Exhibit 99.4
EXECUTION COPY
MOST FAVORED SUPPLIER
AND
ALLIANCE AGREEMENT
AMONG
SCHLUMBERGER OILFIELD HOLDINGS LIMITED
SCHLUMBERGER TECHNOLOGY CORPORATION
AND
HANOVER COMPRESSION LIMITED PARTNERSHIP
Dated
August 31, 2001
TABLE OF CONTENTS
Page
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ARTICLE I PURPOSE OF STRATEGIC ALLIANCE....................................................................... 2
1.1 Mission Statement............................................................................ 2
1.2 Alliance Objectives.......................................................................... 2
1.3 Alliance Goals............................................................................... 2
ARTICLE II OPERATION OF THE STRATEGIC ALLIANCE................................................................ 3
2.1 Management of Activities under the Strategic Alliance........................................ 3
2.2 Meetings of the Management Committee......................................................... 3
2.3 Responsibilities of the Management Committee................................................. 3
2.4 No Solicitation of Employees................................................................. 5
ARTICLE III RESPONSIBILITIES OF THE PARTIES................................................................... 6
3.1 Joint Responsibilities of Hanover and Schlumberger........................................... 6
3.2 Pursuing Designated Projects................................................................. 7
3.3 Business Cooperation in Schlumberger GeoMarkets.............................................. 8
3.4 Most Favored Supplier Status................................................................. 9
3.5 Automation Systems Alignment/Licensing....................................................... 11
3.6 Business Process Alignment/ISO Certification/Schlumberger QHSE Standards..................... 12
ARTICLE IV TERM AND PAYMENT................................................................................... 12
4.1 Consideration................................................................................ 12
4.2 Initial Term................................................................................. 13
4.3 Additional Terms............................................................................. 13
4.4 Termination for Default or Otherwise......................................................... 13
4.5 Registration Rights Agreement................................................................ 14
ARTICLE V REPRESENTATIONS AND WARRANTIES...................................................................... 14
5.1 Representations and Warranties of the Parties................................................ 14
5.2 Additional Representation of Schlumberger.................................................... 14
5.3 Survival of Representations and Warranties................................................... 15
ARTICLE VI TAXES.............................................................................................. 15
6.1 Taxes........................................................................................ 15
6.2 Withholding Taxes............................................................................ 15
6.3 Sales and Value Added Tax.................................................................... 16
6.4 Definitions.................................................................................. 16
ARTICLE VII INDEMNIFICATION AND INSURANCE..................................................................... 16
7.1 INDEMNIFICATION.............................................................................. 16
7.2 Insurance.................................................................................... 17
7.3 Survival..................................................................................... 17
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TABLE OF CONTENTS
(continued)
Page
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ARTICLE VIII PROPRIETARY INFORMATION.......................................................................... 17
8.1 Proprietary Information...................................................................... 17
8.2 Disclosure................................................................................... 17
8.3 Covenant..................................................................................... 17
8.4 Authorization................................................................................ 18
8.5 Right to Disclose............................................................................ 18
8.6 No Rights to Proprietary Information......................................................... 18
8.7 Legal Process................................................................................ 18
8.8 Survival..................................................................................... 19
ARTICLE IX INVENTIONS AND DISCOVERIES......................................................................... 19
9.1 Single Party Inventions and Discoveries...................................................... 19
9.2 Joint Inventions and Discoveries............................................................. 19
ARTICLE X NON-COMPETITION..................................................................................... 20
ARTICLE XI WITHHOLDING OF INTEREST PAYMENTS................................................................... 20
ARTICLE XII MISCELLANEOUS..................................................................................... 21
12.1 Legal Relationship of Parties................................................................ 21
12.2 Non-Exclusivity.............................................................................. 21
12.3 Compliance With Laws......................................................................... 21
12.4 Assignment................................................................................... 21
12.5 Publicity.................................................................................... 21
12.6 Entire Agreement............................................................................. 22
12.7 Notices...................................................................................... 22
12.8 Forum; Waiver of Jury Trial.................................................................. 23
12.9 Limitation on Damages........................................................................ 23
12.10 Costs and Expenses........................................................................... 23
12.11 Counterparts................................................................................. 24
12.12 Severability................................................................................. 24
12.13 Waiver....................................................................................... 24
12.14 Compliance with FCPA......................................................................... 24
12.15 Further Assurances........................................................................... 24
12.16 Applicable Law............................................................................... 24
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MOST FAVORED SUPPLIER AND ALLIANCE AGREEMENT
This MOST FAVORED SUPPLIER AND ALLIANCE AGREEMENT (this "Agreement") is
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entered into and effective this 31st day of August, 2001 by and among
SCHLUMBERGER OILFIELD HOLDINGS LIMITED, a British Virgin Islands corporation
("XXXX"), SCHLUMBERGER TECHNOLOGY CORPORATION, a Texas corporation ("STC" and
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together with XXXX, "Schlumberger"); and HANOVER COMPRESSION LIMITED
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PARTNERSHIP, a Delaware limited partnership, together with its affiliates
("Hanover"). In addition, CAMCO INTERNATIONAL INC., a Delaware corporation, and
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HANOVER COMPRESSOR COMPANY, a Delaware corporation, each join in making this
Agreement for the limited purposes described above such entity's name on the
signature pages hereto. Schlumberger and Hanover are sometimes referred to
individually as a "Party" and collectively as the "Parties." To the extent this
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Agreement refers to rights or obligations of Schlumberger within the United
States, the term "Schlumberger" shall mean only STC and to the extent that this
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Agreement refers to rights and obligations of Schlumberger outside the United
States, the term "Schlumberger" shall mean only XXXX.
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RECITALS
WHEREAS, Schlumberger is a respected developer and worldwide provider of
drilling, completion, production and project management services, together with
specialized know-how, ideas and technology relating thereto, and presently
possesses the expertise and business contacts to market and develop such
services on a worldwide basis;
WHEREAS, Hanover is a respected worldwide provider of full service natural
gas compression on a rental, contract compression, maintenance and acquisition
leaseback basis, including the servicing, financing, fabrication and equipment
for contract natural gas, oil and water handling applications, power generation,
pump systems and gas measurement;
WHEREAS, Schlumberger and Hanover have agreed to enter into a strategic
relationship (the "Strategic Alliance") and, subject to the terms hereof, to
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align their respective resources for the purpose of enhancing the Parties
ability to, individually or collectively, provide best value solutions in agreed
upon sectors of the oil and gas industry worldwide;
WHEREAS, Schlumberger and Hanover have agreed that Hanover shall enter into
a most favored supplier relationship pursuant to which, subject to the terms
hereof, Hanover shall be Schlumberger's most favored supplier (the "MFS
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Relationship") with respect to all of Schlumberger's and it affiliates' gas
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compression and certain oilfield surface production requirements; and
WHEREAS, Schlumberger and Hanover desire to enter into such Strategic
Alliance and MFS Relationship upon the terms and conditions set forth in this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Schlumberger and Hanover agree as follows:
ARTICLE I
PURPOSE OF STRATEGIC ALLIANCE
1.1 Mission Statement. It is the mission of the Parties to align their
respective goals and resources whenever mutually determined to be consistent
with their common commercial interests for the purpose of fostering and
maintaining a dynamic and enduring collaborative relationship which will enhance
their ability to meet the needs of the oil and gas industry worldwide for best
value solutions utilizing their complimentary alliance services.
1.2 Alliance Objectives. The purpose of the Strategic Alliance is for
Schlumberger and Hanover to work together with the goal of creating a
comprehensive, mutually satisfactory, long-term relationship to:
(a) Enhance Schlumberger's and Hanover's ability to provide
coordinated services to customers.
(b) Exploit common areas of potential business growth through
operational and technical synergies.
(c) Assist Hanover in penetrating and establishing a presence in
certain new international markets.
(d) Develop solutions which result in lower lease operating expense
to clients through enhanced production and more efficient equipment and capital
utilization.
1.3 Alliance Goals. The intent of the Parties in entering the Strategic
Alliance is to develop, support and continuously improve the way Schlumberger
and Hanover conduct business together when mutually determined to be appropriate
by establishing and meeting the following goals:
(a) Schlumberger and Hanover will be committed to conducting their
activities under the Strategic Alliance in a safe and environmentally
responsible manner.
(b) Schlumberger and Hanover will develop an in-depth understanding
of their respective needs and capabilities in order to continuously improve the
Strategic Alliance and the services they provide under the Strategic Alliance.
