Document:

Filed by Bowne Pure Compliance

 

Exhibit 10-18k

EMPLOYMENT AGREEMENT

This Employment Agreement, (the “Agreement”) is made as of the 1st day of January, 2007, between
Selective Insurance Company of America, a New Jersey corporation with a principal place of business
at 40 Wantage Avenue, Branchville, New Jersey 07890 (the “Company”) and Eduard J. Pulkstenis, an
individual with a mailing address of Post Office. Box 2589, Branchville, NJ 07826 (the
"Executive”).

SECTION 1. definitions.

1.1. Definitions. For purposes of this Agreement, the following terms shall have the
meanings set forth below:

“Accounting Firm” has the meaning given to such term in Section 3.6(b) hereof.

“Agreement” has the meaning given to such term in the Preamble hereto.

“Board” means the Board of Directors of the Company’s Parent.

“Cause” means any one or more of the following:

(i) the Executive shall have been convicted by a court of competent jurisdiction of, or
pleaded guilty or nolo contendere to, any felony under, or within the meaning of, applicable
United States federal or state law;

(ii) the Executive shall have breached in any respect any one or more of the material
provisions of this Agreement, including, without limitation, any failure to comply with the
Code of Conduct, and, to the extent such breach may be cured, such breach shall have
continued for a period of thirty (30) days after written notice by the Chief Executive
Officer to the Executive specifying such breach; or

(iii) the Executive shall have engaged in acts of insubordination, gross negligence or
willful misconduct in the performance of the Executive’s duties and obligations to the
Company.

For purposes of clauses (ii) and (iii) of this definition of “Cause”, no act, or failure to act, on
the part of the Executive shall be considered grounds for “Cause” under such clauses if such act,
or such failure to act, was done or omitted to be done based upon authority or express direction
given by the Chief Executive Officer, Senior Executive Vice President of Insurance Operations, or
such other executive as the Chief Executive Officer may designate, or based upon the advice of
counsel for the Company.

 

 

 

“Change in Control” means the occurrence of an event of a nature that would be required to be
reported by the Company’s Parent in response to Item 5.01 of a Current Report on Form 8-K, as in
effect on the date thereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act;
provided, however, that a Change in Control shall,
in any event, conclusively be deemed to have occurred upon the first to occur of any one of
the following events:

(i) The acquisition by any “person” or “group” (as such terms are used in Sections
13(d)(3) and 14(d)(2) of the Securities Exchange Act or any successor provisions to either
of the foregoing), including, without limitation, any current shareholder or shareholders of
the Company’s Parent, of securities of the Company’s Parent resulting in such person or
group being a “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange
Act) of twenty-five percent (25%) or more of any class of Voting Securities of the Company’s
Parent;

(ii) The acquisition by any “person” or “group” (as such terms are used in Sections
13(d)(3) and 14(d)(2) of the Securities Exchange Act or any successor provisions to either
of the foregoing), including, without limitation, any current shareholder or shareholders of
the Company’s Parent, of securities of the Company’s Parent resulting in such person or
group being a “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange
Act) of twenty percent (20%) or more, but less than twenty-five percent (25%), of any class
of Voting Securities of the Company’s Parent, if the Board adopts a resolution that such
acquisition constitutes a Change in Control;

(iii) The sale or disposition of more than fifty percent (50%) of the Company’s
Parent’s assets on a consolidated basis, as shown in the Company’s Parent’s then most recent
audited consolidated balance sheet;

(iv) The reorganization, recapitalization, merger, consolidation or other business
combination involving the Company’s Parent the result of which is the ownership by the
shareholders of the Company’s Parent of less than eighty percent (80%) of those Voting
Securities of the resulting or acquiring Person having the power to vote in the elections of
the board of directors of such Person; or

(v) A change in the membership in the Board which, taken in conjunction with any other
prior or concurrent changes, results in twenty percent (20%) or more of the Board’s
membership being persons not nominated by the Company’s Parent’s management or the Board as
set forth in the Company’s Parent’s then most recent proxy statement, excluding changes
resulting from substitutions by the Board because of retirement or death of a director or
directors, removal of a director or directors by the Board or resignation of a director or
directors due to demonstrated disability or incapacity.

(vi) Anything in this definition of Change in Control to the contrary notwithstanding,
no Change in Control shall be deemed to have occurred for purposes of this Agreement by
virtue of any transaction which results in the Executive, or a group of Persons which
includes the Executive, acquiring, directly or indirectly, Voting Securities of the Company.

 

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“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Code of Conduct” has the meaning given to such term in Section 2.3(a) hereof.

“Commencement Date” has the meaning given to such term in Section 2.2 hereof.

“Company” has the meaning given to such term in the Preamble hereto and includes any Person
which shall succeed to or assume the obligations of the Company hereunder pursuant to Section 5.6
hereof.

“Company’s
Parent” means Selective Insurance Group, Inc., a publicly traded New Jersey
corporation with a principal office at 40 Wantage Avenue, Branchville, New Jersey 07890.

“Determination” has the meaning given to such term in Section 3.6(b) hereof.

“Disability” means the Executive’s physical injury or physical or mental illness which causes
him to be absent from his duties with the Company on a full-time basis for a continuous period in
excess of the greater of: (i) the period of disability constituting permanent disability as
specified under the Company’s long-term disability insurance coverage applicable to the Executive
at the time of the determination of the existence of a disability (or, if such determination is
made after the occurrence of a Change in Control, as specified under the long-term disability
insurance coverage applicable to the Executive prior to a Change in Control) or (ii) 180 days,
unless within thirty (30) days after a Notice of Termination is thereafter given the Executive
shall have returned to the full-time performance of his duties.

“Early Termination” has the meaning given to such term in Section 3.2 hereof.

“Excise Tax” has the meaning given to such term in Section 3.6(a) hereof.

“Executive” has the meaning given to such term in the Preamble hereto.

“Extended Benefit Period” has the meaning given to such term in Section 3.3(c) hereof.

“Good Reason” means the occurrence of any one or more of the following:

(i) any reduction in the Executive’s Salary below the annualized rate in effect on the
date preceding the date on which a Change in Control shall have occurred unless such
reduction is implemented for the senior executive staff generally, provided, however, that
such reduction shall constitute Good Reason even if implemented for senior executive staff
generally if such reduction occurs within two years after a Change in Control;

 

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(ii) (A) a failure by the Company to continue in effect benefits that are comparable in
the aggregate to the benefits the Executive receives under the Plans in which the Executive
participates, other than as a result of the normal expiration of any such Plan as to other
eligible employees in accordance with its terms as in effect on the date preceding the date
on which a Change in Control shall have occurred, or (B) the taking of any action, or the
failure to act, by the Company which would adversely affect the Executive’s continued
participation in any of such Plans on at least as favorable a basis to him as was the case
on the date preceding the date on which a Change in Control shall have occurred or which
would materially reduce the Executive’s benefits in the future under any such Plans, unless,
in any of the cases described in sub-clauses (A) and (B) of this clause (ii), such failure
to continue in effect, taking of any action or failure to act affects all participants of
such Plan generally;

(iii) without the Executive’s express prior written consent, the assignment to the
Executive of any duties inconsistent with his positions, duties, responsibilities and status
with the Company immediately prior to a Change in Control, or any material diminution in the
Executive’s responsibilities as an executive of the Company as compared with those he had as
an executive of the Company immediately prior to a Change in Control, or any change in the
Executive’s titles or office as in effect immediately prior to a Change in Control, or any
removal of the Executive from, any of such positions, except in connection with the
termination of the Executive’s employment for Cause, Disability or Retirement or as a result
of the Executive’s death, or by his termination of his employment other than for Good
Reason;

(iv) without the Executive’s express prior written consent, the imposition of a
requirement by the Company that the Executive be based at any location in excess of fifty
(50) miles from the location of the Executive’s office on the date preceding the date on
which a Change in Control shall have occurred;

(v) without the Executive’s express prior written consent, any reduction in the number
of paid vacation days to which the Executive was entitled as of the date preceding the date
on which a Change in Control shall have occurred;

(vi) the failure by the Company to obtain from any Person with which it may merge or
consolidate or to which it may sell all or substantially all of its assets, the agreement of
such Person as set forth in the proviso in Section 5.6 hereof; provided that such
merger, consolidation or sale constitutes a Change in Control;

(vii) subsequent to a Change in Control, any purported termination of the Executive’s
employment which is not effected pursuant to a Notice of Termination given in accordance
with Section 3.2 hereof; or

(viii) within two years after a Change in Control shall have occurred, any material
breach by the Company of any of the terms and conditions of this
Agreement or any Plans referred to in clause (ii) of this definition of “Good Reason”
to which the Executive is entitled to receive benefits thereunder, provided, to the extent
such breach may be cured, such breach shall have continued for a period of thirty (30) days
after written notice of the Company specifying such breach.

 

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“Gross-Up Payment” has the meaning given to such term in Section 3.6(a) hereof.

“Notice of Termination” means a written notice which shall (i) indicate the specific
termination provision in this Agreement relied upon, (ii) set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive’s employment under
the provision so indicated and, (iii) specify the date of termination in accordance with this
Agreement (other than for a termination for Cause).

“Overpayments” has the meaning given to such term in Section 3.6(c) hereof.

“Person” means an individual, partnership, corporation, association, limited liability
company, trust, joint venture, unincorporated organization, and any government, governmental
department or agency or political subdivision thereof.

“Plans” has the meaning given to such term in Section 2.4(b) hereof.

“Rabbi Trust” has the meaning given to such term in Section 3.4(d) hereof.

“Release” has the meaning given to such term in Section 3.5 hereof.

“Restrictive Covenants” has the meaning given to such term in Section 3.5 hereof.

“Retirement” means a termination of the Executive’s employment by the Company or the Executive
(i) at such age as shall be established by the Board for mandatory or normal retirement of Company
executives in general (which age shall be, if the determination of Retirement is made after the
occurrence of a Change in Control, the age established by the Board prior to a Change in Control),
which shall not be less than age 65, or (ii) at any other retirement age set by mutual agreement of
the Company and the Executive and approved by the Board.

“Salary” has the meaning given to such term in Section 2.4(a) hereof.

“Section 409A Tax” has the meaning given to such term in Section 3.7 hereof.

“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.

“Term” has the meaning given to such term in Section 2.2 hereof.

 

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“Termination Date” means (i) if the Executive’s employment is to be terminated by the Company
for Disability, thirty (30) days after a Notice of Termination is given; provided that the
Executive shall not have returned to the performance of the Executive’s duties on a full-time basis
during such thirty (30) day period; and (ii) if the Executive’s employment is to be terminated by
either the Company or the Executive for any other reason, the date on which a Notice of Termination
is given.

“Total Payments” has the meaning given to such term in Section 3.6(a) hereof.

“Triggering Event” has the meaning given to such term in Section 3.4(d) hereof.

“Trustee” has the meaning given to such term in Section 3.4(d) hereof.

“Underpayments” has the meaning given to such term in Section 3.6(c) hereof.

“Voting Securities” means, with respect to a specified Person, any security of such Person
that has, or may have upon an event of default or in respect to any transaction, a right to vote on
any matter upon which the holder of any class of common stock of such Person would have a right to
vote.

1.2. Terms Generally. Unless the context of this Agreement requires otherwise, words
importing the singular number shall include the plural and vice versa, and any pronoun shall
include the corresponding masculine, feminine and neuter forms.

1.3. Cross-References. Unless otherwise specified, references in this Agreement to
any Paragraph or Section are references to such Paragraph or Section of this Agreement.

SECTION 2. Employment and Compensation. The following terms and conditions will
govern the Executive’s employment with the Company throughout the Term.

2.1. Employment. The Company hereby employs the Executive, and the Executive hereby
accepts employment with the Company, on the terms and conditions set forth herein.

2.2. Term. The term of employment of the Executive under this Agreement shall
commence as of the date hereof (the “Commencement Date”) and, subject to Section 3.1 hereof, shall
terminate three (3) year(s) after the Commencement Date, and shall automatically be extended for
additional one (1) year periods thereafter (any such renewal periods, together with the initial
three (3) year period, being referred to as the “Term”) unless terminated by either party by
written notice to the other party.

 

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2.3. Duties.

(a) The Executive agrees to serve as Senior Vice President during the
Term. In such capacity, the Executive shall have the responsibilities and duties customary for
such office(s) and such other executive responsibilities and duties as are assigned by the Chief
Executive Officer, Senior Executive Vice President of Insurance Operations, or such other executive
as the Chief Executive Officer may
designate, which are consistent with the Executive’s position(s). The Executive agrees to
devote substantially all his business time, attention and services to the business and affairs of
the Company and its subsidiaries and to perform his duties to the best of his ability. At all
times during the performance of this Agreement, the Executive will adhere to the Code of Conduct of
the Company (the “Code of Conduct”) that has been or may hereafter be established and communicated
by the Company to the Executive for the conduct of the position or positions held by the Executive.
The Executive may not accept directorships on the board of directors of for-profit corporations
without the prior written consent of the Executive Vice President, Human Resources of the Company.
The Executive may accept directorships on the board of directors of not-for-profit corporations
without the prior, written consent of the Executive Vice President, Human Resources so long as
(a) such directorships do not interfere with Executive’s ability to carry out his responsibilities
under this Agreement, and (b) Executive promptly notifies the Executive Vice President, Human
Resources in writing of the fact that he has accepted such a non-profit directorship.

(b) If the Company or the Executive elects not to renew the Term pursuant to Section 2.2,
the Executive shall continue to be employed under this Agreement until the expiration of the
then current Term (unless earlier terminated pursuant to Section 3.1 hereof), shall cooperate
fully with the Chief Executive Officer, Senior Executive Vice President of Insurance
Operations, or such other executive as the Chief Executive Officer may designate and shall
perform such duties not inconsistent with the provisions hereof as he shall be assigned by the
Chief Executive Officer, Senior Executive Vice President of Insurance Operations, or such other
executive as the Chief Executive Officer may designate.

2.4. Compensation.

(a) Salary. For all services rendered by the Executive under this Agreement, the
Company shall pay the Executive a salary during the Term at a rate of not less than THREE
HUNDRED THOUSAND AND NO/100 DOLLARS ($300,000.00) per year, which may be increased but not
decreased unless decreased for the senior executive staff generally (the “Salary”), payable in
installments in accordance with the Company’s policy from time to time in effect for payment of
salary to executives. The Salary shall be reviewed no less than annually and nothing contained
herein shall prevent the Company from at any time increasing the Salary or other benefits
herein provided to be paid or provided to the Executive or from providing additional or
contingent benefits to the Executive as it deems appropriate.

(b) Benefits. During the Term, the Company shall permit the Executive to
participate in or receive benefits based on eligibility under the Selective Insurance Group,
Inc. 2005 Omnibus Stock Plan, the Selective Insurance Group, Inc. Cash Incentive Plan, the
Selective Insurance Retirement Savings Plan, the Retirement Income Plan For Selective Insurance
Company of America, as amended, the Selective Insurance Company of America Deferred
Compensation Plan, the Selective Insurance Supplemental Pension Plan and any other incentive
compensation, stock option, stock appreciation right, stock bonus, pension, group
insurance, retirement, profit sharing, medical, disability, accident, life insurance plan,
relocation plan or policy, or any other plan, program, policy or arrangement of the Company
intended to benefit the employees of the Company generally, if any, in accordance with the
respective provisions thereof, from time to time in effect (collectively, the “Plans”).

 

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(c) Vacations and Reimbursements. During the Term, the Executive shall be
entitled to vacation time off and reimbursements for ordinary and necessary business travel and
entertainment expenses in accordance with the Company’s policies on such matters from time to
time in effect.

(d) Perquisites. During the Term, the Company shall provide the Executive with
suitable offices, secretarial and other services, and other perquisites to which other
executives of the Company generally are (or become) entitled, to the extent as are suitable to
the character of the Executive’s position with the Company, subject to such specific limits on
such perquisites as may from time to time be imposed by the Company.

SECTION 3. Termination and Severance.

3.1. Termination. The Executive’s employment hereunder shall commence on the
Commencement Date and continue until the expiration of the Term, except that the employment of the
Executive hereunder shall earlier terminate:

(a) Death. Upon the Executive’s death.

(b) Disability. At the option of the Company, upon the Disability of the
Executive.

(c) For Cause. At the option of the Company, for Cause.

(d) Resignation. At any time at the option of the Executive, by resignation
(other than a resignation for Good Reason).

(e) Without Cause. At any time at the option of the Company, without Cause;
provided, that a termination of the Executive’s employment hereunder by the Company
based on Retirement, death, or Disability shall not be deemed to be a termination without
Cause.

(f) Relocation. At the option of the Executive at any time prior to a Change in
Control, if the Company imposes a requirement without the consent of the Executive that the
Executive be based at a location in excess of fifty (50) miles from the location of the
Executive’s office on the Commencement Date.

(g) For Good Reason. At any time at the option of the Executive within two (2)
years following the occurrence of a Change in Control, for Good Reason.

 

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3.2. Procedure For Termination. Any termination of the Executive’s employment by the
Company or by the Executive prior to the expiration of the Term (an “Early Termination”) shall be
communicated by delivery of a Notice of Termination to the other party hereto given in accordance
with Section 5.13 hereof. Any Early Termination shall become effective as of the applicable
Termination Date.

3.3. Rights and Remedies on Termination. The Executive will be entitled to receive
the payments and benefits specified below if there is an Early Termination.

(a) Accrued Salary. If the Executive’s employment is terminated pursuant to any
of the Paragraphs set forth in Section 3.1 hereof, then the Executive (or his legal
representative, as applicable) shall only be entitled to receive his accrued and unpaid Salary
through the Termination Date.

(b) Severance Payments.

(i) If the Executive’s employment is terminated pursuant to Paragraphs (a) or (b) in
Section 3.1 hereof, then the Executive (or his legal representative, as applicable) shall be
entitled to receive a severance payment from the Company in an aggregate amount equal to the
product of (A) 1 times (B) the Executive’s Salary plus an amount equal to
the average of the three most recent annual cash incentive payments (each an “ACIP”) made
to the Executive; provided that any such severance payment shall be reduced by the
amount of payments the Executive receives under any life or disability insurance policies
with respect to which the premiums were paid by the Company.

(ii) If the Executive’s employment is terminated pursuant to Paragraph (e) or (f) in
Section 3.1 hereof, then the Executive shall be entitled to receive a severance payment from
the Company in an aggregate amount equal to the product of (A) 1.5 times (B) the
Executive’s Salary plus an amount equal to the average of the three most recent ACIP
payments made to the Executive.

(iii) The severance payment required to be paid by the Company to the Executive
pursuant to Paragraph (b)(i) or (b)(ii) above, shall, subject to Section 3.7, be paid in
equal monthly installments over the twelve (12) month period following the Termination Date.

(c) Severance Benefits.

(i) If the Executive’s employment is terminated pursuant to any of the Paragraphs set
forth in Section 3.1 hereof, then the Executive (or his legal representative, as applicable)
shall be entitled to receive the benefits which the Executive has accrued or earned or which
have become payable under the Plans as of the Termination Date, but which have not yet been
paid to the Executive. Payment of any such benefits shall be made in accordance with the
terms of such Plans.

 

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(ii) If the Executive’s employment is terminated pursuant to Paragraph (e) or (f) in
Section 3.1 hereof, then the Company shall, subject to Section 3.7, maintain in full force
and effect for the continued benefit of the Executive and his dependents for a period
terminating on the earlier of (A) twelve (12) months following the applicable Termination
Date, or (B) the commencement date of equivalent benefits from a new employer, (any such
period being referred to as the applicable “Extended Benefit Period”) all insured and
self-insured medical, dental, vision, disability and life insurance employee benefit Plans
in which the Executive was entitled to participate immediately prior to the Termination
Date; provided that the Executive’s continued participation is not barred under the
general terms and provisions of such Plans. Notwithstanding the foregoing, the Executive
shall continue to participate in such Plans during the Extended Benefit Period only to the
extent that such Plans remain in effect for other executives of the Company from time to
time during the Extended Benefit Period and subject to the terms of such Plans, including
any modifications and amendments thereto following the Termination Date. In the event that
the Executive’s participation in any such Plan is barred by its terms, the Company shall
arrange, at its sole cost and expense, to have issued for the benefit of the Executive and
his dependents during the Extended Benefit Period individual policies of insurance providing
benefits substantially similar (on an after-tax basis) to those which the Executive
otherwise would have been entitled to receive under such Plans pursuant to this Paragraph
(c)(ii). Executive shall be responsible for making any required contributions to the cost
of such coverage, on an after-tax basis, at the rate which Executive was obligated to pay
immediately prior to the Termination Date. If, at the end of the applicable Extended
Benefit Period, the Executive has not previously received or is not receiving equivalent
benefits from a new employer, or is not otherwise receiving such benefits, the Company shall
arrange to enable the Executive to convert his and his dependents’ coverage under such Plans
to individual policies or programs upon the same terms as employees of the Company may apply
for such conversions upon termination of employment. In no event shall the Company’s
obligation to provide disability benefits hereunder be reduced as a result of any individual
disability policy purchased by the Executive.

 

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(d) Rights Under Plans. If the Executive’s employment is terminated pursuant to
Paragraphs (a), (b), (e), or (f) in Section 3.1 hereof, the Executive shall be entitled to the
benefits of any stock options, stock appreciation rights, restricted stock grants, stock
bonuses or other benefits theretofore granted by the Company to the Executive under any Plan,
whether or not provided for in any agreement with the Company; provided,
however, that (i) all unvested stock options, stock appreciation rights, restricted
stock grants, stock bonuses, long-term incentives and similar benefits shall be deemed to be
vested in full on the Termination Date, notwithstanding any provision to the contrary or any
provision requiring any act or acts by the Executive in any agreement with the Company or any
Plan; (ii) to the extent that any such stock options, stock appreciation rights, restricted
stock grants, stock bonuses, long-term incentives or similar benefits shall require by its
terms the exercise thereof by the Executive, the last date to exercise the same shall,
notwithstanding any provision to the contrary in any agreement or any Plan, be the earlier of
(A) the later to occur of the fifteenth day of the third month following the date at which, or
the December 31 of the calendar year in which, any such stock options, stock appreciation
rights, restricted stock grants, stock bonuses, long-term incentives or similar benefits would
otherwise have expired if not extended, or (B) the original expiration date had the Executive’s
employment not so terminated; and (iii) if the vesting or exercise pursuant hereto of any such
stock options, stock appreciation rights, restricted stock grants, stock bonuses, long-term
incentives or similar benefits shall have the effect of subjecting the Executive to liability
under Section 16(b) of the Securities Exchange Act or any similar provision of law, the vesting
date thereof shall be deemed to be the first day after the Termination Date on which such
vesting may occur without subjecting the Executive to such liability.

(e) No Double Dipping.

(i) The severance payments and severance benefits the Executive may be entitled to
receive pursuant to this Section 3.3 shall be in lieu of any of the payments and benefits
the Executive may be entitled to receive pursuant to any other agreement, plan or
arrangement providing for the payment of severance payments or benefits.

(ii) The Executive expressly disclaims any interest he may have in the Selective
Insurance Company of America Severance Plan.

3.4. Rights and Remedies on Termination After Change in Control. The Executive will
be entitled to receive the severance payments and severance benefits specified below in the event
there shall occur a termination of the Executive’s employment pursuant to Paragraph (e) or (g) of
Section 3.1 hereof within two (2) years following the occurrence of a Change in Control. The
severance payments and benefits the Executive may be entitled to receive pursuant to this Section
3.4 shall be in addition to, and not in lieu of, any of the payments and benefits the Executive may
be entitled to receive pursuant to Section 3.3 hereof, unless expressly so stated to be in lieu of
such benefits and/or payments.

 

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(a) Severance Payments. The Executive shall be entitled to receive a severance
payment from the Company in an aggregate amount equal to the product of (i) 1.5; and (ii) the
greater of:

(1) the sum of the Executive’s Salary plus the Executive’s
target ACIP in effect as of the Termination Date, or

(2) the sum of the Executive’s Salary in effect as of the Termination
Date plus the Executive’s average ACIP for the three calendar years prior to
the calendar year in which the Termination Date occurs.

Such payment shall be made, subject to Section 3.7, thirty (30) business days following the
Termination Date, provided that the Executive has executed and delivered a Release pursuant to
Section 3.5 hereof and such Release has become effective and irrevocable. The severance
payment required to be paid by the Company to the Executive pursuant to this Section 3.4(a) shall
be in lieu of, and not in addition to, any other severance payments required to be paid by the
Company to the Executive.

(b) Severance Benefits. Subject to Section 3.7, the Company shall maintain in full
force and effect, for the continued benefit of the Executive and his dependents for a period
terminating on the earlier of: (i) eighteen (18) months after the Termination Date or (ii) the
commencement date of equivalent benefits from a new employer (the “CIC Extended Benefit Period”),
all insured and self insured medical, dental, vision, disability and life insurance employee
welfare benefit plans in which the Executive was entitled to participate immediately prior to the
Termination Date; provided that the Executive’s continued participation is not barred under
the general terms and provisions of such Plans. Notwithstanding the foregoing, the Executive shall
continue to participate in such Plans during the CIC Extended Benefit Period only to the extent
that such Plans remain in effect for other executives of the Company from time to time during the
CIC Extended Benefit Period and subject to the terms of such Plans, including any modifications and
amendments thereto following the Termination Date. In the event that the Executive’s participation
in any such Plan is barred by its terms, the Company, at its sole cost and expense, shall arrange
to have issued for the benefit of the Executive and his dependents individual policies of insurance
providing benefits substantially similar (on an after-tax basis) to those which the Executive
otherwise would have been entitled to receive under such Plans pursuant to this Paragraph (b).
Executive shall be responsible for making any required contributions to the cost of such coverage,
on an after-tax basis, at the rate which Executive was obligated to pay immediately prior to the
Termination Date. If, at the end of the applicable CIC Extended Benefit Period, the Executive has
not previously received or is not receiving equivalent benefits from a new employer, or is not
otherwise receiving such benefits, the Company shall arrange to enable the Executive to convert his
and his dependents’ coverage under such Plans to individual policies or programs upon the same
terms as employees of the Company may apply for such conversions upon termination of employment.
The severance benefits required to be provided by the Company to the Executive pursuant to this
Paragraph (b) shall be in lieu of, and not in addition to, any severance benefits
required to be provided to the Executive pursuant to Section 3.3(c)(ii) hereof. In no event
shall the Company’s obligation to provide disability benefits hereunder be reduced as a result of
any individual disability policy purchased by the Executive.

 

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(c) Rights Under Plans. The Executive shall be entitled to the benefits of any stock
options, stock appreciation rights, restricted stock grants, stock bonuses or other benefits
theretofore granted by the Company to the Executive under any Plan, whether or not provided for in
any agreement with the Company; provided, however, that (i) all unvested stock
options, stock appreciation rights, restricted stock grants, stock bonuses, long-term incentives
and similar benefits shall be deemed to be vested in full on the Termination Date, notwithstanding
any provision to the contrary or any provision requiring any act or acts by the Executive in any
agreement with the Company or any Plan; (ii) to the extent that any such stock options, stock
appreciation rights, restricted stock grants, stock bonuses, long-term incentives or similar
benefits shall require by its terms the exercise thereof by the Executive, the last date to
exercise the same shall, notwithstanding any provision to the contrary in any agreement or any
Plan, be the earlier of (A) the later to occur of the fifteenth day of the third month following
the date at which, or the December 31 of the calendar year in which, any such stock options, stock
appreciation rights, restricted stock grants, stock bonuses, long-term incentives or similar
benefits would otherwise have expired if not extended or (B) the original expiration date had the
Executive’s employment not so terminated; and (iii) if the vesting or exercise pursuant hereto of
any such stock options, stock appreciation rights, restricted stock grants, stock bonuses,
long-term incentives or similar benefits shall have the effect of subjecting the Executive to
liability under Section 16(b) of the Securities Exchange Act or any similar provision of law, the
vesting date thereof shall be deemed to be the first day after the Termination Date on which such
vesting may occur without subjecting the Executive to such liability.

(d) Rabbi Trust. The Company shall maintain a trust intended to be a grantor trust
within the meaning of subpart E, Part I, subchapter J, chapter 1, subtitle A of the Code (the
"Rabbi Trust”). Coincident with the occurrence of a Change in Control, the Company shall promptly
deliver to a bank as trustee of the Rabbi Trust (the “Trustee”), an amount of cash or certificates
of deposit, treasury bills or irrevocable letters of credit adequate to fully fund the payment
obligations of the Company under this Section 3.4. The Company and Trustee shall enter into a
trust agreement that shall provide that barring the insolvency of the Company, amounts payable to
the Executive under this Section 3.4 (subject to Section 3.7) shall be paid by the Trustee to the
Executive five (5) days after written demand by the Executive to the Trustee, with a copy to the
Company, certifying that such amounts are due and payable under this Section 3.4 because the
Executive’s employment has been terminated pursuant to Paragraph (e) or (g) in Section 3.1 hereof
at a time which is within two (2) years following the occurrence of a Change in Control (a
"Triggering Event”). Such trust agreement shall also provide that if the Company shall, prior to
payment by the Trustee, object in writing to the Trustee, with a copy to the Executive, as to the
payment of any amounts demanded by the Executive under this Section 3.4, certifying that such
amounts are not due and payable to the Executive because a Triggering Event has not
occurred, such dispute shall be resolved by binding arbitration as set forth in Section 5.8
hereof.

 

- 13 -

 

3.5. Conditions to Severance Payments and Benefits. The Executive’s right to receive
the severance payments and benefits pursuant to Sections 3.3 and 3.4 hereof, is expressly
conditioned upon (a) receipt by the Company of a written release (a “Release”) executed by the
Executive in the form of Exhibit A hereto, and the expiration of the revocation period described
therein without such Release having been revoked, and (b) the compliance by the Executive with the
covenants, terms or provisions of Sections 4.1 and 4.2 hereof (the “Restrictive Covenants”). If
the Executive shall fail to deliver a Release in accordance with the terms of this Section 3.5 or
shall breach any of the Restrictive Covenants, the Company’s obligation to make the severance
payments and to provide the severance benefits pursuant to Sections 3.3 and 3.4 hereof shall
immediately and irrevocably terminate.

3.6. Tax Effect of Payments.

(a) Gross-Up Payment. In the event that it is determined that any payment,
distribution or other benefit of any type to or for the Executive’s benefit made by the Company, by
any of its affiliates, by any Person who acquires ownership or effective control of the Company or
ownership of a substantial portion of the Company’s assets (within the meaning of Section 280G of
the Code and the regulations thereunder) or by any affiliate of such Person, whether paid or
payable or distributed or distributable or otherwise made available pursuant to the terms of this
Agreement or otherwise (the “Total Payments”), would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise
tax, together with any such interest or penalties, are collectively referred to as the “Excise
Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”)
in an amount such that after payment by the Executive of all taxes imposed upon the Gross-Up
Payment, including any Excise Tax, the Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed on the Total Payments.

(b) Determination by Accountant. All mathematical determinations and all
determinations of whether any of the Total Payments are “parachute payments” (within the meaning of
Section 280G of the Code) that are required to be made under this Section, including all
determinations of whether a Gross-Up Payment is required, of the amount of such Gross-Up Payment
and of amounts relevant to the last sentence of this Section (collectively, the “Determination”),
shall be made by an independent accounting firm acceptable to each of the parties hereto, or, if no
firm is acceptable to both parties hereto, each of the Executive and the Company shall select an
accounting firm acceptable to it, and such accounting firms shall together designate an independent
accounting firm, provided, however, that any accounting firm so designated shall
not have been previously retained by either party for a period of a least two (2) years subsequent
to the applicable Termination Date. Any independent accounting firm selected by the Executive and
the Company or designated pursuant to this Paragraph (b) shall be referred to herein as the
“Accounting Firm”. Subject to Section 3.6(c) and Section 3.7, if a
Gross-Up Payment is determined to be payable, it shall be paid by the Company to the Executive
within five (5) days after such Determination is delivered to the Company. Subject to Section
3.6(c), any Determination by the Accounting Firm shall be binding upon the Company and Executive,
absent manifest error. All of the costs and expenses of the Accounting Firm shall be borne by the
Company.

