Document:

ex10_2.htm

Exhibit 10.2

 

 

OMNIBUS AGREEMENT

among

TETRA TECHNOLOGIES, INC.,

COMPRESSCO PARTNERS GP INC.,

and

COMPRESSCO PARTNERS, L.P.

 

 

 

 

	 	 	 	 	 

	TABLE OF CONTENTS
	 	 	 	 
	 
	 	 
	ARTICLE I
	 	 	 	 
	DEFINITIONS
	 	 	 	 
	 
	 	 	 	 
	1.1 Definitions
	 	 	1	 
	 
	 	 	 	 
	ARTICLE II
	 	 	 	 
	SERVICES
	 	 	 	 
	 
	 	 	 	 
	2.1 Services and Personnel Provided to the Partnership Group
	 	 	6	 
	2.2 Subcontract Services Provided between the Partnership Entities and TETRA Entities
	 	 	8	 
	 
	 	 	 	 
	ARTICLE III
	 	 	 	 
	EQUIPMENT TRANSFERS
	 	 	 	 
	 
	 	 	 	 
	3.1 Equipment Transfers between the Partnership Entities and TETRA Entities
	 	 	8	 
	 
	 	 	 	 
	ARTICLE IV
	 	 	 	 
	INDEMNIFICATION
	 	 	 	 
	 
	 	 	 	 
	4.1 Environmental Indemnification
	 	 	9	 
	4.2 Additional Indemnification
	 	 	10	 
	4.3 Limitations Regarding Indemnification
	 	 	11	 
	4.4 Indemnification Procedures
	 	 	11	 
	 
	 	 	 	 
	ARTICLE V
	 	 	 	 
	MISCELLANEOUS
	 	 	 	 
	 
	 	 	 	 
	5.1 Choice of Law; Submission to Jurisdiction
	 	 	12	 
	5.2 Notice
	 	 	12	 
	5.3 Entire Agreement
	 	 	13	 
	5.4 Termination
	 	 	13	 
	5.5 Effect of Waiver or Consent
	 	 	13	 
	5.6 Amendment or Modification
	 	 	13	 
	5.7 Assignment; Third Party Beneficiaries
	 	 	13	 
	5.8 Counterparts
	 	 	13	 
	5.9 Severability
	 	 	14	 
	5.10 Gender, Parts, Articles and Sections
	 	 	14	 
	5.11 Further Assurances
	 	 	14	 
	5.12 Withholding or Granting of Consent
	 	 	14	 
	5.13 Laws and Regulations
	 	 	14	 
	5.14 Negation of Rights of Limited Partners, Assignees and Third Parties
	 	 	14	 
	5.15 No Recourse Against Officers or Directors
	 	 	14	 
	 
	 	 	 	 
	SCHEDULES AND EXHIBITS
	 	 	 	 
	 
	 	 	 	 
	Schedule 1.1 — Fixed Margin Amount Percentage
	 	 	 	 
	Schedule 2.1(c) — SG&A Services
	 	 	 	 

i

 

OMNIBUS AGREEMENT

     THIS OMNIBUS AGREEMENT is entered into on, and effective as of, the Closing Date (as defined
herein), by and among TETRA Technologies, Inc., a Delaware corporation (“TETRA”), Compressco
Partners GP Inc., a Delaware corporation (the “General Partner”), and Compressco Partners, L.P., a
Delaware limited partnership (the “Partnership”). The above-named entities are sometimes referred
to in this Agreement singularly as a “Party” and collectively as the “Parties.”

RECITALS:

     The Parties desire by their execution of this Agreement to evidence their understanding:

     1. As more fully set forth in Article II, with respect to: (a) the reimbursement obligations
of the Partnership Group to: (i) the General Partner for all direct and indirect expenses incurred
by the General Partner in providing all personnel and services reasonably necessary to manage the
Partnership Entities’ operations and conduct the Partnership Group’s business and (ii) TETRA for
all direct and indirect expenses incurred by the TETRA Entities in providing all personnel and
services reasonably necessary to conduct the Partnership Group’s Mexico-based business and all
corporate and general and administrative services reasonably necessary to assist in the operation
of the business of the Partnership Group; and (b) subcontract services that may, from time to time,
be provided between any Partnership Entity and any TETRA Entity.

     2. As more fully set forth in Article III, with respect to the purchase and sale, lease or
like-kind exchange of PES Equipment between any Partnership Entity and any TETRA Entity as is
needed or desired by the entity obtaining such PES Equipment to meet its production enhancement
services obligations.

     3. As more fully set forth in Article IV, with respect to certain indemnification rights and
obligations among the Parties.

     In consideration of the premises and the covenants, conditions, and agreements contained
herein, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

     1.1 Definitions.

          (a) Capitalized terms used herein but not defined shall have the meanings given them in the
Partnership Agreement.

          (b) As used in this Agreement, the following terms shall have the respective meanings set
forth below:

     “Affiliate” has the meaning given to such term in the Partnership Agreement.

 

 

     “Agreement” means this Omnibus Agreement, as it may be amended, modified or
supplemented from time to time in accordance with the terms hereof.

     “Books and Records” means collectively books, records, ledgers, files, invoices,
documents, work papers, correspondence, lists (including customer lists and supplier lists),
all tangible and digital or electronic copies of technology, designs, formulae (chemical and
otherwise), copies of software, databases, procedures, schedules, methods, discoveries,
processes, techniques, research and development, technical data, tools, materials,
specifications, information technology infrastructure, apparatuses, creations, improvements,
works of authorship in any media, confidential, proprietary or non-public information, and
other similar materials.

     “Business Day” means any day other than a Saturday, a Sunday or a day on which banking
institutions in Oklahoma City, Oklahoma are authorized or are obligated by law, executive
order or governmental decree to be closed.

     “Change of Control” means, with respect to any Person (the “Applicable Person”), any of
the following events: (i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the Applicable Person’s
assets to any other Person, unless immediately following such sale, lease, exchange or other
transfer such assets are owned, directly or indirectly, by the Applicable Person or such
Applicable Person owns or controls such other Person; (ii) the dissolution or liquidation of
the Applicable Person; (iii) the consolidation or merger of the Applicable Person with or
into another Person, other than any such transaction where (a) the outstanding Voting
Securities of the Applicable Person are changed into or exchanged for Voting Securities of
the surviving Person or its parent and (b) the holders of the Voting Securities of the
Applicable Person immediately prior to such transaction own, directly or indirectly, not
less than a majority of the outstanding Voting Securities of the surviving Person or its
parent immediately after such transaction; and (iv) a “person” or “group” (within the
meaning of Sections 13(d) or 14(d)(2) of the Exchange Act) being or becoming the “beneficial
owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of more than 50% of all
of the then outstanding Voting Securities of the Applicable Person, except in a merger or
consolidation that would not constitute a Change of Control under clause (iii) above.

     “Closing Date” means the date of the closing of the initial public offering of Common
Units.

     “Common Unit” has the meaning given such term in the Partnership Agreement.

     “Compressco” means Compressco, Inc., a Delaware corporation.

     “Compressor Unit” means a wellhead compressor unit used by the Partnership to provide
natural gas wellhead compression-based production enhancement services, including GasJack®
compressor units and VJackTM compressor units.

     “Conflicts Committee” has the meaning given such term in the Partnership Agreement.

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     “Contribution Agreement” means that certain Contribution, Conveyance and Assumption
Agreement, dated as of the Closing Date, by and among Compressco, Compressco Field Services,
Inc., Compressco Canada, Inc., Compressco de Mexico, S. de R.L. de C.V., the General
Partner, the Partnership, OPCO, Compressco Netherlands B.V., Compressco Holdings, LLC,
Compressco Netherlands Coöperatief U.A., MLP Sub, TETRA International Incorporated,
Production Enhancement Mexico, S. de R.L. de C.V. and TETRA Technologies Inc., together with
the additional conveyance documents and instruments contemplated or referenced thereunder,
as such may be amended, supplemented or restated from time to time.

     “Covered Environmental Losses” has the meaning given to such term in Section 4.1(a).

     “Environmental Laws” means all federal, state, and local laws, statutes, rules,
regulations, orders and ordinances, legally enforceable requirements and rules of common law
relating to protection of the environment including, without limitation, the federal
Comprehensive Environmental Response, Compensation, and Liability Act, the Superfund
Amendments Reauthorization Act, the Resource Conservation and Recovery Act, the Clean Air
Act, the Federal Water Pollution Control Act, the Toxic Substances Control Act, the Oil
Pollution Act, the Safe Drinking Water Act, the Hazardous Materials Transportation Act and
other environmental conservation and protection laws, each as amended through and existing
on the Closing Date.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     “Fabricated Cost” means the total costs (other than any allocations of general and
administrative expenses) incurred in fabricating a particular item of PES Equipment, as
determined by the books and records of the Partnership, prepared in accordance with GAAP.

