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EXHIBIT 10.1
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ASSET PURCHASE AGREEMENT
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THIS AGREEMENT MADE THE 24TH DAY OF MARCH, 2000,
AMONG:
584022 ALBERTA LTD.
AND
THE SHAREHOLDERS OF
584022 ALBERTA LTD.
AND
PHELPS DRILLING LTD.
AND
UTI ENERGY CORP.
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ARTICLE 1 INTERPRETATION..........................................1
1.1 Defined Terms...............................................1
1.2 Currency....................................................5
1.3 Sections and Headings.......................................5
1.4 Number, Gender and Persons..................................5
1.5 Accounting Principles.......................................5
1.6 Entire Agreement............................................5
1.7 Time of Essence.............................................5
1.8 Applicable Law..............................................5
1.9 Successors and Assigns......................................6
1.10 Severability................................................6
1.11 Amendments and Waivers......................................6
1.12 Knowledge or Awareness......................................6
1.13 Schedules...................................................7
ARTICLE 2 PURCHASE AND SALE OF PURCHASED ASSETS...................7
2.1 Purchased Assets............................................7
2.2 Excluded Assets.............................................9
2.3 Merchantability............................................10
ARTICLE 3 PURCHASE PRICE.........................................10
3.1 Purchase Price.............................................10
3.2 Adjustments................................................10
3.3 Allocation of Purchase Price...............................12
3.4 GST........................................................12
ARTICLE 4 ASSUMPTION OF OBLIGATIONS..............................13
4.1 Assumption of Obligations..................................13
4.2 Exclusion of Liabilities...................................13
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER...............13
5.1 Organization...............................................13
5.2 Authorization..............................................14
5.3 No Conflict................................................14
5.4 No Other Agreements to Purchase............................14
5.5 Sufficiency of Purchased Assets............................14
5.6 Title to Purchased Assets..................................15
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5.7 Leased Real Property.......................................15
5.8 Intellectual Property......................................15
5.9 Insurance..................................................16
5.10 Material Contracts.........................................16
5.11 Compliance with Laws; Governmental Authorization...........17
5.12 Consents and Approvals.....................................18
5.13 Financial Statements.......................................18
5.14 Books and Records..........................................18
5.15 Absence of Changes.........................................18
5.16 Non-Arm's Length Transactions..............................19
5.17 Litigation.................................................20
5.18 Residency..................................................20
5.19 Environmental Matters......................................20
5.20 Employee Matters...........................................20
5.21 Customers and Suppliers....................................20
5.22 Y2K Compliance.............................................21
5.23 Full Disclosure............................................21
5.24 Brokers....................................................21
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER............22
6.1 Organization...............................................22
6.2 Authorization..............................................22
6.3 No Conflict................................................22
6.4 Consents and Approvals.....................................22
6.5 Investment Canada..........................................23
6.6 Brokers....................................................23
ARTICLE 7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.............23
7.1 Survival of Representations and Warranties.................23
ARTICLE 8 COVENANTS..............................................23
8.1 Access to Purchased Business and Purchased Assets..........23
8.2 Delivery of Books and Records..............................24
8.3 Change of Name.............................................25
8.4 Conduct of Purchased Business Prior to Closing.............25
8.5 Third Party Consents and Novations.........................26
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8.6 Financial Statement Cooperation............................27
8.7 Exclusivity................................................27
8.8 Non-Competition............................................27
ARTICLE 9 CONDITIONS OF CLOSING..................................29
9.1 Conditions of Closing in Favour of Purchaser...............29
9.2 Conditions of Closing in Favour of Seller..................31
ARTICLE 10 CLOSING AND TRANSFER OF POSSESSION.....................32
10.1 Place of Closing...........................................32
10.2 Closing Deliveries by Seller...............................32
10.3 Closing Deliveries by Purchaser............................33
10.4 Further Assurances.........................................33
10.5 Transfer of Possession and Title...........................33
10.6 Risk of Loss...............................................33
ARTICLE 11 INDEMNIFICATION........................................34
11.1 Indemnification by Seller and Shareholders.................34
11.2 Indemnification by Purchaser and UTI.......................34
11.3 Limitations on Indemnification.............................35
11.4 Notice of Claim............................................35
11.5 Direct Claims..............................................36
11.6 Third Party Claims.........................................36
11.7 Settlement of Third Party Claims...........................37
11.8 Co-operation...............................................37
11.9 Scope......................................................37
ARTICLE 12 TERMINATION; REMEDIES; LIMITATIONS.....................37
12.1 Termination Agreement......................................37
12.2 Effect of Termination......................................38
ARTICLE 13 MISCELLANEOUS..........................................38
13.1 Notices....................................................38
13.2 Consultation...............................................39
13.3 Disclosure.................................................40
13.4 Best Efforts...............................................40
13.5 Counterparts...............................................40
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Schedule 1 - Financial Statements
Schedule 2 - Drilling Rigs and Equipment
Schedule 3 - Drilling Contracts
Schedule 4 - Leased Real Property
Schedule 5 - Vehicles
Schedule 6 - Other Agreements
Schedule 7 - Licenses and Permits
Schedule 8 - Intellectual Property
Schedule 9 - Allocation of Purchase Price
Schedule 10 - Insurance Policies
Schedule 11 - Consents and Approvals
Schedule 12 - Permitted Encumbrances
Schedule 13 - Subsequent Changes
Schedule 14 - Legal and Regulatory Proceedings
Schedule 15 - Environmental Matters
Schedule 16 - Intentionally Left Blank
Schedule 17 - Major Customers
Schedule 18 - Opinion of Seller's Counsel
Schedule 19 - Opinion of Purchaser's and UTI's Counsel
Schedule 20 - Related Transactions
Schedule 21 - Bill of Sale
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT made the 24th day of March, 2000,
AMONG:
584022 ALBERTA LTD., a corporation existing under the
laws of Alberta (hereinafter referred to as the
"SELLER")
- and -
THE PERSONS LISTED ON THE SIGNATURE PAGES HEREOF
UNDER THE HEADING "SHAREHOLDERS", each being a
shareholder of 584022 Alberta Ltd. (hereinafter
referred to collectively as the "SHAREHOLDERS")
- and -
PHELPS DRILLING LTD., a corporation existing under
the laws of Alberta (hereinafter referred to as the
"PURCHASER")
- and -
UTI ENERGY CORP., a corporation existing under the
laws of Delaware (hereinafter referred to as "UTI")
THIS AGREEMENT WITNESSES THAT in consideration of the respective
covenants, agreements, representations, warranties and indemnities of the
Parties herein contained and for other good and valuable consideration (the
receipt and sufficiency of which are acknowledged by each Party), the Parties
agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINED TERMS
For the purposes of this Agreement, unless the context otherwise
requires, the following terms shall have the respective meanings set out below
and grammatical variations of such terms shall have corresponding meanings:
"ABCA" means the Business Corporations Act (Alberta) as in effect on
the date hereof;
"AFFILIATE" has the meaning given to that term in the ABCA;
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"ANNUAL FINANCIAL STATEMENTS" means the financial statements of the
Seller prepared by Seller's accountants on a review engagement basis as
at and for financial year ended November 30, 1996 and thereafter
prepared by the Seller for the financial years ended November 30, 1997,
November 30, 1998 and November 30, 1999, including the notes thereto,
copies of which are annexed hereto as Part 1 of Schedule 1;
"ASSOCIATE" has the meaning given to that term in the ABCA;
"ASSUMED OBLIGATIONS" has the meaning set out in Section 4.1;
"BILL OF SALE" means the assignment, bill of sale and assumption
agreement in substantially in the form attached as Schedule 21;
"BUSINESS DAY" means any day of the week, except Saturday, Sunday, or
any statutory holiday in Calgary, Alberta or Los Angeles, California;
"CDN. $" or "$" means lawful currency of Canada;
"CLOSING" means the closing of the purchase and sale contemplated
hereby on the Closing Date;
"CLOSING DATE" means April 18, 2000 or such other date as the Seller
and the Purchaser may mutually determine;
"CONTRACT" means any agreement, indenture, contract, lease, deed of
trust, licence, option, instrument or other commitment, whether written
or oral;
"EFFECTIVE TIME" means 12:01 a.m. (Calgary time) on the Closing Date;
"ENCUMBRANCE" means any encumbrance, lien, charge, hypothecation,
pledge, mortgage, title retention agreement, security interest of any
nature, adverse claim, exception, reservation, easement, right of
occupation, any matter capable of registration against title,
preferential arrangement or restriction of any kind including, without
limitation, any restriction on the use, voting, transfer, receipt of
income or other exercise of any attributes of ownership;
"ENVIRONMENTAL LAWS" has the meaning set out in Subsection 5.19(a);
"EXCLUDED ASSETS" has the meaning set out in Section 2.2;
"EXCLUDED LIABILITIES" has the meaning set out in Section 4.2;
"FINAL ACCOUNTING STATEMENT" has the meaning set out in Subsection
3.2(c);
"FINANCIAL STATEMENTS" means the Annual Financial Statements and the
Interim Financial Statements;
"GST" has the meaning set out in Subsection 3.4(a);
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"INTELLECTUAL PROPERTY" has the meaning set out in Subsection 2.1(l);
"INTERIM ACCOUNTING STATEMENT" has the meaning set out in Subsection
3.2(b);
"INTERIM FINANCIAL STATEMENTS" means the unaudited financial statements
of the Seller as prepared by the Seller as at and for the three month
period commencing December 1, 1999 and ending on February 29, 2000, a
copy of which are annexed hereto as Part 2 of Schedule 1;
"LEASED REAL PROPERTY" means the real property that is used in the
Purchased Business and leased by the Seller and which is described in
Schedule 4;
"LIABILITIES" means any and all indebtedness, liabilities and
obligations, whether accrued or fixed, absolute or contingent, matured
or unmatured or determined or determinable, including, without
limitation, those arising under any Contract or law;
"LOSSES" means, in respect of any matter, all claims, demands,
proceedings, losses, damages, Liabilities, deficiencies, costs and
expenses (including, without limitation, all legal and other
professional fees and disbursements, interest, penalties and amounts
paid in settlement) arising directly or indirectly as a consequence of
such matter;
"MANAGEMENT AGREEMENT" means the Amended and Restated Management
Agreement dated September 1, 1996 between the Seller and Phelps, as
amended;
"PARTY" means a party to this Agreement, and "PARTIES" means all of
such parties;
"PERMITTED ENCUMBRANCES" means any of the following Encumbrances:
(i) servitudes, easements, restrictions, rights-of-way
and other similar rights in real property or any
interest therein, provided the same are not of such
nature as to materially adversely affect the use of
the property subject thereto;
(ii) undetermined or inchoate liens, charges and
privileges incidental to current construction or
current operations and statutory liens, charges,
adverse claims, security interests or encumbrances of
any nature whatsoever claimed or held by any
governmental authority that relate to obligations not
due or delinquent;
(iii) assignments of insurance provided to landlords (or
their mortgagees) pursuant to the terms of any lease,
and liens or rights reserved in any lease for rent or
for compliance with the terms of such lease and that
relate to obligations not due or delinquent;
(iv) security given in the ordinary course of the
Purchased Business to any public utility, any
municipality or government or any statutory or public
authority and that relate to obligations not due or
delinquent;
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(v) the reservations in any original grants from the
Crown of any real property or interest therein and
statutory exceptions to title, which do not
materially detract from the value of the real
property concerned or materially impair its use in
the operation of the Purchased Business;
(vi) the Encumbrances described in Part 1 of Schedule 12
which will continue after Closing; and
(vii) the Encumbrances described in Part 2 of Schedule 12
which will be discharged by the Seller at the
Closing;
"PERSON" means any individual, corporation, partnership, joint venture,
trust, unincorporated association, or any other judicial entity or a
government, state or agency or political subdivision thereof;
"PHELPS" means Phelps Drilling International Ltd., a corporation
subsisting under the laws of Alberta;
"PRIME RATE" means the annual variable rate of interest quoted or
published from time to time by Royal Bank of Canada at its main branch
in Calgary, Alberta as the "prime rate" of interest charged by it for
Canadian dollar loans made in Canada;
"PURCHASE PRICE" has the meaning set out in Section 3.1;
"PURCHASED ASSETS" has the meaning set out in Section 2.1;
"PURCHASED BUSINESS" means the business carried on by the Seller
consisting primarily of an oilfield drilling contract business;
"TAX ACT" means the Income Tax Act (Canada), as amended from time to
time;
"TIME OF CLOSING" means 2:00 p.m. (Calgary time) on the Closing Date,
or such other time on the Closing Date as the Seller and the Purchaser
may mutually determine;
"US EXCHANGE ACT" means the United States Securities Exchange Act of
1934, as amended from time to time;
"US SECURITIES ACT" means the United States Securities Act of 1933, as
amended from time to time;
"UTI" means UTI Energy Corp., a corporation subsisting under the laws
of the State of Delaware;
"592655" means 592655 Alberta Ltd., a corporation subsisting under the
laws of Alberta; and
"700392" means 700392 Alberta Ltd., a corporation subsisting under the
laws of Alberta.
