MEMBERSHIP INTEREST EXCHANGE AGREEMENT
DATED
APRIL 5, 2000
BY AND BETWEEN
TETRA SERVICES, INC.,
AND
BROOKS WELL SERVICING, INC.
MEMBERSHIP INTEREST EXCHANGE AGREEMENT
TABLE OF CONTENTS
Page
----
I. EXCHANGE OF MEMBERSHIP INTERESTS........................................1
1.1 Exchange of Membership Interests..............................1
II. CLOSING................................................................2
2.1 Closing.......................................................2
III. REPRESENTATIONS AND WARRANTIES........................................3
3.1 Representations and Warranties of TSI.........................3
3.2 Representations and Warranties of BROOKS......................8
IV. COVENANTS.............................................................12
4.1 Covenants of Parties.........................................12
V. NONCOMPETITION AND NONSOLICITATION.....................................16
5.1 Covenants of TSI.............................................16
5.2 Covenants of BROOKS..........................................17
5.3 Definition of Territory......................................18
5.4 Injunctive Relief............................................18
5.5 Reasonableness of Covenants..................................18
5.6 Severability of Covenants....................................18
5.7 Independent Covenants........................................18
5.8 Materiality..................................................18
VI. INDEMNITY.............................................................18
6.1 Indemnification by TSI.......................................18
6.2 Indemnification by BROOKS....................................19
6.3 Conditions of Indemnification................................20
6.4 Limitation of Liability......................................21
6.5 Survival.....................................................21
VII. MISCELLANEOUS PROVISIONS.............................................22
7.1 Expenses.....................................................22
7.2 Notice.......................................................22
7.3 Governing Law................................................23
7.4 Entire Agreement; Amendments and Waivers.....................23
7.5 Severability.................................................23
7.6 Headings and Schedules.......................................23
7.7 Assignment; Successors Bound.................................23
7.8 Execution in Counterparts....................................23
Exhibit A - Dawson Freer Lease
Exhibit B - TSI Edinburgh Sublease
Exhibit C - Estoppel Certificate
Exhibit D - Confidentiality Agreement
MEMBERSHIP INTEREST EXCHANGE AGREEMENT
THIS MEMBERSHIP INTEREST EXCHANGE AGREEMENT (this "AGREEMENT") is made
and entered into as of this 5th day of April, 2000, by and between TETRA
Services, Inc., a Texas corporation ("TSI"), and Brooks Well Servicing, Inc., a
Delaware corporation ("BROOKS"). TSI and BROOKS may be from time to time
individually referred to as a "PARTY" or collectively referred to herein as the
"PARTIES."
W I T N E S S E T H:
WHEREAS, TSI is engaged in the business of providing oil and gas frac
tank rental and vacuum truck services throughout the State of Texas and desires
to transfer all of said business to BROOKS (the "FRAC TANK AND VACUUM
BUSINESS"); and
WHEREAS, TSI is the sole member of KVAC, LLC, a Texas limited liability
company (the "TETRA LLC"), which is the owner of all of the operating assets of
the Frac Tank and Vacuum Business;
WHEREAS, BROOKS is engaged in the business of providing oil and gas
well production testing, pipe testing, liquid mud and wireline (slick line)
services throughout the States of Texas and Louisiana and in the Gulf of Mexico
and desires to transfer all of said business to TSI, except for the pipe testing
business and assets located in Caldwell, Texas (the "PRODUCTION AND PIPE TESTING
BUSINESS");
WHEREAS, BROOKS is the sole member of T-Production Testing, LLC, a
Texas limited liability company (the "BROOKS LLC"), which is the owner of all of
the operating assets of the Production and Pipe Testing Business; and
WHEREAS, TSI and BROOKS each desire to exchange and acquire the
respective above-described businesses conducted by TETRA LLC and BROOKS LLC, by
exchanging all of the membership interests held by such Party with the other
Party as herein provided;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
I. EXCHANGE OF MEMBERSHIP INTERESTS
1.1 EXCHANGE OF MEMBERSHIP INTERESTS. Subject to the terms and
conditions contained in this Agreement and in reliance upon the
representations, warranties, covenants and agreements contained in this
Agreement, TSI hereby transfers, assigns and sells to BROOKS all of its
membership interests in and to TETRA LLC (the "TETRA LLC MEMBERSHIP
INTERESTS"), and, in consideration therefor, BROOKS hereby transfers,
assigns and sells to TSI all of its membership interests in and to
BROOKS LLC (the "BROOKS LLC MEMBERSHIP INTERESTS"). The Parties
acknowledge and agree that to the extent available, it is the intent of
the Parties to obtain "like kind exchange" treatment for federal income
tax purposes pursuant to Section 1031 of the Internal Revenue
1
Code of 1986, as amended, (the "CODE") with respect to the particular
assets held by TETRA LLC and BROOKS LLC pursuant to the exchange of
membership interests contemplated herein.
II. CLOSING
2.1 CLOSING. The consummation of the transactions contemplated
by this Agreement (the "CLOSING") occurred at 8:00 p.m., Houston, Texas
time, at the offices of Jenkens & Gilchrist P.C., 1100 Louisiana, Suite
1800, Houston, Texas, on April 5, 2000 (the "CLOSING DATE"). At the
Closing, the following events occurred, each such event under the
control of one Party hereto being a condition precedent to the events
under the control of the other Party, and each such event being deemed
to have occurred simultaneously with the other events:
(a) TRANSFER OF MEMBERSHIP INTERESTS. TSI has
delivered to BROOKS (1) a certificate representing 100% of the
outstanding membership interests of TETRA LLC, and (2) a
certified copy of the Articles of Organization and the
Regulations (and any amendments thereto) of TETRA LLC
evidencing its existence as a single member limited liability
company with a single member. BROOKS has delivered to TSI (1)
a certificate representing 100% of the outstanding membership
interests of BROOKS LLC, and (2) a certified copy of the
Articles of Organization and the Regulations (and any
amendments thereto) of BROOKS LLC evidencing its existence as
a single member limited liability company with a single
member.
(b) EVIDENCE OF RELEASE OF LIENS ON ASSETS. Each of
TSI and BROOKS has delivered to the other Party evidence of
the release of all liens or encumbrances existing with respect
to either Party's membership interest in TETRA LLC and BROOKS
LLC, respectively, and to all of the TETRA LLC Assets (as
defined in Section 3.1(g) herein) and the BROOKS LLC Assets
(as defined in Section 3.2(g) herein), respectively.
(c) CERTIFICATE OF SECRETARY. Each of TSI and BROOKS
has delivered to each other a certificate of their respective
Secretary or equivalent representative, certifying true and
correct copies of their respective articles of incorporation,
bylaws and resolutions duly adopted by the Board of Directors
of such company authorizing the execution, delivery and
performance of this Agreement, each in a form and substance
reasonably satisfactory to the other Party. Each of TSI and
BROOKS has provided to the other Party good standing/existence
certificates for TSI and TETRA LLC, and from BROOKS and
BROOKS, LLC, as the case may be, from appropriate state
authorities of their states of incorporation and formation.
2
(d) RESIGNATIONS. If TETRA LLC or BROOKS LLC has any
officers or managers acting on its respective behalf, such
entity has delivered duly executed resignations of all of its
officers and/or managers.