(c) Schlumberger and Hanover will establish common success assessment
systems for their performance under the Strategic Alliance.
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(d) The management of Schlumberger and Hanover will support the
development, growth and success of the Parties under the Strategic Alliance
during the term thereof.
ARTICLE II
OPERATION OF THE STRATEGIC ALLIANCE
2.1 Management of Activities under the Strategic Alliance. Each Party
shall designate three representatives (each a "Designated Representative") to
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participate on a Management Committee (the "Management Committee"). The
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Management Committee shall have all powers and rights necessary, appropriate or
advisable to effectuate and carry out its responsibilities hereunder. Two (2)
Designated Representatives shall constitute a quorum for the transaction of the
business of the Management Committee; provided, that at least one (1) Designated
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Representative of Schlumberger and one (1) Designated Representative of Hanover
shall be present for a quorum to exist. All decisions of the Management
Committee must be unanimously approved by the Designated Representative present
at the meeting and shall be final and binding upon the Parties hereto.
Schlumberger hereby designates (i) Xxxxx Xxxxx, (ii) Xxx Xxxxxxxx and (iii)
Xxxxx Xxxxxxx as its initial Designated Representatives. Hanover hereby
designates (i) Xxxxxxx X. XxXxxx, (ii) Xxxxxxx X. Xxxxx and (iii) Xxxxx Xxxx as
its initial Designated Representatives. Either Party may replace any of its
Designated Representatives by providing written notice thereof to the other
Party; provided that such successor Designated Representative shall be
reasonably acceptable to the other Party. The Management Committee may, in its
discretion, resolve to appoint one or more alliance managers (each an "Alliance
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Manager") to act as agents of the Management Committee with respect to the day-
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to-day management and coordination of the Parties' efforts pursuant to the
Strategic Alliance and all other matters deemed appropriate to be delegated by
such Management Committee.
2.2 Meetings of the Management Committee. Meetings of the Management
Committee shall be conducted with such frequency as the Management Committee
shall deem appropriate; provided that the Management Committee shall at a
minimum (a) conduct a meeting (whether in person or by telephone) once per
calendar quarter and (b) conduct an in person meeting once per calendar year.
The meetings conducted in person shall be at a location determined by the
Management Committee.
2.3 Responsibilities of the Management Committee. The Management Committee
shall be responsible for the coordination, management and oversight of the
Parties' activities under the Strategic Alliance. Without limiting the
generality of the foregoing, the Management Committee shall have the following
responsibilities (which responsibilities the Management Committee may delegate
to the Alliance Managers or other representatives of Schlumberger and Hanover):
(a) Annual Performance Goals. On or prior to November 1 of each
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calendar year during the Term of the Strategic Alliance, the Management
Committee shall evaluate, establish and adopt performance goals (the
"Performance Goals") with respect to each Party's expected activities under the
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Strategic Alliance for the upcoming calendar year. Such Performance Goals shall
be detailed and specific, and shall include objective and quantifiable
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metrics against which to measure the benefits to the Parties of the Strategic
Alliance and each Party's contributions thereto.
(b) "Lay-Out Meetings"; Sustained Internal Marketing. On or prior to
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the date that is three (3) months from the date hereof, the Management Committee
shall host a series of "lay-out" meetings (the "Lay-Out Meetings") with certain
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key employees and sales people of Schlumberger and Hanover. The purpose of the
Lay-Out Meetings shall be to introduce the mission, goals and objectives of the
Parties under the Strategic Alliance to such persons. The Management Committee
shall develop the agenda for the Lay-Out Meetings. In addition, the Management
Committee shall be responsible on an ongoing basis for ensuring that the
Strategic Alliance is marketed within the Parties' respective organizations.
This shall include such communication as the Management Committee shall deem
appropriate of the status, progress and benefits to the Parties of the Strategic
Alliance.
(c) Long-Term Strategic Plan. On or prior to the date that is six (6)
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months from the date hereof and annually thereafter, the Management Committee
shall evaluate, establish and adopt or update a long-term strategic plan (the
"Strategic Plan") for the Parties under the Strategic Alliance. The purpose of
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the Strategic Plan shall be to identify common areas of potential growth and
future business opportunities for the Parties under the Strategic Alliance and
to evaluate the evolving technology needs and synergies of products and services
of the Parties within the MFS Scope (as defined in Section 3.4(c) hereof) or in
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other areas where the Parties may deem it favorable to collaborate.
(d) Identification and Pursuit of Leads and Business Projects. Within
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thirty (30) days of the date hereof, the Management Committee shall adopt a non-
exclusive, initial list of build, own and operate projects (the "Designated
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Projects List") agreed by the Parties to be within the scope of the Strategic
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Alliance and mutually beneficial to pursue jointly. Build, own and operate
projects ("B.O.O. Projects") are projects with an extended term and ownership
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component by one or more of the parties plus ongoing operational, maintenance or
other services. The Management Committee shall coordinate and direct the efforts
of the Parties to submit qualifying bids for the purpose of winning the B.O.O.
Projects set forth on the Designated Projects List (such B.O.O. Projects are
hereinafter referred to as "Designated B.O.O. Projects"). In addition, the
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Management Committee shall review the contents of such Designated Projects List
at each meeting thereof and shall update and revise such Designated Projects
List as appropriate at such time. It shall be the responsibility of the
Management Committee to develop and implement a business plan with respect to
the joint identification and pursuit by the Parties under the Strategic Alliance
of new customer leads and B.O.O. Projects. Such business plan shall include the
joint marketing and advertising of the services offered by the Parties under the
Strategic Alliance.
(e) General Guidelines regarding Contracts with Customers. On or
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prior to the date that is twelve (12) months from the date hereof and annually
thereafter, the Management Committee shall oversee the Parties' development or
updating of broad written guidelines (the "Contracting Guidelines") to govern
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the Parties' contracts with customers with respect to Designated B.O.O.
Projects. Such Contracting Guidelines shall include, but shall not be limited
to, marketing, bidding, contracting and risk management, pricing, invoicing,
revenue sharing and collections procedures, it being acknowledged and agreed
that the Management Committee may
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as it deems appropriate determine and agree upon modifications to such
procedures on a project-by-project basis taking into account customer needs and
the laws and regulations applicable in the jurisdiction in which the project is
to be performed.
(f) Quarterly Review. Once per calendar quarter, the Management
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Committee shall discuss Schlumberger's needs within the MFS Scope and other
areas where Hanover may be able to provide products or services to Schlumberger.
These discussions will also include topics such as the technical requirements of
equipment Schlumberger expects to need in the future. The Management Committee
will review the performance of the Parties with respect to the MFS Relationship,
and other issues relating to the projects on which the Parties are working
together with respect to the MFS Relationship and discuss ways to improve such
relationship. The Management Committee shall also review any projects as to
which Hanover submitted a quote but was not selected as a provider of products
or services and discuss the reason(s) that Hanover was not selected and how
Hanover may improve its chances of being selected on such projects in the
future.
In addition, Hanover's Designated Representatives may petition
Schlumberger's Designated Representatives to expand the MFS Scope to include
products or services currently classified as Supplemental Products and Services.
The decision whether to include any such products or services in the MFS Scope
shall be in Schlumberger's sole discretion, but shall include such factors as
quality, price, reputation, market share, compatibility with Schlumberger's
needs and whether such products or services compete with any Schlumberger
products or services or products or services for which Schlumberger has existing
supplier relationships. Hanover's Designated Representatives may also petition
Schlumberger's Designated Representatives to include additional Hanover products
or services in the Supplemental Products and Services on a similar basis.
(g) Annual Report and Performance Audit. On or prior to the date that
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is forty-five (45) days following the end of each calendar year during the Term
of the Strategic Alliance, the Management Committee shall prepare and deliver to
the Parties an annual report and performance audit (the "Annual Report") with
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respect to the immediately preceding year. The Annual Report shall summarize the
performance of the Parties under the Strategic Alliance during the immediately
preceding year against the Performance Goals.
(h) Interpretation and Dispute Resolution. The Management Committee
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shall be responsible for interpreting and applying this Agreement and the
obligations imposed on the Parties hereunder. Any dispute, claim or controversy
arising out of this Agreement shall be submitted to the Management Committee for
resolution. The Management Committee's decision as to any such dispute, claim or
controversy shall be final and binding on the Parties. If the Management
Committee is unable to resolve such dispute, claim or controversy within thirty
(30) days following the date of submission, the Parties may pursue all legal
remedies.
