1
EXHIBIT 2.1
MASTER FORMATION AGREEMENT
BY AND AMONG
SCHLUMBERGER LIMITED,
▇▇▇▇▇ ▇▇▇▇▇▇ INCORPORATED
AND
THE OTHER PARTIES LISTED
ON THE
SIGNATURES PAGES HERETO
SEPTEMBER 6, 2000
2
TABLE OF CONTENTS
Page
----
ARTICLE 1. DEFINITIONS AND GENERAL................................................................................1
1.1 Definitions....................................................................................1
1.2 Construction..................................................................................16
1.3 References....................................................................................16
1.4 Headings......................................................................................16
1.5 Calculations..................................................................................16
ARTICLE 2. ORGANIZATION OF VENTURE ENTITIES......................................................................17
2.1 Transfers to Venture Entities.................................................................17
2.2 Purchases by SLBV and ▇▇▇▇....................................................................21
2.3 Transferred Assets............................................................................21
2.4 Non-Transferred Assets........................................................................24
2.5 Non-Transferred Liabilities...................................................................24
2.6 Ownership of the Venture Entities.............................................................24
2.7 Transferring Affiliates and Recipient Joint Venture Entities..................................24
ARTICLE 3. THE CLOSING...........................................................................................24
3.1 Execution of the Amended Venture Entity Charter Documents.....................................24
3.2 Execution of Transfer Documents...............................................................25
3.3 Contribution of Accounts Receivable in Lieu of Cash...........................................25
3.4 Contribution of Working Capital...............................................................25
3.5 Richmond Campus Sublease......................................................................26
3.6 Adjusting Payments............................................................................26
3.7 Closing Statements; Objections................................................................27
3.8 Disclosure Letter and Exhibit Updates.........................................................28
3.9 Venture Entity Supplements....................................................................29
3.10 Closing, Second Closing and Third Closing.....................................................29
3.11 Conditions to Each Party's Closing Obligation.................................................32
3.12 Conditions to the Closing Obligations of Schlumberger, SOHL, SPLC, SLBV and STC...............33
3.13 Conditions to the Closing Obligation of ▇▇▇▇▇ ▇▇▇▇▇▇..........................................34
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SCHLUMBERGER, SOHL, SPLC, SLBV AND STC..............................34
4.1 Due Organization, Good Standing and Power.....................................................34
4.2 Authorization and Validity of Agreements......................................................35
4.3 Lack of Conflicts.............................................................................36
4.4 No Consents...................................................................................36
4.5 Certain Fees..................................................................................37
4.6 Financial Statements..........................................................................37
4.7 No Material Changes...........................................................................37
4.8 Schlumberger Subsidiaries.....................................................................37
4.9 Real Property.................................................................................38
i
3
4.10 Title to Personal Property....................................................................39
4.11 Schlumberger Governmental Approvals...........................................................39
4.12 Taxes.........................................................................................39
4.13 Employees.....................................................................................40
4.14 Compliance with Laws..........................................................................40
4.15 Legal Proceedings.............................................................................41
4.16 Sufficiency and Condition of the Schlumberger Transferred Assets..............................41
4.17 Material Contracts............................................................................41
4.18 Proprietary Rights............................................................................42
4.19 Employee Benefit Matters......................................................................43
4.20 No Stock of U.S. Corporation..................................................................44
4.21 Environmental Issues..........................................................................44
4.22 Relations with Governments, Etc...............................................................45
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇ ▇▇▇▇▇▇........................................................45
5.1 Due Organization, Good Standing and Power.....................................................45
5.2 Authorization and Validity of Agreements......................................................46
5.3 Lack of Conflicts.............................................................................46
5.4 No Consents...................................................................................47
5.5 Certain Fees..................................................................................47
5.6 Financial Statements..........................................................................47
5.7 No Material Changes...........................................................................47
5.8 ▇▇▇▇▇ ▇▇▇▇▇▇ Subsidiaries.....................................................................47
5.9 Real Property.................................................................................48
5.10 Title to Personal Property....................................................................49
5.11 ▇▇▇▇▇ ▇▇▇▇▇▇ Governmental Approvals...........................................................49
5.12 Taxes.........................................................................................49
5.13 Employees.....................................................................................50
5.14 Compliance with Laws..........................................................................51
5.15 Legal Proceedings.............................................................................51
5.16 Sufficiency and Condition of the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Assets..............................51
5.17 Material Contracts............................................................................51
5.18 Proprietary Rights............................................................................53
5.19 Employee Benefit Matters......................................................................53
5.20 No Stock of U.S. Corporation..................................................................54
5.21 Environmental Issues..........................................................................54
5.22 Pooling Inquiries.............................................................................55
5.23 Relations with Governments, Etc...............................................................55
ARTICLE 6. COVENANTS PRIOR TO CLOSING............................................................................56
6.1 Conduct of the Business Prior to Closing......................................................56
6.2 Commercial Efforts............................................................................58
6.3 Notice of Claims..............................................................................58
6.4 Access to Businesses..........................................................................58
6.5 Insurance.....................................................................................59
6.6 No Solicitation...............................................................................59
ii
4
6.7 US EmployCo...................................................................................59
6.8 Documentation of U.S. Documented Vessels......................................................59
6.9 Liabilities in the Panamanian Companies.......................................................60
6.10 Joint Use Facilities..........................................................................60
ARTICLE 7. OTHER COVENANTS.......................................................................................60
7.1 Insurance.....................................................................................60
7.2 Bulk Sales Acts...............................................................................60
7.3 Expenses......................................................................................60
7.4 Books of Account and Special Rights...........................................................61
7.5 Firewalls.....................................................................................62
7.6 Name..........................................................................................63
7.7 Venture Entity Audits.........................................................................63
7.8 Shared and Corporate Support Services Agreement...............................................63
7.9 Transition Services Agreement.................................................................63
7.10 Limitation on Lower-Tier Foreign Subsidiaries.................................................63
7.11 Form of Venture Entities......................................................................64
7.12 Venture Entity Contracts......................................................................64
7.13 Venture Entity Distributions..................................................................65
7.14 Venture Entity Seismic Acquisitions...........................................................65
7.15 President.....................................................................................65
7.16 Veto Powers...................................................................................65
7.17 Further Assurances............................................................................65
7.18 Quarterly Financials..........................................................................66
7.19 Technical Liaisons............................................................................66
7.20 Failure of Consent; Joint Contracts and Joint Permits.........................................66
7.21 Shareholders Representatives Committee........................................................68
7.22 Algerian Dinars...............................................................................69
7.23 Prohibited Payments...........................................................................69
ARTICLE 8. LIABILITIES AND INDEMNIFICATION.......................................................................70
8.1 Venture Entity and US EmployCo Indemnification................................................70
8.2 ▇▇▇▇▇ ▇▇▇▇▇▇ Indemnification..................................................................71
8.3 Schlumberger Indemnification..................................................................73
8.4 Tax Indemnity.................................................................................75
8.5 Partner Cross-Indemnities.....................................................................78
8.6 Settlement of Indemnities.....................................................................79
8.7 Waiver of Consequential Damages...............................................................80
8.8 Exclusive Remedy; Negligence of Indemnified Parties...........................................80
ARTICLE 9. INTELLECTUAL PROPERTY.................................................................................81
9.1 Schlumberger/STC Assignment...................................................................81
9.2 ▇▇▇▇▇ ▇▇▇▇▇▇ Assignment.......................................................................81
9.3 Grant-Back License to Schlumberger............................................................81
9.4 Grant-Back License to ▇▇▇▇▇ ▇▇▇▇▇▇............................................................81
9.5 License of Future Developments................................................................82
iii
5
9.6 License of Schlumberger Retained IP..........................................................83
9.7 License of ▇▇▇▇▇ ▇▇▇▇▇▇ Retained IP...........................................................83
9.8 Transferability of Future Developments (Sale of Business).....................................84
9.9 Transferability of Future Developments (Joint Ventures).......................................84
9.10 Reservation of Intellectual Property..........................................................84
9.11 Abandonment of Transferred IP.................................................................84
9.12 Meaning of Abandonment........................................................................84
9.13 Good Faith Efforts to Maintain Transferred IP.................................................85
9.14 Abandonment of Intellectual Property that Includes Future Developments........................85
9.15 Enforcement of Intellectual Property..........................................................85
ARTICLE 10. TERMINATION, AMENDMENT, WAIVER AND MODIFICATION......................................................86
10.1 Termination...................................................................................86
10.2 Effect of Termination.........................................................................86
10.3 Amendment.....................................................................................86
10.4 Extension/Waiver..............................................................................86
ARTICLE 11. TRANSFER RESTRICTIONS................................................................................87
11.1 Put/Call Provisions...........................................................................87
11.2 Change of Control.............................................................................88
11.3 Right of First Refusal........................................................................89
11.4 No Partial Dispositions.......................................................................91
11.5 Transfers to Wholly Owned Subsidiaries........................................................91
ARTICLE 12. GENERAL PROVISIONS...................................................................................91
12.1 Survival of Representations, Warranties and Pre-Closing Covenants and Certain Indemnification
Obligations...................................................................................91
12.2 Governing Law.................................................................................92
12.3 Parties in Interest; Assignment...............................................................92
12.4 Counterparts..................................................................................92
12.5 Notices.......................................................................................92
12.6 Competition and Confidentiality...............................................................93
12.7 Litigation and Claim Support..................................................................94
12.8 Enforcement...................................................................................94
12.9 Entire Agreement; Conflicts...................................................................94
12.10 Consents and Approval.........................................................................94
12.11 Obligations of Schlumberger and ▇▇▇▇▇ ▇▇▇▇▇▇..................................................94
12.12 Publicity.....................................................................................95
12.13 Severability..................................................................................95
12.14 No Strict Construction........................................................................95
12.15 Jurisdiction and Venue........................................................................95
iv
6
MASTER FORMATION AGREEMENT
This Master Formation Agreement (as may be supplemented or amended in
accordance with the provisions hereof, this "AGREEMENT"), dated as of September
6, 2000, is by and among Schlumberger Limited, a Netherlands Antilles
corporation ("SCHLUMBERGER"), Schlumberger Oilfield Holdings Limited, a British
Virgin Islands company wholly owned by Schlumberger ("▇▇▇▇"), Schlumberger Plc,
a United Kingdom limited liability company wholly owned by Schlumberger
("SPLC"), Schlumberger B.V., a Netherlands limited liability company wholly
owned by Schlumberger ("SLBV"), Schlumberger Technology Corporation, a Texas
corporation wholly owned by Schlumberger ("STC"), and ▇▇▇▇▇ ▇▇▇▇▇▇ Incorporated,
a Delaware corporation ("▇▇▇▇▇ ▇▇▇▇▇▇").
Schlumberger, SOHL, SPLC, SLBV, STC and ▇▇▇▇▇ ▇▇▇▇▇▇, in each case
acting where necessary through various subsidiaries, wish to combine their
respective Seismic Businesses (as defined below) into the following entities:
(a) a limited liability company to be formed under the laws of the
State of Delaware ("US VENTURE ENTITY"), which will hold the U.S. portions of
such businesses and will be owned 70% by STC or an Affiliate of STC and 30% by
▇▇▇▇▇ ▇▇▇▇▇▇ or an Affiliate of ▇▇▇▇▇ ▇▇▇▇▇▇;
(b) Geco-Prakla (UK) Limited, a United Kingdom company ("UK VENTURE
ENTITY"), which will hold the U.K. portions of such businesses and will be owned
70% by SPLC and 30% by an Affiliate of ▇▇▇▇▇ ▇▇▇▇▇▇;
(c) Delft Geophysical B.V., a Netherlands company ("DUTCH VENTURE
ENTITY"), which will hold the non-U.S. and non-U.K. portions of such businesses
located in the Dutch Countries (as defined below) and will be owned 70% by SLBV
and 30% by an Affiliate of ▇▇▇▇▇ ▇▇▇▇▇▇; and
(d) Schlumberger Seismic Holdings Limited, a British Virgin Islands
company ("BVI VENTURE ENTITY"), which will hold the remaining non-U.S. and
non-U.K. portions of such businesses and will be owned 70% by ▇▇▇▇ and 30% by
one or more Affiliates of ▇▇▇▇▇ ▇▇▇▇▇▇.
Accordingly, in consideration of the premises and the mutual covenants
of the parties set forth herein and upon the terms and subject to the conditions
set forth herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE 1. DEFINITIONS AND GENERAL
1.1 Definitions. The capitalized terms defined in this Section 1.1,
whenever used in this Agreement, shall have the following meanings for all
purposes of this Agreement:
"ADJUSTMENT AMOUNT" has the meaning given such term in Section 3.10(c).
-1-
7
"AFFILIATE" means, with respect to any Person, any other Person that directly or
indirectly through one or more intermediaries controls, is controlled by or is
under common control with the Person in question. For purposes of this
definition, "CONTROL" means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities or general partnership or
managing member interests, by contract or otherwise. Without limiting the
generality of the foregoing, a Person shall be deemed to control any other
Person in which it owns, directly or indirectly, a majority of the ownership
interests.
"AFFILIATED OWNERS" has the meaning given such term in Section 11.2.
"AGREEMENT" has the meaning given such term in the preamble hereto.
"ALTERNATIVE NON-MONETARY CONSIDERATION" has the meaning given such term in
Section 11.3(b).
"APPLICABLE LAW" means any applicable statute, law, regulation, ordinance, rule,
judgment, order, decree, permit, approval, concession, grant, franchise,
license, agreement or requirement of any Governmental Authority having
jurisdiction over the matter or matters in question, and in each case as
existing (including all of the terms and provisions of applicable common law) at
the time in question.
"APPRAISAL NOTICE" has the meaning given such term in Section 11.3(b).
"APPRAISER" has the meaning given such term in Section 11.3(b).
"AUDIT REPORT" has the meaning given such term in Section 3.7(c).
"▇▇▇▇▇ ▇▇▇▇▇▇" means ▇▇▇▇▇ ▇▇▇▇▇▇ Incorporated, a Delaware corporation.
"▇▇▇▇▇ ▇▇▇▇▇▇ BENEFIT PLAN" means every Employee Benefit Plan sponsored,
maintained or contributed to, or required to be contributed to, by ▇▇▇▇▇ ▇▇▇▇▇▇,
or any ERISA Affiliate of ▇▇▇▇▇ ▇▇▇▇▇▇, for the benefit of current or former
employees of the ▇▇▇▇▇ ▇▇▇▇▇▇ Seismic Business in the United States.
"▇▇▇▇▇ ▇▇▇▇▇▇ DISCLOSURE LETTER" means the disclosure letter from ▇▇▇▇▇ ▇▇▇▇▇▇
to Schlumberger, SOHL, SPLC, SLBV and STC dated and delivered the date of this
Agreement and containing exceptions to the representations, warranties and
covenants hereof and certain other information called for hereby.
"▇▇▇▇▇ ▇▇▇▇▇▇ GOVERNMENTAL APPROVALS" has the meaning given such term in Section
5.11.
"▇▇▇▇▇ ▇▇▇▇▇▇ INDEMNIFIED PERSONS" means ▇▇▇▇▇ ▇▇▇▇▇▇ and its Affiliates and
their respective officers, directors, managers and employees.
-2-
8
"▇▇▇▇▇ ▇▇▇▇▇▇ INITIAL PERCENTAGE" means the net book value of ▇▇▇▇▇ ▇▇▇▇▇▇'
Multiclient Survey Library as of the Closing Date, divided by the Original
Total.
"▇▇▇▇▇ ▇▇▇▇▇▇ LEASED REAL PROPERTY" has the meaning given such term in Section
5.9(a)(i).
"▇▇▇▇▇ ▇▇▇▇▇▇ MATERIAL CONTRACT" has the meaning given such term in Section
5.17.
"▇▇▇▇▇ ▇▇▇▇▇▇ OTHER REAL PROPERTY RIGHTS" has the meaning given such term in
Section 5.9(a)(i).
"▇▇▇▇▇ ▇▇▇▇▇▇ OWNED REAL PROPERTY" has the meaning given such term in Section
5.9(a)(i).
"▇▇▇▇▇ ▇▇▇▇▇▇ OWNER" means a subsidiary of ▇▇▇▇▇ ▇▇▇▇▇▇ that owns 30% of a
Venture Entity.
"▇▇▇▇▇ ▇▇▇▇▇▇ PROPRIETARY RIGHTS" has the meaning given such term in Section
5.18(a).
"▇▇▇▇▇ ▇▇▇▇▇▇ REAL PROPERTY LEASE" has the meaning given such term in Section
5.9(b).
"▇▇▇▇▇ ▇▇▇▇▇▇ RETAINED IP" means the Intellectual Property that (i) is owned by
▇▇▇▇▇ ▇▇▇▇▇▇ or its Affiliates or to which ▇▇▇▇▇ ▇▇▇▇▇▇ or its Affiliates
otherwise have rights, (ii) has utility for more than one application, including
the ▇▇▇▇▇ ▇▇▇▇▇▇ Seismic Business, (iii) is not primarily related to, but has
some utility to and is used in or involved in a work in progress for, the ▇▇▇▇▇
▇▇▇▇▇▇ Seismic Business, and (iv) exists as of the Closing Date, including the
▇▇▇▇▇ ▇▇▇▇▇▇ Retained IP that is identified in Schedule 9.7 to the ▇▇▇▇▇ ▇▇▇▇▇▇
Disclosure Letter.
"▇▇▇▇▇ ▇▇▇▇▇▇ SEISMIC BUSINESS" means the business of ▇▇▇▇▇ ▇▇▇▇▇▇ and its
subsidiaries comprised solely of the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Assets and the
▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Liabilities.
"▇▇▇▇▇ ▇▇▇▇▇▇ SUBSIDIARY" has the meaning given such term in Section 5.1.
"▇▇▇▇▇ ▇▇▇▇▇▇ SUBSIDIARIES INTERESTS" has the meaning given such term in Section
5.8.
"▇▇▇▇▇ ▇▇▇▇▇▇ TRANSFERRED ASSETS" means the assets to be transferred by ▇▇▇▇▇
▇▇▇▇▇▇ and its Affiliates to the Venture Entities and their subsidiaries
pursuant to Section 2.1 and those sold to Schlumberger and its Affiliates
pursuant to Section 2.2.
"▇▇▇▇▇ ▇▇▇▇▇▇ TRANSFERRED EMPLOYEES" means the ▇▇▇▇▇ ▇▇▇▇▇▇ Seismic Business
employees who are to be employed by a Venture Entity or one of its subsidiaries
or US EmployCo as set forth on Schedule 5.13 to the ▇▇▇▇▇ ▇▇▇▇▇▇ Disclosure
Letter.
"▇▇▇▇▇ ▇▇▇▇▇▇ TRANSFERRED IP" means the Intellectual Property that (i) is owned
by ▇▇▇▇▇ ▇▇▇▇▇▇ or its Affiliates or to which ▇▇▇▇▇ ▇▇▇▇▇▇ or its other
Affiliates otherwise have rights, (ii) is used or held for use primarily in
connection with or otherwise primarily related to the ▇▇▇▇▇ ▇▇▇▇▇▇
-3-
9
Seismic Business and (iii) exists as of the Closing Date, including the ▇▇▇▇▇
▇▇▇▇▇▇ Proprietary Rights identified by Schedule 5.18(a) to the ▇▇▇▇▇ ▇▇▇▇▇▇
Disclosure Letter.
"▇▇▇▇▇ ▇▇▇▇▇▇ TRANSFERRED LIABILITIES" means the liabilities to be transferred
by ▇▇▇▇▇ ▇▇▇▇▇▇ and its Affiliates to the Venture Entities and their
subsidiaries pursuant to Section 2.1 and, subject to the indemnification
obligations of ▇▇▇▇▇ ▇▇▇▇▇▇ and its Affiliates under Article 8, the obligations
of ▇▇▇▇▇ ▇▇▇▇▇▇ and its Affiliates under any Contracts included as ▇▇▇▇▇ ▇▇▇▇▇▇
Transferred Assets.
"▇▇▇▇▇ ▇▇▇▇▇▇ TRANSFERRING AFFILIATES" has the meaning given such term in
Section 5.1.
"▇▇▇▇▇ ▇▇▇▇▇▇ TRANSFERRING ENTITIES" has the meaning given such term in Section
5.1.
"BVI COUNTRIES" has the meaning given such term in Section 2.1(c)(i)(A).
"BVI VENTURE ENTITY" has the meaning given such term in the preamble to this
Agreement.
"CASUALTY OR CONDEMNATION LOSS" means, with respect to the Schlumberger Seismic
Business or the ▇▇▇▇▇ ▇▇▇▇▇▇ Seismic Business, as the case may be, (i) a Loss,
whether or not insured, as a result of any fire, flood, accident, explosion,
strike, labor disturbance, riot, act of God or public enemy or other calamity or
casualty, unless either such Loss shall have been substantially cured, repaired
or restored by Schlumberger or ▇▇▇▇▇ ▇▇▇▇▇▇, as the case may be, prior to the
Closing Date, or such party shall have otherwise substantially compensated the
Venture Entities for such Loss, or (ii) that proceedings have been instituted or
threatened seeking the condemnation or other taking of a portion of such
business in the future.
"CHANGE OF CONTROL EVENT" has the meaning given such term in Section 11.2.
"CHARTER DOCUMENTS" means, with respect to any entity, (a) the articles or
certificate of formation, incorporation or organization (or the equivalent
organizational documents) of that entity, (b) the bylaws or limited liability
company agreement or regulations (or the equivalent governing documents) of that
entity and (c) each document setting forth the designation, amount and relative
rights, limitations and preferences of any class or series of equity ownership
in that entity or any rights in respect of that entity's equity ownership
interests.
"CLAIM" means any claim, demand, suit, action, investigation, proceeding,
governmental action or cause of action of any kind or character (in each case,
whether civil, criminal, investigative or administrative), known or unknown,
under any theory, including those based on theories of contract, tort, statutory
liability, strict liability, employer liability, premises liability, products
liability or breach of warranty.
"CLOSING" means the closing of the transactions contemplated by this Agreement
to occur on the Closing Date.
-4-
10
"CLOSING DATE" has the meaning given such term in Section 3.10(a).
"CLOSING STATEMENTS" has the meaning given such term in Section 3.7(a).
"CODE" means the United States Internal Revenue Code of 1986, as amended.
"COMMITTEE" has the meaning given such term in Section 7.21.
"CONTRACTS" means contracts, leases, licenses, indentures, agreements, purchase
orders, commitments and all other legally binding arrangements, whether oral or
written, express or implied.
"DISPOSING PARTY" has the meaning given such term in Section 11.3(a).
"DISPOSITION" has the meaning given such term in Section 11.3(a).
"DISPOSITION NOTICE" has the meaning given such term in Section 11.3(a).
"DUTCH COUNTRIES" has the meaning given such term in Section 2.1(b)(ii)(A).
"DUTCH VENTURE ENTITY" has the meaning given such term in the preamble to this
Agreement.
"EMPLOYEE BENEFIT PLANS" means all pension, retirement, profit-sharing, medical,
vacation, hospitalization, vision, dental, health, life, severance or
termination of employment plans, including any "employee benefit plan" as
defined in Section 3(3) of ERISA.
"EMPLOYEE MATTERS AGREEMENT" means the agreement regarding certain employee
matters to be executed and delivered by the parties, the Venture Entities and US
EmployCo in mutually agreed form.
"ENVIRONMENTAL, HEALTH AND SAFETY REQUIREMENTS" means any Applicable Law
relating to (a) the prevention, abatement or elimination of pollution, (b) the
generation, handling, treatment, storage, disposal or transportation of waste
materials, (c) exposure to oil, pollutants, hazardous or toxic materials or
wastes, or (d) protection of the environment or safety in the workplace.
"ENVIRONMENTAL LIABILITIES" shall mean any and all Losses (including any
remedial, removal, response, abatement, cleanup, investigative and/or monitoring
costs and any other related costs and expenses) incurred or imposed (a) pursuant
to any agreement, order, notice of responsibility, directive (including
directives embodied in Environmental, Health and Safety Requirements),
injunction, judgment or similar document (including settlements) arising under
or in connection with Environmental, Health and Safety Requirements, or (b)
pursuant to any Claim by a Governmental Authority or other Person for personal
injury, property damage, damage to natural resources, remediation, or payment or
reimbursement of response costs incurred or asserted by such Governmental
Authority or Person pursuant to common law or statute and related to Hazardous
Substances.
-5-
11
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means with respect to any Person, any trade or business,
whether or not incorporated, which together with such Person would be deemed a
"single employer" within the meaning of Section 414(b), (c) or (m) of the Code.
"EXCHANGE ACT" means the United States Securities Exchange Act of 1934, as
amended.
"EXERCISE NOTICE" has the meaning given such term in Section 11.3(a).
"FAIR MARKET VALUE" has the meaning given such term in Section 11.3(b).
"FCPA" means the Foreign Corrupt Practices Act of the United States of 1977, as
amended.
"FIXED ASSETS AND INVENTORY" means assets duly categorized as "Fixed and
Long-Term Assets" (i.e., not "current assets") or "Inventory" (other than
Multiclient Survey Libraries) on the March 31 Balance Sheets.
"FUTURE DEVELOPMENTS" means improvements, enhancements or modifications made to
the Transferred IP, and inventions, discoveries, works of authorship, know-how,
technical information, work product and/or other information developed by a
Venture Entity or by the Venture Entities and all Intellectual Property embodied
in any of the foregoing that are created, conceived or first reduced to practice
during the term of this Agreement. Future Developments do not include
improvements, enhancements or modifications made to the Transferred IP, or
inventions, discoveries, works of authorship, know-how, technical information,
work product or other information developed by one or more Venture Entities that
is 100% funded by Schlumberger, ▇▇▇▇▇ ▇▇▇▇▇▇ or an independent third party and
to which the Venture Entities do not have the right to license such Future
Development as would otherwise be required by Section 9.5.
"GAAP" means generally accepted accounting principles, as in effect in the
United States applied on a consistent basis.
"GOVERNMENTAL APPROVAL" means any permit, license, franchise, approval, consent,
waiver, certification, qualification or other authorization issued, granted,
given or otherwise made available or the expiration or termination of any
applicable waiting period by or under the authority of any Governmental
Authority or pursuant to any Applicable Law.
"GOVERNMENTAL AUTHORITY" means any federal, state, local or foreign government
or any provincial, departmental or other political subdivision thereof, or any
entity, body or authority exercising executive, legislative, judicial,
regulatory, administrative or other governmental functions, including any court,
department, commission, board, bureau, agency, instrumentality or administrative
body.
-6-
12
"GUARANTEE" by any Person means any obligation, contingent or otherwise, of such
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person or, in any manner providing for the payment of any
Indebtedness or other obligation of any other Person or otherwise protecting the
holder of such Indebtedness or other obligation against loss (whether arising by
virtue of partnership arrangements, by obtaining letters of credit, by agreement
to keep-well, to purchase assets, goods, securities or services, or to
take-or-pay or otherwise); provided, however, that the term "GUARANTEE" shall
not include endorsements for collection or deposit in the ordinary course of
business.
"HAZARDOUS SUBSTANCES" means any substance which is regulated (or the cleanup of
which can be required) under any Environmental, Health and Safety Requirement,
whether now or in the future. Without limiting the generality of the foregoing,
Hazardous Substances shall include (a) "hazardous wastes," "hazardous
substances," "toxic substances," "pollutants," or "contaminants" or other
similar identified designations in, or otherwise subject to regulation under,
any Environmental, Health and Safety Requirement; and (b) petroleum, refined
petroleum products and fractions or by-products thereof, in each case whether in
their virgin, used or waste state.
"INDEBTEDNESS" of any Person means, without duplication, (a) all obligations of
such Person for borrowed money or with respect to deposits or advances of any
kind, (b) all obligations of such Person evidenced by bonds, debentures, notes
or similar instruments, (c) all obligations of such Person upon which interest
charges are customarily paid, (d) all obligations of such Person under
conditional sale or other title retention agreements relating to property or
assets purchased by such Person, (e) all obligations of such Person issued or
assumed as the deferred purchase price of property or services (excluding trade
accounts payable, trade advertising and accrued obligations), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all capital lease obligations of such Person, (i)
all obligations of such Person in respect of interest rate protection
agreements, foreign currency exchange agreements or other interest or exchange
rate hedging arrangements and (j) all obligations of such Person as an account
party in respect of letters of credit and bankers' acceptances. The Indebtedness
of any Person shall include the Indebtedness of any partnership in which such
Person is a general partner, other than to the extent that the instrument or
agreement evidencing such Indebtedness expressly limits the liability of such
Person in respect thereof.
"INDEMNIFIED PARTY" means any party or any Venture Entity that is entitled to
indemnification under this Agreement.
"INDEMNIFYING PARTY" means any party or Venture Entity from which
indemnification is sought under this Agreement.
"INDEPENDENT ACCOUNTANTS" has the meaning given such term in Section 3.7(c).
"INITIATING PARTY" has the meaning given such term in Section 11.1(a).
-7-
13
"INTELLECTUAL PROPERTY" means patents, patent applications (filed, unfiled or
being prepared), records of invention, invention disclosures, trademarks
(registered or unregistered), trademark applications (filed, unfiled or being
prepared), trade names, copyrights (registered or unregistered), copyright
applications (filed, unfiled or being prepared), service marks (registered or
unregistered), service ▇▇▇▇ applications (filed, unfiled or being prepared),
database rights (registered or unregistered), all together with the goodwill
associated with such marks or names, trade secrets, shop and royalty rights,
technology, inventions, know-how, processes and confidential and proprietary
information, including any being developed (including but not limited to
designs, manufacturing data, design data, test data, operational data, and
formulae), whether or not recorded in tangible form through drawings, software,
reports, manuals or other tangible expressions, whether or not subject to
statutory registration, whether foreign or domestic, and all rights to any of
the foregoing.
"IRS" means the United States Internal Revenue Service.
"JOINT CONTRACTS" has the meaning given such term in Section 7.20(b).
"JOINT PERMITS" has the meaning given such term in Section 7.20(c).
"LIABILITIES" means, collectively, the Schlumberger Transferred Liabilities and
the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Liabilities.
"LIBOR" means the rate appearing on the appropriate page of the Bloomberg
Monitor (or such other page or service as may replace it for the purpose of
displaying London interbank offered rates of leading reference banks) at
approximately 11:00 a.m. London time, as the rate for U.S. Dollar deposits for a
three-month interest period. In the event that such rate is not available at
such time for any reason, "LIBOR" shall be the rate (rounded to the nearest 1/16
of 1% or, if there is no nearest 1/16 of 1%, the next higher 1/16 of 1%) at
which U.S. Dollar deposits of US$5 million are offered for a three-month
interest period in immediately available funds by The Chase Manhattan Bank to
leading banks in the London interbank market at approximately 11:00 a.m. London
time (or as soon thereafter as possible).
"LIEN" means, with respect to any property or other asset of any Person (or any
revenues, income or profits of that Person therefrom) (in each case whether the
same is consensual or nonconsensual or arises by Contract, operation of law,
legal process or otherwise), (i) any mortgage, lien, security interest, pledge,
attachment, levy or other charge or encumbrance of any kind thereupon or in
respect thereof or (ii) any other arrangement under which the same is
transferred, sequestered or otherwise identified with the intention of
subjecting the same to, or making the same available for, the payment or
performance of any liability in priority to the payment of the ordinary,
unsecured creditors of that Person. For purposes of this Agreement, a Person
will be deemed to own subject to a Lien any asset that it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease, synthetic lease or other title retention agreement
relating to that asset.
-8-
14
"LOSS" shall mean any loss, cost, liability or expense, settlement, damage of
any kind, judgment, obligation, charge, fee, fine, penalty, interest, court cost
and/or administrative and reasonable attorneys' fees or disbursements (at all
levels, including appellate), but excluding a party's indirect corporate and
administrative overhead costs.
"MARCH 31 BALANCE SHEETS" has the meaning given such term in Section 3.6(a)(ii).
"MULTICLIENT SURVEY LIBRARY" means the library of nonexclusive, multiclient
seismic surveys owned, in whole or in part, or otherwise held by Schlumberger or
▇▇▇▇▇ ▇▇▇▇▇▇ and their respective Affiliates, as applicable.
"NON-MONETARY CONSIDERATION" has the meaning given such term in Section 11.3(b).
"NON-PUBLIC INFORMATION" means information not in the public domain relating to
costs, profits or profit margins; strategic plans; plans for development of new
products, services or technologies; customer names; bids, pricing policies,
prices, price schedules or terms; proposed transactions; technology plans or
status of implementation; proposals; contracts; or marketing plans.
"NON-TRANSFERRED ASSETS" means the Non-Transferred Schlumberger Assets and the
Non-Transferred ▇▇▇▇▇ ▇▇▇▇▇▇ Assets.
"NON-TRANSFERRED ▇▇▇▇▇ ▇▇▇▇▇▇ ASSETS" has the meaning given such term in Section
2.4.
"NON-TRANSFERRED ▇▇▇▇▇ ▇▇▇▇▇▇ BUSINESSES" means all products and services of
▇▇▇▇▇ ▇▇▇▇▇▇ and its Affiliates other than the ▇▇▇▇▇ ▇▇▇▇▇▇ Seismic Business.
"NON-TRANSFERRED LIABILITIES" means all liabilities of Schlumberger, ▇▇▇▇▇
▇▇▇▇▇▇ and their respective Affiliates other than the Schlumberger Transferred
Liabilities and the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Liabilities, respectively, and
includes those listed on Exhibit 2.5.1 with respect to Schlumberger and its
Affiliates and on Exhibit 2.5.2 with respect to ▇▇▇▇▇ ▇▇▇▇▇▇ and its Affiliates.
"NON-TRANSFERRED SCHLUMBERGER ASSETS" has the meaning given such term in Section
2.4.
"NON-TRANSFERRED SCHLUMBERGER BUSINESSES" means all products and services of
Schlumberger and its Affiliates other than the Schlumberger Seismic Business.
"NON-U.S. VENTURE ENTITY GROUP" means BVI Venture Entity, Dutch Venture Entity
and UK Venture Entity and their respective subsidiaries, collectively.
"NPV" has the meaning given such term in Section 3.10(c).
"NPV PERCENTAGE" has the meaning given such term in Section 3.10(c).
"NPV TOTAL" has the meaning given such term in Section 3.10(c).
-9-
15
"ORIGINAL TOTAL" means the sum of the net book value of ▇▇▇▇▇ ▇▇▇▇▇▇'
Multiclient Survey Library as of the Closing Date, the net book value of the
Schlumberger Multiclient Survey Library as of the Closing Date, and the
Schlumberger Write-Up Amount.
"OTHER ASSETS" means (i) all Schlumberger Transferred Assets, including the
Schlumberger net operating loss carry-forwards related to the Schlumberger
Seismic Business in the U.K., which are included in the Schlumberger Transferred
Assets and recorded on the books of UK Venture Entity as deferred tax assets, or
(ii) ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Assets, as applicable, in each case other than
Fixed Assets and Inventory and Multiclient Survey Libraries.
"OTHER PARTY" has the meaning given such term in Section 11.1(a).
"PAYOR PARTY" has the meaning given such term in Section 3.10(c).
"PBGC" means the U.S. Pension Benefit Guaranty Corporation.
"PENSION BENEFIT PLAN" means every benefit plan subject to Title IV of ERISA or
the minimum funding requirements of Section 302 of ERISA.
"PERCENTAGE INTEREST" means a Person's direct or indirect ownership interest in
each Venture Entity, which interest is, with respect to (i) Schlumberger
(through subsidiaries), 70%, and (ii) ▇▇▇▇▇ ▇▇▇▇▇▇ (through subsidiaries), 30%.
"PERMITTED ENCUMBRANCES" means (a) Liens for current Taxes not yet due; (b)
workers' or unemployment compensation Liens arising in the ordinary course of
business; (c) mechanics', materialmen's, suppliers', vendors' garnishment or
similar Liens arising in the ordinary course of business for amounts not yet
due; (d) nonpossessory mineral interests; and (e) utility easements not
materially impairing the use or value of the burdened property (but not any
violation thereof or encroachment thereon).
"PERSON" means any corporation, limited liability company, individual, joint
stock company, joint venture, partnership, unincorporated association,
Governmental Authority or other entity.
"PERSONAL PROPERTY" means machinery and equipment; furniture and fixtures;
tools; leasehold improvements; vessels, barges and other marine transportation
equipment; railcars, trucks and automobiles; computing and telecommunications
equipment; and other items of tangible personal property (and interests in any
of the foregoing).