     “Fixed Margin Amount” means (a) with respect to newly fabricated PES Equipment, the
amount resulting from the product of (i) the Fabricated Cost and (ii) the percentage,
expressed as a decimal, set forth on Schedule 1.1 to this Agreement (the “Fixed
Margin Amount Percentage”), which Schedule may be amended from time to time with the
approval of the Conflicts Committee, and (b) with respect to previously fabricated PES
Equipment, the amount resulting from the product of (i) the Net Book Value and (ii) the
Fixed Margin Amount Percentage.

     “Fabricated Margin Amount Percentage” has the meaning given to such term in the
definition of the Fixed Margin Amount.

     “GAAP” means generally accepted accounting principles in the United States,
consistently applied.

     “General Partner” has the meaning given to such term in the preamble to this Agreement.

     “General Partner Services” has the meaning given to such term in Section 2.1(a).

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     “Hazardous Substance” means (a) any substance that is designated, defined or classified
as a hazardous waste, hazardous material, pollutant, contaminant or toxic or hazardous
substance, or that is otherwise regulated under any Environmental Law, including, without
limitation, any hazardous substance as such term is defined under the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended, (b) petroleum,
petroleum products, crude oil, gasoline, fuel oil, motor oil, waste oil, diesel fuel, jet
fuel and other petroleum hydrocarbons, whether refined or unrefined, and (c) asbestos,
whether in a friable or a non-friable condition, and polychlorinated biphenyls.

     “Indemnified Party” means either the Partnership Group or the TETRA Entities, as the
case may be, each in its capacity as a party entitled to indemnification in accordance with
Article IV.

     “Indemnifying Party” means either the Partnership Group or the TETRA Entities, as the
case may be, each in its capacity as a party from whom indemnification may be required in
accordance with Article IV.

     “Intellectual Property” means all of the following intellectual property: (a) patents
and patent applications; (b) registered and unregistered copyrights and copyright
applications; (c) trademarks, service marks, trade names, and trade dress, together with the
goodwill associated therewith, and any applications for the foregoing; (d) domain names; (e)
trade secrets and confidential information; and (f) the right to sue and collect for past,
present and future infringement and misappropriation of all such intellectual property.

     “Jointly-Owned Intellectual Property” shall mean the Intellectual Property jointly
owned by MLP Sub and OPCO pursuant to the Contribution Agreement, each of MLP Sub and OPCO
holding a joint and undivided interest in such Intellectual Property.

     “Losses” has the meaning given to such term in Section 4.2.

     “Mexico Services” has the meaning given to such term in Section 2.1(b).

     “Mexico-based TETRA Entities” has the meaning given to such term in Section 2.1.

     “MLP Sub” has the meaning given to such term in the definition of the Partnership
Group.

     “Net Book Value” means the net book value of a particular item of PES Equipment, as
determined by the books and records of the Partnership, prepared in accordance with GAAP.

     “OPCO” has the meaning given to such term in the definition of the Partnership Group.

4

 

     “Partnership” has the meaning given to such term in the preamble to this Agreement.

     “Partnership Agreement” means the First Amended and Restated Agreement of Limited
Partnership of the Partnership, dated as of the Closing Date, as amended from time to time,
to which reference is hereby made for all purposes of this Agreement.

     “Partnership Assets” means the wellhead compression-based production enhancement
services and any related well monitoring and automated sand separation services contracts
(including any subcontracts for the provision of such services), manufacturing operations,
customer relationships, Compressor Units, well monitoring assets, automated sand separation
assets and other related equipment and assets, including leases of real property, directly
or indirectly conveyed, contributed or otherwise transferred to the Partnership Group as of
the Closing Date pursuant to the Contribution Agreement.

     “Partnership Entities” means the General Partner and each member of the Partnership
Group; and “Partnership Entity” means any of the Partnership Entities.

     “Partnership Entity Intellectual Property” has the meaning given to such term in
Section 2.1(f).

     “Partnership Group” means the Partnership, Compressco Partners Sub, Inc., a Delaware
corporation (“MLP Sub”), Compressco Partners Operating, LLC, a Delaware limited liability
company (“OPCO”) and any Subsidiary of the Partnership, MLP Sub or OPCO.

     “Party” or “Parties” have the meanings given to such terms in the preamble to this
Agreement.

     “Person” has the meaning given to such term in the Partnership Agreement.

     “PES Equipment” means Compressor Units, well monitoring assets, automated sand
separation assets and other equipment and assets, together with any tangible components
thereof, all related appliances, parts, accessories, appurtenances, accessions, additions,
improvements and replacements thereto, all other equipment or components of any nature from
time to time incorporated or installed therein and all substitutions for any of the
foregoing.

     “Services” has the meaning given to such term in Section 2.1(c).

     “SG&A Services” has the meaning given to such term in Section 2.1(c).

     “Subsidiary” has the meaning given to such term in the Partnership Agreement.

     “TETRA” has the meaning given to such term in the preamble to this Agreement.

5

 

     “TETRA Entities” means TETRA and any Person (other than the Partnership Entities)
controlled, directly or indirectly, by TETRA; and “TETRA Entity” means any one of the TETRA
Entities.

     “Transfer” has the meaning given to such term in Section 3.1.

     “Voluntary Cleanup Program” means a program of the United States or a state of the
United States enacted pursuant to Environmental Laws that provides for a mechanism for the
written approval of, or authorization to conduct, voluntary remedial action for the
clean-up, removal or remediation of contamination that exceeds actionable levels established
pursuant to Environmental Laws.

     “Voting Securities” of a Person means securities of any class of such Person entitling
the holders thereof to vote in the election of, or to appoint, members of the board of
directors or other similar governing body of the Person; provided, that if such Person is a
limited partnership, Voting Securities of such Person shall be the general partner interest
in such Person.

ARTICLE II

SERVICES

     2.1 Services and Personnel Provided to the Partnership Group. On and as of the Closing Date,
(i) all of Compressco’s U.S. employees will become employees of the General Partner and be
dedicated to managing the Partnership Entities’ operations and conducting the Partnership Group’s
business on a full-time basis and (ii) the Partnership Group’s operations in Mexico will be
supported on a part-time basis by the employees and consultants of Mexico-based TETRA Entities
(such TETRA Entities, the “Mexico-based TETRA Entities”). The Partnership will reimburse the
General Partner and TETRA for all direct and indirect expenses incurred by the General Partner, the
Mexico-based TETRA Entities and TETRA on the Partnership Group’s behalf on the following terms:

     (a) The General Partner shall provide the Partnership Group with all personnel and
services reasonably necessary to manage the Partnership Entities’ operations and conduct the
Partnership Group’s business (such personnel and services, the “General Partner Services”).
The General Partner Services shall be substantially similar in nature and quality to the
services previously provided by Compressco’s U.S. employees to Compressco in connection with
Compressco’s management and operation of the Partnership Assets prior to the Closing Date
and no lower in quantity than is reasonably necessary to manage the Partnership Entities’
operations and conduct the Partnership Group’s business, even if greater in quantity than
previously provided prior to the Closing Date.

     (b) TETRA shall cause the Mexico-based TETRA Entities to provide the Partnership Group
with all personnel and services reasonably necessary to conduct the Partnership Group’s
Mexico-based business (such personnel and services, the “Mexico Services”). The Mexico
Services shall be substantially similar in nature and quality to the services previously
provided by the Mexico-based TETRA Entities’ personnel to

6

 

Compressco in connection with Compressco’s management and operation of the Partnership
Assets prior to the Closing Date and no lower in quantity than is reasonably necessary to
conduct the Partnership Group’s Mexico-based business, even if greater in quantity than
previously provided prior to the Closing Date.

     (c) TETRA shall provide the Partnership Entities with certain corporate and general and
administrative services reasonably necessary for the operation of the business of the
Partnership Group, which services may include (without limitation), at the Partnership’s
request, those services set forth on Schedule 2.1(c) (such services, collectively,
the “SG&A Services” and, together with the General Partner Services and the Mexico Services,
the “Services”). The SG&A Services shall be substantially similar in nature and quality to
the services previously provided by TETRA to Compressco in connection with Compressco’s
management and operation of the Partnership Assets prior to the Closing Date and no lower in
quantity than is reasonably necessary to assist in the operation of the business of the
Partnership Group, even if greater in quantity than previously provided prior to the Closing
Date.

     (d) In connection with providing the Services, the General Partner and TETRA shall be
entitled to allocate to the Partnership Group any costs and expenses incurred by the
General Partner, the Mexico-based TETRA Entities or TETRA, as the case may be, on any
reasonable basis determined by the General Partner or TETRA, as the case may be.

     (e) The Partnership hereby agrees to reimburse the General Partner and TETRA for all
costs and expenses allocated to the Partnership Group in accordance with Section 2.1(d).