2.4 No Solicitation of Employees. Except as provided in the Stock Purchase
Agreement, during the term of the Strategic Alliance and for twelve (12) months
after the date of termination of the Strategic Alliance, Hanover and
Schlumberger agree that they will not, and will cause their respective
affiliates not to, directly or indirectly, in any capacity whatsoever, recruit
or solicit, or attempt to induce or solicit any employee of the other party to
terminate or
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alter his or her relationship with that party. However, the foregoing shall not
prohibit either party from hiring employees of the other party who respond to
general solicitations not directed at specific individuals, or from hiring
employees of the other party who initiate contact with such party to seek
employment without having been solicited by such party. For purposes of this
Section 2.4, "general solicitations" shall mean (i) advertising for employment
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in any bulletin board (including electronic bulletin boards), newspaper, trade
journal or other publication available for general distribution to the public
without specific reference to any particular employees; (ii) participation in
any hiring fair or similar event open to the public not targeted at either
Party's employees; and (iii) use of recruiting or employee search firms by a
Party that have been instructed by that Party not to target any specific
employees of the other Party.
ARTICLE III
RESPONSIBILITIES OF THE PARTIES
3.1 Joint Responsibilities of Hanover and Schlumberger. Hanover and
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Schlumberger shall have joint responsibility for the following matters:
(a) Providing necessary and appropriate information to the Management
Committee, as and when requested, in a prompt and timely manner (including,
without limitation, financial information and performance data necessary for the
Management Committee to evaluate and establish the Performance Goals, the
Strategic Plan and the Annual Report).
(b) Providing necessary and appropriate support to the Management
Committee, as and when requested, in a prompt and timely manner (including,
without limitation, technical and engineering support in developing the
Performance Goals and the Strategic Plan).
(c) Making key employees and sales people available for the Lay-Out
Meetings and to facilitate the on-going internal marketing of the Parties'
activities under the Strategic Alliance.
(d) Developing the Contracting Guidelines.
(e) Developing a joint strategy and plan with respect to each
Designated B.O.O. Project.
(f) Providing training to key employees and sales people for each of
Hanover and Schlumberger to enable each Party to effectively promote each
other's products and services that are within the scope of the Alliance.
(g) Coordinating marketing and sales activity with respect to this
Agreement and the Parties' activities under the Strategic Alliance on a regular
basis.
(h) Making sufficient employees and resources available to meet the
Performance Goals and the general goals and objectives of the Parties under the
Strategic Alliance.
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(i) Providing all reasonably necessary technical support to each
other, including the provision of a sufficient number of qualified personnel, in
connection with preparing and submitting a quote with respect to any Designated
B.O.O. Project (including technical presentations, quotes and proposal
preparations).
(j) Evaluating existing customers and prospects to determine which
may provide business opportunities for the Parties under the Strategic Alliance.
(k) Other joint responsibilities as determined in the discretion of
the Management Committee.
3.2 Pursuing Designated B.O.O. Projects.
(a) Generally. With respect to each Designated B.O.O. Project, the
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Parties will proceed to (1) jointly submit a quote according to a
prime/subcontract relationship with Schlumberger as the prime contractor (the
"Prime") and Hanover as the Subcontractor (the "Sub"), or (2) jointly submit a
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quote as two concurrent but separate contractors or under such other structure
as required by the client or as otherwise agreed by the Management Committee;
provided, however, that Schlumberger would not be a Sub under any such
structure. The Management Committee (or, if delegated by the Management
Committee to the Alliance Managers or other representatives of Schlumberger and
Hanover, such Alliance Managers or other representatives) will determine the
scope of services to be provided by each Party should a contract be awarded. The
Parties agree to use commercially reasonable efforts to cause the customer with
respect to such Designated B.O.O. Project to award a contract to the Prime and
to accept the Party designated as the Sub, or to award separate contracts to
each of Hanover and Schlumberger, as applicable. If Hanover wants to pursue a
project with Schlumberger in which Schlumberger will be the subcontractor to
Hanover, Schlumberger shall have complete discretion as to whether it wants to
pursue that project and any such project shall be outside the terms, provisions
and scope of the Strategic Alliance.
(b) Prime/Sub Relationship. In the event that the Management
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Committee determines to pursue a Designated B.O.O. Project according to a
prime/subcontract relationship, the following guidelines shall be followed:
(i) The Prime and the Sub shall work cooperatively to submit a
quote, provided that (1) the Prime shall have authority to decide, in its
reasonable discretion, the final form and content of the Parties' quote, and (2)
the Prime shall retain final control of all post-award activities as prime
contractor, including but not limited to project management, technical direction
and client interaction.
(ii) The Sub shall (1) timely prepare and submit to the Prime
the substantive content of the Sub's proposal, and (2) furnish appropriately
qualified personnel, information and materials, as necessary, and devote
substantial efforts to assist the Prime in developing and preparing the
proposal.
(iii) If a contract is awarded to the Prime during the Term
hereof, the Prime and the Sub shall enter into a subcontract for such work,
which subcontract shall be on
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terms usual and customary in the Parties' industry and shall be consistent with
the Contracting Guidelines developed by the Parties and the Management
Committee.
(c) Pricing. With respect to any Designated B.O.O. Project, each
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Party shall have the right to designate its own pricing and payment terms in
accordance with its own business practices to such Party's accounts.
3.3 Business Cooperation in Schlumberger GeoMarkets.
(a) Generally. Schlumberger agrees, through its Production Services
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and Engineering segment ("PSE"), to assist Hanover in developing Hanover's
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businesses, as such businesses currently operate and any natural evolution
thereof, that are not in competition with Schlumberger's businesses, as such
businesses currently operate and any natural evolution thereof, in all cases,
anywhere in the world in which Schlumberger currently does business and in which
Hanover does not yet have a meaningful presence (the "Business Cooperation
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Objective"). It is the intent of the Parties that the Business Cooperation
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Objective be interpreted and modified from time to time as deemed appropriate by
the Management Committee. The nature and scope of Schlumberger's responsibility
hereunder shall initially consist of that set forth in Section 3.3(b), but may
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be extended to Hanover in other areas over time on terms to be mutually agreed,
as deemed appropriate by the Management Committee.
(b) Cooperative GeoMarkets. On or prior to December 31, 2001, Hanover
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will, in consultation with Schlumberger, identify (6) top Schlumberger
GeoMarkets (geographic business units defined by Schlumberger) where PSE/Hanover
synergies may be produced (the "Cooperative GeoMarkets"). The Management
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Committee may from time-to-time thereafter update the list of Cooperative
GeoMarkets; provided, however, that such list shall never exceed six (6)
Cooperative GeoMarkets. In each Cooperative GeoMarket, during the Term of this
Agreement, Schlumberger agrees to provide Hanover the support of Schlumberger's
full infrastructure within each Cooperative GeoMarket. Such support shall
include:
(i) Designated Employees. For a period of five (5) years from
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the date hereof, Schlumberger shall host one (1) Hanover employee in each
Cooperative GeoMarket (each a "Designated Employee") pursuant to the terms and
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conditions hereof. The Designated Employee for each Cooperative GeoMarket shall
be selected by Hanover; provided that such Designated Employee shall be
reasonably acceptable to Schlumberger. Hanover may replace any of its Designated
Employees by providing written notice thereof to Schlumberger; provided that
such successor Designated Employee shall be reasonably acceptable to
Schlumberger. On or before the date that is three (3) months from the date on
which Hanover selects a Designated Employee, Schlumberger shall provide an
office space for such Designated Employee in the Schlumberger headquarters in
the respective Cooperative GeoMarket. Schlumberger shall generally assist such
Designated Employee to accomplish the Business Cooperation Objective. In
addition, Schlumberger shall provide a level of administrative and secretarial
support, at its cost, to such Designated Employee commensurate with that
provided to PSE's managerial employees in such Cooperative GeoMarket.
Schlumberger shall also assist Hanover, if so requested, in the hiring, training
and overseeing of the Designated Employees.
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Each Designated Employee shall be an employee of and paid by Hanover
and shall report to and take direction from Hanover. During the first year of
each Designated Employee's employment within the applicable Cooperative
GeoMarket (i.e. one Cooperative GeoMarket per Designated Employee), Hanover
shall record all salary, benefits and employment taxes paid to or on behalf of
that Designated Employee. Schlumberger shall reimburse Hanover for one-half of
that amount within 30 days after receiving a detailed invoice for same from
Hanover. Each such Designated Employee shall sign a confidentiality agreement in
the form attached hereto as Exhibit 3.3(b) for the benefit of Schlumberger and
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its affiliates.
