Document:

Exhibit 10.15

 

KLX INC.

 

2014   DEFERRED COMPENSATION PLAN

 

Effective

December 1, 2014

 

 

KLX Inc. Deferred Compensation Plan

 

TABLE OF CONTENTS

 

	
ARTICLE I
    	
Establishment and Purpose
    	
1
    
	
 
    	
 
    	
 
    
	
ARTICLE II
    	
Definitions
    	
1
    
	
 
    	
 
    	
 
    
	
ARTICLE III
    	
Eligibility and Participation
    	
9
    
	
 
    	
 
    	
 
    
	
ARTICLE IV
    	
Deferrals
    	
9
    
	
 
    	
 
    	
 
    
	
ARTICLE V
    	
Company Contributions
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE VI
    	
Benefits
    	
13
    
	
 
    	
 
    	
 
    
	
ARTICLE VII
    	
Modifications to Payment Schedules
    	
15
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII
    	
Valuation of Account Balances; Investments
    	
16
    
	
 
    	
 
    	
 
    
	
ARTICLE IX
    	
Administration
    	
17
    
	
 
    	
 
    	
 
    
	
ARTICLE X
    	
Amendment and Termination
    	
19
    
	
 
    	
 
    	
 
    
	
ARTICLE XI
    	
Informal Funding
    	
20
    
	
 
    	
 
    	
 
    
	
ARTICLE XII
    	
Claims
    	
20
    
	
 
    	
 
    	
 
    
	
ARTICLE XIII
    	
General Provisions
    	
24
    

 

 

ARTICLE I
   Establishment and Purpose

 

KLX Inc. (the “Company”) hereby adopts the KLX Inc. 2014 Deferred Compensation Plan (the “Plan”), effective December 1, 2014.

 

The purpose of the Plan is to attract and retain key Employees by providing Participants with an opportunity to defer receipt of a portion of their salary, bonus, and other specified Compensation. The Plan is not intended to meet the qualification requirements of Code Section 401(a), but is intended to meet the requirements of Code Section 409A, and shall be operated, construed and administered accordingly.

 

The Plan constitutes an unsecured promise by a Participating Employer to pay benefits in the future.  Participants in the Plan shall have the status of general unsecured creditors of the Company or the Adopting Employer, as applicable.  Each Participating Employer shall be solely responsible for payment of the benefits of its Employees and their Beneficiaries.  The Plan is unfunded for federal tax purposes and is intended to be an unfunded arrangement for Eligible Employees who are part of a select group of management or highly compensated Employees of the Employer within the meaning of Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA.  Any amounts set aside to defray the liabilities assumed by the Company or an Adopting Employer will remain the general assets of the Company or the Adopting Employer and shall remain subject to the claims of the Company’s or the Adopting Employer’s creditors until such amounts are distributed to the Participants.

 

ARTICLE II
   Definitions

 

2.1                               Account. Account means a bookkeeping account maintained by the Committee to record the payment obligation of a Participating Employer to a Participant as determined under the terms of the Plan.  The Committee may maintain an Account to record the total obligation to a Participant and component Accounts to reflect amounts payable at different times and in different forms.  Reference to an Account means any such Account established by the Committee, as the context requires.  Accounts are intended to constitute unfunded obligations within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.

 

2.2                               Account Balance. Account Balance means, with respect to any Account, the total payment obligation owed to a Participant from such Account as of the most recent Valuation Date.

 

2.3                               Adopting Employer. Adopting Employer means an Affiliate who, with the consent of the Company, has adopted the Plan for the benefit of its eligible employees.

 

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2.4                               Affiliate. Affiliate means a corporation, trade or business that, together with the Company, is treated as a single employer under Code Section 414(b) or (c)

 

2.5                               Beneficiary.  Beneficiary means a natural person, estate, or trust designated by a Participant to receive payments to which a Beneficiary is entitled in accordance with provisions of the Plan.  The Participant’s spouse, if living, otherwise the Participant’s estate, shall be the Beneficiary if: (i) the Participant has failed to properly designate a Beneficiary, or (ii) all designated Beneficiaries have predeceased the Participant.

 

A former spouse shall have no interest under the Plan, as Beneficiary or otherwise, unless the Participant designates such person as a Beneficiary after dissolution of the marriage, except to the extent provided under the terms of a domestic relations order as described in Code Section 414(p)(1)(B).

 

2.6                               Business Day.  Business Day means each day on which the New York Stock Exchange is open for business.

 

2.7                               Cause. Cause shall have the meaning ascribed thereto in the Participant’s employment agreement. If the Participant is not party to an employment agreement, Cause shall occur: (i) upon the Participant entering a plea of guilty or no-contest with respect to, or being convicted by a court of competent jurisdiction of, (x) any felony, whether or not involving the Company or (y) another crime involving dishonesty or moral turpitude or which could reflect negatively on the Company or otherwise impede its operations; (ii) if the Participant breaches a duty of loyalty owed to the Company or, as a result of the Participant’s gross negligence, breaches a duty of care owed to Company; (iii) if the Participant fails or refuses to perform any of the Participant’s material employment duties in any respect, after the Participant being given written notice by the Company of such failure or refusal, and his failure to cure the same within 30 calendar days of receipt of such notice; (iv) the Participant’s breach of a written policy of the Company or the rules of any governmental or regulatory body, which breach is not remedied (if susceptible to remedy) following written notice by the Company of such breach, failure or refusal and the Participant’s failure to cure the same within 30 calendar days of receipt of such notice; (v) the Participant engaging in any misconduct, negligence, act of dishonesty, violence or threat of violence (including any violation of securities laws) that is injurious to the Company.

 

2.8                               Change in Control.  Change in Control means, with respect to a Participating Employer that is organized as a corporation, any of the following events: (i) a change in the ownership of the Participating Employer, (ii) a change in the effective control of the Participating Employer, or (iii) a change in the ownership of a substantial portion of the assets of the Participating Employer.

 

For purposes of this Section, a “change in the ownership” of the Participating Employer occurs on the date on which any one person, or more than one person acting as a group, acquires ownership of stock of the Participating Employer that, together with stock held by such person or group constitutes more than 50% of the total fair market value or total voting power of the stock of the Participating Employer.  A “change in the effective control” of the

 

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Participating Employer occurs on the date on which either: (i) a person, or more than one person acting as a group, acquires ownership of stock of the Participating Employer possessing 30% or more of the total voting power of the stock of the Participating Employer, taking into account all such stock acquired during the 12-month period ending on the date of the most recent acquisition, or (ii) a majority of the members of the Participating Employer’s Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of such Board of Directors prior to the date of the appointment or election, but only if no other corporation is a majority shareholder of the Participating Employer. A “change in the ownership of a substantial portion of assets” occurs on the date on which any one person, or more than one person acting as a group, other than a person or group of persons that is related to the Participating Employer, acquires assets from the Participating Employer that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Participating Employer immediately prior to such acquisition or acquisitions, taking into account all such assets acquired during the 12-month period ending on the date of the most recent acquisition.

 

An event constitutes a Change in Control with respect to a Participant only if the Participant performs services for the Participating Employer that has experienced the Change in Control, or the Participant’s relationship to the affected Participating Employer otherwise satisfies the requirements of Treasury Regulation Section 1.409A-3(i)(5)(ii).

 

Notwithstanding anything to the contrary herein, with respect to a Participating Employer that is a partnership, Change in Control means only a change in the ownership of the partnership or a change in the ownership of a substantial portion of the assets of the partnership, and the provisions set forth above respecting such changes relative to a corporation shall be applied by analogy.

 

The determination as to the occurrence of a Change in Control shall be based on objective facts and in accordance with the requirements of Code Section 409A.

 

2.9                               Claimant.  Claimant means a Participant or Beneficiary filing a claim under Article XII of this Plan.

 

2.10                        Code.  Code means the Internal Revenue Code of 1986, as amended from time to time and the regulations and guidance promulgated thereunder.

 

2.11                        Code Section 409A. Code Section 409A means section 409A of the Code.

 

2.12                        Committee.  Committee means the committee appointed by the Board of Directors of the Company (or the appropriate committee of such board) to administer the Plan.  If no designation is made, the Chief Executive Officer of the Company or his delegate shall have and exercise the powers of the Committee.

 

2.13                        Company.  Company means KLX Inc.

 

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2.14                        Company Contribution.  Company Contribution generally means a credit by a Participating Employer to a Participant’s Retirement Account(s) in accordance with the provisions of Article V of the Plan.  Company Contributions are credited at the sole discretion of the Participating Employer and the fact that a Company Contribution is credited in one year shall not obligate the Participating Employer to continue to make such Company Contribution in subsequent years.  Unless the context clearly indicates otherwise, a reference to Company Contribution shall include Earnings attributable to such contribution.

 

2.15                        Company Contribution Retirement Account.  Company Contribution Retirement Account means an Account which may be established by the Committee to record amounts of specified Company Contributions that are separately tracked and payable to a Participant upon Separation from Service in a separate form of payment elected by the Participant for the Company Contribution Retirement Account.  A separate Company Contribution Retirement Account may be established for each year’s specified Company Contributions, provided that any Company Contribution Retirement Accounts with identical Payment Schedules may be combined.

 

2.16                        Compensation.  Compensation means that portion of a Participant’s base salary, bonus, commission, and such other compensation (if any) approved by the Committee from time to time as Compensation that may be deferred under this Plan.  Compensation shall not include any compensation that has been previously deferred under this Plan or any other arrangement subject to Code Section 409A.  Compensation approved for Deferral may be reduced by the Committee as necessary so that it does not exceed 100% of the Compensation of the Participant remaining after deduction of all required income and employment taxes, employee benefit deductions, and other deductions required by law.

 

2.17                        Compensation Deferral Agreement.  Compensation Deferral Agreement means an agreement between a Participant and a Participating Employer that specifies: (i) the amount of each component of Compensation that the Participant has elected to defer to the Plan in accordance with the provisions of Article IV, and (ii) the Payment Schedule applicable to one or more Accounts.  The Committee may permit different deferral amounts for each component of Compensation and may establish a minimum or maximum deferral amount for each such component.  Unless otherwise specified by the Committee in the Compensation Deferral Agreement, Participants may defer up to 75% of their base salary and up to 100% of other types of Compensation for a Plan Year.  A Compensation Deferral Agreement may also specify the investment allocation described in Section 8.4.

 

2.18                        Death Benefit.  Death Benefit means the benefit payable under the Plan to a Participant’s Beneficiary(ies) upon the Participant’s death as provided in Section 6.1 of the Plan.

 

2.19                        Deferral. Deferral means a credit to a Participant’s Account(s) that records that portion of the Participant’s Compensation that the Participant has voluntarily elected to defer to the Plan in accordance with the provisions of Article IV.  Unless the context of the Plan clearly indicates otherwise, a reference to Deferrals includes the amount of Deferrals credited to an Account and any Earnings attributable to such Deferrals.

 

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Deferrals shall be calculated with respect to the gross Compensation payable to the Participant prior to any deductions or withholdings except as provided in Plan Section 2.14. Changes to payroll withholdings that affect the amount of Compensation being deferred to the Plan shall be allowed only to the extent permissible under Code Section 409A.

 

2.20                        Disability.  Disability means that the Participant, because of physical or mental disability or incapacity, is unable to perform the Participant’s employment duties for an aggregate of 180 working days during any 12-month period.  All disputes arising under this Plan regarding the Participant’s disability or incapacity shall be determined by a reputable physician, selected by the Company at the time such dispute arises, whose decision shall be conclusively binding.

 

2.21                        Earnings. Earnings mean a positive or negative adjustment to the value of an Account, based upon the allocation of the Account by the Participant among deemed investment options in accordance with Article VIII.

 

2.22                        Effective Date.  Effective Date means December 1, 2014.

 

2.23                        Eligible Employee. Eligible Employee means a member of a “select group of management or highly compensated employees” of a Participating Employer within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, as determined by the Committee from time to time.

 

2.24                        Employee. Employee means a common-law employee of an Employer.

 

2.25                        Employer.  Employer means, with respect to Employees it employs, the Company and each Affiliate.

 

2.26                        ERISA. ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time.

 

2.27                        Fiscal Year Compensation. Fiscal Year Compensation means Compensation earned during one or more consecutive fiscal years of a Participating Employer, all of which is paid after the last day of such fiscal year or years.

 

2.28                        Incumbent Board. Incumbent Board means the Board of Directors of the Company as constituted immediately prior to the consummation of a Change in Control.

 

2.29                        Participant. Participant means an Eligible Employee who (i) has made a valid Deferral election that has been accepted by the Committee, (ii) has received a Company Contribution pursuant to Article V and (iii) any other person with an Account Balance greater than zero, regardless of whether such individual continues to be an Eligible Employee.  A Participant’s continued participation in the Plan shall be governed by Section 3.2 of the Plan.

 

2.30                        Participating Employer.  Participating Employer means the Company and each Adopting Employer.

 

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2.31                        Payment Schedule.  Payment Schedule means the date as of which payment of an Account under the Plan will commence and the form in which payment of such Account will be made.

 

2.32                        Performance-Based Compensation.  Performance-Based Compensation means Compensation where the amount of, or entitlement to, the Compensation is contingent on the satisfaction of pre-established organizational or individual performance criteria relating to a performance period of at least 12 consecutive months.  Organizational or individual performance criteria are considered pre-established if established in writing by not later than 90 days after the commencement of the period of service to which the criteria relate, provided that the outcome is substantially uncertain at the time the criteria are established.  The determination of whether Compensation qualifies as “Performance Based Compensation” will be made in accordance with Treasury Regulation Section l.409A-1(e) and subsequent guidance.

