Document:

Exhibit 10.2

 

Subject to a request for confidential treatment, certain portions of this agreement have been intentionally omitted.  The omitted portions subject to the confidential treatment request are designated by three asterisks ([***]).  A complete version of this agreement has been separately filed with the Securities and Exchange Commission.

 

AMENDMENT NO. 7

 

TO

FIRST AMENDED AND RESTATED TRANSACTION DOCUMENT NO. 1
 BETWEEN
 SERVICEMASTER CONSUMER SERVICES LIMITED PARTNERSHIP

AND

INTERNATIONAL BUSINESS MACHINES CORPORATION

 

1.0          Introduction.

 

This Amendment No. 7 (herein, “Amendment”) amends the terms and conditions of the First Amended and Restated Transaction Document No. 1 entered into between Service-Master Consumer Services Limited Partnership (“SVM”) and International Business Machines Corporation (“IBM”), effective November 1, 2010, as amended (herein, “Transaction Document No. 1”). TD No. 1 is written under the terms and conditions of the First Amendment and Restated Master Services Agreement between SVM and IBM dated November 1, 2010 (herein, “Agreement”).  Any capitalized term not defined in this Amendment shall have the meaning ascribed to it in the Agreement or Transaction Document No. 1. In the event of any inconsistency between the terms of Transaction Document No. 1 and the terms of this Amendment, the terms of this Amendment shall prevail.

 

2.0          Recitals.

 

In consideration of the foregoing premises, the mutual covenants contained herein, and other good and valuable consideration, the sufficiency of which is acknowledged, the Parties hereby amend Transaction Document No. 1 as set forth below.

 

3.0          Effective Date of Amendment.

 

The effective date of this Amendment is August 1, 2012.

 

4.0          Term / Termination of Amendment.

 

The term of this Amendment will begin as of the effective date shown in Section 3.0 above and run concurrently with the Transaction Document Term of Transaction Document No. 1.

 

 

5.0          Order of Control.

 

Except as specifically modified by this Amendment, the terms and conditions of Transaction Document No. 1, including its Schedules, as subsequently amended, shall remain unchanged and shall remain in full force and effect.

 

6.0          Amended Terms.

 

6.1       Changes to Schedule A — Schedule A (Definitions) to Transaction Document No. 1 is deleted in its entirety and replaced with Attachment 1 attached hereto and incorporated herein by reference. This change revises the definition of “Pool Percentage” by reducing it from [***] to [***].

 

6.2       Changes to Schedule D-1 — Schedule D-1 (Service Level Methodology) to Transaction Document No. 1 is deleted in its entirety and replaced with Attachment 2 attached hereto and incorporated herein by reference. This change adjusts the Pool Percentage in Section 3(a)(iii)(B) of Schedule D-1.

 

6.3       Changes to Schedule D-2 - Schedule D-2 (Service Level Matrix) to Transaction Document No. 1 is deleted in its entirety and replaced with Attachment 3 attached hereto and incorporated herein by reference. [***].

 

6.4       Changes to Schedule D-3 - Schedule D-3 (Critical Services) to Transaction Document No. 1 is amended by [***].

 

IN WITNESS WHEREOF, the Parties have caused this Amendment to be duly executed by their authorized representatives as of the dates set forth below.

 

	
Agreed   to:
    	
 
    	
Agreed   to:
    
	
 
    	
 
    	
 
    
	
ServiceMaster   Consumer Services Limited Partnership
    	
 
    	
International Business Machines Corporation
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Beth Phalen
    	
 
    	
By:
    	
/s/   Eusebio Formoso
    
	
Authorized   signature
    	
 
    	
Authorized   signature
    
	
Name   (type or print): Beth Phalen
    	
 
    	
Name   (type or print): Eusebio Formoso 
    
	
 
    	
 
    	
IBM   Project Executive
    
	
 
    	
 
    	
 
    
	
Date:   8/17/12
    	
 
    	
Date:   8/13/2012
    
					

 

 

Subject to a request for confidential treatment, certain portions of this agreement have been intentionally omitted.  The omitted portions subject to the confidential treatment request are designated by three asterisks ([***]).  A complete version of this agreement has been separately filed with the Securities and Exchange Commission.

 

ATTACHMENT 1 TO AMENDMENT NO. 7

 

SCHEDULE A
  DEFINITIONS

 

This is Schedule A, Definitions, to the First Amended and Restated Transaction Document No. 1 to that certain First Amended and Restated Master Services Agreement, dated as of November 1, 2010, between ServiceMaster Consumer Services, L.P. and International Business Machines Corporation.  The following terms used in Transaction Document No. 1 have the meanings indicated below.

 

	
A.01        “AAA Rules”   means the American Arbitration Association’s Commercial Arbitration Rules. 
    
	
 
    
	
A.02        “Acceptance   Criteria” means the acceptance criteria applicable to each Deliverable   provided or developed by Service Provider, including Critical Transformation   and Transition Milestones and Projects, as specified by the Parties in   accordance with the “Governance and Change Control” Exhibit.
    
	
 
    
	
A.03        “ACD Agent”   has the meaning set forth in the “Network” section of Schedule E-7.
    
	
 
    
	
A.04        [***]
    
	
 
    
	
A.05        “Add/Change”   has the meaning set forth in the “End User” section of Schedule E-7.
    
	
 
    
	
A.06        “Affected   Employees” means the individuals listed in the “List of Affected   Employees” Schedule, who are employed by a member of the Customer   Group prior to the Effective Date and to whom Service Provider or Network   Services Provider shall consider for offers of employment pursuant   to the “Terms for Affected Employees” Schedule.
    
	
 
    
	
A.07        “Allocation   of Pool Percentage” means the portion of the Pool Percentage that is   specified for any particular CPI in the event of a Service Level Default for   such Service Level.  Any such portion   shall not exceed [***] of the At Risk Amount.
    
	
 
    
	
A.08        “Annual   Satisfaction Survey” means the annual survey of Customer designated   managers / stakeholders receiving the Services from Service Provider.
    
	
 
    
	
A.09        “Application   Development Resource Baseline” represents the Resource Baseline for   Application Maintenance, Application Development, and the PMO Core Team’s   application resources.
    
	
 
    
	
A.10        “Application   Development Services” has the meaning set forth in the “Application   Development and Maintenance” section of Schedule E-7.
    

 

	
 
    
	
A.11        “Application   Maintenance Services” has the meaning set forth in the “Application   Development and Maintenance” section of Schedule E-7.
    
	
 
    
	
A.12        “Arbitration   Notice” means a written notice requesting arbitration in accordance with Section 3(a)(iii)(D) of   the “Service Level Methodology” Schedule.
    
	
 
    
	
A.13        “ARC”   means an additional resource charge to Customer by Service Provider pursuant   to the ARC/RRC process described in Section 2.4 and Section 2.5   of Schedule E-1 for Resource Unit usage above the ARC Point.
    
	
 
    
	
A.14        “ARC Point”   means the threshold point Resource Unit consumption must exceed before an ARC   will be applied.  [***]
    
	
 
    
	
A.15        “ARC Rate”   means the monetary rate per unit to be charged by Service Provider to   Customer for any Resource Unit consumption for each applicable Resource Unit   [***] according to the formulas defined in Section 2.4(b) of   Schedule E-1.
    
	
 
    
	
A.16        “ARC/RRC   Measurement Period” means the period of time over which applicable   Resource Units are to be measured, to determine the applicability of an ARC   or RRC.
    
	
 
    
	
A.17        “ARC/RRC   Rates” means the ARC Rates and the RRC Rates.
    
	
 
    
	
A.18        “At Risk   Amount” means, for any month during the Term, [***] of the [***] for such   month, which is the amount that Service Provider will have at risk for all   Service Level Credits in such month.
    
	
 
    
	
A.19        “Base Charges”   means all of the recurring monthly Charges described in Section 2.2   of Schedule E-1.
    