     (f) With respect to all Intellectual Property authored, created, invented, conceived,
reduced to practice or developed by the General Partner arising out of the General Partner
Services or by TETRA or the Mexico-based TETRA Entities arising out of the Mexico Services
or the SG&A Services that is related to the business of a Partnership Entity (the
“Partnership Entity Intellectual Property”), the General Partner or TETRA, as the case may
be, hereby assigns, sells and transfers, and TETRA hereby agrees to cause any applicable
Mexico-based TETRA Entity to assign, sell and transfer, to the applicable Partnership
Entity or Entities all of the General Partner’s, TETRA’s or such applicable Mexico-based
TETRA Entity’s, as the case may be, right, title, and interest in and to such Partnership
Entity Intellectual Property. With respect to Partnership Entity Intellectual Property
that is an improvement or modification of the Jointly-Owned Intellectual Property of OPCO
and MLP Sub, the General Partner or TETRA, as the case may be, hereby assigns, sells, and
transfers, and TETRA hereby agrees to cause any applicable Mexico-based TETRA Entity to
assign, sell and transfer, joint and undivided interests in and to such Partnership Entity
Intellectual Property to OPCO and MLP Sub in the General Partner’s, TETRA’s or such
applicable Mexico-based TETRA Entity’s, as the case may be, right, title, and interest in
and to such Partnership Entity Intellectual Property.

7

 

     (g) Each of the General Partner and TETRA, as the case may be, shall execute, shall
cause its respective employees and contractors to execute, and TETRA shall cause any
applicable Mexico-based TETRA Entity to execute, any documents reasonably necessary to
effectuate and record such assignment, sale and transfer to the applicable Partnership
Entity or Entities.

     (h) Each Partnership Entity shall own title to all tangible and electronic or digital
copies of the Books and Records relating to such Partnership Entity, in each case,
including all rights of copyright and other Intellectual Property in and to such Books and
Records, or in the case of the Books and Records that disclose or embody the Jointly-Owned
Intellectual Property of OPCO and MLP Sub, each of OPCO and MLP Sub shall hold a joint and
undivided interest in and to any Intellectual Property in and to such Books and Records.
The Partnership shall cause each Partnership Entity to grant a royalty-free license to the
General Partner to use and modify hereunder its Intellectual Property and Books and
Records, whether held solely or jointly, in furtherance of the provision of services to the
Partnership Entities pursuant to this Agreement and grants the General Partner the right to
retain such Books and Records in connection therewith for the purposes of providing
services to the Partnership Entities pursuant to this Agreement. During the term of this
Agreement, the General Partner shall, upon reasonable request, make available or deliver,
or cause to be made available or delivered, to a Partnership Entity, its Books and Records.

     2.2 Subcontract Services Provided between the Partnership Entities and TETRA Entities.
Notwithstanding anything to the contrary in this Agreement, any Partnership Entity or any TETRA
Entity may, but shall be under no obligation to, perform for any TETRA Entity or any Partnership
Entity, respectively, and any TETRA Entity or any Partnership Entity may, but shall be under no
obligation to, obtain from any Partnership Entity or any TETRA Entity, respectively, such
production enhancement or other oilfield services on a subcontract basis as are needed or desired
by the entity obtaining such services, for such periods of time and in such amounts as may be
mutually agreed upon by TETRA and the General Partner; provided, however, that in any such case,
such services are performed on terms that are (i) approved by the Conflicts Committee, (ii) no less
favorable to the Partnership Group than those generally being provided to or available from
non-affiliated third parties, as determined by the General Partner, or (iii) fair and reasonable to
the Partnership Group, taking into account the totality of the relationships between the parties
involved (including other transactions that may be particularly favorable or advantageous to the
Partnership Group), as determined by the General Partner.

ARTICLE III

EQUIPMENT TRANSFERS

     3.1 Equipment Transfers between the Partnership Entities and TETRA Entities. Notwithstanding
anything to the contrary in this Agreement, any Partnership Entity or any TETRA Entity may, but
shall be under no obligation to, sell, lease or like-kind exchange (each such sale, lease or
exchange, for purposes of this Section 3.1, a “Transfer”) to any TETRA Entity or any Partnership
Entity, respectively, and any TETRA Entity or any Partnership Entity may, but shall be under no
obligation to, obtain from any Partnership Entity or any TETRA

8

 

Entity, respectively, such newly fabricated or previously fabricated PES Equipment as is
needed or desired by the obtaining entity to meet its production enhancement services obligations,
in such amounts, in such conditions and for such periods of time, if applicable, as may be mutually
agreed upon by TETRA and the General Partner; provided, however, that, in any such case, such
Transfer is on terms that are (i) approved by the Conflicts Committee, (ii) no less favorable to
the Partnership Group than those generally being provided to or available from non-affiliated third
parties, as determined by the General Partner, or (iii) fair and reasonable to the Partnership
Group, taking into account the totality of the relationships between the parties involved
(including other transactions that may be particularly favorable or advantageous to the Partnership
Group), as determined by the General Partner; provided, further, that, notwithstanding anything to
the contrary in this Section 3.1, any TETRA Entity may purchase from any Partnership Entity newly
fabricated PES Equipment only for a price that is not less than the Fabricated Cost plus the Fixed
Margin Amount; and provided, further, that, notwithstanding anything to the contrary in this
Section 3.1, any TETRA Entity may purchase from any Partnership Entity previously fabricated PES
Equipment only for a price that is not less than the Net Book Value plus the Fixed Margin Amount.

ARTICLE IV

INDEMNIFICATION

     4.1 Environmental Indemnification.

     (a) Subject to Section 4.3, TETRA shall indemnify, defend and hold harmless the
Partnership Group from and against any environmental claims, losses and expenses
(including, without limitation, court costs and reasonable attorney’s and expert’s fees) of
any and every kind or character suffered or incurred by the Partnership Group by reason of
or arising out of:

          (i) any violation of Environmental Laws associated with ownership or operation of the
Partnership Assets; or

          (ii) any event or condition associated with ownership or operation of the Partnership
Assets (including, without limitation, the presence of Hazardous Substances on, under, about
or migrating to or from the Partnership Assets or the disposal or release of Hazardous
Substances generated by operation of the Partnership Assets) including, without limitation,
(A) the cost and expense of any investigation, assessment, evaluation, monitoring,
containment, cleanup, repair, restoration, remediation, or other corrective action required
or necessary under Environmental Laws or to satisfy any applicable Voluntary Cleanup
Program, (B) the cost or expense of the preparation and implementation of any closure,
remedial, corrective action or other plans required or necessary under Environmental Laws or
to satisfy any applicable Voluntary Cleanup Program and (C) the cost and expense for any
environmental pre trial, trial or appellate legal or litigation support work; provided, in
the case of clauses (A) and (B) such cost and expense shall not include the costs of and
associated with project management and soil and ground water monitoring;

9

 

but only to the extent that such violation complained of under Section 4.1(a)(i) or such
events or conditions included under Section 4.1(a)(ii) occurred before or existed on the
Closing Date (collectively, “Covered Environmental Losses”).

     (b) The Partnership Group shall indemnify, defend and hold harmless the TETRA Entities
from and against any Covered Environmental Losses suffered or incurred by TETRA and its
Affiliates relating to the Partnership Assets (as well as any assets acquired by the
Partnership after the Closing Date) occurring on or after the Closing Date, except to the
extent that the Partnership Group is indemnified with respect to any of such Covered
Environmental Losses under Section 4.1(a).

     (c) Except for claims for Covered Environmental Losses made before the third
anniversary of the Closing Date, which shall not terminate, all indemnification obligations
in this Section 4.1 shall terminate on the third anniversary of the Closing Date.

     4.2 Additional Indemnification. In addition to and not in limitation of the indemnification
provided under Section 4.1(a), subject to Section 4.3, TETRA shall indemnify, defend and hold
harmless the Partnership Group from and against any claims, losses and expenses (including, without
limitation, court costs and reasonable attorney’s and expert’s fees) of any and every kind or
character, known or unknown, fixed or contingent, suffered or incurred by the Partnership Group
(such claims, losses and expenses, together with the Covered Environmental Losses, the “Losses”))
by reason of or arising out of:

          (a) failure to convey good and defensible title to the Partnership Assets to one or more
members of the Partnership Group to the extent any such failure renders the Partnership Group
unable to use or operate the Partnership Assets in substantially the same manner as they were
operated by the TETRA Entities immediately prior to the Closing Date; or

          (b) all federal, state and local income tax liabilities attributable to the operation of the
Partnership Assets prior to the Closing Date, including any such income tax liabilities of TETRA
that may result from the consummation of the formation transactions for the Partnership Entities;
or

          (c) the failure of the Partnership Group to have on the Closing Date any consent or
governmental permit necessary to allow the transfer of any of the Partnership Assets or any such
Partnership Assets to the extent any such failure renders the Partnership Group unable to use or
operate the Partnership Assets in substantially the same manner that the Partnership Assets were
owned or operated immediately prior to the Closing Date,

provided, however, that in the case of clause (a) and (c) above, such indemnification obligations
shall terminate on the third anniversary of the Closing Date; and that in the case of clause (b)
above, such indemnification obligations shall survive until 60 days after the termination of any
applicable statute of limitations.

