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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as
of September 11, 1997, between UTI Energy Corp., a Delaware corporation
("UTI"), J Acquisition Corp., a Texas corporation and a direct wholly owned
subsidiary of UTI ("UTI Sub"), J.S.M. & Associates, Inc., a Texas corporation
("JSM"), Jim A. James ("James"), and James F. Silhan ("Silhan" and together
with James, the "Shareholders");
W I T N E S S E T H:
WHEREAS, the Boards of Directors of each of UTI, UTI Sub and
JSM each have determined that it is in the best interests of their respective
shareholders for UTI Sub to merge with and into JSM (the "Merger") upon the
terms and subject to the conditions of this Agreement;
WHEREAS, UTI, UTI Sub and the Shareholders desire to make
certain representations, warranties, covenants and agreements in connection
with the Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties agree as follows:
ARTICLE I
DEFINITIONS
Unless otherwise specifically stated in the text of this Agreement,
the following terms shall have the following meanings:
"Final Statement" has the meaning ascribed thereto in Section 3.4.
"Accounts Receivable" has the meaning ascribed thereto in Section
4.22.
"Affiliate" shall mean, in relation to any Person (the "First Party"),
any other Person (a) that is directly or indirectly Controlled by the First
Party, or (b) that directly or indirectly Controls the First Party, or (c) that
is, directly or indirectly, Controlled by a Person that also, directly or
indirectly, Controls the First Party.
"Agreement" means this Agreement and Plan of Merger between UTI, UTI
Sub, JSM and the Shareholders, including all exhibits hereto.
"Articles of Merger" shall have the meaning ascribed thereto in
Section 2.1.
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"Average Sales Price" shall mean $64.97, which is the average closing
sale price per share of the UTI Common Stock, for the thirty trading days
immediately preceding September 3, 1997, as reported by the American Stock
Exchange, less $2.25, with both the average closing price and the $2.25
deduction to be adjusted to take into account any stock dividends, stock splits
or other changes in capitalization of UTI, including without limitation, the
three-for-one stock dividend declared by UTI's Board of Directors and paid on
September 5, 1997 to stockholders of record on August 25, 1997.
"Balance Sheet Date" shall have the meaning ascribed to thereto in
Section 3.4.
"Benefit Plan" shall mean any collective bargaining agreement or any
bonus, Pension Plan, Welfare Plan, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical dependent care, cafeteria, employee assistance,
scholarship program or other plan, arrangement or understanding (whether or not
legally binding) providing benefits.
"Certificate" shall have the meaning ascribed thereto in Section
3.2(a).
"Claims" has the meaning ascribed thereto in Section 5.6.
"Closing" has the meaning ascribed thereto in Section 2.1.
"Closing Date" shall mean the date on which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of any subsequent federal Tax laws.
"Constituent Corporations" has the meaning ascribed thereto in Section
2.2.
"Contracts" has the meaning ascribed thereto in Section 4.11.
"Damages" shall mean any and all liabilities, losses, damages,
demands, assessments, claims, costs and expenses (including interest, awards,
judgments, penalties, settlements, fines, costs of remediation, diminutions in
value, costs and expenses incurred in connection with investigating and
defending any claims or causes of action (including, without limitation,
attorneys' fees and expenses calculated on a solicitor and client basis and all
fees and expenses of consultants and other professionals)), but excluding
punitive or exemplary damages, other than those imposed in connection with a
third Person claim.
"Debt" shall mean (i) the principal amount of all Debt Obligations
(other than current bank indebtedness and the current portion of long-term
debt), (ii) the carry value of all capital leases (other than the current
portion of lease obligations) and (iii) all non-current and accrued liabilities
not included in the definition of "Working Capital", including deferred income
taxes.
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"Debt Obligations" shall mean any contract, agreement, indenture, note
or other instrument relating to the borrowing of money or any guarantee or
other contingent liability in respect of any indebtedness for borrowed money or
obligation of any Person (other than the endorsement of negotiable instruments
for deposit or collection in the ordinary course of business) and shall
specifically include any shareholder loans.
"Effective Time" has the meaning ascribed thereto in Section 2.1.
"Entitlements" shall mean the benefit of all outstanding work and
purchase orders, drilling contracts, sales contracts, other commitments,
contracts and engagements to which JSM is entitled as of the Closing.
"Environmental Condition" means any pollution, contamination,
degradation, damage or injury caused by, related to or arising from the
generation, handling, use, treatment, storage, transportation, disposal,
discharge, release or emission of any Hazardous Materials.
"Environmental Laws" shall mean all federal, state, provincial or
municipal laws, rules, regulations, statutes, ordinances, or orders of any
Governmental Entity relating to (a) the control of any potential pollutant or
protection of the air, water, or land, (b) solid, gaseous or liquid waste
generation, handling, treatment, storage, disposal or transportation and (c)
exposure to hazardous, toxic or other substances alleged to be harmful. The
term "Environmental Laws" shall also include all state, provincial, local and
municipal laws, rules, regulations, statutes, ordinances and orders dealing
with the same subject matter or promulgated by any governmental or
quasi-governmental agency thereunder or to carry out the purposes of any
federal, state, provincial, local and municipal law.
"Environmental Liabilities" shall mean any and all Damages (including
remediation, removal, response, abatement, clean-up, investigative and/or
monitoring costs and any other related costs and expenses) incurred or imposed
(a) pursuant to any agreement, order, notice, requirement, responsibility or
directive (including directives embodied in Environmental Laws), injunction,
judgment or similar documents (including settlements) arising out of, in
connection with or under Environmental Laws in existence on the date of this
Agreement, or (b) pursuant to any claim by a Governmental Entity or other third
Person or entity for personal injury, property damage, damage to natural
resources, remediation or similar costs or expenses incurred or asserted by
such entity or person pursuant to common law or statute and arising out of or
in connection with a release, as such term is defined in Environmental Laws, of
Hazardous Materials.
"Environmental Permit" shall mean any permit, license, approval,
registration, identification number or other authorization with respect to JSM
under any applicable law, regulation or other requirement of the United States
or of any state, province, municipality or other subdivision thereof relating
to the control of any pollutant or protection of health or the environment,
including laws, regulations or other
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requirements relating to emissions, discharges, releases or threatened releases
of pollutants, contaminants or hazardous or toxic materials or wastes into
ambient air, surface water, groundwater or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of chemical substances, pollutants, contaminants or
hazardous or toxic materials or wastes.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Estimated Cash Payment" shall mean an amount of cash equal to the
Estimated Purchase Price less $13,400,000.
"Estimated Purchase Price" shall be an amount agreed upon by UTI and
the Shareholders based on the Shareholders' calculation of the Purchase Price
based on the Shareholders' good faith estimate of JSM's Working Capital and
Debt.
"Excluded Assets" shall mean the oil and gas properties and other
assets specifically described on Schedule 1 hereto.
"Exhibit" shall refer to the Exhibits to this Agreement, unless
otherwise stated, and an Exhibit may be attached to the Agreement or set forth
in a separate document denoted as an Exhibit to this Agreement.
"Final Statement" has the meaning ascribed thereto in Section 3.4.
"Financial Statement" shall mean the balance sheet and income
statement of JSM prepared in conformity with GAAP.
"GAAP" shall mean generally accepted accounting principles used in the
United States of America, applied on a consistent basis.
"Governmental Authority" shall mean any and all foreign, federal,
state or local governments, governmental institutions, public authorities and
governmental entities of any nature whatsoever, and any subdivisions or
instrumentalities thereof, including, but not limited to, departments, boards,
bureaus, commissions, agencies, courts, administrations and panels, and any
divisions or instrumentalities thereof, whether permanent or ad hoc and whether
now or hereafter constituted and existing.
"Governmental Requirement" shall mean any and all laws (including, but
not limited to, applicable common law principles), statutes, ordinances, codes,
rules, regulations, interpretations, guidelines, directions, orders, judgments,
writs, injunctions, decrees, decisions or similar items or pronouncements,
promulgated, issued, passed or set forth by any Governmental Authority.
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"Hazardous Material" shall mean (a) any petroleum or petroleum
products, (b) radioactive materials, urea formaldehyde, asbestos and PCBs and
(c) any other chemical, substance or waste that is regulated by any
Governmental Entity under any Environmental Law.
"Income Tax Returns" shall mean all returns (including information
returns), declarations, reports, statements and other documents of, relating
to, or required to be filed in respect of, any and all Taxes based in whole or
in part on net income (including, but not limited to, the Texas franchise tax),
and the term "Income Tax Return" shall mean any one of the foregoing Income Tax
Returns.
"Indemnity Claim" has the meaning ascribed thereto in Section 13.6.
"JSM" shall mean J.S.M. & Associates, Inc., a Texas corporation.
"JSM Retained Liabilities" shall mean (i) the payment obligations of
JSM with respect to all trade payables as of the Closing, (ii) the obligations
of JSM under the express written terms of the Entitlements to the extent and
only to the extent such obligations are not Pre-Closing Obligations and (iii)
property taxes to the extent accrued and reflected in the calculation of
Working Capital.
"Material Adverse Effect" shall mean a single event, occurrence or
fact that (together with all other events, occurrences and facts that could
reasonably be expected to result in a loss to JSM) would have, or might
reasonably be expected to have, a material adverse effect on the assets,
business, operations, prospects or financial condition of JSM, or that would
constitute a criminal violation of law involving a felony or indictable
offense.
"Merger" has the meaning ascribed thereto in the recitals to this
Agreement.
"Merger Consideration" has the meaning ascribed thereto in Section
3.1(c).
"Ordinary Course of Business" shall mean the operation of JSM's
business in the ordinary course consistent with past practices.
"Outstanding JSM Shares" shall mean the number of shares of JSM Stock
issued and outstanding immediately prior to the Effective Time (other than
those shares to be canceled in accordance with Section 3.1(b) after giving
effect to the Share Redemption).
"Pension Benefit Guaranty Corporation" has the meaning ascribed
thereto in Section 4.10.
"Pension Plans" has the meaning ascribed thereto in Section 3.10.
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"Person" shall mean any natural person, any Governmental Authority and
any entity the separate existence of which is recognized by any Governmental
Authority or Governmental Requirement, including, but not limited to,
corporations, partnerships, limited liabilities companies, joint ventures,
joint stock companies, trusts, estates, companies and associations, whether
organized for profit or otherwise.
"Pre-Closing Obligations" shall mean all obligations of JSM (including
indemnification and other contingent obligations) relating to (i) acts, events
or omissions occurring, or circumstances relating to JSM or its business or
assets existing, at or prior to the Closing, (ii) goods or services provided to
or for the benefit of JSM or any of its Affiliates prior to the Closing, (iii)
goods or services provided by or on behalf of JSM or any of its Affiliates or
licensees prior to the Closing, (iv) any pending or threatened litigation or
claims made or threatened prior to the Closing, (v) any of the matters listed
on Schedule 2 hereto, (vi) any obligation relating to the Excluded Assets,
(vii) any obligation relating to the conduct of the business of JSM, the
ownership or operation of the assets of JSM or any benefit realized by JSM
prior to the Closing, (viii) contracts, agreements and other commitments that
were required to be scheduled in the Disclosure Schedule and were not
scheduled, (ix) any Taxes for any period through the Date of Closing to the
extent such Taxes have not been fully accrued as current liabilities on the
Final Statement, and (x) any obligations to the employees of JSM under any
contracts, agreements, arrangements or understandings with such employees
entered into or existing at or prior to the Closing and all other obligations
with such employees entered into or existing at or prior to the Closing and all
other obligations of JSM or any of its Affiliates with respect to its employees
at or prior to the Closing.
"Purchase Price" shall mean $15,400,000 plus (i) the amount, if any,
by which Working Capital minus Debt as of the Closing exceeds $400,000 and
minus (ii) the absolute amount, if any, by which $400,000 exceeds Working
Capital minus Debt as of the Closing.
"Reference Balance Sheet" has the meaning ascribed thereto in Section
4.4.
"Retained Shares" means 10% of the UTI Shares.
"Rigs" shall mean the equipment described on Schedule 3 which
constitutes 7 fully-equipped land drilling rigs and parts and equipment
relating to an eighth land drilling rig.
"Securities Act" has the meaning ascribed in Section 4.28.
"Shareholder Indemnified Parties" has the meaning ascribed thereto in
Section 13.2.
"Share Redemption" shall mean the redemption of shares of JSM Common
Stock prior to the Merger in consideration of the Excluded Assets as provided
in Section 6.5.
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"Shareholders" shall mean Jim A. James and James F. Silhan.
"Shares" shall mean all of the issued and outstanding shares of
capital stock of JSM.
"Survival Period" has the meaning ascribed thereto in Section 12.1.
"Surviving Corporation" has the meaning ascribed thereto in Section
2.2.
"Taxes" shall mean all federal, state, local, foreign and other taxes
assessments or duties, including, but not limited to, all income, gross
receipts, ad valorem, sales, use, franchise, transfer, profits, value added,
withholding, payroll, employment, excise, estimated severance, property,
windfall profits and other taxes, assessments or duties of any kind whatsoever,
imposed or collected by any Governmental Authority or pursuant to any
Governmental Requirement, together with any interest, penalty, addition to tax,
fine or other additional amounts imposed thereon or related thereto, and the
term "Tax" means any one of the foregoing items.
"Tax Returns" shall mean all returns (including information returns),
declarations, reports, statements and other documents of, relating to, or
required to be filed in respect of, any and all Taxes based in whole or in part
on net income (including, but not limited to, the Texas franchise tax), and the
term "Tax Return" shall mean any one of the foregoing Tax Returns.
"TBCA" means the Texas Business Corporations Act.
"UTI Common Stock" means the common stock, $.001 per value, of UTI.
"UTI Indemnified Parties" has the meaning ascribed thereto in Section
13.1.
"UTI Released Parties" has the meaning ascribed thereto in Section
13.1.
"UTI Shares" means 618,748, the number of shares of UTI Common Stock
determined by dividing $13,400,000 by the Average Sales Price.
