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Purchase Agreement

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Date:
2002
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258K
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#137125

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PURCHASE AGREEMENT among SCHLUMBERGER TECHNOLOGY CORPORATION ("Seller") and GRANT PRIDECO, INC. ("Purchaser Parent") TABLE OF CONTENTS PAGE ---- ARTICLE I PURCHASE AND SALE.......................................................................................2 1.1 Purchase and Sale.............................................................................2 1.2 Limitation on Assignments.....................................................................2 1.3 Consideration/Allocation......................................................................3 1.4 Purchase Price Adjustment.....................................................................3 1.5 Excluded Assets...............................................................................6 1.6 Assumed and Excluded Liabilities..............................................................6 ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER...............................................................7 2.1 Organization..................................................................................7 2.2 Capitalization; Seller's Ownership of Acquired Entities.......................................7 2.3 Subsidiaries..................................................................................7 2.4 Authority of Seller...........................................................................8 2.5 No Conflict/Consents..........................................................................8 2.6 Personal Property.............................................................................9 2.7 Real Property................................................................................10 2.8 Intellectual Property........................................................................11 2.9 Financial Statements.........................................................................12 2.10 Absence of Certain Changes and Events........................................................12 2.11 Taxes........................................................................................14 2.12 Litigation...................................................................................16 2.13 Employee Benefit Matters.....................................................................16 2.14 Material Contracts...........................................................................18 2.15 Warranties and Product Liability.............................................................20 2.16 Brokers......................................................................................20 2.17 Absence of Certain Payments..................................................................20 2.18 Employees....................................................................................20 2.19 Environmental................................................................................21 2.20 Environmental Permits........................................................................22 2.21 Compliance with Law; Authorizations..........................................................22 2.22 Securities/Resale............................................................................23 2.23 No Other Representations or Warranties.......................................................23 ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER PARENT...................................................23 3.1 Organization.................................................................................23 3.3 Authority of Purchaser Parent................................................................23 3.4 Brokers......................................................................................24 3.5 No Conflict; Consents........................................................................24 3.6 Taxes........................................................................................24 3.7 Litigation...................................................................................24 3.8 Environmental................................................................................25 3.9 Compliance with Law; Authorizations..........................................................25 3.10 Securities/Resale............................................................................25 TABLE OF CONTENTS PAGE ---- 3.11 Securities Representations...................................................................25 3.12 Issuance and Listing of Shares...............................................................26 3.13 No Other Representations or Warranties.......................................................26 ARTICLE IV COVENANTS OF SELLER...................................................................................26 4.1 Corporate and Other Actions..................................................................26 4.2 Full Access..................................................................................26 4.3 Ordinary Course of Business..................................................................26 4.4 Filings and Consents.........................................................................27 4.5 Employment Matters...........................................................................28 4.6 Covenant Not to Compete......................................................................28 4.7 Non-Solicitation of Employees................................................................29 4.8 Nondisclosure of Proprietary Information.....................................................29 4.9 Transition Services Agreement................................................................30 4.10 Registration Rights Agreement................................................................30 4.11 Financial Statements.........................................................................30 4.12 Insurance Matters............................................................................31 4.13 Cooperation on Financing.....................................................................31 4.14 Formation of Entities and Transfer of Assets.................................................32 4.15 Joint Contracts..............................................................................32 4.16 MFGPro.......................................................................................32 4.17 Union Negotiations...........................................................................32 ARTICLE V COVENANTS OF PURCHASER PARENT..........................................................................33 5.1 Corporate and Other Actions..................................................................33 