 

- 14 -

 

(c) Underpayments and Overpayments. As a result of uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments not made by the Company should have been made
(“Underpayments”) or that Gross-Up Payments will have been made by the Company which should not
have been made (“Overpayments”). In either event, the Accounting Firm shall determine the amount
of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount
of such Underpayment shall promptly be paid by the Company to or for the Executive’s benefit. In
the case of an Overpayment, the Executive shall, at the direction and expense of the Company, take
such steps as are reasonably necessary (including the filing of returns and claims for refund),
follow reasonable instructions from, and procedures established by, the Company and otherwise
reasonably cooperate with the Company to correct such Overpayment; provided,
however, that (i) the Executive shall in no event be obligated to return to the Company an
amount greater than the net after-tax portion of the Overpayment that the Executive has retained or
has received as a refund or has received the benefit of from the applicable taxing authorities and
(ii) this provision shall be interpreted in a manner consistent with the intent of this Section,
which is to make the Executive whole, on an after-tax basis, for the application of the Excise Tax,
it being understood that the correction of an Overpayment may result in the Executive’s repaying to
the Company an amount which is less than the Overpayment. Anything herein to the contrary
notwithstanding, in the event of a final determination as to the liability for the Excise Tax
applicable to the Total Payments such determination shall be the basis for determining whether
there have been Underpayments or Overpayments pursuant to this Section 3.6. For this purpose, a
final determination shall mean a final agreement reached with the Internal Revenue Service or a
final determination by a court with jurisdiction from which there is no appeal, in either case,
concluded in accordance with the provisions of this Paragraph (c).

(d) Application of Section 409A. Notwithstanding anything contained in this Section
3.6, no portion of the Gross-Up Payment shall be paid to the Executive so as to cause the Executive
to be subject to tax under Section 409A of the Code. In particular, if necessary to avoid taxation
under Code Section 409A, the Gross-Up Payment shall be paid to Executive in a lump sum at the same
date that severance payments are paid to the Executive pursuant to Section 3.4(a). If the amount
of the Gross-Up Payment cannot be fully determined pursuant to Section 3.6(b) by such date, the
Company shall pay to the Executive on such date an estimate of the Gross-Up Payment, as determined
by the Accounting Firm, and shall pay the remainder (or the Executive shall reimburse the Company
the difference) 30 days thereafter.

 

- 15 -

 

3.7. Section 409A Tax. Notwithstanding anything herein to the contrary, to the extent
any payment or provision of benefits under this Agreement upon the Executive’s “separation from
service” is subject to Section 409A of the Code, no such payment shall be made, and Executive shall
be responsible for the full cost of such benefits, for six (6) months following the Executive’s
“separation from service” if the Executive is a “specified employee.” On the expiration of such
six (6) month period, any payments delayed, and an amount sufficient to reimburse the Executive for
the cost of benefits met by the Executive, during such period shall be aggregated (the “Make-Up
Amount”) and paid in full to the Executive, and any succeeding payments and benefits shall continue
as scheduled hereunder. The Company shall credit the Make-Up Amount with interest at no
less than the interest rate it pays for short-term borrowed funds, such interest to accrue from the
date on which payments would have been made, or benefits would have been provided, by the Company
to the Executive absent the six month delay. The terms “separation from service” and “specified
employee” shall have the meanings set forth under Section 409A and the regulations and rulings
issued thereunder. Furthermore, the Company shall not be required to make, and the Executive shall
not be required to receive, any severance or other payment or benefit under Sections 3.3, 3.4 or
3.6 hereof if the making of such payment or the provision of such benefit or the receipt thereof
shall result in a tax to the Executive arising under Section 409A of the Code (a “Section 409A
Tax”). In the event the Company cannot make a payment or provide a benefit under Sections 3.3, 3.4
or 3.6 hereof, or if the Executive cannot receive any such payment or benefit, in accordance with
the terms of such Sections, without the Executive incurring a Section 409A Tax, then the Company
and the Executive shall work together in good faith to agree on an alternative payment schedule or
an alternative benefit of comparable economic value acceptable to both parties (and to amend this
Agreement, where necessary or desirable) such that the Executive does not incur a Section 409A Tax
or the Executive incurs the least amount of Section 409A Tax as is possible under the
circumstances. If a satisfactory alternative payment schedule or benefit cannot be agreed to by
the later to occur of (i) the originally scheduled payment, distribution or benefit date and (ii)
six months following the date of the Executive’s “separation from service,” the Company shall
provide such payment, distribution or benefit to the Executive (“409A Amount”) on the originally
scheduled date for such payment, distribution or benefit together with an additional payment (a
“409A Payment”) in an amount such that after payment by the Executive of all taxes imposed on the
409A Payment (excluding any Excise Tax to which payment to the Executive is made pursuant to
Section 3.6(a)), the Executive retains an amount of the 409A Payment equal to any taxes (including
taxes, penalties and interest under Section 409A) on the 409A Amount.

SECTION 4. Restrictive Covenants.

4.1. Confidentiality. The Executive agrees that he will not, either during the Term
or at any time after the expiration or termination of the Term, disclose to any other Person any
confidential or proprietary information of the Company, the Company’s Parent, or any of their
subsidiaries, except for (a) disclosures to directors, officers, key employees, independent
accountants and counsel of the Company and its subsidiaries as may be necessary or appropriate in
the performance of the Executive’s duties
hereunder,  (b) disclosures which do not have a material adverse effect on the business or
operations of the Company and its subsidiaries, taken as a whole,

 

- 16 -

 

 (c) disclosures which the
Executive is required to make by law or by any court, arbitrator or administrative or legislative
body (including any committee thereof) with apparent jurisdiction to order the Executive to
disclose or make accessible any information, (d) disclosures with respect to any other litigation,
arbitration or mediation involving this Agreement, and (e) disclosures of any such confidential or
proprietary information that is, at the time of such disclosure, generally known to and available
for use by the public otherwise than by the Executive’s wrongful act or omission. The Executive
agrees not to take with him upon leaving the employ of the Company any document or paper relating
to any confidential information or trade secret of the Company and its subsidiaries, except that
Executive shall be entitled to retain (i) papers and other materials of a personal nature,
including but limited to, photographs, correspondence, personal diaries, calendars and Rolodexes
(so long as such Rolodexes do not contain the Company’s only copy of business contact information),
personal files and phone books, (ii) information showing his compensation or relating to his
reimbursement of expenses, (iii) information that he reasonably believes may be needed for tax
purposes, and (iv) copies of plans, programs and agreements relating to his employment, or
termination thereof, with the Company.

4.2. Non-Solicitation of Employees. The Executive agrees that, except in the course
of performing his duties hereunder, he will not, either during the Term and for a period of two (2)
years after the expiration or termination of the Term, directly or indirectly, solicit or induce or
attempt to solicit or induce or cause any of the employees of the Company, the Company’s Parent, or
any of their subsidiaries to leave the employ of the Company, the Company’s Parent, or of any of
their subsidiaries.

SECTION 5. Miscellaneous Provisions.

5.1. No Mitigation; Offsets. The Executive shall not be required to mitigate damages
or the amount of any payment provided for under this Agreement by seeking other employment or
otherwise and no future income earned by the Executive from employment or otherwise shall in any
way reduce or offset any payments due to the Executive hereunder. Assuming a payment or otherwise
is due Executive under this Agreement, the Company may offset against any amount due Executive
under this Agreement only those amounts due Company in respect of any undisputed, liquidated
obligation of Executive to the Company.

5.2. Governing Law. The provisions of this Agreement will be construed and
interpreted under the laws of the State of New Jersey, without regard to principles of conflicts of
law.

5.3. Injunctive Relief and Additional Remedy. The Executive acknowledges that the
injury that would be suffered by the Company as a result of a breach of the provisions of Sections
4.1 and 4.2 hereof would be irreparable and that an award of monetary damages to the Company for
such a breach would be an inadequate remedy. Consequently, the Company will have the right, in
addition to any other rights it may
have, to obtain injunctive relief to restrain any breach or threatened breach or otherwise to
specifically enforce any provision of this Agreement, and the Company will not be obligated to post
bond or other security in seeking such relief. Each of the parties hereby irrevocably submits to
the exclusive jurisdiction of the federal and state courts of the State of New Jersey for the
purpose of injunctive relief.

 

- 17 -

 

5.4. Representations and Warranties by Executive. The Executive represents and
warrants to the best of his knowledge that the execution and delivery by the Executive of this
Agreement do not, and the performance by the Executive of the Executive’s obligations hereunder
will not, with or without the giving of notice or the passage of time, or both: (a) violate any
judgment, writ, injunction, or order of any court, arbitrator or governmental agency applicable to
the Executive or (b) conflict with, result in the breach of any provisions of or the termination
of, or constitute a default under, any agreement to which the Executive is a party or by which the
Executive is or may be bound.

5.5. Waiver. The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by either party in exercising any right,
power, or privilege under this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law, (a) no waiver that
may be given by a party will be applicable except in the specific instance for which it is given;
and (b) no notice to or demand on one party will be deemed to be a waiver of any obligation of such
party or of the right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement.

5.6. Assignment. No right or benefit under this Agreement shall be assigned,
transferred, pledged or encumbered (a) by the Executive except by a beneficiary designation made by
will or the laws of descent and distribution or (b) by the Company except that the Company may
assign this Agreement and all of its rights hereunder to any Person with which it may merge or
consolidate or to which it may sell all or substantially all of its assets; provided that
such Person shall, by agreement in form and substance satisfactory to the Executive, expressly
assume and agree to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such merger, consolidation or sale had taken place.
Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the
Company and each of its successors and assigns, and the Executive, his heirs, legal representatives
and any beneficiary or beneficiaries designated hereunder.

5.7. Entire Agreement; Amendments. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes all prior agreements
and understandings, oral or written, between the parties hereto with respect to the subject matter
hereof. This Agreement may not be amended orally, but only by an agreement in writing signed by
the parties hereto.

 

- 18 -

 

5.8. Arbitration. Any dispute which may arise between the Executive and the Company
with respect to the construction, interpretation or application of any of the terms, provisions,
covenants or conditions of this Agreement or any claim arising from or relating to this Agreement
will be submitted to final and binding arbitration by three (3) arbitrators in Newark, New Jersey,
under the expedited rules of the American Arbitration Association then obtaining. One such
arbitrator shall be selected by each of the Company and the Executive, and the two arbitrators so
selected shall select the third arbitrator. Selection of all three arbitrators shall be made
within thirty (30) days after the date the dispute arose. The written decision of the arbitrators
shall be rendered within ninety (90) days after selection of the third arbitrator. The decision of
the arbitrators shall be final and binding on the Company and the Executive and may be entered by
either party in any New Jersey federal or state court having jurisdiction.

5.9. Legal Costs. The Company shall pay any reasonable attorney’s fees and costs
incurred by the Executive in connection with any dispute regarding this Agreement so long as
Executive’s claim(s) or defense(s) in such action are asserted in the good faith belief that they
are not frivolous. The Company shall pay any such fees and costs promptly following its receipt of
written requests therefor, which requests shall be made no more frequently than once per calendar
month. The Company shall bear all legal costs and expenses incurred in the event the Company should
contest or dispute the characterization of any amounts paid pursuant to this Agreement as being
nondeductible under Section 280G of the Code or subject to imposition of an excise tax under
Section 4999 of the Code, including, without limitation, the reasonable costs and expenses of any
counsel selected by the Executive to represent him in connection with such a matter.

5.10. Severability. In the case that any one or more of the provisions contained in
this Agreement shall, for any reason, be held invalid or unenforceable, the other provisions of
this Agreement shall remain in full force and effect. Any provision of this Agreement held invalid
or unenforceable only in part or degree shall remain in full force and effect to the extent not
held invalid or unenforceable.

5.11. Counterparts; Facsimile. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same agreement. This
Agreement may be executed via facsimile.

5.12. Headings; Interpretation. The various headings contained herein are for
reference purposes only and do not limit or otherwise affect any of the provisions of this
Agreement. It is the intent of the parties that this Agreement not be construed more strictly with
regard to one party than with regard to any other party.

 

- 19 -

 

5.13. Notices.

(a) All notices, requests, demands and other communications required
or permitted under this Agreement shall be in writing and sent as follows:

If to the Company, to:

Selective Insurance Company of America

40 Wantage Avenue

Branchville, New Jersey 07890

Attn: General Counsel

Fax: (973) 948-0282

If to the Executive, to:

Eduard J. Pulkstenis

P.O. Box 2589

Branchville, NJ 07826

(b) All notices and other communications required or permitted under this Agreement which
are addressed as provided in Paragraph (a) of this Section 5.13, (i) if delivered personally
against proper receipt shall be effective upon delivery, (ii) if sent by facsimile transmission
(with evidence supplied by the sender of the facsimile’s receipt at a facsimile number
designated for receipt by the other party hereunder, which other party shall be obligated to
provide such a facsimile number) shall be effective upon dispatch, and (iii) if sent (A) by
certified or registered mail with postage prepaid or (B) by Federal Express or similar courier
service with courier fees paid by the sender, shall be effective upon receipt. The parties
hereto may from time to time change their respective addresses and/or facsimile numbers for the
purpose of notices to that party by a similar notice specifying a new address and/or facsimile
number, but no such change shall be deemed to have been given unless it is sent and received in
accordance with this Section 5.13.

5.14. Withholding. All amounts payable by the Company to the Executive hereunder
(including, but not limited to, the Salary or any amounts payable pursuant to Sections 3.3 and/or
3.4 hereof) shall be reduced prior to the delivery of such payment to the Executive by an amount
sufficient to satisfy any applicable federal, state, local or other withholding tax requirements.

 

- 20 -

 

IN WITNESS WHEREOF, the Company and Executive have executed this Agreement as of the
Commencement Date.

	 	 	 	 	 
	 	SELECTIVE INSURANCE COMPANY OF AMERICA

 	 
	 	By:  	/s/ Victor N. Daley
 	 
	 	 	Victor N. Daley 	 
	 	 	Its Executive Vice President, Human Resources 	 
	 
	 	EXECUTIVE

 	 
	 	/s/ Eduard J. Pulkstenis
 	 
	 	Eduard J. Pulkstenis 	 
	 	 	 
	 

 

- 21 -

 

EXHIBIT A

FORM OF RELEASE

Reference is hereby made to the Employment Agreement, dated as of
                    , 200
 ____ 
(the
“Employment Agreement”), by and between                      (the “Executive”) and
Selective Insurance Company of America, a New Jersey corporation (the “Company”).
Capitalized terms used but not defined herein shall have the meanings specified in the Employment
Agreement.

Pursuant to the terms of the Employment Agreement and in consideration of the payments to be
made to the Executive by the Company, which Executive acknowledges are in excess of what Executive
would otherwise be entitled to receive, the Executive hereby releases and forever discharges and
holds the Company and its parent, affiliates, and subsidiaries (collectively, the “Company
Parties” and each a “Company Party”), and the respective officers,
directors, employees, partners, stockholders, members, agents, affiliates, successors and assigns
and insurers of each Company Party, and any legal and personal representatives of each of the
foregoing, harmless from all claims or suits, of any nature whatsoever (whether known or unknown),
past, present or future, including those arising from the law, being directly or indirectly related
to the Executive’s employment by or the termination of such employment by any Company Party,
including, without limiting the foregoing, any claims for notice, pay in lieu of notice, wrongful
dismissal, severance pay, bonus, overtime pay, incentive compensation, interest or vacation pay for
the Executive’s service as an officer or director to any Company Party through the date hereof.
The Executive also hereby agrees not to file a lawsuit asserting any such claims. This release
(this “Release”) includes, but is not limited to, claims growing out of any legal
restriction on any Company Party’s right to terminate its employees and claims or rights under
federal, state, and local laws prohibiting employment discrimination (including, but not limited
to, claims or rights under Title VII of the Civil Rights Act of 1964, as amended by the Civil
Rights Act of 1991, the Americans with Disabilities Act, the Family and Medical Leave Act, the Fair
Labor Standards Act, the Uniformed Services Employment and Reemployment Rights Act, the Employee
Retirement Income Security Act, the Equal Pay Act, the Age Discrimination in Employment Act of
1967, as amended by the Older Workers Benefit Protection Act of 1990, and the laws of the State of
New Jersey against discrimination, or any other federal or state statutes prohibiting
discrimination on the basis of age, sex, race, color, handicap, religion, national origin, and
sexual orientation, or any other federal, state or local employment law, regulation or other
requirement) which arose before the date this Release is signed, excepting only claims in the
nature of workers’ compensation, claims for vested benefits, and claims to enforce this agreement.
The Executive acknowledges that because this Release contains a release of claims and is an
important legal document, he has been advised to consult with counsel before executing it, that he
may take up to [twenty-one
(21)]1
[forty-five (45)]2
days to decide whether to execute it, and that he may revoke this Release by delivering or
mailing a signed notice of revocation to the Company at its offices within seven (7) days after
executing it. If Executive executes this Release and does not subsequently revoke the release
within seven (7) days after executing it, then this Release shall take effect as a legally binding
agreement between Executive and the Company.

 

			
	 
	1	 	Delete brackets and use text enclosed therewith if 45
days is not otherwise required by Section 7(f)(1)(F) of the Age Discrimination
in Employment Act and/or 29 C.F.R. Part 1625. If 45 days is so required,
delete bracketed text in its entirety.
	 
	2	 	Delete brackets and use text enclosed therewith if 45
days is required by Section 7(f)(1)(F) of the Age Discrimination in Employment
Act and/or 29 C.F.R. Part 1625. If 45 days is not so required, delete
bracketed text in its entirety.

 

- 2 -

 

If Executive does not deliver to the Company an original signed copy of this Release by
                    , or if Executive signs and revokes this Release within seven (7) days as set forth
above, the Company will assume that Executive rejects the Release and Executive will not receive
the payments referred to herein.

The Executive acknowledges that there is a risk that after signing this Release he may
discover losses or claims that are released under this Release, but that are presently unknown to
him. The Executive assumes this risk and understands that this Release shall apply to any such
losses and claims.

The Executive understands that this Release includes a full and final release covering all
known and unknown, injuries, debts, claims or damages which have arisen or may have arisen from
Executive’s employment by or the termination of such employment by any Company party. The
Executive acknowledges that by accepting the benefits and payments set forth in the Employment
Agreement, he assumes and waives the risks that the facts and the law may be other than as he
believes.

Notwithstanding the foregoing, this Release does not release, and the Executive continues to
be entitled to, (i) any rights to exculpation or indemnification that the Executive has under
contract or law with respect to his service as an officer or director of any Company Party and (ii)
receive the payments to be made to him by the Company pursuant to Section 3.3 and/or 3.4 of the
Employment Agreement (including any plan, agreement or other arrangement that is referenced in or
the subject of the applicable Section), subject to the conditions set forth in Section 3.5 of the
Employment Agreement, (iii) any right the Executive may have to obtain contribution as permitted by
law in the event of entry of judgment against him as a result of any act or failure to act for
which he and any Company party are jointly liable, and (iv) any claim in respect of any insurance
policy with any Company party entered into outside of the employment relationship.

This Release constitutes the release referenced in Section 3.5 of the Employment Agreement.

 

- 3 -

 

The undersigned Executive, having had the time to reflect, freely accepts and agrees to the
above Release. The Executive acknowledges and agrees that no Company representative has made any
representation to or agreement with the Executive relating to this Release which is not contained
in the express terms of this
Release. The Executive acknowledges and agrees that the execution and delivery of this
Release is based upon the Executive’s independent review of this Release, and the Executive hereby
expressly waives any and all claims or defenses by the Executive against the enforcement of this
Release which are based upon allegations or representations, projections, estimates, understandings
or agreements by the Company or any of its representatives or any assumptions by the Executive that
are not contained in the express terms of this Release.

	 	 	 	 	 	 	 
	 	 	EXECUTIVE
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Date:	 	 	 	 
	 

	 	 	 	 	 	 

[Attach disclosures required by the Older Workers Benefit Protection Act, if required]

 

- 4 -

 

AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT

This AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (the “Amendment”) is made effective as of this
15th day of April, 2008 between Selective Insurance Company of America, a New Jersey corporation
with a principal place of business at 40 Wantage Avenue, Branchville, New Jersey 07890 (the
“Company”), and Eduard J. Pulkstenis, an individual with a mailing address of Post Office. Box
2589, Branchville, NJ 07826, (the “Executive”).

WHEREAS, on January 1, 2007, the parties entered into an Employment Agreement (the “Employment
Agreement”); and

WHEREAS, the parties wish to amend the Employment Agreement to reflect recent guidance under
Sections 409A and 162(m) of the Internal Revenue Code of 1986, as amended, and to reflect certain
changes in the terms of the Executive’s employment as a result of the Executive’s promotion to
Executive Vice President of the Company;

NOW, THEREFORE, for and in consideration of the mutual promises, terms, provisions and
conditions set forth herein, the parties hereby amend the Employment Agreement, effective as of the
date first above written unless otherwise noted, as follows:

1. Effective January 1, 2009, a new definition shall be added to Section 1.1 of the Employment
Agreement (Definitions) as follows:

“Section 409A” means Section 409A of the Code and the regulations of the
Treasury and other applicable guidance promulgated thereunder.

2. Effective January 1, 2009, the definition of “Good Reason” in Section 1.1 of the Employment
Agreement shall be deleted in its entirety and replaced with the following:

“Good Reason” means the occurrence of any one or more of the following
conditions; provided, however, that no such condition shall be deemed
to constitute “Good Reason” unless the Executive provides notice of such
condition to the Company within ninety (90) days of its initial existence, and
the Company shall have failed to remedy the condition within thirty (30) days
of its receipt of such notice:

(i) any material diminution in the Executive’s Salary below the annualized rate
in effect on the date on which a Change in Control shall have occurred, unless
such reduction is implemented for the senior executive staff generally,
provided, however that such reduction shall constitute Good Reason even
if implemented for senior executive
staff generally if such reduction occurs within two years after a Change in
Control;

 

- 2 -

 

(ii) any material negative change in the aggregate benefits the Executive
receives, other than as a result of the normal expiration of any Plan as to
other eligible employees in accordance with its terms as in effect on the date
preceding the date on which a Change in Control shall have occurred, or unless
such change affects all participants of such Plan generally;

(iii) without the Executive’s express prior written consent, a material
diminution of the Executive’s position, duties, responsibilities and status
with the Company immediately prior to a Change in Control, or any material
diminution in the Executive’s responsibilities as an executive of the Company
as compared with those he had as an executive of the Company immediately prior
to a Change in Control, or any material negative change in the Executive’s
titles or office as in effect immediately prior to a Change in Control, except
in connection with the termination of the Executive’s employment for Cause,
Disability or Retirement or as a result of the Executive’s death, or by his
termination of his employment other than for Good Reason;

(iv) without the Executive’s express prior written consent, the imposition of a
requirement by the Company that the Executive be based at any location in
excess of fifty (50) miles from the location of the Executive’s office on the
date preceding the date on which a Change in Control shall have occurred;

(vi) the failure by the Company to obtain from any Person with which it may
merge or consolidate or to which it may sell all or substantially all of its
assets, the agreement of such Person as set forth in the proviso in Section 5.6
hereof; provided that such merger, consolidation or sale constitutes a
Change in Control; or

(vii) within two years after a Change in Control shall have occurred, any
action or inaction that constitutes a material breach by the Company of any of
the terms and conditions of this Agreement.

3. The first sentence of Section 2.3(a) of the Employment Agreement shall be deleted and
replaced with the following:

The Executive agrees to serve as Executive Vice President during the Term.

 

- 3 -

 

4 The first sentence of Section 2.4(a) of the Employment Agreement shall be deleted and
replaced with the following:

For all services rendered by the Executive under this Agreement, the Company
shall pay the Executive a salary during the Term at a rate of not less than
THREE HUNDRED SEVENTY-FIVE THOUSAND AND
00/100 DOLLARS ($375,000.00) per year, which may be increased but not decreased
unless decreased for the senior executive staff generally (the “Salary”),
payable in installments in accordance with the Company’s policy from time to
time in effect for payment of salary to its executives.

5. Section 3.3(b)(i) of the Employment Agreement shall be deleted and replaced with the
following:

If the Executive’s employment is terminated pursuant to Paragraphs (a) or (b)
in Section 3.1 hereof, then the Executive (or his legal representative, as
applicable) shall be entitled to receive a severance payment from the Company
in an aggregate amount equal to the product of (A) 1.5 times (B) the
Executive’s Salary plus an amount equal to the average of the three
most recent annual cash incentive payments (each an “ACIP”) made to the
Executive; provided that any such severance payment shall be reduced by
the amount of payments the Executive receives under any life or disability
insurance policies with respect to which the premiums were paid by the Company.

6. Section 3.3(b)(ii) of the Employment Agreement shall be deleted and replaced with the
following:

If the Executive’s employment is terminated pursuant to Paragraph (e) or (f) in
Section 3.1 hereof, then the Executive shall be entitled to receive a severance
payment from the Company in an aggregate amount equal to the product of (A) 1.5
times (B) the Executive’s Salary plus an amount equal to the
average of the three most recent ACIP payments made to the Executive.

7. The first sentence of Section 3.3(c)(ii) of the Employment Agreement shall be amended
by substituting “eighteen (18) months” for “twelve (12) months.”

8. Section 3.4(a) of the Employment Agreement shall be deleted and replaced with the
following:

The Executive shall be entitled to receive a severance payment from the Company
in an aggregate amount equal to the product of (i) 2; and (ii) the greater of:

(1) the sum of the Executive’s Salary plus the Executive’s target
ACIP in effect as of the Termination Date; or

(2) the sum of the Executive’s Salary as of the Termination Date
plus the Executive’s average ACIP for the three (3) calendar years
prior to the calendar year in which the Termination Date occurs.”

 

- 4 -

 

Such payment shall be made, subject to Section 3.7, sixty (60) days following
the Executive’s termination of employment; provided, however, that, if
and to the extent any payments under this Section 3.4 constitute deferred
compensation subject to Section 409A, then, unless the Change in Control
qualifies as a change in the ownership of the Company, a change in effective
control of the Company, or a change in the ownership of a substantial portion
of the assets of the Company, as described in Treasury Regulations Section
1.409A-3(i)(5), such payment shall be made at the times specified in Section
3.3(b)(iii) of the Employment Agreement. The severance payment(s) required to
be made by the Company to the Executive pursuant to this Section 3.4(a) shall
be in lieu of, and not in addition to, any other severance payments required to
be paid by the Company to the Executive.

9. The first sentence of Section 3.4(b) of the Employment Agreement shall be amended by
substituting “twenty-four (24) months” for “eighteen (18) months.”

10. Effective January 1, 2009, Section 3.4(c)(ii) of the Employment Agreement shall be deleted
and replaced with the following:

(ii) to the extent that any such stock options, stock appreciation rights,
restricted stock grants, stock bonuses, long-term incentives or similar
benefits shall require by their terms the exercise thereof by the Executive,
the last date to exercise the same shall, notwithstanding any provision to the
contrary in any agreement or Plan, be the earliest of (A) the later to occur of
the fifteenth day of the third month following the date on which, or the
December 31 of the calendar year in which, any such stock options, stock
appreciation rights, restricted stock grants, stock bonuses, long-term
incentives or similar benefits would otherwise have expired if not extended,
(B) the original expiration date had the Executive’s employment not so
terminated, and (C) with respect only to a stock option or stock appreciation
right, the tenth anniversary of the date of grant of such stock right;

11. Effective January 1, 2009, Section 3.5 of the Employment Agreement shall be renumbered as
Section 3.5(a) and retitled “Release and Restrictive Covenants,” and the first sentence of Section
3.5(a) of the Employment Agreement shall be deleted and replaced with the following:

Within ten (10) days of the Executive’s termination of employment, the Company
shall provide the Executive with a release substantially in the form of
Exhibit A attached hereto (the “Release”). The Executive’s right to
receive the severance payments and benefits pursuant to Sections 3.3 and 3.4
hereof is expressly conditioned upon (i) receipt by the Company of the Release
executed by the Executive within forty-five (45) days of receipt by the
Executive of such Release, and the expiration of the revocation period
described therein without such
Release having been revoked, and (ii) the compliance by the Executive with the
covenants, terms and provisions of Sections 4.1 and 4.2 hereof (the
“Restrictive Covenants”).

 

- 5 -

 

12. A new Section 3.5(b) of the Employment Agreement shall be added as follows:

(b) Performance-Based Compensation. Upon the expiration of the initial
three (3) year period of the Term, during any calendar year in which the
Executive is a “covered employee,” as defined in Section 162(m)(3) of the Code,
if any ACIP entitlements or stock-based awards of the Executive are intended to
qualify as “performance based compensation” within the meaning of Section
162(m) of the Code, then the Executive shall not be entitled to any severance
payments based on his ACIP payments or accelerated vesting of his stock-based
awards pursuant to Section 3.3 or 3.4 of this Agreement if and to the extent
that such payments or accelerated vesting would cause any portion of such ACIP
entitlements or stock-based awards to fail to be deductible pursuant to Section
162(m) of the Code.

13. Effective January 1, 2009, Section 3.6(d) of the Employment Agreement shall be deleted in
its entirety and replaced with the following:

Application of Section 409A. Notwithstanding anything in this Section
3.6 to the contrary, all Gross-Up Payments shall be made by the end of the
Executive’s taxable year next following the taxable year in which he remits the
related taxes to the applicable taxing authorities.

14. Effective January 1, 2009, Section 3.7 of the Employment Agreement shall be deleted in its
entirety and replaced with the following:

(a) Specified Employee Provisions. “Notwithstanding anything herein to
the contrary, if the Executive is a “specified employee,” as defined under
Section 409A, of the Company, as determined by the Board or the Compensation
Committee of the Company or the Company’s parent company from time to time,
upon the date of his “separation from service,” as defined in Section 409A,
from the Company (his “Separation from Service”), then, to the extent any
payment or provision of benefits under this Agreement upon the Executive’s
Separation from Service is subject to Section 409A of the Code, no such payment
shall be made and the Executive shall be responsible for the full cost of such
benefits for six (6) months following the Executive’s Separation from Service;
provided, however, that such six month delay of payments shall not
apply to any payments or benefits that are not subject to Section 409A,
including the following: (a) any severance or other payments that become due
and payable during the period commencing with the date of the Executive’s date
of termination of employment and ending on March 15 of the succeeding calendar
year and which qualify as “short term deferral payments” under Section 409A,
and

 

- 6 -

 

(b) any remaining severance or other payments paid after the Executive’s
Separation from Service to the extent (i) that the dollar amount of such
payments does not exceed two (2) times the lesser of (x) the Executive’s
annualized compensation (based on the Executive’s annual rate of pay for the
calendar year preceding the calendar year in which the separation from service
occurred, adjusted to reflect any increase during such calendar year which was
expected to continue indefinitely had the Executive’s separation from service
not occurred) or (y) the maximum amount of compensation that may be taken into
account under a qualified plan pursuant to Section 401(a)(17) of the Code for
the calendar year in which the separation from service occurred, and (ii) such
severance or other payments are to be made to the Executive no later than the
last day of the second calendar year following the calendar year in which the
Separation from Service occurs. For purposes of Section 409A, the severance
payments and each monthly provision of severance benefits under Sections 3.3
and 3.4 of this Agreement shall be treated as a right to a series of
separate payments.

