Document:

Exhibit 4.1

 

REGISTRATION RIGHTS AGREEMENT

 

BY AND AMONG

 

NABORS INDUSTRIES LTD.

 

AND

 

NABORS RED LION LIMITED

 

Dated as of [·], 2014

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I.
    	
DEFINITIONS
    	
1
    
	
 
    	
 
    
	
SECTION 1.01
    	
DEFINED   TERMS
    	
1
    
	
SECTION 1.02
    	
OTHER   INTERPRETIVE PROVISIONS
    	
5
    
	
 
    	
 
    
	
ARTICLE II.
    	
REGISTRATION RIGHTS
    	
6
    
	
 
    	
 
    
	
SECTION 2.01
    	
SHELF   REGISTRATION; FILING
    	
6
    
	
SECTION 2.02
    	
PIGGYBACK   RIGHTS
    	
8
    
	
SECTION 2.03
    	
BLACK-OUT   PERIODS
    	
10
    
	
SECTION 2.04
    	
REGISTRATION   PROCEDURES
    	
12
    
	
SECTION 2.05
    	
UNDERWRITTEN   OFFERINGS
    	
17
    
	
SECTION 2.06
    	
REGISTRATION   EXPENSES
    	
18
    
	
SECTION 2.07
    	
INDEMNIFICATION
    	
18
    
	
SECTION 2.08
    	
RULES   144 AND 144A AND REGULATION S; FORM S-3
    	
22
    
	
SECTION 2.09
    	
LIMITATION   ON REGISTRATIONS AND UNDERWRITTEN OFFERINGS
    	
22
    
	
SECTION 2.10
    	
SECTION 16   MATTERS
    	
23
    
	
 
    	
 
    
	
ARTICLE III.
    	
MISCELLANEOUS
    	
23
    
	
 
    	
 
    
	
SECTION 3.01
    	
TERMINATION
    	
23
    
	
SECTION 3.02
    	
INJUNCTIVE   RELIEF
    	
23
    
	
SECTION 3.03
    	
ATTORNEYS’   FEES
    	
24
    
	
SECTION 3.04
    	
NOTICES
    	
24
    
	
SECTION 3.05
    	
AMENDMENT
    	
25
    
	
SECTION 3.06
    	
SUCCESSORS,   ASSIGNS AND TRANSFEREES
    	
25
    
	
SECTION 3.07
    	
BINDING   EFFECT
    	
25
    
	
SECTION 3.08
    	
THIRD   PARTY BENEFICIARIES
    	
25
    
	
SECTION 3.09
    	
GOVERNING   LAW; JURISDICTION
    	
26
    
	
SECTION 3.10
    	
WAIVER   OF JURY TRIAL
    	
26
    
	
SECTION 3.11
    	
SEVERABILITY
    	
26
    
	
SECTION 3.12
    	
COUNTERPARTS
    	
26
    
	
SECTION 3.13
    	
HEADINGS
    	
26
    
	
SECTION 3.14
    	
JOINDER
    	
26
    
	
SECTION 3.15
    	
EXISTING   REGISTRATION STATEMENTS
    	
27
    
	
SECTION 3.16
    	
OTHER   ACTIVITIES
    	
27
    
	
SECTION 3.17
    	
TIME   OF THE ESSENCE
    	
27
    

 

i

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is made and entered into as of [·], 2014, by and among 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 and C&J Energy Services, Inc. a Delaware corporation (“Penny”) are parties to an Agreement and Plan of Merger, dated as of the date hereof (the “Merger Agreement”);

 

WHEREAS, concurrently with the execution of the Merger Agreement, Navy and the Company entered into a Separation Agreement, dated as of the date hereof (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 [$0.001] 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).

 

“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)(iii).

 

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

 

“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).

 

“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).

 

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

 

“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.

 

5

 

(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 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

 

6

 

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 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

 

7

 

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 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.

 

8

 

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 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.

 

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

 

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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 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

 

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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 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

 

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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 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);

 

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(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 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;

 

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

 

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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 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

 

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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 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

 

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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 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

 

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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 (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

 

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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 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

 

20

 

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 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

 

21

 

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 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.

 

22

 

(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 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.

 

23

 

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 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:

 

	
[RED LION]
    	
 
    
	
[·]
    	
 
    
	
Telephone:
    	
[·]
    
	
Email:
    	
[·]
    
	
Attention:
    	
[·]
    

 

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

 

	
[·]
    	
 
    
	
Telephone:
    	
[·]
    
	
Email:
    	
[·]
    
	
Attention:
    	
[·]
    

 

To the Company following the Effective Time:

 

C&J Energy Services Ltd.
 3990 Rogerdale
 Houston, Texas 77042
 Telephone:                       (713) 325-6000
 Email:                                                tmoore@cjenergy.com
 Attention:                             General Counsel

 

24

 

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:

 

	
[·]
    	
 
    
	
Telephone:
    	
[·]
    
	
Email:
    	
[·]
    
	
Attention:
    	
[·]
    

 

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

 

25

 

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 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

 

26

 

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.

 

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]

 

27

 

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:
    	
 
    	
 
    
	
 
    	
 
    
	
Name:
    	
 
    
	
Title:
    	
 
    
			

 

[Signature Page to Registration Rights Agreement]

 

 

	
NAVY
    	
 
    
	
 
    	
 
    
	
NABORS INDUSTRIES LTD.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
Name:
    	
 
    
	
Title:
    	
 
    
			

 

[Signature Page to Registration Rights Agreement]Exhibit 10.1

 

	
 
    

 

TRANSITION SERVICES AGREEMENT

 

dated as of [            ], 2014

 

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
    	
3
    
	
Section 2.03.
    	