(e) DELIVERY OF MINUTE BOOKS AND RECORDS. Each of TSI
and BROOKS has delivered to the other Party all minute books,
membership interest transfer books, tax records and other
records with respect to the ownership, operation and business
of TETRA LLC and BROOKS LLC, respectively.
(f) EVIDENCE OF VEHICLE TITLE. At or prior to the
Closing, TSI has delivered to BROOKS true and correct copies
of all of the titles for all of the vehicles owned by TETRA
LLC. At or prior to the Closing, BROOKS has delivered to TSI
true and correct copies of all of the titles for all of the
vehicles owned by BROOKS LLC.
(g) LEASES AND SUBLEASES. DAWSON PRODUCTION PARTNERS,
L.P., an affiliate of BROOKS, and TSI shall have entered into
the lease in the form attached hereto as EXHIBIT "A" (the
"DAWSON FREER LEASE") and have delivered a fully-executed
version of the DAWSON Freer Lease to the Parties. BROOKS and
TSI shall have entered into the sublease in the form attached
hereto as EXHIBIT "B" (the "TSI EDINBURGH SUBLEASE") and have
delivered a fully-executed version of the TSI Edinburgh
Sublease to the Parties. TSI shall also obtain and deliver to
BROOKS an estoppel certificate in substantially the form
attached hereto as EXHIBIT "C" for the TSI lease in Edinburgh,
Texas.
(h) LEGAL OPINIONS. At the Closing, legal counsel for
TSI shall have delivered a legal opinion in form and substance
satisfactory to BROOKS. At the Closing, legal counsel for
BROOKS shall have delivered a legal opinion in form and
substance satisfactory to TSI.
III. REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF TSI. TSI hereby
represents and warrants to BROOKS as of the Closing Date as follows:
(a) ORGANIZATION. TSI is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Texas, and has the requisite corporate
power to carry on its business as now being conducted.
(b) POWER AND AUTHORITY; ENFORCEABILITY. TSI has all
requisite corporate power to enter into this Agreement and to
perform its obligations hereunder. This Agreement has been
duly authorized by all necessary corporate action on the part
of TSI, executed and delivered on behalf of TSI, and, assuming
due authorization, execution and delivery by BROOKS,
constitutes a legal, valid and binding obligation of TSI,
3
enforceable in accordance with its terms, except that (i) such
enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or
affecting creditors' rights generally and (ii) the remedy of
specific performance and injunction and other forms of
equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding
therefor may be brought.
(c) LIMITED LIABILITY COMPANY EXISTENCE AND
QUALIFICATION OF TETRA LLC. TETRA LLC is a limited liability
company duly organized, validly existing and in good standing
under the laws of the State of Texas and has the requisite
power to own, operate and lease its properties and to carry on
its business as presently conducted. TETRA LLC has no
subsidiaries and has no ownership or equity interest in any
individual, partnership, joint venture, corporation, limited
liability company, bank, trust or unincorporated organization
(a "PERSON").
(d) CAPITALIZATION AND OWNERSHIP. TSI is the 100%
owner of all of the membership interests of TETRA LLC and no
other membership interests or equity interests are authorized
or outstanding. All of such membership interests are fully
paid and non-assessable and were not issued in violation of
any preemptive or other rights of any Person to acquire
securities of TETRA LLC. TSI is the lawful owner of all the
outstanding TETRA LLC Membership Interests, with full right,
power and authority to sell and transfer the membership
interests, free and clear of any and all security interests,
liens, proxies, member agreements, voting agreements, voting
trusts, encumbrances and adverse claims, to BROOKS pursuant to
the provisions of this Agreement. TSI has no other commitment,
plan or arrangement to issue or sell any of the TETRA LLC
Membership Interests or to issue or sell any options, warrants
or other securities that are convertible or exchangeable for
such membership interests.
(e) NO CONFLICTS. Neither the execution and delivery
of this Agreement nor the consummation of the transactions
contemplated herein (i) will conflict with or result in a
breach, default or violation of (A) any of the terms,
provisions or conditions of the Articles of Incorporation or
Bylaws of TSI or the Articles of Organization or Regulations
of TETRA LLC, or (B) any material agreement, document,
instrument, judgment, decree, order, governmental permit,
certificate or license to which TSI or TETRA LLC is a party or
to which they are subject or by which their property is bound,
(ii) will result in the creation of any lien, charge or other
encumbrance on any material property or asset of TETRA LLC, or
(iii) will require TSI or TETRA LLC to obtain the consent of
any third party.
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(f) NO BUSINESS ACTIVITIES. With the exception of
ownership of the operating assets of the Frac Tank and Vacuum
Business, TETRA LLC has not engaged in any business
activities.
(g) ASSETS; TITLE TO ASSETS. Schedule 3.1(g) includes
a complete and accurate list or description of all assets (the
"TETRA LLC ASSETS") owned by TETRA LLC. TETRA LLC has good and
marketable title to all of the TETRA LLC Assets, in each case
free and clear of any lien, encumbrance, mortgage, deed of
trust, pledge or other similar security interest ("LIEN"),
except Liens for property and ad valorem taxes, assessments
and other applicable governmental charges not due and payable.
TETRA LLC does not own or lease, and has never owned or
leased, any real property. SUBJECT ONLY TO THE EXPRESS
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT,
ALL OF THE TETRA LLC ASSETS ARE TRANSFERRED "AS-IS",
"WHERE-IS" AND "WITH ALL FAULTS". TSI MAKES NO REPRESENTATIONS
OR WARRANTIES AS TO THE CONDITION, MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OF ANY OF THE TETRA LLC ASSETS.
(h) INTELLECTUAL PROPERTY. Other than the name "TETRA
LLC", TETRA LLC does not own or possess any licenses or other
rights to use any patents, patent applications, trademarks,
copyrights, service marks or trade names.
(i) INSURANCE. Liability and casualty insurance
coverage is maintained for the TETRA LLC Assets and such
coverage is adequate for the repair and replacement of such
TETRA LLC Assets. Such insurance coverage has continued
through the Closing Date.
(j) TAX MATTERS. All federal, state and other tax
returns and reports required to be filed by or on behalf of
TETRA LLC and its predecessors have been duly filed, except
those for which extensions have been obtained. All taxes and
other assessments and levies (including all interest and
penalties) and all installments of estimated taxes required to
be paid, withheld or collected by TETRA LLC have been duly
paid, withheld or collected, as the case may be, and the same
have been paid over to the proper governmental agencies or
segregated and set aside for such payment as required by law.
TETRA LLC has not received any notice of an assessment,
deficiency notice, 30-day letter, or similar notice with
respect to sales tax or other taxes from any taxing authority
with respect to any taxable period ending on or before the
Closing Date. TETRA LLC has not executed or filed with any
taxing authority any agreement extending the period for
assessment or collection of any taxes or made any election or
taken any action to jeopardize the status of TETRA LLC as a
disregarded entity for U. S. federal income tax purposes.
TETRA LLC is not a party to any pending action or proceeding
5
by any governmental authority for assessment or collection of
taxes and no claim for assessment or collection of taxes has
been asserted against it.
