10-12B/A

As filed with the Securities and Exchange Commission on April 8, 2014

File No. 001-36325

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

Amendment No. 1

FORM 10

 

 

GENERAL FORM FOR

REGISTRATION OF SECURITIES

PURSUANT TO SECTION 12(b) OR 12(g) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

 

NOW Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   46-4191184

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

7402 North Eldridge Parkway,

Houston, Texas

  77041
(Address of Principal Executive Offices)   (Zip Code)

(281) 823-4700

(Telephone Number, Including Area Code)

 

 

Copy to:

J. Eric Johnson

Locke Lord LLP

600 Travis Street, Suite 2800

Houston, Texas 77002

Telephone: (713) 226-1200

Fax: (713) 229-2642

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class to be so registered

 

Name of exchange on which each class is to be registered

Common Stock, par value $0.01 per share   New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

 

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   x  (do not check if a smaller reporting company)    Smaller reporting company   ¨

 

 

 


INFORMATION REQUIRED IN REGISTRATION STATEMENT

CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT AND ITEMS OF FORM 10

The information required by the following Form 10 Registration Statement items is contained in the sections identified below of the information statement attached hereto as Exhibit 99.1, each of which are incorporated into this Form 10 Registration Statement by reference.

 

Item 1. Business

The information required by this item is contained under the sections “Summary,” “Risk Factors,” “Cautionary Statement Regarding Forward-Looking Statements,” “The Separation and the Distribution,” “Business,” “Properties,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk,” “Certain Relationships and Related-Party Transactions” and “Where You Can Find More Information” of the information statement and is hereby incorporated by reference.

 

Item 1A. Risk Factors

The information required by this item is contained under the sections “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” of the information statement and is hereby incorporated by reference.

 

Item 2. Financial Information

The information required by this item is contained under the sections “Capitalization,” “Unaudited Pro Forma Combined Financial Statements,” “Selected Combined Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk,” and “Index to Financial Statements” and the financial statements referenced therein of the information statement and is hereby incorporated by reference.

 

Item 3. Properties

The information required by this item is contained under the sections “Business” and “Properties” of the information statement and is hereby incorporated by reference.

 

Item 4. Security Ownership of Certain Beneficial Owners and Management

The information required by this item is contained under the section “Security Ownership of Certain Beneficial Owners and Management” of the information statement and is hereby incorporated by reference.

 

Item 5. Directors and Executive Officers

The information required by this item is contained under the section “Corporate Governance and Management” of the information statement and is hereby incorporated by reference.

 

Item 6. Executive Compensation

The information required by this item is contained under the sections “Corporate Governance and Management—Director Compensation,” “Corporate Governance and Management—Compensation Committee Interlocks and Insider Participation,” “Executive Compensation” and “Compensation Discussion and Analysis” of the information statement and is hereby incorporated by reference.

 

Item 7. Certain Relationships and Related Transactions, and Director Independence

The information required by this item is contained under the sections “Certain Relationships and Related-Party Transactions” and “Corporate Governance and Management” of the information statement and is hereby incorporated by reference.


Item 8. Legal Proceedings

The information required by this item is contained under the sections “Business,” “Properties” and “Index to Financial Statements” and the financial statements referenced therein of the information statement and is hereby incorporated by reference.

 

Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters

The information required by this item is contained under the sections “Summary,” “The Separation and the Distribution,” “Dividend Policy,” “Capitalization” and “Description of Capital Stock” of the information statement and is hereby incorporated by reference.

 

Item 10. Recent Sales of Unregistered Securities

None.

 

Item 11. Description of Registrant’s Securities to be Registered

The information required by this item is contained under the sections “Dividend Policy” and “Description of Capital Stock” of the information statement and is hereby incorporated by reference.

 

Item 12. Indemnification of Directors and Officers

The information required by this item is contained under the section “Description of Capital Stock—Limitation on Liability of Directors, Indemnification of Directors and Officers, and Insurance” of the information statement and is hereby incorporated by reference.

 

Item 13. Financial Statements and Supplementary Data

The information required by this item is contained under the sections “Unaudited Pro Forma Combined Financial Statements” and “Index to Financial Statements” and the financial statements referenced therein of the information statement and is hereby incorporated by reference.

 

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

 

Item 15. Financial Statements and Exhibits

(a) Financial Statements

The following financial statements are included in the information statement and are hereby incorporated by reference:

 

    Unaudited Pro Forma Combined Financial Statements

 

    Annual Audited Combined Financial Statements:

 

    Report of Independent Registered Public Accounting Firm

 

    Combined Balance Sheets as of December 31, 2013 and 2012

 

    Combined Statements of Income for the Years Ended December 31, 2013, 2012 and 2011

 

    Combined Statements of Comprehensive Income for the Years Ended December 31, 2013, 2012 and 2011

 

    Combined Statements of Changes in Net Parent Company Investment for the Years Ended December 31, 2013, 2012 and 2011

 

    Combined Statements of Cash Flows for the Years Ended December 31, 2013, 2012 and 2011

 

    Notes to Combined Financial Statements


(b) Exhibits

The following documents are filed as exhibits to this Registration Statement:

 

Exhibit No.

 

Exhibit Description

  2.1**   Form of Separation and Distribution Agreement between National Oilwell Varco, Inc. and NOW Inc.
  3.1**   Form of NOW Inc. Amended and Restated Certificate of Incorporation
  3.2**   Form of NOW Inc. Amended and Restated Bylaws
10.1**   Form of Transition Services Agreement between National Oilwell Varco, Inc. and NOW Inc.
10.2**   Form of Tax Matters Agreement between National Oilwell Varco, Inc. and NOW Inc.
10.3**   Form of Employee Matters Agreement between National Oilwell Varco, Inc. and NOW Inc.
10.4**   Form of Master Distributor Agreement between National Oilwell Varco, L.P. and DNOW L.P.
10.5**   Form of Master Services Agreement between National Oilwell Varco, L.P. and DNOW L.P.
10.6**   Form of NOW Inc. Long-Term Incentive Plan
10.7*   Credit Agreement among NOW Inc., Wells Fargo Bank, National Association, as Administrative Agent, and the lenders and other financial institutions named therein, dated as of [], 2014
21.1**   Subsidiaries of NOW Inc.
99.1**   Information statement of NOW Inc., preliminary and subject to completion, dated April 8, 2014

 

* To be filed by amendment.
** Filed herewith.


SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

 

NOW INC.

/s/ Robert R. Workman

By:   Robert R. Workman
Title:   President and Chief Executive Officer

Dated: April 8, 2014

EX-2.1

Exhibit 2.1

SEPARATION AND DISTRIBUTION AGREEMENT

BY AND BETWEEN

NATIONAL OILWELL VARCO, INC.

AND

NOW INC.

DATED AS OF [], 2014


TABLE OF CONTENTS

 

         Page  
ARTICLE I.  

            DEFINITIONS

     2   
ARTICLE II.  

            THE SEPARATION

     13   

2.1.

 

Transfer of Assets and Assumption of Liabilities

     13   

2.2.

 

SpinCo Assets

     15   

2.3.

 

SpinCo Liabilities

     16   

2.4.

 

Transfer of Excluded Assets; Assumption of Excluded Liabilities

     17   

2.5.

 

Approvals and Notifications

     18   

2.6.

 

Novation of SpinCo Liabilities

     20   

2.7.

 

Novation of Excluded Liabilities

     21   

2.8.

 

Termination of Agreements

     21   

2.9.

 

Treatment of Shared Contracts

     22   

2.10.

 

Bank Accounts; Cash Balances

     23   

2.11.

 

Other Ancillary Agreements; Effect of Ancillary Agreements

     24   

2.12.

 

Intellectual Property

     25   

2.13.

 

Disclaimer of Representations and Warranties

     25   
ARTICLE III.  

            THE DISTRIBUTION

     26   

3.1.

 

Actions Prior to the Distribution

     26   

3.2.

 

Effecting the Distribution

     27   

3.3.

 

Conditions to the Distribution

     28   

3.4.

 

Sole Discretion

     29   

3.5.

 

Closing

     30   
ARTICLE IV.  

            DISPUTE RESOLUTION

     30   

4.1.

 

General Provisions

     30   

4.2.

 

Consideration by Senior Executives

     30   

4.3.

 

Arbitration

     31   

4.4.

 

Allocation of Undetermined Liabilities and Third-Party Claims

     33   
ARTICLE V.  

            MUTUAL RELEASES; INDEMNIFICATION; COOPERATION

     33   

5.1.

 

Release of Pre-Distribution Claims

     33   

5.2.

 

Indemnification by SpinCo

     36   

5.3.

 

Indemnification by NOV

     37   

5.4.

 

Indemnification Obligations Net of Insurance Proceeds

     37   

5.5.

 

Procedures for Indemnification of Third-Party Claims

     38   

5.6.

 

Additional Matters

     40   

5.7.

 

Remedies Cumulative

     41   

5.8.

 

Survival of Indemnities

     42   

5.9.

 

Guarantees, Letters of Credit and Other Obligations

     42   

5.10.

 

Right of Contribution

     42   

5.11.

 

No Impact on Third Parties

     43   

5.12.

 

No Cross-Claims or Third-Party Claims

     43   

 

i


5.13.

 

Severability

     43   

5.14.

 

Ancillary Agreements

     44   

5.15.

 

Cooperation in Defense and Settlement

     44   
ARTICLE VI.  

            INSURANCE MATTERS

     45   

6.1.

 

Policies and Rights Included Within Assets

     45   

6.2.

 

Claims Made Policies

     45   

6.3.

 

Occurrence-Based Policies

     46   

6.4.

 

Claims-Made or Similarly Based Policies

     47   

6.5.

 

Administration; Exceeding Policy Limits; Allocation of Insurance Proceeds

     47   

6.6.

 

Agreement for Waiver of Conflict and Shared Defense

     48   

6.7.

 

Cooperation on Insurance Matters

     49   

6.8.

 

Miscellaneous Insurance Matters

     49   
ARTICLE VII.  

            EXCHANGE OF INFORMATION; CONFIDENTIALITY

     49   

7.1.

 

Agreement for Exchange of Information

     49   

7.2.

 

Ownership of Information

     50   

7.3.

 

Compensation for Providing Information

     50   

7.4.

 

Record Retention

     50   

7.5.

 

Limitations of Liability

     50   

7.6.

 

Other Agreements Providing for Exchange of Information

     50   

7.7.

 

Auditors and Audits; Annual and Quarterly Financial Statements and Accounting

     51   

7.8.

 

Cooperation

     52   

7.9.

 

Privileged Matters

     53   

7.10.

 

Confidentiality

     55   

7.11.

 

Protective Arrangements

     56   
ARTICLE VIII.  

            FURTHER ASSURANCES AND ADDITIONAL COVENANTS

     56   

8.1.

 

Further Assurances

     56   

8.2.

 

Performance

     57   

8.3.

 

Order of Precedence

     57   
ARTICLE IX.  

            TERMINATION

     58   

9.1.

 

Termination

     58   
ARTICLE X.  

            MISCELLANEOUS

     58   

10.1.

 

Counterparts; Entire Agreement; Corporate Power

     58   

10.2.

 

Governing Law

     59   

10.3.

 

Assignability

     59   

10.4.

 

Third-Party Beneficiaries

     59   

10.5.

 

Notices

     60   

10.6.

 

Severability

     60   

10.7.

 

Force Majeure

     60   

10.8.

 

Publicity

     61   

10.9.

 

Expenses

     61   

10.10.

 

Late Payments

     61   

10.11.

 

Headings

     61   

 

ii


10.12.

 

Survival of Covenants

     61   

10.13.

 

Waivers of Default

     62   

10.14.

 

Specific Performance

     62   

10.15.

 

Amendments

     62   

10.16.

 

Interpretation

     62   

10.17.

 

Limitations of Liability

     63   

 

iii


ANNEX AND SCHEDULES

 

Schedule 1.1A  

Assumed Actions

Schedule 1.1B  

SpinCo Business Exclusions

Schedule 1.1C  

SpinCo Contracts

Schedule 1.1D  

SpinCo Intellectual Property

Schedule 1.1E  

SpinCo Software

Schedule 2.2(a)(i)  

Members of the SpinCo Group following the Distribution

Schedule 2.2(a)(v)  

SpinCo Assets

Schedule 2.2(b)(v)  

Excluded Assets

Schedule 2.3(a)(ii)  

SpinCo Liabilities

Schedule 2.3(b)(i)  

Excluded Liabilities

Schedule 2.8(b)(ii)  

Agreements between SpinCo Group and NOV Group that will not be terminated

Schedule 2.8(b)(iv)  

Intercompany accounts payable or accounts receivable that will not be terminated

Schedule 2.9(a)  

Shared Contracts

Schedule 5.5(g)  

Special provisions applicable to certain pending Third-Party Claims

Schedule 5.9(a)  

Guarantees, letters of credit and other obligations from which the NOV Group is to be removed

Schedule 6.1(c)  

Insurance policies for which waivers of subrogation are required

EXHIBITS  
Exhibit A  

Employee Matters Agreement

Exhibit B  

Tax Matters Agreement

Exhibit C  

Transition Services Agreement

 

iv


SEPARATION AND DISTRIBUTION AGREEMENT

This SEPARATION AND DISTRIBUTION AGREEMENT, made and entered into effective as of [], 2014 (this “Agreement”), is by and between National Oilwell Varco, Inc., a Delaware corporation (“NOV”), and NOW Inc., a Delaware corporation and wholly owned subsidiary of NOV (“SpinCo”). NOV and SpinCo are each a “Party” and are sometimes referred to herein as the “Parties”. Capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in Article I.

R E C I T A L S

WHEREAS, the Board of Directors of NOV (the “NOV Board”) has determined that it is appropriate, desirable and in the best interests of NOV and its stockholders to create a new publicly traded company to own and operate the SpinCo Business;

WHEREAS, SpinCo has been incorporated for this purpose and has not engaged in activities except in preparation for its corporate reorganization (including activities with respect to the SpinCo Financing Arrangements) and the distribution of its stock;

WHEREAS, in furtherance of the foregoing, the NOV Board has (i) determined that it is appropriate, desirable and in the best interest of NOV and its stockholders for NOV and its applicable Subsidiaries to transfer the SpinCo Assets to SpinCo and certain entities designated by SpinCo that will be Subsidiaries of SpinCo as of the Distribution Date (any such entities, the “SpinCo Designees”), and for SpinCo and the SpinCo Designees to assume the SpinCo Liabilities, in each case as more fully described in this Agreement and the Ancillary Agreements (the “Separation”) and (ii) approved this Agreement and each of the Ancillary Agreements;

WHEREAS, on the terms and conditions set forth in this Agreement, NOV shall contribute (or cause to be contributed) the SpinCo Assets to SpinCo and the SpinCo Designees in exchange for SpinCo Common Stock and the assumption by SpinCo of the SpinCo Liabilities (the “Contribution”);

WHEREAS, NOV currently intends that, on the Distribution Date, NOV shall distribute to holders of shares of NOV Common Stock, through a spin-off, all of the outstanding shares of SpinCo Common Stock, as more fully described in this Agreement and the Ancillary Agreements (the “Distribution”);

WHEREAS, for U.S. federal income tax purposes, the Contribution and the Distribution, if effected, taken together, are intended to qualify as a tax-free transaction under Sections 355 and 368(a)(1)(D) of the Code;

WHEREAS, this Agreement is intended to be, and is hereby adopted as, a “plan of reorganization” within the meaning of Treas. Reg. 1.368-2(g); and

WHEREAS, it is appropriate and desirable to set forth the principal corporate transactions required to effect the Separation and the Distribution and certain other agreements that will govern certain matters relating to the Separation and the Distribution and the relationship of NOV, SpinCo and their respective Subsidiaries, following the Distribution.


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

ARTICLE I.

DEFINITIONS

For the purpose of this Agreement, the following terms shall have the following meanings:

AAA Commercial Arbitration Rules” shall have the meaning set forth in Section 4.3(a).

Action” means any demand, action, claim, charge, suit, countersuit, arbitration, inquiry, subpoena, proceeding or investigation of any nature by or before any Governmental Authority or in any arbitration or mediation.

Affiliate” means, when used with respect to a specified Person, a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person. For the purpose of this definition, “control” (including with correlative meanings, “controlled by” and “under common control with”), when used with respect to any specified Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment, undertaking or otherwise. It is expressly agreed that, from and after the Effective Time and for purposes of this Agreement and the Ancillary Agreements, no member of the SpinCo Group shall be deemed to be an Affiliate of any member of the NOV Group, and no member of the NOV Group shall be deemed to be an Affiliate of any member of the SpinCo Group.

Agent” means the distribution agent to be appointed by NOV to distribute to the stockholders of NOV all of the outstanding shares of SpinCo Common Stock pursuant to the Distribution.

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

Allocable Portion of Insurance Proceeds” shall have the meaning set forth in Section 6.5.

Amended Financial Report” shall have the meaning set forth in Section 7.7(b).

Ancillary Agreements” means the Employee Matters Agreement, the Transition Services Agreement, the Tax Matters Agreement, the Master Distributor Agreement, the Master Services Agreement and the Transfer Documents.

Approvals or Notifications” means any consents, waivers, approvals, permits or authorizations to be obtained from, notices, registrations or reports to be submitted to, or other filings to be made with, any third Person, including any Governmental Authority.

Assets” means, with respect to any Person, the assets, properties, claims and rights (including goodwill) of such Person, wherever located (including in the possession of vendors or other third parties or elsewhere), of every kind, character and description, whether real, personal or mixed,

 

2


tangible, intangible or contingent, in each case, whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of such Person, including the following:

(a) all accounting and other legal and business books, records, ledgers and files whether in printed, electronic, written or any other form;

(b) all apparatus, computers and other electronic data processing and communications equipment, fixtures, machinery, equipment, furniture, office equipment, automobiles, trucks, motor vehicles and other transportation equipment and other tangible personal property;

(c) all inventories of materials, parts, raw materials, components, supplies, works-in-process and finished goods and products;

(d) all interests in real property of whatever nature, including easements, whether as owner, mortgagee or holder of a Security Interest in real property, lessor, sublessor, lessee, sublessee or otherwise;

(e) (i) all interests in and rights with respect to any capital stock or other equity interests of any Subsidiary, Affiliate or any other Person, (ii) all bonds, notes, debentures or other securities issued by any Subsidiary, Affiliate or any other Person, (iii) all loans, advances or other extensions of credit or capital contributions to any Subsidiary, Affiliate or any other Person and (iv) all other investments in securities of any Person;

(f) all license agreements, leases of personal property, open purchase orders for raw materials, supplies, parts or services, unfilled orders for the manufacture and sale of products, and other contracts, agreements or commitments;

(g) all deposits, letters of credit and performance and surety bonds;

(h) all written (including in electronic form) technical information, data, specifications, research and development information, engineering drawings and specifications, operating and maintenance manuals, and materials and analyses prepared by consultants and other third parties;

(i) all Intellectual Property;

(j) all Software;

(k) all cost information, sales and pricing data, customer prospect lists, supplier records, customer and supplier lists, customer and vendor data, correspondence and lists, product data and literature, artwork, design, formulations and specifications, development and business process files and data, vendor and customer drawings, quality records and reports and other books, records, studies, surveys, reports, plans and documents;

 

3


(l) all prepaid expenses, trade accounts and other accounts and notes receivable;

(m) all rights under contracts or agreements, all claims or rights against any Person arising from the ownership of any Asset, all rights in connection with any bids or offers and all claims, choses in action or similar rights whether sounding in tort, contract or otherwise, whether accrued or contingent;

(n) all rights under insurance policies and all rights in the nature of insurance, indemnification or contribution;

(o) all Permits;

(p) all cash or cash equivalents, bank accounts, brokerage accounts, lock boxes, and other third-party deposit arrangements;

(p) all interest rate, currency, commodity or other swap, collar, cap or other hedging or similar agreements or arrangements; and

(g) any Privileged Information that relates solely to the SpinCo Business.

Assumed Actions” means those Actions which are listed in Schedule 1.1A.

Audited Party” shall have the meaning set forth in Section 7.7(a)(ii).

Business Day” means any day that is not a Saturday, Sunday or any other day on which banks are required or authorized by Law to be closed in the city of Houston, Texas.

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

Contract” means any written agreement, license, contract, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment or undertaking.

Contribution” shall have the meaning set forth in the Recitals.

Corporate Action” means any Action, whether filed before, on or after the Effective Time, to the extent it asserts violations of any federal, state, local, foreign or international securities Law, securities class action or shareholder derivative claim.

Custodial Party” means the party that maintains the Records Facility where Stored Records are held.

Dispute” shall have the meaning set forth in Section 4.1(a).

Dispute Committee” shall have the meaning set forth in Section 4.1(a).

Distribution” shall have the meaning set forth in the Recitals.

 

4


Distribution Agent” means American Stock Transfer & Trust Co., LLC.

Distribution Date” means the date on which NOV, through the Distribution Agent, distributes all of the issued and outstanding shares of SpinCo Common Stock to holders of NOV Common Stock in the Distribution.

Effective Time” means 5:00 p.m. Central Standard Time, or such other time as NOV may determine, on the Distribution Date.

Employee Matters Agreement” means the Employee Matters Agreement, dated as of the date hereof, between NOV and SpinCo, in substantially the form attached as Exhibit A hereto, as such agreement may be modified or amended from time to time in accordance with its terms.

Environmental Law” means any Law relating to pollution, protection or restoration of or prevention of harm to the environment or natural resources, including the use, handling, transportation, treatment, storage, disposal, Release or discharge of Hazardous Materials or the protection of or prevention of harm to human health and safety.

Environmental Liabilities” means all Liabilities relating to, arising out of or resulting from any Hazardous Materials, Environmental Law or contract or agreement relating to environmental, health or safety matters (including all removal, remediation or cleanup costs, investigatory costs, response costs, natural resources damages, property damages, personal injury damages, costs of compliance, including with any product take-back requirements, or with any settlement, judgment or other determination of Liability and indemnity, contribution or similar obligations) and all costs and expenses, interest, fines, penalties or other monetary sanctions in connection therewith.

Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder, as the same shall be in effect at the time reference is made thereto.

Excluded Assets” shall have the meaning set forth in Section 2.2(b).

Excluded Liabilities” shall have the meaning set forth in Section 2.3(b).

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

Form 10” means the registration statement on Form 10 filed by SpinCo with the SEC in connection with the Distribution, including any amendments or supplements thereto.

Governmental Approvals” means any notices or reports to be submitted to, or other filings to be made with, or any consents, registrations, approvals, permits or authorizations to be obtained

 

5


from, any Governmental Authority; provided, however, that no Consent required from any counterparty to any Contract shall constitute a Governmental Approval for purposes of this Agreement.

Governmental Authority” means any nation or government, any state, municipality or other political subdivision thereof, and any entity, body, agency, commission, department, board, bureau, court, tribunal or other instrumentality, whether federal, state, local, domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory, administrative or other similar functions of, or pertaining to, government and any official thereof.

Group” means either the SpinCo Group or the NOV Group, as the context requires.

Hazardous Materials” means any chemical, material, substance, waste, pollutant, emission, discharge, release or contaminant that could result in liability under, or that is prohibited, limited or regulated by or pursuant to, any Environmental Law, and any natural or artificial substance (whether solid, liquid or gas, noise, ion, vapor or electromagnetic) that could cause harm to human health or the environment, including petroleum, petroleum products and byproducts, asbestos and asbestos-containing materials, urea formaldehyde foam insulation, electronic, medical or infectious wastes, polychlorinated biphenyls, radon gas, radioactive substances, chlorofluorocarbons and all other ozone-depleting substances.

Indebtedness” means (i) any indebtedness for borrowed money or the deferred purchase price of property as evidenced by a note, bond or other instrument, (ii) obligations as lessee under capital leases, (iii) obligations secured by any mortgage, pledge, security interest, encumbrance, lien or charge of any kind existing on any Asset owned or held by any Person, whether or not such Person has assumed or become liable for the obligations secured thereby, (iv) any obligation under any interest rate swap agreement, (v) accounts payable, (vi) reimbursement obligations with respect to surety and performance bonds or letters of credit, and (vii) obligations under direct or indirect guarantees of (including obligations, contingent or otherwise, to assure a creditor against loss in respect of) indebtedness or obligations of the kinds referred to in clauses (i), (ii), (iii), (iv), (v) and (vi) above.

Indemnifying Party” shall have the meaning set forth in Section 5.4(a).

Indemnitee” shall have the meaning set forth in Section 5.4(a).

Indemnity Payment” shall have the meaning set forth in Section 5.4(a).

Information” means information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, memos, and other technical, financial, employee or business information or data.

 

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Information Statement” means the Information Statement attached as an exhibit to the Form 10 and sent to the holders of NOV Common Stock in connection with the Distribution, including any amendment or supplement thereto.

Initial Notice” shall have the meaning set forth in Section 4.2.

Insurance Administration” shall mean, with respect to each Shared Policy: (i) the accounting for premiums, retrospectively-rated premiums, defense costs, Indemnity Payments, deductibles and retentions, as appropriate, under the terms and conditions of each of the Shared Policies; (ii) the reporting to insurance carriers of any circumstances, incidents, occurrences, losses or claims which may cause the per-occurrence, per claim or aggregate limits of any Shared Policy to be exceeded, and (iii) the distribution of Insurance Proceeds as contemplated by this Agreement.

Insurance Proceeds” means those monies:

(a) received by an insured from an insurance carrier; or

(b) paid by an insurance carrier on behalf of the insured;

in either such case net of any applicable premium adjustments (including reserves and retrospectively rated premium adjustments) and net of any costs or expenses incurred in the collection thereof; provided, however, that with respect to a captive insurance arrangement, Insurance Proceeds shall only include net amounts received by the captive insurer from a Third Party in respect of any captive reinsurance arrangement.

Insured Claims” shall mean those Liabilities that, individually or in the aggregate, are covered within the terms and conditions of any of the Shared Policies, whether or not subject to deductibles, co-insurance, uncollectability or retrospectively-rated premium adjustments.

Intellectual Property” means all of the following whether arising under the Laws of the United States or of any other foreign or multinational jurisdiction: (a) patents, patent applications (including patents issued thereon) and statutory invention registrations, including reissues, divisions, continuations, continuations in part, substitutions, renewals, extensions and reexaminations of any of the foregoing, and all rights in any of the foregoing provided by international treaties or conventions, (b) trademarks, service marks, trade names, service names, trade dress, logos and other source or business identifiers, including all goodwill associated with any of the foregoing and any and all common law rights in and to any of the foregoing, registrations and applications for registration of any of the foregoing, all rights in and to any of the foregoing provided by international treaties or conventions, and all reissues, extensions and renewals of any of the foregoing, (c) Internet domain names, (d) copyrightable works, copyrights, moral rights, mask work rights, database rights and design rights, whether or not registered, and all registrations and applications for registration of any of the foregoing, and all rights in and to any of the foregoing provided by international treaties or conventions, (e) confidential and proprietary information, including trade secrets, invention disclosures, processes and know-how and (f) intellectual property rights arising from or in respect of any technology.

Law” means any national, supranational, federal, state, provincial, local or similar law (including common law), statute, code, order, ordinance, rule, regulation, treaty (including any

 

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income tax treaty), license, permit, authorization, approval, consent, decree, injunction, binding judicial or administrative interpretation or other requirement, in each case, enacted, promulgated, issued or entered by a Governmental Authority.

Liabilities” means any and all Indebtedness, guarantees, assurances, commitments, liabilities, responsibilities, Losses, remediation, deficiencies, reimbursement obligations in respect of letters of credit, damages, fines, penalties, settlements, sanctions, costs, expenses, interest and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, accrued or not accrued, asserted or unasserted, liquidated or unliquidated, foreseen or unforeseen, known or unknown, reserved or unreserved, or determined or determinable, including those arising under any Law, claim (including any Third-Party Claim), demand, Action, or order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority or arbitration tribunal, and those arising under any contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment or undertaking, or any fines, damages or equitable relief that is imposed, in each case, including all costs and expenses relating thereto.

Losses” means actual losses (including any diminution in value), costs, damages, fines, penalties and expenses (including legal and accounting fees and expenses and costs of investigation and litigation), whether or not involving a Third-Party Claim.

Master Distributor Agreement” means the Master Distributor Agreement, dated as of the date hereof, between DNOW, LP and National Oilwell Varco, L.P.

Master Services Agreement” means the Master Services Agreement, dated as of the date hereof, between DNOW, LP and National Oilwell Varco, L.P.

Non-Custodial Party” means the party that owns Stored Records held in the other party’s Records Facility.

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

NOV Accounts” shall have the meaning set forth in Section 2.10(a).

NOV Board” shall have the meaning set forth in the Recitals.

NOV Business” means each and every business conducted at any time by any member of the NOV Group, except the SpinCo Business.

NOV Common Stock” means the common stock, par value $0.01 per share, of NOV.

NOV Group” means NOV, each Subsidiary of NOV immediately after the Effective Time and each Affiliate of NOV immediately after the Effective Time (in each case other than any member of the SpinCo Group).

NOV Indemnitees” shall have the meaning set forth in Section 5.2.

 

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NOV Intellectual Property” means (a) the NOV Name and NOV Marks, and (b) all other Intellectual Property that, as of the Effective Time, is owned or licensed by any member of either Group, other than the SpinCo Intellectual Property.

NOV Name and NOV Marks” means the names, marks, trade dress, logos, monograms, domain names and other source or business identifiers of NOV or any of its Affiliates using or containing “NOV” or “National Oilwell Varco” (in block letters or otherwise), “NOV” or “National Oilwell Varco” either alone or in combination with other words or elements, and all names, marks, trade dress, logos, monograms, domain names and other source or business identifiers confusingly similar to or embodying any of the foregoing either alone or in combination with other words or elements, together with the goodwill associated with any of the foregoing.

NOV Retained Liabilities” means all Liabilities of the NOV Group relating to the NOV Assets or NOV Business, excluding any SpinCo Liabilities.

NOV Software” means all Software that, as of the Effective Time, is owned or licensed by any member of either Group, other than the SpinCo Software.

NOV Transfer Documents” shall have the meaning set forth in Section 2.1(b).

NYSE” means the New York Stock Exchange.

Other Party’s Auditor” shall have the meaning set forth in Section 7.7(a)(ii).

Permit” means all permits, licenses, franchises, authorizations, concessions, certificates, consents, exemptions, approvals, variances, registrations, or similar authorizations from any Governmental Authority.

Person” means any individual, general or limited partnership, corporation, business trust, joint venture, association, company, limited liability company, unincorporated organization, a limited liability entity, any other entity and any Governmental Authority.

Policies” shall mean insurance policies and insurance Contracts of any kind (other than life and benefits policies or Contracts), including primary, excess and umbrella policies, general liability policies, punitive damages liability, control of well, railroad protective liability, cyber liability, director and officer liability, fiduciary liability, automobile, aircraft, property, terrorism, business interruption, workers’ compensation and employee dishonesty insurance policies, surety bonds and captive insurance company arrangements, together with the rights, benefits and privileges thereunder.

Prime Rate” means the rate which JPMorgan Chase Bank (or any successor thereto or other major money center commercial bank agreed to by the parties hereto) announces from time to time as its prime lending rate, as in effect from time to time.

Privileged Information” means any information, in written, oral, electronic or other tangible or intangible forms, including any communications by or to attorneys (including attorney-client privileged communications), memoranda and other materials prepared by attorneys or under their direction (including attorney work product), as to which a party or its respective Subsidiaries would be entitled to assert or have a privilege, including the attorney-client and attorney work product privileges.

 

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Record Date” means 5:00 p.m. Eastern Time on the date to be determined by the NOV Board as the record date for determining stockholders of NOV entitled to receive shares of SpinCo Common Stock in the Distribution.

Record Holders” means the holders of record of NOV Common Stock as of the Record Date.

Records Facility” shall have the meaning set forth in Section 7.4(a).

Release” means any release, spill, emission, discharge, leaking, pumping, pouring, dumping, injection, deposit, disposal, dispersal, leaching or migration of Hazardous Materials into the environment (including ambient air, surface water, groundwater and surface or subsurface strata).

Representatives” means, with respect to any Person, any of such Person’s directors, officers, employees, agents, consultants, advisors, accountants, attorneys or other representatives.

Response” shall have the meaning set forth in Section 4.2.

Restructuring Steps Memorandum” means the memorandum setting forth the restructuring steps to be taken prior to the Effective Time and the sequence thereof, a copy of which has been previously provided to Spinco by NOV.

Revolving Credit Facility” means a revolving credit facility pursuant to a revolving credit facility agreement entered into prior to the Effective Time by SpinCo, as borrower, the lender named therein as administrative agent, and the lenders named therein, on such terms and conditions as agreed to by SpinCo and the other parties to the revolving credit facility agreement and approved by NOV.

SEC” means the U.S. Securities and Exchange Commission.

Security Interest” means any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer, or other encumbrance of any nature whatsoever.

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

Shared Contract” shall have the meaning set forth in Section 2.9(a).

Shared Policies” means all Policies, current or past, which are owned or maintained by or on behalf of NOV or any of its Subsidiaries which relate to the SpinCo Business and the NOV Business.

Software” means any and all (a) computer programs, including any and all software implementation of algorithms, models and methodologies, whether in source code, object code, human readable form or other form, (b) databases and compilations, including any and all data

 

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and collections of data, whether machine-readable or otherwise, (c) descriptions, flow charts and other work products used to design, plan, organize and develop any of the foregoing, screens, user interfaces, report formats, firmware, development tools, templates, menus, buttons and icons and (d) documentation, including user manuals and other training documentation, relating to any of the foregoing.

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

SpinCo Accounts” shall have the meaning set forth in Section 2.10(a).

SpinCo Assets” shall have the meaning set forth in Section 2.2(a).

SpinCo Balance Sheet” means the audited combined balance sheet of the SpinCo Group, including the notes thereto, as of December 31, 2013.

SpinCo Business” means (a) the worldwide distribution business of NOV and its Subsidiaries and Affiliates (including, for the purposes of this definition, SpinCo and its Subsidiaries and Affiliates) prior to the date hereof as described in the Information Statement as the “distribution business” and (b) without limiting the foregoing clause (a) and except as otherwise expressly provided in this Agreement, any terminated, divested or discontinued businesses, Assets or operations that were of such a nature that they would be part of the SpinCo Business (as described in the foregoing clause (a)) had they not been terminated, divested or discontinued (regardless of whether they ever operated under the “SpinCo” name); provided, that the “SpinCo Business” shall not include any of the businesses, Assets or operations described on Schedule 1.1B.

SpinCo Certificate of Incorporation” shall have the meaning set forth in Section 3.1(f).

SpinCo Common Stock” means the common stock, par value $0.01 per share, of SpinCo.

SpinCo Contracts” means:

(a) any Contract with respect to which the only Persons party thereto or with rights, benefits or obligations thereunder or whose Assets are bound thereby are members of the SpinCo Group and third parties unaffiliated with the NOV Group;

(b) any employment, change of control, retention, consulting, indemnification, termination, severance or other similar agreements with any SpinCo Employee or consultants of the SpinCo Group;

(c) the Contracts listed on Schedule 1.1C; and

(d) any Contract that is otherwise expressly contemplated pursuant to this Agreement or any of the Ancillary Agreements to be assigned to SpinCo or any member of the SpinCo Group.

SpinCo Designees” shall have the meaning set forth in the Recitals.

 

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SpinCo Employee” means any individual who, immediately prior to the Distribution, is either actively employed primarily by, or then on an approved leave of absence from, any Person that will be a member of the SpinCo Group immediately after the Distribution.

SpinCo Financing Arrangements” means the Revolving Credit Facility.

SpinCo Group” means SpinCo, each Subsidiary of SpinCo immediately after the Effective Time and each Affiliate of SpinCo immediately after the Effective Time.

SpinCo Indemnitees” shall have the meaning set forth in Section 5.3.

SpinCo Intellectual Property” means the Intellectual property set forth on Schedule 1.1D.

SpinCo Liabilities” shall have the meaning set forth in Section 2.3(a).

SpinCo Policies” shall mean all Policies, current or past, which are owned or maintained by or on behalf of NOV or any Subsidiary of NOV, which relate exclusively to the SpinCo Business and which Policies are either maintained by SpinCo or a member of the SpinCo Group or assignable to SpinCo or a member of the SpinCo Group.

SpinCo Software” means the Software set forth on Schedule 1.1E.

SpinCo Transfer Documents” shall have the meaning set forth in Section 2.4(b).

Stored Records” means Tangible Information held in a Records Facility maintained or arranged for by the party other than the party that owns such Tangible Information.

Subsidiary” or “subsidiary” means, with respect to any Person, any corporation, limited liability company, joint venture or partnership of which such Person (a) beneficially owns, either directly or indirectly, more than fifty percent (50%) of (i) the total combined voting power of all classes of voting securities of such Person, (ii) the total combined equity interests or (iii) the capital or profit interests, in the case of a partnership, or (b) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.

Tangible Information” means Information that is contained in written, electronic or other tangible forms.

Tax Matters Agreement” means the Tax Matters Agreement, dated as of the date hereof, between NOV and SpinCo, in substantially the form attached as Exhibit B hereto, as such agreement may be modified or amended from time to time in accordance with its terms.

Tax Return” shall have the meaning set forth in the Tax Matters Agreement.

Taxes” shall have the meaning set forth in the Tax Matters Agreement.

Third Party” shall have the meaning set forth in Section 5.5(a).

Third-Party Claim” shall have the meaning set forth in Section 5.5(a).

 

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Transfer Documents” shall have the meaning set forth in Section 2.4(b).

Transferred Entity” shall have the meaning set forth in Section 2.2(a)(i).

Transition Services Agreement” means the Transition Services Agreement, dated as of the date hereof, between NOV and SpinCo, in substantially the form attached as Exhibit C hereto, as such agreement may be modified or amended from time to time in accordance with its terms.

Unreleased SpinCo Liability” shall have the meaning set forth in Section 2.6(b).

Unreleased Excluded Liability” shall have the meaning set forth in Section 2.7(b).

ARTICLE II.

THE SEPARATION

2.1. Transfer of Assets and Assumption of Liabilities. Unless otherwise provided in this Agreement or in any Ancillary Agreement, on or prior to the Effective Time in accordance with the Restructuring Steps Memorandum and to the extent not previously effected prior to the date hereof pursuant to the steps of the Restructuring Steps Memorandum:

(i) NOV shall, and shall cause its applicable Subsidiaries to, assign, transfer, convey and deliver to SpinCo, or the applicable SpinCo Designees, and SpinCo or such SpinCo Designees shall accept from NOV and its applicable Subsidiaries, all of NOV’s and such Subsidiaries’ respective direct or indirect right, title and interest in and to all of the SpinCo Assets (it being understood that if any SpinCo Asset shall be held by a Transferred Entity or a wholly owned Subsidiary of a Transferred Entity, such SpinCo Asset may be assigned, transferred, conveyed and delivered as a result of the transfer of all or substantially all of the equity interests in such Transferred Entity);

(ii) SpinCo and the applicable SpinCo Designees shall accept, assume and agree faithfully to perform, discharge and fulfill all the SpinCo Liabilities in accordance with their respective terms. SpinCo and such SpinCo Designees shall be responsible for all SpinCo Liabilities, regardless of when or where such SpinCo Liabilities arose or arise, or whether the facts on which they are based occurred prior to or subsequent to the Effective Time, regardless of where or against whom such SpinCo Liabilities are asserted or determined (including any SpinCo Liabilities arising out of claims made by the respective directors, officers, employees, agents, stockholders, Subsidiaries or Affiliates of either Group against any member of either Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud, misrepresentation, breach of contract or any other cause by any member of either Group, or any of their respective directors, officers, employees or agents;

(iii) NOV shall cause its applicable Subsidiaries to assign, transfer, convey and deliver to certain of its other Subsidiaries, which shall accept, such applicable Subsidiaries’ respective right, title and interest in and to any Excluded Assets specified by NOV to be so assigned, transferred, conveyed and delivered; and

 

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(iv) NOV and certain of its Subsidiaries shall accept and assume from certain of its other Subsidiaries and agree faithfully to perform, discharge and fulfill the Excluded Liabilities of such other Subsidiaries in accordance with their respective terms, and NOV and its applicable Subsidiaries shall be responsible for all Excluded Liabilities, regardless of when or where such Excluded Liabilities arose or arise, or whether the facts on which they are based occurred prior to or subsequent to the Effective Time, regardless of where or against whom such Excluded Liabilities are asserted or determined (including any such Excluded Liabilities arising out of claims made by the respective directors, officers, employees, agents, stockholders, Subsidiaries or Affiliates of either Group against any member of either Group) or whether asserted or determined prior to the date hereof, and regardless of whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud, misrepresentation, breach of contract or any cause by any member of either Group, or any of their respective directors, officers, employees or agents.

(b) In furtherance of the assignment, transfer, conveyance and delivery of the SpinCo Assets and the assumption of the SpinCo Liabilities in accordance with Sections 2.1(a)(i) and 2.1(a)(ii), on, before or as of the date that such SpinCo Assets are assigned, transferred, conveyed or delivered or such SpinCo Liabilities are assumed, (i) NOV shall execute and deliver, and shall cause its Subsidiaries to execute and deliver, such transfer, contribution, distribution or other similar agreements, bills of sale, deeds, stock powers, certificates of title, assignments of contracts and other instruments of transfer, conveyance and assignment as and to the extent necessary to evidence the transfer, conveyance and assignment of all of NOV’s and its Subsidiaries’ (other than SpinCo and its Subsidiaries) right, title and interest in and to the SpinCo Assets to SpinCo and the SpinCo Designees, and (ii) SpinCo shall execute and deliver, and shall cause the SpinCo Designees to execute and deliver, such assumptions of contracts and any other instruments of assumption as and to the extent necessary to evidence the valid and effective assumption of the SpinCo Liabilities by SpinCo and the SpinCo Designees. All of the documents contemplated by this Section 2.1(b) are referred to collectively herein as the “NOV Transfer Documents.”

(c) To the extent that any SpinCo Asset is not transferred or assigned to, or any SpinCo Liability is not assumed by, a member of the SpinCo Group at the Effective Time or is owned or held by a member of the NOV Group after the Effective Time, from and after the Effective Time, any such SpinCo Asset or SpinCo Liability shall be held by such member of the NOV Group for the use and benefit of the member of the SpinCo Group entitled thereto (at the expense of the member of the SpinCo Group entitled thereto) in accordance with Section 2.5(c), and, subject to Section 2.5(b):

(i) NOV shall, and shall cause its applicable Subsidiaries to, as soon as reasonably practicable, assign, transfer, convey and deliver to SpinCo or certain of its Subsidiaries designated by SpinCo, and SpinCo or such Subsidiaries shall accept from NOV and its applicable Subsidiaries, all of NOV’s and such Subsidiaries’ respective right, title and interest in and to such SpinCo Assets; and

(ii) SpinCo and certain of its Subsidiaries designated by SpinCo shall, as soon as reasonably practicable, accept, assume and agree faithfully to perform, discharge and fulfill all such SpinCo Liabilities in accordance with their respective terms.

 

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(d) SpinCo hereby waives compliance by each and every member of the NOV Group with the requirements and provisions of any “bulk-sale” or “bulk-transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or all of the SpinCo Assets to any member of the SpinCo Group.

(e) NOV hereby waives compliance by each and every member of the SpinCo Group with the requirements and provisions of any “bulk-sale” or “bulk-transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or all of the Excluded Assets to any member of the NOV Group.

2.2. SpinCo Assets.

(a) For purposes of this Agreement, “SpinCo Assets” means (without duplication):

(i) all issued and outstanding equity interests held by NOV or its Subsidiaries in the Subsidiaries of NOV that have been or shall be contributed to, or otherwise transferred, conveyed, or assigned to, the SpinCo Group or entities that shall be members of the SpinCo Group as of the Effective Time, as listed on Schedule 2.2(a)(i) (such Subsidiaries and entities, the “Transferred Entities”);

(ii) all SpinCo Contracts;

(iii) all Assets reflected as assets of SpinCo or its Subsidiaries on the SpinCo Balance Sheet, subject to any dispositions of such Assets subsequent to the date of the SpinCo Balance Sheet;

(iv) all SpinCo Intellectual Property and SpinCo Software; and

(v) all Assets that are expressly provided by this Agreement or any Ancillary Agreement as Assets to be transferred to SpinCo or any other member of the SpinCo Group, including the Assets listed on Schedule 2.2(a)(v).

Notwithstanding the foregoing, the SpinCo Assets shall not, in any event, include the Excluded Assets referred to in Section 2.2(b). All rights of the SpinCo Group in respect of NOV insurance policies are set forth in Article VI and shall not otherwise be included in the SpinCo Assets.

(b) For the purposes of this Agreement, “Excluded Assets” means (without duplication):

(i) all issued and outstanding equity interests held by NOV or its Subsidiaries in any entity that is not a member of the SpinCo Group;

 

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(ii) any cash or cash equivalents withdrawn from SpinCo Accounts in accordance with Section 2.10(e);

(iii) the NOV Intellectual Property and NOV Software;

(iv) any Shared Contract (other than any SpinCo Assets arising under any Shared Contract;

(v) the Assets listed on Schedule 2.2(b)(v) and any and all other Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets to be retained by NOV or any other member of the NOV Group;

(vi) any and all Assets of any members of the NOV Group that are not SpinCo Assets pursuant to Section 2.2(a); and

(vii) any Privileged Information that relates to the NOV Business.

2.3. SpinCo Liabilities.

(a) For the purposes of this Agreement, “SpinCo Liabilities” means (without duplication):

(i) all Liabilities, including any Environmental Liabilities, to the extent relating to, arising out of or resulting from:

(A) the operation or ownership of the SpinCo Business, as conducted at any time prior to, on or after the Effective Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any Person (whether or not such act or failure to act is or was within such Person’s authority)) other than Liabilities arising under any Shared Contracts to the extent such Liabilities relate to the NOV Business; or

(B) any SpinCo Asset;

in any such case, whether arising before, on or after the Effective Time;

(ii) the Liabilities listed on Schedule 2.3(a)(ii) and any and all other Liabilities that are expressly provided by this Agreement or any Ancillary Agreement as Liabilities to be assumed by SpinCo or any member of the SpinCo Group, and all agreements, obligations and Liabilities of any member of the SpinCo Group under this Agreement or any of the Ancillary Agreements;

(iii) all Liabilities relating to, arising out of or resulting from the SpinCo Financing Arrangements;

(iv) all Liabilities reflected as liabilities or obligations of SpinCo or its Subsidiaries on the SpinCo Balance Sheet, subject to any discharge of such Liabilities subsequent to the date of the SpinCo Balance Sheet; and

(v) all Liabilities arising out of claims made by the respective directors, officers, stockholders, employees, agents, Subsidiaries or Affiliates of either Group against any member of either Group to the extent relating to, arising out of or resulting from the SpinCo Business or the other Liabilities referred to in clauses (i) through (iv) above, inclusive.

 

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Notwithstanding the foregoing, the SpinCo Liabilities shall not include the Excluded Liabilities referred to in Section 2.3(b).

(b) For the purposes of this Agreement, “Excluded Liabilities” means (without duplication):

(i) the Liabilities listed on Schedule 2.3(b)(i) and any and all other Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement as Liabilities to be retained or assumed by NOV or any other member of the NOV Group;

(ii) all agreements and obligations of any member of the NOV Group under this Agreement or any of the Ancillary Agreements;

(iii) any and all Liabilities to the extent relating to, arising out of or resulting from any Excluded Assets (other than Liabilities arising under any Shared Contracts to the extent such Liabilities relate to the SpinCo Business), in any such case, whether arising before, on or after the Effective Time;

(iv) all Liabilities arising out of claims made by the respective directors, officers, stockholders, employees, agents, Subsidiaries or Affiliates of either Group against any member of either Group to the extent relating to, arising out of or resulting from the NOV Business or the other Liabilities referred to in clauses (i) through (iii) above, inclusive; and

(v) all Liabilities arising out of the ownership or operation, prior to the Effective Time, by any entity that is a member of the SpinCo Group as of the Effective Time, of (A) the NOV Business; or (B) any other Asset never used in the SpinCo Business; or (C) with respect to other Assets that were, prior to the Effective Time, owned by an entity that is a member of the SpinCo Group but used in both the SpinCo Business and other businesses or activities unrelated to the SpinCo Business (“Other Businesses”), that portion of any Liabilities arising from the use of those Assets in the Other Businesses.

2.4. Transfer of Excluded Assets; Assumption of Excluded Liabilities.

(a) To the extent that any Excluded Asset is transferred or assigned to, or any Excluded Liability is assumed by, a member of the SpinCo Group at the Effective Time or is owned or held by a member of the SpinCo Group after the Effective Time, from and after the Effective Time, any such Excluded Asset or Excluded Liability shall be held by such member of the SpinCo Group for the use and benefit of the member of the NOV Group entitled thereto (at the expense of the member of the NOV Group entitled thereto) in accordance with Section 2.5(c), subject to Section 2.5(b) and:

(i) SpinCo shall, and shall cause its applicable Subsidiaries to, as soon as reasonably practicable, assign, transfer, convey and deliver to NOV or certain of its Subsidiaries designated by NOV, and NOV or such Subsidiaries shall accept from SpinCo and its applicable Subsidiaries, all of SpinCo’s and such Subsidiaries’ respective right, title and interest in and to such Excluded Assets; and

(ii) NOV and certain of its Subsidiaries designated by NOV shall, as soon as reasonably practicable, accept, assume and agree faithfully to perform, discharge and fulfill all such Excluded Liabilities in accordance with their respective terms.

 

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(b) In furtherance of the assignment, transfer, conveyance and delivery of Excluded Assets and the assumption of Excluded Liabilities set forth in Sections 2.4(a)(i) and 2.4(a)(ii), and without any additional consideration therefor: (i) SpinCo shall execute and deliver, and shall cause its Subsidiaries to execute and deliver, such transfer, contribution, distribution or other similar agreements bills of sale, deeds, stock powers, certificates of title, assignments of contracts and other instruments of transfer, conveyance and assignment as and to the extent necessary to evidence the transfer, conveyance and assignment of all of SpinCo’s and its Subsidiaries’ right, title and interest in and to the Excluded Assets to NOV and its Subsidiaries and (ii) NOV shall execute and deliver, and shall cause its Subsidiaries to execute and deliver, such assumptions of contracts and any other instruments of assumption as and to the extent necessary to evidence the valid and effective assumption of the Excluded Liabilities. All of the foregoing documents contemplated by this Section 2.4(b) and by Sections 2.1(a)(iii) and 2.1(a)(iv) shall be referred to collectively herein as the “SpinCo Transfer Documents” and, together with the NOV Transfer Documents, the “Transfer Documents.”

2.5. Approvals and Notifications.

(a) To the extent that the transfer or assignment of any SpinCo Asset, the assumption of any SpinCo Liability, the transfer or assignment of any Excluded Asset, the assumption of any Excluded Liability, or the Separation or the Distribution requires any Approvals or Notifications, the parties shall endeavor to obtain or make such Approvals or Notifications as soon as reasonably practicable; provided, however, that, except to the extent expressly provided in this Agreement or any of the Ancillary Agreements or as otherwise agreed between NOV and SpinCo, neither NOV nor SpinCo shall be obligated to contribute capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any Person in order to obtain or make such Approvals or Notifications.

(b) If and to the extent that the valid, complete and perfected transfer or assignment to (i) the SpinCo Group of any SpinCo Assets or assumption by the SpinCo Group of any SpinCo Liabilities or (ii) the NOV Group of any Excluded Asset or assumption by the NOV Group of any Excluded Liability, would be a violation of applicable Law, would result in a breach, or constitute a default (or an event which, with the giving of notice or lapse of time, or both, would become a default) under any contract, agreement or other material instrument or

 

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would otherwise adversely affect the rights of a member of the SpinCo Group or the NOV Group thereunder or require any Approvals or Notifications in connection with the Separation or the Distribution that have not been obtained or made by the Effective Time, then, unless the parties hereto shall otherwise mutually determine, the transfer or assignment to the SpinCo Group of such SpinCo Assets or to the NOV Group of such Excluded Assets, or the assumption by the SpinCo Group of such SpinCo Liabilities or the NOV Group of such Excluded Liabilities, as the case may be, shall be automatically deemed deferred and any such purported transfer, assignment or assumption shall be null and void until such time as all legal impediments are removed or such Approvals or Notifications have been obtained or made. Notwithstanding the foregoing, any such SpinCo Assets or Excluded Assets or SpinCo Liabilities or Excluded Liabilities shall continue to constitute SpinCo Assets, Excluded Assets, SpinCo Liabilities or Excluded Liabilities, as applicable, for all other purposes of this Agreement.