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1.2 CURRENCY
Unless otherwise indicated, all dollar amounts in this Agreement are
expressed in Canadian funds.
1.3 SECTIONS AND HEADINGS
The division of this Agreement into Articles, Sections and Subsections
and the insertion of headings are for convenience of reference only and shall
not affect the interpretation of this Agreement. Unless otherwise indicated, any
reference in this Agreement to an Article, Section, Subsection or Schedule
refers to the specified Article, Section or Subsection of or Schedule to this
Agreement.
1.4 NUMBER, GENDER AND PERSONS
In this Agreement, words importing the singular number only shall
include the plural and vice versa, words importing gender shall include all
genders and words importing persons shall include individuals, corporations,
partnerships, associations, trusts, unincorporated organizations, governmental
bodies and other legal or business entities of any kind whatsoever.
1.5 ACCOUNTING PRINCIPLES
Any reference in this Agreement to generally accepted accounting
principles refers to generally accepted accounting principles that have been
established in Canada, including those approved from time to time by the
Canadian Institute of Chartered Accountants or any successor body thereto.
1.6 ENTIRE AGREEMENT
Except for the provisions of the Confidentiality Agreement dated June
16, 1999 between Phelps and UTI that survive the termination of this Agreement,
this Agreement constitutes the entire agreement between the Parties with respect
to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether written or oral. There are
no conditions, covenants, agreements, representations, warranties or other
provisions, express or implied, collateral, statutory or otherwise, relating to
the subject matter hereof except as herein provided.
1.7 TIME OF ESSENCE
Time shall be of the essence of this Agreement.
1.8 APPLICABLE LAW
This Agreement shall be construed, interpreted and enforced in
accordance with, and the respective rights and obligations of the Parties shall
be governed by, the laws of the Province of Alberta and the federal laws of
Canada applicable therein, and each Party irrevocably and unconditionally
submits to the non-exclusive jurisdiction of the courts of such province and all
courts competent to hear appeals therefrom.
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1.9 SUCCESSORS AND ASSIGNS
(a) Subject to Subsection 1.9(b), no Party may assign any of its
rights or obligations hereunder without the prior written
consent of the other Parties.
(b) The Purchaser may assign its right under this Agreement in
whole or in part to any Affiliate of UTI; provided, however,
that any such assignment shall not relieve either the
Purchaser or UTI from any of its obligations to the Seller or
the Shareholders hereunder. Notwithstanding any such
assignment, if an event of default occurs under this
Agreement, the Seller shall have the option to claim
performance or payment of the obligations from the Purchaser,
UTI or the assignee or transferee and to bring proceedings
against any or all of them, provided that nothing herein shall
entitle the Seller to receive duplicate performance or payment
of the same obligation.
(c) This Agreement shall enure to the benefit of and shall be
binding on and enforceable by the Parties and, where the
context so permits, their respective successors and permitted
assigns.
1.10 SEVERABILITY
If any provision of this Agreement is determined by a court of
competent jurisdiction to be invalid, illegal or unenforceable in any respect,
such determination shall not impair or affect the validity, legality or
enforceability of the remaining provisions hereof, and each provision is hereby
declared to be separate, severable and distinct; provided that if the economic
or legal substance of the transactions contemplated hereby are affected in an
adverse manner to any Party by the severance of such provision, then the Parties
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the Parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the extent
possible.
1.11 AMENDMENTS AND WAIVERS
No amendment or waiver of any provision of this Agreement shall be
binding on any Party unless consented to in writing by such Party. No waiver of
any provision of this Agreement shall constitute a waiver of any other provision
nor shall any waiver constitute a continuing waiver unless otherwise provided.
1.12 KNOWLEDGE OR AWARENESS
In this Agreement, references to a Party's knowledge or awareness and
similar references mean the actual knowledge of the current officers and
employees of such Party who are primarily responsible for the matters in
question after such Persons have engaged in, or caused to be performed, a
reasonable review of the relevant files and records of such Party relating to
the Purchased Assets, but without any further inquiry and does not include
knowledge or awareness of any other Person.
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1.13 SCHEDULES
The following Schedules are attached to and form part of this
Agreement:
Schedule 1 - Financial Statements
Schedule 2 - Drilling Rigs and Equipment
Schedule 3 - Drilling Contracts
Schedule 4 - Leased Real Property
Schedule 5 - Vehicles
Schedule 6 - Other Agreements
Schedule 7 - Licenses and Permits
Schedule 8 - Intellectual Property
Schedule 9 - Allocation of Purchase Price
Schedule 10 - Insurance Policies
Schedule 11 - Consents and Approvals
Schedule 12 - Permitted Encumbrances
Schedule 13 - Subsequent Changes
Schedule 14 - Legal and Regulatory Proceedings
Schedule 15 - Environmental Matters
Schedule 16 - Intentionally Left Blank
Schedule 17 - Major Customers
Schedule 18 - Opinion of Seller's Counsel
Schedule 19 - Opinion of Purchaser's and UTI's Counsel
Schedule 20 - Related Transactions
Schedule 21 - Bill of Sale
ARTICLE 2
PURCHASE AND SALE OF PURCHASED ASSETS
2.1 PURCHASED ASSETS
Upon the terms and subject to the conditions of this Agreement, the
Seller shall sell, assign and transfer to the Purchaser and the Purchaser shall
purchase from the Seller, on the Closing Date, all of the property and assets of
the Seller (other than the Excluded Assets), whether real or personal, tangible
or intangible, of every kind and description and wherever situate (collectively,
the "PURCHASED ASSETS"), including, without limitation, the following:
(a) DRILLING EQUIPMENT. All drilling rigs and related assets and
ancillary equipment together with all spare parts and related
assets necessarily incidental to the use of the drilling rigs
including, without limitation, the drilling equipment
described in Part 1 of Schedule 2;
(b) DRILLING CONTRACTS. All rights under drilling contracts under
which Seller has agreed to provide drilling services to a
third party including drilling contracts for which drilling
services have been commenced by Seller prior to but have not
been completed by Seller as of the Effective Time including,
without limitation, the Contracts described in Schedule 3;
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(c) LEASED REAL PROPERTY. All rights (whether as lessee or lessor)
under leases of real property, together with all leasehold
improvements relating thereto including, without limitation,
the Leased Real Property described in Schedule 4;
(d) OFFICE EQUIPMENT. All furniture, furnishings and accessories,
computer equipment (hardware and software, including all
rights under licences and other agreements relating thereto),
telephones, cellular phones, office equipment and office
supplies together with all service, operational and other
manuals and all replacement parts and tools with respect to
the foregoing including, without limitation, all office
equipment described in Part 2 of Schedule 2;
(e) OTHER MACHINERY AND EQUIPMENT. All machinery and shop
equipment, hand tools and handling equipment including,
without limitation, the machinery and equipment described in
Part 3 of Schedule 2;
(f) VEHICLES. All trucks, cars and other vehicles including,
without limitation, the vehicles described in Schedule 5;
(g) LEASES OF PERSONAL PROPERTY. All rights under vehicle and
equipment leases, rental equipment contracts and office
equipment leases and Contracts including, without limitation,
the leases described in Schedules 2 and 5;
(h) INVENTORIES. All inventories including, without limitation,
raw materials and replacement parts;
(i) PREPAID EXPENSES. All prepaid expenses;
(j) OTHER AGREEMENTS. All rights under orders or Contracts for the
provision of goods or services (whether as buyer or seller),
distribution and agency agreements, and other Contracts not
otherwise referred to in this Section 2.1 including, without
limitation, the Contracts described in Schedule 6;
(k) LICENCES AND PERMITS. All licences, permits, approvals,
consents, registrations, certificates and other authorizations
required to carry on the Purchased Business in the ordinary
course including, without limitation, those described in
Schedule 7;
(l) INTELLECTUAL PROPERTY. All trade or brand names, business
names, trade marks, trade mark registrations and applications,
service marks, service mark registrations and applications,
copyrights, copyright registrations and applications, patents,
patent registrations and applications and other patent rights
(including any patents issued on such applications or rights),
trade secrets, proprietary manufacturing information and
know-how, equipment and parts lists and descriptions,
instruction manuals, inventions, inventors' notes, research
data, unpatented blue prints, drawings and designs, formulae,
processes, technology and other intellectual property,
together with all rights under licences, registered user
agreements, technology transfer agreements and other
agreements or instruments relating to any of the foregoing
(collectively, "INTELLECTUAL
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PROPERTY") including, without limitation, the trademarks,
copyrights, patents, licences and agreements described in
Schedule 8;
(m) BOOKS AND RECORDS. All books and records (other than those
required by law to be retained by the Seller, copies of which
will be made available to the Purchaser), including, without
limitation, customer lists, sales records, price lists and
catalogues, sales literature, advertising material,
manufacturing data, production records, employee manuals,
personnel records, supply records, inventory records and
correspondence files (together with, in the case of any such
information that is stored electronically, the media on which
the same is stored);
(n) TELEPHONE NUMBERS. The right to the use of the Seller's
telephone and cellular numbers and facsimile numbers to the
extent permitted by the appropriate telephone authority; and
(o) GOODWILL. All goodwill, together with the exclusive right for
the Purchaser to represent itself as carrying on the Purchased
Business in succession to the Seller and the right to use any
words indicating that the Purchased Business is so carried on.
2.2 EXCLUDED ASSETS
Notwithstanding the provisions of Section 2.1, the Purchased Assets
shall exclude the following property and assets of the Seller as determined at
the Effective Time (collectively, the "EXCLUDED ASSETS"):
(a) CASH. All cash on hand or in banks or other depositories;
(b) ACCOUNTS RECEIVABLE. All accounts receivable, trade accounts,
notes receivable, and book debts due or accruing due in
respect of services provided by the Seller or Phelps on behalf
of the Seller prior to the Effective Time and which have been
invoiced by the Seller or by Phelps prior to the Effective
Time;
(c) WORK IN PROGRESS. All work in progress consisting of services
provided by the Seller or by Phelps prior to the Effective
Time and which have not been invoiced by the Seller or by
Phelps as of the Effective Time;
(d) INCOME TAXES. All income tax payments and/or installments paid
by the Seller and the right to receive any refund of income
taxes paid by the Seller;
(e) PROVINCIAL SALES TAXES. All British Columbia provincial sales
tax payments and/or installments paid by the Seller and the
right to receive any refund of provincial sales taxes paid by
the Seller;
(f) GST. All GST payments and/or installments paid by the Seller
and the right to receive any refund of GST paid by the Seller;
(g) BANK ACCOUNTS. All bank accounts of the Seller;
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(h) MANAGEMENT AGREEMENTS. The interest of Seller in the
Management Agreement;
(i) INTERCORPORATE INDEBTEDNESS. All amounts due or accruing due
to or by the Seller from or to Phelps including, without
limitation, any amounts due or accruing due from or to Phelps
under the Management Agreement; and
(j) LITIGATION. Any and all payments payable or to become payable
to the Seller in regard to any actions, suits or proceedings.
