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EXHIBIT 10.3
AMENDED AND RESTATED
SUBORDINATION AGREEMENT
THIS AMENDED AND RESTATED SUBORDINATION AGREEMENT (this
"AGREEMENT") is made effective as of the 19th day of June, 1998, by and among
FWA DRILLING COMPANY, INC. ("FWA"), INTERNATIONAL PETROLEUM SERVICE COMPANY
("IPSCO"), TRIAD DRILLING COMPANY ("TRIAD"), UNIVERSAL WELL SERVICES, INC.
("UNIVERSAL"), USC, INCORPORATED, ("USC"), UTI ENERGY CORP. ("UTI"), UTICO,
INC. ("UTICO"), PANTHER DRILLING, INC. FORMERLY KNOWN AS VIERSEN & COCHRAN
DRILLING COMPANY ("PANTHER") J.S.M. & ASSOCIATES, INC. ("JSM") AND PETERSON
DRILLING COMPANY ("PETERSON") AND MELLON BANK, N.A. ("BANK"). FWA, IPSCO,
Triad, Universal, USC, Panther and Peterson are hereinafter sometimes
collectively referred to as the "BORROWERS" and individually as a "BORROWER".
UTI and UTICO are hereinafter sometimes collectively referred to as the
"GUARANTORS" and individually as a "GUARANTOR". The Borrowers and the
Guarantors are hereinafter sometimes collectively referred to as the "OBLIGORS"
and individually as an "OBLIGOR".
BACKGROUND
A. Each Obligor is or may become indebted to another Obligor. Each
Obligor is interested in the welfare of the other Obligors and will
benefit if Bank extends or maintains credit to Borrowers.
B. Borrowers have requested that Bank extend and maintain credit to
Borrowers. Bank is willing to do so provided this Agreement is
executed.
C. Obligors and Bank are parties to that certain Amended and Restated
Loan and Security Agreement dated April 11, 1997, as amended (the
"PRIOR LOAN AGREEMENT").
D. Obligors and Bank are parties to that certain Amended and Restated
Loan and Security Agreement of even date herewith (the "LOAN
AGREEMENT"). The Prior Loan Agreement and the Loan Agreement may
hereinafter be collectively referred to as the "Loan Agreements".
NOW, THEREFORE, the parties hereto, as an inducement for Bank
to extend and maintain credit to Borrowers, and with the understanding that
Bank is relying upon the provisions of this Agreement and intending to be
legally bound hereby, agree as follows:
1. DEFINITIONS. Capitalized terms used but not
otherwise defined herein shall have the meanings set forth therefor in the Loan
Agreement. The following words and phrases as used in capitalized form in this
Agreement, whether in singular or plural, shall have the meanings indicated:
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1.1 "SENIOR DEBT" shall mean all liabilities and
obligations of any nature, whether primary,
secondary, absolute, contingent, sole, joint, several
or joint and several, and all interest thereon and
all fees, costs and expenses (including attorney's
fees and legal expenses) related thereto, now or at
any time or times hereafter existing, contracted or
incurred, of or by any Obligor to Bank, including
without limitation, the obligations of Obligors with
respect to that certain $30,000,000 line of credit
from Bank to Borrowers and all other sums payable
under the Loan Agreement as it may be amended,
modified or supplemented and all Loan Documents as
defined therein and all other sums payable under the
Loan Agreement as it may be amended, modified or
supplemented and all Loan Documents as defined
therein, and all increases, decreases, extensions,
amendments, replacements and renewals of any of such
liabilities and obligations. Without limiting the
foregoing, Bank shall have the option to make
advances and provide financing in the future to any
Obligor or to a receiver, trustee or other fiduciary
appointed by a court in any insolvency or court
proceeding for any Obligor or to any Obligor as a
debtor-in-possession. Obligors consent to the
financing of any Obligor or such fiduciary or
debtor-in-possession after any such insolvency or
court proceeding and agree that such financing shall
be included within the Senior Debt and the
subordination and other restrictions and provisions
of this Agreement shall be applicable thereto.
1.2 "SUBORDINATED DEBT" shall mean all liabilities and
obligations of any nature, whether primary,
secondary, absolute, contingent, sole, joint, several
or joint and several, and all interest thereon and
all fees, costs and expenses (including attorney's
fees and legal expenses) related thereto, now or at
any time or times hereafter existing, contracted or
incurred, of any one Obligor to another Obligor.
2. SUBORDINATION.
2.1 Each Obligor subordinates all Subordinated Debt and
all claims and demands arising therefrom to all the
Senior Debt. Each Obligor agrees that all of the
Senior Debt shall be paid before such Obligor shall
be paid anything (of any kind or character) on
account of the principal of or interest on any
Subordinated Debt or any other sums payable in
connection therewith. Until all of the Senior Debt
is paid, performed and complied with in full and this
Agreement is terminated, no Obligor will make, demand
or accept, either directly or indirectly, payment (of
any kind or character) of all or any part of the
Subordinated Debt without the prior written consent
of Bank. The Senior Debt shall not be deemed to have
been paid, performed or complied with in full unless
the Bank has unconditionally and irrevocably received
payment of the Senior Debt and this Agreement has
been terminated.