(c) If any SpinCo Asset or SpinCo Liability is owned or held by any member of the NOV Group after the Effective Time, or any Excluded Asset or Excluded Liability is held by any member of the SpinCo Group after the Effective Time, whether as a result of the provisions of Section 2.5(b) or for any other reason, then, insofar as reasonably possible, the member of the SpinCo Group holding or owning such Excluded Asset or such Excluded Liability, or the member of the NOV Group holding such SpinCo Asset or SpinCo Liability, as the case may be, shall thereafter hold such SpinCo Asset or Excluded Asset or SpinCo Liability or Excluded Liability, as the case may be, for the use and benefit of the member of the NOV Group or SpinCo Group entitled thereto (at the expense of the member of the NOV Group or SpinCo Group entitled thereto). In addition, the member of the SpinCo Group retaining such Excluded Asset or such Excluded Liability, or the member of the NOV Group retaining such SpinCo Asset or SpinCo Liability, shall, insofar as reasonably possible and to the extent permitted by applicable Law, treat such SpinCo Asset or Excluded Asset or SpinCo Liability or Excluded Liability in the ordinary course of business in accordance with past practice and take such other actions as may be reasonably requested by the member of the SpinCo Group or NOV Group to whom such SpinCo Asset or Excluded Asset is to be transferred or assigned, or which shall assume such SpinCo Liability or Excluded Liability, as the case may be, in order to place such member of the SpinCo Group or NOV Group in a substantially similar position as if such SpinCo Asset or Excluded Asset or SpinCo Liability or Excluded Liability had been transferred, assigned, assumed or retained in connection with the Separation to or by the party entitled thereto and so that all the benefits and burdens relating to such SpinCo Asset or Excluded Asset or SpinCo Liability or Excluded Liability, as the case may be, including use, risk of loss, potential for gain, and dominion, control and command over such SpinCo Asset or Excluded Asset or SpinCo Liability or Excluded Liability, as the case may be, and all costs and expenses related thereto, shall inure from and after the Effective Time to the SpinCo Group, in the case of any SpinCo Asset or SpinCo Liability, or the NOV Group, in the case of any Excluded Asset or Excluded Liability.

(d) If and when the Approvals or Notifications, the absence of which caused the deferral of transfer or assignment of any SpinCo Asset or Excluded Asset or the deferral of assumption of any SpinCo Liability or Excluded Liability pursuant to Section 2.5(b), are obtained or made, and, if and when any other legal impediments for the transfer or assignment of any SpinCo Asset or Excluded Asset or the assumption of any SpinCo Liability or Excluded Liability have been removed, the transfer or assignment of the applicable SpinCo Asset or

 

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Excluded Asset or the assumption of the applicable SpinCo Liability or Excluded Liability, as the case may be, shall be effected in accordance with the terms of this Agreement and/or the applicable Ancillary Agreement.

(e) Except as otherwise agreed between NOV and SpinCo, (i) any member of the NOV Group retaining a SpinCo Asset or SpinCo Liability (whether as a result of the provisions of Section 2.1(c), Section 2.5(b) or for any other reason) and (ii) any member of the SpinCo Group holding or owning an Excluded Asset or Excluded Liability (whether as a result of the provisions of Section 2.4(a), Section 2.5(b) or for any other reason), shall not be obligated, in order to effect the transfer of such Asset or Liability to the Group member entitled thereto, to expend any money unless the necessary funds are advanced (or otherwise made available) by the Group member entitled thereto, other than reasonable out-of-pocket expenses, attorneys’ fees and recording or similar fees, all of which shall be promptly reimbursed by the Group member entitled to such Asset or Liability.

2.6. Novation of SpinCo Liabilities.

(a) Each of NOV and SpinCo, at the request of the other, shall endeavor, if reasonably practicable, to obtain, or to cause to be obtained, if reasonably practicable, any consent, substitution, approval or amendment required to novate or assign all obligations under agreements, leases, licenses and other obligations or Liabilities of any nature whatsoever that constitute SpinCo Liabilities, or to obtain in writing the unconditional release of all parties to such arrangements other than any member of the SpinCo Group, so that, in any such case, the members of the SpinCo Group shall be solely responsible for the SpinCo Liabilities; provided, however, that neither NOV nor SpinCo shall be obligated to contribute any capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any third Person from whom any such consent, substitution, approval, amendment or release is requested.

(b) If NOV or SpinCo is unable to obtain, or to cause to be obtained, any such required consent, substitution, approval, amendment or release, and the applicable member of the NOV Group continues to be bound by such agreement, lease, license or other obligation or Liability (each, an “Unreleased SpinCo Liability”), SpinCo shall, to the extent not prohibited by Law, as indemnitor, guarantor, agent or subcontractor for such member of the NOV Group, as the case may be, (i) pay, perform and discharge fully all the obligations or other Liabilities of such member of the NOV Group that constitute Unreleased SpinCo Liabilities from and after the Effective Time and (ii) use its commercially reasonable efforts to effect such payment, performance or discharge prior to any demand for such payment, performance, or discharge is permitted to be made by the obligee thereunder on any member of the NOV Group. If and when any such consent, substitution, approval, amendment or release shall be obtained or the Unreleased SpinCo Liabilities shall otherwise become assignable or able to be novated, NOV shall promptly assign, or cause to be assigned, and SpinCo or the applicable SpinCo Group member shall assume, such Unreleased SpinCo Liabilities without exchange of further consideration.

 

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2.7. Novation of Excluded Liabilities.

(a) Each of NOV and SpinCo, at the request of the other, shall endeavor, if reasonably practicable, to obtain, or to cause to be obtained, if reasonably practicable, any consent, substitution, approval or amendment required to novate or assign all obligations under agreements, leases, licenses and other obligations or Liabilities of any nature whatsoever that constitute Excluded Liabilities, or to obtain in writing the unconditional release of all parties to such arrangements other than any member of the NOV Group, so that, in any such case, the members of the NOV Group shall be solely responsible for such Excluded Liabilities; provided, however, that neither NOV nor SpinCo shall be obligated to contribute any capital or pay any consideration in any form (including providing any letter of credit, guaranty or other financial accommodation) to any third Person from whom any such consent, substitution, approval, amendment or release is requested.

(b) If NOV or SpinCo is unable to obtain, or to cause to be obtained, any such required consent, substitution, approval, amendment or release and the applicable member of the SpinCo Group continues to be bound by such agreement, lease, license or other obligation or Liability (each, an “Unreleased Excluded Liability”), NOV shall, to the extent not prohibited by Law, as indemnitor, guarantor, agent or subcontractor for such member of the SpinCo Group, as the case may be, (i) pay, perform and discharge fully all the obligations or other Liabilities of such member of the SpinCo Group that constitute Unreleased Excluded Liabilities from and after the Effective Time and (ii) use its commercially reasonable efforts to effect such payment, performance, or discharge prior to any demand for such payment, performance, or discharge is permitted to be made by the obligee thereunder on any member of the SpinCo Group. If and when any such consent, substitution, approval, amendment or release shall be obtained or the Unreleased Excluded Liabilities shall otherwise become assignable or able to be novated, SpinCo shall promptly assign, or cause to be assigned, and NOV or the applicable NOV Group member shall assume, such Unreleased Excluded Liabilities without exchange of further consideration.

2.8. Termination of Agreements.

(a) Except as set forth in Section 2.8(b), in furtherance of the releases and other provisions set forth in Article V, SpinCo and each member of the SpinCo Group, on the one hand, and NOV and each member of the NOV Group, on the other hand, hereby terminate any and all agreements, arrangements, commitments or understandings, whether or not in writing, between or among SpinCo and/or any member of the SpinCo Group and/or any entity that shall be a member of the SpinCo Group as of the Effective Time, on the one hand, and NOV and/or any member of the NOV Group (other than entities that shall be members of the SpinCo Group as of the Effective Time), on the other hand, effective as of the Effective Time. No such terminated agreement, arrangement, commitment or understanding (including any provision thereof which purports to survive termination) shall be of any further force or effect after the Effective Time. Each party shall, at the reasonable request of any other party, take, or cause to be taken, such other actions as may be necessary to effect the foregoing.

(b) The provisions of Section 2.8(a) shall not apply to any of the following agreements, arrangements, commitments or understandings (or to any of the provisions thereof):

 

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(i) this Agreement and the Ancillary Agreements (and each other agreement or instrument expressly contemplated by this Agreement or any Ancillary Agreement to be entered into by any of the parties hereto or any of the members of their respective Groups, including, for the avoidance of doubt, those agreements and instruments entered into in connection with the SpinCo Financing Arrangements); (ii) any agreements, arrangements, commitments or understandings filed as an exhibit, whether in preliminary or final form, to the Form 10 or otherwise listed or described on Schedule 2.8(b)(ii); (iii) any agreements, arrangements, commitments or understandings to which any Person other than the parties hereto and the members of their respective Groups is a party (it being understood that to the extent that the rights and obligations of the parties and the members of their respective Groups under any such agreements, arrangements, commitments or understandings constitute SpinCo Assets or SpinCo Liabilities, they shall be assigned pursuant to Section 2.1); (iv) any intercompany accounts payable or accounts receivable described on Schedule 2.8(b)(iv); (v) any agreements, arrangements, commitments or understandings to which any member of the NOV Group or SpinCo Group, other than NOV, SpinCo or any wholly owned Subsidiary of NOV or SpinCo, as the case may be, is a party (it being understood that directors’ qualifying shares or similar interests shall be disregarded for purposes of determining whether a Subsidiary is wholly owned); (vi) any Shared Contracts; and (vii) any other agreements, arrangements, commitments or understandings that this Agreement or any Ancillary Agreement expressly contemplates shall survive the Effective Time.

2.9. Treatment of Shared Contracts.

(a) Without limiting the generality of the obligations set forth in Section 2.1, unless the parties otherwise agree or the benefits of any contract, agreement, arrangement, commitment or understanding described in this Section 2.9 are expressly conveyed to the applicable party pursuant to an Ancillary Agreement, (i) any contract, agreement, arrangement, commitment or understanding that is listed on Schedule 2.9(a) shall be assigned in part to the applicable member(s) of the applicable Group, if so assignable, or appropriately amended prior to, on or after the Effective Time, so that each party or the members of its respective Group shall, as of the Effective Time, be entitled to the rights and benefits, and shall assume the related portion of any Liabilities, inuring to its respective businesses, in each case, in accordance with the allocation of benefits and burdens set forth on Schedule 2.9(a), and (ii) (A) any contract, agreement, arrangement, commitment or understanding that is an Excluded Asset or Excluded Liability but, prior to the Effective Time, inured in part to the benefit or burden of any member of the SpinCo Group, and (B) any contract, agreement, arrangement, commitment or understanding that is a SpinCo Asset or a SpinCo Liability but, prior to the Effective Time, inured in part to the benefit or burden of any member of the NOV Group, shall be assigned in part to the applicable member(s) of the applicable Group, if so assignable, or appropriately amended prior to, on or after the Effective Time, so that each party or the members of its respective Group shall, as of the Effective Time, be entitled to the rights and benefits, and shall assume the related portion of any Liabilities, inuring to its respective businesses (any contract, agreement, arrangement, commitment or understanding referred to in clause (i) or (ii) above, a “Shared Contract”); provided, however, that, in the case of each of clause (i) and (ii), (1) in no event shall any member of any Group be required to assign (or amend) any Shared Contract in its entirety or to assign a portion of any Shared Contract which is not assignable (or cannot be amended) by its terms (including any terms imposing consents or conditions on an assignment

 

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where such consents or conditions have not been obtained or fulfilled), and (2) if any Shared Contract cannot be so partially assigned by its terms or otherwise, or cannot be amended or if such assignment or amendment would impair the benefit the parties thereto derive from such Shared Contract, then the parties shall, and shall cause each of their respective Subsidiaries to, take such other reasonable and permissible actions (including by providing prompt notice to the other party with respect to any relevant claim of Liability or other relevant matters arising in connection with a Shared Contract so as to allow such other party the ability to exercise any applicable rights under such Shared Contract) to cause a member of the SpinCo Group or the NOV Group, as the case may be, to receive the rights and benefits of that portion of each Shared Contract that relates to the SpinCo Business or the businesses retained by NOV, as the case may be (in each case, to the extent so related), as if such Shared Contract had been assigned to (or amended to allow) a member of the applicable Group pursuant to this Section 2.9, and to bear the burden of the corresponding Liabilities (including any Liabilities that may arise by reason of such arrangement), as if such Liabilities had been assumed by a member of the applicable Group pursuant to this Section 2.9.

(b) Each of NOV and SpinCo shall, and shall cause the members of its Group to, (i) treat for all Tax purposes the portion of each Shared Contract inuring to its respective businesses as Assets owned by, and/or Liabilities of, as applicable, such party, or its subsidiaries, as applicable, not later than the Effective Time, and (ii) neither report nor take any Tax position (on a Tax Return or otherwise) inconsistent with such treatment (unless required by applicable Law).

(c) Nothing in this Section 2.9 shall require any member of any Group to make any material payment (except to the extent advanced, assumed or agreed in advance to be reimbursed by any member of the other Group), incur any material obligation or grant any material concession for the benefit of any member of any other Group in order to effect any transaction contemplated by this Section 2.9.

2.10. Bank Accounts; Cash Balances.

(a) NOV and SpinCo each agrees to take, or cause the respective members of their respective Groups to take, at the Effective Time (or such earlier time as NOV and SpinCo may agree), all actions necessary to amend all contracts or agreements governing each bank and brokerage account owned by SpinCo or any other member of the SpinCo Group (collectively, the “SpinCo Accounts”) so that such SpinCo Accounts, if currently linked (whether by automatic withdrawal, automatic deposit or any other authorization to transfer funds from or to, hereinafter “linked”) to any bank or brokerage account owned by NOV or any other member of the NOV Group (collectively, the “NOV Accounts”), are de-linked from the NOV Accounts.

(b) NOV and SpinCo each agrees to take, or cause the respective members of their respective Groups to take, at the Effective Time (or such earlier time as NOV and SpinCo may agree), all actions necessary to amend all contracts or agreements governing the NOV Accounts so that such NOV Accounts, if currently linked to a SpinCo Account, are de-linked from the SpinCo Accounts.

 

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(c) It is intended that, following consummation of the actions contemplated by Sections 2.10(a) and 2.10(b), there shall be in place a centralized cash management process pursuant to which the SpinCo Accounts shall be managed centrally and funds collected shall be transferred into one or more centralized accounts maintained by SpinCo.

(d) It is intended that, following consummation of the actions contemplated by Sections 2.10(a) and 2.10(b), there shall continue to be in place a centralized cash management process pursuant to which the NOV Accounts shall be managed centrally and funds collected shall be transferred into one or more centralized accounts maintained by NOV.

(e) With respect to any outstanding payments initiated by NOV, SpinCo, or any of their respective Subsidiaries prior to the Separation, such outstanding payments shall be honored following the Separation by the Person or Group owning the account from which the payment was initiated.

(f) As between NOV and SpinCo (and the members of their respective Groups), all payments made and reimbursements received after the Separation by either party (or member of its Group) that relate to a business, Asset or Liability of the other party (or member of its Group), shall be held by such party for the use and benefit of the party entitled thereto (at the expense of the party entitled thereto). Each party shall maintain an accounting of any such payments and reimbursements, and the parties shall have a monthly reconciliation, whereby all such payments made and reimbursements received by each party are calculated and the net amount owed to NOV or SpinCo shall be paid over with right of set-off. If at any time the net amount owed to either party exceeds $10,000,000, an interim payment of such net amount owed shall be made to the party entitled thereto within three (3) business days of such amount exceeding $10,000,000. Notwithstanding the foregoing, neither NOV nor SpinCo shall act as collection agent for the other party, nor shall either party act as surety or endorser with respect to non-sufficient funds checks, or funds to be returned in a bankruptcy or fraudulent conveyance action.

2.11. Other Ancillary Agreements; Effect of Ancillary Agreements. Effective as of the date hereof, each of NOV and SpinCo shall execute and deliver all Ancillary Agreements to which it is a party (other than the Transfer Documents, which shall be executed on or prior to the Distribution Date). The Ancillary Agreements shall include:

(a) The Tax Matters Agreement, which will govern each of the Parties’ respective rights, responsibilities and obligations after the Effective Time with respect to Taxes, including ordinary course of business Taxes and Taxes, if any, incurred as a result of any failure of the Distribution to qualify as a tax-free distribution for U.S. federal income tax purposes. The Tax Matters Agreement sets forth the respective obligations of each of the Parties with respect to the filing of Tax Returns, the administration of Tax contests, cooperation, access to information and provision of corporate Records with respect to such matters, and certain other matters, and imposes certain restrictions on each of the Parties’ ability to engage in certain actions following the Effective Time. Except as expressly set forth in this Agreement or any Ancillary Agreement, all matters relating to Taxes in connection with the transactions contemplated by this Agreement shall be governed exclusively by the Tax Matters Agreement;

 

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(b) The Employee Matters Agreement, which will govern each of the Parties’ respective rights, responsibilities and obligations after the Effective Time relating to, arising out of, or resulting from the employment, service, termination of employment or termination of service of NOV Employees and SpinCo Employees, including with respect to access to information and provision of corporate Records with respect to such matters. Except as expressly set forth in this Agreement or any Ancillary Agreement, all matters relating to the above in connection with the transactions contemplated by this Agreement shall be governed exclusively by the Employee Matters Agreement;

(c) The Transition Services Agreement, which will govern each of the Parties’, or such Parties’ Affiliates, respective rights, responsibilities and obligations after the Effective Time relating to, arising out of, or resulting from shared services or common uses of facilities and equipment that will continue for a transitional period after the Effective Time.

(d) The Master Distributor Agreement and the Master Services Agreement, which will govern each of the Parties’, or such Parties’ Affiliates, respective rights, responsibilities and obligations after the Effective Time relating to, arising out of, or resulting from the Parties’ ongoing commercial relationships.

2.12. Intellectual Property.

(a) SpinCo shall have the right to use NOV Name and NOV Marks in connection with the operation of the SpinCo Business for a limited period of 180 days following the Effective Time. After such 180-day period, SpinCo shall discontinue all use of NOV Name and NOV Marks, including any use on stationery or letterhead and any use on other SpinCo Assets. All of SpinCo’s use of NOV Name and NOV Marks shall inure to the benefit of NOV. SpinCo agrees to use NOV Name and NOV Marks in accordance with such quality standards established by NOV and communicated to SpinCo, it being understood that the products and services used in association with NOV Name and NOV Marks immediately before the Effective Time are of a quality that is acceptable to NOV and justifies the license granted herein. Except as set forth in this Section 2.12(a), it is expressly agreed that SpinCo is not obtaining any right, title or interest in NOV Name and NOV Marks. SpinCo will not contest the ownership, validity or enforceability of the NOV Name and NOV Marks, and nothing in this Section 2.12(a) shall be construed to limit NOV’s ability to use NOV Name and NOV Marks following the Effective Time

2.13. Disclaimer of Representations and Warranties. EACH OF NOV (ON BEHALF OF ITSELF AND EACH MEMBER OF THE NOV GROUP) AND SPINCO (ON BEHALF OF ITSELF AND EACH MEMBER OF THE SPINCO GROUP) UNDERSTANDS AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT, NO PARTY TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR OTHERWISE, IS REPRESENTING OR WARRANTING IN ANY WAY AS TO THE ASSETS, BUSINESSES OR LIABILITIES TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS OR APPROVALS REQUIRED IN CONNECTION THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER

 

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MATTER CONCERNING, ANY ASSETS OF SUCH PARTY, AS TO, IN THE CASE OF INTELLECTUAL PROPERTY, NON-INFRINGEMENT OR ANY WARRANTY THAT ANY SUCH INTELLECTUAL PROPERTY IS “ERROR FREE,” OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SET-OFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY CLAIM OR OTHER ASSET, INCLUDING ANY ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY ASSIGNMENT, DOCUMENT OR INSTRUMENT DELIVERED HEREUNDER TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF. EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN “AS IS,” “WHERE IS” BASIS (AND, IN THE CASE OF ANY REAL PROPERTY, EXCEPT AS OTHERWISE AGREED BY NOV, BY MEANS OF A QUITCLAIM OR SIMILAR FORM DEED OR CONVEYANCE) AND THE RESPECTIVE TRANSFEREES SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE WILL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST, AND (II) ANY NECESSARY APPROVALS OR NOTIFICATIONS ARE NOT OBTAINED OR THAT ANY REQUIREMENTS OF LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.

ARTICLE III.

THE DISTRIBUTION

3.1. Actions Prior to the Distribution. Prior to the Effective Time and subject to the terms and conditions set forth herein, the parties shall take, or cause to be taken, the following actions in connection with the Distribution:

(a) Notice to NYSE. NOV shall, to the extent possible, give the NYSE not less than ten (10) days’ advance notice of the Record Date in compliance with Rule 10b-17 under the Exchange Act.

(b) Securities Law Matters. SpinCo shall file with the SEC any amendments or supplements to the Form 10 as may be necessary or advisable in order to cause the Form 10 to become and remain effective as required by the SEC or federal, state or other applicable securities Laws. NOV and SpinCo shall cooperate in preparing, filing with the SEC and causing to become effective registration statements or amendments thereof which are required to reflect the establishment of, or amendments to, any employee benefit and other plans necessary or advisable in connection with the transactions contemplated by this Agreement and the Ancillary Agreements. NOV and SpinCo shall take all such action as may be necessary or advisable under the securities or “blue sky” Laws of the United States (and any comparable Laws under any non-U.S. jurisdiction) in connection with the transactions contemplated by this Agreement and the Ancillary Agreements.

(c) Mailing of Information Statement. NOV shall, as soon as is reasonably practicable after the Form 10 is declared effective under the Exchange Act and the NOV Board has approved the Distribution, cause the Information Statement to be mailed to the Record Holders.

 

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(d) The Distribution Agent. NOV shall enter into a distribution agent agreement with the Agent or otherwise provide instructions to the Agent regarding the Distribution.

(e) Stock-Based Employee Benefit Plans. At or prior to the Effective Time, NOV and SpinCo shall take all actions as may be necessary to approve the stock-based employee benefit plans of SpinCo in order to satisfy the requirements of Rule 16b-3 under the Exchange Act and the applicable rules and regulations of the NYSE.

(f) Certificate of Incorporation; Bylaws. NOV and SpinCo shall take all necessary action that may be required to provide for the adoption by SpinCo of the Certificate of Incorporation of SpinCo (the “SpinCo Certificate of Incorporation”) and the Bylaws of SpinCo, each in such form as may be reasonably determined by NOV and SpinCo, and SpinCo shall file the SpinCo Certificate of Incorporation with the Secretary of State of the State of Delaware.

(g) Financing Arrangements. SpinCo shall enter into the SpinCo Financing Arrangements, on such terms and conditions as agreed by NOV (including the amount, if any, that shall be borrowed pursuant to the SpinCo Financing Arrangements and the interest rates for such borrowings). NOV and SpinCo shall participate in the preparation of all materials and presentations as may be reasonably necessary to secure funding pursuant to the SpinCo Financing Arrangements, including any marketing efforts or road shows related thereto. The parties agree that NOV shall be responsible for any third-party costs and expenses incurred on or prior to the Distribution Date by, and for reimbursement of such costs and expenses to, any member of the NOV Group or SpinCo Group associated with the SpinCo Financing Arrangements.

(h) Restructuring Steps Memorandum. NOV and SpinCo shall take the steps set forth on the Restructuring Steps Memorandum to the extent the Restructuring Steps Memorandum contemplates such steps being taken at or prior to the Effective Time.

(i) Satisfying Conditions to Distribution. NOV and SpinCo shall cooperate to cause the conditions to the Distribution set forth in Section 3.3 to be satisfied and to effect the Distribution at the Effective Time.

3.2. Effecting the Distribution.

(a) Delivery of SpinCo Common Stock. On or prior to the Distribution Date, NOV shall deliver to the Agent, for the benefit of the Record Holders, book-entry transfer authorizations for such number of the outstanding shares of SpinCo Common Stock as is necessary to effect the Distribution.

(b) Effective Time. The Effective Time on the Distribution Date shall be 5:00 p.m. Central Standard Time, or such other time as NOV may determine.

(c) Distribution of Shares and Cash. NOV shall instruct the Agent to distribute, as soon as practicable following the Effective Time, to each Record Holder the following: (i) [] shares of SpinCo Common Stock for each share of NOV Common Stock held by such Record Holder as of the Record Date and (ii) cash, if applicable, in lieu of fractional shares obtained in the manner provided in Section 3.2(d).

 

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(d) No Fractional Shares. No fractional shares shall be distributed or credited to book-entry accounts in connection with the Distribution. As soon as practicable after the Effective Time, NOV shall direct the Agent to determine the number of whole shares and fractional shares of SpinCo Common Stock allocable to each holder of record or beneficial owner of NOV Common Stock as of the Record Date, to aggregate all such fractional shares and to sell the whole shares obtained thereby in open market transactions (with the Agent, in its sole and absolute discretion, determining when, how and through which broker-dealer and at what price to make such sales), and to cause to be distributed to each such holder or for the benefit of each such beneficial owner, in lieu of any fractional share, such holder’s or owner’s ratable share of the proceeds of such sale, after deducting any taxes required to be withheld and after deducting an amount equal to all brokerage charges, commissions and transfer taxes attributed to such sale. Neither NOV nor SpinCo shall be required to guarantee any minimum sale price for the fractional shares of SpinCo Common Stock. Neither NOV nor SpinCo shall be required to pay any interest on the proceeds from the sale of fractional shares.

(e) Beneficial Owners. Solely for purposes of computing fractional share interests pursuant to Section 3.2(d), the beneficial owner of NOV Common Stock held of record in the name of a nominee in any nominee account shall be treated as the holder of record with respect to such shares.

(f) Unclaimed Stock or Cash. Any SpinCo Common Stock or cash in lieu of fractional shares with respect to SpinCo Common Stock that remains unclaimed by any Record Holder one hundred eighty (180) days after the Distribution Date shall be delivered to SpinCo. SpinCo shall hold such SpinCo Common Stock for the account of such Record Holder, and the parties agree that all obligations to provide such SpinCo Common Stock and cash, if any, in lieu of fractional share interests shall be obligations of SpinCo, subject in each case to applicable escheat or other abandoned property Laws, and NOV shall have no Liability with respect thereto.

(g) Transfer Authorizations. SpinCo agrees to provide all book-entry transfer authorizations for shares of SpinCo Common Stock that NOV or the Agent shall require in order to effect the Distribution.

3.3. Conditions to the Distribution. The consummation of the Distribution shall be subject to the satisfaction, or waiver by NOV in its sole and absolute discretion, of the following conditions:

(a) Approval by NOV Board. This Agreement and the transactions contemplated hereby, including the declaration of the Distribution, shall have been approved by the NOV Board, and such approval shall not have been withdrawn.

(b) Completion of the Separation. The Separation shall have been completed in accordance with the Restructuring Steps Memorandum.

(c) Opinions of Legal Counsel and Nationally Recognized Accounting Firm. NOV shall have received an opinion from each of (i) its legal counsel and (ii) a nationally

 

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recognized accounting firm in form and substance satisfactory to NOV, in its sole discretion, each to the effect that the Contribution and the Distribution, if effected, taken together, shall qualify as a transaction that is tax-free for U.S. federal income tax purposes under Sections 368(a)(1)(D) and 355 of the Code.

(d) Governmental Approvals. All Governmental Approvals necessary to consummate the Distribution and to permit the operation of the SpinCo Business after the Effective Time substantially as it is conducted at the date hereof shall have been obtained and be in full force and effect.

(e) Securities Laws. The actions and filings necessary or appropriate under applicable securities Laws in connection with the Distribution shall have been taken or made, and, where applicable, have become effective or been accepted by the applicable Governmental Authority.

(f) No Order or Injunction. No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Distribution or any of the related transactions shall be in effect, and no other event outside the control of NOV shall have occurred or failed to occur that prevents the consummation of the Distribution or any of the related transactions.

(g) Effectiveness of Form 10; Mailing of Information Statement. The Form 10 registering the SpinCo Common Stock shall be effective under the Exchange Act, with no stop order in effect with respect thereto, and the Information Statement included therein shall have been mailed to NOV’s stockholders as of the Record Date.

(h) Listing on NYSE. The SpinCo Common Stock shall have been accepted for listing on the NYSE, subject to official notice of distribution.

(i) Contribution. NOV shall have received the SpinCo Common Stock in connection with the Contribution and shall be satisfied in its sole discretion that, as of the Effective Time, it shall have no further Liability whatsoever under the SpinCo Financing Arrangements (including in connection with any guarantees provided by any member of the NOV Group).

(j) Execution of Ancillary Agreements. Each of the Ancillary Agreements shall have been duly executed and delivered by the parties thereto.

(k) No Circumstances Making Distribution Inadvisable. No events or developments shall have occurred or exist that, in the judgment of the NOV Board, in its sole and absolute discretion, make it inadvisable to effect the Distribution or the other transactions contemplated hereby, or would result in the Distribution or the other transactions contemplated hereby not being in the best interest of NOV or its stockholders.

3.4. Sole Discretion. The foregoing conditions are for the sole benefit of NOV and shall not give rise to or create any duty on the part of NOV or the NOV Board to waive or not waive such conditions or in any way limit NOV’s right to terminate this Agreement as set forth in Article IX or alter the consequences of any such termination from those specified in such Article. Any determination made by the NOV Board prior to the Distribution concerning the satisfaction or waiver of any or all of the conditions set forth in Section 3.3 shall be conclusive.

 

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3.5. Closing. The closing and consummation of the transactions contemplated by this Agreement to occur prior to or on the Distribution Date shall take place at the principal executive offices NOV located in Houston, Texas.

ARTICLE IV.

DISPUTE RESOLUTION

4.1. General Provisions.

(a) Any dispute, controversy or claim arising out of or relating to this Agreement or the Ancillary Agreements (except as otherwise set forth in any such Ancillary Agreements)(a “Dispute”), including (i) the validity, interpretation, breach or termination thereof or (ii) whether any Liability not specifically characterized in this Agreement or its Schedules, whose proper characterization is disputed, is a SpinCo Liability or a NOV Retained Liability, shall be resolved in accordance with the procedures set forth in this Article IV, which shall be the sole and exclusive procedures for the resolution of any such Dispute unless otherwise specified in the applicable Ancillary Agreement or in this Article IV.

(b) THE PARTIES EXPRESSLY WAIVE AND FOREGO ANY RIGHT TO TRIAL BY JURY.

(c) The specific procedures set forth in this Article IV, including the time limits referenced herein, may be modified by agreement of both of the Parties in writing.

(d) All applicable statutes of limitations and defenses based upon the passage of time shall be tolled while the procedures specified in this Article IV are pending. The Parties shall take any necessary or appropriate action required to effectuate such tolling.

(e) Commencing with a request contemplated by Section 4.2, all communications between the parties or their representatives in connection with the attempted resolution of any Dispute shall be deemed to have been delivered in furtherance of a Dispute settlement and shall be exempt from discovery and production, and shall not be admissible into evidence for any reason (whether as an admission or otherwise), in any arbitral or other proceeding for the resolution of any Dispute.

4.2. Consideration by Senior Executives. If a Dispute is not resolved in the normal course of business at the operational level, the Parties shall attempt in good faith to resolve the Dispute by negotiation between executives designated by the parties who hold, at a minimum, the office of Senior Vice President and/or General Counsel (such designated executives, the “Dispute Committee”). Either party may initiate the executive negotiation process by providing a written notice to the other (the “Initial Notice”). Within fifteen (15) days after delivery of the Initial Notice, the receiving party shall submit to the other a written response (the “Response”). The Initial Notice and the Response shall include (a) a statement of the Dispute and of each party’s position and (b) the names and titles of the executive who may represent that party as the Dispute Committee and of any other persons who may accompany the executive. The Parties

 

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agree that the Dispute Committee shall have full and complete authority to resolve any Disputes submitted pursuant to this Section 4.2. Such Dispute Committee and other applicable executives shall meet in person or by teleconference or video conference within thirty (30) days of the date of the Initial Notice to seek a resolution of the Dispute. In the event that the Dispute Committee and other applicable executives are unable to agree to a format for such meeting, the meeting shall be convened in person at a mutually acceptable location in Houston, Texas.

4.3. Arbitration.

(a) In the event any Dispute is not finally resolved pursuant to Section 4.2 within sixty (60) days from the delivery of the Initial Notice, and unless the parties have mutually agreed to mediate or use some other form of alternative dispute resolution in an attempt to resolve the Dispute, then such Dispute may be submitted by either party to be finally resolved by binding arbitration pursuant to the AAA Commercial Arbitration Rules as then in effect (the “AAA Commercial Arbitration Rules”).

(b) Without waiving its rights to any remedy under this Agreement and without first complying with the provisions of Section 4.2, either party may seek any interim or provisional relief that is necessary to protect the rights or property of that party either (i) before any federal or state court in Harris County, Texas, (ii) before a special arbitrator, as provided for under the AAA Commercial Arbitration Rules, or (iii) before the arbitral tribunal established hereunder.

(c) Unless otherwise agreed by the parties in writing, any Dispute to be decided in arbitration hereunder shall be decided (i) before a sole arbitrator if the amount in dispute, inclusive of all claims and counterclaims, totals less than $10,000,000; or (ii) by an arbitral tribunal of three (3) arbitrators if (A) the amount in dispute, inclusive of all claims and counterclaims, is equal to or greater than $10,000,000 or (B) either party elects in writing to have such dispute decided by three (3) arbitrators when one of the parties believes, in its sole judgment, the issue could have significant precedential value; however, the party who makes such election under clause (B) shall solely bear the increased costs and expenses associated with a panel of three (3) arbitrators (i.e., the additional costs and expenses associated with the two (2) additional arbitrators).

(d) A panel of three (3) arbitrators shall be chosen as follows: (i) upon the written demand of either party and within fifteen (15) days from the date of receipt of such demand, each party shall name an arbitrator selected by such party in its sole discretion; and (ii) the two (2) party-appointed arbitrators shall thereafter, within thirty (30) days from the date on which the second of the two (2) arbitrators was named, name a third, independent arbitrator who shall act as chairperson of the arbitral tribunal. In the event that either party fails to name an arbitrator within fifteen (15) days from the date of receipt of a written demand to do so, then upon written application by either party, that arbitrator shall be appointed pursuant to the AAA Commercial Arbitration Rules. In the event that the two (2) party-appointed arbitrators fail to appoint the third, independent arbitrator within thirty (30) days from the date on which the second of the two (2) arbitrators was named, then upon written application by either party, the third, independent arbitrator shall be appointed pursuant to AAA Commercial Arbitration Rules. If the arbitration shall be before a sole independent arbitrator, then the sole independent

 

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arbitrator shall be appointed by agreement of the parties within fifteen (15) days from the date of receipt of written demand of either party. If the parties cannot agree to a sole independent arbitrator, then upon written application by either party, the sole independent arbitrator shall be appointed pursuant to AAA Commercial Arbitration Rules.

(e) The place of arbitration shall be Houston, Texas. Along with the arbitrator(s) appointed, the parties shall agree to a mutually convenient location, date and time to conduct the arbitration, but in no event shall the final hearing(s) be scheduled more than six (6) months from submission of the Dispute to arbitration unless the parties agree otherwise in writing.

(f) The arbitral tribunal shall have the right to award, on an interim basis, or include in the final award, any relief that it deems proper in the circumstances, including money damages (with interest on unpaid amounts from the due date), injunctive relief (including specific performance) and attorneys’ fees and costs; provided that the arbitral tribunal shall not award any relief not specifically requested by the parties and, in any event, shall not award any damages of the types prohibited under Section 10.18. Upon constitution of the arbitral tribunal following any grant of interim relief by a special arbitrator or court pursuant to Section 4.3(b), the tribunal may affirm or disaffirm that relief, and the parties shall seek modification or rescission of the order entered by the special arbitrator or court as necessary to accord with the tribunal’s decision.

(g) Neither party shall be bound by Rule 13 of the Federal Rules of Civil Procedure or any analogous Law or provision in the AAA Commercial Arbitration Rules governing deadlines for compulsory counterclaims; rather, each party shall be free to bring a counterclaim at any time (subject to any applicable statutes of limitation).

(h) So long as either party has a timely claim to assert, the agreement to arbitrate Disputes set forth in this Section 4.3 shall continue in full force and effect subsequent to, and notwithstanding the completion, expiration or termination of, this Agreement.

(i) The interim or final award in an arbitration pursuant to this Article IV shall be conclusive and binding upon the parties, and a party obtaining a final award may enter judgment upon such award in any federal or state court in Harris County, Texas.

(j) It is the intent of the parties that the agreement to arbitrate Disputes set forth in this Section 4.3 shall be interpreted and applied broadly such that all reasonable doubts as to arbitrability of a Dispute shall be decided in favor of arbitration.

(k) The parties agree that any Dispute submitted to arbitration shall be governed by, and construed and interpreted in accordance with Laws of the State of Texas, as provided in Section 10.2 and, except as otherwise provided in this Article IV or mutually agreed to in writing by the parties, the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq., shall govern any arbitration between the parties pursuant to this Section 4.3.

(l) Subject to Section 4.3(c)(ii)(B), each party shall bear its own fees, costs and expenses and shall bear an equal share of the costs and expenses of the arbitration, including the fees, costs and expenses of the three (3) arbitrators; provided that the arbitral tribunal may award the prevailing party its reasonable fees and expenses (including attorneys’ fees), if it finds that there was no good faith basis for the position taken by the other party in the arbitration.

 

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(m) Notwithstanding anything in this Article IV to the contrary, any disputes relating to the interpretation of Article V or requesting injunctive relief or specific performance shall be conducted according to the fast-track arbitration procedures of the AAA Commercial Arbitration Rules then in effect.

4.4. Allocation of Undetermined Liabilities and Third-Party Claims.

(a) As of the date of this Agreement, the Parties have not identified any unallocated Liabilities. If a Liability is not explicitly addressed in this Agreement or set forth in the Schedules, the parties shall be presumed to have intended that the Liability be a SpinCo Liability or an NOV Retained Liability. Such presumption may only be overcome by clear and convincing evidence to the contrary.

(b) If either Party or any of its Subsidiaries shall receive notice or otherwise learn of the assertion of a Liability or Third-Party Claim which is not determined to be a SpinCo Liability or an NOV Retained Liability, such Party shall give the other Party written notice thereof promptly (and in any event within 15 days) after such Person becomes aware of such Liability or Third-Party Claim. Thereafter, the Party shall deliver to the other Party, promptly (and in any event within 10 calendar days) after the Party’s receipt thereof, copies of all notices and documents (including court papers) received by the Party or the member of such Party’s Group relating to the matter. If a dispute shall arise between the Parties as to the proper characterization of any Liability, then any Party may refer that Dispute to the Dispute Committee in accordance with Section 4.2.

(c) NOV may commence defense of any unallocated Third-Party Claims pending decision of the Dispute Committee (or decision regarding an Action, if applicable), but shall not be obligated to do so. If NOV commences any such defense and subsequently SpinCo is determined hereunder to have the exclusive obligation to such Third-Party Claim, then, upon the request of SpinCo, NOV shall promptly discontinue the defense of such matter and transfer the control thereof to SpinCo. In such event, SpinCo will reimburse NOV for all costs and expenses incurred prior to resolution of such dispute in the defense of such Third-Party Claim.

ARTICLE V.

MUTUAL RELEASES; INDEMNIFICATION; COOPERATION

5.1. Release of Pre-Distribution Claims.

(a) Except as provided in Section 5.1(c), effective as of the Effective Time, SpinCo does hereby, for itself and each other member of the SpinCo Group, their respective Affiliates (other than any member of the NOV Group), successors and assigns, and all Persons who at any time prior to the Effective Time have been directors, officers, agents or employees of any member of the SpinCo Group (in each case, in their respective capacities as such), release and forever discharge NOV and the members of the NOV Group, their respective Affiliates (other than any member of the SpinCo Group), successors and assigns, and all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or

 

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employees of any member of the NOV Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities whatsoever, whether at Law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of Law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Effective Time, including in connection with the transactions related to or undertaken in connection with the Separation and the Distribution and all other activities to implement the Separation and the Distribution or contemplated hereunder.

(b) Except as provided in Section 5.1(c), effective as of the Effective Time, NOV does hereby, for itself and each other member of the NOV Group, their respective Affiliates (other than any member of the SpinCo Group), successors and assigns, and all Persons who at any time prior to the Effective Time have been directors, officers, agents or employees of any member of the NOV Group (in each case, in their respective capacities as such), release and forever discharge SpinCo, the respective members of the SpinCo Group, their respective Affiliates (other than any member of the NOV Group), successors and assigns, and all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of the SpinCo Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities whatsoever, whether at law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Effective Time, including in connection with the transactions related to or undertaken in connection with the Separation and the Distribution and all other activities to implement the Separation and the Distribution or contemplated hereunder.

(c) Nothing contained in Section 5.1(a) or (b) shall impair any right of any Person to enforce this Agreement, any Ancillary Agreement or any agreements, arrangements, commitments or understandings that are specified in Section 2.8(b) or the applicable Schedules thereto as not to terminate as of the Effective Time, in each case in accordance with its terms. Nothing contained in Section 5.1(a) or (b) shall release any Person from:

(i) any Liability provided in or resulting from any agreement among any members of the NOV Group or the SpinCo Group that is specified in Section 2.8(b) or the applicable Schedules thereto as not to terminate as of the Effective Time, or any other Liability specified in such Section 2.8(b) as not to terminate as of the Effective Time;

(ii) any Liability, contingent or otherwise, assumed, transferred, assigned or allocated to the Group of which such Person is a member in accordance with, or any other Liability of any member of any Group under, this Agreement or any Ancillary Agreement (including any SpinCo Liability and any Excluded Liability, as applicable);

 

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(iii) any Liability for the sale, lease, construction or receipt of goods, property or services purchased, obtained or used in the ordinary course of business by a member of one Group from a member of the other Group prior to the Effective Time;

(iv) any Liability for unpaid amounts for products or services or refunds owing on products or services due on a value-received basis for work done by a member of one Group at the request or on behalf of a member of the other Group;

(v) any Liability that the parties may have with respect to indemnification or contribution pursuant to this Agreement for claims brought against the Parties by third parties, which Liability shall be governed by the provisions of this Article V and Article VI and any other applicable provisions of this Agreement or any Ancillary Agreement; or

(vi) any Liability the release of which would result in the release of any third Person other than a Person released pursuant to this Section 5.1.

In addition, nothing contained in Section 5.1(a) shall release NOV from honoring its existing obligations to indemnify any director, officer or employee of a member of the SpinCo Group who was a director, officer or employee of a member of the NOV Group on or prior to the Effective Time, to the extent that such director, officer or employee becomes a named defendant in any Action with respect to which such director, officer or employee was entitled to such indemnification pursuant to then-existing obligations, it being understood that, if the underlying obligation giving rise to such Action is a SpinCo Liability, SpinCo shall indemnify NOV for such Liability (including NOV’s costs to indemnify the director, officer or employee) in accordance with the provisions set forth in this Article V.

(d) SpinCo covenants that it shall not make, and shall not permit any member of the SpinCo Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against NOV or any member of the NOV Group, or any other Person released pursuant to Section 5.1(a), with respect to any Liabilities released pursuant to Section 5.1(a). NOV covenants that it shall not make, and shall not permit any member of the NOV Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against SpinCo or any member of the SpinCo Group, or any other Person released pursuant to Section 5.1(b), with respect to any Liabilities released pursuant to Section 5.1(b).

(e) It is the intent of each of NOV and SpinCo, by virtue of the provisions of this Section 5.1, to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Effective Time, between or among SpinCo or any member of the SpinCo Group, on the one hand, and NOV or any member of the NOV Group, on the other hand (including any contractual agreements or arrangements existing or alleged to exist between or among any such members on or before the Effective Time), except as expressly set forth in Section 5.1(c). At any time, at the request of any other party to this Agreement, each party shall cause each member of its respective Group to execute and deliver releases in form reasonably satisfactory to the other party reflecting the provisions hereof.

 

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(f) Any breach of the provisions of this Section 5.1 by either NOV or SpinCo shall entitle the other party to recover reasonable fees and expenses of counsel in connection with such breach or any Action resulting from such breach.

5.2. Indemnification by SpinCo. Subject to Section 5.4, SpinCo shall, and shall cause the other members of the SpinCo Group to, indemnify, defend and hold harmless NOV, each member of the NOV Group and each of their respective directors, officers and employees, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “NOV Indemnitees”), from and against any and all Liabilities of the NOV Indemnitees relating to, arising out of or resulting from any of the following items (without duplication):

(a) the failure of SpinCo or any other member of the SpinCo Group or any other Person to pay, perform or otherwise promptly discharge any SpinCo Liabilities or SpinCo Contracts in accordance with their respective terms, whether prior to or after the Effective Time or the date hereof;

(b) the SpinCo Business, any SpinCo Liabilities or any SpinCo Contracts;

(c) the Assumed Actions;

(d) any Corporate Action or Action relating exclusively to the SpinCo Business from which SpinCo is unable to cause a NOV Group party to be removed pursuant to Section 5.6(d);

(e) any failure by SpinCo or a member of the SpinCo Group to use commercially reasonable efforts to obtain the waivers of subrogation contemplated by Section 5.4(c);

(f) any breach by SpinCo or any member of the SpinCo Group of this Agreement or any of the Ancillary Agreements;

(g) any guarantee, indemnification obligation, letter of credit reimbursement obligations, surety, bond or other credit support agreement, arrangement, commitment or understanding for the benefit of SpinCo or its Subsidiaries by NOV or any of its Subsidiaries (other than SpinCo or its Subsidiaries) that survives following the Effective Time; and

(h) any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to all information contained in any of the Form 10 (including in any amendments or supplements thereto), the Information Statement (as amended or supplemented if SpinCo shall have furnished any amendments or supplements thereto), or any marketing materials prepared in connection with the SpinCo Financing Arrangements, other than any such statement or omission in the Form 10, Information Statement or marketing materials based on information furnished by NOV and solely concerning the NOV Group.

 

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5.3. Indemnification by NOV. Subject to Section 5.4, NOV shall, and shall cause the other members of the NOV Group to, indemnify, defend and hold harmless SpinCo, each member of the SpinCo Group and each of their respective directors, officers and employees, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “SpinCo Indemnitees”), from and against any and all Liabilities of the SpinCo Indemnitees relating to, arising out of or resulting from any of the following items (without duplication):

(a) the failure of NOV or any other member of the NOV Group or any other Person to pay, perform or otherwise promptly discharge any Excluded Liabilities, whether prior to or after the Effective Time or the date hereof;

(b) the NOV Business and the Excluded Assets;

(c) the Excluded Liabilities;

(d) any Corporate Action or Action relating exclusively to the NOV Business from which NOV is unable to cause a SpinCo Group party to be removed pursuant to Section 5.6(d);

(e) any failure by NOV or a member of the NOV Group to use commercially reasonable efforts to obtain the waivers of subrogation contemplated by Section 5.4(d);

(f) any breach by NOV or any member of the NOV Group of this Agreement or any Ancillary Agreements; and

(g) any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to all information contained in any of the Form 10 (including in any amendments or supplements thereto), the Information Statement (as amended or supplemented if SpinCo shall have furnished any amendments or supplements thereto), or any marketing materials prepared in connection with the SpinCo Financing Arrangements, in each case based on information furnished by NOV and solely concerning the NOV Group.

5.4. Indemnification Obligations Net of Insurance Proceeds.

(a) The parties intend that any Liability subject to indemnification or reimbursement pursuant to this Article V or Article VI shall be net of Insurance Proceeds that actually reduce the amount of the Liability. Accordingly, the amount that any party (an “Indemnifying Party”) is required to pay to any Person entitled to indemnification hereunder (an “Indemnitee”) shall be reduced by any Insurance Proceeds theretofore actually recovered by or on behalf of the Indemnitee in respect of the related Liability. If an Indemnitee receives a payment (an “Indemnity Payment”) required by this Agreement from an Indemnifying Party in respect of any Liability and subsequently receives Insurance Proceeds, then the Indemnitee shall pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if the Insurance Proceeds had been received, realized or recovered before the Indemnity Payment was made.

 

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(b) An insurer who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of the indemnification provisions hereof, have any subrogation rights with respect thereto, it being expressly understood and agreed that no insurer or any other Third Party shall be entitled to a “windfall” (i.e., a benefit they would not be entitled to receive in the absence of the indemnification provisions hereof) by virtue of the indemnification provisions hereof.

(c) Each of NOV and SpinCo shall, and shall cause the members of its Group to, when appropriate, use commercially reasonable efforts to obtain waivers of subrogation for each of the insurance policies identified on Schedule 6.1(c). Each of NOV and SpinCo hereby waives, for itself and each member of its Group, its rights to recover against the other party in subrogation or as subrogee for a third Person.

(d) For all claims as to which indemnification is provided under Section 5.2 or 5.3 other than Third-Party Claims (as to which Section 5.5 shall apply), the reasonable fees and expenses of counsel to the Indemnitee for the enforcement of the indemnity obligations shall be borne by the Indemnifying Party.

5.5. Procedures for Indemnification of Third-Party Claims.

(a) If an Indemnitee shall receive written notice from a Person (including any Governmental Authority) who is not a member of the NOV Group or the SpinCo Group (a “Third Party”) of any claim or of the commencement by any such Person of any Action (collectively, a “Third-Party Claim”) with respect to which an Indemnifying Party may be obligated to provide indemnification to such Indemnitee pursuant to Section 5.2 or 5.3, or any other Section of this Agreement or, subject to Section 5.14, any Ancillary Agreement, such Indemnitee shall give such Indemnifying Party written notice thereof within fourteen (14) days of receipt of such written notice. Any such notice shall describe the Third-Party Claim in reasonable detail and include copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third-Party Claim. Notwithstanding the foregoing, the failure of an Indemnitee to provide notice in accordance with this Section 5.5(a) shall not relieve an Indemnifying Party of its indemnification obligations under this Agreement, except to the extent to which the Indemnifying Party shall demonstrate that it was materially prejudiced by the Indemnitee’s failure to provide notice in accordance with this Section 5.5(a).

(b) An Indemnifying Party may elect to defend (and to seek to settle or compromise), at such Indemnifying Party’s own expense and by such Indemnifying Party’s own counsel, any Third Party Claim. Within thirty (30) days after the receipt of notice from an Indemnitee in accordance with Section 5.5(a) (or sooner, if the nature of such Third-Party Claim so requires), the Indemnifying Party shall notify the Indemnitee of its election whether the Indemnifying Party shall assume responsibility for defending such Third-Party Claim. After notice from an Indemnifying Party to an Indemnitee of its election to assume the defense of a Third-Party Claim, such Indemnitee shall have the right to employ separate counsel and to participate in (but not control) the defense, compromise, or settlement thereof, but the fees and expenses of such counsel shall be the expense of such Indemnitee except as otherwise expressly set forth herein.

 

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(c) If an Indemnifying Party has elected to assume the defense of a Third-Party Claim, then such Indemnifying Party shall be solely liable for all fees and expenses incurred by it in connection with the defense of such Third-Party Claim and shall not be entitled to seek any indemnification or reimbursement from the Indemnitee for any such fees or expenses incurred during the course of its defense of such Third Party Claim, regardless of any subsequent decision by the Indemnifying Party to reject or otherwise abandon its assumption of such defense. If an Indemnifying Party elects not to assume responsibility for defending any Third-Party Claim or fails to notify an Indemnitee of its election within thirty (30) days after receipt of a notice from an Indemnitee, such Indemnitee shall have the right to control the defense of such Third-Party Claim, in which case the Indemnifying Party shall be liable for all reasonable fees and expenses incurred by the Indemnitee in connection with the defense of such Third-Party Claim.

(d) Notwithstanding an election by an Indemnifying Party to defend a Third-Party Claim pursuant to Section 5.5(b), a Indemnitee may, upon notice to the Indemnifying Party, elect to take over the defense of such Third-Party Claim if (i) in its exercise of reasonable business judgment, the Indemnitee determines that the Indemnifying Party is not defending such Third-Party Claim competently or in good faith, (ii) the Indemnitee determines in its exercise of reasonable business judgment that there exists a compelling business reason for such Indemnitee to defend such Third-Party Claim (other than as contemplated by the foregoing clause (i)), (iii) the Indemnifying Party makes a general assignment for the benefit of creditors, has filed against it or files a petition in bankruptcy or insolvency or is declared bankrupt or insolvent or declares that it is bankrupt or insolvent, or (iv) there occurs a change of control of the Indemnifying Party.

(e) An Indemnitee that does not conduct and control the defense of any Third-Party Claim, or an Indemnifying Party that has failed to elect to defend any Third-Party Claim as contemplated hereby, nevertheless shall have the right to employ separate counsel (including local counsel as necessary) of its own choosing to monitor and participate in (but not control) the defense of any Third-Party Claim for which it is a potential Indemnitee or Indemnifying Party, but the fees and expenses of such counsel shall be at the expense of such Indemnitee or Indemnifying Party, as the case may be, and the provisions of Section 5.5(c) shall not apply to such fees and expenses. Notwithstanding the foregoing, subject to Section 7.7, such party shall cooperate with the party entitled to conduct and control the defense of such Third-Party Claim in such defense and make available to the controlling party, at the non-controlling party’s expense, all witnesses, information and materials in such party’s possession or under such party’s control relating thereto as are reasonably required by the controlling party. In addition to the foregoing, if any Indemnitee shall in good faith determine that such Indemnitee and the Indemnifying Party have actual or potential differing defenses or conflicts of interest between them that make joint representation inappropriate, then the Indemnitee shall have the right to employ separate counsel (including local counsel as necessary) and to participate in (but not control) the defense, compromise or settlement thereof, and the Indemnifying Party shall bear the reasonable fees and expenses of such counsel for all Indemnitees.

(f) Neither party may settle or compromise any Third-Party Claim for which either party is seeking to be indemnified hereunder without the prior written consent of the other party, which consent may not be unreasonably withheld, unless such settlement or compromise is solely for monetary damages, does not involve any finding or determination of wrongdoing or

 

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violation of Law by the other party and provides for a full, unconditional and irrevocable release of the other party from all Liability in connection with the Third-Party Claim. The parties hereby agree that if a party presents the other party with a written notice containing a proposal to settle or compromise a Third-Party Claim for which either party is seeking to be indemnified hereunder and the party receiving such Proposal does not respond in any manner to the party presenting such proposal within thirty (30) days (or within any such shorter time period that may be required by applicable Law or court order) of receipt of such proposal, then the party receiving such proposal shall be deemed to have consented to the terms of such proposal.