	
 
    
	
A.20        [***]
    
	
 
    
	
A.21        “Baseline   Data” means the actual data measured during a Measurement Period [***].
    
	
 
    
	
A.22        “Blackberry   ID” has the meaning set forth in the “Messaging” section of Schedule E-7.
    
	
 
    
	
A.23        [***]
    
	
 
    
	
A.24        “BSC”   refers to Customer Business Applications for one or more departments or   subsidiaries of Customer.
    
	
 
    
	
A.25        “Change   Control Procedures” means the process and procedures to be followed by   Customer and Service Provider in accordance with the “Governance and   Change Control” Exhibit when either Party wishes to make a   Change to the existing Services.
    

 

	
 
    
	
A.26        “Change   Management Procedure” means a detailed procedure describing how   operational IT or Service delivery Changes will be made to meet the Customer’s   business needs within the accepted timeframes and subject to specific   approvals.
    
	
 
    
	
A.27        “Change Order   Log” means a historical log of Change Orders throughout the Term.
    
	
 
    
	
A.28        “Change   Threshold” means [***] occurring during a Business Day.
    
	
 
    
	
A.29        “Charge   Mechanics” means the specific mechanics, formulas or specified rates,   such as ARCs, RRCs, rate cards, [***]  Pass-Through Charges,   out-of-pocket expenses and other specifics used to calculate or govern the   Charges.
    
	
 
    
	
A.30        “Chargeable   Project Work” means Project activities to the extent such performance is   (i) requested and approved by Customer as evidenced by a signed Project   Work Order, and (ii) are not activities otherwise required to be   performed by Service Provider pursuant to its obligations under the Master   Agreement.  Service Provider is   compensated for Chargeable Project Work as specified in Section 3.2   of Schedule E-1. 
    
	
 
    
	
A.31        “Charges”   Schedule describes the methodology for calculating all of the Charges   payable by Customer to Service Provider with respect to the Services that   Service Provider shall deliver to Customer pursuant to the Master Agreement.
    
	
 
    
	
A.32        “COBRA”   means continuation coverage required under Section 4980 of the Internal   Revenue Code, Part 6 of Title I of ERISA or applicable state law.
    
	
 
    
	
A.33        “Compound   Service Level” means a single Service Level that is comprised of two or   more independent service metrics, conditions, components or elements which   are separately tracked, measured and reported on, and which all together   comprise the Compound Service Level.  A   Compound Service Level may be a CPI, KPI or GPI.  
    
	
 
    
	
A.34        “Consulting   and Non-IT Projects” means consulting and other non-information   technology Projects that are not otherwise included in the Services.
    
	
 
    
	
A.35        “Continuation   Period” means the period beginning on the Hire Date and ending [***]   thereafter.
    
	
 
    
	
A.36        “Core Third   Party Agreements” means those Proposed Transferred Agreements identified   as “core” agreements in the “Third Party Agreements” Schedule.
    
	
 
    
	
A.37        “Critical   Performance Indicators” or “CPIs” means those Service Levels which   are (i) described in the applicable “Service Level Matrix”   Schedule as a CPI and (ii) for which a Service Level Credit may be   payable.  Each CPI has an Expected   Service Level and a Minimum Service Level associated with it, unless   otherwise specified.
    
	
 
    
	
A.38        “Critical   Transition and Transformation Milestone” means a milestone specified in Schedule   F-3.
    

 

	
 
    
	
A.39        “Cross-Tower   Services” means Services that affect multiple Towers .
    
	
 
    
	
A.40        “Customer   Authorized User” means a person authorized by Customer to receive   Services. 
    
	
 
    
	
A.41        “Customer   Business Applications” means the software applications and their   associated databases as listed in the “Customer Business Applications”   Schedule.
    
	
 
    
	
A.42        “Customer   Governance Organization” means the Customer governance organization   described in Section 2.2 of the “Governance and Change Control”   Exhibit.
    
	
 
    
	
A.43        “PMOs”   mean the Customer PMO and the Service Provider PMO.
    
	
 
    
	
A.44        “Customer PMO”   means Customer’s program management office that oversees all Service delivery   in accordance with the “Governance and Change Control” Exhibit.
    
	
 
    
	
A.45        “Database   Instance” has the meaning set forth in the “Server, Storage and Database”   section of Schedule E-7.
    
	
 
    
	
A.46        [***]
    
	
 
    
	
A.47        [***]
    
	
 
    
	
A.48        “Deliverable   Form” means the form attached as Appendix 4-F to the “Governance   and Change Control” Exhibit.
    
	
 
    
	
A.49        “Designated   CPI” means those CPIs which are designated in the “Service Level Methodology”   Schedule as the subject of a Service Level Termination Event pursuant   to Section 2(c)(iv) of the “Service Level Methodology”   Schedule.
    
	
 
    
	
A.50        “Detailed   Re-Solution Plan” means a fully detailed written Re-Solution Plan   prepared and agreed upon by the Parties as further described in Section 5.3   of Schedule F-1.
    
	
 
    
	
A.51        “Detailed   Specification Report” means the detailed specification report prepared by   Service Provider as part of the Change Control Procedures.
    
	
 
    
	
A.52        “Detailed   Transformation and Transition Plan” means the detailed written draft of   the proposed final Transformation and Transition Plan as further described in   Section 3.2(a) of Schedule F-1.
    
	
 
    
	
A.53        “Disaster   Recovery” has the meaning set forth in the “Disaster Recovery” section of   Schedule E-7.
    
	
 
    
	
A.54        [***]
    
	
 
    
	
A.55        [***]
    

 

	
 
    
	
A.56        “Early   Rebadge Fixed Fees” has the meaning set forth in Schedule E-3.
    
	
 
    
	
A.57        “Email ID”   has the meaning set forth in the “Messaging” section of Schedule E-7.
    
	
 
    
	
A.58        “Emergency   Change” means an operational change to the environment necessary to   maintain continuity of Services prior to providing notice to Customer or   obtaining Customer’s approval of such change.
    
	
 
    
	
A.59        “Employee   Service” means the duration of employment with Customer, its Affiliates   or predecessors from an employee’s date of hire with Customer (or its   Affiliate or predecessor) until the Hire Date as service with Service   Provider.
    
	
 
    
	
A.60        “End User   Satisfaction Survey” means end-user satisfaction surveys conducted in   accordance with the “Governance and Change Control” Exhibit.
    
	
 
    
	
A.61        “Enhancement” means   a routine, stand alone change or improvement that does not impact a system functionality,   that does not require integration testing (but will require testing prior to   placing into production), and where the change or improvement can be   completed in less than [***].  A branch   move will be treated as an Enhancement if less than [***].  Any such change or improvement taking [***]   or more is considered a Project.
    
	
 
    
	
A.62        “Essential   Business Application”  are those Customer Business Applications   listed in the  “Critical Services” Schedule.
    
	
 
    
	
A.63        [***]
    
	
 
    
	
A.64        “Expected   Service Level Default” means a recurring failure of Service Provider to   meet the Expected Service Level for the same CPI or KPI [***] during a   Service Level Reporting Period.
    
	
 
    
	
A.65        “Expected   Service Level” means the expected level of performance for a CPI or a   KPI, as applicable, as set forth in the applicable “Service Level Matrix”   Schedule.
    
	
 
    
	
A.66        “General   Performance Indicators” or “GPIs” means those Service Levels which are   described in the applicable “Service Level Matrix” Schedule as   a GPI.  Each General Performance   Indicator has a Minimum Service Level associated with it unless otherwise   specified.  No Service Level Credits are   available in connection with GPIs.
    
	
 
    
	
A.67        “Governance   and Change Control” means the Exhibit by which Service Provider will   provide Customer with the performance reporting for the Services as specified   in the “Service Level Agreement” Schedule.
    
