-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HFlcAKd+dF9dIaBkQNYSDNlwA0/F/ku8O2bOH/SbIrIL6Qt3xUt2MPioyTzlsam9 4aSoPft/89NNo75sWVU8LA== 0000950134-01-504534.txt : 20010802 0000950134-01-504534.hdr.sgml : 20010802 ACCESSION NUMBER: 0000950134-01-504534 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010801 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PATTERSON UTI ENERGY INC CENTRAL INDEX KEY: 0000889900 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 752504748 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22664 FILM NUMBER: 1695154 BUSINESS ADDRESS: STREET 1: 4510 LAMESA HWY STREET 2: P O DRAWER 1416 CITY: SNYDER STATE: TX ZIP: 79549 BUSINESS PHONE: 9155731104 MAIL ADDRESS: STREET 1: P O DRAWER 1416 CITY: SNYDER STATE: TX ZIP: 79550 FORMER COMPANY: FORMER CONFORMED NAME: PATTERSON ENERGY INC DATE OF NAME CHANGE: 19940228 10-Q 1 d89352e10-q.txt FORM 10-Q FOR QUARTER ENDED JUNE 30, 2001 1 - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission file number 0-22664 PATTERSON-UTI ENERGY, INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of 75-2504748 incorporation or organization) (I.R.S. Employer Identification No.) P. O. BOX 1416, 4510 LAMESA HIGHWAY, SNYDER, TEXAS, 79550 (Address of principal executive offices) (Zip Code) (915) 573-1104 (Registrant's telephone number, including area code) Patterson Energy, Inc. (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of July 23, 2001 the issuer had 76,242,316 outstanding shares of common stock, $0.01 par value, its only class of voting stock. - -------------------------------------------------------------------------------- 2 PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES INDEX
PAGE Part I - Financial Information Item 1. Financial Statements Unaudited condensed consolidated balance sheets............................ 3 Unaudited condensed consolidated statements of income...................... 4 Unaudited condensed consolidated statement of stockholders' equity......... 5 Unaudited condensed consolidated statements of cash flows.................. 6 Notes to unaudited condensed consolidated financial statements............. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................................... 13 Item 3. Quantitative and Qualitative Disclosures About Market Risk................. 16 Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995............................................. 17 Part II - Other Information Item 4. Submission of Matters to a Vote of Security Holders........................ 18 Item 6. Exhibits and Reports on Form 8-K........................................... 19 Signatures............................................................................... 23
2 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS THE FOLLOWING UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INCLUDE ALL ADJUSTMENTS WHICH IN THE OPINION OF MANAGEMENT ARE NECESSARY IN ORDER TO MAKE SUCH FINANCIAL STATEMENTS NOT MISLEADING. PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
JUNE 30, DECEMBER 31, 2001 2000 --------- ------------ ASSETS (IN THOUSANDS, EXCEPT SHARE DATA) Current assets: Cash and cash equivalents ................................................................. $ 26,015 $ 66,916 Accounts receivable, less allowance for doubtful accounts of $4,041 at June 30, 2001 and $3,462 at December 31, 2000 .................................................. 195,150 136,894 Federal income taxes receivable ........................................................... -- 2,447 Inventory ................................................................................. 14,333 12,953 Deferred income taxes ..................................................................... 10,024 11,090 Other ..................................................................................... 5,713 7,442 --------- --------- Total current assets .................................................................. 251,235 237,742 Property and equipment, at cost, net .......................................................... 546,239 442,559 Intangible assets, net ........................................................................ 54,224 56,374 Other ......................................................................................... 3,168 3,223 --------- --------- Total assets .......................................................................... $ 854,866 $ 739,898 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of notes payable ....................................................... $ -- $ 4,477 Accounts payable: Trade .................................................................................. 73,365 69,829 Other .................................................................................. 5,314 10,119 Federal income taxes payable .............................................................. 25,273 1,331 Accrued expenses .......................................................................... 41,600 24,687 --------- --------- Total current liabilities ............................................................. 145,552 110,443 Deferred income taxes, net .................................................................... 93,029 71,899 Other ......................................................................................... 602 1,318 Notes payable, net of current maturities ...................................................... 20,000 74,939 --------- --------- Total liabilities ..................................................................... 259,183 258,599 --------- --------- Commitments and contingencies ................................................................. -- -- Stockholders' equity: Preferred stock par value $.01; authorized 1,000,000 shares, no shares issued ............. -- -- Common stock, par value $.01; authorized 200,000,000 shares with 77,745,964 and and 76,249,642 issued and 76,239,416 and 74,743,094 outstanding at June 30, 2001 and December 31, 2000, respectively .................................... 777 763 Additional paid-in capital ................................................................ 427,136 397,489 Retained earnings ......................................................................... 179,749 94,672 Accumulated other comprehensive income .................................................... (324) 30 Treasury stock, at cost, 1,506,548 shares ................................................. (11,655) (11,655) --------- --------- Total stockholders' equity ............................................................ 595,683 481,299 --------- --------- Total liabilities and stockholders' equity ............................................ $ 854,866 $ 739,898 ========= =========
- -------------------------------------------------------------------------------- The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 4 PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - --------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------------- ---------------------- 2001 2000 2001 2000 --------- --------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Operating revenues: Drilling ............................................ $ 247,173 $ 110,984 $ 453,232 $ 211,937 Drilling and completion fluids ...................... 27,516 5,109 47,186 9,474 Pressure pumping .................................... 8,750 3,562 16,087 7,742 Other ............................................... 4,125 3,684 9,645 6,777 --------- --------- --------- --------- 287,564 123,339 526,150 235,930 --------- --------- --------- --------- Operating costs and expenses: Drilling ............................................ 137,724 86,219 267,921 168,615 Drilling and completion fluids ...................... 23,210 3,987 39,575 7,534 Pressure pumping .................................... 4,755 2,549 9,150 5,287 Depreciation, depletion and amortization ............ 19,381 15,101 38,701 29,449 General and administrative .......................... 8,757 4,963 16,819 9,940 Merger costs ........................................ 5,943 -- 5,943 -- Restructuring and other charges ..................... 7,202 -- 7,202 -- Other ............................................... 1,343 743 2,430 1,421 --------- --------- --------- --------- 208,315 113,562 387,741 222,246 --------- --------- --------- --------- Operating income ........................................ 79,249 9,777 138,409 13,684 --------- --------- --------- --------- Other income (expense): Interest income ..................................... 665 258 1,516 516 Interest expense .................................... (1,192) (2,989) (2,722) (5,390) Other ............................................... 63 81 131 97 --------- --------- --------- --------- (464) (2,650) (1,075) (4,777) --------- --------- --------- --------- Income before income taxes .............................. 78,785 7,127 137,334 8,907 --------- --------- --------- --------- Income tax expense (benefit): Current ............................................. 21,388 (74) 36,429 1,436 Deferred ............................................ 8,931 2,574 15,828 1,753 --------- --------- --------- --------- 30,319 2,500 52,257 3,189 --------- --------- --------- --------- Net income .............................................. $ 48,466 $ 4,627 $ 85,077 $ 5,718 ========= ========= ========= ========= Net income per common share: Basic ............................................... $ 0.63 $ 0.07 $ 1.12 $ 0.08 ========= ========= ========= ========= Diluted ............................................. $ 0.61 $ 0.06 $ 1.07 $ 0.08 ========= ========= ========= ========= Weighted average number of common shares outstanding: Basic ............................................... 76,350 69,898 76,123 69,754 ========= ========= ========= ========= Diluted ............................................. 79,152 73,147 79,158 73,487 ========= ========= ========= =========
- -------------------------------------------------------------------------------- The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 5 PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) (in thousands) - --------------------------------------------------------------------------------
Common Stock Accumulated --------------------- Additional Other Number paid-in Retained Comprehensive Treasury of Shares Amount capital earnings Income Stock Total --------- --------- ---------- -------- ------------- --------- --------- Balance, December 31, 2000 ............ 76,250 $ 763 $ 397,489 $ 94,672 $ 30 $ (11,655) $ 481,299 Issuance of common stock .............. 810 8 21,712 -- -- -- 21,720 Exercise of stock options ............. 565 5 3,000 -- -- -- 3,005 Exercise of warrants .................. 121 1 1,819 -- -- -- 1,820 Tax benefit related to exercise of stock options ..................... -- -- 3,116 -- -- -- 3,116 Foreign currency translation .......... -- -- -- -- (354) -- (354) Net income ............................ -- -- -- 85,077 -- -- 85,077 --------- --------- ---------- -------- ------------- --------- --------- Balance, June 30, 2001 ................ 77,746 $ 777 $ 427,136 $179,749 $ (324) $ (11,655) $ 595,683 ========= ========= ========== ======== ============= ========= =========
- -------------------------------------------------------------------------------- The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 6 PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, ---------------------- 2001 2000 --------- --------- Cash flows from operating activities: Net income ........................................................................... $ 85,077 $ 5,718 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization ............................................. 38,701 29,449 Net (gain) loss on sale of assets .................................................... 905 (346) Amortization of debt discount ........................................................ -- 238 Abandonments ......................................................................... 411 -- Deferred income tax expense .......................................................... 16,626 1,753 Change in operating assets and liabilities: Increase in trade accounts receivable ................................... (52,395) (16,624) (Increase) decrease in inventory ........................................ (1,380) 301 Decrease in accrued federal income taxes receivable ..................... 2,447 -- Decrease in other current assets ........................................ 2,597 1 Increase (decrease) in trade accounts payable ........................... (3,268) 7,570 Increase in accrued expenses ............................................ 18,404 2,697 Increase in federal income taxes payable ................................ 23,942 120 Increase (decrease) in other liabilities ................................ (715) 186 Increase (decrease) in other current payables ........................... (4,805) 836 --------- --------- Net cash provided by operating activities ........................... 126,547 31,899 --------- --------- Cash flows from investing activities: Acquisitions ......................................................................... (27,045) (35,232) Purchases of property and equipment .................................................. (86,429) (35,476) Proceeds from sales of property and equipment ........................................ 816 773 Change in other assets ............................................................... (143) (320) --------- --------- Net cash used in investing activities ............................... (112,801) (70,255) --------- --------- Cash flows from financing activities: Purchase of treasury stock ........................................................... -- (1,650) Proceeds from notes payable .......................................................... 9,760 34,225 Payments of notes payable ............................................................ (69,177) (1,750) Proceeds from exercise of stock options and warrants ................................. 4,825 2,888 --------- --------- Net cash provided by (used in) financing activities ................. (54,592) 33,713 --------- --------- Net decrease in cash and cash equivalents ........................... (40,846) (4,643) Foreign currency translation adjustment ............................. (55) (227) Cash and cash equivalents at beginning of period .......................................... 66,916 16,339 --------- --------- Cash and cash equivalents at end of period ................................................ $ 26,015 $ 11,469 ========= ========= Supplemental disclosure of cash flow information: Net cash paid during the period for: Interest ....................................................................... $ 3,247 $ 3,149 Income taxes ................................................................... $ 7,150 $ 69
- -------------------------------------------------------------------------------- On January 5, 2001, the Company issued 810,070 shares of its common stock valued at $26.8125 per share and paid approximately $11.3 million cash as consideration for Jones Drilling Corporation and certain assets of three other entities affiliated with Jones Drilling Corporation. The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 7 PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF CONSOLIDATION AND PRESENTATION On May 8, 2001, the merger between Patterson Energy, Inc. and UTI Energy Corp. ("UTI") was consummated by vote of the stockholders of each of the companies. The merger was treated as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and was accounted for as a pooling of interests for financial accounting purposes. Accordingly, historical financial statements as presented herein, have been restated to provide for the retroactive effect of the merger. As a part of the merger, the name of Patterson Energy, Inc. was changed to "Patterson-UTI Energy, Inc." (see Note 2). The consolidated financial statements include the accounts of Patterson-UTI Energy, Inc. ("Patterson-UTI") and its wholly-owned subsidiaries, (collectively referred to herein as "Patterson-UTI" or the "Company"). All significant intercompany accounts and transactions have been eliminated. The interim condensed consolidated financial statements have been prepared by management of the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations, although the Company believes the disclosures included herein are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for presentation of the information have been included. The unaudited condensed consolidated balance sheet as of December 31, 2000, as presented herein, was derived from the audited balance sheets of the Company and UTI, but does not include all disclosures required by generally accepted accounting principles. The U.S. dollar is the functional currency for all of the Company's operations except for its Canadian operations which uses the Canadian dollar as functional currency. The effects of exchange rate changes are reflected as a separate component of stockholders' equity. The Company provides a dual presentation of its earnings per share; Basic Earnings per Share ("Basic EPS") and Diluted Earnings per Share ("Diluted EPS"). Basic EPS is based on the weighted average number of shares outstanding during the periods presented. Diluted EPS includes common stock equivalents, which are dilutive to earnings per share. For the three and six-month periods ended June 30, 2001, the dilutive securities, consisting of certain stock options and warrants, were approximately 2.8 million and 3.0 million, respectively, compared to dilutive securities of approximately 3.2 million and 3.7 million for the three and six month periods ended June 30, 2000, respectively. The results of operations for the three and six months ended June 30, 2001, are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made to the 2000 consolidated financial statements in order for them to conform with the 2001 presentation. 7 8 PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED 2. RECENT ACQUISITIONS AND UTI MERGER Acquisitions On January 5, 2001, the Company consummated the transactions contemplated by certain agreements among the Company and Jones Drilling Corporation, Henderson Welding, Inc., L.E.J. Truck and Crane, Inc., and L.E. Jones Drilling Company (collectively the "Jones Entities"). The acquired assets consisted of 21 drilling rigs (of which 14 were marketable when acquired) and related equipment and approximately $2.3 million of net working capital. The net purchase price of $33.2 million consisted of 810,070 shares of the Company's common stock valued at $26.8125 per share and $11.3 million cash plus approximately $240,000 in transaction costs. The pro forma results of combining the consolidated results of operations as if the Jones Entities had been acquired on January 1, 2000, are considered immaterial and have no effect on earnings per share. In January 2001, the Company acquired six drilling rigs, through three separate transactions, for approximately $15.7 million in cash. The above acquisitions were accounted for as purchases and the related results of operations and cash flows have been included in the condensed consolidated financial statements since the respective dates of acquisition. No goodwill was recorded in connection with these acquisitions. UTI Merger On February 4, 2001, Patterson Energy, Inc. entered into an Agreement and Plan of Merger with UTI providing for the merger of the two entities, with Patterson Energy, Inc. as the surviving company. On May 8, 2001, the stockholders of each company approved the merger. Each outstanding share of UTI common stock was converted into one share of Patterson-UTI common stock and each option or warrant then outstanding representing the right to receive UTI common stock was converted into the right to purchase Patterson-UTI common stock on an equivalent basis. A total of 37,782,135 shares of Patterson-UTI common stock was issued pursuant to the merger and an additional 3,621,079 shares were reserved for issuance under the then outstanding UTI stock options. Additionally the stockholders of Patterson-UTI approved an increase in the Company's authorized shares of common stock from 50 million to 200 million and a name change to "Patterson-UTI Energy, Inc." following consummation of the merger. The Company incurred $13.1 million in expenses related to the merger. Such expenses consisted of $5.9 million in merger costs which were primarily related to professional fees paid to investment banking firms, attorneys, accountants, and commercial printers for their professional services rendered and $7.2 million in restructuring costs and other related charges incurred as a result of the following: o severance costs and related expenses of $2.8 million, o closing of duplicate operational facilities of $1.6 million, o costs of $1.0 million incurred for repaying the Company's credit facility (see Note 6), o fees and expenses related to the transfer of licenses and leaseholds, and in some instances the impairment of such leaseholds, the combination or cancellation of various service contracts and the renegotiation of certain insurance policies of $1.8 million. The merger was treated as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and was accounted for as a pooling of interests for financial accounting purposes. The consolidated financial statements give retroactive effect to the merger, which includes combining the companies' previous historical consolidated financial statements as of December 31, 2000 and for the three and six-month periods ended June 30, 2000. Certain immaterial adjustments were made in those periods to conform the previous accounting policies of UTI with those of Patterson-UTI. 8 9 PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED 3. STOCKHOLDERS' EQUITY As a part of the merger with UTI, the Company's stockholders approved the merger and an amendment to the Company's Charter increasing the number of authorized shares of the Company's common stock to 200 million (see Note 2). On May 7, 2001, warrants to purchase 121,250 shares of UTI's common stock were exercised. The exercise price ranged from $13.25 to $17.50. The $1.8 million in proceeds resulting from the exercise was used as partial payment of notes payable owed to the same parties (see Note 6). In January 2001, the Company issued 810,070 shares of its common stock as partial consideration for the acquisition of Jones Drilling Corporation and its related entities (see Note 2). The common stock was recorded at $26.8125 per share, its fair market value on the date of the announcement of the transaction. 4. OTHER COMPREHENSIVE INCOME (LOSS) The following table illustrates the foreign currency translation adjustment for the three and six months ended June 30, 2001 and 2000 (unaudited, in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------- -------------------- 2001 2000 2001 2000 -------- -------- -------- -------- Net income .................................. $ 48,466 $ 4,627 $ 85,077 $ 5,718 Other comprehensive income (loss): Foreign currency translation adjustment ..... 1,268 249 (354) 249 -------- -------- -------- -------- Comprehensive income ........................ $ 49,734 $ 4,876 $ 84,723 $ 5,967 ======== ======== ======== ========
5 PRO FORMA FINANCIAL INFORMATION The following includes selected unaudited pro forma combined financial information (in thousands) as of June 30, 2000 and for the three and six month periods then ended to give effect to the merger of Patterson-UTI and UTI using the pooling of interests method of accounting at the exchange ratio of one share of Patterson-UTI common stock for each share of UTI common stock.
THREE MONTHS SIX MONTHS ENDED ENDED JUNE 30, 2000 JUNE 30, 2000 ------------- ------------- Patterson revenues ......... $ 67,139 $ 125,705 UTI revenues ............... 55,585 109,858 Adjustments ................ 615 367 ------------- ------------- Patterson-UTI revenues ..... $ 123,339 $ 235,930 ============= ============= Patterson net income ....... $ 3,808 $ 4,719 UTI net income ............. 745 1,049 Adjustments ................ 74 (50) ------------- ------------- Patterson-UTI net income.... $ 4,627 $ 5,718 ============= =============
The adjustments above were made to conform the accounting methods of Patterson-UTI and UTI to adjust for certain differences between the two companies' relative methods of accounting for the recognition of revenue under turnkey drilling contract arrangements. Patterson-UTI applies the completed contract method to turnkey drilling contracts which requires revenue and costs associated with drilling the well to be deferred until drilling is complete. UTI accounts for its turnkey arrangements using the percentage-of-completion method in which revenue is recognized as costs are incurred relative to the expected total cost of drilling the well. 9 10 PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED 6. NOTES PAYABLE During the quarter ended June 30, 2001, the Company repaid, prior to their scheduled maturities, $69.2 million under its existing credit facilities and other term obligations. The Company incurred expense of $448,000 as a result of prepayment penalties and $587,000 related to deferred financing costs which were unamortized at the time the debt was extinguished. On June 29, 2001, the Company increased its existing revolving line of credit with CIT Group/Business Credit, Inc., Foothill Capital Corp., Fleet Capital Corp., and The CIT Group/Equipment Financing, Inc. ("CIT"), to $100.0 million and extended the term of the facility to June 2005. The revolving line of credit carries a floating interest rate of LIBOR plus 1.75% to 2.75% based on Patterson-UTI's twelve month trailing Earnings Before Income Taxes Depreciation and Amortization ("EBITDA"). The facility has no significantly restrictive financial or operational covenants until amounts drawn under the facility exceed $80.0 million. As of June 30, 2001, the Company had $20.0 million outstanding under this revolving line of credit. This CIT line of credit was originally a facility of UTI and became a credit facility of Patterson-UTI as a result of the merger. 7. CONTINGENCIES The Company is involved in several claims arising in the ordinary course of business. Management believes all such claims are covered by insurance or that such matters will not have a material adverse effect on the Company's financial statements. The Company is self-insured for employee health insurance claims up to a maximum of $100,000 per employee under medical claims, at which point the Company is fully insured. The Company is self-insured for workers compensation up to a maximum of $500,000 per event for workers compensation claims, at which point the Company is fully insured. Although the Company believes that adequate reserves have been provided for expected liabilities arising from its self-insured obligations, management's estimates of these liabilities may change in the future as circumstances develop. The Company's operations are subject to the many hazards inherent in the onshore drilling industry, such as blowouts, explosions, sour gas, well fires and spills. These hazards can result in personal injury and loss of life, severe damage to or destruction of property and equipment, pollution or environmental damage and suspension of operations. Although the Company maintains insurance protection as management deems appropriate, such insurance coverage may not provide sufficient funds to protect the Company from all liabilities that could result from its operations. Also, claims will be subject to various retentions and deductibles. While the Company has generally been able to obtain some degree of contractual indemnification from its customers in most of its dayrate drilling contracts, no such indemnification is typically available for footage or turnkey contracts. The indemnity agreements require the customers to hold the Company harmless in the event of loss of production or reservoir damage. This contractual indemnification may not be supported by adequate insurance maintained by the customer. The Company's operations routinely involve the handling of various materials, including hazardous materials. The Company may be exposed to liability under numerous state and federal environmental laws, rules and regulations including dealing with hazardous materials. In addition, environmental laws and regulations including The Comprehensive Environmental Response, Compensation and Liability Act (also know as the "Superfund Law"), may impose strict liability whereby the Company could be liable for clean-up costs, even if the situation resulted from previous conduct of the Company that was lawful at the time conducted or from improper conduct of or conditions caused by previous property owners or other persons not associated with the Company. The Company maintains insurance coverage against some environmental liabilities, including pollution caused by sudden and accidental oil spills. 10 11 PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED 7. CONTINGENCIES - (CONTINUED) Management believes it has adequately reserved for these contingencies. Management believes that the outcome of known and potential claims will not have a material adverse effect on the Company's operations. 8. BUSINESS SEGMENTS The Company primarily conducts its business through three distinct operating activities: contract drilling of oil and natural gas wells and provision of pressure pumping services and drilling and completion fluid services to operators in the oil and natural gas industry. Separate financial data for each of the Company's three business segments is provided below. - --------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ----------------------- ---------------------- (IN THOUSANDS) 2001 2000 2001 2000 --------- --------- --------- --------- Revenues: Drilling ......................................... $ 247,173 $ 110,984 $ 453,232 $ 211,937 Drilling and completion fluids ................... 27,516 5,109 47,186 9,474 Pressure pumping ................................. 8,750 3,562 16,087 7,742 Other ............................................ 4,125 3,684 9,645 6,777 --------- --------- --------- --------- Total operating revenues ............................. $ 287,564 $ 123,339 $ 526,150 $ 235,930 ========= ========= ========= ========= Income from operations: Drilling ......................................... $ 87,508 $ 9,887 $ 144,240 $ 14,266 Drilling and completion fluids ................... 1,271 (32) 2,106 (318) Pressure pumping ................................. 2,646 (94) 4,283 86 Other ............................................ 969 16 925 (350) Merger costs and other restructuring charges ..... (13,145) -- (13,145) -- --------- --------- --------- --------- 79,249 9,777 138,409 13,684 Interest income ...................................... 665 258 1,516 516 Interest expense ..................................... (1,192) (2,989) (2,722) (5,390) Other ................................................ 63 81 131 97 --------- --------- --------- --------- Income before income taxes ........................... $ 78,785 $ 7,127 $ 137,334 $ 8,907 ========= ========= ========= =========
9. RECENTLY ISSUED ACCOUNTING STANDARDS The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, "Business Combinations," ("SFAS No. 141") in June 2001. SFAS No. 141 addresses financial accounting and reporting for business combinations and supersedes APB Opinion No. 16, "Business Combinations," and Financial Accounting Standards Board Statement No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises." SFAS No. 141 is effective for all business combinations initiated after June 30, 2001 and provides that such combinations are to be accounted for using one method, the purchase method. The Company has adopted SFAS No. 141 as of June 30, 2001. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," ("SFAS No. 142") in June 2001. SFAS No. 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, 11 12 PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED 9. RECENTLY ISSUED ACCOUNTING STANDARDS - (CONTINUED) "Intangible Assets." SFAS No. 142 applies to all fiscal years beginning after December 15, 2001. The provisions of SFAS No. 142 are not expected to have a material impact on the Company's consolidated financial statements. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations," ("SFAS No. 143") in July 2001. SFAS No. 143 addresses financial accounting requirements for retirement obligations associated with tangible long-lived assets. SFAS No. 143 is effective beginning June 15, 2002. The provisions of SFAS No. 143 are not expected to have a material impact on the Company's consolidated financial statements. 12 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING SUMMARY OF LIQUIDITY AND CAPITAL RESOURCES AND RESULTS OF OPERATIONS IS BASED ON CONSOLIDATED FINANCIAL INFORMATION THAT HAS BEEN RESTATED TO REFLECT THE MERGER OF UTI INTO PATTERSON-UTI ON MAY 8, 2001, UNDER THE POOLING OF INTERESTS METHOD OF ACCOUNTING. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2001, we had working capital of approximately $105.7 million including cash and cash equivalents of $26.0 million as compared to working capital of $127.3 million including cash and cash equivalents of $66.9 million at December 31, 2000. For the six months ended June 30, 2001, our various sources and uses of cash flow were: Sources: o $126.5 million derived from operations primarily attributable to the following factors: o Net income of $85.1 million which was largely attributable to an: o Increase in average dayrates from $8,912 per day in the fourth quarter of 2000 to $10,956 per day in the second quarter of 2001 and resulting increase in average cash margin from $3,131 per day in the fourth quarter of 2000 to $4,851 per day in the second quarter of 2001, o Improvement in utilization rates as indicated in "Results of Operations" on page 14, and o Increase in average operating rigs from 209 at December 31, 2000 to 244 at June 30, 2001, primarily due to the addition of 27 drilling rigs in January of 2001 with the purchase of Jones Drilling Corporation and three other transactions. o $4.8 million from the exercise of stock options and warrants, o $816,000 from the sale of certain property and equipment and o $9.8 million in loan proceeds from the Company's revolving line of credit. Uses: o $11.3 million as partial consideration in the acquisition of Jones Drilling Corporation and its related entities and $15.7 million for six drilling rigs from other non-affiliated entities, o $69.2 million in payments on debt and o $86.4 million for capital expenditures for the betterment and refurbishment of both the marketable and non-marketable drilling rigs, as well as the acquisition and procurement of drilling equipment, to fund leasehold acquisition, exploration and development of oil and natural gas properties and to fund capital expenditures for our drilling and completion fluids segment. On January 5, 2001, the Company consummated the transactions contemplated by certain agreements among the Company and Jones Drilling Corporation, Henderson Welding, Inc., L.E.J. Truck and Crane, Inc., and L.E. Jones Drilling Company. The acquired assets consisted of 21 drilling rigs (of which 14 were marketable when acquired) and related equipment and approximately $2.3 million of net working capital. We believe that the current level of cash and cash equivalents, together with cash generated from operations should be sufficient to meet our immediate capital needs. From time to time, acquisition opportunities are reviewed relating to our business. The timing, size or success of any acquisition and the associated capital commitments are unpredictable. Should further opportunities for growth requiring capital arise, we believe we would be able to satisfy these needs through a combination of working capital, cash generated from operations, and either debt or equity financing. However, there can be no assurance that such capital would be available. 13 14 RESULTS OF OPERATIONS The following tables summarize operations of the Company for the three months ended June 30, 2001 and 2000: - --------------------------------------------------------------------------------
THREE MONTHS ENDED JUNE 30, --------------------------------- CONTRACT DRILLING 2001 2000 % CHANGE - ----------------- -------- -------- -------- (DOLLARS IN 000'S) Revenues .................................. $247,173 $110,984 122.7% Drilling cost ............................. 137,724 86,219 59.7% General and administrative expense ........ 1,859 1,631 14.0% Corporate overhead and other .............. 2,270 451 403.3% Depreciation and amortization ............. 17,812 12,796 39.2% Operating income .......................... 87,508 9,887 785.1% Rig utilization rate ...................... 82% 63% 30.2% Average # of rigs owned ................... 302 259 16.6% Operating days ............................ 22,560 14,774 52.7% Average revenue per operating day ......... $ 10.95 $ 7.51 45.8% Average drilling cost per operating day ... 6.10 5.83 4.6%
- -------------------------------------------------------------------------------- The significant increases shown are reflective of increased productivity in the contract drilling industry as evidenced by: o increase in average rig utilization and in the number of operating days and o the addition of an average 43 drilling rigs from the second quarter of 2000 to that of 2001. - --------------------------------------------------------------------------------
THREE MONTHS ENDED JUNE 30, -------------------------------- DRILLING AND COMPLETION FLUIDS 2001 2000 % CHANGE - ------------------------------ -------- -------- -------- (DOLLARS IN 000'S) Revenues ................................... $ 27,516 $ 5,109 438.6% Drilling and completion fluids cost ........ 23,210 3,987 482.1% General and administrative expense ......... 2,128 811 162.4% Corporate overhead and other ............... 272 29 837.9% Depreciation and amortization .............. 635 314 102.2% Operating income (loss) .................... 1,271 (32) 4,071.9%
- -------------------------------------------------------------------------------- The increases noted were primarily attributable to the addition of the fluids division of Ambar, Inc., during October 2000. Also contributing are improvements in the industry's economic conditions, which are related to improved oil and natural gas prices. - --------------------------------------------------------------------------------
THREE MONTHS ENDED JUNE 30, ------------------------------- PRESSURE PUMPING 2001 2000 % CHANGE - ---------------- -------- -------- -------- (DOLLARS IN 000'S) Revenues ................................... $ 8,750 $ 3,562 145.6% Pressure pumping costs ..................... 4,755 2,549 86.5% General and administrative expense ......... 876 708 23.7% Depreciation ............................... 473 399 18.5% Operating income (loss) .................... $ 2,646 $ (94) 2,914.9% Total jobs ................................. 1,052 612 71.9% Average revenue per job .................... $ 8.32 $ 5.82 42.9%
- -------------------------------------------------------------------------------- The improvement in the pressure pumping segment's operating results are primarily attributable to improved market conditions as evidenced by the increase in number of jobs and revenue per job. 14 15 RESULTS OF OPERATIONS - (CONTINUED) The following tables summarize operations of the Company for the six months ended June 30, 2001 and 2000: - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, --------------------------------- CONTRACT DRILLING 2001 2000 % CHANGE - ----------------- -------- -------- -------- (DOLLARS IN 000'S) Revenues ................................... $453,232 $211,937 113.9% Drilling cost .............................. 267,921 168,615 58.9% General and administrative expense ......... 2,412 3,035 (20.5)% Corporate overhead and other ............... 4,238 815 420.0% Depreciation and amortization .............. 34,421 25,206 36.6% Operating income ........................... 144,240 14,266 911.1% Rig utilization rate ....................... 79% 61% 29.5% Average # of rigs owned .................... 301 252 19.4% Operating days ............................. 43,313 28,178 53.7% Average revenue per operating day .......... $ 10.46 $ 7.52 39.1% Average drilling cost per operating day .... 6.18 5.98 3.3%
- -------------------------------------------------------------------------------- The significant increases shown are reflective of increased productivity in the contract drilling industry as evidenced by: o increase in average rig utilization and in the number of operating days and o the addition of an average 49 drilling rigs from the first six months of 2000 to that of 2001. - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, --------------------------------- DRILLING AND COMPLETION FLUIDS 2001 2000 % CHANGE - ------------------------------ -------- -------- -------- (DOLLARS IN 000'S) Revenues ................................... $ 47,186 $ 9,474 398.1% Drilling and completion fluids cost ........ 39,575 7,534 425.3% General and administrative expense ......... 3,842 1,591 141.5% Corporate overhead and other ............... 442 70 531.4% Depreciation and amortization .............. 1,221 597 104.5% Operating income (loss) .................... 2,106 (318) 762.3%
- -------------------------------------------------------------------------------- The increases noted were primarily attributable to the addition of the fluids division of Ambar, Inc., during October 2000. Also contributing are improvements in the industry's economic conditions which are related to increases in oil and natural gas prices as stated below. - --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, --------------------------------- PRESSURE PUMPING 2001 2000 % CHANGE - ---------------- -------- -------- -------- (DOLLARS IN 000'S) Revenues ................................... $ 16,087 $ 7,742 107.8% Pressure pumping costs ..................... 9,150 5,287 73.1% General and administrative expense ......... 1,794 1,566 14.6% Depletion and depreciation ................. 860 803 7.1% Operating income ........................... $ 4,283 $ 86 4,880.2% Total jobs ................................. 2,020 1,265 59.7% Average revenue per job .................... $ 7.96 $ 6.12 30.1%
- -------------------------------------------------------------------------------- The improvement in the pressure pumping segment's operating results are primarily attributable to improved market conditions as evidenced by the increase in number of jobs and revenue per job. 15 16 VOLATILITY OF OIL AND NATURAL GAS PRICES AND ITS IMPACT ON OPERATIONS Our revenue, profitability and future rate of growth are substantially dependent upon prevailing prices for oil and natural gas, with respect to our contract drilling, pressure pumping and drilling and completion fluids segments. Historically, oil and natural gas prices and markets have been volatile. Prices are affected by market supply and demand factors as well as actions of state and local agencies, the United States and foreign governments and international cartels. All of these are beyond our control. Any significant or extended decline in oil and/or natural gas prices would have a material adverse effect on our financial condition and results of operations. Low level commodity prices beginning in the fourth quarter of 1997 and continuing into mid-1999 adversely impacted our operations. Although there has been significant improvement in oil and natural gas prices since mid-1999, we expect oil and natural gas prices to continue to be volatile and therefore to affect our financial condition and operations and our ability to access capital sources. IMPACT OF INFLATION We believe that inflation will not have a significant impact on our financial position or operations. RECENTLY ISSUED ACCOUNTING STANDARDS The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, "Business Combinations," ("SFAS No. 141") in June 2001. SFAS No. 141 addresses financial accounting and reporting for business combinations and supersedes APB Opinion No. 16, "Business Combinations," and Financial Accounting Standards Board Statement No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises." SFAS No. 141 is effective for all business combinations initiated after June 30, 2001 and provides that such combinations are to be accounted for using one method, the purchase method. The Company has adopted SFAS No. 141 as of June 30, 2001. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," ("SFAS No. 142") in June 2001. SFAS No. 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets." SFAS No. 142 applies to all fiscal years beginning after December 15, 2001. The provisions of SFAS No. 142 are not expected to have a material impact on the Company's consolidated financial statements. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations," ("SFAS No. 143") in July 2001. SFAS No. 143 addresses financial accounting requirements for retirement obligations associated with tangible long-lived assets. SFAS No. 143 is effective beginning June 15, 2002. The provisions of SFAS No. 143 are not expected to have a material impact on the Company's consolidated financial statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We have exposure to market risk associated with the floating rate portion of the interest charged on the $20.0 million outstanding under our credit facility with CIT. The CIT credit facility, which matures on June 29, 2005, bears interest at LIBOR plus 1.75 % to 2.75% based on the Company's twelve month trailing EBITDA. Our exposure to interest rate risk due to changes in LIBOR is not expected to be material. At June 30, 2001, the fair value of the obligation approximates its related carrying value because the obligation bears interest at the current market rate. 16 17 ---------- CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Item 2 of this Report contains forward-looking statements which are made pursuant to the "safe harbor" provisions of The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements relating to: liquidity; financing of operations; continued volatility of oil and natural gas prices; source and sufficiency of funds required for immediate capital needs and additional rig acquisitions (if further opportunities arise); and such other matters. The words "believes," "plans," "intends," "expected," "estimates" or "budgeted" and similar expressions identify forward-looking statements. The forward-looking statements are based on certain assumptions and analyses we make in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate in the circumstances. We do not undertake to update, revise or correct any of the forward-looking information. Factors that could cause actual results to differ materially from our expectations expressed in the forward-looking statements include, but are not limited to, the following: projected revenues following the merger being lower than expected; intense competition in the contract drilling industry; low oil prices and/or natural gas prices; adverse market conditions for contract drilling services; drill-pipe shortages; labor shortages, primarily qualified drilling rig personnel; insurance coverage limitations and requirements; inability to acquire additional drilling rigs on terms favorable to us and the loss of key personnel, particularly Cloyce A. Talbott and A. Glenn Patterson, our Chief Executive Officer and our President and Chief Operating Officer, respectively. For a more complete explanation of these various factors and others, see "Cautionary Statement for Purposes of the 'Safe Harbor' Provisions of the Private Securities Litigation Reform Act of 1995" included in our Annual Report on Form 10-K for the year ended December 31, 2000, beginning on page 20, and "Risk Factors" included in our joint proxy statement/prospectus dated March 14, 2001, beginning on page 19 included as a part of our registration statement on Form S-4 filed with the SEC on March 7, 2001, in connection with the UTI merger. ---------- 17 18 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held a special meeting of its stockholders on May 8, 2001. The following table sets forth certain information relating to each of the matters voted upon at the meeting.
WITHHELD/ BROKER MATTERS VOTED UPON FOR AGAINST ABSTAIN NON-VOTES ------------------ ---------- --------- --------- --------- 1. Adoption of the Agreement and Plan of Merger, dated as of February 4, 2001 between the Company and UTI and approval of the merger of UTI into the Company contemplated thereby. 31,186,164 61,473 10,290 0 2. Approval of the Amendment to the Restated Certificate of Incorporation of the Company to increase the Company's authorized shares of common stock from 50,000,000 shares to 200,000,000 shares. 22,129,732 9,108,274 19,921 0 3. Approval of the Amendment to the Restated Certificate of Incorporation of the Company to change the Company's corporate name to "Patterson-UTI Energy, Inc." 31,035,483 203,415 19,029 0
18 19 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS. The following exhibits are filed herewith or incorporated by reference: 2.1 Plan and Agreement of Merger dated October 14, 1993, between Patterson Energy, Inc., a Texas corporation, and Patterson Energy, Inc., a Delaware corporation, together with related Certificates of Merger. (1) 2.2 Agreement and Plan of Merger, dated April 22, 1996 among Patterson Energy, Inc., Patterson Drilling Company and Tucker Drilling Company, Inc. (2) 2.2.1 Amendment to Agreement and Plan of Merger, dated May 16, 1996 among Patterson Energy, Inc., Patterson Drilling Company and Tucker Drilling Company, Inc. (3) 2.3 Asset Purchase Agreement dated as of September 30, 2000 between Ambar Drilling Fluids LP, LLLP and Ambar, Inc. (4) 2.4 Agreement and Plan of Merger dated as of January 5, 2001 among Patterson Energy, Inc., Patterson Drilling Company LP, LLLP and Jones Drilling Corporation. (5) 2.5 Asset Purchase Agreement, dated as of January 5, 2001 among Patterson Energy, Inc., Patterson Drilling Company LP, LLLP and L.E. Jones Drilling Company. (5) 2.6 Agreement and Plan of Merger, dated February 4, 2001, by and between UTI Energy Corp. and Patterson Energy, Inc. (6) 3.1 Restated Certificate of Incorporation. (7) 3.2 Bylaws. (1) 3.3 Rights Agreement dated January 2, 1997, between Patterson Energy, Inc. and Continental Stock Transfer & Trust Company. (8) 4.1 Excerpt from Restated Certificate of Incorporation of Patterson-UTI Energy, Inc. regarding authorized Common Stock and Preferred Stock. 10.1 Loan and Security Agreement, dated November 22, 1999. 10.1.1 First Amendment to Loan and Security Agreement, dated May 2, 2000. 10.1.2 Second Amendment to Loan and Security Agreement, dated May 18, 2000. 10.1.3 Third Amendment to Loan and Security Agreement, dated October 18, 2000. 10.1.4 Fourth Amendment to Loan and Security Agreement, dated May 8, 2001. 10.1.5 Fifth Amendment to Loan and Security Agreement, dated June 29, 2001. 10.1.6 Revolving Loan Promissory Note, dated June 29, 2001. 10.1.7 Guaranty Agreement, dated June 29, 2001. 10.1.8 Pledge Agreement, dated June 29, 2001. 19 20 10.2 Aircraft Lease, dated December 20, 2000, (effective January 1, 2001) between Talbott Aviation, Inc. and Patterson Energy, Inc. (9) 10.3 Patterson-UTI Energy, Inc. 1993 Stock Incentive Plan, as amended. (10) 10.4 Patterson-UTI Energy, Inc. Non-Employee Directors' Stock Option Plan, as amended. (11) 10.5 Patterson-UTI Energy, Inc. Amended and Restated 1997 Long-Term Incentive Plan. (12) 10.6 Amended and Restated Non-Employee Director Stock Option Plan of Patterson-UTI Energy, Inc. (13) 10.7 Amended and Restated Patterson-UTI Energy, Inc. 1996 Employee Stock Option Plan. (13) 10.8 1997 Stock Option Plan of DSI Industries, Inc. (12) 10.9 Model Form Operating Agreement. (14) 10.10 Form of Drilling Bid Proposal and Footage Drilling Contract. (14) 10.11 Form of Turnkey Drilling Agreement. (14) - ---------- 20 21 (1) Incorporated herein by reference to Item 27, "Exhibits" to Amendment No. 2 to Registration Statement on Form SB-2 (File No. 33-68058-FW) filed on October 28, 1993. (2) Incorporated by reference to Item 7, "Financial Statements and Exhibits" to Form 8-K dated April 22, 1996 and filed on April 30, 1996. (3) Incorporated by reference to Item 7, "Financial Statements and Exhibits" to Form 8-K dated May 16, 1996 and filed on May 22, 1996. (4) Incorporated by reference to Item 7, "Financial Statements and Exhibits" to Form 8-K dated October 3, 2000 and filed on November 6, 2000. (5) Incorporated by reference to Item 16, "Exhibits" to Registration Statement on Form S-3 filed on January 8, 2001. (6) Incorporated herein by reference to Joint Proxy Statement/Prospectus filed on March 14, 2001. (7) Incorporated herein by reference to Item 7, "Financial Statements and Exhibits" to Form 8-K dated and filed on May 8, 2001. (8) Incorporated by reference to Item 2, "Exhibits" to Registration Statement on For 8-A filed on January 14, 1997. (9) Incorporated herein by reference to Item 14, "Exhibits, Financial Statement Schedules and Reports on Form 8-K" to Form 10-K dated December 31, 2000. (10) Incorporated herein by reference to Item 8, "Exhibits" to Registration Statement on Form S-8 (File No. 333-47917) filed on March 13, 1998. (11) Incorporated herein by reference to Item 8, "Exhibits" to Registration Statement on Form S-8 (File No. 33-39471) filed on November 4, 1997. (12) Incorporated herein by reference to Item 8, "Exhibits" to Post-Effective Amendment No. 1 to Registration Statement on Form S-8 (file No. 333-60470) filed on July 25, 2001. (13) Incorporated herein by reference to Item 8, "Exhibits" to Post-Effective Amendment No.1 to Registration Statement on Form S-8 (file No. 333-60466) filed on July 25, 2001. (14) Incorporated by reference to Item 27, "Exhibits" to Registration Statement on Form SB-2 (File No. 33-68058-FW) filed on August 30, 1993. 21 22 (b) REPORTS ON FORM 8-K. The following reports on Form 8-k were filed: (1) Report dated May 8, 2001 announcing the completion of the merger between Patterson Energy, Inc. and UTI Energy Corp., filed May 8, 2001. (2) Report dated April 19, 2001 announcing the Company's first quarter 2001 results from operations, filed April 23, 2001. (3) Report dated May 8, 2001 announcing the unaudited Pro Forma Financial Statements of Patterson-UTI Energy, Inc. filed July 23, 2001. 22 23 SIGNATURE In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PATTERSON ENERGY, INC. By: /s/ Cloyce A. Talbott ----------------------------------- Cloyce A. Talbott Chief Executive Officer By: /s/ Jonathan D. Nelson ----------------------------------- Jonathan D. Nelson Vice President-Finance Chief Financial Officer DATED: August 1, 2001 23 24 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 4.1 Excerpt from Restated Certificate of Incorporation of Patterson-UTI Energy, Inc. regarding authorized common stock and preferred stock. 10.1 Loan and Security Agreement, dated November 22, 1999. 10.1.1 First Amendment to Loan and Security Agreement, dated May 2, 2000. 10.1.2 Second Amendment to Loan and Security Agreement, dated May 18, 2000. 10.1.3 Third Amendment to Loan and Security Agreement, dated October 18, 2000. 10.1.4 Fourth Amendment to Loan and Security Agreement, dated May 8, 2001. 10.1.5 Fifth Amendment to Laon and Security Agreement, dated June 29, 2001. 10.1.6 Revolving Loan Promissory Note, dated June 29, 2001. 10.1.7 Guaranty Agreement, dated June 29, 2001. 10.1.8 Pledge Agreement, dated June 29, 2001.
24 EX-4.1 3 d89352ex4-1.txt EXCERPT FROM RESTATED CERTIFICATE OF INCORPORATION 1 EXHIBIT 4.1 EXCERPT FROM RESTATED CERTIFICATE OF INCORPORATION OF PATTERSON-UTI ENERGY, INC. "Section 2. COMMON STOCK 2.1 Issuance, Consideration, and Terms. Any unissued shares of the Common Stock may be issued from time to time for such consideration, having a value of not less than the par value thereof, as may be fixed from time to time by the Board of Directors. Any treasury shares may be disposed of for such consideration as may be determined from time to time by the Board of Directors. The Common Stock shall be subject to the express terms of the Preferred Stock and any series thereof. Each share of Common Stock shall be of equal rank and shall be identical to every other share of Common Stock. Holders of Common Stock shall have such rights as are provided herein and by law. 2.2 Voting Rights. Except as expressly required by law or as provided in or fixed and determined pursuant to Section 1 of this Article FOURTH, the entire voting power and all voting rights shall be vested exclusively in the Common Stock. Each holder of shares of Common Stock shall be entitled to one (1) vote for each share standing in such holder's name on the books of the Corporation. 2.3 Dividends. Subject to Section 1 of this Article FOURTH, the holders of Common Stock shall be entitled to receive, and shall share equally share for share, when and as declared by the Board of Directors, out of the assets of the Corporation which are by law available therefor, dividends or distributions payable in cash, in property, or in securities of the Corporation." EX-10.1 4 d89352ex10-1.txt LOAN AND SECURITY AGREEMENT 1 EXHIBIT 10.1 LOAN AND SECURITY AGREEMENT BY AND AMONG THE CIT GROUP/BUSINESS CREDIT, INC., AS AGENT AND LENDER, GMAC BUSINESS CREDIT, LLC, AS SYNDICATION AGENT AND LENDER, FOOTHILL CAPITAL CORPORATION, AS DOCUMENTATION AGENT AND LENDER, UTI ENERGY CORP., UTICO, INC., UTICO HARD ROCK BORING, INC., INTERNATIONAL PETROLEUM SERVICE COMPANY, NORTON DRILLING SERVICES, INC., AND NORTON DRILLING COMPANY MEXICO, INC., AS THE GUARANTORS AND UTI DRILLING, L.P., NORTON DRILLING COMPANY, UNIVERSAL WELL SERVICES, INC., UTI MANAGEMENT SERVICES, L.P. AND SUITS DRILLING COMPANY, AS THE COMPANIES (AND BORROWERS) DATED AS OF: NOVEMBER 22, 1999 UTI - LOAN AND SECURITY AGREEMENT 2 TABLE OF CONTENTS
PAGE ---- SECTION 1. Definitions.....................................................................................1 SECTION 2. Conditions Precedent...........................................................................27 SECTION 3. Revolving Loans................................................................................30 SECTION 4. Acquisition Facility Loans and Permitted Acquisitions..........................................34 SECTION 5. Letters of Credit..............................................................................38 SECTION 6. Collateral.....................................................................................41 SECTION 7. Representations, Warranties and Covenants......................................................45 SECTION 8. Interest, Fees and Expenses....................................................................66 SECTION 9. Powers.........................................................................................68 SECTION 10. Events of Default and Remedies.................................................................69 SECTION 11. Termination....................................................................................73 SECTION 12. Miscellaneous..................................................................................74 SECTION 13. Agreement Between the Lenders..................................................................80 SECTION 14. Lenders........................................................................................83
UTI - LOAN AND SECURITY AGREEMENT (i) 3 EXHIBITS Exhibit A - Form of Revolving Loan Promissory Note Exhibit B - Form of Assignment and Transfer Agreement Exhibit C - Form of Borrowing Notice SCHEDULES Schedule 1 - Existing Liens Schedule 7(1) - Collateral Locations and Chief Executive Office Schedule 7(8)(b)(ii) - Rig Operations Report Schedule 7(8)(b)(iii) - Receivables Aging Report Schedule 7(10)(H)(iv) - Investments Schedule 7(18)(d) - Other Lending Agreements Schedule 7(18)(e)(i) - Real Property Owned or Leased Schedule 7(18)(e)(iv) - Rigs and Other Equipment Schedule 7(18)(f) - Litigation Schedule 7(18)(k) - Environmental Matters Schedule 7(18)(m) - Subsidiaries; Capital Stock Schedule 7(18)(n) - Insurance Policies Schedule 7(18)(o) - Indebtedness UTI - LOAN AND SECURITY AGREEMENT (ii) 4 LOAN AND SECURITY AGREEMENT THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation (hereinafter "CITBC") with offices located at 1211 Avenue of the Americas, New York, New York 10036, Foothill Capital Corporation, a California corporation ("FCC"), GMAC Business Credit, LLC, a Michigan limited liability company ("GMAC"), and any other party hereafter becoming a Lender hereunder pursuant to Section 13, Paragraph 9 hereof each individually sometimes referred to as a "LENDER" and collectively the "LENDERS"), CITBC as Agent for the Lenders (hereinafter the "AGENT"), are pleased to confirm the terms and conditions under which the Lenders acting through the Agent shall make revolving loans and other financial accommodations to UTI Drilling, L.P., a Texas limited partnership ("UTI"), Norton Drilling Company, a Delaware corporation ("NDC"), Universal Well Services, Inc., a Delaware corporation ("UWSI"), UTI Management Services, L.P., a Texas limited partnership ("UTIMS"), and Suits Drilling Company, an Oklahoma corporation ("SDC"), (UTI, NDC, SDC, UWS and UTIMS, together with any additional entities which may become a Company hereunder from time to time, are referred to herein individually, as a "COMPANY", and collectively, as the "COMPANIES"), each with its principal place of business and chief executive office at 16800 Greenspoint Park, Suite 225N, Houston, Texas 77060, supported by the guaranties of UTI Energy Corp., a Delaware corporation (the "PARENT"), UTICO, Inc., a Delaware corporation ("HOLDING"), UTICO Hard Rock Boring, Inc., a Delaware corporation ("UHRB"), International Petroleum Service Company, a Pennsylvania corporation ("IPSCO"), Norton Drilling Services, Inc., a Delaware corporation ("NDS"), and Norton Drilling Company Mexico, Inc., a Delaware corporation ("NDM") (Parent, Holding, UHRB, IPSCO, NDS and NDM are referred to herein, individually, as a "GUARANTOR", and collectively, as the "GUARANTORS"), with Parent's and each of UWSI's, UHRB's, IPSCO's, UTIMS's, NDS's and NDM's principal place of business and chief executive office at 16800 Greenspoint Park, Suite 225N, Houston, Texas 77060, and Holding's principal place of business and chief executive office at 801 West Street, Wilmington, Delaware 19801-1545. SECTION 1. DEFINITIONS "ACCOUNTS" shall mean all of each Company's now existing and future: (a) accounts (as defined in the U.C.C.) and any and all other receivables (whether or not specifically listed on schedules furnished to the Agent), including, without limitation, all accounts created by or arising from all of each Company's sales of goods or rendition of services to its customers, and all accounts arising from sales or rendition of services made under any of such Company's trade names or styles, or through any of such Company's divisions; (b) any and all instruments (as defined in the U.C.C.), documents (as defined in the U.C.C.) and chattel paper (as defined in the U.C.C.); (c) unpaid seller's rights (including rescission, replevin, reclamation and stoppage in transit) relating to the foregoing or arising therefrom; (d) rights to any goods represented by any of the foregoing, including rights to returned or repossessed goods; (e) reserves and credit balances arising hereunder; (f) guarantees or collateral for any of the foregoing; (g) insurance policies or rights relating to any of the foregoing; (h) contract rights; and (i) cash and non-cash proceeds of any and all the foregoing. "ACCOUNTS RECEIVABLE ADVANCE PERCENTAGE" shall mean eighty percent (80%). UTI - LOAN AND SECURITY AGREEMENT 1 5 "ACQUISITION" shall mean the purchase, lease (whether a capital lease, an operating lease or otherwise) or other acquisition of any or all of the following: (a) Rigs; (b) Rigs Accessories (other than (i) maintenance and replacement components and parts (including installation) for existing Rigs and Rigs acquired hereafter, and (ii) drill pipe for Rigs, in each case acquired in the ordinary course of business or (iii) the purchase of tangible assets pursuant to the reinvestment of casualty insurance proceeds); (c) more than 50% of the voting common stock or capital stock of any Person; and (d) all or substantially all of the assets of any Person. "ACQUISITION AGREEMENTS" shall have the meaning assigned to such term in Section 4 hereof. "ACQUISITION FACILITY COMMITMENT" shall mean, with respect to any Lender, a portion of the Revolving Loans which may be advanced as Acquisition Facility Loans, evidencing the amount of its commitment to make Acquisition Facility Loans (all such loans being Revolving Loans), as modified from time to time pursuant to the terms hereof, not to exceed $45,000,000 in the aggregate. "ACQUISITION FACILITY LOANS" shall have the meaning assigned to such term in Section 4 hereof. "ADMINISTRATIVE MANAGEMENT FEE" shall mean the sum of $25,000 per annum which shall be paid to the Agent for its own account in accordance with Section 8, Paragraph 8 hereof to offset the expenses and costs (excluding Out-of-Pocket Expenses) of the Agent in connection with record keeping, periodic examinations, analyzing and evaluating the Collateral. "AGREEMENT" shall mean this Loan and Security Agreement (as the same may be amended, modified or changed from time to time). "AGENT COMMITMENT LETTER" shall mean the commitment letter dated October 6, 1999, issued by the Agent to, and accepted by, each Company (as the same may be amended, modified or changed from time to time). "ANNIVERSARY DATE" shall mean the date occurring four (4) years from the date hereof and the same date in every year thereafter. "APPLICABLE MARGIN" means, with respect to any amount outstanding made under any LIBOR Loans or Revolving Loans other than LIBOR Loans, as the case may be, the rate of interest per annum determined as set forth below: (a) during the period from the Closing Date through the Financial Statement Delivery Date (as defined below) for the fiscal quarter ending on December 31, 1999: UTI - LOAN AND SECURITY AGREEMENT 2 6
AS TO REVOLVING LOANS AS TO OTHER THAN LIBOR LOANS LIBOR LOANS ---------------------- ----------- 0.25% 2.25%
(b) during the period between any two Financial Statement Delivery Dates for any Margin Period occurring after December 31, 1999, the rate determined by reference to the pricing grid below as a function of the amount of TTM EBITDA:
AS TO REVOLVING LOANS AS TO TTM EBITDA OTHER THAN LIBOR LOANS LIBOR LOANS ---------- ---------------------- ----------- > or = to $27,500,000 0.00% 1.75% > $27,500,000 and > or = to $22,500,000 0.00% 2.00% < $22,500,000 and > or = to $17,500,000 0.25% 2.25% < $17,500,000 and > or = to $15,000,000 0.50% 2.50% < $15,000,000 0.75% 2.75%