(k) CUSTOMERS. Schedule 3.1(k) contains and true and
correct listing of all customers of the Frac Tank and Vacuum
Business since January 1, 1999. Except as set forth on
Schedule 3.1(k), there has not been any material adverse
change in the business relationship of TSI or TETRA LLC with
any customer or supplier listed on such schedule.
(l) EMPLOYEE MATTERS. TETRA LLC does not have and
has never had any employees. TETRA LLC does not sponsor or
contribute to, has never sponsored or contributed to, and has
never been required to contribute to, any "employee benefit
plan", as defined by Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), including
without limitation, any employee welfare benefit plan, any
employee pension benefit plan, or any other plan, program or
arrangement for the benefit of, relating to or with any
employee of any Person.
(m) LEGAL COMPLIANCE. TSI is conducting and has,
since October 1, 1998, and to its knowledge, at all times on
or prior thereto, conducted the Frac Tank and Vacuum Business
in compliance with all applicable federal, state, local and
foreign laws, regulations and orders ("LAWS AND REGULATIONS"),
including without limitation the rules and regulations of the
United States Occupational Safety and Health Administration
and the United States Environmental Protection Agency. TSI has
not since October 1, 1998, to its knowledge, at any time on or
prior thereto, received any notice or communication from any
Governmental Entity alleging noncompliance with any applicable
Laws and Regulations.
(n) ENVIRONMENTAL COMPLIANCE. TSI has, to its
knowledge, operated the Frac Tank and Vacuum Business and the
TETRA LLC Assets in material compliance with all applicable
federal, state, county and local environmental laws, statutes,
regulations, ordinances and administrative agency orders
("ENVIRONMENTAL LAWS") and to TSI's knowledge, there are no
current or pending civil or administrative enforcement
actions, penalties, judgments, costs or liabilities against
the Frac Tank and Vacuum Business or the TETRA LLC Assets
resulting from any violation of Environmental Laws. TSI has
provided BROOKS with all information in TSI's possession or
control relating to the existence of contamination resulting
from the release or disposal of hazardous substances, solid or
hazardous wastes, or petroleum substances at, in, on or under
any facility or property leased, owned or used in connection
with the Frac Tank and Vacuum Business or the TETRA LLC Assets
and any conditions existing as a result of such releases or
disposal that could substantially interfere with the use of
said business or assets.
6
(o) LITIGATION, JUDGMENTS, ETC. Except as described
on Schedule 3.1(o), there are no actions, suits,
investigations or proceedings relating to or which may have a
material adverse affect on the Frac Tank and Vacuum Business
to which TSI or the TETRA LLC is a party pending in any court
or before or by any federal, state or other governmental
department, commission, agency or other instrumentality
(excluding any rule making, investigation, or similar
proceeding of general applicability and any appeal or petition
for review relating thereto), or before any arbitrator
("PROCEEDINGS"), and TSI has not received written notice, or
to TSI's knowledge any oral notice, threatening any such
matter. TETRA LLC is not a party to any Proceeding, and, to
TSI's knowledge, no facts exist which could result in TETRA
LLC being made a party to any Proceeding. Neither TSI nor
TETRA LLC is in default with respect to any judgment, order,
writ, injunction, decree or award applicable to it of any
court or other governmental instrumentality or arbitrator
having jurisdiction over it.
(p) MINUTE BOOK AND CHARTER DOCUMENTS. The minute
book of TETRA LLC that has been delivered to BROOKS
constitutes the sole minute book of TETRA LLC and contains a
complete and accurate record of all actions of the sole member
of TETRA LLC. TSI has delivered to BROOKS true and correct
copies of the Articles of Organization and Regulations of
TETRA LLC as currently in effect.
(q) DISCLOSURE OF FACTS. No representation, warranty
or statement by TSI in this Agreement or in TSI's disclosure
schedules referred to herein contains any untrue statement of
material fact, or omits to state a fact necessary in order to
make such representation, warranty or statement not materially
misleading. There are no facts peculiar to TSI or TETRA LLC
that TSI has not disclosed to BROOKS that materially adversely
affect, or insofar as TSI can reasonably foresee, would
materially adversely affect, the Frac Tank and Vacuum Business
or the TETRA LLC Assets if such business or assets were to be
continued to be owned by TSI.
(r) NO BROKERS OR FINDERS. Except as set forth on
Schedule 3.1(r), TSI has not entered into any agreement,
understanding or arrangement with any broker or finder, and
has not incurred any brokerage or finder's fees or agent's
commissions or other similar charges to any person or entity
with respect to the transactions contemplated by this
Agreement.
(s) INTERCOMPANY MATTERS. Except as otherwise set
forth on Schedule 3.1(s), there are no contracts, loans or
other transactions existing as of the Closing Date between
TETRA LLC and TSI or any of its affiliated companies, and all
intercompany accounts, if any, will be adjusted to zero at or
prior to the Closing.
7
(t) INVESTOR REPRESENTATIONS. TSI is acquiring the
membership interests in BROOKS LLC for its own account, for
investment purposes, and not with a view to (or for sale in
connection with) any distribution of such securities.
3.2 REPRESENTATIONS AND WARRANTIES OF BROOKS. BROOKS hereby
represents and warrants to TSI as of the Closing Date as follows:
(a) ORGANIZATION. BROOKS is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Delaware, and has the requisite corporate
power to carry on its business as now being conducted.
(b) POWER AND AUTHORITY; ENFORCEABILITY. BROOKS has
all requisite corporate power to enter into this Agreement and
to perform its obligations hereunder. This Agreement has been
duly authorized by all necessary corporate action on the part
of BROOKS, executed and delivered on behalf of BROOKS, and,
assuming due authorization, execution and delivery by BROOKS,
constitutes a legal, valid and binding obligation of BROOKS,
enforceable in accordance with its terms, except that (i) such
enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or
affecting creditors' rights generally and (ii) the remedy of
specific performance and injunction and other forms of
equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding
therefor may be brought.
(c) LIMITED LIABILITY COMPANY EXISTENCE AND
QUALIFICATION OF BROOKS LLC. BROOKS LLC is a limited liability
company duly organized, validly existing and in good standing
under the laws of the State of Texas and has the requisite
power to own, operate and lease its properties and to carry on
its business as presently conducted. BROOKS LLC has no
subsidiaries and has no ownership or equity interest in any
individual, partnership, joint venture, corporation, limited
liability company, bank, trust or unincorporated organization
(a "PERSON").
(d) CAPITALIZATION AND OWNERSHIP. BROOKS is the 100%
owner of all of the membership interests of BROOKS LLC and no
other membership interests or equity interests are authorized
or outstanding. All of such membership interests are fully
paid and non-assessable and were not issued in violation of
any preemptive or other rights of any Person to acquire
securities of BROOKS LLC. BROOKS is the lawful owner of all
the outstanding BROOKS LLC Membership Interests, with full
right, power and authority to sell and transfer the membership
interests, free and clear of any and all security interests,
liens, proxies, member agreements, voting agreements, voting
trusts, encumbrances and adverse claims, to BROOKS pursuant to
the provisions of this Agreement. BROOKS has no
8
other commitment, plan or arrangement to issue or sell any of
the BROOKS LLC Membership Interests or to issue or sell any
options, warrants or other securities that are convertible or
exchangeable for such membership interests.
