merger are subject to the satisfaction prior to the merger of the following
conditions:
- Stockholder Approval. The Norton Drilling stockholders have approved and
adopted the merger agreement and the merger.
- Listing. The AMEX has authorized for listing the UTI common stock
issuable in connection with the merger.
- Approvals. All waiting periods applicable to the merger the under
Hart-Scott-Rodino Antitrust Improvements Act of 1976 have expired or
terminated, and UTI and Norton Drilling obtained all consents, approvals,
permits and authorizations required to be obtained except as would not
reasonably likely have a material adverse effect on UTI or Norton
Drilling.
- Effectiveness of Registration Statement. The SEC has not issued any stop
order suspending the effectiveness of the registration statement of which
this proxy statement/prospectus is a part, nor has it started any
proceeding for that purpose.
- Governmental Actions. No court of competent jurisdiction has issued a
temporary restraining order, preliminary or permanent injunction or other
order and no other legal restraint or prohibition preventing the merger
is in effect.
Additional Conditions to Obligations of UTI and UTI's Merger Subsidiary
The obligations of UTI and its merger subsidiary to complete the merger
also are subject to the following conditions:
- Representations and Warranties. Except as would not reasonably be
expected to have a material adverse effect on Norton Drilling, the
representations and warranties of Norton Drilling in the merger agreement
are true and correct in all material respects on and as of the date of
the merger as though made on and as of the date of the merger, and UTI
has received a certificate to such effect signed by a duly authorized
Norton Drilling officer.
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<PAGE> 33
- Performance of Obligations. Norton Drilling has performed in all material
respects all obligations it is required to perform under the merger
agreement.
- Certifications. UTI has received certified copies of resolutions of
Norton Drilling's Board of Directors and a majority of its stockholders
approving and adopting the merger agreement and the merger.
- Legal Opinions. UTI has received the required opinions of Norton
Drilling's legal counsel.
Additional Conditions to Obligations of Norton Drilling
The obligations of Norton Drilling to complete the merger also are subject
to the following conditions:
- Representations and Warranties. Except as would not reasonably be
expected to have a material adverse effect on UTI, the representations
and warranties of UTI in the merger agreement are true and correct in all
material respects on and as of the date of the merger as though made on
and as of the date of the merger, and Norton Drilling has received a
certificate to such effect signed by a duly authorized UTI officer.
- Performance of Obligations. UTI has performed in all material respects
all obligations it is required to perform under the merger agreement.
- Certifications. Norton Drilling has received a certified copy of the
resolutions of UTI's Board of Directors approving and adopting the merger
agreement and the merger.
- Legal Opinions. Norton Drilling has received the required opinions of
UTI's legal counsel.
- Fairness Opinion. Houlihan Lokey Howard & Zukin has not revoked, modified
or changed its fairness opinion in a manner adverse to the Norton
Drilling stockholders.
TERMINATION
Conditions to Termination
The merger agreement may be terminated at any time prior to the merger,
notwithstanding the approval and adoption of the merger agreement by the Norton
Drilling stockholders:
- by mutual written consent duly authorized by the Boards of Directors of
both UTI and Norton Drilling;
- by either Norton Drilling or UTI if the merger has not occurred by
December 31, 1999; provided, however, that this right to terminate is not
available to the party whose failure to fulfill its obligations under the
merger agreement caused the merger not to occur before December 31, 1999;
- by either Norton Drilling or UTI if a court of competent jurisdiction or
governmental body or regulatory authority has issued a nonappealable
final order, decree or ruling or has taken any other action that
permanently prohibits the merger;
- by either Norton Drilling or UTI if the requisite vote of the Norton
Drilling stockholders has not been obtained at the special meeting;
- by UTI if:
I Norton Drilling failed to use its reasonable best efforts to call and
hold the special meeting by December 31, 1999,
I Norton Drilling failed to comply in any material respect with any of its
covenants or agreements in the merger agreement and did not cure such
failure within 30 days of notice of such failure,
I any representation or warranty of Norton Drilling in the merger
agreement was not true when made (and not cured within 30 days of notice
of such breach) or on and as of the date of the merger except where such
breach would not have a material adverse effect on Norton Drilling, or
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<PAGE> 34
I the Norton Drilling Board of Directors withdrew, modified or changed its
recommendation of the merger agreement or the merger in a manner adverse
to UTI, or approved or recommended any Acquisition Proposal;
- by Norton Drilling if:
I UTI or its merger subsidiary failed to comply in any material respect
with any of its covenants or agreements in the merger agreement and did
not cure such failure within 30 days of notice of such failure,
I any representation or warranty of UTI or its merger subsidiary in the
merger agreement was not true when made (and not cured within 30 days of
notice of such breach) or on and as of the date of the merger except
where such breach would not have a material adverse effect on UTI,
I the Norton Drilling Board of Directors withdrew, modified or changed its
recommendation of the merger agreement or the merger in a manner adverse
to UTI, or approved or recommended any Acquisition Proposal, or
I by June 30, 1999, UTI has not given Norton Drilling reasonable
assurances that the registration statement of which this proxy
statement/prospectus is a part will be declared effective in sufficient
time to consummate the merger by December 31, 1999.
Fees and Expenses
Except as set forth below, each of UTI and Norton Drilling will pay its own
fees and expenses incurred in connection with the merger agreement and the
merger, whether or not the merger is completed.
Norton Drilling will pay UTI a fee of $1 million upon the first to occur of
the following events:
- UTI or Norton Drilling terminates the merger agreement due to Norton
Drilling's Board approval or recommendation of an Acquisition Proposal;
- UTI terminates the merger agreement due to Norton Drilling's Board
withdrawing, modifying or changing its recommendation of the merger
agreement or the merger in a manner adverse to UTI, and Norton Drilling
consummates a transaction pursuant to an Acquisition Proposal on or prior
to September 30, 2000; or
- any party makes or publicly announces an Acquisition Proposal, the Norton
Drilling stockholders have not approved the merger and Norton Drilling
consummates a transaction pursuant to an Acquisition Proposal on or prior
to September 30, 2000.
Norton Drilling will pay up to $400,000 of UTI's out-of-pocket expenses
relating to the merger, upon the first to occur of any of the following events:
- UTI terminates the merger agreement due to Norton Drilling's failure to
use its reasonable best efforts to call and hold the special meeting by
December 31, 1999;
- UTI terminates the merger agreement due to Norton Drilling's failure to
comply in any material respect with any of its covenants or agreements in
the merger agreement and its not curing such failure within 30 days of
notice of such failure; or
- UTI terminates the merger agreement due to any representation or warranty
of Norton Drilling in the merger agreement being untrue when made (and
not being cured within 30 days of notice of such breach) or on and as of
the date of the merger except where such breach would not have a material
adverse effect on Norton Drilling.
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UTI will pay up to $250,000 of Norton Drilling's out-of-pocket expenses
relating to the merger, upon the first to occur of any of the following events:
- Norton Drilling terminates the merger agreement due to UTI's or its
merger subsidiary's failure to comply in any material respect with any of
its covenants or agreements in the merger agreement and its not curing
such failure within 30 days of notice of such failure; provided that UTI
also will pay Norton Drilling a $250,000 fee if UTI primarily caused such
failure or such failure was due to circumstances or events reasonably
within UTI's control;
- Norton Drilling terminates the merger agreement due to any representation
or warranty of UTI or its merger subsidiary in the merger agreement being
not true when made (and not being cured within 30 days of notice of such
breach) or on and as of the date of the merger except where such breach
would not have a material adverse effect on UTI; or
- Norton Drilling terminates the merger agreement due to UTI's failure, by
June 30, 1999, to give Norton Drilling reasonable assurances that the
registration statement of which this proxy statement/prospectus is a part
will be declared effective in sufficient time to consummate the merger by
December 31, 1999; provided that in such event UTI also will pay Norton
Drilling a $125,000 fee.
AMENDMENTS AND WAIVERS
UTI and Norton Drilling may amend the merger agreement in writing by action
taken or authorized by their respective Boards of Directors at any time prior to
the merger, provided, however, that after the Norton Drilling stockholders have
approved and adopted the merger agreement and the merger, UTI and Norton
Drilling cannot amend the merger agreement without stockholder approval if
applicable law requires stockholder approval of such amendment.
At any time prior to the merger, either UTI or Norton Drilling may, to the
extent allowed by law, extend the time for the performance of any of the
obligations or other acts by the other, waive any inaccuracies in the
representations and warranties contained in the merger agreement or in any
document delivered pursuant to the merger agreement, or waive compliance with
any of the agreements or conditions contained in the merger agreement, provided
that any such extension or waiver is set forth in writing.
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COMPARATIVE PER SHARE PRICES AND DIVIDENDS
UTI common stock is listed on the AMEX under the symbol "UTI". Norton
Drilling common stock is quoted on the OTC Bulletin Board under the symbol
"NORT". The following table sets forth the high and low sales prices per share
of UTI common stock as reported on AMEX and Norton Drilling common stock as
reported on the Nasdaq Stock Market's National Market or OTC Bulletin Board, as
applicable. The prices for UTI common stock have been restated to reflect a
three-for-one stock split effected on September 5, 1997. The prices for Norton
Drilling common stock have been restated to reflect a five-for-one reverse stock
split effected on February 2, 1999. Although Norton Drilling's fiscal year end
is November 30, the information is on a calendar year basis.
<TABLE>
<CAPTION>
UTI NORTON DRILLING
------------- ----------------
HIGH LOW HIGH LOW
----- ----- ------- ------
<S> <C> <C> <C> <C>
YEAR ENDING DECEMBER 31, 1999:
Second Quarter (through June , 1999)...................... $ $ $ $
First Quarter............................................... 10.63 5.25 2.63 1.25
YEAR ENDED DECEMBER 31, 1998:
Fourth Quarter.............................................. 12.00 5.75 4.05 1.85
Third Quarter............................................... 13.38 6.50 5.15 2.35
Second Quarter.............................................. 20.50 12.50 8.05 4.40
First Quarter............................................... 26.44 12.00 10.95 4.85
YEAR ENDED DECEMBER 31, 1997:
Fourth Quarter.............................................. 48.63 18.50 24.70 9.40
Third Quarter............................................... 42.50 15.21 10.65 3.45
Second Quarter.............................................. 15.33 8.46 4.05 2.20
First Quarter............................................... 11.96 6.83 3.90 2.05
</TABLE>
See "Selected Financial Data of UTI and Norton Drilling -- Comparative
Market Value Information" for recent price information. You are urged to obtain
current market quotations.
Neither UTI nor Norton Drilling has paid a cash dividend on its common
stock during the past two years and neither company anticipates paying such a
dividend in the foreseeable future.
COMPARISON OF RIGHTS OF STOCKHOLDERS OF UTI AND NORTON DRILLING
The rights of both the UTI stockholders and the Norton Drilling
stockholders are governed by Delaware law and their respective certificates of
incorporation and bylaws. The following is a summary of the material differences
between the current rights of the Norton Drilling stockholders and those of the
UTI stockholders.
The following summary of stockholder rights is not complete. You must refer
to Delaware law, UTI's Certificate of Incorporation, UTI's Bylaws, Norton
Drilling's Certificate of Incorporation and Norton Drilling's Bylaws for a full
description of the rights of the Norton Drilling stockholders and the UTI
stockholders. We have filed copies of the certificates of incorporation and
bylaws with the SEC and will send you copies of such documents upon your
request. See "Where To Find More Information."
AUTHORIZED CAPITAL
UTI has authorized 50,000,000 shares of common stock and 5,000,000 shares
of preferred stock. As of June , 1999, there were shares of common
stock and no shares of preferred stock outstanding.
Norton Drilling has authorized 100,000,000 shares of Norton Drilling common
stock and as of June , 1999, there were shares of Norton Drilling
common stock outstanding.
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REMOVAL OF DIRECTORS
Norton Drilling's bylaws provide that the stockholders holding a majority
of the outstanding shares entitled to vote may remove directors, with or without
cause, at any time at any special stockholders meeting called for such purpose.
UTI's certificate of incorporation and bylaws provide that directors cannot
be removed from office, except for cause.
DIRECTORS ELECTIONS, QUALIFICATIONS AND NUMBER
Norton Drilling's bylaws provide that the number of directors shall not be
less than one or more than ten, as the entire Board of Directors or the
stockholders, at any stockholders meeting, may from time to time fix by
resolution, provided that no decrease in the number of directors shall shorten
the term of any then incumbent director.
UTI's certificate of incorporation and bylaws provide that the Board of
Directors shall be divided into three classes, as nearly equal in number as
possible, and each director shall hold office until the third succeeding annual
meeting following his election, or his earlier death, resignation or removal.
UTI's bylaws provide that the Board of Directors shall determine the number of
directors, subject to the right of UTI's stockholders to change such number at
any annual stockholders meeting, or at a special stockholders meeting called for
that purpose.
UTI's bylaws provide that nominations of persons for election to the UTI
Board of Directors may be made at a UTI stockholders meeting only (a) by or at
the direction of the UTI Board or (b) by a UTI stockholder who (1) is a UTI
stockholder of record on the date of the giving of the notice described below
and on the record date for the determination of UTI stockholders entitled to
vote at such annual meeting and (2) gives timely notice of such nomination in
writing to the UTI Secretary. To be timely, a UTI stockholder's notice must be
delivered to or mailed and received at UTI's principal executive offices not
less than 90 days nor more than 120 days prior to the anniversary date of the
immediately preceding annual stockholders meeting; provided, however, that in
the event the annual meeting is called for a date that is not within 30 days
before or after such anniversary date, stockholder notice must be so delivered
or received not later than the close of business on the tenth day following the
day on which such notice of the meeting date was mailed or public disclosure of
the annual meeting date was made, whichever occurs first. A UTI stockholder's
notice to the UTI Secretary shall set forth (a) as to each person whom the UTI
stockholder proposes to nominate for election or re-election as director, all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A promulgated under the Securities Exchange
Act of 1934, as amended, or any successor regulation thereto, (b) the name and
record address of the UTI stockholder proposing such business, (c) the class and
number of shares of UTI that are beneficially owned by the stockholder, (d) a
description of all arrangements or understandings between such UTI stockholder
and each proposed nominee and any other person or persons (including their
names) pursuant to which such stockholder is to make the nomination or
nominations and (e) a representation that such UTI stockholder intends to appear
in person or by proxy at the annual meeting to nominate the persons named in the
notice. Such notice must be accompanied by a written consent of each proposed
nominee to being named as a nominee and to serve as a director if elected.
STOCKHOLDER RIGHTS PLANS
Norton Drilling does not have a stockholder rights plan.
On February 25, 1999, the UTI Board of Directors declared a dividend of one
preferred share purchase right (a "Right") for each outstanding share of UTI
common stock, and authorized the issuance of one Right for each share of UTI
common stock that becomes outstanding prior to the Distribution Date (as
hereinafter defined) or the final expiration date of the Rights. Each Right
entitles the registered holder to purchase one share of Series I Preferred
Stock, par value $.01 per share (the "Preferred Shares"), at a
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price of $42.50 per one one-thousandth interest in a Preferred Share, subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement between UTI and ChaseMellon Shareholder Services L.L.C., as Rights
Agent.
Until the earlier to occur of (a) ten business days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 15% or more of the
outstanding shares of UTI common stock and (b) ten business days following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer that would result in a person or group beneficially owning 15% or
more of such outstanding shares of UTI common stock (the earlier of such dates
being called the "Distribution Date"), the UTI common stock certificates
outstanding as of the record date will evidence the Rights. The Rights Agreement
provides that, until the Distribution Date, the Rights will be transferred only
with the shares of UTI common stock.
Until the Distribution Date (or earlier redemption, exchange or expiration
of the Rights), new UTI common stock certificates issued after the record date,
upon transfer or new issuance of UTI common stock, will contain a notation
incorporating the Rights Agreement by reference.
Until the Distribution Date (or earlier redemption, exchange or expiration
of the Rights), the surrender for transfer of any certificates for UTI common
stock outstanding as of the record date also will constitute the transfer of the
Rights associated with the UTI common stock represented by such certificate. As
soon as practicable following the Distribution Date, UTI will cause separate
certificates evidencing the Rights to be mailed to holders of record of the UTI
common stock as of the close of business on the Distribution Date and such
separate Rights certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date and will expire
on February 26, 2009 unless the expiration date is extended or unless UTI
earlier redeems or exchanges the Rights, in each case as described below.
The purchase price payable, and the number of interests in Preferred Shares
or other securities or property issuable, upon exercise of the Rights will be
adjusted from time to time to prevent dilution (a) in the event UTI grants a
stock dividend on, or subdivides, combines or reclassifies, the Preferred
Shares, (b) if UTI grants to holders of the Preferred Shares certain rights,
options or warrants to subscribe for or purchase Preferred Shares at a price, or
securities convertible into Preferred Shares with a conversion price, less than
the then current market price of the Preferred Shares or (c) if UTI distributes
to holders of the Preferred Shares evidences of indebtedness or assets
(excluding regular periodic cash dividends paid out of earnings or retained
earnings or dividends payable in Preferred Shares) or subscription rights or
warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-thousandth
interests in a Preferred Share issuable upon exercise of each Right also will be
adjusted in the event UTI effects a stock split of the Preferred Shares or a
stock dividend on the Preferred Shares payable in Preferred Shares or UTI
subdivides, consolidates or combines the Preferred Shares occurring, in any such
case, prior to the Distribution Date.
UTI may not redeem interests in Preferred Shares purchasable upon exercise
of the Rights. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1 per share but will be entitled to an aggregate
dividend of 1,000 times the dividend declared per share of UTI common stock. In
the event UTI liquidates, the holders of the interests in Preferred Shares will
be entitled to a minimum preferential liquidation payment of $100 per share but
will be entitled to an aggregate payment of 1,000 times the payment made per
share of UTI common stock. Each Preferred Share will have 1,000 votes, voting
together with the shares of UTI common stock. In the event of UTI merges,
consolidates or effects another transaction in which shares of UTI common stock
are exchanged, each Preferred Share will be entitled to receive 1,000 times the
amount received per share of UTI common stock. These rights are protected by
customary antidilution provisions.
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Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one one-thousandth interest in a Preferred Share
purchasable upon exercise of each Right should approximate the value of one
share of UTI common stock.
In the event UTI is, in effect, acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power is sold, proper provision will be made so that each holder of a Right
thereafter generally will have the right to receive, upon the exercise of the
Right at its then current exercise price, that number of shares of acquiring
company common stock that at the time of such transaction will have a market
value of two times the exercise price of the Right. In the event any person
becomes an Acquiring Person, proper provision will be made so that each holder
of a Right, other than Rights beneficially owned by the Acquiring Person (which
will thereafter be null and void for all purposes of the Rights Agreement and
the holder thereof shall thereafter have no rights with respect to such Rights,
whether under the Rights Agreement or otherwise), thereafter will have the right
to receive upon exercise that number of shares of UTI common stock having a
market value of two times the exercise price of the Right. Under some
circumstances, in lieu of shares of UTI common stock, other equity and debt
securities, property, cash or combinations thereof, including combinations with
shares of UTI common stock, may be issued upon payment of the exercise price if
of equal value to the number of shares of UTI common stock for which the Right
is exercisable.
Under certain circumstances, after a Person has become an Acquiring Person,
the UTI Board of Directors may exchange the Rights (other than Rights that were
or are beneficially owned by an Acquiring Person), in whole or in part, at an
exchange ratio of one share of UTI common stock per Right (subject to
adjustment).
ACTION BY UNANIMOUS CONSENT
Norton Drilling's bylaws provide that any action permitted to be taken at
any stockholders meeting may be taken without a meeting, without prior notice
and without a vote, if the holders of shares having not less than the minimum
number of votes that would have been necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted, sign a written consent setting forth the action taken.
UTI's bylaws provide that any action permitted or required to be taken at
any stockholders meeting may be taken without a meeting, without prior notice
and without a vote, if the holders of all of the outstanding common stock sign a
written consent setting forth the action taken.
SPECIAL MEETING OF STOCKHOLDERS
Norton Drilling's bylaws provide that the Board of Directors or the
President may call special stockholders meetings, and the President or Secretary
shall call special stockholders meetings at the request of stockholders owning a
majority of the shares of Norton Drilling common stock outstanding and entitled
to vote at a special stockholders meeting.
UTI's bylaws provide that the Board of Directors, the Chairman of the Board
or the President may call special stockholders meetings at any time.
NOTICE OF SPECIAL MEETINGS OF STOCKHOLDERS
Norton Drilling's bylaws provide that notice of the time and place of every
stockholders meeting shall be given not less than ten nor more than 60 days
before the meeting date, except that where the matter to be acted upon is a
merger or consolidation of Norton Drilling, or a sale, lease or exchange of all
or substantially all of Norton Drilling's assets, notice shall be given not less
than 20 nor more than 60 days prior to such meeting.
UTI's bylaws provide that notice of the time and place of every
stockholders meeting shall be given not less than ten nor more than 60 days
before the meeting date.
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NOTICE OF SPECIAL MEETINGS OF BOARD OF DIRECTORS
Norton Drilling's bylaws provide that the President, or the number of
directors that would constitute a quorum of the Norton Drilling Board of
Directors, may call special meetings of the Board. The Norton Drilling Secretary
shall give notice of such meetings to each director by mail at least two days
before the meeting date, or by telephone, telegraph or personal delivery no
later than one day before the meeting date.
UTI's bylaws provide that the Chairman of the Board, on his own behalf or
at the direction of any two directors, may call Board meetings. The UTI
Secretary shall mail notice of each such meeting to each director, addressed to
him at his residence or usual place of business at least seven days before the
meeting date, or sent to him at his residence or at such place of business by
telegraph or cable, or delivered personally or by telephone, not later than five
days before the meeting date.
CHARTER AMENDMENTS
UTI's certificate of incorporation provides that the provisions relating to
its classified board of directors and removal of directors cannot be amended
without the approval of 66 2/3% of the outstanding shares entitled to vote
thereon.