(g) Schedule 5.5(g) identifies certain pending Third-Party Claims with respect to which Liabilities will be allocated and the other actions taken as set forth therein. With respect to the Third-Party Claims identified in Schedule 5.5(g), in the event of any conflict between the provisions of this Article V and the provisions of Schedule 5.5(g), the latter shall govern. There shall be no requirement under this Section 5.5 to give notice with respect to any Third-Party Claims identified in Schedule 5.5(g), that exist as of the Effective Time.

(h) The provisions of this Section 5.5 (other than this Section 5.5(h)) and the provisions of Section 5.6 shall not apply to Taxes (Taxes being governed by the Tax Matters Agreement).

(i) All Assumed Actions have been tendered by NOV to SpinCo and are deemed to be formally accepted by SpinCo upon the execution of this Agreement.

(j) The Indemnifying Party shall establish a procedure reasonably acceptable to the Indemnitee to keep the Indemnitee reasonably informed of the progress of the Third-Party Claim and to notify the Indemnitee when any such Third-Party Claim is closed, regardless of whether such Third-Party Claim was resolved by settlement, verdict, dismissal or otherwise.

5.6. Additional Matters.

(a) Indemnification payments in respect of any Liabilities for which an Indemnitee is entitled to indemnification under this Article V shall be paid by the Indemnifying Party to the Indemnitee as such Liabilities are incurred upon demand by the Indemnitee, including reasonably satisfactory documentation setting forth the basis for the amount of such indemnification payment, including documentation with respect to calculations made and consideration of any Insurance Proceeds that actually reduce the amount of such Liabilities. THE INDEMNITY AGREEMENTS CONTAINED IN THIS ARTICLE V SHALL REMAIN OPERATIVE AND IN FULL FORCE AND EFFECT, REGARDLESS OF (I) ANY INVESTIGATION MADE BY OR ON BEHALF OF ANY INDEMNITEE, (II) THE KNOWLEDGE BY THE INDEMNITEE OF LIABILITIES FOR WHICH IT MIGHT BE ENTITLED TO INDEMNIFICATION HEREUNDER AND (III) ANY TERMINATION OF THIS AGREEMENT.

(b) Any claim on account of a Liability that does not result from a Third-Party Claim shall be asserted by written notice given by the Indemnitee to the related Indemnifying Party. Such Indemnifying Party shall have a period of thirty (30) days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such

 

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thirty (30)-day period, such Indemnifying Party shall be deemed to have refused to accept responsibility to make payment. If such Indemnifying Party does not respond within such thirty (30)-day period or rejects such claim in whole or in part, such Indemnitee shall be free to pursue such remedies as may be available to such party as contemplated by this Agreement and the Ancillary Agreements.

(c) In the event of payment by or on behalf of any Indemnifying Party to any Indemnitee in connection with any Third-Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right, defense or claim relating to such Third-Party Claim against any claimant or plaintiff asserting such Third-Party Claim or against any other Person. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right, defense or claim.

(d) In the event of an Action for which indemnification is sought pursuant to Section 5.2 or 5.3 and in which the Indemnifying Party is not a named defendant, if either the Indemnitee or Indemnifying Party shall so request, the parties shall use commercially reasonable efforts to substitute the Indemnifying Party for the named defendant.

(e) In the event that SpinCo or NOV establishes a risk accrual in an amount of at least $10,000,000 with respect to any Third-Party Claim for which such party has indemnified the other party pursuant to Section 5.2 or 5.3, as applicable, it shall notify the other party of the existence and amount of such risk accrual (i.e., when the accrual is recorded in the financial statements as an accrual for a potential liability), subject to the parties entering into an appropriate agreement with respect to the confidentiality and/or privilege thereof.

(f) An Indemnitee shall take all reasonable steps to mitigate damages in respect of any claim for which it seeks indemnification hereunder, and shall use reasonable efforts to avoid any costs or expenses associated with such claim and, if such costs and expenses cannot be avoided, to minimize the amount thereof; provided, however, that an Indemnitee shall have no obligation to make a claim for recovery against any of its insurers with respect to any Losses for which it is seeking indemnification.

(g) THE RELEASES AND INDEMNIFICATION OBLIGATIONS OF THE PARTIES IN THIS AGREEMENT ARE EXPRESSLY INTENDED, AND SHALL OPERATE AND BE CONSTRUED, TO APPLY EVEN WHERE THE LOSSES OR LIABILITIES FOR WHICH THE RELEASE AND/OR INDEMNITY ARE GIVEN ARE CAUSED, IN WHOLE OR IN PART, BY THE SOLE, JOINT, JOINT AND SEVERAL, CONCURRENT, CONTRIBUTORY, ACTIVE OR PASSIVE NEGLIGENCE OR THE STRICT LIABILITY OR FAULT OF THE PARTY BEING RELEASED OR INDEMNIFIED.

5.7. Remedies Cumulative. The remedies provided in this Article V shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party; provided, however, if a party has recovered any Losses from the other party pursuant to any provision of this Agreement or any Ancillary Agreement or otherwise, it shall not be entitled to recover the same Losses pursuant to any other provision of this Agreement or any Ancillary Agreement or otherwise.

 

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5.8. Survival of Indemnities. The rights and obligations of each of NOV and SpinCo and their respective Indemnitees under this Article V shall survive (a) the sale or other transfer by any party of any Assets or businesses or the assignment by it of any Liabilities, and (b) any merger, consolidation business combination, sale of all or substantially all of the Assets, restructuring, recapitalization, reorganization or similar transaction involving either party or any of its respective Subsidiaries.

5.9. Guarantees, Letters of Credit and Other Obligations. In furtherance of, and not in limitation of, the obligations set forth in Section 2.6:

(a) On or prior to the Effective Time or as soon as practicable thereafter, SpinCo shall (with the reasonable cooperation of the applicable member(s) of the NOV Group) use its commercially reasonable efforts to have any member(s) of the NOV Group removed as guarantor of or obligor for any SpinCo Liability to the extent that they relate to SpinCo Liabilities, including in respect of those guarantees, letters of credit and other obligations set forth on Schedule 5.9(a).

(b) On or prior to the Effective Time, to the extent required to obtain a release from a guarantee, letter of credit or other obligation of any member of the NOV Group, SpinCo shall execute a substitute document in the form of any such existing guarantee or letter of credit, as applicable, or such other form as is agreed to by the relevant parties to such guarantee agreement, letter of credit or other obligation, except to the extent that such existing guarantee contains representations, covenants or other terms or provisions either (i) with which SpinCo would be reasonably unable to comply or (ii) which would be reasonably expected to be breached.

(c) If the parties are unable to obtain, or to cause to be obtained, any such required removal as set forth in clauses (a) and (b) of this Section 5.9, (i) SpinCo shall, and shall cause the other members of the SpinCo Group to, indemnify, defend and hold harmless each of the NOV Indemnitees for any Liability arising from or relating to such guarantee, letter of credit or other obligation, as applicable, and shall, as agent or subcontractor for the applicable NOV Group guarantor or obligor, pay, perform and discharge fully all of the obligations or other Liabilities of such guarantor or obligor thereunder, and (ii) SpinCo shall not, and shall cause the other members of the SpinCo Group not to, agree to renew or extend the term of, increase any obligations under, or transfer to a third Person, any loan, guarantee, letter of credit, lease, contract or other obligation for which a member of the NOV Group is or may be liable unless all obligations of the members of the NOV Group with respect thereto are thereupon terminated by documentation satisfactory in form and substance to NOV in its sole and absolute discretion.

5.10. Right of Contribution.

(a) Contribution. If any right of indemnification contained in this Article V is held unenforceable or is unavailable for any reason, or is insufficient to hold harmless an Indemnitee in respect of any Liability for which such Indemnitee is entitled to indemnification

 

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hereunder, then the Indemnifying Party shall contribute to the amounts paid or payable by the Indemnitees as a result of such Liability (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and its Subsidiaries, on the one hand, and the Indemnitees entitled to contribution, on the other hand, as well as any other relevant equitable considerations.

(b) Allocation of Relative Fault. Solely for purposes of determining relative fault pursuant to this Section 5.10: (i) any fault associated with the business conducted with the SpinCo Assets or SpinCo Liabilities (except for the gross negligence or intentional misconduct of NOV or a NOV Subsidiary) or with the ownership, operation or activities of the SpinCo Business prior to the Effective Time, shall be deemed to be the fault of SpinCo and the SpinCo Subsidiaries, and no such fault shall be deemed to be the fault of NOV or a NOV Subsidiary; and (ii) any fault associated with the business conducted with the Excluded Assets or Excluded Liabilities (except for the gross negligence or intentional misconduct of SpinCo or a SpinCo Subsidiary) or with the ownership, operation or activities of the NOV Business prior to the Effective Time, shall be deemed to be the fault of NOV and the NOV Subsidiaries, and no such fault shall be deemed to be the fault of SpinCo or a SpinCo Subsidiary. For purposes of this Section 5.10, with respect to any Liability relating to matters covered by Section 5.2(h) or 5.3(g) or otherwise relating to misstatements or omissions under securities or antifraud Laws, the relative fault of a member of the SpinCo Group, on the one hand, and of a member of the NOV Group, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact (i) relates to a member of the SpinCo Group or a member of the NOV Group and (ii) relates to information that was supplied by a member of the SpinCo Group or a member of the NOV Group.

(c) Contribution Procedures. The provisions of Sections 5.5 and 5.6 shall govern any contribution claims.

5.11. No Impact on Third Parties. For the avoidance of doubt, except as expressly set forth in this Agreement, the indemnifications provided for in this Article V are made only for purposes of allocating responsibility for Liabilities between the NOV Group, on the one hand, and the SpinCo Group, on the other hand, and are not intended to, and shall not, affect any obligations to, or give rise to any rights of, any third parties.

5.12. No Cross-Claims or Third-Party Claims. Each of SpinCo and NOV agrees that it shall not, and shall not permit the members of its respective Group to, in connection with any Third-Party Claim, assert as a counterclaim or third-party claim against any member of the NOV Group or SpinCo Group, respectively, any claim (whether sounding in contract, tort or otherwise) that arises out of or relates to this Agreement, any breach or alleged breach hereof, the transactions contemplated hereby (including all actions taken in furtherance of the transactions contemplated hereby on or prior to the date hereof), or the construction, interpretation, enforceability or validity hereof, which in each such case shall be asserted only as contemplated by Article IV.

5.13. Severability. If any indemnification provided for in this Article V is determined by a Texas federal or state court to be invalid, void or unenforceable, the liability shall be apportioned between the Indemnitee and the Indemnifying Party as determined in a separate proceeding in accordance with Article IV.

 

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5.14. Ancillary Agreements. Notwithstanding anything in this Agreement to the contrary, to the extent any Ancillary Agreement contains any indemnification obligation or contribution obligation relating to any SpinCo Liability, Excluded Liability, SpinCo Asset or Excluded Asset contributed, assumed, retained, transferred, delivered, conveyed or governed pursuant to such Ancillary Agreement, the indemnification obligations and contribution obligations contained herein shall not apply to such SpinCo Liability, Excluded Liability, SpinCo Asset or Excluded Asset and instead the indemnification obligations and/or contribution obligations set forth in such Ancillary Agreement shall govern with regard to such SpinCo Liability, Excluded Liability, SpinCo Asset or Excluded Asset.

5.15. Cooperation in Defense and Settlement.

(a) With respect to any Third-Party Claim that implicates both parties in a material fashion due to the allocation of Liabilities, responsibilities for management of defense and related indemnities pursuant to this Agreement or any of the Ancillary Agreements, the parties agree to use commercially reasonable efforts to cooperate fully and maintain a joint defense (in a manner that will preserve for the parties the attorney-client privilege, joint defense or other privilege with respect thereto).

(b) To the extent there are documents, other materials, access to employees or witnesses related to or from a Party that is not responsible for the defense or Liability of a particular Action, such Party shall provide to the other Party reasonable access to documents, other materials, employees, and shall permit employees, officers and directors to cooperate as witnesses in the defense of such Action.

(c) Each of NOV and SpinCo agrees that at all times from and after the Effective Time, if an Action currently exists or is commenced by a third party with respect to which a party (or one of its Subsidiaries) is a named defendant, but the defense of such Action and any recovery in such Action is otherwise not a Liability allocated under this Agreement or any Ancillary Agreement to that party, then the other party shall use commercially reasonable efforts to cause the named but not liable defendant to be removed from such Action and such defendants shall not be required to make any payments or contributions therewith.

(d) In the case of any Action involving a matter contemplated by Section 5.15(c), (i) if there is a conflict of interest that under applicable rules of professional conduct would preclude legal counsel for one party or one of its Subsidiaries representing another party or one of its Subsidiaries or (ii) if any Third-Party Claim seeks equitable relief that would restrict or limit the future conduct of the non-responsible party or one of its Subsidiaries or such party’s business or operations of a party or its Subsidiaries, then the non-responsible party shall be entitled to retain, at its expense, separate legal counsel to represent its interest and to participate in the defense, compromise, or settlement of that portion of the Third-Party Claim against that party or one of its Subsidiaries.

 

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ARTICLE VI.

INSURANCE MATTERS

6.1. Policies and Rights Included Within Assets.

(a) The SpinCo Assets shall include (i) the SpinCo Policies, if any, and (ii) any and all rights of any member of the SpinCo Group under each of the Shared Policies, subject to the terms of such Shared Policies and any limitations or obligations of any member of the SpinCo Group contemplated by this Article VI. The rights under the Shared Policies allocated under this provision specifically include rights of indemnity and the right to be defended by or at the expense of the insurer if the Shared Policies contain such right: (x) with respect to all alleged wrongful acts, claims, suits, actions, proceedings, injuries, losses, Liabilities, damages and expenses incurred or claimed to have been incurred and reported or notified to the insurer per any claims-made policy reporting provision prior to the Distribution Date by any Person in or in connection with the conduct of the SpinCo Business and (y) any other claim made against SpinCo or any of its Subsidiaries that may arise out of an insured or insurable occurrence or wrongful act covered under one or more of such Shared Policies. Nothing in this provision shall be deemed to constitute (or to reflect) an assignment of the Shared Policies, or any of them, to any member of the SpinCo Group.

(b) The NOV Assets shall include (i) the NOV Business Policies and (ii) the Shared Policies, excluding any rights under the Shared Policies allocated to the SpinCo Group pursuant to Section 6.1(a) above.

6.2. Claims Made Policies.

(a) NOV shall maintain for a period that is six years after the effective date directors and officers liability insurance policies to provide total limits of $120 million, consisting of $100 million of traditional A/B/C coverage and $20 million in side A DIC coverage. Such D&O policies (i) shall cover all Persons insured by those policies who become employees of SpinCo comprising the NOV directors and officers liability insurance program that began on April 21, 2013, and (ii) shall have material terms and conditions no less favorable than those contained in the 2013 – 2014 policies, except for the policy period, premium and provisions excluding coverage for wrongful acts postdating the Distribution Date. NOV shall provide SpinCo with copies of the D&O Policies upon request within a reasonable time after the D&O policies are issued.

(b) NOV shall maintain for a period that is six years after the effective date fiduciary liability insurance policies, to provide total limits of $15 million. Such fiduciary policies (i) shall cover all Persons insured by those policies who become employees of SpinCo comprising the NOV fiduciary liability insurance program commencing on August 17, 2013, and (ii) shall have material terms and conditions no less favorable than those contained in the 2013 – 2014 policies, except for the policy period, premium and provisions excluding coverage for wrongful acts post-dating the Final Distribution Date. NOV shall provide SpinCo with copies of such fiduciary policies upon request within a reasonable time after the Fiduciary Policies are issued.

 

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(c) With respect to any D&O policies or endorsements and any fiduciary policies or endorsements secured under Section 6.2(a) and Section 6.2(b), respectively, the associated premiums incurred shall be apportioned amongst the Parties in the same manner as expenses are allocated among the Parties’ pursuant to Section 10.9 herein.

(d) To the extent that NOV is unable prior to the Final Distribution Date to obtain any of the policies or endorsements as provided for in paragraphs (a) and (b) of this Section 6.2, then, with respect to claims based on wrongful acts on or before the Distribution Date, NOV shall use commercially reasonable efforts to secure alternative insurance arrangements on applicable standalone insurance policies for SpinCo to provide benefits on terms and conditions (including policy limits) in favor of SpinCo and the other Persons to be insured no less favorable than the benefits (including policy limits) that were to be afforded by the policies described in paragraphs (a) and (b) of this Section 6.2. With respect to such alternative insurance arrangements, NOV and SpinCo shall be responsible for the premium and any other costs under their applicable standalone insurance policies. NOV shall not under any circumstances purchase any such alternative coverage containing an exclusion for claims based on wrongful acts up to and including the Distribution Date to the extent such exclusion would preclude coverage for SpinCo and other Persons to be insured under the stand alone policies, if NOV has obtained substantially similar insurance coverage for itself on a standalone basis without that exclusion.

(e) With respect to the D&O policies and fiduciary policies, NOV and SpinCo shall be severally responsible for bearing the full amount of any deductibles, retentions, co-payments and/or any claims, costs and expenses (“Insurance Expenses”) that are not covered under or are required by such insurance policies, to the extent attributable to claims against each or reasonably allocated to each based on the nature of such claim (i.e., primarily related to the SpinCo Business or any of the NOV Business), or if such claim is not primarily related to the SpinCo Business or any of the NOV Business, in the proportion that the premium of such D&O policy or fiduciary policy or endorsements has been allocated pursuant to Section 6.2(c).

6.3. Occurrence-Based Policies.

(a) With respect to the occurrence-based Shared Policies, which include workers’ compensation/employer’s liability, certain excess/umbrella liability, certain punitive damages liability, automobile liability and general liability, including products and completed operations liability, for claims against any member of the SpinCo Group that occur prior to the Distribution Date, NOV will continue to provide the Spinco Group with access to such Shared Policies.

(b) NOV shall reasonably cooperate with the SpinCo Group and take commercially reasonable actions as may be necessary or advisable to assist the SpinCo Group in submitting such claims to which such occurrence-based Shared Policies are responsive; provided, that SpinCo shall be responsible for any premium adjustments, third party claims handling fees, claims fees, deductibles, deposits, cash collateral or co-payments legally due and owing or required relating to such claims and NOV shall not be required to maintain such occurrence-based Shared Policies beyond their current terms. SpinCo and NOV shall take commercially reasonable actions as may be necessary for claims settlements, defense selection, and claims strategy within the respective deductibles of the Shared Policies.

 

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6.4. Claims-Made or Similarly Based Policies.

(a) With respect to the claims-made Shared Policies, which include certain excess/umbrella liability, for claims against any member of the SpinCo Group which arise from occurrences and lawsuits noticed to the Shared Policies’ insurers prior to the Distribution Date, NOV will continue to provide the SpinCo Group with access to such Shared Policies.

(b) NOV shall reasonably cooperate with the SpinCo Group and take commercially reasonable actions as may be necessary or advisable to assist the SpinCo Group in submitting such notices prior to the Distribution Date to which such claims-made Shared Policies are responsive; provided, that SpinCo shall be responsible for any premium adjustments, deductibles, retentions, claims fees, claims preparation costs, deposits, cash collateral or co-payments legally due and owing or required relating to claims arising from such occurrences and lawsuits noticed and NOV shall not be required to maintain such claims-made Shared Policies beyond their current terms except as required under Section 6.2.

6.5. Administration; Exceeding Policy Limits; Allocation of Insurance Proceeds.

(a) Except as otherwise provided in Section 6.3 and Section 6.4 hereof, from and after the Effective Time, NOV shall be responsible for (i) Insurance Administration of the Shared Policies and (ii) Claims Administration of the Shared Policies with respect to NOV Retained Liabilities and SpinCo Liabilities; provided, that the retention of such responsibilities by NOV is in no way intended to limit, inhibit or preclude any right to insurance coverage for any Insured Claim of SpinCo under the Shared Policies as contemplated by the terms of this Agreement; and provided, further, that NOV’s retention of the administrative responsibilities for the Shared Policies shall not relieve the party (or member of its Group) submitting any Insured Claim of the primary responsibility for reporting such Insured Claim accurately, completely, in a timely manner and in accordance with the Shared Policies reporting provisions or of such party (or member of its Group’s) authority to settle any such Insured Claim within any period permitted or required by the relevant policy. NOV may discharge its administrative responsibilities under this Section 6.5 by contracting for the provision of services by independent parties. Each of the applicable Parties shall pay any costs relating to defending its respective Insured Claims under Shared Policies to the extent such costs, including defense, out-of-pocket expenses, and direct and indirect costs of employees or agents of NOV related to Claims Administration and Insurance Administration are not covered under such Shared Policies. In the absence of another agreed arrangement for a claim or particular claims, NOV shall determine and invoice the costs to be paid by SpinCo using commercially reasonable methods consistently applied. Each of the Parties shall be responsible for obtaining or reviewing the appropriateness of releases upon settlement of its respective Insured Claims under Shared Policies.

(b) Where NOV Retained Liabilities and/or SpinCo Liabilities, as applicable, are specifically covered under the same Shared Policy for periods prior to the Distribution Date, or where such Shared Policies cover claims made after the Distribution Date with respect to an occurrence or wrongful act committed and/or noticed or reported as applicable wholly prior to

 

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the Distribution Date, then from and after the Distribution Date, a member of the NOV Group and/or the SpinCo Group may claim coverage for Insured Claims under such Shared Policy as and to the extent that such insurance is available up to the full extent of the applicable limits of liability of such Shared Policy (and may receive any Insurance Proceeds with respect thereto as contemplated by Section 6.2, Section 6.3, Section 6.4 or Section 6.5(c) hereof), subject to the terms of this Section 6.5. Except as set forth in this Section 6.5, NOV and SpinCo shall not be liable to one another for claims not reimbursed by insurers for any reason, including coinsurance provisions, deductibles, quota share deductibles, self-insured retentions, bankruptcy or insolvency of an insurance carrier, Shared Policy limitations or restrictions, any coverage disputes, any failure to timely claim by NOV and SpinCo or any defect in such claim or its processing. It is expressly understood that the foregoing shall not limit any party’s liability to any Indemnitee for indemnification pursuant to ARTICLE VII.

(c) Except as otherwise provided in Section 6.3 and Section 6.4, and where not in conflict with or prohibited by specific insurance policy conditions, Insurance Proceeds received with respect to claims, costs and expenses under the Shared Policies shall be paid to or on behalf of NOV, which shall thereafter administer the Shared Policies by paying the Insurance Proceeds, as appropriate, to NOV with respect to NOV Retained Liabilities or, to SpinCo with respect to SpinCo Liabilities. Payment of the allocable portions of indemnity costs of Insurance Proceeds resulting from such Shared Policies will be made by NOV to the appropriate party upon receipt from the insurance carrier. In the event that the aggregate limits on any Shared Policies are exceeded by the aggregate of outstanding Insured Claims by members of the two Groups, the relevant Parties agree to allocate the Insurance Proceeds received for those Insured Claims based upon which relevant Group had such Insured Claim, or if the relevant Group is undeterminable, based upon which relevant Group was originally allocated the insurance premium (their “Allocable Portion of Insurance Proceeds”), and any party who has received Insurance Proceeds in excess of such party’s Allocable Portion of Insurance Proceeds shall pay to the other party the appropriate amount so that each party will have received its Allocable Portion of Insurance Proceeds pursuant hereto. The Parties agree to use commercially reasonable efforts to maximize available coverage under those Shared Policies applicable to it, and to take all commercially reasonable steps to recover from all other responsible parties in respect of an Insured Claim to the extent coverage limits under a Shared Policy have been exceeded or would be exceeded as a result of such Insured Claim. In the event that the aggregate limits on any Shared Policies are exceeded by the aggregate of outstanding Insured Claims, the Parties will negotiate with the Shared Policies’ insurers or other insurance markets for a full reinstatement or replacement of such Shared Policies’ aggregate limits for their mutual benefit, if the cost of such reinstatement or replacement is commercially reasonable. Costs for such reinstatement to be borne by the Parties based on their Allocated Portion of the Insurance Proceeds attributable to that policy’s Insured Claims.

6.6. Agreement for Waiver of Conflict and Shared Defense. In the event that Insured Claims or self-insured claims by members of more than one Group exist relating to the same occurrence, the Parties shall jointly defend to the extent permitted by applicable Law and rules of professional responsibility applicable to legal counsel for the defense. Nothing in this Section 6.6 shall be construed to limit or otherwise alter in any way the obligations of the Parties to this Agreement, including those created by this Agreement, by operation of Law or otherwise.

 

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6.7. Cooperation on Insurance Matters. The Parties agree to use their commercially reasonable efforts to cooperate with respect to the various insurance matters contemplated by this Agreement.

6.8. Miscellaneous Insurance Matters.

(a) Nothing in this Agreement shall be deemed to restrict NOV or SpinCo, or any members of their respective Groups, from acquiring at its own expense any Insurance Policy in respect of any Liabilities or covering any period. Except as otherwise provided in this ARTICLE VI, from and after the Distribution Date, NOV and SpinCo shall be responsible for obtaining and maintaining their respective insurance programs for their risk of loss and such insurance arrangements shall be separate programs apart from each other and each will be responsible for its own premium payments, deductibles and/or retentions for such insurance programs. Further, NOV and SpinCo shall be responsible individually after the Distribution Date for qualifying, obtaining and maintaining their respective self-insurance permits as applicable or procuring such insurance as may be deemed appropriate for their own risk.

(b) Each of the Parties intends by this Agreement that a third-party Person, including a third-party insurer or reinsurer, or other third-party Person that, in the absence of the Agreement would otherwise be obligated to pay any claim or satisfy any indemnity or other obligation, shall not be relieved of the responsibility with respect thereto and shall not be entitled to a “windfall” (i.e., avoidance of the obligation that such Person would have in the absence of this Agreement). To the extent that any such Person would receive such a windfall, the Parties shall negotiate in good faith concerning an amendment of this Agreement.

ARTICLE VII.

EXCHANGE OF INFORMATION; CONFIDENTIALITY

7.1. Agreement for Exchange of Information. Except as otherwise provided in any Ancillary Agreement, each of NOV and SpinCo, on behalf of itself and the members of its respective Group, shall use commercially reasonable efforts to provide or make available, or cause to be provided or made available, to the other party, at any time before or after the Effective Time, as soon as reasonably practicable after written request therefor, any Information (or a copy thereof) in the possession or under the control of either party or any of its Subsidiaries to the extent that: (i) such Information relates to the SpinCo Business or any SpinCo Asset or SpinCo Liability, if SpinCo is the requesting party, or to the NOV Business or any Excluded Asset or Excluded Liability, if NOV is the requesting party; (ii) such Information is required by the requesting party to comply with its obligations under this Agreement or any Ancillary Agreement; or (iii) such Information is required by the requesting party to comply with any obligation imposed by any Governmental Authority; provided, however, that, in the event that the party to whom the request has been made determines that any such provision of Information could be commercially detrimental, violate any Law or agreement or waive any attorney-client privilege, then the parties shall use commercially reasonable efforts to permit compliance with such obligations to the extent and in a manner that avoids any such harm or consequence. The party providing Information pursuant to this Section 7.1 shall only be obligated to provide such Information in the form, condition and format in which it then exists and in no event shall such party be required to perform any improvement, modification, conversion, updating or reformatting of any such Information, and nothing in this Section 7.1 shall expand the obligations of the parties under Section 7.4.

 

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7.2. Ownership of Information. Any Information owned by one Group that is provided to a requesting party pursuant to Section 7.1 or 7.7 shall remain the property of the providing party. Unless specifically set forth herein, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such Information.

7.3. Compensation for Providing Information. The party requesting Information agrees to reimburse the other party for the reasonable out-of-pocket costs, if any, of creating, gathering and copying such Information or otherwise complying with the request with respect to such Information.

7.4. Record Retention.

(a) The parties agree and acknowledge that it is not practicable to separate all Tangible Information belonging to the parties, and that following the Effective Time, each party will have some of the Tangible Information of the other party stored at its facilities or at Third Party records storage locations arranged for by such party (each, a “Records Facility”).

(b) Each party shall use the same degree of care (but no less than a reasonable degree of care) as it takes to preserve confidentiality for its own similar Information: (i) to maintain the Stored Records as to which it is the Custodial Party in accordance with its regular records retention policies and procedures and the terms of this Section 7.4; and (ii) to comply with the requirements of any “litigation hold” that relates to Stored Records as to which it is the Custodial Party that relates to (x) any Action that is pending as of the Effective Time or (y) any Action that arises or becomes threatened or reasonably anticipated after the Effective Time as to which the Custodial Party has received a written notice of the applicable “litigation hold” from the Non-Custodial Party.

7.5. Limitations of Liability. No party shall have any liability to any other party in the event that any Information exchanged or provided pursuant to this Agreement is found to be inaccurate in the absence of willful misconduct by the party providing such Information. No party shall have any liability to any other party if any Information is destroyed after commercially reasonable efforts by such party to comply with the provisions of Section 7.4.

7.6. Other Agreements Providing for Exchange of Information.

(a) The rights and obligations granted under this Article VII are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange, retention or confidential treatment of Information set forth herein or any Ancillary Agreement.

(b) Either party that receives, pursuant to a request for Information in accordance with this Article VII, Tangible Information that is not relevant to its request shall (i) return it to the providing party or, at the providing party’s request, destroy such Tangible Information and (ii) deliver to the providing party a certificate certifying that such Tangible Information was returned or destroyed, as the case may be, which certificate shall be signed by an authorized Representative of the requesting party.

 

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(c) When any Tangible Information provided by one party to the other party (other than Tangible Information provided pursuant to Section 7.4) is no longer needed for the purposes contemplated by this Agreement or any Ancillary Agreement or is no longer required to be retained by applicable Law, the receiving party shall promptly, after request of the other party, either return to the other party all Tangible Information in the form in which it was originally provided (including all copies thereof and all notes, extracts or summaries based thereon) or, if the providing party has requested that the other party destroy such Tangible Information, certify to the other party that it has destroyed such Tangible Information (and such copies thereof and such notes, extracts or summaries based thereon); provided, that this obligation to return or destroy such Tangible Information shall not apply to any Tangible Information solely related to the receiving party’s business, Assets, Liabilities, operations or activities.

7.7. Auditors and Audits; Annual and Quarterly Financial Statements and Accounting.

(a) Each party agrees that during the period ending 180 days following the Effective Time (and with the consent of the other party, which consent shall not be unreasonably withheld or delayed, during any period of time after such 180-day period reasonably requested by such requesting party, so long as there is a reasonable business purpose for such request) and in any event solely with respect to the preparation and audit of each of the party’s financial statements for any of the fiscal years 2013 and 2014, the printing, filing and public dissemination of such financial statements, the audit of each party’s internal control over financial reporting and such party’s management’s assessment thereof (as applicable), and each party’s management’s assessment of such party’s disclosure controls and procedures (as applicable):

(i) Each party shall provide or provide access to the other party on a timely basis, all information reasonably required to meet its schedule for the preparation, printing, filing, and public dissemination of its annual financial statements and for management’s assessment of the effectiveness of its disclosure controls and procedures and its internal control over financial reporting in accordance with Items 307 and 308, respectively, of Regulation S-K promulgated by the SEC and, to the extent applicable to such party, its auditor’s audit of its internal control over financial reporting and management’s assessment thereof in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 and the Commission’s and Public Company Accounting Oversight Board’s rules and auditing standards thereunder (such assessments and audit being referred to as the “Internal Control Audit and Management Assessments”). Without limiting the generality of the foregoing, each party will provide all required financial and other information with respect to itself and its Subsidiaries to its auditors in a sufficient and reasonable time and in sufficient detail to permit its auditors to take all steps and perform all reviews necessary to provide sufficient assistance to each Other Party’s Auditor with respect to information to be included or contained in such other party’s annual financial statements and to permit such other party’s auditor and management to complete the Internal Control Audit and Management Assessments, as required;

(ii) Each audited party shall authorize, and use its commercially reasonable efforts to cause, its respective auditors to make available to each other party’s auditor (each such other Party’s auditors, the “Other Party’s Auditor”) both the personnel who performed or are performing the annual audits of such audited party (such party with

 

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respect to its own audit, the “Audited Party”) and work papers related to the annual audits of such Audited Party, in all cases within a reasonable time prior to such Audited Party’s auditors’ opinion date, so that the Other Party’s Auditor is able to perform the procedures it considers necessary to take responsibility for the work of the Audited Party’s auditor as it relates to its auditor’s report on such other party’s financial statements, all within sufficient time to enable such other party to meet its timetable for the printing, filing and public dissemination of its annual financial statements. Each party shall make available to the Other Party’s Auditor and management its personnel and Records in a reasonable time prior to the Other Party’s Auditor’s opinion date and other party’s management’s assessment date so that the Other Party’s Auditor and other party’s management are able to perform the procedures they consider necessary to conduct the Internal Control Audit and Management Assessments, as required.

(b) In the event a party restates any of its financial statements that includes such party’s audited or unaudited financial statements with respect to any balance sheet date or period of operation as of the end of and for the fiscal years 2013 and 2014, such party will deliver to the other party a substantially final draft, as soon as the same is prepared, of any report to be filed by such first party with the SEC that includes such restated audited or unaudited financial statements (the “Amended Financial Report”); provided, however, that such first party may continue to revise its Amended Financial Report prior to its filing thereof with the SEC, which changes will be delivered to the other party as soon as reasonably practicable; provided, further, however, that such first Party’s financial personnel will actively consult with the other party’s financial personnel regarding any changes which such first party may consider making to its Amended Financial Report and related disclosures prior to the anticipated filing of such report with the SEC, with particular focus on any changes which would have an effect upon the other party’s financial statements or related disclosures. Each party will reasonably cooperate with, and permit and make any necessary employees available to, the other party, in connection with the other party’s preparation of any Amended Financial Reports.

(c) If either party or member of its respective Group is required, pursuant to Rule 3-09 of Regulation S-X promulgated by the SEC or otherwise, to include in its Exchange Act filings audited financial statements or other information of the other Party or member of the other party’s Group, the other party shall use its commercially reasonable efforts (i) to provide such audited financial statements or other information, and (ii) to cause its outside auditors to consent to the inclusion of such audited financial statements or other information in the party’s Exchange Act filings.

(d) Nothing in this Section 7.7 shall require any Party to violate any agreement with any third party regarding the confidentiality of confidential and proprietary information relating to that third party or its business; provided, however, that in the event that a Party is required under this Section 7.7 to disclose any such information, such Party shall use commercially reasonable efforts to seek to obtain such third party’s consent to the disclosure of such information.

7.8. Cooperation. Without limiting any other provision of this Agreement, the parties agree to consult and cooperate to the extent reasonably necessary with respect to any Actions, and, upon reasonable written request of the other party, shall use reasonable efforts to make

 

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available to such other party the former, current and future directors, officers, employees, other personnel and agents of the members of its respective Group (whether as witnesses or otherwise). The requesting party shall bear all costs and expenses in connection therewith. Notwithstanding the foregoing, this Section 7.8 shall not require a party to take any step that would significantly interfere, or that such party reasonably determines could significantly interfere, with its business.

7.9. Privileged Matters.

(a) The parties recognize that legal and other professional services that have been and shall be provided prior to the Effective Time have been and shall be rendered for the collective benefit of the parties and their respective Subsidiaries, and that each party and its respective Subsidiaries should be deemed to be the client with respect to such services for the purposes of asserting all privileges and immunities that may be asserted under applicable Law in connection therewith.

(b) The parties agree as follows: (i) NOV shall be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to the NOV Business, whether or not the Privileged Information is in the possession or under the control of a member of the NOV Group or the SpinCo Group; NOV shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to any Excluded Liabilities resulting from any Actions that are now pending or may be asserted in the future, whether or not the Privileged Information is in the possession or under the control of a member of the NOV Group or the SpinCo Group; and (ii) SpinCo shall be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to the SpinCo Business, whether or not the Privileged Information is in the possession or under the control of a member of the NOV Group or the SpinCo Group; SpinCo shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges and immunities in connection with any Privileged Information that relates solely to any SpinCo Liabilities resulting from any Actions that are now pending or may be asserted in the future, whether or not the Privileged Information is in the possession or under the control of a member of the NOV Group or the SpinCo Group.

(c) Subject to Sections 7.9(d) and 7.9(e), the parties agree that they shall have a shared privilege or immunity with respect to all privileges not allocated pursuant to Section 7.9(b) and all privileges and immunities relating to any Actions or other matters that involve both parties (or one or more of their respective Subsidiaries) and in respect of which both parties have Liabilities under this Agreement, and that no such shared privilege or immunity may be waived by either party without the consent of the other party.

(d) If any dispute arises between NOV and SpinCo, or any of their respective Subsidiaries, regarding whether a privilege or immunity should be waived to protect or advance the interests of either party and/or their respective Subsidiaries, each party agrees that it shall: (i) negotiate with the other party in good faith, (ii) endeavor to minimize any prejudice to the rights of the other party and (iii) not unreasonably withhold consent to any request for waiver by the other party. Further, each party specifically agrees that it shall not withhold its consent to the waiver of a privilege or immunity for any purpose except to protect its own legitimate interests.

 

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(e) Upon receipt by SpinCo or by any of the SpinCo Subsidiaries of any subpoena, discovery or other request that may reasonably be expected to result in the production or disclosure of Information subject to a shared privilege or immunity or as to which NOV or any of the NOV Subsidiaries has the sole right hereunder to assert a privilege or immunity, or if SpinCo obtains knowledge that any of its, or a SpinCo Subsidiary’s, current or former directors, officers, agents or employees have received any subpoena, discovery or other requests that may reasonably be expected to result in the production or disclosure of such Privileged Information, SpinCo shall promptly provide written notice to NOV of the existence of the request (which notice shall be delivered to NOV no later than five (5) business days following the receipt of any such subpoena, discovery or other request) and shall provide NOV a reasonable opportunity to review the Information and to assert any rights it or they may have, including under this Section 7.8 or otherwise, to prevent the production or disclosure of such Privileged Information.

(f) Upon receipt by NOV or by any of the NOV Subsidiaries of any subpoena, discovery or other request that may reasonably be expected to result in the production or disclosure of Information subject to a shared privilege or immunity or as to which SpinCo or any of the SpinCo Subsidiaries has the sole right hereunder to assert a privilege or immunity, or if NOV obtains knowledge that any of its, or a NOV Subsidiary’s, current or former directors, officers, agents or employees have received any subpoena, discovery or other requests that may reasonably be expected to result in the production or disclosure of such Privileged Information, NOV shall promptly provide written notice to SpinCo of the existence of the request (which notice shall be delivered to SpinCo no later than five (5) business days following the receipt of any such subpoena, discovery or other request) and shall provide SpinCo a reasonable opportunity to review the Information and to assert any rights it or they may have, including under this Section 7.8 or otherwise, to prevent the production or disclosure of such Privileged Information.

(g) Any furnishing of, or access to, Information pursuant to this Agreement and the transfer of the Asset and retention of the Excluded Assets are made and done in reliance on the agreement of the parties set forth in this Section 7.9 and in Section 7.10 to maintain the confidentiality of Privileged Information and to assert and maintain all applicable privileges and immunities. The parties further agree that: (i) the exchange or retention by one party to the other party of any Privileged Information that should not have been transferred or retained, as the case may be, pursuant to the terms of this Article VII shall not be deemed to constitute a waiver of any privilege or immunity that has been or may be asserted under this Agreement or otherwise with respect to such Privileged Information; and (ii) the party receiving or retaining such Privileged Information shall promptly return or transfer, as the case may be, such Privileged Information to the party who has the right to assert the privilege or immunity.

(h) In furtherance of, and without limitation to, the parties’ agreement under this Section 7.9, NOV and SpinCo shall, and shall cause their applicable Subsidiaries to, use reasonable efforts to maintain their respective separate and joint privileges and immunities, including by executing joint defense and/or common interest agreements where necessary or useful for this purpose.

 

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7.10. Confidentiality.

(a) Confidentiality. From and after the Effective Time, subject to Section 7.11 and except as contemplated by or otherwise provided in this Agreement or any Ancillary Agreement, NOV, on behalf of itself and each of the NOV Subsidiaries, and SpinCo, on behalf of itself and each of the SpinCo Subsidiaries, agrees to hold, and to cause its respective Representatives to hold, in strict confidence, with at least the same degree of care that applies to NOV’s confidential and proprietary information pursuant to policies in effect as of the Effective Time, all confidential and proprietary Information concerning the other party (or its business) and the other party’s Subsidiaries (or their respective businesses) that is either in its possession (including confidential and proprietary Information in its possession prior to the Effective Time) or furnished by the other party or the other party’s Subsidiaries or their respective Representatives at any time pursuant to this Agreement or any Ancillary Agreement, and shall not use any such confidential and proprietary Information other than for such purposes as may be expressly permitted hereunder or thereunder, except, in each case, to the extent that such confidential and proprietary Information has been: (i) in the public domain or generally available to the public, other than as a result of a disclosure by such party or any of its Subsidiaries or any of their respective Representatives in violation of this Agreement, (ii) later lawfully acquired from other sources by such party or any of its Subsidiaries, which sources are not themselves bound by a confidentiality obligation or other contractual, legal or fiduciary obligation of confidentiality with respect to such confidential and proprietary Information or (iii) independently developed or generated without reference to or use of the respective proprietary or confidential Information of the other party or any of its Subsidiaries. If any confidential and proprietary Information of one party or any of its Subsidiaries is disclosed to another party or any of its Subsidiaries in connection with providing services to such first party or any of its Subsidiaries under this Agreement or any Ancillary Agreement, then such disclosed confidential and proprietary Information shall be used only as required to perform such services.

(b) No Release; Return or Destruction. Each party agrees not to release or disclose, or permit to be released or disclosed, any confidential or proprietary Information of the other party addressed in Section 7.10(a) to any other Person, except its Representatives who need to know such Information in their capacities as such, and except in compliance with Section 7.11. Without limiting the foregoing, when any Information furnished by the other party after the Effective Time pursuant to this Agreement or any Ancillary Agreement is no longer needed for the purposes contemplated by this Agreement or any Ancillary Agreement, each party shall, at its option, promptly after receiving a written notice from the disclosing party, either return to the disclosing party all such Information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or certify to the disclosing party that it has destroyed such Information (and such copies thereof and such notes, extracts or summaries based thereon); provided, however, that a party shall not be required to destroy or return any such Information to the extent that (i) the party is required to retain the Information in order to comply with any applicable Law, (ii) the Information has been backed up electronically pursuant to the party’s standard document retention policies and will be managed and ultimately destroyed consistent with such policies or (iii) it is kept in the party’s legal files for purposes of resolving any dispute that may arise under this Agreement or any Ancillary Agreement.

 

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(c) Third-Party Information; Privacy or Data Protection Laws. Each party acknowledges that it and its respective Subsidiaries may presently have and, following the Effective Time, may gain access to or possession of confidential or proprietary Information of, or personal Information relating to, Third Parties: (i) that was received under confidentiality or non-disclosure agreements entered into between such Third Parties, on the one hand, and the other party or the other party’s Subsidiaries, on the other hand, prior to the Effective Time or (ii) that, as between the two parties, was originally collected by the other party or the other party’s Subsidiaries and that may be subject to and protected by privacy, data protection or other applicable Laws. As may be provided in more detail in an applicable Ancillary Agreement, each party agrees that it shall hold, protect and use, and shall cause its Subsidiaries and its and their respective Representatives to hold, protect and use, in strict confidence the confidential and proprietary Information of, or personal Information relating to, Third Parties in accordance with privacy, data protection or other applicable Laws and the terms of any agreements that were either entered into before the Effective Time or affirmative commitments or representations that were made before the Effective Time by, between or among the other party or the other party’s Subsidiaries, on the one hand, and such Third Parties, on the other hand.

7.11. Protective Arrangements. In the event that either party or any of its Subsidiaries is requested or required (by oral question, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process) by any Governmental Authority or pursuant to applicable Law or the rules of any stock exchange on which the shares of the party or any member of its Group are traded to disclose or provide any confidential or proprietary Information of the other party (other than with respect to any such Information furnished pursuant to the provisions of Sections 7.1 through 7.10, as applicable), that is subject to the confidentiality provisions hereof, such party shall provide the other party with written notice of such request or demand as promptly as practicable under the circumstances so that such other party shall have an opportunity to seek an appropriate protective order, at such other party’s own cost and expense. In the event that such other party fails to receive such appropriate protective order in a timely manner and the party receiving the request or demand reasonably determines that its failure to disclose or provide such Information shall actually prejudice the party receiving the request or demand, then the party that received such request or demand may thereafter disclose or provide Information to the extent required by such Law (as so advised by counsel) or by lawful process or such Governmental Authority.

ARTICLE VIII.

FURTHER ASSURANCES AND ADDITIONAL COVENANTS

8.1. Further Assurances.

(a) In addition to the actions specifically provided for elsewhere in this Agreement, each of the parties hereto shall use its commercially reasonable efforts, prior to, on and after the Effective Time, to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably necessary, proper or advisable on its part under applicable Laws, regulations and agreements, to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements.

 

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(b) Without limiting the foregoing, prior to, on and after the Effective Time, each party hereto shall cooperate with each other party hereto, and without any further consideration, but at the expense of the requesting party, to execute and deliver, or use its commercially reasonable efforts to cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain or make any Approvals or Notifications of, any Governmental Authority or any other Person under any permit, license, agreement, indenture or other instrument (including any Third-Party consents or Governmental Approvals), and to take all such other actions as such party may reasonably be requested to take by any other party hereto from time to time, consistent with the terms of this Agreement and the Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement and the Ancillary Agreements and the transfers of the SpinCo Assets and the assignment and assumption of the SpinCo Liabilities and the other transactions contemplated hereby and thereby. Without limiting the foregoing, each party shall, at the reasonable request, cost and expense of any other party, take such other actions as may be reasonably necessary to vest in such other party all of the transferring party’s right, title and interest to the Assets allocated to such party by this Agreement or any Ancillary Agreement, in each case, if and to the extent it is practicable to do so.

(c) On or prior to the Effective Time, NOV and SpinCo in their respective capacities as direct and indirect stockholders of their respective Subsidiaries, shall each ratify any actions that are reasonably necessary or desirable to be taken by any Subsidiary of NOV or Subsidiary of SpinCo, as the case may be, to effectuate the transactions contemplated by this Agreement and the Ancillary Agreements.

(d) Prior to the first anniversary of the Distribution Date, if one or more of the parties identifies any commercial or other service that is needed to assure a smooth and orderly transition of the businesses in connection with the consummation of the transactions contemplated hereby, and that is not otherwise governed by the provisions of this Agreement or any Ancillary Agreement, the parties will cooperate in determining whether there is a mutually acceptable basis on which the other party will provide such service; provided, that if such service is to extend beyond the first anniversary of the Distribution Date, the terms and conditions upon which the services are to be provided beyond the first anniversary of the Distribution Date shall be market and arm’s-length terms and conditions.

8.2. Performance. NOV shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement or in any Ancillary Agreement to be performed by any member of the NOV Group. SpinCo shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement or in any Ancillary Agreement to be performed by any member of the SpinCo Group. Each party (including its permitted successors and assigns) further agrees that it shall (a) give timely notice of the terms, conditions and continuing obligations contained in this Section 8.2 to all of the other members of its Group, and (b) cause all of the other members of its Group not to take, or omit to take, any action which action or omission would violate or cause such party to violate this Agreement or any Ancillary Agreement.

8.3. Order of Precedence. Notwithstanding anything to the contrary in this Agreement or any Ancillary Agreement, in the case of any conflict between the provisions of this Agreement

 

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and the provisions of any Ancillary Agreement, the provisions of this Agreement shall prevail; provided, however, that in relation to any matters concerning Taxes, the Tax Matters Agreement shall prevail over this Agreement and any other Ancillary Agreement, and in relation to any matters governed by the Employee Matters Agreement, the Employee Matters Agreement shall prevail over this Agreement and any other Ancillary Agreement.

ARTICLE IX.

TERMINATION

9.1. Termination. This Agreement and any Ancillary Agreement may be terminated and the terms and conditions of the Separation and the Distribution may be amended, modified or abandoned at any time prior to the Effective Time by and in the sole and absolute discretion of the NOV Board without the approval of any Person, including SpinCo or the stockholders of NOV. In the event that this Agreement is terminated, this Agreement shall become null and void and no party, nor any party’s directors, officers or employees, shall have any liability of any kind to any Person by reason of this Agreement. After the Distribution, this Agreement may not be terminated except by an agreement in writing signed by Parent and SpinCo; provided, notwithstanding the foregoing, Article VII shall not be terminated or amended after the Effective Time in a manner adverse to the third-party beneficiaries thereof without the Consent of any such Person.

ARTICLE X.

MISCELLANEOUS

10.1. Counterparts; Entire Agreement; Corporate Power.

(a) This Agreement and each Ancillary Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each party and delivered to each other party.

(b) This Agreement and the Ancillary Agreements, and the exhibits, annexes and schedules hereto and thereto, contain the entire agreement between the parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter and there are no agreements or understandings between the parties with respect to such subject matter other than those set forth or referred to herein or therein.

(c) NOV represents on behalf of itself and each other member of the NOV Group, and SpinCo represents on behalf of itself and each other member of the SpinCo Group, as follows:

(i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and each Ancillary Agreement to which it is a party and to consummate the transactions contemplated hereby and thereby; and

(ii) this Agreement and each Ancillary Agreement to which it is a party have been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof.

 

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(d) Each party hereto acknowledges that it and each other party hereto may execute this Agreement and the Ancillary Agreements by facsimile, stamp or mechanical signature. Each party hereto expressly adopts and confirms each such facsimile, stamp or mechanical signature made in its respective name as if it were a manual signature, agrees that it shall not assert that any such signature is not adequate to bind such party to the same extent as if it were signed manually and agrees that at the reasonable request of any other party hereto at any time it shall as promptly as reasonably practicable cause this Agreement and each Ancillary Agreement to be manually executed (any such execution to be as of the date of the initial date thereof).

10.2. Governing Law. This Agreement and, unless expressly provided therein, each Ancillary Agreement (and any claims or disputes arising out of or related hereto or thereto or to the transactions contemplated hereby and thereby or to the inducement of any party to enter herein and therein, whether for breach of contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Texas, irrespective of the choice of laws principles of the State of Texas, including all matters of validity, construction, effect, enforceability, performance and remedies.

10.3. Assignability. Except as set forth in any Ancillary Agreement, this Agreement and each Ancillary Agreement shall be binding upon and inure to the benefit of the parties hereto and thereto, respectively, and their respective successors and permitted assigns; provided, however, that no party hereto or thereto may assign its respective rights or delegate its respective obligations under this Agreement or any Ancillary Agreement without the express prior written consent of the other parties hereto or thereto and provided, further, that a Party may assign its rights and delegate its obligations under this Agreement or any Ancillary Agreement in connection with a change of control of such Party or a sale or disposition of all or substantially all of the Assets or Liabilities or lines of business of such Party, provided, that no such assignment or delegation shall release such Party from any Liability or obligation under this Agreement or any Ancillary Agreement and that the surviving entity of such change of control or the transferee of such Assets shall agree in writing, reasonably satisfactory to the other Party, to be bound by the terms of this Agreement as if named as a “Party” hereto.

10.4. Third-Party Beneficiaries. Except for the release and indemnification rights under this Agreement or any Ancillary Agreement of any NOV Indemnitee or SpinCo Indemnitee in their respective capacities as such, (a) the provisions of this Agreement and each Ancillary Agreement are solely for the benefit of the parties and are not intended to confer upon any Person (including, without limitation, any stockholders of NOV or stockholders of SpinCo) except the parties hereto and thereto any rights or remedies hereunder or thereunder; and (b) there are no third-party beneficiaries of this Agreement or any Ancillary Agreement, and neither this Agreement nor any Ancillary Agreement shall provide any third Person (including, without limitation, any stockholders of NOV or stockholders of SpinCo) with any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement or any Ancillary Agreement.

 

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10.5. Notices. All notices, requests, claims, demands or other communications under this Agreement and, to the extent applicable and unless otherwise provided therein, under each of the Ancillary Agreements, shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by facsimile or electronic transmission with receipt confirmed (followed by delivery of an original via overnight courier service), or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10.5):

If to NOV, to:

National Oilwell Varco, Inc.

7909 Parkwood Circle Drive

Houston, Texas 77036

Attention: General Counsel

If to SpinCo, to:

NOW Inc.

7402 North Eldridge Parkway

Houston, Texas 77041

Attention: General Counsel

Any party may, by notice to the other party, change the address and contact person to which any such notices are to be given.

10.6. Severability. If any provision of this Agreement or any Ancillary Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof or thereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. Upon such determination, the parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the parties.

10.7. Force Majeure. Neither party shall be deemed in default of this Agreement or any Ancillary Agreement for failure to fulfill any obligation, other than a delay or failure to make a payment, so long as and to the extent to which any delay or failure in the fulfillment of such obligations is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. In the event of any such excused delay, the time for performance shall be extended for a period equal to the time lost by reason of the delay. A party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event, (a) provide written notice to the other party of the nature and extent of any such Force Majeure condition; and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement or any Ancillary Agreement, as applicable, as soon as reasonably practicable.