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2.2 Notwithstanding the foregoing, Obligors may make
payments on the Subordinated Debt, provided that, (a)
no Event of Default, or event which, with the giving
of notice, passage of time or both, would constitute
an Event of Default with respect to the Senior Debt
or any documents executed in connection therewith,
has occurred; and (b) such payment would not result
in such an Event of Default.
2.3 The right of Bank to enforce the subordination
provisions and any other provisions hereof shall not
in any way be prejudiced or impaired by any act or
failure to act on the part of Bank or Obligors, or by
any noncompliance by Obligors with the terms,
provisions and covenants of this Agreement.
3. IN FURTHERANCE OF SUBORDINATION.
3.1 Each Obligor assigns to Bank its interest in all
Subordinated Debt and all security and guaranties
therefor as security for the payment of the Senior
Debt. Bank will be under no duty to take any action
with respect to the preservation of rights in any
such collateral or guaranties or against any parties
thereto or any other person, or to make any demand or
give any notice, or to take any other action with
respect thereto other than to exercise reasonable
care in the physical custody thereof.
3.2 Upon any distribution of any of the assets of any
Obligor, any guarantor of any of the Subordinated
Debt or any collateral securing the Subordinated
Debt, upon or in connection with any dissolution,
winding up, liquidation, arrangement or
reorganization of any Obligor, any guarantor of any
of the Subordinated Debt or any other person or
entity, or upon any assignment for the benefit of
creditors or any other marshalling of the assets
and/or liabilities of any Obligor or any guarantor of
any of the Subordinated Debt, any payment, dividend
or distribution of any kind (whether in cash,
securities or other property) which would otherwise
be payable or deliverable with respect to the
Subordinated Debt, shall be paid or delivered
directly to Bank for application (in the case of
cash) to or as collateral (in the case of securities
or other property) for the Senior Debt.
3.3 If any proceeding described in SUBSECTION 3.2 is
commenced, Bank is irrevocably authorized (in its own
name or in the name of any Obligor or otherwise), but
shall have no obligation, to demand, sue for, collect
and receive all such payments, dividends and
distributions referred to in subsection 3.2, give
acquittances therefor, file claims, proofs of claim
and take such other actions (including without
limitation, voting the Subordinated Debt) as it may
deem necessary or advisable. Bank is granted a power
of attorney by each
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Obligor with full power of substitution to execute
and file such documentation and take any other action
Bank may deem advisable to accomplish the foregoing,
and to protect Bank's interest in the Subordinated
Debt and its right of enforcement thereof. Such power
being coupled with an interest is irrevocable.
4. LIMITATIONS ON CREDITOR'S RIGHTS. Without the prior
written consent of Bank, each Obligor agrees that it will not: (a) institute
any court proceedings against any Obligor to collect any Subordinated Debt, or
(b) exercise any right or remedy against any Obligor or its assets.
5. PAYMENTS HELD IN TRUST. In the event that any
Obligor receives any dividend, distribution or payment referred to in SECTION
3, or receives any payment (of any kind or character) of any Subordinated Debt
or security therefor in violation of this Agreement, such Obligor will (a) not
credit such payments against the Subordinated Debt, (b) notify Bank immediately
thereof, and (c) receive the same in trust for Bank and will immediately pay
and deliver the same to Bank in precisely the form received, except for any
requisite endorsement or assignment, which such Obligor will make and
authorizes Bank or any of its officers or employees to make in the event that
such Obligor does not make the same. Bank will apply any such moneys so
received by it in reduction of the Senior Debt and will hold any property other
than money so received by it as collateral security therefor.
6. BANK'S RIGHTS. Without affecting or releasing any
obligation or agreement of any Obligor under this Agreement or the
subordination provided herein, Bank may at any time or times consent or agree
to any of the following with respect to any of the Senior Debt: (a) amend,
modify, alter or waive any of the terms thereof or any of the documents
executed in connection therewith, (b) renew or extend the time for payment of
all or any part thereof, (c) increase or decrease the amount thereof, (d)
accept collateral security or guaranties therefor and sell, exchange, fail to
perfect, release or otherwise deal with all or any part of any such collateral
or guaranties, (e) release any party primarily or secondarily obligated
thereon, (f) grant indulgences and take or refrain from taking any action with
regard to the collection or enforcement thereof, and (g) take any action which
might otherwise constitute a defense to or a discharge of any Obligor. Nothing
contained in this Agreement shall impair any right of Bank with respect to any
of the Senior Debt or any collateral security or guaranties therefor or the
proceeds thereof.