(e) NO CONFLICTS. Neither the execution and delivery
of this Agreement nor the consummation of the transactions
contemplated herein (i) will conflict with or result in a
breach, default or violation of (A) any of the terms,
provisions or conditions of the Articles of Incorporation or
Bylaws of BROOKS or the Articles of Organization or
Regulations of BROOKS LLC, or (B) any material agreement,
document, instrument, judgment, decree, order, governmental
permit, certificate or license to which BROOKS or BROOKS LLC
is a party or to which they are subject or by which their
property is bound, (ii) will result in the creation of any
lien, charge or other encumbrance on any material property or
asset of BROOKS LLC, or (iii) will require BROOKS or BROOKS
LLC to obtain the consent of any third party.
(f) NO BUSINESS ACTIVITIES. With the exception of
ownership of the operating assets of the Production and Pipe
Testing Business, BROOKS LLC has not engaged in any business
activities.
(g) ASSETS; TITLE TO ASSETS. Schedule 3.2(g) includes
a complete and accurate list or description of all assets (the
"BROOKS LLC ASSETS") owned by BROOKS LLC. BROOKS LLC has good
and marketable title to all of the BROOKS LLC Assets, in each
case free and clear of any lien, encumbrance, mortgage, deed
of trust, pledge or other similar security interest ("LIEN"),
except Liens for property and ad valorem taxes, assessments
and other applicable governmental charges not due and payable.
BROOKS does not own or lease, and has never owned or leased,
any real property. SUBJECT ONLY TO THE EXPRESS REPRESENTATIONS
AND WARRANTIES CONTAINED IN THIS AGREEMENT, ALL OF THE BROOKS
LLC ASSETS ARE TRANSFERRED "AS-IS", "WHERE-IS" AND "WITH ALL
FAULTS". BROOKS MAKES NO REPRESENTATIONS OR WARRANTIES AS TO
THE CONDITION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OF ANY OF THE BROOKS LLC ASSETS.
(h) INTELLECTUAL PROPERTY. Other than the name
"BROOKS LLC", BROOKS LLC does not own or possess any licenses
or other rights to use any patents, patent applications,
trademarks, copyrights, service marks or trade names.
(i) INSURANCE. Liability and casualty insurance
coverage is maintained for the BROOKS LLC Assets and such
coverage is adequate for the repair and replacement of such
BROOKS LLC Assets. Such insurance coverage has continued
through the Closing Date.
9
(j) TAX MATTERS. All federal, state and other tax
returns and reports required to be filed by or on behalf of
BROOKS LLC and its predecessors have been duly filed, except
those for which extensions have been obtained. All taxes and
other assessments and levies (including all interest and
penalties) and all installments of estimated taxes required to
be paid, withheld or collected by BROOKS LLC have been duly
paid, withheld or collected, as the case may be, and the same
have been paid over to the proper governmental agencies or
segregated and set aside for such payment as required by law.
BROOKS LLC has not received any notice of an assessment,
deficiency notice, 30-day letter, or similar notice with
respect to sales tax or other taxes from any taxing authority
with respect to any taxable period ending on or before the
Closing Date. BROOKS LLC has not executed or filed with any
taxing authority any agreement extending the period for
assessment or collection of any taxes or made any election or
taken any action to jeopardize the status of BROOKS LLC as a
disregarded entity for U. S. federal income tax purposes.
BROOKS LLC is not a party to any pending action or proceeding
by any governmental authority for assessment or collection of
taxes and no claim for assessment or collection of taxes has
been asserted against it.
(k) CUSTOMERS. SCHEDULE 3.2 (k) contains a true and
correct listing of all customers of the Production and Pipe
Testing Business since January 1, 1999. Except as set forth on
Schedule 3.1(k), there has not been any material adverse
change in the business relationship of BROOKS or BROOKS LLC
with any customer or supplier listed on such schedule.
(l) EMPLOYEE MATTERS. BROOKS LLC does not have and
has never had any employees. BROOKS LLC does not sponsor or
contribute to, has never sponsored or contributed to, and has
never been required to contribute to, any "employee benefit
plan", as defined by Section 3(3) of the ERISA, including
without limitation, any employee welfare benefit plan, any
employee pension benefit plan, or any other plan, program or
arrangement for the benefit of, relating to or with any
employee of any Person.
(m) LEGAL COMPLIANCE. BROOKS is conducting and has,
since October 1, 1998, and to its knowledge, at all times on
or prior thereto, conducted the Production and Pipe Testing
Business in compliance with all applicable Laws and
Regulations, including, without limitation, the rules and
regulations of the United States Occupational Safety and
Health Administration and the United States Environmental
Protection Agency. BROOKS has not since October 1, 1998, to
its knowledge, at any time on or prior thereto, received any
notice or communication from any Governmental Entity alleging
noncompliance with any applicable Laws and Regulations.
10
(n) ENVIRONMENTAL COMPLIANCE. BROOKS has, to its
knowledge, operated the Production and Pipe Testing Business
and the BROOKS LLC Assets in material compliance with all
applicable federal, state, county and local environmental
laws, statutes, regulations, ordinances and administrative
agency orders ("ENVIRONMENTAL LAWS") and to BROOKS's
knowledge, there are no current or pending civil or
administrative enforcement actions, penalties, judgments,
costs or liabilities against the Production and Pipe Testing
Business resulting from any violation of Environmental Laws.
BROOKS has provided TSI with all information in BROOKS's
possession or control relating to the existence of
contamination resulting from the release or disposal of
hazardous substances, solid or hazardous wastes, or petroleum
substances at, in, on or under any facility or property
leased, owned or used in connection with the Production and
Pipe Testing Business or the BROOKS LLC Assets and any
conditions existing as a result of such releases or disposal
that could substantially interfere with the use of said
business or assets.
(o) LITIGATION, JUDGMENTS, ETC. Except as described
on Schedule 3.2(o), there are no actions, suits,
investigations or proceedings relating to or which may have a
material adverse effect on the Production and Pipe Testing
Business to which BROOKS or the BROOKS LLC is a party pending
in any court or before or by any federal, state or other
governmental department, commission, agency or other
instrumentality (excluding any rule making, investigation, or
similar proceeding of general applicability and any appeal or
petition for review relating thereto), or before any
arbitrator ("PROCEEDINGS"), and BROOKS has not received
written notice, or to BROOKS's knowledge any oral notice,
threatening any such matter. BROOKS LLC is not a party to any
Proceeding, and, to BROOKS's knowledge, no facts exist which
could result in BROOKS LLC being made a party to any
Proceeding. Neither BROOKS nor BROOKS LLC is in default with
respect to any judgment, order, writ, injunction, decree or
award applicable to it of any court or other governmental
instrumentality or arbitrator having jurisdiction over it.
(p) MINUTE BOOK AND CHARTER DOCUMENTS. The minute
book of BROOKS LLC that has been delivered to TSI constitutes
the sole minute book of BROOKS LLC and contains a complete and
accurate record of all actions of the sole member of BROOKS
LLC. BROOKS has delivered to TSI true and correct copies of
the Articles of Organization and Regulations of BROOKS LLC as
currently in effect.