"UTI Sub" has the meaning ascribed thereto in the opening paragraph of
this Agreement.
"Working Capital" shall mean, in accordance with GAAP and with
reference to a consolidated balance sheet of JSM, (a) the sum of the amounts
represented on such balance sheet for the accounts receivable (other than from
related parties), inventories, prepaid expenses and other net current assets
less (b) the amounts represented on such balance sheet for all net current
liabilities, including (i) current bank indebtedness, (ii) accounts payable and
accrued liabilities, (iii) income tax payable and (iv) the current portion of
lease obligations and long-term debt.
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ARTICLE II
THE MERGER
2.1 The Merger; Effective Time of the Merger. Upon the
terms and conditions of this Agreement and in accordance with the TBCA, UTI Sub
shall be merged with and into JSM at the Effective Time. The Merger shall
become effective immediately when articles of merger (the "Articles of
Merger"), prepared and executed in accordance with the relevant provisions of
the TBCA, is filed with the Secretary of State of the State of Texas or, if
agreed to by the parties, at such time thereafter as is provided in the
Articles of Merger (the "Effective Time"). The filing of the Articles of
Merger shall be made as soon as practicable on or after the closing of the
transactions contemplated hereby (the "Closing").
2.2 Effects of the Merger.
(a) At the Effective Time: (i) UTI Sub shall be merged with
and into JSM, the separate existence of UTI Sub shall cease and JSM shall
continue as the surviving corporation (UTI Sub and JSM are sometimes referred
to herein as the "Constituent Corporations" and JSM is sometimes referred to
herein as the "Surviving Corporation"); (ii) the Articles of Incorporation of
JSM shall be the Articles of Incorporation of the Surviving Corporation; and
(iii) the Bylaws of JSM as in effect immediately prior to the Effective Time
shall be the Bylaws of the Surviving Corporation.
(b) The directors and officers of UTI Sub at the
Effective Time shall, from and after the Effective Time, be the initial
directors and officers of the Surviving Corporation and shall serve until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and Bylaws.
(c) At and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises of
a public as well as of a private nature, and be subject to all the
restrictions, disabilities and duties of each of the Constituent Corporations;
and all and singular rights, privileges, powers and franchises of each of the
Constituent Corporations, and all property, real, personal and mixed, and all
debts due to either of the Constituent Corporations on whatever account, as
well as for stock subscriptions and all other things in action or belonging to
each of the Constituent Corporations, shall be vested in the Surviving
Corporation; and all property, rights, privileges, powers and franchises, and
all and every other interest shall be thereafter as effectually the property of
the Surviving Corporation as they were of the Constituent Corporations; and the
title to any real estate vested by deed or otherwise, in either of the
Constituent Corporations, shall not revert or be in any way impaired; but all
rights of creditors and all liens upon any property of either of the
Constituent Corporations shall be preserved unimpaired; and all debts,
liabilities and duties of the Constituent Corporations shall thenceforth attach
to the Surviving
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Corporation, and may be enforced against it to the same extent as if said debts
and liabilities had been incurred by it.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
3.1 Effect on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of common stock, no par value, of JSM ("JSM Common Stock") or capital
stock of UTI Sub:
(a) Capital Stock of Sub. Each issued and outstanding
share of the capital stock of UTI Sub shall be converted into and
become one fully paid and nonassessable share of common stock, no par
value, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and UTI-Owned Stock.
Each share of JSM Common Stock and all other shares of capital stock
of JSM that are owned by JSM as treasury stock or by UTI, UTI Sub or
any Subsidiary of JSM or UTI shall be canceled and retired and shall
cease to exist and no stock of UTI or other consideration shall be
delivered or deliverable in exchange therefor.
(c) Consideration for JSM Common Stock. Subject to the
provisions of Section 3.1(d), each share of JSM Common Stock issued
and outstanding immediately prior to the Effective Time (other than
shares to be canceled in accordance with Section 3.1(b)) shall be
converted into the right to receive on the Closing Date a combination
of (1) cash in the amount of the Estimated Cash Payment divided by the
Outstanding JSM Shares and (2) a number of shares of UTI Common Stock
equal to 90% of the UTI Shares divided by the Outstanding JSM Shares
(the cash and UTI Common Stock issuable pursuant to this Section
3.1(c) being referred to as the "Merger Consideration").
(d) Conversion and Cancellation of JSM Common Stock. All
shares of JSM Common Stock, when so converted as provided in Section
3.1(c), shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive such holder's
allocable portion of the Merger Consideration upon the surrender of
such certificate in accordance with Section 3.2, without interest, and
the right to receive such holder's allocable portion of the
Post-Closing Adjustment and Retained Shares in accordance with Section
3.4.
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3.2 Exchange of Certificates.
(a) Exchange Procedure. Upon surrender of a certificate
representing outstanding shares of JSM Common Stock (a "Certificate") for
cancellation to UTI, together with any other documents reasonably required by
UTI, the holder of such Certificate shall be entitled to receive in exchange
therefor the shares of UTI Common Stock and the cash that such holder has the
right to receive pursuant to the provisions of this Section 3.1, and the
Certificate so surrendered shall forthwith be canceled. Until surrendered as
contemplated by this Section 3.2, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the cash and shares of UTI Common Stock as contemplated by Section
3.1.
(b) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to UTI Common Stock declared or
made after the Effective Time with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Certificate with respect to the
right to receive shares of UTI Common Stock represented thereby and no cash
payment in lieu of fractional shares shall be paid to any such holder pursuant
to Section 3.2(e) until the holder of such Certificate shall surrender such
Certificate. Subject to the effect of applicable laws, following surrender of
any such Certificate, there shall be paid to the holder thereof, without
interest: (i) at the time of such surrender, the amount of any cash payable in
lieu of a fractional share of UTI Common Stock to which such holder is entitled
pursuant to Section 3.2(e) and the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with respect to
such whole shares of UTI Common Stock; and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of UTI Common Stock.
(c) No Further Ownership Rights in JSM Common Stock. All
shares of UTI Common Stock issued or cash paid upon the surrender for exchange
of shares of JSM Common Stock in accordance with the terms hereof shall be
deemed to have been issued, paid or delivered in full satisfaction of all
rights pertaining to such shares of JSM Common Stock, and after the Effective
Time there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of JSM Common Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article III.
(d) No Fractional Shares. No certificates or scrip
representing fractional shares of UTI Common Stock shall be issued upon the
surrender for exchange of Certificates pursuant to this Article III and all
fractional shares shall be rounded to the nearest whole share of UTI Common
Stock. Except as provided in this Section 3.2(e), no dividend or other
distribution, stock split or interest shall relate to
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any such fractional security, and such fractional interests shall not entitle
the owner thereof to vote or to any rights as a security holder of UTI.
(e) No Liability. Neither UTI nor JSM shall be liable to
any holder of shares of JSM Common Stock for such shares (or dividends or
distributions with respect thereto) or any cash amounts to the extent such
amount or UTI Common Stock is delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. Any amounts remaining
unclaimed by holders of any such shares two years after the Effective Time (or
such earlier date immediately prior to the time at which such amounts would
otherwise escheat to or become property of any governmental entity) shall, to
the extent permitted by applicable law, become the property of UTI free and
clear of any claims or interest of any such holders or their successors,
assigns or personal representatives previously entitled thereto.
(f) Lost Share Certificates. If a holder shall have lost
or had destroyed such holder's Certificate, such holder may be entitled to
receive the Merger Consideration and other payments provided for hereunder
subject to such holder providing JSM and UTI with a lost certificate affidavit
and indemnification acceptable to UTI.
3.3 Shares of Dissenting Shareholders. Each Shareholder
hereby waives any and all rights to dissent or appraisal with respect to the
Merger.
3.4 Post-Closing Adjustment.
(a) Within 60 calendar days after the Closing Date, UTI
shall prepare and deliver to the Shareholders a statement reflecting the
Purchase Price and UTI's calculation thereof (the "Final Statement"). UTI
shall provide the Shareholders with access to copies of all work papers and
other relevant documents to verify the entries contained in the Final
Statement. The Final Statement shall be prepared in accordance with GAAP. The
Shareholders shall have a period of 15 calendar days after delivery to it of
the Final Statement to review it and make any objections the Shareholders may
have in writing to UTI. If written objections to the Final Statement are
delivered to UTI within such 15-day period, then UTI and the Shareholders shall
attempt to resolve the matter or matters in dispute. If no written objections
are made within the time period provided above, UTI shall pay to the
Shareholders as additional consideration for their shares of JSM Common Stock
acquired in the Merger, in the same proportions as the Shareholders received
the Estimated Cash Payment, the amount, if any, by which the Purchase Price
exceeds the Estimated Purchase Price and the Shareholders, in the same
proportions as the Shareholders received the Estimated Cash Payment, shall
severally reimburse UTI the amount, if any, by which the Estimated Purchase
Price exceeds the Purchase Price, in each case within five calendar days after
the end of such 15-day period. All payments made pursuant to this Section 3.4
shall be paid in immediately available funds by wire transfer to a bank account
or accounts to be designated by the party or parties to receive the payments.
Notwithstanding the foregoing, except for the creation of accounts receivable
from the sale of goods and
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services, no increases in Working Capital shall be considered for adjustments
to the Purchase Price pursuant to this Section 3.4(a) to the extent such items
reflect noncash adjustments to the carrying value of assets or other noncash
transactions.
(b) If disputes with respect to the Final Statement
cannot be resolved by UTI and the Shareholders within 15 calendar days after
the delivery of the objections to the Final Statement, then either party with
notice to the other party may submit the specific matters in dispute to Arthur
Andersen & Co. or such other nationally recognized independent accounting firm
as may be approved by UTI and the Shareholders which firm shall render its
opinion as to such matters. Based on such opinion, such accounting firm will
then send to UTI and the Shareholders its determination on the specific matters
in dispute, which determination shall be final and binding on the parties
hereto. Within five calendar days after delivery of such opinion to UTI and
the Shareholders, UTI shall pay to Shareholders as additional consideration for
their shares of JSM Common Stock acquired in the Merger, in the same
proportions as the Shareholders received the Estimated Payment, the amount, if
any, by which the Purchase Price exceeds the Estimated Cash Payment and the
Shareholders, in the same proportions as the Shareholders received the
Estimated Cash Payment, shall severally reimburse UTI the amount, if any, by
which the Estimated Purchase Price exceeds the Purchase Price. The fees and
other costs charged by each party's own independent accounting firm shall be
borne by such party and the fees and other costs charged by Arthur Andersen &
Co. in connection with resolving any dispute pursuant to this Section 3.4(b)
shall be borne by UTI, on the one hand, and the Shareholders, on the other
hand, equally. All payments made pursuant to this Section 3.4(b) shall be paid
in immediately available funds by wire transfer to a bank account or accounts
to be designated by the party or parties to receive the payments.
(c) For purposes of determining the Purchase Price under
this Section 3.4, the following shall, without duplication, be applied:
(i) inventory and other equipment not reflected on the
Balance Sheet shall not be included as a current asset of JSM for
purposes of calculating the Working Capital of JSM as of the Closing
Date;
(ii) all accrued or unpaid fees of all law firms and
accountants providing services for JSM, the Shareholders and any
Affiliates of JSM or the Shareholders shall be included as current
liabilities for purposes of calculating the Working Capital of JSM as
of the Closing Date;
(iii) No Excluded Assets shall be included as a current
asset of JSM for purposes of calculating the Working Capital of JSM as
of the Closing Date;
(iv) No accounts receivable from, or other amount owed to
JSM by, any Shareholder or Affiliate of any Shareholder shall be
included as
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a current asset for purposes of calculating the Working Capital of JSM
as of the Closing Date;
(v) whether or not set forth on Section 4.6 of the
Disclosure Schedule, any valuable rights of, or material debt owed to,
JSM that has been waived by JSM shall not be included as a current
asset for purposes of calculating the Working Capital of JSM as of the
Closing Date; and
(iv) all Taxes and other amounts payable as a result of
Share Redemption and other transactions effected by JSM prior to the
Closing shall be fully accrued as Debt or a current liability for
purposes of the calculation of Working Capital of JSM as of the
Closing Date, as the case may be.
(d) The Shareholders shall cause all accounts receivable
and other amounts owed to JSM from related parties to be paid in full prior to
the Closing and all outstanding Debt under Debt Obligations to be repaid in
full prior to the Closing.
(e) To the extent the Shareholders fail to pay any
amounts due UTI pursuant to the adjustment provisions contained in this Section
3.4, UTI may offset such amounts against the Retained Shares based on an agreed
value equal to the Average Sales Price. If the Shareholders do not owe any
funds pursuant to this Section 3.4 or pay such funds when due, UTI shall
promptly thereafter deliver the Retained Shares to the Shareholders as
additional consideration in the Merger in the same relative proportions as the
UTI Shares under Section 3.1 delivered to the Shareholders at the Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Shareholders jointly and severally represent and warrant to UTI
that:
Section 4.1 Incorporation; Authority. JSM is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas, and is duly authorized, qualified and licensed under all applicable
Governmental Requirements to carry on its business in the places and in the
manner as now conducted. Section 4.1 of the Disclosure Schedule sets forth a
complete list of all jurisdictions in which JSM owns or leases properties, has
employees or conducts business, and a complete list of all jurisdictions in
which JSM is qualified as a foreign corporation. JSM is duly qualified or
licensed to do business and in good standing as a foreign corporation in every
jurisdiction (which jurisdictions are listed in Section 4.1 of the Disclosure
Schedule) in which the conduct of its business or the ownership or leasing of
its assets require it to be so qualified or licensed, except where the failure
to be so qualified or licensed would not have a Material Adverse Effect. JSM
has the corporate power and authority to carry on its business as it is now
being conducted and to own and operate
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its assets, properties and business. The copies of the Articles of
Incorporation of JSM and all amendments thereto to date (certified by the
Secretary of the State of Texas) and of the bylaws of JSM as amended to date
(certified by its Secretary), each of which are included in Section 4.1 of the
Disclosure Schedule, are true, complete and correct.