2.3 MERCHANTABILITY
Notwithstanding anything to the contrary contained in this Agreement,
the Purchaser and UTI acknowledge that the Purchaser will acquire the Purchased
Assets on an "as is" "where is" basis and that the Seller does not make any
representation or warranty as to the fitness for purpose, condition or
merchantability of the Purchased Assets or any of them, except as expressly
provided otherwise in Article 5. Each of the Purchaser and UTI acknowledge and
agree that they have relied and shall rely solely on their own appraisal and
estimate as to the quantum value of the Purchased Assets and the Purchased
Business and that they have relied and shall rely on their own analysis related
thereto, notwithstanding anything to the contrary contained in this Agreement.
ARTICLE 3
PURCHASE PRICE
3.1 PURCHASE PRICE
Subject to the adjustments provided for in Section 3.2, the aggregate
purchase price (the "PURCHASE PRICE") payable by the Purchaser to the Seller for
the Purchased Assets shall be Cdn. $8,807,333, payable by delivery of a bank
draft or wire transfer at Closing.
3.2 ADJUSTMENTS
(a) APPORTIONMENT OF BENEFITS AND OBLIGATIONS. All benefits and
obligations of any kind and nature accruing, payable or paid
in respect of the Purchased Assets shall be apportioned
between the Seller and the Purchaser as of the Effective Time.
(b) INTERIM ACCOUNTING. An interim accounting and adjustment shall
be carried out by the Seller and a statement (the "INTERIM
ACCOUNTING STATEMENT") shall be prepared and delivered by the
Seller to the Purchaser at least three Business Days prior to
the Closing Date based on the Seller's good faith estimate of
all adjustments to be made to the Purchase Price as of the
Effective Time. The Purchase Price shall be adjusted on the
Closing Date to reflect the adjustments provided for in the
Interim Accounting Statement. At its initiative or upon the
reasonable request of the Seller, the Purchaser agrees to
provide subsequent Interim Accounting Statement(s) after the
Closing Date and before the Final Accounting Statement is
provided, and the Seller and the Purchaser agree to make all
reasonable efforts to agree upon these subsequent interim
adjustments and to provide for the prompt payment of same,
together with interest thereon at the
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Prime Rate from and including the Closing Date to but
excluding the date of payment.
(c) FINAL ACCOUNTING. Following Closing, a final accounting shall
be carried out by the Purchaser and a statement (the "FINAL
ACCOUNTING STATEMENT") shall be prepared and delivered by the
Purchaser to the Seller within nine (9) months after the
Closing Date. Neither the Seller nor the Purchaser shall be
obligated to make any further adjustments to the items
provided for in the Final Accounting Statement after the Final
Accounting Statement is approved or is deemed to have been
approved.
(d) APPROVAL OF FINAL ACCOUNTING STATEMENT. The Seller shall have
a period of 30 days from the date it receives the Final
Accounting Statement in which to review the same. For the
purpose of such review, the Purchaser agrees to permit the
Seller and its authorized representatives to examine all
working papers, schedules and other documentation used or
prepared by the Purchaser in connection with the preparation
of the Final Accounting Statement. If no objection to the
Final Accounting Statement is given to the Purchaser by the
Seller within such 30 day period in accordance with the
provisions of Subsection 3.2(e), the Final Accounting
Statement shall be deemed to have been approved as of the last
day of such 30 day period.
(e) OBJECTION TO FINAL ACCOUNTING STATEMENT. If the Seller objects
to the Final Accounting Statement within the 30 day period
referenced in Subsection 3.2(d) by giving written notice to
the Purchaser setting out in reasonable detail the nature of
such objection, the Seller and Purchaser agree to attempt to
resolve the matters in dispute within 15 days from the date of
giving such notice. If all matters in dispute are resolved by
the Seller and the Purchaser, the Final Accounting Statement
shall be modified to the extent required to give effect to
such resolution and shall be deemed to have been approved as
of the date of such resolution.
(f) DISPUTE RESOLUTION. If the Seller and Purchaser cannot resolve
all matters in dispute within the 15 day period referenced in
Subsection 3.2(e), all unresolved matters shall be submitted
for resolution to a single arbitrator chosen by the Seller and
the Purchaser, or failing agreement, chosen by a judge of the
Court of Queen's Bench of Alberta (the "ARBITRATOR"). The
Arbitrator shall be given access to all materials and
information reasonably requested by it for such purpose. The
rules and procedures to be followed in the arbitration
proceedings shall be determined by the Arbitrator in its
discretion. The Arbitrator's determination of all such matters
shall be final and binding and shall not be subject to appeal
by any Party. The fees and expenses of the Arbitrator shall be
borne equally by the Seller and the Purchaser or in such other
proportion as may be determined by the Arbitrator in its sole
discretion. The Final Accounting Statement shall be modified
to the extent required to give effect to the Arbitrator's
determination and shall be deemed to have been approved as of
the date of such determination.
<PAGE> 17
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(g) PAYMENT OF ADJUSTED AMOUNT. Any adjustments to the Purchase
Price shall be settled by the indebted Party by cash payment
to the recipient Party within 5 Business Days after the Final
Accounting Statement is deemed to have been approved in
accordance with this Section 3.2, together with interest
thereon at the Prime Rate from and including the Closing Date
to but excluding the date of payment.
3.3 ALLOCATION OF PURCHASE PRICE
The Seller and the Purchaser agree to allocate the Purchase Price among
the Purchased Assets in accordance with Schedule 9 and to report the sale and
purchase of the Purchased Assets for all federal, provincial and local tax
purposes in a manner consistent with such allocation.
3.4 GST
(a) The Parties acknowledge that the Purchase Price is exclusive
of the Goods and Services Tax ("GST") as provided for in the
Excise Tax Act (Canada).
(b) Each of the Seller and the Purchaser represent and warrant to
the other that it is a registrant for GST purposes and will
continue to be a registrant at the Closing Date in accordance
with the provisions of the Excise Tax Act (Canada) and that
each of their GST registration numbers is:
Seller - BN 13686 5854 RT0001
Purchaser - o
(c) The Seller represents and warrants to the Purchaser that the
sale of the Purchased Assets is a sale of a business or part
of a business carried on by the Seller at the time of the sale
for the purposes of the Excise Tax Act (Canada), and the
Purchaser represents and warrants to the Seller that the
acquisition of the Purchased Assets represents the acquisition
of all or substantially all of the property that can
reasonably be regarded as being necessary for the Purchaser to
be capable of carrying on the Seller's business or such part
of the Seller's business as a business.
(d) The Seller and the Purchaser shall jointly prepare and execute
the election prescribed by subsection 167(1) of the Excise Tax
Act (Canada) and the Purchaser shall file such election in the
manner and within the time prescribed thereto.
(e) Pursuant to paragraph Subsection 3.4(d) above, and subsection
167(1.1) of the Excise Tax Act (Canada), no GST is payable by
the Purchaser to the Seller in respect of the sale and
purchase of the Purchased Assets.
<PAGE> 18
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ARTICLE 4
ASSUMPTION OF OBLIGATIONS
4.1 ASSUMPTION OF OBLIGATIONS
Upon the terms and subject to the conditions of this Agreement, the
Purchaser shall assume, pay, satisfy, discharge, perform and fulfill, on the
Closing Date, all prospective obligations of the Seller which are required to be
performed on or after the Effective Time (the "ASSUMED OBLIGATIONS") under:
(a) the Contracts described in Schedules 2 through 6 inclusive and
Schedule 8;
(b) the licenses, permits, approvals, consents, registrations,
certificates and other authorizations described in Schedule 7;
(c) any other Contracts entered into by the Seller in the ordinary
course consistent with past business practice and generally
accepted industry practice for the provision of goods or
services by a third party to the Seller on normal commercial
terms and which will not require an aggregate expenditure in
excess of $100,000; and
(d) any other Contracts entered into by the Seller in the ordinary
course consistent with past business practice and generally
accepted industry practice for the provision of goods or
services by the Seller to a third party on normal commercial
terms and which will not result in the receipt of revenue in
excess of $50,000.
4.2 EXCLUSION OF LIABILITIES
Except as set forth in Section 4.1, the Purchaser shall not be
obligated to pay or perform or otherwise be responsible for any Liabilities of
the Seller including any Liabilities or claims of any kind or nature arising out
of or related to the operation of the Purchased Business, the Seller or the
Purchased Assets accrued or incurred or caused by any act, condition, or event
existing or arising on or prior to the Effective Time or relating to the
Excluded Assets (the "EXCLUDED LIABILITIES").
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller represents and warrants to the Purchaser as follows:
5.1 ORGANIZATION
The Seller is a corporation validly subsisting under the laws of the
Province of Alberta and has the corporate power to carry on the Purchased
Business as now being conducted by it and to enter into this Agreement and to
perform its obligations hereunder. The Shareholders are all of the legal and
beneficial shareholders of the Seller.
<PAGE> 19
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5.2 AUTHORIZATION
This Agreement has been duly authorized, executed and delivered by the
Seller and the Shareholders and is a legal, valid and binding obligation of the
Seller and the Shareholders, enforceable against them by the Purchaser in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency and other laws affecting the rights of creditors generally and except
that equitable remedies may be granted only in the discretion of a court of
competent jurisdiction.
5.3 NO CONFLICT
The execution and delivery of this Agreement by the Seller and the
consummation of the transactions herein provided for will not result in:
(a) the breach or violation of any of the provisions of, or
constitute a default under, or conflict with:
(i) any provision of the constating documents or by-laws
or resolutions of the board of directors (or any
committee thereof) or shareholders of the Seller;
(ii) any judgment, decree, order or award of any court,
governmental body or arbitration having jurisdiction
over the Seller;
(iii) any licence, permit, approval, consent or
authorization held by the Seller or necessary to the
operation of the Purchased Business except as set
forth in Schedule 11; or
(iv) any applicable law, statute, ordinance, regulation or
rule;
(b) a default under any Contract to which the Seller is a party or
by which it is or any of the Purchased Assets are bound,
except for the notifications, consents and approvals described
in Part 2 of Schedule 11; or
(c) the creation or imposition of any Encumbrance on any of the
Purchased Assets.
5.4 NO OTHER AGREEMENTS TO PURCHASE
No Person other than the Purchaser has any written or oral agreement or
option or any right or privilege (whether by law, pre-emptive or contractual)
capable of becoming an agreement or option for the purchase or acquisition from
the Seller of any of the Purchased Assets.
5.5 SUFFICIENCY OF PURCHASED ASSETS
The Purchased Assets owned or leased by the Seller are sufficient to
carry on the Purchased Business in a manner consistent with the past business
practices of the Seller. All the tangible Purchased Assets are situate at the
locations set out in Schedules 2 and 5.
<PAGE> 20
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5.6 TITLE TO PURCHASED ASSETS
The Seller is the absolute legal and beneficial owner of and has good
and marketable title to, or in the case of leased, subleased, licensed or
sublicensed Purchased Assets, valid and subsisting leasehold interests or
licenses as the case may be in, all of the Purchased Assets, free and clear of
all Encumbrances, except Permitted Encumbrances, and is exclusively entitled to
possess and dispose of the Purchased Assets (subject only to the necessity for
obtaining the consents and approvals described in Schedule 11).
5.7 LEASED REAL PROPERTY
The Seller is not the beneficial or registered owner of and has not
agreed to acquire any real property or any interest in any real property other
than the Leased Real Property described in Schedule 4. The Seller is not a party
to any lease or agreement to lease in respect of any real property, whether as
lessor or lessee, other than the leases (the "LEASES") described in Schedule 4.
Schedule 4 sets out the parties to each of the Leases, their dates of execution
and expiry dates, any options to renew, the locations of the leased lands and
premises and the rent payable thereunder. Except as described in Schedule 4, the
Seller occupies the Leased Property and has the exclusive right to occupy and
use the Leased Property. Each of the Leases is in good standing and in full
force and effect, and neither the Seller nor any other party thereto is in
breach of any covenants, conditions or obligations contained therein. The Seller
has provided to the Purchaser a true and complete copy of each Lease and all
amendments thereto referred to in Schedule 4.