"PROHIBITED PAYMENT" means the payment, offer or promise to pay, or
authorization of the offer, promise or payment, directly or indirectly (through
one or more intermediaries), of any money or anything of value to (i) any Public
Official for the purpose of influencing any act or decision of, or for securing
any improper advantage from, such Public Official, or a government,
instrumentality thereof, or political party, in order to assist in any way in
obtaining or retaining business for or with,
-10-
16
or directing business to, any person; or (ii) any Public Official or other
person or entity, if such payment, offer, promise or authorization would violate
any applicable law of any country in which any aspect of the Agreement will take
place, or the FCPA.
"PUBLIC INTERNATIONAL ORGANIZATION" means any public international organization
covered by the FCPA, including international financial institutions such as the
World Bank Group, the International Bank for Reconstruction & Development
(IBRD), the European Bank for Reconstruction & Development (EBRD), and the Asian
Development Bank.
"PUBLIC OFFICIAL" shall mean any officer or employee of a government or any
department, agency, or instrumentality thereof, or of a Public International
Organization, any political party, any official of a political party, any
candidate for political office, or any person acting in an official capacity for
or on behalf of any such government, department, agency, instrumentality, Public
International Organization, or political party.
"Q ACQUISITION SYSTEM" means the complete set of equipment using a proprietary
seismic technology developed by Schlumberger for acquisition and delivery of
calibrated data, which enhances the imaging technology through acquisition
systems allowing single sensor recording and calibrated source, supported by
corresponding advances in seismic sources and receiver equipment control
solutions. Such technology is sampling both the seismic wave field and the noise
property using advanced noise removal and beam forming techniques. The developed
point receiver technology allows, among other things, to correct perturbations
such as statics, sensor coupling and sensor sensitivity.
"RECIPIENT PARTY" has the meaning given such term in Section 11.3(a).
"REMEDIAL ACTION" has the meaning given such term in Section 8.2(d).
"RESPONSE NOTICE" has the meaning given such term in Section 11.1(b).
"SAUDI CONTRACTS" means the three surface vibroseis land seismic agreements Nos.
52051/00, 52049/00 and 52050/00 to be performed using, among other things, the Q
Acquisition System, signed between Saudi Aramco and Geophysical Services
Incorporated, a Saudi Arabia company that is an Affiliate of Schlumberger, on
June 28, 2000 and due to start between December 2000 and January 2001 for a
minimum period of three years with two possible one-year extensions.
"SAUDI NON-Q NBV" has the meaning given such term in Section 3.6(a)(i).
"SCHLUMBERGER" means Schlumberger Limited, a Netherlands Antilles corporation.
"SCHLUMBERGER BENEFIT PLAN" means every Employee Benefit Plan sponsored,
maintained, or contributed to, or required to be contributed to, by
Schlumberger, or any ERISA Affiliate of Schlumberger, for the benefit of current
or former employees of the Schlumberger Seismic Business in the United States.
-11-
17
"SCHLUMBERGER DISCLOSURE LETTER" means the disclosure letter from Schlumberger,
SOHL, SPLC, SLBV and STC to ▇▇▇▇▇ ▇▇▇▇▇▇ dated and delivered the date of this
Agreement and containing exceptions to the representations, warranties and
covenants hereof and certain other information called for hereby.
"SCHLUMBERGER GOVERNMENTAL APPROVALS" has the meaning given such term in Section
4.11.
"SCHLUMBERGER INDEMNIFIED PERSONS" means Schlumberger and its Affiliates and
their respective officers, directors, managers and employees.
"SCHLUMBERGER INITIAL PERCENTAGE" means the sum of the net book value of
Schlumberger's Multiclient Survey Library as of the Closing Date and the
Schlumberger Write-Up Amount, divided by the Original Total.
"SCHLUMBERGER LEASED REAL PROPERTY" has the meaning given such term in Section
4.9(a)(i).
"SCHLUMBERGER MATERIAL CONTRACT" has the meaning given such term in Section
4.17.
"SCHLUMBERGER OTHER REAL PROPERTY RIGHTS" has the meaning given such term in
Section 4.9(a)(i).
"SCHLUMBERGER OWNED REAL PROPERTY" has the meaning given such term in Section
4.9(a)(i).
"SCHLUMBERGER OWNER" means a subsidiary of Schlumberger that owns 70% of a
Venture Entity.
"SCHLUMBERGER PROPRIETARY RIGHTS" has the meaning given such term in Section
4.18(a).
"SCHLUMBERGER REAL PROPERTY LEASE" has the meaning given such term in Section
4.9(b).
"SCHLUMBERGER RETAINED IP" means the Intellectual Property that (i) is owned by
Schlumberger or its Affiliates or to which Schlumberger or its Affiliates
otherwise have rights, (ii) has utility for more than one application, including
the Schlumberger Seismic Business, (iii) is not primarily related to, but has
some utility to and is used in or involved in a work in progress for, the
Schlumberger Seismic Business, and (iv) exists as of the Closing Date, including
the Schlumberger Transferred IP that is identified by Schedule 9.6 to the
Schlumberger Disclosure Letter.
"SCHLUMBERGER SEISMIC BUSINESS" means the business of Schlumberger and its
subsidiaries comprised solely of the Schlumberger Transferred Assets and the
Schlumberger Transferred Liabilities.
"SCHLUMBERGER SUBSIDIARY" has the meaning given such term in Section 4.1.
"SCHLUMBERGER SUBSIDIARIES INTERESTS" has the meaning given such term in Section
4.8.
-12-
18
"SCHLUMBERGER TRANSFERRED ASSETS" means the assets to be transferred by
Schlumberger and its Affiliates to the Venture Entities and their subsidiaries
pursuant to Section 2.1, but excluding any assets purchased by Schlumberger and
its Affiliates pursuant to Section 2.2 and then transferred to the Venture
Entities or their subsidiaries.
"SCHLUMBERGER TRANSFERRED EMPLOYEES" means the Schlumberger Seismic Business
employees who are to be employed by a Venture Entity or one of its subsidiaries
or US EmployCo as set forth on Schedule 4.13 to the Schlumberger Disclosure
Letter.
"SCHLUMBERGER TRANSFERRED IP" means the Intellectual Property that (i) is owned
by Schlumberger or its Affiliates or to which Schlumberger or its Affiliates
otherwise have rights, (ii) is used or held for use primarily in connection with
or otherwise primarily related to the Schlumberger Seismic Business, and (iii)
exists as of the Closing Date, including the Schlumberger Proprietary Rights
that are identified by Schedule 4.18(a) to the Schlumberger Disclosure Letter.
"SCHLUMBERGER TRANSFERRED LIABILITIES" means the liabilities to be transferred
by Schlumberger and its Affiliates to the Venture Entities and their respective
subsidiaries pursuant to Section 2.1 and, subject to the indemnification
obligations of Schlumberger and its Affiliates under Article 8, the obligations
of Schlumberger and its Affiliates under any Contracts included as Schlumberger
Transferred Assets.
"SCHLUMBERGER TRANSFERRING AFFILIATES" has the meaning given such term in
Section 4.1.
"SCHLUMBERGER TRANSFERRING ENTITIES" has the meaning given such term in Section
4.1.
"SCHLUMBERGER WRITE-UP AMOUNT" means the excess of (i) the total accumulated
amortization of Schlumberger's Multiclient Survey Library as of the Closing
Date, over (ii) the total sales and license revenue generated from
Schlumberger's Multiclient Survey Library from first license of multiclient data
through the Closing Date, multiplied by 66%.
"SEC" means the U.S. Securities and Exchange Commission.
"SECOND CLOSING" has the meaning given such term in Section 3.10(b).
"SEISMIC BUSINESS" means the business of surface seismic acquisition and/or
surface seismic data processing for the purpose of providing seismic images of
the subsurface of the earth, including the following activities and services:
(i) all forms of surface land, marine, ocean bottom cable and transition zone
seismic data acquisition; (ii) all forms of surface seismic data processing,
including the processing of 3D Vertical Seismic Profiling; (iii) recording of
data from wellbore seismic arrays performed during simultaneous acquisition of
surface 3D data; (iv) trenched in, buried near surface or seabed permanent array
installation and acquisition; (v) surface seismic acquisition, processing and
sales, in each case, of multiclient surveys; (vi) maintenance of surface seismic
data processing centers, including licensing and support of surface seismic
processing software; (vii) equipment design and manufacture for surface seismic
acquisition and processing; (viii) research and
-13-
19
development programs for any of the items in this paragraph and
seismically-assisted reservoir solutions, including software relating thereto;
and (ix) surface seismic data management services as necessary or desirable to
perform the foregoing. The Seismic Business excludes any activity not
specifically included, such as the following: interpretation activities other
than those necessary to support acquisition and processing activities described
above, borehole seismic acquisition, installation and acquisition of data from
wellbore seismic arrays except as noted in clause (iii) above, reservoir
management, commercial seismically-assisted reservoir solutions, non-seismic
data management and non-seismic dynamic reservoir characterization and
performance prediction.
"SEISMIC PROCESSING SOFTWARE PLATFORM" means the object code, source code, make
files, libraries and related documentation necessary to operate, modify and
execute the seismic processing software platform that is the primarily supported
seismic processing software of the Venture Entities. Seismic Processing Software
Platform does not include Schlumberger's GEOFRAME software.
"SHARED SERVICES AGREEMENT" has the meaning given such term in Section 7.8.
"SHAREHOLDERS REPRESENTATIVES COMMITTEE" means the committee established under
the Shareholders' Agreement.
"SHAREHOLDERS' AGREEMENT" means the agreement attached hereto as Exhibit 1.1 to
be signed by Schlumberger, ▇▇▇▇▇ ▇▇▇▇▇▇, each Schlumberger Owner, each ▇▇▇▇▇
▇▇▇▇▇▇ Owner and each shareholder of US EmployCo relating to certain governance
and other matters regarding the Venture Entities and US EmployCo.
"SLBV" means Schlumberger B.V., a Netherlands limited liability company wholly
owned by Schlumberger.
"▇▇▇▇" means Schlumberger Oilfield Holdings Limited, a British Virgin Islands
company wholly owned by Schlumberger.
"SPLC" means Schlumberger Plc, a United Kingdom limited liability company wholly
owned by Schlumberger.
"STC" means Schlumberger Technology Corporation, a Texas corporation wholly
owned by Schlumberger.
"SUBLEASE" has the meaning given such term in Section 3.5.
"TAXES" means all income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Section 59A of the Code), customs' duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated or other
taxes of any kind whatsoever, imposed by any Governmental Authority, including
any interest, penalties or other additions thereto.
-14-
20
"TECHNICAL LIAISONS" has the meaning given such term in Section 7.19.
"TOP-UP AMOUNT" has the meaning given such term in Section 2.2(c).
"TOTAL INCREASE" has the meaning given such term in Section 3.6(a)(v).
"TRANSACTION DOCUMENTS" means this Agreement, the Transfer Documents, the
Charter Documents for the Venture Entities, the Shareholders' Agreement, the
Sublease, the Shared Services Agreement, the Transition Services Agreement and
the Employee Matters Agreement.
"TRANSFER DOCUMENTS" has the meaning given such term in Section 3.2.
"TRANSFER NOTICE" has the meaning given such term in Section 11.1(a).
"TRANSFEREES" has the meaning given such term in Section 8.4(g)(i).
"TRANSFERORS" has the meaning given such term in Section 8.4(g)(i).
"TRANSFERRED ASSETS" means, collectively, the Schlumberger Transferred Assets
and the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Assets.
"TRANSFERRED IP" means, depending on usage, either the Schlumberger Transferred
IP or the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred IP or both.
"TRANSFERRED LIABILITIES" means, collectively, the Schlumberger Transferred
Liabilities and the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Liabilities.
"TRANSITION SERVICES AGREEMENT" has the meaning given such term in Section 7.9.
"U.K." means the United Kingdom.
"U.S." means the United States of America.
"US EMPLOYCO" means the corporation to be set up and owned 70% by STC or an
Affiliate of STC and 30% by an Affiliate of ▇▇▇▇▇ ▇▇▇▇▇▇ to serve as the
employer of the employees of the US Venture Entity and its U.S. Affiliates.
"US EMPLOYCO INDEMNIFIED PERSONS" means US EmployCo and its Affiliates (other
than Schlumberger, ▇▇▇▇▇ ▇▇▇▇▇▇ and their respective Non-Venture Entity
Affiliates) and their respective officers, directors, managers and employees.
"UK VENTURE ENTITY" has the meaning given such term in the preamble to this
Agreement.
-15-
21
"US VENTURE ENTITY" has the meaning given such term in the preamble to this
Agreement.
"VAT" means value added taxes.
"VENTURE" means the overall business relationship constituting a venture
contemplated by this Agreement and includes all of the Venture Entities.
"VENTURE ENTITIES" means, collectively, US Venture Entity, UK Venture Entity,
BVI Venture Entity and Dutch Venture Entity and, unless the context clearly
indicates otherwise or unless otherwise provided, their respective subsidiaries.
"VENTURE ENTITY INDEMNIFIED PERSONS" means the Venture Entities and their
respective Affiliates (other than Schlumberger, ▇▇▇▇▇ ▇▇▇▇▇▇ and their
respective non-Venture Entity Affiliates) and their respective officers,
directors, managers and employees.
"VENTURE GROUP" means each Venture Entity, US EmployCo and their respective
controlled Affiliates.
"VENTURE OWNER" means any ▇▇▇▇▇ ▇▇▇▇▇▇ Owner or any Schlumberger Owner, and
"VENTURE OWNERS" means, with respect to any Venture Entity, both the ▇▇▇▇▇
▇▇▇▇▇▇ Owner and the Schlumberger Owner for such entity.
"VENTURE OWNER PARENT" means Schlumberger or ▇▇▇▇▇ ▇▇▇▇▇▇, as appropriate.
1.2 Construction. Words used in this Agreement, regardless of the
number or gender specifically used, shall be deemed and construed to include any
other number, singular or plural, and any other gender, masculine, feminine or
neuter, as the context shall require.
1.3 References. As used in this Agreement, unless expressly stated
otherwise, references to (a) "INCLUDE" or "INCLUDING" mean "including, without
limitation," (b) a "PARTY" mean Schlumberger, SOHL, SPLC, SLBV, STC or ▇▇▇▇▇
▇▇▇▇▇▇, and to the "PARTIES" mean all of them, and (c) "DAYS" means calendar
days unless otherwise indicated. Unless otherwise specified, all references in
this Agreement to Articles, Sections, Schedules and Exhibits are deemed
references to the corresponding Articles, Sections, Schedules and Exhibits in,
to and of this Agreement, each of such Schedules and Exhibits being made a part
hereof for all purposes.
1.4 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
1.5 Calculations. Whenever a calculation is called for in any
Transaction Document, each calculation or part of a calculation shall be rounded
to six decimal places. Percentages shall be converted to a decimal and that
decimal shall be rounded to six decimal places. All interest calculations shall
be done on a bond-equivalent basis consisting of twelve 30-day months.
-16-
22
ARTICLE 2. ORGANIZATION OF VENTURE ENTITIES
2.1 Transfers to Venture Entities. Subject to the terms and conditions
of this Agreement, the Venture Entities will be organized as follows:
(a) US Venture Entity. (i) At or prior to the Closing, STC or
a subsidiary thereof will form or cause to be formed US Venture Entity and shall
transfer or cause to be transferred to US Venture Entity in exchange for an
equity ownership interest therein:
(A) all of the shares or other equity
interests of the Schlumberger Subsidiaries that conduct the
Schlumberger Seismic Business in the U.S., including those
listed on Exhibit 2.1(a)-1;
(B) (1) all of the assets of STC and its
Affiliates that are primarily related to the Seismic Business
in the U.S. and within the balance sheet categories listed on
Exhibit 2.1(a)-1 and (2) all of the non-balance sheet assets
and business of STC and its U.S. Affiliates that are primarily
related to the Seismic Business in the U.S.; and
(C) the liabilities of STC and its
Affiliates that are primarily related to the Seismic Business
in the U.S. and within the balance sheet categories listed on
Exhibit 2.1(a)-1.
(ii) At the Closing, ▇▇▇▇▇ ▇▇▇▇▇▇ shall transfer or
cause to be transferred to US Venture Entity or its subsidiaries, in
exchange for an equity ownership interest therein (which equity
ownership interest shall be based on the relative book value of the
assets transferred to US Venture Entity by ▇▇▇▇▇ ▇▇▇▇▇▇ and its
Affiliates under this paragraph (ii) compared to the book value of
those assets transferred to US Venture Entity by STC and its Affiliates
under paragraph (i)):
(A) (1) all of the assets of ▇▇▇▇▇ ▇▇▇▇▇▇
and its Affiliates that are primarily related to the Seismic
Business in the U.S. and within the balance sheet categories
listed on Exhibit 2.1(a)-2 and (2) all of the non-balance
sheet assets and business of ▇▇▇▇▇ ▇▇▇▇▇▇ and its U.S.
Affiliates that are primarily related to the Seismic Business
in the U.S.; and
(B) the liabilities of ▇▇▇▇▇ ▇▇▇▇▇▇ and its
Affiliates that are primarily related to the Seismic Business
in the U.S. and within the balance sheet categories listed on
Exhibit 2.1(a)-2.
(iii) Immediately following the transfers by ▇▇▇▇▇
▇▇▇▇▇▇ described in the preceding paragraph, STC or one of its U.S.
Affiliates shall purchase for cash from ▇▇▇▇▇ ▇▇▇▇▇▇ a portion of ▇▇▇▇▇
▇▇▇▇▇▇' resulting equity ownership interest in US Venture Entity such
that following such purchase, ▇▇▇▇▇ ▇▇▇▇▇▇ will hold a 30% equity
ownership interest
-17-
23
in US Venture Entity. The amount of cash to be paid for such equity
ownership interest shall be determined pursuant to Section 2.2.
(b) Dutch Venture Entity. (i) At or prior to the Closing,
Schlumberger or an Affiliate of Schlumberger shall contribute US$700,000 in cash
to Dutch Venture Entity and ▇▇▇▇▇ ▇▇▇▇▇▇ or an Affiliate of ▇▇▇▇▇ ▇▇▇▇▇▇ shall
contribute US$300,000 in cash to Dutch Venture Entity. The parties agree that
these cash contributions can be used to offset liabilities contributed to the
Venture in the adjusting payments made pursuant to Section 3.6.
(ii) At or prior to the Closing, and subsequent to
the contribution by ▇▇▇▇▇ ▇▇▇▇▇▇ described in the immediately preceding
paragraph, the Dutch Venture Entity or one of its subsidiaries shall
assume the liabilities of SLBV and its Affiliates that are primarily
related to the Seismic Business in the Dutch Countries and within the
balance sheet categories listed on Exhibit 2.1(b)-1 and shall acquire
from SLBV or an Affiliate of SLBV (if not already owned directly or
indirectly by Dutch Venture Entity):
(A) all of the shares or other equity
interests of the Schlumberger Subsidiaries that conduct the
Schlumberger Seismic Business in the countries set forth on
Schedule 2.1(b)-1 (collectively, the "DUTCH COUNTRIES"),
including those listed on Exhibit 2.1(b)-1; and
(B) (1) all of the assets of SLBV and its
Affiliates that are primarily related to the Seismic Business
in the Dutch Countries and within the balance sheet categories
listed on Exhibit 2.1(b)-1 and (2) all of the non-balance
sheet assets and business of SLBV and its Affiliates that are
primarily related to the Seismic Business in the Dutch
Countries.
(iii) At the Closing, and subsequent to the
transactions effected pursuant to the two immediately preceding
paragraphs, Dutch Venture Entity or one of its Affiliates shall assume
the liabilities of ▇▇▇▇▇ ▇▇▇▇▇▇ and its Affiliates that are primarily
related to the Seismic Business in the Dutch Countries and within the
Balance Sheet categories listed in Exhibit 2.1(b)-2 and shall purchase
in cash from ▇▇▇▇▇ ▇▇▇▇▇▇ or its Affiliates:
(A) all of the assets of ▇▇▇▇▇ ▇▇▇▇▇▇ and
its Affiliates that are primarily related to the Seismic
Business in the Dutch Countries and within the balance sheet
categories listed on Exhibit 2.1(b)-2; and
(B) all of the non-balance sheet assets and
business of ▇▇▇▇▇ ▇▇▇▇▇▇ and its Affiliates that are primarily
related to the Seismic Business in the Dutch Countries;
provided, however, that both Section 2.1(b)(iii)(A) and (B) shall
exclude those assets purchased by SLBV or its Affiliates pursuant to
paragraph (iv) below.
-18-
24
(iv) At the Closing SLBV or its Affiliates shall
purchase from ▇▇▇▇▇ ▇▇▇▇▇▇ and its Affiliates certain assets of ▇▇▇▇▇
▇▇▇▇▇▇ and its Affiliates that are primarily related to the Seismic
Business in the Dutch Countries to be agreed by Schlumberger and ▇▇▇▇▇
▇▇▇▇▇▇ in accordance with Section 2.2 and SLBV or its Affiliates shall
contribute such assets to the Dutch Venture Entity or its subsidiaries.
The cash purchase price for such assets shall be determined in
accordance with Section 2.2.
(c) BVI Venture Entity. (i) At or prior to the Closing, ▇▇▇▇
shall transfer or cause to be transferred to BVI Venture Entity (if not already
owned directly or indirectly by BVI Venture Entity):
(A) all of the shares or other equity
interests of the Schlumberger Subsidiaries that conduct the
Schlumberger Seismic Business in countries outside the U.S.,
outside the U.K. and outside the Dutch Countries
(collectively, the "BVI COUNTRIES"), including those listed on
Exhibit 2.1(c)-1;
(B) (1) all of the assets of ▇▇▇▇ and its
Affiliates that are primarily related to the Seismic Business
in the BVI Countries and within the balance sheet categories
listed on Exhibit 2.1(c)-1 and (2) all of the non-balance
sheet assets and business of ▇▇▇▇ and its Affiliates that are
primarily related to the Seismic Business in the BVI
Countries; and
(C) the liabilities of ▇▇▇▇ and its
Affiliates that are primarily related to the Seismic Business
in the BVI Countries and within the balance sheet categories
listed on Exhibit 2.1(c)-1.
(ii) At the Closing, ▇▇▇▇▇ ▇▇▇▇▇▇ shall transfer or
cause to be transferred to BVI Venture Entity or its subsidiaries, in
exchange for a 30% equity ownership interest therein:
(A) (1) all of the assets of ▇▇▇▇▇ ▇▇▇▇▇▇
and its Affiliates that are primarily related to the Seismic
Business in the BVI Countries and within the balance sheet
categories listed on Exhibit 2.1(c)-2 and (2) all of the
non-balance sheet assets and business of ▇▇▇▇▇ ▇▇▇▇▇▇ and its
Affiliates (including the stock of Western Sea Services of
Panama S. de ▇.▇., a Panamanian company) that are primarily
related to the Seismic Business in the BVI Countries;
provided, however, that both Section 2.1(c)(ii)(A)(1) and (2) shall
exclude those assets purchased by ▇▇▇▇ and its Affiliates pursuant to
paragraph (iii) below; and
(B) the liabilities of ▇▇▇▇▇ ▇▇▇▇▇▇ and its
Affiliates that are primarily related to the Seismic Business
in the BVI Countries and within the balance sheet categories
listed on Exhibit 2.1(c)-2.
-19-
25
(iii) At Closing, ▇▇▇▇ or its Affiliates shall
purchase from ▇▇▇▇▇ ▇▇▇▇▇▇ and its Affiliates certain assets of ▇▇▇▇▇
▇▇▇▇▇▇ and its Affiliates that are primarily related to the Seismic
Business in the BVI Countries to be agreed by Schlumberger and ▇▇▇▇▇
▇▇▇▇▇▇ in accordance with Section 2.2 and ▇▇▇▇ or its Affiliates shall
contribute such assets to the BVI Venture Entity or its subsidiaries.
The cash purchase price for such assets shall be determined in
accordance with Section 2.2.
(d) UK Venture Entity. (i) At or prior to the Closing, SPLC
shall transfer or cause to be transferred to UK Venture Entity (if not already
owned directly or indirectly by UK Venture Entity):
(A) all of the shares or other equity
interests of the Schlumberger Subsidiaries that conduct the
Schlumberger Seismic Business in the U.K., including those
listed on Exhibit 2.1(d)-1;
(B) (1) all of the assets of SPLC and its
Affiliates that are primarily related to the Seismic Business
in the U.K. and within the balance sheet categories listed on
Exhibit 2.1(d)-1 and (2) all of the non-balance sheet assets
and business of SPLC and its U.K. Affiliates that are
primarily related to the Seismic Business in the U.K.; and
(C) the liabilities of SPLC and its
Affiliates that are primarily related to the Seismic Business
in the U.K. and within the balance sheet categories listed on
Exhibit 2.1(d)-1.
(ii) At the Closing, ▇▇▇▇▇ ▇▇▇▇▇▇ shall transfer or
cause to be transferred to UK Venture Entity or its subsidiaries, in
exchange for a 30% equity ownership interest in the UK Venture Entity,
all of the shares or other equity interests of a new U.K. subsidiary,
to which shall have been transferred prior to Closing:
(A) (1) all of the assets of ▇▇▇▇▇ ▇▇▇▇▇▇
and its Affiliates that are primarily related to the Seismic
Business in the U.K. and within the balance sheet categories
listed on Exhibit 2.1(d)-2 and (2) all of the non-balance
sheet assets and business of ▇▇▇▇▇ ▇▇▇▇▇▇ and its Affiliates
that are primarily related to the Seismic Business in the
U.K.; and
(B) the liabilities of ▇▇▇▇▇ ▇▇▇▇▇▇ and its
Affiliates that are primarily related to the Seismic Business
in the U.K. and within the balance sheet categories listed on
Exhibit 2.1(d)-2.
(e) Assumption of Liabilities. The appropriate Venture Entity
or its subsidiaries shall assume the Schlumberger Transferred Liabilities and
the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Liabilities to the extent such Transferred
Liabilities are not contributed to the Venture by virtue of a contribution of
the shares or other equity interests of a Schlumberger Subsidiary or a ▇▇▇▇▇
▇▇▇▇▇▇ Subsidiary, as applicable.
-20-
26
2.2 Purchases by SLBV and ▇▇▇▇.
(a) Subject to the terms and conditions of this Agreement,
▇▇▇▇▇ ▇▇▇▇▇▇ shall provide to Schlumberger, for Schlumberger's approval, a
preliminary version of:
(i) Exhibit 2.2(a)-1, containing a proposed listing
of the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Assets that Dutch Venture Entity or one
of its Affiliates will purchase at Closing pursuant to Section 2.1(b),
and
(ii) Exhibit 2.2(a)-2, containing a proposed listing
of the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Assets that BVI Venture Entity or one
of its Affiliates will purchase at Closing pursuant to Section 2.1(c).
(b) As soon as practicable following the signing of this
Agreement but no later than one month before the anticipated Closing Date, the
parties shall arrange for a third-party valuation of the Schlumberger
Transferred Assets and the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Assets by
PricewaterhouseCoopers LLP and agree to supplement and amend Exhibit 2.2(a)-1
and Exhibit 2.2(a)-2 as necessary to reflect the results of the valuation and
any changes in the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Assets included on the exhibits and
to maintain the agreed Percentage Interests in each Venture Entity. Schlumberger
agrees that the valuation shall not affect the aggregate purchase price paid for
the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Assets under this Section 2.2.
(c) The parties agree that the aggregate cash purchase price
to be paid for a portion of the ▇▇▇▇▇ ▇▇▇▇▇▇ equity ownership interest in US
Venture Entity pursuant to Section 2.1(a) and for the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred
Assets set forth on Exhibit 2.2(a)-1 and Exhibit 2.2(a)-2, as supplemented or
amended at or prior to Closing, shall not exceed US$500 million. The parties
further agree that the price to be paid for the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Assets
set forth on Exhibit 2.2(a)-1 and Exhibit 2.2(a)-2, collectively, shall be in an
amount equal to US$500 million less (i) the amount of cash paid for a portion of
the ▇▇▇▇▇ ▇▇▇▇▇▇ equity ownership interest in US Venture Entity pursuant to
Section 2.1(a) and (ii) to the extent such a payment for assets would result in
an adverse financial impact on Schlumberger or its Affiliates, an amount not to
exceed US$20 million (the "TOP-UP AMOUNT"). The Top-Up Amount shall be paid to
▇▇▇▇▇ ▇▇▇▇▇▇ or its Affiliates by ▇▇▇▇ or SLBV or their respective Affiliates,
as appropriate, in cash.
(d) The parties agree that the purchase of assets and
contribution of those assets to each of the Venture Entities hereunder shall be
allocated among the Venture Entities in a manner to achieve a 70%/30% split of
the net assets transferred by Schlumberger Transferring Entities and ▇▇▇▇▇
▇▇▇▇▇▇ Transferring Entities, respectively, to each Venture Entity.
2.3 Transferred Assets. Except as provided in Section 2.4, Schlumberger
and ▇▇▇▇▇ ▇▇▇▇▇▇ agree that, whether or not listed in the Exhibits containing
the Schlumberger Transferred Assets or the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Assets or
the Closing Statements, the Schlumberger Transferred Assets and the ▇▇▇▇▇ ▇▇▇▇▇▇
Transferred Assets shall include all of the following assets of Schlumberger and
its Affiliates or ▇▇▇▇▇ ▇▇▇▇▇▇ and its Affiliates used or held for use primarily
-21-
27
in connection with or otherwise primarily related to their respective Seismic
Businesses as the same shall exist as of the Closing Date:
(a) Real Property Owned. All owned real property together with
(i) all rights, privileges, easements, rights of way, licenses, hereditaments,
servitudes, use rights and other appurtenances relating thereto; (ii) all right,
title and interest in and to any land lying in the bed of any street, road or
highway, existing or proposed, in front of or adjoining any of such real
property, any award made or to be made with respect to any of such real property
by reason of change of grade or the closing of any street, road or highway and
all strips and gores of real property abutting or adjoining any of such real
property; and (iii) all buildings, structures, improvements, paved parking
areas, fixtures and all other appurtenances thereto located on such real
property.
(b) Real Property Leases. All leases under which Schlumberger
or ▇▇▇▇▇ ▇▇▇▇▇▇ or an Affiliate thereof is the lessee of real property;
provided, however, that once discovered, any such material leases that are not
listed on the appropriate Schedule or Exhibit may be returned by the Venture
Entities to the transferring party and need not be assumed by the Venture
Entities.
(c) Leases of Real Property to Third Parties. All leases under
which Schlumberger or ▇▇▇▇▇ ▇▇▇▇▇▇ or an Affiliate thereof is the lessor of any
real property.
(d) Other Real Property Rights. All additional real property
rights, privileges, easements, rights of way, licenses, hereditaments,
servitudes, use rights and appurtenances relating thereto.
(e) Personal Property Owned. All Personal Property and
interests in Personal Property owned.
(f) Personal Property Leased. All leases of Personal Property
entered into by Schlumberger, ▇▇▇▇▇ ▇▇▇▇▇▇ or any of their respective Affiliates
(as lessees), including master leases pertaining to vehicles, vessels and
equipment, which in any case are not fully performed as of the Closing Date;
provided, however, that once discovered, any such material leases that are not
listed on the appropriate Schedule or Exhibit may be returned by the Venture
Entities to the transferring party and need not be assumed by the Venture
Entities.
(g) Inventory. All raw materials, work-in-process, finished
goods, purchased goods, merchandise held for resale, materials and supplies,
including in-transit inventories, spare parts and stores.
(h) Contracts. To the extent such rights exist on or accrue
after the Closing Date, all (i) Contracts for the sale or purchase of goods or
services, or both, entered into by Schlumberger, ▇▇▇▇▇ ▇▇▇▇▇▇ or any of their
respective Affiliates, and portions of Contracts for the sale or purchase of
goods or services, or both, which in any case are not fully performed as of the
Closing Date; (ii) Contracts relating to any Schlumberger Transferred Employee
or ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Employee; (iii) Contracts between Schlumberger,
▇▇▇▇▇ ▇▇▇▇▇▇ or any of their respective Affiliates and a third party imposing
confidentiality obligations on such third party with respect to any of the
-22-
28
Schlumberger Transferred Assets or the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Assets; and (iv)
other Contracts; provided, that to the extent that any Contracts for the sale of
goods or services by Schlumberger, ▇▇▇▇▇ ▇▇▇▇▇▇ or their respective Affiliates
are transferred to the Venture Entities or subsidiaries thereof, the Venture
Entities or their subsidiaries shall assume any of Schlumberger's or ▇▇▇▇▇
▇▇▇▇▇▇' obligations with respect to product or service warranties, and any other
conditions to sale, under such Contracts relating to products sold or services
provided after the Closing Date.
(i) Governmental Approvals. To the extent transferable, all
Governmental Approvals.
(j) Claims Against Third Parties. All rights, Claims, credits
or rights of set-off against third parties, whether liquidated or unliquidated,
fixed or contingent, including rights of indemnification, hold harmless
agreements, covenants not to prosecute and other agreements; provided, however,
that any counterclaims, defenses or rights of set-off against third parties that
relate to and would otherwise decrease the amount of a Loss for which the
transferring party would have an indemnification obligation to the Venture
Entities under Article 8 shall be retained by the transferring party and be
applied to decrease the transferring party's indemnification obligation. If the
amount received by the transferring party under any such counterclaim, defense
or right of set-off exceeds the amount of the related indemnity obligation under
Article 8, that excess shall be promptly paid over to the appropriate Venture
Entity.
(k) Warranties. All rights under all covenants and warranties
to the extent related to the Schlumberger Transferred Assets, the ▇▇▇▇▇ ▇▇▇▇▇▇
Transferred Assets or the operation or conduct of Schlumberger's or ▇▇▇▇▇
▇▇▇▇▇▇' Seismic Business, express or implied (including title warranties and
manufacturers', suppliers' and contractors' warranties), that have heretofore
been made by any predecessors in title or any third-party manufacturers,
suppliers, contractors, engineers and other third parties in connection with
products or services purchased by or furnished for use in connection with
Schlumberger's or ▇▇▇▇▇ ▇▇▇▇▇▇' Seismic Business.
(l) Intellectual Property. Subject to Section 2.4(d), all
right, title and interest in all Intellectual Property.
(m) Information Technology. Subject to Section 2.4(d), the
process control software and computer applications software, owned or licensed,
whether for general business usage (e.g., accounting, word processing, graphics
and spreadsheet analysis) or specific, unique-to-the-business usage (e.g., order
processing, manufacturing, process control and shipping), the computer
operating, security or programming software, owned or licensed, and the computer
hardware, owned or leased, including in each case the related Contracts.
(n) Multiclient Survey Libraries. All rights relating to the
Multiclient Survey Libraries.
(o) Panamanian Subsidiary. The equity interests of Western
U.S. Marine S. de ▇.▇., a Panamanian company.
-23-
29
2.4 Non-Transferred Assets. Notwithstanding any provisions of Section
2.1 and Section 2.2 to the contrary, the following assets of Schlumberger and
its Affiliates (the "NON-TRANSFERRED SCHLUMBERGER ASSETS") and of ▇▇▇▇▇ ▇▇▇▇▇▇
and its Affiliates (the "NON-TRANSFERRED ▇▇▇▇▇ ▇▇▇▇▇▇ ASSETS") shall be retained
by the respective parties and not be transferred to the Venture Entities:
(a) The assets of the Non-Transferred Schlumberger Businesses
and of the Non-Transferred ▇▇▇▇▇ ▇▇▇▇▇▇ Businesses;
(b) The assets of Schlumberger, ▇▇▇▇▇ ▇▇▇▇▇▇ and their
respective Affiliates that are set forth on Exhibit 2.4.1 (Schlumberger, SOHL,
SPLC, SLBV and STC) and Exhibit 2.4.2 (▇▇▇▇▇ ▇▇▇▇▇▇);
(c) The accounts receivable of ▇▇▇▇▇ ▇▇▇▇▇▇, except as
provided in Section 3.3; and
(d) The Schlumberger Retained IP and the ▇▇▇▇▇ ▇▇▇▇▇▇ Retained
IP.
