Exhibit 10.2

ASSET PURCHASE AGREEMENT

by and between

TESCO CORPORATION,

CHEYENNE SERVICES, LTD.

and

Carlos A. Torres

dated

November 1, 2005

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TABLE OF CONTENTS

 

ARTICLE I PURCHASE AND SALE

   1

Section 1.01     Acquired Assets

   1

Section 1.02     Excluded Assets

   2

ARTICLE II PURCHASE PRICE

   2

Section 2.01     Purchase Price

   2

Section 2.02     Purchase Price Adjustment

   3

Section 2.03     Purchase Price Adjustment – Depreciated Fixed Assets

   4

Section 2.04     Prorations; Adjustments

   5

Section 2.05     Like Kind Exchange

   6

Section 2.06     Allocation of Consideration

   6

ARTICLE III ASSUMED LIABILITIES; RETAINED LIABILITIES

   6

Section 3.01     Assumed Liabilities

   6

Section 3.02     Retained Liabilities

   6

ARTICLE IV THE CLOSING

   7

Section 4.01     Time and Place

   7

Section 4.02     Documents to be Delivered By Seller

   7

Section 4.03     Documents to be Delivered by Purchaser

   9

ARTICLE V CONDITIONS TO CLOSING

   9

Section 5.01     Purchaser’s Conditions to Closing

   9

Section 5.02     Seller’s Conditions to Closing

   10

ARTICLE VI REPRESENTATIONS AND WARRANTIES OF SELLER

   11

Section 6.01     Organization of Seller; Authority

   11

Section 6.02     Noncontravention

   11

Section 6.03     Title to Acquired Assets

   11

Section 6.04     No Equity Interests

   12

Section 6.05     Absence of Changes

   12

Section 6.06     Personal Property

   13

Section 6.07     Permits

   13

Section 6.08     Contracts

   13

Section 6.09     Intellectual Property

   15

Section 6.10     Brokers’ Fees

   16

Section 6.11     Taxes

   16

Section 6.12     Product and Service Warranty

   17

Section 6.13     Employees; Employee Relations

   17

Section 6.14     Employee Benefit Plans

   18

Section 6.15     Environmental Matters

   19

Section 6.16     Property Matters

   20

Section 6.17     Customers, Vendors and Suppliers

   21

Section 6.18     Insurance

   21

Section 6.19     Books and Records

   21

Section 6.20     Inventories

   21

Section 6.21     Assets Necessary to the Business

   21

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Section 6.22     Conformity to Law

   22

Section 6.23     Commissions

   22

Section 6.24     Absence of Certain Business Practices

   22

Section 6.25     Financial Statements

   22

Section 6.26     Safety Performance

   22

Section 6.27     Disclosure

   22

ARTICLE VII REPRESENTATIONS AND WARRANTIES OF BUYER

   23

Section 7.01     Organization and Standing of Purchaser; Authority

   23

Section 7.02     Noncontravention

   23

Section 7.03     Brokers

   23

ARTICLE VIII COVENANTS

   23

Section 8.01     Conduct of Business

   23

Section 8.02     Access

   25

Section 8.03     Third Party Approvals

   25

Section 8.04     Non-Competition

   25

Section 8.05     Retained Employees

   26

Section 8.06     Use of Name

   27

Section 8.07     Further Assurances

   27

Section 8.08     Confidentiality

   27

Section 8.09     Exclusivity

   28

Section 8.10     Frank’s Patent Dispute

   28

Section 8.11     Accounts Receivable

   29

ARTICLE IX INDEMNIFICATION

   29

Section 9.01     Survival

   29

Section 9.02     Indemnity

   29

Section 9.03     Limitations on Liability of Seller and Partner

   30

Section 9.04     Claims

   30

ARTICLE X TERMINATION

   31

Section 10.01  Termination

   31

Section 10.02  Effect of Termination

   31

ARTICLE XI GENERAL

   32

Section 11.01  Expenses

   32

Section 11.02  Notices

   32

Section 11.03  Entire Agreement

   32

Section 11.04  Governing Law

   33

Section 11.05  Arbitration

   33

Section 11.06  Sections and Section Headings

   33

Section 11.07  Assigns

   33

Section 11.08  No Third Party Rights or Remedies

   33

Section 11.09  Rules of Construction

   33

Section 11.10  Counterparts

   34

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Exhibit A

  

Escrow Agreement

  

Exhibit B

  

Assignment and Bill of Sale

  

Exhibit C

  

Lease Agreement

  

Schedule 1.01(a)

  

Equipment

  

Schedule 1.01(b)

  

Scheduled Contracts

  

Schedule 1.01(e)

  

Patent Rights

  

Schedule 1.01(g)

  

Permits

  

Schedule 1.01(i)

  

Bank Accounts

  

Schedule 1.02

  

Excluded Assets

  

Schedule 2.01

  

Rick Garland Patents

  

Schedule 2.02

  

Net Working Capital

  

Schedule 2.03(a)-1

  

Depreciated Value of Acquired Assets

  

Schedule 2.03(a)-2

  

Self Constructed Assets

  

Schedule 2.06

  

Purchase Price Allocation

  

Schedule 3.01

  

Assumed Liabilities

  

Schedule 3.02

  

Retained Liabilities

  

Schedule 3.02(g)

  

Indebtedness

  

Schedule 6.03

  

Encumbrances

  

Schedule 6.03-1

  

Tax Exceptions

  

Schedule 6.05

  

Absence of Changes

  

Schedule 6.06(b)-1

  

Title

  

Schedule 6.06(b)-2

  

Repairs/Maintenance

  

Schedule 6.07

  

Scheduled Permits

  

Schedule 6.08

  

Contracts

  

Schedule 6.09(a)

  

Seller Intellectual Property

  

Schedule 6.09(b)

  

Ownership of Intellectual Property

  

Schedule 6.09(c)

  

Infringement

  

Schedule 6.09(d)

  

IP Fees and Payments

  

Schedule 6.11

  

Tax Matters

  

Schedule 6.13

  

Business Employees

  

Schedule 6.14

  

Plans

  

Schedule 6.15(a)

  

Environmental Permits

  

Schedule 6.15(c)

  

Compliance with Environmental Laws

  

Schedule 6.16(a)

  

Real Property

  

Schedule 6.17

  

Major Customers, Vendors/Suppliers

  

Schedule 6.18

  

Insurance

  

Schedule 6.20

  

Inventories

  

Schedule 6.25

  

Financial Statements

  

Schedule 6.26

  

Safety Performance

  

Schedule 8.01

  

Conduct of Business

  

Schedule 8.05

  

Employment Claims

  

Schedule 8.10

  

Franks’ Patent

  

Schedule 11.05

  

Arbitration Provisions

  

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ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT (this “Agreement”) is dated as of the 1st day of
November, 2005, by and between TESCO CORPORATION, an Alberta corporation (the
“Purchaser”), CHEYENNE SERVICES, LTD., a Texas limited partnership (the
“Seller”), and Carlos A. Torres (“Torres”).

WHEREAS, Seller desires to sell and Purchaser desires to purchase certain assets
which are referenced as Acquired Assets in Section 1.01 below, which comprise
Seller’s casing and tubular running business and inspection services business
which includes (i) equipment and expertise used in the handling, running,
installation and removal of tubing and casing, (ii) related services including
wellsite supervision of said running, installation and removal, (iii) assembly
torque monitoring services, and (iv) the sale of certain consumable items
related thereto (the “Business”).

WHEREAS, Cheyenne Houston Management LLC, a Texas limited liability company
(“CHM”), is the sole general partner of the Seller, Torres is the sole limited
partner of Seller and Torres is the sole member of CHM;

NOW, THEREFORE, in consideration of the mutual promises and agreements set forth
herein, Purchaser, Seller and Partner agree as follows:

ARTICLE I

PURCHASE AND SALE

Section 1.01 Acquired Assets. Subject to the terms and conditions set forth in
this Agreement, at the Closing referred to in Article IV hereof, Seller shall
sell, assign, transfer, and deliver to Purchaser, and Purchaser shall purchase,
acquire, and take assignment and delivery of all of the following assets (all of
which assets are hereinafter referred to collectively as the “Acquired Assets”):

(a) all right, title and interest of Seller in and to the equipment, machinery,
furniture and furnishings, computers and computer hardware (including processing
units, terminals, disk drives, tape drives, printers, keyboards, screens, and
peripherals), vehicles, trailers, apparatus, tools, dies, appliances, implements
and other tangible personal property used or usable in the Business including
the personal property listed on Schedule 1.01(a) hereto (the “Equipment”);

(b) all right, title and interest of Seller in, to and under the contracts and
agreements described on Schedule 1.01(b) hereto (the “Scheduled Contracts”) and
all rights (including rights of refund and offset), privileges, deposits,
claims, causes of action and options relating or pertaining to any of the
Scheduled Contracts;

(c) all right, title and interest of Seller in and to inventories, including
parts and spare parts inventories, chemicals, finished goods, products,
work-in-progress, raw materials and other inventories (“Inventories”) used in
the Business or usable in the Business as it is presently conducted;

 

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(d) all of Seller’s books, records, papers and instruments of whatever nature
and wherever located that relate to the Acquired Assets or which are required or
necessary in order for Purchaser to conduct the Business from and after Closing
in the manner in which the Business is presently being conducted, including,
without limitation, copies of specifications, blue prints, drawings, designs,
sales, promotional and marketing literature, accounting and financial records,
personnel and labor records, subject to any applicable legal restrictions, sales
and property tax records and returns, sales records, but excluding income tax
records and returns and corporate minute book and stock records;

(e) all right, title and interest of Seller in all patents and patent
applications listed in Schedule 1.01(e) (“Patent Rights”), all trademarks,
technology, know-how, data, copyrights, tradenames, service marks, licenses and
other intellectual property (“Intellectual Property”) used in the conduct of the
Business, including, without limitation, all software, all of Seller’s rights
under any licenses related to Seller’s use, at any time, of computer equipment,
hardware or software;

(f) any lists in the possession of Seller that identify customers to whom sales
have been made in connection with the operation of the Business and vendors from
whom supplies are purchased in connection with the operation of the Business;

(g) all right, title and interest of Seller in and to all permits,
authorizations, certifications, approvals, ordinances, licenses and other
similar rights (“Permits”) used or usable in the conduct of the Business, to the
extent assignable, including the Permits listed on Schedule 1.01(g);

(h) all right, title and interest in and to the names “Cheyenne Services, Inc.
and Cheyenne Services, Ltd.” and any derivative thereof used in the Business but
excluding the names “Cheyenne Fluid Services, Inc.” and “Cheyenne Supply, Inc.”;

(i) the bank accounts referenced on Schedule 1.01(i);

(j) all current assets of Seller determined in accordance with generally
accepted accounting principles; and

(k) all other assets, know-how, technology, trade secrets, goodwill and rights
of every kind and nature, real or personal, tangible or intangible, owned, used
or held for use by Seller in the Business as of the Closing.

Section 1.02 Excluded Assets. Notwithstanding the foregoing, Seller is not
selling, and Purchaser is not purchasing pursuant to this Agreement, any of the
assets of Seller listed on Schedule 1.02, and the term “Acquired Assets” shall
not include the assets listed on Schedule 1.02.