5.8 INTELLECTUAL PROPERTY
Schedule 8 sets out all registered or pending Intellectual Property
(including particulars of registration or application for registration) and all
licences, registered user agreements and other Contracts that comprise or relate
to Intellectual Property. The Intellectual Property comprises all trade or brand
names, business names, trade marks, service marks, copyrights, patents, trade
secrets, know-how, inventions, designs and other industrial or intellectual
property necessary to conduct the Purchased Business. The Seller is the
beneficial owner of the Intellectual Property, free and clear of all
Encumbrances, and is not a party to or bound by any Contract or any other
obligation whatsoever that limits or impairs its ability to sell, transfer,
assign or convey, or that otherwise affects, the Intellectual Property. No
Person has been granted any interest in or right to use all or any portion of
the Intellectual Property. To the knowledge of the Seller, the conduct of the
Purchased Business does not infringe upon the industrial or intellectual
property rights, domestic or foreign, of any other Person. Neither the Seller
nor the Shareholders are aware of a claim of any infringement or breach of any
industrial or intellectual property rights of any other Person, nor have the
Seller or the Shareholders received any notice that the conduct of the Purchased
Business, including the use of the Intellectual Property, infringes upon or
breaches any industrial or intellectual property rights of any other Person, and
the Seller and the Shareholders have no knowledge of any infringement or
violation of any of the Seller's rights in the Intellectual Property. Neither
the Seller nor the Shareholders are aware of any state of facts that casts doubt
on the validity or enforceability of any of the Intellectual Property. The
Seller has provided to the Purchaser a true and complete copy of all Contracts
and amendments thereto that comprise or relate to the Intellectual Property
referred to in Schedule 8.
<PAGE> 21
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5.9 INSURANCE
The Seller has insured the Purchased Assets set forth in Schedules 2, 4
and 5 in accordance with the Seller's normal business practices against loss or
damage by all insurable hazards or risks and such insurance coverage will be
continued in full force and effect up to and including the Time of Closing.
Schedule 10 sets out all insurance policies (specifying the insurer, the amount
of the coverage, the type of insurance, the policy number and any pending claims
thereunder) maintained by the Seller on the Purchased Assets set forth in
Schedules 2, 4 and 5 as of the date hereof and true and complete copies of the
most recent inspection reports, if any, received from insurance underwriters or
others as to the condition of the Purchased Assets. The Seller is not in default
with respect to any of the provisions contained in any such insurance policy and
has not failed to give any notice or present any claim under any such insurance
policy, in due and timely fashion. The Seller has provided to the Purchaser a
true copy of each insurance policy referred to in Schedule 10.
5.10 MATERIAL CONTRACTS
The Schedules describe each of the following material subsisting
Contracts relating to the Purchased Business or Purchased Assets to which the
Seller is a party or by which it or any of the Purchased Assets is bound:
(a) any Contract for the purchase or supply of materials,
supplies, equipment or services involving more than $50,000 in
respect of any one such Contract or more than $100,000 in
respect of all such Contracts;
(b) any employment, consulting or management Contract or any other
Contract with any officer, employee or consultant, other than
oral Contracts of indefinite hire terminable by the Seller
without cause or reasonable notice;
(c) any profit sharing, bonus, stock option, pension, retirement,
disability, stock purchase, medical, dental, hospitalization,
insurance or similar plan or agreement providing benefits to
any current or former director, officer, employee or
consultant;
(d) any Encumbrance registered against any of the Purchased Assets
or a leasing transaction of the type required to be
capitalized in accordance with generally accepted accounting
principles;
(e) any distributor, sales, advertising, agency or manufacturer's
representative Contract;
(f) any collective bargaining agreement or other Contract with any
labour union;
(g) any Contracts for capital expenditures in excess of $50,000 in
respect of any one such Contract or in excess of $100,000 in
the aggregate in respect of all such Contracts;
(h) any Contract for the sale of any assets;
<PAGE> 22
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(i) any Contract pursuant to which the Seller is a lessor of any
machinery, equipment, motor vehicles, office furniture,
fixtures or other personal property;
(j) any non-competition or similar Contract;
(k) any licence, franchise or other agreement that relates in
whole or in part to any Intellectual Property;
(l) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any other similar commitment
with respect to, the obligations, Liabilities (whether
accrued, absolute, contingent or otherwise) or indebtedness of
any other Person, except for cheques endorsed for collection
in the ordinary course of the Purchased Business, which
obligations, Liabilities or indebtedness the Purchaser shall
be obligated to pay, assume or perform or otherwise be
responsible;
(m) any Contract that expires, or may expire if the same is
renewed or extended at the option of any Person other than the
Seller, more than one year after the date of this Agreement;
(n) any Contract entered into by the Seller other than in the
ordinary course of the Purchased Business; or
(o) any other Contract which is material to the Seller or the
absence of which would have a material adverse effect on the
Purchased Business or the Purchased Assets.
Except as described in the Schedules, the Seller has performed all of the
obligations required to be performed by it and is entitled to all benefits
under, and is not in default or alleged to be in default in respect of, any
Contract relating to the Purchased Business or Purchased Assets to which it is a
party or by which it is bound; the Seller has not received payment under any
Contract for any goods or services not yet provided by the Seller under such
Contract; all such Contracts are in good standing and in full force and effect,
and no event, condition or occurrence exists that, after notice or lapse of time
or both, would constitute a default under any of the foregoing. The Seller has
provided to the Purchaser a true and complete copy of each Contract listed or
described in the Schedules and all amendments thereto, other than oral
Contracts.
5.11 COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATION
To the knowledge of the Seller, the Seller has complied in all material
respects with all laws, statutes, ordinances, regulations, rules, judgments,
decrees or orders applicable to the Purchased Business or the Purchased Assets.
Schedule 7 sets out a complete and accurate list of all licences, permits,
approvals, consents, certificates, registrations and authorizations (whether
governmental, regulatory or otherwise) (the "LICENCES") held by or granted to
the Seller, and there are no other licences, permits, approvals, consents,
certificates, registrations or authorizations necessary to carry on the
Purchased Business or to own or lease any of the Purchased Assets. Each Licence
is valid, subsisting, in good standing, and transferable or assignable to the
Purchaser, except as noted otherwise in Schedule 7. The Seller has received no
notice of nor is the Seller in default or breach of any Licence and, to the
knowledge of the Seller, no proceeding is pending or threatened to revoke or
limit any Licence. The Seller has provided
<PAGE> 23
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to the Purchaser a true and complete copy of each Licence and all amendments
thereto referred to in Schedule 7.
5.12 CONSENTS AND APPROVALS
(a) REGULATORY CONSENTS. There is no requirement to make any
filing with, give any notice to or to obtain any licence,
permit, certificate, registration, authorization, consent or
approval of, any governmental or regulatory authority as a
condition to the lawful consummation of the transactions
contemplated by this Agreement, except for the filings,
notifications, licences, permits, certificates, registrations,
consents and approvals described in Part 1 of Schedule 11 or
that relate solely to the identity of the Purchaser or the
nature of any business carried on by the Purchaser.
(b) THIRD PARTY CONSENTS. There is no requirement under any
Contract relating to the Purchased Business or Purchased
Assets to which the Seller is a party or by which it is bound
to give any notice to, or to obtain the consent or approval
of, any party to such agreement, instrument or commitment
relating to the consummation of the transactions contemplated
by this Agreement, except for the notifications, consents and
approvals described in Part 2 of Schedule 11.
5.13 FINANCIAL STATEMENTS
The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
prior periods, are correct and complete, and present fairly the assets,
Liabilities and financial condition of the Seller as at the respective dates of
the Financial Statements and the sales, earnings and results of operations of
the Seller for the respective periods covered by the Financial Statements. The
Seller has provided to the Purchaser true and complete copies of the Financial
Statements.
5.14 BOOKS AND RECORDS
The books and records of the Seller fairly and correctly set out and
disclose, in accordance with Canadian generally accepted accounting principles,
the financial position of the Seller as at the date hereof, and all financial
transactions of the Seller relating to the Purchased Business have been
accurately recorded in such books and records.
5.15 ABSENCE OF CHANGES
Since September 1, 1999, the Purchased Business has been carried on in
the ordinary and normal course consistent with the Seller's past business
practice and, except as set forth in the Financial Statements or as described in
Schedule 13 there has not been:
(a) any material adverse change in the condition (financial or
otherwise), assets, Liabilities, operations, earnings,
business or prospects of the Purchased Business;
<PAGE> 24
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(b) any damage, destruction or loss (whether or not covered by
insurance) affecting Purchased Assets having a value in excess
of $100,000 in each instance or $200,000 in the aggregate;
(c) any Liability or Contract incurred or entered into by the
Seller in connection with the Purchased Business, other than
those incurred or entered into in the ordinary and normal
course of the Purchased Business and consistent with the
Seller's past business practice;
(d) any labour trouble adversely affecting the Purchased Business
or the Purchased Assets;
(e) any sale, assignment, transfer, licenses, disposition, pledge,
mortgage or granting of a security interest or other
Encumbrance on or over any Purchased Assets;
(f) any write-down or write-off of any inventory, accounts or
notes receivable or any portion thereof relating to the
Purchased Business in amounts exceeding $50,000 in each
instance or $100,000 in the aggregate;
(g) any amendment, termination or waiver of any rights of value to
the Purchased Business in amounts exceeding $100,000 in each
instance or $200,000 in the aggregate;
(h) any capital expenditures or commitments relating to the
Purchased Business or Purchased Assets in excess of $200,000
in the aggregate;
(i) any change in the maintenance procedures followed by the
Seller;
(j) any change in the accounting or tax practices followed by the
Seller; or
(k) any change in the credit terms offered to customers of, or by
suppliers to, the Purchased Business.
5.16 NON-ARM'S LENGTH TRANSACTIONS
(a) Except for any Contracts which do not form part of the
Purchased Assets or the Assumed Obligations, the Seller is not
party to any Contract with any officer, director, employee,
shareholder or any other Person not dealing at arm's length
with the Seller (within the meaning of the Tax Act) or any
Affiliate or Associate of any of the foregoing.
(b) No officer, director or shareholder of the Seller and no
entity that is an Affiliate or Associate of one or more of
such individuals:
(i) owns, directly or indirectly, any interest in (except
for shares representing less than five per cent of
the outstanding shares of any class or series of any
publicly traded company), or is an officer, director,
employee or consultant of, any Person that is, or is
engaged in business as, a competitor
<PAGE> 25
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of the Purchased Business or a lessor, lessee,
supplier, distributor, sales agent or customer of the
Purchased Business; or
(ii) owns, directly or indirectly, in whole or in part,
any property that the Seller uses in the operation of
the Purchased Business.
5.17 LITIGATION
Except as described in Schedule 14, there are no actions, suits or
proceedings (whether or not purportedly on behalf of the Seller) pending or, to
the best knowledge of the Seller, threatened against or affecting the Seller at
law or in equity or before or by any federal, provincial, municipal or other
governmental department, court, commission, board, bureau, agency or
instrumentality, domestic or foreign, or before or by an arbitrator or
arbitration board. The Seller is not aware of any ground on which any such
action, suit or proceeding might be commenced with any reasonable likelihood of
success.
5.18 RESIDENCY
The Seller is a resident of Canada for the purposes of the Tax Act.
5.19 ENVIRONMENTAL MATTERS
(a) Except as described in Schedule 15, the Seller has been and is
in compliance in all material respects with all applicable
federal, provincial, municipal and local laws, statutes,
ordinances, by-laws and regulations, and other directives and
decisions rendered by any ministry, department or
administrative or regulatory agency ("ENVIRONMENTAL LAWS")
relating to the protection of the environment, occupational
health and safety or the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of any pollutants, contaminants, chemicals or
industrial toxic or hazardous wastes or substances.
(b) The Seller has never received any notice of nor been
prosecuted for non-compliance with any Environmental Laws with
respect to the Purchased Business or the Purchased Assets.
(c) The Seller has delivered to the Purchaser a true and complete
copy of all environmental audits, evaluations, assessments,
studies or tests relating to the Purchased Business or
Purchased Assets of which it is aware.
5.20 EMPLOYEE MATTERS
The Seller has no employees and has not entered into any consulting or
employment contracts or similar contracts.