10

 

     4.3 Limitations Regarding Indemnification.

     (a) The aggregate liability of TETRA under Section 4.1(a) shall not exceed $5.0
million.

     (b) No claims may be made against TETRA for indemnification pursuant to Sections
4.1(a) or 4.2 unless the aggregate dollar amount of the Losses suffered or incurred by the
Partnership Group exceeds $250,000, and thereafter TETRA shall be liable for the full
amount of such Losses, subject to the limitations of Section 4.3(a).

     (c) Notwithstanding anything herein to the contrary, in no event shall TETRA have any
indemnification obligations under Section 4.1(a) for claims made as a result of additions
to or modifications after the Closing Date of Environmental Laws existing as of the Closing
Date or new Environmental Laws promulgated after the Closing Date.

     4.4 Indemnification Procedures.

     (a) The Indemnified Party agrees that promptly after it becomes aware of facts giving
rise to a claim for indemnification under this Article IV, it will provide notice thereof
in writing to the Indemnifying Party, specifying the nature of and specific basis for such
claim.

     (b) The Indemnifying Party shall have the right to control all aspects of the defense
of (and any counterclaims with respect to) any claims brought against the Indemnified Party
that are covered by the indemnification under this Article IV, including, without
limitation, the selection of counsel, determination of whether to appeal any decision of
any court and the settling of any such matter or any issues relating thereto; provided,
however, that no such settlement shall be entered into without the consent of the
Indemnified Party (with the concurrence of the Conflicts Committee in the case of the
Partnership Group) unless it includes a full release of the Indemnified Party from such
matter or issues, as the case may be, and does not include the admission of fault,
culpability or a failure to act, by or on behalf of such Indemnified Party.

     (c) The Indemnified Party agrees to cooperate fully with the Indemnifying Party, with
respect to all aspects of the defense of any claims covered by the indemnification under
this Article IV, including, without limitation, the prompt furnishing to the Indemnifying
Party of any correspondence or other notice relating thereto that the Indemnified Party may
receive, permitting the name of the Indemnified Party to be utilized in connection with
such defense, the making available to the Indemnifying Party of any files, records or other
information of the Indemnified Party that the Indemnifying Party considers relevant to such
defense and the making available to the Indemnifying Party, at no cost to the Indemnifying
Party, of any employees of the Indemnified Party; provided, however, that in connection
therewith the Indemnifying Party agrees to use reasonable efforts to minimize the impact
thereof on the operations of the Indemnified Party and further agrees to endeavor to
maintain the confidentiality of all files, records and other information furnished by the
Indemnified Party pursuant to this Section 4.4. In no event shall the obligation of the
Indemnified Party to cooperate

11

 

with the Indemnifying Party as set forth in the immediately preceding sentence be
construed as imposing upon the Indemnified Party an obligation to hire and pay for counsel
in connection with the defense of any claims covered by the indemnification set forth in
this Article IV; provided, however, that the Indemnified Party may, at its own option, cost
and expense, hire and pay for counsel in connection with any such defense. The
Indemnifying Party agrees to keep any such counsel hired by the Indemnified Party informed
as to the status of any such defense, but the Indemnifying Party shall have the right to
retain sole control over such defense.

     (d) In determining the amount of any loss, cost, damage or expense for which the
Indemnified Party is entitled to indemnification under this Agreement, the gross amount of
the indemnification will be reduced by (i) any insurance proceeds realized by the
Indemnified Party and (ii) all amounts recovered by the Indemnified Party under contractual
indemnities from third Persons. The Partnership hereby agrees to use commercially
reasonable efforts to realize any applicable insurance proceeds or amounts recoverable
under such contractual indemnities.

ARTICLE V

MISCELLANEOUS

     5.1 Choice of Law; Submission to Jurisdiction. This Agreement shall be subject to and
governed by the laws of the State of Delaware, excluding any conflicts-of-law rule or principle
that might refer the construction or interpretation of this Agreement to the laws of another state.
Each Party hereby submits to the jurisdiction of the state and federal courts in the State of
Delaware and to venue in Delaware.

     5.2 Notice. All notices, requests or consents provided for or permitted to be given pursuant
to this Agreement must be in writing and must be given by depositing same in the United States
mail, addressed to the Person to be notified, postpaid, and registered or certified with return
receipt requested or by delivering such notice in person or by facsimile to such Party. Notice
given by personal delivery or mail shall be effective upon actual receipt. Notice given by
facsimile shall be effective upon actual receipt if received during the recipient’s normal business
hours, or at the beginning of the recipient’s next Business Day after receipt if not received
during the recipient’s normal business hours. All notices to be sent to a Party pursuant to this
Agreement shall be sent to or made at the address set forth below or at such other address as such
Party may stipulate to the other Parties in the manner provided in this Section 5.2.

For notices to any of the TETRA Entities:

TETRA Technologies, Inc.

24955 Interstate 45 North

The Woodlands, TX 77380

Phone: 281-367-1983

Fax: 281-364-4398

Attention: General Counsel

12

 

For notices to any of the Partnership Entities:

Compressco Partners, L.P.

101 Park Avenue, Suite 1200

Oklahoma City, OK 73102

Phone: 405-677-0221

Fax: 405-619-9244

Attention: President

     5.3 Entire Agreement. This Agreement constitutes the entire agreement of the Parties relating
to the matters contained herein, superseding all prior contracts or agreements, whether oral or
written, relating to the matters contained herein.

     5.4 Termination. This Agreement, other than the provisions set forth in Articles IV and V
hereof, shall terminate upon the earlier to occur of (i) a Change of Control of the General Partner
or TETRA or (ii) the third anniversary of the Closing Date.

     5.5 Effect of Waiver or Consent. No waiver or consent, express or implied, by any Party to or
of any breach or default by any Person in the performance by such Person of its obligations
hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or
default in the performance by such Person of the same or any other obligations of such Person
hereunder. Failure on the part of a Party to complain of any act of any Person or to declare any
Person in default, irrespective of how long such failure continues, shall not constitute a waiver
by such Party of its rights hereunder until the applicable statute of limitations period has run.

     5.6 Amendment or Modification. This Agreement may be amended or modified from time to time
only by the written agreement of all the Parties; provided, however, that the Partnership may not,
without the prior approval of the Conflicts Committee, agree to any amendment or modification of
this Agreement that the General Partner determines will adversely affect the holders of Common
Units. Each such instrument shall be reduced to writing and shall be designated on its face an
“Amendment” or an “Addendum” to this Agreement.

     5.7 Assignment; Third Party Beneficiaries. Any Party shall have the right to assign its
rights under this Agreement without the consent of any other Party, but no Party shall have the
right to assign its obligations under this Agreement without the consent of the other Parties.
Subject to the limitations set forth in Section 5.14, each of the Parties hereto specifically
intends that each entity comprising the TETRA Entities and each entity comprising the Partnership
Entities, as applicable, whether or not a Party to this Agreement, shall be entitled to assert
rights and remedies hereunder as third-party beneficiaries hereto with respect to those provisions
of this Agreement affording a right, benefit or privilege to any such entity.

     5.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, with the same effect as if all signatory Parties had signed the same
document. All counterparts shall be construed together and shall constitute one and the same
instrument.

13

 

     5.9 Severability. If any provision of this Agreement or the application thereof to any Person
or circumstance shall be held invalid or unenforceable to any extent, the remainder of this
Agreement and the application of such provision to other Persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.

     5.10 Gender, Parts, Articles and Sections. Whenever the context requires, the gender of all
words used in this Agreement shall include the masculine, feminine and neuter, and the number of
all words shall include the singular and plural. All references to Article numbers and Section
numbers refer to Articles and Sections of this Agreement.

     5.11 Further Assurances. In connection with this Agreement and all transactions contemplated
by this Agreement, each Party agrees to execute and deliver such additional documents and
instruments and to perform such additional acts as may be necessary or appropriate to effectuate,
carry out and perform all of the terms, provisions and conditions of this Agreement and all such
transactions.

     5.12 Withholding or Granting of Consent. Except as otherwise expressly provided in this
Agreement, each Party may, with respect to any consent or approval that it is entitled to grant
pursuant to this Agreement, grant or withhold such consent or approval in its sole and uncontrolled
discretion, for any reason, and subject to such conditions as it shall deem appropriate.

     5.13 Laws and Regulations. Notwithstanding any provision of this Agreement to the contrary,
no Party shall be required to take any act, or fail to take any act, under this Agreement if the
effect thereof would be to cause such Party to be in violation of any applicable law, statute, rule
or regulation.