(q) DISCLOSURE OF FACTS. No representation, warranty
or statement by BROOKS in this Agreement or in BROOKS's
disclosure schedules referred to herein contains any untrue
statement of material fact, or omits to state a fact necessary
in order to make such representation,
11
warranty or statement not materially misleading. There are no
facts peculiar to BROOKS or BROOKS LLC that BROOKS has not
disclosed to TSI that materially adversely affect, or insofar
as BROOKS can reasonably foresee, would materially adversely
affect, the Production and Pipe Testing Business or the
BROOKS LLC Assets if such business or assets were to be
continued to be owned by BROOKS.
(r) NO BROKERS OR FINDERS. Except as set forth on
Schedule 3.2(r), BROOKS has not entered into any agreement,
understanding or arrangement with any broker or finder, and
has not incurred any brokerage or finder's fees or agent's
commissions or other similar charges to any person or entity
with respect to the transactions contemplated by this
Agreement.
(s) INTERCOMPANY MATTERS. Except as otherwise set
forth on Schedule 3.2(s), there are no contracts, loans or
other transactions existing as of the Closing Date between
BROOKS LLC and BROOKS or any of its affiliated companies, and
all intercompany accounts, if any, will be adjusted to zero at
or prior to the Closing.
(t) INVESTOR REPRESENTATIONS. BROOKS is acquiring the
membership interests in the TETRA LLC for its own account, for
investment purposes, and not with a view to (or for sale in
connection with) any distribution of such securities.
IV. COVENANTS
4.1 COVENANTS OF PARTIES. The Parties hereby covenant and
agree as follows:
(a) ACCESS. Each of TSI and BROOKS acknowledges that
it has permitted the other Party and its authorized employees,
agents, accountants, legal counsel and other representatives
to have access to the books, records, facilities, properties,
personnel and officers of TSI and TETRA LLC, or BROOKS and
BROOKS LLC, as the case may be, and has caused the employees,
legal counsel, accountants, engineers and other
representatives of such companies to be available to the
reviewing Party for such purposes.
(b) PRESS RELEASES. None of TSI, BROOKS or their
respective affiliates shall issue or cause publication of any
press release or other announcement or public communication
with respect to this Agreement or the transactions
contemplated hereby without the prior written consent of the
other Party hereto, which consent shall not unreasonably be
withheld; PROVIDED THAT, nothing herein shall prohibit any
Party from issuing or causing publication of any such press
release,
12
announcement or public communication to the extent that such
Party reasonably determines that such action is required by
law.
(c) CONFIDENTIAL NATURE OF INFORMATION. Each of TSI
and BROOKS shall treat in confidence all confidential
documents, materials and other information which it shall have
obtained regarding the other Party during the course of the
negotiations leading to the execution of this Agreement, in
its due diligence investigation, and in the preparation of
agreements and other documents relating to the consummation of
the transactions contemplated by this Agreement, as set forth
in the Confidentiality Agreement dated February 4, 2000,
between the Tetra Technologies, Inc. and Key Energy Services,
Inc., a copy of which is attached hereto as EXHIBIT "D".
(d) PARTY NAMES. Within ninety (90) days after the
Closing, (i) BROOKS shall undertake all steps necessary to
change the name of TETRA LLC to eliminate any reference to the
name of TETRA, and shall not permit TETRA LLC to use the TETRA
name or any trademarks, logos or other materials bearing the
TETRA name, trademarks or logos, and (ii) TSI shall undertake
all steps necessary to change the name of TSI to eliminate any
reference to the name of TSI or KEY, and shall not and shall
not permit BROOKS LLC to use the BROOKS or KEY name and any
trademarks, logos or other materials bearing the BROOKS or KEY
name, trademarks or logos.
(e) TAX MATTERS. BROOKS shall file or cause to be
filed all required tax returns relating to TETRA LLC and TSI
shall file or cause to be filed all required Tax Returns
relating to BROOKS LLC, in each case through the Closing Date.
Each of TSI and BROOKS shall promptly provide the other Party
with copies of any such filings.
(f) TAX TREATMENT. TSI and BROOKS agree to use all
reasonable efforts to effect "like kind exchange" treatment
for federal tax purposes pursuant to Section 1031 of the Code
with respect to the TETRA LLC Assets and BROOKS LLC Assets
transferred pursuant to the exchange of membership interests
contemplated herein.
(g) POST-CLOSING TAX COOPERATION AND ACCESS. From and
after the Closing, each Party shall make available to the
other Party, and to any Federal, state, municipal or local
government, governmental authority, regulatory or
administrative agency, governmental commission, department,
board, agency, governmental commission, department, board,
agency or instrumentality, court, tribunal, arbitrator or
arbitral body responsible for the imposition or collection of
any taxes ("TAXING AUTHORITY") as reasonably requested by such
other Party, all information, records or documents relating to
tax liabilities or potential tax liabilities of or relating to
the Frac Tank and Vacuum Business and the Production and
13
Pipe Testing Business, as the case may be, for all periods
prior to or including the Closing Date and shall preserve all
such information, records and documents until the expiration
of any applicable statute of limitations or extensions
thereof. Each Party shall prepare and provide to the other
Party any federal, state, local or foreign tax data and other
information, including such information required by the other
Party's customary tax and accounting questionnaires, requested
by the other Party for the other Party's use in preparing its
tax returns for any period prior to or including the Closing
Date. Such tax data and other information shall be prepared by
each Party and provided to the other Party within sixty (60)
days after any request for such data or other information.
Each Party shall bear its own expenses in complying with the
foregoing provisions.
(h) EMPLOYEES. Prior to Closing, (i) TSI will
terminate all of its employees employed in the Frac Tank and
Vacuum Business as set forth on Schedule 4.1(h)(i) and (ii)
BROOKS will terminate all of its employees employed in the
Production and Pipe Testing Business as set forth on Schedule
4.1(h)(ii). For purposes herein, all of the employees listed
on Schedules 4.1(h)(i) and (ii) shall be referred to herein as
"FORMER EMPLOYEES". After Closing, each of TSI and BROOKS
shall, in its sole and absolute discretion, be entitled to
offer employment to the other Party's Former Employees on such
terms as the offering Party deems desirable. Without
limitation, neither TSI nor BROOKS will be responsible for, or
have any liability with respect to, the other Party's (i)
benefits being provided or promised to be provided to the
Former Employees, or any other matters relating to such Former
Employees which arose prior to the Closing, (ii) employee
benefit plans, funds, or arrangements, including, without
limitation, "employee welfare benefit plans" as defined in
Section 3(1) of ERISA, and (iii) deferred compensation,
vacation, severance, stock option, employee stock purchase, or
similar plan, program or arrangement. After the Closing, both
TSI and BROOKS expressly reserve the right to refuse to offer
employment to any Former Employee for any reason which, in its
sole discretion, it deems appropriate; and, without
limitation, nothing in this Agreement shall be construed to
grant or establish any enforceable rights, legal or equitable,
in any Former Employee with respect to any person other than
his or her former employer on or after the Closing. If either
TSI or BROOKS offer employment to any Former Employee, such
employment will not create any obligation or commitment on the
part of the offering Party to honor any agreements,
commitments or representations of any kind made to such Former
Employee by their former employer herein. Without limiting the
generality of the forgoing, each former employer herein shall
retain all responsibility and liability for compliance with
the requirements of Code Section 4980B ("COBRA") through the
Closing Date, including, without limitation, the obligation to
provide continuation coverage for its Former Employees for the
period required by COBRA, and TSI and BROOKS each represent
that they have
14
no current intention to terminate their "group health plan"
as defined in Section 4980B(g)(2) of the Code, and will
indemnify the other for the excess of aggregate benefits paid
to Former Employees of the former employer from the other's
group health plan, over the aggregate premiums collected with
respect to such Former Employees under the other's group
health plan, by reason of being required to provide COBRA
coverage to those Former Employees of the former employer who
are not employed by the other following the Closing.