5.21 CUSTOMERS AND SUPPLIERS
(a) Schedule 17 sets out the major customers of the Purchased
Business, being those customers of the Purchased Business
accounting for more than 10% of revenue
<PAGE> 26
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during either the period January 1, 1996 to February 29, 2000,
or the last 12 calendar months. To the knowledge of the Seller
there has been no termination or cancellation of, and no
modification or change in, the Seller's business relationship
with any major customer or group of major customers. The
Seller has no reason to believe that the benefits of any
relationship with any of the major customers or suppliers of
the Purchased Business will not continue after the Closing
Date in substantially the same manner as prior to the date of
this Agreement.
(b) Except as set forth in Schedule 17, the Seller has not derived
any of its revenues during its last fiscal year from sales to,
or within, the United States or from services performed in the
United States.
5.22 Y2K COMPLIANCE
To the knowledge of the Seller, all of the Purchased Assets are Year
2000 Compliant to the extent applicable. For the purposes of this Agreement,
"Year 2000 Compliant" means that:
(a) neither the performance nor the functionality of the Purchased
Assets will be affected by dates prior to, during, or after
the year 2000, or by any changes to the field configuration
which contains the date information within any part of the
Purchased Assets caused by the advent of the year 2000;
(b) the Purchased Assets are and will be capable of accurate and
timely processing, storage, inputting, outputting, displaying,
sorting and sequencing of any data or input which includes an
indication of or reference to a date; and
(c) the Purchased Assets are and will be capable of accurate and
timely identification, manipulation, and calculation using
dates outside the 1900 - 1999 year range.
5.23 FULL DISCLOSURE
To the knowledge of the Seller, there are no facts pertaining to the
Seller, the Purchased Business or the Purchased Assets which could reasonably be
expected to have a material adverse effect on the Purchased Business or the
Purchased Assets and which have not been disclosed in this Agreement or the
Schedules.
5.24 BROKERS
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Seller.
<PAGE> 27
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser and UTI, jointly and severally, represent and warrant to
the Seller as follows:
6.1 ORGANIZATION
The Purchaser is a corporation validly subsisting under the laws of the
Province of Alberta and has the corporate power to enter into this Agreement and
to perform its obligations hereunder. UTI is a corporation validly subsiding
under the laws of the State of Delaware and has the corporate power to enter
into this Agreement and to perform its obligations hereunder.
6.2 AUTHORIZATION
This Agreement has been duly authorized, executed and delivered by each
of the Purchaser and UTI and are legal, valid and binding obligations of the
Purchaser and UTI enforceable against the Purchaser and UTI, as the case may be,
by the Seller in accordance with the terms of this Agreement, except as such
enforcement may be limited by bankruptcy, insolvency and other laws affecting
the rights of creditors generally and except that equitable remedies may only be
granted in the discretion of a court of competent jurisdiction.
6.3 NO CONFLICT
The execution and delivery of this Agreement by each of the Purchaser
and UTI and the consummation of the transactions herein provided for will not
result in the violation of any provision of, or constitute a default under, or
conflict with or cause the acceleration of any obligation of the Purchaser or
UTI under:
(a) any provision of the constating documents or by-laws or
resolutions of the board of directors (or any committee
thereof) or shareholders of the Purchaser or UTI;
(b) any judgment, decree, order or award of any court,
governmental body or arbitrator having jurisdiction over the
Purchaser or UTI;
(c) any applicable law, statute, ordinance, regulation or rule; or
(d) any Contract to which the Purchaser or UTI is a party or by
which the Purchaser or UTI are bound.
6.4 CONSENTS AND APPROVALS
(a) REGULATORY CONSENTS. There is no requirement for either the
Purchaser or UTI to make any filing with, give any notice to
or obtain any licence, permit, certificate, registration,
authorization, consent or approval of, any government or
regulatory authority as a condition to the lawful consummation
of the transactions contemplated by this Agreement and that
would materially adversely affect the
<PAGE> 28
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Purchaser's or UTI's ability to consummate the transactions
contemplated by this Agreement.
(b) THIRD PARTY CONSENTS. Except for notices to UTI's lenders and
any applicable stock exchange, there is no requirement under
any Contract to which either the Purchaser or UTI is a party
or by which either the Purchaser or UTI is bound, to give
notice to, to obtain the consent or approval of, any party to
such Contract relating to the transactions contemplated in
this Agreement that would materially adversely affect the
Purchaser's or UTI's ability to consummate the transactions
contemplated by this Agreement.
6.5 INVESTMENT CANADA
The Purchaser will comply with the Investment Canada Act and the
Competition Act to the extent, if any, applicable to the transactions referred
to in this Agreement including, without limitation, the related transactions
contemplated by the agreements listed in Schedule 20.
6.6 BROKERS
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Purchaser.
ARTICLE 7
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Notwithstanding the Closing or any investigation made by or on behalf
of the Party entitled to the benefit thereof, the representations and warranties
contained in this Agreement and in all certificates and documents delivered
pursuant to or contemplated by this Agreement shall survive the Closing of the
transactions contemplated hereby and shall not be merged in any conveyances or
other documents provided pursuant to this Agreement, provided that no claim may
be made by one Party against any other Party, pursuant to or based upon any of
these representations and warranties unless written notice thereof with
reasonable particulars shall have been provided by such Party to the other Party
within 18 months following the Closing.
ARTICLE 8
COVENANTS
8.1 ACCESS TO PURCHASED BUSINESS AND PURCHASED ASSETS
The Seller shall permit the Purchaser to conduct a due diligence review
of the Purchased Assets and the records and documents related thereto and to the
Purchased Business. The Seller shall forthwith make available to the Purchaser
and its authorized representatives and, if requested by the Purchaser, provide a
copy to the Purchaser of, all title documents, Contracts,
<PAGE> 29
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financial statements, policies, plans, reports, licences, orders, permits, books
of account, accounting records and all other documents, information and data
relating to the Purchased Business. The Seller shall afford the Purchaser and
its authorized representatives every reasonable opportunity to have free and
unrestricted access to the Purchased Assets during normal business hours and all
other property and assets utilized in the Purchased Business. At the request of
the Purchaser, the Seller shall execute such consents, authorizations and
directions as may be necessary to permit any inspection of the Purchased
Business or any of the Purchased Assets or to enable the Purchaser or its
authorized representative to obtain full access to all files and records
relating to any of the Purchased Assets maintained by governmental or other
public authorities. At the Purchaser's request, the Seller shall co-operate with
the Purchaser in arranging any such meetings as the Purchaser should reasonably
request with:
(a) customers, suppliers, distributors or others who have or have
had a business relationship with the Seller in respect of the
Purchased Business; and
(b) the auditors, solicitors or any other persons engaged or
previously engaged to provide services to the Seller who have
knowledge of matters relating to the Purchased Business or
Purchased Assets.
In particular, without limitation, the Seller shall permit the
Purchaser's representatives or consultants to conduct all such testing and
inspection in respect of environmental matters at such locations of the
Purchased Business as the Purchaser may determine, in its sole discretion, as
may be required to satisfy the Purchaser in respect of such matters and the
Seller shall permit the representatives or consultants of the Purchaser to
conduct a physical review of the equipment of the Purchased Business as the
Purchaser reasonably deems necessary so as to enable the Purchaser to appraise
and/or estimate the quantum of value of such equipment. The exercise of any
rights of inspection by or on behalf of the Purchaser under this Section 8.1
shall not mitigate or otherwise affect any of the representations and warranties
of the Seller hereunder, which shall continue in full force and effect as
provided in Section 7.1. Notwithstanding the foregoing or anything to the
contrary contained in this Agreement, each of the Purchaser and UTI acknowledge
and agree that it has relied and shall rely solely on its own appraisal and
estimate of the quantum of value of the Purchased Assets and the Purchased
Business and that it has relied and shall rely on its own analysis related
thereto.
8.2 DELIVERY OF BOOKS AND RECORDS
At the Time of Closing, there shall be delivered to the Purchaser by
the Seller all the books and records described in Section 2.1. The Purchaser
agrees that it will preserve the books and records so delivered to it for a
period of 4 years from the Closing Date, or for such longer period as is
required by any applicable law, and will permit the Seller or its authorized
representatives reasonable access thereto in connection with the affairs of the
Seller relating to its matters, but the Purchaser shall not be responsible or
liable to the Seller for or as result of any accidental loss or destruction of
or damage to any such books or records. Until March 1, 2001, the Seller will be
permitted reasonable access to the computer system which relates to the
Purchased Assets to handle accounting and other matters relating to Seller.
<PAGE> 30
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8.3 CHANGE OF NAME
The Seller agrees that from and after the Closing Date the Seller will
not use the words "Phelps Drilling" or "Phelps Drilling International" or any
variation thereof or any similar words in any active business or other activity
which might create any confusion over these names.
8.4 CONDUCT OF PURCHASED BUSINESS PRIOR TO CLOSING
Without in any way limiting any other obligations of the Seller
hereunder, during the period from the date hereof to the Time of Closing:
(a) CONDUCT BUSINESS IN THE ORDINARY COURSE. The Seller shall
conduct the Purchased Business and maintain the Purchased
Assets in a proper and prudent manner consistent with past
practice and generally accepted industry practice. In
addition, the Seller shall not, without the prior written
consent of the Purchaser (such consent not to be unreasonably
withheld), (i) enter into any transaction or refrain from
doing any action that, if effected before the date of this
Agreement, would constitute a breach of any representation,
warranty, covenant or other obligation of the Seller contained
herein, or (ii) make any material decisions or enter into any
material Contracts with respect to the Purchased Business or
the Purchased Assets other than the entering into or
performance of drilling contracts and maintenance and repair
activities that are entered into or conducted in the ordinary
course of business and in a proper and prudent manner
consistent with past business practice and generally accepted
industry practice;
(b) CONTINUE INSURANCE. The Seller shall (i) continue to maintain
in full force and effect all policies of insurance or renewals
thereof now in effect, (ii) take out, at the expense of the
Purchaser, such additional insurance as may be reasonably
requested by the Purchaser and (iii) give all notices and
present all claims under all policies of insurance in a due
and timely fashion;
(c) REGULATORY CONSENTS. The Seller shall use its best efforts to
obtain, at or prior to the Time of Closing, from all
appropriate federal, provincial, municipal or other
governmental or regulatory bodies, the licences, permits,
consents, approvals, certificates, registrations and
authorizations described in Part 1 of Schedule 11;
(d) PRESERVE GOODWILL. The Seller shall use its best efforts to
preserve intact the Purchased Business and Purchased Assets
and to carry on the Purchased Business as currently conducted,
and the Seller shall use its best efforts to promote and
preserve for the Purchaser the goodwill of suppliers,
customers and others having business relations with the
Seller;
(e) DISCHARGE LIABILITIES. The Seller shall pay and discharge the
Liabilities of the Seller relating to the Purchased Business
in the ordinary course in accordance and consistent with the
previous practice of the Seller, except those contested in
good faith by the Seller;
<PAGE> 31
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(f) CORPORATE ACTION. The Seller shall use its best efforts to
take or cause to be taken all necessary corporate action,
steps and proceedings to approve or authorize validly and
effectively the transfer of the Purchased Assets to the
Purchaser and the execution and delivery of this Agreement and
the other agreements and documents contemplated hereby and to
cause all necessary meetings of directors and shareholders of
the Seller to be held for such purpose; and
(g) BEST EFFORTS. The Seller shall use its best efforts to satisfy
the conditions contained in Section 9.1.
8.5 THIRD PARTY CONSENTS AND NOVATIONS
(a) The Seller shall promptly give such notices to third parties
and use its best efforts to obtain such third party consents
and novations as the Purchaser or the Seller may reasonably
deem necessary or desirable in connection with the
transactions contemplated by this Agreement including, without
limitation, those consents and novations described in Schedule
11. The Purchaser shall cooperate and use its best efforts to
assist the Seller in giving such notices and obtaining such
consents and novations.