With respect to the Shell Nigeria seismic data described on Exhibit 2.4.2, one
or more of the Venture Entities will use commercially reasonable efforts to sell
such data on behalf of ▇▇▇▇▇ ▇▇▇▇▇▇ and remit promptly to ▇▇▇▇▇ ▇▇▇▇▇▇ any
amounts collected in connection therewith. ▇▇▇▇▇ ▇▇▇▇▇▇ shall pay to the Venture
Entity that completed such sale a 2% sales commission fee as payment in full for
its efforts.
2.5 Non-Transferred Liabilities. Notwithstanding any provisions of
Section 2.1 and Section 2.2 to the contrary, the liabilities of (i) the
Non-Transferred Schlumberger Businesses and of the Non-Transferred ▇▇▇▇▇ ▇▇▇▇▇▇
Businesses, and (ii) Schlumberger, ▇▇▇▇▇ ▇▇▇▇▇▇ and their respective Affiliates
that are primarily related to the Schlumberger Seismic Business or the ▇▇▇▇▇
▇▇▇▇▇▇ Seismic Business and set forth on Exhibit 2.5.1 (Schlumberger, SOHL,
SPLC, SLBV and STC) and Exhibit 2.5.2 (▇▇▇▇▇ ▇▇▇▇▇▇), shall be retained by the
respective parties and not be transferred to the Venture Entities.
2.6 Ownership of the Venture Entities. Upon Closing, the owners and
their respective ownership percentages in each Venture Entity shall be as set
forth on Exhibit 2.6.
2.7 Transferring Affiliates and Recipient Joint Venture Entities.
Exhibit 2.7.1 (Schlumberger) and Exhibit 2.7.2 (▇▇▇▇▇ ▇▇▇▇▇▇) list each
Schlumberger Transferring Affiliate and ▇▇▇▇▇ ▇▇▇▇▇▇ Transferring Affiliate,
respectively, and the Venture Entities to which Schlumberger Transferred Assets
or ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Assets will be transferred.
ARTICLE 3. THE CLOSING
3.1 Execution of the Amended Venture Entity Charter Documents. At the
Closing and upon the terms and subject to the conditions of this Agreement, the
appropriate Venture Owners shall execute and deliver, or cause to be executed
and delivered, any amendments to the Charter Documents of the respective Venture
Entities necessary to reflect the ownership described on
-24-
30
Exhibit 2.6 and such other amendments as shall be mutually agreed on by
Schlumberger and ▇▇▇▇▇ ▇▇▇▇▇▇, and shall file or cause to be filed with the
necessary Governmental Authorities any documents necessary to be filed with such
Governmental Authorities to reflect those amendments as soon as practicable and
shall cause the Venture Entities to deliver to the appropriate entities
identified on Exhibit 2.6 certificates or other evidence reflecting those
entities' ownership interest in each Venture Entity. Attached hereto as Exhibit
3.1 is the form of limited liability company agreement of US Venture Entity to
be executed at Closing.
3.2 Execution of Transfer Documents. At the Closing, the appropriate
entities shall execute and deliver, effective as of the Closing Date, transfer
documents in substantially the form set forth on Exhibit 3.2.1 (U.S.) and
Exhibit 3.2.2 (non-U.S.) for each country in which assets will be transferred to
effect the conveyances described in Section 2.1 and Section 2.2 (the "TRANSFER
DOCUMENTS"); provided, however, that each such conveyance document may be
revised as necessary to comply with the local country laws. Any conflicts
between those conveyance documents and this Agreement shall be resolved in favor
of this Agreement.
3.3 Contribution of Accounts Receivable in Lieu of Cash. The parties
agree that if ▇▇▇▇▇ ▇▇▇▇▇▇ desires to use any accounts receivable in lieu of
cash to offset liabilities contributed to a Venture Entity or to satisfy any of
the other cash obligations of ▇▇▇▇▇ ▇▇▇▇▇▇ to the Venture Entities (but not to
Schlumberger) under this Article 3, ▇▇▇▇▇ ▇▇▇▇▇▇ shall first provide to
Schlumberger a list of those accounts receivable at least 10 days prior to
Closing, which list will be updated as of the Closing Date. If Schlumberger
agrees to accept any of these accounts receivable, the collection of such
accounts receivable shall be managed by the appropriate Venture Entity in the
ordinary course of business on behalf of ▇▇▇▇▇ ▇▇▇▇▇▇ and the amounts collected
shall be received by ▇▇▇▇▇ ▇▇▇▇▇▇ or its designated Affiliate as detailed on the
related invoice. The appropriate Venture Entity will book accounts receivable
from ▇▇▇▇▇ ▇▇▇▇▇▇ for the amount of the agreed upon receivables to be used in
lieu of cash. No later than the fifth day after notification is received by
▇▇▇▇▇ ▇▇▇▇▇▇ from the appropriate Venture Entity that a third-party receivable
has been paid, ▇▇▇▇▇ ▇▇▇▇▇▇ or its designated Affiliate shall pay such amounts
over to the appropriate Venture Entity. Any such amounts not collected within
120 days of Closing shall be paid to the appropriate Venture Entity by ▇▇▇▇▇
▇▇▇▇▇▇ in cash. The parties agree that where Indebtedness is assumed by a
Venture Entity from Schlumberger or one of Schlumberger's Affiliates or ▇▇▇▇▇
▇▇▇▇▇▇ or one of ▇▇▇▇▇ ▇▇▇▇▇▇' Affiliates, and the corresponding receivable is
transferred to another Venture Entity by Schlumberger or one of Schlumberger's
Affiliates or ▇▇▇▇▇ ▇▇▇▇▇▇ or one of ▇▇▇▇▇ ▇▇▇▇▇▇' Affiliates, respectively,
such liability need not be offset with cash or other assets, nor shall the
receivable be subject to the collection provisions of this Section 3.3.
3.4 Contribution of Working Capital. Upon the Closing, Schlumberger and
▇▇▇▇▇ ▇▇▇▇▇▇ shall cause their respective subsidiaries listed on Exhibit 2.6 to
contribute to the applicable Venture Entity an amount of cash (or, in the case
of ▇▇▇▇▇ ▇▇▇▇▇▇, accounts receivable as described in Section 3.3) as working
capital, which amount shall be agreed upon between the parties at least 30 days
prior to the Closing; provided, however, that neither ▇▇▇▇▇ ▇▇▇▇▇▇ and its
Affiliates nor Schlumberger and its Affiliates shall be required on a collective
basis under this Section 3.4 to contribute aggregate working capital in excess
of the lesser of US$50 million and an agreed upon three-month working capital
projection. The contribution of working capital to each Venture Entity
-25-
31
shall be in the proportion of 70% by Schlumberger and its Affiliates and 30% by
▇▇▇▇▇ ▇▇▇▇▇▇ and its Affiliates.
3.5 Richmond Campus Sublease. Upon Closing and conditioned upon no
changes that affect US Venture Entity being made to the underlying lease for the
premises prior to Closing without US Venture Entity's consent, each of US
Venture Entity and ▇▇▇▇▇ ▇▇▇▇▇▇ or its applicable subsidiary shall execute and
deliver a sublease substantially in the form of Exhibit 3.5 (the "SUBLEASE") for
the sublease by US Venture Entity from ▇▇▇▇▇ ▇▇▇▇▇▇ of the ▇▇▇▇▇ ▇▇▇▇▇▇ Richmond
Campus located in Houston, Texas, for 10 years at the fair market rental value
set forth in the Sublease.
3.6 Adjusting Payments.
(a) Fixed Assets and Inventory.
(i) In determining the net book value of the Fixed
Assets and Inventory of Schlumberger as of the Closing Date for all
purposes under this Agreement, the net book value of the capital
expenditures made by Schlumberger that are related to the Saudi
Contract but are not related to the Q Acquisition System shall be
deducted (the "SAUDI NON-Q NBV"). ▇▇▇▇▇ ▇▇▇▇▇▇ shall pay to
Schlumberger 30% of the Saudi Non-Q NBV in cash.
(ii) If the net book value of the Fixed Assets and
Inventory of both Schlumberger and ▇▇▇▇▇ ▇▇▇▇▇▇ as of the Closing Date
is less than the amount reflected on the March 31 balance sheets of
Schlumberger and ▇▇▇▇▇ ▇▇▇▇▇▇ with respect to their respective Seismic
Businesses to be contributed and/or transferred to the Venture Entities
attached hereto as Exhibit 3.6.1 (Schlumberger) and Exhibit 3.6.2
(▇▇▇▇▇ ▇▇▇▇▇▇) (collectively, the "MARCH 31 BALANCE SHEETS"), the party
whose aggregate net book value has decreased the most shall pay to the
appropriate Venture Entity the amount of that party's decrease less the
amount of the other party's decrease in cash or, in the case of ▇▇▇▇▇
▇▇▇▇▇▇, use accounts receivable as described in Section 3.3.
(iii) If the net book value of the Fixed Assets and
Inventory of Schlumberger as of the Closing Date has increased but the
net book value of the Fixed Assets and Inventory of ▇▇▇▇▇ ▇▇▇▇▇▇ has
decreased or remained constant, ▇▇▇▇▇ ▇▇▇▇▇▇ shall pay to Schlumberger
30% of Schlumberger's increase in cash, and ▇▇▇▇▇ ▇▇▇▇▇▇ shall pay to
the appropriate Venture Entity the amount of ▇▇▇▇▇ ▇▇▇▇▇▇' decrease in
cash or use accounts receivable as described in Section 3.3.
(iv) If the net book value of the Fixed Assets and
Inventory of ▇▇▇▇▇ ▇▇▇▇▇▇ as of the Closing Date has increased but the
net book value of the Fixed Assets and Inventory of Schlumberger has
decreased or remained constant, Schlumberger shall pay to ▇▇▇▇▇ ▇▇▇▇▇▇
70% of ▇▇▇▇▇ ▇▇▇▇▇▇' increase in cash, and Schlumberger shall pay to
the appropriate Venture Entity the amount of Schlumberger's decrease in
cash.
-26-
32
(v) If the net book value of the Fixed Assets and
Inventory of each of Schlumberger and ▇▇▇▇▇ ▇▇▇▇▇▇ as of the Closing
Date has increased, each of Schlumberger and ▇▇▇▇▇ ▇▇▇▇▇▇ shall then
divide the amount of its actual increase by the total actual aggregate
increase of Schlumberger and ▇▇▇▇▇ ▇▇▇▇▇▇ combined (the "TOTAL
INCREASE"), and (i) if Schlumberger's actual percentage of the
aggregate increase is less than 70%, Schlumberger shall pay to ▇▇▇▇▇
▇▇▇▇▇▇ in cash an amount equal to (A) 70% minus Schlumberger's actual
percentage multiplied by (B) the Total Increase and (ii) if ▇▇▇▇▇
▇▇▇▇▇▇' actual percentage of the aggregate increase is less than 30%,
▇▇▇▇▇ ▇▇▇▇▇▇ shall pay to Schlumberger in cash an amount equal to (A)
30% minus ▇▇▇▇▇ ▇▇▇▇▇▇' actual percentage multiplied by (B) the Total
Increase.
(b) The parties agree that, with respect to US Venture Entity
and the Non-U.S. Venture Entity Group, the net book value of (i) Schlumberger's
Other Assets less the Schlumberger Transferred Liabilities and (ii) ▇▇▇▇▇
▇▇▇▇▇▇' Other Assets less the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Liabilities shall each
equal zero, and that each party shall contribute cash or, in the case of ▇▇▇▇▇
▇▇▇▇▇▇, use accounts receivable as described in Section 3.3, to US Venture
Entity or BVI Venture Entity (on behalf of the Non-U.S. Venture Entity Group) as
necessary in order to make such amount equal zero. However, the amount of the
accrued dry dock provision included in the Schlumberger Transferred Liabilities
does not need to be offset with Other Assets or cash by Schlumberger. The
calculations in this Section 3.6(b) shall be made separately (i) for US Venture
Entity and (ii) for the Non-U.S. Venture Entity Group as a whole.
(c) The parties agree that no payment made under this Section
3.6 shall affect the agreed-upon Percentage Interests.
(d) With respect to any payment due under Section 3.6(a), the
payee party shall have the right to designate to the payor party an Affiliate of
the payee party to which the payment shall be made.
3.7 Closing Statements; Objections.
(a) Closing Statements. As promptly as practicable, but in no
event more than 21 days after the Closing Date, Schlumberger and ▇▇▇▇▇ ▇▇▇▇▇▇
shall prepare and deliver to the other parties a statement (the Schlumberger and
▇▇▇▇▇ ▇▇▇▇▇▇ statements, collectively, the "CLOSING STATEMENTS") which reflects
the Schlumberger Transferred Assets, the Schlumberger Transferred Liabilities,
the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Assets and the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Liabilities
as of the Closing Date based on, among other things, the results of any interim
due diligence. The Closing Statements shall be prepared in accordance with GAAP
applied on a basis consistent with the principles used in the preparation of the
March 31 Balance Sheets of ▇▇▇▇▇ ▇▇▇▇▇▇ and Schlumberger. The Closing Date
amounts for ▇▇▇▇▇ ▇▇▇▇▇▇ will be adjusted to (i) remove the net book value of
its Richmond campus located in Houston, Texas referred to in Section 3.5 and
(ii) value the ▇▇▇▇▇ ▇▇▇▇▇▇ facility located in Isleworth, England, at its fair
market value of US$30 million (▇▇▇▇▇ ▇▇▇▇▇▇ shall provide to Schlumberger a copy
of the third-party appraisal of the resale value of the property at its present
commercial use net of any costs necessary to prepare the property for resale
that supports the US$30 million valuation, which valuation shall be subject to
independent
-27-
33
assessment by Schlumberger); provided, however, that the valuation of the
Isleworth facility, less its net book value, shall not exceed by more than US$1
million the net book value of the Richmond campus reflected in the March 31
Balance Sheet of ▇▇▇▇▇ ▇▇▇▇▇▇.
(b) Audit of Closing Statements. The Venture's auditors,
PricewaterhouseCoopers LLP, shall conduct an audit of the Closing Statements and
deliver a report relating thereto in the form of Exhibit 3.7 to the shareholders
of the Venture Entities within 30 days after delivery of the Closing Statements.
(c) Objections to Closing Statements. The parties shall have a
period of 15 days after the delivery to them of the auditor's report described
in Section 3.7(b) (the "AUDIT REPORT") to review and make any objections to that
report that the parties may have in writing to the other parties. Schlumberger
and ▇▇▇▇▇ ▇▇▇▇▇▇ shall each have the right to review the related work papers and
to conduct due diligence with respect to that report and the underlying assets
and liabilities and to propose adjustments to that report in accordance with
this Section 3.7(c); provided, however, that proposed adjustments of less than
US$1 million in the aggregate can be ignored by either party. The parties agree
to work together in good faith to finalize the Closing Statements and the audit
described in Section 3.7(b) in time for the Second Closing. If no written
objections to the Closing Statements or the Audit Report are delivered to any
party within the 15-day period, the Closing Statements and Audit Report shall be
deemed to be accepted and approved by the parties, and the Second Closing, if
necessary, shall be held in accordance with Section 3.10(b). If written
objections of any party to the Closing Statements or the Audit Report are
delivered to any other party within the 15-day period, then the parties shall
attempt to resolve the matter or matters in dispute and, if successful, the
Second Closing shall take place at such time as the parties may mutually agree.
Any objecting party shall quantify its objections to the extent reasonably
practicable in all written objections delivered to any other party with respect
to the Closing Statements or the Audit Report. If such disputes cannot be
resolved by the parties within 15 days after the delivery of the objections,
then the specific matters in dispute shall be submitted to a nationally
recognized independent accounting firm (other than Schlumberger's or ▇▇▇▇▇
▇▇▇▇▇▇' then-current independent accounting firm) (the "INDEPENDENT
ACCOUNTANTS"), which firm shall render its opinion as to such matters within 10
days. Based on that opinion, the Independent Accountants shall then send to each
of the parties a written determination of the matters in dispute and a written
determination of any adjustments to the Closing Statements or Audit Report based
upon such opinion, whereupon the confirmed or revised Closing Statements and
Audit Report shall be final and binding upon the parties. The Second Closing
shall not occur until each of the parties shall have received the documents
prepared by the Independent Accountants evidencing that opinion. All costs, fees
and expenses charged or incurred by the Independent Accountants, if any, shall
be borne by the party against whom the Independent Accountants render their
opinion; provided, however, that if such opinion does not clearly identify a
losing party, such costs, fees and expenses shall be borne equally by ▇▇▇▇▇
▇▇▇▇▇▇ and Schlumberger.
3.8 Disclosure Letter and Exhibit Updates.
(a) At least 15 days prior to Closing, Schlumberger shall
provide to ▇▇▇▇▇ ▇▇▇▇▇▇ any updates to the Schlumberger Disclosure Letter, and
▇▇▇▇▇ ▇▇▇▇▇▇ shall provide to Schlumberger any updates to the ▇▇▇▇▇ ▇▇▇▇▇▇
Disclosure Letter, in each case necessary to make
-28-
34
its representations and warranties herein true and accurate; provided, however,
that such updates shall be for informational purposes only and shall not change
the liabilities or obligations of the other parties hereunder unless
specifically agreed to in writing by Schlumberger with respect to ▇▇▇▇▇ ▇▇▇▇▇▇'
changes and ▇▇▇▇▇ ▇▇▇▇▇▇ with respect to Schlumberger's changes, and
Schlumberger or ▇▇▇▇▇ ▇▇▇▇▇▇ may reject the transfer of any additional
liabilities included in such updates of the other party to the Venture Entities
or require that cash be paid to offset the liability.
(b) At least 15 days prior to Closing, Schlumberger shall
provide to ▇▇▇▇▇ ▇▇▇▇▇▇ any updates to the Schlumberger Exhibits and ▇▇▇▇▇
▇▇▇▇▇▇ shall provide to Schlumberger any updates to the ▇▇▇▇▇ ▇▇▇▇▇▇ Exhibits,
in each case necessary to make such Exhibits true and accurate.
3.9 Venture Entity Supplements. At Closing, the parties shall cause
each Venture Entity and US EmployCo to execute and deliver to Schlumberger and
▇▇▇▇▇ ▇▇▇▇▇▇ a supplement to this Agreement substantially in the form of Exhibit
3.9, pursuant to which that Venture Entity and US EmployCo shall agree to
assume, perform and comply with the obligations and conditions hereunder
contemplated to be assumed, performed or complied with by it.
3.10 Closing, Second Closing and Third Closing.
(a) Closing. Upon the terms and subject to the conditions of
this Agreement, the Closing of the transactions contemplated by this Agreement
shall take place (i) with respect to the assets and liabilities to be
transferred to US Venture Entity, at the offices of ▇▇▇▇▇ ▇▇▇▇▇ L.L.P., ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, and (ii) with respect to the assets and
liabilities to be transferred to UK Venture Entity, Dutch Venture Entity or BVI
Venture Entity, at such location or locations outside of the U.S. as the parties
may mutually agree, in each case within 30 days of the satisfaction or waiver of
all of the conditions to Closing set forth below at such time as the parties may
mutually agree (the "CLOSING DATE"). Schlumberger and ▇▇▇▇▇ ▇▇▇▇▇▇ shall each
designate two entities, one U.S. and one non-U.S., to receive as nominee, to the
extent practicable, all payments due to Schlumberger or ▇▇▇▇▇ ▇▇▇▇▇▇ under this
Section. US Venture Entity and the Non-U.S. Venture Entity Group also shall each
designate an entity to receive as nominee, to the extent practicable, all
payments due to them under this Section. At the Closing, Schlumberger or
Affiliates of Schlumberger shall pay to ▇▇▇▇▇ ▇▇▇▇▇▇ or Affiliates of ▇▇▇▇▇
▇▇▇▇▇▇, by wire transfer to an account or accounts designated by ▇▇▇▇▇ ▇▇▇▇▇▇
prior to Closing, US$500 million in accordance with Section 2.2 and the asset
transfers contemplated by Article 2 shall be effected.
(b) Second Closing. A second closing shall take place (i) with
respect to payments relating to US Venture Entity, at the offices of ▇▇▇▇▇ ▇▇▇▇▇
L.L.P., ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, and (ii) with respect to
payments relating to UK Venture Entity, Dutch Venture Entity or BVI Venture
Entity, at such location or locations outside of the U.S. as the parties may
mutually agree, in each case as soon as practicable after the Closing and in
accordance with Section 3.7, at such time as the parties may mutually agree, but
in no event later than 100 days after the Closing (the "SECOND CLOSING").
Schlumberger and ▇▇▇▇▇ ▇▇▇▇▇▇ shall each designate two entities, one U.S. and
one non-U.S., to receive as nominee, to the extent practicable, all payments due
to Schlumberger or ▇▇▇▇▇ ▇▇▇▇▇▇ under this Section. US Venture Entity and the
Non-U.S.
-29-
35
Venture Entity Group also shall each designate an entity to receive as nominee,
to the extent practicable, all payments due to them under this Section.
(1) If, as of the Closing Date, the net book value of
the Fixed Assets and Inventory of Schlumberger and/or ▇▇▇▇▇ ▇▇▇▇▇▇ as reflected
in the Closing Statements for Schlumberger and ▇▇▇▇▇ ▇▇▇▇▇▇ with respect to a
Venture Entity is less than the amount reflected for that party and that Venture
Entity on the March 31 Balance Sheets of Schlumberger and ▇▇▇▇▇ ▇▇▇▇▇▇, the
parties shall recalculate any adjusting payments made pursuant to Section
3.6(a), and if Schlumberger or ▇▇▇▇▇ ▇▇▇▇▇▇ made an adjusting payment pursuant
to Section 3.6(a) that was too large, the entity (which may be a Venture Entity)
that received that payment shall refund the overage to the payor at the Second
Closing, plus interest on the overpaid amount at a rate of LIBOR (as of the
Closing Date) plus one percent from the Closing Date to the date of the Second
Closing. If, after recalculation and refunding, if any, pursuant to the previous
sentence, Schlumberger or ▇▇▇▇▇ ▇▇▇▇▇▇ made an adjusting payment pursuant to
Section 3.6(a) that was too small, ▇▇▇▇▇ ▇▇▇▇▇▇ or Schlumberger, as appropriate,
shall pay sufficient cash to the appropriate Venture Entity, or to Schlumberger
or ▇▇▇▇▇ ▇▇▇▇▇▇ to cure the shortfall at the Second Closing, plus interest on
the underpaid amount at a rate of LIBOR (as of the Closing Date) plus one
percent from the Closing Date to the date of the Second Closing.
(2) The net book value of the Schlumberger Other
Assets less the Schlumberger Transferred Liabilities, and the net book value of
the ▇▇▇▇▇ ▇▇▇▇▇▇ Other Assets less the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Liabilities as
reflected in the Closing Statements for Schlumberger and ▇▇▇▇▇ ▇▇▇▇▇▇ with
respect to each of US Venture Entity and the Non-U.S. Venture Entity Group, will
be compared to the amounts determined under Section 3.6(b) and the parties shall
recalculate any adjusting payments made pursuant to Section 3.6(b). If
Schlumberger or ▇▇▇▇▇ ▇▇▇▇▇▇ made an adjusting payment pursuant to Section
3.6(b) that was too large, the appropriate Venture Entity shall refund the
overage to the payor at the Second Closing, plus interest on the overpaid amount
at a rate of LIBOR (as of the Closing Date) plus one percent from the Closing
Date to the date of the Second Closing. If, after recalculation and refunding,
if any, pursuant to the previous sentence, either Schlumberger or ▇▇▇▇▇ ▇▇▇▇▇▇
has a shortfall, the party with the shortfall shall pay sufficient cash to the
appropriate Venture Entity to cure the shortfall at the Second Closing, plus
interest on the underpaid amount at a rate of LIBOR (as of the Closing Date)
plus one percent from the Closing Date to the date of the Second Closing.
(3) The parties also shall recalculate the amount of
the payment due by ▇▇▇▇▇ ▇▇▇▇▇▇ to Schlumberger under Section 3.6(a)(i) and make
any necessary adjustments thereto at the Second Closing, plus interest on the
overpaid or underpaid amount at a rate of LIBOR (as of the Closing Date) plus
one percent from the Closing to the date of the Second Closing.
(4) The parties agree that no payment made under this
Section 3.10(b) shall affect the agreed-upon Percentage Interests. The parties
further agree that no interest payment shall be made pursuant to this Section
3.10(b) unless the aggregate shortage or overage that would necessitate such a
payment under this Section 3.10(b) was in an amount greater than US$5 million;
provided, however, that if the shortage or overage is greater than US$5 million,
interest shall be due on the total amount of the shortage or overage and not
just the amount in excess of US$5 million.
-30-
36
(c) Third Closing. As soon as practicable after the fourth
anniversary of the Closing Date, but in no event more than 15 days following
such anniversary, the parties shall calculate the net present value ("NPV") of
Schlumberger's and ▇▇▇▇▇ ▇▇▇▇▇▇' Multiclient Survey Library as of the Closing
Date using the aggregate sales revenue for each calendar quarter generated by
that library during such four-year period, discounted to the Closing Date at a
rate of LIBOR (as of the Closing Date) plus one percent, such aggregate sales
revenue to include any transfer fees, settlement amounts and commitments to
license additional amounts going forward pursuant to settlements which the
parties have received or to which they are entitled. Such revenues shall be
determined in accordance with GAAP applied on a basis consistent with principles
to be used by the Venture Entities. Revenue from acreage covered by both
libraries will be allocated between the libraries according to the Initial
Percentages (defined below). The percentage that the NPV of Schlumberger's
library or ▇▇▇▇▇ ▇▇▇▇▇▇' library, as the case may be, bears to the total
combined NPV of Schlumberger's library and ▇▇▇▇▇ ▇▇▇▇▇▇' library (the "NPV
TOTAL") is such party's "NPV PERCENTAGE."
In the event that Schlumberger's and ▇▇▇▇▇ ▇▇▇▇▇▇' NPV Percentages are
equal to their respective Initial Percentages, no adjusting payment will be made
by either party to the other. In the event either party's NPV Percentage is less
than such party's Initial Percentage, such party (the "PAYOR PARTY") shall pay
to the other party in cash, promptly following agreement by Schlumberger and
▇▇▇▇▇ ▇▇▇▇▇▇ on the calculation of the NPV Total, the "ADJUSTMENT Amount," which
will be equal to (1) or (2):
(1) In the event the NPV Total is less than the
Original Total, (a) the difference between the Payor Party's Initial Percentage
and NPV Percentage times (b) the NPV Total; or
(2) In the event the NPV Total is more than the
Original Total, (a) the difference between the Payor Party's Initial Percentage
and NPV Percentage times (b) the Original Total;
provided, however, that in no event shall the Adjustment Amount exceed US$100
million payable by Schlumberger and its Affiliates or ▇▇▇▇▇ ▇▇▇▇▇▇ and its
Affiliates, nor shall any such payments affect the agreed-upon Percentage
Interests. The Payor Party may, in its discretion, cause one or more of its
Affiliates to pay the Adjustment Amount to the other party. At the time of such
payment, the Payor Party and the party receiving the Adjustment Amount shall
negotiate in good faith to agree on the allocation of the Adjustment Amount
between the U.S. and non-U.S. components of the Multiclient Survey Libraries,
and failing such agreement, shall allocate the Adjustment Amount in accordance
with the ratios set forth on Exhibit 3.10(c). Insofar as a payment is to be made
to ▇▇▇▇▇ ▇▇▇▇▇▇ with respect to the U.S. component of the Multiclient Survey
Libraries, STC shall, for purposes of this Section 3.10(c), be included in the
term "Payor Party." Schlumberger and ▇▇▇▇▇ ▇▇▇▇▇▇ shall each designate two
entities, one U.S. and one non-U.S., to receive as nominee, to the extent
practicable, all payments due to Schlumberger or ▇▇▇▇▇ ▇▇▇▇▇▇ under this
Section. US Venture Entity and the Non-U.S. Venture Entity Group also shall each
designate an entity to receive as nominee, to the extent practicable, all
payments due to them under this Section.
-31-
37
The parties shall have a period of 15 days after the later of the
delivery to them of the calculation of the Adjustment Amount and the access to
all related workpapers and relevant employees to review and make any objections
to the calculation of the Adjustment Amount that the parties may have in writing
to the other parties. If no written objections to the calculation of the
Adjustment Amount are delivered to any party within the 15-day period, the
calculation of the Adjustment Amount shall be deemed to be accepted and approved
by the parties, and the Third Closing, if necessary, shall be held in accordance
with this Section 3.10(c) on or prior to the 30th day following the fourth
anniversary of the Closing Date at such time and place as the parties may
mutually agree. If written objections of any party to the calculation of the
Adjustment Amount are delivered to any other party within the 15-day period,
then the parties shall attempt to resolve the matter or matters in dispute. Any
objecting party shall quantify its objections to the extent reasonably
practicable in all written objections delivered to any other party with respect
to the calculation of the Adjustment Amount. If such disputes cannot be resolved
by the parties within five days after the delivery of the objections to the
calculation of the Adjustment Amount, then the specific matters in dispute shall
be submitted to the Independent Accountants, which firm shall render its opinion
as to such matters within 30 days. Based on that opinion, the Independent
Accountants shall then send to each of the parties a written determination of
the matters in dispute and a written determination of any adjustments to the
calculation of the Adjustment Amount based upon such opinion, whereupon the
confirmed or revised calculation of the Adjustment Amount shall be final and
binding upon the parties. The Third Closing shall not occur until each of the
parties shall have received the documents prepared by the Independent
Accountants evidencing that opinion. All costs, fees and expenses charged or
incurred by the Independent Accountants, if any, shall be borne by the party
against whom the Independent Accountants render their opinion; provided,
however, that if such opinion does not clearly identify a losing party, such
costs, fees and expenses shall be borne equally by ▇▇▇▇▇ ▇▇▇▇▇▇ and
Schlumberger. The parties agree that interest shall be paid on the Adjustment
Amount at a rate of LIBOR (as of the 36th day after the fourth anniversary of
the Closing Date) plus one percent for the period beginning on the 36th day
after the fourth anniversary of the Closing Date and ending on the date such
Adjustment Amount is paid.
The parties shall use their good faith efforts to calculate and agree
upon the ▇▇▇▇▇ ▇▇▇▇▇▇ Initial Percentage and the Schlumberger Initial Percentage
within 90 days following the Closing Date. ▇▇▇▇▇ ▇▇▇▇▇▇ shall certify in writing
to Schlumberger the calculation of the ▇▇▇▇▇ ▇▇▇▇▇▇ Initial Percentage as agreed
upon and Schlumberger shall certify in writing to ▇▇▇▇▇ ▇▇▇▇▇▇ the calculation
of the Schlumberger Initial Percentage as agreed upon.
Schlumberger and ▇▇▇▇▇ ▇▇▇▇▇▇ agree that each Venture Entity shall
manage the contributed multiclient survey libraries in a manner not intended to
favor either Schlumberger or ▇▇▇▇▇ ▇▇▇▇▇▇ with respect to the calculations set
forth in this Section 3.10(c).
3.11 Conditions to Each Party's Closing Obligation. The respective
obligations of each party to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment at or prior to the Closing Date of
the following conditions:
(a) that no litigation, investigation, inquiry or proceeding
is pending or, to each party's knowledge, threatened in or by any court,
tribunal, government agency or authority, domestic
-32-
38
or foreign, to restrain, enjoin or prohibit consummation of the transactions
contemplated by this Agreement;
(b) the applicable parties shall have finalized, executed and
delivered the following agreements:
(i) the Employee Matters Agreement;
(ii) the Shareholders' Agreement;
(iii) the Transfer Documents;
(iv) the Sublease;
(v) the Venture Entity and US EmployCo supplements;
(vi) the Shared Services Agreement;
(vii) the Transition Services Agreement; and
(viii) any charter amendments referenced in Section
3.1 not already effected as of Closing.
(c) the Governmental Approvals listed in Exhibit 3.11(c) shall
have been obtained or otherwise satisfied.
3.12 Conditions to the Closing Obligations of Schlumberger, SOHL, SPLC,
SLBV and STC. The obligation of Schlumberger, SOHL, SPLC, SLBV and STC to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment at or prior to the Closing Date of the following additional
conditions:
(a) ▇▇▇▇▇ ▇▇▇▇▇▇ shall have performed in all material respects
its obligations under this Agreement required to be performed by it and shall
have obtained all necessary material consents (absent some legal reason
prohibiting same) at or prior to the Closing Date;
(b) the representations and warranties of ▇▇▇▇▇ ▇▇▇▇▇▇ set
forth in this Agreement shall have been true and correct in all respects when
made and shall be true and correct in all respects at and as of the Closing Date
as if made at and as of the Closing Date, except as affected by transactions
contemplated or permitted by this Agreement and except for such failures to be
true and correct, individually or in the aggregate, as would not have a material
adverse effect on the Seismic Business of the Venture Entities after the Closing
Date, taken as a whole; and
(c) Schlumberger, SOHL, SPLC, SLBV and STC shall have received
a certificate, dated the Closing Date, from the President or any Vice President
of ▇▇▇▇▇ ▇▇▇▇▇▇ to the effect that the conditions set forth in Sections 3.12(a)
and 3.12(b) have been satisfied.
-33-
39
3.13 Conditions to the Closing Obligation of ▇▇▇▇▇ ▇▇▇▇▇▇. The
obligation of ▇▇▇▇▇ ▇▇▇▇▇▇ to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment at or prior to the Closing Date of
the following additional conditions:
(a) Schlumberger, SOHL, SPLC, SLBV and STC shall each have
performed in all material respects their respective obligations under this
Agreement required to be performed by them and shall have obtained all necessary
material consents (absent some legal reason prohibiting same) at or prior to the
Closing Date;
(b) the representations and warranties of Schlumberger, SOHL,
SPLC, SLBV and STC set forth in this Agreement shall have been true and correct
in all respects when made and shall be true and correct in all respects at and
as of the Closing Date as if made at and as of the Closing Date, except as
affected by transactions contemplated or permitted by this Agreement and except
for such failures to be true and correct, individually or in the aggregate, as
would not have a material adverse effect on the Seismic Business of the Venture
Entities after the Closing Date, taken as a whole; and
(c) ▇▇▇▇▇ ▇▇▇▇▇▇ shall have received a certificate, dated the
Closing Date, from the President or any Vice President of Schlumberger to the
effect that the conditions set forth in Sections 3.13(a) and 3.13(b) have been
satisfied.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SCHLUMBERGER, SOHL,
SPLC, SLBV AND STC
Except as set forth in the Schlumberger Disclosure Letter,
Schlumberger, SOHL, SPLC, SLBV and STC, jointly and severally, represent,
warrant and covenant to ▇▇▇▇▇ ▇▇▇▇▇▇, as of the date of this Agreement, that the
following are true and correct:
4.1 Due Organization, Good Standing and Power. Schlumberger is a
corporation duly incorporated, validly existing and in good standing under the
laws of the Netherlands Antilles and has all requisite corporate power and
authority under Applicable Law and its Charter Documents to own or lease and to
operate its assets and to conduct or cause to be conducted the Schlumberger
Seismic Business as it is now being conducted by Schlumberger. ▇▇▇▇ is a
corporation duly incorporated, validly existing and in good standing under the
laws of the British Virgin Islands and has all requisite corporate power and
authority under Applicable Law and its Charter Documents to own or lease and to
operate its assets and to conduct or cause to be conducted the Schlumberger
Seismic Business as it is now being conducted by ▇▇▇▇. SPLC is a United Kingdom
limited liability company duly organized, validly existing and in good standing
under the laws of the U.K. and has all requisite power and authority under
Applicable Law and its Charter Documents to own or lease and to operate its
assets and to conduct or cause to be conducted the Schlumberger Seismic Business
as it is now being conducted by SPLC. SLBV is a Netherlands limited liability
company duly organized, validly existing and in good standing under the laws of
the Netherlands and has all requisite power and authority under Applicable Law
and its Charter Documents to own or lease and to operate its assets and to
conduct or cause to be conducted the Schlumberger Seismic Business as
-34-
40
it is now being conducted by SLBV. STC is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Texas and
has all requisite corporate power and authority under Applicable Law and its
Charter Documents to own or lease and to operate its assets and to conduct or
cause to be conducted the Schlumberger Seismic Business as it is now being
conducted by STC. Each subsidiary of Schlumberger that is being contributed to
the Venture Entities as a part of the Schlumberger Seismic Business (each, a
"SCHLUMBERGER SUBSIDIARY") and each of the other Affiliates of Schlumberger
(excluding ▇▇▇▇, SPLC, SLBV and STC) that is transferring or contributing assets
or liabilities to the Venture Entities pursuant to this Agreement (collectively,
the "SCHLUMBERGER TRANSFERRING AFFILIATES" and, together with the Schlumberger
Subsidiaries, the "SCHLUMBERGER TRANSFERRING ENTITIES") is, or will be at the
Closing Date, a corporation, limited liability company or other entity duly
organized and validly existing under the laws of its jurisdiction of
organization. Each of the Schlumberger Transferring Entities has all requisite
corporate or other power and authority to own or lease and to operate its assets
and to conduct the Schlumberger Seismic Business now being or to be conducted by
it at the time of the Closing. Each of Schlumberger, SOHL, SPLC, SLBV, STC and
each Schlumberger Transferring Entity is, or will be at the Closing Date, duly
authorized, qualified or licensed to do business as a foreign corporation or
other organization in good standing in each of the jurisdictions in which its
right, title or interest in or to any of the Schlumberger Transferred Assets
held by it or the Schlumberger Seismic Business conducted by it requires such
authorization, qualification or licensing, except where the failure to have such
authorization, qualification or licensing would not have a material adverse
effect on the Schlumberger Seismic Business. Each of Schlumberger, SOHL, SPLC,
SLBV and STC has all requisite corporate power and authority under Applicable
Law and its Charter Documents to enter into this Agreement and the other
Transaction Documents to which it is or will be a party and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. Each Schlumberger Transferring Entity has, or
will have at the Closing Date, all corporate or other requisite power and
authority under Applicable Law and its Charter Documents to enter into the
Transaction Documents to which it is or will be a party, to perform its
obligations thereunder and to consummate the transactions contemplated thereby.