(b) Amendments and Acknowledgements. All payments to the Executive
pursuant to this Agreement are intended to comply with, or to be exempt from,
the requirements of Section 409A of the Code. The Company and Executive agree
that they will consider in good faith any and all amendments to this Agreement
either may deem necessary to ensure compliance with the provisions of Section
409A of the Code. However, the Executive acknowledges that, notwithstanding
the 409A Payment set forth in Section 3.7 of this Agreement, the Executive
bears the entire risk of any adverse Federal and State tax consequences and
penalty taxes in the event any payment pursuant to this Agreement is deemed to
be subject to Section 409A of the Code and that no representations have been
made to the Executive relating to the tax treatment of any payment pursuant to
this Agreement under Section 409A of the Code and the corresponding provisions
of any applicable State income taxation laws [(including California income
taxation laws)].”

 

- 7 -

 

15. Effective January 1, 2009, the second sentence in Section 5.1 of the Employment Agreement
shall be deleted and replaced with the following:

Assuming a payment or otherwise is due to the Executive under this Agreement,
the Company may offset against any amount due to the Executive under this
Agreement only those amounts due to the Company in respect of any undisputed,
liquidated obligation of the Executive to the Company; provided,
however, that any amount due to
the Company by the Executive shall first be applied to offset amounts due to
the Executive under this Agreement that are not deferred compensation subject
to Section 409A, and then, to the extent applicable, to offset amounts due to
the Executive under this Agreement that are deemed to be deferred compensation
subject to Section 409A; and further provided that, if and to
the extent required to satisfy the provisions of Treasury Regulation Section
1.409A-3(j)(xiii), any debt of the Executive to the Company may be offset
against any amount due to the Executive under this Agreement that constitutes
deferred compensation subject to Section 409A only if (a) such debt is incurred
in the ordinary course of the service relationship between the Executive and
the Company, (b) the entire amount of the offset is limited to $5,000 in any of
the Company’s taxable years, and (c) the offset is made at the same time and in
the same amount as the debt otherwise would have been due and collected from
the Executive.

16. All other provisions of the Employment Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, the Company and the Executive have executed this Amendment effective as of
the date above written.

	 	 	 	 	 
	 	SELECTIVE INSURANCE COMPANY OF AMERICA

 	 
	 	By:  	/s/ Victor N. Daley
 	 
	 	 	Victor N. Daley 	 
	 	 	Its Executive Vice President, Human Resources 	 
	 
	 	EXECUTIVE

 	 
	 	/s/ Eduard J. Pulkstenis
 	 
	 	Eduard J. Pulkstenis 	 
	 	 	 
	 

 

- 8 -Filed by Bowne Pure Compliance

 

Execution Version

Exhibit 10.1

MEMBERSHIP INTERESTS

PURCHASE AGREEMENT

BY AND AMONG

NEWPARK RESOURCES, INC.,

NEWPARK DRILLING FLUIDS LLC,

NEWPARK TEXAS, L.L.C.,

CCS INC.,

AND

CCS ENERGY SERVICES LLC

Dated as of April 16, 2008

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE I DEFINITIONS; INTERPRETATION
	 	 	2	 
	 
	 	 	 	 
	1.1 Defined Terms
	 	 	2	 
	1.2 Other Definitions
	 	 	8	 
	1.3 Interpretation; Absence of Presumption
	 	 	10	 
	1.4 Headings; Definitions
	 	 	11	 
	 
	 	 	 	 
	ARTICLE II THE SALE
	 	 	11	 
	 
	 	 	 	 
	2.1 Agreement to Purchase and Sell; Non-assumed Liabilities
	 	 	11	 
	2.2 Consideration
	 	 	12	 
	2.3 Closing
	 	 	13	 
	2.4 Working Capital Price Adjustment
	 	 	16	 
	2.5 Purchase Price Allocation
	 	 	18	 
	2.6 Further Assurances
	 	 	18	 
	 
	 	 	 	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES OF NEWPARK
	 	 	19	 
	 
	 	 	 	 
	3.1 Organization and Qualification
	 	 	19	 
	3.2 Capitalization of the Transferred Entities
	 	 	19	 
	3.3 Authority Relative to This Agreement
	 	 	20	 
	3.4 Consents and Approvals; No Violations
	 	 	20	 
	3.5 Compliance with Law
	 	 	21	 
	3.6 Financial Statements; Liabilities
	 	 	21	 
	3.7 Absence of Certain Changes or Events
	 	 	22	 
	3.8 Litigation
	 	 	22	 
	3.9 Permits
	 	 	23	 
	3.10 Employee Benefits; Labor Matters
	 	 	23	 
	3.11 Brokers
	 	 	25	 
	3.12 Taxes
	 	 	26	 
	3.13 Environmental Matters
	 	 	26	 
	3.14 Title; Condition and Sufficiency of Assets
	 	 	27	 
	3.15 Intellectual Property
	 	 	28	 
	3.16 Material Contracts
	 	 	28	 
	3.17 Real Property
	 	 	29	 
	3.18 Inventory
	 	 	30	 
	3.19 Accounts Receivable
	 	 	30	 
	3.20 Insurance
	 	 	30	 
	3.21 Customers and Suppliers
	 	 	31	 
	3.22 Bank Accounts
	 	 	31	 
	3.23 Illegal Payments
	 	 	31	 
	3.24 No Other Representations or Warranties
	 	 	31	 
	 
	 	 	 	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER AND CCS
	 	 	32	 
	 
	 	 	 	 
	4.1 Organization and Qualification
	 	 	32	 
	4.2 Authority Relative to This Agreement
	 	 	32	 
	4.3 Consents and Approvals; No Violations
	 	 	32	 
	4.4 Financing
	 	 	33	 
	4.5 Brokers
	 	 	33	 
	4.6 Acquisition of Transferred Interests
	 	 	33	 
	4.7 Limitation of Newpark’s Warranties
	 	 	33	 

 

i

 

	 	 	 	 	 
	ARTICLE V COVENANTS
	 	 	34	 
	 
	 	 	 	 
	5.1 Access
	 	 	34	 
	5.2 Efforts
	 	 	34	 
	5.3 Further Assurances
	 	 	38	 
	5.4 Conduct of Business
	 	 	38	 
	5.5 Consents
	 	 	39	 
	5.6 Public Announcements
	 	 	39	 
	5.7 No Shop
	 	 	40	 
	5.8 Intercompany Accounts
	 	 	40	 
	5.9 Termination of Intercompany Agreements
	 	 	40	 
	5.10 Use of Names, etc.
	 	 	40	 
	5.11 Litigation Support
	 	 	40	 
	5.12 Noncompetition; Nonsolicitation
	 	 	41	 
	5.13 Labor Matters
	 	 	42	 
	5.14 Environmental Inspection
	 	 	42	 
	5.15 Bayou Choctaw Site
	 	 	45	 
	5.16 NEWS Assets
	 	 	46	 
	5.17 Post-Closing Covenants
	 	 	46	 
	 
	 	 	 	 
	ARTICLE VI EMPLOYEE MATTERS COVENANTS
	 	 	46	 
	 
	 	 	 	 
	6.1 Employees and Compensation
	 	 	46	 
	6.2 Welfare Benefits Plans
	 	 	47	 
	6.3 Miscellaneous Employee Issues
	 	 	48	 
	 
	 	 	 	 
	ARTICLE VII TAX MATTERS
	 	 	49	 
	 
	 	 	 	 
	7.1 Liability for Taxes and Related Matters
	 	 	49	 
	7.2 Transfer Taxes
	 	 	51	 
	 
	 	 	 	 
	ARTICLE VIII CONDITIONS TO OBLIGATIONS TO CLOSE
	 	 	51	 
	 
	 	 	 	 
	8.1 Conditions to Obligation of Each Party to Close
	 	 	51	 
	8.2 Conditions to Purchaser’s Obligation to Close
	 	 	51	 
	8.3 Conditions to DFI’s and Newpark Texas’ Obligations to Close
	 	 	53	 
	 
	 	 	 	 
	ARTICLE IX TERMINATION
	 	 	53	 
	 
	 	 	 	 
	9.1 Termination
	 	 	53	 
	9.2 Notice of Termination
	 	 	56	 
	9.3 Effect of Termination
	 	 	56	 

 

ii

 

	 	 	 	 	 
	ARTICLE X SURVIVAL AND INDEMNIFICATION
	 	 	57	 
	 
	 	 	 	 
	10.1 Survival Periods
	 	 	57	 
	10.2 Indemnification by Newpark, DFI and Newpark Texas
	 	 	58	 
	10.3 Indemnification by Purchaser and CCS
	 	 	58	 
	10.4 Third-Party Claims
	 	 	58	 
	10.5 Limitations
	 	 	59	 
	10.6 Disregard of Materiality
	 	 	60	 
	10.7 Mitigation; Additional Indemnification Provisions
	 	 	60	 
	10.8 Exclusive Remedies
	 	 	60	 
	10.9 Tax Indemnification Matters
	 	 	60	 
	 
	 	 	 	 
	ARTICLE XI MISCELLANEOUS
	 	 	61	 
	 
	 	 	 	 
	11.1 Counterparts
	 	 	61	 
	11.2 Governing Law; Jurisdiction and Forum; Waiver of Jury Trial
	 	 	61	 
	11.3 Entire Agreement
	 	 	61	 
	11.4 Expenses
	 	 	62	 
	11.5 Notices
	 	 	62	 
	11.6 Successors and Assigns
	 	 	63	 
	11.7 Third-Party Beneficiaries
	 	 	63	 
	11.8 Amendments and Waivers
	 	 	63	 
	11.9 Severability
	 	 	63	 

 

iii

 

SCHEDULES

	 	 	 	 	 
	Schedule 1.3

	 	–
	 	Knowledge of Newpark
	Schedule 3.2(a)

	 	–
	 	Capitalization of the Transferred Interests
	Schedule 3.2(c)

	 	–
	 	Capitalization of Transferred Entities
	Schedule 3.4

	 	–
	 	Consents and Approvals
	Schedule 3.6(a)

	 	–
	 	Financial Statements
	Schedule 3.6(b)

	 	–
	 	Interim Financial Statements
	Schedule 3.6(d)

	 	–
	 	Internal Controls
	Schedule 3.7

	 	–
	 	Absence of Certain Changes or Events
	Schedule 3.8

	 	–
	 	Litigation
	Schedule 3.9

	 	–
	 	Permits
	Schedule 3.10(a)

	 	–
	 	Employee Benefits
	Schedule 3.10(b)

	 	–
	 	Compliance with ERISA and Code Section 409A
	Schedule 3.10(c)

	 	–
	 	Contributions or Payments
	Schedule 3.10(f)

	 	–
	 	Current Employees
	Schedule 3.10(j)

	 	–
	 	Employee Benefits, Labor Matters
– Claims and Accidents
	Schedule 3.12

	 	– 	 	Tax Matters
	Schedule 3.13(a)

	 	–
	 	Environmental Matters
	Schedule 3.13(b)

	 	–
	 	Environmental Permits
	Schedule 3.13(c)

	 	–
	 	Environmental Compliance
	Schedule 3.13(d)

	 	–
	 	Third Party Disposal Sites
	Schedule 3.14(a)

	 	–
	 	Title
	Schedule 3.14(b)

	 	–
	 	Condition of Assets
	Schedule 3.15(a)

	 	–
	 	Transferred Intellectual Property
	Schedule 3.15(c)

	 	–
	 	Infringement Matters
	Schedule 3.16

	 	–
	 	Material Contracts
	Schedule 3.17(a)

	 	–
	 	Owned Real Property
	Schedule 3.17(b)

	 	–
	 	Leased Real Property
	Schedule 3.19

	 	–	 	Accounts Receivable
	Schedule 3.20

	 	– 	 	Insurance Policies
	Schedule 3.21

	 	– 	 	Customers and Suppliers
	Schedule 3.22

	 	–
	 	Bank Accounts
	Schedule 5.4

	 	–
	 	Conduct of Business
	Schedule 5.9

	 	–
	 	Intercompany Agreements
	Schedule 5.12(c)

	 	–
	 	Nonsolicitation of Employees
	Schedule 5.17(b)

	 	–
	 	Fourchon Sublease Term Sheet
	Schedule 6.1(b)

	 	–
	 	Excluded Post-Closing Benefits
	Schedule 6.2(f)

	 	–
	 	Severance Benefits
	Schedule 8.2(g)

	 	–
	 	Lafayette Sublease Term Sheet
	Schedule 8.2(h)

	 	–
	 	Additional Conditions
	Schedule 10.2(d)

	 	–
	 	Indemnification
	 
	 	 	 	 
	Exhibit A

	 	–
	 	Form of Deposit Escrow Agreement

 

iv

 

MEMBERSHIP INTERESTS PURCHASE AGREEMENT

This MEMBERSHIP INTERESTS PURCHASE AGREEMENT (this “Agreement”), dated as of April 16,
2008, is entered into by and among Newpark Resources, Inc., a Delaware corporation
(“Newpark”), Newpark Drilling Fluids LLC, a Texas limited liability company and a direct
wholly-owned subsidiary of Newpark (“DFI”), Newpark Texas, L.L.C., a Louisiana limited
liability company and an indirect wholly-owned subsidiary of Newpark (“Newpark Texas”), CCS
Inc., an Alberta corporation (“CCS”) and CCS Energy Services LLC, a Louisiana limited
liability company (“Purchaser”), and an Affiliate of CCS.

RECITALS

WHEREAS, DFI owns all of the outstanding membership interests of Newpark Environmental
Services LLC, a Texas limited liability company (“NESI”);

WHEREAS, NESI owns (i) all of the outstanding membership interests of Newpark Environmental
Management Company, L.L.C., a Louisiana limited liability company (“NESI Management”), and
(ii) all of the outstanding limited partner interests in Newpark Environmental Services
Mississippi, L.P., a Mississippi limited partnership (“NESI Mississippi”);

WHEREAS, Newpark Texas owns all of the outstanding general partner interest in NESI
Mississippi;

WHEREAS, NESI and its Subsidiaries are engaged in the business of receiving, transferring,
processing and disposal of non-hazardous exploration and production waste generated in the oil and
gas industry and the processing and disposal of non-hazardous industrial waste generated by
refiners, manufacturers, service companies and industrial municipalities located primarily in the
United States Gulf Coast area;

WHEREAS, DFI desires to sell and transfer all of its interest in NESI and Newpark Texas
desires to sell and transfer all of its general partner interest in NESI Mississippi;

WHEREAS, Purchaser desires to purchase from DFI all of its interest in NESI and from Newpark
Texas all of its interest in NESI Mississippi; and

WHEREAS, the parties desire to make certain representations, warranties, covenants and
agreements in connection with this Agreement.

NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth and other good
and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and
intending to be legally bound, the parties hereby agree as follows:

 

 

ARTICLE I

DEFINITIONS; INTERPRETATION

1.1 Defined Terms. For the purposes of this Agreement, the following terms shall have the following meanings:

(a) “Acquired Interests” shall mean all of the outstanding (i) membership interests in
NESI, and (ii) general partner interests in NESI Mississippi.

(b) “Action” shall mean any action, claim, suit, arbitration, litigation, proceeding
or investigation by any Person or by or before any Governmental Entity.

(c) “Affiliate” shall mean, with respect to any Person, any other Person that
directly, or through one or more intermediaries, controls or is controlled by or is under common
control with such Person; provided, that, after the Closing, (i) none of the Transferred Entities
shall be considered an Affiliate of Newpark or any of Newpark’s Affiliates and (ii) none of Newpark
or any of Newpark’s Affiliates shall be considered an Affiliate of any Transferred Entity. For
purposes of this Agreement, “control” shall mean, as to any Person, the power to direct or cause
the direction of the management and policies of such Person, whether through the ownership of
voting securities, by contract or otherwise (and the terms “controlled by” and “under common
control with” shall have correlative meanings).

(d) “Benefit Plan” shall mean any “employee benefit plan,” as defined in Section 3(3)
of ERISA (whether or not subject to ERISA), and any other plan, policy, program, practice,
agreement, understanding or arrangement (whether written or oral) providing compensation or other
benefits to any current or former director, officer, manager, member, employee or consultant (or to
any dependent or beneficiary thereof) of a Transferred Entity, which is now (or was within the past
six (6) years) maintained, sponsored or contributed to by Newpark or its Subsidiaries, under which
any Transferred Entity has any present or future obligation or liability, whether actual or
contingent, including but not limited to all profit-sharing, bonus, stock option, stock purchase,
stock appreciation, restricted stock, phantom stock, or other stock or equity-based compensation,
pension, retirement, severance, deferred compensation, excess benefit, supplemental unemployment,
post-retirement medical or life insurance, welfare, flexible benefit, cafeteria, incentive, sick
leave, long-term disability, medical, hospitalization, life insurance, other insurance or employee
benefit plan.

(e) “Business” shall collectively mean the business conducted by the Transferred
Entities relating to (x) the receiving, transferring, processing and disposal of non-hazardous
exploration and production wastes generated in the oil and gas industry that is exempt from RCRA,
including waste that is contaminated with naturally occurring radioactive materials
(“NORM”), primarily for generators in the United States Gulf Coast and Permian Basin areas,
and (y) the processing and disposal of non-hazardous industrial wastes generated by refiners,
manufacturers, service companies and industrial municipalities located primarily in the United
States Gulf Coast.

(f) “Business Day” shall mean any day that is not a Saturday, a Sunday or other day on
which commercial banks in the City of Houston, Texas, are required or authorized by Law to be
closed.

(g) “COBRA Continuation Coverage” shall mean the continuation coverage requirements
under Code Section 4980B and Part 6 of Title I of ERISA, or comparable provisions of state and
local Law.

 

2

 

(h) “Code” shall mean the U.S. Internal Revenue Code of 1986, as amended.

(i) “Confidentiality Agreement” shall mean the Confidentiality Agreement dated March
31, 2007, by and between Newpark and CCS Income Trust.

(j) “Contract” shall mean any agreement, indenture, deed of trust, note, bond,
mortgage, lease, license, commitment, guarantee, purchase order, contract, obligation or
undertaking (whether written or oral and whether express or implied).

(k) “Divested Assets” shall mean any assets, business unit or business operation
owned, operated or conducted by any Transferred Entity or by Purchaser (including its Affiliates
and Subsidiaries) at any time prior to the Closing Date, the divestiture of which (or the execution
of a consent decree that contemplates a divestiture) is required by any Governmental Entity as a
condition to a consent or approval of such Governmental Entity, or the expiration or termination of
the waiting period (or extension thereof) under the HSR Act, necessary for the consummation of the
Closing.

(l) “Environmental Laws” shall mean any Law relating to pollution or the protection of
the environment or natural resources; to releases, discharges, emissions or disposals to air,
water, land or groundwater of Hazardous Materials; to the use, handling, transport, release or
disposal of polychlorinated biphenyls, asbestos or urea formaldehyde or any other Hazardous
Material; to the treatment, storage, disposal or management of Hazardous Materials; including the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601, et seq.
(“CERCLA”), the Resource Conservation and Recovery Act, 42 U.S.C. 6901, et seq.
(“RCRA”), the Toxic Substances Control Act, 15 U.S.C. 2601, et seq. (“TSCA”), the
Clean Air Act, 42 U.S.C. 7401, et seq., the Federal Water Pollution Control Act, 33 U.S.C. 1251,
et seq., the Safe Drinking Water Act, 42 U.S.C. 300f, et seq., the Emergency Planning and
Community Right to Know Act, 42 U.S.C. 11001, et seq. (“EPCRA”); and other comparable
foreign, state and local Laws, including the Texas Natural Resources Code (only insofar as it
relates to pollution or the protection of the environment or natural resources), and all rules,
regulations and guidance documents promulgated pursuant thereto or published thereunder.

(m) “Environmental Permits” means all Permits issued by Governmental Entities that are
required under Environmental Laws in connection with the Business.

(n) “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.

(o) “Former Employee” shall mean an individual who, as of immediately prior to the
Closing, is not a current employee of Newpark or any of its Affiliates (including the Transferred
Entities, DFI and Newpark Texas) in any capacity but who, during any period prior to the Closing,
was primarily employed by the Transferred Entities, Newpark Texas, DFI, Newpark or its other
Subsidiaries in connection with the Business (as opposed to the other businesses of Newpark, its
Subsidiaries or Affiliates).

(p) “GAAP” shall mean generally accepted accounting principles in the United States as
in effect at the time the applicable financial statements were prepared.

 

3

 

(q) “Governmental Entity” shall mean any court, administrative agency, commission or
other governmental authority, body or instrumentality, federal, state, local, domestic or foreign
governmental or regulatory authority or any self-regulatory authority or arbitral or similar forum.

(r) “Hazardous Materials” shall mean each and every element, compound, chemical
mixture, contaminant, pollutant, material, waste or other substance which is defined, determined or
identified as hazardous or toxic under Environmental Laws or the release of which is regulated
under Environmental Laws. Without limiting the generality of the foregoing, the term includes:
“hazardous substances” as defined in CERCLA; “extremely hazardous substances” as defined in EPCRA;
“hazardous waste” as defined in RCRA; crude oil, petroleum products or any fraction thereof;
radioactive materials including source, byproduct or special nuclear materials; asbestos or
asbestos-containing materials; chlorinated fluorocarbons; and radon.

(s) “HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

(t) “Indebtedness” means, without duplication: (i) the principal of and premium (if
any) in respect of all indebtedness for borrowed money, including accrued interest, (ii) bank
overdrafts (excluding undrawn lines) and outstanding checks to the extent treated as negative cash,
accounts payable, bank overdrafts or otherwise included as debt in the financial statements of the
Transferred Entities (it being understood that only the amount of such bank overdraft or the
portion of the check that is treated as negative cash, accounts payable, bank overdraft or debt
shall be treated as “Indebtedness”), and (iii) lease obligations that are properly
classified as a capital lease on a balance sheet in accordance with GAAP (“Capital
Leases”); provided, that “Indebtedness” shall not include (A) trade payables, accrued expenses
and intercompany or intracompany liabilities arising in the ordinary course of business, or (B) any
liability for Taxes.

(u) “Intellectual Property” means all U.S. and foreign or multinational intellectual
property, including all trademarks, service marks and trade names (“Trademarks”), mask
works, inventions, patents, copyrights and copyrightable works, trade secrets and know-how
(including any registrations or applications for registration of any of the foregoing) and all
other similar types of proprietary intellectual property rights arising under the Laws of any
country or jurisdiction.

(v) “Inventory” means all inventory of each of the Transferred Entities, wherever
located, including raw materials, works-in-progress, finished goods, consigned goods, supplies,
scrap, wrappings, supply and packaging terms, containers and spare parts.

(w) “Law” shall mean any federal, state, local or foreign law (including common law),
statute, ordinance, rule, regulation, judgment, code, order, injunction, decree, arbitration award,
agency requirement, license or permit of any Governmental Entity.

(x) “Liens” shall mean all liens, pledges, charges, claims, security interests,
purchase agreements, options, title defects, restrictions on transfer, imperfections of title,
easements,
encroachments, options, rights of first refusal, rights of first offer or other encumbrances
and agreements of any nature whatsoever, whether consensual, statutory or otherwise; provided,
that, with respect to the Transferred Interests, “Liens” shall not include any of the foregoing
described in Section 3.2(a) of the Newpark Disclosure Schedule.

 

4

 

(y) “Losses” shall mean all losses, costs, charges, expenses (including interest and
penalties due and payable with respect thereto and reasonable attorneys’ and other professional
fees and expenses in connection with any Action whether involving a third-party claim or any claim
solely between the parties hereto), obligations, liabilities, settlement payments, awards,
judgments, fines, penalties, damages, demands, claims, assessments or deficiencies.

(z) “Material Adverse Effect” shall mean any event, circumstance, change or effect
that has or would reasonably be expected to have a material adverse effect on the Business, results
of operations or financial condition of the Transferred Entities, taken as a whole; provided,
however, that no change or effect arising out of or resulting from any of the following shall be
deemed by itself or by themselves, either alone or in combination, to constitute or contribute to a
Material Adverse Effect:

(i) general changes affecting the industries or markets in which the Business operates,
provided, that any such change does not have or cause a disproportionate effect on the
Transferred Entities as compared to other similar business in the geographic areas in which
the Transferred Entities are operating;

(ii) general political or economic conditions or changes therein (including the
commencement, continuation or escalation of a war, material armed hostilities or other
material international or national calamity or acts of terrorism or earthquakes, hurricanes,
other natural disasters or acts of God), provided that with respect to earthquakes,
hurricanes, other natural disasters or acts of God, any such events do not have or cause a
disproportionate effect on the Transferred Entities as compared to other similar business in
the geographic areas in which the Transferred Entities are operating;

(iii) general financial or capital market conditions, including interest rates or
currency exchange rates, or changes therein;

(iv) any changes in applicable Law or GAAP or other accounting standards, or
authoritative interpretations thereof, from and after the date of this Agreement, provided,
that any such change in Law does not make it illegal for the Transferred Entities to
continue to conduct the Business in substantially the same manner in which it is conducted
on the date of this Agreement;

(v) the announcement of the potential sale of the Business; the negotiation, execution,
announcement or existence of this Agreement or the consummation of the transactions
contemplated by this Agreement; or changes or actions directly resulting from any of the
foregoing, including any change in the relationships of the Transferred Entities with their
respective customers, suppliers or employees; and

(vi) any action or omission required pursuant to the terms of this Agreement, or
pursuant to the express written request of Purchaser.

 

5

 

(aa) “Newpark Change of Control” shall mean (i) a merger or consolidation of Newpark
with or into any other corporation or other entity or Person or (ii) a sale, lease, exchange or
other transfer in one transaction or series of related transactions of all or substantially all of
Newpark’s outstanding securities or all or substantially all of Newpark’s assets; provided, that
the following events shall not constitute a “Newpark Change of Control”: (A) a merger or
consolidation of Newpark in which the holders of the voting securities of Newpark immediately prior
to the merger or consolidation hold at least a majority of the voting securities in the successor
corporation immediately after the merger or consolidation; (B) a sale, lease, exchange or other
transfer in one transaction or a series of related transactions of all or substantially all of
Newpark’s assets to a wholly-owned subsidiary; or (C) the reincorporation of Newpark.

(bb) “Newpark Group Health Plan” shall mean the benefit programs under Newpark’s group
benefits plan providing health, medical, prescription drug, dental and vision benefits other than
through a Section 125 health care flexible spending account.

(cc) “Organizational Documents” of any Person means, as applicable, the following
documents or equivalent governing documents: (i) the articles of incorporation and bylaws of any
Person that is a corporation, (ii) the certificate of formation and company agreement of any Person
that is a limited liability company, or (iii) the certificate of formation and partnership
agreement of any Person that is a partnership, including any amendments to any of the foregoing
documents.

(dd) “Permitted Liens” means the following Liens: (a) Liens for Taxes, assessments or
other governmental charges or levies that are not yet due or payable or that are being contested in
good faith by appropriate proceedings or that may thereafter be paid without penalty if, to the
extent required by GAAP, adequate reserves with respect thereto are maintained on the books of the
Transferred Entities in accordance with GAAP; (b) statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen, workmen, repairmen and other similar Liens imposed
by Law and on a basis consistent with past practice; (c) Liens incurred or deposits made in the
ordinary course of business and on a basis consistent with past practice in connection with
workers’ compensation, unemployment insurance or other types of social security; (d) defects or
imperfections of title, easements, covenants, rights-of-way, restrictions and other similar
non-monetary charges or encumbrances not materially detracting from the value of or materially
interfering with the use or operation of the affected property within the ordinary conduct of the
Business; (e) Liens incurred in the ordinary course of business and on a basis consistent with past
practice and the provisions of Section 5.4 hereof securing obligations or liabilities that are not
material to the Transferred Entities or the Transferred Interests; and (f) easements, covenants,
rights-of-way and other similar conditions and restrictions (i) recorded in the applicable real
property records of the county in which the affected property is located, (ii) that may reasonably
be shown or identified by survey or physical inspection of the affected property, or (iii) set
forth in applicable zoning, building and other similar regulations, so long as no such matter
identified in clauses (i), (ii) or (iii) prevents or materially hinders or interferes with the use
of such affected property substantially as currently used for the purposes of the Business.

 

6

 

(ee) “Permits” means all franchises, approvals, consents, permits, authorizations,
licenses, orders, registrations, certificates, variances or other similar rights obtained from any
Governmental Entity.

(ff) “Person” shall mean a person, group (within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended), corporation, partnership, limited liability
company, joint venture, trust or other entity or organization, including a Governmental Entity.

(gg) “Subsidiary” shall mean, with respect to any Person, any corporation, entity or
other organization whether incorporated or unincorporated, of which (i) such first Person directly
or indirectly owns or controls at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the board of directors or others
performing similar functions or (ii) such first Person is a general partner, joint venturer,
manager or managing member.

(hh) “Tax” shall mean any tax of any kind, including any federal, state, local and
foreign (including any political subdivision thereof) income, profits, license, severance,
occupation, windfall profits, capital gains, capital stock, transfer, registration, social security
(or similar), production, franchise, gross receipts, margin, payroll, sales, employment, use,
property, excise, value added, estimated, stamp, alternative or add-on minimum, environmental,
withholding and any other tax or assessment, together with all interest, penalties and additions
imposed with respect to such amounts.

(ii) “Tax Benefit” shall mean any decrease in Taxes paid or increase in a refund due,
including any interest with respect thereto.

(jj) “Tax Return” shall mean any return, declaration, report, claim for refund or
information return or statement filed or required to be filed with any taxing authority relating to
Taxes, including any schedule or attachment thereto, and including any amendment thereof.

(kk) “Transferred Employee” shall mean an individual who is, at the time of the
Closing, employed by any of the Transferred Entities, and shall include any employee of any
Transferred Entity at the time of Closing who is on short-term disability, sick leave or other
authorized leave of absence or military leave.

(ll) “Transferred Entities” shall mean NESI, NESI Management and NESI Mississippi.

(mm) “Transferred Interests” shall collectively mean (i) the Acquired Interests, (ii)
all of the outstanding membership interests in NESI Management, and (iii) all of the outstanding
limited partnership interests of NESI Mississippi.

(nn) “Treasury Regulations” shall mean the Treasury Regulations promulgated under the
Code.

(oo) “Welfare Plan” shall mean any employee welfare benefit plan within the meaning of
Section 3(1) of ERISA, any short-term disability program classified as a “payroll practice,” any
group health plan within the meaning of Code Section 105, any cafeteria plan within the
meaning of Code Section 125, any dependent care assistance program within the meaning of Code
Section 129, any adoption assistance plan within the meaning of Code Section 137, any tuition
assistance plan within the meaning of Code Section 127, and any qualified transportation plan
within the meaning of Code Section 132, other than any severance plan.