Norton Drilling's certificate of incorporation does not contain such a
provision.
STOCKHOLDER PROPOSALS
UTI's bylaws provide that in order for business to be properly brought
before a UTI annual stockholders meeting , such business must be (a) specified
in the notice of the meeting (or any supplement thereto) given by or at the UTI
Board's direction, (b) otherwise properly brought before the annual meeting by
or at the UTI Board's direction or (c) otherwise properly brought before the
annual meeting by a UTI stockholder who (1) is a UTI stockholder of record on
the date of the giving of the notice described below and on the record date for
the determination of UTI stockholders entitled to vote at such annual meeting
and (2) gives timely notice of such business in writing to the UTI Secretary. To
be timely, a UTI stockholder's notice must be delivered to or mailed and
received at UTI's principal executive offices not less than 90 days nor more
than 120 days prior to the anniversary date of the immediately preceding annual
stockholders meeting; provided, however, that in the event the annual meeting is
called for a date that is not within 30 days before or after such anniversary
date, stockholder notice must be so delivered or received not later than the
close of business on the tenth day following the day on which such notice of the
meeting date was mailed or public disclosure of the annual meeting date was
made, whichever occurs first. A UTI stockholder's notice to the UTI Secretary
shall set forth (a) a brief description of the matter desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (b) the name and record address of the UTI stockholder proposing
such business, (c) the class and number of shares of UTI that are beneficially
owned by the UTI stockholder, (d) any material interest of the UTI stockholder
in such business and (e) a representation that such UTI stockholder intends to
appear in person or by proxy at the annual meeting to bring such business before
the meeting.
Norton Drilling's bylaws do not contain a similar provision.
OTHER MATTERS
Norton Drilling does not expect that any matters other than those described
in this proxy statement/ prospectus will be brought before the special meeting.
If any other matters are presented, however, the persons named in the
appropriate proxy intend to vote the proxy in accordance with their discretion.
33
<PAGE> 41
LEGAL MATTERS
Fulbright & Jaworski L.L.P., Houston, Texas, will pass upon for UTI the
validity of the shares of UTI common stock to be issued to the Norton Drilling
stockholders in connection with the merger. Solovay Edlin & Eiseman, P.C., New
York, New York, will pass upon for Norton Drilling legal matters in connection
with the merger.
EXPERTS
Ernst & Young LLP, independent auditors, have audited UTI's consolidated
financial statements and schedule included in UTI's Annual Report on Form 10-K
for the year ended December 31, 1998, as set forth in their report, which is
incorporated by reference in this proxy statement/prospectus and elsewhere in
the registration statement. UTI's financial statements and schedule are
incorporated by reference in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.
The consolidated financial statements of Norton Drilling and related
schedules incorporated in this proxy statement/prospectus by reference from the
Annual Report on Form 10-K of Norton Drilling Services, Inc. for the fiscal year
ended November 30, 1998, have been audited by Robinson Burdette Martin & Cowan,
L.L.P., independent accountants, as indicated in their report with respect
thereto, which is incorporated herein by reference, and has been so incorporated
in reliance upon the report of said firm and upon the authority of said firm as
experts in accounting and auditing.
FUTURE STOCKHOLDER PROPOSALS
Due to the contemplated merger, Norton Drilling does not currently expect
to hold another annual stockholders meeting because Norton Drilling will be a
wholly-owned subsidiary of UTI following the merger. In the event the merger
does not occur, Norton Drilling must have received at its principal executive
offices, not later than September 5, 1999, any stockholder proposals to be
included in the proxy statement to be mailed to all Norton Drilling stockholders
entitled to vote at the next Norton Drilling annual stockholders meeting.
UTI's 1999 annual stockholders meeting will be held on June 30, 1999 and
the deadline for UTI stockholders to include proposals in the proxy statement
for such meeting or properly bring proposals for consideration at such meeting
has passed. UTI must receive any stockholder proposal to be presented at UTI's
2000 annual stockholders meeting no later than February 8, 2000 to be eligible
for inclusion in UTI's proxy statement and proxy used in connection with the
2000 annual meeting. In addition, UTI's bylaws provide that for business to be
properly brought before such meeting, such business must be (a) specified in the
notice of the 2000 annual meeting (or any supplement thereto) given by or at the
UTI Board's direction, (b) otherwise properly brought before the 2000 annual
meeting by or at the UTI Board's direction or (c) otherwise properly brought
before the 2000 annual meeting by a stockholder who (1) is a UTI stockholder of
record on the date of the giving of the notice described below and on the record
date for the determination of UTI stockholders entitled to vote at the 2000
annual meeting and (2) gives timely notice of such business in writing to the
UTI Secretary. To be timely, a UTI stockholder's notice must be delivered to or
mailed and received at UTI's principal executive offices no earlier than
February 8, 2000 and no later than March 9, 2000; provided, however, that in the
event the 2000 annual meeting is called for a date that is not within 30 days of
June 7, 2000, stockholder notice must be so delivered or received not later than
the close of business on the tenth day following the day on which such notice of
the 2000 annual meeting date was mailed or public disclosure of the 2000 annual
meeting date was made, whichever occurs first. A UTI stockholder's notice to the
UTI Secretary shall set forth (a) a brief description of the matter desired to
be brought before the 2000 annual meeting and the reasons for conducting such
business at the 2000 annual meeting, (b) the name and record address of the UTI
stockholder proposing such business, (c) the class and number of shares of UTI
that are beneficially owned by the UTI stockholder, (d) any material interest of
the UTI stockholder in such business and (e) a representation that such UTI
stockholder intends to appear in person or by proxy at the 2000 annual meeting
to bring such business before such meeting.
34
<PAGE> 42
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
AMONG
UTI ENERGY CORP.,
NDS ACQUISITION CORP.,
NORTON DRILLING SERVICES, INC. ("NDS")
AND THE PRIMARY STOCKHOLDERS OF NDS
DATED AS OF APRIL 26, 1999
<PAGE> 43
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C> <C>
ARTICLE I
THE MERGER
1.1 The Merger; Effective Time of the Merger......................... A-1
1.2 Closing.......................................................... A-1
1.3 Effects of the Merger............................................ A-1
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock.......................................... A-2
(a) Stock of Sub................................................ A-2
(b) Cancellation of Treasury Stock and Related Party Stock...... A-2
(c) Exchange Ratio for NDS Common Stock......................... A-2
(d) Conversion of Stock Options................................. A-3
(e) Adjustment of Conversion Number............................. A-3
2.2 Exchange of Certificates......................................... A-3
(a) Exchange Procedures......................................... A-3
(b) Distributions with Respect to Shares Prior to Exchange of A-3
Certificates................................................
(c) No Further Ownership Rights in NDS Common Stock............. A-4
(d) No Fractional Shares........................................ A-4
(e) No Liability................................................ A-4
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of NDS............................ A-4
(a) Organization, Standing and Power............................ A-5
(b) Capital Structure........................................... A-5
(c) Authority; No Violations; Consents and Approvals............ A-5
(d) SEC Documents............................................... A-6
(e) Information Supplied........................................ A-7
(f) Absence of Certain Changes or Events........................ A-7
(g) No Undisclosed Material Liabilities......................... A-7
(h) No Default.................................................. A-8
(i) Compliance with Applicable Laws............................. A-8
(j) Litigation.................................................. A-8
(k) Taxes....................................................... A-8
(l) Employee Matters; ERISA..................................... A-10
(m) Labor Matters............................................... A-11
(n) Intangible Property......................................... A-12
(o) Environmental Matters....................................... A-12
(p) Opinion of Financial Advisor................................ A-14
(q) State Takeover Statutes; Vote Required...................... A-14
(r) Intentionally Omitted....................................... A-14
(s) Intentionally Omitted....................................... A-14
(t) Insurance................................................... A-14
(u) Brokers..................................................... A-14
(v) Material Contracts and Agreements........................... A-14
(w) Title to Properties......................................... A-14
(x) Representations Relating to Sunny Plants, Inc. and Lobell
Corporation................................................. A-15
</TABLE>
A-i
<PAGE> 44
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C> <C>
3.2 Representations and Warranties of UEC and Sub.................... A-15
(a) Organization, Standing and Power............................ A-15
(b) Capital Structure........................................... A-15
(c) Authority; No Violations, Consents and Approvals............ A-16
(d) SEC Documents............................................... A-16
(e) Information Supplied........................................ A-17
(f) Absence of Certain Changes or Events........................ A-17
(g) No Undisclosed Material Liabilities......................... A-17
(h) Litigation.................................................. A-18
(i) No Vote Required............................................ A-18
(j) Material Contracts and Agreements........................... A-18
(k) Broker Fees................................................. A-18
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS OF NDS
4.1 Conduct of Business by NDS Pending the Merger.................... A-18
(a) Ordinary Course............................................. A-18
(b) Dividends; Changes in Stock................................. A-18
(c) Issuance of Securities...................................... A-18
(d) Governing Documents......................................... A-19
(e) No Acquisitions............................................. A-19
(f) No Dispositions............................................. A-19
(g) No Dissolution, Etc......................................... A-19
(h) Certain Employee Matters.................................... A-19
(i) Indebtedness; Leases; Capital Expenditures.................. A-20
(j) Taxes....................................................... A-20
(k) Accounting.................................................. A-20
4.2 No Solicitation.................................................. A-20
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Access to Information............................................ A-21
5.2 NDS Stockholders' Meeting........................................ A-21
5.3 Legal Conditions to Merger....................................... A-22
5.4 Intentionally Omitted............................................ A-22
5.5 Stock Options.................................................... A-22
5.6 Indemnification; Directors' and Officers' Insurance.............. A-22
5.7 Agreement to Defend.............................................. A-23
5.8 Intentionally Omitted............................................ A-23
5.9 Public Announcements............................................. A-23
5.10 Other Actions.................................................... A-23
5.11 Advice of Changes; SEC Filings................................... A-23
5.12 Reorganization................................................... A-23
5.13 Intentionally Omitted............................................ A-23
5.14 Letter of NDS's Accountants...................................... A-24
5.15 Stock Options.................................................... A-24
5.16 Other Benefits................................................... A-24
5.17 Employment Agreements............................................ A-24
</TABLE>
A-ii
<PAGE> 45
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C> <C>
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger....... A-24
(a) NDS Stockholder Approval.................................... A-24
(b) AMEX Listing................................................ A-24
(c) Other Approvals............................................. A-24
(d) S-4......................................................... A-25
(e) No Injunctions or Restraints................................ A-25
6.2 Conditions of Obligations of UEC and Sub......................... A-25
(a) Representations and Warranties.............................. A-25
(b) Performance of Obligations of NDS........................... A-25
(c) Intentionally Omitted....................................... A-25
(d) Certifications and Opinion.................................. A-25
(e) Good Standing Certificates.................................. A-26
(f) Tax Opinion................................................. A-26
6.3 Conditions of Obligations of NDS................................. A-26
(a) Representations and Warranties.............................. A-26
(b) Performance of Obligations of UEC and Sub................... A-26
(c) Certifications and Opinion.................................. A-26
(d) Tax Opinion................................................. A-27
(e) Fairness Opinion............................................ A-27
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination...................................................... A-28
7.2 Effect of Termination............................................ A-29
7.3 Amendment........................................................ A-30
7.4 Extension; Waiver................................................ A-30
ARTICLE VIII
GENERAL PROVISIONS
8.1 Payment of Expenses.............................................. A-30
8.2 Nonsurvival of Representations, Warranties and Agreements........ A-30
8.3 Notices.......................................................... A-31
8.4 Limited Joinder by Primary Stockholders.......................... A-31
(a) General Indemnity by the Primary Stockholders............... A-31
(b) Indemnification Basket; Limitation; Effect of Materiality
Qualifiers; Pro Rata Obligation............................. A-31
(c) Waiver of Contribution...................................... A-32
(d) Covenant Not to Compete With the Business................... A-32
8.5 Interpretation: Certain Definitions.............................. A-33
8.6 Counterparts..................................................... A-33
8.7 Entire Agreement; No Third-Party Beneficiaries................... A-33
8.8 Governing Law.................................................... A-33
8.9 No Remedy in Certain Circumstances............................... A-33
8.10 Assignment....................................................... A-33
8.11 Enforcement of the Agreement..................................... A-34
ANNEXES
Annex A -- List of Stockholders Executing Irrevocable Proxy and Form of
Irrevocable Proxy
Annex B -- List of Employees Receiving Options and Material Terms of
Options
Annex C -- Intentionally omitted from this proxy statement/prospectus
</TABLE>
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<PAGE> 46
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM DEFINED IN SECTION
- ------------ ------------------
<S> <C>
Acquisition Proposal........................................ 4.2(a)
AMEX........................................................ 3.2(c)(iii)
Basket Amount............................................... 8.4(b)(i)
CERCLA...................................................... 3.1(o)(A)
Certificate of Merger....................................... 1.1
Certificates................................................ 2.2(a)
Closing..................................................... 1.1
Closing Date................................................ 1.2
Code........................................................ Recitals
Confidentiality Agreements.................................. 5.1
Constituent Corporations.................................... 1.3(a)
Conversion Number........................................... 2.1(c)
Current Balance Sheet....................................... 3.1(k)(i)
Damages..................................................... 8.4(a)
DGCL........................................................ 1.1
Effective Time.............................................. 1.1
Environmental Law........................................... 3.1(o)(A)
ERISA....................................................... 3.1(l)(i)
Exchange Act................................................ 3.1(c)(iii)
FASB........................................................ 4.1(k)
Fractional Dividends........................................ 2.2(d)
GAAP........................................................ 3.1(d)
Governmental Entity......................................... 3.1(c)(iii)
Hazardous Material.......................................... 3.1(o)(B)
HSR Act..................................................... 3.2(c)(iii)
Indemnified Liabilities..................................... 5.6(a)
Indemnified Parties......................................... 5.6(a)
Injunction.................................................. 6.1(e)
IRS......................................................... 3.1(k)(ii)
Material Adverse Effect..................................... 3.1(a)(ii)
Merger...................................................... Recitals
Merger Agreement............................................ Preamble
NDS......................................................... Preamble
NDS Beneficiary............................................. 3.1(l)(i)
NDS Benefit Plans........................................... 3.1(l)(i)
NDS Common Stock............................................ 2.1
NDS Disclosure Letter....................................... 3.1
NDS ERISA Affiliate......................................... 3.1(l)(ii)
NDS Intangible Property..................................... 3.1(n)
NDS Litigation.............................................. 3.1(j)
NDS Order................................................... 3.1(j)
NDS Permits................................................. 3.1(i)
NDS Representatives......................................... 4.2(a)
NDS SEC Documents........................................... 3.1(d)
NDS Stock Option............................................ 5.5
NDS Stock Plans............................................. 5.5
Notice of Superior Proposal................................. 4.2(b)
Options..................................................... 3.1(b)(ii)
OSHA........................................................ 3.1(o)(A)
</TABLE>
A-iv
<PAGE> 47
<TABLE>
<CAPTION>
DEFINED TERM DEFINED IN SECTION
- ------------ ------------------
<S> <C>
PBGC........................................................ 3.1(l)(iv)
Primary Stockholder or Primary Stockholders................. Preamble
Proxy Statement............................................. 3.1(c)(iii)
Release..................................................... 3.1(o)(C)
Released Parties............................................ 8.4(d)
Remedial Action............................................. 3.1(o)(D)
Returns..................................................... 3.1(k)(i)
S-4......................................................... 3.1(e)
SEC......................................................... 3.1(c)(iii)(A)
Securities Act.............................................. 3.1(d)
Superior Proposal........................................... 4.2(c)
Survival Period............................................. 8.4(b)(ii)
Surviving Corporation....................................... 1.3(a)
Sub......................................................... Preamble
Subsidiary.................................................. 2.1(b)
Taxes....................................................... 3.1(k)
Termination Fee............................................. 7.2(b)
UEC Common Stock............................................ 2.1(c)
UEC......................................................... Preamble
UEC Disclosure Letter....................................... 3.2
UEC Indemnified Parties..................................... 8.4(a)
UEC Litigation.............................................. 3.2(d)
UEC SEC Documents........................................... 3.2(d)
UEC Stock Purchase Rights................................... 2.1(c)
Voting Debt................................................. 4.1(c)
</TABLE>
A-v
<PAGE> 48
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 26, 1999 (this "Merger
Agreement"), among UTI Energy Corp., a Delaware corporation ("UEC"), NDS
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of UEC
("Sub"), Norton Drilling Services, Inc., a Delaware corporation ("NDS"), and the
stockholders of NDS signatory hereto (the "Primary Stockholders" and each a
"Primary Stockholder").
WHEREAS, the Boards of Directors of UEC, Sub and NDS have each approved the
merger of Sub with and into NDS (the "Merger") upon the terms and subject to the
conditions of this Merger Agreement, thus enabling UEC to acquire all of the
common stock of NDS solely in exchange for common stock of UEC;
WHEREAS, each of the stockholders of NDS listed on Annex A hereto has
executed contemporaneously with the execution of this Merger Agreement an
irrevocable proxy substantially in the form of Annex A hereto.
WHEREAS, at UEC's request, NDS has agreed to grant (2 business days
following announcement of the Merger to the public) the options described on
Annex B hereto to the employees of NDS listed on Annex B;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, UEC, Sub and NDS 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
THE MERGER
1.1 The Merger; Effective Time of the Merger. Upon the terms and
conditions of this Merger Agreement and in accordance with the Delaware General
Corporation Law (the "DGCL"), Sub shall be merged with and into NDS at the
Effective Time (as hereinafter defined). The Merger shall become effective
immediately when a certificate of merger (the "Certificate of Merger"), prepared
and executed in accordance with the relevant provisions of the DGCL is duly
filed with the Secretary of State of the State of Delaware or, if agreed to by
the parties, at such time thereafter as is provided in the Certificate of Merger
(the "Effective Time"). The filing of the Certificate of Merger shall be made as
soon as practicable after the closing of the Merger (the "Closing").
1.2 Closing. The Closing shall take place at 10:00 a.m. on a date to be
specified by the parties, which shall be no later than the second business day
after satisfaction (or waiver in accordance with this Merger Agreement) of the
latest to occur of the conditions set forth in Article VI (the "Closing Date"),
at the offices of Fulbright & Jaworski L.L.P., 1301 McKinney, Suite 5100,
Houston, Texas, unless another date or place is agreed to in writing by the
parties.
1.3 Effects of the Merger.
(a) At the Effective Time: (i) Sub shall be merged with and into NDS,
the separate existence of Sub shall cease and NDS shall continue as the
surviving corporation (Sub and NDS are sometimes referred to herein as the
"Constituent Corporations" and NDS is sometimes referred to herein as the
"Surviving Corporation") and the merger shall have such effects as are set
forth in Section 259 of the DGCL; (ii) the Certificate of Incorporation of
NDS shall be amended to change NDS's authorized shares of capital stock to
1,000 shares, par value $.01 per share, of common stock,
A-1
<PAGE> 49
and as so amended shall be the Certificate of Incorporation of the
Surviving Corporation; and (iii) the Bylaws of Sub as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving
Corporation.
(b) The directors and officers of NDS 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
Certificate of Incorporation and Bylaws.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 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, par value $0.01 per share, of NDS ("NDS Common Stock") or capital stock
of Sub:
(a) Stock of Sub. Each share of common stock, par value $.01 per
share, of Sub issued and outstanding immediately prior to the Effective
Time will be converted into one share of common stock, par value $.01 per
share, of the Surviving Corporation, and the stock of the Surviving
Corporation issued on that conversion will constitute all of the issued and
outstanding shares of capital stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Related Party Stock. Each share
of NDS Common Stock and all other shares of capital stock of NDS that are
owned by NDS as treasury stock and any shares of NDS Common Stock and all
other shares of capital stock of NDS owned in any case by UEC, any entity
controlling UEC or any wholly-owned Subsidiary (as hereinafter defined) of
such entities or by any wholly-owned Subsidiary of NDS shall be canceled
and retired and shall cease to exist and no UEC Common Stock or cash in
lieu of fractional shares shall be delivered or deliverable in exchange
therefor. As used in this Merger Agreement, the word "Subsidiary" means,
with respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which: (i) such party or any other
Subsidiary of such party is a general partner (excluding partnerships, the
general partnership interests of which are held by such party or any
Subsidiary of such party that do not have a majority of the voting interest
in such partnership); or (ii) at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions
with respect to such corporation or other organization is, directly or
indirectly, owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and any one or more of its Subsidiaries.
(c) Exchange Ratio for NDS Common Stock. Subject to the provisions of
Section 2.2(d) hereof, each share of NDS Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares to
be canceled in accordance with Section 2.1(b)) shall, at the Effective Time
and without the requirement of any action by the holder thereof, be
exchanged for and converted into .2631579 (the "Conversion Number") shares
of common stock, par value $.001 per share, of UEC ("UEC Common Stock").
All references in this Merger Agreement to the UEC Common Stock to be
received pursuant to the Merger shall be deemed to include the stock
purchase rights established pursuant to that certain Rights Agreement dated
February 26, 1999, by and among USC and Chase Mellon Shareholder Services,
L.L.C. (The "UEC Stock Purchase Rights"). All such shares of NDS Common
Stock, when so exchanged and converted, shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such shares shall cease to
have any rights with respect thereto, except the right to receive a
certificate representing the shares of UEC Common Stock and cash in lieu of
fractional shares of UEC Common Stock as contemplated by Section 2.2(d),
upon the surrender of such
A-2
<PAGE> 50
certificate representing shares of NDS Common Stock in accordance with
Section 2.2, without interest.
(d) Conversion of Stock Options. Each outstanding NDS Stock Option (as
defined in Section 5.5) shall be converted as provided in Section 5.5.
(e) Adjustment of Conversion Number. If, subsequent to the date of
this Agreement but prior to the Effective Time, the number of shares of UEC
Common Stock issued and outstanding is changed as a result of a stock
split, reverse stock split, recapitalization, reclassification, exchange of
shares, or stock or cash dividends or other similar transaction, the
Conversion Number and other items dependent thereon shall be appropriately
and equitably adjusted herein.