 

2.33                        Plan.  Generally, the term Plan means the “KLX Inc. 2014 Deferred Compensation Plan” as documented herein and as may be amended from time to time hereafter. However, to the extent permitted or required under Code Section 409A, the term Plan may in the appropriate context also mean a portion of the Plan that is treated as a single plan under Treasury Regulation Section l.409A-1(c), or the Plan or portion of the Plan and any other nonqualified deferred compensation plan or portion thereof that is treated as a single plan under such section.

 

2.34                        Plan Year.  Plan Year means January 1 through December 31.

 

2.35                        Retirement. Retirement means a Participant’s Separation from Service after attainment of age 62 or completion of 10 years of service (or deemed service, as determined by the Committee). For purposes of this Plan, a “year of service” shall be any 12 month period of employment with the Company or an affiliate.

 

2.36                        Retirement Benefit.  Retirement Benefit means the benefits payable to a Participant from his or her Retirement Accounts under the Plan following the Retirement of the Participant.

 

2.37                        Retirement Account.  Retirement Account means an Account established by the Committee to record elective Deferrals and Earnings thereon payable to a Participant upon Separation from Service.  A separate Retirement Account may be established for each year’s Deferrals, provided that any Retirement Accounts with identical Payment Schedules may be combined.  Unless the Participant specifically allocates Deferrals to a Specified Date Account, all elective Deferrals and Company Contributions other than specified Company Contributions separately allocated to a Company Contribution Retirement Account shall be allocated to a Retirement Account on behalf of the Participant.

 

2.38                        Separation from Service. Separation from Service means an Employee’s termination of employment with the Employer. Whether a Separation from Service has occurred shall be determined by the Committee in accordance with Code Section 409A.

 

Except in the case of an Employee on a bona fide leave of absence as provided below, an Employee is deemed to have incurred a Separation from Service if the Employer and the Employee reasonably anticipate that the level of services to be performed by the Employee

 

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after a date certain would be reduced to 20% or less of the average services rendered by the Employee during the immediately preceding 36-month period (or the total period of employment, if less than 36 months), disregarding periods during which the Employee was on a bona fide leave of absence.

 

An Employee who is absent from work due to military leave, sick leave, or other bona fide leave of absence shall incur a Separation from Service on the first date immediately following the later of: (i) the six month anniversary of the commencement of the leave, or (ii) the expiration of the Employee’s right, if any, to reemployment under statute or contract.  Notwithstanding the preceding, however, an Employee who is absent from work due to a physical or mental impairment that is expected to result in death or last for a continuous period of at least six months and that prevents the Employee from performing the duties of his or her position of employment or a similar position shall incur a Separation from Service on the first date immediately following the 29-month anniversary of the commencement of the leave

 

For purposes of determining whether a Separation from Service has occurred, the Employer means the Employer as defined in Section 2.25 of the Plan, except that in applying Code sections 1563(a)(l ), (2) and (3) for purposes of determining whether another organization is an Affiliate of the Company under Code Section 414(b), and in applying Treasury Regulation Section 1.414(c)-2 for purposes of determining whether another organization is an Affiliate of the Company under Code Section 414(c), “at least 50 percent” shall be used instead of “at least 80 percent” each place it appears in those sections.

 

The Committee specifically reserves the right to determine whether a sale or other disposition of substantial assets to an unrelated party constitutes a Separation from Service with respect to a Participant providing services to the seller immediately prior to the transaction and providing services to the buyer after the transaction.  Such determination shall be made in accordance with the requirements of Code Section 409A.

 

2.39                        Specified Date Account.  Specified Date Account means an Account established by the Committee to record the amounts of each year’s elective Deferrals and, if applicable, specified Company Contributions that are payable at a future date as specified in the Participant’s Compensation Deferral Agreement.  A Specified Date Account may be identified in enrollment materials as an “In-Service Account” or such other name as established by the Committee without affecting the meaning thereof.

 

2.40                        Specified Date Benefit.  Specified Date Benefit means the benefits payable to a Participant under the Plan in accordance with Section 6.1(c).

 

2.41                        Specified Employee.  Specified Employee means an Employee who, as of the date of his or her Separation from Service, is a “key employee” of the Company or any Affiliate, any stock of which is actively traded on an established securities market or otherwise. An Employee is a key employee if he or she meets the requirements of Code Section 416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with applicable regulations thereunder and without regard to Code Section 416(i)(5)) at any time during the 12-month period ending on the Specified Employee Identification Date.  Such Employee shall be treated as a key employee for the

 

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entire 12-month period beginning on the Specified Employee Effective Date.

 

For purposes of determining whether an Employee is a Specified Employee, the compensation of the Employee shall be determined in accordance with the definition of compensation provided under Treasury Regulation Section l.415(c)-2(d)(3) (wages within the meaning of Code section 3401(a) for purposes of income tax withholding at the source, plus amounts excludible from gross income under section 125(a), 132(f)(4), 402(e)(3), 402(h)(1)(B), 402(k) or 457(b), without regard to rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed); provided, however, that, with respect to a nonresident alien who is not a Participant in the Plan, compensation shall not include compensation that is not includible in the gross income of the Employee under Code Sections 872, 893, 894, 911, 931 and 933, provided such compensation is not effectively connected with the conduct of a trade or business within the United States.

 

Notwithstanding anything in this paragraph to the contrary: (i) if a different definition of compensation has been designated by the Company with respect to another nonqualified deferred compensation plan in which a key employee participates, the definition of compensation shall be the definition provided in Treasury Regulation Section 1.409A- 1(i)(2), and (ii) the Company may through action that is legally binding with respect to all nonqualified deferred compensation plans maintained by the Company, elect to use a different definition of compensation.

 

In the event of corporate transactions described in Treasury Regulation Section 1.409A1 (i)6), the identification of Specified Employees shall be determined in accordance with the default rules described therein, unless the Employer elects to utilize the available alternative methodology through designations made within the timeframes specified therein.

 

2.42                        Specified Employee Identification Date.  Specified Employee Identification Date means December 31, unless the Employer has elected a different date through action that islegally binding with respect to all nonqualified deferred compensation plans maintained by the Employer.

 

2.43                        Specified Employee Effective Date.  Specified Employee Effective Date means the first day of the fourth month following the Specified Employee Identification Date, or such earlier date as is selected by the Committee.

 

2.44                        Substantial Risk of Forfeiture.  Substantial Risk of Forfeiture means the description specified in Treasury Regulation Section 1.409A-1(d).

 

2.45                        Termination Benefit.  Termination Benefit means the benefit payable to a Participant under the Plan following the Participant’s Separation from Service prior to Retirement.

 

2.46                        Unforeseeable Emergency.  Unforeseeable Emergency means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, the Participant’s dependent (as defined in Code section 152, without regard to section 152(b)(l ), (b)(2) and (d)(l )(B)), or a Beneficiary; loss of the Participant’s property due to

 

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casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance, for example, as a result of a natural disaster); or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.  The types of events which may qualify as an Unforeseeable Emergency may be limited by the Committee.

 

2.47                        Valuation Date.  Valuation Date means each Business Day.

 

ARTICLE III
   Eligibility and Participation

 

3.1                               Eligibility and Participation.  An Employee becomes an Eligible Employee upon meeting the criteria for eligibility established by the Committee from time to time and receiving written notification of eligibility from the Committee.  An Eligible Employee becomes a Participant upon the earlier to occur of: (i) a credit of Company Contributions under Article V, or (ii) the acceptance by the Committee of a Deferral election made by the Eligible Employee on a timely basis in accordance with Article IV.

 

3.2                               Duration.  A Participant shall be eligible to defer Compensation and receive allocations of Company Contributions, subject to the terms of the Plan, for as long as such Participant remains an Eligible Employee.  A Participant who is no longer an Eligible Employee but has not incurred a Separation from Service may not defer Compensation under the Plan beyond the Plan Year in which he or she became ineligible but may otherwise exercise all of the rights of a Participant under the Plan with respect to his or her Account(s).  On and after a Separation from Service, a Participant shall remain a Participant as long as his or her Account Balance is greater than zero (0), and during such time may continue to make allocation elections as provided in Section 8.4. An individual shall cease being a Participant in the Plan when all benefits under the Plan to which he or she is entitled have been paid.

 

ARTICLE IV
   Deferrals

 

4.1                               Initial Deferral Elections, Generally.

 

(a)                                Amount, Time and Form of Payment. A Participant may make elective Deferrals of Compensation by submitting a Compensation Deferral Agreement during the enrollment periods established by the Committee and in the manner specified by the Committee, but in any event, in accordance with Section 4.2.  A Compensation Deferral Agreement that is not timely filed with respect to a service period or component of Compensation shall be considered void and shall have no effect with respect to such service period or Compensation.

 

The Participant shall specify on his or her Compensation Deferral Agreement for each Plan Year the amount of elective Deferrals for that Plan Year and whether a

 

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portion, or all, of such Deferrals will be paid at Retirement or earlier Separation from Service or on a specified date or dates.  If a Deferral amount is identified but no designation regarding time of payment is made, all Deferrals for the Plan Year shall be paid upon Retirement or earlier Separation from Service.  A Participant may also specify in his or her Compensation Deferral Agreement the Payment Schedules for amounts deferred to Retirement or to one or more specified dates. If the Payment Schedule is not specified in a Compensation Deferral Agreement, the Payment Schedule shall be a single lump sum.

 

(b)                                Modification Prior to Filing Deadline. A Compensation Deferral Agreement may be revoked or modified by the Plan Administrator or by the Participant.  Such modification or revocation must be made in writing by the deadline specified by the Plan Administrator, but in no event later than the latest date available for a specified form of compensation as set forth in Sections 4.2(a)-(g), below.

 

4.2                               Timing Requirements for Compensation Deferral Agreements.

 

(a)                                First Year of Eligibility.  In the case of the first year in which an Eligible Employee becomes eligible to participate in the Plan, he or she has up to 30 days following his or her initial eligibility to submit a Compensation Deferral Agreement with respect to Compensation to be earned during such year.  The Compensation Deferral Agreement described in this paragraph becomes irrevocable upon the end of such 30-day period.  The determination of whether an Eligible Employee may file a Compensation Deferral Agreement under this paragraph shall be determined in accordance with the rules of Code Section 409A, including the provisions of Treasury Regulation Section 1.409A-2(a)(7).

 

A Compensation Deferral Agreement filed under this paragraph applies to Compensation earned on and after the date the Compensation Deferral Agreement becomes irrevocable.

 

(b)                                 Prior Year Election.  Except as otherwise provided in this Section 4.2, Participants may defer Compensation by filing a Compensation Deferral Agreement no later than December 31 of the year prior to the year in which the Compensation to be deferred is earned.  A Compensation Deferral Agreement described in this paragraph shall become irrevocable with respect to such Compensation as of January I of the year in which such Compensation is earned.

 

(c)                                 Performance-Based Compensation.  Participants may file a Compensation Deferral Agreement with respect to Performance-Based Compensation no later than the date that is six months before the end of the performance period, provided that:

 

(i)                                    the Participant performs services continuously from the later of the beginning of the performance period or the date the criteria are established through the date the Compensation Deferral Agreement is submitted; and

 

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(ii)         The Compensation is not readily ascertainable as of the date the Compensation Deferral Agreement is filed.

 

A Compensation Deferral Agreement becomes irrevocable with respect to Performance-Based Compensation as of the day immediately following the latest date for filing such election.  Any election to defer Performance-Based Compensation that is made in accordance with this paragraph and that becomes payable as a result of the Participant’s death or upon a Change in Control (as defined in Treasury Regulation Section l.409A-3(i)(5)) prior to the satisfaction of the performance criteria, will be void.

 

(d)                                Sales Commissions.  Sales commissions (as defined in Treasury Regulation Section 1.409A-2(a)(12)(i)) are considered to be earned by the Participant in the taxable year of the Participant in which the sale occurs.  The Compensation Deferral Agreement must be filed before the last day of the year preceding the year in which the sales commissions are earned, and becomes irrevocable after that date.

 

(e)                                  Fiscal Year Compensation.  A Participant may defer Fiscal Year Compensation by filing a Compensation Deferral Agreement no later than the last day of the fiscal year prior to the fiscal year or years in which such Fiscal Year Compensation is earned.  The Compensation Deferral Agreement described in this paragraph becomes irrevocable on the first day of the fiscal year or years to which it applies.

 

(f)                                   Short-Term Deferrals.  Compensation that meets the definition of a “short-term deferral” described in Treasury Regulation Section l.409A- l(b)(4) may be deferred in accordance with the rules of Article VII, applied as if the date the Substantial Risk of Forfeiture lapses is the date payments were originally scheduled to commence, provided, however, that the provisions of Section 7.3 shall not apply to payments attributable to a Change in Control (as defined in Treasury Regulation Section 1.409A-3(i)(5)).

 

(g)                                  Certain Forfeitable Rights. With respect to a legally binding right to a payment in a subsequent year that is subject to a forfeiture condition requiring the Participant’s continued services for a period of at least 12 months from the date the Participant obtains the legally binding right, an election to defer such Compensation may be made on or before the 30th day after the Participant obtains the legally binding right to the Compensation, provided that the election is made at least 12 months in advance of the earliest date at which the forfeiture condition could lapse. The Compensation Deferral Agreement described in this paragraph becomes irrevocable after such 30th day. If the forfeiture condition applicable to the payment lapses before the end of the required service period as a result of the Participant’s death or disability (as defined in Treasury Regulation Section 1.409A-3(i)(4)) or upon a Change in Control (as defined in Treasury Regulation Section l.409A-3(i)(5)), the Compensation Deferral Agreement will be void unless it would be considered timely under another rule described in this Section.