	
 
    
	
A.68        “Governance   Process Functional Responsibilities Matrix” means a process   responsibility matrix that details the responsibilities of each of the   Parties related to a given process identified in the “Governance and   Change Control” Exhibit.
    

 

	
 
    
	
A.69        “Governance   Transition Deliverables” are set forth in Appendix 4-A of the “Governance   and Change Control” Exhibit.
    
	
 
    
	
A.70        “Handset”   has the meaning set forth in the “Network” section of Schedule E-7.
    
	
 
    
	
A.71        “Help Desk   Seat” has the meaning set forth in the “End User” section of Schedule E-7.
    
	
 
    
	
A.72        “High Level   Transformation and Transition Plan” means an initial high level project   plan for the Transformation and Transition Project prepared by Service   Provider in accordance with Schedule F-1.
    
	
 
    
	
A.73        “High Priority   Governance Processes” means those high priority governance processes   identified as such in Appendix 4-B of the “Governance and Change   Control” Exhibit.
    
	
 
    
	
A.74        “Hire Date”   means the date on which a Transitioned Employee begins employment with   Service Provider.  Except for employees   on a Leave of Absence, the Hire Date for the Transitioned Employees will be   determined in accordance with the “Transformation and Transition Plan”   Schedule.
    
	
 
    
	
A.75        “IMAC”   has the meaning set forth in the “End User” section of Schedule E-7.
    
	
 
    
	
A.76        “Immediate   Change” means any proposed Change requested by Customer (i) that is   reasonably required to comply with any Customer Law, Customer Compliance   Directive or any system or business requirement as requested by Customer that   Customer reasonably deems appropriate to avoid a substantial impact to its   systems or business, and (b) there is insufficient time to prepare a   Change Order for such Change in accordance with normal Change Control   Procedures or if the applicable charges (if any) are not agreed to prior to   Customer’s requirement to commence work related to such Change.
    
	
 
    
	
A.77        “Incident”   means an event or issue that may cause interruption or reduction in quality   of the Services to an end-user.
    
	
 
    
	
A.78        [***]
    
	
 
    
	
A.79        [***]
    
	
 
    
	
A.80        “Infrastructure   Project Resource Baseline” is described in Schedule E-3 and in the   “Other” section of Schedule E-7.
    
	
 
    
	
A.81        “Install”   has the meaning set forth in the “End User” section of Schedule E-7.
    
	
 
    
	
A.82        “IP Telephony   Port” has the meaning set forth in the “Network” section of Schedule E-7.
    

 

 

	
A.83        “iSEC”   means the Information Security Controls document described in the “Procedures   Manual” Exhibit.
    
	
 
    
	
A.84        “Issues   Management Process” means the issues management process used to track and   resolve all Services performance and operational issues and other   non-operational issues according to the timeframes indicated in Appendix   4-B and Section 2.4 of the “Governance and Change Control”   Exhibit.
    
	
 
    
	
A.85        “IT Assets”   means Customer’s information technology hardware and Customer’s Software.
    
	
 
    
	
A.86        “Key Performance   Indicators” or “KPIs” means those Service Levels which are   described in the applicable “Service Level Matrix” Schedule as   a KPI.  Each Key Performance Indicator   has an Expected Service Level and Minimum Service Level associated with it,   unless otherwise specified.  No Service   Level Credits are available in connection with KPIs.
    
	
 
    
	
A.87        [***]
    
	
 
    
	
A.88        “Leave of   Absence” or “LOA” means an approved leave of absence for short   term disability and/or the Family Medical Leave Act pursuant to the Customer   Group’s applicable policies.
    
	
 
    
	
A.89        “LOA Offer   Date” means a date within [***] after any employee on an LOA is removed   from leave status.
    
	
 
    
	
A.90        [***]
    
	
 
    
	
A.91        “Massachusetts   Information Security Regulation” means the Massachusetts Standards for   the Protection of Personal Information of Residents of the Commonwealth, 201   CMR 17.00-17.04.
    
	
 
    
	
A.92        “Measured   Applications”  are the Customer Business Applications.  The “tier” for each Measured Application is   listed in the “Customer Business Applications” Schedule.
    
	
 
    
	
A.93        [***]
    
	
 
    
	
A.94        “Measurement   Window” means the periodic evaluation and reporting frequency for each   individual Service Level as specified in the applicable “Service Level   Matrix” Schedule (e.g., monthly, quarterly, semi-annually,   annually).
    
	
 
    
	
A.95        [***] 
    
	
 
    
	
A.96        “Minimum   Service Level Default” means a single failure of Service Provider to meet   the applicable Minimum Service Level for a specific CPI or KPI in the   applicable Measurement Window (e.g., monthly).
    

 

	
 
    
	
A.97        “Minimum   Service Level” means the minimum level of performance set forth in the   applicable “Service Level Matrix” Schedule with respect to each   CPI, KPI or GPI.
    
	
 
    
	
A.98        “Monthly   Performance Scorecard Report” means the report describing Service   Provider’s performance of the Services in the preceding month in accordance   with Section 2.5.1(b) of the “Governance and Change   Control” Exhibit.
    
	
 
    
	
A.99        “Move”   has the meaning set forth in the “End User” section of Schedule E-7.
    
	
 
    
	
A.100      “Network   Printer” has the meaning set forth in the “End User” section of Schedule E-7.
    
	
 
    
	
A.101      “Offer Date”   means the date agreed to by the Parties in accordance with the “Transformation   and Transition Plan” Schedule, except for Customer employees on   Leaves of Absence.
    
	
 
    
	
A.102      “Operating   System Instance” has the meaning set forth in the “Server, Storage and   Database” section of Schedule E-7.
    
	
 
    
	
A.103      “Operational”   means, with respect to a personal computer (including peripherals), and/or an   PDA/handheld device, the point in time after which installation and configuration   of the unit by Service Provider have occurred and the unit user has expressly   acknowledged in writing that the unit has been successfully installed and   configured.
    
	
 
    
	
A.104      “Patch   Management” means the process of receiving, reviewing, installing and   tracking software updates issued by a software or hardware provider.
    
	
 
    
	
A.105      “PBX Voice   Port” has the meaning set forth in the “Network” section of Schedule E-7.
    
	
 
    
	
A.106      “PCI” and “PCI   DSS” mean the PCI Data Security Standard as published from time to time by   the PCI Security Standards Council.
    
	
 
    
	
A.107      [***]
    
	
 
    
	
A.108      “Personal   Computer” has the meaning set forth in the “End User” section of Schedule    E-7.
    
	
 
    
	
A.109      [***]
    
	
 
    
	
A.110      “Pool   Percentage” means [***] of the At Risk Amount or, for any period during   which one or more Special CPIs has been established by Customer, [***].  For avoidance of doubt, the applicable   percentage points shall be apportioned by Customer across the CPIs such that   the individual pool percentages shall total an amount not greater than [***],   as applicable; provided, that at least [***] shall be allocated across   the Special CPIs, if any.
    
	
 
    
	
A.111      “PPQA”   means product and process quality assurance.
    

 

	
 
    
	
A.112      “Preliminary   Specification Report” means the preliminary specification report prepared   by Service Provider in accordance with the Change Control Procedures.
    
	
 
    
	
A.113      [***]
    
	
 
    
	
A.114      “Problem”   means the unknown underlying cause of one or more Incidents.
    
	
 
    
	
A.115      “Problem   Management” means the process by which Problems are identified,   communicated, managed, tracked, and resolved.
    
	
 
    
	
A.116      “Process   Leader” means the lead Service Provider SME.
    
	
 
    
	
A.117      “Process   Owner” means the designated lead Customer SME.
    