2.2 Exchange of Certificates.
(a) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, UEC shall mail to each holder of record of a certificate or
certificates which, immediately prior to the Effective Time, represented
outstanding shares of NDS Common Stock (the "Certificates") (other than
NDS, UEC, any entity controlling UEC or any wholly owned Subsidiaries of
any such entities): (i) a letter of transmittal (which shall specify that
delivery shall be effected and risk of loss and title to the Certificates
shall pass only upon delivery of the Certificates to UEC and shall be in
such form and have such other provisions as UEC may reasonably specify);
and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of UEC Common
Stock and any cash in lieu of a fractional share of UEC Common Stock. Upon
surrender of a Certificate for cancellation to UEC or to such other agent
or agents as may be appointed by UEC and reasonably acceptable to NDS,
together with such letter of transmittal, duly executed, and any other
required documents, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that number of
whole shares of UEC Common Stock which such holder has the right to receive
pursuant to the provisions of this Article II and any cash in lieu of
fractional shares of UEC Common Stock as contemplated by Section 2.2(d),
and the Certificate so surrendered shall forthwith be canceled. In the
event of a transfer of ownership of NDS Common Stock that is not registered
in the transfer records of NDS, a certificate representing the appropriate
number of shares of UEC Common Stock may be issued to a transferee if the
Certificate representing such NDS Common Stock is presented to UEC
accompanied by all documents required to evidence and effect such transfer
and by evidence that any applicable stock transfer taxes have been paid.
Until surrendered as contemplated by this Section 2.2, each Certificate
shall be deemed at any time after the Effective Time to represent only the
right to receive upon such surrender the certificate representing shares of
UEC Common Stock and cash in lieu of any fractional shares of UEC Common
Stock as contemplated by this Section 2.2 and all dividends or other
distributions thereon with a record date after the Effective Time as
contemplated by Section 2.2(b).
(b) Distributions with Respect to Shares Prior to Exchange of
Certificates. No dividends or other distributions with respect to UEC
Common Stock declared or made after the Effective Time with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the UEC Common Stock represented thereby as a
result of the exchange and conversion provided in Section 2.1(b), and no
cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.2(d) until the holder of such Certificate shall
surrender such Certificate. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be paid to the
holder thereof, without interest: (i) at the time of such surrender, the
amount of any cash payable in lieu of a fractional share of UEC Common
Stock to which such holder is entitled pursuant to Section 2.2(d) and the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of UEC
Common Stock; and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective
Time but prior to surrender and a payment date subsequent to surrender
payable with respect to such whole shares of UEC Common Stock.
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(c) No Further Ownership Rights in NDS Common Stock. All shares of UEC
Common Stock issued in exchange for and upon the conversion of NDS Common
Stock in accordance with the terms hereof (including any cash paid pursuant
to Section 2.2(b) or 2.2(d)) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of NDS Common Stock,
subject, however, to the Surviving Corporation's obligation to pay any
dividends or make any other distributions with a record date prior to the
Effective Time that may have been declared or made by NDS on such shares of
NDS Common Stock in accordance with the terms of this Merger Agreement or
prior to the date hereof and which remain unpaid at the Effective Time, 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 NDS Common Stock that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation for any reason, they shall be canceled and
exchanged as provided in this Article II.
(d) No Fractional Shares. No certificates or scrip representing
fractional shares of UEC Common Stock shall be issued pursuant to this
Article II, and, except as provided in this Section 2.2(d), no dividend or
other distribution, stock split or interest shall relate to any such
fractional security, and such fractional interests shall not entitle the
owner thereof to vote or to any rights of a security holder of UEC. In lieu
of any fractional security, UEC shall pay to each holder of shares of NDS
Common Stock who would otherwise have been entitled to a fraction of a
share of UEC Common Stock pursuant to this Article II, an amount in cash
(without interest) equal to such holder's proportionate interest in the sum
of (i) the fraction of a share of UEC Common Stock to which such holder
would otherwise have been entitled, multiplied by $10.00, and (ii) the
aggregate dividends or other distributions that are payable with respect to
such shares of UEC Common Stock pursuant to Section 2.2(b) (such dividends
and distributions being herein called the "Fractional Dividends"). For
purposes of determining whether a holder of shares of NDS Common Stock is
to receive payment in lieu of fractional shares, all shares of NDS Common
Stock held of record by such holder shall be aggregated.
(e) No Liability. Neither NDS nor UEC shall be liable to any holder of
shares of NDS Common Stock or UEC Common Stock, as the case may be, for
such shares (or dividends or distributions with respect thereto) or cash in
lieu of fractional shares of UEC Common Stock delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of NDS. Subject to the exceptions set
forth in the disclosure letter to be delivered to UEC and Sub in connection
herewith (the "NDS Disclosure Letter"), NDS represents and warrants to UEC and
Sub as follows:
(a) Organization, Standing and Power.
(i) Each of NDS and its Subsidiaries is a corporation, duly
organized, validly existing and in good standing under the laws of its
state of incorporation, has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as
now being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the business it is conducting, or
the operation, ownership or leasing of its properties, makes such
qualification necessary, other than where the failure to be so organized
or so to qualify (individually or in the aggregate) would not have a
Material Adverse Effect (as defined below) on NDS. NDS has delivered to
UEC complete and correct copies of its certificate of incorporation and
bylaws. Section 3.1(a) of the NDS Disclosure Letter sets forth each
direct, or indirect, Subsidiary of NDC and its jurisdiction of
incorporation.
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(ii) As used in this Merger Agreement a "Material Adverse Effect"
shall mean any effect or change that is or would be materially adverse
to the business, operations, assets, condition (financial or otherwise)
or results of operations of (i) in respect of NDS, NDS and its direct
and indirect Subsidiaries, taken as a whole, in the amount of $25,000
(except that solely with respect to Sections 6.2(a) and 7.1(c), such
amount shall be $250,000) and (ii) in respect of UEC, UEC and all of its
direct and indirect Subsidiaries taken as a whole; provided, however, a
Material Adverse Effect shall not include (A) any effect or change,
including changes in national or international economic conditions,
relating to or affecting the United States land contract drilling
industry as a whole (including a decline in United States or worldwide
oil and gas commodity prices), (B) changes, or possible changes, in
foreign, Federal, state or local statutes and regulations or (C) any
action taken or required to be taken to satisfy any requirement imposed
in connection with the review of the Merger under the HSR Act.
(b) Capital Structure.
(i) Section 3.1(b)(i) of the NDS Disclosure Letter sets forth the
authorized, issued and outstanding capital stock of NDS and each
Subsidiary as well as any other securities (including debt securities)
of NDS or its Subsidiaries. Except as set forth on Section 3.1(b)(i) to
the NDS Disclosure Letter, all outstanding shares of capital stock of
NDS and its Subsidiaries have been duly authorized and validly issued
and are fully paid and non-assessable and were not issued in violation
of any preemptive rights or other preferential rights of subscription or
purchase other than those that have been waived or otherwise cured or
satisfied and all such shares owned by NDS, or a direct or indirect
wholly owned Subsidiary of NDS, are free and clear of all liens,
charges, encumbrances, claims and options of any nature.
(ii) Section 3.1(b)(ii) of the NDS Disclosure Letter sets forth the
material terms (including exercise price, vesting schedule, date of
grant, date of expiration and number of shares of NDS Common Stock or
other securities underlying the securities) underlying all options,
warrants, rights, commitments (including pre-emptive rights) or
agreements (collectively, "Options") to which NDS or any Subsidiary of
NDS is bound to issue, deliver, sell, purchase, redeem or acquire or
cause to be issued, delivered, sold, purchased, redeemed or acquired,
shares of NDS Common Stock, capital stock of a Subsidiary or any other
securities of NDS or its Subsidiaries.
(iii) There are not as of the date hereof, and there will not be at
the Effective Time, any stockholder agreements, voting trusts or other
agreements or understandings (except for proxies being signed as set
forth in Annex A) to which NDS is a party or by which it is bound
relating to the voting of any shares of the capital stock of NDS. There
are no restrictions on NDS to vote the capital stock of any of its
Subsidiaries.
(c) Authority; No Violations; Consents and Approvals.
(i) The Board of Directors of NDS has approved the Merger and this
Merger Agreement, by vote of the directors with no negative vote, and
declared the Merger and this Merger Agreement to be in the best
interests of the stockholders of NDS. The directors of NDS have advised
NDS and UEC that they intend to vote or cause to be voted all of the
shares of NDS Common Stock for which they have voting power in favor of
approval of the Merger and this Merger Agreement. NDS has all requisite
corporate power and authority to enter into this Merger Agreement and,
subject, with respect to consummation of the Merger, to approval of this
Merger Agreement and the Merger by the stockholders of NDS in accordance
with the DGCL, to consummate the transactions contemplated hereby. The
execution and delivery of this Merger Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of NDS, subject, with respect to
consummation of the Merger, to approval of this Merger Agreement and the
Merger by the stockholders of NDS in accordance with the DGCL. This
Merger Agreement has been duly executed and delivered by NDS and,
subject, with respect to consummation of the Merger, to
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approval of this Merger Agreement and the Merger by the stockholders of
NDS in accordance with the DGCL, and assuming this Merger Agreement
constitutes the valid and binding obligation of UEC and Sub, constitutes
a valid and binding obligation of NDS enforceable in accordance with its
terms, subject, as to enforceability, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
effecting creditors' rights and to general principles of equity and
limitations imposed on indemnity obligations by applicable federal and
state securities laws.
(ii) Except as set forth on Section 3.1(c)(ii) to the NDS
Disclosure Letter, the execution and delivery of this Merger Agreement
by NDS does not, and the consummation by NDS of the transactions
contemplated hereby and compliance with the provisions hereof will not,
conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right
of termination, cancellation or acceleration of any obligation or to the
loss of a material benefit under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or
assets of NDS or any of its Subsidiaries under, any provision of (A) the
Certificate of Incorporation or Bylaws of NDS or any provision of the
comparable charter or organizational documents of any of its
Subsidiaries, (B) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to NDS or any of its Subsidiaries or (C)
assuming the consents, approvals, authorizations or permits and filings
or notifications referred to in Section 3.1(c)(ii) to the NDS Disclosure
Letter and in subparagraph (iii) of this Section 3.1(c) are duly and
timely obtained or made and the approval of the Merger and this Merger
Agreement by the stockholders of NDS has been obtained, any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
NDS or any of its Subsidiaries or any of their respective properties or
assets, other than, in the case of clause (B) or (C), any such
conflicts, violations, defaults, rights, liens, security interests,
charges or encumbrances that, individually or in the aggregate, would
not have a Material Adverse Effect on NDS, materially impair the ability
of NDS to perform its obligations hereunder or prevent in any material
respect the consummation of any of the transactions contemplated hereby.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from, any U.S. or
non-U.S. court, administrative agency or commission or other
governmental authority or instrumentality (a "Governmental Entity"), is
required by, or with respect to, NDS or any of its Subsidiaries in
connection with the execution and delivery of this Merger Agreement by
NDS or the consummation by NDS of the transactions contemplated hereby,
as to which the failure to obtain or make would have a Material Adverse
Effect, except for: (A) the filing with the Securities and Exchange
Commission (the "SEC") of (1) a proxy statement in preliminary and
definitive form relating to the meeting of NDS's stockholders to be held
in connection with the Merger (the "Proxy Statement") and (2) such
reports under Section 13(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and such other compliance with the
Exchange Act and the rules and regulations thereunder, as may be
required in connection with this Merger Agreement and the transactions
contemplated hereby; (B) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware; (C) such filings and
approvals as may be required by any applicable state securities, "blue
sky" or takeover laws, or environmental laws or (D) the filing of a
premerger notification report by NDS under the HSR Act (if required by
NDS), and the expiration or termination of the applicable waiting period
with respect thereto.
(d) SEC Documents. NDS has made available to UEC (or such information
was readily accessible through the SEC Edgar Website) a true and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by NDS with the SEC since December 31, 1995 and prior to
the date of this Merger Agreement (the "NDS SEC Documents") which are all
the documents that NDS was required to file with the SEC since such date.
As of their respective dates, the NDS SEC Documents complied in all
material respects with the requirements of the
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Securities Act of 1933, as amended (the "Securities Act"), or the Exchange
Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such NDS SEC Documents, and none of the NDS SEC
Documents contained, when filed, any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading. The consolidated financial statements of
NDS included in the NDS SEC Documents complied as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case
of the unaudited statements, as permitted by Rule 10-01 of Regulation S-X
of the SEC) and fairly present in accordance with applicable requirements
of GAAP (subject, in the case of the unaudited statements, to normal
year-end adjustments and other adjustments discussed therein) the
consolidated financial position of NDS and its consolidated Subsidiaries as
of their respective dates and the consolidated results of operations and
the consolidated cash flows of NDS and its consolidated Subsidiaries for
the periods presented therein.
(e) Information Supplied. None of the information supplied or to be
supplied by NDS for inclusion or incorporation by reference in the
Registration Statement on Form S-4 to be filed with the SEC in connection
with the issuance of shares of UEC Common Stock in the Merger (the "S-4")
will, at the time the S-4 is filed with the SEC or when it becomes
effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
none of the information supplied or to be supplied by NDS and included or
incorporated by reference in the Proxy Statement will, at the date mailed
to stockholders of NDS or at the time of the meeting of such stockholders
to be held in connection with the Merger, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event with respect to NDS or any of its
Subsidiaries, or with respect to other information supplied by NDS for
inclusion in the Proxy Statement or S-4, shall occur that is required to be
described in an amendment of, or a supplement to, the Proxy Statement or
the S-4, such event shall be so described, and such amendment or supplement
shall be promptly filed with the SEC and, as required by law, disseminated
to the stockholders of NDS. The Proxy Statement, insofar as it relates to
NDS or its Subsidiaries or other information supplied by NDS for inclusion
therein, will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder,
except that no representations or warranties are made by NDS with respect
to statements made or incorporated by reference therein based on
information supplied by UEC or any of its Subsidiaries.
(f) Absence of Certain Changes or Events. Except as disclosed in, or
reflected in the financial statements included in, the NDS SEC Documents or
on Section 3.1(f) to the NDS Disclosure Letter, or except as contemplated
by this Merger Agreement, since February 28, 1999, there has not been: (i)
any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of
NDS's capital stock; (ii) any amendment of any material term of any
outstanding equity security of NDS or any Subsidiary; (iii) any repurchase,
redemption or other acquisition by NDS or any Subsidiary of any outstanding
shares of capital stock or other equity securities of, or other ownership
interests in, NDS or any Subsidiary, except as contemplated by NDS Benefit
Plans; (iv) any material change in any method of accounting or accounting
practice by NDS or any Subsidiary; or (v) a Material Adverse Effect with
respect to NDS.
(g) No Undisclosed Material Liabilities. Except as disclosed in the
NDS SEC Documents or on Section 3.1(g) to the NDS Disclosure Letter, there
are no liabilities of NDS or any of its Subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable
or otherwise, that would have a Material Adverse Effect on NDS, other than:
(i) liabilities adequately
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provided for on the Current Balance Sheet; (ii) liabilities incurred in the
ordinary course of business since February 28, 1999; (iii) liabilities
under this Merger Agreement; and (iv) except as disclosed on Section
3.1(l)(i) to the NDS Disclosure Letter.
(h) No Default. Neither NDS nor any of its Subsidiaries is in default
or violation (and no event has occurred which, with notice or the lapse of
time or both, would constitute a default or violation) of any term,
condition or provision of (i) in the case of NDS and its Subsidiaries,
their respective charter and bylaws, (ii) except as disclosed in Section
3.1(h) to the NDS Disclosure Letter, any note, bond, mortgage, indenture,
license, agreement or other instrument or obligation to which NDS or any of
its Subsidiaries is now a party or by which NDS or any of its Subsidiaries
or any of their respective properties or assets may be bound or (iii) any
order, writ, injunction, decree, statute, rule or regulation applicable to
NDS or any of its Subsidiaries, except in the case of (ii) and (iii) for
defaults or violations which in the aggregate would not have a Material
Adverse Effect on NDS.
(i) Compliance with Applicable Laws. NDS and its Subsidiaries hold all
permits, licenses, variances, exemptions, orders, franchises and approvals
of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "NDS Permits"), except where the failure so to
hold would not have a Material Adverse Effect on NDS. NDS and its
Subsidiaries are in compliance with the terms of the NDS Permits, except
where the failure so to comply would not have a Material Adverse Effect on
NDS. Except as disclosed in the NDS SEC Documents or as set forth on
Section 3.1(i) to the NDS Disclosure Letter, the businesses of NDS and its
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except for possible violations which
would not have a Material Adverse Effect on NDS. Except as set forth on
Section 3.1(i) to the NDS Disclosure Letter, no investigation or review by
any Governmental Entity with respect to NDS or any of its Subsidiaries is
pending or, to the best knowledge of NDS, threatened, other than those the
outcome of which would not have a Material Adverse Effect on NDS.
(j) Litigation. Except as disclosed in the NDS SEC Documents or in the
NDS litigation report included in Section 3.1(j) of the NDS Disclosure
Letter, there is no (i) suit, action or proceeding pending, or, to the best
knowledge of NDS, threatened against or affecting NDS or any Subsidiary of
NDS ("NDS Litigation"), or (ii) judgment, decree, injunction, rule or order
of any Governmental Entity or arbitrator outstanding against NDS or any
Subsidiary of NDS ("NDS Order"), that could (in any case) have a Material
Adverse Effect on NDS or prevent NDS from consummating the transactions
contemplated by this Merger Agreement.
(k) Taxes.
(i) Except as set forth on Section 3.1(k)(i) to the NDS Disclosure
Letter, each of NDS, each of its Subsidiaries and any affiliated,
combined or unitary group of which any such corporation is or was a
member has (A) timely (taking into account any extensions) filed in
correct form all federal and all material state, local and non-U.S.
returns, declarations, reports, estimates, information returns and
statements ("Returns") required to be filed by or with respect to it in
respect of any Taxes (as hereinafter defined), (B) timely paid all Taxes
that are due and payable (except for audit adjustments that would not
have a Material Adverse Effect on NDS in the aggregate or to the extent
that liability therefor is reserved for in NDS's unaudited balance sheet
at February 28, 1999 included in the most recent Quarterly Report on
Form 10-Q of NDS (the "Current Balance Sheet")) for which NDS or any of
its Subsidiaries may be liable, (C) established reserves that are
included in the Current Balance Sheet that are adequate for the payment
of all Taxes not yet due and payable with respect to the results of
operations of NDS and its Subsidiaries through the date of the Current
Balance Sheet, and (D) complied in all respects with all applicable
laws, rules and regulations relating to the payment and withholding of
Taxes and has in all respects timely withheld from employee wages and
paid over to the proper
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governmental authorities all amounts required to be so withheld and paid
over, except where such failure to comply or to withhold would not have
a Material Adverse Effect on NDS.
(ii) Section 3.1(k)(ii) to the NDS Disclosure Letter sets forth the
last taxable period through which the federal income Tax Returns of NDS
and any of its Subsidiaries have been examined by the Internal Revenue
Service ("IRS") or otherwise closed. Except to the extent being
contested in good faith, all deficiencies asserted as a result of such
examinations and any examination by any applicable state, local or
non-U.S. taxing authority have been paid, fully settled or adequately
provided for in the Current Balance Sheet. Except as set forth in the
NDS SEC Documents or as set forth in Section 3.1(k)(ii) to the NDS
Disclosure Letter, no federal, state, local or non-U.S. Tax audits or
other administrative proceedings or court proceedings are presently
pending with regard to any Taxes for which NDS or any of its
Subsidiaries would be liable, and no deficiency for any such Taxes has
been proposed, asserted or assessed pursuant to any such examination
against NDS or any of its Subsidiaries by any federal, state, local or
non-U.S. taxing authority with respect to any period.
(iii) Except as disclosed on Section 3.1(k)(iii) to the NDS
Disclosure Letter, neither NDS nor any of its Subsidiaries has executed
or entered into (or prior to the close of business on the Closing Date
will execute or enter into) with the IRS or any other taxing authority
(A) any agreement or other document extending or having the effect of
extending the period for assessments or collection of any Taxes for
which NDS or any of its Subsidiaries would be liable or (B) a closing
agreement pursuant to Section 7121 of the Code, or any predecessor
provision thereof or any similar provision of state, local or non-U.S.
Tax law that relates to the assets or operations of NDS or any of its
Subsidiaries.
(iv) Except as disclosed on Section 3.1(k)(iv) to the NDS
Disclosure Letter, there are no liens or security interests on any of
the assets of NDS or any of its Subsidiaries that arose in connection
with any failure or alleged failure to pay any Tax other than for Taxes
which are not yet delinquent.
(v) Except as disclosed on Section 3.1(k)(v) to the NDS Disclosure
Letter, neither NDS nor any of its Subsidiaries is a party to an
agreement that provides for the payment of any amount that would
constitute a "parachute payment" within the meaning of Section 280G of
the Code.
(vi) Neither NDS nor any of its Subsidiaries has made an election
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as such
term is defined in Section 341(f)(4) of the Code) owned by NDS or any of
its Subsidiaries.
(vii) Except as set forth in NDS SEC Documents or as disclosed on
Section 3.1(k)(vii) to the NDS Disclosure Letter, neither NDS nor any of
its Subsidiaries is a party to, is bound by or has any obligation under
any tax sharing agreement, tax indemnity agreement or similar agreement
or arrangement.
(viii) Except as disclosed on Section 3.1(k)(viii) to the NDS
Disclosure Letter, neither NDS nor any of its Subsidiaries has any
liability for Taxes under Treas. Reg. sec. 1.1502-6, or any similar
provision of state, local or non-U.S. law, except for Taxes of the
affiliated group of which NDS is the common parent corporation, within
the meaning of Section 1504(a)(1) of the Code or any similar provision
of state, local or non-U.S. law.