Transition Services   Managers
    	
3
    
	
Section 2.04.
    	
Personnel
    	
4
    
	
 
    	
 
    	
 
    
	
ARTICLE III   OTHER ARRANGEMENTS
    	
5
    
	
Section 3.01.
    	
Third Party Licenses and   Consents
    	
5
    
	
Section 3.02.
    	
Third Party Providers
    	
5
    
	
 
    	
 
    	
 
    
	
ARTICLE IV   ADDITIONAL AGREEMENTS
    	
5
    
	
Section 4.01.
    	
Navy Computer-Based and   Other Resources
    	
5
    
	
Section 4.02.
    	
Co-location and Facilities   Matters
    	
6
    
	
Section 4.03.
    	
Access
    	
7
    
	
Section 4.04.
    	
Cooperation
    	
7
    
	
 
    	
 
    	
 
    
	
ARTICLE V   COSTS AND DISBURSEMENTS
    	
8
    
	
Section 5.01.
    	
Costs and Disbursements
    	
8
    
	
Section 5.02.
    	
Taxes
    	
9
    
	
Section 5.03.
    	
No Right to Set-Off
    	
9
    
	
 
    	
 
    	
 
    
	
ARTICLE VI   STANDARD FOR SERVICE
    	
9
    
	
Section 6.01.
    	
Standard for Service
    	
9
    
	
Section 6.02.
    	
Disclaimer of Warranties
    	
10
    
	
Section 6.03.
    	
Compliance with Laws and   Regulations
    	
11
    
	
 
    	
 
    	
 
    
	
ARTICLE VII   LIMITED LIABILITY AND INDEMNIFICATION
    	
11
    
	
Section 7.01.
    	
Consequential and Other   Damages
    	
11
    
	
Section 7.02.
    	
Limitation of Liability
    	
11
    
	
Section 7.03.
    	
Obligation To Reperform;   Liabilities
    	
11
    
	
Section 7.04.
    	
Release and Recipient   Indemnity
    	
11
    
	
Section 7.05.
    	
Provider Indemnity
    	
12
    
	
Section 7.06.
    	
Indemnification Procedures
    	
12
    
	
Section 7.07.
    	
Liability for Payment   Obligations
    	
12
    
	
Section 7.08.
    	
Exclusion of Other Remedies
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII   DISPUTE RESOLUTION
    	
12
    
	
Section 8.01.
    	
Dispute Resolution
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE IX   TERM AND TERMINATION
    	
13
    
	
Section 9.01.
    	
Term and Termination
    	
13
    

 

i

 

	
Section 9.02.
    	
Effect of Termination
    	
14
    
	
Section 9.03.
    	
Force Majeure
    	
14
    
	
 
    	
 
    	
 
    
	
ARTICLE X   GENERAL PROVISIONS
    	
15
    
	
Section 10.01.
    	
No Agency
    	
15
    
	
Section 10.02.
    	
Subcontractors
    	
15
    
	
Section 10.03.
    	
Treatment of Confidential   Information
    	
15
    
	
Section 10.04.
    	
Further Assurances
    	
16
    
	
Section 10.05.
    	
Notices
    	
16
    
	
Section 10.06.
    	
Severability
    	
17
    
	
Section 10.07.
    	
Entire Agreement
    	
17
    
	
Section 10.08.
    	
No Third-Party   Beneficiaries
    	
17
    
	
Section 10.09.
    	
Governing Law
    	
17
    
	
Section 10.10.
    	
Amendment
    	
17
    
	
Section 10.11.
    	
Rules of Construction
    	
17
    
	
Section 10.12.
    	
Counterparts
    	
18
    
	
Section 10.13.
    	
Assignability
    	
18
    
	
Section 10.14.
    	
Waiver of Jury Trial
    	
18
    
	
Section 10.15.
    	
Non-Recourse
    	
18
    

 

	
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 [            ], 2014 (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 [            ], 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 [            ], 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.

 

“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 7.04.

 

“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.

 

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

 

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

 

2

 

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

 

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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) 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 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.

 

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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 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

 

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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.  From the Separation Time through December 31, 2014, 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 provided under the Benefits Transition for the period from the Separation Time through December 31, 2014 and (b) a separate amount equal to the incremental administrative cost of maintaining such insurance coverage 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.

 

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

 

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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.

 

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 Separation Agreement, in the Merger Agreement or in any other Ancillary Agreement, 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 Agreement, Red Lion and its Affiliates shall cause all of their personnel having access to the Navy intranet or such other computer software, 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 personnel only for the purposes contemplated by, and subject to the terms of, this Agreement.

 

(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

 

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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 room, restroom and other similar facilities].  Unless otherwise provided in the Schedules, such ancillary services (i) shall not include [          ] and (ii) shall only 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,

 

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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 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.

 

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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, 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

 

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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, 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 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 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.

 

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

 

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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 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 7.03, 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

 

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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 7.05, 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, 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 7.03, 7.04 and 7.05 of this Agreement shall be the sole and exclusive remedies of the Provider

 

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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.

 

(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

 

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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 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

 

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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.

 

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

 

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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 2.05, 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

 

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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:

 

[                    ]

 

with a copy to:

 

[                    ]

 

(ii)                              if to Red Lion:

 

[                    ]

 

with a copy to:

 

[                    ]

 

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

 

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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.

 

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.]

 

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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.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
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Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
NABORS RED LION LIMITED
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
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Title:

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