	
 
    
	
A.118      “Productive   Hours” means the number of productive hours actually worked by a Service   Provider employee or Service Provider subcontractor employee, excluding   non-productive time (which includes travel, vacation, holiday, training,   education, marketing, administrative staff meetings, medical leave and   military leave) to provide the Services.    Productive Hours does not include Service Provider internal management   time
    
	
 
    
	
A.119      “Project”   is a group of related, phased activities that may span multiple days, weeks,   or months that are documented through written Project Work Orders, which may   have defined milestones and Deliverables, are required for Service Provider   to perform the Services, and any such change or improvement taking [***] or   more is considered a Project.  As part   of the Services, Service Provider shall provide the services, functions,   responsibilities and materials necessary to manage, perform and complete the   Projects that

 

(a)               are in   progress as of the Effective Date, which are described in the “Project”   Schedule,

 

(b)               are approved   but not yet in progress as of the Effective Date that are agreed to at that   time by the Parties, based upon the approach that they used in agreeing to   the Projects described in the preceding clause (a), which are described in   the “Project” Schedule, and

 

(c)               encompass   future initiatives, as required to provide the Services.

 

Service   Provider shall report on the level of effort expended on Projects on a weekly   basis.
    
	
 
    
	
A.120      “Project   Change Request” means a Change to a Project requested after a Project   Work Order has been approved by Customer.    Any Changes to Projects in progress (as of the Effective Date)must be   described in detail and any such Change will be addressed through the Change   Control Procedures.  
    
	
 
    
	
A.121      “Project   Initiation and Authorization” process to request project services   according to the timeframes indicated in Appendix 4-B and Section 2.4   of in the “Governance and Change Control” Exhibit.
    
	
 
    
	
A.122      [***]
    

 

	
 
    
	
A.123      [***]
    
	
 
    
	
A.124      “Project   Rates” means charges calculated using the hourly rates set forth in Schedule   E-6.
    
	
 
    
	
A.125      “Project   Schedule” refers to a “Project Work Order.”
    
	
 
    
	
A.126      “Project Work   Order” means the documentation authorizing the specific requirements,   including scope, acceptance criteria, milestones, Service Locations, Service   Provider’s schedule and pricing commitment for a particular Project (such   commitment is referred to as “baselined” in the Service Levels).  A Project Work Order is also referred to   operationally as a statement of work for a Project.
    
	
 
    
	
A.127      “Proposed   Transferred Agreements” means those Managed Agreements identified as “Proposed   to be Assumed,” if any, in the “Third Party Agreements” Schedule.
    
	
 
    
	
A.128      “RCA”   means Root Cause Analysis.
    
	
 
    
	
A.129      “Remote   Locations” means those locations identified with an “N” in the “IBM on site”   column in the “Customer Facilities” Schedule.
    
	
 
    
	
A.130      “Required   Modification” means a software or hardware update that is required to   eliminate a program error, ensure reliability, ensure legal compliance or   that is required to enable system compatibility.
    
	
 
    
	
A.131      “Re-Solution   Milestone” has the meaning set forth in Schedule F-5.
    
	
 
    
	
A.132      “Re-Solution   Plan” means the plan pursuant to which the Services will be re-solutioned   or transitioned to Successor Service Providers, as described in Schedule F.
    
	
 
    
	
A.133      “Re-Solution   Project” means the Project pursuant to which certain Services will be   restructured and certain other Services will be transitioned to Customer or   Successor Service Providers, as outlined in the Re-Solution Plan.
    
	
 
    
	
A.134      “Resource   Baseline” for each applicable category of Service, means that quantity of   Resource Units that is included in the monthly Base Charges set forth in Schedule   E-3.  The Resource Baselines for   each month of the Term are set forth in Schedule E-5.
    
	
 
    
	
A.135      “Resource   Unit” means, for each applicable Service, the individual unit of resource   consumption included in the Resource Baseline and used to calculate   adjustments to Base Charges in the form of either an ARC or a RRC, as   applicable, for Resource Unit consumption [***] according to the formulas   defined in Section 2.4(b) of Schedule E-1.
    
	
 
    
	
A.136      “Responsible   Executive” has the meaning set forth in Section 2.2.8(a) of   the “Governance and Change Control” Exhibit.
    

 

	
 
    
	
A.137      “Retained   Expenses” are those expenses and costs for which Customer is financially   responsible.
    
	
 
    
	
A.138      “Root Cause   Analysis” or “RCA” means the process to identify the root   cause of Problems and developing a plan for corrective actions.
    
	
 
    
	
A.139      “Router”   has the meaning set forth in the “Network” section of Schedule E-7.
    
	
 
    
	
A.140      “RRC”   means a reduced resource credit issued to Customer by Service Provider   pursuant to the ARC/RRC process described in Section 2.4 and Section 2.5   of Schedule E-1.
    
	
 
    
	
A.141      “RRC Point”   means the threshold point at which Resource Unit consumption must be reduced   below the Resource Baseline before a RRC will be applied. [***]
    
	
 
    
	
A.142      “RRC Rate”   means the monetary rate per unit to be credited by Service Provider to   Customer for any Resource Unit consumption for each applicable Resource Unit   [***] according to the formulas defined in Section 2.4(b) of   Schedule E-1.
    
	
 
    
	
A.143      “Ruggedized   Mobile Device” has the meaning set forth in the “End User” section of Schedule E-7.
    
	
 
    
	
A.144      “Senior   Executives” means the senior official from each Party (or the Party’s   parent company) designated in Section 2.3(c)(iii) of the “Dispute   Resolution Procedures” Exhibit.
    
	
 
    
	
A.145      “Service   Authorization” means a request in the form of a Project Work Order or   similar approval for the provision of certain services that authorizes a   change in the volume of certain Resource Units which will trigger an ARC or   RRC.  For certain non-Project related   Resource Units the requirement for a Service Authorization shall be satisfied   via the mutually agreed upon process by which end-users are authorized to   request a service from Service Provider.
    
	
 
    
	
A.146      [***]
    
	
 
    
	
A.147      “Service   Level Credit” means the financial credits incurred by Service Provider in   favor of Customer for Service Level Defaults for CPIs determined in   accordance with the provisions of Section 6(a) of the “Service   Level Methodology” Schedule.
    
	
 
    
	
A.148      “Service   Level Default” means a Minimum Service Level Default or Expected Service   Level Default.
    
	
 
    
	
A.149      “Service   Level Improvement Date” means the date beginning [***] after each   applicable Service Level Commencement Date.
    
	
 
    
	
A.150      “Service   Level” Schedule sets forth certain Service Levels against which   Service Provider’s performance of the Services will be measured.  Also referred to as the “Service Level   Matrix.”
    

 

	
 
    
	
A.151      “Service   Level Reporting Period” means each [***] beginning on each applicable   Service Level Commencement Date and continuing (rolling) monthly throughout   the Term.  [***]
    
	
 
    
	
A.152      “Service   Level Termination Event” has the meaning provided in Section 2(c)(iv) of   the “Service Level Methodology” Schedule.
    
	
 
    
	
A.153      “Service   Level Type” are listed in the “Service Level” Schedule.
    
	
 
    
	
A.154      “Service   Provider Benefit Plans” As of the Hire Date, the Transitioned Employees   shall be immediately eligible to participate in all employee benefit savings   and defined contribution programs, plans or policies generally maintained for   similarly situated employees of Service Provider (as the same may be modified   from time to time, “Service Provider Benefit Plans”).
    
	
 
    
	
A.155      “Service   Provider Governance Organization” means the Service Provider governance   organization described in Section 2.2 of the “Governance and   Change Control” Exhibit.
    
	
 
    
	
A.156      “Service   Provider PMO” means the Program Management Office established by Service   Provider to oversee all Services (including Services effective as of the   Effective Date and Services added after the Effective Date) in accordance   with the “Governance and Change Control” Exhibit.
    
	
 
    
	
A.157      “Service   Request” means a request for assistance or performance in connection with   the Services.
    