(ix) Neither NDS nor any of its Subsidiaries has participated in
any international boycott within the meaning of Section 999 of the Code.
(x) Except as disclosed on Section 3.1(k)(x) to the NDS Disclosure
Letter and minor locations not material to the business of NDS and its
U.S. Subsidiaries, neither NDS nor any of
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its Subsidiaries has had a permanent establishment in any foreign
country, as defined in any applicable treaty or convention between the
United States and such foreign country.
(xi) Neither NDS nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
For purposes of this Merger Agreement, "Taxes" shall mean all federal,
state, local, non-U.S. and other taxes, charges, fees, levies, imposts,
duties, licenses or other assessments, together with any interest,
penalties, additions to tax or additional amounts imposed by any taxing
authority.
(l) Employee Matters; ERISA.
(i) Benefit Plans. Section 3.1(l)(i) to the NDS Disclosure Letter
contains a true and complete list and description of each of the
following items: each employee benefit plan, program or arrangement
covering any current or former officer, director, employee or
independent contractor of NDS (or any of its Subsidiaries) or any of
their dependents or beneficiaries (each, a "NDS Beneficiary") including,
but not limited to, any "employee benefit plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), whether or not terminated or covered by ERISA, if NDS
or any of its Subsidiaries could have statutory or contractual liability
with respect thereto on or after the date hereof. The items described
above, together with each management, employment, deferred compensation,
severance, change in control, bonus or other contract for personal
services with or covering any NDS Beneficiary, whether or not
terminated, if NDS or any of its Subsidiaries could have statutory or
contractual liability with respect thereto on or after the date hereof,
are referred to collectively herein as the "NDS Benefit Plans."
(ii) Contributions and Payments. All material contributions and
other material payments required to have been made by NDS or any entity
required to be aggregated therewith pursuant to Code Section 414 (a "NDS
ERISA Affiliate") with respect to any NDS Benefit Plan (or to any person
pursuant to the terms thereof) have been or will be timely made and all
such amounts properly accrued through the date of this Merger Agreement
have been reflected in the financial statements of NDS included in the
NDS SEC Documents.
(iii) Qualification; Compliance. Each NDS Benefit Plan that is
intended to be "qualified" within the meaning of Code Section 401(a) has
been determined by the IRS to be so qualified or the applicable remedial
period applicable to the Plan will not have ended prior to the Effective
Time, and, to the best knowledge of NDS, no event or condition exists or
has occurred that would reasonably be expected to result in the
revocation or denial of any such determination which would have a
Material Adverse Effect on NDS. With respect to each NDS Benefit Plan,
NDS and each NDS ERISA Affiliate are in compliance with, and each NDS
Benefit Plan and related source of benefit payment is and has been
operated in compliance with, all applicable laws, rules and regulations
governing such plan or source, including, without limitation, ERISA, the
Code and applicable local law (including non-U.S. law), except for
violations that would not have a Material Adverse Effect on NDS. To the
best knowledge of NDS, except as set forth in Section 3.1(l)(iii) to the
NDS Disclosure Letter, no NDS Benefit Plan is subject to any ongoing
audit, investigation, or other administrative proceeding of the IRS, the
Department of Labor, or any other federal, state, or local governmental
entity or is scheduled to be subject to such an audit, investigation or
proceeding.
(iv) Liabilities. With respect to the NDS Benefit Plans,
individually and in the aggregate, and, to the best knowledge of NDS,
there exists no condition or set of circumstances that could subject NDS
or any NDS ERISA Affiliate to any liability arising under the Code,
ERISA or any other applicable law (including, without limitation, any
liability to or under any such plan or to the Pension Benefit Guaranty
Corporation ("PBGC"), or under any indemnity agreement to which NDS or
any NDS ERISA Affiliate is a party), which liability, excluding
liability for
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benefit claims, funding obligations and PBGC insurance premiums, each
payable in the ordinary course, would have a Material Adverse Effect on
NDS. No claim, action or litigation has been made, commenced or, to the
best knowledge of NDS, threatened, by or against NDS or any of its
Subsidiaries with respect to any NDS Benefit Plan (other than for
benefits or PBGC premiums payable in the ordinary course) that would
have a Material Adverse Effect on NDS.
(v) Retiree Welfare Plans. Except as disclosed in Section 3.1(l)(v)
to the NDS Disclosure Letter, no NDS Benefit Plan that is a "welfare
plan" (within the meaning of ERISA Section 3(1)) provides benefits for
any retired or former employees (other than as required pursuant to
ERISA Section 601).
(vi) Payments Resulting from Merger. Except as disclosed on Section
3.1(l)(vi) to the NDS Disclosure Letter, the consummation or
announcement of any transaction contemplated by this Merger Agreement
will not (either alone or upon the occurrence of any additional or
further acts or events) result in (A) any payment (whether of severance
pay or otherwise) becoming due from NDS or any of its Subsidiaries to
any NDS Beneficiary or to the trustee under any "rabbi trust" or similar
arrangement, or (B) any benefit under any NDS Benefit Plan being
established or increased, or becoming accelerated, vested or payable.
(vii) Funded Status of Plans. Each NDS Benefit Plan that is subject
to either the minimum funding requirements of ERISA Section 302 or to
Title IV of ERISA has assets that, as of the date hereof, have a fair
market value not less than the present value of the accrued benefit
obligations thereunder on a termination basis, as of the date hereof,
based on the actuarial methods, tables and assumptions utilized by such
plan's independent actuary in preparing such plan's most recently
prepared actuarial valuation report, except to the extent that
applicable law would require the use of different actuarial assumptions
if such plan was to be terminated as of the date hereof, in which case
those different assumptions shall apply for purposes of this
representation. NDS and its Subsidiaries have no unfunded liabilities,
as determined under local funding requirements, with respect to any NDS
Benefit Plans that cover such non-U.S. employees which would, in the
aggregate, have a Material Adverse Effect on NDS.
(viii) Multiemployer Plans. Except as described on Section
3.1(l)(viii) to the NDS Disclosure Letter, no NDS Benefit Plan is or was
a "multiemployer plan" (within the meaning of ERISA Section 4001(a)(3)),
a multiple employer plan described in Code Section 413(c), or a
"multiple employer welfare arrangement" (within the meaning of ERISA
Section 3(40)). Except as disclosed in Section 3.1(l)(viii) to the NDS
Disclosure Letter, neither NDS nor any NDS ERISA Affiliate has been
obligated to contribute to, or otherwise has or has had any liability
with respect to, any multiemployer plan, multiple employer plan, or
multiple employer welfare arrangement.
(m) Labor Matters. Except as set forth in Section 3.1(m) to the NDS
Disclosure Letter,
(i) neither NDS nor any of its Subsidiaries is a party to any
collective bargaining agreement or other current labor agreement with
any labor union or organization, and to the knowledge of NDS and its
Subsidiaries there is no current union representation dispute involving
employees of NDS or any of its Subsidiaries nor does NDS or any of its
Subsidiaries know of any activity or proceeding of any labor
organization (or representative thereof) or employee group (or
representative thereof) to organize any such employees;
(ii) there is no unfair labor practice charge or grievance arising
out of a collective bargaining agreement or other grievance procedure
against NDS or any of its Subsidiaries pending, or, to the knowledge of
NDS or any of its Subsidiaries, threatened, that has, or would have, a
Material Adverse Effect on NDS;
(iii) there is no complaint, lawsuit or proceeding in any forum by
or on behalf of any present or former employee, any applicant for
employment or any classes of the foregoing
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alleging breach of any express or implied contract of employment, any
law or regulation governing employment or the termination thereof or
other discriminatory, wrongful or tortious conduct in connection with
the employment relationship against NDS or any of its Subsidiaries
pending, or, to the knowledge of NDS or any of its Subsidiaries,
threatened, that has, or would have, a Material Adverse Effect on NDS;
(iv) there is no strike, dispute, slowdown, work stoppage or
lockout pending, or, to the knowledge of NDS or any of its Subsidiaries,
threatened, against or involving NDS or any of its Subsidiaries that
has, or could have, a Material Adverse Effect on NDS;
(v) NDS and each of its Subsidiaries are in compliance with all
applicable laws respecting employment and employment practices, terms
and conditions of employment, wages, hours of work and occupational
safety and health, except for non-compliance that does not have, and
would not have, a Material Adverse Effect on NDS; and
(vi) there is no proceeding, claim, suit, action or governmental
investigation pending or, to the knowledge of NDS or any of its
Subsidiaries, threatened, in respect to which any current or former
director, officer, employee or agent of NDS or any of its Subsidiaries
is or may be entitled to claim indemnification from NDS or any of its
Subsidiaries (A) pursuant to their respective charters or bylaws, (B) as
provided in any indemnification agreement to which NDS or any Subsidiary
of NDS is a party or (C) pursuant to applicable law that has, or would
have, a Material Adverse Effect on NDS.
(n) Intangible Property. NDS and its Subsidiaries possess or have
adequate rights to use all trademarks, trade names, patents, service marks,
brand marks, brand names, computer programs, database, industrial designs,
know how, trade secrets, copyrights and other intellectual property rights
that are material to the condition or conduct of the business operations of
NDS and its Subsidiaries (collectively, the "NDS Intangible Property").
Except as set forth on Section 3.1(n) to the NDS Disclosure Letter, all of
the NDS Intangible Property is owned by NDS or its Subsidiaries free and
clear of any and all liens, claims or encumbrances, except those the
failure to so own would not have a Material Adverse Effect on NDS. To the
knowledge of NDS, the operation of the businesses of each of NDS or its
Subsidiaries does not, in any material respect, conflict with, infringe
upon, violate or interfere with or constitute an appropriation of any
right, title, interest or goodwill, including, without limitation, any
intellectual property right, trade secret, trademark, trade name, patent,
service mark, brand mark, brand name, computer program, database,
industrial design, copyright or any pending application therefor of any
other person and there have been no claims made or notices received in
connection therewith.
(o) Environmental Matters.
For purposes of this Merger Agreement:
(A) "Environmental Law" means any applicable law regulating,
prohibiting or requiring the notification of Releases into any part of
the natural environment, pertaining to the protection of natural
resources, the environment and public and employee health and safety, or
governing or regulating the use, storage, handling, transportation,
treatment, processing, disposal or generation of any Hazardous
Materials, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA") (42
U.S.C. Section 9601 et seq.), the Hazardous Materials Transportation Act
(49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery
Act (42 U.S.C. Section 6901 et seq.), the Clean Water Act (33 U.S.C.
Section 1251 et seq.), the Clean Air Act (33 U.S.C. Section 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. Section 7401 et
seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Section 136 et seq.), Emergency Planning and Community Right to Know Act
(42 U.S.C. Section 11001 et seq.), Safe Drinking Water Act (Section 42
U.S.C. Section 300 et seq.) and the Occupational Safety and Health Act
(29 U.S.C. Section 651 et seq.) ("OSHA") and the regulations promulgated
pursuant thereto, and any other such
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applicable county, province, state or local statutes, and the
regulations promulgated pursuant thereto, as such laws have been and may
be amended or supplemented through the Closing Date.
(B) "Hazardous Material" means any substance, material or waste
which is regulated pursuant to any Environmental Law by any public or
governmental authority in the jurisdictions in which the applicable
party or its Subsidiaries conducts business, or in the United States,
including, without limitation, any material or substance which is
defined as a "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste" or "restricted hazardous waste,"
"contaminant," "pollutant," "toxic waste" or "toxic substance" under any
provision of Environmental Law;
(C) "Release" means any release, spill, effluent, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment, or into or
out of any property owned, operated or leased by the applicable party or
its Subsidiaries; and
(D) "Remedial Action" means all actions, including, without
limitation, any capital expenditures, required by a governmental entity
or required under any Environmental Law, or voluntarily undertaken to
(I) investigate, clean up, remove, treat, or in any other way ameliorate
or address any Hazardous Materials or other substance in the indoor or
outdoor environment; (II) prevent the Release or threat of Release, or
minimize the further Release of any Hazardous Material so it does not
endanger or threaten to endanger the public health or welfare of the
indoor or outdoor environment; (III) perform pre-remedial studies and
investigations or post-remedial monitoring and care pertaining or
relating to a Release; or (IV) bring the applicable party into
compliance with any Environmental Law.
(i) Except as disclosed on Section 3.1(o)(i) to the NDS Disclosure
Letter, the operations of NDS and its Subsidiaries have been and, as of
the Closing Date, will be in compliance with all Environmental Laws,
except where the failure to so comply would not have a Material Adverse
Effect on NDS;
(ii) Except as disclosed on Section 3.1(o)(ii) to the NDS
Disclosure Letter, NDS and its Subsidiaries have obtained and will, as
of the Closing Date, maintain all permits required under applicable
Environmental Laws for the continued operations of their respective
businesses, except such permits the lack of which would not have a
Material Adverse Effect on NDS;
(iii) Except as disclosed on Section 3.1(o)(iii) to the NDS
Disclosure Letter, NDS and its Subsidiaries are not subject to any
outstanding orders, investigations or material contracts with any
Governmental Entity or other person respecting (A) Environmental Laws,
(B) Remedial Action or (C) any Release or threatened Release of a
Hazardous Material which would have a Material Adverse Effect on NDS;
(iv) Except as disclosed on Section 3.1(o)(iv) to the NDS
Disclosure Letter, NDS and its Subsidiaries have not received any
written communication alleging, with respect to any such party, the
violation of or liability under any Environmental Law or liability
attributable to the Release of any Hazardous Material, which violations
or liabilities, individually or in the aggregate, would have a Material
Adverse Effect on NDS;
(v) Except as disclosed on Section 3.1(o)(v) to the NDS Disclosure
Letter, neither NDS nor any of its Subsidiaries has any contingent
liabilities in connection with the Release of any Hazardous Material
into the indoor or outdoor environment (whether on-site or off-site)
that, individually or in the aggregate, would have a Material Adverse
Effect on NDS;
(vi) Except as disclosed on Section 3.1(o)(vi) to the NDS
Disclosure Letter, the operations of NDS or its Subsidiaries involving
the generation, transportation, treatment, storage or disposal of
Hazardous Material or any state equivalent are in compliance with
applicable
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Environmental Laws, except where the failure to so comply, individually
or in the aggregate, would not reasonably be expected to have a Material
Adverse Effect on NDS; and
(vii) Except as disclosed on Section 3.1(o)(vii) to the NDS
Disclosure Letter, to the best knowledge of NDS, there is not now on or
in any property (leased or owned) of NDS or its Subsidiaries any of the
following: (A) any underground storage tanks or surface impoundments;
(B) any asbestos-containing materials; or (C) any polychlorinated
biphenyls, any of which ((A), (B), or (C) preceding), individually or in
the aggregate, would have a Material Adverse Effect on NDS.
(p) Opinion of Financial Advisor. NDS has received the verbal opinion
of Houlihan Lokey Howard & Zukin (a written copy of which will be delivered
to UEC promptly upon receipt by NDS) to the effect that, as of the date
hereof, the Conversion Number is fair from a financial point of view to the
holders of NDS Common Stock.
(q) State Takeover Statutes; Vote Required. NDS has taken all action
to assure that no state takeover statute or similar statute or regulation,
including, without limitation, Section 203 of the DGCL, shall apply to the
Merger or any of the other transactions contemplated hereby. The
affirmative vote of the holders of a majority of the outstanding shares of
NDS Common Stock is the only vote of the holders of any class or series of
NDS capital stock necessary to approve this Merger Agreement and the
transactions contemplated hereby. NDS has taken such other action with
respect to any other anti-takeover provisions in its Bylaws or Certificate
of Incorporation to the extent necessary to consummate the Merger on the
terms set forth in this Merger Agreement.
(r) Intentionally Omitted
(s) Intentionally Omitted
(t) Insurance. NDS maintains insurance coverage reasonably adequate
for the operation of the business of NDS and each of its Subsidiaries
(taking into account the cost and availability of such insurance), and the
transactions contemplated hereby will not materially adversely affect such
coverage. Section 3.1(t) sets forth a true and complete list of such
coverage.
(u) Brokers. Except as disclosed on Section 3.1(u) to the NDS
Disclosure Letter hereof, no broker, investment banker, or other person is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Merger Agreement
based upon arrangements made by or on behalf of NDS.
(v) Material Contracts and Agreements. All material contracts of NDS
and its Subsidiaries have been included in the NDS SEC Documents unless not
required to be so included pursuant to the rules and regulations of the
SEC. Section 3.1(v) to the NDS Disclosure Letter sets forth a list of all
written or oral contracts, agreements or arrangements to which NDS or any
of its Subsidiaries or any of their respective assets is bound that would
be required to be filed as exhibits to NDS's Annual Report on Form 10-K for
the year ended November 30, 1998, or, based on information currently
available to NDS, are expected to be required to be filed as an exhibit to
NDS's Annual Report on Form 10-K for the year ended November 30, 1999.
Section 3.1(v) to the NDS Disclosure Letter also sets forth each drilling
contract, employment or severance contract, lease agreement (that require
payments that in the aggregate exceed $25,000 over the term of such lease)
and credit agreement, note or other instrument relating to indebtedness of
NDS or its Subsidiaries (except that would not involve indebtedness
individually or in the aggregate amounts exceeding $25,000).
(w) Title to Properties.
(i) Section 3.1(w)(i) to the NDS Disclosure Letter sets forth a
true and complete list of each drilling rig and related drilling
equipment owned or leased by NDS or its Subsidiaries, including a
summary of the technical specifications thereof. Such drilling rigs
constitute 16 marketable rigs. Each of NDS and its Subsidiaries has good
and indefeasible title to, or valid
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leasehold interests in, all its properties and assets purported to be
owned by it in the NDS SEC Documents, except for such as are no longer
used or useful in the conduct of its businesses or as have been disposed
of in the ordinary course of business, and except for defects in title,
easements, restrictive covenants and similar encumbrances or impediments
that, in the aggregate, do not and will not materially interfere with
its ability to conduct its business as currently conducted. All such
assets and properties, other than assets and properties in which NDS or
any of the Subsidiaries has leasehold interests, are free and clear of
all liens, other than those set forth in the NDS SEC Documents, and
except for liens, that, in the aggregate, do not and will not materially
interfere with the ability of NDS or any of its Subsidiaries to conduct
business as currently conducted.
(ii) Except as specifically disclosed in the NDS SEC Documents,
Each of NDS and its Subsidiaries has complied in all material respects
with the terms of all leases to which it is a party and under which it
is in occupancy, and all such leases are in full force and effect.
(x) Representations Relating to Sunny Plants, Inc. and Lobell
Corporation.
(i) The fair market value of the real property secured by the
mortgage note from Farm Credit of South Florida to Sunny Plants, Inc.
(which NDS or its Subsidiaries have guaranteed pursuant to that certain
Guarantee dated April 29, 1993) is equal to or greater than the
obligations (including costs and expenses, including accounting and
attorneys' fees that would be required to be paid or reimbursed by NDS
or its Subsidiaries in connection with foreclosure and collection or
otherwise) that NDS and its Subsidiaries are responsible for pursuant to
such guarantee.
(ii) All costs and expense relating to the discontinuance of
operations of NDS's Subsidiary, Lobell Corporation and its affiliates,
and its former subsidiary, Sunny Plants, Inc. and its affiliates that
have not yet been paid in full are fully accrued for as current
liabilities on the Current Balance Sheet (except for amounts
specifically disclosed in the Company's annual report or Form 10-K for
the year ended November 30, 1998).
3.2 Representations and Warranties of UEC and Sub. Subject to the
exceptions set forth in the disclosure letter to be delivered to NDS in
connection herewith (the "UEC Disclosure Letter"), UEC and Sub jointly and
severally represent and warrant to NDS as follows:
(a) Organization, Standing and Power. Each of UEC and Sub is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware, has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted, and is duly qualified and in good standing to do business in
each jurisdiction in which the business it is conducting, or the operation,
ownership or leasing of its properties, makes such qualification necessary,
other than in such jurisdictions where the failure to be so organized or so
to qualify (individually or in the aggregate) would not have a Material
Adverse Effect on UEC.
(b) Capital Structure. As of the date hereof, the authorized capital
stock of UEC consists of 50,000,000 shares of UEC Common Stock and
5,000,000 of preferred stock ("UEC Preferred Stock"). At the close of
business on March 31, 1999 (i) 16,489,281 shares of UEC Common Stock were
issued and outstanding, (ii) no shares of UEC Preferred Stock were
outstanding and (iii) an aggregate of 2,183,910 shares of UEC Common Stock
were reserved for issuance pursuant to outstanding options, warrants and
agreements. As of the date hereof, the authorized capital stock of Sub
consists of 1,000 shares of common stock, par value $.01 per share, 1,000
shares of which are validly issued, fully paid and nonassessable, and are
owned by UEC. Sub was formed solely for the purpose of participating in the
Merger, has no assets other than that amount of cash which is required for
it to be organized as a corporation under the DGCL and has conducted no
activities other than in connection with its incorporation.
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(c) Authority; No Violations, Consents and Approvals.
(i) Each of UEC and Sub has all requisite corporate power and
authority to enter into this Merger Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Merger Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on
the part of UEC and Sub. This Merger Agreement has been duly executed
and delivered by UEC and Sub. Assuming this Merger Agreement constitutes
the valid and binding obligation of NDS (and the Primary Stockholders),
it also constitutes a valid and binding obligation of each of UEC and
Sub and is enforceable against each of them in accordance with its
terms; provided, however, that such enforceability is subject to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity and limitations imposed on indemnity obligations by
applicable federal and state securities laws.
