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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Hanover Compressor Company
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $0.001 per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
410768 10 5
- --------------------------------------------------------------------------------
(CUSIP Number)
Dean Ferris, c/o Schlumberger Technology Corporation,
300 Schlumberger Drive, MD:23, Sugarland, Texas 77478
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
August 31, 2001
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or
240.13d-1(g), check the following box / /.
NOTE: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. Sections 240.13d-7 for
other parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section
of the Act but shall be subject to all other provisions of the Act (however,
see the Notes).
POTENTIAL PERSONS WHO ARE TO RESPOND TO THE SOLICITATION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1746 (03-00)
CUSIP NO. 410768 10 5
- --------------------------------------------------------------------------------
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
------------------------------------------------------------
Schlumberger Technology Corporation 22-1692661
- ------------------- ------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(See Instructions)
(a) .......................................................
(b) .......................................................
- ------------------- ------------------------------------------------------------
3. SEC Use Only ..............................................
- ------------------- ------------------------------------------------------------
4. Source of Funds (See Instructions) 00.......................
- ------------------- ------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings Is Required
Pursuant to Items 2(d) or 2(e)..............................
- ------------------- ------------------------------------------------------------
6. Citizenship or Place of Organization Texas
- ------------------- ------------------------------------------------------------
- ------------------- ------------------------------------------------------------
Number of 7. Sole Voting Power 51,491
Shares Bene- --------------------------------------------------------------
ficially by
Owned by Each 8. Shared Voting Power 0
Reporting --------------------------------------------------------------
Person With
9. Sole Dispositive Power 51,491
--------------------------------------------------------------
10. Shared Dispositive Power 0
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting
Person 51,491
- ------------------- ------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain
Shares (See Instructions)
- ------------------- ------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11) 0.1%
- ------------------- ------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
CO..........................................................
............................................................
............................................................
............................................................
............................................................
CUSIP NO. 410768 10 5
- --------------------------------------------------------------------------------
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Schlumberger Surenco S.A.
- ------------------- ------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(See Instructions)
(a) .......................................................
(b) .......................................................
- ------------------- ------------------------------------------------------------
3. SEC Use Only ..............................................
- ------------------- ------------------------------------------------------------
4. Source of Funds (See Instructions) 00.......................
- ------------------- ------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings Is Required
Pursuant to Items 2(d) or 2(e)..............................
- ------------------- ------------------------------------------------------------
6. Citizenship or Place of Organization Panama
- ------------------- ------------------------------------------------------------
- ------------------- ------------------------------------------------------------
Number of 7. Sole Voting Power 6,762,479
Shares Bene- --------------------------------------------------------------
ficially by
Owned by Each 8. Shared Voting Power 0
Reporting --------------------------------------------------------------
Person With
9. Sole Dispositive Power 6,762,479
--------------------------------------------------------------
10. Shared Dispositive Power 0
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting
Person 6,762,479
- ------------------- ------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain
Shares (See Instructions)
- ------------------- ------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11) 17.5%
- ------------------- ------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
CO..........................................................
............................................................
............................................................
............................................................
............................................................
CUSIP NO. 410768 10 5
- --------------------------------------------------------------------------------
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Schlumberger Oilfield Holdings Ltd.
- ------------------- ------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(See Instructions)
(a) .......................................................
(b) .......................................................
- ------------------- ------------------------------------------------------------
3. SEC Use Only ..............................................
- ------------------- ------------------------------------------------------------
4. Source of Funds (See Instructions) 00.......................
- ------------------- ------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings Is Required
Pursuant to Items 2(d) or 2(e)..............................
- ------------------- ------------------------------------------------------------
6. Citizenship or Place of Organization Cayman Islands
- ------------------- ------------------------------------------------------------
- ------------------- ------------------------------------------------------------
Number of 7. Sole Voting Power 366,158
Shares Bene- --------------------------------------------------------------
ficially by
Owned by Each 8. Shared Voting Power 0
Reporting --------------------------------------------------------------
Person With
9. Sole Dispositive Power 366,158
--------------------------------------------------------------
10. Shared Dispositive Power 0
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting
Person 366,158
- ------------------- ------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain
Shares (See Instructions)
- ------------------- ------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11) 0.9%
- ------------------- ------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
CO..........................................................
............................................................
............................................................
............................................................
............................................................
CUSIP NO. 410768 10 5
- --------------------------------------------------------------------------------
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Camco International Inc. 13-3517570
- ------------------- ------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(See Instructions)
(a) .......................................................
(b) .......................................................
- ------------------- ------------------------------------------------------------
3. SEC Use Only ..............................................
- ------------------- ------------------------------------------------------------
4. Source of Funds (See Instructions) 00.......................
- ------------------- ------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings Is Required
Pursuant to Items 2(d) or 2(e)..............................
- ------------------- ------------------------------------------------------------
6. Citizenship or Place of Organization Delaware
- ------------------- ------------------------------------------------------------
- ------------------- ------------------------------------------------------------
Number of 7. Sole Voting Power 6,762,479
Shares Bene- --------------------------------------------------------------
ficially by
Owned by Each 8. Shared Voting Power 0
Reporting --------------------------------------------------------------
Person With
9. Sole Dispositive Power 6,762,479
--------------------------------------------------------------
10. Shared Dispositive Power 0
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting
Person 6,762,479
- ------------------- ------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain
Shares (See Instructions)
- ------------------- ------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11) 17.5%
- ------------------- ------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
CO..........................................................
............................................................
............................................................
............................................................
............................................................
CUSIP NO. 410768 10 5
- --------------------------------------------------------------------------------
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Operational Services, Inc. 76-0313484
- ------------------- ------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(See Instructions)
(a) .......................................................
(b) .......................................................
- ------------------- ------------------------------------------------------------
3. SEC Use Only ..............................................
- ------------------- ------------------------------------------------------------
4. Source of Funds (See Instructions) 00.......................
- ------------------- ------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings Is Required
Pursuant to Items 2(d) or 2(e)..............................
- ------------------- ------------------------------------------------------------
6. Citizenship or Place of Organization Texas
- ------------------- ------------------------------------------------------------
- ------------------- ------------------------------------------------------------
Number of 7. Sole Voting Power 97,261
Shares Bene- --------------------------------------------------------------
ficially by
Owned by Each 8. Shared Voting Power 0
Reporting --------------------------------------------------------------
Person With
9. Sole Dispositive Power 97,261
--------------------------------------------------------------
10. Shared Dispositive Power 0
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting
Person 97,261
- ------------------- ------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain
Shares (See Instructions)
- ------------------- ------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11) 0.3%
- ------------------- ------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
CO..........................................................
............................................................
............................................................
............................................................
............................................................
CUSIP NO. 410768 10 5
- --------------------------------------------------------------------------------
1. Names of Reporting Persons.
I.R.S. Identification Nos. of above persons (entities only).
Schlumberger Limited
- ------------------- ------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group
(See Instructions)
(a) .......................................................
(b) .......................................................
- ------------------- ------------------------------------------------------------
3. SEC Use Only ..............................................
- ------------------- ------------------------------------------------------------
4. Source of Funds (See Instructions) 00.......................
- ------------------- ------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings Is Required
Pursuant to Items 2(d) or 2(e)..............................
- ------------------- ------------------------------------------------------------
6. Citizenship or Place of Organization Netherlands Antilles
- ------------------- ------------------------------------------------------------
- ------------------- ------------------------------------------------------------
Number of 7. Sole Voting Power 0
Shares Bene- --------------------------------------------------------------
ficially by
Owned by Each 8. Shared Voting Power 0
Reporting --------------------------------------------------------------
Person With
9. Sole Dispositive Power 0
--------------------------------------------------------------
10. Shared Dispositive Power 0
- --------------------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting
Person 8,707,693
- ------------------- ------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain
Shares (See Instructions)
- ------------------- ------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11) 22.5%
- ------------------- ------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
CO..........................................................
............................................................
............................................................
............................................................
............................................................
ITEM 1. SECURITY OF ISSUER
This statement on Schedule 13-D relates to common stock, par value $.001 per
share, of Hanover Compressor Company (the "Hanover Stock") and is being filed
pursuant to Rule 13d-1 under the Securities and Exchange Act of 1934, as
amended. The principal executive offices of the Issuer is located at 12001
North Houston Rosslyn, Houston, Texas 77806.
ITEM 2. IDENTITY AND BACKGROUND
The name of the reporting persons filing this statement are Schlumberger
Limited, a company incorporated in the Netherlands Antilles ("SLB"),
Schlumberger Technology Corporation, a company incorporated in Texas ("STC"),
Camco International, Inc., a company incorporated in Delaware ("CII"),
Schlumberger Surenco S.A., a company incorporated in Panama ("Surenco"),
Operational Services, Inc., a Company incorporated in Texas ("OSI"), and
Schlumberger Oilfield Holdings Ltd., a company incorporated in the British
Virgin Islands ("SOHL," and together with SLB, STC, CII, Surenco and OSI, the
"Schlumberger Companies"). SLB owns, directly or indirectly, all of the
equity interests of each of STC, CII, Surenco, OSI and SOHL and thus may be
deemed to beneficially own all of the Hanover Stock owned by the other
Schlumberger Companies. The directors and executive officers of each of SLB,
STC, CII, Surenco, OSI and SOHL are set forth on Schedule I hereto.
The address for the principal executive offices of the Schlumberger Companies
are as follows:
153 East 53rd Street, 57th Floor
New York, New York 10022
42 Rue Saint-Dominique
Paris, France 75007
Park Straat 83
The Hague, The Netherlands 2514 JG
The principal business of the Schlumberger Companies is to engage, directly
or indirectly, in two primary business segments: (i) Oilfield Services, which
is organized into three product groups: Reservoir Evaluation, Reservoir
Development, and Reservoir Management, that provide exploration and
production services required during the life of an oil and gas reservoir to
the petroleum industry; and (ii) Schlumberger Sema, which provides design,
implementation, operations and management of information systems and
IT-related consulting services, smart card-based solutions, semiconductor
test, metrology and handling systems and services, and corporate IP (internet
protocol) and network solutions to customers.
During the past five years, none of SLB, STC, CII, Surenco, OSI and SOHL or,
to the best of their knowledge, any of the persons listed on Schedule I
hereto, (i) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), or (ii) has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction
that resulted in a judgment decree or final order enjoining future violations
of, or prohibiting or mandating any activities subject to, federal or state
securities laws or finding any violation of such laws except as follows:
On July 27, 1999, the US Department of Justice filed petitions against SLB
and Smith International, Inc., with the United States District Court in
Washington, D.C., alleging civil and criminal contempt in connection with the
completion of the MI drilling fluids joint venture transaction between SLB
and Smith. The petitions alleged that the transaction violated a 1994 consent
decree entered in U.S. v. Baroid Corporation (the "Baroid decree"). On
December 9, 1999, SLB, Smith and the Department of Justice agreed to settle
the civil contempt claim. The Court subsequently found Smith and SLB in
criminal contempt and fined each $750,000. The December 22, 1999 order
approving the civil settlement agreement provides for the modification of the
Baroid decree, with the consent of the Department of Justice, to remove the
reference to "Schlumberger Ltd." from the Baroid decree, and for disgorgment
of the net income of the joint venture from the time of its creation through
the date of the settlement agreement. SLB's share of the amount payable in
connection with the settlement was $6.34 million. On March 13, 2000,
following expiration of a public comment period regarding the proposed
modification, the Court signed the order modifying the Baroid decree.
The attached Schedule I is a list of the executive officers and directors of
SLB, STC, CII, Surenco, OSI and SOHL which contain the following information
with respect to each such person: (i) name, (ii) business address, (iii)
present principal occupation or employment and the name, principal business
address and address of any corporation or other organization in which such
employment is conducted, and (iv) citizenship.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
On June 28, 2001, the Issuer, Hanover Compression Limited Partnership, STC,
CII, Surenco and SOHL entered into a Purchase Agreement (the "Purchase
Agreement"), pursuant to which on August 31, 2001, the Issuer acquired equity
interests in certain companies engaged in, and assets used in connection
with, the gas compression business of the Schlumberger group of companies.
Hanover Compression Limited Partnership acquired: (i) 100% of the issued and
outstanding shares of the capital stock of Productions Operators Corporation,
a Delaware corporation, from CII, (ii) a 35.5% equity interest in and a
$7,952,000 note to Harwat International Finance N.V., a Curacao limited
liability company, from SOHL (iii) a 30% equity interest in and a $79,185,000
loan to WilPro Energy Service (PIGAP II) Limited, a Cayman Islands company,
from Surenco and (iv) the assets of Operational Services, Inc.'s Mechanical
Services Group ((i) through (iv) is referred to herein as the "Purchase"). In
addition, pursuant to the Purchase Agreement, STC, SOHL and Hanover
Compression Limited Partnership entered into an Alliance Agreement.
The purchase price paid by Hanover for the assets and the Alliance Agreement
consisted of (i) Two Hundred Seventy Million Dollars ($270,000,000) in cash
(subject to certain true up provisions and a possible additional $58,000,000
payment upon the occurrence of certain events), (ii) a promissory note in the
principal amount of One Hundred Fifty Million Dollars ($150,000,000), and
(iii) 8,707,693 shares of Hanover Stock.
ITEM 4. PURPOSE OF TRANSACTION
The shares of Hanover Stock received by the Schlumberger Companies were
acquired as partial consideration for certain equity interests of companies
engaged in, assets used in connection with, and an Alliance Agreement related
to the gas compression business conducted by the Schlumberger Companies. The
shares of Hanover Stock are being held for investment purposes by the
Schlumberger Companies.
It is currently expected that following the consummation of the Purchase, the
business and operations of Hanover will continue to be conducted as they have
historically been conducted. Except as described below, the Schlumberger
Companies have no present plans or proposals that would result in any
extraordinary corporate transaction, such as a merger, reorganization,
liquidation involving Hanover or any of its subsidiaries, or purchase or sale
or transfer of a material amount of assets of Hanover or any of its
subsidiaries or any other material changes to Hanover's capitalization,
dividend policy, corporate structure, business or composition of the board of
directors of Hanover or the management of Hanover. Pursuant to the Purchase
Agreement, the Schlumberger Companies are entitled to appoint one director to
the Board of Directors of Hanover until the later to occur of (i) the fifth
anniversary of the consummation of the Purchase Agreement and (ii) the
termination of the Alliance Agreement, so long as the Schlumberger Companies
hold an aggregate of at least five percent (5%) of Hanover's issued and
outstanding capital stock. If the Schlumberger Companies' designee is not
elected to Hanover's Board of Directors, Hanover shall take all actions
necessary, subject to applicable laws and New York Stock Exchange rules, to
appoint a designee of the Schlumberger Companies.
The Schlumberger Companies intend to review continuously their position in
Hanover. Depending upon future evaluations of the business prospects of
Hanover and upon other developments, including, but not limited to, general
economic and business conditions and stock market conditions, the
Schlumberger Companies may retain or from time to time increase their
holdings or dispose of all or a portion of their holdings of Hanover, subject
to any applicable legal and contractual restrictions on the ability to do so.
The Schlumberger Companies are contractually prohibited, except upon the
occurrence of certain events, from (i) selling their shares of Hanover Stock
prior to June 28, 2004 or (ii) increasing their collective holdings of
Hanover Stock to more than 25% outstanding shares during such period.
ITEM 5. INTEREST IN SECURITIES OF ISSUER
(a) On August 31, 2001, the Schlumberger Companies acquired an aggregate of
8,707,693 shares of Hanover Stock in the Purchase. The holdings of the
individual Schlumberger Companies are as follows:
COMPANY SHARES PERCENTAGE
------- ------ ----------
STC 51,491 0.1%
CII 6,762,479 17.5%
Surenco 1,430,304 3.7%
SOHL 366,158 0.9%
OSI 97,261 0.3%
Total 8,707,693 22.5%
SLB, as the direct or indirect owner of all of the other Schlumberger
Companies, may be deemed to beneficially own all 8,707,693 shares of Hanover
Stock owned by the Schlumberger Companies.
(b) Each of the Schlumberger Companies (other than SLB) has sole voting and
dispositive power with respect to the number of shares of Hanover Stock set
forth opposite its name in the table above.
(c) Except as described herein, none of SLB, STC, CII, Surenco, OSI or SOHL
or, to the best of their knowledge, any other person referred to in Schedule
I attached hereto, beneficially owns or has acquired or disposed of any
Hanover Stock during the past 60 days.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER
Except as described herein, none of SLB, STC, CII, Surenco, OSI or SOHL or,
to the best of their knowledge, any other person referred to in Schedule I
attached hereto, has any contracts, arrangements, understandings or
relationships (legal or otherwise) with any persons with respect to any
securities of Issuer, including, but not limited to, transfers or voting of
any securities, finders fees, joint ventures, loan or option arrangements,
puts or calls, guarantees of profits, division of profits or loss, or the
giving or withholding of any proxies.
1. Registration Rights Agreement
Pursuant to the Lock-Up, Standstill and Registration Rights Agreement dated
August 31, 2001, between STC, CII, Surenco, SOHL, OSI and Hanover (the
"Rights Agreement"), Hanover has granted to each of the Schlumberger
Companies certain registration rights in connection with their receipt of the
Hanover Stock. The registration rights granted to the Schlumberger Companies
include (i) the right, subject to certain restrictions, to register the
Hanover Stock in any registration of securities initiated by Hanover within
the period of time beginning on the third anniversary of the date of the
Rights Agreement and ending on the tenth anniversary of the date of the
Rights Agreement, and (ii) the right, subject to certain restrictions, to
demand up to five registrations of the Hanover Stock within the period of
time beginning on the third anniversary of date of the Rights Agreement and
ending on the tenth anniversary of the date of the Rights Agreement.
Also pursuant to the Rights Agreement, neither STC nor any of its affiliates
will directly or indirectly, offer, sell, contract to sell, pledge, grant any
option to purchase, make any short sale or otherwise dispose of any of the
Hanover Stock or any options or warrants to purchase any Hanover Stock, or
any securities convertible into, exchangeable for
or that represent the right to receive such Hanover Stock beginning on the
date of the Rights Agreement through the tenth anniversary of the date of the
Rights Agreement.
In addition, the Rights Agreement specifies that neither STC nor any of its
affiliates shall, without the prior written consent of Hanover, (i) seek or
cause or participate in any transaction which would cause STC and its
affiliates to own, directly or indirectly, greater than twenty-five percent
(25%) of the shares of Common Stock of Hanover then outstanding, (ii) make
any public announcement with respect to, or submit a proposal for, any
extraordinary transaction involving Hanover, (iii) form or join in any group
with respect to the matters set forth in (i) above, or (iv) enter into
discussions or arrangements with any third party with respect to matters set
forth in (i) or advise assist other take any other action with respect to the
foregoing.
2. The Purchase Agreement
Pursuant to the Purchase Agreement, Hanover Compression Limited Partnership
and Hanover have agreed to use commercially reasonable efforts to cause
WilPro Energy Services (PIGAP II) Limited to accomplish substantial
completion of the project in accordance with the PIGAP II Services Agreement,
dated as of April 16, 1999 between PDVSA PETROLEO Y GAS S.A. and WilPro
Energy Services (PIGAP II) Limited, and any tests necessary for the PIGAP II
financing to become non-recourse to Hanover and its affiliates on or before
December 31, 2002. If such conditions are not met on or prior to December 31,
2002, Hanover Compression Limited Partnership may force Surenco to repurchase
the equity interest and note purchased from Surenco.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS
The following documents are hereby filed as exhibits:
1. Purchase Agreement dated June 28 2001, by and among Schlumberger
Technology Corporation, Schlumberger Oilfield Holdings Limited,
Schlumberger Surenco S.A., Camco International Inc., Hanover Compressor
Company and Hanover Compression Limited Partnership.
2. Lock-Up, Standstill and Registration Rights Agreement dated August 31,
2001, by and among Schlumberger Technology Corporation, Schlumberger
Oilfield Holdings Limited, Schlumberger Surenco S.A., Camco
International, Inc. and Hanover Compressor Company.
3. Amendment No. 1 to the Purchase Agreement dated as of August 30, 2001,
by and among Schlumberger Technology Corporation, Schlumberger Oilfield
Holdings Limited, Schlumberger Surenco S.A., Camco International Inc.,
Hanover Compressor Company and Hanover Compression Limited Partnership.
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
OF THE SCHLUMBERGER COMPANIES
Set forth below is the name and present principal occupation or employment of
each executive officer and member of the board of directors of each of the
Schlumberger Companies. The business address of each is c/o Schlumberger
Technology Corporation, 300 Schlumberger Drive, Sugar Land, Texas 77478. Each
person is, unless indicated below, a citizen of the United States.
NAME AND POSITION PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT CITIZENSHIP
SLB
DIRECTORS
Don E. Ackerman Private Investor U.S.A.
D. Euan Baird Chairman of the Board and Chief Executive Officer of U.K.
Schlumberger Limited
John Deutch Institute Professor, Massachusetts Institute of Technology, U.S.A.
Cambridge Massachusetts
Victor E. Grijalva Vice Chairman and Executive Vice President of Schlumberger Ecuador
Limited
Andre Levy-Lang Private Investor France
John C. Mayo Finance Director of General Electric Company, plc, London, U.K.
England
William T. McCormick, Jr. Chairman and Chief Executive Officer of CMS Energy Corp., U.S.A.
Dearborn, Michigan
Didier Primat President of Primwest Holdings N.V., Curacao, Netherlands France
Antilles
Nicolas Seydoux Chairman and Chief Executive France
Officer of Gaumont, Paris, France
Linda Gillespie Stuntz Partner of the law firm
Stuntz, Davis & Staffer, P.C., Washington, D.C. U.S.A.
Sven Ullring Independent Advisor, Hovik, Norway Norway
Yoshihiko Wakumuto Adviser to Toshiba Corporation, Tokyo, Japan Japan
EXECUTIVE OFFICERS
D. Euan Baird Chairman of the Board and Chief Executive Officer U.K.
Jack Liu Executive Vice President and Chief Financial Officer U.S.A.
Victor Grijalva Vice Chairman Ecuador
Andrew Gould Executive Vice President, Oilfield Services Division U.K.
Irwin Pfister Executive Vice President, Schlumberger Sema Division U.S.A.
STC
DIRECTORS
David S. Browning VP, Secretary & General Counsel U.S.A.
Gary Kolstad OFS GeoMarket Manager, US Land U.S.A.
Arthur Lindenauer Chairman, STC U.S.A.
Rex Ross President, North & Central America Schlumberger Sema U.S.A.
OFFICERS
Arthur Lindenauer Chairman, STC U.S.A.
Vacancy President N/A
David S. Browning Vice President U.S.A.
Roseline Chapel-Delayne Vice President France
Peter A. Goode Vice President Australia
Gary Kolstad Vice President U.S.A.
David Mullen Vice President Ireland
Julio M. Quintana Vice President U.S.A.
William Coates VP & GM Austin Tech Center U.S.A.
Sophie Zurquiyah Rousset VP & GM Sch Conveyance & Delivery U.S.A./France
Francois Auzerais VP & GM Sch Doll Research Center U.S.A.
Joe Goss VP Sch Reservoir Completions Center U.S.A.
David Malone VP Sch Reservoir Completions Center U.S.A.
Tom Zimmerman VP Sugar Land Product Center U.S.A.
David S. Browning Secretary U.S.A.
Terry D. Keller Treasurer U.S.A.
SURENCO
DIRECTORS
Brendan Connolly OFS GeoMarket Mgr. - VTT U.K.
Joseph Kantarjian OFS GeoMarket Controller - VTT Lebanon/Venezuela
Marc Ribas OFS GeoMarket Personnel Mgr - VTT France
OFFICERS
Brendan Connolly President U.K.
Orlando Vaca Vice President Bolivia
Jean-Francois Bauer Secretary France
Joseph Kantarjian Treasurer Lebanon/Venezuela
SOHL
DIRECTORS
Glen Beadon Operations Mgr Anadrill - VTT Trinidad/Venezuela
Joseph Kantarjian OFS GeoMarket Controller - VTT Lebanon/Venezuela
Khalid M. Houh Business Manager, Reservoir Evaluation Saudi Arabia
OFFICERS
Khalid M. Houh Business Manager, Reservoir Evaluation Saudi Arabia
Joseph Kantarjian Treasurer Lebanon/Venezuela
CII
DIRECTORS
David S. Browning Vice President and Secretary & General Counsel of STC U.S.A.
Arthur Lindenauer Chairman - STC U.S.A.
OFFICERS
Rene J. Huck President and Chief Executive Officer France
Lias J. Steen Vice President U.S.A.
John D. Deane Vice President Drilling Technology U.S.A.
Lias J. Steen Secretary & General Counsel U.S.A.
Allen Wienecke Treasurer U.S.A.
OSI
DIRECTORS
Antonio Campo President, IPM Columbia
Kenneth Trice President, OSI U.S.A.
OFFICERS
Kenneth Trice President U.S.A.
Antonio Campo Vice President Columbia
Kenneth Trice Secretary U.S.A.
Ann Bruso Webb Assistant Secretary U.S.A.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete
and correct.
SCHLUMBERGER LIMITED SCHLUMBERGER OILFIELD HOLDINGS LTD.
By: /s/ Victor Grijalva By: /s/ Joseph Kantarjian
----------------------------------------------- -----------------------------------------------
Name: Victor Grijalva Name: Joseph Kantarjian
Title: Vice Chairman and Executive Vice President Title: Director and Treasurer
SCHLUMBERGER TECHNOLOGY CORPORATION SCHLUMBERGER SURENCO S.A.
By: /s/ Peter A. Goode By: /s/ Orlando Vaca
----------------------------------------------- -----------------------------------------------
Name: Peter A. Goode Name: Orlando Vaca
Title: Vice President Title: Vice President
CAMCO INTERNATIONAL INC. OPERATIONAL SERVICES, INC.
By: /s/ Lias J. Steen By: /s/ Kenneth Trice
----------------------------------------------- -----------------------------------------------
Name: Lias J. Steen Name: Kenneth Trice
Title: Vice President Title: President
16
PURCHASE AGREEMENT
AMONG
SCHLUMBERGER TECHNOLOGY CORPORATION
("STC")
SCHLUMBERGER OILFIELD HOLDINGS LIMITED
("SOHL")
SCHLUMBERGER SURENCO S.A.
("SURENCO")
CAMCO INTERNATIONAL INC.
("CII")
HANOVER COMPRESSOR COMPANY
("HANOVER")
AND
HANOVER COMPRESSION LIMITED PARTNERSHIP
("PURCHASER")
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is entered into on the 28th day of June,
2001, among SCHLUMBERGER TECHNOLOGY CORPORATION, a Texas corporation ("STC"),
CAMCO INTERNATIONAL INC., a Delaware company ("CII"), SCHLUMBERGER SURENCO
S.A., a Panamanian company ("SURENCO"), and SCHLUMBERGER OILFIELD HOLDINGS
LTD., a British Virgin Islands company ("SOHL" and together with STC, CII and
Surenco, each a "SELLER" and, collectively, the "SELLERS" or "SCHLUMBERGER"),
HANOVER COMPRESSOR COMPANY, a Delaware corporation ("HANOVER"), and HANOVER
COMPRESSION LIMITED PARTNERSHIP, a Delaware limited partnership
("PURCHASER"), all of which are sometimes herein referred to as the "Parties"
and one of which is referred to as a "Party".
WHEREAS, subject to the terms and conditions set forth herein, the
Parties desire to effect: (i) the purchase by Purchaser and/or its
Affiliates, and the sale by each of the Sellers of their respective interests
in the gas compression business of the Schlumberger group of companies, the
composition of which is more fully described below, and (ii) the entry by
Hanover, SOHL or its designee, and STC into a strategic alliance as more
fully described below (together, the "TRANSACTION").
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, Purchaser, Hanover, and each Seller separately
agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 PURCHASE AND SALE. Subject to the terms and conditions hereof,
Purchaser and/or one or more of its Affiliates shall purchase: (i) 100% of
the issued and outstanding shares (the "POC SHARES") of the capital stock of
Production Operators Corporation, a Delaware corporation ("POC"), from CII,
(ii) a 35.5% equity interest in and a $7,952,000 loan to (the "HARWAT
INTEREST") Harwat International Finance N.V., a Curacao limited liability
company ("HARWAT"), from SOHL, (iii) a 30% equity interest in and a
$79,185,000 loan to ("WILPRO INTEREST") WilPro Energy Service (PIGAP II)
Limited, a Cayman Islands company ("WILPRO"), from Surenco, (iv) the
contracts and other assets of Operational Services, Inc.'s Mechanical
Services Group listed on EXHIBIT 1.1A (the "OSI ASSETS") and (v) the
contracts and other assets of STC relating to the Rocky Mountain gas
processing plant listed on EXHIBIT 1.1B (the "ROCKY MOUNTAIN ASSETS"). In
addition, STC, SOHL and Purchaser shall enter into the Alliance Agreement.
The consummation of the transactions contemplated in this SECTION 1.1 shall
be referred to herein as the "Closing".
1.2 CONSIDERATION/ALLOCATION.
(a) Subject to the terms and conditions hereof, and subject
to the adjustments specified in SECTION 1.3 hereof, the aggregate amount (the
"AGGREGATE PURCHASE PRICE") paid by Hanover for the Schlumberger Equity
Interests, the OSI Assets, the Rocky Mountain Assets and the Alliance
Agreement, which shall be allocated by the Parties in accordance with SECTION
1.2(c), shall consist of: (i) the following amounts paid at Closing: (A) Two
Hundred Seventy Million Dollars ($270,000,000) in cash, (B) One Hundred Fifty
Million Dollars
$150,000,000) in the form of a subordinated promissory note having the terms
set forth on the Term Sheet attached hereto as EXHIBIT 1.2 (the "HANOVER
NOTE") and (C) a number of shares of Hanover common stock ("HANOVER STOCK")
having a value (without giving effect to any restrictions on transfer) of Two
Hundred Eighty Three Million Dollars ($283,000,000), as provided in SECTION
1.2(b), and (ii) upon any draw down on a financing of the PIGAP II project
owned by WilPro, the net amount of the draw down multiplied by 30% until an
aggregate of Fifty Eight Million Dollars ($58,000,000) in cash has been paid
to Surenco.
(b) The Hanover Stock to which Sellers shall be entitled on
the Closing Date according to the terms of this ARTICLE I shall be the number
of such shares equal to the quotient of the purchase price to be paid in the
form of Hanover Stock divided by the Average Closing Price. The "Average
Closing Price" shall mean the average of the closing prices (the "UNCOLLARED
AVERAGE") of one share of Hanover Stock on the New York Stock Exchange as
reported in The Wall Street Journal for the thirty (30) days on which the New
York Stock Exchange is open and available for at least five (5) hours for the
trading of securities immediately prior to the earlier to occur of (i) the
tenth day following the day on which the final condition to closing set forth
in SECTION 6.3, SECTION 6.4, SECTION 6.6, SECTION 7.3, SECTION 7.4 and
SECTION 7.6 is satisfied or waived and (ii) the Closing Date; provided,
however, that if the UnCollared Average exceeds $41.50, the Average Closing
Price shall equal $41.50, and if the UnCollared Average is less than $32.50,
the Average Closing Price shall equal $32.50. For these purposes, during such
thirty (30) day period, Hanover or its Affiliates shall not purchase or cause
to be purchased any of the outstanding Hanover Stock and Sellers or their
Affiliates shall not sell or cause to be sold any of the outstanding Hanover
Stock; provided, however, that Hanover may purchase up to 300,000 shares of
Hanover Stock to fulfill its contractual obligations to participants under
its 401(k) plan. The Parties agree that the calculation of Average Closing
Price shall be carried to five (5) decimal places.
(c) Subject to the adjustments specified in SECTION 1.3,
the final allocation of the Aggregate Purchase Price among the Sellers shall
be as set forth on SCHEDULE 1.2(c).
(d) Immediately prior to the Closing, the Sellers may cause
POC to pay such Sellers cash (and may cause each POC Company to pay to POC
any component thereof); provided, that after giving effect to such payments,
the excess of current assets over current liabilities to be shown on the
Closing Balance Sheet shall not be less than Ten Million Dollars
($10,000,000). Each Seller may cause: (i) POC to make any such payments to
Sellers in the form of a dividend or a redemption, and (ii) any POC Company
to make any such payment to POC in the form of a dividend, a redemption, or
an inter-company loan.
(e) The parties agree that they shall use the discount
percentage set forth on SCHEDULE 1.2(e) as the value of the Hanover Stock for
all tax, accounting or other reporting purposes; provided, however, that the
determination of such value shall not affect the amount of Hanover Stock
issued pursuant to SECTION 1.2(b) hereof.
1.3 PURCHASE PRICE ADJUSTMENT.
(a) The Aggregate Purchase Price shall be adjusted by the
difference between the Actual Net Worth of the POC Companies (including
Schlumberger's equity ownership in the
2
Transferred Joint Venture Companies) on the Closing Date and the Target Net
Worth of the POC Companies (including Schlumberger's equity ownership in the
Transferred Joint Venture Companies). As set forth below, such adjustments
shall occur in two stages: (i) on the Closing Date, the Parties shall adjust
the Aggregate Purchase Price to reflect the difference between the Estimated
Net Worth of the POC Companies (including Schlumberger's equity ownership in
the Transferred Joint Venture Companies) and the Target Net Worth of the POC
Companies (including Schlumberger's equity ownership in the Transferred Joint
Venture Companies), and (ii) upon delivery of the True-Up Balance Sheet, the
Parties shall adjust the Aggregate Purchase Price to reflect the difference
between the Actual Net Worth of the POC Companies (including Schlumberger's
equity ownership in the Transferred Joint Venture Companies) and the
Estimated Net Worth of the POC Companies (including Schlumberger's equity
ownership in the Transferred Joint Venture Companies). If the relevant
Estimated Net Worth with respect to the POC Companies, the Harwat Interest or
the WilPro Interest is less than the relevant Target Net Worth, then the
applicable Seller shall remit to Purchaser on the Closing Date an amount
equal to such difference. If the relevant Estimated Net Worth with respect to
the POC Companies, the Harwat Interest or the WilPro Interest is greater than
the relevant Target Net Worth, then Purchaser shall remit to the applicable
Seller on the Closing Date an amount equal to such difference.
