UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

FORM 8-K

 


 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of report (Date of the earliest event reported) March 24, 2015

 


 

NABORS INDUSTRIES LTD.

(Exact Name of Registrant as Specified in Its Charter)

 


 

Bermuda

 

001-32657

 

980363970

(State or Other Jurisdiction

 

(Commission

 

(IRS Employer

Of Incorporation)

 

File Number)

 

Identification No.)

 

Crown House

 

 

4 Par-la-Ville Road

 

 

Second Floor

 

 

Hamilton, HM08 Bermuda

 

N/A

(Address of Principal Executive Offices)

 

(Zip Code)

 

(441) 292-1510

(Registrant’s Telephone Number, Including Area Code)

 

 

(Former Name or Former Address, if Changed Since Last Report)

 


 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o                 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230 .425)

 

o                 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o                 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o                 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Introductory Note

 

On March 24, 2015, Nabors Industries Ltd. (“Nabors”) completed the previously-announced transactions (“Transactions”) contemplated by (i) the Agreement and Plan of Merger, dated as of June 25, 2014 (as amended from time to time, the “Merger Agreement”), by and among Nabors, Nabors Red Lion Limited, a Bermuda exempted Company that was a direct, wholly-owned subsidiary of Nabors prior to the Transactions (“Red Lion”), Nabors CJ Merger Co., a Delaware corporation and direct, wholly-owned subsidiary of Red Lion (“Merger Sub”), CJ Holding Co., a Delaware corporation and indirect, wholly-owned subsidiary of Red Lion (“USHC”) and C&J Energy Services, Inc., a Delaware corporation (“C&J”), and (ii) the Separation Agreement, dated as of June 25, 2014 (as amended from time to time, the “Separation Agreement”), by and between Nabors and Red Lion.

 

Item 1.01            Entry into a Material Definitive Agreement.

 

The information provided in the Introductory Note and under Item 2.01 is incorporated herein by reference.

 

On March 24, 2015, in connection with the completion of the Transactions, Nabors entered into certain ancillary agreements intended to govern certain aspects of its ongoing relationship with Red Lion and C&J following the Transactions. These ancillary agreements are: (i) the Employee Benefits Agreement, dated as of March 24, 2015, by and among Nabors, Red Lion and C&J (the “Employee Benefits Agreement”); (ii) the Tax Matters Agreement, dated as of March 24, 2015, by and between Nabors and Red Lion (the “Tax Matters Agreement”); (iii) the Global Alliance Agreement, dated as of March 24, 2015, by and between Nabors and Red Lion (the “Global Alliance Agreement”); (iv) the Registration Rights Agreement, dated as of March 24, 2015, by and between Nabors and Red Lion (the “Registration Rights Agreements”); and (v) the Transition Services Agreements, each dated as of March 24, 2015, by and between Nabors and Red Lion (each, a “Transition Services Agreement”).

 

Employee Benefits Agreement. The Employee Benefits Agreement governs Nabors’, Red Lion’s and C&J’s obligations with respect to employment-related matters and liabilities of employees of Nabors’ completion and production services business (the “C&P Business”) after the Merger. The Employee Benefits Agreement generally provides that a member of the Red Lion Group (as defined therein) will assume and retain liabilities relating to Red Lion employees arising from an action first asserted upon or after the effective time of the Separation (as defined therein) and that the Nabors Group (as defined therein) will retain all liabilities with respect to employment, or termination of employment, of continuing employees of the C&P Business arising from an action first asserted before the effective time of the Separation.

 

Tax Matters Agreement. The Tax Matters Agreement governs Nabors’ and Red Lion’s respective rights, responsibilities and obligations with respect to taxes, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and assistance and cooperation in respect of tax matters, in each case related to tax matters of Nabors and the C&P Business after the Merger. The Tax Matters Agreement generally provides that Nabors is responsible for, and will indemnify Red Lion for, all pre-closing taxes attributable to the C&P Business and Red Lion is responsible for all post-closing taxes attributable to the C&P Business. In addition, subject to certain exceptions, Nabors is responsible for any taxes that arise in connection with the Separation.

 

Global Alliance Agreement. The Global Alliance Agreement establishes a framework for cooperation between Nabors and Red Lion in connection with business opportunities where Nabors and Red Lion can provide complementary services, and provide for certain mutual exclusivity and non-competition obligations. Specifically, the Global Alliance Agreement creates a procedure whereby Nabors and Red Lion will cooperate with respect to procurement processes conducted by third parties requesting or including the provision of both certain drilling services (as provided by Nabors) and certain completion and production services (as provided by Red Lion). Also, for the term of the Global Alliance Agreement, Red Lion generally agrees not to provide or offer, directly or indirectly, certain drilling services, and Nabors generally agrees not to provide or offer, directly or indirectly, completion and production services on land, in each case except in collaboration with the other or in certain named jurisdictions.

 

Registration Rights Agreement. The Registration Rights Agreement governs Nabors’ and Red Lion’s respective rights and obligations with respect to the registration for resale of Red Lion common shares held by Nabors following the Merger. Pursuant to the Registration Rights Agreement, Red Lion is required to prepare and file a shelf registration statement with the SEC for all of the Red Lion common shares held by Nabors and maintain the effectiveness of such shelf registration statement until the date upon which there are no longer any registrable securities outstanding.

 

2



 

Transition Services Agreements. Pursuant to the Transition Services Agreements, Nabors and Red Lion will, on a transitional basis, provide to each other certain support services and other assistance after the Merger.

 

The foregoing descriptions of the Employee Benefits Agreement, the Tax Matters Agreement, the Global Alliance Agreement, the Registration Rights Agreement and the Transition Services Agreements do not purport to be complete and are qualified in their entirety by reference to the Employee Benefits Agreement, the Tax Matters Agreement, the Global Alliance Agreement, the Registration Rights Agreement and each of the Transition Services Agreements, filed herewith as Exhibits 10.1, 10.2, 10.3, 10.4, 10.5 and 10.6, respectively, and incorporated by reference herein.

 

Item 2.01            Completion of Acquisition or Disposition of Assets.

 

The information provided in the Introductory Note and under Item 1.01 is incorporated herein by reference.

 

Pursuant to the Separation Agreement, Nabors separated the C&P Business from Nabors’ other businesses, all of which were indirectly held by Red Lion as of the date of the Separation Agreement, such that Red Lion retained ownership of the C&P Business, and all of Nabors’ other businesses were transferred to other Nabors subsidiaries (the “Separation”). Prior to the Merger (defined below), Red Lion issued to a wholly-owned subsidiary of Nabors 61,342,404 Red Lion common shares, so that such subsidiary held a total of 62,542,404 Red Lion common shares immediately prior to the Merger.

 

Following the Separation, pursuant to the Merger Agreement, Merger Sub merged with and into C&J, with C&J surviving the merger as a wholly-owned subsidiary of Red Lion (the “Merger”). At the effective time of the Merger (the “Effective Time”), each issued and outstanding share of C&J common stock (other than shares owned by C&J or Merger Sub), par value $0.01 per share, was converted to the right to receive one Red Lion common share, par value $0.01 per share, resulting in C&J’s public shareholders owning approximately 47% of the issued and outstanding Red Lion common shares and Nabors owning approximately 53% of the issued and outstanding Red Lion common shares. In connection with the closing of the Merger, Red Lion changed its name to “C&J Energy Services Ltd.” Red Lion’s common shares were approved for listing on the New York Stock Exchange (“NYSE”) and began trading under the ticker symbol “CJES” beginning on March 25, 2015.

 

As part of its consideration for the closing of the Merger, Nabors received approximately $688 million in cash, which was financed with term loans and borrowings under a new revolving credit facility drawn upon by the combined company at the closing of the Merger. Nabors expects to use such proceeds to prepay outstanding borrowings under its $300 million unsecured term loan facility and for general corporate purposes.

 

The foregoing descriptions of the Separation Agreement and the Merger Agreement are qualified in their entirety by reference to the Merger Agreement and Separation Agreement, which were filed with the Securities Exchange Commission (“SEC”) as Exhibit 10.1 and Exhibit 10.2, respectively, to Nabors’ Current Report on Form 8-K filed on July 1, 2014 and are incorporated by reference herein, and the amendments of each of the Separation Agreement and the Merger Agreement, which were filed with the SEC as Exhibit 10.1 and Exhibit 10.2, respectively, to Nabors’ Current Report on Form 8-K filed on February 9, 2015 and are incorporated by reference herein.

 

3



 

Item 9.01            Financial Statements and Exhibits.

 

(b) Pro forma financial information.

 

The unaudited pro forma condensed consolidated balance sheet of Nabors dated as of December 31, 2014 and the unaudited pro forma condensed consolidated statement of income (loss) of Nabors for the year ended December 31, 2014, and the accompanying notes thereto, are filed as Exhibit 99.1 to this Current Report on Form 8-K.

 

(d) Exhibits

 

Exhibit No.

 

Description

10.1

 

Employee Benefits Agreement by and among Nabors Industries Ltd., Nabors Red Lion Limited and C&J Energy Services, Inc.

10.2

 

Tax Matters Agreement by and between Nabors Industries Ltd. and Nabors Red Lion Limited.

10.3

 

Global Alliance Agreement by and between C&J Energy Services Ltd. and Nabors Industries Ltd.

10.4

 

Registration Rights Agreement by and between Nabors Industries Ltd. and Nabors Red Lion Limited.

10.5

 

Transition Services Agreement by and between Nabors Industries Ltd. and Nabors Red Lion Limited, for the provision of services to Nabors Red Lion Limited by Nabors Industries Ltd.

10.6

 

Transition Services Agreement by and between Nabors Industries Ltd. and Nabors Red Lion Limited, for the provision of services to Nabors Industries Ltd. by Nabors Red Lion Limited.

99.1

 

The unaudited pro forma condensed consolidated balance sheet of Nabors Industries Ltd. dated as of December 31, 2014 and the unaudited pro forma condensed consolidated statement of income (loss) of Nabors Industries Ltd. for the year ended December 31, 2014, and the accompanying notes thereto.

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

NABORS INDUSTRIES LTD.

 

 

 

 

 

 

Date: March 30, 2015

 

By:

/s/ Mark D. Andrews

 

 

 

Mark D. Andrews

 

 

 

Corporate Secretary

 

4



 

Exhibit Index

 

Exhibit No.

 

Description

10.1

 

Employee Benefits Agreement by and among Nabors Industries Ltd., Nabors Red Lion Limited and C&J Energy Services, Inc.

10.2

 

Tax Matters Agreement by and between Nabors Industries Ltd. and Nabors Red Lion Limited.

10.3

 

Global Alliance Agreement by and between C&J Energy Services Ltd. and Nabors Industries Ltd.

10.4

 

Registration Rights Agreement by and between Nabors Industries Ltd. and Nabors Red Lion Limited.

10.5

 

Transition Services Agreement by and between Nabors Industries Ltd. and Nabors Red Lion Limited, for the provision of services to Nabors Red Lion Limited by Nabors Industries Ltd.

10.6

 

Transition Services Agreement by and between Nabors Industries Ltd. and Nabors Red Lion Limited, for the provision of services to Nabors Industries Ltd. by Nabors Red Lion Limited.

99.1

 

The unaudited pro forma condensed consolidated balance sheet of Nabors Industries Ltd. dated as of December 31, 2014 and the unaudited pro forma condensed consolidated statement of income (loss) of Nabors Industries Ltd. for the year ended December 31, 2014, and the accompanying notes thereto.

 

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Exhibit 10.1

 

EXECUTION VERSION

 

EMPLOYEE BENEFITS AGREEMENT

 

This Employee Benefits Agreement, dated as of March 24, 2015, is entered into by and between Nabors Industries Ltd., a Bermuda exempted Company (“Navy”), Nabors Red Lion Limited, a Bermuda exempted Company and currently a wholly owned Subsidiary of Navy (“Red Lion”), and C&J Energy Services, Inc., a Delaware corporation (“Penny,” and together with Navy and Red Lion, the “Parties”), effective as between Navy and Red Lion at the Separation Time and effective as among all the Parties at the Effective Time (as defined below).

 

RECITALS:

 

WHEREAS, in connection with the transactions contemplated by the Separation Agreement entered into by Navy and Red Lion, dated as of June 25, 2014, as amended from time to time (the “Separation Agreement”), the Merger Agreement entered into by the Parties, Nabors CJ Merger Co., a Delaware corporation, and CJ Holding Co., a Delaware corporation, dated as of June 25, 2014, as amended from time to time (the “Merger Agreement”), and the Transition Services Agreement entered into by Navy and Red Lion, dated as of the date hereof, pursuant to which Navy has agreed to provide certain services to Red Lion on a transition basis following the Closing (as defined in the Merger Agreement) (the “Transition Services Agreement”), the Parties have agreed to enter into this Agreement to allocate among Navy, Red Lion and Penny the Assets, Liabilities and responsibilities with respect to certain employee compensation, pension and benefit plans, programs and arrangements and certain employment matters;

 

NOW THEREFORE, in consideration of the foregoing and the mutual agreements, covenants and other provisions set forth in this Agreement, the Parties hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

Unless otherwise defined in this Agreement, capitalized words and expressions and variations thereof used in this Agreement or in its Exhibits have the meanings set forth below.  Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Separation Agreement.

 

1.1                               Agreement” means this Employee Benefits Agreement, including all the Exhibits hereto.

 

1.2                               Benefit Continuation Period” means the period of time from the Effective Time through the earlier of (i) the one-year anniversary of the Effective Time and (ii) December 31, 2015.

 

1.3                               Canadian Defined Contribution Plan” has the meaning given to it in Section 2.4(b).

 



 

1.4                               Code” means the Internal Revenue Code of 1986, as amended, or any successor federal income tax Law.  Reference to a specific Code provision also includes any proposed, temporary or final regulation in force under that provision.

 

1.5                               Continuing Employees” has the meaning given to it in Section 2.1 and includes those Delayed Transfer Service Providers who become Continuing Employees as described in Section 2.6(a).

 

1.6                               Covered Flex Plan Employees” has the meaning given to it in Section 3.3.

 

1.7                               Delayed Transfer Service Providers” has the meaning given to it in Section 2.6(a).

 

1.8                               Effective Time” has the meaning given to it in the Merger Agreement.

 

1.9                               ERISA” means the Employee Retirement Income Security Act of 1974, as amended.  Reference to a specific provision of ERISA also includes any proposed, temporary or final regulation in force under that provision.

 

1.10                        Hire Date” has the meaning given to it in Section 2.6(a).

 

1.11                        Merger Agreement” has the meaning given to it in the preamble to this Agreement.

 

1.12                        Navy” has the meaning given to it in the preamble to this Agreement.

 

1.13                        Navy 401(k) Plan” has the meaning given to it in Section 3.1(a).

 

1.14                        Navy Employee Benefit Plan” means any employee benefit plan, program, policy, practice, agreement, or other arrangement providing benefits to any current or former employee, consultant, officer or director of Navy or any of its Subsidiaries or any beneficiary or dependent thereof that is entered into, sponsored or maintained by Navy or any of its Subsidiaries, whether or not written, including any employee welfare benefit plan within the meaning of Section 3(1) of ERISA, any employee pension benefit plan within the meaning of Section 3(2) of ERISA (whether or not any such plan is subject to ERISA) and any bonus, incentive, deferred compensation, vacation, insurance, stock purchase, stock option, equity award, equity-linked award, severance, retention, employment, change of control or fringe benefit plan, program, policy, practice, agreement, or arrangement.

 

1.15                        Navy Flex Plan” has the meaning given to it in Section 3.3.

 

1.16                        Navy Nonqualified Plans” has the meaning given to it in Section 6.3(a).

 

1.17                        Navy Severance Plan” means the Nabors Industries, Inc. Severance Plan, as it is in effect as of the signing of this Agreement. For purposes of this Agreement, Navy Severance Plan also includes the Nabors Industries, Inc. Severance Plan as modified by Nabors Production Services Ltd., but only to the extent all such modifications are accurately set forth on Exhibit D.

 



 

1.18                        Navy U.S. DB Plan” has the meaning given to it in Section 6.1.

 

1.19                        Navy U.S. DB Plan Trust” has the meaning given to it in Section 6.1.

 

1.20                        Navy Vacation Policy” means policy 300.40.2 (Vacation) of the Nabors Industries, Inc. Human Resources Policies and Procedures Manual, with effective date January 1, 2009.

 

1.21                        NCPS Vacation Policy” means Index No. NCPS 21.0 of the Nabors Completion & Production Services Co. Human Resources Policies and Procedures Manual, with effective date January 1, 2013.

 

1.22                        NCS” has the meaning given to it in Section 2.6(a).

 

1.23                        New Plans” has the meaning given to it in Section 3.2(a).

 

1.24                        Nonqualified Plan Participants” has the meaning given to it in Section 6.3(b).

 

1.25                        Penny” has the meaning given to it in the preamble to this Agreement.

 

1.26                        Penny Common Stock” has the meaning given to it in the Merger Agreement.

 

1.27                        Penny Employee” means each individual who is employed by Penny or a Subsidiary of Penny immediately prior to the Effective Time.

 

1.28                        Penny Employee Benefit Plan” has the meaning given to it in the Merger Agreement.

 

1.29                        Project Services Agreement” has the meaning given to it in Section 2.6(a).

 

1.30                        Red Lion” has the meaning given to it in the preamble to this Agreement.

 

1.31                        Red Lion Employee” means any individual who, immediately prior to the Effective Time, is employed by a Red Lion Entity, including any individual absent due to short-term medical leave, long-term medical leave, vacation, holiday or leave of absence, including military leave and leave under the Family and Medical Leave Act, but excluding those individuals listed on Exhibit A and/or Exhibit C.

 

1.32                        Red Lion Employee Benefit Plan” has the meaning given to it in the Merger Agreement.

 

1.33                        Red Lion Group 401(k) Plan” has the meaning given to it in Section 6.2.

 

1.34                        Red Lion Group Flex Plan” has the meaning given to it in Section 3.3.

 

1.35                        Red Lion Group Severance Plan” has the meaning given to it in Section 3.1(b).

 

1.36                        Red Lion Self-Insured Workers’ Compensation Liabilities” has the meaning given to it in Section 2.5(a).

 



 

1.37                        Red Lion Vacation Policy” has the meaning given to it in Section 3.4.

 

1.38                        Red Lion Workers’ Compensation Claims” mean all Liabilities under or in connection with workers’ compensation benefits with respect to any Continuing Employee or any other Person who is or was employed by a Red Lion Entity, in each case, arising from an Action first asserted upon or after the Separation Time or, with respect to Continuing Employees who are Delayed Transfer Service Providers, upon or after their applicable Hire Date.

 

1.39                        Separation Agreement” has the meaning given to it in the preamble to this Agreement.

 

1.40                        Service” has the meaning given to it in Section 2.6(a).

 

1.41                        Service End Date” has the meaning given to it in Section 2.6(a).

 

1.42                        Transaction Agreements” has the meaning given to it in the Merger Agreement.

 

1.43                        Transferred Account Balances” has the meaning given to it in Section 3.3.

 

1.44                        TSA Benefits Transition Period” has the meaning given to it in Section 2.4(b).

 

1.45                        WARN Act” has the meaning given to it in Section 5.2.

 

ARTICLE II

EMPLOYMENT OF RED LION EMPLOYEES;

SEVERANCE; ASSUMPTION AND RETENTION OF LIABILITIES;

RED LION PARTICIPATION IN NAVY EMPLOYEE BENEFIT PLANS;

RED LION WORKERS COMPENSATION CLAIMS

 

2.1                               Employment of Red Lion Employees.  All Red Lion Employees who are employed by a Red Lion Entity immediately prior to the Effective Time are referred to herein as “Continuing Employees.”

 

2.2                               Severance.  A Continuing Employee shall not be deemed to have terminated employment in connection with or in anticipation of the consummation of the transactions contemplated by the Transaction Agreements for purposes of determining eligibility for severance benefits.  The applicable member of the Red Lion Group shall be solely responsible for all Liabilities in respect of, all costs arising out of, and all payments and benefits relating to, the termination or alleged termination of any Continuing Employee’s employment or other service that occurs as a result of, in connection with, or following the consummation of, the transactions contemplated by the Transaction Agreements, including any amounts required to be paid (including any payroll or other taxes), and the costs of providing benefits, under any applicable severance, separation, redundancy, termination or similar plan, program, practice, contract, agreement, Law or regulation (such benefits to include any medical or other welfare benefits, outplacement benefits, accrued vacation and taxes).  The Red Lion Group shall indemnify and hold harmless the Navy Group with respect to any Actions by a Continuing

 



 

Employee asserting that such Continuing Employee is entitled to severance benefits under the applicable Navy Severance Plan.

 

2.3                               Assumption and Retention of Liabilities.

 

(a)                                 From and after the Separation Time, except as otherwise expressly provided in this Agreement, a member of the Red Lion Group shall retain, assume, perform, discharge, fulfill when due, hold the Navy Group harmless from, and to the extent applicable, comply with all of the following, in accordance with their respective terms: (i) all Red Lion Employee Benefit Plans and all Liabilities under and in connection with all Red Lion Employee Benefit Plans, in each case, arising from any Action first asserted upon or after the Separation Time; (ii) all Liabilities arising from any Action first asserted upon or after the Separation Time with respect to the employment or other service or termination of employment or other service of all Continuing Employees who are not Delayed Transfer Service Providers; (iii) all Liabilities arising from any Action first asserted upon or after his or her Hire Date with respect to the employment or other service or termination of employment or other service of all Delayed Transfer Service Providers who become Continuing Employees; (iv) all Liabilities arising from any Action first asserted upon or after the Separation Time with respect to or in connection with the engagement or termination of services by Red Lion or a Red Lion Entity of any individual who is or was an independent contractor (including any temporary service worker, consultant, freelancer, on-call worker, incidental worker, worker providing services under a retainer agreement, or other non-payroll worker of Red Lion or any Red Lion Entity, who is not an employee of Red Lion or a Red Lion Entity under applicable Laws) (for the avoidance of doubt, no such individual under this clause (iv) shall be a “Red Lion Employee” under this Agreement); (v) all Red Lion Workers’ Compensation Claims; and (vi) any other Liabilities expressly assigned to the Red Lion Group under this Agreement.

 

(b)                                 The Navy Group shall retain, assume, perform, discharge and fulfill when due, and hold the Red Lion Group harmless from: (i) all Liabilities with respect to the employment or other service or termination of employment or other services of all Continuing Employees who are not Delayed Transfer Service Providers to the extent that such Liabilities arose from an Action pending or asserted in writing before the Separation Time; (ii) all Liabilities with respect to the employment or other service or termination of employment or other services of all Delayed Transfer Service Providers who become Continuing Employees to the extent that such Liabilities arose from an Action pending or asserted in writing before his or her Hire Date; (iii) except as otherwise set forth in Section 2.6(b), all Liabilities with respect to the employment or other service or termination of employment or other service of all individuals who provide or have provided services to the Navy Group and who are not Continuing Employees (other than such claims referenced in Section 2.3(a)(iv)); (iii) all Liabilities arising under or relating to workers’ compensation claims of Red Lion Employees that are not Red Lion Workers’ Compensation Claims; and (iv) any other Liabilities expressly assigned to the Navy Group under this Agreement.

 

2.4                               Red Lion Participation in Navy Employee Benefit Plans. (a) Except as set forth on Exhibit B and/or in compliance with the applicable terms of the Transition Services Agreement, immediately prior to the Separation Time, (i) Red Lion and each other Red Lion Entity shall cease to be a participating employer in each Navy Employee Benefit Plan, other than any Red

 



 

Lion Employee Benefit Plan, (ii) the Red Lion Employees shall cease to accrue further benefits and shall cease to be active participants in the Navy Employee Benefit Plans (other than any Red Lion Employee Benefit Plan), and (iii) the Parties shall take all necessary action before the Separation Time to effectuate the foregoing clauses (i) and (ii).  Penny and Red Lion shall indemnify and hold Navy and its Subsidiaries, other than the Red Lion Entities, harmless for any Liability arising solely from the Continuing Employees’ continued participation in any Navy Employee Benefit Plan listed on Exhibit B hereto after the Separation Time; provided, however, that Navy and its Subsidiaries shall take commercially reasonable efforts to cooperate with Penny and Red Lion in defending against any claims for any such Liability.  Except as otherwise expressly provided in this Agreement (including Section 2.2) or any other Transaction Agreement, Navy shall indemnify and hold Red Lion, each Red Lion Entity and Penny harmless for any Liability under any Navy Employee Benefit Plan with respect to service (and the termination of service) prior to the Separation Time of Red Lion Employees and of individuals described in Section 2.3(a)(iv) of this Agreement; provided, however, that such indemnification obligation shall not apply to the extent (and only to the extent) that any such Liability results from action taken by or omitted by any Red Lion Entity or Penny after the Separation Time.  For the avoidance of doubt, Navy shall not be obligated to indemnify the Red Lion Group with respect to Liabilities for compensation or benefits that accrue, are paid or are provided to Continuing Employees on or after the Separation Time even if the levels of, or eligibility for, compensation or benefits are based on service provided prior to the Separation Time.

 

(b)                     Canadian Plans.  Notwithstanding the foregoing, the Parties agree that, to the extent permitted by applicable Law and the terms of the applicable Navy Employee Benefit Plans, Continuing Employees will continue to participate (at the sole cost and expense of the Red Lion Group) in the Canadian benefit plans listed on Exhibit B from the Separation Time through the last day of the quarter following the quarter in which the Closing Date occurs (the “TSA Benefits Transition Period”).  Notwithstanding the terms of the Transition Services Agreement, at the Effective Time or, if earlier, the time that participation by Continuing Employees in the Pension Plan for Employees of Nabors Drilling Canada Limited (the “Canadian Defined Contribution Plan”) is no longer commercially feasible, the applicable Continuing Employees’ active participation in the Canadian Defined Contribution Plan shall cease.  Until such time as a Continuing Employee’s entitlement is settled or paid in full, Navy shall retain all Liabilities under the Canadian Defined Contribution Plan with respect to such Continuing Employee and shall retain and/or continue to administer all Assets associated with the Canadian Defined Contribution Plan (including those held under any related trust(s)) in accordance with applicable law and the terms of the Canadian Defined Contribution Plan.

 

2.5                   Red Lion Workers’ Compensation Claims Administration.  Subject to the Navy Group’s reasonable cooperation, the Red Lion Group will use commercially reasonable efforts to obtain the release, effective as of the Separation Time, of the Navy Group, from those letters of credit, bonds or other instruments or collateral provided by the Navy Group that are in effect as of the signing of this Agreement (collectively, “Red Lion Self-Insured Workers’ Compensation Liabilities”), in each instance with respect to the Red Lion Workers’ Compensation Claims.  From and after the Separation Time, Red Lion will be solely responsible for the administration and payment of all of the Red Lion Workers’ Compensation Claims (including the Red Lion Self-Insured Workers’ Compensation Liabilities), all of which will continue to be Liabilities of the Red Lion Group; provided, however, that the Navy Group shall

 



 

provide reasonable cooperation with respect to any such administration to the extent requested by the Red Lion Group.

 

2.6                   Delayed Transfer Service Providers. (a) The individuals listed on Exhibit C are collectively referred to herein as “Delayed Transfer Service Providers.”  A member of the Red Lion Group shall provide to each applicable Delayed Transfer Service Provider an offer of employment or continued service that complies with the requirements set forth in Section 3.1(a) no later than 10 business days prior to completion of the applicable “Service” (as defined in the Project Services Agreement between Nabors Corporate Services Inc. (“NCS”) and Penny (the “Project Services Agreement”) with which the Delayed Transfer Service Provider is assisting or the applicable written scope of work with which the Delayed Transfer Service Provider is associated, including pursuant to the Transition Services Agreement) (the “Service End Date”).  Each such offer must be accepted within 10 business days following the date the offer is made (unless earlier extended) and will be for employment effective as of the day immediately following the Service End Date or, if later, the date that the applicable Delayed Transfer Service Provider is able to return (and does return) from an approved leave of absence and begins work with the applicable member of the Red Lion Group (the “Hire Date”). Each applicable Delayed Transfer Service Provider shall be treated as a Continuing Employee for all purposes under this Agreement (including the applicable provisions of the Transition Services Agreement) as of the applicable Hire Date.

 

(b)                     Severance.  In the event a member of the Red Lion Group does not provide an offer of employment or continued service in accordance with Section 2.6(a) and the Navy Group terminates the employment or service of a Delayed Transfer Service Provider within three months following completion of the applicable Service, then the Red Lion Group shall be solely responsible for paying the costs, if any, incurred under the applicable Navy Severance Plan, by the Navy Group in connection with any such termination.  For the avoidance of doubt, if a Delayed Transfer Service Provider does not accept an offer of employment made by a member of the Red Lion Group in accordance with Section 2.6(a), the Red Lion Group shall have no Liability under this Section 2.6(b).

 

ARTICLE III

TERMS OF EMPLOYMENT FOR EMPLOYEES

 

3.1                               Levels of Compensation and Benefits for Employees.

 

(a)                                 During the Benefit Continuation Period, the Red Lion Group shall provide to each Continuing Employee and Penny Employee either, or a combination of, as determined in the sole discretion of Red Lion and its appropriate officers, comparable types and levels of employee benefits (including salary, cash incentive compensation and health and welfare benefits) as those provided immediately prior to the Effective Time (or any applicable Hire Date) to similarly-situated employees of Penny or to similarly-situated Red Lion Employees (except that, with respect to the Canadian Defined Contribution Plan and the Nabors Industries, Inc. Retirement Savings Plan (the “Navy 401(k) Plan”), such comparable types and levels of benefits shall be provided as soon as administratively feasible, but in any event no later than May 31, 2015 (or, if later, the applicable Hire Date with respect to Continuing Employees who are Delayed Transfer Service Providers)); provided, however, that the Red Lion Group shall

 



 

continue to provide the type and level of employee benefits to Continuing Employees to the extent necessary to comply with any comparable employment or similar requirement contained in the applicable Navy Severance Plan; and provided further, however, that nothing in this Section 3.1(a) shall restrict or prevent the Red Lion Group from taking any actions during the Benefit Continuation Period with respect to the Continuing Employees that would result in the payment of severance benefits pursuant to Section 3.1(b), so long as such actions do not result in any Liability to the Navy Group.

 

(b)                                 Immediately following the Effective Time, each Continuing Employee and each Penny Employee shall be eligible to receive severance benefits from the Red Lion Group under the same terms and conditions as the applicable Navy Severance Plan (the “Red Lion Group Severance Plan”).  The Red Lion Group shall take into account for purposes of calculating (i) a Continuing Employee’s severance benefits under the Red Lion Group Severance Plan, such Continuing Employee’s service with Navy and its Affiliates (and their respective predecessors) prior to the Separation Time (or any applicable Hire Date), and with Red Lion and its Affiliates from and after the Separation Time (or applicable Hire Date), as service for the Red Lion Group and (ii) a Penny Employee’s severance benefits under the Red Lion Group Severance Plan, such Penny Employee’s service with Penny and its Affiliates (and their respective predecessors) prior to the Effective Time, and with Red Lion and its Affiliates from and after the Effective Time, as service for the Red Lion Group.

 

3.2                               Service Credit and Welfare Plans.

 

(a)                                 For all purposes (including vesting, eligibility to participate and level of benefits) under the employee benefit plans of the Red Lion Group providing benefits to any Continuing Employees or Penny Employees from or after the Effective Time (the “New Plans”), Red Lion shall take commercially reasonable efforts to provide, subject to the approval of any applicable insurance carrier, that each Continuing Employee and Penny Employee shall be credited with his or her years of service with Navy, Red Lion, Penny, their respective Affiliates and each of their respective predecessors, as applicable, prior to the Effective Time or, with respect to Continuing Employees who are Delayed Transfer Service Providers, prior to the applicable Hire Date, in either case, to the same extent as such Continuing Employee or Penny Employee, as applicable, was entitled, before the Effective Time or applicable Hire Date, to credit for such service under any similar employee benefit plan in which such Continuing Employee or Penny Employee, as applicable, participated or was eligible to participate immediately prior to the Effective Time or applicable Hire Date; provided that the foregoing shall not apply with respect to benefit accrual under any defined benefit pension plan or to the extent that its application would result in a duplication of benefits with respect to the same period of service.

 

(b)                                 In addition, and without limiting the generality of the foregoing, Red Lion shall take commercially reasonable efforts to cause, subject to the approval of any applicable insurance carrier, (i) each Continuing Employee and Penny Employee to be immediately eligible to participate, without any waiting time, in any and all New Plans to the extent coverage under such a New Plan is comparable to the applicable employee benefit plan in which such Continuing Employee or Penny Employee participated immediately prior to the Effective Time or applicable Hire Date, and (ii) for purposes of each New Plan providing medical, dental,

 



 

pharmaceutical and/or vision benefits to any Continuing Employee or Penny Employee, all pre-existing condition exclusions and actively-at-work requirements of such New Plan to be waived for such employee and his or her covered dependents, unless and to the extent the individual, immediately prior to entry in the New Plans, was subject to such conditions under the applicable employee benefit plan in which such Continuing Employee or Penny Employee participated immediately prior to the Effective Time or applicable Hire Date.

 

3.3                               Flexible Spending Accounts.  Effective as of the end of the TSA Benefits Transition Period or, with respect to each Continuing Employee that is Delayed Transfer Service Provider, as of the Hire Date: (a) the account balances under health care flexible spending accounts and under dependent care spending accounts (whether positive or negative, the “Transferred Account Balances”) under Navy’s health care flexible spending and dependent care spending plan(s) (collectively, the “Navy Flex Plan”) of the Continuing Employees who are participants in the Navy Flex Plan (the “Covered Flex Plan Employees”) shall be transferred to one or more comparable plans of the Red Lion Group (collectively, the “Red Lion Group Flex Plan”); (b) the elections, contribution levels and coverage levels of the Covered Flex Plan Employees shall apply under the Red Lion Group Flex Plan in the same manner as under the Navy Flex Plan; and (c) the Covered Flex Plan Employees shall be reimbursed from the Red Lion Group Flex Plan for claims incurred at any time during the plan year of the Navy Flex Plan in which the TSA Benefits Transition Period ends (or, with respect to Continuing Employees who are Delayed Transfer Service Providers, the plan year of the Navy Flex Plan in which the applicable Delayed Transfer Service Provider’s Hire Date occurs) that are submitted to the Red Lion Group Flex Plan from or after such time on the same basis and the same terms and conditions as under the Navy Flex Plan.  As soon as practicable after the end of the TSA Benefits Transition Period (or an applicable Hire Date), and in any event within 10 business days after the amount of the applicable Transferred Account Balances is determined, the Navy Group shall pay the Red Lion Group the net aggregate amount of the applicable Transferred Account Balances, if such amount is positive, or the Red Lion Group shall pay the Navy Group the net aggregate amount of the Transferred Account Balances, if such amount is negative.

 

3.4                               Vacation.  Subject to the terms of the Transition Services Agreement, Continuing Employees shall continue to participate in the NCPS Vacation Policy, Navy Vacation Policy, or the Canadian vacation policy, as applicable, with such participation to continue through the end of the TSA Benefits Transition Period (or, with respect to Continuing Employees who are Delayed Transfer Service Providers, through the applicable Hire Date). Beginning on the first day following the end of the TSA Benefits Transition Period or the applicable Hire Date, Continuing Employees shall be subject to the vacation, sick leave and other personal or paid time off policies of the Red Lion Group applicable to the respective Continuing Employee (the “Red Lion Vacation Policy”); provided, however, (i) the Red Lion Group shall credit each Continuing Employee with accrued but unused vacation time as of the end of the TSA Benefits Transition Period (or the applicable Hire Date) and (ii) for calendar year 2015, any Continuing Employee who was subject to the Navy Vacation Policy, the Canadian vacation policy or Section I of the NCPS Vacation Policy shall not accrue an amount of vacation that would result in him or her being granted a cumulative amount of vacation from Navy or its Affiliates and the Red Lion Group that is greater than the maximum amount of vacation that such Continuing Employee could have been granted pursuant to the Navy Vacation Policy, Canadian vacation policy or

 



 

NCPS Vacation Policy in which he or she participated, as applicable, immediately prior to the end of the TSA Benefits Transition Period (or the applicable Hire Date).

 

ARTICLE IV

BONUS AWARDS FOR RED LION EMPLOYEES

 

4.1                               Bonus Awards.  The Red Lion Entity employing the applicable Continuing Employee shall be responsible for determining and paying all bonus awards to the Continuing Employee in respect of all applicable performance periods during which the Separation Time occurs or, with respect to Continuing Employees who are Delayed Transfer Service Providers, all applicable performance periods during which the Hire Date occurs, and, in either case, all performance periods thereafter, in each case under and in accordance with the terms of the Red Lion Employee Benefit Plans and the Nabors Annual Incentive Plan, as applicable.

 

ARTICLE V

COBRA, HIPAA, WARN

 

5.1                               COBRA and HIPAA.  The Red Lion Group will assume and be responsible for, and shall indemnify and hold harmless the Navy Group for, all Liabilities resulting from any Actions asserted upon or after the Separation Time with respect to Continuing Employees or, with respect to Continuing Employees who are Delayed Transfer Service Providers, asserted upon or after the Hire Date, and, in each case, their eligible dependents, in respect of health insurance under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and the Health Insurance Portability and Accountability Act of 1996, Sections 601, et seq. and Sections 701, et seq. of ERISA, Section 4980B and Sections 9801, et seq. of the Code and applicable state or similar Laws.

 

5.2                               WARN Act.  Effective from and after the Separation Time, the Red Lion Group shall assume Liability for, and shall indemnify and hold harmless the Navy Group with respect to, any Liabilities incurred by the Navy Group pursuant to the Worker Adjustment and Retraining Notification Act and any similar Law (collectively, the “WARN Act”) resulting from the termination of employment of any Continuing Employee by any member of the Red Lion Group upon or after the Separation Time.  The Navy Group shall assume Liability for, and shall indemnify and hold harmless the Red Lion Group with respect to, any Liabilities incurred by the Red Lion Group pursuant to the WARN Act resulting from the termination of employment of any Red Lion Employee by any member of the Red Lion Group prior to the Separation Time and the termination of employment of any other current or former employee or service provider of the Navy Group, in each case who is not a Continuing Employee.

 

ARTICLE VI

PENSION PLANS AND DEFERRED COMPENSATION PLANS

 

6.1                               Navy U.S. DB Plan. From and after the Effective Time, the Navy Group shall retain all Liabilities under Navy’s Pool Company Retirement Income Plan (the “Navy U.S. DB Plan”) and all Assets held under the trust(s) associated with the Navy U.S. DB Plan (collectively, the “Navy U.S. DB Plan Trust”).  The Navy Group shall indemnify and hold harmless the Red

 



 

Lion Group with respect to all Liabilities under, relating to, and in connection with the Navy U.S. DB Plan and the Navy U.S. DB Plan Trust.

 

6.2                               401(k) Plan.  The Red Lion Group will cause a cash or deferred arrangement intended to qualify under Section 401(a) of the Code (the “Red Lion Group 401(k) Plan”) to accept rollovers (including rollovers of loans) from and after the Effective Time from the Navy 401(k) Plan with respect to the Continuing Employees.  For purposes of this Section 6.2, a member of the Red Lion Group shall assume the KVS 401(k) Plan and all Assets and Liabilities under and in connection with, and shall indemnify and hold the Navy Group harmless from all Liabilities arising from any Action first asserted upon or after the Separation Time with respect to, the KVS 401(k) Plan and the trust(s) thereunder to the extent the KVS 401(k) Plan has not merged with and into the Navy 401(k) Plan prior to the Separation Time.

 

6.3                               Nonqualified Deferred Compensation.

 

(a)                                 Navy shall retain, or cause its Subsidiaries (other than any Red Lion Entities) to retain, all Assets and all Liabilities arising out of or relating to the Nabors Industries, Inc. Deferred Compensation Plan and the Nabors Industries, Inc. Executive Deferred Compensation Plan (collectively, the “Navy Nonqualified Plans”).

 

(b)                                 As soon as reasonably practicable following the Separation Time or, the applicable Hire Date with respect to Continuing Employees who are Delayed Transfer Service Providers, Navy shall provide to Red Lion a list of all Continuing Employees who are participants in the Navy Nonqualified Plans (the “Nonqualified Plan Participants”).  Following the Effective Time, Red Lion shall provide, or shall cause to be provided, to Navy notice of the termination of employment of any Nonqualified Plan Participant upon or as soon as practicable following any such termination.

 

ARTICLE VII

GENERAL AND ADMINISTRATIVE

 

7.1                               Reasonable Efforts/Cooperation.  Each of the Parties hereto will use its commercially reasonable efforts to promptly take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable Laws to consummate the transactions contemplated by this Agreement.  Each of the Parties hereto shall reasonably cooperate with respect to any issue relating to the transactions contemplated by this Agreement for which the other Party seeks a determination letter or private letter ruling from the Internal Revenue Service, an advisory opinion from the Department of Labor or any other filing (including securities filings (remedial or otherwise)), consent or approval with respect to or by a governmental agency or authority in any jurisdiction in the United States or abroad.

 

7.2                               No Third-Party Beneficiaries.  This Agreement is solely for the benefit of the Parties and is not intended to confer upon any other Persons any rights or remedies hereunder.  Nothing in this Agreement shall preclude the Navy Group, the Red Lion Group or any of their respective Affiliates, at any time, from amending, merging, modifying, terminating, eliminating, reducing, or otherwise altering in any respect any employee benefit plan, program, policy, practice, agreement or arrangement, any benefit thereunder or any trust, insurance policy or

 



 

funding vehicle related thereto.  Nothing contained in this Agreement shall (a) constitute or be deemed to be an amendment to any Navy Employee Benefit Plan, Penny Employee Benefit Plan or Red Lion Employee Benefit Plan or any other compensation or benefit plan, program, practice, policy, agreement or arrangement of Penny, Navy, Red Lion, the Red Lion Group or any of their respective Affiliates; or (b) limit the right of Red Lion, Navy, Penny or any of their respective Affiliates to terminate the employment or service of any employee or other service provider at any time.

 

ARTICLE VIII

MISCELLANEOUS

 

8.1                               Effect if Separation Time or Effective Time Does Not Occur.  If the Separation Agreement is terminated prior to the Separation Time or the Effective Time, then this Agreement shall terminate and all actions and events that are, under this Agreement, to be taken or occur effective immediately prior to or as of the Separation Time or the Effective Time, as applicable, or otherwise in connection with the transactions contemplated by the Transaction Agreements, shall not be taken or occur except to the extent specifically agreed by Navy and Red Lion and, respecting Penny, by Penny.

 

8.2                               Relationship of Parties.  Nothing in this Agreement shall be deemed or construed by the Parties or any third party as creating the relationship of principal and agent, partnership or joint venture between the Parties, it being understood and agreed that no provision contained herein, and no act of the Parties, shall be deemed to create any relationship between the Parties other than the relationship set forth herein.

 

8.3                               Affiliates.  Each of Navy, Red Lion and Penny shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement to be performed by one of Navy’s Subsidiaries (other than the Red Lion Group) or a Red Lion Entity or one of Penny’s Subsidiaries, respectively.

 

8.4                               Notices.  All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed given to a Party when (a) delivered to the appropriate address by hand or by nationally recognized overnight courier service (costs prepaid); (b) sent by facsimile with confirmation of transmission by the transmitting equipment; or (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, in each case to the following addresses and facsimile numbers and marked to the attention of the person (by name or title) designated below (or to such other address, facsimile number or person as a Party may designate by notice to the other Parties):

 

if to Navy or, prior to the Effective Time, Red Lion:

 

Nabors Industries Ltd

Crown House

Second Floor

4 Par-la-Ville Road

Hamilton, HM 08

Bermuda

 



 

Attention:                                         Corporate Secretary

 

with a copy (which shall not constitute notice) to:

 

Nabors Corporate Services, Inc.

515 West Greens Road, Suite 1200

Houston, Texas 66057

Attention:                                         Laura Doerre

Facsimile:                                         (281) 775-8166

 

with a copy (which shall not constitute notice) to:

 

Milbank, Tweed, Hadley & McCloy LLP

One Chase Manhattan Plaza

New York, New York 10005

Attention:                                         Charles J. Conroy

Scott W. Golenbock

Facsimile:                                         (212) 530-5219

 

if to Penny:

 

C&J Energy Services, Inc.

3990 Rogerdale

Houston, TX 77042

Attention: Theodore Moore

Facsimile: (713) 325-5920

 

with a copy (which shall not constitute notice)  to:

 

Vinson & Elkins L.L.P.

1001 Fannin, Suite 2500

Houston, Texas 77002

Attention:                                         Jeffery B. Floyd

Stephen M. Gill

Facsimile:                                         (713) 615-5956

 

if to a member of the Red Lion Group after the Effective Time:

 

C&J Energy Services Ltd.

Canon’s Court

22 Victoria Street

Hamilton HM12

Bermuda

Attention:  Corporate Secretary

 



 

with a copy (which shall not constitute notice) to:

 

Vinson & Elkins L.L.P.

1001 Fannin, Suite 2500

Houston, Texas 77002

Attention:                                         Jeffery B. Floyd

Stephen M. Gill

Facsimile:                                         (713) 615-5956

 

8.5                               Incorporation of Separation Agreement Provisions.  The following provisions of the Separation Agreement are hereby incorporated herein by reference, and unless otherwise expressly specified herein, such provisions shall apply as if fully set forth herein mutatis mutandis (references in this Section 8.5 to an “Article” or “Section” shall mean Articles or Sections of the Separation Agreement, and references in the material incorporated herein by reference shall be references to the Separation Agreement):  Article III (relating to Mutual Releases and Indemnification); Section 4.1 (relating to Further Assurances); Section 4.2 (relating to Agreement for Exchange of Information); Section 4.3 (relating to Privileged Matters); and Article V (relating to Miscellaneous).  Notwithstanding the foregoing, in the event of any conflict between the terms and conditions of this Agreement and the Separation Agreement, the provisions of this Agreement shall control.

 

[Signature Page Follows]

 



 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day and year first above written.

 

 

NABORS INDUSTRIES LTD.

 

 

 

By:

/s/ Mark D. Andrews

 

 

Name:  Mark D. Andrews

 

 

Title: Corporate Secretary

 

 

 

 

 

NABORS RED LION LIMITED

 

 

 

By:

/s/ Mark D. Andrews

 

 

Name:  Mark D. Andrews

 

 

Title: Director

 

 

 

 

 

C&J ENERGY SERVICES, INC.

 

 

 

By:

/s/ Randall C. McMullen, Jr.

 

 

Name:  Randall C. McMullen, Jr.

 

 

Title: President and Chief Financial Officer

 

[SIGNATURE PAGE TO EMPLOYEE BENEFITS AGREEMENT]

 



 

EXHIBIT A

 

EXCLUDED RED LION EMPLOYEES

 

·                  Andrew Stephens

 

Provided, however, that notwithstanding anything to the contrary in the Merger Agreement, the Separation Agreement or any Ancillary Agreement, Navy and its Subsidiaries acknowledge and agree that Penny shall be permitted to solicit and otherwise hire or retain, as applicable, Andrew Stephens for employment with Penny beginning no earlier than the Effective Time or continuing with the Red Lion Group on and after the Effective Time, as applicable.

 



 

EXHIBIT B

 

CONTINUED PARTICIPATION IN CANADIAN EMPLOYEE BENEFIT PLANS

 

Section 2.4(b) — Canadian Benefit Plans

 

·                              Nabors Canada Group Benefit Program

 

·                               NPSL Flexible Benefit Plan

 

·                               Dental

 

·                               Extended Health Care Benefit (Drugs, Health Care Professionals, Medical Supplies and Services, EHC-Hospital, and EHC-Medical and Non-Medical Travel Emergencies)

 

·                               Basic life insurance

 

·                               Basic accidental death & dismemberment (AD&D)

 

·                               Long-term disability

 

·                               Survivor benefit

 

·                               Employee Assistance

 

·                               Optional Benefits

 

·                  Critical Illness

 

·                  Optional AD&D

 

·                  Optional Enhanced Disability (Short- and Long-term)

 

·                  Optional Life

 

·                              Canadian Vacation Policy

 

·                              Paid-Time Off Policy (including sick leave)

 



 

EXHIBIT C

 

DELAYED TRANSFER SERVICE PROVIDERS

 

Erica McCoy, Vendor Services

 

Roxanne Forrester, Vendor Services

 

Latisha Cruz, Catalog Contractor

 



 

EXHIBIT D

 

NAVY SEVERANCE PLAN — NPSL MODIFICATIONS

 

General Severance Guidance

 

1.              Covered Employees: Management, Exempt Employees, Non-Exempt Salaried employees, Hourly Employees (excluding involuntary terminations for “lack of work” as per Employment Standards Section 55, which an employer may terminate employment without further notice or payments in lieu of notice).

 

2.              “Base Pay” definition mirrors the definition in the Nabors Industries, Inc. Severance Plan

 

3.              Upon an involuntary termination without “just cause,” all covered employees (excluding Hourly Employees terminated for “lack of work,” as noted above) receive the Employment Standards minimum.

 

4.              In addition to the Employment Standards minimum, upon an involuntary termination without “just cause”, covered employees (excluding Hourly Employees) receive an additional “common law” severance amount.  Typically, the “common law” severance amounts follow the guideline of 1-2 weeks/year of service for Non-Exempt; 2-3 weeks/year of service for Exempt & Management

 

5.              Benefit continuation may be offered to Management and Exempt employees, up to 1 month.

 

6.              Employees are required to provide a release to NPSL prior to receiving any severance above the Employment Standards minimum.

 

Alberta Employment Standards Termination Notice

 

NPSL provides written termination notice (or payment in lieu of notice), as applicable, of the following minimum amounts:

 

·                  One week for employment of more than 3 months, but less than 2 years;

·                  Two weeks for employment of 2 years or more, but less than 4 years;

·                  Four weeks for employment of 4 years or more, but less than 6 years;

·                  Five weeks for employment of 6 years or more, but less than 8 years;

·                  Six weeks for employment of 8 years or more, but less than 10 years; and

·                  Eight weeks for employment of 10 years or more.

 




Exhibit 10.2

 

EXECUTION VERSION

 

TAX MATTERS AGREEMENT

 

by and among

 

Nabors Industries Ltd.

 

and

 

Nabors Red Lion Limited

 

Dated as of March 24, 2015

 



 

TAX MATTERS AGREEMENT

 

THIS TAX MATTERS AGREEMENT (this “Agreement”), dated as of March 24, 2015, is by and among Nabors Industries Ltd., a Bermuda exempted company (“Navy”), and Nabors Red Lion Limited, a Bermuda exempted company (“Red Lion”).  Each of Navy and Red Lion is sometimes referred to herein as a “Party” and, collectively, as the “Parties.”

 

WHEREAS, Navy, directly and through its various subsidiaries, is engaged in the Non-Red Lion Business and the Red Lion Business;

 

WHEREAS, as a condition to the execution of the Agreement and Plan of Merger, dated as of June 25, 2014, as amended from time to time, by and among Navy, Red Lion and C&J Energy Services, Inc., a Delaware corporation (“Penny,” and such agreement, the “Merger Agreement”), Navy is causing certain of its Subsidiaries to engage in the Red Lion Restructuring, which includes the U.S. Distributions;

 

WHEREAS, the Parties intend that, for U.S. federal income Tax purposes, the U.S. Distributions qualify under Section 355 of the Code, but, in the case of the distribution by Nabors International Finance Inc., a Delaware corporation (“NIFI”), subject to the possible application of Section 355(d) of the Code;

 

WHEREAS, pursuant to the Merger Agreement, the parties will effect the merger of Nabors CJ Merger Co., a Delaware corporation (“Merger Sub”), with and into Penny, with Penny continuing as the surviving corporation (the “Merger”), as a result of which the issued and outstanding shares of Penny Common Stock will be converted into the right to receive Red Lion Common Shares;

 

WHEREAS, following the Merger, Red Lion will transfer, or cause to be transferred, the shares of Penny to CJ Lux Holdings S.à r.l., a limited liability company organized under the laws of Luxembourg and wholly owned by Red Lion (“LuxCo”), and thereafter LuxCo will transfer the shares of Penny to CJ Holding Co., a Delaware corporation (“USHC”); and

 

WHEREAS, the Parties wish to (a) provide for the payment of Tax liabilities and entitlement to refunds thereof, allocate responsibility for, and cooperation in, the filing of Tax Returns, and provide for certain other matters relating to Taxes, (b) set forth certain covenants and indemnities relating to the preservation of the Intended Tax Treatment of certain steps of the Red Lion Restructuring, and (c) set forth certain rights, responsibilities and obligations relating to Taxes.

 

NOW, THEREFORE, in consideration of the foregoing and the terms, conditions, covenants and provisions of this Agreement, each of the Parties mutually covenants and agrees as follows:

 



 

ARTICLE I

 

DEFINITIONS

 

Section 1.01          General.  As used in this Agreement, the following terms shall have the following meanings:

 

Accounting Firm” has the meaning set forth in Section 8.01.

 

Adjustment” means an adjustment of any item of income, gain, loss, deduction, credit or any other item affecting Taxes of a taxpayer pursuant to a Final Determination.

 

Agreement” has the meaning set forth in the preamble to this Agreement.

 

Ancillary Agreement” has the meaning set forth in the Separation Agreement.

 

Benefited Party” has the meaning set forth in Section 4.01(b).