ARTICLE II

PURCHASE PRICE

Section 2.01 Purchase Price. Purchaser shall pay to Seller, as the aggregate
purchase price (the “Purchase Price”) for the Acquired Assets (i) an amount
equal to $17,000,000

 

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(reduced by an amount equal to the quotient of $10,000 times the number of days
from and after October 24, 2005 through and including the Closing Date)
consisting of (a) a cash amount equal to $16,000,000 (reduced by an amount equal
to the quotient of $10,000 times the number of days from and after October 24,
2005 through and including the Closing Date) payable to Seller and (b) a cash
amount equal to $1,000,000 payable, on behalf of Seller, to Rick Garland to
satisfy the Company’s obligation to acquire all right, title and interest of his
in and to the patents listed on Schedule 2.01, (ii) the Additional Depreciated
Fixed Assets Amount (as defined in Section 2.03), and (iii) a contingent payment
up to $3,000,000 (plus interest), such contingent payment being payable in
accordance with and secured by the cash held in the escrow agreement in the form
attached as Exhibit A. The cash portion of the purchase price payable to Seller
will be subject to adjustment as provided in Sections 2.02, 2.03 and 2.04.

Section 2.02 Purchase Price Adjustment.

(a) For purposes of establishing the Purchase Price, Purchaser and Seller have
assumed that the Net Working Capital (as defined below) of Seller as of the
Closing Date will be $1,236,700 (the “Net Working Capital Threshold”). “Net
Working Capital” shall mean total current assets being acquired by Purchaser
less total current liabilities being assumed by Purchaser as more particularly
described on and calculated in accordance with the accounting principles and
methodologies referenced on Schedule 2.02.

(b) Within five days prior to Closing, Seller shall prepare and deliver to
Purchaser a certificate (the “Pre-Closing Working Capital Certificate”) of an
authorized officer of Seller setting forth Seller’s good faith estimate of
Seller’s Net Working Capital as of the Closing Date (the “Estimated Closing Date
Net Working Capital”). From and after the delivery of the Pre-Closing Working
Capital Certificate, Purchaser shall be permitted to review Seller’s working
papers relating to the preparation of the Pre-Closing Working Capital
Certificate, and Seller shall provide Purchaser with reasonable access to the
persons involved in preparing or reviewing such Pre-Closing Working Capital
Certificate. Seller shall revise the Pre-Closing Working Capital Certificate
based on Purchaser’s reasonable objections to the amounts set forth therein. If
the Estimated Closing Date Net Working Capital set forth in the Pre-Closing
Working Capital Certificate exceeds the Net Working Capital Threshold, then the
Purchase Price will be increased and Purchaser shall pay as an addition to the
cash portion of the Purchase Price payable at Closing an amount equal to such
excess. If the Estimated Closing Date Net Working Capital set forth in the
Pre-Closing Working Capital Certificate is less than the Net Working Capital
Threshold, then the Purchase Price will be reduced and the cash portion of the
Purchase Price payable by Purchaser at Closing shall be reduced by such
difference.

(c) As soon as reasonably practicable following the Closing Date, and in any
event within 45 days thereafter, Purchaser shall prepare and deliver to Seller a
certificate (the “Post-Closing Working Capital Certificate”) of an authorized
officer of Purchaser setting forth Purchaser’s good faith calculation of the
actual Net Working Capital as of the Closing Date (the “Final Closing Date Net
Working Capital”). From and after the delivery of the Post-Closing Working
Capital Certificate, Seller shall be permitted to review Purchaser’s working
papers relating to the preparation of the Post-Closing Working Capital
Certificate, and Purchaser shall provide Seller with reasonable access to the
persons involved in preparing or reviewing such Post-Closing Working Capital
Certificate.

 

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(d) (i) Within 20 days after Seller’s receipt of the Post-Closing Working
Capital Certificate, Seller shall notify Purchaser as to whether Seller agrees
or disagrees with the calculation of the Final Closing Date Net Working Capital
as reflected on the Post-Closing Working Capital Certificate and, if Seller
disagrees, such notice shall set forth in reasonable detail the particulars of
such disagreement. If Seller provides a notice of agreement or does not provide
a notice of disagreement within such 20 day period, then Seller shall be deemed
to have accepted the calculations and the amounts set forth in the Post-Closing
Working Capital Certificate delivered by Purchaser, which shall then be final,
binding and conclusive for all purposes hereunder. If any such notice of
disagreement is timely provided, then Purchaser and Seller shall each use
reasonable efforts for a period of 15 days thereafter to resolve any
disagreements with respect to the calculations in the Post-Closing Working
Capital Certificate.

(ii) If, at the end of the 15-day resolution period, the parties are unable to
resolve any disagreements as to items in the Post-Closing Working Capital
Certificate, then KPMG, LLP (or such other independent accounting firm of
recognized national standing as may be mutually selected by Purchaser and
Seller) shall resolve any remaining disagreements. If within 4 days KPMG, LLP is
unwilling or unable to serve in such capacity then Deloitte & Touche LLP shall
be requested to serve in such capacity. If within 4 days Deloitte & Touche LLP
is not willing or able to serve in such capacity, then Seller shall within 10
days from Deloitte & Touche LLP’s failure to serve to deliver to Purchaser a
listing of three other accounting firms of recognized national or regional
standing none of which has performed audit services for Seller within the last
three years and Purchaser shall within 10 days after receipt of such list,
select one of such three accounting firms (such firm as is ultimately selected
pursuant to the aforementioned procedures being the “Accountant”). The
Accountant shall be charged with determining as promptly as practicable, but in
any event within 30 days after the date on which such dispute is referred to the
Accountant any disputed items required to determine Seller’s actual Net Working
Capital as of the Closing. The costs and expenses of the Accountant shall be
allocated between Seller and Purchaser so that Seller’s share of such fees and
expenses shall be in the same proportion that the aggregate amount of the
disputed items submitted by Seller to the Accountant that is unsuccessfully
disputed by Seller (as finally determined by the Accountant) bears to the total
amount of all disputed items so submitted by Seller to the Accountant. The
determination of the Accountant shall be final, binding and conclusive for all
purposes hereunder.

(iii) Within five Business Days of the date on which the last disputed item
required to determine the actual Net Working Capital as of the Closing is
resolved pursuant to this Section 2.02, Purchaser shall pay to Seller an amount
equal to the excess, if any, of the Final Closing Date Net Working Capital minus
the Estimated Closing Date Net Working Capital, or Seller shall pay to Purchaser
an amount equal to the excess, if any, of the Estimated Closing Date Net Working
Capital minus the Final Closing Date Net Working Capital.

Section 2.03 Purchase Price Adjustment – Depreciated Fixed Assets. (a) The
purchase price payable at Closing will be increased by the “Additional
Depreciated Fixed Assets Amount”. “Additional Depreciated Fixed Assets Amount”
shall include (1) the actual cost of assets acquired by Seller after
February 28, 2005 (as evidenced by third party invoices)

 

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reduced by depreciation through the Closing Date as reflected on Schedule
2.03(a)-1; plus (2) the direct actual cost of the self constructed assets (as
evidenced by third party invoices) plus a mutually agreed labor charge for
related Seller employee time reduced by depreciation through the Closing Date as
reflected in Schedule 2.03(a)-2. Depreciation, as referenced herein, shall be
calculated in accordance with the depreciation methods referenced on Schedule
2.03(a)-1 and 2.03(a)-2.

(b) At the Closing, Seller and Purchaser shall agree to an estimate of the
actual costs of assets purchased after February 28, 2005 and the actual cost of
self constructed assets to be included in the calculation of the Additional
Depreciated Fixed Assets Amount (the “Estimated Costs”). As soon as reasonably
practicable following the Closing Date, and in any event within 45 days
thereafter, Purchaser shall review the supporting detail and documentation
provided by Seller in support of the Estimated Costs. Within 60 days following
the Closing Date, Purchaser shall notify Seller as to whether the Purchaser
agrees or disagrees with the Estimated Costs proposed by Seller and, if
Purchaser disagrees, such notice shall set forth in reasonable detail the
particulars of such disagreement which may be a statement that the documentation
provided by Seller does not fully support the Estimated Costs. If Purchaser
provides a notice of agreement or does not provide a notice of disagreement
within such 60-day period, then Purchaser shall be deemed to have accepted the
statement of Estimated Costs. If any such notice of disagreement is timely
provided, then Purchaser and Seller shall each use reasonable efforts for a
period of 15 days thereafter to resolve any disagreements with respect to the
calculation of Estimated Costs.

(c) If, at the end of the 15-day resolution period, the parties are unable to
resolve any disagreements as to items in the statement of Estimated Costs, then
the Accountant shall be charged with determining, as promptly as practicable,
but in any event within 30 days after the date on which such dispute is referred
to the Accountant any disputed items required to determine Seller’s actual costs
with respect to the subject assets. The costs and expenses of the Accountant
shall be allocated between Seller and Purchaser so that Purchaser’s share of
such fees and expenses shall be in the same proportion that the aggregate amount
of the disputed items submitted by Purchaser to the Accountant that is
unsuccessfully disputed by Purchaser (as finally determined by the Accountant)
bears to the total amount of all disputed items so submitted by Purchaser to the
Accountant. The determination of the Accountant shall be final, binding and
conclusive for all purposes hereunder.

(d) If the Accountant concludes that the Estimated Costs in dispute were
overstated or are not properly supported by the documentation provided by
Seller, then Seller shall within five Business Days of such determination, pay
to Purchaser an amount equal to the Estimated Costs in dispute.

Section 2.04 Prorations; Adjustments. (a) All personal property taxes and ad
valorem taxes with respect to the Acquired Assets and all rent and other
payments under or pursuant to the Scheduled Contracts shall be apportioned and
shall be adjusted, as of the Closing Date, and the net amount thereof shall be
added to or deducted from, as the case may be, that portion of the Purchase
Price paid by Purchaser on the Closing Date. If the amount of any item is not
known at the time of Closing, it shall be apportioned on a basis which is agreed
to by Purchaser and Seller

 

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prior to the payment of the Purchase Price with a reapportionment at the later
of the payment of the balance of the Purchase Price under Section 2.02 hereof or
when definitive data is available.

(b) Seller shall pay all sales, use, and other transfer taxes with respect to
the sale and Purchaser’s purchase of the Acquired Assets.

Section 2.05 Like Kind Exchange. Purchaser may consummate the purchase of all or
part of the Assets as part of a so-called like kind exchange (the “Exchange”)
pursuant to §1031 of the Internal Revenue Code of 1986, as amended, provided
that (i) all costs, fees and expenses attendant to the Exchange shall be the
responsibility of Purchaser and (ii) Seller shall not be required to acquire or
hold title to any property or assets other than the Acquired Assets for purposes
of consummating the Exchange but rather the Exchange shall be effected through
an assignment by Purchaser of its rights under this Agreement to a qualified
intermediary. In the event that all conditions precedent to the consummation of
the transaction have been satisfied, Seller hereby agrees that the Closing may
be delayed to permit Purchaser to effect the Exchange, provided that in no event
may Seller delay such Closing beyond the date set forth in Section 10.01(e)
hereof. Seller shall not, by this Agreement or acquiescence to the Exchange,
(1) have its rights under this Agreement, including (without limitation) those
that survive Closing, affected or diminished in any manner or (2) be responsible
for compliance with or be deemed to have warranted to Purchaser that the
Exchange in fact complies with §1031 of the Internal Revenue Code of 1986, as
amended (the “Code”).