 

7

 

1.2 Other Definitions. The following terms shall have the meanings defined in the
Section indicated:

	 	 	 
	Accounting Arbitrator

	 	Section 2.4(b)
	Acquired Business

	 	Section 5.12(b)
	Acquired Company

	 	Section 5.12(b)
	Acquisition Transaction

	 	Section 5.7
	Act

	 	Section 3.2(a)
	Adjusted EBITDA

	 	Section 0
	Adjusted EBITDA Method

	 	Section 5.2(e)
	Agreed Value

	 	Section 5.2(e)
	Agreement

	 	Preamble
	Alleged Recognized Environmental Condition

	 	Section 5.14(b)
	Alleged Recognized Environmental Cost

	 	Section 5.14(c)(i)
	Allocation Statement

	 	Section 2.5
	Annual Financial Statements

	 	Section 3.6(a)
	Assignment and Assumption Agreement

	 	Section 2.3(b)(i)(C)
	ASTM E1527-05

	 	Section 5.14(a)
	Bayou Choctaw Property

	 	Section 5.15
	Capital Leases

	 	Section 1.1(t)
	CCS

	 	Preamble
	CERCLA

	 	Section 1.1(k)
	Claim

	 	Section 2.2(c)
	Closing

	 	Section 2.1(a)
	Closing Date

	 	Section 2.3(a)
	Closing Date Net Working Capital

	 	Section 2.4(b)
	Corporate Guaranty

	 	Section 5.17(a)
	Covered Business

	 	Section 5.12(a)
	Credit Agreement

	 	Section 2.1(b)(v)
	Current Assets

	 	Section 2.4(c)
	Current Liabilities

	 	Section 2.4(c)
	DCF Method

	 	Section 5.2(e)
	Deductible

	 	Section 10.5(a)
	Deposit

	 	Section 2.2(b)
	Deposit Escrow Account

	 	Section 2.2(b)
	Deposit Escrow Agreement

	 	Section 2.2(b)
	DFI

	 	Preamble
	Divestiture

	 	Section 5.2(d)(i)
	Divestiture Notice

	 	Section 5.2(e)
	Divestiture Threshold

	 	Section 5.12(b)
	DOJ

	 	Section 5.2(a)
	Due Date

	 	Section 7.1(e)

 

8

 

	 	 	 
	Effective Time

	 	Section 2.3(a)
	Environmental Dispute

	 	Section 5.14(d)
	Environmental Inspection Period

	 	Section 5.14(b)
	Environmental Report

	 	Section 5.14(b)
	EPCRA

	 	Section 1.1(k)
	EPCRS

	 	Section 3.10(a)
	Escrow Agent

	 	Section 2.2(b)
	Estimated Closing Statement

	 	Section 2.4(a)
	Estimated Net Working Capital

	 	Section 2.4(a)
	Estimated Net Working Capital Deficiency Amount

	 	Section 2.4(a)
	Estimated Net Working Capital Excess Amount

	 	Section 2.4(a)
	Final Closing Statement

	 	Section 2.4(b)
	Final Working Capital Adjustment

	 	Section 2.4(b)
	Fourchon Sublease

	 	Section 5.17(b)
	FTC

	 	Section 5.2(a)
	Governmental Consent

	 	Section 5.2(d)(i)
	Holdback Escrow Account

	 	Section 2.2(c)
	Holdback Escrow Agreement

	 	Section 2.2(c)
	Holdback Funds

	 	Section 2.2(c)
	Indemnified Parties

	 	Section 10.3
	Indemnifying Party

	 	Section 10.4
	Interim Financial Statements

	 	Section 3.6(b)
	IRS

	 	Section 3.10(a)
	Lafayette Sublease Agreement

	 	Section 8.2(g)
	Leased Real Property

	 	Section 3.17(b)
	LTM EBITDA

	 	Section 9.1(a)(x)
	Management

	 	Section 3.13(c)
	Material Contracts

	 	Section 3.16
	Minimum Claim Amount

	 	Section 10.5(a)
	NESI

	 	Recitals
	NESI Management

	 	Recitals
	NESI Mississippi

	 	Recitals
	Net Working Capital

	 	Section 2.4(c)
	Newpark

	 	Preamble
	Newpark Breach

	 	Section 9.1(a)(vi)
	Newpark Disclosure Schedule

	 	Article III
	Newpark Indemnified Parties

	 	Section 10.3
	Newpark Texas

	 	Preamble
	NEWS

	 	Section 5.16
	NEWS Permits

	 	Section 5.16
	NMIS

	 	Section 8.2(g)
	Non-assumed Liabilities

	 	Section 2.1(b)
	NORM

	 	Section 1.1(e)
	Notice of Alleged Recognized Environmental Conditions

	 	Section 5.14(b)
	Order

	 	Section 3.8
	Outside Date

	 	Section 9.1(a)(iv)

 

9

 

	 	 	 
	Owned Real Property

	 	Section 3.17(a)
	Phase I Report

	 	Section 5.14(b)
	Phase II Report

	 	Section 5.14(b)
	Post-Closing Period

	 	Section 7.1(b)
	Pre-Closing Period

	 	Section 7.1(a)
	Predecessor Entities

	 	Section 3.1(b)
	Purchase Price

	 	Section 2.2(a)
	Purchaser

	 	Preamble
	Purchaser Breach

	 	Section 9.1(a)(v)
	Purchaser Indemnified Parties

	 	Section 10.2
	RCRA

	 	Section 1.1(k)
	Real Property Lease

	 	Section 3.17(b)
	Remaining Alleged Recognized Environmental Conditions

	 	Section 5.14(c)(iii)
	Restricted Period

	 	Section 5.12(a)
	Sale

	 	Section 2.1(a)
	Selected Alleged Recognized Environmental Conditions

	 	Section 5.14(c)(iii)
	Straddle Period

	 	Section 7.1(a)
	Surviving Covenants

	 	Section 10.1
	Tax Contest

	 	Section 7.1(f)
	Trademarks

	 	Section 1.1(u)
	Transferred Intellectual Property

	 	Section 3.15(a)
	Transportation Contract

	 	Section 3.16(j)
	TSCA

	 	Section 1.1(k)
	WARN Act

	 	Section 5.13(a)

1.3 Interpretation; Absence of Presumption.

(a) For the purposes of this Agreement, “to the knowledge of Newpark” shall mean the actual
knowledge, without independent investigation, of the individuals identified in Section 1.3 of the
Newpark Disclosure Schedule.

(b) For the purposes of this Agreement, (i) words in the singular shall be held to include the
plural and vice versa and words of one gender shall be held to include the other gender as the
context requires, (ii) the terms “hereof,” “herein,” and “herewith” and words of similar import
shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Article, Section and paragraph references are to the
Articles, Sections and paragraphs to this Agreement unless otherwise specified, (iii) the word
“including” and words of similar import when used in this Agreement shall mean “including without
limitation” unless the context otherwise requires or unless otherwise specified, (iv) the word “or”
shall not be exclusive, (v) all pronouns and any variations thereof refer to the masculine,
feminine or neuter, single or plural, as the context may require and (vi) all references to any
period of days shall be deemed to be to the relevant number of calendar days unless otherwise
specified.

 

10

 

(c) This Agreement shall be construed without regard to any presumption or rule requiring
construction or interpretation against the party drafting or causing any instrument to be drafted.

1.4 Headings; Definitions. The Section and Article headings contained in this Agreement are
inserted for convenience of reference only and will not affect the meaning or interpretation of
this Agreement. All capitalized terms defined in this Agreement are equally applicable to both the
singular and plural forms of such terms.

ARTICLE II

THE SALE

2.1 Agreement to Purchase and Sell; Non-assumed Liabilities.

(a) Agreement to Purchase and Sell. Upon the terms and subject to the conditions set
forth in this Agreement, at the closing of the transactions contemplated by this Agreement (the
“Closing”), DFI and Newpark Texas shall sell, transfer, convey and assign to Purchaser, and
Purchaser shall purchase and acquire from DFI and Newpark Texas, all of DFI’s and Newpark Texas’
respective rights, title and interest in and to the Acquired Interests, free and clear of all Liens
(the “Sale”).

(b) Non-Assumption of Liabilities. Purchaser, its Affiliates and Subsidiaries (other
than the Transferred Entities following the Closing, but subject in all respects to Purchaser’s and
its Affiliates’ (including the Transferred Entities’) right to indemnification pursuant to
Section 10.2(c) for the Non-assumed Liabilities) shall not (by the execution and performance of
this Agreement, by operation of law or otherwise) assume, become responsible for, or incur any
liability or obligation for, and Newpark shall assume as of the Closing and be liable for and pay
in full, and the Transferred Entities are not intended to have any liability or obligation of any
kind (including any obligation of payment or performance), whether legal or equitable, matured or
contingent, known or unknown, foreseen or unforeseen, ordinary or extraordinary, patent or latent,
asserted prior to, at or after the date of this Agreement, relating to or arising out of any and
all of the following (each and all of which are hereinafter referred to as the “Non-assumed
Liabilities”):

(i) any severance pay obligation of any of the Transferred Entities or of Newpark
Texas, DFI, Newpark or any of its other Affiliates or Subsidiaries with respect to any
Former Employee;

(ii) any Benefit Plan (other than (A) the Change of Control Agreements listed in
Section 3.16(h)(ii) of the Newpark Disclosure Schedule between NESI and the Transferred
Employees listed therein, and (B) the liabilities and obligations of any Transferred Entity
under any Benefit Plan to the extent of any amounts with respect thereto are recorded as a
liability in the calculation of the Estimated Net Working Capital, as adjusted by the
Closing Date Net Working Capital, for which Purchaser shall be
responsible post-Closing), including, without limitation, the Newpark Group Health
Plan, and any other employee benefit plan (within the meaning of Section 3(3) of ERISA) or
any other fringe benefit program maintained or sponsored by Newpark or any of its
Subsidiaries or Affiliates or to which Newpark or any of its Subsidiaries or Affiliates
contributes or any contributions, benefits or liabilities therefor or any liability for the
withdrawal or partial withdrawal from or termination of any such plan or program by Newpark
or any of its Subsidiaries or Affiliates;

 

11

 

(iii) the litigation described in Section A of Section 3.8 of the Newpark Disclosure
Schedule;

(iv) any obligations or liabilities relating to the site or facility known as the
Guillory Land farm near Eunice, Louisiana including, but not limited to, any closure,
post-closure, monitoring, testing, analyzing, clean-up or remediation operation or lease
termination;

(v) any Indebtedness of Newpark Texas, Newpark or its other Affiliates or Subsidiaries,
including, without limitation, that arising under the current $225,000,000 Amended and
Restated Credit Agreement dated December 21, 2007 between Newpark and JPMorgan Chase Bank,
NA, as administrative agent, Calyon New York Branch, as Syndication Agent, and Bank America,
N.A., as Documentation Agent and the loan parties and lenders identified therein or its
predecessor or successor credit agreements (collectively, the “Credit Agreement”)
and any obligations or liabilities of the Transferred Entities arising out of or in
connection with their guaranteeing of the Credit Agreement or pledging their assets as
security for the Credit Agreement. Notwithstanding the foregoing, Capital Leases of the
Transferred Entities shall not be considered a Non-assumed Liability to the extent expressly
set forth in the Annual Financial Statements or Interim Financial Statements; and

(vi) any liabilities relating to or arising from (A) the Bayou Choctaw Property, or
(B) the NEWS Permits and any business operations or assets of NEWS or the Transferred
Entities pursuant to or otherwise related to the NEWS Permits.

(c) Transferred Entities’ Liabilities. The provisions of Section 2.1(b) above shall
not in any manner adversely affect, diminish or otherwise relieve the Transferred Entities from
their respective obligations to pay, discharge, perform or otherwise satisfy, as the case may be,
any and all liabilities, commitments or obligations of the Transferred Entities (other than the
Non-assumed Liabilities), subject in all respects to Purchaser’s right to seek indemnification with
respect thereto under Article X.

2.2 Consideration.

(a) In consideration for the Acquired Interests, Purchaser shall pay an aggregate amount equal
to the sum of $85,000,000, subject to the adjustments in Section 2.4(a), Section 5.2(d) and
Section 5.14(c) (the “Purchase Price”), payable as described below.

(b) Upon execution of this Agreement, Purchaser shall deliver $5,000,000 in cash (the
“Deposit”) to JPMorgan Chase Bank, NA, as escrow agent (the “Escrow Agent”) to be
held by Escrow Agent in an interest bearing account (the “Deposit Escrow Account”) in
accordance with the terms of this provision and the Deposit Escrow Agreement, dated as of the date
hereof, among Newpark, Purchaser and Escrow Agent, in the form attached hereto as Exhibit A (the
“Deposit Escrow Agreement”). The Deposit shall be distributed to Newpark and credited to
the Purchase Price at Closing, or if this Agreement is terminated pursuant to Section 9.1, shall be
distributed pursuant to Section 9.3.

 

12

 

(c) Newpark agrees that the sum of $6,112,500 (the “Holdback Funds”) otherwise payable
to Newpark as part of the Purchase Price at Closing shall be delivered by Purchaser to the Escrow
Agent pursuant to an escrow agreement mutually acceptable to Newpark, Purchaser and the Escrow
Agent (the “Holdback Escrow Agreement”) to be held by the Escrow Agent in an interest
bearing account (the “Holdback Escrow Account”) as required by the terms of the Holdback
Escrow Agreement and this provision. Newpark shall be entitled to all interest earned on the
Holdback Escrow Account except as specifically provided in this Section 2.2(c). The Holdback Funds
shall be applied towards any claims made by a Purchaser Indemnified Party pursuant to Article X
below and in accordance with the terms of the Holdback Escrow Agreement. The Purchaser Indemnified
Parties shall first seek reimbursement for any Losses for which they are entitled to receive
indemnification under this Agreement out of the funds deposited in the Holdback Escrow Account,
pursuant to the terms of the Holdback Escrow Agreement, until such funds are exhausted or released
from the Holdback Escrow Account. On the first anniversary of the Closing, the Holdback Amount
shall be reduced to an amount equal to the lesser of: (i) $3,056,250, or (ii) the remaining funds
held in the Holdback Escrow Account, and any amounts in excess of $3,056,250 shall be released to
Newpark, unless prior to that date Purchaser advises the Escrow Agent and Newpark in writing that
any claim for indemnification (each, a “Claim”) by any Purchaser Indemnified Party is
pending. Any such notice shall specify the total amount of the pending Claim(s). If such notice
is timely received by the Escrow Agent, the Escrow Agent shall release only that part of the
Holdback Escrow Account that is eligible to be released pursuant to the preceding sentence that
exceeds the total amount of any Claim(s) received, with the remaining funds to be held in the
Holdback Escrow Account until such Claim(s) are resolved. On the second anniversary of the
Closing, the remaining funds held in the Holdback Escrow Account shall be released to Newpark,
unless any Claim(s) have been made and are not resolved, in which event the Escrow Agent shall
release only that part, if any, of the Holdback Escrow Account that exceeds the total amount of
unresolved Claim(s), with the remaining funds relevant to the unresolved Claim(s) to be held in
escrow until such Claim(s) are resolved.

2.3 Closing.

(a) The Closing shall take place at the offices of Andrews Kurth LLP, 10001 Woodloch Forest
Drive, Suite 200, The Woodlands, Texas 77380 at 10:00 a.m., Houston, Texas time, on the date (the
“Closing Date”) that is one Business Day following the satisfaction or waiver of the
conditions set forth in Article VIII (other than those conditions that by their nature are to be
satisfied or waived at the Closing, but subject to the satisfaction or waiver of those
conditions) or at such other place, time or date as may be mutually agreed upon in writing by
Newpark and Purchaser. Notwithstanding the foregoing, the parties hereto intend that such Closing
shall be deemed to be effective, and the transactions contemplated by this Agreement shall be
deemed to occur simultaneously, at 11:59 p.m., Central Daylight Time, on the Closing Date (the
“Effective Time”).

 

13

 

(b) At the Closing:

(i) DFI and Newpark Texas, as applicable, shall deliver or cause to be delivered to or
for the benefit of the Purchaser, in the case of documents, duly executed by each applicable
party, the following:

(A) certificates evidencing the Acquired Interests to the extent that such
Acquired Interests are in certificate form, duly endorsed in blank or with stock
powers duly executed in proper form for transfer, and with any required stock
transfer stamps affixed thereto;

(B) to the extent that the Acquired Interests are not in certificate form, such
documents evidencing the transfer, assignment, conveyance and sale of the Acquired
Interests by DFI and Newpark Texas to Purchaser, as Purchaser may reasonably
require;

(C) an assignment and assumption agreement (the “Assignment and Assumption
Agreement”) in a form mutually acceptable to the parties pursuant to which DFI
and Newpark Texas, as applicable, shall assign the Acquired Interests to Purchaser
and Purchaser shall accept such Acquired Interests on the terms set forth in this
Agreement and in accordance with the Organizational Documents of NESI and NESI
Mississippi;

(D) resignation letters, effective as of the Effective Time, of those managers,
directors, officers or representatives of the Transferred Entities as Purchaser may
request in writing no less than five (5) Business Days prior to the Closing Date;

(E) all minute books, formation, organizational, governance and similar
“corporate” documents and records and all other files, documents, data, information,
papers, personnel and employment records and other records of the Transferred
Entities, relating to the conduct of the Business and the ownership, use and
possession of the assets of the Transferred Entities in connection therewith, in the
possession of Newpark or any of its Affiliates, other than (A) any books and records
that Newpark or any of its Affiliates is required by Law to retain the originals of,
in which case copies thereof shall be made available to Purchaser; and (B) personnel
and employment records for employees and Former Employees of Newpark or any of its
Affiliates who are not Transferred Employees; provided, that Newpark and its
Subsidiaries shall have access to, or otherwise the right to retain a copy of, all
such books and records to the extent
reasonably necessary for, and for use in connection with, Tax, regulatory,
litigation or other legitimate, non-competitive purposes;

(F) an acknowledgement from DFI and Newpark Texas of the receipt of the
Purchase Price, less the Holdback Funds;

 

14

 

(G) evidence, reasonably satisfactory to Purchaser, of the release of the Liens
and releases of liability of the Transferred Entities with respect to the payment of
the funded Indebtedness as required pursuant to Section 8.2(d);

(H) the certificate required by Section 8.2(c) hereof;

(I) a legal opinion of counsel to Newpark, DFI and Newpark Texas, dated as of
the Closing, addressed to Purchaser in the form and substance reasonably
satisfactory to Purchaser, which shall expressly entitle Purchaser’s lenders to rely
thereon;

(J) the Holdback Escrow Agreement;

(K) a resolution or other document reasonably satisfactory to Purchaser
evidencing the withdrawal as of the Effective Time of NESI, and any of the other
Transferred Entities that are “Adopting Employers” as defined in the Newpark
Resources, Inc. Savings and Incentive Plan, from said plan; and

(L) such other documents and certificates required to be delivered by DFI or
Newpark Texas pursuant to the terms of this Agreement.

(ii) The Purchaser shall deliver or cause to be delivered to or for the benefit of DFI
or Newpark Texas, as applicable, in the case of documents, duly executed, the following:

(A) the Purchase Price, less the aggregate amount of the Deposit (and any
interest earned thereon) and the Holdback Funds, in cash by wire transfer of
immediately available funds into an account or accounts designated by Newpark not
less than two (2) Business Days prior to the Closing;

(B) the Holdback Funds in cash by wire transfer of immediately available funds
to the Escrow Agent;

(C) the Assignment and Assumption Agreement;

(D) the certificate required by Section 8.3(c) hereof;

(E) the Holdback Escrow Agreement; and

(F) such other documents and certificates required to be delivered by the
Purchaser pursuant to the terms of this Agreement.

 

15

 

2.4 Working Capital Price Adjustment.

(a) For the purpose of determining the Purchase Price, at least five (5) Business Days prior
to the Closing Date, Newpark shall cause to be prepared and delivered to Purchaser a statement (the
“Estimated Closing Statement”) setting forth a good faith estimate of the Net Working
Capital (the “Estimated Net Working Capital”) and the components and calculation thereof,
as of the Effective Time, determined in accordance with this Section 2.4. The Estimated Closing
Statement shall be subject to the review and agreement of Purchaser, and Newpark and the Purchaser
shall cooperate and negotiate in good faith to resolve any dispute regarding the Estimated Closing
Statement prior to the Closing; provided, however, that if any item of dispute regarding the
Estimated Closing Statement and the calculation of the Estimated Net Working Capital is not
resolved by agreement in writing between Newpark and the Purchaser by the second Business Day prior
to the Closing Date, then Newpark’s estimate of such disputed item, together with the resolved
disputed items, shall be deemed final solely for purposes of determining the Estimated Net Working
Capital.

To the extent the Estimated Net Working Capital is greater than $6,000,000 (such difference
being herein referred to as the “Estimated Net Working Capital Excess Amount”), the
Purchase Price shall be increased by the amount of the Estimated Net Working Capital Excess Amount
as provided in Section 2.2. To the extent the Estimated Net Working Capital is less than
$6,000,000 (such difference being herein referred to as the “Estimated Net Working Capital
Deficiency Amount”), the Purchase Price shall be reduced by the amount of the Estimated Net
Working Capital Deficiency Amount as provided in Section 2.2.

(b) Within ninety (90) calendar days of the Closing Date, the Purchaser shall cause to be
prepared and delivered to Newpark a statement (the “Final Closing Statement”) setting forth
the actual Net Working Capital as of the Effective Time (the “Closing Date Net Working
Capital”), the components and calculation thereof, and the difference, if any, between the
Estimated Net Working Capital and the Closing Date Net Working Capital (the amount of such
difference being referred to as the “Final Working Capital Adjustment”). If the Final
Closing Statement reflects a difference between the Estimated Net Working Capital and the amount of
the Closing Date Net Working Capital, Newpark shall have thirty (30) calendar days following the
receipt of the Final Closing Statement to review the components and calculation of the Closing Date
Net Working Capital. The failure of Newpark to object to the Final Closing Statement within such
thirty (30) calendar day period shall be deemed to be an acceptance by Newpark of the Final Working
Capital Adjustment. If Purchaser and Newpark agree on all matters in the Final Closing Statement
and the calculation of the Closing Date Net Working Capital, or if Newpark otherwise fails to
timely object to such matters, then:

(i) if the Closing Date Net Working Capital is greater than the Estimated Net Working
Capital, the Final Working Capital Adjustment shall be paid by Purchaser to Newpark within
three (3) Business Days of Newpark’s acceptance, or deemed acceptance, of the Final Working
Capital Adjustment, with such funds paid via wire transfer of immediately available funds to
the account designated by Newpark; and

(ii) if the Closing Date Net Working Capital is less than the Estimated Net Working
Capital, the Final Working Capital Adjustment shall be deducted from and reduce the Purchase
Price and Newpark shall pay to Purchaser, within three (3) Business Days of Newpark’s
acceptance, or deemed acceptance, of the Final Working Capital Adjustment, an amount equal
to the Final Working Capital Adjustment, with such amount paid via wire transfer of
immediately available funds to the account designated by Purchaser.

 

16

 

If Newpark and Purchaser are unable to agree on any component or the calculation of the Closing
Date Net Working Capital and the Final Working Capital Adjustment, such dispute shall be resolved
by a nationally recognized accounting firm reasonably acceptable to Newpark and Purchaser who shall
not be Ernst & Young, L.L.P. or Purchaser’s accounting firm (the “Accounting Arbitrator”),
whose determination shall be final and binding on Purchaser and Newpark, and any required payments
by Purchaser to Newpark, on the one hand, or by Newpark to the Purchaser, on the other hand, shall
be made within three (3) Business Days of the final resolution of such dispute. All fees and
expenses of the Accounting Arbitrator shall be paid by the party whose proposed Closing Date Net
Working Capital is farthest from the final Closing Date Net Working Capital as determined by such
Accounting Arbitrator. Any dispute as to which party’s proposed Closing Date Net Working Capital
is closest to the final Closing Date Net Working Capital shall be resolved by the Accounting
Arbitrator and shall be specified in the final report prepared by such Accounting Arbitrator. Each
of Purchaser and Newpark shall pay their respective advisor’s fees, charges and expenses incurred
by such Person in connection with the dispute.

(c) For purposes of this Agreement, “Net Working Capital” shall (i) be calculated as
of the Effective Time on an aggregate basis among the Transferred Entities and (ii) mean the amount
equal to the Current Assets minus Current Liabilities. “Current Assets” shall mean,
subject to the adjustments set forth below, the current assets of the Transferred Entities as of
the Effective Time comprised of accounts receivable, whether billed or unbilled (net of allowances
for doubtful accounts); costs and estimated earnings in excess of billings on uncompleted
contracts; the current portion of any notes or other receivables; inventories; and prepaid
expenses. “Current Liabilities” shall mean, subject to the adjustments set forth herein,
the current liabilities of the Transferred Entities as of the Effective Time comprised of accounts
payable; accrued liabilities; the current portion of any Capital Leases; billings in excess of
costs and estimated earnings on uncompleted contracts; and, payroll, accrued incentive compensation
and bonuses, accrued vacation benefits and related taxes and withholdings payable. Subject to the
adjustments set forth below, Current Assets and Current Liabilities shall be computed in accordance
with GAAP on a basis consistent with the December 31, 2007 combined balance sheet of NESI.
Notwithstanding the foregoing, for purposes of calculating the Net Working Capital, the Current
Assets and the Current Liabilities shall not include:

(i) to the extent not incurred in the ordinary course of business, intercompany
receivables and payables between or among any of the Transferred Entities, Newpark and its
other Affiliates;

(ii) any bank or funded Indebtedness including, without limitation, any short-term debt
and the current portion of any long-term debt that has been or will be paid in
full by the Transferred Entities, Newpark and its other Affiliates prior to the
Effective Time; and

(iii) any liability for income Taxes payable by any of the Transferred Entities that
are actually paid or payable, when due, by Newpark or one of its Affiliates other than the
Transferred Entities.

 

17

 

(d) The provisions of this Section 2.4 shall not be subject to the provisions of Article X
hereof or any limitations of liability set forth therein.

2.5 Purchase Price Allocation. The parties agree to allocate the Purchase Price (including,
for purposes of this Section 2.5, any other consideration treated for U.S. federal income tax
purposes as being paid to Newpark, including any applicable liabilities assumed or taken subject
to) among the assets of the Transferred Entities in accordance with an allocation schedule to be
prepared by Purchaser in accordance with this Section 2.5. Within thirty (30) days of the final
determination of the Closing Date Net Working Capital and Final Working Capital Adjustment,
Purchaser shall deliver to Newpark an allocation statement setting forth Purchaser’s allocation of
the Purchase Price pursuant to Section 1060 of the Code and any other applicable Tax Laws (as the
same may be revised pursuant to this Section 2.5, the “Allocation Statement”). Within
forty-five (45) days following its receipt of the Allocation Statement, Newpark shall have the
right to dispute any such proposed allocation; otherwise, such proposed allocation shall become
final. If Newpark so disputes any such allocation and Purchaser and Newpark are unable to resolve
their disagreement within the forty-five (45) days following notification of such dispute, the
dispute shall be submitted to the Accounting Arbitrator, whose expense shall be borne equally by
Purchaser and Newpark, for resolution within forty-five (45) days of such submission. The decision
of the Accounting Arbitrator with respect to such dispute shall be binding upon Purchaser and
Newpark. Purchaser and Newpark (i) shall be bound by the allocations determined pursuant to this
Section 2.5 for purposes of determining any Taxes; (ii) shall prepare and file all Tax Returns
(such as IRS Form 8594 or other Tax Returns required by Section 1060 of the Code) to be filed with
any Tax authority in a manner consistent with such allocation; and (iii) shall take no position
inconsistent with such allocations in any Tax Return, any proceeding before any Tax authority or
otherwise. In the event that any such allocation is disputed by any Tax authority, the party
receiving notice of such dispute shall promptly notify and consult with the other party hereto
concerning resolution of such dispute.

2.6 Further Assurances. At any time and from time to time after the Closing Date, each party
hereto shall, at the request of another party and at such requesting party’s sole cost and expense,
execute and deliver such other instruments of conveyance and transfer and take such other actions
as such other party may reasonably request in order to more effectively consummate the transactions
contemplated hereby and to vest in the Purchaser title to all of the rights, title and interest of
DFI and Newpark Texas, as applicable, in and to the Transferred Interests. The parties hereto
acknowledge that the transaction shall be treated as an asset sale for federal and state income tax
purposes and that all federal and state tax net operating losses will be retained by Newpark.

 

18

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF NEWPARK

Except as set forth in the corresponding Section of the disclosure schedule delivered to
Purchaser concurrently with the execution of this Agreement (the “Newpark Disclosure
Schedule”) (it being agreed that disclosure of any item on the Newpark Disclosure Schedule in
any one or more Sections of the Newpark Disclosure Schedule shall be deemed disclosure with respect
to other sections of this Agreement if the relevance of such disclosure to a representation or
warranty is reasonably apparent), Newpark represents and warrants to Purchaser as follows:

3.1 Organization and Qualification.

(a) Each of DFI and Newpark Texas and each Transferred Entity is (i) a corporation or other
legal entity duly organized, validly existing and in good standing under the Laws of the
jurisdiction of its organization and has all requisite corporate or other organizational power and
authority to carry on its businesses as now being conducted and (ii) qualified to do business and
is in good standing as a foreign corporation or foreign limited liability company in each
jurisdiction where the conduct of its business requires such qualification, except, in the case of
clause (ii), where the failure to be so qualified or in good standing, would not reasonably be
expected to have a Material Adverse Effect.

(b) Except for (i) the conversion of Newpark Environmental Services of Texas, LP, a Texas
limited partnership, into NESI, and (ii) the merger of each of NID, LP, a Texas limited
partnership, NES Permian Basin, LP, a Texas limited partnership, and Newpark Environmental
Services, L.L.C., a Louisiana limited liability company (collectively, the “Predecessor
Entities”) into NESI, no entity has since January 1, 2006 been merged into or otherwise
consolidated with, and no entity has been converted into, a Transferred Entity, any of the
Predecessor Entities or Newpark Environmental Services of Texas, LP.

3.2 Capitalization of the Transferred Entities.

(a) The Transferred Interests constitute the entire membership or partnership interests, as
applicable, in the Transferred Entities and are collectively wholly owned by DFI, Newpark Texas or
NESI, as applicable, free and clear of all Liens other than the Liens described in Section 3.2(a)
of the Newpark Disclosure Schedule and have not been issued in violation of any preemptive or
similar rights. Except for the Transferred Interests, there are no other equity interests of any
Transferred Entities reserved, issued or outstanding, and except as set forth in Section 3.2(a) of
the Newpark Disclosure Schedule, there are no preemptive or other outstanding rights, options,
warrants, equity appreciation rights, redemption rights, repurchase rights, convertible,
exercisable, or exchangeable securities or other agreements of any character relating to the issued
or unissued ownership interest in any of the Transferred Entities or any other securities or
obligations convertible or exchangeable into or exercisable for, or giving any Person a right to
subscribe for or acquire, any securities or other equity interests of any Transferred Entity or
which obligate any of the Transferred Entities to issue any of its membership or
partnership interests, as applicable, or other securities or which otherwise relate to the
sale or transfer by any Transferred Entity of any of its ownership interests or securities (whether
debt or equity). Except as set forth in Section 3.2(a) of the Newpark Disclosure Schedule, no
Transferred Entity has an obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its securities or ownership interests or to pay any dividend or make any
distribution in respect thereof. Neither Newpark, DFI, Newpark Texas nor any of the Transferred
Entities have agreed to register any ownership interests in or securities of the Transferred
Entities under the Securities Act of 1933, as amended (the “Act”), or under any state
securities Law.

(b) Except as set forth in Section 3.2(a) of the Newpark Disclosure Schedule, there are no
voting trusts or other agreements or understandings to which any Transferred Entity is a party with
respect to the voting of the Transferred Interests.

 

19

 

(c) All Transferred Entities and their respective jurisdictions of organization, and for each
Transferred Entity the number of outstanding units or percentage interests or other equity
interests in such Transferred Entity and the identity of the holders of such units or interests are
identified in Section 3.2(c) of the Newpark Disclosure Schedule.