(b) CLOSING BALANCE SHEET. In order to determine the
Estimated Net Worth of the POC Companies (including Schlumberger's equity
ownership in the Transferred Joint Venture Companies), at or prior to the
Closing Date, Schlumberger shall prepare and deliver to Purchaser, or cause
to be prepared and delivered, at its own expense, a consolidated balance
sheet for the POC Companies, which includes the Harwat Interest and the
WilPro Interest, dated as of the last day of the month preceding the month in
which the Closing occurs (the "CLOSING BALANCE SHEET").
(c) TRUE-UP BALANCE SHEET. Within seventy-five (75) days
following the Closing Date, Purchaser shall prepare and deliver to
Schlumberger, or cause to be prepared and delivered, at its own expense, a
consolidated balance sheet for the POC Companies, which includes the Harwat
Interest and the WilPro Interest, dated as of the Closing Date (the "TRUE-UP
BALANCE SHEET") showing the Net Worth of the POC Companies, the Harwat
Interest and the WilPro Interest, in each case, at the Closing Date (as
adjusted pursuant to this SECTION 1.3(c), the "ACTUAL NET WORTH"). If
Schlumberger notifies Purchaser that it accepts the True-Up Balance Sheet or
fails to notify Purchaser in writing that it disputes the True-Up Balance
Sheet within fifteen (15) days of receipt of the True-Up Balance Sheet, then
Purchaser shall pay to the applicable Seller the amount, if any, by which the
applicable Actual Net Worth is greater than the applicable Estimated Net
Worth, and the applicable Seller shall pay to Purchaser the amount, if any,
by which the applicable Estimated Net Worth, is greater than the applicable
Actual Net Worth.
(d) PREPARATION AND ACCESS. The Closing Balance Sheet and
the True-Up Balance Sheet: (i) shall be prepared in all respects in
accordance with GAAP and consistent with Schlumberger's past practices, using
the equity method for the interests in the Transferred Joint Venture
Companies, (ii) shall not take into consideration any events occurring after
the Closing Date and (iii) except as set forth in SECTION 1.3(i) and SECTION
1.3(j), shall not account for the Excluded Liabilities or the Excluded
Assets. Schlumberger shall permit Purchaser's accountants
3
reasonable access to and review of all books and records, work papers, and
other pertinent information requested from time to time for the review of the
Closing Balance Sheet and the preparation of the True-Up Balance Sheet.
(e) DISPUTES. If Schlumberger notifies Purchaser in writing
within fifteen (15) days after receipt of the True-Up Balance Sheet that
Schlumberger disagrees with the determination of the Actual Net Worth of the
POC Companies (including Schlumberger's equity ownership in the Transferred
Joint Venture Companies), and that such dispute would result in an adjustment
to the Actual Net Worth of the POC Companies (including Schlumberger's equity
ownership in the Transferred Joint Venture Companies) on an aggregate basis
of at least One Million Dollars ($1,000,000), and such notice states with
reasonable specificity the basis for such disagreement, the Parties shall
attempt in good faith to resolve such dispute as soon as possible. Excluding
any disputed amount, Schlumberger shall pay to Purchaser the amount, if any,
by which the Estimated Net Worth of the POC Companies (including
Schlumberger's equity ownership in the Transferred Joint Venture Companies)
is greater than the Actual Net Worth of the POC Companies (including
Schlumberger's equity ownership in the Transferred Joint Venture Companies)
or Purchaser shall pay to Schlumberger the amount, if any, by which the
Actual Net Worth of the POC Companies (including Schlumberger's equity
ownership in the Transferred Joint Venture Companies) is greater than the
Estimated Net Worth of the POC Companies (including Schlumberger's equity
ownership in the Transferred Joint Venture Companies). If the Parties are
unable to resolve such dispute within thirty (30) days after Purchaser's
receipt of such notice, the Parties shall as soon as reasonably practicable
thereafter jointly submit such dispute for arbitration to an independent
mutually acceptable certified public accounting firm (or, if the Parties
cannot agree within seven (7) days on such an arbitrating accounting firm, to
the Houston office of Deloitte & Touche L.L.P. (the "ARBITRATING ACCOUNTING
FIRM")) for the purpose of resolving the dispute set forth in such notice.
The review performed by the Arbitrating Accounting Firm shall be limited to
the issues identified in the notice, which issues shall only relate to
whether the Actual Net Worth of the POC Companies (including Schlumberger's
equity ownership in the Transferred Joint Venture Companies), as shown on the
True-Up Balance Sheet, has been calculated correctly based on the principles
set forth in the first sentence of SECTION 1.3(d). The Arbitrating Accounting
Firm shall review and decide the issue or issues within thirty (30) days
after such submission. The decision of the Arbitrating Accounting Firm shall
be set forth in writing and delivered to the Parties, and shall be final and
binding. If the aggregate Net Worth of the POC Companies (including
Schlumberger's equity ownership in the Transferred Joint Venture Companies)
as determined by the Arbitrating Accounting Firm differs by more than One
Million Dollars ($1,000,000) from the Actual Net Worth of the POC Companies
(including Schlumberger's equity ownership in the Transferred Joint Venture
Companies), then such difference shall be settled between the Parties not
later than the third (3rd) business day after delivery of the written
decision by the Arbitrating Accounting Firm, in accordance with the method
set forth in SECTION 1.3(f). In case of any such payment, interest shall be
due from the Closing Date. The fees and costs of the Arbitrating Accounting
Firm shall be borne equally by Schlumberger and Purchaser.
(f) PAYMENTS AND INTEREST. Any payments called for by SECTION
1.3(a), SECTION 1.3(c) or SECTION 1.3(e) shall be made by wire transfer of
same-day funds, not later than the third (3rd) business day after the amount of
the payment is determined under the applicable section. Any payments called for
by SECTION 1.3(i) or SECTION 1.3(j) shall be made by wire
4
transfer of same-day funds on the date specified in the applicable section.
Interest shall be added to any amounts payable under this SECTION 1.3, and
shall be calculated at the prime interest rate as reported in THE WALL STREET
JOURNAL on the Closing Date (the "PRIME INTEREST RATE") on an annual basis,
pro-rated for the actual number of days between the Closing Date and the date
the payment is made.
(g) ALLOCATION OF PAYMENTS AND RECEIPTS BY SELLERS. Any
payment to or from Sellers under this SECTION 1.3 relating to the POC Companies
or the POC Joint Venture Companies shall be made by or to STC or CII. Any
payment to or from Sellers under this SECTION 1.3 relating to the WilPro
Companies or the Harwat Companies shall be made by or to Surenco or SOHL.
(h) DEFERRED TAX LIABILITIES. The amount of the Deferred State
Income Taxes payable reflected in the POC Companies' account number 230010 and
the Deferred Federal Income Taxes payable reflected in the POC Companies'
account number 230021 shall be excluded from the Balance Sheet, the Closing
Balance Sheet and the True-Up Balance Sheet.
(i) CURRENT TAX LIABILITIES. The POC Companies' current State
Income Taxes payable account number 210010 and Federal Income Taxes payable
account number 210020 (the balances of which accounts as of May 31, 2001 are
reflected in SCHEDULE 1.3(i)) shall be included in the Balance Sheet, the
Closing Balance Sheet and the True-Up Balance Sheet solely for the purpose of
this SECTION 1.3 notwithstanding the fact that the liabilities represented by
these accounts are Excluded Liabilities. The Purchaser shall pay to the Sellers
the amount reflected in those accounts as of the Closing Date on the first
quarterly tax payment date following the Closing Date.
(j) OTHER EXCLUDED ASSETS AND EXCLUDED LIABILITIES. The
assets and liabilities listed on SCHEDULE 1.3(j) shall be included in the
Balance Sheet, the Closing Balance Sheet and the True-Up Balance Sheet solely
for the purpose of this SECTION 1.3 notwithstanding the fact that the assets
and liabilities represented by these accounts are Excluded Assets and
Excluded Liabilities. The Purchaser shall pay to the Sellers on January 1,
2002 the amount of the liabilities reflected in those accounts listed in
SCHEDULE 1.3(j) as of the Closing Date less the amount of the assets
reflected in those accounts listed in SCHEDULE 1.3(j) as of the Closing Date.
1.4 EXCLUDED ASSETS. The Purchaser will not acquire any of the
Excluded Assets. As such, the Parties agree that the Excluded Assets shall be
transferred out of the POC Companies to Sellers or any non-POC Company
Affiliate of Sellers prior to the Closing.
1.5 EXCLUDED LIABILITIES. Except as set forth in SECTION 1.3(i) and
SECTION 1.3(j), notwithstanding any other provision of this Agreement,
Purchaser shall not assume, or otherwise be responsible for, any Excluded
Liabilities.
1.6 CONTRACT ASSIGNMENTS. Effective as of the Closing, CII shall
assign to Hanover or a designated Affiliate of Hanover, and Hanover or its
designated Affiliate shall assume, all rights and obligations of CII under
the agreements set forth on SCHEDULE 1.6.
5
1.7 PIGAP PUT; PRIORITY OF SET-OFF BY SCHLUMBERGER.
(a) Purchaser and Hanover shall use commercially reasonable
efforts to cause WilPro to accomplish "Project Substantial Completion" as
defined in the PIGAP II SERVICES AGREEMENT dated as of April 16, 1999 between
PDVSA PETROLEO Y GAS, S.A. and WILPRO ENERGY SERVICES (PIGAP II) LIMITED (the
"PIGAP II Agreement") and any tests necessary for the PIGAP II financing to
become non-recourse to Hanover and its Affiliates on or before December 31,
2002. If "Project Substantial Completion" does not occur on or before
December 31, 2002, or if the PIGAP II financing has not become non-recourse
without giving effect to any third party guarantees or credit support to
Hanover and its Affiliates as of that date, Purchaser will have the right, at
its sole discretion, to give Surenco notice at any time from January 1, 2003
until January 31, 2003 that Purchaser desires to put the WilPro Interest back
to Surenco pursuant to the terms of this Section 1.7(a) (the "PIGAP Put"). On
or before the date that is thirty (30) days after Purchaser notifies Surenco
in writing that Purchaser will exercise the PIGAP Put, Surenco shall, subject
to the Schlumberger right of set-off in Section 1.7(b) hereof, return to
Purchaser (i) the portion of the Aggregate Purchase Price allocated to the
WilPro Interest in SCHEDULE 1.2(c) and paid at Closing with interest from the
date of receipt of such payments at the prime rate as set forth in the WALL
STREET JOURNAL as of the Closing Date, plus (ii) the amount of any cash
contributions made by Purchaser and its Affiliates to WilPro after Closing
plus interest accrued thereon at the prime interest rate as reflected in the
WALL STREET JOURNAL as of the last business day prior to the contribution and
(iii) less the amount of any cash distribution received by Purchaser and its
Affiliates from WilPro after Closing plus interest accrued thereon at the
prime interest rate as reflected in the WALL STREET JOURNAL as of the last
day business day prior to the distribution (the sum of (i)+(ii)-(iii) being
the "PIGAP Consideration") and Purchaser shall deliver to Surenco
certificates evidencing the WilPro Interest, duly endorsed in blank or
accompanied by duly executed stock powers. At such time as WilPro (A)
satisfies the Project Substantial Completion test under the PIGAP II
Agreement and (B) the PIGAP II financing, if any, becomes non-recourse to
Hanover and its Affiliates, the PIGAP Put shall expire and have no further
value.
(b) Notwithstanding anything herein to the contrary, in the
event that the Purchaser shall exercise the PIGAP Put, Schlumberger shall have
the right to one or a series of set-offs aggregating the PIGAP Consideration
against all obligations of payment owed to Schlumberger by Hanover or Purchaser
in the following order of priority:
(i) Any amount the Parties agree is owed to SOHL and
Surenco under Section 1.3 hereof.
(ii) Any amount the Parties agree is owed to SOHL and
Surenco pursuant to Section 9.3 and Section 9.8 hereof.
(iii) Any amount the Parties agree is owed to
Schlumberger pursuant to Section 1.3, Section 9.3 or Section 9.8 hereof.
(iv) Any other amount the Parties agree is owed to
Sellers under any Related Agreement.
6
(c) If (i) the Sellers or any of their Affiliates have to
make aggregate payments in excess of $10 million pursuant to the terms of the
Project Completion Agreement as defined under the PIGAP II financing
documents among Schlumberger and/or its Affiliates, WilPro, Overseas Private
Investment Corporation and SACE relating to the PIGAP II financing for the
PIGAP II project of WilPro, or (ii) the Project Completion Agreement is still
outstanding as of December 31, 2002, the Sellers shall give Purchaser written
notice of that fact and Purchaser shall either, at its sole discretion,
within ten (10) days of receipt of that notice, exercise the PIGAP Put or pay
to Sellers and their Affiliates the aggregate amount the Sellers and their
Affiliates paid under the Project Completion Agreement (or if the Project
Completion Agreement is still outstanding as of December 31, 2002, cause the
Sellers and their Affiliates to be released from any obligations under the
Project Completion Agreement). If the Purchaser exercises the PIGAP Put, on
or before the date that is thirty (30) days after Purchaser notifies Surenco
in writing that Purchaser will exercise the PIGAP Put, Surenco shall, subject
to the Schlumberger right of set-off in Section 1.7(b) hereof, and subject to
the next sentence hereof, return to Purchaser the PIGAP Consideration and
Purchaser shall deliver to Surenco certificates evidencing the WilPro
Interest, duly endorsed in blank or accompanied by duly executed stock
powers. The Parties agree that if Purchaser or its Affiliates pay to Surenco
any amounts to cover amounts paid by Surenco and its Affiliates under the
Project Completion Agreement, the amounts so paid are not part of the PIGAP
Consideration or otherwise subject to being returned to Purchaser. In
addition, any capital contribution made by Purchaser or its Affiliates to
WilPro after it has reimbursed Surenco for amounts paid under the Project
Completion Agreement shall be not subject to return by Surenco if Purchaser
later exercises the PIGAP Put.
(d) If Surenco has not received Fifty Eight Million Dollars
($58,000,000) pursuant to SECTION 1.2(a)(ii) by December 31, 2001, interest
shall begin accruing at the prime interest rate as reported in the WALL STREET
JOURNAL on the first business day after December 31, 2001 on the difference
between $58,000,000 and the amount received pursuant to SECTION 1.2(a)(ii). If
Purchaser exercises the PIGAP Put, the accrued interest shall be cancelled. If,
however, the PIGAP Put expires, then the Affiliate of Purchaser that owns the
WilPro Interest directly shall pay to Surenco the amount of the accrued interest
within three (3) days of the expiration of the PIGAP Put.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as set forth in the Disclosure Statement delivered by the
Sellers to Purchaser and Hanover in connection herewith, each Seller represents
and warrants to Purchaser as follows as of the date of this Agreement and the
Closing Date:
2.1 ORGANIZATION. Each Seller and POC Entity is duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its organization and has all requisite corporate or partnership power and
authority and all material licenses, permits and authorizations necessary to
own or lease and operate its properties and to carry on its business as now
being conducted. Each POC Entity is duly qualified or licensed to do business
and is in good standing in each jurisdiction listed on SCHEDULE 2.1, which
jurisdictions constitute all of the jurisdictions in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to
be so qualified,
7
licensed or in good standing would not have a Material Adverse Effect. The
Sellers have delivered to Purchaser a true and correct copy of the
certificate of incorporation and bylaws (or other applicable charter
documents at non-U.S. or non-corporate entities) ("CHARTER DOCUMENTS") of
each POC Entity, in each case as amended to the date hereof and each of such
documents is in full force and effect. No POC Entity is in default or in
violation of any provision of its Charter Documents.
2.2 CAPITALIZATION; SELLER'S OWNERSHIP OF POC COMPANIES AND INTEREST
IN JOINT VENTURE COMPANIES.
(a) SCHEDULE 2.2 sets forth: (i) all of the outstanding
capital stock of POC and each Person for which POC, directly or indirectly,
owns: (A) more than 50% of the outstanding capital stock or other equity
interests (all such Persons, together with POC, being referred to as a "POC
COMPANY" or the "POC Companies"), and (B) some, but not more than 50% of the
outstanding capital stock or other equity interests (each such Person being
referred to as a "POC JOINT VENTURE COMPANY"), (ii) all of the capital stock
of Harwat and each Person for which Harwat, directly or indirectly, owns any
capital stock or equity interest (the "HARWAT COMPANIES"), (iii) all of the
capital stock of WilPro and each Person for which WilPro, directly or
indirectly, owns any capital stock or equity interest (the "WILPRO COMPANIES"
and, together with the POC Joint Venture Companies and the Harwat Companies,
the "TRANSFERRED JOINT VENTURE COMPANIES"), (iv) all of the indebtedness owed
by any Transferred Joint Venture Company to any Seller or Affiliate of the
Sellers and (v) for each POC Company, each POC Joint Venture Company, each
Harwat Company, and each WilPro Company (collectively, the "POC ENTITIES"),
its name, structure (i.e., corporation, partnership, limited liability
company, etc.), and jurisdiction of incorporation, formation or organization,
as applicable. The authorized, issued and outstanding capital stock of each
of the POC Entities is as set forth on SCHEDULE 2.2, and the issued and
outstanding capital stock of each of the POC Entities is duly authorized,
validly issued, fully paid and nonassessable.
(b) There are no outstanding options, rights, warrants,
contracts, or commitments for the issuance or sale by the Sellers or any of
the POC Entities of, or any securities of any of the POC Entities convertible
into or exchangeable for, any shares of capital stock of any of the POC
Entities (whether treasury or issued and outstanding), and there is no
agreement or arrangement not yet fully performed which would result in the
creation of any of the foregoing.
(c) Sellers own and have, and at the Closing shall transfer
to Purchaser, good and valid title to the Schlumberger Equity Interests, free
and clear of all Liens, except for those set forth on SCHEDULE 2.2. The
capital stock of POC to be purchased by Purchaser hereunder constitutes all
the issued and outstanding capital stock of POC. The capital stock of Harwat
to be purchased by Purchaser hereunder represents a 35.5% interest in the
profits, capital and distributions of Harwat as of the Closing Date and is
all of the capital stock of Harwat owned by Sellers or any of their
Affiliates. The loan to Harwat to be purchased by Purchaser hereunder
represents all of the indebtedness of Harwat to Sellers and their Affiliates.
The capital stock of WilPro to be purchased by Purchaser hereunder represents
a 30% interest in the profits, capital and distributions of WilPro as of the
Closing Date and is all of the capital stock of WilPro owned
8
by Sellers or any of their Affiliates. The loan to WilPro to be purchased by
Purchaser hereunder represents all of the indebtedness of WilPro to Sellers
and their Affiliates.
2.3 AUTHORITY OF SELLERS. Sellers have full corporate (or other
applicable entity) power and authority to enter into this Agreement and to
carry out the transactions contemplated herein to be performed by Sellers.
The execution, delivery, and performance by Sellers of this Agreement, the
other agreements contemplated hereby, and each of the transactions
contemplated hereby or thereby have been duly and validly authorized by
Sellers. No other corporate act or proceeding on the part of any Sellers, its
board of directors (or other managing body), or its equityholders is
necessary to authorize the execution, delivery, or performance by such Seller
of this Agreement or any other agreement contemplated hereby or thereby. This
Agreement has been duly executed and delivered by each Seller. This Agreement
constitutes, and the other agreements contemplated hereby upon execution and
delivery by each Seller will each constitute, a valid and binding obligation
of such Seller, enforceable against same in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditor rights and to general equity principles.
2.4 NO CONFLICT/CONSENTS. Except as set forth on SCHEDULE 2.4, the
execution and delivery of this Agreement by each Seller does not, and the
consummation of the transactions contemplated hereby and performance by such
Seller of its obligations hereunder will not: (a) violate, conflict with, or
result in a breach by such Seller, or any POC Entity of any term, condition
or provision of the Charter Documents of such Seller or such POC Entity, (b)
violate, conflict with, or result in a breach of any term, condition, or
provision of, or constitute a default by such Seller or any POC Entity (or
create an event which, with the giving of notice or lapse of time or both,
would constitute such a default) or give rise to any right of termination,
cancellation, or acceleration under, any agreement, lease, instrument,
mortgage, license or franchise to which such Seller, or any POC Entities is a
party, or by which any of their respective properties are bound, (c) violate,
conflict with, or result in a breach of any term, condition, or provision of,
or constitute a default by such Seller or any POC Entity (or create an event
which, with the giving of notice or lapse of time or both, would constitute
such a default) or give rise to any right of termination, cancellation, or
acceleration under, any joint venture agreement with respect to a POC Joint
Venture Company, Harwat, or WilPro, (d) result in the creation of any Lien
upon any of such Seller's or any POC Entity's respective properties or give
to others any interest or right in any of their respective properties,
including, but not limited to, a right to purchase any of such properties, or
(e) except for applicable requirements of the HSR Act, and as otherwise set
forth on SCHEDULE 2.4, require any order, consent, approval or authorization
of, or notice to, or declaration, filing, application, qualification or
registration with, any governmental or regulatory authority. Except as set
forth on SCHEDULE 2.4, the failure of any Person not a party hereto to
authorize or approve this Agreement will not give any Person the right to
enjoin, rescind or otherwise prevent or impede the sale of the Schlumberger
Equity Interests to Purchaser in accordance with the terms of this Agreement
or to claim ownership in any of the Schlumberger Equity Interests following
the Closing or to obtain damages from, or any other judicial relief against,
Purchaser as a result of the transactions carried out in accordance with the
provisions of this Agreement.
9
2.5 BOOKS AND RECORDS. The minute books and stock record books of
the POC Companies, all of which have been made available to Purchaser, are
complete and correct and have been maintained in accordance with sound
business practices and the requirements of Section 13(b)(2) of the Exchange
Act (whether or not subject to the Exchange Act). The minute books of the POC
Companies contain materially accurate and complete records of all meetings
held of, and all action taken by, the stockholders, the boards of directors
(or other governing board with respect to such entity) and committees of such
boards of directors (or such governing board), and no meeting of any such
stockholders, board of directors (or other governing board with respect to
such entity) and committees of such boards of directors (or such governing
board), has been held for which minutes have not been prepared and are not
contained in such minute books. At the Closing, all of those books and
records will be in the possession of the POC Companies. Any minutes of the
Transferred Joint Venture Companies delivered to Purchaser in connection
herewith, are, to the knowledge of the Sellers, true, complete and correct in
all respects.
2.6 PERSONAL PROPERTY. The POC Entities have good and valid title
to, or a valid leasehold interest in, the personal properties, assets and
equipment used by them and shown on the Balance Sheet or the POC Financial
Statements or acquired after the date thereof (except for property sold or
otherwise disposed of since the date thereof in the ordinary course of
business), free and clear of all Liens except for: (a) Liens reflected in the
POC Financial Statements, (b) Liens arising by operation of Law for taxes not
yet due and payable, (c) the rights of customers, suppliers, and
subcontractors in the ordinary course of business under general principles of
commercial law, (d) Liens that do not, individually or in the aggregate,
materially and adversely restrict or affect the POC Entities' current use and
enjoyment of such property or materially or adversely affect the market value
of such property, and (e) Liens noted on SCHEDULE 2.6 (collectively, the
"PERMITTED PERSONAL PROPERTY LIENS").
2.7 REAL PROPERTY.
(a) SCHEDULE 2.7(a) contains a true, complete and correct
list separated by category, as of the date hereof, of all real property owned
(the "OWNED REAL PROPERTY") or leased (the "LEASED REAL PROPERTY") by any POC
Entity. Seller has delivered or made available to Purchaser copies of the
deeds, leases or other instruments by which such real property is owned or
leased by the POC Companies, and all such deeds, leases or other instruments
are listed on SCHEDULE 2.7(a).
(b) The POC Entities own the Owned Real Property in fee
simple and hold the leasehold interests in the Leased Real Property free and
clear of all Liens, except: (i) Liens disclosed in SCHEDULE 2.7(b), (ii)
mortgages or security interests shown on the POC Financial Statements as
securing specified liabilities or obligations, (iii) mortgages or security
interests incurred in connection with the purchase of property or assets
after the date of the POC Financial Statements and disclosed in SCHEDULE
2.7(b) (such mortgages and security interests being limited to the property
or assets so acquired), (iv) Liens for current Taxes and assessments and
other charges by any Governmental Authority not yet due and payable or which
may thereafter be paid without penalty or are being contested in good faith
by appropriate proceedings, and (v) imperfections of title that, individually
or in the aggregate, do not materially and adversely affect the market value
of such property (collectively, the "PERMITTED REAL PROPERTY LIENS").
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(c) Except as described on SCHEDULE 2.7(c):
(i) There are no pending or, to the knowledge of
any Seller, threatened actions seeking to expropriate or condemn all or any
part of the Owned Real Property which would materially and adversely affect
the current use, occupancy, value or marketability thereof.
(ii) There are no leases, subleases, licenses,
concessions, or other agreements, written or oral, to which any POC Entity is
a party, granting to any party the right of use or occupancy of any portion
of such Owned Real Property, and there are no outstanding options to
purchase, lease or use, or rights of first refusal to purchase such Owned
Real Property, or any portions thereof or interests therein to which any POC
Entity is a party.
(d) Except as described in SCHEDULE 2.7(d), with respect to
each Leased Real Property, the lease or sublease is valid, legally binding
and enforceable by and against the POC Company party thereto in accordance
with its terms, and in full force and effect, and no breach or default by
such POC Company party thereto or, to the knowledge of Sellers, any of the
other parties thereto exists, and no event has occurred which, with notice or
lapse of time, would constitute a breach or default by a POC Company or by
Sellers or permit termination, modification, or acceleration thereunder.
2.8 NO UNDISCLOSED LIABILITIES. Except as set forth in SCHEDULE 2.8,
the POC Entities have no liabilities or obligations of any nature (whether
known or unknown and whether absolute, accrued, contingent, choate or
inchoate, or otherwise), except for liabilities or obligations reflected or
reserved against in the Balance Sheet or liabilities incurred in the ordinary
course of business after the date of the Balance Sheet
2.9 ACCOUNTS RECEIVABLE. All accounts receivable of the POC
Companies that are reflected on the Closing Balance Sheet or the Balance
Sheet (collectively, the "ACCOUNTS RECEIVABLE") represent or will represent
valid obligations enforceable in accordance with their terms arising from
sales actually made or services actually performed in the ordinary course of
business. Except as set forth in SCHEDULE 2.9 or paid prior to the Closing
Date, the Accounts Receivable are or will be as of the Closing Date
materially collectible net of the respective reserves shown on the Closing
Balance Sheet or the Balance Sheet (which reserves are calculated in
accordance with GAAP and in a manner consistent with Schlumberger's past
practice). There is no contest, claim, or right of set-off, other than
returns in the ordinary course of business, under any contract or agreement
with any obligor of an Accounts Receivable relating to the amount or validity
of such Accounts Receivable, except as set forth on SCHEDULE 2.9.
2.10 INTELLECTUAL PROPERTY.
(a) The POC Entities own or possess adequate and
enforceable licenses or other rights to use (including foreign rights) all
Intellectual Property used or employed in the business of the POC Companies
and such rights will not cease to be valid rights of the POC Entities by
reason of the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby. The POC Entities own or
possess all the
11
Intellectual Property necessary to operate their respective businesses as
currently being conducted.
(b) SCHEDULE 2.10 sets forth a list of all of the
Intellectual Property (excluding those items that would come within clause
(e) of the definition of Intellectual Property) of the POC Companies.
SCHEDULE 2.10 sets forth: (i) for each patent, the number, normal expiration
date and subject matter for each country in which such patent has been
issued, or, if applicable, the application number, date of filing and subject
matter for each country, (ii) for each registered trademark and registered
service mark, the application serial number or registration number, the
classes of goods and services covered and the expiration date for each
country in which a trademark or service mark has been registered, and (iii)
for each copyright, the number and date of filing for each country in which a
copyright has been filed. All pending patent applications have been duly
filed.
(c) Except as shown on SCHEDULE 2.10, no POC Company has
any obligation to compensate any person for the use of any Intellectual
Property, and no POC Company has granted to any person any license, option,
or other rights to use in any manner any of its Intellectual Property,
whether requiring the payment of royalties or not, other than licenses to the
POC Companies of franchises or other licenses in the ordinary course of
business.
(d) No POC Entity has received any written, or to the
knowledge of Sellers, oral notice of invalidity or infringement of any rights
of others with respect to any Intellectual Property. No person has notified
any of the POC Companies in writing, or to the knowledge of Sellers, orally,
that it is claiming any ownership of or right to use such Intellectual
Property. No Person, to the knowledge of any Seller, is infringing upon any
such Intellectual Property in any way. The use of the Intellectual Property
by any of the POC Companies does not conflict with, infringe upon or
otherwise violate the rights of any third party in or to such Intellectual
Property, and no action has been instituted against or written notices
received by any of the POC Companies that are presently outstanding alleging
that the use of such Intellectual Property infringes upon or otherwise
violates any rights of a third party in or to such Intellectual Property.
2.11 FINANCIAL STATEMENTS. The POC Financial Statements, as set
forth in SCHEDULE 2.11, were prepared in accordance with GAAP and present
fairly the financial position (i) of POC and POC's interest in the POC
Companies and in the POC Joint Venture Companies, (ii) of Harwat and Harwat's
interest in the Harwat Companies and (iii) of WilPro and WilPro's interest in
the WilPro Companies for the periods and as of the dates thereof and the
results of operations of the POC Entities and POC's interest in the POC Joint
Venture Companies for such periods.
2.12 NO MATERIAL ADVERSE CHANGE. Except as set forth on SCHEDULE
2.12, since May 31, 2001, there has not been any change in the business,
operations, properties, assets, or financial condition of any of the POC
Entities, and no event has occurred or circumstance exists, that could
reasonably be expected to have a Material Adverse Effect.
2.13 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
SCHEDULE 2.13 or as permitted under SECTION 1.4 hereof, since December 31,
2001, except to the extent reflected in
12
the Balance Sheet, the POC Entities have conducted their businesses only in
the ordinary course of business and there has not been any:
(a) Change in any POC Entity's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital stock
of any POC Entity; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement, or
other acquisition by any POC Entity of any shares of any such capital stock.
(b) Amendment to the articles or certificate of
incorporation, bylaws, limited liability company agreement, operating
agreement or other organizational document, as the case may be, of any POC
Entity.
(c) Payment or increase by any POC Company of any bonuses,
salaries, or other compensation except in the ordinary course of business to
any director, officer or employee, or, except in the ordinary course of
business consistent with past practice, entry into any employment, severance,
or similar contract or agreement with any director, officer, or employee.
(d) Adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any employees
of any POC Company.
(e) Damage to or destruction or loss of any assets or
property of any POC Entity, whether or not covered by insurance, materially
and adversely affecting the properties, assets, business, or financial
condition, of the POC Companies, taken as a whole.
(f) Entry into, termination of, or receipt of notice of
termination of: (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) any
contract, agreement or transaction involving a total remaining commitment by
or to any POC Entity of at least Five Hundred Thousand Dollars ($500,000).
(g) Sale (other than sales of inventory in the ordinary
course of business), lease, or other disposition of any material asset or
property of any POC Entity or mortgage, pledge, or imposition of any lien or
other encumbrance other than Permitted Personal Property Liens and Permitted
Real Property Liens on any material asset or property of any POC Entity,
including the sale, lease, or other disposition of any Intellectual Property.
(h) Cancellation or waiver of any claims or rights with a
value to any POC Entity in excess of Five Hundred Thousand Dollars ($500,000).
(i) Change in the accounting methods used by any POC Entity.
(j) Agreement or settlement or agreement to settle any
claim or assessment for Taxes entered into on a basis that would increase the
Tax liability of any of the POC Entities for a Post-Closing Tax Period, or
the surrender of any right to claim a refund of Taxes or otherwise offset any
Tax liability.
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(k) Material election with respect to Taxes of any POC Entity.
(l) Agreement, whether oral or written, by any POC Company (or
POC Entity if applicable) to do any of the foregoing.
2.14 TAXES. Except as set forth on SCHEDULE 2.14:
(a) Except as set forth on SCHEDULE 2.14(a), all Tax
Returns required to be filed by or with respect to each POC Company, and, to
the knowledge of the Sellers, each Transferred Joint Venture Company, either
separately or as a member of a group of corporations, have been timely filed
with the appropriate Governmental Authorities. All such Tax Returns with
respect to each POC Company and, to the knowledge of the Sellers, each
Transferred Joint Venture Company are materially accurate, true and complete,
and none of the POC Companies currently is the beneficiary of any extension
of time to file any such Tax Return. The Sellers have delivered or made
available to Purchaser complete and accurate copies of all of such Tax
Returns relating to any Tax Periods of the POC Companies that are still
subject to audit by a Governmental Authority.