(b) Each of the Seller and the Purchaser agree that, in the event
any consent or novation necessary or desirable to preserve for
the Purchased Business any right or benefit under any lease,
license, contract, commitment or other agreement or
arrangement to which the Seller is a party is not obtained or
in the reasonable opinion of the Seller shall not be obtained
prior to the Closing, the Seller will, subsequent to the
Closing, cooperate with the Purchaser in attempting to obtain
such consent or novation as promptly thereafter as
practicable. Until such consent or novation is obtained or if
such consent or novation cannot be obtained, the Seller shall
use its best efforts to provide the Purchaser with the rights
and benefits of the affected lease, license, contract,
commitment or other agreement or arrangement (collectively,
the "NON-ASSIGNABLE RIGHTS") for the term of such lease,
license, contract or other agreement or arrangement, and, if
the Seller provides such rights and benefits, the Purchaser
shall assume the obligations and burdens thereunder and
indemnify and save harmless the Seller in respect thereof. In
particular, the Seller shall, at the request of the Purchaser:
(i) hold any such Non-Assignable Rights in trust for the
Purchaser or act as agent for the Purchaser;
(ii) enforce any rights of the Seller arising from such
Non-Assignable Rights against the issuer thereof or
the other party or parties thereto;
(iii) take all such actions and do, or cause to be done,
all such things at the request of the Purchaser as
shall reasonably be necessary and proper in order
that the value of any Non-Assignable Rights shall be
preserved and shall enure to the benefit of the
Purchaser; and
(iv) pay over to the Purchaser, all monies collected by or
paid to the Seller in respect of such Non-Assignable
Rights in respect of amounts due or accruing due
subsequent to the Effective Time.
<PAGE> 32
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(iv) pay over to the Purchaser, all monies collected by or paid to
the Seller in respect of such Non-Assignable Rights in respect
of amounts due or accruing due subsequent to the Effective
Time.
8.6 FINANCIAL STATEMENT COOPERATION
The Seller agrees, at the cost and expense of the Purchaser, to
cooperate with the Purchaser and to assist the Purchaser's outside auditors in
the preparation of any financial statements relating to the Purchased Assets and
the Seller that may be reasonably requested by the Purchaser or UTI for filing
with the Securities and Exchange Commission in connection with any filings that
may be made by the Purchaser or UTI under the US Securities Act or the US
Exchange Act. Such financial statements shall consist of (i) such audited
balance sheets and audited statements of operations, cash flows and changes in
equity together with the notes thereon and (ii) such unaudited interim balance
sheet and unaudited interim statements of operations, cash flows and changes in
equity, if any, in each case as the Purchaser or UTI shall reasonably deem to be
required by the Purchaser or UTI.
8.7 EXCLUSIVITY
From the date hereof until the Closing, neither the Seller nor any of
the Shareholders will directly or indirectly initiate discussions with or engage
in negotiations with any Person other than the Purchaser for any sale of the
Purchased Business or any of the Purchased Assets, whether through any sale of
assets, sale of shares, reorganization or otherwise.
8.8 NON-COMPETITION
(a) Each of the Seller and the Shareholders acknowledges that
pursuant to this Agreement the Purchaser will purchase from
the Seller the goodwill of the Seller and the Purchased
Business, and that to induce the Purchaser to pay the Purchase
Price, the protection and maintenance of such goodwill
constitutes a legitimate interest to be protected by the
Purchaser and UTI by this covenant not to compete. Therefore,
each of the Seller and the Shareholders agrees, severally and
not jointly, that for the period (the "NONCOMPETITION PERIOD")
commencing upon the Closing Date and ending upon the fifth
anniversary (the "ENDING DATE") of the Closing Date, he, she
or it shall not, directly or indirectly, either as an
employee, employer, consultant, agent, principal, partner,
shareholder (other than a shareholder of 5% or less of a
publicly traded company), corporate officer or director, or in
any other individual or representative capacity, engage or
participate in the land contract drilling business in North
America (such entire geographic area is hereinafter referred
to as the "NONCOMPETITION AREA") provided that nothing herein
shall restrict the Seller or any Shareholder upon his or her
cessation of employment with the Purchaser from providing
well-site drilling consulting services to operators. Each of
the Seller and the Shareholders represents to the Purchaser
that the enforcement of the restriction contained in this
Section 8.8 would not be unduly burdensome to it. Each of the
Seller and the Shareholders further represents and
acknowledges that it has willingly entered
<PAGE> 33
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into this agreement not to compete and is willing and able to
compete in other geographical areas not prohibited by this
Section 8.8.
(b) Each of the Seller and the Shareholders agrees that in
addition to the application of the provisions set forth in
Article 11, a breach or violation of this covenant not to
compete shall entitle the Purchaser and UTI, as a matter of
right, to an injunction issued by any court of competent
jurisdiction, restraining any further or continued breach or
violation of this covenant. Such right to an injunction shall
be cumulative and in addition to, and not in lieu of, any
other remedies to which the Purchaser or UTI may show itself
justly entitled. Further, each of the Seller and the
Shareholders agrees that during any period in which it is in
breach of this covenant not to compete, the Noncompetition
Period applicable to such Seller or Shareholder who is in
breach of this covenant shall be extended for the amount of
time that it is in breach hereof.
(c) Each of the Seller and the Shareholders agrees, severally and
not jointly, that for the Noncompetition Period it will not,
either directly or indirectly, (i) solicit for employment, or
allow any corporation or business entity controlled directly
or indirectly by or affiliated with the Seller or any such
Shareholder to solicit for employment, any Person that at that
time is, or at any time during the 12 month period immediately
preceding the Closing Date was, an employee, consultant or
agent of the Seller, the Purchaser, UTI or any of their
Affiliates (except that this shall not prohibit reasonable and
customary general solicitations of employment through the
media) or (ii) make known to any Person that is engaged in the
contract land drilling business in the Non-Competition Area or
executive recruiting or search firms that have clients engaged
in such business, the names of any Person that at that time
is, or at any time during the 12-month period immediately
preceding the Closing Date was, an employee, consultant or
agent of the Purchaser, the Seller or any of their Affiliates
relating to the Purchased Business.
(d) Notwithstanding anything contained herein to the contrary, the
existence of any claim or cause of action of the Seller
against the Purchaser or UTI, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the
enforcement by the Purchaser of the covenants of the Seller
and the Shareholders contained in this Section 8.8.
(e) The Parties agree that the limitations contained in this
Section 8.8 with respect to geographic area, duration and
scope of activity are reasonable. However, if any court shall
determine that the geographic area, duration or scope of
activity of any restriction contained in this Section 8.8 is
unenforceable, it is the intention of the Parties that such
restrictive covenant set forth herein shall not thereby be
terminated but shall be deemed amended to the extent required
to render it valid and enforceable.
<PAGE> 34
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8.9 UPDATE OF SCHEDULES
From the date hereof through and including the Closing Date, the Seller
may correct or update any of the Schedules. Any such correction or update shall
be made by actual delivery of an amended Schedule, marked to show changes (the
"AMENDED SCHEDULE"), which Amended Schedule shall replace the original Schedule
hereto. The Purchaser shall be given a reasonable opportunity to review any
Amended Schedule prior to Closing and shall have the right to postpone the
Closing for up to two Business Days to review any Amended Schedule delivered on
or immediately before the Closing Date. The Purchaser shall have the right to
terminate this Agreement at any time prior to the Closing if it is not
satisfied, acting reasonably, with any information contained in any Amended
Schedule.
ARTICLE 9
CONDITIONS OF CLOSING
9.1 CONDITIONS OF CLOSING IN FAVOUR OF PURCHASER
The sale and purchase of the Purchased Assets is subject to the
following terms and conditions for the exclusive benefit of the Purchaser, to be
performed or fulfilled at or prior to the Time of Closing:
(a) CLOSING DELIVERIES. The Seller shall have delivered to the
Purchaser the documents required to be delivered pursuant to
Section 10.2;
(b) REPRESENTATIONS AND WARRANTIES. The representation and
warranties of the Seller contained in this Agreement shall be
true and correct in all material respects at the Time of
Closing with the same force and effect as if such
representations and warranties were made at and as of such
time, and a certificate of the Seller, dated the Closing Date
to that effect shall have been delivered to the Purchaser,
such certificate to be in form and substance satisfactory to
the Purchaser, acting reasonably;
(c) COVENANTS. All of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Seller at or
before the Time of Closing shall have been complied with or
performed in all material respects, and a certificate of the
Seller dated the Closing Date to that effect shall have been
delivered to the Purchaser, such certificate to be in form and
substance satisfactory to the Purchaser, acting reasonably;
(d) REGULATORY CONSENTS. There shall have been obtained from all
appropriate federal, provincial, municipal or other
governmental or administrative bodies such licences, permits,
consents, approvals, certificates, registrations and
authorizations as are required to be obtained by the Seller to
permit the change of ownership of the Purchased Assets
contemplated hereby, including, without limitation, those
described in Part 1 of Schedule 11, in each case in form and
substance satisfactory to the Purchaser, acting reasonably;
<PAGE> 35
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(e) CONTRACTUAL CONSENTS. The Seller shall have given or obtained
the notices, consents and approvals described in Part 2 of
Schedule 11, in each case in form and substance satisfactory
to the Purchaser, acting reasonably;
(f) NO ACTION OR PROCEEDING. No legal or regulatory action or
proceeding shall be pending or threatened by any Person to
enjoin, restrict or prohibit the purchase and sale of the
Purchased Assets contemplated hereby;
(g) NO MATERIAL DAMAGE. No material damage or physical alteration
to the whole or any material part of the Purchased Assets or
the Purchased Business, which would materially affect the
value of the Purchased Assets or the Purchased Business, shall
have occurred between the date hereof and the Time of Closing;
(h) NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse changes in the condition (financial or otherwise), of
the assets, Liabilities, operations, earnings, business or
prospects of the Purchased Business since the date of the most
recent Financial Statements;
(i) NO ENCUMBRANCES. The Seller shall have provided for the
discharge of the Encumbrances listed in Part 2 of Schedule 12
to the satisfaction of the Purchaser, acting reasonably;
(j) CONTINUED OPERATION. During the period from the date hereof to
the Time of Closing, the Seller shall have operated the
Purchased Business in a proper and prudent manner in
accordance with generally accepted industry practices;
(k) LEGAL OPINION. The Seller shall have delivered to the
Purchaser a favourable opinion of counsel to the Seller in the
form annexed hereto as Schedule 18;
(l) DUE DILIGENCE. The Purchaser shall have completed, within 14
days following execution of this Agreement by the Parties,
satisfactory due diligence regarding the Purchased Assets, the
results of which are in all respects satisfactory to the
Purchaser in its sole discretion;
(m) BOARD APPROVAL. UTI shall have obtained, within fourteen days
following execution of this Agreement by the Parties, the
approval of its board of directors for the matters set out
herein; and
(n) COMPLETE TRANSACTION. This Agreement constitutes one part of a
three part transaction, and accordingly shall not be binding
unless the related transactions contemplated by the agreements
listed in Schedule 20 are closed concurrent with the Closing
of the transactions contemplated by this Agreement.
If any of the conditions contained in this Section 9.1 shall not be
performed or fulfilled at or prior to the Time of Closing to the sole
satisfaction of the Purchaser, acting reasonably, the Purchaser may, by notice
to the Seller, terminate this Agreement, provided that the Purchaser may also
bring an action pursuant to Article 11 against the Seller and/or the
Shareholders for damages suffered by the Purchaser where the non-performance or
non-fulfillment of the relevant
<PAGE> 36
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condition is a result of a breach of covenant, representation or warranty by the
Seller. Any such condition may be waived in whole or in part by the Purchaser
without prejudice to any claims it may have for breach of covenant,
representation or warranty.