Section 4.2 Share Capital. The authorized capital stock of JSM
consists of 5,000 shares of common stock without par value, of which 3,000
shares are issued and 2,000 shares are outstanding and 1,992 shares will be
outstanding following the Share Redemption. All of such issued and outstanding
shares are validly issued and outstanding, fully paid and nonassessable. There
are no outstanding subscriptions, options, warrants, calls, commitments,
obligations or agreements relating to any of the authorized or outstanding
capital stock of JSM. The Shareholders own all of the issued and outstanding
Shares free and clear of all liabilities, liens, encumbrances, pledges, trusts,
voting trusts or stockholders' agreements, equities, charges, options,
conditional sale or title retention agreements, covenants, restrictions,
reservations, commitments, obligations or other burdens or encumbrances of any
nature whatsoever ("Encumbrances").
Section 4.3 Subsidiaries. Except for each entity listed on
Section 4.3 of the Disclosure Schedule (such entities hereinafter referred to
as the "Limited Partnerships"), (i) JSM does not, directly or indirectly, own
or control any capital stock, equity interest, or have any proprietary interest
in, any Person, nor does it directly or indirectly control the management of
any Person, nor does it have any obligation to acquire any such interest in the
future, and (ii) JSM has not, since its inception, directly or indirectly owned
or controlled any capital stock, equity interest, or had any proprietary
interest in, any Person, has it directly or indirectly controlled the
management of any Person. Each of the Limited Partnerships has been dissolved,
and except as disclosed on Section 4.3 of the Disclosure Schedule, none of the
Limited Partnerships had been, prior to such dissolution, in any way funded or
capitalized. JSM has provided JSM with copies of all correspondence and
documentation relating to the formation, operation and dissolution of the
Limited Partnerships.
Section 4.4 Financial Statements. The Shareholders have
delivered to UTI copies of the JSM August 31, 1997, balance sheet (the
"Reference Balance Sheet"), and income statement for the 11-month period ended
on such date (the "Balance Sheet Date"), copies of which are included in
Section 4.4 of the Disclosure Schedule.
All financial statements of JSM supplied to UTI by the Shareholders,
whether or not included in Section 4.4 of the Disclosure Schedule, are true and
accurate in all material respects, except as disclosed on Section 4.4 of the
Disclosure Schedule; have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods indicated, and present fairly the
financial condition and the results of the operations of JSM as of the dates
and for the periods indicated thereon, except that the interim period
statements do not include footnotes or normal year-end adjustments. The
Reference Balance Sheet reflects, as of the Balance Sheet Date, all
liabilities, debts and obligations of any nature of JSM, whether accrued,
absolute, contingent or
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otherwise, and whether due, or to become due, including, but not limited to,
liabilities, debts or obligations on account of Taxes, to the extent such items
are required to be reflected on such balance sheet under GAAP consistently
applied.
Section 4.5 Liabilities, Debts and Obligations. JSM has no
liabilities, debts or obligations of any nature whatsoever, whether due or to
become due, and whether accrued, absolute, contingent or otherwise, that are
not disclosed on the Reference Balance Sheet or in this Agreement or the
Disclosure Schedule, except for (a) liabilities incurred in the Ordinary Course
of Business subsequent to the Balance Sheet Date and (b) obligations under
contracts and commitments entered into in the Ordinary Course of Business and
not required under GAAP to be reflected on the Reference Balance Sheet
(including required footnotes), which, in both cases, individually or in the
aggregate are not material to the financial condition or operating results of
JSM. As of the Balance Sheet Date, there did not exist any declared but unpaid
dividend or other distribution or any repurchase or similar obligation with
respect to any capital stock of JSM.
Section 4.6 Events Since Balance Sheet Date. Since the Balance
Sheet Date there has not been, except for the Share Redemption or as disclosed
fully and correctly in Section 4.6 of the Disclosure Schedule:
(a) any change in the condition (financial or otherwise)
or in the properties, assets, liabilities, business or prospects of JSM, except
normal and usual changes in the Ordinary Course of Business that individually
and in the aggregate have not had a Material Adverse Effect;
(b) any declaration, setting aside, or payment of any
dividend or other distribution on or in respect of the capital stock of JSM, or
any direct or indirect redemption, purchase or other acquisition of any of such
stock or any issuance of any shares of such stock or any granting or entering
into of any option or commitment relating to any of such stock;
(c) any increase in the compensation or rate of
compensation or commissions payable or to become payable by JSM to any of its
directors, officers, employees or consultants, or any hiring of any employee by
JSM who is entitled to compensation, or any payment or accrual of any bonus,
profit-sharing or other extraordinary compensation to any director, officer,
employee or consultant, or any change in any then existing bonus,
profit-sharing, pension, retirement or other similar plan, agreement or
arrangement or any adoption of or entering into of any new bonus,
profit-sharing, pension, stock option, retirement, group life or health
insurance or other similar plan, agreement or arrangement;
(d) any change in the accounting methods or practices
followed by JSM, including, but not limited to, the method for accounting for
contract revenues and expenses, or any change in depreciation or amortization
policies or rates heretofore adopted by it;
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(e) any sale, lease, abandonment or other disposition by
JSM of any interest in real property or of any machinery, equipment or other
asset, except for any Excluded Assets and except for any sales, leases,
abandonments or other dispositions in the Ordinary Course of Business not
exceeding $10,000 individually or $50,000 in the aggregate;
(f) any labor trouble, strike or any other occurrence,
event or condition affecting the employees of JSM that has or is reasonably
expected to have a Material Adverse Effect;
(g) any breach or default by JSM or, to the best of the
Shareholders's and JSM's knowledge, by any other party, under any agreement or
obligation to which JSM is a party or by which any of its assets are bound;
(h) any damage, destruction or loss (whether or not
covered by insurance) adversely affecting the assets or the business of JSM,
except for damages, destruction or loss that reasonably would be expected to
occur in the Ordinary Course of Business not exceeding $25,000, individually or
in the aggregate;
(i) to the best of JSM's and the Shareholders's
knowledge, any legislative or regulatory change adversely affecting any of the
assets or any business of JSM;
(j) any change in the types, nature, composition or
quality of the services of any business of JSM, any materially adverse change
in the contributions of any of the service lines of any business of JSM to the
revenues or net income of such business, or any materially adverse change in
the sales, revenue or net income of any business of JSM;
(k) any transaction entered into or engaged in by JSM
other than transactions in the Ordinary Course of Business; or
(l) any waiver by JSM of a valuable right or of a
material debt owed to it, or any satisfaction or discharge of any encumbrance
or payment of any obligation by JSM except in the Ordinary Course of Business;
(m) any change or amendment to a material contract or
agreement of JSM except changes or amendments in the Ordinary Course of
Business that individually and in the aggregate would not have a Material
Adverse Effect;
(n) any transaction between JSM and any Shareholder or
any Affiliate of a Shareholder or any family member of a Shareholder or
Affiliate of such family member; or
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(o) to the best of the Shareholders's or JSM's knowledge,
any other occurrences, events or conditions that have had, or can reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on JSM.
Section 4.7 Directors, Officers and Employees. The Shareholders
have provided to UTI a true and complete list of the names of and current
annual compensation paid by JSM to each director, officer and employee of JSM.
With respect to each employee of JSM hired after August 15, 1987, JSM maintains
in its files a fully completed Form I-9 pursuant to the Immigration Reform and
Control Act of 1986, and the rules and regulations promulgated thereunder. To
the best of JSM's and the Shareholders's knowledge, no officer or key employee
of JSM is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of any such employee with JSM, or any other party. To the best of
JSM's and the Shareholders's knowledge, no employee of JSM has received notice
from a former employer claiming such employee to be in breach of any such
employment contract, patent disclosure agreement or other contract or
agreement. JSM does not have any collective bargaining agreements covering any
of its employees. JSM is not aware that any officer or key employee of JSM, or
that any group of those Persons, intends to terminate their employment with
JSM. The employment of each officer and employee of JSM is terminable at the
will of JSM.
Section 4.8 Inventories. The method of valuing such inventories
as of the Balance Sheet Date is consistent with that used in respect of the
beginning and end of each of the two most recent fiscal years of JSM.
Section 4.9 Taxes and Governmental Returns and Reports. Except
as set forth in Section 4.9 of the Disclosure Schedule:
(a) all Tax Returns of or relating to any Tax that are
required to be filed on or before the Closing Date for, by, on behalf of or
with respect to JSM or any of its subsidiaries, including, but not limited to,
those relating to the income, business, operations or property of JSM or any of
its subsidiaries and those which include or should include JSM or any of its
subsidiaries (whether on a separate, consolidated, affiliated, combined,
unitary or any other basis), have been or will be timely filed with the
appropriate foreign, federal, provincial, state and local authorities on or
before the Closing Date, and all Taxes shown to be due and payable on such Tax
Returns or related to such Tax Returns have been or will be paid in full on or
before the Closing Date;
(b) all such Tax Returns and the information and data
contained therein have been or will be properly and accurately compiled and
completed, fairly present or will fairly present the information purported to
be shown therein, and reflect or will reflect all liabilities for Taxes for the
periods covered by such Tax Returns;
(c) none of such Tax Returns are under audit or
examination by any foreign, federal, provincial, state or local authority and
there are no agreements,
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waivers or other arrangements providing for an extension of time with respect
to the assessment or collection of any Tax or deficiency of any nature against
JSM or any of its subsidiaries or with respect to any such Tax Return, or any
suits or other actions, proceedings, investigations or claims now pending or
threatened against JSM or any of its subsidiaries with respect to any Tax, or
any matters under discussion with any foreign, federal, state or local
authority relating to any Tax, or any claims for any additional Tax asserted by
any such authority;
(d) all Taxes assessed and due and owing from or against
JSM or any of its subsidiaries on or before the Closing Date (including, but
not limited to, ad valorem Taxes relating to any property of JSM or any of its
subsidiaries) have been or will be timely paid in full on or before the Closing
Date;
(e) all withholding Tax and Tax deposit requirements
imposed on JSM or any of its subsidiaries for any and all periods ending on or
before the Closing Date, or through and including the Closing Date for periods
that have not ended on or before the Closing Date, have been or will be timely
satisfied in full on or before the Closing Date;
(f) the Financial Statements reflect and include adequate
charges, accruals, reserves and provisions for the payment in full of any and
all Taxes payable with respect to any and all periods ending on or before the
respective dates thereof; and
(g) there is no basis known to the Shareholders for any
reassessment of Tax and there have been no special assessments on any assets of
JSM or its subsidiaries.
Section 4.10 Employee Benefit Plans.
(a) Section 4.10 of the Disclosure Schedule contains a
list and brief description of all "employee pension benefit plans" (as defined
in Section 3(2) of ERISA) (sometimes referred to herein as "Pension Plans"),
"employee welfare benefit plans" (as defined in Section 3(1) of ERISA)
(sometimes referred to herein as "Welfare Plans") and all other Benefit Plans
maintained, or contributed to, by JSM for the benefit of any present or former
officers or employees of JSM. JSM has delivered to UTI true, complete and
correct copies of (i) each Benefit Plan (or, in the case of any unwritten
Benefit Plans, descriptions thereof), (ii) the most recent three annual reports
on Form 5500 filed with the IRS with respect to each Benefit Plan, (if any such
report was required), (iii) the most recent IRS determination letter and all
rulings or determinations requested subsequent to the date of that letter, (iv)
the most recent actuarial report for each Benefit Plan for which an actuarial
report is required, (v) the most recent summary plan description for each
Benefit Plan for which such summary plan description is required and each
summary of material modifications prepared after the last summary plan
description, (vi) each trust agreement and group annuity contract relating to
any Benefit Plan and (vii) all material correspondence for the last
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three years with the IRS or Department of Labor relating to plan qualification,
filing of required forms, or pending, contemplated or announced plan audits.
(b) Except as set forth in Section 4.10 of the
Disclosure Schedule, all Pension Plans have been the subject of determination
letters from the IRS to the effect that such Pension Plans are qualified and
exempt from Federal income taxes under Section 401(a) and 501(a), respectively,
of the Code and no such determination letter has been revoked nor has
revocation been threatened, nor has any such Pension Plan been amended since
the date of its most recent determination letter or application therefor in any
respect that would adversely affect its qualification or materially increase
its costs. To the best of JSM's and the Shareholders's knowledge, no event has
occurred which could subject any Pension Plan to disqualification by the
Internal Revenue Service under the Code. JSM has paid all premiums (including
any applicable interest, charges and penalties for late payment) due the
Pension Benefit Guaranty Corporation ("PBGC") with respect to each Pension Plan
for which premiums are required. No Pension Plan maintained by JSM has been
terminated under circumstances which would result in liability to the PBGC.
(c) Each Benefit Plan which has been or is sponsored,
participated in or contributed to by JSM: (i) is in compliance in all material
respects with all requirements of ERISA, (ii) has no issue pending (other than
the payment of benefits in the normal course) nor any issue resolved adversely
to JSM which may subject JSM to the payment of any penalty, interest, tax or
other obligation, and (iii) is in compliance with the terms of the Benefit Plan
and the Code.
(d) The execution of this Agreement or the consummation
of the transactions contemplated by this Agreement will not give rise to any,
or trigger any, change of control, or severance benefit or other similar
provision in any Benefit Plan.
(e) JSM does not provide employee post-retirement
medical or health coverage or contribute to or maintain any employee welfare
benefit plan which provides for health benefit coverage following termination
of employment except as is required by Section 4980B(f) of the Code or other
applicable statute, nor has it made any representations, agreements, covenants
or commitments to provide that coverage.