4.2 Authorization and Validity of Agreements. The execution and
delivery by Schlumberger, SOHL, SPLC, SLBV and STC of this Agreement, the
execution and delivery by Schlumberger, SOHL, SPLC, SLBV, STC and each
Schlumberger Transferring Entity of the other Transaction Documents to which any
of them is or will be a party and the consummation by them of the transactions
contemplated hereby and thereby have been (in the case of Schlumberger, SOHL,
SPLC, SLBV and STC), or will be at the Closing Date (in the case of each
Schlumberger Transferring Entity), duly authorized and approved by all necessary
corporate or other action under Applicable Law and the relevant Charter
Documents on the part of Schlumberger, SOHL, SPLC, SLBV, STC and such
Schlumberger Transferring Entity, as the case may be, and do not and will not
require the approval of the stockholders of Schlumberger. This Agreement has
been duly executed and delivered by Schlumberger, SOHL, SPLC, SLBV and STC, and
at the Closing each of the other Transaction Documents to which Schlumberger,
SOHL, SPLC, SLBV, STC or any Schlumberger Transferring Entity is a party will
have been duly executed and delivered by Schlumberger, SOHL, SPLC, SLBV, STC and
such Schlumberger Transferring Entity, as the case may be. This Agreement
-35-
41
is the legal, valid and binding obligation of Schlumberger, SOHL, SPLC, SLBV and
STC, enforceable against each in accordance with its terms, except as that
enforceability may be (i) limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and (ii) subject to general principles of equity
(regardless of whether that enforceability is considered in a proceeding in
equity or at law). At the Closing, each other Transaction Document to which
Schlumberger, SOHL, SPLC, SLBV, STC or any Schlumberger Transferring Entity is a
party will be the legal, valid and binding obligation of Schlumberger, SOHL,
SPLC, SLBV, STC and such Schlumberger Transferring Entity, as the case may be,
in each case enforceable against Schlumberger, SOHL, SPLC, SLBV, STC and such
Schlumberger Transferring Entity in accordance with its terms, except as that
enforceability may be (i) limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and (ii) subject to general principles of equity
(regardless of whether that enforceability is considered in a proceeding in
equity or at law).
4.3 Lack of Conflicts. Neither the execution and delivery by
Schlumberger, SOHL, SPLC, SLBV or STC of this Agreement nor the execution and
delivery by Schlumberger, SOHL, SPLC, SLBV, STC or any Schlumberger Transferring
Entity of any other Transaction Document to which Schlumberger, SOHL, SPLC,
SLBV, STC or any such Schlumberger Transferring Entity is or will be a party,
nor the consummation by them of the transactions contemplated hereby and
thereby, does or will (i) conflict with, or result in the breach of any
provision of, the Charter Documents of Schlumberger, SOHL, SPLC, SLBV, STC or
any such Schlumberger Transferring Entity, (ii) violate any Applicable Law or
any permit, order, award, injunction, decree or judgment of any Governmental
Authority applicable to or binding upon Schlumberger, SOHL, SPLC, SLBV, STC or
any such Schlumberger Transferring Entity or to which any of their respective
properties or assets is subject, (iii) result in the creation of any Lien upon
any of the Schlumberger Transferred Assets or (iv) violate, conflict with or
result in the breach or termination of, or otherwise give any other Person the
right to terminate, or constitute a default, event of default or an event that
with notice, lapse of time or both, would constitute a default or event of
default under the terms of, any Contract included in the Schlumberger
Transferred Assets or by which any of the Schlumberger Transferred Assets is
subject.
4.4 No Consents. Schedule 4.4 to the Schlumberger Disclosure Letter
sets forth all Governmental Approvals or other material consents known by
Schlumberger to be required in connection with the execution and delivery by
Schlumberger, SOHL, SPLC, SLBV or STC of this Agreement or the Closing of the
transactions contemplated by this Agreement or any other Transaction Document.
No Governmental Approvals or other consents are required for the execution and
delivery by Schlumberger, SOHL, SPLC, SLBV or STC of this Agreement, except for
such Governmental Approvals or consents as would not, in the aggregate, have a
material adverse effect on the Schlumberger Seismic Business. At the Closing, no
Governmental Approval or other consent will be required by Schlumberger, SOHL,
SPLC, SLBV, STC or any Schlumberger Transferring Entity for the consummation of
the transactions contemplated by this Agreement and the other Transaction
Documents to which Schlumberger, SOHL, SPLC, SLBV, STC or any such Schlumberger
Transferring Entity is a party, except for such Governmental Approvals or
consents as would not, in the aggregate, have a material adverse effect on the
Schlumberger Seismic Business.
-36-
42
4.5 Certain Fees. Neither Schlumberger nor any of its Affiliates nor
any of their officers, directors or employees, on behalf of Schlumberger or such
Affiliates, has employed any broker or finder or incurred any other liability
for any brokerage fees, commissions or finders' fees in connection with the
transactions contemplated hereby.
4.6 Financial Statements. The true and correct net book value
determined in accordance with GAAP consistently applied (except for the change
in Schlumberger's accounting for its Multiclient Survey Libraries as set forth
on Schedule 4.7 to the Schlumberger Disclosure Letter) of all the Fixed Assets
and Inventory of Schlumberger as of March 31, 2000 is set forth in the March 31
Balance Sheet of Schlumberger.
4.7 No Material Changes. Since March 31, 2000, no change in the
Schlumberger Seismic Business or the Schlumberger Transferred Assets has
occurred which would, individually or in the aggregate, result in a material
adverse effect on the Schlumberger Seismic Business, and Schlumberger has not
taken any action (or omitted to take any action) which, if such action or
omission occurred after the execution of this Agreement, would result in a
violation by Schlumberger of Section 6.1. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ and
its Affiliates have caused the Schlumberger Seismic Business to be conducted in
the ordinary course consistent with its past practice (including with respect to
the collection of receivables, payment of payables and other liabilities,
advertising activities, sales practices (including promotions, discounts and
concessions), inventory levels, Multiclient Survey Libraries, accounting
policies (except that Schlumberger has changed its accounting estimates with
respect to its Multiclient Survey Libraries as set forth on Schedule 4.7 to the
Schlumberger Disclosure Letter) and contributions to or accruals to or in
respect of Employee Benefit Plans).
4.8 Schlumberger Subsidiaries. Schedule 4.8 to the Schlumberger
Disclosure Letter sets forth a list of each Schlumberger Subsidiary, together
with the authorized, issued and outstanding equity capitalization of each
Schlumberger Subsidiary (the "SCHLUMBERGER SUBSIDIARIES INTERESTS").
Schlumberger is the indirect beneficial owner of all of the issued and
outstanding Schlumberger Subsidiaries Interests free and clear of all Liens.
Except for the Schlumberger Subsidiaries Interests, there are no shares of
capital stock or other equity securities of any of the Schlumberger Subsidiaries
issued and outstanding. The Schlumberger Subsidiaries Interests have not been
issued in violation of, and the Schlumberger Subsidiaries Interests are not
subject to, any purchase option, call, right of first refusal, preemptive,
subscription or similar rights under any provision of Applicable Law, the
Charter Documents of Schlumberger or the Schlumberger Subsidiaries or any
Contract to which Schlumberger or any of the Schlumberger Subsidiaries is a
party or is otherwise bound. There are no outstanding warrants, options, rights,
"phantom" stock rights, agreements, convertible or exchangeable securities or
other commitments (other than this Agreement) pursuant to which any of the
Schlumberger Subsidiaries is or may become obligated to issue, sell, purchase,
return or redeem any shares of capital stock or other equity securities. There
are no equity securities of any of the Schlumberger Subsidiaries reserved for
issuance for any purpose. There are no outstanding bonds, debentures, notes or
other securities having the right to vote on any matters on which stockholders
or equity owners of any of the Schlumberger Subsidiaries may vote.
-37-
43
4.9 Real Property.
(a) Title.
(i) Set forth on Schedule 4.9 to the Schlumberger
Disclosure Letter is a list of all owned real property included in the
Schlumberger Transferred Assets (the "SCHLUMBERGER OWNED REAL
PROPERTY") and a list of all leasehold estates in all leased real
property included in the Schlumberger Transferred Assets (the
"SCHLUMBERGER LEASED REAL PROPERTY"). Schedule 4.9 also identifies all
Schlumberger Owned Real Property and Schlumberger Leased Real Property
that also is used by other businesses of Schlumberger. No Schlumberger
Owned Real Property is leased to any third party, and no Schlumberger
Leased Real Property is subleased to any third party. Schlumberger,
SOHL, SPLC, SLBV, STC or a Schlumberger Transferring Entity, as
applicable, has (A) good and indefeasible fee title to all Schlumberger
Owned Real Property, (B) good and valid title to the leasehold estates
in all Schlumberger Leased Real Property and (C) good and valid title
to all other real property rights included in the Schlumberger
Transferred Assets (the "SCHLUMBERGER OTHER REAL PROPERTY RIGHTS"), in
the case of each of clauses (A), (B) and (C) above, free and clear of
all Liens, subject only to Permitted Encumbrances.
(ii) Schlumberger, SOHL, SPLC, SLBV, STC or a
Schlumberger Transferring Entity, as applicable, has good and valid
title to (A) all rights of way included in the Schlumberger Owned Real
Property, and (B) all improvements on any such rights of way that are
considered real property for state law purposes, in each case free and
clear of all Liens, subject only to Permitted Encumbrances.
(b) Schlumberger Real Property Leases. Each of the leases
relating to the Schlumberger Leased Real Property (each, a "SCHLUMBERGER REAL
PROPERTY LEASE") is in full force and effect and constitutes the legal, valid
and binding obligations of Schlumberger or its Affiliates that are parties
thereto and, to the knowledge of Schlumberger, the other parties thereto,
enforceable against Schlumberger and such Affiliates and, to the knowledge of
Schlumberger, the other parties thereto, in accordance with their respective
terms.
(c) No Other Realty. Except for the Schlumberger Owned Real
Property, the Schlumberger Leased Real Property and the Schlumberger Other Real
Property Rights, neither Schlumberger nor any Affiliate of Schlumberger owns or
leases any real property used or held for use primarily in or related primarily
to or necessary for the operation or conduct of the Schlumberger Seismic
Business or has any options to acquire any fee interest or leasehold interest in
any real property for use primarily in or related primarily to or necessary for
the operation or conduct of the Schlumberger Seismic Business.
(d) No Claims. There are no pending or, to the knowledge of
Schlumberger, threatened condemnation, eminent domain or similar proceedings
affecting the Schlumberger Owned Real Property, the Schlumberger Leased Real
Property or the Schlumberger Other Real Property Rights. There are no existing
public improvements which may reasonably be expected to result in any special
assessment against the Schlumberger Owned Real Property.
-38-
44
(e) Title Exceptions. All utility easements, rights of access
and other easements and similar rights serving the Schlumberger Owned Real
Property are legally enforceable to permit the operation of the Schlumberger
Seismic Business in substantially the manner in which the Schlumberger Seismic
Business is currently operated. Other than Permitted Encumbrances, there are no
encroachments upon the Schlumberger Owned Real Property and no encroachments of
any improvements composing the Schlumberger Owned Real Property onto adjacent
property, except for such encroachments as would not, in the aggregate, have a
material adverse effect on a particular item of real property. The improvements
to the Schlumberger Owned Real Property (and the current uses thereof) do not
violate set-back, building or side lines, or any applicable land use covenants,
zoning regulations, or similar enforceable restrictions, nor do they encroach on
any easements located on the Schlumberger Owned Real Property.
4.10 Title to Personal Property. Schlumberger, SOHL, SPLC, SLBV, STC
and the Schlumberger Transferring Entities have good and valid title to all
Personal Property included in the Schlumberger Transferred Assets, in each case,
free and clear of all Liens, subject only to Permitted Encumbrances.
4.11 Schlumberger Governmental Approvals. (i) To the knowledge of
Schlumberger, there are no Governmental Approvals necessary for the operation of
the Schlumberger Seismic Business which Schlumberger or one of its Affiliates
does not possess, (ii) there is no proceeding pending or, to the knowledge of
Schlumberger, threatened under which any Governmental Approvals that have been
issued or granted to Schlumberger or one of its Affiliates in connection with
the operation of the Schlumberger Seismic Business (the "SCHLUMBERGER
GOVERNMENTAL APPROVALS") may be revoked, terminated or suspended, nor, to the
knowledge of Schlumberger, is there any reasonable grounds for the revocation,
termination or suspension of any Schlumberger Governmental Approvals, and (iii)
no third-party consents are required for the assignment or transfer of each of
the Schlumberger Governmental Approvals to the Venture Entities.
4.12 Taxes.
(a) Liens for Unpaid Taxes. Except with respect to Permitted
Encumbrances, (i) there are no Liens for unpaid Taxes on any of the Schlumberger
Transferred Assets, (ii) no Claim has been made by any Governmental Authority
which could give rise to any such Lien, (iii) none of the Schlumberger
Transferred Assets is property that is required to be treated as owned by any
other Person pursuant to the so-called "safe harbor lease" provisions of former
Section 168(f)(8) of the Code and (iv) none of the Schlumberger Transferred
Assets directly or indirectly secures any debt the interest on which is tax
exempt under Section 103(a) of the Code.
(b) Payment of Taxes. Insofar as concerns the Schlumberger
Seismic Business, (i) each of the Schlumberger Subsidiaries has timely filed or
will timely file with the appropriate taxing authority all returns required to
be filed on or prior to the Closing Date, and each such return was or will be
complete and correct in all material respects, (ii) all Taxes shown on such
returns as due and payable or for which any of the Schlumberger Subsidiaries are
or could otherwise be held liable, or which are or could otherwise become
chargeable as an encumbrance upon any of the Schlumberger Transferred Assets,
have been or will be duly and timely paid by Schlumberger or a
-39-
45
Schlumberger Subsidiary, (iii) no Tax audits or other administrative proceedings
or court proceedings are pending with regard to any Taxes for which any of the
Schlumberger Subsidiaries may be liable or for which an owner of a Schlumberger
Subsidiary may be liable as a result of such ownership, (iv) none of the
Schlumberger Subsidiaries or owners thereof has entered into any agreement with
any Governmental Authority extending the period for assessment or collection of
any Taxes, (v) no Person has made with respect to any of the Schlumberger
Subsidiaries, or any Schlumberger Transferred Assets held by any of the
Schlumberger Subsidiaries, any consent under Section 341 of the Code, (vi) none
of the Schlumberger Subsidiaries is a party to an agreement that provides for
the payment of any amount that would constitute a "parachute payment" within the
meaning of Section 280G of the Code, and (vii) none of the Schlumberger
Subsidiaries is a party to or is bound by or has any obligation under any
Tax-sharing agreement, Tax indemnity agreement or similar agreement or
arrangement.
4.13 Employees. Schedule 4.13 to the Schlumberger Disclosure Letter
sets forth the names and titles of each Schlumberger Transferred Employee. There
are no discrimination complaints, employment-related complaints or any other
kind of labor-related disputes against Schlumberger, SOHL, SPLC, SLBV, STC or
any Schlumberger Transferring Entity in connection with the Schlumberger Seismic
Business pending before or, to the knowledge of Schlumberger, threatened before
any Governmental Authority, and, to the knowledge of Schlumberger, no dispute
respecting minimum wage or overtime Claims exists. The Schlumberger Seismic
Business has not experienced any labor disputes or any work stoppage due to
labor disagreements within the past three years. With respect to the
Schlumberger Seismic Business: (i) there is no unfair labor practice charge or
complaint against Schlumberger, SOHL, SPLC, SLBV, STC or any Schlumberger
Transferring Entity actually pending or, to the knowledge of Schlumberger,
threatened before the National Labor Relations Board or similar agencies in
non-U.S. jurisdictions; (ii) there is no labor strike, slowdown or stoppage
actually pending or, to the knowledge of Schlumberger, threatened against or
affecting Schlumberger, SOHL, SPLC, SLBV, STC or any Schlumberger Transferring
Entity; and (iii) no attempt to organize any of the Schlumberger Transferred
Employees has resulted in an election within the past three years or, to the
knowledge of Schlumberger, is threatened respecting any of the Schlumberger
Transferred Employees. The Schlumberger Seismic Business is not now, and has not
at any time within the past three years been, subject to any collective
bargaining agreement, Contract, letter of understanding or other similar
arrangement with any labor union or organization.
4.14 Compliance with Laws. The Schlumberger Transferred Assets are
being operated by Schlumberger, SOHL, SPLC, SLBV, STC or a Schlumberger
Transferring Entity, as the case may be, in compliance with all Applicable Laws,
except for such noncompliance as would not, in the aggregate, have a material
adverse effect on the Schlumberger Seismic Business. Neither Schlumberger nor
any of its Affiliates has received any notice from any Governmental Authority
that the operations of the Schlumberger Seismic Business are being conducted in
violation of any Applicable Law or is the subject of any investigation or review
pending or threatened by any Governmental Authority relating to any alleged
violation. There is no outstanding order, writ, judgment, stipulation,
injunction, decree, determination, award or other order of any Governmental
Authority against Schlumberger or its Affiliates that relates to the
Schlumberger Transferred Assets.
-40-
46
4.15 Legal Proceedings. There are no Claims pending or threatened
against Schlumberger or any of its Affiliates before any Governmental Authority
(i) seeking to prevent or delay the Closing or (ii) relating to the Schlumberger
Seismic Business.
4.16 Sufficiency and Condition of the Schlumberger Transferred Assets.
(a) Sufficiency. The Schlumberger Transferred Assets, together
with the Schlumberger Retained IP and the services being provided under the
Shared Services Agreement, constitute all property and other rights necessary to
operate and conduct the Schlumberger Seismic Business in substantially the same
manner as it is currently being operated and conducted.
(b) Condition. All of the material Personal Property currently
used in the Schlumberger Seismic Business and included in the Schlumberger
Transferred Assets is in good operating condition and repair (ordinary wear and
tear excepted). The material Personal Property currently used in the
Schlumberger Seismic Business and included in the Schlumberger Transferred
Assets has been maintained in a manner consistent with industry practice.
4.17 Material Contracts. Schedule 4.17 to the Schlumberger Disclosure
Letter contains a correct and complete list as of the date of this Agreement of
all the Contracts used or held for use primarily in or related primarily to the
operation or conduct of the Schlumberger Seismic Business of the following types
that are to be transferred to and assumed (or, in the case of Guarantees,
replaced as mutually agreed) by the Venture Entities as of the Closing Date and
to which Schlumberger or any of its Affiliates is a party or to which any of the
Schlumberger Transferred Assets are subject (each, a "SCHLUMBERGER MATERIAL
CONTRACT"):
(a) any indenture, note, loan or credit agreement or other
Contract relating to the borrowing of money or to the direct or indirect
Guarantee or assumption of the obligation of any other Person, including any
arrangement which has the economic effect, although not the legal form of a
Guarantee;
(b) any Contract which is expected to involve the payment of
an amount in excess of US$250,000 or receipt of an amount in excess of
US$100,000;
(c) any joint venture, partnership or similar organizational
Contract involving a sharing of profits or losses related to all or any portion
of the Schlumberger Seismic Business;
(d) any Contract granting to any Person a right of first
refusal or option to purchase or acquire any Schlumberger Transferred Asset or
group of Schlumberger Transferred Assets;
(e) any agency, sponsor, consultant or commission agreement
where any Person is providing such services to the Schlumberger Seismic
Business;
(f) any Guarantee (other than any indemnification Contract)
with respect to which Schlumberger or any of its Affiliates is the obligor in
respect of an obligation that exceeds US$100,000;
-41-
47
(g) any indemnification Contract with respect to which
Schlumberger or any of its Affiliates is the obligor (including in connection
with the sale of assets) that was made outside the ordinary course of business;
(h) any Contract or consent decree which imposes or could by
its terms impose any material restrictions on the Venture Entities with respect
to their geographical areas of operations or scope or type of business;
(i) any Contract involving swaps, futures, derivatives or
similar instruments, regardless of value, except such Contracts entered into as
a hedging activity in the ordinary course of business consistent with
Schlumberger's past practice and internal policy guidelines;
(j) any collective bargaining agreement;
(k) any Contract pursuant to which a Governmental Authority is
providing tax abatements or other similar economic incentives in connection with
the Schlumberger Seismic Business;
(l) any seismic data processing software license agreement
which is material to the Schlumberger Seismic Business;
(m) any material Contract between Schlumberger or one of its
Affiliates and another Affiliate relating to the Schlumberger Seismic Business;
or
(n) any Contract not otherwise specified in paragraphs (a)
through (m) above that is material to the Schlumberger Seismic Business, taken
as a whole.
Schlumberger and its Affiliates have duly performed and complied in all
material respects with their respective obligations under each Schlumberger
Material Contract. None of Schlumberger or any of its Affiliates has received
any notice of termination or default from any other party to such Schlumberger
Material Contract. To the knowledge of Schlumberger, no other party to such
Schlumberger Material Contract is in default of its obligations thereunder. Each
such Schlumberger Material Contract may be assigned to the Venture Entities
without the consent of any other party thereto.
4.18 Proprietary Rights.
(a) Schedule 4.18(a) to the Schlumberger Disclosure Letter
sets forth a correct and complete list of the following items of Intellectual
Property used or held for use primarily in or related primarily to and, in each
case, material to the operation or conduct of the Schlumberger Seismic Business
(collectively, the "SCHLUMBERGER PROPRIETARY RIGHTS"): (i) patents and patent
applications; (ii) trademarks, trade names and service marks; (iii) registered
copyrights; and (iv) documented invention disclosures, in each case whether
registered or unregistered, and U.S. or non-U.S.
-42-
48
(b) (i) Schlumberger or its Affiliates own or possess adequate
licenses or other valid rights to use all the Schlumberger Proprietary Rights;
(ii) the Schlumberger Proprietary Rights included in the Schlumberger
Transferred Assets, together with the Schlumberger Retained IP, constitute all
such rights necessary to conduct the Schlumberger Seismic Business in
substantially the same manner as it is presently being conducted; (iii) the
validity of the Schlumberger Proprietary Rights and the rights therein of
Schlumberger or any of its Affiliates have not been questioned in any litigation
to which Schlumberger or any of its Affiliates is a party, nor, to the knowledge
of Schlumberger, is any such litigation threatened; (iv) to the knowledge of
Schlumberger, the conduct of the Schlumberger Seismic Business does not conflict
with any Intellectual Property of others; and (v) the consummation of the
transactions contemplated hereby will not conflict with, alter or impair any
Schlumberger Proprietary Rights.
(c) To Schlumberger's knowledge, no use of any Schlumberger
Proprietary Rights has heretofore been, or is now being, made by any Person
other than Schlumberger and its Affiliates, and no infringement of any
Schlumberger Proprietary Rights has occurred or is continuing. No director or
officer of Schlumberger has any ownership interest in any of the Schlumberger
Proprietary Rights.
4.19 Employee Benefit Matters.
(a) Copies of Documents. Schlumberger has furnished to ▇▇▇▇▇
▇▇▇▇▇▇ true and complete copies of the following items relating to each
Schlumberger Benefit Plan: (i) the governing plan documents, including all
amendments thereto; (ii) the most recent summary plan description and summary of
material modifications; (iii) the most recent Form 5500 Annual Report filed with
the IRS, together with attachments thereto or similar reports filed in non-U.S.
jurisdictions; and (iv) if applicable, the most recent actuarial report.
(b) Pension Plans. No Schlumberger Benefit Plan that is a
Pension Benefit Plan has an accumulated or waived funding deficiency within the
meaning of Section 412 of the Code, and no liability (including contingent
liability) has been incurred, directly or indirectly, to or on account of any
such Pension Benefit Plan pursuant to Title IV of ERISA (excluding liability for
benefit Claims and funding obligations payable in the ordinary course of
business and liability for PBGC insurance premiums payable in the ordinary
course of business) and the present value of the liabilities accrued thereunder,
as of the most recent valuation date determined on an accumulated benefit
obligation basis pursuant to Statement of Financial Accounting Standards No. 87,
did not exceed the fair market value of the assets held in trust thereunder as
of such date. No proceedings have been instituted to terminate any Schlumberger
Benefit Plan that is a Pension Benefit Plan, and no condition exists that
presents a risk to Schlumberger or any ERISA Affiliate of Schlumberger of
incurring a liability to or on account of a Pension Benefit Plan pursuant to
Title IV of ERISA (excluding liability for benefit Claims and funding
obligations payable in the ordinary course of business and liability for PBGC
insurance premiums payable in the ordinary course of business). None of the
Schlumberger Transferred Assets is the subject of any Lien arising under Section
302(f) of ERISA or Section 412(n) of the Code.
-43-
49
(c) Compliance with Applicable Laws. Each Schlumberger Benefit
Plan and all related trusts, insurance Contracts and funds have been maintained,
funded and administered in substantial compliance with all Applicable Laws. No
Claims with respect to Schlumberger Benefit Plans (other than routine Claims for
benefits) or with respect to any fiduciary or other Person dealing with any
Schlumberger Benefit Plan are pending or threatened. Schlumberger and all ERISA
Affiliates of Schlumberger have complied with the requirements of Sections 4980B
and 4980D of the Code with respect to employees and former employees of the
Schlumberger Seismic Business.
(d) No Multiemployer Plan. Neither Schlumberger nor any ERISA
Affiliate of Schlumberger has any obligation to contribute to or has any
liability or potential liability (including, but not limited to, actual or
potential withdrawal liability) with respect to any "multiemployer plan," as
such term is defined in Section 3(37) of ERISA, or with respect to any employee
benefit plan of the type described in Sections 4063 and 4064 of ERISA or Section
413(c) of the Code, in each case, that is a Schlumberger Benefit Plan.
(e) No Excess Parachute Payments. No Schlumberger Benefit Plan
provides, and neither Schlumberger nor any ERISA Affiliate of Schlumberger is
otherwise obligated to provide, any amount constituting an excess parachute
payment (as defined in Section 280G of the Code) with respect to any current or
former employee of the Schlumberger Seismic Business that will become a
liability of a Venture Entity.
4.20 No Stock of U.S. Corporation. As of immediately prior to the
Closing Date, none of the Schlumberger Transferred Assets will consist of the
stock of a corporation or other entity which is treated as a corporation under
the income tax laws of the U.S. or any state or political subdivision thereof.
4.21 Environmental Issues. To the knowledge of Schlumberger:
(a) (i) Schlumberger has made available for inspection and
review by ▇▇▇▇▇ ▇▇▇▇▇▇ copies of all environmental consultants' reports (if any)
in its possession that describe or address environmental contamination to any
Schlumberger Owned Real Property or Schlumberger Leased Real Property; (ii)
there are no Hazardous Substances at, in, under or migrating to or from any
Schlumberger Owned Real Property or Schlumberger Leased Real Property which,
either because of the nature of such Hazardous Substances or their quantities,
(x) create a risk of exposure to Hazardous Substances which is significantly
deleterious to human health; (y) create a risk of significant damage to natural
resources; or (z) under Applicable Law, are required to be removed or
remediated; (iii) with respect to all Hazardous Substances that have been
produced, used or stored by the Schlumberger Seismic Business within the past
five (5) years on the Schlumberger Owned Real Property or Schlumberger Leased
Real Property, there are no violations of Environmental, Health and Safety
Requirements arising from the Schlumberger Seismic Business having stored,
labeled, handled, released, treated, manufactured, processed, transported,
documented and disposed of such Hazardous Substances; (iv) neither Schlumberger
nor any of its Affiliates has received any written communications from any
Governmental Authority expressly claiming or alleging that the Schlumberger
Seismic Business is or has been operated within the past five (5) years in
violation of any Environmental, Health and Safety Requirements; and (v) Schedule
4.21(a) to the Schlumberger
-44-
50
Disclosure Letter describes all conditions known to Schlumberger or its
Affiliates which could reasonably result in the assertion of a Claim under any
Environmental, Health and Safety Requirement with respect to the Schlumberger
Transferred Assets, including (x) known existing soil or groundwater
contamination at, on or beneath all or any part of a Schlumberger Owned Real
Property or Schlumberger Leased Real Property; (y) known existing soil or
groundwater contamination relating to waste disposal or other activities of the
Schlumberger Seismic Business prior to Closing; and (z) any known noncompliance
of the Schlumberger Transferred Assets or any part thereof under any
Environmental, Health and Safety Requirement.
(b) There is no friable asbestos or materials containing
polychlorinated biphenyls at or on any of the Schlumberger Owned Real Property.
4.22 Relations with Governments, Etc. Neither Schlumberger, SOHL, SPLC,
SLBV, STC nor any Schlumberger Transferring Entity has made, offered or agreed
to offer a Prohibited Payment in connection with the Schlumberger Seismic
Business that would cause any such entity to be in violation of the FCPA or any
Applicable Law of similar effect.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇ ▇▇▇▇▇▇
Except as set forth in the ▇▇▇▇▇ ▇▇▇▇▇▇ Disclosure Letter, ▇▇▇▇▇ ▇▇▇▇▇▇
represents, warrants and covenants to Schlumberger, SOHL, SPLC, SLBV and STC, as
of the date of this Agreement, that the following are true and correct:
5.1 Due Organization, Good Standing and Power. ▇▇▇▇▇ ▇▇▇▇▇▇ is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority under Applicable Law and its Charter Documents to own or lease and to
operate its assets and to conduct or cause to be conducted the ▇▇▇▇▇ ▇▇▇▇▇▇
Seismic Business as it is now being conducted by ▇▇▇▇▇ ▇▇▇▇▇▇. Each subsidiary
of ▇▇▇▇▇ ▇▇▇▇▇▇ that is being contributed or transferred to the Venture Entities
as a part of the ▇▇▇▇▇ ▇▇▇▇▇▇ Seismic Business (each, a "▇▇▇▇▇ ▇▇▇▇▇▇
SUBSIDIARY") and each of the other Affiliates of ▇▇▇▇▇ ▇▇▇▇▇▇ that is
transferring or contributing assets or liabilities to the Venture Entities
pursuant to this Agreement (collectively, the "▇▇▇▇▇ ▇▇▇▇▇▇ TRANSFERRING
AFFILIATES" and, together with the ▇▇▇▇▇ ▇▇▇▇▇▇ Subsidiaries, the "▇▇▇▇▇ ▇▇▇▇▇▇
TRANSFERRING ENTITIES") is, or will be at the Closing Date, a corporation,
limited liability company or other entity duly organized and validly existing
under the laws of its jurisdiction of organization. Each of the ▇▇▇▇▇ ▇▇▇▇▇▇
Transferring Entities has all requisite corporate or other power and authority
to own or lease and to operate its assets and to conduct the ▇▇▇▇▇ ▇▇▇▇▇▇
Seismic Business now being or to be conducted by it at the time of the Closing.
Each of ▇▇▇▇▇ ▇▇▇▇▇▇ and each ▇▇▇▇▇ ▇▇▇▇▇▇ Transferring Entity is, or will be at
the Closing Date, duly authorized, qualified or licensed to do business as a
foreign corporation or other organization in good standing in each of the
jurisdictions in which its right, title or interest in or to any of the ▇▇▇▇▇
▇▇▇▇▇▇ Transferred Assets held by it or the ▇▇▇▇▇ ▇▇▇▇▇▇ Seismic Business
conducted by it requires such authorization, qualification or licensing, except
where the failure to have such authorization, qualification or licensing would
not have a material adverse effect on the ▇▇▇▇▇ ▇▇▇▇▇▇ Seismic Business. ▇▇▇▇▇
▇▇▇▇▇▇ has all requisite corporate power and authority under Applicable Law and
its Charter Documents to enter into this Agreement and the other
-45-
51
Transaction Documents to which it is or will be a party and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. Each ▇▇▇▇▇ ▇▇▇▇▇▇ Transferring Entity has, or
will have at the Closing Date, all corporate or other requisite power and
authority under Applicable Law and its Charter Documents to enter into the
Transaction Documents to which it is or will be a party, to perform its
obligations thereunder and to consummate the transactions contemplated thereby.
5.2 Authorization and Validity of Agreements. The execution and
delivery by ▇▇▇▇▇ ▇▇▇▇▇▇ of this Agreement, the execution and delivery by ▇▇▇▇▇
▇▇▇▇▇▇ and each ▇▇▇▇▇ ▇▇▇▇▇▇ Transferring Entity of the other Transaction
Documents to which any of them is or will be a party and the consummation by
them of the transactions contemplated hereby and thereby have been (in the case
of ▇▇▇▇▇ ▇▇▇▇▇▇), or will be at the Closing Date (in the case of each ▇▇▇▇▇
▇▇▇▇▇▇ Transferring Entity), duly authorized and approved by all necessary
corporate or other action under Applicable Law and the relevant Charter
Documents on the part of ▇▇▇▇▇ ▇▇▇▇▇▇ and such ▇▇▇▇▇ ▇▇▇▇▇▇ Transferring Entity,
as the case may be, and do not and will not require the approval of the
stockholders of ▇▇▇▇▇ ▇▇▇▇▇▇. This Agreement has been duly executed and
delivered by ▇▇▇▇▇ ▇▇▇▇▇▇, and at the Closing each of the other Transaction
Documents to which ▇▇▇▇▇ ▇▇▇▇▇▇ or any ▇▇▇▇▇ ▇▇▇▇▇▇ Transferring Entity is a
party will have been duly executed and delivered by ▇▇▇▇▇ ▇▇▇▇▇▇ and such ▇▇▇▇▇
▇▇▇▇▇▇ Transferring Entity, as the case may be. This Agreement is the legal,
valid and binding obligation of ▇▇▇▇▇ ▇▇▇▇▇▇, enforceable against it in
accordance with its terms, except as that enforceability may be (i) limited by
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and (ii) subject
to general principles of equity (regardless of whether that enforceability is
considered in a proceeding in equity or at law). At the Closing, each other
Transaction Document to which ▇▇▇▇▇ ▇▇▇▇▇▇ or any ▇▇▇▇▇ ▇▇▇▇▇▇ Transferring
Entity is a party will be the legal, valid and binding obligation of ▇▇▇▇▇
▇▇▇▇▇▇ and such ▇▇▇▇▇ ▇▇▇▇▇▇ Transferring Entity, as the case may be, in each
case enforceable against ▇▇▇▇▇ ▇▇▇▇▇▇ and such ▇▇▇▇▇ ▇▇▇▇▇▇ Transferring Entity
in accordance with its terms, except as that enforceability may be (i) limited
by any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and (ii) subject
to general principles of equity (regardless of whether that enforceability is
considered in a proceeding in equity or at law).