 

Carryback” has the meaning set forth in Section 4.02(b).

 

Closing Date” means the date on which the Merger is consummated.

 

Code” means the Internal Revenue Code of 1986, as amended.

 

Common Parent” means the “common parent corporation” of an “affiliated group” (in each case, within the meaning of Section 1504 of the Code) filing a U.S. federal consolidated Income Tax Return.

 

Disqualifying Action” means a Navy Disqualifying Action or a Red Lion Disqualifying Action.

 

Due Date” means (a) with respect to a Tax Return, the date (taking into account all valid extensions) on which such Tax Return is required to be filed under applicable Law and (b) with respect to a payment of Taxes, the date on which such payment is required to be made to avoid the incurrence of interest, penalties and/or additions to Tax.

 

Effective Time” has the meaning set forth in the Separation Agreement.

 

Employee Benefits Agreement” means the Employee Benefits Agreement by and between the Parties dated as of the date hereof.

 

Extraordinary Transaction” means any action that is not in the Ordinary Course of Business, but shall not include any action described in or contemplated by the Separation Agreement, the Merger Agreement or any Ancillary Agreement or that is undertaken pursuant to the Red Lion Restructuring.

 

Fifty-Percent or Greater Interest” has the meaning ascribed to such term for purposes of Sections 355(d) and (e) of the Code.

 

2



 

Final Determination” means the final resolution of liability for any Tax for any taxable period, by or as a result of (a) a final decision, judgment, decree or other order by any court of competent jurisdiction that can no longer be appealed, (b) a final settlement with the IRS, a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code, or a comparable agreement under the Laws of other jurisdictions, which resolves the entire Tax liability for any taxable period, (c) any allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such refund or credit may be recovered by the jurisdiction imposing the Tax, or (d) any other final resolution, including by reason of the expiration of the applicable statute of limitations or the execution of a pre-filing agreement with the IRS or other Taxing Authority.

 

Income Tax Return” means any Tax Return on which Income Taxes are reflected or reported.

 

Income Taxes” means any Taxes based upon, measured by, or calculated with respect to:  (a) net income or profits or net receipts (including, but not limited to, any capital gains, minimum Tax or any Tax on items of Tax preference, but not including sales, use, real or personal property, or transfer or similar Taxes) or (b) multiple bases (including corporate franchise, doing business and occupation Taxes) if one or more bases upon which such Tax may be based, measured by, or calculated with respect to, is described in clause (a).

 

Indemnified Party” means the Party which is entitled to seek indemnification from the other Party pursuant to the provisions of Article III.

 

Indemnifying Party” means the Party from which the other Party is entitled to seek indemnification pursuant to the provisions of Article III.

 

Information” has the meaning set forth in Section 7.01(a).

 

Information Request” has the meaning set forth in Section 7.01(a).

 

Intended Tax Treatment” means the U.S. Distributions (a) qualify under Section 355 of the Code and (b) are not subject to the application of  Section 355(d) or (e) of the Code, other than the possible application of Section 355(d) in the case of the NIFI Distribution.

 

IRS” means the U.S. Internal Revenue Service or any successor thereto, including, but not limited to its agents, representatives, and attorneys.

 

Law” means any U.S. or non-U.S. federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, administrative pronouncement, order, requirement or rule of law (including common law).

 

LuxCo” has the meaning set forth in the recitals to this Agreement.

 

Merger” has the meaning set forth in the recitals to this Agreement.

 

Merger Agreement” has the meaning set forth in the recitals to this Agreement.

 

3



 

Merger Sub” has the meaning set forth in the recitals to this Agreement.

 

Mixed Business Income Tax Return” means any Income Tax Return (other than a Navy Consolidated Return), including any consolidated, combined or unitary Income Tax Return, that reflects or reports Income Taxes that relate to at least one asset or activity that is part of the Non-Red Lion Business, on the one hand, and at least one asset or activity that is part of the Red Lion Business, on the other hand.

 

Mixed Business Non-Income Tax Return” means any Non-Income Tax Return that reflects or reports Non-Income Taxes that relate to at least one asset or activity that is part of the Non-Red Lion Business, on the one hand, and at least one asset or activity that is part of the Red Lion Business, on the other hand.

 

Mixed Business Non-Income Taxes” means any U.S. federal, state or local, or non-U.S. Non-Income Taxes attributable to any Mixed Business Non-Income Tax Return.

 

Mixed Business Non-U.S. Income Tax Return” means any Mixed Business Income Tax Return on which Mixed Business Non-U.S. Income Taxes are reflected or reported.

 

Mixed Business Non-U.S. Income Taxes” means any non-U.S. Income Taxes attributable to any Mixed Business Income Tax Return.

 

Mixed Business U.S. Income Tax Return” means any Mixed Business Income Tax Return on which Mixed Business U.S. Income Taxes are reflected or reported.

 

Mixed Business U.S. Income Taxes” means any U.S. federal, state or local Income Taxes attributable to any Mixed Business Income Tax Return.

 

Mixed Return Preparing Party” has the meaning set forth in Section 2.04(a)(iii).

 

Mixed Return Reviewing Party” has the meaning set forth in Section 2.04(a)(iii).

 

Navy” has the meaning set forth in the preamble to this Agreement.

 

Navy Consolidated Return” means the U.S. federal Income Tax Return required to be filed by NIFI as the Common Parent.

 

Navy Consolidated Taxes” means any U.S. federal Income Taxes attributable to any Navy Consolidated Return.

 

Navy Consultation Statement” has the meaning set forth in Section 6.02(d)(iii).

 

Navy Disqualifying Action” means (a) any action (or the failure to take any action) within its control by Navy or any Navy Entity (including entering into any agreement, understanding or arrangement or any negotiations with respect to any transaction or series of transactions), (b) any event (or series of events) involving the capital stock of Navy or any Navy Entity, or any assets of Navy or any Navy Entity, or (c) any breach by Navy or any Navy Entity of any representation, warranty or covenant made by them in this Agreement, in each case, that

 

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would affect the Intended Tax Treatment of the U.S. Distributions; provided, however, the term “Navy Disqualifying Action” shall not include any action described in the Separation Agreement, the Merger Agreement or any Ancillary Agreement.

 

Navy Entity” means any Subsidiary of Navy; provided, however, that Red Lion or any Subsidiary of Red Lion (including Penny) shall not be considered a Navy Entity for periods after the Effective Time.

 

Navy General Counsel” has the meaning set forth in Section 6.02(d)(i).

 

Navy Group” means, individually or collectively, as the case may be, Navy and any Navy Entity.

 

Navy Taxes” means, without duplication, all known and unknown Taxes (including any Taxes resulting from an Adjustment) (a) of Navy or any Subsidiary or former Subsidiary of Navy (including, for the avoidance of doubt, Red Lion and any Subsidiary of Red Lion as of the date prior to the Closing Date) for any Pre-Closing Period and, with respect to a Straddle Period, the portion of such period ending at the end of the day on the Closing Date (determined in accordance with Section 2.05) and (b) any Restructuring Taxes, in each case, other than Red Lion Taxes.

 

NCPS” means Nabors Completion & Production Services Co, a Delaware corporation.

 

NIFI” has the meaning set forth in the recitals to this Agreement.

 

NIFI Distribution” means the distribution by NIFI of NCPS.

 

NII” means Nabors Industries, Inc., a Delaware corporation.

 

NII Distribution” means the distribution by NII of NCPS.

 

Non-Income Tax Return” means any Tax Return relating to Taxes other than Income Taxes.

 

Non-Income Taxes” means any Taxes other than Income Taxes.

 

Non-Red Lion Business” has the meaning set forth in the Separation Agreement.

 

Notified Action” has the meaning set forth in Section 6.03(a).

 

Ordinary Course of Business” means an action taken by a Person only if such action is taken in the ordinary course of the normal day-to-day operations of such Person.

 

Party” and “Parties” have the meaning set forth in the preamble to this Agreement.

 

Past Practice” means past practices, accounting methods, elections and conventions.

 

Penny” has the meaning set forth in the recitals to this Agreement.

 

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Penny Common Stock” has the meaning set forth in the Merger Agreement.

 

Person” has the meaning set forth in the Separation Agreement.

 

Post-Closing Period” means any taxable period (or portion thereof) beginning after the Closing Date, including for the avoidance of doubt, the portion of any Straddle Period beginning after the Closing Date.

 

Pre-Closing Period” means any taxable period (or portion thereof) ending on or before the Closing Date, including for the avoidance of doubt, the portion of any Straddle Period ending at the end of the day on the Closing Date.

 

Preparing Party” has the meaning set forth in Section 2.04(a)(ii).

 

Prohibited Entities List” means a list of entities the issuance of Red Lion shares (or the shares of any entity in the chain of NCPS ownership (including NCPS)) to which could cause the U.S. Distributions to fail to qualify for the Intended Tax Treatment as a result of an agreement, understanding, arrangement, or substantial negotiations by persons who were directors, officers or by another person or persons with the implicit or explicit permission of one or more of such officers, directors, or controlling shareholders of Navy or any of its Subsidiaries during the two-year period ending on the date of the Red Lion Restructuring regarding a potential acquisitive transaction involving such entities, to be provided by Navy to Red Lion and Penny no less than five (5) days prior to Closing.

 

Prohibited Issuance” means (i) any issuance after the Closing of Red Lion shares, options, warrants or similar interests or such interests of any entity in the chain of NCPS ownership (including NCPS) to any Person in connection with a public offering (within the meaning of Treasury Regulation Section 1.355-7(h)(11)) or a private placement of such stock by Red Lion or such entity in the chain of NCPS ownership (including NCPS), (A) if immediately following and as a result of such issuance, such Person would be a ten-percent shareholder (within the meaning of Treasury Regulation Section 1.355-7(h)(14)), or a “coordinating group” (within the meaning of Treasury Regulation Section 1.355-7(h)(4)) that is treated as a ten-percent shareholder, directly or indirectly, of NCPS or (B) which is taken into account for purposes of Section 355(e) of the Code as a result of pre-Merger Actions of Penny and (ii) any issuance or grant after the Closing of Red Lion capital stock, options, warrants or similar interests, or capital stock, options, warrants or similar interests of any entity in the chain of NCPS ownership (including NCPS), as consideration to effect a merger with or acquisition of any entity (or any affiliate of such entity) included on the Prohibited Entities List. For the avoidance of doubt, the Merger shall not constitute a Prohibited Issuance.

 

Proposed Action” has the meaning set forth in Section 6.02(d).

 

Proposed Action Notice” has the meaning set forth in Section 6.02(d)(i).

 

Red Lion” has the meaning set forth in the preamble to this Agreement.

 

Red Lion Business” has the meaning set forth in the Separation Agreement.

 

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Red Lion Common Shares” has the meaning set forth in the Merger Agreement.

 

Red Lion Disqualifying Action” means (a) any action described in Section 6.02(b) (whether or not 6.02(c) is complied with), (b) any violation of Navy’s preemptive rights under Section 6.3(b) of the Bye-Laws of Red Lion Ltd., or (c) any breach by Red Lion or any Red Lion Entity of any representation, warranty or covenant made by them in this Agreement, in each case, taken or occurring after the Closing and as a result of which the U.S. Distributions fail to qualify for the Intended Tax Treatment; provided, however, the term “Red Lion Disqualifying Action” shall not include (i) any action described in the Separation Agreement, the Merger Agreement or any Ancillary Agreement (including, in each case, the exhibits thereto) or that is undertaken pursuant to the Red Lion Restructuring and (ii) any action that would not have caused the U.S. Distributions to fail to qualify for the Intended Tax Treatment in the absence of a Navy Disqualifying Action.

 

Red Lion Entity” means any Subsidiary of Red Lion immediately after the Effective Time.

 

Red Lion Group” means, individually or collectively, as the case may be, Red Lion and any Red Lion Entity.

 

Red Lion Restructuring” has the meaning set forth in the Separation Agreement.

 

Red Lion Taxes” means, without duplication, all known and unknown Taxes, (a) of or attributable to the Red Lion Business and the Red Lion Group  (i) for any Post-Closing Period (other than any Restructuring Taxes) and (ii) for any Pre-Closing Period and, with respect to a Straddle Period, the portion of such period ending at the end of the day on the Closing Date (determined in accordance with Section 2.05), to the extent that such Taxes are accrued and reflected in the Working Capital adjustment pursuant to section 2.7 of the Separation Agreement and,(b) incurred as a result of a Red Lion Disqualifying Action.  Red Lion Taxes shall also include Taxes imposed as a result of the U.S. Distributions failing to qualify for the Intended Tax Treatment as a result of an inaccuracy in the representations and warranties set forth in Sections 4.1(b)(vi)(1)-(2) of the Merger Agreement, it being understood that Taxes (i) shall be considered to result from such inaccuracy only if such Taxes would arise without regard to events occurring after the Closing and (ii) shall be treated as Red Lion Taxes only if such Taxes otherwise would not have been incurred.

 

Refund” means any refund (or credit in lieu thereof) of Taxes (including any overpayment of Taxes that can be refunded or, alternatively, applied to other Taxes payable), including any interest paid on or with respect to such refund of Taxes; provided, however, that for purposes of this Agreement, the amount of any Refund required to be paid to another Party shall be reduced by the net amount of any Income Taxes imposed on, related to, or attributable to, the receipt or accrual of such Refund.

 

Restriction Period” has the meaning set forth in Section 6.02(b).

 

Restructuring Taxes” means any Taxes imposed on or arising as a result of the Restructuring.  For the avoidance of doubt, Restructuring Taxes shall include, without limitation,

 

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Transfer Taxes and Taxes payable by reason of (i) deferred intercompany transactions or excess loss accounts triggered by any step of the Red Lion Restructuring, (ii) the issuance or settlement in connection with the Red Lion Restructuring of intercompany receivables, payables, loans and other accounts between Red Lion or any member of the Red Lion Group, on the one hand, and Navy and any member of the Navy Group, on the other hand, (iii) the failure of any of the steps of the Red Lion Restructuring intended to qualify as a series of distributions subject to Sections 332 and 355 of the Code to so qualify, (iv) the application of Section 355(d) of the Code to the NIFI Distribution and (v) restructuring Red Lion Assets located in Canada in connection with the Red Lion Restructuring, provided that Restructuring Taxes shall not include any Taxes payable by Nabors Production Services Ltd. (“NPSL”) after the closing as a result of any NPSL tax attributes that are reduced in connection with cancellation of debt income, if any, arising in connection with the contribution of a portion of the Notes to NPSL prior to the Closing Date.

 

Reviewing Party” has the meaning set forth in Section 2.04(a)(ii).

 

Separation Agreement” means the Separation Agreement by and between Navy and Red Lion dated as of June 25, 2014.

 

Separation Date” has the meaning set forth in the Separation Agreement.

 

Single Business Return” means any Tax Return including any consolidated, combined or unitary Tax Return, that reflects or reports Tax Items relating only to the Non-Red Lion Business, on the one hand, or the Red Lion Business, on the other (but not both), whether or not the Person charged by Law to file such Tax Return is engaged in the business to which the Tax Return relates.

 

Single Business Return Preparing Party” has the meaning set forth in Section 2.04(b).

 

Single Business Return Reviewing Party” has the meaning set forth in Section 2.04(b).

 

Single Business Taxes” means any U.S. federal, state or local, or foreign Taxes attributable to any Single Business Return.

 

Straddle Period” means any taxable period that begins on or before and ends after the Closing Date.

 

Subsidiary” has the meaning set forth in the Separation Agreement.

 

Tax” means (a) all taxes, charges, fees, duties, levies, imposts, or other similar assessments, imposed by any U.S. federal, state or local or foreign governmental authority, including, but not limited to, net income, gross income, gross receipts, excise, real property, personal property, sales, use, service, service use, license, lease, capital stock, transfer, recording, franchise, business organization, occupation, premium, environmental, windfall profits, profits, customs, duties, payroll, wage, withholding, social security, employment, unemployment, insurance, severance, workers compensation, excise, stamp, alternative minimum, estimated, value added, ad valorem and other taxes, charges, fees, duties, levies, imposts, or other similar assessments, (b) any interest, penalties or additions attributable thereto, and (c) all liabilities in

 

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respect of any items described in clauses (a) or (b) payable by reason of assumption, transferee or successor liability, operation of Law or Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor thereof or any analogous or similar provision under Law).

 

Tax Attributes” means net operating losses, capital losses, investment tax credit carryovers, earnings and profits, foreign tax credit carryovers, overall foreign losses, previously taxed income, separate limitation losses and any other losses, deductions, credits or other comparable items that could affect a Tax liability for a past or future taxable period.

 

Tax Benefit” means any refund, credit, or other reduction in Tax payments otherwise required to be made to a Taxing Authority.

 

Tax Group” means any U.S. federal, state, local or foreign affiliated, consolidated, combined, unitary or similar group or fiscal unity that joins in the filing of a single Tax Return.

 

Tax Item” means any item of income, gain, loss, deduction, credit, recapture of credit or any other item which increases or decreases Taxes paid or payable.

 

Tax Matter” has the meaning set forth in Section 7.01(a).

 

Tax Package” means all relevant Tax-related information relating to the operations of the Non-Red Lion Business or the Red Lion Business, as applicable, that is reasonably necessary to prepare and file the applicable Tax Return.

 

Tax Proceeding” means any audit, assessment of Taxes, pre-filing agreement, other examination by any Taxing Authority, proceeding, appeal of a proceeding or litigation relating to Taxes, whether administrative or judicial, including proceedings relating to competent authority determinations.

 

Tax Return” means any return, report, certificate, form or similar statement or document (including any related or supporting information or schedule attached thereto and any information return, or declaration of estimated Tax) required to be supplied to, or filed with, a Taxing Authority in connection with the payment, determination, assessment or collection of any Tax or the administration of any Laws relating to any Tax and any amended Tax return or claim for refund.

 

Taxing Authority” means any governmental authority or any subdivision, agency, commission or entity thereof or any quasi-governmental or private body having jurisdiction over the assessment, determination, collection or imposition of any Tax (including the IRS).

 

Transaction Agreement” means this Agreement, the Merger Agreement, the Separation Agreement, the Employee Benefits Agreement and the Transition Services Agreement (as defined in the Merger Agreement).

 

Transactions” means the Restructuring, and the other transactions contemplated by the Separation Agreement, the Merger Agreement and the Ancillary Agreements.

 

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Transfer Taxes” means all sales, use, transfer, real property transfer, intangible, recordation, registration, documentary, stamp or similar Taxes imposed as a result of the Restructuring.

 

Treasury Regulations” means the final and temporary (but not proposed) income Tax regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

 

Unqualified Tax Opinion” means a “will” opinion, without substantive qualifications, of a nationally recognized law or accounting firm, which firm is reasonably acceptable to Navy, to the effect that a transaction will not affect the Intended Tax Treatment.

 

U.S.” means the United States of America.

 

U.S. Distributions” means the NII Distribution and the NIFI Distribution.

 

U.S. Income Taxes” means any Income Taxes imposed by or payable to the United States, any State or any political subdivision of the United States or any State.

 

USHC” has the meaning set forth in the recitals to this Agreement.

 

Section 1.02          Additional Definitions.  Capitalized terms not defined in this Agreement shall have the meaning ascribed to them in the Separation Agreement.

 

ARTICLE II

 

PREPARATION, FILING AND PAYMENT OF TAXES SHOWN DUE ON TAX RETURNS

 

Section 2.01          U.S. Income Tax Returns.

 

(a)           Navy Consolidated Returns.  Navy shall cause to be prepared and filed all Navy Consolidated Returns, and shall pay or cause to be paid all Taxes shown to be due and payable on such Tax Returns; provided that Red Lion shall reimburse Navy for any such Taxes that are Red Lion Taxes (for the avoidance of doubt taking into account those payments (if any) of Taxes with respect to such Tax Return made on or prior to the Closing Date by Red Lion or a Red Lion Entity).

 

(b)           Extraordinary Transactions.  Notwithstanding anything to the contrary in this Agreement, for all Tax purposes, the Parties shall report any Extraordinary Transactions that are caused or permitted by Red Lion or any Red Lion Entity on the Closing Date after the Effective Time as occurring on the day after the Closing Date pursuant to Treasury Regulation Section 1.1502-76(b)(1)(ii)(B) or any similar or analogous provision of state, local or foreign Law and for purposes of allocating responsibility for Taxes pursuant to this Agreement.

 

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(c)           Mixed Business U.S. Income Tax Returns.

 

(i)            Navy shall prepare and file (or cause a Navy Entity to prepare and file) any Mixed Business U.S. Income Tax Return required to be filed by Navy or a Navy Entity and shall pay, or cause such Navy Entity to pay, all Taxes shown to be due and payable on such Tax Return; provided that Red Lion shall reimburse Navy for any such Taxes that are Red Lion Taxes (for the avoidance of doubt taking into account those payments (if any) of Taxes with respect to such Tax Return made on or prior to the Closing Date by Red Lion or a Red Lion Entity).

 

(ii)           Red Lion shall prepare and file (or cause a Red Lion Entity to prepare and file) any Mixed Business U.S. Income Tax Return required to be filed by Red Lion or a Red Lion Entity after the Closing Date, if any, and Red Lion shall pay, or cause such Red Lion Entity to pay, all Taxes shown to be due and payable on such Tax Return; provided that Navy shall reimburse Red Lion for any Taxes that are Navy Taxes.

 

(d)           Single Business U.S. Income Tax Returns.

 

(i)            Navy shall prepare and file (or cause a Navy Entity to prepare and file) any Single Business Return that relates to U.S. Income Taxes for a Pre-Closing Period or a Straddle Period required to be filed by Navy or a Navy Entity, if any, and shall pay, or cause such Navy Entity to pay, all Taxes shown to be due and payable on such Tax Return; provided that Red Lion shall reimburse Navy for any such Taxes that are Red Lion Taxes (for the avoidance of doubt taking into account those payments (if any) of Taxes with respect to such Tax Return made on or prior to the Closing Date by Red Lion or a Red Lion Entity).

 

(ii)           Red Lion shall prepare and file (or cause a Red Lion Entity to prepare and file) any Single Business Return that relates to U.S. Income Taxes for a Pre-Closing Period or a Straddle Period required to be filed by Red Lion or a Red Lion Entity after the Closing Date, if any, and Red Lion shall pay, or cause such Red Lion Entity to pay, all Taxes shown to be due and payable on such Tax Return; provided that Navy shall reimburse Red Lion for any Taxes that are Navy Taxes.

 

Section 2.02          Mixed Business Non-U.S. Income Tax Returns and Mixed Business Non-Income Tax Returns.

 

(a)           Navy shall prepare and file (or cause a Navy Entity to prepare and file) any Mixed Business Non-U.S. Income Tax Return and any Mixed Business Non-Income Tax Return for a Pre-Closing Period or a Straddle Period required to be filed by Navy or a Navy Entity and shall pay, or cause such Navy Entity to pay, all Taxes shown to be due and payable on such Tax Return; provided that Red Lion shall reimburse Navy for any such Taxes that are Red Lion Taxes (for the avoidance of doubt taking into account those payments (if any) of Taxes with respect to such Tax Return made on or prior to the Closing Date).

 

(b)           Red Lion shall prepare and file (or cause a Red Lion Entity to prepare and file) any Mixed Business Non-U.S. Income Tax Return and any Mixed Business Non-Income Tax Returns, in each case for a Pre-Closing Period or a Straddle Period required to be filed by Red Lion or a Red Lion Entity after the Closing Date, and Red Lion shall pay, or cause such Red

 

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Lion Entity to pay, all Taxes shown to be due and payable on such Tax Return; provided that Navy shall reimburse Red Lion for any such Taxes that are Navy Taxes (for the avoidance of doubt taking into account those payments (if any) of Taxes with respect to such Tax Return made on or prior to the Closing Date).

 

Section 2.03          Single Business Returns.  Except as set forth in Section 2.01(d), (a) Navy shall prepare and file (or cause a Navy Entity to prepare and file) any Single Business Return for a Pre-Closing Period or a Straddle Period required to be filed by Navy or a Navy Entity and shall pay, or cause such Navy Entity to pay, all Taxes shown to be due and payable on such Tax Return; provided that Red Lion shall reimburse Navy for any such Taxes that are Red Lion Taxes (for the avoidance of doubt taking into account those payments (if any) of Taxes with respect to such Tax Return made on or prior to the Closing Date), and (b) Red Lion shall prepare and file (or cause a Red Lion Entity to prepare and file) any Single Business Return for a Pre-Closing Period or a Straddle Period required to be filed by Red Lion or a Red Lion Entity and Red Lion shall pay, or cause such Red Lion Entity to pay, all Taxes shown to be due and payable on such Tax Return; provided that Navy shall reimburse Red Lion for any such Taxes that are Navy Taxes (for the avoidance of doubt taking into account those payments (if any) of Taxes with respect to such Tax Return made on or prior to the Closing Date).

 

Section 2.04          Tax Return Procedures.

 

(a)           Procedures relating to Tax Returns other than Single Business Returns.

 

(i)            Navy Consolidated Returns.  With respect to all Navy Consolidated Returns, Navy shall include only the items of income, gain, deduction, loss and credit determined as if there was a closing of the books as of the close of the Closing Date.  Navy shall prepare the portions of such Navy Consolidated Returns that relate to the Red Lion Business in a manner that is consistent with Past Practice unless otherwise required by applicable Law and shall provide a draft of such portions of such Navy Consolidated Return to Red Lion for its review and comment at least thirty (30) days prior to the Due Date for such Navy Consolidated Return, provided, however, that nothing herein shall prevent Navy from timely filing any such Navy Consolidated Return.  The Parties shall negotiate in good faith to resolve all disputed issues.  Any disputes that the Parties are unable to resolve shall be resolved by the Accounting Firm pursuant to Section 8.01.  In the event that any dispute is not resolved (whether pursuant to good faith negotiations among the Parties or by the Accounting Firm) prior to the Due Date for the filing of any Navy Consolidated Return, such Navy Consolidated Return shall be timely filed by Navy and the Parties agree to amend such Navy Consolidated Return as necessary to reflect the resolution of such dispute in a manner consistent with such resolution.

 

(ii)           Mixed Business U.S. Income Tax Returns.  The Party required to prepare and file any Mixed Business U.S. Income Tax Return (the “Preparing Party”) shall prepare the portions of such Mixed Business U.S. Income Tax Return that relates to the business of the other Party (the “Reviewing Party”) (the Red Lion Business or the Navy Business, as the case may be) in a manner that is consistent with Past Practice unless otherwise required by applicable Law and shall provide a draft of such portion of

 

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such Mixed Business U.S. Income Tax Return to the Reviewing Party for its review and comment at least thirty (30) days prior to the Due Date for such Mixed Business U.S. Income Tax Return, provided, however, that nothing herein shall prevent the Preparing Party from timely filing any such Mixed Business U.S. Income Tax Return.  In the event that Past Practice is not applicable to a particular item or matter, the Preparing Party shall determine the reporting of such item or matter in good faith.  The Parties shall negotiate in good faith to resolve all disputed issues.  Any disputes that the Parties are unable to resolve shall be resolved by the Accounting Firm pursuant to Section 8.01.  In the event that any dispute is not resolved (whether pursuant to good faith negotiations among the Parties or by the Accounting Firm) prior to the Due Date for the filing of any Mixed Business U.S. Income Tax Return, such Mixed Business U.S. Income Tax Return shall be timely filed by the Preparing Party and the Parties agree to amend such Mixed Business U.S. Income Tax Return as necessary to reflect the resolution of such dispute in a manner consistent with such resolution.

 

(iii)          Mixed Business Tax Returns.  The party that is required to prepare and file any Mixed Business Non-U.S. Income Tax Return or Mixed Business Non-Income Tax Return pursuant to Section 2.02 (the “Mixed Return Preparing Party”) shall prepare any such Tax Returns consistent with Past Practice unless otherwise required by Law.  In the event that Past Practice is not applicable to a particular item or matter, the Mixed Return Preparing Party shall determine the reporting of such item or matter in good faith.  The Mixed Return Preparing Party shall submit to the other party (the “Mixed Return Reviewing Party”) information relating to the portion of such Tax Return that relates to Taxes for which the Mixed Return Reviewing Party is responsible pursuant to this Agreement, and in no event shall the Mixed Return Preparing Party be required to share any other information with the Mixed Return Reviewing Party, along with a statement setting forth the calculation of the Tax reimbursable by the Mixed Return Reviewing Party under Section 2.02 at least thirty (30) days prior to the Due Date for such Tax Return, provided, however, that nothing herein shall prevent the Mixed Return Preparing Party from timely filing any such Mixed Business Non-U.S. Income Tax Return or Mixed Business Non-Income Tax Return.  The Parties shall negotiate in good faith to resolve all disputed issues.  Any disputes that the Parties are unable to resolve shall be resolved by the Accounting Firm pursuant to Section 8.01.  In the event that any dispute is not resolved (whether pursuant to good faith negotiations among the Parties or by the Accounting Firm) prior to the Due Date for the filing of any Mixed Business Non-U.S. Income Tax Return or Mixed Business Non-Income Tax Return, such Mixed Business Non-U.S. Income Tax Return or Mixed Business Non-Income Tax Return, as applicable, shall be timely filed by the Mixed Return Preparing Party and the Parties agree to amend such Mixed Business Non-U.S. Income Tax Return or Mixed Business Non-Income Tax Return, as applicable, as necessary to reflect the resolution of such dispute in a manner consistent with such resolution.

 

(b)           Procedures relating to Single Business Returns.  The Party that is required to prepare and file any Single Business Return pursuant to Section 2.01(d) or 2.03 (the “Single Business Return Preparing Party”) which reflects Taxes which are reimbursable by the other Party (the “Single Business Return Reviewing Party”), in whole or in part, shall (x) unless otherwise required by Law or agreed to in writing by the Single Business Return Reviewing

 

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Party, prepare such Tax Return in a manner consistent with Past Practice to the extent such items affect the Taxes for which the Single Business Return Reviewing Party is responsible pursuant to this Agreement, and (y) submit to the Single Business Return Reviewing Party a draft of any such Tax Return (or to the extent practicable the portion of such Tax Return that relates to Taxes for which the Single Business Return Reviewing Party is responsible pursuant to this Agreement) along with a statement setting forth the calculation of the Tax shown due and payable on such Tax Return reimbursable by the Single Business Return Reviewing Party under Section 2.01(d) or 2.03 at least thirty (30) days prior to the Due Date for such Tax Return provided, however, that nothing herein shall prevent the Single Business Return Preparing Party from timely filing any such Single Business Return.  The Parties shall negotiate in good faith to resolve all disputed issues.  Any disputes that the Parties are unable to resolve shall be resolved by the Accounting Firm pursuant to Section 8.01.  In the event that any dispute is not resolved (whether pursuant to good faith negotiations among the Parties or by the Accounting Firm) prior to the Due Date for the filing of any Single Business Return, such Single Business Return shall be timely filed by the Single Business Return Preparing Party and the Parties agree to amend such Single Business Return as necessary to reflect the resolution of such dispute in a manner consistent with such resolution.

 

(c)           Notwithstanding anything to the contrary in this Article II, the portion of any Tax Return that relates to any Restructuring Taxes shall be prepared by Navy in the manner determined by Navy in its sole discretion (or, if such Tax Return is required to be prepared by Red Lion, shall be prepared by Red Lion in the manner determined by Navy in its sole discretion, provided, however, that nothing herein shall obligate Red Lion to take a position on a Tax Return that is inconsistent with applicable law), provided, further, that to the extent such Tax Return relates to any Taxes other than U.S. federal, state or local Taxes, Navy shall provide a draft of any such portion of any such Tax Return to Red Lion for its review and comment at least thirty (30) days prior to the Due Date for such Tax Return, provided, however, that nothing herein shall prevent Navy or Red Lion from timely filing any such Tax Return.  The Parties shall negotiate in good faith to resolve all disputed issues.  Any disputes that the Parties are unable to resolve shall be resolved by the Accounting Firm pursuant to Section 8.01.  In the event that any dispute is not resolved (whether pursuant to good faith negotiations among the Parties or by the Accounting Firm) prior to the Due Date for the filing of any such Tax Return, such Tax Return shall be timely filed by Navy and the Parties agree to amend such Tax Return as necessary to reflect the resolution of such dispute in a manner consistent with such resolution.

 

Section 2.05          Straddle Period Tax Allocation.  Navy and Red Lion shall take all actions necessary or appropriate to close the taxable year of Red Lion and each Red Lion Entity for all Tax purposes as of the close of the Closing Date to the extent required or permitted by applicable Law.  If applicable Law does not require or permit Red Lion or a Red Lion Entity, as the case may be, to close its taxable year on the Closing Date, then the allocation of income or deductions required or permitted to determine any Taxes or other amounts attributable to the portion of the Straddle Period ending on, or beginning after, the Closing Date shall (i) in the case of Taxes that are based upon or related to income or receipts or imposed on a transactional basis, be deemed equal to the amount that would be payable if the Tax year or period ended on the Closing Date; and (ii) in the case of other Taxes, be allocated pro rata per day between the portion of the period ending on the Closing Date and the portion of the period beginning the day after the Closing Date; provided that exemptions, allowances or deductions that are calculated on an annual or

 

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periodic basis shall be allocated between such portions in proportion to the number of days in each such portion.

 

Section 2.06          Timing of Payments.  All Taxes required to be paid or caused to be paid pursuant to this Article II by either Navy or a Navy Entity or Red Lion or a Red Lion Entity, as the case may be, to an applicable Taxing Authority or reimbursed by Navy or Red Lion to the other Party pursuant to this Agreement, shall, in the case of a payment to a Taxing Authority, be paid on or before the Due Date for the payment of such Taxes and, in the case of a reimbursement to the other Party, be paid at least two (2) business days before the Due Date for the payment of such Taxes by the other Party.

 

Section 2.07          Expenses.  Except as provided in Sections 3.01 and 3.02 (in respect of indemnification) and 8.01 (in respect of the Accounting Firm), each Party shall bear its own expenses incurred in connection with this Article II.

 

Section 2.08          Apportionment of Red Lion Taxes.  For all purposes of this Agreement, but subject to Section 4.03, Navy and Red Lion shall jointly determine in good faith which Tax Items are properly attributable to assets or activities of the Red Lion Business (and in the case of a Tax Item that is properly attributable to both the Red Lion Business and the Navy Business, the allocation of such Tax Item between the Red Lion Business and the Navy Business) in a manner consistent with the provisions hereof and any disputes shall be resolved by the Accounting Firm in accordance with Section 8.01.

 

ARTICLE III

 

INDEMNIFICATION

 

Section 3.01          Indemnification by Navy.  Navy shall pay, and shall indemnify and hold Red Lion and each Red Lion Entity harmless from and against, without duplication, (a) all Navy Taxes, (b) all Taxes incurred by Red Lion or any Red Lion Entity by reason of the breach by Navy of any of its representations, warranties or covenants hereunder, and (c) any costs and expenses related to the foregoing (including reasonable attorneys’ fees and expenses).

 

Section 3.02          Indemnification by Red Lion.  Red Lion shall pay, and shall indemnify and hold Navy and each Navy Entity harmless from and against, without duplication, (a) all Red Lion Taxes, (b) all Taxes incurred by Navy or any Navy Entity by reason of the breach by Red Lion of any of its representations, warranties or covenants hereunder, and (c) any costs and expenses related to the foregoing (including reasonable attorneys’ fees and expenses).  Notwithstanding anything herein to the contrary, in no event shall Red Lion be required to indemnify Navy or any Navy Entity for Taxes imposed as a result of the application of Section 355(d) of the Code to the NIFI Distribution.

 

Section 3.03          Indemnity Survival.  Each Party’s right to indemnification under Sections 3.01 and 3.02 shall terminate thirty (30) days following the expiration of the applicable statute of limitations.

 

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Section 3.04          Characterization of and Adjustments to Payments.

 

(a)           For all Tax purposes, Navy and Red Lion agree to treat (i) any payment required by this Agreement (other than payments with respect to interest accruing after the Closing Date) as either a contribution by Navy to Red Lion or a Red Lion Entity or a distribution by Red Lion or a Red Lion Entity to Navy, as the case may be, occurring immediately prior to the Closing Date and (ii) any payment of non-federal Taxes by or to a Taxing Authority or any payment of interest as taxable or deductible, as the case may be, as paid to the Party entitled under this Agreement to retain such payment or required under this Agreement to make such payment, in either case except as otherwise required by applicable Law.

 

(b)           Any indemnity payment under this Article III shall be decreased to take into account an amount equal to the Tax Benefit actually realized by the Indemnified Party (which Tax Benefit would not have arisen or been realized but for such indemnified liability).

 

Section 3.05          Timing of Indemnification Payments.  Indemnification payments in respect of any liabilities for which an Indemnified Party is entitled to indemnification pursuant to this Article III shall be paid by the Indemnifying Party to the Indemnified Party within ten (10) days after written notification thereof by the Indemnified Party, including reasonably satisfactory documentation setting forth the basis for, and calculation of, the amount of such indemnification payment.

 

ARTICLE IV

 

REFUNDS, CARRYBACKS, TIMING DIFFERENCE AND TAX ATTRIBUTES

 

Section 4.01          Refunds.

 

(a)           Except as provided in this Section 4.01 or Section 4.02, Navy shall be entitled to all Refunds of Taxes for which Navy is responsible pursuant to Article III, and Red Lion shall be entitled to all Refunds of Taxes for which Red Lion is responsible pursuant to Article III and Refunds that are accrued and reflected in the Working Capital adjustment pursuant to section 2.7 of the Separation Agreement.  A Party receiving a Refund to which the other Party is entitled pursuant to this Agreement shall pay the amount to which such other Party is entitled within ten (10) days after the receipt of the Refund.

 

(b)           In the event of an Adjustment relating to Taxes for which one Party is responsible pursuant to Article III which would have given rise to a Refund but for an offset against the Taxes for which the other Party is or may be responsible pursuant to Article III (the “Benefited Party”), then the Benefited Party shall pay to the other Party, within ten (10) days of the Final Determination of such Adjustment an amount equal to the amount of such reduction in the Taxes of the Benefited Party plus interest at the rate set forth in Section 6621(a)(1) on such amount for the period from the filing date of the Tax Return that would have given rise to such Refund to the payment date.

 

(c)           Notwithstanding Section 4.01(a), to the extent that a Party applies or causes to be applied an overpayment of Taxes as a credit toward or a reduction in Taxes otherwise payable (or a Taxing Authority requires such application in lieu of a Refund) and such overpayment of Taxes, if received as a Refund, would have been payable by such Party to the

 

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other Party pursuant to this Section 4.01, such Party shall pay such amount to the other Party no later than the Due Date of the Tax Return for which such overpayment is applied to reduce Taxes otherwise payable.

 

(d)           To the extent that the amount of any Refund under this Section 4.01 is later reduced by a Taxing Authority or in a Tax Proceeding, such reduction shall be allocated to the Party to which such Refund was allocated pursuant to this Section 4.01 and an appropriate adjusting payment shall be made.

 

Section 4.02          Carrybacks.

 

(a)           The carryback of any loss, credit or other Tax Attribute from any Post-Closing Period shall be in accordance with the provisions of the Code and Treasury Regulations (and any applicable state, local or foreign Laws).

 

(b)           Except to the extent otherwise consented to by Navy or prohibited by applicable Law, Red Lion shall elect to relinquish, waive or otherwise forgo the carryback of any loss, credit or other Tax Attribute from any Post-Closing Period to any Pre-Closing Period or Straddle Period (a “Carryback”).  In the event that Red Lion (or the appropriate member of the Red Lion Group) is prohibited by applicable Law to relinquish, waive or otherwise forgo a Carryback (or Navy consents to a Carryback), Navy shall cooperate with Red Lion, at Red Lion’s expense, in seeking from the appropriate Taxing Authority such Refund as reasonably would result from such Carryback, to the extent that such Refund is directly attributable to such Carryback, and shall pay over to Red Lion the amount of such Refund within ten (10) days after such Refund is received; provided, however, that Red Lion shall indemnify and hold the members of the Navy Group harmless from and against any and all collateral Tax consequences resulting from or caused by any such Carryback, including, without limitation, the loss or postponement of any benefit from the use of Tax Attributes generated by a member of the Navy Group if (i) such Tax Attributes expire unutilized, but would have been utilized but for such Carryback, or (ii) the use of such Tax Attributes is postponed to a later taxable period than the taxable period in which such Tax Attributes would have been utilized but for such Carryback.

 

Section 4.03          Tax Attributes.

 

(a)           Navy and Red Lion shall jointly determine in good faith the allocation of Tax Attributes arising in a Pre-Closing Period to the Navy Group and the Red Lion Group in accordance with the Code and Treasury Regulations, including Treasury Regulations Sections 1.1502-9T(c), 1.1502-21, 1.1502-21T, 1.1502-22, 1.1502-79 and, if applicable, 1.1502-79A (and any applicable state, local and foreign Laws); provided, that (i) earnings and profits will be allocated in accordance with Code Section 312(h) and Treasury Regulations Sections 1.312-10(b) and 1.1502-33(e) and (ii) Navy shall make any determination as to (A) basis, and (B) valuation, and shall make such determination consistent with Past Practice, where applicable.  Navy and Red Lion hereby agree to compute all Taxes for Post-Closing Periods consistently with the determination of the allocation of Tax Attributes pursuant to this Section 4.03(a) unless otherwise required by a Final Determination.

 

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(b)           To the extent that the amount of any Tax Attribute is later reduced or increased by a Taxing Authority or Tax Proceeding, such reduction or increase shall be allocated to the Party to which such Tax Attribute was allocated pursuant to Section 4.03(a).

 

Section 4.04          [Reserved]

 

Section 4.05          Timing Differences.  If pursuant to a Final Determination any Tax Benefit is actually realized by a member of the Red Lion Group as a result of an Adjustment to any Taxes for which a member of the Navy Group is responsible hereunder (or Tax Attribute of a member of the Navy Group) and such Tax Benefit would not have arisen or been realized but for such Adjustment, or if pursuant to a Final Determination any Tax Benefit is actually realized by a member of the Navy Group as a result of an Adjustment to any Taxes for which a member of the Red Lion Group is responsible hereunder (or Tax Attribute of a member of the Red Lion Group) and such Tax Benefit would not have arisen or been realized but for such Adjustment, Red Lion or Navy, as the case may be, shall make a payment to either Navy or Red Lion, as appropriate, within thirty (30) days following the realization of any such Tax Benefit, in an amount equal to the Tax Benefit actually realized (including any Tax Benefit actually realized as a result of the payment).

 

ARTICLE V

 

TAX PROCEEDINGS

 

Section 5.01          Notification of Tax Proceedings.  Within ten (10) days after an Indemnified Party becomes aware of the commencement of a Tax Proceeding that may give rise to Taxes for which an Indemnifying Party is responsible pursuant to Article III, such Indemnified Party shall notify the Indemnifying Party of such Tax Proceeding, and thereafter shall promptly forward or make available to the Indemnifying Party copies of notices and communications relating to such Tax Proceeding.  The failure of the Indemnified Party to notify the Indemnifying Party of the commencement of any such Tax Proceeding within such ten (10) day period or promptly forward any further notices or communications shall not relieve the Indemnifying Party of any obligation which it may have to the Indemnified Party under this Agreement except to the extent that the Indemnifying Party is actually prejudiced by such failure.

 

Section 5.02          Tax Proceeding Procedures Generally.

 

(a)           Tax Proceedings relating to Navy Consolidated Returns, Mixed Business U.S. Income Tax Returns and Single Business U.S. Income Tax Returns.

 

(i)            Except as provided in Section 5.03, Navy (including through a Navy Entity) shall be entitled to contest, compromise and settle any Adjustment proposed, asserted or assessed pursuant to any Tax Proceeding with respect to any Navy Consolidated Return, Mixed Business U.S. Income Tax Return, or Single Business Return required to be prepared by Navy or a Navy Entity pursuant to Section 2.01, and any such defense shall be made diligently and in good faith; provided that to the extent that such Tax Proceeding could materially affect the amount of Taxes for which Red Lion is responsible pursuant to Article III, Navy (A) shall keep Red Lion informed in a timely

 

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manner of all actions proposed to be taken by Navy with respect to such Tax Proceeding (but limited to the portion of such Tax Proceeding that relates to Taxes for which Red Lion is responsible pursuant to Article III) and (B), shall permit Red Lion to participate in all proceedings with respect to such Tax Proceeding (but limited to the portion of such Tax Proceeding that relates to Taxes for which Red Lion is responsible pursuant to Article III) and shall not settle any such Tax Proceeding without the prior written consent of Red Lion, which shall not be unreasonably withheld, delayed or conditioned.

 

(ii)           Except as provided in Section 5.03, Red Lion (including through a Red Lion Entity) shall be entitled to contest, compromise and settle any Adjustment proposed, asserted or assessed pursuant to any Tax Proceeding with respect to any Mixed Business U.S. Income Tax Return or Single Business Return required to be prepared by Red Lion or a Red Lion Entity pursuant to Section 2.01, and any such defense shall be made diligently and in good faith; provided that to the extent that such Tax Proceeding could materially affect the amount of Taxes for which Navy is responsible pursuant to Article III, Red Lion (A) shall keep Navy informed in a timely manner of all actions proposed to be taken by Red Lion with respect to such Tax Proceeding (but limited to the portion of such Tax Proceeding that relates to Taxes for which Navy is responsible pursuant to Article III) and (B) shall permit Navy to participate in all proceedings with respect to such Tax Proceeding (but limited to the portion of such Tax Proceeding that relates to Taxes for which Navy is responsible pursuant to Article III) and shall not settle any such Tax Proceeding without the prior written consent of Navy, which shall not be unreasonably withheld, delayed or conditioned.

 

(b)           Tax Proceedings relating to Mixed Business Non-U.S. Income Tax Returns and Mixed Business Non-Income Tax Returns.  The Mixed Return Preparing Party with respect to any Mixed Business Non-U.S. Income Tax Return or Mixed Business Non-Income Tax Return shall be entitled to contest, compromise and settle any Adjustment proposed, asserted or assessed pursuant to any Tax Proceeding with respect to such Tax Return and any such defense shall be made diligently and in good faith; provided that the Mixed Return Preparing Party shall (i) keep the Mixed Return Reviewing Party informed in a timely manner of all actions proposed to be taken by the Mixed Return Preparing Party with respect to such Tax Proceeding and, (ii) to the extent such Tax Proceeding could materially affect the amount of Taxes for which the Mixed Return Reviewing Party is responsible pursuant to Article III, shall permit the Mixed Return Reviewing Party to participate in all proceedings with respect to such Tax Proceeding (but limited to the portion of such Tax Proceeding that relates to Taxes for which the Mixed Return Reviewing Party is responsible pursuant to Article III) and shall not settle any such Tax Proceeding without the prior written consent of the Mixed Return Reviewing Party, which shall not be unreasonably withheld, delayed or conditioned.

 

(c)           Tax Proceedings relating to Single Business Returns.  Except as provided in Sections 5.02(a) and 5.03, the Indemnifying Party shall be entitled to contest, compromise and settle any Adjustment proposed, asserted or assessed pursuant to any Tax Proceeding with respect to any Single Business Return for which the Indemnifying Party is responsible pursuant to Article III and any such defense shall be made diligently and in good faith; provided, that the Indemnifying Party shall keep the Indemnified Party informed in a timely manner of all actions

 

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proposed to be taken by the Indemnifying Party and shall permit the Indemnified Party to participate in all proceedings with respect to such Tax Proceeding.

 

Section 5.03                             Tax Proceedings in respect of Restructuring Taxes and Disqualifying Actions.

 

(a)                                 Navy and Red Lion shall be entitled to jointly contest, compromise and settle any Adjustment proposed, asserted or assessed pursuant to any Tax Proceeding relating to (i) Restructuring Taxes (to the extent reflected on a Tax Return including solely Red Lion or any Red Lion Entities) and (ii) any Taxes attributable to a Red Lion Disqualifying Action.

 

(b)                                 Navy shall be entitled to contest, compromise and settle any Adjustment proposed, asserted or assessed pursuant to any Tax Proceeding relating to (i) Restructuring Taxes (to the extent reflected on a Tax Return of Navy or a Navy Entity) and (ii) any Taxes attributable to a Navy Disqualifying Action, and shall defend such Adjustment diligently and in good faith; provided that Navy shall keep Red Lion informed in a timely manner of all actions taken or proposed to be taken by Navy.

 

Section 5.04                             Tax Proceedings in respect of Transfer Pricing Matters.  Notwithstanding anything to the contrary in this Article V, if (a) a Tax Proceeding that relates to transfer pricing matters (including, for the avoidance of doubt, any proceeding that is part of a competent authority process) would reasonably be expected to give rise to an Adjustment of Taxes for which one party is responsible pursuant to Article III, and (b) such responsible party is not the party entitled to control such Tax Proceeding pursuant to this Article V, then the party entitled to control such Tax Proceeding shall permit such responsible party to participate in all proceedings with respect to such Tax Proceeding (or, if Red Lion is such responsible party, solely the portion of such Tax Proceeding that relates to Taxes for which Red Lion is responsible pursuant to Article III), and shall not agree to any settlement or compromise of such Tax Proceeding without the consent of such responsible party, which consent shall not be unreasonably withheld, delayed or conditioned.

 

ARTICLE VI

 

INTENDED TAX TREATMENT OF CERTAIN TRANSACTIONS

 

Section 6.01                             [Reserved]

 

Section 6.02                             Restrictions Relating to the Restructuring.

 

(a)                                 General.  Neither Navy nor Red Lion shall, nor shall Navy or Red Lion permit, any Navy Entity or any Red Lion Entity, respectively, to take or fail to take, as applicable, any action that constitutes a Disqualifying Action described in the definitions of Navy Disqualifying Action and Red Lion Disqualifying Action, respectively.

 

(b)                                 Restrictions.  Prior to the first day following the second anniversary of the Merger (the “Restriction Period”), except as required pursuant to any agreement to which Red Lion or NCPS became bound prior to the Effective Time, Red Lion:

 

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(i)                                     shall, and shall cause its Subsidiaries to continue and cause to be continued the active conduct of the Red Lion Business (within the meaning of Sections 355(a)(1)(C) and 355(b) of the Code and taking into account Section 355(b)(3) of the Code), in all cases as conducted immediately prior to the Restructuring;

 

(ii)                                  shall not, and shall not permit its Subsidiaries that conduct the Red Lion Business to, voluntarily dissolve or liquidate (including any action that is a liquidation for federal income tax purposes);

 

(iii)                               shall not, and shall not permit its Subsidiaries to (or enter into any agreement, understanding, arrangement, or substantial negotiations to (within the meaning of Section 355(e) of the Code and Treasury Regulation Section1.355-7)) engage in any Prohibited Issuance;

 

(iv)                              shall not, and shall not permit its Subsidiaries to (or enter into any agreement, understanding, arrangement, or substantial negotiations to (within the meaning of Section 355(e) of the Code and Treasury Regulation Section 1.355-7)), sell or dispose of any Red Lion Entity in the chain of ownership that includes NCPS (including NCPS); provided, however, that sales or dispositions of any such Red Lion Entity to any Person that is a direct or indirect wholly owned Subsidiary of Red Lion shall be permitted; and

 

(v)                                 shall not, and shall not permit NCPS or any entity in the chain of NCPS ownership to, sell, transfer, or otherwise dispose of or agree to, sell, transfer or otherwise dispose (including in any transaction treated for federal income tax purposes as a sale, transfer or disposition) of assets (including, any shares of capital stock of a Subsidiary) that, in the aggregate, constitute more than 30% of the consolidated gross assets of NCPS.  The foregoing sentence shall not apply to (1) sales, transfers, or dispositions of assets in the Ordinary Course of Business, (2) any cash paid to acquire assets from an unrelated Person in an arm’s-length transaction, (3) any assets transferred to a Person that is disregarded as an entity separate from the transferor for federal income tax purposes, (4) any mandatory or optional repayment (or pre-payment) of any indebtedness of Red Lion or any member of the Red Lion Group or (5) any merger, consolidation or amalgamation of Red Lion or any of its Subsidiaries  with any Person that is a direct or indirect wholly owned Subsidiary of Red Lion.  The percentages of gross assets or consolidated gross assets of NCPS sold, transferred, or otherwise disposed of, shall be based on the fair market value of the gross assets of NCPS owned as of the Closing Date.  For purposes of this Section 6.02(b)(v), a merger of Red Lion or one of its Subsidiaries with and into any Person that is not a wholly owned Subsidiary of Red Lion shall constitute a disposition of all of the assets of Red Lion or such Subsidiary.

 

(c)                                  Notwithstanding the restrictions imposed by Section 6.02(b), during the Restriction Period, Red Lion or a Red Lion Entity may proceed with any of the actions or transactions described therein, if (i) Red Lion shall first have requested Navy to obtain a ruling in accordance with Section 6.03(a) to the effect that such action or transaction will not affect the Intended Tax Treatment of the U.S. Distributions and Navy shall have received such a ruling in form and substance reasonably satisfactory to it, (ii) Red Lion shall have provided to Navy an

 

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Unqualified Tax Opinion in form and substance reasonably satisfactory to Navy, or (iii) Navy shall have waived in writing the requirement to obtain such ruling or opinion.  In determining whether a ruling or opinion is reasonably satisfactory, Navy may consider, among other factors, the appropriateness of any underlying assumptions or representations used as a basis for the ruling or opinion and the views on the substantive merits.