(d) Except for NESI’s ownership of interests in NESI Management and NESI Mississippi, no
Transferred Entity owns or controls, directly or indirectly, any capital stock, membership
interests, security or other equity interest in any other Person.

3.3 Authority Relative to This Agreement. Newpark, DFI and Newpark Texas each has all
necessary corporate or limited liability company power and authority, and has taken all corporate
or limited liability company action necessary, to execute, deliver and perform this Agreement and
any agreements ancillary hereto and to consummate the transactions contemplated by this Agreement
in accordance with the terms of this Agreement. This Agreement has been duly and validly executed
and delivered by Newpark, DFI and Newpark Texas and, assuming the due authorization, execution and
delivery of this Agreement by Purchaser, constitutes a valid, legal and binding agreement of
Newpark, DFI and/or Newpark Texas (as applicable) enforceable against each in accordance with its
terms. As of the Closing, each ancillary document hereto will be duly and validly executed by
Newpark, DFI and/or Newpark Texas (as applicable) and, assuming the due authorization, execution
and delivery of any such ancillary agreements hereto by Purchaser (as applicable), will constitute
the valid, legal and binding agreement of Newpark, DFI and/or Newpark Texas (as applicable),
enforceable against each in accordance with their terms.

3.4 Consents and Approvals; No Violations. No filing with or notice to, and no permit,
authorization, registration, consent or approval of, any Governmental Entity is required on the
part of Newpark, DFI, Newpark Texas or any Transferred Entity for the execution, delivery and
performance by Newpark, DFI or Newpark Texas of this Agreement or the consummation by Newpark, DFI
or Newpark Texas of the transactions contemplated by this Agreement, except (i) compliance with any
applicable requirements of the HSR Act, (ii) as may be required with respect to the state or
federal licenses
or permits relating to the Business set forth on Section 3.9 and Section 3.13(b) of the
Newpark Disclosure Schedule, or (iii) as set forth in Section 3.4 of the Newpark Disclosure
Schedule. Assuming compliance with the items described in clauses (i) through (iii) of the
preceding sentence, and except as set forth in Section 3.4 of the Newpark Disclosure Schedule,
neither the execution, delivery and performance of this Agreement by Newpark, DFI or Newpark Texas
nor the consummation by Newpark, DFI or Newpark Texas of the transactions contemplated by this
Agreement will (A) conflict with or result in any breach, violation or infringement of any
provision of the respective Organizational Documents of Newpark, DFI, Newpark Texas or any
Transferred Entity, (B) result in a breach, violation or infringement of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to the creation of any Lien or
any right of termination, amendment, modification, cancellation or acceleration) or require the
consent of or other action by any Person under, any of the terms, conditions or provisions of any
Contract or Order, arbitration award, judgment or decree or other instrument binding on Newpark,
DFI, Newpark Texas or any Transferred Entities, or (C) violate or infringe any Law applicable to
Newpark, DFI, Newpark Texas or any Transferred Entity or any of their respective properties or
assets, except for breaches, violations, infringements, defaults, Liens or other rights described
in clauses (B) and (C) that would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.

 

20

 

3.5 Compliance with Law. Except with respect to the subject matter of Section 3.10 (Employee
Benefits; Labor Matters), Section 3.12 (Taxes) and Section 3.13 (Environmental Matters), which
constitute the sole and exclusive representations and warranties of Newpark with respect to
compliance with Tax Laws, employee benefits and labor Laws, and Environmental Laws, the operations
of the Transferred Entities and the conduct of the Business are, and have been, conducted in all
material respects in accordance with all applicable Laws, regulations, orders or other requirements
of all Governmental Entities having jurisdiction over the Transferred Entities or the Business.
None of Newpark or any Transferred Entity has received notice of any violation by the Transferred
Entities of any such Law, regulation, order or other legal requirement relating to violations
pending as of the date hereof, and no Transferred Entity is currently in default with respect to
any order, writ, judgment, award, injunction or decree of any Governmental Entity applicable to the
Transferred Entities or the Business, except for any violation, breach or default which would not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

3.6 Financial Statements; Liabilities.

(a) Section 3.6(a) of the Newpark Disclosure Schedule contains the combined unaudited balance
sheet and statement of operations of the Transferred Entities as of and for the fiscal years ended
December 31, 2006 and December 31, 2007 (collectively, with any notes thereto, the “Annual
Financial Statements”). The Annual Financial Statements have been prepared in accordance with
GAAP applied on a consistent basis (except as may be noted therein), and present fairly, in all
material respects, the combined financial position and the combined results of operations of the
Transferred Entities as of the dates set forth therein, except
that the Annual Financial Statements do not include footnotes that would be required by GAAP
and do not include a statement of cash flows. Except as set forth on Section 3.6(a) of the Newpark
Disclosure Schedule, since December 31, 2007, none of the Transferred Entities has (i) made any
material change in its accounting policies or (ii) effected any prior period adjustment to, or
other restatement of, its financial statements for any period covered by the Annual Financial
Statements. The Annual Financial Statements have been prepared from and are consistent in all
material respects with the books and records of the Transferred Entities (which books and records
are correct and complete in all material respects).

(b) Section 3.6(b) of the Newpark Disclosure Schedule contains the combined unaudited balance
sheet and statement of operations of the Transferred Entities as of and for the three (3) month
period ended March 31, 2008 (collectively, with any notes thereto, the “Interim Financial
Statements”). The Interim Financial Statements have been prepared in accordance with GAAP
applied on a consistent basis (except as may be noted therein), and present fairly, in all material
respects, the combined financial position and the combined results of operations of the Transferred
Entities as of March 31, 2008, except that the Interim Financial Statements do not include
footnotes that would be required by GAAP and do not include a statement of cash flows. The Interim
Financial Statements have been prepared from and are consistent, in all material respects, with the
financial books and records of the Transferred Entities (which financial books and records are
correct and complete in all material respects).

 

21

 

(c) There are no liabilities or obligations of the Transferred Entities of any nature, whether
or not accrued, contingent or otherwise, in excess of $4,000,000 in the aggregate that would be
required by GAAP to be reflected on a balance sheet of the Transferred Entities other than those
that (i) are reflected or reserved against on the respective balance sheets included in the Interim
Financial Statements; (ii) have been incurred in the ordinary course of business since March 31,
2008 consistent with prior practice; or (iii) are permitted or expressly contemplated by this
Agreement.

(d) Newpark has devised and maintained, or has caused the Transferred Entities to devise and
maintain, systems of internal accounting controls sufficient to provide reasonable assurance that
all transactions by the Transferred Entities are recorded as necessary to permit the preparation of
the Transferred Entities’ financial statements in accordance with GAAP, and to maintain proper
accountability for items. Notwithstanding the foregoing, the following filings by Newpark with the
SEC pursuant to the Securities Exchange Act of 1934, and the rules promulgated thereunder, the
pertinent provisions of which are set forth in Section 3.6(d) of the Newpark Disclosure Schedule,
set forth certain disclosures regarding Newpark’s internal controls: Amendment No. 2 to the Annual
Report on Form 10-K/A for the year ended December 31, 2005; Quarterly Report on Form 10-Q for the
quarterly periods ending March 31, 2006, June 30, 2006 and September 30, 2006; Annual Report on
Form 10 K for the year ended December 31, 2006; and Quarterly Report on Form 10-Q for the quarterly
periods ending March 31, 2007 and June 30, 2007 and September 30, 2007; and Annual Report on Form
10-K for the year ended December 31, 2007.

3.7 Absence of Certain Changes or Events. Except as contemplated by this Agreement or as set forth in Section 3.7 of the Newpark
Disclosure Schedule, since December 31, 2007, the Business has been conducted, in all material
respects, in the ordinary course consistent with past practice and there has not been with respect
to the Transferred Entities (i) any event, development or state of circumstances that has had or
would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect,
(ii) any damage, destruction, loss or casualty to property or assets that are material to the
Business, (iii) any increase in compensation payable or benefits to directors, officers, managers
or key employees of the Transferred Entities other than in the ordinary course of business, (iv)
any single capital expenditure or commitment in excess of $175,000 for additions to property or
equipment, or aggregate capital expenditures and commitments in excess of $375,000 (on a
consolidated basis) for additions to property or equipment, (v) any incurrence of any Indebtedness
by the Transferred Entities, (vi) any material payments, discount activity or any other
consideration to customers or suppliers, other than in the ordinary course of business consistent
with past practice, (vii) any failure to pay or satisfy when due any material liability of any
Transferred Entity, or (viii) any commitment or agreement to do any of the foregoing.

3.8 Litigation. As of the date of this Agreement, (i) except as set forth in Section 3.8 of
the Newpark Disclosure Schedule, there is no Action pending or, to the knowledge of Newpark,
threatened against any Transferred Entity, and (ii) no Transferred Entity is subject to any
outstanding order, judgment, writ, injunction, stipulation, award or decree (“Order”).
Since January 1, 2002, neither Newpark nor any of the Transferred Entities has received any written
claim from a holder of a mineral interest or right seeking the recovery of royalties for which any
of the Transferred Entities may reasonably be expected to be liable nor, to the knowledge of
Newpark, has any such holder threatened to bring any such claim.

 

22

 

3.9 Permits. Except with respect to the subject matter of Section 3.13 (Environmental
Matters), which constitutes the sole and exclusive representations and warranties of Newpark with
respect to Environmental Permits, the Transferred Entities have all material Permits necessary to
conduct the Business as currently conducted and to operate, own, lease or otherwise hold the assets
of the Transferred Entities. All such Permits are (i) listed in Section 3.9 of the Newpark
Disclosure Schedule and (ii) in full force and effect, and there are no proceedings pending or, to
the knowledge of Newpark, threatened, that seek the revocation, cancellation, suspension or any
adverse modification of any such Permits.

3.10 Employee Benefits; Labor Matters.

(a) Section 3.10(a) of the Newpark Disclosure Schedule sets forth a true and complete list of
all material Benefit Plans. With respect to each Benefit Plan, Newpark and/or Newpark Texas has
made available to Purchaser true and correct copies of (i) each material Benefit Plan (or, if not
written, a written summary of its material terms), including without limitation all plan documents,
trust agreements, insurance contracts or other funding vehicles and
all amendments thereto, (ii) all current summary plan descriptions, (iii) the most recent
annual report (Form 5500 series) filed with the Internal Revenue Service (“IRS”) with
respect to such Benefit Plan, (iv) the most recent actuarial report or other financial statement
relating to such Benefit Plan, (v) the most recent determination or opinion letter, if any, issued
by the IRS with respect to any Benefit Plan and any pending request for such a determination, (vi)
the most recent nondiscrimination tests performed under the Code (including 401(k) and 401(m)
tests) for each Benefit Plan, (vii) all material filings, other than routine tax filings, made with
any Governmental Entity, including without limitation any filings under the Employee Plan
Compliance Resolution System (“EPCRS”) or the Department of Labor Voluntary Delinquent
Filer or Voluntary Fiduciary Correction Programs during the past twelve (12) months.

(b) With respect to the Benefit Plans identified in Section 3.10(a) of the Newpark Disclosure
Schedule, as applicable, and except as set forth in Section 3.10(b) of the Newpark Disclosure
Schedule, (i) each has been operated in all material respects in accordance with its terms and in
compliance with applicable Laws, including applicable provisions of ERISA, the Code and other
applicable Law; (ii) each that is intended to be qualified within the meaning of Section 401(a) of
the Code has received a favorable determination letter as to its qualification; (iii) no
“reportable event” (as such term is defined in Section 4043 of ERISA) that would reasonably be
expected to result in material liability, no nonexempt “prohibited transaction” (as such term is
defined in Section 406 of ERISA and Section 4975 of the Code) or “accumulated funding deficiency”
(as such term is defined in Section 302 of ERISA and Section 412 of the Code (whether or not
waived) has occurred with respect to any such plan that is subject to ERISA; (iv) no suit,
administrative proceeding, action or other litigation is pending, or to the knowledge of Newpark or
Newpark Texas is threatened, against or with respect to any such Benefit Plan, including any audit
or inquiry by the IRS or United States Department of Labor (other than routine benefits claims),
which could continue to be a liability of a Transferred Entity after the Effective Time, (v) no
Transferred Entity has any liability under ERISA Section 502, (vi) all contributions and payments
to such Benefit Plan are deductible and have been deductible under Code Sections 162 or 404, and
(vii) no Transferred Entity has any liability for an excise tax under Chapter 43 of the Code.

 

23

 

(c) Except as set forth in Section 3.10(c) of the Newpark Disclosure Schedule, all
contributions or payments required to be made or accrued before the Effective Time under the terms
of any Benefit Plan in which any Transferred Employees participate will have been made or accrued
by the Effective Time, except where the failure to make any such contribution or payment would not,
individually or in the aggregate, have a Material Adverse Effect. No Benefit Plan is subject to
Title IV of ERISA or Section 412 of the Code. No Transferred Entity has incurred or reasonably is
expected to incur any liability to the Pension Benefit Guaranty Corporation with respect to any
Benefit Plan. No Benefit Plan is a “multiemployer plan” (as defined in Section 3(37) of ERISA).

(d) Except as required by Law, no Benefit Plan provides any of the following retiree or
post-employment benefits to any Person: medical, disability or life insurance benefits. No Benefit
Plan is a voluntary employee beneficiary association under Section 501(a)(9) of the Code. Newpark
and its Subsidiaries are in material compliance with (i) the requirements of the applicable health
care continuation and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and the regulations (including proposed regulations)
thereunder and any similar state Law and (ii) the applicable requirements of the Health
Insurance Portability and Accountability Act of 1996, as amended, and the regulations (including
the proposed regulations) thereunder.

(e) No payment or benefit provided pursuant to any Benefit Plan between a Transferred Entity
and any “service provider” (as such term is defined in Section 409A of the Code and the Treasury
Regulations and IRS guidance thereunder) will or may provide for the deferral of compensation
subject to Section 409A of the Code, whether pursuant to the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby (either alone or upon the
occurrence of any additional or subsequent events) or otherwise.

(f) Section 3.10(f) of the Newpark Disclosure Schedule lists all current employees of the
Transferred Entities as of April 1, 2008 and their hourly rates of compensation or base salaries
(as applicable) and their respective accrued vacation, sick leave and other paid time off days. In
addition, to the extent any current employee of a Transferred Entity is on a leave of absence as of
April 1, 2008, Section 3.10(f) of the Newpark Disclosure Schedule indicates the nature of such
leave of absence and each such employee’s anticipated date of return to active employment. The
Transferred Entities currently comply in all material respects and during the past three (3) years
have continuously complied in all material respects, with all Laws relating to the hiring,
employment and termination of workers, including, but not limited to, Laws relating to the
classification of workers, wages, hours, overtime, employment taxes, equal employment opportunity,
non-discrimination, medical leave, military leave, and immigration and with all Laws governing
occupational health and safety.

 

24

 

(g) None of the Transferred Entities is delinquent in payments to, or on behalf of, any
employees for any wages, salaries, commissions, bonuses or other direct compensation for any
services performed by employees to date or amounts required to be reimbursed to such employees.
None of the Transferred Entities is delinquent in payments of any employment taxes on behalf of any
employees with respect to services provided through the Closing Date. There has been no charge of
discrimination filed or, to the knowledge of Newpark, threatened, against any of the Transferred
Entities with the Equal Employment Opportunity Commission or similar Governmental Entity. There is
no pending or, to the knowledge of Newpark, threatened administrative or judicial proceeding or
material investigation under the Fair Labor Standards Act, the Family and Medical Leave Act, the
Americans with Disabilities Act, the Age Discrimination in Employment Act, Title VII of the Civil
Rights Act of 1964, the Occupational Safety and Health Act, the National Labor Relations Act,
ERISA, the Code, or any other federal or state Law relating to the employees of the Transferred
Entities.

(h) None of the Transferred Entities is a party to or otherwise bound by any collective
bargaining agreement or other contract or agreement with any labor organization, nor is any such
contract or agreement presently being negotiated. There is no pending or, to the knowledge of
Newpark, threatened (i) material unfair labor practice, labor dispute (other than routine
individual grievances), labor arbitration proceeding or Action pertaining to labor issues or
matters against the Transferred Entities relating to the Business, by or on behalf of any employee,
prospective employee, former employee, labor organization or Governmental Entity, (ii) material
activity or proceeding by a labor union or representative thereof to organize any employees of the
Transferred Entities, or (iii) lockouts, strikes, material slowdowns, material
work stoppages or other material labor controversies by or with respect to employees of the
Transferred Entities.

(i) None of Newpark, Newpark Texas or any Transferred Entity has received any notice of any
violation of any immigration and naturalization Laws relating to employment and employees, and each
of Newpark, Newpark Texas and any Transferred Entity has properly completed and maintained all
applicable immigration and naturalization forms as required by Law (including, where applicable but
not limited to, I-9 forms) with respect to the past and present employees of the Business.
Newpark, Newpark Texas and the Transferred Entities are in compliance with all such immigration and
naturalization Laws and there are no citations, investigations, administrative proceedings or
formal complaints or violations of the immigration or naturalization Laws pending or, to Newpark’s
knowledge, threatened before any Governmental Entity involving any past or present employees of the
Business.

(j) Section 3.10(j) of the Newpark Disclosure Schedule sets forth a true, complete and correct
description of (i) all pending or, to the knowledge of Newpark, threatened claims as of the date
hereof and immediately prior to the Closing of past or present employees of the Business for
compensation for injury, disability or illness arising out of such employee’s employment in the
Business, and (ii) any accident that occurred within the past two years in which any employee of
the Business was injured within the course and scope of employment.

3.11 Brokers. No broker, finder or investment banker is entitled to any brokerage or finder’s
fee or other commission in connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of Newpark, DFI, Newpark Texas or the Transferred Entities.
Newpark shall solely be responsible for the fees of its financial advisors under any arrangement
made by on or on behalf of Newpark, DFI, Newpark Texas or the Transferred Entities.

 

25

 

3.12 Taxes.

(a) Except as set forth in Section 3.12 of the Newpark Disclosure Schedule (i) all Tax Returns
required to be filed on or prior to the date of this Agreement by, or with respect to any
activities of, the Transferred Entities have been filed, and all Taxes due with respect to such Tax
Returns (whether or not shown to be due on such Tax Returns) have been paid, except to the extent
any failure to file such Tax Return or pay such Taxes could not be expected to have a Material
Adverse Effect; (ii) all such Tax Returns were correct and complete in all material respects; (iii)
there is no action, suit, proceeding, investigation, audit or claim outstanding, pending or, to the
knowledge of Newpark, threatened with respect to any Taxes of the Transferred Entities; (iv) none
of the Transferred Entities has granted any extension or waiver of the statute of limitations
applicable to any Tax Return, which period (after giving effect to any extension or waiver) has not
yet expired; (v) each of the Transferred Entities has complied, in all material respects, with all
applicable Laws relating to the payment and withholding of Taxes and has duly and timely withheld
and paid over to the appropriate taxing authorities all amounts
required to be so withheld and paid over; and (vi) none of the Transferred Entities is a party
to, is bound by or has any obligation under any Tax sharing or Tax indemnity agreement or similar
contract or arrangement with Newpark or a Subsidiary of Newpark which will remain in effect as to
such Transferred Entity after the Closing.

(b) Neither DFI nor Newpark Texas is a “foreign person” within the meaning of
Section 1445(f)(3) of the Code.

(c) NESI and NESI Management are each classified as disregarded entities for federal tax
purposes. NESI Mississippi is classified as a partnership for federal tax purposes. With respect
to any entity classification elections (using IRS Form 8832 or otherwise) made by the Transferred
Entities during 2007, such entities were (i) eligible to make such elections and (ii) accurately
completed and timely filed such elections prior to the date hereof.

(d) Notwithstanding any other provision of this Agreement to the contrary, it is agreed and
understood that no representation or warranty is made by Newpark in respect of Tax matters, other
than the representations and warranties set forth in Section 3.10 and this Section 3.12.

3.13 Environmental Matters.

(a) Except as set forth in Section 3.13(a) of the Newpark Disclosure Schedule, each of the
Transferred Entities hold and are in compliance, in all material respects, with all Environmental
Permits necessary to conduct the Business as currently conducted and to own, lease or otherwise
hold the assets of the Transferred Entities, and all of such Environmental Permits are in full
force and effect, except where any failure to hold or be in compliance with any such Environmental
Permit or the failure of any such Environmental Permit to be in full force and effect would not
reasonably be expected to result in a Material Adverse Effect, and there are no proceedings
pending, or to the knowledge of Newpark, threatened that seek revocation, cancellation, suspension,
penalties or any adverse modification of such Environmental Permits.

 

26

 

(b) All such Environmental Permits (including any pending application therefor) are listed in
Section 3.13(b) of the Newpark Disclosure Schedule, and any that are not transferable pursuant to
this transaction are so designated.

(c) Except as set forth in Section 3.13(c) of the Newpark Disclosure Schedule, each of the
Transferred Entities is in compliance, in all material respects, with all Environmental Laws, and
no unresolved written notice, request for information, claim, demand, summons or order has been
received or, to the knowledge of Newpark, threatened by any Governmental Entity (i) with respect to
any alleged violation of any Environmental Law in connection with the Business; or (ii) with
respect to any alleged failure to have any Environmental Permit required for the Business; or (iii)
with respect to any use, possession, generation, treatment, storage, recycling, processing,
transportation or disposal (collectively, “Management”) or exposure of or to any Hazardous
Materials by any of the Transferred Entities.

(d) Section 3.13(d) of the Newpark Disclosure Schedule lists all third party facilities where
any of the Transferred Entities has, since January 1, 2000, delivered, or arranged for disposal of,
(i) any third party customer’s waste products, and (ii) any storm water from barges, as well as a
general description of the type of waste product delivered to such facility.

(e) In the event Purchaser provides any Notice of Alleged Recognized Environmental Condition
under Section 5.14 hereof, Newpark shall be permitted to update the disclosures referenced in this
Section 3.13 to reflect such Alleged Recognized Environmental Condition and for all purposes of
this Agreement, the disclosure set forth in such revised Newpark Disclosure Schedules shall modify
the representations and warranties contained in this Section 3.13 as if disclosed in connection
with the execution of this Agreement.

(f) Notwithstanding any other provision of this Agreement to the contrary, the representations
and warranties included in this Section 3.13 shall constitute the sole and exclusive
representations and warranties of Newpark and the Transferred Entities relating to environmental
matters, including any matters arising under Environmental Laws or related to Hazardous Materials.

3.14 Title; Condition and Sufficiency of Assets.

(a) Except as set forth in Section 3.14(a) of the Newpark Disclosure Schedule, each of the
Transferred Entities has good and marketable title to, or a valid leasehold interest in, all of its
respective properties and assets, in each case free and clear of all Liens, except for Permitted
Liens.

(b) Except as set forth in Section 3.14(b) of the Newpark Disclosure Schedule, the buildings,
machinery, equipment, tools, furniture, improvements and other tangible assets of the Business
included in the assets of the Transferred Entities are, in all material respects, in reasonably
good operating condition and repair, normal wear and tear excepted, and sufficient to permit their
use in the continuing operations of the Business as such operations are currently conducted or have
been conducted consistent with past practices.

 

27

 

(c) Except as provided in Section 3.14(a) of the Newpark Disclosure Schedule and taking into
consideration the transfer of the Bayou Choctaw Property and the NEWS Permits by the Transferred
Entities prior to the Closing Date, the Transferred Entities’ assets constitute all of the assets,
rights, contracts, and other properties necessary for the Purchaser to operate the Business in all
material respects in the manner as it is now being conducted by the Transferred Entities. The
Fannett Cavern injection well has been completed and is operational.

3.15 Intellectual Property.

(a) Section 3.15(a) of the Newpark Disclosure Schedule contains a list of all material
Intellectual Property that is currently owned by any Transferred Entity (“Transferred
Intellectual Property”) that has been issued or registered or is the subject of a pending
application for
issuance or registration. To the knowledge of Newpark, all such Transferred Intellectual
Property is subsisting, is not expired or abandoned, and is valid and enforceable.

(b) No Transferred Intellectual Property is subject to any outstanding judgment, injunction,
order, decree or agreement materially restricting the use thereof by any Transferred Entity or
materially restricting the licensing thereof by any Transferred Entity to any Person.

(c) Except as set forth in Section 3.15(c) of the Newpark Disclosure Schedule, to the
knowledge of Newpark, (i) no Transferred Entity has infringed, misappropriated or otherwise
violated, in any material respect, any Intellectual Property of any other Person, and (ii) the
Intellectual Property material to the Business is not being infringed, misappropriated or otherwise
violated by any other Person.

3.16 Material Contracts. Section 3.16 of the Newpark Disclosure Schedule includes a true and
complete list of the following Contracts to which any of the Transferred Entities is a party or is
bound:

(a) Contracts that are material to the Business (i) for the furnishing to any of the
Transferred Entities of materials, supplies, goods, services or equipment or (ii) concerning
Intellectual Property (other than off-the-shelf, commercially available licenses to software);

(b) any Contract obligating any of the Transferred Entities to deliver materials, goods,
products, supplies, services or equipment that has annual payments (or under which such payments
are reasonably expected) in excess of $100,000 per year, excluding any such Contracts which are
terminable by such Transferred Entity without penalty on not more than sixty (60) calendar days
notice;

(c) any equity partnership, equity joint venture or other similar agreement between a
Transferred Entity and another Person;

(d) any agreement relating to the acquisition or disposition of any business (whether by
merger, sale of stock, sale of assets or otherwise) relating to the Business or any Transferred
Entity, (i) entered into by Newpark, Newpark Texas or any Transferred Entity after December 31,
2005 or (ii) under which any of the Transferred Entities will have any obligation with respect to
an “earn-out,” contingent purchase price or similar contingent payment obligation;

 

28

 

(e) any agreement which restricts any Transferred Entity from competing with any other Person
or any Person from conducting the Business in any geographic area;

(f) any Contract or agreement for the payment of compensation or benefits to or on behalf of
any employee, agent, consultant or representative that provides for annual payments (or under which
such payments are reasonably expected) in excess of $100,000 per year, excluding any such Contracts
which are terminable by such Transferred Entity without payment of severance or other similar
compensation on not more than sixty (60) calendar days notice;

(g) any collective bargaining agreement or other Contract with a labor union, labor
organization, workers council or similar body regarding any Transferred Employees;

(h) any loan agreements, indentures, mortgages, letters of credit, Capital Leases, security
agreements or other agreements or commitments for the borrowing of money for use in the Business or
the subjecting of any assets of the Transferred Entities to a Lien (other than Permitted Liens);

(i) any (i) Contract with Newpark or any Affiliate of Newpark other than the Transferred
Entities, or (ii) any written Contract with any current or former officer, director or employee of
any Transferred Entity or any Affiliate of such individual, in each of cases (i) and (ii), that are
material to the Transferred Entities, taken as a whole, and the conduct of the Business; and

(j) to the extent not included in Section 3.16(a) above, any Contract with a provider of tugs
or barges (“Transportation Contract”).

Each Contract required to be disclosed pursuant to this Section 3.16 (collectively, the
“Material Contracts”), whether written or oral, is in full force and effect and is a valid
and binding agreement of the Transferred Entity, as the case may be, and, to Newpark’s knowledge,
of each other party thereto. None of the Transferred Entities or, to the knowledge of Newpark, any
other party thereto is in default or breach in any material respect under the terms of any such
Material Contract and neither any Transferred Entity, Newpark, DFI nor Newpark Texas has received
any notice of termination or threatened termination of any Material Contract or is aware of any
facts or circumstances that either currently or with the passage of time could result in a breach
or default under or give rise to a right to terminate any Material Contract, including, without
limitation, any Transportation Contract. Newpark has made available to the Purchaser complete and
correct copies of each Material Contract.

3.17 Real Property. Except as set forth in Section 3.17 of the Newpark Disclosure Schedule and
as set forth below in Section 3.24 below:

(a) Section 3.17(a) of the Newpark Disclosure Schedule sets forth, as of the date hereof, the
fee owner and address of all real property owned by any Transferred Entity (the “Owned Real
Property”). With respect to each parcel of Owned Real Property (i) each owner thereof has good
and marketable title to such Owned Real Property, free and clear of all Liens, except for Permitted
Liens; and (ii) there does not exist any actual, pending or, to the knowledge of Newpark,
threatened condemnation or eminent domain proceedings that affect any Owned Real Property.

 

29

 

(b) Section 3.17(b) of the Newpark Disclosure Schedule sets forth, as of the date hereof, a
description of each lease, sublease and other agreement pursuant to which any Transferred Entity
holds a leasehold or subleasehold estate or has otherwise granted a leasehold or subleasehold
estate, including any surface leases, drilling rights or other surface-use rights that may have
been granted to or from any Transferred Entity (or Affiliate thereof) to any third party with
respect to the Transferred Entities’ Owned Real Property and the non-owned real property
(the “Leased Real Property”). Complete and correct copies of all agreements
pertaining to the Leased Real Property (each a “Real Property Lease,” collectively, the
“Real Property Leases”) have been made available to Purchaser prior to the date hereof.
With respect to each of the Real Property Leases (i) each Real Property Lease is in full force and
effect and is valid and enforceable in accordance with its terms; (ii) there is no default under
any Real Property Lease by any Transferred Entity or, to the knowledge of Newpark, by any other
party thereto; (iii) no Transferred Entity has received or delivered a written notice of default or
objection to any party to any Real Property Lease to pay and perform its obligations, and, to the
knowledge of Newpark, no event has occurred or circumstance exists which, with the delivery of
notice, the passage of time or both, would constitute a material breach or default, or permit the
termination, modification or acceleration of rent under such Real Property Lease; and (iv) if a
Transferred Entity is the lessee under a Real Property Lease, then the applicable Transferred
Entity holds a good and valid leasehold interest in such Leased Real Property as set forth therein.

3.18 Inventory. Except as would not reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect, the Inventories included in the Net Working Capital as
of the Effective Time consist of materials and goods of a quality which are usable or salable in
the normal course of the Business. The Inventories included in the Net Working Capital as of the
Effective Time are valued in accordance with the normal inventory valuation policies of the
Transferred Entities for stating items of inventory at the lower of cost or market value in
accordance with GAAP.

3.19 Accounts Receivable. Except as set forth in Section 3.19 of the Newpark Disclosure
Schedule, the accounts receivable of the Business included in the Net Working Capital as of the
Effective Time (i) will be valid and genuine; (ii) will have arisen solely out of bona fide sales
and deliveries of goods, performance of services and other business transactions in the ordinary
course of business consistent with past practices; and (iii) will be collectible in the ordinary
course of business consistent with past practice (net of any reserve for doubtful accounts set
forth in the Net Working Capital).

3.20 Insurance. Section 3.20 of the Newpark Disclosure Schedule lists all material insurance
policies, Contracts or programs of self-insurance owned or held by or for the benefit of any
Transferred Entity on the date of this Agreement which cover the Business and/or the Transferred
Entities. All such insurance policies, Contracts and programs of self-insurance are in full force
and effect and are valid and enforceable. All premiums due thereunder have been paid, and neither
Newpark, Newpark Texas nor any of the Transferred Entities has received notice of cancellation or
termination with respect to such insurance policies, Contracts and programs of self-insurance,
other than in connection with normal renewals of any such insurance policies, Contracts and
programs of self-insurance. There is no claim by or with respect to any Transferred Entity pending
under any such policies as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or in respect of which such underwriters have reserved their
rights. To the knowledge of Newpark, there is no threatened termination of, premium increase
with respect to, or alteration of coverage under, any of such policies.