(ii) Except as set forth on Section 3.2(c)(ii) to the UEC
Disclosure Letter, the execution and delivery of this Merger Agreement
does not, and the consummation of the transactions contemplated hereby
and compliance with the provisions hereof will not, conflict with, or
result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of
UEC or Sub under, any provision of (A) the Certificate of Incorporation
or Bylaws of UEC or Sub, (B) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to UEC or Sub or (C)
assuming the consents, approvals, authorizations or permits and filings
or notifications referred to in Section 3.2(c)(iii) are duly and timely
obtained or made, any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to UEC or Sub or any of properties or
assets, other than, in the case of clause (B) or (C), any such
conflicts, violations, defaults, rights, liens, security interests,
charges or encumbrances that, individually or in the aggregate, would
not have a Material Adverse Effect on UEC, materially impair the ability
of UEC or Sub to perform its respective obligations hereunder or prevent
in any material respect the consummation of any of the transactions
contemplated hereby.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any
Governmental Entity is required by or with respect to UEC in connection
with the execution and delivery of this Merger Agreement by UEC and Sub
or the consummation by UEC and Sub of the transactions contemplated
hereby, as to which the failure to obtain or make would have a Material
Adverse Effect on UEC, except for: (A) the filing with the SEC of the
S-4, such reports under Section 13(a) of the Exchange Act and such other
compliance with the Securities Act and the Exchange Act and the rules
and regulations thereunder as may be required in connection with this
Merger Agreement and the transactions contemplated hereby, and the
obtaining from the SEC of such orders as may be so required; (B) the
filing of the Certificate of Merger with the Secretary of State of the
State of Delaware; (C) filings with, and approval of, the American Stock
Exchange, Inc. (the "AMEX"); (D) such filings and approvals as may be
required by any applicable state securities, "blue sky" or takeover laws
or environmental laws or (E) the filing of a premerger notification
report by UEC under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and the expiration or termination of
the applicable waiting period with respect thereto.
(d) SEC Documents. A true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by UEC with the
SEC since January 1, 1996 (the "UEC SEC Documents") has been made available
to NDS (or such information was readily accessible through the SEC Edgar
Website). The UEC SEC Documents are all the documents (other than
preliminary material) that UEC was required to file with the SEC since such
date. As of their respective dates, the UEC SEC Documents complied in all
material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder
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applicable to such UEC SEC Documents, and none of the UEC SEC Documents
contained when filed any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of UEC included in the UEC
SEC Documents complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, were
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in
the case of the unaudited statements, as permitted by Rule 10-01 of
Regulation S-X of the SEC) and fairly present in accordance with applicable
requirements of GAAP (subject, in the case of the unaudited statements, to
normal year-end adjustments and other adjustments discussed therein) the
consolidated financial position of UEC and its consolidated Subsidiaries as
of their respective dates and the consolidated results of operations and
the consolidated cash flows of UEC and its consolidated Subsidiaries for
the periods presented therein.
(e) Information Supplied. None of the information supplied or to be
supplied by UEC or any of its Subsidiaries for inclusion or incorporation
by reference in the S-4 will, at the time the S-4 is filed with the SEC or
when it becomes effective under the Securities Act contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading, and none of the information supplied or to be supplied by UEC
or any of its Subsidiaries and included or incorporated by reference in the
Proxy Statement will, at the date mailed to stockholders of NDS or at the
time of the meeting of such stockholders to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading. If at any time prior to the Effective Time any
event with respect to UEC or any of its Subsidiaries, or with respect to
other information supplied by UEC or any of its Subsidiaries for inclusion
in the Proxy Statement or S-4, shall occur that is required to be described
in an amendment of, or a supplement to, the Proxy Statement or the S-4,
such event shall be so described, and such amendment or supplement shall be
promptly filed with the SEC. The Proxy Statement, insofar as it relates to
UEC or Subsidiaries of UEC or other information supplied by UEC or any of
its Subsidiaries for inclusion therein, will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder, except that no representations or warranties are
made by UEC with respect to statements made or incorporated by reference
therein based on information supplied by NDS or any of NDS's Subsidiaries.
(f) Absence of Certain Changes or Events. Except as disclosed in, or
reflected in the financial statements included in, the UEC SEC Documents or
on Section 3.2(f) to the UEC Disclosure Letter, or except as contemplated
by the Merger Agreement, since December 31, 1998 there has not been: (i)
any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of
UEC's capital stock; (ii) any amendment of any material term of any
outstanding equity security of UEC or any Subsidiary; (iii) any material
change in any method of accounting or accounting practice by UEC or any
Subsidiary; or (iv) any other transaction, commitment, dispute or other
event or condition (financial or otherwise) of any character (whether or
not in the ordinary course of business) that would have a Material Adverse
Effect on UEC.
(g) No Undisclosed Material Liabilities. Except as disclosed in the
UEC SEC Documents or on Section 3.2(g) to the UEC Disclosure Letter, there
are no liabilities of UEC or any of its Subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable
or otherwise, that would have a Material Adverse Effect on UEC, other than:
(i) liabilities adequately provided for on the balance sheet of UEC dated
as of December 31, 1998 (including the notes thereto) contained in UEC's
Annual Report on Form 10-K for the year ended December 31, 1998 or (ii)
liabilities incurred in the ordinary course of business since December 31,
1998.
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(h) Litigation. Except as disclosed in the UEC SEC Documents or on
Section 3.2(h) to the UEC Disclosure Letter, there is no (i) suit, action
or proceeding pending or, to the best knowledge of UEC, threatened against
or affecting UEC or any Subsidiary of UEC ("UEC Litigation"), or (ii)
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against UEC or any Subsidiary of UEC that (in any
case) would have a Material Adverse Effect on UEC or prevent UEC from
consummating the transactions contemplated by this Merger Agreement.
(i) No Vote Required. No vote of the holders of any class or series of
UEC capital stock is necessary to approve the Merger Agreement or the
transactions contemplated hereby, including, without limitation, the
issuance of UEC Common Stock.
(j) Material Contracts and Agreements. All material contracts of UEC
or its Subsidiaries have been included in the UEC SEC Documents unless not
required to be included pursuant to the rules and regulations of the SEC.
Section 3.2(j) of the UEC Disclosure Letter sets forth a list of all
written or oral contracts, agreements or arrangements to which UEC or any
of its Subsidiaries or any of their respective assets are bound which meet
the definition of material contracts set forth in Section 6.01 of
Regulation S-K promulgated under the Securities Act and which have not been
included in the UEC SEC Documents.
(k) Broker Fees. No broker or finder has acted for UEC in connection
with this Merger Agreement and no broker or finder is entitled to any
brokerage or finders fee or to any commission in respect thereof based upon
arrangements or understandings made by or on behalf of UEC.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS OF NDS
4.1 Conduct of Business by NDS Pending the Merger. During the period from
the date of this Merger Agreement and continuing until the Effective Time, NDS
agrees as to itself and its Subsidiaries that (except as expressly contemplated
or permitted by this Merger Agreement, or to the extent that UEC shall otherwise
consent in writing):
(a) Ordinary Course. Except as provided on Section 4.1(a) to the NDS
Disclosure Letter, each of NDS and its Subsidiaries shall carry on its
businesses in the usual, regular and ordinary course in substantially the
same manner as heretofore conducted and, to the extent consistent
therewith, shall use all reasonable efforts to preserve intact its present
business organizations, keep available the services of its current officers
and employees and endeavor to preserve its relationships with customers,
suppliers and others having business dealings with it, in each case
consistent with past practices, to the end that its goodwill and ongoing
business shall not be impaired in any material respect to the fullest
extent reasonably possible at the Effective Time.
(b) Dividends; Changes in Stock. Except as provided on Section 4.1(b)
to the NDS Disclosure Letter, NDS shall not and it shall not permit any of
its Subsidiaries to: (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, except for dividends
from a Subsidiary of NDS to NDS or another Subsidiary of NDS; (ii) split,
combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or
in substitution for shares of NDS capital stock; or (iii) repurchase,
redeem or otherwise acquire, or permit any of its Subsidiaries to purchase,
redeem or otherwise acquire, any shares of NDS's capital stock, except as
required by the terms of its securities outstanding on the date hereof or
as contemplated by any existing employee benefit plan.
(c) Issuance of Securities. Except as provided on Section 4.1(c) to
the NDS Disclosure Letter, NDS shall not, and it shall not permit any of
its Subsidiaries to, issue, deliver or sell, or authorize or propose to
issue, deliver or sell, any shares of its capital stock of any class, any
Voting Debt or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, Voting Debt (i.e. debt securities or
preferred stock having any rights to vote at any meeting of stockholders)
or
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convertible securities, other than: (i) the issuance of NDS Common Stock
upon the exercise of the NDS Stock Options granted under the NDS Stock
Plans that are outstanding on the date hereof, or in satisfaction of stock
grants or stock-based awards made prior to the date hereof pursuant to the
NDS Stock Plans; (ii) issuances by a wholly owned Subsidiary of its capital
stock to its parent; and (iii) the NDS Stock Options contemplated by Annex
B.
(d) Governing Documents. Except as contemplated hereby or in
connection herewith, neither NDS nor any of its Subsidiaries shall amend or
propose to amend its Certificate of Incorporation or Bylaws.
(e) No Acquisitions. NDS shall not and it shall not permit any of its
Subsidiaries to, acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof without the prior written consent of UEC.
(f) No Dispositions. Other than: (i) dispositions or proposed
dispositions listed on Section 4.1(f) to the NDS Disclosure Letter; or (ii)
sales or leases in the ordinary course of business consistent with past
practice, NDS shall not and it shall not permit any of its Subsidiaries to
sell, lease, encumber or otherwise dispose of, or agree to sell, lease
(whether such lease is an operating or capital lease), encumber or
otherwise dispose of, any of its assets without the prior written consent
of UEC.
(g) No Dissolution, Etc. Except as otherwise permitted or contemplated
by this Merger Agreement, NDS shall not authorize, recommend, propose or
announce an intention to adopt a plan of complete or partial liquidation or
dissolution of NDS or any of its Subsidiaries.
(h) Certain Employee Matters. Except as set forth on Section 4.1(h) to
the NDS Disclosure Letter or as may be required by applicable law or any
agreement to which NDS or any NDS ERISA Affiliate is a party on the date
hereof or as expressly contemplated by this Merger Agreement, NDS shall
not, nor shall it permit any NDS ERISA Affiliate to:
(i) amend, or increase the amount of (or accelerate the payment or
vesting of) any benefit or amount payable under, any employee benefit
plan or any other contract, agreement, commitment, arrangement, plan or
policy providing for compensation or benefits to any current or former
director, officer, employee or independent contractor who would be
deemed to be an employee under applicable guidelines published by the
IRS, and maintained by, contributed to or entered into by, NDS or any
NDS ERISA Affiliate, including, without limitation, the existing NDS
Benefit Plans except in the ordinary course of business consistent with
past practice and as approved in advance by UEC in writing, such
approval not to be unreasonably withheld;
(ii) increase (or enter into any contract, agreement, commitment or
arrangement to increase in any manner) the compensation or fringe
benefits, or otherwise to extend, expand or enhance the engagement,
employment or any related rights, of any current or former director,
officer, employee or independent contractor who would be deemed to be an
employee under applicable guidelines published by the IRS, of NDS or any
NDS ERISA Affiliate, except increases in the ordinary course of business
consistent with past practice;
(iii) adopt, establish or implement any plan, policy or other
arrangement providing for any form of benefits or other compensation to
any current or former director, officer, employee or independent
contractor who would be deemed to be an employee under applicable
guidelines published by the IRS, of NDS or any NDS ERISA Affiliate;
(iv) enter into or amend any employment agreement, severance
agreement, or other contract, agreement or arrangement with any current
or former director, officer, employee or independent contractor who
would be deemed to be an employee under applicable guidelines published
by the IRS, of NDS or any NDS ERISA Affiliate; or
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(v) pay or agree to pay any pension, retirement allowance or other
benefit not required or contemplated by any of the existing NDS Benefit
Plans as in effect on the date of this Merger Agreement to any current
or former director, officer, employee or independent contractor who
would be deemed to be an employee under applicable guidelines published
by the IRS, of NDS or any NDS ERISA Affiliate.
(i) Indebtedness; Leases; Capital Expenditures. Except as set forth on
Section 4.1(i) to the NDS Disclosure Letter, NDS shall not, nor shall NDS
permit any of its Subsidiaries to, (A) incur any indebtedness for borrowed
money or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire any debt securities of NDS or
any of its Subsidiaries or guarantee any debt securities of others, (B)
except in the ordinary course of business, enter into any lease (whether
such lease is an operating or capital lease) or create any mortgages,
liens, security interests or other encumbrances on the property of NDS or
any of its Subsidiaries in connection with any indebtedness thereof, except
for those securing purchase money indebtedness or (C) commit to aggregate
capital expenditures in excess of $100,000 during any calendar month,
except as approved in advance in writing by UEC, such approval not to be
unreasonably withheld.
(j) Taxes. Neither NDS nor any of its Subsidiaries shall make any
material election relating to Taxes or compromise any material Tax
liability.
(k) Accounting. Neither NDS nor any of its Subsidiaries shall change
any material accounting principle used by it, except as required by
statement, rules or regulations promulgated by the Financial Accounting
Standards Board (the "FASB") or the SEC.
4.2 No Solicitation.
(a) NDS will not, and will not authorize or permit any of its
officers, directors, agents and other representatives or those of any of
its Subsidiaries (collectively, "NDS Representatives") to, and will not
authorize any employee of NDS or any of its Subsidiaries to and on becoming
aware of will take all reasonable actions to stop the employee from
continuing to, directly or indirectly, solicit or initiate or encourage
(including by way of furnishing information) any prospective buyer or the
making of any proposal that constitutes, or may reasonably be expected to
lead to, an Acquisition Proposal (as defined herein) from any person, or
engage in any discussions or negotiations relating thereto or accept any
Acquisition Proposal; provided, however, that, notwithstanding any other
provision of this Merger Agreement, NDS may, prior to the vote of the
stockholders of NDS for approval of the Merger, but not thereafter if the
Merger is approved thereby, in response and only in response to a written
request made without any solicitation, initiation, encouragement,
discussion or negotiation by NDS or any NDS Representatives, furnish
information concerning NDS to any person or "group" (within the meaning of
Section 13(d)(3) of the Exchange Act) pursuant to a confidentiality
agreement on substantially the same terms (provided that the NDS Board of
Directors may, if required by its fiduciary duties, permit an offer to be
received from such group in accordance with the terms of such
confidentiality agreement) as the Confidentiality Agreements between NDS
and UEC described in Section 5.1 hereof, provided that the Board of
Directors of NDS shall conclude in good faith on the basis of, among other
things, advice of outside counsel to NDS that such action is necessary in
order for the Board of Directors of NDS to act in a manner that is required
by its fiduciary obligations under applicable law. NDS shall immediately
cease and cause to be terminated any existing solicitation, initiation,
encouragement, activity, discussion or negotiation with any parties
conducted heretofore by NDS or any NDS Representatives with respect to any
Acquisition Proposal existing on the date hereof. NDS will promptly notify
UEC of the pendency of any negotiations respecting, or the receipt of, any
Acquisition Proposal. It is understood that any violation of this Section
4.2 by NDS or any NDS Representative shall be deemed a material breach of
this Merger Agreement by NDS. As used in this Merger Agreement,
"Acquisition Proposal" shall mean any proposal or offer, other than a
proposal or offer by UEC, for a tender or exchange offer, a merger,
consolidation or other business combination involving NDS or any Subsidiary
of NDS or any proposal
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to acquire in any manner a substantial (15% or more) equity interest in, or
substantial portion of the assets of, NDS or any of its Subsidiaries.
(b) Neither the Board of Directors of NDS nor any committee thereof
shall, except in connection with the termination of this Merger Agreement
pursuant to Section 7.1(a), (b) or (d), (i) withdraw or modify, or propose
to withdraw or modify, in a manner adverse to UEC or Sub, the approval or
recommendation by the Board of Directors of NDS or any such committee of
this Merger Agreement or the Merger, or take any action having such effect,
or (ii) approve or recommend, or propose to approve or recommend, any
Acquisition Proposal. Notwithstanding the foregoing, in the event the Board
of Directors of NDS receives an Acquisition Proposal that, in the exercise
of its fiduciary obligations (as determined in good faith by a majority of
the disinterested members thereof based on, among other things, the advice
of outside counsel), it determines to be a Superior Proposal, the Board of
Directors may withdraw or modify its approval or recommendation of this
Merger Agreement or the Merger and may (subject to the following sentence)
terminate this Merger Agreement, in each case at any time after midnight on
the fifth business day following UEC's receipt of written notice (a "Notice
of Superior Proposal") advising UEC that the Board of Directors has
received an Acquisition Proposal that it has determined to be a Superior
Proposal, specifying the material terms and conditions of such Superior
Proposal (including the proposed financing for such proposal and a copy of
any documents conveying such proposal) and identifying the party making
such Superior Proposal. NDS may terminate this Merger Agreement pursuant to
the preceding sentence only if the stockholders of NDS shall not yet have
voted upon the Merger and NDS shall have paid to UEC the Termination Fee
(as defined in Section 7.2(b)). Any of the foregoing to the contrary
notwithstanding, NDS may engage in discussions with any party that has made
an unsolicited takeover proposal for the limited purpose of determining
whether such proposal (as opposed to any further negotiated proposal) is a
Superior Proposal. Nothing contained herein shall prohibit NDS from taking
and disclosing to its stockholders a position contemplated by Rule 14e-2(a)
following UEC's receipt of a Notice of Superior Proposal.
(c) For purposes of this Merger Agreement, a "Superior Proposal" means
any bona fide proposal to acquire, directly or indirectly, all of the NDS
Common Stock then outstanding or all or substantially all of the assets of
NDS and its Subsidiaries, and otherwise on terms that a majority of the
disinterested members of the Board of Directors of NDS determines in its
good faith reasonable judgment to be more favorable to NDS's stockholders
than the Merger. In reaching such good faith determination, the Board of
Directors of NDS will give significant consideration to whether an
Acquisition Proposal includes definite financing.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Access to Information. Upon reasonable notice, NDS shall afford to the
officers, employees, accountants, counsel and other representatives of UEC,
access, during normal business hours during the period prior to the Effective
Time, to all its properties, books, contracts, commitments and records and,
during such period, NDS shall furnish promptly to UEC (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to SEC requirements and (b) all other information
concerning its business, properties and personnel as UEC may reasonably request.
UEC and NDS agree that they will not use any information obtained pursuant to
this Section 5.1 for any purpose unrelated to the consummation of the
transactions contemplated by this Merger Agreement. The Confidentiality
Agreements dated as of March 1, 1999 and April 25, 1999, respectively, between
UEC and NDS (the "Confidentiality Agreements") shall apply with respect to
information furnished thereunder or hereunder and any other activities
contemplated thereby.
5.2 NDS Stockholders' Meeting. NDS shall call a meeting of its
stockholders to be held as promptly as practicable after the date hereof for the
purpose of voting upon this Merger Agreement and the Merger. Subject to Sections
4.2(a) and (b), NDS will, through its Board of Directors, recommend to
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its stockholders approval of such matters and not rescind such recommendation
and shall use its best efforts to obtain approval and adoption of this Merger
Agreement and the Merger by its stockholders. NDS shall use all reasonable
efforts to hold such meeting as soon as practicable after the date upon which
the S-4 becomes effective.
5.3 Legal Conditions to Merger. Except as otherwise provided herein, each
of NDS, UEC and Sub will take all reasonable actions necessary to comply
promptly with all legal requirements that may be imposed on such party with
respect to the Merger (including, without limitation, furnishing all information
required under the HSR Act and in connection with approvals of or filings with
any other Governmental Entity) and will promptly cooperate with and furnish
information to each other in connection with any such requirements imposed upon
any of them or any of their Subsidiaries in connection with the Merger. Each of
NDS and UEC will, and will cause its respective Subsidiaries to, take all
actions reasonably necessary to obtain (and will cooperate with each other in
obtaining) any consent, acquiescence, authorization, order or approval of, or
any exemption or nonopposition by (including requests for waivers or no action
letters from the Securities and Exchange Commission), any Governmental Entity or
court required to be obtained or made by NDS, UEC or any of their Subsidiaries
in connection with the Merger or the taking of any action contemplated thereby
or by this Merger Agreement. UEC shall (and NDS shall if required) file a
premerger notification and report form under the HSR Act with respect to the
Merger as promptly as reasonably possible following execution and delivery of
this Agreement. UEC (and NDS if required) agrees to use reasonable efforts to
promptly respond to any request for additional information pursuant to Section
(e)(1) of the HSR Act.
5.4 Intentionally Omitted.
5.5 Stock Options. At the Effective Time, each outstanding option to
purchase NDS Common Stock and any stock appreciation rights related thereto that
has been granted pursuant to the NDS Stock Plans and any warrant to acquire NDS
Common Stock (an "NDS Stock Option"), whether vested or unvested, shall be
deemed to constitute an option to acquire, on the same terms and conditions as
were applicable under such NDS Stock Option, a number of shares of UEC Common
Stock equal to the number of shares of NDS Common Stock purchasable pursuant to
such NDS Stock Option multiplied by the Conversion Number, at a price per share
equal to the per-share exercise price for the shares of NDS Common Stock
purchasable pursuant to such NDS Stock Option divided by the Conversion Number;
provided, however, that in the case of any NDS Stock Option to which Code
Section 421 applies by reason of its qualification under any of the Code
Sections 422-424, the exercise price and number of shares subject to such option
shall be determined in a manner that meets the requirements for issuing or
assuming a stock option in a transaction to which Code Section 424(a) applies
and provided further, that the number of shares of UEC Common Stock that may be
purchased upon exercise of such NDS Stock Option shall not include any
fractional share and, upon exercise of such NDS Stock Option, a cash payment
shall be made for any fractional share based upon the closing price of a share
of UEC Common Stock on the AMEX on the last trading day of the calendar month
immediately preceding the date of exercise.