 

(d)                                 Navy Consultation Right. During the Restriction Period, at least thirty (30) days prior to Red Lion or any entity in the chain of NCPS ownership (including NCPS) (i) issuing shares, options, warrants or similar interests (other than any such interests (x) issued, in a transaction, other than a Prohibited Issuance, to which Code Sections 83 or 421(a) or (b) applies, to a person for the performance of services as an employee, director, or independent contractor for Red Lion, Penny or any affiliate, (y) prohibited from being issued under 6.02(b)(iii) or (z) subject to preemptive rights under Section 6.3(b) of the Bye-Laws of Red Lion Ltd.), (ii) merging with an entity not on the Prohibited Entities List, (iii) amending its Memorandum of Association, certificate of incorporation or other organizational documents, or taking any other action affecting its capital stock, in each case in a manner that diminishes Navy’s relative per-share voting rights with respect to Red Lion or such entity, or (iv) agreeing to be acquired by an entity not on the Prohibited Entities List (each, a “Proposed Action”):

 

(i)                                     Red Lion shall provide written notice of such Proposed Action to Navy’s general counsel (the “Navy General Counsel”) describing the steps to be taken pursuant to such Proposed Action and the parties involved in such Proposed Action (the “Proposed Action Notice”);

 

(ii)                                  Red Lion and Navy will cooperate with each other and provide each other such information as Red Lion or Navy, as applicable, reasonably determines to be necessary for it to determine whether the Proposed Action may compromise the Intended Tax Treatment of the U.S. Distributions.

 

(iii)                               The Navy General Counsel shall, within twenty (20) days of receipt of the Proposed Action Notice, respond in writing to Red Lion informing Red Lion that Navy objects to the Proposed Action because Navy has determined in good faith that there is a reasonable risk that the Proposed Action would cause the U.S. Distributions to fail to qualify for the Intended Tax Treatment (such written response, the “Navy Consultation Statement”).  In the event that Navy objects to the Proposed Action pursuant to the preceding sentence, the Navy Consultation Statement shall set forth a detailed explanation specifying the factual basis and legal analysis supporting Navy’s good faith assessment that there is a reasonable risk that the Proposed Action would cause the U.S. Distributions to fail to qualify for the Intended Tax Treatment;

 

(iv)                              Following receipt of the Navy Consultation Statement, Red Lion or the Red Lion Entity shall be permitted to take the Proposed Action.  Notwithstanding anything in this Agreement to the contrary, Red Lion shall indemnify Navy for any Taxes imposed as a result of the U.S. Distributions failing to qualify for the Intended Tax Treatment as a result of Red Lion or a Red Lion Entity taking a Proposed Action if (1) no Tax would have been imposed but for an agreement, understanding, arrangement or substantial negotiations during the two-year period ending on the date of the

 

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Restructuring by persons who were directors, officers or by another person or persons with the implicit or explicit permission of one or more of such officers, directors, or controlling shareholders of Penny or any of its Subsidiaries, or (2) Navy properly objected to such Proposed Action in accordance with the terms of this Section 6.02(d). For the avoidance of doubt, Red Lion shall not be required to indemnify Navy pursuant to this Section 6.02(d)(iv) for any Taxes imposed as a result of the U.S. Distributions failing to qualify for the Intended Tax Treatment as a result of a Proposed Action taken following completion of the consultation process described in this Section 6.02(d) if (i) Navy does not object to such Proposed Action and (ii) either (A) no event or circumstance described in (1) above occurred, or (B) an event or circumstance described in (1) above has occurred, but the Tax would have been imposed even had such event or circumstance not occurred.

 

(e)                                  Tax Reporting.  Each of Navy and Red Lion covenants and agrees that it will not take, and will cause its respective Affiliates to refrain from taking, any position on any Income Tax Return that is inconsistent with the Intended Tax Treatment of the U.S. Distributions.

 

(f)                                   For the avoidance of doubt, notwithstanding the restrictions set forth in this Section 6.02, Red Lion shall be permitted to enter into the Merger and the Merger shall not be considered to be a Red Lion Disqualifying Action, but shall not impact any obligations of the parties under this Agreement.

 

Section 6.03                             Procedures Regarding Opinions and Rulings.

 

(a)                                 If Red Lion notifies Navy that it desires to take one of the actions described in Section 6.02(b) (a “Notified Action”), Navy shall cooperate with Red Lion and use its reasonable best efforts to seek to obtain a ruling from the IRS or an Unqualified Tax Opinion for the purpose of permitting Red Lion to take the Notified Action unless Navy shall have waived the requirement to obtain such ruling or opinion.  If such a ruling is to be sought, Navy shall apply for such ruling and Navy and Red Lion shall jointly control the process of obtaining such ruling.  In no event shall Navy be required to file any ruling request under this Section 6.03(a) unless Red Lion represents that (i) it has read such ruling request, and (ii) all information and representations, if any, relating to any member of the Red Lion Group, contained in such ruling request documents are (subject to any qualifications therein) true, correct and complete.  Red Lion shall reimburse Navy for all reasonable costs and expenses incurred by the Navy Group in obtaining a ruling or Unqualified Tax Opinion requested by Red Lion within ten (10) days after receiving an invoice from Navy therefor.

 

(b)                                 Navy shall have the right to obtain a ruling or an Unqualified Tax Opinion at any time in its sole and absolute discretion.  If Navy determines to obtain such ruling or opinion, Red Lion shall (and shall cause each Red Lion Entity to) cooperate with Navy and take any and all actions reasonably requested by Navy in connection with obtaining such ruling or opinion (including by making any representation or reasonable covenant or providing any materials requested by the IRS or the law firm issuing such opinion); provided, that Red Lion shall not be required to make (or cause a Red Lion Entity to make) any representation or covenant that is untrue or inconsistent with historical facts, or as to future matters or events over

 

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which it has no control.  In connection with obtaining such ruling, Navy shall apply for such ruling and shall have sole and exclusive control over the process of obtaining such ruling.  Navy shall reimburse Red Lion for all reasonable costs and expenses incurred by the Red Lion Group in cooperating with Navy’s efforts to obtain a ruling or Unqualified Tax Opinion within ten (10) days after receiving an invoice from Red Lion therefor.

 

(c)                                  Except as provided in Sections 6.03(a) and (b), following the Effective Time, neither Red Lion nor any Red Lion Entity or Affiliate shall seek any guidance from the IRS or any other Taxing Authority (whether written, verbal or otherwise) at any time concerning the Restructuring (including the impact of any transaction on the Restructuring).

 

ARTICLE VII

 

COOPERATION

 

Section 7.01                             General Cooperation.

 

(a)                                 The Parties shall each cooperate fully (and each shall cause its respective Subsidiaries to cooperate fully) with all reasonable requests in writing (“Information Request”) from another Party hereto, or from an agent, representative or advisor to such Party, in connection with the preparation and filing of Tax Returns (including the preparation of Tax Packages), claims for Refunds, Tax Proceedings, and calculations of amounts required to be paid pursuant to this Agreement, in each case, related or attributable to or arising in connection with Taxes of any of the Parties or their respective Subsidiaries covered by this Agreement and the establishment of any reserve required in connection with any financial reporting (a “Tax Matter”).  Such cooperation shall include the provision of any information reasonably necessary or helpful in connection with a Tax Matter (“Information”) and shall include, without limitation, at each Party’s own cost:

 

(i)                                     the provision of any Tax Returns of the Parties and their respective Subsidiaries, books, records (including information regarding ownership and Tax basis of property), documentation and other information relating to such Tax Returns, including accompanying schedules, related work papers, and documents relating to rulings or other determinations by Taxing Authorities (which, in the case of any Navy Consolidated Return or Mixed Business Income Tax Return, shall be limited to the portion of such Tax Return that relates to Taxes for which Red Lion is responsible pursuant to this Agreement);

 

(ii)                                  the execution of any document (including any power of attorney) in connection with any Tax Proceedings of any of the Parties or their respective Subsidiaries, or the filing of a Tax Return or a Refund claim of the Parties or any of their respective Subsidiaries;

 

(iii)                               the use of the Party’s reasonable best efforts to obtain any documentation in connection with a Tax Matter; and

 

(iv)                              the use of the Party’s reasonable best efforts to obtain any Tax Returns (including accompanying schedules, related work papers, and documents),

 

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documents, books, records or other information in connection with the filing of any Tax Returns of any of the Parties or their Subsidiaries (which, in the case of any Navy Consolidated Return or Mixed Business Income Tax Return, shall be limited to the portion of such Tax Return, documents, books, records or other information that relates to Taxes for which Red Lion is responsible pursuant to this Agreement).

 

Each Party shall make its employees, advisors, and facilities available, without charge, on a reasonable and mutually convenient basis in connection with the foregoing matters.

 

Section 7.02                             Retention of Records.  Navy and Red Lion shall retain or cause to be retained (including by a Navy Entity or Red Lion Entity, as the case may be) all Tax Returns, schedules and work papers, and all material records or other documents relating thereto in their possession, until sixty (60) days after the expiration of the applicable statute of limitations (including any waivers or extensions thereof) of the taxable periods to which such Tax Returns and other documents relate or until the expiration of any additional period that any Party reasonably requests, in writing, with respect to specific material records and documents.  A Party intending to destroy any material records or documents shall provide the other Party with reasonable advance notice and the opportunity to copy or take possession of such records and documents.  The Parties hereto will notify each other in writing of any waivers or extensions of the applicable statute of limitations that may affect the period for which the foregoing records or other documents must be retained.

 

ARTICLE VIII

 

MISCELLANEOUS

 

Section 8.01                             Dispute Resolution.  In the event of any dispute between the Parties as to any matter covered by this Agreement, the parties shall appoint a nationally recognized independent public accounting firm (the “Accounting Firm”) to resolve such dispute.  In this regard, the Accounting Firm shall make determinations with respect to the disputed items based solely on representations made by Navy and Red Lion and their respective representatives, and not by independent review, and shall function only as an expert and not as an arbitrator and shall be required to make a determination in favor of one Party only.  The Parties shall require the Accounting Firm to resolve all disputes no later than thirty (30) days after the submission of such dispute to the Accounting Firm, but in no event later than the Due Date for the payment of Taxes or the filing of the applicable Tax Return, if applicable, and agree that all decisions by the Accounting Firm with respect thereto shall be final and conclusive and binding on the Parties.  The Accounting Firm shall resolve all disputes in a manner consistent with this Agreement and, to the extent not inconsistent with this Agreement, in a manner consistent with the Past Practices of Navy and its Subsidiaries, except as otherwise required by applicable Law.  The Parties shall require the Accounting Firm to render all determinations in writing and to set forth, in reasonable detail, the basis for such determination.  The fees and expenses of the Accounting Firm shall be borne equally by the Parties.

 

Section 8.02                             Tax Sharing Agreements.  All Tax sharing, indemnification and similar agreements, written or unwritten, as between Navy or a Navy Entity, on the one hand, and Red Lion or a Red Lion Entity, on the other (other than this Agreement or any other Transaction

 

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Agreement), shall be or shall have been terminated no later than the Effective Time and, after the Effective Time, none of Navy or a Navy Entity, or Red Lion or a Red Lion Entity shall have any further rights or obligations under any such Tax sharing, indemnification or similar agreement.

 

Section 8.03                             Interest on Late Payments.  With respect to any payment between the Parties pursuant to this Agreement not made by the due date set forth in this Agreement for such payment, the outstanding amount will accrue interest at a rate per annum equal to the rate in effect for underpayments under Section 6621 of the Code from such due date to and including the payment date.

 

Section 8.04                             Survival of Covenants.  Except as otherwise contemplated by this Agreement, all covenants and agreements of the Parties contained in this Agreement shall survive the Effective Time and remain in full force and effect in accordance with their applicable terms.

 

Section 8.05                             Successors.  This Agreement shall be binding on and inure to the benefit of any successor by merger, acquisition of assets, or otherwise, and to any of the parties hereto (including without limitation any successor of a Navy Entity or Red Lion Entity succeeding to the Tax Attributes of either under Section 381 of the Code), to the same extent as if such successor had been an original party to this Agreement.  As of the Effective Time, this Agreement shall be binding on Penny and Penny shall be subject to the obligations and restrictions imposed on Red Lion hereunder, including, without limitation, with respect to the restrictions imposed on Red Lion under Section 6.02.

 

Section 8.06                             Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced under any Law or as a matter of public policy, all other conditions and provisions of this Agreement shall remain in full force and effect.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties to this Agreement 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.

 

Section 8.07                             Entire Agreement.  Except as otherwise expressly provided in this Agreement, this Agreement constitutes the entire agreement of the Parties hereto with respect to the subject matter of this Agreement and supersedes all prior agreements and undertakings, both written and oral, between or on behalf of the Parties hereto with respect to the subject matter of this Agreement.

 

Section 8.08                             Assignment; No Third-Party Beneficiaries.  This Agreement shall not be assigned by any Party without the prior written consent of the other Party hereto, except that each Party may assign (a) any or all of its rights and obligations under this Agreement to any of its Affiliates and (b) any or all of its rights and obligations under this Agreement in connection with a sale or disposition of any of its assets or entities or lines of business; provided, however, that, in each case, no such assignment shall release such Party from any liability or obligation under this Agreement nor change any of the steps in the Plan of Reorganization (as such term is defined in the Separation Agreement).  Except as provided in Article III with respect to indemnified Parties, this Agreement is for the sole benefit of the Parties to this Agreement and their respective Subsidiaries and their permitted successors and assigns and nothing in this

 

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Agreement, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

Section 8.09                             Specific Performance.  In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party who is or is to be thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief of its rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.  The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, may be inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived.  Any requirements for the securing or posting of any bond with such remedy are waived by the Parties to this Agreement.

 

Section 8.10                             Amendment.  No provision of this Agreement may be amended or modified except by a written instrument signed by the Parties to this Agreement.  No waiver by any Party of any provision of this Agreement shall be effective unless explicitly set forth in writing and executed by the Party so waiving.  The waiver by any Party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other subsequent breach.

 

Section 8.11                             Rules of Construction.  Interpretation of this Agreement shall be governed by the following rules of construction:  (a) 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; (b) references to the terms Article, Section, paragraph, clause, Exhibit and Schedule are references to the Articles, Sections, paragraphs, clauses, exhibits and schedules of this Agreement unless otherwise specified; (c) the terms “hereof,” “herein,” “hereby,” “hereto,” and derivative or similar words refer to this entire Agreement, including the Schedules and Exhibits hereto; (d) references to “$” shall mean U.S. dollars; (e) the word “including” and words of similar import when used in this Agreement shall mean “including without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive; (g) references to “written” or “in writing” include in electronic form; (h) provisions shall apply, when appropriate, to successive events and transactions; (i) the headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement; (j) Navy and Red Lion have each participated in the negotiation and drafting of this Agreement and if an ambiguity or question of interpretation should arise, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or burdening either Party by virtue of the authorship of any of the provisions in this Agreement or any interim drafts of this Agreement; and (k) a reference to any Person includes such Person’s successors and permitted assigns.

 

Section 8.12                             Counterparts.  This Agreement may be executed in one or more counterparts each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page to this Agreement by facsimile or portable document format (PDF) shall be as effective as delivery of a manually executed counterpart of any such Agreement.

 

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Section 8.13                             Coordination with the Employee Benefits Agreement.  To the extent any covenants or agreements between the Parties with respect to employee withholding Taxes are set forth in the Employee Benefits Agreement, such Taxes shall be governed exclusively by the Employee Benefits Agreement and not by this Agreement.

 

Section 8.14                             Confidentiality.  The parties hereby agree that the provisions of the Confidentiality Agreement (as defined in the Merger Agreement) shall apply to all information and material furnished by any party or its representatives hereunder (including any Information and any Tax Returns).

 

Section 8.15                             Notices.  Any notice, demand, claim or other communication under this Agreement will be in writing and will be deemed to have been given (a) on delivery if delivered personally; (b) on the date on which delivery thereof is guaranteed by the carrier if delivered by a national courier guaranteeing delivery with an fixed number of days of sending; or (c) on the date of facsimile transmission thereof if delivery is confirmed, but, in each case, only if addressed to the Parties in the following manner at the following addresses or facsimile numbers (or at the other address or other number as a Party may specify by notice to the others):

 

If to:  Navy, to:

 

Nabors Industries Ltd.

Crown House

Second Floor

4 Par-la-Ville Road

Hamilton, HM 08

Bermuda

Attention:  Corporate Secretary

 

with a copy to:

 

Nabors Corporate Services, Inc.

515 West Greens Road, Suite 1200

Houston, Texas 66057

Facsimile:  (281) 775-4319
Attention:  General Counsel

 

with a copy to:

 

Milbank, Tweed, Hadley & McCloy LLP

One Chase Manhattan Plaza

New York, New York 10005

Facsimile:  (212) 530-5219

Attention:  Charles J. Conroy

Scott W. Golenbock

 

If to:  Red Lion, to:

 

C&J Energy Services Ltd.

 

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Canon’s Court

22 Victoria Street

Hamilton HM12

Bermuda

Attention:  Corporate Secretary

 

with a copy to:

 

C&J Energy Services Ltd.
3990 Rogerdale Rd.
Houston, Texas 77042

Facsimile:  (713) 325-5920

Attention:  Theodore Moore

 

with a copy to:

 

Vinson & Elkins LLP
1001 Fannin, Suite 2500
Houston, Texas 77007
Facsimile:  (713) 615-5956

Attention:  Jeffery B. Floyd

Stephen M. Gill

 

Any notice to Navy will be deemed notice to all members of the Navy Group, and any notice to Red Lion will be deemed notice to all members of the Red Lion Group.

 

Section 8.16                             Effective Date.  This Agreement shall become effective as of the Separation Date.

 

[The remainder of this page is intentionally left blank.]

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day and year first above written.

 

 

Nabors Industries Ltd.

 

 

 

 

 

By

/s/ Mark D. Andrews

 

Name: Mark D. Andrews

 

Title: Corporate Secretary

 

 

 

 

 

Nabors Red Lion Limited

 

 

 

 

 

By

/s/ Mark D. Andrews

 

Name: Mark D. Andrews

 

Title: Director

 




Exhibit 10.3

 

EXECUTION VERSION

 

This GLOBAL ALLIANCE AGREEMENT dated March 24, 2015 (the “Agreement”) sets forth the understanding between NABORS RED LION LIMITED (to be renamed C&J ENERGY SERVICES LTD.), a Bermuda exempted company (the “Company”), and NABORS INDUSTRIES LTD., a Bermuda exempted company (“Navy”) with respect to their ongoing business relationship following the completion of the Merger (as defined herein).  For the purposes hereof, “Parties” shall mean jointly the Company and Navy, and “Party” shall mean either one of them.

 

RECITALS

 

WHEREAS, in connection with that certain Merger Agreement, dated June 25, 2014 (the “Merger Agreement”), by and among C&J Energy Services, Inc. (“C&J Energy Services”), Navy, the Company, Nabors CJ Merger Co., a Delaware corporation and CJ Holding Co., a Delaware corporation, as amended from time to time, pursuant to which the parties will effect the merger of a newly formed Delaware corporation with and into C&J Energy Services in which the issued and outstanding shares of Penny Common Stock (as defined in the Merger Agreement) will be converted into the right to receive Red Lion Common Shares (as defined in the Merger Agreement), with C&J Energy Services continuing as the surviving corporation and an indirect wholly owned Subsidiary (as defined in the Merger Agreement) of the Company, all upon the terms and subject to the conditions set forth therein (the “Merger”), with the Company changing its name to “C&J Energy Services Ltd.” pursuant to the Merger, the Parties desire to formally establish their understanding regarding their ongoing commercial relationship as described herein;

 

WHEREAS, following the completion of the Merger and the other transactions contemplated as part of the Red Lion Restructuring (as defined in the Merger Agreement), the Company and its affiliates will engage in the business on a global basis of (a) the production business of Navy prior to the effective date of this Agreement, which is comprised of workover rigs and all ancillary equipment and related service offerings, including fluids hauling, storage and disposal (including saltwater disposal wells), and (b) the completions business of Navy prior to the effective date of this Agreement, which is comprised of completions services including wireline, coil tubing, pressure pumping, hydraulic fracturing, and cementing, in each case in connection with the oil and gas industry (“P&C Services”);

 

WHEREAS, following the completion of the Merger and the other transactions contemplated as part of the Red Lion Restructuring, Navy and its affiliates will engage in the business on a global basis of providing drilling rigs and ancillary services related thereto, (a) including rig operations, hauling, location building, instrumentation optimization software, directional drilling services, performance drilling, redrilling, recompletion, and rig and equipment manufacturing and services in the oil and gas industry but (b) for the purposes of this Agreement, excluding shallow drilling rigs and ancillary services related thereto (the “Drilling Services”);

 

WHEREAS, the Parties desire to formally establish their understanding regarding the cooperation of the Parties in the performance of the P&C Services and the Drilling Services by the Parties (collectively, the “Complementary Services”) with respect to Eligible Projects (as

 



 

defined below) following the date hereof, in each case only to the extent set forth in this Agreement;

 

WHEREAS, the Parties, by acting in accordance with the process set forth in this Agreement to review and discuss economic opportunities as they may arise, intend to use commercially reasonable efforts to promote the applicable Complementary Service of the other Party to existing and potential Clients (as defined below) throughout the world in respect of (a) spot market opportunities, (b) contractual bids, and (c) Navy’s domestic and international service offerings, in each case in an effort to facilitate the introduction of Company technology offerings into multiple markets and to provide Navy with a strategic advantage in its service offerings;

 

NOW THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the Parties agree as follows:

 

ARTICLE I
COOPERATION

 

SECTION 1                               GENERAL PREMISES

 

1.1                               Subject to Section 3, in the event either Party is invited by a Client to participate in an Eligible Project, that Party shall inform the other Party of such invitation, and the Parties shall act in accordance with this Agreement to collaborate with respect to such Eligible Project with the goal of securing the engagement with the Client to provide the Client-requested Complementary Services.

 

Complementary Services Procurement Process” means any procurement process that is conducted by a third party (such third party, a “Client”) where (a) the Client has requested that the Complementary Services be bid together as a single offering by participating bidders, or (b) the Party submitting a bid wishes to include in its bid any of the services included within the other Party’s Complementary Services.

 

Eligible Project” means any Complementary Services Procurement Process where the final anticipated result of such process is that the Client will award to a participating bidder a contract for the selected bidder to provide components of both Complementary Services in an Eligible Country.

 

Eligible Country” means any country other than (a) subject to Section 1.8, Saudi Arabia, (b) Ecuador, (c) Argentina, (d) until the termination or expiration of that certain Cooperation Agreement dated November 26, 2013 (“Mexico Cooperation Agreement”), between C&J Energy Services and Compañía Perforadora México, S.A.P.I. DE C.V. in accordance with its terms, Mexico, and (e) with respect to workover services contracted by Shehtah Nabors LP, Canada.

 

1.2                               With respect to each Eligible Project, the Parties shall share documentation provided by the Client to the extent the Client permits the Party invited to participate in the Eligible Project to share Eligible Project-related documentation and information with such Party’s agents, subcontractors, and strategic partners.  The Parties shall discuss the Eligible

 

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Project and shall act in good faith to develop a bid to provide Complementary Services that comply with all requirements and requests of the Client regarding the requested Complementary Services.  “Primary Bidding Party” means the Party that has been invited to participate in the procurement process for the Eligible Project, or that otherwise has the relationship with the Client that would ordinarily be expected to result in the awarding of the contract to provide Complementary Services.  “Secondary Bidding Party” means, with respect to the applicable Eligible Project, the Party other than the Primary Bidding Party.

 

1.3                               With respect to each Eligible Project, the Parties will discuss in good faith the bidding requirements, the scope and other requirements for the Complementary Services, and options for transaction structuring.  Notwithstanding anything to the contrary in this Agreement, the Primary Bidding Party on the applicable Eligible Project shall in all instances have discretion regarding bid submissions and all other communications with the Client.  Subject to Section 1.7, the Secondary Bidding Party on the applicable Eligible Project shall not (a) except to the extent otherwise agreed by the Primary Bidding Party in its sole discretion, submit a bid for such Eligible Project, and (b) except to the extent otherwise unanimously approved by the Steering Committee (as defined below), communicate with the applicable Client regarding such Eligible Project.  Except to the extent otherwise agreed by the Primary Bidding Party in its sole discretion, the transaction structure to provide the Client the Complementary Services shall be a one-to-one services agreement between the Client (or its designee) and the Primary Bidding Party (or one of its affiliates), with the Secondary Bidding Party acting as a subcontractor of the Primary Bidding Party’s in the provision of the applicable Complementary Services (with such principal-subcontractor relationship to be set forth in a subcontractor services agreement to be agreed by the Parties with respect to the applicable Complementary Services).

 

1.4                               The Primary Bidding Party shall engage the Secondary Bidding Party as part of the bid to provide Complementary Services with respect to an Eligible Project; provided, however, that in the event of any of the following, the Primary Bidding Party on an Eligible Project shall have no obligation to collaborate with the Secondary Bidding Party on such Eligible Project, and the Secondary Bidding Party shall have no right to participate in or directly benefit solely from the Primary Bidding Party’s dealings with the applicable Client regarding the applicable Eligible Project:

 

(a)                                 The Secondary Bidding Party informs the Primary Bidding Party that the Secondary Bidding Party (i) does not wish to provide the applicable Complementary Services or (ii) lacks the authorization or capability to provide the Complementary Services in a manner that complies with all of the Client’s requirements;

 

(b)                                 The Client rejects the Secondary Bidding Party’s involvement in the bidding process or the proposed delivery of the Complementary Services;

 

(c)                                  The Secondary Bidding Party (i) fails to provide, in a timely and complete fashion, information or documentation requested by the Client to assist in the evaluation of the Primary Bidding Party’s proposal, or (ii) fails to participate in any presentation, additional submissions, or other similar activities (to the extent such activities are permitted under law and this Agreement) necessary to secure the contract to provide the applicable Complementary Services;

 

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(d)                                 The Secondary Bidding Party proposes Complementary Services, or any terms and conditions relating thereto (including pricing), that do not comply with every bidding or service requirement established by the Client regarding the applicable Eligible Project;

 

(e)                                  The Secondary Bidding Party is not at that time authorized, or in the process of obtaining authorization (to the extent the Secondary Bidding Party can reasonably demonstrate such pending authorization to be on schedule to be issued prior to the scheduled work start date for the applicable Eligible Project), to provide the applicable Complementary Services in all jurisdictions proposed by the Client;

 

(f)                                   The Secondary Bidding Party is then, or has at any point during the previous six months, been convicted, sanctioned, or investigated for failure to comply with any anti-bribery, anti-corruption, occupational safety, or import/export (or other trade regulation) violation in the applicable country;

 

(g)                                  The Secondary Bidding Party fails to provide a proposal to the Primary Bidding Party to provide the Services, in a manner and on terms that are entirely consistent with the Client’s requests as communicated by the Primary Bidding Party to the Secondary Bidding Party, by the earlier of (i) the date thirty (30) days after the date on which the Primary Bidding Party informs the Secondary Bidding Party of the project and provides substantially accurate bidding requirements for the applicable Eligible Project, and (ii) the date five (5) days prior to the date on which the Primary Bidding Party’s bid is due to be submitted to the Client; provided, however, that in any event, the Secondary Bidding Party shall have at least twenty (20) days to submit such proposal after the Primary Bidding Party requests such proposal; or

 

(h)                                 After receiving the Secondary Bidding Party’s pricing proposal for the applicable Complementary Services, the Primary Bidding Party obtains or receives a bona fide proposal from a third party to provide such Complementary Services for fees that are lower than the fees proposed by the Secondary Bidding Party; provided, however, that prior to the Primary Service Provider’s giving notice to the Secondary Bidding Party that the Secondary Bidding Party will thereafter be excluded from participating in the bidding process for such Complementary Services, the Parties shall follow the following Process:

 

(i)                                     The Primary Bidding Party shall inform the Secondary Bidding Party that another party has proposed lower pricing (without any obligation to disclose what the third party’s pricing proposal is to the extent the Primary Bidding Party is bound by an effective confidentiality obligation to such third party); then

 

(ii)                                  The Secondary Bidding Party shall have up to five (5) business days to submit a revised pricing proposal;

 

(iii)                               In the event the Secondary Bidding Party’s revised pricing proposal remains higher than the third party’s pricing proposal, the Primary Bidding Party shall have no obligation to involve or consider the Secondary Bidding Party regarding the applicable Complementary Services, and the Primary Bidding Party may proceed on that basis; and

 

(iv)                              In the event the Secondary Bidding Party’s revised pricing proposal is lower or equal to the third party’s pricing proposal, the Primary Bidding Party shall

 

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continue to collaborate with the Secondary Bidding Party in accordance with this Agreement unless and until any of the events set forth in this Section 1.4 occur (excluding lower third party pricing provided at a later date).

 

1.5                               In the event either Party desires not to participate in the proposal process for the applicable Eligible Project, such Party shall promptly notify the other Party of such Party’s intent not to participate with respect to such potential Eligible Project.  Upon receipt of such notification, the notified Party may procure or arrange for the applicable Complementary Service of the notifying Party to be performed by a third party without further obligation under this Agreement with respect to the applicable Eligible Project.

 

1.6                               In the event the Primary Bidding Party discloses to the Secondary Bidding Party information concerning any procurement or proposal process and the Secondary Bidding Party desires not to participate in such procurement or proposal process, or in the event the Primary Bidding Party ceases including the Secondary Bidding Party in the bidding process as result of any of the criteria set out in Section 1.4 being met, the Secondary Bidding Party shall not bid or otherwise act on such procurement or proposal process.

 

1.7                               For the avoidance of doubt, nothing in this Agreement shall preclude Navy from providing Drilling Services and heavy workover services in connection with integrated projects currently underway (including extensions thereof) or that arise in the future and for which the Company has not been approved to act on such integrated project as a primary bidder or integrated project manager by, as applicable, (a) the client conducting the procurement process, or (b) the agent or integrated project manager selected by the ultimate client to manage the procurement process associated with such integrated project.

 

1.8                               The Parties shall discuss in good faith economic opportunities in Saudi Arabia to collaborate on projects on terms and conditions to be agreed by the Parties on a case by case basis, in each case as such opportunities may arise.  In each case, the Parties shall discuss in good faith whether the procedures set forth in this Agreement are practicable and appropriate for the applicable opportunity in Saudi Arabia.  Each Party shall have the right to include on the agenda for any Steering Committee meeting discussion items covering (a) potential economic opportunities in Saudi Arabia that have been identified, or (b) potential strategies for the Parties to increase opportunities in Saudi Arabia.  The Steering Committee may issue recommendations relating to Saudi Arabia, but each Party shall not be obligated to comply with those recommendations except to the extent agreed in writing by the Parties.

 

SECTION 2                               TERM; TERMINATION

 

2.1                               This Agreement shall be effective as of the date of its execution, and shall terminate in accordance with the provisions described below.

 

2.2                               This Agreement shall terminate upon the earlier of (and without any further liability for the Parties, except for those liabilities assumed by each Party with respect to third parties):

 

(a)                                 The fifth anniversary of the date hereof; and

 

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(b)                                 The first anniversary of the first date Navy beneficially owns less than 15% of the outstanding common shares of the Company.

 

2.3                               If any contract entered into with any third party remains in effect upon the termination date, this Agreement shall remain in force solely for purpose of completing such outstanding contract and the completion of the corresponding Eligible Project.

 

SECTION 3                               EXCLUSIVITY; NON-COMPETE

 

3.1                               The Parties acknowledge and agree that the obligation to collaborate on an exclusive basis, to the extent set forth herein, is limited to Eligible Projects; provided, however, that:

 

(a)                                 In the event a Secondary Bidding Party competes with the Primary Bidding Party with respect to an Eligible Project for any reason, whether such competition is permitted under or in breach of this Agreement, then upon the Primary Bidding Party’s election, the country in which such Eligible Project is located shall not thereafter be considered an Eligible Country (i) for any Complementary Services Procurement Process conducted in such country, regardless of whether such procurement process is in progress as of, or commences after, the first date of such competition between the Parties, and (ii) for the purposes of Section 3.4;

 

(b)                                 In the event (i) a Party has an obligation under Section 3.4 not to compete in a given country with the other Party in the provision of Complementary Services and (ii) that the non-compete obligation is found to be invalid or unenforceable by the applicable governing authority of such country, such jurisdiction shall not thereafter be considered an Eligible Country with respect to either Party (A) for any Complementary Services Procurement Process conducted by either Party in such jurisdiction, regardless of whether such procurement process is in progress as of, or commences after, the first date of such competition between the Parties, and (B)  the provisions of Sections 3.4 (a), (b) and (c) shall not apply to either Party;

 

(c)                                  In the event a Primary Bidding Party is not obligated to solicit bids from the other Party as a Secondary Bidding Party under this Agreement (as set out in Section 1.4) with respect to an Eligible Project, the Primary Bidding Party may proceed with respect to such Eligible Project, but the Secondary Bidding Party shall not proceed with respect to such Eligible Project;

 

(d)                                 In the event a Party notifies the other that the notifying Party does not intend to proceed with respect to an Eligible Project (as set out in Section 1.5), the Party so notified may proceed with respect to such Eligible Project but the notifying Party shall not proceed with respect to such Eligible Project; and

 

(e)                                  In the event a Primary Bidding Party is in breach of its obligations set forth in Section 1 with respect to such Eligible Project, the other Party may proceed with respect to such Eligible Project to the extent permitted under Section 3.4, without prejudice to its rights under this agreement or otherwise.

 

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3.2                               Except as expressly provided otherwise in this Agreement, nothing herein shall preclude any Party or its parent or Affiliates from engaging in any business or purchasing any property of any kind whatsoever.

 

Affiliate” means, with respect to any individual or entity, any other individual or entity, directly or indirectly, controlling, controlled by, or under common control with, such individual or entity, where “control,” as used with respect to any individual or entity, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such individual or entity, whether through the ownership of voting securities, by contract or otherwise.  Navy and the Company shall be deemed not to be Affiliates for purposes of this Agreement.

 

3.3

 

(a)                                 In no event shall either Party be prohibited under this Section 3 from an acquisition of a business or assets for any third party if such business or assets include an operating segment performing the other Party’s applicable Complementary Service, so long as (a) the revenues attributed to such operating segment do not constitute 25% or more of the aggregate revenues attributed to the business or assets so being acquired during the twelve months preceding such acquisition and (b) the acquiring Party (i) acts in good faith to divest the competitive portion of the acquired business or (ii) causes the acquired business not to compete with the other Party with respect to Eligible Project procurement processes that commence after the closing date of the acquisition of the business.

 

(b)                                 In no event shall either Party be prohibited under this Section 3 from conducting coiled tubing drilling operations.

 

3.4                               Non-Compete.

 

(a)                                 Subject to Section 3.3, the Company shall not provide or offer, directly or indirectly, Drilling Services, other than directional drilling services currently developed or currently in development by the Company anywhere in the world except in collaboration with Navy as set out in this Agreement.

 

(b)                                 Subject to Section 3.3, Navy shall not provide or offer, directly or indirectly, P&C Services on land anywhere in the world except in collaboration with the Company as set out in this Agreement; provided, however, that the forgoing restriction on Navy’s activities shall not apply regarding any of the following: (i) Saudi Arabia; (ii) Argentina; (iii) Ecuador; (iv) until the termination or expiration of the Mexico Cooperation Agreement, Mexico; (v) heavy workover services performed with drilling rigs; and (vi) with respect to workover services contracted by Shehtah Nabors LP, Canada.

 

(c)                                  Each Party in the role of Secondary Bidding Party regarding the applicable Eligible Project shall not bid or offer to provide Complementary Services regarding such Eligible Project except in collaboration with the Primary Bidding Party, except as otherwise set forth in this Agreement.

 

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3.5                               The Parties recognize and accept that monetary damages may not be a sufficient remedy for any breach of this Section 3; therefore, the non-breaching Party shall be entitled to pursue equitable and injunctive relief and all other remedies to the maximum extent available at law or equity.

 

ARTICLE II
DEVELOPMENT OF BUSINESS

 

SECTION 4                               STEERING COMMITTEE

 

4.1                               The Parties agree to create a steering committee formed by four (4) proprietary members, as follows:  two (2) members appointed by the Company, and two (2) members appointed by Navy, each of which shall be an officer of the applicable Party or one of its subsidiaries (the “Steering Committee”).

 

4.2                               The Steering Committee shall meet at regular intervals, at least once a month, or when otherwise requested by either Party, in order to resolve matters arising under this Agreement or for purposes otherwise addressed in this Section 4.  The Steering Committee may gather in person, by video conference, telephone conference or any other means which the Parties may agree upon.  In any event the members of the Steering Committee or its representatives may proceed to have day to day communications by any means each Party deems appropriate in order to address any business matters pertaining to this Section 4.

 

4.3                               The Parties hereby agree that the Steering Committee shall be initially formed as follows:

 

Company:

 

(i)                                    Donald Gawick
                                                Position:                         Chief Operating Officer
                                                Address:                         3990 Rogerdale
                                                                                                                        Houston, TX 77042
                                                Phone:                                  (713) 325-5973
                                                Email:                                    dgawick@cjenergy.com

 

(ii)                                James H. Prestidge, Jr.
                                                Position:                         Chief Strategy Officer
                                                Address:                         3990 Rogerdale
                                                                                                                        Houston, TX 77042
                                                Phone:                                  (713) 325-5974
                                                Email:                                    jprestidge@cjenergy.com

 

8



 

Navy:

 

(i)                                     Siggi Meissner
                                                Position:                         President, Nabors International Management Limited
                                                Address:                         Crown House Second Floor

4 Par-La-Ville Road

Hamilton, Hm08

Bermuda

Phone:                                  (441) 292-1510
                                                Email:                                    Siggi.Meissner@nabors.com

 

(ii)                                  Ernie Nelson

Position:                         Vice President, Nabors Drilling USA Inc.

Address:                         515 West Greens Road, Suite 1000

Houston, Texas 66057

Phone:                                  (281) 874-0035
                                                Email:                                    Ernie.Nelson@nabors.com

 

4.4                               There may be a corresponding number of alternate members of the Steering Committee to substitute for the proprietary members in the event of the absence or inability of the proprietary members.  The Parties may invite other individuals to attend on a need or convenient basis.  The Parties are free to designate such alternate members.  Likewise, either Party may at any time and from time to time change any of its representatives in the Steering Committee by written notice to the other Party.

 

4.5                               The Steering Committee shall serve as a forum for discussion of (a) disputes arising under this Agreement, (b) business capabilities and developments, (c) bidding processes and optimizing interactions to improve bidding results, and (d) evaluation and implementation of spot-market opportunities to provide the Complementary Services, either on an individual or combined basis.

 

SECTION 5                               RELATIONSHIP OF THE PARTIES

 

5.1                               A representative of the Primary Bidding Party shall act as the sole representative of the Parties in any Complementary Services Procurement Process relating to the applicable Eligible Project.

 

5.2                               This Agreement shall not be interpreted to create a company, partnership or other legal entity among the Parties or to impose any corporate or partnership obligation or liability on any Party.  Additionally, no Party shall be deemed for any purpose to be the employee, agent, legal representative, partner or joint venturer of the other Party, nor shall any Party have the authority to act on behalf of or bind any other Party.  To the extent that reference herein is made to a consortium between Parties, such references shall be construed to constitute a contractual agreement to work together as independent entities, and not as a joint venture, partnership or other combined legal entity.

 

9



 

5.3                               Regarding the participation in any upcoming private or public bid or other governmental procurement procedure for an Eligible Project with respect to which that Parties are collaborating in accordance with this Agreement, the Parties assume herein the following commitments:

 

(a)                                 Each Party shall be responsible for the accuracy and completeness of the information provided by that Party in connection with any procurement procedure.

 

(b)                                 Each Party shall act in good faith to offer terms and conditions (including pricing) sufficient be the successful bidder for the applicable Eligible Project, in each case taking into consideration each Party’s operational capabilities and profitability.

 

SECTION 6                               CONFIDENTIAL INFORMATION; PUBLIC RELEASES

 

6.1                               Each Party agrees, and hereby agrees to cause its Affiliates not to disclose any (a) non-public financial, technical, or operating information (including those related to processes and techniques associated with performance of P&C Services and Drilling Services), (b) information relating to any Eligible Project or any other project or bidding process discussed by the Parties as a potential Eligible Project, and (c) other information designated as confidential (collectively, the “Confidential Information”), in each case as provided by the other Party or its Affiliates in connection with this Agreement.  Each Party in its role as a Secondary Bidding Party shall treat as Confidential Information all information relating to any Eligible Project or any other project or bidding process discussed by the Parties as a potential Eligible Project.  Such confidentiality obligation shall not apply (i) to the extent disclosure of an item of information is required by applicable law, rule or regulation, provided that the disclosing Party complies with Section 6.4, (ii) to any such information that is publicly available, (iii) to any such information that a Party has received from a third party wherein the Party is under no obligation of confidentiality to the third party with respect to such information, or (iv) with respect to the Company only, to any such Confidential Information that was assigned to the Company by Navy as a result of the transactions contemplated by the Merger Agreement or the Separation Agreement (as defined in the Merger Agreement).

 

6.2                               Neither Party shall use any Confidential Information provided by the other Party or its Affiliates, as applicable, for any purpose other than the performance of the relevant contracts entered into with third parties.

 

6.3                               The obligations in this Section 6 shall continue for a period of 5 (five) years after termination of this Agreement.

 

6.4                               Before any Party hereto, or any of its Affiliates or agents, releases any information concerning this Agreement, which release is intended for or would reasonably be expected to result in a dissemination thereof, it shall obtain the other Party’s written consent to the release thereof, unless (a) such information is otherwise publicly available, or (b) the release thereof is required by any law or order to which such party is bound or subject, or in connection with any litigation pertaining to the performance of this agreement, involving the other party; provided, however, in any case, the releasing party shall promptly notify the other Party prior to the release of the information, and that such other Party shall have the right to make a release on

 

10



 

its own name and require that the releases be joint and/or simultaneous, to which purpose the Parties shall make the necessary arrangements.  The Party requesting that the releases be joint and/or simultaneous shall respond promptly to the releasing party so as not to delay the release of information.

 

6.5          Notwithstanding the foregoing, the Primary Bidding Party is hereby authorized to include in any submission and thus, inform to third parties, any and all information provided in the corresponding technical and economic proposals by the Secondary Bidding Party with respect to the applicable Eligible Project, including the information related to its prices, operations, personnel, and related matters to the extent required to submit a bid that complies with a Client’s requirements for an Eligible Project, and to engage in discussions and respond to Client queries in connection with the procurement process for such Eligible Project.

 

SECTION 7          COMPLIANCE WITH LAW

 

7.1          Each Party agrees to comply with any and all laws, rules, regulations, decrees, legislative enactments, administrative decisions, judicial orders and other directions of governmental or judicial authorities applicable to such Party.

 

7.2          Each Party warrants and represents to the other Party and covenants with the other Party, that it has not made and will not on behalf of the Parties make any offer of, payment of or promise to pay, or gift of or promise to give, any money or anything of value, directly or indirectly, through one or more intermediaries or otherwise, to (a) any official or employee of any government or agency or subdivision thereof for the purpose of influencing any official act or decision of such official or employee or inducing him to use his influence to affect any act or decision of such government, agency or subdivision, or (b) any political party or party official or candidate for political office for the purpose of influencing any official act or decision of such party, official or candidate or inducing such party, official or candidate to use its influence to affect any act or decision of a government or agency or subdivision thereof, in the case of both (a) and (b), in order to assist the Parties to obtain or retain business.

 

7.3          Each of the Company and Navy represents, warrants and undertakes that:

 

(a)           it shall not accept or give any commission or gift or other financial benefit or inducement from or to any person or party in connection with an Eligible Project or in any other dealing on behalf of the Company or Navy, as the case may be, and shall immediately inform the other Party of the details of any such commission, gift, benefit or inducement which may be offered;

 

(b)           it is familiar with and understands the provisions and requirements of the United States Foreign Corrupt Practices Act of 1977, as amended, and the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, as well as applicable foreign anti-corruption laws and all other anti-corruption and/or anti-bribery laws, regulations and requirements of any jurisdiction applicable to the Company or Navy (whether by virtue of either Party’s jurisdiction of incorporation or conduct of business operations) (collectively, the “Applicable Anti-Corruption Laws”);

 

11



 

(c)           is in compliance, and at all times during the term of this Agreement will comply, with all Applicable Anti-Corruption Laws and the Policy.  For the purposes of this clause, “Policy” means the policies, rules and procedures (in each case as amended from time to time) adopted by a Party to ensure that the other Party and its officers, directors, employees, agents, contractors and sub-contractors comply with Applicable Anti-Corruption Laws, and, the policies, rules and procedures adopted by the other Party;

 

(d)           neither the Company nor Navy, as applicable, or any other person operating on its behalf, has made, offered, authorized or promised to make any payment, gift, promise or other advantage (including any fee, gift, sample, travel expense, entertainment, service, equipment, loan, debt forgiveness, donation, grant or other payment or support in cash or in kind), directly or indirectly, to any officer or employee of a government, a public international organization or any department or agency thereof, or to any government instrumentality (including any state-owned, -operated, and -controlled entities) or any person acting in an official capacity on behalf of any of the same (“Government Official”) (i) for the purpose of obtaining or retaining business or favorable government action, influencing any official act or decision of a Government Official or inducing such Government Official to use his or her influence to affect or influence any governmental act or decision for the Company or itself/ himself, or (ii) for any purpose that is otherwise illegal or improper under any Applicable Anti-Corruption Law (any such payment, gift, promise or other advantage, a “Prohibited Payment”);

 

(e)           it shall, at all times during the term of this Agreement comply with the Policy (as may be amended or restated from time to time) and all Applicable Anti-Corruption Laws (including any future anti-corruption or anti-bribery laws, regulations or requirements of any jurisdiction applicable to the Company or Navy);

 

(f)            it shall not (i) make, offer, authorize or promise to make any Prohibited Payment, directly or indirectly, to any Government Official, or (ii) take any action or engage in any activity that could reasonably be expected to expose the Company or Navy (or any of their respective Affiliates) to any risk of criminal or civil penalties under any Applicable Anti-Corruption Law (including any future anti-corruption or anti-bribery laws, regulations or requirements of any jurisdiction applicable to the Company or Navy);

 

(g)           it shall maintain books and records that fairly and accurately reflect all of its transactions relating to any Eligible Project and shall retain the books and records relating to this cooperation structure for at least five (5) years after the date the this Agreement expires or is terminated.  The Parties shall have the right to audit such books and records for any reason at any time, and from time to time, prior to the date that is two (2) years after the date this Agreement is terminated.  The Parties shall assist and fully cooperate with any such audit, including making documents and personnel available to the other Party; and

 

(h)           in addition to the audit rights set forth above, each of the Company and Navy agrees to be subject to and cooperate fully with a Client’s completion of appropriate (initial and periodic) due diligence with respect to the applicable Party’s reputation and history of compliance with the Applicable Anti-Corruption Laws, in each case, to the extent the Company or Navy, as applicable, has provided the applicable Complementary Service in the applicable Eligible Country prior to the date of such due diligence.

 

12



 

SECTION 8          INTELLECTUAL PROPERTY

 

8.1          Navy and its Affiliates shall retain all right, title and interest in and to their intellectual property and any and all improvements, modifications and derivative works thereof (collectively, “Navy IP”).  In the event that any intellectual property is created by Navy (or any of its Affiliates or service providers), all right, title and interest throughout the world in and to all such intellectual property shall vest solely in Navy unconditionally and immediately upon such intellectual property having been developed, written or produced, unless the Parties agree otherwise in writing.

 

8.2          The Company and its Affiliates shall retain all right, title and interest in and to their intellectual property and any and all improvements, modifications and derivative works thereof (collectively, “Company IP”).  In the event that any intellectual property is created by a Company (or any of its Affiliates or service providers), all right, title and interest throughout the world in and to all such intellectual property shall vest solely in the Company unconditionally and immediately upon such intellectual property having been developed, written or produced, unless the Parties agree otherwise in writing.

 

8.3          No license or right, express or implied, is granted under this Agreement by Navy, the Company or their respective Affiliates in or to their respective intellectual property, except that, solely to the extent required for performance of the applicable Party’s obligations under this Agreement, each of Navy and the Company, for itself and on behalf of their respective Affiliates, hereby grants to the other (and their respective Affiliates) a non-exclusive, revocable, non-transferable license during the term of this Agreement to such intellectual property that is provided by the granting Party to the other Party in connection with this Agreement, but only to the extent and for the duration necessary (and in no case after the expiration of the term of this Agreement) for each Party acting in the role of a Primary Bidding Party to present the Secondary Bidding Party’s capabilities and proposals to the applicable potential Client.

 

SECTION 9          HEALTH, SAFETY AND ENVIRONMENTAL STANDARDS

 

9.1          The Parties agree and acknowledge that health, safety and environmental compliance (“HSE”) are vital components of their operations and shall follow the generally accepted industry HSE standards.  Where a Primary Bidding Party has been awarded a contract by a Client on an Eligible Project, and the Secondary Bidding Party has executed a subcontract with the Primary Bidding Party to provide Complementary Services in connection with such Eligible Project, each Party shall comply with the applicable Client’s HSE standard applicable to the operations of such Client’s suppliers on such Eligible Project.

 

SECTION 10        AMENDMENTS

 

10.1        Any amendment to the terms of this Agreement shall only be effective if made in writing and signed by both Parties.  Once an Amendment Agreement is made, it shall be deemed incorporated as of its effective date with respect to all future contracts entered into by the Parties with any third party, unless expressly stated to the contrary therein.

 

13



 

SECTION 11        ASSIGNMENT

 

11.1        The obligations of the Parties under this Agreement shall inure to their respective successors and assigns; provided that neither Party shall have the right to assign its rights or obligations (directly or through a sale of any entity) without the consent of the other Party.  An assignment without such prior written consent shall be deemed null and void.

 

SECTION 12        NOTICES

 

12.1        Any notice hereunder shall be in writing and shall be delivered by (a) personal delivery, (b) courier service, (c) certified or registered mail, postage prepaid, or (d) by e-mail.  Any such notice shall be deemed given upon its receipt at the following address (or, in the case of emails upon confirmation of receipt):

 

If to the Company:

C&J Energy Services Ltd.

 

Canon’s Court

 

22 Victoria Street

 

Hamilton HM12

 

Bermuda

 

Attention: Corporate Secretary

 

 

Cc.

C&J Energy Services Ltd.

 

3990 Rogerdale

 

Houston, TX 77042

 

Attention: Mr. Theodore R. Moore

 

Email: tmoore@cjenergy.com

 

 

Cc.

Mr. Stephen M. Gill

 

Vinson & Elkins L.L.P.

 

1001 Fannin, Suite 2500

 

Houston, TX 77002

 

Email: SGill@velaw.com

 

 

If to Navy:

Nabors Industries Ltd.

 

Crown House, Second Floor

 

4 Par-la-Ville Road

 

Hamilton, HM 08

 

Bermuda

 

Attention: Corporate Secretary

 

 

Cc.

Nabors Corporate Services, Inc.

 

515 West Greens Road, Suite 1200

 

Houston, Texas 66057

 

Attention: General Counsel

 

Email: Laura.Doerre@nabors.com

 

 

Cc.

Milbank, Tweed, Hadley & McCloy LLP

 

One Chase Manhattan Plaza

 

New York, New York 10005

 

14



 

 

Attention:

Charles J. Conroy

 

 

Nicholas Smith

 

Email:

CConroy@milbank.com

 

 

NSmith@milbank.com

 

12.2        By notice a Party may change its address for notice.

 

SECTION 13        GOVERNING LAW; DISPUTE RESOLUTION

 

13.1        This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York, United States of America, without regard to New York’s conflict of law provisions.

 

13.2        The Parties agree that any ancillary, service or operational contract that is required to perform the Complementary Services in terms of an Eligible Project may be governed by foreign law or by any other law the Parties agree thereto.

 

13.3        In the event of any dispute or difference arising out of or related to this Agreement, the senior management of the Parties shall consult and negotiate with each other in good faith.

 

13.4        If within a period of thirty (30) calendar days after a Party has given written notice to the other Party that a dispute or difference exists — and the Parties have not mutually agreed in writing to a settlement of such dispute or difference — then the dispute or difference shall be finally settled by binding arbitration administered by the American Arbitration Association (“AAA”) in accordance with its Commercial Arbitration Rules.  The place of arbitration shall be Houston, Texas.  The arbitration proceedings shall be conducted before one arbitrator.  Initially, Navy and the Company shall act in good faith to agree upon an arbitrator.  If the Parties do not agree upon an arbitrator within fifteen (15) days from the date of the written request for arbitration, the AAA shall select the arbitrator.  The arbitrator may award to the prevailing Party, if any, as determined by the arbitrator, damages and some or all of the prevailing Party’s costs and fees, which shall include all reasonable pre-award expenses of the arbitration, including the arbitrator’s fees, administrative fees (including any filing and case service fees), travel expenses, out-of-pocket expenses such as copying and telephone, court costs, witness fees, and attorneys’ fees; provided, however, for clarity, that the arbitrator will have no authority to award damages or losses of any nature prohibited by this Agreement.  The arbitration shall be conducted pursuant to the Federal Arbitration Act, Title 9 of the U.S. Code.  Judgment on the award may be entered in any federal court located in Houston.