9.2 CONDITIONS OF CLOSING IN FAVOUR OF SELLER
The sale and purchase of the Purchased Assets is subject to the
following terms and conditions for the exclusive benefit of the Seller, to be
performed or fulfilled at or prior to the Time of Closing:
(a) CLOSING DELIVERIES. The Purchaser shall have delivered to the
Seller the Purchase Price and documents required to be
delivered pursuant to Section 10.3;
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Purchaser and UTI contained in this
Agreement shall be true and correct in all material respects
at the Time of Closing with the same force and effect as if
such representations and warranties were made at and as of
such time, and a certificate of each of the Purchaser and UTI,
dated the Closing Date, to that effect shall have been
delivered to the Seller each such certificate to be in form
and substance satisfactory to the Seller, acting reasonably;
(c) COVENANTS. All of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Purchaser
and UTI at or before the Time of Closing shall have been
complied with or performed in all material respects, and a
certificate of each of the Purchaser and UTI, dated the
Closing Date, to that effect shall have been delivered to the
Seller, each such certificate to be in form and substance
satisfactory to the Seller, acting reasonably;
(d) REGULATORY CONSENTS. There shall have been obtained from all
appropriate federal, provincial, municipal or other
governmental or administrative bodies such licences, permits,
consents, approvals, certificates, registrations and
authorizations as are required to be obtained by the Purchaser
to permit the change of ownership of the Purchased Assets
contemplated hereby, including those described in Part I of
Schedule 11, in each case in form and substance satisfactory
to the Seller, acting reasonably;
(e) NO ACTION OR PROCEEDING. No legal or regulatory action or
proceeding shall be pending or threatened by any person to
enjoin, restrict or prohibit the purchase and sale of the
Purchased Assets contemplated hereby;
(f) LEGAL OPINIONS. The Purchaser and UTI shall have delivered to
the Seller favourable opinions of counsel to the Purchaser and
UTI in the form annexed hereto as Schedule 19;
(g) APPROVALS. The Seller shall have obtained, within five
Business Days following execution of this Agreement, the
approval of its board of directors and of its shareholders for
the matters set out herein; and
<PAGE> 37
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(h) COMPLETE TRANSACTION. This Agreement constitutes one part of a
three part transaction, and accordingly shall not be binding
unless the related transactions contemplated by the agreements
listed in Schedule 20 are closed concurrent with the Closing
of the transactions contemplated by this Agreement.
If any of the conditions contained in this Section 9.2 shall not be
performed or fulfilled at or prior to the Time of Closing to the satisfaction of
the Seller acting reasonably, the Seller may, by notice to the Purchaser and
UTI, terminate this Agreement, provided that the Seller may also bring an action
pursuant to Article 11 against the Purchaser and/or UTI for damages suffered by
the Seller where the non-performance or non-fulfillment of the relevant
condition is as a result of a breach of covenant, representation or warranty by
the Purchaser and UTI. Any such condition may be waived in whole or in part by
the Seller without prejudice to any claims it may be have for breach of
covenant, representation or warranty.
ARTICLE 10
CLOSING AND TRANSFER OF POSSESSION
10.1 PLACE OF CLOSING
The Closing shall take place at the Time of Closing at the offices of
Macleod Dixon in Calgary, Alberta.
10.2 CLOSING DELIVERIES BY SELLER
At the Closing the Seller shall deliver to the Purchaser:
(a) an executed counterpart of the Bill of Sale plus any other
deeds, conveyances, bills of sale, assurances, transfers,
assignments and any other documentation necessary or
reasonably required to transfer the Purchased Assets to the
Purchaser with a good and marketable title, free and clear of
all Encumbrances whatsoever except for Permitted Encumbrances.
(b) a certificate of corporate status and an officer's
certificate, certified by a senior officer of the Seller as of
the Closing Date, which certificate shall include copies of
its constating documents and by-laws and of the resolution
authorizing the execution, delivery and performance by the
Seller of this Agreement and any documents to be provided by
it pursuant to the provisions hereof;
(c) a receipt for the Purchase Price;
(d) the certificates and other documents required to be delivered
pursuant to Section 9.1; and
(e) all such other documents relevant to the closing of the
transactions contemplated hereby as the Purchaser, acting
reasonably, may request.
<PAGE> 38
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10.3 CLOSING DELIVERIES BY PURCHASER
At the Closing the Purchaser shall deliver to the Seller:
(a) the Purchase Price by bank draft or wire transfer;
(b) an executed counterpart of the Bill of Sale;
(c) certificates of corporate status and officers' certificates,
certified by a senior officer of each of the Purchaser and of
UTI as of the Closing Date, which certificates shall include
copies of constating documents and by-laws and of the
resolution authorizing the execution, delivery and performance
by the Purchaser and UTI of this Agreement and any documents
to be provided by them pursuant to the provisions hereof;
(d) the certificates and other documents required to be delivered
pursuant to Section 9.2; and
(e) all such other documents relevant to the closing of the
transactions contemplated hereby as the Seller, acting
reasonably, may request.
10.4 FURTHER ASSURANCES
From and after the Closing Date, each Party to this Agreement covenants
and agrees that it will at all times after the Closing Date, at the expense of
the requesting Party, promptly execute and deliver all such documents,
including, without limitation, all such additional conveyances, transfers,
consents and other assurances and do all such other acts and things as any other
Party, acting reasonably, may from time to time request be executed or done in
order to better evidence or perfect or effectuate any provision of this
Agreement or of any agreement or other document executed pursuant to this
Agreement or any of the respective obligations intended to be created hereby or
thereby.
10.5 TRANSFER OF POSSESSION AND TITLE
Subject to compliance with the terms and conditions hereof, the
transfer of possession of and title to the Purchased Assets shall be deemed to
take effect as at the Time of Closing.
10.6 RISK OF LOSS
From the date hereof up to the Time of Closing, the Purchased Assets
shall be and remain at the risk of the Seller. If, prior to the Time of Closing,
all or any part of the Purchased Assets that are necessary to carry on the
Purchased Business as currently conducted are destroyed or damaged by fire or
any other casualty or shall be appropriated, expropriated or seized by
governmental or other lawful authority, the Purchaser may elect to complete the
purchase without reduction of the Purchase Price, in which event all proceeds of
insurance or compensation for expropriation or seizure shall be paid to the
Purchaser at the Time of Closing and all right and claim of the Seller to any
such amounts not paid by the Closing Date shall be assigned at the Time of
Closing to the Purchaser.
<PAGE> 39
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ARTICLE 11
INDEMNIFICATION
11.1 INDEMNIFICATION BY SELLER AND SHAREHOLDERS
The Seller and the Shareholders jointly and severally agree to
indemnify and save harmless the Purchaser from all Losses suffered or incurred
by the Purchaser as a result of or arising directly or indirectly out of or in
connection with:
(a) any breach by the Seller of or any inaccuracy of any
representation or warranty of the Seller contained in this
Agreement or in any agreement, certificate or other document
delivered pursuant hereto;
(b) any breach or non-performance by the Seller of any covenant to
be performed by it that is contained in this Agreement or in
any agreement, certificate or other document delivered
pursuant hereto;
(c) the Excluded Liabilities or the Excluded Assets; and
(d) the operation of the Purchased Business, or the ownership of
the Purchased Assets, prior to the Time of Closing.
11.2 INDEMNIFICATION BY PURCHASER AND UTI
The Purchaser and UTI jointly and severally agree to indemnify and save
harmless the Seller from all Losses suffered or incurred by the Seller as a
result of or arising directly or indirectly out of or in connection with:
(a) any breach by the Purchaser or UTI of or any inaccuracy of any
representation or warranty contained in this Agreement or in
any agreement, instrument, certificate or other document
delivered pursuant hereto;
(b) any breach or non-performance by the Purchaser or UTI of any
covenant to be performed by it that is contained in this
Agreement or in any agreement, certificate or other document
delivered pursuant hereto;
(c) the Assumed Obligations;
(d) any GST which becomes payable by the Seller in respect of the
sale of the Purchased Assets other than as a result of a
misrepresentation or breach by the Seller; and
(e) the operation of the Purchased Business, or the ownership of
the Purchased Assets, on or after the Time of Closing.
<PAGE> 40
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11.3 LIMITATIONS ON INDEMNIFICATION
(a) Notwithstanding the foregoing provisions of this Article, but
subject to (c) below, no Party shall be liable under the
indemnifications in Section 11.1 or 11.2 unless and until the
aggregate amount of liability thereunder exceeds Cdn. $25,000.
(b) Notwithstanding the foregoing provisions of this Article, but
subject to (c) below, the aggregate liability of the Seller
and the Shareholders to the Purchaser under the
indemnification provisions of this Agreement, and the
aggregate liability of the Purchaser and UTI to the Seller
under the indemnification provisions of this Agreement, shall
be limited in each case to an amount equal to the Purchase
Price.
(c) The limitations on the liability of any Party under this
Agreement shall only apply to the extent that there is not any
fraud or wilful misconduct on the part of such Party, and all
such limits on the liability of any Party shall lapse and be
of no force and effect if and to the extent that there is or
has been fraud or wilful misconduct on the part of such Party
in connection with the matter with respect to which any claim
against such Party is made hereunder.
(d) All indemnification to which an indemnified Party may be
entitled pursuant to the provisions of this Article shall be
net of any insurance coverage paid to the indemnified Party
with respect thereto, and shall exclude any claims arising
from the indemnified Party's gross negligence or willful
misconduct after the Closing.
(e) Except for those covenants contained in Article 8 and which
are intended to survive Closing as provided in Article 8, no
Party shall be liable under the indemnifications in Section
11.1 or 11.2 unless written notice of the claim as provided
for in Section 11.4 is given by the Indemnified Party (as
defined in Section 11.4) to the Indemnifying Party (as defined
in Section 11.4), within 18 months following the Closing.
11.4 NOTICE OF CLAIM
In the event that a Party (the "INDEMNIFIED PARTY") shall become aware
of any claim, proceeding or other matter (a "CLAIM") in respect of which any
other Party (the "INDEMNIFYING PARTY") agreed to indemnify the Indemnified Party
pursuant to this Agreement, the Indemnified Party shall promptly give written
notice thereof to the Indemnifying Party. Such notice shall specify whether the
Claim arises as a result of a claim by a Person against the Indemnified Party (a
"THIRD PARTY CLAIM") or whether the Claim does not so arise (a "DIRECT CLAIM"),
and shall also specify with reasonable particularity (to the extent that the
information is available):
(a) the factual basis for the Claim; and
(b) the amount of the Claim, if known.
If, through the fault of the Indemnified Party, the Indemnifying Party
does not receive notice of any Claim in time to effectively contest the
determination of any liability susceptible of being contested, the Indemnifying
Party shall be entitled to set off against the amount claimed by the Indemnified
Party the amount of any Losses incurred by the Indemnifying Party resulting from
<PAGE> 41
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the Indemnified Party's failure to give such notice on a timely basis.
In the event that a Shareholder shall, within 18 months following the
Closing, become aware of a Claim arising from a breach of any representation and
warranty contained in Section 5.6 (Title to Purchased Assets), Section 5.10
(Material Contracts) or 5.19 (Environmental Matters), such Shareholder severally
agrees to give prompt written notice thereof to the Purchaser and UTI. This
obligation is in addition to any disclosure obligation which such Shareholder
may owe to the Purchaser in such Shareholder's capacity as an employee of the
Purchaser or otherwise.
11.5 DIRECT CLAIMS
With respect to any Direct Claim, following receipt of notice from the
Indemnified Party of the Claim, the Indemnifying Party shall have 30 days to
make such investigation of the Claim as is considered necessary or desirable.
For the purpose of such investigation, the Indemnified Party shall make
available to the Indemnifying Party the information relied upon by the
Indemnified Party to substantiate the affected Claim, together with all such
other information as the Indemnifying Party may reasonably request. If both
affected Parties agree at or prior to the expiration of such 30 day period (or
any mutually agreed upon extension thereof) to the validity and amount of such
Claim, the Indemnifying Party shall immediately pay to the Indemnified Party the
full agreed upon amount of the Claim, failing which the matter shall be referred
to binding arbitration in such manner as the Parties may agree or shall be
determined by a court of competent jurisdiction.
11.6 THIRD PARTY CLAIMS
With respect to any Third Party Claim, the Indemnifying Party shall
have the right, at its expense, to participate in or assume control of the
negotiation, settlement or defence of the Claim and, in such event, the
Indemnifying Party shall reimburse the Indemnified Party for all the Indemnified
Party's out-of-pocket expenses as a result of such participation or assumption.