Section 2.06 Allocation of Consideration. Seller and Purchaser agree that the
sale of the Business is subject to Section 1060 of the Code. The Purchase Price
shall be allocated among the Acquired Assets in accordance with Schedule 2.06.
Purchaser and Seller agree (a) that the allocations set forth in Schedule 2.06
have been made in accordance with the Code, (b) to treat and report for income
tax purposes the transactions contemplated by this Agreement in a manner
consistent with such allocation, (c) not to take any action for income tax
purposes inconsistent with such allocation. Seller and Purchaser shall duly
prepare and timely file such reports and information returns as may be
prescribed under Section 1060 of the Code, including Form 8594, and any similar
returns or reports required under other applicable law, to report the allocation
of the Purchase Price in accordance with Schedule 2.06. Seller and Purchaser
acknowledge and agree that the allocations made pursuant to this Section 2.06
are solely for income tax purposes. Seller and Purchaser will notify the other
in the event of an examination, audit or other proceeding regarding the agreed
upon allocation of the Purchase Price.

ARTICLE III

ASSUMED LIABILITIES; RETAINED LIABILITIES

Section 3.01 Assumed Liabilities. Except as expressly referenced in Schedule
3.01 attached hereto (the “Assumed Liabilities”), Purchaser shall not assume,
and shall not be deemed to have assumed, any liability or obligation of Seller
whatsoever, including any liability or obligation relating to the Acquired
Assets.

Section 3.02 Retained Liabilities. Except as expressly referenced in Schedule
3.02 attached hereto, Seller acknowledges and agrees that it is responsible for
and shall indemnify and

 

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hold harmless Purchaser from and against any and all claims, liabilities, losses
or obligations arising out of or relating to the following (“Retained
Liabilities”):

(a) any accrued salaries, bonuses or other accrued compensation or employee
benefits (except vacation time to the extent, if any, expressly included in the
Assumed Liabilities) of any employees of Seller or its Affiliates with respect
to the period prior to the Closing Date;

(b) any obligations to employees or consultants of Seller or its Affiliates
under any employment, consulting, change of control or severance agreements;

(c) all obligations of Seller under this Agreement;

(d) all taxes with respect to the ownership of the Acquired Assets or conduct of
the Business prior to the Closing;

(e) all fees and expenses owed by Seller or its Affiliates to third parties
incurred in connection with the sale of the Acquired Assets;

(f) any contracts, agreements or instruments to which Seller or any of its
Affiliates is a party or any of the Acquired Assets are bound, whether or not
relating to the Business other than liabilities arising after the Closing under
Scheduled Contracts;

(g) all obligations of Seller with respect to any indebtedness, including but
not limited to indebtedness for borrowed money and the other obligations
described on Schedule 3.02(g); and

(h) the business, operations or activities conducted by Seller or any Affiliate
in connection with the Business or the Acquired Assets prior to the Closing
other than the Assumed Liabilities.

ARTICLE IV

THE CLOSING

Section 4.01 Time and Place. The closing of the transfer and delivery of the
documents and instruments necessary to consummate the purchases and sales
contemplated by this Agreement (the “Closing”) shall be held at the offices of
Vinson & Elkins L.L.P., 1001 Fannin, Houston, Texas, at 9 a.m. (Houston, Texas
time) on November 1, 2005, or at such other time or place as Purchaser and
Seller may agree. The date on which the Closing is actually held hereunder is
sometimes referred to herein as the “Closing Date.”

Section 4.02 Documents to be Delivered By Seller. At the Closing:

(a) Seller shall execute and deliver to Purchaser (or its designee) an
Assignment and Bill of Sale, substantially in the form attached hereto as
Exhibit B, conveying to Purchaser (or such designee) good and marketable title
to the Acquired Assets being purchased from Seller;

 

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(b) Seller shall execute and deliver to Purchaser (or its designee) such other
instrument or instruments of sale, transfer and assignment transferring,
assigning and conveying the Acquired Assets as shall be appropriate to vest in
Purchaser (or such designee) good and marketable title to such assets;

(c) Seller shall deliver a copy of the resolutions adopted by the Partners of
the Seller, authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, in each case duly
certified as of the Closing Date by the Secretary or any Assistant Secretary of
Seller;

(d) Seller shall deliver a copy of the certificate of limited partnership of
Seller certified as true and correct by its secretary and a certificate of good
standing of Seller issued by the Secretary of State of the State of Texas as of
a date not more than 10 days prior to the Closing Date;

(e) To the extent any consents or approvals shall be necessary to any of the
transactions, herein contemplated, or to the effective transfer or assignment of
any of the assets being purchased by Purchaser from Seller, Seller shall have
delivered all such consents or approvals in writing in a form satisfactory to
Purchaser;

(f) Seller shall cause Rick L. Garland, Dan Wiggins and Errol A. Sonnier to
execute and deliver to Purchaser Employment Agreements (including
non-competition covenants) in form satisfactory to Purchaser, such Employment
Agreement to have a term of three years and provide for compensation and
benefits that are the same as, or substantially equivalent to, the respective
compensation and benefits currently accorded to each such employee by Seller;

(g) Seller shall deliver evidence satisfactory to Buyer (i) of the release
(subject to filing with the applicable governmental authority) of all
Encumbrances (as defined in Section 6.03 below) affecting the Acquired Assets,
and (ii) that, with respect to the Acquired Assets, all amounts owing under any
indebtedness, including the indebtedness described on Schedule 3.02(g), have
been paid in full or otherwise terminated;

(h) Seller shall execute and deliver lease agreements (the “Founder Lease
Agreements”) respecting the property of Seller located at Houston, Texas;
Springtown, Texas; and Lafayette, Louisiana in the forms attached hereto as
Exhibit C.

(i) Seller shall deliver Phase I environmental reports respecting the real
property related to the Lease Agreements and Founder Lease Agreements;

(j) Seller shall deliver to Purchaser such other agreements and instruments as
may reasonably be required to consummate the transactions contemplated by this
Agreement;

(k) Seller shall deliver documents reasonably satisfactory to Purchaser
evidencing the purchase by the Seller of the rights held by Rick Garland in U.S.
patents No. 4,938,109, No. 5,732,909 and No. 5,992,801 transfer of such patent
rights to Purchaser as part of the Acquired Assets free and clear of any
Encumbrances; and

 

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(l) Seller shall deliver to Purchaser documents sufficient to release all
Encumbrances against the Acquired Assets, including any liens with respect to
any and all outstanding indebtedness including equipment loans at Sterling Bank.

Section 4.03 Documents to be Delivered by Purchaser. At the Closing:

(a) Purchaser shall pay the cash portion of the Purchase Price referenced in
Section 2.01(i)(a) to Seller;

(b) Purchaser shall pay the cash portion of the Purchase Price referenced in
Section 2.01(i)(b) to Rick Garland on behalf of Seller;

(c) Purchaser shall deliver the contingent payment amount referenced in
Section 2.01(i)(c) to the escrow agent under the Escrow Agreement;

(d) Purchaser shall deliver to Seller a copy of the resolutions adopted by the
Board of Directors of Purchaser, authorizing the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby, in each
case duly certified as of the Closing Date by the Secretary or any Assistant
Secretary of Purchaser; and

(e) Purchaser shall deliver to Seller such other agreements and instruments as
may reasonably be required to consummate the transactions contemplated by this
Agreement.

ARTICLE V

CONDITIONS TO CLOSING

Section 5.01 Purchaser’s Conditions to Closing. The obligations of Purchaser to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment of each of the following conditions:

(a) The representations and warranties of Seller herein contained shall be true
and correct on and as of the Closing Date with the same force and effect as
though made as of such date, except for any variations permitted by this
Agreement.

(b) Seller shall have performed and complied, in all material respects, with the
covenants and agreements contained in this Agreement that are required to be
performed or complied with by Seller on or prior to the Closing Date.

(c) Seller shall have secured in writing all necessary consents and approvals,
in form and substance satisfactory to Purchaser, by and from all third parties
whose consent and approval is required by contract or law for the consummation
of the transactions herein contemplated.

(d) Seller shall have delivered all documents required to be delivered by Seller
at Closing, as more specifically set forth in Article IV of this Agreement, in
each case in form and substance reasonably satisfactory to Purchaser.

 

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(e) The parties hereto shall have secured all appropriate orders, consents,
approvals and clearances, in form and substance reasonably satisfactory to
Purchaser, by and from all parties, including regulatory agencies and other
governmental authorities and agencies, whose order, consent, approval or
clearance is required by contract or law for the consummation of the
transactions herein contemplated.

(f) There shall not have been any material adverse change in the Acquired Assets
or the Business since February 28, 2005 or the ability of the Purchaser to use
or operate the Acquired Assets or conduct the Business as used, operated or
conducted by Seller in a manner consistent with Seller’s past practices.

(g) Purchaser shall have completed its due diligence of the Acquired Assets and
the Business, the results of which shall be satisfactory to Purchaser in its
sole and absolute discretion.

(h) The Phase I environmental reports relating to the real property shall have
been delivered to Purchaser and shall be reasonably satisfactory to Purchaser.

(i) Messrs. Scrantz and Sonnier shall have terminated their existing royalty
agreements with Seller and shall have entered into new royalty agreements or
other compensation arrangements reasonably satisfactory to Purchaser.

(j) There shall be no pending or threatened litigation relating to this
Agreement or the transactions contemplated hereby.

(k) Torres and Purchaser shall have entered into a letter agreement with respect
to certain rights of Purchaser relating to certain developing technologies and
products held by Torres or his Affiliates relating to the Business.

Section 5.02 Seller’s Conditions to Closing. The obligation of Seller to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment of the following conditions:

(a) The representations and warranties of Purchaser herein contained shall be
true and correct on and as of the Closing Date with the same force and effect as
though made as of such date, except for any variations permitted by this
Agreement.

(b) Purchaser shall have performed and complied with in all material respects
the covenants and agreements contained in this Agreement that are required to be
performed or complied with by Purchaser on or prior to the Closing Date.

(c) Purchaser shall have delivered all documents required to be delivered by
Purchaser at Closing, as more specifically set forth in Article IV hereof, in
each case in form and substance reasonably satisfactory to Seller.

(d) The parties hereto shall have secured all appropriate orders, consents,
approvals and clearances, in form and substance reasonably satisfactory to
Seller, by and from all parties, including regulatory agencies and other
governmental authorities and agencies, whose

 

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order, consent, approval or clearance is required by contract or law for the
consummation of the transactions herein contemplated.

(e) There shall be no pending or threatened litigation relating to this
Agreement or the transactions contemplated hereby.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller and Partner, jointly and severally, represent and warrant to Purchaser as
follows:

Section 6.01 Organization of Seller; Authority. Seller is a limited partnership
duly organized, validly existing, and in good standing under the laws of the
State of Texas. Seller has all requisite power and authority to own and hold the
Acquired Assets owned or held by it, to carry on the Business in each
jurisdiction where the Business is conducted, and to own or lease and operate
its properties as such Business is now conducted and such properties are now
owned, leased, or operated. Seller has all requisite power and authority to
execute and deliver this Agreement and all other agreements, documents, and
instruments contemplated hereby and to carry out all actions required of Seller
pursuant to the terms of this Agreement and such other agreements. This
Agreement has been duly executed and delivered by Seller and constitutes the
legal, valid, and binding obligation of Seller, enforceable against Seller in
accordance with its terms. All related agreements to be entered into by Seller
at Closing will, at Closing, have been duly executed and delivered by Seller and
will constitute the legal, valid and binding obligations of Seller, enforceable
against Seller in accordance with its terms.