     5.14 Negation of Rights of Limited Partners, Assignees and Third Parties. The provisions of
this Agreement are enforceable solely by the Parties, and no shareholder, limited partner, member,
or assignee of TETRA, the General Partner or the Partnership or other Person shall have the right,
separate and apart from TETRA, the General Partner or the Partnership, to enforce any provision of
this Agreement or to compel any Party to comply with the terms of this Agreement.

     5.15 No Recourse Against Officers or Directors. For the avoidance of doubt, the provisions of
this Agreement shall not give rise to any right of recourse against any officer or director of
TETRA or any Partnership Entity.

(Signature pages follow.)

14

 

     IN WITNESS WHEREOF, the Parties have executed this Agreement on, and effective as of, the
Closing Date.

	 	 	 	 	 	 	 

	 	 	TETRA TECHNOLOGIES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Stuart M. Brightman 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Stuart M. Brightman	 	 
	 

	 	Title:	 	President and Chief Executive
Officer	 	 
	 
	 	 	 	 	 	 
	 	 	COMPRESSCO PARTNERS GP INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Ronald J. Foster	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Ronald J. Foster	 	 
	 

	 	Title:	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	COMPRESSCO PARTNERS, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Compressco Partners GP Inc., its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Ronald J. Foster	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Ronald J. Foster	 	 
	 

	 	Title:	 	President	 	 

Omnibus Agreement

 

 

SCHEDULE 1.1

Fixed-Margin Amount Percentage

     0.25 (or 25.0%)

 

 

SCHEDULE 2.1(c)

SG&A Services

     Pursuant to Section 2.1(c) of this Agreement, TETRA shall provide the Partnership Entities
with corporate and general and administrative services reasonably necessary to assist in the
operation of the business of the Partnership Group, which services shall include, without
limitation, the following services:

	 	(a)	 	secretarial and general office services;
	 
	 	(b)	 	employee benefits administration services (including, without limitation,
equity plan administration services);
	 
	 	(c)	 	investor relations services;
	 
	 	(d)	 	human resources and payroll processing services;
	 
	 	(e)	 	financial services;
	 
	 	(f)	 	information and technology services;
	 
	 	(g)	 	audit services;
	 
	 	(h)	 	legal services;
	 
	 	(i)	 	engineering and technical services;
	 
	 	(j)	 	insurance and risk management services;
	 
	 	(k)	 	global supply chain and procurement services;
	 
	 	(l)	 	accounting services;
	 
	 	(m)	 	tax services;
	 
	 	(n)	 	health, safety and environmental (HSE) services;
	 
	 	(o)	 	facilities management services;
	 
	 	(p)	 	international business development; and
	 
	 	(q)	 	general sales/marketing services.cweiandrews210_1.htm

Exhibit 10.1

CWEI ANDREWS FEE REWARD PLAN II

ARTICLE I

Purpose of Plan

1.1           Purpose of Plan.  The purpose of the Reward Plan (the “Plan”) is to reward eligible employees and other service providers  listed on Exhibit A of Clayton Williams Energy, Inc., and its wholly-owned affiliates (the “Employer”) for continued quality service to the Employer, and to encourage retention of those employees and service providers, by providing them the opportunity to receive bonus payments that are based on profits derived from a portion of the Employer’s working interest in certain wells drilled by Employer in the area described on Exhibit B.

ARTICLE II

Definitions and Construction

2.1           Definitions.                                Where the following words and phases appear in the Plan, each will have the respective meaning set forth below, unless the context clearly indicated to the contrary.

	
  

	
(a)

	
Acquisition Costs:

	
The portion of any costs or expenses incurred by the Employer that are attributable to acquiring the Well Interests.

	
  

	
(b)

	
Affiliate:

	
An “Affiliate” of any specified person means any other person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified person.  For the purposes of this definition, “control” when used with respect to any person means the power to direct the management and policies of such person, directly or indirectly, through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

	
  

	
(c)

	
Agreed Rate:

	
2.96% per annum, compounded quarterly.

	
  

	
(d)

	
Bonus Award:

	
The right granted to a Participant to receive payments, if any, under the terms and conditions of the Plan.

	
  

	
(e)

	
Bonus Percentage:

	
The designated percentage set forth in each Participant’s Notice of Bonus Award that is used to calculate the amount of payments, if any, that such Participant may be entitled to under the Plan.

	
  

	
(f)

	
Change of Control.

	
A “Change of Control” will be deemed to occur as of (i) the date  any “person” or “group” of related persons (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that such person or group shall be deemed to have “beneficial ownership” of all shares that any such person or group has the right to

 

 

  

1

  

acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 35% of the total voting power of the Voting Stock of the Company (or its successor by merger, consolidation or purchase of all or substantially all of its assets) (for the purposes of this clause, such person or group shall be deemed to beneficially own any Voting Stock of the Company held by a parent entity,  if such person or group “beneficially owns” (as defined above), directly or indirectly, more than 35% of the voting power of such parent entity), or (ii) the date of death of Clayton W. Williams, Jr.

	
  

	
(g)

	
Code:

	
The Internal Revenue Code of 1986, as amended from time to time.

	
  

	
(h)

	
Committee:

	
The Compensation Committee of the Company’s board of directors.

	
  

	
(i)

	
Company:

	
Clayton Williams Energy, Inc.

	
  

	
(j)

	
Effective Date:

	
January 1, 2011.

	
  

	
(k)

	
Eligible Person:

	
Each person who is employed by Employer or who performs services for the Employer as a consultant or independent contractor.

	
  

	
(l)

	
Employer:

	
The Company and its wholly-owned Affiliates.

	
  

	
(m)

	
Exchange Act:

	
The Securities Exchange Act of 1934, as amended.

	
  

	
(n)

	
Full Vesting Date:

	
June 1, 2013.

	
  

	
(o)

	
Notice of Bonus Award:

	
The notice provided to each Participant pursuant to Section 3.1, setting forth, among other things, the Participant’s Bonus Percentage under the Plan.

	
  

	
(p)

	
Participant:

	
Each Eligible Person who has been granted a Bonus Award under the Plan and participates in the Plan in accordance with the provisions of Article III.

	
  

	
(q)

	
Payment Date:

	
With respect to each Plan Quarter, the date that payment, if any, is made to eligible Participants pursuant to Article V.

	
  

	
(r)

	
Permitted Assignee:

	
Each Participant’s spouse, parents, or natural or adoptive lineal descendants, or one or more trusts or partnerships established exclusively for the benefit of each Participant’s spouse, parents or natural or adoptive lineal descendants.

	
  

	
(s)

	
Permitted Holder:

	
Clayton W. Williams, Jr. and any Affiliate or Related Person thereof.

  

2

  

	
  

	
(t)

	
Plan:

	
This CWEI Andrews Fee Reward Plan II, as amended from time to time.

	
  

	
(u)

	
Plan Quarter:

	
   Each calendar quarter within a Plan Year.

	
  

	
(v)

	
Plan Year:

	
Each twelve consecutive month period beginning each January 1.

	
  

	
(w)

	
Quarterly Bonus Amount:

	
This amount, if any, for each Participant with respect to each Plan Quarter that is calculated in accordance with the provisions of Section 4.3.

	
  

	
(x)

	
Quarterly Bonus Pool:

	
The bonus pool, if any, determined as of the end of each Plan Quarter in accordance with the provisions of Article IV.

	
  

	
(y)

	
Related Person:

	
With respect to any Permitted Holder, a “Related Person” means:

(1)           any controlling stockholder or a majority (or more) owned subsidiary of such Permitted Holder or, in the case of an individual, any spouse, family member (including adopted children), heir or descendant of such Permitted Holder, any trust created for the benefit of such individual or such individual’s estate, executor, administrator, committee or beneficiaries; or

(2)           any trust, corporation, partnership or other entity, the beneficiaries, stockholders, owners or persons beneficially owning a majority (or more) controlling interest of which consist of such Permitted Holder and/or such other persons referred to in the immediately preceding clause (1).

	
  

	
(z)

	
Sale Transaction:

	
A “Sale Transaction” will be deemed to occur on (1) any sale, exchange, or other disposition to a third party (excluding any Affiliate of the Employer) of (i) the Employer’s Well Interest or of the Employer’s rights or benefits with respect to the Well Interest, or (ii) all or substantially all of the Company’s assets, or (2) a Change of Control.

	
  

	
(aa)

	
Voting Stock:

	
All classes of capital stock of a corporation then outstanding and normally entitled to vote in the election of directors.

	
  

	
(bb)

	
Well:

	
A well drilled by the Employer in the area described on Exhibit B, provided that the well has a spud date on or after the Effective Date.