5.3 Lack of Conflicts. Neither the execution and delivery by ▇▇▇▇▇
▇▇▇▇▇▇ of this Agreement, nor the execution and delivery by ▇▇▇▇▇ ▇▇▇▇▇▇ or any
▇▇▇▇▇ ▇▇▇▇▇▇ Transferring Entity of any other Transaction Document to which
▇▇▇▇▇ ▇▇▇▇▇▇ or any such ▇▇▇▇▇ ▇▇▇▇▇▇ Transferring Entity is or will be a party,
nor the consummation by them of the transactions contemplated hereby and
thereby, does or will (i) conflict with, or result in the breach of any
provision of, the Charter Documents of ▇▇▇▇▇ ▇▇▇▇▇▇ or any such ▇▇▇▇▇ ▇▇▇▇▇▇
Transferring Entity, (ii) violate any Applicable Law or any permit, order,
award, injunction, decree or judgment of any Governmental Authority applicable
to or binding upon ▇▇▇▇▇ ▇▇▇▇▇▇ or any such ▇▇▇▇▇ ▇▇▇▇▇▇ Transferring Entity or
to which any of their respective properties or assets is subject, (iii) result
in the creation of any Lien upon any of the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Assets or
(iv) violate, conflict with or result in the breach or termination of, or
otherwise give any other Person the right to terminate, or constitute a default,
event of default or an event that with notice, lapse of time or both,
-46-
52
would constitute a default or event of default under the terms of, any Contract
included in the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Assets or by which any of the
Schlumberger Transferred Assets is subject.
5.4 No Consents. Schedule 5.4 to the ▇▇▇▇▇ ▇▇▇▇▇▇ Disclosure Letter
sets forth all Governmental Approvals or other material consents known by ▇▇▇▇▇
▇▇▇▇▇▇ to be required in connection with the execution and delivery by ▇▇▇▇▇
▇▇▇▇▇▇ of this Agreement or the Closing of the transactions contemplated by this
Agreement or any other Transaction Document. No Governmental Approvals or other
consents are required for the execution and delivery by ▇▇▇▇▇ ▇▇▇▇▇▇ of this
Agreement, except for such Governmental Approvals or consents as would not, in
the aggregate, have a material adverse effect on the ▇▇▇▇▇ ▇▇▇▇▇▇ Seismic
Business. At the Closing, no Governmental Approval or other consent will be
required by ▇▇▇▇▇ ▇▇▇▇▇▇ or any ▇▇▇▇▇ ▇▇▇▇▇▇ Transferring Entity for the
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents to which ▇▇▇▇▇ ▇▇▇▇▇▇ or any such ▇▇▇▇▇ ▇▇▇▇▇▇
Transferring Entity is a party, except for such Governmental Approvals or
consents as would not, in the aggregate, have a material adverse effect on the
▇▇▇▇▇ ▇▇▇▇▇▇ Seismic Business.
5.5 Certain Fees. Neither ▇▇▇▇▇ ▇▇▇▇▇▇ nor any of its Affiliates nor
any of their officers, directors or employees, on behalf of ▇▇▇▇▇ ▇▇▇▇▇▇ or such
Affiliates, has employed any broker or finder or incurred any other liability
for any brokerage fees, commissions or finders' fees in connection with the
transactions contemplated hereby.
5.6 Financial Statements. The true and correct net book value
determined in accordance with GAAP consistently applied of all the Fixed Assets
and Inventory of ▇▇▇▇▇ ▇▇▇▇▇▇ as of March 31, 2000 is set forth in the March 31
Balance Sheet of ▇▇▇▇▇ ▇▇▇▇▇▇.
5.7 No Material Changes. Since March 31, 2000, no change in the ▇▇▇▇▇
▇▇▇▇▇▇ Seismic Business or the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Assets has occurred
which would, individually or in the aggregate, result in a material adverse
effect on the ▇▇▇▇▇ ▇▇▇▇▇▇ Seismic Business, and ▇▇▇▇▇ ▇▇▇▇▇▇ has not taken any
action (or omitted to take any action) which, if such action or omission
occurred after the execution of this Agreement, would result in a violation by
▇▇▇▇▇ ▇▇▇▇▇▇ of Section 6.1. Since March 31, 2000, ▇▇▇▇▇ ▇▇▇▇▇▇ and its
Affiliates have caused the ▇▇▇▇▇ ▇▇▇▇▇▇ Seismic Business to be conducted in the
ordinary course consistent with its past practice (including with respect to the
collection of receivables, payment of payables and other liabilities,
advertising activities, sales practices (including promotions, discounts and
concessions), inventory levels, Multiclient Survey Libraries, accounting
policies and contributions to or accruals to or in respect of Employee Benefit
Plans).
5.8 ▇▇▇▇▇ ▇▇▇▇▇▇ Subsidiaries. Schedule 5.8 to the ▇▇▇▇▇ ▇▇▇▇▇▇
Disclosure Letter sets forth a list of each ▇▇▇▇▇ ▇▇▇▇▇▇ Subsidiary, together
with the authorized, issued and outstanding equity capitalization of each ▇▇▇▇▇
▇▇▇▇▇▇ Subsidiary (the "▇▇▇▇▇ ▇▇▇▇▇▇ SUBSIDIARIES INTERESTS"). ▇▇▇▇▇ ▇▇▇▇▇▇ is
the indirect beneficial owner of all of the issued and outstanding ▇▇▇▇▇ ▇▇▇▇▇▇
Subsidiaries Interests free and clear of all Liens. Except for the ▇▇▇▇▇ ▇▇▇▇▇▇
Subsidiaries Interests, there are no shares of capital stock or other equity
securities of any of the ▇▇▇▇▇ ▇▇▇▇▇▇ Subsidiaries issued and outstanding. The
▇▇▇▇▇ ▇▇▇▇▇▇ Subsidiaries Interests have not been issued in violation of, and
the ▇▇▇▇▇ ▇▇▇▇▇▇ Subsidiaries Interests are not subject to, any purchase option,
-47-
53
call, right of first refusal, preemptive, subscription or similar rights under
any provision of Applicable Law, the Charter Documents of ▇▇▇▇▇ ▇▇▇▇▇▇ or the
▇▇▇▇▇ ▇▇▇▇▇▇ Subsidiaries or any Contract to which ▇▇▇▇▇ ▇▇▇▇▇▇ or any of the
▇▇▇▇▇ ▇▇▇▇▇▇ Subsidiaries is a party or is otherwise bound. There are no
outstanding warrants, options, rights, "phantom" stock rights, agreements,
convertible or exchangeable securities or other commitments (other than this
Agreement) pursuant to which any of the ▇▇▇▇▇ ▇▇▇▇▇▇ Subsidiaries is or may
become obligated to issue, sell, purchase, return or redeem any shares of
capital stock or other equity securities. There are no equity securities of any
of the ▇▇▇▇▇ ▇▇▇▇▇▇ Subsidiaries reserved for issuance for any purpose. There
are no outstanding bonds, debentures, notes or other securities having the right
to vote on any matters on which stockholders or equity owners of any of the
▇▇▇▇▇ ▇▇▇▇▇▇ Subsidiaries may vote.
5.9 Real Property.
(a) Title.
(i) Set forth on Schedule 5.9 of the ▇▇▇▇▇ ▇▇▇▇▇▇
Disclosure Letter is a list of all owned real property included in the
▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Assets (the "▇▇▇▇▇ ▇▇▇▇▇▇ OWNED REAL
PROPERTY") and a list of all leasehold estates in all leased real
property included in the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Assets (the "▇▇▇▇▇
▇▇▇▇▇▇ LEASED REAL PROPERTY"). Schedule 5.9 also identifies all ▇▇▇▇▇
▇▇▇▇▇▇ Owned Real Property and ▇▇▇▇▇ ▇▇▇▇▇▇ Leased Real Property that
also is used by other businesses of ▇▇▇▇▇ ▇▇▇▇▇▇. No ▇▇▇▇▇ ▇▇▇▇▇▇ Owned
Real Property is leased to any third party, and no ▇▇▇▇▇ ▇▇▇▇▇▇ Leased
Real Property is subleased to any third party. ▇▇▇▇▇ ▇▇▇▇▇▇, or a ▇▇▇▇▇
▇▇▇▇▇▇ Transferring Entity, as applicable, has (A) good and
indefeasible fee title to all ▇▇▇▇▇ ▇▇▇▇▇▇ Owned Real Property, (B)
good and valid title to the leasehold estates in all ▇▇▇▇▇ ▇▇▇▇▇▇
Leased Real Property and (C) good and valid title to all other real
property rights included in the ▇▇▇▇▇ ▇▇▇▇▇▇ Transferred Assets (the
"▇▇▇▇▇ ▇▇▇▇▇▇ OTHER REAL PROPERTY RIGHTS"), in the case of each of
clauses (A), (B) and (C) above, free and clear of all Liens, subject
only to Permitted Encumbrances.
(ii) ▇▇▇▇▇ ▇▇▇▇▇▇ or a ▇▇▇▇▇ ▇▇▇▇▇▇ Transferring
Entity, as applicable, has good and valid title to (A) all rights of
way included in the ▇▇▇▇▇ ▇▇▇▇▇▇ Owned Real Property, and (B) all
improvements on any such rights of way that are considered real
property for state law purposes, in each case free and clear of all
Liens, subject only to Permitted Encumbrances.
(b) ▇▇▇▇▇ ▇▇▇▇▇▇ Real Property Leases. Each of the leases
relating to the ▇▇▇▇▇ ▇▇▇▇▇▇ Leased Real Property (each, a "▇▇▇▇▇ ▇▇▇▇▇▇ REAL
PROPERTY LEASE") is in full force and effect and constitutes the legal, valid
and binding obligations of ▇▇▇▇▇ ▇▇▇▇▇▇ or its Affiliates that are parties
thereto and, to the knowledge of ▇▇▇▇▇ ▇▇▇▇▇▇, the other parties thereto,
enforceable against ▇▇▇▇▇ ▇▇▇▇▇▇ and such Affiliates and, to the knowledge of
▇▇▇▇▇ ▇▇▇▇▇▇, the other parties thereto, in accordance with their respective
terms.
(c) No Other Realty. Except for the ▇▇▇▇▇ ▇▇▇▇▇▇ Owned Real
Property, the ▇▇▇▇▇ ▇▇▇▇▇▇ Leased Real Property and the ▇▇▇▇▇ ▇▇▇▇▇▇ Other Real
Property Rights, neither
-48-
54
▇▇▇▇▇ ▇▇▇▇▇▇ nor any Affiliate of ▇▇▇▇▇ ▇▇▇▇▇▇ owns or leases any real property
used or held for use primarily in or related primarily to or necessary for the
operation or conduct of the ▇▇▇▇▇ ▇▇▇▇▇▇ Seismic Business or has any options to
acquire any fee interest or leasehold interest in any real property for use
primarily in or related primarily to or necessary for the operation or conduct
of the ▇▇▇▇▇ ▇▇▇▇▇▇ Seismic Business.
(d) No Claims. There are no pending or, to the knowledge of
▇▇▇▇▇ ▇▇▇▇▇▇, threatened condemnation, eminent domain or similar proceedings
affecting the ▇▇▇▇▇ ▇▇▇▇▇▇ Owned Real Property, the ▇▇▇▇▇ ▇▇▇▇▇▇ Leased Real
Property or the ▇▇▇▇▇ ▇▇▇▇▇▇ Other Real Property Rights. There are no existing
public improvements which may reasonably be expected to result in any special
assessment against the ▇▇▇▇▇ Hughes Owned Real Property.
(e) Title Exceptions. All utility easements, rights of access
and other easements and similar rights serving the Baker Hughes Owned Real
Property are legally enforceable to permit the operation of the Baker Hughes
Seismic Business in substantially the manner in which the Baker Hughes Seismic
Business is currently operated. Other than Permitted Encumbrances, there are no
encroachments upon the Baker Hughes Owned Real Property and no encroachments of
any improvements composing the Baker Hughes Owned Real Property onto adjacent
property, except for such encroachments as would not, in the aggregate, have a
material adverse effect on a particular item of real property. The improvements
to the Baker Hughes Owned Real Property (and the current uses thereof) do not
violate set-back, building or side lines, or any applicable land use covenants,
zoning regulations, or similar enforceable restrictions nor do they encroach on
any easements located on the Baker Hughes Owned Real Property.
5.10 Title to Personal Property. Baker Hughes and the Baker Hughes
Transferring Entities have good and valid title to all Personal Property
included in the Baker Hughes Transferred Assets, in each case, free and clear of
all Liens, subject only to Permitted Encumbrances.
5.11 Baker Hughes Governmental Approvals. (i) To the knowledge of Baker
Hughes, there are no Governmental Approvals necessary for the operation of the
Baker Hughes Seismic Business which Baker Hughes or one of its Affiliates does
not possess, (ii) there is no proceeding pending or, to the knowledge of Baker
Hughes, threatened under which any Governmental Approvals that have been issued
or granted to Baker Hughes or one of its Affiliates in connection with the
operation of the Baker Hughes Seismic Business (the "BAKER HUGHES GOVERNMENTAL
APPROVALS"), may be revoked, terminated or suspended, nor, to the knowledge of
Baker Hughes, is there any reasonable grounds for the revocation, termination or
suspension of any Baker Hughes Governmental Approvals, and (iii) no third-party
consents are required for the assignment or transfer of each of the Baker Hughes
Governmental Approvals to the Venture Entities.
5.12 Taxes.
(a) Liens for Unpaid Taxes. Except with respect to Permitted
Encumbrances, (i) there are no Liens for unpaid Taxes on any of the Baker Hughes
Transferred Assets, (ii) no Claim has been made by any Governmental Authority
which could give rise to any such Lien, (iii) none of the Baker Hughes
Transferred Assets is property that is required to be treated as owned by any
other
-49-
55
Person pursuant to the so-called "safe harbor lease" provisions of former
Section 168(f)(8) of the Code and (iv) none of the Baker Hughes Transferred
Assets directly or indirectly secures any debt the interest on which is tax
exempt under Section 103(a) of the Code.
(b) Payment of Taxes. Insofar as concerns the Baker Hughes
Seismic Business, (i) each of the Baker Hughes Subsidiaries has timely filed or
will timely file with the appropriate taxing authority all returns required to
be filed on or prior to the Closing Date, and each such return was or will be
complete and correct in all material respects, (ii) all Taxes shown on such
returns as due and payable or for which any of the Baker Hughes Subsidiaries are
or could otherwise be held liable, or which are or could otherwise become
chargeable as an encumbrance upon any of the Baker Hughes Transferred Assets,
have been or will be duly and timely paid by Baker Hughes or a Baker Hughes
Subsidiary, (iii) no Tax audits or other administrative proceedings or court
proceedings are pending with regard to any Taxes for which any of the Baker
Hughes Subsidiaries may be liable or for which an owner of a Baker Hughes
Subsidiary may be liable as a result of such ownership, (iv) none of the Baker
Hughes Subsidiaries or owners thereof has entered into any agreement with any
Governmental Authority extending the period for assessment or collection of any
Taxes, (v) no Person has made with respect to any of the Baker Hughes
Subsidiaries, or any Baker Hughes Transferred Assets held by any of the Baker
Hughes Subsidiaries, any consent under Section 341 of the Code, (vi) none of the
Baker Hughes Subsidiaries is a party to an agreement that provides for the
payment of any amount that would constitute a "parachute payment" within the
meaning of Section 280G of the Code, and (vii) none of the Baker Hughes
Subsidiaries is a party to or is bound by or has any obligation under any
Tax-sharing agreement, Tax indemnity agreement or similar agreement or
arrangement.
5.13 Employees. Schedule 5.13 to the Baker Hughes Disclosure Letter
sets forth the names and titles of each Baker Hughes Transferred Employee. There
are no discrimination complaints, employment-related complaints or any other
kind of labor-related disputes against Baker Hughes or any Baker Hughes
Transferring Entity in connection with the Baker Hughes Seismic Business pending
before or, to the knowledge of Baker Hughes, threatened before any Governmental
Authority, and, to the knowledge of Baker of Hughes, no dispute respecting
minimum wage or overtime Claims exists. The Baker Hughes Seismic Business has
not experienced any labor disputes or any work stoppage due to labor
disagreements within the past three years. With respect to the Baker Hughes
Seismic Business: (i) there is no unfair labor practice charge or complaint
against Baker Hughes or any Baker Hughes Transferring Entity actually pending
or, to the knowledge of Baker Hughes, threatened before the National Labor
Relations Board or similar agencies in non-U.S. jurisdictions; (ii) there is no
labor strike, slowdown or stoppage actually pending or, to the knowledge of
Baker Hughes, threatened against or affecting Baker Hughes or any Baker Hughes
Transferring Entity; and (iii) no attempt to organize any of the Baker Hughes
Transferred Employees has resulted in an election within the past three years
or, to the knowledge of Baker Hughes, is threatened respecting any of the Baker
Hughes Transferred Employees. The Baker Hughes Seismic Business is not now, and
has not at any time within the past three years been, subject to any collective
bargaining agreement, Contract, letter of understanding or other similar
arrangement with any labor union or organization.
-50-
56
5.14 Compliance with Laws. The Baker Hughes Transferred Assets are
being operated by Baker Hughes or a Baker Hughes Transferring Entity, as the
case may be, in compliance with all Applicable Laws, except for such
noncompliance as would not, in the aggregate, have a material adverse effect on
the Baker Hughes Seismic Business. Neither Baker Hughes nor any of its
Affiliates has received any notice from any Governmental Authority that the
operations of the Baker Hughes Seismic Business are being conducted in violation
of any Applicable Law or is the subject of any investigation or review pending
or threatened by any Governmental Authority relating to any alleged violation.
There is no outstanding order, writ, judgment, stipulation, injunction, decree,
determination, award or other order of any Governmental Authority against Baker
Hughes or its Affiliates that relates to the Baker Hughes Transferred Assets.
5.15 Legal Proceedings. There are no Claims pending or threatened
against Baker Hughes or any of its Affiliates before any Governmental Authority
(i) seeking to prevent or delay the Closing or (ii) relating to the Baker Hughes
Seismic Business.
5.16 Sufficiency and Condition of the Baker Hughes Transferred Assets.
(a) Sufficiency. The Baker Hughes Transferred Assets, together
with the Baker Hughes Retained IP and the services being provided under the
Transition Services Agreement, constitute all property and other rights
necessary to operate and conduct the Baker Hughes Seismic Business in
substantially the same manner as it is currently being operated and conducted.
(b) Condition. All of the material Personal Property currently
used in the Baker Hughes Seismic Business and included in the Baker Hughes
Transferred Assets is in good operating condition and repair (ordinary wear and
tear excepted). The material Personal Property currently used in the Baker
Hughes Seismic Business and included in the Baker Hughes Transferred Assets has
been maintained in a manner consistent with industry practice.
5.17 Material Contracts. Schedule 5.17 to the Baker Hughes Disclosure
Letter contains a correct and complete list as of the date of this Agreement of
all the Contracts used or held for use primarily in or related primarily to the
operation or conduct of the Baker Hughes Seismic Business of the following types
that are to be transferred to and assumed (or, in the case of Guarantees,
replaced as mutually agreed) by the Venture Entities as of the Closing Date and
to which Baker Hughes or any of its Affiliates is a party or to which any of the
Baker Hughes Transferred Assets are subject (each, a "BAKER HUGHES MATERIAL
CONTRACT"):
(a) any indenture, note, loan or credit agreement or other
Contract relating to the borrowing of money or to the direct or indirect
Guarantee or assumption of the obligation of any other Person, including any
arrangement which has the economic effect, although not the legal form, of a
Guarantee;
(b) any Contract which is expected to involve the payment of
an amount in excess of US$250,000 or receipt of an amount in excess of
US$100,000;
-51-
57
(c) any joint venture, partnership or similar organizational
Contract involving a sharing of profits or losses related to all or any portion
of the Baker Hughes Seismic Business;
(d) any Contract granting to any Person a right of first
refusal or option to purchase or acquire any Baker Hughes Transferred Asset or
group of Baker Hughes Transferred Assets;
(e) any agency, sponsor, consultant or commission agreement
where any person is providing such services to the Baker Hughes Seismic
Business;
(f) any Guarantee (other than any indemnification Contract)
with respect to which Baker Hughes or any of its Affiliates is the obligor in
respect of an obligation that exceeds US$100,000;
(g) any indemnification Contract with respect to which Baker
Hughes or any of its Affiliates is the obligor (including in connection with the
sale of assets) that was made outside the ordinary course of business;
(h) any Contract or consent decree which imposes or could by
its terms impose any material restrictions on the Venture Entities with respect
to their geographical areas of operations or scope or type of business;
(i) any Contract involving swaps, futures, derivatives or
similar instruments, regardless of value, except such Contracts entered into as
a hedging activity in the ordinary course of business consistent with Baker
Hughes' past practice and internal policy guidelines;
(j) any collective bargaining agreement;
(k) any Contract pursuant to which a Governmental Authority is
providing tax abatements or other similar economic incentives in connection with
the Baker Hughes Seismic Business;
(l) any seismic data processing software license agreement
which is material to the Baker Hughes Seismic Business;
(m) any material Contract between Baker Hughes or one of its
Affiliates and another Affiliate relating to the Baker Hughes Seismic Business;
or
(n) any Contract not otherwise specified in paragraphs (a)
through (m) above that is material to the Baker Hughes Seismic Business, taken
as a whole.
Baker Hughes and its Affiliates have duly performed and complied in all
material respects with their respective obligations under each Baker Hughes
Material Contract. None of Baker Hughes or any of its Affiliates has received
any notice of termination or default from any other party to such Baker Hughes
Material Contract. To the knowledge of Baker Hughes, no other party to such
Baker Hughes Material Contract is in default of its obligations thereunder. Each
such Baker Hughes
-52-
58
Material Contract may be assigned to the Venture Entities without the consent of
any other party thereto.
5.18 Proprietary Rights.
(a) Schedule 5.18(a) to the Baker Hughes Disclosure Letter
sets forth a correct and complete list of the following items of Intellectual
Property used or held for use primarily in or related primarily to and, in each
case, material to the operation or conduct of the Baker Hughes Seismic Business
(collectively, the "BAKER HUGHES PROPRIETARY RIGHTS"): (i) patents and patent
applications; (ii) trademarks, trade names and service marks; (iii) registered
copyrights; and (iv) documented invention disclosures, in each case whether
registered or unregistered, and U.S. or non-U.S.
(b) (i) Baker Hughes or its Affiliates own or possess adequate
licenses or other valid rights to use all the Baker Hughes Proprietary Rights;
(ii) the Baker Hughes Proprietary Rights included in the Baker Hughes
Transferred Assets, together with the Baker Hughes Retained IP, constitute all
such rights necessary to conduct the Baker Hughes Seismic Business in
substantially the same manner as it is presently being conducted; (iii) the
validity of the Baker Hughes Proprietary Rights and the rights therein of Baker
Hughes or any of its Affiliates have not been questioned in any litigation to
which Baker Hughes or any of its Affiliates is a party, nor, to the knowledge of
Baker Hughes, is any such litigation threatened; (iv) to the knowledge of Baker
Hughes, the conduct of the Baker Hughes Seismic Business does not conflict with
any Intellectual Property of others; and (v) the consummation of the
transactions contemplated hereby will not conflict with, alter or impair any
Baker Hughes Proprietary Rights.
(c) To Baker Hughes' knowledge, no use of any Baker Hughes
Proprietary Rights has heretofore been, or is now being, made by any Person
other than Baker Hughes and its Affiliates, and no infringement of any Baker
Hughes Proprietary Rights has occurred or is continuing. No director or officer
of Baker Hughes has any ownership interest in any of the Baker Hughes
Proprietary Rights.
5.19 Employee Benefit Matters.
(a) Copies of Documents. Baker Hughes has furnished to
Schlumberger true and complete copies of the following items relating to each
Baker Hughes Benefit Plan: (i) the governing plan documents, including all
amendments thereto; (ii) the most recent summary plan description and summary of
material modifications; (iii) the most recent Form 5500 Annual Report filed with
the IRS, together with attachments thereto or similar reports filed in non-U.S.
jurisdictions; and (iv) if applicable, the most recent actuarial report.
(b) Pension Plans. No Baker Hughes Benefit Plan that is a
Pension Benefit Plan has an accumulated or waived funding deficiency within the
meaning of Section 412 of the Code, and no liability (including contingent
liability) has been incurred, directly or indirectly, to or on account of any
such Pension Benefit Plan pursuant to Title IV of ERISA (excluding liability for
benefit Claims and funding obligations payable in the ordinary course of
business and liability for
-53-
59
PBGC insurance premiums payable in the ordinary course of business) and the
present value of the liabilities accrued thereunder, as of the most recent
valuation date determined on an accumulated benefit obligation basis pursuant to
Statement of Financial Accounting Standards No. 87, did not exceed the fair
market value of the assets held in trust thereunder as of such date. No
proceedings have been instituted to terminate any Baker Hughes Benefit Plan that
is a Pension Benefit Plan, and no condition exists that presents a risk to Baker
Hughes or any ERISA Affiliate of Baker Hughes of incurring a liability to or on
account of a Pension Benefit Plan pursuant to Title IV of ERISA (excluding
liability for benefit Claims and funding obligations payable in the ordinary
course of business and liability for PBGC insurance premiums payable in the
ordinary course of business). None of the Baker Hughes Transferred Assets is the
subject of any Lien arising under Section 302(f) of ERISA or Section 412(n) of
the Code.
(c) Compliance with Applicable Laws. Each Baker Hughes Benefit
Plan and all related trusts, insurance Contracts and funds have been maintained,
funded and administered in substantial compliance with all Applicable Laws. No
Claims with respect to Baker Hughes Benefit Plans (other than routine Claims for
benefits) or with respect to any fiduciary or other Person dealing with any
Baker Hughes Benefit Plan are pending or threatened. Baker Hughes and all ERISA
Affiliates of Baker Hughes have complied with the requirements of Sections 4980B
and 4980D of the Code with respect to employees and former employees of the
Baker Hughes Seismic Business.
(d) No Multiemployer Plan. Neither Baker Hughes nor any ERISA
Affiliate of Baker Hughes has any obligation to contribute to or has any
liability or potential liability (including, but not limited to, actual or
potential withdrawal liability) with respect to any "multiemployer plan," as
such term is defined in Section 3(37) of ERISA, or with respect to any employee
benefit plan of the type described in Sections 4063 and 4064 of ERISA or Section
413(c) of the Code, in each case, that is a Baker Hughes Benefit Plan.
(e) No Excess Parachute Payments. No Baker Hughes Benefit Plan
provides, and neither Baker Hughes nor any ERISA Affiliate of Baker Hughes is
otherwise obligated to provide, any amount constituting an excess parachute
payment (as defined in Section 280G of the Code) with respect to any current or
former employee of the Baker Hughes Seismic Business that will become a
liability of a Venture Entity.
5.20 No Stock of U.S. Corporation. As of immediately prior to the
Closing Date, none of the Baker Hughes Transferred Assets will consist of the
stock of a corporation or other entity which is treated as a corporation under
the income tax laws of the U.S. or any state or political subdivision thereof.
5.21 Environmental Issues. To the knowledge of Baker Hughes:
(a) (i) Baker Hughes has made available for inspection and
review by Schlumberger copies of all environmental consultants' reports (if any)
in its possession that describe or address environmental contamination to any
Baker Hughes Owned Real Property or Baker Hughes Leased Real Property; (ii)
there are no Hazardous Substances at, in, under or migrating to or from any
Baker Hughes Owned Real Property or Baker Hughes Leased Real Property which,
either
-54-
60
because of the nature of such Hazardous Substances or their quantities, (x)
create a risk of exposure to Hazardous Substances which is significantly
deleterious to human health; (y) create a risk of significant damage to natural
resources; or (z) under Applicable Law, are required to be removed or
remediated; (iii) with respect to all Hazardous Substances that have been
produced, used or stored by the Baker Hughes Seismic Business within the past
five (5) years on the Baker Hughes Owned Real Property or Baker Hughes Leased
Real Property, there are no violations of Environmental, Health and Safety
Requirements arising from the Baker Hughes Seismic Business having stored,
labeled, handled, released, treated, manufactured, processed, transported,
documented and disposed of such Hazardous Substances; (iv) neither Baker Hughes
nor any of its Affiliates has received any written communications from any
Governmental Authority expressly claiming or alleging that the Baker Hughes
Seismic Business is or has been operated within the past five (5) years in
violation of any Environmental, Health and Safety Requirements; and (v) Schedule
5.21(a) to the Baker Hughes Disclosure Letter describes all conditions known to
Baker Hughes or its Affiliates which could reasonably result in the assertion of
a Claim under any Environmental, Health and Safety Requirement with respect to
the Baker Hughes Transferred Assets, including (x) known existing soil or
groundwater contamination at, on or beneath all or any part of a Baker Hughes
Owned Real Property or Baker Hughes Leased Real Property; (y) known existing
soil or groundwater contamination relating to waste disposal or other activities
of the Baker Hughes Seismic Business prior to Closing; and (z) any known
noncompliance of the Baker Hughes Transferred Assets or any part thereof under
any Environmental, Health and Safety Requirement.
(b) There is no friable asbestos or materials containing
polychlorinated biphenyls at or on any of the Baker Hughes Owned Real Property.
5.22 Pooling Inquiries. Baker Hughes will provide to Schlumberger
within 21 days after the execution of this Agreement a written opinion from its
independent accountants to the effect that the consummation of the transaction
contemplated hereby should not cause Baker Hughes to rescind or modify any
pooling of interests accounting used in connection with any previous
transaction. As of the date hereof, there are no open, ongoing inquiries or
investigations by the SEC, and there has been no prior determination by the SEC,
to the effect that the consummation of the transactions contemplated hereby
would cause Baker Hughes to rescind or modify any pooling of interests
accounting used in connection with any previous transaction. Baker Hughes shall
notify Schlumberger as soon as it obtains knowledge of any such inquiry,
investigation or determination.
5.23 Relations with Governments, Etc. Neither Baker Hughes nor any
Baker Hughes Transferring Entity has made, offered or agreed to offer a
Prohibited Payment in connection with the Baker Hughes Seismic Business that
would cause any such entity to be in violation of the FCPA or any Applicable Law
of similar effect.
-55-
61
ARTICLE 6. COVENANTS PRIOR TO CLOSING
Schlumberger, STC, SOHL, SPLC, SLBV and Baker Hughes each agree that
during the period between the date of this Agreement and the Closing:
6.1 Conduct of the Business Prior to Closing.
(a) Except as expressly provided otherwise in this Agreement,
(i) it shall conduct (and shall cause its Affiliates to conduct) the
Schlumberger Seismic Business or the Baker Hughes Seismic Business, as the case
may be, in the ordinary course consistent with its past practice (including with
respect to the collection of receivables, payment of payables and other
liabilities, advertising activities, bidding practices, sales practices
(including promotions, discounts and concessions), equipment maintenance,
replacements or upgrades and off-site and on-site storage, treatment and
disposal of Hazardous Substances generated prior to Closing), and (ii) it shall
use its commercially reasonable best efforts (or cause its Affiliates to use
their commercially reasonable best efforts) to maintain the Schlumberger
Transferred Assets or the Baker Hughes Transferred Assets, as the case may be,
in substantially the same condition (except normal wear and tear) existing on
the date hereof.
(b) It shall use its commercially reasonable best efforts,
consistent with past practices, to maintain the services of, and good relations
with, the dealers, jobbers, distributors, customers and suppliers with whom
sales or purchases are currently effected in connection with the Schlumberger
Seismic Business or the Baker Hughes Seismic Business, as the case may be.
(c) Except as set forth in Schedule 6.1(c) to the Schlumberger
Disclosure Letter or the Baker Hughes Disclosure Letter, as applicable, it shall
not, and shall cause its Affiliates not to, take any of the following actions in
connection with the Schlumberger Seismic Business or the Baker Hughes Seismic
Business, as the case may be, without the express written consent of the other
parties to this Agreement:
(i) incur, assume or Guarantee any Indebtedness or
make any loans, advances or capital contributions to or investments in
any other Person, in each case other than in the ordinary course of
business consistent with its past practice;
(ii) enter into any swap, futures or derivatives
transaction except a hedging activity in the ordinary course of
business consistent with its past practice and internal policy
guidelines;
(iii) sell, transfer, pledge or otherwise dispose of
any Schlumberger Transferred Asset or any Baker Hughes Transferred
Asset, as the case may be, except for sales of inventory and the sale,
transfer or other disposition of uneconomic or obsolete equipment in
the ordinary course of business consistent with its past practice;
(iv) cancel or compromise any Indebtedness owed to it
or waive any Claims except in the ordinary course of business
consistent with its past practice;
-56-
62
(v) make any expenditure or commitment in excess of
US$5,000,000 other than (A) in the ordinary course of business
consistent with its past practice or (B) pursuant to requirements of
Applicable Law;
(vi) make any change in any method of accounting or
keeping of books of account or accounting practices or principles,
except as required by Applicable Law or, in the opinion of the
independent public accountants of such party, by GAAP;
(vii) except in the ordinary course of business
consistent with its past practice, enter into, materially modify, amend
or terminate, or waive any material rights under, any Schlumberger
Material Contract or Baker Hughes Material Contract, as applicable;
(viii) close any facilities which are material to the
financial condition, results of operations, business or prospects of
the Schlumberger Seismic Business or the Baker Hughes Seismic Business,
as applicable;
(ix) mortgage, pledge or subject to any Lien any of
the Schlumberger Transferred Assets or the Baker Hughes Transferred
Assets, as the case may be, except for Permitted Encumbrances;
(x) settle or agree to settle any litigation or other
legal proceeding relating to the Schlumberger Seismic Business or the
Baker Hughes Seismic Business, as the case may be, where such
settlement would have, or would reasonably be expected to have,
individually or in the aggregate, a material impact on the operations
or conduct of the business of the Venture Entities;
(xi) grant any rebates, discounts, advances or
allowances to any customers of the Schlumberger Seismic Business or the
Baker Hughes Seismic Business, as the case may be, except in the
ordinary course of business and consistent with its past practice;
(xii) except in the ordinary course of business
consistent with its past practice, fail to renew any material lease; or
(xiii) agree to do any of the foregoing.
For the avoidance of doubt, none of the covenants set forth in this Section 6.1
are intended to or shall impose any restriction on (1) the respective operations
of Schlumberger or Baker Hughes or their respective Affiliates that are not
related to the Schlumberger Seismic Business or the Baker Hughes Seismic
Business, as applicable, (2) the Non-Transferred Schlumberger Assets or the
Non-Transferred Baker Hughes Assets or (3) the ability of Schlumberger, Baker
Hughes or their respective Affiliates to transfer or assign any Non-Transferred
Assets or Non-Transferred Liabilities from a Schlumberger Transferring Entity or
a Baker Hughes Transferring Entity, as applicable, to an entity that is not a
Schlumberger Transferring Entity or a Baker Hughes Transferring Entity.
-57-
63
6.2 Commercial Efforts. Subject to the rights of Schlumberger and Baker
Hughes hereunder, each of Schlumberger and Baker Hughes will use its
commercially reasonable best efforts to take all actions and to do all things
(including obtaining necessary consents and Governmental Approvals) necessary in
order to consummate the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the Closing conditions set forth in Section
3.12 or Section 3.13, as applicable). The parties agree to cooperate with each
other in connection with making any filing or providing any notice with
Governmental Authorities and obtaining any Governmental Approvals and consents
deemed necessary to consummate the transactions contemplated hereby or any
licenses, permits or other Governmental Approvals necessary to operate the
Seismic Business after the Closing. Except with the prior written consent of
Schlumberger (in the case of action by Baker Hughes) or Baker Hughes (in the
case of action by Schlumberger), each of Schlumberger and Baker Hughes shall use
its commercially reasonable best efforts to refrain from doing or omitting to do
any act that would cause any of its representations or warranties made in this
Agreement or any other Transaction Document not to be true and correct as if
such representations and warranties were made immediately after such act or
omission to act; provided, however, that nothing in this Section 6.2 shall be
deemed for any purpose to require Schlumberger or Baker Hughes to refrain from
taking or omitting to take any action necessary to comply with Applicable Law.
The parties agree that using their commercially reasonable best efforts shall
not include initiating litigation, licensing any assets or divesting of assets
other than cash in order to obtain any consents or Governmental Approvals.