If the Indemnifying Party elects to assume such control, the Indemnified Party
shall have the right to participate in the negotiation, settlement or defence of
such Third Party Claim and to retain counsel to act on its behalf, provided that
the fees and disbursements of such counsel shall be paid by the Indemnified
Party unless the Indemnifying Party consents to the retention of such counsel or
unless the named parties to any action or proceeding include both the
Indemnifying Party and the Indemnified Party and a representation of both the
Indemnifying Party and the Indemnified Party by the same counsel would be
inappropriate due to the actual or potential differing interests between them
(such as the availability of different defenses). If the Indemnifying Party,
having elected to assume such control, thereafter fails to defend the Third
Party Claim within a reasonable time, the Indemnified Party shall be entitled to
assume such control and the Indemnifying Party shall be bound by the results
obtained by the Indemnified Party with respect to such Third Party Claim. If any
Party Claim is of a nature such that the Indemnified Party is required by
applicable law to make a payment to any Person (a "THIRD PARTY") with respect to
the Third Party Claim before the completion of settlement negotiations or
related legal proceedings, the Indemnified Party may make such payment and the
Indemnifying Party shall, forthwith after demand by the Indemnified Party,
reimburse the Indemnified Party
<PAGE> 42
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for such payment. If the amount of any liability of the Indemnified Party under
the Third Party Claim in respect of which such a payment was made, as finally
determined, is less than the amount that was paid by the Indemnifying Party to
the Indemnified Party, the Indemnified Party shall, forthwith after receipt of
the difference from the Third Party, pay the amount of such difference to the
Indemnifying Party.
11.7 SETTLEMENT OF THIRD PARTY CLAIMS
If the Indemnifying Party fails to promptly assume control of the
defence of any Third Party Claim, the Indemnified Party shall have the exclusive
right to contest, settle or pay the amount claimed. Whether or not the
Indemnifying Party assumes control of the negotiation, settlement or defence of
any Third Party Claim, the Indemnifying Party shall not settle any Third Party
Claim without the written consent of the Indemnified Party, which consent shall
not be unreasonably withheld or delayed; provided, however, that the liability
of the Indemnifying Party shall be limited to the proposed settlement amount if
any such consent is not obtained for any reason.
11.8 CO-OPERATION
The Indemnified Party and the Indemnifying Party shall co-operate fully
with each other with respect to Third Party Claims, and shall keep each other
fully advised with respect thereto (including supplying copies of all relevant
documentation promptly as it becomes available).
11.9 SCOPE
The provisions of this Article 11 shall apply to any Claim for breach
of any covenant, representation, warranty or other provision of this Agreement
or any agreement, certificate or other document delivered pursuant to this
Agreement (other than a claim for specific performance or injunctive relief)
with the intent that all such Claims shall be subject to the limitations and
other provisions contained in this Article 11.
ARTICLE 12
TERMINATION; REMEDIES; LIMITATIONS
12.1 TERMINATION AGREEMENT
This Agreement and the transactions contemplated hereby may be
terminated at any time prior to the Closing:
(a) by the mutual consent of the Seller, the Purchaser and UTI; or
(b) if the Closing has not occurred by May 17, 2000, then
(i) by the Purchaser if any condition specified in
Section 9.1 has not been satisfied on or before such
date, and shall not have been waived by the
Purchaser, or
<PAGE> 43
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(ii) by the Seller if any condition specified in Section
9.2 has not been satisfied on or before such date,
and shall not have been waived by the Seller;
provided, in each case, that the failure to consummate the
transactions contemplated hereby on or before such date did
not result from the failure by the Party or Parties seeking
termination of this Agreement to fulfill any undertaking or
commitment provided for herein on the part of such Party or
Parties that is required to be fulfilled on or prior to
Closing.
12.2 EFFECT OF TERMINATION
Without limiting any Party's respective rights, Liabilities and
remedies hereunder, in the event of termination of this Agreement by the
Purchaser or the Seller pursuant to Subsection 12.1(b), written notice thereof
shall forthwith be given by the terminating Party to the other Party or Parties
hereto, and this Agreement shall thereupon terminate.
ARTICLE 13
MISCELLANEOUS
13.1 NOTICES
(a) Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be delivered in
person, transmitted by telecopy or similar means of recorded
electronic communication or sent by registered mail, charges
prepaid, addressed as follows:
(i) if to the Seller or the Shareholders:
584022 ALBERTA LTD.
Hanover Place, Suite 1450
101-6th Avenue S.W.
Calgary, Alberta T2P 3P4
Attention: T.V. Dumont
Fax No.: (403) 262-2497
with a copy to:
FIELD ATKINSON PERRATON
1900 First Canadian Centre
350 - 7th Avenue S.W.
Calgary, Alberta T2P 3N9
Attention: Mr. Brian Yaworski
Fax No: (403) 264-7084
<PAGE> 44
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(ii) if to the Purchaser or UTI:
PHELPS DRILLING LTD. or UTI ENERGY CORP.
c/o UTI Energy Corp.
16800 Greenspoint Park, Suite 225N
Houston, Texas 77060
Attention: Chief Executive Officer
Fax No.: (281) 875-9145
with a copy to:
MACLEOD DIXON
3700 Canterra Tower
400 - 3rd Avenue S.W.
Calgary, Alberta
T2P 4H7
Attention: Mr. Richard P. Borden
Fax No. (403) 264-5973
(b) Any such notice or other communication shall be deemed to have
been given and received on the day on which it was delivered
or transmitted (or, if such day is not a Business Day, on the
next following Business Day) or, if mailed, on the third
Business Day following the date of mailing; provided, however,
that if at the time of mailing or within three Business Days
thereafter there is or occurs a labour dispute or other event
that might reasonably be expected to disrupt the delivery of
documents by mail, any notice or other communication hereunder
shall be delivered or transmitted by means of recorded
electronic communication as aforesaid.
(c) A Party may at any time change its address for service from
time to time by giving notice to the other Party in accordance
with this Section 13.1
13.2 CONSULTATION
Prior to the Closing and except as required by any applicable law or
any regulatory or stock exchange requirement, no Party shall issue any press
release or make any public announcement without the prior written consent of the
other Parties, which consent shall not be unreasonably withheld or delayed. Upon
the Closing, the Parties shall consult with each other before issuing any press
release or making any other public announcement with respect to this Agreement
or the transactions contemplated hereby.
<PAGE> 45
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13.3 DISCLOSURE
Prior to any press release or public announcement of the transaction
contemplated hereby pursuant to Section 13.2, no Party shall disclose this
Agreement or any aspects of the transaction contemplated hereby except to its
board of directors, its senior management, its legal, accounting, financial or
other professional advisors or its lenders, all on a "need to know basis", or as
otherwise may be required by any applicable law or any regulatory authority or
stock exchange having jurisdiction.
13.4 BEST EFFORTS
The Parties acknowledge and agree that, for all purposes of this
Agreement, an obligation on the part of one Party to use its best efforts to
obtain from any Person any waiver, consent, approval, permit, licence or other
document shall not require such Party to make any payment to such Person for the
purpose of procuring the same, other than payments for amounts due and payable
to such Person, payments for incidental expenses incurred by such Person and
payments required by any applicable law or regulation.
13.5 COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall
constitute an original and all of which taken together shall constitute one and
the same instrument.
IN WITNESS WHEREOF this Agreement has been executed by the Parties as
of the date first above written.
584022 ALBERTA LTD.
By:
----------------------------
By:
----------------------------
<PAGE> 46
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SHAREHOLDERS
------------------------------- -------------------------------------
Witness THEODORE V. DUMONT
-------------------------------- ------------------------------------
Witness DONALD E. NAKONECHNY
-------------------------------- ------------------------------------
Witness ARTHUR G. HIBBARD
-------------------------------- ------------------------------------
Witness GORDON E. VAN EATON
-------------------------------- ------------------------------------
Witness JOHN W. MILLER
PHELPS DRILLING LTD.
By:
---------------------------------
By:
---------------------------------
UTI ENERGY CORP.
By:
---------------------------------
By:
---------------------------------
<PAGE> 47
SCHEDULE 9
ALLOCATION OF PURCHASE PRICE
Class 41 Tangible Depreciable Property
-------------------
<PAGE> 48
SCHEDULE 21
ASSIGNMENT, BILL OF SALE AND ASSUMPTION AGREEMENT
This Assignment, Bill of Sale and Assumption Agreement (the
"Agreement") is dated effective the _____day of April, 2000, and made between
584022 Alberta Ltd. (the "Seller") and Phelps Drilling Ltd. (the "Purchaser").
WHEREAS the Seller, the shareholders of the Seller, the Purchaser and
UTI Energy Corp. entered into an Asset Purchase Agreement dated as of the
_______ day of March, 2000 (the "Purchase and Sale Agreement") providing, among
other things, for the sale by the Seller to the Purchaser of the Purchased
Assets;
AND WHEREAS pursuant to the Purchase and Sale Agreement, the Seller and
the Purchaser are required to execute and deliver this Agreement in connection
with the consummation of the transactions contemplated by the Purchase and Sale
Agreement;
AND WHEREAS any capitalized term used but not defined in this Agreement
shall have the meaning ascribed to such term in the Purchase and Sale Agreement;
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. ASSIGNMENT OF ASSETS. The Seller hereby assigns, transfers, conveys,
sells and delivers to the Purchaser, and the Purchaser hereby accepts,
all right, title and interest of the Seller in and to the Purchased
Assets, TO HAVE AND TO HOLD the Purchased Assets unto the Purchaser
forever, together with all rights belonging or pertaining thereto.
2. FURTHER ASSURANCES RE PURCHASED ASSETS. The Seller hereby covenants to
execute and deliver to the Purchaser all such other and further
instruments of assignment and transfer, and all such notices, releases
and other documents that would more fully and specifically assign and
transfer to and vest in the Purchaser the title and interest of the
Seller in and to all of the Purchased Assets hereby assigned and
transferred, or intended to be assigned and transferred free and clear
of all Encumbrances whatsoever except for Permitted Encumbrances. To
the extent that, with respect of any of the Purchased Assets, no
assignment document other than this Agreement is executed, the parties
intend that this Agreement constitutes the conveyance, transfer and
assignment of such Purchased Assets.
3. ASSUMPTION OF OBLIGATIONS. The Purchaser hereby assumes, in accordance
with the terms of the Purchase and Sale Agreement, the Assumed
Obligations.
4. FURTHER ASSURANCES RE ASSUMED OBLIGATIONS. The Purchaser hereby
covenants to execute and deliver to the Purchaser all such other and
further instruments of assumption, and all such notices, releases and
other documents that would more fully and specifically assume all of
the Assumed Obligations.
<PAGE> 49
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5. GOVERNING LAW. This Agreement and the rights and obligations of the
Seller and the Purchaser hereunder shall be governed by, interpreted
and enforced in accordance with the laws of the Province of Alberta
without giving effect to principles thereof relating to conflicts of
law rules that would direct application of laws of another
jurisdiction, except to the extent that it is mandatory that the law of
another jurisdiction shall apply.
6. CONFLICT AND INCONSISTENCY, NO MERGER. To the extent any conflict or
inconsistency exists between the provisions of this Agreement and the
Purchase and Sale Agreement, the provisions of the Purchase and Sale
Agreement shall govern. The terms and provisions of the Purchase and
Sale Agreement (including, without limitation, the representations,
warranties and covenants therein) shall not merge, be extinguished or
otherwise affected by the delivery and execution of this Agreement or
any other document delivered pursuant to Section 2 of this Agreement or
Section 10.2 or Section 10.3 of the Purchase and Sale Agreement.
7. BINDING EFFECT. This Agreement shall be binding upon and shall enure to
the benefit of the parties hereto and their respective successors and
assigns.
8. COPIES. This Agreement may be executed in counterpart, each of which
shall be deemed an original and which shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the Seller and the Purchaser have executed this
Agreement as of the day and year first above written.
584022 ALBERTA LTD.
BY:
-----------------------------
BY:
-----------------------------
PHELPS DRILLING LTD.
BY:
-----------------------------