Section 6.02 Noncontravention. Neither the execution and delivery of this
Agreement by Seller nor the consummation by Seller of the transactions
contemplated hereby will constitute a violation of, or be in conflict with, or
constitute or create a default under, or result in the creation or imposition of
any Encumbrance (as defined in Section 6.03 below) upon any assets or property
of Seller (including, without limitation, any of the Acquired Assets) pursuant
to (a) the charter documents, bylaws or other organizational documents of
Seller, each as amended to date; (b) any contract, agreement or commitment
(including the Scheduled Contracts) to which Seller is a party or by which
Seller or any of its assets or properties (including, without limitation, any of
the Acquired Assets) is bound, or to which Seller or any of such assets or
properties (including, without limitation, any of the Acquired Assets) is
subject; or (c) any statute or any judgment, decree, order, regulation, or rule
of any court or governmental authority to which Seller is subject.

Section 6.03 Title to Acquired Assets. Except as described in Schedule 6.03-1,
Seller is the lawful owner of, has good and valid record and marketable title
to, and has the full right to sell, convey, transfer, assign, and deliver the
Acquired Assets to Purchaser. Except as set forth on Schedule 6.03, all of the
Acquired Assets are held by Seller free and clear of any security interest,
liens, claims, charges, options, mortgages, debts, leases (or subleases),
conditional sales agreements, title retention agreements, encumbrances of any
kind, or restrictions against the transfer or assignment thereof (collectively,
“Encumbrances”). At and as of the Closing, Seller will convey the Acquired
Assets to Purchaser by deeds, bills of sale, certificates of title, and
instruments of assignment and transfer effective to vest in Purchaser, and
Purchaser will have

 

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good and valid record and marketable title to all of the Acquired Assets, free
and clear of all Encumbrances.

Section 6.04 No Equity Interests. Except as noted in Schedule 6.03, the Acquired
Assets do not include any equity interest, or any security convertible,
exercisable or exchangeable into any equity interest, in any person.

Section 6.05 Absence of Changes. Except as set forth on Schedule 6.05, since
February 28, 2005:

(a) there has not been any material adverse change in Seller’s business
financial condition, prospects, assets or operations or any occurrence or
circumstance which could have such a material adverse change;

(b) the Acquired Assets and the Business have been operated and maintained in
the ordinary course of business;

(c) there has not been any material damage, destruction or loss affecting any
portion of the assets or properties of Seller related to the Business, whether
covered by insurance or not;

(d) there has not been any sale, transfer, lease, abandonment, or other disposal
of any property or assets of Seller related to the Business, except in the
ordinary course of business and consistent with past practices with comparable
replacement thereof;

(e) there has been no merger or consolidation of Seller with any other person or
any agreement with respect thereto;

(f) there have been no dividends or other distributions declared or made by
Seller;

(g) there has been no actual, pending or, to the Knowledge of Seller, threatened
adverse change in the relationship of Seller or any of its Affiliates with any
material customer, supplier, distributor or sales representative of the
Business;

(h) neither Seller nor any of its Affiliates has entered into any employment,
consulting, severance or indemnification agreement or an agreement with respect
to a retention bonus with any of the employees of the Business, nor has Seller
or any of its Affiliates incurred or entered into any collective bargaining
agreement or other obligation to any labor organization or employee;

(i) there has not been any change by the Seller nor any of its Affiliates in the
accounting principles, policies or treatments applicable to the Business or
otherwise affecting the Acquired Assets;

(j) except for a change in the pay structure for Rick Garland, made effective
6-1-05 and merit raises for hourly paid employees made in the normal course of
business, there

 

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has been no increase in the compensation or benefits of any officer or employee
of the Business; and

(k) there is no contract or agreement to do any of the foregoing, except as
expressly permitted by this Agreement.

Section 6.06 Personal Property.

(a) Except for items listed in Schedule 1.02, Schedule 1.01(a) lists each item
of equipment, tools, machinery, parts, materials, supplies, furniture, cars,
trucks, trailers and other rolling stock and each other item of tangible
personal property used or held for use by Seller or any of its Affiliates in
connection with the Business.

(b) Except for items listed on Schedule 1.02, the personal property included in
the Acquired Assets (the “Personal Property”) constitutes all of the tangible
personal property necessary for the continued ownership, use and operation of
the Business consistent with the past practices of Seller since December 31,
2004 and with the practices of Seller as of the date hereof. Except as set forth
on Schedule 6.06(b)-1, Seller has good and marketable title to such Personal
Property free and clear of all Encumbrances. Upon the consummation of the
transactions contemplated by this Agreement, Purchaser will have good and
marketable title to the Personal Property free and clear of all Encumbrances.
Except for equipment and tools undergoing normal rebuilding, repairs and
maintenance as described in Schedule 6.06(b)-2, each item of Personal Property
is in good working order and repair (taking its age and ordinary wear and tear
into account), has been operated and maintained in the ordinary course of
business and remains in suitable and adequate condition for use consistent with
its primary use since December 31, 2004 (or later acquisition date). Seller and
its Affiliates have not deferred maintenance of any such item in contemplation
of the transactions contemplated by this Agreement.

Section 6.07 Permits. Schedule 6.07 lists all Permits granted by any
governmental authority and used or held by Seller or any of its Affiliates in
connection with the ownership and operation of the Acquired Assets or conduct of
the Business (the “Scheduled Permits”). The Scheduled Permits constitute all
Permits necessary for the continued ownership, use and operation of the Business
consistent in all material respects with the past practices of the Business
since December 31, 2004. Except as set forth in Schedule 6.07, the Scheduled
Permits are valid and in full force and effect and Seller and its Affiliates are
not in default, and no condition exists that with notice or lapse of time or
both would constitute a default, under any of the Scheduled Permits.

Section 6.08 Contracts.

(a) Schedule 6.08 identifies each of the following contracts, agreements,
commitments or arrangements (whether written or verbal, “Contracts”) used or
usable in connection with or relating to the Business to which Seller or any of
its Affiliates is a party or by which it or its properties is bound (each such
identified Contract, a “Material Contract”):

(i) any Contract that provides for the payment by Seller or any of its
Affiliates of more than $25,000 in any consecutive 12-month period or more than
$25,000 over the remaining life of such Contract other than a Contract that
(A) is

 

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terminable by any party thereto giving notice of termination to the other party
thereto not more than 30 days in advance of the proposed termination date and
(B) even if so terminable, contains no post-termination obligations, termination
penalties, buy-back obligations or similar obligations;

(ii) any Contract that constitutes a purchase order or other Contract relating
to the sale, purchase, lease or provision by Seller or any of its Affiliates of
goods or services in excess of $25,000 in any 12-month period;

(iii) any Contract providing for a master services agreement or similar
arrangement;

(iv) any Contract that could result in well control or environmental liability

(v) any Contract that grants any person the exclusive right to sell products or
provide services within any geographical region other than a Contract that
(A) is terminable by any party thereto giving notice of termination to the other
party thereto not more than 30 days in advance of the proposed termination date
and (B) even if so terminable, contains no post-termination obligations,
termination penalties, buy-back obligations or similar obligations;

(vi) any Contract that purports to limit the freedom of Seller or any of its
Affiliates to compete in any line of business or to conduct business in any
geographic location;

(vii) any Contract that is for the sale of goods or services and has not been
substantially completed by Seller or any of its Affiliates as of the Closing
Date and which (A) was entered into by Seller or any of its Affiliates on terms
known at the time the Contract was entered into not to be commercially
reasonable or (B) was entered into with the expectation that Seller or any of
its Affiliates would incur a loss;

(viii) any Contract that was entered into outside of the ordinary course of
business;

(ix) any Contract constituting a partnership, joint venture or other similar
Contract;

(x) any Contract relating to indebtedness for borrowed money, any Contract
creating a capital lease obligation, any Contract for the sale of accounts
receivable, any Contract constituting a guarantee of debt of any third person or
any Contract requiring Seller or any of its Affiliates to maintain the financial
position of any other person;

(xi) any Contract in respect of Intellectual Property Rights granted to or by
Seller or any of its Affiliates;

 

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(xii) any lease (including any master lease covering multiple items of personal
property) of any item or items of personal property with a rental expense under
such lease (whether for a single item or multiple items) in excess of $25,000 in
any consecutive 12-month period;

(xiii) any Contract providing for the deferred payment beyond 30 days of any
purchase price including any “earn out” or other contingent fee arrangement;

(xiv) any Contract between Seller, on the one hand, and any Affiliate of Seller,
on the other hand (including any Contract providing for (i) compensation, the
acceleration of benefits or the loss of any rights in connection with the
consummation of the transactions contemplated by this Agreement or (ii) the
indemnification of such Affiliate by Seller);

(xv) any Contract with any governmental authority; and

(xvi) any Contract involving interest rate swaps, cap or collar agreements,
commodity or financial future or option contracts or similar derivative or
hedging Contracts.

(b) True and complete copies (including all amendments) of each written Material
Contract, and written summaries of each verbal Material Contract, have been
provided to Purchaser. Except as disclosed in Schedule 6.08: (i) each Material
Contract is the legal, valid obligation of Seller, and to the Knowledge of
Seller, any other person party thereto, binding and enforceable against Seller
and, to the Knowledge of Seller, any other person party thereto, in accordance
with its terms; (ii) each Material Contract has not been terminated, and neither
Seller nor, to the Knowledge of Seller, any other person is in material breach
or default thereunder, and to the Knowledge of Seller no event has occurred that
with notice or lapse of time, or both, would constitute a material breach or
default, or permit termination, modification in any manner adverse to Seller or
acceleration thereunder; (iii) no party has asserted or has any right to offset,
discount or otherwise abate any amount owing under the Material Contract except
as expressly set forth in such Contract; and (iv) neither of Seller nor any of
its Affiliates is a party to any Contract described in Section 6.08(a) that is
not disclosed in Schedule 6.08.

(c) Except as disclosed in Schedule 6.08, each Material Contract may be assigned
to Purchaser without the consent of any party thereto in connection with the
transactions contemplated by this Agreement nor that the assignment of any such
Material Contract will not provide any party thereto the right to terminate any
such Material Contract or alter the rights and obligations of the parties
thereto or the terms of any such Material Contract in any material respect.

Section 6.09 Intellectual Property.

(a) Schedule 6.09(a) identifies all Intellectual Property Rights owned or used
in the conduct of the Business (the “Seller Intellectual Property”). The Seller
Intellectual Property constitutes all Intellectual Property Rights necessary for
the continued operation of the Business consistent with the past practices of
the Business since December 31, 2004.

 

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(b) Except as set forth on Schedule 6.09(b), Seller has ownership of, or valid
licenses to use, all of the Seller Intellectual Property, free and clear of all
Encumbrances. All consents required under the Seller Intellectual Property in
connection with the transactions contemplated by this Agreement have been
obtained and furnished in writing to Purchaser. Upon the consummation of the
transactions contemplated by this Agreement, Purchaser will have good and
marketable title to the Seller Intellectual Property free and clear of all
Encumbrances.