	
  

	
(cc)

	
Well Costs:

	
The Employer’s share of costs pursuant to any operating agreement for the drilling, completing, equipping, deepening, or sidetracking the Well, including, without limitation: (i) the costs of surveying and staking the Well, the costs of any surface damages, and the costs of clearing, coring, testing, logging, and evaluating the Well; (ii) the costs of casing, cement, and cement services for the Well; (iii) the cost of plugging and abandoning the Well (including standard and customary radiation activities associated therewith), if it is determined that the Well would not produce in commercial  quantities and 

 

  

3

  

should be abandoned; (iv) all direct charges and overhead chargeable to the Employer with respect to the Well under any applicable operating agreement until such time as all operations are carried out as required by applicable regulations and sound engineering practices to make such Well ready for production, including such charges and overhead attributable to the installation and testing of wellhead equipment, or costs to plug and abandon a dry hole; (v) all costs incurred by the Employer in recompleting or plugging back the Well; (vi)  all costs incurred by the Employer in reworking the Well if the rework is covered by an authority for expenditure under the applicable operating agreement; (vii) all costs incurred by the Employer in locating, drilling, completing, equipping, deepening, or sidetracking any enhanced recovery producer or injector Well (including the costs of all necessary surface equipment such as steam generators, compressors, water treating facilities, injection pumps, flow lines and steam lines); and (viii) the costs of constructing production facilities, pipelines and other facilities necessary to develop property acquired pursuant to the terms  hereof and produce, collect, store, treat, deliver, market, sell or otherwise dispose of oil, gas, and other hydrocarbons and minerals therefrom; provided, that Well Costs will not include any Acquisition Costs.

 

	
  

	
(dd)

	
Well Interest:

	
10% of the Employer’s working interest in each Well.

	
  

	
(ee)

	
Well Interest Profits:

	
As of the applicable measurement date, an amount equal to the cumulative cash proceeds earned by the Employer with respect to all Well Interests, minus the sum of (i) Well Costs and other expenses incurred by the Employer with respect to such Well Interests, plus (ii) an internal rate of return on such costs equal to the Agreed Rate.

2.2           Number and Gender. The masculine gender, when used herein, includes the feminine gender, and, unless context indicates otherwise, the singular includes the plural and the plural the singular.

2.3           Headings.  The headings of Articles and Section herein are included solely for convenience, and if there is any conflict between headings and the text of the Plan, the text will control.  All references to Sections and Articles are to this Plan unless otherwise indicated.

 

Andrews Fee Reward Plan II.doc

  

4

  

ARTICLE III

Participation

3.1           Selection of Participants and Grant of Bonus Awards. The Committee, in its sole discretion, may select which, if any, Eligible Persons will be granted Bonus Awards and become Participants in the Plan. Each Participant's Bonus Percentage will be determined by, and in the sole discretion of, the Committee. Each Bonus Award granted to a Participant will be evidenced by a Notice of Bonus Award that will specify (a) the Participant's Bonus Percentage, (b) the Participant's effective date of Plan participation, and (c) such other terms and provisions as the Committee may determine in its sole discretion.

3.2           Commencement of Participation. Each Eligible Person will become a Participant upon the effective date of Plan participation specified in his Notice of Bonus Award, provided that such Eligible Person returns to the Company an executed Notice of Bonus Award. Once an Eligible Person becomes a Participant in the Plan, he will remain a Participant until his Plan participation terminates in accordance with Section 3.3.

3.3           Termination of Participation.                                                       A Participant's Plan participation will terminate on the earliest to occur of the following:

	
  

	
(a)

	
The date on which such Participant terminates employment or service with the Employer for any reason, but only if such termination date occurs prior to the Full Vesting Date; provided, however, that with respect to a Participant who is a consultant or independent contractor and who is not actively performing services for the Employer, such Participant will, for purposes of the Plan, be deemed to remain in the service of the Employer unless and until the Committee, in its sole discretion, determines that such service relationship has been terminated;

	
  

	
(b)

	
The date on which such Participant forfeits his Bonus Award after the Full Vesting Date pursuant to Section 6.2;

	
  

	
(c)

	
The date of death of such Participant if there is no Permitted Assignee pursuant to Article VII; or

	
  

	
(d)

	
The date of termination of the Plan or such Participant's Bonus Award pursuant to Article X.

From and after the date a person's Plan participation terminates, such person will not be entitled to receive any payment under the Plan, pursuant to a Bonus Award or otherwise.

ARTICLE IV

Quarterly Bonus Pool and Quarterly Bonus Amounts

4.1           Calculation of Quarterly Bonus Pool.  As soon as administratively practicable after the last day of each Plan Quarter, the Committee will calculate the Quarterly Bonus Pool for such Plan Quarter in the following manner:

 

  

5

  

 

	
  

	
(a)

	
If Well Interest Profits, determined as of the last day of the applicable Plan Quarter, equal a negative amount or zero, the Quarterly Bonus Pool for such Plan Quarter will be deemed to be equal to zero.

 

	
  

	
(b)

	
If Well Interest Profits, determined as of the last day of the applicable Plan Quarter, equal an amount greater than zero, the Quarterly Bonus Pool for such Plan Quarter will be an amount equal to (i) Well Interest Profits determined as of the last day of such Plan Quarter, minus (ii) the sum of the Quarterly Bonus Pools for all preceding Plan Quarters (taking into account that a Quarterly Bonus Pool will be deemed to be equal to zero if it would otherwise be a negative amount).

4.2           Calculation of Quarterly Bonus Pool in the Event of a Sale Transaction. In the event a Sale Transaction occurs with respect to a Plan Quarter, the Quarterly Bonus Pool for such Plan Quarter will be calculated in the manner described in Section 4.1, except that Well Interest Profits will be deemed to include the amount of net sale proceeds from the Sale Transaction that the Committee, using any reasonable method it deems appropriate, determines is attributable to the Well Interest. In the event that the Sale Transaction does not result in the receipt of any net sale proceeds (for example, a Change of Control), the Committee will determine a deemed amount of net sale proceeds attributable to the Well Interest, taking into account the relevant facts and circumstances and using any reasonable method it deems appropriate.

4.3           Calculation of Participants' Quarterly Bonus Amounts. As soon as administratively practicable after the last day of each Plan Quarter, the Committee will calculate each Participant's Quarterly Bonus Amount for such Plan Quarter, which will be an amount equal to the product of the Participant's Bonus Percentage multiplied by the Quarterly Bonus Pool for such Plan Quarter (taking into account that a Quarterly Bonus Pool will be deemed to be equal to zero if it would otherwise be a negative amount).

ARTICLE V

Payment of Quarterly Bonus Amounts

5.1 Payment of Quarterly Bonus Amounts. With respect to each Plan Quarter, each Participant whose Plan participation has not terminated as of the Payment Date for such Plan Quarter will be entitled to receive a payment, if any, equal to one hundred percent (100%) of his Quarterly Bonus Amount for such Plan Quarter. Such payment will be made by the Employer in cash in a single sum as soon as administratively practicable following the last day of the applicable Plan Quarter, but in no event later than two and one-half (2 1/2) months following the last day of the Plan Year in which such Plan Quarter ends.

ARTICLE VI

Forfeiture of Bonus Awards

6.1           Forfeiture of Bonus Award Prior to Full Vesting Date. If a Participant's Plan participation terminates in accordance with Section 3.3 prior to the Full Vesting Date, such Participant's Bonus Award will be forfeited as of the date that his Plan participation terminates. By way of example and not limitation, a Participant who terminates employment with the 

 

 

  

6

  

Employer prior to the Full Vesting Date will forfeit his Bonus Award as of the date of such termination of employment.

6.2           Forfeiture of Vested Bonus Award for Cause. Each Participant will forfeit his Bonus Award if such Participant:

	
  

	
(a)

	
with respect to time periods during which such Participant is employed by or performing (or deemed to be performing) services for the Employer, (1) materially breaches the terms of his employment agreement or other services agreement with the Employer or any of its Affiliates, (2) materially breaches the terms of any corporate policy or code of conduct established by the Employer or any of its Affiliates, or (3) the Committee, in its sole discretion, determines that such Participant has engaged in gross negligence or willful misconduct in the performance of services for the Employer or any of its Affiliates, including, without limitation, a willful refusal without proper legal reason to perform his duties and responsibilities, or

	
  

	
(b)

	
at any time, including time periods during which such Participant is not employed by or performing (or deemed to be performing) services for the Employer, (i) admits or enters a plea of no contest to or is convicted of a felony against the Employer or any of its Affiliates, (ii) materially breaches any provision of any agreement with the Employer or any of its Affiliates, or (iii) engages in dishonest or fraudulent conduct with respect to the business, reputation or affairs of the Employer or any of its Affiliates.

The forfeiture provisions of this Section 6.2 will apply regardless of whether a Participant's employment or service relationship with the Employer was terminated as a result of conduct described in subsections (a) or (b) above, and regardless of whether such Participant continued Plan participation through the Full Vesting Date.

6.3           Forfeiture of Bonus Award on Account of Participant's Death if No Permitted Assignee. A Participant will forfeit his Bonus Award upon the Participant's date of death if the Committee determines that the deceased Participant's Bonus Award was not transferred to a Permitted Assignee pursuant to Article VII or that no Permitted Assignee exists.