(b) Each POC Company and, to the knowledge of the Sellers,
each Transferred Joint Venture Company, has timely paid or made provision for
the payment of all Taxes that have or may become due with respect to Tax
Periods (or portions thereof) ending on or before the date hereof. The
accruals and reserves with respect to such Taxes (other than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) provided in the Balance Sheet are adequate to cover all Taxes
accruing or payable with respect to Tax Periods (or portions thereof) ending
on or before the date hereof. All Taxes (including, without limitation, sales
and use and employment taxes) that any POC Company is or was required by Law
to withhold or collect have been duly withheld or collected and, to the
extent required, have been timely paid to the proper Governmental Authority
or other Person. The POC Companies have properly requested, received and
retained all necessary exemption certificates and other documentation
supporting any claimed exemption or waiver of Taxes on sales or other
transactions as to which such POC Companies would have been obligated to
collect or withhold Taxes.
(c) There are no liens for Taxes (other than for current
Taxes not yet due and payable) upon any assets of the POC Companies, and none
of the assets of such POC Companies is property that is required to be
treated for Tax purposes as being owned by any other Person.
(d) There are currently no deficiencies for Taxes that have
been claimed, proposed or assessed by any Governmental Authority against any
of the POC Companies or, to the knowledge of the Sellers, any of the
Transferred Joint Venture Companies. There are no current, pending or, to the
Sellers' knowledge, threatened audits, investigations or claims for or
relating to any liability in respect of Taxes of the POC Companies, and there
are no matters under discussion with any Governmental Authority with respect
to Taxes of the POC Companies. To the knowledge of Sellers, there are no
current, pending or threatened audits, investigations or claims for or
relating to any liability in respect of Taxes of the Transferred Joint
Venture Companies, and there are no matters under discussion with any
Governmental Authority with respect to Taxes of the Transferred Joint Venture
Companies. SCHEDULE 2.14(d) sets forth
14
for each POC Company the Tax Returns which have been audited within the last
six years by the relevant Governmental Authorities for each period set forth
on SCHEDULE 2.14(d). No power of attorney has been executed by or on behalf
of any of the POC Companies with respect to any matters relating to Taxes
that is currently in force. No extension or waiver of a statute of
limitations relating to Taxes is in effect with respect to any of the POC
Companies. Set forth in SCHEDULE 2.14(d) for each POC Company are the
jurisdictions in which such POC Company has filed Tax Returns within the last
three tax years. No POC Company has received a written claim within the last
three years by a Governmental Authority in a jurisdiction where a POC Company
does not file Tax Returns that such POC Company may be subject to taxation in
that jurisdiction.
(e) There are no Tax sharing, indemnity, allocation or
similar agreements in effect as between any of the POC Companies or, to the
Knowledge of Sellers, any Transferred Joint Venture Company and any other
party (except for any such agreement between a Seller or any of its
Affiliates, on the one hand, and the POC Entities on the other hand). The POC
Companies and, to the knowledge of Sellers, the Transferred Joint Venture
Companies, have no contractual obligations to indemnify any other Person with
respect to Taxes.
(f) There are no overall foreign losses allocable to the
POC Companies under Regulation Section 1.1502-9 subject to recapture.
(g) No POC Company will be required to recognize for Tax
purposes in a Post-Closing Tax Period any income or gain which would
otherwise have been required to be recognized under the accrual method of
accounting in a Pre-Closing Tax Period as a result of Sellers or the POC
Companies making a change in method of accounting or otherwise deferring the
recognition of income or gain to a Post-Closing Tax Period as a result of the
accounting method used in a Pre-Closing Tax Period.
(h) Except as set forth on SCHEDULE 2.14(h), none of the
POC Companies is subject to any joint venture, partnership or other
agreement, arrangement or contract that is treated as a partnership for Tax
purposes.
(i) During the applicable period specified in Section
897(c)(1)(A)(ii) of the Code, (i) neither POC nor POI has been a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code, and (ii) neither Harwat nor WilPro has owned assets
that constitute "United States real property interests" as defined in Section
897(c)(1) of the Code.
(j) No POC Company has made an election, and is required,
to treat any of its assets as tax-exempt bond financed property or tax-exempt
use property within the meaning of Section 168 of the Code or under any
comparable provision of foreign, state or local Tax law or has filed a
consent pursuant to the collapsible corporation provisions of Section 341(f)
of the Code (or any corresponding provision of state or local law) or agreed
to have Section 341(f)(2) of the Code (or any corresponding provision of
state or local law) apply to any disposition of any asset of any POC Company.
15
(k) No POC Company has made any payments, is obligated to
make any payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
deductible under Section 280G of the Code.
(l) No POC Company, the Sellers or any of their Affiliates
or, to the knowledge of Sellers, any Transferred Joint Venture Company has
requested or received any ruling from any Governmental Authority, or signed
any binding agreement with any Governmental Authority (including, without
limitation, any advance pricing agreement), that would impact the amount of
Tax liability of any POC Company or, to the knowledge of Sellers, any
Transferred Joint Venture Company after the Closing Date.
(m) Except as set forth on SCHEDULE 2.14(m), no POC Company
has ever been a member of any affiliated group of corporations which has
filed a combined, consolidated, or unitary return for federal, state, local,
or foreign tax purposes, other than the Selling Group.
(n) No POC Company owns any debt obligation or any shares
issued by Purchaser or any of its Affiliates.
(o) SCHEDULE 2.14(o) sets forth with respect to each of the
POC Companies organized in a foreign jurisdiction: (i) the amount of current
and accumulated earnings and profits as of the date hereof, and (ii) the
amount of previously taxed income within the meaning of Section 959 of the
Code as of December 31, 2000.
(p) Neither any of the Sellers nor the Purchaser would be
required to include any amount in gross income with respect to any of the POC
Companies or, to the knowledge of Sellers, any Transferred Joint Venture
Company pursuant to Section 951 of the Code if the taxable year of each of
the POC Companies and the Transferred Joint Venture Companies were deemed to
end on the Closing Date. None of the POC Companies and, to the knowledge of
Sellers, none of the Transferred Joint Venture Companies has an investment in
"United States property" for purposes of Section 956 of the Code.
(q) Each of the POC Companies organized in a foreign
jurisdiction and, to the knowledge of Sellers, each of the Transferred Joint
Venture Companies organized in a foreign jurisdiction: (i) has not been
engaged in a United States trade or business for federal income tax purposes,
(ii) has not been a passive foreign investment company within the meaning of
the Code, (iii) has not consented at any time under any foreign tax provision
similar to Section 341(f)(1) of the Code, to have provisions similar to
Section 341(f)(2) of the Code apply to any disposition of the POC Companies'
or Transferred Joint Venture Companies', as applicable, assets, (iv) has not
agreed, and, to the Seller's knowledge, is not required, under any foreign
tax provision similar to Section 481(a) of the Code to make any adjustment by
reason of a change in accounting method or otherwise, and (v) has not
participated in or cooperated with an international boycott within the
meaning of Section 999(b)(3) of the Code, nor has been requested to do so in
connection with any transaction or proposed transaction.
(r) Each of STC, CII and POC is eligible to make an
election under Section 338(h)(10) of the Code and the Regulations thereunder
(and any comparable election
16
under any relevant state or local law) with respect to the sale of the POC
Shares and the deemed sale of the stock of POI pursuant to this Agreement.
2.15 LITIGATION. Except as set forth on SCHEDULE 2.15, there is no
written demand, claim, suit, action, arbitration or legal, administrative or
other proceeding pending or, to the knowledge of Sellers, threatened against
the POC Entities or any of their respective officers, directors, employees,
assets, or properties.
2.16 ERISA AND RELATED MATTERS.
(a) Set forth on Schedule 2.16 is a list of: (i) all
benefit arrangements that are applicable to POC Employees (the "POC Benefit
Arrangements") and (ii) all Benefit Plans that are maintained, contributed to
or participated in by any of the POC Companies (the "POC Companies Plans") on
the date hereof. Any POC Companies Plan which covers only POC Employees or
Former POC Employees (or any of them) is indicated on Schedule 2.16 and is
referred to herein as a "Subsidiary Plan".
(b) With respect to the Subsidiary Plans, the Sellers have
supplied to Purchaser a true and correct copy of each such plan and, to the
extent applicable, all applicable related trusts and amendments thereto, the
most recent summary plan descriptions, summary of material modifications,
favorable determination letters, actuarial reports, FAS-106 reports, the
three most recently filed Form 5500 annual reports filed with the IRS and
Department of Labor ("DOL"), and all filings made under the Voluntary
Compliance Resolution or Closing Agreement Program or the DOL Delinquent
Filer Program. Sellers have supplied to Purchaser true and correct copies of
all relevant POC Benefit Arrangements, which are written, and a written
description of any such POC Benefit Arrangement, which is not in written form.
(c) All of the POC Companies Plans comply in form and
operation in all material respects with all applicable requirements of Law,
except such compliance failures which, individually or in the aggregate, can
be corrected without material liability to the POC Companies under compliance
programs made available by the IRS or DOL.
(d) Except as set forth on Schedule 2.16, all POC Companies
Plans which are employee pension benefit plans as defined in Section 3(2) of
ERISA and which are intended to comply with Section 401(a) of the Code
qualify in form and have been maintained in compliance with Section 401(a) of
the Code in all material respects.
(e) There have been no "prohibited transactions" (as
described in Section 406 of ERISA or Section 4975 of the Code) with respect
to any of the relevant POC Companies Plans which could result in any
liability to any POC Company.
(f) Except as set forth on Schedule 2.16, all accrued
obligations of the POC Companies, whether arising by operation of Law, by
contract or by past custom, for compensation, including bonuses, to its
officers, directors, employees, consultants or agents, for Taxes and other
obligations to any Governmental Authority payable by any of the POC Companies
in connection with such compensation, and for payments with respect to any
POC Companies Plan, have been paid, or adequate accruals for such obligations
have been and are being made by the POC Companies, and will be reflected on
the Closing Balance Sheet.
17
(g) There are no pending actions, suits or claims involving
any POC Companies Plans other than routine claims for benefits and qualified
domestic relations, medical or child support orders.
(h) None of the POC Companies Plans are multiemployer plans
(as defined in Section 3(37) of ERISA).
(i) Except as set forth in Schedule 2.16, with respect to
each POC Companies Plan which is subject to Title IV of ERISA, Part 3 of
Title I of ERISA or Section 412 of the Code: (i) no reportable event (within
the meaning of Section 4043 of ERISA, other than an event for which the
reporting requirements have been waived by regulations) has occurred, (ii)
there was not an accumulated funding deficiency (within the meaning of
Section 302 of ERISA or Section 412 of the Code), whether or not waived, as
of the most recently ended plan year, (iii) there is no "unfunded benefit
liability" (within the meaning of Section 4001(a)(18) of ERISA, but excluding
from the definition of "current value" of "assets" accrued but unpaid
contributions), (iv) all "required installments" within the meaning of
Section 412(m) of the Code and Section 302(e) of ERISA, whichever may apply
have been made when due, (v) none of Sellers, the POC Companies or any ERISA
Affiliate is required to provide security under Section 401(a)(29) of the
Code, (vi) all premiums (and interest charges and penalties for late payment,
if applicable) have been paid when due to the Pension Benefit Guaranty
Corporation ("PBGC"), (vii) no filing has been made by or on behalf of any
ERISA Affiliate with the PBGC, (viii) no proceeding has been commenced by the
PBGC to terminate any such Plan, and (ix) no condition exists which could
constitute grounds for the termination of any such Plan by the PBGC.
(j) Except as set forth in Schedule 2.16, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (either alone or in conjunction with
any other event, such as termination of employment): (i) result in any
payment (including, without limitation, severance, unemployment compensation,
parachute or otherwise) becoming due to any director or any POC Employee, any
POC Companies Plan or any POC Benefit Arrangement or otherwise, (ii)
significantly increase any benefits otherwise payable under any POC Companies
Plan, or (iii) result in any acceleration of the time of payment or vesting
of any material benefits.
(k) Except as set forth in Schedule 2.16, or as required by
Law, no POC Companies Plan provides post-employment medical, disability or
life insurance benefits. The POC Financial Statements accurately reflect the
liability for any such post-employment benefits, as required by FAS-106.
(l) Except as disclosed on Schedule 2.16, no POC Company
has any liability, contingent or otherwise with respect to any Benefit Plan
maintained by the Sellers or any ERISA Affiliate thereof, which is not a POC
Companies Plan.
(m) Except as set forth on Schedule 2.16: (i) each Foreign
Plan is, and has been, established, registered (where required), qualified,
administered, funded (where required), and invested in compliance in all
material respects with the terms thereof and all applicable laws, (ii) with
respect to each Foreign Plan, all required filings and reports have been made
in a timely
18
and complete manner with necessary governmental authorities, (iii) all
obligations of the POC Companies to or under the Foreign Plans (whether
pursuant to the terms thereof or any applicable laws) have been satisfied,
and there are no outstanding defaults or violations thereunder by such POC
Companies, (iv) full payment has been made in a timely manner of all amounts
which are required to be made as contributions, payments or premiums to or in
respect of any Foreign Plan under applicable law or under any Foreign Plan or
any agreement relating to a Foreign Plan, and (v) no taxes, penalties or fees
are owing or assessable under any such Foreign Plan.
(n) To the knowledge of Sellers, no event has occurred with
respect to any registered Foreign Plan which would result in the revocation
of the registration of such Foreign Plan, or which would entitle any person
(without the consent of the sponsor of such Foreign Plan) to wind up or
terminate any such Foreign Plan, in whole or in part, or could otherwise
reasonably be expected to have an adverse effect on the tax status of any
such Foreign Plan.
(o) There are no going-concern unfunded actuarial
liabilities, past service unfunded liabilities or solvency deficiencies with
respect to any of the Foreign Plans. No contribution holidays have been taken
under any such Foreign Plans. There have been no withdrawals of assets or
transfers of assets from any such Foreign Plan, except in accordance with
applicable laws.
2.17 MATERIAL CONTRACTS.
(a) SCHEDULE 2.17(a) sets forth a complete and accurate
list of each of the following contracts, instruments, leases, deeds and
agreements relating to the business of each of the POC Companies to which
Sellers or any POC Company is a party or by which any of them is bound other
than contracts, instruments, leases, deeds and agreements to which POC
Companies are the only parties (collectively, the "POC MATERIAL CONTRACTS"):
(i) Indentures, mortgages, loan agreements,
capital leases, security agreements, or other agreements or commitments for
the borrowing of money, or the deferred purchase price of assets.
(ii) Purchase or sales orders and other contracts
for the sales of goods and services (including leases of equipment) by
Sellers or a POC Company, excluding any such orders or series of orders or
contracts or series of contracts not involving payments to Sellers or a POC
Company exceeding Five Hundred Thousand Dollars ($500,000) in any instance.
(iii) Contracts involving the expenditure by
Sellers or a POC Company of more than Five Hundred Thousand Dollars
($500,000) in any instance for the purchase of material, supplies, equipment
or services.
(iv) Contracts not otherwise described in this
paragraph (a) that involve the expenditure by Sellers or a POC Company of
more than Two Hundred Fifty Thousand Dollars ($250,000) and that are not
terminable by Sellers or a POC Company without penalty on not more than
ninety (90) days notice.
(v) Guarantees of the obligations of third parties.
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(vi) Agreements which restrict Sellers, its
Affiliates or any POC Company from competing with any other person or entity
or from conducting business in any geographic area.
(vii) Contracts or agreements (other than
employment agreements) with officers or other members of senior management of
Sellers or a POC Company.
(viii) License agreements (as licensor or
licensee) with third parties (excluding end-user licenses granted to
customers of Sellers or a POC Company) that involve expenditures or receipts
by Sellers of more than One Hundred Thousand Dollars ($100,000).
(ix) Employment agreements with officers or other
members of senior management of Sellers or a POC Company.
(x) Contracts relating to the acquisition of any
business enterprise or the assets thereof.
(xi) Exclusive distributor, dealer or similar
contracts.
(xii) Agreements or contracts of which the primary
focus is indemnification arrangements.
(xiii) Any contract with the federal, state or
local government or any agency or department thereof.
(xiv) Commission agreements with any third parties.
(xv) Consulting agreements involving payments in
excess of One Hundred Thousand Dollars ($100,000) annually.
(xvi) Obligations under standby letters of credit,
guarantees, indemnity bonds and other credit support instruments heretofore
issued on behalf of Sellers or a POC Company and outstanding as of the date
hereof.
(xvii) Agreements or contracts pursuant to which
any third party has a purchase option, a buy-out option, a "put" right or any
other similar right or option whatsoever.
(xviii) Agreements or contracts pursuant to which
any Person is entitled to an earn-out participation or other similar right
entitling such Person to a portion of the profit of revenue of any POC Entity
(other than any right enjoyed by such Person by virtue of his or her holding
common stock of or a partnership interest in, as applicable, a POC Entity, or
sales commissions of employees).
(b) SCHEDULE 2.17(b) sets forth a list of certain material
agreements, contracts, instruments, leases and deeds of the Transferred Joint
Venture Companies, which list contains all of the items that would be
responsive to clauses (i), (ii), (v), (vi), (xvi) or (xvii) of SECTION
2.17(a) if such Section applied to the Transferred Joint Venture Companies
(collectively
20
the "JV MATERIAL CONTRACTS" and together with the POC Material Contracts, the
"MATERIAL CONTRACTS").
(c) True and correct copies (or, if oral, written
summaries) of each of the Material Contracts have been made available to
Purchaser.
(d) Except as set forth in SCHEDULE 2.17(a) and SCHEDULE
2.17(b): (i) each Material Contract is in full force and effect, and is a
valid and binding agreement of each Seller or the POC Entity, as applicable,
and (to the knowledge of Sellers) each of the other parties thereto,
enforceable against them in accordance with its terms, subject to the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights generally
and other general equitable principles (whether considered in a proceeding in
equity or at law), (ii) no condition exists or event has occurred that
(whether with or without notice or lapse of time or both) would constitute a
default by (x) any Seller or any POC Entity party to any such Material
Contract or (y) to the knowledge of any Seller, any other party to any such
Material Contract, (iii) as of the date hereof, no party to any Material
Contract has notified any Seller or any POC Entity in writing or, to the
Sellers' knowledge, orally of any dispute with respect to a Material Contract
and, to such Seller's knowledge, all parties to any such Material Contracts
have complied in all material respects with the provisions thereof, and (iv)
there are no renegotiations of, attempts to renegotiate, or outstanding
rights being asserted in writing or, to the Sellers' knowledge, orally to
renegotiate any material amounts paid or payable to any such POC Entity under
current or contemplated contract or agreement with any Person and no such
Person has made written demand for such renegotiation.
2.18 BROKERS. Except for Salomon Smith Barney Inc., the fees and
expenses of which shall be the responsibility of Sellers, no broker or
investment banker acting on behalf of the Sellers or any of the POC Entities
or under the authority of any of them is or will be entitled to any broker's
or finder's fee or any other commission or similar fee directly or indirectly
from any POC Entities in connection with any of the transactions contemplated
herein.
2.19 INSURANCE. With respect to each POC Company and, to the
knowledge of Sellers, each Transferred Joint Venture Company, (i) all
relevant Insurance Policies are in full force and effect and insure against
risks and liabilities to an extent and in a manner customary in the industry
in which each relevant POC Entity operates, (ii) all premiums due with
respect to such Insurance Policies prior to the date hereof have been paid by
the Seller or the POC Entity covered thereby, (iii) the POC Entities have
complied in all material respects with the provisions of such policies and
have not received any written notice from any of its insurance brokers or
carriers that such broker or carrier will not be willing or able to renew
their existing coverage, and (iv) no POC Entity is in default with respect to
any provision contained in any such Insurance Policy.
2.20 EMPLOYEES. Except as set forth on Schedule 2.20: (a) no POC
Company or, to the knowledge of Sellers, Transferred Joint Venture Company is
a party to a collective bargaining agreement or currently negotiating any
such agreement, (b) no complaint against any POC Company or, to the knowledge
of Sellers, Transferred Joint Venture Company is currently pending before the
National Labor Relations Board or the Equal Employment Opportunity
21
Commission or before any analogous entity in any country, (c) no POC Company
or, to the knowledge of Sellers, Transferred Joint Venture Company is
materially delinquent in payments to any of its employees for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed for it or amounts required to be reimbursed to such employees, (d)
each POC Company and, to the knowledge of Sellers, Transferred Joint Venture
Company is materially in compliance with all applicable Laws respecting
labor, employment, fair employment practices, terms and conditions of
employment, workers' compensation, occupational safety, plant closings and
wages and hours, (e) each POC Company and, to the knowledge of Sellers,
Transferred Joint Venture Company has withheld all amounts required by Law or
by agreement to be withheld from the wages, salaries and other payments to
employees, and is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing, (f) no POC Company
or, to the knowledge of Sellers, Transferred Joint Venture Company is liable
for any payment to any trust or other fund or to any Governmental Authority
with respect to unemployment compensation benefits, social security or other
benefits or obligations for employees (other than routine payments to be made
in the normal course of business and consistent with past practice), and (g)
no employees of any POC Company or, to the knowledge of Sellers, Transferred
Joint Venture Company are in any material respect in violation of any term of
any employment contract, non-disclosure agreement, non-competition agreement,
or any restrictive covenant to a former employer relating to the right of any
such employee to be employed by such POC Company or, Transferred Joint
Venture Company because of the nature of the business presently conducted.
Each Seller has made available to Purchaser true and complete copies of: (i)
all severance agreements with directors, POC Employees, or consultants to any
POC Company, (ii) all severance programs and policies of each such POC
Company with or relating to such POC Employees, (iii) all plans, programs,
agreements and other arrangements of each such POC Company with or relating
to its directors, officers, employees or consultants which contain change in
control provisions, (iv) any written material relating to the material
personnel policies of any POC Company, and (v) any employment or other
agreement of any employee or consultant (excluding consultants who are
attorneys or accountants of public accounting firms) of any POC Company who
is paid or entitled to payment by any POC Company in an amount exceeding, in
the aggregate, Two Hundred Thousand Dollars ($200,000) for fiscal year 2000,
or expected to exceed, in the aggregate, Two Hundred Thousand Dollars
($200,000) for fiscal year 2001.
2.21 ENVIRONMENTAL.
(a) Except as set forth on SCHEDULE 2.21: (i) the POC
Entities are currently and have in the past been in material compliance with
all Environmental Laws, and (ii) there are no existing or, to the knowledge
of Sellers, threatened Environmental Claims against any POC Entities.
(b) Except as set forth on SCHEDULE 2.21: (i) there have
been no releases or threatened releases of Hazardous Substances on, upon or
into any properties currently or previously owned, operated or leased by the
POC Companies other than those authorized by Environmental Laws, (ii) there
are no PCBs or asbestos located at or on any properties currently or
previously owned, operated or leased by the relevant POC Companies, and (iii)
there are no consent decrees, consent orders, judgments, judicial or
administrative orders, agreements with
22
(other than Environmental Permits) or liens by, any Governmental Authority
relating to violations of any Environmental Laws which regulate, obligate or
bind any POC Entities.
(c) True and correct copies of any environmental reports,
audits or assessments which have been conducted, either by or on behalf of
the POC Companies regarding any properties currently or previously owned,
operated or leased by any of them have been made available to Purchaser and
SCHEDULE 2.21 lists such reports, audits and assessments.
2.22 ENVIRONMENTAL PERMITS. The POC Companies: (i) are in possession
of all permits, licenses, registrations and government authorizations
("ENVIRONMENTAL PERMITS") required under Environmental Laws for the current
operation of their business, and (ii) are in material compliance with the
requirements and limitations included in such Environmental Permits.
2.23 AFFILIATE TRANSACTIONS. Set forth on SCHEDULE 2.23 is a list of
each written agreement and material oral agreements (other than oral
agreements for the provision of administrative or overhead-type services) to
which: (a) each Seller or any Affiliate thereof provides material goods or
services to any of the relevant POC Companies, or (b) any such POC Companies
provides material goods or services to such Seller.
2.24 COMPLIANCE WITH LAW; AUTHORIZATIONS.
(a) Each of the relevant POC Entities and the conduct of
their respective businesses is and has been in substantial compliance with
all applicable laws, rules or regulations of any federal, state, local or
foreign government or agency thereof ("GOVERNMENT REGULATIONS") relating to
the business, operations, assets or properties of such POC Entity. No such
POC Entity has received any written or, to the knowledge of such Seller,
other notice to the effect that, or otherwise been advised that, it is not in
or may not be in compliance with any such Government Regulations.
(b) Each relevant POC Company has all licenses, permits,
authorizations and approvals issued by any Governmental Authority
(collectively, "PERMITS"), which are currently valid and in full force and
effect, necessary to carry on their respective businesses as presently
conducted except for those Permits which the failure to possess would not
constitute a Material Adverse Effect.
2.25 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article II, no Seller nor
any other person or entity makes any other express or implied representation
or warranty to Hanover or Purchaser.
2.26 SECURITIES; RESALE. The Seller is not acquiring the Hanover
Stock with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act. The Seller understands that except
as provided in the Registration Rights Agreement (as defined in SECTION 5.7
hereof): (a) the Hanover Stock has not been and is not being registered under
the Securities Act or any state securities laws, and may not be offered for
sale, sold, assigned or transferred unless: (i) subsequently registered
thereunder, or (ii) an exemption exists permitting such Hanover Stock to be
sold, assigned or transferred without such registration, and (b) except as
set forth in the Registration Rights Agreement, neither Hanover nor any other
person is under
23
any obligation to register the Hanover Stock under the Securities Act or any
state securities laws or to comply with the terms and conditions of any
exemption thereunder.
2.27 SUFFICIENCY OF ASSETS. The buildings, plants, structures,
equipment, inventories and systems (other than systems that support services
of the type Schlumberger typically provides its subsidiaries) of the POC
Entities are sufficient for the continued conduct of the POC Entities after
the Closing in substantially the same manner as conducted prior to the
Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HANOVER AND PURCHASER
Hanover and Purchaser jointly and separately represent and warrant to
each of the Sellers as follows:
3.1 ORGANIZATION. Each of Hanover and Purchaser is duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its organization and has all requisite corporate or partnership power and
authority and all material licenses, permits and authorizations necessary to
own or lease and operate its properties and to carry on its business as now
being conducted. Hanover and Purchaser has delivered to Schlumberger a true
and correct copy of the certificate of incorporation and bylaws of Hanover
and the certificate of limited partnership and limited partnership agreement
of Purchaser, in each case as amended to the date hereof and each of such
documents is, to their knowledge, in full force and effect. Neither Hanover
nor Purchaser is in default or in violation of any provision of its Charter
Documents
3.2 CAPITALIZATION.
(a) As of the date hereof, Hanover has authorized under its
certificate of incorporation 200,000,000 shares of Hanover Stock and
3,000,000 shares of preferred stock, of which, as of May 11, 2001, seventy
million three hundred sixteen thousand two hundred twenty-six (70,316,226)
shares of Hanover Stock and no shares of preferred stock were issued and
outstanding. Hanover has no other stock authorized, issued or outstanding,
(b) All issued and outstanding shares of Hanover Stock are
validly issued, fully paid and non-assessable and not subject to any
preemptive rights created by statute, Hanover's certificate of incorporation
or bylaws or any contract,
(c) There is no outstanding vote, plan or pending proposal
for any redemption of stock of Hanover or any merger or consolidation of
Hanover with or into any other entity,
(d) The Hanover Stock to be issued pursuant to the terms of
this Agreement has been duly authorized and, when issued in accordance with
the terms hereof, will be validly issued, fully paid and nonassessable,
(e) All of the outstanding interests in Purchaser are owned
by a wholly-owned subsidiary of Hanover, and all such shares are validly
issued, fully paid and non-assessable, and
24
(f) As of May 11, 2001, except for options and warrants to
purchase 7,805,178 shares of Hanover Stock, there are no outstanding options,
warrants, rights (preemptive or otherwise) with respect to the capital stock
of Hanover.
3.3 AUTHORITY OF HANOVER AND PURCHASER. Hanover and Purchaser have
full corporate power and authority to enter into this Agreement and to carry
out the transactions contemplated herein. The execution, delivery, and
performance by Hanover and Purchaser of this Agreement, the other agreements
contemplated hereby, and each of the transactions contemplated hereby or
thereby have been duly and validly authorized by Hanover and Purchaser. No
other corporate act or proceeding on the part of either Hanover or Purchaser,
their board of directors, or their shareholders is necessary to authorize the
execution, delivery, or performance by Hanover and Purchaser of this
Agreement or any other agreement contemplated hereby or thereby. This
Agreement has been duly executed and delivered by Hanover and Purchaser. This
Agreement constitutes, and the other agreements contemplated hereby upon
execution and delivery by Hanover and Purchaser will each constitute, a valid
and binding obligation of Hanover and Purchaser, enforceable against Hanover
and Purchaser in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditor rights and to
general equity principles.
3.4 BROKERS. Except for GKH Partners, L.P., Goldman, Sachs & Co. and
J.P. Morgan Securities Inc., the fees and expenses of which shall be the
responsibility of Purchaser, no broker or investment banker acting on behalf
of Hanover or Purchaser is or will be entitled to any broker's or finder's
fee or any other commission or similar fee directly or indirectly in
connection with any of the transactions contemplated hereby.
3.5 HANOVER SEC FILINGS; FINANCIAL STATEMENTS; ABSENCE OF CERTAIN
CHANGES.
(a) Hanover has timely filed all forms, reports, statements
and documents required to be filed with the Securities and Exchange
Commission (the "SEC") since January 1, 1998 (collectively, the "HANOVER SEC
REPORTS") each of which complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, each as in effect on
the date so filed. Hanover has heretofore delivered or made available to each
Seller or (in the case of any such document not yet filed with the SEC, but
to be filed prior to Closing) promptly will deliver or make available
thereto, in the form filed with the SEC (including any amendments thereto),
true and complete copies of the Hanover SEC Reports. Except to the extent
revised or superseded by a subsequent filing with the SEC, none of the
Hanover SEC Reports filed since January 1, 1998 and prior to the date hereof,
contains any untrue statement of a material fact or omits to state a material
fact required to be stated or incorporated by reference therein or necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and
(b) Each of the audited and unaudited financial statements
of Hanover (including any related notes thereto) included in the Hanover SEC
Reports, complies or, if not yet filed, will comply as to form in all
material respects with all applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto; has been or,
if not yet filed, will have been prepared in accordance with GAAP (except, in
the case of unaudited quarterly statements, as permitted by Form 10-Q under
the Exchange Act) applied
25
on a consistent basis throughout the periods involved (except as may be
indicated on the notes thereto) and fairly presents or, if not yet filed,
will fairly present the consolidated financial position of Hanover at the
respective date thereof and the consolidated results of its operations and
changes in cash flows for the periods indicated (subject, in the case of
unaudited quarterly statements, to normal year-end audit adjustments).
3.6 NO CONFLICT; CONSENTS. Except as set forth on SCHEDULE 3.6, the
execution and delivery of this Agreement by Hanover and Purchaser does not,
and the consummation of the transactions contemplated hereby and performance
by Hanover and Purchaser of their obligations hereunder will not: (a)
violate, conflict with or result in a breach by Hanover and Purchaser of any
term, condition or provision of the charter, by-laws or analogous
organizational documents of Hanover or Purchaser, (b) violate, conflict with
or result in a breach of any term, condition or provision of, or constitute a
default by Hanover or Purchaser (or create an event which, with the giving of
notice or lapse of time or both, would constitute such a default) or give
rise to any right of termination, cancellation or acceleration under, any
material agreement, lease, instrument, mortgage, license or franchise to
which Hanover or Purchaser is a party, or by which any of their respective
properties are bound, (c) result in the creation of any Lien in an amount
greater than $5 million upon any of Hanover's or Purchaser's respective
properties or give to others any interest or right in any of their respective
properties, including, but not limited to, a right to purchase any of such
properties, or (d) except for applicable requirements of the HSR Act, and as
otherwise set forth on SCHEDULE 3.6, require any order, consent, approval or
authorization of, or notice to, or declaration, filing, application,
qualification or registration with, any governmental or regulatory authority.
Except as set forth on SCHEDULE 3.6, the failure of any Person not a party
hereto to authorize or approve this Agreement will not give any Person the
right to enjoin, rescind or otherwise prevent or impede the sale of the POC
Shares or any POC Company to Purchaser in accordance with the terms of this
Agreement or to obtain damages from, or any other judicial relief against,
Seller as a result of the transactions carried out in accordance with the
provisions of this Agreement.
3.7 NO UNDISCLOSED LIABILITIES. Except as set forth on SCHEDULE 3.7
and to the extent set forth on the consolidated balance sheet of Hanover
dated December 31, 2000, including the notes thereto, included in Hanover's
Annual Report on Form 10-K for the fiscal year ended December 31, 2000, or on
the consolidated balance sheet of Hanover at March 31, 2001, including the
notes thereto, included in Hanover's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 2001 and, except for current liabilities
incurred in the ordinary course of business since March 31, 2001, the Hanover
Entities have no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, choate or inchoate, or
otherwise) which would be required to be reflected on a balance sheet or in
the notes thereto prepared in accordance with GAAP, which, individually or in
the aggregate, has had, or would reasonably be expected to have, a material
adverse effect on the business, operations or financial condition of Hanover
and its subsidiaries taken as a whole (a "HANOVER MATERIAL ADVERSE EFFECT")
or a material adverse effect on the ability of Hanover or Purchaser to
consummate the transactions contemplated by this Agreement.