5.6 Indemnification; Directors' and Officers' Insurance.
(a) NDS shall, and from and after the Effective Time, the Surviving
Corporation shall, indemnify, defend and hold harmless each person who is
now, or has been at any time prior to the date hereof or who becomes prior
to the Effective Time, an officer or director of NDS or any of its
Subsidiaries or an employee of NDS or any of its Subsidiaries who acts as a
fiduciary under any NDS Benefit Plans (the "Indemnified Parties") against
all losses, claims, damages, costs, expenses (including attorneys' fees),
liabilities or judgments or amounts that are paid in settlement with the
approval of the indemnifying party (which approval shall not be
unreasonably withheld) of or in connection with any threatened or actual
claim, action, suit, proceeding or investigation based in whole or in part
on or arising in whole or in part out of the fact that such person is or
was a director, officer or such employee of NDS or any of its Subsidiaries,
whether pertaining to any matter existing or occurring at or prior to the
Effective Time and whether asserted or claimed prior to, or at or after,
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the Effective Time (including arising out of or relating to the Merger, the
consummation of the transactions contemplated herein, and any action taken
in connection therewith) ("Indemnified Liabilities"). Any Indemnified Party
wishing to claim indemnification under this Section 5.6, upon learning of
any such claim, action, suit, proceeding or investigation, shall notify NDS
(or after the Effective Time, UEC and the Surviving Corporation), but the
failure so to notify shall not relieve a party from any liability that it
may have under this Section 5.6, except to the extent such failure
materially prejudices such party. The Indemnified Parties as a group may
retain only one law firm to represent them with respect to each such matter
unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
Indemnified Parties.
(b) All rights to indemnification for acts or omissions occurring
prior to the Effective Time now existing in favor of the Indemnified
Parties as provided in the Certificate of Incorporation or by-laws of NDS
or its Subsidiaries and in any indemnification agreements to which they are
parties shall survive the Merger, including the right to advancement of
expenses as incurred to the fullest extent permitted by Delaware law, and
the Surviving Corporation shall continue such indemnification rights for
acts or omissions prior to the Effective Time in full force and effect in
accordance with their terms and UEC shall be financially responsible
therefor. The provisions of this Section 5.6 are intended to be for the
benefit of, and shall be enforceable by, the parties hereto and each
Indemnified Party, and his or her heirs and representatives. No party shall
enter into any settlement regarding the foregoing without prior approval of
the Indemnified Party, which approval shall not be unreasonably withheld.
5.7 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental body or other person or
other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages in
connection therewith, the parties hereto agree to cooperate and use their
reasonable efforts to defend against and respond thereto.
5.8 Intentionally Omitted.
5.9 Public Announcements. UEC and NDS will agree with each other with
respect to the contents thereof before issuing any press release or otherwise
making any public statements with respect to the transactions contemplated by
this Merger Agreement, except as may be required by applicable law or by
obligations pursuant to any listing agreement with any national securities
exchange or transaction reporting system (but shall still provide a copy of such
release to the other party).
5.10 Other Actions. Except as contemplated by this Merger Agreement,
neither UEC nor NDS shall, and shall not permit any of its Subsidiaries to, take
or agree or commit to take any action that is reasonably likely to result in any
of its respective representations or warranties hereunder being untrue in any
material respect or in any of the conditions to the Merger set forth in Article
VI not being satisfied.
5.11 Advice of Changes; SEC Filings. UEC and NDS shall confer on a regular
basis with each other, report on operational matters and promptly advise each
other orally and in writing of any change or event having, or which, insofar as
can reasonably be foreseen, could have, a Material Adverse Effect on UEC or NDS,
as the case may be. NDS and UEC shall promptly provide each other (or their
respective counsel) copies of all filings (other than HSR filings) made by such
party with the SEC or any other state or federal Governmental Entity in
connection with this Merger Agreement and the transactions contemplated hereby.
5.12 Reorganization. It is the intention of UEC and NDS that the Merger
will qualify as a reorganization described in Section 368(a) of the Code (and
any comparable provisions of applicable state law). Neither NDS nor UEC (or any
of their respective Subsidiaries) will take or omit to take any action (whether
before, on or after the Closing Date) that would cause the Merger not to be so
treated. The parties will characterize the Merger as such a reorganization for
purposes of all Returns and other filings.
5.13 Intentionally Omitted.
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5.14 Letter of NDS's Accountants. NDS shall use its best efforts to cause
to be delivered to UEC a letter of Robinson Burdette Martin & Cowan, L.L.P.,
NDS's independent public accountants, dated a date within two business days
before the date on which the S-4 shall become effective and addressed to UEC, in
form and substance reasonably satisfactory to UEC and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the S-4. In connection with NDS's
efforts to obtain such letter, if requested by Robinson Burdette Martin & Cowan
L.L.P., UEC shall provide a representation letter to Robinson Burdette Martin &
Cowan, L.L.P. complying with SAS 72, if then required.
5.15 Stock Options. On the first business day following announcement of
this Merger Agreement to the public, NDS shall grant the NDS Stock Options
described on Annex B pursuant to option agreements approved by UEC. UEC shall
take all corporate action necessary to reserve for issuance a sufficient number
of shares of UEC Common Stock for delivery upon exercise of the NDS Stock
Options assumed by UEC in accordance with Section 2.1(d) and Section 5.5 of the
Merger Agreement. As soon as possible after the Effective Time, UEC shall file
with the SEC a registration statement on Form S-8 (or any successor form) with
respect to the shares of UEC Common Stock subject to the NDS Stock Options (to
the extent such shares of UEC Common Stock are permitted to be registered on
Form S-8).
5.16 Other Benefits. At UEC's request, such request deemed made hereby,
NDS shall award to each of S. Howard Norton, III and John W. Norton a $40,000
stay bonus to be paid by NDS to such individual contemporaneously with the
closing of the transactions contemplated by this Merger Agreement. In addition,
UEC requires, and Sherman H. Norton, Jr. and NDS agree, as a condition to the
Merger, (i) to amend Mr. Norton's existing employment agreement so that it does
not require Mr. Norton to provide any services to NDS or UEC or their
Subsidiaries following the Merger and (ii) to enter into a consulting/employment
agreement that requires UEC to pay Mr. Norton an aggregate fee/salary at
$25,000, provided such agreement shall not require Mr. Norton to provide any
services to UEC or Norton or any of their respective Subsidiaries.
5.17 Employment Agreements. S. Howard Norton, III and John W. Norton and
UEC agree to negotiate in good faith new 3-year employment agreements with
tailing 1 year non-compete arrangements and salaries at least equal to their
current annual salaries and benefits substantially similar to their current
benefits on the date of this Merger Agreement.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) NDS Stockholder Approval. This Merger Agreement and the Merger
shall have been approved and adopted by the affirmative vote of the holders
of a majority of the outstanding shares of NDS Common Stock entitled to
vote thereon.
(b) AMEX Listing. The shares of UEC Common Stock issuable to NDS
stockholders pursuant to this Merger Agreement shall have been authorized
for listing on the AMEX upon official notice of issuance.
(c) Other Approvals. The waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated and
all filings required to be made prior to the Effective Time with, and all
consents, approvals, permits and authorizations required to be obtained
prior to the Effective Time from, any Governmental Entity in connection
with the execution and delivery of this Merger Agreement and the
consummation of the transactions contemplated hereby shall have been made
or obtained (as the case may be), except where the failure to obtain such
consents, approvals, permits and authorizations would not be reasonably
likely to result in a Material
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Adverse Effect on UEC (assuming the Merger has taken place) or to
materially adversely affect the consummation of the Merger.
(d) S-4. The S-4 shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceedings seeking a
stop order.
(e) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect;
provided, however, that prior to invoking this condition, each party shall
have complied fully with its obligations under Section 5.7 hereof and, in
addition, shall use all reasonable efforts to have any such decree, ruling,
injunction or order vacated, except as otherwise contemplated by this
Merger Agreement.
6.2 Conditions of Obligations of UEC and Sub. The obligations of UEC and
Sub to effect the Merger are subject to the satisfaction of the following
conditions, any or all of which may be waived in whole or in part by UEC:
(a) Representations and Warranties. Each of the representations and
warranties of NDS set forth in this Merger Agreement shall be true and
correct in all material respects as of the date of this Merger Agreement
and (except to the extent such representations and warranties speak as of
an earlier date) as of the Closing Date as though made on and as of the
Closing Date, except where the failure to be so true and correct (without
giving effect to the individual materiality thresholds otherwise contained
in Section 3.1 hereof) would not have a Material Adverse Effect on NDS, and
UEC shall have received a certificate dated the Closing Date on behalf of
NDS from a duly authorized officer of NDS to that effect.
(b) Performance of Obligations of NDS. NDS shall have performed in all
material respects all obligations required to be performed by it under this
Merger Agreement at or prior to the Closing Date.
(c) Intentionally Omitted.
(d) Certifications and Opinion. NDS shall have furnished UEC with:
(i) a certified copy of a resolution or resolutions duly adopted by
the Board of Directors of NDS approving this Merger Agreement and
consummation of the Merger and the transactions contemplated hereby and
directing the submission of the Merger to a vote of the stockholders of
NDS;
(ii) a certified copy of a resolution or resolutions duly adopted
by the holders of a majority of the outstanding shares of NDS Common
Stock approving the Merger and the transactions contemplated hereby; and
(iii) a favorable opinion, dated the Closing Date, in customary
form and substance, of Solovay Edlin & Eiseman, P.C., counsel to NDS,
dated the Closing Date to the effect that:
(A) NDS is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has
corporate power to own its properties and assets and to carry on its
business as presently conducted and as described in the Registration
Statement;
(B) NDS has the requisite corporate power to effect the Merger
as contemplated by this Merger Agreement; the execution and delivery
of this Merger Agreement did not, and the consummation of the Merger
will not, violate any provision of NDS's Certificate of Incorporation
or Bylaws; and upon the filing by the Surviving Corporation of the
Certificate of Merger, the Merger shall become effective;
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(C) Each of NDS's Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of
its jurisdiction of incorporation, and has corporate power to own its
properties and assets and to carry on its business as presently
conducted; and
(D) The Board of Directors of NDS has taken all action required
by the DGCL and its Certificate of Incorporation or its Bylaws to
approve the Merger and to authorize the execution and delivery of
this Merger Agreement and the transactions contemplated hereby; the
Board of Directors and the stockholders of NDS have taken all action
required by the DGCL and NDS's Certificate of Incorporation and
By-Laws to authorize the Merger in accordance with the terms of this
Merger Agreement; and this Merger Agreement is a valid and binding
agreement of NDS enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws or judicial
decisions now or hereafter in effect relating to creditors' rights
generally or governing the availability of equitable relief; and
(e) Good Standing Certificates. NDS shall have furnished UEC with good
standing and existence certificates for NDS and its Subsidiaries from their
respective jurisdictions of incorporation and other jurisdictions as UEC
shall reasonably request.
(f) Tax Opinion. UEC shall have received an opinion, satisfactory to
the receiving person, dated on or about the date that is two days prior to
the date the Proxy Statement is first mailed to stockholders of NDS, of
Fulbright & Jaworski L.L.P., to the effect that, if the Merger is
consummated in accordance with the terms of this Merger Agreement, the
Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, UEC, Sub and NDS will
each be a party to that reorganization within the meaning of Section 368(b)
of the Code and no gain or loss will be recognized by UEC or Sub as a
result of the Merger, which opinion shall not have been withdrawn or
modified in any material respect. A second opinion, reconfirming the
foregoing and dated as of the Closing Date, satisfactory to the receiving
person, shall have been issued to UEC. In rendering such opinions, such
counsel may receive and rely upon representations of fact contained in
certificates of UEC, Sub and NDS.
6.3 Conditions of Obligations of NDS. The obligation of NDS to effect the
Merger is subject to the satisfaction of the following conditions, any or all of
which may be waived in whole or in part by NDS:
(a) Representations and Warranties. Each of the representations and
warranties of UEC and Sub set forth in this Merger Agreement shall be true
and correct in all material respects as of the date of this Merger
Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and
as of the Closing Date, except where the failure to be so true and correct
(without giving effect to the individual materiality thresholds otherwise
contained in Section 3.2 hereof) would not have a Material Adverse Effect
on UEC, and NDS shall have received a certificate dated the Closing Date by
a duly authorized officer of UEC to that effect.
(b) Performance of Obligations of UEC and Sub. UEC and Sub shall have
performed in all material respects all obligations required to be performed
by them under this Merger Agreement at or prior to the Closing Date.
(c) Certifications and Opinion. UEC shall have furnished NDS with:
(i) a certified copy of a resolution or resolutions duly adopted by
the Board of Directors or a duly authorized committee thereof of UEC and
Sub approving this Merger Agreement and consummation of the Merger and
the transactions contemplated hereby;
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(ii) a favorable opinion, dated the Closing Date, in customary form
and substance, of Fulbright & Jaworski LLP, Counsel to UEC, to the
effect that:
(A) Each of UEC and Sub is a corporation duly incorporated,
validly existing and in good standing under the laws of its
jurisdiction of incorporation and has corporate power to own its
properties and assets and to carry on its business as presently
conducted and as described in its Annual Report on Form 10-K for the
year ended December 31, 1998; UEC and Sub each has the requisite
corporate power to effect the Merger as contemplated by this Merger
Agreement; the execution and delivery of this Merger Agreement did
not, and the consummation of the Merger will not, violate any
provision of UEC's or Sub's Certificate of Incorporation or Bylaws;
and upon the filing by the Surviving Corporation of the Certificate
of Merger, the Merger shall become effective;
(B) The respective Board of Directors of UEC and Sub have taken
all action required under its jurisdiction of incorporation, its
Certificate of Incorporation or its Bylaws to authorize the execution
and delivery of this Merger Agreement and the transactions
contemplated hereby, and to authorize the Merger in accordance with
the terms of this Merger Agreement; and this Merger Agreement is a
valid and binding agreement of UEC and Sub enforceable in accordance
with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws or judicial decisions now or hereafter in effect relating to
creditors' rights generally or governing the availability of
equitable relief; and
(C) The shares of UEC Common Stock to be delivered to the
holders of NDS Common Stock pursuant to Article II are duly
authorized and when issued and delivered as contemplated by this
Merger Agreement will be legally and validly issued and fully paid
and nonassessable and no stockholders of UEC shall have any
preemptive rights with respect thereto either pursuant to the
organizational documents of UEC or under applicable law of the
jurisdiction of UEC's organization.
(d) Tax Opinion. NDS shall have received an opinion, satisfactory to
NDS, dated on or about the date that is two days prior to the date the
Proxy Statement is first mailed to stockholders of NDS, a copy of which
will be furnished to UEC, of outside counsel reasonably satisfactory to
NDS, to the effect that, if the Merger is consummated in accordance with
the terms of this Merger Agreement, the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section
368(a) of the Code, UEC, Sub and NDS will each be a party to that
reorganization within the meaning of Section 368(b) of the Code, no gain or
loss will be recognized by the stockholders of NDS as a result of the
Merger upon the conversion of shares of NDS Common Stock into shares of UEC
Common Stock and no gain or loss will be recognized by NDS as a result of
the Merger, which opinion shall not have been withdrawn or modified in any
material respect. A second opinion, reconfirming the foregoing and dated as
of the Closing Date, shall have been issued to NDS and a copy shall have
been provided to UEC. In rendering such opinions, such counsel may receive
and rely upon representations of fact contained in certificates of UEC, Sub
and NDS.
(e) Fairness Opinion. Houlihan Lokey Howard & Zukin has not revoked,
modified or changed its opinion referred to in Section 3.1(p) in any manner
adverse to the holders of the NDS Common Stock.
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ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Merger Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after approval of the matters presented in connection with the Merger by the
stockholders of NDS:
(a) by mutual written consent of NDS and UEC, or by mutual action of
their respective Boards of Directors;
(b) by either NDS or UEC if (i) the Merger shall not have been
consummated by December 31, 1999 (provided that the right to terminate this
Merger Agreement under this clause (i) shall not be available to any party
whose breach of any representation or warranty or failure to fulfill any
covenant or agreement under this Merger Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date);
(ii) any court of competent jurisdiction, or some other governmental body
or regulatory authority shall have issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall
have become final and nonappealable; or (iii) any required approval of the
stockholders of NDS shall not have been obtained by reason of the failure
to obtain the required vote upon a vote held at a duly held meeting of
stockholders or at any adjournment thereof;
(c) by UEC if (i) for any reason NDS fails to use its reasonable best
efforts to call and hold a stockholders' meeting for the purpose of voting
upon this Merger Agreement and the Merger by December 31, 1999; (ii) NDS
shall have failed to comply in any material respect with any of the
covenants or agreements contained in this Merger Agreement to be complied
with or performed by NDS at or prior to such date of termination (provided
such breach has not been cured within 30 days following receipt by NDS of
notice of such breach and is existing at the time of termination of this
Merger Agreement); (iii) any representations and warranties of NDS
contained in this Merger Agreement shall not have been true when made
(provided such breach has not been cured within 30 days following receipt
by NDS of notice of such breach and is existing at the time of termination
of this Merger Agreement) or on and as of the Effective Time as if made on
and as of the Effective Time (except to the extent it relates to a
particular date), except where the failure to be so true and correct
(without giving effect to the individual materiality thresholds otherwise
contained in Section 3.1 hereof) would not have a Material Adverse Effect
on NDS; or (iv) the Board of Directors of NDS or any committee thereof (A)
withdraws, modifies or changes its recommendation of this Merger Agreement
or the Merger in a manner adverse to the UEC or shall have resolved to do
any of the foregoing, or (B) approves or recommends, or proposes to approve
or recommend, any Acquisition Proposal. For purposes of determining whether
a representation or warranty is true or correct for purposes of this
Section 7.1(c), the qualifications and information set forth in Annex C
shall not be considered and shall be deemed not made.
(d) by NDS if (i) UEC or Sub shall have failed to comply in any
material respect with any of the covenants or agreements contained in this
Merger Agreement to be complied with or performed by it at or prior to such
date of termination (provided such breach has not been cured within 30 days
following receipt by UEC of notice of such breach and is existing at the
time of termination of this Merger Agreement); (ii) any representations and
warranties of UEC or Sub contained in this Merger Agreement shall not have
been true when made (provided such breach has not been cured within 30 days
following receipt by UEC of notice of such breach and is existing at the
time of termination of this Merger Agreement) or on and as of the Effective
Time as if made on and as of the Effective Time (except to the extent it
relates to a particular date), except where the failure to be so true and
correct (without giving effect to the individual materiality thresholds
otherwise contained in Section 3.2 hereof) would not have a Material
Adverse Effect on UEC; or (iii) pursuant to Section 4.2(b).
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(e) By NDS if by June 30, 1999, UEC has not given NDS reasonable
assurance that the S-4 will be declared effective by the SEC in sufficient
time to consummate the Merger by December 31, 1999.
7.2 Effect of Termination.
(a) In the event of termination of this Merger Agreement by either NDS
or UEC as provided in Section 7.1, this Merger Agreement shall forthwith
become void and there shall be no liability or obligation on the part of
NDS or UEC except (i) with respect to this Section 7.2, the second and
third sentences of Section 5.1 and Section 8.1, and (ii) to the extent that
such termination results from the willful breach by a party hereto of any
of its representations or warranties or of any of its covenants or
agreements, in each case, as set forth in this Merger Agreement except as
provided in Section 8.9.
(b) If UEC or NDS, as applicable, terminates this Merger Agreement
pursuant to Section 4.2(b) or Sections 7.1(c)(iv)(B), NDS shall immediately
pay UEC a fee of $1.0 million (the "Termination Fee") in cash or by wire
transfer of immediately available funds to an account designated by UEC.
(c) If UEC terminates this Merger Agreement pursuant to Section
7.1(c)(iv)(A) and NDS consummates a transaction pursuant to an Acquisition
Proposal on or prior to September 30, 2000, NDS shall pay to UEC the
Termination Fee. The Termination Fee payable under this Section 7.2(c)
shall be payable on the consummation of such transaction.
(d) NDS also agrees to pay to UEC the Termination Fee if (i) after the
date hereof and before the termination of this Merger Agreement, an
Acquisition Proposal shall have been made and publicly announced by any
party, (ii) the stockholders of NDS shall not have approved the Merger and
(iii) on or prior to September 30, 2000, NDS consummated a transaction
pursuant to an Acquisition Proposal. The Termination Fee payable under this
Section 7.2(d) shall be payable on the consummation of such transaction.
(e) If this Agreement shall be terminated pursuant to Sections
7.1(c)(i), 7.1(c)(ii) or 7.2(c)(iii), then NDS shall pay UEC any and all
expenses (not to exceed $400,000) incurred by UEC directly attributable to
the proposed acquisition of NDS including negotiation and execution of this
Agreement and the attempted completion of the Merger. Each such expense
shall be paid within thirty days after UEC shall have submitted the written
request for payment of such expense except that in the event NDS shall in
good faith raise any question as to whether any particular expense is
payable by NDS under this subsection (e), then NDS shall be entitled to
delay payment of such expense until UEC shall supply documentation
sufficient to establish that the particular expense is payable under the
standards specified in this subsection (e). In no event shall any request
for additional documentation to which UEC shall be entitled under this
subsection (e) of itself entitle NDS to delay payment of any other expense
owed by NDS under this subsection (e). If NDS shall for any reason fail to
make payment specified herein at the time required, then NDS shall pay UEC
on demand interest at a per annum rate equal to 300 basis points in excess
of the prime rate (as reported in the Wall Street Journal) (or the maximum
lawful rate if lesser than such rate) on the amount remaining unpaid from
that time until such payment shall be received by UEC and shall also
reimburse UEC for all attorney's fees and other expenses which UEC shall
reasonably incur to enforce its rights to such payment.