 

30

 

3.21 Customers and Suppliers. Section 3.21 of the Newpark Disclosure Schedule sets forth the
ten largest suppliers and ten largest customers of the Business during the twelve (12) month period
ending March 31, 2008. Except as set forth in Section 3.21 of the Newpark Disclosure Schedule,
Newpark has no knowledge that any such supplier or customer has or intends to cancel or otherwise
substantially modify its relationship with any Transferred Entity, as applicable, or to decrease
materially or limit its services, supplies or materials, or its usage or purchase of services or
products from any Transferred Entity.

3.22 Bank Accounts. Set forth in Section 3.22 of the Newpark Disclosure Schedule are (i) the
name and address of each bank or other financial institution in which any of the Transferred
Entities or any of their Subsidiaries has an account or a safe deposit box, the account and safe
deposit box numbers thereof, and the names of all persons authorized to draw thereon or to have
access thereto, (ii) the names of all persons authorized to borrow funds on behalf of any of the
Transferred Entities or any of their Subsidiaries and the names of all entities from which they are
authorized to borrow funds, and (iii) the names of all persons, if any, holding powers of attorney
from any of the Transferred Entities or any of their Subsidiaries.

3.23 Illegal Payments. To the best knowledge of Newpark, none of Newpark, DFI, Newpark Texas
or any of the Transferred Entities and their Subsidiaries or any director, manager, officer,
employee, or agent of such entities has, directly or indirectly, paid or delivered any fee,
commission, or other sum of money or item of property however characterized to any broker, finder,
agent, government official, or other person, in the United States or any other country, in any
manner related to the business or operations of any of the Transferred Entities or any of their
Subsidiaries, which Newpark or any such director, officer, employee, or agent knows or has reason
to believe to have been illegal under any applicable Law.

3.24 No Other Representations or Warranties. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
EXPRESSLY CONTAINED IN THIS AGREEMENT, THE ASSETS OF THE TRANSFERRED ENTITIES ARE BEING ACQUIRED BY
PURCHASER “AS IS” AND “WHERE IS,” AND NONE OF NEWPARK, DFI, NEWPARK TEXAS, NOR ANY OF THEIR
RESPECTIVE AGENTS, AFFILIATES, OFFICERS, DIRECTORS, MANAGERS, EMPLOYEES, OR REPRESENTATIVES, NOR
ANY OTHER PERSON, MAKES OR SHALL BE DEEMED TO MAKE ANY REPRESENTATION OR WARRANTY TO PURCHASER,
EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, ON BEHALF OF NEWPARK, DFI, NEWPARK TEXAS, OR ANY AFFILIATE
THEREOF, AND NEWPARK, DFI, NEWPARK TEXAS, AND EACH OF THEIR RESPECTIVE AFFILIATES BY THIS AGREEMENT
DISCLAIM ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS,
IMPLIED, AT COMMON LAW, STATUTORY OR OTHERWISE, AS TO THE LIABILITIES, OPERATIONS OF THE
BUSINESS OR THE TRANSFERRED ENTITIES, THE TITLE, CONDITION, VALUE OR QUALITY OF THE ASSETS OF THE
TRANSFERRED ENTITIES AND EACH OF NEWPARK, DFI, NEWPARK TEXAS AND THEIR RESPECTIVE AFFILIATES
SPECIFICALLY DISCLAIM ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR
FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO ANY OF THE ASSETS OF THE TRANSFERRED ENTITIES.

 

31

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER AND CCS

Purchaser and CCS jointly and severally represent and warrant to Newpark as follows:

4.1 Organization and Qualification. Purchaser is a Louisiana limited liability company and CCS
is an Alberta corporation, and each of Purchaser and CCS is duly organized, validly existing and in
good standing under the Laws of the jurisdiction of its organization, has all requisite power and
authority to own, lease and operate its properties and assets and to carry on its business as now
being conducted and is qualified to do business and is in good standing as a foreign limited
liability company or foreign corporation in each jurisdiction where the ownership, leasing or
operation of its properties or assets or conduct of its business requires such qualification except
where the failure to be so qualified or in good standing, would not reasonably be expected to have
a material adverse effect on CCS and its Subsidiaries, taken as a whole.

4.2 Authority Relative to This Agreement. Purchaser and CCS each has all necessary limited
liability company or corporate power and authority, and has taken all action necessary, to execute,
deliver and perform this Agreement and any agreements ancillary hereto to which it is a party and
to consummate the transactions contemplated by this Agreement in accordance with the terms of this
Agreement. This Agreement has been duly and validly executed and delivered by Purchaser and CCS
and, assuming the due authorization, execution and delivery of this Agreement by Newpark, DFI and
Newpark Texas constitutes a valid, legal and binding agreement of Purchaser and CCS, enforceable
against Purchaser and CCS in accordance with its terms. As of the Closing, each ancillary document
hereto will be duly and validly executed by Purchaser and CCS (as applicable) and, assuming the due
authorization, execution and delivery of any such ancillary agreements hereto by Newpark, DFI or
Newpark Texas (as applicable), will constitute the valid, legal and binding agreement of Purchaser
and CCS, enforceable against Purchaser and CCS in accordance with their terms.

4.3 Consents and Approvals; No Violations. No filing with or notice to, and no permit,
authorization, registration, consent or approval of, any Governmental Entity is required on the
part of Purchaser or CCS for the execution, delivery and performance by Purchaser or CCS of this
Agreement or the consummation by Purchaser or CCS of the transactions contemplated by this
Agreement, except
compliance with the applicable requirements of the HSR Act. Assuming compliance with the item
described in the preceding sentence, neither the execution, delivery and performance of this
Agreement by Purchaser or CCS nor the consummation by Purchaser or CCS of the transactions
contemplated by this Agreement will (A) conflict with or result in any breach, violation or
infringement of any provision of the respective Organizational Documents of Purchaser or CCS, (B)
result in a breach, violation or infringement of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to the creation of any Lien or any right of
termination, amendment, cancellation or acceleration) under, any of the terms, conditions or
provisions of any Contract to which Purchaser, CCS or any of their respective Subsidiaries is a
party or by which any of them or any of their properties or assets may be bound or (C) violate or
infringe any Law applicable to Purchaser, CCS or any of their respective Subsidiaries or any of
their respective properties or assets, except in the cases of clauses (B) and (C), for such
breaches, violations, infringements or Liens that would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the ability of Purchaser to timely
consummate the transactions contemplated by this Agreement.

 

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4.4 Financing. Purchaser has available, or will have available at the Closing, sufficient
funds, available lines of credit or other sources of immediately available funds to enable
Purchaser to purchase the Acquired Interests on the terms and conditions of this Agreement. The
obligations of Purchaser hereunder are not subject to any conditions regarding Purchaser’s ability
to obtain financing for the consummation of the transactions contemplated herein.

4.5 Brokers. No broker, finder or investment banker is entitled to any brokerage or finder’s
fee or other commission in connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of Purchaser. Purchaser shall solely be responsible for the
fees of its financial advisors under any arrangement made by on or on behalf of Purchaser.

4.6 Acquisition of Transferred Interests. Purchaser has such knowledge and experience in
financial and business matters, and is capable of evaluating the merits and risks of its purchase
of the Transferred Interests. Purchaser confirms that Newpark has made available to Purchaser and
its agents the opportunity to ask questions of the officers and management employees of Newpark and
of the Transferred Entities as well as access to the documents, information and records relating to
the Transferred Interests, and to acquire additional information about the business and financial
condition of the Transferred Interests. Purchaser is acquiring the Transferred Interests for
investment and not with a view toward or for sale in connection with any distribution thereof, or
with any present intention of distributing or selling the Transferred Interests. Purchaser
acknowledges that the Transferred Interests have not been registered under the Securities Act or
any state securities Laws, and agrees that the Transferred Interests may not be sold, transferred,
offered for sale, pledged, hypothecated or otherwise disposed of without registration under the
Securities Act, except pursuant to an exemption from such registration available under the
Securities Act, and without compliance with foreign securities Laws, in each case, to the extent
applicable.

4.7 Limitation of Newpark’s Warranties. Purchaser acknowledges that Newpark makes no
representations with respect to the Business or the Transferred Entities except as expressly set
forth in this Agreement.

 

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ARTICLE V

COVENANTS

5.1 Access.

(a) After the date of this Agreement until the earlier of the Closing or the termination of
this Agreement, Newpark shall, and shall cause each of the Transferred Entities and their
respective representatives to (i) afford Purchaser and its representatives access, at reasonable
times during normal business hours after first obtaining the consent of Newpark, to the books,
records, properties and personnel of the Transferred Entities; (ii) furnish Purchaser and its
representatives with such additional financial, operating and other data and information within the
control of Newpark and/or the Transferred Entities as Purchaser may reasonably request; and (iii)
otherwise cooperate with the investigation by Purchaser and its representatives of the Transferred
Entities; provided, however, that if the Outside Date is extended past July 1, 2008, Newpark may
limit Purchaser’s access to the personnel of the Transferred Entities if Newpark determines, in its
reasonable discretion, that such access would be disruptive to Newpark’s business. Any expenses
related to the furnishing of such information which is within the control of Newpark and/or the
Transferred Entities shall be paid by Newpark. The foregoing shall not require Newpark, DFI,
Newpark Texas or any Transferred Entity to permit any inspection, or to disclose any information,
that in the reasonable judgment of Newpark is reasonably likely to result in the disclosure of any
trade secrets to third parties, violate any of its obligations with respect to confidentiality or
disclose information that does not relate exclusively to the Business. All information provided to
Purchaser and its representatives in accordance with this Agreement, including this Section 5.1, or
by a third party subject to an obligation of confidentiality for the benefit, either directly or
indirectly, of Newpark shall, prior to the Closing, be held by Purchaser and its representatives in
accordance with, shall be considered “Evaluation Material” under, and shall be subject to
the terms of, the Confidentiality Agreement. All requests for information made pursuant to this
Section 5.1(a) shall be directed to a designated officer of Newpark or such other individual as may
be designated by Newpark, and shall not be granted to the extent deemed inconsistent with any Law.

(b) At and after the Closing Date, Purchaser shall and shall cause its Affiliates and each of
their respective representatives to afford Newpark and its representatives access, at reasonable
times during normal business hours after first obtaining the consent of Purchaser, to the books,
records, properties and personnel of the Transferred Entities and furnish Newpark and its
representatives with such additional financial, operating and other data and information as Newpark
may reasonably request in order to prepare its Tax Returns and other documents and reports required
to be filed by it with Governmental Entities, in its financial statements or in connection with any
Action against or investigation by, any Governmental Entity of, or in connection with any Tax
examination of, Newpark. All requests for information made pursuant
to this Section 5.1(b) shall be directed to a designated officer of Purchaser or such other
individual as may be designated by Purchaser.

5.2 Efforts.

(a) Each of Newpark and CCS shall file, or cause to be filed, on or before May 1, 2008 with
the Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) the
notification and report form required for the transactions contemplated hereunder by the HSR Act,
requesting early termination of the waiting period thereunder. Newpark and CCS shall use
reasonable efforts to coordinate their initial filing of the notification and report form so that
such filings are made simultaneously. Each of the parties further agrees to use commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement and to cooperate with the other in connection with
the foregoing, including using commercially reasonable efforts (i) to supply

 

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promptly any
additional information or documentary material that may be requested by a Governmental Entity,
including, without limitation, the DOJ or the FTC, (ii) to obtain all other consents, approvals and
authorizations that are required to be obtained under any federal, state, local or foreign Law or
regulation, (iii) to lift or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to this Agreement to consummate the transactions contemplated
by this Agreement, (iv) to effect as promptly as practicable all necessary registrations, filings
and responses to requests for additional information or documentary material from a Governmental
Entity, if any, and (v) to fulfill all conditions to this Agreement.

(b) Further, and without limiting the generality of the rest of this Section 5.2, each of the
parties shall promptly (i) furnish to the other such necessary information and reasonable
assistance as the other party may request in connection with the foregoing, (ii) inform the other
of any communication from any Governmental Entity regarding any of the transactions contemplated by
this Agreement, and (iii) provide counsel for the other party with copies of all filings made by
such party, and all correspondence between such party (and its advisors) with any Governmental
Entity and any other information supplied by such party to a Governmental Entity or received from a
Governmental Entity in connection with the transactions contemplated by this Agreement; provided,
however, that materials may be redacted (x) to remove any references concerning the valuation of
the Business and the Transferred Entities, and (y) as necessary to comply with contractual
arrangements. Each party shall, subject to applicable Law, permit counsel for the other party to
review in advance, and consider in good faith the views of the other party in connection with, any
proposed written communication to any Governmental Entity in connection with the transactions
contemplated by this Agreement. The parties agree not to participate in any substantive meeting or
discussion, either in person or by telephone, with any Governmental Entity in connection with the
transactions contemplated by this Agreement unless it consults with the other party in advance and,
to the extent not prohibited by such Governmental Entity, gives the other party the opportunity to
attend and participate.

(c) Further, and without limiting the generality of the rest of this Section 5.2, Purchaser
and CCS shall use commercially reasonable efforts (which, for the avoidance of doubt, shall include
any Divestiture required in accordance with Section 5.2(d) below) to avoid or eliminate each and
every impediment under any antitrust, competition, or trade regulation Law that may be asserted by
any Governmental Entity with respect to this Agreement so as to make effective as promptly as
practicable the transactions contemplated by this Agreement and to avoid any suit or proceeding
which would otherwise have the effect of preventing or delaying the Closing. By way of example and
subject to the commercially reasonable limitations in the preceding sentence, the steps involved in
the preceding sentence shall include (i) at the request of Newpark and subject to the rights of
Newpark to terminate this Agreement pursuant to Section 9.1(a)(iv) hereof, defending through
litigation on the merits, including appeals, any claim asserted in any court or other proceeding by
any party, (ii) proposing, negotiating, committing to or effecting, by consent decree, hold
separate order or otherwise, the sale, divestiture or disposition of such assets or businesses of
Purchaser (including its Affiliates and Subsidiaries) or the Transferred Entities, including
entering into customary ancillary agreements on commercially reasonable terms relating to any such
sale, divestiture or disposition of such assets or businesses, (iii) agreeing to any limitation on
the conduct of Purchaser (including its Subsidiaries) or the Transferred Entities, or (iv) agreeing
to take any other action as may be

 

35

 

required by a Governmental Entity in order to (A) obtain all
necessary consents, approvals and authorizations as soon as reasonably possible, (B) avoid the
entry of, or to effect the dissolution of, any injunction, temporary restraining order or other
order in any suit or proceeding, or (C) effect the expiration or termination of any waiting period
which would otherwise have the effect of preventing or delaying the Closing. For the avoidance of
doubt, the parties agree that any Divestiture required in accordance with Section 5.2(d) below
shall be deemed commercially reasonable for purposes of this Section 5.2. At the request of
Purchaser, Newpark shall use commercially reasonable efforts to take, or cause the Transferred
Entities to take, any action with respect to the Transferred Entities as set forth above in this
Section 5.2(c), provided that any such action is conditioned upon (and shall not be completed prior
to) the consummation of the transactions contemplated by this Agreement.

(d) The obligations of CCS and Purchaser to take any action described in clause (ii) of
Section 5.2(c) above (a “Divestiture”) shall be subject to the provisions of this
Section 5.2(d). In the event any Governmental Entity shall require a Divestiture in order to (A)
obtain all necessary consents, approvals and authorizations as soon as reasonably possible, (B)
avoid the entry of, or to effect the dissolution of, any injunction, temporary restraining order or
other order in any suit or proceeding, or (C) effect the expiration or termination of any waiting
period which would otherwise have the effect of preventing or delaying the Closing (collectively, a
“Governmental Consent”), the following terms shall be applicable:

(i) If the Agreed Value of the Divested Assets is less than $7,000,000, CCS and
Purchaser shall assume all risks and responsibilities for such Divestiture as necessary in
order to obtain the required Governmental Consent and the Purchase Price shall not be
adjusted because of any required Divestiture.

(ii) If the Agreed Value of the Divested Assets is equal to or greater than $7,000,000
and less than $10,000,000, CCS and Purchaser shall assume all risks and responsibilities for
such Divestiture as necessary in order to obtain the required
Governmental Consent; provided, however, that the Purchase Price shall be reduced by
the amount of the Agreed Value in excess of $7,000,000.

(iii) If the Agreed Value of the Divested Assets is equal to or greater than
$10,000,000, then Purchaser shall have the option to terminate the transactions contemplated
by this Agreement by providing Newpark written notice, within fifteen (15) days of the date
upon which the Agreed Value of the Divested Assets is finally determined in accordance with
this Section 5.2, of Purchaser’s election to either continue with the transactions
contemplated by this Agreement or to terminate this Agreement. If Purchaser fails to timely
provide such notice to Newpark, this Agreement shall be deemed to have been terminated,
without any further action of any party hereto, pursuant to Section 9.1(a)(x) below. If
Purchaser timely notifies Newpark of Purchaser’s election to continue with the transactions
contemplated by this Agreement, CCS and Purchaser shall assume all risks and
responsibilities for such Divestiture as necessary in order to obtain the required
Governmental Consent; provided, however, that the Purchase Price shall be reduced by the
amount of $3,000,000.

 

36

 

(e) For purposes of this Agreement, the “Agreed Value” of any Divested Asset shall be
the amount equal to: (A) (x) the number obtained by dividing $85,000,000 by the LTM EBITDA
(determined in accordance with Sections 9.1(a)(x) and 9.1(b)) multiplied by (y) the Adjusted EBITDA
(the “Adjusted EBITDA Method”), or (B) if the Divested Asset is a property or asset owned
or leased by CCS or its Affiliates and CCS reasonably determines that the Adjusted EBITDA Method
will not result in a fair determination of the Agreed Value, CCS may calculate the Agreed Value
utilizing a discounted cash flow analysis based upon the present value of the estimated future cash
flows from such Divested Asset over a ten (10) year period beginning July 1, 2008 and ending June
30, 2018, using a discount rate of ten percent (10%) per annum (the “DCF Method”). If a
Divestiture is required to obtain any necessary Governmental Consent, promptly following the
determination by CCS that such Divestiture is required CCS shall provide written notice to Newpark
(a “Divestiture Notice”) which shall identify the proposed Divested Assets and set forth
CCS’ calculation of the Agreed Value relating to such assets. Newpark shall have ten (10) calendar
days following the receipt of such Divestiture Notice to review the calculation of the Agreed
Value. If Newpark and CCS are unable to agree on the calculation of such Agreed Value, such
dispute shall be resolved as follows: (i) if the Agreed Value was determined on the basis of the
Adjusted EBITDA Method, any such dispute shall be submitted to the Accounting Arbitrator selected
in the manner provided in Section 2.4(b), and (ii) if the Agreed Value was determined on the basis
of the DCF Method, any such dispute shall be submitted to a valuation expert mutually acceptable to
CCS and Newpark who shall determine the Agreed Value in accordance with the DCF Method. If CCS and
Newpark are unable to mutually agree upon a valuation expert within twenty (20) calendar days
following the receipt of such Divestiture Notice, Newpark and CCS shall each select a valuation
expert, and the two valuation experts shall select a third valuation expert who will determine, on
its own, the Agreed Value of such Divested Asset in accordance with the preceding sentence. Any
costs and expenses of an Accounting Arbitrator or valuation experts shall be shared equally by
Newpark and CCS.

For purposes hereof, “Adjusted EBITDA” shall mean the net income of the Divested Asset
plus interest expense, federal, state and local taxes based on income, depreciation
and amortization of the Divested Asset for the twelve month period ended March 31, 2008 as
reflected in the Annual Financial Statements and Interim Financial Statements or the accounting
records used in the preparation of such financial statements (or similar financial records of CCS
should the Divested Asset be a CCS asset), less the amount of general and administrative expenses
allocable to such Divested Asset in proportion to the relative revenue contributions of the
Divested Asset during such period to the extent not otherwise taken into account in the
determination of the net income of the Divested Asset;

(f) To the extent there are alternative assets, business units or business operations owned,
operated or conducted by any Transferred Entity or by CCS or Purchaser (including their
Subsidiaries) that may be divested in order to obtain any required Governmental Consent, the
parties hereto agree that they shall use their best efforts to cause the divestiture of the assets
or properties which have the lowest Agreed Value, regardless of whether such assets or properties
are owned by any of the Transferred Entities, CCS or Purchaser (or their Subsidiaries). In the
event there are alternative assets, business units or business operations owned, operated or
conducted by Purchaser (including their Affiliates) which may be divested, CCS and Purchaser shall
afford Newpark access to the books, records, properties and financial information relating to any
such assets, business units or business operations for the purpose of determining the assets or
properties which have the lowest Agreed Value for purposes of this Section 5.2(f).

 

37

 

5.3 Further Assurances. The parties hereto agree that, from time to time, whether before, at
or after the Closing Date, each of them will execute and deliver such further instruments of
conveyance and transfer and take such other action as may be necessary to carry out the purposes
and intents of this Agreement.

5.4 Conduct of Business. From the date of this Agreement through the earlier of the Closing or
the termination of this Agreement, except as otherwise expressly contemplated by this Agreement,
required by Law or disclosed in Section 5.4 of the Newpark Disclosure Schedule, Newpark shall cause
each of the Transferred Entities to (i) conduct the Business in the ordinary course of business,
and (ii) use commercially reasonable efforts to preserve intact the Transferred Entities’
respective business organizations and goodwill, keep available the services of their respective
present senior officers and key employees, and preserve the goodwill and business relationships
with customers, suppliers and others having business relationships with them. From the date of this
Agreement through the earlier of the Closing or the termination of this Agreement, except as
otherwise contemplated by this Agreement, required by Law or disclosed in Section 5.4 of the
Newpark Disclosure Schedule, without Purchaser’s written consent (which shall not be unreasonably
withheld or delayed), Newpark shall cause each Transferred Entity to:

(a) not (i) amend or propose to amend their respective Organizational Documents, (ii) split,
subdivide, combine or reclassify their outstanding equity interest, (iii) declare, set aside or pay
any non-cash distribution, or (iv) purchase, redeem or otherwise acquire or dispose directly or
indirectly any equity interests or securities of any Transferred Entity;

(b) not issue, sell, transfer, pledge, dispose of, encumber or agree to issue, sell, transfer,
pledge, dispose of, or encumber, any additional equity securities, or any options, warrants or
rights of any kind with respect thereto;

(c) not sell, lease, license, pledge, dispose of or encumber any assets, properties (whether
real, personal, tangible or intangible), rights or businesses, other than sales or dispositions of
assets in the ordinary course of business consistent with past practice that do not constitute a
sale of a business, product line, business unit or business operation;

(d) not enter into any transaction for, or make, any acquisition of any businesses, material
assets, product lines, business units, business operations, stock or other properties, other than
acquisitions in the ordinary course of business in connection with the operation of the Business;

(e) not adopt, enter into or amend any employment, severance, special pay arrangement or other
similar arrangements or agreements with any employee (including any Former Employee or Transferred
Employee) except (i) as required by applicable Law, (ii) as required by contractual arrangements in
effect as of the date of this Agreement, or (iii) arrangements or agreements that are entered into
or amended in the ordinary course of business consistent with past practice;

 

38

 

(f) not increase the compensation or benefits of any Transferred Employee, except (i) as
required pursuant to contractual arrangements in effect as of the date of this Agreement and
disclosed as a Material Contract in the Newpark Disclosure Schedule or as required or permitted
under this Agreement, (ii) as required by applicable Law, or (iii) in the ordinary course of
business consistent with past practice;

(g) not adopt a plan or agreement of complete or partial liquidation, dissolution,
restructuring, merger, consolidation, recapitalization or other reorganization of any of the
Transferred Entities;

(h) not settle, release, waive or compromise any Actions in any manner that, post-Closing,
restricts the operation of the Business as currently conducted or for consideration in excess of
$1,000,000 individually; or settle release, waive or compromise any right or claim with a fair
market value in excess of $1,000,000 individually;

(i) not make any change to an accounting method for Tax purposes for any of the Transferred
Entities or make any Tax election for any Transferred Entity other than in accordance with past
practice, except in each case as required in accordance with GAAP or applicable Law;

(j) except as may be required as a result of a change in Law or in GAAP, not change any of the
financial accounting principles or practices;

(k) not enter into any Contract which would constitute a Material Contract outside of the
ordinary course of business, or terminate or waive any material provision of, amend or otherwise
modify any material provision of a Material Contract; and

(l) not authorize any of, or commit to do or enter into any binding Contract with respect to
any of the foregoing actions in clauses (a) through (k).

Notwithstanding anything to the contrary, Newpark and its Subsidiaries shall have the right to
remove from any Transferred Entity all cash and cash equivalents in the manner as determined by
Newpark (including by means of dividends, the creation or repayment of intercompany debt or
otherwise) subject to the provisions of Section 2.4.

5.5 Consents. Newpark and Purchaser shall cooperate with each other to obtain any consents
required from third parties in connection with the consummation of the transactions contemplated by
this Agreement.

5.6 Public Announcements. Except as otherwise required by Law, any listing agreement with any
securities exchange or any securities exchange regulation, each of Newpark and Purchaser will
consult with the other and obtain the consent of the other (which consent shall not be unreasonably
withheld or delayed) before issuing any press releases or any public statements with respect to
this Agreement and the transactions contemplated by this Agreement.

 

39

 

5.7 No Shop. From and after the date hereof until the earlier of the termination of this
Agreement or the Closing Date, Newpark shall not, and shall cause its Affiliates not to (and use
its commercially reasonable efforts to cause its directors, officers, employees, representatives
and agents not to) do any of the following, directly or indirectly, with any third party (other
than with Purchaser regarding the transactions contemplated by this Agreement): (i) discuss,
negotiate, authorize, assist, participate in, recommend, propose or enter into, either as the
proposed surviving, merged, acquiring or acquired corporation, any transaction involving a merger,
consolidation, business combination, purchase or disposition of (A) the Business or a material
amount of the assets of the Transferred Entities, or (B) any membership, partnership or other
equity interest in any of the Transferred Entities (any such transaction, an “Acquisition
Transaction”), (ii) facilitate, encourage, solicit or initiate discussions, negotiations or
submissions of proposals or offers from any third party in respect of an Acquisition Transaction,
or (iii) furnish or cause to be furnished to any third party any information concerning the
Business or the Transferred Entities in connection with an Acquisition Transaction.

5.8 Intercompany Accounts. On or prior to the Closing Date, all intercompany accounts between
(i) the Transferred Entities, on one hand, and (ii) Newpark and its other Affiliates, on the other
hand, shall be settled or otherwise eliminated, except for those accounts included in the Estimated
Net Working Capital, as adjusted by the Closing Date Net Working Capital.

5.9 Termination of Intercompany Agreements. Effective at the Closing, all Contracts, including all obligations to provide goods,
services or other benefits, between Newpark and/or any of its Subsidiaries (other than any
Transferred Entity), on the one hand, and any of the Transferred Entities, on the other hand, shall
be terminated without any party having any continuing obligation to the other, except for (i) this
Agreement, and (ii) other Contracts listed in Section 5.9 of the Newpark Disclosure Schedule.

5.10 Use of Names, etc. Within 30 days after the Closing Date, Purchaser shall cause the
Transferred Entities to file amendments to their Organizational Documents with the applicable
Governmental Entities changing the names of the Transferred Entities to names that do not include
the words “Newpark” or any name confusingly or misleadingly similar thereto, such amendments to be
effective as soon as practicable following the Closing Date. For the avoidance of doubt, Purchaser
and its Affiliates may use the name “Newpark” and all other Trademarks owned or licensed by Newpark
or its Affiliates and used in connection with the Business as of the Closing on any materials
distributed or available to customers for the later of (i) 90 days after the Closing Date or (ii)
the exhaustion of inventory in existence as of the Closing Date, subject to applicable Law, in each
case, in a mutually agreed transitional manner. Thereafter, Purchaser shall not use such
Trademarks, other than (i) in a neutral, non-trademark sense to discuss the history of the
Business, or (ii) as required by applicable Law.

5.11 Litigation Support. In the event and for so long as each party actively is prosecuting,
contesting or defending any Action by a third party in connection with (a) any transactions
contemplated under this Agreement or (b) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction
involving the Business or the Transferred Entities, and any of the foregoing require the other
party’s cooperation due to such party’s ownership of the Business or the Transferred Entities at a
relevant time, the requested party shall, and shall cause its Subsidiaries and controlled
Affiliates to, cooperate reasonably with the requesting party and its counsel, at the requesting
party’s expense for any out-of-pocket expenses, in the prosecution, contest or defense, make
available its personnel, and provide such testimony and access to its books and records as shall be
reasonably necessary in connection with the prosecution, contest or defense, subject to appropriate
confidentiality measures.

 

40

 

5.12 Noncompetition; Nonsolicitation.

(a) For the period commencing on the Closing Date and ending on the earlier of (i) the fifth
anniversary of the Closing Date, or (ii) a Newpark Change of Control (the “Restricted
Period”) neither Newpark nor any of its Subsidiaries shall, except as permitted by this
Section 5.12, engage in the business of providing environmental services in the oil and gas
industry in the United States and Gulf of Mexico including, without limitation, the collection,
processing and disposal of crude oil, petroleum products and other oilfield wastes, non-Hazardous
Materials and NORM for generators in the United States including refiners, manufacturers, service
companies and industrial municipalities as conducted by the Business as
of the Closing Date (the “Covered Business”); provided, that the Covered Business
shall not include the processing and disposal of environmental wastes and the providing and
performance of waste management, reclamation and disposal services in a manner substantially
similar to those which are currently provided by Newpark and its Subsidiaries (other than the
Transferred Entities), which includes but is not limited to (i) the collection and disposal of oil
and gas industry water (typically salt water contaminated with oil) that is exempt from RCRA, which
operations are currently conducted in Oklahoma and the panhandle of Texas and are part of Newpark’s
Fluids Systems and Engineering segment, operating under the name of Mid-Continent Completion
Fluids, and (ii) the management of environmental waste utilizing pits and other earth structures,
land farming, annular injection and offsite disposal of pit waste including the handling of NORM
for the oil and gas industry which is currently part of Newpark’s Mats and Integrated Service
segment and which was historically known as Soloco; provided, further, that such exceptions shall
not permit Newpark or any of its Subsidiaries to engage in the business of collecting, processing
and disposing of crude oil, petroleum products and other oilfield wastes, non-Hazardous Materials,
industrial wastes and NORM for the oil and gas industry in the Gulf of Mexico. This
Section 5.12(a) shall cease to be applicable to any Person at such time as it is no longer an
Affiliate or Subsidiary of Newpark.

(b) Notwithstanding the provisions of Section 5.12(a), nothing in this Agreement shall
preclude, prohibit or restrict Newpark or any of its Affiliates or Subsidiaries from (i) acquiring,
owning or holding up to 10% of the outstanding securities of any entity whose securities are listed
and traded on a national securities exchange or market or any securities required to be registered
under the Securities Exchange Act of 1934; or (ii) engaging in any manner in any business activity
that would otherwise violate this Section 5.12 that is acquired from any Person (an “Acquired
Business”) or is carried on by any Person that is acquired by or combined with Newpark or a
Subsidiary of Newpark at any time during the Restricted Period (an “Acquired Company”);
provided, that, if the aggregate consolidated revenues of the Acquired Business or the Acquired
Company for the fiscal year ending prior to the completion of such purchase or acquisition is in
excess of 5% of the consolidated revenues of Newpark and its Subsidiaries for the fiscal year
ending prior to such purchase or acquisition (the “Divestiture Threshold”), then, as soon
as promptly practicable, Newpark or such Subsidiary shall dispose or agree to dispose of all or a
portion of the Acquired Business or the Acquired Company so that the aggregate consolidated
revenues for the fiscal year ending prior to the completion of such purchase or acquisition of the
remaining portion of the Acquired Business or the Acquired Company shall be less than the
Divestiture Threshold.