3.8 NO MATERIAL ADVERSE CHANGE. Except as set forth in SCHEDULE 3.8
or as disclosed in the Hanover SEC Reports publicly available prior to the
date hereof, since March 31, 2001, there has not been any change in the
business, operations, properties, assets, or condition of any
26
of the Hanover Entities, and no event has occurred or circumstance exists
that has resulted, or would reasonably be expected to result, in a Hanover
Material Adverse Effect, provided, that, for purposes of this SECTION 3.8, a
Material Adverse Effect shall not include: (a) changes to the industry or
markets in which Hanover and its Affiliates operate that are not unique to
Hanover or its Affiliates, and (b) any change resulting from the announcement
or disclosure of the transactions contemplated herein.
3.9 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
SCHEDULE 3.9, as contemplated by this Transaction or in connection with the
financing of this Transaction, or as disclosed in the Hanover SEC Reports
publicly available prior to the date hereof, since March 31, 2001 the Hanover
Entities have conducted their businesses in all material respects only in the
ordinary course of business and there has not been any amendment to the
articles or certificate of incorporation, bylaws, limited liability company
agreement, operating agreement or other organizational document, as the case
may be, of any Hanover Entity.
3.10 TAXES. Purchaser is eligible to make an election under Section
338(h)(10) of the Code and the Regulations thereunder with respect to its
purchase of the POC Shares pursuant to this Agreement. Hanover is not a
"United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
3.11 LITIGATION. Except as set forth on SCHEDULE 3.11 or as
disclosed in the Hanover SEC Reports publicly available prior to the date
hereof, there is no demand, claim, suit, action, arbitration or legal,
administrative or other proceeding pending or, to the knowledge of Hanover,
threatened against the Hanover Entities or relating to the transactions
contemplated by this Agreement or the Alliance Agreement, before any
arbitrator, court or governmental or regulatory body, which could reasonably
be expected to be decided unfavorably against any Hanover Entity, and, if so
decided, would reasonably be expected to have a Hanover Material Adverse
Effect or a material adverse effect on the ability of Hanover or Purchaser to
consummate the transactions contemplated by this Agreement or the Alliance
Agreement. No Hanover Entity has received any written or, to the knowledge of
Hanover, oral notice that any Hanover Entity or any of their assets is
subject to any decree, order or judgment which would reasonably be expected
to have a Hanover Material Adverse Effect or a material adverse effect on the
ability of Hanover or Purchaser to consummate the transactions contemplated
by this Agreement or the Alliance Agreement.
3.12 ERISA AND RELATED MATTERS.
(a) All benefit arrangements that are applicable to
employees of Purchaser (the "HANOVER BENEFIT ARRANGEMENTS"), and all Benefit
Plans that are maintained, contributed to or participated in by the Purchaser
(the "HANOVER ENTITIES PLANS") comply in form and operation in all material
respects with all applicable requirements of Law, except such compliance
failures which, individually or in the aggregate, can otherwise be corrected
without material liability to the Hanover Entities under compliance
resolution programs made available by the IRS or Department of Labor.
(b) All Hanover Entities Plans which are employee pension
benefit plans as defined in Section 3(2) of ERISA and which are intended to
comply with Section 401(a) of the
27
Code qualify in form and have been maintained in compliance with Section
401(a) of the Code in all material respects.
(c) None of the Hanover Entities Plans are subject to Title
IV of ERISA, Part 3 of Title I of ERISA or Section 412 of the Code.
(d) No Hanover Entities Plan provides post-employment
medical, disability or life insurance benefits. The Hanover SEC Reports
accurately reflect the liability for any such post-employment benefits, as
required by FAS-106.
3.13 ENVIRONMENTAL. Except as set forth in SCHEDULE 3.13 or
disclosed in the Hanover SEC Reports publicly available prior to the date
hereof, there are no existing or, to the knowledge of Hanover, threatened
Environmental Claims against any Hanover Entity which could reasonably be
expected to be decided unfavorably against such Hanover Entity and, if so
decided, would reasonably be expected to have a Hanover Material Adverse
Effect or a material adverse effect on the ability of Hanover or Purchaser to
consummate the transactions contemplated by this Agreement.
3.14 COMPLIANCE WITH LAW; AUTHORIZATIONS. Hanover and each of the
Hanover Entities and the conduct of their respective businesses is and has
been in compliance with all Government Regulations relating to the business,
operations, assets or properties of Hanover and each Hanover Entity except
for such failures that would not reasonably be expected to have a Hanover
Material Adverse Effect or a material adverse effect on the ability of
Hanover or Purchaser to consummate the transactions contemplated by the
Agreement. No Hanover Entity has received any written or, to the knowledge of
Hanover, other notice to the effect that, or otherwise been advised that, it
is not in or may not be in compliance with any such Government Regulations
except for such failures that would not reasonably be expected to have a
Hanover Material Adverse Effect or a material adverse effect on the ability
of Hanover or Purchaser to consummate the transactions contemplated by this
Agreement.
3.15 SECURITIES/RESALE. Neither Hanover nor Purchaser is acquiring
the stock of POC, Harwat, or WilPro with a view to or for sale in connection
with any distribution thereof within the meaning of the Securities Act.
Hanover and Purchaser understands that: (a) the stock of POC, Harwat, or
WilPro has not been and is not being registered under the Securities Act or
any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless: (i) subsequently registered thereunder, or (ii) an
exemption exists permitting such stock to be sold, assigned or transferred
without such registration, and (b) neither Seller nor any other person is
under any obligation to register such stock under the Securities Act or any
state securities laws or to comply with the terms and conditions of any
exemption thereunder.
3.16 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article III, neither
Hanover, Purchaser nor any other person or entity makes any other express or
implied representation or warranty.
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ARTICLE IV
COVENANTS OF SELLER
Each Seller hereby covenants to and agrees with Hanover and Purchaser
as follows:
4.1 CORPORATE AND OTHER ACTIONS. Prior to the Closing Date, the
Sellers shall use all commercially reasonable efforts to fulfill their
obligations under this Agreement and to consummate the transactions
contemplated hereby.
4.2 FULL ACCESS. Prior to the Closing Date, the Sellers shall cause
the POC Companies to, and use commercially reasonable efforts to cause the
Transferred Joint Venture Companies to, afford Purchaser and its counsel,
accountants, lenders, advisers and other authorized representatives, with
reasonable prior notice, reasonable access during normal business hours (when
accompanied by an authorized representative of the POC Companies) to the
respective premises, properties, personnel, books and records of the POC
Companies or the POC Entities, as applicable, and any other assets or
information that Purchaser reasonably deems necessary (but so as not to
unduly disrupt the normal course of operations of the POC Companies or the
POC Entities, as applicable) and shall furnish Purchaser with such financial
and operating data concerning the POC Companies or the POC Entities, as
applicable, as Purchaser shall reasonably request. No information or
knowledge obtained in any investigation pursuant to this SECTION 4.2 shall
affect or be deemed to modify any representation or warranty contained in
this Agreement or the conditions to the obligations of the parties to
consummate the transactions contemplated herein.
4.3 ORDINARY COURSE OF BUSINESS. Prior to the Closing Date, Sellers
shall cause the POC Companies to be operated in the ordinary course of
business and to preserve intact their current business organizations, shall
use commercially reasonable efforts to keep available the services of the
current officers, employees and agents of such POC Companies, and shall use
commercially reasonable efforts to maintain the relations and good will with
suppliers, landlords, creditors, employees, agents, and others having
business relationships with such POC Companies. Prior to the Closing Date,
Sellers shall not consent to the Transferred Joint Venture Companies taking
any actions outside the ordinary course of business to which the Transferred
Joint Venture Companies have a legal obligation to seek the consent of the
Sellers. In addition, prior to the Closing Date, Sellers shall not permit any
of the POC Companies, without the prior written consent of the Purchaser, to
take any action, or fail to take any action, as a result of which any of the
changes or events listed in SECTION 2.13 does or is likely to occur.
4.4 FILINGS AND CONSENTS. Each Seller shall use its commercially
reasonable efforts to obtain and to cooperate in obtaining any consent,
approval, authorization or order of, and in making any registration or filing
with, any governmental agency or body or other third party required in
connection with the execution, delivery or performance of this Agreement.
Each Seller (in cooperation with Purchaser) agrees to cause to be made all
appropriate filings to be made by such Person under the HSR Act in a timely
fashion.
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4.5 EMPLOYMENT MATTERS.
(a) For all awards outstanding as of the POC Closing Date
under any long-term incentive plan maintained by Seller or the POC Companies,
the POC Employees shall be treated as terminated employees as of the Closing
Date, and the terms and conditions of the governing plan and/or agreement
will apply to such awards, except for the four key employees retained by or
seconded by the Seller.
(b) As of the Closing Date, under the terms of the
Schlumberger Discounted Stock Purchase Plan (the "Schlumberger DSPP"), the
POC Employees shall be treated as terminated employees under the terms and
conditions of the Schlumberger DSPP.
(c) Effective as of the Closing Date, the POC Companies
shall cease to be participating employers in the Schlumberger Technology
Corporation Pension Plan (the "STC Pension Plan"), the Schlumberger
Technology Corporation Restoration Savings Plan, and the Schlumberger
Technology Corporation Supplementary Benefit Plan (collectively, the "Seller
Retirement Plans"), and as of such date all employees of the POC Companies
shall cease to be eligible to participate in the Seller Retirement Plans. As
of the Closing Date, all POC Employees will be fully vested in their accrued
benefit under the STC Pension Plan. Any service or compensation earned by an
employee of the POC Companies for any period after the Closing Date shall be
disregarded for all purposes of the Seller Retirement Plans.
(d) Pursuant to the Transition Services Agreement, Seller
agrees to provide payroll administration services with respect to POC
Employees on behalf of Purchaser and to allow POC Employees to continue to
participate in the Schlumberger Group Health Care Plan ("Schlumberger Health
Plan") and the Schlumberger Short-Term Disability Plan, following the Closing
Date until the last day of the calendar quarter ending after the Closing
Date, or such other period as the parties may agree (the "Benefits Transition
Period"). Purchaser will reimburse Seller for the costs of providing such
services and administering such benefits during the Benefits Transition
Period as set forth in the Transition Services Agreement. Effective as of the
end of the Benefits Transition Period, the POC Companies shall cease to be
participating employers in the POC Companies Plans that are welfare benefit
plans as described in Section 3(1) of ERISA and that are not Subsidiary Plans
(the "Seller Welfare Benefit Plans"), except that the POC Companies shall
cease to be participating employers in Seller's group term life, accidental
death & dismemberment, business travel accident and long-term disability
plans effective as of the POC Closing Date.
(e) Unless specifically provided otherwise in this
Agreement, effective as of the Closing Date, the POC Companies and their
employees shall cease participation in all POC Companies Plans that are not
Subsidiary Plans, and all POC Employees shall be treated as terminated
employees under such plans. On or prior to the Closing Date, Seller shall, or
shall cause the POC Companies to, take such action as may be necessary or
appropriate to conform the POC Companies Plans to the provisions of Section
5.2.
4.6 COVENANT NOT TO COMPETE. Each Seller agrees that, for the term
of the Alliance Agreement plus three years from the date of termination of
the Alliance Agreement it will not, and will cause each of its Affiliates not
to, engage anywhere in the world in any Prohibited
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Activity. If any court of competent jurisdiction shall finally hold that the
time, territory or any other provision set forth in this SECTION 4.6
constitutes an unreasonable restriction, such provision shall not be rendered
void, but shall apply as to such time, territory or to such other extent as
such court may determine constitutes a reasonable restriction under the
circumstances involved. Each Seller acknowledges that the restrictions
contained in this SECTION 4.6 are reasonable and necessary to protect the
legitimate interests of Hanover and Purchaser and that any breach by any
Seller of any provision hereof will result in irreparable injury to Hanover
and Purchaser. Each Seller acknowledges that, in addition to all remedies
available at law, Hanover and Purchaser shall be entitled to equitable
relief, including injunctive relief, and an equitable accounting of all
losses and damages.
4.7 COOPERATION WITH SEC FILINGS; FINANCING. Sellers shall provide
all necessary reasonable assistance to Purchaser (at Purchaser's expense),
and shall use reasonable efforts to cause Sellers' independent accountants,
PriceWaterhouseCoopers LLP, to provide all necessary assistance to Purchaser
(at Purchaser's expense), with the timely preparation of audited financial
statements for the POC Companies as may be required under the Securities Act
or the Exchange Act, and the execution by employees and officers of the
Sellers of representation letters as may be requested by
PriceWaterhouseCoopers LLP in accordance with customary audit practices for
the issuance of an unqualified audit opinion. The Sellers consent to Hanover
using the audited financial statements for the POC Companies in connection
with any offering of debt or equity securities by Hanover.
4.8 TRANSITION SERVICES AGREEMENT. On or prior to the Closing Date,
the applicable Sellers shall execute and deliver a transition services
agreement substantially in the form attached as EXHIBIT 4.8 hereto (the
"TRANSITION SERVICES AGREEMENT") with respect to facilities and services
currently shared by any of the POC Companies and other business operations of
each applicable Seller.
4.9 ALLIANCE AGREEMENT. On or prior to the Closing Date, each
applicable Seller shall execute and deliver an Alliance Agreement
substantially in the form attached as EXHIBIT 4.9 (the "ALLIANCE AGREEMENT")
hereto with respect to certain compressed gas and surface oil and gas
production equipment and related services to be provided by Hanover.
4.10 REGISTRATION RIGHTS AGREEMENT. On or prior to the Closing Date,
each applicable Seller shall execute and deliver a Registration Rights
Agreement substantially in the form attached as EXHIBIT 4.10 hereto with
respect to the registration for sale under the Securities Act of the Hanover
Stock.
4.11 SALE OF OSI ASSETS AND ROCKY MOUNTAIN ASSETS. Sellers agree
that Sellers and/or one of their Affiliates shall sell the OSI Assets and the
Rocky Mountain Assets to Purchaser and/or one of its Affiliates on the
Closing Date, all on terms and conditions (other than price, which is set
forth on SCHEDULE 1.2(c) hereof) reasonably satisfactory to the Parties.
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ARTICLE V
COVENANTS OF HANOVER AND PURCHASER
Hanover and Purchaser hereby covenant to and agree with Schlumberger as
follows:
5.1 CORPORATE AND OTHER ACTIONS. Prior to the Closing Date, each of
Hanover and Purchaser shall use all commercially reasonable efforts to fulfill
its obligations under this Agreement and to consummate the transactions
contemplated hereby.
5.2 BENEFIT PLANS.
(a) Purchaser shall pay or cause the POC Companies or their
successors to pay severance benefits in accordance with the Schlumberger
Severance Program (based on service recognized pursuant to such program plus
service with Purchaser and/or the POC Companies or their successors following
the POC Closing Date) to any POC Employee whose employment is terminated in
less than twelve (12) months after the Closing Date, except for any
employees: (i) who shall be terminated by the POC Companies or their
successors for Cause (as defined in the Schlumberger Severance Program), (ii)
who voluntarily terminate their employment with the POC Companies or their
successors other than for Good Reason, or (iii) who were employed for a fixed
time period and are terminated upon expiration of that time period. Purchaser
shall also pay repatriation benefits in accordance with Schlumberger's
policies as in effect on the Closing Date to any POC Employee terminated
outside of his country of origin within 12 months of the POC Closing Date.
Purchaser shall be responsible for any liabilities associated with the
termination of employment of any POC Employee following the Closing Date.
Purchaser agrees that POC Employees will receive the benefit of any vacation
accrued under the applicable Schlumberger vacation policy as of the Closing
Date, either through a cash-out of such accrual or through actual paid time
off.
(b) Effective as of the end of the Benefits Transition
Period with respect to the Schlumberger Health Plan and the Schlumberger
Short-Term Disability Plan, and effective as of the POC Closing Date with
respect to the other Seller Welfare Benefit Plans, Purchaser shall take all
actions necessary or appropriate to extend coverage to POC Employees who are
covered under the Seller Welfare Benefit Plans on the Closing Date (and their
covered dependents) under the Purchaser Welfare Benefit Plans. POC Employees
(and their dependents covered under the Applicable Seller Welfare Plans)
shall be eligible to participate in the Purchaser Welfare Benefit Plans
without regard to any eligibility period, waiting period, evidence of
insurability requirements or pre-existing condition limitations and to the
extent that the POC Employees provide appropriate evidence of same, shall be
given credit under the Purchaser Welfare Benefit Plans for amounts paid under
a corresponding Applicable Seller Welfare Benefit Plan or Subsidiary Plan
during the same period for purposes of applying deductibles, co-payments and
out-of-pocket maximums as though such amounts had been paid in accordance
with the terms and conditions of the applicable Purchaser Welfare Benefit
Plan.
(c) Following the Closing Date, Purchaser and/or the POC
Companies and/or their successors shall retain or, as applicable, assume
sponsorship of, and responsibility for, all Subsidiary Plans, provided that
(i) Seller shall remain solely responsible for any and all liabilities
arising under the VCP submission with respect to the Production Operators
Inc. Thrift Plan (the
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"POI Thrift Plan") described in Schedule 2.16 (and the POC Companies balance
sheet will be adjusted to reflect the elimination of the liability accrued in
anticipation of this filing), and Seller shall take all action necessary to
complete such VCP submission as soon as practicably possible following the
date hereof, (ii) Purchaser shall freeze benefit accruals under the POI
Thrift Plan upon termination of the Benefit Transition Period, however,
pursuant to the Transition Services Agreement, the POI Thrift Plan shall
remain a part of the Schlumberger Master Profit-Sharing Trust until December
31, 2001, and (iii) Seller shall pay pro-rated bonuses to employees
participating in the Subsidiary Plans that are Bonus Plans as described in
Section 5.2(e). Purchaser shall ensure that: (A) POC Employees (and their
eligible dependents) shall participate in the employee benefit plans,
policies, programs and arrangements maintained from time to time by Purchaser
for the benefit of similarly situated employees of Purchaser (collectively,
the "Purchaser Plans"), which Purchaser Plans may include the Subsidiary
Plans, on terms and conditions which, subject to the provisions of this
Section 5.2, are substantially the same as applied to other similarly
situated employees of Purchaser, and (B) POC Employees shall be given credit
under the Purchaser Plans and the Purchaser Welfare Benefit Plans for their
service with Seller and the POC Companies and their predecessors for all
purposes to the extent such service was taken into account under a
corresponding POC Companies Plan as of the Closing Date.
(d) Effective as of the Closing Date: (i) the Purchaser
shall assume all liabilities and obligations, with respect to any POC
Employees, as may arise under the terms of any individual employment or
severance agreements other than liabilities for any amounts payable by any of
the POC Companies solely as a result of the consummation of the transactions
contemplated by the Agreement, (ii) the Purchaser shall become the successor
in interest to such agreements, and (iii) Schlumberger shall no longer be a
guarantor of any obligations arising under such agreements with respect to
such employees or former employees.
(e) Purchaser shall pay and be responsible for the payment
of all amounts which may be or become due to POC Employees under the Bonus
Plans (other than the Schlumberger Performance Incentive Plan, Target
Variable Incentive Plan and the Target Variable Compensation Plan),
including, but not limited to, pro-rated awards thereunder to POC Employees
who are terminated or constructively terminated by Purchaser on or after the
Closing Date; provided, however, that the Purchaser may substitute its own
bonus arrangement following the Closing Date. Seller shall pay to POC
Employees participating in the Schlumberger Performance Incentive Plan,
Target Variable Incentive Plan and the Target Variable Compensation Plan
bonuses based on performance as of the Closing Date, and Purchaser shall have
no liability for any bonuses pursuant to such plans.
(f) For any POC Employees who terminate employment on or
after the Benefits Transition Period, Purchaser shall be responsible for
administering compliance with the continuation coverage requirements for
"group health plans" under Title X of the Consolidated Omnibus Reconciliation
Act of 1985, as amended ("COBRA").
(g) The parties acknowledge and agree that all provisions
contained in this Agreement with respect to employee benefit plans or
employee compensation are included for the sole benefit of the respective
parties hereto and shall not create any right in any other Person,
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including, without limitation, any employees of the POC Companies, any
participant in any POC Companies Plans or any beneficiary thereof.
5.3 FULL ACCESS. From and after the Closing Date, Purchaser shall
cause the POC Companies to afford Sellers and their counsel, accountants,
advisors, and other authorized representatives, with reasonable prior notice,
reasonable access during normal business hours (when accompanied by an
authorized representative of the POC Companies) to the respective premises,
properties, personnel, books and records of the POC Companies and any other
assets or information that Seller reasonably deems necessary solely in
connection with Seller's review of the True-Up Balance Sheet (but so as not
to unduly disrupt the normal course of operations of the POC Companies).
Seller shall pay all out-of-pocket expenses of such personnel and all
reasonable out-of-pocket expenses of Hanover, Purchaser or the POC Companies
for such assistance.
5.4 FILINGS AND CONSENTS. Purchaser shall use its commercially
reasonable efforts to obtain and to cooperate in obtaining any consent,
approval, authorization or order of, and in making any registration or filing
with, any governmental agency or body or other third party required in
connection with the execution, delivery or performance of this Agreement;
provided, however, that Purchaser shall have no obligation to dispose of any
of its assets or to agree to dispose of any of the assets of the POC
Companies. Purchaser (in cooperation with Seller) agrees to cause to be made
all appropriate filings under the HSR Act in a timely fashion.
5.5 DIRECTORS' AND OFFICERS' INSURANCE. Purchaser will cause each of
the persons covered by the policies of directors' and officers' liability
insurance maintained by the POC Companies to be covered with respect to
matters occurring prior to the Closing Date for a continuous period of not
less than two (2) years from the Closing Date (without any gap or lapse in
coverage) under one or more directors' and officers' liability insurance
policies that replicate the coverage provided by the directors' and officers'
liability insurance policies most recently maintained by the POC Companies
(with terms and conditions which are no less advantageous) to the extent such
policies are available. Hanover or the POC Companies will not amend the
certificate of incorporation or by-laws of any of the POC Companies in any
way to reduce or eliminate the level of indemnification provided by the
applicable POC Company to the past and current officers and directors of such
POC Company.
5.6 USE OF SCHLUMBERGER NAME. Promptly after the Closing, which in
no event shall exceed a three (3) month period, Purchaser shall cause each of
the POC Companies to cease the use of the Schlumberger name or any derivative
thereof in any way by: (a) changing the name of any POC Company that includes
"Schlumberger" to exclude such reference, and (b) removing the Schlumberger
name, any derivative thereof, and any logo related thereto from any tanks,
trucks, business cards, stationery or other objects on which such name
appears.
5.7 REGISTRATION RIGHTS AGREEMENT. On or prior to the Closing Date,
Hanover shall execute and deliver a Registration Rights Agreement
substantially in the form attached as EXHIBIT 4.10 hereto (the "REGISTRATION
RIGHTS AGREEMENT") with respect to the registration for sale under the
Securities Act of the Hanover Stock.
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5.8 ALLIANCE AGREEMENT. On or prior to the Closing Date, Hanover
shall execute and deliver an Alliance Agreement substantially in the form
attached as EXHIBIT 4.9 (the "ALLIANCE AGREEMENT") with respect to certain
compressed gas and surface oil and gas production equipment and related
services to be provided by Hanover.
5.9 HANOVER BOARD SEAT. Subject to Schlumberger or any of its
Affiliates continued ownership of at least five percent (5%) of Hanover's
issued and outstanding capital stock, Hanover and Hanover's ultimate parent
company, if any, shall appoint, nominate, and recommend the election of a
director designated by Schlumberger to serve with full voting rights until
the later to occur of (a) the fifth (5th) anniversary of the Closing Date and
(b) the termination of the Alliance Agreement, provided that the identity of
such director is reasonably acceptable to Hanover. If Schlumberger's designee
is not elected, Hanover shall, to the extent permitted by Delaware law, the
rules of the New York Stock Exchange and Hanover's Charter Documents, take
all actions necessary (including, if necessary, expanding Hanover's board of
directors) to appoint a designee of Schlumberger to Hanover's board of
directors, provided that the identity of such nominee is reasonably
acceptable to Hanover and such person has not unsuccessfully stood for
election as a director of Hanover. In addition, if the Schlumberger designee
shall resign or be removed from office for any reason, Hanover shall, to the
extent permitted by Delaware law, the rules of the New York Stock Exchange
and Hanover's Charter Documents, appoint, nominate and recommend the election
of a replacement director designated by Schlumberger and take all actions
necessary to appoint such replacement director to fill such vacancy, provided
that the identity of such replacement director is reasonably acceptable to
Hanover. Hanover agrees not to change its Charter Documents without the
consent of the Schlumberger designee to, in any way, limit its ability to
fulfill its obligation under this SECTION 5.9.
5.10 HANOVER GUARANTEES. Purchaser agrees to provide to each
applicable Seller or its applicable Affiliate at its request and to perform
an unconditional counter-guarantee (a "COUNTER-GUARANTEE") in a form to be
mutually agreed by the Parties prior to Closing, securing the payment of
certain amounts which third party lenders under the financing for the "SIMCO"
and "El Furrial" projects (a) may demand from the applicable Seller or its
Affiliates under guarantees or other financing support arrangements, or (b)
may require from the applicable Seller or its Affiliates after the date
hereof as conditions to granting their consent to any part of the Transaction.
5.11 SCHLUMBERGER GUARANTEE. Upon the closing of the PIGAP II
financing and receipt of the proceeds called for by Section 1.2(a)(ii)
hereof, one or more of the Sellers or their Affiliates shall, to the extent a
guarantee is required by the lenders of the PIGAP II financing, guarantee the
repayment of the sum of 30% multiplied by the obligation under the PIGAP II
financing until such time as the lenders of the PIGAP II financing release
such guarantee upon the terms of such financing. Purchaser agrees that so
long as such guarantee is outstanding, the Sellers shall be included to the
same extent as Purchaser and its Affiliates are included in all
decision-making processes of WilPro or its equity owners that could
reasonably be expected to increase the Sellers' liability under the guarantee
and that Purchaser shall not transfer any equity ownership in WilPro without
the Sellers' consent.
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5.12 PURCHASE OF WILPRO ENERGY SERVICES (GUARA) LTD. Purchaser
agrees that Purchaser and/or one of its Affiliates shall purchase and Sellers
agree to sell, on the Closing Date, a 50% interest in WilPro Energy Services
(GUARA) Ltd. (the "GUARA INTEREST") directly from the Williams Companies,
substantially on the terms and subject to the conditions set forth in the
term sheet attached hereto as EXHIBIT 5.12.
5.13 PURCHASE OF OSI MECHANICAL SERVICES GROUP AND ROCKY MOUNTAIN
GAS CONTRACTS. Purchaser agrees that Purchaser and/or one of its Affiliates
shall buy the OSI Assets and assume the Rocky Mountain Assets on the Closing
Date, all on terms and conditions (other than price, which is set forth on
SCHEDULE 1.2(c) hereof) reasonably satisfactory to the Parties.
5.14 OPTIONS FOR YME ASSETS. If the Sellers have not sold the
production equipment recently decommissioned from the Maersk Giant
Semi-submersible, which was under contract to Stat-Oil for use in its YME
Field listed on SCHEDULE 5.14 hereto by March 31, 2002, Purchaser and/or one
of its Affiliates shall, if so requested by Sellers on or before April 30,
2002 in the Sellers' sole discretion, purchase such equipment from Sellers on
an "as is", "where is" basis for $9,500,000 provided that the "as is" and
"where is" condition at that time is not materially worse than as at the date
hereof. SCHEDULE 5.14 sets forth the purchase prices for each such piece of
equipment. If the Sellers are able to sell part of such equipment prior to
March 31, 2002, the $9,500,000 purchase price shall be reduced by the greater
of (i) the amount of the price listed on SCHEDULE 5.14 for the sold equipment
or (ii) the proceeds of the sold equipment.
5.15 DESIGNATION OF PURCHASING ENTITIES. Purchaser shall, as soon as
practicable and in no event more than three days after the date hereof,
notify the Sellers of the identity of the purchasing entity with respect to
the POC Companies, the WilPro Interest, the Harwat Interest, the OSI Assets
and the Rocky Mountain Assets. Hanover Cayman, Limited, a Cayman Islands
company that is wholly owned by Purchaser, shall be the buyer of the WilPro
Interest. The Sellers agree that, up to ten days prior to the Closing, the
Purchaser may change these purchasing entities, subject to the Sellers
consent (which will not be unreasonably withheld).
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to purchase the Schlumberger Equity
Interests, the OSI Assets and the Rocky Mountain Assets and complete the
Closing at the Closing Date are, at the option of Purchaser, subject to
satisfaction of each of the following conditions precedent on or before the
Closing Date (Purchaser and Hanover agree that there is no financing or board
approval conditions to their obligations to purchase the POC Shares, the
Harwat Interest or the WilPro Interest at the Closing Date):
6.1 WARRANTIES TRUE AS OF BOTH PRESENT DATE AND THE CLOSING DATE.
The representations and warranties of each Seller contained herein shall have
been accurate, true and correct in all material respects on and as of the
date hereof, and, except to the extent that any such representation or
warranty is made solely as of the date hereof or as of another date earlier
than the Closing Date shall also be accurate, true and correct in all
material respects, on and as of the Closing Date with the same force and
effect as though made by each Seller on and as of the
36
Closing Date. If one or more of such representations or warranties are not
accurate, true and correct in all material respects on and as of any such
date, the conditions precedent in this Section 6.1 shall nevertheless be
deemed satisfied unless the inaccuracy, falsity or incorrectness of such
representations or warranties have resulted or would reasonably be expected
to result in aggregate losses of Seventeen Million Dollars ($17,000,000) or
more or have a material adverse effect on the ability of Sellers to
consummate the transactions contemplated by this Agreement.
6.2 COMPLIANCE WITH AGREEMENTS AND COVENANTS. Each Seller shall have
performed and complied in all material respects with all of its covenants and
obligations contained in this Agreement to be performed and complied with on
or prior to the Closing Date.
6.3 COMPETITION LAW APPROVALS. All required notice and waiting
periods under the HSR Act and any other applicable competition laws which,
and to the extent, Schlumberger or Hanover or their respective Affiliates
shall be legally responsible to make or obtain shall have expired or been
waived.
6.4 INJUNCTIONS. No court or Governmental Authority shall have
issued an order which shall then be in effect restraining or prohibiting the
completion of the transactions contemplated hereby, and no suit shall have
been instituted seeking the same.
6.5 DELIVERIES BY SELLERS. Each Seller shall have effected the
deliveries required pursuant to SECTION 8.2 below.
6.6 CONSENTS. All orders, consents, approvals, permits,
authorizations, notices, declarations, filings, applications, qualifications
and registrations identified in SCHEDULE 2.4 shall have been obtained and be
in full force and effect.
6.7 INTER-COMPANY OBLIGATIONS. All outstanding inter-company
obligations between any Seller and any of the relevant POC Companies shall be
settled and terminated at or prior to the Closing, other than obligations
that reflect amounts owed for actual services performed or goods delivered in
the ordinary course.
6.8 HANOVER SHARE PRICE.
(a) The trading price of the Hanover Stock shall not have
increased or decreased, relative to the Philadelphia Oil Services Index
(OSX), by more than twenty-seven and one-half (27.5) percentage points from
its closing trading price on May 25, 2001 and its closing trading price on
the day before the Closing Date.
(b) The UnCollared Average of Hanover Stock shall not
exceed $46.50, unless Schlumberger has agreed, notwithstanding the provisions
of SECTION 1.2 hereof, to accept the number of shares of Hanover Stock equal
to the quotient of Two Hundred Fifty Million Dollars ($250,000,000) divided
by the UnCollared Average as the stock portion of the Aggregate Purchase
Price.
6.9 CAMCO MEXICO CONTRACT. Sellers shall have assigned to a POC Company
(or to such other entity designated in advance by Purchaser) all right, title
and interest in and to that
37
certain General Services Agreement (the "Halliburton Contract"), between
Halliburton de Mexico, S.A. de C.V. and Camco Mexico, S.A. de C.V. (Contract
No. CARM-002-2000).
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
The obligation of each Seller, as applicable, to sell the
Schlumberger Equity Interests, the OSI Assets and the Rocky Mountain Assets
and complete the Closing at the Closing Date are, at the option of each
Seller, subject to the satisfaction of each of the following conditions
precedent on or before the Closing Date:
7.1 WARRANTIES TRUE AS OF BOTH PRESENT DATE AND THE APPLICABLE
CLOSING DATE. The representations and warranties of Hanover and Purchaser
contained herein shall have been accurate, true and correct in all material
respects on and as of the date hereof, and shall also be accurate, true and
correct in all material respects on and as of the Closing Date with the same
force and effect as though made by Hanover and Purchaser on and as of the
Closing Date.
7.2 COMPLIANCE WITH AGREEMENTS AND COVENANTS. Hanover and Purchaser
shall have performed and complied in all material respects with all of their
covenants and obligations contained in this Agreement to be performed and
complied with on or prior to the Closing Date.
7.3 COMPETITION LAW APPROVALS. All required notice and waiting
periods under the HSR Act and any other applicable competition laws which,
and to the extent, Hanover or Sellers, or their respective Affiliates shall
be legally responsible to make or obtain shall have expired or been waived.
7.4 INJUNCTIONS. No court or Governmental Authority shall have
issued an order which shall then be in effect restraining or prohibiting the
completion of the transactions contemplated hereby and no suit shall have
been instituted seeking the same.
7.5 DELIVERIES BY PURCHASER. Purchaser shall have effected the
deliveries required pursuant to SECTION 8.3 below.
7.6 CONSENTS. All orders, consents, approvals, permits,
authorizations, notices, declarations, filings, applications, qualifications
and registrations identified in SCHEDULE 3.6 shall have been obtained and be
in full force and effect.