 

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4.3                               Allocation of Deferrals; Minimum Deferral Period.  A Compensation Deferral Agreement may designate a portion of each year’s Deferrals for payment on one or more Specified Dates or upon Retirement or earlier Separation from Service.  The Committee may establish a minimum Deferral period for the establishment of a Specified Date Account (for example, the third Plan Year following the year Compensation is earned.) and may waive the minimum Deferral period for Specified Date Accounts already in existence at the time of the allocation of a Deferral amount to such Specified Date Account.

 

4.4                              Deductions from Pay. The Committee has the authority to determine the payroll practices under which any component of Compensation subject to a Compensation Deferral Agreement will be deducted from a Participant’s Compensation.

 

4.5                              Vesting.  Participant Deferrals shall be 100% vested at all times to the extent the Compensation being deferred is vested pursuant to the terms of any agreement, plan or arrangement pursuant to which the Compensation was granted to the Participant.

 

4.6                              Cancellation of Deferrals.  The Committee may cancel a Participant’s Deferrals: (i) for the balance of the Plan Year in which an Unforeseeable Emergency occurs, (ii) if the Participant receives a hardship distribution under the Employer’s qualified 401(k) plan, through the end of the Plan Year in which the six month anniversary of the hardship distribution falls, and (iii) during periods in which the Participant is unable to perform the duties of his or her position or any substantially similar position due to a mental or physical impairment that can be expected to result in death or last for a continuous period of at least six months, provided cancellation occurs by the later of the end of the taxable year of the Participant or the 15th day of the third month following the date the Participant incurs the disability (as defined in this paragraph).

 

ARTICLE V
   Company Contributions

 

5.1                               Discretionary Company Contributions.  The Participating Employer may, from time to time in its sole and absolute discretion, credit Company Contributions to any Participant in any amount determined by the Participating Employer.  Such contributions will be allocated to a Retirement Account or Specified Date Account as determined by the Employer and be payable according to the Payment Schedule applicable to such Account. Deferrals of Compensation in the form of restricted stock awards deferred as restricted stock units shall not be eligible for Company Contributions.

 

5.2                               Vesting.  Company Contributions described in Section 5.1 above, and the Earnings thereon, shall vest in accordance with the vesting schedule(s) established by the Committee at the time that the Company Contribution is made.  Unless otherwise specified by the Committee, Company Contributions will vest in equal installments on January 15th of each of the three (3) years succeeding the year in which the contribution is made.  In addition, unless otherwise specified by the Committee at the time the Company Contribution is made, a Participant will fully vest in all Company

 

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Contributions upon (i) meeting the requirements of a Retirement, (ii) a Separation from Service by the Company without Cause, (iii) the Participant’s death, (iv) a Change in Control and (v) meeting the requirements of a Disability.  The Participating Employer may, at any time, in its sole discretion, increase a Participant’s vested interest in a Company Contribution (for example, upon death, disability or a Change in Control). The portion of a Participant’s Accounts that remains unvested upon his or her Separation from Service after the application of the terms of this Section 5.2 shall be forfeited.

 

ARTICLE VI
   Benefits

 

6.1                               Benefits, Generally.  A Participant shall be entitled to the following benefits under the Plan:

 

(a)                                Retirement Benefit. Upon the Participant’s Separation from Service due to Retirement, he or she shall be entitled to a Retirement Benefit. The Retirement Benefit shall be equal to the sum of all his or her Retirement Account Balances. The Retirement Benefit shall be based on the value of the Retirement Account Balance(s) as of last day of the sixth month following the Participant’s Separation from Service and is payable on the first day of the seventh month following the month in which the Separation from Service occurs.

 

(b)                               Termination Benefit. Upon the Participant’s Separation from Service for reasons other than death or Retirement, he or she shall be entitled to a Termination Benefit.  The Termination Benefit shall be equal to the sum of his or her Retirement Account Balances.  The Termination Benefit shall be based on the value of the Retirement Account Balance(s) as of last day of the sixth month following the Participant’s Separation from Service and is payable on the first day of the seventh month following the month in which the Separation from Service occurs.

 

(c)                                 Specified Date Benefit. If the Participant has established one or more Specified Date Accounts, he or she shall be entitled to a Specified Date Benefit with respect to each such Specified Date Account. The Specified Date Benefit shall be equal to the Specified Date Account Balance, based on the value of that Account Balance as of the end of the month designated by the Participant at the time the Account was established. Except in the case of an earlier Separation from Service, the Specified Date Benefit will be payable on the first day of the month following the month designated by the Participant. In the event that the Participant incurs a Separation from Service, the remaining balances of any Specified Date Accounts, determined as of the last day of the sixth month following the Participant’s Separation from Service, will be paid on the first day of the seventh month following the month in which the Separation from Service occurs.

 

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(d)                                Death Benefit.  In the event of the Participant’s death, his or her designated Beneficiary(ies) shall be entitled to a Death Benefit.  The Death Benefit shall be equal to the vested portion of the Participant’s total Account Balance.  The Death Benefit shall be based on the value of the Participant’s Accounts as of the end of the month in which death occurred and paid on the first day of the following month in a single lump sum.

 

(e)                                 Unforeseeable Emergency Payments.  A Participant who experiences an Unforeseeable Emergency may submit a written request to the Committee to receive payment of all or any portion of his or her vested Accounts.  Whether a Participant or Beneficiary is faced with an Unforeseeable Emergency permitting an emergency payment shall be determined by the Committee based on the relevant facts and circumstances of each case, but, in any case, a distribution on account of Unforeseeable Emergency may not be made to the extent that such emergency is or may be reimbursed through insurance or otherwise, by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not cause severe financial hardship, or by cessation of Deferrals under this Plan. If an emergency payment is approved by the Committee, the amount of the payment shall not exceed the amount reasonably necessary to satisfy the need, taking into account the additional compensation that is available to the Participant as the result of cancellation of deferrals to the Plan, including amounts necessary to pay any taxes or penalties that the Participant reasonably anticipates will result from the payment.  The amount of the emergency payment shall be subtracted first from the vested portion of the Participant’s Retirement Accounts beginning with the Retirement Accounts with the longest Payment Schedule until depleted and then from the vested Specified Date Accounts, beginning with the Specified Date Account with the latest payment commencement date.  Emergency payments shall be paid in a single lump sum within the 90-day period following the date the payment is approved by the Committee.

 

6.2                               Form of Payment.

 

(a)                                Retirement Benefit.  A Participant who is entitled to receive a Retirement Benefit shall receive payment of each Retirement Account in a single lump sum, unless the Participant elects, pursuant to Section 4.2 or Article VII, to have such Retirement Account paid in one of the following alternative forms of payment (i) annual installments over a period of two to fifteen years, or (ii) a lump sum payment of a percentage of the Account Balance in the Retirement Account, with the balance paid in substantially equal annual installments over a period of two to fifteen years.

 

(b)                                Termination Benefit. A Participant who is entitled to receive a Termination Benefit shall receive payment of the vested portion of his or her Retirement Accounts in a single lump sum.

 

(c)                                 Specified Date Benefit.  A Specified Date Benefit shall be paid in a single lump sum, unless the Participant elects, pursuant to Section 4.2 or Article VII, to have the Specified Date Account paid in annual installments over a period of two to five years.  Regardless of any prior elections, upon a Separation from Service all

 

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Specified Date Account Balances shall be paid in a single lump sum pursuant to the valuation and payment rules provided in Section 6.1(c).

 

(d)                                Death Benefit.  A designated Beneficiary who is entitled to receive a Death Benefit shall receive payment of such benefit in a single lump sum.

 

(e)                                 Change in Control.  Notwithstanding any other provision of the Plan, if a Separation from Service occurs within 24 months following a Change in Control (and regardless of whether a Participant qualifies for Retirement) a Participant will receive his or her unpaid vested Account Balances in a single lump sum pursuant to the valuation and payment rules provided in Sections 6.1(b) and (c), as applicable.

 

(f)                                  Small Account Balances.  The Committee shall pay the value of the Participant’s Retirement Accounts in a single lump sum if the balance of such Accounts as of the valuation dates for payment of the Retirement Benefit is not greater than twenty-five thousand dollars ($25,000).

 

(g)                                 Rules Applicable to Installment Payments.  If a Payment Schedule specifies installment payments, annual payments will be made beginning as of the payment commencement date for such installments (e.g., the first day of the seventh month following the month in which the Separation from Service occurs) and shall continue on each anniversary thereof until the number of installment payments specified in the Payment Schedule has been paid.  The amount of each installment payment shall be determined by dividing (a) by (b), where (a) equals the Account Balance as of the Valuation Date and (b) equals the remaining number of installment payments.  For purposes of Article VII, each series of installment payments will be treated as a single payment.

 

6.3                               Acceleration of or Delay in Payments.  The Committee may elect to accelerate the time or form of payment of a benefit owed to the Participant hereunder, provided such acceleration is permitted under Treasury Regulation Section 1.409A-3(j)(4).  The Committee may also delay the time for payment of a benefit owed to the Participant hereunder, to the extent permitted under Treasury Regulation Section 1.409A-2(b)(7).  If the Plan receives a domestic relations order (within the meaning of Code Section 414(p)(1)(B)) directing that all or a portion of a Participant’s Accounts be paid to an “alternate payee”, any amounts to be paid to the alternate payee(s) shall be paid in a single lump sum.

 

ARTICLE VII
   Modifications to Payment Schedules

 

7.1                               Participant’s Right to Modify.  A Participant may modify a Retirement or Specified Date Payment Schedule with respect to an Account, consistent with the permissible Payment Schedules available under the Plan, provided such modification complies with the requirements of this Article VII.

 

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7.2                               Time of Election. The date on which a modification election is submitted to the Committee must be at least 12 months prior to the date on which payment is scheduled to commence under the Payment Schedule in effect prior to the modification.

 

7.3                               Date of Payment under Modified Payment Schedule.  In no event may the date payments are to commence under the modified Payment Schedule be no earlier than five years after the date payment would have commenced under the original Payment Schedule.  Under no circumstances may a modification election result in an acceleration of payments in violation of Code Section 409A.

 

7.4                               Effective Date.  A modification election submitted in accordance with this Article VII is revocable up to the latest time a valid election may be filed under Section 7.2 and becomes effective 12 months after such date.

 

7.5                               Effect on Accounts.  An election to modify a Payment Schedule is specific to the Account or payment event to which it applies, and shall not be construed to affect the Payment Schedules of any other Accounts.

 

ARTICLE VIII
   Valuation of Account Balances; Investments

 

8.1                               Valuation.  Deferrals shall be credited to appropriate Accounts on the date such Compensation would have been paid to the Participant absent the Compensation Deferral Agreement.  Company Contributions shall be credited to the Retirement Account at the times determined by the Committee.  Valuation of Accounts shall be performed under procedures approved by the Committee.

 

8.2                               Adjustment for Earnings.  Each Account will be adjusted to reflect Earnings on each Business Day.  Adjustments shall reflect the net earnings, gains, losses, expenses, appreciation and depreciation associated with an investment option for each portion of the Account allocated to such option (“investment allocation”).

 

8.3                               Investment Options.  Investment options will be determined by the Committee.  The Committee shall be permitted to add or remove investment options from the Plan menu from time to time, provided that any such additions or removals of investment options shall not be effective with respect to any period prior to the effective date of such change.

 

8.4                               Investment Allocations.  A Participant’s investment allocation constitutes a deemed, not actual, investment among the investment options comprising the investment menu.  At no time shall a Participant have any real or beneficial ownership in any investment option included in the investment menu, nor shall the Participating Employer or any trustee acting on its behalf have any obligation to purchase actual securities as a result of a Participant’s investment allocation.  A Participant’s investment allocation shall be used solely for purposes of adjusting the value of a Participant’s Account Balances.

 

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A Participant shall specify an investment allocation for each of his or her Accounts in accordance with procedures established by the Committee.  Allocation among the investment options must be designated in increments of 1%.  The Participant’s investment allocation will become effective on the same Business Day or, in the case of investment allocations received after a time specified by the Committee, the next Business Day.

 

A Participant may change an investment allocation on any Business Day, both with respect to future credits to the Plan and with respect to existing Account Balances, in accordance with procedures adopted by the Committee.  Changes shall become effective on the same Business Day or, in the case of investment allocations received after a time specified by the Committee, the next Business Day, and shall be applied prospectively.

 

Notwithstanding anything in this Section 8.4 to the contrary, a Participant may not change his or her investment allocation with respect to restricted stock units deferred under the Plan until six months following the date such restricted stock units vest.

 

8.5                               Unallocated Deferrals and Accounts.  If the Participant fails to make an investment allocation with respect to an Account, such Account shall be invested in an investment option, the primary objective of which is the preservation of capital, as determined by the Committee.

 

ARTICLE IX
   Administration

 

9.1                               Plan Administration.  This Plan shall be administered by the Committee which shall have discretionary authority to make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Plan and to utilize its discretion to decide or resolve any and all questions, including but not limited to eligibility for benefits and interpretations of this Plan and its terms, as may arise in connection with the Plan. Claims for benefits shall be filed with the Committee and resolved in accordance with the claims procedures in Article XII.  All determinations by the Committee shall be made in good faith and in its sole discretion.