As used herein, "FINANCIAL STATEMENT DELIVERY DATE" means the earlier of (i) the last day on which the quarterly or annual financial statements of the Companies are to be delivered to the Agent and the Lenders pursuant to Section 7, Paragraph 8(a), or (ii) the date upon which such financial statements actually are delivered to the Agent and the Lenders. As used herein, "MARGIN PERIOD" means a period commencing on the most recent Financial Statement Delivery Date and ending on the next Financial Statement Delivery Date. Each change in the Applicable Margin shall become effective on the first day of the calendar month next following the applicable Financial Statement Delivery Date. "APPLICATION FOR LETTER OF CREDIT" shall mean an application for the issuance of a Letter of Credit as prescribed by the bank or financial institution issuing the same. "APPRAISAL OF ORDERLY LIQUIDATION VALUE" shall mean a formal written appraisal by an Approved Appraiser establishing Orderly Liquidation Value of an asset or property as set forth in a report by such Approved Appraiser delivered to the Agent, which appraisal and report shall be in form and substance acceptable to the Agent. "APPROVED APPRAISER" shall mean M.E.L. Valuations, Inc. or any other appraiser acceptable to the Agent. "AVAILABILITY" shall mean, with respect to the Companies taken as a whole, at any time the excess of (a) the lesser of (i) the Line of Credit or (ii) the sum of (A) Eligible Accounts Receivable of such Companies multiplied by the Accounts Receivable Advance Percentage, and (B) the lesser of (I) Net Book Value multiplied by the Equipment Advance Percentage or (II) the aggregate value of Eligible Equipment of the Companies multiplied by the Equipment Advance Percentage, over (b) the sum of (i) the outstanding aggregate amount of all Obligations, including, without limitation, all UTI - LOAN AND SECURITY AGREEMENT 3 7 Obligations with respect to Revolving Loans and outstanding undrawn balance of Letters of Credit outstanding and (ii) the Availability Reserve. "AVAILABILITY RESERVE" shall mean, with respect to the Companies, the sum of (a) three (3) months rental payments on all leased premises (where Rigs are stored from time to time) of the Companies for which the Companies have not delivered to the Agent a landlord's waiver (in form and substance satisfactory to Agent in the exercise of its reasonable business judgment), provided that such amount shall be adjusted from time to time hereafter upon (i) delivery to the Agent of any such acceptable waiver, (ii) the opening or closing of a Collateral storage location and/or (iii) any change in rental payment and/or storage charge, and (b) an amount equal to any and all past due storage charges with respect to all warehouse locations at which Collateral may be located, provided that the Companies shall promptly advise the Agent of all such amounts and, upon request by the Agent, provide a report to the Agent with respect thereto, and (c) such other reserves as the Agent reasonably determines are appropriate under the circumstances, including, without limitation, reserves for liens on Accounts or Equipment. "AVERAGE LIFE" means, as of the date of determination, with reference to any Indebtedness For Borrowed Money, the quotient obtained by dividing (a) the sum of the products of the number of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness For Borrowed Money multiplied by the amount of such principal payment by (b) the sum of all such principal payments. "ASSIGNMENT AND TRANSFER AGREEMENT" shall mean the Assignment and Transfer Agreement in the form of Exhibit B hereto. "BOARD" means the Board of Governors of the Federal Reserve System of the United States (or any successor) and any other banking authority to which the Lenders are subject for Eurocurrency Liabilities (within the meaning of Regulation D of the Board as in effect from time to time) or any other category of deposits or liabilities by reference to which the LIBOR Loan rate of interest is determined. "BUSINESS DAY" shall mean any day that the Agent is open for business in New York, New York, which is not (a) a Saturday, Sunday or legal holiday in the State of New York or (b) a day on which banking institution chartered by the State of New York or the United States are legally required to close. "CANADIAN ACQUISITION" means the Acquisition of a Person or business unit whose principal place of business is in Canada, or an Acquisition of assets by a Subsidiary, formed under Canadian law, of an Obligor. "CANADIAN EXCHANGEABLE SHARES" means shares of Capital Stock of a Canadian Operating Company issued to a Person in connection with a Permitted Acquisition by such Canadian Operating Company, which Person is not an Obligor or Subsidiary of an Obligor, and which shares of Capital Stock are (i) not entitled to vote generally in the election of directors of such Canadian Operating Company, (ii) are convertible at the option of the holder into shares of common stock of the Parent UTI - LOAN AND SECURITY AGREEMENT 4 8 and (iii) are subordinated (with respect to dividends and preference in liquidation) to the Capital Stock of the Canadian Operating Company which is pledged to the Agent. "CANADIAN FINANCE COMPANY" shall mean a direct, wholly-owned Subsidiary of an Obligor, which Subsidiary is organized under Canadian Law, with a limited purpose of acquiring loans of, and/or making loans to a Canadian Operating Company (which loans are secured by a Canadian First Priority Lien) and other ministerial and incidental powers reasonably necessary or incident thereto, and 66% of the Capital Stock of which is pledged to the Agent. "CANADIAN FIRST PRIORITY LIEN" means a perfected, first priority lien on all of the assets of a Canadian Operating Company or Canadian Finance Company (other than automobiles, Real Estate and Intellectual Property), subject only to (a) Permitted Liens, (b) prior liens of a Canadian Finance Company, (c) liens in favor of an affiliate of the Agent and (d) any other lien which Agent, in its sole discretion, approves in writing. "CANADIAN OPERATING COMPANY" shall mean a direct, wholly-owned Subsidiary of an Obligor (except to the extent of Canadian Exchangeable Shares), which is organized under Canadian law, and 66% of the Capital Stock of which is pledged to the Agent, provided that notwithstanding the foregoing, no Canadian Exchangeable Shares of such Canadian Operating Company will be pledged to the Agent. "CAPITAL EXPENDITURES" for any period shall mean the aggregate of all expenditures of each Company during such period that in conformity with GAAP are required to be included in or reflected by the property, plant or equipment or similar fixed asset account reflected in the consolidated balance sheet of such Company. "CAPITAL LEASE" shall mean any lease of property (whether real, personal or mixed) which, in conformity with GAAP, is accounted for as a capital lease or a Capital Expenditure on the balance sheet of each Company. "CAPITAL STOCK" means, with respect to any Person, any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents (however designated) of such Person's equity, including all common stock and preferred stock, any limited or general partnership interest and any limited liability company membership. "CHASE BANK RATE" shall mean the rate of interest per annum announced by The Chase Manhattan Bank, N.A. from time to time as its prime rate in effect at its principal office in the City of New York. (The prime rate is not intended to be the lowest rate of interest charged by The Chase Manhattan Bank, N.A. to its borrowers). "CLOSING DATE" shall mean November 22, 1999. "COLLATERAL" shall mean, with respect to all Obligors, all present and future Accounts, Equipment, Inventory, Documents of Title, General Intangibles (other than Intellectual Property except as set forth below) and Other Collateral, whether now existing or hereafter arising, and cash UTI - LOAN AND SECURITY AGREEMENT 5 9 and non-cash proceeds thereof; and, following the occurrence of an Event of Default, and so long as the same is continuing, Collateral shall also include in addition to the foregoing such Real Estate, automobiles owned by any Obligor and Intellectual Property of such Obligors as Agent shall have requested or obtained a lien or security interest as contemplated in Paragraph 8, Paragraph 9 and/or Paragraph 10 of Section 6 of this Agreement, and cash and non-cash proceeds thereof. "COLLECTIONS" shall have the meaning provided for in Section 3, Paragraph 4 of this Agreement. "CONSOLIDATED BALANCE SHEET" shall mean a consolidated balance sheet for the Parent and the consolidated Subsidiaries thereof eliminating all inter-company transactions and prepared in accordance with GAAP. "CONSOLIDATING BALANCE SHEET" shall mean a Consolidated Balance Sheet plus individual balance sheets for each Company, and the other Subsidiaries of Parent, if any, each showing all eliminations of inter-company transactions and prepared in accordance with GAAP. "CONTRACT RATE" shall mean the applicable rate of interest computed as set forth in Section 8, Paragraph 1(a) of this Agreement. "CUSTOMARILY PERMITTED LIENS" shall mean: (a) liens of local or state authorities (excluding federal tax liens) for franchise or other like taxes (and interest and penalties thereon), provided that the aggregate amounts of such taxes relating to such liens shall not exceed $1,000,000 in the aggregate at any one time; (b) statutory liens of landlords and liens of carriers, warehousemen, mechanics, materialmen and other like liens imposed by law, created in the ordinary course of business and for amounts not yet due (or which are being contested in good faith by appropriate proceedings or other appropriate actions which are sufficient to prevent imminent foreclosure of such liens) and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (c) deposits made (and the liens thereon) in the ordinary course of business (including, without limitation, security deposits for leases, surety bonds and appeal bonds) in connection with workers' compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, contracts (other than for the repayment or guarantee of borrowed money or purchase money obligations), statutory obligations and other government contracts, not to exceed $1,000,000 in the aggregate outstanding at any one time. (d) easements (including, without limitation, reciprocal easement agreements and utility agreements), encroachments, rights of way, minor defects or irregularities in title, variation and other restrictions, charges or encumbrances (whether or not recorded) affecting the Real Estate and which in the aggregate do not materially interfere with the occupation, use or enjoyment by each Company in its business of the property so encumbered; UTI - LOAN AND SECURITY AGREEMENT 6 10 (e) liens for taxes not yet delinquent or which are being contested in good faith by appropriate proceedings, provided that (i) adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP, and (ii) such liens secure liabilities not exceeding $1,000,000; (f) judgment and attachment liens not giving rise to an Event of Default or liens created by or existing from any litigation or legal proceeding that are being contested in good faith by appropriate proceedings, promptly instituted and diligently conducted, and for which adequate reserves have been made to the extent required by GAAP, provided that (i) such liens are junior and inferior to those of the Agent, (ii) the judgment or attachment amount does not exceed $1,000,000, and (iii) an Availability Reserve has been established with respect thereto; (g) liens created pursuant to this Agreement or any of the Loan Documents executed in connection herewith in favor of the Agent; (h) leases or subleases of Real Estate or Rigs granted to others not interfering in any material respect with the business of the Parent or any of the Obligors; provided that leases or subleases of Rigs shall be subordinated to in writing (in form and substance reasonably satisfactory to the Agent) to the liens arising under Loan Documents and otherwise permitted hereunder; and (i) liens in favor of collecting or payor banks having a right of setoff, revocation, refund or chargeback in favor of collecting or payor banks with respect to money or instruments of the Parent or any of its Subsidiaries on deposit with or in possession of such bank. "DATED LIABILITIES" shall have the meaning assigned to such term in Section 12, Paragraph 12 hereof. "DATED ASSETS" shall have the meaning assigned to such term in Section 12, Paragraph 12 hereof. "DEFAULT" shall mean any event specified in Section 10 hereof, which, after the giving of notice, the lapse of time, or both, or any other condition, event or act, has been satisfied, would constitute an Event of Default. "DEFAULT RATE OF INTEREST" shall mean a rate of interest per annum equal to the lesser of (a) the Maximum Legal Rate or (b) the sum of (i) two percent (2%) and (ii) the applicable contract rate of interest based upon the applicable increment over the Chase Bank Rate as determined under Section 8 hereof, which the Agent on behalf of the Lenders shall be entitled to charge each Company on all Obligations to the extent provided in Section 10, Paragraph 2(ii) of this Agreement. "DEPOSITORY ACCOUNTS" shall have the meaning specified in Section 3, Paragraph 4 hereof. "DESIGNATED MERGER" shall mean the merger or consolidation on or before December 31, 1999 of (a) NDS, IPSCO and Lobell Corporation (and no other entities) in a transaction in which UTI - LOAN AND SECURITY AGREEMENT 7 11 NDS or IPSCO is the sole surviving entity, and (b) NDC with and into UTI (and no other entities) in a transaction in which UTI is the sole surviving entity; provided that in each case (i) there has not occurred and Event of Default that is continuing which has not been waived in writing by the Agent and no Default or Event of Default would occur or exist after giving effect thereto, and (ii) no Person receives any consideration which would not be permitted to be paid to such Person at such time as a Restricted Payment (and in such case such consideration shall constitute a Restricted Payment for all purposes of this Agreement). "DISQUALIFIED STOCK" means, any Capital Stock of an Obligor or any Subsidiary thereof that, by its terms (or by the terms of any security into which it is convertible or for which it is exercisable, redeemable or exchangeable), or upon the happening of any event or with the passage of time, matures, or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, in each case on, or prior to, the Anniversary Date, or is convertible into or is exchangeable for debt securities of the Obligor or any Subsidiary thereof, except to the extent that such exchange or conversion rights cannot be exercised prior to the Anniversary Date; provided, however, that solely for purposes of determining which Capital Stock is Disqualified Stock, the Anniversary Date shall mean the Maturity Date and each subsequent Anniversary Date that arises by virtue of a renewal that actually occurs pursuant to Section 11 of this Agreement; provided further, however, that Qualified Capital Stock, which becomes Disqualified Capital Stock (whether or not in connection with the failure of any party hereto to terminate this Agreement pursuant to Section 11), shall not constitute Disqualified Capital Stock if the payment, conversion or other rights in respect thereof are subordinated in writing (in form and substance reasonably satisfactory to the Agent) to the full payment and performance of all Obligations to the Lenders and the Agent under the Loan Documents on or before the effective date of such recharacterization hereunder. For the purpose of this Agreement the determination that Qualified Capital Stock shall be treated as Disqualified Capital Stock shall only apply prospectively (and not apply retroactively) from and after the date on which Qualified Capital Stock actually becomes Disqualified Capital Stock under the foregoing definition. "DOCUMENTATION FEE" shall mean the cost and expenses to compensate the Agent for such use of inside counsel for completion of post-closing matters, modifications, waivers, releases, amendments or additional collateral with respect to the Loan Documents, the Collateral and/or the Obligations. "DOCUMENTS OF TITLE" shall mean all present and future documents (as defined in the U.C.C.) including, without limitation, all warehouse receipts, bills of lading, shipping documents, chattel paper, instruments and similar documents, all whether negotiable or not and all goods and Equipment relating thereto and all cash and non-cash proceeds of the foregoing. "DOMESTIC" shall mean (a) with respect to a Person, a Person formed under the laws of the United States or any state thereof, and (b) with respect to assets, that (i) such assets are located in the continental United States, Alaska or Hawaii or (ii) an acquisition of such assets by a Subsidiary formed under laws of a state of the United States of America. UTI - LOAN AND SECURITY AGREEMENT 8 12 "DOMESTIC ACQUISITION" shall mean the acquisition of a Person or business whose principal place of business and chief executive office is in the United States of America. "DOMESTIC RIGS" shall mean Rigs owned by each Company which are located in the 50 states of the United States of America. "EARLY TERMINATION DATE" shall mean the date on which the Companies terminate this Agreement or the Line of Credit which date is prior to an Anniversary Date. "EARLY TERMINATION FEE" shall: (a) mean the fee the Agent on behalf of the Lenders is entitled to charge the Companies if the Companies terminate the Line of Credit or this Agreement on a date prior to the fourth anniversary of the Closing Date; and (b) be determined by multiplying the Line of Credit by (i) seven-tenths of one percent (0.70%) if the Early Termination Date occurs on or prior to one year (1) after the Closing Date, (ii) one-half of one percent (0.50%) if the Early Termination Date occurs after one (1) year after the Closing Date but on or prior to two (2) years after the Closing Date (iii) three-tenths of one percent (0.30%) if the Early Termination Date occurs after two (2) years after the Closing Date but on or prior to three (3) years after the Closing Date; and (iv) two-tenths of one percent (0.20%) if the Early Termination Date occurs after three (3) years but prior to four (4) years after the Closing Date. "EBITDA" shall mean, in any period, all earnings before all (a) interest and tax obligations, (b) depreciation and depletion and (c) amortization for said period, all determined in accordance with GAAP on a basis consistent with the latest audited financial statements of the Companies, the Parent and their respective consolidated Subsidiaries but excluding the effect of extraordinary and non-reoccurring gains or losses and non-cash compensation expense for such period. "ELIGIBLE ACCOUNTS RECEIVABLE" shall mean, with respect to all Companies, the gross amount of the Companies' Trade Accounts Receivable that are subject to a valid, first priority and fully perfected lien and security interest in favor of the Agent on behalf of the Lenders and which conform to the warranties contained herein less, without duplication, the sum of (a) any returns, discounts, claims, credits and allowances of any nature (whether issued, owing, granted or outstanding); (b) reserves for: (i) sales to the government of the United States of America or to any agency, department or division thereof; (ii) foreign sales other than sales (x) secured by stand-by letters of credit (in form and substance satisfactory to the Agent) issued or confirmed by, and payable at, banks having a place of business in the United States of America and payable in United States currency, or (y) to customers residing in Canada, provided that such sales otherwise comply with all of the other criteria for eligibility hereunder and are payable in United States or Canadian currency; (iii) accounts that remain unpaid more than ninety (90) days from invoice date; (iv) contra accounts with respect to accounts receivable; (v) sales to Parent, any Subsidiary thereof, or to any company affiliated with Parent or any Company in any way; (vi) bill and hold (deferred shipment) or consignment sales; (vii) sales to any customer which is (w) insolvent, (x) a debtor in any bankruptcy, insolvency, arrangement, reorganization, receivership or similar proceedings under any federal or state law, (y) negotiating, or has called a meeting of its creditors for purposes of negotiating, a compromise of its debts or (z) financially unacceptable to the Agent or has a credit rating unacceptable to the Agent in the exercise of its reasonable credit judgement; (viii) all sales to any customer if fifty percent (50%) or more of UTI - LOAN AND SECURITY AGREEMENT 9 13 either (x) all outstanding invoices of such customer or (y) the aggregate dollar amount of all outstanding invoices of such customer, are unpaid more than ninety (90) days from invoice date; any other reasons deemed necessary by the Agent in its reasonable business judgment and which are customary either in the commercial finance industry; and (x) an amount representing probable returns, discounts, claims, credits, offsets and allowances (including, but not limited to, any of the foregoing attributable to Liens for the benefit of unpaid subcontractors of any Company) and; (c) accounts due from an account debtor to the extent that such accounts exceed, in the aggregate, thirty percent (30%) of the aggregate of all accounts as of the date of determination. As used in this definition, "sales" means the sale of goods or the charges for the performance of services. Eligible Accounts Receivable do not include any Accounts for which the Agent shall not have received monthly reports as the Agent shall require pursuant to Section 3, Paragraph 2 (but in any event reports shall be required to be provided pursuant to Section 7, Paragraph 8(b)(iii)(D) hereof). "ELIGIBLE ASSIGNEE" means (a) any Lender, (b) a commercial bank or financial institution organized or licensed under the laws of the United States, or a state thereof, and having total assets in excess of $500,000,000, or an asset based lender affiliated therewith, (c) a commercial bank organized under the laws of the OECD, or a political subdivision of any such country, and having total assets in excess of $500,000,000; provided that such bank is acting through a branch or agency located in the country in which it is organized, or another country which is also a member of the OECD; and (d) any other bank or financial institution approved by both the Agent and the Parent. "ELIGIBLE EQUIPMENT" shall mean, with respect to the Companies taken as a whole, the Orderly Liquidation Value (with Orderly Liquidation Value being based upon the then most recent Appraisal of Orderly Liquidation Value) of Qualified Domestic Rigs owned by such Companies that are subject to a valid, first priority and fully perfected lien and security interest in favor of the Agent for the benefit of the Lenders and which are not subject to any other Lien (other than Permitted Liens) and conform to the warranties contained herein and which at all times continue to be acceptable to the Agent in the exercise of its reasonable business judgment and less the applicable Availability Reserves. "EMPLOYEE PLAN" shall means any employee benefit plan, program or policy with respect to which each Company or any ERISA Affiliate may have any liability or any obligation to contribute, other than a Plan or a Multiemployer Plan. "ENVIRONMENTAL LAWS" shall mean applicable federal, state or local laws, rules or regulations, and any applicable judicial interpretations thereof, including any judicial or administrative order, judgment, permit, approval decision or determination, in each case pertaining to conservation or protection of the environment, in effect at the time in question, including the Clean Air Act, the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), the Federal Water Pollution Control Act, the Occupational Safety and Health Act, the Resource Conservation and Recovery Act, the Safe Drinking Water Act, the Toxic Substances Control Act, the Superfund Amendments and Reauthorization Act of 1986, the Hazardous Materials Transportation Act and analogous state and local laws as may be amended from time to time thereby imposing either more or less stringent requirements as relates to activity occurring after the date hereof of any such amendments. UTI - LOAN AND SECURITY AGREEMENT 10 14 "EQUIPMENT" shall mean all present and hereafter acquired equipment (as defined in the U.C.C.) including, without limitation, all Rigs, all Rig Accessories and all other machinery, equipment, furnishings and fixtures, and all additions, substitutions and replacements thereof, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto and all proceeds of whatever sort thereof; provided that notwithstanding the foregoing, Equipment shall not include drill pipe. "EQUIPMENT ADVANCE PERCENTAGE" shall mean fifty percent (50%). "ERISA" shall mean the Employee Retirement Income Security Act or 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "ERISA AFFILIATE" shall mean (a) any person which, together with each Company, is treated as a "single employer" under Section 414 of the Internal Revenue Code of 1986, as amended and the regulations thereunder, and (b) any Subsidiary of each Company. "EVENT(S) OF DEFAULT" shall have the meaning provided for in Section 10 of this Agreement. "EXCLUDED L/Cs" shall mean the aggregate undrawn face amount of standby Letters of Credit, not to exceed $1,700,000 in the aggregate, which Letters of Credit were issued on account of the Companies to insurance companies to assure payment of premiums and workers' claims in connection with workers' compensation claims. "EXCESS" shall have the meaning provided for in Section 3, Paragraph 8 of this Agreement. "FAIR MARKET VALUE" shall mean, with respect to any asset or property of any Obligor or any of its Subsidiaries, the value of the consideration obtained or obtainable in a cash sale of such asset or property in the open market between a willing buyer and willing seller under no compulsion to sell or buy, determined in an arm's length negotiation conducted in good faith and in an orderly market process in the ordinary course of business. "FINANCIALLY WEAKENED" shall mean a Person (i) has material liabilities, contingent or liquidated, which Agent believes, in its discretion, could be reasonably expected to have a Material Adverse Effect if such Person were made a participant in the consolidated cash management system of the Parent and its Subsidiaries or (ii) could reasonably be expected to have such negative cash flows for the foreseeable future that the Agent finds it unreasonable, in its discretion, to allow unlimited intercompany loans or advances thereto, or investments therein, while such condition persists. "FINANCIALS" shall have the meaning provided for in Section 7, Paragraph 18(g) of this Agreement. "FISCAL QUARTER" shall mean each three (3) month period ending on March 31, June 30, September 30 and December 31 of each year. UTI - LOAN AND SECURITY AGREEMENT 11 15 "FISCAL YEAR" shall mean each twelve (12) month period commencing on January 1 of each year and ending on the following December 31. "FIXED CHARGE COVERAGE RATIO" shall mean, for the twelve month period ending on the date of the then most recent consolidated financial statements of the Parent and its Subsidiaries delivered (or required to be delivered) to the Agent pursuant to Section 7, Paragraph 8, the ratio determined by dividing (a) EBITDA for Parent on a consolidated basis plus the aggregate of all proceeds received from the issuance of Capital Stock by (b) the sum (for such period) of (i) all interest obligations due, (ii) the amount of principal scheduled or required to be repaid on the Indebtedness For Borrowed Money for Parent on a consolidated basis, but excluding (A) principal portions of Indebtedness For Borrowed Money of Parent on a consolidated basis that are repaid or discharged directly with Capital Stock (which Capital Stock is issued within twelve months prior to such repayment or discharge), (B) principal portions of Indebtedness For Borrowed Money and other Indebtedness of the Parent on a consolidated basis that are refinanced using securities that constitute Indebtedness For Borrowed Money (other than the Revolving Loans) or proceeds therefrom (which securities are issued within twelve months prior to such refinancing), (C) the repayment of up to $3,500,000 of principal amount of the promissory notes originally issued on July 31, 1998, in the aggregate face amount of $7,790,000 to the former shareholders of SUITS Enterprises, Inc. in the event the Average Trading Value (as defined in such notes as in effect on the date hereof) exceeds $30.00 per share, and (D) principal portions of the Obligations, (iii) Capital Expenditures (other than for Permitted Acquisitions or replacements of assets subject to casualty occurrence with similar assets funded from insurance proceeds of such casualty occurrence or purchases of assets with proceeds from sales of assets permitted under this Agreement, (iv) all federal, state and local income tax expenses due and payable, and (v) all dividends of cash and property (other than dividends of Qualified Capital Stock). "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time and for the period as to which such accounting principles are to apply. "GENERAL INTANGIBLES" shall have the meaning set forth in the U.C.C. and shall include, without limitation, all present and future right, title and interest in and to all tradenames, Trademarks (together with the goodwill associated therewith), Patents, licenses, customer lists, distribution agreements, supply agreements, indemnification rights and tax refunds, together with all monies and claims for monies now or hereafter due and payable in connection with any of the foregoing or otherwise; all rights to payment, whether or not yet earned by performance, from time to time arising in connection with or otherwise relating to sales of Inventory by any Obligor to its customers including, without limitation, rights to payment from Obligors' customers pursuant to Obligors' trade credit agreements with their customers; and all cash and non-cash proceeds thereof. "GUARANTY" shall mean one or more guarantees to be executed and delivered by Guarantors on or before the Closing Date in favor of the Agent in form acceptable to the Agent, guaranteeing all present and future Obligations (as the same may be amended, modified or changed from time to time). UTI - LOAN AND SECURITY AGREEMENT 12 16 "GUARANTOR" shall mean any person who now or may hereafter guarantees payment or performance of all or any part of the Obligations, including, without limitation, each of the Guarantors (as defined in the first paragraph of this Agreement). "HAZARDOUS MATERIALS" means (a) hazardous waste as defined in applicable regulations issued pursuant to the Resource Conservation and Recovery Act of 1976, or in any applicable federal, state or local law or regulation, (b) hazardous substances, as defined in CERCLA, or in applicable state or local law or regulation, (c) gasoline or any other petroleum product, (d) toxic substances, as defined in the Toxic Substances Control Act of 1976, or in any applicable federal, state or local law or regulation, (e) insecticides, fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or in any applicable federal, state or, local law or regulation as each such act, statute or regulation may be amended from time to time, and (f) asbestos. "INDEBTEDNESS" shall mean, without duplication, all liabilities, contingent or otherwise, which are any of the following: (a) obligations in respect of money or for the deferred purchase price of property, services or assets, other than Inventory, or (b) lease obligations which, in accordance with GAAP, have been, or which should be, capitalized. "INDEBTEDNESS FOR BORROWED MONEY" shall mean, without duplication, all liabilities, contingent or otherwise, which are any of the following: (a) obligations in respect of borrowed money or for the deferred purchase price of property, services, stock or assets (and excluding extended trade terms of less than 365 days for purchases of Equipment, Inventory or services), or (b) lease obligations which, in accordance with GAAP, have been, or which should be, capitalized. "INDEMNIFIED PERSON" shall have the meaning specified in Section 7, Paragraph 13 of this Agreement. "INDEMNIFIED LIABILITIES" shall have the meaning specified in Section 7, Paragraph 13 of this Agreement. "INTELLECTUAL PROPERTY" shall mean all Trademarks, Patents, copyrights, copyright licenses and other related property which constitute General Intangibles. "INVENTORY" shall mean all of each Company's present and hereafter acquired inventory (as defined in the U.C.C.) including, without limitation, all drill pipe and all merchandise, inventory and goods, and all additions, substitutions and replacements thereof, wherever located, together with all goods and materials used or usable in manufacturing, processing, packaging or shipping same; in all stages of production from raw materials through work-in-process to finished goods and all proceeds thereof of whatever sort; provided that notwithstanding the foregoing, Inventory shall not include Rigs and Rig Accessories. "ISSUING BANK" shall mean the bank issuing Letters of Credit for any Company. "LETTERS OF CREDIT" shall mean all letters of credit issued with the assistance of the Agent on behalf of the Lenders by the Issuing Bank for or on behalf of any Company. UTI - LOAN AND SECURITY AGREEMENT 13 17 "LETTER OF CREDIT GUARANTY" shall mean the guaranty delivered by the Agent in behalf of the Lenders to the Issuing Bank of a Company's reimbursement obligation under the Issuing Bank's reimbursement agreement, Application for Letter of Credit or other like document. "LETTER OF CREDIT GUARANTY FEE" shall mean the fee the Agent in behalf of the Lenders may charge the Company under Section 8, Paragraph 6 of this Agreement for: (a) issuing the Letter of Credit Guaranty or (b) otherwise aiding the Company in obtaining Letters of Credit. "LETTER OF CREDIT SUB-LINE" shall mean $10,000,000 in the aggregate. "LIBOR" shall mean at any time of determination with respect to each interest period, the quotient obtained by dividing (i) the arithmetic average (rounded to the nearest 1/16 of 1%) of the offered quotation to first-class banks in the interbank eurodollar market by The Chase Manhattan Bank, N.A. (or its successor) for U.S. dollar deposits of amounts in same day funds generally comparable to the aggregate principal amount of the loan for which an interest rate is then being determined with maturities comparable to the LIBOR Period to be applicable to such loan, determined as of 10:00 A.M. (New York time) on the date which is two Business Days prior to the commencement of such LIBOR Period, (and rounded upward to the next whole multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable to any member bank of the Federal Reserve System in respect of eurocurrency liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D). In the event that The Chase Manhattan Bank, N.A. (or its successor) is unable or unwilling to make the applicable LIBOR rates known to the Agent, or if The Chase Manhattan Bank, N.A. (or its successor) no longer exists, then for each interest period LIBOR shall mean the London Interbank Offered rate paid in London on dollar deposits from other banks as determined by the Agent based upon information presented on Telerate Systems at Page 3750 as of 11:00 a.m. (London time) or the date which is on the date which is two Business Days prior to the commencement of such LIBOR Period (and rounded upward to the next whole multiple of 1/16 of 1%. "LIBOR LOAN" shall mean a Revolving Loan for which a Company has elected to use LIBOR for interest rate computations. "LIBOR PERIOD" shall mean the LIBOR for one month, two month, three month or six month U.S. dollar deposits, as selected by a Company. "LINE OF CREDIT" shall mean the commitment of the Lenders in the aggregate amount of $65,000,000 to (a) make Revolving Loans pursuant to Sections 3 and 4 of this Agreement, and (b) assist the Companies in opening Letters of Credit pursuant to Section 5 of this Agreement (up to the Letter of Credit Sub-Line). "LINE OF CREDIT FEE" shall: (a) mean the fee due the Agent for the benefit of the Lenders at the end of each month for the Line of Credit, and (b) be determined by multiplying (i) the difference between the Line of Credit and the sum of (x) the average daily balance of Revolving Loans of all UTI - LOAN AND SECURITY AGREEMENT 14 18 Companies plus (y) the average daily undrawn balance of all Letters of Credit for said month, by (ii) three-eighths of one percent (0.375%) per annum for the number of days in said month. "LOAN DOCUMENTS" shall mean, collectively, this Agreement and all notes (including the Promissory Notes), guarantees, security agreements and other agreements, documents and instruments now or at any time hereafter executed and/or delivered by any Obligor, a Canadian Finance Company or a Canadian Operating Company in connection with this Agreement (as the same may be amended, modified or changed from time to time). "LOAN FACILITY FEE" shall mean the fee payable to the Agent for the benefit of the Lenders in accordance with, and pursuant to, the provisions of Section 8, Paragraph 3 of this Agreement. "LOUISIANA PLEDGED COLLATERAL" shall have the meaning provided for in Section 6, Paragraph 11 of this Agreement. "MATERIAL ADVERSE EFFECT" shall mean, relative to any occurrence of whatever nature (including any adverse determination in any litigation, arbitration or governmental investigation or proceeding), (a) a material adverse effect on the financial condition, business, operations, prospects or assets of (i) the Parent and its Subsidiaries (including the Companies) taken as a whole or (ii) UTI on an individual basis, or (b) a material impairment of the ability of (i) the Parent and its Subsidiaries (including the Companies) taken as a whole or (ii) UTI on an individual basis, to perform obligations under the Loan Documents to which it is a party or (c) an impairment of the validity or enforceability of any Loan Document in any manner which materially affects any material rights and/or material benefits intended to be bestowed on Lenders and/or the Agent under the Loan Documents. "MATURITY DATE" means the fourth anniversary of the Closing Date. "MAXIMUM LEGAL RATE" shall mean the maximum lawful interest rate which may be contracted for, charged, taken, received or reserved under this Agreement or the Loan Documents by the Agent and/or the Lenders in accordance with applicable state or federal law (whichever provides for the highest permitted rate), taking into account all items contracted for, charged or received in connection with the Obligations evidenced hereby which are treated as interest under the applicable state or federal law, as such rate may change from time to time. "MOBILE RIGS" shall mean Rigs and Rig Accessories which are attached or affixed to, or comprise an integral part of, a vehicle, trailer or carrier. "MULTIEMPLOYER PLAN" shall mean any plan which is a "multiemployer plan" (as such term is defined in Section 4001(a)(3) of ERISA) to which each Company or any ERISA Affiliate contributes or has any obligation or liability to make contributions, including any withdrawal liability, contingent or otherwise. "NET BOOK VALUE" shall mean, the amount determined, on a consolidated basis, for property, plant and equipment (net of accumulated depreciation) as reflected on the Parent's consolidated financial statements as determined in accordance with GAAP. UTI - LOAN AND SECURITY AGREEMENT 15 19 "OBJECTION" means a claim by the Agent in its reasonable discretion that a Person that is or may be acquired is Financially Weakened. "OBLIGATIONS" shall mean all loans, advances, debts, liabilities and obligations for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or such amounts are liquidated or determinable) owing by any Obligor to the Agent or any Lender, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, arising under the Agreement or any of the other Loan Documents. This term includes all principal, interest (including all interest which accrues after the commencement of any case or proceeding in bankruptcy after the insolvency of, or for the reorganization of any Obligor, whether or not allowed in such proceeding), fees, charges, expenses, attorneys' fees and any other sum chargeable to any Obligor under the Agreement or any of the other Loan Documents. "OBLIGOR" shall mean each Company and each Guarantor, and "OBLIGORS" shall mean, collectively, all of the Companies and all of the Guarantors. "OECD" means the Organization for Economic Cooperation and Development. "OPERATING LEASES" shall mean all leases of property (whether real, personal or mixed) other than Capital Leases. "ORDERLY LIQUIDATION VALUE" shall mean, at any date of determination, with respect to any Equipment the value that would be obtained from a private sale thereof (net of sales and liquidation expenses) completed within a six (6) month period on an "as is and where is" basis where such sale is properly advertised and conducted under current market conditions by an Approved Appraiser. In the absence of an actual sale, such value shall have the meaning customarily determined by appropriate appraisal methodologies in the equipment appraisal industry at the time of the valuation, less the estimated marshaling, stacking, reconditioning and sale expenses designed to maximize the resale value of such Equipment as determined by an Approved Appraiser. Such value shall be determined based on the then physical condition and location (i.e., "as is and where is") of such Equipment, and their useful life and remaining useful life. An Approved Appraiser's valuation, in the absence of a sale, may be made with or without physical inspection, at the Agent's discretion, and except as otherwise provided in this Agreement such valuation as set forth in the then most recent Appraisal of Orderly Liquidation Value shall apply with respect to determinations of Orderly Liquidation Value under this Agreement. "OTHER COLLATERAL" shall mean all now owned and hereafter acquired deposit accounts maintained with any bank or financial institutions; all cash and other monies and property in the possession or control of the Agent and/or the Lenders; all books of account, records, customer lists, customer files, customer records, data bases and other records in any way relating to any of the foregoing, ledger cards, disks and related data processing computers and software and all rights, licenses, privileges, trade secrets and other rights for the possession and operation of same, at any time evidencing or containing information relating to any of the Collateral described herein, or UTI - LOAN AND SECURITY AGREEMENT 16 20 otherwise necessary or helpful in the collection thereof or realization thereon; all pension plan reversions; all letters of credit, credit memoranda and advices of credit for the benefit of Company, and all of Company's rights to enforce and receive payment thereof; all now owned and hereafter acquired investment property, including all "Investment Property" as that term is defined in Section 9-115 of the U.C.C.; and all cash and non-cash proceeds of the foregoing. "OTHER OVERADVANCES" shall have the meaning provided for in Section 8, Paragraph 1(b) of this Agreement. "OUT-OF-POCKET EXPENSES" shall mean all of the Agent's and/or the Lenders' present and future reasonable out of pocket expenses incurred relative to this Agreement, whether incurred heretofore or hereafter, which expenses shall include, without being limited to, the reasonable fees, costs and expenses of the Agent's and/or Lenders' legal counsel in connection with the preparation, negotiation, execution, amendment, administration and enforcement of this Agreement and/or the other loan and security documents executed in connection herewith or relating hereto from time to time, the cost of record searches, all costs and expenses incurred by the Agent and/or the Lenders in opening bank accounts, depositing checks, receiving and transferring funds, and any charges imposed on the Agent and/or the Lenders due to "insufficient funds" of deposited checks and the Agent's and/or the Lenders' standard fee relating thereto, any amounts paid by the Agent in behalf of the Lenders, incurred by or charged to the Agent in behalf of the Lenders by the Issuing Bank under the Letter of Credit Guaranty or any Company's reimbursement agreement, application for Letter of Credit or other like document which pertain either directly or indirectly to such Letters of Credit, and the Agent's and/or the Lenders' standard fees relating to the Letters of Credit and any drafts thereunder, reasonable travel, lodging and similar expenses of the Agent's personnel inspecting and monitoring the Collateral from time to time hereunder, local counsel fees, title insurance premiums, real estate survey costs, fees and taxes relative to the filing of financing statements, costs of preparing and recording mortgages/deeds of trust against the Real Estate and all expenses, costs and fees set forth in Section 10, Paragraph 3 of this Agreement. "OVERADVANCES" shall have the meaning provided in Section 3, Paragraph 1. "OVERADVANCE RATE" shall mean a rate equal to one-half of one percent (1/2%) per annum in excess of the applicable contract rate of interest determined in accordance with Section 8, Paragraph 1(a) of this Agreement. "PATENTS" shall mean all present and hereafter acquired patents and/or patent rights of each Company and all cash and non-cash proceeds thereof. "PERMITTED ACQUISITION" shall mean an Acquisition of any of the following in a transaction that meets the conditions precedent and other criteria for an Acquisition Facility Loan set forth in Section 4 of this Agreement (whether or not the proceeds of any Acquisition Facility Loans will be used in connection with such acquisition): (a) Rigs and/or Rigs Accessories (but excluding (i) maintenance and replacement components and parts (including installation) acquired in the ordinary course of business for existing UTI - LOAN AND SECURITY AGREEMENT 17 21 Rigs and Rigs acquired hereafter, (ii) drill pipe acquired in the ordinary course of business for Rigs, or (iii) purchases of tangible assets pursuant to the reinvestment of casualty insurance proceeds); and (b) acquisitions of 90% or more of the Capital Stock or all or substantially all of the assets of a Person engaged primarily in a Qualifying Business. "PERMITTED BUSINESS INVESTMENTS" means: (a) investments by UTI in any Person engaged primarily in a Qualified Business which, immediately after the making of such investment, is or becomes a Substantially-Owned Subsidiary of UTI and an Obligor pursuant to Section 4, provided that the Parent has furnished to the Agent the information described in Section 4 of this Agreement, except that such investments shall not be Permitted Business Investments to the extent that the Agent reasonably determines that the liabilities and other obligations (contingent or otherwise) of any Obligor resulting therefrom or associated therewith could reasonably be expected to have a Material Adverse Effect; (b) loans and other extensions of credit to officers, directors and employees of any Obligor and its Subsidiaries for travel, entertainment and moving and other relocation expenses made in direct furtherance and in the ordinary course of the business of any such Obligor or its Subsidiaries, provided that the aggregate principal amount of loans and other extensions of credit made pursuant to this clause (b) does not exceed $1,000,000 at any one time outstanding; (c) loans by any Obligor to NDM for NDM's working capital needs in an amount not to exceed $3,000,000 outstanding at any one time in the aggregate with respect to all loans by Obligors. (d) payments to any employee, officer or director of any Obligor or any of its Subsidiaries pursuant to employee benefit plans or compensation arrangements entered into in the ordinary course of business and approved by the Board of Directors of the applicable Obligor or such Subsidiary or payments, contributions or transactions relating to such plans; and (e) Permitted Joint Venture Investments; (f) Advances, contributions and loans or other investments, by an Obligor, in or to, a Canadian Operating Company for the purpose of consummating Permitted Acquisitions and working capital and other general purposes; provided that (i) the amount of such advances, contributions and loans do not exceed in the aggregate 125% of the total purchase price of Permitted Acquisitions consummated by such Canadian Operating Company, (ii) no more than 27% of such advances, contributions and loans may be in the form of an advance, contribution or other investment that is not a loan, and (iii) all such loans are secured by a Canadian First Priority Lien. (g) Advances, contributions, loans or other investments by an Obligor in or to a Canadian Finance Company, provided that, UTI - LOAN AND SECURITY AGREEMENT 18 22 (i) such advances, contributions, loans and other investments are for the purpose of funding the purchase from an Obligor of loans made pursuant to paragraph (f) of this definition or for general corporate and working capital of such Canadian Finance Company; (ii) such advances, contributions, loans or other investments are for the purpose of enabling such Canadian Finance Company to make loans to a Canadian Operating Company for the purpose of consummating Permitted Acquisitions or for general corporate and working capital purposes, provided that (A) the loans made by the Canadian Finance Company to the Canadian Operating Company do not exceed in the aggregate 125% of the total purchase price of Permitted Acquisitions consummated by such Canadian Operating Company less any advances, contributions, loans or investments made by an Obligor to the Canadian Operating Company pursuant to paragraph (f) of this definition, and (B) all such loans made by the Canadian Finance Company to the Canadian Operating Company are secured by a Canadian First Priority Lien; or (iii) the purpose of such advances, contributions, loans or other investments is for the purpose of purchasing loans made by another Canadian Finance Company to a Canadian Operating Company pursuant to clause (g)(ii) of this definition and the cash proceeds of the loans being purchased are being used to repay amounts due hereunder; or (iv) the purpose of such advances, contributions, loans and investments is to purchase loans (that do not exceed 125% of the total purchase price of Canadian Operating Company less any advances, contributions, loans or investments made by an Obligor to the Canadian Operating Company pursuant to paragraph (g) of this definition) made by a third party to a Canadian Operating Company that are secured by a Canadian First Priority Lien. "PERMITTED FINANCIAL INVESTMENTS" means the following kinds of instruments to the extent that the aggregate amount thereof outstanding do not exceed $15,000,000 at any time (except that such $15,000,000 limitation shall not apply for instruments described in subparagraphs (c) or (g) or (h) immediately below or in the event that no Revolving Loan is outstanding) during which there are any Revolving Loans outstanding: (a) investments in certificates of deposit in United States dollars or Canadian dollars maturing within one year from the date of issuance thereof, and overnight investments, issued by a bank or trust (i) organized under the laws of the United States or any state thereof, having capital, surplus and undivided profits aggregating at least $500,000,000, or (ii) organized under the laws of any jurisdiction other than the United States or any state thereof, provided that such foreign bank shall be one of the three most reputable, creditworthy banks in such country; or (iii) organized under the laws of Canada or any province thereof, having capital, surplus and undivided profits aggregating at least $500,000,000 or the Canadian dollar equivalent thereto; (b) deposit accounts (i) in a bank or trust organized under the laws of the United States or any state thereof or Canada or any province thereof, having capital surplus and undivided profits aggregating at least $200,000,000 and whose commercial paper (or that of the holding company with which such bank or trust company is affiliated) is rated A-1 or better by Standard & Poor's Rating Group or P-1 or better by Moody's Investors Service, Inc. or Canadian equivalent UTI - LOAN AND SECURITY AGREEMENT 19 23 rating service, if applicable, (ii) in banks outside of the United States, in currencies other than U.S. dollars, which banks provide working capital, operating accounts or similar services to one or more Subsidiaries of an Obligor at such foreign banks, provided that such foreign bank shall be one of the three most reputable, creditworthy banks in such country and (iii) in a bank organized under the laws of the United States or any state thereof or Canada or any province thereof not included in the descriptions in clause (i) or (ii) above, so long as the aggregate amount on deposit in such bank by any Obligor and its Subsidiaries does not exceed $5,000,000 or the Canadian equivalent thereof; (c) receivables arising from the sale of goods and services in the ordinary course of business of any Obligor and its Subsidiaries; (d) investments in eurodollars not in excess of $10,000,000 in the aggregate at any time outstanding, issued by any bank or trust company having capital, surplus and undivided profits aggregating at least $500,000,000 and whose long term certificates of deposit are, at the time of acquisition thereof by any Obligor, rated A-1 or better by Standard & Poor's Ratings Group of P-1 or better by Moody's Investor Service, Inc.; (e) marketable direct obligations issued or unconditionally guaranteed by the United States or Canadian government or issued by any agency thereof and backed by the full faith and credit of the United States or Canada, as the case may be, in each case maturing no later than one year from the date of acquisition; (f) money market, mutual or similar funds that invest in obligations referred to in clauses (a) or (d) of this definition, in each case having assets in excess of $500,000,000; (g) currency price hedging agreements, using customary ISDA swap documentation or comparable documentation, entered into for the purpose of hedging actual exposure on the currency price risks of its Qualified Business and not speculation (with a maximum liability not to exceed US $5,000,000 at any time for hedging of Mexican Pesos); or (h) the acquisition or ownership of Capital Stock or obligations or securities received in settlement of debts (created in the ordinary course of business) owing to any Obligor thereof. "PERMITTED INDEBTEDNESS" shall mean without duplication: (i) current indebtedness maturing in less than one year and incurred in the ordinary course of business for raw materials, supplies, equipment, services, taxes or labor; (ii) purchase money indebtedness secured only by the Purchase Money Liens; (iii) Subordinated Debt; (iv) deferred taxes and other expenses incurred in the ordinary course of business; (v) other indebtedness existing on the date of execution of this Agreement and listed in the most recent financial statement delivered to the Agent and the Lenders or otherwise disclosed in the Loan Documents to the Agent in writing; (vi) Indebtedness of (a) an Obligor owed to another Obligor, and (b) Indebtedness of an Obligor owed to a Subsidiary of the Parent that is not an Obligor, provided that such Indebtedness (other than accounts payable and intercompany charges in the ordinary course of business) is evidenced by a promissory note and is subordinated in writing (in a manner reasonably satisfactory to the Agent) in right of payment to the prior payment in full of UTI - LOAN AND SECURITY AGREEMENT 20 24 the Obligations (c) of the Parent or any Subsidiary thereof to the Parent or to any other Subsidiary thereof pursuant to the concentrated cash management system for (1) collections of accounts receivable or (2) disbursements to trade creditors; (vii) Indebtedness assumed as part of the acquisition of any entity or asset by any Obligor or any Subsidiary thereof, whether by merger, consolidation, purchase of assets or otherwise; provided that (A) such Indebtedness is not created, incurred or assumed in contemplation of such acquisition of such entity or asset and (B) the aggregate amount of all such Indebtedness constituting Indebtedness For Borrowed Money does not exceed $5,000,000 outstanding at any time, and (C) any Indebtedness discharged at the closing of such acquisition shall not be deemed or constitute assumed Indebtedness; (viii) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within two Business Days; (ix) Indebtedness arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guarantees, letters of credit, surety bonds or performance bonds securing any obligation of any Obligor, or any Subsidiary thereof, incurred or assumed in connection with the disposition of any business, assets or any Subsidiary of the Parent or any other Obligor or Subsidiary thereof other than Guarantees by any Obligor or any Subsidiary thereof of Indebtedness For Borrowed Money incurred by any Person acquiring all or a portion of such business, asset or Subsidiary for the purpose of financing such acquisition; provided that the maximum aggregate liability with respect to all such Indebtedness and the amount of Indebtedness subject to such Guarantees in each case with respect to a particular transaction, shall at no time exceed the gross proceeds actually received from the sale of such business, asset or Subsidiary; (x) Indebtedness constituting the net obligations of a Person as of the date of a required calculation under currency hedging agreements entered into in the ordinary course of business and not for the purposes of speculation; (xi) Permitted Obligor Refinancing Indebtedness; (xii) Indebtedness constituting a Permitted Business Investment (without duplication); (xiii) Indebtedness of a Subsidiary of any Obligor incurred in connection with a transaction permitted under Section 7, Paragraph 10H of this Agreement; (xiv) Indebtedness of the Obligors to the Agent and/or the Lenders arising under this Agreement and the other Loan Documents; (xv) Indebtedness of any Obligor or any Subsidiary thereof, not otherwise described above, not to exceed in the aggregate with respect to all Obligors and Subsidiaries taken as a whole $5,000,000 outstanding at any one time. "PERMITTED INTERCOMPANY BALANCES" means loans, advances, inter-company accounts, transfers and investments (including, but not limited to, loans made pursuant to the concentrated cash management system for collections of accounts receivable or disbursements to trade creditors) by any Obligor in, with or to any other Obligor; provided that (i) each such lender and borrower (or transferor and transferee, as the case may be) Obligor is Solvent after giving effect thereto, (ii) each such Obligor has received reasonably equivalent value in exchange for the transfers made and obligations incurred by it in connection therewith and (iii) loans, transfers or advances to or investments in Restricted Subsidiaries which were effected after the date of acquisition thereof by an Obligor that do not exceed in the aggregate the amount obtained by subtracting from the applicable Restricted Subsidiary Borrowing Base an amount equal to Revolving Loans from the Lenders to such Restricted Subsidiary. UTI - LOAN AND SECURITY AGREEMENT 21 25 "PERMITTED JOINT VENTURES" means an investment in a limited liability company, limited partnership or other entity for which there is no recourse liability beyond the amount of the investment made other than an Obligor (a) that is engaged in a Qualified Business; and (b) no debt or equity interest in which (other than directors' qualifying shares with respect to corporations formed under the laws of any country other than the United States of America) is or will be held by an officer or director of the Obligor or of any Subsidiary thereof, or any spouse, immediate family member of, or other relative having the same principal residence as, any such officer or director, or any trust the beneficiary of which is any of the foregoing parties or any other Affiliate of the Obligor (except the Obligor or any Subsidiary thereof). "PERMITTED JOINT VENTURE INVESTMENTS" means investments by any Obligor in a Permitted Joint Venture if, after giving effect to such Investment, the aggregate fair market value of all assets of the Obligors (determined on the date of transfer) transferred since the Closing Date to Permitted Joint Ventures (less the lesser of (a) aggregate fair market value (as determined in good faith by the Board of Directors of the Parent and evidenced by a resolution duly adopted by the Board of Directors of the Parent) and (b) the aggregate fair market value of all such assets subsequently transferred back to the Obligor) would not exceed five percent (5%) of the consolidated net worth of the Parent determined as of the end of the Parent's most recent fiscal quarter for which financial information is available immediately prior to the date of determination); provided that the Parent has provided to the Agent the information described in Section 4 of this Agreement, except that such investments shall not be Permitted Joint Venture Investments to the extent that the Agent reasonably determines that the liabilities an other obligations (contingent or otherwise) of any Obligor resulting therefrom or associated therewith could reasonably be expected to have a Material Adverse Effect. "PERMITTED LIENS" shall mean: (a) liens existing on the date hereof and listed on Schedule 1 hereto and other liens expressly permitted, or consented to, by the Agent; (b) Purchase Money Liens; (c) Customarily Permitted Liens; (d) liens granted to the Agent by any of the Companies; (e) liens for taxes not yet due and payable or which are being diligently contested in good faith by Parent or any direct or indirect Subsidiary thereof by appropriate proceedings and which liens are not (i) other than with respect to Real Estate, senior to the liens of the Agent or (ii) for taxes due the United States of America; (f) any renewal for any lien permitted by any of the preceding clauses with respect to the assets originally subject to such lien; provided that (i) the obligation secured is not increased to an amount greater than the outstanding amount secured by such lien as of the date of such renewal, (ii) the terms of the lien remain substantially identical to original terms and (ii) such lien is secured only by liens on those assets that secured such obligation prior to the renewal; (g) liens securing Permitted Obligor Refinancing Indebtedness, so long as such Permitted Obligor Refinancing Indebtedness is secured only by liens on those assets that secured such Indebtedness prior to the renewal, extension, refinancing, refund or repurchase or by liens otherwise permitted by this definition; (h) liens on assets acquired in a Permitted Acquisition that secure only Permitted Indebtedness assumed in such Permitted Acquisition (provided such liens that would not constitute Customarily Permitted Liens are disclosed to the Agent in connection with the delivery of information regarding such Permitted Acquisition pursuant to Section 4 of this Agreement); and (i) Customarily Permitted Liens on assets acquired, whether acquired in an asset purchase transaction or a stock purchase transaction, in a Permitted Acquisition. UTI - LOAN AND SECURITY AGREEMENT 22 26 "PERMITTED OBLIGOR REFINANCING INDEBTEDNESS" means (a) Indebtedness of any Obligor existing on the Closing Date, the terms of which have been amended, modified or supplemented in a manner that such Indebtedness does not (i) adversely affect the priority of such Indebtedness in right of payment in relation to the Revolving Loans, (ii) accelerate the maturity of such Indebtedness or (iii) shorten the Average Life of such Indebtedness and (b) Indebtedness of any Obligor, the net proceeds of which are used to renew, extend, refinance, refund or repurchase outstanding Indebtedness of the Obligor; provided that (A) if the Indebtedness being renewed, extended, refinanced, refunded or repurchased is pari passu with or subordinated in right of payment to the Revolving Loans, then such Indebtedness is pari passu with or subordinated in right of payment to the Revolving Loans at least to the same extent as the Indebtedness being renewed, extended, refinanced, refunded or repurchased, (B) such Indebtedness is incurred that is equal to or greater than the remaining Average Life at the time such Indebtedness is scheduled to mature no earlier than the Indebtedness being renewed, extended, refinanced, refunded or repurchased and such Indebtedness has an Average Life at the time such Indebtedness is incurred that is equal to or greater than the remaining Average Life of the Indebtedness being renewed, extended, refinanced, refunded or repurchased; provided, further, that such Indebtedness is in an aggregate principal amount (or, if such Indebtedness is issued at a price less than the principal amount thereof, the aggregate amount of gross proceeds therefrom is) not in excess of the sum of (x) the aggregate principal amount then outstanding of the Indebtedness being renewed, extended, refinanced, refunded or repurchased (or if the Indebtedness being renewed, extended, refinanced, refunded or repurchased was issued at a price less than the principal amount thereof, then not in excess of the amount of liability in respect thereof determined in accordance with GAAP, (y) the amount of accrued and unpaid interest, if any, on the Indebtedness being renewed, extended, refinanced, refunded or repurchased and (z) the amount of fees, expenses and costs related to the incurrence of such Permitted Obligor Refinancing Indebtedness; provided that, after giving effect thereto, the scheduled payments or aggregate outstanding amount of such Indebtedness is not increased to an amount greater than the outstanding amount thereof as of the date of such renewal, extension, refinancing, refund or repurchase, and (C) the material terms of such Indebtedness shall be substantially identical to the term that existing prior to such renewal, extension, refinancing, refund or repurchase except as expressly provided above. "PERSON" shall mean any individual, partnership, joint venture, firm, corporation, limited liability company or partnership, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "PLAN" shall mean any employee pension benefit plan (as defined in Section 3(2) of ERISA), subject to Title IV of ERISA or Section 412 of the Internal Revenue Code of 1986, as amended, other than a Multiemployer Plan, with respect to which Parent, its Subsidiaries or an ERISA Affiliate contributes or has an obligation or liability to contribute, including any such plan that may have been terminated. "PROJECTIONS" shall have the meaning provided for in Section 7, Paragraph 18(g) of this Agreement. UTI - LOAN AND SECURITY AGREEMENT 23 27 "PROMISSORY NOTES" shall mean each and every Revolving Loan Promissory Note, in the form of Exhibit A attached hereto, delivered by the Companies to the Agent to evidence the Revolving Loans, pursuant to, and repayable in accordance with, the provisions of Section 3 of this Agreement. "PURCHASE MONEY LIENS" shall mean liens on any item of equipment acquired after the date of this Agreement; provided that (i) each such lien shall attach only to the property to be acquired, (ii) for each aggregate purchase price for equipment in excess of $500,000, a description of the property so acquired is furnished to the Agent contemporaneously with the acquisition thereof, and (iii) the debt incurred in connection with such acquisitions shall not exceed in the aggregate $5,000,000 incurred in any Fiscal Year. "QUALIFIED BUSINESS" means the business of oil and gas well drilling, oil and gas well construction, oil and gas well completion and oil and gas well workover or well service, and any business reasonably related thereto. "QUALIFIED DOMESTIC RIGS" shall mean (i) Domestic Rigs and (ii) Mobile Rigs (which are located in the United States) to the extent Agent determines that such Mobile Rigs are subject to a perfected first priority lien in favor of the Agent and securing all Obligations. "QUALIFIED STOCK" means, with respect to any Person, any Capital Stock of such Person or a Subsidiary of Such Person that is not Disqualified Stock. "REAL ESTATE" shall mean fee and/or leasehold interests in the real property of each Obligor and each Subsidiary thereof which may be encumbered, mortgaged, pledged or assigned to the Agent or its designee in accordance with the terms of the Loan Documents from time to time. "REGULATION D" shall mean Regulation U of the Board (respecting eurocurrency liabilities), and all official rulings and interpretations thereunder or thereof. "REGULATION U" shall mean Regulation U of the Board (respecting margin credit extended by banks), as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof. "REGULATION X" shall mean Regulation X of the Board (respecting the Companies who obtain margin credit), as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof. "REQUESTED OVERADVANCES" shall have the meaning provided for in Section 8, Paragraph 1(b) of this Agreement. "REQUIRED LENDERS" shall mean Lenders holding more than sixty-five percent (65%) of the outstanding loans, advances, extensions of credit and commitments to each Company hereunder. "RESTRICTED PAYMENT" means (a) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of any of the Obligors now or hereafter outstanding, UTI - LOAN AND SECURITY AGREEMENT 24 28 (b) any redemption, retirement, purchase or other acquisition, direct or indirect, of any shares of any class of stock of any of the Obligors, now or hereafter outstanding, or of any warrants, rights or options to acquire any such shares, except to the extent that the consideration therefor consists of shares of stock (including warrants, rights or options relating thereto) of the Parent, and (c) any investment, loan or advance by any of the Obligors not permitted under Section 7, Paragraph 10G. "RESTRICTED SUBSIDIARY BORROWING BASE" means with respect to each Restricted Subsidiary, the sum of (A) the product of the Eligible Accounts Receivable of a Restricted Subsidiary multiplied by the Accounts Receivable Advance Percentage, and (B) the product of the Eligible Equipment of such Restricted Subsidiary multiplied by the Equipment Advance Percentage. "RESTRICTED SUBSIDIARIES" means first tier Subsidiaries of Parent formed, or acquired, after the date hereof (a) in connection with a business acquisition that the parties thereto have attempted to structure as a transaction that satisfies the requirements of Section 368 of the Internal Revenue Code of 1986, as amended, or (b) is designated as such by the Agent pursuant to Section 4, Paragraph 5(b) of this Agreement and (c) otherwise satisfies the requirements to be a Company in accordance with Section 4, Paragraph 5(a) hereof. "REVOLVING LOANS" shall mean the loans and advances made, from time to time, to or for the account of each Company by the Agent on behalf of the Lenders pursuant to Section 3 or Section 4 of this Agreement. "REVOLVING LOAN ACCOUNT" shall have the meaning specified in Section 3, Paragraph 6 of this Agreement. "REVOLVING LOAN COMMITMENT" shall mean, with respect to each Lender, the amount set forth under Lender's name on the signature pages hereof, or acquired by a Lender pursuant to Section 13, Paragraph 9, evidencing the amount of its commitment to make Revolving Loans, as the same may be reduced from time to time pursuant to this Agreement. "REVOLVING LOAN PROMISSORY NOTE" shall mean the promissory note in the form of Exhibit A hereto executed by each Company to evidence the Revolving Loans made by the Agent on behalf of the Lenders to each Company pursuant to Section 3 of this Agreement. "RIG(S)" shall mean all land-based drilling and workover rigs owned by any Company, together with all Rig Accessories which are installed on or affixed to such Rig (but excluding hard rock boring machinery and equipment directly owned by UHRB). "RIG ACCESSORIES" shall mean pumps, drilling equipment, machinery, equipment and parts and other miscellaneous assets indirect or necessarily related to the ownership of Rigs (but excluding hard rock boring machinery and equipment). "SETTLEMENT DATE" shall mean the date, weekly, and more frequently, at the discretion of the Agent, upon the occurrence of an Event of Default or a continuing decline or increase of the Revolving Loans that the Agent and the Lenders shall settle amongst themselves so that (x) the Agent UTI - LOAN AND SECURITY AGREEMENT 25 29 shall not have, as Agent, any money at risk and (y) on such Settlement Date the Lenders shall have a pro rata amount of all outstanding Revolving Loans, provided that each Settlement Date for a Lender shall be a Business Day on which such Lender and its bank are open for business. "SOLVENT" shall mean, with respect to any Person, (i) the fair value of such Person's assets exceeds the fair value of such Person's liabilities; (ii) such Person is generally able to pay its debts as they become due and payable; and (iii) such Person does not have unreasonably small capital to carry on its business as it is currently conducted absent extraordinary and unforeseen circumstances. "SUBORDINATED AGREEMENT" shall have the meaning specified in Section 7, Paragraph 1 of this Agreement. "SUBORDINATED DEBT" shall mean (i) the Indebtedness For Borrowed Money due a Subordinating Creditor (and the note evidencing such) which has been subordinated, by a Subordination Agreement, to the prior payment and satisfaction of the Obligations to the Agent and/or the Lenders (in form and substance satisfactory to the Agent), or (ii) the Indebtedness For Borrowed Money due to a creditor which Indebtedness For Borrowed Money has been subordinated to the prior payment and satisfaction of the Obligations to the Agent and the Lenders, by means of a written agreement whose terms are substantially similar to a Subordination Agreement. "SUBORDINATING CREDITOR" shall mean any party hereafter executing a Subordination Agreement. "SUBORDINATION AGREEMENT" shall mean (i) any agreement among any or all Obligors, a Subordinating Creditor, the Agent and, at the discretion of the Agent, the Lenders (or any of them) or (ii) any agreement among any or all Obligors, as the Subordinating Creditor, the Agent and, at the discretion of the Agent, the Lenders (or any of them), pursuant to which, in either case, the Subordinated Debt is subordinated to the prior payment and satisfaction of the Obligations to the Agent and the Lenders in form and substance satisfactory to the Agent upon execution and delivery thereof (as the same may be amended, modified or changed from time to time). "SUBSIDIARY" shall mean any corporation or other entity of which a Person owns, directly or indirectly, through one or more intermediaries, more than 50% of the Capital Stock or other equity interest at the time of determination. "SUBSTANTIALLY-OWNED SUBSIDIARY" means a Subsidiary of an Obligor in which such Obligor owns and controls, directly or indirectly, not less than ninety percent (90%) of the capital stock thereof (with power to vote on and control all matters of such Subsidiary). "TANGIBLE NET WORTH" shall mean at any date, total assets at such date less the sum of (a) intangible assets and (b) total liabilities, and shall be determined in accordance with GAAP, on a consistent basis with the latest audited financial statements. "TARGET" shall have the meaning assigned to such term in Section 4 of this Agreement. UTI - LOAN AND SECURITY AGREEMENT 26 30 "TRADE ACCOUNTS RECEIVABLE" shall mean that portion of Accounts which arises from the sale of Inventory or the rendition of services in the ordinary course of business. "TRADEMARKS" shall mean all present and hereafter acquired trademarks and/or trademark rights (together with the goodwill associated therewith) and all cash and non-cash proceeds thereof. "TRANSFEREE" shall have the meaning provided for in Section 13, Paragraph 5(b) of this Agreement. "TRIGGERING EVENT" shall have the meaning provided for in Section 3, Paragraph 4 of this Agreement. "TTM EBITDA" shall mean, as of any date of determination thereof, EBITDA of the Parent and all of its Subsidiaries on a consolidated basis for the twelve (12) consecutive month period immediately preceding the date of determination thereof; provided that, (i) on December 31, 1999, TTM EBITDA shall be determined for the twelve month period immediately preceding December 31, 1999 by multiplying the EBITDA for the period from June 30, 1999 through December 31, 1999 by 2, and (ii) on March 31, 2000, TTM EBITDA shall be determined for the twelve month period immediately preceding March 31, 2000 by multiplying the EBITDA for the period from June 30, 1999 through March 31, 2000 by 1.333. "U.C.C." shall mean the Uniform Commercial Code as in effect from time to time in the State of Texas. SECTION 2. CONDITIONS PRECEDENT The obligation of the Agent and the Lenders to make loans hereunder is subject to the satisfaction of, or waiver of, immediately prior to or concurrently with the making of such loans, the following conditions precedent: (a) LIEN SEARCHES - The Agent shall have received tax, judgment and U.C.C. searches satisfactory to the Agent for all locations presently occupied or used by any Obligor. (b) CASUALTY INSURANCE - The Companies shall have delivered to the Agent evidence satisfactory to the Agent that casualty insurance policies listing Agent as loss payee or mortgagee, as the case may be, are in full force and effect, all as set forth in Section 7, Paragraph 5 of this Agreement. (c) UCC FILINGS - Any documents (including, without limitation, financing statements) required to be filed in order to create, in favor of the Agent for the benefit of the Lenders a first and exclusive perfected security interest in the Collateral with respect to which a security interest may be perfected by a filing under the U.C.C. shall have been properly filed in each office in each jurisdiction required in order to create in favor of the Agent for the benefit of the Lenders a perfected lien on the Collateral. The Agent shall have received acknowledgement copies of all such filings (or, in lieu thereof, the Agent shall have received other evidence satisfactory to the Agent that all such filings UTI - LOAN AND SECURITY AGREEMENT 27 31 have been made); and the Agent shall have received evidence that all necessary filing fees and all taxes or other expenses related to such filings have been paid in full. (d) PAYMENT OF FEES AND EXPENSES - The fees and expenses, payable on or before the Closing Date as described in Section 8 of this Agreement, shall have been paid in full. (e) GUARANTEES - One or more guarantees shall have been executed and delivered by Guarantors in favor of the Agent in form acceptable to the Agent, guaranteeing all present and future Obligations. (f) OPINIONS - Counsel for each Obligor shall have delivered to the Agent opinions satisfactory to the Agent opining, inter alia, that, subject to the (i) filing, priority and remedies provisions of the U.C.C., (ii) the provisions of the Bankruptcy Code, insolvency statutes or other like laws, (iii) the equity powers of a court of law and (iv) such other matters as may be agreed upon with the Agent: (a) this Agreement, (b) the Guaranty of the Guarantors, and (c) all other specifically identified loan documents of each Obligor, (x) are valid, binding and enforceable according to their terms, (y) are duly authorized and (z) do not violate any terms, provisions, representations or covenants in the charter or by-laws of any Obligor or, to the best knowledge of such counsel, of any material loan agreement, mortgage, deed of trust, note, security or pledge agreement or indenture to which any Obligor is a signatory or by which any Obligor or its assets is bound. In addition, counsel for the Subordinating Creditor(s) shall have delivered an opinion satisfactory to the Agent that the Subordination Agreement(s) have been duly authorized, executed and delivered and constitute valid and binding agreements enforceable against such Subordinating Creditor(s) in accordance with the terms thereof. (g) PLEDGE AGREEMENT - Each Guarantor, as a pledgor, shall (a) execute and deliver to the Agent for the benefit of the Lenders a pledge and security agreement and stock powers pledging to the Agent for the benefit of the Lenders, as additional Collateral, all of the issued and outstanding stock of any and all of its Subsidiaries and, (b) deliver to the Agent for the benefit of the Lenders the stock certificates evidencing such stock together with duly executed stock powers with respect thereto. (h) ADDITIONAL DOCUMENTS - Each Obligor shall have executed and delivered to the Agent all loan documents necessary to consummate the lending arrangement contemplated by the Loan Documents. (i) SUBORDINATION AGREEMENT - The Subordinating Creditors, which shall include each Obligor in one Subordination Agreement and Canpartners Investments IV, LLC in another Subordination Agreement, shall have executed and delivered to the Agent their respective Subordination Agreements, in form and substance satisfactory to the Agent, subordinating the debt due the Subordinating Creditor by any Obligor to the prior payment and satisfaction of the Obligations to the Agent and/or the Lenders. (j) BOARD RESOLUTION - The Agent shall have received a copy of the resolutions of the Board of Directors of each Obligor authorizing the execution, delivery and performance of (i) this UTI - LOAN AND SECURITY AGREEMENT 28 32 Agreement, (ii) the Guaranty (in the case of Guarantors); and (iii) any related agreements, in each case certified by the Secretary or Assistant Secretary of the applicable Obligor as of the date hereof, together with a certificate of the Secretary or Assistant Secretary of the applicable Obligor as to the incumbency and signature of the officers of the applicable Obligor executing such agreements and any certificate or other documents to be delivered by them pursuant hereto, together with evidence of the incumbency of such Secretary or Assistant Secretary. (k) CORPORATE/LIMITED PARTNERSHIP ORGANIZATION - The Agent shall have received (i) a copy of the Certificate of Incorporation of each corporate Obligor certified by the Secretary of State of its incorporation, (ii) a copy of the By-Laws (as amended through the date hereof) of each corporate Obligor, certified by the Secretary or Assistant Secretary thereof; and (iii) a copy of the certificate of limited partnership of each limited partnership which is an Obligor certified by the secretary of state of the state of its formation. (l) OFFICER'S CERTIFICATE - The Agent shall have received an executed Officer's Certificate of each Obligor, satisfactory in form and substance to the Agent, certifying that: (i) the representations and warranties contained herein are true and correct in all material respects on and as of the date hereof; (ii) each Obligor is in compliance with all of the terms and provisions set forth in the Loan Documents to which it is a party; and (iii) no Default or Event of Default has occurred and is continuing. (m) ABSENCE OF DEFAULT AND MATERIAL ADVERSE CHANGE - No Default, Event of Default has occurred and is continuing or material adverse change in the financial condition, business, prospects, profits, operations or assets of any Obligor shall have occurred. (n) APPRAISALS - The Agent shall have received appraisals on each Company's Rigs, which appraisals shall be by an appraiser acceptable to the Agent and shall indicate an Orderly Liquidation Value of not less than $150,000,000 with respect to Rigs. (o) DELIVERY OF TITLES - Each Company shall deliver to the Agent the original certificates of title issued by the department of transportation or other corresponding instrumentality or agency of any State or jurisdiction which relates to any Rig owned by each Company that is also classified by such State or jurisdiction as a certificated vehicle, together with all such fees and documentation necessary or desirable, under applicable law, to endorse on such title and effectuate a first priority lien and security interest thereon in favor of the Agent for the benefit of the Lenders. (p) THE AGENT COMMITMENT LETTER - Each Company and each Obligor shall have fully complied, to the satisfaction of the Agent, with all of the terms and conditions of the Agent Commitment Letter. (q) LEGAL RESTRAINTS/LITIGATION - At the date of execution of this Agreement, there shall be no (x) litigation, investigation or proceeding (judicial or administrative) pending or threatened against any Obligor or its assets, by any agency, division or department of any county, city, state or federal government arising out of this Agreement, (y) injunction, writ or restraining order restraining or prohibiting the consummation of the financing arrangements contemplated under this Agreement UTI - LOAN AND SECURITY AGREEMENT 29 33 or (z) to the best knowledge of the Obligors, suit, action, investigation or proceeding (judicial or administrative) pending or threatened against any Obligor or its assets, which, in the opinion of the Agent if adversely determined would reasonably be expected to have a Material Adverse Effect. (r) DISBURSEMENT AUTHORIZATION - Each Company shall have delivered to the Agent all information necessary for the Agent to issue wire transfer instructions on behalf of each Company for the initial and subsequent loans and/or advances to be made under this Agreement including, but not limited to, disbursement authorizations in form acceptable to the Agent. (s) EXAMINATION AND VERIFICATION - The Agent shall have completed to the satisfaction of the Agent an examination and verification of the Accounts, Inventory, Equipment, books and records of each Obligor which examination shall indicate that, after giving effect to all loans, advances and extensions of credit to be made at closing, all of the Companies shall have an initial additional Availability of $25,000,000, all as more fully required by the Agent Commitment Letter. It is understood that such requirement contemplates that all debts, obligations and payables are current. (t) DEPOSITORY ACCOUNTS - Each Company shall have established a system of bank accounts with respect to the collection of Accounts and the deposit of proceeds of Equipment as shall be requested and acceptable to the Agent in all respects. (u) EXISTING REVOLVING CREDIT AGREEMENT - Each Obligor's existing credit agreement with Mellon Bank, N.A. shall be (x) terminated, (y) all loans and obligations of each Company and/or the Guarantors thereunder shall be paid or satisfied in full utilizing the proceeds of the initial Revolving Loans to be made under this Agreement and (z) all liens upon or security interests in favor of in connection therewith shall be terminated, assigned to the Agent and/or released upon such payment as specified by the Agent. (v) CERTAIN OTHER AGREEMENTS - A copy, certified by an executive officer of the Parent as being true and complete, of each of the following: (i) the limited partnership agreement of UTI and UTIMS certified by the general partner thereof, (ii) in the case of SDC, a copy of the outstanding promissory note and related merger documents, and (iii) in the case of the Obligors, the note purchase agreements and related documents (including amendments thereto in connection with the transactions contemplated by this Agreement) with Canpartners Investments IV, LLC. Upon the execution of this Agreement and the initial disbursement of loans hereunder, all of the above Conditions Precedent shall have been deemed satisfied except as each Company and the Agent shall otherwise agree herein or in a separate writing. SECTION 3. REVOLVING LOANS 1. Upon the Agent's receipt of an executed Revolving Loan Promissory Note, the Lenders agree, subject to the terms and conditions of this Agreement from time to time, and within (x) the Availability and (y) the Line of Credit, but subject to Lenders' right to make "overadvances", to make loans and advances to the Companies on a revolving basis (i.e., subject to the limitations set forth herein, each Company may borrow, repay and re-borrow Revolving Loans); provided, however, UTI - LOAN AND SECURITY AGREEMENT 30 34 that the Lenders shall not be obligated to lend to any Restricted Subsidiary an amount in excess of a sum equal to (1) the Restricted Subsidiary Borrowing Base less (2) the aggregate amount of all loans thereto by any and all Obligors. Subject to such limitations, the aggregate amount of such loans and advances outstanding shall be up to the sum of: (a) outstanding Eligible Accounts Receivable of the Companies multiplied by the Accounts Receivable Advance Percentage, plus (b) the lesser of (i) Net Book Value multiplied by the Equipment Advance Percentage or (ii) the aggregate value of Eligible Equipment of the Companies multiplied by the Equipment Advance Percentage, minus (c) the outstanding undrawn balance of Letters of Credit outstanding, and minus (d) the Availability Reserves. Each request shall constitute, unless otherwise disclosed in writing to the Agent and the Lenders a representation and warranty by each Company that (i) after giving effect to the requested advance, no Default or Event of Default has or will have occurred and be continuing, (ii) such requested Revolving Loan is within the Line of Credit and Availability, and (iii) the proceeds of such Revolving Loan shall be used (A) if the Revolving Loan is an Acquisition Facility Loan, solely for Permitted Acquisitions, and (B) if the Revolving Loan is not an Acquisition Facility Loan, for the purposes permitted for such loans as set forth in Section 7, Paragraph 18(l). All requests for loans and advances must be received by an officer of the Agent no later than 1:00 p.m., New York time, on the day on which such loans and advances are required and must designate the portion thereof which are Acquisition Facility Loans and the portion thereof which are Revolving Loans other than Acquisitions Facility Loans. Should the Agent for any reason honor requests for advances in excess of the limitations set forth herein, such advances shall be considered "overadvances" and shall be made in the Agent's sole discretion, subject to any additional terms the Agent deems necessary. 