(f) No Pension Plan that JSM maintains, or to which JSM
is obligated to contribute, had, as of the respective annual valuation date for
each such Pension Plan, an "unfunded benefit liability" (as such term is
defined in Section 4001(a)(18) of ERISA). None of the Pension Plans has an
"accumulated funding deficiency" (as such term is defined in Section 302 of
ERISA or Section 412 of the Code), whether or not waived. To the best of JSM's
and the Shareholders's knowledge, none of JSM, any officer of JSM or any of the
Benefit Plans which are subject to ERISA, including the Pension Plans, or any
trusts created thereunder, or any trustee or administrator thereof, has engaged
in a "prohibited transaction" (as such term is defined in Section 406, 407 or
408 of ERISA or Section 4975 of the Code) or any other breach of fiduciary
responsibility that could subject JSM or any officer of JSM to
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the tax or penalty on prohibited transactions imposed by such Section 4975 or
to any liability under Section 502(i)(1) of ERISA. Neither any of such Benefit
Plans nor any of such trusts have been terminated, nor has there been any
"reportable event" (as that term is defined in Section 4043 of ERISA) with
respect to which the 30-day notice requirement has not been waived and neither
JSM nor the Shareholders is aware of any other reportable events with respect
thereto during the last five years. JSM has never been a party to or
contributed to a "multiemployer pension plan" (as such term is defined in
Section 4001(a)(3) of ERISA).
(g) With respect to any Benefit Plan that is a Welfare
Plan, (i) no such Benefit Plan includes a welfare benefits fund, as such term
is defined in Section 419(e) of the Code, (ii) each such Benefit Plan that is a
group health plan, as such term is defined in Section 5000(b)(1) of the Code,
complies with the applicable requirements of Section 4980B(f) of the Code and
(iii) each such Benefit Plan (including any such Plan covering retirees or
other former employees) may be amended or terminated without material liability
to JSM on or at any time after the Closing.
(h) Neither JSM, the Shareholders, nor any member of a
controlled group or affiliated service group as defined in Section s 414(b),
(c), (m) and (o) of the Code of which JSM or the Shareholders is a member
(collectively, the "Company") has made a complete or partial withdrawal from a
multiemployer plan (as defined in Section 3(37) of ERISA) so as to incur
withdrawal liability as defined in Section 4201 of ERISA which remains unpaid.
The execution of this Agreement or the consummation of the transactions
contemplated by this Agreement will not give rise to, or trigger, any liability
under ERISA to JSM. JSM, and each Benefit Plan maintained by JSM has complied
with all the requirements of such Benefit Plan, ERISA, and the Code. JSM shall
be reimbursed by the Shareholders for all liability, taxes, liens, penalties or
other obligations related to any Benefit Plan maintained or contributed to by
any other member of JSM.
Section 4.11 Contracts and Agreements. Section 4.11 of the
Disclosure Schedule sets forth a true and complete list of all of the following
contracts, agreements, leases, licenses, plans, arrangements or commitments,
written or oral, to which JSM is a party or by which JSM or any of its assets
or properties is in any way bound or obligated (including all amendments,
supplements and modifications thereto):
(a) all contracts, agreements or commitments,
including, but not limited to, drilling contracts (identifying each contract
that is a turn-key contract), all subcontracts and contracts in respect of the
provision of services or the purchase of raw materials, supplies or other
products or utilities, except those entered into in the Ordinary Course of
Business involving payments or receipts by JSM of less than $10,000;
(b) all offers, tenders, bids or the like outstanding
and capable of being converted into an obligation of JSM by an acceptance or
other act of some other Person, including bids to provide turn-key drilling
services;
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(c) all master supply and service contracts;
(d) all collective bargaining agreements, union
agreements, employment agreements, consulting agreements or agreements
providing for the services of an independent contractor;
(e) all profit-sharing, pension, stock option,
severance pay, retirement, bonus, deferred compensation, group life and health
insurance or other employee benefit plans, agreements, arrangements or
commitments of any nature whatsoever and all agreements with any present or
former officer, director or stockholder of JSM;
(f) all leases and all other contracts, agreements or
legally enforceable commitments relating to or affecting real property or any
interest therein;
(g) all loan or credit agreements, indentures,
guarantees (other than endorsements made for collection), mortgages, pledges,
conditional sales or other title retention agreements, and all equipment
financing obligations, lease and lease-purchase agreements;
(h) all contracts, agreements, arrangements or legally
enforceable commitments relating to the issuance of capital stock, bonds or
other securities of JSM;
(i) all contracts, agreements, arrangements or legally
enforceable commitments relating to the acquisition by JSM of any of its
assets;
(j) all performance bonds, bid bonds, surety bonds and
the like, all contracts and bids covered by such bonds, and all letters of
credit and guaranties;
(k) all consent decrees and other judgments, decrees or
orders, settlement agreements and agreements relating to competitive
activities, requiring or prohibiting any future action;
(l) all accounts, notes and other receivables (other
than customer account receivables generated in the Ordinary Course of
Business), and all security therefor, and all documents and agreements related
thereto;
(m) all contracts, agreements, arrangements or legally
enforceable commitments of any nature with the Shareholders or any Affiliate of
the Shareholders or any family member of a Shareholder or Affiliate of such
family member;
(n) all licenses of intellectual property to or from
JSM;
(o) all contracts, agreements, arrangements or legally
enforceable commitments that cannot be canceled by JSM without penalty;
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(p) all contracts, agreements, arrangements, or legally
enforceable commitments that cannot be canceled by JSM by notice of 30 days or
less;
(q) all contracts, agreements, arrangements or legally
enforceable commitments that could give rise to any indemnity obligations;
(r) all drilling contracts performed in whole or in
part at any time the past two years; and
(s) all contracts, agreements, arrangements or legally
enforceable commitments that are material to JSM or the operation of any of its
businesses.
All of such contracts, agreements, leases, licenses, plans, arrangements and
commitments and all other such items binding on JSM or its assets not
specifically described above (collectively, the "Contracts") are valid, binding
and in full force and effect in accordance with their terms and conditions and
there is no existing default thereunder or breach thereof by JSM, or, to the
best of the Shareholders's and JSM's knowledge, by any other party to the
Contracts, or any conditions that, with the passage of time or the giving of
notice or both, might constitute such a default by JSM, or, to the best of the
Shareholders's and JSM's knowledge, by any other party to the Contracts, and
the Contracts will not be breached by or give any other party a right of
termination as a result of the transactions contemplated by this Agreement.
All Contracts were entered into in the Ordinary Course of Business of JSM, and,
with respect to Contracts pursuant to which JSM is to provide services or
products, were entered into by JSM with the intention and expectation by JSM of
realizing a profit from the performance of the Contract. Copies of all of the
documents (or in the case of oral commitments, descriptions of the material
terms thereof) relevant to the Contracts listed on Section 4.11 of the
Disclosure Schedule have been delivered by the Shareholders to UTI and such
copies and descriptions are true and accurate and include all amendments,
supplements or modifications to the Contracts.
Section 4.12 Effect of Agreement. The execution and delivery of
this Agreement by JSM and the Shareholders and the consummation of the Merger
and the transactions contemplated hereby will not (i) result in any breach of
any of the terms or conditions of, or constitute a default under, the Articles
of Incorporation or other charter documents or bylaws of JSM or the
Shareholders, or any commitment, mortgage, note, bond, debenture, deed of
trust, contract, agreement, license or other instrument or obligation to which
JSM or the Shareholders is now a party or by which JSM or the Shareholders or
any of their properties or assets may be bound or affected; (ii) result in any
violation of any Governmental Requirement applicable to JSM or the
Shareholders; (iii) cause JSM to lose the benefit of any right or privilege it
presently enjoys or, to the best of the Shareholders's and JSM's knowledge,
cause any Person who normally does business with JSM not to continue to do so
on the same basis as before; (iv) relieve any Person of any obligation to JSM
(whether contractual or otherwise) or enable any other Person to terminate any
such obligation or any right or benefit enjoyed by JSM or to exercise any right
under any agreement, including any
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Contract, with or otherwise in respect of JSM or the assets or business of JSM;
or (v) require notice to or the consent, authorization, approval or order of
any Person.
Section 4.13 Properties, Assets and Leasehold Estates. JSM owns
or has the right to use (pursuant to a valid lease or license disclosed on
Section 4.11 of the Disclosure Schedule) all property, real or personal,
tangible or intangible, (i) reflected on the Reference Balance Sheet (other
than items sold by JSM since the Balance Sheet Date in the Ordinary Course of
Business for which the proceeds from such sales did not exceed $50,000
individually or in the aggregate) or (ii) utilized in or necessary for the
operation of its business. Section 4.13 of the Disclosure Schedule sets forth
a true and complete list of all such property as of the date hereof (with all
property that is leased or licensed being designated as such). JSM has good
and marketable title to all the properties, interests in properties, assets and
leasehold estates, real and personal, set forth in Section 4.13 of the
Disclosure Schedule, free and clear of all mortgages, liens, pledges,
conditional sales agreements, charges, easements, covenants, assessments,
restrictions and encumbrances of any nature whatsoever. All leases of property
under which JSM purports to be a lessee are valid, binding and in full force
and effect. Except as set forth in Section 4.13 of the Disclosure Schedule,
the structures, equipment and other properties owned or used by JSM are in good
operating condition and repair, normal wear and tear excepted; provided,
however, that no representation is provided with respect to the operational
condition of JSM's rigs. During the past two years, there has not been any
significant interruption of the business of JSM due to the breakdown or
inadequate maintenance of any of the assets of JSM. All such structures,
equipment and other properties of JSM and the present use of such items conform
to all Governmental Requirements, and no notice of any violation of any such
Governmental Requirements relating to such assets or their use has been
received by JSM. JSM has all easements, rights of ingress and egress, and
utilities and services necessary for all operations conducted by it. Neither
the whole nor any portion of any real property owned or occupied by JSM has
been condemned or otherwise taken by any public authority, nor, to the best of
the Shareholders's and JSM's knowledge, is any such condemnation or taking
threatened or planned.
Section 4.14 Bank Accounts. Section 4.14 of the Disclosure
Schedule sets forth a true and complete list of all bank or financial accounts
and safe deposit boxes of JSM and of the credit and debit balances of such bank
and financial accounts as of the most recent practicable date. Since the date
of the balances set forth on such list, there have been no payments out of or
drafts against any of the accounts included therein other than routine payments
and drafts in the ordinary course of business. Section 4.14 of the Disclosure
Schedule also lists all persons having signatory authority over or access to
such bank and financial accounts and safe deposit boxes.
Section 4.15 Suits, Actions and Claims. Except as set forth in
Section 4.15 of the Disclosure Schedule, (i) there are no suits, actions,
claims, inquiries, investigations or legal, administrative or arbitration
proceedings involving JSM or in which JSM is engaged or that are pending or, to
the best of the Shareholders' and JSM's knowledge, threatened against or
affecting JSM or any of its properties, assets or business, or that
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question the validity or legality of the transactions contemplated hereby, (ii)
no basis or grounds for any such suit, action, claim, inquiry, investigation or
proceeding exists, and (iii) there is no outstanding order, writ, injunction or
decree of any Governmental Authority against or affecting JSM or any of its
properties, assets or business. Section 4.15 of the Disclosure Schedule sets
forth all claims, including the status thereof, over the past two years against
JSM with respect to personal injury, negligence or responsibility for damages
or injuries relating to JSM's business and operations or for reservoir damage
or obligation to redrill or work over a well.
Section 4.16 Insurance Policies. Section 4.16 of the Disclosure
Schedule contains a list of all insurance policies (specifying the insurer, the
amount of coverage, the type of insurance and the policy number) covering JSM
or its properties, assets, business and personnel. Such policies afford JSM
coverage in such amounts and against such risks as is customary for companies
engaged in the same type and scope of business as JSM. There are no special
circumstances with respect to such policies or the business or operations of
JSM that lead to any liability under such insurance policies being avoided by
the insurers issuing such policies or, to the best of the Shareholders's and
JSM's knowledge, the premiums thereunder being increased. Except as set forth
on Section 4.16 of the Disclosure Schedule, there is no claim outstanding under
any such insurance policy nor to the best of the Shareholders's and JSM's
knowledge are there any circumstances that are likely to give rise to such a
claim. JSM is not in default with respect to any provision contained in such
insurance policies, nor has it failed to give any notice or present any claim
thereunder in timely fashion. All such policies are in full force and effect,
with all premiums due thereon to date fully paid.
Section 4.17 Licenses and Permits; Compliance with Governmental
Requirements. Section 4.17 of the Disclosure Schedule sets forth a true and
complete list of all licenses and permits necessary for the conduct of JSM's
business. JSM has all such licenses and permits validly issued to it and in
its name, and all such licenses and permits are in full force and effect. True
and correct copies of all such licenses and permits necessary for the conduct
of business are included in Exhibit 4.17 hereto. No violations are or have
been recorded in respect of such licenses or permits and no proceeding is
pending or, to the best of the Shareholders's and JSM's knowledge, threatened
seeking the revocation or limitation of any of such licenses or permits. The
consummation of the transactions contemplated by this Agreement will not
constitute a violation of any such license or permit or impair or adversely
affect in any manner any such license or permit. JSM has complied with all
Governmental Requirements applicable to its business, and all Governmental
Requirements with respect to the distribution and sale of products and services
by it.
Section 4.18 Authorization. Each Shareholder has all requisite
legal right, power, capacity and authority to execute and deliver this
Agreement and to perform fully such Shareholder's obligations hereunder. This
Agreement has been duly executed by each Shareholder and constitutes the legal,
valid and binding obligation of such Shareholder, enforceable against such
Shareholder in accordance with its terms, except
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as limited by applicable bankruptcy, moratorium, insolvency or other similar
laws affecting generally the rights of creditors or by principles of equity.
Section 4.19 No Untrue Statements. The statements,
representations and warranties of the Shareholders set forth in this Agreement
and the Exhibits hereto and in all other documents and information furnished to
UTI and UTI Sub and its representatives in connection herewith do not include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements, representations and warranties made not
misleading.
Section 4.20 Records. The books, records and minutes kept by
JSM with respect to its business and assets have been kept properly in all
material respects in accordance with all Governmental Requirements and contain
records of all matters required to be included therein by any Governmental
Requirement or by generally accepted accounting principles, and such books,
records and minutes are true, accurate and complete in all material respects.
Section 4.21 No Dissolution or Judgment. No order has been
entered or petition presented or resolution passed for the dissolution or
winding up of JSM nor has any distress, execution or other process been levied
in respect of JSM or any of its assets nor is there any unfulfilled or
unsatisfied judgment or order outstanding against JSM.