7.7 HANOVER SHARE PRICE.
(a) The trading price of the Hanover Stock shall not have
increased or decreased, relative to the Philadelphia Oil Services Index
(OSX), by more than twenty-seven and one-half (27.5) percentage points or
more from its closing trading price on May 25, 2001 and its closing trading
price on the day before the Closing Date.
(b) The UnCollared Average of Hanover Stock shall not be
less than $27.50, unless Hanover has agreed, notwithstanding the provisions
of SECTION 1.2 hereof, to issue to Schlumberger the number of shares of
Hanover Stock equal to the quotient of Two Hundred
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Fifty Million Dollars ($250,000,000) divided by the UnCollared Average as the
stock portion of the Aggregate Purchase Price.
ARTICLE VIII
CLOSING
8.1 CLOSING. The Closing shall take place (i) at the offices of
Schlumberger Technology Corporation, 300 Schlumberger Drive, Sugar Land,
Texas 77478 with respect to the sale of the POC Shares and (ii) at a place
outside the U.S. to be mutually agreed by the Parties with respect to the
sale of the Harwat Interest and the WilPro Interest, in each case, at 10:00
A.M. on a day no more than 15 business days after all conditions precedent
set forth in Article 6 and Article 7 have been satisfied or waived by the
Parties, or such other date as is mutually agreeable to Sellers and Purchaser
(the "CLOSING DATE").
8.2 SELLERS' DELIVERIES. At the Closing, each Seller shall deliver,
or cause to be delivered, to Purchaser:
(a) A certificate, signed by an executive officer of
Seller, certifying that the representations and warranties of Seller
contained herein are true in all material respects.
(b) Copies of each of the following, in each case certified
by the Secretary of the Seller to be in full force and effect on the Closing
Date:
(i) Such Seller's certificate or articles of
incorporation or other applicable charter documents, certified by the
Secretary of State of Texas or the appropriate governmental authority, as
applicable, as of a date not more than ten (10) days prior to Closing.
(ii) A good standing certificate with respect to
STC, certified by the Secretary of State of the State of Texas and CII,
certified by the Secretary of State of the State of Delaware, as applicable,
as of a date not more than five (5) days prior to Closing
(iii) Such Seller's bylaws or other applicable
charter documents, as amended through Closing.
(iv) Resolutions of such Seller's Board of
Directors or other governing body, the form and substance of which are
reasonably satisfactory to the Purchaser, authorizing and approving the
execution and delivery of this Agreement and the other agreements
contemplated hereby, and the transactions contemplated hereby.
(c) Certificates evidencing the POC Shares, Harwat
Interest, or WilPro Interest, as applicable, duly endorsed in blank or
accompanied by duly executed stock powers.
(d) The stock record book, minute book and seal (if any) of
each of the POC Companies being conveyed.
(e) Opinion(s) of Sellers' counsel, dated the Closing Date,
in a form reasonably acceptable to Purchasers.
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(f) Any other items required to be delivered by Seller
under the terms and provisions of this Agreement.
(g) An executed Registration Rights Agreement.
(h) An executed Transaction Services Agreement.
(i) An executed Alliance Agreement.
(j) All third party consents to be delivered hereunder.
(k) A statement, in form and substance reasonably
satisfactory to Purchaser, that satisfies Purchaser's obligations under
Regulation Section 1.1445-2(b)(2) of the Code as to the purchase of the POC
Shares.
(l) Evidence, in form and substance reasonably satisfactory
to Purchaser, that Sellers have consummated the assignment of the Halliburton
Contract pursuant to the terms of SECTION 6.9 hereof.
(m) Executed transfer agreements for each of (i) the POC
Shares, (ii) the Harwat Interest, and (iii) the WilPro Interest.
(n) Executed assignment agreements for each of the
contracts listed on SCHEDULE 1.6.
(o) Executed copies of asset purchase agreements effecting
the sale of the OSI Assets and the Rocky Mountain Assets.
8.3 PURCHASER'S DELIVERIES. At the Closing, Purchaser shall deliver,
or cause to be delivered, to Sellers:
(a) A certificate, signed by an executive officer of
Hanover and Purchaser, certifying that the representations and warranties of
Hanover and Purchaser contained herein are true in all material respects.
(b) Copies of each of the following, in each case certified
by the Secretary of Hanover to be in full force and effect on the Closing
Date:
(i) Hanover's certificate or articles of
incorporation, certified by the Secretary of State of Delaware as of a date
not more than ten (10) days prior to Closing.
(ii) A good standing certificate with respect to
Hanover, certified by the Secretary of State of Delaware as of a date not
more than five (5) days prior to Closing.
(iii) Hanover's bylaws, as amended through Closing.
(iv) Resolutions of Hanover's Board of Directors,
the form and substance of which are reasonably satisfactory to the Sellers,
authorizing and approving the
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execution and delivery of this Agreement and the other agreements
contemplated hereby, and the transactions contemplated hereby.
(c) Copies of each of the following, in each case certified
by the Secretary of the Purchaser to be in full force and effect on the
Closing Date:
(i) The Purchaser's certificate of formation,
certified by the Secretary of State of Delaware as of a date not more than
ten (10) days prior to Closing.
(ii) A good standing certificate with respect to
the Purchaser, certified by the Secretary of State of Delaware as of a date
not more than five (5) days prior to Closing.
(iii) The Purchaser's partnership agreement, as
amended through Closing.
(iv) Resolutions of the Purchaser's general
partner, the form and substance of which are reasonably satisfactory to the
Sellers, authorizing and approving the execution and delivery of this
Agreement and the other agreements contemplated hereby, and the transactions
contemplated hereby.
(d) Same-day funds in the amount of the cash consideration
as required by SECTION 1.2.
(e) Certificates evidencing the Hanover Stock duly endorsed
in blank or accompanied by duly executed stock powers.
(f) The duly executed Hanover Note.
(g) All Counter-Guarantees provided for herein, duly
executed.
(h) Opinion(s) of Purchaser's counsel, dated the Closing
Date, in a form reasonably acceptable to Sellers.
(i) Any other items to be delivered by Purchaser under the
terms and provisions of this Agreement.
(j) An executed Alliance Agreement.
(k) An executed Transaction Services Agreement.
(l) An executed Registration Rights Agreement.
(m) Executed transfer agreements for each of (i) the POC
Shares, (ii) the Harwat Interest, and (iii) the WilPro Interest.
(n) Executed assignment agreements for each of the
contracts listed on SCHEDULE 1.6.
41
(o) Executed copies of asset purchase agreements effecting
the purchase of the OSI Assets, the Rocky Mountain Assets and the Guara
Interest.
8.4 TERMINATION. This Agreement shall terminate:
(a) Upon the mutual agreement of Schlumberger and Purchaser.
(b) On or after December 31, 2001, upon written notice from
Purchaser to Schlumberger if any of the conditions precedent set forth in
ARTICLE 6 have not been satisfied (other than through the failure of
Purchaser to comply with its obligations under this Agreement).
(c) On or after December 31, 2001, upon written notice from
Schlumberger to Purchaser if any of the conditions precedent set forth in
ARTICLE 7 have not been satisfied (other than through the failure of
Schlumberger to comply with its obligations under this Agreement).
If this Agreement is terminated pursuant to this SECTION 8.4, all
further obligations of the Parties under this Agreement will terminate,
except that: (i) the obligations in SECTION 11.1 will survive, and (ii) if
this Agreement is terminated by Schlumberger or Hanover because of the breach
of the Agreement by the other party, the terminating party's right to pursue
all legal remedies will survive such termination unimpaired. If this
Agreement is terminated, the obligations of the parties under that certain
Confidentiality Agreement (the "CONFIDENTIALITY AGREEMENT"), dated December
5, 2000, between Hanover and Schlumberger, shall survive and continue in full
force and effect.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
9.1 SURVIVAL. The representations and warranties of the parties
hereto contained herein and in the Related Agreements shall survive the
Closing for a period of eighteen months, except that: (a) Tax Warranties and
the warranties in SECTION 3.10 shall survive until the Tax Statute of
Limitations Date, (b) the ERISA Warranties shall survive until the ERISA
Statute of Limitations Date, (c) the Environmental Warranties shall survive
until the second (2nd) anniversary of the Closing Date, and (d) Title and
Authorization Warranties shall survive forever. Neither Purchaser nor any of
the Sellers shall have any liability with respect to claims first asserted in
connection with any representation or warranty after the survival period
specified therefore in this SECTION 9.1.
9.2 INDEMNIFICATION BY SELLERS (OTHER THAN FOR TAX MATTERS). Subject
to SECTION 9.4, SECTION 9.7 and SECTION 9.12, each Seller agrees to indemnify
on a joint and several basis Purchaser, its officers, directors, Affiliates,
successors and assigns, including, for the avoidance of doubt, the POC
Companies after the Closing (the "PURCHASER INDEMNIFIED PARTIES") against,
and agree to hold the Purchaser Indemnified Parties harmless from, any and
all Losses incurred or suffered by any Purchaser Indemnified Party arising
out of any of the following:
(a) Any breach of or any inaccuracy in any representation
or warranty made by any Seller in this Agreement or any Related Agreement or
any document delivered by any Seller at the Closing (other than for Tax
Warranties); provided, that Sellers shall have no liability
42
under this SECTION 9.2(a) for any breach of or inaccuracy in any
representation or warranty unless a notice of the Purchaser Indemnified
Party's claim is given to the Seller not later than the expiration of those
representations and warranties pursuant to SECTION 9.1.
(b) Any breach of or failure by any Seller to perform any
covenant or obligation of the applicable Seller set out in this Agreement or
any Related Agreement or any document delivered by any Seller at the Closing
(other than those relating to Taxes).
(c) Any Excluded Liability.
(d) For each customer contract of the POC Companies in
existence as of the Closing Date (other than the contracts in existence on
the date hereof relating to POI Unit Numbers 867, 868 and 871) that contains
an option for the customer to purchase compression equipment owned by a POC
Company or to cause a POC Company to purchase compression equipment from a
customer, if, during the original term of that contract (excluding any
renewal, holdover or extension periods), the customer exercises that purchase
or sale option, the amount, if any, by which the fair market value of such
equipment exceeds the amount received by Hanover and its Affiliates
(including the POC Companies) pursuant to such purchase option or the amount
by which the amount paid by the POC Company exceeds the fair market value of
such equipment pursuant to such sale option; provided, however, that this
SECTION 9.2(d) shall not apply if the exercise of such purchase option is due
to the breach of contract, contract default, negligence or willful misconduct
of Hanover or its Affiliates (including the POC Companies) or if Hanover or
any of its Affiliates (including the POC Companies) encourages the exercise
of the purchase option by the customer in any way or has any agreement with
the customer relating to the purchase option beyond what is in the contract.
Purchaser agrees to and to cause its Affiliates to use commercially
reasonable efforts to negotiate the put or call provisions out of any such
contracts that come up for renewal; provided, however, that the Purchaser or
its Affiliates shall not be required to alter any other terms of such
contracts to their detriment in order to remove the purchase or sale options.
This SECTION 9.21 shall not apply to any purchase option or sale option that
is amended in any way adverse to the Sellers after the Closing.
9.3 INDEMNIFICATION BY PURCHASER (OTHER THAN FOR TAX MATTERS). Hanover
and Purchaser agree to indemnify on a joint and several basis Sellers, their
officers and, directors, their Affiliates after the Closing, and their
successors and assigns (the "SELLER INDEMNIFIED PARTIES") against, and agree to
hold the Seller Indemnified Parties harmless from, any and all Losses incurred
or suffered by any Seller Indemnified Party arising out of any of the following:
(a) Any breach of or any inaccuracy in any representation
or warranty made by Hanover or Purchaser in this Agreement (other than in
SECTION 3.10) or any Related Agreement or any document delivered by Purchaser
at the Closing; PROVIDED, that Hanover and Purchaser shall have no liability
under this SECTION 9.3(a) for any breach of or inaccuracy in any
representation or warranty unless a notice of the Seller Indemnified Party's
claim is given to Hanover and Purchaser not later than the expiration of
those representations and warranties pursuant to SECTION 9.1.
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(b) Any breach of or failure by Hanover or Purchaser to
perform any covenant or obligation of Hanover or Purchaser set out in this
Agreement or any Related Agreement or any document delivered by Purchaser at
the Closing (other than those relating to Taxes).
9.4 LIMITATIONS ON LIABILITY OF SELLER. Notwithstanding any other
provision of this Agreement:
(a) The Purchaser Indemnified Parties shall have the right
to payment by the applicable Seller under SECTION 9.2(a) only with respect to
indemnifiable Losses that either (i) exceed One Hundred Thousand Dollars
($100,000) and relate to an inaccuracy or breach or series of related
inaccuracies or breaches under SECTION 2.6, 2.7, 2.8, 2.10, 2.18, 2.19, 2.21,
2.22 or 2.24 with respect to one or more Transferred Joint Venture Companies
or (ii) exceed Fifty Thousand Dollars ($50,000) and relate to any other
inaccuracy or breach or series of related inaccuracies or breaches with
respect to one or more Transferred Joint Venture Companies or that relate to
an inaccuracy or breach or series of related inaccuracies or breaches with
respect to one or more POC Companies; provided, however, that no Purchaser
Indemnified Party shall be entitled to indemnification under Section 9.2(a)
unless the sum of the aggregate amount of all indemnifiable Losses (other
than as excluded in CLAUSE (i) OR (ii)) for inaccuracies and breaches under
this Agreement and under the Related Agreements exceeds Seventeen Million
Dollars ($17,000,000) (at which point the Purchaser Indemnified Parties shall
be entitled to all indemnifiable Losses (other than as excluded in CLAUSE (i)
OR (ii)) accrued up to such threshold).
(b) The total liability of Sellers collectively under or in
connection with this Agreement or the Related Agreements or the transactions
contemplated hereby or thereby (including under SECTION 9.2(a), SECTION
9.2(b) or otherwise) for any breach of or inaccuracy in any representation or
warranty (other than any Title and Authorization Warranty or Tax Warranty)
shall not exceed Three Hundred and Twenty-Five Million Dollars
($325,000,000). Subject to the previous sentence, to the extent that such
liability exceeds the sum of (i) $270,000,000, plus any payment received
pursuant to clause (ii) of Section 1.2(a) plus or minus any payments made
under SECTION 1.3 and (ii) the aggregate amount of cash received by Sellers
from Purchaser in payments under the Hanover Note ((i) and (ii),
collectively, the "AGGREGATE CASH RECEIVED"), the amount of that liability in
excess of the Aggregate Cash Received may be satisfied by cancellation of an
equivalent amount of unpaid principal under the Hanover Note.
(c) The total liability of Sellers collectively under or in
connection with this Agreement or the Related Agreements for any breach of
the Title and Authorization Warranty or any covenant or obligation of Seller
hereunder shall not exceed the total consideration received by Sellers under
SECTION 1.2(a) and Section 1.3; provided, however, that the total liability
of Sellers under this SECTION 9.4 shall not exceed the total consideration
received by Sellers under SECTION 1.2(a) and SECTION 1.3. Any payments by
Sellers under this SECTION 9.4(c) shall be made by payment in the following
order: (i) cash in the amount of $270,000,000, plus any payment received
pursuant to clause (ii) of Section 1.2(a) in cash plus or minus any payments
made under SECTION 1.3, (ii) the amount of any cash received under the
Hanover Note or in consideration of the Hanover Stock, (iii) of cancellation
of principal (including capitalized interest) under the Hanover Note (valued
at face value) and (iv) return of any remaining Hanover Stock.
44
(d) Notwithstanding anything herein to the contrary, the
limitations set forth in this SECTION 9.4 shall not apply with respect to
Losses incurred or suffered by any Purchaser Indemnified Party arising out of
any Excluded Liability. Likewise, any indemnification payment made to a
Purchaser Indemnified Party arising out of any Excluded Liability shall not
count against the thresholds and caps set forth in this SECTION 9.4.
(e) Except in the case of equitable remedies, the sole and
exclusive liability and responsibility of Sellers to the Purchaser
Indemnified Parties under or in connection with this Agreement or the Related
Agreements or the transactions contemplated hereby or thereby (including for
any breach of or inaccuracy in any representation or warranty or for any
breach of any covenant or obligation or for any other reason), and, the sole
and exclusive remedy of the Purchaser Indemnified Parties with respect to any
of the foregoing, shall be as set forth in ARTICLE 9 and in ARTICLE 10.
9.5 NOTICE OF THIRD PARTY CLAIMS; ASSUMPTION OF DEFENSE. The
Indemnified Person shall give notice as promptly as is reasonably
practicable, but in any event no later than ten (10) business days after
receiving notice thereof, to the Indemnifying Person of the assertion of any
claim, or the commencement of any suit, action or proceeding, by any Person
not a party hereto in respect of which indemnity may be sought under this
Agreement (which notice shall specify in reasonable detail the nature and
amount of such claim together with such information as may be necessary for
the Indemnifying Person to determine that the limitations in SECTION 9.4 have
been satisfied or do not apply); provided that the failure to notify the
Indemnifying Person will not relieve the Indemnifying Person of any liability
it may have to the Indemnified Person except to the extent that the
Indemnifying Person demonstrates that its defense of such action is
prejudiced by its failure to receive timely notice. The Indemnifying Person
may, at its own expense: (a) participate in the defense of any such claim,
suit, action or proceeding, and (b) upon notice to the Indemnified Person, at
any time during the course of any such claim, suit, action or proceeding,
assume the defense thereof with counsel of its own choice and in the event of
such assumption, shall have the exclusive right, subject to SECTION 9.6, to
settle or compromise such claim, suit, action or proceeding. If the
Indemnifying Person assumes such defense, the Indemnified Person shall have
the right (but not the duty) to participate in the defense thereof and to
employ counsel, at its own expense, separate from the counsel employed by the
Indemnifying Person. Whether or not the Indemnifying Person chooses to defend
or prosecute any such claim, suit, action or proceeding, all of the parties
hereto shall cooperate in the defense or prosecution thereof.
9.6 SETTLEMENT OR COMPROMISE. Any settlement or compromise made or
caused to be made by the Indemnified Person or the Indemnifying Person, as
the case may be, of any such claim, suit, action or proceeding of the kind
referred to in SECTION 9.5 shall also be binding upon the Indemnifying Person
or the Indemnified Person, as the case may be, in the same manner as if a
final judgment or decree had been entered by a court of competent
jurisdiction in the amount of such settlement or compromise; provided, that:
(a) no obligation, restriction or Loss shall be imposed on the Indemnified
Person as a result of such settlement or compromise without its prior written
consent, which consent shall not be unreasonably withheld, and (b) the
Indemnified Person will not compromise or settle any claim, suit, action or
proceeding without the prior written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld.
45
9.7 NATURE OF SELLER'S AND PURCHASER'S REPRESENTATIONS, WARRANTIES,
COVENANTS, AND INDEMNIFICATION OBLIGATIONS. Except as otherwise expressly set
forth in this Agreement, the representations, warranties, covenants, and
indemnification obligations of the Sellers are not jointly allocated and are
several in nature; provided, however, that STC and CII shall be jointly and
severally liable for the representations, warranties, covenants, and
indemnification obligations of STC and CII, and Surenco and SOHL shall be
jointly and severally liable for the representations, warranties, covenants,
and indemnification obligations of Surenco and SOHL. Except as otherwise
expressly set forth in this Agreement, Purchaser and Hanover shall be jointly
and severally liable for the representations, warranties, covenants, and
indemnification obligations of Purchaser and Hanover.
9.8 TAX INDEMNIFICATION.
(a) Following the Closing, subject to SECTION 9.7, each
Seller agrees to indemnify on a joint and several basis the Purchaser
Indemnified Parties (including the POC Companies) against and hold them
harmless from: (i) all liability for Taxes of each of the POC Companies
(including any obligation to contribute to the payment of a Tax determined on
a consolidated, combined or unitary basis with respect to a group of
corporations that includes or included one or more of the POC Companies) for
all Pre-Closing Tax Periods, (ii) all liability (as a result of Regulation
Section 1.1502-6(a) or otherwise) for Taxes of a Seller or any other entity
which is or has been an Affiliate of the POC Companies (other than any of the
POC Companies or Hanover or its Affiliates), (iii) any and all Losses arising
out of, resulting from or incident to any breach by a Seller or any of its
Affiliates of any covenant contained in SECTION 4.3 (as it relates to SECTION
2.13(j)-(k)) or ARTICLE 10, and (iv) any and all Losses arising out of,
resulting from or incident to the breach of any Tax Warranty relating to the
POC Companies without regard to any qualification contained therein as to
materiality, except to the extent that any such Losses are otherwise
indemnified pursuant to the foregoing CLAUSES (i) - (iii). Notwithstanding
the foregoing, a Seller shall not indemnify and hold harmless any of
Purchaser, its Affiliates or officers, directors, employees or agents from
any liability for Taxes of the POC Companies for any Pre-Closing Tax Period
to the extent of the reserve (other than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income), if
any, established therefor in the True Up Balance Sheet (other than reserves
for Taxes that constitute Excluded Liabilities). For purposes of this SECTION
9.8(a), Taxes shall include the amount of Taxes which would have been paid
but for the application of any credit or net operating loss or capital loss
deduction attributable to Post-Closing Tax Periods.
(b) Subject to SECTION 9.7, following the Closing, each
Seller agrees to indemnify on a joint and several basis the Purchaser
Indemnified Parties (including the POC Companies) against and hold them
harmless from: (i) all liability for Taxes of each Transferred Joint Venture
Company for all Pre-Closing Tax Periods and (ii) any and all Losses arising
out of, resulting from or incident to the breach of any Tax Warranty relating
to the Transferred Joint Venture Companies without regard to any
qualification contained therein as to materiality, except to the extent any
such Losses are otherwise indemnified pursuant to the foregoing Clause (i);
provided, however, that claims for Taxes shall accumulate until the end of
the calendar year (or the partial year ending three years after the Closing
Date) at which time Purchaser shall provide notice of the amount of such
claim to Surenco and SOHL and the Sellers shall pay that amount to the
appropriate Person designated by Hanover within 30 days of receipt
46
of that notice, and if the aggregate liability of the Sellers under this
SECTION 9.8(b) would otherwise exceed One Million Dollars ($1,000,000) then
any additional claims for indemnifiable Losses against the Sellers under this
SECTION 9.8(b) shall be applied against the Seventeen Million Dollars
($17,000,000) threshold in SECTION 9.4(a). It is understood and agreed that
the $1,000,000 of indemnifiable Losses shall (i) only apply for a period of
three (3) years following the Closing; and (ii) not be applied to the
$17,000,000 threshold provided in Section 9.4(a) above in determining
Seller's obligations under such Section. Notwithstanding the foregoing, a
Seller shall not indemnify and hold harmless any Purchaser Indemnified
Parties for such Taxes to the extent of the reserve, if any, established
therefore on the balance sheet for a Transferred Joint Venture Company dated
as of the Closing Date and used in the preparation of the True-Up Balance
Sheet (other than any reserve for deferred Taxes established to represent
timing differences between book and tax income). In addition, in order to
claim indemnity under this SECTION 9.8(b), a Purchaser Indemnified Party must
make a good faith claim for such indemnity prior to the third (3rd)
anniversary of the Closing Date.
(c) Following the Closing, Hanover and Purchaser agree to
indemnify on a joint and several basis the Seller Indemnified Parties against
and hold them harmless from: (i) all liability for Taxes of the POC Entities
(including any obligation to contribute to the payment of a Tax determined on
a consolidated, combined or unitary basis with respect to a group of
corporations that includes or included the POC Entities) for any Post-Closing
Tax Period (except to the extent such Taxes arise from a breach of a Tax
Warranty), (ii) any and all Losses arising out of, resulting from or incident
to the breach by Purchaser or any of its Affiliates of any covenant contained
in ARTICLE 10 of this Agreement, and (iii) any and all Losses arising out of,
resulting from or incident to the breach of any representation in SECTION
3.10 without regard to any qualification contained therein as to materiality,
except to the extent that any such Losses are otherwise indemnified pursuant
to the foregoing clauses (i) and (ii).
(d) In the case of any Straddle Period:
(i) real, personal and intangible property Taxes
("PROPERTY TAXES") of the POC Entities for a Pre-Closing Tax Period shall be
equal to the amount of such Property Taxes for the entire Straddle Period
multiplied by a fraction, the numerator of which is the number of days during
the Straddle Period that are in the Pre-Closing Tax Period and the
denominator of which is the total number of days in the Straddle Period; and
(ii) the Taxes of the POC Entities (other than
Property Taxes) for any Pre-Closing Tax Period shall be computed as if such
Taxable Period ended as of the end of the day on the Closing Date.
(e) Sellers' indemnity obligation in respect of Taxes for a
Pre-Closing Tax Period shall initially be effected by their payment to
Purchaser of the excess of: (i) any such Taxes for a Pre-Closing Tax Period
(as may be evidenced by any Tax Return prepared by Purchaser in accordance
with SECTION 10.2(a) or as otherwise indicated in a written notice prepared
by Purchaser) over (ii) the amount of such Taxes paid by Sellers or any of
their Affiliates, other than the POC Entities, at any time plus the amount of
such Taxes paid by the POC Entities on or prior to the Closing Date. Sellers
shall pay such excess to Purchaser within ten (10) days after written demand
is made by Purchaser (but not earlier than five (5) days before
47
the date on which Taxes for the relevant Tax Period are required to be paid
to the relevant Governmental Authority). If the amount of any such Taxes paid
by Sellers or any of their Affiliates (other than the POC Entities) at any
time plus the amount of such Taxes paid by the POC Entities on or prior to
the Closing Date exceeds the amount of such Taxes for the Pre-Closing Tax
Period, Purchaser shall pay to Sellers the amount of such excess within ten
(10) days after the Tax Return with respect to the final liability for such
Taxes is required to be filed with the relevant Governmental Authority. In
the case of a Tax that is contested in accordance with the provisions of
SECTION 9.8(f), payment of the Tax to the appropriate Governmental Authority
shall not be considered to be due earlier than the date a final determination
to such effect is made by the appropriate Governmental Authority or court.
(f) (i) If a claim with respect to Taxes of any POC
Company shall be made by any Governmental Authority, which, if successful,
might result in an indemnity payment to an Indemnified Person, one of its
Affiliates or any of its officers, directors, employees or agents pursuant to
this SECTION 9.8, the Indemnified Person shall promptly and in any event no
more than thirty (30) days following the Indemnified Person's receipt of such
claim, give written notice to the Indemnifying Person of such claim (a "TAX
CLAIM"); provided, however, the failure of the Indemnified Person to give
such notice shall only relieve the Indemnifying Person from its
indemnification obligations hereunder to the extent it is actually prejudiced
by such failure.
(ii) With respect to any Tax Claim relating to a
Taxable Period ending on or prior to the Closing Date, Sellers shall, upon
written notification to Purchaser of its desire to, control all proceedings
and may make all decisions taken in connection with any such Tax Claim
(including selection of counsel) at its own expense; provided, however, that
Sellers and Purchaser shall jointly control any Tax Claims the resolution of
which will have an affect on Taxes of the POC Companies after the Closing
Date. Sellers and Purchaser shall jointly control all proceedings taken in
connection with any Tax Claim relating solely to Taxes of the POC Companies
for a Straddle Period. Purchaser shall control at its own expense all
proceedings with respect to any Tax Claim relating to a Taxable Period
beginning after the Closing Date. A party shall promptly notify the other
party if it decides not to control the defense or settlement of any Tax Claim
which it is entitled to control pursuant to this Agreement, and the other
party shall thereupon be permitted to defend and settle such proceeding.
(iii) Sellers, Purchaser, the POC Companies, and
each of their respective Affiliates shall reasonably cooperate with each
other in contesting any Tax Claim. Such cooperation shall include the
retention and, upon the request of the party or parties controlling
proceedings relating to such Tax Claim, the provision to such party or
parties of records and information which are reasonably relevant to such Tax
Claim, and making employees available on a mutually convenient basis to
provide additional information or explanation of any material provided
hereunder or to testify at proceedings relating to such Tax Claim.
(g) For the avoidance of doubt, it is agreed that in
determining any Tax liability that may give rise to indemnification hereunder
with respect to a Transferred Joint Venture Company, the Parties shall
multiply the amount of such Tax liability by the Purchaser's
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percentage ownership interest in such Transferred Joint Venture Company
(which percentage ownership shall be determined as of immediately following
the Closing).
9.9 TIME LIMITS. Any right to indemnification or other recovery
under this Article 9 shall only apply to Losses with respect to which the
Indemnified Person shall have notified the Indemnifying Person within the
applicable time period set forth in SECTIONS 9.2, 9.3 or 9.8 as the case may
be.
9.10 NET LOSSES.
(a) Notwithstanding anything contained herein to the
contrary, the amount of any Losses incurred or suffered by an Indemnified
Person shall be calculated after giving effect to: (i) any insurance proceeds
received by the Indemnified Person (or any of its Affiliates) with respect to
such Losses, (ii) any cash Tax benefit actually realized (determined by
taking into account the indemnity payment that would otherwise be made but
for the reduction under this clause (ii)) by the Indemnified Person (or any
of its Affiliates) arising from the facts or circumstances giving rise to
such Losses, and (iii) any net recoveries obtained by the Indemnified Person
(or any of its Affiliates) from any other third party. Each Indemnified
Person shall exercise commercially reasonable efforts to obtain such
proceeds, benefits and recoveries. If any such proceeds, benefits or
recoveries are received by an Indemnified Person (or any of its Affiliates)
with respect to any Losses after an indemnification payment with respect
thereto, the Indemnified Person (or such Affiliate) shall pay to the
Indemnifying Person the amount of such proceeds, benefits or recoveries (up
to the amount of the Indemnifying Person's payment).
(b) Upon making any payment to an Indemnified Person in
respect of any Losses, the Indemnifying Person will, to the extent of such
payment, be subrogated to all rights of the Indemnified Person (and its
Affiliates) against any third party in respect of the Losses to which such
payment relates. Such Indemnified Person (and its Affiliates) and
Indemnifying Person will execute upon request all instruments reasonably
necessary to evidence or further perfect such subrogation rights.
9.11 PURCHASE PRICE ADJUSTMENTS. Purchaser and Sellers shall treat
any amounts payable under SECTION 9.2, 9.3 or 9.8 as an adjustment to the
Aggregate Purchase Price. If contrary to the intent of Purchaser and Sellers
expressed in the preceding sentence, a Governmental Authority requires any
payment pursuant to this Article 9 to be treated in a different manner, then
the Indemnifying Person shall indemnify and hold harmless the Indemnified
Person on an after-tax basis.
9.12 REMEDIAL ACTION. With respect to any matter for which the
Sellers are required to indemnify and defend Hanover pursuant to the terms of
this Agreement and that requires any removal, remedial, response, cleanup or
corrective action ("REMEDIAL ACTION") under any Environmental Law to address
the conditions that cause, contribute to or are associated with such matter,
the Sellers may elect to implement and complete in a timely manner such
Remedial Action, which Remedial Action shall be limited to actions that are
necessary to comply with applicable cleanup standards and/or appropriate
requests by any Governmental Authority, and may rely on risk assessment or
risk reduction principles or programs, provided such principles or
49
programs are authorized by applicable Environmental Law and are acceptable to
the applicable Governmental Authority. In consultation with Hanover, the
Sellers shall endeavor to plan, design, implement and perform such Remedial
Action without undue delay and in a manner consistent with the business
operations of Hanover. This will include the opportunity for Hanover to
review and comment on any such draft reports, plans and designs prior to the
submission of such documents to any Governmental Authority. The Sellers shall
provide Hanover with copies of all reports and plans submitted to any
Governmental Authority and with any other information reasonably requested by
Hanover with respect to such Remedial Actions. Hanover shall use commercially
reasonable efforts to cooperate with the Sellers in the implementation and
performance of any Remedial Action undertaken by the Sellers pursuant to this
provision, including the taking of commercially reasonable efforts to avoid
or mitigate any Losses or potential Losses of Hanover that could result from
such Remedial Action.
ARTICLE X
TAX MATTERS
10.1 SECTION 338(h)(10) ELECTIONS.
(a) With respect to CII's sale of the POC Shares and the
deemed sale for Tax purposes of the shares of POI, STC (and/or, to the extent
necessary, its Affiliates) will join with Purchaser (and/or, to the extent
necessary, its Affiliates) to make irrevocable elections under Section
338(h)(10) of the Code and, if permissible, similar elections under any
applicable state, local or foreign Tax laws (collectively, the "ELECTIONS").
Hanover and STC (and their Affiliates) shall report the transaction
consistently with the Elections and agree not to take any action that could
cause such Elections to be invalid, and shall take no position contrary
thereto unless required to do so pursuant to a determination (as defined in
Section 1313(a) of the Code or any similar state, local or foreign Tax
provision).
(b) As soon as practicable after the Closing Date, Hanover
and STC (and their Affiliates) shall execute any and all forms necessary to
effectuate the Elections (including, without limitation, IRS Form 8023 and
any similar forms under applicable state, foreign and local tax laws
(collectively, the "SECTION 338 FORMS")). Hanover and STC (and their
Affiliates) shall prepare and complete each such Section 338 Form no later
than fifteen (15) days prior to the date such Section 338 Form is required to
be filed. Hanover and STC (and their Affiliates) shall each cause the Section
338 Forms to be duly executed by an authorized person, and shall duly and
timely file the Section 338 Forms in accordance with applicable Tax laws and
the terms of this Agreement. Hanover and STC (and their Affiliates) shall
also cooperate with each other to take all actions necessary and appropriate
(including, without limitation, filing such additional forms, Tax Returns,
elections, schedules and other documents as may be required) to effect and
preserve the Elections in accordance with the provisions of Regulation
Section 1.338(h)(10)-1 (and comparable provisions of each applicable state
and local tax law) or any successor provisions.