6.3 Notice of Claims. After obtaining knowledge thereof, each of
Schlumberger and Baker Hughes shall give notice to the other party of (a) any
Claim or filed, threatened or contemplated litigation or any Casualty or
Condemnation Loss or other event, occurrence or development that would have,
individually (including a series of related Claims, litigation, Casualty or
Condemnation Losses or other events, occurrences or developments), a material
adverse effect on the Schlumberger Seismic Business or the Baker Hughes Seismic
Business, as applicable, or (b) the occurrence of any Casualty or Condemnation
Loss or other event, occurrence or development that would result in such party's
or its Affiliates' representations and warranties set forth in this Agreement or
in any other Transaction Document not being true and correct if they were made
at any time prior to or as of the Closing Date or impair in any material respect
such party's or its Affiliates' ability to perform its respective obligations
under this Agreement or any other Transaction Document in any material respect.
6.4 Access to Businesses. Prior to the Closing and subject to Section
7.5, for the purposes of and within the scope of a due diligence review with
respect to the transactions contemplated hereby, each of Schlumberger and Baker
Hughes shall give, and shall cause its Affiliates to give, the other party's
representatives full access at reasonable times to the premises, books, records,
Contracts, assets and accounts of the Schlumberger Seismic Business or the Baker
Hughes Seismic Business, as applicable, and will make reasonably available to
the other party and its representatives at a reasonable place and time, the
officers and employees and independent accountants of such party for interviews
to verify all information furnished to it and its representatives and to
otherwise become familiar with the Schlumberger Seismic Business or the Baker
Hughes Seismic Business, as applicable. However, Schlumberger and Baker Hughes
each agree to notify the other of any desire to take any environmental testing
samples. The party receiving
-58-
64
such notice shall provide the notifying party within 10 days of receipt of such
notice of its decision either to allow or not to allow such testing. If the
receiving party decides not to allow such testing, the party desiring to take
such samples may either withdraw its request or notify the other party that the
subject property will be excluded from the assets to be transferred pursuant to
Section 2.1. Any environmental testing samples shall be taken in such manner as
to cause as little disruption to operations as possible.
6.5 Insurance. Subject to availability on commercially reasonable
terms, each of Schlumberger and Baker Hughes shall keep in full force and effect
insurance policies with respect to the Schlumberger Seismic Business or the
Baker Hughes Seismic Business, as the case may be, substantially similar in
coverage and amounts to the insurance maintained with respect thereto on the
date hereof until the Closing. In the event of a Casualty or Condemnation Loss,
Schlumberger or Baker Hughes, as the case may be, shall, at the Venture's
option, restore its Seismic Business to substantially the same position it was
in immediately prior to such Casualty or Condemnation Loss or pay over to the
appropriate Venture Entity the insurance proceeds received in connection
therewith.
6.6 No Solicitation.
(a) Neither Schlumberger, nor any of its officers, directors,
employees, representatives or agents will, directly or indirectly, solicit,
initiate or knowingly encourage any offer or proposal for, or any indication of
interest in, or negotiate with a third party concerning, a business combination
with, or the purchase and sale of, all or any material portion of the
Schlumberger Seismic Business or any other transaction that would hinder or
delay the Closing. However, Schlumberger and Baker Hughes agree that such
prohibition shall not preclude the sale or merger of Schlumberger so long as
that sale or merger does not hinder or delay the Closing. Schlumberger will
advise Baker Hughes immediately should any third party contact it with respect
to any business combination, purchase or sale described in this Section 6.6(a).
(b) Neither Baker Hughes nor any of its officers, directors,
employees, representatives or agents will, directly or indirectly, solicit,
initiate or knowingly encourage any offer or proposal for, or any indication of
interest in, or negotiate with a third party concerning, a business combination
with, or the purchase and sale of, all or any material portion of the Baker
Hughes Seismic Business or any other transaction that would hinder or delay the
Closing. However, Schlumberger and Baker Hughes agree that such prohibition
shall not preclude the sale or merger of Baker Hughes so long as that sale or
merger does not hinder or delay the Closing. Baker Hughes will advise
Schlumberger immediately should any third party contact it with respect to any
business combination, purchase or sale described in this Section 6.6(b).
6.7 US EmployCo. Prior to Closing, STC and an Affiliate of Baker Hughes
will incorporate US EmployCo, which will be owned 70% by STC or an Affiliate
thereof and 30% by Baker Hughes or an Affiliate thereof.
6.8 Documentation of U.S. Documented Vessels. Baker Hughes shall cause
each of the following U.S.-flagged marine vessels to be transferred to Western
U.S. Marine S. de R.L. and
-59-
65
reflagged in Panama prior to Closing: the Western Aleutian, Western Polaris,
Arctic Star and Western Shore.
6.9 Liabilities in the Panamanian Companies. Prior to Closing and in
anticipation of the transfer described in Section 2.1, Baker Hughes hereby
covenants and agrees to transfer out of each of Western U.S. Marine S. de R.L.
and Western Sea Services of Panama S. de R.L. (i) all liabilities other than the
Amended, Restated and Replacement Master Lease and Demise Charter of Western
Trident dated as of July 15, 1999 between First Security Bank, National
Association, as Lessor, and Western Sea Services of Panama S. de R.L., as
Lessee, and related documents and (ii) any balance sheet assets requested to be
so transferred by Schlumberger.
6.10 Joint Use Facilities. Within 30 days after the date of this
Agreement, Schlumberger and Baker Hughes shall each provide to the other a list
of all owned or leased real property of Schlumberger and Baker Hughes,
respectively, that is not being included in the Schlumberger Transferred Assets
or the Baker Hughes Transferred Assets, respectively, but which is used by the
Schlumberger Seismic Business or the Baker Hughes Seismic Business,
respectively.
ARTICLE 7. OTHER COVENANTS
7.1 Insurance. After the Closing, each Venture Entity shall procure and
maintain adequate insurance covering its operations and assets. Coverage may be
provided under master policies of Schlumberger on terms to be agreed by each
Venture Entity and Schlumberger.
7.2 Bulk Sales Acts. Each party agrees that it is responsible for any
special notification required to be given to its creditors under the bulk sales
laws and any other similar laws in any applicable jurisdiction in connection
with the transactions contemplated by this Agreement. Each party agrees promptly
and diligently to pay and discharge when due or to contest and litigate all
Claims of its respective creditors that are asserted against any party or any of
the Venture Entities by reason of any asserted noncompliance with any such bulk
sales laws, and to indemnify and hold the other parties and the Venture Entities
harmless therefrom.
7.3 Expenses.
(a) Except as otherwise specifically provided in this
Agreement and whether or not the Closing occurs, Schlumberger or its Affiliates
shall pay (i) all expenses incurred by or on behalf of Schlumberger or any of
its Affiliates in connection with the preparation, authorization and execution
of this Agreement and the other Transaction Documents, the formation of the
Venture Entities, and the conveyance, transfer, assignment and delivery of the
Schlumberger Seismic Business, including all fees and expenses of agents,
representatives, counsel and accountants, (ii) all Taxes arising out of the
conveyance, transfer, assignment and delivery of the Schlumberger Seismic
Business to the Venture Entities and (iii) all amounts payable with respect to
any claim for brokerage or finders' fees or other commissions with respect to
the transactions contemplated by this Agreement based in any way on any
agreement, arrangement or understanding made by Schlumberger or any of its
Affiliates.
-60-
66
(b) Except as otherwise specifically provided in this
Agreement and whether or not the Closing occurs, Baker Hughes or its Affiliates
shall pay (i) all expenses incurred by or on behalf of Baker Hughes or any of
its Affiliates in connection with the preparation, authorization and execution
of this Agreement and the other Transaction Documents, the formation of the
Venture Entities, and the conveyance, transfer, assignment and delivery of the
Baker Hughes Seismic Business to the Venture Entities, including all fees and
expenses of agents, representatives, counsel and accountants, (ii) all Taxes
arising out of the conveyance, transfer, assignment and delivery of the Baker
Hughes Seismic Business to the Venture Entities, including any assets purchased
by Schlumberger or its Affiliates pursuant to Section 2.1 and then transferred
to the Venture Entities, and (iii) all amounts payable with respect to any claim
for brokerage or finders' fees or other commissions with respect to the
transactions contemplated by this Agreement based in any way on any agreement,
arrangement or understanding made by Baker Hughes or any of its Affiliates.
7.4 Books of Account and Special Rights.
(a) As indicated above, the assets transferred to the Venture
Entities by Schlumberger and Baker Hughes include Schlumberger's and Baker
Hughes' rights, if any, to the trade names, trademarks and trade secrets used in
the Schlumberger Seismic Business and the Baker Hughes Seismic Business,
respectively, that are listed in the Exhibits referred to in Section 2.1. Except
as provided below, no Venture Entity shall receive or utilize any rights or
interest in the names of Schlumberger Limited, Baker Hughes Incorporated or any
of their respective Affiliates or any other name, logo, abbreviation, word or
combination thereof of similar import. It is hereby agreed that the Venture
Entities may utilize, at their sole option, the following items:
(i) Without limitation of time, the Venture Entities
may use manuals, technical specifications, descriptive literature and
catalogs in existence at the Closing Date and bearing Schlumberger's or
Baker Hughes' name or marks, provided that the name and marks are
stamped or overprinted with that Venture Entity's own name or marks;
(ii) The Venture Entities shall have a period of 180
days after the Closing Date within which to use the names and marks of
Schlumberger or Baker Hughes;
(iii) The Venture Entities shall have the right to
sell any of the inventories or products that are in bags or other
containers bearing any of the names or marks of Schlumberger or Baker
Hughes, so long as the inventories or products produced after 180 days
following the Closing Date are not packaged in bags or other containers
that bear such names or marks; and
(iv) Schlumberger and Baker Hughes hereby agree to
allow the Venture Entities to utilize in their respective businesses,
both within the United States and in foreign jurisdictions, the phrase
"a Schlumberger/Baker Hughes company" or phrases of substantially
similar content. It is agreed that the Venture Entities may use said
phrase in any advertising material, letterhead, packaging or on any
other necessary or desirable signs, notices or printed material.
-61-
67
(b) Schlumberger and Baker Hughes will transfer to the
appropriate Venture Entity all of the following relating primarily to the
Schlumberger Seismic Business and Baker Hughes Seismic Business, respectively:
(i) all sales and business records, files, product specifications, drawings and
correspondence; (ii) engineering, manufacturing, maintenance, operating and
production records; (iii) personnel records of Schlumberger Transferred
Employees and Baker Hughes Transferred Employees, including medical records of
each such employee to the extent permitted by Applicable Law; (iv) customer
lists; (v) sales and marketing material; (vi) credit records of customers; (vii)
notebooks and log books; (viii) marketing or other studies; and (ix) all other
books and records (including accounting and Tax records); excluding, however,
(A) all records prepared in connection with or related to the negotiation of the
transactions contemplated by this Agreement and the other Transaction Documents
and (B) any of the foregoing that are the subject of binding confidentiality
agreements with non-Affiliates of Schlumberger or Baker Hughes restricting their
conveyance or disclosure to the Venture Entities; provided, however, that
Schlumberger or Baker Hughes shall use its commercially reasonable best efforts
to obtain the right from such non-Affiliates either to disclose such records to
the Venture Entities or to transfer such confidentiality agreements to the
Venture Entities. Schlumberger and Baker Hughes may retain copies of tax, legal
and accounting records necessary to perform their respective legal obligations.
Schlumberger and Baker Hughes further agree to cooperate with the Venture
Entities to make available from time to time all other books and records
relating to the Schlumberger Seismic Business and Baker Hughes Seismic Business,
respectively, for any valid purpose. Notwithstanding the foregoing, neither
Schlumberger, Baker Hughes, nor any of their respective Affiliates shall be
required to transfer any tax records to any Venture Entity unless such records
are reasonably necessary for the Venture Entity to determine its liability for
Taxes or to satisfy other requirements imposed on the Venture Entity by an
applicable Governmental Authority. Schlumberger and Baker Hughes acknowledge the
mutual expectation that selected tax records of administrative value to Venture
Entities will contain confidential information relating to, respectively, the
Schlumberger Non-Transferred Businesses and the Baker Hughes Non-Transferred
Businesses. Schlumberger and Baker Hughes agree to cooperate in identifying one
or more means to convey the information of value to the Venture Entity, while
assuring the maintenance of the confidentiality of the information relating to
the Non-Transferred Businesses.
7.5 Firewalls.
(a) Schlumberger shall not exchange, disclose, discuss or
otherwise make available to Baker Hughes or any of the Venture Entities any
Non-Public Information of Schlumberger relating to any Non-Transferred
Schlumberger Businesses or any Non-Transferred Schlumberger Assets.
(b) Baker Hughes shall not exchange, disclose, discuss or
otherwise make available to Schlumberger or any of the Venture Entities any
Non-Public Information of Baker Hughes relating to any Non-Transferred Baker
Hughes Business or any Non-Transferred Baker Hughes Assets.
(c) Schlumberger and Baker Hughes agree that no later than 12
months after Closing, any facilities that are jointly used by Schlumberger,
Baker Hughes or any of their respective
-62-
68
Affiliates and any Venture Entity or any subsidiary of a Venture Entity shall,
to the extent practicable, be segregated into separate areas for the employees
of the Venture Entity and the employees of Schlumberger, Baker Hughes or their
respective Affiliates, other than lunch rooms, cantinas and other common areas.
7.6 Name. Each of US Venture Entity, UK Venture Entity, Dutch Venture
Entity and BVI Venture Entity shall, unless impracticable, adopt a legal name
that includes the words "Western GECO" and conduct its Seismic Business under
the name "Western GECO; a Schlumberger/Baker Hughes company"; provided, however,
that the Venture Entities may use such additional names as they deem necessary
or desirable.
7.7 Venture Entity Audits. There shall be an annual audit of the
aggregate operations and businesses of the Venture Entities, taken as a whole,
conducted by PricewaterhouseCoopers LLP, or whatever independent auditor
Schlumberger is then using, the first of which shall occur as of the Closing
Date. The parties agree to, and agree to cause each of the Venture Entities to,
cooperate with such independent auditor with respect to such audits and to make
the results thereof available to Schlumberger and Baker Hughes. In addition, the
parties agree to cause the Venture Entities to give Schlumberger and Baker
Hughes and their respective representatives full access at reasonable times to
the Venture Entities' books and records and to permit the audit of such books
and records upon request; provided, however, that, in the case of Baker Hughes,
such access shall be granted not more than one time per year.
7.8 Shared and Corporate Support Services Agreement. Schlumberger shall
make available certain services to the Venture Entities, and the Venture
Entities shall make certain services available to Schlumberger, as described in
and on the terms and subject to the conditions set forth in Exhibit 7.8 (the
"SHARED SERVICES AGREEMENT").
7.9 Transition Services Agreement. Baker Hughes shall make available
certain services to the Venture Entities, and the Venture Entities shall make
certain services available to Baker Hughes as described in and on the terms and
subject to the conditions set forth in Exhibit 7.9 for up to one year after the
Closing Date (the "TRANSITION SERVICES AGREEMENT").
7.10 Limitation on Lower-Tier Foreign Subsidiaries. Subject to the last
paragraph of this Section 7.10, (1) Schlumberger will ensure that, at the time
of formation of the Venture Entities, UK Venture Entity, Dutch Venture Entity
and BVI Venture Entity will not have subsidiaries which, as to Baker Hughes, are
below a third tier, as determined by section 902 of the Code, and (2)
Schlumberger will cause the appropriate Schlumberger Affiliates and Schlumberger
Subsidiaries (including UK Venture Entity, Dutch Venture Entity and BVI Venture
Entity) to refrain from taking any acts or actions that would cause UK Venture
Entity, Dutch Venture Entity or BVI Venture Entity to form non-U.S. corporations
(or other non-U.S. entities treated as corporations for U.S. federal income tax
purposes) under UK Venture Entity, Dutch Venture Entity or BVI Venture Entity,
unless such non-U.S. corporations (or other non-U.S. entities) would, as to
Baker Hughes, constitute third- tier or higher corporations for purposes of
section 902 of the Code, unless such action is agreed to by Baker Hughes.
-63-
69
The obligations otherwise imposed on Schlumberger, Schlumberger
Affiliates, and Schlumberger Subsidiaries by this Section 7.10 are subject to
the following: (1) Baker Hughes shall hold its interests in UK Venture Entity
and BVI Venture Entity either directly, through another U.S. domestic
corporation which holds such interest directly, or through a non-U.S.
corporation of which all of the voting stock is held directly by Baker Hughes or
by another U.S. domestic corporation, as described in section 902(a) of the
Code; (2) Baker Hughes shall hold its interest in Dutch Venture Entity either
directly or through another U.S. domestic corporation which holds such interest
directly; (3) such obligations apply only to non-U.S. corporations (or other
non-U.S. entities treated as corporations for U.S. federal income tax purposes)
of which at least 33-1/3% of the shares or other equity interests are held,
directly or indirectly, by UK Venture Entity, Dutch Venture Entity or BVI
Venture Entity; and (4) such obligations do not apply, in any calendar year, to
such non-U.S. corporations (or other non-U.S. entities treated as corporations
for U.S. federal income tax purposes) which, during such year, do not, in the
aggregate, when combined with all other such non-U.S. corporations or other
entities, incur foreign income taxes, within the meaning of section 902(c)(4) of
the Code, in an amount which is at least equal to US$3,000,000 or foreign
currency equivalent.
7.11 Form of Venture Entities.
(a) US Venture Entity will take no action inconsistent with
the classification of US Venture Entity as a partnership under section 7701 of
the Code. US Venture Entity will not create, and will cause its subsidiaries to
refrain from creating, any entities owned, directly or indirectly, by US Venture
Entity that would be classified under section 7701 of the Code as other than
branches or partnerships, unless such action is agreed to by both Venture Owners
of the US Venture Entity. Such prohibited actions shall include the making of an
election under section 7701 of the Code for an entity to be treated as a
corporation for federal income tax purposes.
(b) None of UK Venture Entity, Dutch Venture Entity or BVI
Venture Entity shall make any entity classification election under section 7701
of the Code to be treated as other than a corporation, unless such action is
agreed to by both Venture Owners of the Venture Entity; provided, however, that
the foregoing shall only apply to the named (top tier) Venture Entities and not
to their respective subsidiaries.
7.12 Venture Entity Contracts. So long as Baker Hughes or Schlumberger,
as applicable, maintains a direct or indirect ownership interest in the Venture
Entities, Baker Hughes and Schlumberger and their respective Affiliates shall
have the right to contract with the Venture Entities or Affiliates of the
Venture Entities (other than Schlumberger, Baker Hughes and their respective
non-Venture Entity Affiliates), and the Venture Entities or their Affiliates
shall be obligated to so contract, on an arm's length basis, for access to the
multiclient seismic survey libraries of the Venture Entities, data processing
services and all other services of the Venture Entities, including services to
support businesses of Schlumberger or Baker Hughes outside of the Seismic
Business, in each case, at a price not to exceed the lowest price then being
charged to any other party for such services in the same circumstances. The
Venture Entities may contract on an arm's length basis for services to be
provided to the Venture Entities by Schlumberger, Baker Hughes or their
respective Affiliates.
-64-
70
7.13 Venture Entity Distributions. Each Venture Entity shall, at the
request of any Venture Owner (which request can only be made once each calendar
year), and after due review and discussion by the Shareholders Representatives
Committee, make a distribution to its Venture Owners of the net cash balance of
the Venture Entity and its subsidiaries as reflected on the most recently
prepared balance sheet before the date of the determination of the amount of the
distribution, subject to any legal restrictions and excluding:
(a) any cash balance that a Venture Owner Parent and its
subsidiaries contributed to a Venture Entity and its subsidiaries for the
purpose of covering short- and long-term liabilities that the Venture Owner
Parent and its subsidiaries contributed to the Venture Entities and their
respective subsidiaries pursuant to Section 2.1, so long as those liabilities
exist; and
(b) any portion of the cash balance that would be required for
planned uses of cash (net of projected sources of cash) reflected on the rolling
three-year annual Venture business plans, as potentially amended, cash flow
projections and forecasts to the extent the distribution of the net cash balance
would have otherwise required the Venture Owners of any Venture Entity to make a
cash capital contribution or a Venture Entity to separately finance through debt
or equity the planned uses of cash (net of projected sources of cash) so
reflected. The business plan, forecast and cash flow projections shall be
determined by fiscally prudent management practices in a highly cyclical and
capital intensive industry.
None of the Venture Owners nor their respective Affiliates shall have liability
to any Venture Owner, any Venture Entity or their respective Affiliates for the
effect that a distribution has on the operations, financial results, financial
condition or cash flow of any Venture Owner, Venture Entity or their respective
Affiliates.
7.14 Venture Entity Seismic Acquisitions. It is the intention of both
Venture Owner Parents that an appropriate balance should be struck between
non-proprietary acquisition activity and other acquisition activities of the
Venture and to this end, both Venture Owner Parents must approve annual
expenditures in excess of 30% of annual business plan revenues in any financial
plan year on acquisition of speculative, non-exclusive or multiclient seismic
data.
7.15 President. The parties hereby agree that either Schlumberger or
Baker Hughes may remove the President of Western GECO for proper cause or poor
performance. Schlumberger may appoint a replacement president.
7.16 Veto Powers. The parties hereby agree that neither Venture Owner
Parent shall utilize its veto power to prevent the other Venture Owner Parent
and its Affiliates from utilizing the Venture's products and services in joint
bids, subcontracts and similar contracts with the customers of the Venture and
its Affiliates or of the Venture Owner Parent and its Affiliates.
7.17 Further Assurances. Each of the parties agrees to use its
commercially reasonable best efforts to take, or cause to be taken by their
respective Affiliates, all actions and to do, or cause to be done by their
respective Affiliates, all things necessary, proper or advisable to, subject to
Section 6.2: (a) obtain and, when appropriate, record as promptly as possible
any consents, licenses,
-65-
71
permits or other Governmental Approvals not obtained prior to Closing deemed
necessary or beneficial in connection with the consummation of the transactions
contemplated hereby and the operation of the Seismic Business after the Closing;
(b) defend any lawsuits or other legal proceedings, whether judicial or
administrative, calling into question this Agreement or the consummation of the
transactions contemplated hereby; and (c) furnish to the other parties such
documentation, information and assistance as reasonably may be requested in
connection with the foregoing. The parties also agree from time to time to (a)
execute, deliver and, when appropriate, record any such documents of transfer,
conveyance and assignment in mutually agreeable form in addition to those
referenced in Section 3.2 and (b) take such other actions as the parties shall
agree are necessary or appropriate to accomplish the transactions contemplated
hereby, including the grants of licenses. The parties expressly agree that any
expenses incurred by a party in connection with this Section 7.17 shall be paid
by the party incurring the expense and no reimbursement shall be sought from the
requesting party.
7.18 Quarterly Financials. The Venture Entities shall provide to
Schlumberger and Baker Hughes combined financial information at least quarterly.
7.19 Technical Liaisons. Each of Schlumberger and Baker Hughes may
appoint up to two technical liaisons ("TECHNICAL LIAISONS"). These Technical
Liaisons shall be granted broad access to the research and development plans and
projects of the Venture Entities, except for (A) any such plan or project that
(i) solely involves Schlumberger or its Affiliates or (ii) involves any
independent third party and is protected by confidentiality provisions that
prohibit such access, in which case Baker Hughes and its Technical Liaisons will
not have access to any aspect of that plan or project, or (B) any such plan or
project that (i) solely involves Baker Hughes or its Affiliates or (ii) involves
any independent third party and is protected by confidentiality provisions that
prohibit such access, in which case Schlumberger and its Technical Liaisons will
not have access to any aspect of that plan or project. Up to twice per year when
requested by the Technical Liaison from either party or any member of the
Shareholders Representatives Committee of any Venture Entity, each Venture
Entity shall present a research and development report to its Shareholders
Representatives Committee and the Technical Liaisons detailing (i) existing and
planned research and development projects, (ii) current status, significant
progress and significant failures of ongoing research and development projects,
(iii) patent status, invention disclosures, prosecution status and maintenance
status and (iv) such other information as any Technical Liaisons or any member
of the Shareholders Representatives Committee may reasonably request.
7.20 Failure of Consent; Joint Contracts and Joint Permits.
(a) Failure of Consent.
(i) To the extent that the assignment or transfer of
any shares of stock, Contracts, Governmental Approvals or other assets
or rights to be transferred or assigned to a Venture Entity or a
subsidiary thereof, as provided herein, shall require the consent of
any other Person, this Agreement shall not constitute an agreement to
transfer or assign the same if an attempted assignment or transfer
would constitute a breach thereof or violation of Applicable Law.
Subject to any other provision or condition herein dealing with
specific
-66-
72
consents, if any such consent is not obtained, the parties will
cooperate with the appropriate Venture Entity or subsidiary thereof to
secure a reasonable, mutually agreeable arrangement designed to provide
that Venture Entity (or such subsidiary) with the benefits of any such
shares of stock, Contracts, Governmental Approvals or other assets or
rights, including enforcement for the benefit of that Venture Entity
(or such subsidiary) of any and all rights of the transferring party
against the other party or parties thereto arising out of the breach or
cancellation by such other party or parties or otherwise.
(ii) If a consent is not obtained and a reasonable
arrangement cannot be put in place as of the Closing and Closing
without such consent would have a material adverse effect on the
transferring party, the parties agree that the assets or liabilities
requiring such consent (along with such other assets or liabilities as
are necessary to be maintained by the transferring party in connection
therewith) shall not be transferred as of the Closing. The parties
agree to use their commercially reasonable best efforts to obtain the
consent or make suitable arrangements as soon as practicable. Prior
thereto, the transferring party shall operate such assets in the
ordinary course of business and maintain any profits from the Closing
Date until the consent is obtained or another suitable arrangement is
put in place for the benefit of the applicable Venture Entity and shall
pay over such profits to the appropriate Venture Entity on a monthly
basis. Upon receipt of the necessary consent or consummation of another
suitable arrangement, the parties shall close the transfer of such
assets or liabilities.
(iii) If any such consent or other reasonable
arrangement is not obtained or secured on or before the later to occur
of the one-year anniversary of this Agreement or the end of the term of
the Contract to which such consent relates not to exceed 16 months, the
transferring party shall compensate the appropriate Venture Entity in
cash for the assets, properties or rights included in the Exhibits that
cannot be transferred to that Venture Entity as contemplated by this
Agreement in an amount equal to the amount reflected for such assets,
properties or rights on the appropriate March 31 Balance Sheet less any
profits paid over to a Venture Entity in connection with such assets,
properties or rights pursuant to subparagraph (ii) above.
(iv) Any incremental Taxes or other costs incurred as
a result of an arrangement to hold assets for the benefit of a Venture
Entity pursuant to this Section 7.20(a) shall be borne by the party
that owns those assets as of the Closing Date. The provisions of this
Section 7.20 apply to the transfers contemplated by Section 2.1.
Notwithstanding anything to the contrary set forth in this Section
7.20(a), the parties agree that obtaining consents shall be a condition
to Closing as further described in Article 3. The parties further agree
that this provision shall apply only to the extent a Venture Entity or
a subsidiary or branch thereof is available to accept the transfer of
the Transferred Assets as of the Closing Date and that if no such
entity or branch is available, any such incremental Taxes or other
costs shall be borne by Schlumberger until such entity or branch is
available.
(b) Joint Contracts. With respect to any contract, agreement,
purchase order or other arrangement relating in part to the Schlumberger Seismic
Business or the Baker Hughes
-67-
73
Seismic Business and in part to Non-Transferred Schlumberger Businesses or
Non-Transferred Baker Hughes Businesses (the "JOINT CONTRACTS"), which would
otherwise be transferred hereby that Schlumberger, Baker Hughes or their
respective Affiliates are unable to modify prior to the Closing Date without
materially affecting the economic value to Schlumberger, Baker Hughes, the
Venture Entities or one or more of their respective Affiliates so that the
portion thereof pertaining to Schlumberger's or Baker Hughes' Seismic Business
was segregated, the transferring party, if permitted by the terms of the Joint
Contract, shall continue such Joint Contract in effect until its stated
expiration without regard to any available renewal options. The benefits and
obligations under such Joint Contract relating to the Seismic Business shall be
for the account of the applicable Venture Entity, and the remaining benefits and
obligations shall be retained by the transferring entity. Each of Schlumberger,
Baker Hughes, the Venture Entities and their respective Affiliates that are
parties to any Joint Contract shall perform its respective obligations
thereunder so as not to create a default. Neither the transferring party nor the
transferee party under a Joint Contract will be obligated to extend credit to
the other party. Each party will indemnify, defend and hold harmless the other
party from the consequences of any default by it (or its Affiliates) under any
Joint Contract. Unless both parties desire to maintain the same Joint Contract,
the parties shall cooperate with one another after the Closing to obtain
separate contracts for the transferor or transferee on the most advantageous
terms to each that may be available.
(c) Joint Permits. Schlumberger, Baker Hughes or one of their
respective Affiliates shall continue to be the holder of all Governmental
Approvals that relate in part to the Schlumberger Seismic Business or the Baker
Hughes Seismic Business and in part to the Non-Transferred Schlumberger
Businesses or the Non-Transferred Baker Hughes Businesses (the "JOINT PERMITS")
for the joint benefit of both the transferring party and the transferee party
hereunder to the extent allowed by Applicable Law. Additionally, Schlumberger,
Baker Hughes or one of their respective Affiliates shall, to the extent allowed
by Applicable Law, continue to be the holder, as nominee and on a provisional
basis, of all Governmental Approvals as to which the transferring party was not
able to assign to a Venture Entity at the Closing or as to which a Venture
Entity has not then obtained a suitable replacement Governmental Approval. The
transferring party and the transferee party shall cooperate to obtain promptly
all required consents to effectively permit the assignment of all Governmental
Approvals that are not Joint Permits. With respect to Joint Permits, the
transferring party and the transferee party shall cooperate in seeking separate
Governmental Approvals for each such party if, in their reasonable judgment,
such efforts have a reasonable probability of success without adverse
consequences for either party. Each party shall comply with all terms and
conditions of all Joint Permits pertaining to its respective business. The
transferring party and the transferee party shall indemnify, defend and hold
harmless the other party and its Affiliates from and against any violation of
any Joint Permit resulting from the acts or omissions of such party or its
Affiliates under such Joint Permit. The parties shall cooperate in seeking any
amendment to any Joint Permit requested by another party, provided the other
party will not be adversely affected. The requesting party shall bear all
reasonable costs incurred by it and the other party in such efforts.
7.21 Shareholders Representatives Committee. Each of Schlumberger and
Baker Hughes shall appoint two senior representatives to serve on a Shareholders
Representatives Committee (the
-68-
74
"COMMITTEE"), to discuss the overall policies, procedures and directions of the
Venture Entities. The following matters shall be presented to the Committee for
its approval:
(a) Any matter identified in the Shareholders' Agreement as
requiring the approval of representatives of both owners of a Venture Entity;
(b) The rolling three-year annual Venture business plan and
forecasts and any quarterly updates of the same;
(c) The incurrence, assumption or guarantee by a Venture
Entity of Indebtedness in excess of US$50 million in any single transaction or
series of related transactions; and
(d) Appointment or removal of the President of Western GECO.
7.22 Algerian Dinars. To the extent a Venture Entity has a need for
Algerian Dinars and is aware that Baker Hughes or its Affiliates has excess
Algerian Dinars, if Baker Hughes still owns, directly or indirectly, its
interest in the Venture, Baker Hughes and that Venture Entity shall, to the
extent practicable, discuss the terms on which Baker Hughes would transfer or
otherwise make available Algerian Dinars to that Venture Entity.
7.23 Prohibited Payments. In connection with transactions involving
members of the Venture Group, none of the parties, their respective Affiliates
or members of the Venture Group will make any Prohibited Payment. The parties
acknowledge that a Prohibited Payment does not include the payment, offer, or
promise to pay or authorization of an offer, promise or payment that (i) is
lawful under the written laws and regulations of the Public Official's country,
(ii) is a reasonable and bona fide expenditure, such as travel and lodging
expenses, incurred by or on behalf of the Public Official and is directly
related to the promotion, demonstration, or explanation of products or services,
or to the execution or performance of a contract with a government or agency
thereof, or (iii) a facilitating payment. All payments to Public Officials must
be recorded in the books and records of the relevant entity so that it properly
reflects the transaction. Each party agrees that if it knows of any information
indicating there may have been a Prohibited Payment or an otherwise unlawful
payment in connection with any business transaction relating to the Venture, or
breach of any representation in Sections 4.22 or 5.23 of this Agreement, the
party will immediately provide any relevant information to the other party. Each
Venture Entity and US EmployCo will adopt, for its own benefit and the benefit
of the other members of the Venture Group that it controls, compliance policies,
procedures and controls pertaining to the FCPA and similar laws applicable to
the Venture Group in other countries. The scope of the audit in Section 7.7 may,
at a party's request, include a review of the Venture Group's compliance with
such policies, procedures and controls. The members of the Venture Group shall
keep books, records, and accounts pertaining to their respective businesses in
reasonable detail, which accurately and fairly reflect the transactions and
dispositions of the assets of their respective businesses.
-69-
75
ARTICLE 8. LIABILITIES AND INDEMNIFICATION
8.1 Venture Entity and US EmployCo Indemnification.
(a) Except to the extent provided in Sections 8.2 and 8.3,
each Venture Entity and its subsidiaries and US EmployCo, jointly and severally,
shall be responsible for and shall indemnify, defend and hold harmless the
Schlumberger Indemnified Persons and the Baker Hughes Indemnified Persons from
and against and in respect of any Claim or Loss arising out of any breach or
default in performance by the Venture Entities or US EmployCo of any of the
obligations that are to be performed or assumed by them under the Transaction
Documents or pursuant to their Charter Documents and any and all Claims or
Losses, direct, indirect, consequential, punitive or exemplary, resulting from
or connected with (i) occurrences or exposure after the Closing Date in regard
to products or services of the Venture Entities or US EmployCo, (ii) any failure
by a Venture Entity or US EmployCo to duly pay, perform or discharge the
Schlumberger Transferred Liabilities or the Baker Hughes Transferred
Liabilities, (iii) any payment by a Schlumberger Indemnified Person or a Baker
Hughes Indemnified Person as a guarantor or obligor of any obligation retained
by Schlumberger or Baker Hughes for and on behalf of a Venture Entity, including
those Guarantees, bid and performance bonds, customs guarantees, surety bonds
and letters of credit listed in Schedule 8.1 to the Schlumberger Disclosure
Letter or the Baker Hughes Disclosure Letter, (iv) any Environmental Liability
arising from or attributable to any condition, event, circumstance, activity,
practice, incident, action or omission occurring on or after the Closing Date
and related in any manner to the Venture Entities or US EmployCo, the
Schlumberger Transferred Assets, the Schlumberger Seismic Business, the Baker
Hughes Transferred Assets or the Baker Hughes Seismic Business; provided that
this indemnity does not apply to such Environmental Liabilities to the extent
they are attributable to or result from acts or omissions that occurred prior to
the Closing Date, (v) any payments required in connection with the post-Closing
termination following a formal decision of the Venture to so terminate of any
agency Contract primarily related to the Schlumberger Seismic Business or the
Baker Hughes Seismic Business and provided that such Contract is for valid
services and duly documented or (vi) any other aspect of the Venture Entities'
or US EmployCo's ownership, use or operation of their respective assets and
businesses; provided, however, that indemnification provided in this Section 8.1
shall not extend to any Claim to the extent that it arises out of any act or
omission of any Baker Hughes Indemnified Person or Schlumberger Indemnified
Person, respectively, on or after the Closing Date.
(b) Schlumberger or Baker Hughes, as the case may be, shall
give written notice to the applicable Venture Entity or US EmployCo within 30
days of knowledge by either of them of any matters that may give rise to a Claim
for indemnification from a Venture Entity or US EmployCo under this Agreement,
and Schlumberger and Baker Hughes shall cooperate with that Venture Entity or US
EmployCo in any investigation by that Venture Entity or US EmployCo of such
matters. Failure to so notify the Venture Entity or US EmployCo shall not
relieve the Venture Entity or US EmployCo of any liability which the Venture
Entity or US EmployCo might have to Schlumberger or Baker Hughes Indemnified
Persons, except to the extent that such failure materially prejudices the
Venture Entity's or US EmployCo's position. This indemnification is in addition
to the other indemnifications provided for in this Agreement or the Charter
Documents of the Venture Entities or US EmployCo.