(ii) Hiring Foreign Nationals. For a period of five (5) years
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from the date hereof, Schlumberger shall advise and consult with Hanover,
working with Hanover's Designated Employees and international human resources
personnel, in hiring, training and overseeing foreign nationals who shall be
employed by Hanover in each Cooperative GeoMarket. Such advice and consultation
shall include the areas of tax compliance, payroll management, expatriate
packages, housing, safety, INS issues, compensation structures and
evacuation/repatriation services.
3.4 Most Favored Supplier Status.
(a) General. During the Term of this Agreement, Hanover shall be the
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most favored supplier ("Most Favored Supplier"), with such rights and
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obligations set forth herein, with respect to Schlumberger's and its affiliates'
outsourcing requirements for all products and services within the MFS Scope.
(b) Rights of Most Favored Supplier. As Most Favored Supplier,
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Hanover shall have the opportunity to fill all of Schlumberger's and/or its
affiliates' needs with respect to each Qualified Project (as defined below), to
the exclusion of other suppliers, subject to Hanover's demonstrated
competitiveness as to cost, specification conformity, delivery, quality and
local content (if required in connection with a non-U.S. Qualified Project) or
other variables relevant to that type of Qualified Project (each a
"Specification" and collectively, the "Specifications"). A "Qualified Project"
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shall mean, subject to Section 3.4(c), any project anywhere in the world
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conducted by, or proposed to be conducted by, Schlumberger or any of its
affiliates that requires, or would require, any of the products or services
within the MFS Scope. To the extent practicable, Schlumberger shall notify
Hanover of each Qualified Project with at least twenty (20) days advance notice
(or such additional notice as is reasonable and customary in light of the size
and scope of the Qualified Project) to provide Hanover the opportunity to submit
a quote with respect to Hanover's intended workscope (a "Hanover Quote"). With
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respect to each Qualified Project as to which Hanover submits a Hanover Quote,
Schlumberger shall determine, in its reasonable discretion, whether such Hanover
Quote is competitive as follows:
(i) United States Projects. For Qualified Projects that are in
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the United States, STC or its designated affiliates (collectively, "Schlumberger
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US") shall be required to evaluate the Hanover Quote prior to soliciting or
--
evaluating additional quotes from other suppliers. If Schlumberger US
determines, in good faith and exercising its commercially reasonable discretion,
that the Hanover Quote is competitive with respect to the Specifications as a
whole, Schlumberger US shall accept it. If Schlumberger US determines, in good
faith and
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exercising its commercially reasonable discretion, that the Hanover Quote is not
competitive with respect to the Specifications as a whole, Schlumberger US shall
promptly notify Hanover in writing thereof, which notice shall specify with
reasonable particularity the basis for its decision. After the receipt of such
revised Hanover Quote or the expiration of such one to three day period,
Schlumberger US will have the right to solicit quotes from third parties against
which the Hanover Quote will be evaluated. Following the receipt of additional
quotes, Schlumberger US will have the right to select any quote Schlumberger US
determines, in good faith and exercising its commercially reasonable discretion,
to be more competitive with respect to the Specifications as a whole than the
Hanover Quote. Hanover agrees to use commercially reasonable efforts to submit
its quotes, or to notify Schlumberger US of its desire not to submit a quote, in
a timely manner and to use good faith in determining the Specifications of its
quotes. Notwithstanding anything herein to the contrary, if Hanover submits a
quote to Schlumberger US and any other party with respect to the same Qualified
Project, Schlumberger US shall be entitled to solicit quotes concurrently from
Hanover and other suppliers against which the Hanover Quote will be evaluated.
In such case, and with respect to such Hanover Quote, Hanover and Schlumberger
shall follow the procedures set forth in Section 3.4(b)(ii).
(ii) Non-United States Projects. For Qualified Projects that are
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outside the United States, XXXX or its designated affiliates (collectively,
"Schlumberger Non-US") shall be entitled to solicit quotes concurrently from
-------------------
Hanover and other suppliers against which the Hanover Quote shall be evaluated.
If Schlumberger Non-US determines, in good faith and exercising its commercially
reasonable discretion, that the Hanover Quote is competitive with respect to the
Specifications as a whole, Schlumberger Non-US shall accept it. If Schlumberger
Non-US determines, in good faith and exercising its commercially reasonable
discretion, that the Hanover Quote is not competitive with respect to the
Specifications as a whole, Schlumberger Non-US will have the right to accept a
more competitive quote. Schlumberger Non-US shall promptly notify Hanover in
writing thereof, which notice shall specify with reasonable particularity the
basis for its decision. Hanover agrees to use commercially reasonable efforts to
submit its quotes, or to notify Schlumberger Non-US of its desire not to submit
a quote, in a timely manner and to use good faith in determining the
Specifications of its quotes.
(c) MFS Scope.
---------
(i) The Parties agree that the "MFS Scope" shall mean
---------
Schlumberger's or its affiliates' requirements for the products and services
described on Schedule 3.4 hereto; provided, that the MFS Scope, unless otherwise
------------ --------
agreed by the Management Committee, shall not include the following products or
services: (A) systems integration or information technology, (B) multi-phase
pumping and metering, (C) remote monitoring and control of downhole equipment,
(D) wellhead to pipeline system design and project management and financing and
(E) any products or services that Schlumberger provides itself unless
Schlumberger decides, in its sole discretion, to outsource its requirements for
any such products or service for a particular project.
(ii) the Parties agree that the "MFS Scope" does not currently
---------
include the following products or services ("Supplemental Products and
Services"):
10
(A) Oil processing, consisting specifically of
process heaters, free water knock outs, oil
dehydration, electrostatic, thermal,
mechanical, desalters, crude distillation and
hydrotreating;
(B) Pump packages, including transfer pumps and
injection pumps; or
(C) Water handling equipment (but not services).
With respect to Supplemental Products and Services, Schlumberger agrees, to
the extent practicable, to notify Hanover with at least twenty (20) days advance
notice (or such additional notice as is reasonable and customary) of
Schlumberger projects where Schlumberger intends to have these products or
services provided by a third party and to allow Hanover to submit a quote for
Schlumberger's needs for such products or services. Schlumberger shall be under
no obligation to select Hanover as the supplier of such products or services;
provided, that if Hanover is not selected, Schlumberger shall provide Hanover
with a written explanation of the reasons that Hanover was not selected.
(d) Miscellaneous. Notwithstanding anything herein to the contrary,
-------------
the provisions of Sections 3.4(a) and 3.4(b) shall not apply if (i) the
--------------- ------
application of such provisions would cause Schlumberger or its affiliates to
breach a contractual commitment in existence on the date hereof to use another
supplier with respect to specific products or services on specific projects
within the MFS Scope (provided, that Schlumberger represents and warrants that
no contractual commitments in existence on the date hereof confer upon any
supplier other than Hanover most favored supplier or other analogous rights that
would conflict with Hanover's rights hereunder with respect to gas compression
products and services that are within the MFS Scope for future projects), or
(ii) the prospective customer requests another supplier or objects to the use of
Hanover as a supplier (provided, that Schlumberger, its affiliates and their
respective directors, officers, employees, agents and other representatives
shall not solicit or otherwise encourage such request or objection).
Notwithstanding anything herein to the contrary, if any of the procedures set
forth in Sections 3.4(a) or 3.4(b) violate applicable law or regulations, the
--------------- ------
customer's written policies and procedures, or a customer otherwise objects in
writing to the procedures of Sections 3.4(a) or 3.4(b), such procedures shall
--------------- ------
not be followed and the Parties shall use commercially reasonable efforts to
allow Hanover to submit a quote in a manner consistent with such laws,
regulations or customer policies and procedures. Hanover acknowledges and agrees
that Schlumberger is not representing or warranting that Hanover will be
selected as a provider for any Qualified Project and that, provided Schlumberger
substantially follows the procedures and satisfies its obligations set forth
herein, Schlumberger shall not have any liability under this Agreement if
Hanover is not so selected.