 

41

 

(c) During the Restricted Period, neither Newpark nor any of its Subsidiaries shall, directly
or indirectly, solicit for employment or employ any Transferred Employee (other than any Person set
forth in Section 5.12(c) of the Newpark Disclosure Schedule); provided, however, that this
Section 5.12(c) shall not prohibit Newpark or any of its Subsidiaries from making general
solicitations not specifically targeted at the Transferred Employees and employ persons in
connection with such general solicitations or, on and after the first anniversary of the Closing
Date, from employing or hiring any person who initiates discussions regarding employment without
any solicitation by Newpark or any of its Subsidiaries.

5.13 Labor Matters.

(a) Following the Closing until ninety (90) days thereafter, neither the Purchaser, the
Transferred Entities nor any Affiliates thereof shall cause any “employment losses” (as that term
is defined in the Worker Adjustment and Retraining Notification Act (“WARN Act”)) that
would give rise to any obligations or liabilities of Newpark or its Affiliates under the WARN Act.

(b) Newpark, Newpark Texas and the Purchaser shall cooperate in connection with any required
notification to, or any required consultation with, the employees, employee representatives, work
councils, unions, labor boards and relevant Governmental Entities concerning the transactions
contemplated by this Agreement.

5.14 Environmental Inspection.

(a) Promptly following the execution of this Agreement, Purchaser shall commence its review of
the environmental condition of the assets of the Transferred Entities which review shall include
such environmental reports (both Phase I and Phase II) prepared by independent third parties as may
be made available to Purchaser (the “Third Party Environmental Reports”). Newpark
acknowledges that CCS and Purchaser (i) have recently received the Third Party Environmental
Reports regarding the assets of the Transferred Entities, (ii) did not set the scope and nature of
such Third Party Environmental Reports, and (iii) may require additional testing and inspection to
confirm the environmental condition of the assets of the Transferred Entities based upon a review
of the Third Party Environmental Reports and such additional Environmental Reports as obtained by
Purchaser. Provided that Newpark has received at least forty-eight (48) hours’ prior written
notice of any access and has consented in writing to such access (which consent shall not to be
unreasonably withheld, conditioned or delayed), Newpark shall permit, and shall cause the
Transferred Entities to permit, CCS, Purchaser and their respective representatives and specialists
to have access to the assets of the Transferred Entities during all reasonable business hours prior
to June 1, 2008 for the purpose of completing any Phase II environmental testing and reports
regarding the assets of the Transferred Entities as may be required by CCS or Purchaser, in their
reasonable discretion and based upon the Environmental Reports. CCS and Purchaser shall take all
reasonable actions in connection with such access to minimize the interference with the assets,
operations and business of Newpark and the Transferred Entities. The parties agree that the
environmental site assessment shall be performed for each of the Owned Real Property and Leased
Real Property sites as Purchaser may

 

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determine and that such assessment shall conform, in all
material respects, to the standard of the “Standard Practice for Environmental Site Assessments:
Phase I Environmental Site Assessment Process,” known as ASTM E1527-05 (“ASTM E1527-05”).
In connection with such environmental site assessment, Newpark shall, and shall cause each of the
Transferred Entities to, reasonably cooperate with Purchaser and provide to Purchaser and its
representatives copies of such records and documents (in addition to the “helpful documents” as
defined below) as may be reasonably requested. Newpark shall identify a “key site manager” with
“good knowledge of the uses and physical characteristics of the property,” both as defined in ASTM
E1527-05, for purposes of the required interview with respect to the Owned Real Property and Leased
Real Property. Interviewees shall be as specific as reasonably possible to the extent of their
knowledge, and shall answer in good faith to the extent of their knowledge pursuant to and as
defined in ASTM E1527-05. The key site manager shall promptly identify and provide the Purchaser
and its representatives all “helpful documents” (as defined in ASTM E1527-05) that are within the
possession or control of such key site manager.

(b) As soon as reasonably practicable, but in any event no later than June 1, 2008 (the
interim period between the execution of this Agreement and June 1, 2008 being referred to as the
“Environmental Inspection Period”), Purchaser shall (i) provide to Newpark a copy of each
environmental report received by Purchaser relating to the Phase I environmental site assessments
(individually, a “Phase I Report” and collectively, the “Phase I Reports”) and the
Phase II environmental site assessments (individually a “Phase II Report” and collectively, the
“Phase II Reports”), and (ii) notify Newpark in writing of any alleged “recognized
environmental conditions” (as defined in ASTM E1527 05) adversely affecting any Owned Real Property
or Leased Real Property (any environmental conditions reflected in a Phase I Report, Phase II
Report or Third Party Environmental Report (collectively, an “Environmental Report”)
identified in such notice is referred to as an “Alleged Recognized Environmental
Condition”). The notice (“Notice of Alleged Recognized Environmental Conditions”)
shall include a description and reasonably detailed explanation (including all reports and other
supporting documentation) of each Alleged Recognized Environmental Condition being claimed, and a
value that Purchaser, in good faith, attributes to each Alleged Recognized Environmental Condition.
Newpark and Purchaser shall promptly meet in an attempt to mutually agree upon a proposed
resolution of any such Alleged Recognized Environmental Conditions and the costs related thereto.
If Purchaser and Newpark are not able to agree upon a proposed resolution of any Alleged Recognized
Environmental Condition and the costs related thereto on or before the date that is five (5) days
prior to the Outside Date, such dispute shall be resolved by arbitration in accordance with
Section 5.14(d) below. Alleged Recognized Environmental Conditions not included in a Notice of
Alleged Recognized Environmental Conditions provided to Newpark on or before June 1, 2008 in
accordance with this Section 5.14 may not thereafter be asserted under this Section 5.14 as an
adjustment to the Purchase Price or as a right to terminate this Agreement.

 

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(c) In the event an Environmental Report shall identify an Alleged Recognized Environmental
Condition and Purchaser shall provide Newpark a Notice of Alleged Recognized Environmental
Condition in accordance with Section 5.14(b), the following provisions shall apply:

(i) If the aggregate cost to resolve any and all Alleged Recognized Environmental
Conditions as finally determined in accordance with this Section 5.14 the “Alleged
Recognized Environmental Cost”) is less than $1,000,000, (A) Purchaser shall assume all
risks and responsibilities with respect to such Alleged Recognized Environmental Conditions
and shall have no right to seek indemnification under Article X with respect thereto, (B)
the Purchase Price shall not be adjusted as a result of any such Alleged Recognized
Environmental Cost, and (C) Purchaser shall have no right to terminate this Agreement as a
result of such Alleged Recognized Environmental Conditions.

(ii) If the Alleged Recognized Environmental Cost is equal to or greater than
$1,000,000 and less than $2,000,000, (A) Purchaser shall assume all risks and
responsibilities with respect to such Alleged Recognized Environmental Conditions and
shall have no right to seek indemnification under Article X with respect thereto, (B) the
Purchase Price shall be reduced by the amount of the Alleged Recognized Environmental Cost
in excess of $1,000,000, and (C) Purchaser shall have no right to terminate this Agreement
as a result of such Alleged Recognized Environmental Conditions.

(iii) If the Alleged Recognized Environmental Cost is equal to or greater than
$2,000,000, Newpark shall have the option to cure or otherwise remediate, at its sole cost
and expense, a portion of the Alleged Recognized Environmental Conditions in accordance with
this Section 5.14(c)(iii) by providing Purchaser written notice thereof within five (5) days
of the final determination of the Alleged Recognized Environmental Costs pursuant to this
Section 5.14. If Newpark fails to timely exercise its option as herein provided, Newpark
shall be deemed to have elected not to exercise its option to cure or otherwise remediate
all or any portion of the Alleged Recognized Environmental Conditions. If Newpark notifies
Purchaser that Newpark is not exercising its option, or Newpark fails to timely exercise its
option as herein provided and is deemed to have elected not to exercise its option to cure
or remediate the Alleged Recognized Environmental Conditions, Purchaser shall have the right
to elect to either terminate this Agreement or to continue this Agreement and Purchaser must
provide Newpark written notice, within thirty (30) days of the date upon which the Alleged
Recognized Environmental Cost is finally determined in accordance with this Section 5.14 of
its election. If Purchaser fails to timely provide such notice to Newpark, this Agreement
shall be deemed to have been terminated, without any further action of any party hereto,
pursuant to Section 9.1(a)(vii) below.

If Newpark does exercise its option to cure or remediate under this
Section 5.14(c)(iii), Newpark shall undertake to cure or remediate one or more of the
Alleged Recognized Environmental Conditions selected by Newpark (the “Selected Alleged
Recognized Environmental Conditions”) so that the aggregate Alleged Recognized
Environmental Cost for the remaining Alleged Recognized Environmental Conditions (the
“Remaining Alleged Recognized Environmental Conditions”) does not equal or exceed
$2,000,000. Newpark shall complete the cure or remediation of the Selected Alleged
Recognized Environmental Conditions as soon as practicable but in any event not later than
six (6) months following the date Newpark delivers Purchaser notice of Newpark’s election to
exercise the option herein to cure or remediate the Selected Alleged Recognized
Environmental Conditions. If, following the cure or remediation of the Selected Alleged
Recognized Environmental Conditions, the Alleged Recognized

 

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Environmental Cost of the
Remaining Alleged Recognized Environmental Conditions is more than $1,000,000 but less than
$2,000,000, (A) Purchaser shall assume all risks and responsibilities with respect to such
Remaining Alleged Recognized Environmental Conditions and shall have no right to seek
indemnification under Article X with respect thereto, (B) the Purchase Price shall be
reduced by the amount of the Alleged Recognized Environmental Cost for the Remaining Alleged
Recognized Environmental Conditions in excess of $1,000,000, and (C) Purchaser shall have no
right to terminate this Agreement as a result of such Remaining Alleged Recognized
Environmental Conditions. If, following the cure or remediation of the Selected Alleged
Environmental Conditions, the Alleged Recognized Environmental Cost of the Remaining Alleged
Recognized
Environmental Conditions is less than $1,000,000, (A) Purchaser shall assume all risks
and responsibilities with respect to such Remaining Alleged Recognized Environmental
Conditions and shall have no right to seek indemnification under Article X with respect
thereto, (B) the Purchase Price shall not be adjusted as a result of any such Alleged
Recognized Environmental Cost, and (C) Purchaser shall have no right to terminate this
Agreement as a result of such Remaining Alleged Recognized Environmental Conditions.

If Newpark does not elect, or is deemed to have not elected, to cure or remediate any
Alleged Recognized Environmental Conditions and Purchaser timely elects to continue with the
transactions contemplated herein, (A) Purchaser shall assume all risks and responsibilities
with respect to such Alleged Recognized Environmental Conditions and shall have no right to
seek indemnification under Article X with respect thereto, (B) the Purchase Price shall be
reduced by the amount of $1,000,000, and (C) Purchaser shall be deemed to have waived any
right to terminate this Agreement as a result of such Alleged Recognized Environmental
Conditions.

(d) Any dispute relating to an Alleged Recognized Environmental Condition and the cost of any
proposed or acceptable resolution thereof (an “Environmental Dispute”), shall be settled by
binding arbitration. Any such arbitration proceeding shall be conducted by one arbitrator mutually
agreeable to Newpark and Purchaser. In the event that within ten (10) Business Days after
submission of any Environmental Dispute to arbitration, Newpark and Purchaser cannot mutually agree
on one arbitrator, Newpark and Purchaser shall each select one arbitrator, and the two arbitrators
so selected shall select a third arbitrator who will arbitrate the Environmental Dispute on his
own. The decision of the arbitrator shall be binding and conclusive upon the parties to this
Agreement. Such decision shall be written and shall be supported by written findings of fact and
conclusions which shall set forth the determination of such arbitrator. Any such arbitration shall
be held in Houston, Texas, under the commercial rules then in effect of the American Arbitration
Association. Newpark and Purchaser shall equally share the fees of the arbitrator and applicable
administrative fees and shall otherwise pay their respective costs and expenses in connection
therewith.

5.15 Bayou Choctaw Site. Between the date of this Agreement and the Closing Date, Newpark
shall cause NESI to transfer and convey to Newpark or one of its Affiliates the real property
commonly referred to as the “Bayou Choctaw” site located in West Baton Rouge Parish, Louisiana (the
“Bayou Choctaw Property”).

 

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5.16 NEWS Assets. Between the date of this Agreement and the Closing Date, Newpark shall
cause one or more of the Transferred Entities to transfer and convey to Newpark Environmental Water
Solutions, LLC (“NEWS”) the permits described in Section 5.4 of the Newpark Disclosure
Schedule that are held by the Transferred Entities for the benefit and use by NEWS (the “NEWS
Permits”) in connection with the business operations conducted by NEWS which are not within the
Business being acquired by Purchaser.

5.17 Post-Closing Covenants.

(a) Not later than sixty (60) days following the Closing, Purchaser shall either (i) cause
Newpark to be fully and unconditionally released in a writing reasonably satisfactory to Newpark
from all obligations of Newpark under that certain Corporate Guaranty dated December 23, 2005 by
and between Newpark and General Electric Capital Corporation (the “Corporate Guaranty”), or
(ii) fully satisfy and discharge all obligations to which the Corporate Guaranty relates and
provide Newpark with evidence thereof satisfactory to Newpark.

(b) Promptly following the Closing, Newpark and Purchaser shall cooperate in good faith to
obtain the consent of the Greater LaFourche Port Commission to the sublease of that certain tract
of land described in Section 5.17(b) of the Newpark Disclosure Schedule by NESI to DFI and upon
receipt of such consent, Purchaser (or NESI) and DFI shall enter into a sublease agreement (the
“Fourchon Sublease”) consistent with the terms and provisions set forth in Section 5.17(b)
of the Newpark Disclosure Schedule and otherwise in a form mutually acceptable to Newpark and
Purchaser.

ARTICLE VI

EMPLOYEE MATTERS COVENANTS

6.1 Employees and Compensation.

(a) Newpark shall update Section 3.10(f) of the Newpark Disclosure Schedule as of two (2)
Business Days prior to the Closing Date to reflect the Transferred Employees as of the Closing
Date.

(b) Except as set forth on Schedule 6.1(b) of the Newpark Disclosure Schedule, from the
Closing Date through the first anniversary of the Closing Date, Purchaser shall provide, or shall
cause the Transferred Entities to provide, the Transferred Employees with compensation (including
bonuses, commissions and/or other annual incentive opportunities) and employee benefits that in the
aggregate are not substantially less favorable than the compensation and benefits provided by
Newpark and its Affiliates as of immediately prior to the Closing Date and as set forth in Sections
3.10(a), 3.10(f) and 6.2(f) of the Newpark Disclosure Schedule. Nothing in the foregoing provision
or otherwise shall in any way alter the “at will” nature of the employment relationship between any
Transferred Employee, on the one hand, and any Transferred Entity, on the other hand.

 

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6.2 Welfare Benefits Plans.

(a) Effective as of the Effective Time and to the extent permitted by applicable Law,
Purchaser shall permit each Transferred Employee to enroll in Welfare Plans provided by
Purchaser or its Affiliates to their employees on the Closing Date which are consistent with
Section 6.1(b).

(b) Subject to the provisions of Section 6.2(a) and the conditions stated below, with respect
to the coverage of the Transferred Employees under the group health plans provided by Purchaser or
its Affiliates, (i) each such employee’s credited service with Newpark and its Affiliates shall be
credited against any waiting period applicable to eligibility for enrollment of new employees under
Purchaser’s group health plans; (ii) limitations on benefits due to pre-existing conditions shall
be waived (or, if such a waiver is not otherwise required by applicable Laws, Purchaser shall use
commercially reasonable efforts to have them waived), to the extent waived under the corresponding
Benefit Plan for any Transferred Employee enrolled in any group health plan maintained by Newpark
and its Affiliates as of the Closing Date; and (iii) any out of pocket annual maximums and
deductibles taken into account under the Newpark group health plan for any Transferred Employee
from and after January 1, 2008 to the Closing Date, shall to the extent permitted under Purchaser’s
group health plans, be credited under said group health plans. Notwithstanding anything to the
contrary herein, Purchaser’s obligations in this Section 6.2(b) are subject to and conditioned upon
satisfaction of all of the following conditions: (i) copies of all group health plan records
pertaining to out of pocket annual maximums, deductibles and similar costs incurred by Transferred
Employees under the Newpark group health plans shall be provided to the insurance carriers
providing group health benefits to employees of Purchaser or its Affiliates; (ii) only expenses
incurred from and after January 1, 2008, will be credited; and (iii) the insurance carriers that
provide group health benefits to Purchaser’s employees shall receive certificates of creditable
coverage for all of the Transferred Employees and their dependents.

(c) Purchaser shall be responsible for providing the notices and making available COBRA
Continuation Coverage for all Transferred Employees and their respective covered dependents whose
qualifying events (as defined in Code Section 4980B) occur on or after the Closing Date. Newpark
shall continue to be responsible for providing the notices and making available COBRA Continuation
Coverage, for all of the Former Employees and their respective covered dependents whose qualifying
events (as defined in Code Section 4980B) occur prior to the Closing Date.

(d) Notwithstanding anything in this Agreement to the contrary, if any Transferred Employee
has become disabled (within the meaning of the applicable Welfare Plan maintained by Newpark or its
Affiliates that provides short-term or long-term disability benefits) prior to the Closing Date,
Newpark and/or its Affiliates will retain liability for the provision of disability benefits
payable to such Transferred Employee under Newpark’s Welfare Plans, if any, with respect to such
disability (but not with respect to any reoccurrence of such a disability after such Transferred
Employee returns to active service on or following the Closing Date). From and after the Closing
Date, any right to reemployment for any Transferred Employees who are on short-term or long-term
disability as of immediately prior to the Effective Time shall be the obligation of Purchaser and
its Affiliates and not of Newpark and its Affiliates.

(e) From and after the Effective Time, (i) Purchaser shall assume and honor or shall cause the
Transferred Entities to assume and honor, all unpaid vacation or other paid time off days of the
Transferred Employees that accrued prior to the Effective Time, and (ii) Purchaser
shall sponsor a vacation and paid time off policy that applies to each Transferred Employee
and shall take into account service with Newpark and its Affiliates as provided in Section 6.3(a).

 

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(f) Subject to the limitations set forth in Section 2.1(b)(ii), Purchaser shall provide
Transferred Employees whose employment is terminated during the six-month period immediately
following the Closing Date severance pay and benefits on the terms and conditions set forth in
Section 6.2(f) of the Newpark Disclosure Schedule. Notwithstanding the foregoing, Purchaser and the
Transferred Entities shall not be under any obligation to continue the employment of any individual
for any period of time following the Closing as a result of any provision of this Agreement.

6.3 Miscellaneous Employee Issues.

(a) For all purposes under the employee benefit plans, practices or arrangements of Purchaser
and its Affiliates (including the Transferred Entities) providing benefits to any Transferred
Employee after the Closing Date, each Transferred Employee shall be credited with all years of
service for which such Transferred Employee was credited before the Effective Time under any
similar employee benefit plans, practices or arrangements of Newpark and its Affiliates.

(b) No provision of this Agreement shall create any third party beneficiary or other rights in
any employee (including any beneficiary or dependent thereof) or any other persons in respect of
continued employment with any of Newpark, Newpark Texas, Purchaser or the Transferred Entities or
any of their respective Affiliates, and no provision of this Agreement shall create any such rights
in any such persons with respect to any benefits that may be provided, directly or indirectly,
under any Plan, policy or arrangement which may be established or maintained by Newpark, Newpark
Texas, the Transferred Entities or Purchaser.

(c) Notwithstanding anything to the contrary herein, Newpark and its Affiliates hereby
covenant and agree that, following the Closing, any confidentiality provision in any agreement
between Newpark or any Affiliate and any Transferred Employee, together with any confidentiality
obligation of any Transferred Employee arising under the Law in favor of Newpark and its
Affiliates, shall not prohibit any such Transferred Employee’s use, post-Closing, of any
confidential information solely relating to the Business and for the benefit of the Transferred
Entities and their Affiliates. In addition, Newpark and its Affiliates hereby covenant and agree
that any non-competition provision in any agreement between Newpark or any Affiliate and any
Transferred Employee shall not prohibit a Transferred Employee’s activities, post-Closing, solely
relating to the Business and for the benefit of the Transferred Entities and their Affiliates. Any
Transferred Employee that, in the absence of this Agreement, would be bound by any such
confidentiality or non-competition provisions in favor of Newpark and its Affiliates post-Closing,
shall be a third-party beneficiary of this Agreement solely with respect to this Section 6.3(c).

 

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ARTICLE VII

TAX MATTERS

7.1 Liability for Taxes and Related Matters.

(a) Newpark Liability for Taxes. Except for the amounts recorded as a liability in
the calculation of the Estimated Net Working Capital, as adjusted by the Closing Date Net Working
Capital, Newpark shall be liable for and indemnify Purchaser for all Taxes imposed on or due from
the Transferred Entities (i) for any taxable year or period that ends on or before the Effective
Time (a “Pre-Closing Period”), and (ii) with respect to any taxable year or period
beginning before and ending after the Effective Time (a “Straddle Period”), the portion of
such taxable year ending on and including the Effective Time. Newpark shall be entitled to any
refund of Taxes of the Transferred Entities received for any Pre-Closing Period and any portion of
a Straddle Period ending on and including the Closing Date, except to the extent any such refunds
have been taken into account as a Current Asset in computing Net Working Capital.

(b) Purchaser Liability for Taxes. Purchaser shall be liable for and indemnify
Newpark for all Taxes imposed on or due from the Transferred Entities for any taxable year or
period that begins after the Effective Time (a “Post-Closing Period”) and, with respect to
any Straddle Period, the portion of such taxable year beginning after the Effective Time.

(c) Taxes for Straddle Periods. To the extent permitted by Law or administrative
practice, the taxable year of the Transferred Entities shall be closed at the Effective Time. To
the extent that the taxable year of the Transferred Entities is not closed pursuant to the previous
sentence and it is therefore necessary to determine the liability for Taxes for a Straddle Period,
the determination of the Taxes for the portion of the year or period ending on, and for the portion
of the year or period beginning after, the Effective Time shall be determined by assuming that the
Transferred Entities had a taxable year or period which ended at the Effective Time, except that
exemptions, allowances or deductions that are calculated on an annual basis (other than net
operating losses and tax credits carried forward from years ending prior to the Effective Time),
shall be prorated on the basis of the number of days in the annual period elapsed through the
Effective Time as compared to the number of days in the annual period elapsing after the Effective
Time. Net operating losses and tax credits carried forward from years ending prior to the
Effective Time shall be allocated first, to the extent that they can be utilized, to the taxable
year or period ending on the Effective Time.

(d) Adjustment to Purchase Price. Any payment by Purchaser or CCS, on the one hand,
or Newpark, on the other hand, pursuant to Section 2.4 or Article X and any Tax indemnification
payment pursuant to this Section 7.1 will be treated as an adjustment to the Purchase Price for all
Tax purposes. The indemnification obligations contained in Sections 7.1(a) and 7.1(b) above shall
survive the Closing Date until seventy-five (75) days following the expiration of the statutory
periods of limitations (including any extensions to such limitations periods agreed to by Newpark
or the Purchaser, as the case may be).

 

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(e) Tax Returns. Newpark shall file, or cause to be filed, when due all Tax Returns
that are required to be filed by or for the Transferred Entities for taxable years or periods
ending on or before the Effective Time, and Purchaser shall file, or cause to be filed, when due
all Tax Returns that are required to be filed by or for the Transferred Entities for taxable years
or periods ending after the Effective Time. If Newpark could be liable for any Taxes with respect
to any Tax Return filed by Purchaser, Purchaser shall (i) cause such Tax Return to be prepared on a
basis which is consistent with the Transferred Entities’ Tax Returns previously filed and in
accordance with past practices unless otherwise required (rather than permitted) by the Code and/or
Treasury Regulations at such time, (ii) deliver a copy of such Tax Return along with accompanying
work papers to Newpark not less than thirty (30) days prior to the due date (as extended, if
applicable) for the filing of such Tax Return (the “Due Date”), (iii) if, at any time prior
to the Due Date, Newpark notifies Purchaser that Newpark objects to any item reflected on such Tax
Return which item may affect Newpark’s liability for Taxes, Purchaser shall, prior to the Due Date,
make any and all changes to such item or items reasonably requested by Newpark and Purchaser shall
not file any such Tax Return until it has made such reasonable changes and received Newpark’s
agreement thereto (not to be unreasonably withheld). If Purchaser has fully complied with this
Section 7.1(e) with respect to a Tax Return to be filed by Purchaser, Newpark shall pay Purchaser
the Taxes for which Newpark is liable pursuant to Section 7.1(a) but which are payable with such
Tax Return within five (5) Business Days (x) prior to the Due Date for the filing of such Tax
Returns or (y) after the date that Purchaser has provided Newpark with the revised Tax Return
referred to in clause (iii) of the previous sentence, whichever is later. If Purchaser fails to
satisfy any of its obligations pursuant to this Section 7.1(e) with respect to any Tax Return,
Newpark shall, in addition to any other remedies available to Newpark, have no obligation to
indemnify Purchaser for any Taxes reflected on such Tax Return.

(f) Contest Provisions. Purchaser shall promptly notify Newpark in writing upon
receipt by Purchaser, any of its Affiliates or the Transferred Entities of notice of any pending,
proposed, threatened or actual Tax audit or Tax deficiency, assessment or other claim which may
affect the Taxes for any Pre-Closing Period or any Straddle Period for which Newpark would be
liable pursuant to Section 7.1(a). Newpark shall promptly notify Purchaser in writing upon receipt
by Newpark, Newpark Texas or any of their Affiliates of notice of any pending, proposed, threatened
or actual Tax audit or Tax deficiency, assessment or other claim which may affect the Taxes for any
Straddle Period for which Purchaser would be liable pursuant to Section 7.1(b). Newpark shall have
the sole right to control the defense in any Tax audit or administrative court proceeding (a
“Tax Contest”) relating to any Pre-Closing Period and to employ counsel and other advisors
of its choice at its expense, provided that Purchaser (together with its counsel and other
advisors) shall be entitled, at its sole cost, to participate in (but not control) any proceeding
relating to any such Pre-Closing Period. In the event Newpark shall have the right to control any
such Tax Contest, Purchaser shall, upon request of Newpark, execute any such document and take such
other action as may be reasonably requested by Newpark to obtain an extension of the period during
which the taxable year or period to which such Tax Contest relates remains subject to further audit
or examination. In the event of any Tax Contest relating to a Straddle Period of the Transferred
Entities, (i) to the extent the issues can be separated into those for which Newpark would be
liable under Section 7.1(a) and those for which Purchaser would be liable under Section 7.1(b),
then each of Newpark, on the one hand, and Purchaser, on the other, shall control the defense of
those issues for which it would be liable, employing counsel and other advisors of its own choice,
at its expense, (ii) with respect to all
other issues, Purchaser shall be entitled to control the defense employing counsel and other
advisors of its choice at its expense, provided that Newpark (along with counsel and other advisors
of its choice) shall be entitled to participate in the defense of and to take over such

 

50

 

defense if
Purchaser is not prosecuting the defense diligently, vigorously and professionally. Neither
Purchaser nor the Transferred Entities may agree to settle any Tax claim which may affect the Taxes
for which Newpark or its Affiliates would be liable under Section 7.1(a) without the prior written
consent of Newpark, which consent shall not be unreasonably withheld. Further, neither Newpark nor
any of its Affiliates may agree to settle any Tax claim which may affect the Taxes for which
Purchaser or the Transferred Entities would be liable under Section 7.1(b) without the prior
written consent of Purchaser, which consent shall not be unreasonably withheld.

7.2 Transfer Taxes. Any transfer taxes (excluding income taxes or capital gain taxes) arising
from the sale of the Acquired Interests shall be borne by Purchaser.

ARTICLE VIII

CONDITIONS TO OBLIGATIONS TO CLOSE

8.1 Conditions to Obligation of Each Party to Close. The respective obligations of each party
to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction
or waiver at or prior to the Closing Date of the following conditions:

(a) HSR Act. Any waiting period (and any extension thereof) applicable to the
consummation of the transactions contemplated by this Agreement under the HSR Act shall have
expired or been terminated.

(b) No Injunctions. No injunction or other order issued by any court of competent
jurisdiction preventing the consummation of the Sale shall be in effect.

(c) No Illegality. No Law shall have been enacted, entered, promulgated and remain in
effect that prohibits or makes illegal consummation of the Sale.

(d) Alleged Recognized Environmental Cost. The amount of any Alleged Recognized
Environmental Cost, and any resulting adjustment to the Purchase Price, shall have either been
mutually agreed to by Newpark and the Purchaser or otherwise determined in accordance with
Section 5.14(d).

8.2 Conditions to Purchaser’s Obligation to Close. The obligations of Purchaser to effect the
transactions contemplated by this Agreement shall be subject to the satisfaction or waiver by
Purchaser on or prior to the Closing Date of all of the following conditions:

(a) Representations and Warranties. The representations and warranties of Newpark set
forth in this Agreement that are qualified as to materiality shall be true and correct and the
representations and warranties of Newpark set forth in this Agreement that are not so qualified
shall be true and correct in all material respects, in each case on the date of this Agreement and
on the Closing Date as though made on the Closing Date, except those representations and warranties
that address matters only as of a particular date or only with respect to a specific period of
time, which need only be true and correct (or true and correct in all material respects, as
applicable) as of such date or with respect to such period; provided, however, that a breach of any
of the foregoing representations and warranties shall not constitute the non-fulfillment of the
foregoing condition if such breach is capable of cure, and such breach is actually cured, by the
earlier of (i) thirty (30) calendar days after written notice thereof from Purchaser and (ii) the
Outside Date.

 

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(b) Covenants and Agreements. The covenants and agreements of Newpark, DFI and Newpark
Texas to be performed or complied with on or before the Closing Date in accordance with this
Agreement including, without limitation, the delivery of the items described in Section 2.3(b)(i),
shall have been duly performed or complied with in all material respects.

(c) Officer’s Certificate. Purchaser shall have received a certificate, dated as of
the Closing Date and signed on behalf of Newpark by an executive officer of Newpark, stating that
the conditions specified in Section 8.2(a) and Section 8.2(b) have been satisfied.

(d) Releases of Liens and Indebtedness. The Purchaser shall have received reasonable
evidence that (i) the Transferred Interests and all assets held by the Transferred Entities shall
have been released from any and all Liens (other than Permitted Liens), and (ii) the Transferred
Entities shall have been released from all guaranties or other liability with respect to Newpark’s
funded Indebtedness.

(e) No Material Adverse Effect. No Material Adverse Effect shall have occurred, nor
shall any event or circumstance have occurred which would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

(f) FIRPTA. Newpark shall deliver to Purchaser at the Closing a duly executed and
acknowledged certificate, in customary form and substance reasonably acceptable to Purchaser and in
compliance with the Code and Treasury Regulations, certifying such facts as to establish that the
sale of the Acquired Interests is exempt from withholding pursuant to Section 1445 of the Code.

(g) Lafayette Sublease. Newpark Mats and Integrated Services LLC (“NMIS”) and
NESI shall have entered into a sublease (the “Lafayette Sublease Agreement”) of the office
space described in Section 8.2(g) of the Newpark Disclosure Schedule on terms and provisions
consistent with those set forth on Section 8.2(g) of the Newpark Disclosure Schedule and otherwise
in a form mutually acceptable to Newpark and Purchaser. Newpark shall also deliver to Purchaser at
the Closing evidence of the consent, if any, required from the lessor in a form reasonably
acceptable to Purchaser.