(f) If this Agreement shall be terminated pursuant to Sections
7.1(d)(i) or 7.1(d)(ii), then UEC shall pay NDS any and all expenses (not
to exceed $250,000) (the "NDS Expense Amount") incurred by NDS directly
attributable to the proposed acquisition of NDS including negotiation and
execution of this Merger Agreement and the attempted completion of the
Merger. Each such expense shall be paid within thirty days after NDS shall
have submitted the written request for payment of such expense except that
in the event NDS shall in good faith raise any question as to whether any
particular expense is payable by UEC under this subsection (f), then UEC
shall be entitled to delay
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payment of such expense until NDS shall supply documentation sufficient to
establish that the particular expense is payable under the standards
specified in this subsection (f). In no event shall any request for
additional documentation to which UEC shall be entitled under this
subsection (f) of itself entitle UEC to delay payment of any other expense
owed by UEC under this subsection (f). If UEC shall for any reason fail to
make payment specified herein at the time required, then UEC shall pay NDS
on demand interest at a per annum rate equal to 300 basis points in excess
of the prime rate (as reported in the Wall Street Journal) (or the maximum
lawful rate if lesser than such rate) on the amount remaining unpaid from
that time until such payment shall be received by NDS and shall also
reimburse NDS for all attorney's fees and other expenses which NDS shall
reasonably incur to enforce its rights to such payment. In addition, in the
event NDS has terminated the Merger Agreement pursuant to Section 7.1(d)(i)
and UEC's failure to materially comply with such agreements or covenants
was due to circumstances or events reasonably within its control or
primarily caused by it, UEC shall pay, in addition to the NDS Expense
Amount, the sum of $250,000 (the "NDS Termination Fee"). In addition, in
the event NDS has terminated the Merger Agreement pursuant to Section
7.1(e) of the Merger Agreement, UEC shall pay, in addition to the NDS
Expense Amount, the sum of $125,000; provided, however, such amount shall
be paid in lieu of (and not in addition to) the NDS Termination Fee.
(g) The parties hereto agree that the agreements contained in this
Section 7.2 are an integral part of this transactions contemplated by this
Merger Agreement and constitute liquidated damages, and each party's sole
and exclusive remedy in the event of termination of this Merger Agreement,
and not a penalty.
7.3 Amendment. This Merger Agreement may be amended by the parties hereto,
by action taken or authorized by their respective Boards of Directors, at any
time before or after approval of the matters presented in connection with the
Merger by the stockholders of NDS, but, after any such approval, no amendment
shall be made which by law requires further approval by such stockholders
without such further approval. This Merger Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto;
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto; and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Payment of Expenses. Except as set forth in Section 7.2, each party
hereto shall pay its own expenses incident to preparing for entering into and
carrying out this Merger Agreement and the consummation of the transactions
contemplated hereby, whether or not the Merger shall be consummated.
8.2 Nonsurvival of Representations, Warranties and Agreements. None of the
representations, warranties and agreements in this Merger Agreement or in any
instrument delivered pursuant to this Merger Agreement shall survive the
Effective Time and any liability for breach or violation thereof shall terminate
absolutely and be of no further force and effect at and as of the Effective
Time, except (i) for the agreements contained in Sections 2.1, 2.2, 5.5, 5.6,
5.12 and 7.2 and this Article VIII and (ii) as otherwise provided in Section
8.4. The Confidentiality Agreements shall survive the execution and delivery of
this Merger Agreement, and the provisions of the Confidentiality Agreements
shall apply to all information and material delivered hereunder.
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8.3 Notices. Any notice or communication required or permitted hereunder
shall be in writing and either delivered personally, telegraphed or telecopied
or sent by certified or registered mail, postage prepaid, and shall be deemed to
be given, dated and received when so delivered personally, telegraphed or
telecopied or, if mailed, five business days after the date of mailing to the
following address or telecopy number, or to such other address or addresses as
such person may subsequently designate by notice given hereunder:
(a) if to UEC or Sub, to:
16800 Greenspoint Park, Suite 225 N
Houston, Texas 77060
Attention: Chief Financial Officer
Fax: (281) 875-9145
with a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010
Attention: Charles L. Strauss, Esquire
Fax: (713) 651-5246
and (b) if to NDS, to:
Norton Drilling Services, Inc.
5211 Brownfield Highway, Suite 230
Lubbock, Texas 79407
Attention: Howard Norton, President
Fax: (806) 785-8420
with a copy to:
Solovay Edlin & Eiseman, P.C.
845 Third Avenue
New York, New York 10022
Attention: Michael B. Solovay, Esq.
Fax: (212) 355-4608
8.4 Limited Joinder by Primary Stockholders. In order to induce UEC and
Sub to enter into this Merger Agreement, each of the Primary Stockholders agree
as follows:
(a) General Indemnity by the Primary Stockholders. The Primary
Stockholders, jointly and severally covenant and agree that such Primary
Stockholders will indemnify, hold harmless and defend UEC and Sub and their
respective officers, directors, employees, agents, representatives and
affiliates (including NDS and its Subsidiaries) and their respective heirs,
legal representatives, successors and assigns (collectively, the "UEC
Indemnified Parties"), at all times from and after the Closing Date, from
and against 20% of any claims, liabilities, obligations, losses, damages,
costs, expenses (including reasonable attorney's fees and costs and
expenses of investigation) ("Damages") of or to any of UEC Indemnified
Parties that may now or in the future be paid, incurred or suffered by any
UEC Indemnified Party or asserted against any UEC 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 any party hereto other than UEC or Sub under this
Merger Agreement or from any misrepresentation in or omission from any
list, schedule, certificate or other instrument furnished or to be
furnished to UEC or Sub pursuant to the terms of this Merger Agreement.
(b) Indemnification Basket; Limitation; Effect of Materiality
Qualifiers; Pro Rata Obligation.
(i) For purposes of determining whether there has been a
misrepresentation or breach of a representation or warranty for purposes
of this Section 8.4 only, all representations and warranties
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shall be deemed to have been made with the following qualifier: "To the
Primary Stockholders' knowledge after thorough investigation". There
shall be no indemnification under Section 8.4(a) for a misrepresentation
or breach of a representation or warranty recoverable against a party
obligated to provide indemnification under Section 8.4(a) until the
Damages (gross, without reduction to the Primary Stockholders 20%
proportionate share) for which indemnification is sought from such party
(for this purpose, the Primary Stockholders shall be deemed a single
party) exceed $250,000 in the aggregate (the "Basket Amount"), and once
all such Damages (gross, without reduction to the Primary Stockholders
20% proportionate share) exceed the Basket Amount, such party shall be
obligated to the UEC Indemnified Parties for any and all such Damages
exceeding the Basket Amount. In addition, the Primary Stockholders
obligation to provide indemnification under Section 8.4(a) shall be
limited in the aggregate to payments to all UEC Indemnified Parties of
$1,500,000.
(ii) For purposes of the indemnification under Section 8.4(a), all
representations and warranties shall be deemed to survive until December
31, 2000 (the "Survival Period"). Any claim for indemnification with
respect to a misrepresentation or breach of a representation or warranty
breach or inaccuracy must be made within the Survival Period. Any claim
for indemnification that is made during the Survival 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.
(iii) For purposes of determining the right of a party to make a
claim for indemnification for a misrepresentation or breach of
representation or warranty under Section 8.4(a), 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 threshold provided for above under the "Basket Amount"
is intended to be the only materiality qualification for such matters
for purposes of indemnification.
(c) Waiver of Contribution. Any claim for indemnification made by any
UEC Indemnified Party pursuant to this Section 8.4 shall be asserted
against the Primary Stockholders and their heirs, legal representatives,
successors and assigns. Such Primary Stockholders hereby expressly
acknowledges and agrees that such Primary Stockholder shall be liable and
responsible therefor to the extent provided in this Section 8.4 and that it
shall not seek or receive indemnification or contribution from NDS or its
Subsidiaries, with respect to such claim for indemnification.
(d) Covenant Not to Compete With the Business. Each of the Primary
Stockholders agrees that, effective as of the Closing Date, for a period of
three years thereafter in all jurisdictions other than Louisiana, which
shall be applicable for two years only, such Primary Stockholder will not,
and will cause each of his Affiliates to not, without the consent of UEC,
directly or indirectly, provide contract land drilling services in the
State of Texas, Oklahoma, New Mexico and Louisiana (including all parishes
therein) and the country of Mexico except for the account of UEC and its
Affiliates. The Primary Stockholders acknowledge that a remedy at law for
any breach or attempted breach of this Section 8.4(d) will be inadequate
and further agree that any breach of this Section 8.4(d) will result in
irreparable harm to NDS and UEC and NDS and UEC shall, in addition to any
other remedy that may be available to either of them, be entitled to
specific performance and injunctive and other equitable relief in case of
any such breach or attempted breach. The Primary Stockholders acknowledge
that this covenant not to compete is being provided as an inducement to UEC
to consummate the Merger and that this Section 8.4(d) 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 UEC and NDS. Whenever
possible, each provision of this Section 8.4(d) shall be interpreted in
such a manner as to be effective and valid under applicable law but if any
provision of this Section 8.4(d) shall be prohibited by or invalid under
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applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remaining provisions of
this Section 8.4(d). If any provision of this Section 8.4(d) 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 8.4(d) but shall be confined in its operation to
the provision of this Section 8.4(d) directly involved in the controversy
in which such judgment shall have been rendered. In the event that the
provisions of this Section 8.4(d) 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.
8.5 Interpretation: Certain Definitions. When a reference is made in this
Merger Agreement to Sections, such reference shall be to a Section of this
Merger Agreement unless otherwise indicated. The table of contents, glossary of
defined terms and headings contained in this Merger Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Merger Agreement. Whenever the word "include," "includes" or "including" is
used in this Merger Agreement, it shall be deemed to be followed by the words
"without limitation." The phrase "made available" in this Merger Agreement shall
mean that the information referred to has been made available if requested by
the party to whom such information is to be made available. As used in this
Merger Agreement, "affiliate" means, as to the person specified, any person
controlled, controlled by, or under common control with such person, and
"person" means any individual, corporation, general or limited partnership,
limited liability company, joint venture, estate, trust or other entity.
8.6 Counterparts. This Merger Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.7 Entire Agreement; No Third-Party Beneficiaries. This Merger Agreement
(together with the Confidentiality Agreement, and any other documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereto and (b) except as provided
in Section 5.6, is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
8.8 Governing Law. This Merger Agreement shall be governed and construed
in accordance with the laws of the State of Texas, without giving effect to the
principles of conflicts of law thereof.
8.9 No Remedy in Certain Circumstances. Each party agrees that, should any
court or other competent authority hold any provision of this Merger Agreement
or part hereof to be null, void or unenforceable, or order any party to take any
action inconsistent herewith or not to take an action consistent herewith or
required hereby, the validity, legality and enforceability of the remaining
provisions and obligations contained or set forth herein shall not in any way be
affected or impaired thereby, unless the foregoing inconsistent action or the
failure to take an action constitutes a material breach of this Merger Agreement
or makes the Merger Agreement impossible to perform in which case this Merger
Agreement shall terminate pursuant to Article VII hereof. Except as otherwise
contemplated by this Merger Agreement, to the extent that a party hereto took an
action inconsistent herewith or failed to take action consistent herewith or
required hereby pursuant to an order or judgment of a court or other competent
authority, such party shall not incur any liability or obligation unless such
party breached its obligations under Section 5.3 hereof or did not in good faith
seek to resist or object to the imposition or entering of such order or
judgment.
8.10 Assignment. Neither this Merger Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to any
newly formed direct or indirect wholly
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owned Subsidiary of UEC. Subject to the preceding sentence, this Merger
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
8.11 Enforcement of the Agreement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Merger
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Merger Agreement and
to enforce specifically the terms and provisions hereof in any court of the
United States located in the State of Texas, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (a) consents to submit itself to the personal jurisdiction of any
Federal or state court sitting in Texas in the event any dispute between the
parties hereto arises out of this merger Agreement solely in connection with
such a suit between the parties, (b) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court and (c) agrees that it will not bring any action relating to this
Merger Agreement in any court other than a Federal or state court sitting in
Texas.
A-34
<PAGE> 82
IN WITNESS WHEREOF, each of the following individuals has caused this
Merger Agreement to be signed, and each party that is not an individual has
caused this Merger Agreement to be signed, by its respective officers thereunto
duly authorized, all as of the date first written above.
UTI ENERGY CORP.
By: /s/ JOHN E. VOLLMER III
----------------------------------
John E. Vollmer III
Chief Financial Officer
NDS ACQUISITION CORP.
By: /s/ JOHN E. VOLLMER III
----------------------------------
John E. Vollmer III
Chief Financial Officer
NORTON DRILLING SERVICES, INC.
By: /s/ S. HOWARD NORTON, III
----------------------------------
S. Howard Norton, III
President
PRIMARY STOCKHOLDERS
/s/ SHERMAN H. NORTON, JR.
------------------------------------
Sherman H. Norton, Jr.
/s/ S. HOWARD NORTON, III
------------------------------------
S. Howard Norton, III
/s/ JOHN W. NORTON
------------------------------------
John W. Norton
A-35
<PAGE> 83
ANNEX A TO MERGER AGREEMENT
SHERMAN H. NORTON, JR.
S. HOWARD NORTON, III
JOHN W. NORTON
NORTON FAMILY TRUST
A-36
<PAGE> 84
ANNEX B TO MERGER AGREEMENT
<TABLE>
<S> <C> <C> <C>
JOHN W. NORTON 114,000 NORTON SHARES > converts into 30,000
- UTI shares
S. HOWARD NORTON, III 114,000 NORTON SHARES > converts into 30,000
- UTI shares
</TABLE>
3 Year vesting, 1/3, 1/3, 1/3
Exercise price equals greater of (A) $2.63 per share or (B) closing price for a
share of NDS Common Stock on date of grant.
A-37
<PAGE> 85
EXHIBIT B
[LETTERHEAD OF HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC]
April 26, 1999
The Board of Directors of
Norton Drilling Services, Inc.
c/o: Mr. S. Howard Norton
President and Chief Executive Officer
Norton Drilling Services, Inc.
5211 Brownfield Highway
Suite 230
Lubbock, Texas 79407-3501
Dear Mr. Norton:
At your request, on behalf of the stockholders of Norton Drilling Services,
Inc. (the "Company" hereinafter), we have analyzed certain financial information
in relation to the Company's proposed acquisition by UTI Energy Corp., a
Delaware corporation ("UTI" hereinafter) as set forth herein, and submit this
letter on our findings.
The acquisition would involve a merger between a subsidiary of UTI ("Sub"
hereinafter) and the Company. The proposed consideration would involve UTI
issuing to the shareholders of the Company .2631579 of a share of UTI Common
Stock, $.001 par value, for every one share of the Company's Common Stock. Such
transaction and other related transactions disclosed to Houlihan Lokey are
referred to collectively herein as the "Transaction."
You have requested our opinion (the "Opinion") as to the matters set forth
below. The Opinion does not address the Company's underlying business decision
to effect the Transaction. We have not been requested to, and did not, solicit
third party indications of interest in acquiring all or any part of the Company.
Furthermore, at your request, we have not negotiated the Transaction or advised
you with respect to alternatives to it.
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. reviewed the Company's annual report to shareholders and Form 10-K for
the fiscal year ended November 30, 1998 and quarterly reports on Form
10-Q for the quarters ended February 28, 1999, and August 31, 1998,
which the Company's management has identified as being the most current
financial statements available;
2. reviewed UTI's Form 10-K for the fiscal year ended December 31, 1998;
3. reviewed a copy of the Draft Agreement and Plan of Merger among UTI
Energy Corp., NDS Acquisition Corp., and Norton Drilling Services, Inc.
and the Primary Shareholders of Norton Drilling Services, Inc. dated
April 26, 1999;
4. reviewed a draft press release dated April 26, 1999, detailing the
Transaction;
5. reviewed UTI's April 26, 1999, press release regarding its March 31,
1999, quarter earnings;
<PAGE> 86
6. met with certain members of the senior management of the Company to
discuss the operations, financial condition, future prospects and
projected operations and performance of the Company;
7. spoke with Mr. John E. Vollmer III, Vice President, Treasurer and Chief
Financial Officer, of UTI to discuss the operations, financial
condition, future prospects and projected operations and performance of
the combined Company and UTI's rational for the Transaction;
8. visited the business offices of the Company;
9. reviewed the historical market prices and trading volume for the
Company's publicly traded securities;
10. reviewed the historical market prices and trading volume for UTI's
publicly traded securities;
11. reviewed certain other publicly available financial data for certain
companies that we deem comparable to the Company, and publicly
available prices and premiums paid in other transactions that we
considered similar to the Transaction; and
12. conducted such other studies, analyses and inquiries as we have deemed
appropriate.
We have relied upon and assumed, without independent verification, that the
financial information provided to us has been reasonably prepared and reflects
the best currently available estimates of the financial condition of the Company
and that there has been no material change in the assets or financial condition
of the Company since the date of the most recent financial statements made
available to us. Projections for the Company, UTI, or the proposed combined
company were not made available to us. As such, our opinion does not include an
analysis of the future performance of the aforementioned entities.
We have not made any physical inspection or independent appraisal of any of
the properties or assets of the Company. Our opinion is necessarily based on
business, economic, market and other conditions as they exist and can be
evaluated by us at the date of this letter.
The Company, like other companies and any business entities analyzed by
Houlihan Lokey or which are otherwise involved in any manner in connection with
this Opinion, could be materially affected by complications that may occur, or
may be anticipated to occur, in computer-related applications as a result of the
year change from 1999 to 2000 (the "Y2K Issue"). In accordance with
long-standing practice and procedure, Houlihan Lokey's services are not designed
to detect the likelihood and extent of the effect of the Y2K Issue, directly or
indirectly, on the financial condition and/or operations of a business. Further,
Houlihan Lokey has no responsibility with regard to the Company's efforts to
make its systems, or any other systems (including its vendors and service
providers), Year 2000 compliant on a timely basis. Accordingly, Houlihan Lokey
shall not be responsible for any effect of the Y2K Issue on the matters set
forth in this Opinion.
In accordance with recognized professional ethics, our fees for this
service are not contingent upon the opinion expressed herein, and neither
Houlihan Lokey Howard & Zukin Financial Advisors, Inc. nor any of its employees
have a present or intended financial interest in the Company.
Based upon the foregoing, and in reliance thereon, it is our opinion that
the consideration to be received by the stockholders of the Company in
connection with the Transaction is fair to them from a financial point of view.
HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC.
<PAGE> 87
LIMITING FACTORS AND OTHER ASSUMPTIONS
In accordance with recognized professional ethics, the professional fee for
this service is not contingent upon Houlihan Lokey Howard & Zukin Financial
Advisors, Inc.'s ("Houlihan Lokey") conclusion of value, and neither Houlihan
Lokey nor any of its employees has a present or intended financial interest in
the Company.
The opinion of value expressed herein is valid only for the stated purpose
and date of the letter.
The conclusions are based upon the assumption that present management would
continue to maintain the character and integrity of the enterprise through any
sale, reorganization, or diminution of the owners' participation.
This letter and the conclusions arrived at herein are for the exclusive use
of the Company. Furthermore, the letter and conclusions are not intended by the
author, and should not be construed by the reader, to be investment advice in
any manner whatsoever. The conclusions reached herein represent the considered
opinion of Houlihan Lokey based upon information furnished to it by the Company
and other sources. The extent to which the conclusions and valuations arrived at
herein should be relied upon, should be governed and weighted accordingly.
No opinion, counsel or interpretation is intended in matters that require
legal or other appropriate professional advice. It is assumed that such
opinions, counsel or interpretations have been or will be obtained from the
appropriate professional sources.
<PAGE> 88
PRELIMINARY COPIES
NORTON DRILLING SERVICES, INC.
SPECIAL MEETING OF STOCKHOLDERS
------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Sherman H. Norton, Jr. and David W. Ridley,
and each of them, with full power of substitution and resubstitution, to vote
all shares of common stock of Norton Drilling Services, Inc. (the "Company")
that the undersigned is entitled to vote at a Special Meeting of Stockholders to
be held at , on the day of , 1999, at 10:00 a.m.
local time, and at any adjournment or postponement thereof, hereby ratifying all
that said proxies or their substitutes or resubstitutes may do by virtue hereof,
and the undersigned authorizes and instructs said proxies to vote as follows:
1. APPROVAL OF THE MERGER: To consider and vote upon a proposal to approve
and adopt a merger agreement among UTI Energy Corp. ("UTI"), NDS Acquisition
Corp., a wholly-owned subsidiary of UTI ("Merger Sub"), the Company and the
primary stockholders of the Company, and the merger of Merger Sub with and into
the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
and in his discretion, upon any other matters that may properly come before the
meeting or any adjournment or postponement thereof.
(Continued and to be dated and signed on the other side.)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Receipt of the Notice of Special Meeting and of the Proxy Statement annexed
to the same, as well as the Annual Report on Form 10-K of the Company and the
Quarterly Report of Form 10-Q of the Company, is hereby acknowledged.
Dated , 199_
(Signature of Stockholder)
(Signature of Stockholder)
Your signature should appear the same as your name appears herein. If signing as
attorney, executor, administrator, trustee or guardian, please indicate the
capacity in which signing. When signing as joint tenants, all parties to the
joint tenancy must sign. When the proxy is given by a corporation, it should be
signed by an authorized officer.
II-1
<PAGE> 89
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Delaware law, a corporation may include provisions in its certificate
of incorporation that will relieve its directors of monetary liability for
breaches of their fiduciary duty to the corporation, except under certain
circumstances, including a breach of the director's duty of loyalty, acts or
omissions of the director not in good faith or which involve intentional
misconduct or a knowing violation of law, the approval of an improper payment of
a dividend or an improper purchase by the corporation of stock or any
transaction from which the director derived an improper personal benefit. The
Registrant's Restated Certificate of Incorporation, as amended, provides that
the Registrant's directors are not liable to the Registrant or its stockholders
for monetary damages for breach of their fiduciary duty, subject to the
described exceptions specified by Delaware law.
Section 145 of the Delaware General Corporation Law grants to the
Registrant the power to indemnify each officer and director of the Registrant
against liabilities and expenses incurred by reason of the fact that he is or
was an officer or director of the Registrant if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Registrant and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The amended By-laws of the
Registrant provide for indemnification of each officer and director of the
Registrant to the fullest extent permitted by Delaware law.
Section 145 of the Delaware General Corporation Law also empowers the
Registrant to purchase and maintain insurance on behalf of any person who is or
was an officer or director of the Registrant against liability asserted against
or incurred by him in any such capacity, whether or not the Registrant would
have the power to indemnify such officer or director against such liability
under the provisions of Section 145. The Registrant does maintain a directors'
and officers' liability policy for such purposes.