3.5 Automation Systems Alignment/Licensing. Hanover and Schlumberger will
work cooperatively to develop mutually compatible solutions in the area of
automation and remote control of oilfield production equipment at sites at which
the Parties operate under the Strategic Alliance. In connection herewith,
Schlumberger agrees to provide to Hanover consulting advice and technical
assistance with respect to the development and operation of technical solutions
that monitor and collect data from, and provide remote operation of,
11
production equipment beyond the well-head. Schlumberger and Hanover will form a
technical committee that will be comprised of two members from each of Hanover
and Schlumberger to discuss the technical direction, proposed development plans,
and commercialization strategy for such production optimization solutions. In
addition, Schlumberger consents to Hanover licensing the IP Anywhere technology
directly from Wireless Matrix Corporation. Hanover agrees to provide to
Schlumberger access to and information on Hanover's solution sets in the area of
automation and remote control of oilfield production equipment.
3.6 Business Process Alignment/ISO Certification/Schlumberger QHSE
Standards. On or prior to the date that is three (3) months from the date
hereof, Schlumberger shall, at its own cost, perform standard Schlumberger
contractor due diligence audits on Hanover's processing and packaging facilities
to determine if such facilities are in compliance with Schlumberger health,
safety and environmental standards as in effect from time to time (the
"Schlumberger QHSE Standards"), as well as the ISO certification standards (the
---------------------------
"ISO Certification Standards" and, together with the Schlumberger QHSE
---------------------------
Standards, the "Standards"). Schlumberger shall notify Hanover promptly of the
---------
results of such audits. If any such facility is not in compliance with the
Standards, Schlumberger will, upon the request of Hanover, assist Hanover to
comply with such Standards. If Hanover requests such assistance from
Schlumberger, Hanover shall pay Schlumberger's standard consultant rates and
other customary costs and expenses for such assistance. Schlumberger shall have
no obligation to place any of its personnel at any facility that is not in
substantial compliance with the Schlumberger QHSE Standards. To the extent
Hanover is not in compliance with ISO Certification Standards, Schlumberger
shall use its commercially reasonable efforts to extend its ISO Certification
umbrella to cover Hanover in situations in which the written policies and
procedures of the customer require ISO Certification. If customer policies and
procedures require that Hanover's facilities meet ISO Certification Standards
(and Schlumberger is unable to extend its ISO Certification umbrella to cover
Hanover), Schlumberger shall contract with Hanover in arms' length transactions
on a consultant basis to provide to Hanover those parts of ISO certified
business that Hanover chooses not to handle internally and that Schlumberger is
capable of handling. The Parties agree that any facility which the Parties
operate together shall comply with Schlumberger QHSE Standards.
ARTICLE IV
TERM AND PAYMENT
4.1 Consideration. In consideration of Schlumberger's entry into this
Agreement, the performance of the obligations and duties set forth herein, and
the sale of the assets and the assignments of rights granted herein, Hanover has
delivered to (i) XXXX $6,281,200 in cash and 114,424 shares of common stock of
Hanover Compressor Company, a Delaware corporation and the parent of Hanover
("Parent"), and (ii) STC $2,826,500 in cash and 51,491 shares of common stock of
------
Parent ((i) and (ii), collectively, the "Alliance Consideration"). Payment of
----------------------
the Alliance Consideration by Hanover to XXXX was a condition precedent to the
obligations of Schlumberger to perform under this Agreement.
12
4.2 Initial Term. Unless earlier terminated as hereinafter set forth, this
Agreement shall become effective on the date first set forth above, and shall
continue in effect for a period of five (5) years thereafter (the "Term").
----
4.3 Additional Terms. Unless terminated by either Party by written notice
served thirty (30) days prior to the end of the initial Term or any additional
Term, the Term of this Agreement will be automatically extended for successive
one (1) year periods.
4.4 Termination for Default or Otherwise. Notwithstanding the foregoing,
this Agreement may be terminated:
(a) at any time upon the mutual written agreement of the Parties;
(b) immediately by Schlumberger if Hanover breaches a material
provision of the Stock Purchase Agreement or the Hanover Note (as defined in the
Stock Purchase Agreement) that results in Schlumberger having the right to
demand registration of all Hanover Stock received under this Agreement pursuant
to the terms of the Registration Rights Agreement (as defined below);
(c) immediately by Schlumberger if Hanover breaches a material
provision of this Agreement and such breach continues uncured for a period of
thirty (30) days after Hanover's receipt of written notice from Schlumberger
thereof;
(d) immediately by Hanover if Schlumberger breaches a material
provision of this Agreement and such breach continues uncured for a period of
thirty (30) days after Schlumberger's receipt of written notice from Hanover
thereof;
(e) immediately by Schlumberger if the Performance Goals are not met
solely as a result of Hanover's refusal or unwillingness to commit the necessary
resources to the activities under the Strategic Alliance, which failure
continues uncured for a period of ninety (90) days after Hanover's receipt of
written notice from Schlumberger thereof;
(f) immediately by Schlumberger if any competitor, or any person or
entity controlled by a competitor, of Schlumberger's Oilfield Services
Businesses (as defined below), acquires, directly or indirectly, an interest in
Parent exceeding the greater of ten percent (10%) or the percentage then held by
Schlumberger of the then issued and outstanding shares of Parent capital stock
entitled to vote in the election of directors, or otherwise acquires a contract
right to designate a person to serve on the board of directors of Parent or
Parent's ultimate parent company; provided, that issuance to such competitor of
such shares or contract rights shall not give rise to a termination right if
approved by Schlumberger's designee to the Parent board of directors. "Oilfield
--------
Services Businesses" shall mean Schlumberger's role as a contract supplier of
-------------------
products, services and technology in the drilling activities relating to oil and
gas xxxxx, the development of oil and gas fields, and the management and
production thereof, together with any natural evolution thereof. The Parties
agree that companies whose primary businesses are midstream (e.g. El Paso,
Dynergy, Reliant Energy, Xxxxxx Xxxxxx, Enron Corp. and The Xxxxxxxx Companies
Inc.), shall not be deemed a competitor of Schlumberger's Oilfield Services
Businesses; or
13
(g) immediately by Schlumberger if any Primary Competitor, or any
person or entity controlled by such Primary Competitor, of Schlumberger's
Information Technology Solutions Businesses (as defined below) acquires,
directly or indirectly, an interest in Parent exceeding the greater of ten
percent (10%) or the percentage then held by Schlumberger of the then issued and
outstanding shares of Parent capital stock entitled to vote in the election of
directors, or otherwise acquires a contract right to designate a person to serve
on the board of directors of Parent or Parent's ultimate parent company;
provided, that issuance to such competitor of such shares or contract rights
shall not give rise to a termination right if approved by Schlumberger's
designee to the Parent board of directors. The term "Primary Competitor" shall
------------------
mean any of five (5) competitors of Schlumberger's Information Technology
Solution Businesses (as defined below) who shall be designated as such by
Schlumberger in a written notice to Hanover; provided, that Schlumberger may
--------
only modify such list of Primary Competitors one (1) time in any calendar year.
Schlumberger's "Information Technology Solutions Businesses" shall mean
-------------------------------------------
Schlumberger's role as a contract supplier of customized network solutions and
solutions using information technology for systems integration, mobile telecom,
banking and finance, public utilities and network solutions, whether inside or
outside of the Oilfield Services Services Businesses. Schlumberger designates
its initial five Primary Competitors as (i) GM-Plus, (ii) EDS, (iii) IBM, (iv)
SAIC, and (v) Cap Gemini.
(h) by either Party, if any proceeding in bankruptcy or
reorganization or for the appointment of a receiver or trustee or any other
proceeding under any law for the relief of debtors instituted by or against the
other Party is not dismissed within sixty (60) days of its commencement, or
immediately if the other Party makes a general assignment for the benefit of its
creditors.
Neither Party shall have any liability for termination of the
Agreement pursuant to this Section 4.4 or any further obligation following such
-----------
termination; provided, that (1) any term or provision of this Agreement or any
referenced agreement that is specifically stated to survive the termination of
this Agreement shall so survive, (2) such termination shall not affect a Party's
rights with respect to any pre-termination breach of the provisions of this
Agreement, and (3) termination of this Agreement shall not result in a
diminution or modification of obligations of either Party to provide ongoing
products or services to customers or with respect to the Parties' obligations,
if any, relating to any quotes submitted prior to such termination. Each Party
may continue to exercise its rights hereunder to the extent necessary to allow
such Party to fulfill its obligations to customers or under any quotes submitted
prior to termination hereof.
4.5 Registration Rights Agreement. On the date hereof, Parent has executed
and delivered a Registration Rights Agreement to Schlumberger (the "Registration
------------
Rights Agreement") with respect to the registration for sale under the
----------------
Securities Act of 1933, as amended (the "Securities Act"), of the shares of
--------------
Parent common stock included in the Alliance Consideration (the "Alliance
--------
Stock").