(i) INSURANCE MATTERS. TSI hereby acknowledges that
casualty insurance has been maintained with respect to the
TETRA LLC Assets and the Frac Tank and Vacuum Business through
and until the date of Closing. BROOKS hereby acknowledges that
casualty insurance has been maintained with respect to the
BROOKS LLC Assets and the Production and Pipe Testing Business
through and until the Closing. Each Party agrees that any and
all proceeds under any such insurance policies received as
compensation or indemnity for damages to any of the TETRA LLC
Assets or BROOKS LLC Assets (whether held at such time or not)
that occurred after November 15, 1999 shall be included as an
asset of such company and promptly paid over to TSI or BROOKS,
as the case may be, upon receipt. Each of TSI and BROOKS will
be responsible for obtaining their own insurance coverage of
their respective acquired assets from and after the Closing.
(j) TRANSITION PERIOD ACCESS. Each of TSI and BROOKS
shall for a period of sixty (60) days following the Closing
Date (the "TRANSITION PERIOD"), without further consideration,
permit the other Party to have reasonable access to their
respective facilities for the purpose of identifying, marking,
moving, removing or any other related activity in connection
with the exchange of the TETRA LLC ASSETS and BROOKS LLC
Assets contemplated herein.
(k) TRANSFER OF JOBS IN PROGRESS. Attached hereto as
SCHEDULE 4.1(k)-(i) is a list of all jobs utilizing TETRA LLC
Assets that are in progress as of the Closing Date (the "TETRA
JOBS"). Attached hereto as SCHEDULE 4.1(k)-(ii) is a list of
all jobs utilizing BROOKS LLC Assets that are in progress as
of the Closing Date (the "BROOKS JOBS"). All work performed by
TSI or its affiliates on the TETRA Jobs, or by BROOKS or its
affiliates on the BROOKS Jobs, prior to 12:01 a.m., Houston
time, on April 5, 2000 (the "EFFECTIVE TIME") shall be for the
account of TSI or BROOKS, as the case may be, and such Party
may invoice the applicable customer for such work in
accordance with its customary invoicing procedures. All work
performed on any jobs in progress after the Effective Time
shall be for the account of the Party, TSI or BROOKS, as the
case may be, that acquired the membership interests of the
limited liability company that is the owner of the TETRA LLC
Assets or the BROOKS LLC Assets involved in such work.
15
FURTHER ASSURANCE. If, at any time after the Closing, either TSI or
BROOKS shall consider that any further assignments or assurances or any other
acts or things are necessary or desirable to vest, perfect or confirm, of record
or otherwise, in or to the membership interests in the BROOKS LLC or the TETRA
LLC, as the case may be, or title to the BROOKS LLC Assets or the TETRA LLC
Assets, as the case may be, the other Party shall execute and deliver all such
deeds, assignments and assurances, and do all such other things as may be
reasonably requested by the requesting Party or and as may be necessary and
proper to vest, perfect or confirm title to such membership interests or assets
in or to the requesting Party and otherwise to carry out the purposes of this
Agreement. Within sixty (60) days after the Closing Date, the Parties agree to
use their good faith efforts to jointly classify the BROOKS LLC Assets and TETRA
LLC Assets for the purpose of achieving, to the maximum extent possible, "like
kind" non-recognition treatment for such assets under Section 1031 of the Code.
TSI and BROOKS further agree to use their respective best efforts to cause the
transfer of all vehicle titles comprising a part of the TETRA LLC Assets and the
BROOKS LLC Assets, respectively, to be issued and original titles in the name of
such entity to be delivered to the other Party before May 1, 2000. TSI shall be
responsible for transferring all TETRA LLC titles, and BROOKS shall be
responsible for transferring all BROOKS LLC titles. Neither Party shall be
obligated to deliver completed titles to the other Party until such other Party
has confirmed in writing that it possesses all original titles, free and clear
of liens, showing TETRA LLC or BROOKS LLC, as the case may be, as the owner of
record of each subject vehicle.
V. NONCOMPETITION AND NONSOLICITATION
5.1 COVENANTS OF TSI. TSI, together with its parent and
affiliates, agree that for a period of five (5) years following the
Closing Date, it shall not directly or indirectly, through its parent
or any affiliate, without the prior express written consent of BROOKS:
(a) engage in the business of providing frac tank
rental or vacuum truck services for the oil and gas industry
within the Territory (as defined below);
(b) knowingly call upon any person who is, at that
time, an employee of BROOKS or its parent entities or any
other BROOKS affiliate, in a managerial capacity for the
purpose or with the intent of enticing such employee away from
or out of the employ of BROOKS or its parent or any such
affiliate; or
(c) promote or assist, financially or otherwise
(including, without limitation, lending, guaranteeing loans or
otherwise providing financial assurance in any way), any
person, firm, partnership, corporation or other entity
whatsoever to do any of the above.
16
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit TSI or its parent or any TSI affiliate from, directly or indirectly,
(i) acquiring an interest in or any investment in any business or entity that
derives five percent (5%) or less of its gross revenues from the business of
frac tank rental or vacuum truck services within the Territory so long as the
portion or portions of the acquired or invested business or entity that derives
revenues from such business within the Territory is sold or otherwise divested
within eighteen (18) months after the date of such acquisition or investment,
(ii) engaging in the business of providing frac tank rental and vacuum truck
services outside of the Territory or (iii) utilizing vacuum trucks solely in
connection with plug and abandonment services performed by TSI or its
affiliates.
5.2 COVENANTS OF BROOKS. BROOKS, together with its parent and
affiliates, agree that for a period of five (5) years following the
Closing Date, it shall not directly or indirectly, through its parent
or any BROOKS affiliate, without the prior express written consent of
TSI:
(a) engage in the business of providing well
production testing, pipe testing, liquid mud and wireline
(slick line) services for the oil and gas industry within the
Territory, except that TSI acknowledges and agrees that BROOKS
is currently performing pipe testing services out of its
facility in Caldwell, Texas and can continue to perform such
pipe testing services outside the Territory after Closing;
(b) knowingly call upon any person who is, at that
time, an employee of TSI or its parent entities or any other
TSI affiliate, in a managerial capacity for the purpose or
with the intent of enticing such employee away from or out of
the employ of TSI or its parent or any such affiliate; or
(c) promote or assist, financially or otherwise
(including, without limitation, lending, guaranteeing loans or
otherwise providing financial assurance in any way), any
person, firm, partnership, corporation or other entity
whatsoever to do any of the above.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit BROOKS or its parent or any BROOKS affiliate from, directly or
indirectly, (i) acquiring an interest in or any investment in any business or
entity that derives five percent (5%) or less of its gross revenues from the
business of well production testing, pipe, liquid mud and wireline (slick line)
services within the Territory so long as the portion or portions of the acquired
or invested business or entity that derives revenues from such business is sold
or otherwise divested within eighteen (18) months after the date of such
acquisition or investment, (ii) engaging in the business of providing well
production testing, pipe testing, liquid mud and wireline (slick line) services
outside the Territory or (iii) marketing, selling or reselling any liquid mud
products of TSI or any TSI affiliate in accordance with a distribution or
reseller agreement between such parties.