 

SECTION 14        INDEMNIFICATION; DAMAGES AND LIMITATION OF LIABILITY

 

14.1        INDEMNIFICATION.

 

(a)           Indemnification by Navy.  Navy shall defend, indemnify and hold harmless the Company, its Affiliates, officers, directors, employees, successors and permitted assigns from and against any loss, liability (including settlements, judgments, fines and penalties) or costs (including reasonable attorney fees, court costs and other litigation expenses) relating to any action, suit or proceeding (whether civil, criminal, administrative, arbitral,

 

15



 

investigative or otherwise) brought by a third party against the Company (including by any governmental agency):

 

(i)            alleging that the Navy IP (and use thereof) infringes or misappropriates, or causes the infringement or misappropriation of, the copyright, trademark, patent, trade secrets or other intellectual property rights of a third party, except to the extent such infringement or misappropriation is a direct result of: (A) the Company’s use of the Navy IP in contravention of Navy’s instructions regarding the use thereof; (B) modifications to Navy IP made by the Company that are not made in accordance with the specifications, or with the approval, of Navy; (C) the Company not complying with instructions or designs provided by Navy with respect to the Navy IP; or (D) any combination of the Navy IP by the Company with products or materials other than those provided, specified or authorized by Navy;

 

(ii)           relating to breach of Section 6 (Confidentiality) by Navy; or

 

(iii)          relating to breach of Section 7 (Compliance with Law) by Navy.

 

Navy shall indemnify the Company from any costs incurred in connection with enforcing this Section 14.1(a).

 

(b)           Indemnification by the Company.  The Company shall defend, indemnify and hold harmless Navy, its Affiliates, officers, directors, employees, successors and permitted assigns from and against any loss, liability (including settlements, judgments, fines and penalties) or costs (including reasonable attorney fees, court costs and other litigation expenses) relating to any action, suit or proceeding (whether civil, criminal, administrative, arbitral, investigative or otherwise) brought by a third party against Navy (including by any governmental agency):

 

(i)            alleging that the Company IP (and use thereof) infringes or misappropriates, or causes the infringement or misappropriation of, the copyright, trademark, patent, trade secrets or other intellectual property rights of a third party, except to the extent such infringement or misappropriation is a direct result of: (A) Navy’s use of the Company IP in contravention of the Company’s instructions regarding the use thereof; (B) modifications to Company IP made by Navy that are not made in accordance with the specifications, or with the approval, of the Company; (C) Navy not complying with instructions or designs provided by the Company with respect to the Company IP; or (D) any combination of the Company IP by Navy with products or materials other than those provided, specified or authorized by the Company;

 

(ii)           relating to breach of Section 6 (Confidentiality) by the Company; or

 

(iii)          relating to breach of Section 7 (Compliance with Law) by the Company.

 

The Company shall indemnify Navy from any costs incurred in connection with enforcing this Section 14.1(b).

 

16



 

(c)           Indemnification Procedures.  If any claim is commenced against a Party entitled to indemnification under Section 14.1(a) or Section 14.1(b) (the “Indemnified Party”), prompt notice thereof shall be given by the Indemnified Party to the other Party (the “Indemnifying Party”); provided, however, that failure by the Indemnified Party to provide prompt notice to the Indemnifying Party pursuant to this Section 14.1 shall not affect the right of the Indemnified Party to be indemnified hereunder except to the extent the Indemnifying Party is prejudiced by such delay.  At the Indemnifying Party’s cost: (i) the Indemnifying Party may immediately take control of the defense of such claim and engage attorneys acceptable to the Indemnified Party to defend such claim; and (ii) the Indemnified Party shall cooperate with the Indemnifying Party (and its attorneys) in the defense of such claim.  The Indemnified Party may, at its own cost, participate (through its attorneys or otherwise) in such defense.  No settlement of a claim that involves a remedy other than the payment of money by the Indemnifying Party shall be entered into without the consent of the Indemnified Party.  If the Indemnifying Party does not assume control over the defense of a claim as provided in this Section 14.1(c), the Indemnified Party may engage attorneys acceptable to the Indemnifying Party and defend the claim in such manner as it may deem appropriate, at the cost of the Indemnifying Party; provided, however, that in any such event, the Indemnified Party shall not, without the Indemnifying Party’s consent (which it may withhold in its sole discretion), enter into a settlement regarding the applicable claim that requires the Indemnifying Party to admit fault or perform any action other than the payment of money.

 

(d)           Contribution.  If any claim (whether brought against one or both Parties) entitles each Party to indemnification from the other under Section 14.1(a) or Section 14.1(b), then the Parties shall allocate between themselves any loss, liability or costs arising out of or relating to such claim according to each Party’s relative share of liability.  Contributory negligence, or any analogous principle, shall not be a defense to any allocation of loss, liability or costs pursuant to this Section 14.1(d).

 

14.2        DAMAGES AND LIMITATION OF LIABILITY.

 

(a)           Direct Damages.  Each of the Parties shall be liable to the other for any direct damages arising out of or relating to its performance or failure to perform under this Agreement.

 

(b)           Consequential Damages.  Neither Party shall be liable to the other Party for, nor shall the measure of damages include, any special, indirect, incidental, consequential or exemplary damages (including lost profits, lost savings, loss of reputation, and loss of opportunity included in such damages) arising out of or relating to its performance or failure to perform under this Agreement; provided, however, that (i) a Party shall be liable to the other Party for any consequential damages that result directly from willful misconduct or gross negligence of the liable Party, and (ii) to the extent a Party is nonetheless determined to be entitled to recover such special, indirect, incidental, consequential or exemplary damages, such damages may be recovered only to the extent the Party claiming such damages has actually paid amounts to a third party as part of a judgment or settlement.

 

17



 

(c)           No Limitation on Obligation to Indemnify.  The limitations or exculpations of liability set forth in Section 14.2(b) shall not apply with respect to an Indemnifying Party’s obligation to indemnify the Indemnified Party as set out in Section 14.1.

 

(d)           Liability relating to Complementary Service Delivery.  Liability between the Parties with respect to each Party’s performance of the applicable Complementary Services relating to an Eligible Project, including knock-for-knock liability for oilfield operations, shall be set forth the subcontract to be executed between the Primary Bidding Party and the Secondary Bidding Party with respect to the applicable Eligible Project.

 

SECTION 15        ADDITIONAL SUPPORT

 

15.1        If any potential Eligible Project will require the prequalification of either or both Parties as a result of the jurisdiction in which such Eligible Project is to be performed, each Party agrees to consider in good faith opportunities for each Party to use commercially reasonable efforts to assist the other Party in obtaining the necessary prequalification in the applicable jurisdiction so as to permit participation in such Eligible Project and future Eligible Projects, including, in each case as appropriate in the circumstances and as agreed by the Parties, through the utilization of such Party’s existing relationships, knowledge of the prequalification process, oral or written support in favor of such Party (as requested by the applicable prequalification agency) and related actions.

 

SECTION 16        OTHER PROVISIONS

 

16.1        This Agreement and the ancillary documents referenced herein contain the entire agreement among the Parties and their Affiliates with respect to their relationship as set forth in this Agreement, and supersede all prior agreements and understandings of the Parties in this matter.

 

16.2        Should one or more provisions of this Agreement be held invalid, illegal, void or unenforceable, then (a) the application of such provision in circumstances other than those as to which it is determined to be invalid, unlawful, void or unenforceable, shall not be impaired or otherwise affected, and (b) the validity, legality and enforceability of the remaining provisions of this Agreement shall not be impaired or otherwise affected and shall be construed to give effect to the Parties’ intent consistent with the spirit of the affected provisions in consideration of the overall agreement between the Parties, and applicable laws.

 

16.3        No delay on the part of a Party in exercising any rights hereunder shall operate as a waiver of such rights, except that with respect to a Party’s failure to respond, or delay in responding within five business days, regarding participation in, and in the provision of information relating to, an Eligible Project (or potential Eligible Project), such failure or delay shall result in the irrevocable waiver of such Party’s rights as a Secondary Bidding Party with respect to such Eligible Project.

 

16.4        This Agreement may be executed in multiple counterparts, each of which shall be deemed an original but all of which taken together shall constitute one and the same instrument.  Each Party shall be entitled to rely on the delivery of executed facsimile copies of counterpart execution pages of this Agreement.

 

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16.5        If there is any inconsistency or conflict between this Agreement and the relevant contracts with third parties or any other documents, the provisions of this Agreement shall prevail as between the Parties.  The Parties hereby agree to exercise their rights and obligations under any document solely on a basis consistent with this Agreement.

 

16.6        The Company shall not agree (and shall cause C&J Energy Services not to agree) to any amendment or modification to the Mexico Cooperation Agreement (as amended by Amendment No. 1 thereto) that would extend or delay the expiration date of the Mexico Cooperation Agreement, or directly impair the ability of Navy to perform Drilling Services in Mexico.

 

(Rest of the page is intentionally left in blank)

 

19



 

IN WITNESS WHEREOF the Parties have executed this Agreement effective as of March 24, 2015.

 

C&J ENERGY SERVICES LTD.

 

NABORS INDUSTRIES LTD.

 

 

 

 

 

 

By:

/s/ Mark D. Andrews

 

By:

/s/ Mark D. Andrews

Name: Mark D. Andrews

 

Name: Mark D. Andrews

Title: Director

 

Title: Corporate Secretary

 




Exhibit 10.4

 

EXECUTION VERSION

 

REGISTRATION RIGHTS AGREEMENT

 

BY AND AMONG

 

NABORS INDUSTRIES LTD.

 

AND

 

NABORS RED LION LIMITED

 

Dated as of March 24, 2015

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

 

ARTICLE I.

  DEFINITIONS

 

1

 

 

 

 

 

DEFINED TERMS

 

1

 

OTHER INTERPRETIVE PROVISIONS

 

5

 

 

 

 

ARTICLE II.

  REGISTRATION RIGHTS

 

6

 

 

 

 

 

SHELF REGISTRATION

 

6

 

PIGGYBACK RIGHTS

 

8

 

BLACK-OUT PERIODS

 

10

 

REGISTRATION PROCEDURES

 

12

 

UNDERWRITTEN OFFERINGS

 

17

 

REGISTRATION EXPENSES

 

18

 

INDEMNIFICATION

 

18

 

RULES 144 AND 144A AND REGULATION S; FORM S-3

 

22

 

LIMITATION ON REGISTRATIONS AND UNDERWRITTEN OFFERINGS

 

22

 

SECTION 16 MATTERS

 

23

 

 

 

 

ARTICLE III.

  MISCELLANEOUS

 

23

 

 

 

 

 

TERMINATION

 

23

 

INJUNCTIVE RELIEF

 

23

 

ATTORNEYS’ FEES

 

23

 

NOTICES

 

24

 

AMENDMENT

 

26

 

SUCCESSORS, ASSIGNS AND TRANSFEREES

 

26

 

BINDING EFFECT

 

26

 

THIRD PARTY BENEFICIARIES

 

26

 

GOVERNING LAW; JURISDICTION

 

26

 

WAIVER OF JURY TRIAL

 

27

 

SEVERABILITY

 

27

 

COUNTERPARTS

 

27

 

HEADINGS

 

27

 

JOINDER

 

27

 

EXISTING REGISTRATION STATEMENTS

 

28

 

OTHER ACTIVITIES

 

28

 

TIME OF THE ESSENCE

 

28

 

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REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is made and entered into as of March 24, 2015, by and between Nabors Industries Ltd., a Bermuda exempted company (“Navy”), and Nabors Red Lion Limited, a Bermuda exempted company (which will be renamed “C&J Energy Services Ltd.” at the Effective Time (as defined in the Merger Agreement (as defined below)), including any of its successors by merger, acquisition, reorganization, conversion or otherwise, the “Company”).

 

WITNESSETH:

 

WHEREAS, Navy, the Company, C&J Energy Services, Inc. a Delaware corporation (“Penny”), Nabors CJ Merger Co., a Delaware corporation, and CJ Holding Co., a Delaware corporation, are parties to an Agreement and Plan of Merger, dated as of June 25, 2014, as amended from time to time (the “Merger Agreement”);

 

WHEREAS, concurrently with the execution of the Merger Agreement, Navy and the Company entered into a Separation Agreement, dated as of June 25, 2014, as amended from time to time (the “Separation Agreement”), pursuant to which, inter alia, the Company will issue Company Shares (as defined below) to Navy; and

 

WHEREAS, in connection with the consummation of the transactions contemplated by the Merger Agreement, and pursuant to the terms of the Merger Agreement, the parties desire to enter into this Agreement in order to provide for certain registration rights as set forth below.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual promises, covenants and agreements of the parties hereto, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I.

 

DEFINITIONS

 

SECTION 1.01                                      Defined Terms.  As used in this Agreement, the following terms shall have the following meanings:

 

Adverse Disclosure” means public disclosure of material, non-public information that, in the good faith judgment of the Board, after consultation with outside counsel to the Company, (i) would be required to be made in any Registration Statement or report filed with the SEC by the Company so that such Registration Statement or report would not be materially misleading and would not be required to be made at such time but for the filing of such Registration Statement or report; and (ii) the Company has a business purpose for not disclosing such information publicly.

 

Affiliate” has the meaning specified in Rule 12b-2 under the Exchange Act; provided, that no security holder of the Company shall be deemed an Affiliate of any other security holder

 



 

of the Company solely by reason of an investment in the Company.  The term “Affiliated” has a correlative meaning.

 

Agreement” has the meaning set forth in the preamble.

 

Automatic Shelf Registration Statement” means a registration statement filed on Form S-3 by a WKSI pursuant to General Instruction I.D. or I.C. (or other successor or appropriate instruction) of such form.

 

Board” means the board of directors of the Company.

 

Business Day” means any day other than a Saturday, Sunday or a day on which commercial banks located in New York, New York are required or authorized by law or executive order to be closed.

 

Company” has the meaning set forth in the preamble.

 

Company Public Sale” has the meaning set forth in Section 2.02(a).

 

Company Shares” means the common shares of the Company, par value $0.01 per share, any securities into which such shares shall have been changed or converted, any securities distributed in respect of such shares, or any securities resulting from any reclassification, recapitalization, exchange or similar transactions with respect to such shares.

 

Covered Company Shares” means the Company Shares issued to Navy or any of its Affiliates pursuant to the Separation Agreement, but only to the extent such Company Shares are held by Navy or its Affiliates.

 

Determination Date” has the meaning set forth in Section 2.01(a)(ii).

 

Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor thereto, and any rules and regulations promulgated thereunder, all as the same shall be in effect from time to time.

 

FINRA” means the Financial Industry Regulatory Authority.

 

Form S-1” means a registration statement on Form S-1 under the Securities Act, or any comparable or successor form or forms thereto.

 

Form S-3” means a registration statement on Form S-3 under the Securities Act, or any comparable or successor form or forms thereto.

 

Holder” means (i) any holder of Registrable Securities or (ii) any Person that is entitled to acquire Registrable Securities, in each case that is a party hereto or that succeeds to rights hereunder pursuant to Section 3.06.

 

Included Registrable Securities” has the meaning set forth in Section 2.02(a).

 

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Issuer Free Writing Prospectus” means an issuer free writing prospectus, as defined in Rule 433 under the Securities Act, relating to an offer of Registrable Securities.

 

Lock-up Period Expiration Date” means the date that is the six month anniversary of the Effective Time (as defined in the Merger Agreement).

 

Loss” or “Losses” has the meaning set forth in Section 2.07(a).

 

Managing Underwriter” has the meaning set forth in Section 2.01(a)(i).

 

Marketed Underwritten Offering” means any Underwritten Offering (including a Marketed Underwritten Shelf Take-Down, but, for the avoidance of doubt, not including any Shelf Take-Down that is not a Marketed Underwritten Shelf Take-Down) that involves a customary “road show” (including an “electronic road show”) or other substantial marketing effort by the Company and the underwriters over a period of at least 48 hours.

 

Marketed Underwritten Shelf Take-Down” has the meaning set forth in Section 2.01(c)(ii).

 

Marketed Underwritten Shelf Take-Down Notice” has the meaning set forth in Section 2.01(c)(ii).

 

Merger Agreement” has the meaning set forth in the recitals.

 

Navy” has the meaning set forth in the preamble.

 

Other Holders” has the meaning set forth in Section 2.02(b).

 

Parity Holders” has the meaning set forth in Section 2.02(b).

 

Participating Holder” means, with respect to any Registration, any Holder of Registrable Securities covered by the applicable Registration Statement.

 

Penny” has the meaning set forth in the recitals.

 

Permitted Assignee” has the meaning set forth in Section 3.06.

 

Person” means any individual, partnership, corporation, company, association, limited liability company, unincorporated organization, trust or joint venture, or a government, governmental agency or political subdivision thereof or any other entity.

 

Piggyback Notice” has the meaning set forth in Section 2.02(a).

 

Prospectus” means the prospectus included in any Registration Statement, all amendments and supplements to such prospectus, including pre- and post-effective amendments to such Registration Statement, and all other material incorporated by reference in such prospectus.

 

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Registrable Securities” means any Covered Company Shares and any securities that may be issued or distributed or be issuable or distributable in respect of, or in substitution for, any Covered Company Shares by way of conversion, exercise, dividend, stock split or other distribution, merger, consolidation, exchange, recapitalization or reclassification or similar transaction, in each case whether now owned or hereinafter acquired; provided that any such Registrable Securities shall cease to be Registrable Securities to the extent (i) a Registration Statement with respect to the sale of such security has been declared effective under the Securities Act and such security has been disposed of in accordance with the plan of distribution set forth in such Registration Statement, (ii) such security has been sold pursuant to Rule 144 (or any successor provision) under the Securities Act or (iii) such security ceases to be outstanding.

 

Registration” means a registration with the SEC of the Company’s securities for offer and sale to the public under a Registration Statement.  The terms “register” and “registered” shall have a correlative meaning.

 

Registration Expenses” has the meaning set forth in Section 2.06.

 

Registration Statement” means any registration statement of the Company filed with, or to be filed with, the SEC under the rules and regulations promulgated under the Securities Act, including the related Prospectus, amendments and supplements to such registration statement, including pre- and post-effective amendments, and all exhibits and all material incorporated by reference in such registration statement; provided that any reference to a “Registration Statement” without reference to a time includes such Registration Statement as amended by any post-effective amendments as of the time of first contract of sale for the Registrable Securities.

 

Representatives” means, with respect to any Person, any of such Person’s officers, directors, employees, agents, attorneys, accountants, actuaries, consultants, equity financing partners or financial advisors or other Person associated with, or acting on behalf of, such Person.

 

Rule 144” means Rule 144 (or any successor provisions) under the Securities Act.

 

SEC” means the Securities and Exchange Commission.

 

Securities Act” means the Securities Act of 1933, as amended, and any successor thereto, and any rules and regulations promulgated thereunder, all as the same shall be in effect from time to time.

 

Separation Agreement” has the meaning set forth in the recitals.

 

Shelf Holder” means a Holder who is selling Registrable Securities pursuant to a Shelf Registration Statement.

 

Shelf Period” has the meaning set forth in Section 2.01(a)(i).

 

Shelf Registration Statement” means a Registration Statement of the Company filed with the SEC on either (i) Form S-3 (or any successor form or other appropriate form under the Securities Act) or (ii) if the Company is not permitted to file a Registration Statement on Form

 

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S-3, an evergreen Registration Statement on Form S-1 (or any successor form or other appropriate form under the Securities Act), in each case for an offering to be made on a delayed or continuous basis pursuant to Rule 415 (or any successor provision) under the Securities Act covering all or any portion of the Registrable Securities, as applicable. For the avoidance of doubt, references to “Shelf Registration Statement” shall include any Registration Statement filed pursuant to Section 2.01(a) hereof.

 

Shelf Take-Down” has the meaning set forth in Section 2.01(c)(i).

 

Subsidiary” means, with respect to any Person, any entity of which (i) a majority of the total voting power of shares of stock or equivalent ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, trustees or other members of the applicable governing body thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if no such governing body exists at such entity, a majority of the total voting power of shares of stock or equivalent ownership interests of the entity is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof.  For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated (or has the right to be allocated, through membership interests, partnership interests or otherwise) a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control the managing member or general partner of such limited liability company, partnership, association or other business entity.

 

Underwritten Offering” means an offering in which securities of the Company are sold to an underwriter or underwriters on a firm commitment basis for reoffering to the public.

 

Underwritten Shelf Take-Down Request” has the meaning set forth in Section 2.01(c)(ii).

 

WKSI” means a “well-known seasoned issuer” as defined in Rule 405 under the Securities Act and which (i) is a “well-known seasoned issuer” under paragraph (1)(i)(A) of such definition or (ii) is a “well-known seasoned issuer” under paragraph (1)(i)(B) of such definition and is also eligible to register a primary offering of its securities relying on General Instruction I.B.1 of Form S-3 or Form F-3 under the Securities Act.

 

SECTION 1.02              Other Interpretive Provisions.  In this Agreement, except as otherwise provided:

 

(i)                                     A reference to an Article or Section is a reference to an Article or Section of this Agreement, and references to this Agreement include any recital in this Agreement.

 

(ii)                                  Headings and the table of contents are inserted for convenience only and shall not affect the construction or interpretation of this Agreement.

 

(iii)                               Unless the context otherwise requires, words importing the singular include the plural and vice versa, words importing the masculine include the feminine and vice

 

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versa, and words importing persons include corporations, associations, partnerships, joint ventures and limited liability companies and vice versa.

 

(iv)                              Unless the context otherwise requires, the words “hereof” and “herein,” and words of similar meaning refer to this Agreement as a whole and not to any particular Article, Section or clause.  The words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation.”

 

(v)                                 A reference to any legislation or to any provision of any legislation shall include any successor legislation and any amendment, modification or re-enactment thereof and any legislative provision substituted therefor.

 

(vi)                              All determinations to be made by any party hereunder may be made by such party in its sole discretion, and such party may determine, in its sole discretion, whether or not to take actions that are permitted, but not required, by this Agreement to be taken by such party, including the giving of consents required hereunder.

 

(b)                                 The parties hereto have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intention or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

 

ARTICLE II.

 

REGISTRATION RIGHTS

 

SECTION 2.01                                      Shelf Registration Filing.

 

(i)                                     The Company shall prepare and file as promptly as practicable after the Effective Date under the Merger Agreement, but in no event later than (a) 120 days after the Effective Date if the Company is (1) required to use Form S-1 or (2) is not a WKSI, or (b) 180 days after the Effective Date if the Company is permitted to use Form S-3 and is a WKSI, a Registration Statement under the Securities Act to permit the public resale of the Covered Company Shares from time to time, including as permitted by Rule 415 under the Securities Act (or any similar provision then in force) with respect to all Covered Company Shares (the “Shelf Registration Statement”). The Shelf Registration Statement filed pursuant to this Section 2.01(a) shall be on Form S-3 if the Company is eligible to use Form S-3 or Form S-1 if the Company is not eligible to use Form S-3; provided, however, that if a Prospectus supplement will be used in connection with the marketing of an Underwritten Offering from the Shelf Registration Statement and the managing underwriter of such Underwritten Offering (the “Managing Underwriter”) at any time shall notify Navy in writing that, in the sole judgment of such Managing Underwriter, inclusion of detailed information to be used in such Prospectus supplement is of material importance to the success of the Underwritten Offering of such Registrable Securities, the Company shall use its reasonable best efforts to include such information in such a Prospectus supplement.  To the extent, in accordance with the previous sentence, the Company files a Shelf Registration Statement on Form S-1, the Company shall use

 

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its commercially reasonable efforts to convert such Form S-1 to a Shelf Registration Statement on Form S-3 as soon as practicable after the Company is eligible to use Form S-3, and, if at the time of such filing the Company is a WKSI, the Form S-3 shall be filed as an Automatic Shelf Registration Statement. Subject to Section 2.01(b), the Company will use reasonable best efforts to cause the initial Shelf Registration Statement filed pursuant to this Section 2.01(a) to become effective prior to the Lock-up Period Expiration Date and to cause a Shelf Registration Statement covering the Registrable Securities to be continuously effective under the Securities Act from and after the date the initial Shelf Registration Statement is declared or becomes effective until the date on which there are no longer any Registrable Securities outstanding (the “Shelf Period”).  Subject to Section 2.01(b), the Company shall be deemed not to have used reasonable best efforts to keep a Shelf Registration Statement effective during the Shelf Period if the Company intentionally takes any action or omits to take any action that would result in Holders of the Registrable Securities covered thereby not being able to offer and sell any Registrable Securities pursuant to such Shelf Registration Statement during the Shelf Period, unless such action or omission is required by applicable law. Each Shelf Registration Statement, when declared effective (including the documents incorporated therein by reference), will comply as to form with all applicable requirements of the Securities Act and the Exchange Act and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

 

(ii)                                  At any time after the filing of a Form S-3, if the Company is no longer eligible to use Form S-3 (the “Determination Date”), within 10 days after such Determination Date, the Company shall (A) give written notice thereof to all of the Holders and (B) file a Registration Statement on an appropriate form (or a post-effective amendment converting the Form S-3 to an appropriate form) covering all of the Registrable Securities, and use reasonable best efforts to have such Registration Statement declared effective as promptly as practicable after the date the Form S-3 is no longer useable by the Holders to sell their Registrable Securities.

 

(b)                                 Suspension of Registration.  Notwithstanding anything to the contrary contained herein, the Company may, upon written notice to (x) all Holders, delay the filing of the initial Shelf Registration Statement or (y) any Shelf Holder whose Registrable Securities are included in the Shelf Registration Statement, suspend such Shelf Holder’s use of any Prospectus which is a part of the Shelf Registration Statement (in which event the Shelf Holder shall discontinue sales of the Registrable Securities pursuant to the Shelf Registration Statement, but such Shelf Holder may settle any contracted sales of Registrable Securities) if the Company (i) is pursuing an acquisition, merger, reorganization, disposition or other similar transaction and the Company determines in good faith that its ability to pursue or consummate such a transaction would be materially adversely affected by any required disclosure of such transaction in the Shelf Registration Statement or (ii) has experienced some other material non-public event, the disclosure of which at such time, in the good faith judgment of the Company, would be Adverse Disclosure; provided, however, in no event shall (A) such filing of the initial Shelf Registration Statement be delayed under clauses (i) or (ii) of this Section 2.01(b) for a period that exceeds 75 days or (B) such Shelf Holders be suspended under clauses (i) or (ii) of this Section 2.01(b) from selling Registrable Securities pursuant to the Shelf Registration Statement (y) more than two times during any 12-month period or (z) for a period exceeding 45 days in the aggregate in any 90 day period or 90 days in the aggregate during any 365 day period.  Upon disclosure of such

 

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information or the termination of the condition described above, the Company shall provide prompt notice to the Shelf Holders whose Registrable Securities are included in the Shelf Registration Statement, promptly terminate any suspension of sales it has put into effect and take such other actions to permit registered sales of Registrable Securities as contemplated in this Agreement.  In addition, to the extent that any time after the fifth anniversary of the date of this agreement (i) the Company is not eligible to use Form S-3 or any equivalent short form registration statement and (ii) Navy and its Affiliates hold less than 10% of the issued and outstanding Company Shares, the Shelf Period shall be suspended until such time as the Company is eligible to use Form S-3 or any equivalent short form registration statement at which time the Company shall file and cause to be declared effective a Shelf Registration Statement on Form S-3 for the registration of all Registrable Securities. In the event the Shelf Period is suspended as contemplated by the preceding sentence, the Company shall promptly use commercially reasonable efforts to become eligible to use Form S-3 as soon as practicable after such suspension.

 

(c)                                  Shelf Take-Downs.

 

(i)                                     An offering or sale of Registrable Securities pursuant to a Shelf Registration Statement by any Holder (each, a “Shelf Take-Down”) may, subject to Section 2.09, be initiated at any time on or after the Lock-up Period Expiration Date by Navy.  Navy shall not be required to permit the offer and sale of any securities by any Person (other than a Holder) in connection with any such Shelf Take-Down initiated by Navy.

 

(ii)                                  Subject to Section 2.09, if Navy elects by written request to the Company, a Shelf Take-Down by any Holder shall be in the form of an Underwritten Offering (an “Underwritten Shelf Take-Down Request”) and the Company shall amend or supplement the Shelf Registration Statement for such purpose as soon as practicable.  Navy shall have the right to select the Managing Underwriter to administer such offering; provided that such Managing Underwriter shall be reasonably acceptable to the Company.  If the plan of distribution for any Underwritten Shelf Take-Down Request includes a customary “road show” (including an “electronic road show”) or other substantial marketing effort by the Company and the underwriters over a period expected to exceed 48 hours (a “Marketed Underwritten Shelf Take-Down”), promptly upon delivery of such Underwritten Shelf Take-Down Request (but in no event more than three Business Days thereafter), the Company shall deliver a written notice (a “Marketed Underwritten Shelf Take-Down Notice”) of such Marketed Underwritten Shelf Take-Down to all Holders (other than Navy), and, subject to Section 2.01(c)(i), the Company shall include in such Marketed Underwritten Shelf Take-Down all such Registrable Securities of such Holders that are registered on such Shelf Registration Statement for which the Company has received written requests, which requests must specify the aggregate amount of such Registrable Securities of such Holder to be offered and sold pursuant to such Marketed Underwritten Shelf Take-Down, for inclusion therein within three Business Days after the date that such Marketed Underwritten Shelf Take-Down Notice has been delivered.

 

SECTION 2.02                                      Piggyback Rights.

 

(a)                                 Participation.  If at any time during the Shelf Period, the Company proposes to file (i) a shelf registration statement other than the Shelf Registration Statement (in which event

 

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the Company covenants and agrees to include thereon a description of the transaction under which Navy acquired the Registrable Securities), (ii) a Prospectus supplement to an effective shelf registration statement, other than any Shelf Registration Statement contemplated by Section 2.01(a) of this Agreement, and Holders could be included without the filing of a post-effective amendment thereto (other than a post-effective amendment that is immediately effective), or (iii) a registration statement, other than a shelf registration statement, in the case of each of clause (i), (ii) or (iii), for the sale of Company Shares in an Underwritten Offering for its own account and/or another Person (a “Company Public Sale”), then, as soon as practicable, but not less than five Business Days prior to the filing of (A) any preliminary Prospectus supplement relating to such Underwritten Offering pursuant to Rule 424(b) under the Securities Act, (B) the Prospectus supplement relating to such Underwritten Offering pursuant to Rule 424(b) under the Securities Act (if no preliminary Prospectus supplement is used) or (C) such Registration Statement or immediately effective post-effective amendment, as the case may be, the Company shall give notice (including, but not limited to, notification by electronic mail) of such proposed Underwritten Offering to the Holders (the “Piggyback Notice”) and such notice shall offer the Holders the opportunity to include in such Underwritten Offering such number of Covered Company Shares (the “Included Registrable Securities”) as each such Holder may request in writing within three Business Days of the issuance of the Piggyback Notice.  If the Company has been advised in writing (including but not limited to electronic communications) by the Managing Underwriter or Underwriters that the inclusion of Registrable Securities for sale for the benefit of the Holders will have a significant adverse effect on the price, timing or distribution of the Company Shares in the Underwritten Offering or the market for the Company Shares, then the amount of Registrable Securities to be offered for the accounts of the Holders shall be determined based on the provisions of Section 2.02(b) of this Agreement.  The Piggyback Notice required to be provided in this Section 2.02(a) to the Holders shall be provided on a Business Day pursuant to Section 3.04 hereof. If no request for inclusion from a Holder is received within the specified time, such Holder shall have no further right to participate in such Underwritten Offering. If, at any time after giving written notice of its intention to undertake an Underwritten Offering and prior to the closing of such Underwritten Offering, the Company shall determine for any reason not to undertake or to delay such Underwritten Offering, the Company may, at its election, give written notice of such determination to the Holders and, (x) in the case of a determination not to undertake such Underwritten Offering, shall be relieved of its obligation to sell any Included Registrable Securities in connection with such terminated Underwritten Offering without prejudice to the right of Navy to immediately request an Underwritten Offering pursuant to Section 2.01(c), and (y) in the case of a determination to delay such Underwritten Offering, shall be permitted to delay offering any Included Registrable Securities for the same period as the delay in the Underwritten Offering.  Any Holder shall have the right to withdraw such Holder’s request for inclusion of its Registrable Securities in such offering by giving written notice to the Company of such withdrawal up to and including the time of pricing of such offering.  Each Holder’s rights under this Section 2.02(a) shall terminate when such Holder (together with any Affiliates of such Holder) first holds, directly or indirectly, less than $25 million in the aggregate of Registrable Securities, based on the volume weighted average closing price of Company Shares for the ten trading days immediately preceding the date on which the determination is made.

 

(b)                                 Priority of Rights.  If the Managing Underwriter or Underwriters of any proposed Underwritten Offering of Company Shares included in an Underwritten Offering involving

 

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Included Registrable Securities advises the Company in writing (including but not limited to electronic communications) that the total amount of Registrable Securities that the Holders and any other Persons intend to include in such offering exceeds the number that can be sold in such offering without being likely to have a significant adverse effect on the price, timing or distribution of the Company Shares offered or the market for the Company Shares, then the Registrable Securities to be included in such Underwritten Offering shall include the number of Registrable Securities that such Managing Underwriter or Underwriters advises the Company can be sold without having such adverse effect, with such number to be allocated (A) in the case of a primary Registration on behalf of the Company: (i) first, to the Company, (ii) second, pro rata among all Holders and holders of any other securities of the Company having rights of Registration on parity with the Registrable Securities (“Parity Holders”) who have requested participation in such Underwritten Offering and (iii) third, other securities requested to be included in such Underwritten Offering, and (B) in the case of an underwritten secondary Registration on behalf of holders of the Company’s securities other than Registrable Securities (“Other Holders”): (i) first, the securities requested to be included therein by the Other Holders requesting such registration, (ii) second, the Registrable Securities requested to be included in such Registration, pro rata among the Holders and any Parity Holders that are not Other Holders of any such Registrable Securities and (ii) third, other securities requested to be included in such Registration, including securities included on behalf of the Company. The pro rata allocations for each such Holder shall be the product of (A) the aggregate number of Registrable Securities proposed to be sold by all Holders and Parity Holders participating in the Underwritten Offering (for the avoidance of doubt, after giving effect to the allocation to the Company pursuant to clause (A)(i) above and the allocation to the Other Holders pursuant to clause (B)(i) above) multiplied by (B) the fraction derived by dividing (x) the number of Registrable Securities owned at such time by such Holder by (y) the aggregate number of Registrable Securities owned at such time by all Holders and Parity Holders participating in the Underwritten Offering.  All Participating Holders and Parity Holders shall have the opportunity to share pro rata that portion of such priority allocable to any Holder(s) or Parity Holders to the extent not so participating.

 

SECTION 2.03                                      Black-out Periods.

 

(a)                                 Black-out Periods for Holders.  In the event of any Company Public Sale of the Company’s equity securities in an Underwritten Offering, and without limiting the rights of the Holders set forth in Section 2.02, each of the Holders agrees, if requested by the Managing Underwriter or Underwriters in such Underwritten Offering, not to, subject to customary exceptions, (1) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any Company Shares (including Company Shares that may be deemed to be beneficially owned by the Holders in accordance with the rules and regulations of the SEC and Company Shares that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for Company Shares, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of Company Shares, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Company Shares or other securities, in cash or otherwise, or (3) publicly disclose the intention to do any of the foregoing, in each case, during the period beginning seven days before and ending 45 days (or such other longer or shorter period as may be reasonably requested by the Company or the Managing Underwriter or

 

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Underwriters, including to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in the FINRA rules or any successor provisions or amendments thereto) after the date of the underwriting agreement entered into in connection with such Company Public Sale, to the extent timely notified in writing by the Company or the Managing Underwriter or Underwriters.  If requested by the Managing Underwriter or Underwriters of any such Company Public Sale, the Holders shall execute a separate agreement to the foregoing effect.  The Company may impose stop-transfer instructions with respect to the Company Shares (or other securities) subject to the foregoing restriction until the end of the period referenced above.

 

(b)                                 Black-out Period for the Company and Others.  In the case of an offering of Registrable Securities pursuant to Section 2.01 that is an Underwritten Offering, the Company and each of the Holders agree, if requested by Navy or the Managing Underwriter or Underwriters with respect to such Marketed Underwritten Offering, not to, subject to customary exceptions, (1) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any Company Shares (including Company Shares that may be deemed to be beneficially owned by the Holders in accordance with the rules and regulations of the SEC and Company Shares that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for Company Shares, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of Company Shares, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Company Shares or other securities, in cash or otherwise, or (3) publicly disclose the intention to do any of the foregoing, in each case, during the period beginning seven days before, and ending 45 days (or such other longer or shorter period as may be reasonably requested by Navy or the Managing Underwriter or Underwriters, including to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in the FINRA rules or any successor provisions or amendments thereto) after the date of the underwriting agreement entered into in connection with such Underwritten Offering, to the extent timely notified in writing by Navy or the Managing Underwriter or Underwriters, as the case may be.  Notwithstanding the foregoing, the Company may effect a public sale or distribution of securities of the type described above and during the periods described above if such sale or distribution is made pursuant to a Registration on Form S-4 or S-8 or any successor form to such forms or as part of any Registration of securities for offering and sale to employees, directors or consultants of the Company and its Subsidiaries pursuant to any employee stock plan or other employee benefit plan arrangement.  The Company agrees to use commercially reasonable efforts to obtain from each holder of restricted securities of the Company, which securities are the same as or similar to the Registrable Securities being registered, or any restricted securities convertible into or exchangeable or exercisable for any of such securities, an agreement not to effect any public sale or distribution of such securities during any such period referred to in this paragraph, except as part of any such Registration, if permitted.  Without limiting the foregoing, if after the date hereof the Company grants any Person (other than a Holder) any rights to demand or participate in a Registration, the Company agrees that the agreement with respect thereto shall include such Person’s agreement to comply with any black-out period required by this Section as if it were a Holder hereunder.  If requested

 

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by the Managing Underwriter or Underwriters of any such Underwritten Offering, the Holders shall execute a separate agreement to the foregoing effect.  The Company may impose stop-transfer instructions with respect to the Company Shares (or other securities) subject to the foregoing restriction until the end of the period referenced above.

 

SECTION 2.04                                      Registration Procedures.

 

(a)                                 In connection with the Company’s Registration obligations under Section 2.01, and subject to the applicable terms and conditions set forth therein, the Company shall its use reasonable best efforts to effect such Registration to permit the sale of such Registrable Securities in accordance with the intended method or methods of distribution thereof as expeditiously as reasonably practicable, and in connection therewith the Company shall:

 

(i)                                     prepare the required Registration Statement, including all exhibits and financial statements required under the Securities Act to be filed therewith, and, before filing a Registration Statement, Prospectus or any Issuer Free Writing Prospectus, or any amendments or supplements thereto, (x) furnish to the underwriters, if any, Navy and the other Holders of the Registrable Securities covered by such Registration Statement, copies of all such documents, which documents shall be subject to the review of such underwriters, Navy and the other Holders and their respective counsel, (y) make such changes in such documents concerning Navy and the other Holders prior to the filing thereof as Navy and the other Holders, or their respective counsel, may reasonably request and (z) not file any Registration Statement or Prospectus or amendments or supplements thereto to or use any Issuer Free Writing Prospectus to which Navy or the underwriters, if any, shall reasonably object;

 

(ii)                                  prepare and file with the SEC such pre- and post-effective amendments to such Registration Statement, supplements to the Prospectus and such amendments or supplements to any Issuer Free Writing Prospectus as may be (x) reasonably requested by Navy, (y) reasonably requested by any other Participating Holder (to the extent such request relates to information relating to such Holder), or (z) necessary to keep such Registration Statement effective for the period of time required by this Agreement, and comply with provisions of the applicable securities laws with respect to the sale or other disposition of all securities covered by such Registration Statement during such period in accordance with the intended method or methods of disposition by the sellers thereof set forth in such Registration Statement;

 

(iii)                               notify the Participating Holders and the Managing Underwriter or Underwriters, if any, and (if requested) confirm such notice in writing and provide copies of the relevant documents, as soon as reasonably practicable after notice thereof is delivered by the Company (A) when the applicable Registration Statement or any supplement or amendment thereto has been filed or becomes effective, and when the applicable Prospectus or Issuer Free Writing Prospectus or any amendment or supplement thereto has been filed, (B) of any written comments by or correspondence from the SEC or any request by the SEC or any other federal or state governmental authority for amendments or supplements to such Registration Statement, Prospectus or Issuer Free Writing Prospectus or for additional information (whether before or after the effective date of the Registration Statement), (C) of the issuance by the SEC of any stop order suspending the effectiveness of such Registration Statement or any order by the SEC or any other regulatory authority preventing or suspending the use of any preliminary or final

 

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Prospectus or any Issuer Free Writing Prospectus or the initiation or threatening of any proceedings for such purposes, (D) if, at any time, the representations and warranties of the Company in any applicable underwriting agreement cease to be true and correct in all material respects, (E) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for offering or sale in any jurisdiction and (F) of the receipt by the Company of any notification with respect to the initiation or threatening of any proceeding for the suspension of the qualification of the Registrable Securities for offering or sale in any jurisdiction;

 

(iv)                              promptly notify each Participating Holder and the Managing Underwriter or Underwriters, if any, when the Company becomes aware of the occurrence of any event as a result of which the applicable Registration Statement, the Prospectus included in such Registration Statement (as then in effect) or any Issuer Free Writing Prospectus contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein (in the case of such Prospectus, any preliminary Prospectus or any Issuer Free Writing Prospectus, in light of the circumstances under which they were made) not misleading, when any Issuer Free Writing Prospectus includes information that may conflict with the information contained in the Registration Statement, or, if for any other reason it shall be necessary to amend or supplement such Registration Statement, Prospectus or Issuer Free Writing Prospectus in order to comply with the Securities Act and, in either case as promptly as reasonably practicable thereafter, prepare and file with the SEC, and furnish without charge to the Participating Holders and the Managing Underwriter or Underwriters, if any, an amendment or supplement to such Registration Statement, Prospectus or Issuer Free Writing Prospectus which shall correct such misstatement or omission or effect such compliance;

 

(v)                                 use its reasonable best efforts to prevent, or obtain the withdrawal of, any stop order or other order or notice preventing or suspending the use of any preliminary or final Prospectus or any Issuer Free Writing Prospectus;

 

(vi)                              promptly incorporate in a Prospectus supplement, Issuer Free Writing Prospectus or post-effective amendment to the applicable Registration Statement such reasonable information as the Managing Underwriter or Underwriters and Navy agree should be included therein relating to the plan of distribution with respect to such Registrable Securities, and make all required filings of such Prospectus supplement, Issuer Free Writing Prospectus or post-effective amendment as soon as reasonably practicable after being notified of the matters to be incorporated in such Prospectus supplement, Issuer Free Writing Prospectus or post-effective amendment;

 

(vii)                           furnish to each Participating Holder and each underwriter, if any, without charge, as many conformed copies as such Holder or underwriter may reasonably request of the applicable Registration Statement and any amendment or post-effective amendment or supplement thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference);

 

(viii)                        deliver to each Participating Holder and each underwriter, if any, without charge, as many copies of the applicable Prospectus (including each preliminary Prospectus), any Issuer Free Writing Prospectus and any amendment or supplement thereto as such Holder or

 

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underwriter may reasonably request (it being understood that the Company consents to the use of such Prospectus, any Issuer Free Writing Prospectus and any amendment or supplement thereto by each Holder and the underwriters, if any, in connection with the offering and sale of the Registrable Securities thereby) and such other documents as such Holder or underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities by such Holder or underwriter;

 

(ix)                              use its reasonable best efforts to cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter or underwriters, if any, to consummate the disposition of such Registrable Securities;

 

(x)                                 on or prior to the date on which the applicable Registration Statement is declared effective, use commercially reasonable efforts to register or qualify, and cooperate with the Participating Holders, the Managing Underwriter or Underwriters, if any, and their respective counsel, in connection with the Registration or qualification of such Registrable Securities for offer and sale under the securities or “Blue Sky” laws of each state and other jurisdiction of the United States as any Participating Holder or Managing Underwriter or Underwriters, if any, or their respective counsel, reasonably request in writing and do any and all other acts or things reasonably necessary or advisable to keep such Registration or qualification in effect for such period as required by Section 2.01(a), whichever is applicable, provided that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to taxation or general service of process in any such jurisdiction where it is not then so subject;

 

(xi)                              cooperate with the Participating Holders and the Managing Underwriter or Underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends, and enable such Registrable Securities to be in such denominations and registered in such names as the Managing Underwriter or Underwriters, if any, may request at least two Business Days prior to any sale of Registrable Securities to the underwriters;

 

(xii)                           make such representations and warranties to the Participating Holders, and the underwriters or agents, if any, in form, substance and scope as are customarily made by issuers in secondary underwritten public offerings;

 

(xiii)                        unless agreed to in writing by each Holder, on or after the date of this Agreement, not enter into any agreement which (a) is inconsistent with, or adversely affects, the rights granted to the Holders with respect to Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof in any material respect or (b) other than as set forth in this Agreement, would allow any holder of Company Shares to include Company Shares in any Registration Statement filed by the Company on a basis that is superior or more favorable in any material respect to the rights granted to the Holders hereunder;

 

(xiv)                       enter into such customary agreements (including underwriting and indemnification agreements) and take all such other actions as Navy or the Managing

 

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Underwriter or Underwriters, if any, reasonably request in order to expedite or facilitate the Registration and disposition of such Registrable Securities;

 

(xv)                          obtain for delivery to the underwriter or underwriters, if any, an opinion or opinions from counsel for the Company dated, in the event of an Underwritten Offering, the date of the closing under the underwriting agreement, in customary form, scope and substance, which opinions shall be reasonably satisfactory to such underwriters and their respective counsel;

 

(xvi)                       in the case of an Underwritten Offering, obtain for delivery to the Company and the Managing Underwriter or Underwriters, with copies to the Participating Holders, a comfort letter from the Company’s independent certified public accountants (and, if necessary, any other independent certified public accountants or independent auditors of any Subsidiary of the Company or any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement) in customary form and covering such matters of the type customarily covered by comfort letters as the Managing Underwriter or Underwriters reasonably request, dated the date of execution of the underwriting agreement and brought down to the closing under the underwriting agreement;

 

(xvii)                    cooperate with each Participating Holder and each underwriter, if any, participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA;

 

(xviii)                 use its reasonable best efforts to comply with all applicable securities laws and make available to its security holders, as soon as reasonably practicable, an earnings statement satisfying the provisions of Section 11(a) of the Securities Act and the rules and regulations promulgated thereunder;

 

(xix)                       provide and cause to be maintained a transfer agent and registrar for all Registrable Securities;

 

(xx)                          not later than the effective date of the applicable Registration Statement, provide a CUSIP number for all Registrable Securities and, if requested, provide the applicable transfer agent with printed certificates for the Registrable Securities which are in a form eligible for deposit with The Depositary Trust Company;

 

(xxi)                       use its reasonable best efforts to cause all Registrable Securities covered by the applicable Registration Statement to be listed on each securities exchange on which the Company Shares are then listed or quoted and on each inter-dealer quotation system on which any of the Company’s equity securities are then quoted;

 

(xxii)                    make available upon reasonable notice at reasonable times and for reasonable periods for inspection by Navy, by any underwriter participating in any disposition to be effected pursuant to such Registration Statement and by any attorney, accountant, professional advisor or other agent retained by Navy or any such underwriter, all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause all of the Company’s officers, directors and employees and the independent public accountants who have certified its financial statements to make themselves available to discuss the business of the Company and to supply all information reasonably requested by any such Person in connection

 

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with such Registration Statement as shall be necessary to enable them to exercise their due diligence responsibility;

 

(xxiii)                 in the case of an Underwritten Offering, cause the senior executive officers of the Company to participate in the customary “road show” presentations that may be reasonably requested by the Managing Underwriter or Underwriters, if any, in any such Underwritten Offering and otherwise to facilitate, cooperate with, and participate in each proposed offering contemplated herein and customary selling efforts related thereto;

 

(xxiv)                take no direct or indirect action prohibited by Regulation M under the Exchange Act;

 

(xxv)                   take all commercially reasonable action to ensure that any Issuer Free Writing Prospectus utilized in connection with any Registration covered by Section 2.01 complies in all material respects with the Securities Act, is filed in accordance with the Securities Act to the extent required thereby, is retained in accordance with the Securities Act to the extent required thereby and, when taken together with the related Prospectus, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;

 

(xxvi)                take all reasonable actions to ensure that the information available to investors at the time of pricing includes all information required by applicable law (including the information required by Sections 12(a)(2) and 17(a)(2) of the Securities Act); and

 

(xxvii)             take all such other commercially reasonable actions as are necessary or advisable in order to expedite or facilitate the disposition of such Registrable Securities in accordance with the terms hereof.

 

(b)                                 When the Company files a Shelf Registration Statement, the Company agrees that it shall include in such Shelf Registration Statement such disclosures as may be required by Rule 430B under the Securities Act (referring to the unnamed selling security holders in a generic manner by identifying the initial offering of the securities to the Holders) in order to ensure that the Holders may be added to such Shelf Registration Statement at a later time through the filing of a Prospectus supplement rather than a post-effective amendment.

 

(c)                                  The Company may require each Participating Holder to furnish to the Company such information regarding the distribution of such securities and such other information relating to such Holder and its ownership of Registrable Securities as the Company may from time to time reasonably request in writing.  Each Participating Holder agrees to furnish such information to the Company and to cooperate with the Company as reasonably necessary to enable the Company to comply with the provisions of this Agreement.

 

(d)                                 Each Participating Holder agrees that, upon delivery of any notice by the Company of the occurrence of any event of the kind described in Section 2.04(a)(iii)(C), (D), or (E) or Section 2.04(a)(iv), such Holder will forthwith discontinue disposition of Registrable Securities pursuant to such Registration Statement until (i) such Holder’s receipt of the copies of the supplemented or amended Prospectus or Issuer Free Writing Prospectus contemplated by Section 2.04(a)(iv), (ii) such Holder is advised in writing by the Company that the use of the

 

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Prospectus or Issuer Free Writing Prospectus, as the case may be, may be resumed, (iii) such Holder is advised in writing by the Company of the termination, expiration or cessation of such order or suspension referenced in Section 2.04(a)(iii)(C) or (E) or (iv) such Holder is advised in writing by the Company that the representations and warranties of the Company in such applicable underwriting agreement are true and correct in all material respects.  If so directed by the Company, such Holder shall deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in such Holder’s possession, of the Prospectus or any Issuer Free Writing Prospectus covering such Registrable Securities current at the time of delivery of such notice.  In the event the Company shall give any such notice, the Shelf Period shall be extended by the number of days during the period from and including the date of the giving of such notice to and including the date when each seller of Registrable Securities covered by such Registration Statement either receives the copies of the supplemented or amended Prospectus or Issuer Free Writing Prospectus contemplated by Section 2.04(a)(iv) or is advised in writing by the Company that the use of the Prospectus or Issuer Free Writing Prospectus may be resumed.

 

(e)                                  To the extent that Navy or any of its Affiliates is deemed to be an underwriter of Registrable Securities pursuant to any SEC comments or policies or otherwise, the Company agrees that (1) the indemnification and contribution provisions contained in this Agreement shall be applicable to the benefit of Navy or its Affiliates in its role as deemed underwriter in addition to their capacity as Holder and (2) Navy and its Affiliates shall be entitled to conduct such activities which it would normally conduct in connection with satisfying its “due diligence” defense as an underwriter in connection with an offering of securities registered under the Securities Act, including conducting due diligence and the receipt of customary opinions and comfort letters.

 

SECTION 2.05                                      Underwritten Offerings.  In the event that, in accordance with Section 2.01(c), the Registrable Securities are to be sold under the Shelf Registration Statement pursuant to an Underwritten Offering, the Company will take all reasonable actions requested by the Managing Underwriter or Underwriters in order to expedite or facilitate the sale of the Registrable Securities, including entering into an underwriting agreement with the Managing Underwriter or Underwriters, such agreement to be reasonably satisfactory in substance and form to each of the Company, Navy and the underwriters, and to contain such representations and warranties by the Company and such other terms as are generally prevailing in agreements of that type, including, among other provisions, indemnities to the effect and to the extent provided in Section 2.07.  No Shelf Holder may participate in such Underwritten Offering unless such Shelf Holder agrees to sell its Registrable Securities on the basis provided in such underwriting agreement and completes and executes all questionnaires, powers of attorney, indemnities and other documents reasonably required under the terms of such underwriting agreement.  Each Shelf Holder may, at its option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of the underwriters also be made to and for such Shelf Holder’s benefit and that any or all of the conditions precedent to the obligations of the underwriters under such underwriting agreement also be conditions precedent to its obligations.  No Shelf Holder shall be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Shelf Holder and its ownership of the securities being registered on its behalf and its intended method of distribution and any other

 

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representations required by law.  If any Shelf Holder disapproves of the terms of an underwriting, such Shelf Holder may elect to withdraw therefrom by notice to the Company and the Managing Underwriter; provided, however, that such notice of withdrawal must be made at a time before the time of pricing of such offering (which shall be deemed to occur upon the execution of the purchase or underwriting agreement) in order to be effective.  No such withdrawal or abandonment shall affect the Company’s obligation to pay Registration Expenses.