-----
14
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Parties. Each Party represents
and warrants to the other as follows:
(a) it is corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its organization and has all
requisite corporate or partnership power and authority and all material
licenses, permits and authorizations necessary to own or lease and operate its
properties and assets and to carry on its business as now being conducted, and
it is not subject to any material disability by reason of the failure to be duly
qualified as a foreign corporation for the transaction of business or to be in
good standing under the laws of any jurisdiction;
(b) it has full corporate power and authority to execute this
Agreement and to take all actions required by, and to perform the obligations
contained in, this Agreement, and that each Party's obligations under this
Agreement do not conflict with its obligations under any other agreement to
which it may be a party; and
(c) the performance of its obligations under this Agreement complies
and will comply with all applicable federal, state, local and foreign laws and
regulations.
5.2 Additional Representation of Schlumberger. Schlumberger is not
acquiring the Alliance Stock with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act. Schlumberger
understands that except as provided in the Registration Rights Agreement: (a)
the Alliance Stock has not been and is not being registered under the Securities
Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless: (i) subsequently registered thereunder, or (ii)
an exemption exists permitting such Alliance Stock to be sold, assigned or
transferred without such registration, and (b) except as provided in the
Registration Rights Agreement, neither Hanover nor any other person is under any
obligation to register the Alliance Stock under the Securities Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder except as set forth in the Registration Rights Agreement.
5.3 Survival of Representations and Warranties. The representations and
warranties contained in this Article V shall continue in effect after the
---------
execution and delivery of this Agreement, and shall survive the expiration or
earlier termination of this Agreement.
ARTICLE VI
TAXES
6.1 Taxes. Each Party shall pay and agrees to indemnify and hold the other
Party harmless from and against any and all liabilities or claims for taxes (but
not including any fines, penalties and interest relating thereto) which any
taxing authority claiming jurisdiction may assess or levy against the
indemnified Party on account of or resulting from operations, sales or
15
services made or rendered by the indemnifying Party pursuant to this Agreement;
provided, however, that such indemnification obligation:
(i) shall be reduced by the value of any tax benefit realized by the
indemnified Party in satisfying the tax liability being indemnified;
(ii) shall be limited to the actual tax benefit realized (determined
without regard to any net operating loss, net capital loss, or tax credit
otherwise available to the indemnifying Party and not related to or resulting
from the indemnified tax liability) by the indemnifying Party as a result of the
tax authorities' imposition of taxes on the indemnified Party; and
(iii) shall be increased such that the after-tax value of the payment to
the indemnified Party shall equal the amount (after the application of clauses
-------
(i) and (ii)) of the liability or claim so indemnified.
--- ----
Each Party shall make all tax reports and take all actions consistent
with the foregoing, including amending the indemnifying Party's relevant tax
returns to the extent that such return reflects income, gain, loss, credits,
receipts or other items that a taxing authority has otherwise required to be
reported by the indemnified Party.
6.2 Withholding Taxes. In the event that it is so required by law, each
Party reserves the right to, and each Party hereby acknowledges and agrees that
the other Party may, withhold tax for the account of the other Party from
payments due and owing from one Party to the other Party. Each Party
acknowledges that if such withholding is required, all payments due and owing
would be net of such withholding. The Party withholding such tax shall make
every effort to obtain and provide the other Party with an original copy of the
authorized tax receipt in respect of the withholding and payment of such taxes.
Provided further, that both Parties undertake and agree to use their best
endeavors to cooperate in good faith to ensure that withholding tax or taxes
that may become payable by either Party are minimized, reduced or eliminated in
accordance with applicable law without undue detriment to (or any obligations to
incur any material costs by) the undertaking Party.
6.3 Sales and Value Added Tax. The invoicing Party shall be responsible
for the collection and remittance of any sales tax or value added tax imposed
and required to be paid under applicable law. The invoicing Party will use all
available exemptions where relevant.
6.4 Definitions. For purposes of this Agreement, the expression "tax"
or "taxes" shall mean any tax, duty or other charge whatsoever, now in existence
or enacted in the future, including: taxes covering income, excess profits,
royalties, turnover, sale, and employment taxes; value added taxes; customs
duties, surtaxes, import, sales taxes and other legal imposts levied or charged
on a Party's equipment, materials and/or supplies imported for the purpose of
performing operations, sales or services under this Agreement; property taxes
assessed against the property, equipment, materials, consumables or supplies of
a Party; together with all penalties, interest, assessments and charges arising
out of late payment or non-payment, levied, charged, or assessed by any
government entity, unless incurred solely due to the negligence of
16
one party, in which case such penalties, interest, assessments and charges shall
not be indemnified under this Agreement.
ARTICLE VII
INDEMNIFICATION AND INSURANCE
7.1 INDEMNIFICATION. UNLESS MUTUALLY AGREED IN WRITING BY THE PARTIES (OR
THE RELEVANT PARENT, SUBSIDIARY, AFFILIATED OR RELATED COMPANIES OF THE
RESPECTIVE PARTIES), EACH PARTY ("INDEMNITOR") AGREES TO RELEASE, PROTECT,
----------
DEFEND, INDEMNIFY AND HOLD HARMLESS THE OTHER PARTY, ITS PARENT, SUBSIDIARY AND
AFFILIATED OR RELATED COMPANIES AND ALL OF THEIR RESPECTIVE OFFICERS, DIRECTORS,
EMPLOYEES, INVITEES AND REPRESENTATIVES (COLLECTIVELY, "INDEMNITEES") FROM AND
-----------
AGAINST ANY AND ALL CLAIMS, LOSSES, COSTS, DEMANDS, SUITS, JUDGMENTS, PENALTIES,
DAMAGES, SETTLEMENTS (APPROVED BY INDEMNITOR), LIABILITIES, DEBTS, EXPENSES AND
CAUSES OF ACTION OF WHATSOEVER NATURE, INCLUDING WITHOUT LIMITATION REASONABLE
ATTORNEY'S FEES AND COSTS OF LITIGATION (COLLECTIVELY "CLAIMS") BROUGHT BY A
------
THIRD PARTY IN RESPECT OF PERSONAL OR BODILY INJURY TO, SICKNESS, DISEASE OR
DEATH OF THE RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, INVITEES OR
REPRESENTATIVES (WHICH SHALL NOT INCLUDE ANY OF THE INDEMNITEES) OF THE
INDEMNITOR, ITS PARENT, SUBSIDIARIES OR AFFILIATED COMPANIES (COLLECTIVELY,
"INDEMNITOR GROUP") AND IN RESPECT OF LOSS OF OR DAMAGE TO PROPERTY OF ANY OF
----------------
THE INDEMNITOR GROUP, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT,
REGARDLESS OF WHETHER ATTRIBUTABLE TO STRICT LIABILITY, STATUTORY LIABILITY,
PRODUCTS LIABILITY, TORT, BREACH OF CONTRACT, BREACH OF DUTY (STATUTORY OR
OTHERWISE), THE SOLE, JOINT OR CONCURRENT NEGLIGENCE OR ANY OTHER FAULT OR
RESPONSIBILITY OF THE INDEMNITEES, ANY OF THE INDEMNITOR GROUP OR ANY OTHER
PERSON.
7.2 Insurance. Each Party agrees to maintain adequate insurance (including
excess coverage) in the forms and amounts deemed in its sole discretion to
adequately cover it against the risks inherent in performing its obligations
under this Agreement. Each policy of insurance of an Indemnitor hereunder shall
name the other Party, its parent, subsidiary and affiliated or related
companies, and all of their respective officers, directors, employees, and
representatives as an additional insured, provide and contain a waiver of
subrogation against the other Party, its parent, subsidiary and affiliated or
related companies, and all of their respective officers, directors, employees,
and representatives to the extent of the indemnity obligations assumed by such
Indemnitor. Upon reasonable request, each Party will provide the other with a
certificate of insurance evidencing such coverage. Each Party may be entitled to
self insure. Where appropriate joint insurance shall be arranged on behalf of
both Parties with terms and conditions to be agreed by both Parties.
17
7.3 Survival. The indemnification provided in this Article VII shall
survive the termination of this Agreement and shall continue in full force and
effect until the expiration of statute of limitation with respect to any Claim.