 

9.2                               Administration upon Change in Control.  Upon a Change in Control, the Committee, as constituted immediately prior to such Change in Control, shall continue to act as the Committee unless, prior to the Change in Control, the Incumbent Board appoints (in its sole discretion) an independent third party to act as the Committee.

 

Unless otherwise determined by the Incumbent Board in its sole discretion prior to the Change in Control, following such Change in Control, the Company may not remove the Committee, unless 2/3rds of the members of the Board of Directors of the Company and a majority of Participants and Beneficiaries with Account Balances consent to the removal and replacement of the Committee.

 

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The Participating Employer shall, with respect to the Committee identified under this Section: (i) pay all reasonable expenses and fees of the Committee, (ii) indemnify the Committee (including individuals serving as Committee members) against any costs, expenses and liabilities including, without limitation, attorneys’ fees and expenses arising in connection with the performance of the Committee’s duties hereunder, except with respect to matters resulting from the Committee’s gross negligence or willful misconduct, and (iii) supply full and timely information to the Committee on all matters related to the Plan, any rabbi trust, Participants, Beneficiaries and Accounts as the Committee may reasonably require.

 

9.3                               Withholding.  The Participating Employer shall have the right to withhold from any payment due under the Plan (or with respect to any amounts credited to the Plan) any taxes and other amounts required by law to be withheld in respect of such payment (or credit).  Withholdings with respect to amounts credited to the Plan shall be deducted from Compensation that has not been deferred to the Plan.

 

9.4                               Indemnification.  The Participating Employers shall indemnify and hold harmless each employee, officer, director, agent or organization, to whom or to which are delegated duties, responsibilities, and authority under the Plan or otherwise with respect to administration of the Plan, including, without limitation, the Committee and its agents, against all claims, liabilities, fines and penalties, and all expenses reasonably incurred by or imposed upon him or her or it (including but not limited to reasonable attorneys’ fees) which arise as a result of his or her or its actions or failure to act in connection with the operation and administration of the Plan to the extent lawfully allowable and to the extent that such claim, liability, fine, penalty, or expense is not paid for by liability insurance purchased or paid for by the Participating Employer. Notwithstanding the foregoing, the Participating Employer shall not indemnify any person or organization if his or her or its actions or failure to act are due to gross negligence or willful misconduct or for any such amount incurred through any settlement or compromise of any action unless the Participating Employer consents in writing to such settlement or compromise.

 

9.5                               Delegation of Authority.  In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit, and may from time to time consult with legal counsel who shall be legal counsel to the Company.

 

9.6                               Binding Decisions or Actions.  The decision or action of the Committee in respect of any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations thereunder shall be final and conclusive and binding upon all persons having any interest in the Plan.

 

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ARTICLE X
   Amendment and Termination

 

10.1                       Amendment and Termination.  The Company may at any time and from time to time amend the Plan or may terminate the Plan as provided in this Article X.  Each Participating Employer may also terminate its participation in the Plan.

 

10.2                       Amendments.  The Company, by action taken by its Board of Directors, may amend or suspend the Plan at any time and for any reason, provided that any such amendment shall not reduce the vested Account Balances of any Participant accrued as of the date of any such amendment or restatement (as if the Participant had incurred a voluntary Separation from Service on such date) or reduce any rights of a Participant under the Plan or other Plan features with respect to Deferrals made prior to the date of any such amendment or restatement without the consent of the Participant. The Board of Directors of the Company may delegate to the Committee the authority to amend the Plan without the consent of Participants or the Board of Directors: (i)  to comply with, or take into account changes in, or interpretations or rescissions of, applicable tax laws, securities laws, employment laws, accounting rules or standards and other applicable laws, rules, regulations, guidance, ruling, judicial decision or legal requirement; (ii) facilitating the administration of the Plan; (iii) clarifying provisions based on the Committee’s interpretation of the document; and (iv) making such other amendments as the Board of Directors may authorize.

 

10.3                       Termination. The Company, by action taken by its Board of Directors, may terminate the Plan and pay Participants and Beneficiaries their Account Balances in a single lump sum at any time, to the extent and in accordance with Treasury Regulation.  Section 1.409A-3(j)(4)(ix).  If a Participating Employer terminates its participation in the Plan, the benefits of affected Employees shall be paid at the time provided in Article VI.

 

10.4                       Sections 409A and 457A of the Code Generally.  If any provision of the Plan or a Compensation Deferral Agreement would, in the reasonable, good faith judgment of the Committee, result or likely result in the imposition on a Participant, a Beneficiary or any other person of (i) any additional tax, accelerated taxation, interest or penalties under Code Section 409A or (ii) accelerated taxation or penalties under Section 457A of the Code, the Committee may modify the terms of the Plan, the Compensation Deferral Agreement or may take any other such action, without the consent of the Participant, Beneficiary or such other person, in the manner that the Committee may reasonably and in good faith determine to be necessary or advisable to avoid the imposition of such additional tax, accelerated taxation, interest, or penalties or otherwise comply with Sections 409A and 457A of the Code.  This Section 10.4 does not create an obligation on the part of the Company to make any modifications and does not guarantee that Account Balances will not be subject to additional taxes, accelerated taxation, interest or penalties under Sections 409A or 457A of the Code.

 

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ARTICLE XI
   Informal Funding

 

11.1                      General Assets.  Obligations established under the terms of the Plan may be satisfied from the general funds of the Participating Employers, or a trust described in this Article XL No Participant, spouse or Beneficiary shall have any right, title or interest whatever in assets of the Participating Employers.  Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Participating Employers and any Employee, spouse, or Beneficiary.  To the extent that any person acquires a right to receive payments hereunder, such rights are no greater than the right of an unsecured general creditor of the Participating Employer.

 

11.2                      Rabbi Trust.  A Participating Employer may, in its sole discretion, establish a grantor trust, commonly known as a rabbi trust, as a vehicle for accumulating assets to pay benefits under the Plan.  Payments under the Plan may be paid from the general assets of the Participating Employer or from the assets of any such rabbi trust.  Payment from any such source shall reduce the obligation owed to the Participant or Beneficiary under the Plan.

 

ARTICLE XII
   Claims

 

12.1                      Filing a Claim.  Any controversy or claim arising out of or relating to the Plan shall be filed in writing with the Committee which shall make all determinations concerning such claim.  Any claim filed with the Committee and any decision by the Committee denying such claim shall be in writing and shall be delivered to the Participant or Beneficiary filing the claim (the “Claimant”).

 

(a)                                In General. Notice of a denial of benefits will be provided within 90 days of the Committee’s receipt of the Claimant’s claim for benefits.  If the Committee determines that it needs additional time to review the claim, the Committee will provide the Claimant with a notice of the extension before the end of the initial 90-day period.  The extension will not be more than 90 days from the end of the initial 90-day period and the notice of extension will explain the special circumstances that require the extension and the date by which the Committee expects to make a decision.

 

(b)                                Contents of Notice.  If a claim for benefits is completely or partially denied, notice of such denial shall be in writing and shall set forth the reasons for denial in plain language.  The notice shall: (i) cite the pertinent provisions of the Plan document, and (ii) explain, where appropriate, how the Claimant can perfect the claim, including a description of any additional material or information necessary to complete the claim and why such material or information is necessary.  The claim denial also shall include an explanation of the claims review procedures and the time limits applicable to such procedures, including a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse decision on review.

 

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12.2                      Appeal of Denied Claims.  A Claimant whose claim has been completely or partially denied shall be entitled to appeal the claim denial by filing a written appeal with a committee designated to hear such appeals (the “Appeals Committee”).  A Claimant who timely requests a review of the denied claim (or his or her authorized representative) may review, upon request and free of charge, copies of all documents, records and other information relevant to the denial and may submit written comments, documents, records and other information relevant to the claim to the Appeals Committee.  All written comments, documents, records, and other information shall be considered “relevant” if the information: (i) was relied upon in making a benefits determination, (ii) was submitted, considered or generated in the course of making a benefits decision regardless of whether it was relied upon to make the decision, or (iii) demonstrates compliance with administrative processes and safeguards established for making benefit decisions.  The Appeals Committee may, in its sole discretion, if it deems appropriate or necessary, decide to hold a hearing with respect to the claim appeal.

 

(a)                                In General.  Appeal of a denied benefits claim must be filed in writing with the Appeals Committee no later than 60 days after receipt of the written notification of such claim denial.  The Appeals Committee shall make its decision regarding the merits of the denied claim within 60 days following receipt of the appeal (or within 120 days after such receipt, in a case where there are special circumstances requiring extension of time for reviewing the appealed claim).  If an extension of time for reviewing the appeal is required because of special circumstances, written notice of the extension shall be furnished to the Claimant prior to the commencement of the extension.  The notice will indicate the special circumstances requiring the extension of time and the date by which the Appeals Committee expects to render the determination on review.  The review will take into account comments, documents, records and other information submitted by the Claimant relating to the claim without regard to whether such information was submitted or considered in the initial benefit determination.

 

(b)                                Contents of Notice.  If a benefits claim is completely or partially denied on review, notice of such denial shall be in writing and shall set forth the reasons for denial in plain language. The decision on review shall set forth: (i) the specific reason or reasons for the denial, (ii) specific references to the pertinent Plan provisions on which the denial is based, (iii) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all documents, records, or other information relevant (as defined above) to the Claimant’s claim, and (iv) a statement describing any voluntary appeal procedures offered by the plan and a statement of the Claimant’s right to bring an action under Section 502(a) of ERISA.

 

12.3                      Claims Appeals Upon Change in Control. Upon a Change in Control, the Appeals Committee, as constituted immediately prior to such Change in Control, shall continue to act as the Appeals Committee. Upon such Change in Control, the Company may not remove any member of the Appeals Committee, but may replace resigning members if 2/3rds of the members of the Board of Directors of the Company and a majority of Participants and Beneficiaries with Account Balances consent to the replacement. The Appeals Committee shall have the exclusive authority at the appeals stage to interpret the terms of the Plan and 

 

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resolve appeals under the Claims Procedure.

 

Each Participating Employer shall, with respect to the Committee identified under this Section: (i) pay its proportionate share of all reasonable expenses and fees of the Appeals Committee, (ii) indemnify the Appeals Committee (including individual committee members) against any costs, expenses and liabilities including, without limitation, attorneys’ fees and expenses arising in connection with the performance of the Appeals Committee hereunder, except with respect to matters resulting from the Appeals Committee’s gross negligence or willful misconduct, and (iii) supply full and timely information to the Appeals Committee on all matters related to the Plan, any rabbi trust, Participants, Beneficiaries and Accounts as the Appeals Committee may reasonably require.

 

12.4                      Legal Action.  A Claimant may not bring any legal action, including commencement of any arbitration, relating to a claim for benefits under the Plan unless and until the Claimant has followed the claims procedures under the Plan and exhausted his or her administrative remedies under such claims procedures.  Any such legal action must be commenced within one year of a final determination hereunder with respect to such claim.

 

If a Participant or Beneficiary prevails in a legal proceeding brought under the Plan to enforce the rights of such Participant or any other similarly situated Participant or Beneficiary, in whole or in part, the Participating Employer shall reimburse such Participant or Beneficiary for all legal costs, expenses, attorneys’ fees and such other liabilities incurred as a result of such proceedings.  If the legal proceeding is brought in connection with a Change in Control, or a “change in control” as defined in a rabbi trust described in Section 11.2, the Participant or Beneficiary may file a claim directly with the trustee for reimbursement of such costs, expenses and fees.

 

12.5                       Discretion of Appeals Committee.  All interpretations, determinations and decisions of the Appeals Committee with respect to any claim shall be made in its sole discretion, and shall be final and conclusive.

 

12.6                      Arbitration.

 

(a)                                Prior to Change in Control.  If, prior to a Change in Control, any claim or controversy between a Participating Employer and a Participant or Beneficiary is not resolved through the claims procedure set forth in Article XII, such claim shall be submitted to and resolved exclusively by expedited binding arbitration by a single arbitrator.  Arbitration shall be conducted in accordance with the following procedures:

 

The complaining party shall promptly send written notice to the other party identifying the matter in dispute and the proposed remedy.  Following the giving of such notice, the parties shall meet and attempt in good faith to resolve the matter.  In the event the parties are unable to resolve the matter within 21 days, the parties shall meet and attempt in good faith to select a single arbitrator acceptable to both parties.  If a single arbitrator is not selected by mutual consent within ten Business Days following the giving of the written notice of dispute, an arbitrator shall be selected 

 

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from a list of nine persons each of whom shall be an attorney who is either engaged in the active practice of law or recognized arbitrator and who, in either event, is experienced in serving as an arbitrator in disputes between employers and employees, which list shall be provided by the main office of either JAMS, the American Arbitration Association (“AAA”) or the Federal Mediation and Conciliation Service. If, within three Business Days of the parties’ receipt of such list, the parties are unable to agree on an arbitrator from the list, then the parties shall each strike names alternatively from the list, with the first to strike being determined by the flip of a coin.  After each party has had four strikes, the remaining name on the list shall be the arbitrator.  If such person is unable to serve for any reason, the parties shall repeat this process until an arbitrator is selected.