17
5.3 DEFINITION OF TERRITORY. For purposes of this Article V,
the term "TERRITORY" shall mean the geographic area as more
particularly described on SCHEDULE 5.3 attached hereto.
5.4 INJUNCTIVE RELIEF. Because of the difficulty of measuring
economic losses to the beneficiaries of the foregoing covenants as a
result of a breach, and because of the immediate and irreparable damage
that would be caused to such beneficiaries for which they would have no
other adequate remedy, each of TSI and BROOKS agree that in the event
of breach by either Party of the applicable covenant, such covenant may
be enforced by the non-breaching Party by, without limitation,
injunctions and restraining orders.
5.5 REASONABLENESS OF COVENANTS. It is agreed by the Parties
that the foregoing covenants in this Article V impose a reasonable
restraint on the TSI and BROOKS, as the case may be, in light of the
activities and business of the other Party on the date of the execution
of this Agreement and future plans of the other Party.
5.6 SEVERABILITY OF COVENANTS. The covenants in this Article V
are severable and separate, and the unenforceability of any specific
covenant shall not affect the provisions of any other covenants.
Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth
are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
5.7 INDEPENDENT COVENANTS. All of the covenants in this
Article V shall be construed as an agreement independent of any other
provision of this Agreement, and the existence of any claim or cause of
action of the obligor under the foregoing covenants against the
enforcing Party, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the enforcing
Party of such covenants.
5.8 MATERIALITY. Each of TSI and BROOKS hereby agrees that the
foregoing noncompetition covenants are a material and substantial part
of this transaction.
VI. INDEMNITY
6.1 INDEMNIFICATION BY TSI. TSI hereby agrees to protect,
defend, indemnify and hold harmless BROOKS and its parent and
affiliates, together with their respective shareholders, officers,
directors, employees, agents, legal representatives, successors and
permitted assigns, from and against any demand, claim, action, cause of
action, suit, proceeding, investigation, liability, forfeiture, fine,
penalty, interest obligation, deficiency, obligation, judgment, loss,
damage, cost or expense (including, without limitation, reasonable
attorneys' fees)
18
(hereinafter referred to as "LOSS" or "LOSSES") incurred or suffered
by any of them and caused by or arising out of:
(i) any breach or default in the performance
by TSI of any covenant or agreement of TSI contained in this
Agreement or in any agreement executed in conjunction herewith
or transaction contemplated hereby;
(ii) any breach of warranty or
representation made by TSI herein, in any exhibit or schedule
hereto, or in any certificate or instrument delivered by TSI
or TETRA LLC to BROOKS pursuant hereto;
(iii) the ownership of the membership
interests in TETRA LLC and its TETRA LLC Assets and the
operations of the Frac Tank and Vacuum Truck Business on or
prior to the Closing Date;
(iv) the failure of TSI or its parent or any
TSI affiliate to pay any obligation to any creditor in
connection with the Frac Tank and Vacuum Business arising on
or prior to the Closing; or
(v) the ownership and operation of BROOKS
LLC, its BROOKS LLC Assets and the Production and Pipe Testing
Business from and after the Closing Date.
6.2 INDEMNIFICATION BY BROOKS. BROOKS hereby agrees to
protect, defend, indemnify and hold harmless TSI and its parent and
affiliates, together with their respective shareholders, officers,
directors, employees, agents, legal representatives, successors and
permitted assigns, from and against any Loss incurred or suffered by
any of them and caused by or arising out of:
(i) any breach or default in the performance
by BROOKS of any covenant or agreement of BROOKS contained in
this Agreement or in any agreement executed in conjunction
herewith or transaction contemplated hereby;
(ii) any breach of warranty or
representation made by BROOKS herein, in any exhibit or
schedule hereto, or in any certificate or instrument delivered
by BROOKS or BROOKS LLC to TSI pursuant hereto;
(iii) the ownership of the membership
interests in BROOKS LLC and its BROOKS LLC Assets and the
operations of the Production and Pipe Testing Business on or
prior to the Closing Date;
(iv) the failure of BROOKS or its parent or
any BROOKS affiliate to pay any obligation to any creditor in
connection with the Production and Pipe Testing Business
arising on or prior to the Closing; or
19
(v) the ownership and operation of TETRA
LLC, its TETRA LLC Assets and the Frac Tank and Vacuum
Business from and after the Closing Date.
6.3 CONDITIONS OF INDEMNIFICATION. The obligations and
liabilities of TSI or BROOKS, as the case may be (for purposes of this
Section, the "INDEMNIFYING PARTIES"), to protect, defend, indemnify and
hold harmless the other Party (the "INDEMNIFIED PARTY") under Section
6.1 or 6.2 above with respect to claims asserted by third parties shall
be subject to the following terms and conditions:
(i) promptly after receipt of notice of
commencement of any action evidenced by service of process or
other legal pleading, or the assertion in writing of any claim
by a third party, the Indemnified Party shall give the
Indemnifying Party written notice thereof, together with a
copy of such claim, process, or other legal pleading, and the
Indemnifying Party shall have the right to undertake the
defense thereof by representatives of its choosing (subject to
the right of the Indemnified Party to reasonably consent
thereto) and at its expense; PROVIDED, HOWEVER, that the
Indemnified Party may participate in the defense with counsel
of its own choice and at its expense. The failure to give the
preceding notice shall not operate as a waiver of any
indemnification rights hereunder so long as the Indemnifying
Party is not prejudiced as a result thereof, and the
Indemnifying Party shall undertake the defense in accordance
with the foregoing as soon as it learns of the third party
claim even though it may learn of such claims through some
other means;
(ii) in the event that the Indemnifying
Party, by the thirtieth (30th) day after receipt of notice (as
set forth above) of any such claim (or, if earlier, by the
tenth (10th) day preceding the day on which an answer or other
pleading must be served in order to prevent judgment by
default in favor of the person asserting such claim), does not
elect to defend against such claim, the Indemnified Party
shall have the right, but not the obligation, to undertake the
defense, compromise or settlement of such claim on behalf of
and for the account and risk of the Indemnifying Party's
expense, subject to the right of the Indemnifying Party to
assume the defense of such claims at any time prior to
settlement, compromise or final determination thereof;
(iii) anything in this section to the
contrary notwithstanding, the Indemnifying Party shall not
settle any claim without the prior written consent of the
Indemnified Party unless such settlement involves only the
payment of money and does not involve any admission of
liability or stipulation of fact which the Indemnified Party
believes in its sole discretion may have an adverse effect on
it and the claimant provides to the Indemnified Party a full
release from all liability in respect of such claim. If the
settlement of the claim involves more than the payment of
20
money or involves an admission of liability or stipulation of
fact, the Indemnifying Party shall not settle the claim
without the prior written consent of the Indemnified Party;
and
(iv) the Indemnified Party and the
Indemnifying Party will each cooperate with all reasonable
requests of the other.