(h) Other. Purchaser shall have received reasonable evidence of the satisfaction of
any additional conditions to Purchaser’s obligations to close as set forth in Section 8.2(h) of the
Newpark Disclosure Schedule.

 

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8.3 Conditions to DFI’s and Newpark Texas’ Obligations to Close. The obligations of DFI and
Newpark Texas to consummate the transactions contemplated by this Agreement shall be subject to the
satisfaction or waiver by Newpark on or prior to the Closing Date of all of the following
conditions:

(a) Representations and Warranties. The representations and warranties of Purchaser
set forth in this Agreement that are qualified as to materiality shall be true and correct and the
representations and warranties of Purchaser set forth in this Agreement and that are not so
qualified shall be true and correct in all material respects, in each case on the date of this
Agreement and on the Closing Date as though made on the Closing Date, except those representations
and warranties that address matters only as of a particular date or only with respect to a specific
period of time, which need only be true and correct (or true and correct in all material respects,
as applicable) as of such date or with respect to such period; provided, however, that a breach of
any of the foregoing representations and warranties shall not constitute the non-fulfillment of the
foregoing condition if such breach is capable of cure and such breach is actually cured, by the
earlier of (i) thirty (30) calendar days after written notice thereof from Newpark and (ii) the
Outside Date.

(b) Covenants and Agreements. The covenants and agreements of Purchaser to be
performed or complied with on or before the Closing Date in accordance with this Agreement
including, without limitation, the delivery of the items described in Section 2.3(b)(ii), shall
have been duly performed or complied with in all material respects.

(c) Officer’s Certificate. Newpark shall have received a certificate, dated as of the
Closing Date and signed on behalf of Purchaser by an executive officer of Purchaser, stating that
the conditions specified in Section 8.3(a) and Section 8.3(b) have been satisfied.

ARTICLE IX

TERMINATION

9.1 Termination.

(a) Subject to the provisions of this Section 9.1, this Agreement may be terminated at any
time prior to the Closing:

(i) by mutual written consent of Newpark and Purchaser;

(ii) by Newpark if CCS (or Purchaser) shall not have filed on or before May 1, 2008
with the DOJ and FTC the notification and report form required to be filed by CCS (or
Purchaser) for the transactions contemplated hereby pursuant to the HSR Act;

(iii) by Purchaser if Newpark shall not have filed on or before May 1, 2008 with the
DOJ and FTC the notification and report form required to be filed by Newpark for the
transactions contemplated hereby pursuant to the HSR Act;

(iv) by either Newpark, on the one hand, or Purchaser, on the other hand, if the
Closing shall not have occurred on or before July 1, 2008 (the “Outside Date”);
provided, however, that (A) either Newpark or Purchaser may, at its sole discretion, extend
the Outside Date on one or more occasions for an aggregate period not to exceed forty-five
(45) days if all other conditions to consummation of the transactions contemplated by this
Agreement are satisfied or capable of then being satisfied, and the sole reason that such
transactions have not been consummated by such date is that the condition set forth in
Section 8.1(a) has not been satisfied, provided, that the extension may be increased to a
period not to exceed seventy-five (75) days if a Divestiture is required and any dispute
with respect to the Agreed Value is submitted to an Accounting Arbitrator or a valuation
expert in accordance with Section 5.2(e), provided, further, that the Outside Date shall

 

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not
be extended for a period in excess of five (5) Business Days following the later to occur of
the date upon which the waiting period (or any extension thereof) under the HSR Act shall
have expired or been terminated, or the date upon which a determination of the Agreed Value
is made, (B) either Newpark or Purchaser may, at its sole discretion, extend the Outside
Date on one or more occasions for an aggregate period not to exceed forty-five (45) days if
one or more Environmental Disputes shall have been submitted to arbitration in accordance
with Section 5.14(d), provided, that the Outside Date shall not be extended for a period in
excess of five (5) Business Days following the date upon which the arbitrator shall have
delivered his written decision with respect to such Environmental Disputes, (C) either
Newpark or Purchaser may, at its sole discretion, extend the Outside Date (as same may have
been extended) until the sooner to occur of (1) the expiration of Purchaser’s thirty (30)
day notice period provided for in Section 5.14(c)(iii), or (2) five (5) Business Days
following the Purchaser’s delivery of its notice under Section 5.14(c)(iii) that Purchaser
is electing to continue with the transactions contemplated by this Agreement, (D) either
Newpark or Purchaser may, at its sole discretion, extend the Outside Date (as same may have
been extended) up to six (6) months if Newpark exercises its option under
Section 5.14(c)(iii) to cure or remediate the Selected Alleged Recognized Environmental
Conditions, (E) either Newpark or Purchaser may, at its sole discretion, extend the Outside
Date on one or more occasions for an aggregate period not to exceed thirty (30) days if a
dispute with respect to LTM EBITDA shall have been submitted to an Accounting Arbitrator in
accordance with Section 9.1(b), provided, that the Outside Date shall not be extended for a
period in excess of five (5) Business Days following the date on which the Accounting
Arbitrator shall have delivered his written decision with respect to any such dispute, and
(F) the right to terminate this Agreement under this Section 9.1(a)(iv) shall not be
available to any party to this Agreement whose failure to comply or perform in any material
respect with such party’s representations, warranties, covenants or other agreements
contained in this Agreement has been the cause of or resulted in the failure of the
transactions contemplated by this Agreement to occur on or before the Outside Date. In the
event (x) any Environmental Report required pursuant to Section 5.14 hereof shall not have
been completed on or before the Outside Date, or (y) any Environmental Dispute shall not
have been resolved by arbitration or otherwise on or before the Outside Date as it may
have been extended pursuant to clause (B) above, Newpark shall have the right, at its
discretion, to terminate this Agreement on the Outside Date (as same may have been
extended). In the event Newpark shall not have completed the cure or remediation of the
Selected Alleged Recognized Environmental Conditions on or before the Outside Date as it may
have been extended pursuant to clause (D) above, Purchaser shall have the right, at its
discretion, to terminate this Agreement on the Outside Date (as the same may have been
extended);

(v) by Newpark at any time if (A) the representations and warranties of Purchaser in
this Agreement that are qualified as to materiality were not true and correct or the
representations and warranties of Purchaser in this Agreement that are not so qualified were
not true and correct in all material respects when made or at any time thereafter, or (B)
Purchaser is in breach in any material respect of any of its covenants or other agreements
in this Agreement (clauses (A) and (B) collectively, a “Purchaser Breach”), and such
Purchaser Breach continues uncured for thirty (30) calendar days after written notice
thereof by Newpark; provided, however, that such thirty (30) day period shall not be
extended past the Outside Date;

 

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(vi) by Purchaser at any time if (A) the representations and warranties of Newpark in
this Agreement that are qualified as to materiality were not true and correct or the
representations and warranties of Newpark in this Agreement that are not so qualified were
not true and correct in all material respects when made or at any time thereafter or (B) any
one of Newpark, DFI or Newpark Texas are in breach in any material respect of any of their
respective covenants or other agreements in this Agreement (clauses (A) and (B)
collectively, a “Newpark Breach”), and such Newpark Breach continues uncured for
thirty (30) calendar days after written notice thereof by Purchaser; provided, however, that
such thirty (30) day period shall not be extended past the Outside Date;

(vii) by Purchaser pursuant to Section 5.14(c)(iii) or otherwise in accordance with the
provisions of Section 5.14(c)(iii);

(viii) by Purchaser, if it is not satisfied, in its sole discretion, with the results
of its due diligence, provided, however, that as a condition to its right to terminate this
Agreement pursuant to this Section 9.1(a)(viii), the Purchaser must provide written notice
of such termination to Newpark on or before July 1, 2008. If Purchaser fails to provide
such written notice of termination on or before July 1, 2008, Purchaser shall have waived
any right to terminate this Agreement pursuant to this Section 9.1(a)(viii);

(ix) by Purchaser pursuant to Section 5.2(d)(iii) or otherwise in accordance with the
provisions of Section 5.2(d)(iii);

(x) by Purchaser if it is determined that LTM EBITDA of the Transferred Entities does
not equal or exceed $15,500,000, provided, however, that as a condition to its right to
terminate this Agreement pursuant to this Section 9.1(a)(x), the Purchaser must provide
written notice of such termination to Newpark on or before June 1, 2008 and such notice
shall include detailed information setting forth Purchaser’s calculation of
the LTM EBITDA. If Purchaser fails to provide such written notice of termination on or
before June 1, 2008, Purchaser shall have waived any right to terminate this Agreement
pursuant to this Section 9.1(a)(x). For purposes of this Agreement, “LTM EBITDA”
means, subject to the adjustments below, an amount equal to the combined net income,
calculated in accordance with GAAP consistently applied, plus interest expenses, federal,
state and local taxes based on income, depreciation and amortization of the Transferred
Entities for the twelve (12) calendar month period ending March 31, 2008. In calculating
the LTM EBITDA, the parties agree to the following adjustments: (A) asset impairments and
similar non-cash charges shall be disregarded; and (B) any extraordinary, non-recurring and
unusual gains, losses, or expenses on sales of assets or businesses shall be disregarded.

 

55

 

(b) In the event Purchaser shall, in accordance with the provisions of this Article IX,
provide notice of termination pursuant to Section 9.1(a)(x), Newpark shall have a period of not
less than five (5) Business Days to review Purchaser’s calculation of the LTM EBITDA. If Newpark
disputes any such calculations and Newpark and Purchaser are unable to mutually agree upon the
amount of the LTM EBITDA within ten (10) Business Days of Newpark’s receipt of the notice of
termination, Newpark may require such dispute to be resolved by an Accounting Arbitrator who shall
be selected in the same process described in Section 2.4(b) and whose decision shall be final and
binding on the parties hereto. All fees and expenses of the Accounting Arbitrator shall be paid by
(i) Newpark if it is determined that Purchaser did have a right to terminate under Section
9.1(a)(x), and (ii) by Purchaser if it is determined that Purchaser did not have a right to
terminate under Section 9.1(a)(x).

9.2 Notice of Termination. In the event of termination of this Agreement by Newpark, on the
one hand, or Purchaser, on the other hand, pursuant to Section 9.1, written notice of such
termination shall be given by the terminating party to the other parties to this Agreement on or
before the dates set forth in Section 9.1 or if no date is set forth, on or before the Outside Date
(as it may be extended).

9.3 Effect of Termination.

(a) In the event of the termination of this Agreement pursuant to Section 9.1, this Agreement
shall terminate and become void and have no effect, and the transactions contemplated by this
Agreement shall be abandoned without further action by the parties to this Agreement, except that
the provisions of Sections 5.1(a) (as they relate to the Confidentiality Agreement), 9.3, 11.2 and
11.4 shall survive the termination of this Agreement; provided, however, that such termination
shall not relieve any party to this Agreement of any liability for breach of this Agreement and the
terminating party’s right to pursue all legal remedies will survive such termination.

(b) Notwithstanding anything in this Agreement to the contrary, if this Agreement is
terminated pursuant to Section 9.1(a)(ii), Section 9.1(a)(iv) (other than as a result of the
conditions in Section 8.1 or 8.2 having not been satisfied or Newpark’s failure to complete
the cure or remediation of the Selected Alleged Recognized Environmental Conditions on or before
the Outside Date as extended pursuant to Section 9.1(a)(iv)(D)), Section 9.1(a)(v) or
Section 9.1(a)(viii), then Newpark shall be permitted to receive from the Escrow Agent the Deposit,
together with interest thereon, as liquidated damages. The parties acknowledge and agree that if
this Agreement is terminated pursuant to Section 9.1(a)(ii), Section 9.1(a)(iv), except as provided
above, Section 9.1(a)(v) or Section 9.1(a)(viii), Newpark’s damages would be difficult or
impossible to quantify with reasonable certainty, and accordingly the payment of the Deposit
provided for in this Section 9.3(b) is a payment of liquidated damages (and not penalties) which is
based upon the parties’ estimate of the damages Newpark will suffer or incur as a result of the
event giving rise to such payment and the resulting termination of this Agreement, and the payment
of such Deposit by Purchaser as herein provided shall be the sole and exclusive remedy of Newpark
in the event of any such termination.

(c) In the event the Deposit is disbursed to Newpark pursuant to Section 9.3(b) above,
Purchaser and CCS shall have no further liability with respect to this Agreement or the
transactions contemplated by this Agreement to Newpark or its stockholders (provided, that nothing
in this Agreement shall relieve Purchaser from liability arising out of fraud and provided,
further, that notwithstanding the foregoing, the maximum aggregate liability of Purchaser, CCS, and
their affiliates, officers, directors, partners, managers, employees, representatives, and agents
under or in any manner relating to this Agreement or the transaction contemplated herein shall not
exceed $5,000,000), it being understood that in no event shall Purchaser be required to pay the
Deposit on more than one occasion. Any such payment shall be net of any amounts as may be required
to be deducted or withheld therefrom under the Code or under any provision of Tax law.

 

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(d) In the event that this Agreement is terminated for any reason other than pursuant to
Section 9.1(a)(ii), Section 9.1(a)(iv) (other than as a result of the conditions in Section 8.1 or
8.2 having not been satisfied or Newpark’s failure to complete the cure or remediation of the
Selected Alleged Recognized Environmental Conditions on or before the Outside Date as extended
pursuant to 9.1(a)(iv)(C)), Section 9.1(a)(v) or Section 9.1(a)(viii), the Deposit shall not be
payable to Newpark and any funds deposited by Purchaser in the Deposit Escrow Account in connection
with this Agreement, together with any interest thereon, shall be released to Purchaser.

ARTICLE X

SURVIVAL AND INDEMNIFICATION

10.1 Survival Periods. Regardless of any investigation at any time made by or on behalf of any
party hereto, or of any information any party may have in respect thereof, all representations and
warranties, and all covenants that contemplate or may involve actions to be taken or obligations in
effect prior to the Closing, in each case contained in this Agreement or in any Schedule to this
Agreement, or in any certificate, document or other instrument delivered in connection with this
Agreement, shall survive the Closing as herein provided; provided, however, that the right to
commence any claim with respect thereto under Section 10.2(a), 10.2(b), 10.3(a) and 10.3(b), shall
terminate and cease
to be of further force and effect as of the date which is twenty-four (24) months following
the Closing Date; and provided, further that (i) the representations and warranties set forth in
Section 3.2 (Capitalization of the Transferred Entities), Section 3.3 (Authority Relative to this
Agreement), Section 3.10 (Employee Benefits; Labor Matters), Section 3.11 (Brokers), Section 3.13
(Environmental Matters), Section 3.14(a) (Title), Section 4.2 (Authority Relative to this
Agreement), Section 4.5 (Brokers) and Section 4.6 (Acquisition of Transferred Interests), and the
right to commence any claim with respect thereto under Section 10.2(a) and 10.3(a), shall survive
the execution and delivery of this Agreement until the fifth anniversary of the Closing Date, and
(ii) the representations and warranties set forth in Section 3.12 (Taxes) and the right to commence
any claim with respect thereto under Section 10.2(a), shall survive until the date which is thirty
(30) days following the expiration of the applicable statute of limitations. Those covenants that
contemplate or may involve actions to be taken or obligations in effect after the Closing shall
survive in accordance with their terms (the “Surviving Covenants”). Notwithstanding the
foregoing, any covenant, agreement, representation, warranty or other matter in respect of which
indemnity may be sought under this Agreement shall survive the time at which it would otherwise
terminate pursuant to this Section 10.1, if notice of the inaccuracy or breach thereof or other
matter giving rise to such right of indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time.

 

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10.2 Indemnification by Newpark, DFI and Newpark Texas. Subject to the terms and conditions of
this Article X including the limitations set forth in Section 10.1 and Section 10.5 and the
provisions of Section 5.14(c) relating to Alleged Recognized Environmental Costs, from and after
the Closing Date, Newpark, DFI and Newpark Texas shall jointly and severally indemnify and hold
harmless Purchaser and its Affiliates, and each of their respective directors, officers, employees
and agents (collectively, the “Purchaser Indemnified Parties”) from and against any and all
Losses to the extent resulting from or arising out of:

(a) any breach or inaccuracy of any representation or warranty of Newpark contained in this
Agreement, other than those which have been waived in writing by Purchaser prior to the Closing;

(b) any breach of any Surviving Covenant contained in this Agreement to be performed by
Newpark, DFI or Newpark Texas after the Closing;

(c) any Non-assumed Liabilities; or

(d) the matters described in Section 10.2(d) of the Newpark Disclosure Schedule.

10.3 Indemnification by Purchaser and CCS. Subject to the terms and conditions of this
Article X including the limitations set forth in Section 10.1 and Section 10.5, from and after the
Closing Date, Purchaser and CCS shall jointly and severally indemnify and hold harmless Newpark and
its Affiliates, and each of their respective directors, officers, employees and agents,
(collectively, the “Newpark Indemnified Parties” and together with Purchaser Indemnified
Parties the “Indemnified Parties”) from and against any and all Losses resulting from or
arising out of:

(a) any breach or inaccuracy of any representation or warranty of Purchaser contained in this
Agreement, other than those which have been waived in writing by Newpark, DFI and Newpark Texas
prior to the Closing; or

(b) any breach of any Surviving Covenant contained in this Agreement to be performed by
Purchaser or CCS after the Closing.

10.4 Third-Party Claims. If a claim by a third party is made against an Indemnified Party, and
if such party intends to seek indemnity with respect thereto under this Article X, such Indemnified
Party, shall promptly notify, in writing, Purchaser, if a Newpark Indemnified Party, or Newpark, if
a Purchaser Indemnified Party (Purchaser and CCS, or Newpark, DFI and Newpark Texas, as the case
may be, the “Indemnifying Party”), of such claims. The failure to provide such written
notice shall not result in a waiver of any right to indemnification hereunder except to the extent
that the Indemnifying Party is actually and materially prejudiced by such failure. The Indemnifying
Party shall have twenty (20) days after receipt of such notice to elect to undertake, conduct and
control, through counsel of its own choosing and at its own expense, the settlement or defense
thereof, and the Indemnified Party shall cooperate with it in connection therewith. Notwithstanding
the foregoing, an Indemnified Party shall have the right to employ separate counsel at the
Indemnifying Party’s expense and participate in (but not control) such defense if the named parties
to any such proceeding include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a

 

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conflict of interest is likely to exist
if the same counsel were to represent such Indemnified Party and the Indemnifying Party.
Notwithstanding the foregoing, in no event shall an Indemnifying Party be required to pay the
expenses of more than one (1) separate counsel. The Indemnified Party shall not pay or settle any
claim without the prior written consent of the Indemnifying Party (which consent shall not be
unreasonably withheld). Notwithstanding the foregoing, the Indemnified Party shall have the right
to pay or settle any such claim; provided, that, in such event, it shall waive any right to
indemnity therefor by the Indemnifying Party. The Indemnifying Party shall not, except with the
consent of the Indemnified Party, (i) enter into any settlement that does not include, as an
unconditional term thereof, the giving by the person or persons asserting such claim to all
Indemnified Parties of an unconditional release from all liability with respect to such claim, or
(ii) consent to entry of any judgment that imposes injunctive or equitable relief.

10.5 Limitations.

(a) No indemnity shall be payable to the Purchaser Indemnified Parties under Section 10.2(a)
with respect to any claim resulting from any breach or inaccuracy of any representation or
warranty, unless and until the aggregate of all Losses due from Newpark, DFI and/or Newpark Texas
exceeds $1,500,000 (the “Deductible”), in which event all Losses so due in excess of the
Deductible shall be paid in the aggregate by Newpark, DFI and/or Newpark Texas; provided, that the
aggregate amount payable by Newpark, DFI and Newpark Texas for all claims arising under this
Agreement shall not exceed 33% of the Purchase Price.
Notwithstanding anything to the contrary contained in this Agreement, neither Newpark, DFI nor
Newpark Texas shall be required to indemnify any Purchaser Indemnified Party with respect to any
Loss (or series of related Losses) incurred by or asserted by reason of any breach of any
representation or warranty contained in this Agreement if the Loss (or series of related Losses)
from such breach is less than (i) $75,000, if such Loss is incurred before such time as the
aggregate amount of all Losses due from Newpark exceeds the Deductible, and (ii) $30,000 if such
Loss is incurred after such time as the aggregate amount of all Losses due from Newpark exceeds the
Deductible (the “Minimum Claim Amount”), nor shall any Losses less than the Minimum Claim
Amount be included for purposes of calculating whether the Deductible has been exceeded. The
limitations set forth in this Section 10.5(a) shall not apply with respect to (i) any amounts
payable under Section 2.4 or Losses arising under Section 10.2(b), Section 10.2(c), or
Section 10.2(d) (except as otherwise indicated in Section 10.2(d) of the Newpark Disclosure
Schedule), (ii) any breach of Section 5.12, and/or (iii) any acts of willful misconduct or fraud.

(b) No indemnity shall be payable to the Newpark Indemnified Parties under Section 10.3(a)
with respect to any claim resulting from any breach or inaccuracy of any representation or
warranty, unless and until the aggregate of all Losses due from Purchaser and CCS exceeds the
Deductible, in which event all Losses so due in excess of the Deductible shall be paid in full by
Purchaser and/or CCS; provided, that the aggregate amount payable by Purchaser and CCS for all
claims arising under this Agreement shall not exceed 33% of the Purchase Price. Notwithstanding
anything to the contrary contained in this Agreement, neither Purchaser nor CCS shall be required
to indemnify any Newpark Indemnified Party with respect to any Loss (or series of related Losses)
incurred by or asserted by reason of any breach of any representation or warranty contained in this
Agreement if the Loss (or series of related Losses) from such breach is less than the Minimum Claim
Amount, nor shall any Losses less than the Minimum Claim Amount be included for purposes of
calculating whether the Deductible has been exceeded. The limitations set forth in this
Section 10.5(b) shall not apply with respect to (i) any amounts payable under Section 2.4 or Losses
arising under Section 10.3(b), and/or (ii) any acts of willful misconduct or fraud.

 

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10.6 Disregard of Materiality. For purpose of this Article X, all qualifications and
exceptions in Article III or Article IV of this Agreement relating to materiality or words of
similar impact (including “Material Adverse Effect”) or substantiality or any qualification
or requirement that a matter be or not be “reasonably expected to occur” shall be disregarded for
purposes of determining whether there has been a breach or inaccuracy of any such representation or
warranty pursuant to Section 10.2(a) or Section 10.3(a).

10.7 Mitigation; Additional Indemnification Provisions. Each Indemnified Party shall use
commercially reasonable efforts to mitigate any claim or liability that an Indemnified Party
asserts under this Article X. For purposes of this Agreement, Losses shall be decreased by any
actually realized Tax Benefit resulting from the payment or accrual of such Losses; provided,
however, that Tax Benefits shall only be taken into account for such purpose to the extent that
they are actually realized within three (3) years of the Closing Date. For purposes of this
Agreement, Losses shall be calculated after giving effect to
any amounts recovered from third parties, including amounts recovered under insurance policies
with respect to such Losses, net of any costs to recover such amounts. Any Indemnified Party having
a claim under these indemnification provisions shall make a good-faith effort to recover all
losses, costs, damages and expenses from insurers of such Indemnified Party under applicable
insurance policies so as to reduce the amount of any Losses hereunder; provided, that actual
recovery of any insurance shall not be a condition to the Indemnifying Party’s obligation to make
indemnification payments to the Indemnified Party in accordance with the terms of this Agreement.
If the Indemnifying Party receives any amounts under applicable insurance policies, or from any
other Person alleged to be responsible for a Loss, after an indemnification payment by the
Indemnifying Party has been made for such Loss, then the Indemnified Party shall promptly reimburse
the Indemnifying Party for such indemnification payment up to the amount so received or realized by
the Indemnified Party. No Indemnified Party will, in any event, be entitled to any incidental,
indirect, consequential, special, exemplary or punitive damages (other than any such damages
payable to third parties or in the event of fraud, willful misconduct, or Newpark’s breach of
Section 5.12(a)). The Indemnifying Party shall not be liable under Section 10.2 for any Loss
relating to any matter to the extent that the amount of such Loss is reflected in the calculation
of the Closing Date Net Working Capital.

10.8 Exclusive Remedies. Excluding any claim for injunctive relief or equitable relief
relating to any breach of Section 5.12 or as otherwise expressly provided herein, the parties
hereto acknowledge and agree that, following the Closing, the indemnification provisions of
Sections 10.2 and 10.3 shall be the sole and exclusive remedies of the parties hereto (other than
in the case of fraud or willful misconduct), respectively, for any Losses arising out of this
Agreement or the transactions contemplated hereby.

10.9 Tax Indemnification Matters. Notwithstanding anything to the contrary in this Article X,
the above provisions of this Article X shall not apply to tax indemnification matters of Sections
7.1(a) and 7.1(b) with respect to the Pre-Closing Period, Straddle Period or Post-Closing Period,
which shall instead be governed by Article VII.

 

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ARTICLE XI

MISCELLANEOUS

11.1 Counterparts. This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement, and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to the other party.

11.2 Governing Law; Jurisdiction and Forum; Waiver of Jury Trial.

(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF TEXAS APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE AND WITHOUT
REFERENCE TO THE CHOICE-OF-LAW PRINCIPLES THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF A
DIFFERENT JURISDICTION.

(b) EACH PARTY TO THIS AGREEMENT IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY TEXAS STATE OR
FEDERAL COURT IN ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION MAY BE HEARD AND DETERMINED IN SUCH TEXAS STATE OR
FEDERAL COURT. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT THAT
IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION.
THE PARTIES FURTHER AGREE, TO THE EXTENT PERMITTED BY LAW, THAT FINAL AND UNAPPEALABLE JUDGMENT
AGAINST ANY OF THEM IN ANY ACTION CONTEMPLATED ABOVE SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY
OTHER JURISDICTION WITHIN OR OUTSIDE THE UNITED STATES BY SUIT ON THE JUDGMENT, A CERTIFIED COPY OF
WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND AMOUNT OF SUCH JUDGMENT.

(c) EACH PARTY TO THIS AGREEMENT WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION ARISING OUT OF OR RELATING TO
THIS AGREEMENT. EACH PARTY TO THIS AGREEMENT CERTIFIES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT OR INSTRUMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS SET FORTH
ABOVE IN THIS SECTION 11.2.

11.3 Entire Agreement. This Agreement (including the Schedules to this Agreement) together
with the Confidentiality Agreement, contain the entire agreement between the parties with respect
to the subject matter of this Agreement and supersede any prior discussion, negotiation, term
sheet, agreement, understanding or arrangement and there are no agreements, understandings,
representations or warranties between the parties other than those set forth or referred to in this
Agreement.

 

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11.4 Expenses. Except as set forth in this Agreement, whether the transactions contemplated by
this Agreement are consummated or not, all legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such costs and expenses unless expressly otherwise contemplated in this
Agreement. The parties acknowledge and agree that the filing fees required to be paid to the
Federal Trade Commission in connection with the notification filings under the HSR Act shall be
split equally between Newpark and Purchaser up to an aggregate of $150,000, after which amount
Purchaser shall be solely responsible for all such filing fees in excess of $150,000.

11.5 Notices. All notices and other communications to be given to any party hereunder shall be
sufficiently given for all purposes hereunder if in writing and delivered by hand, courier or
overnight delivery service or three days after being mailed by certified or registered mail, return
receipt requested, with appropriate postage prepaid, or when received in the form of a telegram or
facsimile and shall be directed to the address set forth below (or at such other address or
facsimile number as such party shall designate by like notice):

	 	 	 	 
	 	If to Newpark:

	 	Newpark Resources, Inc.
	 	 

	 	2700 Research Forest Drive, Suite 100
	 	 

	 	The Woodlands, Texas 77381
	 	 

	 	Attention: Mark J. Airola
	 	 

	 	Fax No: (281) 362-6801
	 	 
	 	 
	 	with a copy to:

	 	Andrews Kurth LLP
	 	 

	 	10001 Woodloch Forest Drive, Suite 200
	 	 

	 	The Woodlands, Texas 77380
	 	 

	 	Attention: William C. McDonald
	 	 

	 	Fax No: (713) 238-7286
	 	 
	 	 
	 	If to CCS or Purchaser:

	 	CCS Inc.
	 	 

	 	Watermark Tower
	 	 

	 	24th Floor, 530-8 Avenue SW
	 	 

	 	Calgary, Alberta T2P 2S8
	 	 

	 	Attention: Jim McMahon
	 	 

	 	Fax No: (403) 261-5612
	 	 
	 	 
	 	with a copy to:

	 	Thompson & Knight LLP
	 	 

	 	333 Clay Street, Suite 3300
	 	 

	 	Houston, Texas 77002
	 	 

	 	Attention: Timothy T. Samson
	 	 

	 	Fax No: (832) 397-8068

 

62

 

11.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of
the parties to this Agreement and their respective successors and permitted assigns; provided,
however, that no party to this Agreement will assign its rights or delegate any or all of its
obligations under this Agreement without the express prior written consent of each other party to
this Agreement, except that (i) each of Newpark, DFI, Newpark Texas and Purchaser may assign their
respective rights and obligations under this Agreement to an Affiliate of Newpark and/or Purchaser,
as the case may be; provided, that no such assignment shall release Newpark, Newpark Texas and/or
Purchaser from any liability or obligation under this Agreement and (ii) CCS, as part of any
merger, consolidation, contribution by or reorganization of CCS in which all of CCS’s operating
assets are merged into, consolidated with or otherwise contributed to Purchaser or any
Affiliate of Purchaser, may assign all of its respective rights and obligations under this
Agreement to such successor in interest to CCS’s assets and CCS shall thereafter have no further
liability or obligation under this Agreement. Any attempted assignment in violation of this
Section 11.6 shall be void.

11.7 Third-Party Beneficiaries. Except for the narrow purpose set forth in the last sentence
of Section 6.3(c), this Agreement is not intended to confer upon any Person not a party to this
Agreement (and their successors and assigns) any rights or remedies hereunder.

11.8 Amendments and Waivers. This Agreement may not be modified or amended except by an
instrument or instruments in writing signed by each of the parties hereto. Any party to this
Agreement may, only by an instrument in writing, waive compliance by the other parties to this
Agreement with any term or provision of this Agreement on the part of such other parties to this
Agreement to be performed or complied with. The waiver by any party to this Agreement of a breach
of any term or provision of this Agreement shall not be construed as a waiver of any subsequent
breach.

11.9 Severability. If any term, provision, covenant or restriction of this Agreement is held
by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated so long as the
economic or legal substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such a determination, the parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent possible.

[Remainder of page left intentionally blank]

 

63

 

IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of the parties as
of the day first above written.

	 	 	 	 	 
	 	NEWPARK RESOURCES, INC.

 	 
	 	By:  	/s/  Paul L. Howes
 	 
	 	 	Name:  	Paul L. Howes 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 

	 	 	 	 	 
	 	NEWPARK DRILLING FLUIDS LLC

 	 
	 	By:  	/s/  James E. Braun
 	 
	 	 	Name:  	James E. Braun 	 
	 	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 	NEWPARK TEXAS, L.L.C.

 	 
	 	By:  	/s/  Mark J. Airola
 	 
	 	 	Name:  	Mark J. Airola 	 
	 	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 	CCS INC.

 	 
	 	By:  	/s/  Jim McMahon
 	 
	 	 	Name:  	Jim McMahon 	 
	 	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 	CCS ENERGY SERVICES LLC

 	 
	 	By:  	/s/  Jim McMahon
 	 
	 	 	Name:  	Jim McMahon 	 
	 	 	Title:  	Vice President

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