	
 
    
	
A.158      [***]
    
	
 
    
	
A.159      “Severity   Level” has the meaning set forth in the “Service Level Matrix”   Schedule [***].
    
	
 
    
	
A.160      “SMEs”   means subject matter experts.
    
	
 
    
	
A.161      “Special CPI”   means a CPI defined by Customer, in accordance with Section 3(a)(iii) of   the “Service Level Methodology” Schedule, [***].
    
	
 
    
	
A.162      “Storage”   has the meaning set forth in the “Server, Storage and Database” section of Schedule E-7.
    
	
 
    
	
A.163      “Support”   means labor and associated maintenance activities as required for Service   Provider to perform or provide the Services, or for Customer to receive the   Services.
    
	
 
    
	
A.164      “Switch”   has the meaning set forth in the “Network” section of Schedule E-7.
    

 

	
 
    
	
A.165      “Telecom   Expense Management” has the meaning set forth in the “Network” section of   Schedule E-7.
    
	
 
    
	
A.166      [***]
    
	
 
    
	
A.167      “Thin Client   Device” has the meaning set forth in the “End User” section of Schedule E-7.
    
	
 
    
	
A.168      “Transformation   and Transition Charges” means Service Provider’s Charges for the   provision of the Transformation and Transition Services, as set forth in “Pricing”   Schedule.
    
	
 
    
	
A.169      “Transformation   and Transition Project” has the meaning set forth in Section 2.1   of Schedule F-1.
    
	
 
    
	
A.170      “Transformation   and Transition Project” means the project undertaken by Service Provider   to facilitate the transfer of operational responsibility for the Services   from Customer and its third party vendors to Service Provider.
    
	
 
    
	
A.171      “Transition   Management Office” means the TMO established in accordance with the “Governance   and Change Control” Exhibit by Service Provider to manage and   execute the Transition and Transformation projects necessary for the   commencement of the delivery of Services associated with a Transaction   Document.
    
	
 
    
	
A.172      [***]
    
	
 
    
	
A.173      “Transitioned   Employees” means all Affected Employees who become Service Provider   employees in accordance with the Master Agreement, the “Terms for Affected   Employees” Schedule and the “List of Affected Employees” Schedule.
    
	
 
    
	
A.174      [***]
    
	
 
    
	
A.175      [***]
    
	
 
    
	
A.176      [***]
    
	
 
    
	
A.177      “Variable   Charges” means, collectively, the ARCs/RRCs and Charges attributable to   Chargeable Project Work.
    
	
 
    
	
A.178      “Voicemail   Box” has the meaning set forth in the “Network” section of Schedule E-7.
    
	
 
    
	
A.179      “WAN Device”   has the meaning set forth in the “Network” section of Schedule E-7.
    
	
 
    
	
A.180      “WARN Act”   means the Transitioned Employees for compliance with the Worker Adjustment   and Retraining Act of 1988, as amended.
    

 

	
 
    
	
A.181      “Web App Project”   means customer-facing Web application maintenance, application development   and content management related activities for the Customer Business   Applications relating to the internet or “world-wide web.”
    
	
 
    
	
A.182      [***]
    
	
 
    
	
A.183      [***]
    
	
 
    
	
A.184      [***]
    
	
 
    
	
A.185      “Wireless   Access Point” or  “WAP” has the   meaning set forth in the “Network” section of Schedule E-7.
    

 

 

Subject to a request for confidential treatment, certain portions of this agreement have been intentionally omitted.  The omitted portions subject to the confidential treatment request are designated by three asterisks ([***]).  A complete version of this agreement has been separately filed with the Securities and Exchange Commission.

 

ATTACHMENT 2 TO AMENDMENT NO. 7

 

SCHEDULE D-1

SERVICE LEVEL METHODOLOGY

 

This is Schedule D-1, Service Level Methodology, to the First Amended and Restated Transaction Document No. 1 to that certain First Amended and Restated Master Services Agreement, dated as of November 1, 2010, between ServiceMaster Consumer Services, L.P. and International Business Machines Corporation.  Unless otherwise defined herein, capitalized terms have the meanings set forth in the Master Agreement, the “Definitions” Exhibit to the Master Agreement, or the “Definitions” Schedule to the Transaction Document.

 

1.             General Provisions.

 

(a)           General.

 

(i)            The Service Levels measure whether Service Provider is meeting certain agreed, measurable criteria for the Services that Service Provider is contractually committed to provide to Customer.  Service Provider shall monitor, measure, collect, record and report to Customer its performance beginning on each Service Level Commencement Date and thereafter during the Term (including any Termination Assistance Period prior to handover to Customer or Customer’s Successor Service Provider) against all Service Levels then in effect.

 

(ii)           The “Service Level Matrix” Schedule sets forth certain Service Levels against which Service Provider’s performance of the Services shall be measured.  Service Provider shall perform the Services at or above the levels of performance indicated for CPIs, KPIs and GPIs as set forth in this Schedule D-1 and the applicable “Service Level Matrix” Schedule, and if Service Provider fails to do so and is not otherwise excused from such failure, Service Provider shall take the corrective actions and may be subject to the other remedial measures specified in this Schedule D-1 and the Agreement.

 

(iii)          Service Provider shall perform the Services that are not subject to expressly defined Service Levels at a level of service that meets or exceeds the greater of [***].

 

(iv)          Service Provider shall be responsible for, and have in place as of each applicable Service Level Commencement Date, all of the measuring, monitoring and reporting capabilities necessary for measuring, monitoring and reporting Service Provider’s performance against the Service Levels as described in Section 5 below.

 

(v)           Except as otherwise stated in the applicable “Service Level Matrix” Schedule, all Service Levels shall be measured by Service Provider [***].  Service

 

 

Provider shall report to Customer its performance against Service Levels upon the Measurement Window frequency specified for each Service Level in the applicable “Service Level Matrix” Schedule.

 

(vi)          For a Compound Service Level, satisfaction of each and every metric, condition, component or element is necessary for the satisfaction of the corresponding Service Level.  Customer may create a Compound Service Level from separate, pre-existing Service Levels.  Where a Compound Service Level is created from a number of separate, pre-existing Service Levels, the Allocation of Pool Percentage for such Compound Service Level shall not exceed [***].

 

(vii)         Service Provider will promptly investigate and remediate all failures associated with Service Levels in accordance with Section 8 below.

 

(viii)        Service Provider will provide Customer with the performance reporting for the Services as specified in this Schedule D-1, the “Reports” Schedule, and the “Governance and Change Control” Exhibit.

 

(ix)           Service Provider will minimize recurrences of all performance-related failures for which it is responsible in accordance with Section 8 below.  Service Provider will also be responsible for reporting to Customer any problems, such as outages, that appear likely to result in a failure to meet any Service Level, within [***] of Service Provider becoming aware of any such problem.

 

(x)            Customer will have the right to receive Service Level Credits and ultimately to terminate the Services notwithstanding any of the aforesaid efforts of Service Provider, if and to the extent such rights accrue in accordance with the Agreement or this Schedule D-1.

 

(xi)           Customer and Service Provider will each provide a single point of contact for the prompt resolution of all Service Level Defaults and all failures to provide Services to Customer in accordance with the “Service Level Agreement” Schedule and the Agreement.

 

(b)           Reporting of Performance Measures.

 

Commencing on the Service Level Commencement Date and continuing throughout the Term, including during any Termination Assistance Period:

 

(i)            Service Provider shall assemble and create the reports described in the “Reports” Schedule and the “Service Level Agreement” Schedule on the performance of the Services, in order to assist in the effective management of the Services and support the improvement of the Service Levels as described herein.