 

Unless the parties agree otherwise, within 60 days of the selection of the arbitrator, a hearing shall be conducted before such arbitrator at a time and a place agreed upon by the parties.  In the event the parties are unable to agree upon the time or place of the arbitration, the time and place shall be designated by the arbitrator after consultation with the parties.  Within 30 days of the conclusion of the arbitration hearing, the arbitrator shall issue an award, accompanied by a written decision explaining the basis for the arbitrator’s award.

 

In any arbitration hereunder, the Participating Employer shall pay all administrative fees of the arbitration and all fees of the arbitrator, except that the Participant or Beneficiary may, if he/she/it wishes, pay up to one-half of those amounts.  Each party shall pay its own attorneys’ fees, costs, and expenses, unless the arbitrator orders otherwise.  The prevailing party in such arbitration, as determined by the arbitrator, and in any enforcement or other court proceedings, shall be entitled, to the extent permitted by law, to reimbursement from the other party for all of the prevailing party’s costs (including but not limited to the arbitrator’s compensation), expenses, and attorneys’  fees.  The arbitrator shall have no authority to add to or to modify this Plan, shall apply all applicable law, and shall have no lesser and no greater remedial authority than would a court of law resolving the same claim or controversy.  The arbitrator shall, upon an appropriate motion, dismiss any claim without an evidentiary hearing if the party bringing the motion establishes that it would be entitled to summary judgment if the matter had been pursued in court litigation.

 

The parties shall be entitled to discovery as follows: Each party may take no more than three depositions.  The Participating Employer may depose the Participant or Beneficiary plus two other witnesses, and the Participant or Beneficiary may depose the Participating Employer, pursuant to Rule 30(b)(6) of the Federal Rules of Civil Procedure, plus two other witnesses.  Each party may make such reasonable document discovery requests as are allowed in the discretion of the arbitrator.

 

The decision of the arbitrator shall be final, binding, and non-appealable, and may be enforced as a final judgment in any court of competent jurisdiction.

 

This arbitration provision of the Plan shall extend to claims against any parent, subsidiary, or affiliate of each party, and, when acting within such capacity, any 

 

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officer, director, shareholder, Participant, Beneficiary, or agent of any party, or of any of the above, and shall apply as well to claims arising out of state and federal statutes and local ordinances as well as to claims arising under the common law or under this Plan.

 

Notwithstanding the foregoing, and unless otherwise agreed between the parties, either party may apply to a court for provisional relief, including a temporary restraining order or preliminary injunction, on the ground that the arbitration award to which the applicant may be entitled may be rendered ineffectual without provisional relief.

 

Any arbitration hereunder shall be conducted in accordance with the Federal Arbitration Act: provided, however, that, in the event of any inconsistency between the rules and procedures of the Act and the terms of this Plan, the terms of this Plan shall prevail.

 

If any of the provisions of this Section 12.6(a) are determined to be unlawful or otherwise unenforceable, in the whole part, such determination shall not affect the validity of the remainder of this section and this section shall be reformed to the extent necessary to carry out its provisions to the greatest extent possible and to insure that the resolution of all conflicts between the parties, including those arising out of statutory claims, shall be resolved by neutral, binding arbitration. If a court should find that the provisions of this Section 12.6(a) are not absolutely binding, then the parties intend any arbitration decision and award to be fully admissible in evidence in any subsequent action, given great weight by any finder of fact and treated as determinative to the maximum extent permitted by law.

 

The parties do not agree to arbitrate any putative class action or any other representative action. The parties agree to arbitrate only the claims(s) of a single Participant or Beneficiary.

 

(b)                                Upon Change in Control.  If, upon the occurrence of a Change in Control, any dispute, controversy or claim arises between a Participant or Beneficiary and the Participating Employer out of or relating to or concerning the provisions of the Plan, such dispute, controversy or claim shall be finally settled by a court of competent jurisdiction which, notwithstanding any other provision of the Plan, shall apply a de novo standard of review to any determination made by the Company or its Board of Directors, a Participating Employer, the Committee, or the Appeals Committee.

 

ARTICLE XIII
   General Provisions

 

13.1                       Assignment.  No interest of any Participant, spouse or Beneficiary under this Plan and no benefit payable hereunder shall be assigned as security for a loan, and any such purported 

 

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assignment shall be null, void and of no effect, nor shall any such interest or any such benefit be subject in any manner, either voluntarily or involuntarily, to anticipation, sale, transfer, assignment or encumbrance by or through any Participant, spouse or Beneficiary.  Notwithstanding anything to the contrary herein, however, the Committee has the discretion to make payments to an alternate payee in accordance with the terms of a domestic relations order (as defined in Code Section 414(p)(1)(B)).

 

The Company may assign any or all of its liabilities under this Plan in connection with any restructuring, recapitalization, sale of assets or other similar transactions affecting a Participating Employer without the consent of the Participant.

 

13.2                       No Legal or Equitable Rights or Interest.  No Participant or other person shall have any legal or equitable rights or interest in this Plan that are not expressly granted in this Plan.

 

Participation in this Plan does not give any person any right to be retained in the service of the Participating Employer.  The right and power of a Participating Employer to dismiss or discharge an Employee is expressly reserved.  The Participating Employers make no representations or warranties as to the tax consequences to a Participant or a Participant’s beneficiaries resulting from a deferral of income pursuant to the Plan.

 

13.3                       No Employment Contract.  Nothing contained herein shall be construed to constitute a contract of employment between an Employee and a Participating Employer.

 

13.4                       Notice. Any notice or filing required or permitted to be delivered to the Committee under this Plan shall be delivered in writing, in person, or through such electronic means as is established by the Committee. Notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Written transmission shall be sent by certified mail to:

 

KLX INC.

ATTN: VICE PRESIDENT OF HUMAN RESOURCES

1300 CORPORATE CENTER WAY

WELLINGTON, FL 33414

 

Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing or hand-delivered, or sent by mail to the last known address of the Participant.

 

13.5                       Headings.  The headings of Sections are included solely for convenience of reference, and if there is any conflict between such headings and the text of this Plan, the text shall control.

 

13.6                       Invalid or Unenforceable Provisions.  If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof and the Committee may elect to construe such invalid or unenforceable provisions in a manner that conforms to applicable law or as if such provisions, to the extent invalid or unenforceable, had not been included.

 

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13.7                       Lost Participants or Beneficiaries.  Any Participant or Beneficiary who is entitled to a benefit from the Plan has the duty to keep the Committee advised of his or her current mailing address.  If benefit payments are returned to the Plan or are not presented for payment after a reasonable amount of time, the Committee shall presume that the payee is missing.  The Committee, after making such efforts as in its discretion it deems reasonable and appropriate to locate the payee, shall stop payment on any uncashed checks and may discontinue making future payments until contact with the payee is restored.

 

13.8                       Facility of Payment to a Minor.  If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Committee may make such distribution: (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence, or (ii) to the conservator or committee or, if none, to the person having custody of an incompetent payee.  Any such distribution shall fully discharge the Committee, the Company, and the Plan from further liability on account thereof.

 

13.9                       Governing Law.  To the extent not preempted by ERISA, the laws of the State of Florida shall govern the construction and administration of the Plan.

 

IN WITNESS WHEREOF, the undersigned executed this Plan as of the                                    day of                           , 2014, to be effective as of the Effective Date.

 

 

KLX Inc.

 

	
By:
    	
 
    	
 
    	
(Print Name)
    
	
 
    	
 
    
	
Its:
    	
 
    	
 
    	
(Title)
    
	
 
    	
 
    
	
(Signature)
    	
 
    	
 
    	
 
    
					

 

26Exhibit 10.16

 

IT SERVICES AGREEMENT

 

IT SERVICES AGREEMENT (this “Agreement”), dated as of [                      ], 2014, by and between B/E AEROSPACE, INC., a corporation organized under the laws of the State of Delaware (“B/E”), and KLX INC., a corporation organized under the laws of the State of Delaware (“KLX”).  Each of B/E and KLX is sometimes referred to herein as a “Party”, and together, as the “Parties”.

 

WHEREAS, the Parties entered into that certain Separation and Distribution Agreement, dated as of [                      ], 2014 (the “Separation Agreement”; capitalized terms used in this Agreement but not otherwise defined herein have the meanings ascribed to such terms in the Separation Agreement);

 

WHEREAS, pursuant to and subject to the terms of the Separation Agreement, the Manufacturing Business will be separated from the CMS Business;

 

WHEREAS, prior to the date of this Agreement, members of the B/E Group have provided to members of the KLX Group, certain IT services necessary to conduct their respective businesses;

 

WHEREAS, it is contemplated under the terms of the Separation Agreement that, in connection with the Separation Transaction and the Distribution, for a limited period of time following the Distribution, B/E or one or more other members of the B/E Group will continue to provide certain of such IT services to members of the KLX Group; and

 

WHEREAS, B/E is willing to provide, or cause to be provided, and KLX is willing to receive, such IT services on the terms and conditions set forth herein;

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

ARTICLE I
 DEFINITIONS

 

Section 1.1                                    Definitions.

 

(a)                                 For the purposes of this Agreement:

 

“Additional Service” means an IT service:  (1) that was provided by B/E or another member of the B/E Group (or that was provided by a third party on behalf of B/E or another member of the B/E Group) to KLX or another member of the KLX Group as of the Distribution Date; and (2) that the recipient of such service reasonably believes (y) was inadvertently or unintentionally omitted from Schedule A and (z) is necessary or advisable for the conduct of the CMS Business.

 

“Agreement” has the meaning given in the Preamble.

 

 

“B/E” has the meaning given in the Preamble.

 

“B/E Indemnified Person” has the meaning given in Section 10.2.

 

“Change Request” has the meaning given in Section 2.1(c).

 

“Change Request Proposal” has the meaning given in Section 2.1(c).

 

“Equipment” has the meaning given in Section 4.5(a).

 

“Fees” has the meaning given in Section 5.1(a).

 

“Force Majeure Event” has the meaning given in Section 4.4(a).

 

“Group” means, with respect to any Party, Service Provider or Service Recipient, such Party, Service Provider, or Service Recipient, respectively, and each of such Party’s, Service Provider’s or Service Recipient’s Affiliates, respectively.

 

“IT Services” has the meaning given in Section 2.1(a).

 

“KLX” has the meaning given in the Preamble.

 

“KLX Indemnified Person” has the meaning given in Section 10.1.

 

“Migration Assistance” has the meaning given in Section 2.5(a).

 

“Party” and “Parties” have the meanings given in the Preamble.

 

“Personnel” means, with respect to any Party, the Representatives of such Party, and the employees, officers, directors, agents, representatives, advisors, independent contractors and consultants of any third parties engaged by such Party or the other members of such Party’s Group to provide a Third Party Service.

 

“Records” has the meaning given in Section 6.5.

 

“Representatives” means, with respect to any Party, the employees, officers, directors, agents, representatives, advisors, independent contractors and consultants of (i) such Party and (ii) the other members of such Party’s Group.

 

“Sales Taxes” has the meaning given in Section 5.3.

 

“Security Regulations” has the meaning given in Section 6.4(a).

 

“Separation Agreement” has the meaning given in the Recitals.

 

“Service Coordinator” has the meaning given in Section 2.2.

 

“Service Provider” means a member of the B/E Group, when it is providing a B/E Service to a member of the KLX Group under the terms of this Agreement.

 

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“Service Receiver Data” has the meaning given in Section 8.1(a).

 

“Service Recipient” means a member of the KLX Group, when it is receiving an IT Service from a member of the B/E Group under the terms of this Agreement.

 

“Systems” has the meaning given in Section 6.4(a).

 

“Term” shall mean, with respect to each of the IT Services and Migration Assistance, the period of time beginning on the Distribution Date and expiring on the earlier of (i) the date set forth in Schedule A (or if not specified therein, such period as may be reasonably requested by the Service Recipient to which such IT Service or Migration Assistance is provided) or (ii) the last day of the twenty-fourth (24th) month following the date hereof, in each case unless earlier terminated pursuant to Section 11.2, in each case, subject to any extension as provided in Section 11.1.

 

“Terminating Party” has the meaning given in Section 11.2(a).

 

“Terminating Third Party Service” has the meaning given in Section 11.2(c).

 

“Third Party Service” has the meaning given in Section 2.1(b)(i).

 

(b)                                 In this Agreement, except to the extent otherwise provided or where the context otherwise requires:

 

(i)                                     when a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated;

 

(ii)                                  the headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;

 

(iii)                               whenever the words “include”, “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation”;

 

(iv)                              the words “hereof”, “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement;

 

(v)                                 the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms; and

 

(vi)                              references to a Person are also to its successors and permitted assigns.

 

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ARTICLE II
 SERVICES

 

Section 2.1                                    Services to be Provided to the KLX Group.

 

(a)                                 In General. During the applicable Term, and in accordance with the terms and conditions of this Agreement, B/E shall provide (or cause to be provided), or shall cause another member of the B/E Group to provide (or cause to be provided), to KLX or another member of the KLX Group: (1) the services described in Schedule A hereto; and (2) any Additional Services as may be requested in writing by KLX, identifying in reasonable detail the specifics of such service to be performed by a member of the B/E Group (each such service, an “IT Service”).

 

(b)                                 Third Party Services.

 

(i)                                     A Service Provider may, in its discretion and with prior written notice to the Service Recipient, engage, or cause another member of the Service Provider’s Group to engage, one or more third parties to provide some or all of the IT Services (any such IT Service provided by a third party, a “Third Party Service”).