 

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10.8. Publicity. From and after the Effective Time for a period of 180 days, SpinCo and NOV shall consult with each other before issuing, and give each other the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement and the Ancillary Agreements, and shall not issue any such press release or make any public statement prior to such consultation, except as may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system.

10.9. Expenses.

(a) Except as otherwise expressly provided (x) in this Agreement (including Section 3.1, and paragraphs (a)(ii), (b) and (c) of this Section 10.9) or (y) in any Ancillary Agreement, the Parties agree that all out-of-pocket costs, fees and expenses (including the costs to obtain any Consents) incurred and directly related to the transactions contemplated hereby, including any Liability incurred following the Separation as a result of the consummation of the Separation, shall be borne and paid by the Person incurring such cost or Liability, and (ii) the costs and expenses described on Schedule 10.9(a)(ii) shall be paid by the party to which such costs and expenses are allocated thereon.

(b) NOV shall pay all fees earned, and all costs and expenses incurred, on or prior to the Distribution Date directly related to the Separation, and thereafter each party shall be responsible for payment of its respective outside advisors for all work performed, whether in connection with the Separation or otherwise, after the Distribution Date.

(c) With respect to any expenses incurred pursuant to a request for further assurances granted under Section 8.1(b), the parties agree that such expenses shall be borne and paid by the party incurring such expense in complying with such request; it being understood that no party shall be obliged to incur any third-party accounting, consulting, advisor, banking or legal fees, costs or expenses, and the requesting party shall not be obligated to pay such fees, costs or expenses, unless such fee, cost or expense shall have had the prior written approval of the requesting party.

10.10. Late Payments. Except as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any amount not paid when due pursuant to this Agreement or any Ancillary Agreement (and any amounts billed or otherwise invoiced or demanded and properly payable that are not paid within sixty (60) days of such bill, invoice or other demand) shall accrue interest at a rate per annum equal to the Prime Rate plus two percent (2%).

10.11. Headings. The article, section and paragraph headings contained in this Agreement and in the Ancillary Agreements are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement or any Ancillary Agreement.

10.12. Survival of Covenants. Except as expressly set forth in any Ancillary Agreement, the covenants, representations and warranties contained in this Agreement and each Ancillary Agreement, and liability for the breach of any obligations contained herein or therein, shall survive the Separation and the Distribution and shall remain in full force and effect.

 

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10.13. Waivers of Default. Waiver by any party of any default by the other party of any provision of this Agreement or any Ancillary Agreement shall not be deemed a waiver by the waiving party of any subsequent or other default, nor shall it prejudice the rights of such party. No failure or delay by any party in exercising any right, power or privilege under this Agreement or any Ancillary Agreement shall operate as a waiver thereof nor shall a single or partial exercise thereof prejudice any other or further exercise thereof or the exercise of any other right, power or privilege.

10.14. Specific Performance. Subject to the provisions of Article IV, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement or any Ancillary Agreement, the party or parties who are, or are to be, thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief (on an interim or permanent basis) in respect of its or their rights under this Agreement or such Ancillary Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The parties agree that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by each of the parties to this Agreement.

10.15. Amendments. No provisions of this Agreement or any Ancillary Agreement shall be deemed waived, amended, supplemented or modified by any party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the party against whom such waiver, amendment, supplement or modification is sought to be enforced; provided, at any time prior to the Effective Time, the terms and conditions of this Agreement, including terms relating to the Separation and the Distribution, may be amended, modified or abandoned by and in the sole and absolute discretion of the NOV Board without the approval of any Person, including SpinCo or the stockholders of NOV; and provided, further, notwithstanding the foregoing, Article VII shall not be terminated or amended after the Effective Time in a manner adverse to the third-party beneficiaries thereof without the Consent of any such Person.

10.16. Interpretation. In this Agreement and any Ancillary Agreement, (a) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other genders as the context requires; (b) the terms “hereof,” “herein,” “herewith” and words of similar import, and the terms “Agreement” and “Ancillary Agreement” shall, unless otherwise stated, be construed to refer to this Agreement or the applicable Ancillary Agreement as a whole (including all of the Schedules, Exhibits and Appendices hereto and thereto) and not to any particular provision of this Agreement or such Ancillary Agreement; (c) Article, Section, Exhibit, Schedule and Appendix references are to the Articles, Sections, Exhibits, Schedules and Appendices to this Agreement (or the applicable Ancillary Agreement) unless otherwise specified; (d) the word “including” and words of similar import when used in this Agreement (or the applicable Ancillary Agreement) means “including, without limitation”; (e) the word “or” shall not be exclusive; (f) unless expressly stated to the contrary in this

 

62


Agreement or in any Ancillary Agreement, all references to “the date hereof,” “the date of this Agreement,” “hereby” and “hereupon” and words of similar import shall all be references to the date first stated in the preamble to this Agreement, regardless of any amendment or restatement hereof; (g) unless otherwise provided, all references to “$” or “dollars” are to United States dollars; and (h) references to the performance, discharge or fulfillment of any Liability in accordance with its terms shall have meaning only to the extent such Liability has terms, and if the Liability does not have terms, the reference shall mean performance, discharge or fulfillment of such Liability.

10.17. Limitations of Liability. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NEITHER SPINCO NOR ITS AFFILIATES, ON THE ONE HAND, NOR NOV NOR ITS AFFILIATES, ON THE OTHER HAND, SHALL BE LIABLE UNDER THIS AGREEMENT TO THE OTHER FOR ANY SPECIAL, INDIRECT, PUNITIVE, EXEMPLARY, REMOTE, SPECULATIVE OR SIMILAR DAMAGES IN EXCESS OF COMPENSATORY DAMAGES OF THE OTHER ARISING IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY (OTHER THAN ANY SUCH LIABILITY WITH RESPECT TO A THIRD-PARTY CLAIM).

 

63


IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives.

 

NATIONAL OILWELL VARCO, INC.
By:  

 

Name:  
Title:  
NOW INC.
By:  

 

Name:  
Title:  

SEPARATION AND DISTRIBUTION AGREEMENT

SIGNATURE PAGE

EX-3.1

Exhibit 3.1

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF

NOW INC.

NOW Inc. (the “Corporation”), a corporation organized and existing under the General Corporation Law of the State of Delaware (“DGCL”), for the purpose of amending and restating the Corporation’s certificate of incorporation, does hereby submit the following:

A. The name of the Corporation is NOW Inc.

B. The date of filing of the Corporation’s original Certificate of Incorporation was November 22, 2013, and was filed under the name NOW Inc.

C. The Board of Directors of the Corporation and the sole stockholder of the Corporation have duly adopted this Amended and Restated Certificate of Incorporation as set forth on Exhibit A hereto in accordance with Sections 103, 228, 242 and 245 of the DGCL.

D. This Amended and Restated Certificate of Incorporation shall become effective upon filing with the Secretary of State of the State of Delaware.

IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of the Corporation on this     day of                 , 2014.

 

NOW INC.
By:  

 

Name:  

 

Title:  

 


EXHIBIT A

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF

NOW INC.

FIRST: NAME.

The name of the Corporation is NOW Inc.

SECOND: REGISTERED AGENT.

The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle 19801. The name of the registered agent of the Corporation at such address is The Corporation Trust Company.

THIRD: CORPORATE PURPOSE.

The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful business, act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “DGCL”).

FOURTH: CAPITAL STOCK.

The following is a statement of the powers, preferences and rights, and the qualifications, limitations and restrictions, of the classes of stock of the corporation, and the authority with respect thereto expressly vested in the Board of Directors of the Corporation (the “Board”):

I. AUTHORIZED SHARES.

The total number of shares of stock that the Corporation shall have authority to issue is, [•] shares of capital stock, consisting of (i) [] shares of common stock, par value $0.01 per share (the “Common Stock”) and (ii) [•] shares of preferred stock, par value $0.01 per share (the “Preferred Stock”). All holders of Common Stock shall be entitled to one vote per share on all matters to be voted on by the Corporation’s stockholders.

II. PREFERRED STOCK.

The Preferred Stock may be issued from time to time in one or more classes or series, the shares of each class or series to have any designations and powers, preferences, and rights, and qualifications, limitations, and restrictions thereof as are stated and expressed in this Part II of this Article Fourth and in the resolution or resolutions providing for the issue of such class or series adopted by the Board as hereinafter prescribed. The authority of the Board with respect to each such class or series will include, without limiting the generality of the foregoing, the determination of any or all of the following:

 

  (i) whether or not the class or series is to have voting rights, special, or limited, or is to be without voting rights, and whether or not such class or series is to be entitled to vote as a separate class either alone or together with the holders of one or more other classes or series of stock;


  (ii) the number of shares to constitute the class or series and the designations thereof;

 

  (iii) the preferences and relative, participating, optional, or other special rights, if any, and the qualifications, limitations, or restrictions thereof, if any, with respect to any class or series;

 

  (iv) whether or not the shares of any class or series shall be redeemable at the option of the Corporation or the holders thereof or upon the happening of any specified event, and, if redeemable, the redemption price or prices (which may be payable in the form of cash, notes, securities, or other property), and the time or times at which, and the terms and conditions upon which, such shares shall be redeemable and the manner of redemption;

 

  (v) whether or not the shares of a class or series shall be subject to the operation of retirement or sinking funds to be applied to the purchase or redemption of such shares for retirement, and, if such retirement or sinking fund or funds are to be established, the periodic amount thereof, and the terms and provisions relative to the operation thereof;

 

  (vi) the dividend rate, whether dividends are payable in cash, stock of the Corporation, or other property, the conditions upon which and the times when such dividends are payable, the preference to or the relation to the payment of dividends payable on any other class or classes or series of stock, whether or not such dividends shall be cumulative or noncumulative, and if cumulative, the date or dates from which such dividends shall accumulate;

 

  (vii) the preferences, if any, and the amounts thereof which the holders of any class or series thereof shall be entitled to receive upon the voluntary or involuntary dissolution of, or upon any distribution of the assets of, the Corporation;

 

  (viii) whether or not the shares of any class or series, at the option of the Corporation or the holder thereof or upon the happening of any specified event, shall be convertible into or exchangeable for the shares of any other class or classes or of any other series of the same or any other class or classes of stock, securities, or other property of the Corporation and the conversion price or prices or ratio or ratios of the rate or rates at which such conversion or exchange may be made, with such adjustments, if any, as shall be stated and expressed or provided for in such resolution or resolutions; and

 

  (ix) any other special rights and protective provisions with respect to any class or series as may to the Board seem advisable.

The shares of each class or series of the Preferred Stock may vary from the shares of any other class or series thereof in any or all of the foregoing respects and in any other manner. The Board may increase the number of shares of the Preferred Stock designated for any existing class

 

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or series by a resolution adding to such class or series authorized and unissued shares of the Preferred Stock not designated for any other class or series. The Board may decrease the number of shares of the Preferred Stock designated for any existing class or series by a resolution subtracting from such class or series authorized and unissued shares of the Preferred Stock designated for such existing class or series, and the shares so subtracted shall become authorized, unissued, and undesignated shares of the Preferred Stock.

Except as required by the DGCL, any Preferred Stock designation or this Amended and Restated Certificate of Incorporation, a series of Preferred Stock may be authorized, and the terms of any series of Preferred Stock may be amended, without the consent, approval or other action of the holders of Common Stock, of any other series of Preferred Stock or any other class of capital stock of the Corporation.

III. NO PREEMPTIVE RIGHTS.

No holder of shares of Common Stock or Preferred Stock of the Corporation shall have any preemptive or other rights, except such rights as are expressly provided by contract, to purchase or subscribe for or receive any shares of any class, or series thereof, of stock of the Corporation, whether now or hereafter authorized, or any warrants, options, bonds, debentures or other securities convertible into, exchangeable for or carrying any right to purchase any shares of any class, or series thereof, of stock; but such additional shares of stock and such warrants, options, bonds, debentures or other securities convertible into, exchangeable for or carrying any right to purchase any shares of any class, or series thereof, of stock may be issued or disposed of by the Board to such persons, and on such terms and for such lawful consideration, as in its discretion it shall deem advisable or as to which the Corporation shall have by binding contract agreed.

IV. NO CUMULATIVE VOTING.

Cumulative voting of shares of any class or series of stock of the Corporation is prohibited.

V. GENERAL.

Subject to the foregoing provisions of this Amended and Restated Certificate of Incorporation, the Corporation may issue shares of its Preferred Stock and Common Stock from time to time for such consideration (not less than the par value thereof) as may be fixed by the Board, which is expressly authorized to fix the same in its absolute discretion subject to the foregoing conditions. Shares so issued for which the consideration shall have been paid or delivered to the Corporation shall be deemed fully paid stock and shall not be liable to any further call or assessment thereon, and the holders of such shares shall not be liable for any further payments in respect of such shares.

The Corporation shall have authority to create and issue rights and options entitling their holders to purchase shares of the Corporation’s capital stock of any class or series or other securities of the Corporation, and such rights and options shall be evidenced by instrument(s) approved by the Board. The Board shall be empowered to set the exercise price, duration, times for exercise, and other terms of such rights or options; provided, however, that the consideration to be received for any shares of capital stock subject thereto shall not be less than the par value thereof.

 

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FIFTH: MANAGEMENT OF CORPORATION.

The following provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:

I. DIRECTORS.

The number, classification, and terms of the Board and the procedures to elect directors, to remove directors, and to fill vacancies in the Board shall be as follows:

(a) Subject to the rights of holders of a series of shares of Preferred Stock to elect one or more directors pursuant to any provisions of any certificate of designation relating to any such series, the number of directors will be fixed exclusively by a majority of the entire Board of Directors from time to time. In no event shall the number of directors that constitute the Board be fewer than three. No decrease in the number of directors shall have the effect of shortening the term of any incumbent director. Directors of the Corporation need not be elected by written ballot unless the bylaws of the Corporation otherwise provide.

(b) The Board shall be divided into three classes designated Class I, Class II, and Class III, respectively, all as nearly equal in number as possible, with each director then in office receiving the classification that at least a majority of the Board designates. The number of directors in each class shall be the whole number contained in the quotient derived by dividing the authorized number of directors by three, and if a fraction is also contained in the quotient, then if that fraction is one-third (1/3) then the extra director shall be a member of Class III, and if the fraction is two-thirds (2/3) then one of the extra directors shall be a member of Class III and the other shall be a member of Class II. Each director shall serve for a term ending on the third annual meeting following the annual meeting at which such director was elected; provided, however, that the directors first elected to Class I shall serve for a term ending on the annual meeting following their first election as directors, the directors first elected to Class II shall serve for a term ending on the second annual meeting following their first election as directors, and the directors first elected to Class III shall serve a full term as hereinabove provided. The foregoing notwithstanding, each director shall serve until his or her successor shall have been qualified, or until he or she becomes disabled or is otherwise removed. At each annual meeting of stockholders, directors will be elected to succeed the class of directors whose terms have expired. If for any reason the number of directors in the various classes shall not conform with the formula set forth in the preceding paragraph, the Board may (but shall not be required to) redesignate any director into a different class in order that the balance of directors in such classes shall conform thereto.

(c) Vacancies in the Board resulting from death, resignation, retirement, disqualification, removal from office, or other cause and newly-created directorships resulting from any increase in the authorized number of directors may be filled by no less than a majority vote of the remaining directors then in office, though less than a quorum, who are designated to

 

- 5 -


represent the same class or classes of stockholders that the vacant position, when filled, is to represent or by the sole remaining director (but not by the stockholders except as required by law), and each director so chosen shall receive the classification of the vacant directorship to which such director has been appointed or, if that is a newly-created directorship, shall receive the classification that at least a majority of the Board designates and shall hold office until the first meeting of stockholders held after such director’s election for the purpose of electing directors of that classification and until such director’s successor is elected and qualified or until his earlier death, resignation, or removal from office.

(d) The number, qualifications, terms of office, manner of election, time and place of meeting, compensation and powers and duties of the directors may be prescribed from time to time by the bylaws of the Corporation, and the bylaws of the Corporation may also contain any other provisions for the regulation and management of the affairs of the Corporation not inconsistent with law or this Amended and Restated Certificate of Incorporation.

(e) A director of any class of directors of the Corporation may be removed before the expiration date of that director’s term of office, only for cause, by an affirmative vote of the holders of not less than eighty percent (80%) of the votes of the outstanding shares of the class or classes or series of stock then entitled to be voted at an election of directors of that class or series, voting together as a single class, cast at the annual meeting of stockholders or at any special meeting of stockholders called by a majority of the Board for this purpose.

II. POWER TO AMEND BYLAWS.

The bylaws may be altered or repealed and new bylaws may be adopted (a) at any annual or special meeting of stockholders if notice of the proposed alteration, repeal or adoption of the new bylaw or bylaws be contained in the notice of such annual or special meeting by the affirmative vote of a majority of the stock issued and outstanding and entitled to vote thereat, voting together as a single class, or (b) by the affirmative vote of a majority of the members present at any regular meeting of the Board, or at any special meeting of the Board, without any action on the part of the stockholders, if notice of the proposed alteration, repeal or adoption of the new bylaw or bylaws be contained in the notice of such regular or special meeting.

Notwithstanding the foregoing, the affirmative vote of the holders of at least eighty percent (80%) of the votes of the outstanding shares of the class or classes or series of stock then entitled to be voted shall be required to alter, amend or repeal Article II, Section Four (Special Meetings), Article II, Section 14 (Action Without Meeting), Article III, Section 1 (Power; Number; Term of Office), Article III, Section 7 (Resignation and Removal), Article III, Section 7 (Vacancies; Increases in the Number of Directors), Article VI (Indemnification of Directors, Officers, Employees and Agents), and Article IX (Amendments) of the Corporation’s bylaws.

III. NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS OF STOCKHOLDERS.

Subject to the rights, if any, of holders of Preferred Stock as set forth in a Preferred Stock designation, any action required or permitted to be taken by the stockholders of the Corporation must be effected at an annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by those stockholders.

 

- 6 -


Special meetings of the stockholders of the Corporation for any purpose or purposes may be called at any time by (i) the Chief Executive Officer of the Corporation, or (ii) the Board, pursuant to a resolution approved by a majority of the directors which the Corporation would have if there were no vacancies.

SIXTH: ELIMINATION OF CERTAIN LIABILITY OF DIRECTORS AND INDEMNIFICATION.

I. ELIMINATION OF CERTAIN LIABILITY OF DIRECTORS.

No director shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty by such director as a director, except for liability (a) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the DGCL, or (d) for any transaction from which the director derived an improper personal benefit. Any amendment or repeal of this Part I of this Article Sixth shall be prospective only, and neither the amendment nor repeal of this Part I of this Article Sixth shall eliminate or reduce the effect of this Part I of this Article Sixth in respect to any matter occurring, or any cause of action, suit or claim that, but for this Part I of this Article Sixth would accrue or arise, prior to such amendment or repeal. If the DGCL hereafter is amended to authorize corporate action further eliminating or limiting the liability or directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided herein, shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended from time to time.

II. INDEMNIFICATION.

To the fullest extent authorized or permitted by the DGCL (as now in effect or as amended), and as further specified in the Corporation’s bylaws, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that such person, or a person of whom he or she is the legal representative, is or was the Corporation’s director or officer, or by reason of the fact that the Corporation’s director or officer is or was serving, at the Corporation’s request, as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans maintained or sponsored by the Corporation.

SEVENTH: AMENDMENTS TO THIS CERTIFICATE

Notwithstanding anything contained in this Amended and Restated Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least eighty percent (80%) of the votes of the outstanding shares of the class or classes or series of stock then entitled to be voted shall be required to alter, amend or repeal Part I, II and III of Article Fifth, or Article Seventh of this Amended and Restated Certificate of Incorporation.

 

- 7 -

EX-3.2

Exhibit 3.2

AMENDED AND RESTATED BYLAWS

OF

NOW INC.

A Delaware Corporation

Date of Adoption:

[], 2014


Table of Contents

 

         

Page

 

Article I             OFFICES

     1   

Section 1.

   Registered Office      1   

Section 2.

   Other Offices      1   

Article II             STOCKHOLDERS

     1   

Section 1.

   Place of Meetings      1   

Section 2.

   Quorum; Adjournment of Meetings      1   

Section 3.

   Annual Meetings      2   

Section 4.

   Special Meetings      2   

Section 5.

   Record Date      2   

Section 6.

   Notice of Meetings      3   

Section 7.

   Stock List      3   

Section 8.

   Notice of Stockholder Proposals      4   

Section 9.

   Proxies      5   

Section 10.

   Voting; Elections; Inspectors      5   

Section 11.

   Conduct of Meetings      6   

Section 12.

   Meetings by Remote Communication      6   

Section 13.

   Treasury Stock      7   

Section 14.

   Action Without Meeting      7   

Article III           BOARD OF DIRECTORS

     7   

Section 1.

   Power; Number; Term of Office      7   

Section 2.

   Quorum      7   

Section 3.

   Place of Meetings; Order of Business      7   

Section 4.

   Regular Meetings      8   

Section 5.

   Special Meetings      8   

Section 6.

   Resignation and Removal      8   

Section 7.

   Vacancies; Increases in the Number of Directors      8   

Section 8.

   Compensation      8   

Section 9.

   Action Without a Meeting; Telephone Conference Meeting      9   

Section 10.

   Approval or Ratification of Acts or Contracts by Stockholders      9   

 

i


Article IV         COMMITTEES

     9   

Section 1.

   Designation Powers      9   

Section 2.

   Procedure; Meetings; Quorum      10   

Section 3.

   Substitution of Members      10   

Article V          OFFICERS

     10   

Section 1.

   Number, Titles and Term of Office      10   

Section 2.

   Salaries      10   

Section 3.

   Removal      10   

Section 4.

   Vacancies      10   

Section 5.

   Powers and Duties of the Chief Executive Officer      11   

Section 6.

   Powers and Duties of the Chairman of the Board      11   

Section 7.

   Powers and Duties of the President      11   

Section 8.

   Vice Presidents      11   

Section 9.

   Treasurer      11   

Section 10.

   Assistant Treasurers      11   

Section 11.

   Secretary      12   

Section 12.

   Assistant Secretaries      12   

Section 13.

   Action with Respect to Securities of Other Corporations      12   

Article VI           INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS

     12   

Section 1.

   Right to Indemnification      12   

Section 2.

   Indemnification of Employees and Agents      13   

Section 3.

   Right of Claimant to Bring Suit      13   

Section 4.

   Non-exclusivity of Rights      13   

Section 5.

   Insurance      14   

Section 6.

   Savings Clause      14   

Section 7.

   Definitions      14   

Article VII         CAPITAL STOCK

     14   

Section 1.

   Certificates of Stock      14   

Section 2.

   Transfer of Stock      15   

Section 3.

   Ownership of Stock      15   

Section 4.

   Regulations Regarding Stock      15   

Section 5.

   Lost or Destroyed Certificates      16   

 

ii


Article VIII       MISCELLANEOUS PROVISIONS

     16   

Section 1.

   Fiscal Year      16   

Section 2.

   Corporate Seal      16   

Section 3.

   Notice and Waiver of Notice      16   

Section 4.

   Facsimile Signatures      16   

Section 5.

   Reliance upon Books, Reports and Records      17   

Section 6.

   Electronic Transmissions      17   

Section 7.

   Exclusive Forum      17   

Article IX         AMENDMENTS

     17   

 

iii


AMENDED AND RESTATED BYLAWS

OF

NOW INC.

ARTICLE I

OFFICES

Section 1. Registered Office. The registered office of the Corporation required by the General Corporation Law of the State of Delaware (the “DGCL”) to be maintained in the State of Delaware, shall be the registered office named in the Certificate of Incorporation of the Corporation, as may be amended and/or restated from time to time, or such other office as may be designated from time to time by the Board of Directors in the manner provided by law. Should the Corporation maintain a principal office within the State of Delaware such registered office need not be identical to such principal office of the Corporation.

Section 2. Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

STOCKHOLDERS

Section 1. Place of Meetings. All meetings of the stockholders shall be held at the principal office of the Corporation, or at such other place within or without the State of Delaware as shall be specified or fixed in the notices or waivers of notice thereof. In lieu of holding a meeting of stockholders at a designated place, the Board may, in its sole discretion, determine that any meeting of stockholders may be held solely by means of remote communication.

Section 2. Quorum; Adjournment of Meetings.

(a) Unless otherwise required by law or provided in the Certificate of Incorporation or these bylaws, the holders of a majority of the stock issued and outstanding and entitled to vote in the election of directors, present in person or represented by proxy, shall constitute a quorum at any meeting of stockholders for the transaction of business, except that when specified business is to be voted on by a class or series of stock voting separately as a class, the holders of a majority of the voting power of all outstanding shares of such class or series represented in person or by proxy shall constitute a quorum of such class or series for the transaction of such business and all questions with respect to a subject matter, except the election of directors which is set forth in Section 10(e) of Article II of these bylaws, shall be decided by a vote of the holders of shares having a majority of the voting power so represented at any meeting of stockholders at which a quorum is present. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

(b) Notwithstanding the other provisions of the Certificate of Incorporation or these bylaws, the chairman of the meeting or the holders of a majority of the issued and outstanding


stock, present in person or represented by proxy, at any meeting of stockholders, whether or not a quorum is present, shall have the power to adjourn such meeting from time to time. No notice of the time and place of adjourned meeting need be given if (A) the time and place, if any, thereof, and (B) the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting, are announced at the meeting at which adjournment is taken. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at such meeting. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally called.

Section 3. Annual Meetings. An annual meeting of the stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, within or without the State of Delaware, on such date, and at such time as the Board of Directors shall fix and set forth in the notice of the meeting, which date shall be within thirteen (13) months subsequent to the later of the date of incorporation or the last annual meeting of stockholders.

Section 4. Special Meetings. Unless otherwise provided in the Certificate of Incorporation, special meetings of the stockholders for any purpose or purposes may be called at any time by the (i) the Chief Executive Officer of the Corporation, or (ii) the Board of Directors pursuant to a resolution adopted by a majority of the directors which the Corporation would have if there were no vacancies.

Section 5. Record Date.

(a) For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors of the Corporation may fix, in advance, a date as the record date for any such determination of stockholders, which date shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action.

(b) If the Board of Directors does not fix a record date for any meeting of the stockholders, the record date for determining stockholders entitled to notice of or to vote at such meeting shall be at the close of business on the day next preceding the day on which notice is given, or, if in accordance with Article VIII, Section 3 of these bylaws notice is waived, at the close of business on the day next preceding the day on which the meeting is held. The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

(c) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

 

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Section 6. Notice of Meetings. Written notice of the place, date and hour of all meetings and the means of remote communication, if any, by which stockholders and proxy holders may be deemed present in person and vote at such meeting, and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be given by or at the direction of the Chairman of the Board (if any) or the President, the Secretary or the other person(s) calling the meeting to each stockholder entitled to vote thereat not less than ten (10) nor more than sixty (60) days before the date of the meeting. Such notice may be delivered either personally or by mail. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. Without limiting the manner by which notice otherwise may be given to stockholders, any notice to stockholders may be given by electronic transmission in the manner provided by Sections 222 and 232 of the DGCL. Meetings may be held without notice if all stockholders entitled to vote are present (without being present for the purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened), or if notice is waived by those not present in accordance with Article VIII, Section 3 of these bylaws. The Board may cancel, reschedule or postpone any previously scheduled annual or special meeting.

Section 7. Stock List.

(a) A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in the name of such stockholder, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, (1) at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, (2) or if not so specified, at the place where the meeting is to be held, (3) on a reasonably accessible electronic network, provided that the information required to gain access to such list is furnished with the notice of the meeting or (4) during ordinary business hours, at the principal place of business of the Corporation.

(b) If the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time and may be inspected by any stockholder who is present at that meeting. If the meeting is to be held solely by means of remote communication, then the list also shall be open to the examination of any stockholder during the whole time of that meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of that meeting. Nothing contained in this Section 7 shall require the Corporation to include electronic mail addresses or other electronic contact information on that list. The stock list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

 

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Section 8. Notice of Stockholder Proposals.

(a) At any annual or special meeting of stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual or special meeting, business must be: (A) specified in the notice of meeting given by or at the direction of the Board of Directors, (B) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (C) otherwise properly brought before the meeting by a stockholder. In order for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and such proposal must be a proper matter for stockholder action under the DGCL. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than the ninety (90) days and not more than one hundred twenty (120) days prior to the anniversary of the date on which the proxy materials for the immediately preceding annual meeting of stockholders were first mailed; provided, however, that in the event no annual meeting was held in the previous year or the date of the annual meeting is more than thirty (30) days before or more than thirty (30) days after the first anniversary of the preceding year’s annual meeting of stockholders, notice by the stockholder must be so received not later than the close of business on the later of one hundred twenty (120) calendar days in advance of such annual meeting or ten (10) calendar days following the date on which public announcement of the date of the meeting is first made. In the event the Chief Executive Officer or the Board of Directors calls a special meeting of stockholders for the election of directors, a stockholder proposing to nominate a person for that election must give in writing to the Secretary of the Corporation notice of the proposal not earlier than one hundred and twenty (120) days and not later than ninety (90) days prior to the special meeting, or ten (10) days after public announcement of the date of the special meeting and the proposed nominees.

(b) A stockholder’s notice to the Secretary shall set forth as to each matter the stockholder proposals to be brought before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the Corporation’s books, of the stockholder proposing such business, (iii) the class and number of shares of the Corporation that are beneficially owned by the stockholder, (iv) any material interest of the stockholder in such business, and (v) any other information that is required to be provided by the stockholder pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “1934 Act”), in his capacity as a proponent to a stockholder proposal. Notwithstanding the foregoing, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholders’ meeting, stockholders must provide notice as required by the regulations promulgated under the 1934 Act.

(c) Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 8. The chairman of the meeting shall, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting and in accordance with the provisions of this Section 8, and, if he should so determine, he shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted.

 

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Section 9. Proxies.

(a) Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him by proxy. Proxies for use at any meeting of stockholders shall be filed with the Secretary, or such other officer as the Board of Directors may from time to time determine by resolution, before or at the time of the meeting. All proxies shall be received and taken charge of and all ballots shall be received and canvassed by the secretary of the meeting who shall decide all questions touching upon the qualification of voters, the validity of the proxies, and the acceptance or rejection of votes, unless an inspector or inspectors shall have been appointed by the chairman of the meeting, in which event such inspector or inspectors shall decide all such questions.

(b) No proxy shall be valid after three (3) years from its date, unless the proxy provides for a longer period. Each proxy shall be revocable unless expressly provided therein to be irrevocable and coupled with an interest sufficient in law to support an irrevocable power.

(c) Should a proxy designate two or more persons to act as proxies, unless such instrument shall provide the contrary, a majority of such persons present at any meeting at which their powers thereunder are to be exercised shall have and may exercise all the powers of voting thereby conferred, or if only one be present, then such powers may be exercised by that one; or, if an even number attend and a majority do not agree on any particular issue, each proxy so attending shall be entitled to exercise such powers in respect of the same portion of the shares as he is of the proxies representing such shares.

Section 10. Voting; Elections; Inspectors.

(a) Unless otherwise required by law, provided in the Certificate of Incorporation or provided in a preferred stock designation, each stockholder shall have one vote for each share of stock entitled to vote which is registered in his name on the record date for the meeting. Shares registered in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the bylaw (or comparable instrument) of such corporation may prescribe, or in the absence of such provision, as the Board of Directors (or comparable body) of such corporation may determine. Shares registered in the name of a deceased person may be voted by his executor or administrator, either in person or by proxy.

(b) All voting, except as required by the Certificate of Incorporation or where otherwise required by law, may be by a voice vote; provided, however, that upon demand therefor by stockholders holding a majority of the issued and outstanding stock present in person or by proxy at any meeting a stock vote shall be taken. Every stock vote shall be taken by written ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. All elections of directors shall be by ballot, unless otherwise provided in the Certificate of Incorporation.

(c) At any meeting at which a vote is taken by ballots, the chairman of the meeting may appoint one or more inspectors, each of whom shall subscribe an oath or affirmation to execute faithfully the duties of inspector at such meeting with strict impartiality and according to the best of his ability. Such inspector shall receive the ballots, count the votes and make and sign a certificate of the result thereof. The chairman of the meeting may appoint any person to serve as inspector, except no candidate for the office of director shall be appointed as an inspector.

 

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(d) Unless otherwise provided in the Certificate of Incorporation, cumulative voting of shares of any class or series of stock of the Corporation is prohibited.

(e) Unless otherwise provided in the Certificate of Incorporation, a nominee for director shall be elected to the Board if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election at any meeting for the election of directors at which a quorum is present, provided that if as of a date that is fourteen (14) days in advance of the date the Corporation files its definitive proxy statement with the Securities and Exchange Commission (regardless of whether or not the proxy statement is thereafter revised or supplemented) the number of nominees exceeds the number of directors to be elected, the directors shall be elected by the vote of a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors. The Nominating/Corporate Governance Committee has established procedures under which any director who is not elected shall offer his or her resignation to the Board. The Nominating/Corporate Governance Committee will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. The Board will act on the Committee’s recommendation and publicly disclose its decision and the rationale behind it within ninety (90) days from the date of certification of the election results.

Section 11. Conduct of Meetings.

(a) The meetings of the stockholders shall be presided over by the Chairman of the Board (if any), or if he is not present, by the President, or if neither the Chairman of the Board (if any), nor President is present, by a chairman elected at the meeting. The Secretary of the Corporation, if present, shall act as secretary of such meetings, or if he is not present, an Assistant Secretary shall so act; if neither the Secretary nor an Assistant Secretary is present, then a secretary shall be appointed by the chairman of the meeting. The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to him in order. Such rules, regulations, or procedures, whether adopted by the Board or prescribed by the chair of the meeting, may include, without limitation, the following: (1) the establishment of an agenda or order of business for the meeting; (2) rules and procedures for maintaining order at the meeting and the safety of those present; (3) limitations on attendance at or participation in the meeting to stockholders of record, their duly authorized and constituted proxies, or such other persons as the chair of the meeting shall determine; (4) restrictions on entry to the meeting after the time fixed for the commencement; and (5) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board or the chair of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

Section 12. Meetings by Remote Communication. If authorized by the Board, and subject to such guidelines and procedures as the Board may adopt, stockholders and proxy holders not physically present at a meeting of stockholders may, by means of remote communication, participate in the meeting and be deemed present in person and vote at the meeting, whether such meeting is to be held in a designated place or solely by means of remote communication, provided that (1) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote

 

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communication is a stockholder or proxy holder, (2) the Corporation shall implement reasonable measures to provide such stockholders and proxy holders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including the opportunity to read or hear the proceedings in the meeting substantially concurrently with such proceedings and (3) if the stockholder or proxy holder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the Corporation.

Section 13. Treasury Stock. The Corporation shall not vote, directly or indirectly, shares of its own stock owned by it and such shares shall not be counted for quorum purposes.

Section 14. Action Without Meeting. Unless otherwise provided in the Certificate of Incorporation, the stockholders shall not be entitled to consent to corporate action in writing without a meeting.

ARTICLE III

BOARD OF DIRECTORS

Section 1. Power; Number; Term of Office.

(a) The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, and subject to the restrictions imposed by law or the Certificate of Incorporation, they may exercise all the powers of the Corporation.

(b) Subject to the rights of holders of a series of shares of Preferred Stock to elect one or more directors pursuant to any provisions of any certificate of designation relating to any such series, the number of directors will be fixed exclusively by a majority of the entire Board of Directors from time to time. If the Board of Directors makes no such determination, the number of directors shall be the number set forth in the Certificate of Incorporation. No decrease in the number of directors shall have the effect of shortening the term of any incumbent director.

(c) The classes of the Board and their respective terms shall be as set forth in the Certificate of Incorporation.

(d) Unless otherwise provided in the Certificate of Incorporation, directors need not be stockholders nor residents of the State of Delaware.

Section 2. Quorum. Unless otherwise provided in the Certificate of Incorporation, a majority of the total number of directors shall constitute a quorum for the transaction of business of the Board of Directors and the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

Section 3. Place of Meetings; Order of Business. The directors may hold their meetings and may have an office and keep the books of the Corporation, except as otherwise provided by law, in such place or places, within or without the State of Delaware, as the Board of Directors may from time to time determine by resolution. At all meetings of the Board of Directors business shall be transacted in such order as shall from time to time be determined by the Chairman of the Board (if any), or in his absence by the President, or by resolution of the Board of Directors.

 

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Section 4. Regular Meetings. Regular meetings of the Board of Directors shall be held at such times and places as shall be designated from time to time by resolution of the Board of Directors. Notice of such regular meetings shall not be required.

Section 5. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board (if any), the President or, on the written request of any two directors, by the Secretary, in each case on at least twenty four (24) hours personal, written, telegraphic, cable or wireless notice to each director. Such notice, or any waiver thereof pursuant to Article VIII, Section 3 hereof, need not state the purpose or purposes of such meeting, except as may otherwise be required by law or provided for in the Certificate of Incorporation or these bylaws.

Section 6. Resignation and Removal. Any director may resign at any time, by giving notice in writing or by electronic transmission to the Chairman of the Board, the Chief Executive Officer, the President, or the Secretary. Any such resignation shall take effect at the time specified in the notice of resignation or, if no time is specified, immediately upon receipt of the notice. Unless otherwise specified in the notice of resignation, acceptance of the resignation shall not be necessary to make it effective. A director of any class of directors of the Corporation may be removed before the expiration date of that director’s term of office, only for cause, by an affirmative vote of the holders of not less than eighty percent (80%) of the votes of the outstanding shares of the class or classes or series of stock then entitled to be voted at an election of directors of that class or series, voting together as a single class, cast at the annual meeting of stockholders or at any special meeting of stockholders called by a majority of the board of directors for this purpose.

Section 7. Vacancies; Increases in the Number of Directors. Unless otherwise provided in the Certificate of Incorporation, any vacancies in the Board resulting from death, resignation, retirement, disqualification, removal from office, or other cause and newly-created directorships resulting from any increase in the authorized number of directors may be filled by no less than a majority vote of the remaining directors then in office, though less than a quorum, who are designated to represent the same class or classes of stockholders that the vacant position, when filled, is to represent or by the sole remaining director (but not by the stockholders except as required by law), and each director so chosen shall receive the classification of the vacant directorship to which such director has been appointed or, if that is a newly-created directorship, shall receive the classification that at least a majority of the Board designates and shall hold office until the first meeting of stockholders held after such director’s election for the purpose of electing directors of that classification and until such director’s successor is elected and qualified or until his earlier death, resignation, or removal from office.

Section 8. Compensation. Unless otherwise restricted by the Certificate of Incorporation, the Board of Directors shall have the authority to fix the compensation of directors.

 

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Section 9. Action Without a Meeting; Telephone Conference Meeting.

(a) Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors, or any committee designated by the Board of Directors, may be taken without a meeting if all members of the Board of Directors or committee, as the case may be consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. Such consent shall have the same force and effect as a unanimous vote at a meeting, and may be stated as such in any document or instrument filed with the Secretary of State of Delaware.

(b) Unless otherwise restricted by the Certificate of Incorporation, subject to the requirement for notice of meetings, members of the Board of Directors, or members of any committee designated by the Board of Directors, may participate in a meeting of such Board of Directors or committee, as the case may be, by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

Section 10. Approval or Ratification of Acts or Contracts by Stockholders. The Board of Directors in its discretion may submit any act or contract for approval or ratification at any annual meeting of the stockholders, or at any special meeting of the stockholders called for the purpose of considering any such act or contract, and any act or contract that shall be approved or be ratified by the vote of the stockholders holding a majority of the issued and outstanding shares of stock of the Corporation entitled to vote and present in person or by proxy at such meeting (provided that a quorum is present), shall be as valid and as binding upon the Corporation and upon all the stockholders as if it has been approved or ratified by every stockholder of the Corporation.

ARTICLE IV

COMMITTEES

Section 1. Designation Powers. The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more committees, including, if they shall so determine, an executive committee, each such committee to consist of one or more of the directors of the Corporation. Any such designated committee shall have and may exercise such of the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation as may be provided in such resolution, except that no such committee shall have the power or authority of the Board of Directors in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution of the Corporation, or amending, altering or repealing the bylaws or adopting new bylaws for the Corporation and, unless such resolution or the Certificate of Incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Any such designated committee may authorize the seal of the Corporation to be affixed to all papers that may require it. In addition to the above such committee or committees shall have such other powers and limitations of authority as may be determined from time to time by resolution adopted by the Board of Directors.

 

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Section 2. Procedure; Meetings; Quorum. Any committee designated pursuant to Section 1 of this Article IV shall have a committee chair designated by the Board of Directors (or if not so designated by the Board of Directors, by the members of the committee by majority vote of the committee members), shall keep regular minutes of its proceedings and report the same to the Board of Directors when requested, shall fix its own rules or procedures, and shall meet at such times and at such place or places as may be provided by such rules, or by resolution of such committee or resolution of the Board of Directors. At every meeting of any such committee, the presence of a majority of all the members thereof shall constitute a quorum and the affirmative vote of a majority of the members present shall be necessary for the adoption by it of any resolution.

Section 3. Substitution of Members. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member.

ARTICLE V

OFFICERS

Section 1. Number, Titles and Term of Office. The officers of the Corporation shall be a President, one or more Vice Presidents (any one or more of whom may be designated Executive Vice President or Senior Vice President), a Treasurer, a Secretary and, if the Board of Directors so elects, a Chairman of the Board and such other officers as the Board of Directors may from time to time elect or appoint. Each officer shall hold office until his successor shall be duly elected and shall qualify or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. Any number of offices may be held by the same person, unless the Certificate of Incorporation provides otherwise. No officer need be a director.

Section 2. Salaries. The salaries or other compensation of the officers and agents of the Corporation shall be fixed from time to time by the Board of Directors.

Section 3. Removal. Any officer or agent elected or appointed by the Board of Directors may be removed, either with or without cause, by the vote of a majority of the whole Board of Directors at a special meeting called for the purpose, or at any regular meeting of the Board of Directors, provided the notice for such meeting shall specify that the matter of any such proposed removal will be considered at the meeting but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights.

Section 4. Vacancies. Any vacancy occurring in any office of the Corporation may be filled by the Board of Directors.

 

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Section 5. Powers and Duties of the Chief Executive Officer. The President shall be the Chief Executive Officer of the Corporation unless the Board of Directors designates the Chairman of the Board as Chief Executive Officer. Subject to the control of the Board of Directors and the executive committee (if any), the Chief Executive Officer shall have general executive charge, management and control of the properties, business and operations of the Corporation with all such powers as may be reasonably incident to such responsibilities; he may agree upon and execute all leases, contracts, evidences of indebtedness and other obligations in the name of the Corporation and may sign all certificates for shares of capital stock of the Corporation; and shall have such other powers and duties as designated in accordance with these bylaws and as from time to time may be assigned to him by the Board of Directors.

Section 6. Powers and Duties of the Chairman of the Board. If elected, the Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors; and he shall have such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the Board of Directors.

Section 7. Powers and Duties of the President. Unless the Board of Directors otherwise determines, the President shall have the authority to agree upon and execute all leases, contracts, evidences of indebtedness and other obligations in the name of the Corporation; and, unless the Board of Directors otherwise determines, he shall, in the absence of the Chairman of the Board or if there be no Chairman of the Board, preside at all meetings of the stockholders and (should he be a director) of the Board of Directors; and he shall have such other powers and duties as designated in accordance with these bylaws and as from time to time may be assigned to him by the Board of Directors.

Section 8. Vice Presidents. In the absence of the President, or in the event of his inability or refusal to act, a Vice President designated by the Board of Directors shall perform the duties of the President, and when so acting shall have all the powers of and be subject to all the restrictions upon the President. In the absence of a designation by the Board of Directors of a Vice President to perform the duties of the President, or in the event of his absence or inability or refusal to act, the Vice President who is present and who is senior in terms of time as a Vice President of the Corporation shall so act. The Vice Presidents shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

Section 9. Treasurer. The Treasurer shall have responsibility for the custody and control of all the funds and securities of the Corporation, and he shall have such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the Board of Directors. He shall perform all acts incident to the position of Treasurer, subject to the control of the Chief Executive Officer and the Board of Directors; and he shall, if required by the Board of Directors, give such bond for the faithful discharge of his duties in such form as the Board of Directors may require.

Section 10. Assistant Treasurers. Each Assistant Treasurer shall have the usual powers and duties pertaining to his office, together with such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the Chief Executive Officer or the Board of Directors. The Assistant Treasurers shall exercise the powers of the Treasurer during that officer’s absence or inability or refusal to act.

 

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Section 11. Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors, committees of directors and the stockholders, in books provided for that purpose; he shall attend to the giving and serving of all notices; he may in the name of the Corporation affix the seal of the Corporation to all contracts of the Corporation and attest the affixation of the seal of the Corporation thereto; he may sign with the other appointed officers all certificates for shares of capital stock of the Corporation; he shall have charge of the certificate books, transfer books and stock ledgers, and such other books and papers as the Board of Directors may direct, all of which shall at all reasonable times be open to inspection of any director upon application at the office of the Corporation during business hours; he shall have such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the Board of Directors; and he shall in general perform all acts incident to the office of Secretary, subject to the control of the Chief Executive Officer and the Board of Directors.

Section 12. Assistant Secretaries. Each Assistant Secretary shall have the usual powers and duties pertaining to his office, together with such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the Chief Executive Officer or the Board of Directors. The Assistant Secretaries shall exercise the powers of the Secretary during that officer’s absence or inability or refusal to act.

Section 13. Action with Respect to Securities of Other Corporations. Unless otherwise directed by the Board of Directors, the Chief Executive Officer shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of security holders of or with respect to any action of security holders of any other corporation in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation.

ARTICLE VI

INDEMNIFICATION OF DIRECTORS, OFFICERS,

EMPLOYEES AND AGENTS

Section 1. Right to Indemnification. Each person who was or is, made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she or a person of whom he or she is the legal representative, is or was or has agreed to become a director or officer of the Corporation or is or was serving or has agreed to serve at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving or having agreed to serve as a director or officer, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended, (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment) against all expense, liability and loss (including without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement)

 

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reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to serve in the capacity which initially entitled such person to indemnity hereunder and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Article VI shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the DGCL requires, the payment of such expenses incurred by a current, former or proposed director or officer in his or her capacity as a director or officer or proposed director or officer (and not in any other capacity in which service was or is or has been agreed to be rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such indemnified person, to repay all amounts so advanced if it shall ultimately be determined that such indemnified person is not entitled to be indemnified under this Section or otherwise.

Section 2. Indemnification of Employees and Agents. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation, individually or as a group, with the same scope and effect as the indemnification of directors and officers provided for in this Article.

Section 3. Right of Claimant to Bring Suit. If a written claim received by the Corporation from or on behalf of an indemnified party under this Article VI is not paid in full by the Corporation within ninety days after such receipt, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the DGCL for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

Section 4. Non-exclusivity of Rights. The right to indemnification and the advancement and payment of expenses conferred in this Article VI shall not be exclusive of any other right which any person may have or hereafter acquire under any law (common or statutory), provision of the Certificate of Incorporation of the Corporation, bylaw, agreement, vote of stockholders or disinterested directors or otherwise.

 

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Section 5. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any person who is or was serving as a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.

Section 6. Savings Clause. If this Article VI or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify and hold harmless each director and officer of the Corporation, as to costs, charges and expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative to the full extent permitted by any applicable portion of this Article VI that shall not have been invalidated and to the fullest extent permitted by applicable law.

Section 7. Definitions. For purposes of this Article, reference to the “Corporation” shall include, in addition to the Corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger prior to (or, in the case of an entity specifically designated in a resolution of the Board of Directors, after) the adoption hereof and which, if its separate existence had continued, would have had the power and authority to indemnify its directors, officers and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.

ARTICLE VII

CAPITAL STOCK

Section 1. Certificates of Stock.

(a) The shares of the capital stock of the Corporation may be certificated or uncertificated, as provided under Delaware law, and shall be entered in the books of the Corporation and registered as they are issued. Any certificates representing shares of stock shall be in such form, not inconsistent with that required by law and the Certificate of Incorporation, as shall be approved by the Board of Directors, setting forth the number and class of shares of the stock of the Corporation owned by the stockholder. Any certificates issued to any shareholder of the Corporation shall bear the name of the Corporation and state that it is organized under the laws of the State of Delaware, the name of the shareholder, and the number of shares (and, if the stock of the Corporation shall be divided into classes or series, the class and series of such shares) represented. Each certificate shall be signed either manually or by facsimile, by (i) the Chairman of the Board (if any), President or a Vice President and (ii) by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer and shall be sealed with the seal of the Corporation or a facsimile thereof if the Board of Directors shall have provided for such seal. In case any officer, transfer agent or registrar who shall have signed or whose facsimile signature or signatures shall have been placed upon any such certificate or

 

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certificates shall have ceased to be such officer, transfer agent or registrar before such certificate is issued by the Corporation, such certificate may nevertheless be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The stock record books and the blank stock certificate books shall be kept by the Secretary, or at the office of such transfer agent or transfer agents as the Board of Directors may from time to time by resolution determine.

(b) Within a reasonable time after the issuance of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice that shall set forth the name of the Corporation, that the Corporation is organized under the laws of the State of Delaware, the name of the stockholder, and the number of shares (and, if the stock of the Corporation shall be divided into classes or series, the class and series of such shares) represented, and any restrictions on the transfer or registration of such shares of stock imposed by the Corporation’s Certificate of Incorporation, these Bylaws, any agreement among stockholders or any agreement between stockholders and the Corporation.

Section 2. Transfer of Stock.

(a) Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation, or authority to transfer, it shall be the duty of the Corporation to issue a new certificate or evidence of the issuance of uncertificated shares to the stockholder entitled thereto, cancel the old certificate and record the transaction upon the Corporation’s books. Upon the surrender of any certificate for transfer of stock, such certificate shall at once be conspicuously marked on its face “Cancelled” and filed with the permanent records of the Corporation.

(b) Upon receipt of proper transfer instructions from the registered owner of uncertificated shares, such uncertificated shares shall be cancelled, issuance of new equivalent uncertificated shares or certificated shares shall be made to the stockholder entitled thereto and the transaction shall be recorded upon the books of the Corporation. If the Corporation has a transfer agent or registrar acting on its behalf, the signature of any officer or representative thereof may be in facsimile.

(c) The Board of Directors may appoint a transfer agent and one or more co-transfer agents and registrar and one or more co-registrars and may make or authorize such agent to make all such rules and regulations deemed expedient concerning the issue, transfer and registration of shares of stock.

Section 3. Ownership of Stock. The Corporation shall be entitled to treat the holder of record of any share or shares of capital stock of the Corporation as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.

Section 4. Regulations Regarding Stock. The Board of Directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration or the replacement of (i) certificates for shares and (ii) uncertificated shares of capital stock of the Corporation.

 

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Section 5. Lost or Destroyed Certificates. The Board of Directors may determine the conditions upon which a new certificate of stock or an uncertificated share may be issued in place of a certificate which is alleged to have been lost, stolen or destroyed; and may, in their discretion, require the owner of such certificate or his legal representative to give bond, with sufficient surety, to indemnify the Corporation and each transfer agent and registrar against any and all losses or claims that may arise by reason of the issue of (i) a new certificate or (ii) an uncertificated share in the place of the certificate so lost, stolen or destroyed.

ARTICLE VIII

MISCELLANEOUS PROVISIONS

Section 1. Fiscal Year. The fiscal year of the Corporation shall be such as established from time to time by the Board of Directors.

Section 2. Corporate Seal. The Board of Directors may provide a suitable seal, containing the name of the Corporation. The Secretary shall have charge of the seal (if any). If and when so directed by the Board of Directors or a committee thereof, duplicates of the seal may be kept and used by the Treasurer or by the Assistant Secretary or Assistant Treasurer.

Section 3. Notice and Waiver of Notice.

(a) Whenever any notice is required to be given by law, the Certificate of Incorporation or under the provisions of these bylaws, said notice shall be deemed to be sufficient if given (i) by telegraphic, cable or wireless transmission or (ii) by deposit of the same in a post office box in a sealed prepaid wrapper addressed to the person entitled thereto at his post office address, as it appears on the records of the Corporation, and such notice shall be deemed to have been given on the day of such transmission or mailing, as the case may be.

(b) Whenever notice is required to be given by law, the Certificate of Incorporation or under any of the provisions of these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or the bylaws.

Section 4. Facsimile Signatures. In addition to the provisions for the use of facsimile signatures elsewhere specifically authorized in these bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors.

 

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Section 5. Reliance upon Books, Reports and Records. Each director and each member of any committee designated by the Board of Directors shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account or reports made to the Corporation by any of its officers, or by an independent certified public accountant, or by an appraiser selected with reasonable care by the Board of Directors or by any such committee, or in relying in good faith upon other records of the Corporation.

Section 6. Electronic Transmissions. For purposes of these bylaws, “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient, and that may be directly reproduced in paper form by such recipient through an automated process.

Section 7. Exclusive Forum. Unless the Board otherwise determines, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director or officer of the Corporation to the Corporation or the Corporation’s stockholders, creditors or other constituents, (iii) any action asserting a claim against the Corporation or any director or officer of the Corporation arising pursuant to any provision of the DGCL or the Certificate of Incorporation or these bylaws (as either may be amended from time to time), or (iv) any action asserting a claim against the Corporation or any director or officer of the Corporation governed by the internal affairs doctrine; provided, that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state court sitting in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware.