Section 4.22 Accounts Receivable. All notes and accounts
receivable of JSM shown on the Reference Balance Sheet or that have arisen
since the Balance Sheet Date ("Accounts Receivable") have arisen in the
Ordinary Course of Business. All Accounts Receivable either (i) have been
collected or (ii) are collectible on the respective due dates thereof, or, if
no due date is stated with respect thereto, within ninety (90) days of their
creation in the Ordinary Course of Business, in each case in the aggregate
recorded amounts thereof, less the applicable reserves with respect thereto
reflected on the Reference Balance Sheet. JSM has not factored or discounted
or agreed to factor or discount any Account Receivable. The values at which
the Accounts Receivable are carried reflect the accounts receivable valuation
policy of JSM which is consistent with JSM's past practice and in accordance
with GAAP, consistently applied. Section 4.22 of the Disclosure Schedule sets
forth a true, correct and complete list of all Accounts Receivable written off
by JSM, in whole or in part, as uncollectible during the two years preceding
the date hereof. Section 4.22 of the Disclosure Schedule also sets forth a
true, correct and complete aging of the Accounts Receivable of JSM as of the
most recent practicable date.
Section 4.23 Environmental Representations and Warranties.
(a) Neither JSM nor any Shareholder has received any
written notice of any investigation or inquiry by any Governmental Authority
under any applicable Environmental Laws relating to the ownership or operation
of the assets of JSM. JSM has not disposed of any Hazardous material (as
defined below) on any of the assets
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currently owned or leased or that have been owned or leased by, JSM or its
affiliates or predecessor entitles (the "JSM Assets") and no condition exists
on any of the JSM Assets which would subject JSM or the Shareholders or the JSM
Assets to any remedial obligations under any applicable Environmental Law.
(b) Except where the failure to do so would not have a
Material Adverse Effect, JSM and its Affiliates have obtained and been in
compliance with all of the terms and conditions of all permits, licenses, and
other authorizations which are required under, and has complied with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in all applicable
Environmental Laws relating to the JSM Assets.
(c) Neither JSM or any of its Affiliates nor, to their
best knowledge, any prior owner or operator of the JSM Assets, has caused or
allowed the generation, use, treatment, storage or disposal of Hazardous
Materials at any site or facility owned, leased or operated by JSM or its
Affiliates or used in connection with the JSM Assets except in accordance with
all applicable Environmental Laws or except to the extent the same would not
have a Material Adverse Effect.
(d) None of the JSM Assets have been subject to the
release of any Hazardous Materials except to the extent that the same would not
have a material adverse effect on JSM.
(e) JSM has secured all Environmental Permits necessary
to the operation of the JSM Assets currently owned by JSM and JSM is in
compliance with such permits.
(f) JSM has not received any notice, nor is it aware,
of any proposal to amend, revoke or replace any environmental Permit, or
requiring the issuance of any additional Environmental Permit, necessary to
operate the JSM Assets owned by JSM.
(g) Seller has not received inquiry or notice nor does
Seller have any reason to suspect or believe that it will receive inquiry or
notice of any actual or potential proceedings, claims, lawsuits or losses
related to or arising under any Environmental Laws and related to the JSM
Assets.
(h) JSM is not currently operating or required to be
operating any of the JSM Assets under any compliance order, schedule, decree or
agreement, any consent decree, order or agreement, or corrective action decree,
order or agreement issued or entered into under any Environmental Law.
(i) JSM and the JSM Assets are to the best of
Shareholders' knowledge in compliance with all applicable limitations,
restrictions, conditions, standards, prohibitions, requirements and obligations
established under Environmental Laws except to the extent any such
noncompliance would not have in Material Adverse Effect.
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Section 4.24 Brokers and Finders. No broker or finder has acted
for JSM or the Shareholders in connection with this Agreement or the
transactions contemplated by this Agreement and no broker or finder is entitled
to any brokerage or finder's fee or to any commission in respect thereof based
in any way on agreements, arrangements or understandings made by or on behalf
of JSM or the Shareholders.
Section 4.25 Customers. Section 4.25 of the Disclosure Schedule
sets forth a true, correct and complete list of all customers of JSM to which
JSM has sold or provided products or services during the two years immediately
preceding the date hereof. To the best of JSM's and the Shareholders's
knowledge, no customer of JSM has any present plan or intention to reduce its
drilling activity for the next 12 months to a level that is materially below
the average annual drilling activity of such customer over the past two years.
Section 4.26 No Royalties. Except with respect to the Excluded
Assets, the historical royalty obligations relating thereto have been fully
paid and will be assumed by the Shareholders with respect to the future, no
royalty or similar item or amount is being paid or is owing by JSM, nor is any
such item accruing, with respect to the operation, ownership or use of the
business or the assets of JSM.
Section 4.27 No Affiliate Obligations. JSM does not have any
obligations or liabilities to the Shareholders or any Affiliate of the
Shareholders, except for obligations and liabilities that will be released in
full at no cost to JSM on or prior to the Closing Date.
Section 4.28 Investment Purpose; Accredited Investor. Each
Shareholder (i) is an accredited investor as that term is defined in Regulation
D promulgated under the Securities Act of 1993, as amended (the "Securities
Act"), and (ii) is acquiring the UTI Shares for its own account, for investment
purposes and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities
Act, except pursuant to a valid registration statement under the Securities Act
declared effective by the Securities and Exchange Commission or pursuant to a
valid exemption from registration under the Securities Act. Each Shareholder
acknowledges that the issuance to such Shareholder of the UTI Shares has not
been registered under the Securities Act or the securities laws of any state
and will contain an appropriate restrictive legend.
Section 4.29 JSM Corporate Authority. The execution and
delivery of this Agreement by JSM, the performance by it of all the terms and
conditions hereof to be performed by it and the consummation of the
transactions contemplated hereby by it, including the Merger and the Share
Redemption, have been duly authorized and approved by any requisite corporate
action on the part of JSM, including all necessary approvals by the
Shareholders of the Merger and this Agreement. This Agreement constitutes the
legal, valid and binding obligation of JSM enforceable against JSM in
accordance with its terms, subject to applicable bankruptcy, insolvency or
other similar laws relating to or affecting the enforcement of creditors'
rights generally and to
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general principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law) and the enforceability of the
indemnification provisions contained in Section 15.4 being subject to
limitations under public policy:
(a) Except for the filing and recordation of a
Certificate of Merger as required by the TBCA,
(b) The affirmative vote of the holders of a majority
of the outstanding shares of JSM Common Stock was the only vote of the
holders of any class or series of JSM's capital stock necessary to
approve this Agreement and the transactions contemplated hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF UTI
UTI represents and warrants to the Shareholders that:
Section 5.1 Due Incorporation and Qualification. UTI is a
corporation duly organized and validly existing under Delaware law and has all
requisite power to carry on its business as now being conducted. UTI Sub is a
corporation duly organized and validly existing under Texas law. UTI and UTI
Sub is qualified to do business in each other jurisdiction in which its failure
to so qualify would materially and adversely affect UTI or its financial
condition or business or ability to perform the transactions contemplated by
this Agreement.
Section 5.2 Performance of Agreement.
(a) UTI and UTI Sub has all necessary corporate power
and authority to enter into and carry out the transactions contemplated by this
Agreement.
(b) UTI's and UTI Sub's execution, delivery and
performance of this Agreement have been duly and validly authorized and
approved by all necessary corporate action on the part of UTI and UTI Sub, as
applicable.
(c) The execution, delivery and performance of this
Agreement by UTI and UTI Sub, and the transactions contemplated hereby, will
not violate (i) any provision of the certificate of incorporation or bylaws of
UTI and UTI Sub, (ii) any material agreement or instrument to which UTI is a
party or by which UTI is bound, (iii) any judgment, order, ruling, or decree
applicable to UTI as a party in interest, or (iv) any Governmental Requirement
applicable to UTI.
(d) This Agreement is the valid and binding agreement
of UTI and UTI Sub, enforceable against UTI and UTI Sub in accordance with its
terms, except as limited by applicable bankruptcy, moratorium, insolvency or
other similar laws affecting
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generally the rights of creditors or by principles of equity and the
indemnification provisions contained in Section 15.4 being subject to
limitation under public policy.
Section 5.3 Brokers and Finders. No agent, broker, investment
banker, person or firm acting on behalf of UTI or under its authority is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee directly or indirectly from the Shareholders in connection with any
of the transactions contemplated hereby.
Section 5.4 Financial Ability. UTI has on the date hereof, and
on the Closing Date will have, the financial ability to perform its obligations
under this Agreement.
Section 5.5 Authorization for UTI Common Stock. UTI has taken
all necessary corporate action to permit it to issue the number of shares of
UTI Common Stock required to be issued pursuant to the terms of this Agreement.
Subject to the provisions of Section 2.1, the shares of UTI Common Stock issued
pursuant to the terms of this Agreement will, when issued, be validly issued,
fully paid and nonassessable and not subject to preemptive rights. The UTI
Common Stock issuable pursuant to this Agreement will, when issued, be listed
on the American Stock Exchange subject to official notice of issuance.
Section 5.6 SEC Documents. UTI has provided to the
Shareholders its Annual Report on Form 10-K for the year ended December 31,
1996, Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997 and
June 30, 1997, its Current Reports on Form 8-K dated January 27, 1997 and April
11, 1997, as amended, and its proxy statement with respect to its Annual
Meeting of Stockholders for 1997 (such documents collectively referred to
herein as the "SEC Documents"). As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations of the Commission promulgated thereunder applicable to such SEC
Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of UTI included in the SEC Documents comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the Commission with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present the consolidated financial position of
UTI and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended. Since September 30, 1996, other than as discussed in the SEC Documents,
there has been no material adverse change in the business of UTI and its
subsidiaries, taken as a whole.
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ARTICLE VI
OBLIGATIONS OF PARTIES PRIOR TO CLOSING
Section 6.1 General. Up to and including the Closing Date,
none of the parties will take any action which would cause any of its
representations and warranties herein not to be true and correct in all
material respects as of the Closing Date except by written authorization of the
other parties. Each party shall use its best efforts to carry out and comply
with the provisions of this Agreement, to satisfy the conditions applicable to
such party and to consummate the sale and purchase in accordance with this
Agreement.
Section 6.2 Access to Records and Properties of JSM. Subject
to requirements of confidentiality imposed by contract or by law, the
Shareholders will cause JSM to make available to UTI and its accountants,
counsel and other representatives, access during normal business hours to the
properties, books and records of JSM and allow JSM's officers and
representatives to be available to UTI for consultation. In exercising the
right of access, UTI will not unreasonably interfere with the conduct of the
business or make disclosure of this Agreement or its terms to any third party
without the prior written consent of JSM, unless required by law.
Section 6.3 Conduct of Business of JSM Until the Closing. Up
to and including the Closing Date, unless UTI consents in writing to contrary
action, the Shareholders will cause JSM to:
(a) not change its capital stock by reclassification,
subdivision, reorganization, issuance of additional stock or otherwise;
(b) except for the Share Redemption, not issue or sell,
or purchase or otherwise reacquire, any of its capital stock, or grant or
commit to grant any options, warrants, or other rights to subscribe for, or
purchase, or otherwise acquire, any shares of its capital stock, or issue or
commit to issue any securities convertible into or exchangeable for shares of
its capital stock;
(c) except for the Share Redemption to the Shareholders
as provided in Section 6.5, not declare any dividend on its capital stock or
make any other similar payment or distribution thereon or in respect thereof;
(d) not change or amend its Certificate of
Incorporation or By-Laws;
(e) maintain its books, records and accounts in
accordance with GAAP and in the usual and regular manner consistent with prior
years;
(f) not borrow or agree to borrow any money or
guarantee, or agree to guarantee the obligations of others;
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(g) not make any contracts or commitments other than in
the Ordinary Course of Business;
(h) not allow any material contract to be terminated or
to be materially modified prior to the full term of the contract unless
approved by the Board of Directors, or by a duly authorized officer;
(i) not create, assume or permit to exist any mortgage,
pledge or other lien or encumbrance on any of its assets except in the Ordinary
Course of Business;
(j) not sell, assign, lease or otherwise dispose of any
of its material assets other than in connection with the replacement of
obsolete or worn-out items;
(k) use best efforts to preserve intact the current
business organizations of JSM, keep available the services of the current
officers, employees and agents of the JSM, and maintain the relations and
goodwill with all suppliers, customers, licensers, licensees, landlords, trade
creditors, employees, agents and others having business relationships with JSM;
(l) cause JSM to furnish to UTI copies of all financial
statements and certificates and reports concerning operation of the business,
as and when such financial statements, certificates and reports are delivered
to any Shareholder or pursuant to any material contract of JSM; and
(m) use its best efforts not to do, or fail to do, any
act which results or will result (i) in any of the representations and
warranties of the Shareholders under this Agreement being materially incorrect
or (ii) in the nonfulfillment of any of the conditions stated in Article VII.
Section 6.4 No Negotiation. Until such time, if any, as this
Agreement is terminated pursuant to Article X, the Shareholders will not, and
shall cause JSM not to, nor will they permit any of their respective
representatives to and shall cause JSM's representatives not to, directly or
indirectly solicit, initiate or encourage any inquiries, offers or proposals
from, discuss or negotiate with or execute any agreement regarding or provide
any information to, any Person (other than UTI) relating to any transaction
involving the sale of the capital stock of JSM owned by the Shareholders or the
business or operations of JSM or any of the property or assets of either JSM,
or of any of the capital stock or any other equity securities of JSM, or any
merger, consolidation, business combination, liquidation, recapitalization,
dissolution or similar transaction involving JSM (collectively, "Sale
Proposals") or any other transaction the consummation of that would or could
reasonably be expected to impede, interfere with, prevent or materially delay
the transactions contemplated hereunder or which that or could reasonably be
expected to materially dilute the benefits to UTI of the transactions
contemplated hereunder. If any such written inquiries or Sale Proposals are
received by, or any such information is requested in writing from or any such
negotiations or
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discussions are sought to be initiated with the JSM or any of the Shareholders,
then the Shareholders will, and shall cause JSM to, promptly notify UTI of the
nature, terms and status of the foregoing and the identity of the inquiring
party and provide UTI with a copy of all written materials provided in
connection with such Sale Proposal. Until such time, if any, as this Agreement
is terminated pursuant to Article 9, none of the JSM or the Shareholders will
accept any Sale Proposal from any person or entity other than UTI.