 

(ii)           Service Provider shall provide detailed supporting information for each report to Customer in electronic form suitable for use on a personal computer.  In addition, Service Provider shall make such information available to Customer on-line using commonly available technology.  The raw data and detailed supporting

 

 

information shall be deemed to be Customer Confidential Information, and Customer may access such information on-line at any time during the Term; provided, that IBM may retain a copy of such data solely for its accounting records, subject to the provisions of Section 11 of the Master Agreement.

 

(iii)          Commencing with the first Service Level Commencement Date, within ten (10) Business Days after the last day of each month during the Term, Service Provider will provide a monthly performance report for CPIs and KPIs that reports various metrics, including:

 

(A)          Service Provider’s performance against and calculations with respect to each Service Level during the preceding month;

 

(B)           the Performance Trend/Improvement Report; and

 

(C)           potential problems of which Service Provider is aware that could reasonably be expected to result in a failure to meet a Service Level and remedial actions including summaries of the reports submitted to Customer in accordance with Service Provider’s obligation to periodically submit Service Level reports and Service Level Credits.

 

Notwithstanding the above, Service Provider shall only be required to report on GPIs upon the request of Customer, and upon such request, Service Provider shall produce the monthly performance report within ten (10) Business Days.  Service Provider shall only be required to provide within ten (10) Business Days Performance Trend/Improvement Reports on GPIs upon the request of Customer.

 

(iv)          If any monthly performance report provided by Service Provider to Customer does not have reasonably sufficient detail and accuracy for Customer to determine whether Service Provider achieved or failed to achieve the Expected Service Level and/or Minimum Service Level for each Service Level in the immediately preceding Measurement Window, then Customer may provide written notice thereof to Service Provider, which notice must contain reasonable detail of the deficiencies in the subject monthly performance report.  If within ten (10) days after receiving such a notice Service Provider fails to deliver to Customer a revised or replacement monthly performance report containing reasonably sufficient detail and accuracy for Customer to determine whether Service Provider achieved or failed to achieve a Service Level in the applicable Measurement Window [***].

 

2.             Service Level Obligations.

 

(a)           Service Level Obligations.

 

The metrics, measurement standards, and other pertinent features for CPIs, KPIs and GPIs are described in “Service Level Matrix” Schedule.

 

 

(b)           Commencement of Service Level Obligations.

 

The Parties agree that Service Provider will begin delivering the Services in accordance with the Service Levels as of each applicable Service Level Commencement Date for a particular Service.  Unless otherwise agreed in writing, Service Provider is not accountable for Service Level performance prior to each applicable Service Level Commencement Date.

 

(c)           Service Level Defaults, Service Level Termination Event, and Excused Performance.

 

(i)            CPIs, KPIs and GPIs Generally.

 

The Parties acknowledge and agree that all Service Levels are important to the proper support and operation of Customer’s business.  However, certain of the Service Levels are of particular importance to Customer’s business and are therefore designated as CPIs and KPIs.  Certain of the Service Levels, while important to Customer’s business operations, are less critical to Customer and are designated as GPIs.

 

(ii)           CPI Service Level Defaults.

 

Service Provider’s performance that results in a Service Level Default with respect to a CPI (to the extent not excused pursuant to paragraph (v), below) shall:

 

(A)          entitle Customer to receive a Service Level Credit;

 

(B)           be escalated to the Operations Oversight Committee; and

 

(C)           result in Service Provider promptly preparing a formal written recovery plan designed to prevent the reoccurrence of such Service Level Default and, once approved by Customer, Service Provider shall promptly implement at Service Provider’s sole cost, such approved plan.

 

(iii)          KPI Service Level Defaults.

 

Service Provider’s performance that results in a Service Level Default with respect to a KPI (to the extent not excused pursuant to paragraph (v), below) shall:

 

(A)          be escalated to the Operations Oversight Committee; and

 

(B)           result in Service Provider promptly preparing a formal written recovery plan designed to prevent the reoccurrence of such Service Level Default and, once approved by Customer, Service Provider shall promptly implement at Service Provider’s sole cost, such approved plan.

 

(iv)          Service Level Termination Events.

 

A Service Level Termination Event shall be deemed to exist if Service Provider fails to meet the [***] in any Service Level Reporting Period.  [***].  [***]. Customer shall have available to it all of the remedies set forth in the Agreement for the occurrence of a Service Level Termination Event.

 

 

(v)           [***]

 

(d)           [***] [omitted 2 pages]

 

3.             Additions, Modifications, Deletions and Reclassifications of Service Levels.

 

[***] [omitted 4 pages]

 

4.             [***] Service Levels.

 

(a)           [***] Availability and Dates.

 

[***]

 

(b)           [***] Methodology.

 

[***]

 

5.             Measuring Tools.

 

(a)           Commencing on each applicable Service Level Commencement Date, Service Provider shall provide, implement, maintain and utilize the necessary measurement and monitoring tools and procedures required to measure and report on Service Provider’s performance of the Services against the applicable Service Levels.  Service Provider’s measurement and monitoring of Service Level performance shall permit reporting at a level of detail reasonably sufficient to permit Customer to verify compliance with the Service Levels, and shall be subject to audit by Customer pursuant to the Agreement.  Service Provider shall provide Customer with information about and access to such procedures upon request for purposes of verification.

 

(b)           Notwithstanding the foregoing, any new tools required for new Service Levels added after the Execution Date shall be identified in the Change Order or other documentation approving such new Service Level.  In connection therewith, Service Provider shall be obligated to propose a commercially reasonable measuring tool or methodology for a Service Level, and if it fails to do so, such tool or methodology shall be determined using the dispute resolution procedure set forth in the Agreement.

 

(c)           If, after the Execution Date or the implementation of tools for new Service Levels or the tools Service Provider is required to implement pursuant to Section 5(a) above for existing Service Levels, one Party desires to use a different measuring tool or methodology for a Service Level, such Party shall request such change through the Change Control Procedures.  If the other Party approves the new measuring tool or methodology, the Parties will reasonably adjust the Service Level measurements to account for any increased or decreased sensitivity in the new measuring tools, provided that if the Parties cannot agree on the required adjustment, either Party may escalate the matter in accordance with the

 

 

governance procedures set forth in the “Governance and Change Control” Exhibit, and if the dispute is not resolved thereby, the matter shall be resolved in accordance with the Dispute Resolution Procedures.  It is not anticipated that changes in the measuring tools or methodologies will drive changes in Service Levels; rather, the need to collect and accurately reflect the performance data should drive the development or change in measuring tools or methodologies.

 

6.             Service Level Credits [***].

 

(a)           Service Level Credit Calculation.

 

Subject to Section 6(f) below, for each CPI Expected Service Level Default or Minimum Service Level Default, Service Provider shall accrue to Customer a Service Level Credit that will be computed in accordance with the following formula:

 

Performance Credit = A × B

 

Where A is the At Risk Amount; and

 

Where B is  the Allocation of Pool Percentage for the applicable CPI.

 

For example only, assume that Service Provider fails to meet the Minimum Service Level for a CPI, the At Risk Amount is [***]% of the [***], and the [***] for the month in which the Service Level Default occurred were $[***].  Additionally, assume that the Allocation of Pool Percentage for such CPI is [***]%.  The Performance Credit due to Customer for such Service Level Default would be computed as follows:

 

A (the At Risk Amount) is $[***] ($[***]  ×  [***]%);

 

Multiplied by B (the Allocation of Pool Percentage for such CPI), which is [***];

 

Yields a Performance Credit = $[***]

 

(b)           Multiple Defaults.

 

[***]

 

(c)           Notice of Service Level Credits.

 

Service Provider shall notify Customer in writing if Customer becomes entitled to a Service Level Credit, which notice shall be provided monthly and shall describe the Service Level Default for the month that is the subject of the monthly CPI report.

 

(d)           [***]

 

 

(e)           Reconciliation of Service Level Credits [***].