-70-
76
8.2 Baker Hughes Indemnification.
(a) Baker Hughes shall be responsible for, and shall indemnify
and hold the Venture Entity Indemnified Persons, US EmployCo Indemnified Persons
and Schlumberger Indemnified Persons, as the case may be, harmless from and
against, any Claim or Loss arising out of:
(i) any inaccuracy in any of the representations or
breach of any of the warranties made in this Agreement or any other
Transaction Document by Baker Hughes or its Affiliates as of the date
of this Agreement or as of the Closing Date; provided that in
determining the scope of Baker Hughes' indemnification obligations
under this Section 8.2(a)(i), any qualification as to materiality or
material adverse effect in the representations and warranties shall be
disregarded (it being understood that such qualifications as to
materiality or material adverse effect shall apply only for the
purposes of determining whether there has been a breach);
(ii) any item described in the Baker Hughes
Disclosure Letter as an exception to a representation or warranty in
this Agreement;
(iii) any breach or default in performance of any of
the obligations that are to be performed by Baker Hughes or its
Affiliates under this Agreement or any other Transaction Document;
(iv) any Claims against a Venture Entity, US EmployCo
or their respective Affiliates, as the successors to the Baker Hughes
Seismic Business (including any product or service liability Claims or
Claims for warranties of products or services), relating to any period
prior to the Closing Date, the liability or obligation for which is not
expressly assumed at or prior to the Closing by that Venture Entity, US
EmployCo or their respective Affiliates pursuant to any Transaction
Document;
(v) any burden or obligation, whether monetary or
non-monetary, imposed on any Venture Entity Indemnified Person, US
EmployCo Indemnified Person or Schlumberger Indemnified Person as a
result of any judgment, decree, order, settlement or other agreement
relating to time periods or matters prior to the Closing Date but
entered into by Baker Hughes or any of its Affiliates or issued after
the date hereof (The obligations of Baker Hughes and its Affiliates
under the previous sentence shall not be subject to the limitations
imposed by Section 8.7.); or
(vi) any Claims with respect to Baker Hughes
Transferred Liabilities in excess of the amount at which those
liabilities were valued upon transfer to a Venture Entity.
(b) Baker Hughes shall remain liable for, and shall indemnify
and hold the Schlumberger Indemnified Persons, the US EmployCo Indemnified
Persons and the Venture Entity Indemnified Persons harmless against, any Loss
with respect to any obligations, violations, assessments, cleanups, Claims and
judgments relating to those items specifically identified in
-71-
77
Schedule 5.21(a) or Schedule 5.21(b), if any, to the Baker Hughes Disclosure
Letter. Baker Hughes shall also be liable for, and hereby agrees to indemnify
and hold the Schlumberger Indemnified Persons, the US EmployCo Indemnified
Persons and the Venture Entity Indemnified Persons harmless against, any
Environmental Liability arising from or attributable to any condition, event,
circumstance, activity, practice, incident, action or omission existing or
occurring prior to the Closing Date and related in any manner to (i) the Baker
Hughes Transferred Assets, (ii) the Baker Hughes Seismic Business or (iii) the
use, storage, disposal or treatment, or the transportation for storage, disposal
or treatment, of Hazardous Substances by any Person prior to the Closing Date
and in any way associated with the Baker Hughes Transferred Assets or the Baker
Hughes Seismic Business. This indemnification obligation shall apply
irrespective of whether the Environmental Liabilities subject to this provision
are known or unknown as of the Closing Date.
(c) Baker Hughes shall remain liable for, and shall indemnify
the Schlumberger Indemnified Persons, the US EmployCo Indemnified Persons and
the Venture Entity Indemnified Persons harmless against, any cost or expense
incurred by the Venture Entities or US EmployCo in bringing any of the Baker
Hughes Transferred Assets or the Baker Hughes Seismic Business into compliance
with Applicable Law if the Baker Hughes Transferred Assets or Baker Hughes
Seismic Business are not in such compliance as of the Closing Date. This
obligation shall apply even if a Governmental Authority has not yet issued a
citation or order relating to the noncompliance.
(d) Schlumberger, US EmployCo or the applicable Venture
Entity, as the case may be, shall give written notice to Baker Hughes within 30
days of knowledge by any of them of any matters that may give rise to a claim
for indemnification from Baker Hughes under this Section 8.2, and Schlumberger,
US EmployCo and the Venture Entities shall cooperate with Baker Hughes in any
investigation by Baker Hughes of such matters. Failure to so notify Baker Hughes
shall not relieve Baker Hughes of any liability which Baker Hughes might have to
the Schlumberger Indemnified Persons, the US EmployCo Indemnified Persons or the
Venture Entity Indemnified Persons, except to the extent that such failure
materially prejudices Baker Hughes' position. With respect to any matter for
which Baker Hughes is required to indemnify and defend the Schlumberger
Indemnified Persons, the US EmployCo Indemnified Persons or the Venture Entity
Indemnified Persons pursuant to the terms of this Agreement and that requires
any removal, remedial, response, cleanup or corrective action ("REMEDIAL
ACTION") under any Environmental, Health and Safety Requirement to address the
conditions that cause, contribute to or are associated with such matter, Baker
Hughes 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 programs are authorized by
applicable Environmental, Health and Safety Requirements and are acceptable to
the applicable Governmental Authority. In consultation with Schlumberger and the
applicable Venture Entity, Baker Hughes shall endeavor to plan, design,
implement and perform such Remedial Action without undue delay and in a manner
consistent with the business operations of the Venture Entities. This will
include the opportunity for Schlumberger and the applicable Venture Entity to
review and comment on any such draft reports, plans and designs prior to the
submission of such documents to any Governmental Authority. Baker Hughes shall
provide Schlumberger and the appropriate Venture Entity with copies of all
reports and plans submitted to any Governmental Authority and
-72-
78
with any other information reasonably requested by Schlumberger and the
appropriate Venture Entity with respect to such Remedial Actions. Schlumberger
and the Venture Entities shall use commercially reasonable efforts to cooperate
with Baker Hughes in the implementation and performance of any Remedial Action
undertaken by Baker Hughes pursuant to this provision, including the taking of
commercially reasonable efforts to avoid or mitigate any Losses or potential
Losses of Schlumberger and the Venture Entities that could result from such
Remedial Action.
(e) This indemnification is in addition to the other
indemnifications provided for in this Agreement or the Charter Documents of the
Venture Entities or US EmployCo.
8.3 Schlumberger Indemnification.
(a) Schlumberger shall be responsible for, and shall indemnify
and hold the Venture Entity Indemnified Persons, the US EmployCo Indemnified
Persons and the Baker Hughes Indemnified Persons, as the case may be, harmless
from and against, any Claim or Loss arising out of:
(i) any inaccuracy in any of the representations or
breach of any of the warranties made in this Agreement or any other
Transaction Document by Schlumberger or its Affiliates as of the date
of this Agreement or as of the Closing Date; provided that in
determining the scope of Schlumberger's indemnification obligations
under this Section 8.3(a)(i), any qualification as to materiality or
material adverse effect in the representations and warranties shall be
disregarded (it being understood that such qualifications as to
materiality or material adverse effect shall apply only for the
purposes of determining whether there has been a breach);
(ii) any item described in the Schlumberger
Disclosure Letter as an exception to a representation or warranty in
this Agreement;
(iii) any breach or default in performance of any of
the obligations that are to be performed by Schlumberger or its
Affiliates under this Agreement or any other Transaction Document;
(iv) any Claims against a Venture Entity, US EmployCo
or their respective Affiliates, as the successors to the Schlumberger
Seismic Business (including any product or service liability Claims or
Claims for warranties of products or services), relating to any period
prior to the Closing Date, the liability or obligation for which is not
expressly assumed at or prior to Closing by that Venture Entity, US
EmployCo or their respective Affiliates pursuant to any Transaction
Document;
(v) any burden or obligation, whether monetary or
non-monetary, imposed on any Venture Entity Indemnified Person, US
EmployCo Indemnified Person or Baker Hughes Indemnified Person as a
result of any judgment, decree, order, settlement other agreement
relating to time periods or matters prior to the Closing Date, but
entered into by Schlumberger or any of its Affiliates or issued after
the date hereof (The obligations of
-73-
79
Schlumberger and its Affiliates under the previous sentence shall not
be subject to the limitations imposed by Section 8.7.); or
(vi) any Claims with respect to Schlumberger
Transferred Liabilities in excess of the amount at which these
liabilities were valued upon transfer to a Venture Entity.
(b) Schlumberger shall remain liable for, and shall indemnify
and hold the Baker Hughes Indemnified Persons, US EmployCo Indemnified Persons
and the Venture Entity Indemnified Persons harmless against, any Loss with
respect to any obligations, violations, assessments, cleanups, Claims and
judgments relating to those items specifically identified in Schedule 4.21(a)
and Schedule 4.21(b), if any, to the Schlumberger Disclosure Letter.
Schlumberger shall also be liable for, and hereby agrees to indemnify and hold
the Baker Hughes Indemnified Persons, US EmployCo Indemnified Persons and the
Venture Entity Indemnified Persons harmless against, any Environmental Liability
arising from or attributable to any condition, event, circumstance, activity,
practice, incident, action or omission existing or occurring prior to the
Closing Date and related in any manner to (i) the Schlumberger Transferred
Assets, (ii) the Schlumberger Seismic Business or (iii) the use, storage,
disposal or treatment, or the transportation for storage, disposal or treatment,
of Hazardous Substances by any Person prior to the Closing Date and in any way
associated with the Schlumberger Transferred Assets or the Schlumberger Seismic
Business. This indemnification obligation shall apply irrespective of whether
the Environmental Liabilities subject to this provision are known or unknown as
of the Closing Date.
(c) Schlumberger shall remain liable for, and shall indemnify
the Baker Hughes Indemnified Persons, US EmployCo Indemnified Persons and the
Venture Entity Indemnified Persons harmless against, any cost or expense
incurred by the Venture Entities or US EmployCo in bringing any of the
Schlumberger Transferred Assets or the Schlumberger Seismic Business into
compliance with Applicable Law if the Schlumberger Transferred Assets or
Schlumberger Seismic Business are not in such compliance as of the Closing Date.
This obligation shall apply even if a Governmental Authority has not yet issued
a citation or order relating to the noncompliance.
(d) Baker Hughes, US EmployCo or the applicable Venture
Entity, as the case may be, shall give written notice to Schlumberger within 30
days of knowledge by any of them of any matters that may give rise to a claim
for indemnification from Schlumberger under this Section 8.3, and Baker Hughes,
US EmployCo and the applicable Venture Entity shall cooperate with Schlumberger
in any investigation by Schlumberger of such matters. Failure to so notify
Schlumberger shall not relieve Schlumberger of any liability which Schlumberger
might have to the Baker Hughes Indemnified Persons, the US EmployCo Indemnified
Persons or the Venture Entity Indemnified Persons, except to the extent that
such failure materially prejudices Schlumberger's position. With respect to any
matter for which Schlumberger is required to indemnify and defend the Baker
Hughes Indemnified Persons, the US EmployCo Indemnified Persons or the Venture
Entity Indemnified Persons pursuant to the terms of this Agreement and that
requires any Remedial Action under any Environmental, Health and Safety
Requirement to address the conditions that cause, contribute to or are
associated with such matter, Schlumberger 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
-74-
80
by any Governmental Authority and may rely on risk assessment or risk reduction
principles or programs, provided such principles or programs are authorized by
applicable Environmental, Health and Safety Requirements and are acceptable to
the applicable Governmental Authority. In consultation with Baker Hughes and the
applicable Venture Entity, Schlumberger shall endeavor to plan, design,
implement and perform such Remedial Action without undue delay and in a manner
consistent with the business operations of the Venture Entities. This will
include the opportunity for Baker Hughes and the applicable Venture Entity to
review and comment on any such draft reports, plans and designs prior to the
submission of such documents to any Governmental Authority. Schlumberger shall
provide Baker Hughes and the appropriate Venture Entity with copies of all
reports and plans submitted to any Governmental Authority and with any other
information reasonably requested by Baker Hughes and the appropriate Venture
Entity with respect to such Remedial Actions. Baker Hughes and the Venture
Entities shall use commercially reasonable efforts to cooperate with
Schlumberger in the implementation and performance of any Remedial Action
undertaken by Schlumberger pursuant to this provision, including the taking of
commercially reasonable efforts to avoid or mitigate any Losses or potential
Losses of Baker Hughes and the Venture Entities that could result from such
Remedial Action.
(e) This indemnification is in addition to the other
indemnifications provided for in this Agreement or the Charter Documents of the
Venture Entities or US EmployCo.
8.4 Tax Indemnity.
(a) Schlumberger Tax Indemnity. Unless specifically included
in the Schlumberger Transferred Liabilities, Schlumberger shall be liable (i)
for all Taxes of Schlumberger and its Affiliates which arise from or relate to
the Schlumberger Seismic Business for any period or portion thereof ending on or
before the Closing Date, (ii) for all Taxes with respect to the transfer of the
Schlumberger Transferred Assets to the Venture Entities or US EmployCo and (iii)
for all liability for Taxes of Schlumberger or any other entity which is or has
been a member of an affiliated, unitary or combined group with any of the
Schlumberger Subsidiaries; provided, however, that the Venture Entities and US
EmployCo shall be responsible for all Taxes of the Schlumberger Subsidiaries for
all taxable periods beginning after the Closing Date. Schlumberger shall
indemnify and hold the Venture Entity Indemnified Persons, the US EmployCo
Indemnified Persons and the Baker Hughes Indemnified Persons harmless from and
against all of the above Taxes.
(b) Baker Hughes Tax Indemnity. Unless specifically included
in the Baker Hughes Transferred Liabilities or taken into account in the
computation of working capital pursuant to Section 3.4, Baker Hughes shall be
liable (i) for all Taxes of Baker Hughes and its Affiliates which arise from or
relate to the Baker Hughes Seismic Business for any period or portion thereof
ending on or before the Closing Date, (ii) for all Taxes with respect to the
transfer of the Baker Hughes Transferred Assets to the Venture Entities or US
EmployCo, including any such Taxes imposed in connection with the purchase of
certain assets by Schlumberger or its Affiliates pursuant to Section 2.1 and
then transferred to the Venture Entities, and (iii) for all liability for Taxes
of Baker Hughes or any other entity which is or has been a member of an
affiliated, unitary or combined group with any of the Baker Hughes Subsidiaries;
provided, however, that the Venture Entities and US EmployCo shall be
responsible for all Taxes of the Baker Hughes Subsidiaries for all taxable
periods
-75-
81
beginning after the Closing Date. Baker Hughes shall indemnify and hold the
Venture Entity Indemnified Persons, the US EmployCo Indemnified Persons and the
Schlumberger Indemnified Persons harmless from and against all of the above
Taxes.
(c) Venture Entity Tax Indemnity. Each Venture Entity and US
EmployCo shall be liable for all Taxes imposed on it, its subsidiaries and joint
ventures, or attributable to the ownership, use or operation of its assets or
the assets of its subsidiaries and joint ventures, and for which neither
Schlumberger nor Baker Hughes is liable under Section 8.4(a) and Section 8.4(b).
Each Venture Entity and US EmployCo shall indemnify and hold the Schlumberger
Indemnified Persons and the Baker Hughes Indemnified Persons harmless from and
against all Taxes described in the preceding sentence.
(d) Proration of Certain Taxes. For purposes of this Section
8.4, any Taxes which are payable with respect to a tax period that includes (but
does not end on) the Closing Date shall be allocated such that the amount of
such Tax allocable to the period ending on the Closing Date shall be the total
amount of such Taxes for the entire period multiplied by a fraction, the
numerator of which is the number of days in the partial period through and
including the Closing Date, and the denominator of which is the total number of
days in such period.
(e) Tax Cooperation. Unless Schlumberger and Baker Hughes
otherwise agree, Schlumberger, Baker Hughes and their respective Affiliates
shall cooperate as set forth below with respect to Tax matters for time periods
ending on or before the Closing Date.
(i) Tax Cooperation in General. Schlumberger, Baker
Hughes, US EmployCo and the Venture Entities shall cooperate fully, as
and to the extent reasonably requested by the other party, in
connection with the filing of Tax returns and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include
the retention and (upon the other party's request) the provision of
records and information which are reasonably relevant (in the sole
opinion of the requesting party) to any such audit, litigation or other
proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any material
provided hereunder.
(ii) Retention of Books and Records. Each party shall
retain all books and records with respect to Tax matters pertinent to
the other party until the expiration of the applicable statute of
limitations (and, to the extent notified by the other party, any
extensions thereof), shall give the other party reasonable written
notice prior to transferring, destroying or discarding any such books
and records and, at such time, if the other party so requests, shall
allow the other party to take possession of such books and records.
(iii) Refunds. Except to the extent reflected as an
asset on the books of the Schlumberger Seismic Business or the Baker
Hughes Seismic Business on the Closing Date which is contributed to the
Venture Entities or US EmployCo, Schlumberger shall be entitled to all
refunds of Taxes with respect to the Schlumberger Seismic Business for
any Tax period or portion thereof which ends on or before the Closing
Date, and Baker Hughes shall be entitled to all refunds of Taxes with
respect to the Baker Hughes Seismic Business for any
-76-
82
Tax period or portion thereof ending on or before the Closing Date.
Notwithstanding the foregoing, to the extent that any Tax refund is
with respect to a period ending on or before the Closing Date, but
arises as a result of a carry-back of a Tax credit, net operating loss,
or other Tax attribute arising in a Tax period or a portion thereof
which begins after the Closing Date, any such Tax refund shall belong
to the Venture Entities or US EmployCo. Each party shall use its
commercially reasonable best efforts to obtain any refund of Taxes to
which any other party may be entitled pursuant to this Agreement and,
upon receipt of any such refund, shall promptly transmit such amount to
the party entitled thereto.
(iv) Tax Certificates. Each party shall use its
commercially reasonable best efforts to obtain, when requested by
another party, any certificate or other document from any Governmental
Authority.
(v) Cooperation Costs. The parties agree that any
expenses incurred by a party in connection with the cooperation
described in this Section 8.4(e) shall be the responsibility of the
party incurring the cost and no reimbursement shall be sought from the
requesting party.
(f) Tax Reporting. Each of the Venture Entities and US
EmployCo shall prepare all Tax returns therefor. Each Venture Entity and US
EmployCo shall provide to Schlumberger and Baker Hughes or a designated
Affiliate, in a timely manner, all such financial information as will enable
Schlumberger and Baker Hughes and their respective Affiliates (i) to make all
calculations of Taxes or Tax credits that are incident to their ownership of the
Venture Entities and US EmployCo and (ii) to comply with all applicable
reporting requirements of any Governmental Authority with jurisdiction over
Schlumberger and Baker Hughes or any of their respective Affiliates.
(g) VAT. Notwithstanding any provision of this Agreement to
the contrary:
(i) BVI Venture Entity, Dutch Venture Entity and
their respective Affiliates (collectively, the "TRANSFEREES") shall
remit in a timely manner either to the appropriate Governmental
Authority or to the applicable Transferor (as defined hereafter) all
required VAT with respect to transfers of assets to the Transferees by
Baker Hughes, Schlumberger or their respective Affiliates
(collectively, the "TRANSFERORS") as contemplated by this Agreement
within those countries to be agreed by Baker Hughes and Schlumberger at
Closing. The countries to which this provision applies shall be those
in which recovery of the VAT by the Transferees is reasonably
anticipated to occur within six (6) months of the Closing Date.
(ii) Each Transferor shall reimburse the applicable
Transferee for any VAT previously paid by such Transferee pursuant to
clause (i), where such VAT has not been recovered by the Transferee
within six (6) months of the Closing Date.
(iii) With respect to VAT incurred in connection with
transfers of assets as contemplated by this Agreement in countries not
encompassed by the agreement in clause
-77-
83
(i), the Transferors shall remit such VAT in a timely manner either to
the appropriate Governmental Authority or to the applicable Transferee
as appropriate, so as to enable the Transferees to obtain VAT credit
for such remittances.
(iv) With respect to VAT paid by the Transferors
pursuant to clauses (ii) and (iii), the Transferees shall reimburse
each Transferor for all VAT paid by such Transferor on behalf of any of
the Transferees with respect to asset transfers pursuant to this
Agreement at such time as the Transferees recover such VAT through
refund or credit against their other VAT liabilities.
(v) Where a Transferee recovers VAT paid by more than
one party from a Governmental Authority, the reimbursement to a
Transferor under clause (iv) shall be equal to the VAT recovery from
that Governmental Authority for the relevant VAT reporting period
multiplied by the ratio which the Transferor's unreimbursed VAT bears
to the total VAT input credits of the Transferee with respect to that
Governmental Authority and reporting period.
(vi) All parties shall cooperate in their compliance
with the tax laws and procedures of the countries relevant to
subsections (i), (ii) and (iii) so as to enable the Transferees to
obtain all available credits for such remittances against the VAT
liabilities of the Transferees.
(vii) VAT reimbursements equal to or greater than
US$10,000 payable to a Transferor pursuant to clause (iv) shall be paid
by the applicable Transferee as soon as practicable after recovery. For
administrative convenience, a VAT recovery of less than US$10,000 may
be temporarily held by the Transferee, and remitted to the respective
Transferor no less often than semi-annually.
8.5 Partner Cross-Indemnities.
(a) In the event that the Venture Entities or US EmployCo are
unable to fulfill their indemnity obligations under Section 8.1 with respect to
a Loss of any of the Schlumberger Indemnified Persons properly brought under
Section 8.1, Baker Hughes shall and hereby agrees to indemnify and hold harmless
such Schlumberger Indemnified Person for 30% of the unsatisfied Loss.
(b) In the event that the Venture Entities or US EmployCo are
unable to fulfill their indemnity obligations under Section 8.1 with respect to
a Loss of any of the Baker Hughes Indemnified Persons properly brought under
Section 8.1, Schlumberger shall and hereby agrees to indemnify and hold harmless
such Baker Hughes Indemnified Person for 70% of the unsatisfied Loss.
Schlumberger also agrees to pay over to Baker Hughes as promptly as practicable
70% of any call against the Amended, Restated and Replacement Parent Guarantee
(BH Trust No. 1999-1) from Baker Hughes dated as of July 15, 1999; provided,
however, that interest shall begin to accrue on any such amount owed at a rate
of LIBOR (as of the first business day following the day on which Schlumberger
is notified of any such call) plus one percent beginning on the first business
day
-78-
84
following the day on which Schlumberger is notified of any such call and shall
be paid with the amount of Schlumberger's indemnification obligation relating to
such call.
8.6 Settlement of Indemnities.
(a) De Minimis Exception. Except for the obligations of the
parties hereto under Sections 8.4 and 8.5, Losses that do not exceed US$25,000,
whether incurred as a result of a single incident or a series of related
incidents, shall not be considered Losses for purposes of determining whether an
indemnification obligation exists; provided, however, that the limitation
contained in this Section 8.6 shall not be applicable to the payment obligations
contained in Section 3.6, Section 3.10 or any assumption of the Transferred
Liabilities. If a Loss or series of related Losses exceeds US$25,000, the entire
Loss, and not just the amount of the Loss in excess of US$25,000, shall be
subject to the indemnification obligations hereunder.
(b) Third-Party Claims. If any Claim or assertion of liability
is made or asserted by a third party against the Indemnified Party based on any
liability or assertion of a right that, if established, would constitute a
breach of any of the representations, warranties, covenants or agreements of any
other party, any Venture Entity or US EmployCo or other Claim, in respect of
which indemnification has been provided for hereunder, the Indemnified Party
shall, with reasonable promptness, but not later than 30 days following such
assertion, give to the Indemnifying Party written notice of such claim or
assertion of liability and request the Indemnifying Party to defend same.
Failure to so notify the Indemnifying Party shall not relieve the Indemnifying
Party of any liability which the Indemnifying Party might have to the
Indemnified Party, except to the extent that such failure materially prejudices
the Indemnifying Party's position. The Indemnifying Party shall have the right
to defend against such liability or assertion, in which event, the Indemnifying
Party shall give written notice to the Indemnified Party of acceptance of the
defense of such Claim and the identity of counsel selected by the Indemnifying
Party. Except as set forth below, such notice to the Indemnified Party shall
give the Indemnifying Party full authority to defend, adjust, compromise or
settle, without any cost or expense to the Indemnified Party, such action, suit,
proceeding or demand of which such notice shall have been given in the name of
the Indemnified Party or otherwise as the Indemnifying Party shall elect. The
Indemnifying Party shall consult with the Indemnified Party prior to any such
compromise or settlement, and the Indemnified Party shall have the right to
refuse such compromise or settlement and, at its cost, to take over such defense
if the proposed compromise or settlement would impose any obligation or burden
on the Indemnified Party other than the payment of cash for which the
Indemnifying Party agrees to be completely responsible; provided, however, that
in such event, the Indemnifying Party shall not be responsible for, nor shall it
be obligated to indemnify the Indemnified Party against, any cost and liability
in excess of such compromise or settlement. With respect to any defense accepted
by the Indemnifying Party, the Indemnified Party shall be entitled to
participate with the Indemnifying Party in such defense and also shall be
entitled to employ separate counsel for such defense at its expense. In the
event the Indemnifying Party does not accept the defense of any indemnified
Claim as provided above, the Indemnified Party shall have the right to employ
counsel for such defense at the expense of the Indemnifying Party, and to, in
good faith with due regard to the interests of the Indemnifying Party, control
all decisions regarding the handling of the defense without the consent of the
Indemnifying Party, but shall not have the right to compromise or settle any
such action or consent to the entry of
-79-
85
any judgment with respect to such action without the consent of the Indemnifying
Party, which consent shall not be unreasonably withheld, unless such settlement,
compromise or consent includes an unconditional release of the Indemnifying
Party from all liability and obligations arising out of such action. Baker
Hughes and Schlumberger agree to cooperate with the other party, US EmployCo or
a Venture Entity, as the case may be, in the defense of any actions brought by
third parties, and the relevant records of each party shall be available to the
other parties with respect to any such defense. None of Baker Hughes,
Schlumberger, US EmployCo or any Venture Entity will provide assistance to the
party asserting the Claim unless such assistance is required by Applicable Law.
(c) Each of the parties, US EmployCo and each Venture Entity
shall have a duty to take reasonable steps to mitigate its Losses to the fullest
extent possible, including diligently pursuing any possible indemnification,
counterclaim or other action against third parties under any Contract or other
obligation relating to the cause or effect of the Loss; provided, however, that
no Indemnified Party shall have any duty to make any claim under its own
insurance coverage for an indemnification obligation of an Indemnifying Party.
Furthermore, each Indemnifying Party shall waive any rights of subrogation that
its insurance company may have to make any claims under any insurance coverage
of an Indemnifying Party against an Indemnified Party to the extent of any
indemnification obligations hereunder. If an Indemnifying Party makes a payment
hereunder, that party shall be subrogated to the rights of the payee against any
applicable third-party indemnitor or other third party (other than an insurance
carrier) from which recovery of payment may be possible. Additionally, to the
extent that an Indemnified Party collects some or all of a Loss from an
insurance carrier, third-party indemnitor or any other third party instead of
seeking indemnity from an Indemnifying Party hereunder, such insurance carrier,
third-party indemnitor or other third party shall have no rights hereunder to
seek reimbursement from the otherwise Indemnifying Party. To the extent the
total Loss is reduced due to the receipt of an offsetting payment from a third
party under an indemnification obligation, a counterclaim against that third
party or otherwise, the parties shall share that payment pro rata based on their
Percentage Interests. For example, if a Loss of US$100,000 is incurred that
would otherwise be the liability of Schlumberger (US$70,000) and Baker Hughes
(US$30,000) and Schlumberger receives the entire US$100,000 from a third party
based on a previous indemnity, Schlumberger would be obligated to apply
US$30,000 of that payment to Baker Hughes' portion of the Loss.
(d) The parties agree that no payment of funds in settlement
of any indemnification obligations provided for in this Agreement or any other
Transaction Document shall affect the agreed-upon Percentage Interests.
8.7 Waiver of Consequential Damages. EXCEPT AS PROVIDED IN SECTION 8.1,
SECTION 8.2(A)(V) OR SECTION 8.3(A)(V), NO PARTY, US EMPLOYCO OR VENTURE ENTITY
SHALL BE REQUIRED TO INDEMNIFY OR PAY THE AMOUNT OF ANY LOSS TO ANY OTHER PARTY,
US EMPLOYCO OR VENTURE ENTITY IN CONNECTION WITH THIS AGREEMENT ARISING FROM
INDIRECT, CONSEQUENTIAL, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES, EXCEPT FOR
INDIRECT, CONSEQUENTIAL, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES ACTUALLY PAID TO
ANY THIRD PARTY BY THE INDEMNIFIED PARTY SEEKING INDEMNIFICATION HEREUNDER.
8.8 Exclusive Remedy; Negligence of Indemnified Parties. THE
INDEMNIFICATION OBLIGATIONS OF THE PARTIES UNDER THIS ARTICLE 8 SHALL BE THE
EXCLUSIVE REMEDY FOR ANY CLAIM BY
-80-
86
ANY PARTY AGAINST ANY OTHER PARTY BASED ON THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, AND SHALL BE EFFECTIVE REGARDLESS OF BY WHOM ASSERTED, AND REGARDLESS
OF WHETHER ANY CLAIM OR LOSS RESULTS SOLELY OR IN PART FROM THE ACTIVE, PASSIVE
OR CONCURRENT NEGLIGENCE (BUT NOT GROSS NEGLIGENCE) OF ANY OF THE PARTIES TO BE
INDEMNIFIED.
ARTICLE 9. INTELLECTUAL PROPERTY
9.1 Schlumberger/STC Assignment. (a) STC assigns to US Venture Entity
in accordance with Article 2 all right, title and interest in and to the
Schlumberger Transferred IP primarily related to the Seismic Business in the
U.S. (b) Schlumberger assigns or causes to be assigned to the appropriate
non-U.S. Venture Entity in accordance with Article 2 all right, title and
interest in and to the Schlumberger Transferred IP primarily related to the
Schlumberger Seismic Business outside the U.S.
9.2 Baker Hughes Assignment. Baker Hughes assigns or causes to be
assigned to (a) US Venture Entity in accordance with Article 2 all right, title
and interest in and to the Baker Hughes Transferred IP primarily related to the
Seismic Business in the U.S. and (b) the appropriate non-U.S. Venture Entity in
accordance with Article 2 all right, title and interest in and to the Baker
Hughes Transferred IP primarily related to the Seismic Business outside the U.S.
9.3 Grant-Back License to Schlumberger.
(a) US Venture Entity hereby grants to STC or any of its U.S.
Affiliates as designated by STC a perpetual, exclusive (including the Venture
Entities), irrevocable, transferable (with the right to sublicense),
royalty-free license to make, have made, sell, offer for sale and use, outside
the scope of the Seismic Business in the U.S., equipment and services that fall
within the scope of the Schlumberger Transferred IP included in the assignment
of Section 9.1(a). Notwithstanding the preceding, STC or any of its U.S.
Affiliates may utilize the 3D Vertical Seismic Profiling technology that exists
as of the Closing Date within the Seismic Business in the U.S., but without
access to any Future Developments relating to such technology.
(b) The Non-U.S. Venture Entity Group hereby grants to
Schlumberger or any of its non-U.S. Affiliates as designated by Schlumberger a
perpetual, exclusive (including the Venture Entities), irrevocable, transferable
(with right to sublicense), royalty-free license to make, have made, sell, offer
for sale and use, outside the scope of the Seismic Business outside of the U.S.,
equipment and services that fall within the scope of the Schlumberger
Transferred IP included in the assignment of Section 9.1(b). Notwithstanding the
preceding, Schlumberger or any of its non-U.S. Affiliates may utilize the 3D
Vertical Seismic Profiling technology that exists as of the Closing Date within
the Seismic Business outside the U.S., but without access to any Future
Developments relating to such technology.
9.4 Grant-Back License to Baker Hughes.
(a) US Venture Entity hereby grants to Baker Hughes or any of
its U.S. Affiliates as designated by Baker Hughes a perpetual, exclusive
(including the Venture Entities), irrevocable,
-81-
87
transferable (with the right to sublicense), royalty-free license to make, have
made, sell, offer for sale and use, outside the scope of the Seismic Business in
the U.S., equipment and services that fall within the scope of the Baker Hughes
Transferred IP included in the assignment of Section 9.2(a). Notwithstanding the
preceding, Baker Hughes or any of its U.S. Affiliates may utilize the 3D
Vertical Seismic Profiling technology that exists as of the Closing Date within
the Seismic Business in the U.S., but without access to any Future Developments
relating to such technology.
(b) The Non-U.S. Venture Entity Group hereby grants to Baker
Hughes or any of its non-U.S. Affiliates as designated by Baker Hughes a
perpetual, exclusive (including the Venture Entities), irrevocable, transferable
(with right to sublicense), royalty-free license to make, have made, sell, offer
for sale and use, outside the scope of the Seismic Business outside of the U.S.,
equipment and services that fall within the scope of the Baker Hughes
Transferred IP included in the assignment of Section 9.2(b). Notwithstanding the
preceding, Baker Hughes or any of its non-U.S. Affiliates may utilize the 3D
Vertical Seismic Profiling technology that exists as of the Closing Date within
the Seismic Business outside of the U.S., but without access to any Future
Developments relating to such technology.
9.5 License of Future Developments.
(a) US Venture Entity shall grant to each of STC and Baker
Hughes, or their designated U.S. Affiliates, a perpetual, irrevocable,
non-transferable (except as provided in Section 9.8 and Section 9.9),
royalty-free, non-exclusive license to make, have made, sell, offer for sale and
use, outside the scope of the Seismic Business in the U.S., any Future
Development while STC or Baker Hughes, as appropriate, has an ownership
interest, whether direct or indirect, in the US Venture Entity. Notwithstanding
the non-exclusive nature of the preceding license, the US Venture Entity agrees
not to license any Future Developments to any competitor of Baker Hughes or
Schlumberger in the oilfield service industry. The license of this Section
9.5(a) to a contributing party does not include any license, express or
otherwise, to the Transferred IP transferred by the other party, except as to
the Seismic Processing Software Platform as discussed below. Accordingly, STC
and Baker Hughes recognize that if they need the Transferred IP of the other
party in order to utilize the Future Development, they would have to obtain a
license to that Transferred IP. The parties agree, however, to and the US
Venture Entity does hereby extend to STC and Baker Hughes or their designated
U.S. Affiliates a perpetual, irrevocable, non-transferable (with right to
sublicense to customers), royalty-free, non-exclusive, license in the
Transferred IP, as necessary, for each party to utilize the Seismic Processing
Software Platform and Future Developments relating to same outside the scope of
the Seismic Business in the U.S. This license includes the right to operate,
execute, copy, distribute, and modify the software. In this regard, the US
Venture Entity will provide each of STC and Baker Hughes a copy of the source
and object codes for the Seismic Processing Software Platform and any related
documentation.
(b) The Non-U.S. Venture Entity Group shall grant to each of
Schlumberger and Baker Hughes, or their designated non-U.S. Affiliates, a
perpetual, irrevocable, non-transferable (except as provided in Section 9.8 and
Section 9.9), royalty-free, non-exclusive license to make, have made, sell,
offer for sale and use, outside the scope of the Seismic Business outside the
U.S., any Future Development while Schlumberger or Baker Hughes, as appropriate,
has an ownership
-82-
88
interest, whether direct or indirect, in the Non-U.S. Venture Entity Group.
Notwithstanding the non-exclusive nature of the preceding license, the Non-U.S.
Venture Entity Group agrees not to license any Future Development to any
competitor of Baker Hughes or Schlumberger in the oilfield service industry. The
license of this Section 9.5(b) to a contributing party does not include any
license, express or otherwise, to the Transferred IP transferred by the other
party, except as to the Seismic Processing Software Platform as discussed below.
Accordingly, Schlumberger and Baker Hughes recognize that if they need the
Transferred IP of the other party in order to utilize the Future Development,
they would have to obtain a license to that Transferred IP. The parties agree,
however, to and the Non-U.S. Venture Entity Group, does hereby extend to STC and
Baker Hughes or their designated Non-U.S. Affiliates a perpetual, irrevocable,
non-transferable (with right to sublicense to customers), royalty-free,
non-exclusive, license in the Transferred IP, as necessary, for each party to
utilize the Seismic Processing Software Platform and Future Developments
relating to same outside the scope of the Seismic Business outside the U.S. This
license includes the right to operate, execute, copy, distribute, and modify the
software. In this regard, the Non-U.S. Venture Entity Group will provide each of
Schlumberger and Baker Hughes a copy of the source and object codes for the
Seismic Processing Software Platform and any related documentation.