(c) Except as disclosed on Schedule 6.09(c), during the three-year period
preceding the date of this Agreement, none of Seller or its Affiliates has been
a party to any judicial or administrative proceeding alleging, nor has Seller or
any Affiliate of Seller been notified during such three-year period of any
allegation of, any infringement or misappropriation of any item of Seller
Intellectual Property, whether owned by Seller or any other person. To the
Knowledge of Seller, there has been no other material infringement or
misappropriation (or facts that are reasonably likely to give rise to a material
infringement or misappropriation) by Seller of any Intellectual Property Rights
of third persons or of any continuing material infringement or misappropriation
(or facts that are reasonably likely to give rise to a material infringement or
misappropriation) by any other person of any of the Seller Intellectual
Property. No Seller Intellectual Property is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting the use thereof.

(d) Except as set forth on Schedule 6.09(d), all statutory obligations and all
fees, annuities and other payments which are due on or before the Closing Date
for any of the Seller Intellectual Property including, without limitation, all
United States or foreign patents, patent applications, trademark registrations,
service mark registrations, copyright registrations and any applications for any
of the preceding, have been met or paid in full.

Section 6.10 Brokers’ Fees. Neither Seller nor any of its Affiliates has any
liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement for which
Purchaser or any of its Affiliates could become liable or obligated.

Section 6.11 Taxes.

(a) Except as disclosed on Schedule 6.11, (i) all tax returns required to be
filed by Seller or any of its Affiliates with respect to any of the Acquired
Assets or the Business have been duly and timely filed with the appropriate
governmental authority, (ii) all tax items required to be included in each such
tax return have been so included and all such tax items and any other
information provided in each such tax return is true, correct and complete,
(iii) all taxes owed by Seller or any of its Affiliates with respect to any of
the Acquired Assets or the Business that are or have become due have been timely
paid in full, (iv) no penalty, interest or other charge is or will become due
with respect to the late filing of any such tax return or late payment of any
such tax, (v) all tax withholding and deposit requirements imposed with respect
to any of the Acquired Assets or the Business have been satisfied in full in all
respects, (vi) there are no Encumbrances on any of the Acquired Assets or the
Business that arose in connection with any failure (or alleged failure) to pay
any tax, (vii) there is no claim pending or threatened by any governmental
authority in connection with any such tax, (viii) none of such tax returns are
now

 

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under audit or examination by any governmental authority, (ix) there are no
agreements, waivers or other arrangements providing for an extension of time
with respect to the filing of any such tax return or the assessment or
collection of any such tax, and (x) Purchaser will not be liable as a successor
or transferee for any unpaid taxes related to the Business or the Acquired
Assets.

(b) For purposes of this Section 6.11, the terms “taxes,” “tax items” and “tax
returns” shall have the meanings prescribed below:

(i) “tax” or “taxes” means any taxes, assessments, fees and other governmental
charges imposed by any governmental authority, including without limitation
income, profits, gross receipts, net proceeds, alternative or add-on minimum, ad
valorem, value added, turnover, sales, use, property, personal property
(tangible and intangible), environmental, stamp, leasing, lease, user, excise,
duty, franchise, capital stock, transfer, registration, license, withholding,
social security (or similar), unemployment, disability, payroll, employment,
fuel, excess profits, occupational, premium, severance, estimated, or other
charge of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not;

(ii) “tax items” means all items of income, gain, loss, deduction and credit and
other tax items; and

(iii) “tax return” means any return, declaration, report, claim for refund, or
information return or statement relating to taxes, including any schedule or
attachment thereto, and including any amendment thereof.

Section 6.12 Product and Service Warranty. No warranty claims have been asserted
during the three year period prior to the date hereof in connection with the
operation of the Acquired Assets or the Business from which Seller or any of its
Affiliates have incurred costs in excess of $25,000.

Section 6.13 Employees; Employee Relations.

(a) Neither of Seller nor any of its Affiliates is a party to or bound by any
collective bargaining agreement applicable to any employee involved in the
Business (“Business Employee”), nor have Seller or any of its Affiliates
experienced any strikes, grievances, claims of unfair labor practices, or other
collective bargaining disputes with respect to any Business Employee during the
five-year period prior to the date of this Agreement. Neither Seller nor any of
its Affiliates has committed any unfair labor practice with respect to any
Business Employee during such five-year period. To the Knowledge of Seller, no
organizational efforts are presently being made or threatened by or on behalf of
any labor union with respect to any Business Employees.

(b) Except for unemployment compensation claims which will not adversely impact
the Acquired Assets or Purchaser, no legal proceedings, charges, complaints,
grievances or similar actions have been commenced with respect to Seller or any
of its Affiliates under any laws or regulations affecting the employment
relationship, and, to the Knowledge of Seller, no proceedings, charges, or
complaints are threatened under any such laws or regulations and no facts or
circumstances exist which would give rise to any such proceedings, charges,
complaints,

 

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or claims. Seller and its Affiliates are not subject to any settlement or
consent decree with any present or former employee, employee representative or
any governmental authority relating to claims of discrimination or other claims
in respect to employment practices and policies. No governmental authority has
issued a judgment, order, decree or finding with respect to the labor and
employment practices (including practices relating to discrimination) of either
of Seller or any of its Affiliates.

(c) Schedule 6.13 sets forth a true, correct and complete list, as of the
Closing Date, of all Business Employees. The list described in the preceding
sentence shows each Business Employee’s name, job title, original hire date,
bonus paid or payable for calendar year 2004 and current base salary or base
wages. Except for two pending worker’s compensation cases which will not
adversely impact the Acquired Assets or Purchaser, as of the date of this
Agreement, no current or former Business Employee of Seller is on a disability
leave of absence, is receiving disability benefits, or is in an elimination or
other waiting period with respect to his or her receipt of disability benefits.
There are no loans or other obligations payable or owing by Seller or any of its
Affiliates to any Business Employee, except salaries, wages and salary advances
and reimbursement of expenses incurred and accrued in the ordinary course of
business, nor are any loans or debts payable or owing by any such individuals to
Seller or any of its Affiliates, nor have Seller or any of its Affiliates
guaranteed any of such individual’s respective loans or obligations. There are
no contracts of employment with any of the Business Employees except as listed
on Schedule 6.13. True and complete copies (including all amendments) of each
such contract of employment with any of the Business Employees have been
provided to Purchaser.

Section 6.14 Employee Benefit Plans.

(a) Schedule 6.14 lists each of the following (collectively, the “Plans”) that
is sponsored, maintained or contributed to as of the date hereof by Seller for
the benefit of the current or former directors, officers or employees (or
beneficiaries thereof) of Seller into categories corresponding with the
applicable subsections of this Section 6.14:

(i) each “employee benefit plan,” as such term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”); and

(ii) each stock option plan, bonus plan or arrangement, incentive award plan or
arrangement, vacation policy, severance pay plan, policy, or agreement, deferred
compensation agreement or arrangement, executive compensation or supplemental
income arrangement, and each other employee benefit plan, agreement,
arrangement, program, or practice that is not described in Section 6.14(a)(i).

(b) None of Seller nor any Affiliate of Seller, or any corporation, trade,
business or entity under common control with Seller within the meaning of
section 4.14(b), (c), (m) or (o) of the Code or Section 4001 of ERISA (a
“Commonly Controlled Entity”) sponsors, maintains contributes to or has an
obligation to contribute to, nor has Seller, any Affiliate or any Commonly
Controlled Entity at any time within six years prior to the Closing Date,
sponsored, maintained, contributed to or had an obligation to contribute to,
either (a) a multiemployer plan

 

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within the meaning of Section 3(37) of ERISA, (b) any plan subject to Title IV
of ERISA or (c) any plan subject to Section 302 of ERISA or section 412 of the
Code. With respect to each group health plan maintained by Seller, Seller has
complied with the continuation of coverage requirements set forth in section
4980B(f) of the Code, Section 601 et. seq. of ERISA, and applicable state laws.

Section 6.15 Environmental Matters.

(a) Schedule 6.15(a) sets forth all environmental Permits required for operation
of the Business. No additional environmental Permits are required for the sale
and transfer of the Acquired Assets to Purchaser or are required to be obtained
by Purchaser for the operation of the Business and use of the Acquired Assets by
Purchaser as of the Closing Date. Except as otherwise disclosed in Schedule
6.15(a), the environmental Permits described therein are in full force and
effect. There are no proceedings pending or threatened which might affect
(i) the validity of any environmental Permits described in Schedule 6.15(a),
(ii) the ability of Seller or Purchaser to obtain prior to the Closing Date any
environmental Permit described in Schedule 6.15(a) which has not been obtained
at the date of this Agreement, or (iii) the ability of Purchaser to obtain
within the time specified by applicable environmental law any environmental
Permit described in Schedule 6.15(a), nor is there any basis for any such
proceeding.

(b) None of the Acquired Assets or other property used in the Business is
subject to any Encumbrance imposed by or arising under any environmental law,
and there are no proceedings pending or threatened for imposition of any such
Encumbrance, nor is there any basis for any such Encumbrance or proceeding.

(c) The Business and the Acquired Assets are currently, and have at all times in
the past been operated, in compliance with the requirements of applicable
environmental laws except for minor instances as described in Schedule 6.15(c)
that were corrected or remediated. Neither Seller nor any of its Affiliates have
received any communication in any form from any governmental authority or any
other person alleging that Seller is not in compliance with any environmental
law applicable to the Business. To the Knowledge of Seller, there are no
circumstances relating to the Business that may prevent or interfere with
Purchaser’s compliance with all environmental laws applicable to the Business as
of the Closing Date.

(d) There are no present or past actions, activities, circumstances, conditions,
events or incidents, including, without limitation, any release of any hazardous
materials, with respect to the Business or the Acquired Assets that could
reasonably be expected to form the basis for assertion of any environmental
liability against any owner or operator of the Business or the Acquired Assets.
There has been no release of hazardous materials in connection with the Business
for which all clean-up, remediation and restoration actions required under
environmental laws have not been performed and completed to the satisfaction of
the relevant governmental authority. There is no asbestos contained in or
forming part of any equipment, property, building, building component, structure
or office space used in connection with the Business.

(e) There are no proceedings pending or threatened against Seller or any of its
Affiliates or any predecessor with respect to the operation of the Business,
against the Business

 

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itself or any property or assets used therein, in which any violation of any
environmental law is alleged or any environmental liability is asserted, nor is
there any basis for any such proceeding.

(f) Seller has provided or made available to Purchaser all internal and external
environmental audits, assessments, reports, studies, documents, and
correspondence on environmental matters and compliance with environmental laws
relating to the operation of the Business and use of the Acquired Assets that
are in the possession or control of Seller.

Section 6.16 Property Matters.

(a) Except for the real property listed on Schedule 6.16(a) (which are Excluded
Assets), Seller does not own or have any interest in any real property
(beneficially or of record).

(b) Other than Seller, there are no parties physically occupying or using any
portion of any real property covered by the Lease Agreements or the Founder
Lease Agreements nor do any other parties have the right to physically occupy or
use any portion of the real property covered by the Lease Agreements or the
Founder Lease Agreements. Certificates of occupancy and all other material
licenses, permits, authorizations and approvals required by any governmental
authority having jurisdiction over such real property have been issued for
Seller’s occupancy of the facilities located on the real property covered by the
Lease Agreements and the Founder Lease Agreements and all such certificates,
licenses, permits, authorizations and approvals have been paid for and are in
full force and effect. Seller has not made application for rezoning of any of
the real property covered by the Lease Agreements or the Founder Lease
Agreements and, to the Knowledge of Seller, there are no proposed or pending
changes to any zoning affecting the real property covered by the Lease
Agreements or the Founder Lease Agreements. To the Knowledge of Seller, none of
the real property covered by the Lease Agreements or the Founder Lease
Agreements is within any area determined by the Department of Housing and Urban
Development to be flood prone under the Federal Flood Disaster Protection Act of
1973. To the Knowledge of Seller, the facilities located on the real property
covered by the Lease Agreements and the Founder Lease Agreement are free from
material structural and mechanical defects and have been used by Seller in the
ordinary course of business and remain as of the date hereof in suitable and
adequate condition for such continued use. There are no outstanding work orders
issued by or on behalf of Seller with respect to any such facilities. Seller has
such rights of entry to and exit from the real property covered by the Lease
Agreements and the Founder Lease Agreements and the facilities located thereon
as is necessary to carry on the Business consistent with past practices.