 

Upon occurrence of the events giving rise to a Service Level Credit, Service Provider shall owe a debt to Customer for the applicable Service Level Credit amount.  [***].  Service Provider shall credit to Customer against the next monthly invoice:

 

(A)          all accrued Service Level Credits [***], and

 

(B)           all accrued Service Level Credits [***].

 

If there will be no further invoices, Service Provider will pay the amount of such Service Level Credits to Customer within thirty (30) calendar days.  [***]

 

(f)            Cumulative Remedies and Waivers.

 

The exercise by Customer of its rights under this Schedule D-1, including the right to receive Service Level Credits [***], shall be without prejudice to its other rights or remedies under the Agreement or at law or equity, including Customer’s right to claim and collect damages and Customer’s right to terminate the Agreement in whole or in part in accordance with the Agreement.  [***]

 

(g)           No Liquidated Damages.

 

Service Level Credits shall not constitute liquidated damages for the corresponding failure to perform, and Customer shall be free to pursue any and all remedies available under the Agreement with respect thereto, provided, that any such credits actually paid by Service Provider to Customer shall be offset against any damages awarded to Customer for claims arising from the corresponding failure to perform.

 

7.             Annual Review.

 

Within twelve (12) months after each applicable Service Level Commencement Date, and at least annually thereafter (after all initial Service Level Commencement Dates have passed, the Parties shall agree to synchronize to a single date for future use), or at either Party’s request, Service Provider and Customer will review the Service Levels and any proposed adjustments to them as appropriate pursuant to the Change Control Procedures to reflect any improved performance capabilities associated with advances in the technology and methods used to perform the Services or material changes in volumes and metrics used to determine the Service Levels.  The Parties will also review any other considerations relating to the Service Levels raised by either Party.  As part of this review process, the Parties may jointly:  (a) determine and agree on the addition and/or removal of Service Levels, (b) revise the categorization of Service Levels, and (c) revise the results of the automatic continuous improvement adjustment developed for a particular Service Level pursuant to Section 4 above or improve a particular Service Level not subject to the automatic continuous improvement adjustments of Section 4 above.

 

8.             Investigation and Correction.

 

[***]

 

 

Service Provider shall promptly investigate and correct each failure to meet the Service Levels (whether or not such failure constitutes a Service Level Default) by:

 

[***]

 

 

 

Subject to a request for confidential treatment, certain portions of this agreement have been intentionally omitted.  The omitted portions subject to the confidential treatment request are designated by three asterisks ([***]).  A complete version of this agreement has been separately filed with the Securities and Exchange Commission.

 

ATTACHMENT 3 TO AMENDMENT NO. 7

 

SCHEDULE D-2

SERVICE LEVEL MATRIX

 

This is Schedule D-2, Service Level Matrix, to the First Amended and Restated Transaction Document No. 1 to that certain First Amended and Restated Master Services Agreement, dated as of November 1, 2010, between ServiceMaster Consumer Services, L.P. and International Business Machines Corporation.  Unless otherwise defined herein, capitalized terms have the meanings set forth in the Master Agreement, the “Definitions” Exhibit to the Master Agreement, or the “Definitions” Schedule to the Transaction Document.

 

[***] [omitted 9 pages]exhibit101.htm

Exhibit 10.1

 

 

 

 

FARMOUT AGREEMENT

King City Oil Field

King City Prospect

Monterey County, California

THIS FARMOUT AGREEMENT (“Agreement”) is made effective the 7th day of September, 2012 between Delta Oil & Gas, Inc.  (hereinafter referred to as “Delta”) and MPG King City Project, L.P., (hereinafter referred to as “MPG”).

WHEREAS, Delta represents, but does not warrant that it owns a percentage of oil and gas leasehold interests (“AMI Leases”) in and to certain lands located in Monterey County, California, which leases and lands are more particularly described on the attached Exhibit “A” which is incorporated herein by this reference and which lands shall constitute an Area of Mutual Interest (“AMI”).

WHEREAS, MPG desires the right to earn from Delta an assignment of a portion of Delta’s interest in the initial test well (the “SVB 2-32”) and the Area of Mutual Interest and, with the consent of Sunset, which consent is attached hereto and forms part of this Agreement, Delta is willing to grant such rights as provided herein.

NOW, THEREFORE, for and in consideration of the mutual promises and covenants contained herein, to be kept and performed by the parties hereto, and other valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto do hereby agree as follows:

1.            COMPLETION OF TEST WELL

On or before December 31, 2012, Delta, and its partners, shall complete the initial test well (the “SBV 2-32”) which has been drilled within the AMI to a depth of approximately 3,500’.   Failure to complete the SBV 2-32 prior to December 31, 2012 shall terminate this Agreement and all payments made by MPG shall be returned to MPG.

2.            COSTS

a.           Upon MPG successfully raising the sum of Three Hundred and Fifty Thousand Dollars ($350,000), MPG shall pay to Delta the sum of Three Hundred Thousand Dollars ($300,000) and, subject to subparagraph 2 (b) hereof, shall receive from Delta a Twenty Five Percent (25%)gross working interest in the SBV 2-32, which will revert to a Twenty Percent (20%) gross working interest after the Sunset penalty payout of Four Hundred Percent (400%) is achieved, and, subject to sub-paragraphs 2 (c) and (e) hereof, the right to earn a Twenty Percent (20%) gross working interest in all additional wells drilled in the
AMI.

b.           With respect to the SBV 2-32, MPG shall also pay to Sunset Twenty Five Percent (25%) of the costs of completing the SBV 2-32, including, without limitation, installation of and flow line tie-ins, battery installations, testing and installation of production facilities and/or abandonment costs and site remediation in the event the well does not produce hydrocarbons in economically viable quantities.

 

 

 

 

 

  

Page 1 of 6

  

 

 

 

c.           With respect to all subsequent wells drilled within the AMI, MPG shall have the right to participate as to a Twenty Percent (20%) gross working interest by paying Twenty Five Percent (25%) of all costs associated with the drilling and completion of such wells.

d.  With respect to the SBV 2-32, an Authorization for Expenditure (“AFE”) for the completion of the SBV 2-32 well shall be forwarded to MPG prior to commencement of completion operations. This AFE shall represent the estimated cost of completing the SBV 2-32 Well and Sunset shall have the right from time to time to demand and receive from MPG payment in advance of its respective share of the AFE.  MPG shall pay the full amount of the payment so invoiced within 15 working days of receipt of the AFE for completion, testing and installation of all equipment necessary for commencement of sales for the SBV 2-32. In the event MPG fails or
refuses to make any such advance payments then MPG shall forfeit all of its right, title and interest to earn an interest in the SBV 2-32 and the AMI as well as any advanced monies under this Agreement, and this Agreement shall be deemed terminated.

e.  With respect to additional wells to be drilled within the AMI (the “Additional Well(s)”), an election form shall be forwarded to MPG by Sunset providing 10 days for MPG to make its election to participate or not participate in any such well.  If MPG elects to participate, an AFE for each well shall be forwarded to MPG prior to commencement of drilling operations. This AFE shall represent the estimated cost of drilling and completing the Additional Well(s) and Sunset shall have the right from time to time to demand and receive from MPG payment in advance of its respective share of the AFE.  MPG shall pay the full amount
of the payment so invoiced prior to commencement of drilling operations and within 5 working days of receipt of the AFE for completion, testing and installation of all equipment necessary for commencement of sales for the Additional Well(s). In the event MPG elects not to participate in any Additional Well and/or fails or refuses to make any such  payments required under any AFE, then MPG shall forfeit all of its right to earn an interest in such Additional Well and the spacing unit associated therewith and shall forfeit  any monies advanced under this Agreement in respect of such Additional Well(s),.Upon termination of this Agreement as aforesaid, Delta shall be entitled to participate in such Additional Well(s) to the extent of its own pro rata share as well as the pro rata share to which MPG was previously entitled. 