 

SECTION 2.06                                      Registration Expenses.  All expenses incident to the Company’s performance of or compliance with this Agreement shall be paid by the Company, including (i) all registration and filing fees, and any other fees and expenses associated with filings required to be made with the SEC, FINRA and if applicable, the fees and expenses of any “qualified independent underwriter,” as such term is defined in Rule 2720 of the National Association of Securities Dealers, Inc. (or any successor provision), and of its counsel, (ii) all fees and expenses in connection with compliance with any securities or “Blue Sky” laws (including fees and disbursements of counsel for the underwriters in connection with “Blue Sky” qualifications of the Registrable Securities), (iii) all printing, duplicating, word processing, messenger, telephone, facsimile and delivery expenses (including expenses of printing certificates for the Registrable Securities in a form eligible for deposit with The Depository Trust Company and of printing Prospectuses and Issuer Free Writing Prospectuses), (iv) all fees and disbursements of counsel for the Company and of all independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance), (v) Securities Act liability insurance or similar insurance if the Company so desires or the underwriters so require in accordance with then-customary underwriting practice, (vi) all fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange or quotation of the Registrable Securities on any inter-dealer quotation system, (vii) all applicable rating agency fees with respect to the Registrable Securities, (viii) any reasonable fees and disbursements of underwriters customarily paid by issuers or sellers of securities, (ix) all fees and expenses of any special experts or other Persons retained by the Company in connection with any Registration, (x) all of the Company’s internal expenses (including all salaries and expenses of its officers and employees performing legal or accounting duties), (xi) all expenses related to the “road show” for any Underwritten Offering, including all travel, meals and lodging and (xii) any other fees and disbursements customarily paid by the issuers of securities.  All such expenses are referred to herein as “Registration Expenses.”  The Company shall not be required to pay any underwriting discounts and commissions and transfer taxes, if any, solely attributable to the sale of Registrable Securities by a Holder pursuant to a Registration Statement.

 

SECTION 2.07                                      Indemnification.

 

(a)                                 Indemnification by the Company.  The Company agrees to indemnify and hold harmless, to the full extent permitted by law, each Holder, each of its direct or indirect partners, members or shareholders and each of such partner’s, member’s or shareholder’s partners, members or shareholders and, with respect to all of the foregoing Persons, each of their respective Affiliates, employees, directors, officers, shareholders, advisors, trustees or agents and each Person who controls (within the meaning of the Securities Act or the Exchange Act) such Persons and each of their respective Representatives from and against any and all losses, penalties, judgments, suits, costs, claims, damages, liabilities and expenses, joint or several

 

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(including reasonable costs of investigation and legal expenses) (each, a “Loss” and collectively “Losses”) arising out of or based upon (i) any untrue or alleged untrue statement of a material fact contained in any Registration Statement under which such Registrable Securities are registered or sold under the Securities Act (including any final, preliminary or summary Prospectus contained therein or any amendment or supplement thereto or any documents incorporated by reference therein), any Issuer Free Writing Prospectus or amendment or supplement thereto, or any other disclosure document produced by or on behalf of the Company or any of its Subsidiaries, including reports and other documents filed under the Exchange Act, (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus, preliminary Prospectus or Issuer Free Writing Prospectus, in light of the circumstances under which they were made) not misleading, (iii) any violation or alleged violation by the Company or any of its Subsidiaries of any federal, state, foreign or common law rule or regulation applicable to the Company or any of its Subsidiaries in connection with any such Registration, qualification, compliance or sale of Registrable Securities, (iv) any failure to register or qualify Registrable Securities in any state where the Company or its agents have affirmatively undertaken or agreed in writing that the Company (the undertaking of any underwriter being attributed to the Company) will undertake such Registration or qualification on behalf of the Holders of such Registrable Securities (provided that in such instance the Company shall not be so liable if it has undertaken its reasonable best efforts to so register or qualify such Registrable Securities) or (v) any actions or inactions or proceedings in respect of the foregoing whether or not such indemnified party is a party thereto, whether such Registration Statement, Prospectus, preliminary Prospectus, Issuer Free Writing Prospectus or other document is issued pursuant to this Agreement or otherwise, and the Company will reimburse, on demand, each such Holder and each of its direct or indirect partners, members or shareholders and each of such partner’s, member’s or shareholder’s partners, members or shareholders and, with respect to all of the foregoing Persons, each of their respective Affiliates, employees, directors, officers, shareholders, advisors, trustees or agents and controlling Persons and each of their respective Representatives, for any legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action; provided, that the Company shall not be liable to any particular indemnified party to the extent that any such Loss arises out of or is based upon (A) an untrue statement or alleged untrue statement or omission or alleged omission made in any such Registration Statement or other document in reliance upon and in conformity with written information furnished to the Company by such indemnified party expressly for use in the preparation thereof that has not been corrected in a subsequent writing prior to the sale of the Registrable Securities to the Person asserting the claim or (B) an untrue statement or omission in a preliminary Prospectus relating to Registrable Securities, if a Prospectus (as then amended or supplemented) that would have cured the defect was furnished to the indemnified party from whom the Person asserting the claim giving rise to such Loss purchased Registrable Securities at least five days prior to the written confirmation of the sale of the Registrable Securities to such Person and a copy of such Prospectus (as amended and supplemented) was not sent or given by or on behalf of such indemnified party to such Person at or prior to the written confirmation of the sale of the Registrable Securities to such Person.  This indemnity shall be in addition to any liability the Company may otherwise have.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Holder or any indemnified party and shall survive the transfer of such securities by such Holder.  The Company shall also

 

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indemnify underwriters (including Persons (including the Holders) deemed to be underwriters by the SEC), selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of the Securities Act and the Exchange Act) to the same extent as provided above with respect to the indemnification of the indemnified parties.

 

(b)                                 Indemnification by the Participating Holders.  Each Participating Holder agrees (severally and not jointly) to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its Affiliates, its employees, directors, officers, shareholders and agents and each Person who controls the Company (within the meaning of the Securities Act or the Exchange Act), and each other Holder, each of such other Holder’s respective direct or indirect partners, members or shareholders and each of such partner’s, member’s or shareholder’s partners, members or shareholders and, with respect to all of the foregoing Persons, each of their respective Affiliates, employees, directors, officers, trustees or agents and each Person who controls (within the meaning of the Securities Act or the Exchange Act) such Persons and each of their respective Representatives from and against any Losses resulting from (i) any untrue statement of a material fact in any Registration Statement under which such Registrable Securities were registered or sold under the Securities Act (including any final, preliminary or summary Prospectus contained therein or any amendment or supplement thereto or any documents incorporated by reference therein) or any Issuer Free Writing Prospectus or amendment or supplement thereto, or (ii) any omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus, preliminary Prospectus or Issuer Free Writing Prospectus, in light of the circumstances under which they were made) not misleading, in each case to the extent, but only to the extent, that (x) such untrue statement or omission is contained in any information furnished in writing by such Holder to the Company specifically for inclusion in such Registration Statement and has not been corrected in a subsequent writing prior to the sale of the Registrable Securities to the Person asserting the claim, and (y) such untrue statement (or alleged untrue statement) or omission (or alleged omission) was made in such Registration Statement, Prospectus, offering circular, Issuer Free Writing Prospectus or other document, in reliance upon and in conformity with written information furnished to the Company by such Holder expressly for use therein.  In no event shall the liability of such Holder hereunder be greater in amount than the dollar amount of the net proceeds (less underwriting discounts and commissions) received by such Holder under the sale of Registrable Securities giving rise to such indemnification obligation.  The Company shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above (with appropriate modification) with respect to information furnished in writing by such Persons specifically for inclusion in any Prospectus, Issuer Free Writing Prospectus or Registration Statement.

 

(c)                                  Conduct of Indemnification Proceedings.  Any Person entitled to indemnification under this Section 2.07 shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that any delay or failure to so notify the indemnifying party shall relieve the indemnifying party of its obligations hereunder only to the extent, if at all, that it is actually and materially prejudiced by reason of such delay or failure) and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that any Person entitled to

 

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indemnification hereunder shall have the right to select and employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Person unless (A) the indemnifying party has agreed in writing to pay such fees or expenses, (B) the indemnifying party shall have failed to assume the defense of such claim within a reasonable time after receipt of notice of such claim from the Person entitled to indemnification hereunder and employ counsel reasonably satisfactory to such Person, (C) the indemnified party has reasonably concluded (based upon advice of its counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, or (D) in the reasonable judgment of any such Person (based upon advice of its counsel) a conflict of interest may exist between such Person and the indemnifying party with respect to such claims (in which case, if the Person notifies the indemnifying party in writing that such Person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such Person).  If the indemnifying party assumes the defense, the indemnifying party shall not have the right to settle such action, consent to entry of any judgment or enter into any settlement, in each case without the prior written consent of the indemnified party, unless the entry of such judgment or settlement (i) includes as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of an unconditional release from all liability in respect to such claim or litigation and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of such indemnified party, and provided that any sums payable in connection with such settlement are paid in full by the indemnifying party.  If such defense is not assumed by the indemnifying party, the indemnifying party will not be subject to any liability for any settlement made without its prior written consent, but such consent may not be unreasonably withheld.  It is understood that the indemnifying party or parties shall not, except as specifically set forth in this Section 2.07(c), in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements or other charges of more than one separate firm admitted to practice in such jurisdiction at any one time unless (x) the employment of more than one counsel has been authorized in writing by the indemnifying party or parties, (y) an indemnified party has reasonably concluded (based on the advice of counsel) that there may be legal defenses available to it that are different from or in addition to those available to the other indemnified parties, or (z) a conflict or potential conflict exists or may exist (based upon advice of counsel to an indemnified party) between such indemnified party and the other indemnified parties, in each of which cases the indemnifying party shall be obligated to pay the reasonable fees and expenses of such additional counsel or counsels.

 

(d)                                 Contribution.  If for any reason the indemnification provided for in paragraphs (a) and (b) of this Section 2.07 is unavailable to an indemnified party or insufficient in respect of any Losses referred to therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such Loss in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party or parties on the other hand in connection with the acts, statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations.  In connection with any Registration Statement filed with the SEC by the Company, the relative fault of the indemnifying party on the one hand and the indemnified party on the other hand shall be determined by reference to, among other things, whether any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by

 

21



 

the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  The parties hereto agree that it would not be just or equitable if contribution pursuant to this Section 2.07(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in this Section 2.07(d).  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.  The amount paid or payable by an indemnified party as a result of the Losses referred to in Sections 2.07(a) and 2.07(b) shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of this Section 2.07(d), in connection with any Registration Statement filed by the Company, a Participating Holder shall not be required to contribute any amount in excess of the dollar amount of the net proceeds (less underwriting discounts and commissions) received by such Holder under the sale of Registrable Securities giving rise to such contribution obligation less any amount paid by such Holders pursuant to Section 2.07(b).  If indemnification is available under this Section 2.07, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Sections 2.07(a) and 2.07(b) hereof without regard to the provisions of this Section 2.07(d).

 

(e)                                  No Exclusivity.  The remedies provided for in this Section 2.07 are not exclusive and shall not limit any rights or remedies which may be available to any indemnified party at law or in equity or pursuant to any other agreement.

 

(f)                                   Survival.  The indemnities provided in this Section 2.07 shall survive the transfer of any Registrable Securities by such Holder.

 

SECTION 2.08                                      Rules 144 and 144A and Regulation S; Form S-3.  The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder, and it will take such further action as: (x) Navy may reasonably request, to enable the Holders to sell Registrable Securities without Registration under the Securities Act within the limitation of the exemptions provided by (i) Rules 144, 144A or Regulation S under the Securities Act, as such Rules may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the SEC; or (y) is necessary to qualify the Company to file registration statements on Form S-3.

 

SECTION 2.09                                      Limitation on Registrations and Underwritten Offerings.

 

(a)                                 Notwithstanding the rights and obligations set forth in Section 2.01, in no event shall the Company be obligated to take any action to effect any Marketed Underwritten Shelf Take-Down at the request of Navy (and its Affiliates and Permitted Assignees) after the Company has effected five Marketed Underwritten Shelf Take-Downs at the request of Navy and its Affiliates and Permitted Assignees.

 

(b)                                 Notwithstanding the rights and obligations set forth in Section 2.01, in no event shall the Company be obligated to take any action to (i) effect more than one Marketed Underwritten Offering in any consecutive 180-day period or (ii) effect any Underwritten

 

22



 

Offering unless Navy proposes to sell Registrable Securities in such Underwritten Offering having a reasonably anticipated net aggregate price (after deduction of underwriter commissions and offering expenses) of at least $75,000,000 or 100% of the Registrable Securities then held by Navy (if the value of such Registrable Securities is reasonably anticipated to have a net aggregate price of less than $75,000,000).

 

SECTION 2.10                                      Section 16 Matters.  The Company and Navy hereby agree to take all such steps as may be required to cause to qualify for exemption under Rule 16b-3(d) or (e), as applicable, under the Exchange Act, and be exempt for purposes of Section 16(b) under the Exchange Act, any acquisitions or dispositions of Company Shares by the Holders in connection with the transactions contemplated by the Merger Agreement, this Agreement or the Separation Agreement, by each Holder who may reasonably be expected to be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Company (with the authorizing resolutions specifying the name of each such Holder whose acquisition or disposition of securities is to be exempted and the number of securities that may be acquired and disposed of by each such person pursuant to the Merger Agreement, this Agreement or the Separation Agreement).

ARTICLE III.

 

MISCELLANEOUS

 

SECTION 3.01                                      Termination.

 

(a)                                 This Agreement shall terminate with respect to any Holder at such time as such Holder (or its Permitted Assignees) does not beneficially own any Registrable Securities.  Notwithstanding the foregoing, the provisions of Sections 2.06, 2.07, 2.08 and 2.10 and all of this Article III shall survive any such termination.  Upon the written request of the Company, each Holder agrees to promptly deliver a certificate to the Company setting forth the number of Registrable Securities then beneficially owned by such Holder.

 

(b)                                 This Agreement shall terminate if both the Effective Time (as defined in the Merger Agreement) has not occurred and the Merger Agreement is terminated in accordance with its terms.

 

SECTION 3.02                                      Injunctive Relief.  It is hereby agreed and acknowledged that it will be impossible to measure in money the damage that would be suffered if the parties fail to comply with any of the obligations herein imposed on them and that in the event of any such failure, an aggrieved Person will be irreparably damaged and will not have an adequate remedy at law.  Any such Person shall, therefore, be entitled (in addition to any other remedy to which it may be entitled in law or in equity) to injunctive relief, including specific performance, to enforce such obligations, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law.

 

SECTION 3.03                                      Attorneys’ Fees.  In any action or proceeding brought to enforce any provision of this Agreement or where any provision hereof is validly asserted as a defense, the

 

23



 

successful party shall, to the extent permitted by applicable law, be entitled to recover reasonable attorneys’ fees in addition to any other available remedy.

 

SECTION 3.04                                      Notices.  In the event a notice or other document is required to be sent hereunder to the Company or any Holder, such notice or other document shall be in writing and shall be considered given and received, in all respects when personally delivered, or when sent by express or courier service or United States registered or certified mail, return receipt requested and postage and other fees prepaid, or by electronic mail, on the day such notice or document is personally delivered or delivered by electronic mail or on the third Business Day following the day on which such notice or other document is delivered to any such commercial delivery service as aforesaid.  Any notice and document shall be addressed to the party entitled to receive such notice or other document (a) in the case of the Company or Navy, at such Person’s address shown below and (b) in the case of any other party hereto, at such party’s address shown on the signature pages hereto, or in each case at such other address as any such party shall request in a written notice sent to the Company.  Any party hereto or its legal representatives may effect a change of address for purposes of this Agreement by giving written notice of such change to the Company, and the Company shall, upon the request of any party hereto, notify such party of such change in the manner provided herein.  Until such notice of change of address is properly given, the addresses set forth herein shall be effective for all purposes.

 

To the Company prior to the Effective Time:

 

Nabors Red Lion Limited

Crown House

Second Floor

4 Par-la-Ville Road

Hamilton, HM 08

Bermuda

Attention:                         Corporate Secretary

 

With a copy (which shall not constitute notice) to:

 

Nabors Corporate Services, Inc.

515 West Greens Road, Suite 1200

Houston, Texas 66057

Telephone:                     (281) 775-8166
Email:
                                             laura.doerre@nabors.com
Attention: 
                       General Counsel

 

With a copy (which shall not constitute notice) to:

 

24



 

Milbank, Tweed, Hadley & McCloy LLP

One Chase Manhattan Plaza

New York, New York 10005
Telephone:
                    (212) 530-5301
Email:
                                             bnadritch@milbank.com
Attention: 
                       Brett Nadritch

 

To the Company following the Effective Time:

 

C&J Energy Services Ltd.

Canon’s Court

22 Victoria Street

Hamilton HM12

Bermuda

Attention:  Corporate Secretary

 

With a copy (which shall not constitute notice) to:

 

C&J Energy Services Ltd.
3990 Rogerdale Rd.
Houston, Texas 77042

Telephone:                     (713) 325-6000
Email:
                                             tmoore@cjenergy.com
Attention: 
                       Theodore Moore

 

With a copy (which shall not constitute notice) to:

 

Vinson & Elkins LLP
1001 Fannin, Suite 2500
Houston, Texas 77007
Telephone:
                    (713) 758-4458
Email:
                                             sgill@velaw.com
Attention:
                          Stephen M. Gill

 

To Navy:

 

Nabors Industries Ltd.

Crown House

Second Floor

4 Par-la-Ville Road

Hamilton, HM 08

Bermuda

Attention:                         Corporate Secretary

 

With a copy (which shall not constitute notice) to:

 

25



 

Nabors Corporate Services, Inc.

515 West Greens Road, Suite 1200

Houston, Texas 66057

Telephone:                     (281) 775-8166
Email:
                                             laura.doerre@nabors.com
Attention: 
                       General Counsel

 

With a copy (which shall not constitute notice) to:

 

Milbank, Tweed, Hadley & McCloy LLP

One Chase Manhattan Plaza

New York, New York 10005
Telephone:
                    (212) 530-5301
Email:
                                             bnadritch@milbank.com
Attention: 
                       Brett Nadritch

 

SECTION 3.05                                      Amendment.  The terms and provisions of this Agreement may only be amended, modified or waived at any time and from time to time by an agreement in writing executed by the Company and Navy.

 

SECTION 3.06                                      Successors, Assigns and Transferees.  Each Holder may assign all or a portion of its rights hereunder to any Affiliate of such Person (each such Person, a “Permitted Assignee”); provided that such transferee shall only be admitted as a party hereunder upon its, his or her execution and delivery of a joinder agreement, in form and substance acceptable to Navy and the Company, agreeing to be bound by the terms and conditions of this Agreement as if such Person were a party hereto (together with any other documents Navy or the Company determine are necessary to make such Person a party hereto), whereupon such Person will be treated as a Holder for all purposes of this Agreement, with the same rights, benefits and obligations hereunder as the transferring Holder with respect to the transferred Registrable Securities.  Any purported assignment in violation of this Section 3.06 will be void.

 

SECTION 3.07                                      Binding Effect.  Except as otherwise provided in this Agreement, the terms and provisions of this Agreement shall be binding on and inure to the benefit of each of the parties hereto and their respective successors.

 

SECTION 3.08                                      Third Party Beneficiaries.  Nothing in this Agreement, express or implied, is intended or shall be construed to confer upon any Person not a party hereto (other than those Persons entitled to indemnity or contribution under Section 2.07, each of whom shall be a third party beneficiary thereof) any right, remedy or claim under or by virtue of this Agreement.

 

SECTION 3.09                                      Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.  ANY ACTION OR PROCEEDING AGAINST THE PARTIES RELATING IN ANY WAY TO THIS AGREEMENT MAY BE BROUGHT AND ENFORCED EXCLUSIVELY IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN

 

26



 

DISTRICT OF NEW YORK AND THE STATE COURTS SITTING IN THE STATE OF NEW YORK, COUNTY OF NEW YORK.  THE PARTIES HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH ACTION BROUGHT IN SUCH COURT OR ANY DEFENSE OF INCONVENIENT FORUM FOR THE MAINTENANCE OF SUCH ACTION.

 

SECTION 3.10                                      Waiver of Jury Trial.  EACH PARTY HERETO HEREBY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 3.10.

 

SECTION 3.11                                      Severability.  If any provision of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

SECTION 3.12                                      Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same agreement.  Facsimile signatures will, for all purposes, be treated as originals.

 

SECTION 3.13                                      Headings.  The heading references herein and in the table of contents hereto are for convenience purposes only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

SECTION 3.14                                      Joinder.  Any Person that holds Covered Company Shares may, with the prior written consent of Navy and the Company, be admitted as a party to this Agreement upon its execution and delivery of a joinder agreement, in form and substance acceptable to Navy and the Company, agreeing to be bound by the terms and conditions of this Agreement as if such Person were a party hereto (together with any other documents Navy determines are necessary to make such Person a party hereto), whereupon such Person will be treated as a Holder for all purposes of this Agreement; provided that if such Person is a Permitted Assignee of a Holder, neither the consent of Navy nor the Company shall be required to permit such Person to execute and deliver such joinder agreement.

 

27



 

SECTION 3.15                                      Existing Registration Statements.  Notwithstanding anything herein to the contrary and subject to applicable law and regulation, the Company may satisfy any obligation hereunder to file a Registration Statement or to have a Registration Statement become effective by a specified date by designating, by notice to the Holders, a registration statement that previously has been filed with the SEC or become effective, as the case may be, as the relevant Registration Statement for purposes of satisfying such obligation, and all references to any such obligation shall be construed accordingly; provided, that such previously filed registration statement may be amended to add the number of Registrable Securities, and, to the extent necessary, to identify as selling stockholders those Holders demanding the filing of a Registration Statement pursuant to the terms of this Agreement.  To the extent this Agreement refers to the filing or effectiveness of other registration statements by or at a specified time and the Company has, in lieu of then filing such registration statements or having such registration statements become effective, designated a previously filed or effective registration statement as the relevant registration statement for such purposes in accordance with the preceding sentence, such references shall be construed to refer to such designated registration statement.

 

SECTION 3.16                                      Other Activities.  Notwithstanding anything in this Agreement, none of the provisions of this Agreement shall in any way limit a Holder or any of its Affiliates from engaging in any brokerage, investment advisory, financial advisory, anti-raid advisory, principaling, merger advisory, financing, asset management, trading, market making, arbitrage, investment activity and other similar activities conducted in the ordinary course of their business.

 

SECTION 3.17                                      Time of the Essence.  The parties agree that time shall be of the essence in the performance of this Agreement.

 

[Remainder of Page Intentionally Blank]

 

28



 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

 

 

COMPANY

 

 

 

NABORS RED LION LIMITED

 

 

 

 

By:

/s/ Mark D. Andrews

 

 

 

Name: Mark D. Andrews

 

Title: Director

 

 

[Signature Page to Registration Rights Agreement]

 



 

NAVY

 

 

 

NABORS INDUSTRIES LTD.

 

 

 

 

 

 

 

By:

/s/ Mark D. Andrews

 

Name: Mark D. Andrews

 

Title: Corporate Secretary

 

 

[Signature Page to Registration Rights Agreement]

 




Exhibit 10.5

 

EXECUTION VERSION

 

 

TRANSITION SERVICES AGREEMENT

 

dated as of March 24, 2015

 

between

 

NABORS INDUSTRIES LTD.

 

And

 

NABORS RED LION LIMITED

 

 



 

TABLE OF CONTENTS

 

 

 

Page

ARTICLE I DEFINITIONS

1

Section 1.01.

Certain Defined Terms

1

 

 

 

ARTICLE II SERVICES, DURATION AND SERVICES MANAGERS

4

Section 2.01.

Services

4

Section 2.02.

Duration of Services

4

Section 2.03.

Transition Services Managers

5

Section 2.04.

Personnel

5

Section 2.05.

Employee Benefits Transition

6

 

 

 

ARTICLE III OTHER ARRANGEMENTS

7

Section 3.01.

Third Party Licenses and Consents

7

Section 3.02.

Third Party Providers

7

 

 

 

ARTICLE IV ADDITIONAL AGREEMENTS

7

Section 4.01.

Navy Computer-Based and Other Resources

7

Section 4.02.

Co-location and Facilities Matters

8

Section 4.03.

Access

10

Section 4.04.

Cooperation

10

 

 

 

ARTICLE V COSTS AND DISBURSEMENTS

10

Section 5.01.

Costs and Disbursements

10

Section 5.02.

Taxes

11

Section 5.03.

No Right to Set-Off

12

Section 5.04.

Allocation of Rebates

12

 

 

 

ARTICLE VI STANDARD FOR SERVICE

12

Section 6.01.

Standard for Service

12

Section 6.02.

Disclaimer of Warranties

14

Section 6.03.

Compliance with Laws and Regulations

14

 

 

 

ARTICLE VII LIMITED LIABILITY AND INDEMNIFICATION

14

Section 7.01.

Personal Injury

14

Section 7.02.

Indirect and Other Damages

14

Section 7.03.

Limitation of Liability

15

Section 7.04.

Obligation To Re-perform; Liabilities

15

Section 7.05.

Release and Recipient Indemnity

15

Section 7.06.

Provider Indemnity

15

Section 7.07.

Indemnification Procedures

15

Section 7.08.

Liability for Payment Obligations

16

Section 7.09.

Exclusion of Other Remedies

16

 

 

 

ARTICLE VIII DISPUTE RESOLUTION

16

Section 8.01.

Dispute Resolution

16

 

i



 

ARTICLE IX TERM AND TERMINATION

17

Section 9.01.

Term and Termination

17

Section 9.02.

Effect of Termination

18

Section 9.03.

Force Majeure

18

 

 

 

ARTICLE X GENERAL PROVISIONS

18

Section 10.01.

No Agency

18

Section 10.02.

Subcontractors

19

Section 10.03.

Treatment of Confidential Information

19

Section 10.04.

Further Assurances

20

Section 10.05.

Notices

20

Section 10.06.

Severability

21

Section 10.07.

Entire Agreement

21

Section 10.08.

No Third-Party Beneficiaries

21

Section 10.09.

Governing Law

21

Section 10.10.

Amendment

22

Section 10.11.

Rules of Construction

22

Section 10.12.

Counterparts

22

Section 10.13.

Assignability

22

Section 10.14.

Waiver of Jury Trial

23

Section 10.15.

Non-Recourse

23

 

 

 

EXHIBIT I

Services Managers

 

 

 

 

SCHEDULE A

Services

 

SCHEDULE B

Facilities

 

SCHEDULE C

Benefits Transition

 

SCHEDULE D

Navy IT Security Policy

 

 

ii



 

This Transition Services Agreement, dated as of March 24, 2015 (this “Agreement”), is made by and between Nabors Industries Ltd., a Bermuda exempted company (“Navy”) and Nabors Red Lion Limited, a Bermuda exempted company and currently a wholly owned Subsidiary of Navy (“Red Lion”).

 

RECITALS

 

WHEREAS, Navy and Red Lion have entered into a Separation Agreement, dated as of June 25, 2014 (as amended, modified or supplemented from time to time in accordance with its terms, the “Separation Agreement”), pursuant to which Navy will transfer to Red Lion, and Red Lion has agreed to receive and assume, certain assets and liabilities of the Red Lion Business (the “Separation”).

 

WHEREAS, Navy, Red Lion, and C&J Energy Services, Inc. a Delaware corporation (“Penny”) have entered into a Merger Agreement, dated as of June 25, 2014 (as amended, modified or supplemented from time to time in accordance with its terms, the “Merger Agreement”), pursuant to which, following the Separation, Penny will merge with a subsidiary of Red Lion and the common stock of Penny will be converted into common shares of Red Lion.

 

WHEREAS, pursuant to the Separation Agreement and the Merger Agreement, the Parties (as defined below) have agreed that Navy shall provide or cause to be provided to Red Lion and/or other members of the Red Lion Group certain services, the use of facilities and other assistance on a transitional basis and in accordance with the terms and subject to the conditions set forth in this Agreement.

 

WHEREAS, the Separation Agreement and the Merger Agreement require execution and delivery of this Agreement by Navy and Red Lion on or prior to the Separation Date.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained in this Agreement, and intending to be legally bound, the Parties hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01.                          Certain Defined Terms.  (a)  Unless otherwise defined in this Agreement, all capitalized terms used in this Agreement shall have the same meaning as in the Separation Agreement.

 

(b)                                 The following capitalized terms used in this Agreement shall have the meanings set forth below:

 

Additional Service” shall have the meaning set forth in Section 2.01(c).

 

Ancillary Agreement” shall have the meaning set forth in the Separation Agreement.

 

1



 

Agreement” shall have the meaning set forth in the Preamble.

 

Benefits Transition” shall have the meaning set forth in Section 2.05.

 

Confidential Information” shall have the meaning set forth in Section 10.03(a).

 

Continuing Employees” shall have the meaning set forth in the Employee Benefits Agreement.

 

Dispute” shall have the meaning set forth in Section 8.01(a).

 

Facilities” shall have the meaning set forth in Section 4.02(a).

 

Force Majeure” means, with respect to a Party, an event beyond the control of such Party (or any Person acting on its behalf), which by its nature could not have been reasonably foreseen by such Party (or such Person), or, if it could have been reasonably foreseen, was unavoidable, and includes acts of God, storms, floods, riots, fires, sabotage, civil commotion or civil unrest, interference by civil or military authorities, acts of war (declared or undeclared) or armed hostilities or other national or international calamity or one or more acts of terrorism, failure of energy sources or facilities, strike, walkout, lockout or other labor trouble or shortage, delays by unaffiliated suppliers or carriers.

 

Interest Payment” shall have the meaning set forth in Section 5.01(b).

 

Navy” shall have the meaning set forth in the Preamble.

 

Navy Employee” shall have the meaning set forth in Section 2.01(b).

 

Navy Employee Benefit Plan” shall have the meaning set forth in the Employee Benefits Agreement.

 

Navy Group” shall have the meaning set forth in the Separation Agreement.

 

Navy Services Manager” shall have the meaning set forth in Section 2.03(a).

 

Party” means Navy and Red Lion individually, and “Parties” means Navy and Red Lion collectively, and, in each case, their permitted successors and assigns.

 

Project Services Agreement” shall mean that certain Project Services Agreement, dated as of February 17, 2015 (as amended, modified or supplemented from time to time in accordance with its terms) between Nabors Corporate Services, Inc. and Penny.

 

Provider” means Navy or its Subsidiary or Affiliate (as determined at the time any Service is provided) providing a Service under this Agreement.

 

Provider Indemnified Party” shall have the meaning set forth in Section 7.05.

 

Recipient” means Red Lion or its Subsidiary or Affiliate (as determined at the time such Service is provided) to whom a Service under this Agreement is being provided.

 

2



 

Recipient Indemnified Party” shall have the meaning set forth in Section 7.06.

 

Red Lion” shall have the meaning set forth in the Preamble.

 

Red Lion Business” shall have the meaning set forth in the Separation Agreement.

 

Red Lion Entities” shall have the meaning set forth in the Separation Agreement.

 

Red Lion Group” shall have the meaning set forth in the Separation Agreement.

 

Red Lion Services Manager” shall have the meaning set forth in Section 2.03(b).

 

Representative” of a Person means any director, officer, employee, agent, consultant, accountant, auditor, attorney or other representative of such person.

 

Schedule(s)” shall have the meaning set forth in Section 2.02.

 

Separation Agreement” shall have the meaning set forth in the Recitals.

 

Separation Date” shall have the meaning shall have the meaning set forth in the Separation Agreement.

 

Service Charges” shall have the meaning set forth in Section 5.01(a).

 

Service Taxes” shall have the meaning set forth in Section 5.02(a).

 

Services” shall have the meaning set forth in Section 2.01.

 

Subsidiary” of any Person shall mean another Person (other than a natural Person), an aggregate amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of the Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first Person.

 

Termination Charges” shall mean, with respect to the early termination of any Service, (a) with respect to labor costs and other costs that are incurred by the Provider on a monthly basis with respect to such Service, an amount equal to any and all Services Charges payable by the Recipient in connection with such Service for the remainder of the month in which such Service is terminated; and (b) with respect to prepaid license fees, prepaid leases, other prepaid costs, and fees that the Provider has not yet paid but is obligated to pay with respect to any reasonable period after the termination of the applicable Service, in each case to the extent such amounts are incurred in connection with the provision of the terminated Services, all such prepaid and committed fees for all periods prepaid or committed; provided, that the Provider shall use its commercially reasonable efforts to reduce any costs, fees or expenses (and to recover prepaid fees) incurred by the Provider or payable to any unaffiliated third-party provider in connection with the provision of such Service and credit any such reductions against the Termination Charges payable by the Recipient (for the avoidance of doubt, no Termination

 

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Charges shall be payable by a Recipient with respect to the early termination of a Service in accordance with Section 9.01(b)).

 

ARTICLE II

 

SERVICES, DURATION AND SERVICES MANAGERS

 

Section 2.01.                          Services.

 

(a)                                 Subject to the terms and conditions of this Agreement, Navy shall provide (or cause to be provided) to the Red Lion Entities (i) the services (including the employee benefits transition described in Section 2.05 and listed on Schedule C to this Agreement) listed on Schedule A to this Agreement and (ii) access to facilities listed on Schedule B to this Agreement ((i) and (ii) collectively, the “Services”).  All Services shall be solely for the use and benefit of Red Lion and its Subsidiaries in conducting the Red Lion Business.

 

(b)                                 At all times during the performance of the Services, all Persons performing such Services (including agents, temporary employees, independent third parties, and consultants), who are collectively referred to herein as the “Navy Employees”, shall be construed as being independent from the Red Lion Group and no Navy Employee shall be considered or deemed to be an employee of any member of the Red Lion Group nor entitled to any employee benefits from any member of the Red Lion Group as a result of this Agreement.  For the avoidance of doubt, Navy acknowledges and agrees that throughout the period that a Navy Employee is providing Services hereunder, Navy is solely responsible for the payment of wages, providing of benefits and satisfaction of all employment-related obligations (including without limitation all obligations with respect to employee leave, immigration, recordkeeping, employment-related taxes and compliance with all labor and employment laws).  Red Lion acknowledges and agrees that, except as may be expressly set forth herein as a Service (including such agreed Additional Services to be provided pursuant to Section 2.01(c) below) or otherwise expressly set forth in the Separation Agreement, or other binding definitive agreement, Navy shall not be obligated to provide, or cause to be provided, any service or goods to any member of the Red Lion Group.

 

(c)                                  If, within one hundred and eighty (180) days after the Separation Date, the Parties determine that a service provided by Navy to any member of the Red Lion Group prior to the date hereof was omitted from the Schedules to this Agreement (each, an “Additional Service”), then the Parties shall negotiate in good faith to agree to the terms and conditions upon which such services would be added to this Agreement, it being agreed that the charges for such services should be determined on a basis consistent with the methodology for determining the initial prices provided for in Section 5.01.

 

Section 2.02.                          Duration of Services.  Subject to the terms of this Agreement, Provider shall provide (or cause to be provided) to the Recipients each Service until the earlier to occur of, with respect to each such Service, (i) the expiration of the period of the maximum duration for such Service as set forth on Schedule A or Schedule B (each a “Schedule”, and collectively, the “Schedules”) or (ii) the date on which such Service is terminated under Section 9.01(b); provided, however, that each Recipient shall use its commercially reasonable efforts in

 

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good faith to transition itself to a stand-alone entity with respect to each Service during the period for such Service as set forth in the relevant Schedules; and provided, further, that in the event that the expiration of the period of the maximum duration is not set forth in Schedule A or Schedule B and such Services are not earlier terminated under Section 9.01(b), the Parties’ obligations with respect to the provision of any such Services and payment for any such Services shall terminate on December 31, 2015.

 

Section 2.03.                          Transition Services Managers.  (a) Navy hereby appoints and designates the individual holding the Navy position set forth on Exhibit I to act as its initial services manager (the “Navy Services Manager”), who will be directly responsible for coordinating and managing the delivery of the Services and have authority to act on Navy’s behalf with respect to matters relating to this Agreement.  The Navy Services Manager will work with the personnel of the Navy Group to periodically address issues and matters raised by Red Lion relating to this Agreement.  Notwithstanding the requirements of Section 10.05, all communications from Red Lion to Navy pursuant to this Agreement regarding routine matters involving the Services set forth on the Schedules shall be made through the Navy Services Manager, or such other individual as specified by the Navy Services Manager in writing and delivered to Red Lion by email or facsimile transmission with receipt confirmed.  In the event the Navy Services Manager is unavailable or intends to be unavailable, the Navy Services Manager shall promptly specify another individual to serve as the Navy Services Manager in the interim. Navy shall notify Red Lion of the appointment of a different Navy Services Manager, if necessary, in accordance with Section 10.05.

 

(b)                                 Red Lion hereby appoints and designates the individual holding the Red Lion position set forth on Exhibit I to act as its initial services manager (the “Red Lion Services Manager”), who will be directly responsible for coordinating and managing the receipt of the Services and have authority to act on Red Lion’s behalf with respect to matters relating to this Agreement.  The Red Lion Services Manager will work with the personnel of Red Lion Entities to periodically address issues and matters raised by Navy relating to this Agreement.  Notwithstanding the requirements of Section 10.05, all communications from Navy to Red Lion pursuant to this Agreement regarding routine matters involving the Services set forth on the Schedules shall be made through the Red Lion Services Manager or such other individual as specified by the Red Lion Services Manager in writing and delivered to Navy by email or facsimile transmission with receipt confirmed.  In the event the Red Lion Services Manager is unavailable or intends to be unavailable, the Red Lion Manager shall promptly specify another individual to serve as the Red Lion Services Manager in the interim. Red Lion shall notify Navy of the appointment of a different Red Lion Services Manager, if necessary, in accordance with Section 10.05.

 

Section 2.04.                          Personnel.  (a) The Provider will have the right, in its reasonable discretion, to (i) designate which personnel it will assign to perform any Service, and (ii) remove and replace such personnel at any time, so long as there is no resulting increase in costs or decrease in the level of service for the Recipient; provided, however, that each Navy Employee shall hold any required licenses and certifications necessary, and shall be fully qualified, to perform the applicable Service and the Provider will use commercially reasonable, good faith efforts to limit the disruption to the Recipient in the transition of the Services to different personnel.  For the avoidance of doubt, no Recipient or other member of the Red Lion Group

 

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shall have the authority to terminate any Navy Employee’s employment with Navy or any other third party.

 

(b)                                 In the event that the provision of any Service by the Provider requires, as set forth in the Schedules, the cooperation and services of the applicable personnel of the Recipient, the Recipient will make available such personnel as may be reasonably necessary to enable the Provider to provide such Service.  The Recipient will have the right, in its reasonable discretion, to (i) designate which personnel it will make available to the Provider in connection with the foregoing sentence, and (ii) remove and replace such personnel at any time, in each case so long as there is no resulting increase in costs to, or any materially adverse effect to the provision of such Service by, the Provider; provided, however, that the Recipient will use its commercially reasonable efforts to limit the disruption to the Provider in the transition of such personnel.  All personnel of the Recipient made available pursuant to this Section 2.04(b) shall be instructed to comply with the applicable policies and guidelines of the Provider while on Provider premises, including any policies and guidelines relating to enterprise information technology (EIT).

 

Section 2.05.                          Employee Benefits Transition.  Except as otherwise provided in Section 2.4(b) of the Employee Benefits Agreement, from the Separation Time through the last day of the quarter following the quarter in which the Closing Date occurs, Navy shall permit the Continuing Employees to continue to participate in the Navy Employee Benefits Plans listed on Schedule C at the same level of benefits and subject to the same terms and conditions that were applicable to such Continuing Employees immediately prior to the Separation Time (the “Benefits Transition”). Notwithstanding anything to the contrary in Section 5.01, the Parties agree that, as payment for the Benefits Transition, Red Lion shall pay Navy (a) the aggregate amount of all premiums (which, for the avoidance of doubt, includes both employer and employee premiums), at the rate(s) in effect as of the Separation Time, that are attributable to the Continuing Employees in connection with the insurance coverage and benefits provided under the Benefits Transition for the period from the Separation Time through termination of such Benefits Transition and (b) a separate amount equal to the incremental administrative cost of maintaining such insurance coverage and benefits (including applicable hardware and software maintenance and support charges) provided under the Benefits Transition for such period for the benefit of the Continuing Employees to the extent the premiums paid pursuant to (a) do not already include such incremental administrative cost. Penny and Red Lion shall each jointly and severally indemnify and hold Navy and its Subsidiaries, other than the Red Lion Entities, harmless for any (i) liability arising solely from the Continuing Employees’ continued participation in any Navy Employee Benefit Plan listed on Schedule C hereto after the Separation Time and (ii) claim or liability arising in connection with the treatment of any such Navy Employee Benefit Plan as a multiple employer welfare arrangement as a result of any Continuing Employee’s participation in any such Navy Employee Benefit Plan, whether upon or following the participation of a Continuing Employee; provided, however, that Navy and its Subsidiaries shall take commercially reasonable efforts to cooperate with Penny and Red Lion in defending against any claims for any such liability.

 

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ARTICLE III

 

OTHER ARRANGEMENTS

 

Section 3.01.                          Third Party Licenses and Consents.  The Parties shall use commercially reasonable efforts to obtain, and to keep and maintain in effect, all governmental or third party licenses and consents required for the provision of any Service by a Provider in accordance with the terms of this Agreement; provided, that if a Provider is unable to obtain or maintain any such license or consent, such Provider shall promptly notify the Recipient in writing and shall, and shall cause its Affiliates to, use commercially reasonable efforts to implement an appropriate alternative arrangement.  To the extent such failure to obtain or maintain any such license or consent is not due to Provider’s own negligence or other failure to satisfy Provider’s obligations hereunder, the reasonable costs relating to obtaining any such licenses or consents, to the extent attributable to the Services, shall be borne by the Recipient; provided, that the Provider shall not incur any such costs without the prior written consent of the Recipient.  If any such license, consent or permissible alternative arrangement is not reasonably available despite the commercially reasonable efforts of the Provider and its Affiliates, such Provider shall not be required to provide the affected Services, and in the event the Provider ceases providing such Services, the Recipient shall have no obligation to pay any Service Charges or Termination Charges in respect of periods after the date the Provider ceases providing such Service.  A Provider shall not, without the Recipient’s prior written consent, enter into any contract or agreement, or modify the terms of any existing contract or agreement, if as a result: (a) the provision of any Service would violate the terms of such contract or agreement; (b) costs payable or potentially payable by Recipient would increase; (c) or such Provider could otherwise become unable to provide any Service.

 

Section 3.02.                          Third Party Providers.  If a Provider receives written notice from any third party service provider that such Person intends to terminate a service pursuant to which such Provider provides, or causes to be provided, a Service to the Recipient, then such Provider shall provide a copy of such written notice to the Recipient and shall use commercially reasonable efforts to secure the continued provision of that service from such third party or an alternative service provider.  In any such event, Recipient shall have no obligation to pay any Service Charge or Termination Charge or otherwise pay any third party costs or expenses relating to such terminated Services in respect of periods after the date of the termination of such Service that has not been continued or for which alternative arrangements have been made.

 

ARTICLE IV

 

ADDITIONAL AGREEMENTS

 

Section 4.01.                          Navy Computer-Based and Other Resources.  (a) As of the date of this Agreement, except as otherwise expressly provided in the Schedules to this Agreement or the Separation Agreement, or as otherwise agreed to by the parties in the Merger Agreement, in any other Ancillary Agreement, or in the Project Services Agreement, or as otherwise agreed to by the parties, or unless required in connection with the performance of or delivery of a Service, Red Lion and its Affiliates shall cease to use and shall have no further access to, and Navy shall have no obligation to otherwise provide, the Navy intranet and other owned or licensed computer software, networks, hardware or technology of Navy or its Affiliates and shall have no access to, and Navy shall have no obligation to otherwise provide, computer-based resources (including e-mail and access to Navy’s or its Affiliates’ computer networks and databases) that require a password or are available on a secured access basis only.  From and after the date of this

 

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Agreement, Red Lion and its Affiliates shall cause all of their personnel having access to the Navy intranet or such other Navy computer software (including source code and object code versions of any applications programs, operating system software, computer software languages, utilities, tools and other computer programs of Navy, in whatever form or media (including the tangible media upon which such are recorded or printed), together with all corrections, improvements, updates and releases thereof), networks, hardware, technology or computer based resources pursuant to the Separation Agreement, any Transaction Document or in connection with performance, receipt or delivery of a Service to comply with all security guidelines (including physical security, network access, internet security, confidentiality and personal data security guidelines) of Navy and its Affiliates to the extent (i) set forth in Schedule D and (ii) Navy provides Red Lion a copy or summary of the applicable guideline.  Red Lion shall ensure that the access contemplated by this Section 4.01 shall be used by such Red Lion personnel, employees, agents or contractors only for the purposes of performing, receiving and/or delivering the Services or as otherwise contemplated by, and subject to the terms of, this Agreement.  For the avoidance of doubt, except as provided in the Project Services Agreement with regards to the Clone and MFT, as those terms are defined therein, Red Lion shall ensure that Navy computer software (including source code and object code versions of any applications programs, operating system software, computer software languages, utilities, tools and other computer programs of Navy, in whatever form or media (including the tangible media upon which such are recorded or printed), together with all corrections, improvements, updates and releases thereof) to which Red Lion has access (x) shall be used solely in connection with Red Lion’s performance, receipt or delivery of the Services hereunder (and shall not be used by or on behalf of Red Lion for any purpose whatsoever following the termination or expiration of this Agreement, except to the extent otherwise agreed in writing by Navy in its sole discretion), (y) shall not be modified by or on behalf of Red Lion, and (z) shall not be modified, copied, emulated or otherwise utilized in connection with any other activity, including not being used by or on behalf of Red Lion to create software applications of equivalent or similar functionality as that of Navy software.

 

(b)                                 Except as expressly provided in this Agreement, the Separation Agreement, the Merger Agreement or any other Ancillary Agreement, or unless required in connection with the performance or delivery of any Services, each of the Parties and its Affiliates shall cease using (and shall cause their employees to cease using) the services made available by the other Party and its Affiliates prior to the date of this Agreement.

 

Section 4.02.                          Co-location and Facilities Matters.  (a) Navy hereby grants to Red Lion and its Affiliates a limited license to use and access space at certain facilities and to continue to use certain equipment located at such facilities (including use of office security and badge services), in each case as listed in Schedule B (the “Facilities”), for substantially the same purposes and in substantially the same manner used immediately prior to the date of this Agreement.  For the avoidance of doubt, at each of the Facilities, Navy shall, in addition to providing access and the right to use such facilities, shall provide to the personnel of Red Lion and its Affiliates substantially all ancillary services that are provided as of the date of this Agreement to its own personnel at such facility, such as, by way of example and not limitation: reception, general maintenance (subject to the immediately following sentence), janitorial, security (subject to the immediately following sentence) and telephone services; access to duplication, facsimile, printing and other similar office services; and use of cafeteria, break

 

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room, restroom and other similar facilities.  Unless otherwise provided in the Schedules, such ancillary services shall include (A) in the case of security, those services provided in connection with shared areas of a Facility, it being understood that the Provider shall not provide security services to Recipient-specific areas of Provider’s facility under the control of Recipient (to the extent that it is reasonably practicable for Recipient to provide such services with respect to any such Recipient-specific area) or security passes that permit entrance to Provider-specific areas of Provider’s facility, except to the extent necessary for Recipient’s personnel to access Recipient-specific areas or common areas of the facility, and (B) in the case of maintenance services, those services historically provided that are general in nature and within the scope of customary maintenance of ordinary wear and tear.

 

(b)                                 Red Lion shall only permit its authorized Representatives, contractors, invitees or licensees to use the Facilities, except as otherwise permitted by Navy in writing.  Red Lion shall, and shall cause its respective Subsidiaries, Representatives, contractors, invitees or licensees to, vacate Navy’s Facilities at or prior to the expiration date relating to each Facility set forth in Schedule B and shall deliver over to Navy or its Subsidiaries, as applicable, the Facilities in substantially the same repair and condition at that date as on the date of this Agreement, ordinary wear and tear and any condition caused by Navy or its Subsidiaries excepted; provided, however, that in the event that the third-party lease for a Facility specifies otherwise, Red Lion shall deliver over such Facility in such repair and condition (taking into account the date that the Party began its occupation of such Facility) as set forth in the third-party lease.  In addition to the access rights provided under Section 4.03, Navy or its Subsidiaries, or the landlord in respect of any third-party lease, shall have reasonable access to their respective Facilities from time to time as reasonably necessary for the security and maintenance thereof in accordance with past practice, the terms of this Agreement and the terms of any third-party lease agreement, if applicable.  Red Lion agrees to maintain commercially appropriate and customary levels (in no event less than what is required by the landlord under the applicable lease agreement) of property and liability insurance in respect of the Facilities the Recipients occupy and the activities conducted thereon and to be responsible for, and to indemnify and hold harmless Navy and other parties in accordance with Article VII in respect of, the acts and omissions of the Recipients’ Representatives, contractors, invitees and licensees.  Red Lion shall, and shall cause its Subsidiaries, Representatives, contractors, invitees and licensees to, comply in all material respects with (i) all Laws applicable to their use or occupation of any Facility including those relating to environmental and workplace safety matters, (ii) Navy’s applicable site rules, regulations, policies and procedures, and (iii) any applicable requirements of any third-party lease governing any Facility.  Navy shall, and shall cause its Subsidiaries, Representatives, contractors, invitees and licensees to, comply in all material respects with (i) all Laws applicable to their use or occupation of any Facility including those relating to environmental and workplace safety matters, (ii) Navy’s applicable site rules, regulations, policies and procedures, and (iii) any applicable requirements of any third-party lease governing any Facility.  Red Lion shall not make, and shall cause its Subsidiaries, Representatives, contractors, invitees and licensees to refrain from making, any material alterations or improvements to the Facilities except with the prior written approval of the other Navy or its Subsidiaries, as applicable, which consent Navy may withhold in its sole discretion.  Navy shall provide heating, cooling, electricity and other utility services for the Facilities substantially consistent with levels provided prior to the date of this Agreement.  The rights granted pursuant to this Section 4.02 shall be in the nature of a license and shall not create a leasehold or other estate or possessory rights in Red

 

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Lion, or its Subsidiaries, Representatives, contractors, invitees or licensees, with respect to the Facilities.

 

Section 4.03.                          Access.  (a) Red Lion shall, and shall cause its Subsidiaries to, allow Navy and its Representatives reasonable access during normal business hours to the Facilities (and portions thereof) occupied by Red Lion necessary for Navy to fulfill its obligations under this Agreement provided, however, that Navy and each Provider will use its commercially reasonable, good faith efforts to limit the disruption to the Recipient in the fulfillment of its obligations under this Agreement.

 

(b)                                 Notwithstanding the other rights of access of the Parties under this Agreement, Navy shall, and shall cause its Subsidiaries to, afford Red Lion, its Subsidiaries and Representatives, following not less than five (5) business days’ prior written notice from Red Lion, reasonable access during normal business hours to the facilities, information, systems, infrastructure, and personnel of the Providers as reasonably necessary for Red Lion to verify the adequacy of internal controls over information technology, reporting of financial data and related processes employed in connection with the Services, including in connection with verifying compliance with Section 404 of the Sarbanes-Oxley Act of 2002; provided, however, such access shall not unreasonably disrupt any of the business or operations of Navy or its Subsidiaries.

 

Section 4.04.                          Cooperation.  It is understood that it will require the significant efforts of both Parties to implement this Agreement and to ensure performance of this Agreement by the Parties at the agreed upon levels in accordance with all of the terms and conditions of this Agreement.  The Parties will cooperate, acting in good faith and using commercially reasonable efforts, to effect a smooth and orderly provision and transition of the Services provided under this Agreement from the Provider to the Recipient (including repairs & maintenance Services and the assignment or transfer of the rights and obligations under any third-party contracts relating to the Services); provided, however, that this Section 4.04 shall not require either Party to incur any material out-of-pocket costs or expenses unless and except as expressly provided in this Agreement or otherwise agreed to in writing by the Parties.

 

ARTICLE V

 

COSTS AND DISBURSEMENTS

 

Section 5.01.                          Costs and Disbursements.  (a) Except as otherwise provided in this Agreement or in the Schedules to this Agreement, a Recipient of Services shall pay to the Provider of such Services an agreed upon monthly fee for the Services based on Provider’s cost of providing such Services (or category of Services, as applicable), including such Provider’s customary allocation of overhead expenses and leveraged assets, services and resources (including applicable hardware and software maintenance and support charges), but excluding any out-of-pocket costs and expenses payable to third party service providers or sellers of hardware and software (each such fee constituting a “Service Charge” and, collectively, “Service Charges”).  During the term of this Agreement, the amount of a Service Charge for any Services (or category of Services, as applicable) shall not increase, except to the extent (i) appropriate to reflect an increase in the volume of Services received or requested by any Recipient, or (ii)  as

 

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otherwise mutually agreed to by the Parties.  The relevant Schedule shall be updated to reflect such increase in Service Charges.  All charges based on a monthly or other time basis will be pro-rated based on actual days elapsed during the period of service.  In addition to the Service Charges, the Recipient shall reimburse the Provider for any out-of-pocket costs and expenses payable to any third party service providers that are providing Services or any acquisitions of hardware and software.