2. In furtherance of the continuing assignment and security interest in the Companies Accounts, each such Company may, at its option (but in all cases subject to Section 3, Paragraph 9 below) promptly after the creation of Accounts, execute and deliver to the Agent in such form and manner as the Agent may reasonably require, solely for the Agent's convenience in maintaining records of collateral, such confirmatory schedules of Accounts as the Agent may reasonably request, and such other appropriate reports designating, identifying and describing the Accounts as the Agent may reasonably require. In addition, each Company may, at its option (but in all cases subject to Section 3, Paragraph 9 below) provide the Agent with copies of agreements with, or purchase orders from, such Company's customers, and copies of invoices to customers, proof of shipment or delivery and such other documentation and information relating to said Accounts and other collateral as the Agent may reasonably require. Failure to provide the Agent with any of the foregoing shall in no way affect, diminish, modify or otherwise limit the security interests granted herein. Each Company hereby authorizes the Agent to affix such Company's printed name or rubber stamp signature on assignment schedules or invoices as the equivalent of a manual signature by one of each Company's authorized officers or agents. 3. (a) The Obligors hereby jointly and severally represent and warrant that: each Trade Account Receivable of each Company is based on an actual and bona fide sale and delivery of goods or rendition of services to its customers, made by such Company in the ordinary course of its business; Equipment and the other goods, if any, being sold and the Trade Accounts Receivable created are the exclusive property of such Company and are not and shall not be subject to any lien, consignment arrangement, encumbrance, security interest or financing statement whatsoever, other than the Permitted Liens; the invoices evidencing such Trade Accounts Receivable are in the name UTI - LOAN AND SECURITY AGREEMENT 31 35 of such Company; and the customers of such Company have accepted the goods or services, owe and are obligated to pay the full amounts stated in the invoices according to their terms, without dispute, offset, defense, counterclaim or contracts, except for disputes and other matters arising in the ordinary course of business with respect to which such Company has complied with the notification requirements of Paragraph 5 of this section; (b) The Obligors confirm to the Agent that any and all taxes or fees relating to each Company's business, sales, the Accounts or goods relating thereto, are such Company's sole responsibility and that same will be paid by such Company when due and that none of said taxes or fees represent a lien on or claim against the Accounts. Each Company agrees to maintain such books and records regarding Accounts as the Agent may reasonably require and agrees that the books and records of each Company will reflect the Agent's interest in the Accounts. All of the books and records of each Company will be available to the Agent at normal business hours, including any records handled or maintained for such Company by any other company or entity (including any Guarantor); provided, however, that the inclusion of this provision is not intended to waive the attorney-client privilege with respect to legal files in the possession of counsel to the Obligors. 4. Until the Agent has advised the Parent to the contrary after the occurrence of a Triggering Event (as defined below), the Companies may and will enforce, collect and receive all amounts owing on the Accounts for the Agent's and Lenders' benefit and on their behalf, but at the Companies' expense; such privilege shall terminate automatically upon the institution by or against any Company of any proceeding under any bankruptcy or insolvency law or, at the election of the Agent, upon the occurrence of any Triggering Event and until such Triggering Event is waived in writing by the Agent or cured to the Agent's satisfaction. Any checks, cash, notes or other instruments or property received by a Company with respect to any Accounts or other proceeds of Collateral shall be held by or on behalf of such Company in trust for the Agent for the benefit of the Lenders, separate from such Company's own property and funds, and immediately deposited to the special depository accounts in the Agent's name at a depository institution designated by the Agent for such purposes (the "DEPOSITORY ACCOUNTS"). Each such Depository Account shall be covered by a tri-party blocked account agreement in form and substance acceptable to Agent among such depository institution, Agent and each Company. Each such blocked account agreement shall provide, among other things, that (i) all items of payment deposited in such accounts and proceeds thereof deposited in the applicable Depositary Account are held by such depositary institution as agent or bailee-in-possession for Agent, (ii) the depositary institution executing such agreement has no rights of setoff or recoupment or any other claim against such account, as the case may be, other than for payment of its service fee and other charges directly related to the administration of such account and for returned checks or other items of payment, and (iii) following Agent giving notice to such depositary institution to do so (which notice Agent agrees not to give to such bank prior to the occurrence of a Triggering Event), such depositary institution agrees to immediately forward all amounts received in the applicable Depositary Account to Agent. From and after the occurrence of a Triggering Event, no Obligor shall, or shall cause or permit any Subsidiary thereof to, accumulate or maintain cash in disbursement or payroll accounts as of any date of determination in excess of checks outstanding against such accounts as of that date and amounts necessary to meet minimum balance requirements. As used in this Agreement, "TRIGGERING EVENT" means: (A) an Event of Default has occurred and is continuing or (B) the amount of Availability, determined without regard UTI - LOAN AND SECURITY AGREEMENT 32 36 to the Excluded L/Cs, at any time is less than $15,000,000. All amounts received by the Agent in payment of Accounts ("COLLECTIONS") will be credited to the Companies' accounts on the Business Day of the Agent's receipt of "good funds" at the Agent's bank account in New York, New York on the Business Day of receipt if received no later than 1:00 p.m. (New York City time) or on the next succeeding Business Day if received after 1:00 p.m. (New York City time). No checks, drafts or other instrument received by the Agent shall constitute final payment to the Agent unless and until such instruments have actually been collected. If all Triggering Events which occur cease to continue for a period of thirty (30) consecutive days, in the reasonable judgment of the Agent based on relevant information provided by the Parent, then the Parent shall resume the enforcement, collection and receipt of all amounts owing on Accounts pursuant to the first sentence of this Paragraph 4, as was in effect prior to the occurrence of such Triggering Events (except as otherwise provided in Section 10 of this Agreement). 5. The Parent agrees to notify the Agent promptly of any matters materially affecting the value, enforceability or collectibility of any Account and of all material customer disputes, offsets, defenses, counterclaims, returns, rejections and all reclaimed or repossessed merchandise or goods. The Parent agrees to issue credit memoranda promptly (with duplicates to the Agent upon request after the occurrence of an Event of Default that is continuing) upon accepting returns or granting allowances, and may continue to do so until the Agent has notified the Parent that an Event of Default has occurred and is continuing and that all future credits or allowances are to be made only after the Agent's prior written approval. Upon the occurrence of an Event of Default that is continuing and until such time as such Event of Default is no longer continuing or is waived in writing by the Agent or cured to the Agent's satisfaction and on notice from the Agent, each Company agrees that all returned, reclaimed or repossessed merchandise or goods shall be set aside by each Company, marked with the Agent's name and held by the Companies for the Agent's account as owner and assignee. 6. The Agent shall maintain a separate account on its books in Parent's name (the "REVOLVING LOAN ACCOUNT") in which the Companies will be charged with loans and advances made by the Agent to them or for their account, and with any other Obligations, including any and all costs, expenses and reasonable attorney's fees which the Agent may incur in connection with the exercise by or for the Agent of any of the rights or powers herein conferred upon the Agent, or in the prosecution or defense of any action or proceeding to enforce or protect any rights of the Agent in connection with this Agreement or the Collateral assigned hereunder, or any Obligations owing to the Agent and the Lenders by each Company. The Companies will be credited with all amounts received by the Agent and/or the Lenders from such Companies or from others for the Companies' account, including, as above set forth, all amounts received by the Agent in payment of assigned Accounts and such amounts will be applied to payment of the Obligations. In no event shall prior recourse to any Accounts or other security granted to or by such Companies be a prerequisite to the Agent's right to demand payment of any Obligation from any Obligor. Further, it is understood that the Agent and/or the Lenders shall have no obligation whatsoever to perform in any respect any of any Company's contracts or obligations relating to the Accounts. 7. After the end of each month, the Agent shall promptly send the Parent a statement showing the accounting for the charges, loans, advances and other transactions occurring between the Agent and the Companies during that month. The monthly statements shall be deemed correct UTI - LOAN AND SECURITY AGREEMENT 33 37 and binding upon the Companies and shall constitute an account stated between such Companies and the Agent unless the Agent receives a written statement of the exceptions within thirty (30) days of the date of the monthly statement. 8. In the event that the sum of (i) the outstanding balance of Revolving Loans and (ii) outstanding balance of Letters of Credit exceeds (x) the maximum amount thereof available under Sections 3 and 5 of this Agreement or (y) the Line of Credit (herein the amount of any excess shall be referred to as the "Excess"), such Excess shall be due and payable to the Agent for the benefit of the Lenders immediately upon the Agent's demand therefor. 9. Until such time as a Company provides the information required by the Agent under Section 3, Paragraphs 2 above, such Company's Trade Accounts Receivable shall not be included as Eligible Accounts Receivable for purposes of calculating Availability. Notwithstanding the foregoing, such Company shall provide monthly summaries of Accounts in form and substance reasonably satisfactory to the Agent described in Section 7, Paragraph 8(b)(iii)(D) of this Agreement. SECTION 4. ACQUISITION FACILITY LOANS AND PERMITTED ACQUISITIONS 1. Dollar Amount of Acquisition Facility Loans. UTI shall be permitted to borrow Revolving Loans for the purpose of the Parent, UTI, or a wholly-owned (except to the extent of Canadian Exchangeable Shares) subsidiary of UTI consummating Permitted Acquisitions ("ACQUISITION FACILITY LOANS") subject to the following conditions: (a) (i) Following the making of such Revolving Loan and consummation of the Permitted Acquisition, there is at least $15 million of Availability (determined without regard to the Excluded L/C's) and no more than an aggregate of $45 million of Revolving Loans outstanding, and (ii) until the Obligors have invested in the aggregate $25 million in cash (whether cash on hand or cash provided from Revolving Loans to consummate Permitted Acquisitions pursuant to this Section 4) in Permitted Acquisitions that are Domestic Acquisitions, the aggregate amount of Revolving Loans outstanding for the purpose of consummating Canadian Acquisitions cannot exceed the sum of (A) $20 million plus (B) the amount of cash invested in Domestic Acquisitions (whether cash on hand or cash provided from Revolving Loans); or (b) UTI and the Parent received the Agent's prior written approval, which approval shall be given or not given in the Agent's sole and absolute discretion. 2. Acquisition Request. In addition, an Obligor's ability to consummate Permitted Acquisitions and UTI's ability to borrow Revolving Loans for the purpose of consummating Permitted Acquisitions are subject to the Parent providing to the Agent at least ten (10) Business Days (except as otherwise stated below or the context otherwise requires) prior to the funding of the Acquisition Facility Loan or the consummation of the Permitted Acquisition the following: (a) (i) in the case of (A) an acquisition of capital stock of a Person or all or substantially all of the assets of a Person, the name of the Person (the "TARGET") which is to be acquired or whose assets are to be acquired, and (B) an acquisition of Rigs or Rig Accessories, the UTI - LOAN AND SECURITY AGREEMENT 34 38 name of the Person from whom the same are to be acquired; (ii) in the case of (A) an acquisition of Capital Stock of a Person or all or substantially all of the assets of a Person, a description of the nature of the Target's business, and (B) an acquisition of Rigs or Rig Accessories, a description of the Rigs or Rig Accessories to be acquired; (b) copies of the current drafts of documentation as and when prepared; (c) copies of substantially final drafts of such documentation at least one (1) Business Day prior to the earlier to occur of (i) the proposed funding date of the Acquisition Facility Loan intended to effect the proposed acquisition or (ii) the date such proposed acquisition is expected to be consummated (the "ACQUISITION AGREEMENTS"); (d) a summary of the terms and conditions of the proposed acquisition; (e) a certificate of the chief financial officer or chief executive officer of the Parent dated on or within two (2) days prior to the earlier to occur of the proposed funding date of the Acquisition Facility Loan or date such Permitted Acquisition is expected to be consummated certifying (i) the total amount of cash that has been used for Permitted Acquisitions as of that date in Canada and the United States, and (ii) that no Default or Event of Default exists that is continuing or could reasonably be expected to occur as a result of the proposed acquisition; and (f) any other information the Agent may reasonably request from time to time prior to such funding or date such Permitted Acquisition is expected to be consummated that is available to such Obligor. In addition, at least three (3) Business Days prior to the earlier to occur of (x) the date that the proposed funding of the Acquisition Facility Loan or (y) date such proposed acquisition is expected to be consummated, the Parent and UTI must have been available to the Agent and the Lenders to answer questions regarding the proposed acquisition and the documentation related thereto. 3. Acquisition Criteria. In addition, the Obligor's ability to consummate Permitted Acquisitions and UTI's ability to borrow Revolving Loans for the purpose of consummating Permitted Acquisitions are subject to the Parent providing the Agent with evidence of the following: (a) Parent has completed due diligence on the Target and the assets to be acquired, as the case may be, reasonably satisfactory to Parent, including, without limitation, if applicable, a due diligence investigation as to the compliance with all Environmental Laws by the Target and the assets to be acquired; (b) Target's material business activities are in a Qualified Business; (c) Unless the Agent otherwise consents, if the proposed acquisition is an acquisition of the stock of a Target, the acquisition will be structured so that the Target will become a direct or indirect Substantially-Owned Subsidiary of UTI; provided that if more than 50% of the consideration to be paid for the acquisition is comprised of the Parent's stock the Target may become UTI - LOAN AND SECURITY AGREEMENT 35 39 a direct Subsidiary of Parent if reasonably required in order for the transaction to qualify as a tax-free reorganization pursuant to Section 368 of the Internal Revenue Code of 1986, as amended. If the proposed acquisition is an acquisition of assets, the acquisition will be structured so that a direct Substantially-Owned Subsidiary owned by UTI shall acquire the assets. (d) If the proposed acquisition is a Canadian Acquisition: (i) the Target to be acquired or the acquisition company to be formed or existing for purposes of owning the assets to be acquired (each a "CANADIAN OPERATING COMPANY") shall become a direct or indirect wholly-owned subsidiary of UTI (except for Canadian Exchangeable Shares); (ii) 66% of the Capital Stock of each Canadian Operating Company (except for Canadian Exchangeable Shares) shall be pledged to the Agent for the benefit of the Lenders (and constitutes a first priority, fully perfected lien and security interest on such stock); and (iii) Any funds advanced to the Canadian Operating Company or through a Canadian Finance Company for purposes of consummating the proposed acquisition shall qualify as Permitted Business Investments. (e) Neither the Target nor its assets nor the acquired assets, as the case may be, shall be subject to any contingent obligations (including contingent obligations arising from any environmental liabilities), environmental liabilities, unsatisfied judgments or any pending action, charge, claim, demand, suit, proceeding, petition, governmental investigation or arbitration that (A) the Agent reasonably determines could reasonably be expected to have a Material Adverse Effect and (B) are not subject to indemnification or adjustment to acquisition consideration (or taken into account in the determination of acquisition consideration) or other remedy reasonably satisfactory to the Agent. (f) The Parent shall have provided to the Agent each of the following to the extent that they are reasonably available to the Parent: (A) copies of (x) the internally prepared financial statements of the Target, for the twelve (12) month period prior to the closing of the proposed acquisition for which financial statements are available and (y) audited or reviewed financial statements to the extent they exist for the two (2) most recently completed fiscal years of the Target, and (B) a pro forma financial projection of the Parent and its Subsidiaries (including the Target) for the period following the date of the consummation of the proposed acquisition through the end of the next succeeding Fiscal Year which reflects compliance with the financial covenants set forth in this Agreement. 4. Acquisition Agreements. As soon as practicable following the earlier to occur of the consummation of the proposed acquisition or the funding of the Acquisition Facility Loans to be used for the proposed acquisition: (a) Agent shall have received executed copies of the Acquisition Agreements relating to the proposed acquisition and shall, in the ordinary course of business, have UTI - LOAN AND SECURITY AGREEMENT 36 40 forwarded copies thereof to the Lenders; (b) the Acquisition Agreements shall be in full force and effect and no material term or condition thereof shall have been amended, modified, or waived after the execution thereof (other than solely to extend the date by which the proposed acquisition is required to occur) except those for which prior written notice was provided to Agent; (c) none of the parties to the Acquisition Agreements shall have failed to perform any material obligation or covenant required by the Acquisition Agreement to be performed or complied with by it on or before the date of the closing of the proposed acquisition unless waived with the consent of the Agent; and (d) Agent shall have received a certificate from the Company's chief executive officer or chief financial officer to the effect set forth in clauses (a), (b) and, to his knowledge, (c) above. 5. Acquisition Loan Documents. (a) If the proposed acquisition is an acquisition of the stock of a Domestic Person, then: (i) the Target shall, upon consummation of such acquisition, become a "Company" for all purposes under the Loan Documents and shall execute and deliver to Agent documentation reasonably required by the Agent in connection therewith, including, without limitation, documentation confirming that such Person is or will be a Company or a Restricted Subsidiary under the Loan Documents and an agreement in writing (in form and substance reasonably satisfactory to the Agent) providing for the subordination of inter-company indebtedness to the Obligations owed to the Agent and the Lenders; (ii) the Obligors shall execute and deliver to the Agent an amendment to the relevant Loan Documents describing as collateral thereunder the stock of the Person and other Collateral owned by such Person (together with documents incident thereto); and (iii) the acquiring Obligor shall deliver to the Agent the certificates representing the stock of such Person together with undated stock powers duly executed in blank. If the proposed acquisition is an acquisition of Domestic assets, UTI shall execute and deliver the Agent such documentation requested by Agent to cause the property acquired to be subject to a fully perfected lien and security interest in favor of Agent for the benefit of the Lenders and for such lien to have priority over all other liens other than Permitted Liens. (b) If, after giving effect to a Permitted Acquisition, the Availability is or would be less than $30,000,000, then the Parent shall notify the Agent in writing, as soon as practicable (but in no event more than five (5) Business Days) after closing of such Acquisition in the event that, (i) any Obligor effected a Permitted Acquisition of the Capital Stock of a Domestic Subsidiary, (ii) such Subsidiary is or could be determined by Agent to be Financially Weakened, and (iii) such Subsidiary is a first tier Subsidiary of the Parent. Such Subsidiary shall be a Restricted Subsidiary for thirty (30) days after the Agent receives written notice unless otherwise provided by operation of this Paragraph 5(b). Within thirty (30) days after the Agent receives such written notice, the Agent shall notify the Parent if the Agent has an Objection to such Subsidiary (or its successor) becoming an Obligor, in which event such Subsidiary (or its successor) shall become and remain a Restricted Subsidiary until such time as the Agent determines, in the Agent's reasonable discretion, that it has no further Objection or such Subsidiary becomes a Subsidiary of UTI. If the Agent fails to assert its Objection, in writing, within such thirty (30) day period, such Subsidiary shall instead not become a Restricted Subsidiary of UTI. Regardless of whether a Subsidiary is a Restricted Subsidiary under this clause (b), however, such Subsidiary shall become a "Company" on the closing of such transaction, and the Agent, the Lenders and the Obligors shall execute all documents (as contemplated in Paragraph 5(a) above) as may be reasonably required to make such Subsidiary a "Company" hereunder. Parent shall cause each Domestic Subsidiary to become a participant in the Parent's consolidated cash UTI - LOAN AND SECURITY AGREEMENT 37 41 management system, (A) in the event such Subsidiary never becomes a Restricted Subsidiary, as soon as practicable but in no event later than twenty (20) months after the acquisition of such Subsidiary, or (B) in the event the Subsidiary becomes a Restricted Subsidiary, as soon as practicable following the date such Subsidiary ceases to be considered a Restricted Subsidiary, but in no event later than twenty (20) months after such date. (c) If, after giving effect to Permitted Acquisition of the Capital Stock of a Domestic Person, Availability exceeds $30,000,000, then such Person (or its successors) shall, upon the closing of the Acquisition thereof, become a "Company" for all purposes hereof, and the parties hereto shall execute all such documents (as contemplated in Paragraph 5(a) above) as may be reasonably required to effect such result, and such Subsidiary shall not be a Restricted Subsidiary. (d) Within thirty (30) days following the closing of each Permitted Acquisition, the Parent shall provide the Agent for the benefit of the Lenders with a complete certified copy or executed original of all Acquisition documents, instruments and agreements executed and delivered in connection with such Acquisition. (e) Any Company that is a Restricted Subsidiary may not become part of the Parent's consolidated cash management system without the prior written approval of the Agent. Any Company that is not a Restricted Subsidiary may become a member of the Parent's consolidated cash management system at any time at the Parent's discretion. SECTION 5. LETTERS OF CREDIT In order to assist the Companies in establishing or opening Letters of Credit with an Issuing Bank to cover the purchase of inventory, equipment or otherwise, each Company has requested the Agent in behalf of the Lenders to join in the applications for such Letters of Credit, and/or guarantee payment or performance of such Letters of Credit and any drafts or acceptances thereunder through the issuance of the Letters of Credit Guaranty, thereby lending the Agent's and Lenders' credit to the Company and the Agent and the Lenders have agreed to do so. These arrangements shall be handled by the Agent subject to the terms and conditions set forth below. 1. Within the Line of Credit and the Availability, the Agent and the Lenders shall assist the Companies in obtaining Letter(s) of Credit in an amount not to exceed the available portion of the Letter of Credit Sub-Line in the aggregate outstanding at any one time. The Agent's and Lenders' assistance for amounts in excess of the limitation set forth herein shall at all times and in all respects be in the Agent's sole discretion. It is understood that the form, expiry date and purpose of each Letter of Credit must be acceptable to the Agent in its reasonable business judgment. Any and all outstanding Letters of Credit shall be treated as a Revolving Loan for Availability purposes. Notwithstanding anything herein to the contrary, so long as an Event of Default shall have occurred and be continuing, the Agent's and Lenders' assistance in connection with the Letter of Credit Guaranty shall be in the Agent's sole discretion unless such Event of Default is no longer continuing or cured to the Agent's satisfaction or waived by the Agent in writing. UTI - LOAN AND SECURITY AGREEMENT 38 42 2. The Agent shall have the right, without notice to any Company, to charge such Company's Revolving Loan Account on the Agent's books with the amount of any and all indebtedness, liability or obligation of any kind incurred by the Agent under the Letters of Credit Guaranty at the earlier of (a) payment by the Agent under the Letters of Credit Guaranty, or (b) so long as an Event of Default shall have occurred and be continuing. Any amount charged to a Company's Revolving Loan Account shall be deemed a Revolving Loan hereunder and shall incur interest at the rate provided in Section 8, Paragraph 1 of this Agreement. 3. The Obligors jointly and severally unconditionally indemnify the Agent and the Lenders and hold the Agent and the Lenders harmless from any and all loss, claim or liability incurred by the Agent and/or the Lenders arising from any transactions or occurrences relating to Letters of Credit established or opened for any Company's account, the collateral relating thereto and any drafts or acceptances thereunder, and all Obligations thereunder, including any such loss or claim due to any action taken by any Issuing Bank, other than for any such loss, claim or liability arising solely out of the gross negligence or willful misconduct by the Agent and/or the Lenders under the Letters of Credit Guaranty. The Obligors further agree jointly and severally to hold the Agent and the Lenders harmless from any errors or omission, negligence or misconduct by the Issuing Bank. Such unconditional obligation of the Obligors to the Agent and the Lenders hereunder shall not be modified or diminished for any reason or in any manner whatsoever, other than as a result of the Agent's and/or the Lenders' gross negligence or willful misconduct. The Obligors agree that any charges incurred by the Agent and/or the Lenders for the account of the Companies by the Issuing Bank shall be conclusive on the Agent and the Lenders and may be charged in the manner determined by the Agent to the Revolving Loan Accounts of the appropriate Companies. 4. The Agent and/or the Lenders shall not be responsible for: the existence, character, quality, quantity, condition, packing, value or delivery of the goods purporting to be represented by any documents; any difference or variation in the character, quality, quantity, condition, packing, value or delivery of the goods from that expressed in the documents; the existence, character, quality or value of services, related to such documents; the validity, sufficiency or genuineness of any documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged; the time, place, manner or order in which shipment is made; partial or incomplete shipment, or failure or omission to ship any or all of the goods referred to in the Letters of Credit or documents; any deviation from instructions; delay, default, or fraud by the shipper and/or anyone else in connection with the Collateral or the shipping thereof; or any breach of contract between the shipper or vendors and the Company. Furthermore, without being limited by the foregoing, the Agent and/or the Lenders shall not be responsible for any act or omission with respect to or in connection with any Collateral. 5. Any action authorized or permitted under this Agreement and taken by the Agent and/or the Lenders, if taken in good faith, or any action taken by any Issuing Bank, under or in connection with the Letters of Credit, the guarantees, the drafts or acceptances, or the Collateral, shall be binding on the Obligors and shall not put the Agent and/or the Lenders in any resulting liability to the Obligors. In furtherance thereof, upon the occurrence of an Event of Default and so long as the same is continuing, the Agent shall have the full right and authority to clear and resolve any questions of noncompliance with documents, to give any instructions as to acceptance or UTI - LOAN AND SECURITY AGREEMENT 39 43 rejection of any documents or goods; to execute any and all steamship or airways guaranties (and applications therefore), indemnities or delivery orders; to grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances, or documents; and to agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letters of Credit, drafts or acceptances; all in the Agent's sole name, and the Issuing Bank shall be entitled to comply with and honor any and all such documents or instruments executed by or received solely from the Agent all without any notice to or any consent from any Company. 6. Without the Agent's express consent and endorsement in writing, each Company agrees: (a) not to execute any and all applications for steamship or airway guaranties, indemnities or delivery orders; to grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances or documents; or to agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letters of Credit, drafts or acceptances; and (b) after the occurrence of an Event of Default and so long as the same is continuing, and which is not waived by the Agent, not to (i) clear and resolve any questions of non-compliance of documents, or (ii) give any instructions as to acceptances or rejection of any documents or goods. 7. Each Company agrees that any necessary import, export or other licenses or certificates for the import or handling of the Collateral will have been promptly procured; all foreign and Domestic governmental laws and regulations in regard to the shipment and importation of the Collateral, or the financing thereof will have been promptly and full complied with; and any certificates in that regard that the Agent may at any time request will be promptly furnished. In this connection, each Company warrants and represents that all shipments made under any such Letters of Credit are in accordance with the laws and regulations of the countries in which the shipments originate and terminate, and are not prohibited by any such laws and regulations. Each Company assumes all risk, liability and responsibility for, and agrees to pay and discharge, all present and future local, state, federal or foreign taxes, duties, or levies owed thereby in connection with the conduct of their respective businesses, except to the extent subject to appropriate dispute resolution proceedings and for which adequate reserves in accordance with GAAP have been established. Any embargo, restriction, laws, customs or regulations of any country, state, city, or other political subdivision, where the Collateral is or may be located, or wherein payments are to be made, or wherein drafts may be drawn, negotiated, accepted, or paid, shall be solely each Company's risk, liability and responsibility. 8. Upon any payments made to the Issuing Bank under the Letter of Credit Guaranty the Agent for the benefit of the Lenders shall acquire by subrogation, any rights, remedies, duties or obligations granted or undertaken by the applicable Company to the Issuing Bank in any application for Letters of Credit, any standing agreement relating to Letters of Credit or otherwise, all of which shall be deemed to have been granted to the Agent for the benefit of the Lenders and apply in all respects to the Agent for the benefit of the Lenders and shall be in addition to any rights, remedies, duties or obligations contained herein. UTI - LOAN AND SECURITY AGREEMENT 40 44 SECTION 6. COLLATERAL 1. As security for the prompt payment in full of all loans and advances made and to be made to each Company from time to time by the Agent and/or the Lenders pursuant hereto, as well as to secure the payment in full of the other Obligations, each Obligor hereby pledges and grants to the Agent for the benefit of the Lenders a continuing general lien upon and security interest in all of its (excluding Real Estate, automobiles owned by any Obligor and Intellectual Property): (a) present and hereafter acquired Inventory; (b) present and hereafter acquired Equipment (including, but not limited to, Eligible Equipment and Rigs); (c) present and future Accounts; (d) present and future Documents of Title; (e) present and future General Intangibles; and (f) present and future Other Collateral; together with all cash and non-cash proceeds and products of the foregoing. 2. The security interests granted hereunder shall extend and attach to: (a) All Collateral which is presently in existence and which is owned by any Obligor or in which any Company has any interest, whether held by such Obligor or others for its account, and, if any Collateral is Equipment, whether such Obligor's interest in such Equipment is as owner or lessee or conditional vendee; (b) All Equipment whether the same constitutes personal property or fixtures, including, but without limiting the generality of the foregoing, all Rigs, dies, jigs, tools, benches, tables, accretions, component parts thereof and additions thereto, as well as all accessories, motors, engines and auxiliary parts used in connection with or attached to the Equipment; (c) All Inventory, if any, and any portion thereof which may be returned, rejected, reclaimed or repossessed by either the Agent or any Obligor from such Obligor's customers, as well as to all supplies, goods, incidentals, packaging materials, labels and any other items which contribute to the finished goods or products manufactured or processed by such Company, or to the sale, promotion or shipment thereof. 3. Each Obligor agrees to safeguard, protect and hold all Inventory for the Agent's account and make no disposition thereof except in the regular course of the business of such Obligor and not otherwise prohibited herein. Until an Event of Default has occurred that is continuing which has not been waived in writing by the Agent and the Agent has given such Obligor notice to the UTI - LOAN AND SECURITY AGREEMENT 41 45 contrary, as provided for below, any Inventory may, to the extent applicable to the Companies, be sold and shipped by each Company to its customers in the ordinary course of such Company's business, on open account terms which do not exceed one hundred twenty (120) days from shipment date or as otherwise provided herein, provided that all proceeds of all sales (including cash, accounts receivable, checks, notes, instruments for the payment of money and similar proceeds) are forthwith transferred, endorsed, and turned over to the Agent for the benefit of the Lenders or deposited in the Depository Accounts in accordance with Section 3, Paragraph 4 of this Agreement. The Agent shall have the right to withdraw this permission at any time upon the occurrence of an Event of Default that is continuing so long as the same is continuing and until such time as such Event of Default is waived or cured to the Agent's reasonable satisfaction, in which event no further disposition shall be made of the Inventory by such Company without the Agent's prior written approval. The proceeds of sales of Inventory shall be deposited in the form received to the Depository Accounts. Upon the sale, exchange, or other disposition of Inventory, as herein provided, the security interest in such Company's Inventory provided for herein shall, without break in continuity and without further formality or act, continue in, and attach to, all proceeds, including any instruments for the payment of money, accounts receivable, contract rights, documents of title, shipping documents, chattel paper and all other cash and non-cash proceeds of such sale, exchange or disposition. As to any such sale, exchange or other disposition, the Agent shall have all of the rights of an unpaid seller, including stoppage in transit, replevin, rescission and reclamation. 4. The Companies agree, at their own cost and expense, to keep the Equipment in as good and substantial repair and condition as the same is now or at the time the lien and security interest granted herein shall attach thereto, reasonable wear and tear excepted, making any and all repairs and replacements when and where necessary, except where the Companies believe, in their reasonable business judgment, that such repairs are not consistent with their customary business practices. The Companies also agree that to safeguard and protect the proceeds of any sales of Equipment such proceeds shall not be commingled with such Companies other property, but shall be segregated, and shall be deposited immediately by such Companies in the identical form received by such Companies by deposit to the Depository Accounts. Upon the sale, exchange, or other disposition of the Equipment, as herein provided, the security interest provided for herein shall, without break in continuity and without further formality or act, continue in, and attach to, all proceeds, including any instruments for the payment of money, accounts receivable, contract rights, documents of title, shipping documents, chattel paper and all other cash and non-cash proceeds of such sales, exchange or disposition. As to any such sale, exchange or other disposition, the Agent shall have all of the rights of an unpaid seller, including stoppage in transit, replevin, rescission and reclamation. Notwithstanding anything in this Agreement to the contrary, any Obligor may from time to time sell, lease, exchange, assign, transfer or otherwise dispose of (1) any Equipment (plus any drill pipe and other inventory reasonably necessary or incident to the ongoing operation of such Rigs), provided that, immediately following the consummation of such sale, lease, exchange or other disposition, (a) the Obligors, taken as a whole, own at least one hundred ten (110) Domestic Rigs upon which the Agent, for the benefit of the Lenders, has a first priority lien and fully perfected security interest, and (b) the Orderly Liquidation Value of the Domestic Rigs upon which the Agent, for the benefit of the Lenders, has such first priority lien and fully perfected security interest exceeds $150,000,000 in aggregate, and (c) in no event shall the Obligors be permitted to sell, lease, exchange, assign or transfer an aggregate number of Rigs in any Fiscal Year of Parent that exceeds UTI - LOAN AND SECURITY AGREEMENT 42 46 15% of the aggregate number of Rigs owned by the Obligors on the first day of such Fiscal Year, or if the foregoing conditions are not or would not otherwise be satisfied upon the consummation of such sale, lease, exchange or other disposition, and (2) Equipment no longer needed in such Obligor's operations; provided, however, that with respect to dispositions permitted in this clause (2), (A) the greater of the Book Value or Fair Market Value of the Equipment so disposed of does not exceed $5,000,000 in the aggregate in any Fiscal Year for all of the Obligors in the aggregate, and (B) the proceeds of such sales or dispositions are delivered to the Agent or deposited in the Depository Accounts in accordance with the foregoing provisions of this paragraph; provided, however, that the aforesaid rights shall automatically cease upon the occurrence of an Event of Default that is continuing which is not waived in writing by the Agent or cured within any applicable grace period. 5. The rights and security interests granted to the Agent for the benefit of the Lenders hereunder are to continue in full force and effect, notwithstanding the termination of this Agreement or the fact that the account maintained in the Companies names on the books of the Agent may from time to time be temporarily in a credit position, until the final payment in full to the Agent and the Lenders of all Obligations and the termination of this Agreement. Any delay, or omission by the Agent and/or the Lenders to exercise any right hereunder, shall not be deemed a waiver thereof, or be deemed a waiver of any other right, unless such waiver be in writing and signed by the Agent. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. 6. To the extent that the Obligations are now or hereafter secured by any assets or property other than the Collateral or by the guarantee, endorsement, assets or property of any other person, then the Agent shall have the right in its sole discretion to determine which rights, security, liens, security interests or remedies the Agent shall at any time pursue, foreclose upon, relinquish, subordinate, modify or take any other action with respect to, without in any way modifying or affecting any of them, or any of the Agent's or the Lenders' rights hereunder. 7. Any reserves or balances to the credit of any Obligor and any other property or assets of such Obligor in the possession of the Agent and/or the Lenders may be held by the Agent as security for any Obligations and applied in whole or partial satisfaction of such Obligations when due. The liens and security interests granted herein and any other lien or security interest the Agent may have in any other assets of such Obligors, shall secure payment and performance of all now existing and future Obligations. The Agent may in its discretion charge any or all of the Obligations to the Revolving Loan Account of such Company when due. 8. This Agreement and the obligation of each Company to perform all of its covenants and obligations hereunder shall be further secured, at the Agent's discretion, upon the occurrence of an Event of Default that is continuing, by mortgage(s), deed(s) of trust or assignment(s) on the Real Estate which shall not be recorded until the occurrence of an Event of Default that is continuing. Upon the occurrence of an Event of Default that is continuing, the Obligors shall promptly execute such mortgages, deeds of trust assignments and other documents as shall be requested by the Agent with respect to Real Estate now owned or hereafter acquired by each Company as the Agent and/or the Lenders shall require to obtain a valid first lien thereon subject only to Permitted Liens and those exceptions of title as set forth in future title insurance policies that are satisfactory to the Agent. UTI - LOAN AND SECURITY AGREEMENT 43 47 9. Upon and from time to time following the occurrence of an Event of Default that is continuing, the Agent for the benefit of the Lenders may, in its sole discretion, record such mortgage(s), deed(s) of trust or assignment(s) on the Real Estate or real estate then existing or acquired after the date thereof. Once recorded, such documents shall remain of record until all of the Obligations are paid and discharged in full (notwithstanding any other provision in any Loan Document). 10. Each Obligor shall give to the Agent for the benefit of the Lenders, and/or shall cause the appropriate party to give to the Agent for the benefit of the Lenders, from time to time such pledge agreements or security agreements with respect to General Intangibles, capital stock and other property (other than (except as provided in this Agreement) with respect to such automobiles and Intellectual Property) of such Obligor which is or may constitute Collateral as the Agent shall require to obtain a valid first priority and fully perfected security interest and liens thereon. This Agreement and the obligation of each Company to perform all of its covenants and obligations hereunder shall be further secured, upon the occurrence of an Event of Default that is continuing, by a security interest in each Obligor's automobiles and Intellectual Property, which shall not attach or be documented or filed or recorded until the occurrence of an Event of Default that is continuing. Upon the occurrence of an Event of Default that is continuing the Obligors shall, at the Agent's request, promptly execute such assignments and other documents and deliver such certificates of title as requested by the Agent with respect to such automobiles and Intellectual Property now owned or hereafter acquired by each Company as the Agent and/or the Lenders shall require to obtain a valid first lien and fully perfected security interest thereon subject only to Permitted Liens. Once recorded, such documents shall remain of record until all of the Obligations are paid and discharged in full (notwithstanding any other provision in any Loan Document). 11. The provisions in this Section 6, Paragraph 11 and in Section 10, Paragraph 4 of this Agreement apply to the Collateral including all proceeds thereof at all times during which such Collateral or the proceeds thereof are located in Louisiana or are otherwise subject to the application of Louisiana law in any respect (the "LOUISIANA PLEDGED COLLATERAL"). (a) The parties hereto recognize and agree that at all times during which portions of the Louisiana Pledged Collateral or the proceeds thereof are located in the State of Louisiana or are otherwise subject to the application of Louisiana law, the perfection and priority of the security interest granted by Obligors to the Agent in such portions or proceeds of the Louisiana Pledged Collateral hereunder and the exercise of remedies in connection therewith shall be subject to the provisions of Chapter 9 of the Louisiana Commercial Laws that are mandatorily applicable thereto notwithstanding under Louisiana law, the choice of any other jurisdiction's laws to govern such matters (La. R.S. Sections 10:9-101, et seq.) and all other applicable provisions of Louisiana law. (b) Contemporaneously with the execution of this Agreement, each Obligor has completed and signed one or more appropriate Louisiana UCC-1 financing statements with regard to the Louisiana Pledged Collateral and the proceeds thereof. Debtor authorizes Secured Party, at Debtor's expense, to file multiple originals, or photocopies, carbon copies or facsimile copies of such Louisiana UCC-1 financing statements with the appropriate filing officer or officers in the State of UTI - LOAN AND SECURITY AGREEMENT 44 48 Louisiana, pursuant to the provisions of Chapter 9 of the Louisiana Commercial Laws (La. R.S. Sections 10:9-101, et. seq.). (c) Debtor shall give the Agent thirty (30) days' notice prior to any change in any Obligor's employer identification number made by the Agent and shall give the Agent notice of any change in such Obligor's employer identification number that is not made by such Obligor within thirty (30) days after such change. In the event of any change whatsoever in an Obligor's employer identification number, such Obligor will execute and file any new UCC-1 financing statements or any other documents that are necessary or desirable to preserve and continue the Agent's security interest under this Agreement within thirty (30) days after such change. SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS 1. Each Obligor hereby warrants and represents and/or covenants with respect to itself and each other Obligor that each Obligor is Solvent. Each Obligor further warrants and represents that Schedule 7(1) hereto correctly and completely sets forth each Obligor's chief executive office and all of the locations of all of each Obligor's locations of all Collateral; and except for the Permitted Liens, the security interests granted herein constitute and shall at all times constitute the first and only liens on the Collateral; that, except for the Permitted Liens, each Obligor is or will be at the time additional Collateral is acquired by it, the absolute owner of the Collateral with full right to pledge, sell, consign, transfer and create a security interest therein, free and clear of any and all claims or liens in favor of others; that each Obligor will at its expense forever warrant and, at the Agent's request, defend the same from any and all claims and demands of any other Person other than the Permitted Liens; that no Obligor will grant, create or permit to exist, any lien upon or security interest in the Collateral, or any proceeds thereof, in favor of any other Person other than the holders of the Permitted Liens; and that the Equipment does not comprise a part of the Inventory of each Company and that the Equipment is and will only be used by each Company in its business and will not be held for sale or lease, or removed from its premises, or otherwise disposed of by each Company without the prior written approval of the Agent except as otherwise expressly permitted in Section 6, Paragraph 4 of this Agreement and, additionally, in the case of the Rigs, in the ordinary course of Business. Each Obligor makes each representation and warranty made in favor of each Subordinating Creditor in each agreement with respect to or evidencing Subordinated Debt ("SUBORDINATED AGREEMENTS") as if the same were set forth at length herein. 2. Each Obligor agrees to maintain books and records pertaining to the Collateral in such detail, form and scope as the Agent shall reasonably require. Each Obligor agrees that the Agent or its agents may enter upon such Obligor's premises at any time during normal business hours, and from time to time, for the purpose of inspecting the Collateral, and any and all records pertaining thereto. The Parent agrees to afford the Agent written notice, on the Agent's request, of changes in the location of any item or items of tangible Collateral, within thirty (30) days following such request. The Parent is required, in any event, to notify the Agent of the relocation of any Rig to a location not previously known to Agent at least once each sixty (60) days, on reports customarily maintained or created in the ordinary course of business by the Obligors. Each Obligor shall also advise the Agent promptly, in sufficient detail, of any material adverse change relating to the type, quantity or quality of the Collateral taken as a whole, ordinary wear and tear excepted or on the security interests UTI - LOAN AND SECURITY AGREEMENT 45 49 granted to the Agent therein. Each Guarantor represents, warrants and covenants that it does not own and shall own no Rigs or Rig Accessories. 3. Each Obligor agrees to: execute and deliver to the Agent, from time to time, solely for the Agent's convenience in maintaining a record of the Collateral, such written statements, and schedules as the Agent may reasonably require, designating, identifying or describing the Collateral pledged to the Agent hereunder. Each Obligor's failure, however, to promptly give the Agent such statements, or schedules shall not affect, diminish, modify or otherwise limit the Agent's security interests in the Collateral. 4. Each Obligor agrees to comply and to cause each Obligor to comply, with the requirements of all state and federal laws in order to grant to the Agent valid and fully perfected first priority security interests in the Collateral, subject only to the Permitted Liens. The Agent is hereby authorized by each Obligor to file any financing statements covering the Collateral whether or not each Obligor's signature appears thereon. Each Obligor agrees to do whatever the Agent may reasonably request, from time to time, consistent with the Obligors' obligations hereunder by way of: filing notices of liens, financing statements, amendments, renewals and continuations thereof; filing of leases (or copies thereof) with appropriate governmental authorities (including, without limitation, for the purposes of obtaining the benefits of 60 Oklahoma Statutes Section 319 and similar laws); cooperating with the Agent's custodians; keeping stock records; transferring proceeds of Collateral to the Depository Accounts; and performing such further acts as the Agent may reasonably require in order to effect the purposes of this Agreement and the other Loan Documents. 5. If Real Estate becomes Collateral hereunder, the Companies agree to maintain and to cause each other Obligor (as applicable) to maintain, casualty insurance on its Real Estate under such policies of insurance, with such insurance companies, in such reasonable amounts and covering such insurable risks as are at all times consistent with industry practices and reasonably satisfactory to the Agent. All policies covering such Real Estate shall be made payable to the Agent for the benefit of the Lenders, in case of loss, under a standard non-contributory "mortgagee", "lender" or "secured party" clause and are to contain such other provisions as the Agent may reasonably require to fully protect the Agent's interest in the Real Estate and to any payments to be made under such policies; provided, however, that such rights under such policies will be subject to the rights under such policies of any holders of Permitted Liens holding claims senior to those of the Agent for the benefit of the Lenders. 6. Each Obligor agrees to pay, when due, all taxes, assessments, claims and other charges (herein "TAXES") lawfully levied or assessed upon such Obligor or the Collateral and if such taxes remain unpaid after the date fixed for the payment thereof unless such taxes are being diligently contested in good faith by such Obligor by appropriate proceedings or if any lien shall be claimed thereunder and execution thereon is not effectively stayed by such proceeding (a) for taxes due the United States of America or (b) which in the Agent's opinion might create a valid obligation having priority over the liens granted to the Agent herein, the Agent may, on each Obligor's behalf, pay such taxes, and the amount thereof shall be an Obligation secured hereby and due to the Agent on demand. UTI - LOAN AND SECURITY AGREEMENT 46 50 7. Each Obligor: (a) agrees to comply with all acts, rules, regulations and orders of any legislative, administrative or judicial body or official, which the failure to comply with would have a material and adverse impact on the Collateral taken as a whole, or any material part thereof, or on the operation of such Obligor's business; provided that such Obligor may contest any acts, rules, regulations, orders and directions of such bodies or officials in any reasonable manner which will not, in the Agent's reasonable opinion, materially and adversely effect the Agent's rights or priority in the Collateral; (b) agrees to comply with all Environmental Laws as presently existing or as adopted or amended in the future, applicable to the ownership and/or use of its property and operation of its business, which the failure to comply with would have a material and adverse impact on the Collateral, or any material part thereof, or on the operation of the business of each Obligor. The Obligors hereby jointly and severally indemnify the Agent and the Lenders and agrees to defend and hold the Agent and the Lenders harmless from and against any and all loss, damage, claim, liability, injury or expense which the Agent and/or the Lenders may sustain or incur (other than as a result of actions of the Agent and/or the Lenders) in connection with any claim or expense asserted against the Agent and/or the Lenders as a result of any environmental pollution, Hazardous Material or environmental clean-up of any Obligor's real property; or any claim or expense which results from each Obligor's operations (including, but not limited to, each Obligor's off-site disposal practices) and such Obligor further agrees that this indemnification shall survive termination of this Agreement as well as the payment of all Obligations or amounts payable hereunder. Each Obligor shall be deemed not to have breached any provision of this Paragraph 7 if (i) the failure to comply with the requirements of this Paragraph 7 resulted from good faith error or innocent omission, (ii) such Obligor promptly commences and diligently pursues a cure of such breach and (iii) such failure is cured within thirty (30) days following such Obligor's receipt of notice of such failure. 8. Until the termination of this Agreement and payment and satisfaction of all Obligations due hereunder, the following periodic reporting shall be required: (a) The Parent agrees that, unless the Agent shall have otherwise consented in writing, Parent will furnish to the Agent and each Lender, within ninety (90) days after the end of each Fiscal Year of Parent, an audited Consolidated Balance Sheet and an unaudited Consolidating Balance Sheet as of the close of such year, and statements of profit and loss, cash flow and reconciliation of surplus of the Parent, of each Company and all of their Subsidiaries of each for such year, in the case of an audited Consolidated Balance Sheet of the Parent, audited by independent public accountants selected by the Parent and satisfactory to the Agent; within sixty (60) days after the end of each Fiscal Quarter a Consolidated Balance Sheet and Consolidating Balance Sheet as of the end of such period and statements of profit and loss, cash flow and surplus of the Parent and all Subsidiaries of each, certified by an authorized financial or accounting officer of Parent; and from time to time, such further information regarding the business affairs and financial condition of the Parent, each Company and all of their Subsidiaries thereof as the Agent may reasonably request, including, without limitation (i) the accountant's management practice letter, and (ii) annual projections in form reasonably satisfactory to the Agent. Each financial statement which Parent is required to submit or cause to be submitted hereunder must be accompanied by an officer's certificate, signed by the President, Vice President, Senior Vice President, Chief Financial Officer, Controller, or Treasurer of the Parent, pursuant to which any one such officer must certify that: (A) the financial statement(s) fairly and accurately represent(s) the Parent's and each Company's financial condition in all material respects UTI - LOAN AND SECURITY AGREEMENT 47 51 at the end of the particular accounting period, as well as the Parents notes and such Company's operating results during such accounting period, subject to year-end audit adjustments and the absence of footnotes which are substantially the same in form, substance and economic effect as those contained in the most recent audited financial statements delivered to the Agent prior to the Closing Date; (B) during the particular accounting period: (x) there has been no Default or Event of Default under this Agreement that is continuing; provided, however, that if any such officer has knowledge that any such Default or Event of Default that is continuing has occurred during such period, the existence of and a detailed description of same shall be set forth in such officer's certificate; and (y) neither any Company nor the Parent has received any notice of cancellation with respect to its property insurance policies; and (C) the exhibits attached to such financial statement(s) constitute detailed calculations showing compliance with all financial covenants contained in this Agreement. (b) (i) Within forty-five (45) days after the end of each fiscal month of the Parent (sixty (60) days for each fiscal month which is the last month of a fiscal quarter), (A) the consolidated balance sheet of the Parent and its Subsidiaries as of the end of such fiscal month and the related consolidated statements of income and a schedule showing aggregate Capital Expenditures and the aggregate amount of depreciation, depletion and amortization expense and accumulated depreciation for such fiscal month and for the elapsed portion of the Fiscal Year ended with the last day of such fiscal month, all of which shall be certified by the chief financial officer or other authorized executive officer of the Parent, (B) together with a comparison for such period and year to date to the projection prepared for the Agent pursuant to Paragraph 8(a)(ii) above, and (C) a list and, on the Agent's request, a copy of the leases and subleases to persons other than Obligors of Rigs and Rig Accessories, related thereto (together with information in reasonable detail describing the terms of each lease, the location of the Equipment and the name and address of the parties thereto); subject to normal year-end audit adjustments and the absence of footnotes which are substantially the same in form, substance and economic effect as those contained in the most recent audited financial statements delivered to the Agent prior to the Closing Date; and (ii) within fifteen (15) days after the end of each fiscal month of the Parent, a report with information in form and substance substantially similar to the form set forth on Schedule 7(8)(b)(ii) hereto, with such changes and modifications to the information and form contained in such report as reasonably acceptable to the Agent, setting forth no less than the following information calculated in good faith based upon the then most current information: (a) total available days; (b) total operating days; and rig counts (including the total rigs, stacked rigs, and marketable rigs) in each case relative to the "Mid-Continent," Mexico, "West Texas/New Mexico," "South Texas," "East Texas" and "Rockies" regions, as such counts relate to crude oil drilling and natural gas and crude oil services; and (iii) within forty-five (45) days after the end of each fiscal month of the Parent, a report in form and substance reasonably satisfactory to the Agent which sets forth a summary in reasonable detail of (A) all Permitted Acquisitions made since the Closing Date to the end of the month first preceding the date of such report, stating whether such acquisition was a Domestic Acquisition or a Canadian Acquisition, the name of the Obligor which is the purchaser and the name and address of the seller, (B) the type and amount of payments in cash (consisting of Revolving Loans and/or other working capital of the Obligors), Capital Stock of the Parent or other consideration paid for the assets or stock purchased in such acquisitions, (C) a list of Rigs, if any, that may be construed to be Mobile Rigs in which a security interest cannot be perfected by filing a financing statement under the U.C.C.; and (D) subject to Section 3, Paragraph 9 above, a report in the form of Schedule 7(8)(b)(iii) with receivables aging of the Parent and its UTI - LOAN AND SECURITY AGREEMENT 48 52 Subsidiaries for the preceding month, all certified by the chief financial officer or other executive officer of the Parent. 9. Until termination of this Agreement and payment and satisfaction of all Obligations due hereunder, each Company agrees that upon Agent's request, each Company shall, at its expense, no more than once in any three (3) month period, but at any time or times as Agent may request on or after an Event of Default and so long as the same is continuing, deliver or cause to be delivered to Agent written updated (as opposed to new) reports or appraisals (including Appraisals of Orderly Liquidation Value) as to the Collateral in form, scope and methodology acceptable to Agent and by an Approved Appraiser, addressed to Agent and Lenders or upon which the Agent and Lenders are expressly permitted to rely. 10. Until termination of this Agreement and payment and satisfaction of all Obligations due hereunder, each Obligor agrees that, without the prior written consent of the Agent, except as otherwise herein provided, it will not and it will not permit any other Obligor to: A. Mortgage or pledge any of its assets as security, or otherwise permit any lien, charge, security interest (whether as a result of a purchase money or title retention transaction, or other security interest, other transaction intended as security) to exist on any of its assets or goods, whether real, personal or mixed, whether now owned or hereafter acquired, except for the Permitted Liens; B. Incur or create any Indebtedness for Borrowed Money other than the Permitted Indebtedness; C. Borrow any money on the security of the Collateral or on any automobile or other vehicle owned by any Obligor, Real Estate or Intellectual Property that is or may become Collateral from sources other than the Agent and the Lenders (excluding purchase money Permitted Indebtedness secured only by Purchase Money Liens); D. Sell, lease, assign, transfer or otherwise dispose of (i) Collateral, except as otherwise specifically permitted by this Agreement, or (ii) either all or substantially all of any Obligor's assets which do not constitute Collateral; provided, however, that as long as there has not occurred an Event of Default that is continuing which has not been waived in writing by the Agent and no Default or Event of Default would occur or exist after giving effect thereto, this Section 7, Paragraph 10D shall not prohibit: (i) any sale, lease assignment, transfer or other disposition permitted under Section 6, Paragraph 4 of this Agreement; (ii) (a) the sale, lease, assignment, transfer or other disposition of Inventory in the ordinary course of business, and (b) the lease of Rigs or other Equipment in the ordinary course of business of the Companies, provided that each such lease shall be subordinate (in form and substance reasonably satisfactory to the Agent) to the terms of the liens and security interests created in connection UTI - LOAN AND SECURITY AGREEMENT 49 53 herewith in favor of the Agent, the aggregate fair market value of such Rigs and other Equipment so leased to third parties not affiliated with any Obligor does not exceed $5,000,000 in the aggregate during the term of this Agreement and all such Rigs and other Equipment so leased are disclosed to the Agent in writing as such and are excluded from Eligible Equipment; (iii) the sale, transfer or disposition approved by the Board of Directors of the Parent to a Person that is not an Obligor of (a) the capital stock or substantially all of the assets of UWSI or IPSCO (so long as such entities do not own any Rigs or Rig Accessories), (b) UHRB's hard rock boring business or assets or (c) all of the capital stock or substantially all of the assets of any other Obligor (other than UTI) that has Tangible Net Worth on a consolidated basis for such Obligor and its Subsidiaries of less than $10,000,000; (iv) the sale, lease, assignment, transfer or other disposition of any or all of the assets of any Obligor to any other Obligor to the extent that the same qualifies as a Permitted Intercompany Balance, except that no more than an aggregate of five (5) Rigs may be leased at any one time to NDM and no Rigs may be sold, transferred or leased to any Guarantor; (v) the sale, transfer or assignment by an Obligor to a Canadian Finance Company of a loan or other amount owed from a Canadian Operating Company to such Obligor; (vi) any Obligor may license any Intellectual Property to any other Obligor, and any Obligor may license any Intellectual Property to a Person that is not affiliated with an Obligor so long as the license of such Intellectual Property does not materially adversely affect the operation of any Obligors' business; and (viii) the sale, transfer or other disposition of oil and gas mineral interests (and related operating agreements covering the operation of such interests). E. Merge, consolidate or otherwise alter or modify its corporate name, principal place of business, chief executive office, structure, status or existence (other than the Designated Mergers), or enter into or engage in any operation or activity that is not a Qualified Business or is materially different from that presently being conducted by the Obligors taken as a whole, except that an Obligor may change its corporate name, or principal place of business or address to a location within the 48 contiguous states of the United States of America; provided that (x) such Obligor shall give the Agent thirty (30) days prior written notice thereof and (y) such Obligor shall execute and deliver prior to or simultaneously with any such action any and all documents and agreements requested by the Agent (including, without limitation, any and all U.C.C. financing statements) to confirm the continuation and preservation of all security interests and liens granted to the Agent for the benefit of the Lenders hereunder; UTI - LOAN AND SECURITY AGREEMENT 50 54 provided, however, that as long as there has not occurred an Event of Default that is continuing which has not been waived in writing by the Agent and no Default or Event of Default would occur or exist after giving effect thereto and such Obligor has complied with clause (x) and clause (y) immediately above, this Section 7, Paragraph 10E of this Agreement shall not prohibit any of the following except to the extent that the Agent reasonably determines, during the thirty (30) day period following the Agent's receipt of the notice referred to in clause (x) above and all executed documents and Agreements requested as described in clause (y) above, that the liabilities and other obligations (contingent or otherwise) of any Obligor resulting therefrom or associated therewith could reasonably be expected to have a Material Adverse Effect or that the Person to be merged or consolidated is Financially Weakened: (i) the merger or consolidation of any Subsidiary of the Parent in existence on the date of this Agreement into any one or more of the Companies in a transaction in which a Company is the surviving Person and no Person other than a Company receives any consideration or if such consideration is paid to others that are not Subsidiaries, if such payment would be permitted to be made if it was made as a Restricted Payment (and in such case such payment shall constitute a Restricted Payment for all purposes of this Agreement); (ii) upon the prior written consent of the Agent which shall not be withheld unreasonably, the merger or consolidation of any foreign Subsidiary of any of the Companies with and into any of the Companies or any Domestic Subsidiary of any of the Companies, in a transaction in which no Person other than the Parent or a Subsidiary of the Parent receives any consideration (or if such consideration is paid to others that are not Subsidiaries, if such payment would be permitted to be made if it was made as a Restricted Payment); (iii) upon the prior written consent of the Agent which shall not be withheld unreasonably, the merger or consolidation of any other Person with and into any of the Companies if (a) all or substantially all of the consideration given by any Company to consummate the merger or consolidation consists of Qualified Stock issued by the Parent, and (b) the applicable Company is the surviving entity and after giving effect to such merger or consolidation, the Companies shall be in compliance, on a pro forma basis after giving effect to such transaction, with all of the covenants contained herein as of the first day of each relevant period for testing such compliance (but without regard to the financial covenants contained in Section 7, Paragraph 11 of this Agreement if such covenants do not then otherwise apply because minimum Availability exceeds $15,000,000), and the Parent shall have delivered to the Agent an officer's certificate to that effect, together with all relevant financial information and calculations demonstrating such compliance; provided, however, that the Agent's consent shall be required to be given if the amount UTI - LOAN AND SECURITY AGREEMENT 51 55 of Availability is more than $30,000,000 after giving effect to the transaction; and (iv) without limitation of any of the other requirements set forth in this Section 7, Paragraph 10, a Company may not merge or consolidate any other Person that has been acquired pursuant to a Permitted Acquisition with and into any of the Companies or integrate such Person's cash management systems with the cash management systems of the other Companies without the Agent's prior written consent, which shall not be unreasonably withheld, unless the Availability both before and after such merger or consolidation is equal or greater than $30,000,000 and the Parent shall have delivered to the Agent an officer's certificate to that effect, together with all relevant financial information and calculations demonstrating such compliance. F. Assume, guarantee, endorse, or otherwise become liable upon the obligations of any Person, other than by the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, except that this Section 7, Paragraph 10F of this Agreement shall not prohibit the assumption, guarantee or incurrence, of any contingent obligation to the extent that such obligation, were it considered Indebtedness, would be permitted to be incurred under the other terms and provisions of Section 7, Paragraph 10B of this Agreement or otherwise constitute Permitted Indebtedness; G. Make any Restricted Payment; provided, however, that as long as no Event of Default has occurred that is continuing which has not been waived in writing by the Agent and no Default or Event of Default would occur or exist after giving effect thereto, this Section 7, Paragraph 10G of this Agreement shall not prohibit: (i) any Restricted Payment by Parent payable solely in shares of Capital Stock or warrants, rights or options to acquire shares of stock of the Parent, including, without limitation, any stock split or stock dividend effected by the Parent; (ii) any Restricted Payment payable solely to one or more of the Obligors, so long as such Restricted Payment is a Permitted Intercompany Balance; (iii) any Restricted Payment if immediately after giving effect to such Restricted Payment no Revolving Loans are then outstanding or result therefrom and the Companies have excess Availability of $15,000,000 or more after giving effect thereto; (iv) any Restricted Payment if (1) immediately after giving effect to such Restricted Payment the Companies have excess Availability of $15,000,000 or more and the Fixed Charge Coverage Ratio (after giving effect to such Restricted Payment by including it in the denominator of such ratio) for the twelve month period ending on the date of the then most recent consolidated financial UTI - LOAN AND SECURITY AGREEMENT 52 56 statements of the Parent and its Subsidiaries delivered (or required to be delivered) to the Agent pursuant to Section 7, Paragraph 8, preceding the date of such Restricted Payment is at least 1.2 to 1.0 and (2) the aggregate amount of all Restricted Payments expended subsequent to the Closing Date (the amount so expended, if other than in cash, to be valued at its fair market value as determined by the Board of Directors of the Parent) does not exceed the sum of (a) $5,000,000, plus (b) 50% of the aggregate consolidated net income of the Parent and its Subsidiaries, determined in accordance with GAAP (or if such consolidated net income shall be a loss, minus 100% of such loss) during the period (treated as one accounting period) subsequent to September 30, 1999, and ending on the last day of the fiscal quarter immediately preceding the date of such Restricted Payment, plus (c) 75% of the aggregate net cash proceeds received by the Parent as a result of the issuance of Qualified Stock of the Parent, including any net proceeds received upon exercise of any rights, options or warrants, other than in connection with the conversion or exchange of any Indebtedness or Disqualified Stock of the Parent; (v) the payment of any dividend by the Parent within sixty (60) days after the date of its declaration if at the date of declaration the payment would have complied with this covenant; (vi) the purchase, redemption, acquisition or retirement of any shares of Capital Stock of the Parent in exchange for, or out of the net proceeds of the substantially concurrent sale (other than to a Subsidiary) of, other shares of Qualified Stock of the Parent; (vii) purchases of common stock by the Parent or a trust pursuant to a stock ownership or similar employee benefit plan of the Parent or the cashless exercise of stock options or warrants to purchase common stock of the Parent by the Parent or a trust that in each case has been approved by the Board of Directors of the Parent; (viii) offsets in an amount not to exceed $5,000,000 in the aggregate against and acquisitions of Capital Stock of the Parent in satisfaction of indemnification and other obligations owed to the Parent or its Subsidiaries under acquisition arrangements in which Capital Stock of the Parent is issued as consideration for the acquisition; and (ix) the payment of dividends on the Parent's Preferred Stock if and when issued pursuant to the Parent's Stockholders Rights Plan with ChaseMellon Shareholder Series LLC or its successor, provided that the aggregate amount of all such dividends paid thereon shall not exceed $50,000 per calendar quarter. UTI - LOAN AND SECURITY AGREEMENT 53 57 H. Make any advance or loan to, or any investment in, any Person or make any Acquisition; provided, however, that as long as there has not occurred an Event of Default that is continuing which has not been waived in writing by the Agent and no Default or Event of Default would occur or exist after giving effect thereto, this Section 7, Paragraph 10H shall not prohibit: (i) any Obligor from having any Permitted Intercompany Balances; (ii) any Obligor from making and owning any Permitted Business Investments; (iii) any Obligor from making and owning any Permitted Financial Investments; (iv) any Obligor from continuing to own loans, advances and investments owned by it on the date hereof which are set forth on Schedule 7.