ARTICLE IX

AMENDMENTS

The bylaws may be altered or repealed and new bylaws may be adopted (a) at any annual or special meeting of stockholders if notice of the proposed alteration, repeal or adoption of the new bylaw or bylaws be contained in the notice of such annual or special meeting by the affirmative vote of a majority of the stock issued and outstanding and entitled to vote thereat, voting together as a single class, or (b) by the affirmative vote of a majority of the members present at any regular meeting of the Board, or at any special meeting of the Board, without any action on the part of the stockholders, if notice of the proposed alteration, repeal or adoption of the new bylaw or bylaws be contained in the notice of such regular or special meeting.

Notwithstanding the foregoing, the affirmative vote of the holders of at least eighty percent (80%) of the votes of the outstanding shares of the class or classes or series of stock then entitled to be voted shall be required to alter, amend or repeal Article II, Section Four (Special Meetings), Article II, Section 14 (Action Without Meeting), Article III, Section 1 (Power; Number; Term of Office), Article III, Section 6 (Resignation and Removal), Article III, Section 7 (Vacancies; Increases in the Number of Directors), Article VI (Indemnification of Directors, Officers, Employees and Agents), and Article IX (Amendments) of the bylaws.

 

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EX-10.1

Exhibit 10.1

TRANSITION SERVICES AGREEMENT

BETWEEN

NATIONAL OILWELL VARCO, INC.

AND

NOW INC.

DATED AS OF [], 2014


TRANSITION SERVICES AGREEMENT

This Transition Services Agreement (this “Agreement”), made and entered into effective as of [], 2014, is by and between National Oilwell Varco, Inc., a Delaware corporation (“NOV”), and NOW Inc., a Delaware corporation (“SpinCo”). NOV and SpinCo are sometimes herein referred to individually as a “Party” and collectively as the “Parties”. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in Article I.

RECITALS

WHEREAS, NOV has determined that it would be appropriate, desirable and in the best interests of NOV and the shareholders of NOV to separate the SpinCo Business from NOV;

WHEREAS, NOV and SpinCo have entered into the Separation and Distribution Agreement, dated [], 2014 (the “Separation Agreement”), in connection with the separation of the SpinCo Business from NOV and the Distribution of SpinCo Common Stock to shareholders of NOV;

WHEREAS, the Separation Agreement also provides for the execution and delivery of certain other agreements (collectively, the “Ancillary Agreements”), including this Agreement, in order to facilitate and provide for the separation of SpinCo and its subsidiaries from NOV; and

WHEREAS, in order to ensure an orderly transition under the Separation Agreement, it will be necessary for NOV, or its Affiliates, to provide to Spinco and for Spinco, or its Affiliates, to provide to NOV, certain corporate, general and administrative services described herein on an interim, transitional basis.

NOW, THEREFORE, for and in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, NOV and SpinCo hereby agree as follows:

ARTICLE I.

DEFINITIONS

Section 1.1. Definitions. As used herein, the following terms shall have the following meanings, unless context clearly requires otherwise, and capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Separation Agreement:

Additional Services” has the meaning ascribed to such term in Section 2.1(c).

Affiliate” means, when used with respect to a specified Person, a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person. For the purpose of this definition, “control” (including with correlative meanings, “controlled by” and “under common control with”), when used with respect to any specified Person, means the possession, directly or indirectly, of the power to


direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment, undertaking or otherwise. It is expressly agreed that, from and after the Effective Time and for purposes of this Agreement and the Ancillary Agreements, no member of the SpinCo Group shall be deemed to be an Affiliate of any member of the NOV Group, and no member of the NOV Group shall be deemed to be an Affiliate of any member of the SpinCo Group.

Applicable Rate” means the Prime Rate plus two percent (2.0%), or such lower rate as may from time to time represent the maximum rate of interest payable under applicable law.

Applicable Services Termination Date” shall have the meaning ascribed to such term in Section 2.1(e)(i).

Expiration Date” means the date which is eighteen (18) months after the Distribution Date.

Distribution Date” means the date on which NOV, through the Agent, distributes all of the issued and outstanding shares of SpinCo Common Stock to holders of NOV Common Stock in the Distribution.

Effective Time” means 5:00 p.m. Central Standard Time, or such other time as NOV may determine, on the Distribution Date.

Group” means either NOV Group or Spinco Group.

Governmental Authority” means any nation or government, any state, municipality or other political subdivision thereof, and any entity, body, agency, commission, department, board, bureau, court, tribunal or other instrumentality, whether federal, state, local, domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory, administrative or other similar functions of, or pertaining to, government and any official thereof.

NOV Group” means NOV, each Subsidiary of NOV immediately after the Effective Time and each Affiliate of NOV immediately after the Effective Time (in each case other than any member of the SpinCo Group).

Person” means any individual, general or limited partnership, corporation, business trust, joint venture, association, company, limited liability company, unincorporated organization, a limited liability entity, any other entity and any Governmental Authority.

Service” means any one of the services listed in Section 2.1(a), and any Additional Services, with two or more of such Services collectively referred to as “Services.”

Service Provider” means a member of the NOV Group or the SpinCo Group, as applicable, when it is providing Services to a member of the other Party’s Group.

Service Provider Group” means the NOV Group or the SpinCo Group, as applicable, when it is providing Services to a member of the other Party’s Group.

 

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Service Recipient” means a member of the SpinCo Group or the NOV Group, as applicable, when it is receiving Services from a member of the other Party’s Group.

Service Recipient Group” means the SpinCo Group or the NOV Group, as applicable, when it is receiving Services from a member of the other Party’s Group.

SpinCo Group” means SpinCo, each Subsidiary of SpinCo immediately after the Effective Time and each Affiliate of SpinCo immediately after the Effective Time.

Section 1.2. Rules of Construction. The Recitals to this Agreement are made a part hereof for all purposes. In this Agreement, terms defined in the singular have the corresponding meanings in the plural, and vice versa. All references to Sections and Articles refer to sections and articles of this Agreement, and all references to Annexes, Exhibits, Schedules or Attachments refer to annexes, exhibits, schedules or attachments to this Agreement, which are attached hereto and made a part hereof for all purposes. The word “including” means “including, but not limited to.” The words “hereof,” “hereby,” “herein,” “hereunder” and similar terms in this Agreement shall refer to this Agreement as a whole and not any particular section or article in which such words appear.

ARTICLE II.

PROVISION OF SERVICES

Section 2.1. Provision of Services

(a) Services to be Provided. Commencing on the Distribution Date, subject to the other provisions of this Agreement and each Annex, the NOV Group agrees to provide, or to cause to be provided, the Services set forth in the Annexes to this Agreement to the applicable member of the SpinCo Group, and the Spinco Group agrees to provide, or to cause to be provided, the Services set forth in the Annexes to this Agreement to the applicable member of the NOV Group.

(b) Nature and Quality of Services. The Service Provider warrants that the quality of the Services performed shall be at the same general level as those provided by NOV to other Affiliates of NOV, and, where applicable, substantially consistent with the quantity and scope of the Services provided to SpinCo by NOV prior to the Distribution Date. If any of such Services were not performed within NOV prior to the Distribution Date, then such Services shall be performed with the same degree of care and with substantially the same service levels as the Service Provider performs comparable services for itself.

(c) Additional Services. Prior to the first anniversary of the Distribution Date, if one of the Parties identifies any commercial or other service that is needed by it to assure a smooth and orderly transition of the businesses in connection with the consummation of the transactions contemplated by the Separation Agreement, and that is not otherwise governed by the provisions of the Separation Agreement or any Ancillary Agreement, the Parties will cooperate in determining whether there is a mutually acceptable basis on which the other Party will provide such service. Any such additional services that the Service Provider Group may provide to the Service Recipient Group are herein referred to as “Additional Services.” Except as expressly set

 

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forth in any Annex hereto, NOV and SpinCo shall not be obligated to provide Services from or at any other location other than their respective corporate headquarters located at 7909 Parkwood Circle Drive, Houston, Texas and 7402 North Eldridge Parkway, Houston, Texas.

(d) Limitations; Resource Allocations. Service Recipients acknowledge that Service Providers provide to themselves and other members of the Service Provider Group services that are similar to the Services. Consequently, the Service Provider may, from time to time, experience competing demands for its various services. Accordingly, Service Recipients agree that Service Providers may use reasonable discretion in prioritizing requests for service delivery among the Service Recipient and other members of the Service Provider Group, in each case consistent with past practices; provided that the Service Provider communicates scheduling issues associated with the delivery of any particular service hereunder with the relevant Service Recipient personnel, and that the Service Provider makes reasonable efforts to accommodate requests for services provided such services requested are consistent with services provided prior to the Distribution Date. No Service Provider shall be required to add or retain staff, equipment, facilities or other resources in order to provide any Service. The Service Provider shall have the right to outsource all or portions of some Services to qualified third parties if the Service Provider deems it necessary in order to enable the Service Provider Group’s personnel to continue to adequately perform their other job functions.

(e) Cancellation of Services prior to Expiration Date.

(i) Subject to clause (ii) of this Section 2.1(e), Service Provider shall have no obligation to provide any Service beyond (A) the termination date for such Service as provided in the applicable Annex for such Service or, if the applicable Annex does not specify a termination date for the Service, then (B) the Expiration Date. As to each Service, the earliest of the foregoing dates shall be referred to herein as the “Applicable Services Termination Date.”

(ii) Each Party shall have the option to terminate any one or more of the Services provided by the other Party at any time prior to the Expiration Date, provided that such Party gives the other Party at least 30 days prior written notice of its election to exercise such option.

(iii) Following the Applicable Services Termination Date and except as otherwise agreed to by the NOV Group and the SpinCo Group, neither Party will be under any further obligation with respect to any Service so terminated; provided that the Service Recipient will remain obligated for any Service Fees for the terminated Service through the Applicable Services Termination Date and any Direct Charges related to such Service.

Section 2.2. Fees for Services.

(a) Service Fees.

(i) Each Party shall pay to the other Party a monthly fee (each a “Service Fee”) for each of the Services as specified on the applicable Annex for each Service (subject to adjustment as set forth in clause (iii) immediately below) for each month up to and including the month in which the Applicable Services Termination Date for each such Service occurs. Notwithstanding the foregoing, certain Service Fees are identified on the Annexes as being

 

4


payable on other than a monthly basis, in which case each such Service Fee shall be payable as set forth on the applicable Annex. The Service Recipient shall be responsible for all applicable taxes imposed on the performance of the Services, other than any taxes imposed on the Service Provider’s income.

(ii) Except as otherwise noted on the Annexes, the Service Fee for each Service shall be increased on the first anniversary of the Distribution Date by a percentage amount equal to the most recently implemented general annual merit increase (expressed as a percentage) for NOV employees working at NOV’s corporate headquarters. For example, assuming that NOV employees receive their annual merit increase on January 1 of each calendar year, the percentage increase in the Service Fees that takes effect on the first anniversary of the Distribution Date shall equal the general merit increase percentage for NOV employees that went into effect on January 1, 2015.

(iii) For any Service Fee based upon full time employee (FTE) calculations or estimated total annual hours for a particular Service, NOV has provided an estimated FTE number or and estimated total annual hours number (“Basis”) in the applicable Annex that is based upon 2013 calculations for such Service. On an annual basis, or earlier if requested by either Party, the Parties shall meet to discuss and modify Basis calculations. Any modifications to the Service Fees and or Basis shall be commemorated by an amendment to applicable Annex(es) signed by both Parties.

(b) Direct Charges. In addition to the fees set forth above, and except as may otherwise be set forth in any Ancillary Agreement, to the extent practicable, the following items will be directly charged to the Service Recipient (“Direct Charges”): (1) all third party expenses directly related to the Service Recipient, including, but not limited to, outside legal fees, outside accounting fees, and fees and expenses of external advisors and consultants, (2) costs associated with any telecommunications contracts or information service licenses to the extent related or arising out of the assignment of any such contracts or licenses to the Service Recipient, and (3) insurance costs, including but not limited to, general liability, automobile liability, comprehensive liability, excess liability, property and directors and officers.

 

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Section 2.3. Payment of Fees.

(a) Except where other billing and/or payment terms are expressly set forth in any Annex hereto, on or before the 15th day of each month during the term of this Agreement, the Service Provider shall make a diligent effort to submit to the Service Recipient an invoice for the Services provided hereunder during the immediately preceding calendar month. Except for amounts being disputed by the Service Recipient in good faith in accordance with Section 2.5, the Service Recipient shall remit payment within thirty (30) days after its receipt of such invoice. Unless otherwise agreed to in writing, the Service Recipient shall remit all funds due under this Agreement to the Service Provider either by wire transfer or Automated Clearing House (ACH) in immediately available funds. The Parties’ wiring instructions are as follows (Each Party may revise these from time to time upon notice to the other Party):

 

NOV:   
Bank Name:   
Routing Number:   
Account Number:   
Account Name:   
Reference:    NOW Transition Services
SpinCo:   
Bank Name:   
Routing Number:   
Account Number:   
Account Name:   
Reference:    NOV Transition Services

(b) To the extent reasonably practicable, all third party invoices for Direct Charges shall be promptly submitted to the Service Recipient for payment. For Direct Charges not paid directly by the Service Recipient, if any, the Service Provider shall include such amounts in its monthly invoice to the Service Recipient.

Section 2.4. Records Maintenance and Audits. Each Party shall, for the time period required by applicable law after the termination of this Agreement, maintain records and other evidence sufficient to accurately and properly reflect the performance of the Services hereunder and the amounts due determined in accordance with Section 2.2. Service Recipients or their representatives shall have reasonable access, after requesting such access in writing in advance, during normal business hours to such records for the purpose of auditing and verifying the accuracy of the invoices submitted regarding such amounts due. Any such audits shall be at the sole cost and expense of the Party performing or requesting such audits. The Service Recipient shall have the right to audit the Service Provider’s books for a period of two (2) years after the month in which the Services were rendered, except in those circumstances where contracts by the Service Provider Group with third parties limit the audit period to a shorter period.

Section 2.5. Disputed Amounts. In the event of a good-faith dispute as to the amount and/or propriety of any invoices or any portions thereof submitted pursuant to Section 2.3, if any, the Service Recipient shall pay all undisputed charges on such invoice, but shall be entitled to withhold payment of any amount in dispute and shall promptly notify the Service Provider in writing of such disputed amounts and the reasons each such charge is disputed. Upon written request, the Service Provider shall use commercially reasonable efforts to provide the Service Recipient with sufficient records relating to the disputed charge so as to enable the Parties to

 

6


resolve the dispute. In the event the Parties are unable to resolve the dispute within 30 days after the invoice becomes due, the matter shall be submitted to a nationally recognized accounting firm agreed to by the Parties. The fees and expenses related to such resolution of the dispute by such firm shall be borne 50% by the Service Recipient and 50% by the Service Provider. The Service Recipient shall remit payment of the amount determined by such firm to be properly payable not later than ten (10) days following such determination, together with interest thereon calculated daily at the Applicable Rate. In the event of any overpayments by the Service Recipient, the Service Provider agrees to promptly (a) refund any such overpaid amount to the Service Recipient, as well as (b) pay interest on the overpayment calculated daily at the Applicable Rate. The determination of such accounting firm in resolution of the dispute shall be final and binding upon the Parties and enforceable by either Party in any court of competent jurisdiction, absent fraud or manifest error. So long as the Parties are attempting in good faith to resolve the dispute, neither Party shall be entitled to terminate the Services related to, or the cause of, the disputed amounts.

Section 2.6. Undisputed Amounts. Any statement or payment not disputed in writing by either Party within one year of the date of such statement or payment shall, absent fraud or manifest error, be considered final and binding and no longer subject to dispute or adjustment.

ARTICLE III.

CONFIDENTIALITY

Section 3.1. Each Party acknowledges that in connection with its performance under this Agreement, it may gain access to confidential material and information that is proprietary to the other Party. Unless otherwise required by applicable law, each Party agrees:

(a) to hold such material and information in strict confidence and not make use thereof other than for performance under or enforcement of this Agreement or the operation of the receiving Party’s business;

(b) to reveal such material and information only to those employees, advisors and contractors requiring such information in connection with the performance of the Services or the operation of the receiving Party’s business only after such employees, advisors or contractors agree to be bound by this confidentiality provision; and

(c) not to reveal such material and information to any third person, except as necessary in connection with the performance or evaluation of the Services or the operation of the receiving Party’s business, and then only to the extent that such persons agree to be bound by the confidentiality obligations set forth herein.

Section 3.2. Notwithstanding the provisions of Section 3.1, a Party may disclose confidential information it has received from the other Party where required in any legal proceedings or by any governmental authority having jurisdiction, but in such event, the receiving Party will provide the disclosing Party with prompt prior notice so that the disclosing Party may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement. In the event that the disclosing Party is unable to obtain such

 

7


protective order or other appropriate remedy, the receiving Party will furnish only that portion of the confidential information which it is advised by a written opinion of its counsel is legally required, and will give the disclosing Party written notice of the information to be disclosed as far in advance as practicable, and will exercise its best efforts to obtain a protective order or other reliable assurance that confidential treatment will be accorded the confidential information so disclosed.

Section 3.3. This confidentiality provision shall survive for a period of two (2) years following the expiration or termination of this Agreement.

ARTICLE IV.

MISCELLANEOUS

Section 4.1. Termination. This Agreement shall terminate on the Expiration Date, unless terminated earlier pursuant to Section 2.1(e).

Section 4.2. No Third Party Beneficiaries. The provisions of this Agreement are enforceable solely by the Parties to the Agreement and no assignee or other person shall have the right, separate and apart from the Parties hereto, to enforce any provisions of this Agreement or to compel any Party to this Agreement to comply with the terms of this Agreement; provided, however, that the limitations of liability in Section 4.4 shall inure to the benefit of, and be enforceable by, the Service Provider and each of its Affiliates.

Section 4.3. No Fiduciary Duties. It is expressly understood and agreed that this Agreement is a purely commercial transaction between NOV and SpinCo and that nothing stated herein shall operate to create any special or fiduciary duty that either Party or any of its Affiliates shall owe to the other Party or vice versa. Nothing stated herein shall obligate or require either Party to do anything which such Party deems to be detrimental or injurious to any other business or commercial activities of itself or any of its Affiliates, and it is expressly understood and agreed that the Service Provider shall be obliged to exert only commercially reasonable efforts in providing Services hereunder.

Section 4.4. Limited Warranty; Limitation of Liability.

The Service Provider represents that it will use reasonable care in providing Services to the Service Recipient, and such Services shall be provided by the Service Provider in accordance with all applicable laws, rules, and regulations. EXCEPT AS SET FORTH IN THE IMMEDIATELY PRECEDING SENTENCE AND IN SECTION 2.1(B), ALL SERVICES AND PRODUCTS ARE RENDERED AND PROVIDED TO THE SERVICE RECIPIENT AS IS, WHERE IS, WITH ALL FAULTS, AND THE SERVICE PROVIDER MAKES NO (AND HEREBY DISCLAIMS AND NEGATES ANY AND ALL) REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE SERVICES RENDERED OR PRODUCTS OBTAINED FOR THE SERVICE RECIPIENT. FURTHERMORE, THE SERVICE RECIPIENT MAY NOT RELY UPON ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING THE

 

8


WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE MADE TO THE SERVICE PROVIDER BY ANY PARTY (INCLUDING, AN AFFILIATE OF THE SERVICE PROVIDER) PERFORMING SERVICES ON BEHALF OF THE SERVICE PROVIDER HEREUNDER, UNLESS SUCH PARTY MAKES AN EXPRESS WARRANTY TO THE SERVICE RECIPIENT.

IT IS EXPRESSLY UNDERSTOOD BY THE SERVICE RECIPIENT THAT THE SERVICE PROVIDER GROUP SHALL HAVE NO LIABILITY FOR ANY SERVICES PROVIDED HEREUNDER AND FURTHER THAT THE SERVICE PROVIDER GROUP SHALL HAVE NO LIABILITY WHATSOEVER FOR THE SERVICES PROVIDED BY ANY THIRD PARTY, UNLESS IN EITHER EVENT SUCH SERVICES ARE PROVIDED IN A MANNER THAT CONSTITUTES GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF THE SERVICE PROVIDER OR ITS AFFILIATES. THE SERVICE RECIPIENT AGREES THAT THE REMUNERATION PAID TO THE SERVICE PROVIDER HEREUNDER FOR THE SERVICES TO BE PERFORMED REFLECT THIS LIMITATION OF LIABILITY AND DISCLAIMER OF WARRANTIES. IN NO EVENT SHALL THE SERVICE PROVIDER BE LIABLE TO THE SERVICE RECIPIENT OR ANY OTHER PERSON FOR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES, LOST PROFITS, LOSS OF GOODWILL, OR LOST OPPORTUNITIES, RESULTING FROM ANY ERROR IN THE PERFORMANCE OF SERVICES OR FROM THE BREACH OF THIS AGREEMENT, REGARDLESS OF THE FAULT OF THE SERVICE PROVIDER GROUP, OR ANY THIRD PARTY PROVIDER OR WHETHER THE SERVICE PROVIDER GROUP, OR THE THIRD PARTY PROVIDER ARE CONCURRENTLY, PARTIALLY, OR SOLELY NEGLIGENT. TO THE EXTENT ANY THIRD PARTY PROVIDER HAS LIMITED ITS LIABILITY TO THE SERVICE PROVIDER OR ITS AFFILIATE FOR SERVICES UNDER AN OUTSOURCING OR OTHER AGREEMENT, THE SERVICE RECIPIENT AGREES TO BE BOUND BY SUCH LIMITATION OF LIABILITY FOR ANY PRODUCT OR SERVICE PROVIDED TO THE SERVICE RECIPIENT BY SUCH THIRD PARTY PROVIDER UNDER THE SERVICE PROVIDER’S OR SUCH AFFILIATE’S AGREEMENT. EXCEPT IN CASES OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, THE SERVICE PROVIDER GROUP’S COLLECTIVE MAXIMUM LIABILITY TO THE SERVICE RECIPIENT WITH RESPECT TO ALL CLAIMS ARISING OUT OF THIS AGREEMENT SHALL BE LIMITED IN THE AGGREGATE TO THE AMOUNT PAYABLE HEREUNDER BY THE SERVICE RECIPIENT (EXCLUDING DIRECT CHARGES).

Section 4.5. Force Majeure. If any Party to this Agreement is rendered unable by force majeure to carry out its obligations under this Agreement, other than a Party’s obligation to make payments as provided for herein, that Party shall give the other Party prompt written notice of the force majeure with reasonably full particulars concerning it. Thereupon, the obligations of the Party giving the notice, insofar as they are affected by the force majeure, shall be suspended during, but no longer than the continuance of, the force majeure. The affected Party shall use all reasonable diligence to remove or remedy the force majeure situation as quickly as practicable.

The requirement that any force majeure situation be removed or remedied with all reasonable diligence shall not require the settlement of strikes, lockouts or other labour difficulty by the Party involved, contrary to its wishes. Rather, all such difficulties may be handled entirely within the discretion of the Party concerned.

 

9


The term “force majeure” means any one or more of: (a) an act of God, (b) a strike, lockout, labour difficulty or other industrial disturbance, (c) an act of a public enemy, war, blockade, insurrection or public riot, (d) lightning, fire, storm, flood or explosion, (e) governmental action, delay, restraint or inaction, (f) judicial order or injunction, (g) material shortage or unavailability of equipment, or (h) any other cause or event, whether of the kind specifically enumerated above or otherwise, which is not reasonably within the control of the Party claiming suspension.

Section 4.6. Further Assurances. In connection with this Agreement and all transactions contemplated by this Agreement, each Party hereto agrees to execute and deliver such additional documents and instruments as may be required for a Party to provide the services hereunder and to perform such other additional acts as may be necessary or appropriate to effectuate, carry out, and perform all of the terms and provisions of this Agreement.

Section 4.7. Notices. Any notice, request, demand, direction or other communication required or permitted to be given or made under this Agreement to a Party shall be in writing and may be given by hand delivery, postage prepaid first-class mail delivery, delivery by a reputable international courier service guaranteeing next business day delivery or by confirmed facsimile to such Party at its address noted below:

 

  (a) in the case of NOV, to:

National Oilwell Varco, Inc.

7909 Parkwood Circle Drive

Houston, Texas 77036

Attention: General Counsel

 

  (b) in the case of SpinCo, to:

NOW Inc.

7402 North Eldridge Parkway

Houston, Texas 77041

Attention: General Counsel

or at such other address of which notice may have been given by such Party in accordance with the provisions of this Section 4.7.

Section 4.8. Counterparts. This Agreement may be executed in several counterparts, no one of which needs to be executed by all of the Parties. Such counterpart shall be deemed to be an original and shall have the same force and effect as an original. All counterparts together shall constitute but one and the same instrument. Signed counterparts delivered via facsimile or via a “pdf” or other legible image file transmitted by electronic mail shall have the same binding effects as originals.

 

10


Section 4.9. Applicable Law. The provisions of this Agreement shall be construed in accordance with the laws of the State of Texas, excluding any conflicts of law rule or principle that might refer the construction or interpretation hereof to the laws of another jurisdiction.

Section 4.10. Dispute Resolution. Except as provided in Section 2.5 with respect to disputed amounts, the dispute resolution procedures set forth in Article IV of the Separation Agreement shall apply to any dispute, controversy or claim (whether sounding in contract, tort or otherwise) that arises out of or relates to this Agreement, any breach or alleged breach hereof, the transactions contemplated hereby (including all actions taken in furtherance of the transactions contemplated hereby on or prior to the date hereof), or the construction, interpretation, enforceability or validity hereof.

Section 4.11. Binding Effect; Assignment. Except for the ability of the Service Provider to cause one or more of the Services to be performed by a third party provider or an Affiliate of the Service Provider, no Party shall have the right to assign or delegate its rights or obligations under this Agreement without the consent of the other Party.

Section 4.12. Invalidity of Provisions. In the event that one or more of the provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality or enforceability of the remaining provisions hereof shall not be affected or impaired thereby.

Section 4.13. Compliance with Law. The Service Recipient Group represents and agrees that it will use the Services provided hereunder only in accordance with all applicable law, and in accordance with the conditions, rules, regulations and specifications which may be set forth in any manuals, materials, documents or instructions made available or communicated by the Service Provider to the Service Recipient or any of its Affiliates on an ongoing basis throughout the term of this Agreement. In performing the Services, the Service Provider Group will comply with all applicable law. The Service Provider reserves the right to take all actions, including termination of any particular Service or Services, that such Service Provider reasonably believes to be necessary to assure compliance with applicable law (including specifically, but without limitation, any applicable antitrust laws and regulations); provided, however, that such Service Provider will endeavor to provide the Service Recipient with as much prior notice as is reasonably practical before taking any such action.

Section 4.14. Modification; Amendment. This Agreement may not be amended or modified except by a written instrument signed by both Parties hereto.

Section 4.15. Waiver. No waiver by either Party of any term or breach of this Agreement shall be construed as a waiver of any other term or breach hereof or of the same or a similar term or breach on any other occasion.

Section 4.16. Entire Agreement. This Agreement constitutes the whole and entire agreement between the Parties hereto and supersedes any prior agreement, undertaking, declarations, commitments or representations, verbal or oral, in respect of the subject matter hereof.

[Signatures of Parties on Next Page]

 

11


IN WITNESS WHEREOF, the Parties hereto have executed this Agreement with effect as of the date first above written.

 

NATIONAL OILWELL VARCO, INC.
By:  

 

  Name:
  Title:
NOW INC.
By:  

 

  Name:
  Title:

SIGNATURE PAGE TO SERVICES AGREEMENT

EX-10.2

Exhibit 10.2

TAX MATTERS AGREEMENT

By and Between

NATIONAL OILWELL VARCO, INC.

and

NOW INC.

Dated as of                          , 2014


TABLE OF CONTENTS

 

         Page  
ARTICLE I  

DEFINITIONS

     2   
ARTICLE II  

PAYMENT OF TAXES

     7   

Section 2.01

 

Income Taxes

     7   

Section 2.02

 

Spin-Off Taxes

     7   

Section 2.03

 

Other Taxes

     8   

Section 2.04

 

Certain Income Taxes

     9   

Section 2.05

 

Allocation of Certain Income Taxes and Income Tax Items

     9   

Section 2.06

 

Refunds

     10   

Section 2.07

 

Carrybacks

     11   
ARTICLE III  

PREPARATION AND FILING OF TAX RETURNS

     12   

Section 3.01

 

NOV Responsibility

     12   

Section 3.02

 

SpinCo Responsibility

     12   

Section 3.03

 

Tax Accounting Practices

     13   

Section 3.04

 

Right to Review Tax Returns

     13   
ARTICLE IV  

TAX-FREE STATUS OF DISTRIBUTION

     13   

Section 4.01

 

Covenants

     13   

Section 4.02

 

Procedures Regarding Opinions and Rulings

     16   
ARTICLE V  

TAX CONTESTS; INDEMNIFICATION; COOPERATION

     16   

Section 5.01

 

Notice

     16   

Section 5.02

 

Control of Tax Contests

     17   

Section 5.03

 

Indemnification Payments

     18   

Section 5.04

 

Interest on Late Payments

     18   

Section 5.05

 

Treatment of Payments

     18   

Section 5.06

 

Expenses

     19   

Section 5.07

 

Cooperation

     19   

Section 5.08

 

Confidentiality

     20   

Section 5.09

 

Retention of Tax Records

     20   
ARTICLE VI  

RESOLUTION OF DISPUTES

     20   

Section 6.01

 

Tax Disputes

     20   
ARTICLE VII  

MISCELLANEOUS PROVISIONS

     21   

Section 7.01

 

Disposition of SpinCo Subsidiaries

     21   

Section 7.02

 

Complete Agreement; Representations

     21   

Section 7.03

 

Costs and Expenses

     21   

Section 7.04

 

Governing Law

     21   

Section 7.05

 

Notices

     22   

Section 7.06

 

Amendment, Modification or Waiver

     22   

Section 7.07

 

No Assignment; Binding Effect

     23   

Section 7.08

 

Counterparts

     23   

 

i


Section 7.09

 

Specific Performance

     23   

Section 7.10

 

Interpretation; Conflict With Ancillary Agreements

     23   

Section 7.11

 

Severability

     23   

Section 7.12

 

Survival

     23   

Section 7.13

 

No Double Recovery

     24   

Section 7.14

 

Jurisdiction

     24   

 

ii


TAX MATTERS AGREEMENT

This TAX MATTERS AGREEMENT (this “Agreement”), dated as of             , 2014, by and between National Oilwell Varco, Inc., a Delaware corporation (“NOV”), and NOW Inc., a Delaware corporation whose sole shareholder is NOV (“SpinCo” and, together with NOV, each, a “Party” and collectively, the “Parties”).

RECITALS

WHEREAS, the Board of Directors of NOV has determined that it will be appropriate and desirable to separate the SpinCo Business from NOV;

WHEREAS, as of the date of this Agreement, the NOV affiliated group for U.S. federal income tax purposes includes SpinCo and its subsidiaries;

WHEREAS, the Parties (or their predecessors-in-interest) have entered into the Separation and Distribution Agreement (as defined herein), pursuant to which NOV has contributed to SpinCo the stock and assets associated with the SpinCo Business (as defined herein) in exchange for shares of common stock of SpinCo (the “Contribution”);

WHEREAS, NOV intends to distribute on a pro rata basis to its shareholders all of the shares of stock of SpinCo (the “Distribution”);

WHEREAS, in order to effect the Contribution and Distribution, the Parties have engaged in various internal transfers of assets and stock including, without limitation, the Internal Spins (as defined below);

WHEREAS, the Parties intend that the Contribution, Distribution and each of the Internal Spins qualify for non-recognition of gain or loss pursuant to one or more of Sections 368(a), 351, 354, 355, 361 or 1032 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”);

WHEREAS, as a result of and upon the Distribution, SpinCo and its subsidiaries will cease to be members of the NOV Group (as defined herein); and

WHEREAS, the Parties desire to allocate the Tax responsibilities, liabilities and benefits of transactions that occur on or prior to, and that may occur after, the date on which the Distribution occurs (the “Distribution Date”) and to provide for and address certain other Tax matters.

NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, the Parties (each on behalf of itself and each of its Affiliates) hereby agree as follows:

 

1


ARTICLE I

DEFINITIONS

Definition of Terms. For purposes of this Agreement (including the recitals hereof) the following terms shall have the following meanings (such meanings to apply equally to both the singular and the plural forms of the terms defined). All Section and Exhibit references are to this Agreement unless otherwise stated. Capitalized terms used in this Agreement but not defined herein shall have the meanings ascribed to such terms in the Separation and Distribution Agreement.

Active Trade or Business” means the active trade or business of SpinCo and its subsidiaries as conducted immediately prior to the Distribution and that form the basis of the Tax Opinions.

Adjustment Request” means any formal or informal claim or request filed with any Governmental Authority for any Refund, underpayment or overpayment of Tax, or any change in available Tax Attributes.

Affiliate” of any Person means any other Person that, immediately after the Distribution, is directly or indirectly “controlled” by any of (i) the Person in question, (ii) any Person of which the Person in question is an Affiliate under clause (i), or (iii) any Affiliate under clause (i) of a Person described in clause (ii). For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities or other interests, by contract or otherwise.

Agreement” has the meaning provided in the first sentence of this Agreement.

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

Code” has the meaning set forth in the recitals.

Contribution” has the meaning set forth in the recitals.

Controlled Corporation” means, with respect to each Spin-Off, the corporation the stock of which is distributed by the Distributing Corporation for such Spin-Off to the shareholder(s) of such Distributing Corporation. The Controlled Corporation for each Spin-Off is either SpinCo or Foreign SpinCo.

Distributing Corporation” means, with respect to each Spin-Off, the corporation that distributes to its shareholder(s) the stock of the Controlled Corporation for such Spin-Off.

Distribution” has the meaning set forth in the recitals.

Distribution Date” has the meaning set forth in the recitals.

External Spin” means the Contribution and Distribution, taken together.

 

2


Final Determination” means the final resolution of liability for any Tax for any taxable period by or as a result of (i) a final and unappealable decision, judgment, decree or other order by any court of competent jurisdiction; (ii) a final settlement with the IRS, a closing agreement or accepted offer in compromise under Code Sections 7121 or 7122, or a comparable arrangement under the laws of another jurisdiction; (iii) any allowance of a Refund in respect of an overpayment of Tax, but only after the expiration of all periods during which such amount may be recovered by the Taxing Authority imposing the Tax; or (iv) any other final disposition, including by reason of the expiration of the applicable statute of limitations or by mutual agreement of the applicable Party, on one hand, and the IRS or other applicable Governmental Authority, on the other hand.

Foreign SpinCo” has the meaning set forth in the Representation Letter.

Governmental Authority” means any federal, state, local, foreign or international court, government, department, commission, board, bureau or agency, or any other regulatory, self-regulatory, administrative or governmental organization or authority.

Group” means the NOV Group and/or the SpinCo Group, as the context requires.

Income Taxes” means all federal, state, local, and foreign income or franchise Taxes or other Taxes based on income or net worth.

Indemnifying Party” has the meaning set forth in Section 5.01.

Indemnitee” has the meaning set forth in Section 5.01.

Internal Spin” means any of (i) the First Domestic Contribution and First Domestic Distribution (as such terms are defined in the Representation Letter), taken together, (ii) the Foreign Contribution and Foreign Distribution (as such terms are defined in the Representation Letter), taken together or (iii) the Second Domestic Contribution and Second Domestic Distribution (as such terms are defined in the Representation Letter), taken together.

IRS” means the U.S. Internal Revenue Service.

Joint Return” means any Return that includes both a member of the NOV Group and a member of the SpinCo Group.

Law” means any applicable foreign, federal, national, state, provincial or local law (including common law), statute, ordinance, rule, regulation, code or other requirement enacted, promulgated, issued or entered into, or act taken, by a Governmental Authority.

NOV” has the meaning provided in the first sentence of this Agreement.

NOV Group” means NOV and each of its Affiliates as of the date hereof, and any corporation or other entity that may become part of such Group from time to time. For the avoidance of doubt, the NOV Group excludes any entity that is a member of the SpinCo Group.

 

3


Other Taxes” means all Taxes other than Income Taxes, including (but not limited to) transfer, sales, use, excise, payroll, property, and unemployment Taxes.

Party” or “Parties” has the meaning provided in the first sentence of this Agreement.

Past Practices” has the meaning set forth in Section 3.03(a).

Person” means any natural person, corporation, general or limited partnership, limited liability company or partnership, joint stock company, joint venture, association, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, or any Governmental Authority, without regard to whether any entity is treated as disregarded for U.S. federal income tax purposes.

Post-Distribution Tax Period” means any taxable period (or portion thereof) beginning after the Distribution Date.

Pre-Distribution Tax Period” means any taxable period (or portion thereof) ending on or before the Distribution Date.

Prime Rate” means the “prime rate” published in the “Money Rates” section of The Wall Street Journal. If The Wall Street Journal ceases to publish the “prime rate,” then the Parties shall mutually agree to an equivalent publication that publishes such “prime rate,” and if such “prime rate” is no longer generally published or is limited, regulated or administered by a Governmental Authority, then a comparable interest rate index mutually agreed to by the Parties.

Proposed Acquisition Transaction” has the meaning set forth in Section 4.02(b)(i).

Refund” means any cash refund of Taxes or reduction of Taxes by means of credit, deduction, offset or otherwise.

Reportable Transaction” means a reportable or listed transaction as defined in Section 6011 of the Code or the Treasury Regulations promulgated thereunder.

Representation Letter” means that certain letter provided by NOV and SpinCo in connection with the Tax Opinions regarding “Certificate of Facts and Representations for the National Oilwell Varco Spin-Off Opinion” and dated as of                     , 2014.

Restricted Period” means the period beginning on the date of this Agreement and ending on, and including, the last day of the two-year period following the Distribution Date.

Ruling” means all private letter rulings granted by the IRS or any other taxing authority relating to the Transactions (whether granted prior to, on or after the date hereof), requests for such rulings, including all supplemental ruling requests and information submissions, and any exhibit to any of the foregoing.

 

4


Satisfactory Guidance” means either a ruling from the IRS or an Unqualified Tax Opinion, at the election of SpinCo, in either case reasonably satisfactory to NOV in both form and substance, including with respect to any underlying assumptions or representations. For the avoidance of doubt, this definition is intended to allow NOV to prevent SpinCo from taking the action that is the subject of a ruling from the IRS or an Unqualified Tax Opinion, if NOV determines in good faith that there is any Tax risk to it from such action based upon either (1) any uncertainty concerning any underlying assumptions or representations in such ruling or opinion or (2) any legal uncertainty referred to in advice it receives from its counsel.

Separate Return” means (i) in the case of the SpinCo Group, a Tax Return of any member of that Group (including any consolidated, combined, affiliated or unitary Return) that does not include, for all or any portion of the relevant taxable period, any member of the NOV Group and (ii) in the case of the NOV Group, a Tax Return of any member of that Group (including any consolidated, combined, affiliated or unitary Return) that does not include, for all or any portion of the relevant taxable period, any member of the SpinCo Group.

Separation and Distribution Agreement” means the Separation and Distribution Agreement, as amended from time to time, by and between NOV and SpinCo dated as of                     , 2014.

SpinCo” has the meaning provided in the first sentence of this Agreement.

SpinCo Business” has the meaning set forth in the Separation and Distribution Agreement.

SpinCo Capital Stock” means (i) all classes or series of capital stock of SpinCo, including common stock and all other instruments treated as equity in SpinCo for U.S. federal Income Tax purposes and (ii) all options, warrants and other rights to acquire such capital stock.

SpinCo Group” means SpinCo and each of its Affiliates as of the date hereof, and any corporation or other entity that may become part of such Group from time to time. For the avoidance of doubt, the SpinCo Group excludes any entity that is a member of the NOV Group.

Spin-Off” means each of the External Spin and the Internal Spins.

Spin-Off Taxes” means all (i) Taxes of any member of the NOV Group or the SpinCo Group resulting from, or arising in connection with, the failure of any Spin-Off to have Tax-Free Status, (ii) Taxes of the type described in clause (i) of any third party for which any member of the NOV Group or the SpinCo Group is or becomes liable, and (iii) reasonable out of pocket legal, accounting and other advisory and court fees in connection with liability for Taxes described in clauses (i) or (ii).

Straddle Period” means any taxable period beginning on or before the Distribution Date and ending after the Distribution Date.

Tax Advisor” means a U.S. Tax counsel or other Tax advisor of recognized national standing reasonably acceptable to both Parties.

 

5


Tax Attribute” means a net operating loss, net capital loss, investment credit, foreign Tax credit, excess charitable contribution, general business credit or any other item of loss, deduction or credit that could reduce a Tax liability.

Tax Contest” means an audit, review, examination or any other administrative or judicial proceeding with the purpose or effect of determining or redetermining Taxes (including any administrative or judicial review of any Adjustment Request).

Tax Dispute” means any dispute arising in connection with this Agreement.

Tax-Free Status” means the qualification of each Spin-Off (A) as a transaction qualifying for non-recognition of gain pursuant to Code Sections 355(a) and 368(a)(1)(D), (B) as a transaction in which the stock of the Controlled Corporation for such Spin-Off is “qualified property” for purposes of Code Sections 355(c) and 361(c), (C) in which the Distributing Corporation for such Spin-Off and the shareholders of such Distributing Corporation recognize no income or gain for U.S. federal Income Tax purposes pursuant to Code Sections 354, 355, 361 and 1032 and (D) for tax-free treatment under comparable provisions of state and local law. For the avoidance of doubt, recognition of income or gain that relates to intercompany items shall not cause a Spin-Off to fail to achieve Tax-Free Status.

Tax Item” means any item of income, gain, loss, deduction, credit, recapture of credit, or any other item (including the basis or adjusted basis of property) which increases or decreases Income Taxes paid or payable in any taxable period.

Tax Opinions” means the Tax opinions rendered by Locke Lord LLP and NOV’s tax advisors relating to the Transactions.

Tax Return” or “Return” means, with regard to Taxes, any return, filing, report, questionnaire, information statement, claim for Refund, or other document required or permitted to be filed, including any amendments that may be filed, for any taxable period with any Taxing Authority.

Taxes” means any income, gross income, gross receipts, profits, capital stock, franchise, withholding, payroll, social security, workers compensation, unemployment, disability, property, ad valorem, stamp, excise, severance, occupation, service, sales, use, license, lease, transfer, import, export, value added, alternative minimum, estimated or other tax (including any fee, assessment, or other charge in the nature of or in lieu of any tax but excluding, for the avoidance of doubt, any assessment under applicable escheat, abandoned property or unclaimed property laws) imposed by any Governmental Authority or political subdivision thereof, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing.

Taxing Authority” means any Governmental Authority imposing Taxes.

Transactions” means the Spin-Offs, the transactions contemplated by the Separation and Distribution Agreement, and any other transfer of assets (whether by contribution, sale or otherwise) between any member of the NOV Group and any member of the SpinCo Group in connection with the Contribution or the Distribution.

 

6


Unqualified Tax Opinion” means an unqualified “will” opinion of a Tax Advisor that permits reliance by NOV. The Tax Advisor, in issuing its opinion, shall be permitted to rely on the validity and correctness, as of the date given, of any previously issued Tax Opinions or Rulings (if any), unless such reliance would be unreasonable under the circumstances.

ARTICLE II

PAYMENT OF TAXES

Section 2.01 Income Taxes.

(a) Except as otherwise provided hereinafter in this Section 2.01 and in Sections 2.02 and 2.04, NOV shall be responsible for, and shall indemnify and hold harmless the SpinCo Group from and against any liability for, all Income Taxes (i) of SpinCo and its Affiliates for any Pre-Distribution Tax Period; (ii) of SpinCo and its Affiliates for any Straddle Period, but only to the extent allocated to NOV pursuant to Section 2.05; or (iii) imposed under Treasury Regulation Section 1.1502–6 or under any comparable or similar provision of state, local or foreign laws or regulations on SpinCo or an Affiliate solely as a result of such company being a member of a consolidated, combined, or unitary group with NOV or any NOV Affiliate during any Tax period.

(b) SpinCo shall be responsible for, and shall indemnify and hold harmless the NOV Group from and against any liability for, all Income Taxes (i) of SpinCo and its Affiliates which are not the responsibility of NOV pursuant to Section 2.01(a) (including, without limitation, Income Taxes for Post–Distribution Tax Periods of SpinCo and its Affiliates); and (ii) of NOV and its Affiliates attributable to acts or omissions of SpinCo or its Affiliates taken after the Distribution (other than acts or omissions that are (A) in the ordinary course of business, (B) otherwise contemplated by the Separation and Distribution Agreement or any Ancillary Agreement or (C) specifically addressed in Section 2.02 below, which shall govern liability for Spin-Off Taxes).

Section 2.02 Spin-Off Taxes.

(a) SpinCo shall be liable, and shall indemnify and hold harmless the NOV Group from and against any liability, for any Spin-Off Taxes that are attributable to (i) any inaccurate statement or representation of fact or intent (or omission to state a material fact) in a letter or certificate that is provided by any member of the SpinCo Group prior to, on or after the date hereof, and that forms the basis for the Tax Opinions or Rulings (if any); (ii) any act or omission by the SpinCo Group after the date of this Agreement inconsistent with the covenants set forth in this Agreement, any other Ancillary Agreement or the Separation and Distribution Agreement; or (iii) any other act or omission by the SpinCo Group after the date of this Agreement, including any act or omission that would have resulted in SpinCo being in breach of Section 4.01(b) but for the receipt by SpinCo of a Ruling from the IRS, an Unqualified Tax Opinion or consent of NOV.

 

7


(b) NOV shall be liable, and shall indemnify and hold harmless the SpinCo Group from and against any liability, for any Spin-Off Taxes attributable to (i) any inaccurate statement or representation of fact or intent (or omission to state a material fact) in a letter or certificate that is provided by any member of the NOV Group prior to, on or after the date hereof and that forms the basis for the Tax Opinions or Rulings (if any); (ii) any act or omission by the NOV Group after the date of this Agreement inconsistent with the covenants set forth in this Agreement, the Separation and Distribution Agreement or any Ancillary Agreement; or (iii) any other act or omission by the NOV Group after the date of this Agreement.

(c) To the extent that liability for any Spin-Off Taxes is subject to indemnity under both paragraphs (a) and (b) above, such liability shall be shared by NOV and SpinCo according to relative fault. If neither Party is at fault, they shall share the liability equally.

Section 2.03 Other Taxes.

(a) Subject to Section 2.03(c), below, NOV shall be responsible for all Other Taxes attributable to NOV and its Affiliates (other than SpinCo and its Affiliates) and to its business activities other than the SpinCo Business, or resulting from the Transactions, for all Pre–Distribution Tax Periods, Straddle Periods, and Post–Distribution Tax Periods.

(b) Subject to Section 2.03(c), below, SpinCo shall be responsible for all Other Taxes attributable to SpinCo and its Affiliates or to the SpinCo Business for all Pre–Distribution Tax Periods, Straddle Periods, and Post–Distribution Tax Periods.

(c) In each case the responsibilities of 2.03(a) and 2.03(b) shall be consistent with the principles described below:

(i) Transfer Taxes.

(A) The NOV Group shall be liable, and shall indemnify the SpinCo Group, for any stamp, sales, use, gross receipts, value-added, real estate transfer or other transfer Taxes imposed in connection with the Transactions.

(B) If business operations or assets of a NOV Group entity are transferred to a SpinCo Group entity as part of the Transactions, the transferee shall assume any and all liabilities for stamp, sales, use, gross receipts, value-added, real estate transfer and other transfer Taxes associated with such transferred operations (but not such liabilities specifically relating to the Transactions) and will have sole responsibility for satisfying such liabilities.

(C) With respect to Refund claims pending on the Distribution Date involving any sales, use, gross receipts or other similar Taxes, (x) in the case of a Refund received by NOV and payable to SpinCo pursuant to the terms hereof, the amount of such payment shall be net of all contingent fee expenses and Taxes paid by NOV and related to such Refund, or (y) in the event that SpinCo receives a Refund due any member of the SpinCo Group directly from the relevant Taxing Authority, it shall reimburse NOV for all contingent fee expenses and Taxes paid by NOV with respect to such Refund. For the avoidance of doubt, SpinCo shall not be liable for any contingent fee expenses or Taxes related to Refunds received prior to the Distribution Date.

 

8


(ii) Property Taxes. If, in connection with the Transactions, property is transferred between legal entities, the transferee shall assume any and all liabilities for real and personal property Taxes associated with such transferred property and will have sole responsibility for satisfying such liabilities.

(iii) Payroll Taxes. If, in connection with the Transactions, an employee moves from one employer to another, the “new” employer shall assume any and all employment related Taxes attributable to such transferred employee and will have sole responsibility for satisfying such liabilities.

Section 2.04 Certain Income Taxes. Notwithstanding anything to the contrary in this Article II, NOV shall be liable, and shall indemnify and hold harmless the SpinCo Group, for all Taxes arising as a result of the Transactions from (i) excess loss accounts taken into account under Code Section 1502, (ii) Code Section 357(c) or (iii) Code Section 361(b), in each case, including under similar state and local law provisions. Any Taxes attributable to deferred intercompany gains that are triggered as a result of the Transactions shall be the responsibility of NOV and shall not be included in determining the SpinCo Group’s Income Tax liability. To the extent there are adjustments to the amount of any deferred intercompany gain triggered as a result of the Distribution, NOV shall be responsible for paying the additional Tax associated with any increase in the amount of gain and shall also be entitled to any Refund attributable to any reduction of gain.

Section 2.05 Allocation of Certain Income Taxes and Income Tax Items.

(a) If NOV, SpinCo or any of their respective Affiliates is permitted but not required under applicable U.S. federal, state, local or foreign Tax laws to treat the Distribution Date as the last day of a taxable period, then the Parties shall treat such day as the last day of a taxable period under such applicable Tax law, and shall file any elections necessary or appropriate to such treatment; provided that this Section 2.05(a) shall not be construed to require NOV to change its taxable year.

(b) Transactions occurring, or actions taken, on the Distribution Date but after the Distribution outside the ordinary course of business by, or with respect to, SpinCo or any of its Affiliates shall be deemed subject to the “next day rule” of Treasury Regulation Section 1.1502–76(b)(1)(ii)(B) (and under any comparable or similar provision under state, local or foreign laws or regulations, provided that if there is no comparable or similar provision under state, local or foreign laws or regulations, then the transaction will be deemed subject to the “next day rule” of Treasury Regulation Section 1.1502–76(b)(1)(ii)(B)) and as such shall for purposes of this Agreement be treated (and consistently reported by the Parties) as occurring in a Post–Distribution Tax Period of SpinCo or a SpinCo Affiliate, as appropriate.

(c) Any Taxes for a Straddle Period with respect to SpinCo and/or its Affiliates (or entities in which SpinCo and/or one of its Affiliates has an ownership interest) shall, for purposes of this Agreement, be apportioned between NOV and SpinCo based on the

 

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portion of the period ending on and including the Distribution Date and the portion of the period beginning after the Distribution Date, and each such portion of such period shall be deemed to be a taxable period (whether or not it is in fact a taxable period). Any allocation of income or deductions required to determine any Income Taxes for a Straddle Period shall be made by means of a closing of the books and records of SpinCo and its Affiliates as of the close of business on the Distribution Date; provided that: (i) NOV may elect to allocate Tax Items (other than any extraordinary Tax Items) ratably in the month in which the Distribution occurs (and if NOV so elects, SpinCo shall so elect) as described in Treasury Regulation Section 1.1502–76(b)(2)(iii) and corresponding provisions of state, local, and foreign Tax laws; and (ii) subject to (i), exemptions, allowances or deductions that are calculated on an annual basis, and not on a closing of the books method, (including, but not limited to, depreciation and amortization deductions) shall be allocated between the period ending on and including the Distribution Date and the period beginning after the Distribution Date based on the number of days for the portion of the Straddle Period ending on and including the Distribution Date, on the one hand, and the number of days for the portion of the Straddle Period beginning after the Distribution Date, on the other hand.

(d) Tax Attributes determined on a consolidated or combined basis for taxable periods ending before or including the Distribution Date shall be allocated to NOV and its Affiliates, and SpinCo and its Affiliates, in accordance with the Code and the Treasury Regulations (and any applicable state, local, or foreign law or regulation). Within an administratively reasonable period following the Distribution Date, NOV shall reasonably determine (i) the amounts and proper allocation of such attributes as of the Distribution Date, and (ii) the Tax basis of the assets and liabilities transferred to SpinCo in connection with the Transactions as of the Distribution Date; provided that SpinCo shall be entitled to participate in such determination. NOV and SpinCo agree to compute their Tax liabilities for taxable periods after the Distribution Date consistent with that determination and allocation, and treat the Tax Attributes and Tax Items as reflected on any federal (or applicable state, local or foreign) Income Tax Return filed by the Parties as presumptively correct.

Section 2.06 Refunds. Except as provided in Section 2.07:

(a) NOV shall be entitled to all Refunds with respect to any Tax for which NOV is responsible under Sections 2.01, 2.02, 2.03, or 2.04. SpinCo shall be entitled to all Refunds with respect to any Tax for which SpinCo is responsible under Sections 2.01, 2.02, 2.03, or 2.04.