ARTICLE VIII
PROPRIETARY INFORMATION
8.1 Proprietary Information. "Proprietary Information" shall mean, and
-----------------------
shall include but not be limited to, each of the Party's respective proprietary
ideas, concepts, development plans for new or improved products or processes,
data, formulae, techniques, designs, sketches, know-how, photographs, plans,
drawings, specifications, samples, test specimens, reports, client and/or
customer lists, sales information, price lists, findings, studies, or
inventions, whether patentable or not, trade secrets, and the like.
8.2 Disclosure. Notwithstanding anything to the contrary in this
Agreement, disclosure, as permitted hereunder, of Proprietary Information shall
only be made to the extent the Parties may agree, there being no obligation on
the part of either Party to disclose any Proprietary Information to the other
Party. The disclosing Party may make disclosure of Proprietary Information
orally, in writing, whether by hands or electronic copy, or partly orally and
partly in writing. The receiving Party agrees to return all written copies of
Proprietary Information to the disclosing Party and destroy all electronic
copies of Proprietary Information upon termination of this Agreement or such
earlier time, upon request of the disclosing Party.
8.3 Covenant. The receiving Party, on behalf of itself and its affiliates,
hereby covenants and agrees that: (i) it shall treat all such Proprietary
Information received from the disclosing Party as a trade secret, proprietary in
nature to the disclosing Party, and will safeguard the secrecy of Proprietary
Information by following commercially reasonable procedures to safeguard such
information, such efforts to be no less than the efforts used for its own
valuable confidential information and trade secrets; and shall use the other's
Proprietary Information only for the purposes of this Agreement or the Strategic
Alliance, as the case may be; (ii) the Proprietary Information shall be
disclosed only to persons within the receiving Party engaged in activities
within the scope of the Agreement or the relevant project, as the case may be,
and as have the need to know such information in connection with such activities
("Engaged Persons") and who have signed appropriate written agreements that
---------------
include the same obligations with respect to Proprietary Information provided
herein; (iii) it shall be responsible for compliance with this Section 8.3 by
-----------
each Engaged Person; (iv) without prior written consent, such Party shall not
disclose the Proprietary Information it has received from the other Party to any
third person other than Engaged Persons, except as set forth in this Section
-------
8.3; and (v) it shall not use, or allow any of its affiliates to use, any
---
Proprietary Information of the other Party in the pursuit and/or execution of
any business opportunity outside the Strategic Alliance.
8.4 Authorization. The receiving Party covenants and agrees not to use,
sell, lease, license or otherwise commercially use Proprietary Information of
the disclosing Party (except as otherwise contemplated herein) unless express,
prior authorization in writing is obtained from an authorized officer of the
disclosing Party.
18
8.5 Right to Disclose. Notwithstanding anything herein to the contrary,
the receiving Party shall have the right to use or disclose any information:
(a) which is, at the time of disclosure, known to the trade or the
public;
(b) which becomes at a later date known to the trade or the public
through no fault of the receiving Party and then only after said later date;
(c) which is possessed by the receiving Party, as evidenced by the
receiving Party's written records, before receipt thereof from the disclosing
Party;
(d) which is disclosed to the receiving Party by a third party who
the receiving Party believes in good faith has an independent right to such
information; or
(e) which is developed by the receiving Party without assistance from
the information received from the disclosing Party, as evidenced by the
receiving Party's written records.
8.6 No Rights to Proprietary Information. By making Proprietary
Information or other evaluative or informational materials available hereunder,
neither Party is or shall be deemed to be granting (expressly or by implication)
any license or other property right under or with respect to any trade secret,
copyright, trademark or other proprietary, intellectual or other property right.
8.7 Legal Process. In the event that either Party is requested or
compelled pursuant to a subpoena, oral questions, interrogatories, requests for
information or documents, court order, civil investigative demand, or other
legal process (collectively, a "Legal Process"), to disclose any Proprietary
-------------
Information of the other Party in a manner or circumstance not otherwise
permitted hereunder, the Party being so requested or compelled shall provide the
other Party with prompt written notice of such Legal Process so that such Party
may seek an appropriate protective order or waive compliance with the provisions
of this Agreement. The Party being so requested or compelled will make
reasonable efforts to avoid any such disclosure and shall not oppose, and will
reasonably cooperate with, any efforts by the other Party to obtain an
appropriate protective order to assure that confidential treatment will be
accorded to such Proprietary Information. If the other Party is not successful
in obtaining such a protective order, the Party being so requested or compelled,
after exercising good faith efforts to obtain reliable assurances that
confidential treatment will be accorded the Proprietary Information, may
disclose that portion of the Proprietary Information that its counsel advises it
in writing it is required to disclose under applicable law in order to comply
with such Legal Process to avoid being liable for contempt, censure or penalty.
Any disclosure of Proprietary Information as permitted under this Section 8.7
-----------
shall not otherwise affect the confidential, proprietary nature of the
Proprietary Information or the Receiving Party's obligations hereunder.
8.8 Survival. The obligations of the Parties pursuant to this Article VI
----------
shall survive the termination of this Agreement.
19
ARTICLE IX
INVENTIONS AND DISCOVERIES
9.1 Single Party Inventions and Discoveries. Inventions, discoveries,
developments, or other work product, including but not limited to copyrightable
works, trademarks, trade dress, trade names, domain names, and Proprietary
Information, including without limitation any modifications, improvements,
enhancements and the like thereto, whether patentable or not (collectively,
"Intellectual Property") of either Party ("Originating Party") developed,
--------------------- -----------------
created or otherwise existing without the participation of the other Party
hereto, whether developed prior to, during, or after the term of this Agreement,
shall be and remain the exclusive property of such Originating Party. Such party
shall be free to establish, protect, maintain, use and otherwise exploit such
Intellectual Property in its sole discretion, without the consent of, or payment
to, the other party hereto.
9.2 Joint Inventions and Discoveries. Any Intellectual Property jointly
developed by the Parties ("Joint Intellectual Property") hereunder shall be
---------------------------
jointly owned and jointly commercialized by them. "Jointly developed" shall mean
-----------------
that the parties have each contributed in a meaningful manner to the development
either financially or in services. Unless separately provided otherwise under
later agreement, the Parties shall mutually determine any efforts necessary to
establish, protect, maintain, use and otherwise exploit Joint Intellectual
Property. The Parties shall each execute any documentation necessary to
establish such joint ownership, and shall ensure that any personnel, whether
employees, independent contractors, or others, who provide services related to
the foregoing Joint Intellectual Property have executed any documents necessary
to permit the foregoing joint ownership. Each Party, as an Originating Party,
agrees to grant to the other Party a non-exclusive, perpetual right and license
to any Intellectual Property of the Originating Party necessary to permit such
Party to exercise its rights to Joint Intellectual Property under this Section
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9.2.
---
ARTICLE X
NON-COMPETITION
During the Term of this Agreement, Hanover shall not, and shall cause
its Affiliates not to, enter into any alliance that would reasonably be expected
to enable a primary competitor of Schlumberger to enter or advance in (i) the
field of multi-phase metering and pumping, (ii) the remote monitoring and
control of downhole equipment or (iii) systems integration or information
technology businesses. During the Term of this Agreement, Schlumberger shall
not, and shall cause its Affiliates not to, enter into any alliance that would
reasonably be expected to enable a competitor of Hanover to enter or advance in
the products or services covered by the MFS Scope. Neither Schlumberger or
Hanover shall participate in the preparation or submission of any quote that
competes with a quote with respect to a Designated B.O.O. Project. Hanover
agrees that if it submits a quote to Schlumberger with respect to any Qualified
Project or with respect to Supplemental Products and Services for a project,
Hanover will not submit a quote or provide services to any other party with
respect to such project on terms that are any more favorable than those included
in the Hanover quote. Once Schlumberger informs Hanover that Hanover's quote
will be accepted with respect to any project, Hanover
20
agrees to not submit any additional quotes to any other party with respect to
such project (but shall not be precluded from honoring previously submitted
quotes). Notwithstanding the foregoing, nothing herein shall prevent Hanover
from continuing its alliance with Aurion Technologies, Inc., Hanover Measurement
Services and Reliant Energy. If any court of competent jurisdiction shall
finally hold that the time, territory or any other provision set forth in this
Article X constitutes an unreasonable restriction, such provision shall not be
---------
rendered void, but shall apply as to such time, territory or to such other
extent as such court may determine constitutes a reasonable restriction under
the circumstances involved. Each Party acknowledges that the restrictions
contained in this Article X are reasonable and necessary to protect the
---------
legitimate interests of the other Party and that any breach by such Party of any
provision hereof will result in irreparable injury to other Party. Each Party
acknowledges that, in addition to all remedies available at law for such Party's
breach hereof, the other Party shall be entitled to equitable relief, including
injunctive relief, and an equitable accounting of all losses and damages.