 

(b)                                 The Provider shall deliver an invoice to the Recipient for all Service Charges (and any taxes due and owing in accordance with Section 5.02), plus any out-of-pocket costs and expenses payable (i) to any third party service providers that are providing Services and (ii) to sellers of any acquired hardware and software, on a monthly basis beginning on the second (2nd) month following the Closing Date, in arrears for the Service Charges and any out-of-pocket costs and expenses due to the Provider under this Agreement.  The Recipient shall pay the undisputed amount of each such invoice by wire transfer to the Provider within fifteen (15) days of the receipt of each such invoice.  If the Recipient fails to pay such amount by such date, the Recipient shall be obligated to pay to the Provider, in addition to the amount due, interest at an annual interest rate of five percent (5%) (the “Interest Payment”), accruing from the date the payment was due through the date of actual payment.  The Provider shall provide the Recipient with data and documentation (including copies of all applicable third-party invoices) reasonably satisfactory to the Recipient (i) supporting the calculation of any Service Charges that are increased pursuant to Section 5.01(a); (ii) supporting any Service Charges that are variable from month to month (including as a result of any increase or reduction in Services or otherwise) or (iii) supporting any out-of-pocket costs and expenses payable to any third party service providers that provided Services and any sellers of hardware and software for the purpose of verifying the accuracy of such calculation.

 

(c)                                  Subject to the confidentiality provisions set forth in Section 10.03, Navy shall, and shall cause its Affiliates to, provide, upon ten (10) days’ prior written notice from Red Lion, any information within its or its Affiliates’ possession that Red Lion reasonably requests in connection with any Services being provided (either by Navy or any of its Affiliates or an unaffiliated third-party provider), including any applicable invoices, agreements documenting the arrangements between Affiliate or third-party provider and the Provider and other supporting documentation.

 

Section 5.02.                          Taxes.  (a) Without limiting any provisions of this Agreement, the Recipient shall bear any and all sales, use, transaction, services, gross receipts (to the extent imposed in lieu of sales or transfer taxes) and transfer taxes and other similar charges (and any related interest and penalties) imposed on, or payable with respect to, Services and any fees or charges, including any Service Charges, payable by it pursuant to this Agreement (any such taxes or amounts “Service Taxes”).

 

(b)                                 Notwithstanding anything to the contrary in Section 5.02(a) or elsewhere in this Agreement, the Recipient shall be entitled to withhold from any payments to the Provider any such taxes that Recipient is required by law to withhold and shall pay over such taxes to the applicable taxing authority.  If the Recipient withholds any amounts respecting Service Taxes, the sum payable by the Recipient to the Provider shall be increased as necessary so that after such withholding has been made (including such withholdings applicable to the additional

 

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amounts payable under this Section), the Provider receives an amount equal to the sum it would have received had no such withholding been made.

 

Section 5.03.                          No Right to Set-Off.  The Recipient shall pay the full amount of Service Charges and shall not set-off, counterclaim or otherwise withhold any amount owed to the Provider under this Agreement on account of any obligation owed by the Provider to the Recipient that has not been finally adjudicated, settled or otherwise agreed upon by the Parties in writing.

 

Section 5.04.                          Allocation of Rebates.  If (a) the Provider receives rebates applicable to resources utilized by the Provider to provide the Services, (b) such rebate applies to a period of time during which the Provider utilized the subject of such rebate to provide the Services, and (c) the Recipient has paid all Service Charges relating to such Services for the period of time to which such rebate applies, then to the extent the Provider has received such rebate (either as a cash payment or as a credit against fees on an invoice), such rebate shall be allocated between the Provider and the Recipient on a pro rata basis to reflect the relative percentage of the usage of the applicable resource for the benefit of the Provider or the Recipient, respectively.  Where a rebate does not correspond to a particular Service category, Service Charge category, or time period during which the Services were provided, the applicable rebate shall be adjusted or divided as appropriate to derive an effective rebate rate for the Service categories, Service Charge categories, and time periods with respect to which rebates are to be allocated pursuant to this Section 5.04.

 

ARTICLE VI

 

STANDARD FOR SERVICE

 

Section 6.01.                          Standard for Service.  (a) Except where the Provider is restricted by an existing contract with a third party or by Law, and unless any Schedule hereto indicates otherwise or the parties shall agree in writing to a different arrangement, Navy agrees to, and to cause each Provider (i) to comply with all applicable Laws and perform the Services such that the nature, quality, standard of care and the service levels at which such Services are performed are no less than the nature, quality, standard of care and service levels at which the same or similar services were performed by or on behalf of the Provider during the twelve-month period prior to the Closing Date (or, if not so previously provided, then substantially similar to that which are applicable to similar services provided to the Provider’s Affiliates or other business components); and (ii) upon receipt of written notice from the Recipient identifying any outage, interruption or other failure of any Service, to respond to such outage, interruption or other failure of any Services in a manner that is no less than that which is substantially similar to the manner in which such Provider or its Affiliates responded to any outage, interruption or other failure of the same or similar services during the twelve-month period prior to the Closing Date (the Parties acknowledge that an outage, interruption or other failure of any Service shall not be deemed to be a breach of the provisions of this Section 6.01 so long as the applicable Provider complies with this clause (ii)).  As of or following the date of this Agreement, if the Provider is or becomes aware of any restriction on the Provider by an existing contract with a third-party that would restrict the nature, quality, standard of care or service levels applicable to delivery of the Services to be provided by the Provider to the Recipient, the Provider shall promptly notify

 

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the Recipient of any such restriction (which notice shall in any event precede any change to, or reduction in, the nature, quality, standard of care or service levels applicable to delivery of the Services resulting from such restriction) and use good faith efforts to provide such Services in a manner as closely as possible to the standards described in this Section 6.01, and the Parties shall negotiate in good faith an amendment to the applicable Schedule to reflect such change to, or reduction in, the nature, quality, standard of care or service levels of the Service, as applicable.  The Provider shall have no obligation to provide any Services hereunder in respect of any business, assets or properties acquired by the Recipient or any of its Affiliates subsequent to the Closing Date.

 

(b)                                 It is understood and agreed that a Provider may (but is not obligated to) from time to time modify, change or enhance the manner, nature, quality and/or standard of care of any Service provided to the Recipient to the extent such Provider is making a similar change in the performance of such services for the Provider and its Affiliates.  The Provider shall promptly furnish to Recipient notice with respect to such modifications, changes or enhancements, including a reasonably detailed description thereof. To the extent any such modification or change affects a Service and relates to technology, software or information systems, the Provider shall have no obligation to continue to provide, or cause to be provided, such Service using the prior technology, software or information systems, but shall be required to provide such Service in accordance with this Agreement (or an alternate service that meets the requirements for such Service set out in Schedule A) using its upgraded or changed technology, software or information systems.  Any reasonable incremental expense incurred by the Provider in making any such modification, change or enhancement to the Services performed hereunder or in providing such Services on an ongoing basis shall be taken into account in the calculation of Service Costs to the extent contemplated by Section 5.01(a); provided, no such incremental cost in making any such modification, change or enhancement to the Services performed hereunder or in providing such Services on an ongoing basis shall be taken into account to the extent an alternative service is utilized by Provider. The Provider shall have no obligation to provide, or cause to be provided, Services to the extent any changes are made to the Recipient’s business that materially increase or materially adversely increase the Provider’s burden with respect to the provision of such Services or that make commercially impracticable the provision of such Services, unless and only to the extent the Parties otherwise agree in writing or as expressly set forth herein.

 

(c)                                  The Provider shall have the right to shut down temporarily for maintenance purposes the operation of the Facilities providing any Service whenever, in the Provider’s sole and absolute discretion, such action is necessary; provided, however, that no preplanned temporary shutdown shall occur with less than forty-eight (48) hours’ advance notice to the applicable Recipient. For clarity, the Provider may temporarily close Facilities without advance notice in order to perform maintenance in response to an emergency or an event that impairs the use of the Facility.  The Provider shall be relieved of its obligations to provide the Services affected by such shutdown during the period that its Facilities are so shut down, and the Recipient shall be relieved of its obligations to pay the Service Charges and potential Termination Charges related to such Services in respect of periods after the date the applicable Services so shut down.

 

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Section 6.02.                          Disclaimer of Warranties.  Except as expressly set forth in this Agreement, the Parties acknowledge and agree that the Services are provided as-is, that the Recipients assume all risks and liability arising from or relating to its use of and reliance upon the Services and each Provider makes no representation or warranty with respect thereto.  EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, PROVIDERS HEREBY EXPRESSLY DISCLAIM ALL REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICES, WHETHER EXPRESS OR IMPLIED, INCLUDING ANY REPRESENTATION OR WARRANTY IN REGARD TO QUALITY, PERFORMANCE, NONINFRINGEMENT, COMMERCIAL UTILITY, MERCHANTABILITY OR FITNESS OF THE TRANSITION SERVICES FOR A PARTICULAR PURPOSE.

 

Section 6.03.                          Compliance with Laws and Regulations.  Each Party shall be responsible for its own compliance with any and all Laws applicable to its performance under this Agreement.  No Party will knowingly take any action in violation of any such applicable Law that results in liability being imposed on the other Party.

 

ARTICLE VII

 

LIMITED LIABILITY AND INDEMNIFICATION

 

Section 7.01.                          Personal Injury.  EACH PARTY (AS AN INDEMNIFYING PARTY) SHALL ASSUME ALL LIABILITY FOR AND SHALL RELEASE, DEFEND, INDEMNIFY, AND HOLD THE OTHER PARTY, ITS AFFILIATES, AND THEIR RESPECTIVE EMPLOYEES, OFFICERS, DIRECTORS, AND AGENTS (ALL AS INDEMNIFIED PARTIES) FREE AND HARMLESS FROM AND AGAINST ALL LOSSES IN CONNECTION HEREWITH IN RESPECT OF INJURY TO OR DEATH OR SICKNESS OF ANY EMPLOYEE, AGENT, OR REPRESENTATIVE OF THE INDEMNIFYING PARTY, ITS AFFILIATES OR THEIR CONTRACTORS OR SUBCONTRACTORS OF ANY PARTY, HOWSOEVER ARISING AND WHETHER OR NOT CAUSED BY THE NEGLIGENCE (WHETHER SOLE, JOINT, OR CONCURRENT, OR ACTIVE OR PASSIVE) OF THE INDEMNIFIED PARTIES, EXCEPT TO THE EXTENT SUCH LOSS IS CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF AN INDEMNIFIED PARTY.

 

Section 7.02.                          Indirect and Other Damages.  Notwithstanding anything to the contrary contained in this Agreement, the Providers shall not be liable to the Recipient or any of its Affiliates or Representatives, whether in contract, tort (including negligence and strict liability) or otherwise, at law or equity, for any punitive, special, indirect, incidental, consequential, or exemplary damages (including any lost profits, lost savings, loss of reputation or loss of opportunity included in such damages), which in any way arise out of, relate to or are a consequence of, the performance or nonperformance by the Providers (including any Affiliates and Representatives of a Provider and any third-party providers, in each case, providing the applicable Services) under this Agreement or the provision of, or failure to provide, any Services under this Agreement; provided, however, that (i) the Provider may be liable to the other Party for any such damages that result directly from the willful misconduct or gross negligence of the Providers, and (ii) to the extent a Party is otherwise determined to be entitled to recover any punitive, special, indirect, incidental, consequential, or exemplary damages, such damages may

 

14



 

be recovered only to the extent the Party claiming such damages has actually paid amounts to a third party as part of a judgment or settlement.

 

Section 7.03.                          Limitation of Liability.  Subject to Section 7.04, the liabilities of each Provider and its Affiliates and Representatives, collectively, under this Agreement for any act or failure to act in connection herewith (including the performance or breach of this Agreement), or from the sale, delivery, provision or use of any Services provided under or contemplated by this Agreement, whether in contract, tort (including negligence and strict liability) or otherwise, shall not exceed the total aggregate Service Charges (excluding any third-party costs and expenses included in such Service Charges) actually paid to such Provider by the Recipient pursuant to this Agreement.

 

Section 7.04.                          Obligation To Re-perform; Liabilities.  In the event of any breach of this Agreement by any Provider with respect to the provision of any Services (with respect to which the Provider can reasonably be expected to re-perform in a commercially reasonable manner), the Provider shall (a) promptly correct in all material respects such error, defect or breach or re-perform in all material respects such Services at the written request of the Recipient and at the sole cost and expense of the Provider and (b)  subject to the limitations set forth in Sections 7.01 and 7.02, reimburse the Recipient and its Affiliates and Representatives for liabilities attributable to such breach by the Provider.  Other than as set forth in Section 7.06, the remedy set forth in this Section 7.04 shall be the sole and exclusive remedy of the Recipient for any such breach of this Agreement.  Any request for re-performance in accordance with this Section 7.04 by the Recipient must be in writing and specify in reasonable detail the particular error, defect or breach, and such request must be made no more than one (1) month from the date such breach occurred.

 

Section 7.05.                          Release and Recipient Indemnity.  Subject to Section 7.01, each Recipient hereby releases the Providers and their Affiliates and Representatives (each, a “Provider Indemnified Party”), and each Recipient hereby agrees to indemnify, defend and hold harmless each such Provider Indemnified Party from and against any and all liabilities arising from, relating to or in connection with the use of any Services by such Recipient or any of its Affiliates, Representatives or other Persons using such Services, except to the extent that such liabilities arise out of, relate to or are a consequence of the applicable Provider Indemnified Party’s bad faith, gross negligence or willful misconduct.

 

Section 7.06.                          Provider Indemnity.  Subject to Section 7.01, each Provider hereby agrees to indemnify, defend and hold harmless the Recipients and their Affiliates and Representatives (each a “Recipient Indemnified Party”), from and against any and all liabilities arising from, relating to or in connection with the use of any Services by such Recipient or any of its Affiliates, Representatives or other Persons using such Services or in connection with the sale, delivery, provision or use of any Services provided under or contemplated by this Agreement to the extent that such liabilities arise out of, relate to or are a consequence of the applicable Provider’s bad faith, gross negligence or willful misconduct.

 

Section 7.07.                          Indemnification Procedures.  The provisions of Article III of the Separation Agreement shall govern claims for indemnification under this Agreement.

 

15



 

Section 7.08.                          Liability for Payment Obligations.  Nothing in this Article VII shall be deemed to eliminate or limit, in any respect, Red Lion’s express obligation in this Agreement to pay Termination Charges or Service Charges for Services rendered in accordance with this Agreement.

 

Section 7.09.                          Exclusion of Other Remedies.  The provisions of Sections 7.04, 7.05 and 7.06 of this Agreement, subject to Section 7.03, shall be the sole and exclusive remedies of the Provider Indemnified Parties and the Recipient Indemnified Parties, as applicable, for any claim, loss, damage, expense or liability, whether arising from statute, principle of common or civil law, principles of strict liability, tort, contract or otherwise under this Agreement.

 

ARTICLE VIII

 

DISPUTE RESOLUTION

 

Section 8.01.                          Dispute Resolution.  (a) In the event of any dispute, controversy or claim arising out of or relating to the transactions contemplated by this Agreement, or the validity, interpretation, breach or termination of any provision of this Agreement, or calculation or allocation of the costs of any Service, including claims seeking redress or asserting rights under any Law (each, a “Dispute”), Navy and Red Lion agree that the Navy Services Manager and the Red Lion Services Manager (or such other persons as Navy and Red Lion may designate) shall negotiate in good faith in an attempt to resolve such Dispute amicably.  If such Dispute has not been resolved to the mutual satisfaction of Navy and Red Lion within fifteen (15) days after the initial written notice of the Dispute (or such longer period as the Parties may agree), then such Dispute shall be resolved in accordance with the dispute resolution process referred to in Article V of the Separation Agreement; provided, that such dispute resolution process shall not modify or add to the remedies available to the Parties under this Agreement.

 

(b)                                 In any Dispute regarding the amount of a Service Charge, if after such Dispute is finally resolved pursuant to the dispute resolution process set forth or referred to in Section 8.01(a), it is determined that the Service Charge that the Provider has invoiced the Recipient, and that the Recipient has paid to the Provider, is greater or less than the amount that the Service Charge should have been, then (a) if it is determined that the Recipient has overpaid the Service Charge, the Provider shall within five (5) business days after such determination reimburse the Recipient an amount of cash equal to such overpayment, plus the Interest Payment, accruing from the date of payment by the Recipient to the time of reimbursement by the Provider; and (b) if it is determined that the Recipient has underpaid the Service Charge, the Recipient shall within five (5) business days after such determination reimburse the Provider an amount of cash equal to such underpayment, plus the Interest Payment, accruing from the date such payment originally should have been made by the Recipient to the time of payment by the Recipient.

 

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ARTICLE IX

 

TERM AND TERMINATION

 

Section 9.01.                          Term and Termination.  (a) This Agreement shall commence immediately upon the Closing Date and shall terminate upon the earlier to occur of:  (i) the last date on which either Party is obligated to provide any Service to the other Party in accordance with the terms of this Agreement or (ii) the mutual written agreement of the Parties to terminate this Agreement in its entirety; provided, however, that this Agreement shall terminate with respect to any individual Service (or category of Services, as applicable), (i) automatically upon the completion of such individual Service (or category of Services, as applicable) or (ii) upon the mutual written agreement of the Parties to terminate this Agreement with respect to such individual Service (or category of Services, as applicable).

 

(b)                                 (i) Without prejudice to a Recipient’s rights with respect to a Force Majeure, a Recipient may from time to time terminate this Agreement with respect to any individual Service or the entirety of the Services or any portion thereof, (A) for any reason or no reason (y) upon providing to the Provider sixty (60) days’ prior written notice, and (z) subject to the obligation to pay any applicable Termination Charges pursuant to Section 9.02, or (B) if the Provider of such Service has failed to perform any of its material obligations under this Agreement with respect to such Service, and such failure shall continue to exist thirty (30) days after receipt by the Provider of written notice of such failure from the Recipient; and (ii) a Provider may terminate this Agreement with respect to one or more Services, in whole but not in part, at any time upon prior written notice to the Recipient if the Recipient has failed to perform any of its material obligations under this Agreement relating to such Services, including making payment of Service Charges when due, and such failure shall be continued uncured for a period of thirty (30) days after receipt by the Recipient of a written notice of such failure from the Provider.  The relevant Schedule shall be updated to reflect any terminated Service.  In the event that any Service is terminated other than at the end of a month, the Service Charge associated with such Service shall be pro-rated for the remainder of such month appropriately.  The Parties acknowledge that there may be interdependencies among the Services being provided under this Agreement that are not identified on the applicable Schedules, and agree that if the Provider’s ability to provide a particular Service in accordance with this Agreement is materially and adversely impacted by the termination of another Service in accordance with Section 9.01(b)(i)(A) prior to the expiration of the period of the maximum duration for such Service, the Parties shall negotiate in good faith to amend the Schedule relating to such impacted continuing Service, which amendment shall be consistent with the terms of, and the pricing methodology used for, comparable Services.

 

(c)                                  A Recipient may from time to time request a reduction in part of the scope or amount of any Service.  If requested to do so by Recipient, the Provider agrees to discuss in good faith appropriate reductions to the relevant Service Charges in light of all relevant factors including the costs and benefits to the Provider of any such reductions.  If, after such discussions, and without prejudice to Recipient’s rights under Section 9.01(b), the Recipient and the Provider do not agree to any requested reduction of the scope or amount of any Service and the relevant Service Charges in connection therewith, then there shall be no change to the scope or amount of any Services or Service Charges under this Agreement.  In the event that a Recipient and a Provider agreed to any reduction of Service and the relevant Service Charges, the relevant Schedule shall be updated to reflect such reduced Service.  In the event that any Service is reduced other than at the end of a month, the Service Charge associated with such Service for the month in which such Service is reduced shall be pro-rated appropriately.

 

17



 

Section 9.02.                          Effect of Termination.  Upon termination of any Service pursuant to this Agreement, the Provider of the terminated Service will have no further obligation to provide the terminated Service, and the relevant Recipient will have no obligation to pay any future Service Charges relating to any such Service; provided, that the Recipient shall remain obligated to the relevant Provider for the (i) Service Charges owed and payable in respect of Services provided prior to the effective date of termination and (ii) any applicable Termination Charges.  In connection with termination of any Service, the provisions of this Agreement not relating solely to such terminated Service shall survive any such termination, and in connection with a termination of this Agreement, Article I, Article VII (including liability in respect of any indemnifiable liabilities under this Agreement arising or occurring on or prior to the date of termination), Article VIII, Article IX, Article X, all confidentiality obligations under this Agreement and liability for all due and unpaid Service Charges and any applicable Termination Charges payable pursuant to the early termination of a Service, shall continue to survive indefinitely.

 

Section 9.03.                          Force Majeure.  (a) No Provider (nor any Person acting on its behalf) shall have any liability or responsibility for failure to fulfill any obligation under this Agreement so long as and to the extent to which the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure; provided, that (i) the Provider (or such Person) shall have exercised commercially reasonable efforts to minimize the effect of Force Majeure on its obligations; and (ii) the nature, quality and standard of care that the Provider shall provide in delivering a Service after a Force Majeure shall be substantially the same as the nature, quality and standard of care that the Provider provides to its Affiliates and its other business components with respect to such Service.  In the event of an occurrence of a Force Majeure, the Provider shall give notice of suspension as soon as reasonably practicable to the other stating the date and extent of such suspension and the cause thereof, and the Provider shall resume the performance of such obligations as soon as reasonably practicable after the removal of such cause. In such event, the Recipient shall be relieved of any and all obligations in respect of the payment of any Service Charge for the applicable suspended Service with respect to the period of time such Service is suspended as a result of the applicable Force Majeure.

 

(b)                                 During the term of this Agreement, including during the period of a Force Majeure, the Recipient shall be entitled to seek an alternative service provider with respect to any Service(s) (at Recipient’s own expense).

 

ARTICLE X

 

GENERAL PROVISIONS

 

Section 10.01.                   No Agency.  Nothing in this Agreement shall be deemed in any way or for any purpose to constitute any party an agent of another unaffiliated party in the conduct of such other party’s business.  Each Provider of any Service under this Agreement shall act as an independent contractor and not as the agent of the Recipient in performing such Service, maintaining control over its employees, its subcontractors and their employees and complying with all withholding of income at source requirements, whether federal, state, local or foreign.

 

18



 

Section 10.02.                   Subcontractors.  A Provider may hire or engage one or more subcontractors to perform any or all of its obligations under this Agreement; provided, that (i) such Provider shall use the same degree of care in selecting any such subcontractor as it would if such contractor was being retained to provide similar services to the Provider and (ii) such Provider shall in all cases remain responsible for all of its obligations under this Agreement with respect to the scope of the Services, the standard for services as set forth in Article VI and the content of the Services provided to the Recipient.

 

Section 10.03.                   Treatment of Confidential Information.  (a) The Parties shall not, and shall cause all other persons providing Services or having access to information of the other Party that is known to such Party as confidential or proprietary (“Confidential Information”) not to, disclose to any other person or use, except for purposes of this Agreement, any Confidential Information of the other Party; provided, however, that each Party may disclose Confidential Information of the other Party, to the extent permitted by applicable Law:  (i) to its Representatives on a need-to-know basis in connection with the performance of such Party’s obligations under this Agreement; (ii) in any report, statement, testimony or other submission required to be made to any Governmental Authority having jurisdiction over the disclosing Party; or (iii) in order to comply with applicable Law, or in response to any summons, subpoena or other legal process or formal or informal investigative demand issued to the disclosing Party in the course of any litigation, investigation or administrative proceeding.  In the event that a Party becomes legally compelled (based on advice of counsel) by deposition, interrogatory, request for documents subpoena, civil investigative demand or similar judicial or administrative process to disclose any Confidential Information of the other Party, such disclosing Party shall provide the other Party with prompt prior written notice of such requirement, and, to the extent reasonably practicable, cooperate with the other Party (at such other Party’s expense) to obtain a protective order or similar remedy to cause such Confidential Information not to be disclosed, including interposing all available objections thereto, such as objections based on settlement privilege.  In the event that such protective order or other similar remedy is not obtained, the disclosing Party shall furnish only that portion of the Confidential Information that has been legally compelled, and shall exercise its commercially reasonable efforts (at such other Party’s expense) to obtain assurance that confidential treatment will be accorded such Confidential Information.  Navy’s Confidential Information shall include any data and software that Red Lion or any of its Affiliates are provided or have access to solely as a result of the access rights provided in Section 4.01.

 

(b)                                 Each Party shall, and shall cause its Representatives to protect the Confidential Information of the other Party by using the same degree of care to prevent the unauthorized disclosure of such as the Party uses to protect its own confidential information of a like nature.

 

(c)                                  Each Party shall cause its Representatives to agree to be bound by the same restrictions on use and disclosure of Confidential Information as are binding upon such Party in advance of the disclosure of any such Confidential Information to them.

 

(d)                                 Each Party shall comply with all applicable state, federal and foreign privacy and data protection Laws that are or that may in the future be applicable to the provision of Services under this Agreement.

 

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Section 10.04.                   Further Assurances.  Each Party covenants and agrees that, without any additional consideration, it shall execute and deliver any further legal instruments and perform any acts that are or may become necessary to effectuate this Agreement.

 

Section 10.05.                   Notices.  Except with respect to routine communications by the Navy Services Manager and Red Lion Services Manager under Section 2.03, all notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by facsimile or electronic transmission with receipt confirmed (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 10.05):

 

(i)                                     if to Navy:

 

Nabors Industries Ltd.

Crown House

Second Floor

4 Par-la-Ville Road

Hamilton, HM 08

Bermuda

Attention: Corporate Secretary

 

with a copy to:

 

Nabors Corporate Services, Inc.

515 West Greens Road, Suite 1200

Houston, Texas 66057

Attention: General Counsel

Facsimile: (281) 775-4319

 

with a copy to:

 

Milbank, Tweed, Hadley & McCloy LLP

One Chase Manhattan Plaza

New York, New York 10005

Attention:  Charles J. Conroy

Scott W. Golenbock

Facsimile: (212) 822-5219

 

(ii)                                  if to Red Lion:

 

C&J Energy Services Ltd.

Canon’s Court

22 Victoria Street

Hamilton HM12

Bermuda

 

20



 

Attention:  Corporate Secretary

 

with a copy to:

 

C&J Energy Services Ltd.

3990 Rogerdale Rd.

Houston, TX 77042

Attention: Steven Carter

Facsimile: (713) 325-5920

 

with a copy to:

 

Vinson & Elkins L.L.P.

1001 Fannin, Suite 2500

Houston, Texas 77002

Attention: Stephen M. Gill

Facsimile: (713) 615-5956

 

Section 10.06.                   Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced under any Law or as a matter of public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any Party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, 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 by this Agreement be consummated as originally contemplated to the greatest extent possible.

 

Section 10.07.                   Entire Agreement.  Except as otherwise expressly provided in this Agreement, this Agreement, the Separation Agreement, the Merger Agreement and the other Ancillary Agreements, constitute the entire agreement of the Parties with respect to the subject matter of this Agreement and supersede all prior agreements and undertakings, both written and oral, between or on behalf of the Parties with respect to the subject matter of this Agreement.

 

Section 10.08.                   No Third-Party Beneficiaries.  Except as provided in Article VII with respect to Provider Indemnified Parties and Recipient Indemnified Parties, this Agreement is for the sole benefit of the Parties and their permitted successors and assigns and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person, including any union or any employee or former employee of Navy or Red Lion, any legal or equitable right, benefit or remedy of any nature whatsoever, including any rights of employment for any specified period, under or by reason of this Agreement.

 

Section 10.09.                   Governing Law.  This Agreement (and any claims or disputes arising out of or related to this Agreement or to the transactions contemplated by this Agreement or to the inducement of any Party to enter into this Agreement or the transactions contemplated by this Agreement, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall in all respects be governed by, and

 

21



 

construed in accordance with, the Laws of the State of New York, including all matters of construction, validity and performance, in each case without reference to any conflict of Law rules that might lead to the application of the Laws of any other jurisdiction.

 

Section 10.10.                   Amendment.  No provision of this Agreement, including any Schedules to this Agreement, may be amended, supplemented or modified except by a written instrument making specific reference to this Agreement or any such Schedules to this Agreement, as applicable, signed by all the Parties.

 

Section 10.11.                   Rules of Construction.  Interpretation of this Agreement shall be governed by the following rules of construction:  (a) 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; (b) references to the terms Article, Section, paragraph and Schedule are references to the Articles, Sections, paragraphs and Schedules of this Agreement unless otherwise specified; (c) references to “$” shall mean U.S. dollars; (d) the word “including” and words of similar import when used in this Agreement shall mean “including without limitation,” unless otherwise specified; (e) the word “or” shall not be exclusive; (f) references to “written” or “in writing” include in electronic form; (g) provisions shall apply, when appropriate, to successive events and transactions; (h) the headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement; (i) Navy and Red Lion have each participated in the negotiation and drafting of this Agreement and if an ambiguity or question of interpretation should arise, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or burdening either Party by virtue of the authorship of any of the provisions in this Agreement or any interim drafts of this Agreement; (j) a reference to any Person includes such Person’s successors and permitted assigns; (k) any reference to “days” means calendar days unless business days are expressly specified; and (l) when calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded, if the last day of such period is not a business day, the period shall end on the next succeeding business day.

 

Section 10.12.                   Counterparts.  This Agreement may be executed in one or more counterparts, and by each Party in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page to this Agreement by facsimile or portable document format (PDF) shall be as effective as delivery of a manually executed counterpart of this Agreement.

 

Section 10.13.                   Assignability.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  No party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the other party hereto; provided, however that either Party may assign its rights hereunder to an Affiliate without the prior written consent of the other Party; provided, further, that such assigning Party shall remain liable for its obligations hereunder notwithstanding such assignment.

 

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Section 10.14.                   Waiver of Jury Trial.  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 TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT.  EACH PARTY (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER; AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTY TO THIS AGREEMENT HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER TRANSACTION AGREEMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.14.

 

Section 10.15.                   Non-Recourse.  No past, present or future director, officer, employee, incorporator, member, partner, shareholder, stockholder, Affiliate, agent, attorney or representative of either Navy or Red Lion or their respective predecessors, successors or Affiliates shall have any liability for any obligations or liabilities of Navy or Red Lion, respectively, under this Agreement or for any claims based on, in respect of, or by reason of, the transactions contemplated by this Agreement.

 

[The remainder of this page is Intentionally left blank.]

 

23



 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed on the date first written above by their respective duly authorized officers.

 

 

NABORS INDUSTRIES LTD.

 

 

 

 

 

By:

/s/ Mark D. Andrews

 

Name: Mark D. Andrews

 

Title: Corporate Secretary

 

 

 

 

 

NABORS RED LION LIMITED

 

 

 

 

 

By:

/s/ Mark D. Andrews

 

Name: Mark D. Andrews

 

Title: Director

 



 

Exhibit I

 

Services Managers

 

 

Position

Navy Services Manager

Sri Valleru, Vice President and Chief Information Officer

 

 

Red Lion Services Manager

Steven Carter, Chief Information Officer

 



 

Schedule A
Services

 

NOTES:

·                  Certain Services contemplated herein and intended to be governed by this Agreement are described in further detail in that certain Project Services Agreement by and between Nabors Corporate Services, Inc. (“NCS”) and C&J, including in Annexes 1-10 thereto.

·                  NCS IT Services are listed under ‘NCS IT Services’ column based on the type of service provided for the associated item.

·                  Certain Functional and Business Services to be provided by NCS and/or NCM are listed under ‘Provider of service to NCPS’ and ‘Provider of service to NPS’. If NCPS or NPS is listed in these columns, it indicates that these Function and Business Services will be provided internally by NCPS or NPS and are not part of the Functional and Business Services to be provided by NCS in accordance with the TSA.  In such instances, NCS will provide NCS IT Services in accordance with the TSA.

·                  Unless otherwise specified, all Services are provided to all business unit locations (H.O. and Remote).

 

Function

 

Category

 

Description

 

NBR System/ Solution

 

Vendor

 

Type

 

NCS IT Services

 

Provider of
service to
NCPS

 

Provider of
service to NPS

 

Notes

IT

 

Access Control

 

Authentication

 

MS Active Directory

 

Microsoft

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS IT

IT

 

Access Control

 

Network Account Management

 

myRequests

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS IT

IT

 

Access Control

 

Systems Access Management

 

myRequests

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS IT

IT

 

Common

 

File/Print

 

MS & Oracle

 

Microsoft

 

On-premise

 

PaaS

 

NCS

 

NCS

 

NCS IT

IT

 

Common

 

Collaboration

 

Sharepoint 2013

 

Microsoft

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS IT

IT

 

Common

 

Requests (tickets) management

 

myRequests

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS IT

IT

 

Common

 

Email

 

Office365

 

Microsoft

 

SaaS

 

SaaS

 

NCS

 

NCS

 

NCS IT

IT

 

Common

 

Nabors imaged desktops

 

 

 

 

 

 

 

PaaS

 

NCS

 

NCS

 

Sourcing, image and the install services. Physical hardware or non-image related additional SW licenses coded directly to BU (NCPS & NPS)

IT

 

Common

 

HQ phone services

 

 

 

 

 

 

 

NCS

 

 

 

 

 

Maintain voicemail recording redirecting to new phone number

 



 

Function

 

Category

 

Description

 

NBR System/ Solution

 

Vendor

 

Type

 

NCS IT Services

 

Provider of
service to
NCPS

 

Provider of
service to NPS

 

Notes

IT

 

Common

 

Mobile phones and aircards

 

 

 

 

 

 

 

IaaS

 

NCS to provide service
NCPS to recover related expenses

 

NCS to provide service
NPS to recover related expenses

 

Sourcing, image and the install services. Physical hardware or non-image related additional SW licenses and monthly carrier services coded directly to BU (NCPS & NPS)

IT

 

Common

 

LAN/WAN Communications, including VSAT support

 

 

 

 

 

 

 

IaaS

 

NCS to provide service
NCPS to recover related expenses

 

NCS to provide service
NPS to recover related expenses

 

Sourcing, image and the install services. Physical hardware or non-image related additional SW licenses and monthly carrier services coded directly to BU (NCPS & NPS)

IT/Sales & Marketing

 

Marketing

 

Nabors.com

 

 

 

 

 

 

 

IaaS

 

NCS

 

NCS

 

 

IT

 

Applications

 

Application support for all applications currently supported by NCS IT

 

Various

 

Various

 

Various

 

IaaS (details for specific application are listed under associated functions)

 

Various

 

Various

 

 

HR

 

Recruiting

 

Requisition Management

 

Taleo

 

Oracle

 

SaaS

 

SaaS

 

NCPS

 

NPS

 

All charges associated to external job site posting will be charged directly to the BU (NCPS & NPS)

 

Services will end when C&J systems separation occurs (C&J version of the systems are cloned).

HR

 

Recruiting

 

Applicant Tracking

 

Taleo

 

Oracle

 

SaaS

 

SaaS

 

NCPS

 

NPS

 

 

 



 

Function

 

Category

 

Description

 

NBR System/ Solution

 

Vendor

 

Type

 

NCS IT Services

 

Provider of
service to
NCPS

 

Provider of
service to NPS

 

Notes

HR

 

Recruiting

 

Offer Letter Management

 

Taleo

 

Oracle

 

SaaS

 

SaaS

 

NCPS to provide service; NCS to provide offer letter template management or appropriate system access to allow NCPS to report

 

NPS to provide service; NCS to provide offer letter template management or appropriate system access to allow NCPS to report

 

 

HR

 

Recruiting

 

Pre-employment screening

 

Taleo

 

Oracle

 

SaaS

 

SaaS

 

NCPS; NCS to manage vendors and background check packages

 

NPS; NCS to manage vendors and background check packages

 

All third party service charges will be coded/charged directly to the BU (NCPS & NPS)

HR

 

Employee Management

 

Employee On-boarding

 

Employee Portal

 

Nabors

 

On-premise

 

SaaS

 

NCPS

 

NPS

 

 

HR

 

Employee Management

 

Employee Management - Requisition

 

myWorkfoce - COS

 

Nabors

 

On-premise

 

SaaS

 

NCPS

 

NPS

 

 

HR

 

Employee Management

 

Employee Master Data Management (HR)

 

HCM - HR

 

Oracle

 

On-premise

 

SaaS

 

NCPS/NCS

 

NPS/NCS

 

Any oracle-based activities, including reports that must be run in Oracle rather than MyWorkforce, need to be provided by NCS

HR

 

Timetracking and Payroll

 

Vacation Requests

 

myPayroll- Vacation Requests

 

Nabors

 

On-premise

 

SaaS

 

NCPS

 

NPS

 

 

HR

 

Timetracking and Payroll

 

Time and Attendance - SGA & Field Support

 

myPayroll - Timesheets

 

Nabors

 

On-premise

 

SaaS

 

NCPS

 

NPS

 

 

HR

 

Timetracking and Payroll

 

Time and Attendance - Field Services

 

NFS

 

Nabors

 

On-premise

 

SaaS

 

NCPS

 

NPS

 

 

HR

 

Timetracking and Payroll

 

Payroll Processing

 

HCM - Payroll

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

NCS

 

 

HR

 

Timetracking and Payroll

 

Grade Rate Table Management for Field Personnel

 

HCM - HR/Payroll

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

NCS

 

 

HR

 

Timetracking and Payroll

 

Garnishments and court orders

 

HCM - Payroll

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Payroll

HR

 

Timetracking and Payroll

 

Payroll Tax Reporting and Payments

 

HCM - Payroll

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

NPS

 

NCS Payroll

HR

 

Timetracking and Payroll

 

Payroll Reporting (non-tax)

 

HCM - Payroll

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

NPS

 

 

HR

 

Benefits

 

Employee Portal Self-service

 

myBenefits- Benefits Enrollment

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NCM

 

 

HR

 

Benefits

 

401(k) Rollover Assistance

 

BOL

 

Merrill Lynch

 

On-premise

 

PaaS

 

NCS

 

N/A

 

Includes KVS 401(k) information assistance

HR

 

Benefits

 

RRSP/NRSP Administration

 

HCM - OAB

 

 

 

On-premise

 

SaaS

 

N/A

 

NCM

 

 

HR

 

Benefits

 

Benefits Reporting

 

HCM - OAB

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

NCM

 

 

 



 

Function

 

Category

 

Description

 

NBR System/ Solution

 

Vendor

 

Type

 

NCS IT Services

 

Provider of
service to
NCPS

 

Provider of
service to NPS

 

Notes

HR

 

Benefits

 

H&W Benefits Administration & Billing

 

HCM - OAB

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

NCM

 

 

HR

 

Benefits

 

COBRA Administration

 

 

 

HCSC

 

 

 

PaaS

 

NCS

 

N/A

 

 

HR

 

Benefits

 

Leave of Absence Administration

 

HCM - OAB

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NCM

 

 

HR

 

Benefits

 

Qualified Administration Medical Support

 

HCM - OAB

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

N/A

 

 

HR

 

Benefits

 

Benefit Vendor Files

 

HCM - OAB

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

NCM

 

 

HR

 

Benefits

 

Benefit Call Center

 

CISCO Call Agent

 

Nabors

 

On-premise

 

PaaS

 

NCS

 

N/A

 

 

HR

 

Benefits

 

Benefits Vendor Management

 

Various Systems

 

Nabors

 

On-premise

 

PaaS

 

NCS

 

NCM

 

 

HR

 

Benefits

 

Claims management

 

HCM - OAB

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NCM

 

For workerscomp and unemployment, only claims relating events prior to the close date will be processed by Nabors. All new claims will not be processed by Nabors.

All medical and other benefits will be processed by Nabors until NCPS employees are moved to C&J benefits

HR

 

Performance Management

 

Goals Management

 

SuccessFactors(myGoals)- Goals

 

SAP

 

SaaS

 

SaaS

 

NCS

 

NCS

 

Services will end when C&J systems separation occurs (C&J version of the systems are cloned).

HR

 

Performance Management

 

Performance - Annual Appraisals Management

 

SuccessFactors - Appraisals (myAppraisals)

 

SAP

 

SaaS

 

SaaS

 

NCS

 

NCS

 

Services will end when C&J systems separation occurs (C&J version of the systems are cloned).

HR

 

Performance Management

 

Annual Compensation Management

 

SuccessFactors - Compensation

 

SAP

 

SaaS

 

SaaS

 

NCS

 

NCS

 

Services will end when C&J systems separation occurs (C&J version of the systems are cloned).

HR

 

Performance Management

 

Training tracking and management

 

myTraining

 

Nabors

 

On-premise

 

SaaS

 

NCPS

 

NPS

 

 

 



 

Function

 

Category

 

Description

 

NBR System/ Solution

 

Vendor

 

Type

 

NCS IT Services

 

Provider of
service to
NCPS

 

Provider of
service to NPS

 

Notes

HR

 

Performance Management

 

Travel Management

 

myTravel

 

CWT

 

SaaS

 

SaaS

 

NCS

 

NCS

 

 

HR

 

Performance Management

 

Workforce Analytics

 

MicroStrategy

 

MicroStrategy

 

On-premise

 

N/A

 

N/A

 

N/A

 

 

Finance

 

Order to Cash

 

Customer Management — Master

 

AR

 

Oracle

 

On-premise

 

SaaS

 

NCPS

 

NCS/NCM

 

 

Finance

 

Order to Cash

 

Contract Management — Pricebooks

 

NFS

 

Nabors

 

On-premise

 

SaaS

 

NCPS

 

NPS

 

 

Finance

 

Order to Cash

 

Field Tickets - Online

 

NFS

 

Nabors

 

On-premise

 

SaaS

 

NCPS

 

NPS

 

 

Finance

 

Order to Cash

 

Field Tickets - Offline

 

NFS - Offline

 

Nabors

 

On-premise

 

SaaS

 

NCPS

 

NPS

 

 

Finance

 

AR

 

Sales Tax Setup

 

NFS

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NPS

 

 

Finance

 

AR

 

Invoice Recording

 

AR

 

Oracle

 

On-premise

 

SaaS

 

NCPS

 

NPS

 

 

Finance

 

AR

 

Customer Invoice to Cash

 

AR

 

Oracle

 

On-premise

 

SaaS

 

NCPS

 

NPS

 

 

Finance

 

AR

 

Collections Process

 

GetPaid

 

Sun Guard

 

On-premise

 

PaaS

 

NCPS

 

NCM

 

 

Finance

 

AR

 

AR Month End Closing

 

AR

 

Oracle

 

On-premise

 

SaaS

 

NCPS/NCS

 

NPS/NCS

 

NCS controls the period; NPS finalizes data for month

Finance

 

AR

 

Backoffice Reporting

 

EIS

 

Other

 

On-premise

 

SaaS

 

NCPS

 

NPS/NCM

 

 

Finance

 

AR

 

AR Analytics

 

MicroStrategy

 

MicroStrategy

 

On-premise

 

N/A

 

N/A

 

N/A

 

 

Finance

 

Inventory

 

Item Master Management - Inventory

 

Inventory

 

Oracle

 

On-premise

 

SaaS

 

NCS IT

 

N/A

 

Nabors NCS IT

Finance

 

Inventory

 

Transfer Creation and Receipt

 

Inventory

 

Oracle

 

On-premise

 

SaaS

 

NCPS

 

N/A

 

 

Finance

 

Inventory

 

WIP

 

Inventory

 

Oracle

 

On-premise

 

SaaS

 

NCPS

 

N/A

 

 

Finance

 

Inventory

 

Adjustments

 

Inventory

 

Oracle

 

On-premise

 

SaaS

 

NCPS

 

N/A

 

NCPS Accounting

Finance

 

Inventory

 

Month end physical count/system and reconciliation

 

Inventory/Spreadsheet

 

Oracle/Excel

 

On-premise

 

IaaS

 

NCPS

 

N/A

 

NCS Materials Management Field and Corp

Finance

 

AP

 

SOA Maintenance

 

SOA

 

Nabors

 

On-premise

 

SaaS

 

NCPS

 

NPS

 

SOA process will be contained within NCPS/NPS from Day 1

Finance

 

AP

 

Use Tax & GST Setup

 

NSG/Oracle

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Tax

Finance

 

AP

 

Invoice Processing

 

AP

 

Oracle & myPayables

 

On-premise

 

SaaS

 

NCS/NCPS

 

NCS/NPS

 

NCS AP

Finance

 

AP

 

Supplier Payment Process

 

AP

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS AP

Finance

 

AP

 

Bank Statement Reconciliation

 

Cash Management

 

Oracle

 

On-premise

 

SaaS

 

NCPS

 

NCM/NCS

 

 

Finance

 

AP

 

Escheatment/Unclaimed Prop

 

AP

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS AP (StoneRiver Tracking Software)

Finance

 

AP

 

Credit Card/PCard Administration

 

myRequests

 

PNC/ComdataWebsite (NCPS), Diners Club and USBank (NPS)

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Travel (Activate/deactivate Cards, Limits)

Finance

 

AP

 

Credit Card/PCard Payment Processing

 

Oracle

 

PNC/ComdataWebsite (NCPS), Diners Club and USBank (NPS)

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS AP

 



 

Function

 

Category

 

Description

 

NBR System/ Solution

 

Vendor

 

Type

 

NCS IT Services

 

Provider of
service to
NCPS

 

Provider of
service to NPS

 

Notes

Finance

 

AP

 

1099 Reporting

 

AP

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS AP (1099-Pro Software)

Finance

 

AP

 

AP Month end closing

 

AP

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

NCS

 

 

Finance

 

AP

 

Expense Report Self-Service

 

iExpense & myPayables

 

Nabors/Oracle

 

On-premise

 

SaaS

 

NCS/NCPS

 

NCS/NPS

 

 

Finance

 

AP

 

Audit of Expense Reports

 

AP

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

NCS

 

per Nabors policies

Finance

 

AP

 

A/P analytics

 

AP

 

Oracle & EIS (no myBIT)

 

On-premise

 

SaaS

 

NCS

 

NCS

 

 

Finance

 

AP

 

Recurring Payments

 

AP

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

NCS

 

Recurring payments such as leases, utilities, rents continued and supported

Finance

 

Assets

 

Drawings Management

 

Adept

 

On-premise

 

Synergis

 

N/A

 

N/A

 

N/A

 

 

Finance

 

Assets

 

Category Definitions

 

FA

 

On-premise

 

Oracle

 

SaaS

 

NCS

 

NCS

 

NCS FA

Finance

 

Assets

 

Asset Category Type, Make and Model Definition

 

myAssets

 

On-premise

 

Nabors

 

SaaS

 

NCS

 

NCS

 

NCS Purchasing (Catalog Team)

Finance

 

Assets

 

Maintenance Bill of Material

 

NSG

 

On-premise

 

Nabors

 

SaaS

 

NCS

 

NCS

 

NCS Purchasing & IT - We do not do anything tied to mBOM’s in system - only item master setup

Finance

 

Assets

 

AFE New/Update Request and Approval Management

 

myAFE

 

On-premise

 

Nabors

 

SaaS

 

NCPS

 

NPS

 

SOA process will be contained within NCPS/NPS from Day 1

Finance

 

Assets

 

AFE accounting cross validation and budget maintenance

 

AFE

 

On-premise

 

Oracle/Nabors

 

SaaS

 

NCS

 

NCS

 

NCS Accounting

Finance

 

Assets

 

Asset Creation, Transfer and Disposal

 

myAssets

 

On-premise

 

Nabors

 

SaaS

 

NCPS

 

NPS

 

 

Finance

 

Assets

 

Asset Physical/Cycle Counts

 

myAssets

 

On-premise

 

Nabors

 

SaaS

 

NCPS

 

NPS

 

 

Finance

 

Assets

 

Asset certification schedule and work order management

 

myAssets

 

On-premise

 

Nabors

 

SaaS

 

NCPS

 

NPS

 

 

Finance

 

Assets

 

Asset maintenance procedures and work order management

 

myAssets

 

On-premise

 

Nabors

 

SaaS

 

NCPS

 

NPS

 

 

Finance

 

Assets

 

Asset Depreciation

 

FA

 

On-premise

 

Oracle

 

SaaS

 

NCS

 

NCS

 

NCS FA

Finance

 

Assets

 

Asset Transfers & Intercompany Sales

 

FA

 

On-premise

 

Oracle

 

SaaS

 

NCS

 

NCS

 

NCS FA

Finance

 

Assets

 

Asset Retirement

 

FA

 

On-premise

 

Oracle

 

SaaS

 

NCS

 

NCS

 

NCS FA

 



 

Function

 

Category

 

Description

 

NBR System/ Solution

 

Vendor

 

Type

 

NCS IT Services

 

Provider of
service to
NCPS

 

Provider of
service to NPS

 

Notes

Finance

 

Assets

 

Fixed Assets Corporate & Tax Books

 

FA

 

On-premise

 

Oracle

 

SaaS

 

NCS

 

NCS

 

NCS FA - existing books.

Any new books setup as part of the integration services will be maintained part of TSA

Finance

 

Assets

 

Month end closing of FA Period

 

FA

 

On-premise

 

Oracle

 

SaaS

 

NCS

 

NCS

 

NCS FA

Finance

 

Assets

 

Data Extraction and Reporting

 

Oracle & EIS

 

On-premise

 

Other

 

SaaS

 

NCS/NCPS

 

NCS/NPS

 

 

Finance

 

Assets

 

Analytical reporting

 

myBIT (MicroStrategy)

 

On-premise

 

MicroStrategy

 

N/A

 

N/A

 

N/A

 

 

Finance

 

Reconciliation, Compliance and Reporting

 

P2P and SCM Analytical reporting

 

GL

 

On-premise

 

Oracle

 

SaaS

 

NCPS

 

NPS

 

 

Finance

 

Reconciliation, Compliance and Reporting

 

Chart of account management

 

GL (moving2015)to Hyperion

 

On-premise

 

Oracle

 

SaaS

 

NCS

 

NCS

 

NCS Accounting

Finance

 

Reconciliation, Compliance and Reporting

 

Cost Center Management (General Ledger)

 

Cost Center Table

 

On-premise

 

Oracle

 

SaaS

 

NCS

 

NCS

 

NCS FA and NCS Accounting

Finance

 

Reconciliation, Compliance and Reporting

 

Cost Center Delegations

 

myCostCenters

 

On-premise

 

Nabors

 

SaaS

 

NCPS

 

NPS

 

 

Finance

 

Reconciliation, Compliance and Reporting

 

Planning and Budget Management

 

GL

 

On-premise

 

Oracle

 

SaaS

 

NCPS/NCS

 

NPS/NCS/NCM

 

 

Finance

 

Reconciliation, Compliance and Reporting

 

Period Close Management (journal adjustments, reconciliation, processing allocation and periodic entries)

 

GL

 

On-premise

 

Oracle

 

SaaS

 

NCPS/NCS

 

NPS/NCS

 

 

Finance

 

Reconciliation, Compliance and Reporting

 

Cash reconciliation

 

Cash Management

 

On-premise

 

Oracle

 

SaaS

 

NCPS

 

NPS/NCM

 

 

Finance

 

Reconciliation, Compliance and Reporting

 

Creation, upload, validation, approvals and process of subledger journals

 

GL (moving2015)to Hyperion

 

On-premise

 

Oracle

 

SaaS

 

NCPS

 

NPS

 

 

Finance

 

Reconciliation, Compliance and Reporting

 

GTC Controls for export restrictions

 

GTC

 

SaaS

 

Other

 

SaaS

 

N/A

 

N/A

 

 

Finance

 

Reconciliation, Compliance and Reporting

 

Consolidation of Books/Ledger

 

GL (moving2015)to Hyperion

 

On-premise

 

Oracle

 

SaaS

 

NCS

 

NCS/NCM

 

 

Finance

 

Reconciliation, Compliance and Reporting

 

SEC reporting (generating Blue book reports - FSG)

 

Oracle & EIS

 

On-premise

 

Other

 

SaaS

 

NCPS

 

NCM

 

 

 



 

Function

 

Category

 

Description

 

NBR System/ Solution

 

Vendor

 

Type

 

NCS IT Services

 

Provider of
service to
NCPS

 

Provider of
service to NPS

 

Notes

Finance

 

Reconciliation, Compliance and Reporting

 

Back office data extraction and reporting

 

myBIT (MicroStrategy)

 

On-premise

 

MicroStrategy

 

N/A

 

N/A

 

N/A

 

 

Finance

 

Tax

 

Income Tax Provision

 

Onesource Tax

 

Thomson Reuters

 

 

 

PaaS

 

NCS

 

NCS

 

NCS Tax

Finance

 

Tax

 

2015 Property Tax Renditions- gather information and send to 3rd party consultant

 

N/A

 

N/A

 

 

 

PaaS

 

NCS

 

NPS

 

NCS Tax

Finance

 

Tax

 

Income Tax Returns

 

Onesource Tax

 

Thomson Reuters

 

 

 

PaaS

 

NCS

 

NCS

 

NCS Tax

Finance

 

Tax

 

Income Tax Payments

 

N/A

 

N/A

 

 

 

PaaS

 

NCS

 

NCS

 

NCS Tax

Finance

 

Tax

 

Sales & Use Tax Returns

 

GL/NFS

 

Nabors

 

 

 

PaaS

 

NCS

 

NPS

 

NCS Tax

Finance

 

Tax

 

Quarterly State Fuel Tax Return

 

Comdata/AP

 

Nabors

 

 

 

PaaS

 

NCS

 

NPS

 

NCS Tax

Finance

 

Tax

 

Property Tax Payments

 

N/A

 

N/A

 

 

 

PaaS

 

NCS

 

NCS

 

NCS Tax

Finance

 

Tax

 

Deferred taxes, prepaid taxes, and income tax payables - TPRF

 

N/A

 

N/A

 

 

 

PaaS

 

NCS

 

NCS

 

NCS Tax

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Purchase Requisitions

 

myPurchasing

 

Nabors

 

On-premise

 

SaaS

 

NCSP

 

NPS

 

 

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Purchase Requisitions Created by Suppliers in NSG

 

NSG

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Vendor Services setup of access for vendors. Vendor creates - Most are shared with other BU’s.