(b) SpinCo and NOV shall each forward to the other Party, or reimburse such other Party for, any Refunds received by the first Party and due to such other Party pursuant to this Section (net of all contingent fees and Taxes payable by the first Party and related to such Refund). Where a Refund is received in the form of a deduction from, or credit or other offset against other or future Tax liabilities, reimbursement with respect to such Refund shall be due in each case on the due date for payment of the Tax from or against which such Refund has been deducted, credited or otherwise offset.

(c) If one Party reasonably so requests, the other Party (at the first Party’s expense) shall file for and pursue any Refund to which the first Party is entitled under this

 

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Section; provided that the other Party need not pursue any Refund on behalf of the first Party unless the first Party provides the other Party a certification by an appropriate officer of the first Party setting forth the first Party’s belief (together with supporting analysis) that the Tax treatment of the Tax Items on which the entitlement to such Refund is based is more likely than not correct, and is not a Tax Item arising from a Reportable Transaction.

(d) If the other Party pays any amount to the first Party under this Section 2.06 and, as a result of a subsequent Final Determination, the first Party is not entitled to some or all of such amount, the other Party shall notify the first Party of the amount to be repaid to the other Party, and the first Party shall then repay such amount to the other Party, together with any interest, fines, additions to Tax, penalties or any additional amounts imposed by a Taxing Authority relating thereto.

Section 2.07 Carrybacks.

(a) Notwithstanding anything to the contrary in this Agreement, SpinCo shall file (or cause to be filed) on a timely basis any available election to waive the carryback of net operating losses, Tax credits or other Tax Items by SpinCo or any Affiliate from a Post–Distribution Tax Period to a Straddle Period or Pre–Distribution Tax Period. Such elections shall include, but not be limited to, the election described in Treasury Regulation Section 1.1502–21(b)(3)(ii)(B), and any analogous election under state, local, or foreign Income Tax laws, to waive the carryback of net operating losses for U.S. federal Income Tax purposes.

(b) If, notwithstanding the provisions of Section 2.07(a), SpinCo is required to carryback losses or credits, SpinCo shall be entitled to any Refund of any Tax obtained by NOV or an NOV Affiliate as a result of the carryback of losses or credits of SpinCo or its Affiliate from any Post-Distribution Tax Period to any Pre-Distribution Tax Period. Such Refund is limited to the net amount received by NOV or an NOV Affiliate, net of any Tax cost incurred by NOV or such Affiliate resulting from such Refund. Upon request by SpinCo, NOV shall advise SpinCo of an estimate of any Tax cost NOV projects will be associated with any carryback of losses or credits of SpinCo or its Affiliates as provided in this Section 2.07(b).

(c) If SpinCo has a Tax Item that must be carried back to any Pre-Distribution Tax Period, SpinCo shall notify NOV in writing that such Tax Item must be carried back. Such notification shall include a description in reasonable detail of the grounds for the Refund and the amount thereof, and a certification by an appropriate officer of SpinCo setting forth SpinCo’s belief (together with supporting analysis) that the Tax treatment of such Tax Item is more likely than not correct, and is not a Tax Item arising from a Reportable Transaction.

(d) If NOV pays any amount to SpinCo under Section 2.07(b) and, as a result of a subsequent Final Determination, SpinCo is not entitled to some or all of such amount, NOV shall notify SpinCo of the amount to be repaid to NOV, and SpinCo shall then repay such amount to NOV, together with any interest, fines, additions to Tax, penalties or any additional amounts imposed by a Taxing Authority relating thereto.

 

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ARTICLE III

PREPARATION AND FILING OF TAX RETURNS

Section 3.01 NOV Responsibility.

(a) Subject to paragraph (b), NOV shall make all determinations with respect to, have ultimate control over the preparation of and file all (i) Joint Returns and NOV Separate Returns, in each case as it determines to be mandatory or advisable for all taxable periods, (ii) SpinCo Separate Returns that are Income Tax Returns for all Pre-Distribution Tax Periods and (iii) subject to SpinCo giving its written consent (which can be withheld for any reason), at NOV’s election, SpinCo Separate Returns that are Income Tax Returns for all Straddle Periods provided that NOV provides written notice to SpinCo 45 days after the end of such Straddle Period that NOV is exercising its right to prepare such Tax Return.

(b) If, in connection with the preparation of any Return, NOV materially modifies any information relating to, or provided in, the pro forma federal and state Income Tax Returns or other information related to members of the SpinCo Group prepared by SpinCo and provided to NOV pursuant to Section 3.02 below, the portions of the Returns that include such information shall be submitted to SpinCo no later than 30 days prior to the due date (including extensions) for filing of such federal Returns and 20 days prior to the due date (including extensions) for filing of such state Returns (or if such due date is within 30 days following the Distribution Date, as promptly as practicable following the Distribution Date). Within 10 days after delivery of any such revised portions of any Return, SpinCo shall provide comments to NOV in writing to the extent SpinCo objects to any revisions that could reasonably be expected to adversely impact any member of the SpinCo Group. Such SpinCo comments shall be incorporated into the Return upon the consent of NOV, not to be unreasonably withheld. If SpinCo does not so notify NOV of any objection, SpinCo shall be considered to have consented to the filing of such Return. The dates for submissions to SpinCo required in this section may be modified by mutual agreement of NOV and SpinCo.

Section 3.02 SpinCo Responsibility.

(a) SpinCo shall make all determinations with respect to, have ultimate control over the preparation of and file all Tax Returns (other than those described in Section 3.01) for the SpinCo Group as it determines to be mandatory or advisable and for all taxable periods. SpinCo shall prepare and provide to NOV all pro forma federal and state Income Tax Returns and other information related to members of the SpinCo Group required to complete any Tax Return which is the responsibility of NOV pursuant to Section 3.01, in the format reasonably requested by NOV, no later than the later of (i) 100 days prior to the due date (including extensions) of the relevant Tax Return or (ii) 30 days following the date on which the Tax basis and/or other applicable Tax attributes required to complete the relevant Tax Return is made available to SpinCo pursuant to Section 2.05(d). The dates for submissions to NOV required in this section may be modified by mutual agreement of NOV and SpinCo.

(b) In the case of any Tax Return that is the responsibility of NOV pursuant to Section 3.01(a) and that relates to an Income Tax that is the obligation of SpinCo, SpinCo shall pay to NOV the amount of the provision for such Income Tax no later than the later of (i) 10 days prior to the due date (including extensions) for the filing of such Tax Return or (ii) 2 days after NOV notifies SpinCo of the amount SpinCo owes.

 

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Section 3.03 Tax Accounting Practices.

(a) Except as provided in Section 3.03(b), any Tax Return for any Pre-Distribution Tax Period or Straddle Period, to the extent it relates to members of the SpinCo Group, shall be prepared in accordance with practices, accounting methods, elections, conventions and Tax positions used with respect to the Tax Return in question for periods prior to the Distribution (“Past Practices”), and, in the case of any item the treatment of which is not addressed by Past Practices, in accordance with generally acceptable Tax accounting practices. Notwithstanding the foregoing, for any Tax Return described in the preceding sentence, (i) a Party will not be required to follow Past Practices if such Party receives either the written consent of the other Party (not to be unreasonably withheld) or a “should” level opinion from a Tax Advisor that the proposed method of reporting is correct and (ii) NOV shall have the right to determine which entities will be included in any consolidated, combined, affiliated or unitary Return that it is responsible for filing.

(b) The Parties shall report the Transactions for all Tax purposes in a manner consistent with the Tax Opinions or Rulings (if any), unless, and only to the extent, an alternative position is required pursuant to a Final Determination. NOV shall determine the Tax treatment to be reported on any Tax Return of any Tax issue relating to the Transactions that is not covered by the Tax Opinions or Rulings (if any).

Section 3.04 Right to Review Tax Returns. Upon request, each Party shall make available to the other Party the portion of Pre-Distribution Tax Period Tax Returns that relates to the SpinCo Group that the first Party is responsible for preparing under this Article III.

ARTICLE IV

TAX-FREE STATUS OF DISTRIBUTION

Section 4.01 Covenants.

(a) Each of SpinCo and NOV will not take or fail to take, or permit its Affiliates to take or fail to take, any action (which includes the undertaking of any transaction) where that action or omission would (i) violate, be inconsistent with or cause to be untrue any covenant, representation or statement in any Tax Opinions or Rulings (if any) or a letter or certificate that forms the basis therefor, or (ii) prevent, or be reasonably likely to prevent, or be inconsistent with, the Tax-Free Status.

(b) During the Restricted Period, except as provided in Section 4.01(c), SpinCo shall not, and shall not permit its Affiliates to, in a single transaction or in a series of transactions:

(i) permit any transaction or series of transactions (or any agreement, understanding or arrangement to enter into a transaction or series of transactions) as determined for purposes of Code Section 355(e), in connection with which (A) any member of the SpinCo

 

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Group would merge or consolidate with any Person, or (B) any Person would (directly or indirectly) acquire, or have the right to acquire, from SpinCo and/or any other Person or Persons, any interest in SpinCo Capital Stock that would, when combined with any other changes in ownership of SpinCo Capital Stock pertinent for purposes of Code Section 355(e), represent 30% or more of the value or total combined voting power of all outstanding shares of SpinCo Capital Stock as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series (a “Proposed Acquisition Transaction”). For these purposes, any recapitalization, repurchase or redemption of SpinCo Capital Stock shall be treated as an indirect acquisition of such stock by a shareholder to the extent such shareholder’s percentage interest in the issuer increases by vote or value. Notwithstanding the foregoing, a Proposed Acquisition Transaction shall not include (w) the adoption by SpinCo of a shareholder rights plan that meets the requirements of IRS Revenue Ruling 90-11, (x) issuances of SpinCo Capital Stock pursuant to an employee stock purchase agreement or equity compensation plan that the board of directors of NOV has approved prior to the Distribution Date or that NOV has notified SpinCo in writing is acceptable to NOV in its sole discretion (for the avoidance of doubt, (i) any modification or amendment to such agreement or plan is also subject to the prior written consent of NOV and (ii) NOV’s approval is required for the underlying purchase agreement or plan but not for each issuance of stock, options or other awards pursuant thereto), (y) transfers on an established market of SpinCo Capital Stock described in Safe Harbor VII of Treasury Regulation Section 1.355-7(d), or (z) issuances of SpinCo Capital Stock described in Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulation Section 1.355-7(d);

(ii) liquidate or partially liquidate, including by way of merger or consolidation, Foreign SpinCo or any other member of the SpinCo Group other than SpinCo;

(iii) liquidate or partially liquidate SpinCo (including, but not limited to, within the meaning of such terms in Code Section 346 and Code Section 302, respectively);

(iv) cause or permit the SpinCo Group to cease to engage in the Active Trade or Business;

(v) cause or permit Foreign SpinCo (together with any direct or indirect subsidiary of Foreign SpinCo that is disregarded as separate from Foreign SpinCo for U.S. federal income tax purposes) to cease to engage in the Active Trade or Business;

(vi) sell or transfer assets (including, without limitation, any stock of Foreign SpinCo or any other member of the SpinCo Group), other than in the ordinary course of business; or

(vii) amend its certificate of incorporation (or other organizational documents), or take any other action, affecting the relative voting rights of the separate classes of SpinCo Capital Stock; provided, however, that this clause (vi) shall not be deemed to be violated upon SpinCo’s adoption of a shareholder rights plan that meets the requirements of IRS Revenue Ruling 90-11.

 

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(c) Notwithstanding Section 4.01(b):

(i) clauses (i) through (vii) of Section 4.01(b) shall not apply upon the prior written consent of NOV, which consent may not be withheld if NOW provides NOV with Satisfactory Guidance concluding that the proposed actions will not result in Spin-Off Taxes;

(ii) for purposes of clause (i), if SpinCo provides NOV an Unqualified Tax Opinion that is intended to be Satisfactory Guidance concerning a Proposed Acquisition Transaction, then such Opinion may be based on the assumption that NOV did not have any agreement, understanding, arrangement or substantial negotiations, within the meaning of Treasury Regulations Section 1.355-7(h), with the counterparty to the Proposed Acquisition Transaction within the two year period preceding the Distribution Date and such assumption shall not prevent such Unqualified Tax Opinion from being considered Satisfactory Guidance by the Parties, provided that (x) such assumption must be based on a certificate of such counterparty that such assumption is true to the best of its knowledge and belief, and (y) NOV may deem such Opinion not to be Satisfactory Guidance if, in its reasonable judgment, there is a risk that such assumption is not correct;

(iii) In the event that SpinCo intends to consummate any Proposed Acquisition Transaction after the end of the Restricted Period but before the end of 30 months after the Distribution Date, then either (x) SpinCo shall be permitted to consummate such Proposed Acquisition Transaction, provided that SpinCo shall provide NOV with an unconditional certification that it did not have any agreement, understanding, arrangement or substantial negotiations, within the meaning of Treasury Regulations Section 1.355-7(h), with the counterparty to such transaction within 12 months after the Distribution Date, and NOV, after reasonable due investigation, is satisfied with the correctness of such certification, or (y) such Proposed Acquisition Transaction shall be subject to the provisions under Sections 4.01(b) and (c) as if such Proposed Acquisition Transaction occurred within the Restricted Period; and

(iv) clauses (ii), (vi) and (vii) of Section 4.01(b) shall not apply with respect to any transactions specifically identified as transactions that are not subject to such clauses in that certain side letter between NOV and SpinCo relating to this Agreement and dated on or about the date of this Agreement.

(d) Notwithstanding anything to the contrary in this Agreement, for purposes of paragraph (c), no Ruling shall be obtained from the IRS if NOV determines that there is a reasonable possibility that such an action could have a significant adverse impact on any member of the NOV Group.

(e) Until January 1st of the calendar year immediately following the calendar year in which the Distribution occurs, SpinCo shall neither cause nor permit any foreign subsidiary of SpinCo to enter into any transaction or take any action that would be considered under the Code to constitute the declaration or payment of a dividend (including pursuant to Section 304 of the Code) without obtaining the prior written consent of NOV (such prior written consent not to be unreasonably withheld).

 

 

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Section 4.02 Procedures Regarding Opinions and Rulings.

(a) Subject to Section 4.01(d), if SpinCo may take certain actions conditioned upon the receipt of Satisfactory Guidance, NOV, at the request of SpinCo, shall use commercially reasonable efforts to expeditiously obtain, or assist SpinCo in obtaining, such Satisfactory Guidance. NOV shall not be required to take any action pursuant to this Section 4.02(a) if SpinCo fails to certify, upon request, that all information and representations relating to any member of the SpinCo Group in the relevant documents are true, correct and complete. SpinCo shall reimburse NOV for all reasonable out-of-pocket costs and expenses incurred by the NOV Group in obtaining Satisfactory Guidance.

(b) NOV shall have the right to obtain a Ruling from the IRS (or any other Taxing Authority) or an Unqualified Tax Opinion at any time in its sole discretion. NOV shall reimburse SpinCo for all reasonable out-of-pocket costs and expenses incurred by the SpinCo Group in obtaining such a Ruling or Unqualified Tax Opinion.

(c) NOV shall have exclusive control over the process of obtaining any Ruling relating to the Transactions and neither SpinCo nor any of its Affiliates shall independently seek any guidance concerning the Transactions from any Taxing Authority at any time. In connection with any Ruling relating to the Transactions that can reasonably be expected to affect SpinCo liabilities under this Agreement, NOV shall (i) keep SpinCo informed of all material actions taken or proposed to be taken by NOV, (ii) reasonably in advance of the submission of any Ruling request provide SpinCo with a draft thereof, consider SpinCo’s comments on such draft, and provide SpinCo with a final copy, and (iii) provide SpinCo with notice reasonably in advance of, and permit SpinCo to attend, any formally scheduled meetings with the IRS (subject to the approval of the IRS) that relate to such Ruling.

ARTICLE V

TAX CONTESTS; INDEMNIFICATION; COOPERATION

Section 5.01 Notice.

(a) Within 15 days after a Party (the “Indemnitee”) becomes aware of the existence of a Tax Contest that may give rise to an indemnification claim under this Agreement by it against the other Party (the “Indemnifying Party”), the Indemnitee shall notify the Indemnifying Party of the Tax Contest, and thereafter shall promptly forward or make available to the Indemnifying Party copies of notices and communications with a Taxing Authority relating to such Tax Contest.

(b) The Indemnifying Party shall not be responsible for any increase in amounts to which the Indemnitee is otherwise entitled to the extent that such increase results solely from the failure of the Indemnitee to provide timely notice as required pursuant to Section 5.01(a).

 

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Section 5.02 Control of Tax Contests.

(a) Except as otherwise provided in paragraphs (b) and (c) below:

(i) NOV shall control, and have sole discretion in handling, settling or contesting, any Tax Contest relating to any Joint Returns, as well as any Separate Returns or other Return if any such Return is related to Taxes for which NOV is responsible pursuant to Article II, or the Tax treatment of the Transactions, provided that (x) NOV shall act in good faith in connection with its control of any such Tax Contests and (y) SpinCo shall have the right to participate in and advise on (including, without limitation, the opportunity to review and comment upon NOV’s communications with the Taxing Authority, which comments shall be incorporated upon the consent of NOV, not to be unreasonably withheld) such items for which SpinCo could be liable under Article II as a result of such Tax Contest; and

(ii) If SpinCo disagrees with NOV’s decision to settle a Tax Contest that may reasonably be expected materially to affect amounts for which SpinCo is liable under Article II, SpinCo shall have the right to contest its liability to NOV under Article II notwithstanding the settlement. SpinCo shall provide written notice to NOV of its intention to contest its liability as a result of any settlement (and its irrevocable election described below) prior to the time such settlement is entered into. Any such contest by SpinCo shall be made under the procedures set forth in Article VI. Under those procedures, SpinCo may irrevocably elect, in its sole discretion, to require the Tax Advisor or the arbitrator to determine either (x) the amount of a settlement with the relevant Taxing Authority that would most accurately reflect the litigation risk of the relevant issue, or (y) the most likely outcome of the issue if it were litigated without a settlement. In either such case, SpinCo shall be liable to NOV, or NOV shall be liable to SpinCo, based solely on the determination of the Tax Advisor or the arbitrator as if a settlement or litigation implementing such determination had actually occurred, without regard to the actual settlement. For the avoidance of doubt, this clause (ii) shall not limit NOV’s ability to settle a Tax Contest.

(b) SpinCo shall control and have sole discretion in handling, settling or contesting, any Tax Contest for a Pre-Distribution Tax Period to the extent such Tax Contest relates solely to Taxes that are the responsibility of SpinCo pursuant to Article II; provided that NOV shall have the right to participate in and advise on all aspects of such Tax Contests and may coordinate discussions with the relevant Taxing Authority with respect thereto.

(c) NOV and SpinCo shall jointly control Tax Contests relating to Tax liability arising from the failure of the Spin-Offs to qualify for tax-free treatment under Code Sections 355 or 361, if, and only if, there is a reasonable likelihood that SpinCo would be liable to NOV under Article II as a result of such Tax Contest. Neither Party shall have the right to settle any such Tax Contest without the consent of the other Party; provided that NOV may settle any such Tax Contest without the consent of SpinCo if NOV waives any claim for indemnification with respect thereto.

(d) Except as otherwise provided in paragraph (a), (b) or (c) above, SpinCo shall have sole control over any Tax Contest that relates to SpinCo Separate Returns for any Post-Distribution Tax Period.

(e) Any out-of-pocket costs incurred in handling, settling or contesting a Tax Contest shall be borne ratably by the Parties based on their ultimate liability under this Agreement for the Taxes to which the Tax Contest relates; provided, however, that if SpinCo

 

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contests a settlement made by NOV as provided in clause (ii) of paragraph (a) above, SpinCo shall bear the costs relating to SpinCo’s contest of such settlement unless SpinCo substantially prevails in such contest.

Section 5.03 Indemnification Payments.

(a) An Indemnitee shall be entitled to make a claim for payment pursuant to this Agreement when the Indemnitee determines that it is entitled to such payment and the amount of such payment (including, for the avoidance of doubt, the finalization of a Return before filing). The Indemnitee shall provide to the Indemnifying Party notice of such claim within 10 days of the date on which it first so becomes entitled to claim such payment, including a description of such claim and a detailed calculation of the amount of the indemnification payment that is claimed, provided, however, that no delay on the part of the Indemnitee in notifying the Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnitor is actually and materially prejudiced thereby. Except as provided in paragraph (b) below, the Indemnifying Party shall make the claimed payment to the Indemnitee within 10 days after receiving such notice, unless the Indemnifying Party reasonably disputes its liability for, or the amount of, such payment.

(b) If the Indemnitee will be obligated to make the payment described in paragraph (a) above to a Taxing Authority or other third Party (including expenses reimbursable under this Agreement), the Indemnifying Party shall not be obligated to pay the Indemnitee more than 5 days before the Indemnitee incurs such expense or makes such payment. If the Indemnitee’s claim for payment arises from a payment that the Indemnifying Party will receive from a third Party, such as a Refund, the Indemnifying Party shall not be obligated to pay the Indemnitee until 5 days after the Indemnifying Party receives such payment.

(c) In the case of a claim under Article II where no payment will be made to or received from a Taxing Authority, paragraph (b) above shall be applied to the payments that would be made to or from a Taxing Authority if the SpinCo Group was treated as a standalone group for all taxable periods.

Section 5.04 Interest on Late Payments. Interest shall accrue with respect to any indemnification payment (including any disputed payment that is ultimately required to be made), not made within the period for payment, at Prime Rate plus 2% per annum compounded quarterly.

Section 5.05 Treatment of Payments.

(a) The amount of all indemnification obligations under this Agreement shall be decreased to take into account the Tax benefits to the Indemnitee of the deductibility of any indemnified item (whether or not any Tax benefit is actually received for a deductible item and assuming the highest applicable taxable rate) and shall be increased where necessary so that, after all the required deductions (whether or not any Tax benefit is actually received for a deductible item and assuming the highest applicable taxable rate) have been made and Taxes imposed, the Indemnitee receives the amount it would have been entitled to receive under this Agreement in the absence of such deductions and Taxes.

 

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(b) Any payments made to one Party by another Party pursuant to (i) this Agreement or (ii) the Separation and Distribution Agreement (if payment made pursuant to the Separation and Distribution Agreement relates to taxable periods (or portions thereof) ending on or before the Distribution) shall be treated by the Parties for all Tax purposes as a distribution by, or capital contribution to, SpinCo, as the case may be, made immediately prior to the Distribution, except to the extent otherwise required by a Final Determination.

Section 5.06 Expenses. Each Party and its Affiliates shall bear their own expenses incurred in connection with preparation of Tax Returns and preparation for and defense of Tax Contests.

Section 5.07 Cooperation. Each member of the NOV Group and the SpinCo Group shall cooperate fully with all reasonable requests from the other Party in connection with the preparation and filing of Tax Returns and Adjustment Requests, Tax Contests and other matters covered by this Agreement.

(a) Such cooperation shall include:

(i) the retention until the expiration of the applicable statute of limitations, and the provision upon request, of Tax Returns, books, records (including information regarding ownership and Tax basis of property), documentation and other information relating to the Tax Returns, including accompanying schedules, related workpapers, and documents relating to Rulings (if any) or other determinations by Taxing Authorities;

(ii) the execution of any document that may be necessary or reasonably helpful in connection with any Tax Contest, the filing of a Tax Return or Adjustment Request by a member of the NOV Group or the SpinCo Group, obtaining a Tax opinion or private letter ruling (except as otherwise provided in Section 4.02(c)), or other matters covered by this Agreement, including certification (provided in such form as may be required by applicable law or reasonably requested and made to the best of a Party’s knowledge) of the accuracy and completeness of the information it has supplied;

(iii) the use of the Parties’ reasonable best efforts to obtain any documentation that may be necessary or reasonably helpful in connection with any of the foregoing;

(iv) the use of the Parties’ reasonable best efforts to make the applicable Party’s current or former directors, officers, employees, agents and facilities available on a reasonable and mutually convenient basis in connection with the foregoing matters; and

(v) making determinations with respect to actions described in Section 4.01(c) as promptly as practicable including, without limitation, making determinations within 10 days with respect to modifications and amendments of employee stock purchase agreements or equity compensation plans under Section 4.01(b)(i)(x).

(b) If a Party fails to comply with any of its obligations set forth in this Section 5.07 upon reasonable request and notice by the other Party, and such failure results in the imposition of additional Taxes, the nonperforming Party shall be liable in full for such additional Taxes.

 

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Section 5.08 Confidentiality. Any information or documents provided under this Agreement shall be kept confidential by the recipient-Party, except as may otherwise be necessary in connection with the filing of Tax Returns or with any Tax Contest. In addition, if NOV or SpinCo determines that providing such information could be commercially detrimental, violate any law or agreement or waive any privilege, the Parties shall use reasonable best efforts to permit compliance with the obligations under this Agreement in a manner that avoids any such harm or consequence.

Section 5.09 Retention of Tax Records. SpinCo may request from NOV and retain copies of (i) with respect to any Joint Return, all pro forma federal and state Tax Returns, supporting schedules and workpapers related to members of the SpinCo Group, and (ii) any Separate Returns for any SpinCo Group members, including supporting schedules and workpapers. If either NOV or SpinCo intends to dispose of documentation with respect to any Pre-Distribution Tax Period, including books, records, Tax Returns and all supporting schedules and information relating thereto (after the expiration of the applicable statute of limitations), of any member of the other Group, or in the case of the SpinCo Group any member included in a Joint Return, they shall provide written notice to the other Party describing the documentation to be disposed of 30 days prior to taking such action. The other Party may arrange to take delivery of the documentation described in the notice at its own expense during the succeeding 30 day period.

ARTICLE VI

RESOLUTION OF DISPUTES

Section 6.01 Tax Disputes. The Parties will endeavor, and will cause their respective Affiliates to endeavor, to resolve in an amicable manner all disputes arising in connection with this Agreement. The Parties shall negotiate in good faith to resolve any Tax Dispute for not less than 45 days. Upon written notice of either Party after 45 days, the matter will be referred to a Tax Advisor acceptable to both Parties. The Tax Advisor may, in its discretion, obtain the services of any third-party necessary to assist it in resolving the dispute. The Tax Advisor shall furnish written notice to the Parties of its resolution of the dispute as soon as practicable, but in any event no later than 45 days after its acceptance of the matter for resolution. Any such resolution by the Tax Advisor will be binding on the Parties and the Parties shall take, or cause to be taken, any action necessary to implement the resolution. All fees and expenses of the Tax Advisor shall be shared equally by NOV, on the one hand, and SpinCo, on the other hand. If, having determined that the dispute must be referred to a Tax Advisor, after 45 days the Parties are unable to find a Tax Advisor willing to adjudicate the dispute in question and whom the Parties in good faith find acceptable, then the dispute will be submitted for arbitration to the American Arbitrators Association, provided, however, that only an arbitrator that qualifies as a Tax Advisor shall be selected.

 

20


ARTICLE VII

MISCELLANEOUS PROVISIONS

Section 7.01 Disposition of SpinCo Subsidiaries. In the event that SpinCo disposes of the stock of a subsidiary that is not a Party to this Agreement (i) without receiving compensation equal to the fair market value of such subsidiary, prior to the disposition, such subsidiary shall deliver to NOV an executed agreement, in a form reasonably acceptable to NOV, agreeing to be bound by this Agreement as if it had been an original Party hereto or (ii) in an exchange intended to result in the receipt of compensation equal to the fair market value of such subsidiary, prior to the disposition, such subsidiary shall deliver to NOV an executed agreement, in a form reasonably acceptable to NOV, agreeing to be bound by Sections 5.07, 5.08, 5.09 and Article VII of this Agreement as if it had been an original Party hereto.

Section 7.02 Complete Agreement; Representations.

(a) Except as explicitly stated herein, this Agreement, together with the exhibits and schedules hereto constitutes the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter.

(b) NOV represents on behalf of itself and each other member of the NOV Group and SpinCo represents on behalf of itself and each other member of the SpinCo Group as follows:

(i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated by this Agreement; and

(ii) this Agreement has been duly executed and delivered by such Person (if such Person is a Party) and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof (assuming the due execution and delivery thereof by the other Party), except as such enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other Laws relating to creditors’ rights generally and by general equitable principles.

Section 7.03 Costs and Expenses. Except as otherwise provided herein, all costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Agreement and the transactions contemplated hereby shall be borne as provided in the Separation and Distribution Agreement.

Section 7.04 Governing Law. This Agreement and any dispute arising out of, in connection with or relating to this Agreement shall be governed by and construed in accordance with the Laws of the State of Texas, without giving effect to the conflicts of laws principles thereof.

 

21


Section 7.05 Notices. All notices, requests, claims, demands and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally or by facsimile transmission or mailed (first class postage prepaid) to the Parties at the following addresses or facsimile numbers:

If to NOV or any member of the NOV Group, to:

National Oilwell Varco, Inc.

7909 Parkwood Circle Drive

Houston, Texas 77036

Attention: General Counsel

If to SpinCo or any member of the SpinCo Group, to:

NOW Inc.

7402 North Eldridge

Houston, Texas 77041

Attention: General Counsel

All such notices, requests and other communications will (i) if delivered personally to the address as provided in this section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided in this section, be deemed given upon receipt and (iii) if delivered by mail in the manner described above to the address as provided in this section, be deemed given upon receipt (in each case regardless of whether such notice, request or other communication is received by any other Person to whom a copy of such notice, request or other communication is to be delivered pursuant to this section). Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving written notice specifying such change to the other party.

Section 7.06 Amendment, Modification or Waiver.

(a) Prior to the Distribution, this Agreement may be amended, modified, waived, supplemented or superseded, in whole or in part, by NOV in its sole discretion by execution of a written amendment delivered to SpinCo. Subsequent to the Distribution, this Agreement may be amended, modified, supplemented or superseded only by an instrument signed by duly authorized signatories of both Parties.

(b) Following the Distribution, any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition. No waiver by any Party of any term or condition of this Agreement, in any one or more instances, shall be deemed or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by Law or otherwise afforded, will be cumulative and not alternative.

 

22


Section 7.07 No Assignment; Binding Effect. 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 any of the Parties without the prior written consent of the other Party; provided, however, that no such consent shall be required in the event of a merger, consolidation or sale of either NOV or SpinCo. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the Parties hereto and their respective successors and assigns.

Section 7.08 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

Section 7.09 Specific Performance. From and after the Distribution, in the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Parties agree that the Party or Parties to this Agreement who are or are to be thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief of its or their rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that, from and after the Distribution, the remedies at law for any breach or threatened breach of this Agreement, including monetary damages, are inadequate compensation for any loss, that any defense in any action for specific performance that a remedy at law would be adequate is hereby waived, and that any requirements for the securing or posting of any bond with such remedy are hereby waived.

Section 7.10 Interpretation; Conflict With Ancillary Agreements. The language of this Agreement shall be construed according to its fair meaning and shall not be strictly construed for or against any Party. Notwithstanding the foregoing, the purposes of Article IV are to ensure the Tax-Free Status and, accordingly, the Parties agree that the language thereof shall be interpreted in a manner that serves this purpose to the greatest extent possible. The Article and Section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the Parties and shall not in any way affect the meaning or interpretation of this Agreement. If, and to the extent, the provisions of this Agreement conflict with the Separation and Distribution Agreement, or any Ancillary Agreement, the provisions of this Agreement shall control.

Section 7.11 Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom.

Section 7.12 Survival. Except with respect to Sections 5.07, 5.08 and 5.09 which shall remain in effect without limitation as to time, the provisions in this Agreement shall be unconditional and absolute and shall remain in effect until the expiration of the statute of limitations for all taxable periods that end before or include the date on which the Distribution occurs and the resolution of all disputes under this Agreement that arose during such periods.

 

23


Section 7.13 No Double Recovery. No provision of this Agreement shall be construed to provide an indemnity or other recovery for any costs, damages, or other amounts for which the damaged party has been fully compensated under any other provision of this Agreement or under any other agreement or action at law or equity. Unless expressly required in this Agreement, a party shall not be required to exhaust all remedies available under other agreements or at law or equity before recovering under the remedies provided in this Agreement.

Section 7.14 Jurisdiction. If any dispute arises out of or in connection with this Agreement, except as expressly contemplated by another provision of this Agreement, the parties irrevocably (and the parties will cause each other member of their respective Group to irrevocably) (a) consent and submit to the exclusive jurisdiction of federal and state courts located in Houston, Texas, (b) waive any objection to that choice of forum based on venue or to the effect that the forum is not convenient, and (c) WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO TRIAL OR ADJUDICATION BY JURY.

 

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IN WITNESS WHEREOF, each Party has caused this Agreement to be executed by a duly authorized officer as of the date first above written.

 

NATIONAL OILWELL VARCO, INC.
a Delaware corporation
By:  

 

Name:  

 

Title:  

 

NOW INC.
a Delaware corporation
By:  

 

Name:  

 

Title:  

 

 

25

EX-10.3

Exhibit 10.3

EMPLOYEE MATTERS AGREEMENT

BY AND BETWEEN

NATIONAL OILWELL VARCO, INC.

AND

NOW INC.

DATED AS OF [], 2014


TABLE OF CONTENTS

 

         Page  

ARTICLE I.

 

DEFINITIONS

     1   

Section 1.1.

 

Definitions

     1   

Section 1.2.

 

Interpretation

     7   

ARTICLE II.

 

GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES

     7   

Section 2.1.

 

General Principles

     7   

Section 2.2.

 

Service Credit

     8   

Section 2.3.

 

Transition Services

     9   

Section 2.4.

 

No Duplication or Acceleration of Benefits

     9   

ARTICLE III.

 

ASSIGNMENT OF EMPLOYEES

     9   

Section 3.1.

 

Active Employees

     9   

Section 3.2.

 

Employee Records

     10   

Section 3.3.

 

Termination of Participation in NOV Benefit Plans

     11   

ARTICLE IV.

 

EQUITY AND INCENTIVE COMPENSATION PLANS

     11   

Section 4.1.

 

Stock Options

     11   

Section 4.2.

 

Restricted Stock Awards

     12   

Section 4.3.

 

Performance Share Awards

     13   

Section 4.4.

 

Liabilities for Settlement of Awards

     15   

Section 4.5.

 

Bonus and Incentive Payments

     15   

Section 4.6.

 

Form S-8

     16   

Section 4.7.

 

Tax Reporting and Withholding for Equity-Based Awards

     16   

Section 4.8.

 

Approval of SpinCo Equity Plan

     17   

ARTICLE V.

 

U.S. QUALIFIED RETIREMENT PLANS

     17   

Section 5.1.

 

Defined Benefit Plans

     17   

Section 5.2.

 

Defined Contribution Plans

     17   

ARTICLE VI.

 

U.S. NONQUALIFIED DEFERRED COMPENSATION PLAN

     19   

Section 6.1.

 

Assets and Liabilities

     19   

Section 6.2.

 

Participation; Distributions

     19   

Section 6.3.

 

Establishment of SpinCo Nonqualified Plan

     19   

Section 6.4.

 

Continuation of Elections

     19   

Section 6.5.

 

Transfer of Assets

     20   

ARTICLE VII.

 

U.S. HEALTH & WELFARE PLANS

     20   

Section 7.1.

 

Establishment of SpinCo Welfare Plans

     20   

Section 7.2.

 

Transitional Matters Under SpinCo Welfare Plans

     20   

Section 7.3.

 

Waiver of Conditions or Restrictions

     21   

Section 7.4.

 

Insurance Contracts

     22   

Section 7.5.

 

Third-Party Vendors

     22   

Section 7.6.

 

Workers’ Compensation

     22   

Section 7.7.

 

Reimbursement Account Plan

     22   

 

i


ARTICLE VIII.

 

BENEFIT ARRANGEMENTS AND OTHER MATTERS

     23   

Section 8.1.

 

Termination of Participation

     23   

Section 8.2.

 

Accrued Time Off

     23   

Section 8.3.

 

Leaves of Absence

     23   

ARTICLE IX.

 

NON-U.S. EMPLOYEES

     23   

Section 9.1.

 

General Principles

     23   

Section 9.2.

 

Treatment of Equity Awards Held By Non-U.S. Employees

     24   

ARTICLE X.

 

GENERAL PROVISIONS

     25   

Section 10.1.

 

Preservation of Rights to Amend

     25   

Section 10.2.

 

Entire Agreement

     25   

Section 10.3.

 

Binding Effect; No Third-Party Beneficiaries; No Amendment of Plans; Assignment

     25   

Section 10.4.

 

Amendment; Waivers

     25   

Section 10.5.

 

Remedies Cumulative

     26   

Section 10.6.

 

Notices

     26   

Section 10.7.

 

Counterparts

     26   

Section 10.8.

 

Severability

     26   

Section 10.9.

 

Governing Law

     26   

Section 10.10.

 

Dispute Resolution

     26   

Section 10.11.

 

Performance

     26   

Section 10.12.

 

Effect if Distribution Does Not Occur

     27   

Section 10.13.

 

Additional Indemnification Matters

     27   

 

ii


EMPLOYEE MATTERS AGREEMENT

THIS EMPLOYEE MATTERS AGREEMENT, made and entered into effective as of [], 2014 (this “Agreement”), is by and between National Oilwell Varco, Inc., a Delaware corporation (“NOV”), and NOW Inc., a Delaware corporation (“SpinCo”). NOV and SpinCo are also referred to in this Agreement individually as a “Party” and collectively as the “Parties.” Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in Article I.

RECITALS

WHEREAS, NOV has determined that it would be appropriate, desirable and in the best interests of NOV and the shareholders of NOV to separate the SpinCo Business from NOV;

WHEREAS, NOV and SpinCo have entered into the Separation and Distribution Agreement, dated [], 2014 (the “Separation Agreement”), in connection with the separation of the SpinCo Business from NOV and the Distribution of SpinCo Common Stock to shareholders of NOV;

WHEREAS, the Separation Agreement also provides for the execution and delivery of certain other agreements, including this Agreement, in order to facilitate and provide for the separation of SpinCo and its subsidiaries from NOV; and

WHEREAS, in order to ensure an orderly transition under the Separation Agreement, it will be necessary for the Parties to allocate between them certain Assets, Liabilities and responsibilities with respect to certain employee compensation and benefit plans and programs, and to address certain other employment matters.

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound hereby, hereby agree as follows:

ARTICLE I.

DEFINITIONS

Section 1.1. Definitions. As used in this Agreement, the following terms shall have the meanings set forth in this Section 1.1:

Adjusted NOV Option” has the meaning set forth in Section 4.1(a).

Adjusted NOV PSA” has the meaning set forth in Section 4.3(a).

Adjusted NOV RSA” has the meaning set forth in Section 4.2(a).

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


Agreement” means this Employee Matters Agreement, together with all Schedules hereto and all amendments, modifications, and changes hereto entered into pursuant to Section 10.4.

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

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

Benefit Plan” means any contract, agreement, policy, practice, program, plan, trust, commitment or arrangement providing for benefits, perquisites or compensation of any nature to any employee or other service provider, or to any family member, dependent, or beneficiary of any such employee or service provider, including pension plans, thrift plans, supplemental pension plans and welfare plans, and contracts, agreements, policies, practices, programs, plans, trusts, commitments and arrangements providing for terms of employment, fringe benefits, severance benefits, change in control protections or benefits, travel and accident, health, life, disability and accident insurance, tuition reimbursement, travel reimbursement, vacation, sick, personal or bereavement days, leaves of absences and holidays; provided, however, the term “Benefit Plan” does not include any workers compensation or similar insurance plans, programs or policies.

Canada Tax Act” means the Income Tax Act (Canada).

Canadian Holder” has the meaning set forth in Section 9.2.

COBRA” means the U.S. Consolidated Omnibus Budget Reconciliation Act of 1985, as codified at Section 601 et seq. of ERISA and at Section 4980B of the Code, and similar applicable state Law.

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

Delayed Transfer SpinCo Option” has the meaning set forth in Section 4.1(c).

Delayed Transfer SpinCo PSA” has the meaning set forth in Section 4.3(c).

Delayed Transfer SpinCo RSA” has the meaning set forth in Section 4.2(c).

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

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

Employee” means any NOV Group Employee, Former Employee or SpinCo Group Employee.

ERISA” means the U.S. Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

FICA” has the meaning set forth in Section 3.1(f).

 

2


Former Employee” means a former employee of the NOV Group whose employment with the NOV Group was terminated before the Distribution (and who is not actively employed by the NOV Group as of the Distribution), regardless of whether or not he or she provided services to the SpinCo Business while employed.

FUTA” has the meaning set forth in Section 3.1(f).

HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended, and the regulations promulgated thereunder.

IRS” means the Internal Revenue Service.

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

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

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

NOV 401(k) Plan” means the National Oilwell Varco, Inc. 401(k) and Retirement Savings Plan.

NOV 401(k) Plan Beneficiaries” has the meaning set forth in Section 5.2(b).

NOV Annual Bonus Plan” has the meaning set forth in Section 4.5(a).

NOV Benefit Plan” means any Benefit Plan sponsored or maintained by a NOV Entity immediately prior to the Distribution Date.

NOV Common Stock” means the common stock, par value $0.01 per share, of NOV.

NOV Delayed Stock Value” means the simple average of the volume weighted average per share price of NOV Common Stock trading on the NYSE during Regular Trading Hours on the four Trading Days immediately preceding the Transfer Date.

NOV Entity” means any member of the NOV Group.

NOV Equity Plan” means any equity compensation plan sponsored or maintained by NOV immediately prior to the Distribution Date, including the National Oilwell Varco, Inc. Long-Term Incentive Plan, the Grant Prideco, Inc. 2006 Long-Term Incentive Plan, the Grant-Prideco, Inc. 2001 Stock Option and Restricted Stock Plan, the Grant Prideco, Inc. 2000 Employee Stock Option and Restricted Stock Plan, the National Oilwell, Inc. Stock Award and Long-Term Incentive Plan and the Varco International, Inc. 2003 Equity Participation Plan.

NOV Group” has the meaning set forth in the Separation Agreement.

NOV Group Employee” means any individual who is employed by a NOV Entity immediately after the Distribution.

 

3


NOV Nonqualified Plan” means the National Oilwell Varco, Inc. Supplemental Savings Plan.

NOV Options” means exercisable and non-exercisable options to purchase shares of NOV Common Stock granted pursuant to any of the NOV Equity Plans.

NOV Pension Plans” has the meaning set forth in Section 5.1.

NOV Post-Distribution Stock Value” means the simple average of the volume weighted average per share price of NOV Common Stock trading on the NYSE during Regular Trading Hours on the first four Trading Days following the Distribution Date.

NOV Pre-Distribution Stock Value” means the simple average of the volume weighted average per share price of NOV Common Stock trading “regular way with due bills” on the NYSE during Regular Trading Hours on the Distribution Date and the three immediately preceding Trading Days.

NOV Price Ratio” means the quotient obtained by dividing the NOV Post-Distribution Stock Value by the NOV Pre-Distribution Stock Value.

NOV PSAs” means performance share awards issued under any of the NOV Equity Plans.

NOV Reimbursement Account Plan” has the meaning set forth in Section 7.7.

NOV RSAs” means restricted stock awards issued under any of the NOV Equity Plans.

NOV Share Ratio” means the quotient obtained by dividing the NOV Pre-Distribution Stock Value by the NOV Post-Distribution Stock Value.

NOV Welfare Plan” means any Welfare Plan sponsored or maintained by any one or more members of the NOV Group as of immediately prior to the Distribution Date.

NYSE” means the New York Stock Exchange.

Party” or “Parties” has the meaning set forth in the preamble to this Agreement.

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

Post Distribution Transferred Employee” means any NOV Group Employee who, as a result of the Distribution, leaves the employment of the NOV Group and becomes an employee of any SpinCo Entity within sixty (60) days after the Distribution Date.

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

Regular Trading Hours” means the period beginning at 9:30 A.M. New York City time and ending at 4:00 P.M. New York City time.

 

4


Securities Act” has the meaning set forth in the Separation Agreement.

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

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

SpinCo 401(k) Plan” has the meaning set forth in Section 5.2(a).

SpinCo 401(k) Plan Beneficiaries” has the meaning set forth in Section 5.2(b).

SpinCo Annual Bonus Plan” has the meaning set forth in Section 4.5(b).

SpinCo Benefit Plan” means any Benefit Plan sponsored or maintained by a SpinCo Entity immediately following the Distribution Date.

SpinCo Business” has the meaning set forth in the Separation Agreement.

SpinCo Common Stock” means the common stock, par value $0.01 per share, of SpinCo.

SpinCo Delayed Price Ratio” means the quotient obtained by dividing the SpinCo Delayed Stock Value by the NOV Delayed Stock Value.

SpinCo Delayed Share Ratio” means the quotient obtained by dividing the NOV Delayed Stock Value by the SpinCo Delayed Stock Value.

SpinCo Delayed Stock Value” means the simple average of the volume weighted average per share price of SpinCo Common Stock trading on the NYSE during Regular Trading Hours on the four Trading Days immediately preceding the Transfer Date.

SpinCo Entity” means any member of the SpinCo Group.

SpinCo Equity Plan” means the plan adopted by SpinCo prior to the Distribution Date and approved by NOV, as sole shareholder of SpinCo, under which the SpinCo equity-based awards in Article IV shall be issued.

SpinCo Group” has the meaning set forth in the Separation Agreement.

SpinCo Group Employees” has the meaning given such term in Section 3.1(a).

SpinCo Nonqualified Plan” has the meaning given such term in Section 6.3(c).

SpinCo Nonqualified Plan Beneficiaries” has the meaning given such term in Section 6.3(c).

SpinCo Option” has the meaning set forth in Section 4.1(b).

SpinCo Pension Participants” has the meaning set forth in Section 5.1.

 

5


SpinCo Price Ratio” means the quotient obtained by dividing the SpinCo Stock Value by the NOV Pre-Distribution Stock Value.

SpinCo PSA” has the meaning set forth in Section 4.3(b).

SpinCo Reimbursement Account Plan” has the meaning set forth in Section 7.7.

SpinCo Share Ratio” means the quotient obtained by dividing the NOV Pre-Distribution Stock Value by the SpinCo Stock Value.

SpinCo Stock Value” means the simple average of the volume weighted average per share price of SpinCo Common Stock trading on the NYSE during Regular Trading Hours on the first four Trading Days following the Distribution Date.

SpinCo RSA” has the meaning set forth in Section 4.2(b).

SpinCo Welfare Plan” means any Welfare Plan sponsored or maintained by any one or more members of the SpinCo Group immediately after the Distribution Date.

SpinCo Welfare Plan Participants” has the meaning set forth in Section 7.1.

Spinoff Agreements” means this Agreement, the Separation Agreement and any Ancillary Agreement.

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

Trading Day” means the period of time during any given calendar day, commencing with the determination of the opening price on the NYSE and ending with the determination of the closing price on the NYSE, in which trading and settlement in shares of NOV Common Stock is permitted on the NYSE.

Transfer Date” means, with respect to any Post Distribution Transferred Employee, the date such Post Distribution Transferred Employee becomes an employee of a SpinCo Entity.

Transition Date” has the meaning set forth in Section 7.1.

Transition Services Agreement” has the meaning set forth in the Separation Agreement.

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

Welfare Plan” means, where applicable, a “welfare plan” (as defined in Section 3(1) of ERISA) or a “cafeteria plan” under Section 125 of the Code, and any benefits offered thereunder, and any other plan offering health benefits (including medical, prescription drug, dental, vision, and mental health and substance abuse), disability benefits, or life, accidental death and disability, and business travel insurance, pre-tax premium conversion benefits, dependent care assistance programs, employee assistance programs, paid time off

 

6


programs, contribution funding toward a health savings account, flexible spending accounts, or cashable credits; provided, however, the term “Welfare Plan” does not include any workers compensation or similar insurance plans, programs or policies.

Section 1.2. Interpretation. The provisions of Section 10.16 of the Separation Agreement are hereby incorporated by incorporated by reference.

ARTICLE II.

GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES

Section 2.1. General Principles.

(a) Except as otherwise provided in the Spinoff Agreements, effective as of the Distribution Date, SpinCo, or one or more members of the SpinCo Group (as determined by SpinCo), shall assume or continue the sponsorship of, and shall pay, perform and discharge, and no NOV Entity shall have any Liability with respect to or under, the following agreements, obligations and Liabilities, and SpinCo shall indemnify each NOV Entity, and the officers, directors, and employees of each NOV Entity, and hold them harmless with respect to such agreements, obligations and Liabilities:

(i) any and all wages, salaries, incentive compensation (as the same may be modified by this Agreement), commissions, bonuses, and any other employee compensation or benefits payable to or on behalf of any SpinCo Group Employee prior to, on or after the Distribution Date, without regard to when such wages, salaries, incentive compensation, commissions, bonuses, or other employee compensation or benefits are or may have been earned;

(ii) any and all immigration-related, visa, work application or similar rights, obligations and Liabilities related to any SpinCo Group Employee; and

(iii) except as expressly provided in the Separation Agreement, any and all Liabilities and obligations whatsoever with respect to claims made by or on behalf of any SpinCo Group Employee in connection with any employee benefit plan, program or policy not retained or assumed by any NOV Entity pursuant to the Spinoff Agreements, including any such Liabilities relating to actions or omissions of or by any SpinCo Entity or any officer, director, employee or agent thereof prior to, on or after the Distribution Date.

(b) Except as otherwise provided in this Agreement, effective as of the Distribution Date, no SpinCo Entity shall have any Liability with respect to or under, the following agreements, obligations and Liabilities, and NOV shall indemnify each SpinCo Entity, and the officers, directors, and employees of each SpinCo Entity, and hold them harmless with respect to such agreements, obligations and Liabilities:

(i) any and all wages, salaries, incentive compensation, commissions, bonuses, and any other employee compensation or benefits payable to or on behalf of any NOV Group Employee or Former Employee prior to, on or after the Distribution Date, without regard to when such wages, salaries, incentive compensation, commissions, bonuses, or other employee compensation or benefits are or may have been earned;

 

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(ii) any and all immigration-related, visa, work application or similar rights, obligations and Liabilities related to any NOV Group Employee or Former Employee; and

(iii) any and all Liabilities and obligations whatsoever with respect to, claims made by or on behalf of any NOV Group Employee or Former Employee in connection with any employee benefit plan, program or policy not retained or assumed by any SpinCo Entity pursuant to the Spinoff Agreements, including such Liabilities relating to actions or omissions of or by any NOV Entity or any officer, director, employee or agent thereof on, prior to or after the Distribution Date.

(c) Notwithstanding the foregoing provisions of this Section 2.1(a):

(i) if a SpinCo Group Employee becomes an employee of the NOV Group after the Distribution Date, the indemnification obligations of SpinCo in Section 2.1(a), as they relate to such Employee, shall only apply to Liabilities arising prior to such individual becoming an employee of the NOV Group after the Distribution Date; and

(ii) if a NOV Group Employee or Former Employee becomes an employee of the SpinCo Group after the Distribution Date, the indemnification obligations of NOV in Section 2.1(b), as they relate to such Employee, shall only apply to Liabilities arising prior to such individual becoming an employee of the SpinCo Group after the Distribution Date.

Section 2.2. Service Credit.

(a) Service for Eligibility and Vesting Purposes. Except as otherwise provided in any other provision of this Agreement and subject to applicable Law, from and after the Distribution Date, SpinCo shall, and shall cause each other SpinCo Entity to, take commercially reasonable steps to give each SpinCo Group Employee’s and Post Distribution Transferred Employee’s full service credit for purposes of eligibility and vesting under any SpinCo Benefit Plan for pre-Distribution Date service with any NOV Entity, to the same extent such service was properly recognized by the applicable NOV Benefit Plans immediately prior to the Distribution Date.

(b) Evidence of Prior Service. Notwithstanding anything to the contrary, but subject to applicable Law, upon reasonable request by either Party (the “Requesting Party”), the other Party (the “Providing Party”) will timely provide to the Requesting Party copies of any records available to the Providing Party to document the service, plan participation and membership of former Employees of the Providing Party who are then Employees of the Requesting Party, and will cooperate with the Requesting Party to resolve any discrepancies or obtain any missing data for purposes of determining benefit eligibility, participation, vesting and calculation of benefits with respect to any such Employee.

 

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Section 2.3. Transition Services. The NOV Group or the SpinCo Group may provide administrative services for certain of the other Party’s benefit programs, payroll and other related matters for a transitional period under the terms of the Transition Services Agreement. The Parties agree to enter into a business associate agreement (if required by HIPAA or other applicable health information privacy Laws) in connection with such Transition Services Agreement.

Section 2.4. No Duplication or Acceleration of Benefits. Notwithstanding anything to the contrary in the Spinoff Agreements, no participant in or beneficiary of the SpinCo 401(k) Plan, SpinCo Welfare Plans or other SpinCo Benefit Plans shall receive benefits under such SpinCo Benefits Plans to the extent that receipt of such benefits would result in duplication of benefits provided by the corresponding Benefit Plan or arrangement of any NOV Entity. Furthermore, unless expressly provided for in the Spinoff Agreements or required by applicable Law, no provision in this Agreement shall be construed to create any right to accelerate vesting or entitlements under any compensation arrangement or Benefit Plan on the part of or with respect to any NOV Group Employee, Former Employee, SpinCo Group Employee, or Post Distribution Transferred Employee.

ARTICLE III.

ASSIGNMENT OF EMPLOYEES

Section 3.1. Active Employees.