 

(ii)                                  To the extent that any third party proprietor of information or software to be disclosed or made available to any Service Recipient in connection with the performance of IT Services hereunder requires the execution of a specific form of non-disclosure agreement, license agreement, use agreement or other terms and conditions as a condition of its consent to use of the same for the benefit of any member of the Service Recipient’s Group or to permit any member of the Service Recipient’s Group to access such information or software, the Service Recipient will execute, or will cause, as necessary, such other member of the Service Recipient’s Group or its or their respective Representatives to execute, such form or agreement.

 

(iii)                               Nothing in this Section 2.1(b) shall in any way affect B/E’s obligation to provide (or cause to be provided) the IT Services pursuant to this Agreement, and B/E shall remain at all times during the applicable Term fully responsible for the performance of the IT Services.

 

(c)                                  Change Requests.  A Service Recipient may request in writing a change to any IT Service, which request must include a description of the proposed change requested and, if any, the associated business specifications (each a “Change Request”).  The Service Provider shall provide such Service Recipient with a written proposal for changing the applicable IT Service in accordance with the Change Request (a “Change Request Proposal”).  Each such Change Request Proposal will include the estimated time and price of implementing the Change Request.  A Service Provider may also identify impacts of the Change Request on the IT Service being provided by a Service Provider and fees related thereto.  If the Parties agree in writing to a Change Request or a written variation thereof, this Agreement will be deemed amended to include the terms and conditions of such agreed-upon Change Request or written variation thereof.  If the Parties do not agree upon a Change Request Proposal or a written variation thereof within ten (10) days after the date such Change Request Proposal is delivered to

 

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the Service Recipient, then the Change Request Proposal will expire, and neither Party shall have any obligation to implement the changes contemplated by such Change Request unless and until the Parties agree separately in writing.  Notwithstanding the foregoing, a Service Provider shall not be obligated to change a Service if (A) the Service Provider is not able to provide the IT Service, as changed, due to capacity, performance, physical or technical limitations, or lack of sufficient resources, or (B) such change results from a change to a Service Recipient’s business or operations that is outside the ordinary course of business.

 

Section 2.2                                    Service Coordinators. B/E and KLX shall each nominate a representative to act as the primary contact person with respect to the performance of the Services (each, a “Service Coordinator”).  Except as otherwise provided herein, all communications relating to the IT Services provided hereunder shall be directed to the Service Coordinators.  The initial Service Coordinators for B/E and KLX, including relevant contact information, are set forth on Schedule B hereto.  Either Party may replace its Service Coordinator at any time by providing prior written notice to the other Party of such replacement.  Solely for the avoidance of doubt, any notice or other communications to be given or made pursuant to this Agreement, including any notice of replacement of a Service Coordinator pursuant to this Section 2.2, shall be given or made in accordance with the terms of Section 12.1, and no notice or other communication to any Service Coordinator shall be a proper notice or other communication for the purposes of this Agreement.

 

Section 2.3                                    Standard of Performance. B/E shall (and shall use commercially reasonable efforts to cause any Person performing IT Services on its behalf to) use commercially reasonable efforts, skill and judgment in providing IT Services hereunder.  Without limiting the foregoing, all IT Services shall be provided in a timely and workmanlike manner, consistent with the manner and level of care with which such IT Services were provided in the ordinary course prior to the Distribution Date.  Notwithstanding the foregoing, the Service Provider’s provision of the IT Services are subject to (a) the Service Provider’s applicable policies and procedures that are in effect on the date hereof, (b) the Service Provider’s capacity, performance, physical or technical limitations (including in respect of internet bandwidth, file server capacity and mailbox capacity) that were applicable to the Service Provider’s provision of the IT Services for the Service Recipients prior to the Distribution Date, and (c) in respect of systems or communications links that are shared between two or more businesses, capacity limitations to ensure that each of the Service Recipients’ and the Service Providers’ business receives reasonably sufficient use of such systems or links.

 

Section 2.4                                    Cooperation.

 

(a)                                 Each Party shall use commercially reasonable efforts, and shall use commercially reasonable efforts to cause the other members of such Party’s Group and any third party providing Third Party Services on behalf of any member of such Party’s Group, to cooperate with the members of the other Party’s Group in all matters relating to the provision and receipt of IT Services and to minimize the expense, distraction and disturbance to the other Party’s Group’s business, and shall perform all obligations hereunder in good faith and in accordance with principles of fair dealing.

 

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(b)                                 Each Party will use commercially reasonable efforts to provide (and will use commercially reasonable efforts to cause each other member of such Party’s Group to provide) information and documentation sufficient for each Service Provider to perform (or cause to be performed) the IT Services in the manner and with the level of care they were provided in the ordinary course prior to the Distribution Date, and will use commercially reasonable efforts to make available, as reasonably requested in writing by a Service Provider, sufficient resources and timely decisions, approvals and acceptances in order that such Service Provider may perform (or cause to be performed) its obligations under this Agreement in a timely and efficient manner.

 

Section 2.5                                    Migration Assistance.

 

(a)                                 Prior to the end of the applicable Term, B/E shall provide (or cause to be provided) to KLX (and any other member of KLX’s Group) such reasonable support and assistance as is necessary to migrate the IT Services to KLX’s internal organization or to a third party provider of KLX or another member of KLX’s Group (such support and assistance, “Migration Assistance”), which may include, without limitation, (i) consulting, (ii) training, (iii) providing reasonable access to data and other information in the standard format and medium (whether electronic or otherwise) of the Service Provider and (iv) reasonable access to employees of the Service Provider.  In the event KLX (or any other member of KLX’s Group) requires Migration Assistance, KLX’s Service Coordinator shall request such Migration Assistance from B/E’s Service Coordinator, and the two Service Coordinators shall discuss the anticipated scope and cost of such Migration Assistance and agree on such scope and cost in advance of such Migration Assistance commencing.  The two Service Coordinators shall regularly discuss such Migration Assistance and any changes in anticipated scope and cost.  In the event that B/E determines at any point in time that the cost of the requested Migration Assistance is expected to materially exceed that initially agreed between the two Service Coordinators, then B/E’s Service Coordinator shall promptly notify KLX’s Service Coordinator and the two Service Coordinators shall discuss and agree whether and how to proceed.  KLX shall pay any actual costs incurred and documented by B/E (or another member of B/E’s Group) in connection with any Migration Assistance (other than Migration Assistance provided pursuant to Section 11.2(c)(iv)), requested by KLX, whether performed by Representatives of B/E or by an external service provider.

 

(b)                                 Representatives of B/E providing Migration Assistance shall be granted reasonable access to KLX’s facilities (or those of another member of KLX’s Group).

 

ARTICLE III
 [RESERVED]

 

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ARTICLE IV
 LIMITATIONS

 

Section 4.1                                    General Limitations.

 

Notwithstanding anything to the contrary herein, no Service Provider (nor any other member of the Service Provider’s Group) shall be required to (a) hire any third party service provider to provide any IT Service, (b) expand its facilities, incur long-term capital expenses, increase its employee headcount or maintain the employment of any specific employee in order to provide any IT Service, (c) purchase, upgrade, enhance or otherwise modify any computer hardware, software or network environment, (d) provide any support or maintenance services for any computer hardware, software or network environment that has been materially upgraded, enhanced or otherwise modified from the computer hardware, software or network environments in use as of the Distribution Date, or (e) provide IT Services hereunder that are greater in nature or scope than the comparable services provided in the conduct of the a Service Recipient’s business during the twelve (12) months immediately prior to the Distribution Date; provided, however, that nothing in this Section 4.1 shall in any way relieve any obligation of B/E to provide (or cause to be provided) the IT Services pursuant to this Agreement, and B/E shall remain, at all times during the Term, fully responsible for the performance of the IT Services.

 

Section 4.2                                    Third Party Limitations.  Each Party acknowledges and agrees that any IT Services (including Third Party Services) provided using third party Intellectual Property are subject to the terms and conditions of any applicable agreements between the Service Provider and such third parties.  With respect to such IT Services, B/E shall use commercially reasonable efforts to (and shall use commercially reasonable efforts to cause any other Service Provider thereof to) (a) obtain any necessary consent (including any necessary licenses) from such third parties in order to provide the IT Services or (b) if any such consent is not obtained, provide acceptable alternative arrangements to provide the relevant IT Services; provided, however, that, at the written request of B/E, KLX shall reimburse B/E for any reasonable and documented additional incremental costs incurred by B/E (or any other Service Provider) in carrying out its obligations under subsection (a) or (b), above.  KLX shall use commercially reasonable efforts to assist B/E in obtaining any such necessary consent or license.

 

Section 4.3                                    Compliance with Laws.

 

(a)                                 No Service Provider shall provide, or cause to be provided, nor shall any Service Provider be required to provide or cause to be provided, any IT Service to the extent that the provision of such IT Service would require such Service Provider, or any Representative of such Service Provider, to violate: (i) any applicable Law, (ii) any policies and/or procedures of such Service Provider designed to respond to applicable Law, or (iii) any other policies and/or procedures of such Service Provider in existence as of the Distribution Date, which policy or procedure, in the case of subparagraph (ii) or (iii) above, continues in effect at such Service Provider.

 

(b)                                 If B/E cannot provide (or cause to be provided) a IT Service due to Section 4.3(a), the Parties shall cooperate, in full compliance with Section 2.4(a), to identify a reasonably acceptable alternative arrangement to provide the affected IT Service; provided,

 

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however, that, at the written request of B/E, KLX shall reimburse B/E for any reasonable and documented additional incremental costs incurred by B/E in providing such IT Service under such alternative arrangement.

 

Section 4.4                                    Force Majeure.

 

(a)                                 B/E shall, at all times during the applicable Term, use commercially reasonable efforts to provide, or cause to be provided, the IT Services without interruption.  In the event and to the extent that any Service Provider is wholly or partially prevented from, or delayed in, providing one or more IT Services, or one or more IT Services are interrupted or suspended, by reason of events beyond the reasonable control of such Service Provider or the other members of such Service Provider’s Group (including acts of God, acts of any Governmental Entity, acts of the public enemy or due to fire, explosions, accidents, floods, embargoes, epidemics, wars, acts of terrorism, nuclear disasters, labor difficulties, civil unrests and/or riots, civil commotions, insurrections, severe or adverse weather conditions, any lack of or shortage of electrical power, malfunctions of equipment or software programs or any other cause beyond the reasonable control of the Service Provider, the other members of the Service Provider’s Group or, in the case of any Third Party Services, the third party providing such Third Party Service on behalf of the Service Provider or another member of the Service Provider’s Group (each, a “Force Majeure Event”)), B/E shall not be obligated to deliver (or cause to be delivered) the affected IT Services during such period, and KLX shall not be obligated to make any payment for any reason hereunder in relation to any IT Services not delivered; provided, however that, during the duration of a Force Majeure Event, B/E shall use commercially reasonable efforts to avoid or remove such Force Majeure Event, and shall use commercially reasonable efforts to resume its performance under this Agreement with the least practicable delay.

 

(b)                                 In the event that any Service Provider has knowledge that the provision of any IT Service is or will be (or would reasonably be expected to be) affected by a Force Majeure Event, B/E shall, to the extent reasonably practicable, promptly provide, in writing, notice of such Force Majeure Event to KLX, describing in reasonable detail such Force Majeure Event, the affected IT Service, and B/E’s reasonable estimate of the scope and duration of such Force Majeure Event.

 

Section 4.5                                    Title to Equipment; Management and Control; Reservation of Rights.

 

(a)                                 Except as otherwise provided herein, all procedures, methods, systems, strategies, tools, equipment, facilities and other resources of any member of the Service Provider’s Group used by such member of the Service Provider’s Group in connection with the provision of IT Services (the “Equipment”) shall remain the property of such member of the Service Provider’s Group and shall at all times be under the sole direction and control of such member of the Service Provider’s Group.

 

(b)                                 In the event that any Service Provider is required to purchase Equipment in order to provide the IT Services or Migration Assistance hereunder, B/E shall notify KLX of the requirement to purchase such Equipment and the Parties shall discuss in good

 

8

 

faith and agree which Party shall purchase such Equipment.  In the event B/E (or another member of B/E’s Group) purchases such Equipment, KLX shall reimburse B/E for the cost of such Equipment promptly, but in any event no later than ninety (90) days, after the purchase thereof.  At the end of the relevant Term, (i) in the event B/E (or another member of B/E’s Group) purchased and was reimbursed by KLX for such Equipment, B/E shall reimburse KLX (A) for applicable depreciation during the Term in respect of such Equipment and (b) to the extent B/E (or another member of B/E’s Group) receives some other benefit by using or retaining such Equipment during, or at the end of, the relevant Term, respectively, for the value of such benefit in an amount to be agreed by the Parties’ respective Service Coordinators; and (ii) in the event KLX purchased such Equipment, to the extent B/E (or another member of B/E’s Group) receives some other benefit by using or retaining such Equipment during, or at the end of, the relevant Term, respectively, B/E shall reimburse KLX for the value of such benefit in an amount to be agreed by the Parties’ respective Service Coordinators.