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Requisition Approvals

 

myPurchasing

 

Nabors

 

On-premise

 

SaaS

 

NCPS

 

NPS

 

NCPS & NPS

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Purchase Orders Create, Change and Issue

 

myPurchasing

 

Nabors

 

On-premise

 

SaaS

 

NCPS

 

NPS

 

NCS buyers will be moved to NCPS pre close

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

RFQ Creation

 

myPurchasing

 

Nabors

 

On-premise

 

SaaS

 

NCPS

 

NPS

 

NCS buyers will be moved to NCPS pre close

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Sales Quote Creation

 

NSG/myPurchasing

 

Nabors

 

On-premise

 

SaaS

 

NCS / NCPS

 

NPS/NCS

 

Buyer or Vendor can create - all non-catalog pricing on a best-effort basis

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Change Orders Created by Vendors (SIR’s)

 

NSG

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NPS/NCS

 

Vendors create SIR and buyer approves. Vendor access and maintenance managed by NCS purchasing (Vendor Services)

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Purchase Orders Approvals

 

PO

 

Oracle

 

On-premise

 

SaaS

 

NCPS

 

NCPS

 

NCS buyers will be moved to NCPS pre close

 



 

Function

 

Category

 

Description

 

NBR System/ Solution

 

Vendor

 

Type

 

NCS IT Services

 

Provider of
service to
NCPS

 

Provider of
service to NPS

 

Notes

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Purchase Order Distributed to Vendor

 

Email/Fax/NSG/B2B

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NCS

 

Approved PO’s auto sent to vendors based on Oracle and NSG vendor setup

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Goods Receiving Entry Process

 

myPurchasing

 

Nabors

 

On-premise

 

SaaS

 

NCPS/

 

NPS

 

NCS buyers will be moved to NCPS pre close

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Goods receiving entry process Inventory first and second step

 

Oracle Inventory

 

Oracle

 

On-premise

 

SaaS

 

NCPS

 

N/A

 

NCS buyers will be moved to NCPS pre close

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

ASN and ASN B2B

 

NSG

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Purchasing and NCS IT Setup and maintenance. Most vendors shared with other Nabors BU

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Goods Receipt Entry - B2B

 

 

 

 

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Purchasing and NCS IT setup and maintenance. Vendor creates - Most are shared vendors with other Nabors BU’s

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Goods Return/Creation

 

myPurchasing and Oracle Inventory

 

Nabors/Oracle

 

On-premise

 

SaaS

 

NCPS

 

NPS

 

NCS buyers will be moved to NCPS pre close

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Invoice Entry Self-Service - Nabors

 

myPayables

 

Nabors

 

On-premise

 

SaaS

 

NCSP/NCS

 

NPS/NCS

 

 

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Invoice Entry Self-Service - Suppliers

 

NSG

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Purchasing setup and management of vendor access

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Invoice Entry - B2B Process

 

myPayables and Oracle

 

Nabors/Oracle

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Purchasing and NCS IT setup and maintenance. Vendor creates - Most are shared vendors with other Nabors BU’s

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Supplier File Room

 

myFileRoom (DocLoc)

 

Other

 

On-premise

 

SaaS

 

N/A

 

N/A

 

AP

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Vendor Maintenance

 

AP

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Purchasing (Vendor Services)

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Vendor On Boarding Request Creation

 

myRequests

 

Nabors

 

On-premise

 

SaaS

 

NCPS

 

NPS

 

MyRequest process for vendor add

 



 

Function

 

Category

 

Description

 

NBR System/ Solution

 

Vendor

 

Type

 

NCS IT Services

 

Provider of
service to
NCPS

 

Provider of
service to NPS

 

Notes

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Vendor On Boarding Request Approval

 

myRequests

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS purchasing and IT maintains approval tables. Not split out by Business Unit

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Vendor On Boarding New Setup

 

AP

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Purchasing

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Vendor Maintenance for NSG

 

NSG

 

 

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Purchasing (Vendor Services)

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Ship To Creation and Maintenance

 

PO

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Purchasing

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Bill To Creation and Maintenance

 

PO

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Purchasing

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Work Group Maintenance Creation and

 

NSG

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Purchasing

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Bill To Defaults

 

NSG

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Purchasing

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Purchasing Close

 

PO

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Purchasing Tied to All Nabors BU’s

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Inventory Close

 

PO

 

Oracle

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Purchasing Tied to All Nabors BU’s

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Item Master NSG and Oracle Creation and Maintenance

 

NSG

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Purchasing

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Catalog Creation and Maintenance

 

NSG

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Purchasing - Catalog price files maintained and updated.

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

MSA Management

 

myRequests

 

Nabors

 

On-premise

 

SaaS

 

NCPS

 

NPS

 

Part of On Boarding process and contact management handled manually.
After close, for the new NCPS only vendors, no MSA will be setup by Nabors. Will be setup as vendor using PO terms and conditions.

 



 

Function

 

Category

 

Description

 

NBR System/ Solution

 

Vendor

 

Type

 

NCS IT Services

 

Provider of
service to
NCPS

 

Provider of
service to NPS

 

Notes

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Setup Standard Notes

 

myPurchasing

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Purchasing - Form not split out by Org or Business Unit

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Call Center

 

Cisco

 

Cisco

 

On-premise

 

PaaS

 

NCS

 

NCS

 

NCS Purchasing

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Expedite Notification Setup

 

NSG

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Purchasing - Form not split out by Org or business Unit

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Setup Reason Codes

 

myPurchasing

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

NCS

 

NCS Purchasing - Form not split out by Org or business Unit

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

ComData, PNC P-Card B2B Process

 

B2B Process

 

Nabors

 

On-premise

 

SaaS

 

NCS

 

N/A

 

B2B Process interfaces with ComData and Nabors HR, Fixed Assets and Payables (NCS IT, NCS AP, NCS Purchasing), Approvals and overrides for ComData, PNC

Procurement

 

MSA

 

Rebates and Discounts

 

AP

 

Oracle

 

 

 

 

 

NCS

 

 

 

Discounts and rebates for NCPS credit of shared contracts will continue to be processed based on the practices prior to the close until the physical separation of the systems or processes.

Procurement

 

Purchase Order, Invoice, and MasterVendor

 

Standard and ad-hoc Reporting

 

myPurchasing and Oracle (no myBIT)

 

Nabors/Oracle

 

On-premise

 

SaaS

 

NCS

 

NCS

 

Standard procurement reporting and ad-hoc reports, including procurement KPIs

QHSE

 

HSE

 

Safety Observation Cards

 

myHSE-SOC

 

Nabors

 

On-premise

 

SaaS

 

N/A

 

N/A

 

Moving to C&J Systems. Access to history

QHSE

 

HSE

 

Bulletin creation, approvals and acknowledgement

 

myHSE-Bulletins

 

Nabors

 

On-premise

 

SaaS

 

N/A

 

N/A

 

Moving to C&J Systems. Access to history

 



 

Function

 

Category

 

Description

 

NBR System/ Solution

 

Vendor

 

Type

 

NCS IT Services

 

Provider of
service to
NCPS

 

Provider of
service to NPS

 

Notes

QHSE

 

HSE

 

Near Miss creation and tracking

 

myHSE-Near Miss

 

Nabors

 

On-premise

 

SaaS

 

N/A

 

N/A

 

Moving to C&J Systems. Access to history

QHSE

 

HSE

 

Incident creation and interface

 

myHSE-Incidents

 

Nabors

 

On-premise

 

SaaS

 

N/A

 

N/A

 

Moving to C&J Systems. Access to history

QHSE

 

HSE

 

Incident Investigation Tracking

 

Desktop Apps

 

Other

 

On-premise

 

SaaS

 

N/A

 

N/A

 

Moving to C&J Systems. Access to history

QHSE

 

HSE

 

Incident Claims mgmt. and reporting

 

ICE

 

Fara/York

 

BPO

 

IaaS

 

N/A

 

N/A

 

Moving to C&J Systems. Access to history

QHSE

 

HSE

 

Analytical reporting

 

myBIT (MicroStrategy)

 

MicroStrategy

 

On-premise

 

N/A

 

N/A

 

N/A

 

 

QHSE

 

HSE

 

Training

 

myTraining

 

Nabors

 

On-premise

 

SaaS

 

N/A

 

N/A

 

Moving to C&J Systems. Access to history

Maint

 

Diagnostic

 

Caterpillar diagnostic

 

Nexiq Pro-Link Engines IQ for CAT

 

Other

 

On-premise

 

Sourcing

 

N/A

 

N/A

 

Managed and supported within NCPS

Maint

 

Diagnostic

 

Detroit Diesel diagnostic

 

DDEC

 

Other

 

On-premise

 

Sourcing

 

N/A

 

N/A

 

Managed and supported within NCPS

Maint

 

Diagnostic

 

Alison Transmission diagnostic

 

Universal Allison DOC

 

Other

 

On-premise

 

Sourcing

 

N/A

 

N/A

 

Managed and supported within NCPS

Maint

 

Diagnostic

 

Cummins diagnostic

 

Cummins InSite

 

Other

 

On-premise

 

Sourcing

 

N/A

 

N/A

 

Managed and supported within NCPS

Maint

 

Diagnostic

 

Canrig Mud diagnostic

 

Allen-Bradley Software PLC

 

Other

 

On-premise

 

Sourcing

 

N/A

 

N/A

 

Managed and supported within NCPS

Maint

 

Diagnostic

 

Tractor-trailer ABS diagnostic

 

Bendix Acom Diagnostics

 

Other

 

On-premise

 

Sourcing

 

N/A

 

N/A

 

Managed and supported within NCPS

Maint

 

Diagnostic

 

Tractor-trailer ABS diagnostic

 

Meritor Wabco

 

Other

 

On-premise

 

Sourcing

 

N/A

 

N/A

 

Managed and supported within NCPS

Maint

 

Diagnostic

 

Mack diagnostic

 

Volvo/Macktool Premium Tech

 

Other

 

On-premise

 

Sourcing

 

N/A

 

N/A

 

Managed and supported within NCPS

 



 

Schedule B

 

Facilities

 

Function

 

Item/Process

 

Description

 

Duration Post-
Close

 

Notes

 

Estimated Monthly Cost

Facilities

 

Victoria, TX

 

Lessor: Nabors Drilling USA, LP

Lessee: Nabors Completion & Production Services Co.

Address: 6204 Highway 59N, Victoria, Texas

 

Month-to Month but no later than 12/31/15

 

NCPS will sublease the 20 acre production services yard from NDUSA on a month to month basis, with thirty days’ notice required for termination of the sublease

 

$6,800

Facilities

 

Altius Centre, Canada

 

Lessor: Nabors Drilling Canada, Ltd.

Lessee: Nabors Production Services, Ltd.

Address: 500 - 4th Avenue SW, Calgary, Alberta, Canada

 

Termination Date: 11/30/20

 

NPS will sublease 6 offices from NDCL on a month to month basis, with thirty days’ notice required for termination of the sublease

 

Increasing annually from CDN $3,281.25 (1/1/15 — 11/30/15) to CDN $4,156.25 (12/1/19 — 11/30/20) (plus parking fees and proportionate share of building occupancy costs, taxes and expenses)

Facilities

 

Altius Centre, Canada

 

Lessor: Nabors Drilling Canada, Ltd.

Lessee: Abandonrite, a division of Nabors Production Services, Ltd.

Address: 500 - 4th Avenue SW, Calgary, Alberta, Canada

 

Termination Date: 11/30/20

 

Abandonrite, a division of NPS, will sublease 15 offices from NDCL on a month to month basis, with thirty days’ notice required for termination of the sublease

 

Increasing annually from CDN $9,843.75 (1/1/15 — 11/30/15) to CDN $12,468.75 (12/1/19 — 11/30/20) (plus parking fees and proportionate share of building occupancy costs, taxes and expenses)

 



 

Function

 

Item/Process

 

Description

 

Duration Post-
Close

 

Notes

 

Estimated Monthly Cost

Facilities

 

Grand Prairie, Canada

 

Lessor: Nabors Drilling Canada, Ltd.

Lessee: Nabors Production Services, Ltd.

Address: 8801 - 99th Street, Clairmont, Grand Prairie, Canada

 

Month-to Month but no later than 12/31/15

 

NPS will sublease a workshop from NDCL on a month to month basis, with thirty days’ notice required for termination of the sublease

 

CDN $21,450

Facilities

 

Grand Prairie, Canada

 

Lessor: Nabors Drilling Canada, Ltd.

Lessee: Nabors Production Services, Ltd.

Address: 8601 - 99th Street, Clairmont, Grand Prairie, Canada

 

Month-to Month but no later than 12/31/15

 

NPS will sublease yardspace from NDCL on a month to month basis, with thirty days’ notice required for termination of the sublease

 

CDN $1,627.50

 



 

Schedule C

 

Benefits Transition

 

Employee Benefit Plan Name

 

Expected
Duration

Nabors Industries Inc. Comprehensive Welfare Benefits Plan (all applicable welfare benefits provided thereunder):

·                  Blue Cross/Blue Shield - medical, prescription drug and dental

·                  Kaiser Permanente (fully funded HMO — California)

·                  United Healthcare vision plan

·                  Basic life insurance

·                  Basic accidental death & dismemberment (AD&D)

·                  Optional life insurance (employee and dependent)

·                  Optional accidental death & dismemberment (AD&D) (employee and dependent)

·                  Long-term disability

·                  Short-term disability

·                  Business Travel Accident (BTA); Ace American Insurance

·                  Flexible Spending Account (Healthcare and Dependent Care FSA)/Bank of America

·                  Employee Assistance Plan

 

 

The last day of the quarter following the quarter in which the closing date occurs.

Leave of Absence (FMLA, etc)

 

The last day of the quarter following the quarter in which the closing date occurs.

Policy 300.40.2 (Vacation) of the Nabors Industries, Inc. Human Resources Policies and Procedures Manual, with effective date January 1, 2009

 

The last day of the quarter following the quarter in which the closing date occurs.

 



 

Employee Benefit Plan Name

 

Expected
Duration

Index No. NCPS 21.0 of the Nabors Completion & Production Services Co. Human Resources Policies and Procedures Manual

 

The last day of the quarter following the quarter in which the closing date occurs.

Paid-Time Off Policy (including sick leave)

 

The last day of the quarter following the quarter in which the closing date occurs.

 



 

Schedule D

 

Navy IT Security Policies

 



 

NABORS INDUSTRIES, INC.

HUMAN RESOURCES POLICIES AND PROCEDURES MANUAL

 

SUBJECT

 

INFORMATION TECHNOLOGY

 

SECTION 
MISCELLANEOUS

 

NUMBER — 300.80.1

PAGE -

1 of 14

 

EFFECTIVE DATE -
January 1, 2002

 

SUPERSEDES ISSUE DATED -
May 1, 1999

 

1



 

POLICY

 

The Information Technology {IT} computing resources and networks are the sole and exclusive property of the company and have become an integral part of the Company’s business operations. In order to ensure that these computing resources and networks are used in a responsible manner and in the best interests of the Company, all employees are required to comply with the following procedure.

 

PROCEDURE

 

1.                                      Introduction

 

The purpose of this policy is to set forth the procedure that has been developed to ensure effective and appropriate use of computing resources and network services. Computing resources include software and hardware related to personal computers, printers, scanners, servers, and the AS 400. The Networks include both the Local Area Networks (LAN’s) and the Wide Area Network (WAN), which is a data and voice communication internet of local area networks (LANs) located in various offices of Nabors subsidiary company offices around the world. These WAN and LANs that are sometimes referred to as Nabors Network (NABNET) are connected to the World Wide Web (the Internet).

 

2.                                      User Accounts

 

User accounts are required to access any of the computer resources and/or networks at all times. Each user account is identified by a unique account name (“User ID”). Separate User IDs may be required for different computer resources and networks.

 

A.                  Eligibility for User Accounts

 

All Nabors employees are eligible for a user account with approval from their Supervisor/Manager. Guest user accounts are available for people who have a business reason for having one.

 

B.                  Obtaining a User Account

 

Requests by Nabors employees and guests for User accounts must be made through the IT Helpdesk using the User Security Form [See HR Policy Manual / HR Forms or Nabors Net / HR Forms]. The information on the User Security Form enables IT to establish and customize each employee’s computing profile, including e-mail, access to administrative records, and other computing resources. The User Security Form must be approved by the employee’s or guest’s Supervisor/Manager. To verify the activation of the user account, the employee or guest should contact the IT Helpdesk. Once an employee’s user account is activated, it remains active as long as the user is employed by a Nabors subsidiary.

 

2



 

Guest user account requests must specify an expiration date that cannot be longer than 90 days from the user account activation date.

 

C.                  Use of User Accounts

 

User Accounts are provided for file storage, printing, electronic mail, Internet access, and for activities related to the Company’s business. Each account represents an allocation of a scarce computing resource and as such is monitored by IT systems administrators for appropriate use. User accounts may be revoked if:

 

·                  the account is found to have been used for activities that violate any portion of this Policy, or

 

·                  the owner of the account has been found violating any portion of this Policy, or

 

·                  the owner of the account is no longer employed by Nabors.

 

Activation of a user account constitutes an agreement that the user understands and will abide by all policies and procedures regarding the use of computing resources and networks.

 

D.                  Sharing User Accounts

 

Each user account is assigned for the sole use of a single user. Sharing of accounts is prohibited. The user for whom the account was created is responsible for the security of the account and all actions associated with the use of the account. Each user account has only one authorized user. If users wish to share information or otherwise collaborate in a group, they must use appropriate network file permissions combined with appropriate group membership.

 

E.                   Deactivation and Deletion of User Accounts

 

Active user accounts are deactivated prior to deletion. The inactive state is an intermediate step between an active user account and a deleted user account. In the inactive state, access is denied to the user and electronic mail addressed to the account is returned to the sender. Files may be archived and deleted upon request of the department manager. An account may be changed to the active state from the inactive state up to the time the account is deleted. When an account is deleted, all files in the user’s directory are either deleted or moved. Electronic mail sent to the user will then be rejected.

 

3



 

F.                    Restriction of User Accounts

 

User account may also be temporarily restricted. There are a number of reasons why this may occur ranging from misuse of computing resources or networks to the detection of a virus on the local computer. If the user account has been restricted, upon attempting to log in, the user may see a short message to the effect of “Please see the System Administrator”, “Please contact the Help Desk” or “Unable to Access Network Resources”. The user either may not be permitted to login to the network or, if logged in, may be disconnected from the network.

 

G.                  Determining User Account Misuse

 

Users are often the first to detect unauthorized use of their account. If this occurs, users must notify the IT Systems Administrator immediately or contact the IT Helpdesk.

 

3.        Security

 

A.                  Selecting a User Account Password

 

The most vulnerable part of any computer system may be the user account password. Any computer system, regardless of what security systems are in place, can be exploited by intruders who can gain access by guessing a password or learning the password from the user. It is important that users select a password that is hard to guess and not share the password with ANYONE. In addition, the user should not write down the password on a sheet of paper or a sticky note and store in the desk drawer. Passwords should be alpha numeric including both letters and numbers. Passwords should also use at least one special character such as “!@#$%^&*”.

 

B.                  Changing A Password

 

It is the responsibility of the user to change the password periodically. Changing the password ensures that if another individual obtains a password the period of exposure will be limited. The system will prompt the user to change the password every 4 to 6 weeks. Users who forget their account passwords must call the IT Help Desk to obtain a new one. IT Help Desk personnel will verify your identity prior to resetting your passwords.

 

C.                  Sharing and Protecting Data

 

Network user accounts are created to provide access to all files and directories (folders) and services within a department. An individual or the department manager must request that the IT Help Desk restrict access to protected files or directories housed on the network. User and administrative security of various networks/systems are controlled by their respective System Administrators.

 

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4.        Network Printers

 

Network printers are an efficient way to utilize print resources. In many cases a large network class printer can serve many users effectively. In some cases it may be more appropriate to utilize a personal printer. This decision must be made by the user in conjunction with his or her manager.

 

IT provides networked laser printers in many offices, in the print/copy rooms and other central locations. When several print jobs are submitted to a shared printer at one time, or if the shared printer is temporarily out of service due to a low toner or a paper misfeed, the print jobs are stored in a print queue until the printer is made available.

 

Paper and toner should be purchased, monitored, and installed in the printers by individual departments/groups. Printer malfunctions should be reported to the IT Help Desk.

 

Abuse of network printer resources is a violation of IT policy. Examples of user abuse of network printer resources include:

 

·                  attempting to print on any media which the printer is not designed to use;

 

·                  any activity which could harm the printer, print server or network;

 

·                  any activity which would deny the service of the printer to other users

 

·                  removal or movement of the network printer.

 

5.        Rights and Responsibilities Associated With User Accounts, Computing Resources and Printing Resources

 

User accounts on a network host provides access to applications and files on the network and printers connected to the network. Internet access provides access to resources on the World Wide Web. IT computing resources are shared by all Nabors employees on a fair and equitable basis. It is the responsibility of IT not only to provide these computing resources but also to ensure that the rights of users are not infringed upon by the abuse of other users. IT utilizes every means available to detect abuse of computing resources. Penalties for abuse of IT computing resources such as personal computers, printers, software, network resources include temporary and permanent restriction of network privileges, employment termination, and in extreme cases criminal prosecution. The following are examples of the types of abuse that are not tolerated

 

A.                  Violation of Laws

 

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Any usage of computing resources or networks for an activity that violates any local, state or federal regulation is prohibited even though that activity may not be explicitly referred to in this document.

 

B.                  Theft and Vandalism of computing resources

 

C.                  Writing, downloading or knowingly proliferating worms and viruses

 

D.                  Storing files on the network that are not for business purposes

 

All data must be stored on the Network. Directories on the IT Network are backed up every day of the workweek. Only changes will be backed up on Mondays through Thursdays. A complete backup is done on Friday. IT backs up disk data on all servers including the IBM AS/400 and HP servers every day of the workweek. All backups are kept in a safe location off-site for a period of 28 days. This backup strategy may change as the applicable technology improves.

 

IT does not permit storage of data on the local hard drives (C: or D:). Local hard drives on the individual machines are not backed up and consequently data may be lost if a computer crashes. Computers are reformatted when needed, in which case all the information on the local drives will be lost. The IT Department is not responsible for any data loss associated with a local drive or storage unit.

 

E.                   Reading, copying or deleting a file on the network without permission from the owner

 

The ability to read, alter, copy or delete a file belonging to another user does not imply permission to read, alter, copy or delete that file. Users must not read, alter, copy or delete a file on the AS/400 unless it pertains to their daily responsibilities.

 

F.                    Password protecting documents on the network or PC workstation.

 

Password protected files cannot be scanned for viruses. Password protected documents will be deleted without notice. If a user requires additional security for a document, a request for assistance should be submitted to the IT Help Desk

 

G.                  Transferring Files to or from different locations on the network.

 

Transferring files to or from different locations on the network and/or Internet, in particular, transferring files which contain offensive material, information for financial gain, or monetary or sexual solicitations is prohibited. Users must not back up their PCs onto the IT Network or copy/load any executables or games or screen-savers or audio/video clips onto any network drive. Executables consist of any files with EXE, VBS, COM, DLL, or SYS extensions. Restrictions pertaining to the duplication of copyrighted materials also apply.

 

H.                 Installing and/or Playing Electronic Games on Nabors Computers

 

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Electronic games waste CPU cycles and network bandwidth and in some cases have detrimental effects on computer systems.

 

I.                      Unauthorized Use of Computing Resources

 

Users must have an active IT Network account to use the IT computing resources.

 

J.                      Breaking Into Accounts

 

Breaking into accounts includes, but is not limited to, gaining access to a user’s account while the user is away from a terminal or a workstation or efforts to determine another user’s password by closely watching a login. If an employee finds a user logged on to the network and that user cannot be located the employee should log out the user’s computer immediately. The employee should not tamper with any programs or data files in the user’s directory.

 

K.                 Cracking or Attempting to Crack Passwords

 

Cracking of passwords includes storing or transferring encrypted or unencrypted password information and writing, transferring, compiling, storing or running programs designed to guess passwords or otherwise gain unauthorized access to user or system accounts or passwords. It also includes programs or techniques designed to trick users into divulging their password.

 

L.                   Sharing of Accounts between Users

 

Sharing of accounts between users includes attempting to impersonate another user or conceal an identity when sending e-mail or posting to news groups.

 

M.               Accessing Information in Others User’s Home Directory

 

Other user’s files should not be accessed even if the files are readable and/or writable.

 

N.                  Unauthorized Modification of Files

 

Modification of files includes writing or modifying files, which have file permissions set to allow modification or writing. This also includes creating new files, renaming, or deleting existing files in directories which may have directory permissions set to allow creation or modification of files.

 

O.                  Unauthorized Broadcast Messages

 

Unauthorized broadcast messages include messages that contain profanity or abuse another user.

 

P.                    Using Computing Resources For PERSONAL Monetary Gain

 

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Q.                  Infringing on Licensing and Copyrights

 

IT provides access to a suite of supported software applications on host computers and on Network connected computers. Most software packages and applications are licensed and/or copyrighted. Various licensing arrangements have been negotiated to provide this software. In some cases, IT has purchased a copy of the software for each machine while in other cases, software packages have “floating node” licenses that limit the number of concurrent users. Licensed software and documentation may not be copied unless the license explicitly states that it may be. Copying software to diskette or any other media or to an unauthorized computer is a violation of IT policy and of various state and federal laws and is prohibited by Nabors. If a user suspects that he or she might be utilizing illegally obtained software he or she must report the suspicion to his or her manager immediately. Managers must obtain legal copies of the software prior to usage.

 

All employees should to be aware of how intellectual property laws, regulations, and policies apply to the electronic environment and respect the property of others. Any copyright infringement is prohibited.

 

R.                  Disrupting or Degrading Service

 

In a large integrated computer network that is shared by a large number of users, such as the Company’s network, many services depend upon distributed computing resources and often upon other network services. These resources include servers, printers, workstations, and the network infrastructure (hubs, switches, routers, cabling system). These resources function in a cooperative manner to provide the variety of network services enjoyed by our many users. It is often difficult to ascertain what impact the disruption or degradation of a computing resource or a network service may have on other network users. IT reserves the right to terminate any process or break any network connection that it determines is adversely affecting the system or the rights of other users.

 

The following is a list of user behavior that may cause disruption or degradation of service:

 

·                  improperly turning a machine off;

 

·                  unplugging the network connection for a machine while it is on;

 

·                  modifying or reconfiguring the software, operating system or hardware of a computer or network facility without permission of the IT department or administrative unit that is in charge of the machine. Other users of the computer and the technicians who support it, are expecting to find it set up exactly the way it was left.

 

·                  attempting to use more resources than the machine can handle (i.e. running a large number of I/O or computationally intensive applications, like opening large Excel spreadsheets);

 

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·                  excessive printing on networked printers, using excessive disk space, or otherwise degrading system performance by monopolizing shared resources;

 

·                  running programs which lock the screen or keyboard (exceptions to this are System Administrators or other IT personnel working on systems related programs and machines located in offices with the approval of the office occupant);

 

·                  sending excessive email;

 

·                  transmitting, receiving, or forwarding of chain letters/e-mails which consist of jokes, hoaxes, poems, images, pornography, stories or ASCI art of a non-business nature.

 

S.                    Excessive Central Processing Usage

 

The machines on the IT network represent an enormous amount of processing power. It is tempting for users to attempt to run programs on as many machines as possible to decrease the total turnaround time of the job. However, running jobs on remote machines can have a serious impact on the interactive performance of the machine. This could render the machine virtually unusable to anyone else. This problem is even more acute if the offending program performs a large amount of I/O, bogging down the network and the file servers. In general, using multiple remote machines for running computational programs is prohibited. If a user has a large computational problem they should contact the Systems Administrator to work out a plan before running the program.

 

T.                   Exceeding Disk Quotas

 

All Banyan and Microsoft Windows NT/2000 accounts are created with a disk quota that limits the amount of disk space a user can access. Once disk quotas have been met, the user will be notified by the IT Department. Under these circumstances the user must reduce the amount of data on the space or arrange for increased disk space. Disk quotas limits are enforced on the IT Network. Failure to reduce your file storage below your quota within a reasonable period of time may result in the deactivation of your account and e-mail address and the removal of your files.

 

IT provides a temporary directory when users have a temporary need for disk space in excess of the quota. Files in this directory are automatically removed after seven days. Users requiring additional disk space on a permanent basis should submit a request to the IT Help Desk. The IT Network Manager must approve all requests for additional space.

 

U.                  Misuse of Electronic Mail and Internet

 

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All users who have access to the Banyan and/or Microsoft NT/2000 Network will automatically have access to e-mail. Users are encouraged to read their e-mail regularly and file mail items they wish to keep in their home directory. Other items should be deleted. Unread mail takes up space in the system queues. If the mail files in all the folders exceed over 150 messages the user will no longer be able to receive or send e-mails. In such cases, the user will be notified of all the mail that was returned. In addition, there is an 8MB limit on the size of an e-mail message (including attachments). Employees who need to send large files to other users should split the mail into multiple e-mails.

 

The Internet is an information retrieval system that incorporates the use of hypertext links and makes extensive use of text integrated with imagery, video and audio data. Internet access is available only for certain users, authorized by Department Managers and IT. IT operates an Intranet Server, which is referred to as NaborsNet (http://NaborsNet). The NaborsNet Web Page provides links to departmental web pages.

 

Electronic mail (e-mail) is covered under the Electronic Communications Privacy Act of 1986. Misuse of electronic mail and internet includes sending any type of message that the sender would be unwilling to sign. (i.e. obscene, or otherwise abusive messages.) This act provides for prosecution of individuals found surreptitiously capturing, reading or altering another’s e-mail without permission. Do not e-mail any message you would not be willing to sign and put in the mail.

 

Misuse of electronic mail and internet also includes any attempt to forge an e-mail message is considered an abuse of network privileges. If a user receives mail that could have been forged, the e-mail should be confirmed with the supposed sender. If it is determined that the e-mail is a forgery, contact the IT systems administrator or the IT Help Desk at 281775-8559. A complete copy of the message should be saved for further investigation.

 

Misuse of electronic mail and internet also includes the sending of chain letters which are a violation of U.S. Postal regulations and are considered a serious violation of IT network policies.

 

Misuse of electronic mail and internet also includes:

 

·                  Transmitting, retrieving or storing any communications of a discriminatory, harassing, or of a sexually explicit, abusive, profane or offensive nature.

 

·                  Creating messages with derogatory or inflammatory remarks about an individual’s race, age, disability, religion, national origin, physical attributes or sexual preference.

 

·                  Any purpose which is illegal, against Company policy or contrary to the Company’s best interest.

 

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·                  Solicitation of non-Company business or for any purpose intended for personal gain.

 

·                  Transmitting, receiving, or forwarding of chain letters which consist of jokes, poems, images, pornography, stories or ASCI art of a non- business nature.

 

·                  Unauthorized mass mailings, which are prohibited. An example of an unauthorized mass mailing is using a mail client’s address book or a directory service to send SPAM e-mail to every user listed there.

 

The Company routinely monitors usage patterns of its E-mail communications. The reasons for this monitoring include cost analysis/allocation and the management of the Company’s gateway to the Internet. All messages created, sent, or retrieved over the E-mail System and Internet are the property of the Company and should be considered public information. The Company reserves the right to access and monitor all messages and files on the Company’s E-mail and Internet system. Employees should not assume electronic communications are totally private and should transmit highly confidential data in other ways. Cases of email abuse will be referred to individual’s department heads.

 

E-mails are for business purposes only. Nabors reserves the right to monitor all incoming and outgoing emails and Internet traffic for content and/or violations of policy. There is no private email within the Nabors Corporate Network.

 

V.                  Misuse of News/Bulletin Boards

 

Misuse of News/Bulletin Boards includes postings deemed obscene, inflammatory, or otherwise abusive. Misuse of News/Bulletin Boards also includes posting a message that a user would not be willing to tell someone face to face. Any attempt to forge a news posting is prohibited.

 

W.               Unauthorized Connection to the Network

 

Only IT personnel and IT authorized personnel may connect their personal PCs to the IT Network. Employees and/or Contractors may not bring their personal computers into the Nabors environment and connect them to the Nabors Corporate network under any circumstances. Nabors will not add network cards or software to those computers. In the event that network access is critical for this contractor the department manager must purchase a computer that follows the company specifications which may be connected to the network.

 

X.                  Unauthorized Installation of Software /Hardware to the Network

 

IT provides general purpose and office productive software on all the computers and installs approved applications at the request of various departments. Only IT Personnel and IT authorized personnel are allowed to install software on any Company’s computers.  With the exception of IT and personnel and IT authorized

 

11



 

personnel, no employee may modify and/or install hardware (example, adding or removing memory, installing a larger hard drive or sound card, etc.) on any company PC. Employees should request IT Help Desk at 281-775-8559 to request installation of any software.

 

Y.                  Providing Access to your Computers using Modems

 

Under no circumstances are Users with modems and communications software (Ex: ProComm) on their computers allowed to keep their computers in ‘Receive (Host) Mode’, which allows access to intruders.

 

6.        System Administration’s Responsibilities

 

IT personnel are held to a higher standard than other users because they have the capability and responsibility to maintain system integrity. On host systems such as the IBM AS/400, HP, the Banyan Network and Microsoft Windows NT/2000, System Administrators and other IT personnel possess access rights which allow them to read, write, or execute any file on the system. System Administrators are entrusted with the security and privacy of all data on the network. As such, confidentiality will always be maintained.

 

A.                  Privacy and Confidentiality

 

IT Personnel are required to protect the confidentiality and integrity of the users private information and other company specific information including but not limited to System Passwords, IP Addresses, security configuration, specific hardware/software configuration during and after their employment with Nabors.

 

B.                  Liability

 

Every effort is made to safeguard data stored on computers, however, IT Systems Administrators are not liable for any loss of data or loss of service on the IT network.

 

C.                  Investigation of Policy Violations

 

IT System Administrators are charged with investigating policy violations and suspected abuse of computing resources and information (files, e-mails, etc.) on the network. During such investigations, System Administrators may inspect program and data files and monitor network traffic.

 

7.        Enforcement

 

A.                  Temporary Restriction

 

Access to a user’s account may be temporarily restricted for a number of reasons, including:

 

·                  maintenance or servicing of the network;

 

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·                  dissemination of information before continued use of an account;

 

·                  investigation of policy violations or suspected abuse of resource.

 

Temporary access restrictions are intended to be short term and usually require the user to contact the appropriate System Administrator for reactivation. The investigation of network policy violations may require a number of potentially affected accounts to be temporarily restricted. A user of an account may not necessarily be the subject of the investigation. For example, it may be suspected that the user’s password has been broken by a third party.

 

B.                  Permanent Restriction

 

If it is determined that a user’s policy violations are so serious that continued use of the IT network would infringe upon the rights or security of other users, or affect the well-being of the Company, the user’s account will be permanently restricted. The President of the Company and Chief Information Officer must approve activation of permanent access restrictions.

 

C.                  Prosecution

 

Users accused of severe abuse may be referred to your Company President and Chief Information Officer for further action or to the appropriate law enforcement agency.

 

D.                  Non-Employees and Recovery of Costs

 

Non-employees accused of severe abuse will be referred to local law enforcement officials. If expenses are incurred during unauthorized use (i.e. paper, printer supplies, etc.), IT reserves the right to pursue full reimbursement of those costs from the individual.

 

8.        Reporting Procedures

 

A.                  Suspicious Activity

 

Users should watch for any suspicious activity involving computer equipment and report it to the IT Help Desk and/or building security immediately.

 

B.                  Theft and Vandalism

 

Theft and vandalism of computer equipment should be reported immediately to the IT Help Desk. Nothing at the scene of the theft or vandalism including hardware, software and data should be disturbed in order to prevent the destruction of potential evidence.

 

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C.                  Electronic Security

 

Users who suspect that the security of their account has been breached should notify the IT Help Desk as soon as possible. The IT Help Desk will alert the System Administrator.

 

D.                  Notification of Remote System Administrators

 

Violation of policies on a remote system requires the notification of the remote System Administrator who will notify IT Networking Services via the IT Help Desk to advise them of the situation.

 

E.                   Inoperative and malfunctioning Equipment

 

Inoperative or malfunctioning computer equipment should be reported to the IT Help Desk. Problems associated with a remote login, or accessing the IT network from other offices should also be reported to the IT Help Desk After normal working hours, these calls are forwarded to the IT Night Operator.  Network support personnel are on call after hours and on weekends and holidays.

 

F.                    Software Problems

 

Software problems should be reported to the IT Help Desk.

 

G.                  Recovery of Deleted Files

 

All files on the IT Network are backed up daily. To request restoration of deleted files, users should contact IT Network Services through the IT Help Desk and provide the following information:

 

·                  exactly which file(s) need to be restored; including the directory in which the files were located (i.e. Proposal.XLS file under K:UsersScv directory);

 

·                  the date and time the file(s) were created;

 

·                  the date and time the file(s) were last modified;

 

·                  the date and time the file(s) were deleted.

 

If located on tape, the files will be restored and placed in a directory named RESTORED. It is the responsibility of the user to move these files to their appropriate place and delete the RESTORED directory. Files which are restricted under IT network policies will not be restored.

 

H.                 Identifying IT Personnel

 

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All IT personnel must wear picture ID provided by the department during working hours. This ID must be visible to all employees during working hours.

 

I.                      Unauthorized Users

 

If an employee who does not have an active account is found using IT computing resources, their individual department head will be notified.

 

15




Exhibit 10.6

 

EXECUTION VERSION

 

 

TRANSITION SERVICES AGREEMENT

 

dated as of March 24, 2015

 

between

 

NABORS INDUSTRIES LTD.

 

And

 

NABORS RED LION LIMITED

 

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

ARTICLE I DEFINITIONS

1

Section 1.01.

Certain Defined Terms

1

 

 

 

ARTICLE II SERVICES, DURATION AND SERVICES MANAGERS

3

Section 2.01.

Services

3

Section 2.02.

Duration of Services

4

Section 2.03.

Transition Services Managers

4

Section 2.04.

Personnel

5

 

 

 

ARTICLE III OTHER ARRANGEMENTS

6

Section 3.01.

Third Party Licenses and Consents

6

Section 3.02.

Third Party Providers

6

 

 

 

ARTICLE IV ADDITIONAL AGREEMENTS

7

Section 4.01.

Co-location and Facilities Matters

7

Section 4.02.

Access

8

Section 4.03.

Cooperation

8

 

 

 

ARTICLE V COSTS AND DISBURSEMENTS

9

Section 5.01.

Costs and Disbursements

9

Section 5.02.

Taxes

9

Section 5.03.

No Right to Set-Off

10

 

 

 

ARTICLE VI STANDARD FOR SERVICE

10

Section 6.01.

Standard for Service

10

Section 6.02.

Disclaimer of Warranties

11

Section 6.03.

Compliance with Laws and Regulations

12

 

 

 

ARTICLE VII LIMITED LIABILITY AND INDEMNIFICATION

12

Section 7.01.

Personal Injury

12

Section 7.02.

Indirect and Other Damages

12

Section 7.03.

Limitation of Liability

12

Section 7.04.

Obligation To Re-perform; Liabilities

13

Section 7.05.

Release and Recipient Indemnity

13

Section 7.06.

Provider Indemnity

13

Section 7.07.

Indemnification Procedures

13

Section 7.08.

Liability for Payment Obligations

13

Section 7.09.

Exclusion of Other Remedies

14

 

 

 

ARTICLE VIII DISPUTE RESOLUTION

14

Section 8.01.

Dispute Resolution

14

 

 

 

ARTICLE IX TERM AND TERMINATION

14

Section 9.01.

Term and Termination

14

 

i



 

Section 9.02.

Effect of Termination

15

Section 9.03.

Force Majeure

16

 

 

 

ARTICLE X GENERAL PROVISIONS

16

Section 10.01.

No Agency

16

Section 10.02.

Subcontractors

16

Section 10.03.

Treatment of Confidential Information

17

Section 10.04.

Further Assurances

17

Section 10.05.

Notices

17

Section 10.06.

Severability

19

Section 10.07.

Entire Agreement

19

Section 10.08.

No Third-Party Beneficiaries

19

Section 10.09.

Governing Law

19

Section 10.10.

Amendment

19

Section 10.11.

Rules of Construction

20

Section 10.12.

Counterparts

20

Section 10.13.

Assignability

20

Section 10.14.

Waiver of Jury Trial

20

Section 10.15.

Non-Recourse

21

 

EXHIBIT I

Services Managers

 

 

 

 

SCHEDULE A

Services

 

SCHEDULE B

Facilities

 

 

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This Transition Services Agreement, dated as of March 24, 2015 (this “Agreement”), is made by and between Nabors Industries Ltd., a Bermuda exempted company (“Navy”) and Nabors Red Lion Limited, a Bermuda exempted company and currently a wholly owned Subsidiary of Navy (“Red Lion”).

 

RECITALS

 

WHEREAS, Navy and Red Lion have entered into a Separation Agreement, dated as of June 25, 2014 (as amended, modified or supplemented from time to time in accordance with its terms, the “Separation Agreement”), pursuant to which Navy will transfer to Red Lion, and Red Lion has agreed to receive and assume, certain assets and liabilities of the Red Lion Business (the “Separation”).

 

WHEREAS, Navy, Red Lion, and C&J Energy Services, Inc., a Delaware corporation (“Penny”) have entered into a Merger Agreement, dated as of June 25, 2014 (as amended, modified or supplemented from time to time in accordance with its terms, the “Merger Agreement”), pursuant to which, following the Separation, Penny will merge with a subsidiary of Red Lion and the common stock of Penny will be converted into common shares of Red Lion.

 

WHEREAS, pursuant to the Separation Agreement and the Merger Agreement, the Parties (as defined below) have agreed that Red Lion shall provide or cause to be provided to Navy and/or other members of the Navy Group certain services, the use of facilities and other assistance on a transitional basis and in accordance with the terms and subject to the conditions set forth in this Agreement.

 

WHEREAS, the Separation Agreement and the Merger Agreement require execution and delivery of this Agreement by Navy and Red Lion on or prior to the Separation Date.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained in this Agreement, and intending to be legally bound, the Parties hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01.         Certain Defined Terms.  (a)  Unless otherwise defined in this Agreement, all capitalized terms used in this Agreement shall have the same meaning as in the Separation Agreement.

 

(b)           The following capitalized terms used in this Agreement shall have the meanings set forth below:

 

Additional Service” shall have the meaning set forth in Section 2.01(c).

 

Affiliate” shall have the meaning set forth in the Separation Agreement.

 



 

Agreement” shall have the meaning set forth in the Preamble.

 

Ancillary Agreement” shall have the meaning set forth in the Separation Agreement.

 

Confidential Information” shall have the meaning set forth in Section 10.03(a).

 

Dispute” shall have the meaning set forth in Section 8.01(a).

 

Facilities” shall have the meaning set forth in Section 4.01(a).

 

Force Majeure” means, with respect to a Party, an event beyond the control of such Party (or any Person acting on its behalf), which by its nature could not have been reasonably foreseen by such Party (or such Person), or, if it could have been reasonably foreseen, was unavoidable, and includes acts of God, storms, floods, riots, fires, sabotage, civil commotion or civil unrest, interference by civil or military authorities, acts of war (declared or undeclared) or armed hostilities or other national or international calamity or one or more acts of terrorism, failure of energy sources or facilities, strike, walkout, lockout or other labor trouble or shortage, delays by unaffiliated suppliers or carriers.

 

Interest Payment” shall have the meaning set forth in Section 5.01(b).

 

Navy” shall have the meaning set forth in the Preamble.

 

Navy Group” shall have the meaning set forth in the Separation Agreement.

 

Navy Services Manager” shall have the meaning set forth in Section 2.03(a).

 

Party” means Navy and Red Lion individually, and “Parties” means Navy and Red Lion collectively, and, in each case, their permitted successors and assigns.

 

Provider” means Red Lion or its Subsidiary or Affiliate (as determined at the time any Service is provided) providing a Service under this Agreement.

 

Provider Indemnified Party” shall have the meaning set forth in Section 7.05.

 

Recipient” means Navy or its Subsidiary or Affiliate (as determined at the time such Service is provided) to whom a Service under this Agreement is being provided.

 

Recipient Indemnified Party” shall have the meaning set forth in Section 7.06.

 

Red Lion” shall have the meaning set forth in the Preamble.

 

Red Lion Business” shall have the meaning set forth in the Separation Agreement.

 

Red Lion Employee” shall have the meaning set forth in Section 2.01(b).

 

Red Lion Entities” shall have the meaning set forth in the Separation Agreement.

 

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Red Lion Services Manager” shall have the meaning set forth in Section 2.03(b).

 

Representative” of a Person means any director, officer, employee, agent, consultant, accountant, auditor, attorney or other representative of such person.

 

Schedule(s)” shall have the meaning set forth in Section 2.02.

 

Separation Agreement” shall have the meaning set forth in the Recitals.

 

Separation Date” shall have the meaning shall have the meaning set forth in the Separation Agreement.

 

Service Charges” shall have the meaning set forth in Section 5.01(a).

 

Service Taxes” shall have the meaning set forth in Section 5.02(a).

 

Services” shall have the meaning set forth in Section 2.01(a).

 

Subsidiary” of any Person shall mean another Person (other than a natural Person), an aggregate amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of the Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first Person.

 

Termination Charges” shall mean, with respect to the early termination of any Service, (a) with respect to labor costs and other costs that are incurred by the Provider on a monthly basis with respect to such Service, an amount equal to any and all Services Charges payable by the Recipient in connection with such Service for the remainder of the month in which such Service is terminated; and (b) with respect to prepaid license fees, prepaid leases, other prepaid costs, and fees that the Provider has not yet paid but is obligated to pay with respect to any reasonable period after the termination of the applicable Service, in each case to the extent such amounts are incurred in connection with the provision of the terminated Services, all such prepaid and committed fees for all periods prepaid or committed; provided, that the Provider shall use its commercially reasonable efforts to reduce any costs, fees or expenses (and to recover prepaid fees) incurred by the Provider or payable to any unaffiliated third-party provider in connection with the provision of such Service and credit any such reductions against the Termination Charges payable by the Recipient (for the avoidance of doubt, no Termination Charges shall be payable by a Recipient with respect to the early termination of a Service in accordance with Section 9.01(b)).

 

ARTICLE II

 

SERVICES, DURATION AND SERVICES MANAGERS

 

Section 2.01.         Services.

 

(a)           Subject to the terms and conditions of this Agreement, Red Lion shall provide (or cause to be provided) to the Navy Group (i) the services listed on Schedule A to this

 

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Agreement and (ii) access to facilities listed on Schedule B to this Agreement ((i) and (ii) collectively, the “Services”).  All Services shall be solely for the use and benefit of Navy and its Subsidiaries in conducting their ongoing operations after the Separation.

 

(b)           At all times during the performance of the Services, all Persons performing such Services (including agents, temporary employees, independent third parties, and consultants), who are collectively referred to herein as the “Red Lion Employees”, shall be construed as being independent from the Navy Group and no Red Lion Employee shall be considered or deemed to be an employee of any member of the Navy Group nor entitled to any employee benefits from any member of the Navy Group as a result of this Agreement.  For the avoidance of doubt, Red Lion acknowledges and agrees that throughout the period that a Red Lion Employee is providing Services hereunder, Red Lion is solely responsible for the payment of wages, providing of benefits and satisfaction of all employment-related obligations (including without limitation all obligations with respect to employee leave, immigration, recordkeeping, employment-related taxes and compliance with all labor and employment laws).  Navy acknowledges and agrees that, except as may be expressly set forth herein as a Service (including such agreed Additional Services to be provided pursuant to Section 2.01(c) below) or otherwise expressly set forth in the Separation Agreement, or other binding definitive agreement, Red Lion shall not be obligated to provide, or cause to be provided, any service or goods to any member of the Navy Group.

 

(c)           If, within one hundred and eighty (180) days after the Separation Date, the Parties determine that a service provided by Red Lion to any member of the Navy Group prior to the date hereof was omitted from the Schedules to this Agreement (each, an “Additional Service”), then the Parties shall negotiate in good faith to agree to the terms and conditions upon which such services would be added to this Agreement, it being agreed that the charges for such services should be determined on a basis consistent with the methodology for determining the initial prices provided for in Section 5.01.

 

Section 2.02.         Duration of Services.  Subject to the terms of this Agreement, Provider shall provide (or cause to be provided) to the Recipients each Service until the earlier to occur of, with respect to each such Service, (i) the expiration of the period of the maximum duration for such Service as set forth on Schedule A or Schedule B (each a “Schedule”, and collectively, the “Schedules”) or (ii) the date on which such Service is terminated under Section 9.01(b); provided, however, that each Recipient shall use its commercially reasonable efforts in good faith to transition itself to a stand-alone entity with respect to each Service during the period for such Service as set forth in the relevant Schedules; and provided, further, that in the event that the expiration of the period of the maximum duration is not set forth in Schedule A or Schedule B and such Services are not earlier terminated under Section 9.01(b), the Parties’ obligations with respect to the provision of any such Services and payment for any such Services shall terminate on December 31, 2015.

 

Section 2.03.         Transition Services Managers.  (a) Navy hereby appoints and designates the individual holding the Navy position set forth on Exhibit I to act as its initial services manager (the “Navy Services Manager”), who will be directly responsible for coordinating and managing the delivery of the Services and have authority to act on Navy’s behalf with respect to matters relating to this Agreement.  The Navy Services Manager will work

 

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with the personnel of the Navy Group to periodically address issues and matters raised by Red Lion relating to this Agreement.  Notwithstanding the requirements of Section 10.05, all communications from Red Lion to Navy pursuant to this Agreement regarding routine matters involving the Services set forth on the Schedules shall be made through the Navy Services Manager, or such other individual as specified by the Navy Services Manager in writing and delivered to Red Lion by email or facsimile transmission with receipt confirmed.  In the event the Navy Services Manager is unavailable or intends to be unavailable, the Navy Services Manager shall promptly specify another individual to serve as the Navy Services Manager in the interim. Navy shall notify Red Lion of the appointment of a different Navy Services Manager, if necessary, in accordance with Section 10.05.

 

(b)           Red Lion hereby appoints and designates the individual holding the Red Lion position set forth on Exhibit I to act as its initial services manager (the “Red Lion Services Manager”), who will be directly responsible for coordinating and managing the receipt of the Services and have authority to act on Red Lion’s behalf with respect to matters relating to this Agreement.  The Red Lion Services Manager will work with the personnel of Red Lion Entities to periodically address issues and matters raised by Navy relating to this Agreement.  Notwithstanding the requirements of Section 10.05, all communications from Navy to Red Lion pursuant to this Agreement regarding routine matters involving the Services set forth on the Schedules shall be made through the Red Lion Services Manager or such other individual as specified by the Red Lion Services Manager in writing and delivered to Navy by email or facsimile transmission with receipt confirmed.  In the event the Red Lion Services Manager is unavailable or intends to be unavailable, the Red Lion Manager shall promptly specify another individual to serve as the Red Lion Services Manager in the interim.  Red Lion shall notify Navy of the appointment of a different Red Lion Services Manager, if necessary, in accordance with Section 10.05.

 

Section 2.04.         Personnel.  (a) The Provider will have the right, in its reasonable discretion, to (i) designate which personnel it will assign to perform any Service, and (ii) remove and replace such personnel at any time, so long as there is no resulting increase in costs or decrease in the level of service for the Recipient; provided, however, that each Red Lion Employee shall hold any required licenses and certifications necessary, and shall be fully qualified, to perform the applicable Service and the Provider will use commercially reasonable, good faith efforts to limit the disruption to the Recipient in the transition of the Services to different personnel.  For the avoidance of doubt, no Recipient or other member of the Navy Group shall have the authority to terminate any Red Lion Employee’s employment with Red Lion or any other third party.

 

(b)           In the event that the provision of any Service by the Provider requires, as set forth in the Schedules, the cooperation and services of the applicable personnel of the Recipient, the Recipient will make available such personnel as may be reasonably necessary to enable the Provider to provide such Service.  The Recipient will have the right, in its reasonable discretion, to (i) designate which personnel it will make available to the Provider in connection with the foregoing sentence, and (ii) remove and replace such personnel at any time, in each case so long as there is no resulting increase in costs to, or any materially adverse effect to the provision of such Service by, the Provider; provided, however, that the Recipient will use its commercially reasonable efforts to limit the disruption to the Provider in the transition of such

 

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personnel.  All personnel of the Recipient made available pursuant to this Section 2.04(b) shall be instructed to comply with the applicable policies and guidelines of the Provider while on Provider premises, including any policies and guidelines relating to enterprise information technology (EIT).