Section 6.5 Share Redemption. Prior to the Closing, the
Shareholders shall cause JSM to redeem four shares of JSM Common Stock held by
each of them in consideration of the Excluded Assets. As part of the Share
Redemption, the Shareholders shall assume all obligations and liabilities
relating to the Excluded Assets and all Pre-Closing Obligations to the extent
they are not JSM Retained Liabilities. The Share Redemption and such
assumption shall be effected in a manner acceptable to UTI. The Shareholders
and UTI shall agree upon a valuation of the Excluded Assets for purposes of the
Share Redemption and there shall be fully accrued as a current liability on the
financial statements of JSM at Closing an amount sufficient to cover all Taxes
payable by JSM in respect of the Share Redemption. JSM agrees following the
Closing to execute, at the sole cost of the Shareholders, any agreements,
certificates or other documents upon the reasonable request of the Shareholders
reasonably necessary to effectuate an orderly transfer of the Excluded Assets
as part of the Share Redemption. All Excluded Assets shall be transferred as
part of the Share Redemption with representations and warranties of any kind,
including title and any implied warranties of fitness for a particular purpose
or merchantability.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SHAREHOLDERS
The obligations of the Shareholders hereunder are subject to
satisfaction of the conditions set out in this Article VII at or before the
Closing Date.
Section 7.1 Opinion of Counsel. The Shareholders shall have
received the opinion of counsel to UTI dated the Closing Date, substantially in
the form of Exhibit 7.1.
Section 7.2 Performance and Obligations of UTI.
(a) All of the terms and conditions of this Agreement
to be complied with and performed by UTI at or before the Closing Date shall
have been complied with and performed in all material respects, and the
representations and warranties made by UTI in this Agreement shall be correct
in all material respects with the same force and effect as though such
representations and warranties had been made at and as of the Closing Date.
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(b) UTI shall have delivered to the Shareholders a
certificate, dated the Closing Date, substantially in the form of Exhibit
7.2(b).
(c) UTI shall have complied on or before the Closing
Date in all material respects with each of its covenants or agreements
contained in this Agreement to be performed on or before the Closing Date.
(d) There shall not have occurred a Material Adverse
Effect with respect to UTI since June 30, 1997.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF UTI
The obligations of UTI hereunder are subject to satisfaction of the
conditions set out in this Article VIII at or before the Closing Date.
Section 8.1 Absence of Litigation. No suit, action or other
proceeding by a third party or governmental entity shall have been instituted
or threatened before any court, governmental entity or legislative body to
enjoin, restrain or prohibit, or to obtain substantial damages in respect of,
or which is related to or arises out of this Agreement or the consummation of
the transactions contemplated hereby, which, in the reasonable judgment of UTI,
would make it inadvisable to consummate such transactions.
Section 8.2 Opinions of Counsel. UTI shall have received the
opinion of counsel to the Shareholders, dated the Closing Date, substantially
in the form of Exhibit 8.2.
Section 8.3 Performance and Obligations of the Shareholders.
(a) All of the terms and conditions of this Agreement
to be complied with and performed by the Shareholders at or before the Closing
Date shall have been complied with and performed in all material respects, and
the representations and warranties made by the Shareholders in this Agreement
shall be correct in all material respects with the same force and effect as
though such representations and warranties had been made as of the Closing
Date.
(b) the Shareholders shall have delivered to UTI a
certificate, substantially in the form of Exhibit 8.3(b).
Section 8.4 Tender of Resignations. Each director and officer
of JSM, as requested by UTI prior to the Closing Date, shall have tendered his
or her resignation as such director and/or officer effective upon Closing.
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Section 8.5 Covenants and Agreements Performed. Seller shall
have complied on or before the Closing Date in all material respects with each
of the covenants or agreements of Seller contained in this Agreement to be
performed on or before the Closing Date.
Section 8.6 No Adverse Change. There shall not have occurred
any Material Adverse Effect with respect to JSM since the Balance Sheet Date.
Section 8.7 Diminution in Value of the Assets. Since the date
of this Agreement, there shall not have been an actual or constructive total
loss of any of the Rigs.
Section 8.8 Debt. JSM shall have paid all Debt outstanding
under the Debt Obligations.
ARTICLE IX
CLOSING
Section 9.1 Place of Closing and Closing Date. The Closing
shall take place at the offices of Fulbright & Jaworski L.L.P., 1301 McKinney,
Suite 5100, Houston, Texas, subject to the satisfaction of the conditions
precedent stated in Articles VII and VIII on September 11, 1997, or such other
date as may be mutually agreed.
Section 9.2 Closing Deliveries by UTI. At the Closing, UTI
shall deliver to the Shareholders as provided in Article III the following:
(a) the Estimated Cash Payment and 90% of the UTI
Shares in accordance with Article III;
(b) the executed Opinion of Counsel described in
Section 7.1;
(c) the certificate executed by an authorized officer
of UTI described in Section 7.2(b);
(d) a certificate executed by the Secretary (or
Assistant Secretary), of UTI and UTI Sub dated as of the Closing Date,
providing the resolutions authorizing the merger under this Agreement adopted
by the Board of Directors of UTI and UTI Sub and the continued effectiveness of
such resolutions, and presenting the incumbency and representative signatures
of the officers executing this Agreement on behalf of UTI and UTI Sub, as the
case may be;
(e) a certificate of good standing for UTI issued by
the Secretary of State of UTI's state of incorporation dated as of a date no
more than ten (10) days prior to the Closing Date; and
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(f) a certificate executed by the Secretary (or
Assistant Secretary) of UTI dated as of the Closing Date stating that UTI has
taken all corporate action necessary on its part to authorize its execution and
delivery of this Agreement and presenting the authority of the officers
executing this Agreement on behalf of UTI.
Section 9.3 Closing, Deliveries by the Shareholders. At the
Closing, the Shareholders shall deliver to UTI the following:
(a) a certificate or certificates evidencing the Shares
duly endorsed for transfer to UTI;
(b) a certificate of good standing for JSM issued by
the Texas Secretary of State and a certificate of existence and good standing
(including as to tax status) in each jurisdiction listed on Exhibit 3.1, in
each case and dated as of a date no more than ten (10) days prior to the
Closing Date;
(c) the executed Opinion of Counsel described in
Section 8.2;
(d) the certificate described in Section 8.3(b);
(e) a certificate executed by the Secretary (or
Assistant Secretary) of JSM dated as of the Closing Date stating that JSM and
its Shareholders has taken all corporate action necessary on their parts to
authorize the execution, delivery and performance of this Agreement and
presenting the authority of the officers executing this Agreement on behalf of
the Shareholders; and
(f) each of the resignations requested in accordance
with the provisions of Section 8.4.
ARTICLE X
TERMINATION
Section 10.1 Termination. This Agreement may be terminated:
(a) At any time prior to the Closing Date with the
mutual written consent of the Shareholders, JSM, UTI; or
(b) On the Closing Date by the Shareholders, if the
Shareholders do not receive bank confirmation of receipt of the Cash Purchase
Price, or if any of the conditions provided in Article VII shall not have been
satisfied, complied with or performed in any material respect on or prior to
the Closing Date and the Shareholders shall not have waived in writing such
non-satisfaction, noncompliance or nonperformance on or before the Closing
Date; or
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(c) On the Closing Date by UTI, if any of the
conditions provided in Article VIII shall not have been satisfied, complied
with or performed in any material respect on or prior to the Closing Date and
UTI shall not have waived in writing such non-satisfaction, noncompliance or
nonperformance on or before the Closing Date.
ARTICLE XI
OBLIGATIONS OF PARTIES AFTER CLOSING
Section 11.1 Post-Closing Confidentiality. After the Closing,
the Shareholders and their Affiliates shall maintain as confidential
information all information in their possession regarding JSM or its business
or assets, and shall not disclose any of such information to any Person except
as may be required to comply with applicable law.
Section 11.2 Cooperation Regarding Financial Information.
(a) The Shareholders, if requested by UTI, shall
cooperate and assist Ernst & Young LLP or other accounting firm designated by
UTI (the "Accountants") in preparing such audited financial statements of JSM
that UTI may reasonably require in order to permit UTI to timely file a Current
Report Form 8-K with the Securities and Exchange Commission in accordance with
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder in connection with the transactions contemplated hereby and to
comply with any financial statement requirements with respect to JSM applicable
to UTI under the Securities Exchange Act of 1934, as amended, the Securities
Act and the rules and regulations thereunder. If requested, the Shareholders
shall use reasonable good faith efforts to cause Elms, Faris & Company to
assist the Accountants in delivering such audited financial statements to UTI
within ten business days prior to the date that UTI is required to file such
financial statements with the Securities and Exchange Commission in connection
with such obligations. The Shareholders shall cause Elms, Faris & Company to
provide UTI with access to such firm's work papers in support of any accounting
or auditing work performed by Elms, Faris & Company in respect of JSM. The
cost of such audit, including fees relating to assistance provided by Elms,
Faris & Company, shall be borne by UTI. The Shareholders will cooperate with
and assist UTI in preparing, and, if requested, shall use reasonable efforts to
cause Elms, Faris & Company to cooperate with, and assist the Accountants in
preparing such other audited financial statements for JSM as may be specified
by UTI.
(b) If in connection with any audit of JSM or UTI
requiring historical information regarding the Excluded Assets, the
Shareholders shall provide such information regarding the same as JSM or UTI
may from time to time request.
Section 11.3 Covenant Not to Compete With the Business. Each of
the Shareholders agrees that, effective as of the Closing Date, for a period of
five years thereafter in all jurisdictions other than Louisiana, which shall be
applicable for two years only, such Shareholder will not, and will cause each
of his Affiliates to not,
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without the consent of UTI, directly or indirectly, provide contract land
drilling services in the State of Texas, Oklahoma, New Mexico and Louisiana
except for the account of UTI and its Affiliates. The Shareholders acknowledge
that a remedy at law for any breach or attempted breach of this Section 11.3
will be inadequate and further agree that any breach of this Section 11.3 will
result in irreparable harm to JSM and, accordingly, UTI and JSM shall, in
addition to any other remedy that may be available to any of them, be entitled
to specific performance and injunctive and other equitable relief in case of
any such breach or attempted breach. The Shareholders acknowledge that this
covenant not to compete is being provided as an inducement to UTI to acquire
the Shares and that this Section 11.3 contains reasonable limitations as to
time, geographical area and scope of activity to be restrained that do not
impose a greater restraint than is necessary to protect the goodwill or other
business interest of UTI and JSM. Whenever possible, each provision of this
Section 11.3 shall be interpreted in such a manner as to be effective and valid
under applicable law but if any provision of this Section 11.3 shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remaining provisions of this Section 11.3. If any provision
of this Section 11.3 shall, for any reason, be judged by any court of competent
jurisdiction to be invalid or unenforceable, such judgment shall not affect,
impair or invalidate the remainder of this Section 11.3 but shall be confined
in its operation to the provision of this Section 11.3 directly involved in the
controversy in which such judgment shall have been rendered. In the event that
the provisions of this Section 11.3 should ever be deemed to exceed the time or
geographic limitations permitted by applicable laws, then such provision shall
be reformed to the maximum time or geographic limitations permitted by
applicable law.
ARTICLE XII
NATURE OF STATEMENTS AND SURVIVAL
Section 12.1 Representations and Warranties. The several
representations and warranties of the parties shall survive the execution and
delivery of this Agreement and the Closing and shall remain in full force and
effect for a period beginning on the date hereof and ending three years
following the Closing Date, with the following exceptions:
(a) the representations and warranties set forth in
Sections 4.1, 4.2, 4.3, 4.13, 4.18, 4.23, 4,26, 4.27, 5.1 and 5.2(a) and (b)
shall survive the execution and delivery of this Agreement and the Closing and
shall remain in full force and effect without limitation as to time; and
(b) the representations and warranties set forth in
Sections 4.9, 4.10, 4.24, 5.24 and 5.3 shall survive the execution and delivery
of this Agreement and the Closing and shall remain in full force and effect for
a period beginning on the date hereof and ending on the 90th day after the
expiration of all applicable statutes of limitations, including any and all
extensions thereof.
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The period during which the representations and warranties shall survive being
referred to herein with respect to such representations and warranties as the
"Survival Period".
Section 12.2 Effect of Survival. The several representations
and warranties made herein by each party shall be effective with respect to any
inaccuracy therein or breach thereof (and a claim for indemnification under
Article XIII may be made thereon) if a written notice asserting the claim shall
have been given within the Survival Period to the party that made the
representation or warranty. Any claim for indemnification made during the
Survival Period shall be valid, and the representations and warranties relating
thereto shall remain in effect for purposes of that indemnification
notwithstanding the fact that the claim may not be resolved within the Survival
Period.
Section 12.3 Effect of Investigation. All representations,
warranties, covenants and agreements made by the parties shall not be affected
by any investigation heretofore or hereafter made by and on behalf of any of
them and shall not be deemed merged into any instruments or agreements
delivered in connection with this Agreement or the Closing or otherwise in
connection with the transactions contemplated hereby.
Section 12.4 Survival of Covenants and Agreements. The
covenants and agreements entered into pursuant to this Agreement shall survive
the execution and delivery of this Agreement and the Closing without
limitation.