(10)(H)(iv), including, without limitation, all investments in Subsidiaries, partnerships and other Persons owned on the Closing Date; provided that the respective amounts thereof do not exceed the corresponding amounts thereof set forth on Schedule 7.(10)(H)(iv). (v) any Obligor from making investments, loans and advances permitted to be made under Section 7, Paragraph 10(G) of this Agreement as a Restricted Payment; (vi) any Obligor from incurring obligations permitted under Section 7, Paragraph 10(F) of this Agreement; (vii) any Obligor from effecting a Permitted Acquisition in accordance with the terms of this Agreement, provided that after giving effect to such Permitted Acquisition the Company has excess Availability (determined as if the Excluded L/Cs were not outstanding) of $15,000,000 or more; (viii) any Obligor from effecting a merger or consolidation permitted under Section 7, Paragraph 10(E) of this Agreement; (ix) the Parent or any Subsidiary thereof from making any investment in any Person to the extent the consideration paid consists of Qualified Stock of the Parent; (x) the acquisition of Capital Stock or securities of any Obligor by another Obligor if the acquiring Obligor would be permitted to have the other Obligor merge into it pursuant to Section 7, Paragraph 10(E) of this Agreement; (xi) any note received as consideration for the sale or disposition of UHRB's hard rock boring assets; provided that the aggregate principal amount of such note does not exceed $2,000,000; and UTI - LOAN AND SECURITY AGREEMENT 54 58 (xii) any other loans, advances or investments of in an amount not to exceed $5,000,000 in the aggregate for all Obligors at any one time outstanding. I. Directly or indirectly conduct any business or enter into, renew, extend or permit to exist any transaction (including the purchase, sale, lease or exchange of any assets or the rendering of any service) or series of related transactions with any Affiliate of the Parent (other than a Substantially-Owned Subsidiary or employee benefit plan or plan trust (an "AFFILIATE TRANSACTION") on terms that are less favorable to the Obligor party to such transaction, than would be available in a comparable arm's length transaction with a Person who is not an affiliate of the Parent, except for: (i) the payment of reasonable and customary regular fees to directors of the Obligor who are not employees of the Obligor; (ii) loans and advances to officers, directors and employees of the Obligors or its Subsidiaries for travel, entertainment and moving and other relocation expenses made in direct furtherance and in the ordinary course of business of the Obligor and its Subsidiaries; provided, however, the aggregate principal amount of loans and advances made pursuant to this clause (ii) shall not exceed $1,000,000 at any time outstanding; (iii) any other transaction with any employee, officer or director of the Obligor or any of its Subsidiaries pursuant to employee benefit or compensation arrangements entered into in the ordinary course of business and approved by the Board of Directors of the Obligor or the Board of Directors of such Subsidiary; provided, however, the aggregate principal amount of loans and advances made pursuant to this clause (iii) shall not exceed $1,000,000 at any time outstanding; (iv) any transaction entered into in the ordinary course of business with the Obligor or any Subsidiary of Parent which is for inter-company charges for administrative services, allocations of overhead, concentrated cash management systems for collections and disbursements, and sales of goods and services in connection with the business of the Parent and its Subsidiaries in the ordinary course of business of such Persons; (v) licenses and other transfers of patents, trademarks, trade names, copyrights, trade secrets, know-how and other intellectual property between and among any two or more of the Obligors and subsidiaries of the Parent; and (vi) transactions between or among any of the Obligors and any of the Subsidiaries of the Parent which qualify as Permitted Intercompany Balances. J. Without the prior written consent of the Agent, UTI - LOAN AND SECURITY AGREEMENT 55 59 (x) amend or modify the Subordinated Debt (if any) in a manner that materially affects the Lenders, (y) amend or modify any Subordination Agreement in a manner that materially affects the Lenders, or (z) make any payment on the Subordinated Debt unless (A) there has not occurred an Event of Default that is continuing which has not been waived in writing by the Agent and no Default or Event of Default would occur and exist after giving effect thereto, (B) such payment is permitted under the Subordination Agreement, (C) after giving effect to such payment as though it were a scheduled or required payment on the Subordinated Debt (other than Subordinated Debt owing to an Obligor) the Fixed Charge Coverage Ratio of the Parent is not less than 1.0 to 1.0 for the twelve month period ending on the date of the then most recent consolidated financial statements of the Parent and its Subsidiaries delivered (or required to be delivered) to the Agent pursuant to Section 7, Paragraph 8, preceding the date of such payment, and (D) after giving effect to such payment, the amount of the Availability would not be less than $15,000,000 (in which case such payment shall not be considered a Restricted Payment under this Agreement); provided, however, if there has not occurred an Event of Default that is continuing which has not been waived in writing by the Agent, nothing contained in paragraph (z) shall prohibit the making of any payment on the Subordinated Debt at any time with Qualified Capital Stock or the proceeds therefrom or if the payment would be permitted as a Restricted Payment (after giving effect to such payment) under this Agreement. K. Allow Canpartners Investments IV, LLC (and its affiliates) or its successors or assigns or the Obligors, so long as the Subordinated Debt thereof is outstanding, not to be subject to an enforceable Subordination Agreement. 11. Until termination of this Agreement and payment and satisfaction in full of all Obligations hereunder, if any Event of Default shall occur and be continuing which has not been waived in writing by the Agent or if the Availability (determined as of the Excluded L/Cs were not outstanding) shall at any time be less than $15,000,000, then the Obligors agree that the Parent will, on a consolidated basis: (a) maintain as of the last day of each calendar month a Tangible Net Worth of not less than $120,000,000; and (b) maintain as of the last day of each month TTM EBITDA of not less than $12,000,000. 12. [Intentionally Omitted] UTI - LOAN AND SECURITY AGREEMENT 56 60 13. The Companies shall, jointly and severally, pay, indemnify, defend, and hold the Agent, the Lender, and each of their respective officers, directors, employees, counsel, agents, and attorneys-in-fact (each, an "INDEMNIFIED PERSON") harmless (to the fullest extent permitted by law) from and against any and all claims, demands, suits, actions, investigations, proceedings, and damages, and all reasonable attorneys fees and disbursements and other costs and expenses actually incurred in connection therewith (as and when they are incurred and irrespective of whether suit is brought), at any time asserted against, imposed upon, or incurred by any of them in connection with or as a result of or related to the execution, delivery, enforcement, performance, and administration of this Agreement and any other Loan Documents or the transactions contemplated herein or therein, and with respect to any investigation, litigation, or proceeding related to this Agreement, any other Loan Document, or the use of the proceeds of the credit provided hereunder (irrespective of whether any Indemnified Person is a party thereto), or any act, omission, event or circumstance in any manner related thereto (all the foregoing, collectively, the "INDEMNIFIED LIABILITIES"). Company shall have no obligation to any Indemnified Person under this Paragraph 13 with respect to any Indemnified Liability that a court of competent jurisdiction finally determines to have resulted from the gross negligence or willful misconduct of such Indemnified Person. This provision shall survive the termination of this Agreement and the repayment of the other Obligations. 14. Each Company agrees to advise the Agent in writing of: (a) all expenditures (actual or anticipated) in excess of $500,000 for (i) environmental clean-up, (ii) environmental compliance or (iii) environmental testing and the impact of said expenses on the Working Capital of the Company; and (b) any notices any Company receives from any local, state or federal authority advising such Company of any material environmental liability (real or potential) stemming from such Company's operations, its premises, its waste disposal practices, or waste disposal sites used by such Company and to provide the Agent with copies of all such notices if so required. 15. [Intentionally Omitted] 16. Each Obligor shall take all action reasonably necessary to assure that its computer-based systems are able to effectively process date-sensitive data functions. The Obligors jointly and severally represent and warrant that the "Year 2000" problem (that is, the inability of certain computer applications to recognize and properly perform date-sensitive functions involving certain dates on or about or subsequent to December 31, 1999) will not result in a material adverse effect on its business, assets or operations. Each Obligor reasonably anticipates that all computer applications which are material to its business will, on a timely basis, be able to properly perform date-sensitive functions for all dates on and after January 1, 2000. Upon the Agent's request from time to time, each Obligor shall provide to the Agent assurances that Parent's and/or each Company's computer systems and software are or will be Year 2000 compliant on a timely basis, all in form and substance reasonably satisfactory to the Agent. 17. Agent may at any time and from time to time request a certificate from an Executive Officer of each Obligor representing that all conditions precedent to the making of Loans contained herein are satisfied. In the event of such request by Agent, Lenders may, at their option, cease to make any further Loans until Agent has received such certificate and, in addition, Agent has determined that such conditions are satisfied. UTI - LOAN AND SECURITY AGREEMENT 57 61 18. In order to induce the Lenders to enter into this Agreement and to make the loans and advances provided for herein and to provide other credit accommodations, each Obligor for itself and each of their respective Subsidiaries jointly and severally make, on or as of the date hereof and on the occurrence of each such loan or advance or other credit accommodation (except to the extent such representations or warranties relate to an earlier date or are no longer true and correct in all material respects solely as a result of transactions not prohibited by the Loan Documents), the following representations and warranties to the Agent and the Lenders: (a) Organization and Qualification. Each Obligor (a) is duly organized validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, (b) has all requisite corporate or partnership power to own its property and to carry on its business as now conducted and (c) is duly qualified to do business and is in good standing, in each case in each jurisdiction in which the failure to be so qualified or in good standing would reasonably be expected to have a Material Adverse Effect. (b) Authorization and Validity. Each Obligor has all requisite corporate or partnership power and authority to execute, deliver and perform its obligations hereunder and under the other Loan Documents to which it is a party and all such action has been duly authorized by all necessary corporate or partnership proceedings on its part. The Loan Documents to which each corporate Obligor is a party have been duly and validly executed and delivered by such Obligor and constitute valid and legally binding agreements of such Obligor enforceable in accordance with the respective terms thereof, except, in each case, as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws relating to or affecting the enforcement of creditors' rights generally and general principles of equity. (c) Consents. No authorization, consent, approval, license or exemption (other than such exemptions that exist under applicable law, that are permitted, or that have been obtained) of any Person or filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, Domestic or foreign, is necessary for the valid, delivery or performance by any Obligor of any Loan Document to which it is a party or for the grant of a security interest in or mortgage on the collateral covered by the Loan Documents, except such matters relating to performance as would ordinarily be done in the ordinary course of business after the date hereof. (d) Conflicting or Adverse Agreements or Ratifications. As of the date hereof, Obligor is a party to any contract or agreement or subject to any restriction which would reasonably be expected to have a Material Adverse Effect. As of the date hereof, all agreements (other than this Agreement and the other Loan Documents) of each Obligor relating to the lending of money or the issuance of letters of credit to or for the account of any party are described hereto on Schedule 7(18)(d). Neither the execution nor delivery by an Obligor of the Loan Documents nor compliance with the terms and provisions hereof or thereof will be contrary to the provisions of, or constitute a default under (i) the charter or bylaws of any corporate Obligor, (ii) the Partnership agreement or any Obligor that is a limited partnership, or (iii) any applicable law or any applicable regulation, order, writ, injunction or decree of any court or governmental instrumentality or (iv) any material agreement to which any Obligor is a party or by which it is bound or to which it is subject, UTI - LOAN AND SECURITY AGREEMENT 58 62 other than such conflict or defaults which would not reasonably be expected to have a Material Adverse Effect or violate any provision of the articles of incorporation or bylaws of any of the Obligors. (e) Title to Assets; Licenses and Permits. (i) Each Obligor has good and marketable title to all of its Equipment, including, without limitation, all Rigs, and other Eligible Equipment, and other personal property and good and indefeasible title to or a subsisting leasehold interest in, all realty as reflected as of the date hereof on its books and records as being owned or leased by it after giving effect to the transaction contemplated herein, subject to no Liens except Permitted Liens. All of the real property owned or leased by any Obligor as of the date hereof is set forth on Schedule 7(18)(e)(i) hereto, with the applicable owner or lessee, location and real property interest identified thereon. To the knowledge of each Obligor there are no actual, threatened or alleged defaults of a material nature with respect to any leases of real property under which any Obligor is bound after giving effect to the transaction contemplated herein. After giving effect to the transaction contemplated herein, each Obligor is current and in good standing with respect to all governmental approvals, permits, certificates, licenses, consents and franchises necessary to continue to conduct its business and to own or lease and operate its properties as heretofore conducted, owned, leased or operated, except where any such failure to maintain or file approvals, permits, certificates, licenses, consents and franchises would not have a Material Adverse Effect. (ii) Since June 30, 1999, and as of the date hereof, nothing has occurred that has had or could reasonably be expected to have a Material Adverse Effect. (iii) Except as fully reflected in the financial statements described in Section 7(18)(g) and the Indebtedness incurred under this Agreement, (i) there were as of the Closing Date (and after giving effect to any loans made on such date), no liabilities or obligations (excluding obligations or liabilities incurred in the ordinary course of business, which, individually, or in the aggregate, could not reasonably be expected to have a Material Adverse Effect) with respect to any Obligor or any of their Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due), and (ii) neither any Obligor nor any of its Subsidiaries knows of any basis for the assertion against any Obligor or any of its Subsidiaries of any such liability or obligation which, either individually or in the aggregate, has, or could be reasonably likely to have, a Material Adverse Effect. (iv) Each of the Domestic Rigs (excluding certain swab trucks and self-propelled service rigs with an Orderly Liquidation Value not exceeding $1,500,000) are (a) goods which are mobile, of a type normally used in more than one jurisdiction and not designed to be permanently used in any one location; and (b) not fixtures under the laws of any jurisdiction in which any of the Domestic Rigs is located. The Domestic Rigs are not "motor vehicles" subject to Chapter 501 of the Transportation Code of the State of Texas or any comparable statute, law, regulation or rule or any state in which any of the Domestic Rigs is located and not certificated as motor vehicles under that laws of any jurisdiction. Each self-propelled Mobile Rig in Texas has been issued a permit license plate or machinery license plate in accordance with Transportation Code Sections 502.276, 623.144 and 623.149 and is exempted from (i) certification under Section 501 of the Transportation Code of the State of Texas pursuant to Texas Department of Transportation Rules, Chapter 43, Section 17.3, UTI - LOAN AND SECURITY AGREEMENT 59 63 and (ii) registration under Section 502 of the Transportation Code of the State of Texas. All of the Rigs (other than immaterial Rig Accessories) owned or leased by any Obligor as of the date hereof are set forth on Schedule 7(18)(e)(iv) hereof; and such schedule contains the information (as of November 13, 1999) described in Section 7, Paragraph 8(b) of this Agreement. (f) Litigation. Except as shown on Schedule 7(18)(f) as of the date hereof, no proceedings against or affecting any Obligor are pending or, to the knowledge of any Obligor, threatened before any court or governmental agency or department which could reasonably be expected to have a Material Adverse Effect. (g) Financial Statements. Prior to the date hereof, the Parent has furnished to the Lenders the audited financial statements of each Obligor as of December 31, 1998 (such financial statements, collectively, are referred to as "FINANCIALS"). The Financials have been prepared in conformity with GAAP consistently applied and present fairly, in all material respects, the consolidated financial condition of the respective Subsidiaries and Affiliates of the Obligor as of the dates thereof. Since the date of the Parent's audited financial statements most recently delivered to the Agent, there has not occurred any event which would reasonably be expected have a Material Adverse Effect. Each Obligor has delivered the Parent's internally prepared financial projections on a consolidated basis for the 15 month period commencing on October 1, 1999 (the "PROJECTIONS"). The Parent has delivered, as of the date hereof, the Projections have been prepared in good faith and are based on what each Obligor believes to be a reasonable assessment of the future performance of the Parent and its Subsidiaries, on a consolidated basis, although there can be no assurances that the results projected in the Projections will occur or that actual results will not vary materially from the projected results. (h) No Defaults. No Obligor is in default (i) under any material provisions of any instrument evidencing any Indebtedness For Borrowed Money or other Indebtedness with an outstanding balance in excess of $100,000 or of any agreement relating thereto in such manner as to cause a Material Adverse Effect or (ii) in any respect under or in violation of any order, writ, injunction or decree of any court or governmental instrumentality, in such manner as to cause a Material Adverse Effect or (iii) under any provision of any material contract to which each Obligor or any of its Subsidiaries is a party, which default would reasonably be expected to have a Material Adverse Effect. (i) Investment Company Act. No Obligor is an "investment company," as such term is defined in the Investment Company Act of 1940, as amended. (j) ERISA. (i) The Parent and each ERISA Affiliate have operated and administered each Plan and Employee Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and would not reasonably be expected to have a Material Adverse Effect. Neither the Parent nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Internal Revenue Code of 1986, as amended relating to employee benefit plans (as defined in Section 3 of ERISA) which would individually or in the aggregate reasonably be expected to have a Material Adverse Effect and no event, transaction or condition has occurred or exists that would reasonably be UTI - LOAN AND SECURITY AGREEMENT 60 64 expected to result in the incurrence of any such liability by each Obligor or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Parent or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the Internal Revenue Code of 1986, as amended, other than such liabilities or liens as would not individually or in the aggregate reasonably be expected to have a Material Adverse Effect; (ii) No accumulated funding deficiency (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived, exists or is expected to be incurred with respect to any Plan. (iii) The Parent and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under Section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate would reasonably be expected to have a Material Adverse Effect. (iv) The expected post-retirement benefit obligation (determined as of the last day of the Parent's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Internal Revenue Code of 1986, as amended) of the Parent and its Subsidiaries would not reasonably be expected to have a Material Adverse Effect. (k) Environmental Matters. Except as disclosed on Schedule 7(18)(k), each Obligor (a) possesses and will possess all environmental, health and safety licenses, permits, authorizations, registrations, approvals and similar rights necessary under Environmental Laws for the Obligors to conduct their operations as now being conducted, except where failure to have such licenses, permits, authorizations, registrations, approvals, and similar rights would not reasonably be expected to have a Material Adverse Effect, and (b) each of such licenses, permits, authorizations, registrations, approvals and similar rights is, and will be, valid and subsisting, in full force and effect and enforceable by the Obligors, and Obligors are, and will be, in compliance with all terms, conditions or other provisions of such permits, authorizations, regulations, approvals and similar rights except for such failure or noncompliance that, individually or in the aggregate for Obligor and their respective Subsidiaries, would not reasonably be expected to have a Material Adverse Effect. Except as disclosed on Schedule 7(18)(k), no Obligor has received any written notices of any violation or noncompliance with, or remedial obligation under, any Environmental Laws (which violation, non-compliance, or remedial obligation has not been cured or would not reasonably be expected to have a Material Adverse Effect) and there are no writs, injunctions, decrees, orders or judgments outstanding under the Environmental Laws, or lawsuits, claims, proceedings, or, to the knowledge of any Obligor, investigations or inquiries pending or threatened under Environmental Laws, relating to the ownership, use, condition, maintenance or operation of, or conduct of business related to, any property owned, leased or operated by any Obligor or other assets of any Obligor other than those violations, instances of noncompliance, obligations, writs, injunctions, decrees, orders, judgments, lawsuits, claims, proceedings, investigations or inquiries that individually or in the aggregate for each Obligor, would not reasonably be expected to have a Material Adverse Effect. Except as disclosed on Schedule 7(18)(k), there are no obligations, undertakings or liabilities arising UTI - LOAN AND SECURITY AGREEMENT 61 65 out of or relating to Environmental Laws which any Obligor has agreed to, assumed or retained, or by which Obligors and their respective Subsidiaries are adversely affected, by contract or otherwise, except such obligations, undertakings or liabilities as would not reasonably be expected to have a Material Adverse Effect. Except as disclosed on Schedule 7(18)(k), no Obligor received a written notice or claim to the effect that any of them are or may be liable to any other Person as the result of a release or threatened release (as such term is used in its broadest sense) of a Hazardous Material except such notice or claim that would not reasonably be expected to have a Material Adverse Effect. (l) Purpose of Loans. The proceeds of the Revolving Credit Loans other than the Acquisition Facility Loans will be used by each Company to refinance current debt, for working capital, and for repairs and ordinary maintenance to the Company's Equipment (i.e., not for acquisitions of Rigs and Rig Accessories and acquisitions of the capital stock or all or substantially all of the assets of any Person, or for any other Capital Expenditures). The proceeds of the Acquisition Facility Loans will be used by UTI for the purpose of funding Permitted Acquisitions. None of the proceeds of any Advance will be used directly or indirectly for the purpose of purchasing or carrying any "margin stock" within the meaning of Regulation U (herein called "MARGIN STOCK") or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry margin stock, or for any other purpose which might constitute this transaction as a "purpose credit" within the meaning of Regulation U. Neither the making of any Loan, nor the use of proceeds thereof, violate Regulation U, Regulation X or any other regulation of the Board. (m) Subsidiaries; Capital Stock. Except as disclosed on Schedule 7(18)(m), on the date hereof or as disclosed in writing to the Agent, no Obligor has any Subsidiaries or is a party to any joint venture, partnership or similar organization. All of the issued and outstanding capital stock of Parent's Subsidiaries is owned by Parent and its direct Subsidiaries. As of the date hereof, the ownership of the capital stock of each Obligor is accurately set forth on Schedule 7(18)(m) hereof; (n) Insurance. Without limiting the provisions of Section 7, Paragraph 5(a) above: (i) Each Obligor will, and will cause each of its respective Subsidiaries to, at all times maintain in full force and effect insurance with reputable and solvent insurance carriers, covering such risks and liabilities and with such insured amounts, deductibles or self-insured retentions consistent with industry standards, and reasonably acceptable to Agent. Schedule 7(18)(n) sets forth a true and complete list of policies in effect covering each Obligor as of the Closing Date. The Obligors will, on each such later date as the Agent or the Required Lenders may reasonably request, furnish a summary of the insurance carried in respect of each Obligor and its Subsidiaries and the assets of each Obligor and its Subsidiaries together with original certificates of insurance, policies and other evidence of such insurance, if any, naming the Agent as an additional insured and/or loss payee as required pursuant to the next paragraph of this Paragraph 18(n), in form and substance reasonably satisfactory to the Agent. (ii) Such insurance shall be provided by insurance companies licensed to do business in the applicable state of each Obligor's operations and shall be rated "A; VIII" UTI - LOAN AND SECURITY AGREEMENT 62 66 or better by Best's Key Ratings Guide or as may be reasonably acceptable to the Agent if not so rated or licensed, and shall include the following insurance coverages and any other insurance coverages that may be required by applicable law: (A) Commercial General Liability insurance written on an occurrence basis, including coverage for premises, operations, products and completed operations, explosion, collapse and underground, broad form commercial general liability equivalent coverages with a minimum combined single limit for bodily injury and property damage of $1,000,000 per occurrence and $2,000,000 in the aggregate, with a self-insured retention not greater than $100,000; (B) Business Automobile Liability insurance covering all owned, non-owned and hired automobiles for a combined bodily injury and property damage limit of no less than $1,000,000 per occurrence and containing appropriate no-fault insurance provisions required by law; (C) Workers' Compensation insurance in amounts required by applicable law and employers liability with limits of not less than $1,000,000; (D) umbrella (or excess form should umbrella coverage be unavailable) liability coverage written on an occurrence basis with a limit of liability of $50,000,000, and also to include a "drop down" provision which will pick up any exhaustion of limits under the primary coverages subject to a retention of $25,000. Such insurance coverage shall provide substantially identical coverages as are set forth in the form of the insurance required in clauses (i), (ii)(A)/(B)/(C) and (iii); (E) All-Risk Physical Loss or Damage Property Insurance (including water damage, Domestic transit coverage, collapse coverage, coverage of fire, flood and earthquakes and rapid means of transportation coverages on an agreed value basis) with respect to any Rig (on a "no-coinsurance" basis) in an amount equal to or greater than fifty percent (50%) of the Orderly Liquidation Value of each Rig with a deductible not greater than $25,000 per occurrence; (F) Pollution Legal Liability Insurance with limits of not less than $5,000,000 per occurrence; and (G) such other insurance policies and coverages as the Agent may require. (iii) All policies except Workers' Compensation shall insure the interests of the Agent and the Lenders (and their respective employees, agents, attorneys, representatives and officers) as additional insureds (each, an "ADDITIONAL INSURED") and the policies required by subclause (ii)(E) of this Paragraph 18(n) (in the nature of property damage insurance) shall provide for the direct payment of all proceeds to the Agent and UTI, as their interests may appear, which proceeds shall then be deposited to the Agent or, if so UTI - LOAN AND SECURITY AGREEMENT 63 67 directed in writing by the Agent, to the Depository Account. Each policy or certificate with respect to insurance of the Collateral shall be endorsed to the Agent's satisfaction for the benefit of the Agent (including, without limitation, by naming the Agent as loss payee, as its interests may appear, as required by the Agent) and such policy or certificate shall be delivered to the Agent. All policies required hereby shall provide for not less than thirty (30) days prior written notice to be received by the Agent and the Lenders of the termination or cancellation of the insurance evidenced thereby, unless such termination or cancellation is a result of non-payment of premiums in which case ten (10) days prior written notice shall be given to the Agent. Each Obligor agrees that, unless the insurance policies by their terms provide that they cannot cease (by reason of nonrenewal or otherwise) without the Agent being informed and having the option to continue the insurance by paying any premiums not paid by the Obligors, receipts showing payment of premiums for required insurance and also of demands from underwriters shall be in the hands of the Agent prior to the risk in question commencing. Prior to the expiration of any such policy of insurance, the appropriate Obligor shall deliver to the Agent an extension or renewal or replacement policy or an insurance certificate evidencing renewal, replacement or extension of such policy. If any such Obligor shall fail to insure such Collateral in accordance with this Paragraph (18)(n) or if any Obligor shall fail to so endorse and deposit, or to extend or renew, all such insurance policies or certificates with respect thereto, the Agent shall have the right (but shall be under no obligation) to advance funds to procure or renew or extend such insurance and each Company jointly and severally agrees to reimburse the Agent for all costs and expenses thereof, with interest on all such funds from the date advanced until paid in full at the highest rate then in effect under the Credit Agreement. The Agent agrees that it shall provide notice to the applicable Company that it has advanced funds on its behalf pursuant to this Paragraph 18(n). Each policy shall also provide: (A) that no Additional Insured shall have any obligation or liability for premiums, commissions, assessments or calls in connection with such insurance; (B) that the insurer thereunder waives all rights of subrogation against all Obligors and the Additional Insureds and any right of set-off or counterclaim and any other right to deduction whether by attachment or otherwise; (C) that such insurance shall be primary without right of contribution from any other insurance carried by or on behalf of any Additional Insured; (D) with respect to liability insurance only that, insofar as the policy is written to cover more than one insured, all terms, conditions, insuring more than one insured, all terms, conditions, insuring agreements and endorsements, with the exception of limits of liability and deductibles, shall operate in the same manner as if there were a separate policy covering each insured; (E) that no Obligor will do or omit any act, nor voluntarily suffer or permit any act to be done or omitted, whereby the insurance required to be carried UTI - LOAN AND SECURITY AGREEMENT 64 68 or maintained hereunder shall or may be suspended, impaired or canceled, and no Obligor will use or operate, or permit the Rigs to be used or operated for purposes more hazardous than permitted by the terms of the insurance policies carried by the Obligors pursuant to this Paragraph (18)(n) without first notifying the Agent and having previously insured the Rigs by additional coverage to extend to such uses, operations or risks; (F) that such policies shall not contain any date recognition exclusions; and (G) that such policies shall insure the Additional Insureds regardless of any breach or violation of the terms, conditions or warranties of such policies by any Obligor. (iv) The Companies shall deliver to each Additional Insured prior notice of any proposed insurance arrangement that the Obligors intend to put into effect which differs in any material respect (including terms of policies or identity of insurers or share of coverage to be provided by a particular insurer) from that which was previously in effect. (v) Each Obligor will, at its own expense, make or cause to be made all proofs of loss and take, or cause to be taken, all other action necessary or appropriate to make collections from the underwriters of insurance required to be carried and maintained by this Paragraph 18(n) and report all claims and give all notices in a timely fashion with copies to the Agent. (vi) Physical Damage Insurance proceeds paid to the Agent and UTI (with the proceeds to be deposited in the Depository Account) shall be applied to the repair or replacement of Collateral at such times and in such amounts as the Companies may require, except that after the occurrence of any Event of Default that is continuing, such proceeds shall, in their entirety, be held as cash Collateral and/or applied by the Agent in satisfaction of the Revolving Loans as it determines in its sole discretion. (o) Indebtedness and Contingent Liabilities. Except as disclosed in Schedule 7(18)(o) as of the date hereof, no Obligor has any outstanding Indebtedness For Borrowed Money (excluding the loans and advances hereunder) or material contractually assumed contingent liabilities. (p) Security Interests. This Agreement and the other Loan Documents create valid security interest and liens in all of the Collateral described therein in favor of the Agent for the benefit of the Lenders securing the Obligations and constitute (subject to (i) the filing of financing statements and assignments of patents and trademarks delivered to the Agent on the date hereof and thereafter from time to time and (ii) the delivery of any collateral after the date hereof as provided herein or any other Loan Document) perfected first priority liens and security interests in substantially all of such Collateral described therein subject to no liens other than Permitted Liens (other than titled UTI - LOAN AND SECURITY AGREEMENT 65 69 equipment, rolling stock and patents, trademarks, copyrights and similar items existing or issued outside of the United States). SECTION 8. INTEREST, FEES AND EXPENSES 1. (a) Interest on the Revolving Loans shall be payable monthly as of the end of each month and shall be an amount equal to the lesser of (a) the sum of (i) the Applicable Margin plus the Chase Bank Rate per annum on the average of the net balances owing by each Company to the Agent and/or the Lenders in the Company's Revolving Loan Account at the close of each day during such month on balances other than LIBOR Loans, and (ii) the Applicable Margin, plus the applicable LIBOR on any LIBOR Loan, on a per annum basis, on the average of the net balances owing by the Company to the Agent and/or the Lenders as set forth in the Company's Revolving Loan Account at the close of each day during such month or (b) interest computed in accordance with the provisions of this clause (a) but at the Maximum Legal Rate. The rates hereunder shall be calculated based on a 360-day year. The Agent and the Lenders shall be entitled to charge the Company's Revolving Loan Account at the rate provided for herein when due until all Obligations have been paid in full. (b) Notwithstanding any provision to the contrary contained in this section in the event that the sum of the outstanding balance of (i) Revolving Loans and Letters of Credit (but subject to Section 3, Paragraph 8 above) exceeds the lesser of (x) the maximum amount of Availability under Sections 3 and 4 of this Agreement or (y) the Line of Credit: (A) as a result of the sum of the Revolving Loans advanced or Letters of Credit arranged by the Agent at the request of any Company (herein "REQUESTED OVERADVANCES"), for any one (1) or more days in any month or months hereafter or (b) for any other reason whatsoever (herein "OTHER OVERADVANCES") and such Other Overadvances continue for five (5) or more consecutive days in any month hereafter, the average net balance of all Revolving Loans owing by each Company to the Agent and the Lenders for such month (or, if the fifth day occurs in a succeeding month, then the net balances shall apply to the month in which the Overadvance first occurred) shall bear interest at the Overadvance Rate. Upon and after the occurrence and during the continuance of an Event of Default and the giving of any required notice by the Agent in accordance with the provisions of Section 10, Paragraph 2 of this Agreement, but only for so long as such Event of Default shall be continuing, all Obligations shall bear interest at the Default Rate of Interest. 2. Each Company may elect to use LIBOR as the basis for calculating the interest rate to accrue on any other Revolving Loans, provided that (A) there is then no Event of Default that is continuing, (B) such Company has so advised the Agent of its election to use LIBOR and the LIBOR Period selected no later than three (3) Business Days preceding the first day of a LIBOR Period and (C) the election and LIBOR shall be effective, provided there is then no Event of Default that is continuing, on the third Business Day following said notice. The LIBOR elections must be for $1,000,000 or integer multiples thereof and there shall be no more than five (5) LIBOR Loans outstanding at one time. If no such election is timely made or can be made, or if the LIBOR rate can not be determined, then the Agent shall use the Chase Bank Rate to compute interest. In the event a Company requests any LIBOR election such Company shall pay to the Agent a $500 processing fee upon the date hereof of each such LIBOR election hereunder. In addition, such Company shall pay to the Agent for the benefit of the Lenders, upon the request of the Agent such amount or UTI - LOAN AND SECURITY AGREEMENT 66 70 amounts as shall compensate the Agent and/or the Lenders for any loss, costs or expenses incurred by the Agent and/or the Lenders (as reasonably determined by the Agent and the Lenders) as a result of: (i) any payment or prepayment on a date other than the last day of a LIBOR Period for such LIBOR Loan, or (ii) any failure of such Company to borrow a LIBOR Loan on the date for such borrowing specified in the relevant notice; such compensation to include, without limitation, an amount equal to any loss or expense suffered by the Agent and/or the Lenders during the period from the date of receipt of such payment or prepayment or the date of such failure to borrow to the last day of such LIBOR Period if the rate of interest obtained by the Agent and/or the Lenders upon the reemployment of an amount of funds equal to the amount of such payment, prepayment or failure to borrow is less than the rate of interest applicable to such LIBOR Loan for such LIBOR Period. The determination by the Agent and/or the Lenders of the amount of any such loss or expense, when set forth in a written notice to such Company, containing the Agent's and/or the Lenders' calculations thereof in reasonable detail, shall be conclusive on such Company, in the absence of manifest error. Calculation of all amounts payable to the Agent and/or the Lenders under this paragraph with regard to LIBOR Loans shall be made as though the Agent and the Lenders had actually funded the LIBOR Loans through the purchase of deposits in the relevant market and currency, as the case may be, bearing interest at the rate applicable to such LIBOR Loans in an amount equal to the amount of the LIBOR Loans and having a maturity comparable to the relevant interest period; provided, however, that the Agent and the Lenders may obtain funds for each of the LIBOR Loans in any manner the Agent and the Lenders see fit and the foregoing assumption shall be used only for calculation of amounts payable under this paragraph. In addition, notwithstanding anything to the contrary contained herein, the Agent and the Lenders shall apply all proceeds of Collateral, including the Accounts, and all other amounts received by it from or on behalf of the Companies (i) initially to the Chase Bank Rate loans and (ii) subsequently to LIBOR Loans; provided, however, (x) and upon the occurrence and during the continuation of an Event of Default or (y) in the event the aggregate amount of outstanding LIBOR Rate Loans exceeds Availability or the applicable maximum levels set forth therefor, the Agent and the Lenders may apply all such amounts received by them to the payment of Obligations in such manner and in such order as the Agent may elect in its reasonable business judgment. In the event that any such amounts are applied to Revolving Loans which are LIBOR Loans, such application shall be treated as a prepayment of such loans and the Agent and the Lenders shall be entitled to indemnification hereunder. 3. In consideration of the Letter of Credit Guaranty of the Agent, the Company shall pay the Agent for the benefit of the Lenders the Letter of Credit Guaranty Fee which shall be an amount equal to one and one-quarter percent (1.25%) per annum, payable monthly, on the face amount of each Letter of Credit less the amount of any and all amounts previously drawn under the Letter of Credit. 4. Any charges, fees, commissions, costs and expenses charged to the Agent and/or the Lenders for a Company's account by any Issuing Bank in connection with or arising out of Letters of Credit issued pursuant to this Agreement or out of transactions relating thereto will be charged to the applicable Company's account in full when charged to or paid by the Agent and when made by any such Issuing Bank shall be conclusive on the Agent. UTI - LOAN AND SECURITY AGREEMENT 67 71 5. The Companies shall reimburse or pay the Agent for: (a) all Out-of-Pocket Expenses and (b) any applicable Documentation Fee. 6. Upon the last Business Day of each month, commencing with the last day of the month in which this Agreement is executed the Companies shall pay the Agent for the benefit of the Lenders the Line of Credit Fee. 7. To induce the Agent and the Lenders to enter into this Agreement and to extend to each Company the Revolving Loan, the Companies shall pay to the Agent for the sole and separate account of the Agent a Loan Facility Fee in the amount of $650,000 upon or prior to the execution of this Agreement which shall be allocated by the Agent in its sole discretion. 8. Upon the date hereof and on such annual anniversary hereof the Companies shall pay to the Agent for the sole and separate account of the Agent the Administrative Management Fee, which shall be fully earned and not refundable or rebateable when due. 9. [Intentionally Omitted] 10. [Intentionally Omitted] 11. Each Company shall pay the Agent's standard charges for, and the fees and expenses of, the Agent's personnel used by the Agent for reviewing the books and records of such Company and for verifying, testing, protecting, safeguarding, preserving or disposing of all or any part of the Collateral; provided, however, that the foregoing (other than Out-of-Pocket Expenses) shall not be payable until the occurrence and during the continuation of an Event of Default which has not been waived in writing by the Agent if the Companies are paying an Administrative Management Fee. 12. In no event shall the rates of interest hereunder exceed the Maximum Legal Rate. In the event that the Contract Rate computed under this section would exceed the Maximum Legal Rate, the rates of interest under this Agreement for any such period shall be limited to the Maximum Legal Rate, but any subsequent reductions in the Contract Rate shall not reduce the rates of interest under this Agreement below the Maximum Legal Rate until the total amount of interest charged hereunder equals the amount of interest that would have been charged had the Contract Rate been charged at all times. 13. Each Company hereby authorizes the Agent to charge the Revolving Loan Account with the Agent with the amount of all payments due hereunder, and under the other Loan Documents as such payments become due. Each Company confirms that any charges which the Agent may so make to each Company's account as herein provided will be made as an accommodation to each Company and solely at the Agent's discretion. SECTION 9. POWERS Each Obligor hereby constitutes the Agent on behalf of the Lenders or any person or agent the Agent may designate as its attorney-in-fact, at such Obligor's cost and expense, to exercise all UTI - LOAN AND SECURITY AGREEMENT 68 72 of the following powers, which being coupled with an interest, shall be irrevocable until all of the Obligations to the Agent and the Lenders have been paid in full: (a) To receive, take, endorse, sign, assign and deliver, all in the name of the Agent or such Obligor, any and all checks, notes, drafts, and other documents or instruments relating to the Collateral; (b) To receive, open and dispose of all mail addressed to such Obligor and to notify postal authorities to change the address for delivery thereof to such address as the Agent may designate; (c) To request from customers indebted on Accounts at any time, in the name of the Agent or such Obligor or that of the Agent's designee, information concerning the amounts owing on the Accounts; (d) To transmit to customers indebted on Accounts notice of the Agent's interest therein and to notify customers indebted on Accounts to make payment directly to the Agent for such Obligor's account; and (e) To take or bring, in the name of the Agent or such Obligor, all steps, actions, suits or proceedings deemed by the Agent necessary or desirable to enforce or effect collection of the Accounts . Notwithstanding anything hereinabove contained to the contrary, the powers set forth in Paragraphs (a), (b), (d) and (e) above may only be exercised after the occurrence of and during the continuation of an Event of Default and until such time as such Event of Default that is continuing is waived in writing by the Agent or cured to the Agent's satisfaction. In addition, the powers set forth in Paragraph (c) above will only be exercised in the name of applicable Obligor or a certified public accountant designated by the Agent prior to the occurrence of such Event of Default that is continuing. SECTION 10. EVENTS OF DEFAULT AND REMEDIES 1. Notwithstanding anything hereinabove to the contrary, the Lenders acting through the Agent may terminate this Agreement immediately upon the occurrence and during the continuance of any of the following (herein "EVENTS OF DEFAULT"): (a) cessation of the business of any other Obligor or the calling of a meeting of the creditors of any other Obligor for purposes of compromising the debts and obligations any Obligor; (b) the failure of any Obligor to generally meet debts as they mature; (c) the commencement by or against any Obligor of any bankruptcy, insolvency, arrangement, reorganization, receivership or similar proceedings under any federal or state law, provided that in the event of any involuntary proceeding commenced against any Obligor such proceeding is not dismissed or discharged within sixty (60) days after commencement thereof; UTI - LOAN AND SECURITY AGREEMENT 69 73 (d) breach by any Obligor of any warranty, representation or covenant contained herein (other than those referred to in Paragraph (e) below) or in any other Loan Document, provided that such breach of any of the warranties, representations or covenants referred in this Paragraph (d) shall not be deemed to be an Event of Default unless and until such breach shall remain unremedied to the Agent's satisfaction for a period of ten (10) Business Days after the occurrence thereof; (e) breach by any Obligor of any warranty, representation or covenant of Section 3, Paragraph 3 (other than the second sentence of Paragraph 3(b)) and Paragraph 4 of this Agreement; Section 4, Paragraphs 3 and Paragraph 4 (other than the first sentence of Paragraph 4) of this Agreement; or Section 7, Paragraphs 1, 5, 6, and 10, 11 and 13 of this Agreement; (f) failure of any Company to pay any of the Obligations within five (5) Business Days of the due date thereof, provided that nothing contained herein shall prohibit the Agent from charging such amounts to the Revolving Loan Account on the due date thereof; (g) any Obligor shall (i) engage in any "prohibited transaction" as defined in ERISA, (ii) have any "accumulated funding deficiency" as defined in ERISA, (iii) have any Reportable Event, (iv) terminate any Plan or (v) be engaged in any proceeding in which the Pension Benefit Guaranty Corporation shall seek appointment, or is appointed, as trustee or administrator of any Plan, and with respect to this Paragraph (g) such event or condition (x) remains uncured for a period of thirty (30) days from date of occurrence and (y) could, in the reasonable opinion of the Agent, subject any Obligor to any tax, penalty or other liability that could have a Material Adverse Effect. (h) the occurrence of any default or event of default (after giving effect to any applicable grace or cure periods) under any instrument or agreement evidencing (x) Subordinated Debt or (y) any other Indebtedness For Borrowed Money of any Company having a principal amount in excess of $1,000,000; (i) any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of more than 30% of the total voting power of all classes of stock then outstanding of Parent entitled to vote in the election of directors; or (j) the occurrence of any default or event of default under any other Loan Document. For purposes of this Agreement and the other Loan Documents, in the event of (x) a misstatement, or misrepresentation with respect to any matter that reasonably could be considered material to a commercial lender (including, without limitation, any negligent or intentional misstatement or misrepresentation in a certificate or other document delivered by an Obligor pursuant to this Agreement) or (y) any breach or violation of any covenant contained in any Loan Document by any Obligor arising from or relating to the failure or delay in delivering to the Agent or depositing into a Depository Account any Collections or other proceeds of Collateral or other funds which are required to be so delivered or deposited pursuant to any Loan Document (including, without limitation, the diversion, misdirection, misuse or misapplication of any such Collections, proceeds or UTI - LOAN AND SECURITY AGREEMENT 70 74 funds), that constitutes an Event of Default, such Event of Default shall be considered continuing until such times as it is waived in writing by the Agent. 2. Upon the occurrence and during the continuation of an Event of Default, the Agent may (at its option), and shall at the direction of the Required Lenders, declare that all loans, advances and extensions of credit provided for in Section 3 of this Agreement shall thereafter be in the Agent's sole discretion and the obligation of the Agent and/or the Lenders to make Revolving Loans and/or open Letters of Credit shall cease unless such Event of Default is waived in writing by the Agent on behalf of the Lenders or cured to the Agent's satisfaction, and so long as an Event of Default shall have occurred and be continuing the Agent may (at its option), and shall at the direction of the Required Lenders declare that: (i) all Obligations shall become immediately due and payable; (ii) the Default Rate of Interest shall be charged on all then outstanding or thereafter incurred Obligations in lieu of the interest provided for in Section 8 of this Agreement; provided that with respect to this clause (ii), (a) the Agent has given the Parent written notice of the Event of Default; provided, further that no notice is required if the Event of Default is the event listed in Paragraph 1(c) of this section, and (b) the Default Rate shall accrue from and after the date of the occurrence of the Event of Default listed in Paragraph 1(c) of this section; and (iii) this Agreement shall immediately terminate upon notice to the Parent; provided, however, that no notice of termination is required if the Event of Default is the event listed in Paragraph 1(c) of this section. The exercise of any remedy available to the Agent and/or the Lender is not exclusive of any other remedy available to the Agent and/or the Lender, which may be exercised at any time by the Agent and/or the Lenders. 3. Immediately upon the occurrence of any Event of Default and during the continuation thereof which has not been waived in writing by the Agent, the Agent may and, at the direction of the Required Lenders, shall to the extent permitted by law: (a) remove from any premises where same may be located any and all documents, instruments, files and records, and any receptacles or cabinets containing same, relating to the Accounts, or the Agent may use, at the expense of the Obligors, such of each Obligor's personnel, supplies or space at each Obligor's places of business or otherwise, including UTIMS, as may be necessary to properly administer and control the Accounts or the handling of collections and realizations thereon; (b) bring suit, in the name of any Obligor or all Obligors, or the Agent on behalf of the Lenders, and generally shall have all other rights respecting said Accounts, including, without limitation, the right to: accelerate or extend the time of payment, settle, compromise, release in whole or in part any amounts owing on any Accounts and issue credits in the name of each Obligor or the Agent; (c) sell, assign and deliver the Collateral and any returned, reclaimed or repossessed merchandise, with or without advertisement, at public or private sale, for cash, on credit or otherwise, at the Agent's sole option and discretion, and the Agent may bid or become a purchaser at any such sale, free from any right of redemption, which right is hereby expressly waived by each Obligor; (d) foreclose the security interests in the Collateral created herein by any available judicial procedure, or to take possession of any or all of the Inventory, Equipment and/or Other Collateral without judicial process, and to enter any premises where any Inventory, Equipment and/or Other Collateral may be located for the purpose of taking possession of or removing the same; and (e) exercise any other rights and remedies provided in law, in equity, by contract or otherwise. The Agent shall have the right to sell, lease, or otherwise dispose of all or any part of the Collateral with reasonable notice, if any, as required by law, whether in its then condition or after further preparation or processing, in the name of the applicable Obligor or the Agent, or in UTI - LOAN AND SECURITY AGREEMENT 71 75 the name of such other party as the Agent may designate, either at public or private sale or at any broker's board, in lots or in bulk, for cash or for credit, with or without warranties or representations, and upon such other terms and conditions as the Agent in its sole discretion may deem advisable, and the Agent shall have the right to purchase at any such sale. If any Inventory and Equipment shall require rebuilding, repairing, maintenance or preparation, the Agent shall have the right, at its option, to do such of the aforesaid as is necessary, for the purpose of putting the Inventory and Equipment in such saleable condition as the Agent shall deem appropriate. Each Obligor agrees, at the request of the Agent, to assemble the Inventory and Equipment and to make it available to the Agent at premises of such Obligor or elsewhere and to make available to the Agent the premises and facilities of such Obligor for the purpose of the Agent's taking possession of, removing or putting the Inventory and Equipment in saleable form. However, if notice of intended disposition of any Collateral is required by law, it is agreed that ten (10) days notice shall constitute reasonable notification and full compliance with the law. The net cash proceeds resulting from the Agent's exercise of any of the foregoing rights (after deducting all charges, costs and expenses, including reasonable attorneys' fees), shall be applied by the Agent to the payment of the Obligations, whether due or to become due, in such order as the Agent may elect, and each Obligor shall remain liable to the Agent and the Lenders for any deficiencies, and the Agent in turn agrees to remit to each Company or its successors or assigns, any surplus resulting therefrom. The enumeration of the foregoing rights is not intended to be exhaustive and the exercise of any right shall not preclude the exercise of any other rights, all of which shall be cumulative. Any mortgage(s), deed(s) of trust or assignment(s) on the Real Estate shall govern the rights and remedies of the Agent and the Lenders thereto. 4. So long as an Event of Default has occurred and is continuing which has not been waived in writing by the Agent, the Agent shall have the following rights and remedies with respect to the Louisiana Pledged Collateral, which rights and remedies are in addition to and are not in lieu or limitation of any other rights and remedies that may be provided in this Agreement, under Chapter 9 of the Louisiana Commercial Laws (La. R.S. Sections 10:9-101, et seq.), under the Uniform Commercial Code of any state other than Louisiana, or at law or equity generally: (a) The Agent may cause the Louisiana Pledged Collateral, or any part or parts thereof, to be immediately seized wherever found, and sold, whether in term of court or in vacation, under ordinary or executory process, in accordance with applicable Louisiana law, to the highest bidder for cash, with or without appraisement, without the necessity of making additional demand, or of notifying any Obligor, or placing any Obligor in default. (b) For purposes of foreclosure under Louisiana executory process procedures, each Obligor confesses judgment and acknowledges to be indebted unto and in favor of the Agent up to the full amount of the Obligations, including, without limitation, principal, interest, costs, expenses, attorneys' fees and other fees and charges. To the extent permitted under applicable Louisiana law, each Obligor additionally waives: (a) the benefit of appraisal as provided in Articles 2332, 2336, 2723 and 2724 of the Louisiana Code of Civil Procedure and all other laws with regard to appraisal upon judicial sale; (b) the demand and three (3) days' delay as provided under Articles 2639 of the Louisiana Code of Civil Procedure; (c) the Notice of Seizure as provided under Articles 2293 of the Louisiana Code of Civil Procedure; (d) the three (3) days' delay provided under Articles UTI - LOAN AND SECURITY AGREEMENT 72 76 2331 and 2722 of the Louisiana Code of Civil Procedure; and (e) all other benefits provided under Articles 2331, 2722 and 2723 of the Louisiana Code of Civil Procedure. (c) Should any of the Louisiana Pledged Collateral be seized as an incident to an action for the recognition or enforcement of the Obligations or this Agreement, by executory process, sequestration, attachment, writ of fieri facias or otherwise, each Obligor agrees that the court issuing any such order shall, if requested by the Agent, appoint the Agent or any Person named by the Agent at the time such seizure is requested, or at any time thereafter, as keeper of the Louisiana Pledged Collateral as provided under La. R.S. Sections 9:5136, et seq. Each Obligor agrees to pay the reasonable fees of such keeper, which compensation to the keeper shall also be a part of the Obligations. (d) Should it become necessary for the Agent to foreclose against the Louisiana Pledged Collateral, all declarations of fact that are made under an authentic act before a Notary Public in the presence of two witnesses, by a person declaring such facts to lie within his or her knowledge, shall constitute authentic evidence for purposes of executory process and also for purposes of La. R.S. Section 9:3509.1, La. R.S. Section 9:3504(D)(6) and La. R.S. Section 10:9-508, as applicable. (e) ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT NOTWITHSTANDING, THE SECURITY INTERESTS IN THE LOUISIANA PLEDGED COLLATERAL GRANTED IN THIS, AND THE AGENT'S REMEDIES IN THE COURTS SITTING IN AND FOR THE STATE OF LOUISIANA WITH RESPECT TO THE LOUISIANA PLEDGED COLLATERAL SHALL BE GOVERNED BY LOUISIANA LAW, WITH NEW YORK LAW GOVERNING THE INTERPRETATION AND CONSTRUCTION OF THE PROVISIONS OF THIS AGREEMENT, ITS APPLICATION TO THE PLEDGED COLLATERAL AND THE PROCEEDS THEREOF, AND ALL RIGHTS AND OBLIGATIONS OF THE PARTIES THEREUNDER IN ALL OTHER RESPECTS. 5. Once the Agent has commenced the exercise of remedies under this Section 10, notwithstanding that the Event of Default may at any time thereafter no longer be continuing, the Agent shall be entitled to continue to exercise any and all rights and remedies contemplated by this Section 10. SECTION 11. TERMINATION Not later than ninety (90) days prior to an Anniversary Date, the Parent shall deliver to the Agent a report, certified by the Parent's Chief Financial Officer or other executive officer, setting forth in reasonable detail the Parent's consolidated capital structure, including a summary of the material terms (including maturity dates and redemption, exchange, conversion, call and similar features, if applicable) of all outstanding debt and capital stock (including preferred stock) and indicate therein (i) if any Qualified Capital Stock will or may become Disqualified Capital Stock during the annual period commencing on the Anniversary Date next following the date of such report and (ii) a calculation of the Fixed Charge Coverage giving effect to the information provided in clause (i) with respect to such period. Except as otherwise permitted herein, the Companies or any Lender acting through the Agent may terminate this Agreement and the Line of Credit only as of the initial or any subsequent Anniversary Date and then only by giving the other at least sixty (60) days prior UTI - LOAN AND SECURITY AGREEMENT 73 77 written notice of termination. Notwithstanding the foregoing the Lenders acting through the Agent may terminate this Agreement immediately upon the occurrence of an Event of Default and so long as the same is continuing; provided, however, that if the Event of Default is an event listed in Paragraph 1(c) of Section 10 of this Agreement, the Agent and the Lenders may regard this Agreement as terminated and notice to that effect is not required. This Agreement, unless terminated as herein provided, shall automatically continue from Anniversary Date to the next successive Anniversary Date. Notwithstanding the foregoing, the Companies may terminate this Agreement and the Line of Credit prior to any applicable Anniversary Date upon sixty (60) days' prior written notice to the Agent and the Lenders, provided that the Companies pay to the Agent for the benefit of the Lenders immediately on demand, an Early Termination Fee, if applicable. All Obligations shall become due and payable as of any termination hereunder or under Section 10 hereof and, pending a final accounting, the Agent and the Lenders may withhold any balances in each and every Company's account (unless supplied with an indemnity satisfactory to the Agent) to cover all of the Obligations, whether absolute or contingent. All of the Agent's and Lenders' rights, liens and security interests shall continue after any termination until all Obligations have been paid and satisfied in full. SECTION 12. MISCELLANEOUS 1. WAIVERS, ETC. Each Obligor hereby waives diligence, demand, presentment and protest and any notices thereof as well as notice of nonpayment, notice of dishonor, notice of intent to accelerate and notice of acceleration. No delay or omission of the Agent and/or the Lenders or any Obligor to exercise any right or remedy hereunder, whether before or after the happening of any Event of Default, shall impair any such right or shall operate as a waiver thereof or as a waiver of any such Event of Default. No single or partial exercise by the Agent or the Lenders of any right or remedy precludes any other or further exercise thereof, or precludes any other right or remedy. 2. NO ORAL AGREEMENT. THIS WRITTEN AGREEMENT AND THE OTHER DOCUMENTS REFERENCED HEREIN OR CONTEMPLATED HEREBY REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. 3. INTEREST SAVINGS PROVISION. It is the intent of each Obligor, the Agent and the Lenders to conform strictly to all applicable state and federal usury laws. All agreements between a Company, any other Obligor, the Agent and the Lenders whether now existing or hereafter arising and whether written or oral, are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of the maturity hereof or otherwise, shall the amount contracted for, charged, received or collected by the Agent and/or the Lenders for the use, forbearance, or detention of the money loaned hereunder or otherwise, or for the payment or performance of any covenant or obligation contained herein or in any other document evidencing, securing or pertaining to the Obligations evidenced hereby which may be legally deemed to be for the use, forbearance or detention of money, exceed the maximum amount which each Company or any other Obligor is legally entitled to contract for, charge, receive or collect under applicable state or UTI - LOAN AND SECURITY AGREEMENT 74 78 federal law. If from any circumstances whatsoever fulfillment of any provision hereof or of such other documents, at the time performance of such provision shall be due, shall involve transcending the limit of validity prescribed by law, then the obligation to be fulfilled shall be automatically reduced to the limit of such validity, and if from any such circumstance the Agent and/or the Lenders shall ever receive as interest or otherwise an amount in excess of the maximum that can be legally collected, then such amount which would be excessive interest shall be applied to the reduction of the principal indebtedness hereof and any other amounts due with respect to the Obligations evidenced hereby, but not to the payment of interest and if such amount which would be excess interest exceeds the Obligations and all other non interest indebtedness described above, then such additional amount shall be refunded to each Company. In determining whether or not all sums paid or agreed to be paid by each Company for the use, forbearance or detention of the Obligations to the Agent and/or the Lenders, under any specific contingency, exceeds the maximum amount permitted by applicable law, each Company and the Agent and the Lenders shall to the maximum extent permitted under applicable law, (a) treat all Obligations as but a single extension of credit, (b) characterize any nonprincipal payment as an expense, fee or premium rather than as sums paid or agreed to be paid by each Company for the use, forbearance or detention of the Obligations, (c) exclude voluntary prepayments and the effect thereof, and (d) amortize, prorate, allocate and spread in equal parts, the total amount of such sums paid or agreed to be paid by each Company for the use, forbearance or detention of the Obligations to the Agent and the Lenders throughout the entire contemplated term of the Obligations so that the interest rate is uniform through the entire term of the Obligations. The terms and provisions of this paragraph shall control and supersede every other provision hereof and all other agreements between a Company, each other Obligor, the Agent and the Lenders. 4. SEVERABILITY. If any provision hereof or of any other agreement made in connection herewith is held to be illegal or unenforceable, such provision shall be fully severable, and the remaining provisions of the applicable agreement shall remain in full force and effect and shall not be affected by such provision's severance. Furthermore, in lieu of any such provision, there shall be added automatically as a part of the applicable agreement a legal and enforceable provision as similar in terms to the severed provision as may be possible. 5. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH COMPANY AND OTHER OBLIGOR, THE AGENT AND THE LENDERS EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT. EACH COMPANY AND OTHER OBLIGOR HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OF PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED. 6. NOTICES. Except as otherwise herein provided, any notice or other communication required hereunder shall be in writing, and shall be deemed to have been validly served, given or delivered when hand delivered or sent by telegram or telex, or three days after deposit in the United State mails, with proper first class postage prepaid and addressed to the party to be notified as follows: UTI - LOAN AND SECURITY AGREEMENT 75 79 (a) if to the Agent, at: The CIT Group/Business Credit, Inc., as Agent 5420 LBJ Freeway, Suite 200 Dallas, Texas Attn: Regional Credit Manager Fax No.: (972) 455-1690 with a copy to Agent's Counsel: Patton Boggs LLP 2001 Ross Avenue, Suite 3000 Dallas, Texas 75201 Attn: James C. Chadwick Fax No.: (214) 758-1550 (b) if to any other party becoming a Lender hereunder to the address specified in the Assignment and Transfer Agreement; (c) if to any other Lender which is a party hereto (other than CITBC), to the address specified under the signature of such Lenders or agent, as the case may be, on the signature pages hereof. (d) if to any Company at: c/o UTI Energy Corp. 16800 Greenspoint Park Suite 225N Houston, Texas 77060 Attention: Chief Financial Officer Fax No.: (281) 875-9145 with a copy to Company's Counsel: Fulbright & Jaworski LLP 1301 McKinney, Suite 5100 Houston, Texas 71010 Attn: Joshua P. Agrons, Partner Fax No.: (713) 651-5246 (e) if to any Guarantor (other than UTICO) at: c/o UTI Energy Corp. 16800 Greenspoint Park Suite 225N Houston, Texas 77060 Attention: Chief Financial Officer Fax No.: (281) 873-4141 UTI - LOAN AND SECURITY AGREEMENT 76 80 with a copy to Guarantor's Counsel: Fulbright & Jaworski LLP 1301 McKinney, Suite 5100 Houston, Texas 71010 Attn: Joshua P. Agrons, Partner Fax No.: (713) 651-5246 (f) if to UTICO, Inc. UTICO, Inc. 801 West Street Wilmington, DE 19801-1545 with a copy to UTICO, Inc.'s Counsel: Fulbright & Jaworski LLP 1301 McKinney, Suite 5100 Houston, Texas 71010 Attn: Joshua P. Agrons, Partner Fax No.: (713) 651-5246 or to such other address as any party may designate for itself by like notice. 7. GOVERNING LAW. EXCEPT AS PROVIDED IN SECTION 10, PARAGRAPH 4(e) OF THIS AGREEMENT, THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING, BUT NOT LIMITED TO SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). 8. NO AMENDMENTS. This Agreement can be amended, modified or changed only by a writing signed by each Obligor, the Agent and the Required Lenders (unless the consent of all Lenders is required pursuant to Section 14, Paragraph 10 of this Agreement). 9. SUBMISSION TO JURISDICTION. (a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK, NEW YORK COUNTY, OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH COMPANY AND OTHER OBLIGOR HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING EACH COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS UTI - LOAN AND SECURITY AGREEMENT 77 81 OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL POSTAGE PREPAID), TO IT AT ITS ADDRESS PROVIDED IN SECTION 14, PARAGRAPH 6(d) OF THIS AGREEMENT SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST EACH COMPANY IN ANY OTHER JURISDICTION. (b) EACH COMPANY AND OTHER OBLIGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT IN THE COURTS REFERRED TO IN THE FIRST SENTENCE OF CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. 