 

(c)                                  Except as otherwise provided herein, management of and control over the provision of the IT Services (including the determination or designation at any time of the Equipment, Personnel and other resources to be used in connection with the provision of the IT Services) shall reside solely with the Service Provider.  Without limiting the generality of the foregoing, all labor matters relating to any employees of the Service Provider or the other members of the Service Provider’s Group shall be within the exclusive control of the Service Provider, and no member of the Service Recipient’s Group shall take any action with regard to such matters.  B/E shall provide for and pay (or cause to be provided for and paid) the compensation and other benefits of its employees, including salary, health, accident and workers’ compensation benefits and all taxes and contributions which an employer is required to pay relating to the employment of employees.  No member of the Service Recipient’s Group shall in any event be liable to the Service Provider or any other member of the Service Provider’s Group, or to any of their respective Personnel, for any failure on the part of any member of the Service Provider’s Group to perform any obligation on the part of such member of the Service Provider’s Group with regard to the compensation, benefits or taxation of its employees or other Personnel.

 

(d)                                 Nothing in this Section 4.5 shall in any way affect any right or obligation of any Party, or any allocation of any assets of any Party, as provided in the Separation Agreement or any other Ancillary Agreement or pursuant to any Continuing Arrangement.

 

Section 4.6                                    Interim Basis Only.

 

Each Party acknowledges that the purpose of this Agreement is to provide the IT Services on an interim basis.  Accordingly, at all times from and after the Distribution Date, each Party shall use its respective commercially reasonable efforts to make or obtain any approvals, permits or licenses, implement any computer systems and take, or cause to be taken, any and all other actions necessary or advisable for the Service Recipients to provide the IT Services for themselves as soon as practicable after the date of this Agreement.

 

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ARTICLE V
 PAYMENT

 

Section 5.1                                    Fees.

 

(a)                                 In connection with each IT Service, KLX shall pay to B/E (i) the fees set forth in Schedule A with respect to such IT Service, or if not specified therein, fees for such IT Service as determined by the mutual agreement of both Parties, negotiated in good faith, and (ii) any reasonable and documented third party fees, costs and expenses which are charged to or incurred by the Service Provider or another member of the Service Provider’s Group in connection with provision of IT Services to the Service Recipient and which are not included in the fees set forth in the Schedules (collectively, the “Fees”).

 

(b)                                 It is the intent of the Parties that the Fees reasonably approximate the actual cost to the Service Provider of providing the IT Services, without any intent to cause the Service Provider to receive any profit or incur any loss with respect thereto.  If at any time a Party reasonably believes that the Fees with respect to any IT Service are materially insufficient to compensate the Service Provider for the cost of providing such IT Service, or that the Fees with respect to any IT Service materially overcompensate the Service Provider for the cost of providing such IT Service, such Party shall promptly provide notice to the other Party of the same, identifying such IT Service and setting forth in reasonable detail its rationale for such belief, and shall include with such notice all available documentation with regard to the cost of providing such IT Service.

 

(c)                                  Upon the delivery of a notice pursuant to Section 5.1(b), the Parties shall cooperate, in full compliance with Section 2.4(a), to come to a mutually acceptable agreement with regard to the appropriate Fees for such IT Service.

 

Section 5.2                                    Billing and Payment Terms.

 

(a)                                 B/E shall invoice KLX on a monthly basis for any Fees, costs or other amounts payable pursuant to this Agreement.

 

(b)                                 Each invoice delivered pursuant to Section 5.2(a) shall set forth a brief description of the IT Services and the Migration Assistance provided, and, with respect to any amounts payable other than Fees pursuant to Section 5.1(a)(i), reasonable documentation to support the charges thereon.

 

(c)                                  Each invoice delivered pursuant to this Section 5.2 shall be payable within 30 days after the date of the invoice.

 

(d)                                 Payment of all invoices provided hereunder shall be made in United States dollars unless otherwise mutually agreed upon by the Parties.

 

(e)                                  If any invoice delivered pursuant to (and in compliance with) this Section 5.2 is not paid in full within thirty (30) days after the date of the invoice, interest shall accrue on the unpaid amount at the annual rate equal to the “Prime Rate” as reported on the thirtieth (30th) day after the date of the invoice in The Wall Street Journal (or, if such day is not a

 

10

 

business day, the first business day immediately after such day), calculated on the basis of a year of three hundred and sixty (360) days and the actual number of days elapsed between the end of the thirty (30)-day payment period and the actual payment date.

 

(f)                                   If there is an Agreement Dispute between the Parties regarding the amounts shown as billed to KLX on any invoice, B/E shall, upon the written request of KLX, furnish to KLX additional documentation reasonably necessary to substantiate the amounts billed including, but not limited to, listings of the dates, times and amounts of the IT Services in question where applicable and practicable.

 

Section 5.3                                    Sales Taxes.

 

All consideration under this Agreement is exclusive of any sales, transfer, value-added, goods or services tax or similar gross receipts based tax (including any such taxes that are required to be withheld, but excluding all other taxes including taxes based upon or calculated by reference to income, receipts or capital) imposed against or on IT Services or Migration Assistance (“Sales Taxes”) provided hereunder, and such Sales Taxes will be added to the consideration where applicable.  Such Sales Taxes shall be separately stated on the relevant invoice.  KLX shall be responsible for any such Sales Taxes and shall either (i) remit such Sales Taxes to B/E (and B/E shall remit such amounts to the applicable taxing authority) or (ii) provide B/E with a certificate or other acceptable proof evidencing an exemption from liability for such Sales Taxes.

 

Section 5.4                                    No Offset.

 

No Party shall withhold any payments to the other Party under this Agreement in order to offset payments due to such Party pursuant to this Agreement, the Separation Agreement or otherwise, unless such withholding is mutually agreed to, in advance, by the Parties.

 

ARTICLE VI
 ACCESS AND SECURITY

 

Section 6.1                                    Access; Work Policy.

 

(a)                                 At all times during the Term, each Party shall provide, and shall cause the other member of its Group to provide, the other Party and its Personnel reasonable ingress to and egress from its facilities and premises, and reasonable access to its equipment and Personnel, for any purpose connected with the delivery or receipt of IT Services hereunder, the exercise of any right under this Agreement or the performance of any obligations required by this Agreement.

 

(b)                                 Each Party shall comply, and shall cause its respective Personnel to comply, with the other Party’s safety and security regulations applicable to each specific site or facility while working at such site or facility.  Except as otherwise agreed to by the Parties, each Party shall cause its Personnel to observe the working hours, working rules, and holiday schedules of the other Party while working on the premises of the other Party.

 

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Section 6.2                                    Additional Security Measures.

 

Each Party acknowledges and agrees that any Service Provider may take physical or information security measures that affect the manner in which IT Services are provided, so long as the substance or overall functionality of any affected IT Services remains the same as it was as of the Distribution Date.

 

Section 6.3                                    Security Breaches.

 

In the event of a security breach that relates to the IT Services, the Parties shall, subject to any applicable Law, cooperate with each other in good faith regarding the timing and manner of (a) notification to their respective customers, potential customers, employees and/or agents concerning a breach or potential breach of security and (b) disclosures to appropriate Governmental Entities.

 

Section 6.4                                    Systems Security.

 

(a)                                 If any Party or its Personnel are given access to any computer systems or software of any member of the other Party’s Group (“Systems”) in connection with such Party’s performance or receipt of IT Services, such Party shall comply, and shall cause the other members of its Group and its Personnel to comply, with all of such other Party’s system security policies, procedures and requirements (as amended from time to time, the “Security Regulations”), and will not tamper with, compromise or circumvent any security or audit measures employed by such other Party.

 

(b)                                 Each Party shall use commercially reasonable efforts to ensure that only those of its Personnel who are specifically authorized to have access to the Systems of the other Party gain such access, and to prevent unauthorized access, use, destruction, alteration or loss of information contained therein, including notifying its Personnel regarding the restrictions set forth in this Agreement and establishing appropriate policies designed to effectively enforce such restrictions.

 

(c)                                  If, at any time, either Party determines that the other Party or its Personnel has sought to circumvent, or has circumvented, its Security Regulations, that any unauthorized Personnel of the other Party has accessed its Systems or that the other Party or any of its Personnel has engaged in activities that may lead to the unauthorized access, use, destruction, alteration or loss of data, information or software, such Party shall immediately terminate any such Personnel’s access to the Systems and promptly notify the other Party.

 

(d)                                 Each Party shall access and use, and shall cause their respective Personnel to access and use, only those Systems, and only such data and information within such Systems, to which it or they have been granted the right to access and use.  Any Party shall have the right to deny the Personnel of the other Party access to such Party’s Systems, after prior written notice and consultation with the other Party, in the event the Party reasonably believes that such Personnel pose a security concern.

 

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Section 6.5                                    Records and Inspection Rights.

 

Each Party shall maintain, and shall cause the other members of such Party’s Group to maintain, accurate records of the receipts, invoices, reports and other documents relating to the IT Services (the “Records”) for the period applicable to such Records under B/E’s records retention policy in effect as of the date of this Agreement, following the expiration of the applicable Term, in order to provide the other Party the opportunity to verify the accuracy, completeness and appropriateness of the charges for the IT Services and that the IT Services are being provided in accordance with the terms of this Agreement and Schedule A.  Upon reasonable written notice from KLX, B/E shall make available to KLX or its Representatives (at KLX’s sole cost and expense) reasonable access to, or at KLX’s sole cost and expense, copies of, the Records with respect to such IT Service during regular business hours.

 

ARTICLE VII
 CONFIDENTIALITY

 

Section 7.1                                    Confidential Information.

 

(a)                                 Notwithstanding any termination of this Agreement, the Parties shall hold, and shall cause each of the other members of their respective Groups to hold, and shall each cause their respective Representatives to hold, and shall use commercially reasonable efforts to cause their respective other Personnel to hold, in strict confidence, and not to disclose or release or use, without the prior written consent of the other Party, any and all Confidential Information concerning the other Party (or any other member of such Party’s Group) or its respective business; provided, however, that the Parties may disclose, or may permit disclosure of, Confidential Information (i) to their respective auditors, attorneys, financial advisors, bankers and other appropriate consultants and advisors who have a need to know such Confidential Information and are informed of their obligation to hold such Confidential Information confidential to the same extent as is applicable to the Parties and in respect of whose failure to comply with such obligations, the applicable Party will be responsible, (ii) if the Parties or any other member of their respective Groups are required or compelled to disclose any such Confidential Information by judicial or administrative process or by other requirements of Law or stock exchange rule, (iii) as required in connection with any legal or other proceeding by one Party against the other Party, or (iv) as necessary in order to permit a Party to prepare and disclose its financial statements, Tax Returns or other required disclosures.  Notwithstanding the foregoing, in the event that any demand or request for disclosure of Confidential Information is made pursuant to clause (ii) above, each Party shall, to the extent not prohibited by applicable Law, promptly notify the other of the existence of such request or demand and shall provide the other a reasonable opportunity to seek an appropriate protective order or other remedy, which such Parties will reasonably cooperate in obtaining, at the sole cost of the Party seeking such order or other remedy.  In the event that such appropriate protective order or other remedy is not obtained, the Party whose Confidential Information is required to be disclosed shall or shall cause the other Party to furnish, or cause to be furnished, only that portion of the Confidential Information that is legally required to be disclosed and shall use commercially reasonable efforts, at the sole cost and expense of the Party whose Confidential Information is required to be disclosed, to ensure that confidential treatment is accorded such Confidential Information.

 

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(b)                                 Nothing in this Article VII shall in any way affect any right or obligation of any Party with regard to any Party’s Confidential Information as provided in the Separation Agreement or any other Ancillary Agreement or pursuant to any Continuing Arrangement.

 

ARTICLE VIII
 INTELLECTUAL PROPERTY AND DATA

 

Section 8.1                                    Ownership of Data and Intellectual Property.

 

(a)                                 KLX shall own all data (i) provided by any member of the KLX Group to any member of the B/E Group in connection with such member of the KLX Group’s receipt of IT Services or (ii) created by or for B/E or any other member of the B/E Group solely in relation to the provision of IT Services to KLX or another member of the KLX Group (collectively, “Service Receiver Data”).

 

(b)                                 Upon the written request of KLX, and at KLX’s sole cost and expense, any Service Receiver Data in possession of B/E or any other member of B/E’s Group shall be promptly provided to KLX in the format in which such Service Receiver Data is maintained as of the time of such request; provided, however, that B/E may retain the relevant Service Receiver Data and provide a copy thereof to KLX:  (i) if necessary for B/E (or any other member of B/E’s Group) to comply with the requirements of Section 6.5, (ii) if necessary for B/E (or any other member of B/E’s Group) to continue to provide the IT Services during the Term; or (iii) if B/E (or any other member of B/E’s Group holding such Service Receiver Data) is unable to delete the Service Receiver Data from its archives using commercially reasonable efforts.  After completion of the IT Services hereunder, neither B/E nor any other member of B/E’s Group shall retain any copy of Service Receiver Data (unless required by Law or if clause (i) or (iii) above applies), and B/E shall deliver, or cause to be delivered, upon the written request of KLX, within such time period as the Parties may reasonably agree, at the sole cost and expense of KLX, all Service Receiver Data in its possession (or in the possession of any other member of its Group) to KLX.

 

(c)                                  All other data, information and Intellectual Property provided by each Party (including each other member of such Party’s Group) and their respective licensors and information, content and software providers in connection with performance of the IT Services shall remain the property of such Party.  No right or license with respect to any Intellectual Property is granted under this Agreement other than as is strictly necessary for B/E to perform, and KLX to receive and use, the IT Services as contemplated herein, and then only to the extent of the interest held by the Party granting such right.

 

Section 8.2                                    Licenses. From the date hereof until the termination of this Agreement, each Service Provider grants to the Service Recipients and their designees and suppliers a non-exclusive, royalty-free, non-transferable, non-sublicensable right and license to use such Service Provider’s Intellectual Property, solely and exclusively in order for the Service Recipients to receive the Services contemplated hereunder.