II-2
<PAGE> 90
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 -- Agreement and Plan of Merger, dated as of April 26, 1999,
by and among UTI Energy Corp., NDS Acquisition Corp.,
Norton Drilling Services, Inc. and the primary
stockholders of Norton Drilling Services, Inc.
(incorporated by reference from the Registrant's
Quarterly Report on Form 10-Q for the three months ended
March 31, 1999).
3.1** -- Restated Certificate of Incorporation of the Registrant,
as amended.
3.2** -- Bylaws of the Registrant, as amended.
3.3 -- Rights Agreement dated as of February 26, 1999, between
the Registrant, and ChaseMellon Shareholder Services,
L.L.C. as Rights Agent (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K
dated February 26, 1999, filed with the Securities and
Exchange Commission on March 4, 1999).
3.4 -- Certificate of Designation, Powers, Preferences and
Rights of Series I Preferred Stock dated February 26,
1999 (incorporated by reference to Exhibit 4.2 to the
Registrant's Current Report on Form 8-K dated February
26, 1999, filed with the Securities and Exchange
Commission on March 4, 1999).
3.5 -- Form of Right Certificate (incorporated by reference to
Exhibit 4.3 to the Registrant's Current Report on Form
8-K dated February 26, 1999, filed with the Securities
and Exchange Commission on March 4, 1999).
4.1 -- See Exhibit Nos. 3.1 through 3.5 for provisions of the
Restated Certificate of Incorporation and amended By-laws
of the Registrant and other instruments defining the
rights of the holders of Common Stock.
4.2 -- Form of Common Stock Certificate (incorporated by
reference to Amendment No. 1 to the Registrant's
Registration Statement on Form S-1 (No. 33-69726)).
4.3 -- Registration Rights Agreement with Bear Stearns & Co.
Inc. dated March 25, 1994, as assigned to Remy Capital
Partners III, L.P. (incorporated by reference to Exhibit
10.17 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993).
4.4 -- Stock Option Agreement dated as of December 19, 1995,
between the Registrant and Remy Consultants Incorporated
(incorporated by reference to Exhibit 2 to the
Registrant's Amendment No. 1 to Schedule 13D dated August
8, 1996).
4.5 -- Amended and Restated UTI Energy Corp. 1996 Employee Stock
Option Plan (incorporated by reference to Exhibit 4.6 to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997).
4.6 -- Warrant Agreement, dated April 11, 1997, by and between
UTI Energy Corp. and Southland Drilling Company, Ltd.
(incorporated by reference to Exhibit 10.1 to the
Registrant's Current Report on Form 8-K dated April 11,
1997).
4.7 -- Note Purchase Agreement dated April 11, 1997, by and
among FWA Drilling Company, Inc., International Petroleum
Service Company, Triad Drilling Company, Universal Well
Services, Inc., USC, Incorporated, Panther Drilling, Inc.
and Canpartners Investments IV, LLC (incorporated by
reference to Schedule 13D relating to the Registrant
filed on April 22, 1997 by Canpartners Investments IV,
LLC, Canpartners Incorporated, Mitchell R. Julis, Joshua
S. Friedman and R. Christian B. Evensen).
</TABLE>
II-3
<PAGE> 91
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.8 -- Note dated April 11, 1997, payable by FWA Drilling
Company, Inc., International Petroleum Service Company,
Triad Drilling Company, Universal Well Services, Inc.,
USC, Incorporated and Panther Drilling, Inc. to
Canpartners Investments IV, LLC. (incorporated by
reference to Exhibit 10.5 to the Registrant's Current
Report on Form 8-K dated April 11, 1997).
4.9 -- Warrant Agreement dated April 11, 1997, by and between
UTI Energy Corp. and Canpartners Investments IV, LLC.
(incorporated by reference to Exhibit 10.6 to the
Registrant's Current Report on Form 8-K dated April 11,
1997).
4.10 -- Warrant dated April 11, 1997, by and between UTI Energy
Corp. and Canpartners Investments IV, LLC. (incorporated
by reference to Exhibit 10.7 to the Registrant's Current
Report on Form 8-K dated April 11, 1997).
4.11 -- Registration Rights Agreement dated April 11, 1997, by
and between UTI Energy Corp. and Canpartners Investments
IV, LLC. (incorporated by reference to Exhibit 10.8 to
the Registrant's Current Report on Form 8-K dated April
11, 1997).
4.12 -- Amended and Restated UTI Energy Corp. Non-Employee
Director Stock Option Plan (incorporated by reference to
Exhibit 4.18 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1997).
4.13 -- 1993 Non-Qualified Incentive Stock Option Plan
(incorporated by reference to Amendment No. 3 to the
Registrant's Registration Statement on Form S-1 (No.
33-69726)).
4.14 -- Amended and Restated 1997 Long-Term Incentive Plan
(incorporated by reference to Exhibit 4.2 to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997).
4.15 -- Form of Warrant to purchase an aggregate of 75,000 shares
of Common Stock at $26.50 per share, which was issued to
the former shareholders of Suits Enterprises, Inc. listed
on such exhibit in the amounts set forth opposite such
former shareholder's name on such exhibit (incorporated
by reference from the Registrant's Quarterly Report on
Form 10-Q for the six months ended June 30, 1998).
4.16 -- Form of Warrant to purchase an aggregate of 25,000 shares
of Common Stock at $35.00 per share, which was issued to
the former shareholders of Suits Enterprises, Inc. listed
on such exhibit in the amounts set forth opposite such
former shareholder's name on such exhibit (incorporated
by reference from the Registrant's Quarterly Report on
Form 10-Q for the six months ended June 30, 1998).
4.17 -- Form of Note Payable in the aggregate amount of $7.79
million, which was issued to the former shareholders of
Suits Enterprises, Inc. listed on such exhibit in the
amounts set forth opposite such former shareholder's name
on such exhibit (incorporated by reference from the
Registrant's Quarterly Report on Form 10-Q for the six
months ended June 30, 1998).
</TABLE>
II-4
<PAGE> 92
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.18 -- Amended and Restated Loan and Security Agreement dated
June 19, 1998, by and among FWA Drilling Company, Inc.,
International Petroleum Service Company, Triad Drilling
Company, Universal Well Services, Inc., USC,
Incorporated, the Registrant, UTICO, Inc., Panther
Drilling, Inc., J.S.M. & Associates, Inc., Peterson
Drilling Company and Mellon Bank, N.A. (incorporated by
reference from the Registrant's Quarterly Report on Form
10-Q for the six months ended June 30, 1998).
4.19 -- Amended and Restated Note dated June 19, 1998, by and
among FWA Drilling Company, Inc., International Petroleum
Service Company, Triad Drilling Company, Universal Well
Services, Inc., USC, Incorporated, the Registrant, UTICO,
Inc., Panther Drilling, Inc., J.S.M. & Associates, Inc.,
Peterson Drilling Company and Mellon Bank, N.A.
(incorporated by reference from the Registrant's
Quarterly Report on Form 10-Q for the six months ended
June 30, 1998).
4.20 -- Amended and Restated Subordination Agreement dated June
19, 1998, by and among FWA Drilling Company, Inc.,
International Petroleum Service Company, Triad Drilling
Company, Universal Well Services, Inc., USC,
Incorporated, the Registrant, UTICO, Inc., Panther
Drilling, Inc., J.S.M. & Associates, Inc., Peterson
Drilling Company and Melon Bank, N.A. (incorporated by
reference from the Registrant's Quarterly Report on Form
10-Q for the six months ended June 30, 1998).
4.21 -- Amended and Restated Contribution Agreement dated June
19, 1998, by and among FWA Drilling Company, Inc.,
International Petroleum Service Company, Triad Drilling
Company, Universal Well Services, Inc., USC,
Incorporated, the Registrant, UTICO, Inc., Panther
Drilling, Inc., J.S.M. & Associates, Inc., Peterson
Drilling Company and Mellon Bank, N.A. (incorporated by
reference from the Registrant's Quarterly Report on Form
10-Q for the six months ended June 30, 1998).
5.1** -- Opinion of Fulbright & Jaworski L.L.P.
8.1** -- Tax Opinion of Fulbright & Jaworski L.L.P. with respect
to certain tax matters.
8.2** -- Tax Opinion of Riker Danzig with respect to certain tax
matters.
21.1 -- Subsidiaries of the Registrant. Incorporated by reference
to Exhibit 21.1 of the Registrant's Annual Report on Form
10-K for the year ended December 31, 1998.
23.1** -- Consent of Fulbright & Jaworski L.L.P. (contained in
Exhibit 5.1).
23.2** -- Consent of Ernst & Young LLP.
23.3** -- Consent of Riker Danzig (contained in Exhibit 8.2).
23.4** -- Consent of Robinson Burdette Martin & Cowan, L.L.P.
24.1* -- Power of Attorney (contained on the signature page
hereto).
</TABLE>
- ---------------
* Filed herewith
** To be filed by amendment
As permitted by Item 601(b)(4)(iii)(A) of Regulation S-K, the Registrant
has not filed with this Registration Statement on Form S-4 certain instruments
defining the right of holders of long-term debt of the Registrant and its
subsidiaries because the total amount of securities authorized under any of such
instruments does not exceed 10% of the total assets of the Registrant and its
subsidiaries on a consolidated basis. The Registrant agrees to furnish a copy of
any such agreement to the Commission upon request. In
II-5
<PAGE> 93
addition, pursuant to Item 601(b)(2), schedules to exhibit 2.1 have not been
filed. Such schedules relate to the representations and warranties of the
parties to such agreements and will be furnished supplementally to the
Commission upon request.
(b) Financial Statement Schedules
None.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include in any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of this Registration Statement (or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the maximum aggregate offering price
may be reflected in the form of prospectus filed with the SEC pursuant
to Rule 424(b) under the Securities Act, if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration
Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the Registration Statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the Registrant pursuant to Section 13 or
15(d) of the Securities and Exchange Act of 1934 that are incorporated
by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934, as amended) that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this Registration Statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), the issuer
II-6
<PAGE> 94
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(d) The undersigned Registrant undertakes that every prospectus: (i) that
is filed pursuant to the paragraph (c) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Securities Act and
is used in connection with an offering of securities subject to Rule 415, will
be filed as a part of an amendment to the Registration Statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(f) The undersigned Registrant hereby undertakes that: (1) for purposes of
determining any liability under the Securities Act, the information omitted from
the form of prospectus filed as part of this Registration Statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this Registration Statement as of the time it was declared
effective; and (2) for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(g) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in the proxy
statement/prospectus filed subsequent to the effective date of the Registration
Statement through the date of responding to the request.
(h) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-7
<PAGE> 95
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Houston, state of Texas
on the 7th day of June 1999.
UTI ENERGY CORP.
By: /s/ VAUGHN E. DRUM
----------------------------------
Vaughn E. Drum
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes
and appoints Vaughn E. Drum and John E. Vollmer III, his/her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him/her and in his/her name, place and stead, in any and all
capacities, to sign this Registration Statement (including all pre-effective and
post-effective amendments), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming that such
attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on June 7, 1999
in the capacities indicated below.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ MARK S. SIEGEL Chairman of the Board and Director
- -----------------------------------------------------
Mark S. Siegel
/s/ VAUGHN E. DRUM President, Chief Executive Officer and
- ----------------------------------------------------- Director (Principal Executive Officer)
Vaughn E. Drum
/s/ JOHN E. VOLLMER III Senior Vice President, Secretary, Treasurer
- ----------------------------------------------------- and Chief Financial Officer (Principal
John E. Vollmer III Financial Officer)
/s/ BRUCE SAUERS Vice President and Corporate Controller
- ----------------------------------------------------- (Principal Accounting Officer)
Bruce Sauers
/s/ KENNETH N. BERNS Director
- -----------------------------------------------------
Kenneth N. Berns
/s/ CURTIS W. HUFF Director
- -----------------------------------------------------
Curtis W. Huff
Director
- -----------------------------------------------------
Terry H. Hunt
Director
- -----------------------------------------------------
Nadine C. Smith
Director
- -----------------------------------------------------
Robert B. Spears
</TABLE>
II-8
<PAGE> 96
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 -- Agreement and Plan of Merger, dated as of April 26, 1999,
by and among UTI Energy Corp., NDS Acquisition Corp.,
Norton Drilling Services, Inc. and the primary
stockholders of Norton Drilling Services, Inc.
(incorporated by reference from the Registrant's
Quarterly Report on Form 10-Q for the three months ended
March 31, 1999).
3.1** -- Restated Certificate of Incorporation of the Registrant,
as amended.
3.2** -- Bylaws of the Registrant, as amended.
3.3 -- Rights Agreement dated as of February 26, 1999, between
the Registrant, and ChaseMellon Shareholder Services,
L.L.C. as Rights Agent (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K
dated February 26, 1999, filed with the Securities and
Exchange Commission on March 4, 1999).
3.4 -- Certificate of Designation, Powers, Preferences and
Rights of Series I Preferred Stock dated February 26,
1999 (incorporated by reference to Exhibit 4.2 to the
Registrant's Current Report on Form 8-K dated February
26, 1999, filed with the Securities and Exchange
Commission on March 4, 1999).
3.5 -- Form of Right Certificate (incorporated by reference to
Exhibit 4.3 to the Registrant's Current Report on Form
8-K dated February 26, 1999, filed with the Securities
and Exchange Commission on March 4, 1999).
4.1 -- See Exhibit Nos. 3.1 through 3.5 for provisions of the
Restated Certificate of Incorporation and amended By-laws
of the Registrant and other instruments defining the
rights of the holders of Common Stock.
4.2 -- Form of Common Stock Certificate (incorporated by
reference to Amendment No. 1 to the Registrant's
Registration Statement on Form S-1 (No. 33-69726)).
4.3 -- Registration Rights Agreement with Bear Stearns & Co.
Inc. dated March 25, 1994, as assigned to Remy Capital
Partners III, L.P. (incorporated by reference to Exhibit
10.17 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993).
4.4 -- Stock Option Agreement dated as of December 19, 1995,
between the Registrant and Remy Consultants Incorporated
(incorporated by reference to Exhibit 2 to the
Registrant's Amendment No. 1 to Schedule 13D dated August
8, 1996).
4.5 -- Amended and Restated UTI Energy Corp. 1996 Employee Stock
Option Plan (incorporated by reference to Exhibit 4.6 to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997).
4.6 -- Warrant Agreement, dated April 11, 1997, by and between
UTI Energy Corp. and Southland Drilling Company, Ltd.
(incorporated by reference to Exhibit 10.1 to the
Registrant's Current Report on Form 8-K dated April 11,
1997).
4.7 -- Note Purchase Agreement dated April 11, 1997, by and
among FWA Drilling Company, Inc., International Petroleum
Service Company, Triad Drilling Company, Universal Well
Services, Inc., USC, Incorporated, Panther Drilling, Inc.
and Canpartners Investments IV, LLC (incorporated by
reference to Schedule 13D relating to the Registrant
filed on April 22, 1997 by Canpartners Investments IV,
LLC, Canpartners Incorporated, Mitchell R. Julis, Joshua
S. Friedman and R. Christian B. Evensen).
</TABLE>
II-9
<PAGE> 97
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.8 -- Note dated April 11, 1997, payable by FWA Drilling
Company, Inc., International Petroleum Service Company,
Triad Drilling Company, Universal Well Services, Inc.,
USC, Incorporated and Panther Drilling, Inc. to
Canpartners Investments IV, LLC. (incorporated by
reference to Exhibit 10.5 to the Registrant's Current
Report on Form 8-K dated April 11, 1997).
4.9 -- Warrant Agreement dated April 11, 1997, by and between
UTI Energy Corp. and Canpartners Investments IV, LLC.
(incorporated by reference to Exhibit 10.6 to the
Registrant's Current Report on Form 8-K dated April 11,
1997).
4.10 -- Warrant dated April 11, 1997, by and between UTI Energy
Corp. and Canpartners Investments IV, LLC. (incorporated
by reference to Exhibit 10.7 to the Registrant's Current
Report on Form 8-K dated April 11, 1997).
4.11 -- Registration Rights Agreement dated April 11, 1997, by
and between UTI Energy Corp. and Canpartners Investments
IV, LLC. (incorporated by reference to Exhibit 10.8 to
the Registrant's Current Report on Form 8-K dated April
11, 1997).
4.12 -- Amended and Restated UTI Energy Corp. Non-Employee
Director Stock Option Plan (incorporated by reference to
Exhibit 4.18 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1997).
4.13 -- 1993 Non-Qualified Incentive Stock Option Plan
(incorporated by reference to Amendment No. 3 to the
Registrant's Registration Statement on Form S-1 (No.
33-69726)).
4.14 -- Amended and Restated 1997 Long-Term Incentive Plan
(incorporated by reference to Exhibit 4.2 to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997).
4.15 -- Form of Warrant to purchase an aggregate of 75,000 shares
of Common Stock at $26.50 per share, which was issued to
the former shareholders of Suits Enterprises, Inc. listed
on such exhibit in the amounts set forth opposite such
former shareholder's name on such exhibit (incorporated
by reference from the Registrant's Quarterly Report on
Form 10-Q for the six months ended June 30, 1998).
4.16 -- Form of Warrant to purchase an aggregate of 25,000 shares
of Common Stock at $35.00 per share, which was issued to
the former shareholders of Suits Enterprises, Inc. listed
on such exhibit in the amounts set forth opposite such
former shareholder's name on such exhibit (incorporated
by reference from the Registrant's Quarterly Report on
Form 10-Q for the six months ended June 30, 1998).
4.17 -- Form of Note Payable in the aggregate amount of $7.79
million, which was issued to the former shareholders of
Suits Enterprises, Inc. listed on such exhibit in the
amounts set forth opposite such former shareholder's name
on such exhibit (incorporated by reference from the
Registrant's Quarterly Report on Form 10-Q for the six
months ended June 30, 1998).
</TABLE>
II-10
<PAGE> 98
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.18 -- Amended and Restated Loan and Security Agreement dated
June 19, 1998, by and among FWA Drilling Company, Inc.,
International Petroleum Service Company, Triad Drilling
Company, Universal Well Services, Inc., USC,
Incorporated, the Registrant, UTICO, Inc., Panther
Drilling, Inc., J.S.M. & Associates, Inc., Peterson
Drilling Company and Mellon Bank, N.A. (incorporated by
reference from the Registrant's Quarterly Report on Form
10-Q for the six months ended June 30, 1998).
4.19 -- Amended and Restated Note dated June 19, 1998, by and
among FWA Drilling Company, Inc., International Petroleum
Service Company, Triad Drilling Company, Universal Well
Services, Inc., USC, Incorporated, the Registrant, UTICO,
Inc., Panther Drilling, Inc., J.S.M. & Associates, Inc.,
Peterson Drilling Company and Mellon Bank, N.A.
(incorporated by reference from the Registrant's
Quarterly Report on Form 10-Q for the six months ended
June 30, 1998).
4.20 -- Amended and Restated Subordination Agreement dated June
19, 1998, by and among FWA Drilling Company, Inc.,
International Petroleum Service Company, Triad Drilling
Company, Universal Well Services, Inc., USC,
Incorporated, the Registrant, UTICO, Inc., Panther
Drilling, Inc., J.S.M. & Associates, Inc., Peterson
Drilling Company and Melon Bank, N.A. (incorporated by
reference from the Registrant's Quarterly Report on Form
10-Q for the six months ended June 30, 1998).
4.21 -- Amended and Restated Contribution Agreement dated June
19, 1998, by and among FWA Drilling Company, Inc.,
International Petroleum Service Company, Triad Drilling
Company, Universal Well Services, Inc., USC,
Incorporated, the Registrant, UTICO, Inc., Panther
Drilling, Inc., J.S.M. & Associates, Inc., Peterson
Drilling Company and Mellon Bank, N.A. (incorporated by
reference from the Registrant's Quarterly Report on Form
10-Q for the six months ended June 30, 1998).
5.1** -- Opinion of Fulbright & Jaworski L.L.P.
8.1** -- Tax Opinion of Fulbright & Jaworski L.L.P. with respect
to certain tax matters.
8.2** -- Tax Opinion of Riker Danzig with respect to certain tax
matters.
21.1 -- Subsidiaries of the Registrant. Incorporated by reference
to Exhibit 21.1 of the Registrant's Annual Report on Form
10-K for the year ended December 31, 1998.
23.1** -- Consent of Fulbright & Jaworski L.L.P. (contained in
Exhibit 5.1).
23.2* -- Consent of Ernst & Young LLP.
23.3** -- Consent of Riker Danzig (contained in Exhibit 8.2).
23.4* -- Consent of Robinson Burdette Martin & Cowan, L.L.P.
23.5** -- Consent of Houlihan Lokey Howard & Zukin
24.1* -- Power of Attorney (contained on the signature page
hereto).
</TABLE>
- ---------------
* Filed herewith
** To be filed by amendment
II-11
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Proxy Statement/Prospectus of UTI
Energy Corp. for the registration of 1,377,651 shares of its common stock and to
the incorporation by reference therein of our report dated February 18, 1999,
with respect to the consolidated financial statements and schedule of UTI Energy
Corp. included in its Annual Report (Form 10-K) for the year ended December 31,
1998, filed with the Securities and Exchange Commission.
Ernst & Young LLP
Houston, Texas
June 1, 1999
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of UTI Energy Corp. on Form S-4 of our report dated January 31, 1999, except as
to the information in the last two paragraphs of Note 17 for which the date is
February 26, 1999, on our audits of the consolidated financial statements of
Norton Drilling Services, Inc. as of November 30, 1998 and 1997 and for the
years ended November 30, 1998, 1997 and 1996, which report is included in Norton
Drilling Services, Inc.'s 1998 Annual Report on Form 10-K. We also consent to
the reference to our firm under the caption "Experts."
Robinson Burdette Martin & Cowan,
L.L.P.
Lubbock, Texas
June 3, 1999