3.            EARNING

a.  Once the SBV 2-32is completed and is capable of producing hydrocarbons in paying quantities, MPG shall own and be entitled to its pro rata share of Twenty Five (25%) of 8/8ths gross working interest in and to the SBV 2-32 until such time as the Sunset penalty payout of Four Hundred Percent (400%) is achieved, at which time MPG’s gross working interest and ownership in the SBV 2-32 will revert to a Twenty Percent (20%) gross working interest.

b.  Additionally, in consideration of the payments referred to herein, MPG shall earn a Twenty Percent (20%) interest in the AMI Lease covering approximately 960 acres. Said interest of lease shall be delivered to MPG at no less than 80% of 8/8ths net revenue interest in the SBV 2-32, provided that the price of oil is less than Eighty Dollars ($80.00) per barrel and at not less that 75% of 8/8ths net revenue interest provided that the price of oil exceeds Eighty Dollars ($80.00) per barrel.. If the SBV 2-32 is a dry hole, MPG shall retain the right to its interest hereunder and said well shall be plugged and abandoned and the site returned to its native
condition, or as near as is reasonably possible.  MPG’s Twenty Percent (20%) gross working interest shall be applicable in all subsequent operations within the AMI.

 

 

 

 

 

  

Page 2 of 6

  

 

 

 

	
4.

	
ABANDONMENT

In the event any well drilled is not capable of producing oil and or gas in commercial quantities then MPG shall pay its 25% pro rata share of 100% of all costs associated with proper abandonment of such Well and restoration of any disturbed area or areas.

	
5.

	
WELL GEOLOGIC AND GEOPHYSICAL DATA

MPG will be provided with all seismic and exploration data, drilling reports, including logs pertaining to the SBV 2-32 and all Additional Wells drilled within the AMI and will have full access during drilling and/or completion, provided it is not then in default of any of the terms or provisions of this Agreement.

	
6.

	
OPERATING AGREEMENT

All operations within the AMI will be conducted in accordance with the terms and provisions of the 1989 Form 610 AAPL Joint Operating Agreement, including 1984 COPAS Accounting Procedures, a copy of which is attached hereto as Exhibit “B”. Said Operating Agreement designates Sunset Exploration, Inc. as “Operator”.

Any leases acquired by any party within the AMI within three (3) years of the date of this Agreement shall be subject to the Operating Agreement and shall be owned by the parties in accordance with their working interest pro rata shares regardless of record ownership of such leases.

	
7.

	
SHUT-IN GAS PAYMENTS

In the event the SBV 2-32 or any subsequent well drilled within the AMI is completed as a well capable of gas production in paying quantities but is shut-in because of a lack of a pipeline connection or market for such gas or oil (hereinafter referred to as “shut-in gas/oil well”), Delta shall immediately notify MPG of such fact and the Operator shall pay all shut-in gas payments necessary to maintain the affected lease(s) in full force and effect subject to reimbursement by MPG of its working interest pro rata share of such payments.

	
8.

	
COMPLIANCE WITH LAWS, RULES AND REGULATIONS

Sunset shall comply with all rules and regulations required as operator and shall also require that all of their operators, contractor and subcontractors comply with any and all applicable laws and regulations, federal, state and local, and with the requirements of each regulatory body or official asserting jurisdiction over operations hereunder.

 

 

 

 

 

  

Page 3 of 6

  

 

 

	
9.

	
SUCCESSORS IN INTEREST

This Agreement and its terms are personal in nature and the underlying leaseholds shall not be assigned and/or sold without the prior written consent of the parties hereto, such consent shall not be unreasonably withheld.

	
10.

	
CONFLICT

In the event of a conflict between the terms of the Operating Agreement provided for above and this Agreement, this Agreement shall control. This Agreement shall supersede any prior correspondence or oral communication between the parties regarding terms of this Agreement. This Agreement may only be amended in writing.

	
11.

	
FORCE MAJEURE

If the operator is rendered unable, wholly or in part, by force majeure to carry out its obligations under this Agreement, other than the obligation to make money payments, it shall give MPG prompt written notice of the force majeure with reasonably full particulars concerning it. Thereupon, so far as Sunset is affected by the force majeure, such obligations shall be suspended during the continuance of the force majeure and for such time thereafter as is reasonably required to resume performance of the obligation following removal of the force majeure situation. The term “force majeure”, as herein employed, shall mean an act of god, strike, lockout or
other industrial disturbance, act of public enemy, war, blockade, public riot, lightning, fire, storm, flood, explosion, governmental action, governmental delay, restraint or inaction, unavailability of equipment or any other cause, whether of the kind specifically enumerated above or otherwise, which is not reasonably within the control of Sunset.

	
12.

	
TAX PARTNERSHIP

It is not intended by this Agreement to create, nor shall this Agreement be construed as creating any relationship between the parties hereto of employer and employees, or any partnership, or association or corporation between the parties hereto. The liabilities of the parties hereto shall be as set forth in this Agreement and MPG and Delta shall be responsible only for their share of the costs, expenses, debts or obligations incurred hereunder as herein provided. The parties hereto agree as between themselves to elect to be excluded from the application of Subchapter K of Chapter I of Subtitle A of the United States Internal Revenue Code of 1954, as amended, and
similar provisions of the statutes of any state.

	
13.

	
NOTICE

Except as otherwise specifically provided herein, any notice or other communication required hereunder shall be considered as having been given if delivered personally, or if mailed postage prepaid or telephone addressed to the following address respectively:

  

 

 

 

 

Page 4 of 6

  

 

 

 

	
 

SUNSET EXPLORATION, INC.

10500 Brentwood Blvd.

Brentwood, CA 94513

(925) 634-2148  phone

(925) 634-6040  fax

ATTN:  Robert E. Nunn

	
 

DELTA OIL & GAS, INC.

Suite 604

700 West Pender Street

Vancouver, British Columbia

CANADA

V6C 1G8

(604) 602-1500  phone

(604) 602-1625  fax

ATTN:  Christopher Paton-Gay

	  	  
	
MPG KING CITY PROJECT, LP

C/o Managed Petroleum Group, Inc (GP)

2140 Lake Park Boulevard

Suite 208

Richardson, TX, USA

75080

(469) 916-4970

ATTN:  Brian S. Anderson, JD

	  

	
14.

	
OTHER PROVISIONS

Unless otherwise directed Sunset shall distribute all revenue generated from production within the prospect area to MPG and shall have the right to deduct prior to disbursement of said revenue all costs associated with lease operating and maintenance, ad valorum taxes royalties, expenses or any monies due and outstanding by MPG.

It is understood that from time to time additional exploration may be necessary to further develop the geologic concept and additional lands and seismic operations may be required. Sunset shall provide an Authority for Expenditure to MPG for any such operation 30 days prior to commencement of said exploration, MPG shall be entitled to its working interest pro rata share of 8/8ths and pay its proportionate shall of those exploration costs.

15.           NON-DISLOSURE

All information regarding the SBV 2-32 or any subsequent well(s) shall be held confidential.  MPG shall not disclose any such confidential information to third parties without the prior consent of Sunset. Sunset is aware that MPG may request certain public informational disclosures from time to time and Sunset will allow such releases provided that such disclosures will not detrimentally affect the potential assets attributable to this Agreement.  This provision shall survive termination of this Agreement for a period of two (2) years after such termination.

 

 

 

 

 

  

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IN WITNESS WHEROF, the parties have executed or have caused this instrument to be executed by their duly authorized officers and/or representatives.

DELTA OIL AND GAS, INC.

By:  /s/  Christopher Paton-Gay                                                        

              Christopher Paton-Gay

              Chief Executive Officer

MPG KING CITY PROJECT, LP.

By:  /s/  Brian S. Anderson                                                                  

              Brian S. Anderson, JD

              Managed Petroleum Group, Inc –President

              General Partner of the Limited Partnership

 

 

 

 

 

 

 

  

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