10. WAIVER OF CONSUMER RIGHTS. EACH COMPANY AND OTHER OBLIGOR HEREBY WAIVES ITS RIGHTS, UNDER THE DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT, SECTION 17.41 ET. SEQ. BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF ITS OWN SELECTION, EACH COMPANY AND OTHER OBLIGOR VOLUNTARILY CONSENTS TO THIS WAIVER. EACH COMPANY AND OTHER OBLIGOR EXPRESSLY WARRANTS AND REPRESENTS THAT IT (a) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION RELATIVE TO LENDER, AND (b) HAS BEEN REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. UTI - LOAN AND SECURITY AGREEMENT 78 82 11. [Intentionally Omitted] 12. JOINT AND SEVERAL LIABILITY; STRUCTURE OF CREDIT FACILITY; OBLIGOR'S INTENT. (a) The Obligors acknowledge that the loans and advances and other credit accommodations to any Company or the Companies as a group hereunder shall be for the benefit of all Obligors. The Obligors hereby irrevocably and unconditionally: (i) agree that they are jointly and severally liable to the Lenders and the Agent, for the full and prompt payment of the Obligations and the performance by each Company of its Obligations hereunder in accordance with the terms hereof; (ii) agree to fully and promptly perform all of its Obligations hereunder with respect to each advance of credit hereunder as if such advance had been made directly to it; and (iii) agree as a primary obligation to indemnify Lenders and the Agent on demand for and against any loss incurred by Lenders and/or the Agent as a result of any of the Obligations of any one or more of the Obligors being or becoming void, voidable, unenforceable or ineffective for any reason whatsoever, whether or not known to Lender and/or the Agent or any Person, the amount of such loss being the amount which Lender and/or the Agent would otherwise have been entitled to recover from any one or more of the Obligors. (b) It is the intent of each Obligor that the indebtedness, obligations and liability hereunder of no one of them be subject to challenge on any basis, including, without limitation, pursuant to any applicable fraudulent conveyance or fraudulent transfer laws. Accordingly, as of the date hereof, the liability of each Obligor under this Paragraph 12, together with all of its other liabilities to all Persons as of the date hereof and as of any other date on which a transfer or conveyance is deemed to occur by virtue of this Agreement, calculated in amount sufficient to pay its probable net liabilities on its existing indebtedness as the same become absolute and matured ("DATED LIABILITIES") is, and is to be, less than the amount of the aggregate of a fair valuation of its property as of such corresponding date ("DATED ASSETS"). To this end, each Obligor under this Paragraph 12, (i) grants to and recognizes in each other Obligor, ratably, rights of subrogation and contribution in the amount, if any, by which the Dated Assets of such Obligor, but for the aggregate of subrogation and contribution in its favor recognized herein, would exceed the Dated Liabilities of such Obligor or, as the case may be, (ii) acknowledges receipt of and recognizes its right to subrogation and contribution ratably from each of the other Obligors in the amount, if any, by which the Dated Liabilities of such Obligor, but for the aggregate of subrogation and contribution in its favor recognized herein, would exceed the Dated Assets of such Obligor under this Paragraph 12. In recognizing the value of the Dated Assets and the Dated Liabilities, it is understood that Obligors will recognize, to at least the same extent of their aggregate recognition of liabilities hereunder, their rights to subrogation and contribution hereunder. It is a material objective of this Paragraph 12 that each Obligor recognizes rights to subrogation and contribution rather than be deemed to be insolvent (or in contemplation thereof) by reason of an arbitrary interpretation of its joint and several obligations hereunder. In addition to and not in limitation of the foregoing provisions of this Paragraph 12, the Obligors and Lender and/or the Agent hereby agree and acknowledge that it is the intent of each Obligor, Lender and the Agent that the obligations of each Obligor hereunder be in all respects in compliance with, and not be voidable pursuant to, applicable fraudulent conveyance and fraudulent transfer laws. UTI - LOAN AND SECURITY AGREEMENT 79 83 (c) Each Obligor agrees and acknowledges that the present structure of the credit facilities detailed in this Agreement is based in part upon the financial and other information presently known to Lender and/or the Agent regarding certain Obligors, the corporate structure of the Obligors, and the present financial condition of the Obligors. Each Obligor represents to the Agent and the Lenders that its existing cash management system processes collections only on a consolidated basis for Parent and its Subsidiaries (other than as to NDC, UWSI, NDS and NDM, which will be in the cash management system by January 2, 2000) and that it would impose a material operational inefficiency on such cash management if it were changed to process collections separately for each Obligor. Each Obligor represents to the Agent and the Lenders that it conducts its commercial dealings with its suppliers, vendors and other creditors as a consolidated enterprise of Parent and its Subsidiaries and not as a separate entity or on any other basis, and holds itself out to the business community at large as an integrated energy services company rather than as separate and distinct companies or enterprises. Each Obligor represents to the Agent and the Lenders that all financial and credit information provided to each Obligor's suppliers, vendors and other creditors are provided only on a consolidated basis for Parent and its Subsidiaries and that such information is not provided for any Obligor on a separate basis or on any other basis. Each Obligor agrees that it shall not make or permit to exist any loans, intercompany accounts or investments between itself and any Company, other present or future Obligor or other present or future Subsidiary of Parent which do not qualify as Permitted Intercompany Balances. Each Obligor hereby agrees that Lender and the Agent shall have the right, in its or their sole credit judgment, to require that any or all of the following changes be made to these credit facilities without limitation on the other applicable provisions of the Loan Documents: (i) establish at the Closing Date and thereafter enforce consolidated lockbox and dominion accounts after the occurrence of any Event of Default and during the continuation thereof, or so long as Availability is less than $15,000,000 for all of the Companies, subject to the last sentence of Section 3, paragraph 4, (ii) further restrict or prohibit loans, intercompany accounts and investments among the Companies, the Obligors and Parent and its Subsidiaries following the occurrence of any Event of Default and during the continuation thereof, or so long as Availability is less than $15,000,000 for all of the Companies, (iii) establish or exercise controls or such other procedures as shall be reasonably deemed by the Agent to be useful in tracking where loans are made under this Agreement and the source of payments received by the Agent and/or Lender on such loans, and (iv) establishing separate borrowing bases, requiring application of collections separately for each Company and restricting Revolving Loans to the Companies, and the Availability of the Companies, to within the same following the occurrence of any Event of Default and during the continuation thereof, or so long as Availability is less than $15,000,000 for all of the Companies. SECTION 13. AGREEMENT BETWEEN THE LENDERS 1. (a) The Agent, for the account of the Lenders, shall disburse all loans and advances to each Company and shall handle all collections of Collateral and repayment of Obligations. It is understood that for purposes of advances to each Company and for purposes of this section, the Agent is using the funds of the Agent. (b) Unless the Agent shall have been notified in writing by any Lender prior to any advance to any Company that such Lender will not make the amount which would constitute its share of the borrowing on such date available to the Agent, the Agent may assume that such Lender shall UTI - LOAN AND SECURITY AGREEMENT 80 84 make such amount available to the Agent on a Settlement Date, and the Agent may, in reliance upon such assumption, make available to each Company a corresponding amount. A certificate of the Agent submitted to any Lender with respect to any amount owing under this subsection shall be conclusive, absent manifest error. If such Lender's share of such borrowing is not in fact made available to the Agent by such Lender on the Settlement Date, the Agent shall be entitled to recover such amount with interest thereon at the rate per annum applicable to Revolving Loans hereunder, on demand, from any Company without prejudice to any rights which the Agent may have against such Lender hereunder. Nothing contained in this subsection shall relieve any Lender which has failed to make available its ratable portion of any borrowing hereunder from its obligation to do so in accordance with the terms hereof. Nothing contained herein shall be deemed to obligate the Agent to make available to any Company the full amount of a requested advance when the Agent has any notice (written or otherwise) that any of the Lenders will not advance its ratable portion thereof. 2. On the Settlement Date, the Agent and the Lenders shall each remit to the other, in immediately available funds, all amounts necessary so as to ensure that, as of the Settlement Date, the Lenders shall have their proportionate share of all outstanding Obligations. 3. The Agent shall forward to each Lender, at the end of each month, a copy of the account statement rendered by the Agent to each Company. 4. The Agent shall, after receipt of any interest and fees earned under this Agreement, promptly remit to the Lenders: (a) their pro rata portion of all fees; provided, however, that the Lenders (other than CITBC in its role as the Agent) shall (x) not share in the Administrative Management Fee or Documentation Fees or the fees provided for in Section 8, Paragraphs 5 and 8 of this Agreement; and (y) receive their share of the Loan Facility Fee in accordance with their respective agreements with the Agent and; (b) interest computed at the rate and as provided for in Section 8 of this Agreement on all outstanding amounts advanced by the Lenders on each Settlement Date, prior to adjustment, that are subsequent to the last remittance by the Agent to the Lenders of each Company's interest. 5. (a) Each Obligor acknowledges that the Lenders may sell participations, in an amount of not less than $5,000,000 in the loans and extensions of credit made and to be made to each Company hereunder. Each Obligor further acknowledges that in doing so, the Lenders may grant to such participants certain rights which would require the participant's consent to certain waivers, amendments and other actions with respect to the provisions of this Agreement, provided that the consent of any such participant shall not be required except for matters requiring the consent of all Lenders hereunder as set forth in Section 14, Paragraph 10 of this Agreement. (b) Each Obligor authorizes each Lender to disclose to any participant or purchasing lender (each, a "TRANSFEREE") and any prospective Transferee any and all financial information in such Lender's possession concerning such Obligor and its affiliates which has been delivered to such Lender by or on behalf of such Obligor pursuant to this Agreement or which has been delivered to such Lender by or on behalf of such Obligor in connection with such Lender's credit evaluation of such Obligor and its affiliates prior to entering into this Agreement. UTI - LOAN AND SECURITY AGREEMENT 81 85 6. Each Company hereby agrees that each Lender is solely responsible for its portion of the Line of Credit and that neither the Agent nor any Lender shall be responsible for, nor assume any obligations for the failure of any Lender to make available its portion of the Line of Credit. Further, should any Lender refuse to make available its portion of the Line of Credit, then the other Lender may, but without obligation to do so, increase, unilaterally, its portion of the Line of Credit in which event such Company is so obligated to that other Lender. 7. In the event that the Agent, the Lenders or any one of them is sued or threatened with suit by any Obligor, or by any receiver, trustee, creditor or any committee of creditors on account of any preference, voidable transfer or lender liability issue, alleged to have occurred or been received as a result of, or during the transactions contemplated under this Agreement, then in such event any money paid in satisfaction or compromise of such suit, action, claim or demand and any expenses, costs and attorneys' fees paid or incurred in connection therewith, whether by the Agent, the Lenders or any one of them, shall be shared proportionately by the Lenders. In addition, any costs, expenses, fees or disbursements incurred by outside agencies or attorneys retained by the Agent to effect collection or enforcement of any rights in the Collateral, including enforcing, preserving or maintaining rights under this Agreement shall be shared proportionately between and among the Lenders to the extent not reimbursed by such Company or from the proceeds of Collateral. The provisions of this paragraph shall not apply to any suits, actions, proceedings or claims that (x) predate the date of this Agreement or (y) are based on transactions, actions or omissions that predate the date of this Agreement. 8. Each of the Lenders agrees with each other Lender that any money or assets of each Obligor held or received by such Lender, no matter how or when received, shall be applied to the reduction of the Obligations (to the extent permitted hereunder) after (x) the occurrence of an Event of Default and so long as the same is continuing and (y) the election by the Required Lenders to accelerate the Obligations. In addition, each Obligor authorizes, and the Lenders shall have the right, without notice, upon any amount becoming due and payable hereunder, to set-off and apply against any and all property held by, or in the possession of such Lender the Obligations due such Lenders. 9. CITBC shall have the right at any time to assign to one or more Eligible Assignees, all or a portion (but in an amount that is not less than $5,000,000) of its rights and obligations under this Agreement; provided that no such assignment shall be made to any Person that does not, prior to the execution of such Assignment Agreement, execute and deliver to the Agent and the Parent IRS Form 1001, Form 4224 or successors forms, and is other exempt from IRS interest withholding obligations. Upon execution of an Assignment and Transfer Agreement, (i) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such assignment, have the rights and obligations of CITBC as the case may be hereunder and (ii) CITBC shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such assignment, relinquish its rights and be released from its obligations under this Agreement. Each Obligor shall, if necessary, execute any documents reasonably required to effectuate the assignments. No other Lender may assign its interest in the loans and advances and extensions of credit hereunder without the prior written consent of the Agent, and such assignment, if consented to, shall be in amounts of not less than $5,000,000. UTI - LOAN AND SECURITY AGREEMENT 82 86 SECTION 14. LENDERS 1. Each Lender hereby irrevocably designates and appoints CITBC as the Agent for the Lenders under this Agreement and any Loan Documents and irrevocably authorizes CITBC as Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and all Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement and any Loan Document together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement and the Loan Documents or otherwise exist against the Agent. 2. The Agent may execute any of its duties under this Agreement and any Loan Document by or through agents or attorneys-in-fact and shall be entitled to the advice of counsel concerning all matters pertaining to such duties. 3. Neither the Agent nor any of its officers, directors, employees, agents, or attorneys-in-fact shall be (i) liable to any Lender for any action lawfully taken or omitted to be taken by it or such person under or in connection with this Agreement and/or any Loan Documents (except for its or such person's own gross negligence or willful misconduct), or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Obligor or any officer thereof contained in this Agreement and all Loan Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement and all ancillary documents or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement and all ancillary documents or for any failure of any Obligor to perform its obligations thereunder. The Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement and any Loan Document or to inspect the properties, books or records of Obligors. 4. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper person or persons and upon advice and statements of legal counsel (including, without limitation, counsel to any Obligor), independent accountants and other experts selected by the Agent. Neither the Agent nor the Lenders shall change the account into which Revolving Loan proceeds are disbursed in response to any telephonic borrowing request. All Revolving Loan proceeds shall be disbursed by the Agent only to the bank accounts designated in a written notice, on the Parent's letterhead, signed by the Parent, and to which the chief financial officer and the controller of the Parent are both signatories. The Agent shall be fully justified in failing or refusing to take any action under this Agreement and all ancillary documents unless it shall first receive such advice or concurrence of the Lenders, or the Required Lenders, as the case may be, as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of UTI - LOAN AND SECURITY AGREEMENT 83 87 taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and all ancillary documents in accordance with a request of the Lenders, or the Required Lenders, as the case may be, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders. 5. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has received notice from a Lender or a Company describing such Default or Event of Default. In the event that the Agent receives such a notice, the Agent shall promptly give notice thereof to the Lenders. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Lenders, or Required Lenders, as the case may be; provided that unless and until the Agent shall have received such direction, the Agent may in the interim (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable and in the best interests of the Lenders. 6. Each Lender expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents or attorneys-in-fact has made any representations or warranties to it and that no act by the Agent hereinafter taken, including any review of the affairs of any Obligor shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of each Obligor and made its own decision to enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition or creditworthiness of each Obligor. The Agent, however, shall provide the Lenders with copies of all financial statements, projections and business plans which come into the possession of the Agent or any of its officers, employees, agents or attorneys-in-fact. 7. The Lenders agree to indemnify the Agent in its capacity as such (to the extent not reimbursed by each Obligor and without limiting the obligation of each Obligor to do so), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever (including negligence on the part of the agent) which may at any time be imposed on, incurred by or asserted against the Agent in anyway relating to or arising out of this Agreement or any ancillary documents or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Agent's gross negligence or willful misconduct. The agreements in this paragraph shall survive the payment of the obligations. UTI - LOAN AND SECURITY AGREEMENT 84 88 8. The Agent may make loans to, and generally engage in any kind of business with any Obligor as though the Agent were not the Agent hereunder. With respect to its loans made or renewed by it or loan obligations hereunder as Lender, the Agent shall have the same rights and powers, duties and liabilities under this Agreement as any Lender and may exercise the same as though it was not the Agent and the terms "Lender" and "Lenders" shall include the Agent in its individual capacities. 9. The Agent may resign as the Agent upon thirty (30) days' notice to the Lenders and such resignation shall be effective upon the appointment of a successor Agent. If the Agent shall resign as Agent, then the Lenders shall appoint a successor Agent for the Lenders whereupon such successor Agent shall succeed to the rights, powers and duties of the Agent and the term "Agent" shall mean such successor Agent effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement. After any retiring Agent's resignation hereunder as the Agent the provisions of this section shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent. 10. Notwithstanding anything contained in this Agreement to the contrary, the Agent will not, without the prior written consent of all Lenders: (a) amend this Agreement to (i) increase the Line of Credit; (ii) reduce the interest rates; (iii) reduce or waive (A) any fees in which the Lenders share hereunder; or (B) the repayment of any Obligations due the Lenders; (iv) extend the maturity of the Obligations; or (v) alter or amend (1) this Paragraph 10 or (2) the definitions of Accounts Receivable Advance Percentage, Equipment Advance Percentage, or Required Lenders, or the Agent's criteria for determining compliance with such definitions of eligibility; (b) release Collateral in bulk without a corresponding reduction in the Obligations to the Lenders, or (c) intentionally make any Revolving Loan if after giving effect thereto the total of Revolving Loans for each Company would exceed one hundred and ten percent (110%) of the maximum amount available under Sections 3 and 4 of this Agreement. In all other respects the Agent is authorized to take such actions or fail to take such actions if the Agent, in its reasonable discretion, deems such to be advisable and in the best interest of the Lenders, including, but not limited to, the making of an overadvance or the termination of this Agreement upon the occurrence and during the continuance of an Event of Default unless it is specifically instructed to the contrary by the Required Lenders. 11. In the event any Lender's consent is required pursuant to the provisions of this Agreement and such Lender does not respond to any request by the Agent for such consent within ten (10) days after such request is made to such Lender, such failure to respond shall be deemed a consent. In addition, in the event that any Lender declines to give its consent to any such request, it is hereby mutually agreed that the Agent and/or any other Lender shall have the right (but not the obligation) to purchase such Lender's share of the Loans for the full amount thereof together with accrued interest thereon to the date of such purchase. 12. Each Lender agrees that notwithstanding the provisions of Section 11 of this Agreement any Lender may terminate this Agreement and the Line of Credit only as of the initial or any subsequent Anniversary Date and then only by giving the Agent sixty (60) days prior written notice thereof. Within thirty (30) days after receipt of any such termination notice, the Agent shall, UTI - LOAN AND SECURITY AGREEMENT 85 89 at its option, either (i) give notice of termination to each Company hereunder or (ii) purchase the Lender's share of the Obligations hereunder for the full amount thereof plus accrued interest thereon. Unless so terminated this Agreement and the Line of Credit shall be automatically extended from Anniversary Date to Anniversary Date. [REMAINDER OF THIS PAGE INTENTIONALLY BLANK] UTI - LOAN AND SECURITY AGREEMENT 86 90 IN WITNESS WHEREOF, this Agreement has been duly executed on the date first written above. COMPANIES: UTI DRILLING, L.P. By: UTICO HARD ROCK BORING, INC., As Sole General Partner By: ------------------------------------- John E. Vollmer III, Vice President UTI MANAGEMENT SERVICES, L.P. By: UTICO HARD ROCK BORING, INC., As Sole General Partner By: ------------------------------------- John E. Vollmer III, Vice President NORTON DRILLING COMPANY UNIVERSAL WELL SERVICES, INC. SUITS DRILLING COMPANY By: ------------------------------------------ John E. Vollmer III, Vice President signing as such on behalf of each of the foregoing Companies. UTI - LOAN AND SECURITY AGREEMENT 91 GUARANTORS: UTI ENERGY CORP. UTICO, INC. UTICO HARD ROCK BORING, INC. NORTON DRILLING SERVICES, INC. NORTON DRILLING COMPANY MEXICO, INC. INTERNATIONAL PETROLEUM SERVICE COMPANY By: ------------------------------------------ John E. Vollmer III, Vice President signing as such on behalf of each of the foregoing Obligors UTI - LOAN AND SECURITY AGREEMENT 92 THE CIT GROUP/BUSINESS CREDIT, INC., as Agent By: ------------------------------------------ Name: ------------------------------------- Title: ------------------------------------ THE CIT GROUP/BUSINESS CREDIT, INC., as a Lender By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- Revolving Loan Commitment: $ --------------- Address for Notices: The CIT Group/Business Credit, Inc., as Agent 5420 LBJ Freeway, Suite 200 Dallas, Texas Attn: Regional Credit Manager Fax No.: (972) 455-1690 UTI - LOAN AND SECURITY AGREEMENT 93 GMAC BUSINESS CREDIT, INC., as a Lender and Syndication Agent By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- Revolving Loan Commitment: $ --------------- Address for Notices: -------------------------------- -------------------------------- -------------------------------- Attn: --------------------------- Fax No.: ------------------------ UTI - LOAN AND SECURITY AGREEMENT 94 FOOTHILL CAPITAL CORPORATION, as a Lender and Documentation Agent By: ------------------------------------------ Name: ------------------------------------- Title: ------------------------------------ Revolving Loan Commitment: $ ---------------- Address for Notices: -------------------------------- -------------------------------- -------------------------------- Attn: --------------------------- Fax No.: ------------------------ UTI - LOAN AND SECURITY AGREEMENT 95 EXHIBIT A REVOLVING LOAN PROMISSORY NOTE November 22, 1999 $65,000,000 FOR VALUE RECEIVED, the undersigned Companies (each a "COMPANY" and, collectively, the "COMPANIES"), promise, jointly and severally, to pay to the order of THE CIT GROUP/BUSINESS CREDIT, INC. (herein "CITBC"), as Agent for the Lenders under a certain Loan and Security Agreement of even date herewith between CITBC as Agent and Lender, other Lenders parties thereto and each Company (herein the "AGREEMENT") at its office located at 1211 Avenue of the Americas, New York, New York 10036, or such other address as may be designated by the Agent, in lawful money of the United States of America and in immediately available funds, the principal amount of Sixty Five Million and No/100 Dollars ($65,000,000), or such other principal amount advanced pursuant to Section 3, Paragraph 1 or Section 4 of the Agreement. The balance of such Revolving Loan will fluctuate as a result of the daily application of the proceeds of collections of the Accounts and the making of additional Revolving Loans as described in said Section 3 or Section 4 of the Agreement. The Revolving Loans may be borrowed, repaid and reborrowed by any Company, subject to the terms of the Agreement. A final payment in an amount equal to the outstanding aggregate balance of principal and interest remaining unpaid, if any, under this Revolving Loan Promissory Notes as shown on the books and records of the Agent shall be due and payable upon any termination of the Agreement. All capitalized terms used herein shall have the meaning provided therefor in this Agreement, unless otherwise defined herein. The Companies further promise, jointly and severally, to pay interest at such office, in like money, on the unpaid principal amount owing hereunder from time to time from the date hereof on the dates and at the rates specified in Section 8, Paragraph 1 of the Agreement. If any payment on this Revolving Loan Promissory Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day, and with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. This Revolving Loan Promissory Note is a Revolving Loan Promissory Note referred to in the Agreement, and is subject to, and entitled to, all provisions and benefits thereof and is subject to optional and mandatory prepayment, in whole or in part, as provided therein. The date and amount of the advance(s) made hereunder may be recorded on the schedule which is attached hereto and hereby made part of this Note or the separate ledgers maintained by the Agent, UTI - LOAN AND SECURITY AGREEMENT A-1 96 provided that any failure to record any such information on such schedule shall not in any manner affect the obligation of any Company to make payments of principal and interest in accordance with the terms of this Revolving Loan Promissory Note. The aggregate unpaid principal amount of all advances made pursuant hereto may be set forth in the balance column on said schedule or such ledgers maintained by the Agent. All such advances, whether or not so recorded, shall be due as part of this Revolving Loan Promissory Note. Each Company confirms that any amount received by or paid to the Agent in connection with this Agreement and/or any balances standing to its credit on any of its accounts on the Agent's books under this Agreement may in accordance with the terms of this Agreement be applied in reduction of this Revolving Loan Promissory Note, but no balance or amounts shall be deemed to effect payment in whole or in part of this Revolving Loan Promissory Note unless the Agent shall have actually charged such account or accounts for the purposes of such reduction or payment of this Revolving Loan Promissory Note. Upon the occurrence and during the continuance of any one or more of the Events of Default specified in the Agreement or upon termination of this Agreement, all amounts then remaining unpaid on this Revolving Loan Promissory Note may become, or be declared to be, immediately due and payable as provided in the Agreement. Each Company and the Guarantors, sureties and endorses jointly and severally waive grace, demand, presentment for payment, notice of dishonor or default, notice of intent to accelerate, notice of acceleration, protest and diligence in collecting this Revolving Loan Promissory Note. UTI - LOAN AND SECURITY AGREEMENT A-2 97 This Revolving Loan Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York and the applicable federal laws of the United States. COMPANIES: UTI DRILLING, L.P. By: UTICO HARD ROCK BORING, INC., As Sole General Partner By: -------------------------------------- John E. Vollmer III, Vice President SUITS DRILLING COMPANY UNIVERSAL WELL SERVICES, INC. NORTON DRILLING COMPANY By: ----------------------------------------- John E. Vollmer III, Vice President UTI MANAGEMENT SERVICES, L.P. By: UTICO HARD ROCK BORING, As Sole General Partner By: ------------------------------------- John E. Vollmer III, Vice President UTI - LOAN AND SECURITY AGREEMENT 98 SCHEDULE TO GRID
Date Loan Payment Balance - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
UTI - LOAN AND SECURITY AGREEMENT 99 EXHIBIT B ASSIGNMENT AND TRANSFER AGREEMENT Dated: , 199 --------------- Reference herein is made to the Loan and Security Agreement dated as of November 22, 1999 (as amended, modified, supplemented and in effect from time to time, the "AGREEMENT"), among UTI ENERGY CORP. AND ITS SUBSIDIARIES, collectively (the "COMPANY"), the Lenders named therein, and The CIT Group/Business Credit, Inc., as Agent (the "AGENT"). Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in this Agreement. This Assignment and Transfer Agreement, between the Assignor (as defined and set forth on Schedule 1 hereto and made a part hereof) and the Assignee (as defined and set forth on Schedule 1 hereto and made a part hereof) is dated as of Date hereof (as set forth on Schedule 1 hereto and made a part hereof). 1. The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Date hereof, an undivided interest (the "ASSIGNED INTEREST") in and to all the Assignor's rights and obligations under this Agreement respecting those, and only those, financing facilities contained in this Agreement as are set forth on Schedule 1 (collectively, the "ASSIGNED FACILITIES" and individually, an "ASSIGNED FACILITY"), in a principal amount for each Assigned Facility as set forth on Schedule 1. 2. The Assignor (i) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any other instrument, document or agreement executed in conjunction therewith (collectively the "LOAN DOCUMENTS") or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any Collateral thereunder or any of the Loan Documents furnished pursuant thereto, other than that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim and (ii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of each Company or any guarantor or the performance or observance by each Company or any guarantor of any of its respective obligations under this Agreement or any of the Loan Documents furnished pursuant thereto. 3. The Assignee (i) represents and warrants that it is legally authorized to enter into this Assignment and Transfer Agreement; (ii) confirms that it has received a copy of this Agreement, together with the copies of the most recent financial statements of each Company, and such other documents and information as it has deemed appropriate to make its own credit analysis; (iii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (iv) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this UTI - LOAN AND SECURITY AGREEMENT B-1 100 Agreement as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will be bound by the provisions of this Agreement and will perform in accordance with its terms all the obligations which by the terms of this Agreement are required to be performed by it as Lender; and (vi) if the Assignee is organized under the laws of a jurisdiction outside the United States, attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's exemption from United States withholding taxes with respect to all payments to be made to the Assignee under this Agreement or such other documents as are necessary to indicate that all such payments are subject to such tax at a rate reduced by an applicable tax treaty. 4. Following the execution of this Assignment and Transfer Agreement, such agreement will be delivered to the Agent for acceptance by it and each Company, effective as of the Date hereof. 5. Upon such acceptance, from and after the Date hereof, the Agent shall make all payments in respect of the assigned interest (including payments of principal, interest, fees and other amounts) to the Assignee, whether such amounts have accrued prior to the Date hereof or accrue subsequent to the Date hereof. The Assignor and Assignee shall make all appropriate adjustments in payments for periods prior to the Date hereof made by the Agent or with respect to the making of this assignment directly between themselves. 6. From and after the Date hereof, (i) the Assignee shall be a party to this Agreement and, to the extent provided in this Assignment and Transfer Agreement, have the rights and obligations of a Lender thereunder, and (ii) the Assignor shall, to the extent provided in this Assignment and Transfer Agreement, relinquish its rights and be released from its obligations under this Agreement. 7. THIS ASSIGNMENT AND TRANSFER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] B-2 101 IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed by their respective duly authorized officers on the date first written above. THE CIT GROUP/BUSINESS CREDIT, INC., AS AGENT as Assignor By: By: ---------------------------- ------------------------------ Title: Title: ------------------------- --------------------------- - -------------------------------- --------------------------------- (the "Company") as Assignee By: By: ---------------------------- ------------------------------ Title: Title: ------------------------- --------------------------- UTI - LOAN AND SECURITY AGREEMENT B-1 102 SCHEDULE 1 TO ASSIGNMENT AND TRANSFER AGREEMENT Name of Assignor: ------------------------------ Name of Assignee: ------------------------------ Date hereof of Assignment: , 199 /200 ----------------- ------ ------
Percentage Assigned of Each Facility (Shown as a percentage of Principal aggregate original Assigned Amount principal amount Facilities Assigned of all Lenders) - ---------- -------- -------------- Revolving Loans $ % ---------------- ---------
SCHEDULE 1 UTI - LOAN AND SECURITY AGREEMENT 103 SCHEDULE 1 - EXISTING LIENS
FILING FILING SECURED LOCATION COMPANY NUMBER DATE PARTY COLLATERAL - -------- ------- ------ ------ ------- ----------
SCHEDULE 1 UTI - LOAN AND SECURITY AGREEMENT 104 SCHEDULE 2 - COLLATERAL LOCATIONS AND CHIEF EXECUTIVE OFFICE CHIEF EXECUTIVE OFFICE COLLATERAL LOCATIONS UTI - LOAN AND SECURITY AGREEMENT E-1 EX-10.1.1 5 d89352ex10-1_1.txt 1ST AMENDMENT TO LOAN AND SECURITY AGREEMENT 1 EXHIBIT 10.1.1 FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is made and entered into as of this 2nd day of May, 2000, by and between THE CIT GROUP/BUSINESS CREDIT, INC. a New York corporation (hereinafter "CITBC"), in its individual capacity and as Agent for the Lenders hereinafter named (hereinafter the "AGENT"), Foothill Capital Corporation, a California corporation ("FCC"), GMAC Business Credit, LLC, a Michigan limited liability company ("GMAC"), and any other party hereafter becoming a Lender pursuant to Section 13, Paragraph 9 of the Agreement (as hereinafter defined), each individually sometimes referred to as a "LENDER" and collectively the "LENDERS"), and UTI Drilling, L.P., a Texas limited partnership ("UTI"), Norton Drilling, L.P., a Delaware limited partnership, as successor in interest by conversion to Norton Drilling Company, a Delaware corporation ("NDLP"), Universal Well Services, Inc., a Delaware corporation ("UWSI"), UTI Management Services, L.P., a Texas limited partnership ("UTIMS"), and Suits Drilling Company, an Oklahoma corporation ("SDC"), (UTI, NDLP, UWSI, UTIMS and SDC, together with any additional entities which may become a Company under the Agreement from time to time, being referred to herein individually, as a "COMPANY", and collectively, as the "COMPANIES"), and UTI Drilling Canada, Inc., a Delaware corporation ("UTI CANADA"). RECITALS A. WHEREAS, pursuant to the terms and subject to the conditions of that certain Loan Agreement and Security Agreement dated as of November 22, 1999 between the parties hereto (such Loan and Security Agreement, as the same is hereby amended and may hereafter be amended from time to time, being hereinafter referred to as the "Agreement"), the Companies were granted a $65,000,000 revolving line of credit which included a letter of credit facility; B. WHEREAS, the indebtedness of the Companies to the Lenders is currently evidenced by that certain Revolving Loan Promissory Note dated November 22, 1999 (the "Initial Revolving Note"), executed by the Companies and payable to CITBC as Agent for the benefit of the Lenders; C. WHEREAS, payment of the Obligations of the Companies was supported by the guaranties of UTI Energy Corp., a Delaware corporation (the "PARENT"), UTICO, Inc., a Delaware corporation ("HOLDING"), UTICO Hard Rock Boring, Inc., a Delaware corporation ("UHRB"), International Petroleum Services Company, a Pennsylvania corporation ("IPSCO"), Norton Drilling Services, Inc., a Delaware corporation ("NDS"), and Norton Drilling Company Mexico, Inc., a Delaware corporation ("NDM") (Parent, Holding, UHRB, IPSCO, NDS and NDM are referred to herein, individually, as a "GUARANTOR", and collectively, as the "GUARANTORS"); D. WHEREAS, to secure, in part, the indebtedness under the Agreement and the Revolving Note (and all renewals, extensions, modifications and/or rearrangements thereof and in connection therewith) and all other indebtedness, liabilities and obligations of the Companies to the Agent for the benefit of the Lenders, then existing or thereafter arising, (i) the Companies have heretofore executed in favor of the Agent certain Loan Documents (as defined in the Agreement), including, without limitation, the Guaranty, (as defined in the Agreement), which Loan Documents (as defined in the Agreement) shall continue as amended in connection herewith in full force and effect FIRST AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 1 2 upon the execution of this Amendment, all of the Loan Documents to continue to secure the payment by the Companies of the Obligations (as defined in the Agreement) all as more fully set forth therein and herein; E. WHEREAS, the Companies have requested a waiver of certain Events of Default under the Agreement; F. WHEREAS, in furtherance of the foregoing and to evidence the agreements of the parties hereto in relation thereto the parties hereto desire to amend the Agreement as hereinafter provided; NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows: AGREEMENT ARTICLE I DEFINITIONS 1.01 Capitalized terms used in this Amendment are defined in the Agreement, as amended hereby, unless otherwise stated. ARTICLE II AMENDMENTS TO AGREEMENT Effective as of the respective date herein indicated, the Agreement is hereby amended as follows: 2.01 AMENDMENT AND REPLACEMENT OF NORTON DRILLING COMPANY AND THE DEFINITION NDC. Effective as of the date of execution of this Amendment, (i) the reference to "Norton Drilling Company, a Delaware corporation ("NDC")" in the preamble to the Agreement is hereby deleted and replaced with "Norton Drilling, L.P., a Delaware limited partnership, successor in interest by conversion to Norton Drilling Company, a Delaware corporation ("NDLP")", and (ii) all references to the term "NDC" in the Agreement shall be deleted and replaced with the term "NDLP". 2.02 AMENDMENT OF DEFINITION OF "GUARANTOR" AND "GUARANTORS". Effective as of the date of execution of this Amendment, the references to "Guarantor" and "Guarantors" in the preamble to the Agreement shall be amended to include UTI Canada. 2.03 AMENDMENT AND RESTATEMENT OF EXHIBIT A TO THE AGREEMENT. Effective as of the date of execution of this Amendment, Exhibit A to the Agreement is amended and restated in its entirety as set forth on Exhibit A attached hereto. FIRST AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 2 3 ARTICLE III ASSUMPTION OF OBLIGATIONS AND RATIFICATION AND GRANT OF LIENS 3.01 ASSUMPTION OF OBLIGATIONS. Effective December 31, 1999, NDC converted from a Delaware corporation to a Delaware limited partnership and changed its name to Norton Drilling, L.P. (collectively, the "Conversion"). NDLP hereby acknowledges and agrees that as result of the Conversion, by operation of law, NDLP is liable for all Obligations of NDC, and NDLP hereby assumes all Obligations of NDC as of December 31, 1999 and all Obligations incurred thereafter (including, without limitation, the indebtedness and obligations under the Initial Revolving Note, the Agreement and the other Loan Documents). 3.02 RATIFICATION AND GRANT OF LIEN. NDLP hereby acknowledges and agrees that as a result of the Conversion, by operation of law, NDLP became the owner of all the assets of NDC as of December 31, 1999. NDLP also acknowledges and agrees that such assets were pledged by NDC as Collateral under the Agreement and that after the Conversion, by operation of law, such assets remained Collateral under the Agreement and subject to the lien granted thereunder to Agent on behalf of the Lenders. NDLP hereby grants to Agent for the benefit of the Lenders a security interest in all Collateral now or hereafter owned by NDLP pursuant to the terms and provisions of Section 6 of the Agreement and acknowledges and agrees that the security interest granted hereunder in any assets previously owned by NDC is a renewal and continuation of the security interest in such assets previously granted by NDC under the Agreement. 3.03 ASSUMPTION OF OBLIGATIONS AND DUTIES UNDER THE AGREEMENT. NDLP hereby (a) reaffirms all representations and warranties made by NDC under the Agreement and the other Loan Documents to which NDC was a party, (b) assumes all covenants, obligations and duties of NDC under the Agreement and the other Loan Documents to which NDC was a party, and (c) agrees to be bound by the terms and provisions of the Agreement as a Company and Obligor thereunder and to be bound by the terms and provisions of the other Loan Documents to which NDC was a party to the same extent and with the same force and effect as if NDLP had been named as NDC in each of the Loan Documents. 3.04 ASSUMPTION OF OBLIGATIONS AND GRANT OF LIEN BY UTI CANADA. Effective as of the date of this Amendment, UTI Canada agrees (i) to be a Guarantor and Obligor under the Agreement and a Guarantor under that certain Guaranty Agreement dated November 22, 1999 executed by the Guarantors for the benefit of CITBC and the other Lenders (the "Guaranty Agreement"), (ii) to be bound by the terms and provisions of the Agreement as a Guarantor and Obligor thereunder and to be bound by the terms of the Guaranty Agreement as a Guarantor thereunder to the same extent and with the same force and effect as if UTI Canada had been originally named as a party in each of such documents, (iii) to assume all covenants, agreements and duties as a Guarantor and Obligor under the Agreement and as a Guarantor under the Guaranty Agreement. UTI Canada also hereby grants to Agent for the benefit of the Lenders a security interest in all Collateral now or hereafter owned by UTI Canada pursuant to the terms of Section 6 of the Agreement. FIRST AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 3 4 ARTICLE IV CONDITIONS PRECEDENT 4.01 CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent in a manner satisfactory to CITBC, unless specifically waived in writing by CITBC: (a) CITBC shall have received each of the following, each in form and substance satisfactory to CITBC, in its sole discretion, and, where applicable, each duly executed by each party thereto, other than CITBC: (i) This Amendment, duly executed by Companies and the Consent, Ratification and Release is executed by the Guarantors; (ii) A Revolving Loan Promissory Note in the stated principal amount of $65,000,000 in amendment, substitution and replacement of the Initial Revolving Note duly signed by the Companies; and (iii) certified copies of the resolutions of the Board of Directors of each of the Companies and the Guarantors authorizing the execution, delivery and performance of this Amendment and any and all other Loan Documents executed by any of the Companies or the Guarantors in connection therewith, along with a certificate of incumbency certified by the secretary of each of the Companies and the Guarantors with specimen signatures of the officers of the Companies and the Guarantors who are authorized to sign such documents, all in form and substance satisfactory to the Agent; and (iv) Pledge Agreement signed by UTI Drilling Canada, Inc., a Delaware corporation ("UTI Canada"), granting to the Agent on behalf of the Lenders (1) a collateral assignment of the promissory note payable by Phelps Drilling Co. ("PDC") to UTI Canada in the stated principal amount of $30,000,000 (the "Intercompany Note"), and the liens securing the Intercompany Note, and (2) pledging 66% of its ownership interest in PDC. The Intercompany Note evidences a loan which is to be used by PDC to acquire all of the drilling assets of Phelps Drilling International, Ltd., 584022 Alberta Ltd. and 700392 Alberta Ltd. (collectively, the "Acquisitions"). Agent must also receive the original of the Intercompany Note duly endorsed to the Agent; and (v) Pledge Amendment duly signed NDS pledging all of its ownership interest in NDLP; and (vi) Pledge Amendment duly signed UTI pledging all of its ownership interest in UTI Canada; and (vii) Pledge Agreement duly signed Norton GP, L.L.C. pledging all of its ownership interest in NDLP; and FIRST AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 4 5 (viii) Opinion from Fullbright & Jaworski, L.L.P. opining that the execution, delivery and performance of the Acquisition Agreements does not violate or result in a breach of or default under the Agreement or any other material agreements to which any of the Obligors is a party; and (ix) Opinion from Borrower's Canadian counsel opining that (1) PDC has the power and authority to execute, deliver and perform the Intercompany Note and the related security agreement and other documents (collectively, the "PDC Loan Documents"), (2) the PDC Loan Documents have been authorized by all necessary corporate action, and (3) the PDC Loan Documents are valid, legal and binding obligations of PDC and are enforceable against PDC, such opinion to be delivered to CITBC within 10 business days from the date of this Amendment; and (x) Copy of the executed asset purchase agreements which evidence the Acquisitions (collectively, the "Acquisition Agreements"); and (xi) All other documents CITBC may request with respect to any matter relevant to this Amendment or the transactions contemplated hereby. (b) The representations and warranties contained herein and in the Agreement and the other documents executed in connection with the Agreement (herein referred to as "Loan Documents"), as each is amended hereby, shall be true and correct as of the date hereof, as if made on the date hereof, except for such representations and warranties as are by their express terms limited to a specific date. (c) No Default or Event of Default shall have occurred and be continuing, unless such Default or Event of Default has been otherwise specifically waived in writing by CITBC. (d) All corporate proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be satisfactory to CITBC. ARTICLE V LIMITED CONSENT AND WAIVER AND RELEASE OF PLEDGE AGREEMENTS 5.01 LIMITED CONSENT TO AND WAIVER REGARDING CHANGE OF NAME AND CONVERSION. The Companies have informed Agent and the other Lenders that the Companies are in default under the Agreement (a) for failure to timely notify the Agent and the other Lenders of the Conversion and for failure to deliver to Agent prior to the Conversion any documents, agreements or financing statements to confirm the continuation and perfection of all of Lenders' security interests, as required by Section 7, Subparagraph 10(E) of the Agreement, and (b) for failure to timely notify the Agent of such Defaults and Events of Default as required under the Agreement. Pursuant to the request of the Companies, the Agent and the other Lenders hereby waive any such Defaults or Events of Default described in the preceding sentence, such waiver being subject to the satisfaction of the conditions precedent in Article IV of this Amendment and to the other terms, conditions and provisions of this Amendment. There are FIRST AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 5 6 no other waivers granted by Lender relating to the Agreement except the waiver specifically set forth in this Section 5.01 and the above waiver is effective only in the specific instances and for the purposes for which given. 5.02 NO OTHER WAIVERS. Except as otherwise specifically provided for in this Amendment, nothing contained herein shall be construed as a waiver by CITBC of any covenant or provision of the Agreement, the other Loan Documents, this Amendment or any other contract or instrument between Companies and CITBC, and the failure of CITBC at any time or times hereafter to require strict performance by Companies of any provision thereof shall not waive, affect or diminish any right of CITBC to thereafter demand strict compliance therewith. CITBC hereby reserves all rights granted under the Agreement, the other Loan Documents, this Amendment, and any other contract or instrument between Companies and CITBC. ARTICLE VI RATIFICATIONS, REPRESENTATIONS AND WARRANTIES 6.01 RATIFICATIONS. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Agreement and the other Loan Documents, and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect. Companies and CITBC agree that the Agreement and the other Loan Documents, as amended hereby, shall continue to be legal, valid, binding and enforceable in accordance with their respective terms. 6.02 REPRESENTATIONS AND WARRANTIES. Companies hereby represent and warrant to CITBC that (a) the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith have been authorized by all requisite corporate action on the part of Companies and will not violate the Articles of Incorporation or Bylaws of Companies; (b) each Company's Boards of Directors have authorized the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith; (c) the representations and warranties contained in the Agreement, as amended hereby, and any other Loan Document are true and correct on and as of the date hereof and on and as of the date of execution hereof as though made on and as of each such date; (d) no Default or Event of Default under the Agreement, as amended hereby, has occurred and is continuing, unless such Default or Event of Default has been specifically waived in writing by CITBC; (e) Companies are in full compliance with all covenants and agreements contained in the Agreement and the other Loan Documents, as amended hereby; and (f) Companies have not amended their Articles of Incorporation or their Bylaws, or agreement of limited partnership, as applicable, since the date of the Agreement. ARTICLE VII MISCELLANEOUS PROVISIONS 7.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made in the Agreement or any other Loan Document, including, without limitation, any document furnished in connection with this Amendment, shall survive the execution and delivery of this FIRST AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 6 7 Amendment and the other Loan Documents, and no investigation by CITBC or any closing shall affect the representations and warranties or the right of CITBC to rely upon them. 7.02 REFERENCE TO AGREEMENT. Each of the Agreement and the other Loan Documents, and any and all other Loan Documents, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Agreement, as amended hereby, are hereby amended so that any reference in the Agreement and such other Loan Documents to the Agreement shall mean a reference to the Agreement, as amended hereby. 7.03 EXPENSES OF CITBC. As provided in the Agreement, Companies agree to pay on demand all costs and expenses incurred by CITBC in connection with the preparation, negotiation, and execution of this Amendment and the other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the costs and fees of CITBC's legal counsel, and all costs and expenses incurred by CITBC in connection with the enforcement or preservation of any rights under the Agreement, as amended hereby, or any other Loan Documents, including, without, limitation, the costs and fees of CITBC's legal counsel. 7.04 SEVERABILITY. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. 7.05 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and shall inure to the benefit of CITBC and Companies and their respective successors and assigns, except that Companies may not assign or transfer any of their rights or obligations hereunder without the prior written consent of CITBC. 7.06 COUNTERPARTS. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument. 7.07 EFFECT OF WAIVER. No consent or waiver, express or implied, by CITBC to or for any breach of or deviation from any covenant or condition by Companies shall be deemed a consent to or waiver of any other breach of the same or any other covenant, condition or duty. 7.08 HEADINGS. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment. 7.09 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 7.10 FINAL AGREEMENT. THE AGREEMENT AND THE OTHER LOAN DOCUMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS EXECUTED. THE AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED FIRST AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 7 8 HEREBY, MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY COMPANIES AND CITBC. 7.11 RELEASE. COMPANIES HEREBY ACKNOWLEDGE THAT THEY HAVE NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM CITBC. COMPANIES HEREBY VOLUNTARILY AND KNOWINGLY RELEASE AND FOREVER DISCHARGE CITBC, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH COMPANIES MAY NOW OR HEREAFTER HAVE AGAINST CITBC, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE AGREEMENT OR OTHER LOAN DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT. [The Remainder of this Page Intentionally Left Blank] FIRST AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 8 9 IN WITNESS WHEREOF, this Amendment has been executed and is effective as of the date first above-written. COMPANIES: UTI DRILLING, L.P. By: Utico Hard Rock Boring, Inc., its sole general partner By: ------------------------------------------- Name: John E. Vollmer, III Title: Vice President UTI MANAGEMENT SERVICES, L.P. By: Utico Hard Rock Boring, Inc., its sole general partner By: ------------------------------------------- Name: John E. Vollmer, III Title: Vice President NORTON DRILLING, L.P., as successor in interest (by conversion) to Norton Drilling Company By: Norton GP, L.L.C., as sole General Partner, By: Norton Drilling Services, Inc., its sole member By: ------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- UNIVERSAL WELL SERVICES, INC. By: ------------------------------------------- Name: John E. Vollmer, III Title: Vice President FIRST AMENDMENT TO LOAN & SECURITY AGREEMENT 10 SUITS DRILLING COMPANY By: ----------------------------- Name: John E. Vollmer, III Title: Vice President UTI CANADA: UTI DRILLING CANADA, INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- LENDERS: THE CIT GROUP/BUSINESS CREDIT,INC. as Agent and Lender By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- GMAC BUSINESS CREDIT, LLC as Syndication Agent and Lender By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- FOOTHILL CAPITAL CORPORATION as Documentation Agent and Lender By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- FIRST AMENDMENT TO LOAN & SECURITY AGREEMENT 11 CONSENT, RATIFICATION AND RELEASE The undersigned each hereby consents to the terms of the within and foregoing Amendment, confirms and ratifies the terms of that certain Guaranty Agreement dated November 22, 1999 executed by the undersigned for the benefit of Agent and the other Lenders (the "Guaranty Agreement"), and acknowledges that the Guaranty Agreement is in full force and effect and ratifies the same, that the undersigned each has no defense, counterclaim, set-off or any other claim to diminish the undersigned's liability under such document, that the undersigned's consent is not required to the effectiveness of the within and foregoing Amendment, and that no consent by the undersigned is required for the effectiveness of any future amendment, modification, forbearance or other action with respect to the Obligations, the Collateral, or any of the other Loan Agreements. THE UNDERSIGNED EACH HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE UNDERSIGNED MAY NOW OR HEREAFTER HAVE AGAINST LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR OTHER AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT. GUARANTORS: UTICO, INC. UTICO HARD ROCK BORING, INC. NORTON DRILLING COMPANY By: MEXICO, INC. -------------------------------- INTERNATIONAL PETROLEUM Kenneth J. Kubacki SERVICES COMPANY Vice President and Treasurer UTI ENERGY CORP. By: ------------------------------------ John E. Vollmer III, Vice President signing as such on behalf of each of the By: foregoing Obligors -------------------------------- John E. Vollmer III Senior Vice President FIRST AMENDMENT TO LOAN & SECURITY AGREEMENT 12 EXHIBIT A REVOLVING LOAN PROMISSORY NOTE May 2, 2000 $65,000,000 FOR VALUE RECEIVED, the undersigned Companies (each a "COMPANY" and, collectively, the "COMPANIES"), promise, jointly and severally, to pay to the order of THE CIT GROUP/BUSINESS CREDIT, INC. (herein "CITBC"), as Agent for the Lenders under a certain Loan and Security Agreement dated November 22, 1999 between CITBC as Agent and Lender, other Lenders parties thereto and each Company, as amended from time to time (herein the "AGREEMENT") at its office located at 1211 Avenue of the Americas, New York, New York 10036, or such other address as may be designated by the Agent, in lawful money of the United States of America and in immediately available funds, the principal amount of Sixty Five Million and No/100 Dollars ($65,000,000), or such other principal amount advanced pursuant to Section 3, Paragraph 1 or Section 4 of the Agreement. The balance of such Revolving Loan will fluctuate as a result of the daily application of the proceeds of collections of the Accounts and the making of additional Revolving Loans as described in said Section 3 or Section 4 of the Agreement. The Revolving Loans may be borrowed, repaid and reborrowed by any Company, subject to the terms of the Agreement. A final payment in an amount equal to the outstanding aggregate balance of principal and interest remaining unpaid, if any, under this Revolving Loan Promissory Notes as shown on the books and records of the Agent shall be due and payable upon any termination of the Agreement. All capitalized terms used herein shall have the meaning provided therefor in this Agreement, unless otherwise defined herein. The Companies further promise, jointly and severally, to pay interest at such office, in like money, on the unpaid principal amount owing hereunder from time to time from the date hereof on the dates and at the rates specified in Section 8, Paragraph 1 of the Agreement. If any payment on this Revolving Loan Promissory Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day, and with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. This Revolving Loan Promissory Note is a Revolving Loan Promissory Note referred to in the Agreement, and is subject to, and entitled to, all provisions and benefits thereof and is subject to optional and mandatory prepayment, in whole or in part, as provided therein. FIRST AMENDMENT TO LOAN & SECURITY AGREEMENT 13 The date and amount of the advance(s) made hereunder may be recorded on the schedule which is attached hereto and hereby made part of this Note or the separate ledgers maintained by the Agent, provided that any failure to record any such information on such schedule shall not in any manner affect the obligation of any Company to make payments of principal and interest in accordance with the terms of this Revolving Loan Promissory Note. The aggregate unpaid principal amount of all advances made pursuant hereto may be set forth in the balance column on said schedule or such ledgers maintained by the Agent. All such advances, whether or not so recorded, shall be due as part of this Revolving Loan Promissory Note. Each Company confirms that any amount received by or paid to the Agent in connection with this Agreement and/or any balances standing to its credit on any of its accounts on the Agent's books under this Agreement may in accordance with the terms of this Agreement be applied in reduction of this Revolving Loan Promissory Note, but no balance or amounts shall be deemed to effect payment in whole or in part of this Revolving Loan Promissory Note unless the Agent shall have actually charged such account or accounts for the purposes of such reduction or payment of this Revolving Loan Promissory Note. Upon the occurrence and during the continuance of any one or more of the Events of Default specified in the Agreement or upon termination of this Agreement, all amounts then remaining unpaid on this Revolving Loan Promissory Note may become, or be declared to be, immediately due and payable as provided in the Agreement. Each Company and the Guarantors, sureties and endorses jointly and severally waive grace, demand, presentment for payment, notice of dishonor or default, notice of intent to accelerate, notice of acceleration, protest and diligence in collecting this Revolving Loan Promissory Note. This Revolving Loan Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York and the applicable federal laws of the United States. FIRST AMENDMENT TO LOAN & SECURITY AGREEMENT 14 This Revolving Loan Promissory Note is given in amendment, replacement and substitution, but not extinguishment, of all amounts unpaid under that certain Revolving Loan Promissory Note dated November 22, 1999 payable by the Companies to the order of CTIBC as Agent for the Lenders in the stated principal amount of $65,000,000.00. COMPANIES: UTI DRILLING, L.P. By: UTICO HARD ROCK BORING, INC., As Sole General Partner By: ----------------------------------------------- John E. Vollmer III, Vice President SUITS DRILLING COMPANY By: --------------------------------------------------- John E. Vollmer III, Vice President UNIVERSAL WELL SERVICES, INC. By: --------------------------------------------------- John E. Vollmer III, Vice President UTI MANAGEMENT SERVICES, L.P. By: UTICO HARD ROCK BORING, As Sole General Partner By: ------------------------------------------- John E. Vollmer III, Vice President NORTON DRILLING, L.P., as successor in interest (by conversion) to Norton Drilling Company By: Norton GP, L.L.C., as sole General Partner By: Norton Drilling Services, Inc., its sole member By: ------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- FIRST AMENDMENT TO LOAN & SECURITY AGREEMENT 15 SCHEDULE TO GRID
Date Loan Payment Balance - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------
FIRST AMENDMENT TO LOAN & SECURITY AGREEMENT EX-10.1.2 6 d89352ex10-1_2.txt 2ND AMENDMENT TO LOAN AND SECURITY AGREEMENT 1 EXHIBIT 10.1.2 SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is made and entered into as of this 18th day of May, 2000, by and between THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation (hereinafter "CITBC"), in its individual capacity and as Agent for the Lenders hereinafter named (hereinafter the "AGENT"), Foothill Capital Corporation, a California corporation ("FCC"), GMAC Business Credit, LLC, a Michigan limited liability company ("GMAC"), and any other party hereafter becoming a Lender pursuant to Section 13, Paragraph 9 of the Agreement (as hereinafter defined), each individually sometimes referred to as a "LENDER" and, collectively, the "LENDERS"), and UTI Drilling, L.P., a Texas limited partnership ("UTI"), Norton Drilling, L.P., a Delaware limited partnership, as successor in interest (by conversion) to Norton Drilling Company, a Delaware corporation ("NDLP"), Universal Well Services, Inc., a Delaware corporation ("UWSI"), UTI Management Services, L.P., a Texas limited partnership ("UTIMS"), and Suits Drilling Company, an Oklahoma corporation ("SDC"), (UTI, NDLP, UWSI, UTIMS and SDC, together with any additional entities which may become a Company under the Agreement from time to time, being referred to herein individually as a "COMPANY" and, collectively, as the "COMPANIES"). RECITALS A. WHEREAS, pursuant to the terms and subject to the conditions of that certain Loan and Security Agreement dated as of November 22, 1999 between the parties hereto (such Loan and Security Agreement, as the same is hereby amended and may hereafter be amended from time to time, being hereinafter referred to as the "Agreement"), the Companies were granted a $65,000,000 revolving line of credit which included a letter of credit facility; B. WHEREAS, the indebtedness of the Companies to the Lenders is currently evidenced by that certain Revolving Loan Promissory Note dated May 2, 2000 (the "Existing Revolving Note"), executed by the Companies and payable to CITBC as Agent for the benefit of the Lenders; C. WHEREAS, payment of the Obligations of the Companies was supported by the guaranties of UTI Energy Corp., a Delaware corporation (the "PARENT"), UTICO, Inc., a Delaware corporation ("HOLDING"), UTICO Hard Rock Boring, Inc., a Delaware corporation ("UHRB"), International Petroleum Services Company, a Pennsylvania corporation ("IPSCO"), Norton Drilling Services, Inc., a Delaware corporation ("NDS"), Norton Drilling Company Mexico, Inc., a Delaware corporation ("NDM") and UTI Drilling Canada, Inc., a Delaware corporation ("UTI CANADA") (Parent, Holding, UHRB, IPSCO, NDS, NDM and UTI Canada are referred to herein, individually, as a "GUARANTOR" and, collectively, as the "GUARANTORS"); D. WHEREAS, to secure, in part, the indebtedness under the Agreement and the Existing Revolving Note (and all renewals, extensions, modifications and/or rearrangements thereof and in connection therewith) and all other indebtedness, liabilities and obligations of the Companies to the Agent for the benefit of the Lenders, then existing or thereafter arising, (i) the Companies have heretofore executed in favor of the Agent certain Loan Documents (as defined in the Agreement), including, without limitation, the Guaranty, (as defined in the Agreement), which Loan Documents SECOND AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 1 2 shall continue as amended in connection herewith in full force and effect upon the execution of this Amendment, all of the Loan Documents to continue to secure the payment by the Companies of the Obligations (as defined in the Agreement) all as more fully set forth therein and herein; E. WHEREAS, the Companies have requested and, pursuant to the terms and subject to the conditions hereof and in connection herewith, the Agent and the Lenders have agreed to increase the amount of the Line of Credit (as defined in the Agreement) to $75,000,000, and accept the Revolving Note (as herein defined) in replacement and substitution (but not extinguishment) of the Existing Revolving Note; F. WHEREAS, in furtherance of the foregoing and to evidence the agreements of the parties hereto in relation thereto the parties hereto desire to amend the Agreement as hereinafter provided; NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Companies, the Agent and the Lenders, intending to be legally bound, agree as follows: AGREEMENT ARTICLE I DEFINITIONS 1.01 Capitalized terms used in this Amendment are defined in the Agreement, as amended hereby, unless otherwise stated. ARTICLE II AMENDMENTS TO AGREEMENT Effective as of the respective date herein indicated, the Agreement is hereby amended as follows: 2.01 NEW DEFINITION OF "CANPARTNERS SUBORDINATION AGREEMENT". Effective as of the date of execution of this Amendment, Section 1. Definitions of the Agreement is amended by adding thereto the following new definition, to be inserted in appropriate alphabetical order: "`CANPARTNERS SUBORDINATION AGREEMENT' shall mean that certain Subordination and Intercreditor Agreement dated as of November 22, 1999 by and among Canpartners Investments IV, LLC, the Lenders, the Agent, UTI, NDLP, SDC, Parent, Holding, UWSI, UHRB, IPSCO, UTIMS, NDS and NDM." 2.02 AMENDMENT AND RESTATEMENT OF DEFINITION OF "ACQUISITION FACILITY COMMITMENT". Effective as of the date of execution of this Amendment, the definition of "Acquisition Facility Commitment" set forth in Section 1. Definitions of the Agreement is amended and restated to read in its entirety as follows: "ACQUISITION FACILITY COMMITMENT shall mean, with respect to any Lender, a portion of the Revolving Loans which may be advanced as Acquisition Facility Loans, evidencing the amount SECOND AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 2 3 of its commitment to make Acquisition Facility Loans (all such loans being Revolving Loans), as modified from time to time pursuant to the terms hereof, not to exceed $55,000,000 in the aggregate." 2.03 AMENDMENT AND RESTATEMENT OF DEFINITION OF "FIXED CHARGE COVERAGE RATIO". Effective as of the date of execution of this Amendment, the definition of "Fixed Charge Coverage Ratio" set forth in Section 1. Definitions of the Agreement is amended and restated to read in its entirety as follows: "FIXED CHARGE COVERAGE RATIO shall mean, for the twelve month period ending on the date of the then most recent consolidated financial statements of the Parent and its Subsidiaries delivered (or required to be delivered) to the Agent pursuant to Section 7, Paragraph 8, the ratio determined by dividing (a) EBITDA for Parent on a consolidated basis plus the aggregate of all proceeds received from the issuance of Capital Stock by (b) the sum (for such period) of (i) all interest obligations due, but excluding any interest paid on or before September 30, 2000 by Parent and any of its Subsidiaries in connection with the prepayment (whether in full or in part) of all principal and interest owing under the Subordinated Debt Loan Documents (as such term is defined in the Canpartners Subordination Agreement), (ii) the amount of principal scheduled or required to be repaid on the Indebtedness For Borrowed Money for Parent on a consolidated basis, but excluding (A) principal portions of Indebtedness For Borrowed Money of Parent on a consolidated basis that are repaid or discharged directly with Capital Stock (which Capital Stock is issued within twelve months prior to such repayment or discharge), (B) principal portions of Indebtedness For Borrowed Money and other Indebtedness of the Parent on a consolidated basis that are refinanced using securities that constitute Indebtedness For Borrowed Money (other than the Revolving Loans) or proceeds therefrom (which securities are issued within twelve months prior to such refinancing), (C) the repayment or prepayment of up to $3,500,000 of principal amount of the promissory notes originally issued on July 31, 1998, in the aggregate face amount of $7,790,000 to the former shareholders of SUITS Enterprises, Inc. in the event the Average Trading Value (as defined in such notes as in effect on the date hereof) exceeds $30.00 per share, (D) principal portions of the Obligations, and (E) any principal paid on or before September 30, 2000 by the Parent or any of its Subsidiaries in connection with the prepayment (whether in full or in part) of principal and interest owing under the Subordinated Loan Documents (as such term is defined in the Canpartners Subordination Agreement), (iii) Capital Expenditures (other than for Permitted Acquisitions or replacements of assets subject to casualty occurrence with similar assets funded from insurance proceeds of such casualty occurrence or purchases of assets with proceeds from sales of assets permitted under this Agreement, (iv) all federal, state and local income tax expenses due and payable, and (v) all dividends of cash and property (other than dividends of Qualified Capital Stock)." SECOND AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 3 4 2.04 AMENDMENT AND RESTATEMENT OF DEFINITION OF "LINE OF CREDIT". Effective as of the date of execution of this Amendment, the definition of "Line of Credit" set forth in Section 1. Definitions of the Agreement is amended and restated to read in its entirety as follows: "LINE OF CREDIT shall mean the commitment of the Lenders in the aggregate amount of $75,000,000 to (a) make Revolving Loans pursuant to Sections 3 and 4 of this Agreement, and (b) assist the Companies in opening Letters of Credit pursuant to Section 5 of this Agreement (up to the Letter of Credit Sub-Line)." 2.05 AMENDMENT AND RESTATEMENT OF SUBPARAGRAPH (f) OF DEFINITION OF "PERMITTED BUSINESS INVESTMENTS". Effective as of the date of execution of this Amendment, subparagraph (f) of the definition "Permitted Business Investments" set forth in Section 1. Definitions of the Agreement is amended and restated to read in its entirety as follows: "(f) Advances, contributions and loans or other investments, by an Obligor, in or to, a Canadian Operating Company for the purpose of consummating Permitted Acquisitions and working capital and other general purposes; provided that (i) the amount of such advances, contributions and loans do not exceed in the aggregate 125% of the total purchase price of Permitted Acquisitions consummated by such Canadian Operating Company, (ii) no more than 35% of such advances, contributions and loans may be in the form of an advance, contribution or other investment that is not a loan, and (iii) all such loans are secured by a Canadian First Priority Lien." 2.06 AMENDMENT AND RESTATEMENT OF SECTION 4, PARAGRAPH 1 OF THE AGREEMENT. Effective as of the date of execution of this Amendment, Section 4, Subparagraph 1(a)(i) of the Agreement is amended and restated to read in its entirety as follows: "(a) (i) Following the making of such Revolving Loan and consummation of the Permitted Acquisition, there is at least $15 million of Availability (determined without regard to the Excluded L/Cs) and no more than an aggregate of $55 million of Revolving Loans outstanding, and (ii) until the Obligors have invested in the aggregate $25 million in cash (whether cash on hand or cash provided from Revolving loans to consummate Permitted Acquisitions pursuant to this Section 4) in Permitted Acquisitions that are Domestic Acquisitions, the aggregate amount of Revolving Loans outstanding for the purpose of consummating Canadian Acquisitions cannot exceed the sum of (A) $20 million plus (B) the amount of cash invested in Domestic Acquisitions (whether cash on hand or cash provided from Revolving Loans); or" 2.07 AMENDMENT OF SECTION 8, PARAGRAPH 7 OF THE AGREEMENT. Effective as of the date of execution of this Amendment, Section 4, Paragraph 7 of the Agreement is amended as follows: (i) The present Paragraph 7 is renumbered as Subparagraph 7(a). (ii) A new Subparagraph 7(b) is hereby added to the Agreement to read in its entirety as follows: "(b) Upon the execution of an amendment to this Agreement increasing the Line of SECOND AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 4 5 Credit to $75,000,000, the Companies shall pay to the Agent for the pro rata benefit of the Lenders an additional one time Loan Facility Fee in the amount of ONE HUNDRED THOUSAND US DOLLARS ($100,000.00)." 2.08 AMENDMENT AND RESTATEMENT OF SECTION 7, PARAGRAPH 10, SUBPARAGRAPH J OF THE AGREEMENT. Effective as of the date of execution of this Amendment, Section 7, Paragraph 10, Subparagraph J, Clause (z) of the Agreement is amended and restated to read in its entirety as follows: "(z) make any payment on the Subordinated Debt unless (A) there has not occurred an Event of Default that is continuing which has not been waived in writing by the Agent and no Default or Event of Default would occur and exist after giving effect thereto, (B) such payment is permitted under the Subordination Agreement, (C) after giving effect to such payment as though it were a scheduled or required payment on the Subordinated Debt (other than Subordinated Debt owing to an Obligor) the Fixed Charge Coverage Ratio of the Parent is not less than 1.0 to 1.0 for the twelve month period ending on the date of the then most recent consolidated financial statements of the Parent and its Subsidiaries delivered (or required to be delivered) to the Agent pursuant to Section 7, Paragraph 8, preceding the date of such payment, and (D) after giving effect to such payment, the amount of the Availability would not be less than $15,000,000 (in which case such payment shall not be considered a Restricted Payment under this Agreement); provided, however, if there has not occurred an Event of Default that is continuing which has not been waived in writing by the Agent, nothing contained in paragraph (z) shall prohibit (i) the making of any payment on the Subordinated Debt at any time with Qualified Capital Stock or the proceeds therefrom or if the payment would be permitted as a Restricted Payment (after giving effect to such payment) under this Agreement, or (ii) the prepayment (whether in full or in part) of principal and interest owing by the Parent or any Subsidiary thereof owing under the Subordinated Debt Loan Documents (as defined in the Canpartners Subordination Agreement) as long as such prepayment does not create an Event of Default and such prepayment occurs on or before September 30, 2000." 2.09 REVOLVING LOAN COMMITMENT. Effective as of the date of execution of this Amendment, the Revolving Loan Commitment for each Lender will be the amount set forth under each Lender's name of the signature page hereof. 