(a) SpinCo Group Employees. Except as otherwise set forth in this Agreement, effective not later than immediately prior to the Distribution Date, NOV or its applicable Subsidiary shall have taken such actions as are necessary to ensure that each individual who is intended to be an employee of the SpinCo Group following the Distribution is employed by a SpinCo Entity immediately prior to the Distribution. Individuals referred to in the immediately preceding sentence who commence active employment with a SpinCo Entity shall be referred to as the “SpinCo Group Employees.” Each of the Parties shall execute, and shall seek to have the applicable employees execute, such documentation, if any, as may be necessary to reflect such assignments and transfers.

(b) NOV Group Employees. Except as otherwise set forth in this Agreement, effective not later than immediately prior to the Distribution Date, NOV or its applicable Subsidiary shall have taken such actions as are necessary to ensure that each individual who is intended to be an employee of the NOV Group following the Distribution (collectively, the “NOV Group Employees”) is employed by a NOV Entity immediately prior to the Distribution. Each of the Parties shall execute, and shall seek to have the applicable employees execute, such documentation, if any, as may be necessary to reflect such assignments and transfers.

(c) At-Will Status. Notwithstanding the above or any other provision of this Agreement (except as provided under Article IX), nothing in this Agreement shall create any obligation on the part of any NOV Entity or any SpinCo Entity to (i) continue the employment of any Employee or permit the return from a leave of absence for any period following the date of this Agreement or the Distribution Date (except as required by applicable Law) or (ii) change the employment status of any Employee from “at will,” to the extent such Employee is an “at will” employee under applicable Law.

 

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(d) Severance. The Distribution and the assignment, transfer or continuation of the employment of Employees as contemplated by this Section 3.1 shall not entitle any Employee to any termination pay, separation pay, salary continuation, severance payments or similar benefits from any member of the NOV Group or the SpinCo Group.

(e) Not a Change of Control/Change in Control. Neither the consummation of the Distribution nor any transaction in connection with the Distribution shall be deemed a “change of control,” “change in control,” or term of similar import for purposes of any Benefit Plan of any NOV Entity or of any SpinCo Entity.

(f) Payroll and Related Taxes. With respect to the tax year containing the Distribution Date, SpinCo will (i) be responsible for all payroll obligations, tax withholding, and reporting obligations regarding SpinCo Group Employees and (ii) furnish a Form W-2 or similar earnings statement to all SpinCo Group Employees. With respect to the portion of the tax year ending on and including the day prior to the Transfer Date, SpinCo will (i) be responsible for all payroll obligations, tax withholding and reporting obligations and (ii) furnish a Form W-2 or similar earnings statement, to all Post Distribution Transferred Employees, if any, who were employed by any member of the NOV Group during such period. With respect to each affected Post Distribution Transferred Employee, NOV and SpinCo shall, and shall cause their respective Affiliates to (to the extent permitted by applicable Law and practicable) (i) treat SpinCo (or the applicable SpinCo Entity) as a “successor employer” and NOV (or the applicable NOV Entity) as a “predecessor,” within the meaning of Sections 3121(a)(1) and 3306(b)(1) of the Code, to the extent appropriate, for purposes of taxes imposed under the United States Federal Insurance Contributions Act, as amended (“FICA”), or the United States Federal Unemployment Tax Act, as amended (“FUTA”), (ii) cooperate with each other to avoid, to the extent possible, the restart of FICA and FUTA upon or following the Transfer Date with respect to each Post Distribution Transferred Employee for the tax year during which the Transfer Date occurs, and (iii) file tax returns, exchange wage payment information, and report wage payments made by the respective predecessor and successor employer on separate IRS Forms W-2 or similar earnings statements to each such Post Distribution Transferred Employee for the tax year in which the Transfer Date occurs, in a manner provided in Section 5 of Revenue Procedure 2004-53.

Section 3.2. Employee Records. NOV shall provide to SpinCo copies of any and all employment records and information (including, but not limited to, any employee files, Form I-9, Form W-2 or other IRS forms) with respect to the SpinCo Group Employees or Post Distribution Transferred Employees and other records reasonably required by SpinCo to enable SpinCo to properly carry out its obligations under this Agreement and under applicable Law. Such provision of records and information shall occur as soon as administratively practicable on or after the Distribution Date or Transfer Date, as applicable, and in all events no later than as required by applicable Law. With respect to any non-electronic copies of employee records and information, NOV shall maintain such employee records and information, including compensation data, consistent with existing document retention polices and they will be made available to SpinCo upon request. Subject to applicable Law, each Party shall permit the other Party reasonable access to employee records and information, to the extent reasonably necessary

 

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for such accessing Party to carry out its obligations hereunder. SpinCo shall bear or reimburse NOV for all reasonable out-of-pocket expenses that are properly substantiated in writing and that are associated with accessing any files stored at third party facilities, and NOV shall have no liability for any loss or damage to files caused (in connection with such access by SpinCo) by third parties or events outside of NOV’s reasonable control.

Section 3.3. Termination of Participation in NOV Benefit Plans. Except as otherwise specified in the Spinoff Agreements, each SpinCo Entity shall terminate its participation in any and all NOV Benefit Plans as of the Distribution Date or at such earlier time as NOV, in its discretion, may direct.

ARTICLE IV.

EQUITY AND INCENTIVE COMPENSATION PLANS

Section 4.1. Stock Options.

(a) NOV Group Employees and Former Employees. Each NOV Option that is outstanding as of the Distribution Date and held by a NOV Group Employee or a Former Employee shall remain an option to purchase NOV Common Stock issued under the applicable NOV Equity Plan (each such option, an “Adjusted NOV Option”). Each Adjusted NOV Option shall be subject to the same terms and conditions after the Distribution Date as the terms and conditions applicable to the corresponding NOV Option immediately prior to the Distribution Date; provided, however, that from and after the Distribution Date:

(i) the per-share exercise price of each such Adjusted NOV Option shall be equal to the product of (A) the per-share exercise price of the corresponding NOV Option immediately prior to the Distribution Date multiplied by (B) the NOV Price Ratio, rounded up to the nearest whole hundredth of a cent; and

(ii) the number of shares of NOV Common Stock subject to each such Adjusted NOV Option shall be equal to the product of (A) the number of shares of NOV Common Stock subject to the corresponding NOV Option immediately prior to the Distribution Date multiplied by (B) the NOV Share Ratio, with any fractional share rounded down to the nearest whole share.

(b) SpinCo Group Employees. Each NOV Option that is outstanding as of the Distribution Date and held by a SpinCo Group Employee shall be converted as of the Distribution Date into an option to purchase SpinCo Common Stock (each such option, a “SpinCo Option”) pursuant to the terms of the SpinCo Equity Plan. Each SpinCo Option shall be subject to terms and conditions after the Distribution Date that are substantially identical to the terms and conditions applicable to the corresponding NOV Option immediately prior to the Distribution Date; provided, however, that from and after the Distribution Date:

(i) the per-share exercise price of each such SpinCo Option shall be equal to the product of (A) the per-share exercise price of the corresponding NOV Option immediately prior to the Distribution Date multiplied by (ii) the SpinCo Price Ratio, rounded up to the nearest whole hundredth of a cent; and

 

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(ii) the number of shares of SpinCo Common Stock subject to each such SpinCo Option shall be equal to the product of (A) the number of shares of NOV Common Stock subject to the corresponding NOV Option immediately prior to the Distribution Date multiplied by (B) the SpinCo Share Ratio, with any fractional share rounded down to the nearest whole share.

(c) Post-Distribution Transferred Employees. Each outstanding NOV Option held by a Post-Distribution Transferred Employee and that is outstanding as of the Transfer Date shall be converted as of the Transfer Date into an option to purchase SpinCo Common Stock (each such option, a “Delayed Transfer SpinCo Option”) pursuant to the terms of the SpinCo Equity Plan. Each Delayed Transfer SpinCo Option shall be subject to terms and conditions after the Transfer Date that are substantially identical to the terms and conditions applicable to the corresponding NOV Option immediately prior to the Transfer Date; provided, however, that from and after the Transfer Date:

(i) the per-share exercise price of each such Delayed Transfer SpinCo Option shall be equal to the product of (A) the per-share exercise price of the corresponding NOV Option immediately prior to the Transfer Date multiplied by (ii) the SpinCo Delayed Price Ratio, rounded up to the nearest whole hundredth of a cent; and

(ii) the number of shares of SpinCo Common Stock subject to each such Delayed Transfer SpinCo Option shall be equal to the product of (A) the number of shares of NOV Common Stock subject to the corresponding NOV Option immediately prior to the Transfer Date multiplied by (B) the SpinCo Delayed Share Ratio, with any fractional share rounded down to the nearest whole share.

(d) Sections 409A and 424. The adjustment or conversion of an NOV Option shall be effectuated in a manner that is intended to avoid the imposition of any penalty or other taxes on the holders thereof pursuant to Section 409A of the Code and to comply with the applicable provisions of Treasury Regulation Section 1.424-1.

Section 4.2. Restricted Stock Awards.

(a) NOV Group Employees and Former Employees. Each NOV RSA that is outstanding as of the Distribution Date and held by a NOV Group Employee or a Former Employee shall be adjusted by multiplying the number of shares of NOV Common Stock subject to such NOV RSA by the NOV Share Ratio (each such adjusted NOV RSA, an “Adjusted NOV RSA”). If the resulting product includes a fractional share, the number of shares of NOV Common Stock subject to such Adjusted NOV RSA shall be rounded down to the nearest whole share. Each Adjusted NOV RSA shall be subject to the same terms and conditions after the Distribution Date as the terms and conditions applicable to the corresponding NOV RSA immediately prior to the Distribution Date.

(b) SpinCo Group Employees. Each NOV RSA that is outstanding as of the Distribution Date and held by a SpinCo Group Employee shall be converted as of the Distribution Date into a SpinCo restricted stock award (each such award, a “SpinCo RSA”) pursuant to the terms of the SpinCo Equity Plan. Each SpinCo RSA shall be subject to terms and

 

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conditions after the Distribution Date that are substantially similar to the terms and conditions applicable to the corresponding NOV RSA immediately prior to the Distribution Date; provided, however, that from and after the Distribution Date:

(i) the number of shares of SpinCo Common Stock subject to each such SpinCo RSA shall be set at a number equal to the product of (A) the number of shares of NOV Common Stock subject to the corresponding NOV RSA immediately prior to the Distribution Date multiplied by (B) the SpinCo Share Ratio, with any fractional share rounded down to the nearest whole share; and

(ii) each such SpinCo RSA shall not be subject to any performance-based vesting conditions but shall vest only upon completion of the originally established performance period of the corresponding NOV RSA, assuming the continued employment of the holder of such SpinCo RSA by SpinCo or a member of the SpinCo Group through such period.

(c) Post-Distribution Transferred Employees. Each outstanding NOV RSA held by a Post-Distribution Transferred Employee and that is outstanding as of the Transfer Date shall be converted as of the Transfer Date into a SpinCo restricted stock award (each such award, a “Delayed Transfer SpinCo RSA”) pursuant to the terms of the SpinCo Equity Plan. Each Delayed Transfer SpinCo RSA shall be subject to terms and conditions after the Transfer Date that are substantially similar to the terms and conditions applicable to the corresponding NOV RSA immediately prior to the Transfer Date; provided, however, that from and after the Transfer Date:

(i) the number of shares of SpinCo Common Stock subject to each such Delayed Transfer SpinCo RSA shall be set at a number equal to the product of (A) the number of shares of NOV Common Stock subject to the corresponding NOV RSA immediately prior to the Transfer Date multiplied by (B) the SpinCo Delayed Share Ratio, with any fractional share rounded down to the nearest whole share; and

(ii) each such Delayed Transfer SpinCo RSA shall not be subject to any performance-based vesting conditions but shall vest only upon completion of the originally established performance period of the corresponding NOV RSA, assuming the continued employment of the holder of such Delayed Transfer SpinCo RSA by SpinCo or a member of the SpinCo Group through such period.

Section 4.3. Performance Share Awards.

(a) NOV Group Employees and Former Employees. The target level of each NOV PSA that is outstanding as of the Distribution Date and held by a NOV Group Employee or a Former Employee shall be adjusted by multiplying the target level number of shares of NOV Common Stock subject to such NOV PSA by the NOV Share Ratio (each such adjusted NOV PSA, an “Adjusted NOV PSA”). If the resulting product includes a fractional share, the number of shares of NOV Common Stock subject to such Adjusted NOV PSA shall be rounded down to the nearest whole share. Each Adjusted NOV PSA shall be subject to the same terms and conditions after the Distribution Date as the terms and conditions applicable to the corresponding NOV PSA immediately prior to the Distribution Date.

 

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(b) SpinCo Group Employees. Each NOV PSA that is outstanding as of the Distribution Date and held by a SpinCo Group Employee shall be converted as of the Distribution Date into a SpinCo performance share award (each such award, a “SpinCo PSA”) pursuant to the terms of the SpinCo Equity Plan. Each SpinCo PSA shall be subject to terms and conditions after the Distribution Date that are substantially similar to the terms and conditions applicable to the corresponding NOV PSA immediately prior to the Distribution Date; provided, however, that from and after the Distribution Date:

(i) the number of shares of SpinCo Common Stock subject to each such SpinCo PSA shall be set at a number equal to the product of (A) the target level number of shares of NOV Common Stock subject to the corresponding NOV PSA immediately prior to the Distribution Date multiplied by (B) the SpinCo Share Ratio, with any fractional share rounded down to the nearest whole share; and

(ii) each such SpinCo PSA shall not be subject to any performance-based vesting conditions but shall vest only upon completion of the originally established performance period of the corresponding NOV PSA, assuming the continued employment of the holder of such SpinCo PSA by SpinCo or a member of the SpinCo Group through such period.

(c) Post-Distribution Transferred Employees. Each outstanding NOV PSA held by a Post-Distribution Transferred Employee and that is outstanding as of the Transfer Date shall be converted as of the Transfer Date into a SpinCo performance share award (each such award, a “Delayed Transfer SpinCo PSA”) pursuant to the terms of the SpinCo Equity Plan. Each Delayed Transfer SpinCo PSA shall be subject to terms and conditions after the Transfer Date that are substantially similar to the terms and conditions applicable to the corresponding NOV PSA immediately prior to the Transfer Date; provided, however, that from and after the Transfer Date:

(i) the number of shares of SpinCo Common Stock subject to each such Delayed Transfer SpinCo PSA shall be set at a number equal to the product of (A) the target level number of shares of NOV Common Stock subject to the corresponding NOV PSA immediately prior to the Transfer Date multiplied by (B) the SpinCo Delayed Share Ratio, with any fractional share rounded down to the nearest whole share; and

(ii) each such Delayed Transfer SpinCo PSA shall not be subject to any performance-based vesting conditions but shall vest only upon completion of the originally established performance period of the corresponding NOV PSA, assuming the continued employment of the holder of such Delayed Transfer SpinCo PSA by SpinCo or a member of the SpinCo Group through such period.

 

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Section 4.4. Liabilities for Settlement of Awards.

(a) Settlement of Adjusted NOV Options. NOV shall be responsible for all Liabilities associated with the Adjusted NOV Options including any option exercise, share delivery, registration or other obligations related to the exercise of the Adjusted NOV Options.

(b) Settlement of SpinCo Options. SpinCo shall be responsible for all Liabilities associated with the SpinCo Options including any option exercise, share delivery, registration or other obligations related to the exercise of the SpinCo Options.

(c) Settlement of Delayed Transfer SpinCo Options. SpinCo shall be responsible for all Liabilities associated with the Delayed Transfer SpinCo Options including any option exercise, share delivery, registration or other obligations related to the exercise of the Delayed Transfer SpinCo Options.

(d) Settlement of Adjusted NOV RSAs. NOV shall be responsible for all Liabilities associated with the Adjusted NOV RSAs including any share delivery, registration or other obligations related to the settlement of the Adjusted NOV RSAs.

(e) Settlement of SpinCo RSAs. SpinCo shall be responsible for all Liabilities associated with the SpinCo RSAs including any share delivery, registration or other obligations related to the settlement of the SpinCo RSAs.

(f) Settlement of Delayed Transfer SpinCo RSAs. SpinCo shall be responsible for all Liabilities associated with the Delayed Transfer SpinCo RSAs including any share delivery, registration or other obligations related to the settlement of the Delayed Transfer SpinCo RSAs.

(g) Settlement of Adjusted NOV PSAs. NOV shall be responsible for all Liabilities associated with the Adjusted NOV PSAs, including any share delivery, registration or other obligations related to the settlement of the Adjusted NOV PSAs.

(h) Settlement of SpinCo PSAs. SpinCo shall be responsible for all Liabilities associated with the SpinCo PSAs, including any share delivery, registration or other obligations related to the settlement of the SpinCo PSAs.

(i) Settlement of Delayed Transfer SpinCo PSAs. SpinCo shall be responsible for all Liabilities associated with the Delayed Transfer SpinCo PSAs, including any share delivery, registration or other obligations related to the settlement of the Delayed Transfer SpinCo PSAs.

Section 4.5. Bonus and Incentive Payments.

(a) Not later than the Distribution Date, SpinCo shall, or shall cause another SpinCo Entity to, take commercially reasonable steps to adopt a plan that will provide annual bonus or short-term cash incentive opportunities for SpinCo Group Employees and Post-Distribution Transferred Employees that are substantially similar to the opportunities provided to such Employees immediately prior to the Distribution Date (the “SpinCo Annual Bonus Plan”),

 

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subject to SpinCo’s right to amend or terminate such plan after the Distribution Date in accordance with the terms thereof. The SpinCo Annual Bonus Plan shall be approved prior to the Distribution Date by NOV, as the sole shareholder of SpinCo, and SpinCo Group Employees shall participate in such SpinCo Annual Bonus Plan immediately following the Distribution Date; provided, however, for the 2014 performance period, in determining whether the performance goals under the SpinCo Annual Bonus Plan have been achieved, SpinCo shall take into account the financial and operational performance of the SpinCo Business prior to the Distribution Date, and service with NOV shall be credited for the purposes of determining whether such SpinCo Group Employee had been a participant in the SpinCo Annual Bonus Plan during such performance period.

(b) For the avoidance of doubt, (i) the NOV Group shall be solely responsible for funding, paying, and discharging all obligations relating to any annual cash incentive awards that any NOV Group Employee is eligible to receive under any NOV annual bonus plans with respect to payments made beginning at or after the Distribution Date, including the NOV Annual Bonus Plan, and no SpinCo Entity shall have any obligations with respect thereto, and (ii) the SpinCo Group shall be solely responsible for funding, paying, and discharging all obligations relating to any annual cash incentive awards that any SpinCo Group Employee or Post Distribution Transferred Employee is eligible to receive under any SpinCo Group annual bonus and other short-term incentive compensation plans with respect to payments made beginning at or after the Distribution Date, including the SpinCo Annual Bonus Plan, and no NOV Entity shall have any obligations with respect thereto.

Section 4.6. Form S-8. Upon or as soon as reasonably practicable after the Distribution Date and subject to applicable Law, SpinCo shall take commercially reasonable steps to prepare and file with the SEC a registration statement on Form S-8 (or another appropriate form) registering under the Securities Act the offering of a number of shares of SpinCo Common Stock at a minimum equal to the number of shares subject to the SpinCo Options, the SpinCo RSAs and the SpinCo PSAs. SpinCo shall use commercially reasonable efforts to cause any such registration statement to be kept effective (and the current status of the prospectus or prospectuses required thereby to be maintained) as long as any such equity awards remain outstanding.

Section 4.7. Tax Reporting and Withholding for Equity-Based Awards. NOV (or one of its Subsidiaries) will be responsible for all income, payroll, or other tax reporting related to income of NOV Group Employees or Former Employees from equity-based awards, and SpinCo (or one of its Subsidiaries) will be responsible for all income, payroll, or other tax reporting related to income of SpinCo Group Employees from equity-based awards. Similarly, NOV will be responsible for all income, payroll, or other tax reporting related to income of its non-employee directors from equity-based awards, and SpinCo will be responsible for all income, payroll, or other tax reporting related to income of its non-employee directors from equity-based awards. Further, NOV (or one of its Subsidiaries) shall be responsible for remitting applicable tax withholdings for NOV Group Employees to each applicable taxing authority, and SpinCo (or one of its Subsidiaries) shall be responsible for remitting applicable tax withholdings for SpinCo Group Employees to each applicable taxing authority; provided, however, that either NOV or SpinCo shall act as agent for the other company by remitting amounts withheld in the form of shares or in conjunction with an exercise transaction to an appropriate taxing authority. The

 

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Parties will cooperate with each other and with third-party providers to effectuate withholding and remittance of taxes, as well as required tax reporting, in a timely, efficient, and appropriate manner.

Section 4.8. Approval of SpinCo Equity Plan. Not later than the Distribution Date, SpinCo shall, or shall have caused a SpinCo Entity to, take commercially reasonable steps to adopt the SpinCo Equity Plan. The SpinCo Equity Plan shall be approved prior to the Distribution Date by NOV, as the sole shareholder of SpinCo.

ARTICLE V.

U.S. QUALIFIED RETIREMENT PLANS

Section 5.1. Defined Benefit Plans. The NOV Group shall retain all Assets and all Liabilities arising out of or relating to all Benefit Plans subject to Title IV of ERISA that are sponsored, maintained, contributed to by or required to be contributed to by any NOV Entity or with respect to which any NOV Entity has or could have any liability (“NOV Pension Plans”). Immediately prior to the Distribution Date or Transfer Date, each SpinCo Group Employee or Post Distribution Transferred Employee, respectively, who is a participant in any NOV Pension Plan (the “SpinCo Pension Participants”) shall cease to actively participate in all such NOV Pension Plans. As of the Distribution Date or Transfer Date, as applicable, each such SpinCo Pension Participant shall be treated in accordance with the terms of the applicable NOV Pension Plan(s) as a terminated vested participant under such NOV Pension Plan(s). No SpinCo Entity shall have any obligation to adopt, sponsor, maintain, participate in, contribute to or otherwise become liable with respect to any Benefit Plan subject to Title IV of ERISA as a result of the Distribution or otherwise.

Section 5.2. Defined Contribution Plans.

(a) Establishment of the SpinCo 401(k) Plan. No later than the Distribution Date, SpinCo shall, or shall cause another SpinCo Entity to, take commercially reasonable steps to establish a defined contribution plan and trust for the benefit of SpinCo Group Employees (the “SpinCo 401(k) Plan”). SpinCo shall be responsible for taking all commercially reasonable steps to establish, maintain, and administer the SpinCo 401(k) Plan with the intention that it be qualified under Section 401(a) of the Code and that the related trust thereunder be exempt under Section 501(a) of the Code. SpinCo (acting directly or through its Affiliates) shall be responsible for any and all Liabilities and other obligations with respect to the SpinCo 401(k) Plan.

(b) Transfer of NOV 401(k) Plan Assets. Not later than 90 days following the Distribution Date (or such later time as mutually agreed by the Parties), NOV shall cause the vested accounts (including any outstanding loan balances) in the NOV 401(k) Plan attributable to SpinCo Group Employees who will participate in the SpinCo 401(k) Plan (the “SpinCo 401(k) Plan Beneficiaries”) and all of the assets in the NOV 401(k) Plan trust related thereto (the “NOV 401(k) Plan SpinCo Assets”) to be transferred in kind or (at the election of the trustee of the NOV 401(k) Plan) in cash to the SpinCo 401(k) Plan, and SpinCo shall cause the SpinCo 401(k) Plan to accept such transfer of accounts and underlying NOV 401(k) Plan SpinCo Assets (including any participant promissory notes) and, effective as of the date of such transfer, to assume and to fully perform, pay, and discharge, all obligations of the NOV 401(k) Plan relating

 

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to the accounts of the SpinCo 401(k) Plan Beneficiaries (to the extent the NOV 401(k) Plan SpinCo Assets related to those accounts are actually transferred from the NOV 401(k) Plan to the SpinCo 401(k) Plan). Notwithstanding any provision to the contrary, the transfer of NOV 401(k) Plan SpinCo Assets shall be conducted in accordance with Section 414(l) of the Code, Treasury Regulation Section 1.414(1)-1, and Section 208 of ERISA. NOV shall be responsible for taking all necessary, reasonable and appropriate action so that, as of the date of transfer of the NOV 401(k) Plan SpinCo Assets and as of any other date relevant for purposes of this Agreement, the NOV 401(k) Plan is qualified under Section 401(a) of the Code and the related trust thereunder is exempt under Section 501(a) of the Code.

(c) Continuation of Elections. Subject to Section 5.2(d), as of the Distribution Date, SpinCo (acting directly or through its Affiliates) shall take commercially reasonable steps to cause the SpinCo 401(k) Plan to recognize and maintain all NOV 401(k) Plan elections, including but not limited to, deferral, investment and payment form elections, beneficiary designations, and the rights of alternate payees under qualified domestic relations orders with respect to SpinCo 401(k) Plan Beneficiaries, to the extent such election or designation is available under the SpinCo 401(k) Plan and may be continued under applicable Law. Prior to the Distribution Date, NOV shall provide written notice to all individuals anticipated to be SpinCo 401(k) Plan Beneficiaries of the intended continuation of such elections. Any deferrals under the SpinCo 401(k) Plan with respect to SpinCo 401(k) Plan Beneficiaries will begin on the first payroll period following the Distribution Date or Transfer Date, as applicable.

(d) Treatment of SpinCo Common Stock and NOV Common Stock.

(i) SpinCo Common Stock Held in NOV 401(k) Plan Accounts. Shares of SpinCo Common Stock distributed in connection with the Distribution in respect of shares of NOV Common Stock held in NOV 401(k) Plan accounts of NOV Group Employees or Former Employees who participate in the NOV 401(k) Plan (the “NOV 401(k) Plan Beneficiaries”) shall be deposited in a SpinCo Common Stock fund under the NOV 401(k) Plan, and NOV 401(k) Plan Beneficiaries will be prohibited from increasing their holdings in such SpinCo Common Stock fund under the NOV 401(k) Plan, unless the fund is transferred to a self-directed brokerage account, and may elect to liquidate their holdings in such SpinCo Common Stock fund and invest those monies in any other investment fund offered under the NOV 401(k) Plan. Any shares of SpinCo Common Stock held in NOV 401(k) Plan accounts of SpinCo Group Employees shall be transferred in kind to the trust underlying the SpinCo 401(k) Plan pursuant to Section 5.2(b).

(ii) SpinCo Common Stock Fund. The SpinCo 401(k) Plan will provide, effective as of the Distribution Date: (1) for the establishment of a SpinCo Common Stock fund and (2) that such SpinCo Common Stock fund shall receive a transfer of and hold all shares of SpinCo Common Stock distributed in connection with the Distribution in respect of NOV Common Stock held in NOV 401(k) Plan accounts of SpinCo 401(k) Plan Beneficiaries.

(iii) NOV Common Stock in SpinCo 401(k) Plan Accounts. Without limiting the generality of the provisions of Section 5.2(b), shares of NOV Common Stock

 

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held in NOV 401(k) Plan accounts of SpinCo 401(k) Plan Beneficiaries prior to the Distribution Date shall be transferred in kind to a NOV Common Stock Fund under the SpinCo 401(k) Plan pursuant to Section 5.2(b). SpinCo 401(k) Plan Beneficiaries will be prohibited from increasing their holdings in NOV Common Stock under such NOV Common Stock Fund and may elect to liquidate their holdings in such NOV Common Stock Fund and invest those monies in any other investment fund offered under the SpinCo 401(k) Plan.

(e) Tax Qualified Status. SpinCo will take commercially reasonable steps to establish and maintain the SpinCo 401(k) Plan with the intention that it be qualified under Section 401(a) of the Code and that the related trust be tax-exempt under Section 501(a) of the Code.

ARTICLE VI.

U.S. NONQUALIFIED DEFERRED COMPENSATION PLAN

Section 6.1. Assets and Liabilities. Except as provided in Section 6.5, the NOV Group shall retain all Assets and all Liabilities arising out of or relating to the NOV Nonqualified Plan, and shall timely make payments to all SpinCo Group Employees or Post Distribution Transferred Employees who are participants in the NOV Nonqualified Plan (the “Nonqualified Plan Participants”) in accordance with the terms of the NOV Nonqualified Plan, as amended.

Section 6.2. Participation; Distributions. The Nonqualified Plan Participants shall cease contributing to and accruing benefits under the NOV Nonqualified Plan as of the Distribution Date or Transfer Date, as applicable. Subject to the terms of the applicable NOV Nonqualified Plan, none of the transactions contemplated by the Separation Agreement or any Ancillary Agreement will trigger a payment or distribution of compensation under the NOV Nonqualified Plan for any Nonqualified Plan Participant. The payment or distribution of any compensation to which any Nonqualified Plan Participant is entitled under the NOV Nonqualified Plan will occur upon such Nonqualified Plan Participant’s separation from service from the SpinCo Group, if so provided pursuant to the terms of such plan and any applicable deferral election, or at such other time as provided in the NOV Nonqualified Plan or such Nonqualified Plan Participant’s deferral election.

Section 6.3. Establishment of SpinCo Nonqualified Plan. On or prior to the Distribution Date, SpinCo shall, or shall cause another SpinCo Entity to, establish and adopt a nonqualified deferred compensation plan (the “SpinCo Nonqualified Plan”), which will provide nonqualified deferred compensation benefits substantially similar to those provided pursuant to the NOV Nonqualified Plan to each SpinCo Group Employee or Post Distribution Transferred Employee who is transferred from the NOV Group to the SpinCo Group who is a participant in the NOV Nonqualified Plan as of the Distribution Date (“SpinCo Nonqualified Plan Beneficiaries”).

Section 6.4. Continuation of Elections. As of the Distribution Date, SpinCo (acting directly or through its Affiliates) shall cause the SpinCo Nonqualified Plan to recognize and maintain all NOV Nonqualified Plan elections, including but not limited to, deferral, investment and payment form elections, beneficiary designations, and the rights of alternate payees under

 

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qualified domestic relations orders with respect to SpinCo Nonqualified Plan Beneficiaries, to the extent such election or designation is available under the SpinCo Nonqualified Plan. Prior to the Distribution Date, NOV shall provide written notice to all individuals anticipated to be SpinCo 401(k) Plan Beneficiaries of the intended continuation of such elections. Any deferrals under the SpinCo Nonqualified Plan with respect to SpinCo Nonqualified Plan Beneficiaries will begin on the first payroll period following the Distribution Date or Transfer Date, as applicable.

Section 6.5. Transfer of Assets. Not earlier than the 10th anniversary of the Distribution Date (or such earlier time as SpinCo may elect in its sole discretion), NOV shall cause all accounts remaining in the NOV Nonqualified Plan at such time that are attributable to SpinCo Employees or Post Distribution Transferred Employees and all of the Assets and Liabilities in the NOV Nonqualified Plan related thereto to be transferred in-kind to the SpinCo Nonqualified Plan, and SpinCo shall cause the SpinCo Nonqualified Plan to accept such transfer of accounts, Assets and Liabilities and, effective as of such transfer, to assume and to fully perform, pay and discharge, all obligations of the NOV Nonqualified Plan relating to such accounts (to the extent the Assets related to those accounts are actually transferred from the NOV Nonqualified Plan to the SpinCo Nonqualified Plan) as of the date of such transfer.

ARTICLE VII.

U.S. HEALTH & WELFARE PLANS

Section 7.1. Establishment of SpinCo Welfare Plans. On or prior to the Distribution Date, SpinCo shall, or shall cause another SpinCo Entity to, take commercially reasonable steps to establish and adopt SpinCo Welfare Plans, which will provide welfare benefits to each SpinCo Group Employee or Post Distribution Transferred Employee who is transferred from the NOV Group to the SpinCo Group who is a participant, as of the Distribution Date or Transfer Date, as applicable, in the analogous NOV Welfare Plans (and their eligible spouses and dependents, as the case may be) (collectively, the “SpinCo Welfare Plan Participants”). Coverage and benefits under the SpinCo Welfare Plans shall be intended to be provided to the SpinCo Welfare Plan Participants on an uninterrupted basis under the newly established SpinCo Welfare Plans. Subject to applicable Law and the terms of the applicable NOV Welfare Plans, SpinCo Welfare Plan Participants shall cease to be eligible for coverage under the NOV Welfare Plans at the Distribution Date or Transfer Date, as applicable.

Section 7.2. Transitional Matters Under SpinCo Welfare Plans

(a) Treatment of Claims Incurred.

(i) Liability for Claims. With respect to unpaid covered claims incurred prior to the Distribution Date or Transfer Date, as applicable, by any SpinCo Welfare Plan Participant under any NOV Welfare Plans, including claims that are self-insured and claims that are fully insured through third-party insurance, NOV shall retain and be responsible for the payment for such claims or shall cause such NOV Welfare Plans to fully perform, pay and discharge all such claims, as the case may be, and except as provided in Section 7.2(a)(iv), no SpinCo Entity shall be responsible for any Liability with respect to any such claims.

 

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(ii) Claims Incurred. For purposes of this Section 7.2(a), a claim or expense is deemed to be incurred (A) with respect to medical (including continuous hospitalization), dental, vision and/or prescription drug benefits, upon the rendering of health services giving rise to such claim or expense; (B) with respect to life insurance, accidental death and dismemberment and business travel accident insurance, upon the occurrence of the event giving rise to such claim or expense; (C) with respect to short- and long-term disability benefits, upon the date of an individual’s disability, as determined by the disability benefit insurance carrier or claim administrator, giving rise to such claim or expense; and (D) with respect to any other claim, upon the date of the event giving rise to such claim.

(iii) Short and Long Term Disability Benefits. Employees of the SpinCo Group who are receiving Short Term Disability or Long Term Disability (“Disability”) benefits immediately prior to the Distribution Date shall have their employment transferred to a NOV Entity effective immediately prior to the Distribution Date and shall be NOV Group Employees for all purposes of this Agreement. If any such Employee is released to return to work or becomes no longer entitled to receive Disability benefits on or after the Distribution Date, and provided that SpinCo is notified by NOV in writing of such fact, SpinCo shall consider if there are any positions within the SpinCo Group for which such Employee may be qualified, but SpinCo shall have no obligation to hire such Employee.

(b) COBRA and HIPAA. The NOV Group shall be responsible for the COBRA claims incurred by Employees (and their qualifying beneficiaries) prior to the Distribution Date or Transfer Date, as applicable, regardless of whether payments for such claims are made or due after the Distribution Date or Transfer Date, as applicable. At and after the Distribution Date, SpinCo shall assume all requirements under COBRA with respect to all SpinCo Group Employees or Post Distribution Transferred Employees (and their qualifying beneficiaries) who, as of the Distribution Date or Transfer Date, as applicable, are covered under a SpinCo Benefit Plan and who have a COBRA qualifying event (as defined in Section 4980B of the Code) on or after the Distribution Date or Transfer Date. NOV (acting directly or through its Affiliates) shall be responsible for administering compliance with any certificate of creditable coverage requirements of HIPAA applicable to the NOV Welfare Plans with respect to SpinCo Group Employees or Post Distribution Transferred Employees. Neither the Distribution nor any transfers of employment that occur as of the Distribution Date shall constitute a COBRA qualifying event (as defined in Section 4980B of the Code).

Section 7.3. Waiver of Conditions or Restrictions. Unless prohibited by applicable Law and subject to the cooperation of applicable third-party insurers and administrators, SpinCo will take commercially reasonable steps to cause the SpinCo Welfare Plans to waive all limitations as to preexisting conditions, exclusions, service conditions, waiting period limitations or evidence of insurability requirements that would otherwise be applicable to the SpinCo Welfare Plan Participant following the Distribution Date or Transfer Date, as applicable, to the extent that such Employee had previously satisfied such limitation under the corresponding NOV Welfare Plan.

 

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Section 7.4. Insurance Contracts. To the extent any NOV Welfare Plan is funded through the purchase of an insurance contract or is subject to any stop loss contract, NOV and SpinCo will cooperate and use their commercially reasonable efforts to replicate such insurance contracts for SpinCo (except to the extent changes are required under applicable state insurance Laws or filings by the respective insurers) and to maintain any pricing discounts or other preferential terms for both NOV and SpinCo for a reasonable term. Neither Party shall be liable for failure to obtain such insurance contracts, pricing discounts, or other preferential terms for the other Party. Each Party shall be responsible for any new or additional premiums, charges, or administrative fees that such Party may incur with respect to its insurance coverage pursuant to this Section 7.4.

Section 7.5. Third-Party Vendors. Except as provided below, to the extent any NOV Welfare Plan is administered by a third-party vendor, NOV and SpinCo will cooperate and use their commercially reasonable efforts to replicate any contract with such third-party vendor for SpinCo and to maintain any pricing discounts or other preferential terms for both NOV and SpinCo for a reasonable term. Neither Party shall be liable for failure to obtain such pricing discounts or other preferential terms for the other Party. Each Party shall be responsible for any new or additional premiums, charges, or administrative fees that such Party may incur with respect to its contracts pursuant to this Section 7.5.

Section 7.6. Workers’ Compensation. With respect to claims for workers compensation in the United States, (a) the NOV Group shall be responsible for claims in respect of (i) NOV Group Employees and Former Employees, whether occurring prior to, on or following the Distribution Date and (ii) SpinCo Group Employees occurring prior to the Distribution Date, and (b) the SpinCo Group shall be responsible for all claims in respect of SpinCo Group Employees and Post Distribution Transferred Employees occurring on or following the Distribution Date or Transfer Date, respectively. For purposes of this Section 7.6, claims shall be deemed to be incurred upon the occurrence of the injury giving rise to such claim.

Section 7.7. Reimbursement Account Plan. On or prior to the Distribution Date, SpinCo shall, or shall cause another SpinCo Entity to, take commercially reasonable steps to establish and adopt a health and dependent care reimbursement account plan (the “SpinCo Reimbursement Account Plan”) substantially identical to the health and dependent care reimbursement account plan maintained by NOV immediately prior to the Distribution for the benefit of SpinCo Welfare Plan Participants immediately prior to the Distribution Date (the “NOV Reimbursement Account Plan”). The Parties shall take all actions appropriate to cause a spin-off of the portion of the NOV Reimbursement Account Plan covering SpinCo Group Employees to the SpinCo Reimbursement Account Plan in accordance with Revenue Ruling 2002-32 and subsequent guidance. Participant elections, contribution levels and coverage levels, as in effect prior to the Distribution Date, as applicable, under the NOV Reimbursement Account Plan, will continue to be effective on and after the Distribution Date, as applicable, under the SpinCo Reimbursement Account Plan. Prior to the Distribution Date, NOV shall provide written notice to all individuals anticipated to be participate in the SpinCo Reimbursement Account Plan immediately after the Distribution of the intended continuation of such elections. As soon as reasonably practicable following the Distribution Date, NOV will transfer to SpinCo or a SpinCo Entity an amount equal to the aggregate participant contributions to the NOV Reimbursement Plan made in the calendar year in which the Distribution Date occurs through the Distribution

 

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Date, less reimbursements during that period. NOV will not be responsible for, and will have no liability relating to, resulting from, or arising out of the provision of health reimbursement and dependent care reimbursement benefits to SpinCo Group Employees following the transfer of the health flexible spending account balances and dependent care flexible spending account balances to the SpinCo Reimbursement Account Plan, except to the extent related to the transfer of balances from the NOV Reimbursement Account Plan to the SpinCo Reimbursement Account Plan. SpinCo intends that the SpinCo Reimbursement Account Plan will be available on and after the Distribution Date.

ARTICLE VIII.

BENEFIT ARRANGEMENTS AND OTHER MATTERS

Section 8.1. Termination of Participation. Except as otherwise provided under applicable Law, the applicable NOV Benefit Plan or this Agreement or in the Transition Services Agreement, effective as of the Distribution Date or Transfer Date, SpinCo Group Employees and Post Distribution Transferred Employees, respectively, shall cease participating in any NOV Benefit Plan.

Section 8.2. Accrued Time Off. SpinCo shall recognize and assume all Liability for all unused vacation, holiday, sick leave, flex days, personal days and paid-time off and other time-off benefits that accrued on or prior to the Distribution Date (with respect to SpinCo Group Employees) or the Transfer Date (with respect to Post Distribution Transferred Employees), and SpinCo shall credit each SpinCo Group or Post Distribution Transferred Employee with such accrual. Within thirty (30) days after the Distribution Date or Transfer Date, as applicable, the NOV Group will calculate (which calculation SpinCo may review and approve prior to payment pursuant thereto) the accrued, used and unused vacation entitlement of the SpinCo Group and Post Distribution Transferred Employees as of the time immediately prior to the Distribution Date or Transfer Date, as applicable, except for any carry-over amounts from calendar year 2013 to 2014, and shall make a cash payment based on such Employee’s annualized rate of pay immediately prior to the Distribution Date or Transfer Date, as applicable, to the SpinCo Group in respect of the vacation entitlement of the SpinCo Group Employee or Post Distribution Transferred Employee, as applicable.

Section 8.3. Leaves of Absence. SpinCo will continue to apply the appropriate leave of absence policies (including compliance with the Family and Medical Leave Act) applicable to inactive SpinCo Group Employees and Post Distribution Transferred Employees who are on an approved leave of absence as of the Distribution Date or Transfer Date, as applicable. Subject to Section 7.2, leaves of absence taken by SpinCo Group or Post Distribution Transferred Employees prior to the Distribution Date or Transfer Date, as applicable, and from which such Employees have not returned to active employment as of the Distribution Date or Transfer Date, as applicable, shall be deemed to have been taken as employees of a SpinCo Entity.

ARTICLE IX.

NON-U.S. EMPLOYEES

Section 9.1. General Principles. Except as explicitly set forth in this Article IX, NOV Group Employees and SpinCo Group Employees who are resident outside of the United States or

 

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otherwise are subject to non-U.S. Law and their related benefits and obligations shall be treated in the same manner as the NOV Group Employees and SpinCo Group Employees who are resident of the United States are treated under this Agreement, mutatis mutandis. All actions taken with respect to non-U.S. Employees in connection with the Distribution will be accomplished in accordance with applicable Law and custom in each of the applicable jurisdictions.

Section 9.2. Treatment of Equity Awards Held By Non-U.S. Employees.

(a) Canadian Holders. For the purposes of this Agreement a NOV Option, NOV RSA or NOV PSA, as applicable, is held by a “Canadian Holder” if such NOV Option, NOV RSA or NOV PSA is held by a Person who is a resident of Canada for the purposes of Canada Tax Act or by a Person who was granted such NOV Option, NOV RSA or NOV PSA in respect of, in the course of, or by virtue of employment in Canada. In respect of any NOV Option, NOV RSA or NOV PSA held by a Canadian Holder, notwithstanding the other provisions of Sections 4.1, 4.2 or 4.3, as applicable, the following rules apply:

(i) Timing for Canadian Holders. The adjustment or conversion of each NOV Option, NOV RSA or NOV PSA held by a Canadian Holder shall be effected with such modifications as may be required such that any action under Sections 4.1, 4.2 or 4.3 which is called for at or as of the Distribution Date shall be taken or completed immediately prior to the Distribution Date;

(ii) Application of Canada Tax Act. It is intended that the provisions of subsection 7(1.4) of the Canada Tax Act apply to the adjustment or conversion of each NOV Option, NOV RSA or NOV PSA held by a Canadian Holder.

(iii) Greater Certainty. For greater certainty, in respect of the application of subsection 7(1.4) of the Canada Tax Act to the adjustment or conversion of any NOV Option, NOV RSA or NOV PSA held by a Canadian Holder, the computation of each amount under Sections 4.1, 4.2 or 4.3, as applicable, shall be undertaken in respect of each such NOV Option, NOV RSA or NOV PSA such that, for purposes of subsection 7(1.4) of the Canada Tax Act,

(x) the amount by which the total value immediately after the Distribution Date of the rights of the Canadian Holder to acquire securities of NOV or SpinCo, as applicable, exceeds of the total of the amount payable to acquire such securities

does not exceed

(y) the amount by which the total value immediately before the Distribution Date of the rights of the Canadian Holder to acquire securities of NOV under the applicable NOV Option, NOV RSA or NOV PSA exceeds of the total of the amount payable to acquire such securities

and NOV or SpinCo, as applicable, shall take all such steps and shall make all such adjustments effective as of the Distribution Date as are necessary to ensure that the conversions or adjustments pursuant to Sections 4.1 or 4.2 are in compliance with the provisions of subsection 7(1.4) of the Canada Tax Act.

(b) [Intentionally omitted.]

 

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ARTICLE X.

GENERAL PROVISIONS

Section 10.1. Preservation of Rights to Amend. The rights of each NOV Entity and each SpinCo Entity to amend, waive, or terminate any plan, arrangement, agreement, program, or policy referred to herein shall not be limited in any way by this Agreement.

Section 10.2. Entire Agreement. This Agreement, together with the documents referenced herein (including the Separation Agreement, the Ancillary Agreements, the plans and agreements referenced herein and any annexes, schedules and exhibits hereto and thereto), constitutes the entire agreement and understanding among the Parties with respect to the subject matter hereof and supersedes all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof. To the extent any provision of this Agreement conflicts with the provisions of the Separation Agreement, the provisions of this Agreement shall be deemed to control with respect to the subject matter hereof.

Section 10.3. Binding Effect; No Third-Party Beneficiaries; No Amendment of Plans; Assignment. This Agreement shall inure to the benefit of and be binding upon the Parties and their respective successors and permitted assigns. Except as otherwise expressly provided in this Agreement, this Agreement is solely for the benefit of the Parties and their respective Affiliates and should not be deemed to confer upon any third parties any remedy, claim, Liability, reimbursement, cause of action, or other rights. Nothing in this Agreement is intended to amend any Benefit Plan or affect the applicable plan sponsor’s right to amend or terminate any Benefit Plan pursuant to the terms of such plan. The provisions of this Agreement are solely for the benefit of the Parties, and no current or former Employee, officer, director, or independent contractor or any other individual associated therewith shall be regarded for any purpose as a third-party beneficiary of this Agreement. This Agreement may not be assigned by any Party, except with the prior written consent of the other Party.

Section 10.4. Amendment; Waivers. No change or amendment may be made to this Agreement except by an instrument in writing signed on behalf of each of the Parties. Any Party may, at any time, (i) extend the time for the performance of any of the obligations or other acts of the other Party, (ii) waive any inaccuracies in the representations and warranties of the other Party contained herein or in any document delivered pursuant hereto, and (iii) waive compliance by the other Party with any of the agreements, covenants, or conditions 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. No failure or delay on the part of any Party in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant, or agreement contained herein, nor shall any single or partial exercise of any such right preclude other or further exercises thereof or of any other right.

 

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Section 10.5. Remedies Cumulative. All rights and remedies existing under this Agreement or the Schedules attached hereto are cumulative to, and not exclusive of, any rights or remedies otherwise available.

Section 10.6. Notices. Unless otherwise expressly provided herein, all notices, claims, certificates, requests, demands and other communications hereunder shall be made or given in accordance with the provisions of Section 10.5 of the Separation Agreement.

Section 10.7. Counterparts. This Agreement, including the Schedules hereto and the other documents referred to herein, may be executed in multiple counterparts, each of which when executed shall be deemed to be an original but all of which together shall constitute one and the same agreement.

Section 10.8. Severability. If any term or other provision of this Agreement or the Schedules attached hereto is determined by a non-appealable decision by a court, administrative agency, or arbitrator to be invalid, void, illegal, or incapable of being enforced by any rule of Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon such determination that any term or other provision is invalid, void, illegal, or incapable of being enforced, the court, administrative agency, or arbitrator shall interpret this Agreement in a manner acceptable to the Parties so as to effect as closely as, and to the fullest extent, possible the original intent of the Parties. If any provision in this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.

Section 10.9. Governing Law. This Agreement (and any claims or disputes arising out of or related hereto or thereto or to the transactions contemplated hereby and thereby or to the inducement of any party to enter herein and therein, whether for breach of contract, tortious conduct, or otherwise and whether predicated on common law, statute, or otherwise) shall be governed by and construed and interpreted in accordance with the Laws of the State of Texas, irrespective of the choice of laws principles of the State of Texas, including all matters of validity, construction, effect, enforceability, performance, and remedies.

Section 10.10. Dispute Resolution. The dispute resolution procedures set forth in Article IV of the Separation Agreement shall apply to any dispute, controversy or claim (whether sounding in contract, tort or otherwise) that arises out of or relates to this Agreement, any breach or alleged breach hereof, the transactions contemplated hereby (including all actions taken in furtherance of the transactions contemplated hereby on or prior to the date hereof), or the construction, interpretation, enforceability, or validity hereof.

Section 10.11. Performance. Each of NOV and SpinCo shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any NOV Entity and any SpinCo Entity, respectively. The Parties each shall take such further actions and shall execute, acknowledge, and deliver, or cause to be executed, acknowledged, and delivered, all such further documents as are reasonably requested by the other to carry out the purposes of this Agreement or of any document delivered pursuant to this Agreement.

 

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Section 10.12. Effect if Distribution Does Not Occur. Notwithstanding anything in this Agreement to the contrary, if the Separation Agreement is terminated prior to the Distribution Date, this Agreement shall be of no further force and effect. In such event, no Party shall have any liability or obligation to any person by reason of this Agreement.

Section 10.13. Additional Indemnification Matters. THE RELEASES AND INDEMNIFICATION OBLIGATIONS OF THE PARTIES IN THIS AGREEMENT ARE EXPRESSLY INTENDED, AND SHALL OPERATE AND BE CONSTRUED, TO APPLY EVEN WHERE THE LOSSES OR LIABILITIES FOR WHICH THE RELEASE AND/OR INDEMNITY ARE GIVEN ARE CAUSED, IN WHOLE OR IN PART, BY THE SOLE, JOINT, JOINT AND SEVERAL, CONCURRENT, CONTRIBUTORY, ACTIVE OR PASSIVE NEGLIGENCE OR THE STRICT LIABILITY OR FAULT OF THE PARTY BEING RELEASED OR INDEMNIFIED.

[ Signatures of the Parties on Next Page ]

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names by a duly authorized officer as of the date first written above.

 

NATIONAL OILWELL VARCO, INC.
By:  

 

  Name:
  Title:
NOW, INC.
By:  

 

  Name:
  Title:
EX-10.4

Exhibit 10.4

MASTER DISTRIBUTOR AGREEMENT

THIS AGREEMENT is made and entered into as of the      day of         , 2014 (the “Effective Date”) by and between NATIONAL OILWELL VARCO, L.P., a Delaware limited partnership, with an office and place of business at 7909 Parkwood Circle Drive, Houston, Texas 77036, hereinafter called “NOV”, and DNOW L.P., a Texas limited partnership, with an office and place of business at 7402 North Eldridge Parkway, Houston, Texas 77041, hereinafter called “DISTRIBUTOR”.

WITNESSETH:

WHEREAS, NOV manufactures, markets and sells certain equipment and parts to be used in the oil and gas industry, hereinafter called “Equipment”.

WHEREAS, DISTRIBUTOR represents that it is engaged in the marketing and selling of such Equipment and desires to be appointed as a distributor of such Equipment and desires to purchase such Equipment, in accordance with the terms of this Agreement, for resale;

WHEREAS, the terms of this Agreement shall govern the distributor relationship between each of the various business groups of NOV and DISTRIBUTOR on a general basis;

NOW THEREFORE, the parties hereto, in consideration of the mutual promises herein contained, do covenant and agree as follows:

I. APPOINTMENT

NOV hereby appoints DISTRIBUTOR as its authorized non-exclusive distributor of the Equipment in the Territory. The Territory to be covered by DISTRIBUTOR is worldwide, except as otherwise agreed between the parties hereto. The Territory, however, shall not include any area or jurisdiction where NOV has an agreement in place that would prevent the sale of the Equipment by DISTRIBUTOR. NOV shall have the right to appoint any other person or entity as a non-exclusive distributor of the Equipment in the Territory and NOV shall have the right to make direct sales of Equipment into the Territory, for which no monies shall be due DISTRIBUTOR.

II. SCOPE OF AGREEMENT

The relationship between DISTRIBUTOR and NOV under this Agreement is that of buyer and seller. DISTRIBUTOR and its agents and employees shall, under no circumstances, be considered to be agents, employees, or representatives of NOV, and they shall not hold themselves out as such to third parties nor attempt to enter into contracts or commitments in the name of or on behalf of NOV nor bind NOV in any respect whatsoever.

III. DISTRIBUTOR RESPONSIBILITIES

DISTRIBUTOR accepts this appointment upon the terms and conditions herein and agrees that, so long as this appointment is in effect, it will:

 

  (a) Use its commercially reasonable efforts to develop business in, to promote the sale and use of, and to sell the Equipment covered by this Agreement in the assigned Territory;


  (b) Maintain a sales organization which actively solicits the sale of products covered by this Agreement, carry out promotional programs, and fully utilize the sales assistance furnished by NOV;

 

  (c) Submit to NOV, upon request if available, the forecasted requirements of DISTRIBUTOR for Equipment;

 

  (d) Buy and resale Equipment, and maintain those stocks of Equipment, components and accessories that are necessary to promote the sales of NOV products and the Equipment and fulfill its customers’ service needs;

 

  (e) Inform NOV of significant personnel changes, and other material changes within the organization of the DISTRIBUTOR, that would materially affect the DISTRIBUTOR’s performance under this Agreement;

 

  (f) Obtain, to the extent necessary or appropriate, any necessary approvals from any governmental, local or other authority, which are required in order to sell the Equipment and comply with the provisions hereof;

 

  (g) Pay NOV for the Equipment purchased from NOV at the prices and upon the terms and conditions herein set forth;

 

  (h) Purchase from NOV Equipment in such quantity as shall satisfy the DISTRIBUTOR’s requirements for resale during the term of this Agreement, unless otherwise agreed to in writing by NOV;

 

  (i) Indemnify and hold harmless NOV, its affiliated companies, parents and their respective directors, officers, employees, agents and other representatives from and against any and all claims, liability, loss, demands, obligations or damage of any kind or character, including without limitation, injuries and death to persons, and loss of or damage to property by whomever owned, arising out of DISTRIBUTOR’s negligent performance, acts or omission under this Agreement. This obligation shall be deemed continuous, notwithstanding any expiration or termination of this Agreement.