(c) As soon as practicable after the Closing Date, Hanover
shall prepare an allocation of the deemed sale price of the assets of POC and
POI resulting from the Elections (as required pursuant to Section 338(h)(10)
of the Code and the Regulations promulgated thereunder) among such assets
(the "SECTION 338 ALLOCATION"). Hanover and STC (and their
50
Affiliates) shall then cooperate in good faith to revise and finalize the
Section 338 Allocation. If Hanover and STC (and their Affiliates) are unable
to agree on the Section 338 Allocation within ninety (90) days after the
Closing Date, they shall request a mutually agreeable nationally recognized
accounting firm to prepare the Section 338 Allocation. The cost of any such
firm shall be borne equally by Hanover and STC (and their Affiliates).
Hanover and STC (and their Affiliates), shall file all Tax Returns
consistently with the Section 338 Allocation and shall not voluntarily take
any action inconsistent therewith upon examination of any Tax Return, in any
refund claim, in any litigation, or otherwise with respect to such Tax
Returns, unless required to pursuant to a determination (as defined in
Section 1313(a) of the Code or any similar foreign, state or local Tax
provision).
(d) Purchaser shall pay to STC one-half of the excess, if
any (the total excess being the "Tax Amount"), of (x) STC and its Affiliates'
actual Tax liability other than United States federal income tax liability
resulting from the sale of the POC Shares and the deemed sale of the stock of
POI (the "Non-Federal Tax Liability") as shown on STC and its Affiliates'
filed Tax Returns for their 2001 taxable year over (y) the amount that would
have been STC and its Affiliates' Non-Federal Tax Liability had the Elections
not been made. The Tax Amount shall be determined by STC and reported on by
PriceWaterhouseCoopers LLP or another nationally recognized accounting firm
mutually agreed by STC and Purchaser applying the same standards to its
review of the Tax Amount as it would in preparing a tax return that it would
sign as an "income tax preparer" (as defined in Section 7701(a)(36) of the
Code) and such accounting firm shall sign a letter certifying that such
determination of the Tax Amount has been made in accordance with such
standards and on a fair and impartial basis. Purchaser shall be given an
opportunity to review the Tax Amount and the supporting schedules and
calculations. Purchaser shall be given the opportunity to ask questions of
the accounting firm and if Purchaser is not satisfied with the detail given
in the supporting schedules, the accounting firm shall provide Purchaser with
any additional supporting detail as Purchaser shall reasonably request.
Purchaser and Sellers agree that the Tax Amount as so determined shall be
final and binding as between the Purchaser and the Sellers, but not
necessarily as between the Purchaser and such accounting firm. Purchaser
shall reimburse the Sellers for the actual out-of-pocket costs (including,
without limitation, the fees and expenses of the accounting firm) they incur
in connection with the provision of supplemental answers and supporting
detail to Purchaser. Purchaser shall pay one-half of the Tax Amount to STC
within 30 days of receipt of an invoice therefore from STC, which invoice
shall provide in reasonable detail the basis for the determination of the Tax
Amount. If the Tax Amount subsequently changes as a result of a
"determination" (as defined in Section 1313(a) of the Code) or the filing of
any Tax Return that results in a change to the Tax Amount, STC shall provide
written notice to Purchaser of such change within sixty (60) days thereof and
provide in reasonable detail the basis for the calculation of the revised Tax
Amount, and within fourteen (14) days thereafter Hanover shall pay to STC
one-half of the amount of any increase in the Tax Amount or STC shall pay to
Hanover one-half of the amount of any decrease in the Tax Amount for which
STC previously was paid by Hanover. The Tax Amount shall be calculated
without regard to any payments made by Purchaser pursuant to SECTION 10.1(F).
(e) Neither Purchaser nor any of its Affiliates shall make
an election under Section 338(g) of the Code with respect to the deemed sale
of the shares of any POC Company, other than POI, that results from the
Elections for Tax purposes unless the Sellers consent to such election (which
consent will not be unreasonably withheld). Purchaser acknowledges that it
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shall not be unreasonable for Sellers to refuse to consent to such an
election if the election would materially increase the liability of a Seller
or an Affiliate of the Seller for Taxes, unless Purchaser indemnifies such
Seller or Affiliate for the amount of such increase. Purchaser shall assure
that any POC Company (1) whose shares are deemed sold, (2) as to which no
section 338(g) election is made, and (3) as to which a deemed sale by a
Seller or an Affiliate of Seller is subject to section 1248 of the Code (a
"Non-Electing Company") shall not make any distribution or deemed
distribution on or after the Closing Date and prior to the end of the
calendar year in which the Closing Date occurs without the consent of Sellers
(which consent will not be unreasonably withheld), provided that all
Non-Electing Companies may in any case make distributions or deemed
distributions in an aggregate amount not exceeding One Million Dollars
($1,000,000) and further that this restriction shall apply to distributions
and deemed distributions by a Non-Electing Company only so long as it is an
Affiliate of the Purchaser. Purchaser acknowledges that it shall not be
unreasonable for Sellers to refuse to consent to such a distribution if the
distribution would reasonably be expected to increase the liability of a
Seller or an Affiliate of the Seller for Taxes, unless Purchaser indemnifies
such Seller or Affiliate for the amount of such increase.
(f) Every three years, beginning with Hanover's tax year
that immediately follows the three-year period that begins with the Hanover
tax year that includes the Closing Date, and ending on the tax year that
includes the fifteenth anniversary of the Closing Date (each such third year,
a "BENEFIT DETERMINATION Year"), Purchaser shall calculate the excess of (x)
the amount of Hanover and its Affiliates' United States consolidated federal
income Tax liability for the preceding three tax years determined as if the
Elections had not been made over (y) the amount of Hanover and its
Affiliates' actual Tax liability as shown on their filed United States
consolidated federal income Tax Return for such tax years (the "SECTION
338(h)(10) BENEFIT"). Hanover shall be entitled to one hundred percent (100%)
of the first Thirteen Million Dollars ($13,000,000) of such Section
338(h)(10) Benefits collectively over all fifteen years, and shall pay to STC
fifty percent (50%) of the Section 338(h)(10) Benefits realized in excess of
such amount (the "STC SHARE"). The Section 338(h)(10) Benefits and the STC
Share shall be determined by Hanover and reported on by
PriceWaterhouseCoopers, LLP or another nationally recognized accounting firm
mutually agreed by Hanover and STC no later than sixty (60) days after the
date on which Hanover's federal income Tax Return is filed for any particular
Benefit Determination Year. Such accounting firm shall report on the Section
338(h)(10) Benefits applying the same standards to its determination of the
Section 338(h)(10) Benefits as it would in preparing a tax return that it
would sign as an "income tax return preparer" (as defined in Section
7701(a)(36) of the Code) and such accounting firm shall sign a letter
certifying that such determination has been made in accordance with such
standards and on a fair and impartial basis. The Sellers shall be given an
opportunity to review the Section 338(h)(10) Benefits and the supporting
schedules and calculations. The Sellers shall be given the opportunity to ask
questions of the accounting firm, and if the Sellers are not satisfied with
the detail given in the supporting schedules, the accounting firm shall
provide the Sellers with any additional supporting detail as the Sellers
shall reasonably request. Sellers and Purchaser agree that the Section
338(h)(10) Benefits, as so determined, shall be final and binding as between
the Sellers and Purchaser, but not necessarily as between the Sellers and
such accounting firm. The Parties agree that the Section 338(h)(10) Benefits
shall be net of the accounting firm's fees for calculating the Section
338(h)(10) Benefit. Sellers shall reimburse Purchaser for the actual
out-of-pocket costs (including, without limitation, the fees and expenses of
the accounting firm) it
52
incurs in connection with the provision of supplemental answers and
supporting detail to the Sellers. Hanover shall pay to STC the STC Share
within such sixty (60) day period and provide in reasonable detail the basis
for the determination of the Section 338(h)(10) Benefit and the STC Share. If
a Section 338(h)(10) Benefit subsequently changes as a result of a
"determination" (as defined in Section 1313(a) of the Code) or filing of any
Tax Return that results in a change to the Section 338(h)(10) Benefits,
Hanover shall provide written notice to STC of such change and any resulting
changes in the STC Share within sixty (60) days thereof and provide in
reasonable detail the basis for the determination of the revised Section
338(h)(10) Benefit, and within fourteen (14) days thereafter Hanover shall
pay to STC (or STC shall pay to Hanover) the increase (or decrease) in the
STC Share.
10.2 OTHER TAX MATTERS.
(a) Subject to SECTION 10.2(d), for any taxable period of
the POC Companies that ends on or before the Closing Date, Sellers and their
Affiliates shall timely prepare, consistent with past practices and custom of
the POC Companies (unless a contrary position is required by Law) and file
with the appropriate Governmental Authority (i) all required consolidated,
combined or unitary Tax Returns that include any of the POC Companies and at
least one entity other than a POC Company (a "GROUP TAX RETURN"), and (ii)
all other Tax Returns of the POC Companies for the 2000 tax year. Sellers and
their Affiliates shall promptly provide Purchaser with copies of all such Tax
Returns (except that as with respect to Group Tax Returns, only insofar as
such Group Tax Returns relate to the POC Companies) and shall pay all Taxes
due with respect to such Tax Returns. Hanover and its Affiliates shall timely
prepare and file with the appropriate Governmental Authority all other Tax
Returns relating to a Pre-Closing Tax Period or Straddle Period required to
be filed and shall pay all Taxes due with respect to such Tax Returns;
PROVIDED, HOWEVER, that Hanover and its Affiliates will prepare such Tax
Returns consistent with past practices of the POC Companies (unless a
contrary position is required by Law) to the extent such Tax Returns relate
to the Taxes of any of the POC Companies for a Pre-Closing Tax Period, and
Sellers shall pay Purchaser (in accordance with the procedures set forth in
SECTION 9.8) for any amount owed by Sellers and their Affiliates pursuant to
SECTION 9.8 with respect to any such Tax Returns. Hanover, Sellers and their
respective Affiliates agree to cause the POC Companies to file all Tax
Returns for the period including the Closing Date on the basis that the
relevant Taxable Period ended as of the end of the day on the Closing Date,
unless the relevant Governmental Authority will not accept a Tax Return filed
on that basis.
(b) Sellers shall be responsible for filing any amended
Group Tax Returns for taxable years ending on or prior to the Closing Date
that are required as a result of examination adjustments made by the IRS or
by the applicable state, local or foreign Governmental Authorities for such
taxable years as finally determined. For all other Tax Returns filed by the
POC Companies, any required amended Tax Returns for taxable years ending on
or prior to the Closing Date resulting from such examination adjustments, as
finally determined, shall be prepared by Purchaser and a copy thereof shall
be furnished to the Sellers. Sellers shall not file any amended,
consolidated, combined or unitary Tax Returns that include any of the POC
Companies for a period ending on or before the Closing Date without the
Purchaser's consent (which consent shall not be unreasonably withheld) if the
filing of any such amended Tax Return may affect the Tax liability of any of
the POC Companies for which the Purchaser is liable.
53
Except as otherwise provided in this SECTION 10.2(b), the filing of any other
amended Tax Return of a POC Company for a Tax Period ending on or before the
Closing Date shall require the consent of Purchaser, which consent shall be
granted in Purchaser's sole and absolute discretion; provided, however, that
such consent will be granted by Purchaser if such filing of an amended Tax
Return results in no material adverse Tax consequences to a POC Company in a
Post-Closing Tax Period and Sellers indemnify Purchaser for any increase in
Taxes of Purchaser or its Affiliates (including the POC Companies) in any
Post-Closing Tax Period incurred as a result of the filing of such amended
Tax Return of a POC Company for a Tax period ending on or before the Closing
Date.
(c) The amount of any refunds or offsets of Taxes of any
POC Entity for any Taxable Period ending on or before the Closing Date
multiplied by the ownership interest of Purchaser and its Affiliates in that
POC Entity immediately after the Closing, shall be for the account of Seller,
except to the extent that such refund or offset arises as a result of a POC
Entity carryback of a loss or other tax benefit arising from a period
beginning after the Closing Date. The amount of any refunds or offsets of
Taxes of the POC Entities for any Taxable Period beginning after the Closing
Date shall be for the account of Purchaser. The amount or economic benefit of
any refunds, credits or offsets of Taxes of the POC Entities for any Straddle
Period shall be equitably apportioned in a manner consistent with SECTION
9.8(d). Subject to the requirements of SECTION 10.2(b), provided that the
non-requesting party, acting in good faith, determines that there is a
reasonable basis for filing a claim with the relevant Governmental Authority,
each party shall, if the other party so requests and at such other party's
expense, cause the POC Companies to file for and obtain any refunds, credits
or offsets to Taxes to which the requesting party is entitled under this
SECTION 10.2(c). Purchaser shall permit Sellers to control the prosecution of
any such claim relating solely to one or more Taxable Periods ending on or
before the Closing Date and, where deemed appropriate by Sellers, shall cause
the POC Companies to authorize by appropriate powers of attorney such persons
as Sellers shall designate to represent the POC Companies with respect to
such refund claim. Each party shall forward, and shall cause its Affiliates
to forward, the amount of such refund or offset to Tax to the party entitled
pursuant to this SECTION 10.2(c) to receive such amount, within ten (10) days
after such refund is received or after such credit or offset is allowed or
applied against other Tax liability, as the case may be. Notwithstanding the
foregoing, the control of the prosecution of a claim for refund of Taxes paid
pursuant to a deficiency assessed subsequent to the Closing Date as a result
of an audit shall be governed by the provisions of SECTION 9.8(f).
(d) If a POC Entity earns credit or loss that is carried
back to offset income for a period ending on or prior to the Closing Date and
if the Sellers or their Affiliates realizes a reduction in Tax for such a
period as a result of such carryback (either in the form of a refund or an
offset), the Sellers shall pay to the Purchaser the amount of such reduction
within 10 days after the receipt of the refund or the offset. The Sellers and
their Affiliates shall, at the request of the Purchaser, cooperate in
connection with the filing of any necessary Tax Returns and other documents
to effect such a carryback at Purchaser's expense, and the Sellers shall
provide a basis for the computation of the amount paid to the Purchaser
pursuant to this SECTION 10.2(d) in reasonable detail.
(e) Sellers, the POC Companies and Purchaser shall reasonably
cooperate, and shall cause their respective Affiliates, officers, employees,
agents, auditors and other
54
representatives reasonably to cooperate, in preparing and filing all Tax
Returns, including maintaining and making available to each other all records
necessary in connection with Taxes and in resolving all disputes and audits
with respect to all Taxable Periods relating to Taxes. Sellers and Purchaser
agree (i) to retain all books and records with respect to Tax matters
pertinent to any POC Company relating to any Tax Period beginning before the
Closing Date until the applicable Tax Statute of Limitations Date and to
abide by all record retention agreements entered into with any Governmental
Authority; (ii) to allow the other party and its representatives at times and
dates mutually acceptable to the parties, to inspect, review and make copies
of such records as such party may deem necessary or appropriate from time to
time, such activities to be conducted during normal business hours at such
party's expense; and (iii) to give the other party reasonable written notice
prior to transferring, destroying or discarding any such books and records
and, if the other party so requests, the Sellers and Purchaser, as the case
may be, shall allow the other party to take possession of such books and
records.
(f) Subject to SECTION 10.1(d), all transfer, documentary,
sales, use, stamp, registration and other similar Taxes (including all
applicable real estate transfer or gains Taxes) and related fees (including
any penalties, interest and additions to Tax) incurred in connection with
this Agreement and the transactions contemplated hereby shall be borne by
Sellers, and Sellers and Purchaser shall cooperate in preparing and filing
all Tax Returns, and other documentation on a timely basis as may be required
to comply with the provisions of such Tax laws.
(g) Sellers shall cause the provisions of any Tax sharing
agreement or similar arrangement between Sellers or any of their Affiliates, on
the one hand, and the POC Entities on the other hand, to be terminated on or
before the Closing Date. After the Closing Date, no party shall have any rights
or obligations under any such Tax sharing agreement.
(h) The consideration for the OSI Assets shall be allocated
and reported for tax purposes in accordance with the provisions of SECTION
10.1(c).
ARTICLE XI
MISCELLANEOUS
11.1 EXPENSES. Each party hereto shall bear its own expenses with
respect to this transaction, including any HSR Act or similar filing or
reporting fees and all transfer taxes on the sale of stock.
11.2 AMENDMENT. This Agreement may be amended, modified or
supplemented only in writing signed by each of the parties hereto.
11.3 NOTICES. Any written notice to be given hereunder shall be
deemed given: (a) when received if given in person or by courier, (b) on the
date of transmission if sent by telex, telecopy or other wire transmission
(receipt confirmed), (c) if to U.S. addressees, three (3) days after being
deposited in the U.S. mail, certified or registered mail, postage prepaid,
and (d) if to U.S. addressees, if sent by a nationally recognized overnight
delivery service, the day following the date given to such overnight delivery
service (specified for overnight delivery) or if to non-U.S. addressees, if
sent by an internationally recognized overnight delivery service, the third
day
55
following the date given to such delivery service (specified for 2nd day
delivery). All notices shall be addressed as follows:
If to a Seller, addressed as follows:
SCHLUMBERGER TECHNOLOGY CORPORATION
300 Schlumberger Drive MD:23
Sugar Land, Texas 77478
Attention: General Counsel
Facsimile: (281) 285-6952
CAMCO INTERNATIONAL INC.
7030 Ardmore
Houston, Texas 77054
Attention: General Counsel
SCHLUMBERGER SURENCO S.A.
Piso 13, Avenida Rio Caura
Parque Humboldt
Caracas 1080, Venezuela
Attention: General Counsel
SCHLUMBERGER OILFIELD HOLDINGS LTD.
Craigmuir Chambers
P.O. Box 71
Roadtown, Tortola, BVI
Attention: General Counsel
In each case, with a copy to:
Gray Cary Ware & Freidenrich LLP
1221 South MoPac, Suite 400
Austin, Texas 78746-6875
Attention: Brian P. Fenske
Telephone: (512) 457-7145
Facsimile: (512) 457-7001
If to Hanover, addressed as follows:
Hanover Compressor Company
12001 North Houston Rosslyn
Houston, Texas 77806
Attention: William S. Goldberg
Telephone: (281) 447-8787
Facsimile: (281) 447-0821
56
with a copy to:
Latham & Watkins
Sears Tower, Suite 5800
233 South Wacker Drive
Chicago, Illinois 60606
Attn: Richard S. Meller
Telephone: (312) 876-7700
Facsimile: (312) 993-9767
If to Purchaser, addressed as follows:
Hanover Compression Limited Partnership
12001 North Houston Rosslyn
Houston, Texas 77806
Attention: William S. Goldberg
Telephone: (281) 447-8787
Facsimile: (281) 447-0821
with a copy to:
Latham & Watkins
Sears Tower, Suite 5800
233 South Wacker Drive
Chicago, Illinois 60606
Attn: Richard S. Meller
Telephone: (312) 876-7700
Facsimile: (312) 993-9767
11.4 WAIVERS. The failure of a party to require performance of any
provision hereof shall not affect its right at a later time to enforce the
same. No waiver by a party of any term, covenant, representation or warranty
contained herein shall be effective unless in writing. No such waiver in any
one instance shall be deemed a further or continuing waiver of any such term,
covenant, representation or warranty in any other instance.
11.5 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
11.6 HEADINGS. The headings preceding the text of Articles and
Sections of this Agreement and the Schedules and Exhibits thereto are for
convenience only and shall not be deemed part of this Agreement.
11.7 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS, AND NOT THE LAWS
OF CONFLICTS, OF THE STATE OF TEXAS.
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11.8 ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the Parties and their respective successors and assigns;
provided that, except as provided in SECTION 1.1, SECTION 5.12, SECTION 5.13
and SECTION 5.14, no assignment of either Party's rights or obligations may
be made without the written consent of the other Party, which consent shall
not be unreasonably withheld or delayed.
11.9 NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties hereto and their respective Affiliates, and, except as
aforesaid, no provision of this Agreement shall be deemed to confer any
remedy, claim or right upon any third party.
11.10 FORUM; WAIVER OF JURY TRIAL. Each party agrees that any suit,
action or proceeding brought by such party against the other in connection
with or arising from this Agreement ("JUDICIAL ACTION") shall be brought
solely in a state or federal court located in Houston, Harris County, Texas,
and each party consents to the jurisdiction and venue of each such court.
EACH PARTY HEREBY WAIVES ITS RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY
JUDICIAL ACTION.
11.11 SCHEDULES. The Parties agree that no disclosure by them in any
Schedule attached hereto shall: (a) constitute a disclosure under any other
Schedule referred to herein, except to the extent that the relevance of such
disclosure to the representation or warranty to which such other disclosure
relates is manifest on the face of the schedule, or (b) establish any
threshold of materiality.
11.12 INCORPORATION. The respective Schedules, Exhibits and
Appendices attached hereto and referred to herein are incorporated into and
form a part of this Agreement.
11.13 COMPLETE AGREEMENT. This Agreement constitutes the complete
agreement of the parties with respect to the subject matter hereof and
supersedes all prior discussions, negotiations and understandings. The
parties agree that, at the Closing, the Confidentiality Agreement shall be
terminated and of no further force and effect.
11.14 DISCLAIMER. Sellers disclaim any representations or warranties
except as specifically set forth in this Agreement. In particular, Sellers
disclaim any representation or warranty, and Purchaser agrees that Sellers
shall have no liability, with respect to any information concerning the POC
Entities not expressly represented and warranted to in this Agreement,
including, without limitation: (a) the information set forth in the
Confidential Information Memorandum distributed by Salomon Smith Barney Inc.
with respect to the POC Entities, (b) any information regarding the POC
Entities provided at any management presentation related to the transactions
contemplated by this Agreement, (c) any information communicated by Salomon
Smith Barney Inc. or made available through the data room process, or (d) any
financial projection or forecast relating to any of the POC Entities. With
respect to any such projection or forecast delivered by or on behalf of
Sellers to Purchaser, Purchaser acknowledges that: (i) there are significant
uncertainties inherent in such projections and forecasts, and (ii) Purchaser
is familiar with such uncertainties and takes full responsibility for making
its own evaluation of the adequacy and accuracy of all such projections and
forecasts; provided, that Sellers in no way limits the representations,
warranties, covenants or other agreements made by Sellers hereunder.
Purchaser shall have no claim against Sellers (or any of
58
its officers, directors or employees), and Sellers shall have no liability to
Purchaser, with respect to any such disclaimed information, including,
without limitation, the Confidential Information Memorandum or any financial
projection or forecast relating to any of the POC Entities.
11.15 KNOWLEDGE DEFINED. For purposes of this Agreement: (a) the
term "knowledge of Seller" or variations thereof shall be limited to the
actual knowledge of the executive officers and directors of Seller and the
POC Entities set forth on SCHEDULE 11.15(a), and (b) the term "knowledge of
Purchaser" or variations thereof shall be limited to the actual knowledge of
the executive officers and directors of Hanover and Purchaser set forth on
SCHEDULE 11.15(b).
11.16 PUBLIC ANNOUNCEMENTS. Schlumberger and Purchaser agree that
they and their Affiliates will not issue any press release or otherwise make
any public statement or respond to any media inquiry with respect to this
Agreement or the transactions contemplated hereby without the prior approval
of the other party, and that all such disclosures shall be jointly
coordinated and managed, except as may be required by Law or by any stock
exchanges having jurisdiction over Seller, Purchaser or their Affiliates.
11.17 DEFINED TERMS. Certain capitalized terms used herein shall
have the meanings ascribed to such terms in Appendix I.
11.18 CURRENCY. All references to "dollars" or "$" in this Agreement
shall mean United States Dollars.
11.19 RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. Schlumberger understands and agrees that
Hanover will cause the legends set forth below or legends substantially
equivalent thereto, to be placed upon any certificate(s) evidencing ownership
of the Hanover Stock, together with any other legends that may be required by
state or federal securities law, or by the bylaws of Hanover, or by any other
agreement between Seller and Hanover or between Seller and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES
ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES ARE
ALSO SUBJECT TO A LOCK-UP,
59
STANDSTILL AND REGISTRATION RIGHTS AGREEMENT DATED
__________, 2001, WHICH RESTRICTS THE TRANSFER HEREOF FOR A
PERIOD OF UP TO THREE YEARS FROM __________, 2001, A COPY OF
WHICH MAY BE OBTAINED FROM THE CORPORATION AT ITS EXECUTIVE
OFFICES.
(b) STOP TRANSFER INSTRUCTIONS. Sellers agree that, in
order to ensure compliance with the restrictions referred to herein, Hanover
may, subject to the terms of the Registration Rights Agreement, issue
appropriate "stop-transfer" instructions to its transfer agent.
(c) REFUSAL TO TRANSFER. Hanover will not be required: (i)
to transfer on its books any shares of Hanover Stock that have been sold or
otherwise transferred in violation of any of the provisions of this
Agreement, or (ii) to treat as owner of such shares of Hanover Stock or to
accord the right to vote or pay dividends to any purchaser or other
transferee to whom such shares of Hanover Stock have been so transferred.
(d) REMOVAL OF LEGEND AND TRANSFER RESTRICTIONS. Any legend
endorsed on a certificate pursuant to SECTION 11.19(a) and the stop transfer
instructions with respect to such shares of Hanover Stock shall be removed
and Hanover shall issue a certificate without such legend to the holder
thereof (1) if the contractual transfer restrictions with respect thereto
have been lifted and (2) if such shares of Hanover Stock are registered under
the Securities Act and if the proposed transfer thereof is consistent with
the plan of distribution in such prospectus (1) if the contractual transfer
restrictions with respect thereto have been lifted and (2) if such holder
provides Hanover with an opinion of counsel for such holder, reasonably
satisfactory to legal counsel for Hanover, to the effect that a sale,
transfer or assignment of such shares of Hanover Stock may be made without
registration.
11.20 SPECIFIC PERFORMANCE. Each of the parties acknowledges and
agrees that the other parties would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the
parties agrees that the other parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in
any action instituted in any court of the United States or any state thereof
having jurisdiction over the parties and the matter, in addition to any other
remedy to which they may be entitled, at law or in equity.
11.21 FURTHER ASSURANCES. After the Closing, each party hereto shall
from time to time, at the request of another party, execute and deliver such
other instruments of conveyance and transfer and take such other actions as
such other party may reasonably request to more effectively consummate the
transactions contemplated hereby and to vest in Purchaser good and valid
title to the Schlumberger Equity Interests.
11.22 SEVERABILITY. In the event that any one or more of the
provisions contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision of this
60
Agreement, and this Agreement shall be construed as if such invalid, illegal
or unenforceable provision had never been contained herein.
[SIGNATURE PAGE FOLLOWS]
61
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on __________________, 2001.
SCHLUMBERGER TECHNOLOGY SCHLUMBERGER SURENCO S.A.
CORPORATION
By: By:
-------------------------------- ------------------------------------
Name: Name:
------------------------------ ----------------------------------
Title: Title:
----------------------------- ---------------------------------
HANOVER COMPRESSOR COMPANY SCHLUMBERGER OIL FIELD HOLDINGS LTD.
By: By:
-------------------------------- ------------------------------------
Name: Name:
------------------------------ ----------------------------------
Title: Title:
----------------------------- ---------------------------------
HANOVER COMPRESSION LIMITED CAMCO INTERNATIONAL, INC.
PARTNERSHIP
By: Hanover Compression General By:
Holdings LLC, its General ------------------------------------
Partner Name:
----------------------------------
By: Title:
-------------------------------- ---------------------------------
Name:
------------------------------
Title:
-----------------------------
S-4
APPENDIX I
DEFINITIONS
The following terms shall have the following meanings:
"2001 Actual Tax Liability" shall have the meaning set forth in SECTION
10.1(d).
"Accounts Receivable" shall have the meaning set forth in SECTION 2.9.
"Actual Net Worth" shall mean the Net Worth as shown on the True-Up
Balance Sheet, as adjusted pursuant to SECTION 1.3(c).
"Affiliate(s)" means any Person controlling, controlled by, or under
common control with, another "Person"; for purposes of this definition (and for
such purposes only), "control" shall mean the ownership, directly or indirectly,
of 50% or more of the outstanding common stock of a Person.
"Agreement" means this Stock Purchase Agreement, including all
Appendices, Schedules and Exhibits hereto, as it may be amended from time to
time in accordance with its terms.
"Aggregate Cash Received" shall have the meaning set forth in SECTION
9.4(b).
"Aggregate Purchase Price" shall have the meaning set forth in SECTION
1.2(a).
"Alliance Agreement" shall have the meaning set forth in SECTION 4.9.
"Alliance Consideration" shall have the meaning set forth in EXHIBIT
4.9.
"Arbitrating Accounting Firm" shall have the meaning set forth in
SECTION 1.3(e).
"Average Closing Price" shall have the meaning set forth in SECTION
1.2(b).
"Balance Sheet" means the unaudited pro-forma consolidated balance
sheet of the POC Entities as of May 31, 2001 prepared in accordance with GAAP,
attached hereto in SCHEDULE 2.11 as adjusted to reflect solely those assets and
liabilities of the POC Entities being sold pursuant to this Agreement.
"Benefit Plans" means any employee benefit plan, program, policy or
arrangement, including, but not limited to, employee welfare benefit plans and
employee pension benefit plans as defined in Sections 3(1) and 3(2),
respectively, of ERISA.
"Bonus Plans" means any cash bonus or incentive compensation
arrangement in place for the POC Employees as of the POC Closing Date.
"Business Day" shall mean any day that is not a Saturday, Sunday or
other day on which commercial banks in Houston, Texas are authorized or required
by law to remain closed.
"Cause" shall have the meaning set forth in the Schlumberger Severance
Program.
"Charter Documents" shall have the meaning set forth in SECTION 2.1.
"Closing" shall have the meaning set forth in SECTION 1.1.
"CII" shall have the meaning set forth in the preamble hereof.
"Closing Balance Sheet" shall have the meaning set forth in SECTION
1.3.
"Closing Date" shall have the meaning set forth in SECTION 8.1.
"COBRA" shall mean the Consolidated Omnibus Reconciliation Act of 1985,
as amended.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" shall have the meaning set forth in SECTION
8.4.
"Counter-Guaranty" shall have the meaning set forth in SECTION 5.10.
"Disclosure Statement" shall have the meaning set forth in ARTICLE 2.
"DOL" shall have the meaning set forth in SECTION 2.16(b).
"Elections" shall have the meaning set forth in SECTION 10.1(a).
"Environmental Claims" shall mean all written governmental
investigations or requests for information, notices of potential responsibility
for response costs, notices of violation, liens, claims, demands, suits, or
causes of action for any damage, including, without limitation, personal injury,
property damage (including, without limitation, any depreciation or diminution
of property values), lost use of property or consequential damages, arising
directly or indirectly out of: (a) Environmental Laws, or (b) the presence, use,
handling, storage, treatment, recycling, generation, transportation, release,
spilling, leaking, pumping, pouring, emptying, discharging, injecting, escaping,
leaching, disposal, dumping or threatened release of Hazardous Substances at any
location, whether or not owned, leased or operated by the POC Entities or the
Hanover Entities, as applicable.
"Environmental Laws" shall mean all applicable federal, state,
district, local and foreign Laws, all rules or regulations promulgated
thereunder, and all orders, consent orders, judgments, notices, permits or
demand letters issued, promulgated or entered pursuant thereto, relating to
pollution or protection of the environment (including, without limitation,
ambient air, surface water, ground water, land surface, or subsurface strata),
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, the Toxic Substances Control Act, the Hazardous
Materials Transportation Act, the Resource Conservation and Recovery Act, the
Clean Water Act, the Safe Drinking Water Act, the Clean Air Act, the Atomic
Energy Act of 1954, the Occupational Safety and Health Act and the Emergency
Planning and
Appendix I-2
Community-Right-to-Know Act, each as amended, and all analogous laws
promulgated or issued by any Governmental Authority.
"Environmental Permits" shall have the meaning set forth in SECTION
2.22.
"Environmental Warranty" shall mean a representation or warranty in
SECTION 2.21 or SECTION 3.13.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any entity (whether or not incorporated) that,
together with Seller or any POC Company is considered under common control and
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code.
"ERISA Statute of Limitations Date" shall the expiration of the
applicable statute of limitations under ERISA (or if such date is not a Business
Day, the next Business Day).
"ERISA Warranty" shall mean a representation or warranty in SECTION
2.16 or SECTION 3.12.
"Estimated Net Worth" shall mean the Net Worth as shown on the Closing
Balance Sheet.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
and the rules and regulations promulgated thereunder.
"Excluded Assets" shall mean the assets of the POC Entities which are
not to be acquired by Purchaser and which are set forth on SCHEDULE 1.4.
"Excluded Liabilities" shall mean the liabilities of the POC Entities
which are not to be acquired by Purchaser and which are set forth on SCHEDULE
1.5.
"Foreign Plan" means each employee benefit plan, program, and other
arrangement providing incentive compensation or other benefits similar to those
provided under any Benefit Plan or benefit arrangement to any POC Employee or
POC Former Employee or dependent thereof, which plan, program or arrangement is
subject to the laws of any jurisdiction outside of the United States.
"Former POC Employees" means those persons employed by the POC
Companies (or employed by Schlumberger Global Resources Limited and performing
services for the POC Companies) prior to the Closing Date whose employment has
terminated prior to the Closing Date.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time and consistently applied.
"Good Reason" means, without the consent the affected employee, either
(i) a 10% reduction in guaranteed base cash compensation (other than as a result
of the failure to achieve a
Appendix I-3
performance - related bonus or as a result of working less overtime) or (ii)
a material reduction in duties, authority or responsibilities of such a
nature as to constitute a constructive discharge of the employee.