6.4           Consequences of Forfeiture of Bonus Award. From and after the date a Participant forfeits his Bonus Award, such person will not be entitled to receive any payment under the Plan pursuant to a Bonus Award or otherwise.

 

Andrews Fee Reward Plan II.doc

  

7

  

ARTICLE VII

Permitted Assignees of Vested Bonus Award Upon Participant's Death

7.1           Permitted Assignees of Vested Bonus Award Upon Participant's Death.

	
  

	
(a)

	
On or after the Full Vesting Date, all or any portion of each Participant's Bonus Award may be transferred, by operation of will or applicable law, to a Permitted Assignee upon such Participant's death.

	
  

	
(b)

	
Each Permitted Assignee who is entitled to receive payments from the Plan under this Section 7.1, if any, will receive and hold only those rights and interests, and be subject to the same terms and conditions that would apply if such Permitted Assignee were a Participant in the Plan, including, without limitation, the restrictions on the transfer of a Participant's Bonus Award. As a condition to receipt of any rights and interests under this Section 7.1, a Permitted Assignee may be required to provide the Committee with any information necessary for the Committee to effect a transfer of such rights and interests, and to execute and deliver a written agreement with the Company agreeing to be bound by the terms of the Plan. Notwithstanding whether a Permitted Assignee has executed and delivered such an agreement, the acceptance of distributions from the Plan by a Permitted Assignee will be deemed to be an agreement by such Permitted Assignee to be bound by the Plan's terms.

	
  

	
(c )

	
To the extent that a payment is made under the Plan to an individual who the Committee determines in good faith is a Permitted Assignee with respect to a deceased Participant's Bonus Award, any and all obligations with respect to such payment will be discharged and neither the Plan nor the Employer will have any obligation to another person claiming to be the Participant's Permitted Assignee with respect to such payment, notwithstanding any subsequent determination by the Committee, a court of law, or otherwise, that such payment was made based on a mistake of fact or a mistake of law.

	
  

	
(d)

	
In the event that there is a dispute or uncertainty regarding the identity of the Permitted Assignee(s) to whom a deceased Participant's Bonus Award may have been transferred, the Committee will be permitted to retain any payment that would otherwise be payable with respect to such Bonus Award until the identity of such Permitted Assignee(s) can be determined. The amount of any such retained payment will be credited with interest at the Agreed Rate from the time such amount would otherwise be payable until the time such amount is paid. In addition, in the case of any bona fide dispute between parties concerning the right to a payment under the Plan, the Committee may, in its discretion, file an interpleader action in a court of competent jurisdiction, naming the parties to the dispute and, if applicable, may pay the disputed amount into the court to be distributed in accordance with the court's decision or take such other action as it determines, in its sole discretion, constitutes an appropriate way to resolve or otherwise settle the dispute.

 

 

  

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ARTICLE VIII

Administration

8.1           Committee Administration. The Plan will be administered by the Committee.

8.2           Meetings.                      The Committee will hold meetings upon such notice and at such time and place as it may from time to time determine. Notice to a member will not be required if waived in writing by that member. A majority of the members of the Committee duly appointed will constitute a quorum for the transaction of business. All resolutions or other actions taken by the Committee at any meeting where a quorum is present will be by vote of a majority of those present at such meeting and entitled to vote. Resolutions may be adopted or other action taken without a meeting upon written consent signed by all of the members of the Committee. Members of the Committee may participate in meetings by means of telephone conference or similar communication whereby all persons participating in the meeting can hear and speak to each other.

8.3           Discretion to Interpret Plan. The Committee has absolute discretion to construe any and all provisions of the Plan, including, but not limited to, the discretion to resolve ambiguities, inconsistencies, or omissions conclusively. The decisions of the Committee upon all matters within the scope of its authority will be binding and conclusive upon all persons.

8.4           Powers and Duties. In addition to the powers described in Section 8.3 and all other powers specifically granted under the Plan, the Committee will have all powers necessary or proper to administer the Plan and to discharge its duties under the Plan, including, but not limited to, the following powers:

	
  

	
(a)

	
To make and enforce such rules, regulations, and procedures as it may deem necessary or proper for the orderly and efficient administration of the Plan;

	
  

	
(b)

	
To enter into an agreement with any individual or entity to perform services with respect to the Plan;

	
  

	
( c)

	
In its discretion, to interpret and decide all matters of fact in determining the amount of and authorizing payments with respect to Bonus Awards under the Plan, its interpretation and decision thereof to be final and conclusive on all persons claiming a right with respect to such Bonus Awards;

	
  

	
(d)

	
In its discretion, to determine eligibility under the terms of the Plan, its determination thereof to be final and conclusive on all persons;

	
  

	
(e)

	
To prepare and distribute information explaining the Plan;

	
  

	
(f)

	
To obtain from the Employer and Participants (or the assignee of a Participant) such information as may be necessary for the proper administration of the Plan;

	
  

	
(g)

	
To sue or cause suit to be brought in the name of the Plan; and

 

 

  

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(h)

	
To establish a claims procedure and any other procedures for implementation of the Plan.

8.5           Expenses. The Employer will pay the reasonable expenses incident to the administration of the Plan, including, but not limited to, the compensation of any legal counsel, advisors, or other technical or clerical assistance as may be required; the payment of any bond or security required by applicable law; and any other expenses incidental to the operation of the Plan that the Committee determines are proper.

8.6           Reliance on Reports, Certificates, and Participant Information. The Committee is entitled to rely conclusively upon all tables, valuations, certificates, opinions, and reports furnished by an actuary, accountant, controller, counsel, insurance company, or other person who is employed or engaged for such purposes. Moreover, the Committee will be entitled to rely upon information furnished to the Committee or the Employer by a Participant (or a Permitted Assignee), including, but not limited to, such person's current mailing address.

8.7           Right to Delegate. The Committee, in its sole discretion, may delegate to one or more employees or agents of the Employer its day-to-day ministerial duties and powers (but only its day-to-day ministerial duties and powers) under the Plan.

8.8           Indemnification. The Company will indemnify and hold harmless each member of the Committee, and each employee or agent of the Employer who is a delegate of the Committee, against any and all expenses and liabilities arising out of such individual's administrative functions or other responsibilities, including, but not limited to, any expenses and liabilities that are caused by or result from an act or omission constituting the negligence of such individual in the performance of such functions or responsibilities, but excluding expenses and liabilities arising out of such individual's own gross negligence or willful misconduct. Expenses against which such person will be indemnified hereunder include, but are not limited to, the amounts of any settlement, judgment, costs, counsel fees, and related charges reasonably incurred in connection with a claim asserted or a proceeding brought. Notwithstanding the foregoing provisions of this Section, this Section will not apply to, and the Company will not indemnify against, any expense that was incurred without the consent or approval of the Company, unless such consent or approval has been waived in writing by the Company.

ARTICLE IX

Nature of the Plan

9.1           Unfunded, Unsecured Plan. The Plan will constitute an unfunded, unsecured obligation of the Employer to make payments of incentive rewards to certain persons from its general assets in accordance with the Plan. Each Bonus Award granted under the Plan merely constitutes a mechanism for measuring such incentive compensation and does not constitute any property right or interest in the Company or any of its Affiliates, or in the Well or the Well Interest. Neither the establishment of the Plan, the granting of Bonus Awards, nor any other action taken in connection with the Plan will be deemed to create an escrow or trust fund of any kind.

 

9.2           No Rights of Participant. No Participant will have any security or other interest in any assets of the Employer or any of its Affiliates as a result of a Bonus Award. Further, no 

 

 

  

10

  

Participant will have any right to receive a property interest in the Well or the Well Interest. Participants and all persons claiming under Participants (including Permitted Assignees) will rely solely on the unsecured promise of the Employer set forth herein, and nothing in the Plan or a Notice of Bonus Award will be construed to give a Participant or anyone claiming under a Participant (including a Permitted Assignee) any right, title, interest, or claim in or to any specific asset, fund, entity, reserve, account, or property of any kind whatsoever owned by the Employer or any of its Affiliates, or in which any such entity may have an interest now or in the future, and each Participant will have the right to enforce any claim hereunder only in the same manner as a general creditor. Neither the establishment of the Plan nor the granting of any Bonus Award will create any right in any Participant to make any decision, or provide input with respect to any decision, relating to the business of the Employer or any of its Affiliates.

ARTICLE X

Amendment and Termination

10.1           Amendment of Plan. Notwithstanding any provision of any other communication, either oral or written, made by the Employer or any of its Affiliates, the Committee, or any other individual or entity to Eligible Persons or to any other individual or entity, the Company reserves the absolute and unconditional right to amend the Plan from time to time. All amendments to the Plan will be in writing, and any oral statements or representations made by the Employer or any of its Affiliates, the Committee, or any other individual or entity that alter, modify, amend, or are inconsistent with the written terms of the Plan will be invalid and unenforceable and may not be relied upon by any Eligible Person, Permitted Assignee, service provider, or other individual or entity. All amendments will be executed by such person or persons as the Company in its discretion authorizes.