2.10 AMENDMENT AND RESTATEMENT OF EXHIBIT A TO THE AGREEMENT. Effective as of the date of execution of this Amendment, Exhibit A to the Agreement is amended and restated in its entirety as set forth on Exhibit A attached hereto. SECOND AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 5 6 ARTICLE III CONDITIONS PRECEDENT 3.01 CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent in a manner satisfactory to CITBC, unless specifically waived in writing by CITBC: (a) CITBC shall have received each of the following, each in form and substance satisfactory to CITBC, in its sole discretion, and, where applicable, each duly executed by each party thereto, other than CITBC: (i) This Amendment, duly executed by the Companies and the Consent, Ratification and Release is executed by the Guarantors; (ii) A Revolving Loan Promissory Note in the stated principal amount of $75,000,000 in amendment, substitution and replacement of the Existing Revolving Note duly signed by the Companies; and (iii) certified copies of the resolutions of the Board of Directors of each of the Companies and the Guarantors authorizing the execution, delivery and performance of the Revolving Loan Promissory Note, this Amendment and any and all other Loan Documents executed by any of the Companies or the Guarantors in connection therewith, along with a certificate of incumbency certified by the secretary of each of the Companies and the Guarantors with specimen signatures of the officers of the Companies and the Guarantors who are authorized to sign such documents, all in form and substance satisfactory to the Agent; and (iv) All other documents CITBC may request with respect to any matter relevant to this Amendment or the transactions contemplated hereby. (b) The representations and warranties contained herein and in the Agreement and the other documents executed in connection with the Agreement (herein referred to as "Loan Documents"), as each is amended hereby, shall be true and correct as of the date hereof, as if made on the date hereof. (c) No Default or Event of Default shall have occurred and be continuing, unless such Default or Event of Default has been otherwise specifically waived in writing by CITBC. (d) All corporate proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be satisfactory to CITBC. (e) CITBC's receipt of the fee described in Section 2.07 of this Amendment. SECOND AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 6 7 ARTICLE IV RATIFICATIONS, REPRESENTATIONS AND WARRANTIES 4.01 RATIFICATIONS. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Agreement and the other Loan Documents, and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect. The Companies and CITBC agree that the Agreement and the other Loan Documents, as amended hereby, shall continue to be legal, valid, binding and enforceable in accordance with their respective terms. 4.02 REPRESENTATIONS AND WARRANTIES. The Companies hereby represent and warrant to CITBC that (a) the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith have been authorized by all requisite corporate action on the part of the Companies and will not violate the Articles (or Certificates) of Incorporation or Bylaws of the Companies; (b) each of the Company's Board of Directors has authorized the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith; (c) the representations and warranties contained in the Agreement, as amended hereby, and any other Loan Document are true and correct on and as of the date hereof and on and as of the date of execution hereof as though made on and as of each such date; (d) no Default or Event of Default under the Agreement, as amended hereby, has occurred and is continuing, unless such Default or Event of Default has been specifically waived in writing by CITBC; (e) the Companies are in full compliance with all covenants and agreements contained in the Agreement and the other Loan Documents, as amended hereby; and (f) the Companies have not amended their Articles (or Certificates) of Incorporation or their Bylaws since the date of the Agreement, except as otherwise disclosed to Agent. ARTICLE V MISCELLANEOUS PROVISIONS 5.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made in the Agreement or any other Loan Document, including, without limitation, any document furnished in connection with this Amendment, shall survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by CITBC or any closing shall affect the representations and warranties or the right of CITBC to rely upon them. 5.02 REFERENCE TO AGREEMENT. Each of the Agreement and the other Loan Documents, and any and all other Loan Documents, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Agreement, as amended hereby, are hereby amended so that any reference in the Agreement and such other Loan Documents to the Agreement shall mean a reference to the Agreement, as amended hereby. 5.03 EXPENSES OF CITBC. As provided in the Agreement, the Companies agree to pay on demand all reasonable costs and expenses incurred by CITBC in connection with the preparation, negotiation, and execution of this Amendment and the other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the SECOND AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 7 8 reasonable costs and fees of CITBC's legal counsel, and all reasonable costs and expenses incurred by CITBC in connection with the enforcement or preservation of any rights under the Agreement, as amended hereby, or any other Loan Documents, including, without limitation, the reasonable costs and fees of CITBC's legal counsel. 5.04 SEVERABILITY. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. 5.05 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and shall inure to the benefit of CITBC and the Companies and their respective successors and assigns, except that the Companies may not assign or transfer any of their rights or obligations hereunder without the prior written consent of CITBC. 5.06 COUNTERPARTS. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument. 5.07 EFFECT OF WAIVER. No consent or waiver, express or implied, by CITBC to or for any breach of or deviation from any covenant or condition by the Companies shall be deemed a consent to or waiver of any other breach of the same or any other covenant, condition or duty. 5.08 HEADINGS. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment. 5.09 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 5.10 FINAL AGREEMENT. THE AGREEMENT AND THE OTHER LOAN DOCUMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS EXECUTED. THE AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY, MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY COMPANIES AND CITBC. 5.11 RELEASE. THE COMPANIES HEREBY ACKNOWLEDGE THAT THEY HAVE NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM CITBC. SECOND AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 8 9 THE COMPANIES HEREBY VOLUNTARILY AND KNOWINGLY RELEASE AND FOREVER DISCHARGE CITBC, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE COMPANIES MAY NOW OR HEREAFTER HAVE AGAINST CITBC, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE AGREEMENT OR OTHER LOAN DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT. [The Remainder of this Page Intentionally Left Blank] SECOND AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 9 10 IN WITNESS WHEREOF, this Amendment has been executed and is effective as of the date first above-written. COMPANIES: UTI DRILLING, L.P. UTI MANAGEMENT SERVICES, L.P. By: Utico Hard Rock Boring, Inc., the sole general partner of UTI Drilling, L.P. and UTI Management Services, L.P. By: --------------------------------------------- Name: John E. Vollmer, III Title: Vice President NORTON DRILLING, L.P. By: Norton GP, L.L.C., its sole general partner By: Norton Drilling Services, Inc., as Sole Member of Norton GP, L.L.C. By: ------------------------------------------ Name: ---------------------------------------- Title: --------------------------------------- UNIVERSAL WELL SERVICES, INC. SUITS DRILLING COMPANY By: ------------------------------------------ Name: John E. Vollmer, III Title: Vice President of each of the foregoing Companies LENDERS: THE CIT GROUP/BUSINESS CREDIT,INC. as Agent and Lender By: -------------------------------------------------- Name: ------------------------------------------------ Title: ----------------------------------------------- Revolving Loan Commitment: $28,846,155.00 SECOND AMENDMENT TO LOAN & SECURITY AGREEMENT 11 GMAC BUSINESS CREDIT, LLC as Syndication Agent and Lender By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- Revolving Loan Commitment: $23,076,922.50 FOOTHILL CAPITAL CORPORATION as Documentation Agent and Lender By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- Revolving Loan Commitment: $23,076,922.50 SECOND AMENDMENT TO LOAN & SECURITY AGREEMENT 12 CONSENT, RATIFICATION AND RELEASE The undersigned each hereby consents to the terms of the within and foregoing Amendment, confirms and ratifies the terms of that certain Guaranty Agreement dated November 22, 1999 executed (or assumed) by the undersigned for the benefit of Agent and the other Lenders (the "Guaranty Agreement"), and acknowledges that the Guaranty Agreement is in full force and effect and ratifies the same, that the undersigned each has no defense, counterclaim, set-off or any other claim to diminish the undersigned's liability under such document, that the undersigned's consent is not required to the effectiveness of the within and foregoing Amendment, and that no consent by the undersigned is required for the effectiveness of any future amendment, modification, forbearance or other action with respect to the Obligations, the Collateral, or any of the other Loan Agreements. THE UNDERSIGNED EACH HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE UNDERSIGNED MAY NOW OR HEREAFTER HAVE AGAINST LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR OTHER AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT. GUARANTORS: UTICO, INC. UTI DRILLING CANADA, INC. UTICO HARD ROCK BORING, INC. By: NORTON DRILLING COMPANY ------------------------------ MEXICO, INC. Kenneth J. Kubacki INTERNATIONAL PETROLEUM Vice President and Treasurer SERVICES COMPANY UTI ENERGY CORP. By: ------------------------------------ John E. Vollmer III, Vice President By: signing as such on behalf of each of the ------------------------------ foregoing Obligors John E. Vollmer III Senior Vice President SECOND AMENDMENT TO LOAN & SECURITY AGREEMENT 13 EXHIBIT A REVOLVING LOAN PROMISSORY NOTE May 18, 2000 $75,000,000 FOR VALUE RECEIVED, the undersigned Companies (each a "COMPANY" and, collectively, the "COMPANIES"), promise, jointly and severally, to pay to the order of THE CIT GROUP/BUSINESS CREDIT, INC. (herein "CITBC"), as Agent for the Lenders under a certain Loan and Security Agreement dated November 22, 1999 between CITBC as Agent and Lender, other Lenders parties thereto and each Company, as amended from time to time (herein the "AGREEMENT") at its office located at 1211 Avenue of the Americas, New York, New York 10036, or such other address as may be designated by the Agent, in lawful money of the United States of America and in immediately available funds, the principal amount of Seventy Five Million and No/100 Dollars ($75,000,000), or such other principal amount advanced pursuant to Section 3, Paragraph 1 or Section 4 of the Agreement. The balance of such Revolving Loan will fluctuate as a result of the daily application of the proceeds of collections of the Accounts and the making of additional Revolving Loans as described in said Section 3 or Section 4 of the Agreement. The Revolving Loans may be borrowed, repaid and reborrowed by any Company, subject to the terms of the Agreement. A final payment in an amount equal to the outstanding aggregate balance of principal and interest remaining unpaid, if any, under this Revolving Loan Promissory Notes as shown on the books and records of the Agent shall be due and payable upon any termination of the Agreement. All capitalized terms used herein shall have the meaning provided therefor in this Agreement, unless otherwise defined herein. The Companies further promise, jointly and severally, to pay interest at such office, in like money, on the unpaid principal amount owing hereunder from time to time from the date hereof on the dates and at the rates specified in Section 8, Paragraph 1 of the Agreement. If any payment on this Revolving Loan Promissory Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day, and with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. This Revolving Loan Promissory Note is a Revolving Loan Promissory Note referred to in the Agreement, and is subject to, and entitled to, all provisions and benefits thereof and is subject to optional and mandatory prepayment, in whole or in part, as provided therein. SECOND AMENDMENT TO LOAN & SECURITY AGREEMENT 14 The date and amount of the advance(s) made hereunder may be recorded on the schedule which is attached hereto and hereby made part of this Note or the separate ledgers maintained by the Agent, provided that any failure to record any such information on such schedule shall not in any manner affect the obligation of any Company to make payments of principal and interest in accordance with the terms of this Revolving Loan Promissory Note. The aggregate unpaid principal amount of all advances made pursuant hereto may be set forth in the balance column on said schedule or such ledgers maintained by the Agent. All such advances, whether or not so recorded, shall be due as part of this Revolving Loan Promissory Note. Each Company confirms that any amount received by or paid to the Agent in connection with this Agreement and/or any balances standing to its credit on any of its accounts on the Agent's books under this Agreement may in accordance with the terms of this Agreement be applied in reduction of this Revolving Loan Promissory Note, but no balance or amounts shall be deemed to effect payment in whole or in part of this Revolving Loan Promissory Note unless the Agent shall have actually charged such account or accounts for the purposes of such reduction or payment of this Revolving Loan Promissory Note. Upon the occurrence and during the continuance of any one or more of the Events of Default specified in the Agreement or upon termination of this Agreement, all amounts then remaining unpaid on this Revolving Loan Promissory Note may become, or be declared to be, immediately due and payable as provided in the Agreement. Each Company and the Guarantors, sureties and endorses jointly and severally waive grace, demand, presentment for payment, notice of dishonor or default, notice of intent to accelerate, notice of acceleration, protest and diligence in collecting this Revolving Loan Promissory Note. This Revolving Loan Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York and the applicable federal laws of the United States. SECOND AMENDMENT TO LOAN & SECURITY AGREEMENT 15 This Revolving Loan Promissory Note is given in amendment, replacement and substitution, but not extinguishment, of all amounts unpaid under that certain Revolving Loan Promissory Note dated May 2, 2000 payable by the Companies to the order of CTIBC as Agent for the Lenders in the stated principal amount of $65,000,000.00. COMPANIES: UTI DRILLING, L.P. By: UTICO HARD ROCK BORING, INC., as sole General Partner By: -------------------------------------------------- John E. Vollmer III, Vice President SUITS DRILLING COMPANY By: ------------------------------------------------------ John E. Vollmer III, Vice President UNIVERSAL WELL SERVICES, INC. By: ------------------------------------------------------ John E. Vollmer III, Vice President UTI MANAGEMENT SERVICES, L.P. By: UTICO HARD ROCK BORING, as Sole General Partner By: -------------------------------------------------- John E. Vollmer III, Vice President NORTON DRILLING, L.P. By: Norton GP, L.L.C., as sole General Partner By: Norton Drilling Services, Inc., its sole Member By: ----------------------------------------------- Name: -------------------------------------------- Title: ------------------------------------------- SECOND AMENDMENT TO LOAN & SECURITY AGREEMENT 16 SCHEDULE TO GRID
Date Loan Payment Balance - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------
SECOND AMENDMENT TO LOAN & SECURITY AGREEMENT EX-10.1.3 7 d89352ex10-1_3.txt 3RD AMENDMENT TO LOAN AND SECURITY AGREEMENT 1 EXHIBIT 10.1.3 THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is made and entered into as of this 18th day of October, 2000, by and among THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation (hereinafter "CITBC"), in its individual capacity and as Agent for the Lenders hereinafter named (hereinafter the "AGENT"), Foothill Capital Corporation, a California corporation ("FCC"), GMAC Business Credit, LLC, a Michigan limited liability company ("GMAC"), The CIT Group/Equipment Financing, Inc., a Delaware corporation ("CITEF"), and any other party hereafter becoming a Lender pursuant to Section 13, Paragraph 9 of the Agreement (as hereinafter defined), each individually sometimes referred to as a "LENDER" and, collectively, the "LENDERS"), and UTI Drilling, L.P., a Texas limited partnership ("UTI"), Norton Drilling, L.P., a Delaware limited partnership, as successor in interest (by conversion) to Norton Drilling Company, a Delaware corporation ("NDLP"), Universal Well Services, Inc., a Delaware corporation ("UWSI"), UTI Management Services, L.P., a Texas limited partnership ("UTIMS"), and Suits Drilling Company, an Oklahoma corporation ("SDC"), (UTI, NDLP, UWSI, UTIMS and SDC, together with any additional entities which may become a Company under the Agreement from time to time, being referred to herein individually as a "COMPANY" and, collectively, as the "COMPANIES"). RECITALS A. WHEREAS, pursuant to the terms and subject to the conditions of that certain Loan and Security Agreement dated as of November 22, 1999 between the parties hereto (such Loan and Security Agreement, as the same is hereby amended and may hereafter be amended from time to time, being hereinafter referred to as the "Agreement"), the Companies were granted a $75,000,000 revolving line of credit which included a letter of credit facility; B. WHEREAS, the indebtedness of the Companies to the Lenders is currently evidenced by that certain Revolving Loan Promissory Note dated May 18, 2000 (the "Existing Revolving Note"), executed by the Companies and payable to CITBC as Agent for the benefit of the Lenders; C. WHEREAS, payment of the Obligations of the Companies was supported by the guaranties of UTI Energy Corp., a Delaware corporation (the "PARENT"), UTICO, Inc., a Delaware corporation ("HOLDING"), UTICO Hard Rock Boring, Inc., a Delaware corporation ("UHRB"), International Petroleum Services Company, a Pennsylvania corporation ("IPSCO"), Norton Drilling Services, Inc., a Delaware corporation ("NDS"), Norton Drilling Company Mexico, Inc., a Delaware corporation ("NDM") and UTI Drilling Canada, Inc., a Delaware corporation ("UTI CANADA") (Parent, Holding, UHRB, IPSCO, NDS, NDM and UTI Canada are referred to herein, individually, as a "GUARANTOR" and, collectively, as the "GUARANTORS"); D. WHEREAS, to secure, in part, the indebtedness under the Agreement and the Existing Revolving Note (and all renewals, extensions, modifications and/or rearrangements thereof and in connection therewith) and all other indebtedness, liabilities and obligations of the Companies to the Agent for the benefit of the Lenders, then existing or thereafter arising, (i) the Companies have heretofore executed in favor of the Agent certain Loan Documents (as defined in the Agreement), THIRD AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 1 2 including, without limitation, the Guaranty, (as defined in the Agreement), which Loan Documents shall continue as amended in connection herewith in full force and effect upon the execution of this Amendment, all of the Loan Documents to continue to secure the payment by the Companies of the Obligations (as defined in the Agreement) all as more fully set forth therein and herein; E. WHEREAS, the Companies have requested and, pursuant to the terms and subject to the conditions hereof and in connection herewith, the Agent and the Lenders have agreed to increase the amount of the Line of Credit (as defined in the Agreement) to $90,000,000, and accept the Revolving Note (as herein defined) in replacement and substitution (but not extinguishment) of the Existing Revolving Note; F. WHEREAS, in furtherance of the foregoing and to evidence the agreements of the parties hereto in relation thereto the parties hereto desire to amend the Agreement as hereinafter provided; NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Companies, the Agent and the Lenders, intending to be legally bound, agree as follows: AGREEMENT ARTICLE I DEFINITIONS 1.01 Capitalized terms used in this Amendment are defined in the Agreement, as amended hereby, unless otherwise stated herein. ARTICLE II AMENDMENTS TO AGREEMENT Effective as of the respective date herein indicated, the Agreement is hereby amended as follows: 2.01 AMENDMENT AND RESTATEMENT OF DEFINITION OF "ACQUISITION FACILITY COMMITMENT". Effective as of the date of execution of this Amendment, the definition of "Acquisition Facility Commitment" set forth in Section 1 of the Agreement is amended and restated to read in its entirety as follows: "`ACQUISITION FACILITY COMMITMENT' shall mean, with respect to any Lender, a portion of the Revolving Loans which may be advanced as Acquisition Facility Loans, evidencing the amount of its commitment to make Acquisition Facility Loans (all such loans being Revolving Loans), as modified from time to time pursuant to the terms hereof, not to exceed $70,000,000 in the aggregate." 2.02 AMENDMENT AND RESTATEMENT OF DEFINITION OF "ADMINISTRATIVE MANAGEMENT FEE". Effective as of the date of execution of this Amendment, the definition of "Administrative Management Fee" set forth in Section 1 of the Agreement is amended and restated to read in its entirety as follows: THIRD AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 2 3 "`ADMINISTRATIVE MANAGEMENT FEE' shall mean the sum of $100,000 per annum which shall be paid to the Agent for its own account in accordance with Section 8, Paragraph 8 hereof to offset the expenses and costs (excluding Out-of-Pocket Expenses) of the Agent in connection with record keeping, periodic examinations, analyzing and evaluating the Collateral." 2.03 AMENDMENT AND RESTATEMENT OF DEFINITION OF "LINE OF CREDIT". Effective as of the date of execution of this Amendment, the definition of "Line of Credit" set forth in Section 1 of the Agreement is amended and restated to read in its entirety as follows: "`LINE OF CREDIT' shall mean the commitment of the Lenders in the aggregate amount of $90,000,000 to (a) make Revolving Loans pursuant to Sections 3 and 4 of this Agreement, and (b) assist the Companies in opening Letters of Credit pursuant to Section 5 of this Agreement (up to the Letter of Credit Sub-Line)." 2.04 AMENDMENT AND RESTATEMENT OF SECTION 4, PARAGRAPH 1 OF THE AGREEMENT. Effective as of the date of execution of this Amendment, Section 4, Subparagraph 1(a)(i) of the Agreement is amended and restated to read in its entirety as follows: "(a) (i) Following the making of such Revolving Loan and consummation of the Permitted Acquisition, there is at least $15 million of Availability (determined without regard to the Excluded L/Cs) and no more than an aggregate of $70 million of Revolving Loans outstanding, and (ii) until the Obligors have invested in the aggregate $25 million in cash (whether cash on hand or cash provided from Revolving Loans to consummate Permitted Acquisitions pursuant to this Section 4) in Permitted Acquisitions that are Domestic Acquisitions, the aggregate amount of Revolving Loans outstanding for the purpose of consummating Canadian Acquisitions cannot exceed the sum of (A) $20 million plus (B) the amount of cash invested in Domestic Acquisitions (whether cash on hand or cash provided from Revolving Loans); or" 2.05 AMENDMENT AND RESTATEMENT OF SECTION 7, PARAGRAPH 11 OF THE AGREEMENT. Effective as of the date of execution of this Amendment, Section 7, Paragraph 11 of the Agreement is amended and restated to read in its entirety as follows: "11. Until termination of this Agreement and payment and satisfaction in full of all Obligations hereunder, if any Event of Default shall occur and be continuing which has not been waived in writing by the Agent or if the Availability (determined as of the Excluded L/Cs were not outstanding) shall at any time be less than $20,000,000, then the Obligors agree that the Parent will, on a consolidated basis: (a) maintain as of the last day of each calendar month a Tangible Net Worth of not less than $120,000,000; and (b) maintain as of the last day of each month TTM EBITDA of not less than $15,000,000." THIRD AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 3 4 2.06 AMENDMENT OF SECTION 8, PARAGRAPH 7 OF THE AGREEMENT. Effective as of the date of execution of this Amendment, Section 8, Paragraph 7 of the Agreement is amended to add a new Subparagraph 7(c) as follows: "(c) Upon the execution of an amendment to this Agreement increasing the Line of Credit to $90,000,000, the Companies shall pay to the Agent for the pro rata benefit of the Lenders an additional one time Loan Facility Fee in the amount One Hundred Fifty Thousand U.S. Dollars ($150,000.00.)" 2.07 REVOLVING LOAN COMMITMENT. Effective as of the date of execution of this Amendment, the Revolving Loan Commitment for each Lender will be the amount set forth under each Lender's name of the signature page hereof. 2.08 AMENDMENT AND RESTATEMENT OF EXHIBIT A TO THE AGREEMENT. Effective as of the date of execution of this Amendment, Exhibit A to the Agreement is amended and restated in its entirety as set forth on Exhibit A attached hereto. ARTICLE III CONDITIONS PRECEDENT 3.01 CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent in a manner satisfactory to CITBC, unless specifically waived in writing by CITBC: (a) CITBC shall have received each of the following, each in form and substance satisfactory to CITBC, in its sole discretion, and, where applicable, each duly executed by each party thereto, other than CITBC: (i) This Amendment, duly executed by the Companies and the Consent, Ratification and Release is executed by the Guarantors; (ii) A Revolving Loan Promissory Note in the stated principal amount of $90,000,000 in amendment, substitution and replacement of the Existing Revolving Note duly signed by the Companies; and (iii) certified copies of the resolutions of the Board of Directors of each of the Companies and the Guarantors authorizing the execution, delivery and performance of the Revolving Loan Promissory Note, this Amendment and any and all other Loan Documents executed by any of the Companies or the Guarantors in connection therewith, along with a certificate of incumbency certified by the secretary of each of the Companies and the Guarantors with specimen signatures of the officers of the Companies and the Guarantors who are authorized to sign such documents, all in form and substance satisfactory to the Agent; and (iv) All other documents CITBC may request with respect to any matter relevant to this Amendment or the transactions contemplated hereby. THIRD AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 4 5 (b) The representations and warranties contained herein and in the Agreement and the other documents executed in connection with the Agreement (herein referred to as "Loan Documents"), as each is amended hereby, shall be true and correct as of the date hereof, as if made on the date hereof. (c) No Default or Event of Default shall have occurred and be continuing, unless such Default or Event of Default has been otherwise specifically waived in writing by CITBC. (d) All corporate proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be satisfactory to CITBC. (e) CITBC's receipt of the fee described in Section 2.06 of this Amendment. ARTICLE IV RATIFICATIONS, REPRESENTATIONS AND WARRANTIES 4.01 RATIFICATIONS. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Agreement and the other Loan Documents, and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect. The Companies and CITBC agree that the Agreement and the other Loan Documents, as amended hereby, shall continue to be legal, valid, binding and enforceable in accordance with their respective terms. 4.02 REPRESENTATIONS AND WARRANTIES. The Companies hereby represent and warrant to CITBC that (a) the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith have been authorized by all requisite corporate or limited partnership action (as applicable) on the part of the Companies and will not violate the Articles (or Certificates) of Incorporation or Bylaws of the Companies that are corporations or the limited partnership agreements or certificates of limited partnership of the Companies that are limited partnerships; (b) each of the Company's Board of Directors (or the general partner of the applicable limited partnership) has authorized the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith; (c) the representations and warranties contained in the Agreement, as amended hereby, and any other Loan Document are true and correct on and as of the date hereof and on and as of the date of execution hereof as though made on and as of each such date; (d) no Default or Event of Default under the Agreement, as amended hereby, has occurred and is continuing, unless such Default or Event of Default has been specifically waived in writing by CITBC; (e) the Companies are in full compliance with all covenants and agreements contained in the Agreement and the other Loan Documents, as amended hereby; and (f) the Companies have not amended their Articles (or Certificates) of Incorporation or their Bylaws since the date of the Agreement, except as otherwise disclosed to Agent. THIRD AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 5 6 ARTICLE V MISCELLANEOUS PROVISIONS 5.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made in the Agreement or any other Loan Document, including, without limitation, any document furnished in connection with this Amendment, shall survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by CITBC or any closing shall affect the representations and warranties or the right of CITBC to rely upon them. 5.02 REFERENCE TO AGREEMENT. Each of the Agreement and the other Loan Documents, and any and all other Loan Documents, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Agreement, as amended hereby, are hereby amended so that any reference in the Agreement and such other Loan Documents to the Agreement shall mean a reference to the Agreement, as amended hereby. 5.03 EXPENSES OF CITBC. As provided in the Agreement, the Companies agree to pay on demand all reasonable costs and expenses incurred by CITBC in connection with the preparation, negotiation, and execution of this Amendment and the other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the reasonable costs and fees of CITBC's legal counsel, and all reasonable costs and expenses incurred by CITBC in connection with the enforcement or preservation of any rights under the Agreement, as amended hereby, or any other Loan Documents, including, without limitation, the reasonable costs and fees of CITBC's legal counsel. 5.04 SEVERABILITY. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. 5.05 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and shall inure to the benefit of CITBC and the Companies and their respective successors and assigns, except that the Companies may not assign or transfer any of their rights or obligations hereunder without the prior written consent of CITBC. 5.06 COUNTERPARTS. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument. 5.07 EFFECT OF WAIVER. No consent or waiver, express or implied, by CITBC to or for any breach of or deviation from any covenant or condition by the Companies shall be deemed a consent to or waiver of any other breach of the same or any other covenant, condition or duty. 5.08 HEADINGS. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment. 5.09 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE THIRD AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 6 7 PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 5.10 FINAL AGREEMENT. THE AGREEMENT AND THE OTHER LOAN DOCUMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS EXECUTED. THE AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY, MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY COMPANIES AND CITBC. 5.11 RELEASE. THE COMPANIES HEREBY ACKNOWLEDGE THAT THEY HAVE NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM CITBC. THE COMPANIES HEREBY VOLUNTARILY AND KNOWINGLY RELEASE AND FOREVER DISCHARGE CITBC, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE COMPANIES MAY NOW OR HEREAFTER HAVE AGAINST CITBC, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE AGREEMENT OR OTHER LOAN DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT. [The Remainder of this Page Intentionally Left Blank] THIRD AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 7 8 IN WITNESS WHEREOF, this Amendment has been executed and is effective as of the date first above-written. COMPANIES: UTI DRILLING, L.P. UTI MANAGEMENT SERVICES, L.P. By: Utico Hard Rock Boring, Inc., the sole general partner of UTI Drilling, L.P. and UTI Management Services, L.P. By: ------------------------------------------- Name: John E. Vollmer, III Title: Vice President NORTON DRILLING, L.P. By: Norton GP, L.L.C., its sole general partner By: Norton Drilling Services, Inc., as Sole Member of Norton GP, L.L.C. By: ------------------------------------------ Name: ---------------------------------------- Title: --------------------------------------- UNIVERSAL WELL SERVICES, INC. SUITS DRILLING COMPANY By: ------------------------------------------ Name: John E. Vollmer, III Title: Vice President of each of the foregoing Companies LENDERS: THE CIT GROUP/BUSINESS CREDIT,INC. as Agent and Lender By: --------------------------------------------------- Name: ------------------------------------------------- Title: ------------------------------------------------ Revolving Loan Commitment: $30,000,000.00 THIRD AMENDMENT TO LOAN & SECURITY AGREEMENT 9 GMAC BUSINESS CREDIT, LLC as Syndication Agent and Lender By: --------------------------------------------------- Name: ------------------------------------------------- Title: ------------------------------------------------ Revolving Loan Commitment: $25,000,000.00 FOOTHILL CAPITAL CORPORATION as Documentation Agent and Lender By: --------------------------------------------------- Name: ------------------------------------------------- Title: ------------------------------------------------ Revolving Loan Commitment: $25,000,000.00 THE CIT GROUP/EQUIPMENT FINANCING, INC. By: --------------------------------------------------- Name: ------------------------------------------------- Title: ------------------------------------------------ Revolving Loan Commitment: $10,000,000.00 THIRD AMENDMENT TO LOAN & SECURITY AGREEMENT 10 CONSENT, RATIFICATION AND RELEASE The undersigned each hereby consents to the terms of the within and foregoing Amendment, confirms and ratifies the terms of that certain Guaranty Agreement dated November 22, 1999 executed (or assumed) by the undersigned for the benefit of Agent and the other Lenders (the "Guaranty Agreement"), and acknowledges that the Guaranty Agreement is in full force and effect and ratifies the same, that the undersigned each has no defense, counterclaim, set-off or any other claim to diminish the undersigned's liability under such document, that the undersigned's consent is not required to the effectiveness of the within and foregoing Amendment, and that no consent by the undersigned is required for the effectiveness of any future amendment, modification, forbearance or other action with respect to the Obligations, the Collateral, or any of the other Loan Agreements. THE UNDERSIGNED EACH HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE UNDERSIGNED MAY NOW OR HEREAFTER HAVE AGAINST LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR OTHER AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT. GUARANTORS: UTICO, INC. UTI DRILLING CANADA, INC. UTICO HARD ROCK BORING, INC. By: NORTON DRILLING SERVICES, INC. ------------------------------- NORTON DRILLING COMPANY Kenneth J. Kubacki MEXICO, INC. Vice President and Treasurer INTERNATIONAL PETROLEUM SERVICES COMPANY UTI ENERGY CORP. By: By: ------------------------------------- ------------------------------- John E. Vollmer III, Vice President John E. Vollmer III signing as such on behalf of each of the Senior Vice President foregoing Obligors THIRD AMENDMENT TO LOAN & SECURITY AGREEMENT 11 EXHIBIT A REVOLVING LOAN PROMISSORY NOTE October 18, 2000 $90,000,000 FOR VALUE RECEIVED, the undersigned Companies (each a "COMPANY" and, collectively, the "COMPANIES"), promise, jointly and severally, to pay to the order of THE CIT GROUP/BUSINESS CREDIT, INC. (herein "CITBC"), as Agent for the Lenders under a certain Loan and Security Agreement dated November 22, 1999 between CITBC as Agent and Lender, other Lenders parties thereto and each Company, as amended from time to time (herein the "AGREEMENT") at its office located at 1211 Avenue of the Americas, New York, New York 10036, or such other address as may be designated by the Agent, in lawful money of the United States of America and in immediately available funds, the principal amount of Ninety Million and No/100 Dollars ($90,000,000), or such other principal amount advanced pursuant to Section 3, Paragraph 1 or Section 4 of the Agreement. The balance of such Revolving Loan will fluctuate as a result of the daily application of the proceeds of collections of the Accounts and the making of additional Revolving Loans as described in said Section 3 or Section 4 of the Agreement. The Revolving Loans may be borrowed, repaid and reborrowed by any Company, subject to the terms of the Agreement. A final payment in an amount equal to the outstanding aggregate balance of principal and interest remaining unpaid, if any, under this Revolving Loan Promissory Notes as shown on the books and records of the Agent shall be due and payable upon any termination of the Agreement. All capitalized terms used herein shall have the meaning provided therefor in this Agreement, unless otherwise defined herein. The Companies further promise, jointly and severally, to pay interest at such office, in like money, on the unpaid principal amount owing hereunder from time to time from the date hereof on the dates and at the rates specified in Section 8, Paragraph 1 of the Agreement. If any payment on this Revolving Loan Promissory Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day, and with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. This Revolving Loan Promissory Note is a Revolving Loan Promissory Note referred to in the Agreement, and is subject to, and entitled to, all provisions and benefits thereof and is subject to optional and mandatory prepayment, in whole or in part, as provided therein. THIRD AMENDMENT TO LOAN & SECURITY AGREEMENT 12 The date and amount of the advance(s) made hereunder may be recorded on the schedule which is attached hereto and hereby made part of this Note or the separate ledgers maintained by the Agent, provided that any failure to record any such information on such schedule shall not in any manner affect the obligation of any Company to make payments of principal and interest in accordance with the terms of this Revolving Loan Promissory Note. The aggregate unpaid principal amount of all advances made pursuant hereto may be set forth in the balance column on said schedule or such ledgers maintained by the Agent. All such advances, whether or not so recorded, shall be due as part of this Revolving Loan Promissory Note. Each Company confirms that any amount received by or paid to the Agent in connection with this Agreement and/or any balances standing to its credit on any of its accounts on the Agent's books under this Agreement may in accordance with the terms of this Agreement be applied in reduction of this Revolving Loan Promissory Note, but no balance or amounts shall be deemed to effect payment in whole or in part of this Revolving Loan Promissory Note unless the Agent shall have actually charged such account or accounts for the purposes of such reduction or payment of this Revolving Loan Promissory Note. Upon the occurrence and during the continuance of any one or more of the Events of Default specified in the Agreement or upon termination of this Agreement, all amounts then remaining unpaid on this Revolving Loan Promissory Note may become, or be declared to be, immediately due and payable as provided in the Agreement. Each Company and the Guarantors, sureties and endorsers jointly and severally waive grace, demand, presentment for payment, notice of dishonor or default, notice of intent to accelerate, notice of acceleration, protest and diligence in collecting this Revolving Loan Promissory Note. This Revolving Loan Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York and the applicable federal laws of the United States. THIRD AMENDMENT TO LOAN & SECURITY AGREEMENT 13 This Revolving Loan Promissory Note is given in amendment, replacement and substitution, but not extinguishment, of all amounts unpaid under that certain Revolving Loan Promissory Note dated May 18, 2000 payable by the Companies to the order of CTIBC as Agent for the Lenders in the stated principal amount of $75,000,000.00. COMPANIES: UTI DRILLING, L.P. By: UTICO HARD ROCK BORING, INC., as sole General Partner By: ----------------------------------------------- John E. Vollmer III, Vice President SUITS DRILLING COMPANY By: --------------------------------------------------- John E. Vollmer III, Vice President UNIVERSAL WELL SERVICES, INC. By: --------------------------------------------------- John E. Vollmer III, Vice President UTI MANAGEMENT SERVICES, L.P. By: UTICO HARD ROCK BORING, as Sole General Partner By: ----------------------------------------------- John E. Vollmer III, Vice President NORTON DRILLING, L.P. By: Norton GP, L.L.C., as sole General Partner By: Norton Drilling Services, Inc., its sole Member By: ------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- THIRD AMENDMENT TO LOAN & SECURITY AGREEMENT 14 SCHEDULE TO GRID
Date Loan Payment Balance - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------
THIRD AMENDMENT TO LOAN & SECURITY AGREEMENT EX-10.1.4 8 d89352ex10-1_4.txt 4TH AMENDMENT TO LOAN AND SECURITY AGREEMENT 1 EXHIBIT 10.1.4 FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is made and entered into as of this 8th day of May, 2001, by and among THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation (hereinafter "CITBC"), in its individual capacity and as Agent for the Lenders hereinafter named (hereinafter the "AGENT"), Foothill Capital Corporation, a California corporation ("FCC"), The CIT Group/Equipment Financing, Inc., a Delaware corporation ("CITEF"), and any other party hereafter becoming a Lender pursuant to Section 13, Paragraph 9 of the Agreement (as hereinafter defined), each individually sometimes referred to as a "LENDER" and, collectively, the "LENDERS"), and UTI Drilling, L.P., a Texas limited partnership ("UTI"), Norton Drilling, L.P., a Delaware limited partnership, as successor in interest (by conversion) to Norton Drilling Company, a Delaware corporation ("NDLP"), Universal Well Services, Inc., a Delaware corporation ("UWSI"), UTI Management Services, L.P., a Texas limited partnership ("UTIMS"), and Suits Drilling Company, an Oklahoma corporation ("SDC"), (UTI, NDLP, UWSI, UTIMS and SDC, together with any additional entities which may become a Company under the Agreement from time to time, being referred to herein individually as a "COMPANY" and, collectively, as the "COMPANIES"). RECITALS A. WHEREAS, pursuant to the terms and subject to the conditions of that certain Loan and Security Agreement dated as of November 22, 1999 between the parties hereto (such Loan and Security Agreement, as the same is hereby amended and may hereafter be amended from time to time, being hereinafter referred to as the "Agreement"), the Companies were granted a $90,000,000 revolving line of credit which included a letter of credit facility; B. WHEREAS, the indebtedness of the Companies to the Lenders is currently evidenced by that certain Revolving Loan Promissory Note dated October 18, 2000 (the "Existing Revolving Note"), executed by the Companies and payable to CITBC as Agent for the benefit of the Lenders in the stated principal amount of $90,000,000.00; C. WHEREAS, payment of the Obligations of the Companies is currently supported by the guaranties of UTI Energy Corp., a Delaware corporation ("UTI ENERGY"), UTICO, Inc., a Delaware corporation ("HOLDING"), UTICO Hard Rock Boring, Inc., a Delaware corporation ("UHRB"), International Petroleum Services Company, a Pennsylvania corporation ("IPSCO"), Norton Drilling Services, Inc., a Delaware corporation ("NDS"), Norton Drilling Company Mexico, Inc., a Delaware corporation ("NDM") and UTI Drilling Canada, Inc., a Delaware corporation ("UTI CANADA") (UTI Energy, Holding, UHRB, IPSCO, NDS, NDM and UTI Canada are referred to herein, individually, as a "GUARANTOR" and, collectively, as the "GUARANTORS"); D. WHEREAS, to secure, in part, the indebtedness under the Agreement and the Existing Revolving Note (and all renewals, extensions, modifications and/or rearrangements thereof and in connection therewith) and all other indebtedness, liabilities and obligations of the Companies to the Agent for the benefit of the Lenders, then existing or thereafter arising, the Companies have heretofore FOURTH AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 1 2 executed in favor of the Agent certain Loan Documents (as defined in the Agreement), including, without limitation, the Guaranty (as defined in the Agreement), which Loan Documents shall continue as amended in connection herewith in full force and effect upon the execution of this Amendment and shall continue to secure the payment by the Companies of the Obligations (as defined in the Agreement) all as more fully set forth therein and herein; E. WHEREAS, (i) the Companies have requested and, pursuant to the terms and subject to the conditions hereof and in connection herewith, the Agent and the Lenders have agreed to remove UTI Energy as a Guarantor, and (ii) the parties have agreed to decrease the amount of the Line of Credit (as defined in the Agreement) to $70,000,000 and the Companies accept the Revolving Note (as herein defined) in replacement and substitution (but not extinguishment) of the Existing Revolving Note; F. WHEREAS, in furtherance of the foregoing and to evidence the agreements of the parties hereto in relation thereto the parties hereto desire to amend the Agreement as hereinafter provided; NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Companies, the Agent and the Lenders, intending to be legally bound, agree as follows: AGREEMENT ARTICLE I DEFINITIONS 1.01 Capitalized terms used in this Amendment are defined in the Agreement, as amended hereby, unless otherwise stated herein. ARTICLE II AMENDMENTS TO AGREEMENT Effective as of the respective date herein indicated, the Agreement is hereby amended as follows: 2.01 DEFINITION OF "GUARANTOR" AND "GUARANTORS". Effective as of the date of this Amendment, the references to "Guarantor" and "Guarantors" in the preamble to the Agreement and in the definition of "Guarantor" set forth in Section 1 of the Agreement are amended to delete UTI Energy. Effective as of the date of this Amendment, neither UTI Energy nor the Parent shall constitute (i) a "Guarantor" or an "Obligor" under the Agreement, or (ii) a party to, or have any obligation or liability under, the Agreement. 2.02 AMENDMENT AND RESTATEMENT OF DEFINITION OF "ACQUISITION FACILITY COMMITMENT". Effective as of the date of this Amendment, the definition of "Acquisition Facility Commitment" set forth in Section 1 of the Agreement is amended and restated to read in its entirety as follows: FOURTH AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 2 3 "'ACQUISITION FACILITY COMMITMENT' shall mean, with respect to any Lender, a portion of the Revolving Loans which may be advanced as Acquisition Facility Loans, evidencing the amount of its commitment to make Acquisition Facility Loans (all such loans being Revolving Loans), as modified from time to time pursuant to the terms hereof, not to exceed $50,000,000 in the aggregate." 2.03 AMENDMENT AND RESTATEMENT OF DEFINITION OF "APPLICABLE MARGIN". Effective as of the date of this Amendment, the definition of "Applicable Margin" set forth in Section 1 of the Agreement is amended and restated to read in its entirety as follows: "APPLICABLE MARGIN" means, with respect to any amount outstanding made under any LIBOR Loans or Revolving Loans other than LIBOR Loans, as the case may be, the rate of interest per annum determined as set forth below: (a) during the period from the Closing Date through the Financial Statement Delivery Date (as defined below) for the fiscal quarter ending on December 31, 1999:
AS TO REVOLVING LOANS AS TO OTHER THAN LIBOR LOANS LIBOR LOANS ---------------------- ----------- 0.25% 2.25%
(b) during the period between any two Financial Statement Delivery Dates for any Margin Period occurring after December 31, 1999, the rate determined by reference to the pricing grid below as a function of the amount of TTM EBITDA:
AS TO REVOLVING LOANS AS TO TTM EBITDA OTHER THAN LIBOR LOANS LIBOR LOANS ---------- ---------------------- ----------- > or = to $55,000,000 0.00% 1.75% < $55,000,000 and > or = to $45,000,000 0.00% 2.00% < $45,000,000 and > or = to $35,000,000 0.25% 2.25% < $35,000,000 and > or = to $30,000,000 0.50% 2.50% < $30,000,000 0.75% 2.75%
As used herein, "FINANCIAL STATEMENT DELIVERY DATE" means the earlier of (i) the last day on which the quarterly or annual financial statements of the Companies are to be delivered to the Agent and the Lenders pursuant to Section 7, Paragraph 8(a), or (ii) the date upon which such financial statements actually are delivered to the Agent and the Lenders. As used herein, "MARGIN PERIOD" means a period commencing on the most recent Financial Statement Delivery Date and ending on the next Financial Statement Delivery Date. Each change in the Applicable Margin shall become effective on the first FOURTH AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 3 4 day of the calendar month next following the applicable Financial Statement Delivery Date." The parties confirm and agree that from the date of this Amendment through and including the Financial Statement Delivery Date for the fiscal quarter ending June 30, 2001, the Applicable Margin (a) for Revolving Loans other than LIBOR Loans shall be 0.00% and (b) for LIBOR Loans shall be 1.75%. 2.04 AMENDMENT AND RESTATEMENT OF DEFINITION OF "EARLY TERMINATION FEE". Effective as of the date of this Amendment, the definition of "Early Termination Fee" set forth in Section 1 of the Agreement is amended and restated to read in its entirety as follows: " `EARLY TERMINATION FEE' shall: (a) mean the fee the Agent on behalf of the Lenders is entitled to charge the Companies if the Companies terminate the Line of Credit or this Agreement on a date prior to the fourth anniversary of the Closing Date; and (b) be determined by multiplying the Line of Credit by (i) one half of one percent (0.50%) if the Early Termination Date occurs on or prior to one year (1) after the Merger Date, (ii) three-tenths of one percent (0.30%) if the Early Termination Date occurs more than one (1) year after the Merger Date but on or prior to three (3) years after the Closing Date; and (iii) two-tenths of one percent (0.20%) if the Early Termination Date occurs more than three (3) years after the Closing Date but prior to four (4) years after the Closing Date." 2.05 AMENDMENT AND RESTATEMENT OF DEFINITION OF "EBITDA". Effective as of the date of this Amendment, the definition of "EBITDA" set forth in Section 1 of the Agreement is amended and restated to read in its entirety as follows: " `EBITDA' shall mean, in any period, all earnings before all (a) interest and tax obligations, (b) depreciation and depletion and (c) amortization for said period, all determined in accordance with GAAP on a basis consistent with the latest audited financial statements of the Companies, the Parent and their respective consolidated Subsidiaries but excluding for any such period (i) the effect of extraordinary and non-reoccurring gains or losses and non-cash compensation expense (ii) restructure charges arising in connection with the Merger, (iii) other charges related to (A) the Merger or (B) changes to indebtedness for borrowed money arising in connection with the Merger, (iv) write downs and write offs of deferred finance charges as a result of the reduction in total committed credit facilities, and (v) charges related to financing costs associated with the Patterson Loan Agreement or this Agreement (but excluding accruals for interest expense); provided, however, the aggregate amount of the items in clauses (ii) through (v) above shall not exceed $20,000,000." FOURTH AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 4 5 2.06 AMENDMENT AND RESTATEMENT OF DEFINITION OF "LINE OF CREDIT". Effective as of the date of this Amendment, the definition of "Line of Credit" set forth in Section 1 of the Agreement is amended and restated to read in its entirety as follows: " `LINE OF CREDIT' shall mean the commitment of the Lenders in the aggregate amount of $70,000,000 to (a) make Revolving Loans pursuant to Sections 3 and 4 of this Agreement, and (b) assist the Companies in opening Letters of Credit pursuant to Section 5 of this Agreement (up to the Letter of Credit Sub-Line)." 2.07 NEW DEFINITIONS. Effective as of the date of this Amendment, Section 1 of the Agreement is amended by adding the following new definitions thereto, to be inserted in appropriate alphabetical order: "LOANS" shall mean shall mean the loans and advances made, from time to time, to or for the account of each Company by the Agent on behalf of the Lenders pursuant to Section 3 or Section 4 of this Agreement. "MERGER" shall mean the merger between Patterson Energy, Inc., a Delaware corporation, and UTI Energy Corp., a Delaware corporation. "MERGER DATE" shall mean May 8, 2001 which is the effective date of the Merger. "PARENT" shall mean Patterson Energy, Inc., a Delaware corporation, successor in interest by merger to UTI Energy Corp., a Delaware corporation. "PATTERSON LOAN AGREEMENT" shall mean that certain Loan and Security Agreement dated December 21, 1999, as subsequently amended, between Patterson Drilling Company and Transamerica Equipment Financial Services Corporation. "PATTERSON NEGATIVE PLEDGE ASSETS" shall mean all assets of Parent and the Patterson Subsidiaries which would constitute Collateral (as such term is originally defined in the Patterson Loan Agreement without any amendments thereto) if the Parent and the Patterson Subsidiaries were a "Borrower" under the Patterson Loan Agreement. "PATTERSON SUBSIDIARIES" shall mean all of the Subsidiaries of the Parent immediately prior to the Merger and any corporation or other entity which becomes a Subsidiary of Parent after the Merger Date (other than as a result of the Merger). 2.08 AMENDMENT AND RESTATEMENT OF SECTION 4, PARAGRAPH 1 OF THE AGREEMENT. Effective as of the date of this Amendment, Section 4, Subparagraph 1(a)(i) of the Agreement is amended and restated to read in its entirety as follows: "(a) (i) Following the making of such Revolving Loan and consummation of the Permitted Acquisition, there is at least $15 million of Availability (determined without FOURTH AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 5 6 regard to the Excluded L/Cs) and no more than an aggregate of $50 million of Revolving Loans outstanding, and (ii) until the Obligors have invested in the aggregate $25 million in cash (whether cash on hand or cash provided from Revolving Loans to consummate Permitted Acquisitions pursuant to this Section 4) in Permitted Acquisitions that are Domestic Acquisitions, the aggregate amount of Revolving Loans outstanding for the purpose of consummating Canadian Acquisitions cannot exceed the sum of (A) $20 million plus (B) the amount of cash invested in Domestic Acquisitions (whether cash on hand or cash provided from Revolving Loans); or" 2.09 AMENDMENT OF SECTION 7, PARAGRAPH 10D. Effective as of the date of execution of this Amendment, Section 7, Paragraph 10D of the Agreement is amended by adding the following clauses (ix) and (x): "(ix) the lease of any or all of the Rigs and other Equipment of any Obligor to the Parent or the Patterson Subsidiaries, so long as (a) such Obligor is Solvent after giving effect to such lease, (b) such Obligor has received reasonably equivalent value in consideration of the lease, (c) such lease does not transfer ownership of the leased assets to the lessee, (d) such lease is an Operating Lease and the term thereof is no longer than one hundred fifty (150) days, (e) such lease by its terms is subordinate (in form and substance reasonably satisfactory to the Agent) to the liens and security interests created hereunder in favor of Agent and the other Lenders, (f) only one (1) original of such lease is executed and such original lease is delivered to Agent promptly after its execution to hold as Collateral under this Agreement, (g) the lessee under such lease executes a certificate for the benefit of Agent and the other Lenders (in form and substance reasonably satisfactory to Agent) agreeing and confirming that ownership of the leased assets remains with the lessor, and (h) the Agent for the benefit of the Lenders retains a fully perfected, first-priority lien in the assets leased; and (x) the sale of Inventory, Rig Accessories and unbilled Accounts of any Obligor to Parent or the Patterson Subsidiaries, so long as (a) such Obligor is Solvent after giving effect to such sale, (b) such Obligor has received the Fair Market Value of such assets in consideration for such sale, (c) any Rig Accessories to be sold are not attached to, and their sale would not adversely effect the value of, any Eligible Equipment, (d) the proceeds for such sales are promptly remitted to Agent to be applied against the Obligations, and (e) the aggregate proceeds for such sales does not exceed $60,000,000." 2.10 AMENDMENT AND RESTATEMENT OF SECTION 7, PARAGRAPH 10, SUBPARAGRAPH E OF THE AGREEMENT. Effective as of the date of this Amendment, Section 7, Paragraph 10, Subparagraph E, clause (i) of the Agreement is amended and restated to read in its entirety as follows: "(i) the merger or consolidation of any Subsidiary of UTI Energy Corp. in existence on the date of this Agreement into any one or more of the Companies in a transaction in which a Company is the surviving Person and no Person other than a Company receives any consideration or if such consideration is FOURTH AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 6 7 paid to others that are not Subsidiaries, if such payment would be permitted to be made if it was made as a Restricted Payment (and in such case such payment shall constitute a Restricted Payment for all purposes of this Agreement);" 2.11 AMENDMENT AND RESTATEMENT OF SECTION 7, PARAGRAPH 10, SUBPARAGRAPH I OF THE AGREEMENT. Effective as of the date of this Amendment, Section 7, Paragraph 10, Subparagraph I, clause (v) of the Agreement is amended and restated to read in its entirety as follows: "(v) licenses and other transfers of patents, trademarks, trade names, copyrights, trade secrets, know-how and other intellectual property between and among any two or more of the Obligors and Subsidiaries of the Parent (other than the Patterson Subsidiaries); and" 2.12 AMENDMENT AND RESTATEMENT OF SECTION 7, PARAGRAPH 11 OF THE AGREEMENT. Effective as of the date of this Amendment, Section 7, Paragraph 11 of the Agreement is amended and restated to read in its entirety as follows: "11. Until termination of this Agreement and payment and satisfaction in full of all Obligations hereunder, if any Event of Default shall occur and be continuing which has not been waived in writing by the Agent or if the Availability (determined as if the Excluded L/Cs were not outstanding) shall at any time be less than $15,000,000, then the Obligors agree that the Parent will, on a consolidated basis: (a) maintain as of the last day of each calendar month a Tangible Net Worth of not less than $375,000,000; and (b) maintain as of the last day of each month TTM EBITDA of not less than $25,000,000." 2.13 NEW SECTION 7, PARAGRAPHS 19, 20 AND 21 OF THE AGREEMENT. Effective as of the date of this Amendment, Section 7 of the Agreement is hereby amended by adding thereto Paragraphs 19 and 20 to read in their entirety as follows: "19. The Companies agree to cause Parent to deliver to Agent all financial statements, reports and other documents required to be delivered by Parent under the terms and provisions of this Agreement. 20. The Companies agree to deliver to Agent the following within sixty (60) days after the termination of financing under the Patterson Loan Agreement a guarantee executed and delivered by the Parent in favor of the Agent and the other Lenders, in form and substance acceptable to Agent, guaranteeing all present and future Obligations. 21. The Companies agree hereafter to cause Parent and the Patterson Subsidiaries to grant no liens or security interests in any of the Patterson Negative FOURTH AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 7 8 Pledge Assets to any Person other than Agent and the other Lenders, except (i) the security interests in such assets of Patterson Drilling Company originally granted under the Patterson Loan Agreement, and (ii) such liens and security interests which would constitute Permitted Liens if Parent and the Patterson Subsidiaries were "Companies" under this Agreement. The Companies represent and warrant that as of May 8, 2001, the Patterson Loan Agreement has not been amended to modify the definition of Collateral, as originally defined therein." 2.14 AMENDMENT OF SCHEDULE 7(1). Effective as of the date of execution of this Amendment, Schedule 7(1) of the Agreement is amended to change the chief executive office for UTI, NDLP, UWSI, UTIMS, SDC, UHRB, IPSCO and NDM to 4510 Lamesa Highway, Snyder, Texas 79549. 2.15 REVOLVING LOAN COMMITMENT. Effective as of the date of this Amendment, the Revolving Loan Commitment for each Lender will be the amount set forth under each Lender's name of the signature page hereof. 2.16 AMENDMENT AND RESTATEMENT OF EXHIBIT A TO THE AGREEMENT. Effective as of the date of this Amendment, Exhibit A to the Agreement is amended and restated in its entirety as set forth on Exhibit A attached hereto. ARTICLE III RELEASE OF UTI ENERGY 3.01 RELEASE OF GUARANTEE OBLIGATION. Effective as of the date of this Amendment, Agent and the Lenders hereby release UTI Energy from all liabilities and obligations under that certain Guaranty Agreement dated November 22, 1999 executed by UTI Energy and the other Guarantors for the benefit of Agent and the other Lenders (the "Guaranty Agreement"); provided, however, the liabilities and obligations of the other Guarantors under the Guaranty Agreement remain effective and have not been released. 3.02 RELEASE OF SECURITY INTEREST. Effective as of the date of this Amendment, Agent and the Lenders hereby (a) release their security interest in the Collateral owned by UTI Energy, including, without limitation, the Pledged Collateral, as such term is defined in that certain Pledge Agreement dated November 22, 1999 executed by UTI Energy and the other Obligors for the benefit of Agent and the other Lenders, and (b) release UTI Energy from all obligations under the Loan Documents. 3.03 REPRESENTATIONS AND WARRANTIES. The Companies hereby represent and warrant to Agent and the other Lenders that all Eligible Accounts Receivable and Eligible Equipment are owned by the Companies. FOURTH AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 8 9 ARTICLE IV CONDITIONS PRECEDENT 4.01 CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent in a manner satisfactory to Agent, unless specifically waived in writing by Agent: (a) Agent shall have received each of the following, each in form and substance satisfactory to Agent, in its sole discretion, and, where applicable, each duly executed by each party thereto, other than Agent: (i) This Amendment, duly executed by the Companies and the Consent, Ratification and Release is executed by the Guarantors; (ii) a Certificate Regarding Merger executed by Patterson Energy, Inc. confirming the merger between Patterson Energy, Inc. and UTI Energy Corp. has closed and is effective; (iii) articles of merger and all other documents necessary under applicable state law are filed with the Secretary of State of Delaware to effectuate the merger between Patterson Energy, Inc., a Delaware corporation, and UTI Energy Corp., a Delaware corporation; (iv) A Revolving Loan Promissory Note (the "Revolving Note") in the stated principal amount of $70,000,000 in amendment, substitution and replacement (but not extinguishment) of the Existing Revolving Note duly signed by the Companies; (v) certified copies of the resolutions of the Board of Directors of each of the Companies and the Guarantors authorizing the execution, delivery and performance of the Revolving Note, this Amendment and any and all other Loan Documents executed by any of the Companies or the Guarantors in connection therewith, along with a certificate of incumbency certified by the secretary of each of the Companies and the Guarantors with specimen signatures of the officers of the Companies and the Guarantors who are authorized to sign such documents, all in form and substance satisfactory to the Agent; and (vi) All other documents Agent may request with respect to any matter relevant to this Amendment or the transactions contemplated hereby. (b) The representations and warranties contained herein and in the Agreement and the other documents executed in connection with the Agreement (herein referred to as "Loan Documents"), as each is amended hereby, shall be true and correct as of the date hereof, as if made on the date hereof. (c) No Default or Event of Default shall have occurred and be continuing, unless such Default or Event of Default has been otherwise specifically waived in writing by Agent. FOURTH AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 9 10 (d) All corporate proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be satisfactory to Agent. ARTICLE V RATIFICATIONS, REPRESENTATIONS AND WARRANTIES 5.01 RATIFICATIONS. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Agreement and the other Loan Documents, and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect. The Companies, Agent and the Lenders agree that the Agreement and the other Loan Documents, as amended hereby, shall continue to be legal, valid, binding and enforceable in accordance with their respective terms. 5.02 REPRESENTATIONS AND WARRANTIES. The Companies hereby represent and warrant to Agent and the Lenders that (a) the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith have been authorized by all requisite corporate or limited partnership action (as applicable) on the part of the Companies and will not violate the Articles (or Certificates) of Incorporation or Bylaws of the Companies that are corporations or the limited partnership agreements or certificates of limited partnership of the Companies that are limited partnerships; (b) each of the Company's Board of Directors (or the general partner of the applicable limited partnership) has authorized the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith; (c) the representations and warranties contained in the Agreement, as amended hereby, and any other Loan Document are true and correct on and as of the date hereof and on and as of the date of execution hereof as though made on and as of each such date; (d) no Default or Event of Default under the Agreement, as amended hereby, has occurred and is continuing, unless such Default or Event of Default has been specifically waived in writing by Agent; (e) the Companies are in full compliance with all covenants and agreements contained in the Agreement and the other Loan Documents, as amended hereby; and (f) the Companies have not amended their Articles (or Certificates) of Incorporation or their Bylaws since the date of the Agreement, except as otherwise disclosed to Agent. ARTICLE VI MISCELLANEOUS PROVISIONS 6.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made in the Agreement or any other Loan Document, including, without limitation, any document furnished in connection with this Amendment, shall survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by Agent or any closing shall affect the representations and warranties or the right of Agent to rely upon them. 6.02 REFERENCE TO AGREEMENT. Each of the Agreement and the other Loan Documents, and any and all other Loan Documents, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Agreement, as amended hereby, are hereby FOURTH AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 10 11 amended so that any reference in the Agreement and such other Loan Documents to the Agreement shall mean a reference to the Agreement, as amended hereby. 6.03 EXPENSES OF AGENT. As provided in the Agreement, the Companies agree to pay on demand all reasonable costs and expenses incurred by Agent in connection with the preparation, negotiation, and execution of this Amendment and the other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the reasonable costs and fees of Agent's legal counsel, and all reasonable costs and expenses incurred by Agent in connection with the enforcement or preservation of any rights under the Agreement, as amended hereby, or any other Loan Documents, including, without limitation, the reasonable costs and fees of Agent's legal counsel. 6.04 SEVERABILITY. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. 6.05 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and shall inure to the benefit of Agent and the Companies and their respective successors and assigns, except that the Companies may not assign or transfer any of their rights or obligations hereunder without the prior written consent of Agent. 6.06 COUNTERPARTS. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument. 6.07 EFFECT OF WAIVER. No consent or waiver, express or implied, by Agent to or for any breach of or deviation from any covenant or condition by the Companies shall be deemed a consent to or waiver of any other breach of the same or any other covenant, condition or duty. 6.08 HEADINGS. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment. 6.09 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 6.10 FINAL AGREEMENT. THE AGREEMENT AND THE OTHER LOAN DOCUMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS EXECUTED. THE AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY, MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY FOURTH AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 11 12 PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY COMPANIES AND AGENT. 6.11 RELEASE. THE COMPANIES HEREBY ACKNOWLEDGE THAT THEY HAVE NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM AGENT. THE COMPANIES HEREBY VOLUNTARILY AND KNOWINGLY RELEASE AND FOREVER DISCHARGE AGENT, THE LENDERS AND THEIR RESPECTIVE PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE COMPANIES MAY NOW OR HEREAFTER HAVE AGAINST AGENT, THE LENDERS AND THEIR RESPECTIVE PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE AGREEMENT OR OTHER LOAN DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT. The foregoing release does not pertain to, affect, terminate, reduce or limit any losses, costs, claims, expenses, causes of action or damages that the Companies or their affiliates may have (whether known or unknown) against GMAC Business Credit, LLC ("GMAC"), and its predecessors, agents (other than Agent), employees, successors and assigns (other than Agent and the other Lenders), including without limiting the generality of the foregoing, such losses, costs, claims, expenses, causes of action or damages as may arise or exist in connection with any prior, present or future demand by GMAC for any premium, fee or charge to be paid, directly or indirectly, by the Companies to GMAC as a result of GMAC's withdrawal from the credit facilities contemplated in the Agreement as amended hereby, or the payment of the outstanding amounts. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] FOURTH AMENDMENT TO LOAN & SECURITY AGREEMENT - Page 12 13 IN WITNESS WHEREOF, this Amendment has been executed and is effective as of the date first above-written. COMPANIES: UTI DRILLING, L.P. UTI MANAGEMENT SERVICES, L.P. By: Utico Hard Rock Boring, Inc., the sole general partner of UTI Drilling, L.P. and UTI Management Services, L.P. By: ------------------------------------------- Name: John E. Vollmer, III Title: Vice President NORTON DRILLING, L.P. By: Norton GP, L.L.C., its sole general partner By: Norton Drilling Services, Inc., as Sole Member of Norton GP, L.L.C. By: ------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- UNIVERSAL WELL SERVICES, INC. SUITS DRILLING COMPANY By: ------------------------------------------- Name: John E. Vollmer, III Title: Vice President of each of the foregoing Companies LENDERS: THE CIT GROUP/BUSINESS CREDIT, INC. as Agent and Lender By: --------------------------------------------------- Name: ------------------------------------------------- Title: ------------------------------------------------ Revolving Loan Commitment: $30,000,000.00 FOURTH AMENDMENT TO LOAN & SECURITY AGREEMENT 14 FOOTHILL CAPITAL CORPORATION as Documentation Agent and Lender By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- Revolving Loan Commitment: $30,000,000.00 THE CIT GROUP/EQUIPMENT FINANCING, INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- Revolving Loan Commitment: $10,000,000.00 FOURTH AMENDMENT TO LOAN & SECURITY AGREEMENT 15 CONSENT, RATIFICATION AND RELEASE The undersigned each hereby consents to the terms of the within and foregoing Amendment, confirms and ratifies the terms of that certain Guaranty Agreement dated November 22, 1999 executed (or assumed) by the undersigned for the benefit of Agent and the other Lenders (the "Guaranty Agreement"), and acknowledges that the Guaranty Agreement is in full force and effect and ratifies the same, that the undersigned each has no defense, counterclaim, set-off or any other claim to diminish the undersigned's liability under such document, that the undersigned's consent is not required to the effectiveness of the within and foregoing Amendment, and that no consent by the undersigned is required for the effectiveness of any future amendment, modification, forbearance or other action with respect to the Obligations, the Collateral, or any of the other Loan Agreements. THE UNDERSIGNED EACH HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES AGENT, THE OTHER LENDERS AND THEIR RESPECTIVE PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE UNDERSIGNED MAY NOW OR HEREAFTER HAVE AGAINST AGENT, THE OTHER LENDERS AND THEIR RESPECTIVE PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR OTHER AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT. The foregoing release does not pertain to, affect, terminate, reduce or limit any losses, costs, claims, expenses, causes of action or damages that the undersigned Guarantors or their affiliates may have (whether known or unknown) against GMAC Business Credit, LLC ("GMAC"), and its predecessors, agents (other than Agent), employees, successors and assigns (other than Agent and the other Lenders), including without limiting the generality of the foregoing, such losses, costs, claims, expenses, causes of action or damages as may arise or exist in connection with any prior, present or future demand by GMAC for any premium, fee or charge to be paid, directly or indirectly, by any of the undersigned Guarantors to GMAC as a result of GMAC's withdrawal from the credit facilities contemplated in the Agreement as amended by the foregoing Amendment, or the payment of the outstanding amounts. GUARANTORS: UTICO, INC. UTI DRILLING CANADA, INC. UTICO HARD ROCK BORING, INC. By: NORTON DRILLING SERVICES, INC. ---------------------------- NORTON DRILLING COMPANY Kenneth J. Kubacki MEXICO, INC. Vice President and Treasurer INTERNATIONAL PETROLEUM SERVICES COMPANY By: ---------------------------------------- John E. Vollmer III, Vice President signing as such on behalf of each of the foregoing Obligors FOURTH AMENDMENT TO LOAN & SECURITY AGREEMENT 16 CONSENT, RATIFICATION AND RELEASE The undersigned, UTI Energy Corp., hereby consents to the terms of the within and foregoing Amendment. THE UNDERSIGNED HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES AGENT, THE OTHER LENDERS AND THEIR RESPECTIVE PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE UNDERSIGNED MAY NOW OR HEREAFTER HAVE AGAINST AGENT, THE OTHER LENDERS AND THEIR RESPECTIVE PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR OTHER AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT. The foregoing release does not pertain to, affect, terminate, reduce or limit any losses, costs, claims, expenses, causes of action or damages that the undersigned or its affiliates may have (whether known or unknown) against GMAC Business Credit, LLC ("GMAC"), and its predecessors, agents (other than Agent), employees, successors and assigns (other than Agent and the other Lenders), including without limiting the generality of the foregoing, such losses, costs, claims, expenses, causes of action or damages as may arise or exist in connection with any prior, present or future demand by GMAC for any premium, fee or charge to be paid, directly or indirectly, by any of the undersigned to GMAC as a result of GMAC's withdrawal from the credit facilities contemplated in the Agreement as amended by the foregoing Amendment, or the payment of the outstanding amounts. UTI ENERGY CORP. By: ------------------------------------ John E. Vollmer III, Vice President FOURTH AMENDMENT TO LOAN & SECURITY AGREEMENT 17 EXHIBIT A REVOLVING LOAN PROMISSORY NOTE May 8, 2001 $70,000,000 FOR VALUE RECEIVED, the undersigned Companies (each a "COMPANY" and, collectively, the "COMPANIES"), promise, jointly and severally, to pay to the order of THE CIT GROUP/BUSINESS CREDIT, INC. (herein "CITBC"), as Agent for the Lenders under a certain Loan and Security Agreement dated November 22, 1999 between CITBC as Agent and Lender, other Lenders parties thereto and each Company, as amended from time to time (herein the "AGREEMENT") at its office located at 1211 Avenue of the Americas, New York, New York 10036, or such other address as may be designated by the Agent, in lawful money of the United States of America and in immediately available funds, the principal amount of Seventy Million and No/100 Dollars ($70,000,000), or such other principal amount advanced pursuant to Section 3, Paragraph 1 or Section 4 of the Agreement. The balance of such Revolving Loan will fluctuate as a result of the daily application of the proceeds of collections of the Accounts and the making of additional Revolving Loans as described in said Section 3 or Section 4 of the Agreement. The Revolving Loans may be borrowed, repaid and reborrowed by any Company, subject to the terms of the Agreement. A final payment in an amount equal to the outstanding aggregate balance of principal and interest remaining unpaid, if any, under this Revolving Loan Promissory Notes as shown on the books and records of the Agent shall be due and payable upon any termination of the Agreement. All capitalized terms used herein shall have the meaning provided therefor in this Agreement, unless otherwise defined herein. The Companies further promise, jointly and severally, to pay interest at such office, in like money, on the unpaid principal amount owing hereunder from time to time from the date hereof on the dates and at the rates specified in Section 8, Paragraph 1 of the Agreement. If any payment on this Revolving Loan Promissory Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day, and with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. This Revolving Loan Promissory Note is a Revolving Loan Promissory Note referred to in the Agreement, and is subject to, and entitled to, all provisions and benefits thereof and is subject to optional and mandatory prepayment, in whole or in part, as provided therein. FOURTH AMENDMENT TO LOAN & SECURITY AGREEMENT 18 The date and amount of the advance(s) made hereunder may be recorded on the schedule which is attached hereto and hereby made part of this Note or the separate ledgers maintained by the Agent, provided that any failure to record any such information on such schedule shall not in any manner affect the obligation of any Company to make payments of principal and interest in accordance with the terms of this Revolving Loan Promissory Note. The aggregate unpaid principal amount of all advances made pursuant hereto may be set forth in the balance column on said schedule or such ledgers maintained by the Agent. All such advances, whether or not so recorded, shall be due as part of this Revolving Loan Promissory Note. Each Company confirms that any amount received by or paid to the Agent in connection with this Agreement and/or any balances standing to its credit on any of its accounts on the Agent's books under this Agreement may in accordance with the terms of this Agreement be applied in reduction of this Revolving Loan Promissory Note, but no balance or amounts shall be deemed to effect payment in whole or in part of this Revolving Loan Promissory Note unless the Agent shall have actually charged such account or accounts for the purposes of such reduction or payment of this Revolving Loan Promissory Note. Upon the occurrence and during the continuance of any one or more of the Events of Default specified in the Agreement or upon termination of this Agreement, all amounts then remaining unpaid on this Revolving Loan Promissory Note may become, or be declared to be, immediately due and payable as provided in the Agreement. Each Company and the Guarantors, sureties and endorsers jointly and severally waive grace, demand, presentment for payment, notice of dishonor or default, notice of intent to accelerate, notice of acceleration, protest and diligence in collecting this Revolving Loan Promissory Note. This Revolving Loan Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York and the applicable federal laws of the United States. FOURTH AMENDMENT TO LOAN & SECURITY AGREEMENT 19 This Revolving Loan Promissory Note is given in amendment, replacement and substitution, but not extinguishment, of all amounts unpaid under that certain Revolving Loan Promissory Note dated October 18, 2000 payable by the Companies to the order of CITBC as Agent for the Lenders in the stated principal amount of $90,000,000.00. COMPANIES: UTI DRILLING, L.P. By: UTICO HARD ROCK BORING, INC., as sole General Partner By: -------------------------------------------------- John E. Vollmer III, Vice President SUITS DRILLING COMPANY By: ------------------------------------------------------ John E. Vollmer III, Vice President UNIVERSAL WELL SERVICES, INC. By: ------------------------------------------------------ John E. Vollmer III, Vice President UTI MANAGEMENT SERVICES, L.P. By: UTICO HARD ROCK BORING, as Sole General Partner By: -------------------------------------------------- John E. Vollmer III, Vice President NORTON DRILLING, L.P. By: Norton GP, L.L.C., as sole General Partner By: Norton Drilling Services, Inc., its sole Member By: --------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------ FOURTH AMENDMENT TO LOAN & SECURITY AGREEMENT 20 SCHEDULE TO GRID