"Government Regulations" shall have the meaning set forth in SECTION
2.24(a).
"Governmental Authority" means any United States federal, state,
provincial or municipal entity, any foreign government, and any political
subdivision or other governmental authority, department, commission, court,
board, bureau, agency or instrumentality, or other entity, domestic or foreign,
exercising executive, legislative, judicial, quasi-judicial, regulatory or
administrative functions of or pertaining to government.
"Guara Interest" shall have the meaning set forth in SECTION 5.12.
"Hanover" shall have the meaning set forth in the preamble hereof.
"Hanover Benefit Arrangements" shall have the meaning set forth in
SECTION 3.12(a).
"Hanover Entities" shall mean Hanover and any of its Affiliates that
are consolidated with Hanover for the purposes of preparing and filing Hanover's
financial reports.
"Hanover Entity Plans" shall have the meaning set forth in SECTION
3.12(a).
"Hanover Material Adverse Effect" shall have the meaning set forth in
SECTION 3.7.
"Hanover Note" shall have the meaning set forth in SECTION 1.2(a).
"Hanover SEC Reports" shall have the meaning set forth in SECTION
3.5(a).
"Hanover Stock" shall have the meaning set forth in SECTION 1.2(a).
"Harwat" shall have the meaning set forth in SECTION 1.1(a).
"Harwat Companies" shall have the meaning set forth in SECTION 2.2(a).
"Harwat Interest" shall have the meaning set forth in SECTION 1.1(a).
"Harwat Purchase Price" shall mean the amount of the Aggregate Purchase
Price allocated to the Harwat Interest.
"Hazardous Substances" shall mean all pollutants, contaminants,
chemicals, wastes, any other carcinogenic, ignitable, corrosive, reactive, toxic
or otherwise hazardous substances or materials (whether solids, liquids or
gases) and any other materials or substances subject to regulation, control or
remediation under Environmental Laws.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Hypothetical 2001 Tax Liability" shall have the meaning set forth in
SECTION 10.1(d).
Appendix I-4
"Indemnified Person" shall mean the Person or Persons entitled to, or
claiming a right to, indemnification under ARTICLE 9.
"Indemnifying Person" shall mean the Person or Persons claimed by the
Indemnified Person to be obligated to provide indemnification under ARTICLE 9.
"Insurance Policies" means the policies or binders of fire, liability,
product liability, workers' compensation, vehicular and other insurance held by
or on behalf of any POC Company and covering their respective assets and
operations.
"Intellectual Property" means: (a) the names Production Operators
Corporation and Production Operators Inc., and all fictional business names,
trading names, registered and unregistered trademarks, service marks, and
applications, (b) all patents, patent applications, and inventions and
discoveries that may be patentable, (c) all copyrights in both published works
and unpublished works, (d) all rights in mask works, and (e) all know-how, trade
secrets, confidential information, customers lists, software, technical
information, data, process technology, plans, drawings, and blue prints; in each
case whether owned, used, or licensed by any POC Company as licensee or
licensor; but does not include any of such matters which Seller or an Affiliate
owns, uses, or is licensed, whether alone or jointly with a POC Company.
"IRS" means the Internal Revenue Service.
"Judicial Action" shall have the meaning set forth in SECTION 11.10.
"JV Material Contracts" shall have the meaning set forth in SECTION
2.17(b).
"knowledge of Purchaser" or "knowledge of Seller" or similar terms
shall have the meaning set forth in SECTION 11.15.
"Law" means any law, statute, regulation, ordinance, rule, order,
decree, judgment, consent decree, settlement agreement or governmental
requirement enacted, promulgated, entered into, agreed to or imposed by any
court or other governmental authority or body.
"Leased Real Property" shall have the meaning set forth in SECTION
2.7(a).
"Lien" means any lien, security interest, charge, claim, condition,
equitable interest, pledge, right of first refusal, mortgage, or deed of trust,
option, lease or restriction of any kind.
"Loss" or "Losses" mean any and all damages, losses, actions,
proceedings, causes of action, claims, encumbrances, demands, assessments,
judgments, costs and expenses including, without limitation, court costs and
reasonable attorneys' and consultants' fees and costs of litigation. For the
avoidance of doubt, in determining Losses attributable to losses incurred by a
Transferred Joint Venture Company, the Parties shall multiply the loss incurred
by such Transferred Joint Venture Company by the Purchaser's ownership interest
in such Transferred Joint Venture Company.
"Material Adverse Effect" means a material adverse effect on the
assets, operations, financial condition of the POC Companies taken as a whole,
provided, that, for purposes of this
Appendix I-5
Agreement, a Material Adverse Effect shall not include: (a) changes to the
industry or markets in which the POC Companies operate that are not unique to
the POC Companies, and (b) any change resulting from the announcement or
disclosure of the transactions contemplated herein.
"Material Contracts" shall have the meaning set forth in SECTION
2.17(b).
"Net Worth" shall mean assets minus liabilities determined in
accordance with GAAP.
"Non-Federal Tax Liability" shall have the meaning set forth in SECTION
10.1(d).
"Owned Real Property" shall have the meaning set forth in SECTION
2.7(a).
"Party" or "Parties" shall have the meaning set forth in the preamble
hereof.
"PBGC" shall have the meaning set forth in SECTION 2.16(i).
"Permits" shall have the meaning set forth in SECTION 2.24(b).
"Permitted Personal Property Liens" shall have the meaning set forth in
SECTION 2.6.
"Permitted Real Property Liens" shall have the meaning set forth in
SECTION 2.7(b).
"Person" means any individual, corporation, partnership, association,
limited liability company, trust, governmental or quasi-governmental authority
or body or other entity or organization.
"PIGAP II Financing" shall have the meaning set forth in SECTION
1.1(b).
"POC" shall have the meaning set forth in SECTION 1.1(a).
"POC Benefit Arrangements" shall have the meaning set forth in SECTION
2.16(a).
"POC Company" or "POC Companies" shall have the meaning set forth in
SECTION 2.2(a).
"POC Companies Plans" shall have the meaning set forth in SECTION
2.16(a).
"POC Employees" means those persons employed by the POC Companies (or
employed by Schlumberger Global Resources Limited and performing services for
the POC Companies) on the POC Closing Date, including employees not actively at
work by reason of layoff, sick leave, absence, vacation, disability or other
approved leave of absence, except for (i) the four key employees retained by
Seller and (ii) any person receiving long-term disability benefits.
"POC Entities" shall mean, collectively, the POC Companies and the
Transferred Joint Venture Companies.
"POC Financial Statements" means, collectively: (a) the audited
consolidated balance sheet of Schlumberger's gas compression business as of
December 31, 2000, and the related consolidated statement of income,
stockholders' equity and cash flows for the year then ended
Appendix I-6
and the accompanying notes thereto attached hereto as SCHEDULE 2.11, (b) the
unaudited consolidated balance sheets of each of Harwat and WilPro as of
December 31, 2000, and the related consolidated statements of income,
stockholders' equity and cash flows for the year then ended and the
accompanying notes thereto attached hereto as SCHEDULE 2.11, and (c) the
unaudited pro-forma consolidated balance sheet of POC as of December 31, 2000
and related consolidated unaudited pro-forma statement of income,
stockholders' equity and cash flows for the year then ended attached hereto
as SCHEDULE 2.11 as adjusted to reflect solely those assets and liabilities
of the POC Companies being sold pursuant to this Agreement.
"POC Joint Venture Company" shall have the meaning set forth in
SECTION 2.2(a).
"POC Material Contracts" shall have the meaning set forth in SECTION
2.17.
"POC Purchase Price" shall mean the amount of the Aggregate Purchase
Price allocated to the POC Shares.
"POC Shares" shall have the meaning set forth in SECTION 1.1(a).
"POI" shall mean Production Operators, Inc., a Florida corporation.
"Post-Closing Tax Period" shall mean any Tax Period beginning after the
Closing Date and that portion of any Straddle Period beginning after the Closing
Date.
"Pre-Closing Tax Period" shall mean any Tax Period ending on or before
the Closing Date and that portion of any Straddle Period ending on the Closing
Date.
"Prime Interest Rate" shall have the meaning set forth in SECTION
1.3(f).
"Prohibited Activity" means dry gas compression by means of
reciprocating, rotating, centrifugal, screw or turbine compressors; PROVIDED,
HOWEVER, that the definition of Prohibited Activity shall not include any (i)
subcontracting for such services or products from third parties, (ii)
multi-phase pumping technologies or (iii) any information technology products or
services.
"Property Taxes" shall have the meaning set forth in SECTION 9.8(c)(i).
"Purchaser" shall have the meaning specified in the preamble hereof.
"Purchaser Indemnified Parties" shall have the meaning set forth in
SECTION 9.2.
"Purchaser Plans" shall have the meaning set forth in SECTION 5.2(c).
"Purchaser Welfare Benefit Plans" shall mean the welfare benefit plans
as described in Section 3(1) of ERISA maintained by Purchaser.
"Registration Rights Agreement" shall have the meaning set forth in
SECTION 5.7.
"Regulation" or "Regulations" means the Treasury Regulations
promulgated under the Code.
Appendix I-7
"Related Agreement" shall mean the asset purchase agreements entered
into at Closing by the Parties or their respective Affiliates relating to the
acquisition of the OSI Assets and the Rocky Mountain Assets.
"Schlumberger" shall have the meaning set forth in the preamble hereof.
"Schlumberger DSPP" shall have the meaning set forth in SECTION 4.5(b).
"Schlumberger Equity Interests" shall mean the POC Shares, the Harwat
Interest and the WilPro Interest.
"Schlumberger Severance Program" means the Schlumberger severance plan
as applicable to the POC Employees.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SEC" means the United States Securities and Exchange Commission.
"Section 338 Forms" shall have the meaning set forth in SECTION
10.1(b).
"Section 338 Allocation" shall have the meaning set forth in SECTION
10.1(c).
"Seller(s)" shall have the meaning specified in the preamble hereof.
"Seller Indemnified Parties" shall have the meaning set forth in
SECTION 9.3.
"Seller Retirement Plans" shall have the meaning set forth in SECTION
4.5(c).
"Seller Welfare Benefit Plans" shall have the meaning set forth in
SECTION 4.5(d).
"Selling Group" shall mean the affiliated group of corporations of
which STC is the common parent entity.
"SOHL" shall have the meaning set forth in the preamble hereof.
"STC" shall have the meaning set forth in the preamble hereof.
"Straddle Period" shall mean any Taxable Period that includes (but does
not end on) the Closing Date.
"Subsidiary Plan" shall have the meaning set forth in SECTION 2.16(a).
"Surenco" shall have the meaning set forth in the preamble hereof.
"Target Net Worth" is equal to the sum of (i) $490,945,500, which is
based on the unaudited financials for the Schlumberger Equity Interests,
excluding (except as set forth in SCHEDULE 1.3(i) and SCHEDULE 1.3(j)) the
Excluded Assets and the Excluded Liabilities, as of
Appendix I-8
May 31, 2001 and (ii) any gain in excess of $100,000 realized after May 31,
2001 by the POC Entities in connection with the termination or cancellation
of any customer contracts.
"Tax" or "Taxes" shall mean, with respect to any Person, all taxes,
assessments, charges, duties, fees, levies, imposts or other governmental
charges, including without limitation, any federal, state, local or foreign
income, gross receipts, license, severance, occupation, capital gains, premium,
environmental (including taxes under Section 59A of the Code), customs,
disability, registration, alternative or add-on minimum, estimated, withholding,
payroll, employment, unemployment insurance, social security (or similar),
superannuation guarantee charge, corporation (including ACT), import, export,
registration, excise, production, sales, use, value-added, frankings, fringe
benefits, occupancy, franchise, real property, personal property, business and
occupation, mercantile, windfall profits, capital stock, stamp, transfer,
workmen's compensation or other tax of any kind whatsoever, including any
interest, penalty or addition thereto, whether disputed or not, for which such
Person may be liable (including any such Tax related to any other Person for
which such Person is liable, by contract, as transferee or successor, by Law
(including as a result of the application of Regulation Section 1.1502-6) or
otherwise).
"Tax Amount" shall have the meaning set forth in SECTION 10.1(d).
"Tax Claim" shall have the meaning set forth in SECTION 9.8(e).
"Tax Period" or "Taxable Period" means any period prescribed by any
Governmental Authority for which a Tax Return is required to be filed or a Tax
is required to be paid.
"Tax Returns" shall mean any return (including information return),
report, notice, form, declaration, claim for refund, estimate, election, or
information statement or other document relating to any Tax, including any
schedule or attachment thereto, and any amendment thereof filed or to be filed
with any Governmental Authority.
"Tax Statute of Limitations Date" shall mean thirty (30) days after the
expiration of the applicable statute of limitations with respect to Taxes,
including any extensions thereof (or if such date is not a Business Day, the
next Business Day).
"Tax Warranty" shall mean a representation or warranty in SECTION 2.14.
"Title and Authorization Warranty" shall mean a representation or
warranty in SECTION 2.2(c) and SECTION 2.3.
"Transaction" shall have the meaning set forth in the preamble hereof.
"Transferred Joint Venture Companies" shall have the meaning set forth
in SECTION 2.2(a).
"Transition Services Agreement" shall have the meaning set forth in
SECTION 4.8.
"True-Up Balance Sheet" shall have the meaning set forth in SECTION
1.3(c).
Appendix I-9
"UnCollared Average" shall have the meaning set forth in SECTION
1.2(B).
"WilPro" shall have the meaning set forth in SECTION 1.1(A).
"WilPro Companies" shall have the meaning set forth in SECTION 2.2(A).
"WilPro Interest" shall have the meaning set forth in SECTION 1.1(A).
"WilPro Purchase Price" shall mean the amount of the Aggregate Purchase
Price allocated to the WilPro Interest.
Appendix I-10
SCHEDULES
1.2(c) Purchase Price Allocation
1.2(e) Discount Percentage
1.3(i) Excluded Current Federal Tax Liabilities Used in True-Up
1.3(j) Excluded Assets and Excluded Liabilities Used in True-Up
1.4 Excluded Assets
1.5 Excluded Liabilities
1.6 Contract Assignments
2.1 POC Companies Operating Jurisdictions
2.2 POC Companies Authorized, Issued and Outstanding Capital Stocks
2.4 POC Companies Conflict and Consents
2.6 POC Companies Personal Property Liens
2.7(a) POC Companies Owned or Leased Real Property
2.7(b) POC Companies Real Property Liens
2.7(c) POC Companies Owned Real Property Liens
2.7(d) POC Companies Leased Real Property Liens
2.8 POC Companies Undisclosed Liabilities
2.9 POC Companies Contested Accounts Receivable
2.10 POC Companies Intellectual Property
2.11 POC Companies Financial Statements
2.12 POC Companies Material Adverse Changes
2.13 POC Companies Certain Changes and Events
2.14(a) POC Companies Extended Tax Returns
2.14(d) POC Companies Audited Tax Returns within the Past 6 Years
2.14(h) POC Companies Joint Ventures or Partnerships
2.14(m) POC Companies Participation Affiliated Groups
2.14(o) POC Companies Current and Accumulated Earnings and Taxed Income of
Foreign Subsidiaries
2.15 POC Companies Pending Litigation
2.16 POC Companies Benefit Plans
2.17(a) POC Companies Material Contracts
2.17(b) Joint Venture Material Contracts
2.20 POC Companies Employee Matters
2.21 POC Companies Environmental Matters
2.23 POC Companies Agreements with Affiliates
3.6 Hanover Conflict and Consents
3.7 Hanover Undisclosed Liabilities
3.8 Hanover Material Adverse Charges
3.9 Hanover Absence of Material Charges
3.11 Hanover Litigation
3.13 Hanover Environmental
5.14 YME Assets
11.15(a) POC Companies Executives Officers and Directors
11.15(b) Hanover Executive Officers and Directors
EXHIBITS
1.2 Hanover Subordinated Promissory Note
4.8 Transition Services Agreement
4.9 Alliance Agreement
4.10 Registration Rights Agreement
TABLE OF CONTENTS
PAGE
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ARTICLE I PURCHASE AND SALE.......................................................................................1
1.1 Purchase and Sale...............................................................................1
1.2 Consideration/Allocation........................................................................1
1.3 Purchase Price Adjustment.......................................................................2
1.4 Excluded Assets.................................................................................5
1.5 Excluded Liabilities............................................................................5
1.6 Contract Assignments............................................................................5
1.7 PIGAP Put; Priority of Set-Off by Schlumberger..................................................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS..............................................................7
2.1 Organization....................................................................................7
2.2 Capitalization; Seller's Ownership of POC Companies and Interest in Joint Venture
Companies.......................................................................................8
2.3 Authority of Sellers............................................................................9
2.4 No Conflict/Consents............................................................................9
2.5 Books and Records..............................................................................10
2.6 Personal Property..............................................................................10
2.7 Real Property..................................................................................10
2.8 No Undisclosed Liabilities.....................................................................11
2.9 Accounts Receivable............................................................................11
2.10 Intellectual Property..........................................................................11
2.11 Financial Statements...........................................................................12
2.12 No Material Adverse Change.....................................................................12
2.13 Absence of Certain Changes and Events..........................................................12
2.14 Taxes..........................................................................................14
2.15 Litigation.....................................................................................17
2.16 ERISA and Related Matters......................................................................17
2.17 Material Contracts.............................................................................19
2.18 Brokers........................................................................................21
2.19 Insurance......................................................................................21
2.20 Employees......................................................................................21
2.21 Environmental..................................................................................22
2.22 Environmental Permits..........................................................................23
2.23 Affiliate Transactions.........................................................................23
2.24 Compliance with Law; Authorizations............................................................23
2.25 No Other Representations or Warranties.........................................................23
2.26 Securities; Resale.............................................................................23
2.27 Sufficiency of Assets..........................................................................24
ARTICLE III REPRESENTATIONS AND WARRANTIES OF HANOVER AND PURCHASER..............................................24
3.1 Organization...................................................................................24
3.2 Capitalization.................................................................................24
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TABLE OF CONTENTS
(continued)
PAGE
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3.3 Authority of Hanover and Purchaser.............................................................25
3.4 Brokers........................................................................................25
3.5 Hanover SEC Filings; Financial Statements; Absence of Certain Changes..........................25
3.6 No Conflict; Consents..........................................................................26
3.7 No Undisclosed Liabilities.....................................................................26
3.8 No Material Adverse Change.....................................................................26
3.9 Absence of Certain Changes and Events..........................................................27
3.10 Taxes..........................................................................................27
3.11 Litigation.....................................................................................27
3.12 ERISA and Related Matters......................................................................27
3.13 Environmental..................................................................................28
3.14 Compliance with Law; Authorizations............................................................28
3.15 Securities/Resale..............................................................................28
3.16 No Other Representations or Warranties.........................................................28
ARTICLE IV COVENANTS OF SELLER...................................................................................29
4.1 Corporate and Other Actions....................................................................29
4.2 Full Access....................................................................................29
4.3 Ordinary Course of Business....................................................................29
4.4 Filings and Consents...........................................................................29
4.5 Employment Matters.............................................................................30
4.6 Covenant Not to Compete........................................................................30
4.7 Cooperation with SEC Filings; Financing........................................................31
4.8 Transition Services Agreement..................................................................31
4.9 Alliance Agreement.............................................................................31
4.10 Registration Rights Agreement..................................................................31
4.11 Sale of OSI Assets and Rocky Mountain Assets...................................................31
ARTICLE V COVENANTS OF HANOVER AND PURCHASER.....................................................................32
5.1 Corporate and Other Actions....................................................................32
5.2 Benefit Plans..................................................................................32
5.3 Full Access....................................................................................34
5.4 Filings and Consents...........................................................................34
5.5 Directors' and Officers' Insurance.............................................................34
5.6 Use of Schlumberger Name.......................................................................34
5.7 Registration Rights Agreement..................................................................34
5.8 Alliance Agreement.............................................................................35
5.9 Hanover Board Seat.............................................................................35
5.10 Hanover Guarantees.............................................................................35
5.11 Schlumberger Guarantee.........................................................................35
5.12 Purchase of WilPro Energy Services (GUARA) Ltd.................................................36
5.13 Purchase of OSI Mechanical Services Group and Rocky Mountain Gas Contracts.....................36
5.14 Options for YME Assets.........................................................................36
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TABLE OF CONTENTS
(continued)
PAGE
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5.15 Designation of Purchasing Entities.............................................................36
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER......................................................36
6.1 Warranties True As of Both Present Date and the Closing Date...................................36
6.2 Compliance with Agreements and Covenants.......................................................37
6.3 Competition Law Approvals......................................................................37
6.4 Injunctions....................................................................................37
6.5 Deliveries by Sellers..........................................................................37
6.6 Consents.......................................................................................37
6.7 Inter-Company Obligations......................................................................37
6.8 Hanover Share Price............................................................................37
6.9 Camco Mexico Contract..........................................................................37
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS.......................................................38
7.1 Warranties True as of Both Present Date and the Applicable Closing Date........................38
7.2 Compliance with Agreements and Covenants.......................................................38
7.3 Competition Law Approvals......................................................................38
7.4 Injunctions....................................................................................38
7.5 Deliveries by Purchaser........................................................................38
7.6 Consents.......................................................................................38
7.7 Hanover Share Price............................................................................38
ARTICLE VIII CLOSING.............................................................................................39
8.1 Closing........................................................................................39
8.2 Sellers' Deliveries............................................................................39
8.3 Purchaser's Deliveries.........................................................................40
8.4 Termination....................................................................................42
ARTICLE IX SURVIVAL AND INDEMNIFICATION..........................................................................42
9.1 Survival.......................................................................................42
9.2 Indemnification by Sellers (other than for Tax Matters)........................................42
9.3 Indemnification by Purchaser (other than for Tax Matters)......................................43
9.4 Limitations on Liability of Seller.............................................................44
9.5 Notice of Third Party Claims; Assumption of Defense............................................45
9.6 Settlement or Compromise.......................................................................45
9.7 Nature of Seller's and Purchaser's Representations, Warranties, Covenants, and
Indemnification Obligations....................................................................46
9.8 Tax Indemnification............................................................................46
9.9 Time Limits....................................................................................49
9.10 Net Losses.....................................................................................49
9.11 Purchase Price Adjustments.....................................................................49
9.12 Remedial Action................................................................................49
ARTICLE X TAX MATTERS............................................................................................50
10.1 Section 338(h)(10) Elections...................................................................50
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TABLE OF CONTENTS
(continued)
PAGE
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10.2 Other Tax Matters..............................................................................53
ARTICLE XI MISCELLANEOUS.........................................................................................55
11.1 Expenses.......................................................................................55
11.2 Amendment......................................................................................55
11.3 Notices........................................................................................55
11.4 Waivers........................................................................................57
11.5 Counterparts...................................................................................57
11.6 Headings.......................................................................................57
11.7 Applicable Law.................................................................................57
11.8 Assignment.....................................................................................58
11.9 No Third Party Beneficiaries...................................................................58
11.10 Forum; Waiver of Jury Trial....................................................................58
11.11 Schedules......................................................................................58
11.12 Incorporation..................................................................................58
11.13 Complete Agreement.............................................................................58
11.14 Disclaimer.....................................................................................58
11.15 Knowledge Defined..............................................................................59
11.16 Public Announcements...........................................................................59
11.17 Defined Terms..................................................................................59
11.18 Currency.......................................................................................59
11.19 Restrictive Legends and Stop-Transfer Orders...................................................59
11.20 Specific Performance...........................................................................60
11.21 Further Assurances.............................................................................60
11.22 Severability...................................................................................60
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Exhibit 2
EXECUTION COPY
LOCK-UP, STANDSTILL AND REGISTRATION RIGHTS AGREEMENT
THIS LOCK-UP, STANDSTILL AND REGISTRATION RIGHTS AGREEMENT (this
"AGREEMENT"), dated as of August 31, 2001 is by and among Schlumberger
Technology Corporation, a Texas corporation ("STC"), Camco International, Inc.,
a Delaware corporation ("CAMCO"), Schlumberger Oilfield Holdings Ltd., a British
Virgin Islands company ("SOHL"), Schlumberger Surenco S.A., a Panama company
("SURENCO"), Operational Services, Inc., a Texas corporation ("OSI"), and
Hanover Compressor Company, a Delaware corporation ("HANOVER").
RECITALS
WHEREAS, pursuant to the Purchase Agreement, dated as of June 28, 2001
(the "PURCHASE AGREEMENT"), among STC, SOHL, Surenco, Camco, Hanover and Hanover
Compression Limited Partnership, a Delaware limited liability partnership
("HCLP"), Camco is acquiring Six Million Seven Hundred Sixty Two Four Hundred
Seventy Nine (6,762,479) shares of Hanover's common stock, par value $0.001 per
share (the "COMMON STOCK"), SOHL is acquiring Two Hundred Fifty One Thousand
Seven Hundred Thirty Four (251,734) shares of the Common Stock and Surenco is
acquiring One Million Four Hundred Thirty Thousand Three Hundred Four
(1,430,304) shares of the Common Stock (collectively, the "SPA SHARES");
WHEREAS, pursuant to the Alliance Agreement, dated as of August 31,
2001 (the "ALLIANCE AGREEMENT"), among STC, SOHL and Hanover, STC is acquiring
Fifty One Thousand Four Hundred Ninety One (51,491) shares of the Common Stock
and SOHL is acquiring One Hundred Fourteen Thousand Four Hundred Twenty Four
(114,424) shares of the Common Stock (collectively the "ALLIANCE SHARES");
WHEREAS, pursuant to the Asset Purchase Agreement, dated as of August
31, 2001 (the OSI ASSET PURCHASE AGREEMENT"), by and between OSI, STC, HCLP and
Hanover, OSI is acquiring Ninety Seven Thousand Two Hundred Sixty One (97,261)
shares of the Common Stock (the "OSI SHARES");
WHEREAS, the parties are entering into this Agreement as a condition to
closing the Purchase Agreement, the Alliance Agreement and the OSI Asset
Purchase Agreement;
AGREEMENTS
NOW, THEREFORE, in consideration of the premises, and of the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. DEFINITIONS. In addition to capitalized terms defined elsewhere in
this Agreement, the following capitalized terms shall have the following meaning
when used in this Agreement. Defined terms used, but not defined, herein shall
have the meanings ascribed to them as set forth in the Purchase Agreement.
"ALLIANCE REGISTRABLE SECURITY" means at any time (i) the Alliance
Shares; (ii) any shares of Common Stock issued or issuable as dividends on, or
other distributions with respect to, the Alliance Shares; and (iii) any other
security issued or issuable in exchange for, or in replacement of, any of the
Alliance Shares, PROVIDED that any such security ceases to be an Alliance
Registrable Security when (a) a registration statement covering the sale of such
Alliance Registrable Security has been declared effective under the Securities
Act and such Alliance Registrable Security has been sold in accordance
therewith, or (b) such Alliance Registrable Security is distributed to the
public pursuant to Rule 144, or any similar provision then in force, under the
Securities Act.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
together with all rules and regulations promulgated thereunder.
"MATERIAL BREACH" means a breach of any obligation to make a payment to
any Seller Party as and when due and payable under the Alliance Agreement, the
Purchase Agreement, the Note or the OSI Asset Purchase Agreement.
"NOTE" means the Subordinated Promissory Note, dated as of August 31,
2001, in the amount of $150,000,000, by HCLP payable to the order of Camco.
"OSI REGISTRABLE SECURITY" means at any time (i) the OSI Shares; (ii)
any shares of Common Stock issued or issuable as dividends on, or other
distributions with respect to, the OSI Shares; and (iii) any other security
issued or issuable in exchange for, or in replacement of, any of the OSI Shares,
PROVIDED that any such security ceases to be an OSI Registrable Security when
(a) a registration statement covering the sale of such OSI Registrable Security
has been declared effective under the Securities Act and such OSI Registrable
Security has been sold in accordance therewith, or (b) such OSI Registrable
Security is distributed to the public pursuant to Rule 144, or any similar
provision then in force, under the Securities Act.
"OTHER REGISTRATION RIGHTS AGREEMENT" means the Third Amended and
Restated Registration Rights Agreement among Hanover and the stockholders party
thereto, as amended from time to time.
"PERSON" means any person or entity, whether an individual, whether in
his capacity as a trustee, executor, administrator or other legal
representative, sole proprietorship, corporation, limited liability company,
general partnership, limited partnership, trust, unincorporated organization,
syndicate, business association, firm, joint venture, governmental agency or
authority or any similar entity.
"PUBLIC OFFERING" means any offering by Hanover of its Common Stock to
the public pursuant to an effective registration statement under the Securities
Act or any comparable
2
statement under any comparable federal statute then in effect (other than any
offerings registered under Form S-4 or Form S-8 or a comparable or successor
form).
"REGISTRATION RIGHTS DATE" shall mean the date that is three (3) years
from the date hereof.
"REGISTRABLE SECURITY" means the Alliance Registrable Securities, the
OSI Registrable Securities and/or the SPA Registrable Securities, as the case
may be.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, together
with all rules and regulations promulgated thereunder.
"SELLER PARTIES" means STC, SOHL, Surenco, Camco, OSI and any Person
who becomes a Seller Party after the date of this Agreement pursuant to Section
7.1 hereof.
"SELLING EXPENSES" means all fees and expenses of underwriters
including discounts, commissions or fees of underwriters, selling brokers,
dealer managers or similar securities industries professionals relating to the
distribution of the Registrable Securities.
"SHARES" means the Alliance Shares, the OSI Shares and/or the SPA
Shares, as the case may be.
"SPA REGISTRABLE SECURITY" means at any time (i) the SPA Shares; (ii)
any shares of Common Stock issued or issuable as dividends on, or other
distributions with respect to, the SPA Shares; and (iii) any other security
issued or issuable in exchange for, or in replacement of, any of the SPA Shares,
PROVIDED that any such security ceases to be an SPA Registrable Security when
(a) a registration statement covering the sale of such SPA Registrable Security
has been declared effective under the Securities Act and such SPA Registrable
Security has been sold in accordance therewith, or (b) such SPA Registrable
Security is distributed to the public pursuant to Rule 144, or any similar
provision then in force, under the Securities Act.
2. PIGGYBACK REGISTRATION.
2.1 RIGHT TO PIGGYBACK. During the period beginning on the
Registration Rights Date and ending on the date ten (10) years thereafter (the
"REGISTRATION PERIOD"), whenever Hanover proposes to register any of its
securities under the Securities Act for sale in a Public Offering and the
registration form to be used may be used for the registration of any Registrable
Securities (a "PIGGYBACK REGISTRATION"), Hanover will give STC and SOHL, as
representatives of the Seller Parties, written notice of its intention to effect
such a registration at least thirty (30) days prior to the proposed filing of a
registration statement with respect thereto and will offer to include in such
registration such Registrable Securities. Upon the written request of STC and
SOHL, acting together as representatives of the Seller Parties, which shall have
been received by Hanover within ten (10) days after STC and SOHL received the
notice described in the immediately preceding sentence, and in accordance with
the priorities set forth
3
in Sections 2.2 and 2.3 below, Hanover will use its reasonable best efforts
to cause such Registrable Securities specified in such notice to be included
in such registration statement.
2.2 PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback
Registration is an underwritten primary registration on behalf of Hanover and
the managing underwriters advise Hanover in writing that in their opinion the
number of securities requested to be included in the registration would
materially interfere with the underwriter's ability to effect the registration
and sale of Hanover's securities, Hanover will include in such registration the
permissible quantity of securities to be sold as determined by the managing
underwriter(s) (a) first, the securities that Hanover proposes to sell, (b)
second, the securities requested to be included therein by other holders
requesting registration under the Other Registration Rights Agreement and the
Registrable Securities requested to be included in such registration, pro rata
among the holders of such securities.
2.3 PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
Hanover's securities and the managing underwriters advise Hanover in writing
that in their opinion the number of securities requested to be included in the
registration would materially interfere with the underwriters' ability to effect
the registration and sale of such securities, Hanover will include in such
registration the permissible quantity of securities to be sold as determined by
the managing underwriter(s) (a) first, the securities requested to be included
therein by the holders requesting such registration, and (b) second, the
Registrable Securities requested to be included in such registration and other
securities requested to be included therein under the Other Registration Rights
Agreement, pro rata among the holders of such securities.
2.4 SELECTION OF UNDERWRITERS. Hanover shall have the right to
select the managing underwriter(s) to administer any offering of Hanover's
securities in which any Seller Party participates pursuant to a Piggyback
Registration.
2.5 LIMITATION WITH RESPECT TO SHELF REGISTRATIONS.
Notwithstanding anything herein to the contrary, the number of Registrable
Securities that Hanover shall be obligated to register pursuant to a Piggyback
Registration with respect to a shelf registration statement on an appropriate
form pursuant to Section 415 of the Securities Act, or any similar rule then in
effect (a "SHELF REGISTRATION"), shall not exceed (A) two million (2,000,000)
Registrable Securities, less (B) the number of Registrable Securities that have
been registered hereunder and not yet sold pursuant to any Shelf Registrations
then outstanding.
3. DEMAND REGISTRATION.
3.1 REGISTRATION. During the Registration Period, STC and SOHL,
acting together as representatives of the Seller Parties, will be entitled to
request five (5) registrations under the Securities Act of all, but in any event
no less than fifteen percent (15%), of the aggregate number of Registrable
Securities (the "DEMAND REGISTRATION"); provided, that STC and SOHL shall not be
entitled to request a Shelf Registration hereunder. Notwithstanding anything
herein to the contrary, Hanover is obligated to effect only five (5)
registrations under this Section 3.1 (regardless of whether such registrations
are only of Alliance Shares, the OSI Shares or the SPA Shares), PROVIDED, that
if Hanover fails (A) to effect such registration of all
4
Registrable Securities for which registration is requested or (B) to have
such registration declared or ordered effective, then one (1) additional
registration request may be made hereunder each time such limit is imposed.