(c) To the Knowledge of Seller, all utilities (including, without limitation,
water, sewer, gas, electricity, trash removal and telephone service) are
available to the facilities located on the real property covered by the Lease
Agreements and the Founder Lease Agreements in sufficient quantities and quality
to adequately serve such facilities in connection with the current operation of
the Business conducted therefrom.

(d) Seller has not received notice of a violation of any applicable ordinance or
other law, order, regulation or requirement, including, without limitation, the
Americans with Disabilities Act of 1990, as amended, and all rules and
regulations promulgated thereunder (the “ADA”), and has not received notice of
condemnation, lien, assessment or the like, relating to

 

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any part of the facilities located on the real property covered by the Lease
Agreements or the Founder Lease Agreements or the operation thereof.

(e) The cost and responsibility for remediating any deficiencies noted in the
Phase I environmental reports relating to the real property related to the
Founder Lease Agreements shall be borne by Seller and Seller shall commence
remediation immediately upon receipt of notice of such deficiency.

Section 6.17 Customers, Vendors and Suppliers.

(a) To the Knowledge of Seller, there is no present intent of any significant
customer, vendor or supplier of the Business to discontinue or substantially
alter its relationship as such with the Business or Purchaser upon consummation
of the transactions contemplated hereby.

(b) Schedule 6.17 sets forth a list of the top 10 customers and top 10
vendor/suppliers of the Business for the fiscal year ended December 31, 2004 and
for the eight months ended August 31, 2005.

Section 6.18 Insurance. Schedule 6.18 sets forth a true and complete list of all
policies, binders, and insurance contracts under which the Business or any of
the Acquired Assets is insured (the “Insurance Policies”). With respect to each
Insurance Policy, Schedule 6.18 sets forth a true and correct description of
(a) the scope of coverage, (b) the limits of liability, (c) deductibles and
other similar amounts, and (d) the aggregate limits and available coverage (if
less than the aggregate limits) as of the date hereof. Each of the Insurance
Policies is in full force and effect, there has been no written notice of any
cancellation or any threatened cancellation of any Insurance Policy, and Seller
is a named insured or loss payee, as applicable, under each Insurance Policy.

Section 6.19 Books and Records. All books and records relating to the ownership
and operation of the Business and the Acquired Assets are located at the
premises of the Business to which such books and records primarily relate, have
been maintained in accordance with applicable law and comprise all of the books
and records relating to the ownership and operation of the Business and the
Acquired Assets.

Section 6.20 Inventories. Seller owns its Inventories free and clear of all
Encumbrances. Except as disclosed on Schedule 6.20, such Inventories were
acquired for sale in the ordinary course of business and are in good and
saleable condition and are not obsolete, slow moving or damaged. None of such
inventory is subject to any consignment, bailment, warehousing or similar
arrangement.

Section 6.21 Assets Necessary to the Business. At and following the Closing, the
Acquired Assets transferred to Purchaser pursuant hereto (a) will constitute all
of the assets necessary or required to permit Purchaser to carry on the Business
in substantially the same manner as presently conducted by Seller and as
conducted by Seller since December 31, 2004 and (b) constitute all of the assets
of Seller and its Affiliates used in the Business presently and since
December 31, 2004 other than the Excluded Assets.

 

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Section 6.22 Conformity to Law. Seller has complied with, and is in compliance
with, (a) all laws, statutes, governmental regulations, and all judicial or
administrative tribunal orders, judgments, writs, injunctions, decrees, or
similar commands applicable to the Business or any of the Acquired Assets
(including, without limitation, any labor, environmental, occupational health,
zoning, or other law, regulation, or ordinance); (b) all unwaived terms and
provisions of all contracts, and agreements to which Seller is a party, or by
which Seller or any of the Acquired Assets is subject; and (c) its charter
documents, bylaws or other organizational documents, each as amended to date.
Seller has not committed, been charged with, or, to its knowledge, been under
investigation with respect to, nor does there exist, any violation of any
provision of any law or regulation in respect of its Business or any of the
Acquired Assets.

Section 6.23 Commissions. Seller does not and will not owe any commissions to
any customer of Seller, and Seller is not obligated to pay any other amounts to
or perform other obligations (other than routine servicing of customer accounts)
for any customer of the Business.

Section 6.24 Absence of Certain Business Practices. Neither Seller nor any
officer, employee or agent of Seller, nor any other person acting on its behalf,
has, directly or indirectly, offered, paid or promised to pay, or authorized the
payment of, any money or other thing of value (including any fee, gift, sample,
travel expense or entertainment with a value in excess of one hundred U.S.
dollars in the aggregate to any one individual in any year), or any commission
payment, to any customer, supplier, government employee, political party or
candidate for political office, or other person who is or may be in a position
to help or hinder the Business (or to assist Seller in connection with any
actual or proposed transaction) which (i) could subject Seller to any damage or
penalty in any civil, criminal or governmental litigation or proceeding in any
jurisdiction, including the United States and Canada, (ii) if not given in the
past, could have had a material adverse effect on the Business or Acquired
Assets, or (iii) if not continued in the future, could materially adversely
effect the Business or Acquired Assets. Seller maintains a system of internal
accounting controls adequate to ensure that Seller maintains no off-the-books
accounts and that Seller’s assets are used only in accordance with Seller’s
management directives.

Section 6.25 Financial Statements. Attached hereto as Schedule 6.25 are copies
of (a) the unaudited balance sheet of Seller at August 31, 2005 and the related
unaudited statements of income for the eight-months then ended (collectively,
the “Financial Statements”). Except as set forth on Schedule 6.25, the Financial
Statements (including any related notes thereto) (i) fairly present the
financial condition, assets and results of operations of Seller as of the
respective dates thereof and for the respective periods covered thereby, and
(ii) have been prepared from, and are in accordance with, the books and records
of Seller.

Section 6.26 Safety Performance. Seller and the Business are in compliance in
all material respects with all laws and regulations applicable to the Seller or
the Business which impose safety standards or safety compliance requirements.
Schedule 6.26 hereto accurately reflects the historical safety performance of
the Seller and the Business for the periods designated in such schedule.

Section 6.27 Disclosure. No representation or warranty by Seller in this
Agreement or in any exhibit, schedule, written statement, certificate, or other
document delivered or to be

 

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delivered to Purchaser pursuant hereto, or in connection with the consummation
of the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein not misleading or necessary in order to provide a prospective purchaser
of the Business with proper and complete information as to Seller and the
identity, value, and usability of the Acquired Assets.

ARTICLE VII

REPRESENTATIONS AND WARRANTIES OF BUYER

Purchaser represents and warrants to Seller as follows:

Section 7.01 Organization and Standing of Purchaser; Authority. Purchaser is a
corporation duly organized, validly existing, and in good standing under the
laws of Alberta. Purchaser has all requisite power and authority to execute and
deliver this Agreement and all other agreements, documents and instruments
contemplated hereby and to carry out all actions required of Purchaser pursuant
to the terms of this Agreement and such other agreements. This Agreement has
been duly executed and delivered by Purchaser and constitutes the legal, valid,
and binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms.

Section 7.02 Noncontravention. Neither the execution and delivery of this
Agreement by Purchaser nor the consummation by Purchaser of the transactions
contemplated hereby will constitute a violation of, or be in conflict with,
constitute, or create a default under, or result in the creation or imposition
of any Encumbrances upon any assets or property of Purchaser pursuant to (a) the
charter documents, bylaws or other organizational documents of Purchaser, each
as amended to date; (b) any contract, agreement or commitment to which Purchaser
is a party or by which Purchaser or any of its assets or properties is bound or
to which Purchaser or any of such assets or properties is subject; or (c) any
statute or any judgment, decree, order, regulation, or rule of any court or
governmental authority to which Purchaser is subject.

Section 7.03 Brokers. Purchaser has not retained, utilized, or been represented
by any broker or finder in connection with the transactions contemplated by this
Agreement.

ARTICLE VIII

COVENANTS

Section 8.01 Conduct of Business. From the date of this Agreement through the
Closing, except as set forth on Schedule 8.01, as contemplated by this
Agreement, or as consented to by Purchaser in writing, (a) Seller shall
(x) operate the Business in the ordinary course of business and (y) use
reasonable efforts to preserve intact the Business and its relationship with
customers, suppliers and others having relationships with the Business and
(b) Seller shall not:

(i) change its accounting methods, policies or practices relating to the
Business, except as required by GAAP;

 

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(ii) make, amend or revoke any election with respect to taxes relating to the
Business or Acquired Assets;

(iii) sell, assign, transfer, lease or otherwise dispose of any capital assets
used or usable in the Business in excess of $5,000 individually or $25,000 in
the aggregate, except in the ordinary course of business;

(iv) create any Encumbrances on any of the Acquired Assets;

(v) merge into or with or consolidate with any other person or acquire all or
substantially all of the business or assets of any person;

(vi) declare or pay any dividend on, or make any other distribution with respect
to, the securities of Seller;

(vii) make any change to its charter, bylaws or other organizational documents;

(viii) purchase any securities of any person;

(ix) take any action or enter into any commitment as part of any liquidation,
dissolution, recapitalization, reorganization or other winding up of its
business or operations;

(x) enter into any settlement of any pending or threatened litigation involving
amounts of $10,000 or more;

(xi) incur any indebtedness except for any such indebtedness required in the
ordinary course of business or that will be repaid in full at Closing;

(xii) terminate or cancel any insurance coverage, except for terminations that
occur in the ordinary course of business and that are renewed in connection
therewith;

(xiii) make any changes to its billing or pricing methods or practices;

(xiv) materially change the timing and recognition of allowances, rebates or
concessions from suppliers;

(xv) hire or terminate any employee or take any actions that would lead to
significant loss of services of employees, except, in both cases, for
terminations for cause;

(xvi) take any actions that would adversely change the relationships with
providers, suppliers and customers of the Business;

(xvii) except as to Rick Garland, Errol Sonnier and Dan Wiggins, change or
implement severance compensation benefits for any employee, increase
compensation

 

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payable or that could become payable, directly or indirectly, to any employee or
increase benefits under, or adopt any bonus, insurance, pension or other
employee benefit plan payments or arrangement for or with any employees, all
except as are consistent with past practices, or otherwise amend any such plan,
payments or arrangements, all except as required by law;

(xviii) acquire any asset that would require the payment of $10,000 or more for
any such asset, except for acquisitions of inventory in the ordinary course of
business consistent with past practices;

(xix) write down Inventories except in each case in accordance with generally
accepted accounting principles; or

(xx) agree, whether in writing or otherwise, to do any of the foregoing.