Date Loan Payment Balance - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------
FOURTH AMENDMENT TO LOAN & SECURITY AGREEMENT EX-10.1.5 9 d89352ex10-1_5.txt 5TH AMENDMENT TO LOAN AND SECURITY AGREEMENT 1 EXHIBIT 10.1.5 FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT THIS FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is made and entered into as of this 29th day of June, 2001, by and among THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation (hereinafter "CITBC"), in its individual capacity and as Agent for the Lenders hereinafter named (hereinafter the "AGENT"), Foothill Capital Corporation, a California corporation ("FCC"), Fleet Capital Corporation, a Rhode Island corporation ("FLEET"), The CIT Group/Equipment Financing, Inc., a Delaware corporation ("CITEF"), and any other party hereafter becoming a Lender pursuant to Section 13, Paragraph 9 of the Agreement (as hereinafter defined), each individually sometimes referred to as a "LENDER" and, collectively, the "LENDERS"), UTI Drilling, L.P., a Texas limited partnership ("UTI"), Norton Drilling, L.P., a Delaware limited partnership, as successor in interest (by conversion) to Norton Drilling Company, a Delaware corporation ("NDLP"), Universal Well Services, Inc., a Delaware corporation ("UWSI"), UTI Management Services, L.P., a Texas limited partnership ("UTIMS"), and Suits Drilling Company, an Oklahoma corporation ("SDC"), (UTI, NDLP, UWSI, UTIMS and SDC, being referred to herein individually as a "UTI COMPANY" and, collectively, as the "UTI COMPANIES"), and Patterson-UTI Drilling Company LP, LLLP, a Delaware limited liability limited partnership ("PUDC"), Patterson-UTI Drilling Company South LP, LLLP, a Delaware limited liability limited partnership ("PUDCS"), Patterson-UTI Drilling Company West LP, LLLP, a Delaware limited liability limited partnership ("PUDCW"), Lone Star Mud LP, LLLP, a Delaware limited liability limited partnership ("LSM"), Ambar Drilling Fluids LP, LLLP, a Delaware limited liability limited partnership ("ADF") (PUDC, PUDCS, PUDCW, LSM and ADF, being referred to herein individually as a "PATTERSON COMPANY" and, collectively, as the "PATTERSON COMPANIES", and the UTI Companies and the Patterson Companies, together with any additional entities which may become a Company under the Agreement from time to time, being referred to herein individually as a "COMPANY" and, collectively, as the "COMPANIES"), Patterson-UTI Energy, Inc., a Delaware corporation ("PARENT"), Patterson Petroleum LP, LLLP, a Delaware limited liability limited partnership ("PPLP"), Patterson Petroleum Trading Company LP, LLLP, a Delaware limited liability limited partnership ("PPTC") and Patterson (LP) LLC, a Delaware limited liability company ("PATTERSON LP"). Patterson (GP) LLC, a Delaware limited liability company ("PATTERSON GP") and Patterson (GP2) LLC, a Delaware limited liability company ("PATTERSON GP2") (Parent, PPLP, PPTC, Patterson LP, Patterson GP and Patterson GP2, being referred to herein individually as a "PATTERSON GUARANTOR" and, collectively, as the "PATTERSON GUARANTORS"). RECITALS A. WHEREAS, pursuant to the terms and subject to the conditions of that certain Loan and Security Agreement dated as of November 22, 1999 between the UTI Companies and the Lenders (such Loan and Security Agreement, as the same has been amended, is hereby amended and may hereafter be amended from time to time, being hereinafter referred to as the "Agreement"), the UTI Companies were granted a revolving line of credit which included a letter of credit facility; FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 1 2 B. WHEREAS, the indebtedness of the UTI Companies to the Lenders is currently evidenced by that certain Revolving Loan Promissory Note dated May 8, 2001 (the "Existing Revolving Note"), executed by the UTI Companies and payable to CITBC as Agent for the benefit of the Lenders in the stated principal amount of $70,000,000; C. WHEREAS, payment of the Obligations of the Companies is currently supported by the guaranties of UTICO, Inc., a Delaware corporation ("HOLDING"), UTICO Hard Rock Boring, Inc., a Delaware corporation ("UHRB"), International Petroleum Services Company, a Pennsylvania corporation ("IPSCO"), Norton Drilling Services, Inc., a Delaware corporation ("NDS"), Norton Drilling Company Mexico, Inc., a Delaware corporation ("NDM") and UTI Drilling Canada, Inc., a Delaware corporation ("UTI CANADA") (Holding, UHRB, IPSCO, NDS, NDM and UTI Canada are referred to herein, individually, as a "UTI GUARANTOR" and, collectively, as the "UTI GUARANTORS"); D. WHEREAS, to secure, in part, the indebtedness under the Agreement and the Existing Revolving Note (and all renewals, extensions, modifications and/or rearrangements thereof and in connection therewith) and all other indebtedness, liabilities and obligations of the UTI Companies to the Agent for the benefit of the Lenders, then existing or thereafter arising, (i) the UTI Companies and UTI Guarantors have heretofore executed in favor of the Agent certain Loan Documents (as defined in the Agreement), including, without limitation, the Guaranty, (as defined in the Agreement), which Loan Documents shall continue as amended in connection herewith in full force and effect upon the execution of this Amendment, all of the Loan Documents to continue to secure the payment by the UTI Companies of the Obligations (as defined in the Agreement) all as more fully set forth therein and herein; E. WHEREAS, the Companies have requested and, pursuant to the terms and subject to the conditions hereof and in connection herewith, the Agent and the Lenders have agreed, to add the Patterson Companies as Companies and Obligors under the Loan Agreement and to add the Patterson Guarantors as Guarantors and Obligors under the Loan Agreement; F. WHEREAS, the Companies have requested and, pursuant to the terms and subject to the conditions hereof and in connection herewith, the Agent and the Lenders have agreed to increase the amount of the Line of Credit (as defined in the Agreement) to $100,000,000, and accept the Revolving Note (as herein defined) in replacement and substitution (but not extinguishment) of the Existing Revolving Note; G. WHEREAS, in furtherance of the foregoing and to evidence the agreements of the parties hereto in relation thereto the parties hereto desire to amend the Agreement as hereinafter provided; NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Companies, the Agent and the Lenders, intending to be legally bound, agree as follows: AGREEMENT ARTICLE I DEFINITIONS 1.01 Capitalized terms used in this Amendment are defined in the Agreement, as amended hereby, unless otherwise stated herein. FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 2 3 ARTICLE II AMENDMENTS TO AGREEMENT Effective as of the respective dates herein indicated, the Agreement is hereby amended as follows: 2.01 AMENDMENT OF DEFINITION OF "COMPANY" AND "COMPANIES". Effective as of the date of execution of this Amendment, the references to "Company" and "Companies" in the preamble to the Agreement and throughout the Agreement shall be amended so as to refer to and to include the UTI Companies and the Patterson Companies. 2.02 AMENDMENT OF DEFINITION OF "GUARANTOR" AND "GUARANTORS". Effective as of the date of execution of this Amendment, the references to "Guarantor" and "Guarantors" in the preamble to the Agreement and throughout the Agreement shall be amended to include the UTI Guarantors and the Patterson Guarantors. 2.03 AMENDMENT AND RESTATEMENT OF DEFINITION OF "ACQUISITION FACILITY COMMITMENT". Effective as of the date of execution of this Amendment, the definition of "Acquisition Facility Commitment" set forth in Section 1 of the Agreement is amended and restated to read in its entirety as follows: " `ACQUISITION FACILITY COMMITMENT' shall mean, with respect to any Lender, a portion of the Revolving Loans which may be advanced as Acquisition Facility Loans, evidencing the amount of its commitment to make Acquisition Facility Loans (all such loans being Revolving Loans), as modified from time to time pursuant to the terms hereof, not to exceed $80,000,000 in the aggregate." 2.04 AMENDMENT AND RESTATEMENT OF DEFINITION OF "ANNIVERSARY DATE". Effective as of the date of this Amendment, the definition of "Anniversary Date" set forth in Section 1 of the Agreement is amended and restated to read in its entirety as follows: " `ANNIVERSARY DATE' shall mean June 29, 2005 and the same date in every year thereafter." 2.05 AMENDMENT OF DEFINITION OF "CUSTOMARILY PERMITTED LIENS". Effective as of the date of execution of this Amendment, the definition of "Customarily Permitted Liens" set forth in Section 1 of the Agreement is amended by adding a new subparagraph (j) thereto to read in its entirety as follows: "(j) with respect of the assets of PPLP and PPTC, (i) liens reserved in customary oil, gas and/or mineral leases for bonus or rental payments and for compliance with the terms of such leases and liens reserved in customary operating agreements, farm out and farm in agreements, exploration agreements, development agreements and other similar agreements for compliance with the terms of such agreements, (ii) liens or charges reserved for royalties, overriding royalties, revenue interests, net revenue interests and advance payment obligations, (iii) any lien or charge securing indebtedness neither assumed nor guaranteed by PPLP or PPTC nor on which FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 3 4 either customarily pays interest, existing upon real estate or rights in or relating to real estate acquired by PPLP or PPTC for substation, metering station, pump station, storage gathering line, transmission line, transportation line, distribution line or for right of way purposes, and (iv) liens and charges arising out of all presently existing and future division and transfer orders, advance payment agreements, processing contracts, gas processing plant agreements, operating agreements, gas balancing or deferred production agreements, pooling, unitization or communitization agreements, pipeline, gathering or transportation agreements, platform agreements, drilling contracts, injection or repressuring agreements, cycling agreements, construction agreements, salt water or other disposal agreements, leases or rental agreements, farm out and farm in agreements, exploration and development agreements, and any and all other contracts or agreements covering, arising out of, used or useful in connection with or pertaining to the exploration, development, operation, production, sale, use, purchase, exchange, storage, separation, dehydration, treatment, compression, gathering, transportation, processing, improvement, marketing, disposal or handling of any property of by PPLP or PPTC, provided that such agreements are entered into in the ordinary course of business on terms customary in the industry." 2.06 AMENDMENT AND RESTATEMENT OF DEFINITION OF "EARLY TERMINATION FEE". Effective as of the date of this Amendment, the definition of "Early Termination Fee" set forth in Section 1 of the Agreement is amended and restated to read in its entirety as follows: " `EARLY TERMINATION FEE' shall: (a) mean the fee the Agent on behalf of the Lenders is entitled to charge the Companies if the Companies terminate the Line of Credit or this Agreement on a date prior to the fourth anniversary of the Fifth Amendment Date; and (b) be determined by multiplying the Line of Credit by (i) seven-tenths of one percent (0.70%) if the Early Termination Date occurs on or prior to one (1) year after the Fifth Amendment Date, (ii) one-half of one percent (0.50%) if the Early Termination Date occurs after one (1) year after the Fifth Amendment Date but on or prior to two (2) years after the Fifth Amendment Date (iii) three-tenths of one percent (0.30%) if the Early Termination Date occurs after two (2) years after the Fifth Amendment Date but on or prior to three (3) years after the Fifth Amendment Date; and (iv) two-tenths of one percent (0.20%) if the Early Termination Date occurs after three (3) years but prior to four (4) years after the Fifth Amendment Date." 2.07 AMENDMENT AND RESTATEMENT OF DEFINITION OF "EXCLUDED L/CS". Effective as of the date of execution of this Amendment, the definition of "Excluded L/Cs" set forth in Section 1 of the Agreement is amended and restated to read in its entirety as follows: " `EXCLUDED L/CS' shall mean the aggregate undrawn face amount of standby Letters of Credit, not to exceed $3,000,000 in the aggregate, which Letters of Credit were issued on account of the Companies to insurance companies to assure payment of premiums and workers' claims in connection with workers' compensation claims." FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 4 5 2.08 AMENDMENT AND RESTATEMENT OF DEFINITION OF "LETTER OF CREDIT SUB-LINE". Effective as of the date hereof, the definition of "Letter of Credit Sub-Line" set forth in Section 1 of the Agreement is amended and restated to read in its entirety as follows: " `LETTER OF CREDIT SUB-LINE' shall mean $20,000,000 in the aggregate." 2.09 AMENDMENT AND RESTATEMENT OF DEFINITION OF "LINE OF CREDIT". Effective as of the date of execution of this Amendment, the definition of "Line of Credit" set forth in Section 1 of the Agreement is amended and restated to read in its entirety as follows: " `LINE OF CREDIT' shall mean the commitment of the Lenders in the aggregate amount of $100,000,000 to (a) make Revolving Loans pursuant to Sections 3 and 4 of this Agreement, and (b) assist the Companies in opening Letters of Credit pursuant to Section 5 of this Agreement (up to the Letter of Credit Sub-Line)." 2.10 AMENDMENT AND RESTATEMENT OF DEFINITION OF "PARENT". Effective as of the date of execution of this Amendment, the definition of "Parent" set forth in Section 1 of the Agreement is amended and restated to read in its entirety as follows: " "PARENT' shall mean Patterson-UTI Energy, Inc., a Delaware corporation formerly known as Patterson Energy, Inc., successor in interest by merger to UTI Energy Corp., a Delaware corporation." 2.11 AMENDMENT AND RESTATEMENT OF DEFINITION OF "PERMITTED BUSINESS INVESTMENT". Effective as of the date of execution of this Amendment, subparagraphs (a), (b) and (c) of the definition of "Permitted Business Investment" set forth in Section 1 of the Agreement are amended and restated and a new subparagraph (h) is added to such Section, each to read in its entirety as follows: "(a) investments by any Company in any Person engaged primarily in a Qualified Business which, immediately after the making of such investment, is or becomes a Substantially-Owned Subsidiary of any Company and an Obligor pursuant to Section 4, provided that the Parent has furnished to the Agent the information described in Section 4 of this Agreement, except that such investments shall not be Permitted Business Investments to the extent that the Agent reasonably determines that the liabilities and other obligations (contingent or otherwise) of any Obligor resulting therefrom or associated therewith could reasonably be expected to have a Material Adverse Effect;" "(b) loans and other extensions of credit to officers, directors and employees of any Obligor and its Subsidiaries for travel, entertainment and moving and other relocation expenses made in direct furtherance and in the ordinary course of the business of any such Obligor or its Subsidiaries, provided that the aggregate principal amount of loans and other extensions of credit made pursuant to this clause (b) does not exceed $4,000,000 at any one time outstanding;" FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 5 6 "(c) loans by any Obligor to NDM for NDM's working capital needs in an amount not to exceed $6,000,000 outstanding at any one time in the aggregate with respect to all loans by Obligors." "(h) investments made in the ordinary course of, and of a nature that is or shall have become customary in, the oil and gas business as a means of actively exploiting, exploring for, acquiring, developing, processing, gathering, marketing or transporting oil and gas through agreements, transactions, interests, or arrangements which permit one to share risks or costs, comply with regulatory requirements regarding local ownership or satisfy other objectives customarily achieved through the conduct of oil and gas business jointly with third parties, including, without limitation, the entry into operating agreements, working interests, royalty interests, mineral leases, processing agreements, farm out and farm in agreements, division orders, contracts for the sale, transportation or exchange of oil or natural gas, unitization and pooling declarations and agreements and area of mutual interest agreements, production sharing agreements or other similar or customary agreements, transactions, properties, interests, and investments and expenditures in connection therewith; provided that an investment pursuant to this clause (h) in capital stock, partnership interests, joint venture interests, limited liability company interests or other similar equity interests in a Person shall not constitute a Permitted Business Investment." 2.12 AMENDMENT AND RESTATEMENT OF SUBPARAGRAPH (a) OF DEFINITION OF "PERMITTED FINANCIAL INVESTMENTS". Effective as of the date of execution of this Amendment, the introductory phrase and subparagraph (a) of the definition of "Permitted Financial Investments" set forth in Section 1. Definitions of the Agreement is amended and restated to read in its entirety as follows: 'PERMITTED FINANCIAL INVESTMENTS' means the following kinds of instruments to the extent that the aggregate amount thereof outstanding do not exceed $35,000,000 at any time (except that such $35,000,000 limitation shall not apply for instruments described in subparagraphs (c) or (g) or (h) immediately below or in the event that no Revolving Loan is outstanding) during which there are any Revolving Loans outstanding: (a) investments in (1) certificates of deposit in United States dollars or Canadian dollars maturing within one year from the date of issuance thereof, and overnight investments, issued by a bank or trust (i) organized under the laws of the United States or any state thereof, having capital, surplus and undivided profits aggregating at least $500,000,000, or (ii) organized under the laws of any jurisdiction other than the United States or any state thereof, provided that such foreign bank shall be one of the three most reputable, creditworthy banks in such country; or (iii) organized under the laws of Canada or any province thereof, having capital, surplus and undivided profits aggregating at least $500,000,000 or the Canadian dollar equivalent thereto, and (2) commercial paper rated A-1 or the equivalent thereof by Standard & Poor's Ratings Group, a Division of McGraw-Hill, Inc., a New York corporation or P-1, or the equivalent thereof by Moody's Investors Service, Inc. and in each case maturing within six months after the date of acquisition;" 2.13 AMENDMENT AND RESTATEMENT OF CLAUSE (vii) OF DEFINITION OF "PERMITTED INDEBTEDNESS". Effective as of the date of execution of this Amendment, clauses (vii) and (xv) of the definition "Permitted Indebtedness" set forth in Section 1. Definitions of the Agreement is amended and restated to read in its entirety as follows: FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 6 7 "(vii) Indebtedness assumed as part of the acquisition of any entity or asset by any Obligor or any Subsidiary thereof, whether by merger, consolidation, purchase of assets or otherwise; provided that (A) such Indebtedness is not created, incurred or assumed in contemplation of such acquisition of such entity or asset and (B) the aggregate amount of all such Indebtedness constituting Indebtedness For Borrowed Money does not exceed $10,000,000 outstanding at any time, and (C) any Indebtedness discharged at the closing of such acquisition shall not be deemed or constitute assumed Indebtedness;" "(xv) Indebtedness of any Obligor or any Subsidiary thereof, not otherwise described above, not to exceed in the aggregate with respect to all Obligors and Subsidiaries taken as a whole $10,000,000 outstanding at any one time." 2.14 AMENDMENT AND RESTATEMENT OF DEFINITION OF "PERMITTED INTERCOMPANY BALANCES". Effective as of the date of the execution of this Amendment, the definition of "Permitted Intercompany Balances" set forth in Section 1 of the Agreement is amended and restated to read in its entirety as follows: "'PERMITTED INTERCOMPANY BALANCES' means loans, advances, inter-company accounts, transfers and investments (including, but not limited to, loans made pursuant to the concentrated cash management system for collections of accounts receivable or disbursements to trade creditors) by any Obligor in, with or to any other Obligor; provided that (i) each such lender and borrower (or transferor and transferee, as the case may be) Obligor is Solvent after giving effect thereto, (ii) each such Obligor has received reasonably equivalent value in exchange for the transfers made and obligations incurred by it in connection therewith, (iii) loans, transfers or advances to or investments in Restricted Subsidiaries which were effected after the date of acquisition thereof by an Obligor that do not exceed in the aggregate the amount obtained by subtracting from the applicable Restricted Subsidiary Borrowing Base an amount equal to Revolving Loans from the Lenders to such Restricted Subsidiary, and (iv) loans, transfers or advances to or investments in PPLP and PPTC may not be made during any time a Triggering Event has occurred and is continuing." 2.15 AMENDMENT OF DEFINITION OF "PERMITTED LIENS". Effective as of the date of execution of this Amendment, the definition of "Permitted Liens" set forth in Section 1 of the Agreement is hereby amended to add a new clause (j) thereto to read in its entirety as follows: "(j) liens granted to Snyder National Bank in a $750,000 certificate of deposit which secures an outstanding letter of credit issued by Snyder National Bank." 2.16 AMENDMENT AND RESTATEMENT OF DEFINITION OF "PURCHASE MONEY LIENS". Effective as of the date of execution of this Amendment, the definition "Purchase Money Liens" set forth in Section 1. Definitions of the Agreement is amended and restated to read in its entirety as follows: FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 7 8 "`PURCHASE MONEY LIENS' shall mean liens on any item of equipment acquired after the date of this Agreement; provided that (i) each such lien shall attach only to the property to be acquired, and (ii) the debt incurred in connection with such acquisitions shall not exceed in the aggregate $10,000,000 incurred in any Fiscal Year." 2.17 AMENDMENT AND RESTATEMENT OF DEFINITION OF "REQUIRED LENDERS". Effective as of the date of execution of this Amendment, the definition of "Required Lender" set forth in Section 1. Definitions of the Agreement is amended and restated to read in its entirety as follows: "`REQUIRED LENDERS' shall mean Lenders holding more than fifty-one percent (51%) of the outstanding loans, advances, extensions of credit and commitments to each Company hereunder." 2.18 AMENDMENT AND RESTATEMENT OF DEFINITION OF "QUALIFIED BUSINESS". Effective as of the date of execution of this Amendment, the definition of "Qualified Business" set forth in Section 1. Definitions of the Agreement is amended and restated to read in its entirety as follows: " `QUALIFIED BUSINESS' means, with respect to all Obligors, the business of oil and gas well drilling, oil and gas well construction, oil and gas well completion and oil and gas well workover or well service, oil and gas well stimulation, drilling mud manufacturing, drilling and completion fluids services and any business or services reasonably related to any foregoing, and with respect to PPLP and PPTC, the business of oil and gas exploration and production and any business or services reasonably related to any of the foregoing." 2.19 NEW DEFINITION. Effective as of the date of this Amendment, Section 1 of the Agreement is amended by adding the following new definition thereto, to be inserted in appropriate alphabetical order: "FIFTH AMENDMENT DATE" shall mean June 29, 2001." 2.20 DELETION OF DEFINITIONS. Effective as of the date of execution of this Amendment, Section 1 of the Agreement is amended by deleting the definitions "Merger Date", "Patterson Loan Agreement", Patterson Negative Pledge Assets" and "Patterson Subsidiaries". 2.21 AMENDMENT AND RESTATEMENT OF SECTION 3, PARAGRAPH 1 OF THE AGREEMENT. Effective as of the date of execution of this Amendment, the last sentence of Section 3, Paragraph 1 of the Agreement is amended and restated to read in its entirety as follows: "Should the Agent for any reason honor requests for advances in excess of the limitations set forth herein, such advances shall be considered "Overadvances" and shall be made at the Agent's sole discretion, subject to any additional terms the Agent deems necessary and the other terms and provisions of this Agreement; provided, however, Agent may not make Overadvances which exceed the Line of Credit. 2.22 AMENDMENT AND RESTATEMENT OF SECTION 4, PARAGRAPH 1 OF THE AGREEMENT. Effective as of the date of execution of this Amendment, Section 4, Subparagraph 1(a)(i) of the Agreement and the introduction thereto is amended and restated to read in its entirety as follows: FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 8 9 "1. Dollar Amount of Acquisition Facility Loans. Each of the Companies shall be permitted to borrow Revolving Loans for the purpose of the Parent, or a wholly-owned Subsidiary of the Parent that is one of the Companies or Obligors, consummating Permitted Acquisitions ("Acquisition Facility Loans") subject to the following conditions: (a) (i) Following the making of such Revolving Loan and consummation of the Permitted Acquisition, there is at least $15 million of Availability (determined without regard to the Excluded L/Cs) and no more than an aggregate of $80 million of Revolving Loans outstanding, and (ii) until the Obligors have invested in the aggregate $25 million in cash (whether cash on hand or cash provided from Revolving Loans to consummate Permitted Acquisitions pursuant to this Section 4) in Permitted Acquisitions that are Domestic Acquisitions, the aggregate amount of Revolving Loans outstanding for the purpose of consummating Canadian Acquisitions cannot exceed the sum of (A) $20 million plus (B) the amount of cash invested in Domestic Acquisitions (whether cash on hand or cash provided from Revolving Loans); or" 2.23 AMENDMENT AND RESTATEMENT OF SECTION 4, SUBPARAGRAPH 1(b) OF THE AGREEMENT. Effective as of the date of execution of the Amendment, Section 4, Subparagraph 1(b) of the Agreement is amended and restated to read in its entirety as follows: " (b) UTI and the Parent received the Required Lenders' prior written approval, which approval shall be given or not given in the sole and absolute discretion of the Lenders." 2.24 AMENDMENT AND RESTATEMENT OF SECTION 5, PARAGRAPH 1. Effective as of the date of execution of the Amendment, the second sentence of Section 5, Paragraph 1 of the Agreement is amended and restated to read in its entirety as follows: "The Agent's and Lenders' assistance for amounts in excess of the limitations set forth herein shall at all times and in all respects be in the sole discretion of the Agent prior to the occurrence and continuance of an Event of Default and thereafter shall require the consent of the Required Lenders." 2.25 AMENDMENT AND RESTATEMENT OF SECTION 6, PARAGRAPH 4. Effective as of the date of execution of this Amendment, clauses (a) and (b) of Section 6, Paragraph 4 of the Agreement are hereby amended and restated in their entirety to read as follows: "(a) the Obligors, taken as a whole, own at least two hundred (200) Domestic Rigs upon which the Agent, for the benefit of the Lenders, has a first priority lien and fully perfected security interest, and (b) the Orderly Liquidation Value of the Domestic Rigs upon which the Agent, for the benefit of the Lenders, has such first priority lien and fully perfected security interest exceeds $200,000,000 in aggregate," 2.26 AMENDMENT TO SECTION 7, SUBPARAGRAPH 8(b). Effective as of the date of execution of this Amendment, Section 7, Paragraph 8(b) is amended to permit, consent to and authorize the monthly Financial Statements for the month ending May 31, 2001 to be delivered by Parent on or before July 31, 2001. FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 9 10 2.27 AMENDMENT OF INTRODUCTION TO SECTION 7, PARAGRAPH 10. Effective as of the date of execution of this Amendment, the introduction to Section 7, Paragraph 10 is amended and restated to read in its entirety as follows: "Until termination of this Agreement and payment and satisfaction of all Obligations due hereunder, each Obligor agrees that, without the prior written consent of Agent (or the Required Lenders for any matter prohibited by Subparagraphs 10A, 10B, 10C and 10D in this Section 7 or for all matters prohibited by this Paragraph at any time during which Availability is less than $20,000,000), except as otherwise herein provided, it will not and it will not permit any other Obligor to:" 2.28 AMENDMENT OF INTRODUCTION TO SECTION 7, PARAGRAPH 10(J). Effective as of the date of execution of this Amendment, the introduction to Section 7, Paragraph 10(J) is amended and restated to read in its entirety as follows: "Without the prior written consent of the Required Lenders," 2.29 AMENDMENT OF SECTION 7, PARAGRAPH 10D. Effective as of the date of execution of this Amendment, Section 7, Paragraph 10D of the Agreement is amended by deleting the clauses (ix) and (x), by amending and restating clauses (ii), (iii), (iv) and (viii) and by adding a new clause (ix), each to read in its entirety as follows: "(ii) (a) the sale, lease, assignment, transfer or other disposition of Inventory in the ordinary course of business, and (b) the lease of Rigs or other Equipment in the ordinary course of business of the Companies, provided that each such lease shall be subordinate (in form and substance reasonably satisfactory to the Agent) to the terms of the liens and security interests created in connection herewith in favor of the Agent, the aggregate fair market value of such Rigs and other Equipment so leased to third parties not affiliated with any Obligor does not exceed $10,000,000 in the aggregate during the term of this Agreement and all such Rigs and other Equipment so leased are disclosed to the Agent in writing as such and are excluded from Eligible Equipment; (iii) the sale, transfer or disposition approved by the Board of Directors of the Parent to a Person that is not an Obligor of (a) the capital stock or substantially all of the assets of UWSI, IPSCO, ADF, LSM, PPLP and PPTC (so long as such entities do not own any Rigs or Rig Accessories), (b) UHRB's hard rock boring business or assets or (c) all of the capital stock or substantially all of the assets of any other Obligor (other than UTI) that has Tangible Net Worth on a consolidated basis for such Obligor and its Subsidiaries of less than $15,000,000; (iv) the sale, lease, assignment, transfer or other disposition of any or all of the assets of any Obligor to any other Obligor to the extent that the same qualifies as a Permitted Intercompany Balance, except that no more than an aggregate of ten (10) Rigs may be leased at any one time to NDM and no Rigs may be sold, transferred or leased to any Guarantor; FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 10 11 (viii) the sale, transfer or other disposition of oil and gas mineral interests (and related operating agreements covering the operation of such interests) and including, without limiting the generality of the foregoing, dispositions of oil and gas properties pursuant to farm-ins and farm-outs and transfers of royalty interests, overriding royalty interests, net revenue interests and other similar transfers, all pursuant to exploration and development activity in the ordinary course of business; (ix) the sale, transfer, lease or assignment by any of the Companies or the Obligors of up to 15 Rigs in aggregate to a Canadian Operating Company;" 2.30 AMENDMENT AND RESTATEMENT OF SECTION 7, PARAGRAPH 10, SUBPARAGRAPH E OF THE AGREEMENT. Effective as of the date of this Amendment, Section 7, Paragraph 10, Subparagraph E, clause (i) of the Agreement is amended and restated to read in its entirety as follows: "(i) the merger or consolidation of any Subsidiary of Parent into any one or more of the Companies in a transaction in which a Company is the surviving Person and no Person other than a Company receives any consideration or if such consideration is paid to others that are not Subsidiaries, if such payment would be permitted to be made if it was made as a Restricted Payment (and in such case such payment shall constitute a Restricted Payment for all purposes of this Agreement);" 2.31 AMENDMENT AND RESTATEMENT OF SECTION 7, PARAGRAPH 10, SUBPARAGRAPH G OF THE AGREEMENT. Effective as of the date of this Amendment, Section 7, Paragraph 10, Subparagraph G of the Agreement is amended to add a new clause (x) thereto to read in its entirety as follows: "(x) the payment of dividends on the Parent's Preferred Stock if and when issued pursuant to the Parent's Rights Agreement, dated as of January 2, 1997, between the Parent and continental Stock Transfer & Trust Company or its successor, provided that the aggregate amount of all such dividends paid thereon shall not exceed $100,000 per calendar quarter." 2.32 AMENDMENT AND RESTATEMENT OF SECTION 7, PARAGRAPH 10, SUBPARAGRAPH H OF THE AGREEMENT. Effective as of the date of this Amendment, clause (xii) of Section 7, Paragraph 10, Subparagraph H of the Agreement is amended and restated and a new clause (xiii) is added to such subparagraph each to read in their entirety as follows: "(xii) the purchase by any Obligor of an airplane to be used for the Obligors in their businesses with a purchase price not to exceed $6,000,000; and (xiii) any other loans, advances or investments in an amount not to exceed $5,000,000 in the aggregate for all Obligors at any one time outstanding ." FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 11 12 2.33 AMENDMENT AND RESTATEMENT OF SECTION 7, PARAGRAPH 10, SUBPARAGRAPH I OF THE AGREEMENT. Effective as of the date of this Amendment, Section 7, Paragraph 10, Subparagraph I, clauses (ii), (iii) and (v) of the Agreement is amended and restated, and new clauses (vii), (viii) and (ix) are hereby added to such Subparagraph to read in their entirety as follows: "(ii) loans and advances to officers, directors and employees of the Obligors or its Subsidiaries for travel, entertainment and moving and other relocation expenses made in direct furtherance and in the ordinary course of business of the Obligor and its Subsidiaries; provided, however, the aggregate principal amount of loans and advances made pursuant to this clause (ii) shall not exceed $3,000,000 at any time outstanding;" "(iii) any other transaction with any employee, officer or director of the Obligor or any of its Subsidiaries pursuant to employee benefit or compensation arrangements entered into in the ordinary course of business and approved by the Board of Directors of the Obligor or the Board of Directors of such Subsidiary; provided, however, the aggregate principal amount of loans and advances made pursuant to this clause (iii) shall not exceed $3,000,000 at any time outstanding;" "(v) licenses and other transfers of patents, trademarks, trade names, copyrights, trade secrets, know-how and other intellectual property between and among any two or more of the Obligors and Subsidiaries of the Parent;" "(vii) any other transaction entered into in the ordinary course of business with any employee, officer or director of Parent or any of its Subsidiaries pursuant to drilling arrangements, exploration and production arrangements, benefit plans, compensation or other similar arrangements entered into in the ordinary course of business and the leasing of aircraft by any senior officer of Parent to any Obligor, all as more fully described in the Parent's annual report on Form 10-K for the year ended December 31, 2000. (viii) the charter from time to time by an employee of the Parent, or any Subsidiary thereof, of any aircraft owned or leased by the Parent or such subsidiary, without regard to the terms of such charter; (ix) the performance of drilling services on a contract basis by Parent or any Subsidiary of the Parent for, or the sales of drilling mud, drilling fluids or other related goods or services to (A) Parent or any other Subsidiary of Parent, or (B) any joint venture or other oil and gas development activity incident to the oil and gas exploration and development activity of any such Subsidiary, without regard to any beneficial interest that an officer or employee of Parent or any such Subsidiary may have in the exploration or development venture for which the drilling services are being performed and as long as such services also comply with Section 7, Subparagraph 10(I) of this Agreement;" 2.34 AMENDMENT AND RESTATEMENT OF SECTION 7, PARAGRAPH 11 OF THE AGREEMENT. Effective as of the date of execution of this Amendment, the Availability threshold in Section 7, Paragraph 11 of the Agreement is amended from $15,000,000 to $20,000,000." FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 12 13 2.35 AMENDMENT OF SECTION 7 OF THE AGREEMENT. Effective as of the date of this Amendment, Section 7 of the Agreement is hereby amended by deleting Paragraphs 19, 20 and 21 thereof. 2.36 AMENDMENT AND RESTATEMENT OF SECTION 7, PARAGRAPH 18, SUBPARAGRAPH (h) OF THE AGREEMENT. Effective as of the date of this Amendment, Section 7, Paragraph 18, Subparagraph (h), clause (i) of the Agreement is amended and restated to read in its entirety as follows: "(i) under any material provisions of any instrument evidencing any Indebtedness For Borrowed Money or other Indebtedness with an outstanding balance in excess of $2,000,000 or of any agreement relating thereto in such manner as to cause a Material Adverse Effect or" 2.37 AMENDMENT AND RESTATEMENT OF SECTION 7, PARAGRAPH 18, SUBPARAGRAPH (l) OF THE AGREEMENT. Effective as of the date of execution of this Amendment, the second sentence of Section 7, Paragraph 18, Subparagraph (l) of the Agreement is hereby amended and restated to read in its entirety as follows: "(l) The proceeds of the Acquisition Facility Loans will be used by the Companies for the purpose of funding Permitted Acquisitions. None of the proceeds of any Advance will be used directly or indirectly for the purpose of purchasing or carrying any "margin stock" within the meaning of Regulation U (herein called "MARGIN STOCK") or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry margin stock, or for any other purpose which might constitute this transaction as a "purpose credit" within the meaning of Regulation U." 2.38 AMENDMENT AND RESTATEMENT OF SECTION 7, PARAGRAPH 18, SUBPARAGRAPH (n)(ii) OF THE AGREEMENT. Effective as of the date of execution of this Amendment, Section 7, Paragraph 18, Subparagraphs (n)(ii)(A), (n)(ii)(D) and (n)(ii)(E) are amended and restated to read in their entirety as follows: "(A) Commercial General Liability insurance written on an occurrence basis, including coverage for premises, operations, products and completed operations, explosion, collapse and underground, broad form commercial general liability equivalent coverages with a minimum combined single limit for bodily injury and property damage of $2,000,000 per occurrence and $2,000,000 in the aggregate, with a self-insured retention not greater than $1,000,000;" "(D) umbrella (or excess form should umbrella coverage be unavailable) liability coverage written on an occurrence basis with a limit of liability of $40,000,000, and also to include a "drop down" provision which will pick up any exhaustion of limits under the primary coverages subject to a retention of $100,000. Such insurance coverage shall provide substantially identical coverages as are set forth in the form of the insurance required in clauses (i), (ii)(A)/(B)/(C) and (iii);" FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 13 14 "(E) All-Risk Physical Loss or Damage Property Insurance (including water damage, Domestic transit coverage, collapse coverage, coverage of fire, flood and earthquakes and rapid means of transportation coverages on an agreed value basis) with respect to all Rigs (on a "no-coinsurance" basis) in an aggregate amount equal to or greater than $200,000,000 with a deductible not greater than $100,000 per occurrence;" 2.39 AMENDMENT AND RESTATEMENT OF SECTION 7, PARAGRAPH 18, SUBPARAGRAPH (n)(iii) OF THE AGREEMENT. Effective as of the date of the execution of this Amendment, the first sentence of Section 7, Paragraph 18, Subparagraph (n)(iii) is amended and restated to read in its entirety as follows: "(iii) All policies except Workers' Compensation shall insure the interests of the Agent and the Lenders (and their respective employees, agents, attorneys, representatives and officers) as additional insureds (each, an "ADDITIONAL INSURED") and the policies required by subclause (ii)(E) of this Paragraph 18(n) (in the nature of property damage insurance) shall provide for the direct payment of all proceeds to the Agent and the applicable Company or Companies, as their interests may appear, which proceeds shall then be deposited to the Agent or, if so directed in writing by the Agent, to the Depository Account." 2.40 AMENDMENT AND RESTATEMENT OF SECTION 7, PARAGRAPH 18, SUBPARAGRAPH (n)(vi) OF THE AGREEMENT. Effective as of the date of the execution of this Amendment, Section 7, Paragraph 18, Subparagraph (n)(vi) is amended and restated to read in its entirety as follows: "(vi) Physical Damage Insurance proceeds paid to the Agent and the applicable Company or Companies (with the proceeds to be deposited in the Depository Account) shall be applied to the repair or replacement of Collateral at such times and in such amounts as the Companies may require, except that after the occurrence of any Event of Default that is continuing, such proceeds shall, in their entirety, be held as cash Collateral and/or applied by the Agent in satisfaction of the Revolving Loans as it determines in its sole discretion." 2.41 AMENDMENT OF SECTION 8, PARAGRAPH 7 OF THE AGREEMENT. Effective as of the date of execution of this Amendment, Section 8, Paragraph 7 of the Agreement is amended to add a new Subparagraph 7(d) as follows: "(d) Upon the execution of an amendment to this Agreement increasing the Line of Credit to $100,000,000, the Companies shall pay to the Agent an additional one time Loan Facility Fee in the amount of Three Hundred Twenty-Five Thousand U.S. Dollars ($325,000.00) to be allocated among the Lenders based on Agent's sole discretion." FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 14 15 2.42 AMENDMENT AND RESTATEMENT OF SECTION 10, PARAGRAPH 1, SUBPARAGRAPH (h) OF THE AGREEMENT. Effective as of the date of this Amendment, Section 10, Paragraph 1, Subparagraph (h) of the Agreement is amended and restated to read in its entirety as follows: "(h) the occurrence of any default or event of default (after giving effect to any applicable grace or cure periods) under any instrument or agreement evidencing (x) Subordinated Debt or (y) any other Indebtedness For Borrowed Money of any Company having a principal amount in excess of $2,000,000;" 2.43 AMENDMENT AND RESTATEMENT OF SECTION 13, PARAGRAPH 9 OF THE AGREEMENT. Effective as of the date of this Amendment, the first sentence of Section 13, Paragraph 9 of the Agreement is amended and restated to read in its entirety as follows: "CITBC shall have the right at any time to assign to one or more Eligible Assignees, all or a portion (but in an amount that is not less than $5,000,000) of its rights and obligations under this Agreement; provided that no such assignment shall be made to any Person that does not, prior to the execution of such Assignment Agreement, execute and deliver to the Agent and the Parent IRS Form W-8BEN, Form W-8ECI or successors forms, and is other exempt from IRS interest withholding obligations. Upon execution of an Assignment and Transfer Agreement, (i) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such assignment, have the rights and obligations of CITBC as the case may be hereunder and (ii) CITBC shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such assignment, relinquish its rights and be released from its obligations under this Agreement." 2.44 AMENDMENT AND RESTATEMENT OF SECTION 14, PARAGRAPH 10. Effective as of the date of execution of this Amendment, Section 14, Paragraph 10 of the Agreement is hereby amended and restated to read in its entirety as follows: "Notwithstanding anything contained in this Agreement to the contrary, the Agent will not, without the prior written consent of all Lenders: (a) amend this Agreement to (i) increase the Line of Credit; (ii) reduce the interest rates; (iii) reduce or waive (A) any fees in which the Lenders share hereunder; or (B) the repayment of any Obligations due the Lenders; (iv) extend the maturity of the Obligations; or (v) alter or amend (1) this Paragraph 10 or (2) the definitions of Accounts Receivable Advance Percentage, Equipment Advance Percentage, or Required Lenders, or the Agent's criteria for determining compliance with such definitions of eligibility; or (b) release Collateral in bulk without a corresponding reduction in the Obligations to the Lenders, except that dispositions of Collateral by any of the Companies which are expressly permitted under this Agreement shall not require consent of the Agent or the other Lenders or any reduction in Lenders' Obligations. The Agent will not increase any Lender's commitment to provide financing hereunder without such Lender's prior written consent. Agent may, in its sole discretion (a) provided no Event of Default has occurred and is continuing, intentionally make Overadvances as long as any such Overadvance is not outstanding for more than ninety (90) consecutive days and after giving effect thereto the total outstanding Revolving Loans for each Company would not exceed one hundred and ten percent (110%) of the maximum amount available under Sections 3 and 4 of this Agreement, and (b) after and during the continuance of an Event of Default, intentionally make Overadvances for purposes of FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 15 16 preserving or protecting the Collateral. Any Overadvance by Agent which is contrary to the limitations set forth in the immediately preceding sentence shall require the written consent of the Required Lenders. In all other respects the Agent is authorized to take such actions or fail to take such actions if the Agent, in its reasonable discretion, deems such to be advisable and in the best interest of the Lenders, including, but not limited to, the making of an overadvance or the termination of this Agreement upon the occurrence and during the continuance of an Event of Default unless it is specifically instructed to the contrary by the Required Lenders." 2.45 AMENDMENT OF SCHEDULE 7(1). Effective as of the date of execution of this Amendment, Schedule 7(1) of the Agreement is amended to add the Chief Executive Office for the Patterson Companies and the Patterson Guarantors as 4510 Lamesa Highway, Snyder, Texas 79549. 2.46 REVOLVING LOAN COMMITMENT. Effective as of the date of execution of this Amendment, the Revolving Loan Commitment for each Lender will be the amount set forth under each Lender's name on the signature page hereof. 2.47 AMENDMENT AND RESTATEMENT OF EXHIBIT A TO THE AGREEMENT. Effective as of the date of execution of this Amendment, Exhibit A to the Agreement is amended and restated in its entirety as set forth on Exhibit A attached hereto. ARTICLE III ASSUMPTION OF OBLIGATIONS AND GRANT OF LIENS 3.01 ASSUMPTION OF OBLIGATIONS. Effective as of the date of this Amendment, the Patterson Companies each hereby assumes and is jointly and severally liable with the UTI Companies for all Obligations as of the date hereof and all Obligations incurred thereafter (including, without limitation, the indebtedness and obligations under the Existing Revolving Note, the Agreement and the other Loan Documents). The UTI Companies shall continue to be jointly and severally liable for all Obligations. 3.02 GRANT OF LIEN. The Patterson Companies each hereby grants to Agent for the benefit of the Lenders a security interest in all Collateral now or hereafter owned by the Patterson Companies pursuant to the terms and provisions of Section 6 of the Agreement. 3.03 REPRESENTATIONS AND DUTIES UNDER THE AGREEMENT. The Patterson Companies hereby (a) make all of the representations and warranties made by the UTI Companies under the Agreement, and (b) agree to be bound by the terms and provisions of the Agreement as a Company and Obligor thereunder to the same extent and with the same force and effect as if the Patterson Companies had been originally named as parties in such document. 3.04 GRANT OF LIEN BY PATTERSON GUARANTORS. Effective as of the date of this Amendment, the Patterson Guarantors (other than PPLP and PPTC) each agrees to be bound by the terms and provisions of the Agreement as a Guarantor and Obligor thereunder to the same extent and with the same force and effect as if the Patterson Guarantors (other than PPLP and PPTC) had been originally named as parties to such document. The Patterson Guarantors (other than PPLP and PPTC) also each hereby grants to Agent for the benefit of the Lenders a security interest in all Collateral now or hereafter owned by the Patterson Guarantors pursuant to the terms of Section 6 of the Agreement. FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 16 17 3.05 NEGATIVE PLEDGE AGREEMENT. PPLP and PPTC agree that until termination of the Agreement and satisfaction of all Obligations due under the Agreement, PPLP and PPTC shall not mortgage, pledge, encumber or assign any of their respective assets except for Permitted Liens. 3.06 AUTHORIZED FILING. The Companies and the Guarantors (other than PPLP and PPTC) authorize CITBC as Agent to file financing statements covering the Collateral in an authenticated record without the Debtor's signature. 3.07 STATES IN WHICH BUSINESS IS CONDUCTED. The Patterson Companies and the Patterson Guarantors (other than PPLP and PPTC) hereby represent and warrant that they are currently conducting their businesses in the States of Delaware, Texas, Pennsylvania, California, Alabama, Colorado, Louisiana, Mississippi, New Mexico, Oklahoma, Utah and Kansas. ARTICLE IV CONDITIONS PRECEDENT 4.01 CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent in a manner satisfactory to CITBC, unless specifically waived in writing by CITBC: (a) CITBC shall have received each of the following, each in form and substance satisfactory to Agent, in its sole discretion, and, where applicable, each duly executed by each party thereto, other than Agent: (i) This Amendment, duly executed by the Companies and the Consent, Ratification and Release executed by the UTI Guarantors; (ii) A Revolving Loan Promissory Note in the stated principal amount of $100,000,000 in amendment, substitution and replacement of the Existing Revolving Note duly signed by the Companies (the "Revolving Note"); and (iii) A Guaranty duly executed by the Patterson Guarantors; and (iv) certified copies of the resolutions of the Board of Directors of each of the Companies and the Guarantors authorizing the execution, delivery and performance of the Revolving Loan Promissory Note, this Amendment and any and all other Loan Documents executed by any of the Companies or the Guarantors in connection therewith, along with a certificate of incumbency certified by the secretary of each of the Companies and the Guarantors with specimen signatures of the officers of the Companies and the Guarantors who are authorized to sign such documents, all in form and substance satisfactory to the Agent; and (v) A Pledge Agreement duly signed by Parent, Patterson GP, Patterson LP, PUDC and Patterson GP2 pledging all of their respective ownership interests in Holding, the Patterson Companies and the Patterson Guarantors (other than Parent); and FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 17 18 (vi) A copy of the signed payoff letter from Transamerica Business Credit with respect to the current financing facilities covering some or all of the Patterson Companies and Patterson Guarantors; and (vii) Wire transfer advice confirming the full and complete payment of all indebtedness owing to Transamerica Business Credit in accordance with the payoff letter referenced in clause (vi) above; (viii) Opinion from Fulbright & Jaworski L.L.P. opining in form and substance satisfactory to CITBC which shall cover such matters incident to the transactions contemplated by this Amendment and the other Loan Document as CITBC may reasonably require and the Companies and Guarantors hereby authorize and direct such counsel to deliver such opinions to CITBC; and (ix) All other documents CITBC may reasonably request with respect to any matter relevant to this Amendment or the transactions contemplated hereby. (b) The representations and warranties contained herein and in the Agreement and the other documents executed in connection with the Agreement (herein referred to as "Loan Documents"), as each is amended hereby, shall be true and correct as of the date hereof, as if made on the date hereof. (c) No Default or Event of Default shall have occurred and be continuing, unless such Default or Event of Default has been otherwise specifically waived in writing by CITBC. (d) All corporate, partnership and limited liability company proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be satisfactory to CITBC. (e) CITBC's receipt of the fee described in Section 2.41 of this Amendment. 4.02 CONDITIONS TO ELIGIBILITY. The Patterson Companies Accounts and Equipment shall not be considered by Agent as Eligible Accounts Receivable or Eligible Equipment under the Agreement until satisfaction of the following conditions precedent in a manner satisfactory to CITBC, unless specifically waived in writing by CITBC: (a) Any financing statements required to be filed in order to create, in favor of CITBC, a first perfected security interest in the Collateral, subject only to the Permitted Encumbrances, shall have been properly filed in each office within ten (10) days after the date of this Amendment in each jurisdiction required in order to create in favor of CITBC a perfected lien on the Collateral. CITBC shall have received acknowledgment copies of all such filings (or, in lieu thereof, CITBC shall have received other evidence satisfactory to CITBC that all such filings have been made) and CITBC shall have received evidence that all necessary filing fees and all taxes or other expenses related to such filings have been paid in full. (b) Within ten (10) days from the date of this Amendment, CITBC shall have received an Opinion from Fulbright & Jaworski L.L.P. opining in form and substance satisfactory to CITBC which FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 18 19 shall cover such matters incident to the transactions contemplated by this Amendment and the other Loan Documents as CITBC may require in its sole discretion and the Companies and Guarantors hereby authorize and direct such counsel to deliver such opinion to CITBC. (c) Within ten (10) days from the date of this Amendment, CITBC shall have received original signed UCC termination statements from Transamerica Business Credit covering all financing statements filed by Transamerica, as secured party, on the Patterson Companies and the Patterson Guarantors. (d) Within ten (10) days from the date of this Amendment, CITBC shall have received updated Collateral Locations for the Companies and the Guarantors, in the form previously provided in Schedule 7(1) of the Agreement. (e) Within 30 days from the date of this Amendment, CITBC shall have received from Parent evidence satisfactory to the Agent that casualty insurance policies of all Companies and Guarantors listing Agent as loss payee or mortgagee, as the case may be, are in full force and effect, all as set forth in Section 7, Paragraph 5 of the Agreement, in form and substance satisfactory to CITBC. (f) Within 30 days from the date of this Amendment, CITBC shall have received security agreement(s), in form and substance satisfactory to CITBC, granting to the Lenders a first priority lien in the Trademarks and Patents of the Patterson Companies and the Patterson Guarantors (other than PPLP and PPTC). (g) Within 90 days from the date of this Amendment, CITBC shall have received desktop appraisals on each Patterson Company's Rigs, which appraisals shall be by an appraiser acceptable to CITBC and shall indicate an aggregate Orderly Liquidation Value of not less than $200,000,000 with respect to such Rigs. (h) Within 90 days from the date of this Amendment, CITBC shall have completed to the satisfaction of CITBC an examination and verification of the Accounts, Inventory, Equipment, books and records of each Patterson Company and Patterson Guarantor. (i) Within 120 days from the date of this Amendment, the Patterson Companies and the Patterson Guarantors shall enter into tri-party blocked account agreements with CITBC and the depository institutions of the Depository Accounts, in form and substance acceptable to CITBC and as required by Section 3, Paragraph 4 of the Agreement. ARTICLE V RATIFICATIONS, REPRESENTATIONS AND WARRANTIES 5.01 RATIFICATIONS. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Agreement and the other Loan Documents, and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect. The Companies and CITBC agree that the Agreement and the other Loan Documents, as amended hereby, shall continue to be legal, valid, binding and enforceable in accordance with their respective terms. FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 19 20 5.02 REPRESENTATIONS AND WARRANTIES. The Companies hereby represent and warrant to CITBC that (a) the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith have been authorized by all requisite corporate, limited partnership or limited liability company action (as applicable) on the part of the Companies and will not violate the Articles (or Certificates) of Incorporation or Bylaws of the Companies that are corporations or the limited partnership agreements or certificates of limited partnership of the Companies that are limited partnerships or regulations of limited liability company agreements of the Companies that are limited liability companies; (b) each of the Company's Board of Directors (or the general partner of the applicable limited partnership) or the members or the Board of Managers of the applicable limited liability company has authorized the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith; (c) the representations and warranties contained in the Agreement, as amended hereby, and any other Loan Document are true and correct on and as of the date hereof and on and as of the date of execution hereof as though made on and as of each such date; (d) no Default or Event of Default under the Agreement, as amended hereby, has occurred and is continuing, unless such Default or Event of Default has been specifically waived in writing by CITBC; (e) the Companies are in full compliance with all covenants and agreements contained in the Agreement and the other Loan Documents, as amended hereby; and (f) the Companies have not amended their Articles (or Certificates) of Incorporation or their Bylaws or similar organizational documents since the date of the Agreement, except as otherwise disclosed to Agent. ARTICLE VI MISCELLANEOUS PROVISIONS 6.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made in the Agreement or any other Loan Document, including, without limitation, any document furnished in connection with this Amendment, shall survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by CITBC or any closing shall affect the representations and warranties or the right of CITBC to rely upon them. 6.02 REFERENCE TO AGREEMENT. Each of the Agreement and the other Loan Documents, and any and all other Loan Documents, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Agreement, as amended hereby, are hereby amended so that any reference in the Agreement and such other Loan Documents to the Agreement shall mean a reference to the Agreement, as amended hereby. 6.03 EXPENSES OF CITBC. As provided in the Agreement, the Companies agree to pay on demand all reasonable costs and expenses incurred by CITBC in connection with the preparation, negotiation, and execution of this Amendment and the other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the reasonable costs and fees of CITBC's legal counsel, and all reasonable costs and expenses incurred by CITBC in connection with the enforcement or preservation of any rights under the Agreement, as amended hereby, or any other Loan Documents, including, without limitation, the reasonable costs and fees of CITBC's legal counsel. FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 20 21 6.04 SEVERABILITY. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. 6.05 SUCCESSORS AND ASSIGNS. The Agreement, as amended hereby, is binding upon and shall inure to the benefit of CITBC, the other Lenders and the Companies and their respective successors and assigns, except that the Companies may not assign or transfer any of their rights or obligations hereunder without the prior written consent of CITBC. 6.06 COUNTERPARTS. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument. 6.07 EFFECT OF WAIVER. No consent or waiver, express or implied, by CITBC to or for any breach of or deviation from any covenant or condition by the Companies shall be deemed a consent to or waiver of any other breach of the same or any other covenant, condition or duty. 6.08 HEADINGS. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment. 6.09 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 6.10 FINAL AGREEMENT. THE AGREEMENT AND THE OTHER LOAN DOCUMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS EXECUTED. THE AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY, MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY THE COMPANIES AND CITBC. 6.11 RELEASE. THE COMPANIES HEREBY ACKNOWLEDGE THAT THEY HAVE NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM CITBC. THE COMPANIES HEREBY VOLUNTARILY AND KNOWINGLY RELEASE AND FOREVER DISCHARGE CITBC, THE OTHER LENDERS, AND THEIR RESPECTIVE PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- Page 21 22 UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE COMPANIES MAY NOW OR HEREAFTER HAVE AGAINST CITBC, THE OTHER LENDERS, AND THEIR RESPECTIVE PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE AGREEMENT OR OTHER LOAN DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT. [The Remainder of this Page Intentionally Left Blank] FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT- 22 23 IN WITNESS WHEREOF, this Amendment has been executed and is effective as of the date first above-written. COMPANIES: UTI DRILLING, L.P. PATTERSON-UTI DRILLING COMPANY WEST LP, LLLP UTI MANAGEMENT SERVICES, L.P. By: Patterson (GP2) LLC, its general partner By: Utico Hard Rock Boring, Inc., the sole general partner of UTI Drilling, L.P. and UTI Management Services, L.P. By: ----------------------------------- Name: --------------------------------- By: Title: ---------------------------------------------- -------------------------------- Name: Jonathan D. Nelson Title: Vice President LONE STAR MUD LP, LLLP NORTON DRILLING, L.P. By: Patterson (GP) LLC, its general partner By: Norton GP, L.L.C., its sole general partner By: By: Norton Drilling Services, Inc., as Sole Member ----------------------------------- of Norton GP, L.L.C. Name: --------------------------------- By: Title: ---------------------------------------------- -------------------------------- Name: ------------------------------------------- AMBAR DRILLING FLUIDS LP, LLLP Title: ------------------------------------------- By: Patterson (GP) LLC, its general partner UNIVERSAL WELL SERVICES, INC. By: SUITS DRILLING COMPANY ----------------------------------- Name: --------------------------------- By: Title: ---------------------------------------------- -------------------------------- Name: Jonathan D. Nelson Title: Vice President of each of the foregoing Companies PATTERSON-UTI DRILLING COMPANY LP, LLLP By: Patterson (GP) LLC, its general partner By: ---------------------------------------------- Name: ---------------------------------------------- Title: ------------------------------------------- PATTERSON-UTI DRILLING COMPANY SOUTH LP, LLLP By: Patterson (GP2) LLC., its general partner By: ---------------------------------------------- Name: ---------------------------------------------- Title: -------------------------------------------
FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT 24 PATTERSON GUARANTORS: LENDERS: PATTERSON-UTI ENERGY, INC. THE CIT GROUP/BUSINESS CREDIT,INC. as Agent and Lender By: ------------------------------------------ Name: By: ---------------------------------------- -------------------------------- Title: Name: --------------------------------------- ------------------------------ Title: ----------------------------- PATTERSON (LP) LLC Revolving Loan Commitment: $30,000,000.00 By: ------------------------------------------ Name: FOOTHILL CAPITAL CORPORATION ---------------------------------------- Title: as Documentation Agent and Lender --------------------------------------- By: -------------------------------- PATTERSON (GP) LLC Name: ------------------------------ Title: By: ----------------------------- ------------------------------------------ Name: Revolving Loan Commitment: $35,000,000.00 ---------------------------------------- Title: --------------------------------------- THE CIT GROUP/EQUIPMENT FINANCING, INC. PATTERSON (GP2) LLC By: -------------------------------- By: Name: ----------------------------------------- ------------------------------ Name: Title: --------------------------------------- ----------------------------- Title: -------------------------------------- Revolving Loan Commitment: $10,000,000.00 PATTERSON PETROLEUM LP, LLLP FLEET CAPITAL CORPORATION By: Patterson (GP) LLC, its general partner By: By: -------------------------------- -------------------------------- Name: Name: ------------------------------ ------------------------------ Title: Title: ----------------------------- ----------------------------- PATTERSON PETROLEUM TRADING COMPANY LP, LLLP Revolving Loan Commitment: $25,000,000.00 By: Patterson (GP) LLC, its general partner By: -------------------------------- Name: ------------------------------ Title: -----------------------------
FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT 25 CONSENT, RATIFICATION AND RELEASE The undersigned each hereby consents to the terms of the within and foregoing Amendment, confirms and ratifies the terms of that certain Guaranty Agreement dated November 22, 1999 executed (or assumed) by the undersigned for the benefit of Agent and the other Lenders (the "Guaranty Agreement"), and acknowledges that the Guaranty Agreement is in full force and effect and ratifies the same, that the undersigned each has no defense, counterclaim, set-off or any other claim to diminish the undersigned's liability under such document, that the undersigned's consent is not required to the effectiveness of the within and foregoing Amendment, and that no consent by the undersigned is required for the effectiveness of any future amendment, modification, forbearance or other action with respect to the Obligations, the Collateral, or any of the other Loan Agreements. THE UNDERSIGNED EACH HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES AGENT AND EACH LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH THE UNDERSIGNED MAY NOW OR HEREAFTER HAVE AGAINST AGENT AND EACH LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR OTHER AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT. GUARANTORS: UTI DRILLING CANADA, INC. UTICO HARD ROCK BORING, INC. NORTON DRILLING SERVICES, INC. NORTON DRILLING COMPANY MEXICO, INC. INTERNATIONAL PETROLEUM SERVICES COMPANY UTICO, INC. By: ------------------------------------- Jonathan D. Nelson, Vice President signing as such on behalf of each of the foregoing Obligors FIFTH AMENDMENT TO LOAN & SECURITY AGREEMENT EX-10.1.6 10 d89352ex10-1_6.txt REVOLVING LOAN PROMISSORY NOTE 1 EXHIBIT 10.1.6 REVOLVING LOAN PROMISSORY NOTE June 29, 2001 $100,000,000 FOR VALUE RECEIVED, the undersigned Companies (each a "COMPANY" and, collectively, the "COMPANIES"), promise, jointly and severally, to pay to the order of THE CIT GROUP/BUSINESS CREDIT, INC. (herein "CITBC"), as Agent for the Lenders under a certain Loan and Security Agreement dated November 22, 1999 between CITBC as Agent and Lender, other Lenders parties thereto and each Company, as amended from time to time (herein the "AGREEMENT") at its office located at 1211 Avenue of the Americas, New York, New York 10036, or such other address as may be designated by the Agent, in lawful money of the United States of America and in immediately available funds, the principal amount of One Hundred Million and No/100 Dollars ($100,000,000), or such other principal amount advanced pursuant to Section 3, Paragraph 1 or Section 4 of the Agreement. The balance of such Revolving Loan will fluctuate as a result of the daily application of the proceeds of collections of the Accounts and the making of additional Revolving Loans as described in said Section 3 or Section 4 of the Agreement. The Revolving Loans may be borrowed, repaid and reborrowed by any Company, subject to the terms of the Agreement. A final payment in an amount equal to the outstanding aggregate balance of principal and interest remaining unpaid, if any, under this Revolving Loan Promissory Note as shown on the books and records of the Agent shall be due and payable upon any termination of the Agreement. All capitalized terms used herein shall have the meaning provided therefor in the Agreement, unless otherwise defined herein. The Companies further promise, jointly and severally, to pay interest at such office, in like money, on the unpaid principal amount owing hereunder from time to time from the date hereof on the dates and at the rates specified in Section 8, Paragraph 1 of the Agreement. If any payment on this Revolving Loan Promissory Note becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day, and with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. This Revolving Loan Promissory Note is a Revolving Loan Promissory Note referred to in the Agreement, and is subject to, and entitled to, all provisions and benefits thereof and is subject to optional and mandatory prepayment, in whole or in part, as provided therein. The date and amount of the advance(s) made hereunder may be recorded on the schedule which is attached hereto and hereby made part of this Note or the separate ledgers maintained by the Agent, provided that any failure to record any such information on such schedule shall not in any manner affect the obligation of any Company to make payments of principal and interest in accordance with the terms of this Revolving Loan Promissory Note. The aggregate unpaid principal amount of all Promissory Note 2 advances made pursuant hereto may be set forth in the balance column on said schedule or such ledgers maintained by the Agent. All such advances, whether or not so recorded, shall be due as part of this Revolving Loan Promissory Note. Each Company confirms that any amount received by or paid to the Agent in connection with the Agreement and/or any balances standing to its credit on any of its accounts on the Agent's books under the Agreement may in accordance with the terms of this Agreement be applied in reduction of this Revolving Loan Promissory Note, but no balance or amounts shall be deemed to effect payment in whole or in part of this Revolving Loan Promissory Note unless the Agent shall have actually charged such account or accounts for the purposes of such reduction or payment of this Revolving Loan Promissory Note. Upon the occurrence and during the continuance of any one or more of the Events of Default specified in the Agreement or upon termination of this Agreement, all amounts then remaining unpaid on this Revolving Loan Promissory Note may become, or be declared to be, immediately due and payable as provided in the Agreement. Each Company and the Guarantors, sureties and endorsers jointly and severally waive grace, demand, presentment for payment, notice of dishonor or default, notice of intent to accelerate, notice of acceleration, protest and diligence in collecting this Revolving Loan Promissory Note. This Revolving Loan Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York and the applicable federal laws of the United States. Promissory Note 3 This Revolving Loan Promissory Note is given in amendment, replacement and substitution, but not extinguishment, of all amounts unpaid under that certain Revolving Loan Promissory Note dated May 8, 2001 payable by the Companies to the order of CITBC as Agent for the Lenders in the stated principal amount of $70,000,000.00.