ARTICLE XIII
INDEMNIFICATION
Section 13.1 General Indemnity by the Shareholders. Each of the
Shareholders, jointly and severally, covenants and agrees that such Shareholder
will indemnify, hold harmless and defend UTI, UTI Sub and JSM and their
respective officers, directors, employees, agents, representatives and
Affiliates and successors and assigns (collectively, the "UTI Indemnified
Parties"), at all times from and after the Closing Date, from and against any
and all Damages of or to any of UTI Indemnified Parties that may now or in the
future be paid, incurred or suffered by any UTI Indemnified Party or asserted
against any UTI Indemnified Party by any Person resulting or arising from or
incurred in connection with any one or more of the following (excluding in each
case all JSM Retained Liabilities):
(a) any Pre-Closing Obligation;
(b) any and all Taxes pertaining or attributable to JSM
and any of its subsidiaries with respect to any and all taxable periods or
portions thereof ending on or before the Closing Date to the extent not fully
accrued on the Final Statement;
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(c) any liability or claim for liability (whether in
contract, in tort or otherwise, and whether or not successful) related to any
liens, obligations or encumbrances of any nature whatsoever against or in any
way related to the assets or the business of JSM to the extent such liability
or claim for liability arises in connection with any lien, obligation or
encumbrance which is in existence at or attributable to periods prior to the
Closing Date;
(d) any liability or claim for liability (whether in
contract, in tort or otherwise, and whether or not successful) related to any
lawsuit or threatened lawsuit or claim involving the Shareholders or JSM based
upon actions, omissions or events occurring on or prior to the Closing Date,
including, but not limited to, those items listed on Schedule 4.15 hereto;
(e) any liability or claim for liability (whether in
contract, in tort or otherwise, and whether or not successful) related to any
workers' compensation or worker injury claim based on any actions, omissions or
events occurring on or prior to the Closing Date;
(f) any liability or claim for liability (whether in
contract, in tort, or otherwise, and whether or not successful) related to the
administration or termination of, or any benefits under, any retirement plan;
(g) any obligation, liability or claim for liability
(whether in contract, in tort, or otherwise, and whether or not successful) of
JSM to any Affiliate of the Shareholders to the extent such obligation,
liability or claim arises in connection with any action, omission or event
occurring on or prior to the Closing Date or relates to any agreement or
commitment in existence on the Closing Date;
(h) any misrepresentation, breach of warranty or
nonfulfillment of any covenant or agreement on the part of the Shareholders
under this Agreement or from any misrepresentation in or omission from any
list, schedule, certificate or other instrument furnished or to be furnished to
UTI pursuant to the terms of this Agreement;
(i) any claim or obligation relating to any of the
Excluded Assets and any claim or liability relating to the Share Redemption or
transfer of the Excluded Assets to the Shareholders, including any Taxes
relating thereto to the extent not fully accrued on the Final Statement; or
(j) all Environmental Liabilities, whenever incurred,
based upon, arising from or related to any conditions, events, circumstances,
facts, activities, practices, incidents, actions or omissions occurring or
existing on or prior to the Closing Date at, on, under, about, or within any
JSM Asset regardless of whether such Environmental Liabilities are known,
unknown, disclosed, undisclosed, fixed or contingent, or whether such
Environmental Liabilities relate to on-site or off-site Environmental
Conditions, including without limitation any such Environmental
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Liabilities arising from the use, storage, handling, treatment, disposal,
generation, transportation or release of any Hazardous Materials on or prior to
the Closing Date.
Section 13.2 General Indemnity by UTI. UTI covenants and agrees
that it will indemnify, hold harmless and defend the Shareholders and their
representatives and Affiliates (other than JSM) (collectively, the
"Shareholders Indemnified Parties"), at all times from and after the Closing
Date, from and against any and all Damages that may now or in the future be
paid, incurred or suffered by any the Shareholders Indemnified Party or
asserted against any the Shareholders Indemnified Party by any Person resulting
or arising from or incurred in connection with any misrepresentation, breach of
warranty or nonfulfillment of any covenant or agreement on the part of UTI
under this Agreement or from any misrepresentation in or omission from any
list, schedule, certificate or other instrument furnished or to be furnished to
the Shareholders pursuant to the terms of this Agreement (excluding in each
case all liabilities and obligations for which the Shareholders have agreed to
indemnify UTI Indemnified Parties pursuant to Section 13.1 above):
Section 13.3 Indemnification Basket; Effect of Materiality
Qualifiers.
(a) There shall be no indemnification for a
misrepresentation or breach of representation or warranty recoverable against a
party obligated to provide indemnification therefor under this Article XIII
until the Damages for all misrepresentations and breaches of representations
and warranties by such party exceed $100,000 in the aggregate (the "Basket
Amount"), and once all such damages exceeds the Basket amount, such party shall
be obligated to the other party for any and all such damages without regard to
the Basket Amount.
(b) For purposes of determining the right of a party to
make a claim for indemnification for a breach of representation or warranty
under Sections 13.1 and 13.2, all representations and warranties that have been
made subject to a materiality or dollar qualification (including any Material
Adverse Effect) shall be deemed to have been made without that qualification,
it being understood and agreed that the thresholds provided for under Section
13.3(a) are intended to be the only materiality qualification for such matters
for purposes of indemnification.
Section 13.4 Waiver of Contribution. Any claim for
indemnification made by any UTI Indemnified Party pursuant to Article XIII
shall be asserted against the Shareholders and their successors and assigns.
The Shareholders hereby expressly acknowledges and agrees that it shall be
liable and responsible therefor and that it shall not seek or receive
indemnification or contribution from JSM with respect to such claim for
indemnification.
Section 13.5 EXPRESS NEGLIGENCE. THE INDEMNIFICATION TO BE
PROVIDED BY THE SHAREHOLDERS TO AN INDEMNITEE HEREUNDER PURSUANT TO THIS
ARTICLE XIII SHALL APPLY NOTWITHSTANDING SUCH MATTER FOR WHICH INDEMNIFICATION
IS TO BE PROVIDED MAY RELATE
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TO THE ORDINARY SOLE OR CONTRIBUTORY NEGLIGENCE, GROSS NEGLIGENCE, WILLFUL
MISCONDUCT OR VIOLATION OF LAW BY INDEMNITEE, INCLUDING JSM, ITS OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS, AND FOR LIABILITIES BASED ON THEORIES OF
STRICT LIABILITY, AND SHALL BE APPLICABLE WHETHER OR NOT NEGLIGENCE OF SUCH
INDEMNITEE IS ALLEGED OR PROVEN, IT BEING THE INTENTION OF THE PARTIES TO
INDEMNIFY SUCH INDEMNITEE FROM AND AGAINST ITS ORDINARY SOLE AND CONTRIBUTORY
NEGLIGENCE AND GROSS NEGLIGENCE AS WELL AS LIABILITIES BASED ON THE WILLFUL
ACTIONS OR OMISSIONS OF THE INDEMNIFIED PARTY AND LIABILITIES BASED ON THEORIES
OF STRICT LIABILITY.
Section 13.6 Notice of Claim. UTI agrees that upon its
discovery of facts giving rise to a claim for indemnity under the provisions of
this Agreement, (such facts being referred to herein as an "Indemnity Claim"),
UTI will give prompt notice thereof in writing to the party from which
indemnity may be sought, together with a statement of such information
regarding the Indemnity Claim as it shall then have, provided that any delay in
giving or failure to give such notice shall not limit any indemnified party's
rights to indemnity hereunder except to the extent that the indemnifying party
is shown to have been materially prejudiced by such delay or failure.
Section 13.7 Right to Participate in Defense. With respect to
any Indemnity Claim related to third party claims or liabilities as to which an
indemnified party seeks indemnity hereunder, the indemnified party shall
provide the indemnifying party with the opportunity to participate in the
defense of such third party claim or liability with counsel of the indemnifying
party's choice and at the indemnifying party's cost and expense. Each of the
indemnified party and the indemnifying party shall reasonably cooperate with
the other and its representatives and counsel in any dispute or defense related
to any third party claim or liability for which indemnity is sought under the
terms of this Agreement.
Section 13.8 Payment. Each party owing an indemnity obligation
hereunder shall promptly pay to the party entitled to indemnity hereunder in
cash the amount of any Damages to which such party is entitled by reason of the
provisions of this Agreement. The indemnifying party shall pay to the
indemnified parties all costs of investigation and defense with respect to
matters subject to indemnity hereunder as such costs are incurred.
ARTICLE XIV
RELEASE
Section 14.1 Release.
(a) AS OF THE CLOSING DATE, EACH SHAREHOLDER DOES
HEREBY FOR HIMSELF AND HIS SUCCESSORS AND ASSIGNS REMISE, RELEASE, ACQUIT AND
FOREVER DISCHARGE UTI, JSM,
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UTI SUB THE SURVIVING CORPORATION AND THEIR RESPECTIVE AFFILIATES, AND THEIR
SUCCESSORS AND ASSIGN, OF AND FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES,
RESPONSIBILITIES, DISPUTES, CAUSES OF ACTION AND OBLIGATIONS OF EVERY NATURE
WHATSOEVER, LIQUIDATED OR UNLIQUIDATED, KNOWN OR UNKNOWN, MATURED OR UNMATURED,
FIXED OR CONTINGENT, THAT THE SHAREHOLDER OR HIS AFFILIATES NOW HAS, OWNS OR
HOLDS OR HAS AT ANY TIME PREVIOUSLY HAD, OWNED OR HELD AGAINST SUCH PARTIES,
INCLUDING WITHOUT LIMITATION ALL LIABILITIES CREATED AS A RESULT OF THE
NEGLIGENCE, GROSS NEGLIGENCE AND WILLFUL ACTS OF JSM AND ITS EMPLOYEES AND
AGENTS, OR UNDER A THEORY OF STRICT LIABILITY, EXISTING AS OF THE CLOSING DATE
OR RELATING TO ANY ACTION, OMISSION OR EVENT OCCURRING ON OR PRIOR TO THE
CLOSING DATE; PROVIDED, HOWEVER, THAT ANY CLAIMS, LIABILITIES, DEBTS OR CAUSES
OF ACTION THAT MAY ARISE IN THE CONNECTION WITH THE FAILURE OF ANY OF THE
PARTIES HERETO TO PERFORM ANY OF THEIR OBLIGATIONS HEREUNDER OR UNDER ANY OTHER
AGREEMENT RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY OR FROM ANY BREACHES
BY ANY OF THEM OF ANY REPRESENTATIONS OR WARRANTIES HEREIN OR IN CONNECTION
WITH ANY OF SUCH OTHER AGREEMENTS SHALL NOT BE RELEASED OR DISCHARGED PURSUANT
TO THIS AGREEMENT.
(b) The Shareholders jointly and severally represent
and warrant that each has not previously assigned or transferred, or purported
to assign or transfer, to any Person or entity whatsoever all or any part of
the claims, demands, liabilities, responsibilities, disputes, causes of action
or obligations released herein. Each Shareholder jointly and severally
covenants and agrees that such Shareholder will not assign or transfer to any
Person or entity whatsoever all or any part of the claims, demands,
liabilities, responsibilities, disputes, causes of action or obligations to be
released herein. Each Shareholder jointly and severally represents and
warrants that such Shareholder has read and understands all of the provisions
of this Section 14.1 and that it has been represented by legal counsel of its
own choosing in connection with the negotiation, execution and delivery of this
Agreement.
(c) EXPRESS NEGLIGENCE. THE RELEASE INDEMNIFICATION
PROVIDED BY THE SHAREHOLDERS PURSUANT TO THIS SECTION 14.1 SHALL APPLY
NOTWITHSTANDING SUCH MATTER FOR WHICH RELEASE IS PROVIDED MAY RELATE TO THE
ORDINARY SOLE OR CONTRIBUTORY NEGLIGENCE, GROSS NEGLIGENCE, WILLFUL MISCONDUCT
OR VIOLATION OF LAW BY A RELEASED PARTY, INCLUDING JSM, ITS OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS, AND FOR LIABILITIES BASED ON THEORIES OF
STRICT LIABILITY, AND SHALL BE APPLICABLE WHETHER OR NOT NEGLIGENCE OF SUCH
RELEASED PARTY IS ALLEGED OR PROVEN, IT BEING THE INTENTION OF THE PARTIES TO
RELEASE SUCH RELEASED PARTY FROM AND AGAINST ITS ORDINARY SOLE AND CONTRIBUTORY
NEGLIGENCE AND GROSS NEGLIGENCE AS WELL AS LIABILITIES BASED ON THE WILLFUL
ACTIONS OR OMISSIONS OF THE RELEASED PARTY AND LIABILITIES BASED ON THEORIES OF
STRICT LIABILITY.
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ARTICLE XV
REGISTRATION AND PUT RIGHTS
Section 15.1 Demand Rights. On one occasion after 90 days
following the Closing Date (the "Demand Date"), the Shareholders may request (a
"Demand Request"), pursuant to this Section 15.1, that UTI register under the
Securities Act the UTI Shares issued to the Shareholders under this Agreement
pursuant to a non-underwritten offering to be made 90 days following the
Closing Date, having a period of distribution not to exceed 90 days; provided,
however, UTI shall not be obligated to prepare and file any registration
statement pursuant to this Section 15.1, or prepare or file any amendment or
supplement thereto, and may suspend sales under, at any time when UTI
reasonably believes that the filing thereof at the time requested, or the
offering of securities pursuant thereto, would materially and adversely affect
a pending or proposed public offering of securities of UTI, an acquisition,
merger, recapitalization, consolidation, reorganization or similar transaction
relating to UTI or negotiations, discussions or pending proposals with respect
thereto or require premature disclosure of information not otherwise required
to be disclosed to the potential detriment of UTI; provided, however, that such
period of sale or distribution shall resume after any such suspension for a
number of days necessary to keep such registration effective for permitted
sales thereunder for a term of 90 days. The filing of a registration
statement, or any amendment or supplement thereto, by UTI may not be deferred,
and the sale and distribution of shares may not be suspended, in each case
pursuant to the foregoing provisions, for more than 60 days after the
abandonment or consummation (or the completion of the distribution of
securities in the case of a public offering) of any of the proposals or
transactions described therein or, in any event, for more than 90 days.