ARTICLE XI
WITHHOLDING OF INTEREST PAYMENTS
Schlumberger may withhold amounts owed to Hanover hereunder to offset
interest amounts then due and payable (including amounts paid-in-kind) by Parent
to Camco International Inc., a Delaware corporation ("Camco"), pursuant to that
certain $150,000,000 principal amount subordinated promissory note of even date
herewith issued by Parent to Camco.
ARTICLE XII
MISCELLANEOUS
12.1 Legal Relationship of Parties. This Agreement and the Strategic
-----------------------------
Alliance contractual relationship defined hereunder shall not constitute,
create, or in any way be interpreted as, a joint venture, partnership or formal
business organization of any kind, for tax purposes or otherwise. Neither Party
shall, except as specifically authorized hereunder, act as an agent or
representative of the other Party for any purpose whatsoever. Except as
expressly provided herein; (a) no Party shall have the authority to bind the
other Party or make any commitment or incur any costs or expenses for or in the
name of the other Party, and (b) no Party hereto shall be responsible in any way
for any obligation or liability incurred or assumed by any other Party. No
employee of any Party shall be deemed to be the employees or servants of the
other Party for any purpose. No Party shall have any fiduciary duty to the
other, no special relationship between the Parties shall be deemed to exist, and
no duties not specifically set forth in this Agreement shall exist between the
Parties.
12.2 Non-Exclusivity. It is the intention of the Parties to operate under
the MFS Relationship and the Strategic Alliance set forth in this Agreement to
pursue the award of business and contracts involving the business activities of
both Parties relating to projects as outlined herein; however, it is understood
and agreed that if either Party is desirous of pursuing business opportunities
that would not be covered by the terms of the MFS Relationship or the Strategic
Alliance set forth herein and which would exclude or preclude the other Party,
such
21
Party, such Party may pursue such opportunities, in its sole discretion, and
such event will not constitute a breach of this Agreement.
12.3 Compliance With Laws. Except as otherwise provided herein, each Party
shall be solely responsible for obtaining any and all necessary visas, work
permits, clearances, customs and other government authorizations, permits and
authorizations required for performing any work that may arise for a client
which originates out of or relates to this Agreement. Each Party agrees that all
work performed hereunder shall be conducted in accordance with all applicable
laws, including governmental safety regulations, standards, procedures and
precautions, and that in connection therewith it employs all necessary or
required protective equipment and devices. Each Party agrees to abide and be
bound by the other Party's policies governing the conduct and safety of
personnel having access to the other Party's facilities or its client's
facilities, including without limitation, the other Party's policies regarding
illegal and unauthorized articles, and drug and alcohol policies. The Parties
shall provide each other with copies of all relevant policies as soon as
possible after the execution of this Agreement.
12.4 Assignment. This Agreement shall not be assigned, in whole or in part,
by any Party without the prior written consent of the other Parties, which
consent may be withheld at the sole discretion of the Parties.
12.5 Publicity. Hanover and Schlumberger acknowledge that they may wish,
from time to time, to use advertising or other similar media vehicle for the
purposes of making public and promoting this Agreement and the preferred
supplier and alliance relationship established hereunder. Hanover and
Schlumberger shall agree to the use of their respective trademarks, service
marks, trade names, company names and logos on a case by case basis and shall do
so in writing.
12.6 Entire Agreement. This Agreement and the Exhibits hereto contain the
entire understanding among the Parties hereto with respect to the subject matter
hereof and supercede all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supercede any
course of performance and/or usage of trade inconsistent with any of the terms
hereof. This Agreement may not be modified or amended other than by agreement
between the Parties in writing.
12.7 Notices. All written notice to be given hereunder shall be deemed
given: (a) when received if given in person or by courier, (b) on the date of
transmission if sent by telex, telecopy or other wire transmission (receipt
confirmed), (c) if to U.S. addresses, three (3) days after being deposited in
the U.S. mail, certified or registered mail, postage prepaid, and (d) if to U.S.
addresses, if sent by a nationally recognized overnight delivery service, the
day following the date given to such overnight delivery service (specified for
overnight delivery) or if to non-U.S. addresses, if sent by an internationally
recognized overnight delivery service, the third (3/rd/) day following the date
give to such delivery service (specified for 2/nd/ day delivery). All notices
and other communications provided for in this Agreement shall be addressed as
follows:
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If to STC, addressed as follows:
SCHLUMBERGER TECHNOLOGY CORPORATION
000 Xxxxxxxxxxxx Xxxxx MD:23
Xxxxx Xxxx, Xxxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxx Xxxx Xxxx & Freidenrich LLP
0000 Xxxxx XxXxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
If to XXXX, addressed as follows:
SCHLUMBERGER OILFIELD HOLDINGS LTD.
Xxxxxxxxx Xxxxxxxx
X.X. Xxx 00
Xxxx Xxxx, Xxxxxxx, XXX
Xxxxxxxxx: General Counsel
with a copy to:
Xxxx Xxxx Xxxx & Freidenrich LLP
0000 Xxxxx XxXxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
If to Hanover, addressed as follows:
Hanover Compression Limited Partnership
00000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
23
with a copy to:
Xxxxxx & Xxxxxxx
Sears Tower, Suite 5800
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
12.8 Forum; Waiver of Jury Trial. Each party agrees that any suit, action
or proceeding brought by such party against the other in connection with or
arising from this Agreement ("Judicial Action") shall be brought solely in a
state or federal court located in Houston, Xxxxxx County, Texas, and each party
consents to the jurisdiction and venue of each such court. EACH PARTY HEREBY
WAIVES ITS RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY JUDICIAL ACTION.
12.9 Limitation on Damages. In no event shall Schlumberger's or Hanover's
aggregate liability for breach or default of this Agreement exceed $14,500,000.
12.10 Costs and Expenses. Each Party shall bear any and all respective
costs and expenses it may incur in connection with performing its obligations
under this Agreement.
12.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Agreement.
12.12 Severability. In the event that any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
12.13 Waiver. Failure or delay in the prompt enforcement of any right
hereunder shall in no way be construed as a waiver of such right. No right or
remedy hereunder of a party shall be deemed waived except pursuant to a written
waiver executed by the party against whom the waiver is to be enforced. Waiver
of any provision of this Agreement on any occasion shall not be construed as a
waiver of any other provision or that provision on any other occasion.
12.14 Compliance with FCPA. The Parties recognize that the United States
Foreign Corrupt Practices Act of 1977, as amended (the "Act"), prohibits the
---
payment or giving of anything of value either directly or indirectly by an
American company or citizen to an official of a foreign government for the
purpose of influencing an act or decision in his official capacity, or inducing
him to use his influence with the foreign government, to assist a company in
obtaining or retaining business for or with, or directing business to, any
person. The Parties covenant that they are familiar with the Act and its
purposes and represent that they and their owners, officers, directors and
employees are not officials, officers or representatives of any government or
political party or candidates for political office and covenant and represent
further that no part of
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any compensation will be accepted or used by the Parties for any purpose, nor
will it take any action, which would constitute a violation of any law of the
United States of America, including the Act.
12.15 Further Assurances. The Parties shall each take such actions and
execute such documents as may be necessary to accomplish the provisions of this
Agreement.
12.16 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS, AND NOT THE CONFLICTS OF LAW
RULES, OF THE STATE OF TEXAS.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized representatives effective as of the date and
year first above written.
SCHLUMBERGER OILFIELD HOLDINGS LIMITED
By:___________________________________________
Name:_________________________________________
Title:________________________________________
SCHLUMBERGER TECHNOLOGY CORPORATION
By:___________________________________________
Name:_________________________________________
Title:________________________________________
HANOVER COMPRESSION LIMITED PARTNERSHIP
By:___________________________________________
Name: Xxxxxxx X. XxXxxx
Title: President and Chief Executive Officer
i
Each of the following have caused this Most Favored Supplier and Alliance
Agreement to be executed on its behalf to acknowledge and agree to the
provisions of Article XI relating to certain holdbacks that serve as set-offs
against amounts owing under the Hanover Note to which the undersigned will be
parties.
CAMCO INTERNATIONAL INC.
By:__________________________________________
Name:________________________________________
Title:_______________________________________
HANOVER COMPRESSOR COMPANY
By:__________________________________________
Name: Xxxxxxx X. XxXxxx
Title: President and Chief Executive Officer
ii
