1
EXHIBIT 4.17
UTI ENERGY CORP.
485 Devon Park Drive, Suite 112
Wayne, Pennsylvania 19087
May 15 1997
Four Flags Holding Company
460 N. Gulph Road
King of Prussia, PA 19406
Attention: Mr. Charles L. Ladner, President
Dear Mr. Grady:
This letter confirms our agreement with Four Flags Holding Company
("Four Flags") with respect to the proposed exercise of warrants (the
"Warrants") to purchase shares of Common Stock ("Common Stock") of UTI Energy
Corp., a Delaware corporation ("UTI"), currently held by Four Flags. As you are
aware, the Warrants were issued to Four Flags Drilling Company, Inc., an
affiliate of Four Flags, on December 14, 1993, and provide the holder with the
right to purchase an aggregate of 162,000 shares of Common Stock at an exercise
price per share of $8.00. The Warrants are currently reflected in two
certificates representing the right to purchase 125,000 and 37,000 shares of
Common Stock respectively. Four Flags also holds a promissory note dated
December 15, 1993, from UTI to UGID Holding Company having a current
outstanding principal amount of $1,000,000 plus accrued and unpaid interest of
$30,798.02 as of May 15, 1997 (the "Note").
Four Flags has requested the right to exercise the Warrant to purchase
125,000 shares of Common Stock with the Note. UTI has agreed to accept the Note
as consideration for this exercise on the following terms:
1. Four Flags shall deliver to UTI the Note marked "Canceled",
together with a certificate executed by an executive officer of Four Flags
certifying that (i) the Note is owned by Four Flags free and clear of any liens
and encumbrances or rights of any third party and (ii) upon UTI's acceptance of
the Note and the issuance of 125,000 shares of Common Stock issuable upon the
exercise of the Warrant, UTI shall have no further liability or obligations
with respect to the Note. The outstanding principal amount of the Note shall be
applied against the exercise price of the Warrant to purchase 125,000 shares of
Common Stock.
2. The accrued and unpaid interest on the Note shall be applied
against the exercise price of the Warrant to purchase 37,000 shares of Common
Stock. Four Flags shall deliver to UTI by wire transfer in immediately
available funds an amount of cash equal to the unpaid exercise price of the
Warrant to purchase 37,000 shares of Common Stock not covered by the accrued
and unpaid interest on the Note.
3. Subject to the receipt of an opinion of counsel that the
shares of Common Stock issuable to Four Flags upon exercise of the Warrant to
purchase 125,000 shares of Common Stock with the Note (the "Note Shares") may
be issued without a restrictive legend for
2
Four Flags Holding Company
May 15, 1997
Page 2
purposes of the Securities Act of 1933, as amended (the "Act"), pursuant to
Rule 144(k) under the Act, UTI shall issue to Four Flags the Note Shares.
4. The 37,000 shares of Common Stock issuable to Four Flags upon
exercise of the Warrant to purchase 37,000 shares of Common Stock with cash and
the accrued and unpaid interest on the Note will be considered restricted
shares and will bear a restrictive legend. Four Flags agrees that such shares
will not be transferred, sold or otherwise disposed of by it except in
compliance with all applicable securities laws and that any transfer or
proposed transfer by it will be subject to the Company receiving an acceptable
opinion of counsel that the transfer is exempt from registration under Act, and
any applicable state securities law.