Section 15.2 Piggyback Rights. If, at any time after 90 days
following the Closing Date, UTI proposes to register under the Securities Act
any shares of UTI Common Stock for sale by it pursuant to an underwritten
public offering of the UTI Common Stock (except with respect to registration
statements filed on Form S-4 or such other forms as shall be prescribed under
the Securities Act for the same purposes as such form), it will at each such
time, prior to the filing of any such registration statement, give written
notice to the Shareholders of its intention so to do, regardless of whether the
Shareholders have previously exercised piggyback registration rights or demand
rights as to any other shares of stock held by it, and, upon the written
request (which must specify the number of shares of UTI Common Stock to
participate in such underwritten offering) of the Shareholders delivered to UTI
within five days of receipt of UTI's notice, UTI will use its best efforts to
cause any UTI Shares as to which registration shall have been so requested to
be included in the shares to be covered by the registration statement proposed
to be filed by UTI. Nothing contained in this Section 15.2 shall, however,
limit UTI's right to cancel, postpone or withdraw any such proposed
registration for any reason. Any request by the Shareholders pursuant to this
Section 15.2 to register UTI Shares for sale in the underwriting shall be on
the same terms and conditions as the shares of UTI Common Stock to be
registered and sold through underwriters under such registration; provided,
however, that as a condition
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to such inclusion the Shareholders shall execute an underwriting agreement
acceptable to the underwriters and, if requested, a custody agreement having
such customary terms as the underwriters shall request, including
indemnification, and if the managing underwriter determines and advises in
writing that the inclusion in the underwriting of all UTI Shares proposed to be
included by the Shareholders and any other shares of UTI Common Stock sought to
be registered by any other stockholder of UTI exercising rights comparable to
those of the Shareholders under this Agreement would, in its reasonable and
good faith judgment, interfere with the successful marketing of the securities
proposed to be registered for underwriting by UTI or by any holder of UTI
Common Stock having the right to require UTI to file a registration statement
to register such UTI Common Stock (the "Other Common Stock"), then the number
of UTI Shares and Other Common Stock requested to be included in the
underwriting shall be reduced pro rata among the Shareholders and the holders
of Other Common Stock requesting such registration and inclusion in the
underwriting and may, in the determination of such managing underwriter and
consistent with pro rata reduction, be reduced to zero.
Section 15.3 Procedure. If and whenever UTI is required by the
provisions of this Agreement to use its best efforts to effect the registration
of any UTI Shares under the Securities Act, UTI will, subject to the other
provisions of this Section 14:
(a) as expeditiously as reasonably practicable after
demand therefor, prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement on the appropriate form with
respect to such UTI Shares and seek to cause such registration statement to
become and remain effective;
(b) as expeditiously as reasonably practicable, prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be necessary to keep such registration statement effective and to comply with
the provisions of the Securities Act with respect to the disposition of such
UTI Shares covered by such registration statement in accordance with the
intended method of distribution set forth in such registration statement;
(c) as expeditiously as reasonably practicable, furnish
to the Shareholders such number of copies of prospectuses and preliminary
prospectuses in conformity with the requirements of the Securities Act, and
such other documents as the Shareholders may reasonably request, in order to
facilitate the public sale or other disposition of such UTI Shares; provided,
however, that the obligation of UTI to deliver copies of prospectuses or
preliminary prospectuses to the Shareholders shall be subject to the receipt by
UTI of reasonable assurances from the Shareholders that it will comply with the
applicable provisions of the Securities Act and of such other securities laws
as may be applicable in connection with any use by it of any prospectuses or
preliminary prospectuses;
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(d) as expeditiously as practicable, use its best
efforts to register or qualify UTI Shares covered by such registration
statement under such other securities laws of such United States jurisdictions
as the Shareholders shall reasonably request (considering the nature and size
of the offering) and do any and all other acts and things which may be
necessary or desirable to enable the Shareholders to consummate the public sale
or other disposition in such jurisdictions of UTI Shares; provided, however,
that UTI shall not be required to qualify to transact business as a foreign
corporation in any jurisdiction in which it would otherwise not be required to
be so qualified or to take any action which would subject it to general service
of process in any jurisdiction in which it is not then so subject;
(e) bear all Registration Expenses (as defined below)
in connection with all registrations hereunder; provided, however, that all
Selling Expenses (as defined below) of UTI Shares and all fees and
disbursements of counsel for the Shareholders in connection with each
registration pursuant to this Article 13 shall be borne by the Shareholders.
Expenses incurred by UTI in complying with this Article 15, including, without
limitation: (i) all registration and filing fees; (ii) all printing expenses;
(iii) all fees and disbursements of counsel for UTI; (iv) all blue sky fees and
expenses; and (v) all fees and expenses of accountants for UTI are herein
referred to as "Registration Expenses". All underwriting fees and discounts
and brokerage and selling commissions relating to UTI Shares to be registered
for sale by the Shareholders and fees and expenses of the counsel for the
Shareholders and any underwriter's counsel applicable to the sales by the
Shareholders in connection with any such registration are herein referred to as
"Selling Expenses"; and
(f) keep each registration pursuant to Section 15.1
hereof effective for a period of up to 90 days or such shorter period of time
until the transfer or sale of all UTI Shares so registered has been completed.
Section 15.4 Indemnification.
(a) In the event of a registration of any UTI Shares
under the Securities Act pursuant to this Article 15, UTI will indemnify and
hold harmless the Shareholders and any other Person, if any, who controls the
Shareholders within the meaning of Section 15 of the Securities Act, against
any losses, claims, damages or liabilities, joint or several, to which the
Shareholders or such controlling Person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities or
actions in respect thereof arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained, on the effective
date thereof, in any registration statement under which such UTI Shares were
registered under the Securities Act, any preliminary prospectus distributed
with the consent of UTI or final prospectus contained therein, or any amendment
thereof or supplement thereto, including all documents incorporated by
reference therein, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Shareholders and each such controlling Person for
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any legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that UTI will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, such preliminary prospectus, such final
prospectus or such amendment or supplement, including all documents
incorporated by reference therein, in reliance upon and in conformity with
written information furnished to UTI by or on behalf of the Shareholders or a
controlling Person of the Shareholders specifically for use in the preparation
thereof.
(b) In the event of any registration of any UTI Shares
under the Securities Act pursuant to this Agreement, the Shareholders shall
jointly and severally indemnify and hold harmless UTI and each Person, if any,
who controls UTI within the meaning of Section 15 of the Securities Act, each
officer of UTI who signs the registration statement, each director of UTI and
each underwriter (if any) and each Person who controls any underwriter (if any)
within the meaning of Section 15 of the Securities Act, against any and all
such losses, claims, damages, liabilities or actions which UTI or such officer,
director, underwriter (if any) or controlling Person may become subject under
the Securities Act or otherwise, and will reimburse UTI, each such officer,
director, underwriter (if any) and controlling Person for any legal or any
other expenses reasonably incurred by such party in connection with
investigating or defending any such loss, claim, damage, liability or action,
if (a) such loss, claim, damage, liability or action in respect thereof arises
out of or is based upon any untrue statement or alleged untrue statement of any
material fact contained in any such registration statement or any such
prospectus, or any amendment thereof or supplement thereto, or arises out of or
is based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and any such statement or omission of a material fact was made in
reliance upon and in conformity with written information furnished to UTI by or
on behalf of the Shareholders specifically for use in connection with the
preparation of such registration statement or prospectus or (b) such loss,
claim, damage, liability or action in respect thereof arises out of or is based
upon the Shareholders's failure to deliver any required prospectus or otherwise
comply with applicable laws regarding the same. In connection with any
transaction contemplated by Section 15.2 hereof, the Shareholders also agree to
indemnify each such underwriter and each Person who controls any such
underwriter within the meaning of Section 15 of the Securities Act as may
reasonably and customarily be requested by the underwriters in connection with
any underwritten offering of such UTI Shares.
(c) Promptly after receipt by any indemnified Person of
notice of any claim or commencement of any action in respect of which indemnity
is to be sought against an indemnifying Person pursuant to this Agreement, such
indemnified Person shall notify the indemnifying Person in writing of such
claim or of the commencement of such action, and, subject to provisions
hereinafter stated, in case any such action shall be brought against an
indemnified Person and such indemnifying Person shall
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have been notified of the same, such indemnifying Person shall be entitled to
participate therein, and, to the extent it shall wish, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified Person, and
after notice from the indemnifying Person to such indemnified Person of its
election to assume the defense thereof, such indemnifying Person shall not be
liable to such indemnified Person in connection with the defense thereof;
provided, however, if there exists or will exist a conflict of interest which
would make it inappropriate in the reasonable judgment of the indemnified
Person for the same counsel to represent both the indemnified Person and such
indemnifying Person then such indemnified Person shall be entitled to retain
its own counsel at the expense of such indemnifying Person; provided further,
however, the indemnifying Person shall not be required to pay for more than one
separate counsel for all of the indemnified Persons in addition to any local
counsel.
Section 15.5 Termination. If Rule 144 or Rule 145 as
promulgated under the Securities Act or any successor or similar rule or
statute shall permit the sale of UTI Shares in compliance with the conditions
thereof and the provisions thereof, the rights of the Shareholders as to
registration provided for in this Agreement as to such UTI Shares shall
terminate immediately.
Section 15.6 Shareholder Put Right. So long as the Shareholders
have not made a Demand Request pursuant to Section 15.1, for a period of 30
days following the Demand Date, the Shareholders may on one occasion request
(the "Put Request") that UTI repurchase from the Shareholders up to one-half of
the UTI Shares issued to them pursuant to the Merger at a repurchase price
equal to the Average Sales Price per share of UTI Common Stock. Such request
shall be made by the Shareholders in writing and shall designate the total
number of UTI Shares requested by the Shareholders to be repurchased and be
accompanied by the certificates representing the UTI Shares to be repurchased
endorsed in blank with a gold medallion signature guarantee. The UTI Shares to
be repurchased shall be transferred free and clear of all liens and
encumbrances. UTI shall pay the repurchase price by wire transfer to the
account or accounts designated in the Put Request two business days following
receipt by UTI of the Put Request and all required documents for against
transfer of the applicable UTI Shares to UTI. The Shareholders and UTI agree
to execute and deliver all agreements, certificates or other documents
reasonably requested by the other party in connection with the Shareholders'
exercise of their rights under this Section 15.6.
ARTICLE XVI
MISCELLANEOUS
Section 16.1 Binding Agreement. All the provisions, covenants,
representations, warranties and conditions of this Agreement shall be binding
upon, and inure to the benefit of and be enforceable by, the parties hereto and
their respective successors and assigns. Prior to the Closing Date, no party
hereto may assign any of its interest herein without the written consent of the
other party (which consent will not be unreasonably withheld), provided that
UTI may assign its rights under this
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Agreement to an Affiliate without any requirement for such consent, but such
assignment shall not release UTI of its obligations under this Agreement if
such obligations are not performed by the assignee. After the Closing Date,
except for the rights under Article XV, which may not be assigned, the rights
of each party hereto may be assigned by such party without any requirement for
consent from the other party.
Section 16.2 Notices. All notices, requests, waivers and other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and shall be deemed to have been duly given upon receipt by
personal delivery, messenger delivery, first-class mail or telecopier, at the
addresses set forth below (or at such other address for a party as such party
shall specify by like notice):
--if to the Shareholders
Jim James James Silhan
1310 E. 44th Street P.O. Box 442
Odessa, TX 79762 Kermit, Texas 79745
with copies to: Hollmann, Lyon, Patterson & Durell, Inc.
1205 West University
Odessa, Texas 79764
Attention: Dan Hollmann
Telecopier No.: (915) 337-8479
--if to UTI, to: UTI Energy Corp.
President
Houston, Texas 77060
Attention: Vaughn E. Drum
Telecopier No.: (281) 873-4141
with copies to: Fulbright & Jaworski L.L.P.
1301 McKinney
Houston, Texas 77010
Attention: Curtis W. Huff
Telecopier No.: (713) 651-5246
Section 16.3 Entire Agreement. This Agreement is the entire
agreement between the parties with respect to the subject matter hereof, and
supersedes all prior agreements and understandings, written and oral, among the
parties hereto with respect to the subject matter hereof.
Section 16.4 Expenses. Except as otherwise provided herein,
each party shall be solely responsible for all expenses incurred by it in
connection with this transaction (including, without limitation, fees and
expenses of its own counsel and accountants).
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Section 16.5 Severability. If any term or other provision of
this Agreement is held invalid, illegal or incapable of being enforced under
any rule or law, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in a
materially adverse manner with respect to either party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
Section 16.6 Waivers. The failure of any party at any time to
require performance of any provision hereof shall not affect its right later to
require such performance. No waiver in any one or more instances shall (except
as otherwise stated therein) be deemed to be a further or continuing waiver of
any such condition or breach in other instances or a waiver of any condition or
breach of any other term, covenant, representation or warranty.
Section 16.7 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
Section 16.8 Headings. The headings preceding the text of
articles and sections of this Agreement are for convenience only and are not
part of this Agreement.
Section 16.9 Applicable Law. This Agreement is governed by and
shall be construed and enforced in accordance with the internal laws of the
State of Texas.
Section 16.10 Construction of Agreement. This Agreement
constitutes a negotiated agreement among the parties and the fact that one
party or the other shall have drafted a particular provision or provisions
shall not be material in the construction of any provision. All Exhibits
referred to in the Agreement are a part of the Agreement.
Section 16.11 References to Articles, Sections and Exhibits.
Unless the context otherwise requires, all references herein to Articles,
Section s and Exhibits shall be to the Articles, Sections and Exhibits of and
to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
THE SHAREHOLDERS UTI ENERGY CORP.
/s/ JIM A. JAMES By: /s/ VAUGHN E. DRUM
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Jim A. James Name: Vaughn E. Drum
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Title: President
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/s/ JAMES F. SILHAN J.S.M. & ASSOCIATES, INC.
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James F. Silhan
By: /s/ JIM A. JAMES
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Name: Jim A. James
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Title: President
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J ACQUISITION CORP.
By: /s/ VAUGHN E. DRUM
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Name: Vaughn E. Drum
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Title: President
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