5.2 Employees and Benefit Plans..................................................................33 5.3 Full Access..................................................................................35 5.4 Filings and Consents.........................................................................35 5.5 Use of Scorpion Name.........................................................................35 5.6 No Negotiation...............................................................................36 5.7 License Back of Transferred Intellectual Property............................................36 5.8 Continuation of Subsidiaries.................................................................37 ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER PARENT...............................................37 6.1 Warranties True As of Both Present Date and the Closing Date.................................37 6.2 Compliance with Agreements and Covenants.....................................................37 6.3 Competition Law Approvals....................................................................37 6.4 Injunctions..................................................................................37 6.5 Deliveries by Seller.........................................................................37 6.6 Consents.....................................................................................38 6.7 Removal of Excluded Assets and Excluded Liabilities..........................................38 6.8 Restructuring................................................................................38 ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER........................................................38 7.1 Warranties True as of Both Present Date and the Closing Date.................................38 -ii- TABLE OF CONTENTS PAGE ---- 7.2 Compliance with Agreements and Covenants.....................................................38 7.3 Competition Law Approvals....................................................................38 7.4 Injunctions..................................................................................38 7.5 Deliveries by Purchaser Parent...............................................................38 7.6 Consents.....................................................................................38 7.7 Restructuring................................................................................39 ARTICLE VIII CLOSING.............................................................................................39 8.1 Closing......................................................................................39 8.2 Seller's Deliveries..........................................................................39 8.3 Purchaser Parent's Deliveries................................................................40 8.4 Termination..................................................................................40 ARTICLE IX SURVIVAL AND INDEMNIFICATION..........................................................................41 9.1 Survival.....................................................................................41 9.2 Indemnification by Seller (other than for Tax Matters).......................................41 9.3 Indemnification by Purchaser Parent (other than for Tax Matters).............................42 9.4 Limitations on Liability of the Seller.......................................................43 9.5 Notice of Third Party Claims: Assumption of Defense..........................................43 9.6 Settlement or Compromise.....................................................................44 9.7 Tax Indemnification..........................................................................44 9.8 Time Limits..................................................................................47 9.9 Net Losses...................................................................................47 9.10 Purchase Price Adjustments...................................................................48 9.11 Remedial Action..............................................................................48 9.12 Negligence of Indemnified Parties............................................................48 9.13 Environmental Matters........................................................................48 9.14 Waiver of Consequential Damages..............................................................50 ARTICLE X TAX MATTERS............................................................................................50 10.1 Tax Elections................................................................................50 10.2 Other Tax Matters............................................................................51 ARTICLE XI MISCELLANEOUS.........................................................................................54 11.1 Delivery of Corporate Documents; Retention of Records........................................54 11.2 Cooperation After Closing....................................................................55 11.3 Expenses.....................................................................................56 11.4 Amendment....................................................................................56 11.5 Notices......................................................................................56 11.6 Waivers......................................................................................57 11.7 Counterparts.................................................................................57 11.8 Headings.....................................................................................57 11.9 Applicable Law...............................................................................57 11.10 Assignment...................................................................................58 11.11 No Third Party Beneficiaries.................................................................58 -iii- TABLE OF CONTENTS PAGE ---- 11.12 Jurisdiction; Venue; Service of Process; Waiver of Jury Trial................................58 11.13 Schedules....................................................................................58 11.14 Incorporation................................................................................58 11.15 Complete Agreement...........................................................................58 11.16 Disclaimer...................................................................................58 11.17 Knowledge Defined............................................................................59 11.18 Public Announcements.........................................................................59 11.19 Currency.....................................................................................59 11.20 Specific Performance.........................................................................59 