(c) In addition, Schlumberger and STC agree to extend to Baker Hughes a
perpetual, irrevocable, non-transferable (with right to sublicense to
customers), royalty-bearing, non-exclusive, license for use outside the U.S. and
for use in the U.S., respectively, in Schlumberger's GEOFRAME software to the
extent necessary for Baker Hughes to utilize the Seismic Processing Software
Platform and Future Developments relating to same outside the scope of the
Seismic Business. The royalty for this license shall be commercially reasonable
and shall not exceed the license fee currently being paid by Baker Hughes for
the GEOFRAME application.
9.6 License of Schlumberger Retained IP.
(a) Schlumberger hereby grants or causes to be granted to the
Non-U.S. Venture Entity Group a non-exclusive, irrevocable, non-transferable
(with the right to sublicense to non-U.S. Affiliates), royalty-free license to
use, within the Seismic Business outside the U.S., Schlumberger Retained IP.
(b) STC hereby grants or causes to be granted to US Venture
Entity a non-exclusive, irrevocable, non-transferable (with the right to
sublicense to U.S. Affiliates), royalty-free license to use, within the Seismic
Business in the U.S., Schlumberger Retained IP.
9.7 License of Baker Hughes Retained IP.
(a) Baker Hughes hereby grants or causes to be granted to the
Non-U.S. Venture Entity Group, a non-exclusive, irrevocable, non-transferable
(with the right to sublicense to non-U.S. Affiliates), royalty-free license to
use, within the Seismic Business outside the U.S., Baker Hughes Retained IP. In
addition, Baker Hughes shall provide to US Venture Entity a copy of the source
code for the Earth-GM software as it exists as of the Closing Date for its
internal use within the Seismic Business in the U.S.
-83-
89
(b) Baker Hughes hereby grants or causes to be granted to US
Venture Entity a non-exclusive, irrevocable, non-transferable (with the right to
sublicense to U.S. Affiliates), royalty-free license to use, within the Seismic
Business in the U.S., Baker Hughes Retained IP. In addition, Baker Hughes shall
provide to the Non-U.S. Venture Entity Group a copy of the source code for the
Earth-GM software as it exists as of the Closing Date for its internal use
within the Seismic Business outside the U.S.
9.8 Transferability of Future Developments (Sale of Business). Future
Developments licensed to Schlumberger or Baker Hughes or its respective
subsidiaries under Sections 9.5 above may be transferred to an unaffiliated
third party by the licensee if that Future Development is used in good faith as
part of an ongoing business that the licensee otherwise is selling to such third
party.
9.9 Transferability of Future Developments (Joint Ventures). Future
Developments licensed to Schlumberger or Baker Hughes or its respective
subsidiaries under Section 9.5 above may be sublicensed by the licensee to a
business entity developing or using the technology in a commercial business and
in which the licensee/sublicensor has a controlling interest.
9.10 Reservation of Intellectual Property. All Intellectual Property of
each party that is not expressly assigned or licensed in this Agreement is
reserved and retained by such party. Except as expressly provided in this
Agreement, as of the Closing Date, no other assignments or licenses of
Intellectual Property are granted whatsoever, whether expressly or by
implication or by estoppel, by any party.
9.11 Abandonment of Transferred IP. In the event that a Venture Entity
abandons Transferred IP assigned to it pursuant to Sections 9.1 or 9.2, that
Venture Entity shall offer to assign, transfer and convey the abandoned
Transferred IP to the originally assigning party, i.e., Schlumberger or Baker
Hughes, at the originally assigning party's cost. The Venture Entity and the
originally assigning party will negotiate in good faith to determine the
resources necessary to effectuate the transfer. Any abandoned Transferred IP
that is assumed under this Section 9.11 may not be used by the assuming party
within or sold or licensed to a third party that does business within the scope
of the Seismic Business.
9.12 Meaning of Abandonment. For purposes of Sections 9.11 - 9.15,
abandonment shall include any of the following acts:
(a) For that Intellectual Property covered by a patent or
patent application, a determination by the Venture Entities not to continue the
prosecution of an entire Patent Family or not to pay any annuity or maintenance
fee on an entire Patent Family. A "PATENT FAMILY" shall mean a particular patent
and its foreign counterparts that include substantially the same claims.
(b) For that Intellectual Property not covered by a patent or
patent application, a determination by the Shareholders Representatives
Committee that the Venture Entities will not further develop and/or exploit the
Intellectual Property.
-84-
90
(c) The mutual agreement between the Venture Entities and the
originally assigning party that the Venture Entities do not intend to pursue the
Intellectual Property.
9.13 Good Faith Efforts to Maintain Transferred IP. Each Venture Entity
will use reasonable efforts to advise the originally assigning party of any
decision by that Venture Entity to abandon or otherwise to not pursue
Transferred IP so as to allow the originally assigning party to maintain the
integrity of the subject Transferred IP. These efforts will include (1)
extending to the Technical Liaisons or a Technical Liaison's designated
alternate an invitation to attend meetings of the Venture Entity's or Venture
Entities' patent committee, (2) advising the originally assigning party
reasonably in advance of any deadlines to maintain any patent or other rights so
that the originally assigning party can act to continue any such protection, and
(3) if necessary, to pay any such fees (such payments to be reimbursed by the
originally assigning party) to continue any such Transferred IP. Furthermore,
the Venture Entity or Venture Entities, as necessary, will cooperate with the
originally assigning party to complete and record any assignments or other
conveyance documents necessary to reflect conveyance to the originally assigning
party.
9.14 Abandonment of Intellectual Property that Includes Future
Developments. In the event that a Venture Entity decides that it will abandon
Intellectual Property owned by it and comprising a Future Development, it will
offer to Schlumberger and Baker Hughes the right to continue protection of same
in the following manner. In the event that the Future Development is determined
to be based upon certain originally assigned Transferred IP, then the Venture
Entity will offer the originally assigning party of the Transferred IP the
option of assuming such protection. If such party elects not to assume
protection of the Future Development, then the Venture Entity shall offer same
to the other party (either Baker Hughes or Schlumberger, as the case may be.)
The assuming party, if one exists, will own the Future Development. In the event
that the Future Development cannot be associated with any Transferred IP, then
the Venture Entity will advise both Schlumberger and Baker Hughes of the Venture
Entity's decision and offer both the opportunity to assume such protection. In
the event that the opportunity to assume such protection is extended to both
Schlumberger and Baker Hughes, and either, but not both, Schlumberger or Baker
Hughes declines to continue protection of the Future Development, the accepting
party shall have the exclusive rights to the Future Development and the license
of same to the declining party pursuant to Section 9.5 will terminate. In the
event that both Schlumberger and Baker Hughes desire to continue protection of
the Future Development, they will co-own such Future Development and share the
costs associated with its protection. Any abandoned Future Development that is
assumed under this Section 9.14 may not be used by the assuming party within the
scope or sold or licensed to a third party that does business within the scope
of the Seismic Business.
9.15 Enforcement of Intellectual Property.
9.15.1 The Venture Entity owner of Transferred IP, Future
Developments or both has the sole right to bring and control any action against
any third party for infringement or misappropriation of Intellectual Property in
such Transferred IP and Future Developments.
9.15.2 In the event any such infringement or misappropriation
primarily (1) involves Transferred IP, (2) is outside the Seismic Business, (3)
does not involve a competitor of the party
-85-
91
that assigned the Transferred IP and (4) the assigning party wishes to bring
suit, but the Venture Entity owner of the Transferred IP does not, the Venture
Entity will transfer promptly to that Party all rights in its possession
necessary to bring suit and to collect any and all monetary, equitable and other
relief available.
9.15.3 In the event any such infringement or misappropriation
primarily (1) involves Transferred IP, (2) is outside the Seismic Business, (3)
involves a competitor of the party that assigned the Transferred IP and (4) the
assigning party wishes to bring suit, but the Venture Entity owner of the
Transferred IP does not, the Venture Entity will transfer promptly to that party
all rights in its possession necessary to bring suit and to collect any and all
monetary, equitable and other relief available. In addition, the Venture Entity
will cooperate with Schlumberger and Baker Hughes, as reasonably necessary,
including joining any such action.
9.15.4 In the event any such infringement or misappropriation
primarily (1) involves a Future Development and (2) is outside the Seismic
Business, Schlumberger and Baker Hughes will consult to determine how to
proceed, and the Venture Entity owner of the Future Development will cooperate
with Schlumberger and Baker Hughes, as reasonably necessary, including joining
any such action.
9.15.5 In the event that any such enforcement action shall
involve Transferred IP, any settlement of such action will be with the agreement
of the originally assigning party.
ARTICLE 10. TERMINATION, AMENDMENT, WAIVER AND MODIFICATION
10.1 Termination. This Agreement may be terminated prior to the Closing
Date (a) by mutual written agreement of Schlumberger and Baker Hughes duly
approved by their respective Boards of Directors or (b) by either Schlumberger
or Baker Hughes if the Closing shall not have occurred on or before March 31,
2001, unless the absence of such occurrence shall be due to the failure of the
party seeking to terminate this Agreement to perform each of its obligations
under this Agreement required to be performed by it at or prior to the Closing
Date.
10.2 Effect of Termination. In the event of the termination of this
Agreement as provided above, there shall be no further liability or obligation
on the part of any of the parties except as set forth in Section 7.3 and Exhibit
12.6 and that, as soon as practicable following termination, the parties shall
mutually agree on and release a joint public announcement of the termination.
10.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed by or on behalf of Schlumberger and Baker Hughes.
10.4 Extension/Waiver. At any time, a party solely with respect to
itself, may: (a) with respect to obligations owed to it or the performance of
other acts for its benefit, extend the time for the performance of such
obligations or such other acts to be performed hereunder by another party; (b)
waive any inaccuracies in the representations and warranties of another party
contained herein or in any document delivered pursuant hereto; and (c) waive
compliance with any of the conditions to the obligations of a party contained
herein. Any agreement on the part of a party to any such
-86-
92
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. No such waiver shall be operative as a waiver of
any other or subsequent requirement of this Agreement.
ARTICLE 11. TRANSFER RESTRICTIONS
Each of Schlumberger and Baker Hughes agrees that it will not,
and will cause each Venture Owner not to, directly or indirectly, sell,
transfer, pledge, hypothecate or otherwise dispose of all or any part of its
ownership interest in any Venture Entity, except in accordance with this Article
11.
11.1 Put/Call Provisions.
(a) If either of Schlumberger or Baker Hughes wishes to
dispose of not less than all of its ownership interests in the Venture, either
Schlumberger or Baker Hughes, as appropriate (the "INITIATING PARTY"), shall
give written notice thereof (the "TRANSFER NOTICE") to the other (the "OTHER
PARTY") by certified mail, return receipt requested, and otherwise in accordance
with the procedures set forth in Section 12.5 hereof, specifying the cash
purchase price (stated in terms of price per percentage point of ownership
interest in the Venture) at which it is willing to effect such disposition of
its ownership interests in all Venture Entities. Schlumberger and Baker Hughes
further agree to coordinate the sale of the Venture hereunder such that
Schlumberger or Baker Hughes either purchases or sells all of its or its
Affiliates' ownership interests of each Venture Entity simultaneously.
(b) Not later than 90 days following receipt of the Transfer
Notice, the Other Party shall notify the Initiating Party in writing (the
"RESPONSE NOTICE") of its election to either (i) purchase the Initiating Party's
entire ownership interest in each Venture Entity at the cash purchase price
(stated in terms of price per percentage point of ownership interest) specified
in the Transfer Notice or (ii) sell to the Initiating Party the Other Party's
entire ownership interest in each Venture Entity at the cash purchase price
equal to the same price per percentage point of ownership interest as set forth
in the Transfer Notice. A failure by the Other Party to deliver a Response
Notice shall be deemed to be a Response Notice to purchase the Initiating
Party's entire ownership interest in each Venture Entity at the cash purchase
price specified in the Transfer Notice, given on the 90th day following receipt
of the Transfer Notice. The Response Notice, whether given or deemed given,
shall be irrevocable and shall be binding upon the Initiating Party and the
Other Party.
(c) The closing of the purchase of any ownership interest in
accordance with the Response Notice shall take place within 90 days after
receipt (or deemed receipt) of such Response Notice. The time and date of such
closing shall be specified in the Response Notice furnished pursuant to Section
11.1(b). If a Response Notice is deemed to have been given pursuant to Section
11.1(b), the closing shall take place at 9:00 a.m., Houston time, on the 120th
day following receipt of the Transfer Notice. At the closing, the party that is
purchasing the ownership interest shall pay the purchase price therefor by
delivering to the party that is selling the ownership interest cash in
immediately available funds to the order of such selling party. Concurrently
with the delivery of such purchase price, the party that is selling the
ownership interest shall execute or cause to be
-87-
93
executed such instruments of transfer as shall be sufficient to fully vest such
ownership interest in the other party. The closing shall take place at such
place as may be unanimously agreed upon by Schlumberger and Baker Hughes. The
closing and transfer of the ownership interests in all Venture Entities shall
occur simultaneously.
(d) Notwithstanding anything to the contrary set forth in this
Section 11.1, Schlumberger and Baker Hughes agree that neither of them shall
exercise its rights under this Section 11.1 until after the fifth anniversary of
the Closing Date; provided, however, that such limitation shall not apply to the
application of this Section 11.1 in accordance with the provisions of Section
11.3(e).
11.2 Change of Control. If at any time Schlumberger or Baker Hughes, or
any of their respective subsidiaries that own, directly or indirectly through
one or more subsidiaries of that subsidiary, an interest in a Venture Entity
(the "AFFILIATED OWNERS"), experiences a Change of Control Event, (a) within 30
days following such Change of Control Event, the party that or whose subsidiary
has experienced such Change of Control Event shall deliver to the other party
written notice of such Change in Control Event, which notice will specify a cash
purchase price for the sale of its entire ownership interest in the Venture to
the other party or purchase the other party's entire ownership interest in the
Venture, (b) such notice shall, for all purposes of this Agreement, be deemed to
be a Transfer Notice as defined in Section 11.1, and (c) each of the provisions
of Section 11.1 shall apply to such Transfer Notice; provided that any failure
to deliver a Response Notice by the party that has not experienced such Change
of Control Event shall not be construed as an election to either purchase or
sell any ownership interest, and the party that has experienced such Change of
Control Event shall have no right to cause any ownership interest to be
purchased or sold pursuant to this Section 11.2. Any failure to deliver a notice
in accordance with clause (a) of the immediately preceding sentence shall be
construed as a Transfer Notice specifying a cash purchase price equal to the net
book value of the applicable ownership interest as of the end of the calendar
month preceding the event giving rise to the obligation to deliver such notice.
If a Change of Control Event occurs with respect to Schlumberger or Baker Hughes
between the date of this Agreement and the Closing Date, the Change of Control
Event shall be deemed to have occurred on the Closing Date for the purposes of
the procedures in this Section 11.2. For purposes hereof, "CHANGE OF CONTROL
EVENT" shall mean (a) with respect to Schlumberger or Baker Hughes, that any one
of the following events has occurred after the date of this Agreement: (i) a
change is proposed by a majority of the stockholders of Schlumberger or Baker
Hughes, as the case may be, as to the number of members, or incumbent
membership, of its Board of Directors such that the incumbent members of said
Board of Directors immediately prior to such change would no longer constitute
at least two-thirds of the Board of Directors after such change and such
proposal is enacted; (ii) any "person" (as such term is used in Section 13(d) of
the Exchange Act) (other than (A) any employee stock ownership trust or similar
entity created by Schlumberger or Baker Hughes, as the case may be, for the
benefit of its employees or (B) Schlumberger, Baker Hughes or their respective
Affiliates), together with its affiliates (as such term is defined in Rule 12b-2
of the General Rules and Regulations under the Exchange Act), has become, at any
date hereafter, the beneficial owner (as such term is defined in Rule 13d-3 of
the General Rules and Regulations under the Exchange Act), directly or
indirectly, of 20% or more of the voting power of its then-outstanding voting
securities; or (iii) the approval by the stockholders of Schlumberger or Baker
Hughes, as the case
-88-
94
may be, of the merger or consolidation of Schlumberger or Baker Hughes, as the
case may be, with, or the sale of all or substantially all of its assets to, any
other "person" (as defined in clause (ii)), unless the incumbent members of its
Board of Directors as constituted immediately prior to such merger or
consolidation or sale shall constitute at least a majority of the directors of
the surviving corporation of such merger or consolidation or the transferee in
such sale, immediately following the consummation of any such transaction, or
any parent (as such term is defined in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act) of such surviving corporation or transferee
and (b) with respect to an Affiliated Owner, a change in the equity ownership of
the Affiliated Owner has occurred such that Schlumberger or Baker Hughes, as
applicable, no longer owns, directly or indirectly, its Percentage Interest in
any Venture Entity. Schlumberger and Baker Hughes agree not to, and agree to
cause their respective Affiliates not to, provide any funds to any Person for
the purpose of acquiring shares of Baker Hughes or Schlumberger, respectively,
with the intention of triggering a Change of Control Event of the type described
in Section 11.2(a)(ii).
11.3 Right of First Refusal.
(a) Procedure. If, at any time after the Closing Date,
Schlumberger or Baker Hughes desires to transfer (a "DISPOSITION") all of its
ownership interests in the Venture to a third party (other than a transfer
allowed by Section 12.3 or this Section 11.3) and has received a bona fide
written offer to that effect with reasonable evidence of sufficient funding,
then Schlumberger or Baker Hughes, as appropriate (the "DISPOSING PARTY"), shall
promptly give notice thereof (the "DISPOSITION NOTICE") to the other party (the
"RECIPIENT PARTY"). The Disposition Notice shall set forth all relevant
information with respect to the proposed Disposition, including the name and
address of the prospective acquirer, the purchase price (and any related
information that is required by Section 11.3(b)), the manner in which the
purchaser shall fund the purchase and any other terms and conditions of the
proposed Disposition. The Recipient Party shall have the preferential right to
acquire such ownership interest for the same purchase price, and on the same
terms and conditions, as set forth in the Disposition Notice, except as provided
otherwise in this Section 11.3. The Recipient Party shall have 30 days following
its receipt of the Disposition Notice in which to notify the Disposing Party
whether it elects to exercise its preferential right; provided, however, that if
either party elects to require an appraisal pursuant to Section 11.3(b), then
the applicable deadline for the Recipient Party to deliver such notice shall be
15 days following delivery of the decision of the Appraiser. A notice in which
the Recipient Party exercises such right is referred to herein as an "EXERCISE
NOTICE."
(b) Non-Cash Consideration. If any portion of the purchase
price, as disclosed in the Disposition Notice, is to be paid in a form other
than cash (including through delivery of stock, promissory notes or other
assets) ("NON-MONETARY CONSIDERATION"), the Disposition Notice shall set forth
the Disposing Party's best estimate of the fair market value of the Non-Monetary
Consideration. If the Recipient Party disagrees with such estimate and so
notifies the Disposing Party within 10 days following delivery of the
Disposition Notice, and if such disagreement is not resolved within 20 days
following delivery of the Disposition Notice, either the Disposing Party or the
Recipient Party, by notice to the other (the "APPRAISAL NOTICE"), may require
the determination of the Fair Market Value of the Non-Monetary Consideration to
be made by an appraiser, investment banker or other Person (the "APPRAISER")
having expertise in the valuation of assets of the type
-89-
95
represented by the Non-Monetary Consideration. As used herein, the term "FAIR
MARKET VALUE" shall mean the fair market value of such Non-Monetary
Consideration, taking into account all relevant factors, including (i) any tax
benefits to be derived by the Disposing Party from such Non-Monetary
Consideration (such as the benefits of effecting a tax-free transaction) and,
(ii) in the case of a promissory note or similar Non-Monetary Consideration, the
creditworthiness of the proposed purchaser (or other maker of the note). The
Appraiser shall be selected by mutual agreement of the Disposing Party and the
Recipient Party; provided, however, that if the Disposing Party and the
Recipient Party are unable to reach such agreement within 20 days following
delivery of the Appraisal Notice, either such party may petition the United
States District Judge for the Southern District of Texas (Houston Division) then
senior in service to designate the Appraiser. If the Appraiser so chosen shall
die, resign or otherwise fail or become unable to serve, a replacement Appraiser
shall be chosen in accordance with the provisions of the immediately preceding
sentence. The decision of the Appraiser shall be final and binding on the
Disposing Party and the Recipient Party, and the fees and expenses of the
Appraiser shall be paid equally by the Disposing Party and the Recipient Party.
Subject to the remaining provisions of this Section 11.3(b), the Recipient Party
shall pay in cash the Fair Market Value of the Non-Monetary Consideration, as so
determined by agreement or by the Appraiser. If the Recipient Party so elects in
its Exercise Notice, the Recipient Party may pay such portion of the purchase
price by delivering to the Disposing Party non-monetary consideration (the
"ALTERNATIVE NON-MONETARY CONSIDERATION") that (y) is in a form substantially
equivalent to the Non-Monetary Consideration and (z) has a Fair Market Value
equal to the Fair Market Value of the Non-Monetary Consideration; provided,
however, that, as a condition to the Recipient Party's right to pay such portion
of the purchase price by delivering the Alternative Non-Monetary Consideration,
the Recipient Party and the Disposing Party shall have first agreed upon the
Fair Market Value of such Alternative Non-Monetary Consideration, or such Fair
Market Value shall have been determined by the Appraiser in accordance with the
provisions of this Section 11.3(b).
(c) Closing. If the preferential right is exercised in
accordance with Section 11.3(a), the closing of such purchase shall occur at an
agreed-upon location on the first business day that is 30 days after the
expiration of the preferential right period (or, if later, the fifth business
day after the receipt of all applicable regulatory and governmental approvals to
the purchase), unless the Disposing Party and the Recipient Party agree upon a
different place or date. At that closing, (i) the Disposing Party shall execute
and deliver to the Recipient Party (x) an assignment of the ownership interest
described in the Disposition Notice, in form and substance reasonably acceptable
to the Recipient Party, containing a general warranty of title as to such
ownership interest (including that such ownership interest is free and clear of
any Liens), (y) in the case of a Disposition of voting securities, the stock
certificates representing such voting securities with stock powers attached and
endorsed in blank, and (z) any other instruments reasonably requested by the
Recipient Party to give effect to the purchase; and (ii) the Recipient Party
shall deliver to the Disposing Party the purchase price specified in the
Disposition Notice in immediately available funds, subject to any modifications
thereof required by Section 11.3(b).
(d) Waiver of Right of First Refusal. If the Recipient Party
does not deliver an Exercise Notice during the applicable period specified in
Section 11.3(a), it shall be deemed to have waived its right of first refusal,
and the Disposing Party shall have the right to dispose of its
-90-
96
ownership interest in the Venture to the proposed purchaser strictly in
accordance with the terms of the Disposition Notice for a period of 90 days
after the expiration of the preferential right period. If, however, the
Disposing Party fails so to dispose of the ownership interest within such 90-day
period, the proposed Disposition shall again become subject to the preferential
right set forth in this Section 11.3.
(e) Relationship to Section 11.1. Subject to the other
provisions of this Section 11.3, nothing in this Section 11.3 shall prevent
Schlumberger or Baker Hughes from exercising its rights under Section 11.1. If
(i) a Disposition Notice is delivered under this Section 11.3, (ii) the
Recipient Party does not deliver an Exercise Notice under this Section 11.3 and
(iii) prior to the Disposition of the applicable interest to the proposed
purchaser, the Recipient Party delivers a Transfer Notice under Section 11.1,
then the provisions of this Section 11.3 and Section 11.1 shall be deemed
amended (y) to permit the proposed purchaser, by agreement with the Disposing
Party, to deliver the Response Notice and (z) to require the closing of the
Disposition of such ownership interest, and the closing described in Section
11.1(c), to occur at concurrent closings; it being the intent of the parties
that the purchaser of the ownership interest, if the closing of the Disposition
of the ownership interest occurs, shall have the right to cause the Disposing
Party to exercise the rights under Section 11.1.
11.4 No Partial Dispositions. Except as set forth in Section 11.5, the
parties agree not to make or attempt to make any partial Disposition of their
respective ownership interests in the Venture to a third party. Any proposed
transfer of a party's ownership interests in the Venture must be for its entire
interest in the Venture.
11.5 Transfers to Wholly Owned Subsidiaries. Notwithstanding anything
to the contrary in this Article 11, the Schlumberger or Baker Hughes
subsidiaries that directly own the Venture Entities may, at any time, transfer
all, or any portion of, their respective ownership interests in a Venture Entity
to a subsidiary which, directly or indirectly, is wholly owned (other than
directors' qualifying shares or local ownership requirements, in each case, of
no more than 5% of the total voting or equity interests) by Schlumberger or
Baker Hughes, as applicable; provided, however, that (a) no transfer of an
ownership interest in US Venture Entity to a wholly owned Affiliate of a Venture
Owner shall be permitted without the consent of the other Venture Owner of the
US Venture Entity if such transfer would trigger the partnership termination
provisions of section 708(b) of the Code, and (b) any such transfer of an
interest in any other Venture Entity is subject to the provisions of Section
7.10. In addition, it is agreed that the provisions of this Section 11.5 shall
in no way hinder the transfers contemplated by Section 2.1.
ARTICLE 12. GENERAL PROVISIONS
12.1 Survival of Representations, Warranties and Pre-Closing Covenants
and Certain Indemnification Obligations. Each of the representations, warranties
and pre-Closing covenants contained in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Closing Date for a period
of five years following the Closing Date; provided, however, that the foregoing
five-year survival period shall not apply to or serve to limit (i) warranties of
title, which shall extend according to their terms; (ii) Claims of which a party
has given another party against
-91-
97
which it is seeking reimbursement for such Claims specific written notice within
said five-year period; (iii) any Claim resulting from the assessment of Taxes
for any period prior to or including the Closing Date, the indemnification for
which shall extend for the period of the statute of limitations applicable to
such Tax Claims; or (iv) any Claims based upon the application or alleged
violation of any Environmental, Health and Safety Requirements, the
indemnification for which shall extend for the period of the applicable statute
of limitations applicable to such Claims.
12.2 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas applicable to Contracts made
and to be performed therein, without giving effect to the principles of
conflicts of law thereof.
12.3 Parties in Interest; Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, and it is not intended to
confer upon any other Person any rights or remedies hereunder, except that each
of the Venture Entities shall be considered to be a third-party beneficiary of
the provisions of this Agreement. Subject to the provisions of Article 11,
neither this Agreement nor any of the rights, interests or obligations hereunder
may be assigned by any of the parties without the prior written consent of the
other parties, except that Schlumberger, SOHL, SPLC, SLBV, STC or Baker Hughes
may at any time assign any or all of its rights or obligations hereunder to one
of its wholly owned subsidiaries (but no such assignment shall relieve
Schlumberger, SOHL, SPLC, SLBV, STC or Baker Hughes, as the case may be, of any
of its obligations under this Agreement).
12.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
12.5 Notices. All notices, requests, demands and other communications
made in connection with this Agreement shall be in writing and shall be deemed
to have been duly given on the date delivered, if delivered personally, by
reputable overnight delivery service that requires a signature on delivery or
sent by facsimile machine with telephonic confirmation of receipt to the Persons
identified below, or three days after mailing in the U.S. Mail if mailed by
certified or registered mail, postage prepaid, return receipt requested,
addressed as follows:
(a) if to Schlumberger:
Schlumberger Limited
277 Park Avenue
New York, New York 10172-2066
Facsimile: 212.350.8127
Attn.: General Counsel
-92-
98
(b) if to Baker Hughes:
Baker Hughes Incorporated
3900 Essex Lane
Houston, Texas 77027
Facsimile: 713.439.8472
Attn.: General Counsel
Such addresses may be changed, from time to time, by means of a notice
given in the manner provided in this Section 12.5.
12.6 Competition and Confidentiality.
(a) Each party agrees that so long as it or one of its
Affiliates continues to hold an ownership interest in any of the Venture
Entities and for a period of three years thereafter, it will not directly or
indirectly engage or invest in any business in the Seismic Business in direct
competition with the business of any of the Venture Entities as conducted
immediately following the Closing. It is understood and agreed that (i) a party
shall not be deemed to be in violation of this Section 12.6(a) as a result of
any acquisition it may make of not more than five percent of the outstanding
shares or other units of any security of any entity subject to the requirements
of Section 13 or 15(d) of the Exchange Act, (ii) the provisions of this Section
12.6(a) shall not apply to any business activities of any party, or any of its
respective Affiliates, actually being conducted as of the date hereof, other
than the Schlumberger Seismic Business and the Baker Hughes Seismic Business,
(iii) Schlumberger and Baker Hughes shall be permitted to process Vertical
Seismic Profiling within the Seismic Business by using Schlumberger Transferred
IP or Baker Hughes Transferred IP, respectively, and without access to Future
Developments and (iv) this Section 12.6(a) shall not be construed to prohibit a
party, directly or through any Affiliates, from hereafter acquiring and
continuing to own and operate any entity that has operations in the Seismic
Business that compete with the business of any of the Venture Entities as
conducted immediately following the Closing if none of the principal operations
of such entity so compete. For purposes of this Section 12.6(a), "principal
operation" shall mean an operation or line of business of an entity that
contributes more than fifteen percent of such entity's revenues. In the event
that either party acquires an entity that has operations competing directly with
any of the Venture Entities, the parties agree to, and to cause the Venture
Entities to, attempt to negotiate mutually agreeable terms upon which such
operations could be transferred to a Venture Entity. If the party that has
acquired the competing business and the Venture Entities cannot reach agreement
on the acquisition of the competing business by the Venture Entities, the party
that has acquired the competing business shall divest itself of that business no
later than the date that is one year after the date of acquisition of the
competing business.
(b) In the event that the covenants contained in Section
12.6(a) are more restrictive than permitted by Applicable Law, the parties agree
that the covenants contained in Section 12.6(a) shall be enforceable and
enforced to the extent permitted by Applicable Law.
(c) The parties shall abide by the confidentiality provisions
of Exhibit 12.6.
-93-
99
(d) Each party acknowledges and agrees that the remedy at law
for any breach of the requirements of this Section 12.6 would be inadequate, and
agrees and consents that, without intending to limit any additional remedies
that may be available, temporary and permanent injunctive and other equitable
relief may be granted without proof of actual damage or inadequacy of legal
remedy in any proceeding that may be brought to enforce any of the provisions of
this Section 12.6.
12.7 Litigation and Claim Support. If so requested by a party or a
Venture Entity, whether in connection with the matters set forth in Article 8 or
otherwise, each of the applicable Venture Entities (if requested by a party) or
parties (if requested by a Venture Entity) shall cooperate, and shall cause
their respective employees to cooperate, with such party and its Affiliates and
their counsel in defending or prosecuting any litigation or Claim brought by
such party against any third party or by any third party against such party.
Cooperation shall include causing the employees of the Venture Entities to
furnish documents, testify as witnesses, appear for depositions and take other
similar actions as a party or Affiliate thereof may reasonably request. The cost
of providing any such support shall be the responsibility of the requesting
party. However, the parties agree that if a Venture Entity employee or party
employee is subpoenaed by an unrelated third party in connection with any such
litigation or Claim, no cost reimbursement request will be made to Schlumberger,
Baker Hughes or any Venture Entity or any of their respective Affiliates in
connection therewith.
12.8 Enforcement. Each of the parties agrees that it shall take no
action to prevent any of the Venture Entities from seeking to enforce any of the
obligations of any of the other parties, as the case may be, under this
Agreement or to obtain damages as a result of any breach thereof. Each of the
parties agrees that it shall not withhold its consent, and shall cause its
representatives on the board of directors, management committee or other
governing body of any of the Venture Entities not to withhold their consent, to
any of the Venture Entities taking any such action against it.
12.9 Entire Agreement; Conflicts. This Agreement, together with each of
the exhibits and disclosure letters hereto, and the other Transaction Documents
(including any exhibits or schedules thereto) constitute the entire agreement
among the parties hereto with respect to the matters covered hereby and thereby
and supersedes all prior agreements and understandings among the parties,
including the Memorandum of Understanding dated May 30, 2000 between
Schlumberger and Baker Hughes and the Confidentiality Agreement effective as of
May 5, 2000 between Schlumberger and Baker Hughes, with respect to the matters
discussed herein or in the other Transaction Documents. If there is any conflict
between this Agreement and any other Transaction Document, the provisions of
this Agreement shall govern.
12.10 Consents and Approval. In the case of any consent or approval
required or contemplated hereby, no party hereto shall unreasonably withhold or
delay consent or approval.
12.11 Obligations of Schlumberger and Baker Hughes. Whenever this
Agreement requires Schlumberger or Baker Hughes to take any action, such
requirement shall be deemed to be a requirement of the applicable subsidiary or
subsidiaries of Schlumberger or Baker Hughes listed in Section 2.7 which holds
the interests in the Venture Entity or Venture Entities in the country in which
the action is required to be taken and a guarantee of such performance by
Schlumberger or Baker Hughes, as applicable.
-94-
100
12.12 Publicity.
(a) No party shall make any press release or other public
statement or disclosure (including communications to employees, customers and
suppliers) regarding this Agreement, its contents or the transactions
contemplated hereby without giving the other parties reasonable prior notice
thereof and the opportunity to review and comment upon such release, statement
or disclosure unless and only to the extent that disclosure is required under
Applicable Law. Baker Hughes and Schlumberger agree that, to the extent
practicable, they will attempt to coordinate any material public disclosures
regarding the Venture.
(b) Baker Hughes and Schlumberger further agree that, to the
extent practicable, they will each circulate to each other proposed drafts of
relevant portions of (i) any press release that is intended to be released
nationally in the U.S. or internationally or (ii) any public filing with the SEC
that, in either case, contains disclosures that are (A) material to Baker Hughes
or Schlumberger, as applicable, (B) not already publicly known or been
previously disclosed to the public and (C) related to the Venture.
12.13 Severability. If any term, provision, covenant or restriction of
this Agreement or the application thereof to any Person or circumstance, at any
time or to any extent, is held by a court of competent jurisdiction or other
Governmental Authority to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement (or the
application of such provision in other jurisdictions or to Persons or
circumstances other than those to which it was held invalid or unenforceable)
shall in no way be affected, impaired or invalidated, and to the extent
permitted by Applicable Law, any such term, provision, covenant or restriction
shall be restricted in applicability or reformed to the minimum extent required
for such to be enforceable. This provision shall be interpreted and enforced to
give effect to the original written intent of the parties hereto prior to the
determination of such invalidity or unenforceability.
12.14 No Strict Construction. The language this Agreement uses shall be
deemed to be the language the parties hereto have chosen to reflect their mutual
intent, and no rule of strict construction or presumption based upon the party
that has drafted this Agreement shall be applied against any party hereto.
12.15 Jurisdiction and Venue. Each of the parties irrevocably agrees
that if any dispute between the parties relating to this Agreement cannot be
resolved amicably by the parties, any action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect thereof
brought by the other party hereto or its successors or assigns, shall be brought
and determined in a Texas state court or U.S. federal district court in Texas,
and each of the parties hereby irrevocably submits with regard to any such
action or proceeding for itself, generally and unconditionally, to the exclusive
jurisdiction of the aforesaid courts; provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this Section 12.15 and
shall not be deemed to be general submission to the jurisdiction of said courts
or in the State of Texas other than for such purpose.
-95-
101
IN WITNESS WHEREOF, the undersigned have duly executed and delivered
this Agreement as of the date first above written.
SCHLUMBERGER LIMITED
By: /s/ Andrew Gould
------------------------
Andrew Gould
Executive Vice President
Oilfield Services
SCHLUMBERGER OILFIELD HOLDINGS LIMITED
By: /s/ Robert Villard
------------------------
Robert Villard
Attorney-in-Fact
SCHLUMBERGER PLC
By: /s/ Robert Villard
------------------------
Robert Villard
Attorney-in-Fact
SCHLUMBERGER B.V.
By: /s/ Robert Villard
------------------------
Robert Villard
Attorney-in-Fact
102
SCHLUMBERGER TECHNOLOGY CORPORATION
By: /s/ Robert Villard
---------------------
Robert Villard
Attorney-in-Fact
BAKER HUGHES INCORPORATED
By: /s/ Andrew Szescila
---------------------
Andrew Szescila
Senior Vice President