 

ARTICLE III

 

OTHER ARRANGEMENTS

 

Section 3.01.         Third Party Licenses and Consents.  The Parties shall use commercially reasonable efforts to obtain, and to keep and maintain in effect, all governmental or third party licenses and consents required for the provision of any Service by a Provider in accordance with the terms of this Agreement; provided, that if a Provider is unable to obtain or maintain any such license or consent, such Provider shall promptly notify the Recipient in writing and shall, and shall cause its Affiliates to, use commercially reasonable efforts to implement an appropriate alternative arrangement.  To the extent such failure to obtain or maintain any such license or consent is not due to Provider’s own negligence or other failure to satisfy Provider’s obligations hereunder, the reasonable costs relating to obtaining any such licenses or consents, to the extent attributable to the Services, shall be borne by the Recipient; provided, that the Provider shall not incur any such costs without the prior written consent of the Recipient.  If any such license, consent or permissible alternative arrangement is not reasonably available despite the commercially reasonable efforts of the Provider and its Affiliates, such Provider shall not be required to provide the affected Services, and in the event the Provider ceases providing such Services, the Recipient shall have no obligation to pay any Service Charges or Termination Charges in respect of periods after the date the Provider ceases providing such Service.  A Provider shall not, without the Recipient’s prior written consent, enter into any contract or agreement, or modify the terms of any existing contract or agreement, if as a result: (a) the provision of any Service would violate the terms of such contract or agreement; (b) costs payable or potentially payable by Recipient would increase; (c) or such Provider could otherwise become unable to provide any Service.

 

Section 3.02.         Third Party Providers.  If a Provider receives written notice from any third party service provider that such Person intends to terminate a service pursuant to which such Provider provides, or causes to be provided, a Service to the Recipient, then such Provider shall provide a copy of such written notice to the Recipient and shall use commercially reasonable efforts to secure the continued provision of that service from such third party or an alternative service provider.  In any such event, Recipient shall have no obligation to pay any Service Charge or Termination Charge relating to such terminated Services in respect of periods after the date of the termination of such Service that has not been continued or for which alternative arrangements have been made.

 

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ARTICLE IV

 

ADDITIONAL AGREEMENTS

 

Section 4.01.         Co-location and Facilities Matters.  (a) Red Lion hereby grants to Navy and its Affiliates a limited license to use and access space at certain facilities and to continue to use certain equipment located at such facilities (including use of office security and badge services), in each case as listed in Schedule B (the “Facilities”), for substantially the same purposes and in substantially the same manner used immediately prior to the date of this Agreement.  For the avoidance of doubt, at each of the Facilities, Red Lion shall, in addition to providing access and the right to use such facilities, provide to the personnel of Navy and its Affiliates substantially all ancillary services that are provided as of the date of this Agreement to its own personnel at such facility, such as, by way of example and not limitation: reception, general maintenance (subject to the immediately following sentence), janitorial, security (subject to the immediately following sentence) and telephone services; access to duplication, facsimile, printing and other similar office services; and use of cafeteria, break room, restroom and other similar facilities.  Unless otherwise provided in the Schedules, such ancillary services shall include (A) in the case of security, those services provided in connection with shared areas of a Facility, it being understood that the Provider shall not provide security services to Recipient-specific areas of Provider’s facility under the control of Recipient (to the extent that it is reasonably practicable for Recipient to provide such services with respect to any such Recipient-specific area) or security passes that permit entrance to Provider-specific areas of Provider’s facility, except to the extent necessary for Recipient’s personnel to access Recipient-specific areas or common areas of the facility, and (B) in the case of maintenance services, those services historically provided that are general in nature and within the scope of customary maintenance of ordinary wear and tear.

 

(b)           Navy shall only permit its authorized Representatives, contractors, invitees or licensees to use the Facilities, except as otherwise permitted by Red Lion in writing.  Navy shall, and shall cause its respective Subsidiaries, Representatives, contractors, invitees or licensees to, vacate Red Lion’s Facilities at or prior to the expiration date relating to each Facility set forth in Schedule B and shall deliver over to Red Lion or its Subsidiaries, as applicable, the Facilities in substantially the same repair and condition at that date as on the date of this Agreement, ordinary wear and tear and any condition caused by Red Lion or its Subsidiaries excepted; provided, however, that in the event that the third-party lease for a Facility specifies otherwise, Navy shall deliver over such Facility in such repair and condition (taking into account the date that the Party began its occupation of such Facility) as set forth in the third-party lease.  In addition to the access rights provided under Section 4.02, Red Lion or its Subsidiaries, or the landlord in respect of any third-party lease, shall have reasonable access to their respective Facilities from time to time as reasonably necessary for the security and maintenance thereof in accordance with past practice, the terms of this Agreement and the terms of any third-party lease agreement, if applicable.  Navy agrees to maintain commercially appropriate and customary levels (in no event less than what is required by the landlord under the applicable lease agreement) of property and liability insurance in respect of the Facilities the Recipients occupy and the activities conducted thereon and to be responsible for, and to indemnify and hold harmless Red Lion and other parties in accordance with Article VII in respect of, the acts and omissions of the Recipients’ Representatives, contractors, invitees and

 

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licensees.  Red Lion shall, and shall cause its Subsidiaries, Representatives, contractors, invitees and licensees to, comply in all material respects with (i) all Laws applicable to their use or occupation of any Facility including those relating to environmental and workplace safety matters, (ii) Red Lion’s applicable site rules, regulations, policies and procedures, and (iii) any applicable requirements of any third-party lease governing any Facility.  Navy shall, and shall cause its Subsidiaries, Representatives, contractors, invitees and licensees to, comply in all material respects with (i) all Laws applicable to their use or occupation of any Facility including those relating to environmental and workplace safety matters, (ii) Red Lion’s applicable site rules, regulations, policies and procedures, and (iii) any applicable requirements of any third-party lease governing any Facility.  Navy shall not make, and shall cause its Subsidiaries, Representatives, contractors, invitees and licensees to refrain from making, any material alterations or improvements to the Facilities except with the prior written approval of the other Red Lion or its Subsidiaries, as applicable, which consent Red Lion may withhold in its sole discretion.  Red Lion shall provide heating, cooling, electricity and other utility services for the Facilities substantially consistent with levels provided prior to the date of this Agreement.  The rights granted pursuant to this Section 4.01 shall be in the nature of a license and shall not create a leasehold or other estate or possessory rights in Navy, or its Subsidiaries, Representatives, contractors, invitees or licensees, with respect to the Facilities.

 

Section 4.02.         Access.  (a) Navy shall, and shall cause its Subsidiaries to, allow Red Lion and its Representatives reasonable access during normal business hours to the Facilities (and portions thereof) occupied by Navy necessary for Red Lion to fulfill its obligations under this Agreement; provided, however, that Red Lion and each Provider will use its commercially reasonable, good faith efforts to limit the disruption to the Recipient in the fulfillment of its obligations under this Agreement.

 

(b)           Notwithstanding the other rights of access of the Parties under this Agreement, Red Lion shall, and shall cause its Subsidiaries to, afford Navy, its Subsidiaries and Representatives, following not less than five (5) business days’ prior written notice from Navy, reasonable access during normal business hours to the facilities, information, systems, infrastructure, and personnel of the Providers as reasonably necessary for Navy to verify the adequacy of internal controls over information technology, reporting of financial data and related processes employed in connection with the Services, including in connection with verifying compliance with Section 404 of the Sarbanes-Oxley Act of 2002; provided, however, such access shall not unreasonably disrupt any of the business or operations of Red Lion or its Subsidiaries.

 

Section 4.03.         Cooperation.  It is understood that it will require the significant efforts of both Parties to implement this Agreement and to ensure performance of this Agreement by the Parties at the agreed upon levels in accordance with all of the terms and conditions of this Agreement.  The Parties will cooperate, acting in good faith and using commercially reasonable efforts, to effect a smooth and orderly provision and transition of the Services provided under this Agreement from the Provider to the Recipient (including repairs & maintenance Services and the assignment or transfer of the rights and obligations under any third-party contracts relating to the Services); provided, however, that this Section 4.03 shall not require either Party to incur any material out-of-pocket costs or expenses unless and except as expressly provided in this Agreement or otherwise agreed to in writing by the Parties.

 

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ARTICLE V

 

COSTS AND DISBURSEMENTS

 

Section 5.01.         Costs and Disbursements.  (a) Except as otherwise provided in this Agreement or in the Schedules to this Agreement, a Recipient of Services shall pay to the Provider of such Services a monthly fee for the Services based on Provider’s cost of providing such Services (or category of Services, as applicable), including such Provider’s out-of-pocket costs and expenses, and customary allocation of overhead expenses and leveraged assets, services and resources (including applicable hardware and software maintenance and support charges) (each such fee constituting a “Service Charge” and, collectively, “Service Charges”).  During the term of this Agreement, the amount of a Service Charge for any Services (or category of Services, as applicable) shall not increase, except to the extent (i) appropriate to reflect an increase in the volume of Services received or requested by any Recipient, (ii) any increases described in the Schedules or as otherwise mutually agreed to by the Parties, and (iii) subject to compliance with Section 5.01(b), any increase in the rates or charges imposed by any third-party provider that is providing Services.  The relevant Schedule shall be updated to reflect such increase in Service Charges.  All charges based on a monthly or other time basis will be pro-rated based on actual days elapsed during the period of service.

 

(b)           The Provider shall deliver an invoice to the Recipient for all Service Charges (and any taxes due and owing in accordance with Section 5.02) on a monthly basis beginning on the second (2nd) month following the Closing Date, in arrears for the Service Charges due to the Provider under this Agreement.  The Recipient shall pay the undisputed amount of each such invoice by wire transfer to the Provider within fifteen (15) days of the receipt of each such invoice.  If the Recipient fails to pay such amount by such date, the Recipient shall be obligated to pay to the Provider, in addition to the amount due, interest at an annual interest rate of five percent (5%) (the “Interest Payment”), accruing from the date the payment was due through the date of actual payment.  The Provider shall provide the Recipient with data and documentation (including copies of all applicable third-party invoices, other than invoices for repair & maintenance Services) reasonably satisfactory to the Recipient supporting the calculation of any Service Charges that are increased pursuant to Section 5.01(a) or are variable from month to month (as a result of changes to the costs incurred by the Provider from any third-party provider in relation to such Service, any reduction in Services or otherwise) for the purpose of verifying the accuracy of such calculation.

 

(c)           Subject to the confidentiality provisions set forth in Section 10.03, Red Lion shall, and shall cause its Affiliates to, provide, upon ten (10) days’ prior written notice from Navy, any information within its or its Affiliates’ possession that Navy reasonably requests in connection with any Services being provided (either by Red Lion or any of its Affiliates or an unaffiliated third-party provider), including any applicable invoices, agreements documenting the arrangements between Affiliate or third-party provider and the Provider and other supporting documentation.

 

Section 5.02.         Taxes.  (a) Without limiting any provisions of this Agreement, the Recipient shall bear any and all sales, use, transaction, services, gross receipts (to the extent imposed in lieu of sales or transfer taxes) and transfer taxes and other similar charges (and any

 

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related interest and penalties) imposed on, or payable with respect to, Services and any fees or charges, including any Service Charges, payable by it pursuant to this Agreement (any such taxes or amounts “Service Taxes”).

 

(b)           Notwithstanding anything to the contrary in Section 5.02(a) or elsewhere in this Agreement, the Recipient shall be entitled to withhold from any payments to the Provider any such taxes that Recipient is required by law to withhold and shall pay over such taxes to the applicable taxing authority.  If the Recipient withholds any amounts respecting Service Taxes, the sum payable by the Recipient to the Provider shall be increased as necessary so that after such withholding has been made (including such withholdings applicable to the additional amounts payable under this Section), the Provider receives an amount equal to the sum it would have received had no such withholding been made.

 

Section 5.03.         No Right to Set-Off.  The Recipient shall pay the full amount of Service Charges and shall not set-off, counterclaim or otherwise withhold any amount owed to the Provider under this Agreement on account of any obligation owed by the Provider to the Recipient that has not been finally adjudicated, settled or otherwise agreed upon by the Parties in writing.

 

ARTICLE VI

 

STANDARD FOR SERVICE

 

Section 6.01.         Standard for Service.  (a) Except where the Provider is restricted by an existing contract with a third party or by Law, and unless any Schedule hereto indicates otherwise or the parties shall agree in writing to a different arrangement, Red Lion agrees to, and to cause each Provider (i) to comply with all applicable Laws and perform the Services such that the nature, quality, standard of care and the service levels at which such Services are performed are no less than the nature, quality, standard of care and service levels at which the same or similar services were performed by or on behalf of the Provider during the twelve-month period prior to the Closing Date (or, if not so previously provided, then substantially similar to that which are applicable to similar services provided to the Provider’s Affiliates or other business components); and (ii) upon receipt of written notice from the Recipient identifying any outage, interruption or other failure of any Service, to respond to such outage, interruption or other failure of any Services in a manner that is no less than that which is substantially similar to the manner in which such Provider or its Affiliates responded to any outage, interruption or other failure of the same or similar services during the twelve-month period prior to the Closing Date (the Parties acknowledge that an outage, interruption or other failure of any Service shall not be deemed to be a breach of the provisions of this Section 6.01 so long as the applicable Provider complies with this clause (ii)).  As of or following the date of this Agreement, if the Provider is or becomes aware of any restriction on the Provider by an existing contract with a third-party that would restrict the nature, quality, standard of care or service levels applicable to delivery of the Services to be provided by the Provider to the Recipient, the Provider shall promptly notify the Recipient of any such restriction (which notice shall in any event precede any change to, or reduction in, the nature, quality, standard of care or service levels applicable to delivery of the Services resulting from such restriction) and use good faith efforts to provide such Services in a manner as closely as possible to the standards described in this Section 6.01, and the Parties shall

 

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negotiate in good faith an amendment to the applicable Schedule to reflect such change to, or reduction in, the nature, quality, standard of care or service levels of the Service, as applicable.  The Provider shall have no obligation to provide any Services hereunder in respect of any business, assets or properties acquired by the Recipient or any of its Affiliates subsequent to the Closing Date.

 

(b)           It is understood and agreed that a Provider may (but is not obligated to) from time to time modify, change or enhance the manner, nature, quality and/or standard of care of any Service provided to the Recipient to the extent such Provider is making a similar change in the performance of such services for the Provider and its Affiliates.  The Provider shall promptly furnish to Recipient notice with respect to such modifications, changes or enhancements, including a reasonably detailed description thereof. To the extent any such modification or change affects a Service and relates to technology, software or information systems, the Provider shall have no obligation to continue to provide, or cause to be provided, such Service using the prior technology, software or information systems, but shall be required to provide such Service in accordance with this Agreement (or an alternate service that meets the requirements for such Service set out in Schedule A) using its upgraded or changed technology, software or information systems.  Any reasonable incremental expense incurred by the Provider in making any such modification, change or enhancement to the Services performed hereunder or in providing such Services on an ongoing basis shall be taken into account in the calculation of Service Costs to the extent contemplated by Section 5.01(a); provided, no such incremental cost in making any such modification, change or enhancement to the Services performed hereunder or in providing such Services on an ongoing basis shall be taken into account to the extent an alternative service is utilized by Provider. The Provider shall have no obligation to provide, or cause to be provided, Services to the extent any changes are made to the Recipient’s business that materially increase or materially adversely increase the Provider’s burden with respect to the provision of such Services or that make commercially impracticable the provision of such Services, unless and only to the extent the Parties otherwise agree in writing or as expressly set forth herein.

 

(c)           The Provider shall have the right to shut down temporarily for maintenance purposes the operation of the Facilities providing any Service whenever, in the Provider’s sole and absolute discretion, such action is necessary; provided, however, that no preplanned temporary shutdown shall occur with less than forty-eight (48) hours’ advance notice to the applicable Recipient. For clarity, the Provider may temporarily close Facilities without advance notice in order to perform emergency or unplanned maintenance.  The Provider shall be relieved of its obligations to provide the Services affected by such shutdown during the period that its Facilities are so shut down, and the Recipient shall be relieved of its obligations to pay the Service Charges and potential Termination Charges related to such Services in respect of periods after the date the applicable Services so shut down.

 

Section 6.02.         Disclaimer of Warranties.  Except as expressly set forth in this Agreement, the Parties acknowledge and agree that the Services are provided as-is, that the Recipients assume all risks and liability arising from or relating to its use of and reliance upon the Services and each Provider makes no representation or warranty with respect thereto.  EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, PROVIDERS HEREBY EXPRESSLY DISCLAIM ALL REPRESENTATIONS AND WARRANTIES REGARDING

 

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THE SERVICES, WHETHER EXPRESS OR IMPLIED, INCLUDING ANY REPRESENTATION OR WARRANTY IN REGARD TO QUALITY, PERFORMANCE, NONINFRINGEMENT, COMMERCIAL UTILITY, MERCHANTABILITY OR FITNESS OF THE TRANSITION SERVICES FOR A PARTICULAR PURPOSE.

 

Section 6.03.         Compliance with Laws and Regulations.  Each Party shall be responsible for its own compliance with any and all Laws applicable to its performance under this Agreement.  No Party will knowingly take any action in violation of any such applicable Law that results in liability being imposed on the other Party.

 

ARTICLE VII

 

LIMITED LIABILITY AND INDEMNIFICATION

 

Section 7.01.         Personal Injury.  EACH PARTY (AS AN INDEMNIFYING PARTY) SHALL ASSUME ALL LIABILITY FOR AND SHALL RELEASE, DEFEND, INDEMNIFY, AND HOLD THE OTHER PARTY, ITS AFFILIATES, AND THEIR RESPECTIVE EMPLOYEES, OFFICERS, DIRECTORS, AND AGENTS (ALL AS INDEMNIFIED PARTIES) FREE AND HARMLESS FROM AND AGAINST ALL LOSSES IN CONNECTION HEREWITH IN RESPECT OF INJURY TO OR DEATH OR SICKNESS OF ANY EMPLOYEE, AGENT, OR REPRESENTATIVE OF THE INDEMNIFYING PARTY, ITS AFFILIATES OR THEIR CONTRACTORS OR SUBCONTRACTORS OF ANY PARTY, HOWSOEVER ARISING AND WHETHER OR NOT CAUSED BY THE NEGLIGENCE (WHETHER SOLE, JOINT, OR CONCURRENT, OR ACTIVE OR PASSIVE) OF THE INDEMNIFIED PARTIES, EXCEPT TO THE EXTENT SUCH LOSS IS CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF AN INDEMNIFIED PARTY.

 

Section 7.02.         Indirect and Other Damages.  Notwithstanding anything to the contrary contained in this Agreement, the Providers shall not be liable to the Recipient or any of its Affiliates or Representatives, whether in contract, tort (including negligence and strict liability) or otherwise, at law or equity, for any punitive, special, indirect, incidental, consequential, or exemplary damages (including any lost profits, lost savings, loss of reputation or loss of opportunity included in such damages), which in any way arise out of, relate to or are a consequence of, the performance or nonperformance by the Providers (including any Affiliates and Representatives of a Provider and any third-party providers, in each case, providing the applicable Services) under this Agreement or the provision of, or failure to provide, any Services under this Agreement; provided, however, that (i) the Provider may be liable to the other Party for any such damages that result directly from the willful misconduct or gross negligence of the Providers, and (ii) to the extent a Party is otherwise determined to be entitled to recover any punitive, special, indirect, incidental, consequential, or exemplary damages, such damages may be recovered only to the extent the Party claiming such damages has actually paid amounts to a third party as part of a judgment or settlement.

 

Section 7.03.         Limitation of Liability.  Subject to Section 7.04, the liabilities of each Provider and its Affiliates and Representatives, collectively, under this Agreement for any act or failure to act in connection herewith (including the performance or breach of this

 

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Agreement), or from the sale, delivery, provision or use of any Services provided under or contemplated by this Agreement, whether in contract, tort (including negligence and strict liability) or otherwise, shall not exceed the total aggregate Service Charges (excluding any third-party costs and expenses included in such Service Charges) actually paid to such Provider by the Recipient pursuant to this Agreement.

 

Section 7.04.         Obligation To Re-perform; Liabilities.  In the event of any breach of this Agreement by any Provider with respect to the provision of any Services (with respect to which the Provider can reasonably be expected to re-perform in a commercially reasonable manner), the Provider shall (a) promptly correct in all material respects such error, defect or breach or re-perform in all material respects such Services at the written request of the Recipient and at the sole cost and expense of the Provider and (b)  subject to the limitations set forth in Sections 7.01 and 7.02, reimburse the Recipient and its Affiliates and Representatives for liabilities attributable to such breach by the Provider.  Other than as set forth in Section 7.06, the remedy set forth in this Section 7.04 shall be the sole and exclusive remedy of the Recipient for any such breach of this Agreement.  Any request for re-performance in accordance with this Section 7.04 by the Recipient must be in writing and specify in reasonable detail the particular error, defect or breach, and such request must be made no more than one (1) month from the date such breach occurred.

 

Section 7.05.         Release and Recipient Indemnity.  Subject to Section 7.01, each Recipient hereby releases the Providers and their Affiliates and Representatives (each, a “Provider Indemnified Party”), and each Recipient hereby agrees to indemnify, defend and hold harmless each such Provider Indemnified Party from and against any and all liabilities arising from, relating to or in connection with the use of any Services by such Recipient or any of its Affiliates, Representatives or other Persons using such Services, except to the extent that such liabilities arise out of, relate to or are a consequence of the applicable Provider Indemnified Party’s bad faith, gross negligence or willful misconduct.

 

Section 7.06.         Provider Indemnity.  Subject to Section 7.01, each Provider hereby agrees to indemnify, defend and hold harmless the Recipients and their Affiliates and Representatives (each a “Recipient Indemnified Party”), from and against any and all liabilities arising from, relating to or in connection with the use of any Services by such Recipient or any of its Affiliates, Representatives or other Persons using such Services or in connection with the sale, delivery, provision or use of any Services provided under or contemplated by this Agreement to the extent that such liabilities arise out of, relate to or are a consequence of the applicable Provider’s bad faith, gross negligence or willful misconduct.

 

Section 7.07.         Indemnification Procedures.  The provisions of Article III of the Separation Agreement shall govern claims for indemnification under this Agreement.

 

Section 7.08.         Liability for Payment Obligations.  Nothing in this Article VII shall be deemed to eliminate or limit, in any respect, Navy’s express obligation in this Agreement to pay Termination Charges or Service Charges for Services rendered in accordance with this Agreement.

 

13



 

Section 7.09.                          Exclusion of Other Remedies.  The provisions of Sections 7.04, 7.05 and 7.06 of this Agreement, subject to Section 7.03, shall be the sole and exclusive remedies of the Provider Indemnified Parties and the Recipient Indemnified Parties, as applicable, for any claim, loss, damage, expense or liability, whether arising from statute, principle of common or civil law, principles of strict liability, tort, contract or otherwise under this Agreement.

 

ARTICLE VIII

 

DISPUTE RESOLUTION

 

Section 8.01.                          Dispute Resolution.  (a) In the event of any dispute, controversy or claim arising out of or relating to the transactions contemplated by this Agreement, or the validity, interpretation, breach or termination of any provision of this Agreement, or calculation or allocation of the costs of any Service, including claims seeking redress or asserting rights under any Law (each, a “Dispute”), Navy and Red Lion agree that the Navy Services Manager and the Red Lion Services Manager (or such other persons as Navy and Red Lion may designate) shall negotiate in good faith in an attempt to resolve such Dispute amicably.  If such Dispute has not been resolved to the mutual satisfaction of Navy and Red Lion within fifteen (15) days after the initial written notice of the Dispute (or such longer period as the Parties may agree), then such Dispute shall be resolved in accordance with the dispute resolution process referred to in Article V of the Separation Agreement; provided, that such dispute resolution process shall not modify or add to the remedies available to the Parties under this Agreement.

 

(b)                                 In any Dispute regarding the amount of a Service Charge, if after such Dispute is finally resolved pursuant to the dispute resolution process set forth or referred to in Section 8.01(a), it is determined that the Service Charge that the Provider has invoiced the Recipient, and that the Recipient has paid to the Provider, is greater or less than the amount that the Service Charge should have been, then (a) if it is determined that the Recipient has overpaid the Service Charge, the Provider shall within five (5) business days after such determination reimburse the Recipient an amount of cash equal to such overpayment, plus the Interest Payment, accruing from the date of payment by the Recipient to the time of reimbursement by the Provider; and (b) if it is determined that the Recipient has underpaid the Service Charge, the Recipient shall within five (5) business days after such determination reimburse the Provider an amount of cash equal to such underpayment, plus the Interest Payment, accruing from the date such payment originally should have been made by the Recipient to the time of payment by the Recipient.

 

ARTICLE IX

 

TERM AND TERMINATION

 

Section 9.01.                          Term and Termination.  (a) This Agreement shall commence immediately upon the Closing Date and shall terminate upon the earlier to occur of:  (i) the last date on which either Party is obligated to provide any Service to the other Party in accordance with the terms of this Agreement or (ii) the mutual written agreement of the Parties to terminate this Agreement in its entirety.

 

14



 

(b)                                 (i) Without prejudice to a Recipient’s rights with respect to a Force Majeure, a Recipient may from time to time terminate this Agreement with respect to the entirety of any individual Service or any portion thereof, (A) for any reason or no reason (y) upon providing to the Provider sixty (60) days’ prior written notice, and (z) subject to the obligation to pay any applicable Termination Charges pursuant to Section 9.02, or (B) if the Provider of such Service has failed to perform any of its material obligations under this Agreement with respect to such Service, and such failure shall continue to exist thirty (30) days after receipt by the Provider of written notice of such failure from the Recipient; and (ii) a Provider may terminate this Agreement with respect to one or more Services, in whole but not in part, at any time upon prior written notice to the Recipient if the Recipient has failed to perform any of its material obligations under this Agreement relating to such Services, including making payment of Service Charges when due, and such failure shall be continued uncured for a period of thirty (30) days after receipt by the Recipient of a written notice of such failure from the Provider.  The relevant Schedule shall be updated to reflect any terminated Service.  In the event that any Service is terminated other than at the end of a month, the Service Charge associated with such Service shall be pro-rated for the remainder of such month appropriately.  The Parties acknowledge that there may be interdependencies among the Services being provided under this Agreement that are not identified on the applicable Schedules, and agree that if the Provider’s ability to provide a particular Service in accordance with this Agreement is materially and adversely impacted by the termination of another Service in accordance with Section 9.01(b)(i)(A) prior to the expiration of the period of the maximum duration for such Service, the Parties shall negotiate in good faith to amend the Schedule relating to such impacted continuing Service, which amendment shall be consistent with the terms of, and the pricing methodology used for, comparable Services.

 

(c)                                  A Recipient may from time to time request a reduction in part of the scope or amount of any Service that is identified on the applicable Schedule as being subject to the provisions of this Section 9.01(c).  If requested to do so by Recipient, the Provider agrees to discuss in good faith appropriate reductions to the relevant Service Charges in light of all relevant factors including the costs and benefits to the Provider of any such reductions.  If, after such discussions, and without prejudice to Recipient’s rights under Section 9.01(b), the Recipient and the Provider do not agree to any requested reduction of the scope or amount of any Service and the relevant Service Charges in connection therewith, then there shall be no change to the scope or amount of any Services or Service Charges under this Agreement.  In the event that a Recipient and a Provider agreed to any reduction of Service and the relevant Service Charges, the relevant Schedule shall be updated to reflect such reduced Service.  In the event that any Service is reduced other than at the end of a month, the Service Charge associated with such Service for the month in which such Service is reduced shall be pro-rated appropriately.

 

Section 9.02.                          Effect of Termination.  Upon termination of any Service pursuant to this Agreement, the Provider of the terminated Service will have no further obligation to provide the terminated Service, and the relevant Recipient will have no obligation to pay any future Service Charges relating to any such Service; provided, that the Recipient shall remain obligated to the relevant Provider for the (i) Service Charges owed and payable in respect of Services provided prior to the effective date of termination and (ii) any applicable Termination Charges.  In connection with termination of any Service, the provisions of this Agreement not relating solely to such terminated Service shall survive any such termination, and in connection with a termination of this Agreement, Article I, Article VII (including liability in respect of any

 

15



 

indemnifiable liabilities under this Agreement arising or occurring on or prior to the date of termination), Article VIII, Article IX, Article X, all confidentiality obligations under this Agreement and liability for all due and unpaid Service Charges and any applicable Termination Charges payable pursuant to the early termination of a Service, shall continue to survive indefinitely.

 

Section 9.03.                          Force Majeure.  (a) No Provider (nor any Person acting on its behalf) shall have any liability or responsibility for failure to fulfill any obligation under this Agreement so long as and to the extent to which the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure; provided, that (i) the Provider (or such Person) shall have exercised commercially reasonable efforts to minimize the effect of Force Majeure on its obligations; and (ii) the nature, quality and standard of care that the Provider shall provide in delivering a Service after a Force Majeure shall be substantially the same as the nature, quality and standard of care that the Provider provides to its Affiliates and its other business components with respect to such Service.  In the event of an occurrence of a Force Majeure, the Provider shall give notice of suspension as soon as reasonably practicable to the other stating the date and extent of such suspension and the cause thereof, and the Provider shall resume the performance of such obligations as soon as reasonably practicable after the removal of such cause. In such event, the Recipient shall be relieved of any and all obligations in respect of the payment of any Service Charge for the applicable suspended Service with respect to the period of time such Service is suspended as a result of the applicable Force Majeure.

 

(b)                                 During the term of this Agreement, including during the period of a Force Majeure, the Recipient shall be entitled to seek an alternative service provider with respect to any Service(s) (at Recipient’s own expense).

 

ARTICLE X

 

GENERAL PROVISIONS

 

Section 10.01.                   No Agency.  Nothing in this Agreement shall be deemed in any way or for any purpose to constitute any party an agent of another unaffiliated party in the conduct of such other party’s business.  Each Provider of any Service under this Agreement shall act as an independent contractor and not as the agent of the Recipient in performing such Service, maintaining control over its employees, its subcontractors and their employees and complying with all withholding of income at source requirements, whether federal, state, local or foreign.

 

Section 10.02.                   Subcontractors.  A Provider may hire or engage one or more subcontractors to perform any or all of its obligations under this Agreement; provided, that (i) such Provider shall use the same degree of care in selecting any such subcontractor as it would if such contractor was being retained to provide similar services to the Provider and (ii) such Provider shall in all cases remain responsible for all of its obligations under this Agreement with respect to the scope of the Services, the standard for services as set forth in Article VI and the content of the Services provided to the Recipient.

 

16



 

Section 10.03.                   Treatment of Confidential Information.  (a) The Parties shall not, and shall cause all other persons providing Services or having access to information of the other Party that is known to such Party as confidential or proprietary (“Confidential Information”) not to, disclose to any other person or use, except for purposes of this Agreement, any Confidential Information of the other Party; provided, however, that each Party may disclose Confidential Information of the other Party, to the extent permitted by applicable Law:  (i) to its Representatives on a need-to-know basis in connection with the performance of such Party’s obligations under this Agreement; (ii) in any report, statement, testimony or other submission required to be made to any Governmental Authority having jurisdiction over the disclosing Party; or (iii) in order to comply with applicable Law, or in response to any summons, subpoena or other legal process or formal or informal investigative demand issued to the disclosing Party in the course of any litigation, investigation or administrative proceeding.  In the event that a Party becomes legally compelled (based on advice of counsel) by deposition, interrogatory, request for documents subpoena, civil investigative demand or similar judicial or administrative process to disclose any Confidential Information of the other Party, such disclosing Party shall provide the other Party with prompt prior written notice of such requirement, and, to the extent reasonably practicable, cooperate with the other Party (at such other Party’s expense) to obtain a protective order or similar remedy to cause such Confidential Information not to be disclosed, including interposing all available objections thereto, such as objections based on settlement privilege.  In the event that such protective order or other similar remedy is not obtained, the disclosing Party shall furnish only that portion of the Confidential Information that has been legally compelled, and shall exercise its commercially reasonable efforts (at such other Party’s expense) to obtain assurance that confidential treatment will be accorded such Confidential Information.

 

(b)                                 Each Party shall, and shall cause its Representatives to protect the Confidential Information of the other Party by using the same degree of care to prevent the unauthorized disclosure of such as the Party uses to protect its own confidential information of a like nature.

 

(c)                                  Each Party shall cause its Representatives to agree to be bound by the same restrictions on use and disclosure of Confidential Information as are binding upon such Party in advance of the disclosure of any such Confidential Information to them.

 

(d)                                 Each Party shall comply with all applicable state, federal and foreign privacy and data protection Laws that are or that may in the future be applicable to the provision of Services under this Agreement.

 

Section 10.04.                   Further Assurances.  Each Party covenants and agrees that, without any additional consideration, it shall execute and deliver any further legal instruments and perform any acts that are or may become necessary to effectuate this Agreement.

 

Section 10.05.                   Notices.  Except with respect to routine communications by the Navy Services Manager and Red Lion Services Manager under Section 2.03, all notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by facsimile or electronic transmission with

 

17



 

receipt confirmed (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 10.05):

 

(i)                                     if to Navy:

 

Nabors Industries Ltd.

Crown House

Second Floor

4 Par-la-Ville Road

Hamilton, HM 08

Bermuda

Attention: Corporate Secretary

 

with a copy to:

 

Nabors Corporate Services, Inc.

515 West Greens Road, Suite 1200

Houston, Texas 66057

Attention: General Counsel

Facsimile: (281) 775-4319

 

with a copy to:

 

Milbank, Tweed, Hadley & McCloy LLP

One Chase Manhattan Plaza

New York, New York 10005

Attention: Charles J. Conroy

Scott W. Golenbock

Facsimile: (212) 822-5219

 

(ii)                              if to Red Lion:

 

C&J Energy Services Ltd.

Canon’s Court

22 Victoria Street

Hamilton HM12

Bermuda

Attention:  Corporate Secretary

 

with a copy to:

 

C&J Energy Services Ltd.

3990 Rogerdale Rd.

Houston, TX 77042

Attention: Steven Carter

Facsimile: (713) 325-5920

 

18



 

with a copy to:

 

Vinson & Elkins L.L.P.

1001 Fannin, Suite 2500

Houston, Texas 77002

Attention: Stephen M. Gill

Facsimile: (713) 615-5956

 

Section 10.06.                   Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced under any Law or as a matter of public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any Party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, 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 by this Agreement be consummated as originally contemplated to the greatest extent possible.

 

Section 10.07.                   Entire Agreement.  Except as otherwise expressly provided in this Agreement, this Agreement, the Separation Agreement, the Merger Agreement and the other Ancillary Agreements, constitute the entire agreement of the Parties with respect to the subject matter of this Agreement and supersede all prior agreements and undertakings, both written and oral, between or on behalf of the Parties with respect to the subject matter of this Agreement.

 

Section 10.08.                   No Third-Party Beneficiaries.  Except as provided in Article VII with respect to Provider Indemnified Parties and Recipient Indemnified Parties, this Agreement is for the sole benefit of the Parties and their permitted successors and assigns and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person, including any union or any employee or former employee of Navy or Red Lion, any legal or equitable right, benefit or remedy of any nature whatsoever, including any rights of employment for any specified period, under or by reason of this Agreement.

 

Section 10.09.                   Governing Law.  This Agreement (and any claims or disputes arising out of or related to this Agreement or to the transactions contemplated by this Agreement or to the inducement of any Party to enter into this Agreement or the transactions contemplated by this Agreement, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall in all respects be governed by, and construed in accordance with, the Laws of the State of New York, including all matters of construction, validity and performance, in each case without reference to any conflict of Law rules that might lead to the application of the Laws of any other jurisdiction.

 

Section 10.10.                   Amendment.  No provision of this Agreement, including any Schedules to this Agreement, may be amended, supplemented or modified except by a written instrument making specific reference to this Agreement or any such Schedules to this Agreement, as applicable, signed by all the Parties.

 

19



 

Section 10.11.                   Rules of Construction.  Interpretation of this Agreement shall be governed by the following rules of construction:  (a) 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; (b) references to the terms Article, Section, paragraph and Schedule are references to the Articles, Sections, paragraphs and Schedules of this Agreement unless otherwise specified; (c) references to “$” shall mean U.S. dollars; (d) the word “including” and words of similar import when used in this Agreement shall mean “including without limitation,” unless otherwise specified; (e) the word “or” shall not be exclusive; (f) references to “written” or “in writing” include in electronic form; (g) provisions shall apply, when appropriate, to successive events and transactions; (h) the headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement; (i) Navy and Red Lion have each participated in the negotiation and drafting of this Agreement and if an ambiguity or question of interpretation should arise, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or burdening either Party by virtue of the authorship of any of the provisions in this Agreement or any interim drafts of this Agreement; (j) a reference to any Person includes such Person’s successors and permitted assigns; (k) any reference to “days” means calendar days unless business days are expressly specified; and (l) when calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded, if the last day of such period is not a business day, the period shall end on the next succeeding business day.

 

Section 10.12.                   Counterparts.  This Agreement may be executed in one or more counterparts, and by each Party in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page to this Agreement by facsimile or portable document format (PDF) shall be as effective as delivery of a manually executed counterpart of this Agreement.

 

Section 10.13.                   Assignability.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  No party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the other party hereto; provided, however that either Party may assign its rights hereunder to an Affiliate without the prior written consent of the other Party; provided, further, that such assigning Party shall remain liable for its obligations hereunder notwithstanding such assignment.

 

Section 10.14.                   Waiver of Jury Trial.  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 TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT.  EACH PARTY (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER; AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTY TO THIS AGREEMENT

 

20



 

HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER TRANSACTION AGREEMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.14.

 

Section 10.15.                   Non-Recourse.  No past, present or future director, officer, employee, incorporator, member, partner, shareholder, stockholder, Affiliate, agent, attorney or representative of either Navy or Red Lion or their respective predecessors, successors or Affiliates shall have any liability for any obligations or liabilities of Navy or Red Lion, respectively, under this Agreement or for any claims based on, in respect of, or by reason of, the transactions contemplated by this Agreement.

 

[The remainder of this page is Intentionally left blank.]

 

21



 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed on the date first written above by their respective duly authorized officers.

 

 

NABORS INDUSTRIES LTD.

 

 

 

 

 

By:

/s/ Mark D. Andrews

 

Name:

Mark D. Andrews

 

Title:

Corporate Secretary

 

 

 

 

 

NABORS RED LION LIMITED

 

 

 

 

 

By:

/s/ Mark D. Andrews

 

Name:

Mark D. Andrews

 

Title:

Director

 



 

Exhibit I

 

Services Managers

 

 

 

Position

Navy Services Manager

 

Sri Valleru, Vice President and Chief Information Officer

 

 

 

Red Lion Services Manager

 

Steven Carter, Chief Information Officer

 



 

Schedule A
Services

 

None.

 



Schedule B

 

Facilities

 

Function

 

Item/Process

 

Description

 

Duration
Post-Close

 

Notes

 

Estimated Monthly
Cost

Facilities

 

Pleasanton, TX

 

Lessor: Nabors Completion & Production Services Co.
Lessee: Nabors Drilling USA, LP
Address: 586 County Road 429, Pleasanton, TX

 

Month-to Month but no later than 12/31/15

 

NDUSA will sublease space from NCPS on a month to month basis, with thirty days’ notice required for termination of the sublease, provided, however, that in no event shall the sublease extend past 12/31/15. It is estimated that the square footage occupied by NDUSA and Canrig is 35% of the total. Total operating expenses are $65,000/month which will be distributed based on such estimated square footage occupied.

 

$22.50/sq. ft. + % of total operating costs based on sq. ft. occupied (total is $65k/month)

Facilities

 

Pleasanton, TX

 

Lessor: Nabors Completion & Production Services Co.
Lessee: Canrig Drilling Technology, Ltd.
Address: 586 County Road 429, Pleasanton, TX

 

Month-to Month but no later than 12/31/15

 

Canrig will sublease space from NCPS on a month to month basis, with thirty days’ notice required for termination of the sublease, provided, however, that in no event shall the sublease extend past 12/31/15. It is estimated that the square footage occupied by NDUSA and Canrig is 35% of the total. Total operating expenses are $65,000/month which will be distributed based on such estimated square footage occupied.

 

$22.50/sq. ft. + % of total operating costs based on sq. ft. occupied (total is $65k/month)

 



 

Function

 

Item/Process

 

Description

 

Duration
Post-Close

 

Notes

 

Estimated Monthly
Cost

Facilities

 

Williston, ND Mancamp

 

Lessor: Nabors Completion & Production Services Co.
Lessee: Nabors Drilling USA, LP
Address:

 

Month-to Month, but no later than 12/31/15

 

NDUSA to be provided with access to available beds (for the avoidance of doubt, beds will not be reserved but will be made available to NDUSA on an as available basis)

 

Beds may be used at a cost of $61 per night

Facilities

 

Denver, CO

 

Lessor: Nabors Completion & Production Services Co.
Lessee: Nabors Drilling USA, LP
Address: 475 17th Street Building, Suite 850, Denver, CO

 

Month-to Month, but no later than 12/31/15

 

NDUSA will sublease space from NCPS on a month to month basis, with thirty days’ notice required for termination of the sublease, provided, however, that in no event shall the sublease extend past 12/31/15. Under the terms of the sublease, 5 offices will be reserved solely for use by C&J and the rest of the space will be shared with NDUSA, Canrig, and Ramshorn

 

$4,523

Facilities

 

Denver, CO

 

Lessor: Nabors Completion & Production Services Co.
Lessee: Canrig Drilling Technology, Ltd.
Address: 475 17th Street Building, Suite 850, Denver, CO

 

Month-to Month, but no later than 12/31/15

 

Canrig will sublease space from NCPS on a month to month basis, with thirty days’ notice required for termination of the sublease provided, however, that in no event shall the sublease extend past 12/31/15. Under the terms of the sublease, 5 offices will be reserved solely for use by C&J and the rest of the space will be shared with NDUSA, Canrig, and Ramshorn

 

$1,771

 



 

Function

 

Item/Process

 

Description

 

Duration
Post-Close

 

Notes

 

Estimated Monthly
Cost

Facilities

 

Denver, CO

 

Lessor: Nabors Completion & Production Services Co.
Lessee: Ramshorn Investments, Inc.
Address: 475 17th Street Building, Suite 850

 

Month-to Month, but no later than 12/31/15

 

Ramshorn will sublease space from NCPS on a month to month basis, with thirty days’ notice required for termination of the sublease, provided, however, that in no event shall the sublease extend past 12/31/15. Under the terms of the sublease, 5 offices will be reserved solely for use by C&J and the rest of the space will be shared with NDUSA, Canrig, and Ramshorn

 

$1,000

Facilities

 

Sylvan Lake, Canada

 

Lessor: Nabors Production Services, Ltd.
Lessee: Nabors Drilling Canada, Ltd.
Address:
33 Schenk Industrial Road, Sylvan Lake, Canada

 

Month-to Month, but no later than 12/31/15

 

Pursuant to the lease agreement dated October 1, 2014, NDUSA will sublease 153,000 square foot yard storage from NCPS on a month to month basis, with thirty days’ notice required for termination of the sublease, provided, however, that in no event shall the sublease extend past 12/31/15.

 

CDN $8,750

 




Exhibit 99.1

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

 

On March 24, 2015, following the separation of the completion and production services business of Nabors Industries Ltd. (“Nabors” and such business, the “C&P Business”) from its other businesses, the C&P Business, which was held by Nabors Red Lion Limited, a wholly-owned subsidiary of Nabors (“Red Lion”), was combined with C&J Energy Services, Inc. (“C&J”) and the previously wholly-owned subsidiary that holds the C&P Business was renamed C&J Energy Services Ltd. (the “Merger”).  As a result of the Merger, Nabors owns approximately 53% of the issued and outstanding common shares of C&J Energy Services Ltd.

 

The following unaudited pro forma condensed consolidated financial information (the “unaudited pro forma statements”) is based on the historical financial statements of Nabors after giving effect to the Merger.  These unaudited pro forma statements give effect to the Merger based on the adjustments described in the accompanying notes to the unaudited pro forma condensed consolidated financial statements.

 

The unaudited pro forma condensed consolidated balance sheet is presented as if the Merger was completed as of December 31, 2014, and the unaudited pro forma condensed consolidated statement of income (loss) is presented as if the Merger was completed on January 1, 2014.

 

The unaudited pro forma statements have been prepared based upon available information and management estimates; actual amounts may differ from these estimated amounts. The unaudited pro forma statements are not intended to represent or be indicative of the financial condition or results of operations that might have occurred had the Merger occurred as of the dates stated above, and further should not be taken as representative of the future financial condition or results of operations.  The pro forma adjustments are described in the notes.

 

The unaudited pro forma statements should be read in conjunction with the audited financial statements and notes and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Nabors’ Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

 



 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

 

As of December 31, 2014

(in thousands)

 

 

 

 

 

Pro Forma

 

 

 

Historical Nabors
Industries Ltd.
Consolidated

 

Deconsolidation
of Nabors Red
Lion Limited (a)

 

Pro Forma
Adjustments

 

Pro Forma
Nabors
Industries Ltd.

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

501,149

 

$

28,401

 

$

674,166

(b)

$

1,146,914

 

Short-term investments

 

35,020

 

 

 

35,020

 

Assets held for sale

 

146,467

 

 

 

146,467

 

Accounts receivable, net

 

1,517,503

 

454,822

 

 

1,062,681

 

Inventory

 

230,067

 

47,588

 

 

182,479

 

Deferred income taxes

 

118,230

 

5,222

 

 

113,008

 

Other current assets

 

193,438

 

13,823

 

 

179,615

 

Total current assets

 

2,741,874

 

549,856

 

674,166

 

2,866,184

 

Long-term investments

 

2,806

 

 

 

2,806

 

Property, plant and equipment, net

 

8,599,125

 

1,265,774

 

 

7,333,351

 

Goodwill

 

173,928

 

92,112

 

 

81,816

 

Investment in unconsolidated affiliates

 

58,251

 

10,180

 

711,728

(c)

759,799

 

Other long-term assets

 

303,958

 

13,305

 

 

290,653

 

Total assets

 

$

11,879,942

 

$

1,931,227

 

$

1,385,894

 

$

11,334,609

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Current debt

 

$

6,190

 

$

 

$

 

$

6,190

 

Trade accounts payable

 

780,060

 

209,094

 

 

570,966

 

Accrued liabilities

 

728,004

 

46,501

 

2,326

(d)

683,829

 

Affiliate payable

 

 

80,556

 

80,556

(e)

 

Affiliate note payable

 

 

953,070

 

953,070

(e)

 

Income taxes payable

 

53,221

 

2,661

 

 

50,560

 

Total current liabilities

 

1,567,475

 

1,291,882

 

1,035,952

 

1,311,545

 

Long-term debt

 

4,348,859

 

 

 

4,348,859

 

Other long-term liabilities

 

601,816

 

 

 

601,816

 

Deferred income taxes

 

443,003

 

323,003

 

 

120,000

 

Total liabilities

 

6,961,153

 

1,614,885

 

1,035,952

 

6,382,220

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

 

Common stock

 

328

 

12

 

12

(f)

328

 

Capital in excess of par value

 

2,452,261

 

665,580

 

665,580

(f)

2,452,261

 

Accumulated other comprehensive income

 

77,522

 

8,064

 

 

69,458

 

Retained earnings

 

3,573,172

 

(357,459

)

(315,650

)(g)

3,614,981

 

Less: treasury shares, at cost

 

(1,194,664

)

 

 

(1,194,664

)

Total shareholders’ equity

 

4,908,619

 

316,197

 

349,942

 

4,942,364

 

Noncontrolling interest

 

10,170

 

145

 

 

10,025

 

Total equity

 

4,918,789

 

316,342

 

349,942

 

4,952,389

 

Total liabilities and equity

 

$

11,879,942

 

$

1,931,227

 

$

1,385,894

 

$

11,334,609

 

 



 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)

 

For the Year Ended December 31, 2014

(in thousands, except per share data)

 

 

 

 

 

Pro Forma

 

 

 

Historical Nabors
Industries Ltd.
Consolidated

 

Deconsolidation
of Nabors Red
Lion Limited (a)

 

Pro Forma
Adjustments

 

Pro Forma
Nabors
Industries Ltd.

 

 

 

 

 

 

 

 

 

 

 

Revenues and other income:

 

 

 

 

 

 

 

 

 

Operating revenues

 

$

6,804,197

 

$

2,252,885

 

$

 

$

4,551,312

 

Earnings (losses) from unconsolidated affiliates

 

(6,301

)

462

 

(153,077

)(h)

(159,840

)

Investment income (loss)

 

11,831

 

121

 

 

11,710

 

Total revenues and other income

 

6,809,727

 

2,253,468

 

(153,077

)

4,403,182

 

 

 

 

 

 

 

 

 

 

 

Costs and other deductions:

 

 

 

 

 

 

 

 

 

Direct costs

 

4,505,064

 

1,824,269

 

 

2,680,795

 

General and administrative expenses

 

549,734

 

159,722

 

33,020

(i)

423,032

 

Depreciation and amortization

 

1,145,100

 

223,726

 

 

921,374

 

Interest expense

 

177,948

 

1,090

 

1,090

(j)

177,948

 

Losses (gains) on sales and disposals of long-lived assets and other expense (income), net

 

9,073

 

2,387

 

 

6,686

 

Impairments and other charges

 

1,027,423

 

363,578

 

(17,213

)(k)

646,632

 

Total costs and other deductions

 

7,414,342

 

2,574,772

 

16,897

 

4,856,467

 

Income (loss) from continuing operations before income taxes

 

(604,615

)

(321,304

)

(169,974

)

(453,285

)

Income tax expense (benefit):

 

62,666

 

12,899

 

6,421

(l)

56,188

 

Subsidiary preferred stock dividend

 

1,984

 

5,084

 

3,100

(m)

 

Income (loss) from continuing operations, net of tax

 

(669,265

)

(339,287

)

(179,495

)

(509,473

)

Less: Net (income) loss attributable to noncontrolling interest

 

(1,415

)

(241

)

 

(1,174

)

Net income (loss) attributable to Nabors

 

$

(670,680

)

$

(339,528

)

$

(179,495

)

$

(510,647

)

 

 

 

 

 

 

 

 

 

 

Earnings (losses) per share:

 

 

 

 

 

 

 

 

 

Basic from continuing operations

 

$

(2.28

)

 

 

 

 

$

(1.76

)

Diluted from continuing operations

 

$

(2.28

)

 

 

 

 

$

(1.76

)

Weighted-average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

290,694

 

 

 

 

 

290,694

 

Diluted

 

290,694

 

 

 

 

 

290,694

 

 



 


(a)  Reflects the deconsolidation of Red Lion’s assets and liabilities at their carrying amounts at December 31, 2014 and Red Lion’s operations for the year ended December 31, 2014.

 

(b)  Reflects the adjustment to cash for cash received from C&J in connection with the Merger, as well as the Red Lion cash balance at December 31, 2014 to be retained by Nabors after the deconsolidation of Red Lion. These amounts were reduced by the payment of estimated Merger-related transaction costs, including costs incurred as of December 31, 2014 as well as costs incurred subsequent to the balance sheet date.

 

Cash consideration

 

$

688,078

 

Red Lion cash

 

28,401

 

Estimated Merger-related transaction costs

 

(42,313

)

 

 

$

674,166

 

 

(c)   Reflects the investment in the newly formed company C&J Energy Services Ltd.

 

Stock Consideration (in thousands, except share price):

 

Red Lion common shares issued to Nabors

 

62,542

 

C&J closing stock price on March 23, 2015

 

$

11.38

 

 

 

$

711,728

 

 

(d)   Represents liabilities to be retained by Nabors after the deconsolidation of Red Lion.

 

(e)   Reflects the repayment of Intercompany Notes in connection with the deconsolidation of Red Lion.  Pursuant to the Separation Agreement, Nabors contributed $162.8 million and Red Lion subsidiaries repaid $87.2 million of the Intercompany Notes, such that the remaining balance owed under the Intercompany Notes following such contribution and repayment was approximately $688 million. The portion of the Intercompany Notes not previously contributed by Nabors or paid by Red Lion subsidiaries was repaid in connection with the Closing, using the cash proceeds received from C&J of $688 million as described in note (b).

 

(f)    Represents the adjustment needed to reflect the current Nabors equity structure, which includes the associated common stock and additional paid in capital reflected in the Red Lion consolidated balance sheet.

 

(g)   Represents the adjustments to retained earnings to reflect the net impact of amounts as a result of the pro forma adjustments column, including an estimated net gain of $35.9 million on the Merger.

 

(h)   Represents Nabors’ 53% investment in the newly formed company C&J Energy Services Ltd., which combines the historical operating results of Red Lion and C&J as though the Merger occurred on January 1, 2014.

 

(i)    Represents management fees allocated to Red Lion for accounting, treasury, human resources, IT and tax and legal services provided by Nabors.  These fees are determined based upon headcount, revenues and assets relative to other Nabors subsidiaries and the Nabors corporate cost structure.  Such fees are consolidated within Nabors and as such, should be adjusted from the Red Lion statement of income.

 

(j)    Represents interest expense to be retained by Nabors after the deconsolidation of Red Lion.

 

(k)   Represents the removal of non-recurring charges for transaction costs incurred by Nabors during the year ended December 31, 2014 related to the Merger, including professional fees and other costs incurred to reorganize the business in contemplation of the Merger.

 

(l)    Reflects income tax expense (benefit) related to income (loss) from continuing operations before income taxes generated by the pro forma adjustments based upon an estimate of the effective tax rate.

 

(m)  Reflects the elimination of preferred stock dividends attributable to preferred stockholders of Red Lion.

 


 

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