Section 8.02 Access. From the date hereof through the Closing, Seller shall
afford to Purchaser and its authorized representatives reasonable access, during
normal business hours and in such manner as not to unreasonably interfere with
normal operation of the Business, to the properties, books, contracts, records
and appropriate officers and employees of Seller to the extent related to the
Business and Acquired Assets, and shall furnish such authorized representatives
with all financial and operating data and other information concerning the
affairs of Seller to the extent related to the Business as Purchaser and such
representatives may reasonably request.

Section 8.03 Third Party Approvals. Purchaser and Seller shall (and shall each
cause their respective Affiliates to) use reasonable efforts to obtain all
consents and approvals of third parties that any of Purchaser, Seller or their
respective Affiliates are required to obtain in order to consummate the
transactions contemplated hereby.

Section 8.04 Non-Competition.

(a) (i) Each of Seller and Partner (for purposes of this Section 8.04, a
“Restricted Party”), in order to induce Purchaser to enter into this Agreement,
expressly covenants and agrees that during the Prohibited Period (as defined
below), such Restricted Party will not, and will cause its Affiliates and
shareholders not to, directly or indirectly, own, manage, operate, join, control
or participate in or be connected with, or loan money to any business,
individual, partnership, firm, corporation or other entity, which wholly or in
any significant part, engages in Tubular Services in any geographic area where
Purchaser or its Affiliates carries on business (a “Competing Business”). For
purposes of this Section 8.04, any such business, individual, partnership, firm,
corporation or other entity shall be deemed to be engaged in significant part in
a Competing Business if more than 5% of its gross revenues in any 12 month
period are attributable to the Competing Business. “Prohibited Period” shall
mean five years from and after the Closing Date.

(ii) Each Restricted Party further expressly covenants and agrees that during
the Prohibited Period, it will not, and will cause its Affiliates and
shareholders not to (1) engage or employ, or solicit or contact with a view to
the engagement or employment of any person who is an officer or employee of
Purchaser or any of its

 

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Affiliates (including any Business Employee); or (2) canvass, solicit, approach
or entice away or cause to be canvassed, solicited, approached or enticed away
from the Business any person who or which is a customer of Purchaser or any of
its Affiliates.

(iii) To the extent that any part of this Section 8.04(a) may be invalid,
illegal or unenforceable for any reason, it is intended that such part shall be
enforceable to the extent that a court of competent jurisdiction shall determine
that such part, if more limited in scope, would have been enforceable, and such
part shall be deemed to have been so written and the remaining parts shall as
written be effective and enforceable in all events.

(b) The parties agree and acknowledge that the limitations as to time,
geographical area and scope of activity to be restrained as set forth in
Section 8.04(a) are reasonable and do not impose any greater restraint than is
necessary to protect the legitimate business interests of Purchaser. The parties
further agree and acknowledge that, in the event of a breach or threatened
breach of any of the provisions of this Section 8.04, Purchaser shall be
entitled to immediate injunctive relief, as any such breach would cause
Purchaser irreparable injury for which they would have no adequate remedy at
law. Nothing herein shall be construed so as to prohibit Purchaser from pursuing
any other remedies available to it hereunder, at law or in equity for any such
breach or threatened breach.

(c) Each Restricted Party hereby represents to Purchaser that it has read and
understands and agrees to be bound by, the terms of this Section 8.04. Each
Restricted Party acknowledges that the geographic scope and duration of the
covenants contained in this Section 8.04 are the result of arm’s-length
bargaining and are fair and reasonable in light of (i) the nature and wide
geographic scope of the operations of the Business, (ii) Seller’s and Partner’s
level of control over and contact with the Business in all jurisdictions in
which it is conducted, (iii) the fact that the Business is conducted throughout
the geographic area where competition is restricted by this Agreement, and
(iv) the amount of consideration that Seller and the Partner are receiving in
connection with the transactions contemplated by this Agreement and the amount
of goodwill for which Purchaser is paying. It is the desire and intent of the
parties that the provisions of this Agreement be enforced to the fullest extent
permitted under applicable legal requirements, whether now or hereafter in
effect and therefore, to the extent permitted by applicable legal requirements,
the parties hereto waive any provision of applicable legal requirements that
would render any provision of this Section 8.04 invalid or unenforceable.

(d) Notwithstanding the other provisions of this section, nothing shall prevent
Partner from acquiring publicly held securities of an entity representing up to
5% of the outstanding equity of such entity.

Section 8.05 Retained Employees. With respect to the Business Employees:

(a) Effective immediately following the Closing, Purchaser shall offer
employment to all of the Business Employees at substantially the same base
compensation as they are currently employed by Seller. Each such Business
Employee who accepts a position shall hereinafter be referred to as a “Retained
Employee” and shall become an employee of Purchaser. In order to facilitate the
foregoing, Seller shall, effective at the Closing, terminate the

 

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employment of all Business Employees and take all appropriate steps necessary to
comply with applicable law in connection with the termination of such Business
Employees.

(b) Notwithstanding anything to the contrary contained in this Section 8.05, the
parties acknowledge and agree that they do not intend to create any third-party
beneficiary rights respecting any Business Employee as a result of the
provisions hereof and specifically hereby negate any intention to so create any
third-party beneficiary rights.

(c) Seller agrees that it shall be solely responsible for all liability, costs
and expenses (including attorneys’ fees) for all employment claims
(collectively, the “Employment Claims”) by any employee or former employee of
Seller which accrued prior to the Closing relating to arbitrations, unfair labor
practice charges, employment discrimination charges, wrongful termination
claims, workers’ compensation claims, any employment-related tort claim or other
claims or charges of or by employees of Seller. Purchaser agrees that it shall
be responsible for all Employment Claims by any Retained Employee which accrued
after the Closing relating to arbitrations, unfair labor practice charges,
employment discrimination charges, wrongful termination claims, workers’
compensation claims, any employment-related tort claim or other claims or
charges of or by the Retained Employee. Schedule 8.05 sets forth a description
of any known Employment Claims by the Business Employees that have been filed or
may be filed after the date hereof arising out of conditions, actions or events
that occurred before the Closing Date.

Section 8.06 Use of Name. From and after the Closing Date, Seller, Partner and
their Affiliates will not, directly or indirectly, use in any manner the name
“Cheyenne Services, Ltd.” or any derivative thereof or any other trade name,
trademark, service mark or logo used by Seller, or any word or logo that is
similar in sound or appearance, in the Business. Partner’s unrelated businesses
operating under the names “Cheyenne Fluid Services, Inc” and “Cheyenne Supply,
Inc.” may continue their present use of these names but shall not be used by
Seller in the Business. Within 60 days after the Closing Date, Seller shall
provide Purchaser with a certified copy of its relevant organizational documents
indicating that it has changed its name in accordance with the foregoing
sentence.

Section 8.07 Further Assurances. Each party hereto will, at the request of the
other, take such further actions as are requested and execute any additional
documents, instruments or conveyances of any kind which may be reasonably
necessary to further effect the transactions contemplated by this Agreement;
provided, however, that no such action, document, instrument or conveyance shall
increase a party’s liability beyond that contemplated by this Agreement.

Section 8.08 Confidentiality. Seller and Partner agree that after the Closing
Date any facts, information, know-how, processes, trade secrets, customer lists
or confidential matters that relate in any way to the Acquired Assets or the
Business shall be maintained in confidence and shall not be divulged by the
Seller, Partner or any of their Affiliates to any party unless and until they
shall become public knowledge (other than by disclosure in breach of this
Section 8.08) or as required by applicable law, including applicable securities
laws and regulations; provided, before Seller, Partner or any of their
Affiliates discloses any of the foregoing as may be required by applicable law,
such person shall give Purchaser reasonable advance notice and take such
reasonable actions as Purchaser may propose to minimize the required disclosure.

 

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Section 8.09 Exclusivity. From the date of this Agreement through the Closing
Date, Seller and Partner will not (and Seller and Partner will not permit any of
Seller’s officers, directors, managers or advisors to), directly or indirectly,
solicit, initiate, encourage, negotiate with, engage in discussions with, accept
any proposal or offers from, or provide any information or access to any person
relating to a, direct or indirect, acquisition of all or substantially all of
the Acquired Assets or the Business (by stock purchase, merger, consolidation or
otherwise) by such person.

Section 8.10 Frank’s Patent Dispute. Seller has notified Purchaser that certain
of the processes/procedures used by Seller in the conduct of the Business could
possibly be argued to infringe upon the patent rights of Frank’s International,
Inc. (“Franks”) under the patent described on Schedule 8.10 hereto (the “Frank’s
Patent”). Seller and Partner agree that in the event that Frank’s, after the
Closing, were to bring an action, claim or demand against Purchaser or its
Affiliates based on the Frank’s patent including, without limitation a claim
based on an allegation of infringement (a “Frank’s Patent Claim”) by Purchaser
or its Affiliates of Frank’s rights under the Frank’s Patent, then:

(i) Partner will engage co-counsel to assist Purchaser and its counsel in
investigating, evaluating, challenging and defending against any Frank’s Patent
Claim. Partner will be responsible for the costs of its designated counsel, and
Purchaser will be responsible for the costs of its designated counsel in such
effort. If Purchaser and Partner engage separate counsel, then Purchaser’s
counsel will be the lead counsel and control the proceeding but Partner’s
counsel will provide substantial support, input and assistance in the
proceeding;

(ii) Partner will fully cooperate, advise, consult with and participate in the
investigation, evaluation, challenging and defense of any Frank’s Patent Claim;

(iii) Seller and Partner will pay fifty percent (50%) of any settlement costs
payable by Purchaser or its Affiliates pursuant to any settlement or economic
accommodation of a Frank’s Patent Claim;

(iv) Seller and Partner, jointly and severally, agree to pay and to indemnify
and hold Purchaser and its Affiliates harmless from and against fifty percent
(50%) of any judgment or award resulting from a final judicial determination
from which no appeal may be taken with respect to any dispute subject to this
Frank’s Patent Claim;

(v) The maximum liability of Seller and Partner under subsections (iii) and
(iv) shall be Five Hundred Thousand Dollars ($500,000);

(vi) In the event that any Frank’s Patent Claim has been commenced by Frank’s
prior to distribution of the funds in the Escrow Agreement, then Purchaser may
cause the escrow agent under the Escrow Agreement to reserve such amount under
the Escrow Agreement as may be reasonably required to satisfy Seller’s and
Partner’s obligations which could arise under subsections (iii) and (iv); and

(vii) Purchaser agrees that prior to entering into any settlement arrangement
with Frank’s with respect to a Frank’s Patent Claim which involves a monetary

 

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settlement payment, Purchaser will consult and coordinate with Partner
respecting nonmonetary alternatives to offering a monetary settlement payment.
Furthermore, Purchaser agrees to use commercially reasonable efforts, along with
Partner, to reach a nonmonetary solution to any Frank’s Patent Claim prior to
agreeing to a monetary settlement payment which would result in Purchaser (on
the one hand) and Seller and Partner (on the other hand) being required to each
bear 50% of such monetary settlement payment.

Section 8.11 Accounts Receivable. To the extent that any of the Accounts
Receivable included in the Acquired Assets are not fully collected (without any
setoff or reduction) within 120 days following the Closing, then Purchaser may
notify Seller that Purchaser desires to assign such uncollected Accounts
Receivable to Seller. In the event of any such assignment, Seller and Partner
will pay to Purchaser, within five Business Days following such assignment an
amount equal to the face amount of all such assigned Accounts Receivable.