Thereafter, Hanover shall have no obligation to include any Registrable
Securities in any registration hereunder.
3.2 PAYMENT OF EXPENSES FOR THE DEMAND REGISTRATION. Hanover
will pay all Registration Expenses (as defined in Section 6 below) for the
Demand Registration, provided that the Seller Parties will pay all Selling
Expenses.
3.3 PRIORITY. If a Demand Registration is an underwritten
Public Offering and the managing underwriters advise Hanover in writing that in
their opinion the inclusion of the number of Registrable Securities and other
securities requested to be included would materially interfere with the
underwriters' ability to effect the registration and sale of such securities,
Hanover will include in such registration the permissible quantity of securities
to be sold as determined by the managing underwriter(s) (a) first, the
Registrable Securities requested to be included in such registration as limited
as set forth in Section 3.1, and (b) second, the securities requested to be
included therein by the other holders under the Other Registration Rights
Agreement, pro rata among the holders of such securities.
3.4 RESTRICTIONS. Hanover may postpone for up to ninety (90)
days the filing or the effectiveness of a registration statement for the Demand
Registration if the Board of Directors of Hanover reasonably and in good faith
determines that such filing would be materially detrimental to Hanover or
require a disclosure of a material fact that might reasonably be expected to
have a material adverse effect on Hanover or any plan or proposal by Hanover or
any of its Affiliates to engage in any acquisition of stock or assets (other
than in the ordinary course of business) or any merger, consolidation, tender
offer or other significant transaction.
3.5 SELECTION OF UNDERWRITERS. Hanover shall have the right to
select the managing underwriter(s) to administer any offering of Hanover
securities pursuant to a Demand Registration.
4. HOLDBACK AGREEMENTS. In addition to the restrictions set forth in
Section 7.1 hereto, each Seller Party agrees not to effect any public sale or
distribution of equity securities of Hanover, or any securities convertible into
or exchangeable or exercisable for such securities, during the seven (7) days
prior to, and during the ninety (90) days following, the effective date of any
underwritten Piggyback Registration or the underwritten Demand Registration in
which Registrable Shares are included (except as part of such underwritten
registration), unless the underwriters managing the Public Offering otherwise
agree.
5. REGISTRATION PROCEDURES. Whenever the Seller Parties have requested
that any Registrable Securities be registered pursuant to this Agreement,
Hanover will use its reasonable best efforts to effect the registration and sale
of such Registrable Securities in accordance with the intended method of
disposition thereof and, pursuant thereto, Hanover will as expeditiously as
possible:
(a) prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its reasonable best efforts
to cause such registration statement to
5
become effective (provided that before filing a registration statement or
prospectus, or any amendments or supplements thereto, Hanover will furnish
copies of all such documents proposed to be filed to the counsel or counsels
for the Seller Parties covered by such registration statement);
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus(es) used in
connection therewith as may be necessary to keep such registration statement
effective for a period of not less than six (6) months or such shorter period
until such Registrable Securities are no longer Registrable Securities and
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) furnish to the Seller Parties such number of copies of
such registration statement, each amendment and supplement thereto, the
prospectus(es) included in such registration statement (including each
preliminary prospectus) and such other documents as the Seller Parties may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by each such seller;
(d) use its reasonable best efforts to register or qualify
such Registrable Securities under such other securities or blue sky laws of such
jurisdictions as the Seller Parties reasonably request and do any and all other
acts and things which may be reasonably necessary or advisable to enable the
Seller Parties to consummate the disposition in such jurisdictions of the
Registrable Securities (provided that Hanover will not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph or (ii) consent to
general service of process in any such jurisdiction);
(e) notify each Seller Party, at any time when a prospectus
relating to such Seller Party is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not misleading, and,
at the request of such Seller Party, Hanover will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus will not contain any untrue
statement of a material fact or omit to state any fact necessary to make the
statements therein not misleading;
(f) cause all such Registrable Securities to be listed
on each securities exchange on which similar securities issued by Hanover are
then listed;
(g) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other customary
actions the Seller Parties or the underwriters, if any, reasonably request in
order to expedite or facilitate the disposition of such Registrable Securities;
(h) make available for inspection by each Seller Party, any
underwriter participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by such Seller
Party or any such underwriter, all financial and
6
other records, pertinent corporate documents and properties of Hanover, and
cause Hanover's officers, directors, employees and independent accountants to
supply all information reasonably requested by such Seller Party, any such
underwriter, attorney, accountant or agent in connection with such
registration statement; and
(i) advise each Seller Party, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for such purpose and promptly use all reasonable
efforts to prevent the issuance of any stop order or to obtain its withdrawal if
such stop order should be issued.
6. REGISTRATION EXPENSES. Except as provided in Section 3.2, all
expenses incident to Hanover's performance of or compliance with this Agreement,
including, but not limited to, all registration and filing fees, fees and
expenses of compliance with securities or blue sky laws, printing expenses,
messenger and delivery expenses, and fees and disbursements of counsel for
Hanover and all independent certified public accountants, underwriters
(excluding Selling Expenses which shall be payable by the Seller Parties) and
other Persons retained by Hanover (all such expenses being herein called
"REGISTRATION EXPENSES"), will be borne by Hanover, provided that Hanover shall
not be required to pay sales commissions, discounts or transfer taxes. In
addition, Hanover will pay its internal expenses (including, but not limited to,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly review, the
expense of any liability insurance obtained by Hanover and the expenses and fees
for listing the securities to be registered on each securities exchange.
7. LOCK-UP PERIOD; STANDSTILL.
7.1 LOCK-UP PERIOD. In order to induce Hanover to enter into
this Agreement, together with the Purchase Agreement, the Alliance Agreement and
the OSI Asset Purchase Agreement, during the period beginning on the date hereof
through the Registration Rights Date, except as permitted below, none of the
Seller Parties or any of their Affiliates will, directly or indirectly, offer,
sell, contract to sell, pledge, grant any option to purchase, make any short
sale or otherwise dispose of any of the SPA Shares, the OSI Shares or the
Alliance Shares, as the case may be, or any options or warrants to purchase any
such Shares, or any securities convertible into, exchangeable for or that
represent the right to receive such Shares. The foregoing restriction is
expressly agreed to preclude the Seller Parties and their Affiliates from
engaging in any hedging or other transaction which is designed to or which could
lead to or result in a sale or disposition of the SPA Shares, the OSI Shares or
the Alliance Shares, as the case may be, even if such Shares would be disposed
of by someone other than the Seller Parties or their Affiliates. Such prohibited
hedging or other transactions would include without limitation any short sale or
any purchase, sale or grant of any right (including without limitation any put
or call option) with respect to any of the SPA Shares, the OSI Shares or the
Alliance Shares, as the case may be, or with respect to any security that
includes, relates to, or derives any significant part of its value from such
Shares. Notwithstanding anything herein to the contrary, the Seller Parties
shall be permitted to transfer any of the Shares (provided that such transfer is
exempt from registration under the Securities Act), together with the rights
granted to such Seller Party under this Agreement, only to a Permitted
Transferee who delivers to Hanover, within a reasonable time after such
transfer, a written
7
instrument by which such transferee agrees to be bound by the applicable
terms of this Agreement. A "PERMITTED TRANSFEREE" shall mean any wholly-owned
Affiliate of a Seller Party or any entity that merges or consolidates with or
owns or acquires all of the equity securities or all or substantially all of
the assets of such Seller Party.
7.2 STANDSTILL. In order to induce Hanover to enter into this
Agreement, together with the Purchase Agreement, the OSI Asset Purchase
Agreement and the Alliance Agreement, during the period beginning on the date
hereof through the Registration Rights Date, each Seller Party agrees that
neither it nor any of its Affiliates or any officers, directors, employees,
advisors, agents or other representatives acting on its behalf will, in any
manner, directly or indirectly, without the prior written consent of Hanover:
(a) effect or seek, offer or propose (whether publicly or
otherwise) to effect, agree to effect or cause or participate in, directly or
indirectly, or in any way assist any other person to effect, offer or propose
(whether publicly or otherwise) to effect or participate in (i) any acquisition,
directly or indirectly, by purchase or otherwise, of any securities (or
beneficial ownership thereof), or rights to acquire any securities, of Hanover
or any successor to or person in control of Hanover, pursuant to which, after
giving effect to such acquisition, the Seller Parties and their Affiliates would
own, directly or indirectly, beneficially or otherwise, greater than twenty-five
percent (25%) of the shares of Common Stock then outstanding; and (ii) any
tender or exchange offer, merger, consolidation or other business combination
involving Hanover's securities, pursuant to which, after giving effect to such
transaction, the Seller Parties and their Affiliates would own, directly or
indirectly, beneficially or otherwise, greater than twenty-five percent (25%) of
the shares of Common Stock then outstanding (or, if applicable, greater than
twenty-five percent (25%) of the outstanding voting stock with respect to any
successor entity to Hanover);
(b) make any public announcement with respect to, or submit a
proposal for, or offer of (with or without conditions), any extraordinary
transaction involving Hanover or any of its securities or relating to any of the
matters set forth in clause (a) above;
(c) form, join or in any way participate in a "group"
(as defined in the Exchange Act) with respect to any of the matters set forth in
clause (a) above; or
(d) enter into any discussions or arrangements with any third
party with respect to any of the matters set forth in clause (a) above or
advise, assist, encourage, finance or seek to persuade others to take any action
with respect to the foregoing.
8. CROSS-DEFAULT.
8.1 SPA DEFAULT. In the event that Hanover commits a Material
Breach of the Purchase Agreement or the OSI Asset Purchase Agreement, which
Material Breach continues uncured for a period of thirty (30) business days
after receipt of written notice of such Material Breach, or Hanover commits a
Material Breach of the Note, which Material Breach continues uncured for a
period of ten (10) business days after receipt of written notice of such
Material Breach (in either case, the "SPA DEFAULT DATE"), then:
8
(a) with respect to all Registrable Securities then
outstanding (including all SPA Registrable Securities, OSI Registrable
Securities and Alliance Registrable Securities), the lock-up provisions set
forth in Section 7.1 hereof shall expire and be of no further force and effect;
and
(b) with respect to all Registrable Securities then
outstanding (including all SPA Registrable Securities, OSI Registrable
Securities and Alliance Registrable Securities), the "Registration Period"
referred to in Sections 2.1 and Section 3.1 hereof shall be deemed to be the
period beginning on the earlier of (1) the Registration Rights Date and (2) the
SPA Default Date, and ending on the date ten (10) years thereafter.
8.2 ALLIANCE DEFAULT. In the event that Hanover commits a
Material Breach of the Alliance Agreement, which Material Breach has continued
uncured for a period of thirty (30) business days after receipt of written
notice of such Material Breach, or the parties to the strategic alliance have
failed to meet the Performance Goals (as defined in the Alliance Agreement)
solely as a result of Hanover's refusal or unwillingness to commit the necessary
resources to the strategic alliance, as determined by STC and SOHL, acting
together as representatives of the Seller Parties, in their reasonable
discretion, which refusal or unwillingness to commit such resources has
continued uncured for a period of thirty (30) business days after receipt of
written notice thereof (in either case, the "ALLIANCE DEFAULT DATE"), then:
(a) with respect to the Alliance Registrable Securities then
outstanding (and expressly NOT with respect to the SPA Registrable Securities or
the OSI Registrable Securities), the lock-up provisions set forth in Section 7.1
hereof shall expire and be of no further force and effect; and
(b) with respect to the Alliance Registrable Securities then
outstanding (and expressly NOT with respect to the SPA Registrable Securities or
the OSI Registrable Securities), the "Registration Period" referred to in
Sections 2.1 and Section 3.1 hereof shall be deemed to be the period beginning
on the earlier of (1) the Registration Rights Date and (2) the Alliance Default
Date, and ending on the date ten (10) years thereafter.
8.3 RIGHT OF FIRST REFUSAL. Hanover or its designee shall have
a right of first refusal with respect to any or all the Registrable Securities
proposed to be sold by the Seller Parties prior to the Registration Rights Date
pursuant to Sections 8.1 or 8.2 hereof. After Hanover's receipt of a written
request for a Piggyback Registration or a Demand Registration, which notice has
been received prior to the Registration Rights Date pursuant to Section 8.1 or
8.2 hereof, Hanover shall have five (5) business days to notify STC and SOHL, as
representatives of the Seller Parties, in writing (the "EXERCISE NOTICE") that
Hanover or its designee shall exercise its right of first refusal hereunder.
Such Exercise Notice shall specify the number of such Registrable Securities to
be purchased by Hanover or its designee (the "PURCHASED SHARES"). On the date
that is ten (10) business days after the date of the Exercise Notice, Hanover or
its designee will purchase the Purchased Shares from the applicable Seller Party
at the Agreed Market Price. The "Agreed Market Price" shall be a price equal to
the average of the closing prices of one share of Common Stock on the New York
Stock Exchange as reported in the Wall Street Journal for the ten (10) business
days immediately after the date of the Exercise Notice on which the New York
Stock Exchange is open and available for at least
9
five (5) hours for the trading of securities. For these purposes, during such
ten (10) business day period, neither Hanover nor its Affiliates will sell or
cause to be sold any outstanding Common Stock and neither the Seller Parties
nor their Affiliates will purchase or cause to be purchased any outstanding
Common Stock.
9. INDEMNIFICATION.
9.1 BY HANOVER. Hanover agrees to indemnify, to the extent
permitted by law, the Seller Parties, their officers, employees and directors
and each Person who controls such Seller Party (within the meaning of the
Securities Act) and such Person's officers, employees and directors against all
losses, claims, damages, liabilities and expenses (including, but not limited
to, reasonable attorneys' fees and expenses) caused by any untrue or alleged
untrue statement of material fact contained in any registration statement,
prospectus or preliminary prospectus, or any amendment thereof or supplement
thereto, or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same are caused by or contained in any information
furnished, or caused to be furnished, in writing to Hanover by any Seller Party
or its Affiliates expressly for use therein or by any Seller Party's failure to
deliver a copy of the prospectus or any amendments or supplements thereto after
Hanover has furnished such Seller Party with a sufficient number of copies of
the same. The payments required by this Section 9.1 will be made periodically
during the course of the investigation or defense, as and when bills are
received or expenses incurred.
9.2 BY SELLER PARTIES. In connection with any registration
statement in which a Seller Party is participating, such Seller Party will
furnish to Hanover in writing such information as Hanover reasonably requests
for use in connection with any such registration statement or prospectus and, to
the extent permitted by law, will indemnify Hanover, its directors, employees
and officers and each Person who controls Hanover (within the meaning of the
Securities Act) against any losses, claims, damages, liabilities and expenses
(including, but not limited to, reasonable attorneys' fees and expenses)
resulting from any untrue or alleged untrue statement of material fact contained
in the registration statement, prospectus or preliminary prospectus, or any
amendment thereof or supplement thereto, or any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in or omitted from any information so
furnished in writing by such Seller Party or its Affiliates for the acknowledged
purpose of inclusion in such registration statement, prospectus or preliminary
prospectus; provided that the liability of each Seller Party will be limited in
all events to the net amount received by such Seller Party from the sale of
Registrable Securities pursuant to such registration statement.
9.3 PROCEDURE. Any Person entitled to indemnification hereunder
will (a) give prompt written notice to the indemnifying Person of any claim with
respect to which it seeks indemnification and (b) permit such indemnifying
Person to assume the defense of such claim with counsel reasonably satisfactory
to the indemnified Person. If such defense is assumed, the indemnifying Person
will not be subject to any liability for any settlement made by the indemnified
Person without its consent (but such consent will not be unreasonably withheld).
An indemnifying Person who is not entitled to, or elects not to, assume the
defense of a claim
10
will not be obligated to pay the fees and expenses of more than one counsel
for all parties indemnified by such indemnifying Person with respect to such
claim. No indemnifying Person, in the defense of any claim, shall, except
with the prior written consent of the indemnified Person, consent to entry of
any judgment or enter into any settlement (1) that does not include as an
unconditional term thereof the giving by the claimant to such indemnified
Person a release from all liability in respect to such claim in form and
substance reasonable satisfactory to such indemnified Person, and (2) that
imposes any equitable remedies, conduct restrictions or affirmative
obligations whatsoever on such indemnified Person other than financial
obligations for which such indemnified Person will be indemnified hereunder.
9.4 SURVIVAL. The indemnification provided for under this
Agreement will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified Person or any officer, director or
controlling Person of such indemnified Person and will survive the transfer of
securities. Hanover also agrees to make such provisions as are reasonably
requested by any indemnified Person for contribution to such Person in the event
Hanover's indemnification is unavailable for any reason.
10. COMPLIANCE WITH RULE 144 AND RULE 144A. Subject to the lock-up
provisions of Section 2.1 hereof, so long as Hanover files reports under Section
13 or 15(d) of the Exchange Act, then at the request of any Seller Party,
Hanover will (a) forthwith furnish to such Seller Party a written statement of
compliance with the filing requirements of the SEC as set forth in Rule 144, as
such rule may be amended from time to time and (b) make available to the public
and such Seller Party such information as will enable such Seller Party to make
sales pursuant to Rule 144. At any time that Hanover is not subject to Section
13 or 15(d) of the Exchange Act, Hanover will provide to such Seller Party and
to any prospective purchaser of Registrable Securities under Rule 144A of the
SEC, the information described in Rule 144A(d)(4) of the SEC.
11. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder which is underwritten unless such
Person (a) agrees to sell its securities on the basis provided in any
underwriting arrangements approved by such Person or Persons entitled hereunder
to approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, custody agreements, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
12. MISCELLANEOUS.
12.1 NO INCONSISTENT AGREEMENTS. Hanover will not hereafter
enter into any agreement with respect to its securities which is inconsistent
with or which otherwise materially limits, restricts or interferes with the
rights granted to the holders of Registrable Securities in this Agreement.
12.2 AMENDMENTS AND WAIVERS. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended or waived at
any time only by the written agreement of Hanover and each Seller Party. Any
waiver, permit, consent or approval of any kind or character on the part of any
such holders of any provision or condition of this
11
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in writing.
12.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, all covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto. Except as set forth in
Section 7.1, this Agreement may not be assigned (and any purported assignment
shall be null and void) without the prior written consent of the non-assigning
Person.
12.4 DESCRIPTIVE HEADINGS. The descriptive headings of
this Agreement are inserted for convenience of reference only and do not
constitute a part of and shall not be utilized in interpreting this Agreement.
12.5 NOTICES. Any notices required or permitted to be sent
hereunder shall be delivered personally or mailed, certified mail, return
receipt requested, or delivered by overnight courier service to the following
addresses, or such other address as any party hereto designates by written
notice to Hanover, and shall be deemed to have been given upon delivery, if
delivered personally, three (3) days after mailing, if mailed, or one (1)
business day after delivery to the courier, if delivered by overnight courier
service:
If to Hanover, to:
Hanover Compressor Company
12001 North Houston Rosslyn
Houston, Texas 77806
Attn: William S. Goldberg
Fax: (281) 447-0821
with a copy to
Latham & Watkins
233 South Wacker Drive, Suite 5800
Chicago, Illinois 60606
Attn: Richard S. Meller, Esq.
Fax: (312) 993-9767
If to STC, to:
Schlumberger Technology Corporation
300 Schlumberger Drive MD:23
Sugar Land, Texas 77478
Attn: General Counsel
Fax: (281) 285-6952
If to Camco, to:
12
Camco International Inc.
7030 Ardmore Houston, Texas 77054
Attention: General Counsel
Fax: (281) 285-6970
If to Surenco, to:
Schlumberger Surenco S.A.
Piso 13, Avenida Rio Caura Parque Humboldt
Caracas 1080, Venezuela
Attention: General Counsel
Fax: (011) 58 212 975-0351
If to SOHL, to:
Schlumberger Oilfield Holdings Ltd.
Craigmuir Chambers P.O. Box 71
Roadtown, Tortola, BVI
Attention: General Counsel
Fax: (011) 31 70 310-5485
If to OSI, to:
Operational Services, Inc.
300 Schlumberger Drive
Sugar Land, Texas 77478
Attention: Legal
Fax: (281) 285-6952
in each case with a copy to:
Gray Cary Ware & Freidenrich
1221 South MoPac, Suite 400
Austin, Texas 78746-6875
Attn: Brian P. Fenske, Esq.
Fax: (512) 457-7001
12.6 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which when so executed and delivered
shall be deemed an original, and such counterparts together shall constitute one
instrument.
12.7 GOVERNING LAW. This Agreement and the transactions
contemplated hereby shall be construed in accordance with, and governed by, the
laws of the State of Texas.
12.8 CONSENT TO JURISDICTION. Each of the parties hereto (i)
consents to submit itself to the personal jurisdiction of any federal court
located in the Harris County, Texas or any Texas state court in the event any
dispute arises out of this Agreement or any of the transactions
13
contemplated hereby, (ii) agrees that it will not attempt to deny or defeat
such personal jurisdiction by motion or other request for leave from any such
court, and (iii) agrees that it will not bring any action relating to this
Agreement in any court other than a federal court sitting in the Harris
County, Texas or a Texas state court.
12.9 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
WAIVES ITS RESPECTIVE RIGHT TO A JURY TRIAL OF ANY PERMITTED CLAIM OR CAUSE OF
ACTION ARISING OUT OF THIS AGREEMENT, ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY, OR ANY DEALINGS BETWEEN ANY OF THE PARTIES HERETO RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL
DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF
THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING,
WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR OTHER MODIFICATIONS TO THIS AGREEMENT, ANY
OF THE TRANSACTIONS CONTEMPLATED HEREBY OR TO ANY OTHER DOCUMENT OR AGREEMENT
RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY.
12.10 SERVICE OF PROCESS. Each of the parties hereto
irrevocably consents to the service of any process, pleading, notices or other
papers by the mailing of copies thereof by registered, certified or first class
mail, postage prepaid, to such party at such party's address set forth herein,
or by any other method provided or permitted under Texas law.
12.11 REPRODUCTION OF DOCUMENTS. This Agreement and all
documents relating hereto, including, but not limited to, (a) consents, waivers,
amendments and modifications which may hereafter be executed and (b)
certificates and other information previously or hereafter furnished, may be
reproduced by any photographic, photostatic, microfilm, optical disk,
micro-card, miniature photographic or other similar process. The parties agree
that any such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding, whether or not the original
is in existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
12.12 REMEDIES. Each of the parties to this Agreement will be
entitled to enforce its rights under this Agreement specifically, to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights existing in its favor. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party shall be entitled to
immediate injunctive relief or specific performance without bond or the
necessity of showing actual monetary damages in order to enforce or prevent any
violations of the provisions of this Agreement.
14
12.13 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
12.14 FINAL AGREEMENT. This Agreement constitutes the
complete and final agreement of the parties concerning the matters referred
to herein, and supersedes all prior agreements and understandings.
12.15 NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction will be used
against any Person.
[SIGNATURE PAGE FOLLOWS]
15
SIGNATURE PAGE FOR
LOCK-UP, STANDSTILL AND REGISTRATION RIGHTS AGREEMENT
The parties hereto have executed this Agreement as of the date first set forth
above.
HANOVER COMPRESSOR COMPANY
By:
----------------------------------------
Name: Michael J. McGhan
Title: President and Chief Executive Officer
SCHLUMBERGER TECHNOLOGY CORPORATION
By:
--------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SCHLUMBERGER SURENCO, S.A.
By:
--------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SCHLUMBERGER OILFIELD HOLDINGS LTD.
By:
--------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
CAMCO INTERNATIONAL INC.
By:
--------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
OPERATIONAL SERVICES, INC.
By:
--------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
AMENDMENT NO. 1 TO PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO PURCHASE AGREEMENT (the "AMENDMENT") is dated
as of August 30, 2001 and is by and among SCHLUMBERGER TECHNOLOGY
CORPORATION, a Texas corporation ("STC"), CAMCO INTERNATIONAL INC., a
Delaware corporation ("CII"), SCHLUMBERGER SURENCO S.A., a Panamanian company
("SURENCO"), and SCHLUMBERGER OILFIELD HOLDINGS LTD., a British Virgin
Islands company ("SOHL" and together with STC, CII and Surenco, each a
"SELLER" and, collectively, the "SELLERS" or "SCHLUMBERGER"), HANOVER
COMPRESSOR COMPANY, a Delaware corporation ("HANOVER"), and HANOVER
COMPRESSION LIMITED PARTNERSHIP, a Delaware limited partnership
("PURCHASER"). Terms used and not defined herein shall have the meanings
assigned to them in the Purchase Agreement dated June 28, 2001, by and among
STC, CII, Surenco, SOHL, Hanover and Purchaser (the "PURCHASE AGREEMENT").
RECITALS
A. WHEREAS, the Sellers, Hanover and Purchaser entered into the
Purchase Agreement on June 28, 2001; and
B. WHEREAS, the Sellers, Hanover and Purchaser desire to amend
the Purchase Agreement as set forth in this Amendment to reflect their
agreement to exclude the Rocky Mountain Assets from the transaction and to
reference their agreement regarding the contracts and other documents listed
on Schedule 1.5(a) hereto.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Sellers, Hanover and Purchaser hereby agree as follows:
1. Section 1.1 of the Purchase Agreement is amended and restated
to read in its entirety as follows:
1.1 PURCHASE AND SALE. Subject to the terms and conditions
hereof, Purchaser and/or one or more of its Affiliates shall
purchase: (i)100% of the issued and outstanding shares (the "POC
SHARES") of the capital stock of Production Operators Corporation, a
Delaware corporation ("POC"), from CII, (ii) a 35.5% equity interest
in and a $7,952,000 loan to (the "HARWAT INTEREST") Harwat
International Finance N.V., a Curacao limited liability company
("HARWAT"), from SOHL, (iii)a 30% equity interest in and a
$79,185,000 loan to ("WILPRO INTEREST") WilPro Energy Service
(PIGAPII) Limited, a Cayman Islands company ("WILPRO"), from Surenco,
and (iv)the contracts and other assets of Operational Services,
Inc.'s Mechanical Services Group listed on Exhibit1.1A (the "OSI
ASSETS"). In addition, STC, SOHL and Purchaser shall enter into the
Alliance Agreement. The consummation of the transactions
contemplated in this Section1.1 shall be referred to herein as the
"Closing".
2. Section 1.2(a) of the Purchase Agreement is amended and
restated to read in its entirety as follows:
(a) Subject to the terms and conditions hereof, and
subject to the adjustments specified in Section1.3 hereof, the
aggregate amount (the "Aggregate Purchase Price") paid by Hanover for
the Schlumberger Equity Interests, the OSI Assets, and the Alliance
Agreement, which shall be allocated by the Parties in accordance with
Section1.2(c), shall consist of: (i)the following amounts paid at
Closing: (A)Two Hundred Seventy Million Dollars ($270,000,000) in
cash, (B)One Hundred Fifty Million Dollars ($150,000,000) in the form
of a subordinated promissory note having the terms set forth on the
Term Sheet attached hereto as Exhibit1.2 (the "Hanover Note") and
(C)a number of shares of Hanover common stock ("Hanover Stock")
having a value (without giving effect to any restrictions on
transfer) of Two Hundred Eighty Three Million Dollars ($283,000,000),
as provided in Section1.2(b), and (ii)upon any draw down on a
financing of the PIGAPII project owned by WilPro, the net amount of
the draw down multiplied by 30% until an aggregate of Fifty Eight
Million Dollars($58,000,000) in cash has been paid to Surenco.
3. Section 4.11 of the Purchase Agreement is amended and
restated to read in its entirety as follows:
4.11 SALE OF OSI ASSETS. Sellers agree that Sellers
and/or one of their Affiliates shall sell the OSI Assets to Purchaser
and/or one of its Affiliates on the Closing Date, all on terms and
conditions (other than price, which is set forth on SCHEDULE 1.2(c)
hereof) reasonably satisfactory to the Parties.
4. Section 5.13 of the Purchase Agreement is amended and
restated to read in its entirety as follows:
5.13 PURCHASE OF OSI MECHANICAL SERVICES GROUP. Purchaser agrees
that Purchaser and/or one of its Affiliates shall buy the OSI Assets
on the Closing Date, all on terms and conditions (other than price,
which is set forth on SCHEDULE 1.2(c) hereof) reasonably satisfactory
to the Parties.
5. Section 5.15 of the Purchase Agreement is amended and
restated to read in its entirety as follows:
5.15 DESIGNATION OF PURCHASING ENTITIES. Purchaser shall,
as soon as practicable and in no event more than three days after the
date hereof, notify the Sellers of the identity of the purchasing
entity with respect to the POC Companies, the WilPro Interest, the
Harwat Interest and the OSI Assets. Hanover Cayman, Limited, a
Cayman Islands company that is wholly owned by Purchaser, shall be
the buyer of the WilPro Interest. The Sellers agree that, up to ten
days prior to the Closing, the Purchaser may change these purchasing
entities, subject to the Sellers consent (which will not be
unreasonably withheld).
2
6. The lead in to Article VI of the Purchase Agreement is
amended and restated to read in its entirety as follows:
The obligations of Purchaser to purchase the Schlumberger
Equity Interests and the OSI Assets and complete the Closing at the
Closing Date are, at the option of Purchaser, subject to satisfaction
of each of the following conditions precedent on or before the
Closing Date (Purchaser and Hanover agree that there is no financing
or board approval conditions to their obligations to purchase the POC
Shares, the Harwat Interest or the WilPro Interest at the Closing
Date):
7. The lead in to Article VII of the Purchase Agreement is
amended and restated to read in its entirety as follows:
The obligation of each Seller, as applicable, to sell the
Schlumberger Equity Interests and the OSI Assets and complete the
Closing at the Closing Date are, at the option of each Seller,
subject to the satisfaction of each of the following conditions
precedent on or before the Closing Date:
8. Section 8.2(o) of the Purchase Agreement is amended and
restated to read in its entirety as follows:
(o) An executed copy of an asset purchase agreement
effecting the sale of the OSI Assets.
9. Section 8.3 (o) of the Purchase Agreement is amended and
restated to read in its entirety as follows:
(o) An executed copy of an asset purchase agreement
effecting the purchase of the OSI Assets and an executed copy of a
stock purchase agreement effecting the purchase of the Guara Interest.
10. The definition of "Excluded Assets" as set forth in Appendix
I to the Purchase Agreement is amended and restated to read in its entirety
as follows:
"Excluded Assets" shall mean the assets of the POC Entities
which are not to be acquired by Purchaser and which are set forth on
SCHEDULE 1.4 hereto, including, without limitation, the assets set
forth on SCHEDULE 1.4(a) hereto.
11. The definition of "Related Agreement" as set forth in
Appendix I to the Purchase Agreement is amended and restated to read in its
entirety as follows:
"Related Agreement" shall mean the asset purchase agreement
entered into at Closing by the Parties or their respective Affiliates
relating to the acquisition of the OSI Assets.
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12. Schedule 1.5 to the Purchase Agreement is amended by
inserting the following after the phrase "4. The balances shown for the
obligations listed on the attached schedule are in USD (000's) as of May 31,
2001 and represent primarily benefit and tax obligations of Schlumberger" :
"5. Any Liability arising from or relating to the assets on
Schedule 1.4(a); and
6. Any Liability arising on or prior to the Closing Date
relating to the agreements set forth in SCHEDULE 1.5(a) or to the
agreements being assigned pursuant to any agreement set forth on
SCHEDULE 1.5(a)."
13. The definition of Target Net Worth is amended and restated to
read in its entirety as follows:
"Target Net Worth" is equal to the sum of (i) $489,861,833,
which is based on the unaudited financials for the Schlumberger
Equity Interests, excluding (except as set forth in SCHEDULE 1.3(i)
and SCHEDULE 1.3(j)) the Excluded Assets and the Excluded
Liabilities, as of May 31, 2001 and (ii) any gain in excess of
$100,000 realized after May 31, 2001 by the POC Entities in
connection with the termination or cancellation of any customer
contracts.
14. SCHEDULE 1.4(a) to the Purchase Agreement is attached hereto.
15. SCHEDULE 1.5(a) to the Purchase Agreement is attached hereto.
16. The Purchase Agreement, as amended by this Amendment, and all
documents and instruments referred to in the Purchase Agreement constitute
the complete agreement of the Parties with respect to the subject matter
hereof and supercede all prior discussions, negotiations and understandings,
both written and oral.
17. The laws of the State of Texas shall govern the
interpretation, validity and performance of the terms of this Amendment,
regardless of the law that might be applied under principles of conflicts of
law.
18. This Amendment may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
and the same instrument.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed and delivered on August 30, 2001.
SCHLUMBERGER TECHNOLOGY CORPORATION SCHLUMBERGER SURENCO S.A.
By: ________________________________ By: ________________________________
Name: ______________________________ Name: ______________________________
Title: ______________________________ Title: ______________________________
HANOVER COMPRESSOR COMPANY SCHLUMBERGER OILFIELD HOLDINGS LTD.
By: ________________________________ By: ________________________________
Name: ______________________________ Name: ______________________________
Title: ______________________________ Title: ______________________________
HANOVER COMPRESSION LIMITED PARTNERSHIP CAMCO INTERNATIONAL, INC.
By: ________________________________ By: ________________________________
Name: ______________________________ Name: ______________________________
Title: ______________________________ Title: ______________________________