PATTERSON-UTI DRILLING COMPANY WEST LP, LLLP COMPANIES: By: Patterson (GP2) LLC, its general partner UTI DRILLING, L.P. By: UTI MANAGEMENT SERVICES, L.P. ------------------------- Name: By: Utico Hard Rock Boring, Inc., the sole general partner of ----------------------- UTI Drilling, L.P. and UTI Management Services, L.P. Title: ---------------------- By: ------------------------ LONE STAR MUD LP, LLLP Name: Jonathan D. Nelson Title: Vice President By: Patterson (GP) LLC, its general partner NORTON DRILLING, L.P. By: ------------------------- By: Norton GP, L.L.C., its sole general partner Name: By: Norton Drilling Services, Inc., as Sole Member ----------------------- of Norton GP, L.L.C. Title: ---------------------- By: ------------------------- AMBAR DRILLING FLUIDS LP, LLLP Name: ----------------------- By: Patterson (GP) LLC, its general partner Title: ---------------------- By: ------------------------- UNIVERSAL WELL SERVICES, INC. Name: SUITS DRILLING COMPANY ----------------------- Title: By: ---------------------- ------------------------- Name: Jonathan D. Nelson Title: Vice President of each of the foregoing Companies PATTERSON-UTI DRILLING COMPANY LP, LLLP By: Patterson (GP) LLC, its general partner By: ------------------------- Name: ----------------------- Title: ---------------------- PATTERSON-UTI DRILLING COMPANY SOUTH LP, LLLP By: Patterson (GP2) LLC., its general partner By: ------------------------- Name: ----------------------- Title: ----------------------
Promissory Note 4 SCHEDULE TO GRID
Date Loan Payment Balance - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Promissory Note EX-10.1.7 11 d89352ex10-1_7.txt GUARANTY AGREEMENT 1 EXHIBIT 10.1.7 GUARANTY AGREEMENT FOR VALUE RECEIVED, as of June 29, 2001, PATTERSON-UTI ENERGY, INC., a Delaware corporation ("PARENT"), PATTERSON (GP) LLC, a Delaware limited liability company ("PATTERSON GP"), PATTERSON (LP) LLC, a Delaware limited liability company ("PATTERSON LP"), PATTERSON PETROLEUM LP, LLLP, a Delaware limited liability limited partnership ("PPLP"), PATTERSON PETROLEUM TRADING COMPANY LP, LLLP, a Delaware limited liability limited partnership ("PPTC") and PATTERSON (GP2) LLC, a Delaware limited liability company ("PATTERSON GP2") (Parent, Patterson GP, Patterson LP, PPLP, PPTC, and Patterson GP2 are referred to herein, individually, as a "GUARANTOR" and, collectively and jointly and severally as, the "GUARANTORS"), guarantee unconditionally the full and prompt payment to the Lenders ( as defined in the Loan Agreement referred to below) and THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, as Agent for the benefit of itself and the other Lenders (in such capacity, the "AGENT"), upon demand, the obligations and indebtedness described below, including, without limitation, the obligations and indebtedness of UTI DRILLING, L.P., a Texas limited partnership ("UTI"), UNIVERSAL WELL SERVICES, INC., a Delaware corporation ("UWSI"), UTI MANAGEMENT SERVICES, L.P., a Texas limited partnership ("UTIMS"), NORTON DRILLING L.P., a Delaware limited partnership, successor in interest by merger to Norton Drilling Company ("NDLP"), SUITS DRILLING COMPANY, an Oklahoma corporation ("SDC"), PATTERSON-UTI DRILLING COMPANY LP, LLLP, a Delaware limited liability limited partnership ("PUDC"), PATTERSON-UTI DRILLING COMPANY SOUTH LP, LLLP, a Delaware limited liability limited partnership ("PUDCS"), PATTERSON-UTI DRILLING COMPANY WEST LP, LLLP , a Delaware limited liability limited partnership("PUDCW"), LONE STAR MUD LP, LLLP, a Delaware limited liability limited partnership, ("LSM"), and AMBAR DRILLING FLUIDS LP, LLLP, a Delaware limited liability limited partnership ("ADF") (UTI, UWSI, UTIMS, NDLP, SDC, PUDC, PUDCS, PUDCW, LSM and ADF (together with each additional Person which may become a "Company" under the Loan Agreement (as defined below) are referred to herein, collectively, as the "BORROWERS"): Any and all indebtedness and obligations, whether direct or indirect, absolute or contingent, primary or secondary, joint or several, (including the "Obligations" as defined in the Loan Agreement referred to below) and all renewals, modifications, increases, rearrangements and extensions thereof for which the Borrowers are now, or hereafter may become, liable or indebted to the Agent or the Lenders, and all interest accruing thereon, fees charged in connection therewith and reimbursable expenses incurred in connection therewith, whether by lapse of time, acceleration of maturity, or otherwise, now or hereafter consisting of, arising under or on account of (i) the Loan and Security Agreement, dated November 22, 1999, among the Borrowers, Agent, certain Lenders, the Guarantors and the other parties listed therein (as the same may be renewed, extended or modified from time to time, the "LOAN AGREEMENT"); (ii) any Loan Document or other document executed in connection with the Loan Agreement or any renewal, extension, or UTI - GUARANTY 1 2 modification of any thereof; and (iii) all costs, reasonable attorneys' fees, and other expenses incurred by Agent by reason of any event which, with the giving of notice or the passage of time or both, has occurred and is continuing and would constitute an Event of Default by the Borrowers under any of the foregoing (all of the foregoing are hereinafter referred to as the "OBLIGATIONS"). To further secure payment of the Obligations, Guarantors grant to Agent, in addition to all other contractual, legal and equitable rights of Agent, the right to offset against any account, certificate of deposit, or other funds of Guarantors in the possession of or under the control of Agent. Guarantors hereby waive notice of acceptance of this Guaranty Agreement (this "GUARANTY") and all other notices in connection herewith or in connection with the Obligations other than notices set forth in Section 12, Paragraph 6 of the Loan Agreement, including, without limitation, notice of intent to accelerate and notice of acceleration, and waives diligence, presentment, demand, protest, and suit on the part of Agent in the collection of any of the Obligations, and agrees that Agent shall not be required to first endeavor to collect any of the Obligations from the Borrowers, or any other party liable for payment of the Obligations (hereinafter referred to as an "OBLIGATED PARTY"), before requiring Guarantors to pay the full amount of the Obligations. Without impairing the rights of Agent against Guarantors, the Borrowers or any other Obligated Party, suit may be brought and maintained against Guarantors at the election of Agent with or without joinder of the Borrowers or any other Obligated Party, any right to any such joinder being hereby waived by Guarantors. Each Guarantor represents to Agent that it is receiving a direct and indirect benefit as a result of this Guaranty and the Obligations; that each Guarantor is a direct or indirect subsidiary or affiliate of the Borrowers and that this Guaranty is necessary and convenient to the conduct, promotion and attainment of the business of the Guarantors and the Borrowers; represents to Agent that after giving effect to this Guaranty and the contingent obligations evidenced hereby it is, and will be, Solvent (as defined in the Loan Agreement); acknowledges that its liability hereunder shall be cumulative and in addition to any other liability or obligation to Agent, whether the same is incurred through the execution of a note, a similar guaranty, through endorsement, or otherwise; and acknowledges that except as set forth in the Loan Agreement, and the other Loan Documents, neither Agent nor any officer, employee, agent, attorney or other representative of Agent has made any representation, warranty or statement to Guarantors to induce it to execute this Guaranty. Each Guarantor hereby agrees that, except as hereinafter provided, its obligations under this Guaranty shall be continuing, absolute and unconditional, irrespective of (i) the validity or enforceability of the Obligations or of any promissory note or other document evidencing all or any part of the Obligations, (ii) the absence of any attempt to collect the Obligations from the Borrowers or any other Obligated Party or other action to enforce the same, (iii) the waiver or consent by Agent or any Lender with respect to any provision of any instrument evidencing the Obligations, or any part thereof, or any other agreement now or hereafter executed by the Borrowers and delivered to Agent, (iv) Agent's election, in any proceeding instituted under UTI - GUARANTY 2 3 Chapter 11 of Title 11 of the United States Code (11 U.S.C. Section 101 et seq.) (the "BANKRUPTCY CODE"), of the application of Section 1111(b)(2) of the Bankruptcy Code, (v) any borrowing or grant of a security interest by the Borrowers, as debtor-in-possession, under Section 364 of the Bankruptcy Code, (vi) the disallowance of all or any portion of Agent's claim(s) for repayment of the Obligations under Section 502 of the Bankruptcy Code, or (vii) any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Anything contained in this Guaranty to the contrary notwithstanding, the obligations of each Guarantor hereunder shall be limited to a maximum aggregate amount equal to the largest amount that would not render Guarantors' obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of the Bankruptcy Code or any applicable provisions of comparable state law (collectively, the "FRAUDULENT TRANSFER LAWS"), after giving effect to all other liabilities of Guarantors, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws and after giving effect as assets to the value (as determined under the applicable provisions of the Fraudulent Transfer Laws) of any rights to subrogation or contribution of Guarantors pursuant to (i) applicable law or (ii) any agreement providing for an equitable allocation among Guarantors and other affiliates of an Obligated Party (if any) of obligations under guaranties by such parties. No release, waiver, or discharge of the Borrowers or any other Obligated Party from liability for payment of any of the Obligations, nor any renewal, supplementation, modification, rearrangement or acceleration of any of the Obligations, nor any amendment of any document evidencing any of the Obligations, either express or implied, shall relieve Guarantors from liability for payment of the full amount of the Obligations; and Guarantors will immediately pay on the Business Day (as defined in the Loan Agreement) following demand therefor all Obligations to Agent or other person entitled thereto, regardless of any defense, right of set-off or counterclaim which the Borrowers or any other Obligated Party may have or assert, and regardless of whether Agent or any other party shall have taken any steps to enforce any rights against the Borrowers, any other Obligated Party, or any other party to collect such sum, and regardless of any other condition or contingency, including, without limitation, any neglect, delay or omission of Agent. Agent is hereby authorized, without notice or demand and without affecting the liability of Guarantors, to, from time to time accept partial payments on the Obligations. Notwithstanding anything to the contrary contained herein, until the Obligations have been paid in full, Guarantors shall not have any right, claim or action, now or hereafter, against the Borrowers or any other Obligated Party arising out of or in connection with this Guaranty or any other document evidencing the Obligations, including, without limitation, any right or claim of subrogation, contribution, reimbursement, exoneration or indemnity, all such rights and claims being hereby expressly and absolutely waived. Each Guarantor is familiar with, and has independently reviewed the financial condition of, the Borrowers and hereby assumes responsibility for keeping itself informed of the financial condition of the Borrowers, and any and all endorsers or other guarantors of any instrument or document evidencing all or any part of the Obligations and of all other circumstances bearing upon the risk of nonpayment of the Obligations or any part thereof that diligent inquiry would UTI - GUARANTY 3 4 reveal. Each Guarantor hereby agrees that Agent shall have no duty to advise Guarantors of information known to Agent regarding such condition or any such circumstances. No Guarantor is relying on the financial condition of the Borrowers as an inducement to enter into this Guaranty. If Agent, in its sole discretion, undertakes at any time or from time to time to provide any such information to Guarantors, Agent shall be under no obligation (i) to undertake any investigation not a part of its regular business routine, (ii) to disclose any information which, pursuant to accepted or reasonable commercial finance practices, Agent wishes to maintain confidential or (iii) to make any other or future disclosures of such information or any other information to Guarantors. Each Guarantor consents and agrees that Agent shall be under no obligation to marshal any assets in favor of Guarantors or against or in payment of any or all of the Obligations. Each Guarantor further agrees that, to the extent that the Borrowers make a payment or payments to Agent, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to the Borrowers, any of their estates, trustees, receivers or any other party, including, without limitation, Guarantors, under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such payment or repayment, the Obligations or part thereof which has been paid, reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the date such initial payment, reduction or satisfaction occurred. Agent may assign its rights hereunder, in whole or in part, to any holder of the Obligations in accordance with the Loan Agreement and upon any such assignment all the terms and provisions of this Guaranty shall inure to the benefit of such assignee, to the extent so assigned. Agent is relying and is entitled to rely upon each and all of the provisions of this Guaranty; and, accordingly, if any provision of this Guaranty should be held to be invalid or ineffective, then all other provisions shall continue in full force and effect notwithstanding. Any and all notices, requests and demands to or upon Guarantors to be effective shall be in writing and given in the manner and subject to the terms set forth in Section 12, Paragraph 6 of the Loan Agreement. It is the intention of the Borrowers, Guarantors and Agent to conform strictly to applicable usury laws. Accordingly, no agreements, conditions, provisions or stipulations contained in this Guaranty or any other instrument, document or agreement between Guarantors or the Borrowers and Agent or any Lender or default of Guarantors or the Borrowers, or the exercise by Agent or any Lender of the right to accelerate the payment of the maturity of principal and interest, or to exercise any option whatsoever contained in this Guaranty or any other agreement between Guarantors or the Borrowers and Agent or any Lender, or the arising of any contingency whatsoever, shall entitle Agent or any Lender to collect, in any event, interest exceeding the maximum rate of interest permitted by applicable state or federal law in effect from time to time hereafter (the "MAXIMUM LEGAL RATE") and in no event shall Guarantors be obligated to pay interest exceeding such Maximum Legal Rate and all agreements, conditions or stipulations, if any, which may in any event or contingency whatsoever operate to bind, obligate UTI - GUARANTY 4 5 or compel Guarantors to pay a rate of interest exceeding the Maximum Legal Rate, shall be without binding force or effect, at law or in equity, to the extent only of the excess of interest over such Maximum Legal Rate. In the event any interest is charged in excess of the Maximum Legal Rate ("EXCESS"), each Guarantor acknowledges and stipulates that any such charge shall be the result of an accident and bona fide error, and such Excess shall be, first, applied to reduce the principal then unpaid hereunder; second, applied to reduce any other Obligations; and third, returned to Guarantors, it being the intention of the parties hereto not to enter at any time into a usurious or otherwise illegal relationship. Each Guarantor recognizes that, with fluctuations in the applicable rate on the Obligations and the Maximum Legal Rate, such an unintentional result could inadvertently occur. By the execution of this Guaranty, each Guarantor covenants that the credit or return of any Excess shall constitute the acceptance by Guarantors of such Excess. If any sum due Agent by Guarantors hereunder is placed in the hands of an attorney for collection, or is collected through probate, bankruptcy, or other court proceeding, then Guarantors promise to pay Agent all reasonable costs, attorneys' fees and other expenses incurred by Agent pursuant to such collection efforts. If the Obligations or any portion thereof are guaranteed by two or more Guarantors, the obligation of Guarantors shall be several and also joint, each with all and also each with any one or more of the others, and may be enforced at the option of Agent against each severally, any two or more jointly, or some severally and some jointly. Agent, in its sole discretion, may release any one or more of such guarantors for any consideration which it deems adequate, and may fail or elect not to prove a claim against the estate of any bankrupt, insolvent, incompetent or deceased Guarantors; and thereafter without notice to any other Guarantors, Agent may extend or renew any part or all of the Obligations and may permit the Borrowers or any other Obligor to incur additional Obligations or other indebtedness, without affecting in any manner the unconditional obligation of the remaining Guarantors. Such action by Agent shall not, however, be deemed to affect any right to contribution which may exist among the Guarantors. The total obligation under this Guaranty shall be UNLIMITED unless otherwise indicated in this Guaranty, and such obligation shall include in addition to any limited amount any and all interest thereon, and all costs and expenses including, without limitation, reasonable attorneys fees incurred in enforcing any of the duties and obligations of Guarantors under this Guaranty. THIS GUARANTY HAS BEEN NEGOTIATED AND SHALL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF NEW YORK. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING, BUT NOT LIMITED TO, SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). AS PART OF THE CONSIDERATION FOR NEW VALUE AND BENEFIT THIS DAY RECEIVED BY GUARANTORS, EACH GUARANTOR HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK OR NEW YORK COUNTY AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY CERTIFIED UTI - GUARANTY 5 6 OR REGISTERED MAIL DIRECTED TO EACH GUARANTOR'S CHIEF EXECUTIVE OFFICE SET FORTH IN SCHEDULE 7(1) OF THE LOAN AGREEMENT AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. GUARANTORS WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE. EXCEPT AS OTHERWISE PROVIDED FOR IN THIS GUARANTY, EACH GUARANTOR WAIVES THE RIGHT TO TRIAL BY JURY (WHICH AGENT AND EACH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS GUARANTY OR THE OBLIGATIONS. THIS WRITTEN GUARANTY, TOGETHER WITH ALL OTHER INSTRUMENTS, AGREEMENTS AND CERTIFICATES EXECUTED BY THE PARTIES IN CONNECTION WITH THE OBLIGATIONS OR WITH REFERENCE HERETO OR THERETO, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. [THIS SPACE INTENTIONALLY LEFT BLANK] UTI - GUARANTY 6 7 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered as of the date first written above. GUARANTORS: PATTERSON-UTI ENERGY, INC. By: ------------------------------------------------ Name: ---------------------------------------------- Title: --------------------------------------------- PATTERSON (LP) LLC By: ------------------------------------------------ Name: ---------------------------------------------- Title: --------------------------------------------- PATTERSON (GP) LLC By: ------------------------------------------------ Name: ---------------------------------------------- Title: --------------------------------------------- PATTERSON (GP2) LLC By: ------------------------------------------------ Name: ---------------------------------------------- Title: --------------------------------------------- PATTERSON PETROLEUM LP, LLLP By: Patterson (GP) LLC, its general partner By: -------------------------------------------- Name: ------------------------------------------ Title: ----------------------------------------- PATTERSON PETROLEUM TRADING COMPANY LP, LLLP By: Patterson (GP) LLC, its general partner By: -------------------------------------------- Name: ------------------------------------------ Title: ----------------------------------------- UTI - GUARANTY EX-10.1.8 12 d89352ex10-1_8.txt PLEDGE AGREEMENT 1 EXHIBIT 10.1.8 PLEDGE AGREEMENT THIS PLEDGE AGREEMENT (this "AGREEMENT"), dated as of June 29, 2001, is made by PATTERSON-UTI ENERGY, INC., a Delaware corporation ("PARENT"), PATTERSON (GP) LLC, a Delaware limited liability company ("PATTERSON GP"), PATTERSON (LP) LLC, a Delaware limited liability company ("PATTERSON LP"), PATTERSON-UTI DRILLING COMPANY LP, LLLP, a Delaware limited liability limited partnership ("PUDC"), and PATTERSON (GP2) LLC, a Delaware limited liability company ("PATTERSON GP2") (Parent, Patterson GP, Patterson LP, PUDC and Patterson GP2 are referred to herein individually as "PLEDGOR" and collectively as the "PLEDGORS") in favor of THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation having an office located at 1211 Avenue of the Americas, New York, New York 10026 ("CITBC"), as Agent, pledgee, assignee and secured party (in any and all such capacities and together with any successors in such capacities, "AGENT") for the benefit of the Lenders (as defined below). RECITALS: A. The ownership interests owned by each Pledgor which are being pledged hereunder are as follows: (1) Parent owns all of the issued and outstanding capital stock of UTICO, Inc., a Delaware corporation ("Holding") and a 100% membership interest in Patterson LP and Patterson GP; (2) Patterson LP owns a 99% limited partnership interest in PUDC, LONE STAR MUD LP, LLLP, a Delaware limited liability limited partnership, ("LSM"), AMBAR DRILLING FLUIDS LP, LLLP, a Delaware limited liability limited partnership ("ADF"), patterson petroleum lp, lllp, a Delaware limited liability limited partnership ("PPLP"), and patterson petroleum trading company lp, lllp, a Delaware limited liability limited partnership ("PPTC"); (3) Patterson GP owns a 1% general partnership interest in PUDC, LSM, ADF, PPLP and PPTC; (4) PUDC owns a 99% limited partnership interest in PATTERSON-UTI DRILLING COMPANY SOUTH LP, LLLP, a Delaware limited liability limited partnership ("PUDCS") and PATTERSON-UTI DRILLING COMPANY WEST LP, LLLP, a Delaware limited liability limited partnership ("PUDCW") and a 100% membership interest in PATTERSON GP2; and (5) Patterson GP2 owns a 1% general partnership interest in PUDCS and PUDCW. B. Each Pledgor is the legal, record and beneficial owner of the Pledged Collateral (as defined below) pledged by it pursuant to this Agreement. C. UTI Drilling, L.P., a Texas limited partnership ("UTI"), Universal Well Services, Inc., a Delaware corporation ("UWSI"), UTI Management Services, L.P., a Texas limited partnership ("UTIMS"), Norton Drilling l.p., a Delaware limited partnership, successor in interest by merger to Norton Drilling Company ("NDLP"), Suits Drilling Company, an Oklahoma corporation ("SDC"), PUDC, PUDCS, PUDCW, LSM, UTI-PLEDGE AGREEMENT 1 2 and ADF (collectively, the "Borrowers") have entered into the Loan and Security Agreement dated as of November 22, 1999 (as amended and modified or supplemented from time to time, the "Loan Agreement") with Agent and the Lenders named therein and from time to time parties thereto (collectively, the "Lenders"), pursuant to which, among other things, the Lenders have agreed to provide certain credit accommodations to or for the benefit of the Borrowers and each Pledgor has agreed to be liable to the Agent and the Lenders in respect of such credit accommodations. Capitalized terms used herein and not defined shall have the meaning assigned to such terms in the Loan Agreement. D. Each of the Pledgors has represented to the Agent and the Lenders that each Pledgor will receive substantial benefit from the performance of the Loan Agreement, and each Pledgor has agreed to grant to the Agent, liens and security interests in the Pledged Collateral owned by it to secure the Secured Obligations (as hereinafter defined). E. It is a condition to the obligations of the Lenders to continue to make the Loans under the Loan Agreement and to issue Letters of Credit that the Pledgors execute and deliver the applicable Loan Documents, including this Agreement. AGREEMENT: NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Pledgor and Agent hereby agree as follows: Section 1. Pledge. As collateral security for the payment and performance when due of all of the Secured Obligations, each Pledgor, jointly and severally, hereby pledges, assigns, transfers and grants to Agent for its benefit and the benefit of the Lenders, a continuing first priority security interest in and to all of the right, title and interest of such Pledgor in, to and under the following property, whether now existing or hereafter acquired (collectively, the "PLEDGED COLLATERAL"): (a) all of the issued and outstanding shares of capital stock of Holding described on Schedule A hereto (the "PLEDGED STOCK") (which are and shall, subject to Section 4(b) hereof, remain at all times until this Agreement terminates, certificated shares), including the certificates representing the Pledged Stock and any interest of Parent in the entries on the books of any financial intermediary pertaining to the Pledged Stock; (b) all additional shares of capital stock of any issuer of the Pledged Stock from time to time acquired by any Pledgor in any manner (which are and shall, subject to Section 4(b) hereof, remain at all times until this Agreement terminates, certificated shares) (which shares shall, upon acquisition, be deemed to be part of the Pledged Stock), including the certificates representing such additional shares and any interest of any Pledgor in the entries on the books of any financial intermediary pertaining to such additional shares; UTI-PLEDGE AGREEMENT 2 3 (c) all partnership interests in (i) PUDC, LSM, ADF, PPLP and PPTC owned by Patterson LP and Patterson GP, and (ii) PUDCW and PUDCS owned by PUDC and Patterson-GP2, together with all rights, privileges, authority and powers of such Pledgors in and to PUDC, LSM, ADF, PPLP, PPTC, PPDCW and PPDCS (collectively, the "Partnerships") or under the Agreements of Limited Partnership of the Partnerships (the "PARTNERSHIP AGREEMENTS") (collectively, the "INITIAL PLEDGED PARTNERSHIP INTERESTS"), and the certificates, instruments and agreements, if any, representing the Initial Pledged Partnership Interests; (d) (i) all of the membership interests (1) of Patterson GP and Patterson LP owned by Parent and (2) of Patterson GP2 owned by PUDC (the "Initial Pledged Membership Interests"); (ii) all limited liability company membership interests and all other ownership interests in any issuer which such Pledgors shall, from time to time, become entitled to receive or shall receive pursuant to subsection (d)(iii) hereof, all certificates, if any, representing any such membership interests, all options and other rights, contractual or otherwise, at any time existing with respect to such membership interests, and all dividends, cash, instruments and other property now or hereafter received, receivable or otherwise distributed in respect of or in exchange for any or all of such membership interests; and (iii) all rights, privileges, authority and powers of such Pledgors under all operating agreements, certificates, and other agreements of Patterson GP, Patterson LP and Patterson GP2 (being herein called the "LLC Agreements"); (e) all options, warrants, rights, agreements, additional partnership interests or other interests relating to any Borrower, Pledgor or any Guarantor (as defined in the Loan Agreement) (collectively, the "ADDITIONAL INTERESTS"; and, collectively with the Initial Pledged Partnership Interests and the Initial Pledged Membership Interests, the "PLEDGED INTEREST"; and, collectively with the Pledged Stock, the "PLEDGED SECURITIES") from time to time acquired by the Pledgor in any manner and the certificates, instruments and agreements, if any, representing the Additional Interests; (f) all intercompany notes now owned or held by any Pledgor and from time to time acquired by any Pledgor in any way, including the intercompany notes described on Schedule B hereto (collectively, the "INTERCOMPANY NOTES") and all certificates or instruments evidencing such Intercompany Notes and all proceeds thereof, all accessions thereto and substitutions therefor; (g) all dividends, cash, options, warrants, rights, instruments, distributions, returns of capital, income, profits and other property, interests or proceeds from time to time received, receivable or otherwise distributed to any Pledgor in respect of or in exchange for any or all of the Pledged Securities or Intercompany Notes (collectively, "DISTRIBUTIONS"); and UTI-PLEDGE AGREEMENT 3 4 (h) all proceeds (as defined under the Uniform Commercial Code as in effect in any relevant jurisdiction (the "CODE") or under other relevant law) of any of the foregoing, and in any event, including, without limitation, any and all (i) proceeds of any insurance (except liability insurance payments in which no Pledgor has any interest made to a Person exclusively entitled thereto and which is not a party to this Agreement), indemnity, warranty or guarantee payable to Agent or to any Pledgor from time to time with respect to any of the Pledged Collateral, (ii) payments (in any form whatsoever) made or due and payable to any Pledgor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Pledged Collateral by any governmental authority (or any person acting on behalf of a governmental authority), (iii) instruments representing obligations to pay amounts in respect of Pledged Securities or Intercompany Notes, (iv) products of the Pledged Collateral, and (v) other amounts from time to time paid or payable under or in connection with any of the Pledged Collateral. Section 2. Secured Obligations. This Agreement is entered into by each Pledgor in favor of Agent, for its benefit and the benefit of the Lenders to secure the payment and performance in full when due, whether at stated maturity, by acceleration or otherwise (including, without limitation, the payment of interest and other amounts which would accrue and become due but for the filing of a petition in bankruptcy or the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)) of: (i) all "Obligations" of the Borrowers and/or any and every Pledgor now or hereafter arising or incurred under or in respect of the Loan Agreement and/or any other Loan Documents; (ii) all obligations of the Borrowers and any and every Pledgor now or hereafter arising or incurred under or in respect of this Agreement or any other Loan Document; and (iii) all interest, charges, fees, costs, expenses, reimbursements, premiums, indemnities and other payments of any kind or nature in respect of amounts or instruments referred to in any of clauses (i) and (ii) (the obligations described in clauses (i) through (iii), collectively, the "SECURED OBLIGATIONS"). Section 3. No Release. Nothing set forth in this Agreement shall relieve any Pledgor from the performance of any term, covenant, condition or agreement on such Pledgor's part to be performed or observed under or in respect of any of the Pledged Collateral or from any liability to any Person under or in respect of any of the Pledged Collateral or shall impose any obligation on Agent or any Lender to perform or observe any such term, covenant, condition or agreement on such Pledgor's part to be so performed or observed or shall impose any liability on Agent or any Lender for any act or omission on the part of any Pledgor relating thereto or for any breach of any representation or warranty on the part of any Pledgor contained in this Agreement or any other Loan Document or under or in respect of the Pledged Collateral or made in connection herewith or therewith. Section 4. Delivery of Pledged Collateral. (a) All certificates, agreements, notes or instruments representing or evidencing the Pledged Collateral, to the extent not previously delivered to Agent, shall immediately upon receipt thereof by any Pledgor be delivered to and held by or on behalf of Agent pursuant hereto except that stock certificates or other evidence of Pledged Collateral relating to corporations incorporated outside of the United States may be held by foreign counsel under an escrow arrangement satisfactory to Agent. All Pledged UTI-PLEDGE AGREEMENT 4 5 Collateral shall be in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to Agent. Agent shall have the right, at any time upon the occurrence of an Event of Default and without notice to any Pledgor, to endorse, assign or otherwise transfer to or to register in the name of Agent or any of its nominees any or all of the Pledged Collateral. In addition, Agent shall have the right at any time to exchange certificates representing or evidencing Pledged Collateral for certificates of smaller or larger denominations. (b) If the issuer of any Pledged Securities is organized in a jurisdiction which does not permit the use of certificates to evidence equity or partnership ownership, as the case may be, or if any of the Pledged Securities are not evidenced by certificates of ownership or other evidence of partnership interests, as the case may be, then the Pledgor that pledged such Pledged Securities shall, to the extent permitted by applicable law, record such pledge on the stock register or books of the issuer, execute any customary stock pledge forms or other documents necessary or appropriate to complete the pledge and give Agent the right to transfer such Pledged Securities under the terms hereof and provide to Agent an opinion of counsel, in form and substance reasonably satisfactory to Agent, confirming such pledge. Section 5. Supplements; Further Assurances. (a) Each Pledgor agrees that at any time and from time to time, at its sole cost and expense, it shall promptly execute and deliver all further instruments and documents, including, without limitation, supplemental or additional UCC-1 financing statements, and take all further action that may be necessary or that Agent may reasonably request, in order to perfect and protect the pledge, security interest and Lien granted or purported to be granted hereby or to enable Agent to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral. (b) Each Pledgor shall, upon obtaining any Pledged Securities or Intercompany Notes of any Person, promptly (and in any event within five Business Days) deliver to Agent a pledge amendment, duly executed by such Pledgor, in substantially the form of Exhibit 1 hereto (each, a "PLEDGE AMENDMENT"), in respect of the additional Pledged Securities or Intercompany Notes which are to be pledged pursuant to this Agreement, and confirming the attachment of the Lien hereby created on and in respect of such additional Pledged Securities or Intercompany Notes. Each Pledgor hereby authorizes Agent to attach each Pledge Amendment to this Agreement and agrees that all Pledged Securities or Intercompany Notes listed on any Pledge Amendment delivered to Agent shall for all purposes hereunder be considered Pledged Collateral. Section 6. Representations, Warranties and Covenants. Each Pledgor, jointly and severally, represents, warrants and covenants (as applicable), after giving effect to the transactions contemplated by the Loan Documents as follows (as to itself and each other Pledgor): (a) No Liens. Such Pledgor is, and at the time of any delivery of any Pledged Collateral to Agent pursuant to Section 4 of this Agreement will be, the sole legal and beneficial owner of the Pledged Collateral pledged by it. All Pledged Collateral pledged by it is on the date hereof, and will be, so owned by such Pledgor free and clear of any Lien except for the Lien created by this Agreement and the Security Agreement. UTI-PLEDGE AGREEMENT 5 6 (b) No Consents, etc. No consent of any party (including, without limitation, stockholders or creditors of such Pledgor) and no consent, authorization, approval, or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or other Person (other than those consents or approvals which have been obtained as of the date hereof) is required (i) for the execution, delivery or performance of this Agreement by such Pledgor or for the pledge by such Pledgor of the Pledged Collateral pursuant to this Agreement, (ii) for the exercise by Agent of the voting or other rights provided for in this Agreement (other than any such consent, approval or action required to be taken by the Agent), or (iii) for the exercise by Agent of the remedies in respect of the Pledged Collateral pursuant to this Agreement (other than any such consent, approval or action required to be taken by the Agent). (c) Due Authorization and Issuance. All of the Pledged Shares pledged by it have been, and to the extent hereafter issued will be upon such issuance, duly authorized and validly issued and fully paid and nonassessable to the extent permitted by applicable law. Patterson GP, Patterson LP and Patterson GP2 have fully paid for their respective Initial Pledged Partnership Interests and there is no amount or other obligation on the part of such Pledgors owing in exchange for their Initial Pledged Partnership Interest or such Pledgors' status as partners of PUDC, LSM, ADF, PPLP, PPTC, PUDCW and PUDCS. Parent and PUDC have fully paid for their respective Initial Pledged Membership Interests and there is no amount or obligation on the part of such Pledgors owing in exchange for the Initial Pledged Membership Interests or such Pledgors' status as members of Patterson GP, Patterson LP and Patterson GP2. (d) Chief Executive Office. Such Pledgors' chief executive offices are located at addresses set forth in Schedule 7(1) of the Loan Agreement and each Pledgor's state of organization is Delaware. No Pledgor shall move its chief executive office except to such new location as such Pledgor may establish in accordance with the last sentence of this Section 6(d). No Pledgor shall establish a new location for its chief executive office or shall it change its name until (i) it shall have given Agent not less than 30 days' prior written notice of its intention to do so, clearly describing such new location or name and providing such other information in connection therewith as Agent or any Secured Party may reasonably request, and (ii) with respect to such new location or name, such Pledgor shall have taken all action satisfactory to Agent to maintain the perfection and priority of the security interest in the Pledged Collateral intended to be granted hereby. (e) Delivery of Pledged Collateral; Filings. Such Pledgor has delivered (or in the case of Pledged Securities acquired by such Pledgor after the date hereof, such Pledgor will have delivered) to Agent all certificates representing the Pledged Securities and Intercompany Notes intended to be pledged pursuant to this Agreement and has directed the Agent to file UCC-1 financing statements (evidencing the lien created by this Agreement) with the Secretary of State of the State of Texas and, with respect to Holding only, the State of Delaware (the States in which the respective chief executive offices of such Pledgors are located), and such delivery and pledge of the Pledged Collateral pursuant to this Agreement creates, upon proper filing, a valid and perfected first priority security interest in the Pledged Collateral securing the payment of the Secured Obligations UTI-PLEDGE AGREEMENT 6 7 pursuant to the Code in effect in each applicable jurisdiction, including, without limitation, the State of Texas and, with respect to Holding only, the State of Delaware. (f) Pledged Collateral. All information set forth herein, including the Schedules annexed hereto, relating to the Pledged Collateral pledged by it is accurate and complete in all respects. (g) No Violations, etc. The pledge of the Pledged Collateral pledged by it pursuant to this Agreement does not violate Regulation U or X of the Federal Reserve Board. (h) Ownership of Pledged Collateral. Except as otherwise permitted by the Loan Agreement, such Pledgor at all times will be the sole beneficial owner of the Pledged Collateral pledged by it. (i) No Options, Warrants, etc. There are no options, warrants, calls, rights, commitments or agreements of any character to which such Pledgor is a party or by which it is bound obligating such Pledgor to issue, deliver or sell or cause to be issued, delivered or sold, additional Pledged Securities or obligating such Pledgor to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. There are no voting trusts or other agreements or understandings to which such Pledgor is a party with respect to the voting of the capital stock of any issuer of the Pledged Securities pledged by it. (j) Partnership Agreements and LLC Agreements. The Pledgors have delivered to Agent a true, correct and complete copy of the Partnership Agreements and the LCC Agreements. Each of the Partnership Agreements and LLC Agreements is in full force and effect, has not as of the date hereof, been amended or modified and there is no existing default by any party thereunder or any event which, with the giving of notice or passage of time or both, would constitute a default by any party thereunder. No person will terminate or agree to terminate the Partnership Agreements or the LLC Agreements or make any amendment or modification to the Partnership Agreements or the LLC Agreements which may have a Material Adverse Effect on the value of the Pledged Collateral. The Pledgors shall deliver to Agent as promptly as practicable following the execution thereof, certified copies or executed originals of each such amendment and modification concurrently with the delivery of such documents to the parties thereto. Section 7. Voting Rights; Distributions; etc. (a) So long as no Event of Default shall have occurred and be continuing: (i) each Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Securities or any part thereof for any purpose not inconsistent with the terms or purpose of this Agreement or any other Loan Document; provided, however, that such Pledgor shall not in any event exercise such rights in any manner which could reasonably be expected to have a Material Adverse Effect on the value of the Pledged Collateral pledged by it or an adverse effect on the other rights and remedies provided to the Agent by this Agreement. UTI-PLEDGE AGREEMENT 7 8 (ii) Subject to the terms of the Loan Agreement, each Pledgor shall be entitled to receive and retain, and to utilize free and clear of the Lien of this Agreement, any and all Distributions, but only if and to the extent made in accordance with the provisions of the Loan Documents; provided, however, that any and all such Distributions consisting of rights or interests in the form of securities shall be, and shall be forthwith delivered to Agent to hold as Pledged Collateral and shall, if received by any Pledgor, be received in trust for the benefit of Agent, be segregated from the other property or funds of such Pledgor, and be forthwith delivered to Agent as Pledged Collateral in the same form as so received (with any necessary endorsement). (iii) Agent shall be deemed without further action or formality to have granted to each Pledgor all necessary consents relating to voting rights and shall, if necessary, upon written request of any Pledgor and at such Pledgor's sole cost and expense, from time to time execute and deliver (or cause to be executed and delivered) to such Pledgor all such instruments as such Pledgor may reasonably request in order to permit such Pledgor to exercise the voting and other rights which it is entitled to exercise pursuant to Section 7(a)(i) hereof and to receive the Distributions which it is authorized to receive and retain pursuant to Section 7(a)(ii) hereof. (b) Upon the occurrence and during the continuance of an Event of Default: (i) All rights of each Pledgor to exercise the voting and other consensual rights it would otherwise be entitled to exercise pursuant to Section 7(a)(i) hereof without any action or the giving of any notice shall cease, and all such rights shall thereupon become vested in Agent (for so long as such Event of Default shall be continuing), which shall thereupon have the sole right to exercise such voting and other consensual rights. (ii) All rights of each Pledgor to receive Distributions which it would otherwise be authorized to receive and retain pursuant to Section 7(a)(ii) hereof shall cease and all such rights shall thereupon become vested in Agent (for so long as such Event of Default shall be continuing), which shall thereupon have the sole right to receive and hold as Pledged Collateral such Distributions. (c) Each Pledgor shall, at its sole cost and expense, from time to time execute and deliver to Agent appropriate instruments as Agent may reasonably request in order to permit Agent to exercise the voting and other rights which it may be entitled to exercise pursuant to Section 7(b)(i) hereof and to receive all Distributions which it may be entitled to receive under Section 7(b)(ii) hereof. (d) All Distributions which are received by any Pledgor contrary to the provisions of Section 7(b)(ii) hereof shall be received in trust for the benefit of Agent, shall be segregated from other funds of such Pledgor and shall immediately be paid over to Agent as Pledged Collateral in the same form as so received (with any necessary endorsement). Section 8. Transfers and Other Liens; Additional Shares. (a) No Pledgor shall (i) sell, convey, assign or otherwise dispose of, or grant any option, right or warrant with respect UTI-PLEDGE AGREEMENT 8 9 to, any of the Pledged Collateral pledged by it except as permitted by the Loan Agreement, (ii) create or permit to exist any Lien upon or with respect to any Pledged Collateral pledged by it other than the Lien and security interest granted to Agent under this Agreement and the Security Agreement, or (iii) except as permitted by the Loan Agreement, permit the issuer of any Pledged Securities pledged by it to merge, consolidate or change its legal form, unless all of the outstanding capital stock, partnership interests or membership interests (as applicable) of the surviving or resulting entity is, upon such merger or consolidation, pledged hereunder and no cash, securities or other property is distributed in respect of the outstanding shares, partnership or membership interests (as applicable) of any other constituent entity. (b) Each Pledgor shall (i) cause each issuer of the Pledged Securities pledged by it not to issue any stock or other securities or equity, partnership or membership interests in addition to or in substitution for the Pledged Securities issued by such issuer, except to such Pledgor or other Pledgors, (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all additional shares of capital stock or other equity, partnership or membership securities of the issuer of the Pledged Securities which are required to be pledged hereunder and (iii) deliver all related stock or transfer powers requested by the Agent. Section 9. Reasonable Care. Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if such Pledged Collateral is accorded treatment substantially equivalent to that which Agent, in its individual capacity, accords its own property consisting of similar instruments or interests, it being understood that neither Agent nor any of the Secured Parties shall have responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Pledged Collateral, whether or not Agent or any other Secured Party has or is deemed to have knowledge of such matters, or (ii) taking any necessary steps to preserve rights against any Person with respect to any Pledged Collateral. Section 10. Remedies Upon Default; Decisions Relating to Exercise of Remedies. (a) If any Event of Default shall have occurred and be continuing, Agent shall have the right, in addition to other rights and remedies provided for herein or otherwise available to it to be exercised from time to time, (i) to retain and apply the Distributions to the Secured Obligations as provided in Section 11 hereof, (ii) to exercise any remedies set forth in any Intercompany Notes (to the extent that a default has occurred thereunder) and (iii) to exercise all the rights and remedies of a secured party under the Code at the time of an event of default, and Agent may also in its sole discretion, without notice except as specified below, sell the Pledged Collateral or any part thereof (including, without limitation, any partial interest in the Pledged Securities) in one or more parcels at public or private sale, at any exchange, broker's board or at any of Agent's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as Agent may deem commercially reasonable, irrespective of the impact of any such sales on the market price of the Pledged Collateral. Agent or any Lender or any of their respective Affiliates may be the purchaser of any or all of the Pledged Collateral at any such sale and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Pledged Collateral sold at such sale, to use and apply any of the Secured Obligations owed to such Person as a credit on account of the purchase price of any Pledged Collateral payable by such Person at such sale. Each purchaser at any such sale shall UTI-PLEDGE AGREEMENT 9 10 acquire the property sold absolutely free from any claim or right on the part of any Pledgor, and each Pledgor hereby waives, to the fullest extent permitted by law, all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Each Pledgor acknowledges and agrees that, to the extent notice of sale shall be required by law, ten Business Days notice to such Pledgor of the time and place of any public sale or the time after which any private sale or other intended disposition is to take place shall constitute reasonable notification of such matters. No notification need be given to a Pledgor if it has signed, after the occurrence of an Event of Default, a statement renouncing or modifying any right to notification of sale or other intended disposition. Agent shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Pledgor hereby waives, to the fullest extent permitted by law, any claims against Agent arising by reason of the fact that the price at which any Pledged Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if Agent accepts the first offer received and does not offer such Pledged Collateral to more than one offeree. (b) Each Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the "SECURITIES ACT"), and applicable state securities laws, Agent may be compelled, with respect to any sale of all or any part of the Pledged Collateral, to limit purchasers to Persons who will agree, among other things, to acquire the Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof. Each Pledgor acknowledges that any such private sales may be at prices and on terms less favorable to Agent than those obtainable through a public sale without such restrictions (including, without limitation, a public offering made pursuant to a registration statement under the Securities Act), and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Pledged Collateral for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would agree to do so. (c) If Agent determines to exercise its right hereunder to sell any or all of the Pledged Collateral, upon written request, each Pledgor shall from time to time furnish to Agent all such information as Agent may request in order to determine the number of securities included in the Pledged Collateral which may be sold by Agent as exempt transactions under the Securities Act and the rules of the Securities and Exchange Commission thereunder, as the same are from time to time in effect. (d) In addition to any of the other rights and remedies hereunder, Agent shall have the right to institute a proceeding seeking specific performance in connection with any of the agreements or obligations hereunder. (e) Notwithstanding any other provision of this Agreement to the contrary, if, after giving effect to (i) any sale, transfer or other disposition of any or all of the Pledged UTI-PLEDGE AGREEMENT 10 11 Collateral pursuant hereto and after the application of the proceeds hereunder to the Secured Obligations and (ii) the sale, transfer or other disposition of any collateral pledged pursuant to any other Loan Document and the application of such proceeds thereunder, any Secured Obligation remains unpaid or unsatisfied, each Pledgor shall remain liable for the unpaid and unsatisfied amount of such Secured Obligations for which such Pledgor is otherwise liable pursuant to the Loan Agreement or otherwise. Section 11. Application of Proceeds. All Distributions held from time to time by Agent in accordance with the terms of this Agreement and all proceeds received by Agent in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral pursuant to the exercise by Agent of its remedies as a secured creditor as provided in Section 10 hereof shall be applied, together with any other sums then held by Agent pursuant to this Agreement, promptly by Agent as follows: FIRST, to the payment of all costs and expenses, fees, commissions and taxes of such sale, collection or other realization, including, without limitation, compensation to Agent and its agents and the reasonable fees and expenses of its counsel, and all expenses, liabilities and advances made or incurred by Agent in connection therewith, together with interest on each such amount at the highest rate then in effect under the Loan Agreement from and after the date such amount is due, owing or unpaid until paid in full; SECOND, to the payment of all other costs and expenses of such sale, collection or other realization, including, without limitation, compensation to the Lenders and their agents and the reasonable fees and expenses of their counsel and all costs, liabilities and indebtedness made or incurred by the Lenders in connection therewith, together with interest on each such amount at the highest rate then in effect under the Loan Agreement from and after the date such amount is due, owing or unpaid until paid in full; THIRD, to the indefeasible payment in full in cash of interest and all amounts other than principal under the Loan Agreement at any time and from time to time owing by any Pledgor under or in connection with the Loan Agreement, ratably according to the unpaid amounts thereof, without preference or priority of any kind among amounts so due and payable, together with interest on each such amount at the highest rate then in effect under the Loan Agreement from and after the date such amount is due, owing or unpaid until paid in full; FOURTH, to the indefeasible payment in full in cash of principal at any time and from time to time owing by the Pledgors under or in connection with the Loan Agreement, ratably according to the unpaid amounts thereof, without preference or priority of any kind, among amounts so due and payable, together with interest on each such amount at the highest rate then in effect under the Loan Agreement from and after the date such amount is due, owing or unpaid until paid in full; and FIFTH, the balance, if any, to the Person lawfully entitled thereto (including Pledgor or its successors or assigns). UTI-PLEDGE AGREEMENT 11 12 Section 12. Expenses. Each Pledgor with respect to itself and jointly and severally with respect to all other Pledgors, will upon demand pay to Agent the amount of any and all expenses of Agent in connection with this Agreement in accordance with Sections 7, Paragraph 13, Section 8, Paragraph 5 and Section 10, Paragraph 3 of the Loan Agreement. All amounts payable by any Pledgor under this Section 12 shall be due upon demand and shall be part of the Secured Obligations. Each Pledgor's obligations under this Section shall survive the termination of this Agreement and the discharge of such Pledgor's other obligations hereunder. Section 13. No Waiver; Cumulative Remedies. (a) No failure on the part of Agent to exercise, no course of dealing with respect to, and no delay on the part of Agent in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein provided are cumulative and are not exclusive of any remedies provided by law. (b) In the event Agent shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to Agent, then and in every such case, each Pledgor, Agent and each holder of any of the Secured Obligations shall, subject to any determination in such proceeding, be restored to their respective former positions and rights hereunder with respect to the Pledged Collateral, and all rights, remedies and powers of Agent and the Secured Parties shall continue as if no such proceeding had been instituted. Section 14. Agent. CITBC has been appointed as agent for itself as a Lender and for the other Lenders pursuant to Section 13, Paragraph 1 of the Loan Agreement. CITBC, as a Lender for itself and the other Lenders (under the Loan Agreement), hereby confirms and restates such appointment as if set forth at length herein. The actions of Agent hereunder are subject to the provisions of the Loan Agreement. Agent shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release or substitution of Pledged Collateral), in accordance with this Agreement and the Loan Agreement. Agent may resign and a successor Agent may be appointed in the manner provided in the Loan Agreement. Upon the acceptance of any appointment as Agent by a successor Agent, that successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent under this Agreement, and the retiring Agent shall thereupon be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was Agent. Section 15. Agent May Perform; Agent Appointed Attorney-in-Fact. If any Pledgor shall fail to do any act or thing that it has covenanted to do hereunder or any warranty on the part of any Pledgor contained herein shall be breached, Agent may (but shall not be obligated to), upon notice to any such Pledgor, do the same or cause it to be done or remedy any such breach, and may expend funds for such purpose. Any and all amounts so expended by Agent shall be paid by such Pledgor promptly upon demand therefor, with interest at the highest rate then in UTI-PLEDGE AGREEMENT 12 13 effect under the Loan Agreement during the period from and including the date on which such funds were so expended to the date of repayment. Each Pledgor's obligations under this Section 15 shall survive the termination of this Agreement and the discharge of such Pledgor's other obligations under the Loan Agreement and the other Loan Documents. Each Pledgor hereby appoints Agent its attorney-in-fact, with full authority in the place and stead of such Pledgor and in the name of such Pledgor, or otherwise, from time to time during the continuance of an Event of Default or at any other time that such Pledgor has failed, after notice from Agent, to take any action required to be taken by it hereunder, in Agent's discretion to take any action and to execute any instrument consistent with the terms of this Agreement and the Loan Agreement which Agent may deem necessary or advisable to accomplish the purposes of this Agreement. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term of this Agreement. Each Pledgor hereby ratifies, to the fullest extent permitted by law, all that such attorney shall lawfully do or cause to be done by virtue hereof. Section 16. Indemnity. (a) INDEMNITY. EACH OF PLEDGORS WITH RESPECT TO ITSELF, AND JOINTLY AND SEVERALLY WITH RESPECT TO THE OTHER PLEDGORS, AGREES TO INDEMNIFY, PAY AND HOLD HARMLESS AGENT AND EACH OF THE LENDERS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 7, PARAGRAPH 13 OF THE LOAN AGREEMENT. TO THE EXTENT THAT THE UNDERTAKING TO INDEMNIFY, PAY AND HOLD HARMLESS SET FORTH IN THE PRECEDING SENTENCE MAY BE UNENFORCEABLE BECAUSE IT IS VIOLATIVE OF ANY LAW OR PUBLIC POLICY, EACH PLEDGOR SHALL CONTRIBUTE THE MAXIMUM PORTION WHICH IT IS PERMITTED TO PAY AND SATISFY UNDER APPLICABLE LAW, TO THE PAYMENT AND SATISFACTION OF ALL INDEMNIFIED LIABILITIES INCURRED BY THE INDEMNITEES OR ANY OF THEM. (b) Survival. The obligations of each Pledgor contained in this Section 16 shall survive the termination of this Agreement and the discharge of such Pledgor's other obligations under this Agreement and the other Loan Documents. (c) Reimbursement. Any amounts paid by any indemnitee as to which such indemnitee has the right to reimbursement shall constitute Secured Obligations secured by the Pledged Collateral. Section 17. Modification in Writing. No amendment, modification, supplement, termination or waiver of or to any provision of this Agreement, nor consent to any departure by any Pledgor therefrom, shall be effective unless the same shall be done in accordance with the terms of this Agreement and the Loan Agreement. Any amendment, modification or supplement of or to any provision of this Agreement, any waiver of any provision of this Agreement and any consent to any departure by any Pledgor from the terms of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement, no notice to or demand on any UTI-PLEDGE AGREEMENT 13 14 Pledgor in any case shall entitle such Pledgor to any other or further notice or demand in similar or other circumstances. Section 18. Termination; Release. When all the Secured Obligations have been indefeasibly paid in full in cash and all of the Revolving Loan Commitments of the Lenders to make any Loan or to issue (or cause a bank to issue) any Letter of Credit under the Loan Agreement have expired, this Agreement shall terminate. Upon termination of this Agreement or any release of Pledged Collateral in accordance with the provisions of the Loan Agreement, the Agent shall, upon the request and at the sole cost and expense of any Pledgor, forthwith assign, transfer and deliver to such Pledgor, against receipt and without recourse to or warranty by Agent, such of the Pledged Collateral pledged by it to be released (in the case of a release) as may be in the possession of Agent and as shall not have been sold or otherwise applied pursuant to the terms hereof, and, with respect to any other Pledged Collateral, proper instruments (including, without limitation, Uniform Commercial Code termination statements on Form UCC-3) acknowledging the termination of this Agreement or the release of such Pledged Collateral, as the case may be. Section 19. Notices. All notices or other communications herein required to be given shall be given at the address and in the manner required in the Loan Agreement. Section 20. Continuing Security Interest; Assignment. This Agreement shall create a continuing security interest in the Pledged Collateral and shall (a) be binding upon each Pledgor, and its successors and assigns and (b) inure, together with the rights and remedies of Agent hereunder, to the benefit of Agent and the other Secured Parties and each of their respective successors, transferees and assigns; no other Persons (including, without limitation, any other creditor of any Pledgor) shall have any interest herein or any right or benefit with respect hereto. Section 21. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK (INCLUDING, BUT NOT LIMITED TO, SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). Section 22. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PLEDGOR WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT EACH PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO HEREBY UTI-PLEDGE AGREEMENT 14 15 IRREVOCABLY WAIVES TRIAL BY JURY, AND EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. Section 23. Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. Section 24. Execution in Counterparts. This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all such counterparts together shall constitute one and the same agreement. Section 25. Headings. The Section headings used in this Agreement are for convenience of reference only and shall not affect the construction of this Agreement. Section 26. Obligations Absolute. All obligations of each Pledgor hereunder shall be absolute and unconditional irrespective of: (i) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of any other Pledgor; (ii) any lack of validity or enforceability of the Loan Agreement, any other Loan Document, or any other agreement or instrument relating thereto; (iii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Loan Agreement, any other Loan Document, or any other agreement or instrument relating thereto; (iv) any exchange, release or non-perfection of any collateral or the pledge of any additional collateral or the failure to recover in respect thereof pursuant to any remedy or right of the Agent or any Lender contained in this Agreement, the Loan Agreement, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Secured Obligations; (v) any exercise or non-exercise, or any waiver of any right, remedy, power or privilege under or in respect of this Agreement or any Loan Document except as specifically set forth in a waiver granted pursuant to the provisions of Section 17 hereof; or UTI-PLEDGE AGREEMENT 15 16 (vi) any other circumstances which might otherwise constitute a defense available to, or a discharge of, any Pledgor. Section 27. Agent's Right to Sever Indebtedness. (a) Each Pledgor acknowledges that (i) the Pledged Collateral does not constitute the sole source of security for the payment and performance of the Secured Obligations and that the Secured Obligations are also secured by other types of property of such Pledgor and its Affiliates in other jurisdictions (all such property, collectively, the "COLLATERAL"), (ii) the number of such jurisdictions and the nature of the transaction of which this instrument is a part are such that it would have been impracticable for the parties to allocate to each item of Collateral a specific loan amount and to execute in respect of such item a separate credit agreement and security agreement, and (iii) each Pledgor intends that Agent have the same rights with respect to the Pledged Collateral, in any judicial proceeding relating to the exercise of any right or remedy hereunder or otherwise, that Agent would have had if each item of Collateral had been pledged or encumbered pursuant to a separate credit agreement and security agreement. In furtherance of such intent, each Pledgor agrees to the greatest extent permitted by law that, from and after the occurrence of an Event of Default, Agent may at its option, at any time and from time to time, by notice (an "ALLOCATION NOTICE") to such Pledgor allocate a portion of the Secured Obligations (the "ALLOCATED INDEBTEDNESS") to the Pledged Collateral pledged by it and sever from the remaining Secured Obligations the Allocated Indebtedness. From and after the giving of an Allocation Notice with respect to the Pledged Collateral, the Secured Obligations hereunder shall be limited to the extent set forth in the Allocation Notice and (as so limited) shall, for all purposes, be construed as a separate credit obligation of such Pledgor unrelated to the other transactions contemplated by the Loan Agreement. To the extent that the proceeds of any judicial proceeding relating to the exercise of any right or remedy hereunder of the Pledged Collateral shall exceed the Allocated Indebtedness, such proceeds shall belong to such Pledgor and shall not be available hereunder to satisfy any Secured Obligations of such Pledgor other than the Allocated Indebtedness. In any action or proceeding to exercise any right or remedy under this Agreement which is commenced after the giving by Agent of an Allocation Notice, the Allocation Notice shall be conclusive proof of the limits of the Secured Obligations hereby secured, and such Pledgor may introduce, by way of defense or counterclaim, evidence thereof in any such action or proceeding. Notwithstanding any provision of this Section 27, the proceeds received by the Agent pursuant to this Agreement shall be applied by the Agent in accordance with the provisions of Section 11 hereof. (b) Each Pledgor hereby waives to the fullest extent permitted by law the right to a discharge of any of the Secured Obligations under any statute or rule of law now or hereafter in effect which provides that the exercise of any particular right or remedy as provided for herein (by judicial proceedings or otherwise) constitutes the exclusive means for satisfaction of the Secured Obligations or which makes unavailable any further judgment or any other right or remedy provided for herein because the Agent elected to proceed with the exercise of such initial right or remedy or because of any failure by Agent to comply with laws that prescribe conditions to the entitlement to such subsequent judgment or the availability of such subsequent right or remedy. In the event that, notwithstanding the foregoing waiver, any court shall for any reason hold that such subsequent judgment or action is not available to Agent, no Pledgor shall to the extent permitted by applicable law, (i) introduce in any other jurisdiction any judgment so holding as a defense to enforcement against such Pledgor of any remedy in the Loan Agreement or any UTI-PLEDGE AGREEMENT 16 17 other Loan Document or (ii) seek to have such judgment recognized or entered in any other jurisdiction, and any such judgment shall in all events be limited in application only to the state or jurisdiction where rendered and only with respect to the Collateral referred to in such judgment. (c) In the event any instrument in addition to the Allocation Notice is necessary to effectuate the provisions of this Section 27, including, without limitation, any amendment to this Agreement, any substitute promissory note or affidavit or certificate of any kind, each Pledgor agrees that it shall execute and deliver any such instrument reasonably requested by the Agent so long as such instrument is consistent with the terms of the Loan Documents. UTI-PLEDGE AGREEMENT 17 18 IN WITNESS WHEREOF, each Pledgor and the Agent have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the date first above written. PLEDGORS: PATTERSON-UTI ENERGY, INC. By: ------------------------------------------------ Name: ---------------------------------------------- Title: --------------------------------------------- PATTERSON (LP) LLC By: ------------------------------------------------ Name: ---------------------------------------------- Title: --------------------------------------------- PATTERSON (GP) LLC By: ------------------------------------------------ Name: ---------------------------------------------- Title: --------------------------------------------- PATTERSON (GP2) LLC By: ------------------------------------------------ Name: ---------------------------------------------- Title: --------------------------------------------- PATTERSON-UTI DRILLING COMPANY LP, LLLP By: Patterson (GP) LLC, its general partner By: ------------------------------------------ Name: ---------------------------------------- Title: --------------------------------------- AGENT: THE CIT GROUP/BUSINESS CREDIT, INC. By: ------------------------------------------ Name: ---------------------------------------- Title: --------------------------------------- UTI-PLEDGE AGREEMENT 19 The undersigned hereby each agrees that it will comply with instructions originated by Pledgee without further consent by Pledgor. It is intended that this undertaking by the undersigned confer control over the Pledged Interests on Pledgee for purposes of perfecting Pledgee's security interest in the Pledged Interests under the Code.
PATTERSON (LP) LLC PATTERSON-UTI DRILLING COMPANY LP, LLLP By: By: Patterson (GP) LLC, its general partner ---------------------------------------- Name: -------------------------------------- Title: By: ------------------------------------- ---------------------------------- Name: -------------------------------- PATTERSON (GP) LLC Title: ------------------------------- By: ---------------------------------------- PATTERSON-UTI DRILLING COMPANY SOUTH LP, LLLP Name: -------------------------------------- By: Patterson (GP2) LLC., its general partner Title: ------------------------------------- By: ---------------------------------- Name: PATTERSON (GP2) LLC -------------------------------- Title: By: ------------------------------ ---------------------------------------- Name: PATTERSON-UTI DRILLING COMPANY WEST LP, LLLP -------------------------------------- Title: By: Patterson (GP2) LLC, its general partner ------------------------------------- By: PATTERSON PETROLEUM LP, LLLP --------------------------------- Name: By: Patterson (GP) LLC, its general partner ------------------------------- Title: By: ----------------------------- ------------------------------ Name: LONE STAR MUD LP, LLLP ---------------------------- Title: By: Patterson (GP) LLC, its general partner --------------------------- By: PATTERSON PETROLEUM TRADING COMPANY LP, --------------------------------- LLLP Name: ------------------------------- By: Patterson (GP) LLC, its general partner Title: ------------------------------ By: ------------------------------ Name: AMBAR DRILLING FLUIDS LP, LLLP ---------------------------- Title: By: Patterson (GP) LLC, its general partner --------------------------- By: --------------------------------- Name: ------------------------------- Title: ------------------------------
UTI-PLEDGE AGREEMENT 20 SCHEDULE A PLEDGED SECURITIES UTICO, INC.: (1) 1,000 shares of common stock owned by Patterson-UTI Energy, Inc. PATTERSON (GP) LLC: (1) 100% membership interest owned by Patterson-UTI Energy, Inc. PATTERSON (LP) LLC: (1) 100% membership interest owned by Patterson-UTI Energy, Inc. AMBAR DRILLING FLUIDS LP, LLLP (1) 1% General Partnership interest owned by Patterson (GP) LLC (2) 99%. Limited Partnership interest owned by Patterson (LP) LLC LONE STAR MUD LP, LLLP (1) 1% General Partnership interest owned by Patterson (GP) LLC (2) 99% Limited Partnership interest owned by Patterson (LP) LLC PATTERSON - UTI DRILLING COMPANY LP, LLLP (1) 1% General Partnership interest owned by Patterson (GP) LLC (2) 99%. Limited Partnership interest owned by Patterson (LP) LLC PATTERSON PETROLEUM LP, LLLP (1) 1% General Partnership interest owned by Patterson (GP) LLC (2) 99%. Limited Partnership interest owned by Patterson (LP) LLC PATTERSON PETROLEUM TRADING COMPANY, LP, LLLP (1) 1% General Partnership interest owned by Patterson (GP) LLC (2) 99%. Limited Partnership interest owned by Patterson (LP) LLC PATTERSON (GP2) LLC (1) 100% membership interest owned by Patterson UTI Drilling Company LP, LLLP PATTERSON - UTI DRILLING COMPANY SOUTH LP, LLLP (1) 1% General Partnership interest owned by Patterson (GP2) LLC (2) 99% Limited Partnership interest owned by Patterson - UTI Drilling Company LP, LLLP PATTERSON UTI DRILLING COMPANY WEST LP, LLLP (1) 1% General Partnership interest owned by Patterson (GP2) LLC (2) 99% Limited Partnership interest owned by Patterson - UTI Drilling Company LP, LLLP UTI-PLEDGE AGREEMENT 21 SCHEDULE B INTERCOMPANY NOTES [None] UTI-PLEDGE AGREEMENT 22 EXHIBIT 1 PLEDGE AMENDMENT This Pledge Amendment, dated , is delivered pursuant to Section 5 of the Agreement referred to below. The undersigned hereby agrees that this Pledge Amendment may be attached to the Pledge Agreement, dated as of June 29, 2001, between the undersigned, certain other parties identified therein and THE CIT GROUP/BUSINESS CREDIT, INC., as Agent (the "AGREEMENT"; capitalized terms used herein and not defined have the meanings ascribed to them in the Agreement) and that the Pledged Securities and/or Intercompany Notes listed on this Pledge Amendment shall be deemed to be and shall become part of the Pledged Collateral and shall secure all Secured Obligations. --------------------------------------- Pledgor By: ------------------------------------ Name: ------------------------------- Title: ------------------------------ UTI-PLEDGE AGREEMENT -----END PRIVACY-ENHANCED MESSAGE-----