ARTICLE IX

INDEMNIFICATION

Section 9.01 Survival. All representations and warranties of Seller and Partner
contained in this Agreement and all covenants contained in this Agreement that
are to be performed prior to the Closing shall survive the Closing until
twenty-four (24) months after the Closing Date, except that (i) the
representations and warranties in Sections 6.01, 6.02 and 6.03 shall survive
indefinitely, (ii) the representations and warranties in Section 6.15 shall
survive for five (5) years following Closing and (iii) the representations and
warranties in Section 6.11 shall survive for until the longer of twenty-four
(24) months after the Closing Date or the applicable statute of limitations.
Seller and Partner shall not have any liability for indemnification claims made
under this Article IX with respect to any such representation, warranty or
pre-closing covenant unless a claim notice is provided by the Purchaser to
Seller or Partner prior to the expiration of the applicable survival period for
such representation, warranty or pre-closing covenant. If a claim notice has
been timely given in accordance with this Agreement prior to the expiration of
the applicable survival period for such representation, warranty or pre-closing
covenant, then the applicable representation, warranty or pre-closing covenant
shall survive as to such claim, until such claim has been finally resolved.

Section 9.02 Indemnity. Seller and Partner agree to jointly and severally
indemnify and hold Purchaser and its Affiliates harmless from and with respect
to any and all claims, liabilities, losses, damages, costs, and expenses,
including, with limitation, the fees and disbursements of counsel, related to or
arising directly or indirectly out of any of the following:

(a) any inaccuracies in any representation or warranty made by Seller or Partner
in or pursuant to this Agreement or any failure or breach by Seller or Partner
of any pre-closing covenant, obligation, or undertaking made by Seller or
Partner in this Agreement;

(b) any failure or breach by Seller or Partner of any post-closing
covenant/obligation or undertaking made by Seller or Partner in this Agreement;

 

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(c) any and all claims, liabilities, and obligations arising out of the
operation of the Acquired Assets or any business carried on by Seller on or
prior to the Closing Date other than Assumed Liabilities; and

(d) any claim or liability arising out of or with respect to Retained
Liabilities.

Section 9.03 Limitations on Liability of Seller and Partner. Notwithstanding
anything to the contrary herein, Seller and Partner shall have no liability
arising out of or relating to Section 9.02(a) (other than as it applies to
Sections 6.01, 6.02, 6.03, 6.10 and 6.11) except and until the aggregate losses
actually incurred by the Purchaser thereunder exceed $50,000 and then only as to
the excess. In no event shall the liability of the Seller or Partner exceed the
Purchase Price.

Section 9.04 Claims.

(a) In the event that Purchaser or any Affiliate desires to make a claim against
Seller or Partner under Section 9.02 hereof in connection with any action, suit,
proceeding, or demand at any time instituted against or made upon Purchaser or
any Affiliate for which Purchaser or such Affiliate may seek indemnification
hereunder (a “Claim”), Purchaser or such Affiliate shall notify Seller and
Partner of such Claim and the claim of indemnification with respect thereto,
provided that failure of Purchaser or such Affiliate to give such notice shall
not relieve Seller and Partner of their obligations under this Article IX,
except to the extent, if at all, that Seller and Partner shall have been
prejudiced thereby. Upon receipt of such notice from Purchaser or any Affiliate,
Seller and Partner shall be entitled to assume responsibility for the defense of
such Claim, and if and only if each of the following conditions is satisfied:

(i) Seller and Partner confirm in writing that they are obligated hereunder to
indemnify Purchaser with respect to such Claim; and

(ii) Purchaser or its Affiliate does not give Seller and Partner written notice
that it has determined, in the exercise of its reasonable discretion, that
matters of corporate or management policy or a conflict of interest make
separate representation by Purchaser’s or its Affiliate’s own counsel advisable.

Purchaser and its Affiliates shall retain the right to employ their own counsel
and to participate in the defense of any Claim, the defense of which has been
assumed by Seller and Partner pursuant hereto, but Purchaser and its Affiliates
shall bear and shall be solely responsible for its own costs and expenses in
connection with such participation. If Seller and Partner assume any defense,
Seller and Partner may not settle the underlying dispute without the prior
approval of Purchaser unless Purchaser and its Affiliates receive a full release
as a part of the settlement and such settlement does not adversely impact the
Purchaser’s ownership or use of the Acquired Assets or conduct of the Business
from and after the Closing.

(b) In the event of any Claims under Section 9.02 hereof, Purchaser or its
Affiliate shall advise Seller and Partner, in writing, of the amount and
circumstances surrounding any liquidated Claim. With respect to liquidated
Claims, if within thirty (30) days Seller and Partner have not contested such
Claim in writing, Seller or Partner shall pay the full amount thereof within ten
(10) days after the expiration of such period. Seller and Partner agree that in

 

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the event of their failure to pay the full amount of such uncontested Claim
within such time, Purchaser shall, in addition to other rights available at law
or in equity, have the right to setoff against the payment of any obligations of
Purchaser under Section 2.02 hereof or in respect of the promissory note the
amount of such Claim that is so unpaid.

(c) Seller’s consent shall be a condition of any settlement other than a
settlement in which a full release of the Seller is obtained.

ARTICLE X

TERMINATION

Section 10.01 Termination. At any time prior to the Closing, this Agreement may
be terminated and the transactions contemplated hereby abandoned:

(a) by the mutual consent of Purchaser and Seller as evidenced in writing signed
by each of Purchaser and Seller;

(b) by Purchaser, if there has been a material breach by Seller of any
representation, warranty or covenant contained in this Agreement which has
prevented the satisfaction of any condition to the obligations of Purchaser at
the Closing and, if such breach is of a character that it is capable of being
cured, such breach has not been cured by Seller within 30 days after written
notice thereof from Purchaser;

(c) by Seller, if there has been a material breach by Purchaser of any
representation, warranty or covenant contained in this Agreement which has
prevented the satisfaction of any condition to the obligations of Seller at the
Closing and, if such breach is of a character that it is capable of being cured,
such breach has not been cured by Purchaser within 30 days after written notice
thereof from Seller;

(d) by either Purchaser or Seller if any governmental authority having competent
jurisdiction has issued a final, non-appealable order, decree, ruling or
injunction (other than a temporary restraining order) or taken any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement; or

(e) by either Purchaser or Seller, if the Closing has not occurred on or before
November 30, 2005, or such later date as the parties may agree upon.

Section 10.02 Effect of Termination. In the event of termination and abandonment
of this Agreement pursuant to Section 10.01, this Agreement shall forthwith
become void and have no effect, without any liability on the part of any party
hereto; provided, however, that if this Agreement is validly terminated by a
party as a result of breach of this Agreement by one or more non-terminating
parties, then the terminating party shall be entitled to all rights and remedies
available under applicable law or equity. The provisions of Section 10.02 hereof
shall survive any termination of this Agreement.

 

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ARTICLE XI

GENERAL

Section 11.01 Expenses. All expenses of the preparation, execution, and
consummation of this Agreement and of the transactions contemplated hereby,
including, without limitation, attorneys’, accountants’, and outside advisers’
fees and disbursements, shall be borne by the party incurring such expenses.

Section 11.02 Notices. All notices, demands, and other communications hereunder
shall be in writing or by written telecommunication, and shall be deemed to have
been duly given if delivered personally, or if mailed by certified mail, return
receipt requested, postage prepaid, or sent by written telecommunication, as
follows:

If to Seller, to:

Cheyenne Services, Ltd.

c/o Carlos Torres

748 Blalock Road

Houston, Texas 77024

Telecopy: (713) 266-5169

If to Partner, to:

Carlos Torres

748 Blalock Road

Houston, Texas 77024

Telecopy: (713) 266-5169

If to Purchaser, to:

Tesco Corporation

6204 6A Street SE

Calgary, Alberta T2H 2B7

Canada

Telecopy: (403) 252-3362

Attention: General Counsel

with a copy to:

Tesco Corporation

c/o Tesco Corporation US

11330 Brittmoore Park Drive

Houston, Texas 77041

Telecopy: (713) 849-0075

Attention: Associate General Counsel

Section 11.03 Entire Agreement. This Agreement contains the entire understanding
of the parties, supersedes all prior agreements and understandings relating to
the subject matter

 

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hereof, and shall not be amended except by a written instrument hereafter signed
by all of the parties hereto. The confidentiality letter agreement, dated
March 28, 2005, by and between Tesco Corporation and Seller shall terminate
effective as of the Closing.

Section 11.04 Governing Law. The validity and construction of this Agreement
shall be governed by the laws of the State of Texas.

Section 11.05 Arbitration.

(a) If a dispute arises out of or relating to this Agreement, or the breach
thereof, and if said dispute cannot be settled through negotiation, then either
party may submit such matter to binding arbitration in accordance with the
procedures set forth in Schedule 11.05.

(b) This provision shall not apply to any dispute that otherwise would be
governed by Section 2.02, Purchase Price adjustment.

Section 11.06 Sections and Section Headings. All enumerated subdivisions of this
Agreement are herein referred to as “section” or “subsection.” The headings of
sections and subsections are for reference only and shall not limit or control
the meaning thereof.

Section 11.07 Assigns. This Agreement shall be binding upon and inure to the
benefit of the heirs and successors of each of the parties. Neither this
Agreement nor the obligations of any party hereunder shall be assignable or
transferable by such party without the prior written consent of the other party
hereto; provided, however, that nothing contained in this Section 11.07 shall
prevent Purchaser, without the consent of Seller or Partner, from transferring
or assigning this Agreement or its rights or obligations hereunder to another
entity controlling, under the control of, or under common control with
Purchaser, provided further, the Seller shall, without the approval of
Purchaser, have the right to convert to a limited partnership provided that such
conversion does not adversely impact the Acquired Assets or the Purchaser.

Section 11.08 No Third Party Rights or Remedies. Except as otherwise expressly
provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any person, firm, or corporation, other than
Seller and Purchaser and their respective shareholders, any rights or remedies
under or by reason of this Agreement.

Section 11.09 Rules of Construction.

(a) In this Agreement, unless the context otherwise requires, words in the
singular number or in the plural number shall each include the singular number
and the plural number and words of the masculine gender shall include the
feminine and the neuter, and, when the sense so indicates, words of the neuter
gender may refer to any gender.

(b) The terms “Affiliate” or “Affiliates” as used in this Agreement shall mean
with respect to any person, any person which, directly or indirectly, controls,
is controlled by, or is under a common control with, such person. The term
“control” (including the terms “controlled by” and “under common control with”)
as used in this definition means the

 

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possession, directly or indirectly, of the power to direct or cause the
direction of management and policies of a person, whether through the ownership
of voting securities, by contract, or otherwise.

(c) The term “person” shall mean an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.

(d) The term “Knowledge” as to Seller shall mean the actual knowledge of the
directors, officers and employees of Seller.

Section 11.10 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

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IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto
have caused this Agreement to be duly executed and delivered by their respective
duly authorized officers as of the date and year first above written.

 

SELLER CHEYENNE SERVICES, LTD. By:   Cheyenne Houston Management LLC, its
general partner By:   /s/ Carlos A. Torres Name:   Carlos A. Torres Title:  
President PARTNER      /s/ Carlos A. Torres Carlos A. Torres PURCHASER TESCO
CORPORATION By:   /s/ Julio M. Quintana Name:   Julio M. Quintana Title:  
President & Chief Executive Officer