 

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ARTICLE IX
 LIMITATION OF LIABILITY; DISCLAIMER OF WARRANTIES

 

Section 9.1                                    Limitation of Liabilities.

 

(a)                                 EXCEPT IN THE CASE OF FRAUD, IN NO EVENT SHALL ANY MEMBER OF THE B/E GROUP OR THE KLX GROUP BE LIABLE TO ANY MEMBER OF THE KLX GROUP OR THE B/E GROUP, RESPECTIVELY, FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT EACH PARTY’S INDEMNIFICATION OBLIGATIONS AS SET FORTH IN ARTICLE X.

 

Section 9.2                                    Disclaimer of Warranties.

 

EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES, AND EACH PARTY EXPRESSLY DISCLAIMS, ANY AND ALL REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE TRANSITION SERVICES TO BE PROVIDED UNDER THIS AGREEMENT, INCLUDING WARRANTIES WITH RESPECT TO MERCHANTABILITY, OR SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE, TITLE AND NON-INFRINGEMENT OF ANY SOFTWARE OR HARDWARE PROVIDED HEREUNDER, AND ANY WARRANTIES ARISING FROM COURSE OF DEALING, COURSE OF PERFORMANCE OR TRADE USAGE.

 

ARTICLE X
 INDEMNIFICATION

 

Section 10.1                             Indemnification of KLX.

 

Subject to the terms of this Article X, from and after the Distribution Date, B/E shall indemnify and hold harmless KLX and the other members of the KLX Group, and each of their respective Representatives (each, a “KLX Indemnified Person”), from and against any and all Indemnifiable Losses incurred by such KLX Indemnified Person arising out of the undertaking, performance or completion by or on behalf of B/E or any other member of the B/E Group of an IT Service pursuant to this Agreement, to the extent such Indemnifiable Losses arise from the gross negligence or willful misconduct of any member of the B/E Group, or any Representative of B/E.

 

Section 10.2                             Indemnification of B/E.

 

Subject to the terms of this Article X, from and after the Distribution Date, KLX shall indemnify and hold harmless B/E and the other members of the B/E Group, and each of their respective Representatives (each, a “B/E Indemnified Person”), from and against any and all Indemnifiable Losses incurred by such B/E Indemnified Person arising out of the undertaking,

 

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performance or completion by or on behalf of B/E or any other member of the B/E Group of an IT Service pursuant to this Agreement, to the extent such Indemnifiable Losses arise from the gross negligence or willful misconduct of any member of the KLX Group, or any Representative of KLX.

 

Section 10.3                             Indemnification Procedures.

 

The provisions of Section 7.04 (Procedures for Indemnification), Section 7.05 (Cooperation in Defense and Settlement), Section 7.06 (Indemnification Obligations Net of Insurance Proceeds) and Section 7.07 (Additional Matters; Survival of Indemnities) of the Separation Agreement are incorporated herein by reference and shall apply to this Agreement and the Parties mutatis mutandis.

 

Section 10.4                             Rights of the Parties.

 

The rights and obligations of the Parties provided in this Article X shall be in addition to (and not in lieu of) any rights or obligations with respect to indemnification provided pursuant to the Separation Agreement and any Ancillary Agreement or Continuing Arrangement, and nothing herein shall in any way limit the rights and obligations of any Party pursuant thereto.

 

ARTICLE XI
 TERM AND TERMINATION

 

Section 11.1                             Term of Agreement. The term of this Agreement shall become effective on the Distribution Date and shall remain in force until the earlier of (a) termination or expiration of all of the respective Terms and (b) termination in accordance with Section 11.2.  The Term may be extended for a period of up to one (1) additional year by KLX in its sole discretion in respect of any IT Service.  The obligation of any Party to make a payment for IT Services or Migration Assistance previously rendered shall not be affected by the termination of this Agreement or the expiration of the Term and shall continue until full payment is made.

 

Section 11.2                             Termination.

 

(a)                                 Termination by B/E or KLX.  This Agreement may be terminated by either Party (the “Terminating Party”) upon written notice to the other Party, if:

 

(i)                                     the other Party materially breaches this Agreement (which, for the avoidance of doubt, includes any failure to make payment in full for IT Services or Migration Assistance, except in a case where there is a good faith dispute thereto) and such breach is not cured, to the reasonable satisfaction of the Terminating Party, within thirty (30) days of written notice thereof; or

 

(ii)                                  the other Party makes a general assignment for the benefit of creditors or becomes insolvent, or a receiver is appointed for, or a court approves reorganization or arrangement proceedings on, such Party.

 

(b)                                 Partial Termination.  Except as otherwise described in the Schedules hereto: (i) KLX may, on sixty (60) days’ written notice to B/E, which notice may not

 

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be effective at any time before the date that is six (6) months after the date hereof, terminate its receipt of any specific IT Service set forth on any part of Schedule A; and (ii) upon receipt of any notice pursuant to Section 4.4(b), KLX may, upon written notice to B/E, immediately terminate its receipt of any IT Service affected by any Force Majeure Event described therein.  Any termination notice delivered pursuant to this Section 11.2(b) shall specify in detail the IT Service or IT Services to be terminated, and the date on which such IT Service or IT Services is to be terminated.

 

(c)                                  Third Party Services. If any Service Provider receives notice from a third party that such third party intends to cease providing a Third Party Service (a “Terminating Third Party Service”) (and such intention is not the result of any action or inaction by B/E or any member of B/E’s Group), and the termination of such Third Party Service would thereby render such Service Provider incapable of providing the relevant IT Service:

 

(i)                                     B/E shall elect (in its sole discretion): (1) to obtain such Third Party Service from an alternate third party service provider; or (2) to terminate such IT Service, effective upon the termination of the Terminating Third Party Service.

 

(ii)                                  B/E shall promptly notify KLX of the third party’s impending termination of services and of B/E’s election under Section 11.2(c)(i), and shall include with such notice a copy of any correspondence received from such third party with regard to such Third Party Service, and a description, in reasonable detail, of the affected IT Service.

 

(iii)                               In the event B/E elects to obtain such Third Party Service from an alternate third party service provider, such Third Party Service shall continue to be provided to the Service Recipient hereunder; provided, however, that KLX shall have the option to terminate such IT Service by written notice to B/E, effective upon the termination of the Terminating Third Party Service.

 

(iv)                              In the event B/E elects to terminate such Third Party Service, such IT Service shall, effective upon the termination of such Terminating Third Party Service, terminate, and thereafter, notwithstanding anything to the contrary contained herein, no member of B/E’s Group shall have any further obligation to provide such IT Service to any member of KLX’s Group; provided, however, that, in the event any Third Party Service is terminated pursuant to this Section 11.2(c)(iv), at the written request of KLX, B/E shall provide (or cause to be provided), at its sole cost and expense, Migration Assistance to the Service Recipient thereof.

 

Section 11.3                             Effect of Termination.

 

In the event that this Agreement is terminated for any reason:

 

(a)                                 Each Party acknowledges and agrees that the obligations of B/E to provide the IT Services, or to cause the IT Services to be provided, hereunder shall immediately cease.  Upon cessation of B/E’s obligation to provide (or cause to be provided) any IT Service, KLX shall, and shall cause any other Service Recipient to, stop using, directly or indirectly, such IT Service.

 

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(b)                                 Upon request, each Party shall, and shall cause the other members of its Group to, return to the other Party all tangible personal property and books, records or files owned by such other Party or its Affiliates and third parties and used in connection with the provision of IT Services that are in their possession as of the termination date.

 

(c)                                  The rights and obligations of each Party under Section 4.5(a) (Title to Equipment), Article V (Payment), Section 6.5 (Records and Inspection Rights), Article VII (Confidentiality), Article VIII (Intellectual Property and Data), Article IX (Limitation of Liability; Disclaimer of Warranties), Article X (Indemnification), Section 11.1 (Term of Agreement), Section 11.3 (Effect of Termination) and Article XII (Miscellaneous) shall survive the termination of this Agreement.

 

ARTICLE XII
 MISCELLANEOUS

 

Section 12.1                             Notices.

 

All notices, requests, claims, demands and other communications hereunder (other than, for the avoidance of doubt, communications relating to the IT Services provided hereunder and directed to a Service Coordinator pursuant to Section 2.2) 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 an internationally recognized overnight courier service, by facsimile (with confirmation of delivery) or registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 12.1):

 

	
(i)
    	
if to B/E:
    
	
 
    	
 
    
	
 
    	
1400   Corporate Center Way
    
	
 
    	
Wellington,   FL 33414
    
	
 
    	
Facsimile:   (561) 791-3966
    
	
 
    	
Attention:   General Counsel
    
	
 
    	
 
    
	
 
    	
with copies to:
    
	
 
    	
 
    
	
 
    	
Shearman & Sterling LLP
    
	
 
    	
599 Lexington Avenue
    
	
 
    	
New York, NY 10022-6069
    
	
 
    	
Facsimile: (212) 848-7179
    
	
 
    	
Attention:   Creighton   O’M. Condon, Esq.
    
	
 
    	
                      Robert M. Katz, Esq.
    
	
 
    	
 
    
	
(ii)
    	
if to KLX:
    
	
 
    	
 
    
	
 
    	
1300 Corporate Center Way
    
	
 
    	
Wellington, FL 33414
    
	
 
    	
Facsimile: [·]
    
	
 
    	
Attention: General Counsel
    

 

18

 

	
 
    	
with copies to:
    
	
 
    	
 
    
	
 
    	
Shearman &   Sterling LLP
    
	
 
    	
599 Lexington Avenue
    
	
 
    	
New York, NY 10022-6069
    
	
 
    	
Facsimile:  (212) 848-7179
    
	
 
    	
Attention:   Creighton   O’M. Condon, Esq.
    
	
 
    	
                    Robert M. Katz, Esq.
    

 

Section 12.2                             Severability.

 

If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect for so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to either 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 an acceptable manner in order that the transactions contemplated by this Agreement are consummated as originally contemplated to the greatest extent possible.

 

Section 12.3                             Entire Agreement.

 

The Separation Agreement, this Agreement, the other Ancillary Agreements and the Continuing Arrangements constitute the entire agreement of the Parties and their Affiliates with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings, both written and oral, between the Parties with respect to the subject matter hereof and thereof.

 

Section 12.4                             Amendment.

 

This Agreement may not be amended or modified except (a) by an instrument in writing signed by, or on behalf of, the Parties or (b) by a waiver in accordance with Section 12.5.

 

Section 12.5                             Waiver.

 

Either Party to this Agreement may (a) extend the time for the performance of any of the obligations or other acts of the other Party and (b) waive compliance with any of the agreements of the other Party or conditions to such Party’s obligations contained herein.  Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the Party to be bound thereby.  Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition of this Agreement.  The failure of either Party to assert any of its rights hereunder shall not constitute a waiver of any of such rights.

 

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Section 12.6                             Assignment.

 

Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by either Party without the prior written consent of the other Party, such consent not to be unreasonably withheld, delayed or conditioned.  Any purported assignment without such consent shall be void.  Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and assigns.  Notwithstanding the foregoing, either Party may assign this Agreement without consent in connection with (a) a merger transaction in which such Party is not the surviving entity and the surviving entity acquires or assumes all or substantially all of such Party’s Assets, or (b) the sale of all or substantially all of such Party’s Assets; provided, however, that such assignment shall be effective only if, and as of the time when, the assignee expressly assumes in writing all of the obligations of the assigning Party under this Agreement, and the assigning Party provides written notice and evidence of such assignment and assumption to the non-assigning Party.  No assignment permitted by this Section 12.6 shall release the assigning Party from liability for the full performance of its obligations under this Agreement.

 

Section 12.7                             Parties in Interest.

 

This Agreement shall be binding upon and inure solely to the benefit of the Parties and their respective successors and permitted assigns, and nothing herein, express or implied (including the provisions of Article X relating to indemnified parties), is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

Section 12.8                             Currency.

 

Unless otherwise specified in this Agreement, all references to currency, monetary values and dollars set forth herein means United States dollars, and all payments hereunder shall be made in United States dollars unless otherwise mutually agreed upon by the Parties.

 

Section 12.9                             Governing Law.

 

This Agreement shall be governed by, and construed in accordance with, the Laws of the State of Delaware, regardless of the Laws that might otherwise govern under applicable principles of conflicts of laws thereof.

 

Section 12.10                      Waiver of Jury Trial.

 

EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER

 

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PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 12.10.

 

Section 12.11                      Counterparts.

 

This Agreement may be executed and delivered (including by facsimile transmission or portable document format (“.pdf”)) in counterparts, and by the different Parties 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.

 

Section 12.12                      Relationship of the Parties.

 

Expect as specifically provided herein, neither Party shall act or represent or hold itself out as having authority to act as an agent or partner of the other Party or in any way bind or commit the other Party to any obligations or agreement.  Nothing contained in this Agreement shall be construed as creating a partnership, joint venture, agency, trust, fiduciary relationship or other association of any kind, each Party being individually responsible only for its obligations as set forth in this Agreement.  The Parties’ respective rights and obligations hereunder shall be limited to the contractual rights and obligations expressly set forth herein on the terms and conditions set forth herein.

 

 [Remainder of page intentionally left blank]

 

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

 

 

	
 
    	
B/E   AEROSPACE, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
KLX   INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[Signature Page to IT Services Agreement]

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