7. TERMINATION. This Agreement will continue in full
force and effect as long as any Senior Debt remains outstanding, and
thereafter, even if there is no longer any Senior Debt remaining unpaid, so
long as Bank has any agreement or understanding with Borrower pursuant to which
Bank may extend credit to any Obligor. To the extent any payment or payments of
any Senior Debt or any Subordinated Debt received by Bank are subsequently
invalidated, declared to be fraudulent or preferential, set aside or are
required to be repaid to a trustee, receiver or other person or entity under
any bankruptcy act, state or federal law, common law or equitable cause, then
this Agreement will be revived and continue in full force and effect. This
Agreement may not be terminated except by an instrument in writing signed by
the Bank.
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8. RELEASES. Bank may release any one or more parties
hereto, or the successors or assigns thereof, from any or all obligations
hereunder, and such release, or any release by operation of law, shall not
release any other party hereto from, nor in any way affect, any of the
obligations of any other party under this Agreement, or affect the
subordination of any of the Subordinated Debt to the Senior Debt.
9. NOTICES. All notices, requests and other
communications made or given in connection with this Agreement shall be given
in the manner set forth in the Loan Agreement.
10. DELAY OR OMISSION NOT WAIVER. Neither the failure
nor any delay on the part of Bank to exercise any right, remedy, power or
privilege hereunder shall operate as a waiver thereof or impair any such right,
remedy, power or privilege. No single, partial or full exercise of any rights,
remedies, powers and privileges by Bank shall preclude further or other
exercise thereof. No course of dealing between Bank and any Obligor shall
operate as or be deemed to constitute a waiver of Bank's rights hereunder or
affect the duties or obligations of any Obligor.
11. MISCELLANEOUS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective permitted
successors and assigns. If any party hereto is a partnership, all provisions
of this Agreement applicable to such party shall be binding upon and include
not only the partnership but each and all of the partners thereof individually.
This Agreement may not be modified except in writing executed by the party
against whom enforcement of such modification is sought. The rights granted to
Bank hereby shall be in addition to any other rights of Bank under any other
subordination agreement, if any, now or hereafter outstanding. All rights and
remedies of Bank shall be cumulative.
12. GOVERNING LAW. This Agreement shall be governed by
and construed according to the laws of the Commonwealth of Pennsylvania.
13. SEVERABILITY. If any provision herein stall for any
reason be held invalid or unenforceable, no other provision shall be affected
thereby, and this Agreement shall be construed as if the invalid or
unenforceable provision had never been a part of it.
14. ENTIRE AGREEMENT. This instrument embodies the entire
agreement of the parties hereto with respect to the subject matter hereof, and
there are no courses of dealing, usages of trade, or other representations,
promises, terms or conditions referring to such subject matter, and no
inducements or representations leading to the execution hereof other than as
mentioned herein.
15. PRIOR SUBORDINATION AGREEMENT. This Agreement amends,
restates and supersedes the terms of that certain Amended and Restated
Subordination Agreement dated April 11, 1997 among the Obligors (other than
Viersen) and Bank.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, intending to be legally bound hereby, effective as of the day and
year first above written.
FWA DRILLING COMPANY, INC.
By: /s/ P. Blake Dupuis
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P. Blake Dupuis, Vice President
(CORPORATE SEAL)
INTERNATIONAL PETROLEUM
SERVICE COMPANY
By: /s/ P. Blake Dupuis
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P. Blake Dupuis, Vice President
(CORPORATE SEAL)
TRIAD DRILLING COMPANY
By: /s/ P. Blake Dupuis
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P. Blake Dupuis, Vice President
(CORPORATE SEAL)
UNIVERSAL WELL SERVICES, INC.
By: /s/ P. Blake Dupuis
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P. Blake Dupuis, Vice President
(CORPORATE SEAL)
USC, INCORPORATED
By: /s/ P. Blake Dupuis
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P. Blake Dupuis, Vice President
(CORPORATE SEAL)
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UTI ENERGY CORP.
By: /s/ P. Blake Dupuis
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P. Blake Dupuis, Vice President
(CORPORATE SEAL)
UTICO, INC.
By: /s/ P. Blake Dupuis
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P. Blake Dupuis, Vice President
(CORPORATE SEAL)
PANTHER DRILLING, INC.,
FORMERLY KNOWN AS
VIERSEN & COCHRAN
DRILLING COMPANY
By: /s/ P. Blake Dupuis
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P. Blake Dupuis, Vice President
(CORPORATE SEAL)
J.S.M. & ASSOCIATES, INC.
By: /s/ P. Blake Dupuis
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P. Blake Dupuis, Vice President
(CORPORATE SEAL)
PETERSON DRILLING COMPANY
By: /s/ P. Blake Dupuis
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P. Blake Dupuis, Vice President
(CORPORATE SEAL) MELLON BANK, N.A.
/s/ Stephen Wilus
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By: Stephen Wilus
Name/Title: Vice President