IV. NOV RESPONSIBILITIES

NOV agrees that, so long as this Agreement is in effect, it will:

 

  (a) Sell to the DISTRIBUTOR for resale within the Territory the Equipment for the period and upon the terms and conditions provided for herein, including any applicable discounts stated herein;

 

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  (b) NOV shall use all reasonable efforts to ship promptly supplies of the Equipment to the DISTRIBUTOR; and

 

  (c) Indemnify and hold harmless DISTRIBUTOR from and against any and all loss, costs, damages and expenses whatsoever which DISTRIBUTOR may sustain or incur, and any and all liability, causes of action, proceedings, claims and demands whatsoever which may be brought or made against the DISTRIBUTOR, arising from any infringement of patent, trademark or other intellectual property rights and claims of any other person for the use of the name “National Oilwell Varco”.

 

  (d) Indemnify and hold harmless DISTRIBUTOR, its affiliated companies, parents and their respective directors, officers, employees, agents and other representatives from and against any and all claims, liability, loss, demands, obligations or damage of any kind or character, including without limitation, injuries and death to persons, and loss of or damage to property by whomever owned, arising out of NOV’s negligent performance, acts or omission under this Agreement (including without limitation claims of product liability or strict liability). This obligation shall be deemed continuous, notwithstanding any expiration or termination of this Agreement.

 

  d) NOV agrees to maintain commercially reasonable insurance with carriers licensed to do business in the State of Texas. Such insurance shall name DISTRIBUTOR as an additional insured on all policies except Workers’ Compensation and Employers Liability and shall include comprehensive liability insurance with limits of no less than $1,000,000.00 combined single limit bodily injury and property damage per occurrence, and shall include product liability coverage.

 

  e) NOV shall notify DISTRIBUTOR of any price changes in writing at least sixty (60) days before such price change would be effective.

V. CONDITIONS OF SALE AND TERMS OF PAYMENT

Sales to DISTRIBUTOR shall be on an open-account basis, subject to approval of NOV’s Treasury Department, and all such sales to DISTRIBUTOR shall be for resale by DISTRIBUTOR. All sales to DISTRIBUTOR shall be in accordance with the provisions of this Agreement and NOV’s standard Terms and Conditions as Seller in effect at the time of each sale. Any provisions of any inquiry or any purchase order placed by DISTRIBUTOR which are inconsistent or in addition to the terms herein contained or NOV’s standard Terms and Conditions as Seller shall be null and void. Purchase orders placed by DISTRIBUTOR shall be effective only insofar as designating the type and quantity of equipment ordered, delivery schedule and invoicing and shipping instructions.

The Equipment shall be delivered by NOV to the DISTRIBUTOR ex works (“EXW”) place of manufacture or NOV’s warehouse, as indicated by NOV, and title and risk of loss with respect to the Equipment shall pass EXW, Incoterms (2010 Edition).

 

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Any tax, license, fee, assessment, customs duty, excise or imposition levied or imposed by any present or future law of any governmental authority shall be the responsibility of the party incurring same.

VI. DELIVERY

NOV will use its reasonable efforts to meet DISTRIBUTOR’s delivery schedules, but NOV shall not be liable for delays in delivery or failure to manufacture or deliver due to any cause beyond its reasonable control. In the event of any such delay, the date of delivery shall be extended for a period equal to the time lost by reason of such delay. Notwithstanding the foregoing, in the event DISTRIBUTOR’s customer refuses to accept such late delivery, DISTRIBUTOR may cancel the order without penalty or cost, except as otherwise agreed between the parties hereto.

VII. PRICES - DISCOUNTS

Equipment covered by this Agreement shall be sold to DISTRIBUTOR at NOV’s prices published in its official price book in effect at the time of shipment, less applicable discounts as may be agreed between the parties hereto from time to time. Prices do not include federal, state or local taxes applicable to the Equipment sold under this Agreement. An amount equal to the appropriate taxes will be added to the invoice where NOV has the legal obligation to collect such taxes. DISTRIBUTOR shall pay such amount to NOV unless DISTRIBUTOR provides NOV with a valid tax exemption certificate authorized by the appropriate taxing authority.

VIII. CHANGES

NOV expressly reserves the right to change the prices in its official price book and Equipment and discounts, and its Terms and Conditions as Seller, in whole or in part, at any time and from time to time. Such changes shall be effective upon notifying DISTRIBUTOR in writing approximately sixty (60) days in advance of any such change or by NOV’s regular notice to the trade announcing any such change. Such changes shall not apply to any outstanding orders or bids.

IX. DURATION OF AGREEMENT

Unless sooner terminated as hereinafter provided, this Agreement shall become effective as of the Effective Date and shall continue in effect for a period of two (2) years and shall be automatically renewed on an annual basis thereafter unless either party notifies the other thirty (30) days in advance of its intent not to renew.

This Agreement may be terminated by either of the parties by delivering or forwarding by telefax, telecopy, telex, courier, or certified or registered mail to the other party, at its address herein before indicated, thirty (30) days’ notice, in writing, of intention to terminate this Agreement; provided, however, that either party shall have the right to terminate this Agreement effective immediately by giving written notice to the breaching party that termination is made for cause. Such written notice must set forth the conditions constituting cause. Situations which shall entitle either party to terminate the Agreement for cause shall include, but not be limited to, any of the following:

 

  (a) Any material breach of this Agreement;

 

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  (b) Violation of any applicable governmental law, statute, regulation, edict, order;

 

  (c) Engaging in conduct which creates a material conflict of interest;

 

  (d) Material misrepresentation of the Equipment;

 

  (e) Misrepresentation of NOV’s policies or services; or

 

  (f) an assignment of the rights granted hereunder to a third party without the written consent of the other party to this Agreement.

In the event of termination or expiration, this Agreement shall become null and void without prejudice, however, to any right of action or remedy which either of said parties may have for the recovery of any monies then owing it hereunder or for the enforcement of any other obligations which may be attached, accrued or become fixed by the terms hereof or by the conduct of either or both of the parties under this Agreement.

Upon termination of this Agreement by DISTRIBUTOR, NOV, at its sole option, may repurchase any of the Equipment purchased by DISTRIBUTOR from NOV pursuant to this Agreement not then sold by DISTRIBUTOR for the same amount paid or to be paid by the DISTRIBUTOR to NOV for such Equipment plus actual transportation charges and delivery expenses. Any unpaid balance owed by DISTRIBUTOR to NOV shall be immediately due upon termination of this Agreement. If NOV terminates this Agreement without cause, Distributor may, at its sole option, return any material purchased by DISTRIBUTOR FROM NOV that is not sold for the same amount paid or to be paid by DISTRIBUTOR TO NOV, except as otherwise agreed between the parties hereto.

NOV shall not be liable by reason of termination, expiration or nonrenewal of this Agreement to DISTRIBUTOR for any compensation, reimbursement, or damages whatsoever, whether based on goodwill established, investments made by DISTRIBUTOR, or otherwise. DISTRIBUTOR hereby waives and renounces any claims for compensation, indemnity of payment to which it might otherwise be entitled under the laws of any political entity in the event of or because of the nonrenewal, expiration or termination of this Agreement for any reason, and agrees further to indemnify and hold harmless NOV from any and all claims of DISTRIBUTOR’s agents, officers or employees for similar compensation, indemnity or payment.

X. WAIVER OF PROVISIONS

Waiver of any breach of any provision herein contained shall not be deemed to be a waiver of any other provision hereof nor a waiver of any future breach of any such provision.

 

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XI. AMENDMENT AND ASSIGNMENT

Unless authorized in writing by an officer of NOV and by an officer of DISTRIBUTOR, no amendment, addition to or modification of the provisions of this Agreement shall be effective except with regard to Equipment, discount and NOV’s Terms and Conditions as Seller as herein provided. Neither this Agreement nor any of the rights, duties or obligations arising hereunder, nor any interest herein, shall be transferred or assigned to any third party person, firm, corporation, or association by DISTRIBUTOR without the express prior written consent of NOV. Any purported transfer or assignment not complying with the foregoing shall be void. The terms of this Agreement shall be binding upon and shall inure to the benefit of and be enforceable by the valid successors and assigns of the parties hereto.

XII. GOVERNING LAW

This Agreement shall be governed by the laws of the State of Texas, United States of America. All causes of action in favor of either party arising out of this Agreement shall be adjudicated only in the courts of such state. Both parties hereby consent to be subject to the personal jurisdiction of such courts and agree that proper venue for any suits by or against DISTRIBUTOR shall be in Harris County, Texas.

DISTRIBUTOR, in connection with performance under this Agreement, shall not violate the laws or regulations of any country, state, province or locality in which this Agreement is to be performed; provided, however, DISTRIBUTOR shall not comply with such laws and regulations or do any actions that would cause NOV to be in violation of any law or regulation of the United States of America. Specifically, DISTRIBUTOR covenants that it will not cause or knowingly allow NOV to be in violation of the Foreign Corrupt Practices Act (“FCPA”) of the United States. NOV shall have the right to terminate this Agreement in the event it learns or has reason to believe DISTRIBUTOR has caused NOV to violate the FCPA. Such termination occurs on the date such violation first occurs.

XIII. PRIOR AGREEMENTS

This Agreement shall supersede and replace any prior distributor agreement between NOV and DISTRIBUTOR and any such prior agreement shall be automatically terminated as of the date of this Agreement, notwithstanding any provision of such prior agreement requiring NOV or DISTRIBUTOR to give notice prior to such termination. NOV shall have no obligation to repurchase any Equipment purchased by DISTRIBUTOR pursuant to such prior agreement, notwithstanding any contrary provision in the prior agreement. In the event of a conflict between the terms contained in this Agreement in Articles I through XVI and the terms contained in NOV’s standard Terms and Conditions as Seller, the terms contained in this Agreement shall govern.

XIV. CONSULTING

From time to time, as requested in writing by NOV, DISTRIBUTOR shall perform various consulting work for NOV. Any fees due for such consulting work shall be on a case-by-case basis and shall be agreed to at the time such work is requested by NOV. Such consulting work shall be limited to a case-by-case basis and may be related solely to a particular project or customer of NOV. Any fee established for such consulting work is not to be considered as creating a precedent for subsequent transactions or consulting work.

 

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XV. MANUFACTURING OF COMPETING PARTS/REPLICATION

As a material part of the consideration of this Agreement, DISTRIBUTOR agrees that it will not use or allow the use of any drawings, technology or know-how supplied by NOV, or otherwise obtained by DISTRIBUTOR under this Agreement, to produce or manufacture competing parts or assemblies for NOV’s Equipment or to replicate NOV’s Equipment or to attempt to analyze, reverse engineering or otherwise ascertain the composition or manufacture of the Equipment. It is understood and agreed that in the event of any violation of this covenant, NOV shall be entitled to all recourse, whether at law or at equity, including injunctive relief. This obligation shall continue after termination of this Agreement.

XVI. REGISTRATION

DISTRIBUTOR covenants and agrees that it shall not allow this Agreement or any memorandum or letter referring to this Agreement or referring to DISTRIBUTOR’s affiliation with NOV to be registered, filed or otherwise placed of record with any government, without NOV’s express prior written consent.

IN WITNESS WHEREOF, the parties hereto have hereunder caused this Agreement to be executed in multiple parts by their respective officers as of the day and year first above written.

 

NATIONAL OILWELL VARCO, L.P.     DNOW L.P.
by its general partner,     By its general partner
NOW Oilfield Services, Inc.     Wilson International, Inc.
By:  

 

    By:  

 

Name:  

 

    Name:  

 

Title:  

 

    Title:  

 

 

7

EX-10.5

Exhibit 10.5

Master Service Agreement

This Master Service Agreement (“MSA”) is entered into this      day of         , 2014 (the “Effective Date”) by and between DNOW L.P. with a place of business at 7402 North Eldridge Parkway Houston, TX 77041 (“DNOW”) and National Oilwell Varco, L.P. (“NOV”) with a place of business at 7909 Parkwood Circle Drive, Houston, TX 77036. NOV, as used herein, shall include NOV and its affiliated and subsidiary companies.

Preamble

WHEREAS, NOV is engaged in the business of providing diversified drilling services to the oil and gas industry worldwide and, from time to time, requires new and replacement equipment, products, parts and supplies for use in its offshore drilling operations.

WHEREAS, DNOW is in the business of furnishing procurement and inventory management services and supplying equipment, products, parts, and supplies for use in the oil and gas industry.

WHEREAS, NOV desires that DNOW be designated as NOV’s non-exclusive supplier for certain services, equipment, products, parts, and supplies to NOV and DNOW desires to be designated as NOV’s non-exclusive supplier in accordance with the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the mutual promises set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, NOV and DNOW agree as follows:

1.0 Scope of Agreement. This MSA defines the contractual rights, obligations and liabilities of the parties related to goods and services supplied by DNOW for NOV. DNOW shall provide procurement services, manage the inventory identified by NOV and such other services as may be agreed by DNOW and NOV (collectively the “Services”). DNOW shall sell the goods ordered by NOV under subsequent verbal or written purchase orders, either in connection with the supply of Services or based on independent purchase orders (the “Goods”) in accordance with the terms and conditions set forth in this MSA. The Goods and Services are collectively referred to herein as “Work”.

2.0 Independent Contractor. DNOW understands and agrees that it has the right to control the manner, means and progress of the Work to be provided hereunder; subject to inspection, approval and acceptance by NOV. DNOW shall furnish all materials, equipment, labor and supplies necessary to perform the Work. DNOW will, at all times, act as an independent contractor and nothing stated or implied herein shall be construed to make DNOW an employee of NOV nor shall DNOW in any way represent that it or any of its employees are employees of NOV. No employment relationship exists between NOV and DNOW, and neither DNOW nor its agents or employees shall be entitled to any employment benefits from NOV including, but not limited to, unemployment compensation, worker’s compensation, or social security.

3.0 Insurance. DNOW agrees to carry at its sole expense the following insurance with B+ rated companies or better:

Comprehensive General Liability Insurance including Contractual, Products and Completed Operations Insurance, covering all operations and work hereunder in the amounts of not less than $1,000,000 for bodily injury and property damage. Such insurance shall specifically refer to this MSA and shall specifically cover on a primary basis the liability assumed by DNOW hereunder.

If Work include the use of a motor vehicle, Automobile liability including all owned, hired and non-owned vehicles used in connection with operations and work performed under this MSA with $1,000,000 Combined Single Limit.

 

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Workers’ Compensation/Employers Liability covering DNOW employees if any. Statutory Workers’ Compensation plus $1,000,000 in Employers Liability and in compliance with the laws of the state in which DNOW is performing the Work.

Umbrella/Excess Liability no less than $5,000,000 in excess of the above listed insurance.

To the extent of the liabilities assumed by DNOW under this MSA, all policies shall name NOV, its affiliates and subsidiaries as Additional Insured on all policies except Workers’ Compensation and Employers Liability and provide, to the extent of the liabilities assumed by DNOW under this MSA, a Waiver of Subrogation, in favor of NOV, its subsidiaries and affiliates on all policies with respect to the Work provided under this MSA. DNOW shall furnish NOV with a certificate of insurance pursuant to above requirements. Certificate holder will be listed as National Oilwell Varco, L.P., its affiliates and subsidiaries. DNOW must provide NOV with thirty (30) days’ notice prior to the cancellation of any policy to which NOV is listed as a Certificate holder.

DNOW and NOV will be considered co-employers (dual or joint employers) of those persons furnished to NOV by DNOW hereunder for purposes of employer liability under worker’s compensation laws. Irrespective of NOV’s status as a co-employer of DNOW’s employees for purposes of workers’ compensation laws, DNOW shall remain primarily responsible for the payment of worker’s compensation benefits to its employees, and shall not be entitled to seek contribution for any such payments from NOV.

The above requirements are minimum requirements and shall not limit DNOW’s liability to NOV in any manner under this MSA.

4.0 Indemnity. (a) Definitions. “NOV Group” means NOV, its parent, affiliates, subsidiaries, co-lessees, partners, joint venturers, co-owners, contractors and subcontractors of any tier and all of their respective officers, directors, employees, agents, representatives and invitees. “DNOW Group” means DNOW, its parent, affiliates, subsidiaries, co-lessees, partners, joint venturers, co-owners, contractors and subcontractors of any tier and all of their respective officers, directors, employees, agents, representatives and invitees.

DNOW will defend, indemnify, release and hold NOV Group harmless from and against any manner of liability, claim, damage, penalty or cost arising out of or related to any injury to (including death) or damage to the property of any party to the extent such injury or property damage is caused by or contributed to by DNOW Group’s negligence. NOV will defend, indemnify, release and hold DNOW Group harmless from and against any manner of liability, claim, damage, penalty or cost arising out of or related to any injury to (including death) or damage to the property of any party to the extent such injury or property damage is caused by or contributed to by NOV Group’s negligence.

5.0 Confidentiality. Both DNOW and NOV shall keep the information provided to it by the other party and related to this Agreement, including, but not limited to proprietary software, various NOV industrial and commercial methods, designs, drawings, specifications, processes, customer lists, costs, equipment, goods, and product usage information (the “Confidential Information”) as confidential. Neither party shall use the Confidential Information for any purpose other than as set forth under this Agreement.

Notwithstanding the foregoing, information provided by either party for purposes hereof shall not be deemed Confidential Information and the obligations of the receiving party under this MSA shall not apply when such information:

 

  a. is already known by the receiving party;

 

  b. is or becomes in the public domain through no wrongful act of the receiving party;

 

  c. is rightly received from a third party not under a confidentiality obligation to the disclosing party;

 

  d. is independently developed by the receiving party without breach of this Agreement;

 

2


  e. is required to be disclosed pursuant to requirements of a governmental agency or is required by operation of law; or

 

  f. is approved for release by written authorization to the receiving party from the disclosing party.

In consideration of NOV making available to DNOW such Confidential Information, DNOW shall treat all Confidential Information supplied by NOV or otherwise obtained by DNOW under this Agreement as confidential and proprietary to NOV and shall not (a) disclose such Confidential Information to others, (b) duplicate such Confidential Information or (c) use the Confidential Information (nor permit any such disclosure, duplication, or use) other than for purposes specifically contemplated by this MSA. DNOW may, however, disclose such Confidential Information to its employees, representatives and advisors who need to know same, for purposes consistent herewith, provided it shall have informed such representatives of the confidential nature of such information and direct such representatives not to disclose such Confidential Information. DNOW also agrees that it will not use or allow the use of the Confidential Information supplied by NOV, or otherwise obtained by DNOW under this Agreement, to replicate NOV’s equipment or to attempt to analyze, reverse-engineer, or otherwise ascertain the composition or manufacture of NOV’s products, either directly or through contractors.

All Confidential Information provided hereunder is and shall remain the sole and exclusive property of the provider of such information and shall be immediately returned to the providing party, along with all copies thereof, upon termination of this MSA or upon the providing party’s request.

NOV may provide DNOW with certain equipment, tools, parts, samples, gauges, and other tangible things for the performance of the Work hereunder by DNOW. DNOW understands and agrees that such equipment, tools, parts, samples, gauges, and other tangible things are the sole and exclusive property of NOV and shall be immediately returned to NOV upon termination of this MSA or upon NOV’s request.

The provisions in this Section 5 shall survive termination of this Agreement.

6.0 Warranty.

Goods. DNOW warrants title to the Goods free and clear of liens, taxes or encumbrances whatsoever. In the case of the purchase of new equipment/parts manufactured by DNOW, DNOW warrants, for a period of twelve (12) months from delivery, that new equipment/parts of its own manufacture shall conform to the material and technical specifications set forth in the purchase order. Secondhand goods are sold “as is”, and DNOW will use reasonable endeavors to specify that such goods are secondhand in the applicable order and shall provide such information upon NOV’s request. If the new equipment/parts fail to conform with such specifications, DNOW will, at NOV’s option, promptly repair or replace the Goods at DNOW’s sole cost or refund the purchase price.

Third Party Goods. Goods manufactured by others are warranted in accordance with the warranty provided by the manufacturer. DNOW will use reasonable endeavors to provide to NOV the terms of the warranty that the manufacturer offers and that will be extended to NOV. DNOW shall provide such terms of warranty to NOV upon NOV’s request.

Services. All Services shall be performed by experienced, capable and competent individuals in a timely, skilful and workmanlike manner and in compliance with this MSA and the work order, and shall be performed with the level of expertise, care and diligence demonstrated by experienced reputable contractors performing work of a similar nature to the Services. DNOW shall stock the required items in accordance with NOV forecasts and specifications. If the Services provided by DNOW fail to conform to the warranties set forth above, DNOW shall, at its sole expense and at NOV’s option, promptly re-perform the Services at DNOW’s sole cost; refund the amount of money paid by NOV for such nonconforming Services; or reimburse NOV for the cost of re-performing the nonconforming Services.

 

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This warranty does not extend to normal wear and tear. This warranty shall be null and void if any repairs, modifications, alterations are made to the Goods supplied hereunder during the warranty period by NOV or by others on its behalf without the prior written consent of DNOW. NOV’s remedies with respect to Goods supplied under this MSA that is found to be defective shall be limited in accordance with this Article 6. DNOW’s total cumulative liability for warranty claims arising from or pertaining to any Goods or Services provided or required to be provided under this MSA, shall not in any case exceed the purchase price paid by NOV of such Goods or Services. THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THE DESCRIPTION ON THE FACE HEREOF. THIS WARRANTY IS GIVEN EXPRESSLY AND IN PLACE OF ALL OTHER EXPRESS OR IMPLIED WARRANTIES AND ALL IMPLIED WARRANTIES FOR MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE DISCLAIMED.

7.0 Consequential Damages.

NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY CONSEQUENTIAL OR INDIRECT DAMAGES (WHETHER FORESEEABLE OR NOT AT THE DATE OF THIS AGREEMENT) INCLUDING BUT NOT LIMITED TO LOSS OF PRODUCTION, LOSS OF PROFITS, OR BUSINESS INTERRUPTION, REGARDLESS OF THE CAUSE, INCLUDING THE SOLE, JOINT OR CONCURRENT NEGLIGENCE IN ANY FORM, WILLFUL OR RECKLESS ACT OR OMISSION, STRICT LIABILITY, BREACH OF WARRANTY, BREACH OF DUTY (STATUTORY OR OTHERWISE), BREACH OF CONTRACT, OR ANY OTHER LEGAL FAULT OR RESPONSIBILITY OF EITHER PARTY, ITS EMPLOYEES OR AGENTS, OR ANY OTHER PERSON OR PARTY. NOTWITHSTANDING THE FOREGOING, THIS LIMITATION SHALL NOT APPLY TO THIRD PARTY CLAIMS FOR WHICH A PARTY IS LIABLE UNDER THIS MSA.

8.0 Payment. Unless otherwise agreed by the parties under subsequent orders, NOV shall pay DNOW the amount invoiced for Goods and/or Services provided by DNOW to NOV under this MSA within thirty (30) days following the receipt of such invoice.

9.0 Term and Termination. This MSA shall have an initial term of two (2) years from the Effective Date (the “Initial Term”). This MSA may be terminated during the Initial Term only in the event of default. After the Initial Term this MSA will continue to be in effect until canceled at the option of either party by providing thirty (30) days written notice to the other party; provided, said cancellation shall not relieve either party of its obligation arising from or incident to the Work performed hereunder prior to such cancellation being effective. Additionally, either party shall have the right to terminate this MSA effective immediately by giving written notice to the breaching party that termination is made for cause. Such written notice must set forth the conditions constituting cause. Situations which shall entitle either party to terminate the MSA for cause shall include, but not be limited to, any of the following:

(a) Any material breach of this MSA;

(b) Violation of any applicable governmental law, statute, regulation, edict, order; or

(c) An assignment of the rights granted hereunder to a third party without the written consent of the other party to this MSA

(d) Any breach of this MSA if such breach is not cured within seven (7) business days from receipt of notice sent by the non-defaulting party specifying the breach.

NOV reserves the right to terminate this MSA effective immediately if DNOW becomes insolvent, makes an assignment for the benefit of creditors, institutes or is the subject of any proceedings under any applicable laws for relief from creditors, insolvency, receivership, bankruptcy, winding-up or dissolution, appoints a receiver, trustee, monitor or liquidator over any assets of DNOW or ceases to carry on business.

Upon termination for cause, NOV shall be entitled to obtain the Goods and complete the Services by commercially reasonable means through third parties and DNOW shall be liable for any additional costs incurred to effect such supply of the Goods and completion of the Services.

 

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Notwithstanding the foregoing, the provisions contained in Sections 4, 5, 6, 7 and 8 of this MSA shall survive any such termination.

10.0 Miscellaneous.

(a) This MSA shall be construed under and in accordance with the laws of the State of Texas without regard to conflicts of law principles that would require application of any other law. Any action or proceeding arising out of or relating to this MSA must be brought in a state or federal court sitting in Harris County, Texas, and each of the parties hereby agrees to irrevocably submit itself to the exclusive jurisdiction of each such court in any such action or proceeding and waives any objection it may now or hereafter have to venue or convenience of forum.

(b) This MSA contemplates unique Work and will not be assignable by DNOW nor shall DNOW subcontract the Work without NOV’s prior written consent. In the event DNOW subcontracts the Work with NOV’s consent, DNOW will notify each such subcontractor of the terms of this MSA and before DNOW may disclose any Confidential Information to any such subcontractor the subcontractor, to the extent allowed by law, must agree in writing to be bound by the terms contained herein to the same extent as if they were parties here. DNOW also agrees that such subcontract shall not release DNOW from its obligations under this MSA and DNOW shall remain liable for the compliance of all such obligations.

(c) Any notice required or provided for herein shall be delivered in person or by certified mail to the addresses herein provided. Notices shall be effective upon receipt by the notified party.

If to NOV:

National Oilwell Varco, L.P.

Attention: General Counsel

7909 Parkwood Circle Drive

Houston, TX 77036

Telephone: (713) 346-7550

Facsimile: (713) 346-7995

If to DNOW:

DNOW L.P.

Attention: General Counsel

7402 North Eldridge Parkway

Houston, TX 77041

Telephone: 281-823-4700

Facsimile: 281-823-5208

By written notice to the other party, any party may change the address to which such notices or communications are to be sent.

(d) Any delay in the timely performance by either party under this MSA, except for the payment of monies and indemnification obligations assumed hereunder (which may not be excused due to Force Majeure), shall be excused if and to the extent caused by occurrences beyond the control of the party, including but not limited to act of God, weather or governmental action, where any such delay cannot be, and could not have been avoided through the exercise of reasonable due diligence and care (such event or occurrence being referred to herein as an event of “Force Majeure”); provided, however, that the party to be excused shall diligently seek to overcome the event of Force Majeure, and resume performance promptly after the event of Force Majeure has been removed. The party seeking to be excused for performance under this MSA shall promptly notify the other, in writing, of the time of commencement of such event of Force Majeure, and specify the detailed nature thereof.

 

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(e) This MSA and all written and verbal work and purchase orders issued by NOV shall constitute the entire agreement between the parties hereto and supersede all previous oral and written agreements, discussions, or understandings, if any, between the parties regarding the subject matter hereof. This MSA and purchase orders, verbal or written, shall control and govern all Work supplied by the DNOW to or for NOV whether or not this MSA is referenced therein. In the event of any conflict between this MSA and orders issued by NOV, the terms of this MSA shall prevail.

(f) No waiver by NOV of any of the terms, provisions or conditions hereof, nor any modification of same, shall be effective unless in writing and signed by NOV’s authorized representative.

(g) For purchased Goods, ownership and risk of loss pass to NOV upon delivery of the Goods.

(h) In performing the Work, DNOW shall comply with all applicable federal, state, local and agency laws, ordinances and regulations.

(i) Except in the event of NOV’s failure to pay DNOW when due, DNOW waives its constitutional and/or statutory liens rights against NOV or its property for any Work performed hereunder.

(j) If any provision of this MSA is held to be illegal, invalid, or unenforceable, such provision shall be fully severable and this MSA will be construed and enforced as if such provision had never been a part of this MSA.

(k) DNOW expressly acknowledges and agrees that, in the event of any breach of this MSA by DNOW and/or its Representatives, NOV will be entitled to equitable relief, including without limitation injunction and specific performance, against DNOW, in addition to all other remedies available to NOV in law and/or in equity.

(l) Nothing herein shall be construed as granting or conferring upon DNOW, expressly, impliedly or otherwise, any licenses or other rights under any of NOV’s patent, trademarks, trade secrets, property, and/or intellectual property rights.

(m) NOV shall have the right at any time, upon reasonable prior notice, during normal business hours, to access DNOW’s facilities to inspect any work in progress hereunder in order to verify timeliness of performance and quality control. In the event of delay, or reasonably anticipated delay, DNOW will immediately notify NOV in writing of the delay or anticipated delay, and its approximate duration. DNOW will undertake to shorten or make up the delay by all reasonable means. In the event DNOW is unable to meet any delivery date(s) hereunder, NOV shall have the right acquire the Work from a third-party source and charge DNOW for any costs in excess of the purchase price for such Work.

(n) Upon notice to DNOW, NOV may, at any time, make changes to the scope of Work and if such changes to the scope of Work are agreed to by DNOW in writing by an authorized representative of DNOW, then DNOW shall fully and immediately comply with such changes.

(o) If requested by NOV, DNOW shall provide NOV with the information and documentation necessary to enable NOV to assign an Export Control Classification Numbers (“ECCN”) for applicable Goods purchased hereunder.

(p) DNOW represents that it has neither given nor received any commissions, payments, gifts, kickbacks, lavish or extensive entertainment, or other things of value to or from any employee or agent of NOV or any third party in connection with this MSA and acknowledges that the giving or receiving of same could be a violation of NOV’s corporate policy.

IN WITNESS WHEREOF, this Agreement is executed as of the date first above written.

 

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NATIONAL OILWELL VARCO, L.P.,
by its general partner
NOW Oilfield Services, Inc.
By:  

 

  signature
Name:  
Title:  
DNOW, L.P.
By its general partner
Wilson International, Inc.
By:  

 

  signature
Name:  
Title:  

 

7

EX-10.6

Exhibit 10.6

NOW INC.

LONG-TERM INCENTIVE PLAN

 

SECTION 1. Purpose of the Plan.

The NOW Inc. Long-Term Incentive Plan (the “Plan”) is intended to promote the interests of NOW Inc., a Delaware corporation (the “Company”), by encouraging Employees, Consultants and Directors to acquire or increase their equity interest in the Company and to provide a means whereby they may develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to remain with and devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its stockholders. The Plan is also contemplated to enhance the ability of the Company and its Subsidiaries to attract and retain the services of individuals who are essential for the growth and profitability of the Company.

 

SECTION 2. Definitions.

As used in the Plan, the following terms shall have the meanings set forth below:

“Award” shall mean an Option, Restricted Stock, Performance Award, Phantom Share, Stock Payment, or SAR.

“Award Agreement” shall mean any written or electronic agreement, contract, instrument or document evidencing any Award, which may, but need not, be executed or acknowledged by a Participant.

“Board” shall mean the Board of Directors of the Company, as constituted from time to time.

“Change of Control” means the occurrence of one of the following events: (a) a report is filed with the SEC on Schedule 13D or Schedule 14D-1 (or any successor schedule, form, or report), each as promulgated pursuant to the Exchange Act, disclosing that any “person” (as the term “person” is used in Section 13(d) or Section 14(d)(2) of the Exchange Act) is or has become a beneficial owner, directly or indirectly, of securities of the Company representing 35% or more of the combined voting power of the Company’s then outstanding securities; (b) the Company is merged or consolidated with another corporation and, as a result thereof, securities representing less than 50% of the combined voting power of the surviving or resulting corporation’s securities (or of the securities of a parent corporation in case of a merger in which the surviving or resulting corporation becomes a wholly-owned subsidiary of the parent corporation) are owned in the aggregate by holders of the Company’s securities immediately before such merger or consolidation; (c) all or substantially all of the assets of the Company are sold in a single transaction or a series of related transactions to a single purchaser or a group of affiliated purchasers; or (d) during any period of 24 consecutive months, individuals who were Directors at the beginning of the period cease to constitute at least a majority of the Board unless the election, or nomination for election by the Company’s shareholders, of more than one half of any new Directors was approved by a vote of at least two-thirds of the Directors then still in office who were Directors at the beginning of the 24 month period.


Notwithstanding the foregoing provisions, to the extent that any payment or acceleration hereunder is subject to Section 409A of the Code as deferred compensation, the term Change of Control shall mean an event described in the foregoing definition of Change of Control that also constitutes a change in control event as defined in Treasury Regulation section 1.409A-3(i)(5).

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations thereunder.

“Committee” shall mean the administrator of the Plan in accordance with Section 3, and shall include reference to the Compensation Committee of the Board (or any other committee of the Board designated, from time to time, by the Board to act as the Committee under the Plan), the Board or subcommittee, as applicable.

“Consultant” shall mean any individual who is not an Employee or a member of the Board and who provides consulting, advisory or other similar services to the Company or a Subsidiary.

“Director” shall mean any member of the Board who is not an Employee.

“Employee” shall mean any employee of the Company or a Subsidiary or a parent corporation.

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

“Fair Market Value” shall mean, as of any applicable date, the last reported sales price for a Share on the New York Stock Exchange (or such other national securities exchange which constitutes the principal trading market for the Shares) for the applicable date as reported by such reporting service approved by the Committee; provided, however, that if Shares shall not have been quoted or traded on such applicable date, Fair Market Value shall be determined based on the next preceding date on which they were quoted or traded, or, if deemed appropriate by the Committee, in such other manner as it may determine to be appropriate. In the event the Shares are not publicly traded at the time a determination of its Fair Market Value is required to be made hereunder, the determination of Fair Market Value shall be made in good faith by the Committee.

“Incentive Stock Option” or “ISO” shall mean an option granted under Section 6(a) of the Plan that is intended to qualify as an “incentive stock option” under Section 422 of the Code or any successor provision thereto.

“Non-Qualified Stock Option” or “NQO” shall mean an option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.

“Option” shall mean an Incentive Stock Option or a Non-Qualified Stock Option.

“Participant” shall mean any Employee, Consultant or Director granted an Award under the Plan.

“Performance Award” shall mean any right granted under Section 6(c) of the Plan.

 

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“Performance Criteria” shall mean the following business criteria with respect to the Company, any Subsidiary or any division, operating unit or product line: net earnings (either before or after interest, taxes, depreciation and/or amortization), sales, revenue, net income (either before or after taxes), operating profit, cash flow (including, but not limited to, operating cash flow and free cash flow), cash flow return on capital, return on net assets, return on stockholders’ equity, return on assets, return on capital, stockholder returns, return on sales, gross or net profit margin, customer or sales channel revenue or profitability, productivity, expense, margins, cost reductions, controls or savings, operating efficiency, customer satisfaction, corporate value measures (including, but not limited to, compliance, safety, environmental and personnel matters), working capital, strategic initiatives, economic value added, earnings per share, earnings per share from operations, price per share of stock, and market share, any of which may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group. The Committee will determine whether the foregoing criteria will be computed without recognition of (a) unusual or nonrecurring events affecting the Company or its financial statements or (b) changes in applicable laws, regulations or accounting principles.

“Person” shall mean individual, corporation, partnership, limited liability company, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof or other entity.

“Phantom Shares” shall mean an Award of the right to receive Shares, cash equal to the Fair Market Value of such Shares or any combination thereof, in the Committee’s discretion, which is granted pursuant to Section 6(d) of the Plan.

“Qualifying Event” shall mean a “Change of Control” of the Company or an Affiliate, or, with respect to de minimus amounts, as determined in good faith by the Committee, such unusual circumstance as the Committee may determine from time to time in its sole discretion.

“Restricted Period” shall mean the period established by the Committee with respect to an Award during which the Award either remains subject to forfeiture, is subject to restrictions or is not exercisable by the Participant.

“Restricted Stock” shall mean any Share, prior to the lapse of restrictions thereon, granted under Section 6(b) of the Plan.

“Rule 16b-3” shall mean Rule 16b-3 promulgated by the SEC under the Exchange Act, or any successor rule or regulation thereto as in effect from time to time.

“SAR” shall mean a stock appreciation right granted under Section 6(e) of the Plan that entitles the holder to receive the excess of the Fair Market Value of a Share on the relevant date over the exercise price of such SAR, with the excess paid in cash and/or in Shares in the discretion of the Committee.

“SEC” shall mean the Securities and Exchange Commission or any successor thereto.

 

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“Shares” or “Common Shares” or “Common Stock” shall mean the common stock of the Company, $0.01 par value, and such other securities or property as may become the subject of Awards under the Plan.

“Stock Payment” means (a) a payment in the form of Shares, or (b) an option or other right to purchase Shares, as part of any bonus, deferred compensation or other arrangement, made in lieu of all or any portion of the compensation, granted pursuant to Section 6(f) of the Plan.

“Subsidiary” shall mean any entity (whether a corporation, partnership, joint venture, limited liability company or other entity) in which the Company owns a majority of the voting power of the entity directly or indirectly, except with respect to the grant of an ISO the term Subsidiary shall mean any “subsidiary corporation” of the Company as defined in Section 424 of the Code.

 

SECTION 3. Administration.

(a) The Committee. The Plan shall be administered by the Compensation Committee of the Board (or any other committee of the Board designated, from time to time, by the Board to act as the Committee under the Plan). Notwithstanding the foregoing, Awards made to Directors shall be administered by the Board. The term “Committee” as used herein shall refer to the Compensation Committee (or other Board committee), the Board, or the subcommittee (as defined in Section 3(c) below), as applicable.

(b) Committee Powers. A majority of the Committee shall constitute a quorum, and the acts of the members of the Committee who are present at any meeting thereof at which a quorum is present, or acts unanimously approved by the members of the Committee in writing, shall be the acts of the Committee. Subject to the terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to a Participant; (iii) determine the number of Shares to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited, or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi) interpret and administer the Plan and any instrument or agreement relating to an Award made under the Plan; (vii) establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (viii) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive, and binding upon all Persons, including the Company, any Subsidiary, any Participant, any holder or beneficiary of any Award, any stockholder and any other Person. However, the Committee’s authority to waive or accelerate the Restricted Period with respect to an Award shall be limited to a Qualifying Event.

 

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(c) Delegation to a Subcommittee. The Committee may, subject to any applicable law, regulatory, securities exchange or other similar restrictions, delegate to one or more members of the Board or officers of the Company (the “subcommittee”), the authority to administer the Plan as to Awards to Employees and Consultants who are not subject to Section 16(b) of the Exchange Act. The Committee may impose such limitations and restrictions, in addition to any required restrictions/limitations, as the Committee may determine in its sole discretion. Any grant made pursuant to such a delegation shall be subject to all of the provisions of the Plan concerning this type of Award.

(d) Modification of Awards. Subject to the limitation set forth at the end of Section 3(b) above, at any time after grant of an Award, the Committee may, in its sole and absolute discretion and subject to whatever terms and conditions it selects:

(1) accelerate the period during which the Award vests or becomes exercisable or payable; and

(2) accelerate the time when applicable restrictions or risk of forfeiture or repurchase lapses; and

(3) extend the period during which the Award may be exercised or paid; and

(4) extend the term of any Award (other than the maximum 10 year term);

provided, that such action may be taken only in compliance with the requirements of Section 162(m) of the Code with respect to an Award that is intended to be performance-based compensation under Section 162(m) of the Code.

 

SECTION 4. Shares Available for Awards.

(a) Shares Available. Subject to adjustment as provided below, the number of Shares that may be issued with respect to Awards granted under the Plan shall be []. If an Award is forfeited or otherwise lapses, expires, terminates or is canceled without the actual delivery of Shares or is settled in cash, then the Shares covered by such Award, to the extent of such forfeiture, expiration, lapse, termination, cancellation or cash settlement, shall again be Shares that may be issued with respect to Awards granted under the Plan. Shares tendered or withheld by the Company to satisfy tax withholding, exercise price or other payment obligations shall be available for issuance under future Awards, subject to the overall limitation provided in the first sentence above. Notwithstanding the foregoing, no more than 5% of the Shares that may be issued under the Plan may be issued pursuant to Stock Payments.

(b) Sources of Shares Deliverable Under Awards. Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or of treasury Shares.

(c) Adjustments. In the event of a stock dividend or stock split with respect to Shares, the number of Shares with respect to which Awards may be granted, the number of Shares subject to outstanding Awards, the grant or exercise price with respect to outstanding Awards and the individual annual grant limits with respect to Awards (other than dollar denominated

 

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Awards) automatically shall be proportionately adjusted, without action by the Committee; provided, however, such automatic adjustment shall be evidenced by written addendums to the Plan and Award Agreements prepared by the Company and, with respect to Options, shall be in accordance with the Treasury Regulations concerning Incentive Stock Options. Further, in the event that the Committee determines that any distribution (whether in the form of cash (other than a regular cash dividend), Shares, other securities, or other property), recapitalization, reorganization, merger, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares (or other securities or property) with respect to which Awards may be granted, (ii) the number and type of Shares (or other securities or property) subject to outstanding Awards, and (iii) the grant or exercise price with respect to any Award or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award; provided that the number of Shares subject to any Award denominated in Shares shall always be a whole number.

(d) Individual Participant Limits. Subject to adjustment pursuant to Section 4(c) above, “Adjustments,” the maximum aggregate number of Shares that may be subject to Share-denominated Awards granted under the Plan to any individual during any calendar year shall not exceed []; provided, however, to the extent the [] Share limit is not awarded to any Participant with respect to any calendar year, the amount not so awarded but permitted for such Participant shall be available for award to such Participant during any subsequent calendar year. As a result, the maximum number of Shares pursuant to which Awards may be granted during any calendar year hereunder to any Participant may be greater than the [] Share limit specified above only to the extent that such Shares were not awarded to such Participant during any preceding calendar year. The method of counting such Shares shall conform to any requirements applicable to performance-based compensation under Section 162(m) of the Code or the rules and regulations promulgated thereunder. The maximum amount of dollar-denominated Awards that may be granted to any individual during any calendar year shall not exceed [].

 

SECTION 5. Eligibility.

Any Employee, Consultant or Director shall be eligible to be designated a Participant by the Committee. No individual shall have any right to be granted an Award pursuant to this Plan.

 

SECTION 6. Awards.

(a) Options. Subject to the provisions of the Plan, the Committee shall have the authority to determine Participants to whom Options shall be granted, the number of Shares to be covered by each Option, the purchase price therefor and the conditions and limitations applicable to the exercise of the Option, including the following terms and conditions and such additional terms and conditions, as the Committee shall determine, that are not inconsistent with the provisions of the Plan.

 

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(1) Exercise Price. The purchase price per Share purchasable under an Option shall be determined by the Committee at the time the Option is granted, but shall not be less than the Fair Market Value per Share on the effective date of such grant.

(2) Time and Method of Exercise. The Committee shall determine and provide in the Award Agreement or by action subsequent to the grant the time or times at which an Option may be exercised in whole or in part, and the method or methods by which, and the form or forms (which may include, without limitation, cash, check acceptable to the Company, Shares already-owned for more than six months (unless such holding requirement is waived by the Committee), Shares issuable upon Option exercise, a “cashless-broker” exercise (through procedures approved by the Committee), other securities or other property, a note, or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price) in which payment of the exercise price and tax withholding obligation with respect thereto may be made or deemed to have been made. Notwithstanding any other provision of the Plan to the contrary, no Participant who is a member of the Board or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to pay the exercise price of an Option in any method which would violate Section 13(k) of the Exchange Act. The Committee shall also determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may vest and be exercised. No portion of an Option which is unexercisable at termination of the Participant’s employment or service, as applicable, shall thereafter become exercisable, except as may be otherwise provided by the Committee either in the Award Agreement or by action following the grant of the Option.

(3) Incentive Stock Options. An Incentive Stock Option may be granted only to an individual who is an Employee of the Company or any parent or subsidiary corporation (as defined in Section 424 of the Code) at the time the Option is granted and must be granted within 10 years from the date the Plan was approved by the Board or the shareholders, whichever is earlier. To the extent that the aggregate Fair Market Value (determined at the time the respective Incentive Stock Option is granted) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by an individual during any calendar year under all incentive stock option plans of the Company and its parent and subsidiary corporations exceeds $100,000, such Incentive Stock Options shall be treated as a Non-Qualified Stock Option. The Committee shall determine, in accordance with applicable provisions of the Code, Treasury Regulations and other administrative pronouncements, which of a Participant’s Incentive Stock Options will not constitute Incentive Stock Options because of such limitation and shall notify the Participant of such determination as soon as practicable after such determination. No Incentive Stock Option shall be granted to an individual if, at the time the Option is granted, such individual owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of its parent or subsidiary corporation, within the meaning of Section 422(b)(6) of the Code, unless (i) at the time such Option is granted the option price is at least 110% of the Fair Market Value of the Common Stock subject to the Option and (ii) such Option by its terms is not exercisable after the expiration of five years from the date of grant. An Incentive Stock Option shall not be transferable otherwise than by will or the laws of descent and

 

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distribution, and shall be exercisable during the Participant’s lifetime only by such Participant or the Participant’s guardian or legal representative. The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code, or any successor provision, and any regulations promulgated thereunder.

(4) Substitution of Stock Appreciation Rights. Subject to the limitations set forth in Section 7(1), the Committee, in its sole discretion, shall have to right to substitute a SAR for an Option at any time prior to or upon exercise of such Option, subject to the provisions of Section 6(e) hereof; provided that such SAR shall be exercisable for the same number of shares of Stock as such substituted Option would have been exercisable for.

(b) Restricted Stock. Subject to the provisions of the Plan, the Committee shall have the authority to determine the Participants to whom Restricted Stock shall be granted, the number of Shares of Restricted Stock to be granted to each such Participant, the duration of the Restricted Period during which, and the conditions, including the Performance Criteria or other specified criteria, including the passage of time, if any, under which the Restricted Stock may vest or be forfeited to the Company, and the other terms and conditions of such Awards. However, except as provided in Section 6(b)(3) with respect to waivers, (i) the minimum Restricted Period for a Restricted Stock Award the vesting of which is based on the achievement of Performance Criteria shall not be less than one year, and (ii) the minimum Restricted Period for a Restricted Stock Award the vesting of which is based solely on the passage of time shall not be less than three years.

(1) Dividends. Dividends paid on Restricted Stock may be paid directly to the Participant, may be subject to risk of forfeiture and/or transfer restrictions during any period established by the Committee or sequestered and held in a bookkeeping cash account (with or without interest) or reinvested on an immediate or deferred basis in additional shares of Common Stock, which credit or shares may be subject to the same restrictions as the underlying Award or such other restrictions, all as determined by the Committee in its discretion, as provided in the Award Agreement.

(2) Registration. Any Restricted Stock may be evidenced in such manner as the Committee shall deem appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of Restricted Stock granted under the Plan, such certificate shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock.

(3) Forfeiture and Restrictions Lapse. Except as otherwise determined by the Committee or the terms of the Award Agreement, upon a Participant’s termination of employment or service (as determined under criteria established by the Committee) for any reason during the applicable Restricted Period, all Restricted Stock shall be forfeited by the Participant and re-acquired by the Company. The Committee may, upon or in connection with a Qualifying Event, waive in whole or in part any or all remaining restrictions with respect to such Participant’s Restricted Stock; provided, however, if the

 

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Award is intended to qualify as performance based compensation under Section 162(m) of the Code, such waiver may be only in compliance with the requirements of Section 162(m) of the Code. Unrestricted Shares, evidenced in such manner as the Committee shall deem appropriate, shall be issued to the holder of Restricted Stock promptly after the applicable restrictions have lapsed or otherwise been satisfied.

(4) Restrictions. Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, restrictions on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Committee determines at the time of the grant of the Award or thereafter. During the Restricted Period, Restricted Stock will be subject to such limitations on transfer as necessary to comply with Section 83 of the Code.

(c) Performance Awards. The Committee shall have the authority to determine the Participants who shall receive a Performance Award, which shall be denominated as a cash or share amount at the time of grant and confer on the Participant the right to receive all or part of such Award upon the achievement of such performance goals (based on the Performance Criteria or any other specified criteria) during such performance periods as the Committee shall establish with respect to the Award. However, except as provided in Section 6(c)(3) with respect to waivers, the minimum performance period shall not be less than one year. The Committee, in its discretion, may determine whether an Award is to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code.

(1) Terms and Conditions. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the performance goals to be achieved during any performance period, the Performance Criteria or other criteria upon which the performance goals are to be based, the length of any performance period and the amount of any Performance Award.

(2) Payment of Performance Awards. Performance Awards may be paid (in cash and/or in Shares, in the sole discretion of the Committee) in a lump sum or in installments following the close of the performance period, or at such later deferral date elected by the Participant, in accordance with procedures established by the Committee with respect to such Award.

(3) Forfeiture and Restrictions Lapse. Except as otherwise determined by the Committee or the terms of the Award Agreement that granted the Performance Award, upon a Participant’s termination of employment or service, as applicable (as determined under criteria established by the Committee) for any reason during the applicable Restricted Period, all Performance Awards shall be forfeited by the Participant and re-acquired by the Company. The Committee may, upon or in connection with a Qualifying Event, waive in whole or in part any or all remaining restrictions with respect to such Participant’s Performance Award; provided, however, if the Award is intended to qualify as performance based compensation under Section 162(m) of the Code, such waiver may be only in compliance with the requirements of Section 162(m) of the Code. Unrestricted

 

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Shares, evidenced in such manner as the Committee shall deem appropriate, shall be issued to the holder of Performance Awards promptly after the applicable restrictions have lapsed or otherwise been satisfied.

(d) Phantom Shares. The Committee shall have the authority to grant Awards of Phantom Shares to Participants upon such terms and conditions as the Committee may determine.

(1) Terms and Conditions. Each Phantom Share Award shall constitute an agreement by the Company to issue or transfer a specified number of Shares or pay an amount of cash equal to the Fair Market Value of a specified number of Shares, or a combination thereof to the Participant in the future, subject to the fulfillment during the Restricted Period of such conditions, including those linked to the Performance Criteria or other specified criteria, including the passage of time, if any, as the Committee may specify at the date of grant. During the Restricted Period, the Participant shall not have any right to transfer any rights under the subject Award, shall not have any rights of ownership in the Phantom Shares and shall not have any right to vote such shares.

(2) Dividend Equivalents. Any Phantom Share award may provide, in the discretion of the Committee, that any or all dividends or other distributions paid on Shares during the Restricted Period be credited in a cash bookkeeping account (with or without interest) or that equivalent additional Phantom Shares be awarded, which account or Phantom Shares may be subject to the same restrictions as the underlying Award or such other restrictions as the Committee may determine.

(3) Forfeiture and Restrictions Lapse. Except as otherwise determined by the Committee or set forth in the Award Agreement, upon a Participant’s termination of employment or service (as determined under criteria established by the Committee) for any reason during the applicable Restricted Period, all Phantom Shares shall be forfeited by the Participant. The Committee may, upon or in connection with a Qualifying Event, waive in whole or in part any or all remaining restrictions with respect to such Participant’s Phantom Shares; provided, however, if the Award is intended to qualify as performance based compensation under Section 162(m) of the Code, such waiver may be only in compliance with the requirements of Section 162(m) of the Code.

(4) Payment of Phantom Shares. Phantom Shares may be paid (in cash and/or in Shares, in the sole discretion of the Committee) in a lump sum or in installments following the close of the Restricted Period, or at such later deferral date elected by the Participant, in accordance with procedures established by the Committee with respect to such Award.

(e) SARs. Subject to the provisions of the Plan, the Committee shall have the authority to determine Participants to whom SARs shall be granted, the number of Shares to be covered by each SAR, the exercise price and the conditions and limitations applicable to the exercise of the SAR, including the following terms and conditions and such additional terms and conditions, as the Committee shall determine, that are not inconsistent with the provisions of the Plan. A SAR may be granted (i) in connection and simultaneously with the grant of an Option, (ii) with respect to a previously granted Option, or (iii) independent of an Option.

 

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(1) Exercise Price. The exercise price per SAR shall be determined by the Committee at the time the SAR is granted, but shall not be less than the Fair Market Value per Share on the effective date of such grant.

(2) Time of Exercise. The Committee shall determine and provide in the Award Agreement the time or times at which a SAR may be exercised in whole or in part.

(3) Method of Payment. The Committee shall determine, in its discretion, whether the SAR shall be paid in cash, shares of Common Stock or a combination of the two.

(f) Stock Payments. Stock Payments may be awarded in such amount and may be based upon such Performance Criteria or other specific criteria, if any, determined appropriate by the Committee, determined on the date such Stock Payment is made or on any date thereafter.

(g) Substitute Awards. Awards may be granted under the Plan in substitution of similar awards held by individuals who become Employees, Consultants or Directors as a result of a merger, consolidation or acquisition by the Company or a Subsidiary of another entity or the assets of another entity. Such substitute awards may have exercise prices less than the Fair Market Value of a Share on the date of such substitution.

(h) General.

(1) Awards May Be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, any other Award granted under the Plan or any award granted under any other plan of the Company or any Subsidiary. Awards granted in addition to or in tandem with ot