11.21 Further Assurances...........................................................................59 11.22 Severability.................................................................................60 -iv- PURCHASE AGREEMENT THIS PURCHASE AGREEMENT is entered into on the 25th day of October, 2002, among Schlumberger Technology Corporation, a Texas corporation (the "Seller"), and Grant Prideco, Inc., a Delaware corporation ("Purchaser Parent") (each a "Party" and collectively, the "Parties"). WHEREAS, the Seller and its Affiliates, through various directly and indirectly wholly-owned subsidiaries, are engaged in the business of developing, manufacturing, selling and distributing drilling bits and related assets and technology to the oil and gas industry and, to a lesser extent, other industrial applications (such business, including the Acquired Entities, the Acquired Assets and the US Assets, the "Business"); WHEREAS, on the terms and subject to the conditions herein, Purchaser Parent desires to purchase the Business from the Seller and its subsidiaries and, on or prior to the Closing Date, will designate one or more existing or newly formed entities to purchase the Business (each such designated subsidiary a "Purchaser Entity" and, collectively the "Purchaser Entities"); WHEREAS, on or prior to the Closing Date, Seller will cause the assets of the Business located in the United States set forth on Seller Schedule O (the "US Assets") to be contributed to and the liabilities and obligations of the Business in the United States to be assumed by Reed-Hycalog Operating, LP, a Delaware limited partnership ("Road Runner-US"); and WHEREAS, on or prior to the Closing Date, Seller will cause all of the assets and liabilities of Reed Tool Singapore Pte. Ltd., a company incorporated in Singapore ("Road Runner-Singapore-Old") to be transferred to and assumed by a newly formed partnership ("Road Runner-Singapore-New") that will be owned directly or indirectly 100% by Camco International (UK) Limited, a United Kingdom corporation ("Road Runner-UK"); and WHEREAS, on or prior to the Closing Date, Seller will cause the inventory, contracts and other assets set forth on Seller Schedule 1.1(a) (the "Acquired Assets") to be acquired by a newly formed Subsidiary of Road Runner-UK; and WHEREAS, in order to transfer the Business to the Purchaser Entities, subject to the terms and conditions set forth herein, the Seller desires to sell to the Purchaser Entities and the Purchaser Parent desires to purchase or cause the Purchaser Entities to purchase from the Seller, all of the issued and outstanding (i) capital stock of Road Runner-UK, (ii) capital stock of Camco International (Canada) Limited, a Canadian corporation ("Road Runner-Canada"), (iii) membership interests of Reed-Hycalog, LLC, a Delaware limited liability company which is the general partner of Road Runner-US ("Road Runner-LLC") and (iv) limited partner interests of Road Runner-US (Road Runner-UK, Road Runner-Canada, Road Runner-LLC, Road Runner-US and their respective subsidiaries, the "Acquired Entities") and certain related assets held by the Seller and its Affiliates. Capitalized terms not defined in the body of this Agreement shall have the meanings assigned to them in Appendix I attached hereto, which is incorporated herein and a part hereof in all respects. NOW, THEREFORE, in consideration of the premises and the mutual promises herein contained, Purchaser Parent, and the Seller hereby agree as follows: ARTICLE I PURCHASE AND SALE 1.1 Purchase and Sale. (a) Purchase. On the terms and subject to the conditions set forth herein, at the Closing, Purchaser Parent and/or its Affiliates shall purchase from the Seller and/or its Affiliates, (i) 100% of the membership interests in Road Runner-LLC, (ii) 100% of the limited partner interests in Road Runner-US, (iii) 100% of the issued and outstanding shares of capital stock of Road Runner-UK, and (iv) 100% of the issued and outstanding shares of capital stock of Road Runner-Canada. In connection with the Restructuring, the Acquired Entities shall assume all Assumed Liabilities (as defined herein) for which they are not already liable. Seller shall be entitled to designate one or more Affiliates of Seller as the Sellers of all or part of the Business at any time prior to the Closing with the consent of Purchaser Parent, which consent will not be unreasonably withheld. (b) Purchaser Entities. Purchaser Schedule 1.1(b) sets forth the name and jurisdiction of formation of the entity that will purchase (i) the membership interests in Road Runner-LLC, (ii) the limited partnership interests in Road Runner-US, (iii) the capital stock of Road Runner-UK, and (iv) the capital stock of Road Runner-Canada. Purchaser Schedule 1.1(b) also specifies for each entity listed, the ownership of that entity and its ownership link to the Purchaser Parent; provided, however, that Purchaser Parent shall be entitled to change the designation of the entities purchasing all or part of the Business at any time prior to the Closing if such change shall not be expected by Seller or Purchaser Parent to have any material adverse consequences on Seller or its Affiliates. 1.2 Limitation on Assignments. The Seller shall use its reasonable commercial efforts to obtain all consents of third parties as are necessary for the assignment of the Acquired Assets and the US Assets and the assignment of any contracts, leases, property (real or personal) or other assets of the Business to the Acquired Entities or their Subsidiaries. To the extent that (i) any of the Acquired Assets or US Assets (and any contracts, leases, property (real or personal) or other assets of the Business to be assigned to an Acquired Entity or their Subsidiaries) are not assignable by the terms thereof, (ii) consents to the assignment of any of the Acquired Assets or US Assets (and any contracts, leases, property (real or personal) or other assets of the Business to be assigned to an Acquired Entity or their Subsidiaries) cannot be obtained as provided herein, (iii) the assignment of any Acquired Assets or US Assets (and any contracts, leases, property (real or personal) or other assets of the Business to be assigned to an Acquired Entity or their Subsidiaries) would constitute a violation of any law, judgment, decree, order, writ, injunction, rule or regulation of any Governmental Authority or (iv) any Acquired Asset or US Asset (and any contract, lease, property (real or personal) or other asset of the Business to be assigned to the Acquired Entities or their Subsidiaries) is not assigned by Seller or its Affiliates at the Closing without a breach by such Person of its obligations hereunder, such Acquired Assets or US Assets (and any contracts, leases, property (real or personal) or other assets of the Business to be assigned to the Acquired Entities or their Subsidiaries) shall be held by
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