10.2           Right to Terminate. Notwithstanding any provision of any other communication, either oral or written, made by the Employer or any of its Affiliates, the Committee, or any other individual or entity to any Eligible Person, Permitted Assignee, service provider, or other individual or entity, the Company reserves the absolute and unconditional right to terminate the Plan, in whole or in part, and to terminate the Bonus Awards of some or all Participants and each Permitted Assignee of such Participants, with such termination to be effective as of the date selected by the Company in its sole discretion.

10.3           Effect of Termination. In the event of a termination of the Plan or a termination of the Bonus Award with respect to one or more Participants pursuant to Section 10.2, each such affected Participant (or his Permitted Assignee(s)) will receive a final payment under the Plan reflecting such Participant's Bonus Award as of the date of such termination. The Committee will determine, in its sole discretion and using any reasonable method and manner which it deems appropriate, the final payment amount that each Participant (or his Permitted Assignee(s)) is entitled to upon such termination, taking into account, in the manner it deems appropriate, such information which is available to the Committee as of the date that it makes its determination. A final payment pursuant to this Section 10.3 will be distributed to a Participant (or his Permitted Assignee(s)) as soon as administratively practicable after such termination and in no event later than two and one-half (2 1/2) months following the last day of the Plan Year in which such termination occurs; provided, however, that, notwithstanding the foregoing to the contrary, to the extent that such termination and final payment would be subject to section 409A of the Code, 

 

 

  

11

  

such termination and final payment will be made in accordance with the applicable requirements of section 409A of the Code and the authority thereunder.

ARTICLE XI

General Provisions

11.1           No Guarantee of Employment.                                                      Nothing contained in the Plan will grant any Eligible Person, or other individual who is an employee of the Employer or any of its Affiliates, or who otherwise performs services for the Employer or any of its Affiliates, the right to be retained in the service of the Employer or any of its Affiliates, nor will anything contained in the Plan limit in any way the right of the Employer or any of its Affiliates to discharge or terminate the service of any individual, including an Eligible Person, at any time, without regard to the effect such discharge or termination may have on any of such individual's rights under the Plan.

11.2           Withholding.                                The Employer will at all times be entitled with respect to a payment due under the Plan: (a) to withhold, or cause to be withheld, from such payment to a Participant (or Permitted Assignee), or from any other payment to such Participant (or Permitted Assignee), an amount necessary to satisfy any and all tax withholding obligations or other deductions with respect to any wages or other payments made to a Participant (or Permitted Assignee), which arise under applicable law or are authorized by the Participant (or Permitted Assignee), and (b) to take any other action as may in its opinion be necessary to satisfy all obligations for the payment of such taxes or such other deductions.

11.3           Offset of Amounts Owed to the Employer. Whenever a Participant (or Permitted Assignee) would be otherwise due any payment pursuant to the Plan, the Employer will be entitled to deduct from such payment any amounts that the Participant (or Permitted Assignee) owes the Employer or any of its Affiliates, including, without limitation, overpayments made under the Plan to either the Participant or a Permitted Assignee, before payment of such amount to such Participant (or Permitted Assignee).

11.4           Agreement to be Bound by Plan.                                                                 Through the acceptance of payments pursuant to the Plan, each Participant agrees to be bound by the terms and conditions of the Plan.

11.5           Nonalienation of Benefits.

	
  

	
(a)

	
Except as provided in Section 7.1, Section 11.3, and Section 11.5(b), or as the Committee may otherwise permit, in writing, in its sole discretion, no interest in or benefit payable under the Plan will be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any action by a Participant to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same will be void and of no effect; nor will any interest in or benefit payable under the Plan be in any way subject to any legal or equitable process, including, but not limited to, garnishment, attachment, levy, seizure, or the lien of any person. This provision will be construed to provide each Participant, or other person claiming any interest or benefit in the Plan through a Participant, with the maximum protection afforded such Participant's interest in the Plan (and the benefits provided thereunder) by law against alienation, 

 

 

  

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encumbrance, and any legal and equitable process, including, but not limited to, attachment, garnishment, levy, seizure, or other lien.

	
  

	
(b)

	
Notwithstanding Section 11.5(a), the Committee will comply with the terms and provisions of a "qualified domestic relations order" as defined in section 414(p) of the Code.

11.6           Unknown Whereabouts.                                           It will be the affirmative duty of each Participant (and Permitted Assignee) to inform the Committee of, and to keep on file with the Committee, his current mailing address. If a Participant (or Permitted Assignee) fails to inform the Committee of his current mailing address, neither the Committee, the Employer, or any Affiliate will be responsible for any late payment or loss of benefits or for failure of any notice to be provided or provided timely under the terms of the Plan to such Participant (or Permitted Assignee).

11.7           Code Section 409A. To the extent that the Plan is (or becomes) subject to Code section 409A, or any successor provision, as amended from time to time, the Committee may at all times interpret and construe the Plan's terms to conform and comply with the requirements of Code section 409A (or any successor provision). Further, notwithstanding any other provision of the Plan to the contrary, the Committee retains the right to amend the Plan to conform and comply with the requirements of Code section 409A (or any successor provision).

11.8           Jurisdiction. Except to the extent that any federal law applies to the Plan and preempts state law, the Plan and all actions arising out of or in connection with the Plan shall be governed by and construed, enforced, and administered according to the laws of the state of Texas, without regard to the conflict of law provisions of the State of Texas or of any other state or jurisdiction.

11.9           Severability. In case any provision of the Plan is held to be illegal, invalid, or unenforceable for any reason, such illegal, invalid, or unenforceable provision will not affect the remaining provisions of the Plan, but the Plan will be construed and enforced as if such illegal, invalid, or unenforceable provision had not been included therein.

11.10           Successors. The rights and obligations of the Company hereunder shall be binding upon and inure to the benefit of the Company and its successors and assigns.

 

Andrews Fee Reward Plan II.doc

  

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EXECUTED this 28th day of June, 2011 to be effective the 1st day of January, 2011.

	  	  	
Clayton Williams Energy, Inc.

 

	  	  	
By:

	
/s/ Mel G. Riggs

	  	  	  	
Mel G. Riggs

	  	  	  	
Executive Vice President

	  	  	  	  

 

Andrews Fee Reward Plan II.doc

  

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EXHIBIT A

Schedule of Participants

	
Last

	
First

	
Percentage

	
Williams

	
 Clayton

	
25.0000%

	
Riggs

	
 Mel

	
6.5625%

	
Pollard

	
 Mike

	
4.3125%

	
Lyssy

	
 Sam

	
5.8125%

	
Cox

	
 Ross

	
1.8750%

	
Pullin

	
 Cash

	
0.9375%

	
Ward

	
 Larry

	
1.8750%

	
Welborn

	
 Greg

	
4.5000%

	
Uzzell

	
 Ed

	
2.2500%

	
Sykes

	
 Margarita

	
0.3750%

	
Taylor

	
 Ellen

	
0.3750%

	
Madrid

	
 Armando

	
3.2812%

	
Newton

	
 Robert

	
3.2813%

	
Brock

	
 Danny

	
2.4375%

	
Gasser

	
 Ron

	
4.1250%

	
Swierc

	
 Matt

	
3.5625%

	
Williams

	
 Clayton Wade

	
0.7500%

	
Helmreich

	
 Andrew

	
2.8125%

	
Burkhardt

	
 Chad

	
1.5000%

	
Kennedy

	
 John

	
6.7500%

	
Grafe

	
 David

	
2.8125%

	
Fincher

	
 Matt

	
2.8125%

	
Thomas

	
 Robert

	
1.8750%

	
Schwope

	
 Kathy

	
0.9375%

	
Alford

	
 Danny

	
1.6875%

	
Hamilton

	
 Janet

	
1.3125%

	
Smith

	
 Mark

	
0.7500%

	
Peacock

	
 Ray

	
0.3750%

	
Henderson

	
 Cris

	
0.3750%

	
Tisdale

	
 Mark

	
0.9375%

	
Polson

	
 Dennis

	
0.9375%

	
Pruitt

	
 Donnie

	
0.7500%

	
Jones

	
 Kim

	
0.7500%

	
Kelly

	
 Denise

	
0.3750%

	
Roome

	
 Joe

	
0.3750%

	
Biggar

	
 McRae

	
0.1875%

	
Hardin

	
 Kay

	
0.1875%

	
Hollums

	
 Patti

	
0.1875%

 

Andrews Fee Reward Plan II.doc

  

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EXHIBIT B

Area

CWEI Andrews Fee Reward Plan II

[Exhibit B consists of a map depicting a lease held by the Employer in Andrews County, Texas.]

Andrews Fee Reward Plan II.doc

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