5. Upon the issuance of the shares of Common Stock on exercise of
the Warrants held by Four Flags as provided herein, Four Flags agrees that,
except as provided in this Section 5, it will have no further registration
rights in regard to UTI or the shares acquired by it and that the Warrants will
be deemed fully exercised. Four Flags further agrees that upon such exercise
and receipt of shares, it will have no further rights in or with respect to the
Warrants. UTI hereby grants to Four Flags piggy-back registration rights
relating to shares not sold as contemplated under paragraph 6 below the same as
those granted to Viersen & Cochran Drilling Company ("Viersen") pursuant to
that certain Stock Purchase Agreement dated August 14, 1996, between the
Company and Viersen. UTI further agrees that, subject in all respects to the
rights of Shamrock Holdings of California, Inc. ("Shamrock") pursuant to that
certain Subscription Agreement dated September 19, 1995, between Shamrock and
UTI, and Canpartners Investments IV, LLC ("Canyon") pursuant to that certain
Registration Rights Agreement dated April 11, 1997, between Canyon and UTI,
Four Flags will be entitled to include, on a substantially similar basis as
Canyon and Shamrock, shares acquired upon exercise of the Warrants for sale
pursuant to the same plan of distribution in a registration of shares of Common
Stock by Remy Capital Partners III, L.P. ("Remy") pursuant to the exercise by
Remy of its demand rights under that certain Registration Rights Agreement
dated March 25, 1994, between Remy (as successor-in-interest by assignment to
Bear, Stearns & Co., Inc.) and UTI.
6. Four Flags has advised UTI that it currently intends to sell
100,000 of the Note Shares in a transaction to be effected through Johnson Rice
& Company L.L.C. ("J&R") to its designee immediately following Four Flag's
exercise of the Warrants. Four Flags further agrees that the remaining Note
Shares not sold through J&R pursuant to the preceding sentence will not be
transferred, sold or otherwise disposed of prior to August 1, 1997, and in the
event the 100,000 Note Shares contemplated to be sold through J&R are not
actually sold due to non-performance by J&R, then Four Flags agrees that such
100,000 Note Shares will not be sold by Four Flags prior to July 1, 1997. In
connection with such sales, UTI agrees, at the request of Four Flags, to
authorize its transfer agent to issue without restrictive legend up to 100,000
of the Note Shares to such person or persons as may be requested by Four Flags
in writing.
7. Four Flags agrees that prior to August 1, 1997, it will not
transfer, sell or otherwise dispose of more than 100,000 of the Note Shares.
Four Flags further agrees that, except for the sale of the 100,000 Note Shares
as contemplated in paragraph 6 above, it will
3
Four Flags Holding Company
May 15, 1997
Page 3
not, without the prior written consent of UTI, sell more than 12,500 shares
during any calendar month.
8. Four Flags further agrees that, except for the certificates
representing the 100,000 Note Shares, UTI may place stop transfer instructions
with its transfer agent in regard to sales by Four Flags in excess of 12,500
shares per month and that the certificates representing such shares may contain
a restrictive legend to the effect that a sale or disposition of those shares
is subject to the terms of this agreement. UTI agrees to promptly remove such
restrictive legend and permit the sale of the shares of Common Stock held by
Four Flags to the extent that such sales are made in compliance with this
Agreement, and in this regard, agrees that on August 1, 1997, it will remove
the restrictive legend relating to this Agreement on certificates representing
12,500 shares. In addition, UTI agrees that on the first business day of each
month following August 1, 1997, so long as Four Flags still holds shares of
Common Stock issued upon exercise of the Warrants, UTI will cause the
restrictive legend relating to this Agreement to be removed so that Four Flags
holds on such date certificates without the restrictive legend relating to this
Agreement representing 12,500 shares of Common Stock (or such lesser number in
the event Four Flags then owns less than 12,500 shares of Common Stock).
9. The parties agree that the rights of Four Flags under this
Agreement are assignable to an affiliate of Four Flags so long as such rights
do not adversely impact the rights of UTI hereunder.
If the foregoing accurately reflects your understanding with respect
to these matters, please execute the enclosed copy of this letter and return it
to me.
Very truly yours,
UTI ENERGY CORP.
By /s/ Mark S. Siegel
------------------------------
Name: Mark S.Siegel
Title: Chairman of the Board
4
Four Flags Holding Company
May 15, 1997
Page 4
ACCEPTED AND AGREED TO:
FOUR FLAGS HOLDING COMPANY
By /s/ Charles L. Ladner
-------------------------
Name: Charles L. Ladner
----------------------
Title: President
---------------------
Date: 5/15/97
----------------------