6.4 LIMITATION OF LIABILITY. Notwithstanding any other
provision hereof, (a) the liability of any Indemnifying Party under
this Agreement for any breach of any representation, warranty or
covenant herein shall be limited to actual damages only and shall not
include any alleged special, incidental, consequential, exemplary or
indirect damages, (b) the Indemnifying Party shall not have any
liability for any claim unless such claim exceeds $5,000 (the
"THRESHOLD AMOUNT") and then not until the aggregate amount of claims
exceeding the Threshold Amount exceeds $50,000 (the "BASKET AMOUNT")
(at which point the Indemnified Party shall become liable for the
entire amount of such Losses and not just the amount in excess of the
Basket Amount); and (c) the aggregate liability of either Party under
this Agreement shall not exceed $4.0 million.
6.5 SURVIVAL. All representations, warranties, covenants,
agreements and obligations set forth in this Agreement, together with
any exhibit, schedule or any other certificate, instrument or document
furnished in connection with this Agreement or the transactions
contemplated hereby shall survive the Closing. All such covenants,
agreements and obligations of the Parties shall survive the Closing for
the period therein specified or, if no period is specified, without
limitation. All Section III representations and warranties of the
Parties shall expire on the date two years from the Closing Date except
that:
(a) the representations and warranties of TSI in
Sections 3.1(a)(c)(d)(g) [Assets; Title to Assets] and (o)
[Litigation, Judgments, etc.] and the representations and
warranties of BROOKS contained in Section 3.2(a)(c)(d)(g)
[Assets; Title to Assets] and (o) [Litigation Judgments, etc.]
shall survive without limitation; and
(b) the representations and warranties of TSI in
Sections 3.1(j)[Tax Matters], 3.1(l)[Employee Matters] and
3.1(n) [Environmental Compliance] and BROOKS in Sections
3.2(j) [Tax Matters], 3.2(l) [Employee Matters] and 3.2(n)
[Environmental Compliance] shall expire sixty (60) days after
the expiration of the applicable statute of limitations
relating to the underlying claim.
Any claim asserted in writing prior to the expiration as provided in this
Section 6.5 of the representation or warranty that is the basis for such
claim shall survive until finally resolved and satisfied in full. The rights
to indemnification, reimbursement or other remedy set forth in this Agreement
will not be affected by any investigation conducted by a Party with respect
to, or any knowledge acquired (or capable of being acquired) by a
21
Party about, the accuracy or inaccuracy or, or compliance with, any
representation, warranty, covenant or obligation.
VII. MISCELLANEOUS PROVISIONS.
7.1 EXPENSES. Each of the Parties shall be responsible for its
own expenses and fees incurred in connection with the transaction
contemplated herein.
7.2 NOTICE. Any notice, demand, request, instruction,
correspondence or other document to be given hereunder by any Party to
another (herein collectively called "NOTICE") shall be in writing and
delivered (i) personally (ii) by courier, (iii) mailed by certified
mail, postage prepaid and return receipt requested, or (iv) by
telecopier, as follows:
To TSI: TETRA Services, Inc.
25025 I-45 North
The Woodlands, Texas 77380
Attention: Paul D. Coombs
Telecopier: (281) 364-4398
With a copy to: Buenker, Nielsen & Kurisky, LLP
10303 Northwest Freeway
Suite 400
Houston, Texas 77092
Attention: Jared D. Nielsen, Esq.
Telecopier: (713) 683-9940
To BROOKS: Brooks Well Servicing, Inc.
C/o Key Energy Services, Inc.
Floor
East Brownwich, New Jersey 08816
Attention: General Counsel
Telecopier: (732) 247-5148
With a copy to: Jenkens & Gilchrist, PC
2200 One American Center
600 Congress Avenue
Austin, Texas 78701
Attention: Bryan C. Campbell, Esq.
Telecopier: (512) 404-3520
Notice given by personal delivery or mail shall be effective upon
actual receipt. Notice given by courier shall be effective one business
day after delivery to the courier. Notice given by telecopier shall be
effective upon actual receipt if received during the recipient's normal
business hours, or at the beginning of the recipient's next business
day after receipt if not received during the recipient's normal
business hours. All Notices by telecopier shall be confirmed promptly
22
after transmission in writing by certified mail or personal delivery.
Any Party may change any address to which Notice is to be given to it
by giving Notice as provided above of such change of address.
7.3 GOVERNING LAW. The provisions of this Agreement and the
documents delivered pursuant hereto shall be governed by and construed
in accordance with the laws of the State of Texas (excluding any
conflicts-of-law rule or principle that might refer same to the laws of
another jurisdiction).
7.4 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement,
together with all exhibits and schedules attached hereto, constitutes
the entire agreement by and among the Parties pertaining to the subject
matter hereof and supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the Parties,
and there are no warranties, representations or other agreements among
the Parties in connection with the subject matter hereof except as set
forth specifically herein or contemplated hereby. No supplement,
modification or waiver of this Agreement shall be binding unless
executed in writing by the Party to be bound thereby. No waiver of any
of the provisions of this Agreement shall be deemed or shall constitute
a waiver of any other provision hereof (regardless of whether similar),
nor shall any such waiver constitute a continuing waiver unless
otherwise expressly provided.
7.5 SEVERABILITY. In the event that any provision contained in
this Agreement shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and the
remaining provisions of this Agreement shall not, at the election of
the Party for whose benefit the provision exists, be in any way
impaired.
7.6 HEADINGS AND SCHEDULES. The headings of the several
Sections herein are inserted for convenience of reference only and are
not intended to be a part of or to affect the meaning or interpretation
of this Agreement. The exhibits and schedules referred to herein are
attached hereto and incorporated herein by this reference.
7.7 ASSIGNMENT; SUCCESSORS BOUND. This Agreement shall not be
assigned by any Party without the prior written consent of the other
Party, except that either Party may assign to a corporate affiliate its
right to purchase the membership interests so long as such Party (or
any successor) will not be relieved of any of its obligations
hereunder. Subject to the foregoing, this Agreement shall be binding
upon and inure to the benefit of the Parties and their respective
successors and permitted assigns.
7.8 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of
which shall constitute a full and complete Agreement. A photocopy or
telecopy of an
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executed counterpart shall be sufficient to bind the Party or Parties
whose signature appears thereon.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
signed in multiple originals by their respective officers thereunto duly
authorized, all as of the Closing Date.
TSI:
TETRA SERVICES, INC.
By: /s/ Paul D. Coombs
------------------------------------
Paul D. Coombs, President
BROOKS:
BROOKS WELL SERVICING, INC.
By: /s/ Joseph B. Eustace
------------------------------------
Joseph B. Eustace, President
EXHIBITS OMITTED
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